I blew Bitcoin up my nose. Carbon Standards.
Come to the meet-up, 31 March. Sustainability Standards, Carbon reporting. Intangible Capital thinking, podcast with Stian Westlake. A very short story, Lydia Davis
“Embarrassing. I blew Bitcoin up my nose. I used Bitcoin to buy cocaine from the dark web on the silk road. What a way to blow 100K.” - Overheard this week.
Sustainability Standards, Carbon reporting
A very short story, Lydia Davis
Links: Creative Capital, Impactful careers; Quilts; Climate thinking on Northern Ireland; deliberative democracy; The problems with offsets; Liverpool and Chinatown; From Afghan Finance minister to Uber driver.
If in London do come for my meet-up, 31 March, 6.30pm, Theatre Deli near Liverpool St. Details here.
Mini Sketch. Been thinking about Lydia Davis. I’ve always loved the short form and more experimental form but only recently have been reading Lydia Davis. This is one very short story, her first version and last version. I’m reading her book of essays. Recommended food for thought for writers and those interested in writer craft. (Amazon link to book)
My sketch this week.
He ordered truffled, wild mushroom and rare breed pig sausage sourdough pizza. He asked to exclude the sausage to make the pizza vegetarian. The waitress at regular intervals was keen for us to order more. I asked what one thing would you change? This is a sustainability dinner. The answers. A global price for carbon. Investments in women's education. The food nutrition obesity complex. What do you gain for travelling to Mars? Not the destination. All the inventions needed for the journey, we hope. We hope. We finish the glass of Italian red wine.
In sustainability world. The SASB-VF-ISSB met and ISSB announced it will be working with GRI. All those acronyms… but essentially it means sustainability standards are progressing and many of the entrenched arguments - for instance between a “double materiality” view point or an “investor-centric” view point might be a little closer to some reconciliation. Most investors pay limited attention to the nuances of those arguments but do pay attention to data - especially “material” data - the data we want/need to make investment relevant decisions.
This makes the SEC announcements that they will require carbon emission disclosure very significant. There is hardly a sustainability investor who has not heard but the recap is:
Board and management oversight and governance of climate-related risks
How any climate-related risks have had or are likely to have a material impact on its business and financial statements over the short-, medium-, or long-term
How any identified climate-related risks have affected or are likely to affect strategy, business model, and outlook
Processes for identifying, assessing, and managing climate-related risks and whether such processes are integrated into the overall risk management system or processes
The impact of climate-related events
Scopes 1 and 2 GHG emissions metrics, separately disclosed, expressed both by disaggregated constituent greenhouse gases and in the aggregate, and in absolute and intensity terms
Scope 3 GHG emissions and intensity, if material, or there is a GHG emissions reduction target or goal that includes its Scope 3 emissions; and
Any climate-related targets or goals, or transition plan…
Columnist Matt Levine has several takes on this but one intriguing idea (which he floats from time to time) is that the SEC is a form of global “meta-regulator” because US business touches the whole world (and so many “stakeholders”, customers, employees, supplies etc.) in so many ways then the way you regulate US business will regulate the world.
In that sense by demanding climate data, the SEC is suggesting climate is relevant for US business and thus the world. There is significant push back on this. Probably best summed up from a regulators view by Hester Peirce, who essentially argue the SEC is not an “Environment Commission. She argues:
“...the proposal will not bring consistency, comparability, and reliability to company climate disclosures. The proposal, however, will undermine the existing regulatory framework that for many decades has undergirded consistent, comparable, and reliable company disclosures…”
If you believe Levine’s view or even weight it a little bit then this disclosure proposal is quite a significant battle. Do feel free to comment your support (or not) here: https://www.sec.gov/rules/submitcomments.htm
Press release with links to full report here.
Matt Levine also highlights a somewhat new piece of thinking on the idea of “Universal Ownership” and how this is different (recall certain passive investors may own 3 - 5 % of all American companies in their tracking mandates).
Several large institutional investors and financial institutions, which collectively have trillions of dollars in assets under management, have formed initiatives and made commitments to achieve a net-zero economy by 2050, with interim targets set for 2030. These initiatives further support the notion that investors currently need and use GHG emissions data to make informed investment decisions. These investors and financial institutions are working to reduce the GHG emissions of companies in their portfolios or of their counterparties and need GHG emissions data to evaluate the progress made regarding their net-zero commitments and to assess any associated potential asset devaluation or loan default risks. [SEC]
Then Matt:
Notice that this is weird. This is not “investors need this information to understand the company providing the information,” but rather “look, investors these days are diversified, and many of them care about the systemic risks to their portfolios, not about how any one company runs its business.” If it’s material to an institutional investor that its portfolio be carbon-neutral, then it needs to know the carbon emissions of each portfolio company, even if those emissions are not actually material to that company.
This strikes me as very new! And basically correct, I mean: Investors are often diversified and systemic these days, so the SEC’s rules might as well reflect how investing actually works. Still it is a novel and surprising concession, asking a company to disclose stuff because it is useful to its shareholders as universal shareholders, not (just) because it is relevant to the company’s own business.
This brings me to what I consider an important idea and conversation. This is Stian Westlake’s and Jonathan Haske’s new book Restarting the Future (Amazon link). I also went to the book launch this week. My summary would be:
The world is much more intangible today than ever before
Understanding the nature of intangibles (spillovers, synergies, sunk costs and scale) gives an alternative explanation for many economic puzzles such as stagnation and productivity, and inequality
This understanding may reject both “lost golden age” narratives (times have changed, we must accept lower growth) and “great divide” (failings of the elite, and inevitable rise of inequality) explanations
The solution may be new or changed institutions/policy that can deal with an intangible world. Old policy/institutions work for a tangible world but are not geared for intangibles.
the political economy challenges are highlighted (legitimacy, protection from lobbying rent-seeking)
Challenges of financing in an intangible world are highlighted (how to value ideas if you will loan against them, collateral; cognitive load of complexity; inflation targeting, monetary policy in intangible world)
Suggestions of equalizing tax treatment of debt and equity; easing regulations to invest into intangible-rich firms; emphasising the positive spillovers from ESG/Sustainability (Environment Social Governance) investing mandates
challenges of cities within an intangible world (agglomeration, remote work, political economy of NIMBY vs YIMBY); infrastructure
Challenges of competition in an intangible world; proposing an “n+1” regulator
More state capacity, design systems that look at both quality and quantity, resist rent seeking and inspire positive cultural change
We discuss this and more in the podcast. Summary below.
But, if this is correct then we need new institutional design. And on that front I am very inspired by Audrey Tang and also the work I have already done with Open Space formats. More on this in another letter.
Stian Westlake is the chief exec at the Royal Statistical Society, and before that he was a policy advisor to government and the executive director at Nesta. He is the co-author with Jonathan Haskel of Capitalism without Capital, and they have a new book out, Restarting the Future. You can follow his Twitter here.
Stian discusses how recessions might be different under an intangible economy. I ask him (H/T Tyler Cowen) how national security concerns might be different in a very intangible world. Part of his answer:
…the west took much more extreme [economic] actions than I think many people had predicted before the war started…what's been amazing about that is because the modern economy depends so much on these highly scalable, intangible intensive products. It's been quite remarkable how it seems, how damaging that's been to Russia. So, the fact that some of these things are all obviously very tech based and perhaps their salience is obvious…. the fashionable kids of Moscow can no longer use Instagram. That's maybe one of the salient examples, but obviously the intangible economy is about much, much more than tech. And we see some really interesting manifestations of this around things like aviation. So, insurers refusing to deal with aviation in Russia and that appearing to ground planes and stop flights. The supply chains that drive maintenance, further causing damages to those kinds of industries and indeed the kind of dependence on things. There was a story the other day about the effect that this is having on dentistry in Russia, because dentistry is so dependent on very flexible supply chains with basically a bunch of specialized manufacturers. … if you are an interconnected, relatively open economy, and Russia was always the most relatively interconnected of the BRIC [Brazil, Russia, India, China] countries, the intangible economy kind of makes it easier to turn off those taps in a way…. how dependent some of these kinds of more security based, more military based factors have been on intangible assets. We've probably all seen the stories of the dependence of the Russian air force on US GPS devices, which has led to them being more observable and perhaps has played a role in the fact that they have not been as present in the conflict as people thought they would be. I think that kind of interconnectivity is like many things in the intangible economy. It's great for winners, it's great if you're the US or if you're a US ally and it's probably not so great for the losers. …
We chat about these observations:
Stagnation
Inequality
Dysfunctional Competition
Fragility
Inauthenticity
And Stian offers an intangible lens to explain the observations.
We discuss: BS jobs and whether culture and trust might be upstream of this.
Why we need new institutions to tackle intangible challenges, whether this would be more technocractic and if there is a political economy challenge on this.
The importance of where the intangible meets the tangible for instance we have heat pump technology but not the intangible systems and ideas to install them. Sanitation is “hardware” but building and co-ordinating all this is an intangible and institutional challenges more than a hardware challege.
What the trade-off is between losing red tape and increasing the risk of corruption.
Stian argues for why the equal tax treatment of debt and equity would be a good idea (while acknowledging this would be politically hard).
Why Stian is more optimistic on institutional renewal.
We play over/under rated on:
Innovation Prizes, Blogging, Sugar tax, Carbon tax, Plastic Bag Tax, Innovation agencies, GDP and UBI, universal basic income.
Stian ends with some life and career advice. Link to transcipt here.
Links:
My friend, Fran Sanderson is involved in creative capital. Check it out:
EA thinking on impactful careers
The story of how Gee Bend was isolated and remained so because of implementing voter suppression is part of the story of why we have such wonderful quilts.
Climate thinking on Northern Ireland:
Audrey Tang - so fascinating on digital and deliberative democracy.
The problems with offsets.
Liverpool and Chinatown
From Afghan Finance minister to Uber driver.