Sages and Seers: Warren Buffett, Bill Clinton, Oxford University Prof. Nick Bostrom, and the Next Economy
The last couple of weeks have seen some remarkable next economy pronouncements from three of the world's smartest people, each representing a different realm of human endeavor: business, politics and academics. Warren Buffett, Bill Clinton, and Oxford University professor Nick Bostrom are among the world's highest achievers, and each has remarkable visibility in to the real, actual state of the world. As such, I couldn't help but notice their recent confluence of messaging.
In his most recent annual shareholder letter, release February 25th, 2012, Warren Buffett touted Berkshire Hathaway's significant, recent investments in renewable energies:
MidAmerican will have 3,316 megawatts of wind generation in operation by the end of 2012, far more than any other regulated electric utility in the country. The total amount that we have invested or committed to wind is a staggering $6 billion. We can make this sort of investment because MidAmerican retains all of its earnings, unlike other utilities that generally pay out most of what they earn. In addition, late last year we took on two solar projects – one 100%-owned in California and the other 49%-owned in Arizona – that will cost about $3 billion to construct. Many more wind and solar projects will almost certainly follow.
Nine billion dollars is a lot, even for a guy like Buffett. He clearly believes in the moneymaking power of the most efficient renewables, so much in fact, that Berkshire Hathaway's energy arm, MidAmerican, is America's leading wind utility. Smart competitors will need to race to catch up, but with "many more" projects in the pipeline, that may be difficult. Berkshire Hathaway is not currently a Green Alpha Advisors holding, but as their next economy plans continue to develop, that may change. We might say the same of GE, which is also going big into renewables, particularly solar, about which a spokesman has commented, "We've been successful, in fact more successful than we thought."
Our next sage, America's 42nd president Bill Clinton, gave a keynote address to the 2012 ARPA-E Energy Innovation Summit, March 1st, 2012, which was exclusively about how we may benefit from actualizing the next economy:
We're the only major country in the world that has one political party where apparently it’s an ideological imperative to deny the reality of climate change…evidence that we now have that is abundant that investments in changing the way we produce and consume energy can launch an enormous economic boon for our country and for the world…We've had this incredible venture capital network in America that has continued to commit to this and that believe in this. Once people know the facts, nobody's against this, but there are still too few...Americans who understand what a huge impact this could have on their future, who understand that there are already more people working in clean energy than in traditional energy. There are still too few people who intensely believe that the consequences of climate change can be calamitous, and that there are wildly profitable ways to avoid climate change. This is a great time to be alive. We just have to make sure that more people understand it and that more people participate in it. [Italics added.]
Clinton's comments resonate with us, as they're (in a far more eloquent and positive way) communicating a message I've been trying to get across recently as well:
There are enormous risks emerging now…but crisis and risk also provide opportunity, notably to those who provide solutions. Next economy investing then can be defined as a way to provide capital to those solutions, and is also the clearest path to competitive investment returns as the world becomes ever riskier and more politically and environmentally complicated. It amazes me that how we decide to manage our economies over just the next few years will make the difference between a new dawn of innovation, freedom and security for mankind, or a dangerous, dirty world fighting for what's left.
And Clinton is right, it is a "great time to be alive." But, like every generation, we need to rise to confront our primary challenges. As Clinton inferred, a big part of that is messaging and creating popular awareness of the challenges and opportunities.
The other part is defining and understanding our challenges so we can bring the best solutions, the theme sounded by my third sage.
Nick Bostrom, professor of philosophy and director of the Future of Humanity Institute at Oxford, in the course of discussing existential, extinction level threats to civilization, made some interesting remarks in an interview this week about understanding risk, even though he did not discuss climate change and resource scarcity:
I think there are vastly better ways of being than we humans can currently reach and experience. We have fundamental biological limitations, which limit the kinds of values that we can instantiate in our life -- our lifespans are limited, our cognitive abilities are limited, our emotional constitution is such that even under very good conditions we might not be completely happy. And even at the more mundane level, the world today contains a lot of avoidable misery and suffering and poverty and disease, and I think the world could be a lot better, both in the transhuman way, but also in this more economic way. The failure to ever realize those much better modes of being would count as an existential risk if it were permanent…But to me the most important thing to do is more analysis, specifically analysis to identify the biggest existential risks and the types of interventions that would be most likely to mitigate those risks.
Taken in reverse order then, our seers are saying, "identify and understand the risks, broadly communicate that there are big risks but also commensurate opportunities, then actualize the opportunities by investing in the very best ways to mitigate those risks and profit from them."
So, the capitalist, the policy expert and the academic futurist are all ringing very clear notes about the next economy. The capitalist sees plainly that renewable energy works profitably, right now, with existing technology. The policymaker agrees, and sees a "wildly" profitable future in expanding the green economy, but worries that too few people understand that for America and maybe civilization to make rapid enough progress. The professor, perhaps more than the others, sounds like us at Green Alpha in asserting that we must study and understand the most significant risks facing civilization, and that we must then invest big in the technologies and other approaches that address and mitigate those risks.
On each of these three fronts, business, political and theoretical, it's clear that our best and brightest are echoing our own economic thesis: that the next economy must and likely will grow faster than the legacy, fossil-fuels based economy, because that's the best way to stimulate economic growth and simultaneously avoid some of our primary risks: win-win. Over time, we're confident that the necessity of these realities will lead our investments to provide above-average returns and to provide a conduit of capital into an economy that minimizes existential risks. Failure to build the next economy is not an option.
Garvin Jabusch is cofounder and chief investment officer of Green Alpha ® Advisors, and is co-manager of the Green Alpha ® Next Economy Index, or GANEX and the Sierra Club Green Alpha Portfolio. He also authors the blog "Green Alpha's Next Economy."