It’s not possible to make oneself permanently secure through inaction
The actual quotation, too long for the email header, is “Unfortunately, it is not possible to make oneself permanently secure by any policy of inaction whatsoever”. Keynes suggested that a successful investor must be willing to change an opinion when facts and circumstances change, leading to the quotation, “When the facts change, I change my mind. What do you do, sir?”.
The Webb telescope has identified fully formed galaxies far earlier than should have been possible, according to the so-called standard model of cosmology, scientists are being forced by new information to reconsider virtually every calculation they ever made about space. So why can’t we follow their example? For the same reason that we know so much about the human body and health and yet continue to eat fried chicken in vast quantities, we care more about instant gratification than our future health.
Capital markets respond quickly to new information. The people who run these markets still eat fried chicken, and if they could make money faster they would, but real returns take time and come with risk. Risks are mitigated only by those that respond to new information. The gigantic capability of our capital markets with all its discipline and respect for the limits of people, technology, consumer preference, law and regulation are finally kicking into gear to address climate change. The results may meet our hopes and aspirations but the way in which markets deliver solutions is going to cut right across how we envision the problem should be solved. We have spent so long thinking about it rather than doing anything that we have all imagined our own solution. For many it's almost hard wired but money does it differently, it changes its mind when the facts change. A fully engaged market, driven by our consumer preference for clean energy, is going to feel counterintuitive and in some cases wrong. We need to decide if we trust the markets to respond to our consumer preference for clean power or if we want to also control how they respond. I suspect that doing both will slow rather than hasten our progress.
On the Slate
The Big Wires Act was reintroduced this week. A shout out for Sen. Hickenlooper and Rep. Peters and the dedicated public servants that wrote it. It’s probably not going anywhere without some pipelines added to the mix, but in the opinion of your correspondent, it is probably worth the trade.
Positive Notes
Berkshire Hathaway will build a manufacturing hub that will include a $500 million factory to produce titanium for aircraft parts powered by solar panels and rechargeable batteries in West Virginia, a state where coal provides more than 90% of the electricity. I don’t know if they care about climate change but I feel sure that financial return and risk mitigation are the prime motivators. While this is great news, the example is utterly useless because it lacks any context, leaving you to ‘feel’ what you will about it, good or bad. To place it into context, we can look at the tech market. To avoid the worst impacts of climate change the IEA suggests we need to invest an estimated $4T annually into infrastructure to achieve a clean energy transition globally. This year, we invested $800b. At the front end of this investment venture capital invested $32b in clean tech compared to the roughly $310b invested in everything else. Venture capital is risk capital and acts like a canary for the priorities of future markets and while $32b sounds a lot, it's not nearly enough. I am in NYC for Climate Week, and find myself pulled toward the young entrepreneurs working to change our future with their energy and foresight for which I hope every last one of them will be rewarded. When I get back to DC next week I will carry examples to our lawmakers appended to a simple message. It is not for the government to create environmentalism or set this as a goal. All governments can do is create the conditions for this to flourish in civil society for its our responsibility to create the demand for clean energy. This includes incentives in my book, but as I have repeatedly said, that check has been written and we are at the limit of its efficacy. Now, our government needs to let our capital markets do their job. If Congress did one thing in this session, it would be to enact permitting reform because it would unleash the gigantic capability of the world's most competitive capital markets. If you want to do something active, help me support and reward the members that understand what needs to be done and who are taking the significant political risk to do it.
As always, I encourage you to forward this email to anyone who may be interested in supporting our work or our members, and of course feel free to reach out to me anytime.
