October 3, 2023 • 17 mins
Garvin Jabusch, Co-Founder and CIO of Green Alpha Advisors, discusses ESG investing.
Hosts: Carol Massar and Tim Stenovec. Producer: Paul Brennan.
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Speaker 1 (00:00):
This is Bloomberg Business Week with Carol Messer and Tim
Steneveek on Bloomberg Radio.
Speaker 2 (00:06):
So we've talked about this a lot.
Speaker 3 (00:08):
Tim that we've seen the establishment financial community, Blackrock, State Street,
Janis Henderson, many other money managers who spent years rolling
out sustainable funds, looking to capitalize on surging interest in
ESG investing, and now they've been abandoning an increasing number
of those products in the US amid political backlash, backlash,
excuse me and investor scrutiny.
Speaker 1 (00:29):
Yeah. Also recently UK Prime Minister Rishi Sunak rolling back
some of the country's climate strategy. Meantime, Carol that EU
has been accelerating its push to become the first climate
neutral continent. A lot going on in what feels like
a reckoning when it comes to ESG.
Speaker 2 (00:42):
It does. Every day there's headlines.
Speaker 3 (00:44):
Our next guest is definitely involved in this world in
the investment space back with us is Garvin J.
Speaker 2 (00:48):
Bush.
Speaker 3 (00:49):
He's co founder and CIO of the asset manager investing firm,
and they are investing in the so called next economy.
We've talked about this with him before. His firm, Green
Alpha Advisors. He is based in Colorado, but he's back
in our Blueberg Interactive broker studio.
Speaker 2 (01:03):
How are you.
Speaker 4 (01:04):
Doing well, Carol, Good to see you, Good to see you, Tim, you.
Speaker 2 (01:06):
See, good to see you. Big Based in Boulder. Yeah,
does that shape kind of how you look at the world.
Speaker 4 (01:13):
It probably does to some extent. You know, we founded
the firm in San Francisco, my co founder Jeremy and
I when we were still working for the Getty Family
office doing green tech betting for them, and we subsequently
moved it up to Boulder. But being there in the
land of the you know, the sustainability mindset and the
outdoors sports world, it definitely does color you're thinking a
(01:33):
little bit.
Speaker 1 (01:34):
Well, how does it make you think differently about how
you invest?
Speaker 4 (01:36):
Though with respect to like stock picking in portfolio construction,
I doubt that it really does overall in terms of mindset,
you know, I try to think about It's funny you
bring up ESG because we don't really think of ourselves
that way. I think a little bit more in terms
of you know, you set our term next economy right, well,
the reason.
Speaker 1 (01:54):
But the reason I ask is because you know, it's
over the weekend we were with some some neighbors, and
you know, Park Slope and Brooklyn got just hit with
rain over the weekend, and everybody was talking about all
the rain that they got in their apartments and their
houses and the basements and stuff. And our neighbors were saying,
you know, we're going to install solar because we feel
(02:15):
like we got to do our part, which I thought
was really interesting because what we're seeing now, no matter
where you live in the world, are the effects of
a changing climate. Yeah, it doesn't matter if you live
in Boulder.
Speaker 4 (02:27):
It doesn't know. We had one of our hardest winters.
I don't know if you guys saw that. The Rockies
just got pounded with snow last winter after ten years
of decreasing snow. We got so much. It was snowy
and icy, you know, into June. This this extremes, right,
extremes both ways. So yeah, I think you're right. There
really is no safe place to go. And if you
(02:48):
read like the new IEA report about how bad it's
getting there, we'll say we need to stop new development
of oil, gas and coal immediately. Right when IEA says that,
you know, we're kind of near a tipping point or
an inflection point. I'm sure you guys both know July
and August were the first and then again the subsequently
the first hottest month on Earth overall, including the austral
winter going on just then. So yeah, times are you
(03:11):
said it in your last Times are super interesting right now?
Speaker 3 (03:13):
So when you think of the next economy, what is
kind of the cross section with ESG and particularly like
I do, think about climate change and what is the
next economy in a world that is no doubt about
there's just things we cannot go back to because of
climate change.
Speaker 4 (03:29):
Yeah, thanks for that question, ESG. I view and opinions
definitely do differ on this, but I view it as
bringing some of the elements of thinking about sustainability or
other subjects that are important to people, such as justice
such as gender equality, such as the EI in general,
into the investment equation in a way that's in my opinion,
(03:52):
pretty incremental, pretty relative. Like a lot of ESG funds,
including you know you mentioned black Rock, will will do
a a sorting survey of oil and gas companies and
then put the greenest one to put in their ESG product. Well,
that's good as far as it goes, And in relative terms,
it is more green than a standard, say index fund, right,
and yet it still is invested in the things that,
(04:14):
as you correctly point out, we can't continue to use
indefinitely if we think we'll have a livable climate indefinitely. Right,
So those things don't go together. So, noticing that disconnect,
we came up with a new philosophy. We call it
next economics. And really what it comes down to, Carol,
is what are the things that the world can do without?
Is not going to be able to function without and
continue to have a growing, thriving economy and definitely without,
And then can I find companies doing those things phenomenally well?
(04:37):
When I can? It's relatively easy call.
Speaker 1 (04:39):
Is oil one of those things?
Speaker 4 (04:40):
Though it's not.
Speaker 1 (04:42):
It's not oil is you know, patrol and based products
are everything, right, whether we're talking about plastic bottles, whether
we're talking about how you get a pair of nikes
from the port to the foot locker or you're.
Speaker 4 (04:55):
Wearing right now. So yeah, yeah, I flew over here today.
I hear what you're saying.
Speaker 1 (05:00):
I mean, tell me, explain to me the world that
we're oil doesn't exist.
Speaker 4 (05:03):
Yeah, so we have a longer time horizon, you know,
we think in five and ten year increments. So we're
not traders, we're investors. We buy things and wait for
them to compound as they start gaining market share away
from their more destructive legacy predecessors for whatever their function
was in the economy. That could be transportation, that could
be materials, that could be just energy generation, as all
(05:25):
these things transition to something that can thrive indefinitely without
making us crash through the planetary boundaries, which I don't
know if you saw the report about that, but we've
already crashed through five of the nine and we're on
our way to more. Buts as fantastic new companies with
very economically competitive replacement technologies for everything that came before
start occurring, they start gaining market share away, meaning they
(05:47):
also not only are they helping us get to a
sustainable world, but they're growing faster than underlying GDP, which
gives me a great shot at long term very competitive
performance while I'm at it.
Speaker 2 (05:55):
So be specific, like what kinds of companies.
Speaker 4 (05:58):
So it depends on the sector, because we are cross
sector across industry. But you think about energy first, right,
so renewables, battery storage. But let's get away from that
a little bit into some of the stuff that Tim
was just bringing up. What about petrochemicals as opposed to
just fossil fuels right for travel there. I'm a huge
fan of biotech, and especially where biotech is converging with
(06:22):
AI to do things like make very interesting new advanced materials.
These are still early, right, but you see chrispergene editing
colliding with agriculture, colliding with material science to make very
very plausible and cheap and indefinitely sustainable replacement materials for plastics,
for waterproofing, for insulation, aerogels as opposed to pink fiberglass
(06:43):
for example. All kinds of interesting stuff all around the economy,
as long as you look and really Carol, back to
your question about ESG, I don't think it's about fact
checking every little detail in every company. I think it's
more about frame checking. You've been saying it. We live
in this unprecedented time. The world's different than it's ever been,
and it's a little bit crazy to fall back on
(07:04):
the old modern portfolio theory in my opinion, which Mark
Which wrote way back in nineteen fifty three, because you
can't respond to an unprecedented situation unprecedented situation by saying, well,
we know how this works, because we don't. It's unprecedented.
Speaker 3 (07:16):
Absolutely, So how do these next economy companies that are
maybe going to take five ten years really develop? I mean,
the establishment kind of stays in place until these guys
can scale up. Like what makes the shift in whether
it's energy, whether it's healthcare. There's so many things pharmaceuticals
so in making, plastics like so entrenched in our world
(07:37):
right now, So what does it take for the lever
to really.
Speaker 4 (07:41):
Move one eighty A couple of things.
Speaker 2 (07:43):
One, sorry there was a lot in there. They apologize
an event.
Speaker 4 (07:46):
I know, we could have a seminar about that now. No,
they have to be phenomenally effective. They have to work as.
Speaker 2 (07:51):
A say, question you never want to answer, but go.
Speaker 4 (07:52):
Ahead, HOWGPT do it? You could do it, but it
has to work as well or better than its predecessor.
And it has to be economically competitive. Like finally we
have evs starting to be cost competitive with internal combustion engines,
and they are so much cheaper to operate, their cost
of ownership is so much less that you're finally starting
to see really strong penetration. Like maybe it's going to
(08:14):
hit twenty five percent of a new sales in California
this year. This is a tipping point where.
Speaker 2 (08:18):
We've talked about the tipping part, right, Yeah, yeah.
Speaker 4 (08:19):
So tipping points do come, but you do have to
be a little bit patient, and it's for the long
term growth investor, which is what we are, right, So
you are in a little bit early, but when it pays,
it really pays.
Speaker 1 (08:29):
Hey, we only have a minute left. You're going to
stick with us though, and we're going to come back
and do more, but just talk to me about performance.
Speaker 4 (08:36):
Long term. Our long term performance is really solid. Our
average annuals are much better than their benchmarks, quite a
bit ahead of their benchmarks. But as you guys know,
this last eighteen months has been tough for growth. So
we've underperformed about the last eighteen months, including today.
Speaker 1 (08:50):
Tougher companies tougher advisors don't include oil companies too.
Speaker 4 (08:53):
Last year, No, that's true, that's true. It's not exclusive.
And you know, and you saw Reads take a lot
of punishment and his interest rates went up. It wasn't
just growth stocks, but it really was this proportionally growth stocks,
especially the handful that I really have long term conviction
in that are still pre earnings. It just got destroyed, right,
I still think, you know, if I can, if I
can go to portfolio level stats for a second. What
(09:14):
I'm trying to do is make sure to assemble a
portfolio that is cheaper than the big indexes, especially SPX,
on a price to book and on a price to
rev basis, but has rev growth that blows it away.
So right now my rev growth is about sixty percent,
which is ten x excuse me, six x SPX, right
about half the price.
Speaker 2 (09:31):
I want to get back to our guest, Garvin J.
Speaker 3 (09:33):
Bush, co founder and CIO of Green Alpha Advisors and
asset manager investing in the next economy as they describe it,
still with us in studio.
Speaker 2 (09:43):
It's so funny. We're having a great conversations about evs.
I mean, is this the is this it? You think
in terms of automobiles? And are you.
Speaker 1 (09:51):
Investing what do you mean like like hydrogen versus Yeah?
Speaker 2 (09:54):
Like are there other options?
Speaker 3 (09:56):
Is this just a stopgap for I don't know, twenty
thirty years.
Speaker 4 (10:00):
I'm sure that in some ways, if you're taking a
very long view, I'm sure that in some ways it
is in an intermediate step between you know, ice and
somewhere else. But I think it's a long stop gap
because for now, economically and in terms of material and
resource availability and just the price it takes to build
one and to run one, it's so much more competitive
than hydrogen or almost any other zero emissions drive train
(10:23):
that you have that I think, yeah, it's the thing now.
And battery technology does keep improving every year, improves about
twelve percent in terms of density every year, just because
it scales and we learn, you know, about rights law
and about just manufacturing and operating leverage. So you know,
in that that means in seven years they'll be twice
twice as cheap and twice as dense at the same time.
(10:46):
So if you have a three hundred mile range car,
it'll be six hundred mile range for about half the
money for the battery pack. So yes, I think they're
very clearly the future.
Speaker 1 (10:54):
What about the components that go into these batteries though,
and the fact that that involves mining, it involves you
know sometimes yeah, tenuous relationships with other countries.
Speaker 4 (11:02):
Politics, Yeah, all of that.
Speaker 1 (11:04):
Carol would say, complicated.
Speaker 4 (11:06):
It's complicated, it's super complicated. And yet, well, what aboutism
is not really a valid form of argument, but I
would say certainly no more so than the fossil fuels economy.
Speaker 1 (11:15):
It's a good point.
Speaker 4 (11:16):
And then secondly, the extractive event. When you're talking about
pulling out a bunch of lithium from the ground, you know,
you do it once and then it's in a vehicle
for ten years, and then it can be you know, JB.
Strable's company, Redwood Materials, will recycle that for you and
it remains in the economy. So yes, there's this destructive
extractive event, and yet that material can remain in the
economy more or less indefinitely, whereas when you pull oil
(11:37):
or coal out of the ground, it's the ultimate non
renewable in that it is consumed entirely on its first
use and you literally got to go back to the well.
So in relative terms, you're correct, there's extractive and it
can be destructive, but it just isn't nearly as bad
as the fossil economy.
Speaker 2 (11:50):
So how are you investing in all of this.
Speaker 3 (11:52):
You've got your big picture, your macro, So I'm looking
at your ETF that you guys have Taiwan semis in it,
applied materials vestus when IBM is in it.
Speaker 2 (12:01):
Yeah, why is IBM in it?
Speaker 4 (12:02):
You know it's funny.
Speaker 3 (12:03):
People still say sorry, IBM, no dis but I'm just
trying to understand.
Speaker 4 (12:08):
I don't worry, IBM. I got your back.
Speaker 3 (12:10):
No.
Speaker 4 (12:10):
People still think of them as the big IT consultancy,
and that's not really them anymore.
Speaker 3 (12:14):
Now.
Speaker 4 (12:14):
They're really an innovation powerhouse, focusing on things like blockchain
technology meaning zero trust ledgers, to AI, to quantum computing,
the real tools of the next economy that are going
to help with solve problems very much the same sort
of reasons that we have other AI names in there,
such as TSM.
Speaker 1 (12:32):
Hey, Caravin, I want to talk about AI in terms of,
you know, how much compute power it takes to actually
do these calculations to have these you know, smart programs
that can do these things. That's kind of hard to justify.
Right from an energy intensity perspective.
Speaker 4 (12:52):
Yeah, they're huge, huge power hogs, no question about it. There.
I think about the energy transition really here again, I
take a thirty thousand foot long term structural view. I
don't think it's the use case for energy that's the problem.
It's the source and as the energy transition continues, and
there's more and more wind and solar of course, with
storage and possibly possibly if Bill Gates is right, and
(13:15):
then anybody ever deploys a working one small module or nuclear.
I'm not invested there because I don't see the economics
in it yet. But possibly geothermal, the deep geo thermal
that can be full time based load anywhere, right, various
you know who know, its possibly confusion at some point
they've got the ignition going on that finally, So okay,
(13:37):
we've talked a lot about that. Actually, yeah, so it's
all really interesting stuff and it's all coming and the
part that's already here is the wind, solar and storage, right,
and it's and it's pretty effective, and it's gaining market
share every year. In that it's almost all of the
new marginal capacity coming online every year. So you know,
fossil fuels are still eighty two percent of the global
energy mix, right, but this is down for eighty seven
percent just a few years ago, and the trend is
(13:57):
going to continue. So it's I don't think it's the
use case. I don't think it's O. No, bitcoin mining
is destroying the earth. I think it's well, no, the
power grid is and as we continue to transition, we'll
be able to use as much energy as we like
for whatever use case. And I think AI is going
to be critical to helping us solve our problems. I
couldn't get over how much I like Mustafa Suliman's new book,
The Coming Wave. If you guys haven't checked that yet,
(14:17):
you probably love it.
Speaker 1 (14:18):
No, I don't have it all.
Speaker 2 (14:19):
Right, have to check it out. I'm looking at from
your website.
Speaker 3 (14:23):
We only invest in companies whose products and services address
the global economy's greatest system level risks.
Speaker 2 (14:28):
What are our greatest system level risks?
Speaker 4 (14:30):
We put them in a few buckets. Of course, the
climate crisis is sort of the grandaddy of all of them,
and a lot of things fall out from that. Tim
was bringing up extreme weather earlier. That's certainly one of
the things, but also resource degradation, especially top soil, water,
other key resources that are being degraded rapidly. But then
also human disease burdens. That's another reason we like biotech.
Speaker 2 (14:49):
Those Madernas in your top holdings, yep, this.
Speaker 4 (14:53):
Is one where the long view did work. We were
early to Maderna. We love their intellectual property around being
able to modify mRNA to affect Phoenix, to change in
an organism so that it could resist a disease. We
knew that that ip estate was worth a lot, even
though they were still pre earnings. You know, we bought
them in twenty nineteen. We didn't see the catalyst of
the pandemic coming, but we were sure glad we held
them when it did hit because that was I don't
(15:14):
even know how much of a returner for us.
Speaker 1 (15:16):
You think they can use this technology for things like cancer.
Speaker 4 (15:20):
Yeah, In fact, they've got several candidates in the pipeline.
Speaker 1 (15:24):
And you're optimistic about those candidates are one varying degrees?
Speaker 4 (15:27):
Yeah, well, that's a good point, Tim, And what I
really like about them is that they right now they've
got about twenty nine shots on goal in their pipeline.
They don't need all of them to be blockbusters, right,
Just a couple will do. And they're actually they just
had their science day and they're projecting fifteen to twenty
billion in annual revs from their pipeline drugs by twenty
twenty eight, not that far out, and still five to
six billion on COVID from now to then.
Speaker 3 (15:49):
Jamie told our Emily Cheg today in an interview, your
children are going to live to one hundred and not
of cancer because of technology, And they talked a lot
about artificialists.
Speaker 1 (15:58):
Jamie Diamond, right, call him Jamie Jamie Diamond, Like, yes.
Speaker 2 (16:02):
You know, what did I say, Jamie Jamie Diamond.
Speaker 4 (16:05):
I didn't really know he was that much of a
tech offer, kind like Madonna.
Speaker 2 (16:07):
You know, Beyonce, you only have one tail world. That's true,
But I mean the whole idea of AI changing things.
Speaker 3 (16:14):
What is your kind of biggest AI bet right now?
Speaker 2 (16:16):
Just got about thirty seconds.
Speaker 4 (16:17):
I'm a huge AI optimist, optimist, and I think that
the confluence with biotech is where most of the games
are going to be, not just in health, but surely
there and I think we could very well be living
in a cancer free world. He could be right about that.
There's a company, verve Therapeutics, that is doing a gene
switch off in your liver that will make it so
you don't make LDLC anymore, meaning heart disease could be
a thing of the past within the next few years.
(16:39):
So yes, AI is needed to be able to mash
all the massive genomic data, but then so is biotech.
So the confluence of AI and biotech, I think is
huge and it's going to define the next century.
Speaker 2 (16:48):
Fascinating, right.
Speaker 3 (16:49):
We talked about some like in terms of innovation healthcare, medical,
like it feels like it's lagged, but I feel like
with COVID Messenger, RNA, like just there's a lot of
things in AI that I feel like they're kind of
the next way.
Speaker 4 (16:58):
I couldn't agree more. Gene editing, interesting stuff. You know.
Walter Isaacson who just wrote the biography of Elon Musk.
His previous one was about Jennifer Dowdner, the discoverer of
Christopher cast nine. Equally fascinating and also worth a reading.
Now that I'm here to do book club, it sounds
like suddenly, but it.
Speaker 2 (17:14):
Sounds like we are two books on our list, Garvin.
Speaker 4 (17:18):
Great to check in with you, all right, Great to
hang with you guys.
Speaker 2 (17:20):
Safe travels home, Garvin J.
Speaker 3 (17:22):
Bush, of course, co founder CIO of Green Alpha Advisors.
Speaker 2 (17:25):
Here in studio,
This is Bloomberg Business Week with Carol Messer and Tim
Steneveek on Bloomberg Radio.
Speaker 2 (00:06):
So we've talked about this a lot.
Speaker 3 (00:08):
Tim that we've seen the establishment financial community, Blackrock, State Street,
Janis Henderson, many other money managers who spent years rolling
out sustainable funds, looking to capitalize on surging interest in
ESG investing, and now they've been abandoning an increasing number
of those products in the US amid political backlash, backlash,
excuse me and investor scrutiny.
Speaker 1 (00:29):
Yeah. Also recently UK Prime Minister Rishi Sunak rolling back
some of the country's climate strategy. Meantime, Carol that EU
has been accelerating its push to become the first climate
neutral continent. A lot going on in what feels like
a reckoning when it comes to ESG.
Speaker 2 (00:42):
It does. Every day there's headlines.
Speaker 3 (00:44):
Our next guest is definitely involved in this world in
the investment space back with us is Garvin J.
Speaker 2 (00:48):
Bush.
Speaker 3 (00:49):
He's co founder and CIO of the asset manager investing firm,
and they are investing in the so called next economy.
We've talked about this with him before. His firm, Green
Alpha Advisors. He is based in Colorado, but he's back
in our Blueberg Interactive broker studio.
Speaker 2 (01:03):
How are you.
Speaker 4 (01:04):
Doing well, Carol, Good to see you, Good to see you, Tim, you.
Speaker 2 (01:06):
See, good to see you. Big Based in Boulder. Yeah,
does that shape kind of how you look at the world.
Speaker 4 (01:13):
It probably does to some extent. You know, we founded
the firm in San Francisco, my co founder Jeremy and
I when we were still working for the Getty Family
office doing green tech betting for them, and we subsequently
moved it up to Boulder. But being there in the
land of the you know, the sustainability mindset and the
outdoors sports world, it definitely does color you're thinking a
(01:33):
little bit.
Speaker 1 (01:34):
Well, how does it make you think differently about how
you invest?
Speaker 4 (01:36):
Though with respect to like stock picking in portfolio construction,
I doubt that it really does overall in terms of mindset,
you know, I try to think about It's funny you
bring up ESG because we don't really think of ourselves
that way. I think a little bit more in terms
of you know, you set our term next economy right, well,
the reason.
Speaker 1 (01:54):
But the reason I ask is because you know, it's
over the weekend we were with some some neighbors, and
you know, Park Slope and Brooklyn got just hit with
rain over the weekend, and everybody was talking about all
the rain that they got in their apartments and their
houses and the basements and stuff. And our neighbors were saying,
you know, we're going to install solar because we feel
(02:15):
like we got to do our part, which I thought
was really interesting because what we're seeing now, no matter
where you live in the world, are the effects of
a changing climate. Yeah, it doesn't matter if you live
in Boulder.
Speaker 4 (02:27):
It doesn't know. We had one of our hardest winters.
I don't know if you guys saw that. The Rockies
just got pounded with snow last winter after ten years
of decreasing snow. We got so much. It was snowy
and icy, you know, into June. This this extremes, right,
extremes both ways. So yeah, I think you're right. There
really is no safe place to go. And if you
(02:48):
read like the new IEA report about how bad it's
getting there, we'll say we need to stop new development
of oil, gas and coal immediately. Right when IEA says that,
you know, we're kind of near a tipping point or
an inflection point. I'm sure you guys both know July
and August were the first and then again the subsequently
the first hottest month on Earth overall, including the austral
winter going on just then. So yeah, times are you
(03:11):
said it in your last Times are super interesting right now?
Speaker 3 (03:13):
So when you think of the next economy, what is
kind of the cross section with ESG and particularly like
I do, think about climate change and what is the
next economy in a world that is no doubt about
there's just things we cannot go back to because of
climate change.
Speaker 4 (03:29):
Yeah, thanks for that question, ESG. I view and opinions
definitely do differ on this, but I view it as
bringing some of the elements of thinking about sustainability or
other subjects that are important to people, such as justice
such as gender equality, such as the EI in general,
into the investment equation in a way that's in my opinion,
(03:52):
pretty incremental, pretty relative. Like a lot of ESG funds,
including you know you mentioned black Rock, will will do
a a sorting survey of oil and gas companies and
then put the greenest one to put in their ESG product. Well,
that's good as far as it goes, And in relative terms,
it is more green than a standard, say index fund, right,
and yet it still is invested in the things that,
(04:14):
as you correctly point out, we can't continue to use
indefinitely if we think we'll have a livable climate indefinitely. Right,
So those things don't go together. So, noticing that disconnect,
we came up with a new philosophy. We call it
next economics. And really what it comes down to, Carol,
is what are the things that the world can do without?
Is not going to be able to function without and
continue to have a growing, thriving economy and definitely without,
And then can I find companies doing those things phenomenally well?
(04:37):
When I can? It's relatively easy call.
Speaker 1 (04:39):
Is oil one of those things?
Speaker 4 (04:40):
Though it's not.
Speaker 1 (04:42):
It's not oil is you know, patrol and based products
are everything, right, whether we're talking about plastic bottles, whether
we're talking about how you get a pair of nikes
from the port to the foot locker or you're.
Speaker 4 (04:55):
Wearing right now. So yeah, yeah, I flew over here today.
I hear what you're saying.
Speaker 1 (05:00):
I mean, tell me, explain to me the world that
we're oil doesn't exist.
Speaker 4 (05:03):
Yeah, so we have a longer time horizon, you know,
we think in five and ten year increments. So we're
not traders, we're investors. We buy things and wait for
them to compound as they start gaining market share away
from their more destructive legacy predecessors for whatever their function
was in the economy. That could be transportation, that could
be materials, that could be just energy generation, as all
(05:25):
these things transition to something that can thrive indefinitely without
making us crash through the planetary boundaries, which I don't
know if you saw the report about that, but we've
already crashed through five of the nine and we're on
our way to more. Buts as fantastic new companies with
very economically competitive replacement technologies for everything that came before
start occurring, they start gaining market share away, meaning they
(05:47):
also not only are they helping us get to a
sustainable world, but they're growing faster than underlying GDP, which
gives me a great shot at long term very competitive
performance while I'm at it.
Speaker 2 (05:55):
So be specific, like what kinds of companies.
Speaker 4 (05:58):
So it depends on the sector, because we are cross
sector across industry. But you think about energy first, right,
so renewables, battery storage. But let's get away from that
a little bit into some of the stuff that Tim
was just bringing up. What about petrochemicals as opposed to
just fossil fuels right for travel there. I'm a huge
fan of biotech, and especially where biotech is converging with
(06:22):
AI to do things like make very interesting new advanced materials.
These are still early, right, but you see chrispergene editing
colliding with agriculture, colliding with material science to make very
very plausible and cheap and indefinitely sustainable replacement materials for plastics,
for waterproofing, for insulation, aerogels as opposed to pink fiberglass
(06:43):
for example. All kinds of interesting stuff all around the economy,
as long as you look and really Carol, back to
your question about ESG, I don't think it's about fact
checking every little detail in every company. I think it's
more about frame checking. You've been saying it. We live
in this unprecedented time. The world's different than it's ever been,
and it's a little bit crazy to fall back on
(07:04):
the old modern portfolio theory in my opinion, which Mark
Which wrote way back in nineteen fifty three, because you
can't respond to an unprecedented situation unprecedented situation by saying, well,
we know how this works, because we don't. It's unprecedented.
Speaker 3 (07:16):
Absolutely, So how do these next economy companies that are
maybe going to take five ten years really develop? I mean,
the establishment kind of stays in place until these guys
can scale up. Like what makes the shift in whether
it's energy, whether it's healthcare. There's so many things pharmaceuticals
so in making, plastics like so entrenched in our world
(07:37):
right now, So what does it take for the lever
to really.
Speaker 4 (07:41):
Move one eighty A couple of things.
Speaker 2 (07:43):
One, sorry there was a lot in there. They apologize
an event.
Speaker 4 (07:46):
I know, we could have a seminar about that now. No,
they have to be phenomenally effective. They have to work as.
Speaker 2 (07:51):
A say, question you never want to answer, but go.
Speaker 4 (07:52):
Ahead, HOWGPT do it? You could do it, but it
has to work as well or better than its predecessor.
And it has to be economically competitive. Like finally we
have evs starting to be cost competitive with internal combustion engines,
and they are so much cheaper to operate, their cost
of ownership is so much less that you're finally starting
to see really strong penetration. Like maybe it's going to
(08:14):
hit twenty five percent of a new sales in California
this year. This is a tipping point where.
Speaker 2 (08:18):
We've talked about the tipping part, right, Yeah, yeah.
Speaker 4 (08:19):
So tipping points do come, but you do have to
be a little bit patient, and it's for the long
term growth investor, which is what we are, right, So
you are in a little bit early, but when it pays,
it really pays.
Speaker 1 (08:29):
Hey, we only have a minute left. You're going to
stick with us though, and we're going to come back
and do more, but just talk to me about performance.
Speaker 4 (08:36):
Long term. Our long term performance is really solid. Our
average annuals are much better than their benchmarks, quite a
bit ahead of their benchmarks. But as you guys know,
this last eighteen months has been tough for growth. So
we've underperformed about the last eighteen months, including today.
Speaker 1 (08:50):
Tougher companies tougher advisors don't include oil companies too.
Speaker 4 (08:53):
Last year, No, that's true, that's true. It's not exclusive.
And you know, and you saw Reads take a lot
of punishment and his interest rates went up. It wasn't
just growth stocks, but it really was this proportionally growth stocks,
especially the handful that I really have long term conviction
in that are still pre earnings. It just got destroyed, right,
I still think, you know, if I can, if I
can go to portfolio level stats for a second. What
(09:14):
I'm trying to do is make sure to assemble a
portfolio that is cheaper than the big indexes, especially SPX,
on a price to book and on a price to
rev basis, but has rev growth that blows it away.
So right now my rev growth is about sixty percent,
which is ten x excuse me, six x SPX, right
about half the price.
Speaker 2 (09:31):
I want to get back to our guest, Garvin J.
Speaker 3 (09:33):
Bush, co founder and CIO of Green Alpha Advisors and
asset manager investing in the next economy as they describe it,
still with us in studio.
Speaker 2 (09:43):
It's so funny. We're having a great conversations about evs.
I mean, is this the is this it? You think
in terms of automobiles? And are you.
Speaker 1 (09:51):
Investing what do you mean like like hydrogen versus Yeah?
Speaker 2 (09:54):
Like are there other options?
Speaker 3 (09:56):
Is this just a stopgap for I don't know, twenty
thirty years.
Speaker 4 (10:00):
I'm sure that in some ways, if you're taking a
very long view, I'm sure that in some ways it
is in an intermediate step between you know, ice and
somewhere else. But I think it's a long stop gap
because for now, economically and in terms of material and
resource availability and just the price it takes to build
one and to run one, it's so much more competitive
than hydrogen or almost any other zero emissions drive train
(10:23):
that you have that I think, yeah, it's the thing now.
And battery technology does keep improving every year, improves about
twelve percent in terms of density every year, just because
it scales and we learn, you know, about rights law
and about just manufacturing and operating leverage. So you know,
in that that means in seven years they'll be twice
twice as cheap and twice as dense at the same time.
(10:46):
So if you have a three hundred mile range car,
it'll be six hundred mile range for about half the
money for the battery pack. So yes, I think they're
very clearly the future.
Speaker 1 (10:54):
What about the components that go into these batteries though,
and the fact that that involves mining, it involves you
know sometimes yeah, tenuous relationships with other countries.
Speaker 4 (11:02):
Politics, Yeah, all of that.
Speaker 1 (11:04):
Carol would say, complicated.
Speaker 4 (11:06):
It's complicated, it's super complicated. And yet, well, what aboutism
is not really a valid form of argument, but I
would say certainly no more so than the fossil fuels economy.
Speaker 1 (11:15):
It's a good point.
Speaker 4 (11:16):
And then secondly, the extractive event. When you're talking about
pulling out a bunch of lithium from the ground, you know,
you do it once and then it's in a vehicle
for ten years, and then it can be you know, JB.
Strable's company, Redwood Materials, will recycle that for you and
it remains in the economy. So yes, there's this destructive
extractive event, and yet that material can remain in the
economy more or less indefinitely, whereas when you pull oil
(11:37):
or coal out of the ground, it's the ultimate non
renewable in that it is consumed entirely on its first
use and you literally got to go back to the well.
So in relative terms, you're correct, there's extractive and it
can be destructive, but it just isn't nearly as bad
as the fossil economy.
Speaker 2 (11:50):
So how are you investing in all of this.
Speaker 3 (11:52):
You've got your big picture, your macro, So I'm looking
at your ETF that you guys have Taiwan semis in it,
applied materials vestus when IBM is in it.
Speaker 2 (12:01):
Yeah, why is IBM in it?
Speaker 4 (12:02):
You know it's funny.
Speaker 3 (12:03):
People still say sorry, IBM, no dis but I'm just
trying to understand.
Speaker 4 (12:08):
I don't worry, IBM. I got your back.
Speaker 3 (12:10):
No.
Speaker 4 (12:10):
People still think of them as the big IT consultancy,
and that's not really them anymore.
Speaker 3 (12:14):
Now.
Speaker 4 (12:14):
They're really an innovation powerhouse, focusing on things like blockchain
technology meaning zero trust ledgers, to AI, to quantum computing,
the real tools of the next economy that are going
to help with solve problems very much the same sort
of reasons that we have other AI names in there,
such as TSM.
Speaker 1 (12:32):
Hey, Caravin, I want to talk about AI in terms of,
you know, how much compute power it takes to actually
do these calculations to have these you know, smart programs
that can do these things. That's kind of hard to justify.
Right from an energy intensity perspective.
Speaker 4 (12:52):
Yeah, they're huge, huge power hogs, no question about it. There.
I think about the energy transition really here again, I
take a thirty thousand foot long term structural view. I
don't think it's the use case for energy that's the problem.
It's the source and as the energy transition continues, and
there's more and more wind and solar of course, with
storage and possibly possibly if Bill Gates is right, and
(13:15):
then anybody ever deploys a working one small module or nuclear.
I'm not invested there because I don't see the economics
in it yet. But possibly geothermal, the deep geo thermal
that can be full time based load anywhere, right, various
you know who know, its possibly confusion at some point
they've got the ignition going on that finally, So okay,
(13:37):
we've talked a lot about that. Actually, yeah, so it's
all really interesting stuff and it's all coming and the
part that's already here is the wind, solar and storage, right,
and it's and it's pretty effective, and it's gaining market
share every year. In that it's almost all of the
new marginal capacity coming online every year. So you know,
fossil fuels are still eighty two percent of the global
energy mix, right, but this is down for eighty seven
percent just a few years ago, and the trend is
(13:57):
going to continue. So it's I don't think it's the
use case. I don't think it's O. No, bitcoin mining
is destroying the earth. I think it's well, no, the
power grid is and as we continue to transition, we'll
be able to use as much energy as we like
for whatever use case. And I think AI is going
to be critical to helping us solve our problems. I
couldn't get over how much I like Mustafa Suliman's new book,
The Coming Wave. If you guys haven't checked that yet,
(14:17):
you probably love it.
Speaker 1 (14:18):
No, I don't have it all.
Speaker 2 (14:19):
Right, have to check it out. I'm looking at from
your website.
Speaker 3 (14:23):
We only invest in companies whose products and services address
the global economy's greatest system level risks.
Speaker 2 (14:28):
What are our greatest system level risks?
Speaker 4 (14:30):
We put them in a few buckets. Of course, the
climate crisis is sort of the grandaddy of all of them,
and a lot of things fall out from that. Tim
was bringing up extreme weather earlier. That's certainly one of
the things, but also resource degradation, especially top soil, water,
other key resources that are being degraded rapidly. But then
also human disease burdens. That's another reason we like biotech.
Speaker 2 (14:49):
Those Madernas in your top holdings, yep, this.
Speaker 4 (14:53):
Is one where the long view did work. We were
early to Maderna. We love their intellectual property around being
able to modify mRNA to affect Phoenix, to change in
an organism so that it could resist a disease. We
knew that that ip estate was worth a lot, even
though they were still pre earnings. You know, we bought
them in twenty nineteen. We didn't see the catalyst of
the pandemic coming, but we were sure glad we held
them when it did hit because that was I don't
(15:14):
even know how much of a returner for us.
Speaker 1 (15:16):
You think they can use this technology for things like cancer.
Speaker 4 (15:20):
Yeah, In fact, they've got several candidates in the pipeline.
Speaker 1 (15:24):
And you're optimistic about those candidates are one varying degrees?
Speaker 4 (15:27):
Yeah, well, that's a good point, Tim, And what I
really like about them is that they right now they've
got about twenty nine shots on goal in their pipeline.
They don't need all of them to be blockbusters, right,
Just a couple will do. And they're actually they just
had their science day and they're projecting fifteen to twenty
billion in annual revs from their pipeline drugs by twenty
twenty eight, not that far out, and still five to
six billion on COVID from now to then.
Speaker 3 (15:49):
Jamie told our Emily Cheg today in an interview, your
children are going to live to one hundred and not
of cancer because of technology, And they talked a lot
about artificialists.
Speaker 1 (15:58):
Jamie Diamond, right, call him Jamie Jamie Diamond, Like, yes.
Speaker 2 (16:02):
You know, what did I say, Jamie Jamie Diamond.
Speaker 4 (16:05):
I didn't really know he was that much of a
tech offer, kind like Madonna.
Speaker 2 (16:07):
You know, Beyonce, you only have one tail world. That's true,
But I mean the whole idea of AI changing things.
Speaker 3 (16:14):
What is your kind of biggest AI bet right now?
Speaker 2 (16:16):
Just got about thirty seconds.
Speaker 4 (16:17):
I'm a huge AI optimist, optimist, and I think that
the confluence with biotech is where most of the games
are going to be, not just in health, but surely
there and I think we could very well be living
in a cancer free world. He could be right about that.
There's a company, verve Therapeutics, that is doing a gene
switch off in your liver that will make it so
you don't make LDLC anymore, meaning heart disease could be
a thing of the past within the next few years.
(16:39):
So yes, AI is needed to be able to mash
all the massive genomic data, but then so is biotech.
So the confluence of AI and biotech, I think is
huge and it's going to define the next century.
Speaker 2 (16:48):
Fascinating, right.
Speaker 3 (16:49):
We talked about some like in terms of innovation healthcare, medical,
like it feels like it's lagged, but I feel like
with COVID Messenger, RNA, like just there's a lot of
things in AI that I feel like they're kind of
the next way.
Speaker 4 (16:58):
I couldn't agree more. Gene editing, interesting stuff. You know.
Walter Isaacson who just wrote the biography of Elon Musk.
His previous one was about Jennifer Dowdner, the discoverer of
Christopher cast nine. Equally fascinating and also worth a reading.
Now that I'm here to do book club, it sounds
like suddenly, but it.
Speaker 2 (17:14):
Sounds like we are two books on our list, Garvin.
Speaker 4 (17:18):
Great to check in with you, all right, Great to
hang with you guys.
Speaker 2 (17:20):
Safe travels home, Garvin J.
Speaker 3 (17:22):
Bush, of course, co founder CIO of Green Alpha Advisors.
Speaker 2 (17:25):
Here in studio,
Hosts And Creators
Tim Stenovec
Carol Massar
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