Jeremy Grantham on Investing in Green Tech | Conversations with Tyler

Hello everyone, and welcome back to Conversations with Tyler. Today I'm chatting with the famous investor and thinker Jeremy Grantham. He is co-founder of Grantham, Mayo, and Van Otterloo, also known as GMO, and he has been in the news a great deal lately with his proclamations on the environment and also bubbles. Jeremy, welcome.

Hi, nice to be with you.

Can the global mining industry produce sufficient raw materials for the green transition?

Not as currently configured, no, not a prayer, not even close.

Which is the most binding constraint?

Lithium today, I would say. If we mined every ounce of lithium that are in the known reserves, it would probably be about 5% of what is required to green the entire economy once. Forgetting about the fact that every 30 years it would then need to be replaced.

But can't we get much more lithium from Australia, from Argentina, develop better ways of mining lithium, cheaper ways? Why is that harder, say, than developing fracking?

It's harder because they've been looking for lithium now for quite a few decades and we have a pretty good idea where the best reserves are, and they are totally inadequate to the task. Now, the lesson we draw from that is we have to change the task. We have to redesign our way around lithium. The Grantham Foundation, I'm happy to say, has an investment, a promising investment in extracting 3 or 4 times the lithium from brine and extracting 50% more from the rock. Of the kind that occurs in Australia. But even with those improvements, we're not close. This is not going to be a closely run battle. We are just going to have to find another way to make lightweight batteries using something other than lithium, and potassium and sodium would be— are very good candidates, and we'll probably do it. And there are hundreds of times more sodium and potassium around than lithium.

If we take away, say, the last 20 years, the era of explosive Chinese growth, isn't the long-term trend for commodities prices really pretty modest? And now China is done growing. Longer-term elasticities of supply are high. The world will be depopulating, as you've pointed out, and thus we should think commodity prices overall will be falling for the next 50 years.

Commodities are unlike a lot of growth aspects. You're dealing with a store that is completely finite. Even if your growth rate decelerates, your store gets less and less. If you're growing at 10% in China, it gets less very rapidly. If you're growing at 2% in Europe, it still gets less. If your growth rate slows, the reserves do not. Mystically increase. That's the, that's the difference to almost all aspects of growth and, uh, and resources.

But we can dematerialize the economy, right? The finite supply argument has been made for a long time. It hasn't yet turned out to be binding. Wouldn't it be strange if all of a sudden it were now binding and the last 20 years is more of a China phenomenon?

We're the bacteria in the petri dish. Someone discovered fossil fuels as sugar. And we accelerated into a frenzy and we can now see the rim of the petri dish and you're saying let's look back, we've doubled and doubled 32 times from nothing to massive. We're down to our last double, we can see the outer rim. Would it be surprising if the growth rate in the petri dish stopped and stopped fairly abruptly? No, it wouldn't. It would not only not be a surprise, it is inevitable.

Q: How effective do you think the Biden Climate and Taxes Act will be in improving the climate situation?

A: I think for climate, it's an extremely important message. And for green tech, which we're invested in, I'm worried that people will suspect that we bribe politicians because this bill could not possibly have been better for the Grantham Foundation that has half its money, half its principal in early-stage green tech, all of which will benefit. All aspects of green are being encouraged in this bill. But more important than that, it sends a message to the rest of the world that dopey US full of climate deniers and politicians with their heads in the sand has finally begun to wake up.

Is the long-run equilibrium that we make green energy much cheaper, but dirty energy becomes cheaper also, and the world just uses much more energy? Because as we move away from oil, its price falls. So Vietnam, Africa, Bangladesh, wherever, they'll just use that oil and the world will remain dirty in terms of carbon.

The interesting thing about green energy is on a marginal cost basis, which we economists know it's the only thing that really matters. The marginal cost of wind and solar and almost all green energy is nil, and it's very hard for even a falling price of fossil fuels to get to nil. It is so cheap to generate wind and solar when you have built the expensive plant, and we will drive fossil fuels out of business.

To bridge intermittency in, say, Vietnam and Bangladesh? Won't we need gas or something?

In the short term, greening is a very energy-intensive effort. When you build a windmill, you put all your labor and all your materials and all the mining that went into it up front. And the same with solar and the same with battery storage. It's almost weird how incredibly intensive in terms of energy and resources it is up front. Then when it's built, it runs itself at almost zero cost. That pulse, if you will, to build at a massive increased rate wind, solar, and storage creates an enormous strange increment in demand for energy which cannot be met yet. Of course, by green energy. So it causes the demand for fossil fuels to go up.

Now you've written about the loss of topsoil in the Midwest and other places and why that's a serious problem. Has anyone heeded that? What's the status of that issue right now?

The ability of Homo sapiens to avoid long-term slow-burning issues is truly profound, as I noticed 15 years ago with climate change. Climate change is now— has now caught fire, but other issues including soil erosion, water shortages, toxicity, loss of insects. There's some really profound and dangerous things going on. And the drop of fertility rate in the developed world. And we show no interest in these things at all, even though they may be burning on a fuse that's only 20 or 30 years out. But the reserves of topsoil in the Midwest have gone from at least a foot to an inch or two. So we still have plenty of soil in most of the prime land, but the safety margin has dwindled to next to nothing. If we do not change Big Ag to be less conducive to erosion, we will start to lose productivity pretty soon. In the next decade, it will start.

I understand that global warming takes place in a commons, right? The Earth's atmosphere. But topsoil is essentially private property. And if a lot of other farms were losing topsoil and you maintained yours, there'd be a high privatized pecuniary return to doing so. So why does short-term time horizons prove to be a problem there? Why doesn't the market internalize the gains and costs?

Markets are occasionally quite efficient, and as we see in stock market bubbles, occasionally ludicrously inefficient, and everything in between. I have unfortunately no confidence in capitalism in dealing with the commons. It showed no easy, quick awareness of climate change or soil erosion or anything else. They Capitalism waits until you bang it on the nose and then it responds sometimes brilliantly, quickly, and effectively. But it does not anticipate problems very well, does it?

If I look at long-term trends for weather disaster-related deaths and even flooding deaths, they're both down slightly, but they're down over time. So how worried should we be about climate change, given that mitigation is relatively effective?

Mitigation is relatively effective. I don't think mitigation has barely gotten going yet. I haven't noticed the great sea walls appearing around the Bostons of the world. I think the world is in complete denial about ocean level rise, and one day when Miami gets an incredible flood, it will wake up and, and do something down in Miami. This is a pay-as-you-go system that we have. We respond, as I say, when we get whacked on the nose. We're not anticipating in mitigation expenditures. We're spending nothing. We're just waiting to see what happens. And what happens is getting obviously very much worse very quickly in the last 2 years. The climate, I hope, is just having a run of bad luck from our point of view. I don't believe this could possibly be typical. The, the, the fact that we have severe droughts in China, India, Europe, and North America at the same time is completely without parallel in history. And you will notice that even though they are in severe droughts, they are simultaneously having here and there floods of a level that we have never seen before, washing away German towns. Not enough to break the drought. The Rhine is unpassable. We have floods in Pakistan, but not enough to break the drought in the Indian subcontinent, etc. Floods in China, floods in North America, down in Mississippi, Kansas, Louisiana.

If you could easily short coastal property, would you do so?

Shorting is a complete mug's game in almost any area, because once you're short, you can lose 10 times your money, and you can only make a decent return if you're right. This is an asymmetry.

You're pretty liquid, right? You could short without leverage.

I don't need leverage. When you go short, Even though you have a simple position, it can multiply. The stock can go up 10 times and cost you 10 times your initial short position. You don't need leverage. If you, if you do leverage, you just die even quicker.

Now, you mentioned major flooding in Jackson, Mississippi. That's a problem right now as we speak on September 1st, 2022. How much do you think real estate values will decline there as a result of the flooding? Like, what would your prediction be?

The history so far on early flooding is that it has little or almost no effect. It's a bit like going bankrupt, very, very slowly at first and then quite sudden. When you need to buy insurance one day, you will not be able to get it except from government subsidy. And on that day, the house prices will start to decline. And then quite possibly there'll be some sort of panic. We do panics pretty well, and the prices will drop like a stone more than they should. And then of course they will rally and so on and so forth. Business as usual.

If I try to seek out the most serious efforts to estimate the costs of global warming, say by 2200, I end up at the papers of Esteban Rossi-Hansberg and. And he comes up with figures somewhere between 5% and 10% of global GDP, which, as you know, is an enormous amount of money, especially come 2200. Now, does that strike you as a fair estimate or an underestimate?

It strikes me as utterly trivial and only producible by economists. I mean, when economists try, they can be absolutely nitwitted. And the guy who got the Nobel Prize for it, for his work on climate change. Actually, he spelled it out. He said, even if there was 10 degrees centigrade, it would only cost something in the range of 10% of GDP. To which I say, dudes, we will be long gone as a species at 10 degrees centigrade. It is quite obvious at 1.1 that we are already having trouble. At 2, we will be struggling and societies will fail here, there, and everywhere. At 3, in a sense, forget about it, and we may have to deal with it, but it will be grievous. At 10 degrees, it takes real imagination to come up with a little number of GDP loss. No, they're complete jokes. You cannot find a serious climate scientist who would bet that society as we know it on a global basis will still be around at 5 degrees centigrade. I have met a lot of them and I asked them this question. Not one thinks we have any material chance of a stable society at 5 degrees centigrade. And the idea that you can bandy around 10 is reserved for Nobel Prize winners.

Sure, but we probably won't see a 5 or 10 degree hike in the temperature. So if we look at what is most likely, it's not just economists who say this, but these are papers co-authored with climate scientists, and markets seem to agree with them that costs of global warming, climate change, will be highly significant but not existential, not a complete disaster for civilization. If you look, say, at prices for coastal property, prices in Florida, prices in the Hamptons. So it's the market and economists broadly agreeing, you know, and you just think they're wrong.

Absolutely. I think it's par for the course for markets to be wrong. On a horizon that's over 2 years, I count on the markets being wrong. As for economists, I typically count on them being wrong for anything that is long-term, anything to do with the commons, anything that requires a lot of common sense. Economists have an ability to build models and get off into abstractions and assumptions so profound that after a while, they need to pinch themselves and remind them remind themselves where they live in the real world. I think the economics profession on the topic of resource limitations, energy in particular, but metals and climate change, has been extravagantly poor. I mean, remarkably lacking, with the one or two Nobel exceptions here and there where economists have actually made a big point of resource and energy as key to the long term. But they're all marginalized. James Galbraith. These are not pillars of the establishment, the people who see energy for what it is. Energy, obviously, is the driver of civilization.

Now, just yesterday you published a piece called Entering the Super Bubble's Final Act, where you described our current situation as being a 2.5 to 3 sigma event. Right, in terms of being an overextended bubble. When I think of other 2.5 to 3 sigma events, like say 9/11, I feel I'm very poorly placed to predict how they will evolve in the future. So if our current situation is something like a 3 sigma event, why should we be so confident that we know how it will evolve? Why think we're so good at spotting bubbles at those margins?

I think 9/11, you bring up an interesting point. My quarterly letter after 9/11, I made exactly that point, that dealing with sudden shocks are impossibly difficult to predict. And that after the '87 crash, a lot of us thought that it would have consequences going deep into the future. It turned out that '87 crash was a unique outlier event that was not to be replayed in the next 25 years. And I use that as an analogy. It seemed to me that 9/11 was an outlier event unlikely to be replaced and bearing utterly no resemblance to a nice stock market bubble like 1929 or 2000, or indeed 2022.

But I think you also say there might be 3 or 4 previous bubbles in history as big as this one. So if we have 3 or 4 data points, why should we be very confident that right now is such a super bubble? Like, what's the magic elixir that you're drawing from? Is it just 3 or 4 data points, or do you know something in theory that other people don't?

No, um, this is precisely the point. Um, there are, there are not many data points and you have to live with that. And you can make the assumption that you would need 30 before you could do any sensible prediction. I believe that markets are a function of human behavior. I believe that human behavior has these flashpoints that is normally quite reasonable. We're relatively efficient. And stock prices are close enough for government work to what they should be. And then once in a blue moon, circumstances conspire to get us into, into an irrational fever, and it takes an extended number of good economic years, extended profit margins at or close to a peak, nearly perfect economic conditions. And it takes a slow, steady buildup of euphoria, and then it hits a kind of flashpoint where people start to buy stocks without any regard to the fundamentals, as we've seen in the meme stocks recently. They buy them because they think someone else may pay more. And these are pretty rare events, and we've had 3, and they have some unique characteristics. In common with each other and in common with nothing else. And now we're in number 4. That impresses the pants off me, I can tell you. I think the 4th one is so similar to the other 3 and the outcomes from the other 3 so unique and interesting that I am willing to bet that this one is going to be the same or similar.

Here's a very direct question. If spotting bubbles is relatively feasible, Why aren't you much richer than you are, noting that you're already quite well-to-do?

Tyler, I have to admit, I needed a partner from day one who was one of the world's great hedge fund guys, because I have been much better at long-term ideas, getting them right, than I have been at turning those ideas into making money. So yes, I have a lousy $1.5 billion in my foundation, but the point is it should be $10 billion. The quality of the ideas was much better than my execution, which has always sucked. I just have not had enough interest in implementing the ideas. It's another life. It takes different talents. I'm interested in ideas like I believe you are. And that doesn't leave as much time for working out the 17th derivative of the options market that would get the job done best. That's a separate skill, which I admire greatly. I envy. I wish I had it as well, but I don't.

If we look at the UK only, how would you describe the current bubble in the UK? What's the overvaluation?

UK is not spectacularly overpriced. The odd thing about this event is that the overpricing, rather like 2000, is concentrated in the US in the stock market. Plenty of places around the world are merely in a bull market, ho-hum, ordinary stuff. Real estate world is completely different. We're way up at the top of the range as a multiple of family income. We've just beaten the so-called housing bubble of '06, but we're pikas compared to Canada, Australia, and Europe, and China. They all went to multiples of family income that were, by historical standards, preposterous. Housing, of course, is a more dangerous thing to mess with in economics. I believe the housing markets around the world will spend spent the next big chunk of time unraveling and causing all manner of perhaps unexpected problems. Of course, the interest rate bond market overvaluation was universal too. We had of the three bubbles, bonds was everywhere and real estate almost everywhere and the stock market curiously confined principally to the US.

Why does there seem to be such a major current productivity crisis in the UK, maybe stretching back 20 years? There's a lot of science in South England, a lot of talent in the country, a democratic government. What's the fundamental thing going wrong there?

Yes, I don't know. Of course, I believe Brexit was one of the worst self-inflicted wounds in modern times that any economy could pull, so that anyone who's building, any Toyota building a plant in Europe who might have built it in Scotland or the north of England will of course now be paid in a way to build it in Europe. And that isn't immediate. Some of it is pretty quick, but it goes on and on for decades. That has just lowered the growth rate of the UK. And then, of course, a lot of industrious Europeans who were settling happily in England and the UK, because of the combination of Brexit and COVID, went home and stayed home. And that's taken a lot of blood out of the system. And they were some of the most industrious people that were there. And yes, they tried very hard in terms of venture capital to gear up, and they will have, by the look of it, some success. But it's a bit like the tail trying to wag the dog. Much better than nothing, but The truthful answer is I don't know why they're quite so bad.

What do you view as the fundamental mistake of post-war British history?

Brexit.

Well, but before that, Brexit happened for some set of reasons. It's not a complete accident. I thought it was a bad idea, but that one even got to that point. The Netherlands didn't vote for their version of Brexit. How did things get so screwed up? That people would press that button?

Actually, it was really bad luck because if you had taken a poll on— and they did— when you took a poll in England, do you approve of immigration, and you did it in 1947, 90% of the people disapproved. If you did it in 1957, it was 82%, and gradually people became accustomed to the idea of immigration and it worked down into the '60s and finally to about 55% and they decided to have Brexit, which became a vote on immigration. And they could never have picked a point with as favorable a vote on immigration. Indeed, the whole of London is pro-immigration and pro-Remain. But had they waited another 20 years, it would have been down to 42% Brexit would have failed. So any time after World War II you had had a Brexit vote equivalent on immigration, it would have failed in England.

Was Margaret Thatcher a successful prime minister?

Yeah, I think you have to say that she was amazingly successful because England was in one of its several periods of economic malaise. And social malaise in a way. We were really stuck in the class system, one of the reasons I left England. And Thatcher did an unbelievable job on that. She would grab Americans from McKinsey— I'm sorry, Brits who'd been 30 years in America at McKinsey and stick them on to run the steel company. And she picked people entirely on merit. It was a kind of shocking introduction of meritocracy into the old establishment based on class and land and so on. And at the end of her era, it was a different Britain, much more competitive, London felt like New York and things happened a lot faster and better.

Now, you grew up near where? South England, is that correct?

No, I was born there. I grew up in a coal mining town, Doncaster.

And where's that?

In Yorkshire.

How has that influenced your subsequent thought, that background?

Mainly the fact that I was brought up by my grandparents who, you know, left school at 13 and opened a little shop eventually and turned it into 17 shops and sold it and turned that into a big restaurant on the main road from London to Edinburgh. And he was himself brought up a Quaker and then became an apostate. But he remained a Quaker in his behavior. So we lived in a world of waste not, want not. And of course it was wartime, so that was double jeopardy. So everything was recycled, waste of any kind was thought to be disgusting. You reused everything. And—

So you grew up thinking about natural resources, right? You grew up thinking about scarcity and natural resources and—

And recycling and all those good things. Yes.

Very— at a very early age before other people were thinking about it.

It's in my cortex. There's nothing I can do about it. When I see waste, I twitch.

So when the relatively extreme optimism of the 1980s came along, were you already a skeptic at that point, or that popped up a bit later?

I'm a great optimist, I suspect, along with you about technology. I think whatever success we're going to have will be on new technology. I am a great fan of American venture capital. It is, I think, the last best American exceptionalism. We're not very exceptional at many things. We're exceptionally bad at plenty of things. In America. But VC, we have the best and the biggest, always have and will for a considerable amount of time. It's very vigorous and it attracts the very best foreigners too. They are a shockingly— encouragingly large fraction of the VC leadership, as you see. And we also have a lion's share of the great research universities that go hand in hand with VC. If we save our bacon, that is the sector that will do the heavy lifting for everybody, including the US. I am optimistic, incidentally, that we will have a plentiful supply of green energy and that we will green the entire system. My worry has always been and still is timing. We don't have a lot of time to spare. The damage we do is already pretty obvious and it's getting worse rapidly. And there are many flashpoints that the serious climate scientists will tell you about. We could pass them any time where the temperature in the far north releases methane and CO2 from tundra and from offshore Frozen methane, clathrates they call them, and that could spiral the temperature out of control. The jet stream could shift, the equivalent ocean currents could shift. There are several of these potential self-reinforcing cycles that— and of course the classic one is you melt the ice The ice reflected the sun, and now the dark ocean absorbs it, and the temperature goes up faster, and more ice melts, etc. So we are really playing with fire, and we just don't know how long we've got, how high the temperature can go without triggering these points. You cannot find a serious climate scientist who would give you a guarantee that that will not happen. Some of them think it's very likely, Some of them think it's unlikely, but all of them agree it can happen when you play with another degree or two centigrade.

Who or what else would you describe as your major intellectual influences?

I was a great fan of Jack Bogle's, um, hardworking, driven, honest man wanting to do the right thing by investors. Um, brilliant.

Why has Boston been so central and so big in asset management? Is that an accident, or you think there's a good reason?

It has a good cluster of universities. With any luck, that should be associated with producing people who think. And if you think, pretty soon you're likely to come up with good ideas. And, um, and then you need to implement them. Good engineering, MIT, and so on. No, Boston has been blessed with an unfair advantage for a long time, the highest incidence of any major city of students.

What is Ray Dalio most wrong about? I know you did a dialogue with him. You agree with him on many points, but how would you describe your main difference with him?

Um, I have never— in my next life, I'm going to be an expert in fixed income, but in this one, I am a beginner, and I've spent my time on equities and to some extent on real estate, and I've left the highly competitive business of fixed income to others, and he has not. But in terms of where we overlap, I have no interesting disagreement with him.

How would you describe your media diet to follow the areas you care about? The environment, commodities, resource scarcity, bubbles. What do you do to track those and other issues?

That has become the great problem for me. I wanted to try and keep up with COVID and I was hiding in the countryside and I was doing 8, 9, 10, 11 hours of reading a day because suddenly climate became an investment issue. Resources, my other pet theme, had a decent paper done on that in 2013, Time time to wake up, we're running out of resources, which I still believe is much more right than wrong. And suddenly they became fashionable. And then to add insult to injury, if you will, we got into a bubble, which is the kind of last specialty that I have in the investment business. It was the first one I got into and it will be the last one on my way out. And so all three components went from really back burner to front burner. At the same time, our activity in our foundation with climate became much more intense because we decided to invest our principal. And in 2.5 years, we have done— built up our own team and done going on 45 of our own investments in early-stage green VC. And fascinating, wonderful people. Couldn't be a better topic to spend, to spend time on, in my opinion. And I think it's a candidate to make more money than anything else, particularly after the new bill has passed. But countries all over the world are beginning to put their shoulder behind climate change. That taxes on carbon are coming in here, there, and everywhere. Incentives for electrification and alternatives. And the real money is usually in the early stages of the next wave of inventions, and they are unbelievably important. We have to find our way to do engineer around the bottlenecks. We live in a world of bottlenecks suddenly, from COVID from climate change, from resource shortages. And we really need to spend more money and time and talent on anticipating the next level of bottlenecks and working on them in advance. And that is what we try and do in the foundation.

Are taxes on carbon so common? I see Australia repealing theirs. Germany still getting rid of nuclear power and burning more dirty coal. Japan seems to be returning to nuclear power, but remarkably little progress toward making dirty energy more expensive.

It's so important to the average voter to fill up their car and do their heating that it's a nearly impossible ask of politicians to do it. Given that, one has to be amazed that the EU has a pretty effective form of carbon tax and that the Chinese are struggling manfully to— that's probably unacceptable now to say manfully— struggling humanly to bring in a carbon trade.

A talent question. If you're looking to hire someone to work in your foundation, Obviously they should be smart, hardworking, and so on. But what traits do you look for above and beyond the usual when you're evaluating talent?

Being agreeable and cooperative. That's easy. Give me another one.

How about when you hire an investment portfolio manager for GMO? Do you look for the same or different?

I don't hire them. That's also—

But at some point you've hired them, right?

No, hardly ever. I only hired 3 people. In my entire career at GMO. I considered that I had no talent for it and attempted to duck it to the best of my ability. I was very proud of the 3 I did hire, but—

If you think about the course of your own life, so you're 83 now, there's what you want to do at 83 and what you wanted to do when you were 60. How has that changed?

I got to say my life has been an a pleasant surprise. And I've been a drifter. I never had any great plans or ambitions as a kid. I was a terrible student and finally kind of woke up about a year into college. Only one university in England, Sheffield, would have me and And then by a series of coincidences, drifted really into Harvard Business School and then drifted into finance. Why? Because my friends were having the most fun, not because I had a battle plan to make lots of money, but it was, they were having more fun than anybody else by such a wide margin. I would've had to be an idiot in 1968 not to not to try and get a job in such an entertaining industry. So I did. And I was driven by ideas. You can never have too many ideas in the investment business, right? It's dense with theoretical ideas, practical ideas, ideas about an individual company, idea about a sector, ideas about the market, ideas about super bubbles. Do those three lousy data points Are they so unique that it constitutes something worth betting on?

Someone like you wouldn't get into Harvard Business School today, right? Has it become too hard to get into Harvard Business School? How did you get in?

I got in by a series of such ludicrous strokes of good fortune that it would be a pity to tell the story in less than a few minutes. But it needed a lot of luck.

Do you think there's not enough serendipity today in who gets into top universities?

Probably not. Yeah.

And how do you think about your own plans from here on out? So you're 83. Do you think, well, it's imperative to earn all the more money to support the foundation? Or do you think, well, I can stop earning money now? Or how do you view your own forthcoming trajectory?

A part of that is very easy. I would like to make absolutely as much money as possible for the foundation, and because we can, we can use it. And I think recycling early-stage Green VC, having it come back with a decent return, go out a second time, come back with profit I think it's a candidate to make more profit than any other area of venture capital, or one of the top segments, because of circumstances, because of the environment moving in our favor, the real environment and the financial environment. No, this is great. I could not have wished for more agreeable colleagues and for more agreeable contemporaries in the green business. They are a very pleasant group to deal with in the environment, broadly speaking, including the NGOs. They're well-intentioned, and other things being even, it's good to deal with people who are well-intentioned.

You seem quite involved in your own foundation, but putting that aside, how efficient do you think American foundations are today?

I have no— No idea. I assume averagely bureaucratic and averagely efficient, but I'm not an expert. I haven't attempted. There are some new foundations being spawned by new wealth, which tends to be more dynamic and fast-moving. There aren't many of them, but They are— they tend to be allies of ours and they make quicker decisions and of course they're helped by the fact that the money is still coming in. Most foundations are limited to their principal.

Nuclear fusion, will it work?

I'd rather suspect it will. You know, there are 30, about 30 or so new second-generation fusion I think there's some chance that the big bureaucratic fusion efforts will work, maybe 1 in 4 that they'll be commercial, some chance anyway. But I think there's a bigger chance than that, that one or more of the 30 of newbies where they're basing their research on brilliant new ideas. The original establishment, a bit like the Concorde, you know, you're building on a technology that very quickly is 30 years out of date. Which is a huge handicap. And the new second generation are availing themselves of math and science of all kinds that has progressed. And I suspect that they will— one of them or more will work. I would say better than 50/50 that we will indeed have successful— from an engineering point of view,— from a science point of view, successful fusion. There is a pretty decent risk that it will not be economic, that we will have had major breakthroughs in storage and that the marginal cost of wind and solar will continue to fall towards zero, so that it simply will not be necessary. But it may well be necessary, and it's in any case imperative given the risks involved here, that we try everything, including perhaps old-fashioned nuclear.

More general forms of geothermal energy, will they work?

I suspect geothermal will also work, and I suspect it has a very good shot at being commercial in some parts because we have just drilled hundreds of thousands of holes in fracking, and the technology improvement, the engineering improvements in that 15-year window were just cosmic. And now we can transfer a lot of that technology towards geothermal. And if you imagine 20,000 wells later in geothermal with capitalists and engineers beavering night and day to do it better. It's hard to believe that we will move from a handful of super attractive easy places today, which are commercial. It's hard to believe we won't move to having big chunks of available commercial geothermal. So I think that's very promising.

Very last question. Let's say you're right about the super bubble. What should be the next thing happening that we should be watching for next? What will be telling us Jeremy was right?

Well, my job description is underrated long-term problems. And they're absolutely fascinating. And not the least reason is Why are they underrated? How do people ignore them? But it brings us back to toxicity. We are making this planet hostile to life in every form. There is every reason to think there are— the insect population from the tropics to the poles has gone down by 50% and it's probably closer to 75%. Every insect person that you can meet will tell you that that could have dire results. The top ones we spent hours badgering poor, poor old EO Wilson, recently deceased, just before COVID on this topic. The great insect people believe that when insects go, and they seem to be going, they're dropping at over 1%, closer to 2% a year in biomass of insects, of wild insects,, and when they go, it might cascade into a threat to human survivability also. The trouble is they can't prove it. Why can't they prove it? Because it's an incredibly complicated system-wide problem which is not financed. E.O. Wilson, the rest of the guys could not get money to fund broad-based research of the type that is required to prove cascade effect from broad loss of insects. Then soil erosion. We might be down to our last 30, 40 decent years of traditional farming as the soil gets eroded from important parts, breadbasket parts of the world. And they're two pretty good problems to be going on with. And water shortages, horribly underappreciated. And what about the population? The population— the fertility rate in South Korea is 0.8, so they're more than halving every generation of 35 years. They're more than halving their baby cohorts. Japan is 1.35, the US is 1.65, the UK about 1.7, and, and parts of Europe— Hungary, Italy— very low, close to getting close to 1. This is a crash. We have no idea how we'll be able to handle aging population and few workers. These are massive problems for the future, and I try and filter them into every conversation, including the letter that we just posted yesterday. It has the required 2 paragraphs to try and wake people up on these other issues. It's pretty hard condensing these arguments to a paragraph, I might say. But more than a paragraph and no one will listen. So we have been trying to filter these issues in like we tried to filter climate change for 15 years. Every time I talked about the stock market, I had to plug climate change and waking up that it would dominate investment portfolios of the future, which of course it will, if it's not already.

Jeremy Grantham, thank you very much.

It's been a real pleasure.

Thank you.