Attitudes in America to Investing, Resource Limitations and Global Warming

Jeremy Grantham offered a personal slant on these problems using his considerable experience in the investment business in an engaging Special Lecture.

Attitudes in America to Investing, Resource Limitations and Global Warming

Irrational Avoidance of the Unpleasant

Additional Material

• Watch the full lecture
• Read an interview with Jeremy Grantham
• Visit the Grantham Institute's site

The lecture theatre was completely full for Jeremy Grantham’s wide-ranging talk on resource limitations, social and psychological limitations, climate change and the implications for the future of the global economy. Quite a challenge for an hour’s lecture to a mixed audience from Imperial College and beyond!

Jeremy offered a personal slant on these problems from his experience of many years in the investment business where, in the long run, there is an incentive to get the answer right.  In the short term though, even Isaac Newton himself was misled by exuberance and unfounded optimism, a trait which we see today in both the financial markets and in attitudes to climate change and other threats. Jeremy showed a series of examples from the 1700s to the present day of bubbles in various stocks and assets, demonstrating the usual behaviour of reversion to the mean which GMO are well known for analysing.

We then heard how, for many commodities, the paradigm of mean reversion is changing to a paradigm of scarcity and price increase.The price of oil has increased and is now tracking around $75/barrel, due to the increased costs of exploration and production, and Jeremy showed a table of many other commodities which have undergone the same paradigm shift.

Two particularly important finite commodities are phosphates and potash, both essential for plant growth and therefore for food production.  Unlike some other commodities, these are not substitutable, so the usual economic solution (price increase until a substitute becomes cheaper) cannot apply.  This is a severe risk to the food supply, especially combined with the growing threat of weather and climate extremes due to climate change.

Jeremy and Hannelore Grantham with Sir Keith O'Nions, Sir Brian Hoskins and Lord Nicholas Stern at Imperial College London

With two “recently acquired” grandchildren, Jeremy's concern for the long term is personal as well as a sound business strategy, in a singular contrast to the short-term way in which parts of society today seem to be managing their affairs.  His talk was a timely reminder that although our problem is long term, the solutions are urgently needed in the very, very short term.

The full lecture is avaible to watch again online, along with many more of the Grantham Institute for Climate Change's Annual and Special Lectures.