Warren Buffett Is Wrong About Climate Change

Warren Buffett doesn't want you to know how his empire is preparing to deal with the disastrous effects of climate change. In fact, he said in a letter released Saturday, he isn't exactly sure this whole "climate change" thing is real, anyway.

In his annual letter to investors in his conglomerate Berkshire Hathaway, the billionaire investor fought back against a proposed shareholder resolution demanding his insurance subsidiaries measure and disclose the risks that climate change poses to their business and how the company is responding to the threat. Buffett compared fears over climate change to the brouhaha around apocalyptic Y2K predictions.

“It seems highly likely to me that climate change poses a major problem for the planet,” the 85-year-old wrote in the letter, released Saturday morning. “I say ‘highly likely’ rather than ‘certain’ because I have no scientific aptitude and remember well the dire predictions of most ‘experts’ about Y2K.”

Insurance companies take on losses after major weather disasters (think droughts, Hurricane Katrina and other big storms), so it makes sense they'd be concerned about climate change. If that's true, why would Buffett say he's not so sure this is real? Because skepticism is better business.

Buffett isn’t denying climate change, but rather using language climate deniers feel comfortable with and will likely cite in future attempts to derail environmental policy. Climate change affects Buffett's business: He owns a Nevada utility that has fought and won against solar development in that state, and his railroad, Burlington Northern, in large part depends on the demand for coal and oil.

Buffett argues in favor of seeing climate change as a likely risk to the world, but against the need for more oversight, transparency or regulation of his companies. It’s a position he’s taken before -- Buffett argued against designating reinsurers, of which he owns the world’s fifth-largest, as too-big-to-fail institutions. Though he said he never spoke directly to regulators about the issue, he made his views public. Regulators, thus far, have agreed.

Why Buffett's Words Matter

Markets, governments and companies aren’t properly pricing the risk of climate change. For instance, are beachfront homes in low-lying areas as valuable as their owners believe? Experts reckon that only once markets and others attach a price to the threat of climate change will the rest of the world finally move to limit the potential consequences. If insurers -- which must grow their assets in order to make good on their guarantees -- measure the potential losses they could incur as a result of climate change, they can then price that risk. Then everyone else could follow.

Buffett's views against disclosure put him in sharp disagreement with Bank of England Governor Mark Carney, who has said that financial markets can help limit the effects of climate change, but only if companies -- such as insurers -- supply the kind of information that Buffett doesn't want to disclose. 

In September remarks to the insurance industry, the chief overseer of the world’s third-largest insurance sector warned about the numerous economic and financial risks posed by climate change. Carney urged companies, particularly insurers, to start taking seriously their responsibility to measure their potential losses. Their own solvency could be at stake, Carney warned.

Insurance companies invest their money in places like the stock market. But “stranded" oil, gas and coal reserves, left in the ground due to the world’s commitment to halt rising temperatures, could render related financial assets worthless. Or the disruption of trade resulting from an extreme weather event could affect related investments.

Cynthia McHale, director of the insurance program for Ceres, a nonprofit group that pushes investors to pay attention to the financial risks of climate change, said in an interview earlier this month that neither insurers nor their government overseers have a good handle on the risks that climate change poses to insurers’ various financial assets.

McHale compared the situation to the one faced by big banks in 2008, when few sufficiently realized the magnitude of potential losses from the U.S. property bust. 

Weathering Heights

Buffett's case against the resolution boils down to this: “Thinking only as a shareholder of a major insurer, climate change should not be on your list of worries.”

First, he said, his company can handle any possible losses thanks to rising premiums. Because insurance policies are typically written for one year and repriced annually, Buffett's company can hike premiums to better account for the heightened risk of climate change-driven losses.

Second, Buffett asserts that climate change has produced neither “more frequent nor more costly hurricanes nor other weather-related events covered by insurance.”

But eight of the 10 costliest hurricanes in U.S. history, in terms of insured losses, have occurred since 2000, according to the Insurance Information Institute. Nine of the 10 costliest floods in U.S. history, when measured by payouts from the federal government’s National Flood Insurance Program, also have occurred since 2000, according to the insurance group.

NOAA

The U.S. experienced five different types of extreme weather last year. 

Munich Re, the world’s biggest reinsurer, estimated that extreme weather events led to $510 billion in insured losses from 1980 to 2011.

Carney said that according to Lloyd’s of London, the world’s oldest insurance market, the roughly 8-inch rise in sea level at the tip of Manhattan since the 1950s increased the insured losses from Hurricane Sandy by 30 percent in New York alone.

PAUL J. RICHARDS via Getty Images

A house in Staten Island, New York, hit in Hurricane Sandy. Scientists say we should prepare for more weather events like the massive storm.

Insurance companies should care about climate change from a selfish perspective if they want to stay in business. Carney has warned that insurers that jack up premiums or exit markets after realizing the potential losses associated with climate change could unwittingly cause the value of their own assets to shrink.

He also warned about potential losses from claims on policies written by insurers. For example, insurance companies could be forced to make massive payouts if victims of climate change successfully hold accountable companies that contributed to it. He likened the situation to the one faced by U.S. insurers stung by tens of billions of dollars in losses from asbestos claims.

In fact, Carney said that as a result of recent weather trends, some now estimate that insurers are undervaluing their potential losses by as much as 50 percent.

Insurance companies caught unprepared for the effects of climate change could cause problems for government officials and put taxpayers at risk.

For example, governments may have to cover markets that insurers dump as a direct result of climate change, the Bank of England chief said, putting taxpayers on the hook.

Bloomberg via Getty Images

Mark Carney, the U.K.'s top central banker, says insurers may be undervaluing their potential risks by 50 percent. 

What Could Change If Insurers Opened Up About This Risk

Disclosing climate change information would improve policymaking, Carney said. It could make climate policy more like monetary policy, where officials who set interest rates often tinker with their stance based on markets’ reactions.

The Financial Stability Board, a global group of the world’s financial regulators, wants financial companies to disclose their risks, too.

Some state insurance regulators in the U.S. are demanding insurers take the threat posed by climate change into account when investing their customers’ money and underwriting insurance policies. Washington state’s insurance regulator, Mike Kreidler, has criticized some insurers for failing to take climate change risks seriously, arguing their own solvency was at risk.

Buffett sounded more alarmed by the prospect of climate change in 2007, when scientific evidence of the impacts of climate change was less well-understood. In his annual letter that year, Buffett wondered aloud whether the deadly and expensive hurricanes of 2004 and 2005 marked the first warning of a new type of climate.

“It would be a huge mistake to bet that evolving atmospheric changes are benign in their implications for insurers,” Buffett wrote in his letter.

He warned that it was “naïve” to think of Hurricane Katrina -- the costliest hurricane in U.S. history -- “as anything close to a worst-case event.”

“These could rock the insurance industry,” Buffett added.

 

Another Huge Company Is Harnessing The Power Of Mindfulness

Taking some time to look inwards goes a long way.

That’s something Salesforce employees will soon be able to do regularly, as the cloud-based software company begins installing mindfulness rooms on each floor of its buildings.

After Buddhist monks from France's Plum Village gave a mindfulness workshop at Salesforce headquarters last October, founder and CEO Marc Benioff decided to outfit the company's new offices with dedicated areas to promote employees’ well-being.

An original proposal for a single floor of mindfulness space in each building was scrapped, and Benioff decided instead to install individual rooms on each floor.

“They came to me and said, ‘There’s constant activity at Salesforce. You should take one of your entire floors and make it a silent floor,’” Benioff said in an interview with The Huffington Post. “I said, ‘That’d be great, unless you work on that floor.’”

Instead, "as we build facilities around the world, we're now going to have a mindfulness section on each floor," he said. This space will not be for employees to make phone calls or take meetings, but rather to fully step away from the intensity of work. When someone enters one of the rooms, he or she will have to do so without bringing along any gadgets like a cell phone or computer.

A tower set to open at 350 Mission Street in San Francisco will be the first to include these spaces, Benioff said. The rooms are meant to encourage employees to turn their focus inwards, rather than thinking about external responsibilities.

“You spend your life going outwards, and your attention is focused on work, projects or other people,” brother Phap Linh of Plum Village told HuffPost. “This is a place where you can go in. The way out of stress, anxiety and difficulty is not out there.”

Benioff has championed mindfulness at his company, and said last year that he has hosted dozens of monks in his spare home in San Francisco. He has also pushed for business leaders to create a stronger culture around their employees’ well-being.

“It’s an anxious era. The antidote to anxiety is mindfulness,” Benioff told The New York Times last year.

Mindfulness can have significant impact on individuals’ physical and mental health. It’s been shown to make you a kinder person and reduce feelings of anger or depression. Guided meditations can help you sleep better, and even keep you young.

The rooms at Salesforce will be sectioned into two areas, one for reading and another for meditating. They will be centrally located on each floor, in order to encourage employees to take a break from their regular work and slow down.

The company is also entertaining the possibility of creating a meditation app geared toward specific goals, like unwinding from a pressing deadline or calming down after a tense exchange with a coworker, Linh said. (It would be the single digital activity allowed in the mindfulness rooms.)

“There’s a lot of fear, stress, anxiety and jealousy out there,” Linh added. “We want to cultivate joy and compassion.”

The monks of Plum Village also proposed bringing Salesforce employees to one of their monasteries for a weeklong retreat.

“It’s not enough to go to a one-hour workshop,” Linh said. With a retreat, “you really feel it in your flesh and can bring it back into your daily life.”

White House Predicts Robots May Take Over Many Jobs That Pay $20 Per Hour

The White House is worried that robots are coming to take your job.

In a report to Congress this week, White House economists forecast an 83 percent chance that workers earning less than $20 per hour will lose their jobs to robots.

Wage earners who receive up to $40 in hourly pay face a 31 percent chance they'll be replaced by robots, while workers who are paid more than $40 an hour face much lower odds -- about 4 percent -- of losing their jobs to automation.

The estimates underscore the myriad threats facing low-wage workers in America, who in recent years have been buffeted by stagnant wages, decreasing employment prospects and higher education costs if they wish to obtain additional credentials in pursuit of better-paying jobs.

In an economy increasingly defined by the yawning gap between rich and poor, White House economists worry that increased automation could exacerbate inequality as the well-paid enjoy the fruits of robot-fueled gains in productivity while everyone else is left to fight for scraps.

One study cited by the White House found that automation has particularly hurt middle-skilled Americans, such as bookkeepers, clerks and some assembly-line workers. A lack of additional training and education opportunities led these workers to settle for lower-skilled positions, and likely lower wages.

Already, the White House noted in its report, most economists reckon that changes in technology are "partially responsible for rising inequality in recent decades."

Robots and other advances in technology are forecast to displace a significant number of blue- and white-collar workers, according to 48 percent of experts surveyed by the Pew Research Center in 2014. They also said that robots and so-called digital agents will displace more jobs than they create by 2025.

Many experts surveyed by Pew said they are concerned that the rise of robots and other technological advances "will lead to vast increases in income inequality, masses of people who are effectively unemployable, and breakdowns in the social order."

It's not a new worry. The famed economist John Maynard Keynes wrote in 1930 about "technological unemployment," or the theory that workers could be displaced due to society's ability to improve labor efficiency at a faster rate than finding new uses for labor.

But White House economists said they don't have enough information to judge whether increased automation will help or hurt the U.S. economy. For example, new jobs could emerge to develop and maintain robots or other new forms of technology.

"While industrial robots have the potential to drive productivity growth in the United States, it is less clear how this growth will affect workers," the White House said in its report.

There are two important questions, according to White House economists. First, if robots replace existing workers, will workers have enough bargaining power to share in their employers' newfound gains? Second, will the economy create new jobs fast enough to replace the lost ones?

Falling union membership -- some 11 percent of U.S. workers belonged to a union last year, down from about 20 percent in 1983 -- suggests that workers may not have much power to demand higher wages from employers who are automating them out of a job.

The economy could create enough new, good-paying jobs to help those displaced by robots, but the plight of manufacturing workers who have lost their jobs in recent decades as manufacturers moved abroad suggests that this, too, could be a challenge.

Instead, according to the White House, the key is to maintain a "robust training and education agenda to ensure that displaced workers are able to quickly and smoothly move into new jobs." With most Americans now financing higher education through debt -- about 1 in 8 Americans collectively owe $1.3 trillion on their student loans -- amid an era of sluggish wages, it's unclear whether higher debt burdens will lead to a better economic future.

White House Predicts Robots May Take Over Many Jobs That Pay $20 Per Hour

The White House is worried that robots are coming to take your job.

In a report to Congress this week, White House economists forecast an 83 percent chance that workers earning less than $20 per hour will lose their jobs to robots.

Wage earners who receive up to $40 in hourly pay face a 31 percent chance they'll be replaced by robots, while workers who are paid more than $40 an hour face much lower odds -- about 4 percent -- of losing their jobs to automation.

The estimates underscore the myriad threats facing low-wage workers in America, who in recent years have been buffeted by stagnant wages, decreasing employment prospects and higher education costs if they wish to obtain additional credentials in pursuit of better-paying jobs.

In an economy increasingly defined by the yawning gap between rich and poor, White House economists worry that increased automation could exacerbate inequality as the well-paid enjoy the fruits of robot-fueled gains in productivity while everyone else is left to fight for scraps.

One study cited by the White House found that automation has particularly hurt middle-skilled Americans, such as bookkeepers, clerks and some assembly-line workers. A lack of additional training and education opportunities led these workers to settle for lower-skilled positions, and likely lower wages.

Already, the White House noted in its report, most economists reckon that changes in technology are "partially responsible for rising inequality in recent decades."

Robots and other advances in technology are forecast to displace a significant number of blue- and white-collar workers, according to 48 percent of experts surveyed by the Pew Research Center in 2014. They also said that robots and so-called digital agents will displace more jobs than they create by 2025.

Many experts surveyed by Pew said they are concerned that the rise of robots and other technological advances "will lead to vast increases in income inequality, masses of people who are effectively unemployable, and breakdowns in the social order."

It's not a new worry. The famed economist John Maynard Keynes wrote in 1930 about "technological unemployment," or the theory that workers could be displaced due to society's ability to improve labor efficiency at a faster rate than finding new uses for labor.

But White House economists said they don't have enough information to judge whether increased automation will help or hurt the U.S. economy. For example, new jobs could emerge to develop and maintain robots or other new forms of technology.

"While industrial robots have the potential to drive productivity growth in the United States, it is less clear how this growth will affect workers," the White House said in its report.

There are two important questions, according to White House economists. First, if robots replace existing workers, will workers have enough bargaining power to share in their employers' newfound gains? Second, will the economy create new jobs fast enough to replace the lost ones?

Falling union membership -- some 11 percent of U.S. workers belonged to a union last year, down from about 20 percent in 1983 -- suggests that workers may not have much power to demand higher wages from employers who are automating them out of a job.

The economy could create enough new, good-paying jobs to help those displaced by robots, but the plight of manufacturing workers who have lost their jobs in recent decades as manufacturers moved abroad suggests that this, too, could be a challenge.

Instead, according to the White House, the key is to maintain a "robust training and education agenda to ensure that displaced workers are able to quickly and smoothly move into new jobs." With most Americans now financing higher education through debt -- about 1 in 8 Americans collectively owe $1.3 trillion on their student loans -- amid an era of sluggish wages, it's unclear whether higher debt burdens will lead to a better economic future.

Why Does Dave Ramsey Want To Stop You From Saving Money?

If the most popular personal finance personality in the United States had a chance to save Americans billions of dollars a year, would he? Apparently not.

On Monday, Dave Ramsey came out against a rule being reviewed by the Obama administration that would require financial advisors to act in the best interest of their clients who are saving for retirement. The fiduciary rule, as it is known, was proposed last year and would apply to 401(K)s and Individual Retirement Accounts (IRAs). 

Ramsey -- a personal finance guru who has written six New York Times bestsellers and has a talk-radio show that draws over 8 million listeners, behind only Rush Limbaugh and Sean Hannity -- said in a tweet that the rule would keep a wide swath of the population from getting personal investing advice. 

This Obama rule will kill the Middle Class and below ability to access personal advice. https://t.co/Eym2Jq5CUP

— Dave Ramsey (@DaveRamsey) February 22, 2016

Current law allows financial advisors to work on commission when they advise savers about retirement accounts. Advisors are also allowed to earn money from mutual fund companies for steering clients to specific funds, even if those funds are not in the client’s best interest.

Such conflicted advice costs retirement savers $17 billion a year in poor investment performance and unnecessary fees, according to a White House estimate. Financial research firm Morningstar puts the cost to retirement savers slightly higher, at $19 billion.

The finance industry has continually argued that the fiduciary rule would restrict access to information from advisors and raise costs for customers. But it's important to remember that the only advice the rule would restrict is potentially conflicted advice. In addition, the advisor of a commission account has an incentive to push the client to buy and sell often, which often drives up the cost for the saver -- the fiduciary rule would restrict advisors from telling clients to buy just to generate commissions.

So why is Dave Ramsey, who preaches a financial code based on cost-cutting and ethical behavior, standing up for a business model that costs Americans billions of dollars a year? 

It might be because he makes money steering his listeners and readers to a network of financial advisors, called endorsed local providers, who can work on commission, said Helaine Olen, a personal finance author who writes an advice column for Slate.

“Ramsey’s entire business model is that he claims you can get 12 percent returns in the market, and he has a network of endorsed local providers who pay him for referrals,” Olen told The Huffington Post. 

Since Ramsey doesn’t disclose his company’s financial details, it’s hard to know exactly how much money is at stake for him, but Olen thinks the fiduciary rule might take a toll on Ramsey's referral business, and it certainly will not be good for endorsed providers who work on commission. 

Ramsey's office did not respond to requests for comment.

While Olen notes that “not everyone who works on commission is doing something with bad intent,” the current system has created a "standard where everybody is on their own and people have to figure out if they are getting advice that is in their best interest. And that’s sort of absurd, right?”

In the past, Ramsey has used his syndicated advice column to tell followers to quit jobs that require them to sell financial products they don’t believe in. A reader once asked if she should keep a part-time job that required her to push credit cards on customers. (Ramsey abhors debt and the questioner shared that view.) 

Ramsey’s advice: Quit, “for the sake of your own integrity.”

CORRECTION: An earlier version of this story incorrectly said Ramsey's radio show airs weekly. It airs five days a week.

What Bill Gates Got Wrong About Green Energy

Bill Gates on Tuesday called for "new inventions" in energy storage to make generating power from solar and wind more economical.

In a blog post accompanying his annual letter, the Microsoft founder said storing energy in lithium-ion batteries for use when the sun has set or the air is still costs triple the average kilowatt-hour of electricity in the United States.

"This is why we need new inventions that improve our ability to store energy cheaply and efficiently," Gates wrote. "Getting them will make it even easier for solar and wind to be a big part of our zero-carbon future." 

He explained:

This figure is based on the capital cost of a lithium-ion battery amortized over the useful life of the battery. For example, a battery that costs $150 per kilowatt-hour of capacity with a life cycle of 500 charges would, over its lifetime, cost $150 / 500, or $0.30 per kilowatt-hour.

So if a consumer tried to store enough electricity in this lithium-ion battery to run her house, she would be paying at least $0.30 per kilowatt-hour for the battery.

According to the EIA, the average price of electricity for consumers in the United States is around $0.10 per kilowatt-hour. The European Union, where prices average 20 cents per kilowatt-hour, and India, where they range from 2 to 15 cents, would see similarly dramatic increases.

The problem is twofold. The way electricity is priced in the United States provides poor incentives for storing excess solar and wind energy, and batteries are expensive. 

Electricity is more expensive during the day, when solar panels generate energy, and cheaper at night. Utility companies will buy consumers' excess solar generated during peak hours and recirculate it into the power grid, then sell it back at a cheaper night rate, when solar panels aren’t producing energy.

Therefore, there's little incentive for people to use solar-storage batteries that hang onto energy during the day if they could be selling it at peak prices to the utility companies and buying it back later on the cheap.

That remains a problem in most states.

But Gates is wrong to harp on the high costs of energy storage technology, according to Matt Roberts, executive director of the trade group Energy Storage Association.

"There's sort of this perception that costs need to come down for something to happen," Roberts told The Huffington Post by phone on Tuesday. "This cost focus is a bit of a red herring. What we need to see out there is more value focus."

For businesses, the long-term benefits are clear. The historic climate accord reached in Paris last year provides a framework for building a low-carbon economy, and it signals to companies that renewable energy will be a smart investment right now, even if the tangible benefits won't show for another few years. 

The costs of storing energy are likely to decrease by 50 percent in the next five years, according to Roberts. That makes sense. Electric automaker Tesla, which released two storage batteries last year, is building a $5 billion manufacturing plant in Nevada called the Gigafactory, which at its peak is projected to produce more lithium-ion batteries in a day than were produced in the entire world in 2013. 

Roberts said Gates would better serve the renewable energy movement by highlighting the positive outlook for energy storage instead of noting obstacles that are already in decline. 

"Those costs are still coming down," he said. "But the big thing that unlocks this is value." 

Here's A Devious Way To Get Workers To Exercise

Corporate wellness programs seem like a no-brainer in theory. In order to get employees to exercise more, companies can just pay them to reach a certain number of steps walked or calories burned. Right?

Not quite, suggests a new study by researchers at the University of Pennsylvania. Rather than rewarding employees with cash or perks for achieving a fitness goal, employers might consider first giving out money and then gradually taking it away from those who fail to reach their goals. 

The idea of losing money for not exercising may help motivate workers, according to the study, published earlier this week in the Annals of Internal Medicine.

“We know that people are irrational, and that they respond more to loss than gains,” Mitesh Patel, one of the researchers, told HuffPost. “People want to avoid the feeling of losing something they feel they already have. That can be very motivating."                                                              

The researchers enlisted a group of 281 slightly overweight adults and instructed them to walk 7,000 steps a day. One group of participants was paid $1.40 each day they hit the goal; another was entered into a lottery to win $5 or $50 if they completed the 7,000 steps; a third group received $42 at the beginning of the month, with $1.40 deducted each day the goal was not achieved. A control group received only feedback on their exercise and no money.

The monetary incentives were offered for 13 weeks. During that time, the group whose money could be taken away actually performed better than the others -- which surprised the researchers. They also didn't expect to see such similar results between the people who got paid to exercise and the ones who didn't get paid at all. 

Participants in the penalization group hit the 7,000 steps on 45 percent of the days. Those who had the possibility of a reward achieved it just 35 percent of the time, and those in the lottery group did so 36 percent of the time. The people who only got feedback hit the goal on 30 percent of the days.

As an interesting note, the participants in the loss incentive group never actually earned the $42 upfront. The researchers paid everyone with a check at the end of the month. The money used during the study was all deducted from an imaginary account, proving that just the psychological fear of losing money is pretty strong. 

The researchers hope that the data will help companies develop more effective ways of getting their employees to exercise. Standard wellness programs usually take the reward approach, like offering to supplement gym memberships or giving prizes for reaching weight or blood pressure goals. But if penalizing employees makes them a little more eager to work out, why not try that?

“If we’re going to use incentives, we should think about how it’s designed and incorporate behavioral economics,” Patel said.

Nearly half of U.S. companies have adopted wellness programs, many of which hinge on outcome-based goals like losing weight or decreasing cholesterol levels. Their actual effectiveness is contested: Some studies argue that they don’t significantly improve health.

Not to mention, when employers start emphasizing the need for workers to take better care of themselves, some worry that the burden of the health care costs get shifted onto those who are less healthy and that the programs will violate employee privacy. In 2014, CVS was sued by one of its employees for allegedly making her disclose her weight and sexual activity under a health screening program or pay $600 a year if she declined.

And while incentivizing workers to get healthy has good intentions, the fundamental message that a company conveys should be that it’s encouraging a culture of healthy behavior. No one wants to be overworked, stressed and, on top of all that, penalized for not having taken enough steps in one day. That’s pretty discouraging -- and won’t solve problems either.