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That is from the New York Times, Tuesday July 18, 2023 at 5.14pm.
There’s a mythological connection between “Phoenix” and “ashes” which feels more uncomfortable every day. But it’s not just hot in Phoenix. As I’m sure you know.
The differentiating thing about climate change as a risk evaluation task is the Unknown Unknowns [™ D.Rumsfeld]. These seem to be limitless across a wide range of vectors – level of disaster, time, location, evaluation of consequences, distribution of consequences.
Kalshi has several weather-related markets, but you can go wrong assuming that climate change is going to impact all weather markets on the same schedule. Eighteen months ago you might have been thinking of Lake Mead water levels as aligned with climate change, and you would have been severely wrong-footed. Even since the exceptional California weather of the past 12 months, this is a market to watch closely:
So “Weather” and “Climate Change” are not the same thing from a risk point of view.
Climate change is not so much a market in itself as a potential game-changer looming over every other risk in markets and in life. Ken Griffin, as you are no doubt aware, has hired every eligible weatherperson in the lower 48 to pack an analytics team to front-run the trashing of longstanding crop assumptions. Graduating meteorologists! Fret no more about getting through that inane 6am prattle on your TV station in Tucumcari NM. You can now proceed directly to nerd heaven in some workspace in Florida (personal hurricane experience guaranteed!) where, if successful, you will receive a thing called a team profit-share. Trust me, you’ll like it. Having to evacuate your home every September is a small price to pay.
Not long ago we believed we could out-engineer the environment. Chinatown provides an entertaining take on the greed-meets-desert innocence of those days. No doubt there are some billionaires who believe they still can, while others (ahem) believe we are so hosed we have to colonize Mars.
To my mind, the mega-risk with climate change is the prospect of the mass migration of hundreds of millions of people from areas that rapidly become un-arrable, un-coolable, uninhabitable.
Mass migration in post-feudal human history has been driven by religion or poverty—and mostly the latter in the past two hundred years. Those processes were comparatively slow. We just don’t have a model for how the world will manage the abrupt de-economization of a South Korea or a Netherlands, let alone the transition of an entire population to another home.
Those risks are not yet quantifiable as a market, although the fabulously rich have, naturally, made provisions: “We Needed to Go.” I don’t a hundred percent get it. Say you’re a tech billionaire and back in your former home state of California there’s just been a climate apocalypse leaving millions gruesomely dead, and you ride up from underground level 7 of your New Zealand bunker to admit the local staff in the morning, do you think they’re going to say “Oh, Mr. Altman, we’re so thankful you’re the Californian who was not incinerated/washed into the ocean, can I make you a soft-boiled egg?”
For the above Kalshi market chart: If the unsmoothed Land-Ocean Temperature Index value for 2023 reported by NASA’s Goddard Institute for Space Studies (GISS) is above 1.02 degrees Celsius, then the market resolved to Yes.
And to end where we began, from the same New York Times article:
“Even Phoenix, no stranger to sweltering temperatures, struggled to cope with the record-setting heat. ‘It just feels awful,’ said Mazey Christensen, 20, an ice cream scooper.”
Ranging far and wide across the crisping landscape of Phoenix, your intrepid reporter sought one last insight to put the garnish on their report. Exhausted, they staggered into an ice cream parlor …
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