Quantum Matters

Why quantum is a Board issue

Quantum computing is a Board issue. Boards of Directors are, however, not aware of this, except in a minority of well-publicised cases.

Does this matter, even as billions of dollars pour into the industry, M&A is on fire – there are rumours that Alphabet is due to spin out its quantum unit – universities ramp up their teaching, and governments publicise their ever-larger contributions? It does. Without buy-in from the Boards of listed and unlisted companies, experimentation is held back, user cases are fewer, and progress in the quantum ecosphere is missing the firepower of the private sector, except for specialised venture capital firms.

There are several obstacles to Boards taking quantum seriously. These range from a lack of knowledge to it being seen as a purely tech matter with scarce impact on the business as a whole. However, the biggest impediment is a lack of time. The pandemic, regulation, geopolitical risk, and Environmental Social Governance (ESG) are the time-consuming priorities discussed at Board level.

To make inroads, the best strategy for governments and quantum firms seeking support and engagement is to emphasise how quantum can transform the sustainability and competitive position of companies, with cybersecurity improvements as the third leg of the stool.

SUSTAINABILITY

The outcomes of the recent United Nations Climate Conference (COP-26) Summit in Scotland were reported as positive. But environmental change cannot rely solely on countries and people polluting less.

The solution lies in technology, or in Bill Gates’s words: “innovation is the only way the world can cut net greenhouse gas emissions from roughly 51bn tonnes per year to zero by 2050.”

Quantum computing can help in myriad ways – see here. Already, in today’s era of noisy intermediate-scale quantum (NISQ) – when processors of over one hundred qbits are still not advanced enough to profit sustainably from quantum advantage – mobility firms like Volkswagen are experimenting on the optimisation of both their complex supply chains and bus routes in busy cities. These may not sound like ground-breaking trials, but the implication is a major cut in polluting footprints.

Or take the 100-year-old process for producing ammonia fertilizer, called Haber-Bosch. It consumes an estimated 3%-5% of all the natural gas produced on the planet. Quantum can help humanity understand how bacteria naturally produce ammonia using considerably less energy. The resulting ‘green ammonia’ would substantially reduce emissions in one of the major carbon dioxide polluting processes.

Over the last few years Boards of Directors of companies – from evident carbon polluters like oil & gas companies through to all others – have seen a sea change in how investors assess them. Larry Fink, who heads up the largest asset manager in the world, BlackRock, has stated that the impact of the environment will be transformational.

The CEO of the $9.5 trillion firm said in 2021: “I believe, more than ever before, that environmental issues and sustainability issues are going to become more and more dominant…”.

What this means in practice is that companies are having to disclose how their business model will be compatible with a net-zero economy, and “how this plan is being incorporated into your long-term strategy and reviewed by your Board of Directors.” (My italics).

And when the Board is involved, progress happens.

As an added bonus, Jon Hammant, Head of Compute for AWS in the UK, notes that quantum computing gives a helping hand to a sustainable future in another way. It has a smaller power consumption due to the exponential growth of its processing capacity via qbits, when compared to a classical computer, which in contrast uses ever more power.

COMPETITION

As well as the need for a sustainability transformation, Boards are focused on competition, alert to the possibility of a disruptive technology competitor which could make their company redundant in a snap.

The only defence is offence, or constant innovation, in which quantum stands to be a major helper. Intriguingly, there is no need to wait for the vast costs of building a quantum computer to come down – the cloud provides entry with variable, low costs.

Amazon’s AWS, Microsoft’s Azure and IBM’s Q all give clients access to a variety of quantum hardware from well-known names in the field like Rigetti, IonQ and D-Wave.

Alex Challans, Co-Founder of data platform, The Quantum Insider, sees huge growth in the quantum cloud confluence: “What we’re seeing is a market that could be worth four billion dollars by 2025 and 26 billion dollars by 2030.”

Diane Côté, the former Chief Risk Officer of the London Stock Exchange Group who now sits on the Board of French bank Société Générale, is adamant that firms need to be in the sandbox of quantum experimentation or be left behind as the technology ramps up exponentially.

HSBC provides a case study of how to participate at a minimum level to boost practical applications.  Through the Next Applications of Quantum Computing (NEASQC) partnership, which involves a four-year EU grant, the global bank is working with academic and corporate partners to develop open-sourced software using quantum technology by 2022.

Others are taking bigger bets. Participants at the November 2021 City Quantum Summit * at the Mansion House in the City of London, heard Rigetti’s Head of Europe, Marco Paini, and Oxford Instrument’s Managing Director Stuart Woods, elaborate on a project with bank Standard Chartered to improve volatility predictions in financial markets.

The numbers tell the story: total capital raised in 2021 up to November is around $2.8bn, compared to $1.0bn in 2020, and $300m in 2019, according to The Quantum Insider.

The data platform highlights that average deal sizes have shot up as the industry moves from Seed – Series A to Series B to D, with a notable Series D round this year being $450m going into PsiQuantum. Increasing numbers of $100m+ rounds are forecast for 2022-2023.

A step up in Mergers & Acquisitions and SPACS is also expected. In 2021 Honeywell merged its quantum division with Cambridge Quantum, to form Quantinuum, In December 2021, US company Odyssey Therapeutics bought London-based Rahko, which is developing quantum computer software for drug discovery.

IonQ and Arqit are now listed via SPACS, with Rigetti going through the SPAC process at the time of writing.

CYBERSECURITY

The third way to capture the attention of Boards is to note the cybersecurity implications of quantum. There is, however, a caveat. Too many Directors and Non-Executive Directors delegate to their Chief Technology Officer or Chief Information Security Officer, neither of which are Board roles. The rare exception to this is when there is a breach and a crisis.

Yet cyber risk is a critical issue for Boards in terms of business continuity, loss of reputation and regulatory fines.

The US-based National Institute of Standards and Technology (NIST) is due to announce postquantum public-key cryptography standards in early 2022. Given the institution’s dominance in the Western world, there is little doubt this will prove a wake-up call to firms that have ignored the need to upgrade – a tedious, complex and time-consuming process, but one that is mission critical.

CONCLUSION

In October 2021 the White House held its first ever quantum Summit, followed a month later by the US and UK government announcing a wide-ranging cooperation agreement in quantum technologies. Awareness of the increasing advances and importance of quantum is starting to permeate through the corporate landscape.

2022-23 can be the time where Directors of corporates in the financial, manufacturing and retail sectors, among others, start to ask the question at Board meetings: what is our company’s strategy to incorporate quantum technology? But for the question to be asked, governments, quantum firms and quantum enthusiasts need to focus on explaining the massive advantages of becoming involved in a mind-boggling technology that can drive sustainability, profitability and security.

*Redcliffe Advisory is the organiser of The City Quantum and AI Summit. To express interest in the October 11, 2022 Summit, please get in touch karina.robinson@robinsonhambro.com

This is a short version of an article that is due to appear in “Chancen und Risiken der Quantentechnologien”, to be published by Springer in Q1 2022, and which has articles by a variety of business and science leaders

Quantum Matters – Quantum Culture

Not just another brick in the wall  

“You think you are the messiahs!” cries out Lily, the super-hero of BBC series Devs, to the bosses in charge of the secretive quantum unit.

That slur can just as easily be applied to the Big Tech chiefs, who started out with missions encapsulated in Google’s motto “Do no evil,” yet proceeded to abuse their monopolistic powers, promote addictive behaviours and allow hate speech to flourish.

Can a different culture be created in the newly emerging quantum ecosphere?

This matters to the world. The Quantum Computing market is forecast to be worth $50bn by 2030, only nine years away. The pace of funds into the sector has already accelerated. Data platform The Quantum Insider (TQI) notes that total disclosed capital flows into the sector were $1.9bn in the first half of 2021, compared to $1bn in all of 2020.

And quantum computing’s capacity to change the world for good can best be harnessed through a diverse workforce working in an inclusive culture that supports stakeholder capitalism.

The key challenge – a decent culture – also matters to quantum companies themselves for three reasons: innovation, recruitment and funding.

Innovation

Similar to all nascent sectors, innovation is key to the development of profitable companies producing jobs and goods.

More inclusive companies are 1.7 times more likely to be innovation leaders in their field, according to a Deloitte report. Gender-diverse companies are 15% more likely to outperform their peers, while ethnically diverse ones are 35% more likely, according to a McKinsey report.

Even without citing hosts of corroborating studies, common sense dictates that the wider the range of opinions, the more chances of new ideas arising. The most productive meetings for transformative ideas are often those where disagreements flourish. The flame of innovation is often created out of friction; group think is the result of bonhomie.

Given that human beings have around 188 cognitive biases, ranging from the self-explanatory Familiarity Bias to the Just World Hypothesis, recruiting in one’s own image is difficult to resist. It behoves quantum company CEOs and their colleagues to diversify the mix, adding to the mainly white and male university PhDs and tech executives in order to bolster innovation.

Recruitment

There is a global war for talent in many sectors. Goldman Sachs, an erstwhile golden destination, is seeing some problems in recruitment. And those it does recruit are now surprisingly vocal. Young bankers complained to senior management about their workload earlier this year, a story avidly picked up by the media.

The UK’s mission to attract the best global talent is not helped by its expensive, time-consuming new immigration regime. One well known quantum start-up was forced to set up two subsidiaries in Continental Europe due to Brexit. On the plus side, the company was pleasantly surprised by the response to a recruitment ad there. Unfortunately, this stood in sharp contrast to its UK job advertisement, which received far fewer responses.

Employees and future employees are empowered, and they are demanding workplace cultures that align with their values. Over 85% of Gen Z believe companies should stand for more than just making a profit. Note that at Apple there was a successful petition to dismiss a well-known new hire with a sexist reputation, as well as a public letter demanding flexible return-to-work policies.

And yet, basic prejudice persists. A female student working on her quantum PhD at an Oxbridge university was asked by her professor: “How do you expect to progress if you keep smiling all the time?!”

Oxford Quantum Circuits (OQC) is doing all the right things and reaping the fruits: over 40% of its job applicants are women. One of its latest ads used these phrases: “We aspire to thrive…thanks to your diversity of thoughts and background…We are building quantum computers to enable life changing discoveries.” The company, led by Ilana Wisby, anonymises all the CVs it receives, posts roles on diversity-focused job boards (LBGT+, black engineers and others) and celebrates its new arrivals with photos on social media that highlight its diverse workforce.

Although helpful, a female CEO is not essential to enable a wider recruitment strategy. Cambridge-based Riverlane, for instance, headed by Steve Brierley, lists its first two values as being “supportive” and “collaborative” and posts a friendly group image of its relatively diverse company.

Denise Ruffner and Andre König of Women in Quantum (WIQ) and OneQuantum are the two major protagonists of the move to shake up the look of the industry and widen access. Their fast-growing mentoring schemes, online recruitment fairs and the setting up of free-to-use country chapters – from Zimbabwe to Nepal to Argentina – are inspiring a new generation.

TQD has been highlighting the issue, while The City Quantum Summit in November will host a special panel on the subject.

To create an inclusive culture, the Good Finance Framework is a good place to start. Designed by The Inclusion Initiative’s Director, Associate Professor Grace Lordan at the London School of Economics*, its 10 steps will also help boost staff loyalty and enthusiasm. This is crucial when quantum companies are competing for the best talent against other industries, as well as between themselves.

What is relevant for talent, is just as relevant for funding.

Funding

Political guru Frank Lunz predicts that how you treat your employees will be the single most important issue for companies over the coming years – above sustainability and shareholder returns.

It is an issue institutional investors are grappling with as part of their Environmental, Social and Governance (ESG) criteria.  Regulation will drive it. The US Securities and Exchange Commission (SEC) this year approved a proposal from Nasdaq, the stock market for tech, requiring its listed companies to publish, comply or explain on board diversity. They must have “two diverse directors, one identifying as female and another as an underrepresented minority or LBGTQ+.”

The UK’s Financial Conduct Authority (FCA) has proposals out for consultation on how it can accelerate the pace of meaningful change on Diversity & Inclusion, noting that it is relevant for risk management, good conduct, healthy working cultures and innovation (my italics).

The writing is on the wall: whether public or private, investors are going to be leading a push for the right cultures. Getting ahead of the game is the best bet for any quantum company.

Build back better is a much over-used phrase. But it encapsulates the desire to avoid the mistakes of the past. In the case of the quantum ecosphere, steering clear of Big Tech’s grave errors to create a better world, both within quantum companies and through quantum computing, is key.

*To note, the author is Co-Director of LSE’s The Inclusion Initiative for the City.

The City Quantum Summit at the Mansion House on November 10th is hosted by the Lord Mayor of the City of London and Redcliffe Advisory, and supported by the National Quantum Computing Centre (NQCC) with TQD as media partner. Diversity and Inclusion is at its core. Register here

Can quantum save the City?

This month we comment in The Quantum Daily on why the City needs to become involved in Quantum Computing, a $10bn market over the next few years. There is a great opportunity in servicing the UK’s 73 quantum start-ups – the second largest number in the world after the US – with fundraising & consultancy, while machine learning for portfolio optimisation, and cybersecurity and MedTech are all going to benefit from it.

Quantum needs to be part of the the City Corporation’s recovery plan.

To note, I write this as a Senior Advisor to Cambridge Quantum Computing and a City champion.  

Read the article here

Green Finance Blossoms

The perfect storm is right now

The world is facing the perfect storm for environmental change. We are at the most exciting time to fight climate disaster in the last four years. The US is set to rejoin the Paris Agreement, China announced it will be carbon neutral in 40 years, and the mid-November Green Horizon Summit hosted by the City of London saw a handful of key regulatory and financial advances.

Despite weather-related catastrophes like wildfires in California and massive flooding in parts of Asia during his term, outgoing President Trump stuck to his early decision to withdraw from the Paris climate accord. Incoming President Biden, instead, affirms his intention to lead a diplomatic initiative to go beyond its current goals of keeping the temperature rise well below 2 degrees Celsius this century. Sustainability is central to the President-elect’s agenda. 

Biden has not simply jumped on the latest bandwagon: he was responsible for one of the first climate change bills ever introduced to the Senate. His goal is for the US to be net zero emissions by 2050, and he has promised to create an enforcement mechanism by the end of his first term. That is a crucial element in a democracy where those who deny climate change represent a substantial force and could back in power in four years.

Meanwhile, China may be the world’s largest emitter of greenhouse gases, but its leadership has now taken a stand on the issue.  A couple of months ago, President Xi Jinping announced at the UN General Assembly that his country will achieve carbon neutrality by 2060, only ten years after the US, not a simple achievement for a fast-growing economy that relies on coal.

In part, this plays into China’s narrative of being a responsible member of the international community, ably contrasting with US withdrawal under President Trump.  However, with a Democratic Party administration in place from 2021, one that will continue to stand up to China’s military and economic might, cooperation on climate change looks likely to be the one area where the two superpowers can work together and achieve major progress on tackling the environmental disaster.

The third part of the equation is not as headline-grabbing as the first two but is arguably as important for its private sector consequences. Last week the Financial Conduct Authority (FCA) announced that from January 1st all London-listed companies will have to disclose how climate change affects their business under Taskforce on Climate-related Financial Disclosures (TCFD) standards; the Bank of England announced the launch of its climate stress test for financial institutions in June 2021; Chancellor Rishi Sunak announced the launch of the first green gilts (UK green treasury bonds), in essence government borrowing for low-carbon projects.

London hosts the world’s most global stock exchange, while the City of London is, still, the centre of international finance. Thus although these UK rules may have arrived after those of the European Union, a leader in this sector, they will have global consequences.

In fact, it is indicative of the City’s aim to lead on green finance that China Yangtze Power plans to list on the London Stock Exchange (LSE). It will be the first Chinese company to receive the LSE’s ‘Green Economy Mark’ for companies that derive at least half their revenues from the green economy. Yangtze Power is the world’s biggest hydropower plant operator in terms of capacity.

Meanwhile, the carbon credit market – where regulatory allowances for emissions can be bought and sold – looks like becoming mainstream. This summer, the KFA Global Carbon ETF listed in New York. The exchange-traded fund tracks the performance of the world’s three most liquid markets for carbon credits.

Critics argue there is a plethora of standards on the environment, making it almost impossible to compare like with like and allowing ‘greenwashing’ of projects and companies. These are but growing pains that will sort themselves out. And the reality is that helping companies transition from high carbon-producing energy via ‘brown bonds’ is just as important for the world economy and jobs as the ‘green bonds’ that finance more fashionable endeavours.

A more meaningful criticism is of the asset managers who are slow to take action while their CEOs publicly take companies to task.

BlackRock, the world’s largest investor, is a case in point. A report released last year by Friends of the Earth and other activist groups concluded that the company’s investment in sectors like palm oil and rubber which generally encourage deforestation had increased by over half a billion dollars in the past five years, while its CEO Larry Fink sends out self-reverential missives.

Admittedly it is far from easy to steer a different course quickly when captain of a behemoth with over $6.5 trillion in assets. What will help move the dial is the FCA’s aim to introduce TCFD obligations for the largest asset managers, life insurers and pension providers by 2022. In the US, even with a divided Congress, the new President could use government procurement as a lever, while the Securities and Exchange Commission (SEC) can write mandatory rules for listed companies.

ESG funds already have $40 trillion under management, and growing apace.

A few other factors are critical. Generation Z and millennials form an ever-larger part of the workforce and are pressuring companies to make stronger commitments to change; living legend David Attenborough and environmental campaigner Extinction Rebellion and others are stepping up their activities; and the 2021 COP26 global climate talks in Glasgow will lead to more advances.

Last, zero interest rates allow governments to invest in a sustainable economy at a time when the pandemic-induced crisis demands job creation in new sectors. At the time of writing, UK Prime Minister Boris Johnson was due to announce a ten point plan to combat climate change, including new national parks, energy efficiency for homes and businesses and innovation funding to achieve net-zero.

Dealing with major global problems relies on collaboration between countries and between the private and the public sector, underpinned by dynamic and innovative financial systems. In a potentially more civil era ushered in by Joe Biden’s arrival in the White House, the next few years look like being ground-breaking in transforming how we produce energy – with outer space a distinct possibility for solar farms over the next decade.

In the words of Antonio Guterres, Secretary General of the United Nations,”Decarbonisation is the greatest commercial opportunity of all time.”