WBD52930 Audio Transcription

Is ESG Signalling Civilisational Decline? With Jeet Sidhu

Release date: Friday 22nd July

Note: the following is a transcription of my interview with Jeet Sidhu. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

In this interview, I talk to Jeet Sidhu and we discuss whether the promotion of obviously deficient ESG standards is a signal of a wider societal malaise: decivilisation, overregulation, political incompetence and consistent policy failures. Is human flourishing on the ropes?

“Nick Szabo has this concept of social scalability, we may come from different areas and have totally different interests, but we can both use the internet and we can both use Bitcoin; there’s no part of using Bitcoin that requires you to embrace my values.”

— Jeet Sidhu

Interview Transcription

Peter McCormack: Jeet, how are you doing, man?

Jeet Sidhu: Doing good.  How are you doing?

Peter McCormack: Good.  Good to finally meet you.

Jeet Sidhu: Yeah, nice to meet you in person, sunny Miami.

Peter McCormack: Sunny Miami.  Well, I've been following you online and on Twitter for a long time, few interactions here or there.  Danny was a big proponent of getting you on to discuss this subject.

Jeet Sidhu: Nice.

Peter McCormack: I've stood and observed the ESG thing from a background for a while, trying to figure out what it is, not just immediately dismiss it, but I've over time been increasingly concerned about how it works and the impact; but at the same time, somebody who thinks about the environment, cares about responsible investing, it is something I'm acutely aware of. 

I've done a couple of interviews recently with Alex Epstein and Andrew Dessler, and I've got an evolving view on climate change and how it's dealt with; and most of all, I've come to a point where I don't fucking know what we do.  But I thought you would be a great person, Danny thought you would be a great person, to get into this with.  So, thank you for coming in, man, it's good to see you.

Jeet Sidhu: Yeah, thanks for having me.  And I appreciate that.  I've watched both those interviews, I found them both really interesting.  I think the problem that you run into with people who have a really strong point of view on one issue or another is that those podcasts, both of them seemed to get really emotional very quickly!  So, in anticipation of this podcast, I did a little bit of research myself.

So, one of the things that Andrew Dessler said in particular was, "The people who don't support renewables, they're anti-science", and that's just not the case.  So, I think there's a couple of things that, because bitcoiners in general are really focused on Bitcoin, they don't understand the full context of what's happening with ESG.  And then in particular, they haven't really done their homework on what's happening in terms of energy transitions.

So, I thought I'd maybe first talk a little bit about what's the background of ESG, and then we can dive into specifically like, "Hey, what is an energy transition?" and that's something that in particular, Andrew Dessler didn't bring up, because it doesn't support -- there's a couple of key terms in renewables, and just so people know my background, I run a TikTok called The Bitcoin Files where I talk about Bitcoin.  I've got 65,000 followers.

Peter McCormack: Nice.  Do you dance?

Jeet Sidhu: I did one dance, didn't get any views!  But I also was a co-mod of the Bitcoin Club on Clubhouse, so I heard from a lot of different people from different walks of life.  And then, in the real world, sort of, I was a corporate finance executive at GE, in the beginning of my career, where we focused on financing industrial energy equipment, and I've looked at the returns of people who are investing in things like renewables and stuff like that.  Prior to this, I worked in leveraged finance for private equity transactions, so I have a little bit of a glimpse into the world of finance. 

So specifically when it came to things, like Andrew Dessler specifically didn't bring up things like capacity factors, which is how often does the sun shine?  If you live in a cloudy country, the capacity factor for a solar farm is going to be low.  The capacity factor for a windfarm can sometimes be low.  And then, you think about how do these renewables get integrated into the grid; and then, what is the pace of transition that can happen?

So, energy transitions is a term that Vaclav Smil talks about.  This is an author widely recognised as an authority in a number of topics.  But Bill Gates supports him and a ton of people support him, and they read his work to understand what's happening.  But what's interesting is, I think because maybe some bitcoiners aren't interested in the space, they don't understand the breadth of work that's been done out there.  So, when someone like Andrew Dessler makes outlandish claims, no one's able to refute them, because they don't know where it's coming from.

Peter McCormack: Yeah.  It's quite interesting when you point that out as well, because when he said, "People are anti-science", I think Epstein also conversely said that the people who are proponents of some of the ideas regarding climate change are maybe anti-human, and I think those two extremes don't help.

Jeet Sidhu: Oh, it's a total extreme.  Part of what happens is the science can get corrupted by incentives.  So, maybe let's take a step back and talk for a moment about where did ESG start, talk about the beginnings of that, and then how it gets to this conversation that we're in today?

Peter McCormack: Can we go back one step?

Jeet Sidhu: Yeah.

Peter McCormack: I always think it's helpful for context at the start for people to understand, they know my position but I'll repeat it, but to understand your position with regard to climate change, whether you think it's real, whether you think humans are causing it, whether you think we can do anything about it, whether we shouldn't. 

There's a broad spectrum of people, certainly within our space, who have views ranging from those who think climate change is not an issue, that we don't need to do anything about it, some people think it is an issue, not sure what we do about it; some people are considered hysterics because they think we should change everything we have about society to protect the environment.  So, it's probably good for you, for context, to set yours; I'll do mine afterwards.

Jeet Sidhu: Okay, sure.  So, climate change is very real, it's happening, the climate models are probably accurate.  But I think the issue that you get into is the difference between some of the science work that's been done on, "The temperature's going to increase because of CO2 emissions", and actually policy-wise, "What does that mean we need to do as a society to react to it?"  I think one side of the debate, maybe the Alex Epstein sort of folks, maybe not him specifically, they ignore the science.  And then, I think the people who are supporting renewables generally tend to ignore the policy implications and the empirical, how you actually put together an electrical grid, and how you put together a functioning civilisation that can have flourishing for everyone.

Because my background is investing in renewables and supporting that, I'm generally actually in the past, I've been pro-renewables.  After doing a little bit more research and reading some of the scientific literature on how energy transitions happen, and then seeing some of the outcomes of renewable-based policy in places like Germany and Sri Lanka, my opinion has shifted, that we need to focus more on things that are both good for the grid, but also zero carbon emission, like nuclear power.

Peter McCormack: That's good.  Okay, I think I've come to a similar position.  So, I was definitely somebody who was concerned about climate and hadn't spent nearly enough time understanding the implications of policy change.  That's why Alex Epstein was useful to me.  He's almost immediately written off by people within the scientific community who are researchers into climate change, someone like Dessler himself, or even Katharine Hayhoe, somebody else I interviewed for old podcast, Defiance, and I think that's sometimes because of the way he structures his arguments.  But I think if you get past that, actually there are some realities that he's very clear on, on the implications of these policy changes, and how it impacts society.

So, I've certainly shifted more towards empathetic to the things that not even just Alex Epstein's talking about, but also Michael Shellenberger; he's another person who's been very good on this.  So, I've become more empathetic to that.  But I'm in a position where I feel like there is an impending growing issue with climate change, and I actually don't know if that can be solved, and if enough work is actually being done on, say, mitigation.  And, I won't say I don't feel like there's enough information out there.  The models on climate change are good, but the models that map what the implications of climate change will be onto various parts -- for various people in different parts of the world; I think a lot more work needs to be done there.  But yeah, I've come to this more confused middle-ground area.

Jeet Sidhu: I think one of the things that helps clarify the debate for me is a mental model on how knowledge is generated in society in general.  So, when you think about the mental model that we're taught in college and high school and stuff like that is, there's one group of people that are experts in a specific field; they may be a little bit lower status, but they really know their stuff.  There's another group of people that are elites who are generalists, and they may not know the specifics, but when the experts get together and reach some type of synthesis of what needs to be done, they will then take that and implement it.  So, the arrow of knowledge, or arrow of influence, flows from experts to elites; that's the mental model we're taught.

But I think if you look at every civilisation outside of ours in history, the arrow of influence actually flows the other way.  So, people who are elites in civilisation can determine fundings and things of that nature, and so they actually tend to influence the way that experts operate.  And with that in mind, I think that the critique generally of ESG, more broadly than some of the stuff we're talking about, Aswath Damodaran is a Professor of Valuation at NYU, widely considered an authority, and his critique of ESG fundamentally comes down to this, which is there's an incredible amount of money to be made by people who are ESG consultants, accounting firms, that want increased disclosures and 10-Ks.  Investment firms like BlackRock that are charging customers higher fees for the same product, like they have an ETF which charges more fees for a climate-focused investment versus an index fund, which is comprised of the same companies.

Then just in general, there's a lot of maybe clout or political, social capital that can be developed by being at the forefront of a large social movement.  And so, Aswath Damodaran's primary critique is that a lot of the ESG-type stuff is pretty misguided.

Peter McCormack: Because it's incentive driven?

Jeet Sidhu: It's largely incentive driven.  So in the past, where I was actually going to start with, was talking about Milton Friedman back in the 1960s and 1970s.  So, there is always a debate in all societies about how resources should be allocated.  One of the things that people would come to companies and say, managers of companies would say, "Managers should be rewarded with products for running the company, so managers have a larger share".  People who were socialists would say, "Well, if you run an electric company and somebody doesn't pay the electricity, you shouldn't shut off the power for them".

Milton Friedman actually ended up winning this debate by saying, "You should manage companies for the benefit of the shareholders, so shareholder value maximisation", and that's been derided.  But the reality is, if you don't shut off power to make people pay for their electricity, then the electricity company doesn't have the ability to invest in the future, so they can't expand to meet demand.  That's a major problem in developing countries, where people, even large corporations, will steal electricity.  So, the grid can't be upgraded, so you can't upgrade your entire civilisation because somebody wants to be nice.

In order to actually advance a society, sometimes you need a Milton Friedman type of person to say that hard decisions need to be made.  And if people want to have a personal preference towards paying the electrical bills of senior citizens and stuff, they should certainly do that.  But the people who are trying to implement it through weird policies and stuff, they don't know the impact that those policies will actually have.  Oftentimes, there's a policy failure.  There's a difference between what people imagine will happen and what actually ends up happening.  So, you can have an entire civilisation bogged down in regulations, kind of like ours is now, where no one can do anything and make progress, because of all these random policies. 

But the real way that society progresses is not through some bureaucrat making a policy.  For example, renewables are largely able to be added to grids because of the ability of natural gas peaking plants to come online.  Natural gas is very cheap in the United States, because a couple of random people in a couple of oil fields in America discovered fracking technology.  So, human civilisation is advancing, because a couple of Texas cowboys in Oklahoma, or wherever, are playing around with oil rigs.  It's not advancing because someone is giving a speech on the steps of Congress.

Peter McCormack: Right, okay, that's interesting.  So, could you map that whole point?  When you talked about the society advances by hard decisions and gets bogged down by regulations and perhaps more social policies with regards to income distribution, can you map that to things like, you know how Elon Musk discussed previously, I can't remember the last time NASA went to the Moon, but it was quite a long time ago, and he said, "We haven't really advanced beyond there".  It's only since he's taken space programmes private, we've seen more advancement.  Can you map that whole thesis to issues such as that?  And are we generally seeing a slowdown in the advancement of society?

Jeet Sidhu: Yeah, so the Elon Musk question is particularly interesting, because for example, firstly in terms of ESG, that's the strongest point against ESG, that everyone, even non-finance people know Tesla, and even non-investors know Tesla, because their cars are really cool.  Everybody wants a Tesla.  Elon Musk has probably done more for the environment than any other player in the space today, because people think Teslas are really cool.  I mean, I know a lot of people who have orders for Cybertrucks.  They're doing it because it's cool, they're not doing it because it's ESG.  So, if ESG wants to scale electric vehicles, the way they do that is by producing more Elon Musk type of people. However, what they've done is, they've given him a negative score on ESG; it doesn't make any sense. 

But specifically to your point, there are certain things that build civilisations and I think, for example, if you think about the Italian city states, wars, or if you think about America, living on farms on a frontier, these types of things are like cauldrons for civilisation, because there is no court of a king that you can go to to say some fancy words and advance yourself; you have to face off against nature, or you have to face off against an opponent.  And if your civilisation or your farm doesn't have functional institutions to deal with issues, the farm that's next to you will then buy your farm in liquidation.  Or, from the Italian city state perspective, the people in the next town will take over your city.

So, certain things form civilisation.  And the problem we've run into in America is basically, we're in a decivilisation process.  After World War II, we became the world hegemon.  We had the largest navy in the world and we also had nuclear weapons, and it provided a nuclear umbrella, so there was no kind of selection pressure for functionality.  On top of that, you had some changes in technology, like the advancement of television in people's homes; but also transistor radios.

This is a little bit controversial for people who like things like John Lennon and The Beatles and stuff, but I think a lot of those ideas were a net negative to society, because instead of people learning from their parents, the accumulated knowledge of hundreds of years, they learned from a radio, so they just deleted all that progress.  Then, instead of learning from something like maybe an apprenticeship, like I'm from Michigan, a lot of people would go and work in a factory and learn from the older people how to do things; instead of that, they went into a university. 

That's when the university system in the United States really took off; it was after World War II.  So, the number of PhDs increased, and all these other things increased that were the external manifestation of progress; but then in reality, all the accumulated knowledge, all the stuff they would have learned from an apprenticeship, the actual social technology for how to advance civilisation, was completely deleted.  And then, since then, no matter how you look at it, I'm sure you're familiar with wtfhappenedin1971.com?

Peter McCormack: Yeah, of course.  Ben, who works on our show, was one of the authors of that.

Jeet Sidhu: Right, and I mean I think that's spreading everywhere.  But the idea behind that is that basically, we're told that our society is advancing, that we're progressing, but there are a lot of measures that seem to indicate that's not the case.  I don't want to bring up too much history --

Peter McCormack: That's fine, keep going.

Jeet Sidhu: I think the thing that you should think about is the Roman Empire.  So, if you think about COVID-19, for example, the stock market, it died for a little bit, but then it came right back up.  So, if you were using GDP as an indicator for how well society is progressing, you'd think after two years of COVID-19, we were doing great.  Well, now we're finding out that's not the case, but if you just depended on GDP like a lot of these prominent academics want you to, you'd be caught off guard.

I think the analogy is, in the Roman Empire, when the Roman Empire was collapsing, there are no people who are writing letters saying, "We're in a societal collapse".  Instead, all you have is little side indicators.  Like, I write a letter to you like, "Hey, I can't travel to Miami to meet up.  There are brigands on the road", that type of thing.  But if you actually look at the equivalent of a fossil record, the Roman mines would throw off ashes, and the ashes would drift over to Iceland and they'd get deposited layer after layer in the ice.  So, if you took an ice core, you could see when there is more deposit, that year they had a lot of mining; when there's less deposits, they had less mining.

So, there's physical indicators of the Roman Empire's rise and its fall.  We don't have that measure today.  I think we're a little bit confused on if our society is actually increasing or decreasing our civilisational level.

Peter McCormack: Are GDP figures inflation adjusted?

Jeet Sidhu: They can be, yeah.

Peter McCormack: But are they?  They generally aren't, though.  I bet if you brought up a GDP chart, it wouldn't be an inflation-adjusted GDP chart.

Jeet Sidhu: I'm not sure.  I might have seen it one way or the other.  But even if you adjust it for inflation, the point is that GDP doesn't necessarily capture what's happening, or the stock market doesn't actually capture what's happening.  I mean, the perfect thing is COVID-19.  Thinking about the response to COVID-19, it was extremely delayed, and we invested billions of dollars, there's probably hundreds of thousands of people in America who work in the military, or who work in FEMA and those types of things, should have been on top of this.  Instead, in the beginning of COVID-19, Balaji Srinivasan and some of the a16z investors --

Peter McCormack: Balaji was great.

Jeet Sidhu: He was like, "You know what, you should wear a mask when you come in the office, you should wear gloves", and they vilified him.  They were like, "This guy's out of control, he's a conspiracy theorist".  If you travel to China or Japan, they wear masks all the time, if anybody's sick or not.

Peter McCormack: Yeah, pre-COVID.

Jeet Sidhu: Pre-COVID.  And it just seems like they were completely caught off-guard and unable to handle COVID-19.  That was a civilisational threat, a pandemic.  Pandemics have ended cities and countries before, so they were completely unaware.  In fact, they vilified the people who raised, "Hey, there's a concern here". 

I think the question we have to ask is, if we face another threat, like another COVID-19 situation, are we actually even well-prepared to deal with it?  I think again, after whatever, 50 years, 60 years, 70 years of a decivilisational process, there's no incentive for functional institutions, a lot of things don't work.

Peter McCormack: Right, and why do you think that is?  Do you bring it down just to the money, because you identified WTF Happened in 1971, we know what happened then; for those who don't, we came off the gold standard.  Actually, when I say "we", that's different, because in the UK, we came off the gold standard a long time ago, a long time before 1971; I think it might even have been the 1930s. 

There is that, but there is also, one of the things that I've always been trying to think about is, why have institutions started to fail?  Have institutions started to fail because there's more exposure to them?  Are people more aware, because we have a wider scope of media, we have social media; or, have they failed because they've got too big?  Have they failed because politics is failing?  What is the reason institutions are failing, because I'm not a burn-it-all-down person, I'm a strengthen-and-rebuild person; but I'm trying to understand why institutions have failed; has the state just got too big?  I don't know.

Jeet Sidhu: I mean, first of all, I think some people listening might be wondering, "What are you guys talking about?  We live in a great country, everything is wonderful and we're the most advanced country in the world".  But I think again, going back to that Roman Empire example, you don't know if your society's actually advancing or declining, because you may live in a beautiful suburb where everything is fine; you don't see any decline at all.

But I think to diagnose the issue, an example would be, a man sees that his neighbourhood has a park.  Elderly people are falling when they're going from the sidewalk into the park, so he spends £500 on his own initiative, builds a set of wooden stairs.  The city comes in and they put red tape around it, they say, "This is out of regulation, the city needs to build this, and it's going to cost anywhere from $60,000 to $115,000".  That's a real event that happened in Canada, I think.

Peter McCormack: There's a thing -- can you find the escalators in New York that cost $25 million?  Did you see --

Jeet Sidhu: Yeah, I'm sure I've seen one where it was like a bathroom cost $10 million, and then in San Francisco it cost a couple of million to build a bus lane.  There's also a train, a high-speed transit that's supposed to go from, I think, Los Angeles to San Francisco, which simply --

Peter McCormack: $70 billion, or something.

Jeet Sidhu: $70 billion overrun.  There's also --

Peter McCormack: Yeah, "Today, it cost $62 million to replace eight escalators in New York.  In 1931, it was $41 million to build the Empire State Building".  I mean, it's just insane.  But some of that, I wonder how much is regulation, how much is backhanders, how much is -- it just doesn't make sense.

Jeet Sidhu: I think an example here of something that's good historical context is people say, "Nuclear is too expensive to build", and it's very frustrating, because again going back to that conversation about, "How do we advance civilisation?" nuclear is zero carbon omission, and it's baseload, and it's dispatchable.  You can keep it running all the time and it solves all these problems, without having to disrupt the reliability of the grid.  But what's happened is, you end up establishing these regulations.  So then, the regulators get staffed by people whose incentives are to --

Peter McCormack: Regulate!

Jeet Sidhu: -- add more regulations.  There was an issue with pilots recently.  Somebody crashed a plane, the guy was an experienced pilot, not a real issue in terms of training or anything; they just added another 100 hours or 500 hours of additional training that pilots need to have in order to qualify.  So recently, when you saw some flight disruptions, part of the problem is it takes a long time to bring up new pilots, because of the weight of all these regulations.  Since these regulations started on nuclear power, we haven't had a new nuclear power plant.

Again, going back to functional institutions, the way that you build things and you get better at building things is by building things.  I learned how to woodwork during COVID-19.  So when I started, I had a single drill and a ton of different bits.  It would take me five minutes to switch the bits, then the battery would run out.  That was the beginning of the summer.  By the end of the summer, I was like a machine.  I had three different drills, tons of different batteries, each one was already set up with a bit; and so, there's a learning curve that happens, where you just get better at building things with higher quality and faster and stuff.

Imagine if we had been building powerplants, one powerplant every single year for the last 50 years.  Imagine the improvements in efficiency we would have had.

Peter McCormack: What did you make though with your woodwork?

Jeet Sidhu: I made a table, I made a bunch of tables for schoolkids, my cousins.

Peter McCormack: Amazing.

Jeet Sidhu: Yeah, and I helped make a more advanced coffee table, things like that.

Peter McCormack: But for you though, what is the right amount of regulation, because I'm not a no-regulation person; let's just be very clear?  There's certain things where I think you need forms of centralised regulation.  I often refer back to what happened, there's a really good film, I think it's called Dark Waters.  Who's that guy who wrote the book?

Danny Knowles: Nathaniel Rich.

Peter McCormack: Yeah, Nathaniel Rich wrote an article, and it was do with DuPont and how they were dumping chemicals into the river, and it caused a bunch of cancers for people in the cities.  I think a zero-regulation environment runs a risk of other consequences.  But I also recognise too much regulation.  What I don't know is, what is the right balance?

Jeet Sidhu: Yeah, it's definitely a difficult question, and it's something that probably needs to be litigated in public.  One of the issues that you run into with ESG is, it's an undemocratic process, and then one of the things that's happening with ESG in particular, CEOs in particular are using the moral language around ESG to push their own interests.

So for example, I read this study in Institutional Investor, where they looked at Coca Cola.  Coca Cola gave themselves a very strong rating for water sustainability.  It turns out 90% of the water usage was excluded from their own study.  And then, they also were depleting the aquifer in places like India, where the citizens can't actually stand up and do anything, and then replenishing the aquifer in America or wherever else, and they were counting those two against each other.  But then locally, they have destroyed that aquifer in India.

A similar situation with Nestlé.  They deplete aquifers in Florida and California, but they still get all these NGO groups to sign off that they're a great socially responsible partner.  Story after story is like this.  And then also, you get people like Elizabeth Holmes, the WeWork CEO.  So, Theranos was a scandal and a fraud, but for WeWork it was just a bad business model.  But the way that they got around that, they made up a new finance term, "Community-adjusted EBITDA".  So, you're losing money, but there's a better impact for the community.  So, when someone is talking too much about ESG, it kind of is a red flag actually that they're doing things in a negative way.

There's also this issue of Baptists and Bootleggers, where somebody who is a larger company, like for example an Amazon, might want more regulations to increase the cost of entry for new competitors.  But just back to your question about the appropriate amount of regulation, I don't know how much regulation's appropriate, but there are some common sense situations where the amount of regulation we have is wildly inappropriate.

I think some of the recent examples, even something as critical as the FDA; they regulate things like vaccines and stuff.  Part of the reason we have -- we had this issue recently where baby formula was unavailable in the United States.  Baby formula in Europe is just as safe as baby formula in America; I don't think it's a controversial statement, but baby formula in Europe is banned from entering the United States, so that's very weird.

Then, just getting to, I talked earlier about the inability to respond to events; events are happening faster than these regulators can respond.  So, something needs to change, where at some point you just need to allow the baby formula to flow from Europe to the United States.  A similar situation, I talked about COVID-19; there is a potential pandemic brewing right now when it comes to Monkeypox, and the situation that we're in right now is, there are vaccines available in Europe, they've been okayed by the European regulator, and the FDA has not okayed the way that they were stored, for example.  I think most people trust that European regulators will do a good job, and they would want those vaccines here to protect vulnerable populations, but it doesn't matter in front of the institutional imperative that there needs to be regulations.

So, these people are willing to allow the destruction of society in certain areas, but they're not willing -- there are just so many examples.  During COVID-19, a scientist, she came up with a way to test for COVID-19.  They told her, "If you don't stop this, you're going to jail".  So, there's so many situations like this where these regulators are a force of their own.  And sure, we need regulations.  If somebody's polluting the water, of course we need to stop that.  But the amount of regulations they're putting on, they're unrelated to things that we care about, like water safety; they're just there for their own purpose.

Peter McCormack: Yeah, I'm with you, I think it's a careful balance.  I mean, one of the things I always think about is, when people talk about, "We shouldn't have regulations, it's anti-free market", I think in terms of building regulations.  I went to the Ai Weiwei exhibition in London once, and one of his exhibitions, he went out to this area of China where during an earthquake, a number of buildings collapsed.  And the reason the buildings collapsed was --

Jeet Sidhu: Was it Chengdu?

Peter McCormack: Yes.

Jeet Sidhu: I lived in Chengdu for six months.

Peter McCormack: Oh, wow!  Well, I say it is, I don't know.

Jeet Sidhu: Yeah, there was a big earthquake in Chengdu, so I imagine that was there.

Peter McCormack: So, he and his team went out there and they got all the steel beams or the girders that basically collapsed, and then they took it back to his warehouse and they built these sculptures out of them.  He did that as a way to teach people about what happened with corruption around building regulations in this area of China.  So for me, I support that, I support building regulations.  You don't want buildings to collapse, and I don't believe people will always self-police; I think certain regulations are helpful.  In the UK, we had a massive fire at a place called Grenfell.  Did that make it over here, that news?

Jeet Sidhu: Oh, yeah.

Peter McCormack: I mean, 80-odd people died, wasn't it?  And that was because of the cladding that was used.  So, they've got new regulation on cladding.  Certain things like that, I think they're really important, especially if people are going to die or get seriously ill, I think we need it.  Do we need hairdressers to have a licence to be able to cut hair?  No, I don't.  That actually comes from Tyler Lindholm when I was up in Wyoming.  He said they were trying to remove a bunch of the regulations, because they had things like there was a licence to be a hairdresser.  He was like, "You don't need a licence to be a hairdresser.  You're cutting hair".

So, I think there is that balance, I just don't know where it comes from.  Perhaps it just comes from smart people like Tyler Lindholm being in power and trying to stop this?

Jeet Sidhu: I want to push back a little bit, because those are definitely both super-emotional examples, and I get it from both of those examples.  But one of the problems that we run into is a lot of these ESG-type of people, who are part of the decivilisational process, ruin society and then they point to the things that are ruined and say, "This is your fault".  So for example, because of safety regulations, pick-up trucks have ballooned in size.  Now they point to the ballooned up pick-up trucks and they say, "Well, you guys are driving these big pick-up trucks.  You don't need that big of a pick-up truck".  It's like, "Yeah, I don't need it, but it's because of your emphasis on safety that it's become that large".

A similar situation when it comes to real estate in America.  Part of the thing that people in Bitcoin talk about a lot is that things like real estate have developed a monetary premium in some markets like Silicon Valley.  Silicon Valley landlords have captured a ton of the value that was created by the Silicon Valley tech giants.  So, they use things like safety, preserving the neighbourhood and measures like this in order to prevent new houses from being built, so you have a limited supply of housing in key places like Silicon Valley or New York City. 

That's great for the people who own those houses, but it's bad for civilisation, because young people cannot go to New York City or Silicon Valley where historically cities have been the engines of economic progress.  So, young people can't afford to live in New York City.  You've got these people who've got a marketing degree, they want to make it in New York City, and they can't afford to.  They can't save money, so they're spending their 20s basically playing a lottery game, like maybe they make it, maybe they don't.  Either way, they're not saving money for their future. 

It's a very dangerous situation, and it's not just housing.  Starting in the 1960s, driven by these environmental concerns, it allowed basically anybody to veto any project, because you could just inundate them with concerns like, this is a situation that happened in California that resulted in massive cost overruns.  Every single house and every single neighbourhood along the route could say, "The way that you've built the wall, it clashes with the vibe basically, and you need to build it a different way", and it puts a wrench in everything.  What's happened is we've become like a read-only culture.  I don't know if you ever burned CDs?

Peter McCormack: Yeah, I remember.

Jeet Sidhu: The read-write CDs and the read-only CDs?

Peter McCormack: Yeah.

Jeet Sidhu: So, we've become a society, because no one has for, whatever, 50 years, we've been stopped from building things by these environmental types of regulations, no one actually has experience in building things.  So, we're stuck with basically what people built.  All of our infrastructure is rotting and old.  You've been to New York City, right?

Peter McCormack: Yeah.

Jeet Sidhu: I used to live in New York City, and every single day I would walk from Grand Central Terminal.

Peter McCormack: Yeah, I know it.

Jeet Sidhu: That's the centre of our country's -- that's our commercial capital, and I would walk in the tunnel to Park Avenue.  And every time it rained, it would just drench your boots and stuff.  In fact, it got to the point where I'd notice, they had garbage cans in the closets to roll out to pick up the drops, because there's no chance it's going to be fixed so, "Let's at least make sure there's not a mess".  That didn't change for the five years that I lived there.  And I went back recently; it still hasn't changed.

Peter McCormack: It's not changed, yeah.

Jeet Sidhu: New York City subways are a total disaster.  I mean, if you go to China, the subways are super-clean and awesome, and there's definitely questions about the sustainability of China's infrastructure buildout, and there's definitely questions on build quality.  They tend to make things pretty gaudy and stuff, and it's not clear that it's sustainable long term, but they can still build things.  If something gets destroyed, they rebuild it.  Whereas, in America, we have no idea what's going on with the subway.  And in fact, during COVID-19, they were trying to make a list to make sure, I think, people are safe, like subway employees.  They don't have a list of employees of the MTA.

Peter McCormack: Let me give you an interesting recent example as well, just because it's quite funny.  I've moved house recently, and the house I've moved to is a new build.  I got to see all the planning permission documents that went back, it was probably over the space of two years, to get permission to build this house, lots of different things from, there's a big tree, a protected tree, it's a 200-year-old tree.  So one of things is, with a tree like that, you can only remove 25% of the roots to build the house, because the tree's protected.  I'm okay with that, it's a beautiful tree.

But the most interesting one is when the building regs people came to sign off the house, they couldn't sign it off, because there wasn't a wheelchair ramp up the step to go into the house.  Now, again, I'm not opposed to regulations for access for wheelchairs into public facilities, train stations, etc, but bear in mind this is my house.  Nobody in my house needs a wheelchair, but it couldn't get signed off until it had one. 

So, one got built, but it's a gravel walkway up to the ramp.  So even if you're in a wheelchair, you're not going to be able to get through this bit of gravel.  But once it's signed off, I'm also then allowed to remove the ramp.  There's no regulation that says I have to keep the ramp; you just cannot sign the house off, so this is a waste of productivity.  There's a waste of productivity of the building regulations person to come and sign it off; there's a waste of productivity of the person building the ramp; and then there's wasted materials; and then there's wasted productivity for getting rid of it, for something that isn't even required.  That, for me, was like, "What the fuck is going on here?"

Jeet Sidhu: I've noticed a similar thing happening.  I think there's two ways to think about it.  So the first is, do you guys have the DMV in England?  We have a Department of Motor Vehicle --

Peter McCormack: DVLA, yeah.

Jeet Sidhu: For us, every American needs to go there, you need to renew your plates, and you also need to pay $500 to own a car or whatever.

Peter McCormack: How often do you do that?

Jeet Sidhu: Once a year.

Peter McCormack: So you have to renew every year?

Jeet Sidhu: Yeah, it's very expensive and it primarily impacts the poor.  But the point is, when you walk into the DMV, because it's a government office and you're required to do it, otherwise you can't get from one place to another, there's no competition for it and it's a really poor experience, to the point that it's mocked in like in children's movies.  Like in Zootopia, a sloth is manning the DMV.  So, it's just a fundamental part of our culture that things are going to suck.

The problem is, in the past, the average American Government employee was either a person who grew up on a farm, a frontiers person, in the very deep past; but then even more recently, it was people who were only one or two generations removed from the frontier, people who had lived in farms.  So, they grew up with those social codes.  The problem that we're in now, I believe, a deep reason for the morass in this country is, every single government employee now has the soul of a DMV employee. 

It's the most frustrating thing that if you read The New York Times, they talk about things like state capacity and, "We need to build in this country again".  But the problem is, it's all DMV employees all the way down.

Peter McCormack: Hold on, why do you have to renew every year?

Jeet Sidhu: I mean, dude, this is my frustration.

Peter McCormack: Your licence essentially; is it like a driving licence?

Jeet Sidhu: You don't need to renew your driving licence, you need to renew your plates.

Peter McCormack: What does that mean, your plates?

Jeet Sidhu: There's a sticker that goes on your plate.

Danny Knowles: It would be like doing your tax, I guess, in the UK.

Peter McCormack: Your road tax?

Jeet Sidhu: Right.

Peter McCormack: But we do that online.  And actually, it's now automated.  So, if it's a road tax, I understand, that's a tax, fine.  It gets renewed online and you get a letter that comes every year.  But if you automatically renew, you don't need the letter.  But it's a 30-second job.  You actually have to go there to do it?

Jeet Sidhu: You might be able to renew online.  But the point is that basically during COVID-19, I had to renew my licence, so I had to show up in person.  So for me, it's maybe more visceral. 

Peter McCormack: Yeah, but a licence is different from a road tax.  A road tax is on the car.

Jeet Sidhu: No, you're right.  That's a specific thing that you might be able to renew, and there is a little bit of a frustration, because it impacts the poor, and then that's different than the licence.  But the point is, you have to deal with these things all the time.

Peter McCormack: And they're the hardest, by the way, I don't know what it's like here, because I know here in the US, it's quite easy to fire somebody if you want to get rid of somebody.  In the UK, if somebody's worked for you for two years, it's actually quite difficult.  You have to go through something called consultation, where you go through a process and can they be employed anywhere else?  The stupid thing about consultation is, if you know you're going to get rid of them, you're basically doing the consultation, knowing you're going to get rid of them, having to find a way to still get rid of them, so it's a complete waste of time.  But it's very hard to get rid of people who work for the government, very hard.  Is it the same here?

Jeet Sidhu: That's my understanding, they have strong unions.  So, that's an example of the type of process the ESG type of people want to implement here, maybe not as part of ESG, but generally as part of their politics.  But think about the impact that has on countries like Italy or Spain, where the older people are generally very well employed, they have great pensions.  But then the younger people have high rates of unemployment, because nobody wants to hire a young person, because they could be a total wildcard and not work well, and stuff.

I know in particular, a lot of the companies that I've talked to in the past, who are looking at expanding into Europe, they take that into consideration.  I think France in particular is bad, maybe The Netherlands is another one.

Peter McCormack: Well, they're really lazy in France.  They don't want to work more than 25 hours a week.  Any rule change, they love a protest in France; so, any rule change, they're getting their tractors out, they're spraying manure everywhere and complaining about some shit or other.  And that's not me just hating the French as a neighbour; I mean, they're generally lazy and complain a lot!

Jeet Sidhu: No, you know, I like the French, and the French in particular are very good with nuclear power, and they've actually -- there's an attempt to nationalise their grid to deal with some of the uncertainty there.  But the point with the DMV employees is it's an experience that a lot of Americans have.  And the point is that basically, when you think about America's nation-building overseas, every single attempt to nation-build has failed.  It failed in Iraq; failed in Afghanistan; failed in Syria; failed in Libya; failed in Egypt; failed in Cambodia in the 1990s.  Every single attempt has failed, despite billions of dollars, in some cases trillions of dollars, tens of thousands or hundreds of thousands of non-governmental organisation, state-sponsored people going over there to teach them how to develop their civilisation.

The problem, if every single one of your citizens that you're sending over there is in their heart of hearts, a DMV employee, nothing's going to happen.  And so, if they can't nation-build overseas, it's the same situation domestically; they can't nation-build here in America.  So, they've inherited institutions they don't know how to run, and they can't build anything new to deal with new problems.

Peter McCormack: You're turning me into a libertarian.

Jeet Sidhu: No, I'm not a libertarian.

Peter McCormack: You're turning me into one!

Jeet Sidhu: No, I think the thing is that, look, in business sometimes we study war as a metaphor.  There's this one guy, John Boyd, who was a strategist who formed some policies in America.  One of the things he came up with is something called an OODA loop, so Observe, Orient, Decide, Act.  The idea is, if we're competing in business and my decision-making cycles are faster than yours, I can potentially find issues that your customers are having and address them very quickly.  From that perspective, for example, Apple's supply chain is run on these types of principles.

But from the perspective of what happened in Afghanistan, for example, it's not just the decision-making cycle, it's also the fact that there's no feedback loop that corrects assumptions that are incorrect.  So what you have, I think in America starting basically from the 1960s, you just have assumptions that are built on top of each other that are completely unrelated to reality.  And it's because we're such a wealthy country, we can have people with delusions running things, and they can run things to the ground and it doesn't matter, because we're at such a peak of civilisation that even if things decline, we're still doing okay.

So, what happened in Afghanistan, for example, is you had assumptions building up to the point where you had an assumption rot.  So, the idea is that they thought they could do nation-building; it turns out that wasn't the case.  They thought they could train up an army before the collapse of Afghanistan; the President was on TV saying, "We have 300,000 soldiers trained up to fight".  They completely disappeared in the face of the enemy's progress.  Event after event, complete failure.

Then, at the very end, the US said, "We're not going to leave, there's not going to be a 'Last helicopter out of Vietnam' situation", but sure enough there was a last helicopter out of the US Embassy situation.  The US soldiers were defending a strip that was in the middle of the city, somebody made a political decision to leave the Bagram Air Base.  It was very well-defended; they could have evacuated the 20,000 citizens that were there, but somebody made a political decision that we can't do that, so the military was forced to respond, and essentially it could have ended horribly.  Do you know what the response was?

Peter McCormack: I mean, it kind of did end horribly.

Jeet Sidhu: Well, it did end horribly, but it could have been much worse.  It could have been like, when the British were driven from Afghanistan, they had to take the overland route through Pakistan.  So imagine, because it was right next to apartment buildings, they could have shut down that airport if they wanted to.  I think a lot of people think that maybe there were some negotiations going on in the background that they would basically allow this to happen in exchange for later on down the line, releasing some of the sanctions on them and stuff.

But the fundamental issue is, afterwards, nobody actually sat down and said, "What exactly happened here?"  There was a great book from The Washington Post, called The Afghanistan Papers, which he got access to these interviews with soldiers.  It turns out for every single year for the last 20 years, soldiers have said, "This is not working and this needs to get fixed, and there's these particular things that are going on, there are crimes that are happening in our name".  What would happen is, that wouldn't get filtered up to the military decision-makers, or the civilian decision-makers.

So, you had 20 years of assumption rot.  And afterwards, Paul Krugman, who's an economist at The New York Times, said, "Bagram Air Base, basically having a defensible way to exfiltrate your civilians, is the new ivermectin", which is something that was proposed to solve COVID, or whatever.  So basically what's happening is, at no point is there ever a feedback cycle where people who make bad decisions are removed. 

So for example, in the British Government, my understanding is it's impossible to remove civil servants, like you said.  And so as a result, politicians come and go; civil servants remain.  And so, there's effectively a deep state that's determining what's happening, and the problem is they're deeply incompetent; I hope you don't mind me saying!

Peter McCormack: Please do, carry on.

Jeet Sidhu: So for example, with COVID-19, one of the ways you can detect COVID-19 in a population is sewage.  So, you can detect rates of disease in sewage.  There's a programme that was launched to do that in the UK, it's operating, it gives them a heads-up view of future pandemics.

Peter McCormack: Well, they've just discovered Polio in the sewage recently.

Jeet Sidhu: Is that right?

Peter McCormack: Yeah.

Jeet Sidhu: By the way, they're removing that programme, because nobody cares about it, because it has nothing to do with your incentives as a civil servant.  Nobody actually cares about the future and is willing to put their reputation on the line for any specific programme, because again, they're completely removed from living on a frontier, or some type of situation where there's a natural selection for cultural codes that are about surviving into the future.  It's all about showing up at your job at the DMV.

Peter McCormack: The ironic thing there though is how we've just had essentially the removal of our Prime Minister for incompetence.  The highest job in the UK is Prime Minister, the most important job some would say, maybe others would argue, but either way he is our Prime Minister, close to the equivalent of a President.  He's the leader of our country, was very popular when he came in, he was a very popular mayor, we had a very successful Olympic Games in 2012, he rallied the nation, everyone loved him.

He ended up becoming our Prime Minister, did okay to begin with, he managed to negotiate our Brexit, which was a very tough negotiation.  Not everyone agreed with what was negotiated, but it happened.  He navigated part of COVID, some people argued against lockdowns, that's fair, we don't need to get in that debate now.  But the point is, he showed some strong leadership.  But behind that, there were a lot of incompetent things going on.  There was a lot of potential, I'm going to say potential because I don't know the detail, but deals over COVID with regards to supply of certain equipment and the tenders maybe going to friends of theirs.

But there were bigger and worse things.  There was this thing called Partygate.  But essentially, when people were told to stay at home, you couldn't go to your grandmother's funeral --

Jeet Sidhu: I've seen pictures.

Peter McCormack: -- they're having piss-ups and parties, and that was something that shouldn't have happened.  There was a guy who was essentially a bit of a nonce, one of the politicians, the Chief Whip, and he'd been accused of certain things.  Then it came out that he'd actually been grabbing blokes' dicks in a bar.  So, all these things came to a head and eventually, a bunch of politicians said, "We're going to resign", and eventually he's been forced out of his position.

At the time that was happening, my film director, Neil Berkley, was over in the UK and he was like "This is incredible, this would never happen in the US.  If it would, Trump would have been gone, but Trump didn't go".  So, you can be ejected as a politician, a Prime Minister, within our country for poor performance; you can be gone.  But you don't seem to be able to do that if you work as a civil servant.  It just seems like you can fuck every -- I mean, our Mayor in Bedford is a fucking incompetent idiot.  The amount of white elephant projects we have in our town is ridiculous.  He's still there.

It's just ironic that we can get rid of the person you think could protect themselves the most, but we can't get rid of these morons.

Jeet Sidhu: So, one way to think about things is this thing called "selectorate theory".  So, we're taught in school that everything is a democracy and every vote is equal to each other.  But there's another perspective, which is it doesn't matter what the total population is, what matters is the selectorate, which is the group of people that are actually making decisions.

For example, you would whittle down the total population to the population of people that vote, and then you whittle that down further to the ten people on maybe either side of the debate that are influence-makers.  So, if you can convince the top ten key people that you should be in power, they'll influence everyone else to vote the party line.  So, what happens is, if you have a narrow selectorate, you generally get more of that situation, where there's more self-interested self-dealing versus if you have a wider selectorate, sometimes it can result in increased legitimacy for the system.

The problem in particular for small municipalities is that the selectorate is very small, very small.  There's maybe a couple of people that run the key organisations that can get people out to vote, and will support you or not support you.  And as long as after the election is over -- like in San Francisco, and I'm sure this is probably happening in your town as well, people who are real estate developers, there's a lot of money that can be made from changing one permit to a different type of permit.  Those sort of hard-to-detect backroom deals are happening.  So, the primary funding sources for municipalities are often people like real estate developers, where if you're a mayor, no one is actually monitoring what's happening and you can make those kinds of side deals.

For example, let's apply that to the wider America.  There is a difference between the influence level of the people who support ESG and the people who are just normal, everyday Americans.  So, the benefits of implementing something like an ESG are very concentrated, but the costs are very diffused.  So, one of the things that happens in America, they've done studies on this, whose policy preferences actually have an impact?  If you are one of the managerial elite in America, like you make more than $250,000, your policy preferences actually end up getting implemented.

Do you know whose policy preferences don't get implemented?  It's not just the blue-collar workers, it's also the business community.  So, if you're a small business owner, you have no voice in America.  So, when you think about things, like you brought up the wheelchair ramp example, the cost of implementing a wheelchair ramp is low for a large corporation, and so for somebody who is managing a large bureaucracy, implementing a wheelchair ramp is no big deal.  But for a small company that's just starting out, mom-and-pop shop in the middle of Oklahoma or somewhere, they can't afford to implement all these different things.

What happens is, policy preferences that are related to how people feel and emotions and stuff like that, they're implemented across the entire country.  It also has the benefit of, they get to use moral language like ESG, or whatever, to impose costs on their potential competitors.  Why does Amazon care -- Amazon or Walmart, right, they raise the minimum wage.  The reason that -- so, I talk to a lot of companies that compete with Amazon locally for talent.  It's very hard to find people.  They're raising the minimum wage and things like that, because it's hard to find people.  That has nothing to do about they care about --

Peter McCormack: They don't give a shit about anyone.

Jeet Sidhu: Yeah, but they're put a lot of ads out that, "Hey, we're personally raising the minimum wage", that type of thing; so, it's a big issue.  The use of moral language to push their own self-interested viewpoints.

Peter McCormack: I mean, that's a good setup for, where did ESG come from!  Okay, but Larry Fink, right.

Jeet Sidhu: No, I mean so look, ESG --

Peter McCormack: Because, it just kind of appeared one day and then it was fucking everywhere, everything's ESG.

Jeet Sidhu: So, I think the way to think about it is there's these long-standing trends in society and people will put papers out about things like ESG for years, and they're ignored until somebody sees a potential to again use the moral language for their personal interest.  They can pick it up and then they can market it.  So, BlackRock is one example of a person who has a massive self-interest, because the fundamental issue with a lot of asset management is that it's somewhat of a commodity business and fees are going down over time, because it's become very competitive.

In general, people who are pushing ETFs like BlackRock maybe, they face competition from index funds, from someone like a Vanguard.  You can get the same returns for a far lower fee, and so they have issues with differentiation.  So, BlackRock raised, I think, at least one fund was $1.45 billion for a single ETF, day one, and you can charge higher fees for ETFs than you can for an index fund.  The composition of his climate change ETF versus an index fund is completely the same, but you can charge higher fees for it.

Peter McCormack: Because they can put the ESG tick?

Jeet Sidhu: Stamp of approval.

Peter McCormack: How big is BlackRock, just out of interest, because they seem to own fucking everything?

Jeet Sidhu: Well, that's part of the thing too, there's a little bit of confusion about that.  So, part of it is that BlackRock is a custodian for other people's assets.  There's also a separate part of BlackRock that's running these ETFs and stuff.

Danny Knowles: It says $9.6 trillion under management.

Jeet Sidhu: Under management.  So, that's not their money, they're managing the funds for other people.

Peter McCormack: Yeah, of course, but they've got influence over that.

Jeet Sidhu: Exactly right.  So, because they're a point of centralisation, they act as a choke point.  So, if BlackRock starts talking about ESG -- the reason this guy's talking about ESG, he's got an awesome ETF that's raising a lot of money, it's exciting for him.  But the way that filters down into the rest of society, now everyone else has to think about ESG.

Peter McCormack: Is it not that he has this -- it is Larry Fink, right?

Danny Knowles: Larry Fink's the CEO.

Peter McCormack: And he has this newsletter, or this letter he writes once a year, or his newsletter he writes.

Jeet Sidhu: A lot of investors do.

Peter McCormack: But he has one that everyone follows; it sets the course for what people will be thinking about, and he brought up ESG in that.  That's what I was told.

Jeet Sidhu: Yeah.  So, it's possible that that was the kick-off point for the new level of interest in ESG, but the background is that basically, a bunch of people came up with studies that -- this is a long-running thing.  In the past, they would use this term "triple bottom line", "Oh, you've got to care about the environment and the social and all this other stuff in addition to your profit".  There are people who are academics who, again because people who are academics are negative value-add to society, they need to find some way to show some value, because they're not adding much.  So, they end up coming up with new ideas to try to differentiate themselves.

One of the things was, companies that are ESG-related, they make more money than companies that aren't ESG-related; you can do good by doing well.  Now, you can do good by doing well, that's for sure, but the specific research that is the underlying bedrock of ESG, according to Aswath Damodaran, who's the top valuation professor at NYU, it's probably pretty shoddy research.  And so, to push these movements, you need the research to be done, then you also need figures like Larry Fink to buy in.  But ESG in particular seems pretty weak, the underlying tenets behind it.

Part of the other thing too is social scalability.  One of the things we like about things like the internet and Bitcoin, Nick Szabo has this concept of social scalability.  We may come from different areas and have totally different interests, but we can both use the internet and we can both use Bitcoin.  There's no part of using Bitcoin that requires you to embrace my values, or using the internet where you've got to sign off that John Lennon is a bad person or something.  So, everyone can use it, regardless of who you are.

Part of the problem with ESG is it's not socially scalable, because people have different values.  How do you decide what is good?  Trying to force other people to adopt your definition of what is good is a function of conflict in human civilisation since forever, so it's unlikely that they're going to converge using artificial intelligence buzzwords to come up with some idea of what is good, what is bad.  It's also very difficult, like I pointed out earlier, with the example of Nestlé and Coca Cola, to come up with the actual impact of a company on the climate.  So, the research that's supporting it is bad, many people like these companies, like Larry Fink, he's trying to sell funds --

Peter McCormack: But he doesn't actually give a fuck about the environment.

Jeet Sidhu: I think I would be shocked -- I think most people would disagree that CEOs of major corporations care about the environment more than they care about running their company or their own self-interest.  I think a lot of these people are using moral language to push their own incentives.

Peter McCormack: How much have you actually looked at ESG from the S and the G, because to me at the moment, ESG really seems like it should just be called E?!  I see very little work discussing the S and the G, it just doesn't seem to be part of the public discourse.

Jeet Sidhu: I agree with that.  I mean, I have looked into certain examples, but the problem with the governance thing is, we have a wealth of knowledge of what constitutes good governance for a corporation; that's already figured out, so there's no way that you can charge more fees for governance, or you can build an academic career on pushing the best corporate governance.  The same thing with the social.  I'm not sure; maybe if somebody could put forward a case of what is a good example of social, but it just goes back to Milton Friedman's point back in the 1970s that, if you have your own personal prejudices, you should manage that on your own time.  You shouldn't steal from other shareholders and redirect resources to stuff that helps you.

Peter McCormack: So, in terms of ESG, like I say, I've not got involved in the debate.  As somebody who is obviously concerned about the environment, I'm interested in responsible investing, but at the same time, I think that's a personal choice.  But the ESG thing has started to feel, I don't know, what was the word we used?  Sinister; there's something that feels very sinister about it, and I think it really came to a head when you see Tesla being taken off the index that ExxonMobil are on.  How are we meant to interpret that?

As somebody who is trying to understand ESG, what the goals of ESG people are, how are we meant to interpret Tesla, who have done probably more than, like you said, I think you said more than anyone for furthering the cause of protecting the environment, I mean they've created electric cars, they've removed the combustion engine from a car, and they've made it popular, they've sold hundreds, maybe even millions of cars now; they've been removed, but ExxonMobil, who I have no idea how much oil they dig out the ground every year, but clearly if there's an index which is about ESG, which we know is all really about E, that doesn't make any sense in this world that ExxonMobil are above Tesla?

Now, have they manipulated it using the S and the G to put them above?  What's going on here; how are we meant to even fucking interpret it?

Jeet Sidhu: Well, I think in the specific case of Tesla, that's exactly the case, that they've manipulated the S and the G aspects of it to exclude Tesla.  But I think nobody doubts that the reason why they're excluding Tesla is because the CEO, Elon Musk, is what I would call a commercial elite, and they are political elites. 

In every human civilisation, there is a competition between the political elites and the commercial elites, and they resolve it in different ways.  So, in South Asia, the way that it's resolved is that the political elites run things, and they adopt things like socialism to have a chokepoint on new industry, giving people new licences and stuff.  Then, they select commercial elites who are non-competitive politically, and give them the licences.  And then they filter, through corruption, bribes, back to the political elites.  In our situation --

Peter McCormack: He's got too much power then?

Jeet Sidhu: He's got too much.  The thing is that Elon Musk represents a potential political threat as well, because he is obviously very charismatic, and he's done good things in the world, like SpaceX and Tesla and stuff.

Peter McCormack: Also, he doesn't give a fuck, he'll call shit out.

Jeet Sidhu: Yeah, he's a little bit of a wildcard.  So, I don't think he's going to get adopted by the political elites as somebody who's a shining example, because the fact that he makes these functional institutions -- he's got three or four companies on the side just running constantly, and it decreases their legitimacy that they have the entire economy at their disposal and they can't do anything, and Elon Musk is over here solving the world's biggest problems.

Peter McCormack: Is the situation with Jack Ma in China a good example of this competition between --

Jeet Sidhu: That's actually a perfect example.  So, do you know the reason why?  There's a couple of reasons why I think Jack Ma was displaced from his company.  So, the first and most obvious one is, and the one that's given in the newspapers, is that he publicly critiqued China's state banks, and said that he was doing a better job at serving the poor than they were.  And then he disappears for a while!

Peter McCormack: Has he been found yet?!

Danny Knowles: I don't know.

Jeet Sidhu: I'm sure he's been found, and he's just retired or whatever.  But the real reason that I think he was taken down is because basically, he would have events like Warren Buffet has events like, "Hey, everyone who's a shareholder, come down; everyone who's an employee come down", and hold rock concerts.  And so he represents kind of a distant threat, but he represents a challenge to Xi Jinping and those types of leaders.  For someone like Xi Jinping, he centralised power, you can't have people who are on the side developing their own power base.

For example, he removed this guy, Bo Xilai, based out of Chongqing, because Bo Xilai was basically pushing Red songs and the cultural revolution culture, and that presents a challenge to what Xi Jinping was doing, so he had to remove that threat.  And it's not sinister, it's just this is how the world works.  People compete for influence and power and stuff, and I think this is what's happening with Elon Musk, that he's getting kind of sidelined, because he is speaking out in ways that go against the political establishment. 

So, I don't think there's anything particularly sinister about it.  They control the indexes and they don't like him, so what can you do?!

Peter McCormack: Yeah.  So, in terms of where ESG's gone wrong and disastrous consequences for the people who've tried to implement the policies, we were spending some time looking at what's happened with Sri Lanka.  Now, the Sri Lanka situation is quite complicated, because the tourism industry was destroyed by COVID, which was a very important industry to the country; I think it generated something like $5 billion a year, so they were dealing with that; a collapsing currency anyway.  But in terms of their drive for becoming high on the ESG country index, they banned pesticides, right, which has seen a collapse in the yields of the crops.

What I can't understand, or what I can't see with that is, would they have been able to cope with that if the economy hadn't have collapsed itself, or is that one of the largest contributions to the collapse of the economy; where's the chicken and egg here?

Jeet Sidhu: So, the mental model that I use for that is assumption rot, like I talked about with Afghanistan; it's like issues compounding on top of each other, and they're impacted on reality and the whole structure collapses. 

So first of all, the reason why I believe Sri Lanka focused on becoming an ESG darling is because the structure of the world is such that the US is the world hegemon, and it's like a prison yard where the US is the shot-caller.  So, if they don't like a country, they kind of call a Code Red, and it's basically open season for domestic rivals to then replace that ruling elite. 

So, in Sri Lanka, there are a couple of things going on where first of all, they face external pressure, because prior to this, there was a long-running civil war and the ruling elite in Sri Lanka essentially committed a massive ethnic cleansing of Tamils in their country; so they face pressure from that.  To avoid that pressure, they started adopting the moral language of ESG.

Peter McCormack: So, they're connected?  Because, when did the war with the Tamils end, because they basically carpet-bombed --

Jeet Sidhu: Well, it's a few years ago, but the problem is that's a long-running potential issue for him.  So, there's a thing called "the chain-gang effect", where -- you notice how in America, Democrats and Republicans have the opposite view on every single major issue?

Peter McCormack: Yeah.

Jeet Sidhu: So what happens is, if you're an ally of mine, I'm going to defend every single one of your positions, and in response you're going to defend every single one of my positions.  So basically, by becoming an ESG darling, they were able to take advantage of that chain-gang effect.  So now, a lot of people who would have effectively looked into Sri Lanka's human rights record, they don't care, because they're adopting ESG.

Peter McCormack: But did they have pressure coming from the US to adopt ESG?  This is something Epstein talked about, Alex Epstein, when we had the interview.  He said essentially, "While the US continues as many fossil fuels as it wants, it was putting pressure on other countries, poorer developing nations, to adopt more renewable energies, or more ESG-based policies".  Now, are they considering them testing grounds?

Jeet Sidhu: Well, so there is a history of, for example, the British tested bombing from planes in their colonies before it was used in World War I, so there is a history of western countries testing out things on colonies.  They used mustard gas on sick soldiers at one point, I remember reading about.  So, that is a possibility.

I think the reality is that, it reminds me of this book, A Fire Upon the Deep, by Vernor Vinge; it's a sci-fi book from a while back.  The human civilisation is not as advanced as another civilisation, so they go over to this dangerous area where there's an ancient archive full of esoteric knowledge.  They break open the archive and they think that they're going to advance their civilisation, but it releases an horrific artificial intelligence that destroys their civilisation.

So, I think the problem that a lot of developing nations run into is, they do want to advance, they see the US is advanced, and they assume that the US or western countries are giving them good advice that's going to help them advance, not realising that the group of people that developed the United States, or Britain, they had a different mindset of a frontier-based mindset, and focused on overcoming natural resource constraints and things like that.  And the group of people that are directing things now are several generations removed from that type of building culture.

In fact, what's happening is exactly what you said.  I think it's a combination of things.  So, in the Sri Lankan example, by adopting ESG, they internally consolidate power as well, because now the United States and other groups will accept them, so they will prevent coups and things like that.  But the problem is that again, every single nation-building exercise the West has tried has totally failed.  They can't build not only internationally, they can't build domestically.  So, when they give advice to other people, it's not good advice.

The people who staff things like the World Bank, they're not as good as they were generations ago; and even generations ago, they were pretty bad.  So, the person who is an academic, who is completely removed from even running a small business, let alone managing hundreds of thousands of people, let alone managing a country, they have no place telling other people how to develop their country.

I'll give you the example of Ghana; that's a more clear example, where their country was developing, their country was using coal to develop, and what happened was the World Bank started to give them advice about how they should develop their power grid.  They pushed things like solar power and it reduced the reliability of the grid, and now they're facing a lot of issues.  Wherever you look, when you start taking advice from people like the Germans, you're in a bad spot.

I'll give you an example; the Poland situation.  So, Poland could be a good, industrial country.  It is industrialising currently, but they use coal.  So the Germans who, again, their grid is the worst possible grid you could possibly have, it's causing international issues, they are using things like the EU Commission to limit the ability of the Polish to grow their economy.  And the reason why is, again, using moral language to push their own incentives, they don't want a powerful Poland, they don't want a culturally autonomous Poland.  So, they're using language of ESG to reduce their ability to develop their country.

Every single country that's developed so far, there's this thing called "energy transition", okay.  So, it took us thousands of years to go from using our hands to using animals.  It took us hundreds, or a thousand years, to go from that to using wood and biofuels.  It took us a couple of hundred years to go from wooden biofuels to coal.  It took us a couple of years to go from coal to oil and natural gas; a couple of decades to go to nuclear.  But Britain is the one that's further along.

But even in the year 2000, our usage of wood as our energy source was still 10% as a global country.  So, every single country that's advanced has used these natural resources to advance.  So, why are they telling countries like Ghana or Sri Lanka that, "You should use renewable energy"?  And let me take a step back, because one of the things that Andrew Dessler did not address, and Alex Epstein didn't address, is grid reliability.  So, this is what it all boils down to.

The way that it works is, there are some time periods when the sun doesn't shine; there are some time periods when the wind doesn't blow.  So, these renewables, they're intermittent and they have low-capacity factors.  So, the way that a grid works is, when people go to work and when people turn on the AC in the summer, there are spikes seasonally and daily.  So, there's a minimum amount of energy that you're always going to need to fill that what's called baseload.  You use things like coal plants and nuclear power.

Then, to fill in the gaps when there are spikes in demand, you use peaker plants, which run natural gas.  So, you strap a gen into the routing, you turn it on.  So, what happens with renewable is, everything else is dispatchable; renewables are intermittent.  They turn on, it's like a total wildcard.  The analogy I would use is, if we're on a volleyball team, the way that you win as a volleyball team, as an amateur, is you just focus on setting up plays for everyone else on your team.  Renewable energy is like a player who's coming in and constantly trying to spike, but they have bad skillset, so they ruin the vibe, you know what I mean?

Peter McCormack: Yeah.

Jeet Sidhu: So, that's what it all boils down to.  When you think about the situation in Germany, first of all, what's interesting is Germany's green movement is partially financed by Russian natural gas interests; I'm not sure if you're aware of that?

Peter McCormack: I didn't!  Danny, I'm going to need a receipt for that.

Jeet Sidhu: Yeah, look into the -- I mean, Hillary Clinton has admitted this.  She didn't admit it, she was annoyed by the fact that this was happening.  Just look up, "Russia financing Germany's green movement".  So, Germany's green movement has 16% of the federal parliament in Germany, so they're a major political force, even more so than here.  And the way that they established legitimacy was by being anti-nuclear decades ago, so they're not going to go away from that.  So, they're anti-nuclear.

Peter McCormack: Why are they anti-nuclear though?  That's the one thing; I've not understood anyone who's anti-nuclear, because I know we've had two significant nuclear plant situations, obviously Ukraine, Chernobyl.  But Chernobyl was an interesting set of factors within a communist state where people under pressure made stupid mistakes with an old reactor.  Fukushima was just a badly positioned nuclear reactor, which was damaged during an earthquake, right?

Jeet Sidhu: Tsunami, yeah.

Peter McCormack: A tsunami from an earthquake.  But they're two unique situations, but how many nuclear plants are there in the world?

Jeet Sidhu: Well first of all, let's just pause for a moment there.  How many people do you think, just based off your common knowledge right now, died from Chernobyl or Fukushima?

Peter McCormack: Well, I know Fukushima was one.  Fukushima was one, and that's even disputed; somebody had lung cancer.

Jeet Sidhu: Well, what happened is, basically there was a scare that there was a nuclear disaster.  And so, because there's decades of green movement propaganda around the impact of nuclear, the Japanese Government evacuated 100,000 people that didn't need to be evacuated.  1,600 of them died, so some people died from suicide, some old people died from heart attacks.  So, more people died from the evacuation than died, like you said, from the actual impact.

I think directly in Chernobyl, the number was like 43, and then there was a second impact on potential cancer rates.  But there was a ton of people who ended up aborting their babies, because they were afraid that they would have radiation issues, but that wasn't the case.  So, it's a massive issue that --

Danny Knowles: 31 from Chernobyl apparently.

Jeet Sidhu: Is that right?  Yeah, that's roughly in my -- I thought it was 34.  So the point is, the thing you've got to understand --

Peter McCormack: They're low numbers.

Jeet Sidhu: Yeah, they're very low numbers, and again when I talked about assumption rot, are you familiar with Carl Sagan?

Peter McCormack: I know that name; why do I know that?

Jeet Sidhu: He's the equivalent of Neil deGrasse Tyson from decades ago.  And so, he established his reputation as a scientist, and then he used it to push this emotionally driven anti-nuclear message.  And there's many such cases like that.  So, these people, I don't want to pick on him, but obviously Andrew Dessler came in here, and he gave a very emotionally charged position, based on his reputation as a scientist.  But the Carl Sagan situation was, he used a weather model which was totally inaccurate.

I forget the exact statement, but it was like, "If there's nuclear reaction, it ends the world, there's a nuclear winter, dust gets put up in the atmosphere forever and it's never going to come down.  It's going to ruin the world, it's going to be a total apocalypse".  Your model is wrong, but that's what's influencing people who are making decisions.

Peter McCormack: So, is it fear of a meltdown of a reactor, and what could happen over a wide area?

Jeet Sidhu: Yeah, that's definitely part of it.  And then the other thing too, and this is conspiracy level stuff, but it's also true; in Germany, natural gas interests drove the rise of the green movement.

Peter McCormack: Yeah, Danny, you found that, didn't you?

Danny Knowles: Yeah.

Jeet Sidhu: In America, natural gas interests are pushing renewable energy.  So, do you know why the natural gas resources -- when you add renewables to the grid, it increases the unreliability.  So, to meet the crazy demand, you need more natural gas to fill that gap.

Peter McCormack: Right, okay.  So, "Russia is secretly funding the environment movement, particularly in Germany, to help pressure the closure of nuclear plants".

Jeet Sidhu: I mean, this is Devin Nunes, but there are much better sources.  I mean, this guy's a politician, but there's much better sources.  Look up Hillary Clinton.  That's a source that I think most people would trust.

Danny Knowles: Or not!

Jeet Sidhu: Well, the people who are pro-ESG might trust that resource a little bit better.  But that's pretty worrying, right?  So, you weren't aware of that?

Peter McCormack: No, but you can see why they would push it, because it's just going to make them rely more on energy from Russia.

Jeet Sidhu: So, the way that Germany has created their grid is, they have this massive pipeline from Russia to Germany that funds the natural gas, they have a ton of renewables that they've added, and then they used to have part of their baseload driven by nuclear power.  They're actually shutting down those powerplants.  They had a vote recently, "Should we not shut down our powerplants?" and they voted to continue to shut them down, even though they're currently facing the prospect of Russia shutting down natural gas to Germany in the winter.  So, old people could die from cold exposure.

One of the fascinating things about this that I discovered when it came to the situation in Ukraine, a lot of these European politicians were open-sourcing their thoughts.

Peter McCormack: By the way, your threads and your information on Ukraine was fantastic.

Jeet Sidhu: Is that right?  I appreciate that.  I got a lot of messages from people on the side like, "This was interesting".

Peter McCormack: Didn't you have one epic long thread.

Jeet Sidhu: That's the thread, yeah.

Peter McCormack: Yeah.  How many tweets have you had now?  Have you hit the limit; is there a limit?

Jeet Sidhu: It was a lot.  Well, if you tweet at a single point in time, there is a limit.

Peter McCormack: It's 25, yeah.

Jeet Sidhu: But I was constantly adding; it wasn't an issue.  But yeah, it was like several hundred.  But the point that I was going to make there is, European politicians knew that putting sanctions on Russia would increase gas prices and would make it difficult to heat homes.  So they said, "The way that we should mitigate this", this is openly stated as part of the decision-making process, "is wear a sweater".  So, when people are dying, potentially dying this winter, you need to understand, they know that and they want to impose their world view more than they care about managing the grid responsibly.

My understanding is, in the UK, there's a potential crisis brewing as well; it's not just Germany.

Peter McCormack: Yeah, the crisis in the UK at the moment is mainly to do with cost.  So, I think, is it today that the payments hit people's bank accounts?

Danny Knowles: I thought it was in September.

Peter McCormack: No, I think it was today.  So, 8 million homes today received a payment of something like £316.  If I've hit that on the nail, I'll be pretty impressed.  Have a look on Sky News.

Danny Knowles: Yeah.

Peter McCormack: So, energy prices have essentially tripled for a lot of people, over tripled for me actually.  But we have caps, and the caps have certain dates when they expire.  In October, the current cap's going to expire, and they expect it to go even higher again, and then again higher in January.  So, the main issue is just with the cost; people just cannot heat their homes, to the point where we have more food banks now in the UK than we have McDonald's.  That was an interesting stat I saw recently.  People who just can't afford to feed their families are going to food banks and getting handouts.

There is now an open discussion about heating banks, where they think, because people can't afford to heat their home and it will be too cold, they're going to be going to certain places to basically sleep so they don't die from the cold, which I can't even get my fucking head around; a western, liberal democracy, a country like the UK, could be in that position, but we are in that position.  There are people who can't afford to heat their homes.

Danny Knowles: It was today, yeah, and they've got a second payment in the autumn.

Peter McCormack: So, how much was it?

Danny Knowles: £326.

Peter McCormack: And 8 million homes?

Danny Knowles: 8 million homes, yeah.

Peter McCormack: So, that's probably means-tested in a certain way, because there's more than 8 million homes.

Danny Knowles: I would imagine so, yeah.

Jeet Sidhu: So, I think that's a really interesting point.  So, the thing is that it's not -- all the interventions -- so, this is a very strong statement I'm going to make, but it's supported by the science, in fact.  The social science literature is clear that social policy interventions tend to fail.  So, Nick Szabo has this criticism, I think it's called The Lab Experiment Criticism, where he points out that things like social policy, they make an experiment in a lab, and then they scale it up to the entire society without a second thought, and those experiments tend to fail.  You can't extrapolate from a small experiment to the wider society.

So the problem is, part of the assumption rot in our society is, we've been doing that for 70 years, since the 1960s.  So when you think about, people can't afford to eat; in the past, if you couldn't afford to eat, you would have a strong family structure around you that you could depend on, you could depend on your neighbours, and stuff like that.  So, part of the problem is that since the 1960s, they've done all these social policies, like for example -- well, there's just all kinds of policies.  It's resulted in things like, there's a massive increase in the number of children who are growing up outside the two-parent homes; there's also a massive decrease in the number of civil society organisations.

One of the things about America that's so beautiful is, there's all these organisations.  Like, if you're into archery, there's an archery range near your house.  They have linoleum floors, they have plastic chairs, and it's a bunch of people who are just interested in that topic.  You get together, you meet up and you talk about it.  The number of those has massively declined in America, and what's happened is, when you introduce money into the equation, you destroy -- it's like a cholesterol for a bottoms-up civilisation.

When de Tocqueville came to America, he wrote Democracy in America, hundreds of years ago.  He remarked that, "Americans love civil society", and they just seem to come up with groups for everything.  If there's a branch in the road, they'll just form a committee to remove the branch in the road!  But today, it's illegal to remove -- it's not illegal --

Peter McCormack: I know what you're getting at.

Jeet Sidhu: This type of intervention is kind of frowned upon, and people don't even have that habit of solving their own problems.

Peter McCormack: Well, yeah, and also it's politically driven for different reasons.  I'm not sure how much it comes from empathy, or how much it comes from protecting your own political position, but what will happen is we will see civil unrest.  We're starting to see protests, various protests in the UK with regards to the costs of living.  But I think we're going to see, yeah, they've been fairly peaceful so far.  I think as we get into the winter months, where things are getting more expensive, people can't afford to feed their families, can't afford to heat their homes, I think we're going to see probably more extreme civil unrest, and perhaps they're trying to prevent that.  But that's why these people know they're getting a payment now and a payment in October.

Jeet Sidhu: So the thing is, social unrest is very bad, but for the vast majority of countries, it doesn't threaten regime legitimacy.  You can burn as many cars as you want, they don't care about you or your freezing family.  To the extent that it impacts their electoral prospects, they're going to set up these heating things.  But the more responsible thing to do would have been to build more nuclear powerplants.

Peter McCormack: Of course.  What's the lag time; how long does it take to build a nuclear powerplant?

Jeet Sidhu: The problem is, effectively it takes very long.  It takes years and it costs -- so the criticism of nuclear power right now is, it takes years to build, it's far in the future, it costs billions of dollars.  The response should be that first of all, the best time to start was yesterday, the second best time to start is today; and then secondly, if you build a nuclear powerplant every single year, you're going to improve your ability to build nuclear powerplants. 

The only reason the cost is so much is that people built them sporadically, so the massive cost overruns and things like that, it's partially driven by that.  There's also these unnecessary regulations.  And then, there's also again this scaremongering; that's the fundamental issue.  They say, "Nuclear waste in your backyard is going to cause an issue".  The amount of nuclear waste in America fits in a football field; these 50-foot stacks, it's like a single football field.

Peter McCormack: Yeah, it's covered in that book, The Fifth Risk; is it The Fifth Risk? 

Jeet Sidhu: I haven't read it, it sounds interesting.

Danny Knowles: That's the book, yeah.

Peter McCormack: Yeah, I think it's covered in there.  But that is a pro-government book, let's just be clear, that book's a pro-state book, and what it's talking about within there is, there are certain things that must be centralised, not a lot, but they're saying one of the things that should be centralised is nuclear waste, and why, and it compares how nuclear waste is treated in Russia compared to the US, and the Russia situation sounds super-scary; they just pour concrete over it and forget about it, whereas they have proper facilities for it in the US.

But I don't know, what is the risk with nuclear waste; what is the actual risk with it?  It exists, I don't want to drink it, I don't want to shower in it, but what is the actual risk with it?  It's not explosive, no?

Jeet Sidhu: No.

Peter McCormack: Is it just contamination.

Jeet Sidhu: Yeah, contamination and proliferation.  And one of the issues is, since it lasts for a long time, the risk is that the social structure around maintaining that corrodes and it just gets left there; that's a potential risk as well.  I'm sure there are more risks.  Maybe someone who's anti-nuclear could actually elucidate that better than I can.  Some of the people that I trust, like scientists, have said that there isn't that big a risk for things like nuclear waste, particularly if you can store it safely.

Part of the big debate in nuclear in America is the storage sites that they've developed to keep it secure, there are large protests against that, because that's a chokepoint, that if you can't manage the waste, then you can't build a new one.  So overall, the trend for nuclear is that it's just massively overstated.

One of the things that's not considered is, nuclear powerplants are zero carbon emission, so there's hundreds of people dying every day from lung cancers and things from all the coal that's in the atmosphere; nuclear power doesn't have that issue.  The other thing too that someone like an Andrew Dessler isn't talking to you about is the issues with the disposal of things like wind turbines and solar panels.  But even more importantly, I'm not an environmentalist, but there are certain things that you just can't replace, like extinct animals.  If an animal goes extinct, that's actually a major loss.  Wind turbines kill endangered birds.

Peter McCormack: Well, yeah, but I've looked into this one, okay.  That's an interesting one you should bring up, the number of bird deaths.  And I know no endangered birds, but number of bird deaths, and it was brought up to me.  Danny, look up how many birds are killed by wind turbines.  But then you can go and look up how other things have killed birds, like windows.  So, it's something like, there's an actual chart --

Danny Knowles: 234,000, it says.  I mean, I don't know how they come up with that number.

Peter McCormack: But look up, "Causes of bird deaths".

Danny Knowles: I mean, I know we looked at this together, and it's kind of a mocking chart though, because it puts cats in there.

Peter McCormack: Yeah, but cats, so 2.4 billion killed by cats.

Danny Knowles: But they kill them for a reason, right?

Peter McCormack: Yeah, because they're predators and they're hungry.  So you've got wind turbines, 240,000, but you've got 600 million by collisions with glass buildings; vehicles 240 million.  We want vehicles, right.  What I'm saying is, there are better arguments against wind turbines than bird deaths.

Jeet Sidhu: The reason I say that is because I've been in the investment committee when we're, "Okay, yeah, we're going to invest in this wind turbine", and part of it is, there's an environmental report that says, "This wind turbine, in the environmental report, it's in the migratory path of XYZ bird.  This number of birds has been killed", and it stuck out to me.  For me personally, sitting there hearing that, and then hearing somebody say, "It's okay to build it", it stuck out to me.  That's more of an emotional argument.

Peter McCormack: Yeah, but birds fly into shit and die, right.  You see them fly into windows because they don't see it.  I just think if you're -- this is my problem with some people presenting data.  They present wind turbines 234,000, and then they don't raise the --

Jeet Sidhu: So, just to be clear, I don't know the source of this chart.  They're saying there's a median/estimated -- the US Fish and Wildlife Service is not going around picking up dead birds, so I would like to look into this a little bit further before calling it a day in terms of the --

Peter McCormack: There's a few sources, we actually looked at a few, and the numbers actually vary quite widely.  But the point being, birds fly into shit and die.

Jeet Sidhu: Yeah. 

Peter McCormack: I think there's a better argument against wind turbines in that the external costs to produce them isn't met with the green benefits.  Also, if nuclear can produce everything we need, at the same production cost, or similar, then we should just be on nuclear.  I think the arguments for and against all these different power sources, I tend to find where the point the person's arguing from, that's where their data comes from.

Jeet Sidhu: That's true.  I mean, for example, when you hear renewable people arguing, they say -- one of the points that Andrew Dessler brought up was that renewable energy is cheaper.  So, he's talking about the marginal cost that you get from adding a wind turbine or a solar farm, but he doesn't talk about the cost it takes to maintain excess capacity.  So for Germany, if they added all these wind turbines and solar panels, they have roughly 50% excess production sitting on the side.  So, their entire old system is still running, because the renewables that they are adding are unreliable.

The amount of fossil fuels that they've been able to reduce as a percentage of their whole system, it's only declined by 14% since 2020.  So, the whole German civilisation is focused on increasing renewables; they've increased it 14%.  There's an entire side infrastructure they have to maintain to keep up the pretence that they're doing renewables.

Some of the specific additional points that he made is that, he says that, "All the studies show that renewables are cheaper".  That's because they look at things like the marginal costs, they don't look at the long-term costs, they don't look at the fact that you have to maintain grid reliability.  All the countries, states, where they implement renewables, the power costs go up.  In Germany, the power costs since the year 2000 have doubled for the average consumer; doubled.

Peter McCormack: Hold on, what's your timeframe on that, because mine's tripled, but it's mainly because of the increase in energy costs.  That's got nothing to do with renewables.

Jeet Sidhu: It's from like 2019.  It's basically before the recent spike in prices.  It's not a recent metric.  The source is also Vaclav Smil, who is a well-respected scientist.  So, even one of the things he talks about is, "High gas prices are driven by the market, and so commodities go and down.  Whereas, renewables, once you plug it in, it stays the same", or whatever.  He literally made the point multiple times, "The price of renewables is flat, and so once you have it, it's guaranteed low-cost energy", but that's not how supply and demand works.  The more renewables you add to a grid, the more unreliable it becomes.

Peter McCormack: Is that true of ERCOT, because how much of the ERCOT grid is now renewables?

Danny Knowles: I think it changes on a day-to-day basis, but I'll have a look.

Jeet Sidhu: That's just the point.  So, look, the other thing too is that renewables, like solar and wind, they're often not built where the energy is used, they're built in faraway places.  So sometimes, there may not be a strong transmission line from one spot to another.  And again, how much are they used?  In Germany, solar is 10% and then wind is 20% capacity factor; that sucks.  And what do you think it is in Texas?  How much wind energy can you add before the grid collapses?  If I'm not wrong, at one point he said, "We can make the grid 70%".

Peter McCormack: 100%, no, 70%, yeah.

Jeet Sidhu: Okay, so Germany's at, whatever, 30% or 40% and their country's collapsing.  So, do you really want to take a risk with some -- I mean, I'm sure he's a nice guy and I'm sure that he has the studies to back up what he's saying; but what I'm saying is that a lot of the academics that are producing this research are doing it because that's what's popular in society, that's obviously what their incentive structure is based on; it's not necessarily the actual truth.

Peter McCormack: There's also peer pressure within their cohort.

Jeet Sidhu: Yeah.

Peter McCormack: Right, "Texas… solar's 2%, nuclear 11%, 18% coal, 23% wind".

Jeet Sidhu: And Texas is not even a good example, because for example they had that cold snap recently and they were like, the people who were running the grid, they underinvested in making their natural gas peakers cold-resistant.  So, yeah, that's a huge issue that the utility had.  That doesn't mean that natural gas is now worse off.  The more renewables you put on the grid, the more natural gas you're going to have to make up for the issues that they're causing.

I mean, how many countries are the ESG type of policies going to collapse before people realise this is not a real way to run a country?

Peter McCormack: So, it seems to me like the very easy and obvious solution just is nuclear.

Jeet Sidhu: That's right.

Peter McCormack: And I think that's why maybe someone like Michael Shellenberger has been really pushing that point.  I think Elon Musk even made that claim, he would eat a sandwich outside one.

Jeet Sidhu: I mean, France is restarting nuclear, Japan is restarting nuclear.  I think there was another country, it's another German-speaking country but it's not Germany, maybe Switzerland, they're also taking a second look at nuclear.  Nuclear is the clear solution and -- so, this is the other issue that we run into.  There's a great article about how the yuppies don't understand Bitcoin, and part of the reason is there's a two-by-two matrix which is prestige and understanding.  There are some things which are very low prestige, but they work really well.

So for example, if you want to increase somebody's lifespan, one of the good ways to do it is to get them doing compound lifts.  In America, compound lifts are associated with a lower-class type of thing, like Arnold, or whatever.  Like Paul Krugman, for example, he does biking, cardio-based.  But if you actually want to improve the lifespans of older people, when they're younger you want them building higher bone density and strength so that when they're older, they don't break a leg, because that's how you rapidly reduce somebody's lifespan.  There's all kinds of things like that.  Are you familiar with Brazilian Jiu-Jitsu?

Peter McCormack: Of course, yeah.  I mean, I've not done it!

Jeet Sidhu: Shall we roll now?!

Peter McCormack: Choke me!

Jeet Sidhu: No, my brother is kind of into it, so I kind of like it as well.  But one of the interesting things you learn about Brazilian Jiu-Jitsu is, first of all, there are other forms of fighting that were more prestigious in the early 1990s, like boxing, of course.  But what they found through the first Ultimate Fighting Championship was Brazilian Jiu-Jitsu was successful.  The reason why was these guys were going on the beach in Rio de Janeiro and getting in fights every single day.  And then, they were going back to their dojos and they were playing with each other, but they weren't doing it in a way like boxing where you actually hurt the person, so they had much faster feedback loops.

As a result, when the Ultimate Fighting Championship first happened in the early 1990s, it was clearly the best system.  But if you were just starting out, you would just say, "Obviously boxing is better than this, maybe wrestling is better than this, maybe if you're a 200-lb person, you can beat up the 150-lb guy".  That wasn't the case.  And oftentimes, what you find is, I talked earlier about what drives civilisational, functional institutions?  It's oftentimes groups that are on the frontier, so the Brazilian Jiu-Jitsu people on the Rio de Janeiro beach, maybe Muscle Beach in California when it comes to the weightlifting stuff.

So, those people who are on the frontier, maybe it's technologists in Silicon Valley, 50 years ago when they were first piecing together things in their garages, those people often have good ideas, but they may be low status.  And if their ideas get enough acceptance, they then become high status.  So, what I would suggest to a lot of people is, you shouldn't be too worried about doing something that's potentially low status.  If you talk about Bitcoin, the primary argument, I think, against Bitcoin maximalism, the biggest attack vector they have is, "You're a toxic maxi".  But many of the things that the Bitcoin maximalists are pushing which are considered toxic, are oftentimes things which are highly functional, but just low prestige right now.

So for example, they've been pushing the food pyramid for decades.  It tells you to have ten servings of bread.  If you have ten servings of bread, that's unhealthy, everyone knows that, but it's considered bro science.  The official science supports the ten servings of bread.  So, when the bitcoiners say, "Eat only meat", in person, no one is forcing people to actually eat meat.  I've had dinner with some of these guys, the worst Bitcoin maximalists, and there's a vegan from another country there, there's somebody who literally opened up the Soylent bottles.  No one is actually mean in person.

The point is, a lot of these positions are taken to increase the status of low-status things that are functional, so it's not just the meat, it's also nuclear power; that's another one.  Five years ago, if you said you were a supporter of nuclear power, people would have assumed you were like some industry shill.  But nuclear power is the correct solution to this problem.  Bitcoin is the correct solution to the issues we have around monetary policy.  Many unpopular things are actually correct. 

If you're not willing to embrace an unpopular opinion here or there, just because it's going to make you look low status, you're not going to be one of the people who's improving civilisation.  You're going to be one of the people that's in Afghanistan in the last helicopter out, or something.

Peter McCormack: Danny, where are you at?

Danny Knowles: I'm still trying to keep up!

Peter McCormack: Is there anything we've not covered?

Jeet Sidhu: I had some notes talking about energy in particular, so I did some research to base what I was saying off of scientific facts, and I had some notes on energy transitions; I think we talked about that.

Peter McCormack: Do you know what I think's needed?  When I interview Alex Epstein, he has to defend his position, because his position is kind of his identity.  And it's not that I don't think he believes it, but I also think there are incentives involved in being that person, when you've written that book and people are buying that book, or you're giving talks.  But I do think he has a lot of useful things he's said that have shifted my opinion and others.  And when I interview Andrew Dessler, it's exactly the same.  They're essentially the same interview, just with two different arguments.

What I think would be useful would be a scenario where maybe me, you, Dessler, Alex are just sat round a table and say, "Hey, let's work through this".  We don't even need to have microphones on, we don't need a camera.  Let's just sit down, let's just talk through these points, let's go and investigate the facts, let's go and find out.  Like, "Andrew, you think we should have solar panels?  Okay, let's go and investigate the facts and the risks and what will happen with that".  And Alex says, "We should continue burning fossil fuels".  Well some of us might go, "Actually, no, that's crazy, we need nuclear".

Whatever the arguments are, just get all the people round the table and work collaboratively; aggressively collaboratively; not trying to prove you can win your argument in front of a camera, not trying to prove to the people listening, not your virtue signal to your audience, just get round a table and say, "Let's just figure this shit out and we'll see what answers we'll come out with".  Probably, it's something that kind of weaves between the middle of both sets of arguments and gets to a logical conclusion, but you're doing it because you're trying to get to the right answer. 

I think the thing you have to establish with that is, what is the answer we're trying to find together?  We're trying to allow humans to flourish with enough energy for a sustainable period of time without destroying the environment.  Alex would agree with that, I think Andrew would agree with that.  So, I think working together, rather than arguing your point, is probably something that needs to happen.

Jeet Sidhu: Well, I disagree a little bit there.

Peter McCormack: Okay.

Jeet Sidhu: So, there's a Nick Szabo blogpost where he talks about how you should value information, and one of the things he talks about how oftentimes -- so, there's two ways.  So, the first thing is from an information complexity perspective, simple messages go faster.  So, simple messages can spread better than longer messages can.  I'm not a nuclear scientist, I have a difficult time talking about nuclear, because it's just a side interest of mine.  But even if I was a nuclear scientist, it would be difficult for me to answer every single objection that people have.  But when somebody says, "We've got to support the environment", that message can spread very quickly.  So, that's one thing to consider.

The other thing to consider is that, what is the power level behind each person's position?  So, somebody like Alex Epstein, he's probably, I assume, getting some good book sales and he's very well-funded potentially.  I know he had a talk with Peter Thiel.  I imagine that he can find a nice job if he needs to.  So, he can feel comfortable stating his positions.  But the thing is, his opposition is far more powerful than he is.  He may have a book, and that's fine, but the people he's competing against for people's opinions have the entire American university system pumping out stuff about how renewables is the policy of the future.

If you go on the Stanford website right now, look up, "Stanford Energy Research", and there's a group of people that are researching energy.  I looked it up, because I figured, "What are the smartest people thinking about nuclear and things like that that I'm learning, or maybe a potential solution?"  They didn't have anyone who's researching nuclear!  You know, the number of nuclear-based PhDs fell off a cliff.  So, the problem that we run into is, there are incentives outside of any discussion that we're having.  There are large social movements that are based on demonising things like nuclear power. 

In fact, something interesting to look up is, look up the number of nuclear-based PhDs over time.  You'll find that it falls off a cliff.  So, the problem is that there is a network structure that has multiple chokepoints, and if you control one of those chokepoints, we talked about selectorate theory earlier --

Danny Knowles: We do have one guy.  We've got Jack Baker.

Jeet Sidhu: There we go, Jack's in the house!

Peter McCormack: Yo, what's up, Jack?!  We should talk to him.

Jeet Sidhu: Yeah, let's get him in here.  If you scroll up, I think scroll to the very top, and I'm not sure if this is the exact thing, but if you click on research maybe?  Basically, if you look at the actual publications and things that they were doing -- right, here's Renewable Energy, Energy Storage and Grid Modernisation, End Use/Efficiency, Policy and Economics.  If you notice on the left under Renewable Energy, they don't list nuclear, despite the fact that it's --

Peter McCormack: Well, some people argue that it's not renewable, right.

Jeet Sidhu: Oh, there it is.

Peter McCormack: Yeah, so Fossil and Nuclear.  But that's weird thing, because I think putting nuclear in with fossil is categorising it as --

Jeet Sidhu: It's categorising it, so they have the power to create these categories.

Peter McCormack: But also, I don't think it should go in with renewable, because it's not renewable.  It's like its own category.

Jeet Sidhu: It is.  So, the other interesting thing is, if you look at the top right, where it says, "Energy Storage and Grid Modernisation", so one of the holy grails of the ESG movement is battery technology.  And just to be clear, the timelines --

Peter McCormack: My understanding of battery technology is, we're never going to be able to scale batteries to the size needed.

Jeet Sidhu: And that's so correct.

Peter McCormack: It's fucking ridiculous, right.

Jeet Sidhu: So, you need batteries.  Batteries would be a huge solution to the way the renewables' intermittency disrupts the grid.  It's never going to happen.  And then, in addition to that, the timescales that they're proposing, like AOC proposed zero carbon emissions by 2030, other people are proposing zero carbon emissions by 2050.  Vaclav Smil at least, who's one of the most well-respected researchers on energy transitions in the past, thinks that's completely unrealistic. 

Just as an example, the way that we heat our homes in America is largely natural gas, so there's little pipelines going from the larger pipelines to every single house in America.  There's a furnace that heats up the house.  So, how are you going to remove and replace all of that infrastructure in a short timeframe, like in five years, ten years?  It doesn't make any sense.  Similarly, electric cars are 1% of the current vehicle fleet.  If you have a paid-off car, are you going to pay $50,000 to get a new electric vehicle?  It doesn't make any sense. 

Just from a cost benefit analysis, the vast majority of people are not going to be transitioning right away.  The other thing is, in terms of industrial production, they cannot produce the amount of electric vehicles they would need, they cannot produce the amount of solar panels.

Peter McCormack: They have a battery problem with electric cars as well, don't they?

Jeet Sidhu: Yeah, but also an industrial problem, that they don't have the facilities to just pump out all these cars, to replace the current vehicle fleet.

Peter McCormack: No, of course.  But the transition is happening, and all car manufacturers are moving to making available hybrids and electrics.  So, it's not a reason not to do it. 

Jeet Sidhu: It's not a reason not to do it, but I'm just saying that their vision of the future includes multiple false assumptions, and I fear that without people calling these things out -- because, the reason people aren't pointing out these issues with their world view is because it's a low-status thing to do. 

Peter McCormack: Well, you get demonised.

Jeet Sidhu: You will get demonised.

Peter McCormack: Alex Epstein's fine.  I'm sure with his book sales and his talks, he makes enough money.  So, he's got no social risk, apart from perhaps anyone in his family who thinks he might be a bit of a nutter.  By the way, I don't think he is a nutter, but they might think he is, because he's presenting a counterargument to the accepted norm.

Someone like Andrew Dessler I think has a social risk, certainly within his -- he works in the universities, he works at Texas Tech.  He has a risk at deviating away from the narrative that has been agreed within his community.  I don't know what that risk is, but we know within universities that professors have been cancelled for holding certain views.  We saw everything that happened at Evergreen College with Bret Weinstein.  And somebody we spoke to said, "You will not get tenure holding certain opinions these days".  So, there's different social risks there.

Jeet Sidhu: Yeah.  So, there's two things I want to dig into there.  The first, in terms of the way that there's a culture war happening.  So, isn't it interesting that the way that you're solving the world's issues is by removing a competitor in the office next door?!  I mean, that is just time after time.  The way the Cultural Revolution happened in China was the same way.  Any time one of these destructive social movements come into power, the way that they empower people is by saying, "You should point out people who aren't supporting Xi Jinping thought", for example.  Similarly here, if you support nuclear, I imagine it does cast some doubt on your future funding.

But the other interesting thing here is, something you said stuck out to me.  Imagine someone like Alex, who's questioning all these things about the current assumptions; the problem with accepting that is it is difficult to change your assumptions about the world.  What if the way that people are making decisions isn't based off what they think is good for society, but it's based off their own incentives?  That's a big shift to make in people's minds.

I'll propose another shift here, which I think is true, but it's a very controversial statement, which is the introduction of the university system in the United States was extremely destructive.  So, I talked earlier about how there was a massive increase in the number of people who went to university, starting in the 1960s.  Did you know that -- and even just high schools; spending in the United States on education has increased five times since roughly the 1960s.  Actually, I think my statistics are 1985 to 2015, all these.  Education spending has increased five times.  Maths scores, flat; reading scores, declining.  So, adult literacy in the United States is actually declining. 

They're spending more and more percentage points of GDP on education with worse results.  When you think about healthcare, healthcare spending has increased from something like 5% to 16%.  That number's probably out of date, I'm sure it's higher now.  The only reason that life expectancy's increased since this statistic is because people had healthier habits; they drank less, they had less cigarettes, things like that; completely unrelated to the massive increase in healthcare spending.

Peter McCormack: Did you see that chart that came out recently in the growth of administrators versus physicians within --

Jeet Sidhu: Oh, yeah, so that's a perfect example.  I think you should pull that up; pull up that chart.

Peter McCormack: Have you seen that, Danny?

Danny Knowles: No.

Peter McCormack: Search for -- unless you've got it on your Twitter.  Marty Bent tweeted it at some point.

Jeet Sidhu: So the thing is, this is true not only in healthcare, but it's also true in education.  So, the number of teachers is not increasing nearly as fast as the number of administrators.

Peter McCormack: This is in the US.  I tried to find the equivalent for the UK, and I don't think it's as high.  I don't think it's as radical as this, but it's insane.  But on the chart, they're putting different acts in, they're putting more bureaucracy in, which goes back to where the whole conversation started.  This is your DMVs.

Jeet Sidhu: Yeah.  Everyone is now a DMV employee.  And, sorry, I think I lost my point a little bit there with the university system.  All of the things that increase our quality of life were invented before the university system was expanded in the 1960s, and they were invented privately, without government help.  So, the narrative that we're told in high schools and colleges is, "There's these people in universities, they have tenure, so they can think free thoughts, they come up with new inventions and then innovation flows from the universities to the general public and to companies, who commercialise the technology".

The reality, and the documented history of this is, many inventions are invented by practitioners or engineers who are doing things, and then they're documented by academics, who then get the credit for inventing them.  So, that's one thing.  But then also, what improved our quality of life?  Everything from refrigerators, microwaves, cathode rays, television, radios, running water.  All of these things were invented before the 1960s, and part of the increased quality of life was increasing the adoption of these technologies.

So, since the 1960s, outside of the mobile phone and some of the innovations that we've seen in semiconductors, a lot of these things were already invented, and it's just they're being implemented.  So, the claim of legitimacy that the university system has, that they're inventing all these things, is fundamentally false.

Peter McCormack: You sure do sound like a libertarian.

Jeet Sidhu: No, I'm not a libertarian, absolutely not.

Peter McCormack: But you sound like one!

Jeet Sidhu: So, my argument against libertarianism is really simple.  The groups of people that are able to expand and improve their quality of life, it's not necessarily in libertarian systems.  You think about the way that the South Koreans expanded their economy, Japan; South Korea was like a dictatorship.  Or Singapore, it's run by one person.  It's just not the case that necessarily libertarianism is the best policy.

Now, where you get into a situation where the government is so inefficient and bloated and stuff, I definitely understand the appeal of libertarianism.

Peter McCormack: Me too, yeah.

Jeet Sidhu: The most interesting paper I've read, which I think about all the time, is this analysis of the GDP of Somalia.  So, there was a communist dictatorship in Somalia, and it was so destructive and destroyed the GDP so much that literal constant warfare was better than that.  So, they tracked GDP by looking at the number of exported cattle in the next country over, I think Ethiopia.  They found that the number of cattle exports actually increased during a period of constant warfare.  But it was still better than the communist system, which was actual straight-up destruction all the time.

Peter McCormack: I think it sounds like, to me, you are pro-democracy, but recognise an expanding inefficient state is something that needs to be addressed?

Jeet Sidhu: Absolutely.  And the thing about democracy is, the Founders didn't implement a democracy, they implemented a republic.  And the reason why is because you get mob rule and things like that; it's not very good.

Peter McCormack: Yeah.  Fascinating, man.  You crushed it, loved this.  Wow, a lot to think about.  Anything I've not asked you that you wish I had asked you?

Jeet Sidhu: No, that's pretty much it.  I think the one thing is, I'm planning to launch a newsletter.  So, if you check out my Twitter, @jeetsidhu_ on Twitter, there's a review link.  If you sign up for that, I'd appreciate it.

Peter McCormack: I will do and we'll put that in the show notes.  Let me know when it's live, and I'll retweet it out and we'll make sure people do that.  But this was brilliant.  You're going to have to come back on the show again, we're going to have to do this again.  I'd really like to dig into the idea of governance and the state with you, because I am a pro-democracy person.  People say, "Well, the US is a republic, but has the method of democracy in how you can vote", and such. 

I am a reluctant statist, somebody who is very unhappy, certainly with what's happening in the UK, the size of our state, the corrosion that's caused in society; but I'm very interested in digging into how that is improved, what the revolution is that comes with that.  I'm sure you'll have some better answers than I have.

So, appreciate you coming on, man, it's great to finally meet you, and yeah, I think people are going to enjoy this.

Jeet Sidhu: Nice to meet you in person too, man.  Catch you next time.