The future is here, it’s just not evenly distributed: the known cause of and solution to the climate crisis
Sustainability has been all the rage in early stage investing circles over the past year, though it’s not clear this is necessarily an early stage type problem to solve.
When thinking about how to advance the efforts of decarbonization / climate change / sustainability, it’s important to think about where this problem comes from. More than half of our greenhouse gas emissions come from two sources: transportation and electricity.
Fortunately, we know how to solve these issues and there is market demand for the solutions that exist today. The problem is that supply chain bottlenecks are preventing us from deploying these solutions faster.
Clean transportation and electricity are the two core problems that Tesla is working to solve. Given the current state of these products and markets, the faster path to impact is to double down on the winner here and help them blitzscale rather than taking the technology risk of trying to invent superior ways to solve these problems.
This is reinforced by the fact that these industries are subject to feedback loops that could allow us to dramatically cut carbon emissions over the next two decades by accelerating Tesla’s path to market dominance.
The feedback loops that will accelerate the decline of greenhouse gas emissions
There are two core feedback loops that will help Tesla blitzscale over the next decade: (1) the electric utility death spiral and (2) the gas station death spiral. The electric utility death spiral is already underway in some geographies, the gas station death spiral is still theoretical, but could prove powerful once it gets going.
The electric utility death spiral
We’ve already seen in Hawaii that more rooftop solar leads to less demand for electricity from traditional power plants, which increases the price of the power generated by those plants for other customers, which then leads to more demand for rooftop solar. Further compounding this is a global feedback loop: the more demand for solar panels, the cheaper they get to produce due to economies of scale, leading to increased demand for rooftop solar.
By accelerating the adoption of rooftop solar, we could help trigger the electric utility death spiral in many more geographies around the world, leveraging market forces to eliminate >1/4 of greenhouse gas emissions.
The Solar Roof + PowerWall is the killer product stack. It’s beautiful, it’s convenient, it’s cost competitive. Aside from constrained supply, there’s no reason why every roof in the world shouldn’t be a solar roof. This isn’t just for new homes, existing homes require roof replacements every 20 or so years. This could be deployed at scale if it could be produced at scale.
The gas station death spiral
Aside from cost, one of the impediments to mass adoption of EVs is the inconvenience factor of charging EVs vis-a-vis filling up a legacy car at a gas station.
Again, there are two related feedback loops here that will reinforce each other once they get started.
The more EVs that are on the road, the more demand for EV charging stations, the more supply of EV charging stations, the more convenient it is to drive an EV, the more EVs there will be on the road.
The converse is also true. The fewer gas powered cars on the road, the less the demand for gas stations, which will cause more gas stations to go out of business, which will make it less convenient to own gas powered cars, meaning more people will choose to buy EVs, reducing the number of gas powered cars.
We’re already starting to see this in parts of California as charging stations continue to proliferate. The world is not California ... yet.
Emerging bottlenecks and necessary solutions
These feedback loops provide the opportunity for us to go for the kill and eliminate >50% of carbon emissions in the next two decades. There is no technology risk and the feedback loops will eliminate the market risk.
While Tesla does not need to be a monopoly and it has been open about sharing it’s patents, at this stage of product and market maturity the fastest path to impact is to help the category leader eliminate the supply chain bottlenecks that are holding them back.
It’s much harder to blitzscale a business that is reliant on atoms than it is to blitzscale a purely digital business and they need a lot of help.
“Any mining companies out there, please mine more nickel ... Tesla will give you a giant contract for a long period of time .... Don’t worry about demand, that’s not the issue.”
- Elon Musk July 22, 2020
A happy side effect of improving the upstream supply chain for Tesla and helping them scale is that it should improve the quality and reduce the cost of batteries across the board, enabling entrepreneurs to solve the transportation problem writ large due to the continued proliferation
of electric powered micro mobility solutions and improved outlook for for electric powered flight in the near term, first with shorter distance VTOL technology and then with longer distance electric powered aircraft.
If we act decisively to accelerate the death spirals that will reshape the transportation and electricity industries before the legacy players have time to react, we could eliminate more than half of greenhouse gas emissions in the next two decades.
The products humanity needs are in production today. There is ample demand for these products today and the feedback loops reduce the market risk of future adoption. The core risk is our ability to execute.
Please note: this is not to say that Inventors should stop working on novel technologies or that venture capitalists should stop funding them. That would never be true in any society I would want to live in, but if we want to solve the climate crisis, we need to focus on accelerating known solutions now.