“All courses of action are risky, so prudence is not in avoiding danger (it’s impossible) but calculating risk and acting decisively. Make mistakes of ambition and not mistakes of sloth. Develop the strength to do bold things, not the strength to suffer.” - Machiavelli, The Prince.

Hard problems deceive us by overestimating the impact of possible (known) solutions or underestimating threat. Both can lead to a denial of reality that skews decision making, inflates bubbles, and hinders progress. We begin by asking if there is a problem at all – if so, how is it best articulated for possible solutions?

We reduce the abstraction of climate change and identify a singular, specific, problem – waste. We then explore the outcomes that possible solutions would take (reduction, processing, elimination). We then look at the present and examine undercurrents in business, culture, politics, and globalization to frame the context of the present decade.

Finally, we use the groundwork laid and explored above to construct the framework for selecting an antifragile portfolio – one that is not only immune to but also benefits from exogenous shocks. We recommend funding in both public and private markets, as a complementary process that balances relatively quick returns (<10 years) that are deployed to fund exceptional ones (>10 years).

** The Ontology of Climate Change ** Climate change, like love, is an abstraction – a concept. A number and combination of observable phenomena are abstracted under this generalization, and later posited as “problems” in need of “solutions”. The a-posteriori observation of this abstraction is singular – the increase in the earth’s temperature.

Reductionist thinking in science draws discrete boundaries in domains of knowledge, which allow us to categorize different phenomena. This categorization is often helpful, for it allows us to bracket problems by ascribing them to specific categories or domains. The result of such thinking helps us in problem solving, for we look for tools and methodologies in a specific domain to solve its respective problems.

Such an approach is categorically wrong when thinking about climate change.

The most important task in thinking about climate change is to identify the correct way to think about phenomena in categories for which we don’t currently have proper language. We must eliminate reductionist dogmas that ascribe easy chains of causation to observed phenomena.

Falling prey to reductionist dogma will overdetermine observable effects and understate inherent risk in a complex system. At worst, it can lead us to deploy capital in ways that exacerbate the problem instead of catalysing a solution.

Science and culture devolve to dogma if we do not (or cannot) question the foundational premise – if there is a problem at all – let alone one that can be solved.

The question, thus, is epistemic – how do we determine the existence of this problem or think about its nature? Science is limited by its ability to measure phenomena for which there are established degrees of measurement and fails at modelling anything at the scale of emergence or complexity. We know more about the temperature this week in our respective cities than we do about its impact on weather, or how it could potentially affect crop harvests in 8 months or 8 years.

Moreover, uncertainty inherent to measurement, the limited availability of data, and a sample size of one planet adds high variability, calling into question whether any type of climate “modelling” is accurate. Our exploration reveals a very specific category of problem – measurement. Furthermore, it reveals our limitations around a certain _type _of modelling and measurement – risk.

Over-reliance on statistical models lead to policymaking that attempts to curb foreseeable harm, and skepticism around the validity of such measurements cite the lack of “reliable evidence”, claiming that no action is warranted. Neither camp provides a plan of action that is exhaustive, and both underscore the uncertainty inherent to the impact of human affairs on the planet.

Thus, we frame risk pertaining to climate change along the following epistemic categories of knowledge:

  1. Known knowns – we know what we know
  2. Known unknowns – we know what we do not know
  3. Unknown unknowns – we do not know what we do not know

We frame the determination of risk in a way that is mutually exclusive and collectively exhaustive. In the first, risk is modelled by reductionism in science. Here, we know both empirical observations and mechanistic interpretations. For instance, we know there are more greenhouse gases in the atmosphere because of industrialization, and how the depletion of the ozone layer affects the temperature of the earth.

In the second category, we are aware of our lack of knowledge about how, when, or if melting ice caps and elevating sea levels will eliminate coastal cities entirely. Risk is endogenous, and difficult to model.

In the third, the risk is the greatest for we cannot articulate problem statements to capture its nature. If we could, these risks would fall in the second category. These risks have fat tailed distributions, so what matters isn’t the hypothetical probability, but the scale of non-linear, convex, impact.

In all instances, uncertainty may not just _underscore _the nature of possible risk but _constitute _it. Simply put, we do not know what we do not know about climate change, it’s possible factors, risks, effects, impacts, or solutions.

Given that we have one planet, the harm is the dose rather than the nature of the offending substance. Our understanding of ecology and its interconnectedness with human activity is opaque, so risk impacts increase non-linearly.

The solution is the following: we reframe our epistemic concerns about climate change independent of our ability to measure, model, or monitor it. Our point of origin thus begins from precaution – in identifying the correct course of action be in the absence of _any _reliable models. _That _is where the money is.

Resource constraint implies that we need to think twice before disrupting the environment at scale. **Our investments, then, must account for the uncertainty concerning adverse effects of climate change as much as it does on the known effects.

Our original question about whether climate change is a solvable problem is now redundant. When we begin with precaution, the abstraction of climate change is reduced to the claim that anthropogenic factors have and continue to disturb the environment. Some ways in which they affect the environment are known, while other ways in which they could, are unknown. Further, these factors are reducible to a singularity – waste – as a consequence of production driven by consumption.

Clear Outcomes and Unclear Solutions Outcomes are categorically different from solutions. Outcomes are the endgame, solutions are processes. Outcomes are results, and solutions are methods used to arrive at envisioned results.

In this context, we have a clear vision of outcomes but not of the solutions that will lead to those outcomes. The outcome to be accomplished seems seemingly obvious – prevent destabilizing the ecology on account of human intervention. It means we reduce _and _redress harm.

We deal with a very specific category of consequences as a result of human activity – waste. It exists across all three states of matter – solid, liquid, and gas – and is disposed of in respective domains – land, oceans, or atmosphere. Of these, the most potent category of waste we can identify is greenhouse gases.

The abstraction of climate change, reduced to waste, can help us in understanding its 1) nature and 2) causes. In all its forms, waste can be dealt with in the following three ways:

a) Reduction (We reduce the waste we produce) b) Processing (Process waste better, or dispose of it more effectively) c) Elimination (Create something that gets rid of it completely)

The capital we deploy needs to fund the right solutions. We achieve high impact and ROI only when the capital we deploy directly or indirectly achieves the outcomes of waste reduction, processing, or elimination.

To invest in the future, we begin by diagnosing the present:

#1, monopoly as the condition for success Capitalism by definition is predicated on the accumulation of capital. The ideology of competition distorts this truth, and failure in all business comes from inability to escape competition – which erodes away profit. The most successful businesses today are monopolies, although they are not characterized as such. Amazon on e-commerce (not retail), Facebook on real social identity (not social media), Google on search (not advertising). Abstractions and generalizations distort the truth about the “moat” around a successful business – its monopoly.

In this regard, creating and capturing value are independent vectors, and monopoly businesses are able to do both. A business in a competitive market creates value but fails to capture any of it. Failure to capture value translates to continual existential threat, which manifests as intellectual sterility without innovation.

#2, Scientific breakthroughs often arrive earlier than applied, engineered products, the adoption of which is dependent on culture Changes in technology are discrete, so measuring marks of progress are empirical and defined. Changes in culture are continuous, non-discrete, non-empirical, and hard to define. Changes in culture affect the adoption (hence success) of a product or an idea just as much as innovation.

On one extreme, this means that it is changes in culture that lead to engineering which instantiates breakthroughs in science.

For instance, the first electric vehicle was built long before Tesla, but adoption of EVs as the norm is a phenomenon of the past decade. John Kellogg made “meatless meat” in 1896, a plant-based alternative to meat, but Beyond Meat exists as a commercial success only in the past decade.

In business strategy, this insight is translated to creating monopolies based on acquiring a last mover advantage. Nevertheless, changes in culture can lead to viral adoptions or boycotting of certain products. It is hard to predict or fund changes in culture, but it would be absurd to discount them as insignificant or unimportant factors.

#3, not all innovations are created equal Different types of innovations have different impacts on the products and the markets they serve. The first is to iterate, which is predicated on an inherently uncertain view of the future. To choose iteration is to discard planning, which by indirect proof is to reject the existence of a vision that will definitely succeed (WeWork). The second type shifts the modality of what is possible, usually creating possibility in a domain where none existed previously (blockchain, crypto). The third type of innovation has to do with complex coordination, where different moving parts are put together to create monopoly value (Tesla).

Investments in the third category are usually the hardest to identify, because complex coordination needs engineering to instantiate specific or even historical breakthroughs in science. Companies and industries in these spaces are usually capital intensive and do not have access to financing easily, which is precisely where the opportunity exists. We invest in these companies and spaces that have vertical integration, then they need to get to reusability, and then they can iterate and innovate.

#4 Globalisation, Culture, and FAANG Mania Part of Big Tech’s success comes from their ability to capture more of the value that they create. Part of this can be attributed to the nature of the tech ecosystem, where technology is scalable at a near zero marginal cost. But part of this has to with the undercurrents of globalisation and shifting trends in consumer culture.

Facebook, Amazon, and Google may be monopolies, but would fail disastrously if everyone tomorrow decides to live like a monk without pursuing or accumulating material goods. The internet accelerated globalization, which accelerated the adoption of consumer culture across the globe. When things (products) are simply novel, there is incentive to try and purchase without assessing whether there is use value. The result: an inflated advertising industry, a shrinking space of new consumer products, and an increasing space of “SaaS businesses”.

Globalization, the internet, and consumer culture in conjunction did a lot more than the mere creation of a global marketplace. It fundamentally shifted the speed with which culture could change. By distributing local knowledge globally, the internet has allowed culture to change rapidly. The result of these three vectors is that the notion of real, personal identity has distorted to create incentive structures around the creation of a global identity - appearance. On the downside, crafting a right “public image” is more important than ever with an ever-shrinking Overton window, but on the upside, it means it takes less than 24 hours for protests about an issue to cross the pond.

Remedy: The Antifragile Portfolio Now that we have articulated 1) the correct problem, 2) the possible scope of outcomes, and 3) the present, we can begin to think about constructing a portfolio that will provide remedy.

Described earlier, our scope of outcomes constitutes the following:

a) Reduction (We reduce the waste we produce) b) Processing (Process waste better, or dispose of it more effectively) c) Elimination (Create something that gets rid of it completely)

Outcomes in the first category (reduction) can be optimized for over the short run, for they can be arrived at independently of technological growth or innovation. Outcomes in the second and third category require innovation, technology, and the right culture to posit the right solutions.

Simply put, waste reduction is the only outcome that can be achieved without positing change in technology. Hence, the solution space demands changing behaviour, which means capital needs to fund a cause rather than a product. Universal acceptance of “waste” as a priced commodity incurred as a cost on the balance sheet will do the job. Lobbying or pushing for legislative change will be hard, capital should be deployed on low risk, high impact events that could shape culture.

One example of this would be to form a class action and sue the United States Government. Specifically, sue to eliminate the legal mandate for US public companies to replace the creation of “shareholder value” with “stakeholder value”. We go to extreme ends in interpreting securities law and argue that waste is to be included as a priced item incurred as a cost on the balance sheet. Another possibility is to sue companies that fail to disclose “climate risk”.

Regardless of whether these lawsuits are successful, they will 1) create the right kind of noise, which could become global instantly, and 2) put pressure on existing corporations to think about optics. The threat of instant global reputational destruction will push forward corporations to change policy far more quickly in desired manners than any _actual _reputational destruction.

Remember, far more companies improved their hiring policies in the aftermath of the #MeToo movement, than as a result of conscious awakening about what is morally correct, or sound hiring practice. Funding the green party would probably not achieve much, and neither would be lobbying to the governments.

To achieve the second and third category of outcomes, waste will either be processed away or eliminated entirely. Improvements in technology will be necessary conditions in both instances. Great investments, however, will be business that form both - the necessary _and _the sufficient conditions - for modalities to change, and for outcomes to be realized. In extremes, this will either create resource (or physical capital) abundance or make an existing domain of resource (or physical capital) redundant.

This is why investing in renewable energy or clean energy is a dead zone. Electricity is perfectly homogenous, undifferentiated good. Consumers care less about where it comes from than _that _it is there. The business of clean energy fails to create a monopoly in any domain of business (proprietary technology, distribution, margin etc.), and perfect competition in a globalized world eats away profit. OPEC+ and global cartels have lowered the cost of oil, which means there is no existing incentive to switch from inefficient to efficient resource allocation – even if it means adding greater endogenous risk.

In the category of clean energy, the outcomes of greater efficiency in processing will come from the likes of smart power grids, and smart homes. But the greatest value (and impact) will perhaps be created in graphene batteries, nuclear fusion, or extracting extraterrestrial energy resources over the next century.

To summarize, we do not begin our inquiry by asking “what are the causes of climate change?”, but by asking ourselves “what do we currently do that generates waste?”. We then find the most efficient mechanism to tackle waste production for this specific category (cause), and fund things that 1) reduce, 2) process, or 3) eliminate it entirely. Across 1) and 2), our major hurdle will be finding the right way to fund adoption, which means eliminating switching costs, and across 2) and 3) our major hurdle would be technological – engineering the right product and designing the right business.

The framework laid above will allow us to avoid the dogmas of reductionism, abstract out commonalities in 1), 2), and 3), and reveal to us solutions in spaces that we may not have traditionally thought of before. The emergent structures investigated around these frameworks may reveal unconventional solutions – such as funding Beyond Meat to eliminate cattle farming (hence steak consumption and thus reduction in methane). However, they will be most effective in identifying the right problem(s) and reframing it by subjecting it to the right sets and categories of constraints.

To say so is not to understate the nature and difficulty of this Herculean task, but to recognize that life is matter of deliberate choices as opposed to agnostic experimentation. A sample emergent solution space for reducing waste outcomes in greenhouse gases can be found below:

Greenhouse

Gases </td>

Industrialization (any production) Energy

(Production) </td>

Agriculture Emergent

Solution Space (Long/Short) </td> </tr>

Reduction • Carbon tax

• Align

incentives

between public and private

sector

• Waste as Cost </td>

• Carbon Credits • Lobby for

Government

controlled clean energy,

government

controlled

renewable

energy </td>

• Better

accountability of resources

• Anti-dumping laws for crops > prevents

overproduction > reduces agro.

waste </td>

• Long on

Carbon Credits • Monopolize

Carbon Credit Marketplace > Sue companies > Charge

premium </td> </tr>

Processing • Nanomaterials, greater

reusability

• Edible cutlery • Product with greater

recyclability </td>

• Smart power grids

• IoT – trackers in homes,

houses, etc. to track usage </td>

• IoT – smart

trackers to

measure crop

productivity

• Hydroponic

farming (greater efficiencies in

production) </td>

• Long on IoT

• IoT needs

resource boom, or better

extraction or

recycling of e

waste

• Long on chips, asteroid mining • Long on metals that will facilitate better waste

processing </td> </tr>

Elimination • 3D Printer with a custom

polymer that can be repurposed several times to create different products </td>

• Nuclear Fusion • Capturing

Solar Power in Space, and

transmitting it to earth </td>

• A caloric pill

that eliminates the need to eat • Pill solves food security > solves overproduction > solves organic waste

management </td>

• Long on

innovation in the world of atoms, engineering,

complex

coordination,

• Household

/countywide

nuclear power plant

• Generator or Hydrogen fuel cells </td> </tr> </table>