The Environment, Capitalism, Technology

It used to be that the only way for humanity to grow — and progress — was through destroying the environment. Sure, the Industrial Revolution brought about the growth of our economies, our population, our prosperity; but it also led to our extracting more resources from the planet, more pollution, and some nightmarish human conditions as well. But is this interplay between the two — of human growth vs. environment, of protection vs. destruction — really a zero-sum game? Even if it were true in history, is it true today? How about for developing economies around the world today — do they have to go through an extractive phase first before entering a protective one… or can they skip that phase altogether through better technology (the way they leapt to mobile)?

And if capitalism is not responsible for environmental degradation, than who or what is? Where does technology come in, and where doesn’t it — if you believe we already have the answers to saving the environment? Marc Andreessen and Sonal Chokshi interview MIT economist Andrew McAfee about all this and more, given his new book, More from Less: The Surprising Story of How We Learned to Prosper Using Fewer Resources — and What Happens Next.

So what does happen next? From nuclear power to dematerialization to Tesla and the next cleantech revolution (or not), this episode of the a16z Podcast brings a different perspective to an important discussion around taking care of our planet… and also ensuring human progress through the spread of human capital and technology.

image: Kevin Gill / Flickr

Show Notes

Overview of progress from the Industrial Revolution to today [1:22]

Definition of capitalism [5:47] and why it promotes efficient use of resources [11:22]

The benefits of clean nuclear energy [17:19]

Advantages of cap and trade to curb carbon emissions [19:00]

Debate over the future of resource use [27:21] and Fuller’s predictions about dematerialization [30:35]

New technologies needed to continue dematerialization trends [36:40]

Transcript

Sonal: Hi, everyone. Welcome to the “a16z Podcast.” I’m Sonal. And I’m excited to do another one of our co-hosted episodes with Marc Andreessen, who joins me in interviewing MIT economist Andrew McAfee — who we’ve actually had on the podcast a couple years ago on a great episode with his coauthor, Erik Brynjolfsson, on their book, “Machine, Platform, Crowd.” But Andy’s new book takes a very different turn from that previous series of books — and focus, on the beam of bits — to focusing on atoms, the physical world. Basically the environment. It’s called “More from Less: The Surprising Story of How We Learned to Prosper Using Fewer Resources and What Happens Next.” And I think it’s a really important book, contributing to the important dialogue we’re having right now on taking care of our planet, and also of taking care of human progress — especially because these two don’t have to be a zero-sum game of the two in conflict with each other.

So, what does it take to go from that narrative of extraction and destruction to one of protection and progress? So, in this episode, we cover everything from what capitalism’s role is in all this — including what it is and isn’t — to the global environment, including China and India. And throughout, we discuss the technology, from energy use and types of energy, to dematerialization — and, surprisingly, the idea of that well before software was even invented. Stay tuned for that bit. But we quickly begin with the technology and effects of the Industrial Revolution.

From the Industrial Revolution to today

Andrew: The industrial era kicked off with the Industrial Revolution, and the James Watt steam engine, and all those other technologies — was this period of amazing human growth. The growth of our economies, growth of our prosperity, growth of our population. And that was great in a sense, but it really did feel like there was a trade-off between improving the human condition and improving the state of the world. And in the industrial era, if you looked at the evidence, you could make a pretty strong case that we were increasing our growth at the expense of the planet that we all lived on. We took more resources from the earth every year. We chopped down more trees. We cleared more cropland. We took more fossil fuels out of the earth. We polluted more. We either domesticated animals or drove them to the brink of extinction. And the reason I decided to write “More from Less” is, I don’t think that’s true anymore.

The evidence supports the idea that in the richest countries — and I’ve got the best data for America — that that trade-off between the human condition and the state of the world is actually in the rearview mirror. Because in almost all the ways that we could care about — improving the human condition — we’re taking fewer resources from our planet, we’re polluting it less. Some of the animals that we pushed to the brink are coming back. I didn’t hear that story being told. And so hence the book.

Sonal: So one thought that struck me in looking at the example of the Industrial Revolution, which everyone points to as the greatest story of progress — you point out that it ended slavery but increased child labor?

Andrew: There were some pretty nightmarish situations early in the industrial period. There really were factories full of kids under the age of 10, working 14-hour days.

Sonal: Yeah.

Andrew: And some of these kids weren’t even sent there by their parents. They were orphans. And this was what we decided to do. I consider that a moral mistake, and different than what kids were doing on farms before. But in most rich countries, slavery ended early in the industrial era. Child labor ended before the 20th century. But we didn’t start dealing with pollution and species that we pushed to the brink of extinction until much, much later than that. So we kind of looked after ourselves first and then the rest of the planet afterward.

Sonal: So, Andy, I want to probe the conflation of capitalism and extraction of resources when it doesn’t actually have to necessarily be that way. But one stat in particular that struck me on that front is that research emerged showing that the U.S. GDP was closely intertwined with energy consumption. You talk about this in your book. Clearly, there’s something about more energy consumption tied with the success of an economy.

Andrew: If you draw a graph of the U.S. economy — the real GDP of the U.S. — from 1800 to 1970, and then you add one more line to that graph, which is total energy consumption per year from 1800 to 1970 — those lines are really hard to tell apart. They sit right on top of each other. And there’s this whole stream of research that turned into an assumption — that if you told me what your energy use per capita was, I would tell you what your GDP per capita was or the state of advancement of your society. And we almost use those two things as proxies for each other. One of the super weird things is that that relationship has completely broken down in the United States — where, again, I know the evidence really well. Total U.S. energy consumption has been basically flat since at least the end of the Great Recession, and maybe even before that started.

Now, in the old-fashioned way of looking at things, you say, “Oh my God, there was this massive recession.” Absolutely not, it grew like crazy. But we’ve divorced energy use from growing the economy. And one of the broad points I make in the book is — that story is very broad. We’ve divorced most other kinds of using up atoms — using materials — from our prosperity growth. And that relationship is not unique to America. It exists elsewhere, and it will spread as we spread capitalism and technology.

One of the things I have fun with in the book was trying to defuse tension, because there are a lot of audiences where if you say capitalism, they start throwing rotten tomatoes at you. They just can’t hear the word. It’s so triggering. So one thing I tried to do is say, like, “What do I mean by capitalism?” And I don’t mean cronyism. I don’t mean corporatism. I don’t mean regulatory capture, or financialization. These are all real things. These are all perversions of actual capitalism.

Sonal: Yeah, I hate that capitalism gets a bad rap. And while we may argue for a better form of capitalism, can you just break it down and sort of tease apart the myth from the facts when it comes to, like, what is capitalism? I think sometimes people are using different labels for different things quite honestly.

Andrew: Yeah. And let’s be clear on what we’re cheerleading about. Capitalism is the best way the earth has ever come up with to get goods and services into the hands of people. Now, that’s a really important thing for a society to do, if you don’t want your people to starve or die of exposure. And when I talk about that, I mean a few pretty specific things. First is that private companies are responsible primarily for producing those goods and services. It’s not the government. It’s not individual craftsmen or artisans or anything. Number two, they use prices that are not centrally set or controlled. And prices convey a huge amount of information about abundance and scarcity, and where you should allocate your attention.

So, we really need prices to be floating around in an economy. We need your property rights and your contracts to be respected by a working court system that believes in protecting those things. So that, if you’re an upstart, if you have a good idea — either the government or some big powerful company, or some billionaire, can’t just come and take it from you without compensating you and without your agreement on that stuff. One of the most important phrases for capitalism is voluntary exchange. You can’t force me to sign a contract. You can’t make me buy a product or forbid me from buying a product. You can’t stop me from moving to another state. So you just have this — it’s free-flowing. But there are these hard and fast constraints and rules about it. If you get those things right, the goods and services will become abundant to people.

One of the things I loved writing the book was that Adam Smith nailed all of these topics in 1776. And yet here we are almost 250 years later, and we’re arguing about things that he kind of put to rest a long time ago. He said you need actual competition, not cronyism, for the benefits of capitalism to accrue. Amen to that.

Marc: He actually went further. He actually called business people the enemies of capitalism.

Sonal: Why?

Andrew: <laughter> He’s got that famous quote that, “Men of trade seldom meet together, even for merriment, except it winds up in a conspiracy against the public.”

Marc: Yeah, he basically argued, it’s like what modern libertarians are actually arguing, which is basically to the extent that business people, like, start to get involved in political policy. They try to rig the political system in their favor. And then that trips the line between so-called capitalism and corporatism. Then politically, that’s sort of the distinction between being pro-business and being pro-market.

Andrew: Or being pro-incumbent and pro-market.

Marc: Right, right, exactly. And what you want is you want to be pro-market. This is what we run into in our business. You know, because we launched these new companies that don’t have any political power whatsoever. And they go into these industries that in some cases are heavily dominated by incumbents. And invariably what you find is an intertwining of the incumbents with the regulatory system, often under the color of consumer protection. But it actually turns out, what’s happened is the incumbents have rigged the system. They’ve rigged the politics for their own preservation, and the hypocrisy gets exposed in the form of, like — you just have a product that’s just obviously better. And then the captured regulatory state comes to try to shut it down to protect incumbents.

Andrew: Well, my favorite one of that was — for a while, I think France or Paris had the requirement that a limo had to go back to its home station for 15 minutes before picking up another customer. Why on earth would that be?

Marc: That’s right? Well, this is always the absurdity of would you really rather, like, stand out in the rain with your arm up, seriously? Right? And by the way, would you really rather have a system in which the driver is able to, like, eyeball you in the street and decide to not give you a ride?

Sonal: I was about to say it because what people don’t talk about is the disproportionate impact on people who don’t look like they’re someone who you want to give a ride to. And now you can get a ride anywhere by anybody.

Marc: Yeah, exactly. But then there’s this risk that, you know, you become the thing that you hate, you know — which is always a danger.

Andrew: We also need to acknowledge there are problems that capitalism itself doesn’t solve. People getting left behind, inequality of some kinds of opportunity, the lack of a safety net, pollution, species loss. Absolutely, these are well understood — sometimes called market failures — and we need to be thoughtful about those things. But, again, Adam Smith, I don’t think he talked about species loss and extinctions, but he got these things right in 1776. And it kind of frustrates me that there’s still this big Marxist hangover going on, where people willfully or ignorantly misunderstand this economic system that we have.

Marc: So in the 20th century, were capitalist systems or communist systems worse for the environment?

Andrew: Oh my God, there’s no comparison. I think the single saddest and most tragic story that I learned when I was researching the book is about the Soviet whaling industry. The Soviets signed up for all the treaties to sharply limit the whale hunts. And then they ignored the treaties that they signed, which is bad enough — and they killed about 200,000 additional whales over the decades before they finally stopped. The crazy part of the story is why they killed 200,000 additional whales. And the answer is for no good reason at all. They didn’t eat the meat. They didn’t need the blubber, because they were already self-sufficient in oil. The only reason they did it was because they had Stalinist five-year plans for growth in the fisheries industry. And whales weigh a lot. And if you kill lots of whales, you grow your fisheries industry.

There’s this heartbreaking story about the guy that was in charge of the fisheries industry. And he was such a pro at executing Stalinist five-year plans, he was named Hero of the Soviet Union. And one of the Soviet scientists went to him at some point and said, “We have to stop this. There will be no more whales for our children to see.” And his reply was, “Our descendants will not be the ones to fire me from my job.” <Damn.> So, you know, we can talk — the capitalist systems, we made pollution mistakes, yes, and we corrected them. What closed communist systems did was keep making mistakes under cover of darkness for no good reason.

Capitalism’s effect on emissions

Marc: I mean, this is very relevant to current events, right? One of the things that is very common, obviously, in the United States right now, is the theory that capitalism is responsible for environmental degradation — and unless we convert to a socialist system immediately, like, the environment is doomed. And, therefore, the very clear assumption and statement is that shifting to a socialist command and control system will lead to better environmental outcomes. That’s a very common theme right now. Like, how do you address that in present times?

Andrew: Yeah. And it’s a tiny bit hidden, right? Because the people who make that argument — I hear them railing against capitalism and saying we need to take better care of the planet via some alternative. And then they get kind of vague about what that alternative is. But I think they’re all either dodging the fact, or lowballing that they want central planning. They want a command and control economy. And let’s call that what it is. It’s something between socialism and communism. And the thing that we need to keep in mind is that the capitalists — the free societies of the West — were the ones that dealt with their pollution problem earliest and best. And what I consider the great triumph of the environmentalist movement that, you know, kicked off around Earth Day, was that “we, the people” demanded that we stop having polluted air and dirty water and things like that. And we got it via things like the Clean Water Act, the Clean Air Act, the Marine Mammal Protection Act. These were landmark pieces of legislation.

The single most important thing that happened after the legislation was passed was we got clever about how to reduce pollution levels. The story of cap and trade for reducing particulate emissions from power plants and reducing sulfur dioxide is such a fantastic story, because we put together this coalition of environmentalists and conservative economists. And we put in place a market system for trading pollution — which sounds weird and bad, except that it has cratered our levels of SO2 and other particulate pollution, and done it for about one-fifth of the originally estimated cost. It was just this extremely efficient thing to do. So the notion that capitalist systems have no way of dealing with increasing pollution is just dead flat wrong.

Sonal: When I was reading the book, one thing that struck me was — do you think that with developing countries today, like India, China. I mean, one would argue they’re more developed than fully developing, however you define it —that they even have to go through an extractive phase first, in their first phase of figuring out how to use their resources? Like, I guess my question is why couldn’t they leapfrog this extractive phase, and just go right to a more practical phase when it comes to the acceleration of technology? Do you think that extractive phase has to happen?

Andrew: It’s pretty clear to me that America and the UK, and I think most other super-rich countries, are past peak stuff. If you weighed our economy year after year, it would weigh less year after year. India and China and Bangladesh are not yet at peak stuff. But they will get to that point much earlier in their GDP per capita trajectory. Because, you know, Nigeria is not going to lay an extensive copper telephone network across the country. They’re not going to build as many coal plants per capita as we did, because that’s just economically inefficient to do. I’ll be surprised if the Chinese have as many private cars per capita as we did earlier in our history, because it’s really impractical to have that heavy, expensive asset sit idle 95% of the time.

So I do think that this technologically very sophisticated economy is going to get countries through this resource transition much earlier than we went through it.

Marc: So one of the things that’s so striking — carbon emissions, right, in the U.S. are falling. And are you telling me they’re starting to fall in certain parts of Europe as well?

Andrew: Yeah, the EU, in general, has been on a shallow downward trend.

Marc: Yeah, you know, there’s lots of advances being made in energy-efficient, you know, technologies of all kinds. And so one would imagine, like, this will continue. Let’s take the strong advocates for dramatic action at their word that we’re gonna run into real trouble globally. How do you not progress from there, to believing we have to take a very different approach from a foreign policy standpoint — in particular towards China and India — potentially up to and including coercive actions? Because if you look at the graph of global emissions growth, it’s very clearly two, like, gigantic examples.

Andrew: So we’re going to invade them to make them reduce their carbon emissions? I don’t see how that plays out. Let me give you a couple of softer ways, because I think there are a couple important ones. One is, they gave the Nobel Prize to Bill Nordhaus last year for his work about how to deal with global warming and the notion of a carbon dividend. When Nordhaus proposed his carbon tax — and I like the phrase carbon dividend better, because it’s not a tax where the government keeps the money, you pass through the government directly to people and give them a carbon dividend, hopefully skewed a little bit toward lower-income people. As part of that, you also do what’s called a border adjustment, where you look at all the imports into the country, and if they come from high-carbon sources, you tax them — just like you would if they were made in this country with high-carbon sources.

I think that’s a really strong incentive for our main trading partners. And China’s probably exhibit A here, to start literally cleaning up their act in this regard. The other thing is, you know, we have one source of power — we have one way to generate power that is scalable, clean, somewhat economical, and not intermittent. And it’s called nuclear. And there are a couple of countries like France and Sweden that have cheap electricity and the cleanest power in Europe. And we’re running away from — and the rest of the world. I find this completely perverse. Why not put together an international coalition — and along with that, an international patent bank — so that it’s cheaper to produce the new generation of nuclear reactor. I’m pretty sure that will get the cost down to the point where it becomes an economic no-brainer, even for low-income countries, to start transitioning into a clean energy environment.

I would do both of those things way before I would try to coerce other countries into changing their energy profile, or doing it in a way that would slow down their growth or impoverish their people.

Marc: So I’m glad you brought up nuclear. I was gonna ask you that. So many groups, just, like, flatly roll out nuclear as an option. So what’s going on there? And, like, what’s the way through that?

Andrew: I honestly don’t know the answer. Why are they so stridently anti-nuclear? There’s probably a bundle of things going on. One is because of everything from Hiroshima and Nagasaki, to Godzilla, to Three Mile Island and Fukushima and Chernobyl. I mean, I just finished watching their “Chernobyl” miniseries on HBO. So I have this kind of visceral “ick” reaction to the idea of super widespread nuclear power. But I think our homework is always not to trust that initial “ick” and to go look at the evidence. And when you actually look at the evidence and look at the issues, I don’t know how you come away [as] anything except a nuclear advocate. And we worry about things like nuclear waste, and we should worry about nuclear waste.

But we don’t then say, well, how much harm is caused by the pollution from other kinds of power generation? Worldwide, there are clearly hundreds of thousands of deaths a year from people breathing coal dust, and people breathing the emissions from coal plants. So the death toll — it’s not even close. And this is backed up by very good research published in “The Lancet” and elsewhere. There’s a nice article in “Our World in Data” about relative safety levels and death rates from different kinds of power. You walk away from that nuclear’s biggest cheerleader. So I don’t quite know why the reaction is so strident and visceral and negative. All I can say — it is not based on evidence. And I’m starting to see a coalition forming that pushes back against that to say, “We’re getting this deeply wrong on an important issue.”

Success of cap and trade

Sonal: Okay, so you were talking about cap and trade. What made that so successful compared to other attempts? Obviously, there’s a market-based mechanism, but give me more details.

Andrew: Cap and trade — the basic idea is [to] make pollution expensive. Attach a cost to it. In other words, put it inside the market. Pollution doesn’t naturally have a price. And when that’s the case, no matter what the press release says, businesses have a strong incentive to go pollute, if it’s free. Okay, put a price on it. And then here’s the brilliance of cap and trade — allow companies to buy and sell that pollution, or more specifically, that right to pollute with each other. So if I’m super dirty, and I can’t clean up quickly, I’ve got to buy the right to pollute. But I’m willing to buy that right if it’s cheaper than the cost of me cleaning myself up.

Sonal: Right.

Andrew: Somebody will sell me that right and make some cash, because they’re already really clean, and they don’t need that right. So this was a line of economics research that got started with legendary Nobel Prize-winning economist Ronald Coase, and descendants of his ideas got put into practice early in the Reagan administration with the help of, like, the Environmental Defense Fund. So this beautiful alliance formed to say, “Hey, let’s try this market-based thing for dealing with pollution.” They overcame whatever reluctance was there from the incumbents, again, and they did it. And then the research is pretty clear that we can just look at what happened to particulate emission from these kinds of plants. America’s skies are just 90-plus percent cleaner than they were when that legislation was passed. And the cost of doing it is a fraction of the original estimate of that.

So there’s a reason for these kinds of crazy fans of markets for getting things done — they work. And when you can put things like pollution in a market, and you do this with cap and trade and carbon dividends and things like that, these are the most efficient ways to deal with the problem.

Marc: Don’t China and India have to sign up for the same thing?

Andrew: One of the problems with carbon is that the harms from it are not local, and they’re not immediate. So maybe the fast-growing, high-carbon countries right now will choose to ignore it for a while longer. We have a couple mechanisms to get them to not do that. And like I said, if you do a border adjustment for the high-carbon products that we import, that’s a really strong incentive to do things better — if we can make it cheaper for them to be green. And, personally, I think nuclear and, you know — a patent banker, cheap technologies around nuclear — is the path to do that. We clearly have to help the currently low-income world get rich on a lower carbon trajectory than they’re on right now. That’s different than saying that they can’t use more energy year after year. I’m not gonna deny them that right to prosperity.

Sonal: Exactly.

Andrew: But we really want them to get cleaner quicker. I think we have tools to do that. And I don’t think that the Chinese and the Indians are indifferent to the longer-term health of the planet. I really don’t believe that.

Sonal: I mean, they’re living with it in the physical way. Everyone there is facing it and experiencing it in a very real way. And we had this podcast a few years ago with Evan Osnos at “The New Yorker.” We were talking about China. One of my favorite things that he talked about is how, because of the growth of the middle class in China, that there is now a huge cohort of people demanding a better environment — precisely because of the market dynamics.

Andrew: Not just that — getting a better environment. So I found this great research that I put in “More from Less.” A very good economist looked at what happened when China finally got serious about urban air pollution. And the reason they got serious about it was — people were leaving the cities even if they didn’t have government permission to do it. People were leaving because their kids were just clearly getting sick and going to have stunted lives. So China took action. And they brought down their country-wide particulate pollution by 30% in 4 years. And they did it with these draconian means, but they did it. And it took us in the United States 12 years to get that same 30% reduction.

One of the points I make in the book is — democracies are probably more receptive to the will of their people. But there are interesting exceptions in both directions. And China was clearly receptive to the will of its people not to choke off their children with pollution.

Sonal: Right, right. I read a ton of Chinese sci-fi, and it’s literally — the recurring theme is basically about the end of the world and, like, [the] environment. But, Andy…

Andrew: Is that right? That’s cool.

Sonal: Yeah, it’s a really big theme, and you have to read a lot of different Chinese science fiction authors to see this, but that’s basically my genre this year. One thing I want to ask you. I understand from the market dynamics point of view why cap and trade was such a successful idea and example, and it’s been proven out. But why couldn’t a government have simply mandated, like — we will just simply put a limit on this. Draconian measures like China did. Why would that not be as effective?

Andrew: Sometimes we did. That’s how we actually brought down CFC emissions so drastically. We just mandated that they be reduced by X percent over time until they got down to close to zero. The reason that worked is that there’s a relatively small number of industries, a relatively small number of companies, and a relatively small number of products that used chlorofluorocarbons. And to be a little bit more cynical, the other reason that ban worked was — somebody eventually whispered to the incumbent companies, “The CFCs you’re making out right now, they’re off-patent. The new generation of coolants, and propellants, and whatnot — those can be under patent. Those can be a big revenue source for you.” And so they finally got industry on their side.

Fiat can work. You know, for example, it is just flat [out] illegal to dump waste at sea in America. We just did that via fiat. We didn’t put a price on it. You cannot hunt animals in national parks. You cannot hunt deer or duck outside their seasons. So sometimes you want to do things by fiat. But I kind of think if you can put it in a market mechanism, and it’s appropriate to do that, I think you’ll get better solutions quicker. Maybe that’s not right. But I’ve got this deep faith in markets — once you put things in them and price them to deal with that price in a very fast way. If you change a business’ cost structure quickly — man, businesses will run from that increased cost like gazelles run when they smell a lion. It’s just amazing how quickly it’ll happen.

Marc: I will tease — or torture Andy a little bit. And that is, you’re probably well aware — support for market-based systems like cap and trade have collapsed.

Andrew: One of the points that I bring up in the book is that sometimes the crazy side of the argument wins. And I think the crazy is winning on nuclear these days. I think the crazy is winning on GMOs. I think the crazy is winning on vaccines in way too many communities. So, you know, as much as I love evidence and trying to think through things, we better be very good communicators about our solutions because the crazy can win.

Sonal: Can we quickly talk on GMOs and the myths and misconceptions around GMOs? Why did you think it was important to talk about GMOs in your book?

Andrew: The reason I thought GMOs were important to include in this book is, they are great ways to help us tread more lightly on the planet. The crop yields will go up. You can grow them in different places. As climate change happens, you’re going to need plants that are hardier — can survive heatwaves and droughts and things like that. The GMO toolkit is our best toolkit for accomplishing those things right now. And yet, it’s stridently opposed by governments and all kinds of groups around the world. And even the EU itself, in addition to the National Academies of Science, and just about every country that you can think of — has reviewed the evidence, and they’ve all come down and said there is no evidence that GMO crops are less safe for the environment, or for humanity, than conventional techniques.

We can get past the point of saying, “Well, it remains to be seen.” No, we need to go do these things. And the reason I get exercised about this, is when I look at things like golden rice — which is this strain of rice that has beta carotene injected into it via GMO techniques, so that you provide vitamin —is it A? It’s a vitamin A deficiency, happens to babies who are weaned on rice gruel, and it leads to blindness. And that deficiency is responsible for about a million deaths a year around the world. Great, you’re anti-GMO? Honestly, that volume of deaths, that’s on you.

Marc: So you discuss in the book, a very famous — at the time, I guess, in the ’70s and ’80s — a very famous debate between two, at the time, very accomplished people — Julian Simon and Paul Ehrlich. And it’s largely been forgotten, but it’s a highly relevant — and maybe even more relevant today than it was at the time. And maybe you could describe their debate and the famous bet.

Debates over resource use

Andrew: Yeah, my favorite bet of all time was the bet between these two guys. Julian Simon pushed back against the dominant narrative, around the time of Earth Day, which was that growth will come to a bad end — that we cannot keep this headlong, uncontrolled market-based growth for a bunch of reasons. Primary of which was — there’ll become too many of us, the earth will not be able to feed everybody, and we’re going to crash into a massive famine. And the prime exponent of that view was Paul Ehrlich, who still is at Stanford, and wrote a book called “The Population Bomb,” where he essentially said, “Look, nothing we can do will prevent hundreds of millions of people from starving in the years ahead. But if we do things like forced population control, and we take control of the means of production, we might be able to stave off the worst things that could happen.” And one of the things I learned was that Simon agreed with that, and wrote things about population control. Then he switched his view, in this wonderful instance of intellectual honesty and humility. And he said, “Wait a minute, we keep on not seeing famines happen, resource crises. We just don’t see these things. Instead, the evidence shows that most things are getting better.”

And he got laughed out of a lot of rooms, and Ehrlich kept on putting out this gloom and doom, “stripping the planet” narrative. And, finally, Simon challenged him to a bet. And Simon said, “Pick any time period of at least a year, and pick any bundle of resources that you want. And at the end of the time period, if the resources are more expensive in real terms than they are now — which kind of means they’re more scarce than they are now, I’ll pay you the difference. If they’re cheaper, you pay me the difference.” I think this probably appeared like a sucker’s bet to Ehrlich. He picked five resources — tungsten, tin, chromium, copper, and I forget the fifth one. And he said, “All right, let’s put a 10-year period on the bet.”

By 1990, the real prices of all five of those things had fallen. The price of the total portfolio had declined by more than half. And Ehrlich mailed Simon a check to acknowledge that he’d lost the bet — didn’t talk about it very much, didn’t attach any kind of note to that check. So I love that episode so much. And I’m trying to do round two of that. I’m using the Long Bets website, which is part of the Long Now Foundation, started by Stewart Brand and others. And I’m offering bets. I’m saying, for example, that no matter what — I’m saying that resources are going to become more affordable. I’m agreeing with Simon on that, but I don’t stop there. I say, in 10 years from now, I bet we’re gonna use less total energy — not per capita, but total energy America-wide in 10 years, after a decade of continued economic growth.

That’s how confident I am in the one-two punch of capitalism and tech progress to take costs out of the system. And, you know, energy and resources cost money. That’s just my reasoning. If you think I’m wrong, step on up. With Long Bets, you both put the money up front. You designate a charity that will get it at the end, and we’ll see what happens.

Marc: So there’s two historical figures in the book who are heroes of mine.

Andrew: Julian Simon and…

Marc: And Bucky Fuller. He came up with this idea, and I think you say it was 1927?

Andrew: Yeah, the ’20s.

Marc: Maybe just explain his idea. Because that was a remarkable insight at a time when there was probably no actual logical foundation to expect what he was saying.

Andrew: So Fuller was this crazy polymath. And he popularized, for example, the geodesic dome — that’s kind of what he’s best known for today, I think — which is the structure that can bear a great deal of weight and very heavy loads while weighing very, very little. And Fuller thought that we would see more and more examples. And there were plenty of opportunities to do that kind of thing all around the economy. And I found, you know, this crazy book that he wrote in the ’20s. And he said, “Look, I did a bunch of calculations.” And he said, “I thought it might be possible to satisfy all of our wants and needs, essentially while using less stuff, while using fewer materials.” And he called the process ephemeralization, making things more ephemeral. That’s a real mouthful to say. So we use the phrase dematerialization more often now. But Fuller was the guy who said, “Gang, we can do this,” in the 1920s, which is crazy.

Sonal: That’s so crazy. That’s pre-software.

Marc: The economy in those days — it was what Joel Mokyr calls the “wheat and steel economy.” That was during the era where GDP first became an economic metric. And it was literally like tonnage.

Andrew: We were weighing things, right?

Marc: It was, like, how much you weigh your output, right? In tons.

Andrew: Yeah. And then we started counting dollars instead, and that was a huge innovation. So the fact that Fuller came up with that that early, is just this weird intellectual shooting star.

Marc: So if I recall correctly, and maybe I’ve made this up in my own head — but I think that one of the lines he used was, “Ephemeralization is the process of making more and more with less and less.” But then he added a line, he said, “Until eventually we are making everything with nothing.”

Andrew: I think he did go that far. He also said, in 1927 — he said, “It’s the number one economic surprise of world man.”

Marc: Right.

Andrew: And so here we are, you know, 90 years later, and it’s still surprising to people.

Sonal: So, one thing that just blew my mind, because I had not actually read that or known that. How could he come up with that in 1920? This is before software even existed. Like, what would give him — because I understand now, Marc, in 2009, when you wrote “Software is Eating the World” — like, I could see someone making that [claim] now. What gave him the chutzpah to say that in 1920? Like, that’s insane.

Andrew: I have no earthly idea. And I don’t think we would have got to this resource turning point — I don’t think we would have achieved absolute dematerialization — without the digital world, without the computer.

Sonal: Yeah.

Andrew: I think software is giving us back the world because it’s letting us slim, swap, optimize, and evaporate our resource use. And I don’t know how we would have got there in a world where we’re still using slide rulers and file cabinets. Maybe we would have. But in my multiverse, we don’t get there in the universes that don’t have the digital revolution.

Sonal: A lot of people when they talk about dematerialization, they talk about it very literally — like, you’re replacing an object, a hard object, with something — its software counterpart. But just make it clear, it’s actually even deeper than that, because when you do think about ride-sharing, and all these entire economies that are growing off the mobile phone — that is what enables the end of ownership. When you think about the fact that today kitchens can be delivering food to you, that is the thing that changes the shape of cities, etc. I think a lot of times when people talk about dematerialization, they take it very literally as, like — the one-on-one replacement of something physical with something digital, and it’s actually bigger than that. It’s like, a whole services economy and reshaping things.

Andrew: Yeah. I talk about these four different vectors for dematerialization. You know, trimming out how much aluminum is in an aluminum can — that’s slimming it down. Swapping out one resource for another, that’s when rare-earths gets expensive. We walk away from them. Optimizing — using the load factor for airlines — has increased from the mid-50s percent to 80% now. You’re just making better use of these resource-intensive assets that you have — and then evaporate, replace it by nothing at all. The smartphone has made me not print out maps or print out film anymore. We have these different vectors for dematerialization to happen. And the point that I make in the book is — they’re happening in obvious ways, in subtle ways, in big ways and small ways, in the foreground and in the background in every industry. Simply because stuff costs money, competition makes you want to save money. And the digital toolkit offers you these great opportunities to do that. I think the story is just that simple. And if that’s true, it’s not about to end.

Marc: So, if you take Fuller’s thought and your thought to their logical extremes, how close can you get — ultimately, someday — to making everything with nothing? Like, if we’re sitting here 50, 100, 200 years from now — like, what are the prospects for being able to take physical inputs out, you know, either 99.99% reduced or taken out entirely from many of the things we’ll be consuming?

Andrew: That depends on how many of us there are, primarily, I think — but I think we can go a lot further down the dematerialization curve than we are right now. It’s not crazy at all to imagine that, you know — let’s say in 2100, that we’re primarily an urban species. We live in these densely populated cities that are, you know, a lot closer to Singapore than Delhi, for example. We’re growing a lot of our food in very vertical, energy-intensive environments. When we need to build a new building, we’re just recycling the steel and the metal that we used for the previous generation of buildings. We’re already doing that a lot right now. And, you know, grow our textiles in weird vats with Petri dishes of bacteria or something. That’s no longer crazy to think about. Will we be getting our protein from living animals, you know, or from scaled-up Petri dishes in 2100?

Sonal: Lab-grown meat, yeah.

Andrew: And who knows about staple crops, if we’ll need cropland for that? But I’m for damn sure that we’re gonna need a much, much smaller acreage of cropland for all of humanity in 2100 than we do right now. So I don’t know, I don’t have a good way to guesstimate where those lower floors are. They’re a lot lower than they are right now. And I really think that — let’s take 2100 as the year — we’ll be this species that occupies a very small physical footprint on the planet without depriving ourselves. And then we go into nature, kind of because it’s cool and because we want to, as opposed to because we need to strip it to satisfy our growth.

Technology developments needed

Marc: I have a question about R&D — the role of research and development in, kind of, delivering on the dream that you’re talking about. You know, because obviously, everything you’re talking about is sort of dependent on future development of advanced technology and creation of new knowledge. The last, like, 20 years — I would say, there’s been basically, like, two dramatic events in energy-related R&D in the U.S. And one is this incredibly positive outcome with respect to fracking and liquid natural gas. There’s been all kinds of positives to come out of that. And even in the energy industry, a lot of experts were shocked [by] how well that stuff has worked. The curves are amazing, because it’s like —  energy production in the U.S. [is] falling, falling, falling, falling, falling — and then, all of a sudden, it just, like, takes off like a rocket ship. Right? When like, nobody was expecting it.

Andrew: To the surprise of everybody.

Marc: Yeah. So that was the good news surprise. The bad news surprise was, you know, Silicon Valley embarked on a very big push to do so-called cleantech/greentech, particularly between 2010, 2012. There’s a huge push. And there were a lot of extremely smart and accomplished people here in the valley who thought that this was the new frontier for American technology, for venture capital and — you know, with obvious, you know, both huge potential positive benefits for the world but also, you know, a huge opportunity to build new businesses.

And I think there were hundreds and hundreds, possibly even thousands of companies, and a very large amount of money and effort — and a lot of people put a lot of work into this, that the results were extremely disappointing on a number of fronts. I mean, there were, maybe, a few isolated cases of success. I mean, one might say we got Tesla and SpaceX out of that, right? In which case, you know, fair enough. But even beyond that, companies had a much harder time developing and/or commercializing those technologies, or just ended up in dire straits that people didn’t expect.

So I’m very curious of your assessment of, like, what went wrong in the Silicon Valley cleantech/greentech adventure. And what should we learn from that, you know, both, like, as an industry and as, like, a world? If we’re going to try that kind of thing again, like — if we’re going to try to double down on R&D here, like, what lessons should we learn from that in terms of how to do it better?

Andrew: I only know it from a great distance. Here’s a super naive way to look at it. If we think about solar, solar has become dominated by China, primarily, because it’s a flavor of manufacturing that they were already pretty good at. And it’s just a scale economies game. <Exactly.> And they’re quite good at scaling up huge factories and turning out, whether it’s a liquid crystal display or a photovoltaic panel. So I think that’s just very, very tough competition. The other thing that I do believe about solar and wind is that they have a place in the energy portfolio, absolutely. But Germany’s experience with trying to become much more reliant on renewables has not gone very well at all, for a couple of reasons — a deep one of which is — it’s dark sometimes, and it’s not windy a lot of times. We have this very serious problem of intermittency with those renewables.

So, they have to be backstopped with something. And if you turn off your nuclear stations — if you decommission them, like Germany is doing — you get backstop in their case with some very dirty coal-powered plants. So they’ve kind of got the worst of both worlds. Their electricity prices are really high, and their carbon emissions, per unit of energy, are really high. You look next door at France, which is very nuclear, and you see neither of those two problems happening. So I think at the individual competition level, going up against China in a scale game is really, really tough. And I think there are some policy mistakes that can make that situation worse. Does that play at all with your experience?

Marc: I think those are definitely big components. You may know the sort of appendix to that whole saga was, yeah — so there was a huge push for solar panels, including some very advanced — we actually have — here in the conference room, we actually have an old cylinder solar panel, one I keep around just because it’s such a great story. It’s the cylindrical solar panel, right? That would have a huge advantage that it could basically follow the sun. <Tracking.> You could track the sun. The only problem with it was it ended up being a 4x-worse value proposition — price-performance value proposition — than conventional solar panels, all in. That was one of the train wrecks out here that actually took down the whole U.S. government DOE program to fund cleantech.

But the kicker on the whole solar thing is — okay, as you said, it became a mass manufacturing game. And so it kind of became, like, memory chips in the ’80s. It lent itself to the Chinese ecosystem, which is able to do mass manufacturing at scale.

Andrew: Quickly and well.

Marc: Right, right. Exactly. Right. Exactly. And so the Chinese have been able to undercut a lot of their American competitors. The kicker to that is the pro-environment administration then reacted to that by putting tariffs on imports of Chinese solar panels — therefore making it cost-ineffective for Americans to deploy solar panels that otherwise would have been much cheaper.

Andrew: So tariffs are — with the possible exception of a border adjustment tariff, because we got to bring down carbon, right? Tariffs are just — Econ 101 bad idea.

Marc: Well, it went beyond, though, just this specific mechanism. It was more an expression of values on the part of the United States government, which is — in theory we care about the environment. In practice, like, we’re more worried about, like, other things. And so we’ll trade off the environment.

Andrew: Yeah. So, you know, the mantra is all — should be, “Let markets work to develop the goods and services and let free trade happen.” And that’s where prosperity will come from and innovation.

Sonal: For me, I was in the thick of that, because we were at the heart of this whole cleantech movement. When I was at PARC, we had a huge investment in photovoltaics. It was my first big white paper. My question is, why can’t it just be just a timing thing, like everything else. Like, it was just too early, the wrong time, the ecosystem wasn’t built out for balance, the system components and services and everything else, the subsidy models were wrong. Because I actually hope that we can get some R&D to the future with cleantech.

Andrew: We are getting cost declines with solar and wind. The price — the installed price, and then the price per unit of energy once they’re installed, is going down, you know, at a really attractive rate. So it’s not that we’re failing with these things. What I was trying to point out earlier is there are just some basic problems with that style of energy — especially because we’re not getting the battery revolution. And the battery nerds that I talk to say, “Look, there’s an energy density limit here.” So you’re pushing up against some physics. And it’s not that we can’t do anything about it, or that we should stop research. Of course, we should continue that going. But you got to backstop it with something.

Sonal: With some portfolio. Right?

Andrew: And that something, in my view, should also be clean. It should be nuclear. And then let’s let the battle rage for which is the cake and which is the icing. I kind of think nuclear is going to be the cake. And we’ll have a little solar and wind icing if we get it right. But maybe I’ll be wrong about that. Well, I just don’t want us to keep putting, you know, huge amounts of carbon in the air to generate electricity. We don’t need to do that.

Marc: So, this is where — I don’t think environmentalism, for the most, part is actually about the environment. I think it’s about something else. And the reason I say that is because, exactly to Andrew’s point, I think we actually have the answers. I think we have the answers, and I think they’re nuclear — which is just, like, in practice an incredibly safe technology, contrary to what everybody believes.

Andrew: Plus one to that.

Marc: And then, I think, look — like, it goes back to the tariff thing. Like, let the Chinese build solar panels. Let them ride the manufacturing cost curve down, and, like, buy their solar panels.

Andrew: Plus one to that.

Marc: Right. And we have two magic technologies. Like, we have the box that generates power by splitting the atom, and we have the sheet that converts sunlight for free. And both of those are, like, incredibly modern production techniques for nuclear and solar. Like, it would just be, like — spectacular what you could do. If you engineered new nuclear plants today from scratch — like, properly, with the technologies. Most of the functional nuclear plants in the West today are, like, on average they’re — are there any younger than, like, 30 or 40 years old? The average is gonna be over that?

Andrew: I think that’s right. I don’t know when the last new one we built was, but it’s been a while.

Marc: And so, if we took current technology and did that, there are some really amazing ideas of things that we can do. I don’t think this has anything to do with the environment.

Sonal: Well, what I find hopeful, though, about what you just said is that we have the answers. And that’s really important. And so a lot of these things come down to market and other dynamics — regulatory, politics, all of that. So it’s not a technological limit, which I find very helpful.

Andrew: It’s also not a policy mystery anymore. We have these essentially magic technologies, where we should be stepping on the accelerator with them super hard if we really wanted to clean up the planet and stop polluting it with greenhouse gases. If we wanted a policy toolkit to reduce carbon, we have it. It’s worked for other kinds of pollution in the past. Carbon is not mysterious. <Yep.> It’s just comparatively politically difficult. <Right.> Now, I think some parts of the world will be more clear-headed than others. And I hope somebody else will show us the way, and their evidence is going to become unignorable at some point.

Sonal: I also just want to make one pitch for the iPhone moment in cleantech, which I know people think can be very much of a long shot. But I think a lot of technology waves do have their major iPhone moment, where there is the technological tip that then drives everyone else to make cheaper versions of that thing later on, once there is this desire and demand and pull and draw to have the thing. And I actually have to say one thing that I did find promising about Tesla, and their move into solar for the home — and battery as sort of this backdoor, this Trojan horse — that the car is a Trojan horse to actually powering your home — that is a very powerful idea. And over time, who knows where that can go, but…

Marc: I will say one thing that’s just from a consumer psychology standpoint. You know, Elon making electric cars sexy?

Sonal: Yeah, that changed the game.

Marc: That’s a big deal.

Sonal: It was way better than Leonardo DiCaprio driving a Prius, which is what I drive.

Andrew: That is absolutely a big deal, and, Sonal, to what you said, I’m thrilled that there are people willing to make some pretty risky bets on things. On the technology and the innovation front, I agree with Marc — we have some magic bullets. I’m going to mix my metaphors. We need lots of other shots on goal, right? And the innovation and the entrepreneurship ecosystem are a way for us to get more shots on goal. Hallelujah.

Sonal: Yeah, and I’ll just say one last thing on that. One of the things that I find really fascinating is that there is this phase with a lot of technologies where there is that very down moment, where things go down, it seems like it’s dead. And in fact, the thing is being built out under the very surface, and you don’t realize that’s happening. And so to me, the death of the cleantech boom is actually promising because — Marc, you alluded to this —but it did fund — Elon Musk rode those subsidies to fund Tesla in the early days. And so who knows what can happen next?

Andrew: I still think there’s a big place for government R&D. Again, more shots on goal, more attention to this — crazy ideas. And the reason Paul Romer won the Nobel Prize last year was he said, “Economies grow on ideas. Human Capital is the gating factor for increasing our growth and prosperity.” Let’s get more human capital out there.

Sonal: Well, Andy, thank you so much for joining the “a16z Podcast.” Your new book, out October 8 — “More from Less: The Surprising Story of How We Learned to Prosper Using Fewer Resources and What Happens Next.” Thank you for joining “a16z Podcast.”

Andrew: Sonal and Marc, thank you for having me. This has been a blast.

Marc: Thanks, Andy.