Current as of 7/31/2020.
The holding company (hereafter referred to as HC) should pursue a simultaneous three-part approach to meaningfully addressing climate change. The first part is to facilitate the rise of political power that emplaces new economic incentives that address climate change and subsequently to invest in ensuring that such co-option of political power is difficult to recreate. The second part is to invest in building the support infrastructure needed to entrench the new economic incentive system. And the third part is to bolster the first two parts from a societal level by increasing our collective compassion for others. These methods can start within the US, but should then be applied abroad. The framework takes on a higher-order perspective because meaningfully fighting climate change means changing everything. And changing everything means changing the rules. Companies, technologies, and products that help drive this scale of change should be the focus of this HC.
Defining the problem
This framework assumes that the climate crisis is truly a crisis requiring urgency. This means that if drastic progress isn’t achieved in the next two to three decades then the effects will be catastrophic to human civilization in a worst-case scenario. The urgency is informed greatly by David Wallace-Wells’ book The Uninhabitable Earth and the 2018 IPCC climate report. The report makes the case that to stay below a 1.5º C warming threshold, global emissions by 2030 need to drop by approximately 50%. 2º–3º C of warming does not spell the end of human civilization, but it vastly increases the level of human suffering experienced. 4º–5º C of warming is the more catastrophic scenario. And very recent evidence on Arctic warming suggests that existing predictions may be greatly underestimating the speed of change. The assumed level of severity greatly influences potential strategies. If we were already on a healthy pace to meet the 2030 emissions targets, then a different set of investments would be appealing however that is not the case. This framework is a reaction to the assertion that across the globe and especially within the US we are nowhere near the 2030 or the more important 2050 targets.
This framework also contends that the predominant capitalist economic system found in most countries is fundamentally at odds with actually fighting climate change. Support for the contention is largely informed by Naomi Klein’s book This Changes Everything and Robert Reich’s book Saving Capitalism. While some countries do better than the US, concentrated economic power generally translates to concentrated political power which allows large corporations to define the rules of the market. As a result, fossil fuel energy companies have enormous influence to fight political change and protect themselves. The most recent example being the industry’s involvement in the US Fed’s COVID-19 corporate bond buyback plan. Current government regulation, incentives, and penalties do not go far enough to address the negative externalities of climate change. Markets can be constructed to reward climate action and discourage inaction, but government must play a critical role as the state is ultimately the enforcer of the rules. To summarize, existing economic power is preventing the needed change, and new incentives are crucial to address climate change.
Part 1: Change economic incentives and prevent future concentration of power
Two areas of focus define this part of the framework. First the HC needs to spark political change that installs government which can define and enforce new systems that tie economic growth to addressing climate change. Think EV tax subsidies, Tesla’s regulatory credit revenue, and MPG requirements but scaled bigger and across every industry globally. The second area is ensuring that in the future it is much more difficult for economic power to translate into political power, with the underlying goal of ensuring that the new incentives remain in place. The HC will do this by funding new forms of corporate governance across its portfolio and by investing in technologies that democratize information thereby allowing the citizenry to more easily monitor and reverse accumulations of economic power.
This framework does not go deep into prescribing the details of the new economic incentives and systems needed to address climate change. The only requirement suggested is that changes be on the level of how nations responded to the onset of the second World War. The reason for not providing further detail is that there is already much existing work on this subject, including the Paris Climate Agreement, Bernie Sanders’ Green New Deal, and Joe Biden’s new climate plan. Furthermore, the decision on incentives and structures does require open debate within a democratic system, even if the intent of this framework is to bring to power those who have specific plans for the changes required.
The Frederick Douglass quote: “Power never concedes without a demand” underlies the goal to spark political change. This change is not just about a single office such as the US presidency (albeit important), but broad-based change across all levels of governments within the US and abroad. Investing in political change will not directly generate returns but spawn the conditions for other investments to be economically viable. Building a sustainable system to facilitate political change will be done by lobbying, identifying specific candidates to heavily support, and building tools that give said candidates an advantage. Lobbying is a tried and true strategy. Identifying and strongly backing certain candidates operates on the theory that some positions afford more strategic value and that some individuals can more quickly influence change. The ability to identify political talent is something to be developed within the HC. Building tools involves improving digital outreach (Hustle), likely voter identification (OutreachCircle), and campaign operations technology (Organizer) in order to increase the chances of success for select candidates. This is no short of an attempt to create a “Koch-topus” of the Left. Fighting fire with fire is dangerous and does not break the cycle, hence the next phase the HC will undertake.
As previously stated, economic power has a habit of turning into political power. This HC will be the last to exploit that mechanism. In its own formation the HC will emplace a structure that forces its curtailment as it gathers economic power. The goal is to construct this company as a model for the future of corporate structure. By imposing an escalating tax on itself that’s enforced by neutral third parties the HC can ensure that it breaks the aforementioned cycle.
Setting an example should also carry into the portfolio companies of the HC. They too should have new structures that provide guarantees against power accumulation that reaches levels enabling government influence. The specific implementations may vary over time, especially as the political change the HC sponsors starts to demand reform. To tie this back to climate change, accumulations of private economic power result in small self-interested groups wielding political power, which disincentivizes the scale of climate action needed over the course of the next five decades. The previous five decades of big oil has proven this out, and there’s no reason to believe it will stop without strong regulatory change. Good intent isn’t as effective as good corporate bylaws and we should be the change we wish to see.
The above strategy may still fail so as an added layer of protection the HC will also invest in companies that focus on the democratization of information. Increases along this axis serve as a check against the accumulation of influence by any oppositional self-interested group. A recent WSJ article documenting the relationship between the rise of the smartphone camera and our understanding of police brutality’s true scale is a great example. And of course the story of Twitter and the Arab Spring is another. Obviously smartphones and Twitter were not built to check police power or to overthrow dictatorships, but they democratized information which spurred change. Areas of investment will be cryptocurrencies, interoperable protocols, open-source SaaS businesses, Fintech, and crowdfunding platforms. The lens of increasing openness and decentralization as default behavior serves as a discerning method for investments to proceed with. Here again the relationship to climate change comes back to preventing powerful groups from reversing the new economic incentives that will foster an ecosystem where the pathway to success means addressing climate change. Why rely only on good corporate bylaws when democratizing information can equip all people with tools to prevent bad actors.
Part 2: Invest to ensure in the success of the new economic incentive systems
In order to ensure that a new economic incentive system addressing climate change succeeds, the HC will simultaneously focus on investments in emissions measurement, modernizing government interface, and securitizing digital and physical technology. At the heart of this approach is the belief that meaningfully addressing climate change will involve delivering significant increases in technology utilization. If we consider an old growth forest the ultimate climate change prevention technology, imagine how much progress we must make in order to recreate the trillions of connections that are responsible for such a resilient system (obviously we should also just plant more trees).
A new economic incentive system that holds markets accountable to the costs of emissions demands accurate measurement of those emissions and their sources. New incentives cannot stand the test of time without measurements that are accurate and all-encompassing. Therefore the HC should seek to invest in companies and technologies that increase our ability to measure and attribute all emissions accurately. The space can be broken into collection, attribution, verification, and synthesis. Al Gore’s new climate TRACE initiative to track all GHG emissions worldwide serves as a good prototype for relevant technology areas. These include better image recognition ML, land based sensor networks, cargo ship monitoring tools, and satellites for image collection. The space can also be cut by consumer and enterprise. As the first part of the framework succeeds, tax breaks for individuals will proliferate “quantified-self” startups focused on emissions. Similarly, regulations requiring GAAP-like reporting on emissions will spawn a new set of emissions accounting firms. The HC should be active in these areas. “You can’t manage what you can’t measure” may be trite, but also underpins the reality that without this foundational piece government will not be able to enforce new incentives and penalties.
Achieving political change that reforms our economic systems and building measurement tools to understand emissions will be for naught if how we interface with the government does not further modernize. The filter for investment here is: Does the technology or company move governments closer to a model that resembles Amazon’s internal micro-service architecture outlined in Jeff Bezos’ famous memo. Today, governments across the globe are riddled with legacy systems and 20th century practices. Improving how we interface with governments will provide stickiness for the new incentive systems and increase governments’ ability to manage and keep pace with technological progress. The military-industrial complex shows that governments can be a massive customer for the goods produced by private enterprise. Areas within this space span the spectrum from permitting for new buildings to applying for federal grants. Companies like OpenGov and government branches such as 18F provide some early validation. To tie back to measurements, the volume and scale of data that governments will need to monitor and analyze alone should provide ample opportunities to sell new services. Government modernization is another method to bolster the ecosystem that will allow all companies to operate frictionlessly while still maintaining compliance with climate regulations.
Meaningfully addressing climate change won’t come from one or two breakthrough technologies, but increases in the use of technology across every sector. With this comes substantial risks if bad actors are able to compromise systems that we become reliant upon. The reality of this threat has been made clear by the actions of Russia in 2016, US cyber attacks in various states, and concerns about Huawei 5G tech as it relates to Chinese government surveillance. If government emissions monitoring APIs or emissions accounting firms are hacked to pump falsified data then the trust of the citizenry will be destroyed and enforcement will be impossible. The vulnerability of digital and physical systems must be addressed through significant investments in cybersecurity, domestic chipmaking, encryption technologies, privacy & identity tools, and data verification. Investments here should bolster all the areas of this framework, especially those that democratize information. Security is necessary and strengthens the entire framework which will lead to many opportunities for the HC.
Part 3: Increase compassion - Higher chance for success and preparation for the worst
A shift in our cultural values will also help address climate change. The HC will pursue investments to increase compassion for others and this will by design further reinforce the first two parts of the framework. The investment areas here cover a truly broad swath of ground. Which areas will lead to success are presently hard to know with certainty so investments will be considered in terms of strategic bets that can generate an outsized shift. Before diving into specifics, some setup is required to describe why the increase in compassion is necessary.
This framework supposes that the goal of addressing climate change is to ensure that the entire projected global population of 8–9 billion people can have a decent standard of living indefinitely, not just a single nation or within a limited time horizon. This makes sense when we consider the alternative. If there is no need to ensure that all future people can live comfortably on Earth indefinitely, then there really isn’t a need to address climate change. The HC should simply invest in ensuring that its owners and their posterity can live in comfort by taking whatever means necessary to do so. Because even in a worst case climate change scenario, the Earth won’t be completely inhospitable to humans, it just won’t be able to support 8–9 billion people in any recognizable way.
So if the goal of addressing climate change is to ensure the future global population can live comfortably and indefinitely on Earth, we have to reckon with defining what comfortably means and how to make it possible. Consider the lifestyle of an American with a net worth of $93,000. This person falls into the top 10% of wealth globally. And people in this category are responsible for 50% of all emissions each year. Given the already baked-in trajectory of the climate crisis, it is unlikely that the other 90% of the world’s population can have that same lifestyle if we are to avert the worst of climate change. Even if there’s a scenario where this is possible, it is prudent to hedge against that by coming to terms with a newly conceptualized way of living. Specifically, a way of living that can support the whole population with as much comfort and safety as possible. Functionally this means those living above the $93K threshold today might have to make drastic concessions, and those below the mark will have to accept that they might never experience that lifestyle. A tough sell for either side.
Acceptance for this change in expectations is why the framework seeks to increase our collective compassion for each other. No one will voluntarily change their existing way of life or give up their dreams for how they wish to live if they have no concern for those who would be harmed by pursuit of their individual desires. A crude analogy is the classic movie scene where a hostage tries to form a connection with the gunman in order to engender empathy, the act itself might not work, but usually it delays things until help arrives. Across all of the following areas the goal is to create a deeper sense of understanding for those not similar to ourselves thereby making the specter of shared sacrifice more palatable.
The first area of investment is revitalizing a sense of community at the local level. The HC will explore different ways that enterprises can bring back new forms of institutions that historically grounded citizens to their communities. A big piece of this will be funding new models of local journalism. Substack with its subscription newsletter format serves as a good prototype. Nextdoor-type community engagement tools, group-chat based social media, and other experimental consumer applications will also be in consideration. Investments in media that foster a sense of citizen participation will be yet another avenue of approach. Funding entities that reinvigorate community life will not only increase our compassion for others geographically close to us but also have the secondary effect of increasing watchfulness over political power and increasing participation in government. In the past, faith-based groups and unions have shown that the aforementioned effect is possible - the 21st century solution needs its versions.
The next area of investment will be in women and underrepresented minority groups across the globe. Genuine understanding of people outside our immediate circle is greatly lacking in the world today. If we’ve never interacted with a given minority group, we’re unlikely to care about their plight. Funding and elevating diverse groups within movies, television, and music will create more compassion since more stories and faces will be highlighted. Marvel’s Black Panther represents the prototype for the kind of media to fund. More importantly, investing in women and minorities should be a lens that the HC applies across every other area of the framework when evaluating opportunities. This investment area also reinforces preventing future concentrations of economic power as historically discrimination and repression have been used to build such power. A society that does not strive towards equality for all its constituents is not a society that will surmount the climate crisis.
Investments within the media will also be made to directly shift the conversation on the effects of climate change and our battle against it. This HC can start to do so by funding specific groups that can carry forth this agenda in overt and covert ways. The history of American movies promoting American ideals proves that propaganda can generate returns and shift attitudes. The range of media may change over time but the end goal will always be increasing our sense of compassion and highlighting the specter of the climate crisis. The Will Smith movie Independence Day fits this mold by pitching all of humanity against a common alien enemy. That message of unity may have been inadvertent but the goal of this HC will be to make such messages intentional. Media and entertainment have always reflected the struggle of an era and now there is a chance to shape that reflection.
To create deeper compounding effects, the HC will invest in education. More educated people generally tend towards more liberal values which should in effect lead to the type of social change desired. Equally important is that education also serves as a direct method to address climate change. To be more specific, increasing education levels for girls globally will lead to naturally lower birth rates thereby reducing the total global population that Earth needs to support. Government will probably need to play a stronger role in education, but opportunities will still exist. As the carbon economy is shuttered, workers in those industries will need new skills and that presents potential for future services. Education not only underlies the development of our cultural beliefs, but also technology, politics, the economy, and everything else.
A consequence of falling birth rates due to increases in education as mentioned above is an increasingly aging population. This presents another area of investment: caregiving. As the needs of older adults grow, various markets and industries will also grow to support them. These are jobs that are low in emissions and provide a pathway for the global workforce to move away from more carbon intensive industries. Culturally this helps redefine work and demands an increase in compassion for others. Society has historically been rather cruel to older adults but as more and more of the globe reaches that stage of life, attitudes will shift and this should be seen as an opportunity. A society with a vibrant and compassionate caregiving industry will necessarily have the right characteristics amenable to addressing climate change.
In a more radical vein and informed by Michael Pollan’s book How to Change Your Mind, the HC should also invest in lobbying and research related to the recreational use of psychedelics and ecstasy. These drugs can drastically change the views of the people who consume them, engendering strong feelings of empathy for nature and other people. The same playbook that was used to legalize marijuana is being implemented within the US for these substances today, which means that the future will present opportunities to advance the HC’s goal of increasing compassion for others. Once the necessary research and regulatory frameworks are complete, psychedelics and ecstasy could offer a genuine pathway to helping re-calibrate our collective relation to one another and the Earth. The approach here is far from orthodox and much remains to be discovered, but the potential benefits are compelling enough for the HC to make investments that further our understanding of what’s possible. It’s no coincidence that the rise of the counterculture in late 1960s America heavily featured the use of psychedelics, and that portends well for the level of political and economic change this framework seeks to accomplish.
The framework in its simplest form is to establish new economic incentives and increase compassion for others which then leads by default to actions that meaningfully address climate change. A single holding company may be limited in its impact, but spawning an ecosystem specifically built to bring change to everything is something that should inspire confidence. As stated somewhere in a book or on the web recently, the beauty of humanity is that we can organize ourselves into any system we wish, the only hard and fast rule is that we cannot violate the laws of physics. The ideas for this framework are undoubtedly audacious, but anything short of revolutionary at this point will doom the climate.
Since submitting this framework my views on some parts have changed. I've yet to update the framework with my new thinking. One example of a change would be investments in the political arena. Given comments by AOC on the Democratic party's online presence in the 2020 election, it seems as though Part 1 of the framework would be better served by increasing investment focus on tools to improve the digital marketing operations of the party at the expense of lobbying or individual candidate support.