It’s The End Of The World As We Know It (And I Feel Fine)

Last week, I was made aware of an extraordinary essay published by GMO called “Time to Wake Up:  Days of Abundant Resources and Falling Prices Are Over Forever” written recently by Jeremy Grantham, the legendary investment strategist.

I don’t use the word “extraordinary” lightly.  The essay is immense in its historical sweep, extensive in its analysis, eye-opening in its implications.

To Grantham, the long era of economic growth we have enjoyed commonly known as the Industrial Age is doomed by a declining supply of resources — especially, unreplenishable fossil fuels, but other metals as well — inevitably limited by a finite planet, in the face of intense competition and the unsustainability of never-ending exponential growth.  The human race will have to move on, somehow, into a different era.

When I sent this essay to some colleagues, suggesting that they would find the paper thought-provoking, one responded very critically, noting that Malthus in the late 18th Century and many others since (see, for instance, 1972’s The Limits of Growth) have been wrong in predicting the imminent collapse of human progress.  I replied that Grantham in fact invokes Malthus, goes into some detail on why his forecast was incorrect at that time, and makes a quite compelling case of why this time could (emphasis, could) be different.  My colleague then went off on a rant, to the effect of “We optimists assume we’ll find answers to our challenges and we usually do, while you pessimists see major problems ahead and want all of us to incur extreme costs and inconveniences to conform to your apocalyptic views and address your fears — which are usually wrong.”

Well, I don’t see it so pessimistically.  Grantham is saying we may well have daunting challenges in front of us — but I personally like challenges.  Grantham is also saying that these are simply the fundamentals of supply and demand, and investors can make wiser bets taking these factors into account — and I personally am allocating my capital and my time with the aim of making gains under some variation of the kind of future environment that Grantham describes. 

These are huge opportunities for those of us in the cleantech community.  Whatever the outcome, I’m not going to be miserable along the way.

One of the rubicons to be crossed in a lifetime is to accept finitude without falling into gloom.  As Grantham notes, we Americans are pretty poor in coming to grips with tough issues.  But, there’s just no way around it.  The Second Law of Thermodynamics states that, purely based on physical laws, the universe is in a perpetual and irreversible state of decay.  As John Maynard Keynes famously said, “In the long-run, we’re all dead.”  With a little more verve, I prefer to roll with R.E.M.“It’s The End Of The World As We Know It (And I Feel Fine)”.

4 replies
  1. David Cowen
    David Cowen says:

    Part 1 of 2
    You’re correct when you said “The human race will have to move on, somehow, into a different era.” As a nation, we are coming to a point where we must break away from old paradigms about our lives—what and how much we consume and what price we pay. In fact, maybe we already are past that point.
    The earth is governed by a simple formula: “In – Out = Accumulation + Reaction,” which all engineers learn early on in their education. That pretty much sums up where we are regarding non-renewable resources: the “In” is “0” (for all practical purposes). The world is a closed system, and we will run out of non-renewable resources at some point. So, we should conserve and extend that point into the future as far as possible.
    But that thinking runs afoul of the entitlement mentality that is so pervasive in many places in the world today. That mentality is why Americans are poor in coming to grips with tough issues, as Grantham points out. It impacts their perceived “fair share” of the pie.
    See Part 2

  2. David Cowen
    David Cowen says:

    Part 2 of 2 Which brings me to my point…the changes necessary for the “human race to move on” will have to start with each of us. While public officials, educational institutions, NGOs and businesses can play a role, I think business can have the greatest impact in two ways. Businesses can develop and offer more sustainable products and services. But more importantly, businesses can help their employees to see that their world needs to change and then provide the tools and developmental programs to enable them to make those changes. You could argue that’s not business’s place, but what entity is better equipped to do that? There would be a ripple effect into their families and the communities in which they live. Educational institutions would follow suit.
    Regarding what products and services cost, as a baby-boomer, I feel obligated to apologize to the younger generations because they will never have what I had at the same cost. There are two reasons. First, I didn’t pay (because I was never charged) the “total cost” of what I acquired, and, second, the generations that follow will pay the total cost plus what I didn’t pay. So, higher costs are inevitable. See Part 3

  3. David Cowen
    David Cowen says:

    Part 3: I, too, feel fine. Human beings have the potential to change and to be creative and find the solutions to today’s problems. We just need to understand where we are, accept it and get moving.

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