How Small Firms Beat Big Ones

Richard Byrd: Welcome to the podcast. Today we have a very special guest, James Kim of PKU Industries. He's the president and founder of the company. James, welcome to the show.

James Kim: Well, thank you. Thank you, Richard. I really appreciate it.

Richard Byrd: I've been really excited to have you on since we had our first conversation. I always love people's origin stories, and you had a really interesting one. It's interesting how your background gives you these building blocks, and all of a sudden you find yourself in a totally different trajectory. You seem like you've put just the right Lego pieces in place to get where you are today. Tell the audience a little bit about your background.

James Kim: Thank you for the flattering introduction. If I look back on my career and what I've done, I don't see anything extraordinary. In fact, a lot of the instances came about and I just followed the route that was provided to me. Just to give you a quick background: I'm an engineer by trade. I actually sailed on board large merchant vessels, chemical tankers, and did that for a few years. Decided that's probably not very conducive to a very good social life.

Richard Byrd: It's hard to meet girls.

James Kim: So I ended up joining the best man of my wedding at a nuclear power station as an engineer. I did that for a few years. And then the course of my career took a turn following the path of my wife, my present wife. When she moved away from South Miami, I had to look for something that followed her, and that took me to working first at Siemens Westinghouse, and then eventually finding a job with GE in 1999. I think that's where the majority of my career path took shape. From GE, I started out again as an engineer, but slowly transferred into the business and the service business, and eventually ran the global O&M business for GE. And then an opportunity came up to come back to Korea. My wife's entire family is in Korea, so you'll see a common theme here.

Richard Byrd: So you owe all this to your wife.

James Kim: Exactly. As we all do. I owe it all to her. And I moved back to Korea to work for a large conglomerate called Doosan. For those who don't know, Doosan is essentially the major power generation equipment manufacturer and services provider in Korea. I joined the EPC team as a commercial director, did that for a few years, and then ended up running their R&D for the gas turbine technology that essentially made Korea the fifth country to possess the technology to produce heavy duty gas turbines. Did that for a few years, and then an opportunity came to work with an investment bank called Macquarie, Australian based, but they've got a huge presence here in the US. Worked for them as a managing director overseeing assets, and then through that position I was led into another opportunity, to be the CEO of a hydrogen producing and distributing company out of Korea. After that rotation was completed, I decided to move back. And in doing so, an acquaintance of mine who owns an engineering company in Korea had an idea that market conditions in both Korea and the US were changing. The idea was to create a company here in the US to help facilitate a lot of those changes in the marketplace, and how the investments are trending in the future in terms of industrial plants and industrial investments. So that brings me to about a year ago, when I moved to Houston, Texas, and created PKU Industries.

Richard Byrd: It's really interesting because each one of those blocks — you've got the old maritime world and then GE. We've talked to some of you guys that were ex-GEers, and it's such a wonderful training ground. You see the track record of the people who have come out of GE and it just teaches you so much business acumen to go with the technical acumen. I think they do a better job of that than most companies of preparing their employees to think like a true business person instead of just purely a technical person.

James Kim: Exactly. Their leadership training, everything I've experienced thus far, is by far one of the best in the industry.

Richard Byrd: You're basically going to get a PhD in business if you want one.

James Kim: Essentially.

Richard Byrd: What were the trends you were seeing when you were working with your friend in both the US and Korea that made you say, "This is convincing, and I would love to come help you realize this"?

James Kim: I think what we were seeing was a demand for industrial companies to invest in the US, because the macro trend we saw was that the US was going to be the growth engine at least for the foreseeable future, especially around petrochemicals, refineries, oil and gas, and especially around power generation. And as you know, a lot of demand for new power generation has come about because of hyperscalers and data centers. When we looked at that and saw that was the macro trend, a lot of the investors that want to invest in the US are actually Korean. There are semiconductor companies, automobile companies, petrochemical companies, or companies that need LNG and therefore co-invest in the US because they need that LNG back home in Korea. Those are just a few examples of why a lot of Korean companies have made the decision to come invest in the US. We definitely saw a large uptick in the activity around those investments, and we thought, is there a place for a company that understands both cultures? Not just the engineering aspect — obviously that's very important, the technical aspect — but also the culture, and how the companies and the regulatory agencies work, and to be able to merge those different cultures toward a common goal in achieving the goal of a particular project. So that's how the genesis of the idea of creating PKU Industries came about.

Richard Byrd: I think that's a really remarkable way to think about it. Seeing the trend was good, but recognizing the cultural aspect — I think people underestimate that so many times. They go, "Look, this is engineering, and people can come together on solving a technical engineering problem regardless of culture, because math and physics are the same no matter where you live." But the cultures can be really challenging. You see JVs fail, you see a lot of these things fail because people don't know how to negotiate, or they don't know how to communicate, or how to know that when they say this, they really mean that. And all those little frailties of people — people just go, "Oh, we'll work that stuff out. We're going to solve this technical problem." Especially technical people really believe that.

James Kim: You bring up a very good point. In my experience back at Doosan in the EPC world, you look at some of the projects that go off-kilter, and the reason is because there are assumptions made. What would be very easy to execute in Korea — because the access to the regulatory body, or access to resources, or access to supply chain lets you carry something out very easily, it's not even a thought — you go overseas and it becomes a major challenge. A lot of what I observed was underestimating those challenges, or in some cases not even realizing those risks are there in the first place. And when people approach risks as they occur, that's when your budgets are blown, your schedules can't be met because you have to deviate and change, and all these things affect the outcome of a project. So one of the things we stress, especially myself and the people who are now working for PKU Industries, is that we focus a lot on the execution side and the experience of executing different types of projects and what the related risks are. Through the lens of a client, we want to approach these projects and ask, what can derail a project in terms of quality, in terms of cost, and in terms of delivery? Those are the key fundamental structural things we have to take into account when we measure whether a project can be successful. And that's an underlying premise for everything, starting from preliminary design to detailed design, to construction, to commissioning, to startup. All these things have to be kept in mind, and these different phases have to be integrated. That's the challenge we want to help our clients get through with minimal or no impact to the outcome of the project.

Richard Byrd: That is well said, and the right way to think about it. So many big projects go over budget and past the allotted amount of time because they are complex. But I don't think it's necessarily the engineering complexity that does it. I think it's those other things you were talking about.

James Kim: Exactly. When you look at a project, if everything went as expected, it's very hard to distinguish a good project from a bad project, because every project has a plan that meets the budget and is delivered on schedule.

Richard Byrd: On day one, every project is on time and on budget. That Gantt chart looks so pretty.

James Kim: It looks so pretty. You do an estimate, an S-curve, and everything looks perfect. It's when the risks emerge that you didn't anticipate — how the organization actually deals with that. But before you deal with it, how well have they anticipated it? Is there a plan? Is there contingency? If something goes wrong, what do we do? Unless you've thought about these things, it really is hard to keep a project on time and on budget. And that's where, when you hear some of the horror stories from Korean investors who have invested and tried to build a plant or build out manufacturing capability in the US, they've run into those situations, and in some cases they've actually just given up and gone back home. Which is very unfortunate. It's bad for everybody — bad for the investor, bad for the local community, bad for the company. It's just not good for anyone.

Richard Byrd: It's not good for the city, the community, the workers, the guy who built the hamburger shop next to where it's going. It's terrible.

James Kim: So what we're hoping is that with a little more insight at the front end of planning, including the engineering, we could alleviate a lot of these potential pains in the future.

Richard Byrd: We got down the road a little bit, but for the people who don't know PKU, give us a thirty-thousand-foot view. What you guys are about, the kind of projects you work on.

James Kim: We primarily focus on industrial projects and industrial plants, around industries such as petrochemicals, power generation, and chemical production. We're also very well versed in hydrogen and carbon capture. Those are some of the specialty industries we're very good at. PKU is co-owned by a company called Pields Engineering, an engineering firm that has been in existence for over twenty years. They're about three hundred and eighty people strong, two hundred and fifty plus full-time engineers, so there's a big, massive weight of engineering knowledge behind PKU Industries. Their experience ranges from feasibility studies, assessing the situation from an engineering perspective, all the way into construction and commissioning and startup. So: feasibility studies, pre-FEED, FEED — meaning front-end engineering and design — basic design, detail design, coordinating procurement, supply chain, construction, and then wrapping it all together in final commissioning and startup. That's what's behind us. PKU eventually wants to get to that point, but initially we're going to focus a lot on engineering services and support and logistics.

Richard Byrd: It's really nice to have that nimbleness of being small, but to have an eight-hundred-pound gorilla behind you.

James Kim: I think it poses a unique opportunity, and I say that because the whole industry right now is in flux. Every industry is in flux, primarily around AI and how to incorporate it, how to stay ahead of the pack and not fall behind. One of the benefits we have is that because we are relatively new, and we're basically creating this company from the ground floor, we have an opportunity to adapt a lot of these tools that are being developed as we speak, so that we become a leaner and more customer-focused company. It makes it easier for us to build it from the ground floor rather than changing something that had been built for many years. So that's a unique opportunity. And if need be, from a knowledge standpoint and a resources standpoint, we've got that partner company in Korea backing us up.

Richard Byrd: You get the best of both worlds there. There are a lot of examples in business — the one I'm thinking about is China. When they industrialized their country, they didn't have landlines. So they went straight to cellular, and they became the leader in cellular. They skipped that whole level because they came in at just the right time. And as cellular technology was blowing up, I feel like that's the way you guys are. You're building a company where AI is just a tool you incorporate in everything you do from day one. If you had to go retrofit every process, everything you've done, to incorporate AI, I think you're going to really struggle. We've been doing it at our company. We're a young company, and just due to the nature of the CEO, myself, I wasn't a super process-oriented person. So we're re-looking at our processes now with AI, and it's remarkable. I don't think you can just bolt AI onto your current processes. I think it changes everything so much, and if you try to incorporate AI into your current processes, you're really selling yourself short. Because if you think about it from an AI-first perspective, you go, "Why do we even need steps three through eight? Let's just do these two steps and we're done. We need one more quality control step, which we already had in there anyway. We don't need to use this software, we don't need to connect it to this other piece of software — just have the AI do it natively." And then you go, "Do we need all that software we were using before?" It's really eye-opening. And you can go in with fresh eyes like you guys are doing and just build it the way it should be, without being held back by your preconceived notion of how it should be.

James Kim: I think you're spot on. Initially when we were looking at this, we knew the direction. We knew AI was something we needed to adopt into our processes. But we went out and used the commercially available LLMs — we paid the subscriptions, the premium subscriptions — and tried the large language models, which generally tend to look at the whole world and try to form-fit trends or anticipate how things occur in the bigger picture. We tried that approach, but our business model was just specific enough that there were some hallucinations, some ideas that we caught and we said, "No, that's not what we want to say. This isn't how we want the process to occur." And so the idea was, we have to teach the AI what we want it to do. It's kind of like hiring a new employee into the organization and trying to teach them the process we follow and why we do certain things. That led us down the path of, instead of a large language model, working with a developer and a small language model, which is more specific to what we need.

Richard Byrd: Trained on your data, without the worry about hallucination. I feel like the LLMs really shoot right down the middle of the fairway with their answers.

James Kim: Exactly. But we may not want to approach it from the middle of the fairway. We might want to hit it toward the right side because we'll have a better approach and not have to go over a bunker or a lake. In any case, that's where we're at — working with an AI developer to create an SLM that includes not only the common knowledge of rules and regulations and specifications, but also what we call an IP vault, an intellectual property vault, which is unique to the experiences of Pields Engineering and PKU. We take all of that knowledge and put it into this vault, and the AI agent has access to that vault, and we give it priorities in terms of decision making. Do you rely on our past experiences first, or do you rely on specifications? Obviously compliance takes precedence, but sometimes there are gray areas where they can go one way or another, in which case our intellectual property based on experience comes into play and helps. So that's the gist of the AI tool we're trying to develop.

Richard Byrd: That sounds really interesting, because I can see where your client specifications come in, and when you look at those, there are maybe twenty different ways you could do it based on the specification. If it's written poorly, a hundred ways. So you're training the AI to say, "Look, when you come into these situations, here's our preferred method of dealing with ambiguity, and maybe even flag this up to an engineer and give us some options on how we would want to do it — but let us make the decision."

James Kim: Have you ever heard clients say, "Oh, this is nice, but we believe it's over-engineered"? That term, over-engineered, typically comes from blindly looking at all of the specifications and regulations and going word for word on what they say. But in a lot of ways, you have to look behind what the words say and what the intent was. You have to understand what the history was, why it came about. And when you do that and take all of that into context, then you're able to have an open discussion with the permitting office or a regulatory agency and tell them, "We understand the intent, and we think this design is enough to deal with the potential risks or liabilities that could occur." We have a discussion, and that's how I think the better-engineered projects come about — with open dialogue, understanding what the intent is for the specifications, and not just following the letter of the law.

Richard Byrd: I think good engineers think that way, and a lesser engineer goes, "Yep, these are the specs, I'm going to go nerd out and engineer this thing." But especially in the energy industry, I see it a lot. Something happened in 1923, and that changed the overall company spec, and for some reason it just stays there, this ghost in the machine. And if you look at it with fresh eyes, you go, "What happened here? Why? Based on the new materials in the industry or new designs that have come out since 1923, maybe we don't need that anymore."

James Kim: And there are new ways to model things, such as airflow — you can model using computational fluid dynamics. These have become very sophisticated over the years, so you can model a lot of things and use that as a basis for the design you're putting forward. There are structures or parts that you can 3D print, versus you couldn't do that before. There are some really wild-looking geometries that you would never have been able to manually machine, but now you can print it on a 3D printer, and it's actually much more effective in terms of rigidity, strength, flexibility, structure — but at like a tenth of the cost.

Richard Byrd: And you only need fifty of them. I grew up a machinist's son, so I grew up in a machine shop my whole life. This was back in the manual machine days, running lathes and mills, no CNCs. I'd look at some of the parts and say, "There's no way we would ever be able to machine something like this." You would never have engineered it that way when you didn't have the 3D printer.

James Kim: But now imagination is wide open in terms of what you can apply. And by the way, my father — we ran a machine shop up in New York for many, many years.

Richard Byrd: Oh, no way. That's cool. But you probably have metal shavings in you too, just like I still do.

James Kim: Yeah. It was before safety and PPE were a big thing in this world. You learn by experience.

Richard Byrd: You learn from the old cut-yourself, and you say, "Okay, don't do that anymore." Oh, it turns out that's really hot.

James Kim: Exactly.

Richard Byrd: We'll have to swap some more stories on that another time. One thing that really captured me when we were talking earlier was a story you told me. At Doosan you were dealing with some really difficult situations. Can you share that story and talk about how it changed the way you think about dealing with complexities on projects?

James Kim: One of the key reasons I was asked to join the Doosan EPC team was that there was massive and rapid growth of the EPC business overseas, predominantly in the Middle East and Southeast Asia. There was a huge boom at the time when I joined. And there were some projects that didn't go as planned, like all projects. There were liquidated damages built into the contract that were designed to protect the client, but in a way the liquidated damages actually protected the contractor as well. So it's actually a fair method, a tried and true method. But they had dug themselves a big hole where they were faced with massive liquidated damages. Part of it was, number one, the projects were multi-billion-dollar projects, billion-plus projects, and because Doosan, though they're good in Korea, weren't as well known overseas, some of the contract terms and conditions stipulated a large sum of money tied up with liquidated damages. So part of the reason I was hired was to come in and sort through these things. First of all, put the fires out, go and negotiate with the clients post-contract.

Richard Byrd: They gave you all the fun jobs.

James Kim: And also put a process in place that would keep the business away from those situations in the future. A lot of the delays, the change orders that are pending, the arbitration issues — a lot of them stem from misunderstanding one another. When you look at it from the lens of, how do I win as a contractor? The traditional way of winning in a project is to make as much money as you can, and when you're done, knock the dust off your hands and walk away, and you're fat, dumb and happy.

Richard Byrd: Laugh all the way to the bank.

James Kim: And when you think like that, you tend to get into a situation where there are disagreements with the client. And I would be willing to bet that there are zero EPC companies and zero projects that have gone without any error from the EPC.

Richard Byrd: Right. So every contractor is going to make a mistake. It's just too much complexity. Statistically, it's going to happen even if you're great.

James Kim: I think the companies that do this well align themselves with the client, and they use that alignment on goals as the basis for having the discussion. So let's say a permitting delay occurred. In the traditional way, you approach it and say, "That's not my problem, because the contract says the permitting issue is your responsibility, Mr. Client, so go take care of it, please." But a collaborative EPC would approach it as, "Hey, this is delaying my end of the work, it's going to delay my contractors coming in and doing their work, and it's going to put an issue all the way down the line, and that ripple effect is much bigger than just a simple delay and maybe a change order." When you approach it that way, the client is much more conducive to saying, "Well, what can we do to resolve this? Let's approach it from the same side of the table. How do we reduce the effect of this?" And, oh by the way, when we're done with this, Mr. Client, we'll do whatever we can in your best interest, but at the end of the day we can't be held liable for this. They fully understand. And they say, "Well, also because of this, I've got to take a little more time, I've got to issue a change order to address this." Those conversations can go a lot smoother. And overall, there was a statistic that if you approach it that way, the impact to the project schedule is reduced by like fifty, sixty percent.

Richard Byrd: Wow, that's amazing. Do you think there's something to be said about that collaborative approach of getting ahead of the problem and seeing it coming? Because like you're saying, a good EPC company will see that coming. An experienced project manager is going to go, "We haven't heard from them on this. I wonder how that's working out. Let me get in touch with them and anticipate what could go wrong here." But so many people aren't as proactive with that. Because you're going to get bogged down with stuff to do on your EPC project — there's no shortage of things to do, so it's easy to get lost behind it. But then there's also that transactional nature of, "Yeah, that's on you, this is on me." I think that transactional type of relationship was really a twenty-year-old thing that shouldn't be going on today, because the world's really changed. And the good thing is customers can work with who they want to work with. Obviously people have to bid on things and you've got to be in the ballpark, but they really remember those instances when you had their back and you were really trying to help them out, and not just "gotcha."

James Kim: And sometimes those decisions to collaborate may impact your bottom line, but the way I see it, it impacts your bottom line short term, in the immediate. So if you are living day to day around financial metrics and your boss is on your back to make sure your financial metrics are met, then you really are forced into that situation where you're defending yourself and defending your company as a contractor. But if you were given a little bit of leeway to say, "Look, we understand that for the long term we may have to take a hit on our bottom line, but it's for the benefit of the client," and try to work something out with the client — if project managers and engineering managers are given that leeway, they tend to do a much better job and produce much better results. That's some of what's in the back of my mind based on the experience I've had that I'd like to incorporate.

Richard Byrd: It's interesting, because I've seen this — not so much in the EPC world, but on the upstream oil and gas side, where service companies and the operator work really hard to get contracts that have a lot of gotchas in them. They don't have revenue generators, because, look, we're going to bid on it so we can win it. If we don't bid low enough, we won't win. And everybody's doing it. But then they put these gotchas in there — if we have to come in, we're going to charge you a mileage fee, and the base is a hundred miles all the way from the place. All these little gotchas that get the invoices and the change orders up.

James Kim: It's a fine balance. Of course there are projects where you have to bid and you might be underwater from day one in terms of hours and what you're being compensated. But if you made the decision, you have to live by it. If that's not what you're comfortable with, you shouldn't have bid that way. Here's my philosophy: in any project, there will come a point — I'm not going to say a hundred percent of the time, but a lot of the time — where a client's going to need you for something above and beyond. And how you respond to that matters. You don't bring up, "Well, give me a PO, and we'll get working." No, you say, "Look, we have a relationship. Let me try to understand and figure out a way we could solve this." Focus on that first. And when you come to agreement on the way to approach it, then you talk about the financials, the commercial aspect of it. Then I think they're much more open-minded to listening to it. You may call those gotcha opportunities, because they are opportunities to make up if you bid low. But if fundamentally, intrinsically, your mindset is to get this project up and running for the benefit of the client and to satisfy what they need — if that lays down the foundation of how you operate, then the chances of coming to a commercial agreement are much, much higher.

Richard Byrd: I totally agree. The way I always like to frame it with clients is, if you know you're going to lose money and be underwater from day one, never make a deal that you're going to hate yourself in the morning for winning.

James Kim: Exactly. Be honest. If that's what they're expecting, chances are the customer's doing it because they're under a budget constraint. They don't have much money to begin with from their client, their off-taker. So do you want to get into that situation and entangle yourself from day one?

Richard Byrd: In some of these larger projects, I've seen them die because they got ten percent of the way through building it and ran out of money. There was some big infrastructure on the east side of town where you go, "Wow, that's a nice foundation that was poured." You mobilize all these people.

James Kim: And those are tragic stories. They really are.

Richard Byrd: And I know people got caught up in that stuff. They paid their vendors, they'd already hired their contractors, and all of a sudden a lot of people get left holding the bag. And then the lawsuits, and it's just a nightmare situation. I guarantee my friend that got involved in that would be very happy to have just walked away from that proposal when he saw it.

James Kim: It's hard, though. Your friend probably had the best intention to do the best he could. But it's big-name people on a big-name project — you think they just won't belly up. Things happen.

Richard Byrd: Force majeure, isn't it? That's the reason lawyers know that one really well. One thing you talked to me about that I thought was a really interesting angle was this idea of asymmetric warfare, and what's going on in world geopolitics and macroeconomics right now. You gave an analogy of asymmetric warfare to the way you're setting up your company. Maybe you can walk our viewers through that.

James Kim: Obviously I don't want to align myself to the side that is playing, in some people's eyes, the unfair way of competing or fighting. But the reality is that the effectiveness of asymmetric warfare is very, very blatant. Nobody can deny the effect. You look at the might of the US, and there's nobody in the world who would doubt that the might of the US military is the greatest in the world, greatest in history, bar none. Nobody would deny that fact. But you look at some of the confrontations that are going on, and the result is that the adversary is fighting with a much, much smaller budget, and yet from a difference point of view, there's not that huge a gap. I use that approach for EPC project management. Now, for full disclosure, I'm not talking about the billions-plus projects, because I don't think companies such as mine can handle projects of that size. But a medium, hundred to three hundred million dollar project that's smaller in nature — if you do a comparison between a large player and a relatively smaller player, and we were to go head to head in terms of the resources allocated, the documentation that would be produced, and we were going to meet head to head on every one of those deliverables, I think we would lose out ninety-nine percent of the time, because the larger players have the resources, they have the know-how, they have the process.

Richard Byrd: And they've got the relationship in a lot of cases too. That's super important.

James Kim: So it's an unfair competition, an unfair battleground, so to speak. In order to win, you have to consider different ways to level the playing field. And what I mean by that is: can we deliver what's important to the client — again, back to quality, cost, and delivery? Can we compete in all three of those, but at a smaller scale? Several things have to come into play to make asymmetric project management come to fruition and develop the results clients want. One is the advent of AI, and really leveraging that to stay lean and be very quick and responsive. The other is that we formed a coalition here in Houston of like-minded smaller companies, but they have their own core competencies and expertise, and it has to be complementary to what we do. We form a coalition so that we approach the problem and stay in our core competency lanes, the swimming lanes. And we have an agreement in place beforehand: how are we going to approach this to deliver what the client needs?

Richard Byrd: Establish the swim lane.

James Kim: And we would focus on what we're good at, and you focus on what you're good at, and we integrate it together and present it to the client, and we'll be very transparent about it.

Richard Byrd: I think when you can combine those best-in-class boutique companies, you're going to get way better than the "pretty good" you'd get from a larger firm. Because it's very hard to hire best-in-class people at every position in your company.

James Kim: Exactly. And there are companies that do that. But those people have to be paid very well.

Richard Byrd: And to make payroll for those big people and big salaries, whether you're using them or not, every two weeks, you've got to charge a lot — and so now you kind of price yourself out of it.

James Kim: I think it creates sort of a death spiral if you have too much overhead. Maybe right now in a lot of these EPCs there's a lot of demand, so that's not a big issue, but there'll come a time where maybe the demand falls off a little bit, and now you've got to deal with all this overhead, fixed cost. And the way a lot of companies do it is they basically peanut-butter those fixed costs onto each project, and therefore the projects become less competitive. And when you can't win a project because it's higher in cost and not competitive, then you've got to peanut-butter more of the overhead and you become less competitive. That's the spiral I've seen some companies fall into. The beauty of this coalition is that if the demand falls off, we're so lean and small in nature that we're able to adapt to where the demand is. That's one. And because we are experts in what we do, and we're going to leverage tools like AI to coordinate and sync us all together so that we have a comprehensive solution and status reports to the client — if we do that very effectively, we're able to deliver everything the client's looking for at a lower cost, much more competitive. Quality-wise it would be right up there, and from a delivery standpoint I'd make the argument we'd be a lot nimbler and faster, because a lot of the smaller companies have the owners, the founders, or the presidents directly involved in these projects. So the decision making is much flatter, and each of those smaller businesses can come up with solutions or compromises much quicker than a bigger company can.

Richard Byrd: I didn't know how to frame it this way, but we have taken an asymmetric approach to our business as well — my sales and marketing consultancy. Because we're small and lean, and we do exactly what you're saying. Like our friends here at Anthem, where we're filming this video. I don't want to own a video studio and have to find good video people and all those kinds of things. We do our part really well, and we bring them in when we need to, and don't have to pay a GP salary over there. It's such a good fit. That speed and nimble approach. And we go head to head with some big companies. We compete with Bain, we compete with Accenture, we compete with some of these global giants that are killers and have a lot more brand awareness than we do. But I've seen a lot of the reports that we have to come in and clean up after those guys, and I will tell you, our product is, in my humble opinion — others may disagree, mileage may vary — but they left key things out that we would never have left out. And when you said you're dealing with owners, we've got a lot of skin in the game. And it's our name attached to it.

James Kim: Exactly.

Richard Byrd: I can't sweep something under the rug because my boss knows better. He caught me red-handed every time. So we have to deliver at a high level every single time, because we just have too much skin in the game. Those larger companies don't have to do that. They win the deal and they put their best twenty-three-year-olds on the problem. And they don't have to care. I won't work with people in my organization who don't care as much as I do about it, and I have the liberty of being able to do that, because I'm not going to go to the best business schools and hire four thousand people this year. So it's a really interesting approach, and I think it's not only allowed you to compete better on price — aside from that, I think you get a better product just for those reasons.

James Kim: I think it's the way of the times. I'm a product of large organizations, and I see the value in large organizations, don't get me wrong. But when you look at the top performers of these large organizations, they have the drive that an owner would have. But at some point in their career they were put on a leash, or they were told to back off, or they were told that idea doesn't work, you've got to go with the other idea. And it frustrates these top performers in a lot of cases.

Richard Byrd: That's right. So then they become like you and me.

James Kim: That's right. We come out and figure we could probably deliver what we used to deliver in a larger organization, but do it much quicker and closer to what the client needs. Because a project going awry doesn't arise from a planned event going wrong. It's always an unplanned, unanticipated issue, and it's not dealt with very efficiently. That's the key issue.

Richard Byrd: Right — "Oh, I've got to talk to my boss, and he's going to talk to his boss, and she needs to talk to her boss, and she's on vacation for two weeks." Whereas if a client comes to me and says, "Hey, Richard, I don't think this is right," let's talk about it right now. And all our clients have my cell phone number. I think people are going to learn to expect that kind of intimacy with their vendors and their contractors and their partners.

James Kim: I get calls in the middle of having dinner with the family, and my wife will kill me for telling you this, but I put the fork down and I tend to the call. I know that's probably going against the grain in terms of a well-balanced lifestyle, but the reality is that people who have their own businesses, founders, presidents — in a lot of cases, work comes first.

Richard Byrd: I think work-life balance is good for everybody except entrepreneurs.

James Kim: Exactly. It doesn't work if you want to do that. You can't be an entrepreneur.

Richard Byrd: I always felt like for employees, a hundred percent, you should. I encourage our employees to have a good work-life balance. I really encourage them to take vacations and really unplug. But that doesn't work out for the owner. There's no backup.

James Kim: I've got a great management team that can field a lot of things, but I never stop thinking about work. In my spare time I read business books. You just can't turn it off.

Richard Byrd: It's just part of it. Well, this is primarily a sales and marketing podcast. We talked a lot about the business of EPC, we touched on the commercial models. But one of the things I find interesting in a situation like this from a sales and marketing perspective: here we are spinning up this company, and it's a company that in the EPC world has long sales cycles, lots of backlog, all these things. And I don't think people fully appreciate how challenging it is to sell these jobs. You're talking about a three hundred million dollar job, and by the way, that's small in your world, but that's a huge project for me. I don't know how many people out there have tried to sell a three hundred million dollar project, but it's challenging, and it takes a lot of time. Walk us through how you got your first customers. Because the other thing is, you're operating from a perspective where you don't have a ton of brand recognition. We were talking about Burns & McDonnell and all these companies that advertise at Daikin Park — people know who they are internationally. So how have you done it?

James Kim: The beauty of PKU Industries is that I don't have to do everything on my own. If I had started this business on my own, I probably would have approached it differently, or not have done it at all, because I know how difficult it is to win your first job. Our first order came about through the association with our partnering company in Korea. They bid into a project, and through that association the client needed a boots-on-the-ground engineering company to help them navigate different regulatory issues, as well as certifying a lot of the design that was happening in Korea — to validate it and certify it to be applicable here in the US. So that's how we came about, through that association. I know it's a unique opportunity, because not a lot of companies have that. But even with that opportunity, it's hard. It's hard because nobody knows PKU Industries. For the last year I've been going to trade shows and association meetings and doing what I can. What I'm finding is that where I have expertise in something, I will provide that knowledge pro bono. And I have to do it willingly — meaning if there are follow-up questions, if there's additional information I have to provide, I have to invest the time and effort to do it the right way. I've done a couple of those related to power projects, carbon capture, and hydrogen, and I think that's starting to produce a little more traction in getting the name out. In addition to our Korea partner bringing work here to the US, we want to create local, organic growth here. So it's a journey. We gave ourselves at least two years to get the wheel rolling, but I think we're well on our way. We won our first order — it's very small, but it is material in size, so I think we can leverage that, market that, use it as a track record. And as you know, your second order is always a little bit easier, and then the third is a little easier, and it gets easier and easier to win new orders.

Richard Byrd: That's right. I remember when I was a young kid and I wanted my first credit card, and they said, "You can't have a credit card unless you have a job." And I said, "Well, I think I need a job," but they said, "You can't have a job unless you have experience." And I was like, "How do I get experience if I don't have a job?" I felt the same way when I started the company. I had a wealth of content I could use when I was selling and doing business development for someone else, and then I had the crazy idea to jump ship and do my own thing, and I'm thinking, "I have no case studies, nobody knows my brand. I've got to figure this out fast."

James Kim: And here you are, a published author. Your name's well out there. But like you said, you just get the first millimeters. The first rotation is the challenging part.

Richard Byrd: Very, very hard. But don't you think there's something very energizing about starting from scratch and figuring it out? Every day there's a new challenge, and you're always coming up with new ideas and testing things with your friend or your coworker.

James Kim: And you can test those things. But you have the ultimate responsibility. Now I have a couple of employees. I'm responsible for myself, for the family, and for the employees as well. So that's tough. But the good thing is that if I have an idea, we can try it. We can take that risk, we can invest a little bit of money to try it and see if it helps — things like the development of the AI tool I was telling you about. The association with the partnering company helped a lot, because they helped invest in that AI tool. I probably couldn't have done it by myself. And two, had I been with a large organization, a lot of the...

Richard Byrd: "You're going to go launch this new AI tool — what do you think?"

James Kim: We would have created a task force team of some number of engineers.

Richard Byrd: And then I think you would have said no.

James Kim: No, HR would have said no. There are a lot of people who say no, who get paid to say no in those organizations.

Richard Byrd: That freedom is really what it's all about. That's why I think entrepreneurs become entrepreneurs — for that freedom. But knowing that you have all that heavy responsibility behind you. The big company I worked for was a French company, and I realized that "bureaucracy" is a French word.

James Kim: Oh, that's going to go over well.

Richard Byrd: No offense to my friends who are here for the World Cup from France. One of the things we talked about when you're talking about marketing your company and getting the word out is the idea of a value proposition. What would you say your value propositions are for PKU?

James Kim: In my thirty-plus years of training, I've come to develop strategies and communicate what I'm trying to say in a manner that's easy to remember. So I thought about how to go about doing this, and what I ended up with is taking the word "trust," because I've always been a firm believer that trust is the main glue or the catalyst that makes relationships work. So if you break down the word "trust" into an acronym — I thought about the components of how you develop that trust. There are five words that start with the letters of the word "trust." The first is T: you have to be tactical. What I mean is you make day-to-day decisions, but you have a clear goal of delivering a high-quality but low-cost product to the client to be competitive. From a tactical standpoint, especially around supply chain and partnerships, you have to make a decision every day. And that decision directs where you end up. So being very tactical about the decisions, and being deliberate. Then the next word is R: reliable. When a customer wants a letter or a contract revision, or they want an answer to a question, and you say, "I'll deliver it tomorrow," or "I'll deliver it this week" — you do it. When you make a promise, you deliver, and over time you become very reliable in that sense. Also the services you provide have to be reliable in that you're consistent in what you're saying. You're not saying one thing one day and another thing another day. You have to be very consistent. So reliable is the second. And the U is upstanding, because that's having high integrity, being compliant with all of the rules and regulations, but on top of that having a sense of responsibility toward society. Whether you volunteer, or do something small in the office and say, "Look, we're going to try to conserve energy," or not produce as much waste, or whatever it may be — being upstanding, being part of the community, is very important to the client, but more important to your employees, because they will relate to that. The next is S: being strategic. Tactical is looking at the day to day; strategic is looking a little further beyond, at what the emerging technologies, emerging processes, and emerging trends are, and seeing whether you have to adapt to those changes and how relevant they are. So being strategic, looking ahead. And then the last is T: technical trust. What I mean by that is, I want our clients to think of PKU Industries as the foremost expert in the fields we're good at, in our core competencies. Anything related to process engineering, anything related to mechanical, anything related to power generation or carbon capture — a question comes up, and I want them to say, "PKU Industries is an expert here." So we want to get to a point where we provide such services that we're recognized as a technical expert. Take those words together, and I think when you put them all together, it not only forms the word "trust," it actually does develop trust with one another.

Richard Byrd: I like it. And not only from an outward-looking marketing and value prop perspective, but also from a recruiting perspective. Those are the kinds of things you can hold your team accountable to. "No, we're not going to do that, because we have to be upstanding." You're talking about reliability — you touched on a couple of things like report generation. We do a lot of voice of customer research for clients. And a lot of times we go in and talk to customers who are sometimes mad at our client, but they haven't really been upfront with them about why they're mad. I think some people find it difficult to have a challenging conversation with other people face to face. They'd rather just fire them and move on and find another handler. And one of the things we've found in the voice of customer research is exactly the things you just described — delivering reports on time. We had one client that was on the verge of getting fired by their customer, and the guy said, "You know what? Technically, they do a great job. The work is good, they finish it on time. But the one thing that really aggravates me, and the reason we're looking to replace them right now, is that they never hand reports in on time. They said it's going to happen in two weeks, and I have to synthesize it and deliver it to my boss for our meeting, and it never comes on time. And every time I've talked to them about it, they say they're going to fix it, and they never fix it, and I can't have this anymore." And when I told our client that, they said, "He never said anything about that. He didn't say it was a big deal." I said, "Did you tell him you were giving it to him every two weeks?" And he said, "Yeah, it's a standard boilerplate thing." And I said, "He's counting on it, and if you can't get this fixed, you're going to get run off." And the CEO said, "This is news I can use. Trust me, we're going to fix this." It just goes to show you, it's those little things that technical companies overlook a lot of times. They think, "Oh, it's just table stakes. They don't really need that stuff." But they don't realize —

James Kim: They don't know the motivation for why they need it. And they don't think to ask, "Why do you need that in two weeks?"

Richard Byrd: So I think that's really important.

James Kim: Or even a call that says, "Hey, I've run into some difficulties, it may take a few more days." That goes a long way toward that earlier discussion around collaboration and understanding.

Richard Byrd: A hundred percent. I want to know the bad news. Send that to me by FedEx; the other can come by boat. I want to know the bad news long before it becomes a really big problem. And I work on tiny, inconsequential projects compared to delivering a gas plant.

James Kim: One thing I've learned is there's no such thing as a small project. Even the ones that are small, that may seem inconsequential — it causes a big ripple effect if you don't deliver on that small piece. And that's where the reliability comes into play. No questions asked: when you promise something, you have to deliver.

Richard Byrd: A hundred percent. You only have one reputation in this world.

James Kim: Exactly. One of my executive coaches has told me that trust is gained in ounces and lost in buckets.

Richard Byrd: That's a very wise man. And I believe it. Anybody who's been in trouble with their wife knows this too. "Sure, honey, I'll do it." And then you don't do it.

James Kim: She would amplify that by many times.

Richard Byrd: What are you seeing about how you're handling year two? Year one's under your belt, and like you said, you've got some momentum going. How are you looking at year two commercially?

James Kim: I think it all depends on how we deliver on the first project. But the word is getting out. Like I said, the pro bono type of work, whether it be in an association or giving a speech — those things are actually gaining traction as something I realize is pretty effective. So we'll probably focus a lot more on that. I'm actually going back to Korea to talk to some key clients and let them know, hey, we're more established than when we first started, and hopefully I can drum up some more business that way. And then at the end of the day, everything I told you — I've got to be pretty consistent in executing, creating that trust, the collaboration. Whether it's through tools or a relationship with partners or whatever it may be, it always goes back to: what does the client's project need, and how can we deliver that? As long as we stay focused — and I've got great, well-seasoned engineers who joined us, and their mindset is very close to what I'm saying; in fact, that was the basis of why they were hired — I think we can deliver something meaningful to our clients. So I'm very hopeful. But I'm always a hope-for-the-best-but-prepare-for-the-worst type of guy.

Richard Byrd: One of the things you said there I really like. We do sales consulting as part of what we deliver for our clients, and one of the things I find interesting is what you just said: let's go back and talk to some people we pitched but lost. I think that's such a smart thing to do. We have a lot of isms in our company, and one of them is that we break sales teams down into two categories: zoo tigers and jungle tigers. The zoo tigers are the ones that wait for the deals to come to them — the zookeeper keeps bringing in steaks. And the jungle tigers are out in the wild. It doesn't matter if they're in the jungle or in Siberia, they're going to eat, and they're going to go find the prey. And they both have their strengths and weaknesses.

James Kim: As a founder seller, nobody's going to bring you a steak. You've got to always be hungry.

Richard Byrd: You're always hungry. One of the things that's interesting is that the weakness of a jungle tiger is that they like new things. They want to chase the next gazelle. And they don't think to go back a lot of times and say, "Look, we've got these closed-lost deals in our pipeline that we should probably go back and revisit and really analyze and see what happened." And in your case, it probably was that they were thinking, "We haven't heard of these guys, they don't have a track record, this is too risky, I don't want to chance it yet." But to come back to them now is a really smart move. Really game-plan them, because you know those people well now. You've already talked to them, you've already talked to the people in the buying committee, and you can orchestrate all the people in the buying center a lot more clearly. It's hard to go into a situation where — a lot of our clients might have ten, twelve people in the buying committee, because they're big deals, and if you can talk to three of the ten people, that's outstanding. It's very difficult to map that buying center. But with those kinds of companies, you really increase your odds a lot. And people a lot of times are like, "Well, they don't like us, they didn't want to work with us, we have to move on." Especially jungle tigers.

James Kim: Oh, no, no. It's a smart way to do it. Definitely going back.

Richard Byrd: Best of luck to you. I think you'll probably have better results because you've got a track record. And your collaborative approach is a good way to think of it too.

James Kim: Just the fundamentals of it — we are now officially registered as an engineering company in Texas, Louisiana, and Tennessee. We've got certified professional engineers on staff. We've got a coalition of other expert companies that fill areas where we're not so good yet, but we can collaborate with them. So I think I can frame a picture where the larger power projects, from A to Z, we could handle everything, because we've got means to access all these different resources, and we've got that fundamental set of resources that we need, plus the partner in Korea to back us up. So to your point, I think it'll be a much more effective sales pitch than I was making about a year ago before I came here to Houston.

Richard Byrd: We work with a lot of companies that are trying to enter the United States market. I don't know why this happened, but for some reason we fell into working with companies entering the US. They saw the same macro trends you saw about why the US is desirable. It's been really interesting to work with those types of companies. And when you can say, "We helped this company enter this market, and we helped this company enter this market" — maybe this is the person we want. And now that you're here, boots on the ground, you can say, "Look, we have this project, come over here. Here's what we know now that we didn't know a year ago. You were probably right to be skeptical of us then, and here's what we've learned, and here are some things that if you partner with somebody else on these deals, they may not know."

James Kim: An idea popped into my mind. I think you're also in a very unique position of interviewing all these different types of enterprises and companies, and if you happen to detect commonality in some of the trends and things going on, you could open up a call — purely voluntary — and just have an open discussion about what people are thinking. I think I would join that call just to learn from other people and see who other like-minded people are and how they're thinking. It would validate some of the thinking I have, and it would also give me an opportunity to let the world know, hey, we exist. I think you might be in a very unique position to be able to coordinate that.

Richard Byrd: That'd be fun. Now, you heard it here first. It's going to be our next group podcast. I think it would be good too, because we helped a Belgian hydrogen company enter the United States. We've helped a Swedish telecom company enter the United States, and, hopefully this hasn't closed yet, a manufacturer of packaging equipment. So it's really interesting. The thing I've noticed about all of them — one of my key takeaways from a commercial side — is that people who enter the United States aren't prepared for the level of marketing intensity that is commonplace here. Especially Europeans. It's much more gentlemanly over there, and a lot more sales-led. And they're not prepared to crank the volume up like they need to here. We're loud Americans. And we're in Texas, and in Texas we're even louder. So you've got to be able to get above that volume.

James Kim: When you come to America, you're going to be at eight or above, and when you're in Texas, it's ten or above. At least.

Richard Byrd: At least. And that level of aggression is just what it takes here. There's a lot of competition, there's a lot more noise, you have very worthy adversaries. The things that maybe differentiated you in Europe, you come here and maybe they're not the same differentiators, or maybe they don't even value them at all — maybe they value something wholly different. And so that's a really challenging thing that we've found. When our clients come to us and say, "Look, we've thought about differentiation, here are our value propositions," we tend to take their word for it, and we go into the market and — oh no, this isn't moving the needle at all. They don't seem to be interested in these things. And I'm like, well, it worked great in the UK. Well, it doesn't work here.

James Kim: So how should we think about that? Maybe do a little bit more research, get more feedback. I think US companies have to tap into what feedback is being provided and really be open to changing based on the feedback.

Richard Byrd: Oh yeah, for sure. Have you ever read that book, What Got You Here Won't Get You There?

James Kim: Exactly. One of the key readings for GE leadership.

Richard Byrd: Of course. The company I worked for had similar things. They made you read Getting to Yes, and Crucial Conversations. It was a great education. I have all those books, I still refer back to them. What is my BATNA?

James Kim: Exactly.

Richard Byrd: Let's talk a little more about AI. This is a podcast in 2026, I've got to talk about AI. We already touched on it a lot, but it's central to what you guys are doing. And it's going to be the thing that helps you get asymmetric relative to your larger competitors. What's your AI thesis?

James Kim: I'm a believer in AI. I think AI will make a difference, but I'm also being very cautious, because I've tried various things for it to do certain tasks, and I think there are still limitations. Unless you are giving it tasks with a certain purpose, and that purpose in the grand scheme of things has to come from you. Humans still have to create what that purpose is and how it fits into the bigger picture of what you're trying to achieve. If you can do that, I think AI right now is a very, very powerful tool. If you expect AI to be able to do that for you, then what you'll see is that it falls short, or sometimes even goes off on tangents and really messes up your entire process. That's the reason our AI development doesn't hinge on large language models. We are trying to create a more specific AI agent based on a smaller language model, and a lot of that trend data or past data that gives the material the AI would refer back to — we have control over that. And so this intellectual property vault, the IP vault, is the value of our partner company and PKU. We put our knowledge in there, and we allow the AI access to that. And obviously, for obvious reasons, we don't want to open that to the public, because then I'd be out of business.

Richard Byrd: Your trade secrets go down there.

James Kim: So that's the approach we're taking. Eventually all those things that we consider IP vault or trade secrets are going to be out in the open, but who knows how long that will take? Until then, you create it, and then we'll just have to adapt as AI changes too.

Richard Byrd: That's one of the things too. As we were using these tools, we've started to develop pretty clear codified processes, and we gated our content, and now we're sharing our processes across teams and sharing agents, and it's been very exciting. Like I said, I'm not a hugely process-oriented person by nature, but one of my partners, Shannon, is very process oriented. It's just, we've got to get our processes documented for this. And I said, I don't disagree with that. But what are we going to do when the next model is here, and you go, "Wow, how might that change our processes?" And also, I'm on the fence about whether we need some of the software that's in our processes now, because I think we can go around it. Documenting it now may be a little bit too mature. Because once you document a process and you say, "Thou shalt all follow this process," people will do it exactly, and then you're lost, because you can no longer have that fresh look at it like you guys were able to take.

James Kim: You've got to be very careful, because the original AI came from neural nets. GE folks were into the Six Sigma thing, right? Transfer functions — this is what causes the output. So x1 times blah blah, and x2, x3, and that equals y. That's the transfer function. But neural nets take that to an upper quadrant. It's x squared and x cubed, and it was able to handle all that. And neural nets predicted the outcome much more closely. In statistics terms, the R-squared value is higher for a neural net model than for a standard typical transfer function. So with the advent of the GPU being so powerful and so quick, they were able to take that neural net concept and really make it go very, very fast. But at the end of the day, all a neural net is doing is taking a bunch of data, form-fitting it, and predicting the outcome. And that's how the large language model came about — the tokens and all that. So if you know that, and you say, "Thou shalt follow this process," to your point, you will lock into that process. But if you say, "Here are the potential outcomes. This is the upside, this is the downside, this is how we made the decision in this particular case, we went there because..." Those are the kinds of data inputs we want to put into the IP vault, so that we're teaching the AI — because it has such a bigger capacity to look at different sorts of data and how it form-fits into the outcome it's predicting. That's the theory, at least. Give it all different types of data and see what comes out. And my hunch is that it will pick up things no human would be able to pick up, if that database gets big enough.

Richard Byrd: I think you're right about that. And it's the same for humans. Have you ever had a boss who was a micromanager? Every time you try to think outside the box or question something — "Stop doing that, stop doing that." I was in a job like that, and I just stopped thinking for myself. But that's not who I am as a person. I've always been challenging and thinking about things and trying to come up with interesting angles. But if you have somebody who slaps you every time and lectures you and says, "No, do this, do this," you don't think for yourself, you don't live up to your potential. So why wouldn't AI be that same thing?

James Kim: That's not a very sophisticated transfer function. Very straightforward. But as you know, the good organizations set boundaries, and you give your employees flexibility and freedom to make decisions within a boundary. They can go any way possible, and the outcome is usually a lot better at the end of the day. It may be inefficient in the beginning, because there's a whole bunch of ideas back and forth, but at the end of the day the outcome is usually better, and those organizations tend to adapt better to changes and deliver more meaningful output. So that's the idea here: yes, large language models are too broad. We want to narrow it down because we're specialized in engineering services, but we also don't want to constrain it. Like I said, we don't want to over-engineer just because this is what the spec says. We say, well, there's some leeway in how we interpret this, and hopefully the AI will pick that up and ask, "Can I apply it to other applications?"

Richard Byrd: And I think in that situation you'll find that AI is going to come up with questions you probably wouldn't have even considered. Its understanding of physics and these things is pretty scarily good. All of a sudden you go, "Wow, I'm surprised it knew that." And it'll fly across a lot of different areas simultaneously where you would maybe have a blind spot. Maybe you're not an expert on laminar flow or whatever, but this thing might be, if it read all the literature. One thing about employees: the way I tell my team is, "Listen, this is what we're trying to solve. Here are the no-go zones — here are the outcomes that we can't have happen. But treat it like it's your money. It's coming out of your pocket. Come to me with a solution and we'll talk about it. But at the end of the day, you get fifty-one percent of the vote. I'll challenge you, I'll challenge your thinking. But at the end of the day, if you really think that's the case, then we'll do it. But you have to follow those parameters." And people really like that. I think they like the autonomy, but they also go, "Wow, with great power comes great responsibility. I don't want to let Richard down on this. Let me rethink my answer. Can I come back in two days?" Yes, come back in two days with a new presentation. I'll repeat the parameters and say go. And the output is pretty darn good.

James Kim: And if the firm profits off of that, there should be incentive to reward the ideas. And if that culture gains momentum and becomes embedded into the culture and the DNA of all the employees, you can't even imagine what could come out of it.

Richard Byrd: I'm good at some things, but there's a whole world of things I'm not good at, and there's an even bigger world of things I'm terrible at. So I hire people who are good at those things, and I don't pretend to be the expert. They're the expert — you tell me. I don't know about HubSpot dashboard setup. I don't want to learn about that. You do it. Talk to me about energy transition and CCS. Why do you feel like that's a good bet for your organization?

James Kim: On carbon capture — contrary to the belief that the Trump administration goes up against anything that's environmentally friendly, that's not true. In fact, they took the Inflation Reduction Act, and there's a particular portion of it that provides a tax credit for carbon capture and long-term storage, and there's a tax credit related to enhanced oil recovery. People in the industry know what I mean when I say EOR. EOR is basically pumping CO2 into a well that is nearly depleted, and through that pressure it enhances the recovery of the last remaining oil. By doing that, you store the CO2 in the depleted caverns. In the past there was some tax credit involved — I believe it was sixty-five dollars a ton — but the Trump administration came in and increased that to eighty-five dollars per ton. So eighty-five dollars per ton was the basis for carbon capture and storage, typically where you capture it and pump it into the ground. No additional value comes out of it. But EOR adds value to the oil and gas company.

Richard Byrd: Absolutely. There's a lot of uncovered oil in these EOR wells. People know it's there. It's hard to get it out.

James Kim: But CO2 will help. It'll kill two birds with one stone, in that you're storing it and you're getting enhanced oil recovery, so your production rate goes up. I know it's not a well-known thing, but the fact that the tax credit went up for that is actually good for the environment, because it incentivizes companies to use carbon capture and storage — and then they get something out of it. In the past, the eighty-five dollars was not enough in an economic sense, because you have to invest to build out the infrastructure and whatnot. But with EOR, which provides some value, and the enhanced tax credit, the economics change. And I suspect that in a back room somewhere, some expert in oil and gas is saying, "The economics have changed, so we need to look at this." Especially in Texas, where now the law has changed so that the permitting responsible party is no longer the federal government. It has trickled down to the state government.

Richard Byrd: The Railroad Commission.

James Kim: The Railroad Commission. So I think that in itself is a big advocate for change on carbon capture.

Richard Byrd: We have a client that helps with those projects and getting permitting and things like that. That was the first step. They can do all the technical stuff, and they've been able to do that for a long time — let's just call it tertiary production. They've spent a lot of time on that, but they said we're just going to focus right now on getting things permitted. The risk for customers is that if we have to get this permitted from the federal government, that becomes a three-year process, and then who's to say three years from now that government's going to even be in place and what's going to change? They just say, "It's too much uncertainty, let's worry about other projects." They can only entertain so much at one time anyway, so those just don't make it off the table because of the uncertainty associated with it. But I agree with you. I think this will help, because the state of Texas is pretty friendly, especially to the oil and gas industry, and just commercially in general — they're open for business. So that could really be one of the big risk reducers that unlocks it. Because that's always been the most frustrating thing to me about carbon capture. They've been able to capture carbon at the flue for a long time. The technology has been around for a really long time, and there's no mystery to it. There are challenges to it, but it's not mysterious technology that we don't understand.

James Kim: It's been around for over fifty years.

Richard Byrd: And so I've always been very frustrated that if the real problem with the environment is that we have produced too much carbon, that's a very solvable problem. From a moral standpoint, it's the right thing to do, and I think everybody agrees, but then the economics is where the rubber meets the road, and the tax credits just didn't address it. Now, upping the tax credit for EOR, in addition to the value of the EOR, and in the state of Texas where there's a lot of carbon capture that can occur...

James Kim: And they're different processes. Process-related carbon capture is a lot cheaper than flue gas carbon capture, which has a lot of other constituents that you have to separate out. But process-related, where you're pulling hydrogen for, let's say, fertilizer and ammonia or urea — pulling CO2 off of that is actually fairly cheap. And they're not doing it right now. So, okay, maybe I'm going down the conspiracy hole a little bit, but you look at some of the bottlenecks out of the Strait of Hormuz right now. It's not just oil — there's actually a lot of fertilizer that's the bigger problem.

Richard Byrd: That's actually a bigger problem. And nobody needs a famine right now.

James Kim: My feeling is that the industry is going to respond by creating manufacturing elsewhere, and the US is ready to do that and really ramp up production for export. If they do that, a lot of it is going to be in the southeast part of the country, in Texas, and as I said, that CO2 is actually cheap to capture. Cheap to capture, get a very good tax credit, ship that to Exxon or the other oil and gas majors to enhance their production? It's a win-win, at least in my opinion.

Richard Byrd: And the other thing is the transportation of it. We have all these pipelines that are inactive — the infrastructure's here. So shipping's not going to be a problem, capturing isn't going to be a problem, economics are there. Well, how do we get the rest of the world to do this? Because I'm all for it.

James Kim: I think Houston is in a unique position because of the focus on petrochemicals, potentially boosting production of ammonia, urea, and fertilizer, and at the same time it's right there to pump into the depleted wells, and there are plenty of them around Texas. So I think Texas is in a really unique position, because the greater the distance between where you capture it and where you have to send it to store it, you're adding cost, pretty significantly. So if you reduce that and it's all localized in an area such as Houston or Louisiana, I think there's tremendous opportunity.

Richard Byrd: The thing I didn't realize about it is I was thinking, how do you take that and ship it around? But it's a supercritical liquid at that point, so now you can — but it's corrosive.

James Kim: It is very corrosive. At the company where I was CEO, that was one of our key technical issues. Making sure the pipeline is well protected and continuously monitored. And that brings up the other point you just made: it's a saving grace for oil companies, because they always have to deal with corrosive environments.

Richard Byrd: That's nothing they haven't solved a million times over. They know how to continuously monitor things. They know how to deal with it. The other thing is that in that world, when you pump it down, you have to guarantee it for a hundred years. And there's really no other industry I can think of that's willing to make a hundred-year bet, or can even pretend to, other than the oil and gas industry. So I think you're right, you're primed. They just need to get around to seeing the value. With the way the administration's moving now, it's more focused on gearing up the growth of oil production. But maybe with a change in administration, with a little more focus on environment, they're going to be like, "Ooh, there's money to be had." That's the thing that was always disappointing about the way we talked about the environment with the last administrations. They never said, "Hey, there's money in it."

James Kim: I don't think they did a good job of that.

Richard Byrd: We have a pretty good ecosystem in Houston with Greentown Labs and what's going on over at the Ion. I went to a few of these conferences over there and I thought, "Man, there's a lot of money to be made here, and it helps the planet, and it's going to help the people." And there was a lot of investment money being thrown at it, and I just thought, this is the way things should happen. And then the new administration kind of dumped some cold water on that. But like you said, I think people took it too holistically and didn't look deeply enough at all the pieces, because there were winners and losers. Some technologies were made uneconomic, some were made more economic. But that's where people who can recognize those opportunities, like yourself, and get the word out about it, is where we really need to be.

James Kim: I'll get the word out. And if there's an interest in checking the feasibility from a technical standpoint and the economics behind it, that's where PKU can come in and handle a lot of that for you. The analysis isn't millions of dollars — it's a front-end feasibility and front-end engineering, and we could do all of those things so that you could evaluate it. And you could put it up on the bookshelf until later. You could always pull that information out, because it would be very good reference material in terms of the economics behind carbon capture.

Richard Byrd: And they can even look at it and say, "We don't have an appetite for this, but if this variable changed, we would have a lot of appetite for that."

James Kim: And what people don't know is that carbon dioxide is actually a product. Not just something to be stored — it's actually one of the best cleaning agents for high tech like semiconductors. They need a lot of CO2 in the foundries. And they pay good money for it. And they're building foundries. They're going to need CO2. I can guarantee they're going to need hydrogen and they're going to need CO2. And they're going to need other industrial gases, nitrogen, oxygen. So there's demand, and the demand is going to go up because they support high tech products and high tech industries. So as the high tech factories ramp up, CO2, carbon capture, and hydrogen generation are all going to be very relevant, I think, in the next three to five years.

Richard Byrd: Well, that is good to know. You heard it here first. I think that's very encouraging, because sometimes when you hear all the gloom and doom about the environment, you feel like things can't change, and it's very discouraging as a human trying to live on this planet and make sure our kids can live on this planet. So when you can see that some of these challenges aren't as big as they seem — you can overcome them, and it's economically sound to do it. In fact, it could be a net win on all fronts. And just encouraging people to take advantage of those opportunities is really critical.

James Kim: Especially the states that border the Gulf — Louisiana, maybe even Alabama, Texas certainly — can benefit because of the proximity of where everything has to fit together. You could keep your costs down relative to everywhere else. The permitting and the rules and laws and regulations are much more at a state level now, so it's easier and less sophisticated than at the federal level. I think all of the pieces are being set in place. Somebody just needs to put it all together and take advantage of it.

Richard Byrd: Well, if you're looking for a carbon capture feasibility study, you know where to go now. Alright, we've talked about a lot of stuff, but stepping back — thirty-five years in power generation, where you've been able to gain a lot of knowledge. What do you know now about building a business in these complex industries that you wish you'd known when you got started?

James Kim: I think I'd put a lot more emphasis on relationships and building trust. I'd have to admit that I was probably a lot more overconfident, to the border of being cocky, thinking I knew more.

Richard Byrd: The poison of youth.

James Kim: But if there's one thing I've changed over the years, you said it best: I don't know everything. But I know what I know, I know what I don't know, and I am willing to delegate what I don't know to people and give them freedom. I don't micromanage them. Let them do what they need to do. That's one. And then from the client's point of view, they may have an idea that is never going to work, but there's an underlying reason why they're bringing it up, so you can't dismiss it. You have to try to clean your mind of all the pre-judgment and assumptions, and put that aside. I think that's probably the one thing I've changed over the years.

Richard Byrd: That is very well said. And I think you have to have a little gray on your head to say something like that, because it's so true. I remember in my twenties, I was like, "These guys are all idiots." And now I have conversations with my son. It's my job to give him advice, whether he likes it or not. He doesn't like it and doesn't accept it. And I'm like, "Well, I'm glad you have everything in the world figured out now that you're twenty-two, the ripe age of twenty-two."

James Kim: Guilty as charged on my end, too. I was with my dad, and he was giving me stock advice, and I was like, "What is he talking about? I don't want to do it." And now I'm like, "I'm doing it! I'm still doing it!"

Richard Byrd: Fathers and sons. I guess to wrap it all up, if you were talking to some of our B2B listeners who are on the sales and commercial side, or just in these technical industries that we serve, what is the one thing you'd like them to focus on based on what we discussed today?

James Kim: We talked about AI, we talked about how the industry's changing, we talked about the challenges. One thing I feel is that we're going into a time of change — a lot faster change than people our age were used to. Things are changing so fast that it's almost on a daily or weekly basis that your prior assumptions are no longer true.

Richard Byrd: I feel that. I definitely feel that.

James Kim: So if there's anything, I'd say don't fear that change. Try to look at it as an opportunity. Now, I'll admit, I don't like change either. Inherently it makes me feel uncomfortable. But try to live with that discomfort and see if there's anything you could take from the change that's occurring, that you have to adapt to, and go with the flow. I think if you do that, you'll be fine. Like this thing with the idea around carbon capture. It was set in stone that it's non-economic. But there's change. So you have to rewrite that equation and reevaluate it. And if you reevaluate it — I've done my calculations, and I think it actually makes sense now, economically. Not huge amounts of money, but it's the right thing to do, and you're making money off of it. So open your mind to those changes. Because if the general public has shut their mind on CCS being non-economical, but you took the change that's occurring and reapplied it to your process or your company, and lo and behold, it's different, it's now profitable — well, you've gained a leg up on everybody else. And if you're first to market for an idea and you capture it very fast, you could establish the next growth engine for your company, or wherever you work. I think we're in a time where there are so many of those changes occurring, and they're all, in my opinion, opportunities.

Richard Byrd: I don't know many companies that wouldn't welcome a new revenue stream. Heck, I sure would love one in mine. Well, James, those were great words of wisdom to leave us on today. If somebody wants to learn more about PKU, where can they go to find out more about you guys?

James Kim: We do have a webpage, PKUIndustries.com. We are in the process of updating it based on the changes that have occurred, but you can get general information there, or you could email me. I'll leave my phone number with you for guests who want to get in touch. They can email me, they can phone me, and I'll try to make myself available.

Richard Byrd: Excellent. I look forward to hearing more of your talks. That's where I first learned about you — the talk you did for an organization that we both belong to. I think you have some really fresh thinking on CCUS, and I love what you're bringing to it. I'm really excited for you and your company as you're starting to get it off the ground. So I wish you the best of luck.

James Kim: Thank you very much for this opportunity. I really enjoyed the talk. I was actually a little bit intimidated with all these cameras, but I think you made a very welcoming environment, and I thank you for that.

Richard Byrd: Thanks. And thanks to our good friends over at Anthem Creative for letting us use this beautiful studio. If anybody needs an awesome video crew with beautiful equipment and a beautiful studio to shoot in, they're great people to work with. Alright, well, thanks a lot, James.

James Kim: Okay, thank you.

Richard Byrd: That's a wrap on today's episode. If you enjoyed it, consider subscribing, sharing, or spreading the news about us on your favorite channel. Thank you for tuning into Above the Clouds: Stories from the Boardroom. Until next time, stay above the clouds.

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