Climate Change In Extremistan

The Black Swan (book)
Taleb's The Black Swan. Image via Wikipedia

In his Edge Magazine essay Life Is Not A Casino, Nassim Nicholas Taleb, the trader and author (of The Black Swan and Fooled By Randomness) discusses why he no longer thinks that using statistics and probability to make decisions is wise. The problem, he says, is that:

When it comes to low odds, decision making no longer depends on the probability alone. It is the pair, probability times payoff (or a series of payoffs), the expectation, that matters. On occasion, the potential payoff can be so vast that it dwarfs the probability—and these are usually real-world situations in which probability is not computable.

Taleb is a very interesting speaker. I highly recommend a couple of his talks which are available as podcasts. He spoke to the Long Now Foundation in February on “The Future Has Always Been Crazier Than We Thought” (mp3, summary), and at PopTech in 2007 (mp3, description).

Bringing us back to our usual topic of energy and climate change, he makes this observation at the end of the essay:

Correspondents keep asking me if the climate worriers are basing their claims on shoddy science and whether, owing to nonlinearities, their forecasts are marred with such a possible error that we should ignore them. Now, even if I agreed that it was shoddy science; even if I agreed with the statement that the climate folks were most probably wrong, I would still opt for the most ecologically conservative stance. Leave Planet Earth the way we found it. Consider the consequences of the very remote possibility that they may be right—or, worse, the even more remote possibility that they may be extremely right.

“Extremely right,” for Taleb, means that climate change will be much worse than we thought, or much faster, or have a much larger impact than expected. The danger of that, despite its low probability, making it a “black swan” in his parlance, means that investing to prevent it is worth it, even if costly. (Of course, I argue elsewhere that it could be profitable, not costly.)

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Obama’s Green Opportunity

US Senator Barack Obama campaigning in New Ham...
Image via Wikipedia

On Wednesday, the Freakonomics blog asked:

If you had a seat at one of the tables where Obama will be meeting over the next days and weeks, what would be some of your suggestions for how he should shape his administration, address the economic mess, consider the energy future, engage the global community, and so on and so forth?

My suggestions for the president-elect:

  1. Energy independence is the biggest lever you have – it generates jobs (including lots in the red states for solar and wind farms and transmission lines as well as high tech jobs in the blue states), technological leadership, economic growth due to new global industries that should be based here in the States, a “sending a man to the moon” type of national goal, and the potential to change the political calculus with the Middle East, Russia, and Venezuela. Yes, we want a market-based approach, but you have a great opportunity to accelerate the revolution through good policies and emphatic “nudges.”
  2. Quick action to start rebuilding relationships with the rest of the world, especially the parts that are not already our close friends – we really need friends everywhere, not just in Europe. Many options here, from driving worldwide action on climate change to a dignified drawdown in Iraq to, yes, drawing Iran, Cuba and some of our other “enemies” into the world community to reduce their threat to us.

At this critical juncture for the U.S. and the world, and with the world-changing potential of a new administration, energy and sustainability are the common thread leading to a desirable outcome.

In the comments, please let me know your thoughts on Obama’s next steps.

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SD Forum’s Green and Clean Dinner Meeting

The Image via Wikipedia

I attended the SDForum Green and Clean Dinner tonight. The topic was “Where’s the Money?” Five panelists, representing a VC firm, a bank, an angel funding group, a bridge-financing firm, and an entrepreneur who has raised his money independently, discussed the various sources of funding for clean tech companies. i took extensive notes, and will provide more details later, but for now some of the highlights were:

  • Liquidity may be different for clean tech companies than we got used to for high tech companies during the Internet boom
  • Because of the technical risks involved in clean tech, the old venture capital adage of “market first, team second, and product third” often needs to be turned around
  • Especially for power, this is a global market – Europe is at least 15 years ahead of the U.S. in terms of regulations supporting alternative energy and other clean tech
  • There are a lot of entrepreneurs seeking funding – the VC read over 2,400 business plans and funded only 21. The angel investor says one of his biggest problems is “perpetual motion machine” proposals – they have to do a lot of scientific due diligence on the proposals

SDForum’s next Green and Clean event is a breakfast meeting in San Francisco on September 30, focusing on Innovation in Transportation.

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Leading VC talks about investing in energy efficiency

Public Domain. Credit information: Hinode JAXA/NASA
Public Domain. Credit information: Hinode JAXA/NASA

Every day I get emails about “clean tech financing this” and “clean tech financing that” – last year there was over $7 billion in investments in clean technologies in the U.S. In this interview in the San Jose Merc, Paul Holland of Foundation Capital describes some of his philosophy on clean tech investment, including a strong focus on technologies that will reduce energy demand:

“The first lesson is there’s nothing wrong with a capital-efficient investment, even in clean tech. The second lesson is, look what happens when you don’t pay attention to the first lesson.”

Foundation has just closed a new $750 million fund, $250 million of which will be focused on clean tech, primarily on the demand side, although they are making some investments in supply as well – solar and biofuels.

Holland is also building a new, extremely energy efficient home in Portola Valley, CA. One of his goals for the building is to make much of the design reusable for other new homes.

“Once you get over the custom elements, it can be reproduced if you want to go down that road.”

You can hear more about Holland’s green energy investing in this Weather Channel interview on Forecast Earth: “Green Venture Capital In Depth”.