#10: What Is The Mindset Needed for 'Green' Investing?

Investing in decarbonisation themes requires the ability to say 'I don't know' regularly.


No one knows how decarbonisation is going to unfold. Investing in it requires a mental model that is a little like a velodrome track cyclist choosing which line to take into a bend: there needs to be allowance for new information, which improves reaction time. This is less about muscle strength and training, and more about mindset. The more we train on this, the better equipped we are to time our investments in the right moment of bigger technology stories that are very hard to predict.

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It can often feel like the smart thinking non-fiction genre has been done to death. Last week however, I read The Scout Mindset: Why Some People See Things Clearly and Others Don't, by Julia Galef. It brought to light many important points, by dividing the world into two very intuitive groups:

SOLDIER MINDSET: Imagine a soldier ready for battle. Adrenalin is elevated. Their actions stem from deeply ingrained reflexes, to fight and defend every blade of grass. Their motivation is to defend beliefs against any argument. They have no time for nuance: the world is black and white, and best understood when repeatable decisions are made without hesitation.

SCOUT MINDSET: A scout is atop a tree, looking out into the distance. Their job is not to attack or defend, but to understand. Their instincts are to go out, see the landscape, make as accurate a map as possible based on what’s really there, not what they wish was there. They are encouraged to erase a section of the map when new information comes, and draw it again.

In a real army, soldiers and scouts both play critical roles. But the soldier mindset is around us all the time. Reasoning can be very militaristic, you typically need to build a fort around your argument: in fact it’s how most of us are taught to debate. A lot of this stems from a pattern scientists call motivated reasoning. This theory argues some ideas feel like our allies, and we need to defend them at all costs. Other ideas are enemies. Without the ideas we fall back on, our framework for viewing the world crumbles. Our judgment is strongly influenced by whichever side we want to see win.

The scout mindset is not interested in seeing one idea win or lose, but instead simply understanding what’s really there — even when it’s unpleasant or inconvenient.


  • Scouts are curious. They’re more likely to say they feel pleasure when learning new information.

  • Scouts are open. They believe it’s virtuous to test one’s beliefs.

  • Scouts are grounded. Their self-worth as a person isn’t tied to how right or wrong they are about any particular topic.

These traits don’t correlate with IQ. They correlate with emotion.

There are people who are not interested in being more scout-like: they like being soldiers, there’s a clear plan and they don’t need to think too much. The questions of whether a God exists, or there’s a ‘right’ minimum wage level, are difficult. An explanation by someone else is reassuring.

Some people are attracted to the idea of a scout mindset, but when it comes time to improve judgment at the expense of challenging long held priors, they opt for the world they already see.

The scout mindset is a learned habit of mind, and like all habits, it takes effort until it is unconscious.

It’s a learned skill to ask possibly the hardest question of all: could I be wrong when I really want to be right?


If we’re practising this in domains when it doesn’t immediately benefit us (i.e. politics), it can be difficult to develop more of a scout mindset. Galef says politics is a category of ideological issue where we have a strong incentive to deceive ourselves because it feels good, or because it helps us fit in with our tribe and peer group. If we don’t know many people who think differently to us on a given topic, we have little incentive to probe deeper and be accurate.

There are a lot of cases in which people do, at least in theory, recognise: 'I think I would be better if I could be more of a scout and faced my problems head-on — either by inviting criticism, or thinking about risks.' But that's just hard to do.


..especially in our mental models around nascent technology.

In this issue of Climate and Money, we’re going to briefly touch on a piece of technology that almost everyone has an opinion on, and leave you to examine how a soldier or a scout might frame the investment opportunity. It’s a fascinating area and we’ll return to it in more detail in the coming months. For now, accept the limitations of a brief summary and take this as an opportunity to watch for how your mind processes information on the topic —


Major nuclear accidents are fairly uncommon and account for far fewer deaths than accidents in other energy sectors. But the ones that have occurred — Chernobyl, Three Mile Island and Fukushima — have led to horrific intergenerational legacies on nearby populations and the environment, and for good reason, there is widespread concern about the safety of nuclear energy production.

The playbook for nuclear power hasn’t changed in decades. The fuel source is enriched uranium, pressed into pellets that form a highly dense form of energy. They generate neutrons that cause the uranium to split apart, creating tremendous energy that is run through a pressurised water and steam process that powers a turbine. At its core the reactor is really a water-boiling machine.


Nuclear reactors can’t overheat. Existing reactors use pumps to maintain a constant flow of water to cool their cores and are equipped with backup diesel generators to keep that process going in the event of a power outage. The core overheated in Fukushima and led to catastrophic failure. So a lot of attempts at new designs have tried to remove this risk altogether, sometimes referred to as ‘walkaway safe’, where the core is incapable of melting down.

Next Generation Nuclear Power is an attempt to break with the old reactor designs and imagine a completely new way of doing this.

The six design concepts are:

  • The Gas-Cooled Fast Reactor (GFR)

  • Very-High-Temperature Reactor (VHTR)

  • Supercritical-Water-Cooled Reactor (SCWR)

  • Sodium-Cooled Fast Reactor (SFR)

  • Lead-Cooled Fast Reactor (LFR)

  • Molten Salt Reactor (MSR)

These reactor concepts have been on the table since the early 2000s, and are designed to address the energy needs of the world well into the future (i.e. 2100 and beyond). To be considered viable, they have to overcome the following ‘high jump’ bars:

  • Be inherently safe and easy to operate

  • Utilise uranium efficiently. Many can employ depleted uranium or “spent” fuel from current reactors

  • Destroy a large fraction of nuclear waste from current reactors via transmutation

  • Generate hydrogen for transportation and other non-electric energy needs

  • Provide built-in resistance to nuclear weapons proliferation

  • Provide a clear cost advantage over other forms of energy generation

  • Carry a financial risk no greater than other forms of energy generation


One company, NuScale, uses light-water technology, which relies on natural forces of heating and cooling that combine with gravity to circulate water through its system, eliminating the need for pumps.

TerraPower, a company founded by Bill Gates, has designed two models that use liquid sodium and molten salt rather than water as a coolant. The boiling point of liquid sodium is higher than the temperature produced by the nuclear reaction itself, so the company says the reactor will not overheat. Many observers regard these new concepts — known as small modular reactors, or SMRs — as a big step forward.

The logic of this is intuitive: if you make something simpler, and smaller, it eliminates backup equipment and remove the needs for outside forces to keep the system going.

Others say the designers are putting too much stock in what they claim to be inherent safety features, and there are those who believe any energy source that can wreak the havoc of a Chernobyl shouldn’t be used anywhere, no matter how different the design of the system.

Finally, the following might surprise you: 10% of the world’s energy already comes from nuclear power plants. At present, that’s more than solar and wind.  


So with the simplified summary above, it’s worth asking:

  • What were your priors the moment you learned we’d be examining nuclear power?

  • What did you learn that you didn’t know?

  • Did new information shift your thinking?

  • Crucially, what new information would you need to be satisfied of a clear decision to invest, not invest, or invest and divest at a particular stage of development?

  • How would you be received in a circle of your closest friends if you argued passionately for, or passionately against next generation nuclear power? Does it matter what your friends would believe?

This issue might seem like a Trojan Horse for nuclear power support. The honest truth is there’s more I still want and need to know. But I want to keep an open mind.

What makes NuScale and TerraPower’s SMRs such a curiosity is none of us know how viable they will prove to be. We all have questions. We all want to be right. But are we able to admit all of us could be wrong, depending on how the future unfolds?


In the context of my mental model around decarbonisation, I learned the following from Galef’s book on the scout mindset:

  • An investor looking to better understand decarbonisation should feel proud, not ashamed, when they learn they are wrong. They should be intrigued, not defensive, when good information challenges their priors.

  • It’s not that a soldier mindset is always bad. But in a scout mindset, over a longer period of time, you actually develop more of a community of people who don't take advantage of your lack of armour. That leads to more perspectives, and better investing.

  • The best investors, and often the most successful people, learn to develop pleasure from saying: ‘I don’t know.’ It’s really hard, but so valuable.


I will leave you with one anecdote from the book. Galef uses the example of someone being at school, threatened by a bully who tells you: 'Hand over your lunch money or I'm going to beat you up.' So, it might seem locally that the best choice is just handing over the lunch money because it's better to lose a few dollars than be physically harmed.

Maybe that's true locally. But, if you zoom out and just think in the longer term: 'Is this really my best choice?' It's not as clear. You can learn to fight. You can maybe set it up so that the bully gets caught and gets sent away for punishment. You could change schools or change classes. You have a lot of options, ways to change the game board you're playing on so that you don't have to just accept the trade-off that's right in front of you.

Most of us look at the puzzle of decarbonisation and forget we have opportunities — in nuclear power, or anything else — to ask better questions, revisit our priors, and make new maps outside of the present moment.

The world should be drawn in pencil, not with a pen — just like how the scouts are taught to do it. Investing in decarbonisation shouldn’t be that different.


Owen C. Woolcock

3 Questions I Am Asking Myself This Week

1. The soldier/scout mindset analogy is similar, but tangential to the ideas raised in Adam Grant’s new book, Think Again. Both books seek to find a way to humble open-mindedness, through different mental models. This is well worth exploring too.

2. The Ford F-150 truck has been America’s best selling vehicle for forty years! Incredibly one in every sixteen vehicles on the road in America is an F-150. The new version, the F-150 Lightning, goes into production in 2022: it’s electric, and a better truck. News of this announcement ties into a lot of the ideas I explored on GM in a prior issue.

3. How do you give birth to a $100b market, without incentivising the wrong dynamics? A strong story by Bloomberg Green on carbon offsets.

If You Read Or Listen To One Thing This Week

An excellent NBC story (video) on the complex water rights picture for farmers in Arizona. Certainly a portend of things to come elsewhere in America.