How Monsters Inc helps me think about the future of energy

First, a bit of COVID-19 digression

COVID-19 has caused us to self-quarantine and isolate ourselves over the last few months. This has accelerated people staying at home and working from home. One way to notice this is by observing the mobility data that Google tracks (using your location data), and the below chart for Australia is indicative of more people staying at home over the last month consequent of the lockdown at work with Scott Morrison.

My 2c on this shutdown is that it was absolutely necessary. We're taking a history lesson from what Hong Kong did back in SARS in 2003 where they shut down virtually all the schools, hospitality, etc.

But I digress, the coronavirus is best left to another blog post. Staying at home for more time than I'm usually accustomed to has been a net positive. I'm not much of an extrovert... I prefer the time alone at home to deeply think about the future.

Intro

A lot of my friends will know that I love watching Pixar films. People get sick of me talking about Wall-E time and time again. I used some of the "free time" that I now have (to be honest that was meant to be a joke because Investment Analysts hardly ever have free time...), to catch up on some of my favourite Pixar films.

This time, you can guess from the title of my blog, I caught up on Monsters Inc and Monsters University.

As an Investment Analyst, our purpose is to make money through being good stewards of our client's capital, by making sensible investments based on what we can observe that could indicate what the future could look like.

To that end, you're probably wondering how I interpret a children's film like Monsters Inc/University. This is a quick and light take on how these 2 films have informed the way I think.

Thinking about Monsters Inc/University more deeply...

I'm assuming that my readers have watched these 2 classic children films. Both films definitely rank in my list of favourite films of all time. I've always been fond of computer animations.

Monsters Inc came first, produced in 2001, and centers on two monsters – James P. "Sulley" Sullivan and his one-eyed partner and best friend Mike Wazowski. They are employed at the titular energy-producing factory Monsters Inc, which generates power by scaring human children. The monster world believes that children are toxic, and when a small child enters the factory, Sulley and Mike must return her home before it is too late.

Monsters University came second, produced in 2013, which revolves around the same 2 characters, focuses on the timeline before they were workers, and where Sulley and Mike meet in their university years, where they start off as rivals, but slowly become best friends.

Watching both together allows you to understand the progression of how far these characters have come. I was SO emotionally invested in their friendship!

Throughout their early years, Mike and Sulley were taught (even during university) that capturing the "scream" energy of children in the human world was the only way to power the monster world which was in an energy crisis (as children were interestingly not getting scared like they used to), by entering different bedrooms of children every day to harvest that energy. They were led to believe human children were a threat and never to communicate with them.

Even the antagonist, in Randall Boggs/Mr Waternoose, were representative of the old ways of thinking. They went to great lengths to continue their preconceptions of how energy was extracted, building an almost barbaric "scream extracting machine" and "kidnapping children" to meet the energy crisis in monster world.

Whilst you could argue these 2 characters were doing all this for the sake of how they understood energy was harvested from human children and to save the company that was important to powering the monster world, Mike and Sulley dared to innovate and think about a net positive to benefit both worlds.

Spoiler alert, by the end of the film through a journey of helping a human child, Boo, return from the monster world back to her human world, they develop an understanding and friendship which challenged Mike and Sulley's preconceptions of humans into one of understanding.

At the end of the film, they discover that laughter energy produced "10x" the output of scream energy. As Sulley says to Mike at the end of the film:

"Remember, laughter is 10 times more powerful than screams".

Mike and Sulley turned a struggling Monsters Inc business, into a revolutionised energy company. They dared to venture into the unknown, and challenge their old ways of thinking they had been taught even during Monsters University. This is despite even the Dean Hardscrabble of Monsters University teaching them back in their university days:

"Scariness is the true measure of a monster. If you're not scary, what kind of a monster are you?"

Mike and Sulley challenged the very definition of what a "monster" was. That saved the company and protected the monster world from an energy shortage which was what the monster world was facing at the beginning.

History of the shift from oil & gas to electricity in the 1900s

What has my ramble about Monsters Inc/University have to do with the real world we live in?

I speak a lot about the first 2 decades of the 1900s. The level of innovation at that point of time, was the biggest we had ever seen in human history. So many innovations were happening at once with the advent of electricity, a new source of energy that was different to the coal, oil and gas that the 1800s was accustomed with to power cities.

It was radical, but Nikola Tesla/Thomas Edison dared to dream of a new energy source to power the world. Of course you can debate all day about who was the real innovator (my view is that it was Tesla, and Edison was more a business man than anything else), but both contributed to challenging our preconceptions of what energy looked like.

I studied physics in HSC, and I was glad I studied "Motors and Generators" in term 2, back in 2014. The history was important. Without physics, I wouldn't have thought more deeply into the history of electricity, and how far we have come as a society. Electricity powers a lot of the things that we take for granted today, like the computer and internet in the late 1900s.

Ark Invest shows a great picture below that highlights the incredible wave of innovations, with electricity and the telephone back in the late 1800s/early 1900s.

Why do I think this is important? This is because I think after more than a century, we are at the cusp of another great wave of innovations. As the Austrian economist Joseph Schumpeter argued in the 1950s, the "gale of creative destruction" describes:

"The process of industrial mutation that incessantly revolutionises the economic structure from within, incessantly destroying the old one, incessantly creating a new one."

Somewhat reminds me of how the old Monsters Inc operated on scream energy to power the monster world, but had to fall, to make way for the revolutionised new company that operated on laughter and produced 10x more energy, saving the company and the monster world.

I think Monsters Inc/University gives us a taste of what could be, for the future supply of energy in our own world. This section of discussion about Nikola Tesla/Thomas Edison reinventing the way we think about energy is something I hope to discuss in more detail in another post.

Future of energy?

You can see in the below chart though, coal, oil and gas (non renewable sources of energy) still dominate the majority of global energy consumption. This has been the case over the last 100+ years.

Now this is where the discussion of renewable energies as an alternative source becomes the topic of debate versus the traditional non-renewable energies we have become used to. It is no surprise that our world is sitting on the fence between the old and the new. The "Mike and Sulley" vs the "Randall and Waternoose".

Whilst I am not a climate activist of any sort, I believe our humanity will continue to make inroads and innovative methods into harnessing alternative sources of energy that need to be sustainable for the long term. I tend to think of myself in the "Mike and Sulley" camp.

After all, we owe it to the survival of our world and future generations beyond anything else. I think that I am not alone in this way of thinking. A lot of us millennials are different when it comes to our thoughts on the environment versus the prior generations.

As an investor in the 21st century at the cusp of incredible growth platforms of innovation, that gets me excited for any companies that dare to dream beyond the conventional and into the unknown (sorry I couldn't help myself with a Frozen 2 allusion...).

There are some companies that I believe are taking steps towards this path, particularly in energy. Next Era Energy and Tesla are good examples.

Conclusion

It takes a degree of humility to accept that there are many unknowns in the future. I find though, several of my favourite films that I follow, do paint a visual image of what the future could be. Energy is an ever important topic, and beyond energy, energy storage as well.

Who would have thought Monsters Inc/University could shed so much light into dreaming about the future of energy?

Thanks all for listening to my ramble...

Stay safe everybody, wishing you all a good Easter long weekend, and happy thinking!

Michael Li