An LP recently asked me, “what exactly is climate tech?” I half-mockingly paraphrased a16z’s now famous fintech prediction, “everything!”
Aka, adapt or die.
1b people are projected to become climate refugees by 2050, sparking both incalculable strain across the worlds’ already-broken migratory systems, but, more rosily, an entire new world order of labor. This great reorganization of people won’t be limited to tropical islands with tiny populations or remote indigenous villages in the Arctic Circle — think major populations across Bangladesh, Pakistan, much of Africa…and, within the US, you don’t have to squint very hard to imagine what “inhospitable” will look like in a mega drought-worn Southwest or a flood-ravaged Gulf. As populaces shift, so too will entire industries. Despite what politicians may say, mining coal in West Virginia or growing almonds in California’s Central Valley is not some immutable god-given right. The same reality has come for cheesemakers in France, wine growers in California, or farmers in rural Madagascar. And, increasingly, autoworkers in the Midwest. The economies that survive will be those that adapt. As Biden says again and again, the IRA is all about jobs. The movement of people & labor.
The world is flat, the planet is multilaterally globalized, and increasingly-online populations expect what they want, when they want it. Drought has dramatically limited the number of ships that can pass through Panama’s canal, raising prices and slowing deliveries. The pandemic, Russia’s invasion of the Ukraine and now Israel’s war with Hamas — Israel has reduced its daily natural gas exports to Egypt from 800m cubic ft to zero! — have laid bare the deep interconnectedness of our global supply and distribution chains. A changing climate is quickly magnifying the intrinsic economic and national security challenges of these instant economies, driving on-, near- and friend-shoring, energy domestication, and scrambles for mineral access. Encouragingly, major decarbonization efforts are underway across our rails, roads, airs and seas, as transport companies hustle to electrify trucking fleets, delivery planes, cargo ships, ports and everything in between. The movement of goods.
Look under the hood of all this adaptation and the climate goldrush can certainly be told as stories of lithium or cobalt or wind or sunshine. But, even more so, it’s the story of an infinitely inexhaustible, ever-growing and equitably-distributed positive sum resource: data. Public utilities, national security agencies and state legislatures; insurance incumbents, multinational banks, state-run telecoms; smallholder farmers, agricultural monoliths, last-mile food distributors; space companies, mining companies, construction companies…it doesn’t matter: as risks shift, magnify and compound, every enterprise, government and entity between has to adapt to an infinitely-dynamic and multi-dimensionally changing climate, tectonic industrial and geopolitical shifts that will be catalyzed by a new generation of hard- and software-enabled data. The movement of services.
The movement of people, goods and services — these are the critical arteries of global capitalism. And as the neoliberal flavor sours, we’re seeing a climate-driven proliferation of protectionist manufacturing, trade and energy (and, sadly, migration) policies — a fundamental reorganization of commerce and society, as civilizations’ entire coexistence are being reimagined. How nations and their markets perceive, quantify and prioritize climate’s many coming challenges is perhaps the biggest variable at play.
In a vacuum, I’m personally drawn to a global carbon tax, aka the solution most serious environmental economists have championed for decades. Unfortunately, our painfully unfederated governments will never peaceably unify — US-wide, let alone globally — to levy anything remotely enforceable. Ok, so how about degrowth? Fewer people using fewer resources, abandoning a growth-at-all-costs mindset for one of harmonious contentment? Sounds nice, but that also ain’t happening. The world is dominated by capital and politics and, if we look at Arizona as an example, my bet is on state legislators battling growth blockers with desalination and piping projects; and, with 80% of their water consumed by politically-powerful ag, how they adapt industrially will determine much of their success.
Carrots and sticks are valuable incentive structures dictating regulatory head- and tailwinds — the market forces that can kill or birth a unicorn. And while it’s hard not to see climate change as the greatest market failure ever, capital and politics are finally cooperating to convert the unrivaled systemic urgency of its challenges into the greatest market opportunity ever. Global warming’s imminence and ubiquity have liberated the argument for action from a philanthropic ideal to one of pure commerciality, security and survival. Of course, alongside most every sector, we can only hope interest rates drop.
From water, energy, food and transport to banking, insurance, construction, travel, education and retirement — and on and on and on — it’s our bet that every intelligent corporate and governmental entity will have to embed scalable software-powered solutions to navigate the known-unknowns and infinite unknown unknowns of our ever-changing climate.
This is our thesis at Rally Cap. If you’re building software-centric solutions that’ll help enterprises and governments adapt to this new reality, whether in the US, Europe or any emerging market, we want to talk to you!