Financial Times slapdash knee-jerk reaction passes for journalism

I guess I give it away by the post title. This later was the subject of a reaction: The most bizarre article

Kadhim Shubber

So, Neil Woodford invested in a cold fusion company

I found this through a post by AlainCo on

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It’s entirely possible it was a good investment. Entirely, maybe possible.

That’s a great start, actually, but then Shubber shows that he knows very little about “cold fusion,” the history of it, and the relationships between LENR scientists, Rossi, Industrial Heat, and Woodford. He may simply have scanned some secondary sources, or even a totally punk tertiary source, Wikipedia.

“Cold fusion” is a popular name for what is now mostly called “low energy nuclear reactions” (LENR), which is more neutral than using the term “fusion,” because, strictly, “fusion” creates a host of assumptions that may not apply. An even more neutral name, now being used by some well-funded researchers — whose interest is science, not “devices,” as such — is the Anomalous Heat Effect, or AHE.

Shubber’s basic story here could be of value. This is an under-reported field. the problem is what he tacks into it.

Here’s a weird thing: in May 2015, Neil Woodford invested £32m of his clients’ money in a company working on cold fusion. Here’s a similarly weird thing: no-one seems to have noticed or talked about it. There isn’t a single story in the UK press, or any other press, about the City’s most high-profile fund manager investing in a widely-ridiculed bit of fringe physics.

“Company working on cold fusion.” If we allow the popular name, okay, but …. exactly where was the money invested? It was $50 million U.S., invested in a British company, IH Holdings International, which was formed apparently to receive the Woodford investment. It appears that all ownership in Industrial Heat, the U.S. LLC, was transferred to IHHI in return for shares. IH had raised $20 million, very likely most of it from the principals, who are also principals at Cherokee Investment Partners, a $2.2 billion holding company that starts up smaller LLCs for environmental remediation projects. Cherokee money, though, it appears, was either not invested in Industrial Heat, or if it was loaned, the loan was repaid when the IH stock was sold. (Most likely, there was no loan, either.)

The stated mission of IHHI is “Engineering design activities for industrial process and production.”

Operating information on IHHI for 2015 is available here. 

Then, having no clue why the name shifted — this new name has been used in official publications, such as the 2004 U.S. Department of Energy Review — he asserts it as a mere “re-branding” instead of a recognition of a basic fact: if there is a nuclear reaction, it is an unknown one, not classic “fusion.”

Any mention of cold fusion, or “low energy nuclear reactions” as its supporters have re-branded it, is likely to attract a mass of trolls, so before going any further, it’s worth looking at two reasons why it’s not taken seriously.

So now, he proceeds to examine “it.” What is “it”? Why cold fusion, of course. So he repeats what has been repeated by many for 27 years. There is no doubt that many have said these things. However, something was often missed. I’ll get to that.

The first is verification. Try and get your hands on a purported cold fusion device to test it independently. Chances are you’ll be given some excuse about it being proprietary technology and so on and so forth, which is a fine argument but it does mean this is an area of science that has mostly rested on trusting people with colourful pasts, rather than cold, hard evidence.

He has completely confused commercial development with science. The two are very, very different. Verification is an aspect of science; discoveries are not, in theory, widely accepted unless independently verified. Then, “colourful past” shows he has Andrea Rossi in mind, because this does not apply to the vast majority of LENR researchers, who have often been established scientists with good reputations. Until, of course, they reported results considered “impossible” by some.

Has “cold fusion” been independently verified? Of course it has! There are hundreds of independent reports. But what does all this mean? There are reasons for some level of continued skepticism. However, this fact stands out: within the last decade or so, every neutral review has come up with, at least, “further research is needed,” at the bottom. Some has been more positive than that. The extreme rejection is from the past, which was a huge mess, it will be studied by sociologists of science for a long time. There is a reproducible experiment, it is just that it does not require a “reliable device,” which may not exist until the reaction is much better understood.

My 2015 paper in Current Science. Someone doing due diligence, or careful journalism, might want to read the entire special section, with a total of 34 papers, all peer-reviewed, though some are short, sketchy reports.

I notice that Shabber makes no reference to scientific sources. There are many reviews of cold fusion published in mainstream journals, the extreme skeptical view that he presents, as if it is the view of scientists, disappeared almost entirely from the journals long ago, though those who want to continue beating a dead horse will claim “that’s because it is so preposterous that it’s not worth replying.” To reviews in mainstream journals?

The second is it’s impossible, according to our current understanding of physics. Feel free to skip the next four paragraphs* if you don’t care what that physics is, but it’s basically to do with this graph:

He presents the standard graph of nuclear binding energy vs. nucleon count (roughly, atomic weight). Let’s put it this way, to start. “Our current understanding of physics,” means the understanding of those who have not deeply considered the problem. Physics does not generate impossibility arguments without a specific condition being analyzed. There is a ready and known contradiction to the argument Shabber gives, and Akito Takahashi, using accepted quantum electrodynamics, actually predicts fusion under a physical condition that might be possible at room temperature, but it is unknown if this is the actual mechanism behind the experimental reports. Basically, there is a lot more going on in science than Shabber recognizes.

That’s a chart of all the elements, starting on the far left with the lightest and moving right to the heaviest. On the y-axis, we have a measure of the binding energy, which is amount of energy you would have to put into an atom in order to break it up. As we move from left to right, more and more energy is needed to break up an atom, meaning the elements are more stable, but after Iron (Fe) we need less and less energy, meaning the elements are becoming less stable.

Yes. So far. However, we are not talking about breaking up atoms. The binding energy is actually the energy released when nucleons are put together. It must show up as an excited state of the combined nucleons, or if they fall to the ground state, as an emission of energy, or the nucleus will break up spontaneously. That is, considering the binding energy as what “you would have to put into an atom in order to break it up” only applies to stable nuclei. Unstable nuclei will break up spontaneously, no energy need be applied (and this releases energy, the reduction in binding energy).

So keep that graph in mind. The other thing you need to know about is electrical charge and something called the “strong nuclear force”. Electrical charge is sort of easy. Positively charged things repel other positively charged things, but attract negatively charged things, and vice-versa. The strong nuclear force is weirder. It’s an attractive force that only acts at extremely short distances; it’s the thing that holds the core of an atom, which is made up of protons and neutrons, together.

Again, correct, so far.

Nuclear fusion basically works like this. The core of a hydrogen atom is a positively charged proton. If you can force another positively charged proton close enough to it, the attractive strong nuclear force will overcome the repelling electrical charges and bind the two together. Importantly, this is a more stable situation. Look at the left of the graph and the huge energy jump between H1 (Hydrogen) and He4 (Helium) — all of that energy gets released and it’s more energy than you used to put them together. It’s like pushing a boulder up a short hill that has a steep and deeper cliff on the other side.

Here he begins to fall into a failure of imagination and recognition of reality. First of all, outside of the Rossi claims and some relatively isolated reports, nobody is talking about forcing protons together to form helium. And Rossi is not based on theory, but — allegedly — on the results of experiment. If nickel-hydrogen reactions are real, nobody knows what the ash is. The known work, studied and confirmed, is with deuterium and helium. And if helium is being formed from deuterium (the preponderance of the evidence at this point is that, clearly, with the AHE, it is), it is not necessarily a result of forcing two deuterons together. That reaction has known reaction products and behavior, and these are missing from the AHE. Takahashi is looking at two deuterium molecules (each formed from two deuterons plus electrons, a deuteron being a proton and a neutron) collapsing into a Bose-Einstein condensate, or similar, and in that collapse, he predicts fusion within a femtosecond, from tunneling. (Shabber does not consider tunneling at all.) This, if it happens, would form 8Be, which spontaneously fissions very rapidly, at least under ordinary conditions, to two helium nuclei. Thus effectively converting deuterium to helium, fusion by result. But this is not what is actually happening, probably, because of certain experimental facts that don’t seem consistent with it. Something else is happening, and that “something” is still mysterious.

The clear counterexample to Shabber’s reasoning is muon-catalyzed fusion, where the presence of a muon — a “heavy electron” — allows a close enough approach of hydrogen isotopes such that they fuse, at high enough rate. The common argument of “impossibility” isn’t actually about impossibility, it is about prediction of rate, and rate cannot be predicted without specific conditions to analyze, and it’s known, now, from other work, that the old predictions of fusion rate in condensed matter, based on certain approximations, were way off. Like maybe something up to 10^24 off. Unfortunately, the “gap” with a naive understanding of “cold fusion” was 10^50. And we already knew, quickly, and it was visible in Pons and Fleischmann’s work, that this was not ordinary “d-d fusion.” Had it been, there would have been the “dead graduate student effect.” And nobody died. Q.E.D.

This, though, was translated into an impossibility argument by way too many.

Nuclear fission, by the way, which is the thing that powers all of our nuclear power stations, happens on the right hand side of the graph. This time, we have very heavy elements, like uranium, that are unstable. If we can overcome the strong nuclear force holding their large cores together, say by firing neutrons at them, the atoms will fly apart, driven by repelling electrical charges, and release more energy than we put in.

He is showing that his understanding is shallow. There is, in uranium fission, no breakup by “firing neutrons.” Rather, the neutrons that drastically increase the instability of fissionable nuclei are slow neutrons. They slip right in. Fast neutrons just bounce off! This idea of huge force needed to cause fusion (in this case the fusion of a neutron and a heavy nucleus) is a defective imagination that then creates a host of misunderstandings. Yes. fusion can be caused by energetic collisions, but that is not the only way, at all. Most fusion, experimentally, is actually below the energy required to “overcome the Coulomb barrier,” it is by tunneling; the energy allows an approach close enough that fusion by tunneling bypasses the barrier. That bypass is not allowed in classical physics, but has been known for a very long time now. The older idea only shows up in popular presentations, typically by those who don’t know or are not careful about the actual known physics.

(Neutrons are not subject to that repulsive force based on charge, Deuterons are not symmetrical, they are perhaps more like a dumb-bell, with a proton end and a neutron end, and there is a process whereby incident deuterons are able to fuse at lower energies than might be expected, effectively by being drawn in neutron-end first, captured by the strong force. This normally splits the deuteron, stripping the proton from it and ejecting it. But this probably has little to do with cold fusion, except that the effect predicted by Takahashi may be benefiting from deuteron polarization, which I would expect. I don’t know. Takahashi’s math is way complex.)

And then we have some arguments written by physicists, who know physics, all right, but don’t know the experimental results of the last 27 years, which are showing something else than what was easily understood. It’s still not understood!

Anyway, physics class over.

Let’s say that I preferred Feynman, with whom I sat for two years, 1961-63. However, not bad, only a little ragged at the end.

The point is, it takes a lot of energy to force atoms to fuse together, even if you get more energy out afterwards. Lots of energy means “hot, extremely hot”. So “cold fusion” is a bit of a contradiction in terms. (Hot fusion works! It’s just super, ridiculously hard.) describes the counterexample.

While it takes a lot of energy to create muons, experimentally, the muons catalyze fusion, they do not participate in it, i.e., they are released and could then catalyze more fusions. However, they have a short lifetime and so far, nobody has figured out how to extend that lifetime to allow an energy payback from what it takes to create them. That creation process doesn’t store much energy in them, each reaction releases far more energy, but this is simply not a practical approach, so far. It shows, however, that some form of catalysis is possible. The normal experimental temperature for MCF is close to absolute zero. What if some other form of catalysis is possible? There are theories involving electron catalysis.

I want to emphasize that, at this time, there is no satisfactory theory of how cold fusion occurs. We only have strong experimental evidence that it does occur. The evidence is not “physics,” it is chemistry, and heat and chemical analysis.

And that is why those who take the time to truly study this field are revising their prior standard skeptical opinions. My paper above proposed research to verify the heat/helium ratio with increased precision. That work is being done. It was not funded by Industrial Heat, but by a major philanthropist, and this work is being done by people of the highest academic reputation, fully funded, with access to the best resources. I expect to see publication within maybe a year, though they are being extremely careful and may take longer.

And what I find genuine skeptics agreeing on, after reading that paper I wrote, is “Yes, this work deserves to be done.” It should nail the question, practically countersinking the nail. Isn’t it about time?

A Woodford spokesperson told us they were “certainly not blind” to the scepticism there is around cold fusion:

We invest in many early-stage companies that are testing the boundaries of scientific understanding. This is an area that has been met with scepticism and we are certainly not blind to this. However, the potential market opportunity suggests to us that it is an area that is worthy of further investigation.

Woodford is not alone or particularly unusual in this conclusion. It is happening when due diligence is pursued. I would warn anyone thinking of investing in cold fusion research that it is possible that commercializing cold fusion will never be possible. It is more likely that it will happen, but that it might take billions in research dollars, a major project. Or maybe someone will get lucky. We will get to the Rossi Affair in due course, here. Woodford is, in any case, accepting that risk. It is a long shot for them, but … the potential payoff is worth perhaps a trillion dollars a year. So their $50 million investment is a ticket in a lottery with odds they estimate as providing a positive average payoff. IHHI might be the best place, at this time, to place such investments. But you can’t just walk into your broker’s office and buy stock in IHHI. There may be other places you could invest. My assessment, that would be at higher risk, but if it’s your money …. and it is all high risk.

The company Woodford has chosen to investigate the area with is called Industrial Heat, which appears to be based in North Carolina but doesn’t have much in the way of a web presence. It’s backed by a North Carolina investor called Tom Darden.

The actual Woodford investment was in IH Holdings International, and Woodford paid for preferred stock. Majority control is in the hands of two: Darden and Vaughn, either their own money or through holding companies that they represent, but there are quite a number of other investors holding smaller stakes, including some with names and reputations in the field. The list of shareholders is on the site I linked to, in the document “Annual return made up to 21 April 2016 with full list of shareholders.”  The company invested in matters, because Industrial Heat is now being sued for $89 million (with triple damages for alleged fraud) by Rossi, but IHHI funds cannot be touched even if Rossi wins the suit.

Industrial Heat was working with Andrea Rossi, a controversial Italian engineer who claims his past convictions were commercially and politically motivated. For years, Rossi, through his Leonardo Corporation, has been trying get traction for his cold fusion “E-Cat” device. So how has the partnership been working out?

My inference from the evidence available to me is that Industrial Heat had a clear goal, which was triple: either develop and commercialize the Rossi technology, or confirm that it didn’t work, or confirm there was something real, but perhaps exaggerated. (Which could still be valuable.)

Industrial Heat mostly does not talk about what they are doing, and they have made no statement as to what they intended. It appears, however, that they realized their goal, and that Woodford knew that IH could not confirm the Rossi claims, which may well be a reason why the new company was set up. Woodford is investing in the rest of the IH work. IH is known to be supporting many scientists in the field, we are already seeing some papers that credit them for support. And they were just approved to host the 20th International Conference on Cold Fusion, in North Carolina, in 2017. They are obviously in good communication with the LENR scientific community, and that is precisely what would interest Woodford, and, as well, their being willing to risk almost $20 million on “crushing the tests” with Rossi showed serious commitment.

Some skeptics think IH was stupid. I see it differently, and, generally, I see that people like Darden and Woodford didn’t get into their positions by being stupid. Cherokee Investment Partners starts risky limited partnerships, in a field that attracts “socially responsible investment.” CIP typically puts in about $20 million of its own money. (And sometimes loses it.) In this case, CIP probably didn’t put in anything, but Darden and Vaughn did, along with others, mostly friends. If Woodford was looking for a place to get their feet wet, they found it with Darden et al. And thus, as to cash flow, the IH investment with Rossi paid off. And they might get some of that money back, that’s quite unclear at this time.

Well, in May this year Rossi filed a lawsuit claiming Industrial Heat had tried to steal his technology and that he was owed about $89m. Industrial Heat rejected the claim and it’s still trundling through a court in Florida. For what it’s worth, one of the arguments Industrial Heat is using in its defence is: “Indeed, using the E-Cat technology Plaintiffs directly provided them, Industrial Heat [has] been unable to produce any measurable excess energy.”

At the beginning of April. Yeah, and if the suit is not settled, or resolved through summary judgment — it’s possible — it might be another year before there is a conclusion. However, this has very little to do with Woodford, since Woodford did not invest in Rossi technology. Industrial Heat is 100% owned by IHHI, so if IH recovers some money as a result of their counterclaim (they are also claiming fraud), that will benefit IHHI and thus Woodford, a little. Not a lot, because the goal of IHHI is to spend the investments on research. If they find something worthwhile, you can be sure they will be seeking much higher investment, because that’s what it will take to develop it. The goal of IHHI, as I see it at this point, is to develop experience and connection with the scientists, as well as to support at least some of the best research, and that is obviously working.

The investment in Industrial Heat, through shares and warrants, currently make up 0.24 per cent of Woodford’s £9.4bn equity income fund and 2.43 per cent of Woodford’s £761.4m “patient capital” fund, suggesting a book value of about £40m (the increase is due to currency movements, a spokesperson told us). A question that investors in the funds who weren’t aware they had backed cold fusion might ponder is what other heroic long-shot investments are tucked within their portfolio.

According to the IHHI records, the investment was $50 million U.S., which is currently $40 million GBP. (Something, however, is wacky about the math….) It is definitely a long-shot investment, but not for the reasons Shubber thinks. Basically, the task is huge. It may take billions in investment and many years before there is any profit. Maybe more. (And, as I have written, maybe never.) However, this is understood ab initio, and an investment fund that takes high risks expects high return if it pays off. IH invested up to $20 million or so. But the payoff could have been (and still could be, from that initial investment, under what has become unlikely but not entirely impossible) in the trillions. And then IH has their finger in many pies.

Maybe, just maybe, cold fusion will end up working. Anything’s possible. Never say never. Whatever. Etc. But there’s something undeniably weird about the UK’s most respected fund manager dipping his toes and his clients’ money into this not very credible part of the world.

And here is the news, actually. Woodford obviously doesn’t buy that it’s “not credible.” That’s a “popular view,” supported only be the kind of shallow analysis seen above, and an information cascade that is over 25 years old, that was never based on a conclusion based on controlled research demonstrating artifact, that simply grew like Topsy, from opinion to opinion spreading effectively as rumor. One of the signs is Shubber’s final comment.

*This is one of those situations where the Wikipedia page is a pretty good starting point for all things cold fusion.

Woodford claims to have performed “due diligence.” If Shubber had done that, he would have done much more than read an article that has seen massive suppression of sourced material from what Wikipedia would, in theory, consider the strongest sources, in favor of old material, mostly, from weaker sources. There are something approaching twenty peer-reviewed reviews of cold fusion in the last ten years. Did Shubber read any of them? See Wikiversity for a view, mostly compiled in 2010, but with a few later references. Wikiversity has a neutrality policy, like Wikipedia, and anyone can edit it, but is neutral by inclusion, instead of what is attempted on Wikipedia, neutrality, in effect, by exclusion of what editors think somehow incorrect or misleading, which can be highly subjective. The Wikipedia article on cold fusion has been in violation of Wikipedia policies for many years, but a strong editorial faction, including some administrators, has maintained it so. Anyone who confronted that was attacked and banned.

Copyright The Financial Times Limited 2016. All rights reserved. You may share using our article tools. Please don’t cut articles from and redistribute by email or post to the web.

This blog post violates the FT stated rules, while claiming fair use under U.S. law. There is no intention here to damage FT’s interests, only to criticize and comment on an article. I (Abd ul-Rahman Lomax) am personally responsible for this post, not Infusion Institute, which takes no position on content here, content is user-provided. I am willing to consider any reasonable requests from FT, but also claim that it is essential to the public interest that material, as published by FT, be critiqued and placed in context. To do that through the restricted summarization process proposed is far too much work for me to undertake personally, I’m not paid for this or for any of my writing, and I don’t want to risk distorting what Shubber has written.

One proposal that could fly: If FT wishes to make this commentary available as a response, and to maintain that, I would be willing to replace this post with a link to the article there. I would want an opportunity to edit this first for that purpose, just as a precaution, but I’m sure that this could be negotiated. (This article was not written for a business audience, but for a scientific one, for the most part.)

Author: Abd ulRahman Lomax


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