Risk, Reward… Renewable Energy – The Next Big Thing

Amazon’s renewable energy win

Amazon announced that they consumed 100% clean electricity all last year, seven years ahead of schedule. How did they do it? By moonlighting as an energy company—something all tech giants should consider.

First, let’s discuss Amazon’s massive real estate footprint. With data centers, distribution hubs, grocery stores, and office buildings in 27 countries, one of their most significant expenses is electricity. A few weeks ago, Amazon revealed that in 2023, they met all their electric needs through carbon-free sources like wind, solar, and nuclear energy.

This accomplishment ties back to Amazon’s 2019 Climate Pledge, which aimed for 100% clean energy by 2030. However, this success only covers their physical buildings, not transportation, which aims for carbon neutrality by 2040.

Critics question Amazon’s clean energy claim, arguing it’s not a one-to-one match between energy production and consumption at each facility. However, Amazon’s strategy is more nuanced. They’ve strategically placed renewable energy projects in optimal locations – wind farms in breezy Iowa and solar farms in sunny Arizona. In these areas, Amazon often produces more clean energy than it uses locally. This excess power feeds into the grid, potentially benefiting nearby residents without their knowledge. Globally, this overproduction in some areas offsets Amazon’s energy use in others, supporting their overall net-zero energy claim.

Before long, more tech companies might have taken a page from Amazon’s Playbook. Microsoft and Google’s carbon emissions have surged due to AI development, so Amazon’s approach offers a sustainable solution. AI demands massive energy, demanding tech firms invest in renewable energy that can power their advancements. Amazon’s 500 global wind and solar projects have set a clear path, making it the largest corporate buyer of renewable energy for four years. To lead and effectively manage the environmental drawbacks of AI, tech companies must double as clean energy producers.

RyanAir’s plane prowess

How does the cheapest airline in travel stay the richest in the stock market? Let’s examine the data.

While Delta Airlines was hit hard by the worldwide IT meltdown and canceled more than 1,000 flights, Europe’s budget airline faced a different challenge: its stock fell 15% due to lower-than-expected summer travel demand, as the company needed to slash fares to fill seats.

Despite this hiccup, RyanAir remains a master of disruption. Since its launch in 1984, the company has bet that people would fly to less popular airports to save money, and they nailed it. RyanAir is known for its no-frills model to keep prices rock bottom.

Here’s a wild story: in 2011, RyanAir tried to remove two bathrooms from their planes to add more seats and cut ticket prices by 5%. The CEO proposed that passengers would be willing to have only 1 restroom on board in exchange for cheaper tickets. Regulators disagreed, insisting on more toilets, but the move highlighted RyanAir’s relentless cost-cutting strategy.

Here’s what we think: Every industry has a “low price peacock”—a company that flaunts the lowest prices as their brand. It’s tough, requiring high volume to make slim margins work. Yet, customers love low prices, making it a winning strategy. Amazon, Walmart, and RyanAir dominate their sectors by consistently offering the lowest prices.

Despite its budget image, RyanAir is the third most valuable airline globally, without ever taking a government bailout. The airline known for cheap flights is actually the richest, financially speaking. In every industry, the low-price leader often wins big.

Steve Ballmer’s money story

Bill Gates isn’t the wealthiest person at Microsoft anymore; his former assistant, Steve Ballmer, has taken the crown. The story of how Ballmer surpassed Gates is a lesson in risk and reward.

Flashback to 1980 when a tech startup led by Bill Gates posted a job for a personal assistant. Enter Steve Ballmer, a Harvard classmate with a big personality. Gates convinced Ballmer to drop out of Stanford Business School and join Microsoft, with a $50,000 salary plus 10% profit growth.

Microsoft restructured six years later, and Ballmer traded his commission for 8% equity. The market experienced a dip in 1987, but rather than pull out, he doubled down, buying even more stock. Over time, the value of his shares soared, making him the largest shareholder at Microsoft, owning 4% of the company.

Fast forward 44 years, and Ballmer is worth $157 billion, making him richer than Gates and the sixth richest person globally. Unlike the other billionaires on that list, Ballmer didn’t found his company but earned his wealth through strategic moves that paid off massively.

The takeaway? Receiving equity instead of cash is risky but can lead to immense wealth. Ballmer’s story is a prime example of how risk can yield huge rewards, demonstrating that significant leaps in wealth often come from owning equity, not just earning a salary.