The next “Michael Burry” for Climate Change
We need the next “Michael Burry” for Climate Change. Someone that asks the necessary questions, is extremely data-driven and commits to his idiosyncratic investment decisions.
“So Mike Burry of San Jose, a guy who gets his hair cut at SuperCuts, and doesn’t wear shoes, knows more than Alan Greenspan and Hank Paulson?” — Lawrence Fields’ lawyer
The Big Short
Michael Burry, an eccentric hedge fund manager, portraited by Christian Bale in the movie “The Big Short” discovered in 2005 that the U.S. housing market was based on high-risk subprime loans would collapse.
Anticipating the market’s collapse in the second quarter of 2007, he created a credit default swap with several investment banks, allowing him to bet against the mortgage-backed securities for profit.
When the market crashed, his long-term bet, exceeding over $1 billion, returned 489% with an overall profit of over $2.69 billion.
Few might think that this was pure luck. It definitely wasn’t! It was asking thorough questions, extreme dedication, and resilience.
Climate Crisis
As the impacts of our urgent climate crises are worsening: Extreme weather conditions, groundwater crisis, glacier melts, and sea-level rise. We need the next Michael Burry to open our eyes for something that only a few people see.
We need people that are challenging the status quo, who don’t believe that “the housing market will always go up”. They can identify the cracks in our society and have no fear of asking the basic questions from a first-principles approach.
Asking critical questions
Only critical thinking will allow us to solve a massive challenge, such as our climate crisis. We should not only focus on the few solutions or sources for global warming but also ask why global warming occurs in the first place? Is it something related to our being or our society? Do we have to change our lifestyle, capitalism, or technology?
Be extremely data-driven
Asking through questions may lead the next Michael Burry on the right path. However, as Peter Ducker famously stated: “If you can’t measure it, you can’t improve it.”
To get a better understanding of global warming, we need more reliable data. For example, Michael Burry looked in all of the loans that were making up several mortgage-backed securities and quickly identified that the interest payments were being delayed.
Therefore, the focus should be on analyzing data and deriving an investment thesis that can guide critical decision making. Al Gore’s initiated “Climate Trace” could provide a promising starting point. The tool allows us to monitor GHG emissions in real-time using satellite-image processing, machine learning, and sensors to help investment decisions around climate impact. This could be a step to develop a platform that could act as Bloomberg for environment data.
Stay resilient
Anybody who watched the movie “The Big Short” has seen the struggles that Michael Burry had to go through. He was dismissed as “crazy” and most investors wanted to withdraw their funds from Michael Burry’s Scion Capital fund. As Mark Twain has famously stated:
“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.“ — Mark Twain
The climate investor will need to be resilient and develop a thick skin. Many conflicts of interest can take the better self of the investor. The investor needs to be fully committed to his idiosyncratic investment decisions and readjust the curse only when the investment thesis has changed significantly.
We should be long climate tech and short high carbon-emitters.
We need the next Michael Burry now!
