Fighting the Tide

My first car was a Ford Cortina, bright yellow with black vinyl seats that bare legs stuck to in the summer. Its body was too big for its emphysemic engine but this didn’t stop me trying to squeeze every last ounce of speed out of it, clinging onto the shaking steering wheel as the speedo hovered ever closer to 85. Coming back from a camping trip in the South of France, the only way we could keep the temperature gauge from going beyond red was to have the heater on full for the entire journey – the usually overwhelming dry heat of service stations hit us like a cool summer breeze as we tumbled, red-faced and soaking, from our mobile oven.

I had passed my test at 17 and to celebrate The Future Mrs R and I packed up our tent and headed north-westwards to a quarry just outside Machynlleth. I was passionate about saving the planet and our pilgrimage was to the National Centre for Alternative Technology. I’d read about it in ‘Undercurrents’, an alternative culture magazine, and it sounded brilliant. Here was the cutting edge of the green revolution. Fast-forward forty-odd years and although we seem to have talked a lot about saving the planet, progress has been woeful. Cars may be far more efficient but in the UK we now collectively travel 100 billion miles more each year than we did back in 1975 – and, while I don’t have the evidence, it certainly feels like I spend a lot more time stuck behind the car in front. Across the world, the environmental can seems to have been an easy option for policymakers to kick down the road.

I try to do my bit. I ride my bike sporadically. I enjoy exploring Norfolk’s quiet lanes where you can ride for an hour without coming across a car. Riding in traffic, I reluctantly accept that cyclists are fair game, which is unfair as I’m not a cyclist – I’m a fat bloke on a bike and in most other respects pretty similar to the fat bloke in the car who is harrying me as I puff my way up a hill.

At home, it looks like our ground source heat pump will be powered by output from what in 2020 will be the world’s largest windfarm. It will join the National Grid at Mangreen via two massive cables buried alongside our hedge. If I’d paid more attention during physics lessons I reckon I could have worked out how to lay some induction coils over the cables and enjoy free electricity. From my rough calculations, it looks to be Pareto-efficient, but probably only because my grasp of Faraday’s Law is so weak I cannot work out who would lose out from my nocturnal coil burying. Based on the assumption that I will be able to crack the technical challenges, I’ve taken the plunge and ordered an electric car.

It could be Pregnant Wife Syndrome (the widely-observed phenomenon that when your wife is expecting every other woman you come across is sporting a neat bump) but just lately a lot more people seem to be fretting about the environment. We work in Europe’s greenest building, so you’d expect the hippy-count to be higher than average, but even here there has been a marked increase in the gentle patter of organic hemp sandals on recycled concrete. Being here means getting invited to conferences and workshops exploring routes to a more sustainable future, gaining a deeper insight into the leading-edge technologies being developed to meet the looming challenge. It’s an exciting time.

Understanding future trends is invaluable in helping us guide our clients’ investment decisions. An analogy I like uses the sea to explain markets. Sit Canute-like at the water’s edge and if the tide happens to follow your command it is simply because you were lucky with your timing; if you believe it is anything else you will soon find yourself inundated by the returning seas. But while you can’t control the waves, if you understand what to look for, you can use their power to surf them. It’s similar with investment markets. Thinking you can consistently beat the market is hubristic nonsense; understanding that valuing assets fairly doesn’t mean all assets have the same expected return opens the opportunity to harness the power of the market.

We use this thinking by tilting our portfolios to take advantage of factors that, typically, produce better returns. One is based on the observation that more profitable companies tend to perform better than less profitable ones. This seems fairly obvious – profitable companies will have more to invest and be spending less time on fire-fighting. If we are taking a longer-term view of investment opportunities it follows that we will want to focus on sectors that are most likely to deliver future profits.

Looking for opportunities in a more sustainable world it pays to remember that it’s often not the core disruptive technology that benefits most, rather the more prosaic existing technologies that enable it. Gutenberg’s press is seen as the technology that launched the Enlightenment but it was T'sai Lun’s far older technology, paper, that enabled it. Investing in a potentially disruptive new technology is risky; investing in an entire sector that is likely to benefit from a fundamental shift less so – think paper suppliers rather than offset printer manufacturers…

Back in Wales, our encounter with our sustainable future was a tad disappointing. We pitched up to something that looked like a muddy scrap yard; bits of half-finished projects littered the yard, contemplated by a small band of lank young men a few years older than me who didn’t seem terribly inclined to do much at all.

Hello – we’ve come to visit the Centre!

  Visit? We don’t really do visitors..

Oh – but we’ve driven 300 miles to get here

  OK, I’ll show you our electric pick-up truck

Which is how we drove for the best part of a day to see an ancient milk float that had had its rear canopy stripped off. I sort of feel that all these years later we’re not really much further forward…

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30 June 2018

Fighting the Tide

If I’d paid more attention during physics lessons I reckon I could have worked out how to lay some induction coils over the cables and enjoy free electricity. From my rough calculations, it looks to be Pareto-efficient, but probably only because my grasp of Faraday’s Law is so weak I cannot work out who would lose out from my nocturnal coil burying.

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3 April 2018

Too Much Information

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