Since 2014, RethinkX, whose research efforts are led by technological disruption experts Tony Seba and James Arbib, has stood alone like a prophet in the desert. Unlike the climate scientists who are now getting more of a hearing, this think tank’s message to business leaders remains largely unheeded. Perhaps that’s because the world they’re predicting, one where we not only survive the climate crisis but come out much more prosperous on the other side, is unimaginable to traditional corporate leaders.
Yet, all of this is changing as RethinkX forecasts have proven correct over many years. “They’re the only ones getting this right,” said Emmanuel Lagarrigue, former Chief Innovation Officer of the global green behemoth Schneider Electric, and now a climate tech investor as Managing Director of General Atlantic’s multi-billion-dollar BeyondNetZero fund.
“The point is that 80% of the technologies we need to keep the planet under global warming targets are already invented, or someone is working on them today,” Lagarrigue continued. “The question is how quickly will they be adopted? Will the incumbents and otherwise well-meaning regulators try to slow them down, which is what they always do in a disruption?”
Moore's Law is Now Contagious
Lagarrigue and other investors are looking to the quantitative models pioneered by Seba and Arbib as essential elements of their investment theses from the 2021 report, Rethinking Climate Change.
Arbib and Seba write (condensed for brevity):
Conventional models underestimate the threat of climate change and the potential of technology to address it. Every year, the threat of climate change is corrected to ‘worse than we originally thought’ while the underestimated potential of technology is corrected to ‘better than we originally thought.’
Our research shows that disruptions of the energy, transportation, and food sectors are inevitable. Solar, wind, and batteries will disrupt coal, oil, and gas. Autonomous electric vehicles providing transportation-as-a-service will disrupt internal combustion engines and private vehicle ownership. Precision fermentation and cellular agriculture will disrupt meat, milk, and other animal products. These disruptions are unfolding simultaneously, with profound implications for climate. It will be up to us to decide whether we deploy these technologies rapidly enough to avoid dangerous climate change.
One way to think of the future path of technology costs and capabilities is to imagine that Moore's Law, the idea that computer chips will double their performance for half the cost every two years, is “contagious” and spreads to other technologies. Now, many of the core tools of our modern world follow similar “S-curves” of adoption and growth that defined Moore’s Law and drove the information revolution.
By most estimates, the cost of solar panels has fallen by over 80% in the last two decades. Wind power costs have dropped more than 50% in the last ten years and are expected to decline by an additional 37– 49% by 2050. Lithium-ion battery prices have plunged by 97% since 1991. In most places, renewable power is already much cheaper than coal or natural gas.
“Humanity and business have reached a point of disruption where we now have an opportunity to make fundamental changes for the planet’s benefit. ,” said Solange Chamberlain, COO of the Commercial Banking division at NatWest.
“We can make changes that could ensure the survival of all living beings. We can make changes that result in a fairer society. We can make changes that result in a healthy and growing economy for people and businesses, for years to come. But it is imperative that big financial institutions make the funding available, and make major commitments of their own, to ensure these changes happen on a lasting, global scale.”
One reason more investment hasn’t poured into the renewables sector is because most businesses and traditional forecasters didn’t see this coming. They continued to project linear, gradual changes to the cost and quality of technologies as if the Moore's Law “contagion” hadn’t been spreading (as if more and more technologies weren’t following similar cost trajectories). For an example, take a look at this chart, courtesy of climate tech investor Ramez Naam, Chief Futurist at Prime Movers Lab, that shows how the international energy agency (IEA) has flubbed years of predictions about global solar panel installations. The chart shows additional gigawatts of new capacity per year:
As the prices for sustainable technologies fall, demand increases, and they become accessible to new markets. This further increases demand. From there, forces like public opinion, regulation, and investment accelerate new technologies while dooming the old to decline. The cost of capital to build a new coal plant today is essentially unaffordable as a result of these forces, while renewable energy continues to boom.
Other key technologies are on similar disruptive journeys, including genome sequencing. It’s also increasingly cheaper to “grow'' organic compounds like meat, dairy, and olive oil using precision fermentation and cellular agriculture. Even chemicals can be made through similar approaches. Goodyear is working to replace oil-derived synthetic rubber in its tires with a new monomer that can be sustainably grown in labs.
Wherever you look, exponential technologies, which by definition improve at least 10% a year in cost and quality, are replacing legacy technologies that can’t keep up. According to the International Energy Agency, the fuel efficiency of traditional car engines only improved by less than 0.09% between 2017 and 2019, while the range of battery-powered electric vehicles nearly doubled.
In the same way investors are running away from coal plants because those facilities will become “stranded assets,” it’s high time for companies to realize that they’re also sitting on assets that will be stranded within the next few years. There are machines on factory floors around the world that will become worthless because they can’t keep pace with more exponential technologies. Whole business models in every industry will vanish. It will be painful, but it’s time to walk away from outdated assets and practices and invest in the future.
It’s nothing personal, legacy technology. It’s just business.