Flo's Notes

McKinsey — Sven Smit on Future Plenty

6 min read

AI-generated notes on Sven Smit’s TUM Speaker Series talk: “Entering a New Era: Towards a Century of Plenty”.

🚀 Core Thesis: The “Century of Plenty”

Smit’s entire talk is a counter-argument to prevailing pessimism. He proposes a “possibility test” for the 21st century: a future where the entire world achieves a “minimum Switzerland” standard of living by 2100.

  • The Benchmark: Switzerland is used as a model for a high-functioning state:
    • 90% trust in government
    • 90% of people are happy
    • 90% of people feel safe
    • 90% clean energy
    • Trains run on time
  • This vision is not a guaranteed scenario, but a test of possibility.
  • This implies a global economy 8.5 times larger than today’s.

⏳ Part 1: The Argument Against Pessimism

Smit counters the “it’s all tough” mindset by looking at history.

  • The Past was Worse: He contrasts our current problems with the “desperate” lives of his ancestors:
    • Great-grandfather: A municipal registrar in the Netherlands dealing with peat farmers who were so poor and desperate, they’d show up drunk to register a birth and not even know their child’s name. They “had no life.”
    • Grandfather: Survived by jumping off a train to Auschwitz.
    • His Youth (70s): Roller-skating on highways during the oil crisis because there was no gas.
  • The Takeaway: We have made immense progress. We shouldn’t be paralyzed by today’s problems, which are “chaff” compared to the past.

📈 Part 2: The Engine of Growth & The 8.5x Economy

The “Machine” of Past Growth

The progress of the last century was driven by compounding growth in:

  1. Workers: 4x people, 9x workers
  2. Skills: e.g., US cognitive skills 30% → 63%
  3. Investment: 9x tools/capital per person
  4. Invention: 50M patents
  5. Energy: 10x
  6. Cities & Trade
  7. Markets

Is Growth Good?

  • Yes. Smit shows strong correlations between GDP growth and:
    • Life expectancy
    • Schooling & Literacy
    • Access to safe water
    • Democracy
  • Conversely, growth is inversely correlated with:
    • Poverty
    • Maternal & child mortality
    • Undernourishment
  • Inequality is the one “puzzle” where growth doesn’t automatically solve the problem, but it lifts the bottom.

The “Plenty” Future: The How

This is not a 1-for-1 replacement. This is building a new, larger system.

1. The Energy Challenge

  • “There is no world of wealth without energy.” This is his strongest point.
  • An 8.5x economy cannot be achieved with a simple 1-for-1 swap of green energy for fossil fuels. This is the “3x economy” model discussed at COP, which he says is insufficient.
  • We need a massive energy expansion:
    • 2-3x Primary Energy
    • 7-12x Electrified Energy
    • 18-30x Low-Carbon Energy
  • The Counter-Intuitive Solution:
    1. We must use all current oil & gas for non-energy, non-burning uses (e.g., fertilizer, petrochemicals).
    2. We must simultaneously build a brand new, massive energy system (Nuclear, Batteries, Solar) to power the 8.5x economy.
    3. This is a 3+1 model, not a 1-for-1 replacement.

2. Debunking Constraints

  • Materials: We have enough.
    • “Rare earths are not rare.” They are just a small, hard-to-extract fraction of the ore, but they are abundant.
    • There is enough steel, copper, lithium, and cobalt.
  • Food: We need ~1.8x more food. He argues the annual productivity increase needed is less than what we achieved in the last 100 years.
  • Climate: The 8.5x economy only adds 0.1°C more warming than the 3x economy model.
    • Why? Because 100% of the incremental energy is clean, and the oil/gas is not being burned for energy.

3. The Enabler: Compounding & Catch-Up

  • “Compounding interest is the strongest force in life.” - Einstein
  • We just need to get the “interest rates” (compounding progress) right on batteries, solar, nuclear, and food.
  • The required 2.6% global GDP per capita growth is achievable.
  • 80% of this is “catch-up growth” – Africa, India, and China doing what Switzerland and Germany are doing today. 20% is new innovation at the frontier.

🧠 Part 3: The Mindset Shift (A Call to Action)

The biggest barrier is our mindset.

  1. Believe the Opportunity is Real: It is technically and materially possible.
  2. Believe Growth is Good: Growth is what pays to fix problems. He uses the example of the Rhine River, which was poisonous in the ’70s. Once Germany (and others) hit ~ $7k GDP/capita, they could afford to clean it up.
  3. This Future Must be BUILT:
    • This is a direct call to engineers and builders.
    • “This future is not virtual, it’s not a computer game. This future needs to be built, built, built.”
    • The world needs ~26,000 large nuclear plant equivalents. The build rate exists (in China, and formerly in France). We just need to “get on with it.”
  4. Don’t Get Lost in the “Microscope”:
    • CEOs (and students) can get depressed looking at the “microscope” of today’s problems (Trump, war, social media).
    • He argues the future is already being built right now (legions of robots, data centers, new tech). “Get on with the work in the future.”

🎙️ Part 4: Q&A and Personal Insights

On Europe’s Competitiveness

  • The room (TUM) is “mixed but on the major side optimistic.”
  • Sven’s view:
    • The EU is only 70 years old; Switzerland took 800 years to unify. It’s complex.
    • Europe’s biggest problem: It’s “over-bureaucratized.”
    • The Big Move for Europe: “Set itself free.” Get bureaucracy (especially for permits) out of the way.
    • Solution: Create “50 mini-Shanghais in Europe” – special projects (like ASML’s new site) where rules are cleared to show what’s possible and create a pull-effect for other regions.

On McKinsey & AI

  • McKinsey’s Evolution:
    • How it works has changed (spreadsheets → AI).
    • What it does has not: Helping CEOs and leaders change their companies.
  • AI at McKinsey:
    • They are all-in. “The fastest learner will win.”
    • Associates use 7-8 AI agents and their internal knowledge graph “Lilly.”
  • McKinsey as “CEO Pipeline”:
    • He attributes this to (1) high-quality talent, (2) growth conditions, and (3) unique proximity to CEO-level problems. “That school doesn’t exist anywhere else.”

On Future Leadership

  • “I don’t think you can be a CEO if you don’t have enough tech background.”
  • He argues most companies (banks, auto) are now fundamentally tech companies. Leadership must understand technology deeply.

On Work-Life & Personal “Hacks”

  • He rejects “work-life balance.” The phrase implies they are in opposition.
  • His philosophy: “It’s a life within which you work.” If work is not part of your life, get another job.
  • In 1996, he was the first male associate at McKinsey to ask for part-time to care for his daughter.
  • He uses “operating model” hacks to manage his life:
    • The “Triangle Flight” Rule: He refuses to do back-and-forth flights. He only flies in triangles or multi-leg journeys. He claims this saves him 2,500 hours per year.
    • He doesn’t get paid for work; he gets paid for ideas. He asks himself a key question before brushing his teeth and often has the answer in the shower. (7 new ideas a week).

⚡ Part 5: Rapid Fire Questions

  • Morning or Night? “I sleep very little.”
  • Favorite City? Amsterdam
  • If not consulting? “Politician.”
  • Swap job for a day? Elon Musk. (“Just carry his backpack and follow around.“)
  • Book to Read? The Rational Optimist (Matt Ridley) or How the World Really Works (Vaclav Smil).
  • What is Strategy? “It starts with the right question.”
  • Quality you look for? Integrity.
  • Next Decade in one word? “Plenty.”

Graph View

Backlinks