Jeremy Grantham on Investing in Green Tech

Jeremy Grantham argues that the mining industry cannot supply the green transition as currently configured, that markets and capitalism systematically fail to anticipate slow-burning commons problems, and that the present US market is the fourth genuine superbubble in history — a call he makes on only three or four prior data points, and says so.

Key ideas

1. Mining cannot green the economy as configured — the answer is redesign, not more digging. Every known lithium reserve, fully mined, would supply roughly 5 per cent of what a single green transition requires, before counting the 30-year replacement cycle. Grantham’s Foundation is funding better lithium extraction from brine and rock, but he treats this as a losing race; the real fix is engineering batteries around potassium and sodium, both hundreds of times more abundant.
2. Green energy’s near-zero marginal cost is decisive, but the build-out itself is fossil-fuel-hungry. Once wind, solar, and storage plant exist, they run at close to nil marginal cost — a threshold falling fossil fuel prices struggle to match. But building that plant is extraordinarily resource- and energy-intensive upfront, so a rapid green build-out temporarily increases demand for the fossil fuels it aims to replace.
3. Grantham calls the present market a fourth superbubble, from a self-admittedly tiny sample. His method pattern-matches against three prior episodes — 1929 and 2000 named directly, plus a third he does not name in this conversation — sharing an extended run of good years, peak profit margins, near-perfect conditions, and a slow build of euphoria ending in a flashpoint where people buy ‘without any regard to the fundamentals’. He concedes a rigorous prediction would need thirty data points, not three or four, and bets on the pattern anyway.
4. He has no confidence capitalism anticipates commons problems. Markets, he says, are ‘occasionally quite efficient’ and ‘occasionally ludicrously inefficient’; on climate, soil erosion, and other commons goods, capitalism ‘waits until you bang it on the nose’ rather than acting ahead of the damage — visible in the absence of sea walls against ocean-level rise and in coastal insurance markets that will not reprice until the crisis is already underway.
5. He rates mainstream cost-of-climate-change estimates as close to worthless. Estimates in the 5–10 per cent-of-global-GDP range by 2200 strike him as ‘utterly trivial and only producible by economists’ — a framing he says no serious climate scientist would accept once the temperature rise gets anywhere near the point where a stable global society stops being achievable.
6. Underappreciated slow burns rival climate change in his view: insects, topsoil, fertility. Wild insect biomass is falling by roughly 1–2 per cent a year — down 50 to 75 per cent overall — with a possible but unprovable cascade risk to human survivability, because the system-wide research needed to prove it has never been funded. Midwestern topsoil has gone from a foot deep to an inch or two. Fertility rates across the developed world (South Korea 0.8, Japan 1.35, parts of Europe near 1.0) point to a demographic crash with no clear handling plan.
7. His own account of himself: better at ideas than at making money from them. Raised by Quaker grandparents in wartime Yorkshire on ‘waste not, want not’, Grantham says the scarcity disposition is ‘in my cortex’. He rates his own investment record as long on correct long-term calls and short on execution — ‘the quality of the ideas was much better than my execution, which has always sucked’ — which is why, in his account, he needed a partner from day one to turn ideas into returns.

Content

Why mining cannot green the economy

Cowen opens by asking whether the mining industry can supply the raw materials the green transition requires. Grantham’s answer is flat: ‘Not as currently configured, no. Not a prayer, not even close.’ Lithium is the binding constraint — decades of prospecting have mapped the known reserves, and mining all of them would cover only about 5 per cent of what greening the entire economy demands once, ignoring the fact that batteries need replacing every 30 years. The Grantham Foundation is investing in extraction improvements (three to four times more lithium from brine, 50 per cent more from Australian-style rock), but Grantham treats these as marginal gains against an unclosable gap. His conclusion is not to mine harder but to redesign around the constraint: potassium and sodium batteries, drawing on elements hundreds of times more abundant than lithium.

Pressed on whether the long-run trend in commodity prices should simply be falling — China’s growth is ending, the world will depopulate — Grantham rejects the analogy between commodities and other growth inputs. A finite store gets smaller even as the growth rate slows; it does not replenish itself. He extends this into a resource-limits argument via the ‘bacteria in a petri dish’ image: humanity discovered fossil fuels as an energy windfall and expanded accordingly, and having doubled 32 times from a standing start, is ‘down to our last double’ — a claim about physical limits, not a forecast with a date attached.

On the mechanics of the transition itself, Grantham argues that the economics favour green energy decisively once built: wind and solar run at close to nil marginal cost, a floor that even falling fossil fuel prices struggle to reach. The catch is the build phase. Constructing wind, solar, and storage capacity is unusually resource- and energy-intensive upfront — all the labour, materials, and mining are front-loaded — so a rapid green build-out creates a temporary surge in demand for the fossil fuels it is meant to replace, particularly to bridge intermittency in fast-growing, energy-poor regions such as Vietnam and Bangladesh.

The commons problem, capitalism, and the price of denial

Grantham welcomes the Biden climate and tax legislation chiefly as a signal — the United States, ‘full of climate deniers’, finally moving — while acknowledging the conflict of interest: the bill could hardly have been better designed for the Grantham Foundation’s own green venture portfolio.

Asked why private markets fail to internalise even privately-owned resource costs, such as topsoil loss on individually owned farmland, Grantham generalises to capitalism’s whole relationship with commons problems: markets are ‘occasionally quite efficient… and everything in between’, but on climate, soil erosion, or any commons issue, ‘capitalism waits until you bang it on the nose, and then it responds’. It does not anticipate. He applies the same logic to coastal real estate: history so far shows early flooding barely dents property values; the real repricing happens only once insurance becomes unavailable except via government subsidy, at which point prices can drop ‘like a stone, more than they should’ before eventually recovering.

On the scale of the risk itself, Grantham dismisses mainstream economic estimates — Nordhaus’s Nobel-winning work implying even 10°C of warming costs only around 10 per cent of GDP — as ‘complete jokes’: ‘we will be long gone as a species at 10 degrees centigrade.’ He reports that in his own conversations with climate scientists, none think a stable global society survives 5°C, and he extends his mistrust of long-horizon forecasting from economists to markets generally: ‘On a horizon that’s over two years, I count on the markets being wrong.‘

The fourth superbubble

Grantham’s essay ‘Entering the Superbubble’s Final Act’, published the day before the interview, frames the present US market as a 2.5–3 sigma extreme. Cowen challenges the epistemics directly: with so few historical analogues, how can Grantham be confident about how it resolves? Grantham’s defence is candid about the weakness before working around it — ‘there are not many data points, and you have to live with that… you would need 30 before you could do any sensible prediction’ — but argues markets are a function of recurring human behaviour: an extended run of good years, peak profit margins, near-perfect conditions, and a slow build of euphoria that ends in a flashpoint where people ‘buy stocks without any regard to the fundamentals… because they think someone else may pay more’. He counts three prior instances sharing this shape — 1929 and 2000 are the two he names directly, alongside an unspecified third — and treats the present market, spanning stocks, real estate, and bonds at once, as a fourth close enough to the pattern to bet on. He is careful to distinguish this from sudden shocks like 9/11 or the 1987 crash, which he calls unrepeated outlier events bearing no resemblance to a ‘nice stock market bubble’.

Within the current bubble he separates components by geography: US equities are the standout overvaluation (echoing 2000), UK equities are not especially stretched, real estate is extreme almost everywhere — worse than the 2006 housing bubble by family-income multiples, though still behind Canada, Australia, Europe, and China — and bond overvaluation is universal. Asked pointedly why he is not richer if bubble-spotting is so tractable, Grantham locates the gap in himself rather than the method: ‘the quality of the ideas was much better than my execution, which has always sucked,’ which is why he says he needed a partner from day one to convert calls into returns.

Britain, Brexit, and Thatcher

A separate thread turns to Grantham’s native Britain. On the UK’s productivity stagnation, he professes not to fully know the cause, but names Brexit as ‘one of the worst self-inflicted wounds in modern times’ — manufacturing investment diverted to the Continent, and industrious European workers who left during Brexit and COVID and did not return. On the vote itself, he reads it as a matter of unlucky timing rather than inevitability: British approval of immigration rose steadily from 10 per cent in 1947 to about 45 per cent by the 2010s, and the referendum landed at almost the last moment such a vote could have passed — twenty years later, he argues, it would have failed. Margaret Thatcher, by contrast, gets an unambiguous endorsement: she broke Britain’s class-bound management culture by appointing on merit rather than pedigree, and left ‘a different Britain, much more competitive’.

Roots in Yorkshire

Grantham traces his resource-scarcity instincts to being raised by his grandparents in the coal-mining town of Doncaster, Yorkshire. His grandfather, an apostate Quaker who nonetheless kept Quaker habits, built a chain of seventeen shops and then a restaurant from nothing; wartime rationing reinforced a household ethic of ‘waste not, want not’ in which everything was reused and waste ‘thought to be disgusting’. Grantham says the disposition is now involuntary: ‘it’s in my cortex… when I see waste, I twitch.’ Against this frugality he sets an unqualified optimism about American venture capital, which he calls the country’s ‘last, best exceptionalism’ — vigorous, attractive to the best foreign talent, and paired with the world’s leading research universities. It is this sector, in his view, that will do the heavy lifting on climate if the world saves itself at all, and he says the Grantham Foundation’s roughly 45 early-stage green investments over two and a half years are the most engaging work of his career.

The uncounted risks, and two technology bets

Closing out, Grantham lists the slow-burning problems he thinks are dangerously underweighted relative to climate change: collapsing insect populations (down 50–75 per cent, declining at 1–2 per cent of biomass a year, with a suspected but unfunded and unproven cascade risk to human survivability — a topic he discussed at length with the late E.O. Wilson); vanishing Midwestern topsoil, down from a foot to an inch or two, with productivity losses expected within a decade; and collapsing developed-world fertility rates (South Korea 0.8, Japan 1.35, the US 1.65, parts of Europe near 1.0), which he calls a demographic ‘crash’ nobody knows how to manage. His diagnosis for the common thread — none of these get funded or heard — is structural: complex, system-wide problems resist the kind of proof that attracts research money, and public attention tolerates at most ‘two paragraphs’ per issue.

He closes on two technology bets, both cautiously optimistic. On nuclear fusion, he rates the odds of eventual commercial success better than 50/50, weighted more towards the roughly thirty newer, second-generation efforts building on modern physics than towards the large legacy programmes he compares to ‘the Concorde’ — technology already decades out of date. On geothermal, he expects the drilling and engineering advances from fifteen years of fracking to transfer directly, moving the technology from a handful of naturally favourable sites today to much broader commercial viability.

See also

• Jeremy Grantham — speaker; co-founder, GMO, and environmental philanthropist
• Tyler Cowen — host
• What Makes a Great Investor — theme; Grantham’s flashpoint-based bubble-calling sits closest to the temperament/behaviour camp’s account of investor edge
• Decadent Finance — Jim Grant‘s structural diagnosis of suspended market corrections; a contrasting mechanism to Grantham’s behavioural, small-sample bubble-calling
• Jim Grant on the AI Bubble, Decadent Finance, and the Lessons of History — companion episode on a rival theory of why bubbles form and persist
• Howard Marks on the AI Bubble, Irrational Exuberance, and Investing Under Radical Uncertainty — closest resonance: another investor reading euphoria through observed behaviour rather than valuation models
• Gustaf Alstromer on YC and Climate Tech — companion climate-tech episode from the opposite end of the market: seed-stage startups rather than macro resource constraints