Over the last 20 years, society has entered into a self-propagating feedback loop of innovation and implosion; brought on by waves of confluence between entrenched power structures and technological advancements. Some waves are slow moving like greenhouse gas emissions; slowly but surely worsening our storms and lengthening our droughts. Some waves are faster; like the tsuanamic wave of economic volatility brought on by the novel Coronavirus; a mercurial state not seen since the great depression, catalyzing a decade of technological and social advancement in mere months. What both surges have in common are untold riches for companies and institutions well-positioned to react to change – and paralyzed potential or even extinction for those who didn’t.
Increasingly, digital and decentralized business practices have led to an era of record-high productivity and reduced costs for those willing to embrace them. Even still, one of the most foundational pillars of the modern economy, the open exchange of commodities, functions nearly the same as it did upon inception, nearly 200 years ago; seemingly immune to the increasingly acute waves of innovation. Some in the world of commodities are ready to embrace foundational change for the betterment of society, while others are either pushing back with the full weight of their multi-billion dollar institutions or greenwashing sustainable finance as a rather insincere public relations initiative.
Enter Maryam Ayati. Maryam spent more than a decade as an executive at Royal Dutch Shell, where she created several organizations, including Shell trading’s origination and investments practice across global crude oil and products and pioneering the LNG to downstream and marine concepts for the company. In private equity settings, Maryam has led the at-scale deployment of clean technology, including the world’s first downstream, liquefied natural gas value chains to replace diesel and fuel oil.
Today she’s the co-founder and CEO of NEO Holdings, which brings established energy industry giants together with the climate and entrepreneurial ecosystem where to align the interests of extractive industries with the priorities of the planet, people and profit.
Your life and career has taken you all over the world. What’s a key story from your life that you’d like to impart on our readers?
I grew up in Iran and my mother is a very fierce feminist educator. When I joined the oil industry in London with Shell, she sat me down and gave me one of the harshest talking to she ever has, telling me the story of growing up as a little girl in Iran with an Anglo-Persian oil company and the allocation of space and resources to expatriates versus local people.
Parts of the Caspian, which is our beautiful coast, were being allocated to Persians. The Iranians weren’t allowed. Some walls said it was for staff only. How could I possibly go into a world that perpetuates that outcome? For my mom, this was a deeply personal and important message to impart on me. And for me, having spent at that point multiple years across the former Soviet Union, traveling around and doing lots of work and also having seen a bit of Africa and understanding the inequality that followed the centralized version of developing supply chains, has been truly fundamental in the way I approach my work.
And so I put this here. For me an important point to drive home on how I look at the world and how many, many hundreds of millions of humans around the world interact with the output of our work, look at the world and how might we engage with them in a conversation that designs a different future.
Now, you are a veteran of commodity markets and the design of the markets themselves, as well as having worked for more than a decade in the oil industry. What challenges would you foresee in terms of implementing substantial change in the way commodities are traded?
Change in how the markets price environmental and social impact is inevitable, but it’s only a stepping stone to a much more rapid redesign of the total system. The last hundred years and the way we’ve interacted with energy and extractives, as they bring to us the various resources and the electricity we need to live the lives we want and the lifestyle that we desired. So, initially, there were no consequences. There was no transparency. Frankly, no one seemed to care. And the supply chain was gray and opaque, as long as the magic of electricity, cooling, refrigeration, heating, all of that was reaching the world starved for it.
Over time, of course, we learned through actual consequences of being nationalized as an industry or being demonized as an industry that corporate social responsibility needed to be taken seriously and it became as sort of a proxy add-on from building schools and hospitals and trying to do the right thing at minimum cost without disturbing the supply chain and disturbing profitability. And so this concept of CSR was born, but it was still opaque and it was at a national level.
So if you were getting your oil out of Nigeria or out of Iran, then you worried about tackling those things so the government doesn’t get upset. Over time, the environmental footprint of what we do has come to the fore and that’s also coincided with a much more engaged global population that can now start to see and talk a little bit, you know, whether they have all the right information or not is a whole other debate that I’m sure we’ll get into. But there’s a much broader group of stakeholders, buyers, sellers, governments, NOC’s, governing bodies and regulators, who now have an opinion on what the environmental footprint of our activities should be. Both in the extractive industries, including energy and mining, et cetera and in the way they are consumed, once they land wherever they’re going to be consumed.
So we invented offsets and it’s a beautiful approximation of, yes perhaps bad things are happening here, but if we do enough good things over here and you bundle them together, that’s a great outcome. At least it aims to get us closer to neutral. And of course, when we’re tackling carbon offsets, we are increasingly working to incorporate other SDGs and bring in some of that social impact into it as well. But it’s still a disconnected model and it’s a model that needs to be matured.
There’s a whole world of people coming at it from a completely different starting point and building a new economy version of this that probably will do its very best to compete with offsets and bundling. It will embody all of the attributes, whether it’s social, whether it’s SDGs, whether it’s environmental, whether it’s the footprint.
Whether it’s this specific commodity is virgin or recycled, whether it comes from a country where people don’t want to support some policy that the government has, or it comes from a country that seems to be embodying more of the universal values that people want to support. All of that will be priced into and tokenized into a singular representation of the resources we consume, by, sell, et cetera.
Tokenizing commodities so that you could use distributed ledger technology to create an immutable record of the history of production of these commodities is no small task. How quick do you think this kind of radical change could be embraced by the broader market?
About three years ago, I sat in a room with 16 of my peers across every commodity trading house and some of the other majors alongside Shell with our antitrust lawyers next to us, and with many, many compliance folks next to us. Talking about how might we take the non-commercial operational aspects of our trading business, crude trading, to a blockchain platform that allows us to avoid fraud. This would allow us to become much more transparent and auditable to any regulator interested in having a look and also to allow us to eliminate an incredible amount of human error and backroom in going digital and going on a blockchain.
And so if in 2017, we were able to have that conversation across the major commodity houses and that led to the creation of what is now backed with most of the North sea crude traders around the table as investors or users of the platform. Then, of course, the industry is ready and of course the industry understands how we might use blockchain technology as a proxy for trust. And that’s a very important thing because we don’t trust one another and we have no intention of trusting one another we’re competitors. We are fiercely competitive in the commercial space.
The future lies in the ability to create space to do the things that data and digital require of us in a system where trust is replaced by the ability to verify and ensure an immutable version of the truth.
One of the world’s first enterprise-grade blockchain platforms was launched to 67% of the Brent trading market using it in 2019. So, of course, we’re ready. And of course, we understand that dilemma is how much of our time and energy, and resources are we going to use to create a digital replica of what we do today, which in many ways is, I think shortsighted and uninformed. Versus having a much broader look at what is possible. What is the crypto world making possible?
And I’m not talking about Bitcoin. I’m genuinely talking about recreation, digital identity for all of the activities and nodes and resources that we consume, touch or undertake today. That’s not far-fetched. That’s easy. It’s being done. And it’s being done at the billions of dollars scale. They’re just not always in our sphere of understanding or knowledge.
So how might we take that lens of the future and build back from a view that’s more informed by what is possible and less constrained, but what by what has always been done?
Transforming the ways commodities are priced and traded is a lofty goal, but as you stated it is just the beginning of something greater. Where is this ultimately headed?
I want to tell you a story if I may set the scene.
When I talk to activists and environmentalists and people in the crypto space and people in the decentralized finance space. All of which are immense, immense economies of their own. Our version of the world is incredibly old school because they have already created and curated many of the common underlying protocols, many of the common underlying technology and assets that allow us to create a digital identity for every node.
Let’s figure out how we bundle that with good activities where in fact, there’s a real need to look at it from a clean slate and take what is possible today, their reserves and assets that are available today, in a data economy and understand how instead of bundling all of that activity that origin to consumption narrative can be incorporated into a single identity token, which is transparent.
Now imagine that level of transparency and what it does to an economic market, what it does to a traded market. That ability to see as a consumer, as a buyer, as a seller and as someone who’s playing in between to be able to see all of that history and let the market decide what it’s worth.
I have a good friend in Singapore whose organization is working very hard to put a price on every SDG sustainable development goal that the UN has created by looking at the way the markets have valued, the voluntary markets, have valued various offsets and how they’ve been associated with either of those in the past. It won’t be long before we can price that into the value of a single commodity.
But even if they don’t, the system will care because we are seeing ESG be priced into the financial mechanisms in the market, regulatory and compliance. If you could put all of that in a single digital representation of a resource that I use as an individual, as a business or as a city, that market is a fundamentally different one than one that has a traditional supply chain. I link it with the acquisition of a piece of paper that says my work pays for trees being planted somewhere. Does that translate?
Let’s face it, how ready is the industry to adopt the kind of change that you’re talking about?
When the Rockefellers or the Shells or BPs of this world were going around a hundred years ago, acquiring the reserves that laid the foundation to a century of wealth and progress and innovation, no one there governed them truly. And no one understood the consequences whilst it was happening.
So can the commodities world ignore the fact that there’s a bunch of very smart kids and grownups sitting in offices in places far away from Nigeria that are laying the common protocols of a future that looks very much like I described?
If the answer is, “yes, we’ll ignore it.” Great. There’s immense opportunity to continue to iterate in the status quo until it becomes irrelevant. But there’s a farther and much more impressive opportunity today to bring to the table the resources, the footprint, the learnings, and the collective wisdom of the energy and commodities industry as our world navigates, understands and tries to design this next system.
The greatest opportunity lost will be to sit back as an industry that has gone through so many years of learning from dudes and ladies shouting at screens to people sitting somewhat civilized and carefully regulated in nice offices all around the world.
That maturity has come with significant lessons learned and it comes with infrastructure, distribution channels, and then an understanding of taking a resource and bringing it to where it needs to be utilized. And how it must be governed to have better outcomes than we had at the onset of the fossil fuel industry and the extractive industry.
So those learnings and those resources and those assets and distribution channels warrant a critical seat at the table with the data scientists, with the environmentalists, with the tech giants who are sitting in front of our legislators and lawmakers, arguing and debating the compliance and governance framework that will govern how we do this business.
As soon as it flips to a tokenized version, which is very much will, and we’re not there, we’re not at that table. We’re not learning from them. We’re having conversations in a closed system. We’re talking to all the same usual suspects who taught us how to go from A to B. And they’ll talk to us about how we might go from B to C, but we have to, we haven’t created an opening to genuinely let all of the viewpoints and let all of the expertise and co-create a future that is much more sustainable, but also much more realistic and much more informed by what technology, digitalization, tokenization, and transparency will enable and will bring to life.
What are some of the other benefits that you see to a tokenized, commodity trading infrastructure to replace the futures markets that we have today?
There’s a whole incentive mechanism that comes into place when we talk about the crypto and the tokenized version of the world, which is about the elimination of waste and its direct link to prosperity. And I know that sounds potentially fluffy, but it’s incredibly important to remember how much of the energy we need to fuel the global growth forecasted is wasted today.
So the ability to eliminate waste in our ecosystem is an incredibly powerful source of new energy. We talk about incentivizing the upstream in all forms, whether it’s mining, extractives, fossil fuels and augmenting solar augmenting wind with the right battery technology to store them, et cetera.
There’s also a much more readily available opportunity, which is the elimination of waste. And the elimination of waste, I want to talk about in terms of an individual, a city, as societies, footprint, and resource intensity of that footprint from a day to day series of activities and how that might transition to a far less resource-intensive one. If all of these activities were priced. And it’s an inevitable outcome. Once you put a price on waste through this footprint analysis and origin tracking that we just discussed, then I as a consumer will be directly incentivized to turn off my light. To do my laundry at a certain time. To get rid of my 5.7 V8. And to do the things it takes to lower that bill. If I care… and many people won’t. But then the city and the governance models on top of that will care. And we can work in ways to manage that and manage resource allocation in a much smarter and sharper way, which will send the right signals to the market.
Because if repeatedly, the city of Los Angeles decides to put in all of its RFPs and all of its acquisition of power, or even waste management or construction, various metrics that require an understanding of the origin and the supply chain of the materials and resources brought in, the markets will value that. The markets will value it all across the supply chain. And much of that, the wasteful cheapest stuff will start to disappear and will save resources in a very different way than we have before.
The other thing that I think will be interesting to watch is how the developing world and the economic South embark on their own version, on their path to prosperity as the natural resources we’ve taken for granted in the developed world, become more and more something that enables their growth and their prosperity. Whether they will go down the path of a more wasteful version of it like the UK or the US, or whether they’ll take a more Japanese model where GDP growth per capita doesn’t coincide with that same spike in wastefulness and footprints per capita.
And so as Africa, as China, as India decides how to proceed to prosperity, having already leapfrogged, brick and mortar in so many of its activities and processes, all of it will be priced in. All of it will be priced in and the markets will be able to see that live and react to it in a way that’s much more immediate than signaling for corporate social responsibility or signaling for more forests to be planted. Both of which need to be done, but this will be a much more immediate and transparent feedback loop.
I mean, imagine being able to drive into a gas station and scanning to see the footprint and the legacy of the molecule, you’re able to put it into your car. Now, you might not care, but clearly, all the guys and girls who get on airplanes, and I appreciate the irony, get on airplanes to go protest in front of hydrocarbon and extractive industries, would.
And that’s a huge portion of the population who would then be able to scan at a moment and see the footprint of the things that are about to pay for. Would you drive across the street to a different gas station where the supply chain gives you cleaner fuel?
I would dare to say, yes. Will the market value that? Absolutely. That’s why we’re seeing organizations like BP under Bernard Looney’s leadership, talk about reinventing a fundamentally different way of interacting with their supply chains and with society. Why Shell has done the same thing. Why so many of the giants who bring these molecules to life, understand, and fundamentally are engaged in a different supply chain. Because it is becoming transparent. Because it is becoming valued. Because it’s the right thing to do. But it’s also the most profitable thing to do.
If we’re talking about designing new markets, the people that are using the current markets, I think reasonably have a say in how that should happen. How do they get their chance to have their voice heard?
That is really the heart of what I spend most of my time thinking about and engaging with many smart people around the world, because many of the established industries are building forward from the past, as a step-by-step approach. There’s a real risk that we create unintended consequences by ignoring what we don’t understand. By ignoring conversations and rooms and protocols and land grabs. The language of which we don’t understand. The rooms into, which we don’t have a doorway.
And ones that fundamentally do challenge our existing vested interests in the supply chains and distribution channels that industry has created and curated and dependent and made efficient and profitable over a hundred years. So that closed system and that desire to preserve value and drive for efficiency, which is the definition of a corporate or any organization, is driving efficiency to milk the infrastructure for even more value. The consequence of that is ignoring an unclear, more opaque version of the world that’s evolving that’s simply opaque to them. Simply opaque to us.
And so what seems to be a genuine opportunity is creating a round table, brain trust and active process of engaging the energy executives who are at the tip of the spear of thinking about this. If you’re thinking about LNG and how that might genuinely become a bridge to a future economy, where solar is working its way up. But, it’s going to take a long time. And we’re thinking about bundling that with offsets and we’re thinking about telling great stories about those offsets, there’s probably an equally important conversation to be in that says what if all of that was done in one place with more transparency?
And what if we brought that wisdom and that ambition into a room that includes others who aren’t today invited. Who should they be? They should be the guys building the crypto version of the world.
And when I talk about the crypto version of the world, I don’t mean Bitcoin. Bitcoin did an amazing job of establishing a model of currency that exists outside of the current fiat systems. But on the back of that, many, many new representations of currencies, assets and resources, what we call stable coins have become part of a daily traded system that buys and sells these tokens as a genuine representation of real-life artifacts, nodes, resources, activities, right?
So that version of the crypto world and these are both incredibly sophisticated and complex tech and data scientists, but also an incredibly sophisticated compliance mechanism. Some of which blows my mind. Having come from a commodities trading regulated environment, where I was sure we understood all the opportunities and sitting in some of the conversations I do now with the crypto world and understanding how they are redesigning, compliance and governance for the very same commodities that we were tackling in my previous life.
That’s incredibly powerful and we should at least understand one another’s language and one another’s strategies and help to create a better common framework for what will be a common protocol. And the protocol is the underlying system in which all of this stuff will be built.
The other people who do warrant a seat at the table are genuinely the activists. So they can give people a bad vibe when I mention that. But so much activism is focused on processes and commodities that the activist doesn’t necessarily understand the provenance of. And doesn’t understand the need or the consequences of, you know, even turning on their laptop, which makes those processes necessary.
So if I use a laptop today and I go and protest against an oil company, I have no moral high ground. Because my whole lifestyle is reliant on the hard work of these men and women all around the world to get this to me. So, that activist community warrants being engaged only to make sure we’re talking about a common version of the truth. So that the legitimate concerns are integrated into this redesign and the ones that are based on a lack of understanding or alleviated through communication.
The tech giant, what I find fascinating, is how much of our day-to-day activities is being outsourced and thereby monetized by tech giants. While we focus as a society on trying to clean up and restructure the previous version of centralized systems we put into place.
What do I mean by that? I mean, A hundred years ago, we created titans and giants sitting out of various offices around the world that governed the wealth of nations and their resources and monetized it. And were trying to work through the good, the bad and the ugly of that as we bring ESGs to the fossil fuel and extractive industries. The same thing is happening with the tech giants. As they start to intermediate our interactions as a society, as a market, and as companies with all the activities we used to be able to access just by walking into a store, walking into a bank, calling someone on the phone.
And if we don’t engage in understanding what it is they are building and trying to both learn from that and influence those outcomes, for a more decentralized version of the future, we’re just handing the baton over to another set of titans and it won’t be the commodity traders. It won’t be the extractives, it won’t be the miners. It’ll be a whole new set of titans.
And so our “raison d’etre” as an established industry perpetuates. If we’re able to take our learnings from the past, our infrastructure, our understanding of how markets work, our ability to deliver a supply chain safely compliantly and with mindfulness to both reliability and security, but bring that into this new economy, that’s being designed right under our noses, but without our participation. That’s where the opportunity is.
And we’ll make sure that the stories around it and the narrative around it also tell it so that the market knows how to react with a much more transparent view on origin, source tracking and all of the things that society says they care about and value and will pay for it today.
Is there a risk that the United States loses more of its stranglehold or monopoly on these financial markets as more agile and cooperative regulators in other jurisdictions encourage the innovators to come and work with them instead?
I’m always a big fan of anything that reduces the ability to monopolize anything. So in that alone, I think anyone sitting in my seat or yours would welcome some competition for this activity.
The other thing that’s interesting and important is the future has to be a sharing economy model. And it’s everything we talk about decentralization, source tracking, peer to peer B to C, et cetera, is all premised on a sharing economy model of neutrality. In many ways, the ability of the major fiat currencies to govern, regulate and dictate international behavior based on political preferences, distorts markets more than anything.
So if there’s an opportunity to bring genuine neutrality away from politics, regardless of which side of the divide one is on. If there’s an opportunity to bring neutrality to the table and ensure that traded markets are behaving as they should, which is responding to market forces versus influenced by the political ability to manage more market forces, that’s going to be an incredibly valuable outcome for all of the economy.
Will this era of hyper-accelerated social and technological upheaval be embraced by markets and investors? Will disruptive technologies such as tokenization and blockchain find their footing in systems historically hesitant to embrace change? It probably all depends on both the courage of the established institutions and the fearless veracity of the insurgents who seek to replace them.
While some would probably wish it wasn’t the case, solving incredibly complex problems such as climate change will require the collective intellect of the same minds that many choose to issue blame. As long-time industry players like Maryam rightfully suggest, the expertise and know-how exist already within the brain trust of the energy industry. The real question is how many of these players will be able to overcome the paralyzing inertia that often stems out of centuries of incumbency and fully realize that potential.