A Next Economy Perspective by Garvin Jabusch.

In their new book Abundance, Ezra Klein and Derek Thompson offer a vision of the future that resonates deeply with the principles I’ve developed as one of two architects of Next Economy Portfolio Theory. Klein and I both envision a future of abundance rather than scarcity—a world where humanity has harnessed innovation and technology to create lives better than what we’ve had before. The parallels between Klein’s thesis and our investment framework at Green Alpha are striking, while the differences highlight the critical role that forward-looking capital allocation plays in building the economy of tomorrow—a role that policy alone cannot fulfill.

Born from Klein’s earlier work on “supply-side progressivism” and Thompson’s “abundance agenda,” the book represents an important shift in how we think about progress—moving from judging liberalism by what it spends to judging it by what it builds. This reframing immediately connected with me, as Next Economy Theory^TM similarly focuses on production rather than consumption, on what we can build rather than merely what we can buy, on the supply side rather than the consumption side.

Shared Visions: Where Klein and Next Economy Theory Align

The foundation of Klein’s argument is refreshingly simple: “to have the future we want, we need to build and invent more of what we need.” This echoes the core premise of Next Economy Portfolio Theory^TM, which focuses on investing in companies that are inventing and producing solutions to systemic risks. Both frameworks reject the notion that scarcity is inevitable, instead recognizing that it’s often a choice—the result of policy decisions and market failures rather than true physical limitations.

Klein’s book opens with a compelling vision of 2050: affordable clean energy, desalinated water, vertical farms, nuclear fusion, and widespread abundance created through innovation that has addressed our most pressing challenges. This vision mirrors what we at Green Alpha have been articulating for years—that innovation focused on solving systemic risks like climate change, resource degradation, and human disease burdens represents the greatest opportunity not just for solving these problems, but for creating unprecedented economic growth.

What Klein emphasizes through policy, Next Economy Theory emphasizes through capital allocation. A fundamental truth that often gets overlooked in climate policy discussions is that capital allocation decisions made today literally build the world we’ll inhabit tomorrow. The lock-in effect of infrastructure investment is particularly powerful. When we invest in fossil fuel infrastructure like pipelines, refineries, or LNG terminals, those assets are designed to operate for 30-50 years. They create not just physical infrastructure but also entrenched economic interests that will fight to keep those assets operational for their full lifespan.

Where Klein writes about a “liberalism that builds,” I see a direct parallel to our thesis that the solutions-driven economy is the primary driver of long-term economic growth. His critique of the demand-side focus of traditional progressive politics aligns with our observation that focusing solely on subsidizing demand for goods whose supply is constrained (like housing, healthcare, and education) leads to rising prices rather than universal access. As Klein notes, “giving people a subsidy for a good whose supply is choked is like building a ladder to try to reach an elevator that is racing ever upward.”

Klein introduces the concept of “everything bagel liberalism” to describe a key dysfunction that has emerged in progressive governance. This is the tendency to layer on so many requirements, standards, processes, and additional goals onto any project that it becomes impossibly expensive or slow—like piling so many toppings on a bagel that it collapses under its own weight. This concept illuminates a fundamental tension between process and outcome that I’ve observed in my own work. Just as Klein laments how affordable housing projects end up costing $700,000 per unit due to excessive requirements, I’ve seen how backward-looking investment metrics create perverse incentives that block capital from flowing to the most innovative solutions providers.

The Housing Crisis: A Microcosm of Our Challenges

Klein’s extensive analysis of the housing crisis perfectly illustrates the systemic problems that Next Economy Theory was designed to address. His diagnosis of how NIMBYism, restrictive zoning, and regulatory barriers have created artificial scarcity in our most productive cities echoes our belief that poor policy decisions – and questionable asset allocation – often stand in the way of an economy of abundance.

The housing shortage is, as Klein eloquently demonstrates, not just an affordability crisis but a productivity crisis. By preventing people from accessing the economic opportunities that cities provide, we’re stifling innovation and limiting economic growth. This creates exactly the kind of economic inefficiency that Next Economy Portfolio Theory seeks to identify and address.

Clean Energy: The Foundation of Abundance

Perhaps nowhere is the alignment between Klein’s vision and Next Economy Theory more evident than in our shared recognition of the transformative potential of clean energy. Klein’s observation that “energy is the nucleus of wealth” resonates with our investment thesis that the transition to clean energy represents the largest wealth creation opportunity of our era.

Klein rightly identifies that we’re living through an extraordinary moment in energy history, with solar and wind costs plummeting to levels that make them not just competitive with fossil fuels but increasingly less expensive. As he notes, “The cost of solar is falling so fast that for much of the day it will be effectively free, in much of the world, by 2030.” This recognition that abundance comes from innovation rather than extraction perfectly aligns with our investment approach.

What’s particularly powerful about renewable energy is its fundamentally different economic trajectory. Unlike fossil fuels, which require continuous extraction and combustion, renewable energy sources like solar and wind have essentially no marginal cost once built. This creates an economy where energy becomes increasingly abundant rather than increasingly scarce—a cornerstone of the abundant future both Klein and Next Economy Theory envision.

Where Next Economy Theory particularly shines is in translating this macro trend into investable opportunities. While Klein focuses on the policy barriers to building clean energy infrastructure, our framework provides a methodology for identifying the companies that are most effectively driving this transition and most likely to capture market share from legacy economy firms.

Where Our Approaches Differ

While Klein and I share a vision of an abundant future driven by innovation, our approaches diverge in several notable ways. Klein’s perspective is primarily political, focusing on the policy changes needed to enable the building of a better future. Next Economy Portfolio Theory, in contrast, is an investment framework—we’re focused on identifying which solutions are most effective and which companies are best positioned to bring them to market.

Klein frames his argument largely around the failures of progressive governance, particularly in blue states and cities. This political framing is valuable for understanding the barriers to progress, but it sometimes overlooks the role that capital allocation plays in driving systemic change. As I’ve argued in my critique of Wall Street’s 3°C forecast, the financial industry’s continued financing of fossil fuel expansion while acknowledging catastrophic climate consequences represents a profound failure of fiduciary duty.

A key difference in our approaches is also evident in how we view benchmark-relative performance. Klein doesn’t address this directly, but his critique of policy being stuck in outdated paradigms mirrors my critique of investment management being constrained by traditional benchmarks. As I’ve argued, “When quarterly benchmark-relative performance becomes the target, it ceases to be a good measure of investment skill.” Like the regulatory systems Klein criticizes, investment benchmarks are looking backward rather than forward, preventing capital from flowing efficiently to the solutions we need.

The rise of passive indexing has exacerbated this problem in ways that parallel Klein’s critique of policy sclerosis. While index funds have democratized investing in important ways, they’ve also created a significant disconnect between investors and what they actually own. Most index investors likely don’t realize they’re financing fossil fuel expansion, deforestation, or other activities that create the very systemic risks we need to address. This passive approach to capital allocation effectively outsources critical investment decisions to index providers, who typically construct indices based on market capitalization rather than forward-looking assessments of risks and opportunities. The result is a massive misallocation of capital that perpetuates legacy systems rather than accelerating the transition to the Next Economy.

Klein also identifies what might be called a personality problem in modern liberalism—a tendency to be overly deferential to process and infinite listening at the expense of decisive action and outcomes. This cultural critique resonates with my observations about the investment world, where the industry has become so focused on tracking benchmarks that it has lost sight of the fundamental purpose of investment management: to allocate capital to its highest and best uses, particularly to companies solving humanity’s greatest challenges.

The difficulty in persuading people to question index fund orthodoxy speaks to how deeply embedded backward-looking investment approaches have become in our financial culture. Changing this may be as much a cultural challenge as it is an educational one—very similar to the cultural shifts Klein identifies as necessary in governance and policy.

The Path Forward

Klein’s vision of abundance requires a transformation in how we build the physical world—homes, energy infrastructure, transportation systems. This complements Next Economy Theory’s focus on how we allocate capital to drive that transformation. Both approaches recognize that we need to fundamentally rethink systems that were designed for a different era.

While policy reform is undoubtedly important, capital allocation has the advantage of being able to move more quickly and directly toward building the abundant future we want. Every investment decision is effectively a vote for what kind of economy we’re constructing. This is what makes Next Economy Portfolio Theory so powerful—it doesn’t just identify the need for change but provides a practical framework for investors to participate in building this better future. By directing capital toward solutions providers, we’re creating both environmental and economic benefits simultaneously.

This approach also avoids the false dilemma that often plagues climate discussions. Instead of framing the issue as growth versus sustainability, both Klein’s abundance framework and Next Economy Theory show how innovative solutions to systemic risks can drive the next wave of economic prosperity.

Conclusion

Abundance is a vital contribution to our understanding of the economic, political, and technological challenges of our time. Its vision of a future built on innovation and production rather than consumption aligns perfectly with the investment philosophy we’ve developed at Green Alpha over the past 16 years.

Where Klein’s book makes its most important contribution is in diagnosing the policy failures that have created artificial scarcity in housing, energy, and infrastructure. Next Economy Theory complements this by providing a framework for identifying and investing in the companies that are creating solutions to these systemic challenges.

Both approaches recognize a fundamental truth: the future of abundance we want is possible, but only if we make different choices—in policy, in investment, and in how we build the physical world. As Klein puts it, “We aspire to more than parceling out the present.” Next Economy Theory offers a pathway for investors to go beyond merely preserving wealth within the constraints of today’s economy, and instead participate in building the more abundant, sustainable, and productive economy of tomorrow, while earning competitive returns as the innovators gain market share.

The timing of this book is particularly important. As Klein noted in a recent interview, the Democratic Party is at “a real liquid moment” after its electoral defeat, searching for a new governing philosophy. The abundance framework offers a constructive path forward—one that directly addresses the cost-of-living concerns that dominated the 2024 election while offering a positive vision of what government can build rather than merely what it can spend.

While both frameworks recognize the need for transformation, I believe capital allocation represents the more immediate and direct lever for creating an economy of abundance. Today’s investment decisions literally create tomorrow’s economic production function. If we continue allocating capital to fossil fuel infrastructure, we lock ourselves into a carbon-intensive future for decades to come. Conversely, by redirecting capital toward renewable energy, advanced materials, and other solutions providers, we can accelerate the transition to a sustainable, abundant economy far more rapidly than policy alone could achieve.

Klein’s work identifies the policy reforms needed to enable building; Next Economy Theory provides the framework for ensuring that what gets built creates the future we want. Together, these perspectives offer a complete vision for transformation—one that harnesses the power of both government and markets to create an economy of genuine abundance that works within planetary boundaries while dramatically improving human welfare.

###

Green Alpha is a registered trademark of Green Alpha Advisors, LLC. Green Alpha Investments is a registered trade name of Green Alpha Advisors, LLC. Green Alpha also owns the trademarks to “Next Economy,” “Investing in the Next Economy,” “Investing for the Next Economy,” “Next Economy Portfolio Theory,” and “Next Economics.” Green Alpha Advisors, LLC is an investment advisor registered with the U.S. SEC Registration as an investment advisor does not imply any certain level of skill or training. Nothing in this post should be construed to be individual investment, tax, or other personalized financial advice. Please see additional important disclosures here: https://greenalphaadvisors.com/about-us/legal-disclaimers/.