Predicting Hurricanes Years in Advance: Solar Forecasting as Capital Strategy | Katherine Monson

I can predict when hurricanes are going to happen, and I could place a position in 2025 about something that's going to happen in 2029.

Today we're joined by Katherine Monson, CEO and co-founder of HailSWX, a leader working at the intersection of science, national security, and high-stakes decision-making. With experience spanning defense, international negotiations, and frontier technology, Katherine now helps industries forecast solar activity and manage real-world risk. Why do we need to know about solar radiation?

The sun spits out bursts of energy, shooting a bunch of electromagnetic force at you. Problem with that electromagnetic energy is it'll impact anything that is electronic that's coming through its wake, as well as people, like the human safety piece. We would worry about radiation. I've built space businesses for the last 12 years, and people say hardware is hard. Space people say space hardware is even harder. Yes, you could build a super hardened satellite, but that's gonna drive $10 million per satellite. And then if I said to you, I can make that cost go cheaper, and all of that's now profit. That's how you're making money. I like these businesses where you make a bad decision with a chip design, you go bankrupt. Space is very similar. You know, you make some bad decisions, you lose several satellites. Most people, that's game over.

Welcome. Welcome back to Dallas. How long has it been since your last visit?

I was last here when I was 16 years old to go to UNT. Debate workshop. Wow. So Mean Green.

Yeah.

One of the best debate programs in the country. So shout out to the Mean Green.

Last month, one of our guests, Brent Ryan, who the business school at North Texas is now the Brent Ryan.

Nice.

And maybe his wife's name's in there as well. Please, just the Brent Ryan School. Just the Brent Ryan School of Business. So UNT was life-changing for him. He's built one of the world's great businesses, had increasing revenue for 41 consecutive years.

It is.

Since you started it.

Wow.

I don't know how many businesses would qualify on that metric. Not many. Not many. But yeah, let's jump in. Solar radiation forecasting methodology. Why do we need to know about solar radiation?

Yeah, so let's back up to the sun.

Yeah.

We're all used to seeing it. Yes. The sun spits out bursts of energy. So it's actually not that dissimilar to anyone who's worked in defense tech and things that we would call jamming. When someone is doing it who's a hostile actor, shooting a bunch of electromagnetic power force at you. The sun does this semi-regularly. So it'll be, you know, we say the word solar storm or solar flare, and that's the sun spitting out a bunch of electromagnetic energy. Problem with that electromagnetic energy is it'll impact anything that is electronic that's coming through its wake, as well as people, like the human safety piece. We would worry about radiation. So people who would care about understanding what the Sun's gonna do, anyone who operates satellites, anyone who operates rockets, that includes hypersonic vehicles. So any of the Golden Dome folks who are working on that kind of defense apparatus, anyone who's flying regularly a polar route. So if you are the pilot who, you know, 5 days on, 5 days off, you do the San Francisco to Amsterdam route, or you do the Tokyo to New York route, Those folks are flying through potentially, they're always flying through some base level of radiation, but during a solar storm, those folks could be flying through 100x, 1,000x more radiation in a given flight than a base level. The other kind of group of folks who would care about solar activity are folks who rely on GPS. So this has become an increasing— Which is everyone, right? More and more, right? So, you know, I said I'm from Iowa, so I'm from the land of ag, corn and soybeans, frankly, the land of pork production as well. So I'm comfortable in this room. So, but precision ag is fascinating now, right? We've got combines that have a map. So, you know, the farmer can go and literally map their field. They can then plan where each of the rows is going to be. They can avoid different waterways. And then they know exactly from a GPS set of coordinates where each seed went.

Wow.

Which allows folks to be even more precise when they're fertilizing, for example, because rather than, you know, what happened when I was a child where you might do kind of large spraying or even some of the like the plane, you know, the crop dusting spraying, the reason that folks are now so precise is fertilizer is a very costly implement or input. So the cost of fertilizer keeps going up. So folks wanna be really efficient about how they're using that fertilizer. So now they know where each seed is, they can spit fertilizer on each seed, which works great when your GPS is working. You end up having problems if you have any type of high solar activity, and all of a sudden where your combine thinks it is, even if it's, you know, 3 centimeters, let alone 3 feet off, you're going to have problems. So this is why folks like John Deere already have a heat map where they'll be able to say like, what's happening right now, red, yellow, green on a map of the country. Who may be having red zone issues, the GPS isn't going to be working. What the hail technology can do, HailSWX is our company name, is help forecast. So rather than just being able to say, hey, it's raining right now, which would be the Earth weather analogy, we would be able to say, hey, next Thursday, you're going to have a problem with your GPS. So if you're running a big commercial ag production, and you're going to have a team of people that are working for 10 days, you have to have, folks are going to need to rest at some point. You can build in your schedule. Next Thursday is not going to be a great day for fertilizing. Let's try to get all that done ahead of time. Like, let's, you know, work on maintenance things next Thursday when our GPS isn't, isn't going to be ideal.

When Connor was first telling me about all this, if you deal with anything precision that uses precision GPS, this will be affected. But then listening to 15-20 minutes of you this morning, it felt like that is like the very, very top surface level of this conversation. Because then you got into the fact of, well, look at how much agriculture uses automated tractors and vehicles, whatnot, or Tesla. Can you go into the effects, like how many, because obviously the precision of a fertilizer or drilling in oil and gas, that's obvious. But can you kind of go into how expansive this technology and what effects could have like, because it sounds like there's just so much more.

In some ways, I think that's the beautiful challenge we have when we're talking about our company is that most companies, I think folks are like, what industry are you in? Okay, I'm in oil and gas, I'm in real estate. And when folks ask us like, what industry are you in? I have to be a little careful to answer the industries that we can help because it is so expansive. So we're helpful in oil and gas, we're helpful in mining, we're helpful in agriculture, we're essential for spacecraft operation. Were essential for human and avionics safety in commercial airlines. There is a financial services part of our business that we're still exploring. So early stage, we're actually actively looking for a quant hedge fund partner. One of the things that blows my mind as I first started, you know, meeting Scott, my business partner, understanding what he had built over the last 14 years was, oh my gosh, the sun is the single energetic variable into Earth's systems. It's like, I just have to stop and pause for a second, right? That's a kind of a mind-blowing thing to think about, that the Earth, you know, is like a closed ecosystem. The only energy variable coming into the system is from the sun. So what that means is if you understand that key, you can start to say, okay, I can predict when El Niño/La Niña is going to happen. I can predict when hurricanes are going to happen. I can predict that it's going to be cold in Michigan, Wisconsin, Ohio in 2029. Okay, from a financial perspective, that means I could go do LNG futures trading and I could place a position in 2025 about something that's going to happen in 2029. Kind of an insane thing to say, right? Like, we're so used to working on more human timescales. What Scott, my business partner who is an astrophysicist, what he discovered was how the sun works. So how the sun generates magnetism at the poles, how that magnetism processes to the equator, it's opposite polarity, so it cancels out, and the process happens again. And so once he understood how the sun works, he realized we can understand what the sun is going to do and predict it.

One of the things this morning, again, and I have a little leg up.

On you because I got to hear it this morning. Yeah, you got to preview.

How much the sun actually affects, because like it feels like there's only two, there's two variables. There's gravity from the moon. And also the sun as well. But then there's the energy from the sun and everything can kind of float up. And how until recently is, you know, you kind of go halfway because you only give half information. But now with your company and your technology, it's the other half of that information.

Yeah. I mean, I think it goes back to, you know, I'm not sure when you guys learned about solar systems, but I remember viscerally here like today, today we learned about the solar system. Right. Right? But like, you know, being an elementary school kid, and you have, you know, your little diorama model of each of the planets, and learning, you know, in the second grade for me, wow, we live in the Goldilocks planet. Like, we live at the perfect distance from the Sun for life to exist. So like, we all kind of intuitively know that the Sun really matters for all of the things that we take for granted. And this is, Ryan, to your point, the next step for us to say not just Do we feel grateful that we live in the Goldilocks zone? We can start to characterize just how dynamic the Sun is. And we don't just, you know, it really for me puts me back into like what it might have been to be living in, you know, the year 1500 and to then have all this science happen in the 1500s that says, wow, we're not the center of the galaxy. We're actually part of a solar system. Like, what does that even mean? And all of these kind of fundamental ways that our understanding of the universe changed. That's kind of what we're— what's happening again here with the research that Scott has discovered. And let me just ground for a second to the work that Scott has done. This was such a breakthrough in the field of physics that the initial discovery is published in Nature. So this is a sea change in the understanding of how the sun works. We're then lucky to be able to say, okay, once we understand how it works, who cares? Like, what can we do with this information? What is the opportunity to help people with real problems and help people with the scale of problems that are millions of dollars per an individual company such that they're willing to then come to us and spend hundreds of thousands, millions of dollars with us to help us help them solve their problem.

Hopefully the Pope won't come arrest you for your blasphemy. Yes, for the blasphemy of your right of changing our perspective.

I hope we're past that. We'll see.

I don't think Leo is interested in that. He's a good Chicago guy.

Oh yeah, I think he's probably learned the same in elementary school. I'm sure he has a diorama of his own.

Yeah, probably so. From a practical standpoint, I'm a farmer in Iowa and I now have this incredible technology and I can put that seed exactly where I want, or I can have it put exactly where I want because of this technology. And you can tell me that I shouldn't be planting, I shouldn't fertilize it on this particular day because there's going to be sun activity that would throw my GPS off. I get that. So you're going to optimize the use of that technology for— and that makes them money. What about aircraft? So are airplanes at risk of crashing? I've not thought of that as a risk because of solar activity. Are they going to take the information you provide and alter their flight schedules, or how does that play out in aviation?

Yeah, so I want to be clear, it's not an issue of crashing per se. It's the sun activity creates radiation, and radiation is harmful for electronics, so avionics boards. As well as people. Airlines have very detailed maintenance schedules already. What we can help with is that the radiation environment is dynamic. So it is a function of the solar cycle. So actually where we are in the cycle right now, we're ramping up on radiation. So folks are looking at a log and saying, well, for the last 5 years, this particular aircraft, like a 787, we needed to replace this avionics board every 9 months, every year and a half, whatever the right time period is for a given set of electronics, that's not static. So if you have a plane that's flying polar routes, it's going to get exposed to much more radiation than other planes in the fleet. But then in any given day, it's a variable amount of radiation. We can't— we have the inputs to say to the airline, here's the total radiation load that's going to happen on this board. For the next 6 months. So the problem that we can help them with there is that they don't have things fail on the ground in Amsterdam. Right. And all of a sudden now you're canceling, you know, 3 flights because you're trying to get this plane fixed that's stuck in Amsterdam. You don't have a spare 787 to take those people, you know, back to San Francisco. So that's a piece of the radiation. We've also had some interesting conversations with— let's talk about the regulatory aspect of this. So the FAA is responsible for safety. That's their function in our economy. The FAA has a radiation model called CARI 7. So having great conversations with those folks to be able to, again, help them anticipate different levels of radiation for different types of work is really what it comes down to. So like if you're a pilot and you're flying 5 days on, 5 days off, San Francisco to Amsterdam, you're going to get a different exposure in radiation than someone who maybe flies the same number of flight hours, but they fly Miami-Dallas. Helping them understand the dynamic nature of radiation and incorporating that then into the guidance that we give people to be able to operate in these roles safely.

From your company standpoint, how are y'all operating? Are you operating like a SaaS? Are you operating like a newsletter and like, hey, I pay you money and then you just say, hey, on Tuesday next week there's going to be a SolarWinds, so don't do anything that day. How do I do business with you? Or how does Lane and his farm and his autonomous vehicles, how do they pay you money?

Yeah, so it is a SaaS business model. Our short-range product is an API. So most of the customers, I should say all really exclusively, the folks who use the short-range model, they have machine-to-machine setup. So they're pulling the forecast data directly into an existing model that they're using to understand radiation or to understand drag for spacecraft, for satellites. We do provide more of a white-glove service. Part of that is this moment in time that is transition. So folks haven't had access to this type of data before. This is something new that folks are realizing, wow, before we kind of did a shrug, like the sun does crazy things. And let me just kind of ground this in an example that I find that often folks have seen in kind of more tech business media. SpaceX, and again, a very high-quality operator. So I say this with kind of the grounding of like, even folks who play this game at the highest level have run into problems. SpaceX launched 100 satellites directly into a solar storm. So, you know, rough order of magnitude, this is a $2 to $5 million asset. Frankly, it could be more, but let's just be conservative. Let's say it's a $5 million asset, 100 of these assets. You think they're going to be on orbit for 5 years. That's your business model. They burn up in 5 days. Painful.

Yeah.

SpaceX is well-capitalized, so they were able to say, wow, that was a real bummer, but we're self-insured. We'll go back to the capital markets. We've got, you know, the war chest that we keep going. A lot of companies wouldn't be able to shrug off a $500 million loss in a single day. That's the type of status quo problem that we're coming in to help solve, which is we can now help you understand when you should be launching, where you should be launching. So if there are periods of high solar activity, It's almost sometimes the analogy I use is if you think you're gonna swim through chicken broth and then you're swimming through clam chowder. So if you have clam chowder, more friction, more drag on that satellite, it's gonna come down faster.

Well, earlier you brought up the buckets of helpful and essential. That sounds like more like it's critical.

Yes.

Maybe you should expand your buckets where it's not just helpful and essential, but there's— More buckets. More buckets, yeah. More buckets. Like the, 'cause obviously if you're dealing with satellites or anything that's going to be in space, there's a critical need for your type of information.

It's existential, right? For some of these companies, you know, again, for SpaceX, they can probably take the, they have taken the $500 million loss and they keep moving. Most companies don't take the $500 million loss and say, ah, cost of doing business. Most companies end up in a situation where they're raising on really bad terms. They're potentially making an acquisition play to, you know, offload assets because their business model isn't viable. If you add an extra $500 million of cost to the cap table, I.

Presume that the solar forecasting was occurring before you and your partner got together and he had an insight into solar activity that was new, changed the dynamic. And I'm curious though, the accuracy before this change that you guys had brought about? Was it just not— that just wasn't accurate information that SpaceX could act upon? And how accurate is your forecast?

So status quo, the way that people have tried to solve this problem previously is, you know, kind of the normal way that humans look at problems, which is, okay, we're in a moment in time. Let's look backward. Let's see what happens. So we have observed data points. Let's see if we can figure out any patterns. So folks essentially are doing, have been doing statistical regression. So they've been taking measurements of solar flares or sunspots and they've been saying, okay, let's see if we can fit these to a curve. So statistical regression to fit it to a curve. Now let's propagate that curve forward. Right. And just see if that kept happening in the way that we fit it to a curve, what would it look like? Right. The challenge is that the sun doesn't operate that way. Right. So what's happening right now— So it's dynamic. Super dynamic. And the piece that we understand is like a second, third order driver than the symptom that you're seeing on the surface of the Sun. And I won't say more than that because that is the secret sauce of the physical model.

Right.

The sunspots are predictive in about a 4-day window. So it's not that dissimilar from Earth weather, right? So if I say it is 90 degrees here in Dallas, If I had to put money on the table, it's going to be 90 degrees tomorrow. In Dallas, it's probably a safe bet to say it might be 90 degrees again next week. Right. With the sun, you know, you can make that kind of comparison of like what's happening right now is predictive for about 4 days, but then it really drops off a cliff. So the status quo public offering, so NOAA through the Department of Commerce has a Space Weather Prediction Center. The Space Weather Prediction Center is the national service that says here's the space weather forecast. They do a perfectly adequate job for about 4 days. Our model is a little tighter. We're hitting at about 15% more accurate than NOAA on that 0 to 4 day window. At that 4 day window is where that statistical regression is not helpful. It's not indicative of what's, what's gonna come beyond. The NOAA model drops to a negative 0.5, which is when I say skill score means standard square error to ground that it's a scale from, you know, 1 perfectly high fidelity, you nailed it, to negative 1, which is like you were exactly opposite wrong. So a score of negative, exactly a negative 0.5, you're better off guessing. Yeah, right. Like it's not a helpful set of data. Right. So when we're coming into these conversations with folks in industry and we're saying, hey, that data set that you were given that wasn't helpful, so you kind of stopped asking the question. And this is where I go back to SpaceX. They are top-notch operators. It's not that they don't care about space weather, it's that nobody was able to give enough of the data set to say, hey, you're going to have a problem, that they have to just kind of shrug and say, well, that's the cost of doing business. Like, we're going to operate in space and this is a dynamic environment and it's challenging. I've built space businesses for the last 12 years and people say hardware is hard. Space people say space hardware is even harder. There's so many things that can kill you in that operating environment.

So what would you tell people that are like, we've had all of human existence without the utilization of this technology or information. Totally understand the 100 satellites, $500 million loss. I'm just saying, it is once in a blue moon that that happens. Why should I pay you or what's different? Like, what is the multiple factor? Like, what is the huge wins? Like, am I going to improve Am I going to improve 5%? Am I going to improve 1,000%? Like, what is the, oh my God, where have you been all my life? I need you in my operation. Like, what is, what is that element?

Let me ground for you that it's not once in a blue moon. So the solar cycle is an 11-year cycle. We are coming down from solar maximum. The last 3, 4, 5-ish years were really challenging. So it's not just SpaceX that had problems. All of the customers that we've converted on the space side, they all have scar tissue. When we come to them and say, hey, we can help you, they're like, oh, thank you. That was really rough. That was deeply unpleasant. We had to have a number of really tough conversations with our board of directors because it looked like we didn't know what we were doing because we didn't. The sad thing then is that nobody did. So it's hard to hold one group more accountable than others. But these folks are like, wow, you can help us avoid a CapEx management problem. So it's, you know, the $500 million is a catastrophic event, but even things like, is this $5 million asset going to be revenue generating for 8 years, or is it going to be revenue generating for 2 years? So one of the ways that we help customers in the space industry is at the planning horizon. So we're actively working with folks right now on a long-range forecast. So we can give them 3, 5, 10, 15 years of what's going to happen in terms of the baseline. That allows folks to make decisions like, should I launch to an 800-kilometer altitude? Because, you know, there's going to be a lot more like the, what I said, clam chowder. It's going to be more friction. So I'm going to come down faster. So I want to start higher because I want that revenue generation for 8 years. That's a choice that they could make if they understand, yep, this is going to be a higher friction, higher drag environment. Some folks have the opposite problem. So there's a whole set of licensing that you need to get from the regulatory side. Where there is now a streamlined process through the FCC, Federal Communications Commission, that says you have to be deorbited within a particular time period. And if you don't deorbit, this is all kind of trying to prevent space trash. Like, we don't want satellites lingering forever and creating, frankly, like collision obstacles for people. The problem that those folks have is if we don't come down soon enough, we lose our million-dollar-per-satellite bond. So that creates a different problem where they want to come to us and say, hey, Kathryn, hey, Scott, can you guys help ensure that with this this particular form factor of satellite, if we start at this altitude, are we going to get low enough fast enough in this next period of time?

I'm a little confused. Well, I'm a lot confused usually, and that's my standard operating procedure. But you, you just talked about a longer-term forecast, and you earlier, you talked about a 4-year, 4-day forecast and said that your models are 15% more accurate than NOAA. I didn't hear you say what happens beyond 4 days other than it falls off a cliff in terms of the predictive value of that 4-day window on the next 4 days. So help me understand, how does your model improve beyond those 4 days, and how do you make a long-range forecast? Do you lose the accuracy, which you must, right, over a longer-term forecast? Well, I say you must.

Well, this is where we go back to the nature of our model is a physical model. So it's based on how the sun works, you know, at a kind of fundamental level. Like, why does the sun do what it does in terms of electromagnetic forces? Our skill score for our long-range model, so that's, again, we can run it out 2 solar cycles. If you, Lane, were like, hey, tell me what's gonna happen 22 years from now, we could generate a long-range forecast for you. It would be a hefty price tag, 'cause we're making it, we're calling a shot that's 22 years out. That long-range forecast, we have a version of that model that we locked in 2022 that is tracking at 0.8 in terms of skill score. Okay. So we do have an operational customer, a beta user who started using that forecast in 2022. Those folks, we just checked in with them and said, and the company's Planet, they're very public about working with us. We've published some papers together, fantastic constellation of small satellites that images the Earth every day. So they've had a pretty bold mission that they've been successful in achieving. We checked in with them and they said, hey, we don't want to upgrade to the newest version of the model. So we're always making tweaks to the model to say, are there things we want to lock in even more? They said, no, our operational flow works great. This has been so highly predictive. We're good. Good work. Thank you. Which is a huge compliment, right? I mean, this is something that we called the shot 3 years ago and to get the feedback from the customer that things have played out exactly as have shown in the forecast. Just to kind of go back and be more clear on our products, we have a short-range offering, which is a rolling 14-day window. So folks who have access to the API, they get an update every day with the next 14 days. There's then the long-range forecast, which is a separate product. That's a static moment in time where someone says, tell me what's going to be a baseline solar activity every month for the next X years. You know, again, you could say we want a 5-year forecast or we want a 10-year forecast. Most folks are kind of in that 5 to 10-year range from a planning horizon. There are very few industries where people are trying to make plans, you know, 10, 15, 20 years out. So those are the two service areas, is the short range and the long range. Some of our customers use only the short range because they're concerned with more tactical operational problems. That'd be more what we would expect to see in, precision agriculture, right? Farmers aren't worried right now about what day of the week they're going to plant in spring of '26. They're worried, hey, am I going to have issues with precision-related impacts for harvesting? So that shorter-range model is more for people who have operational tactical problems. The long-range forecast is for folks who need the planning horizon. So they're making decisions about design. They're making decisions about what hardware is going to be, you know, built and flown. That's a big piece of the space world. You know, satellites, even with new space, with things moving faster than more traditional prime contractors were moving, it still takes a year or two years to design, build, launch the satellite. And you want that satellite on orbit typically for at least 3 to 8 years to be able to, you know, monetize something that cost you $5 million to get it up there. So those planning windows are where we're working with folks because we want to help them design for the operating environment that they will experience.

Couldn't I just make a satellite or spacecraft or whatever that was more protected against radiation?

Absolutely.

And then therefore it doesn't matter what craziness the sun is giving me.

That's exactly how it was done before, right? So folks who were operating geo satellites, Those satellites typically have decades-long tenure. Those satellites then need to be prepared for solar maximum, solar minimum, and that was exactly how we approached aerospace kind of in a more of a legacy mindset, which is like you prepare for the worst-case scenario. But it's no different than if you were preparing for the worst-case scenario in your personal life. You're going to throw money at the problem. So what changed is when folks started to operate in a more cost-effective way. Building smaller form factors, flying in lower orbit, so low Earth orbit, LEO, is a term you often hear for folks operating kind of in this new space model. All of that is about can you create a business model that wouldn't have been viable before because you can do it at such a lower cost basis? So if all of a sudden you said, oh, Kathryn, like I'm gonna try to go, you know, operate in VLEO, which is operating in a super high drag environment, and I, you know, want that satellite to last 10 years, okay, you're now hardening that spacecraft, you're adding so much propulsion capability that you could be adding $20 million of cost, and also just doing something that's operationally risky.

And then probably is way more heavy, which means the rocket is way more expensive.

Also.

So material costs and logistic costs skyrocket.

Exactly. Versus if you said my business model is, I'm going to take beautiful images of the Earth from Vileo for all sorts of, you know, intelligence-type purposes. And I just need this to work for 3 years. If you're operating in the next 3 years, that's going to look very different from a drag environment than what would have been true the last 3 years. So we can help our customers by making decisions that are going to be true of the operating environment they're actually in.

From the forecasting standpoint, I'm assuming that, hey, we've got the solar wind or whatever, it's going to affect this rotation above North America on X date. So therefore maybe make the satellite go on the other side of the world so it avoids it.

So for spacecraft, it's pretty global. Okay. So typically what you're thinking about with satellites is just altitude. So where are you in terms of your orbit? It doesn't so much matter if you're in an orbit that's going, you know, North Pole, South Pole, North Pole, or if you're in an orbit that's going around the equator, that is not going to change your drag. For aircraft, the way that our magnetosphere, so the magnetism around the Earth that shields us from radiation, there's a reason why astronauts are more exposed to radiation than those of us here on Earth. It's because of our atmosphere. It's because of this magnetosphere. At the poles, all of that radiation that gets kind of in our Earth sphere, our zone of operating gets sucked up to the poles. So when you're in an airplane and you're flying through that and there's a high solar storm— actually, you know, I should have started with this. The aurora, right? People think it's beautiful. I used to think it's beautiful. I still think it's beautiful. Honestly, it is. It's gorgeous. It's super interesting.

It sounds like it makes you money though, is what you're going to tell me.

It's not something you'd want to put your body through. Right. Right. It's radiation. It's electromagnetic power. That would not be a safe place for a human body to be.

Oh, wow.

So if you are a person and you are flying a polar route in the middle of a solar storm, you're getting exposed to a lot more radiation. And that's the type of thing that we're able to help airlines predict. Don't go flying directly through this solar storm. Maybe that's a day that you want to change your flight plan to go either lower altitude and let more of the atmosphere protect you, or you want to go lower latitude. And stay out of kind of where all of the radiation is getting concentrated.

Everything I'm hearing so far, like cost mitigation and saving on potential, like almost like an insurance policy.

Yes, I think a lot of people make that analogy.

How can I be proactive with your technology to actually make money?

I'm going to show my bias as an operator, right? Like as an operator, always sitting in the operator seat, all of that cost basis drives whether my business model is going to work or not. And then things like space, when we're talking about, you know, I'm saying, hey, you know, Ryan, yes, you could build a super hardened satellite. But that's going to drive $10 million per satellite, and you're going to own a fleet of 50 satellites. And then I would say to you, great, you want to go find, you know, an extra 10 times $50 million in terms of revenue. And then if I said to you, I can make that cost go cheaper, and all of that's now profit, that's how you're making money, is you're looking at how does this business water close, and anything I can do to bring my cost basis down, that converts directly into profit. My background has been in high-capex business. So I like to play on hard mode. Like, I like these businesses where, you know, semiconductor is a good example of this. You make a bad decision with a chip design, you're billions of dollars into building fab lines. If you're wrong, you go bankrupt. There's not a play it again, oops, our bad moment. It's a wow, that was existential. Space is very similar. You know, you make some bad decisions, you lose several satellites. Most people that's game over. You know, you don't get to go ask folks, hey, I need another $100 million. So sorry, I was irresponsible with the last $100 million.

So this conversation kind of dovetails to a previous episode with Ken Hirsch because he was talking about how like it's all about simplifying and it was like, you know, volume times price minus cost. So for like in this situation, if you can increase the amount of satellites, you know, at a lower price and it's a less cost, I mean, you're making up for everything. So yeah, I'm saying maybe not the apples to apples analogy, but it makes sense.

No, it's perfect. Exactly. And all we're saying when we go to folks is, hey, we can help you save this amount of money and we're going to take a small percentage of it and then you're going to gain the rest of it.

Oh, so you work on points?

Typically the way that we're selling to folks is a flat rate because we do want, especially in this early go-to-market stage, we want it to feel really fair to folks. Like the forecast is the forecast. So if you have 100 satellites and Lane has 10, sure, you're going to get more value for our forecast because you're going to be able to take that savings across a fleet of 100. And Lane's going to say, okay, but like, I'm using the same numbers, even if I'm getting less savings from it. We're really trying to be fair and transparent at this stage to say, Lane, if you keep growing your fleet, great, then you're going to get even more value from this. And like, Ryan's able to capitalize on day one because he's a little bit ahead of you in building out his fleet. When I say that we're capturing return on, like the return on investment from the customer perspective, we are literally sitting down and helping them understand that. So here is where you are unlocking the savings for your specific set of customers for this specific moment in time.

Before worrying about space weather and solar events, we worried about normal weather here on Earth. And I'm from Memphis, Tennessee, which is when I was growing up there and early in my career as an investor, we had the world's largest cattle trader, the world's largest Pork Belly Trader, the largest, you know, most of the ags. And some of them, like Sparks Commodities, developed their own in-house weather teams. And they became— they invested significantly into that technology, those resources, and their weather forecasts were so much more accurate, they were able to monetize that through effective trading, right, of the commodity contracts around that. Then they started selling their weather services to farmers and, and others. And so I, I see the business of weather. This is a new weather for me, but I guess I'm curious about sort of what came first, the chicken or the egg. We interview a lot of entrepreneurs and I've met a lot of entrepreneurs and a lot of times they have a passion play and they become really passionate about something and they turn it into a business before they'd really figured out what the business model is. Elon Musk is known for that. At least that's the reputation he has. If he kind of falls in love with something and, and then he worries about how to make money out of it later. So which came first for you guys? Did you see, it sounds like the science, um, and this sort of breakthrough science came and then there was an epiphany and he went, wait a minute, this could be valuable. Is that how it played out?

Absolutely. You know, Scott's journey with this company started 14 years ago. And it started in a place and time where, you know, Hail SWX as a corporation didn't even exist as an imagination vision. It was Scott as a scientist, and, you know, he's grappling with why doesn't this make sense? Why can't we understand this? You know, there's something I think that drives people who are, you know, called into science, which is I need to understand why. Like, why is this happening? And he wrestled with that problem and was able to have this big breakthrough in terms of the field of physics. And then it organically started to unfold. So I mentioned this period where a lot of the space operators have scar tissue. Those folks reached out to Scott. So they found him at his role as the deputy director at NCAR, the National Center of Atmospheric Research. So he was in an administrative role, but they found his papers and they said, we are getting We're getting burned out here, quite literally. Can you help us? Like, you seem to be onto something here. We desperately need help. So that was a very organic process of people who are having this problem coming to find somebody who they thought could help. I met Scott last year, about a year from now. My background is commercializing new frontier technology. So really working in these places that are high capex, working in places where we've never done this before, do we know if it's going to work or not? Scott and I started talking, and to me it was like layers of onion. So I thought I understood it. I said, okay, great, I understand the space piece of this. I've come from space. Oh, okay, this aviation piece of it, interesting. Radiation, hadn't thought about that. Oh, interesting, you can predict when hurricanes are going to happen. Wait, what? How is the sun related to hurricanes? Oh, interesting, this is tied to Earth weather at large. Interesting. We could start to make a commodities play. We could start to, you know, there are all sorts of ways we could take this technology with futures trading, with being our own insurance company if we thought we would have more actuarial accuracy than anybody else. And that's what really got me intrigued is we need to simultaneously run down each of these industry verticals and make sure that we stay focused, that we don't try to boil the ocean. So that's the moment in the company's journey that we're in right now, which is doing all of the go-to-market capture and product work in the industries that I just mentioned. And we're at different places in different industries. So space, we have, you know, the legacy all the way back to 2022, people who had a very real pain point. We just got started in aviation this Q3, just got started with precision ag Q3, and I would say we're still dipping our toes in for precision oil and gas.. And we have the idea to start with precision mining. We've had a couple of interesting product calls, but haven't had any real, you know, we haven't really chased any customers in that domain. So it's a very early stage for the business. You know, we were just talking earlier about the commodities trading and the futures trading. We are actively looking for a partner in that realm. So I have been taking meetings with different folks who may be our partner. At this stage in my life, I'm not going to come up to speed and try to be a quant trader. Like there is a real skill set to understanding how you would take an idea and make a position in the marketplace. We want to partner. So we want to have our model be an input for somebody else's trading strategy.

Yes, you're experts in this thing over here. And it's more like identifying what's the impact everywhere else. And not just what the impact is, because obviously if you could be like, hey, by the way, we have this giant hurricane coming in a couple of weeks. It's called Katrina. It's going to wipe out the bottom half of the United States. Okay, but then what? That's cool that we have information, but what's the and then? Obviously, I don't have any information, but if I'm the insurance company and I'm going to be out billions of dollars, okay, I see the truck coming. Thank you for letting me know the truck's coming. But it's like, how do you, or is it even in your purview to assist them and to avoid that truck?

So, canavering hurricanes, right? Like, we don't have the power to change. Yeah. What we could do and what we can do is the hurricane thing is so funny to me. So Scott casually in February of this year, he was like, oh, we were talking about something we were gonna be doing down at Cape Canaveral. There's a big satellite launch that is related to nowcasting space weather. So there's a big NASA satellite called Space Weather Follow-On. All of this context just to say we were talking about hurricanes at the Cape. This is a national asset, you know, multi-hundreds of millions of dollars satellite that we're gonna launch with taxpayer money. We don't want this thing to get hurt by a hurricane. Scott said, we don't have to worry about that. It's going to be a light hurricane year. It's like, how do you know that? It's February. He was like, oh, well, because we're in a period of high solar activity. The high solar activity means we have high stratospheric winds. High stratospheric winds means that things are moving. So nothing has time to build up, you know, force into a storm cell. And I said, that'll be super interesting to see how that plays out. Like noted that you said that in February. And Connor and I were just chatting. Gosh, we're halfway through hurricane season. We've had one storm in the Caribbean. He called it. Yeah. So if you're an insurance company and we had picked up the phone in February, I could have said, hey, your capital allocation, you could be a little bit more aggressive with putting it into things that are less liquid because you're probably not going to need to do a lot of payouts this year. So if you want to go grab a couple of extra basis points with the capital that you have ready to deploy, this is the year to do it. If the converse were true, and I think we're going to head, you know, there's going to be periods in the forecast that show the opposite. We would say, you know, if you're gonna go re-up policies for '26, '27, '28, we would recommend that '28 extension, you need to price that differently. I think we would expect that you would see a lot more activity. So can we change the storm happening? Absolutely not. You know, that's force majeure for a reason, act of God. What we can do is help people understand, characterize the risk, and price it accordingly.

Billions of dollars at stake there. I became aware recently of a model that was developed by a female mathematician, statistician that really revolutionized how insurance industries underwrote weather events. And this is in the last 10 years. And one of the things she did was she sort of created a value map of the areas. So it's not just what's the likelihood of a storm hitting, which you may have been able to forecast that more accurately, but it was if the storm does hit, let's use our aerial photography, our mapping to figure out what's the value, what do we have insured on the ground there? So what's our exposure? By doing that, one of the things is you reprice it. The other is you reinsure it, right? You sell off that risk.

Let somebody else take that on.

Let somebody else take that on. So it was, uh, it was intel that allowed insurance companies to make or not lose billions of dollars. It's really fascinating when somebody sees something in a different way. That really improves outcomes. I want to pivot a little bit because I'm really intrigued with part of your background. When I was doing some homework on you, it said early career included work as a fellow at the US Department of Defense and International Negotiations. So, I'm this lower middle market M&A advisor and I work deals and I have to negotiate deals. And I'm always fascinated with, am I negotiating right? Am I using the right style? Where do I push? Where do I pull? When do I shut up? And there's all sorts of different schools of thought on how to negotiate. So you can read one book that says you don't give an inch, right? You just hammer them all the way through the process. And then Harvard has a group that studies this, that's published work that says, no, you want to figure out what a win is for them and you want to let them win over here and you win over there. So if you have a background with the US Department of Defense and international negotiations what do you find to be, and is there a single style, or does it, is it dependent upon the specific negotiation and who you're negotiating with?

So I definitely have a pedagogy, and it's great that you bring up the Harvard Center on Negotiation. So after I left the Pentagon, had a great experience as a fellow there, I decided that the thread I wanted to pull was negotiation. So to me, negotiation represents how do you solve problems with other people, right?. And I did then and desperately do still care about solving the type of complex problems that one person can't solve alone. You know, I don't need help tying my shoes. I got that one. But, you know, Elaine, if you and I are going to go try to figure out how we're going to put positions in liquid natural gas futures markets, I'm going to need your help. I'm not a finance person. You know, I work hardware, technology, frontier CapEx businesses. Like, I'm going to need help navigating Ryan, finding the right people who would be experts at that, that problem solving, I use the word negotiation. So I think a lot of people think, put your hand on the table, we're going to arm wrestle. It's like, no, no, no, we just need to figure out how to get all these group of people to decide, we want to go there together. But also decide, no, I don't actually want to go there. I'm going to go with that other group that's going to that other hilltop. That's also a helpful outcome in a negotiation. Coming out of the Pentagon, I went to go work for one of the two consulting firms that spun out of Harvard Law School. So I worked for Vantage Partners. So if you've ever read the book Getting to Yes, I worked for that team. I did some amazing work at the firm. We worked with a lot of high-capex companies, a lot of Fortune 500 people who have billion-dollar-scale problems so that they're willing to spend $1 million to get very bespoke help. I do think that that informs the way that I see negotiation, which is, what are you trying to do? So I think when people call me and say, you get known in your social community as the negotiation person, which is fun, 'cause then people call you when they have deals. It's really fun, just get to hop in and help people. Folks will say, oh, I need help, and I'm like, great, what are you trying to do? So if you've taken any of the Harvard negotiation framework, interests, what do you care about? What does success look like for you? I am shocked by how many, and I shouldn't be now, right? I've seen this so many times, but I am still surprised by how many really smart people when they're asked that question, they're like, I don't know, I just want to win. I'm like, great, what does that mean to you? Is that, you know, X million dollars deal size? Because that's going to look great, you know, for you to go get the next big deal. Is it profitability? You know, I'm going to be able to get this at, you know, you know, X what it should have cost this, and I'm going to get it on a price that I can flip. You know, it doesn't actually matter what the overall cost or the transaction value is. Is it that you want to build relationships in this industry because you're just getting into it and it's helpful to just put your toe in? And any win in this domain is a step toward, you know, ongoing relationships and expansion of value you can create together. So I would say I always start with the question of like, what are you trying to do here? Like, what do you care about? What does winning mean to you?

Right. And Harvard, if I remember correctly from, from reading their literature and getting to Yes, is, you know, they would differentiate between that and positional bargaining where, you know, Ryan wants to sell me that pad for $100 and I want to pay him $50 and one of us is going to lose, right? Unless we meet in the middle, I guess. And that's okay with both of us. For me, as a, as a guy working deals, the challenge is I get a letter of intent or an indication of interest and it's got these 15 different deal points, right? This price, these terms, the, you know, this employment agreement, that And so there are 15 points and we disagree with all 15, right? We want more money, we want better terms. And you get locked into this positional bargaining that's all conflict. And people yell and scream at each other. I worked in a large M&A shop where there were dozens of dealmakers and it was interesting to see the styles. I had a yeller that sat near me and he yelled and screamed all day at people on the phone. I'm more of a carrot guy. I'm trying to help everybody win. But Harvard's, as I recall, position was find the win, figure out what they want, what is success to them, figure out how without saying, no, this is my position, this is your position, one of us is going to win, one of us is going to lose. How do we figure out how we both win? Now, the practical application of that is challenging to me. Sometimes you get so mired in the deal itself and the negotiation that. And you get so frustrated. So maybe you could come consult me on negotiating.

I'm happy to be helpful where I can.

Absolutely. Maybe that's the reason that the close rate in our industry, which I would call the success rate, is so low. You know, Firmex, which is a provider, a service provider in our industry, did a, does a survey and they interview all the folks like me working deals. And they said that last last year, the most recent 12-month period they studied, said 30% of deals fell out between LOI and closing. And the sort of accepted rate in the lower middle market where I work is that only about 30% of deals that go to market actually transact.

You think that's because of ego and unrealistic expectations?

I think those are two variables.

I think they're more than obviously my business is a billion-dollar business. Exactly.

Would you like to? I'll offer you a dollar. Now we've got a positional bargaining.

What's the difference?

$500 million. But yeah, I mean, there are a lot of variables. I certainly think that when it comes to privately owned businesses, people have a real misconception of what their business is worth. And there's really not great data out there, right? It's not like the— if you own a house, you can get data, you can go online and immediately get data that says, well, my neighbor over here and over here and over here sold it this much per square foot. I think I'm the best house in the neighborhood. Maybe I'll get the high end of the range. Maybe I'm the worst house. But if you own a manufacturing company in Denton, Texas, what are you worth? Well, you know, you pick up the paper and read SpaceX's valuation and you go, oh, well, I'm worth 1,000 times this thing, right?

Well, no, you're not. Well, going off that conversation, you take a company like Hale SXW where it's a fairly new startup, right? Potentially billions and trillions of dollars worth of impact.

Yeah.

How would you even evaluate that?

So one, it's a SaaS business, software as a service. And so it's a subscription model. And this will be no surprise to our guests. The marketplace is in love with businesses that have that recurring model from subscriptions. Low overhead. You're in from a CapEx-heavy industry and now you're in the— Full other flip.

You've gone a full flip. I got to tell you, it's making my life a little easier to be on this side of the low OpEx.

Low CapEx, just go to market. Absolutely. So, you know, if you were to value it today, which they wouldn't want to sell right now because they got the world by the tail and they're going to go, you know, sign up a lot more people. But if they were to value it today, they would take a look at that revenue stream and they put a growth rate on it and they discount that to present value. And then there'd be a multiple applied to it. And right now the multiples for a SaaS business are through the roof for the right SaaS businesses. They don't have a lot of churn, their customers aren't turning over. I wrote a piece the other day for my clients that talked about when businesses and industries are valued at multiples of revenue, there's something really good going on as opposed to multiples of earnings. And there are a handful of industries that are valued at a multiple of revenue and that's, they're in one of them. With that said, every dollar that they add, you know, it's just a, there's a huge multiplier on top of that. So I don't know where they get to that sweet spot where they go, we'd rather, we'd rather sell part or.

All of the business. Well, what's interesting about this conversation though, is though, because it sounds like, and again, I don't know your field enough. It sounds like you're doing something so unique and so new. Revolutionary, you're the only one in the space potentially, that, that model seems a little archaic. Amazon, you know, they made a profit never, and, but they're still like trillions of dollars or whatever it is.

So it's like, I think they made.

A profit by now.

I'm being hyperbolic. For a long time. Uber.

You know, when you got something like this where the impact is billions and trillions and, and somebody's like, well, you've made X dollars, I'll give you $10 million. $10 million may be a multiple, maybe low, but let's just say it's $100 million. And if like, here's $100 million offer, it's like, that might be a lot or it might be a drop in the bucket because maybe it is a $10 billion business, $100 billion business. I guess at some point it has to only be about the numbers, but at what point is it also about.

The vision of the technology? Vision translates into growth and growth translates into a higher multiple. You know, if in knowing this much about what they do, what I would say is if I were trying to assess risk, I'd say, okay, you guys have a secret sauce. How long will you have that secret sauce? When will somebody else figure out what you figured out? Right. So do you think 50 years from now they'll still be the only people that know what they know and have the ability to make that forecast?

Yeah.

Well, if it's, if it's not 50, is it 20? Is it 10? Is it 5? What, what is it? It's really not a technology. It's a knowledge base. Thing. They've discovered something that others haven't discovered yet, or a way to apply something that nobody else has figured out how to apply yet.

I think it kind of falls into trade secret at this point. I do think Scott has like a 3-sigma brain. Yeah. Do I think other 3-sigma brains exist? Absolutely. Will those people be drawn to the field of physics? Will eventually someone walk the same path that Scott walked? Absolutely. So I do think that there's a piece of our business which is serving industrial applications where then the strategic mode is, you know, we've already commercialized this, already have relationships with folks. Let's make sure that we do right by our customers, that we're giving them accurate data in a format that's easy for them to receive, that's priced appropriately for the return on investment that they're receiving. Then we're in a good spot. You know, I think that's, that's a good place to be as a business. We do, I think, have a unique window of time when it comes to futures trading, because currently we are the only people who can call a shot that says, hey, LNG prices in the Midwest are going to be more expensive. Let me say it differently. The demand for LNG is going to be much higher in 2028. Right now, nobody else can make that position in the same way that we can. So sure, I'm sure other people have ways that their trading strategies play out, but the uniqueness of our model is the length of time that we're able to start to call some of these shots. And that's where I think when we're talking about valuations, it's delightful to be a private company because we can really, excuse me for sounding crass maybe, but it's a money printing machine if you figure out how to put the inputs into the right model and then get the right outputs. So I think that's why we're excited about this financial services piece because there is a window of time where we're the only person who can answer that question.

So what is the next 3 months.

6 months, 1 year? Yeah, so again, we are customer obsessed right now. So when folks, you know, folks have been so generous, I think that's the beautiful thing about being a person who builds businesses. Being an entrepreneur is people are always so generous to say, how can I help you? And the way that I answer that question is always, please, if you know someone in space, if you know operators in precision ag, if you know operators in precision mining, I want to talk to the customers. So if there is someone that you have heard has this problem, please don't let them suffer in silence. So we're a little melodramatic here, but like, don't let them suffer the way they have been status quo. We can help them. So put them in touch. Let's talk to them. Maybe that converts to a sale. Maybe that's just helpful product input for us. More specifically, because we're here in Dallas, you know, we're here in the heart of the financial industry, we would love to find a quantitative hedge fund partner that would help us be able to translate our understanding of what's going to happen in terms of space weather, in terms of Earth weather, in terms of liquid natural gas markets. That's probably the one that we think we have the highest kind of— there's a direct causal relationship that we can track in the markets. But frankly, we don't know what we don't know in futures trading. So we'd love to partner with someone who said, oh, actually, I think we'd see that signal really strong, you know, here in this commodity, or we're going to see it in insurance, we're going to see it in shipping. So those are the types of conversations that we're really excited about having. Where we'd love to be, you know, 3 months from now, I'd love to have more of a sense of which of these industries do we want to focus on? You know, which ones are like, put all, you know, all energy here, move fast, which ones are like, yeah, interesting, but we can play it out in phase 2. A year from now, I'd love for us to have a really clear conception of these are the 3 industries that we are hyper-focused on. These other things, sure, it's interesting, but we don't think the return on investment is so strong to justify spending time on it. Or we could find the opposite, which is go hire a whole big team of people and kind of a SaaS, software as a service model, and just deploy them at each of these verticals because they're all super interesting. And it's just a speed to capture game. And we're going to hire the world's best SaaS sales team to go sell this super interesting frontier technology. I think those are the types of questions that we're answering in the next year. But it's all feedback from customers, all.

Feedback from the marketplace. Well, best wishes with that. What a fascinating thing. So I guess as we may get close to wrapping up, I would say that it occurs to me you probably, when you were 10 years old and some obnoxious parent like me said, what do you want to be when you grow up? It wasn't a forecaster of of solar, weather.

I want to be the Secretary of Defense. So it was a very obnoxious answer.

Really?

That was it?

Yeah, I really wanted to be Secretary of Defense.

Oh, wow.

That is so cool. I've never met anybody that wanted to be the Secretary of Defense. We got close. I mean, you got in the playing field there somewhere.

No, and I think I say this with so much respect for public servants. I think I got close enough to realize that, you know, in the same way that you want to be a trash person when you're, you know, 5 years old, you're like, that's a really cool truck. I want to drive it. Got close enough to be like, you know, I don't know that I actually want to do that job.

It's a hard job. My parents always remind me that when I was young, I always— I wanted.

To be the fire truck, not the.

Driver of the truck. No, the truck. I want to be the truck. And I'm like, what kid says that?

Yeah, that's amazing. The same kind that says I want to be Secretary of Defense.

I don't know if that's an actual attainable position. It is. I can't be a Transformer.

Physically, I mean, you know, just wait a couple of decades, Ryan, and we'll see what, you know, the biomechanics field.

Can do for you. Yeah. You've navigated into a really interesting space. You bring in all the talents you've had from these other iterations to it. And I'm excited to, to, to, to watch what happens. I'm now going to be really intellectually curious about this area. I'm going to be paying more attention to solar activity.

I'll call my shot, you know, because we've been talking about forecasting and calling shots. I think you'll have the potential to be a billion-dollar business.

You heard it here first, team. The deal table.

Yeah.

Hail SWX. Again, when, when Connor first started talking about it, it was like— and then every conversation, there's more. Even this morning, or even this conversation, you just— more and more and more, the applications of it and how it affects your current model. I don't know if that's going to be what gets you there, but it's like what Ken Hirsch was saying. You got to pivot and you got to figure out how to— the pathway to get there. And that's just your classic entrepreneurism. But with what y'all are doing, if you're the only one, you're the only players in the game at the moment, at the moment. And if you can, if you're the only one on the field playing the game and the game is, you know, has that billions and trillions of dollars worth of impact, it's like you could be Scrooge McDuck and swim in the money pit.

Scrooge McDuck.

Wow.

The money pit. And you say that, Ryan, I say, you know, thank you. And also that's why I feel we have such an opportunity. But I say this as a true operator, it's also, it's our game to lose, which holds us to a high bar, right? Like we want to be the high-performance athletes who, you know, set a new bar, set a new record, decide this is frontier technology that is not in the land of sci-fi anymore. This is in the land of reality. So I think when you interact with me, when you interact with Scott, when you interact with Connor, you see that in the way we approach this, which is, this is our moment. Like we need to seize it now and we need to be bringing this information to people to be helpful. Like, we shouldn't all be shrugging at the sun being like, well, that's a bummer. Bummer that we lost $500 million of satellites. Like, bummer that people are maybe, you know, being exposed to too much radiation. Like, bummer that we're going to have hurricanes that, you know, it's really hard to price. Like, these are things that to me just feel so connected to what it means to be human and be in the process of discovering more about our world, which is like, we always move toward progress. We always move toward understanding something that, you know, before, before it's known, it's mind-boggling. I think we're right in that moment right now with space weather. Well, thank you so much for being here.

Thank you, guys. Thank you, Kathryn.

That's great.