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Small Business Management Article

Under Climate Change, How Do You Invest?

By

Raymond D. Matkowsky

One of the biggest unanswered questions is what will climate change be like? No one really knows but we can take a few guesses. Supposedly, it will be warmer. What does this mean?

Claims, Counterclaims

One claim that I heard several years ago is that growing seasons will be longer and land further north will become useful farmland. This will be a good benefit. Do not upset the “apple cart.”

The claim is that warming temperature will benefit food supplies. There is a counterclaim that sea levels will rise and make coastal real estate worthless. This is plausible. However, there is not even the slightest bit of evidence for this to be true and one being made public.

In the United States, 90% of homes have air conditioning. 10% do not. It is just the opposite in Europe. Do warming temperatures mean more of a market in Europe? Does it mean that the remaining 10% of Americans can be persuaded to buy air conditioning? Is there going to be less call for snow tires in the Americas and Europe?

About a decade ago, the public was told the world is running out of oil. 40 years ago, I was sitting in a meeting during a presentation that stated the average price of gallon of gasoline would be over $5.00 within a few months. Neither event happened. The United States and the world are pumping more oil than ever. The average price of gasoline in the United States is about $3.50. Higher prices in some areas are not due to shortages. There is no shortage of “experts” though, but they are wrong many times.

How Do You Invest?

So, how do you invest? The first thing you have to do is to accept that soothsayers are wrong more than they are right. The second thing is that nobody can predict the future very precisely. The third thing is that nobody knows your business better than you.

You have to take your best educated guess based on your knowledge. In case you are wrong, you may want to build yourself an off ramp and possible alternatives. If you are right, you will be way ahead of many of your competitors. Business is all about accepting risk, but it can also be very profitable.


If you have any comments, let us know. Email me at rdm@datastats.com. We will try to print it in our next newsletter.

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