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)”.