When Good Ideas Turn Bad
Especially when it gets taken too far…
“I think the trap that we all fall into as the endorphins fire is that we have been taught to learn or naturally do learn based on our wiring, through narratives. And what holds our attention the most is conflict within a narrative.” - Ron Howard, Oscar-Winning Director
I had written a Medium post in Jan 2021 titled ‘Let Me Show You My Virtue(s)’. In this piece, I wrote on how virtue signaling has become the norm and investors are pouring money into funds that harp on scoring high on ESG measures. State Street had even estimated global ESG ETF and index mutual fund assets will increase from $170 billion as of May 31, 2020, to more than $1.3 trillion by 2030.
All seems good if you think about it like an investor, who would like to allocate more capital in ESG compliant companies i.e. companies contributing towards a better environment, being socially responsible towards its society, and having higher standards of governance.
It also seems reasonable when the central government wants to shut down projects that are damaging the environment, or carry a huge risk in case of breakdowns. It also seems fair when the state governments will give a go-ahead only if the new project is green in nature, or banks will provide credit lines only to environment-friendly projects.
Go Green is the mantra and it seemed reasonable till now. But it won’t, in some time.
Just imagine you are attending a concert by Jon Bon Jovi (reminds me of my first ever concert in Emirates Palace, Abu Dhabi). You are standing in the 3rd row from the stage and are loving the show, but you are keen to make the experience even better. So you decide to stand on your toes since others are also doing it. Seems reasonable.
But the row of people behind you are struggling to see the show while standing on their feet, and they won’t tell you that you are inconveniencing them. So they choose to stand on their toes too. Still reasonable.
But the same gets repeated by people in the next row, and then the next row until everyone is standing on their toes, creating instability of sorts, which could (and often does) result in a mishap hurting manny people falling over each other.
You had only good intentions i.e. to enjoy the show with a better view. But when the same intention is repeated over and over by many others, it isn’t good anymore for the system, making it fragile and prone to errors.
All my reading about Russia & Ukraine conflict points me in this very direction. The West (Governments, Corporations, Activists, Legal Firms, and even citizens) have taken the idea of ‘Greener’ Energy Sources too far. This has resulted in a fragile system that seems to have provided Putin enough willpower to go ahead with his plans of invading Ukraine.
Germany, after the Fukushima nuclear accident, decided to close all of its nuclear power plants. Nuclear power supplied almost 25% of Germany’s electricity, and now they are suffering from exorbitant electricity bills, due to reliance on green energy (which has a lesser EROEI i.e. Energy Return on Energy Invested) or fossil fuels sourced from Russia and other oil-exporting countries.
France, on the other hand, generates 70% of its electricity from nuclear power – the highest in the world, and it’s no coincidence that France’s per capita CO2 output is half the level of other industrialized countries such as Germany, Japan, South Korea, and Taiwan.
The same story repeats in the US, in different versions across many states.
Provided herein is a snippet of the New York Times reporting on a decision by a lone federal judge who revoked entire swaths of recently auctioned oil and gas leases in the Gulf of Mexico -
I am not a Macro Strategist or a War Consultant. Nor do I have expertise in Commodity markets, or on Nuclear Power plants. But what I do get to see from time to time, are events that seem to repeat the same human biases we all suffer from, just at a global scale.
The human bias that has seduced many governments into the utopian ESG bandwagon is what Charlie Munger would term as Disliking/Hating Tendency. He explains the same in his talk on Psychological Misjudgments, which to date according to me, remains one of the most important videos/talks one should learn from for a better understanding of the world around us. You can read the transcript here.
Disliking/Hating Tendency also acts as a conditioning device that makes the disliker/hater tend to (1) ignore virtues in the object of dislike, (2) dislike people, products, and actions merely associated with the object of his dislike, and (3) distort other facts to facilitate hatred.
Distortion of that kind is often so extreme that miscognition is shockingly large. When the World Trade Center was destroyed, many Pakistanis immediately concluded that the Hindus did it, while many Muslims concluded that the Jews did it. Such factual distortions often make mediation between opponents locked in hatred either difficult or impossible.
This is exactly what’s been going on in the energy space. Lawyers have kept the physics of energy efficiencies aside and played on the risks that fossil fuels or nuclear energy carry. Activists have committed to a greener world, with no regard to the dependencies that this kind of a world will create, along with increasing costs that will come along due to mass deployment of greener sources, with lower energy efficiencies. Government officials have committed to vote banks and longer tenures in their services of the country, instead of making the economy self-reliant in many ways possible.
This tendency along with many other human biases creates Lollapalooza Effects, and Russia-Ukraine is one such outcome. There would be many more of such unexpected events in time to come. History doesn’t repeat, but it certainly rhymes.
You can change the shape of inanimate objects, but humans will remain the same - emotionally and cognitively biased, while remaining completely blind to these self-induced handicaps.
I sincerely hope that the war in Ukraine comes to an end, while the West, Russia, and Ukraine find a solution that works for each of them. A way forward should be carved out before it’s too late for many whose lives remain at risk while I write this piece.
Source Materials for this piece are -
Doomberg Newsletters
Goehring & Rozencwajg Natural Resource Market Commentary
Recommendations for the Week #
I really enjoyed Dan Carlin’s talk on his ‘Common Sense’ Podcast covering the Russia Ukraine crisis, previous wars, various pacts signed in 100 + years, US bombing Japan, Hitler invading Poland, and so much more. It’s 40 minutes of insightful information that might fascinate you, in case you are curious about the many moving parts of this war.
I discovered a trailer for the movie ‘Writing with Fire’, which is based on India’s only newspaper run by Dalit women. I am still figuring out a way to get my hands on the whole movie, but the trailer itself left me in awe of journalists/reporters who risk their lives, stability, families, and comforts - only to bring out the truth for our consumption. Kudos to every journalist that has contributed to this profession, and made us way more informed before making choices or forming opinions.
Tim Urban is one of my favorite authors online, and he happens to be one of Elon Musk’s favorite too. At least, Elon and I have something in common ;) His recent piece on New York Times was a delightful ride into the reality that COVID unleashed upon us, and what choices it offers going ahead. Highly recommend you to read this one.
Welcome to all the new subscribers to this newsletter. I invite all of you to take an hour out and go through Charlie Munger’s speech on Psychological Misjudgments (link provided in the piece above). This could be the best investment you could make in yourself.
I couldn’t stop myself from making this request, since understanding how human biases take control of one’s decision-making faculty could only make you come to peace with the chaos and uncertainty that we are constantly surrounded by. This is the most essential step before achieving the true potential that resides in all of us.
Wishing you all a fantastic weekend ahead.
Stay Safe 🤝