To whom it concerns,
The operating system of society is accelerating towards a crash. From our attention all the way up to our institutions, our ability to respond lags alarmingly behind the increasing speed and complexity of our world. We are in danger of losing trust in each other, upon whom we must rely to survive the drastic environmental changes that are only just beginning across our planet.
The year is 2020, and we are at a turning point. The Covid-19 pandemic reveals fundamental cracks in the foundations of society running tens, hundreds, and thousands of years back. We are human. We make mistakes. Many of us are entrenched in past decisions, unwilling to make any change. Many of us are ready to burn it all to the ground. Few of us are prepared for Earth’s ecology to shift. But more and more of us are beginning to see the need and ask: how?
Our way of life is in need of transformation. And yet, caution: history is bathed in the blood of idealogical transformations. Revolution is neither peaceful nor efficient. Instead, how can we use the tools and resources available to us to affect meaningful change step by step towards a sustainable way of life?
This memo presents a general framework for evaluating capital allocation strategies that minimize the negative impacts of climate change and maximize sustainable prosperity for humanity—as far into the future as we can see.
To change our outcome, we have to change our incentives
This memo is not an investment strategy for climate tech. “Solving” climate change is not a technological problem. It’s not a scientific problem or an economic problem or a political problem. Nor is it a matter of individual responsibility. It is all of that and more. Climate change is an emergent property of our systems ecology; how we interact with each other is every bit as important as how we interact with our environment. These are the X and Y axes of our model.
In both dimensions, we are the agents; and we are driven by incentives. Of any situation, we can ask: what incentives have gotten us to this point? What incentives can encourage a more sustainable and prosperous path forward? Our answers will always be imperfect and incomplete. More important is the function of change applied. In every human story, we start off wanting one thing, and we learn through struggles to want something better. Our awareness shifts—this is how we evolve.
But we do not all want or need the same things. Some of us struggle for food and housing. Some of us for creative fulfillment or companionship. A simple system of incentives could follow Maslow’s hierarchy of needs. The more our framework can address basic human needs, the more human attention is freed up to work on problems with a scope beyond paying next month’s rent, getting through the day, etc.
For here we come to the crux of the problem: we don’t have any complete solutions yet; nor can we reliably predict outcomes here, especially as we face expanding social and ecological uncertainties. Instead, we need to invest in the evolutionary processes, so to speak, that cultivate awareness. What does this mean? At the highest level, it means that awareness becomes our telos or North Star. It means investing in people, incentivizing knowledge, and trusting in the process—that new and transformative solutions will emerge from the compounding effect of incentives aligned over time.
It’s all about the long term
Can we succeed? How do we even measure success when the rules are changing, with interest rates approaching zero, growth becoming scarce, global instability, and so on? Coming from an era of unsustainable growth, we now need to build new models to represent our new set of requirements.
At a fundamental level, survival is the only metric of success that matters. But our timescale needs to shift. We are so focused on near-term interests, that not only are we ill-prepared for the future, we’ve turned it into a dumping ground for unrealized costs, polluting and plundering our children’s reality. This is now our reality. To break the cycle, we need start thinking about how we create value over the long term, how we survive not just this month, or the next few years, or even decades. We have to think beyond our own lifetimes.
The funny thing about the survival of humanity—there is no finish line. We are only truly “winning” when investing in future generations. Long-term thinking must come to define how we measure value. That’s not to say there’s no place for short-term incentives, but that they are given proper focus and fit into longer cycles. For instance, when we make the smallish loops that compose our day-to-day lives more sustainable, these small wins compound over a long enough horizon to transformative impact. And on the flip side, we can build cathedral projects that span lifetimes, inspiring our imagination to participate in greatness.
In all cases, when we evaluate a project under this scope, we build a model that measures resiliency and long-term potential. We look to identify its core loop. What is its energetic lifecycle, and how does it create sustainable value through each iteration?
Productivity vs knowledge
As a society, we love outputs. We measure the success of an economy in terms of GDP. We worship at the altar of productivity. All our organizations and systems are optimized for maximizing yields. But this accounts for less than half the real equation.
Productivity only measures the intended output. It fails to account for a) any inputs or costs, and b) any side-effects or unintended outputs. This is the mindset of a civilization locked into colonizing new territories in order to extract “free” resources to fuel our growth. A mindset that privatizes all rewards while externalizing its true costs. Like a giant pyramid scheme, this kind of magical accounting is fundamentally unsustainable.
We cannot escape our hungry ghosts; but we can learn to build better systems that supply the energy we need to survive long term. We can define sustainability as the efficiency of a system given all inputs and outputs. The more we can account for the full scope of dependencies and implications, the better our models become.
On a planetary level, it’s impossible to know the full extent. We can only see so far into the complex web of interactions. Yet, this is exactly how we make progress: in the pursuit of knowledge. When we push the limits of our understanding, we unlock new discoveries, innovations and efficiencies. This must become our core loop: we optimize for knowledge instead of productivity. We measure every iteration in terms of what we learn about the sustainability of the process. In the long term, this enables us to build systems we increasingly trust to produce what we need. This becomes a flywheel; it frees us up all the more to pursue knowledge—which may be the only vector of growth that has no limits.
The whole is greater than the sum of its parts
Our interdependence requires a holistic approach. This simply means that any individual solution or effort must be evaluated not just on its own merits, but for how it interfaces with the whole. For instance, scientific research is rarely profitable, and so on its own could be considered unsustainable. But as part of an integrated system, it plays a critical role.
No single solution will solve all the problems that contribute to or are caused by climate change. There is no magic bullet. And indeed, any new inputs will lead to new problems. But by taking time to observe and interact, we can design solutions that fit a particular situation. Instead of just unicorn hunting, we should look to construct a portfolio of diverse initiatives that contribute to each other. Can we incentivize relationships that might otherwise be too fragile to take root in the harsh realities of today’s markets? Can we invest in [food systems, research, journalism, etc.] not because these are high-growth or even profitable endeavors, but because they increase the knowledge of the entire system, making it more sustainable, more likely to survive and prosper?
More than just a philosophy or even a framework, this needs to be a coordinated program for evaluating, incentivizing, and connecting opportunities together—so that each contributes to a bigger picture of sustainability than possible solely on its own.
Our current systems excel at producing one thing: capital. This is why—though it may seem odd—we can start the work to solve climate change as a capital allocation framework for private equity. We use the tools available to us. Capital and equity are the two primary incentives we can apply. As described above, the difference comes in how we measure value. Over a long enough time frame and with more sustainable, holistic accounting, we can optimize capitalism for different outcomes.
Our greatest resource is the potential in people. While there are a slew of existing technologies, research programs, and solutions in the works already we can and will investigate further, nothing yet has the force of change behind it. The knowledge and power to enact such change will come from people—from innovators, implementors, activists, scientists, storytellers, investors, customers, constituents—from us.
Limitations and risks
Likewise, our greatest constraints come from primarily social factors:
✱Talent - hiring is broken. Finding and aligning people to new opportunities at scale. Overcoming short-term and “locked-in” incentives. Inexperience in sustainable best-practices. ✱Corporate structures - power asymmetries between capital and labor lead to widening inequality, surplus hoarding, mass inefficiency, erosion of trust. ✱Political and consumer will - getting people to care. Fragmented attention. Void in leadership. Overcoming the inertia of an aging boomer population that just wants to return to “normal” consumption habits as they retire into the sunset. ✱Competition - how to compete with companies that extract resources unsustainably, that socialize risks and privatize rewards? ✱Biases - our own idealogical biases get baked into our models and evaluation methods. ✱Technological uncertainty - progress in science and climate tech does not follow Moore’s Law. Innovation is unpredictable and inefficiently discovered/distributed. ✱Global instability - an idealogical Cold War with China. Pandemics. Resource scarcity. Systematic inequality. And last but not least, global warming with all its fallouts: ecological disasters, rising seas, habitat destruction, etc.
So what now?
Here are 12 interwoven themes that broadly(!) define where we should deeper investigate and invest to make meaningful progress:
Invest in people - The most dynamic, creative elements in a system often exist at the edges, where there is greater surface area for connections. We can employ this strategy in sourcing talent, building / buying companies, and fitting them together into a holistic program. To start, this program would need to be very hands on, experimenting with a system of incentives that can align people and teams working on diverse efforts (as outlined in the other themes).
Our program might look something like an accelerator. In YC, the greatest benefit is participation in the network with other YCombinator companies. Similarly, we can bring together scientists, startups, publishers, individuals, mature companies, and so on. We optimize not for unicorn potentials, but for what each initiative contributes to the whole. Instead of a tech monoculture, we get a biodiversity of people and shared knowledge. The goal is not necessarily collaboration, but rather the building of a sustainable ecosystem for innovation.
And they are incentivized in return. Perhaps, shared equity pools. Perhaps, a pro sports model where players and owners split league-wide revenues.
Like professional sports, we establish an ethos of excellence; we train teams on sustainable models and best practices they can translate to different domains. We source talent for ambitious projects by composting teams from finished or failed efforts. We lead with empathy and intent. And we trust great solutions will emerge.
2. Energy storage - Tesla is a battery company, wrapped in consumer demand. Underneath the shiny productization, its potential arises from its ability to address the bottleneck of clean energy—storage. Tech innovation in energy storage has universal potential, as it changes our relationship to how we consume power. New behaviors will likely emerge that will touch nearly every industry.
3. Waste reduction - This is an enormous category that generally involves making systems more efficient. It depends critically on accounting for negative externalities—CO2 emissions, plastic pollution, etc. Shifting to cleaner, more renewable sources of energy, building materials, and agricultural and industrial practices will require slow, persistent behavioral replacements: a mosaic of domain-specific problems and solutions that must meet economic demands to effectively compete. For instance, a third of all food goes uneaten. This is responsible for an estimated 8% of global emissions. Waste happens at every step in the supply-chain, but is concentrated differently in high vs. low income nations. We can improve efficiencies in production, distribution, storage, retail, consumption; but there is no magic bullet across all of these systems, which further emphasizes the need to invest not in these individual solutions, but the innovation infrastructure that may produce them.
4. Nature’s carbon cycles - Photosynthesis is the core loop of life on Earth—and our best solution for carbon sequestration. This means primarily, investing in trees. Forest protection and restoration. Agroforestry and tree intercropping. Trees are long-term resources with many positive externalities, some of which can be accounted for with incentive plans. We are cutting down 15 billion trees each year and planting only 5 billion. How can we invest in the long-term supply? One idea to raise awareness: a program to send a sapling to every child born.
5. Regulation - A carbon tax is the single most impactful policy proposal that would enable more renewable and sustainable solutions to compete on the open markets today. It would accelerate adoption dramatically. So how do you invest in government action and policy decisions? By doing the work for them. First, by developing accounting methods that accurately model negative externalities. Second, by demonstrating their effectiveness loudly. Third, by incentivizing communities negatively impacted in transition. Finally, by trusting the process and not giving up. Eventually, the long view will come into vogue, and the payoff will be resounding.
6. Shape the narrative - When we are our own greatest enemy, as is the case with climate change, the battleground becomes a hall of mirrors. Stories shape our collective will to act. Competing interests try to control the narrative by controlling the stories and platforms they’re shared on. How do we shift the Overton window, raise awareness, and cultivate the means to enact more sustainable social action? We invest in storytelling—across the domains of media, publishing, entertainment, science. For instance, BBC’s Planet Earth 2 broke international ratings records by sharing beautiful stories of the natural world. From children’s stories and documentaries to journalism and academic research, we can shape the narrative and inspire the imagination.
7. Eliminate scarcity - 78% of US workers live paycheck to paycheck. The desperate need for economic security and freedom drowns out the potential demand for more sustainable solutions. Investing in basic human needs—housing, food systems, health care, equality—increasingly compounds the demand for long-term solutions. We have a long way to go to consider ourselves an advanced society…
8. Resiliency - What can we learn from global responses to Covid-19? Small, local systems are more resilient and easier to maintain than big ones. Utilizing local resources is a key advantage. Coordinated action from government and leadership is critical to effectively respond to disasters & uncertainties. There’s an opportunity here to develop tools that can help local systems become more resilient. While investing in small and slow solutions that fit better is often more efficient, it also requires more governance. So instead, we can equip governments themselves with systems / tech for addressing local needs. Zoom out to the bigger picture: as China leverages its tech-enabled authoritarianism, we will need to fight back not by becoming surveillance-states ourselves, but with systems based on our resilience, democracy, privacy, federation, etc.
9. Gaming, esports, and online education - What does gaming have to do with climate change? Right now, relatively little. But in the coming future, education will increasingly move online; and it will begin to look like gaming—as it escapes the antiquated norms of schooling and embraces what tech’s learning about engagement. This is already how kids spend most of their free time. Eventually, games and esports will subsume education, with profound impact 1) democratizing access globally, 2) compounding the effects of education with more adaptive, efficient feedback loops, and 3) providing more sustainable, less consumptive outlets for social activity. Note: the dark version of this story results in education becoming an unregulated Skinner box, using mobile gaming dark-patterns, which just highlights the ever-present need to invest in tech that builds attention vs. extracts it.
10. Biomimicry, bioengineering, R&D - Nature is our greatest teacher. We can learn to use nature’s resources in more sustainable ways (alternative cement), to heal itself (plastic-eating bacteria) and as inspiration for transformative tech (aerodynamics). But this requires developing more sustainable funding models and programs for scientific research, experimentation, and development. Especially as universities struggle to stay relevant post-pandemic, the opportunity is ripe to build a new Bell Labs for climate solutions.
11. Conservation - Habitat destruction and species extinction are 1000 times higher than natural background rates. We are watching a library of knowledge burn to the ground, doing next to nothing because the books are written in a language we barely yet understand. Investing in conservation is an investment in our long-term knowledge. We protect ecosystems and species for their own sake, for their role as carbon sinks, for the web of biodiversity they support, but also so that we can learn from them. We don’t know what we don’t know. Like the wolves in Yellowstone that restore the ecological balance, or the hydrothermal bacteria discovered there that now compose a key enzyme in Covid-19 tests. Our conservation initiatives should be paired with research and publishing efforts.
12. Moonshots - Space exploration is largely a red herring. But it is a useful distraction: a cathedral project with the demonstrative ability to mobilize the collective imagination, pushing progress and innovation towards some new, shiny and frightening Other. A new frontier to colonize; new resources to extract and plunder. Perhaps, it can provide enough slack in our relationships with Earth that we can enact the necessary changes to improve our social and environmental interactions. And perhaps along the way, we might discover some new technology—like harnessing gravity as an energy source.
What will be the most valuable company in 100 years?
When we ask ourselves this hypothetical, we must imagine how people will change. Our grandchildren’s children—what will they value? How will they interact with each other, with the world around them? Our answers reflect our own values back to us.
The word knowledge once meant “the action or process of honoring, worship.” Knowledge comes from choosing what we value and acting upon it. What happens then when we invest in knowledge itself? We are investing in the process of how we as a society create value, how we help each other and exchange. When we optimize for what we can learn, then we begin to see connections and how to apply relevant incentives that better fit and support our interdependence.
We create a knowledge flywheel, with long-term network effects. Admittedly, this sounds overly abstract and hand-wavy, but we are only recently beginning to understand how powerful these concepts are, with the rise of digital platforms. While the attention economy has provided extraction companies a new resource to plunder, it also represents an evolution in our incentives. As first generation digital natives, we have the ability to respond to climate change by using these tools to rebuild our society. This is what responsibility means.
In 100 years, our great-grandchildren may look back at this time as the definitive end of the colonial age and the beginning of the age of awareness.