My Climate Journey

Ep 112: Rebecca Henderson, John and Natty McArthur University Professor at Harvard University

Episode Summary

Today's guest is Rebecca Henderson, John and Natty McArthur University Professor at Harvard University. In her position at Harvard, Rebecca has a joint appointment at the Harvard Business School in both the general management and strategy units. She's also a research fellow at the National Bureau of Economic Research. Her work explores how organizations respond to large scale technological shifts most recently in regard to energy and the environment. She teaches “Reimagining Capitalism” in the MBA program and recently published a new book called, "Reimagining Capitalism in a World on Fire," which was released on April 28th. We have a great discussion in this episode about the role of capitalism in society, what's gone well with capitalism, what has gone not so well, and what needs to change as we enter this next era. We also talk a lot about climate change, how to think about the problem, the path forward, and most importantly how Rebecca came to be doing this work to begin with. She has a fascinating journey, and I know it was helpful for me as I'm navigating my own journey. I hope you find it helpful too. Enjoy the show! You can find me on twitter @jjacobs22 or @mcjpod and email at, where I encourage you to share your feedback on episodes and suggestions for future topics or guests.

Episode Notes

In today’s episode, we cover:

Links to topics discussed in this episode:

Episode Transcription

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Hello everyone. This is Jason Jacobs and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help.

Today's guest is Rebecca Henderson, the John and Natty McArthur University Professor at Harvard University, where she has a joint appointment at the Harvard Business School in both the general management and strategy units. She's also a research fellow at the National Bureau of Economic Research. Her work explores how organizations respond to large scale technological shifts most recently in regard to energy and the environment. She teaches re-imagining capitalism in the MBA program and recently published a new book called, "Reimagining Capitalism in A World on Fire," which was released on April 28th. We have a great discussion in this episode about the role of capitalism in society, what's gone well with capitalism. What has gone not so well and what needs to change as we enter this next era.

We also talk a lot about climate change, how to think about the problem, the path forwards, and most importantly how Rebecca came to be doing this work to begin with. She has a fascinating journey, and I know it was helpful for me as I'm navigating my own journey. I hope you find it helpful too.

Rebecca Henderson, welcome to the show.

Rebecca Henderson: Jason, thank you very much. I'm delighted to be here.

Jason Jacobs: As we were just talking about before we hit record in prepping, you've done a bunch of speaking and obviously you're prolific teacher and writer. And so it was a lot of things out there on you. So even though we have not spoken before, and didn't even do a prep call, I feel like I already know you.

Rebecca Henderson: Thank you very much. You know that that makes me super jumpy, right?

Jason Jacobs: Right, you don't have to tell me anything because I already, I mean, I don't, I shouldn't even ask any questions. I should just answer on your behalf.

Rebecca Henderson: Exactly. You probably remember what I've been writing.

Jason Jacobs: Yeah. But for anybody that hasn't done all the prep that I've done. Maybe just give an overview on the work that you do and where you sit with your portfolio of professional time today.

Rebecca Henderson: Sure. So I'm a professor at the Harvard Business School. For many years, I taught innovation but, a few years ago, I became really intrigued by climate and I moved my whole research career to the question of purpose-driven business.

And whether business could make a difference in addressing climate change. I'm just about to publish a book a week tomorrow called "Reimagining Capitalism in a World on Fire." When I wrote it, I had no idea idea of the title would be so opposite. And I lead the leadership and ethics course, the first year required course at the Harvard Business School.

So that's a course in which we take nearly a thousand students through the question of what is business's responsibility in this world, what can be done, what should be done. So I'm very fortunate. It feels to me as if my professional life is absolutely aligned with my passions. I'm very lucky.

Jason Jacobs: When, and why did this transition occur?

Like what were you doing before you got focused on climate and what was it like? Did you hit your head on the shower or, or did it, was it a slow build over time? Like how did you come about making this transition and where did that desire come from?

Rebecca Henderson: So I was a professor at MIT for nearly 20 years at MIT's business school.

And I studied innovation and technology. And in particular, I was obsessed with why large firms have difficulty changing. I'm British, as you can probably tell. And before I became an academic, I spent a couple of years working with a major consulting company in London in the eighties and in London, in the eighties, that meant closing plants in northern England.

So I went back to school, got my PhD. And all my research was about how to make large companies more innovative, why they get stuck. And as it happens, I was the Eastman Kodak Professor of Management. That was actually complete coincidence, but it's one of those deeply ironic, weird coincidences because I spent all my time working with firms like Kodak, trying to get them to shift. About 15 years ago, my brother who's a freelance environmental journalist gave me a bunch of the climate science to read and I read it and I got really, really uncomfortable.

And then I saw Al Gore's movie, "Inconvenient Truth." And for me, that was a catalytic moment that was like, Oh my God, I have to do something. I nearly quit. I nearly quit being an academic. I thought, you know, here I am oiling the wheels of corporate capitalism. What, what am I doing with my life? And I spent a lot of time talking to my friends, working on climate to scientists, to NGOs, to activists.

And it's super interesting. They told me I was in the right place at the right time, that business had an important role to play. And I together with some amazing colleagues set up the first course on sustainable business at MIT. And about 10 years ago, I was recruited to Harvard to help them set up a center for business and the environment.

So it was a sort of gradual process coupled with an "aha" moment. If that makes sense.

Jason Jacobs: And I guess looking back, what are the tenets of how you think about the problem that have been consistent from when you first started thinking, learning about the problem to today and what are the areas where your thinking and perspective has diverged?

Rebecca Henderson: So I always thought climate change was technologically fixable, relatively straightforward to fix compared to problems like inequalities, say. I always believe that we as a society could  address these issues. And I always thought business would be central. My intuition was that the innovativeness, the productivity, the drive of firms was going to be essential.

If we were going to develop the kinds of new technologies we needed and that hasn't changed; I still believe that. I think two things have changed. The first, it sounds so naive now but, when I started working in this area 15 years ago, I thought we would have some kind of price for carbon within, I don't know, two, three, four, five years.

It seems so clear to me that he was the policy on which nearly every economist on the planet could agree a policy that would drive technical change much faster than anyone anticipated. I'd studied technical change for years. I believed and still believe that we get the right incentives in place and just watch us move.

We can lick this problem but, and I believe that hey, we would have it by, you know, around when I started around 2005, I thought, you know, by 2009, 2010, we would have this done, that business could see the case for action. See the business case and we'd be done. And clearly I was really, really wrong about that.

That's the biggest thing. I think that's changed in how I think about this problem.

Jason Jacobs: And why do you think that is? What, what were the assumptions that you had at that time that haven't played out? And I know that the, that the price on carbon hasn't played out, but, but if the economists are in such agreement, then why don't we have one, a place today?

Rebecca Henderson: So, what I assumed is that. Let's call them the elite, the one or two or three or four percent of the world's population that has superb education and access to knowledge and some real stake in the game, the privileged. That group would realize that letting climate change rip unchecked was very much not in their interests.

So to be clear, I'm talking about people like us. I thought that people like us would realize this is crazy. I mean, let's see, shall we take a 25% risk of catastrophically destabilizing the world's climate or increase our energy bills by 3%? Whoa, that seems like a hard trade off. I assumed that just as business people have gotten together, for example, in the mining industry and said, you know, human rights is a huge problem. Let's all work together. Let's try and clean up our supply chains; let's really make a difference. I, at least assumed, something like that would happen. And then I assumed that people would, oh dear... that people care about their children and their grandchildren and, and kind of get climate change. I made the mistake that so many people did.

I thought once you laid out science, once you showed the consequences that people would go, oh my goodness, you're right. Let me insulate my house and pay 5% more on my electricity bill. I mean, I didn't understand what I think we understand now, which is climate change is the world's most difficult problem.

It's invisible. It's happened to other people and it's going to happen some time away from now. I mean, look at COVID right now. We have a COVID denialist movement, even though right now in hospitals, doctors are dying, nurses are dying, people are dying. We have this incredibly rapid moving, very dangerous disease.

And some people saying, Hey, no, no worries. Well, no, let me try and persuade you that, well, there's this invisible gas that's heating up the planet and 10 years from now, you'll be really happy if I raise your energy bill. I mean, it's hard to even get people to go to the gym, even when it's it's their return.

And I underestimated that. And the other issue I really got wrong was the politics. I had not appreciated that the Republican party would decide that climate change was a stocking horse for big government takeover. I thought it was a natural for a bipartisan issue. One that, you know, America could be in the lead on and we could nail this and everyone would be better off.

I didn't understand the political dynamics and how that was going to play out.

Jason Jacobs: So I guess coming back around to today, do you still believe that we should have a price on carbon?

Rebecca Henderson: Yes, I do. I'm not wedded to the precise policy. I have friends who think much more about that than I do, but I think some kind of demand signal would make it huge difference.

About 10 years ago, I edited a book called, "Accelerating Innovation in Energy: Lessons From Other Sectors." And I pulled together eight of the best people in the world, eight colleagues who I knew really understood the history of innovation in the industries that they had studied. So this is a crack team of the best economists who understand where innovation comes from industry by industry.

And the book consists of eight to nine chapters. We do internet, chemicals, agriculture, plastics, you know-- I don't think we do plastics. But, line it up industry by industry, what drove innovation in these industries and what can we learn from it if we're going to really attack the problem of climate change.

And there were three findings that came out of that book. One was entrepreneurship in every industry where there'd been a major takeoff of innovation. It was all about entrepreneurs who pushed the incumbent firms. The second thing that came out was antitrust policy, which is when the incumbents have too much power, they shut down the new stuff.

And it was really striking. I still remember the conference we were at, there was 12 of us in a row and we were all reading out our findings and everyone's like, yeah, entrepreneurship we've got that. But then it was wait.  You're telling me that just at the moment, when you broke up the big companies, that's when innovation took off and computers and, wait, it was when you broke up AT&T that innovation took off in electronics.

I mean, it just came screaming out of the data. And the third thing we found, in addition to public funding for R&D, which was another major finding, but the third thing we found was you need some kind of demand signal when computers were first invented the, it was the U.S. Department of Defense that built that bought the first few models because they were too expensive for any commercial firm to be able to afford.

And it was only with having the government provide the early funding for those first few models that we got, we saw computing take off in the way it did. Agriculture, the same thing. It was government funding that primed the pump for us to get hybrid corn, new forms of seed really triggered the explosion in agricultural innovation that characterized the 19th century, but in the energy is tricky, right?

Because it's not as if government can buy the first, well, you can sort of buy the first nominally produced hydro electron. So, it sort of doesn't look like a computer. You've got to give firms the demand signal to say, I know all the electrons are the same, but you have to produce them through green or clean sources.

I am the world's biggest fan of capitalism. I think it's one of the greatest inventions of the human race, but firms need business models. You can't go to a firm and say, the world will be better off if you put solar panels on your roof, you can't say to them, look burning this fossil fuel is dangerous. You have to stop. If their competitors are doing the same thing, competition will keep them stuck on this old, dirty energy.

What putting in place a carbon tax does is tell everyone in the economy we're serious; we need to stop burning fossil fuels...need a price for carbon.

Jason Jacobs: So I guess my follow up question to that, cause it's clear that you believe that a price on carbon. Would be helpful that we should have a price on carbon, but is it feasible?

Are we ever going to have a present carbon or, or at least in any reasonable timeframe?

Rebecca Henderson: So there's two issues: first, it's clearly not enough. And we can come back to that if you want. But even if I got the perfect policy, it wouldn't be enough to transition the economy fast enough. And secondly, is it feasible? Great question.

So we have several places in the world, most noticeably, British Columbia and Norway--but also I'm in Boston right here in new England. We have the regional Greenhouse Gas Initiative. We have carbon policies in place across the world. I think the precise numbers is there more than 30 ongoing. Forgive me.

I'd have to look that number up for you, but it's a big number. In most places where they've been tried, they have not harmed economic growth and have reduced significantly the burning of fossil fuel. So, absolutely, I think it's feasible. It's clearly feasible at a local scale and it clearly makes a difference.

Jason Jacobs: Well, feasible once implemented to help I get that, but I'm saying what about politically feasible? Like, should we even try? Because at a certain point, no matter how it's like, you have to look with two different factors, right? There's the factor of like in a world without constraints, what would we do to have the biggest impact then you have to factor in, well what's actually viable given the constraints?

Rebecca Henderson: I guess that's what I'm saying is we actually did it in British Columbia and actually did it in New England. So it is politically feasible at local scales. Got it. So the question is can we, can we scale it up? Like, could we really do it in the U.S. could we really do it in the UK? The UK has something very similar.

I mean, the whole of the UK has a very well worked out carbon control mechanism. Are you saying, do I believe with this current administration? No, absolutely not. Could I imagine a different administration? Yeah, sure. Why not?

Jason Jacobs: But even if the administration changes, I mean, that might be at the presidential level, but given how polarized we are as a country, it seems like no matter what we do, given the state of how policy gets made, that there's going to be gridlock.

And even if we are able to put something over the line four years later, it's, it's just gonna, you know, whatever progress we made is just going to get peeled back and it's going to swing the other way. That that's my fear.

Rebecca Henderson: So I hear you. I hear you completely, let me give you the reason not to be completely despairing, firstly, by far the best policy, which I really hope we coalesce around is some variant of cap and dividend.

So we control carbon or we tax carbon and any of the money we get, we send right back to people on the ground and we send it back on a per head basis. So suppose we get a hundred billion in tax revenue in carbon tax revenue. We divide that by all the people in the U.S. and we send everyone a check, and that does something immediately.

It means that people who might otherwise be saying, wait, my gas bill just went up, my price of gasoline just went up by a dime, are seeing a check, for some hundreds of dollars. So there's already reason to be excited about this policy. And secondly, I think if we could get that kind of regime in place, maybe just for four years, I hear you, we would begin to see real progress firms would start to make investments.

We would start to see improvements in human health. I mean, one of the heartbreaking things about COVID as I'm sure you know, is just the reduction in air particulates we're seeing from the slowdown in the economy is probably saving more lives than COVID is taking, I mean, this is like this crazy thing is we're kind of okay with belching all this pollution into the air, which is really harming kids.

And anyway, I'm ranting. I'm sorry. I'll stop. What I'm saying is I think if we got some momentum going, if people saw that A) they were getting a check, so they weren't worse off B) it was completely feasible and C) that we were seeing major investments in, for example, massive retrofitting of houses, you know, get the price, right.

And there's tons, more jobs and retrofitting. That's very labor intensive. It would improve the quality of life in many of the houses that need to be tackled. I think it's possible we could, we could tip. I mean, this is how social security got passed. Right? You put it in place and suddenly people go, Whoa.

This is quite good and it becomes really quite hard to get rid of it. That that's my vision of what we might do.

Jason Jacobs: One of the things I struggle with... so before we hit record, we were, we were talking about how, if you focus on this problem, the more you focus on it, you get more optimistic because you start to see all these things that we could do.

So now that I'm a year and a half in, I've certainly had that experience. But one thing I struggle with is that there is no silver bullet. So, I think they, the catch word, what I've heard is "silver buckshots" where it's like, this thing can help and that they can help, but there's like hundreds or thousands of those things that, that need to be done and in unison, which makes it really hard to start to find anything to hold onto and say, if we can just get this one thing done, we're going to be in a better place. So either we need that, which it doesn't seem like there is a thing like that, or we need to get all these, like little wins, hard fought that are working in harmony and it's like, how do you, how do you do that? Given any one of them feel so heavy until you get the other ones moving? So I, I guess like, am I off base on, on this? I'm not articulating it very well.

Rebecca Henderson: No, no, I think you're doing a great job. It is silver buckshot. In the case of the hole in the ozone layer, for example, there was a solution and you could go to three companies and say, switch your production technology.

And we fixed it and we can fix it. We can persuade the Chinese to do the same thing. We would have it fixed. In the case of climate change is much harder. I mean, let's just be clear what we're trying to do. When I first got involved in climate change. One of my friends who was in the field, looked at me and said, Rebecca, you realize we're trying to rewire the guts of modern capitalism while it's in flight.

You know, this isn't just like trying to change the tire on the plane. That's in flight. This is like trying to change out the engine while it's in flight. I mean, fossil fuels. Built our economy. They're a huge sector. They're deep in the, in the mechanics. So yeah. Plus they have enormous political power. So yes, this is super hard.

I don't think that means it's impossible and it might even be good news or at least we can, we can try and make some lemonade out of these lemons. I don't think humans are stupid. I think humans are ultimately going to wise up and realize that making our only planet unlivable is a fundamentally bad idea.

And that will mean that hundreds of thousands, millions of people need to get engaged. And so, you know, my model for how this might happen or is happening because I actually believe it is happening is in every firm, there are people who are saying, can we cut our carbon emissions? And then in itself that's nothing right to have, you know, I'm on the committee at Harvard that has set a goal to cut our carbon emissions to neutral by 26 and carbon free by 2050. On its own, it's just a drop in the bucket. But, what that does is get everyone engaged in the conversation. Everyone intrigued, like why did we make that commitment?

Everyone thinking, well, how do we get there? It pulls people into the conversation and the fact that Harvard's doing it maybe plays a tiny role in other institutions deciding also to go carbon neutral or carbon free. And as they decide to move, other institutions say, you know, I think there's a business here.

We could pick up the low hanging fruit. We could do that. And we could begin to see technology starting to improve and getting cheaper. I'm sure other guests have talked about this. Elon Musk is the easy example that everyone goes to, but think about what's happening in storage. Think about what's happening in agriculture people discovering new technologies to sequester carbon in the soil.

So we've got business starting to move because everyone has to move because you can't sit back and wait for a policy change. Paradoxically, the fact that we couldn't get the policy in place, it wouldn't have been enough anyway, for sure. It's not enough. It mobilized a whole coalition called "We're Still In," our businesses and mayors and governors say okay, if we can't do it at the federal level, let's do it at the state level.

Let's do it at the city level. Let's try that. And they've got within shouting distance of the Paris commitment just through local commitments. And again, I don't think this is enough, but I think it begins to lay the foundation for the kind of cultural, social and political change we need, which is really a total mobilization of the society to say, you know what burning fossil fuels is like using child labor.

If you're doing it, you really need to stop and you need to have a timetable for when you're going to stop. And I can see that happening. I can see CEO's, you know, few years ago, a CEO who I know well came to me and said, Rebecca, you know, I think the sustainability stuff is garbage. And I said, yeah, I know, I know you think it's just nonsense.

And he said, but everyone I'm trying to hire thinks that's important. You know, when I first started teaching "Reimagining Capitalism," that CEO, he moved his entire company to be more values based when I first started teaching "Reimagining Capitalism," there were 28 people in the class. One of the reasons I'm now leading the required course in leadership and ethics is because it's clear to all of my colleagues and most of the students that even if they disagree with me, this is the right conversation to be having.

So yes, it seems overwhelming and impossible, but we got no choice and it is possible. That's the thing to keep in mind. This is technically possible. We have the resources, we have the technology. It would be cheaper than COVID to fix.

Jason Jacobs: Another thing that I struggle with is that, so I've had some guests on, you know, the, the, you have the CalPERS of the world, for example, that, and I know you've, you've talked about this before, where, because they have the long time horizon where they're looking at like a hundred years out, right.

They can say, oh, a hundred years out this is a, you know, selfishly for the, the pension capital that I manage. If we want to keep those funded for, you know, for the descendants of the people that we have the capital of now, we need to embrace the clean energy transition and accelerate it. But the more those timeframes shorten, the harder that sell is.

And a lot of these CEOs, for example, they're just thinking of like, how do they satisfy the street and how do they stay employed for the next three years, five years, ten years. And how do they make sure to get their bonuses? So, how do you deal with the fact that most of the world doesn't have a hundred year time horizons?

Rebecca Henderson: So first, I think you need to talk to more CEOs. I know many CEOs who would absolutely agree with you that it's hard to keep focused on the longterm, but would say it was absolutely central and was at the core of their business. And we now have really some quite good academic research to suggest that  focusing on the longer term correlated with better performance.

And that indeed, even in this current pandemic, the firms that are investing more in the, in the long term seem to be doing significantly better. But your point is well taken, right? Humans are naturally short, short term focused people take out 16% credit card debt, right? So they're willing to take, you know, 84 cents now rather than a hundred dollars next year, because they want it now.

They want it right now. So I see where you're going. Here's I think the issue; most of the invested money in the world is for pensions and for longterm use. And so if you want to, if you want your pension in 20 or 25 or 30 years, these are issues that are not  "would be nice." These are central issues. So I think many pensioners, many retail customers, people like us.

We'd like to see our money invested in longterm investments. We'd like to make sure the economy transitions away from fossil fuels and many of the very biggest investors as, and you've talked to them. They're seeing that these risks, climate change risk, is not like something they can diversify away from.

This is a real risk to the strength of their portfolio and they have so much money. They cannot diversify away. So what's the problem? The problem is sort of the middle there. The asset managers who've been paid for years on "what did you do for me lately?" Did you do well this year? And, and so there's an immense pressure in the middle of the investment chain to make the money, make the money.

And that's what the CEOs are feeling. But, we're beginning to see, I think the ways to get away from that. Firstly enormous amounts of money are going into passive investments. That is investment that you just say, just give me the fortune 500 index. Don't worry about it. And a passive investment immediately has the externality problem.

What's the number one risk to passive investments. Probably climate change. If it's not climate change is yet another pandemic. Possibly triggered by climate change, but we don't need to go there. So if you're in passive investing, which is now by some measures, like 70% of the market, no problem. And secondly, by this increasing interest in measuring progress.

So if you can get the asset managers to press, not for what was your returns this quarter, but did you make progress against these very concrete, environmental, social goals, ESG goals, what happened to your emission? Are you making the longterm investments that will make a difference? Then we can get the asset managers to hold off.

I mean, think Amazon was able to lose money for many years before they made a profit. How? Because they could communicate to investors what it was they were doing. So, if we're going to transform investments, we need to give investors and asset managers, a new language for talking about what firms should be doing.

And ESG is the first step in that language. So yes, a problem, but not an insuperable one.

Jason Jacobs: And when we talk about. Evolving capitalism, what are the key things that need to shift? And, and the secondary question is like, what are the effects on? Like, where are the consumers fit into all of this? And, and what about our, our lifestyles?

Do they need to change or is it just about kind of changes under the hood at the corporate level that let us off the hook as consumers?

Rebecca Henderson: Oh, Jason, you're asking an enormous question. Okay. I'm going to divide it into two pieces.

Jason Jacobs: Probably cause I asked two questions, which I have a bad habit of doing. And I just can't shake it.

Rebecca Henderson: No worries. I'm right there. I'm right there. So the first question I heard is can consumers make a difference? What is the role of consumers? And the answer to that is easy. Yes. Enormously. As individuals, one of the first things we should all be doing is going to our local utility and saying, gimme green power; is going to our employer and saying, what are our greenhouse targets? How can I help reduce emissions where I work? Is talking to our friends about, hey, Did you know that you're buying, you know, stuff that's just driving fossil fuel consumption. Firms respond so quickly to focused consumer sentiment. Now, historically consumers haven't been willing to do that. The fraction of people willing to pay a little bit more on their electricity bill, for example, has historically been quite low.

That was just starting to shift before the pandemic hit. I think the urgency, the spectacle of the wildfires in California and Australia, the dire science, the flooding in Jakarta, the repeated storms in the Carolinas. Those were really beginning to move people such that they were beginning to act as consumers say, no, no, I want, I want the good stuff, but you're asking.

The second question you asked is which is well, "hey, can I keep flying to Europe? Cause I like flying to Europe. Do I actually have to change my behavior?" I'm afraid I think we really need to change our behaviors. And this is hard. I mean, I'm British. I love flying home to see my family, but I'm very aware of the harm I'm doing.

And I'm aware of the hypocrisy. You know, here I am saying climate change is the greatest issue and I'm getting on the plane and I'm flying home to see my mom. Now, I buy offsets. I try and buy good quality offsets, but I'm aware that's not a satisfactory solution. And I think it's important. Not because my changing my behavior will change the world because clearly it won't, it won't for any of us.

But we know from the social psychology that if I start flying less and I tell my colleagues, I'm flying less because of climate change, then they will, statistically, fly less. I know that if every time I'm thinking of going somewhere, I say to myself, wait, I should take the train instead. Wait, I don't eat beef.

Wait. I, I turn the thermostat down, wait, that I am reminding myself of why this is so central to my life. And I'm giving myself energy and hope for the  political battles and last but not least, there's no way everyone can live at the kind of standard of living that we have in the West. And we'd meet our climate change goals in the short term.

For example, we need to stop eating animal protein. Now I'm quite convinced that scientists will grow us proteins. That will be absolutely delicious and we won't miss them. But, in the meantime, there's a real shift required and we need to shift away from, you know, normal things that consume energy to finding our happiness in other ways.

And that's so easy to say it's super hard to do, but we know that happiness is only very loosely linked with income. That once you have enough to feel safe and enough to eat and a safe space to live, but there's only a weak link between income and happiness. And so I'm sure that we can find a way to, to use less energy and still have a great life. A really good life.

Jason Jacobs: So where do the fossil fuel companies fit into all of this?

Rebecca Henderson: Oh, God. So let's begin by saying which fossil fuel companies. I think it's really important to draw a distinction between those firms that clearly understand the industry is in transition and have been leading that transition firms like the Italian energy company, Enel, which at one point was really building a renewable power plant, a weak or Iberdrola, which is a Spanish utility, which just in the midst of the pandemic, announced that they were doubling down on their investments in clean energy, because it was clearly the future and clearly economic and clearly the way to go. So there are some firms that get this in a deep level, you probably saw Shell's announcements just last week, serious commitments to going carbon neutral and eventually carbon-free.

And I've had the pleasure of working with a couple of energy companies where I've known the CEO and the senior team, and they can see this coming right. What we're facing is a Kodak moment for the world, just as Kodak was making more money than, than anyone could believe possible selling conventional film, but digital film just blew them out of the water.

That's what's going to happen with clean energy, whether it's driven by the politics or the technology or consumer sentiment, the world is going to insist that we no longer use fossil fuels. And the problem of course is we've got like the fossil fuel equivalent of Kodak. We've got firms saying, no, no, we've got to keep using it.

And there is no possible future and worse pumping their money into denialism and politics to preserve their existing business model. I find these kinds of firms very difficult, super important to persuade them, to change their ways in any way we can.

Jason Jacobs: So where does divesting fit in? Is, is that helpful or hurtful to the clean energy transition?

Rebecca Henderson: So I'm on the board of Ceres. So I'm a huge fan of investor engagement. That means that before going to divestment, I go to engagement and I understand you you've had a guest, who's talked about the Climate Action 100 and what they're trying to do, I am such a huge fan. So at Harvard, if I meet a student who says, you know, I think Harvard should divest, the first thing I always say, cause it's true is we absolutely need to do something. And you should point the finger at those of us that are sitting around and not doing everything we can to accelerate this transition. But I don't think divesting all the fossil fuels in the portfolio right now is the answer, because I don't want to divest from firms, like Iberdrola and Enel. I want to enable them.

I want to funnel capital to them. I want them to demonstrate that this is the future of the industry. In the case of funds, I'm less comfortable about say maybe  Chevron or Exxon. I want to have very clear targets. Here's what we want you to do as investors. Here's the direction and what we want you to move.

Here's the plan we want you to have. We want you to stop funding climate denialism. We want you to stop funding policies that are actively contrary to decarbonizing the world. Can you do that? Do you commit to that? Or are you making progress? Are there measureale milestones? If that's the case, okay, well, hang in there.

We'll see where this goes. If not, we're out. There must be penalties. I think that's quite clear for firms that don't move. So I would say divestment is like a weapon of last resort, but I would go, I would start with engagement first.

Jason Jacobs: Then what about some of the shareholder activists, employee shareholder activism that you're seeing at the Amazons and starting to merge selectively in some other large organizations as well? Is that helpful or hurtful?

Rebecca Henderson: I think it's incredibly helpful. I've met so many senior managers who sort of "got woke" or whatever the phrase is really got engaged around this issue because their employees push them. The other major source of change is children. The children of senior managers clearly make a huge difference as well.

But I think the employees, why? Well, because you want your employees to feel good about working where you are. You want the very best employees you want, the smartest employees. They tend to be the ones that are most engaged around thinking about these large picture issues. So I think employee activism plays a huge role.

I think, of course, it will be more difficult after the pandemic. If we go into something like a depression, employees will have relatively less power, but I'm hoping that it will still be an important part of the mix.

Jason Jacobs: I know you've said that you're a huge fan of capitalism. And I also heard you say that dismantling capitalism would be a huge mistake for the people that feel like the existing system can't be reformed in a way that will get us to where we need to go in anywhere near the timelines that we need.

And it's just kind of, I don't know, the expression putting lipstick on a pig or, or, you know, what do you say to them, to those people?

Rebecca Henderson: I say capitalism is radically out of balance. Which is different from needing to be destroyed. The problem was destroying it as we haven't really come up with any great alternatives.

When you go to the extremes, when you, for example, nationalize every economy, every industry in the economy, you put firms in the hands of bureaucrats and, you know, bureaucracies are many things, but let's see fast moving agile, innovative, are not words that come up. I think of capitalism as wonderful servant, but a horrible master.

The problem is we've made capitalism the master we've systematically taken power away from government. We've pulled back from regulations. Not that there aren't bad regulations, but you know, when an administration says we're going to completely stop enforcing every environmental regulation on the books, you're like, ah, I'm sure that's a bad idea. We let capital become the master. But if we can make capital our servant again, it's a fantastic tool. If what you want is toothpaste in more colors than you imagined ever existed, firms will get it for you. If what you want is taking the nifty innovation and solar cells and rolling it out at multibillion dollar scale, capitalism will do that for you.

Would you have to get the rules right. You have to get capitalism under control. You know, so often when people say to me, let's get rid of capitalism. You know, people say, why reimagine it? Why don't we just throw it out the window? I sometimes think what they want is a really good healthcare system and decent education.

And I am so there, right. Giving healthcare to the private sector seems to me like deeply, deeply strange. So yes, there are sectors that should be runby the state in the common interests. But forgetting the hard work of changing the energy system done, we're going to need, we're going to need capitalists.

Jason Jacobs: For the people out there that, let's say I'm the CEO of a, of a major corporation, and I'm hearing you talk about this. And I say, geez, like, it's, you know, this is, this is from an idealistic standpoint, Rebecca, a lot of what you're talking about makes so much sense, but like in a, in a nuts and bolts world, where money makes the world go round, like this stuff is just too, it's too soft. It's too fuzzy. I feel like it's a distraction. What's your answer to them?

Rebecca Henderson: First, please don't assume that most CEOs are like that. I mean, before this current emergency hit us, I had dinner in New York with a bunch of private equity managers, unbelievably successful. I looked up who they were and when you added all the zeros, it was a little breathtaking.

That's another whole question as to whether it's good that there are people like that in the world, but there are people like that in the world. And as we start having dinner, it was quite clear they thought climate change was a planetary emergency that threatened everything they had. So it, it, it's not that there isn't a sense of urgency or a sense of awareness among CEOs now. Is it, you know oh, Rebecca, it's so nice you know, love the British accent, you're so idealistic. That's so cute, but this is never going to happen. Well, let's see. What are you thinking about the alternative. It's let's see, by 2050, which may I say is only 30 years away and your kids will be walking around. The current estimates is most of Miami, most of Vietnam, most of Bangladesh is going...not most of  Bangladesh, forgive me. Most of Southern Vietnam, a good proportion of Bangladesh is going to be under  water, like that's okay? And then I would say, and you can make a lot of money dealing with this and people already starting to do that.

We already see the mechanisms in play. We have Impossible Foods and Beyond Meat, a plant based sector that is generating hundreds of millions in sales and is clearly about to generate billions. The whole automotive sector is going to transition. All utilities are going to transition. This is an opportunity; you will make your employees much happier. You will drive productivity and innovation and creativity right through the firm. You will put yourself in front of a wave of regulation that's coming so that when it hits you are well-prepared for it. And it will cost you, depending on the business you're in, two or three percent in some businesses you can make it the heart of your business strategy.

I mean one of the things I do in my book is go through in some detail, the kinds of business strategies that can take firms in this direction, how they add up to change and how working together at the industry level makes a real difference and could give us the kind of political and social change we need.

So it's definitely a pathway. I think, I think the don't bother me. I'm just focusing on, on the bottom line. I think that's Kodak talking. I think that's failing to see a massive transition that we're running in into at a hundred miles an hour. It's bad management.

Jason Jacobs: So what do you think about the World War II-style mobilization analogy?

Rebecca Henderson: So I love the World War II mobilization, not taken too far. But I love the idea of massive public, private, public, private partnerships to get this done. I love the idea of cooperation within industries to really roll out technologies quickly. I love the idea of making it a central priority of the whole society.

I love that aspect. The, you know, producing bombs and tanks and killing lots of people, not, not so keen on, but I think we need to be careful enough. I'm just being an academic. Don't worry. Great. Great analogy. Let's mobilize.

Jason Jacobs: What about the Green New Deal?

Rebecca Henderson: Again, the Green New Deal is a thousand things to a thousand different people, but should we have a massive program of public investment? Of publicly funded investment in transforming our economy? Absolutely we should. And I think it would pay back very quickly. I think it would help with what is probably going to be a significant recession and not a depression at the end of this pandemic, it would be a classic Keynesian stimulus. It would clean the air.

It would position us well, and it would create millions of jobs, literally millions of jobs.

Jason Jacobs: And given our current polarization in terms of D versus R how do we get ourselves out of that and make any real headway on this problem?

Rebecca Henderson: So I think it's a couple of things. First, if you ask young Republicans what they think about climate change, they're much more likely to think it's an issue and that it's coming.

So I think eventually the idea that this is a partisan issue will disappear with time. I think even in the short term, It's possible to make the case that this is about preserving the economy for the long term. This is about building resilience. That said, I don't think we should hope for a bipartisan solution.

I think we should understand that one party sees the urgency of what's happening and is prepared to move aggressively against it. And that we should do everything we can to back that party. Am I a fan of every policy put forward by every major democratic politician? Absolutely not. Do I think they sometimes downplay the role of business too much?

I do. Do I think that this is the most important thing that we need to face? I do. And so I think we need to trying to elect a Democratic government and have a democratic Congress, House and Senate and a Democratic President. I think that's what it will take.

Jason Jacobs: Accepting that, and I guess, double clicking on that, the next question that I have is there's two different Democratic types of lanes, right?

There's the kind of center left and not trying to alienate the center, right. That hates Trump and, and trying to achieve bipartisan where we can and unify versus be divisive, right. Or there's the more kind of idealistic burn it down. And so I guess the concern with the more idealistic is that it is divisive and it's burn it down.

Right. But the concern with the center is that it's going to be business as usual in a time where we can't afford business as usual. So how do you reconcile that tension?

Rebecca Henderson: Oh, God. If I had an easy answer, I would be a major Democratic politician. You've absolutely laid out the tension. You know, my money for what it's worth.

And this won't be surprising was on  Elizabeth Warren. I really liked her policies, not 100% all of them, but most of them.

Jason Jacobs: That's shocking to me. That's shocking to me given how antibusiness she was.

Rebecca Henderson: That was the set of policies I wasn't comfortable with, but I love the fact that she, yeah. That, that was the bit that most troubled me, but I guess I thought that once in power she would be reasonable, which is an error, perhaps one makes on, on every side. And I didn't get her as antibusiness ; I got her as anti the concentration of power. And that feels to me a real thing to be "anti." You know, I can be pro-business and not pro the kind of massive concentration of wealth and power at the top end of the distribution. So I think that's really important to keep talking about it. Realistically, I don't think we'll really make progress on climate change till we make progress on these deep issues of inequality and lack of opportunity.

I mean, if half the people in the country feel they're not getting their shot at anything, why should they vote for climate change? Some pointy headed policy made up by intellectuals on the East coast. I mean, why. So I think we have to do a really good job of showing ordinary people why this is really in their interests.

And you know what I can just say, I want to steer that middle ground, please. Give me a strong principaled democratic platform that isn't so antibusiness we throw the baby out with the bath water.

Jason Jacobs: Last couple of questions. One is just, if you had a hundred billion dollars and you could allocate it towards anything to accelerate this transition where would you put that money and how would you allocate it?

Rebecca Henderson: I would put it into politics. I would build the equivalent of the Koch network. I would do massive climate education on the ground coupled with massive voter registration. And I would try and pull money out of politics and reform the electoral college.

I think until we have a real democracy with much less money in politics, a democracy that reflects the will of the genuine population. We are not going to be able to crack either the problem of inequality or the problem with climate change. Any money leftover I would put in to leading edge technologies, which are right at the cusp of making the switch.

But I think without policy, we're not going to, we're not going to be able to make progress at scale we need.

Jason Jacobs: So it's interesting to hear that you would put it into the equivalent of the Koch network while simultaneously working to pull money out of politics. Aren't those contradictory statements?

Rebecca Henderson: Yes. And in essence, what I want to do, that's why I'm so glad you gave me a hundred billion, but I want to persuade the people that really have a hundred billion, Bloomberg or Gates or Soros already on the wavelength, that they should vote, that they should put their money to disarm their own class interests.

Absolutely, that's what I'm suggesting. And why am I suggesting it, because to take us back to where we started, I think the survival of the planet is at stake. And I think in the end, that's what's important. And so I think if you really want to make a difference, and there are many wonderful philanthropists deploying a great deal of money without reforming our electoral system and rebuilding trust in our institutions. 71% of Americans think the system is rigged against them and controlled by the rich. And why do they think that? Because there's a lot of it this is true. Yes, I am asking for something mutually contradictory. It has happened historically at moments of immense national crisis. This is back to your war analogy. The private sector has sat down with labor and with governments to say, look okay, we'll give up some of our power.

We need to find it way through this, which is a more balanced way through this. Capitalism only succeeds when it's in balance and the longer it's out of balance, the more damage it's going to cause.

Jason Jacobs: Last question is just for, for anyone who's listening, who is on a similar journey and transition as I am.

And the one that you went on so many years ago, what advice do you have for them as they're trying to figure out how they can help and where they should anchor.

Rebecca Henderson: If you're someone who's wants to do something about climate change, start where you  are. If you're at a business, look around and do what you can within the business. Business, moving forward, will make an enormous difference, both because it can have an immediate effect on on the ground and because it lowers the ideological temperature around climate change. If business is worrying about climate change then maybe it's something to really worry about. So businesses can make an enormous difference in this space. If you're a consumer, think about changing what you eat, what you buy.

It's a small thing. It will have knock on effects to the people around you. If you're an educator teach about this, if you are an accountant or a consultant, learn about this. The climate change issue runs right through every facet of our society and our business. If you are an artist paint or talk about it.

If you're a novelist, write about it. One of the reasons I think we didn't have the nuclear war to end all war is we have these films and books that showed us what that would be like. Help people understand what climate change is going to be like. Get smart about it so that when other people express doubt, you can meet them where they are in ways that they can hear and ways that they can understand.

Look, I know that none of us in the grand scheme of things can make a big difference, but the way I think about this is we're trying to start an avalanche, an avalanche of change. The demand that we build a livable planet and all of us need to be pebbles in that avalanche; we don't know which pebble started it, but if no pebble moves, nothing moves. If none of us do anything, we will not solve this problem.

Jason Jacobs: And my real last question is I wouldn't be doing my job as a host if I didn't say since you have a book coming out, tell us about the book. When's it coming out? What's it called? Where can people get it?

Rebecca Henderson: Thank you for asking about my book. It's called "Reimagining Capitalism in a World on Fire." It's my attempt to capture in 200 readable pages, a 28 session MBA course, 28 one and a half hour session.

So, what did I learn about how business can help save the world? The book suggests there are three big problems facing us: climate change, inequality, and institutional degradation. And it suggests that business can make a difference against all three of these problems. So I lay out a theory of change, a way that business could change the world and ultimately end up triggering massive political and social change.

And if that sounds completely unlikely, read the book; it's full of stories. It's full of people who are doing it right now. And it comes out next Tuesday anywhere where great books are sold.

Jason Jacobs: Because by the time this publishes that'll be in the, in the rear view mirror. So what's the date?

Rebecca Henderson: The book comes out Tuesday, April 28th.

Jason Jacobs: Great. Well, Rebecca, this was an amazing discussion. I enjoyed very much. And thank you so much for coming on the show, for all of your work and best of luck with the book and in general.

Rebecca Henderson: Jason. Thank you so much.

Jason Jacobs: Hey everyone, Jason here. Thanks again for joining me on my climate journey. If you'd like to learn more about the journey you can visit us at  my climate journey dot C O note that is dot C O not .com. Someday we'll get, but right now .co. You can also find me on Twitter @jjacobs22, where I would encourage you to share your feedback on the episode or suggestions for future guests you'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that, thank you.