Looks like the rubber is hitting the road with ESG

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It seems to be taking a little long, but slowly people are realizing they don’t want their own savings to look like the graph below.

We will see how the ‘E’ in ESG is one hundred percent ideologically driven.

The video below has 105k views at the time of posting

The Practical Mechanics of ESG and ‘Stakeholder’ Capitalism

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I’m going to be blogging about ESG a lot more because it’s pretty much the only thing ‘going on’ at the moment. I.e. lots of ‘transformation’ but vanishingly little in the way of GDP growth or increases in quality of life. Some might it say it tends quite a lot to the contrary.

It’s funny how representatives of each niche (affirmative action, green, etc) all think that ‘ESG’ means their niche, none of whom though have a sense for the bigger picture, the why, as in, why is it an aggregate score? It makes no sense on its face - unless you like communism.

I majored in history and consider myself a lifelong student of history in general, it’s something I enjoy giving consideration to all the time, so it bothers me how obvious this all is, while the individual commissars work at too low a resolution in their niche to see the wood for the trees. They are driven by ‘purpose’ after all - it says so on the wall and, if we’re lucky, in their 60 sec black and white financial services ad that looks like every other financial services ad because these companies just don’t care to differentiate any more. Because they have purpose instead.

The Western world, HR departments, energy ‘transition’ people, and many more, need a good old talking-to mano-a-mano. Unfortunately there are just so many different fronts on which the extremely communist war of incentives is being fought - and as we know, It is difficult to get a man to understand something, when his salary depends upon his not understanding it.

ESG update

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This is it. We need to move now.

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My last post attempted to touch on the “oft forgotten” mechanics behind basically everything that is going on right now.

It’s funny, because there is also a lot of stuff not going on, that should be. Here in South Africa, we are in a state of what is really emotional abuse - with sometimes hourly switching back and forth between different amounts of rolling blackouts. A blight on a fragile economy, so egregious and so vulgar that we sit here dumbfounded into inaction and circular debates. We try our best to plan our days and lives accordingly. Let’s call it what it is: a state of blind hope. Or what a shrink might call “dumb and a waste of time”.

South Africans are used to openly debating the ins and outs of public and private projects, but oddly the collective vision seems to stop at the now imprinted in our brains idea that “people in power… public… private… ” - this is going nowhere. Not for people with any dignity - the Rainbow freakin Nation. Just one new nuclear power plant will solve the entire problem (lets put this pitiful scale into perspective). We are at the very bottom of the pit. As much as it pains me to say this, we need a venture capital mindset.

A new power plant clearly costs more than a stick of gum, but also costs distinctly less than the tax revenue that could be collected if any government on earth could operate with enough efficiency to incentivize 100% payments and collection - let alone in a banana republic economy - in 2020.

It would also cost distinctly less than Elon Musk’s tunnel from LA to SF, which is obviously known to be “of benefit to the economy”. Also private. One man, one bank account. The idea that progress can come from anywhere else is just making things difficult on purpose. It is about recognizing the magnitude of capital accumulation in the private markets, and it’s about draining the swamp in the public sector. The latter we have been attempting to do for 25 years, in South Africa.

When VC’s want to go large, they focus on the Customer Acquisition Cost. This is the most fundamental investment/growth lever for big B2C businesses. How much must we spend to de facto achieve x number of paying users and therefore achieve y scale? This is a function of both the value proposition (the real and the brand) and advertising and persuasive efficiency, in order to get people to switch. Electricity generation for 55 million people is also de facto about achieving scale and collecting those earnings. How much money must we invest to power every person in SA - from the ground up?

Negative interest rates means that the wealthy are frothing to get a return on their money. We down here are supposed to be the high growth environment, ironically, but for lack of electricity. Can we not frame the Generation Of Electricity in CAC terms? The whole population of South Africa are your customers, happily paying for a working service (existing infrastructure can be liquidated or repurposed) and our citizens will go from sitting around doing nothing - mostly because that is what we are trained to do, the rest of the time because of the blackouts themselves, to doing, learning, and achieving anything they want to. We already have 4G - and are used to paying for this on demand. This is the only plausible scenario that will have citizens actually increasing in productivity and generating wealth on any reasonable investment time horizon - or before we all get CPTSD.

For the purposes of this discussion, I say we should forget that there is even an existing electricity grid. We need to rebuild everything. We are not such a big country, and mostly the copper wire is all still there. The age of band aids has come and gone. And SA has run out of band aids anyway.

Raoul Pal explains below, what is happening in global finance and the crypto revolution - bitcoin being the spiritual center of the noble project to entirely replace the existing system. The people who really get it, and get where we are are in it, are just getting on with it. No governments involved, and no government could stop it even if they wanted to - that’s how real (as in “dope”) it would be. It’s a really solid two hour Coronavirus listen.

The landscape in the world has completely shifted: governments, infrastructure, financial systems, all failing in front of our eyes. All over leveraged, under-invested. We need to change gears in order to move forward without deluding ourselves. In SA we have simply borne too much opportunity-cost already. The VC mindset says: stop debating rolling blackouts predicated on a scenario with any government involvement at all - this is not the future and we should stop encouraging it, and pivot like good little VCs. Global corporate CAPEX and real re-investment has been dropping for decades, and we are seeing cracks at nation state level. The state we are in is simply an inevitability of the system itself and the sooner we start looking at power generation through the Elon Musk lens, the better. The money is out there, and who the hell doesn’t want to make South Africa productive and wealthy again?

Just as with bitcoin, simply remove the swamp from the conversation. Build a new system. It’s easy, all you gotta do is remember the pitiful scale. That, and what an amazing country South Africa is.

The real reason why things are the way they are.

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Right now the world is experiencing an almost fantastical financial situation, and it is affecting what brands we consume and how.

Central banks are printing the equivalent of the entire market cap of bitcoin, in a single weekend’s “liquidity injection”, leading to rather diabolical asset price inflation. We have fintech versus legacy banks (and the exuberant M&A that goes with it), venture capital situations where the winner-takes-all-until-it-very-suddenly-and-catastrophically-doesn’t (WeWork). Negative interest rates (the lowest in 5000 years - time value of money no longer exists), a stock market that just keeps going up, global currency wars the likes of which we have never seen before, and a re-re-ordering of the global supply chain (China vs the world) are now what we need to keep our eyes on, first and foremost.

This kind of capital flow creates very large biases in the marketplace of ideas and innovations, across sectors. Around the world capital now has a tendency to end up in all the most monopolistic places: think of Uber Eats offering free McDonalds delivery to literally half the developed world at the same time - pension funds are the ones paying for this “customer acquisition” at such massive scale.

It is important to think (and to know) that all this will come to an end with (something like) the global adoption of bitcoin. Bitcoin and its fixed supply means sound money. No printing, and no escaping reality. In this future things, including money itself, will have a tendency to actually cost what they are worth. This is massive.

Today these “forces of fiat currency economics” are often the most significant forces behind the growth and trajectory of the most powerful brands - in particular, global e-commerce. To understand these dynamics well is an essential basis of understanding, when looking to grow your own brand even at a smaller scale, as global platform businesses begin to monopolize many different local markets.

It is up to smaller, striving businesses to focus fanatically on their local markets and their customers, and figure out how to win bigly. It can be done - with the right business and customer insights.

[edit] - Case in point.