The winners and losers of the energy transition: My conversation with Carbon Tracker’s Mark Campanale and Kingsmill Bond
“The energy transition is disrupting the entire fossil fuel system, with profound consequences for financial markets and geopolitics.” This is the opening line of a recent research report from Mark Campanale’s organization, Carbon Tracker. In this episode of the Nightcrawler podcast, I had the pleasure of speaking with both Mark and Kingsmill Bond, the organization’s lead energy strategist, about the increasing risks (and opportunities) unfolding across energy markets. What I personally find fascinating—if not a bit frightening—is to hear both Mark and Kingsmill ring the alarm bells regarding how heavily leveraged institutional investors are to fossil fuel business models that may not exist a decade from now.
“What is going to shake investors out of the sleepiness that they seem to exist in? It is like they are walking quietly all the way till they topple over the cliff…”
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The careful balance between conviction and flexibility
I thoroughly enjoyed this Q&A-style interview with Gavin Baker, the CIO of Atreides Management, a crossover technology investment fund based out of Boston. The conversation is wide-ranging—covering everything from Buffett to 5G—but I particularly appreciated Gavin’s comments regarding the challenge of balancing conviction, flexibility, and the importance of practicing humility as an investor. “Expose yourself to as many different philosophies and processes as possible because you have got to find one that fits your own emotional make up and that helps you be rational when you’re wrong,” he says. “And do not be a philosopher. Do not be a high priest of investment religion. Be a practitioner.”
“Will Danoff taught me the value of being optimistic and open-minded while also playing in the present. The ability to balance conviction and flexibility is hard. It’s one of the things that makes investing an art. And it is the reason why you must find a philosophy that suits your temperament so that you can find the right balance between the two. Too much of either and you are not going to succeed. But Will can be in a meeting, love the story, and then, if the facts change, a few weeks later, he’s selling the stock. Just total dispassion combined with a lot of curiosity and optimism.”
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The cloud in 2030
The disruption from on-premise computing to cloud computing in the 2010s was probably one of the most profound technological shifts of the last decade. But what do the next 10 years look like? Erik Bernhardsson has a great essay this week exploring that very question in a piece titled, “Storm in the stratosphere: how the cloud will be reshuffled.”
“Big transformations tend to happen in two stages. The first step happens when some new technology arrives and people adopt to it in the simplest way that lets them retain their conceptual models from the existing world. The real transformations happens later, when you rethink the consumption model because the new world opens up new ways to create value. The way we consumed music didn’t change materially when Apple started selling songs online. The real transformation happened when providers like Spotify realized the whole notion of ownership didn’t matter anymore.”
“My views on position sizing have been influenced by my investment approach (the long-term ownership of high-quality businesses). And, somewhat counterintuitively, my preference for concentrated bets has also been influenced by my belief that investing is a highly competitive endeavor with intelligent and hard-working participants (particularly in the fight for short-term gains). Given that reality, how can we give ourselves a good shot at long-term success?”
“Most shocking of all, Spotify has kept its lead even as a trio of trillion-dollar titans—Apple, Alphabet and Amazon—launched competitive products. ‘Apple’s big comeback [in the early 2000s] was centered around the iPod—they built their whole brand around music,’ Parker says. ‘Few thought Spotify would survive with iTunes preinstalled on billions of iPhones and Macs.’ Of course, Apple remains a potent player in the space, with an estimated 70 million subscribers in 2020 (YouTube Music has around 50 million, Amazon Music 55 million). But the big three are far behind Spotify’s 170 million paying customers. And Apple and Amazon don’t offer a free, ad-based option. Spotify does, and it attracts an additional 220 million users. ‘Before, ad-supported music was just the on-ramp to subscriptions,’ says Richard Greenfield, a partner at media research shop LightShed Partners. ‘Now it’s big business by itself, and Spotify has no competition.'”
“Jassy is a creature of habit and tradition to an unusual degree. He meets each of his two kids, a son and a daughter, for breakfast once a week (always independently), on the same day at the same time, and has done so for years. He hosts the same weekly, monthly, and annual sports gatherings at his house. He schedules two hours for himself on his calendar once a week to read (often Amazon-related memos), and on Tuesdays, as he’s done for the past 25 years, he has a date night with his wife, Elana.”
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