*Date: 07/03/2024* David Rubenstein recently interviewed Phillip Laffont, Founder and Portfolio Manager of Coatue, at a Bloomberg wealth conference. The video made its rounds on X over the last week and is well worth the 30-minute watch. One line at the end of the interview struck me in the context of the energy transition. Rubenstein asked, “What’s the biggest investment mistake you’ve made?” Laffont responded, “Too cute.” He continued, “Stan Druckenmiller once told me he made 120% of his money in obvious ideas and lost 20% everywhere else. I think that’s very true.” In many ways, it feels like climate investing and the energy transition got too cute over the last several years. We fell prey to SPACs and over-estimated the public market’s appetite for risk. We thought projects funded in zero interest rate markets would survive in 5% markets. We ignored the laws of economics and innovation by putting them in a corner, and “nobody puts baby in a corner”. This all made me think about a [post Morgan Housel wrote a few months ago on the different traps smart people fall into](https://collabfund.com/blog/the-dumber-side-of-smart-people/) and why it’s more common in the investing world. We want to create complex stories and elaborate models of cause and effect. Worse, we believe that complexity equals intelligence and intelligence equals accuracy. We’re also prone to the sunk cost fallacy and tying our research to our self-worth – if we spend time on it, it must be important. And, once we spend all of this time becoming an expert on something, we then can reason ourselves to any prediction or explanation that we see fit. As Housel puts it, the problem is we are: > “…too smart for our own good. There’s a fine line between intellectual rigor and believing your own bullshit, and smart people are more at risk.”  In other words, we get “too cute”. The remedy is going deep into the simple trends that we can confidently predict to hold over the long term. For example, take Jeff Bezos’ insight that the customer will always want better, faster, cheaper—simple idea, but powerful in execution. The energy transition is so early that many of these obvious trends exist.  - Our demand for power driven by things like AI, EVs, and the rise of a middle class in emerging economies like India will rise for the foreseeable future. Jevon’s paradox will dominate, as power gets cheaper we’ll find more ways to use it. - A global labor shortage looms as fewer people train for the frontline workforce that installs and maintains critical infrastructure assets. The world is getting richer, and when a population increases its collective wealth, the workforce moves to desk-based. - Data, driven by the deployment of connected assets, will continue to explode and create new opportunities for how we manage the built world. These themes are obvious, but how they get solved is not. - Does Gen AI cause more power consumption, or do chip design + software eventually combine to create efficiencies? - Solar and storage may look like the path forward for firm power generation, but what about natural gas and/or nuclear? - Will labor shortages be solved by expanding the workforce, making the current one more efficient, or re-training an existing base? Done the right way, finding the correct answer to these questions, and investing in the companies solving the problems takes years of work.  Finally, simplicity doesn’t mean a lack of rigor or laziness. We must take care to avoid falling prey to the Dunning-Kruger effect, two weeks of research doesn’t make anyone an expert. It takes years. The real goal is to become so knowledgeable about a given thesis or investment, that it feels simple to the outsider and can be distilled down into what is always true.  Often, thinking in these terms invites criticism. The critiques come in the form of nothing being innovative enough, not focusing on “the big thing”, that’s too easy, etc… Look no further than the crypto crowd that crushed Munger and Buffet during ZIRP by claiming both were out-of-touch old men who “didn’t get it”. In hindsight, they were more right than wrong. As investors, our challenge is to strike a balance between intellectual rigor and avoiding our own biases. We must become so knowledgeable about our theses that they appear simple to outsiders, all while remaining open to new information and avoiding the trap of complexity for complexity’s sake. The path forward may not always be the most exciting or novel. But by focusing on obvious, enduring trends, we position ourselves for long-term durability and potential returns which is the ultimate goal for any asset manager.