Energy Complexity

By John Mauldin 


If I had to describe my last 500 letters in one word, it would be “complexity.” 

The older I get, the more I realize problems I once thought had reasonably straightforward solutions are, in fact, hideously complicated. 

That doesn’t make them unsolvable but it reduces the odds they will be. 

Often we start with good intentions and end up with unintended consequences, not all of which are good.

One such problem: supplying sufficient energy to maintain global economic growth while also raising living standards for billions in China, India, the entire continent of Africa, and other developing countries. 

And doing so in a sustainable way that doesn’t cause permanent environmental harm for everyone.

Energy prices affect everything. 

They are a necessary input to all other production. 

Some things are more energy-intensive than others, but without it we are all back in the stone age. 

The price matters for the same reason tax rates matter. 

Both are unavoidable costs, so we can produce more of everything if they’re low or at least stable.

This problem is both intensifying and interacting with other challenges. 

Fuel prices have been rising worldwide, and may soon rise further. 

This week Bank of America raised its Brent crude oil forecast to $120 by mid-2022. 

That would be a price unseen since 2012. Natural gas is similarly spiking, as was coal until a recent retreat. 

The average US gasoline price is now $3.42 per gallon.


Source: Bloomberg

We have plenty of other problems and don’t need more, especially rising energy prices as the economy slows. 

Nonetheless, that seems to be what we will get. 

Today I’ll dig into what’s happening and what I think would be better.

Inflexible, Fragile, and Vulnerable

Like the Logistical Sandpiles problem I described last month, energy is actually a series of interrelated crises. 

We all feel the effects in different ways but the particular causes vary widely. 

They also defy simple solutions.

Gavekal’s Tom Holland captured the situation’s breadth well in a recent report, so I’ll just quote him.

“The rise in US gasoline prices has been driven by local refinery disruptions and climbing international prices for oil. 

However, gasoline prices are only part of the US energy story. 

Prices for the natural gas used to generate 40% of US electricity show wild distortions, with three-month forward prices for New England almost four times the benchmark price for Louisiana.

“China’s electricity shortages are all the result of Beijing’s ban on imports of Australian coal coupled with controls on domestic mining. 

India’s impending power cuts stem from a reluctance to pay international market prices for coal imports and capacity constraints on domestic production. 

Brazil’s troubles can be blamed on low water levels at the country’s hydroelectricity plants. 

And in Europe the finger is being pointed at Russia, which has not stepped up natural gas deliveries in response to depleted inventories and rising demand.

“But although the causes of these crises may appear to differ widely, there is a common thread: around the world shortages and price rises are typically the result of market distortions caused by deliberate policies.”

This is inarguably right. 

The original 1974 “Peak Oil” theory was as wrong as I always said. 

The world has plenty of oil, natural gas, and coal. 

We know where it is and how to extract it. 

If the available supply is small enough to raise prices unusually high, it is because humans made choices that led to that outcome. 

The choices may be defensible. 

Maybe they have other benefits, or they’re the least-bad alternative. 

But they are still choices. 

But as with many things human and political, the choices are often based on emotion, not logic.

In the report quoted above, Tom Holland attributes current problems to varying government and corporate policies. 

Then he zeroes in on the common threads.

“The motives behind these decisions vary, but two stand out. 

First, there is the desire to go green: to shift to less polluting energy sources with fewer greenhouse gas emissions. 

Second, there is the urge to improve efficiency: to provide the energy needed with the smallest possible capital investment.

“Both aims are in tune with the spirit of recent years. 

Viewed in isolation, both are laudable. 

But together, they have led to the creation of inflexible and fragile systems, highly vulnerable to disruptions in the supply of single energy sources…

“Politicians are maintaining that the price rises are the result of Covid-induced disruptions and that they will be short-lived. 

Therefore, they are sticking to their longer-term policy agendas. 

Few appear to worry that those very agendas are responsible for much of the rise in prices. 

Until they do, economies will remain exposed to similarly disruptive policy-induced energy crises.”

Hmm. 

Where else do we see fragile, inflexible, crisis-prone vulnerable systems persisting because bureaucrats stubbornly stick to their ill-considered agendas? 

That describes every major central bank.

This may surprise you, but I think the central bankers are mostly sincere. Their goals are usually right. 

The problem is they miscalculate the costs and side effects of reaching those goals. 

This is also the case for some energy policies. 

Sincere policymakers worldwide are putting constraints on the production of energy, increasing the risk on large capital investments in production, and not surprisingly, we get higher energy costs.

Imposing Pain

Today’s problems have roots in decisions year ago. 

You can see in the WTI chart how oil stayed above $80 and sometimes over $100 for about five years beginning in 2010. 

This encouraged capital investment and made many US shale fields profitable.


Source: tradingeconomics.com

In 2014 the Saudis, unhappy with the new competition, decided to defend their market share by producing more aggressively. 

This had a quick effect on prices, keeping crude below $70 and usually below $50 until recently. 

These low prices discouraged capital investment. 

Currently-operating fields have been depleted and here we are.

So part of the problem is purely economic, the normal boom-bust swings seen in any commodity market. 

But policy choices had a major effect, too, as governments around the world decided to fight climate change by discouraging fossil fuels and subsidizing cleaner energy sources, mainly solar and wind.

I realize climate change is a sensitive topic. 

Some think it is a civilization-ending threat, others think it is all a hoax. 

For my part, I just want clean air and water. 

Here in Puerto Rico we depend on unpleasant, unhealthy Bunker C oil-fueled electric plants. 

That is the same nasty fuel used to power oceangoing vessels. 

I would love to see us harvest the abundant sunshine and coastal breezes instead. 

They are better whether sea levels are rising or not. 

But it has to be economically feasible, which government-dictated changes often aren’t.

This is the problem I think policymakers all over the world aren’t facing. 

Clean energy technology is improving but is still a long way from replacing fossil fuels. 

Each alternative has limitations. 

Solar doesn’t produce at night. 

Wind depends on the weather. (Europe had the least wind on record last year.) 

We don’t yet have large-scale ways to store the power they produce, and won’t for quite a few years. 

In the meantime, we’ll still need reliable, 24/7/365 production from coal, natural gas, and nuclear power. 

Phasing them out too quickly invites the kind of shortages and high prices we are now seeing.

Some green energy advocates see high fossil fuel prices as good, thinking it will motivate faster adoption of their preferred solutions. 

This is the same flawed thought process that leads central bankers to punish savers with zero interest rates. 

They fixate on a goal and fail to think of the pain involved in reaching it.

My Camp Kotok friend and insightful thinker Megan Greene wrote an instructive Financial Times column on this point. 

She believes climate change creates real risks. 

But as an economist, she also sees the costs of controlling those risks.

“Most estimates for how we can achieve net zero over the next 30 years assume we will develop affordable technologies to capture carbon and can avoid suffering a major decline in real incomes and standards of living. 

That is a big assumption. 

Even if it’s right, the transition will inevitably create winners and losers.

“To be clear, the potential costs from transitioning and physical risk are less severe than those we’d incur by continuing to destroy the planet. I am not arguing that because there are costs, we shouldn’t do it. 

But politicians must be upfront about the price, financial or otherwise, and have concrete plans to support the losers.”

This is the real problem: Politicians think they can fight climate change without imposing pain on people who didn’t ask for it and aren’t prepared to handle it.

Megan observes this is remarkably similar to the globalization debacle. 

US and European leaders eagerly accepted China into the World Trade Organization but ignored the costs. 

They failed to protect those bearing the costs (Midwestern factory workers, for example), leading directly to today’s social divisions. 

We don’t need to repeat that failure.

Gradual Transition

So this leaves an important question: How do we secure a stable, low-cost energy supply without causing other problems?

You don’t have to believe in climate change to see that continued reliance on fossil fuels isn’t the best long-term solution. 

Among other problems, it empowers some of our geopolitical adversaries and harms poor countries that lack their own supply. 

The need to move fuel through pipelines and tankers makes it inherently expensive. 

The energy industry itself understands this, which is why the major producers are trying to diversify.

But notice that word “diversify.” 

Shifting some of your resources to clean energy isn’t the same as abandoning fossil fuels, which are and will remain necessary for some time. 

Punishing producers and users of a critical resource for which adequate alternative supplies aren’t yet available is counterproductive.

I’m a bit sad to admit China is facing this situation more intelligently than the US. 

That may be surprising, since we know China is by far the world’s worst carbon emitter. 

The regime knows this can’t continue, but also that it must continue until something else can be arranged.

So, for the moment, China remains reliant on coal, oil, and natural gas, importing vast quantities of all three. 

But the government is also planning a gradual transition to cleaner power, which will include not just solar and wind but a massive nuclear power program, amounting to $440 billion over the next 15 years.

According to Bloomberg, China presently has 51 nuclear plants in operation, with 46 more planned or under construction. 

The US has 93 operating plants, many of them decades old, and only two under construction.


Source: Bloomberg

I’m a big nuclear energy proponent. 

I’m convinced it is the best way we have to produce clean, reliable, round-the-clock electricity regardless of weather conditions. 

I certainly don’t want more Chernobyl or Fukushima disasters. 

New designs that don’t depend on externally powered water cooling systems eliminate much of that risk. 

Other technologies like thorium reactors and nuclear fusion are coming. 

Nuclear is the perfect bridge to move us from carbon to a world of clean, sustainable, abundant energy.

In the West, nuclear suffers from “not in my backyard” reservations. 

China doesn’t have that problem, and so can take advantage of this ideal alternative we are largely ignoring here.

I’m far from the only one saying this. 

Bill Gates founded a company called TerraPower to develop advanced nuclear power technology. 

Their “Natrium” design uses liquid sodium rather than water to cool the reactor chamber. 

The high pressure that causes explosions simply doesn’t build up. 

The sodium doesn’t need pumps that can fail in an emergency, as happened in Fukushima. 

It circulates passively via hot air. It can even store heat in tanks of molten salt, which act as a giant battery that further increases power output.

TerraPower’s plant designs are smaller and much less expensive than conventional nuclear power plants. 

This lowers the capital cost for utilities, as well as the risk. 

They produce much smaller quantities of hazardous waste, too.

Chinese companies are developing similar technologies and Chinese state banks are financing about 70% of the costs for the reactors at much lower cost than we see in the West. 

Quoting from the Bloomberg article:

“That makes a huge difference because most of the cost of atomic energy is in upfront construction. 

At 1.4% interest, about the minimum for infrastructure projects in places like China or Russia, nuclear power costs about $42 per megawatt-hour, far cheaper than coal and natural gas in many places. 

At a 10% rate, at the high end of the spectrum in developed economies, the cost of nuclear power shoots up to $97, more expensive than everything else.” 

At the current pace, China will deploy their technology far faster than the US does.

 I should point out that this is going to give the Chinese an enormous edge in nuclear facility production. 

They will be able to drive costs down because of the sheer quantity they are producing internally along with the enormous amount of research and development that must accompany such an effort. 

The West will rapidly fall behind and it will be hard to catch up.

This is really about national security as well as economics. 

A world in which China is energy-independent while the US grid gets less reliable every year is not going to work well.

As I said, this is a complex problem. 

Nuclear alone isn’t the answer, nor are solar and wind, nor are oil, gas, or coal. 

We haven’t even talked about the technologies that may help us keep using fossil fuels while greatly reducing harmful emissions. 

A lot is happening on that front.

Whichever course we take needs to be done in ways that protect innocent bystanders. 

Creating solar jobs in Florida while eliminating West Virginia coal mining jobs simply repeats the globalization mistake. 

Those on the losing end won’t be happy, nor should they be.

Climate warriors like to talk about the “externalities” of fossil fuels. 

They’re not wrong, but their solutions have externalities, too. 

Admitting it, and making sincere efforts to help the victims, would go a long way to getting what they want.

Would you really like to see carbon-free electricity? 

Then why not create the equivalent of Fannie Mae to fund low-interest loans to utility companies to install nuclear? 

Launching 10 or 15 plants a year would not only help the environment, it would create large numbers of high-paying jobs. 

If China can figure out how to switch existing facilities from coal to nuclear, as is doing the switchover on existing coal plants in situ, surely the West can figure it out. 

(I keep saying the West and not just the US, as Europe has some formidable nuclear technology and developers.)

Reliable Energy Needs Reliable Financing

The COP26 is meeting this week, and we did the usual feel-good proclamations, plus scary warnings, mixed in with a rather alarming note. This from the Financial Times:

“The Glasgow Financial Alliance for Net Zero (Gfanz)—which is made up of more than 450 banks, insurers, and asset managers across 45 countries—said it could deliver as much as $100tn of financing to help economies transition to net zero over the next three decades.”

That sounds nice, except buried in it is pressure from within the group and outside the group to commit to not funding new oil and coal projects. 

Somehow the magical thinking goes that if we don’t fund new coal, oil, and natural gas plants, renewable energy can somehow make up the slack and we won’t run out of energy on the way to being carbon free.

Remember the difference between 1.4% interest rates and 10% interest rates on the cost of nuclear power? 

I am not worried that oil and utility companies will lose access to financing. 

But that financing may increasingly come from private sources at higher costs. 

Higher interest costs for utilities means higher energy costs for consumers.

Bank of America’s $120 oil forecast is not all that outrageous. 

If we keep discouraging capital investment in oil and gas production, not just in the US but everywhere, while we are in the process of transition, we will see the same kind of high energy prices which cause riots in France and countries all over the world.

I am as much an environmentalist as anybody. 

I don’t want to see the air I breathe and I want nothing in my dark rum other than a crystal-clear ice cube. 

I recognize the need for transition to a more sustainable clean(er) energy production. 

China plans to replace every one of its coal plants by 2060. 

That is a long time, but they have massive energy needs and they are rationally planning the transition. 

I haven’t seen a lot about rational transition planning at COP26. 

Energy is going to be the ultimate reality check.

Failing to plan and finance a realistic transition will mean much higher and more volatile energy prices. 

We may one day wish for the good old days of $120 oil.

New York, Dallas, and Lake Granbury

I will be flying to New York while many of you are reading this letter. 

Next week’s schedule is full with lunches and dinners and meetings. 

I am really excited about it. 

Right now we are planning a dinner with some of the usual suspects along with Art Cashin. 

It has been too long since I’ve seen Art and many other of my New York friends. 

Then Shane and I will be in Dallas for a few days and end up on Lake Granbury to actually celebrate Thanksgiving with my family.

It is clear I will be flying more in the coming year. 

There are so many people I need to see where a video call just doesn’t cut it. 

And I actually got a live speaking gig offered to me in March. 

There was a point in my life were speaking fees actually were a nontrivial portion of my income. 

For the last two years it has been nonexistent. But significantly more than the fees, I miss speaking in front of a live audience.

So with that let me hit the send button and encourage you to, follow me on Twitter

John Mauldin unplugged and some might say a little unhinged. 

But we have fun and maybe learn something on the trip. 

Have a great week and spend some time with friends!

Your looking forward to live meetings analyst,



John Mauldin
Co-Founder, Mauldin Economics

Government-Bond Swings Burn Wall Street Investors

Shifting expectations for inflation and central-bank policy are sparking surprise moves, hurting big-name players

By Gregory Zuckerman and Julia-Ambra Verlaine

Short-term Treasurys were widely expected to do better than 10- and 30-year bonds, but the opposite is happening. / PHOTO: SAMUEL CORUM/BLOOMBERG NEWS


A rapid U-turn in government-bond markets has sparked deep losses for some of Wall Street’s biggest investors, a stark demonstration of how even small shifts in expectations for economic growth and central-bank policy can upend the most carefully laid bets.

Behind the losses are recent abrupt moves in government-bond prices. 

With central banks signaling plans to end their extraordinary stimulus measures, short-term bonds have tumbled in price, sending yields—which rise when prices fall—to touch their highest levels since March 2020.


At the same time, yields on longer-term bonds, which tend to fall when investors expect slowing growth, have retreated from near their highs for the year. 

The gap between the two narrowed sharply, a phenomenon known as a flattening yield curve. 

That upset popular bets that a gradual return to normal levels of growth and inflation would push interest rates higher in the years to come.

Hedge funds and others who make big bond bets “were caught offsides” by the recent price moves, said Steve Kane, who helps run TCW Group Inc.’s $86 billion MetWest Total Return Bond Fund, which has also seen losses. 

“They’re getting squeezed,” he said.

A Bloomberg Treasurys index has lost about 1.5% since early August.

While the percentages are small relative to the recent swings in bitcoin or stocks such as Avis Budget Group Inc., many hedge funds and others borrow large amounts of money to amplify their bond bets, so mistaken trades can be painful. 

London-based Rokos Capital, run by the investor Chris Rokos, for example, has lost 27% in 2021 as of the end of October, according to people close to the matter, in part from bond trades. 

The fund is on track for its worst year ever.

Multistrategy hedge funds, including ExodusPoint Capital Management LP and Balyasny Asset Management LP, also lost money from recent government-bond moves, according to people familiar with the trades.

For months, investors had been preparing for the Federal Reserve to step down its role in the economy by reducing its bond-buying stimulus program, now scheduled to end in June. 

The investors also anticipated a gradual move by the Fed to raise interest rates over the next couple of years, while becoming more concerned about rising inflation. 

As a result, many wagered that short-term Treasurys would do better than 10- and 30-year bonds—which usually suffer most when long-term inflation rises—steepening the yield curve.

Instead, the opposite is happening, as prices for long-term bonds climb, flattening the curve. 

This same flattening is happening in British, Australian, Canadian and other government-bond markets. 

Such moves usually happen at the end of interest-rate cycles, as investors anticipate an end of interest-rate increases by monetary officials, not as investors prepare for the beginning of rate increases.


The recent moves underscore how challenging it has been for bond investors to anticipate inflation, central-bank policy and resulting market moves after an era of unprecedented stimulus ushered in to avoid an economic crisis. 

Traders say some of the recent moves are spurred by big investors acting to unwind, or exit from, existing positions, to stem their losses.

While inflation worries have racked markets for months, the recent price action suggests that the bond market is now preparing for lingering inflation over the next few years, in tension with the Fed’s view that easing supply-chain bottlenecks will soon slow rising consumer prices.

Bond prices now suggest inflation will be 3% over the next five years, up from 2.5% a month ago, traders say. 

Investors are anticipating a series of interest-rate increases over the next couple of years, which will crimp the economy and eventually reduce inflation, explaining why long-term bonds are doing better than short-term bonds. 

Bond prices indicate that the Fed will raise interest rates five times by the end of 2023, resulting in a slowdown of the global economy.

Investors in stocks and riskier bonds show less concern about the outlook for the global economy. 

Stocks have been surging in recent weeks, with the Dow Jones Industrial Average closing above 36,000 for the first time, while junk-bond prices have also been climbing.

Longer-term yields slumped again at the end of the week after a better-than-expected U.S. jobs report and the Bank of England’s surprise decision to hold rates steady. 

The 10-year yield settled Friday at its lowest level in six weeks.

The Bank of England’s decision to hold rates steady was a surprise. / PHOTO: HENRY NICHOLLS/REUTERS


“Conviction in the path of rates has declined substantially,” said Gennadiy Goldberg, U.S. rates strategist at TD Securities in New York. 

“Global hike expectations have been yanked forward in the most unceremonious of ways, and many people are waiting on the sidelines trying to figure out what their next move should be.”

Many investors are losing money lately in the bond market, but few are more surprising than Mr. Rokos, who has also suffered from some souring Chinese stock investments, according to people close to the matter. 

Mr. Rokos, a co-founder of Brevan Howard, started his own firm in 2015 and has a strong record. 

His fund gained 44% in 2020. 

He is influential enough that other hedge funds sometimes copy his trades.

Mr. Rokos set up his bond trades in both U.S. and British bond markets using derivatives, according to people familiar with the moves. 

His recent assumption has been that central banks in both places would gradually boost interest rates, rather than moving as aggressively as the market now predicts, one of the people said.

Investors expect more swings ahead as economies recover, supply chains normalize and central banks begin raising rates.

“As we get closer to fully departing this [quantitative easing] regime, around mid-next year, we would expect to see market volatility increase,” said Rick Rieder, chief investment officer of global fixed income at asset manager BlackRock. 

“This will likely be a healthy evolution and not a disruptive one.” 

Joe Biden’s two-front war for democracy

The US president’s domestic problems are hobbling his efforts to defend freedom overseas

Gideon Rachman

© James Ferguson


“Are We Rome?” Cullen Murphy’s book with that title was published in the US in 2007, capturing the concern that America was an empire in decline. 

Today, the fashionable question in Washington is “Are we Weimar?” 

Is America, like Germany in the 1920s, a democracy in terminal decline?

These twin fears — Rome and Weimar — are linked. 

Internal and external weaknesses feed off each other. Conventional accounts of the fall of Rome, stress both the barbarians on the frontiers of the empire and the rot at its centre.

Joe Biden certainly believes he is fighting a two-front war for democracy. 

At home, the US president faces the threat of a Republican party that is still in thrall to Donald Trump — the first president in US history to refuse to accept defeat in an election. 

Overseas, he faces the challenge of a rising China — which Biden has framed as part of a larger struggle between democracy and autocracy that will define the 21st century.

In theory, these two battles are complementary. 

A stable and confident America is better placed to “make the world safe for democracy”, as Woodrow Wilson said. 

By contrast, a world in which authoritarianism is on the rise can poison the domestic political atmosphere in the US — witness the American right’s current fascination with Viktor Orban’s Hungary.

In practice, however, the two battles for democracy create contradictory pressures. Biden’s domestic situation means he is fighting the global battle for democracy with one hand tied behind his back. 

The Biden team know that there is no point winning the fight in Taipei or Kabul if you lose it in Washington. 

So the fight for democracy at home must come first.

Biden has promised a “foreign policy for the middle class” — which means every decision he makes, foreign or domestic, will be focused on voters in Middle America. 

This goes well beyond the normal urge of a political party to hold on to power. 

The Democrats fear a second Trump presidency would be openly authoritarian and that even a close election would give the Republicans an opportunity to try to overturn the result. 

That, in turn, could split the country into warring “red” and “blue” enclaves.

The urgency of the battle for democracy at home means that the Biden administration is prevented from making what would otherwise be obvious moves in the battle for democracy overseas.

The most obvious example of this constraint is the White House’s reluctance to make any new foreign trade deals — in deference to the protectionist mood that Trump whipped up. 

America’s paralysis on trade hands a big advantage to China. 

Biden’s foreign-policy people know that Chinese influence cannot be checked with aircraft carriers alone. 

They fear that, without an Asian economic strategy, the US will ultimately lose its battle with China.

The obvious US strategy would be to negotiate a new trade deal with Asian allies. 

The Obama administration concluded just such a deal, the Trans-Pacific Partnership, only for Trump to withdraw from it. 

But the protectionist mood in the US was already so strong — on the left, as well as the right — that Hillary Clinton had also repudiated the TPP while on the presidential campaign trail.

A smaller trade pact was kept alive by Japan and others and revived as the CPTPP. In an ideal world, the Biden foreign-policy team would love to join it. 

In practice, that would be too great a political risk. 

Instead, ironically, China has now applied to join the CPTPP. 

Washington policymakers think America’s Asian allies will only be able to block Chinese membership for a few years. 

Eventually, China will get its wish. A trade alliance originally intended to be a bulwark against Beijing will instead become its battering ram.

The US is now casting around for other economic instruments to boost its influence in Asia. A pact on technology standards looks potentially interesting. 

So do efforts to provide infrastructure funding, as an alternative to Beijing’s Belt and Road Initiative. 

But these are, in truth, second-best solutions.

Biden’s decision to end the war in Afghanistan was also driven, in large part, by his determination to put the sentiments of Middle America above the instincts of the Washington foreign-policy “blob”. 

There was also a geopolitical case made for withdrawal; that quitting Afghanistan would free up US resources to concentrate on China and Russia. 

Both of these arguments have some force. 

But the triumph of the Taliban can hardly be chalked up as a win for democracy. 

Two weeks of televised chaos from Afghanistan were also a big blow to Biden’s reputation for competence at home.

The idea that Biden is a floundering incompetent is now being hammered home by the Republicans, who also point to the failure to control migration on America’s southern border — and to the administration’s struggle to get its spending package through Congress. 

One recent opinion poll saw Biden’s approval rating dipping to 38 per cent; others put him in the low 40s.

The White House is trying to project an image overseas of a resurgent America that is neither Rome nor Weimar. 

But in Biden’s Washington the fear that the president may fail — and the dread of what that might mean for America — now hovers in the background of every conversation.

How Working From Home Could Change Where Innovation Happens

For decades, ‘superstar cities’ have been attracting talent and money. But thanks to remote work, their status is likely to change in unexpected ways, bringing tech expertise to places that have long tried to attract it.

By Christopher Mims 

Photographs by Michael Starghill for The Wall Street Journal


In September of 2020, smack in the middle of the pandemic, facing the prospect of a winter confined to her too-expensive apartment in San Francisco, Rumman Chowdhury decided she had had enough of the city.

So, the tech-startup founder made the unlikely decision to move to Katy, Texas—a town of about 20,000 just west of Houston, best known for America’s most expensive high-school football stadium.

A year later, Dr. Chowdhury is working remotely as the director of machine-learning ethics at Twitter , which now allows employees to work from home forever. 

Not only does she not regret her move, but she sees herself as the vanguard of a much broader trend: America’s professional classes are moving not just to hybrid but also fully remote work, and at the same time moving out of the urban hubs where people with first-class talents once clustered.

“What’s nice is that I can do everything I have been doing, and live in a nicer, more comfortable environment where I have my own office, instead of cramming it into a guest bedroom,” says Dr. Chowdhury. 

She bought her home in Katy sight unseen, and discovered only after moving in that it had one more bedroom than she had realized—for a total of five.

Some researchers and industry experts see the trend as a sign of profound change, at least in the tech industry, which traditionally has been one of the most geographically concentrated fields. 

Many people are moving outside of the usual industry hubs, and they aren’t coming back.


This shift has profound implications for where and how innovation will happen. 

Tech-company engineers and other professionals moving farther from the office could bring tech expertise to places that have long sought to add it. And big companies in coastal hubs now have the ability to tap into talent pools farther afield.

Twitter’s Rumman Chowdhury moved to Katy, Texas, from San Francisco.. / PHOTO: MICHAEL STARGHILL FOR THE WALL STREET JOURNAL

Could superstars lose luster?

In the before (pandemic) times, America’s hottest talent was lured to cities like New York, Boston, Seattle, San Francisco and Los Angeles by outsize pay packages and the promise of working with other first-string talent.

Now Covid-19 has sent some of America’s hottest talent—and, in aggregate, millions of workers—scrambling for the exits from these large, crowded and expensive “superstar cities.”

Americans have already demonstrated the potential scale of remote work: According to a survey commissioned by the Atlantic, 35% of working Americans, or about 50 million people, were working remotely at the peak of the pandemic-era work-from-home trend, in May 2020. 

But it should be noted that America also has a long way to go if the country is to permanently shift to this level of remote work. 

As of August of 2021, only 13.4% of Americans, or about 20 million people, were still working remotely, according to data from the Bureau of Labor Statistics. (BLS data tends to be at the low end of such estimates, however.)


Many economists think the current exodus of talent amounts to a blip—a temporary shift of workers that belies the long-term power of cities to attract the best and brightest. 

This migration, they say, largely represents people moving from city centers to suburbs, a change made possible by hybrid work and less commuting, which will have little long-term impact.

But these economists may be missing a key element of the trend: That companies are embracing the idea of remote work because it enables them to hire people from anywhere, and potentially for less money.

According to data from LinkedIn, as of August, the number of jobs that included a remote option was one out of every eight on the site, which is several times the proportion it was a year ago. 

Out of a pool of about 11 million job postings on LinkedIn, that represents about 1.4 million jobs—including everything from children’s-book editors to anti-money-laundering experts.

Remote work was gaining steam even before the pandemic, which only accelerated its adoption. 

Adam Ozimek, chief economist at Upwork, which operates a platform connecting employers and freelance workers, calls the ever-growing collection of cloud-based tools that make remote work possible—from Zoom and Slack to Figma and GitHub—a “general-purpose technology,” as important as electricity or the computer itself, that could lead to changes in where people live, how work is done, where innovation happens and how wealth is distributed in the U.S.

In the short term, he says, economic data do indeed indicate that people have mostly moved to the suburbs. 

But in the long run, he argues, odds are that millions of people are going to leave America’s biggest cities altogether, in search of higher quality of life and lower cost of living.

“The mobility data we have seen certainly suggests that the greatest number of moves have been into the peripheral regions of superstar cities,” says Dr. Ozimek. 

“But I think we have to consider how households are going to make these decisions and how uncertainty about current remote work opportunities plays into that,” he adds.

In other words, “if a bunch of other potential employers go fully remote, that is really when households can feel more confident about moving far away and giving up access to the superstar-city labor market,” says Dr. Ozimek.

Extrapolating from a September survey of 1,000 hiring managers and other data, Dr. Ozimek projects that 30 million American professionals could be fully remote by 2026.

Matthew Kahn, a professor of economics at the University of Southern California, recently published a paper showing that the pandemic shrank the premium people are willing to pay to live in the center of cities, compared to the suburbs. 

It’s entirely possible, he says, that this trend will continue, pushing people even farther out of existing superstar cities.

“My thought experiment runs like this: Where would every American live, if they could email themselves to work?” says Dr. Kahn. 

The answer, he says, is well-run cities with good amenities—no matter how far they are from headquarters.

A scene outside of Katy High School in Katy, Texas../ PHOTO: MICHAEL STARGHILL FOR THE WALL STREET JOURNAL

Obstacles to moving

But such moves by workers come with challenges. 

Being able to “email yourself to work” depends on how much the average American professional is able—and willing—to adapt to working far from colleagues nearly all the time, as opposed to just part of the time, as has been common in flexible and hybrid working arrangements.

For one thing, working remotely can bring on isolation and creative doldrums. 

There is evidence that the pandemic and widespread remote work shrank our networks at our jobs, according to a Microsoft analysis of billions of Outlook emails and Microsoft Teams meetings. 

One reason this matters: Having more connections with employees outside your team correlates with higher creativity.

But a flood of technologies has arisen to enable remote work, from virtual offices and virtual retreats to virtual business travel, Zoom Rooms and remotely piloted robot bodies for doing blue-collar work from home. 

Companies that are veterans of running remote workplaces have already found a number of ways to bring employees together both in person and virtually, in order to accomplish what coming to the office regularly once did.

For instance, to reproduce the serendipitous “water-cooler conversations” among team members that offices like Apple’s are famously designed to facilitate, every week Dr. Chowdhury uses a feature of Google Meet that randomly assigns pairs of team members on a group video call to individual breakout rooms. 

“We randomly pair people up for 10-minute conversations and there is no goal, it’s just, ‘Hey, how are you, how was your weekend,’ and then it switches,” says Dr. Chowdhury. 

“It’s like speed dating in a sense, or speed networking,” she adds.


Meanwhile, although leaders of tech companies love to talk about how important innovation is, and how important being under the same roof is to innovation, there is scant evidence that people need to collect themselves in the same place every day in order to collaborate and come up with new ideas.

What’s more, research suggests that the kind of innovation that company leaders are thinking about—the de novo generation of an entirely new product or technology—is incredibly rare. 

The kind of innovation that actually drives the bottom line, what you might call everyday innovation, is collaborative and incremental, precisely the kind of steady grind carried out by a small group of employees. 

A year and a half of data on the increased productivity of remote workers suggests current collaboration technologies are more than capable of facilitating collaboration.


Dr. Chowdhury sees herself as the vanguard of a much broader trend. / PHOTO: MICHAEL STARGHILL FOR THE WALL STREET JOURNAL

Creating new hubs

As professionals working for America’s most productive companies leave superstar cities, or never move to them in the first place, the new geography of innovation, and the local economies that benefit from the wages of those who create it, could also be dispersed.

It would be one thing if workers simply dotted the landscape, choosing new places to land willy-nilly, but there’s every indication that they will cluster anew, but using different criteria. 

Cities of the future will have to compete on amenities like good governance, access to the outdoors, better parks and entertainment, says Dr. Kahn, echoing work by the economist Ed Glaeser . 

The flood of coastal expatriates with jobs in tech to places like Boise, Idaho, seems to back up these assertions.

This effect could be especially powerful for tech companies, which are in the best position to leverage existing remote-work technologies, build their own and even sell some of those tools to others. 

Google’s cloud-based productivity tools and Amazon Web Services were both born of internal needs, after all, and are both now essential to remote work at millions of companies.

Who knows which of the new crop of remote-work technologies being developed by tech companies large and small, from virtual reality to telepresence, will expand the pool or enhance the productivity of remote workers next?

The paradoxical result of widespread remote work is that it represents both a centralization and a decentralization of where new technologies are built. 

That is, even as workers disperse geographically, more of them are doing their work in a single place: the internet. 

This change is already helping Silicon Valley giants break through logjams like regional housing crises in order to poach talent wherever it lives.

The team Dr. Chowdhury has built at Twitter in the past six months embodies this trend. 

“I am not limited to hiring people in San Francisco. 

Do you know how amazing that is?” she says. 

“My team is in every U.S. time zone, as well as the U.K. If we went back to an office, where would it be?”


Mr. Mims writes The Wall Street Journal’s Keywords column. 

Ending Hunger Sustainably

Saving the planet does not have to come at the expense of feeding the poor, and vice versa. If governments can implement a series of relatively low-cost initiatives with private-sector support, the world can still wipe out global hunger by 2030 without jeopardizing the fight against climate change.

Maximo Torero


ROME – In 2015, 193 countries gathered at the United Nations and pledged to end global hunger by 2030 as part of the Agenda for Sustainable Development. 

With less than a decade to go, prospects for achieving this goal appear bleak. 

Improving them will require governments and the private sector to address the global food and environmental crises simultaneously.

Food insecurity has increased in recent years as a result of conflicts and climate change, as well as the COVID-19 pandemic and the accompanying global economic crisis. 

Today, up to 811 million people suffer from hunger, including 132 million additional people who were classified as undernourished during the pandemic. 

Another three billion people are too poor to afford a healthy diet.

Efforts to fight hunger have traditionally focused on producing more food – but this has come at a high environmental cost. 

Agriculture depletes 70% of the world’s fresh water and 40% of its land. 

It has contributed to the near-extinction of around one million species. 

Food production generates 30% of global greenhouse-gas (GHG) emissions and is the leading cause of deforestation in the Amazon.

Policymakers seeking to eradicate hunger today thus face a difficult dilemma: preventing billions from going hungry while also saving the planet. 

For example, a fertilizer subsidy could boost crop yields and reduce hunger, but it could also lead to excessive nitrogen use, thus ruining the soil.

Similarly, cattle and rice farms emit methane, a more potent GHG than carbon dioxide. 

The most effective way to reduce methane emissions is to tax them. 

But this would cause food prices to rise, affect poor consumers’ access to nutrition, and threaten the livelihoods of farmers and ranchers.

Countries must therefore establish an optimal level of environmental pollution that doesn’t reduce agricultural productivity or undermine the social and economic well-being of the poor. 

We need a solution that feeds the most mouths without endangering the planet.

Finding a workable plan requires looking at food systems holistically – a major departure from the current siloed approach. 

To avoid unintended consequences, it is essential to quantify any trade-offs with data. 

And to turn data-driven strategies into action demands a coordinated effort to boost public and private investments.

No one intervention alone can solve the hunger problem. 

But studies suggest that a mix of key measures aimed at increasing farm productivity and cutting food loss and waste could reduce the number of chronically hungry people by 314 million in the next decade, and also make healthy diets available for 568 million people. 

Expanding countries’ national safety nets, including school-feeding programs, could give an additional 2.4 billion people access to a healthy diet by 2030.

Another study shows how a series of low-cost initiatives can end hunger for 500 million people by 2030 while also limiting agricultural GHG emissions in line with the goals of the 2015 Paris climate agreement. 

These initiatives include agricultural research and development to produce food more efficiently, information services that provide farmers with weather forecasts and crop prices, literacy programs for women – who account for almost half of small farmers in developing countries – and scaling up social protection. 

This can be accomplished if rich countries double their food-security aid to $26 billion per year until 2030, and poorer countries maintain their annual investment of $19 billion.

Automation can help to manage the trade-offs between food production and environmental protection. 

For example, “AgBots” that resemble small farm vehicles can identify and remove weeds. 

Because they don’t use expensive chemical herbicides, robots can reduce the cost of weeding by 90% and protect the soil from potentially harmful chemicals. 

Likewise, artificial intelligence and cloud solutions can detect pest-infested areas using drone imaging. 

The data collected can help to guide farmers’ irrigation, planting, and fertilization decisions, and indicate the best time of the year to sell a given crop.

Governments must now work with the private sector to make these high-tech, precision-farming systems available at lower costs, especially for small farmers. 

The good news is that private firms are increasingly keen to promote sustainability – including through “blended finance” schemes, which combine an initial investment from governments or multilateral financial institutions with subsequent commercial financing. 

This kind of approach can effectively de-risk private finance and encourage investment in improving food systems.

For example, the US and Dutch governments have been working with the German coffee company Neumann Kaffee Gruppe and three European banks to provide a $25 million loan to small farmers in Colombia, Kenya, Honduras, India, Indonesia, Mexico, Peru, and Uganda for sustainable coffee production. 

The banks initially rejected the proposal because small farmers are usually shut out of financial services and thus unable to prove their creditworthiness, making them a high-risk group for commercial lenders. 

But the banks signed on to the scheme after the Dutch government and Neumann Kaffee Gruppe agreed to cover the first 10% of losses should it not pan out, with the US government absorbing 40% of the remaining losses.


Maximo Torero is Chief Economist of the Food and Agriculture Organization of the United Nations.