“A Bayesian at heart, you are,” my sustainable finance professor once told me, when I questioned the once-conventional wisdom that natural gas is effective in helping our carbon-intensive economy transition to a lower level of emissions.
In the moment, I’d forgotten Bayes’ contribution to statistics and had to look it up. Simply put, Bayes’ theorem involves revising an existing prediction or theory with new evidence and information. This allows us to update our assumptions as we obtain more data.
Yep, that’s me now.
We should all apply Bayes’ theorem to our lives and, by extension, society at large — not least when it comes to how we incentivize new ideas and technologies that could help us confront the climate crisis.
Our current incentive structure still largely favors fixes that are incremental in nature. In contrast, to generate the big, world-changing innovations that are needed to solve the climate crisis, we need more support from the public sector and large corporations — both with funding and deployment — and a fundamental reevaluation of the metrics we use to measure a new idea’s impact on society.
We’ve known about climate change caused by human activity for over 40 years. We’ve known about the greenhouse effect for over 100 years. We’ve known how to capture carbon, build renewable energy infrastructure, and increase energy efficiency for decades. Yet, atmospheric levels of carbon dioxide continue to rise.
In my experience as a fledgling entrepreneur in the carbon removal space and as someone who pays close attention when a behavior I engage in doesn’t yield the results I want, I know that the way we’re going about this isn’t working. Several of my colleagues have echoed this sentiment.
Societally, we must do what we as individuals should also be doing on a regular basis: looking inward, analyzing our behavior, and making changes to put us on a path towards fulfillment. Yet, with climate change, we continue to play by rules that no longer apply.
There seems to be a belief — especially in Silicon Valley and venture capital bubbles — that the conventional free market will save us. Never mind that we don’t truly have a free market in this country; this way of thinking assumes that we can effectively deal with climate change and create a more prosperous future without any systemic changes.
Unfortunately, our current ways of funding new ideas reflect this techno-utopian way of thinking. Our metrics for deciding what makes an idea “successful” tend to allow only for incremental changes, when what we need is a systemic overhaul of our economy.
For starters, the public sector must once again become a funder of big ideas. Government funding gave us some of the most transformative new technologies that served as building blocks for other ideas to take off: GPS, the internet, and space travel are a few examples.
There’s a dichotomy between ensuring a livable future — which requires long-term planning — and the underlying profit motive integral to capitalism, which in recent decades has focused more than ever on the next quarter’s results.
I believe a significant portion of the venture capital world was spoiled over the past two decades. Quick exits and massive returns were the norm as simple apps turned into multi-billion dollar behemoths. It didn’t take much to hit it big. Small teams wrote lines of code, the number of users grew, and advertising money poured in. That’s all it took. No new manufacturing plants, little long-term strategy, and certainly not much in the way of systemic change.
Climate change is inherently a hardware problem — meaning we need large infrastructure projects that radically transform how our economy works. But our incentive structure has been corrupted by shiny new software that grows exponentially overnight, rewarding ideas that use our existing systems to deliver conveniences.
Even our most promising technologies — in carbon capture, for example — are being held hostage by current market incentives. Unlike software, hard technologies require long-term support and investment. Also, they don’t always have working prototypes, which gives them a disadvantage with potential private sector investors. And it is these hard technologies that will enable us to build truly circular systems that render the concept of waste obsolete.
At an investor pitch I attended in lower Manhattan with a gorgeous view of the Midtown skyline, I witnessed software tweaks that addressed smaller problems — such as incremental increases in energy efficiency — receive much more attention than the large-scale, long-term fixes that are desperately needed.
How do we step away from this damaging incentive structure?
It won’t be easy. There’s no magic fix and it will rely to a large extent on changing how we think. We must shift our mindset past the next fiscal quarter and towards the future. Even a five-year exit horizon is too short. We need regulations and incentives aimed at reminding the financial and business communities that with great power comes great responsibility.
Change is going to be costly. We’ll have to face the reality that margins may be lower. We’ll have to get comfortable with longer time horizons. We’ll have to take larger and riskier bets.
But with this, we’ll give ourselves a chance at building a more prosperous future that works for more people.
It’s time to recognize that we’ll either learn to accommodate and thrive in the face of increased risk and potentially lower returns that we have some control over, or they’ll be imposed upon us dramatically by climate change. And worsen exponentially over time.
Rear admiral Grace Hopper said, “The most dangerous phrase in the language is, ‘We’ve always done it this way.’” She’s right. Prior success is not always the best indicator of what the future will demand. As is a common theme with climate change, we must adapt to meet the challenges ahead.
James A.G. Kahn is a student in Columbia Climate School’s Climate and Society master’s program.
Views and opinions expressed here are those of the authors, and do not necessarily reflect the official position of the Columbia Climate School, Earth Institute or Columbia University.