A Few Things: Peter Zeihan, Marko Papic, Future of Work, The Second Mountain, How To Avoid Climate Disaster, The Future of Crypto, Did VC Fly Too Close To The Sun?
June 25 2022
I’ve been on the road this week, so apologies for this being a little late. I am sharing this weekly email with you because I count you in the group of people I learn from and enjoy being around.
“The graveyards are full of indispensable men.”
- Charles de Gaulle
“In general, survival is the only road to riches. Let me say that again: Survival is the only road to riches.”
- Peter L. Bernstein
“Character, like a photograph, develops in darkness.”
- Yousuf Karsh
“All of our miseries are nothing but attachment.”
“The first principle is that you must not fool yourself—and you are the easiest person to fool.”
- Richard Feynman
A. A Few Things Worth Checking Out:
1. Peter Zeihan’s new book is out and I’ve been listening to it on Audible.
If you want to get a summary of the book, he was on the Meb Faber show discussing: Deglobalization, Depopulation and what it means going forward.
2. My friend Marko Papic at Clocktower Group had a great slide deck outlining The Macro-Geopolitical Context.
Here are 5 slides that stood out:
3. Marc Andreessen of A16Z had a wide ranging conversation with Tyler Cowen covering technology, crypto, human behaviour, and the importance of reading history books.
4. My friend Sean Delaney recently did a detailed recap of David Brooks book: The Second Mountain.
We had covered it in 2019.
5. This is cool:
B. How The World Really Works
I’m working through Vaclav Smil’s great new book:
But I’m not ready to discuss it yet.
I still need to process the big ideas, but I wanted to share my notes from Bill Gates: How to Avoid a Climate Disaster, since Gates has been such a vocal supporter of Smil’s work and the books have at their heart the same core idea: Understanding How Our World Works.
When I first picked up Gates’ book, I wondered was this yet another billionaire writing a book to add author to his biography? (he’s written other books too)….What was this +220 page going to tell me apart from how smart Bill Gates is.
But I did end up being impressed and here is what I learnt.
First some facts:
51 billion tons: is how many tons of greenhouse gases the world typically adds to the atmosphere every year, and this is where it comes from:
860 million: the number of people who don’t have electricity.
Income per person and energy use per person go hand in hand. Cheaper energy allows us to lift people out of poverty, but how do we provide that energy without adding to that 51 billion tons a year?
The book is a discussion on how we get those 51 billion tons of greenhouse gases down to zero, while providing more access to energy to the poor.
Why zero emissions?
The reason we need to get to zero is simple. Greenhouse gases trap heat, causing the average surface temperature of the earth to go up. The more gases there are, the more the temperature rises. And once greenhouse gases are in the atmosphere, they stay there for a very long time; something like one-fifth of the carbon dioxide emitted today will still be there in 10,000 years.
There’s no scenario in which we keep adding carbon to the atmosphere. and the world stops getting hotter, and the hotter it gets, the harder it will be for humans to survive, much less thrive. We don’t know exactly how much harm will be caused by a given rise in the temperature, but we have every reason to worry. And, because greenhouse gases remain in the atmosphere for so long, the planet will stay warm for a long time even after we get to zero.
Admittedly, I’m using “zero” imprecisely, and I should be clear about what I mean. In preindustrial times—before the mid-18th century or so—the earth’s carbon cycle was probably roughly in balance; that is, plants and other things absorbed about as much carbon dioxide as was emitted.
If we are going to bring global emissions down to zero, we need to understand where and how we are creating them, and then how to go about bringing them down.
Some charts that helped me visualise the problem:
Of course some would argue that the solution is simple, we just need to use more renewables. But Gates reminds us that history is not on our side. Energy transitions take a long time (he recommends Vaclav Smil’s work here).
One of most useful mental models I got from the book was: Five Questions To Ask In Every Climate Conversation.
How much of the 51 billion tons are we talking about?
Tip: convert tons of emission to a % of 51 billion, to see how meaningful this solution is.
What’s your plan for cement?
How much power are we talking about?
A watt is a joule per second.
How much space do you need?
This is why it’s hard to displace fossil fuels. They are far more energy dense than renewables.
How much is this going to cost?
The shift to a green economy will cost money. Zero carbon solutions are more expensive than their fossil fuel counterparts. These additional costs we can call Green Premiums for now.
27% of the 51 billion tons a year comes from how we produce electricity. Today, fossil fuels account for two-thirds of all electricity generated.
His favourite idea when it comes to electricity production is Nuclear (fusion or fission), combined with a break-through in large-scale batteries, which will make renewables more useful.
The break through he is really hoping for is in the production of hydrogen without emitting carbon. This is because hydrogen can be used in fuel cells, which get their energy from a chemical reaction between hydrogen & oxygen, with water as a by-product.
31% of the 51 billion tons a year comes from how we make things. The key things being the core materials modern civilisation is built on: cement, steel and plastic.
To sum up his path to zero emissions in manufacturing looks like: a) electrify every process possible b) get the electricity used from a power grid that has been de-carbonised c) use carbon capture to absorb the remaining emissions.
19% of the 51 billion tons a year comes from how we grow things. This includes raising animals, growing crops and harvesting trees.
In some ways this is the most complex problem, because there isn’t one good answer. You need to pull on a lot of strings, including: new ways to fertilise plants, raise livestock, waste less food and even eat less meat.
16% of the 51 billion tons a year comes from how we get around.
He starts the chapter with an enlightening quiz:
The correct answers are A and C. Gasoline contains an amazing amount of energy—you’d need to bundle 130 sticks of dynamite together to get as much energy as a single gallon of gas contains.
This is why we use fossil fuels to get around, but cars aren’t the only culprit.
Gates thinks there are four ways to cut down on emissions from transportation: a) do less driving, flying, shipping b) use fewer carbon intensive materials in making cars c) use fuels more efficiently d) switching to electric vehicles and alternative fuels.
To overcome the Green Premium, he recommends better government policies, more on that below.
Knowing the problems above then, his big picture plan for getting the world to zero emissions is reducing the Green Premium of cleaner technologies by:
Expanding the supply of innovation:
Quintuple clean energy and climate-related R&D over the next decade
Make bigger bets on high-risk, high-reward R&D projects
Match R&D with our greatest needs
Work with industry from the beginning
And accelerating the demand for innovation:
Use procurement power
Create incentives that lower costs and reduce risk
Build the infrastructure that will get new technologies to market
Change the rules so new technologies can compete
Of course many people will say Gates is evil or a hypocrite, or why would we take advice from him. I’m not endorsing him or his views.
But I do think the book did a good job laying out the data and the ideas. It’s our job to do the work to decide what to hold on to and what to discard.
C. The Tech and Crypto Section:
1. My 2 cents on crypto and blockchain and where we find ourselves in June 2022:
There was a lot of excess in the last two years (and a lot remains), 90% of crypto just became a get rich scheme for the disfranchised, the speculators and the fraudsters.
But just like speculation doesn’t change the substance of what’s happening at any company, we have to separate the substance of blockchain with the speculation in “crypto”.
I am not a Bitcoin or ETH maximalist. Currencies, coins, tokens come and go. Few units of value or exchange last more than a few decade, and this will likely only increase as the world speeds up.
But technologies persist.
Technologies which allow for ownership and permissionless transfer of value, technologies that are composable and interoperable will spread across society.
As with all new technologies, there are booms and bust cycles. There are frauds and fraudsters. There are speculators, winners and losers.
For me crypto is about ideas such as privacy, open-source tech, ownership (of our online time and assets) and trustless coordination.
These are ideas that keep me interested in crypto. I don’t view and never viewed crypto as a get rich quick scheme.
I’ll end with what I said in mid 2020 before the madness: spend your time going down the crypto rabbit hole, understand the technology (it’s promise and failures), identify the builders and the fraudsters, and then make up your own mind.
2. Crypto has been full of liquidations and margin calls: Celsius, 3 Arrows Capital, Voyager. This was a good thread on the behind scenes of a crypto hedge fund margin call:
How will crypto look like in a few years?
3. Mike Green and Anthony Pompliano had a face off on Bari Weiss podcast: Is Crypto Over? I think Mike Green won.
4. Last week’s PitchBook Analyst Note: Did VC Fly Too Close to the Sun? is a good read.
Some key charts:
5. If you want to know what’s happening behind the scenes in venture this Bloomberg Odd Lots episode titled: Behind The Scenes Now Facing The Industry is a great & honest listen.