For those of you who speak market, you may already know who he is. For those of you who don't, let me tell you why you should be reading and listening to everything this man has to say.
GMO manages assets for clients that add up to about $106 Billion dollars. For individuals, the minimums run between $5M and $10M dollars to even get to talk to them about managing your money.
In other words, GMO handles really big amounts of money for really wealthy individuals and institutions.
But that's not why Grantham is important, or even what makes me think you should listen to him. It is because not only does he speak market, he speaks with deep market knowledge of diminishing resources, and he thinks, and analyzes for the long term.
Which leads him to say things like this in his Q2 2011 Letter to Investors about the problems facing us, and therefore our income stability and overall stability:
Overall, the best farms will have no erosion problems but, on average, soil will continue to be lost across the
globe. Together with increased weather extremes and higher input prices (perhaps much higher), there will be
increasing problems in feeding the world’s growing population.
In particular, a significant number of poor countries found mostly in Africa and Asia will almost certainly suffer from increasing malnutrition and starvation. The possibility of foreign assistance on the scale required seems remote.
The many stresses on agriculture will be exacerbated at least slightly by increasing temperatures, and severely by increased weather instability, especially more frequent and severe droughts and fl oods.
These types of slow-burning problems that creep up on us over decades and are surrounded by a lack of scientific precision hit both our capitalist system and our human nature where it hurts.
Capitalism, despite its magnificent virtues in the short term – above all, its ability to adjust to changing conditions– has several weaknesses that affect this issue.
o It cannot deal with the tragedy of the commons, e.g., overfishing, collective soil erosion, and air contamination.
o The finiteness of natural resources is simply ignored, and pricing is based entirely on short-term supply and
demand.
o More generally, because of the use of very high discount rates, modern capitalism attributes no material cost to damage that occurs far into the future. Our grandchildren and the problems they will face because of a warming planet with increasing weather instability and, particularly, with resource shortages, have, to the standard capitalist approach, no material present value.
Grantham goes on to list how we will likely respond as a society to the issues (not particularly impressively) and the specific impacts to Energy, Metals, Fertilizers such as Phosphorus and Potash (both Potash and Phosphorus are critically necessary for plants to grow - and basic elements, which means we can't manufacture them. We run out, we don't eat. It's really that simple), Water and so on.
This man, worth more than most of us probably can imagine, is talking about how Chinese farmers recycle human waste to limit their soil depletion in his letters to his investors. Why?
Because he recognizes that we are at a tipping point. In his own words:
Last quarter I tried to make the case that the inevitable mismatch between finite resources and exponential population growth had finally shown its true face after many false alarms. This was made manifest through a remarkably bubble-like explosion of prices for raw materials. Importantly, prices surged twice in four years, which is a most unbubble-like event in our history book.The data suggested to us that rarest of rare birds; a new paradigm. And a very uncomfortable one at that. (emphasis is mine)In short, the way we live today is a devils bargain - we have intense short term gain in, well, everything - but there is the price tag. As with credit cards, eventually a payment becomes due, and this time the interest cost may be higher than we can manage.
Recently, as food somehow came up in a conversation with someone I dearly love, a response to our significant increase in local and, at least - whenever not local - organic and fair trade food purchases. "Oh, I don't give that much thought".
As it is with many comments that one recognizes as the sort of thing where it's better to leave it lie and move on to another topic, I did just that.
But it bothered me.
And I began to think that perhaps no one has, as yet, made a convincing argument to the general population about why it is absolutely, utterly critical that they think about that. Because we are at a tipping point. And what my daughter and her daughters may have available to them is likely to be less - far less - than what I have or my parents have.
Those with political agendas will, by turns explain to us how everything is just fine and how we're careening into a crisis situation that is about debts or deficits. Both are wrong.
There's a crisis, but it's much more fundamental than that. It's about water supplies, food availability, soil depletion. It is about the ability to feed our families. Our current level of abundance is unsustainable. And we, as individuals, need to do something about it.
That box of wheat thins, that package of Pepperidge Farms whatever-it-is has implications on our future. My choice to drive to work rather than take public transport has a price.
I hardly fit the description of someone who has either the pedigree or the moral authority to dictate to others. There are packages of Goldfish in my cabinets, Chex in my pantry, Hot Dogs in my freezer. But I am trying - to carpool, to work from home to lower my impact. To eat local and sustainable. To find new ways to abundance that don't involve Pottery Barn.
I have a long way to go, but I'm not alone in that - we're all a far cry from where we need to be on this. It's kind of reassuring to have some company when I travel this road of learning how to live so that my choices don't mean some banana farmer's child in South America goes hungry so that my child can eat.
Few of us like being told we need to change, but, like when a toddler acts out, limits are needed. There are those who would like us to never have to give up individual advantage for group benefit, but they are at odds with a sustainable future. Where individualism gets important is understanding that the government, big business, or new technology aren't going to save us. We have to save ourselves.
So why would Jeremy Grantham, who manages more money than most of us can probably imagine, be talking about agriculture, and not the next new technology? Talking about small farms, and European crop failure in the 1880s rather than the future trajectory of Apple and GM?
Because it's what matters. More than anything. It's going to be where we need to invest, where our risk lies, and where are future is. The future is not the next IPO. It's in the next tomato harvest.
