Know your limits

Read this article to understand:

• The natural boundaries defining our relationship with the planet
• Why changing what we do in five key areas – energy, transport, food, information and materials – could radically improve the global outlook
• How new developments do not necessarily offer one-for-one substitutions, but give scope to upend systems entirely

Back in the 1970s, US academic Dennis Meadows was working at the Massachusetts Institute of Technology, undertaking systems modelling. His work ultimately prompted him to step forward with a bold thought:

“If present growth trends in world population, industrialisation, pollution, food production and resource depletion continue unchanged, the limits to growth on this planet will be reached sometime within the next 100 years,” he wrote. “The most probable result will be a rather sudden and uncontrollable decline in both population and industrial capacity.”¹

Unsurprisingly, that view of societal collapse was not universally welcomed at the time. Fifty years on, the natural world faces a variety of major stresses, but we also have more tools at our disposal – in information technology, energy generation and precision biology – which can be put to work.

Dr Nafeez Ahmed, director of global research communications at thinktank RethinkX, is a respected voice on the risks and opportunities of system transformation. He spoke to AIQ to give his take on where we are and what needs to happen next to put the global economy on a more sustainable footing. 

There is renewed interest in Dennis Meadows and the way he and his team developed ideas around The Limits to Growth. How did they influence you?

Dennis Meadows was pioneering. He and his late partner Donella had an influence on me and many others engaging in systems thinking. Their approach was ground-breaking; they thought about how we need to see global trends in an interconnected way and understand how surface-level phenomena are embedded in environmental and natural systems. That approach means considering the interplay between natural resources and other factors economists might traditionally look at.

The idea of being able to look outside the box and make connections was pivotal. Even if there were limitations to the World3 model, subsequent independent assessments have shown the modelling itself was largely accurate. There are areas where perhaps they overplayed or underplayed certain factors, but they flagged something very important: that natural limits or constraints can exist in nature, and we need to understand our relationship with these planetary boundaries. They also identified a resource bottleneck between 2020 and 2050, which I believe is broadly accurate.

What is often forgotten is that the modelling was not simplistic. They set out a set of scenarios that are interesting tools for decision making and how we anticipate challenges, risks and opportunities. Contemporary research attempting to assess the accuracy of World3 suggests we are close to a potential breakdown, decline and collapse scenario, but perhaps not approaching catastrophic worst-case scenarios – although they are still possible.

Conversely, this research confirms there is also the possibility of leveraging assets and technology and reorganising our societies to move towards a future full of possibilities. Within the scope of the modelling, there are multiple possible pathways. The future is not decided yet: we still have a window to make pivotal decisions about where we go.

You have spoken about feedback loops and how collapse in one system – food or water or geopolitics – could lead to collapse in another. Can you elaborate?

It is difficult to pin a single issue down. The danger is there are a lot of different things happening at the same time. That overwhelms our institutional capacity to respond, and we are starting to see this play out.

We have the climate challenge, and it is escalating. There are always natural disasters taking place, but there is something about the intensity and simultaneous nature of events recently that has struck people hard. We have had a global heatwave involving Europe, Asia and Africa. Perhaps that’s the first time that we've experienced this in such a visceral way; it broke all records.

One day, the Daily Mail was telling everyone not to worry about record heat and go to the beach; the next, there was a complete turnaround, with front-page coverage of the fires in London. Even those who are trying to downplay the problem are being forced to take note.

This is intimately interlinked with other crises. Our dependence on fossil fuels has played a role in our geopolitical vulnerability. We have seen war break out in Europe, partly because Russia has recognised that as a major fossil-fuel exporter, it needs to do something to shore up its global power in an economy where its most prized commodity may no longer be valued as much. There is a lot of complexity to break down, but all this is having repercussions on food and energy prices, driving an inflation and cost-of-living crisis.

These trends were coming into play even before the war in Europe, but are now intensifying. This is what happens when you fail to think systemically or holistically: you bunker down in the traditional way of thinking. The same geopolitical structures, values, land grabbing, energy grabbing – you do whatever you can to keep the show on the road. But these actions accelerate and amplify the interconnected challenges, and so we find ourselves in a feedback loop.

Where is the biggest potential for a negative feedback loop?

The key detail is the connection between Earth-system disruption and human-system destabilisation. When you have things happening in the Earth system that accelerate shocks, we must respond. The fire engines must come out and put fires out, and that will create costs. Politicians need to think about that; but the reality is that certain industries are risk-taking, and we are doing destructive things.

There is a danger we get lost in that symptom-oriented approach. If we focus too much on dealing with the symptoms, we forget the whole system, the big picture, and then we are more vulnerable to the next crisis.

We can see issues emerging with polarised politics and culture, and now people are talking of possible nuclear confrontation. By focusing on symptoms in this way, we become more vulnerable to the next Earth-system shock, because we are devoting too many resources in the existing system to the obvious signs of human-system destabilisation. When the next Earth-system shock takes place, it is more amplified, and more destructive of society and the economy – and we may again respond with more polarisation and division. The result is an amplifying feedback loop. This gives us a sense of how these feedbacks can get out of control.

However, this is a negative way of addressing things. We could get so lost in thinking about risks and crises, we fail to see how rapidly positive changes are coming and how quickly they could be scaled. We need to be asking whether we already have the tools to solve some of our problems. One narrative suggests we need expensive breakthrough technologies to solve our problems. When will we be able to suck carbon out of the air, for example, and do other difficult, expensive things?

What are the key areas with the potential for positive transformation?

If we look at the five foundational sectors in the economy – energy, transport, food, information and materials – existing technologies are going through a familiar pattern of exponential cost reductions and improvements in effectiveness which have historically driven exponential adoption. In these sectors, genuinely disruptive technologies have the potential to solve many of our biggest challenges.

Energy, transport and food are key, accounting for 90 per cent of carbon emissions. In energy, we are looking at solar, wind and batteries (SWB); in transport, electric vehicles (EVs), the potential for autonomous vehicles, and a new model called transport-as-a-service. We are looking at precision fermentation in the food system, and that is driving a revolution in plant-based proteins. This is linked with cellular agriculture, extending the revolution into animal proteins without having to kill animals.

These technologies already exist and are scaling at an exponential rate that has taken many incumbents by surprise. Conventional analysts have consistently failed to anticipate how rapidly the change might happen, and how the performance of these technologies is getting better all the time. If that continues according to the familiar patterns we’ve seen time and again with past technology disruptions, we have good reason to believe these technologies will become not only cost competitive, but cheaper – in most cases up to ten times – than the incumbents, purely due to economic forces. This will increasingly drive the impetus for wide adoption. It is very exciting, very positive and often missed when we are talking about the terrible things going on.

These new technologies are not going to be like-for-like substitutions, either. For example, a car wasn't a faster horse; it was wholly different. It completely changed the game. Many of these technologies are similar in the sense they will not be slightly better than what has gone before: they will completely change the way we do things.

The superpower potential of clean energy is one area worth watching. When you look at all the different combinations of solar, wind and batteries, we find the cheapest and most effective combination involves supersizing generating capacity by three to five times, which means you need far less storage capacity. It means overall system costs are far lower than implied by conventional assessments, because battery storage is one of the most expensive costs.

Once built out, you will be generating three to five times more energy than you do today, with the cost of production almost free, for most of the year. One robust scientific estimate suggests if rolled out globally, such a system could generate ten times today’s energy demand. You won't need continued raw materials inputs as we do with fossil fuels. The installations have a lifetime of around 50 to 80 years, and the technology is getting better.

That suggests a huge potential dividend, which could open other possibilities. Just as zero-cost information led to the emergence of Facebook, Google, Netflix and previously unthinkable new platform-based products and enterprises, this could happen too with renewable superpower. Energy owners will be able to offer their energy for all the services and industries that will now be electrifying and switching to the new energy system.

What could we do with that surplus electricity generated almost free? We could electrify processes that are costly to run, from wastewater treatments to recycling. Many industries could be revolutionised.

Imagine what could happen when, say, utilities invest in SWB facilities that allow them to reduce the cost of wastewater treatment. At first, traditional energy investors are likely to jump in, but the situation could change rapidly and become a global market that major companies seek to participate in. The initial investors will have first-mover advantage. Google is already in the lead here, buying its own SWB facilities – but it has not fully recognised its superpower potential yet. 

The key point is that this new system of energy production could generate more energy than we use today in the fossil-fuel system, at zero marginal cost. For most of the year, once the system is built, the cost of producing energy for those who own SWB systems should reduce to near zero, but the returns from selling that energy to a panoply of services who need it could be attractive.

Just as the disruption of zero marginal cost information via the internet, smartphone and social media has led to the emergence of new business models, value chains and wealth creation opportunities, the same will happen under clean energy, which will drive the emergence of a new electricity trading system. Value creation opportunities will extend far beyond our understanding of the energy system today.

How do you reconcile the negative and the positive scenarios?

It is difficult, because one vision seems dystopian and the other utopian. We are moving through the eye of the needle and the big danger is that negative externalities escalate and derail the transformation of our production systems over the next 20 or 30 years.

What happens depends on the choices we make. If we continue to put up barriers to new technologies, throw money at fossil fuels and engage in conflict, we could accelerate collapse processes. Our actions could delay the rollout of positive technologies, ensuring the change just isn’t fast enough. Our modelling suggests if we do nothing explicit, the disruptions won’t stop, but will take longer to roll out.

For example, if we delay the rollout of renewables to around 2040, we are well into the climate danger zone. Who knows what catastrophic outcomes could occur at that point? There are lots of uncertainties. I sometimes get accused of being a techno optimist, but there is no simple, automatic techno fix. We have brilliant tools that can help solve our problems, but we need to use them in the right way, fast, to get out of the danger zone. That requires big societal choices.

We can leverage markets to scale these things, but it does not mean we don't also leverage state power. We need governments to stop distorting markets and invest in difficult areas where the market is not likely to act, like residential heating. With the right action, there is a roadmap to accelerate change. But to do it, we must understand the possibilities.

What are the prospects of multilateral agreement to ensure change happens?

Many of the largest and most powerful actors in the world do not understand the environment we are in. If we use the framing of the adaptive cycle identified across nature by the late systems ecologist Crawford Holling, global civilisation has experienced a growth stage, a conservation stage and is moving into the release and reorganisation stages. It is a period of breakdown and uncertainty but also radical opportunities for new things.

Civilised societies have been here before, but the difference is that they did not know it. For instance, the printing press broke down medieval monopolies and paved the way for new thinking. It made a scientific revolution possible. But before that happened, a cultural and organisational shift was necessary. No-one planned this, but without it, the modern world as we know it would not exist.

That is different now, because of the knowledge we have and the kind of conversations underway. We are capable of recognising the inflection point we are arriving at. We have the tools and science to understand what is happening in a way no civilisation before us could. But we are still not quite there: until we have people and organisations able to see this moment for what it is – a fundamental phase transformation – to inform our choices, it could go either way.

The challenge is that the dominant world view belongs to the old system, built around incumbent industries. For example, centralised control of fossil fuels has been tied to military security arrangements, and these could unravel rapidly over the next ten to 15 years. This is a real challenge for institutions if they do not understand what is happening.

Further complicating matters are industries with almost open doors to governments, because of the way things have evolved. This results in a kind of thought capture among leaders and decision makers that may not have positive implications over the long run.

How can we open conversations through a more holistic systems lens? 

We have begun having these conversations among influential networks, including asset managers who make decisions about where funding is directed. We need to scale these conversations, because ultimately it is about the kind of world our children will inherit. It’s not about: “Where shall we go on holiday next year to avoid the danger of wildfire?” There are visceral implications for us to think about that not only stretch well into the future but affect us here and now – and it has a very human element to it.

We need to be mindful in the meantime that the conversation has become quite reductionist. It involves asking: “Which evil guys created this mess?” What’s been done has terrible consequences for the environment, and it is difficult to tackle.

There is another narrative we could follow. We simply need to ask: “Does what we are doing make sense? Is it rational to work and invest like this? Are these assets stranded, and will the investments around them therefore collapse within the next ten years?” Incumbent industries need to know that if powerful groups and governments are funding them, it is in everyone's interest to understand whether their assets are at risk of stranding.

When we understand the predictable pattern of technology disruptions throughout history, we realise certain industries are bound to become obsolete due to economic factors well within the next two decades. That process is unstoppable. But if this is allowed to happen without protecting people, it will be devastating for everyone. This doesn’t mean trying to shore up doomed industries, which would be a colossal mistake. It would tie our societies into the failure of industries being outcompeted by superior ones which have potential to generate bigger markets and more jobs. It means ensuring the transformation is managed carefully, so people have opportunities to benefit from this emerging system and are protected from the inevitable decline of incumbent industries.

This could include coming up with a strategy that allows industries to pivot using the best talent: we can make careful decisions about how to move people into new industries and reconfigure existing ones. This means realising environmental imperatives and economic interest are not a zero-sum game. The best pathway is to consider these things together.

You mentioned a lack of societal self-knowledge. Where are the blind spots?

One of the biggest relates to a lack of understanding about the technology solutions impacting the key foundational sectors of our economy. Everyone knows there has been a disruption in information technology, that the Internet has transformed the way we live, work and communicate. But recognition of disruptions in energy, transport and food is not widespread.

The specific dynamics of how those technologies are impacting cost curves, and the relationships between those curves and adoption rates, are not widely understood. When they are understood better, we get a clearer sense of the potential speed and impact of change.

We also need to understand disruption as a lever for system change. Disruptions are never just one-for-one substitutions. They always create new systems with new rules, properties and dynamics. Only by recognising and reorganising our societies to adapt to these new system dynamics can we be in a position to harness, maximise and distribute the benefits. If we fail to make the right choices based on a lack of understanding of how disruptions drive systems change, our societies may not adapt quickly enough. If, for example, we cling onto the centralised utility monopoly regulatory framework for energy, we won't be able to harness the distinctively distributed benefits of a superpower renewable energy system.

The key is to ask: “What are the distinctive system properties, and what risks and opportunities come with that?”

With EVs, for instance, lots of people are asking about materials scarcity. One of the insights we had is that EVs will not only become cheaper, but autonomy will drop costs further. Ride hailing, using transport-as-a-service, will be cheaper than owning and managing your own car: the economics of that make sense.

It might happen through a private market system. It might be something governments choose to build as a public transport system. Either way, driven to mass adoption by the cost trajectory, transport-as-a-service will mean you need a fraction of the vehicles on the road today. Coupled with no longer needing seasonal battery storage due to supersizing generating capacity, this will change the story on materials requirements completely. If we don’t think about this, we could build out a lot of battery storage and not enough generating capacity and end up with a very expensive system.

With renewables, there is a misunderstanding of the intermittency issue. There is an assumption we need baseload power, and fossil fuels will have to supply it, perhaps alongside some carbon capture technology, along with nuclear. That is a different narrative to the one that emerges if you consider the empirical cost curve data showing how renewable technologies will become ten times cheaper than fossil fuel in the next ten-15 years. As my colleague Tony Seba says, a tenfold differential in cost consistently leads to the evisceration of incumbent technologies throughout history.

What about the financial system?

One major misunderstanding of the energy, transport and food transformations is the assumption they need to be state-driven. While the state has an important role to play, markets can do the bulk of the work. That is because the key technology disruptions are scaling for economic reasons. As their costs of production are plummeting exponentially, the opportunities for returns are growing exponentially.

This is an entrepreneurial opportunity that has great potential for value creation, but it is constrained by regulations designed around the old incumbent industries. It needs to be unlocked.

Subsidies for these technologies are not needed – only strategic support for specific difficult areas such as residential heating. The key challenge is to remove market barriers, such as subsidies for incumbents. This recalibrating of markets is simply about making them free, fair and competitive. That will incentivise private finance to come on board, which will be able to contribute most of the investment required. But to do that, we need better regulation. We need free and fair electricity markets, and we need the same in food and transport. An ‘Energy Bill of Rights’ underpinning the rights of individuals to own and trade electricity would unleash entrepreneurial drive.

Finance wants to move in but is constrained when markets are skewed toward incumbent interests that often distort perceptions of risk and opportunity. We need to ensure investors and others think through the issues coherently.

We are looking at a world that is more networked and decentralised, where many of the old, centralised structures will become obsolete quite quickly. It is going to be an exciting space to work in, as we need to think about power shifts. In electricity markets, for example, we expect people will become owners and traders of electricity, breaking existing monopolies, which will be an important value creation opportunity.

Where else do we need to reshape our thinking?

One story that people are not thinking about enough is that we have the tools to begin an era of abundance. We are shifting from an extraction age into a creation age, where energy, food, transport and information are all cheap and abundant.

If we cling to the old mindsets and ways of organising our societies, we might not be able to adapt to this emerging reality – with all sorts of grave consequences. But if we recognise the possibilities, it will completely alter the way we think about finance and how it can be mobilised to generate wealth within planetary boundaries as part of the new system that is emerging.

We already have technologies to leverage to make an amazing world and solve our deepest challenges. They also happen to be the technologies where the biggest opportunities for value creation can be found.