Burning Down the House
Alan Weisman
August 15, 2019 Issue
The Uninhabitable Earth: Life After Warming
by David Wallace-Wells
Tim Duggan, 310 pp., $27.00
by Bill McKibben
Henry Holt, 291 pp., $28.00
Climate scientists’ worst-case scenarios back in 2007, the first year the Northwest Passage became navigable without an icebreaker (today, you can book a cruise through it), have all been overtaken by the unforeseen acceleration of events. No one imagined that twelve years later the United Nations would report that we have just twelve years left to avert global catastrophe, which would involve cutting fossil-fuel use nearly by half. Since 2007, the UN now says, we’ve done everything wrong. New coal plants built since the 2015 Paris climate agreement have already doubled the equivalent coal-energy output of Russia and Japan, and 260 more are underway.
Environmental writers today have a twofold problem. First, how to overcome readers’ resistance to ever-worsening truths, especially when climate-change denial has turned into a political credo and a highly profitable industry with its own television network (in this country, at least; state-controlled networks in autocracies elsewhere, such as Cuba, Singapore, Iran, or Russia, amount to the same thing). Second, in view of the breathless pace of new discoveries, publishing can barely keep up. Refined models continually revise earlier predictions of how quickly ice will melt, how fast and high CO2 levels and seas will rise, how much methane will be belched from thawing permafrost, how fiercely storms will blow and fires will burn, how long imperiled species can hang on, and how soon fresh water will run out (even as they try to forecast flooding from excessive rainfall). There’s a real chance that an environmental book will be obsolete by its publication date.
I’m not the only writer to wonder whether books are still an appropriate medium to convey the frightening speed of environmental upheaval. But the environment is infinitely intricate, and mere articles—much less daily newsfeeds or Twitter—can barely scratch the surface of environmental issues, let alone explore the extent of their consequences. Ecology, after all, is about how everything connects to everything else. Something so complex and crucial still requires books to attempt to explain it.
David Wallace-Wells’s The Uninhabitable Earth expands on his 2017 article of the same name in New York, where he’s deputy editor. It quickly became that magazine’s most viewed article ever. Some accused Wallace-Wells of sensationalism for focusing on the most extreme possibilities of what may come if we keep spewing carbon compounds skyward (as suggested by his title and his ominous opening line, the answer “is, I promise, worse than you think”). Whatever the article’s lurid appeal, I felt at the time of its publication that its detractors were mainly evading the message by maligning the messenger.
Two years later, those critics have largely been subdued by infernos that have laid waste to huge swaths of California; successive, monstrous hurricanes—Harvey, Irma, and Maria—that devastated Texas, Florida, and Puerto Rico in 2017; serial cyclone bombs exploding in America’s heartland; so-called thousand-year floods that recur every two years; polar ice shelves fracturing; and refugees pouring from desiccated East and North Africa and the Middle East, where temperatures have approached 130 degrees Fahrenheit, and from Central America, where alternating periods of drought and floods have now largely replaced normal rainfall.
The Uninhabitable Earth, which has become a best seller, taps into the underlying emotion of the day: fear. This book is meant to scare the hell out of us, because the alarm sounded by NASA’s Jim Hansen in his electrifying 1988 congressional testimony on how we’ve trashed the atmosphere still hasn’t sufficiently registered. “More than half of the carbon exhaled into the atmosphere by the burning of fossil fuels has been emitted in just the past three decades,” writes Wallace-Wells, “since Al Gore published his first book on climate.”
Although Wallace-Wells protests that he’s not an environmentalist, or even drawn to nature (“I’ve never gone camping, not willingly anyway”), the environment definitely has his attention now. With mournful hindsight, he explains how we were convinced that we could survive with a 2 degrees Celsius increase in average global temperatures over preindustrial levels, a figure first introduced in 1975 by William Nordhaus, a Nobel prize–winning economist at Yale, as a safe upper limit. As 2 degrees was a conveniently easy number to grasp, it became repeated so often that policy negotiators affirmed it as a target at the UN’s 2009 Copenhagen climate summit. We now know that 2 degrees would be calamitous: “Major cities in the equatorial band of the planet will become unlivable.” In the Paris Agreement of 2015, 1.5 degrees was deemed a safer limit. At 2 degrees of warming, one study estimates, 150 million more people would die from air pollution alone than they would after 1.5 degrees. (If we include other climate-driven causes, according to the Intergovernmental Panel on Climate Change, that extra half-degree would lead to hundreds of millions more deaths.) But after watching Houston drown, California burn, and chunks of Antarctica and Louisiana dissolve, it appears that “safe” is a relative statement—currently we are only at 1 degree above preindustrial temperatures.
The preindustrial level of atmospheric carbon dioxide was 280 parts per million. We are now at 410 ppm. The last time that was the case, three million years ago, seas were about 80 feet higher. A rise of 2 degrees Celsius would be around 450 ppm, but, says Wallace-Wells, we’re currently headed beyond 500 ppm. The last time that happened on Earth, seas were 130 feet higher, he writes, envisioning an eastern seaboard moved miles inland, to Interstate 95. Forget Long Island, New York City, and nearly half of New Jersey. It’s unclear how long it takes for oceans to rise in accordance with CO2 concentrations, but you wouldn’t want to find out the hard way.
Unfortunately, we’re set to sail through 1.5 and 2 degree increases in the next few decades and keep going. We’re presently on course for a rise of somewhere between 3 and 4 degrees Celsius, possibly more—our current trajectory, the UN warns, could even reach an 8 degree increase by this century’s end. At that level, anyone still in the tropics “would not be able to move around outside without dying,” Wallace-Wells writes.
The Uninhabitable Earth might be best taken a chapter at a time; it’s almost too painful to absorb otherwise. But pain is Wallace-Wells’s strategy, as is his agonizing repetition of how unprecedented these changes are, and how deadly. “The facts are hysterical,” he says, as he piles on more examples.
Just before the 2016 elections, a respected biologist at an environmental NGO told me she actually considered voting for Trump. “The way I see it,” she said, “it’s either four more years on life support with Hillary, or letting this maniac tear the house down. Maybe then we can pick up the pieces and finally start rebuilding.” Like many other scientists Wallace-Wells cites, she has known for decades how bad things are, and seen how little the Clinton-Gore and Obama-Biden administrations did about it—even in consultation with Obama’s prescient science adviser, physicist John Holdren, who first wrote about rising atmospheric CO2 in 1969. For the politicians, it was always, foremost, about the economy.
Unfortunately, as Wallace-Wells notes:
The entire history of swift economic growth, which began somewhat suddenly in the eighteenth century, is not the result of innovation or trade or the dynamics of free trade, but simply our discovery of fossil fuels and all their raw power.
This is our daily denial, which now flies in our faces on hurricane winds, or drops as hot ashes from our immolated forests and homes: growth is how we measure economic health, and growth must be literally fueled. Other than nuclear energy, which has its own problems, no form of energy is so concentrated, and none so cheap or portable, as carbon. By exhuming hundreds of millions of years’ worth of buried organic matter and burning it in a couple of centuries, we built our dazzling modern civilization, not noticing that its wastes were amassing overhead. Now we’re finally paying attention, because hell is starting to rain down.
I encourage people to read this book. Wallace-Wells has maniacally absorbed masses of detail and scoured all the articles most readers couldn’t finish or tried to forget, or skipped because they just couldn’t take yet another bummer. Wallace-Wells has been faulted for not offering solutions—but really, what could he say? We now burn 80 percent more coal than we did in 2000, even though solar energy costs have fallen 80 percent in that period. His dismaying conclusion is that “solar isn’t eating away at fossil fuel use…it’s just buttressing it. To the market, this is growth; to human civilization, it is almost suicide.”

It is now more than 20 years since the Nasdaq, an index of technology shares, crashed after a spectacular rise during the late 1990s. The peak in March 2000 marked the end of the internet bubble. The bust that followed was a vindication of the stringent valuation methods pioneered in the 1930s by Benjamin Graham, the father of “value” investing, and popularised by Warren Buffett. For this school, value means a low price relative to recent profits or the accounting (“book”) value of assets. Sober method and rigour were not features of the dotcom era. Analysts used vaguer measures, such as “eyeballs” or “engagement”. If that was too much effort, they simply talked up “the opportunity”.
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This would be comforting. It would validate a particular approach to valuing companies that has been relied upon for the best part of a century by some of the most successful investors. But the uncomfortable truth is that some features of value investing are ill-suited to today’s economy. As the industrial age gives way to the digital age, the intrinsic worth of businesses is not well captured by old-style valuation methods, according to a recent essay by Michael Mauboussin and Dan Callahan of Morgan Stanley Investment Management.
The job of stock picking remains to take advantage of the gap between expectations and fundamentals, between a stock’s price and its true worth. But the job has been complicated by a shift from tangible to intangible capital—from an economy where factories, office buildings and machinery were key to one where software, ideas, brands and general know-how matter most. The way intangible capital is accounted for (or rather, not accounted for) distorts measures of earnings and book value, which makes them less reliable metrics on which to base a company’s worth. A different approach is required—not the flaky practice of the dotcom era but a serious method, grounded in logic and financial theory. However, the vaunted heritage of old-school value investing has made it hard for a fresher approach to gain traction.
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In Graham’s day the backbone of the economy was tangible capital. But things have changed. What makes companies distinctive, and therefore valuable, is not primarily their ownership of physical assets. The spread of manufacturing technology beyond the rich world has taken care of that. Any new design for a gadget, or garment, can be assembled to order by contract manufacturers from components made by any number of third-party factories. The value in a smartphone or a pair of fancy athletic shoes is mostly in the design, not the production.
In service-led economies the value of a business is increasingly in intangibles—assets you cannot touch, see or count easily. It might be software; think of Google’s search algorithm or Microsoft’s Windows operating system. It might be a consumer brand like Coca-Cola. It might be a drug patent or a publishing copyright. A lot of intangible wealth is even more nebulous than that. Complex supply chains or a set of distribution channels, neither of which is easily replicable, are intangible assets. So are the skills of a company’s workforce. In some cases the most valuable asset of all is a company’s culture: a set of routines, priorities and commitments that have been internalised by the workforce. It can’t always be written down. You cannot easily enter a number for it into a spreadsheet. But it can be of huge value all the same.
A beancounter’s nightmare
There are three important aspects to consider with respect to intangibles, says Mr Mauboussin: their measurement, their characteristics, and their implications for the way companies are valued. Start with measurement. Accounting for intangibles is notoriously tricky. The national accounts in America and elsewhere have made a certain amount of progress in grappling with the challenge. Some kinds of expenditure that used to be treated as a cost of production, such as r&d and software development, are now treated as capital spending in gdp figures. The effect on measured investment rates is quite marked (see chart 2). But intangibles’ treatment in company accounts is a bit of a mess. By their nature, they have unclear boundaries. They make accountants queasy. The more leeway a company has to turn day-to-day costs into capital assets, the more scope there is to fiddle with reported earnings. And not every dollar of r&d or advertising spending can be ascribed to a patent or a brand. This is why, with a few exceptions, such spending is treated in company accounts as a running cost, like rent or electricity.
The treatment of intangibles in mergers makes a mockery of this. If, say, one firm pays $2bn for another that has $1bn of tangible assets, the residual $1bn is counted as an intangible asset—either as brand value, if that can be appraised, or as “goodwill”. That distorts comparisons. A firm that has acquired brands by merger will have those reflected in its book value. A firm that has developed its own brands will not.
The second important aspect of intangibles is their unique characteristics. A business whose assets are mostly intangible will behave differently from one whose assets are mostly tangible. Intangible assets are “non-rival” goods: they can be used by lots of people simultaneously. Think of the recipe for a generic drug or the design of a semiconductor. That makes them unlike physical assets, whose use by one person or for one kind of manufacture precludes their use by or for another.
In their book “Capitalism Without Capital” Jonathan Haskel and Stian Westlake provided a useful taxonomy, which they call the four Ss: scalability, sunkenness, spillovers and synergies. Of these, scalability is the most salient. Intangibles can be used again and again without decay or constraint. Scalability becomes turbo-charged with network effects. The more people use a firm’s services, the more useful they are to other customers. They enjoy increasing returns to scale; the bigger they get, the cheaper it is to serve another customer. The big business successes of the past decade—Google, Amazon and Facebook in America; and Alibaba and Tencent in China—have grown to a size that was not widely predicted. But there are plenty of older asset-light businesses that were built on such network effects—think of Visa and Mastercard. The result is that industries become dominated by one or a few big players. The same goes for capital spending. A small number of leading firms now account for a large share of overall investment (see chart 3).
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The third aspect of intangibles to consider is their implications for investors. A big one is that earnings and accounting book value have become less useful in gauging the value of a company. Profits are revenues minus costs. If a chunk of those costs are not running expenses but are instead spending on intangible assets that will generate future cashflows, then earnings are understated. And so, of course, is book value. The more a firm spends on advertising, r&d, workforce training, software development and so on, the more distorted the picture is.

"PCI(CEF): 8.5%. YTD still at -10.1%"
To be fair, though, this is, I think, just price. It additionally picked up probably 8.5-9% in dividends.