Gianni Kovacevic, the author of "My Electrician Drives a Porsche?" and executive chairman of CopperBank Resources Corp., takes a scientific view of historical, social and environmental trends in energy usage and identifies copper as the common denominator. As global energy usage increases, most of that energy flows through copper. In this interview with The Gold Report, Kovacevic discusses how his book explains his approach in understanding copper's investment opportunity in a scientific context, and the role of the company he founded to take advantage of this secular trend.
The Gold Report: You are the author of "My Electrician Drives a Porsche?," as well as the executive chairman and one of the founders of newly formed CopperBank Resources Corp. How did you come to write this book and what it is all about?
Gianni Kovacevic: I've been a scholar of all things related to energy and electricity since I was a teenager, when I went to the British Columbia Institute of Technology at the age of 18 in the field of electrical studies. The facts are that oil is energy, energy without fossil fuels means electricity, and electricity demands copper. The 220 pages of the book, written as a novel, reinforces in layman's terms the science and facts behind that statement.
There are four types of investors the book could influence: the gray-haired group that has lived through four or five commodity cycles the past 40 years, then there are guys like myself who have followed the up and down wave since the early 2000s. The third type is the newer folks who started to follow these themes after the sharp rebound out of the 2008 financial crisis, but, most important, the book creates a sense of engagement and curiosity for the fourth type of investor, the 99% of the population that has never followed the commodity sector. They are the real target audience, those who have never been captivated by the theme of more people consuming more things.
TGR: Your book starts with a familiar investment concept, that an industrializing CHINDIA needs more commodities, and adds detail and context to that story. Can you give us an overview of your analysis?
GK: The investment community is polarized on the future of China and the emerging economies. Investors are hearing so much noise that they are forgetting to listen to the music. One group believes China and the emerging markets are a short- to medium-term bubble and there is an economic hangover that needs to take place, or is already taking place. By listening to the music through all the noise, investors need to ask themselves, "Why did I take interest in the first place and what has really changed?"
Using the music analogy, ask: Will there be more or less people on the planet in the next 10–20 years? Will their economic footprint for necessities and food be smaller or larger per capita in the future? Will the pace of technology continue to accelerate or slow down? Is energy the keystone to every economy? We know that the world's population will continue to increase, that the demand for necessities will continue to grow, that the pace of technology will continue to accelerate and that energy is the keystone.
In addition to being an investor, I consider myself a scientist. Growing up in the 1980s while other kids were playing video games, my brother and I were reading encyclopedias and National Geographic magazines. The beauty of science is that it is based on facts and not opinions.
I also became a student of the great economic historians of our time. The influence of people like Niall Ferguson, Fareed Zakaria and Don Coxe is throughout the book. By incorporating the collective logic of these great thought leaders into my book, I attempt to offer a broader view on what's happening in the global economy, how we got to this point, and give clues as to what should happen in the future, what I call ignoring the noise and focusing on the music.
Lastly, I'm also an environmentalist. I look at the supply and demand picture for a specific commodity from the vantage point of wants versus needs. We in the developed economies have wants; they, in emerging economies—now I'm talking about a couple billion people here—have needs, and there is a big, big difference between wants and needs. Let me be clear, there is no government, no army and no spiritual force that can stop people from needing the objects of basic progress, water, health and reliable energy.
We used to hear a lot about the NIMBY brand of development, that is not-in-my-back-yard; now the uber greens have taken it one step further to the BANANA brand, build-absolutely-nothing-anywhere-near-anyone. Is that even a remotely plausible line of thinking? Good luck trying to tell someone in India or Africa that they can't have better health or basic energy.
We look at the future economic footprint of the next 500 million to a billion people who are going to become consumers like us. People need to appreciate that in the past 20 years, 500 million people have been taken out of abject poverty. For the 500 million people before them it took 100 years. Estimates now show that the next 500 million people will begin to participate in basic progress in the next decade.
Think about the impact that will have on all of our resources. All of these people live close to the equator. When they begin to have more wealth, they live in more comfort. One of the first things they acquire is an air conditioning unit, or a refrigerator as they eat a protein-based diet. However, whether it's a need or a want, the backbone of their future consumption footprint is energy, and, more specifically, electricity.
TGR: Your book certainly makes the case that the driver of global growth in energy consumption is the emerging economies. When you step back and look at energy consumption, it appears that copper is the common denominator across all energy technologies.
GK: It is indeed and that is a scientific fact. Gold and silver are the best conductors of electricity but for the obvious reason of cost we don't use them. For large-scale use of electricity we use the infinitely recyclable material of copper. But getting back to your question about emerging markets, here is an astounding fact few people ever consider: Imagine you live in rural Africa for a moment with no running water and no household electricity. According to studies, 100% of people in poor communities are willing to pay for reliable access to running water and electricity. We take it for granted; however, for them receiving an electricity bill is an immense sense of citizenship and accomplishment, not to mention the convenience.
Hans Rosling, the Swedish statistician, gives a brilliant TED talk about the greatest invention in history, the washing machine. We press a button and get on with our day, while folks in poor countries toil for half of their day to get that simple task done, and it's not possible without access to water and electricity. In the coming decades every human being on the planet is going to have an electricity bill. We cannot prevent that. So if you stand for progress, humanity and green energy, you also stand for copper, because you should know it is irreplaceable in that equation. Remember another 500 million people will join our club of consumerism in the next decade and a couple of billion people will become holders of electricity bills by 2035.