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Industry Spotlight > Women in Wealth

Complexity Theorist

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For years, atmospheric sciences professor Tim Garrett has been intensely curious — as many are — about what actually drives financial wealth. But then he elevated the discussion to another level: Where does money get its value, Garrett wanted to know, and what does that mean physically?

The 41-year-old Garrett has found his answer in, of all places, the clouds.

“Sometimes I think too much,” says Garrett, who teaches at the University of Utah in Salt Lake City. “But one of the really fun things about physics is going up to a new problem and seeing if maybe some headway can be made. And because the physics is identical for the global economy and for clouds, I can kill two birds with one stone. It’s really a general study of a complex system.”

A cloud physicist, Garrett looks at clouds (the physical world) and civilization (the global economy) as complex, highly energetic systems that in his opinion should obey similar physical laws and evolution paths. Taking his theory a step further, he factored in a popular assumption: that the world needs to improve its energy efficiency in order to offset global warming.

“Something about that seemed wrong to me,” says Garrett, a keynote speaker at the Retirement Income Industry Association (RIIA) conference in Chicago in March. “If we are more efficient, we should grow more quickly. If a child is healthy, it will consume energy efficiently and use that energy it consumes in food to grow. If it grows, it consumes more energy.” Likewise, he adds, civilization as an organism also consumes energy and the stronger it gets, the more power it needs. The issue going forward: Where will the energy come from?

Doug Short, vice president of research for Advisor Perspectives in Lexington, Mass. (and another RIIA presenter), says Garrett’s work challenges advisors to really examine the big picture and shift gears accordingly.

“The thing that makes Tim’s work fascinating is also a big leap for the advisor in that he’s looking at the very big picture and long timeframes relative to normal financial planning. I might look at it from a multi-decades perspective. He’s looking at multi centuries,” added Short. “He’s addressing major cultural issues having to do with profound problems with no easy solutions. The ultimate goal has to be to create an awareness to help us find ways to get policymakers to take this seriously. What we are talking about are problems of epic proportions: How do we wean ourselves off of fossil fuels? We need to look at other novel ways, things not yet discovered.”

RIIA has taken particular interest in Garrett’s research for one overarching reason. Without adequate energy reserves, the thinking goes, your retirement dollars won’t be worth a whole lot. Or, as RIIA chairman François Gadenne puts it: “Your retirement chits are just claims on whatever the economy is going to be worth.”

Garrett’s hypothesis does not incorporate the commonly used GDP, instead using inflation-adjusted wealth. The math that powers Garrett’s equation: Every $100 of global financial wealth (at 1990 levels and in inflation-adjusted dollars) is sustained by one watt of continuous energy consumption.

“It’s not wealth as economists would normally think about it. It includes us and our knowledge and our relationships, even,” he acknowledges. “Wealth is something that encompasses everything we consider to be part of civilization. We’re not just talking about our buildings alone because they are meaningless without us and our knowledge. And you can calculate it. You can quantify it. It’s simple. Basically, I’m summing up production from the beginning of time.”

Garrett admits that traditional economists have a hard time with the concept and that he has endured some “difficult moments” at the hands of critics.  “Yet when I explain it to people with a physics background, it seems almost obvious and naturally intuitive. Why would you do it any other way? I’m not setting out to overturn standard economic theory,” says Garrett. “I just want to figure out how things work. This formulation does work extremely well. I can make forecasts that are extremely accurate in a way I don’t think any other model can.”

And this, he says, is where things get a little scary.

“We must uncover new energy reservoirs to sustain innovation and growth. But the larger we grow, the ever more we need to consume and ever faster we need to uncover new energy sources. There is no system in the universe that can continue to grow forever,” according to Garrett. “One thing I would expect to see in a world that is increasingly constrained in how fast it can consume energy is that competition for resources will increase. Physics suggest this will show up as increased inflation.”

Garrett said he recently has come to think of the trajectory of civilization as being fundamentally a geological issue.

“Civilization has enjoyed a tremendous burst of growth over the last few hundred years and that can be attributed to the discovery of energy reserves,” he observes. “I don’t see why it wouldn’t continue along a similar path. One way that might help is to use fuels that allow for growing wealth without changing atmospheric conditions, including renewables and nuclear power. Although we may switch to a regime less of discovery and more of depletion. Honestly, I try not to think about it.”  


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