I have an Idea for a Business
February 21, 2011
I am a great believer in spending decisions revealing what people actually think. For example, as a proportion of my income, I spend significantly more on alcohol than I do on giving to charities. This allows one to draw the conclusion that I care more about getting drunk than I do about charitable endeavours. Whatever my protestations to the contrary, that would be a fair summary, if I did not devote any time to actually working for said charities. Similarly, one can judge how much you care about people in the developing world in relation to your relatives by comparing the proportion of your income that goes to charities focused at that aim compared to the amount you spend on gifts for said relatives. It turns out that I care more about my sisters than the entire continent of Africa, for example.
The best-known example of this ‘actual thinking revelation’ or ‘revealed preferences’ in action is the market, wherein people spend their money in such a way as to reveal what they really think about the product on offer – or, in the case of the futures, equities, and other financial wizardries markets, what they think about the future of a given commodity or company.
I can see a way of harnessing this phenomenon to produce a win-win outcome for myself. I’m pretty sure climate change is a real thing, mostly because carbon dioxide causes radiative forcing, and any reduction in the ice caps will lower the planet’s albedo and thus increase heat absorption. The extent to which it’s happening is something about which I am uncertain but entirely content to leave in the hands of climate scientists, who seem like a relatively good bunch of chaps, albeit testy in the manner of academics. If someone put out some kind of global warming investment product, which would produce returns as the planet got hotter, I would buy it.
The inverse holds true for climate sceptics. If they really don’t believe the planet is hotting up, then they’ll be willing to buy a product which cashes this claim out. Therefore, I have an Idea for a Business.
What happens if the planet gets hotter? The ice caps melt, and sea levels rise. As a consequence of the latter, land values of low-lying coastal regions decrease, because now they’re underwater. If it doesn’t get hotter, the value of the land under consideration will remain the same, or perhaps go up.
Therefore, I would like to create a business that sells what I call the ‘Climategate Bond’. I will purchase significant tracts of land in areas of the developing world under threat from global warming, and rent them out to local farmers or other land users. I will package up the debt I used to buy the land up with a coupon comprising a portion of the rents extracted from the users of the land, with the remainder going to myself as an operating expense. I will market these bonds in the pages of the Telegraph and the Mail, with perhaps some space on libertarian blogs and Watts up with that.
Assuming I structure the bond in such a way as to ensure the liability lies with its purchaser rather than myself, I will have no worries if my investors’ money ends up, shall we say, underwater. They will make a tidy return on the backs of impoverished farmers in a world of rising food prices, and I will make a lot of money. Of course, if global warming is actually happening, they’ll lose their investment. I’ll make less money, but be proven right.
So, who wants to give me the initial capital I’ll require to get this idea (copyrighted to me forever) off the ground?