Environmentalism for the Rich and Famous

Slowness today motivated primarily by (properly dispensed) narcotics.  Plus, it is Friday, after all.  Still, what is Friday without a little irreverence?  As if I wasn't annoyed enough, a loyal reader points to Paul Kedrosky's Infectious Greed today which relays a rather upsetting account of VC Maven John Doerr.  To wit:

In what was may have been one of the strangest moments at TED in Monterey, an admittedly often strange conference, venture capitalist John Doerr apparently cried yesterday at the end of a speech about climate change. In the talk he repeatedly said "I'm afraid", and then closed by begging emotionally for people and companies to go green...

Oh, how the mighty have made asses of themselves.  Will someone please stop this madness?

Want to get everyone to "go green?"  Either make cheap solar that can compete in the marketplace (I'm talking to you Mr. Doerr) or come up with some other viable alternative.  Subsidize it with a tax break for businesses that get certified green or something if you must, but even that will fall apart eventually if the underlying economics do not hold up.

I am reminded of Bush begging people to stop hoarding gasoline on television.  Hopeless.  Carter wearing a sweater on television, hinting that 68 degrees might be a fine temperature for your home in the winter- not that I'm old enough to remember it, our micro professor played a videotape of it in class.  The market is the market.  Even more so now that the United States enjoys waning influence in global economic affairs.

Since this week has become green smearing week on Going Private, and because I hate Al Gore and all he stands for (because, to me, that looks like hypocrisy), let's examine carbon offsets.  Apparently, I'm in good company pointing the finger at this latest, torturous treatment of economics.  The Economist Blog has been running a mini-series of sorts on it as well.  Recently they quoted Arnold Kling, who was recursively citing them saying:

If you want to fight carbon emissions, then join the Pigou Club and push for taxes on bad energy. If you want to fight carbon emissions at a personal level, then act as if there were a high tax on your use of energy from carbon-emitting sources, and reduce your use of that energy. If you are not really all that worried about carbon emissions, but you get pleasure from making empty, self-righteous gestures, then do what Al Gore does -- buy carbon offsets.

The Economist Blog continues:

Carbon offsets are even more lunatic less effective as a response to flying.  "I am pouring tons of carbon into the air with my transportation needs, so I will therefore . . . increase the supply of electricity in Kansas" doesn't exactly have a fine, logical ring, does it?  In this case, it should be obvious to most readers that this does not work.  The decision to fly marginally increases demand for flying, meaning, if enough people do it, more flights and more carbon; meanwhile, the wind farms you paid to install probably haven't taken a single power plant offline.  Net effect:  more carbon.

The Kling piece in particular is worth a read, not least for its excellent discussion and application of the role of "rent seeking" in sovereign created markets.

If we add to this the knowledge that the carbon offsets Gore buys don't go directly to alternative energy production but to Generation Investment Management, LLP, that begs the question "what the hell is Generation Investment Management?"  Generation Investment Investment Management, LLP, is the investment firm Gore founded which invests in "future proof" companies.  Interesting.  More so when you read Generation's self-descriptions:

We invest in long-only, global, public equities with a concentrated portfolio of 30-50 companies. We aim to buy high quality companies at attractive prices that will deliver superior long-term investment returns. Sustainability research plays an important role in forming our views on the quality of the business, the quality of management and valuation.

Our performance fees align our interests with that of our clients by being based on long term performance.

Well, you don't have to be a genius to read between the lines here and come to a very revealing conclusion.

"We invest in long-only, global, public equities with a concentrated portfolio of 30-50 companies...."

Public equity investment.

"We aim to buy high quality companies at attractive prices that will deliver superior long-term investment returns."

Value/Growth strategy.

"Sustainability research plays an important role in forming our views on the quality of the business, the quality of management and valuation."

Non-financial drivers.

"Our performance fees align our interests with that of our clients by being based on long term performance."

20% Incentive fee.

It is actually pretty clear.  Al Gore wants you to buy carbon offsets because you aren't really buying carbon offsets.

You are investing in Al Gore's long-only hedge fund.

Except, you can't, really.  See, these are carbon offsets for the rich and famous.  Joe Sixpack, unless he's an accredited investor, probably can't invest in Generation Investment Management.  Consider:

GenerationIM is the parent company of Generation Investment Management US LLP ("GenerationUS"), and investment adviser located in Washington, DC and registered with the United States Securities and Exchange Commission under the Investment Advisers Act of 1940.

Well, let's just see what their registration says.

What types of clients do you have? Indicate the approximate percentage that each type of client comprises of your total number of clients:

(1)     Individuals (other than high net worth individuals): 0%
(2)     High net worth individuals: 0%
(3)     Banking or thrift institutions: 0%                     
(4)     Investment companies (including mutual funds): 0%                        
(5)     Pension and profit sharing plans (other than plan participants): 0%                        
(6)     Other pooled investment vehicles (e.g., hedge funds): Over 75%     
(7)     Charitable organizations: 0%
(8)     Corporations or other businesses not listed above: 0%
(9)     State or municipal government entities: 0%
(10)   Other: 0%

You are compensated for your investment services by (check all that apply):

A percentage of your assets under management [X]
Performance based fees [X]
Other (specify): NEGOTIATED FEE ARRANGEMENTS, INCLUDING SET FEES [X]

What is the amount of your assets under management and total number of accounts?

$75,000,000

And what's the minimum investment?  $3,000,000

Power to the people.