I think an important takeaway from this conversation is that resources we typically perceive as exclusively energy commodities (e.g., hydrocarbons) are, in fact, essential material derivatives for modern civilization. Last year, I read How To Industrialize Mars: A Strategy for Self-Sufficiency by Casey Handmer (founder of Terraform Industries), in which he discusses the technologies necessary for establishing a viable civilization on Mars. His analysis is purely technical—not a values-based discussion on whether we should direct resources toward interplanetary human civilization, but an exploration of the energy and material requirements for making such a civilization feasible.
Essentially, Handmer concluded that hydrocarbons are indispensable because they serve as precursors for a wide range of materials, from pharmaceuticals to plastics to fertilizers. I think Jean made an astute point in highlighting that even as we adopt cleaner energy sources, hydrocarbons will still be necessary to meet civilization’s material needs. As of now, these needs still require hydrocarbons, though that may change in the future with advances in nanotechnology and AI.
However, where I disagree with you and your guest is in the assertion that degrowth is a viable solution. Mainland Europe is currently experimenting with degrowth, and how has that been going for them? Long story short, Europe is no longer the political, economic, or aesthetic center of gravity in the world; it has become completely subservient to foreign authoritarian regimes that control energy and material supplies, all due to self-inflicted bad policy decisions. Germany, for example, is pursuing politically driven energy policies by building expensive and fragile wind turbines, which has raised energy costs not only for its citizens but also for its major industries—industries responsible for maintaining Germany’s relatively high standard of living. How is systematically imposing poverty on your own citizenry a viable long-term political strategy? Not only is it economically self-destructive, but it is also inhumane, as the most economically vulnerable populations are disproportionately affected by high energy costs.
A sustainable and viable path forward begins with correctly defining the informational landscape. Capitalism is a legal system in which the state grants institutional protection of property rights to individuals who have demonstrated a legitimate claim—meaning they have borne a cost to acquire it—while simultaneously preventing others from imposing claims on that property without having done the same. In simple terms: Do we cut down the palm tree for wood, or do we use it for shade? Under capitalism, those who have acquired the tree through non-impositional means have the legal right to use it as they see fit.
However, capitalism operates with incomplete accounting for externalities that affect the demonstrated interest of others. The tree, for example could be preventing soil erosion, where the increase in river sedimentation affects everyone’s utilization of the lake, river, stream, etc. Or, the tree could potentially be oxygenating and decarbonizing the atmosphere, which again, is relevant to the collective demonstrated interest. TLDR, Capitalism is an income statement, which emphasizes short term gains and transactional efficiency. Capitalism 2.0 has to transmute into a balance sheet that accounts for changes in all forms of capital—personal, shared, common, cultural, formal, and informal assets.
The challenge to modifying our economic systems will be A, the West is currently directing much of its economic surplus toward servicing debt, making it politically difficult to justify additional costs, such as internalizing externalities, when governments are already struggling to keep their fiscal houses in order. B, the west’s aging demographics are antithetical to remediating the situation in the foreseeable future. C, energy must remain cheap relative to per capita GDP to ensure there is enough surplus economic capacity to internalize externalities.
To illustrate the point: telling someone in the Congo to stop cutting down the rainforest because it degrades the commons is a nonstarter. That individual is too poor to be concerned with long-term consequences when their immediate concern is whether they will eat tomorrow. The key takeaway: per capita energy costs must be low relative to per capita GDP to generate the economic surplus needed for externality pricing. Mandating expensive, unreliable energy impoverishes citizens, which in turn makes it politically impossible to price externalities—ensuring that environmental degradation continues unchecked.
Fantastic interview. You’ve made clear that there’s no energy transition, only energy addition. And he makes clear that each additional energy source we’ve added historically has *depended* upon the use of massive quantities of the prior sources. And there is no exception to this rule on the horizon.
Thank you Nate - another really great guest and I've bought his book! I was aware that no energy transition was in progress, but my mental model of a progression in the use of energy sources has been shattered - it's additive. Notions of simple easy solutions need to be discarded. To give careful and constant thought to our material needs and wants, while being mindful of those of others, is excellent advice, and is perhaps the best we can do as individuals.
I think an important takeaway from this conversation is that resources we typically perceive as exclusively energy commodities (e.g., hydrocarbons) are, in fact, essential material derivatives for modern civilization. Last year, I read How To Industrialize Mars: A Strategy for Self-Sufficiency by Casey Handmer (founder of Terraform Industries), in which he discusses the technologies necessary for establishing a viable civilization on Mars. His analysis is purely technical—not a values-based discussion on whether we should direct resources toward interplanetary human civilization, but an exploration of the energy and material requirements for making such a civilization feasible.
Essentially, Handmer concluded that hydrocarbons are indispensable because they serve as precursors for a wide range of materials, from pharmaceuticals to plastics to fertilizers. I think Jean made an astute point in highlighting that even as we adopt cleaner energy sources, hydrocarbons will still be necessary to meet civilization’s material needs. As of now, these needs still require hydrocarbons, though that may change in the future with advances in nanotechnology and AI.
However, where I disagree with you and your guest is in the assertion that degrowth is a viable solution. Mainland Europe is currently experimenting with degrowth, and how has that been going for them? Long story short, Europe is no longer the political, economic, or aesthetic center of gravity in the world; it has become completely subservient to foreign authoritarian regimes that control energy and material supplies, all due to self-inflicted bad policy decisions. Germany, for example, is pursuing politically driven energy policies by building expensive and fragile wind turbines, which has raised energy costs not only for its citizens but also for its major industries—industries responsible for maintaining Germany’s relatively high standard of living. How is systematically imposing poverty on your own citizenry a viable long-term political strategy? Not only is it economically self-destructive, but it is also inhumane, as the most economically vulnerable populations are disproportionately affected by high energy costs.
A sustainable and viable path forward begins with correctly defining the informational landscape. Capitalism is a legal system in which the state grants institutional protection of property rights to individuals who have demonstrated a legitimate claim—meaning they have borne a cost to acquire it—while simultaneously preventing others from imposing claims on that property without having done the same. In simple terms: Do we cut down the palm tree for wood, or do we use it for shade? Under capitalism, those who have acquired the tree through non-impositional means have the legal right to use it as they see fit.
However, capitalism operates with incomplete accounting for externalities that affect the demonstrated interest of others. The tree, for example could be preventing soil erosion, where the increase in river sedimentation affects everyone’s utilization of the lake, river, stream, etc. Or, the tree could potentially be oxygenating and decarbonizing the atmosphere, which again, is relevant to the collective demonstrated interest. TLDR, Capitalism is an income statement, which emphasizes short term gains and transactional efficiency. Capitalism 2.0 has to transmute into a balance sheet that accounts for changes in all forms of capital—personal, shared, common, cultural, formal, and informal assets.
The challenge to modifying our economic systems will be A, the West is currently directing much of its economic surplus toward servicing debt, making it politically difficult to justify additional costs, such as internalizing externalities, when governments are already struggling to keep their fiscal houses in order. B, the west’s aging demographics are antithetical to remediating the situation in the foreseeable future. C, energy must remain cheap relative to per capita GDP to ensure there is enough surplus economic capacity to internalize externalities.
To illustrate the point: telling someone in the Congo to stop cutting down the rainforest because it degrades the commons is a nonstarter. That individual is too poor to be concerned with long-term consequences when their immediate concern is whether they will eat tomorrow. The key takeaway: per capita energy costs must be low relative to per capita GDP to generate the economic surplus needed for externality pricing. Mandating expensive, unreliable energy impoverishes citizens, which in turn makes it politically impossible to price externalities—ensuring that environmental degradation continues unchecked.
Fantastic interview. You’ve made clear that there’s no energy transition, only energy addition. And he makes clear that each additional energy source we’ve added historically has *depended* upon the use of massive quantities of the prior sources. And there is no exception to this rule on the horizon.
Thank you Nate - another really great guest and I've bought his book! I was aware that no energy transition was in progress, but my mental model of a progression in the use of energy sources has been shattered - it's additive. Notions of simple easy solutions need to be discarded. To give careful and constant thought to our material needs and wants, while being mindful of those of others, is excellent advice, and is perhaps the best we can do as individuals.