I think you're about to see a firing up again or renewed focus on renewables, which I think is ultimately good for climate change and sustainability. And it's being inspired by what is effectively Iran putting its boot on the carotid artery of 20% of the global flow of oil. People have decided, nations have decided they don't want to be subject to the risk of the tumult in the Middle East, much less a sclerotic administration in the United States. So I think we're about to see an absolute tailwind or an afterburner around the investments required to create greater renewable technologies.
In today's office hours, we discuss whether capitalism can solve climate change, how to handle a life-changing equity windfall, and what failure can teach us about resilience. Question number one. Our first question comes from Reddit user SaucyMan11, who says, "Scott, I believe you once said that the world's first trillionaire would be an entrepreneur, private sector company that helps the government address climate change. In fact, the world's first trillionaire is a walking, talking government subsidy who plans to make our species multiplanetary." It makes me wonder if capitalism and climate responsibility can truly coexist. What's your current prediction or feeling around climate mitigation, technology, and importantly, capitalism's relationship to it at all?
It's an interesting question. So, first off, with respect to the world's first trillionaire, I don't think he's going to be a trillionaire very long because I think that he's an amazing engineer and his greatest engineering feat was not landing a rocket on scissors, but working with Goldman, JP Morgan, and AI to engineer an IPO that exploded this thing beyond all reasonable or sustainable valuation. I don't care if he's a meme stock or the cult of Elon, that thing is not going to survive at 100 times revenue, or that valuation isn't going to survive. Now, and also part of the shtick was something kind of related to sustainability, and that is data centers in space, which I think every piece of analysis I look at and every time I see the size of a data center and I remember the cost per kilogram to launch equipment and material into space, I think that is nothing more than the robo or robots times a thousand, or we're going to have a million autonomous taxis within 12 months, said Elon Musk, I think in 2016 or 2017. I think it's an absolute fever dream meant to see above get the stock to 100 times valuation.
Now, in terms of capitalism and climate change, I would argue in a weird way the war in Iran is actually going to result in a more sustainable future with respect to climate change. Why? I think nations all over the world have fired up their windmills and their solar panels, and the economics are taking over here. In any given moment during the summer, during the day, 60% of Texas's electricity is coming from wind power. That's right. Now, Texas isn't exactly Berkeley or Sandled Brooklynites looking to save the whales. It's because the economics of renewables are overtaking the economics or becoming more attractive than the economics of fossil fuels. And not only is there economic upside or incentives to invest in renewables, there is now a renewed sense of security needs that fall on renewables. And that is China. China wasn't really ever put in a corner by the blockage of the Strait of Hormuz because they have made such massive investments in renewables. They'd also stockpiled fossil fuels. But effectively, as the largest producer of solar panels and windmills and batteries, they weren't panicked.
And I think every nation in the world, after seeing what happens when a nation, a rogue nation inspired by a war from the guy we used to trust, Uncle Sam, creates new urgency to figure out diversification away from fossil fuels. So just as the UAE is building a pipeline that bypasses the Strait of Hormuz, everyone or every nation in the world is thinking about how they bypass the Strait of Hormuz with their own native renewable technology. I think you're about to see a firing up again or renewed focus on renewables, which I think is ultimately good for climate change and sustainability. And it's being inspired by what is effectively Iran putting its boot on the carotid artery of 20% of the global flow of oil. People have decided, nations have decided they don't want to be subject to the risk of the tumult in the Middle East, much less a sclerotic administration in the United States. So I think we're about to see an absolute tailwind or an afterburner around the investments required to create greater renewable technologies.
In 2025, renewables represented 88% of total new US power capacity. So everything incremental from this point appears to be renewables. Renewables plus battery storage are projected to account for 99.2% of new capacity. And according to financial advisory firm Lazard, even without subsidies, renewable energy is the most competitive form of generation in the US. See above, economics are taking over here. In the first half of 2025, sustainable funds outperformed traditional funds with a median return of 13% compared to traditional funds at 9%. This May was the first month on record in which solar overtook coal in US electricity generation. That is a, and we're not going back. That's a pretty big pivot point. According to Grand View Research, the global clean technology market size is currently estimated at $916 billion and projected to reach $1.84 trillion by 2030.
Energy demands from AI growth are inadvertently driving climate mitigation investment in clean energy, right? It makes sense that it's one thing to have a data center that everyone hates. It's another thing to say it's going to be fueled by fossil fuels. After 15 years of nearly flat US electricity consumption, demand increased 2.1% per year on average over the last five years and could increase up to 16% across the US by 2030. The CEO of NextEra Energy, one of the largest utility companies in the US, cited renewables as the fastest way to add electricity to the grid. And Forbes projected that meeting new electricity demand via clean energy could save consumers $5 billion annually by 2030 compared to if that demand were met through coal and gas.
Let's talk about nuclear. According to the US Department of Energy, nuclear power is the most reliable energy source in the country, running at full power more than 92% of the time. And US nuclear power plants avoid CO2 emissions by over 430 million metric tons annually. I think about brands that have taken a hit. Ferrari with their electric car, AI with just the worst spokesperson in the world, Kevin O'Leary, for a data center and income inequality. The brand that has really had a renaissance is in fact nuclear, or really bounced off a bottom. In addition, there's incentive on the back end as climate change is pushing up insurance rates, and that is the severity of climate-driven natural disasters resulting in greater premiums. From 2017 to 2022, home insurance premiums rose 40% faster than inflation. I think that's largely regulatory capture. We need a regulated insurance industry where beyond certain EBITDA margins they have to rebate to their customers. Different nations do this successfully. In 2024, extreme climate events cost the US $183 billion in some.
I actually think the market is doing what it's supposed to be doing here. And I think we're going to see, I think we're experiencing it and it's a good thing. And that is a massive resurgence in investments in renewables because of not only economic upside, but because of a reduction or abatement in geopolitical risk.
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Question number two comes from a listener who emailed us. Hi, Scott. I'm a 33-year-old male and I work at a company that has gotten an extreme amount of business hype related to AI. I'm a manager there and as a result RSUs have been part of my compensation for the last seven years or so. The stock price has 10x'd in the past year and my stock sits between 1.1 and 1.4 million depending on the day. Almost all of that will vest over the next two and a half years. The outlook is very positive for that time period, but who knows how long the good times will last. So the question is, how should a younger professional treat outlier compensation in years like this? Do you recommend hiring wealth managers and what would you prioritize in terms of how money is used?
Wow, this is the mother of all good problems. Okay, so it sounds like you have your base, which immediately goes to, well, take a risk. If your stock is 10x'd in the last year, I would argue that that stock is likely fully valued or potentially even overvalued. I would look at its multiple on revenues and earnings relative to your peer group. And the natural inclination around selling a business or selling a stock is when you're worried about the future and it feels shaky, and then to hold on to it when things are good. I find in general the time to sell a business or an asset is when the future looks brightest because that will be reflected in the stock. More than that, typically the way to build real wealth is to just let things compound because if you sell it now, you're going to incur a tax, hopefully a long-term capital gain. And it doesn't sound like you need the money for consumption.
Now, having said that, if this whatever it is, $1.4 million represents more than 50% of your net worth, I'm a big believer in diversification. And there's a middle ground here. You could sell a quarter or half of it and hope that I'm wrong and then it goes up another 10x. But I think when you've experienced a 10x-like gain and it represents more than 50% of your overall net worth, and I don't know if it does, if it's only 10% of your net worth and you're there, then you may want to ride it out. Having said that, you're already very invested in this company from a human capital standpoint. You're working there. So, I would argue that at a 10x valuation, you may want to think about diversifying and selling a quarter of it or a half of it, and then call me and tell me I'm wrong when it 10x's again. And then that's a win for everybody.
But you get wealthy through concentrated bets of your own human capital and financial capital when you're younger. But the moment you have an asset base, don't make the mistake I've made. The mistake I've made is that I've been rich three times. What does that mean? It means I've gone broke twice. And why did I go broke twice? Because I made stupid investments or I wasn't good at what I did? No. Because I was way too concentrated, always in tech, always in my own companies, believing that I was bigger than the markets. And what I didn't realize is that market dynamics trump individual performance of you and/or your company. And if we go into some sort of scary recession in the next 12 months, if whatever sector you're in becomes less hot than it clearly is now, there's nothing the company and/or you can do. It also hurts to be sitting on a $1.4 million gain that turns into $140,000. You're going to anchor off those highs.
So I think, with the little context I have here, I would say sell a decent amount of it and diversify into asset classes that are totally or nearly uncorrelated to where you're investing a great deal of your time, and it sounds like you have a great deal of wealth, and that is this current company. It's not all or nothing. It's not sell all of it or don't sell a share. I would take a little bit off the table, and if it keeps going up, or I take 25 to 50% off the table, and if it keeps going up, I would continue to sell more. The key to wealth creation is making a big bet on a singular investment and focus in terms of your own human capital when you're young. But the moment you have assets, be smarter than I was. Start diversifying and hope you're wrong. Hope it goes up another 10x. But in the meantime, create distinct asset classes that are your Kevlar such that when [__] gets real, and it always does.
What is a recession? Something that typically happens every seven years. We haven't had one in 16 years. Is that right? No, it's more than that. '08. Wow. 17 years. I can't do math. 18 years. You want to be the one that diversified and can take a bullet, right? Kevlar or diversification is your Kevlar. And then as the markets can throw up, you can take a bullet to the chest. It'll still hurt, but you'll survive it because you have your Kevlar, which is diversification. Thanks and congratulations on your good fortune.
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Welcome back. Question number three also comes from email. Prof, seems like you have a lot of successes, but have often talked about some of your failures, including while having young kids. What helped you get back up again? What helped your confidence in doing something again after your failures? And how did you avoid falling into the mindset of giving up and getting beyond those failures? Really appreciate what you do.
I think this is one of my superpowers. I'm, at the end of the day, I'm a storyteller. I'm a good communicator and I have the ability to attract and retain talented people because I like to think I treat people well. I compensate them well and I make them owners. I give away. I think my goal is to give two to three times the equity that most people would give to similar positions at other firms. Anyways, whenever I meet with an entrepreneur that has a great small services company and they're having trouble scaling, I'm like, just show me your cap table. And what you're going to find is the most talented people leave because the senior people are under the impression that they're the magic sauce and the young people are just excited to work there and make a decent living. No, young people want to be you. They want to be owners. They want to make real money. They want to make outsized compensations.
Anyways, the third superpower I have is rejection. And that is I'm willing to endure rejection. And that sounds like easy to say, but I'm not exaggerating. I have a large group of friends who are hugely successful, mostly in the financial services industry and hedge funds. Like I said to the previous question, the industry was bigger. Industry dynamics were bigger than their individual performance. And essentially, there's only two types of alternative investment managers surviving right now. The enormous mega-cap TPG, Elliott, Apollo firms that just are so diversified and have such access to such incredible deal flow that they're winning, and incredible relationships with investors, and then hyper-focused outperformers in like, you know, they only invest in biotech in Spain or they've discovered this one methodology around quant trading. Everyone in the middle, which is probably 80% of funds, is just getting crushed, crushed, just crushed.
And I had a lot of friends that were, you know, quite frankly in the kill zone there. That's not the hard part. The hard part is that these were individuals who knew nothing but success their whole life, were making millions of dollars by the time they were 30, 35, and then things get hard for them and they literally get stuck. They can't get past it. Or the same thing happens with, I know a few friends who never really got over their divorce or personal tragedy. How have I been able? I've been shot in the face. I think I'm generously sort of three or four, three and two. I've had as many business failures as successes. And one of the wonderful things about America, and if you don't take a lot of risk in America, you're not taking advantage of one of the core points of differentiation of the context and the environment you're in. And that is we forgive failure more than any other nation. Even our bankruptcy laws let you start over.
The reason I've been able to endure rejection is because I have a lot of experience and I'm not trying to be cute here. I ran for 10th grade president, 11th grade president, 12th grade president, lost all three times, and based on my track record decided to run for, wait for it, student body president, where I went on to, hold your disbelief, lose. I was never afraid to lose and then get up and try again. I can't tell you how many jobs I've applied for. I can't tell you how many sources of capital I have pitched. I probably raised, I don't know, in various formats a billion dollars from 10 or 15 different investors, maybe 20 or 30 different investors. I wouldn't be surprised if I have pitched over a thousand investors and have a 1 to 2% hit rate, and I am very good at raising money. God, the amount of rejection I've endured from women, and what has that done? It's not made me numb to rejection, but it's made me try to figure out the market and how to increase the likelihood of avoiding rejection the next time I tried to raise capital or start a business.
But I started an e-commerce incubator in '99 that was like done in six months after the dot-com implosion. I interviewed with Procter & Gamble and the Central Intelligence Agency. I applied to Indiana, Penn, Northwestern, Stanford, Duke business schools, rejected by all of them. UT, rejected by all of them. But all you need is one. All you need is one company to hit. All you need is one wonderful person to get to know you and find that you're a good person. They want to spend more time with you. When you find people who have outside success relative to what you think they would have, either professionally or romantically, it's because they're not afraid of rejection. So what's the key to it? Enduring it. Putting yourself in positions of risk. That's why I think sports are so important, is they teach people how to lose and then finding a means of recovery.
Now, I've never really figured out what that is, but figure out there's a couple things that really help me endure rejection or embarrassment because what you're talking about with rejection, what you're really afraid of is public failure. When you start a business, you're risking public failure. When I started an e-commerce incubator in New York backed by Goldman Sachs, Howard Schultz, JP Morgan, there was no reason for it to fail. And when it did fail, it was embarrassing for me. But what's helped me is the following. My atheism, and that is a belief that at some point soon, I'm going to look into my son's eyes and know our relationship is coming to an end and then it's over and it's going to happen really soon. And no one you're worried about what they think of you is going to be alive in a hundred years, and nor are you. It just doesn't matter.
When people see you fail or they see you say something stupid or they hear about you not getting into Stanford or whatever it is, realize they think about, oh, he or she didn't get in or her business failed, you know, oh, you know, whatever. And then they go back to thinking about themselves. In addition, nothing is ever as good or bad as it seems. Hands down. Yeah. You might just feel so rejected by a company, a bad investment, an individual who doesn't return your affection, and recognize that in that moment, the pain, the half-life on it is much shorter than you think. One, you're going to be dead soon. Two, people are thinking about other people. Three, the upside of risks and taking risks is huge. And at a young age, you want to start putting yourselves in position of rejection.
If you aren't getting nos professionally and from a relationship standpoint and taking some risks in terms of your investments, then you are never going to score above your weight class. The best Hall of Fame hitters in the world connect with the ball one out of three times max. Max. But they're not afraid to get up to the plate and risk being beaned in the face by a 90 mph projectile. Are you willing after getting beaned in the face to stand up again and move right back in front of other 90 mph fastballs? So, how do you get used to failure? You fail more. You put yourself in positions of failure, recognizing that at some point, if you're a good person, you work hard, you take risks, eventually you will connect with the ball.
From 2000 to 2008, almost everything I touched turned to [__]. I'm in the prime of my income-earning years. I supposedly have credibility. I've already had some successes under my belt. I could not get arrested by success. I just couldn't. Always raise money, try my hardest, start a company, wham, beaned in the face. Raise $600 million to become the largest shareholder in the New York Times. Going to ask them to diversify, invest in digital. I'm going to make billions of dollars. Boom. Beaned in the face. Lost $500 million of other people's capital. Super embarrassing, but you know what? It doesn't matter. I mean, it's meaningful, but it's not profound. And then I went out and raised more money and made new investments and started a think tank that ultimately got sold for a lot of money. Why? Because as soon as I had failed, you know, I took some time to mourn and then I moved on.
This is a word salad. People aren't thinking about you as much as you're thinking about yourself. You're going to be dead soon and so is everyone that you are worried about what they think of you. Outsized returns for the risk-takers. How do you get there? You constantly force yourself to put yourself. I just dropped my son off at his dorm room for orientation. And all I can say to him is as soon as you get there, start talking to people. As soon as you get there, walk up to people and start saying hi. Right? And sometimes people aren't going to be nice back. Sometimes people aren't going to want to be your friend. That doesn't matter. You develop the calluses. That's the key. The calluses. If you want to get to great yes, start getting nos.
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