Jeremy Grantham: In a Climate of Risk

Jeremy Grantham is a Boston financier who has found himself in the thick of the fight over climate change for more than twenty years. He’s the founder and chief strategist of Grantham Mayo van Otterloo, or GMO, which manages $112 billion in assets.

When we spoke to him in his Rowes Wharf office, overlooking Boston Harbor, Grantham calls himself a “scatterbrained” investor working with a third-rate education. If, after raising the alarm loudly and very early about the catastrophic market bubbles of 1999 and 2008, he’s become one of America’s most prominent financial strategists, it’s a tribute to natural patience and a conservatism that he chalks up to a Yorkshire childhood and a Quaker grandfather. But Grantham’s also glad to carry weight in the world of feverish investment. His quarterly letters have become must-reads, offering a warier look, going deeper into the future, than one usually finds on Wall Street. (His latest is here.)

Grantham discovered the fragility and beauty of the natural world on family trips into old and ravaged forests of the Amazon basin and Borneo. Now his family foundation is engaged in a farsighted effort to fight climate-skeptical “propaganda” with propaganda of its own: funding change-now messages from groups like Bill McKibben’s 350.org, Greenpeace, and the World Wildlife Fund. It’s the “race of our lives”, he wrote: against short-term psychology and an entrenched fossil-fuel economy. Grantham is troubled by the long odds, but still he’s trying to draw money and mass attention to an existential risk — before it’s too late to do anything about it. Call it the biggest short.

Photo credit: Remco Bohle.

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  • Chris made this interview work. There are some good insights into a mind-set. To listen to Grantham speak, it is a public service – the canary in the mine – the work of a ‘foundation.’

    Grantham is a value investor. There’s a reason Grantham isn’t investing in water. The world’s potable water resources were picked over a decade ago by major corporations so there is no value there for trading.

    Are we to believe ISIS is going to get control of that dry sea and hold on for 20-40 years until we run out of dry-sea resources? And the rest of the world is powerless to do anything about it? Seriously?

    If the value of these things rises, alternatives happen, conservation happens, science and technology is applied. The values thus undergo “reversion to the mean”. Because he knows how to assess ‘bubbles’,
    Grantham has long since sold and moved on to the next scarce thing.

    What is wrong with accumulating resources and then selling
    them to an anxious market?
    What is the true value of these things?
    What is wrong with bubbles?
    How is wealth created?

    I wonder how Ms.Maxmin feels about the flipping of Maine’s forests for a profit. Would she consider wealth creation an act of love?
    What is love, if not the constant act of overvaluation?

    BTW, from the wiki for Max-min fairness:
    ……. the division of scarce resources, max-min fairness is
    said to be achieved by an allocation if and only if the allocation is feasible and an attempt to increase the allocation of any participant necessarily results in the decrease in the allocation of some other participant with an equal or smaller allocation.

    • Mary Fonseca

      Absolutely fascinating… We have had torrential rains and floods where I live in Europe. The predictions about resources, especially phosphorus are frightening. Mr. Grantham´s long view into the past and future make him unusual in the investment business, as he admits.

  • Potter

    Very interesting interview. Thank you!