The opposite of oil

About three years ago, after considering starting a green consultancy, I decided to get to the bottom of why there was so much Saudi-shaming globally. The market was not ready for my green dreams and it seemed like an equally interesting challenge to understand Saudi Arabia’s image problem at an intimate level and to come up with a strategy to solve it. 

Over the course of those three years researching Saudi Arabia’s image, I have touched on many topics, placing myself at the level of what non-insiders know because that is where most people are.

The strategy of the PIF is one of those topics. It’s actually surprisingly not a topic that was until very recently extensively covered in the media. We non-insiders actually know little about the strategy of the PIF.

Over the course of the last three years, I heard about Softbank and WeWork, about some renewable energy projects, about investments in the Silicon Valley, Twitter, a dog-walking app. And then these days, I heard about the PIF’s bargain shopping, investments in European oil companies, Newscastle United, Carnival, LiveNation, Warner Music and the willingness to look at any other opportunity. And then all of the sudden we heard about all this shopping spree.

What I am about to say, I’d rather tell this in private to the right people as part of private meetings but I don’t get those opportunities much.

Honestly, the strategy of the PIF makes sense to me only from a tactical level. In my opinion, the recent moves might be tactically sound but they are strategically wrong. Let me tell you why I think that way.

Saudi Arabia is a country with an over-exposure to oil. Because of this, the PIF should invest quite massively in the “opposite” of oil, industries whose profit will rise as oil consumption will decrease. Now, what is the opposite of oil?

Renewable energy projects are quite obviously the opposite of oil. The problem is, that market is crowded, everybody, and their mother, wants to invest in renewable energy but the number of projects are limited, people don’t wand wind farms in their backyard. On top of which, the options we are taking right now are probably not mature yet. It’s obvious to me that in terms of renewable energy, in terms of water management, we are probably at that time in history where IBM was the king of the game, while in the end, Microsoft or Apple will probably win that game.

Tech as a general concept is not the opposite of oil. It depends on the technology and what purpose it serves.

The recent operations the PIF made are not the opposite of oil. I am aware some oil companies are now trying to position themselves as energy companies, trying to diversify their energy mix. But overall they remain very dependent on oil and my guess is that the PIF investing in them has more to do with the fact their shares are at a bargain right now, than with their diversification strategy.

Another way to see it is that oil consumption is related to optimism about the future. The more optimistic we are, the more we consume oil. But tourism, entertainment and generally speaking tech are also industries that thrive in a context of optimism about the future. Starbucks is a brand that thrives on optimism about the future, while McDonalds is the opposite.

And I would think this is a problem for Saudi Arabia’s risk management strategy because we don’t know what the future holds. Are we going to overcome the climate issue or are we not? A sound risk management strategy should cover all scenarios, and there certainly are some gloomy ones out there.

Beyond the strategic problem with those recent operations, there is also an image problem.

First, those operations could have been presented as Saudi Arabia coming to the assistance of companies momentarily in trouble. But that’s not how those operations were presented. When HE Yasir Al-Rumayyan says “We are looking into any opportunity”, it makes Saudi Arabia come across as a “corona profiteer” which is really unfortunate.

Second, the kind of operations that were made, investments in Starbucks or Carnival, don't exactly make Saudi Arabia look like cool and trendy, or ahead of the curve. I am not one to support hype-based investments but I guess that sometimes there is a reason for the hype. Starbucks comes at a discount right now, and Coronavirus might not be the only reason for that. I'd be surprised if the valuations of meat-growing labs or companies producing non-dairy milk were hit much by corona.

Finally, those bargain operations highlight even more, by contrast, the apparent absence of long-term strategy to massively invest in the “opposite” of oil. Saudi Arabia will probably make money with the European oil companies, with Carnival, with LiveNation, but what people expect from a wealth fund like the PIF is a strategy, not just a collection of deals.

But again, what is the “opposite” of oil? Are renewable energy projects the only thing?

I am not a tech expert but I am an expert of people, those people we call consumers. I have spent some time these last few years understanding what stops us from being more environmentally virtuous. I am one of those who think that to face climate change, we mostly already have all the technologies we need, we just have to learn and change our ways slightly, to learn and make a smarter and more massive use of the technologies we already have.

I know a lot of people who are engaged as consumers in the “opposite” of oil and so when I think about what the “opposite” of oil might be, I see a lot of different things.

The truth is, when people want to reduce their carbon footprint, they usually make a lot of different small changes in their lives. They start buying local, they reduce their meat and dairy consumption, they thrive to become zero waste, they borrow things rather than buy them, they make different choices about transportation or housing… Some go as far as deciding not to have children because that is the greatest favor you can do to mother Earth. I do a market watch on those lifestyles and I can tell you some people’s inventiveness is boundless when it comes to helping save the planet.

Overall, these people remain consumers, but as consumers they move toward a very different landscape, with very different brands and behaviors that might look puzzling to people who don’t understand what quest those people are on. Some are hardcore, some are more reasonable.

To be honest, as consumers, those people are still quite poorly served today, depending on where they live. It’s still not convenient to be zero-waste. It’s still not convenient to rent stuff rather than buy. If the economy served those people and those needs better, offering more convenience, a lot more people would switch. Tech could certainly help here, many things could be done differently. 

If I put on my activist hat for a second, I think many things will have to be done differently, entire business models should be turned around. Why are we not testing more? When you look at the world with a child’s eye, there are many things that could certainly be done differently. It’s amazing when you think of it how much money and energy goes into providing safe, drinkable water, and how much of that safe, drinkable water is literally flushed down the toilet. There are so many examples like this.

Strategically speaking, Saudi Arabia should be the champion of those lifestyles, the number 1 investor in this entire new economy, a driving force in defining its fundamentals and in taking it off the ground, because it makes strategic sense.

The truth is most people want to help save the planet but they don’t want this to come at the expense of their perceived quality of living. So how exactly can we do this? This is exactly how we should start thinking from now on. I would think this needs to become a structured program, with a list of things that are being looked at, set up a PMO, order research, set up a few partnerships and the PIF should be part of this effort, they should be on the front lines of this because this is the “opposite” of oil. My question is, are they?

We tend to forget everything oil does for us, as consumers. We tend to forget everything that depends on our collective access to oil. Oil has made us intellectually lazy because it is just so convenient. But it’s time to get our brains working again, it's time to imagine how it could work for us after the oil peak. For someone like me who thrives on complexity, this is an exciting time to be alive.