Sign up to receive new blog posts by email. View archives.

Ideas, Advice and Resources
for Integrated Capital

Sign up to receive new blog posts by email. View archives.

Marie Curie at 1911_Solvay_conference Marie Curie, a very prudent woman, theorizing with Henri Poincaré at the first Solvay Conference in 1911.

This piece is a special collaboration with RSF Social Finance. The post was co-written with Kelley Buhles, Senior Director of Philanthropic Services & Organizational Culture, and was also published on the RSF Social Finance blog.

The world of investing abides by various rules. Some are defined and articulated in formal legislation and regulations, while others are based on customs, common practices, and opinions expressed by jurists in court cases. The expectation of "prudence" in financial management is one such case. (1)

Originally expressed as the “Prudent Man Rule,” this standard—put simply––requires fiduciaries to consider various economic, risk, and liquidity factors as they relate to their clients or beneficiaries, and to invest accordingly. The Uniform Prudent Investor Act, adopted in the 1990s, allows investors to use the principles of Modern Portfolio Theory (MPT), including a total return approach to investing and an emphasis on diversification, as a means of achieving "prudent" fiduciary decisions. The act invited women into the equation, only linguistically, by referencing a "prudent person" rather than a "prudent man." Although "man" was ditched for the gender-neutral term, the thinking and theory were not broadened to include the feminine.

For decades, there was an explicit expectation that men set the standard for prudence: "to observe how men of prudence, discretion, and intelligence manage their own affairs." While the concept of the “prudent woman” may be interpreted as the opposite extreme, we choose this term for our theory over a gender-less alternative because we’ve seen how semantics can hide the truth. We’ve observed that the dominant economic paradigm still reflects what are traditionally considered masculine traits. We wonder what value feminine traits might bring to our increasingly challenging economic situation. In other words, is it time to ask, "What would a prudent woman do?"

One of the ironies of the Prudent Man Rule in economics is that the word "economy" derives from the Greek word that means "management of the household." In our contemporary world, management of the household has become "home economics," a term associated with "women's work," usually unpaid and undervalued. Meanwhile, men dominate the system that we now call economics, that is, the making and exchanging of goods and services in the pursuit of maximum profit.

The market economy, the milieu of the prudent man, has become the lens through which we view our entire world. It is the first and foremost arbiter of ideas and proposals ranging from personal career choices to public policy. Unless an idea makes economic sense, it is subject to ridicule and trivialization. Those who dare to question the superiority of the economy are considered naïve. This is especially true when it comes to investing. The power of assumptions about the purpose of investing is so great that there is virtually no room for disagreement or debate among the professional cadre of advisors, managers, and other practitioners. These embedded assumptions are then transmitted to and imposed upon the clients who place their trust in these professionals. This circle is reinforced by self-interest and fueled by the allure of wealth and power.

We think this has gone too far. Witness the corruption of our democracy by money and greed, the depletion of our natural resources, the poisoning of people and planet, and the vulgar inequality driven by capitalism run amok and rudderless. These are the real risks to the future of investing and the economy.

The world of business and finance has generally been unappreciative of feminine traits, and many women and men have suppressed these aspects of themselves in an effort to conform to the dominant culture. Furthermore, women are often stereotyped in ways that are simplistic, judgmental, and demeaning. What if we could snap our fingers and instantly transform these stereotypes of women into positive character traits of value and power? What if women's ways were the ways of business and investing? We wonder what would happen if the prudent woman stepped in.

Let us be clear: we are not talking about how women can conform to the current world of investing, nor are we promoting gender lens investing. We are talking about the unmitigated feminine—unharnessed, unjudged, and unconstrained. In a system that is so heavily skewed toward the masculine, we think a shift toward the feminine—by women and men alike—would be healthy and prudent.

We offer below our take on what it might mean to work with an investment framework that is founded on feminine traits. We have used research into cultural stereotypes and generalizations regarding what is "feminine" and what is "masculine" as a foundation. We recognize and appreciate that these are stereotypes. Feminine traits are, of course, not limited to women just as masculine traits are not limited to men.

To start, let's look at some of the key character traits that are typically ascribed to men and women. The following information was compiled from studying 64,000 people and published in The Athena Doctrine. (2) “Masculine” Traits

  • Decisive
  • Logical
  • Strong
  • Proud and confident
  • Independent, self-reliant
  • Stubborn
  • Rigid
  • Unapproachable
  • Focused, driven, and straightforward
  • Selfish and competitive
  • Aggressive
  • Assertive
“Feminine” Traits
  • Curious
  • Intuitive
  • Vulnerable
  • Humble
  • Community oriented, team player
  • Imaginative
  • Sensitive
  • Open to new ideas
  • Plans for the future
  • Helpful and nurturing
  • Patient
  • Listens

From these traits, we can envision an alternative, feminine way of thinking about economics:

  • Economics is a human construct that is as fluid as human behavior, not a science that operates by certain fixed and "natural" laws.
  • We can live in an economic matriarchy based on trust, collaboration, and connection, not an economic patriarchy that thrives on competition, fear, and marginalization of the other.
  • Small is beautiful, and growth is not necessarily good or proof of success and worth.
  • Modern Portfolio Theory is only as real as its underlying assumptions, which are merely assumptions, not facts, that have been constructed to make the theory work. We should directly challenge the belief that MPT is real and grounded in mathematics and certainty.

The ideas we describe above are not radical or unrealistic. They are simply more "feminine" than "masculine" and have not been part of the mainstream financial culture of our modern world. Once we open ourselves to these alternative ways of approaching economics, we also become open to a different way of thinking about investing and the standards that could apply to a prudent investor. The Prudent Woman Rule for investing might look like this:

  • A prudent woman takes investing personally while also considering the whole. This means living with contradiction and uncertainty; refusing to ignore or justify that which is difficult, unfamiliar, or frightening; and analyzing the implications of every investment in terms of who benefits and who gets hurt in the generation of financial returns.
  • A prudent woman cares about justice and fairness and considers these to be critical factors in decisions related to money and investing. She knows when enough is enough, and willingly enters into a process of divesting and giving as a way of addressing inequity.
  • A prudent woman educates herself on the origins of wealth; the history of colonization, slavery, and capitalism; gift economies; and other relevant aspects of our modern economy and its alternatives, in order to understand the context and implications of investing.
  • A prudent woman does what she can and is content with small solutions rather than grandiose ambitions and gestures.
  • A prudent woman speaks out and stands up for her approach.

During these trying times, we invite those who have access to wealth of any size to bring a Prudent Woman framework to your investing. We encourage you to have challenging conversations with your investment advisors and financial managers, to question preconceptions about the "rules" of investing, and to imagine what else is not just possible but also valuable and beneficial. Through thoughtful and daring investments, we can build a new field of finance and a new economy based on love, respect, and interdependence.



(1) "All that can be required of a trustee is that he shall conduct himself faithfully and exercise a sound discretion. He is to observe how men of prudence, discretion, and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of the capital to be invested… Do what you will, the capital is at hazard."

(2) Gerzema, John and Michael D’Antonio, The Athena Doctrine, Young & Rubicam Brands and Jossey-Bass, 2013.

Share this post
Congressional Cemetery in Washington DC
The privately-owned Congressional Cemetery in Washington, DC.

Note: I am pleased to announce that I am now part of Outside Investments, a division of NorthStar Asset Management. I will continue to publish my blog here at You can learn more about NorthStar at

On the evening of November 8, 2016, I felt something akin to receiving a call informing me that an important person in my life had died suddenly and horribly. Shocking, senseless, incomprehensible. I sat on the couch with tears streaming down my face.

If this had been just another election where my party lost, it would be one thing. However, the election of Donald Trump has felt like a highly symbolic moment. The world as we know it (or want it to be) now feels mortal. We know intellectually that we as individuals are mortal, but even that can be hard to accept. Trump’s victory represents awakening to a different kind of mortality—the impermanence of our democracy and the perverse power of our economic winners.

Trump is the epitome of what our economic system fosters and supports, whether intentionally or by default: get rich by any means, convince the public (or enough of it) that you care about them, and then willfully and openly operate in a way that flies in the face of laws and regulations, customs, tradition, and decency. We can denounce Donald Trump as a narcissistic con man, but it is hard to deny that our economic system and consumerist values have Trumped the espoused virtues of our democracy.

This, of course, began long before Trump rose to power. His extremism simply highlights what has been a long time coming. Exploitation and extraction are the necessary conditions upon which our economic system has been built and without which the economic engine would come to a standstill—at least the part of the economic engine that works to build wealth for the few at the expense of reasonable financial security for the many. We’ve had ample indications that capitalism as we practice it is destructive to the middle class, that our fixation on growth in the aggregate hurts people at the individual level, and that our disregard for the health of our planet is unconscionable. Donald Trump is an absurd-yet-dangerous caricature of the “success” that our system is designed to achieve.

None of this is easy to take, and we are all implicated. I believe we are awakening to the very real possibility of the death of our democracy, our economic system, the earth as we know it and possibly much or all of humanity – and that it is helpful to understand our times in this context. In fact, every day brings news about melting ice, warming temperatures, species extinctions, water toxicity, and unbreathable air. These “natural” phenomena are inextricably linked to social and political disruption. Drought and starvation, overcrowding and land-grabbing are the kinds of forces that incite resentment and upheaval and that portend the collapse of systems.

It’s been helpful to frame my emotions around the election of Donald Trump in the context of grief and mortality. We know from the work of Kubler-Ross and subsequent findings that there are multiple stages of grief that are not necessarily sequential or separate. On any given day, we may experience all five stages described by Kubler-Ross—denial, anger, bargaining, depression and acceptance—and some people may never experience all of them.

I imagine many of us have been deep in denial about the reality of president-elect Trump, distracting ourselves with all sorts of food, drink, TV, books, movies, sports, and so on. We have felt the deepest outrage and anger, so intense that we have been helpless and miserable while lashing out loudly and relentlessly. We’ve probably tried to convince ourselves that it isn’t really so bad. After all, the earth is billions of years old, humans are only thousands of years old, and one person—no matter who—is a tiny little gnat. Or we’ve told ourselves that the system will hold him accountable, or that maybe we needed this wake-up call. Depression may have become an abiding companion during these past few months, and acceptance—well, that has yet to come for me.

It is not in our power to stop Donald Trump or to prevent the collapse of natural and human-made systems any more than it is in our power to prevent our own or others’ natural deaths. It is in our power, though, to see what is beyond grief, to know when to leave it behind, and to open ourselves to the journey and responsibility of what is next. As we experience the stages of grief for our greater community, it is my New Year’s intention to remember that the death of one person or thing or system is followed by the birth of someone and something new and that I can focus my time and energy there. I want to make space in my heart and especially in my mind for what is helpful and to do what I can to nurture what is good and equitable and compassionate in my daily life. I want to remember that we are not in the throes of sudden death. We are in the midst of a long, slow decline of certain systems and practices. There is room and opportunity for the emergence of that which is local, connected, relational, and fair.

Share this post
London Undergroup logo's message to Mind the Gap

It’s been just about a month since Donald Trump officially became the Republican candidate for President of the United States, and I am finally forcing myself to face reality. To date I have relied upon derision, disbelief and incredulity to persuade myself that this just could not happen. I have commiserated with that “nice conservative”, David Brooks, and chortled with my friends about the hair, the bankruptcies, the narcissism and worse. I didn’t believe this could happen.

Not only has the unthinkable happened in the manifestation of Trump for President, but somewhere close to half the voting public may actually endorse him. Even if “only” 40% vote for Trump, that is still a shocking and unacceptable number. I want to revel in the astounding-yet-overdue shattering of the glass ceiling by Hillary, but I cannot seem to engage with a full heart. I can observe Trump’s misogyny, racism, fear mongering, and hyperbole for what they are, but I cannot shake the deep alienation I am feeling.

I often write about the inequities of our economic system and the inculcated bigotry and bias that fosters polarization. I understand, intellectually, that social tensions, violence and upheaval are the inevitable consequences of growth run amok—that the rich getting rich and the poor getting poor can only go on so long, especially in the face of ecological limits, population overshoot, and information overload. I know that fear, pain, and anxiety should be anticipated and understood in this context, and I can see their roots in our economic system. I tend to interpret current events through this lens, and I appreciate the perspective I’m usually able to maintain.

However, I am having a very hard time rationalizing the behavior and attitudes of Trump and his supporters. I want to empathize. I want to feel their pain. I want to believe that we are all interconnected and be able to take an “enlightened” view of their behavior. But I’m not finding myself capable of standing in their shoes. There is too much vitriol and hatred in the language and demeanor of both the candidate and his supporters for me to cross that divide.

It is not unusual for mediators and negotiators to try to resolve intractable situations by seeking “common ground”. In fact, just recently, a woman I respect and admire commented that some of the most ardent supporters of vibrant local economies are conservative Republicans and that, by extension, we could find places to coalesce. But the gap is too wide, and I feel it personally as well as vicariously. Despite Trump’s nod to “LGB..T … and Q”, the Republican platform condemns the Supreme Court decision that affirmed my right to marry my partner of 26 years. I can only imagine how those who are suffering even worse discrimination and hatred must feel.

How, then, does one move forward? Any tidbits of common ground I might dig up are completely insufficient for bridging the distance that I find. How could I ever entertain the perspective of someone who makes lurid misogynistic jokes about women? Why would I even want to have a conversation with a white supremacist? As I write this blog, I click on an email from an old friend who often sends funny jokes and the occasional political commentary. We are not on the same page anymore. Today’s blast was an 1899 speech by Winston Churchill in which he warns against the rise of the Muslim faith and its violent, proselytizing nature (oops—for a minute, I thought we was talking about Christianity).

When the gap is too wide and treacherous, I think the best we can do is to “mind the gap”—know it exists, acknowledge differences, but don’t waste time trying to bridge it. We need to move past poisonous attitudes, work together where alliances are natural and affirming, take positive action, get along with each other, collaborate, have fun, and take chances. And all of this in the face of scorn, baiting, and dismissal by those on the other side of the gap.

Our economic system relies upon perpetual growth that is fed by exploiting human labor and extracting from nature. This is not new—it’s just more obvious now. As humans become redundant through population growth and technology, and as nature fights back through climate disruption and resource stress, it is not surprising that some portion of the population will react viscerally with blame, hatred, bigotry, and violence. In the past, economic prosperity through growth has bailed us out (as in post-World War II, though we paid an almost unimaginable cost first), but the prospects for continued economic growth are not what they were then.

We still have a choice. We can make an effort to research, learn and understand the dynamics of the economy, ecological limits, and human behavior. We can foster diversity and mutuality. We can depend upon each other. But we cannot cater to or even tolerate the fear-mongering and hateful rhetoric coming from the opposite camp. We must mind the gap.

Share this post
Subatomic collision

A few weeks ago I had the pleasure of attending and speaking at the Confluence Philanthropy gathering in Boston. The conference was populated by well-meaning, sincere and committed people who believe they share a common purpose: promoting environmental sustainability and social justice by helping to move philanthropy in the direction of mission-aligned investing. What I am not so sure about is whether they share enough of the same values, beliefs and assumptions to actually agree on what makes something mission-aligned.

To illustrate my point, we can look at the gulf between two of the conference sessions and one stark Q&A exchange around the issue of justice. The first session I’ll highlight was a breakout panel session titled “REGENERATIVE FINANCE: RADICAL INVESTING ON THE FRONTLINES OF CLIMATE AND ECONOMIC CRISES”. The panel description included a statement that Regenerative Finance considers investments as reparations and that we need to move beyond socially responsible investment toward divestment from the oppressive structures of traditional finance as a whole. One of the panel members, Ed Whitfield of the Fund for Democratic Communities, spoke eloquently of the origins and meaning of wealth. He spoke of wealth as big piles of money that are the appropriated products of nature and human labor. And, because this wealth has been appropriated, it must be moved back into the public sphere where it can produce community benefit. He stressed that we need to replace our speculative economy that is hell-bent on growing profit for the few with a democratic financial system whose purpose is the creation of beneficial value. Each of the panelists stressed that we need to see the financial system as part of a greater whole and that it is limiting and unfair to extract financial return from communities and nature.

The second session was a plenary panel discussion titled “INVESTORS REFLECTIONS WITH THE ROCKEFELLER BROTHERS FUND”. The program description referenced the fund’s watershed announcement to divest from fossil fuels and described them as true visionaries in the field of impact investing. The panelists—all connected with the fund as board members, staff, or advisors—emphasized the fund’s unwavering insistence on receiving market-rate returns in service of its commitment to carry the family’s legacy forward in the form of an endowment and charity. The fund has hired a Wall Street advisor, Perella Weinberg Partners, to guide it on its path of impact investing, despite the advisor having no previous experience in the area of socially responsible investing or ESG evaluation. But fear not! The CEO of the fund stressed that they are “good investors”, the clear inference being that mission and values are to be in service (and subordinate to) the highest purpose—maximizing “risk-adjusted” returns.

It would be wonderful to say that having these substantially different perspectives at the same conference led to a rich dialog about what fair returns are or why the market should dictate all our financial decisions. Sadly, attempts at starting that conversation seemed to be met with deaf ears. During the Q&A period after the plenary panel discussion, Kate Poole, a leader of Regenerative Finance and moderator of the first session (above), asked the following question: "I don't understand your commitment to market rate returns. For me, climate justice is linked to racial justice and economic justice. Where do you think your market rate return is coming from? Isn't it coming from the continued extraction of wealth from poor communities, communities of color, and violent extraction of resources from our planet?" Adam Wolfensohn, member of the Board of the Rockefeller Family Fund, responded, “I don’t believe that market-rate returns are extractive.”

Period. End of story. No discussion. See Kate’s “comic” depiction of the moment here.

And yet, for those of us who purport to prioritize environmental sustainability and social justice, that is the conversation we need to have. I have been struck lately by how often I hear my colleagues and associates saying things like: “we’re all trying to accomplish the same thing”, or “we have to start somewhere”, or “good for them for taking the first step”. I have begun to view this “we’re all winners” mentality as an indicator of our reluctance to face up to the glaring, burning issues of our day—ecological limits and our extractive economy, wealth and income inequality and how we contribute to it, exploitation of the poor and marginalized in the name of economic growth, and the realities of deep social and political divides arising from disillusionment, anger and fear.

I admire Kate Poole for standing up to the establishment, albeit a part of the establishment that has been lauded and praised for its vision. I do not think that Regenerative Finance and the Rockefeller Brothers Fund would agree that we are all trying get to the same place. One wants to deconstruct and redistribute its big pile of money that’s come from extraction and exploitation, while the other wants to keep riding atop it.

These clashes are not new. In fact, they are the stuff of politics, power, and revolution. What’s different is that the rarefied world of Wall Street investing and its “good investors” is now being infiltrated and questioned by a small, vocal, and growing number of people with wealth who are eager to question and redefine investing. They are in for a rocky ride, filled with contradictions, questions, misgivings, doubts, and great accomplishments. I hope that groups like Confluence Philanthropy will rise to this challenge: What does it really mean to commit, financially and economically, to environmental sustainability and social justice? I am convinced that this is the question that needs illumination, reflection, discussion, debate, and all the rest of the messy aspects involved in questioning the conventional and entrenched assumptions about investing.

Share this post
Can we really have our impact investing cake and eat it too?
Photo courtesy of Clockwork Lemon baking blog

For people of wealth and conscience, impact investing offers a compelling and convenient promise—that money can be a force for good even as the owners of capital continue to accrue wealth under the auspices of generally accepted investing practices. Impact investing tells us that the proper “deployment” of our capital will lift the poor out of poverty, clean the air and water, and reinvent our energy systems – all while still earning us a “market rate” return or higher.

Socially responsible investing (SRI), which predates impact investing by several decades, originated in moral stances that investors felt compelled to take even if they had to “sacrifice” returns. Eventually, though, SRI evolved into something very much like impact investing. Both now rest on the “cake” promise—you can do good and make money while you do it.

The idea of sacrificing or sharing returns for the common good, or for the good of those less fortunate, is anathema to impact investors who feel it’s their social right and personal responsibility to seek the highest financial returns possible. Today’s impact investors—wealthy young beneficiaries, Silicon Valley m(b)illionaires, foundations, and pension funds—see no contradiction in seeking out the highest financial returns from investments that aim to have a “positive impact”. One young impact investor profiled in the article linked above had this to say: “The people I know who are thoughtful about impact investing are not crunchy tree-huggers. This is part of the way investing should be done.”

There is a general failure, indeed a refusal, to question the assumption that investing is about making the most money one can with the least amount of personal risk. Perhaps this is because it’s exceedingly uncomfortable to examine the impact that “earning” those market-rate returns has in the world and whether further concentration of wealth in the investor class is worth it, even if they are doing great things.

The cake promise is so appealing precisely because it fails to question certain implicit and unsettling beliefs about ourselves and the economy -- that there is righteousness in growing wealth; that continual growth is necessary and possible even in the face of clear ecological limits and gaping wealth disparities; that we’re under no moral obligation to limit our personal wealth accumulation; and, most egregiously, that money, wealth, and metrics trump (pun intended) other forms of wisdom and knowing that can guide our economic lives. If we don’t question these assumptions, then it sure looks like we can have our cake and eat it too. And we can do so while building a movement, celebrating our impact, and scaling everything in sight.

Perhaps impact investing’s shift to the center and away from the fringe has been inevitable and even desirable within our current culture and systems. More and more people are waking up to the fact that we are exceeding ecological limits, that all of our so-called progress has had devastating and unfair consequences, and that our legacy may be shameful. In the face of such suffering, it makes sense to want to do something—to have an impact, to change the world, to fix things. The possibility of doing so while also securing our personal fortune is both comforting and comfortable.

But let’s not forget the value of the fringe—the contrarian voices, the questioners and doubters, the troublemakers, and cynics. We need their voices more than ever as what was once fringe becomes increasingly mainstream.

Many impact investors consider themselves part of the fringe. And indeed they are—when compared with Wall Street culture and institutional investment norms. My question is whether we’re all still operating within the establishment or whether we are willing and able to rock our own boats. I’m not sure that it’s possible to reconcile our personal desires for wealth and financial security with the inequities of our current capitalist economy when we are operating from positions of comfort or luxury. I admire my clients who tackle this question, and I admire organizations like RSF Social Finance and Capital Institute, where questioning seems to be a prerequisite for employment.

As we witness, support and participate in the impact investing field, I encourage all of us to consider the cake promise. Is it really possible to both have it and eat it? The surge in impact investing relies on increasing aggregation and intermediation to serve the mass market, as evidenced by the involvement of companies like Goldman Sachs and Blackrock. Similar to industrial food and agriculture, the investments they offer may look great and even taste great in your portfolio, but they’ll very likely be made in harmful and exploitative ways that have been buried under the veneer of impact. The push toward scaling up by profit-driven financial companies is one of those inherent capitalist forces that might be beneficial on a small scale, but which has extremely questionable benefit, if not certain harm, for the general public. At its heart and in its SRI origins, impact investing is countercultural. Until the day that all is perfect in our economic and ecological worlds, we need desperately to keep it that way.

Share this post

Volkswagen's "Clean Diesel" Scandal and the Rule of Profit

Leslie with Her First Volkswagen in 1969

The first car I ever bought was a 1969 Volkswagen Beetle (pictured above). I’ve had dalliances with Ford, Toyota, Subaru, and Saab, but my heart has always belonged to VW. I currently own a 2010 Jetta Sportswagen TDI, and I feel like my heart is broken.

Along the way, I chose to forgive the fact that Volkswagen’s roots are intimately co-mingled with Nazi Germany. I grieved when my father’s best friends were killed by a drunk driver who hit their flimsy little VW bug head-on, and I probably should have suspected that the TDI clean diesel story was too good to be true.

Volkswagen’s deception, fraud, and regulatory and criminal violations are sickening. While it’s tempting and necessary to figure out what happened and who is responsible, it’s not sufficient. We need to question the underlying values and assumptions of a system that would tolerate this kind of behavior. And we need to examine our own complicity in this system.

Volkswagen is not the first, nor will it be the last corporation to cross the line from competition to crime in the name of profit. This time might seem different,perhaps because of VW’s brand image as the fun-loving yet efficient and eco-conscious choice, or because we expect more from German engineering.

But as information continues to emerge, we learn that this time really isn’t any different. Like all “good” corporations, Volkswagen set its sights on getting bigger and bigger. VW wanted to be the number one automobile company in the world. To do so, it needed to increase sales in the US, and it identified a potential market opportunity in “clean diesel”. Then, again just like any corporation worth its stock price, it exploited that market opportunity. It’s rather ironic that, after nearly a decade of concentrated effort, Volkswagen claimed the number one spot in June of this year only to lose it virtually overnight – how long the climb to the top and how quick and precipitous the fall from the summit.

There appears to have been a company-wide disregard for environmental regulation and compliance coupled with a single-minded focus on increasing sales. Never mind that the vehicles couldn’t meet EPA standards—just use technology to game the system and fool the regulators. As long as sales were up, what’s a little software tweak here and there?

Isn’t this the name of the game? Anything goes in the name of profit. Drivers wanted to believe them. We wanted to reduce emissions, get great mileage, and feel virtuous while driving zippy little “cars of the people”. As a loyal customer, I am deeply disappointed. As an investment advisor, I am unfortunately not that surprised. Lying and cheating are inevitable by-products of a system dominated by ego, growth, and greed. Yet we are so accustomed to the belief that economic growth is good, and so hyper-focused on that one metric (for ourselves, for our companies, for our country), that we are continually blinded to its dark side. Even now, when so many people have been harmed and so much damage has been done to our earthly home, the financial news is filled with speculation and opinions as to whether the company will survive to become “investable” again. Forget the opportunity to consider the physical and social implications of VW’s actions, the financial gurus go right back to whether we can keep feeding on their bottom line.

It is extremely difficult, if not impossible, to live outside the dominant economy and all its inherent problems. Investing in that economy is also difficult, if not impossible, to avoid. What, then, do we do? First, we take off the blinders. We face the facts of our current condition. We confess our sins, but without seeking or claiming absolution. We live with the ambiguity, tension, and complexity. We admit that we are “walking contradictions”. We do what we can. We don’t claim to have all the answers. We finally admit to knowing deep down that there is no such thing as “clean diesel”.

Share this post
Image from the film "It Came from Beneath the Sea"

Impact investing is all the rage these days. Even Goldman Sachs – the "great vampire squid" of the financial world – has formally entered the field with its recent acquisition of Imprint Capital Advisors. Imprint is a San Francisco company whose founding purpose was to provide professional research and due diligence service to investors seeking to align their investments with their values. It’s no mystery as to why Goldman Sachs would enter the world of impact investing: there’s gold in them thar hills and Goldman wants to stake its claim.

So, why would Imprint sell to Goldman Sachs? The stated purpose is to elevate and scale the business so that more people can engage in impact investing and more good can be done in the world. The real reason probably has more to do with the challenges and downright hassles of running a research-intensive business in which services are tailored to client needs and attention must be paid to relationships. It takes a certain kind of person and a certain kind of commitment to keep doing things this way when there is an alternative staring them in the face and apparently there for the asking—sell to Goldman Sachs, scale up the business, standardize research and offerings, make millions.

The recurring theme is that it’s just too hard and too expensive to do research and due diligence for individual clients with individual specifications, particularly when it’s so easy and so lucrative to gather assets and manage them according to a proprietary methodology. This holds true even if the proprietary methodology turns out to be nothing particularly unique, which is almost always the case.

The investment management industry has done a masterful job of convincing clients that they should pay high fees for average performance. Despite years and reams of research evidence to the contrary, there is a persistent and naïve hope that this time will be different, that this manager will be the next Warren Buffett. And clients generally are willing to pay for this long shot. They are also willing to pay consultants and wealth advisors asset-based fees to oversee these managers, thereby layering fees upon fees. It’s true that these fees are not always transparent or obvious to clients, because they are automatically deducted and don’t require the client to actually write a check or authorize each payment. All of this adds up to a comfortable arrangement for both advisors and clients (at least when the market is doing well).

On the other hand, when it comes to dealing with private investments and unique situations that actually require dedicated time and expertise from advisors, there tends to be a lot of price sensitivity and resistance on the part of clients. This is counterintuitive but prevalent. It begs the question of how advisors can provide important services that are not easily leveraged from one client to another.

At the heart of this conundrum lies our collective pursuit of maximum risk-adjusted returns. On the client side, if investors think they are getting above-market returns net of fees, most of them will be disappointed. Seeking outperformance—and paying for the unlikely possibility—is almost bound to fail.

Meanwhile, many advisors who tout their commitments to community investing, sustainable companies, and social responsibility persist in using conventional Wall Street analytical tools and methodology. Their hope is that this will lead them to the best available investments with the highest risk-adjusted return potential. They spend big chunks of money evaluating the landscape of available opportunities, attempting to measure risk, and using twentieth-century modeling tools to project the future in a strikingly different new century.

There is much money and hand wringing to be saved if we can let go of our dream of finding, in advance, the investment that will prove in retrospect to have been the most profitable. Clients can stop paying fees upon fees for a slim and fleeting chance of beating the market. And advisors can start being more transparent about the nature of their services and more straightforward about setting reasonable expectations.

There are other reasons to give up on seeking those investments that are expected to provide the highest risk-adjusted returns. Many of us know in our hearts that our economic and financial systems are unfair, exploitative, and destructive. To the extent we expect to maximize returns on our money—even while “doing good”—we are exacerbating inequality and ecological breakdown. It is not our god-given right to make money on money. To the extent we want or need to do that, let’s at least share the returns with others who have contributed—employees, customers, suppliers, community, the planet.

Circling back to the challenges of providing customized research and analysis at affordable prices, we find that if we aren’t always seeking the highest “risk-adjusted returns”, it becomes a lot easier and less expensive to do our research. We don’t have to spend time and money making sure we’re getting the best deal. And the truth is nobody knows in advance what the best deal really is.

In fact, we can stop thinking in terms of “deals” altogether if we give up on the drive to outperform. Instead, we can think in terms of mutually beneficial relationships. When we shift to viewing investing as engaging in relationships, we can then focus on developing our own decision-making frameworks to determine how we can recognize and support those relationships with our money.

I have no expectation that we are going to change the way Goldman Sachs operates. I don't hold hope that institutional investors (pension plans, foundations, and large asset managers) will lead the way. It’s up to independent individual investors to stand for the kinds of financial relationships we know are good and right. I know that we can hold ourselves to a different set of principles, that we can turn away from the dominant system, and that we can support each other in these pursuits.

Share this post
The revamped entrance to The Parker Apartments on Queen Anne Hill The renovated entrance to Bellwether's Parker Apartments in Seattle. Photo courtesy of

In a recent post, I highlighted a new investment vehicle offered by Bellwether Housing in Seattle. Bellwether is a nonprofit affordable housing provider with more than 30 years experience in the field, a solid and impressive balance sheet, and an ongoing commitment to providing homes for those who are excluded from the economic benefits of Seattle’s amazing but discriminatory growth.

Bellwether has taken a simple, direct and relationship-based approach to increasing its funding base. The first step is a five-year promissory note offered to accredited investors with a 2% interest rate and a five-year maturity. The proceeds from the offering are to be used for renovations to a recently-purchased apartment building in Seattle.

In response to the offering, Bellwether has received a flurry of local and national press coverage. This included a local NPR station interview with Tory Laughlin, Bellwether’s Deputy Director, and me, personal investor and investment advisor. I had the opportunity to state my opinions—that we have a moral imperative to provide housing for all the people in our community, that the beauty of Bellwether is that it is local and highly reputable as well as financially solid, and that a five-year 2% note should make sense for just about any portfolio that includes an allocation to bonds (fixed income).

Nevertheless, the journalist ended his commentary by asking, “But is it a good investment?” I thought I had made a very straightforward and even obvious case, but he observed that, because “everyone” expects interest rates to rise, a 2% note in five years may not look so good.

I have reflected on that exchange. Despite the compelling case I had made and the variety of good reasons for endorsing Bellwether’s offering, there was still a complete disconnect as far as understanding its value as an investment. The interviewer had been interested, compassionate, and responsive. Then, he stepped out of his whole self and put on his “big boy” financial hat—the one that was compelled to reduce the whole conversation to speculation about interest rates.

Why is it so easy for even the most thoughtful, caring people to have this disconnect when it comes to investing? A big part of the reason is that we’ve become accustomed to looking at investing as a sort of mysterious act—one involving complicated financial instruments, anonymous counterparties, and layers of advisors, issuers, and brokers standing between us and the ultimate recipient of our funds. Usually we’re not allowed to have a relationship with where our money goes, and so we get used to separating ourselves from it and evaluating investments solely on whether we get a “good return.”

There is an antidote to this kind of financial fundamentalism. We can turn away from anonymous, opaque and complex transactions that prioritize a bottom line return for investors at the expense of employees, customers, suppliers, community and the environment. We can turn toward and embrace transactions that are direct, personal and transparent and in which the return to investors is fair in relation to other constituents.

In the case of the Bellwether notes, here is how I evaluated whether I thought it was a good investment:

Is it direct?
Yes. The funds that I invest go directly to Bellwether. In contrast, funds that are invested in the stock market do not go to the company whose stock I buy.

Is it personal?
Yes. I know the organization and its leaders. I have friends who live in Bellwether buildings. The Parker Apartments are in my neighborhood. Even if the building weren’t in my neighborhood, I would know its identity and characteristics.

Is it transparent? Easy to understand? Simple?
Yes. Bellwether is borrowing money from me for five years and agreeing to pay interest at the rate of 2%.

Is it fair to all involved?
Yes. Bellwether analyzed the income and expenses of the Parker Apartments and found that it could afford to pay 2% to investors in its notes. If investors “demand” 3% or 4% or 5%, where will it come from? As an affordable housing provider, Bellwether provides housing that working members of our city can actually afford. If I demand a higher rate, Bellwether would need either to raise their rents, thereby directly reducing the affordability of their apartments, or cut operational costs, thereby reducing the quality of their services.

Looking at investments this way doesn't eliminate questions of risk and return. It simply puts them in a much wider context. When we ask, like our friendly journalist, whether getting a 5% return wouldn't be better, we need to have enough knowledge and information to consider the question fully. Yes, of course, 5% is “better” than 2%—for my wallet. But, would that 5% return help to make possible a more affordable city and diverse community where I'm living? Does it support an organization that I admire and trust and that serves my community? Does it leave enough for the organization to pay its employees what they deserve? I know that investing in Bellwether means I can answer yes to all of those questions. That's why it's a good investment.

Share this post
View of Greening Alfalfa at Living Lands
A view of greening alfalfa at Living Lands in Eastern Washington

On Tuesday evening, Heather and I hosted a gathering at our house for the members of Living Lands I, an LLC that we formed three years ago in collaboration with a group of farmers and investors. Together we wrote our purpose and legal documents to place the highest priority on soil health. Under the astute guidance and leadership of Jim Baird, a longtime farmer and businessperson in Eastern Washington, we purchased a 100-acre piece of farmland in the Columbia River Basin. Jim manages the land in conjunction with his other activities, including Cloudview EcoFarms, an educational and experimental farm project with operations in Royal City and Ephrata.

Our conversation was wide-ranging and spirited. We talked about soil and carbon and the best way to figure out whether we are improving the health of the soil. We are all concerned about water, and it was enlightening to hear from Jim and Sam (another investor and also a farmer based near Ellensburg) about the history of Washington’s water districts, irrigation programs, and farmer involvement. We are currently in the process of transitioning the land we purchased to certified organic status, an important element in our pursuit of soil health, although by no means a silver bullet. This year, we leased the farmland to a young couple Jim has been mentoring. They have been part of Cloudview and are committed to lives in farming. By leasing our land and raising commercial crops (currently alfalfa), they are able to make a living as farmers while continuing their explorations of farming practices.

The next morning, I attended a breakfast meeting here in Seattle. The sponsor was The Nature Conservancy’s NatureVest, a relatively new division that is bringing private and public capital to conservation through various kinds of investment. If I thought 100 acres of farmland in Eastern Washington was complicated, then the work of NatureVest is off the charts. Our state’s land commissioner spoke about the scope of the need for conservation and at the same time the intimate, personal nature of every transaction.

Living Lands and NatureVest are each, in their own ways, vibrant, exciting and multi-dimensional investment opportunities. They are moving the needle toward sustainability in very specific ways, in very specific places. With Living Lands, it’s one piece of land at a time. And the same is true of NatureVest. They’re just dealing with bigger pieces of land!

The vocal financial mainstream is dismissive of “one off” approaches like Living Lands and NatureVest. They want to invest in things that can “scale”, because, really, what’s the potential value of an enterprise that can’t aspire to exponential growth powered by an algorithm or financial model or standardized service model? But when we talk about scale, we should be sure to ask, "Scale for whom?" It usually means a scale that would make investors happy, and, unfortunately, happy investors are often inclined to ignore or minimize employees, nature, communities and families, because their underlying motivation is almost inevitably connected to increasing profit margins.

I say “often” and “usually” because clearly there are investors (and more and more of them) who want to prioritize those other areas rather than exploit them. But even then, there is something in our culture that makes the concept of “scale” difficult to escape. Both inside and outside the mainstream, the obsession with scale is also rationalized as a way to reach more people or “make more impact”. In fact, even an employee of The Nature Conservancy had the audacity to say that he really hoped we wouldn’t need TNC someday—that the goal is to “figure all this stuff out” so the real money can come in and get all of this “to scale”.

Scaling inherently means making a product, service, or solution more uniform and repeatable. This may have been a novel and critical approach in the industrialization and manufacturing eras of the 19th and 20th centuries, but we have gotten stuck and carried away in a world that is drastically different from 100 or even 50 years ago. For people who are so proud of our innovations and creativity, we are really quite old-fashioned to believe the same principles that brought us through the industrial age are going to see us through this next era.

We seem to think it’s appropriate to scale everything—farms, education, healthcare, and even relationships. Yet, people and places are so much more diverse, nuanced and interdependent than assembly-line products or software code. When we scale enterprises that directly serve people and places in all of their uniqueness and weirdness, we must inevitably standardize our understanding of those people and places. In the process, we surely fail to engage them and ourselves fully. We sacrifice quality for quantity.

My reaction to scale is visceral and intense. I find it dehumanizing, single-minded, and boring! We are not going to “scale” Living Lands. We may form Living Lands II and buy another piece of farmland. When we do, we’ll need to pay as much attention to it as we have to Living Lands I. We’ll need to ensure that we raise the right kind of crops for what’s in the soil. We’ll need to find the right person or people to lease the land. It’s a complicated endeavour, but that’s what makes it meaningful. It’s personal and place-based and unique. We are forming relationships that we wouldn’t otherwise have had. We are placing the highest value on the land and the people who know the land.

Likewise, I cannot imagine TNC “scaling” its work, and I fervently hope that is not the intention. Rather, I see it experimenting, trying out ideas, sharing what works and doesn’t, spending a lot of time and energy on design and detail, and putting together fascinating, compelling conservation investments that address what is uniquely applicable and needed in each particular ecosystem.

These are the kinds of investments that should take over the world—not by scaling so that VCs and Wall Street can swoop in and do their “magic”, but by inspiring the participants, engaging the public and working at an essential level—real dirt, real trees, real plants, real people, real understanding and real value.

P.S. – For further exploration of the economic aspects and implications of this subject of scale, I highly recommend Jeremy Rifkin’s latest book, The Zero Marginal Cost Society.

Share this post
Seattle's Construction Boom

Last week, I attended a gathering convened by BALLE (Business Alliance for Local Living Economies). The group consisted of about 20 people, all of whom are committed to investing significant portions of their wealth in local economies, many of them involved with food and agriculture, social entrepreneurship or marginalized populations. Each of us was asked to make a five-minute “dashboard” presentation of something we are working on. I decided to talk about affordable housing because it is such a huge issue in Seattle (and other cities) and because it’s been on my mind and in my heart and portfolio for a long time.

Sometimes you don’t need a lot of words to make a point. In this case, two numbers do it for me. Seattle is humming along with a very high rate of population growth—about 3% per year. And it shows every day in the cranes hanging over downtown, new restaurants and bars, traffic everywhere all the time, and a buzz of excitement and energy that makes it all seem worth it.

Meanwhile, the King County Coalition for Homelessness recently conducted its annual One Night Count of people living on the streets. One might reasonably expect some increase given that the city is growing. But the actual figure is shocking—and shameful. The number of homeless people in King County (where Seattle is by far the largest city) rose not by 3% or even 5% but by 20%!

This 20% number is a window into the larger picture of what is happening to housing in Seattle. It used to be that developers could make a decent profit by building apartments priced for moderate incomes and operating them long term. Nonprofits could build affordable housing with tax credits and government funding. This is no longer true. Government funding is shrinking, and construction and development are focused on higher-end projects with attractive profit margins.

We are experiencing a market failure to address homelessness, housing for the working poor and home ownership for the marginalized. And yet, these are the people who serve us, who entertain us, who labor for us, and who help make our city vibrant, interesting and diverse. Surely, we have a moral obligation and civic duty to be sure they have a decent and affordable place to live.

Enter Integrated Capital. The principle behind integrated capital is that mission and purpose come first. Then comes an analysis of what is needed in terms of the amount and form of financial capital. This can be gifts, grants, loan guarantees, loans, convertible debt, or equity. The key is that mission comes first. Financial returns are secondary and not self-centered. Capital providers (donors, investors) consider the needs and conditions of all participants and engage in discussions around fairness, equity, and affordability.

Here is a simple example of Heather’s and my integrated housing portfolio:

Category Need for Financing Our Investment
Permanent Housing for Homeless People Projects rely heavily on charitable gifts and grants. No predictable rental income as tenants pay a percentage of income as rent, and income is often very low or nonexistent. Plymouth Housing Group, a nonprofit developer and operator of apartment buildings in downtown Seattle. We have contributed to PHG’s capital campaigns and make an annual gift.
Affordable Housing for the Working Poor. These are people who earn around half of Seattle’s median income. They make up to about $37,000 per year. These projects use tax credits and bank loans for about 2/3 of their funding and then rely on government grants for the remaining 1/3. They commit to rents restricted for affordability. As available grants shrink and the need rises, there is a need for low-cost debt financing to fill this funding gap. Bellwether Housing, a nonprofit developer and operator of affordable housing in Seattle. Bellwether is taking a leadership role nationally and in Seattle by offering five-year 2% notes to accredited investors (renewable for a total of 15 years). We plan to invest in these notes.
Affordable Housing for the Urban and the Urbane. There are for-profit market opportunities for developers in this sector, particularly for smaller local businesses that are committed to urban vitality and moderate rents. Eagle Rock, a Seattle developer, renovates and builds interesting urban spaces that offer small studio apartments and shared amenities. We have equity investments in two projects.
Single- and Multi-Family Residences. For now, the market is meeting these needs, although affordability is questionable. We own our home on Queen Anne.

It is my opinion that everyone can and should take this kind of integrated approach to financial decision-making. Admittedly, it is currently much easier for wealthier people (“accredited investors”), so, for now, I am challenging all of us at that end of the wealth and income spectrum to take the Integrated Capital approach.

Share this post
The Perfect Product and Its Troubling Origins

(Right: A photo from the LA Times series shows teenage migrant farm workers picking tomatoes in Sinaloa, Mexico.)

Earlier this month the Los Angeles Times ran a series of articles—heartbreaking exposes, actually—about working conditions and employment practices in large-scale Mexican agribusinesses that supply fresh fruits and vegetables to us here in the United States. I consider myself well-educated and sensitive to issues of exploitation and inequality, but, even now, days later as I write this blog, my hands are shaking and my eyes are filling with tears.

The series of articles describes in vivid detail the plight of Mexican farmworkers who live in squalid and filthy shacks and who are forced to work like prisoners or slaves. One worker noted that the food is treated better than the people.

I know that many of us strive to be conscious consumers. Personally, I read the articles and, wracked with guilt, went straight to our refrigerator dreading what I would find. It turns out that our out-of-season tomatoes come from a company that sources from worker-owned cooperatives in the Baja peninsula: Whew!

But wait just a minute.Would I have bought the tomatoes had I known they came from one of these mega-agribusinesses? I might have. I might have rationalized or deliberately compartmentalized. Or I might have had a sense of entitlement or felt that I just “needed” to have fresh tomatoes this week. I can imagine a twinge of guilt over the fact that tomatoes are decidedly not in season in Seattle, but I’m not sure I would have immediately questioned the conditions under which the tomatoes are raised.

These responses are explainable, and by and large acceptable, within the context of our dominant culture. We are a culture of profit maximizers. We believe the best solutions to our problems and challenges come from markets and competition, and we have become capitalist fundamentalists in our devotion to wealth accumulation. Our “personal” consumer desires are conditioned and developed by this money-making culture. Thus, we rationalize wanting and acquiring that which can be bought at a good price, and we tend to see our choices as limited to those which the market offers. This is the system that has emerged and thrived during our lifetimes.

No matter how compassionate and holistic we strive to be as individuals, most corporate executives consider it their duty and right to maximize profits, and there is a general consensus and expectation in society that successful companies are those that generate the most profit. Thus, in a highly competitive consumer market, businesses try to please their customers by meeting their every desire, while simultaneously trying to lower their costs as much as possible. If customers in New York City or Seattle want tomatoes in December, then, by God, you get them tomatoes in December! And if they refuse to pay any more than they pay when the tomatoes are in season in their home region, you figure out how to get cheaper tomatoes.

And so there we are in the supermarket, with whatever compassionate intentions we might have, confronted by a perfectly ripe and innocent-looking bunch of tomatoes. So what are we going to do? We would like to believe that companies can act ethically and responsibly while meeting our every desire, and companies devote considerable effort to preparing and presenting their annual corporate responsibility reports.

The US retailers mentioned as major buyers in the Los Angeles Times series – Safeway, Whole Foods, and Walmart – all elaborate eloquently on the selected good works they do, the values they espouse, and the efforts they make to be good corporate citizens. Unfortunately, they almost always use wholesalers and distributors to procure their products. They may have written codes of conduct and standards for their suppliers, but they rarely have direct, personal relationships with them. When confronted with stories like those of the Los Angeles Times, they tend to deny knowledge and vow to look into the matter, all in retrospect after they have been caught.

The first priority of publicly traded companies as well as most large privately held companies is to make money—not just some money, or enough money, but as much as they possibly can. That means they will generally not look harder than they have to at where their products or resources are coming from. So it’s up to us to know what we’re buying, where it came from, who produced it and how they are treated, and what resources have been used. Only then can we make sound decisions.

The same is true of our investments. When I’m presented with an investment opportunity that promises “market” rate returns, the first questions I always ask are, “How are returns generated?” and “Who and/or what is getting hurt?” Remember, market rate returns are those generated by Safeway, Whole Foods, and Wal-Mart, and we have just taken a deeper look into how those returns are made. If you are promised high returns on your financial capital and if you know there are human efforts and natural resources required to generate these returns, the questions should be: Who is making the effort and how much are they being paid? Do they have an opportunity to share in the profits? What about nature? Does she have a voice? What about the seventh generation?

As we end a year in which the US stock market has reached record high levels, it’s tempting to revel in the gains without considering the sacrifices made by the tomato workers and the seamstresses and the salesclerks. To remind ourselves to look beyond the numbers, I invite each of us to make 2015 the Year of the Onion. Onions, like investment returns, have many layers that must be peeled away to reach their core. And just as we have a right and a responsibility to know where our food comes from, so do we have a right and a responsibility to know where our investment returns come from and whether or not we ought to be accepting them.

Share this post
Endless Self Storage Facilities

Sometimes something is so over the top that I just can’t let it go. It’s a refrain that keeps coming back again and again. That’s what happened after I read a New York Times article about the current spate of building and selling of high-end condos in Manhattan.

First, there are the stratospheric prices we’ve all heard about. In New York City, high-end means millions and not just seven figures, and the residential housing market is segmented much like the 1%. There are now luxury, super-luxury and ultra-luxury units with prices starting at about $3 million, $5 million, and $10 million respectively. But apparently the markets are getting a bit tired, and prices may even be peaking. As one real estate marketing guy asked (with seemingly no sense of irony), “How many people can actually spend $25 million for a home?” Well, if you have to ask ….

Then there are the details that take the situation beyond the ridiculous and into the absurd. The Times article mentions one of the developers, Adam Gordon, who is described as having shifted his focus. Rather than developing luxury buildings, he’s chosen to take an 11-story building on 61st Street and convert it into a luxury storage facility. Now, I know the storage business is astoundingly large – according to the Self Storage Association, there are 2.3 billion square feet of self-storage space in the US. But luxury storage space?

That thread led me to another Manhattan luxury building: “Deeded underground parking and maid’s quarters are old news; these days the latest ‘extra’ up for purchase in New York’s priciest condos may be the least sexy: storage bins. At One57, there are 21 of them up for grabs, but those who need the subterranean space to stash away their bric-à-brac can expect to pay big. One57 is asking $216,000, or about $4,000 a square foot for a 54-square-foot bin, according to a recent amendment that Extell filed with the AG.”

A few weeks ago I spent some time with a woman who lives on the Lower East Side of New York in a rent-controlled apartment on a block that is still primarily populated by people like her, that is to say, those who live at the other end of the ultra-luxury spectrum, at least financially. She laughingly described the day a movie crew was filming on her block. She and her friends excitedly sorted through the “discarded” household items on the sidewalks as they do whenever a neighbor leaves stuff out for the taking. When the movie folks told them they were disturbing the film set, my friend thought, “Oh, I just thought it was an unusually good day for shopping.”

What a counterpoint. At one end of the spectrum are ultra-luxury apartments for part-time residents with storage units that cost more than most people’s houses. They represent “stuck money” – vast amounts of wealth sunk into spacious rooms and stuff to fill them even though there’s no one home. At the other end is “free circulation” – surplus goods made freely available to those who need it in the spirit of reciprocity and community. Neither is all good or all bad, but it’s striking how deeply skewed we’ve become toward the belief that security and comfort come from growing our own personal pool of “stuck money”. We fail to imagine the possibilities of the flow, while those who do entertain ideas of a circular economy tend to be marginalized as outsiders and naive about the real world.

In a system that has formed around the desire for personal wealth and the assumption of infinite growth, this is not surprising. But it’s also not sustainable. So why not start imagining what would happen if we let some of that surplus wealth flow more freely through our world? What might it look like if all the stuff that’s in those luxury storage units was put out onto the sidewalk for the taking?

  • Mr. Gordon might build low-income housing or something else that’s really needed in New York City.
  • An industry based on taking up space for stuff that’s not being used would lose about $24 billion per year in revenue (the Self-Storage Association proudly provides this figure), and those who have been paying for storage would save $24 billion.
  • If we stop spending on stuff and start circulating what we already have, the planet may actually get some much-needed relief and regeneration.
  • Innovation and creativity would be drawn like a magnet to the logistical, organizational, pricing puzzles of circulation. There would be new hives of local economic activity centered on pick up, delivery, and listings.Take a look at for a vision of what is possible.
  • There would be a revival of repair shops and neighborhood delivery services
  • People who love a good yard sale would think they’d died and gone to heaven!
Share this post
Cape Cod Landscape

In August, I attended a five-day leadership course by Meg Wheatley called “Warriors for the Human Spirit”, at the Cape Cod Institute. About 60 of us joined Meg each day from 9:00 to noon for a combination of presentation, discussion, and small group work.

Each day was focused around a certain theme, beginning with the global dynamics impacting leadership today, then recognizing we are a lost culture and thinking about getting ourselves unlost, being clear about the definition of the problem before devising solutions, creating islands of sanity, and preserving and sustaining ourselves. Meg is a masterful teacher—focused and forceful in her message while patient and appreciative of others’ offerings.

I can’t begin to do justice to Meg’s expertise and insight and so have been hesitant to try and distill all I learned into a brief post. I'm also still digesting and exploring what I learned through the course, and I'm in no rush to crystallize things ahead of time. For now, I’ve decided to share three provocative snippets and then describe how I see their relationship to economics, finance and investing.

1. Systems That Are Fundamentally Broken Can’t Be Fixed
We want to change the “system”, but it’s emergent, not mechanical. It has properties and characteristics that are unrelated to the parts that created it, so we can’t go in and fix one part or another and hope to change a system.

Meg suggests the analogy of a chocolate chip cookie. We bake the cookie from a set of discrete ingredients—flour, sugar, butter, salt, chocolate chips. If we discover that the cookies contain too much salt or not enough sugar or they crumble too easily, we can’t fix them. The same is true of complex systems. We have to start over. We are deluding ourselves if we think we can change them.

My Association: Impact Investing
It’s tempting to believe we can have it all—change the system while reaping “market rate” returns. That is the defining ambition of impact investing, and some people actually believe it’s the only way to change the financial system: to beat it at its own game, to prove it’s possible to make more money doing good than bad. To me, trying to turn profit maximizers into kind and compassionate profit maximizers feels like a losing proposition and leaves me dispirited, hopeless, and very frightened about our the future.

What gets me really excited and energized is the multitude of small contrarians who are willing to start over, who are willing to reject profit maximization for a few and consider what’s best for the most. An example in investing would be the RSF Social Finance practice of bringing borrowers and lenders together to mutually agree upon an interest rate that meets the needs of both parties (as much as possible). RSF is not trying to convince Bank of America to change its lending practices. RSF is starting over.

2. Clarity of Purpose Now Is More Important than Being Hopeful
In her own words: "For me personally, as an activist in the world for more than 40 years, I too have struggled with abandoning hope. I have discovered that beyond hope and fear is the place of clear seeing and strengthened commitment to the causes, places and people I champion. Enormous energy becomes available when we replace expectations with clarity. All the energy we put into pumping ourselves up, or denying how difficult it is, or denying that it's not working out the way we wanted it to--all that energy becomes available to us so that we see clearly, and can fully engage our intelligence to work with what is."

We have to get to a place where we do what we do because it’s the right thing to do, because it’s what we absolutely have to do, whether we think we will change the world or not. Meg pretty much dismisses hope and reminds us that the flip side of hope is fear. If we are always moving between hope and fear, we don’t leave room for our good work. She encourages us to find the place beyond hope and fear, where we are in relationship with others at a small, local and personal level. And not because what we’re doing will “scale up” to change the world but because it’s the right thing to do.

My Association: "Scaling Up"
Some impact investing proponents, like many venture capitalists, adopt a mantra that the only worthy investment is a business or enterprise that can “scale up”. It’s one thing to build a business with the clear intention of growing and selling it to the highest bidder. It’s quite another to apply this single-minded agenda to an investment that is intended to affect real people in real places at a scale that is intentionally personal and local. While some impact investors may choose the scale path, this is not necessary or even preferable. Rather than work out of grandiose visions of making a global impact or making something alternative become mainstream, we can find great meaning in doing small things that are right and good and meaningful to us and those we serve.

3. Our Belief in Unending Progress is Delusional
Our distinctly American belief in progress–that life can always get better and better—blinds us to the realities of culture, civilizations, collapse and emergence. We keep trying to fix things and make them better rather than recognizing decline and the need for entirely new systems. We have a sense of being unique, able to conquer anything, but in fact we are not different! We are fully human. We would do well to learn the lessons of the past and of other cultures.

Meg used these examples: Celts Symbols Tibetan Symbols Line Graphs

My Association: Circular Economy
When it comes to economics and finance, we seem to have a cultural aversion to the concept of circles and a major attraction to upward sloping lines. Even though we talk about natural cycles and the cycle of life and death, we seem to shut off that part of our minds when talk turns to money and wealth. Yet there is something beautiful about the concept of a circular economy, one that embraces flows of money and capital as well as production and reuse. When we shift from line to circle in our thinking about the economy (as I discussed in my last blog), everything changes. Urgency and frenetic activity can be replaced with patience and reflection. Working with money and wealth in terms of cycles and flows rather than accumulation and hoarding could indeed be the most impactful contribution we could make to the world at this time.

Share this post

Pondering my latest summer read, Overfished Ocean Strategy

Two works by Seattle-based photographer Chris Jordan
Two works by Seattle-based artist and activist Chris Jordan

I’ve just finished the business book equivalent of “beach reading”. The book is Overfished Ocean Strategy by Nadya Zhexemmbayeva. It’s highly accessible, not very long (173 pages), and very entertaining. The title of the book is a play on the business bestseller Blue Ocean Strategy, published in 2005 and written by W. Chan Kim and Renee Mauborgne. Blue Ocean strategy is the idea that businesses should seek out new market spaces (blue oceans) rather than trying to compete in the crowded waters of existing markets and companies.

Zhexemmbayeva riffs on the ocean analogy with her observation that our oceans and indeed all of the earth’s resources are “overfished”. It is no longer practical or profitable to seek and exploit new waters. Instead we need to face the fact that we are depleting our resources and jeopardizing our survival and then move joyfully into a whole new way of doing business. In her words, “To discover the abundance of the future, we first need to recognize the scarcity of the present.”

In a refreshing and down to earth style, Zhexemmbayeva lays out five principles that can transform our linear throwaway economy into one that relies upon circular flow, imaginative cross-fertilization of ideas, a way of growing that replaces stuff with service, the use of models and iteration in place of formulaic strategic plans, and organizations grounded in common mindsets rather than rigid departmental boundaries.

Zhexemmbayeva is eclectic in her interests and citations. She draws upon the work of highly regarded thinkers, activists and practitioners and weaves them together in a way that I found very pleasing. I read about old friends like The Natural Step and Harry Mintzberg, and enjoyed how they fit into the Overfished Ocean strategy.

For the very reasons that this book is accessible and enjoyable, it also left me pondering the questions that fascinate me: Can we reconcile a circular economy with a linear money system? Is it possible to have economic growth in a circular economy? If we radically move to a circular economy, doesn’t that necessarily (and happily) lead to shrinking material output and shrinking GDP? Or if we monetize everything non-material in an effort to maintain a growth economy in a resource-constrained world, do we really want to live like that?

Zhexemmbayeva does not address these questions. She categorically sets them aside, saying, “…I am not here to debate the philosophy or theory of growth.” This was probably the right decision for her. She wants to motivate business leaders to grow in a better way, a way that she sees as transformative, and nothing is likely to dissuade business action more than the exploration of systemic tensions and contradictions.

Whether you’re seeking inspiration for a new business model or for deeper musings on the nature of business and economy, I highly recommend picking up Overfished Ocean Strategy. It’s a perfect summer read – deceptively simple while tackling very complex and entrenched ideas. And I will continue to work on the puzzling questions of circles and lines and how or whether they can co-exist.

Next up for my summer reading and pondering are Carol Sanford’s The Responsible Entrepreneur and Meg Wheatley’s So Far From Home.

Share this post
Sunrise over the Earth from outer space

The New York Times recently published an expose of billionaire hedge fund founder Tom Steyer, his new-found commitment to environmentalism, and the inevitable contradictions between his business activities of the not-so-distant past and his current stirrings. The story provides details of the coal mines and power plants in Australia, Indonesia, China and India that Steyer’s company, Farallon Capital Management, has funded and from which the company and Steyer have profited handily. It’s estimated that the mines that received funding from Farallon have increased their annual coal production by 70 million tons, which is more than the annual amount of coal consumed by the United Kingdom. At the same time, profits from those mines have enabled Steyer to commit $100 million this year to defeat political candidates who oppose government actions to slow climate change.

The article provides plentiful opportunities for accusations of hypocrisy and plutocracy. Critics compare leftist Steyer to the Koch brothers in terms of buying political power and influence, and some even go so far as to say that at least the Koch brothers are consistent in their words and actions. Environmentalists find it hard to overlook the damage done in the past, and some of us scratch our heads that it would take such a smart person so long to figure out that coal mines in Asia might not be a great idea.

Why did it take so long? Why, indeed, do any of us persist in behavior that is so clearly damaging? Certain damaging behavior is simply illegal—drunk driving or shoplifting, for example. But the great bulk of actions that cumulatively cause overwhelming damage are culturally acceptable, even condoned, until a tipping point is reached and they become objectionable. Slavery, sweatshops, superfund sites—all have been acceptable until they were not. At the individual level, at what point does a collector become a hoarder? When does fascination become fixation? What distinguishes an obsession from a passion?

Think about it in the context of investing and the very real and raw example of Tom Steyer, who kept on doing damaging things until he finally woke up. Even then, for Steyer it was not a sudden and immediate conversion. Why not? Here is one insight drawn from the story of a huge Australian mine set to begin operations in 2015:

Given Mr. Steyer’s reputation as an active environmentalist, Australian opponents of the mine were startled to learn of his firm’s role as an early investor.

“It’s gobsmacking,” Philip Spark, president of the Northern Inland Council for the Environment, a nonprofit trying to stop construction of the mine, said in a telephone interview. “It’s amazing that such a person could have been involved in this project.”

Mark Carnegie, an investment banker in Australia who was involved in the Maules Creek deal, said he could sense even then that Mr. Steyer was struggling to reconcile his motivations as a profit-seeking investor with his growing anxieties about the environment.

But the investment was financially irresistible.

“But the investment was financially irresistible.”

Irresistible. Like romance, seduction, and sex. The word evokes fantasies and flights of imagination, dreams and wishes, release from the cares of the day. “But the investment was financially irresistible.” It was big and bold. It promised outsized returns from far-flung locations. In the face of the irresistible, long-term damage to the planet and its inhabitants was probably the last thing on his mind, if it even registered at all. Danger, perhaps, but that’s part of the allure. Risk, yes, but only that which he believed could be conquered.

The challenge before us is to be irresistibly drawn to the common good, to simplicity and enough-is-enough, to fairness and justice. We shouldn’t expect to lose our attraction to the irresistible, nor should we want that. But most of us are capable of expanding our consciousnesses such that we can shift from the irresistibility of profit and economic growth at any cost to the shining and irresistible vision of real and good work done well with great joy and compassion.

Tom Steyer, along with Michael Bloomberg and Hank Paulson, has sponsored a report, Risky Business, which illuminates the economic threats to the United States of climate change and urges nonpartisan responses to both the threats and the opportunities. Echoing and building upon the work of millions before them, the report and its sponsors appear to want to make an irresistible case for taking climate change seriously. I hope they succeed.

Share this post
SheepCowSeed Bank

95% of all terrestrial species on earth live in the soil. A handful of soil contains miles and miles of filament. We could sequester all of the carbon emissions attributed to human activity with 17% of the world’s arable land—if we managed it holistically.We need to pay attention to dirt!

Last week before the BALLE conference, I spent a couple of days at Paicines Ranch in San Benito County. Owned by Sallie Calhoun and her husband Matt, the ranch is big and sprawling and home to increasingly healthy soil, thanks to the dedication and common sense of Sallie and Matt. They recently hired Kelly Mulville to further their work in holistic management of the ranch (also see this TED Talk by Allan Savory), including education and outreach. Kelly provided the facts found in the first paragraph—little snippets interjected into his presentation with no particular drama but with monumental implications. We were eager students.

Building soil health involves a hands-on, intimate, relationship with the land. It involves a lot of upfront time to figure out what’s going on, what is needed and how best to accomplish a goal. It requires long-term thinking and planning. It almost always involves herds of animals on the land, pooping, peeing, and tromping with their hooves to feed and stimulate plant mass that then feeds and stimulates the soil. The payoff can be almost immediate in terms of water retention, soil fertility, and productivity. And the long-term implications are truly life or death. Soil, air, food, and health are as interconnected as those filaments in a handful of dirt.

Wouldn’t it be exciting if we approached finance and investing with the same curiosity and commitment that dirt evokes? And with the same kind of thoughtful approach that holistic management uses? It seems to me that the trick lies in taking our eyes off the (money) ball long enough to figure out what really matters. So how do we do that? Here are three guidelines I gleaned from my days at Paicines Ranch and on a lovely FiberShed tour I participated in later in the week:

1. Spend the time upfront.

In the world of investment management, most advisors and managers are compensated based on a percentage of the assets that are entrusted to them to oversee. This means that they have an incentive to “gather assets” and start managing them right away. If we think of gathering assets as fencing them in, then the process of visioning, planning, testing and evaluating would be akin to surveying and studying the land before making the commitment to build a fence.

Investors should spend lots of time upfront just as ranchers and farmers who practice holistic management spend time contemplating, considering, and weighing possibilities against a well-conceived holistic goal. If we are going to be urgent about anything, it should be about how we can use money to facilitate a long-term vision, not about how to “get rich” today.

2. Put a face on it.

There’s something about spending time with a cow or a sheep—not to mention a baby or a sibling, parent, friend, neighbor or the future generations—that gives us immediate perspective on our interdependence. We seem to have a cultural tendency to compartmentalize money from everything else that matters to us. The more we see the connections between ourselves, our money, and the well-being of the earth and its inhabitants, the better we will be at making good financial decisions.

3. Last things come first.

The game of “why” is revealing. If you ask me why I want to invest my money, I might say that I want to make more money. You might ask why I want to make more money, and I might say that I need to support myself. Again you might ask why, and I would present another motivation, deeper or more fundamental than the last.

After a number of iterations, most people arrive at commonalities—love, relationship, security, connection, well-being. And yet so many investment professionals stop at the first why. It appears to be sufficient to work with “making money” as the ultimate why. Instead, first and foremost should be that which comes at the end of our string of why’s. From there we can work forward to what we want to do and how we want to do it.

Here’s to soil and sheep, cows and compost as our natural guides on the path to integrated capital.

Share this post

How Creative Expressions Illuminate the Numbers

Kara Walker's Subtlety Sugar Baby Sculpture
Photo by Phil Alexander from Creative Time's public-sourced Digital Sugar Baby.

Thomas Piketty, author of the recently published Capital in the 21st Century, has been called a “rock star”. His message has clearly struck a nerve, not just in the rarefied halls of academia but on the bestseller lists of Amazon and the New York Times. Wealth inequality and capitalism go hand and hand, and he has collected and analyzed the data to prove it.

Piketty is not the first person to make this observation, and really we already know his conclusions through our own observation, intuition and plain old common sense. Nevertheless, the time seems right for his contribution. It’s quite a statement of public interest that a 700-page, data-filled economics tome should top the bestseller lists, currently beating out Flash Boys, Thrive, and Lean In.

Piketty identifies a central tenet of capitalism: as long as the return on private financial capital exceeds the rate of growth of the economy (r>g), wealth will accrue to those with the capital. An innocent enough observation, but one that states only part of the equation. When more wealth accrues to those with capital, less wealth accrues to workers and the commons. Even that statement sounds a bit innocuous.

Great wealth carries the legacies of colonialism, slavery, and environmental exploitation that come hand in hand with invention, scientific breakthroughs, and economic growth. We need only tune in to ourselves and our media to connect the dots between unbreathable air in Asia and our iphones and apps at home. Yet when we are presented with data—even data as impressive and compelling as that of Piketty—we only see numbers, graphs, and charts. We don’t see the very real connections, causes, and effects that swirl around these abstract representations of people’s lives. We may know in our guts that inequality is wrong or harmful and yet still fail to internalize and act upon this knowledge.

If you are a person who has trouble compartmentalizing, it helps to engage in these issues at multiple levels and with various aspects of ourselves. Art is one way to do this. I find that although I am steeped and vitally interested in the financial system and our economy, I cannot glean from my reading the heart-wrenching reality of the underpinnings of inequality. I need to feel it deeply and differently than in my conceptual brain.

This has happened for me as I have viewed and reflected upon the images of a recent work, A Subtlety or the Marvelous Sugar Baby, created by Kara Walker (shown above). Walker has built a huge sculptural installation in the soon-to-be demolished Domino Sugar Refining Factory in Brooklyn. I have not visited the site, but I can feel its power through images (including the captivating "making of" video viewable from the link above). It feels like a loving assault.

Walker’s sculpture is strikingly beautiful--white, shining, tactile. The subject is a massive African American woman identifiable by her features and kerchief, a caricature but not really because she is big and powerful. She’s a survivor of violence, rape, and hatred. She is embedded in a factory where the canes that had been farmed by slaves were brought to be processed and “refined” into pure white sugar for the privileged. Walker's extensive title for the work describes it as "an Homage to the unpaid and overworked Artisans who have refined our Sweet tastes from the cane fields to the Kitchens of the New World," but you can get a much richer sense of the artist's vision from this interview between Walker and NPR reporter Audie Cornish.

Let’s not quibble over whether Piketty’s numbers are 100% accurate. We should know beyond a doubt that something is wrong when 30% or more of the wealth of this country is owned by 1% of the population and when 25 hedge fund managers accumulated more wealth in 2013 than all of our country’s kindergarten teachers combined. Let’s instead use every bit of our intelligence, intuition and emotions to figure out how to make things more fair!

Art illuminates data. Piketty is a master of measurement, and Kara Walker is a master of the evocative power of art. One without the other is incomplete. We need both if we really want to be equipped to achieve justice and equality.

Share this post
Dyed fabrics from Color Studies course

For the past five years, I have been a student at the Gail Harker Center for Creative Arts in La Conner, Washington. Last week I began a new course—Level 2 Studies in Design, Hand and Machine Stitch—after previously completing certificate courses in Color Studies and Art and Design. During our five-day session, we dyed fabric and threads and began designing with color schemes. We played and experimented--and learned. The dyed fabrics above will be the canvas upon which we stitch an idea into a design and ultimately a beautiful piece of work.

This is not your normal art school. We are learning the elements of design and using them to make Women’s Art. We intentionally identify stitch and needlework as art. We raise our own awareness and others’ to the exquisite beauty, creativity, skill and rigor of needle art. Before I even began stitching, I completed a two-year course in Art and Design that educated me in the elements of design—color, texture, lines, space—as well as the use on paper of media such as fluid acrylics, pastels, colored pencils and markers. I learned to design and carve printmaking stamps and experimented with all manner of acrylic media. Now, as I enter the world of stitch, I can feel the ancient urges that led women to beautify, embellish and decorate that which was also functional and useful in life.

In professional life, I and others are doing something similar. We are naming and claiming Women’s Investing. In much the same way that the art world has tended to diminish the legitimacy of needle art, the financial world tends to diminish the legitimacy of fully transparent financial relationships based on personal connections and fairness for all parties. Just as needle art requires a highly developed sense of design and amazing skill, women’s investing is disciplined and rigorous with a strict emphasis on risk management. It’s not less serious or less legitimate. It’s different. A person who chooses to invest in this way is not inferior or naïve. She (or he) is different.

Color Studies at the Gail Harker Center for Creative Arts Leslie at the Gail Harker Center for Creative Arts

Our teacher, Gail Harker, is the best teacher I have ever had. Gail’s purpose is to build individuals, to help us find our voices and artistic expression. If you visit an exhibit of Gail’s students’ artwork, you will most likely notice first that each person’s work is unique. There are common foundational elements, but the outcome is different for each artist. When I work with investors, I am inspired by Gail. I remember that my job is to help lay the groundwork and foundations upon which each individual can build her or his unique portfolio.

Gail combines vast knowledge and experience with humor and freshness in a way that leaves me trusting that she is as much a learner today as she was in her youth. She knows her stuff, having spent her life immersed in art, and our classes include a healthy amount of instruction. At the same time, Gail experiments and plays. She’s unafraid to look foolish. She laughs easily and considers everything an opportunity for insight.

The financial services business could take some lessons from Gail. We need to take ourselves less seriously in order to make room for new ideas, deep listening, and alternative perspectives. We need to remember that “in the beginner’s mind, there are many possibilities, but in the expert’s there are few.”

Share this post
Cover of Flash Boys by Michael Lewis

I am one of the 160,000 people who purchased Flash Boys by Michael Lewis during its first week of publication. The book is highly entertaining and provocative. It’s causing a “shitstorm”—to use Michael’s terminology—and rightfully so. To paraphrase what he said in an interview with Jon Stewart, the great American stock market, once perceived to be venerable and respected, is now a sham.

The real sham of the stock market, however, runs deeper than the farce that high-frequency trading makes of “best execution” (making sure clients get the best available prices for purchases and sales of stock). Throughout Flash Boys, high-frequency traders are treated as a breed of speculator distinct from “…an actual buyer of stock—a real investor, channeling capital to productive enterprise.” This distinction glosses over one unpleasant fact and a huge gray area.

Unpleasant Fact: Less than 1% of stock market activity actually channels capital to productive enterprise.
The stated purpose of the stock market may be to channel capital to productive enterprise, but that is not actually what is happening 99% of the time. Wall Street executives like to toss around lofty terms like “capital formation”. The fact is that more than 99% of the trading activity in US stocks involves “used stock”, shares that were previously issued and are now just moving from one owner to another (like used cars).

Less than 1% of all purchases are actually new stock that is providing capital to companies. The Clash of Cultures: Investment vs. Speculation, written by John Bogle and published in 2012, cites these five-year statistics: total equity IPOs (initial public offerings) averaged $45 billion per year and follow-on offerings averaged $205 billion, while total stock market trading volume averaged $33 trillion. That means you stand about a 1% chance of actually “channeling capital to productive enterprise” when you or your mutual fund or your account manager buys stock.

Gray Area: What’s the Difference between an Investor and a Speculator?
It follows from the above that most of us have never really channeled capital to an enterprise through our participation in the stock market, whether through direct purchases or through a manager or mutual fund. I suspect many of us have always assumed that we were investing in those companies whose stock we hold in our portfolios. Oops!

If buying stocks is not actually providing capital to companies, then how does it qualify as an investment? Perhaps buying stock in a company is a form of partnership with that company, an alignment of interests over the long term so that the saver can participate in the success of the economy and the company. If we’re not actually channeling capital, we might feel a long-term alignment with a company is a solid substitute.

Even this interpretation has serious limits. The average US mutual fund has a turnover rate of about 100%, which means that it’s possible that all of the stocks that begin the year in the portfolio have been replaced by the end of the year (or some stocks have been bought and sold many times during the year). For such funds, a “long-term” horizon is a period of weeks or months. At the lower end are index funds with average turnover rates in the single digits. At the higher end are mutual funds with rates in the 200s.

In Flash Boys, high-frequency traders are called out as speculators because they operate in milliseconds, and to be fair they don’t even claim to be investors. But even if a hedge fund manager or mutual fund portfolio manager operates in minutes or hours, he is still considered an “investor”. The irony is that most investment managers and funds that claim to be long-term investors still have such high turnover rates that they beg the question: are they investing or speculating?

Not at all surprised
When I worked at Salomon Brothers in the 1980s (with Michael Lewis and the crowd from Liar’s Poker), there were very few women on the trading floor. I went there because I wanted to succeed in a man’s world, which I did, until I couldn’t stand it anymore. In Flash Boys, a tale of Wall Street some 20-30 years later, I still counted just three Wall Street women and some fleeting references to a few wives.

At the end of Flash Boys, we meet the ultimate outsiders and arguably coolest people in the book, the 750-member Women’s Adventure Club of Centre County, Pennsylvania. The connection to the story is subtle, but it spoke to me. The group’s founder, Lisa Wandel, realized that “many women were afraid to hike alone in the woods.” So they got together and worked through fear and doubt—some learned to fly on a trapeze, won mountain biking championships, ran races, raced cars and plunged into ice-cold rivers.They happen to live along the route of the fiber cable that runs from Chicago to New Jersey and observed its construction as they scaled steep hills on their bikes. One wonders what they would have said about it had they known its purpose. These women are nowhere near Wall Street and seem to be all the better for it.

To put a fine point on it, I was not at all shocked by the revelations in Flash Boys. I’m sorry to have to say that, but it’s true. Start with a culture of avarice and ego based on money as the one and only measure of worth. Then, turn a bunch of young male technology addicts loose on a project that incentivizes them to go as fast as possible, beat everyone else, and make a lot of money in the process. What do we expect? Boys will be boys.

Share this post
Wealth Inequality - Perceptions vs Reality

Common sense has told us for a while now that there’s something wrong with the kind of glaring wealth disparity that we have today. A hint showed up in Janet Yellen’s recent press interview, in which she announced that the Fed would not follow a rigid rule regarding the unemployment rate. Basically, the plan had been to start raising interest rates when unemployment reached 6.5%. But, as she stated, all is not well in our economy, and it’s hard to claim that the Fed needs to clamp down by raising interest rates and presumably slowing activity. Yellen didn’t say it publicly, but it seems obvious to me and others—there are other problems with our economy that are not reflected in the average unemployment rate. We need to go deeper and look differently.

One way to start is to study the extremes. We tend to think and talk about the economy in averages and medians, forgetting that these numbers say nothing about distribution. The average of 100 and 100 is 100, as is the average of 1 and 199, but what different stories they tell! In the United States, a recent study by Credit Suisse found that the average wealth per adult had reached an all-time high of $51,600. Yet the richest 400 people in our country own 62% of the total wealth while the poorest 47% own zero. The average is irrelevant.

Unfortunately, politicians and government are extremely hesitant to address the issue of wealth inequality. We are now seeing a push for raising the minimum wage, but even that tiny nod toward addressing income disparity (which is but one contributor to wealth inequality) arouses vicious debates, blaming the poor and glorifying the “job creators”. Wealth buys power and influence, which translates into some very tangible results, for example longer life expectancy and greater political influence. The concentration of wealth in fewer and fewer hands has serious implications for the future of our economy, our system of government, and our civilization.

These issues are gaining traction in academia, popular publications, and the press. The long term risks associated with wealth inequality are being identified and getting the close attention they deserve. The discussion is beginning to move beyond inane and shortsighted rants about fostering job creation and preserving economic growth, to considerations of long-term well-being and survival of our civilization.

I highlight below three significant publications:

1. In 2009 I read a book called Spirit Level: Why Equality is Better for Everyone. An odd name, I thought, for a book about inequality and its effects on humans, until I actually checked the definition of "spirit level". The authors, medical researchers and epidemiologists, Richard Wilkinson and Kate Pickett initially set out to try to understand the causes of big differences in life expectancy among people at different levels of society. What they discovered is remarkable. They found that differences in average income from one “developed” country to another did not matter in terms of life expectancy but that inequality within countries was highly significant. In case after case, they found that income and/or wealth inequality was highly correlated not only with life expectancy but with levels of trust, mental illness and addiction, obesity, children’s educational performance, teenage births. homicides, imprisonment rates, and social mobility. Their findings in a nutshell: “Health and social problems are more common in more unequal countries.” Among “developed” countries, the US stands out as the most unequal and the least healthy.

2. John Fullerton noted in his most recent Capital Institute bulletin an article about a new model developed by Safa Motesharrei et al and published as “Human and Nature Dynamics (HANDY): Modeling Inequality and Use of Resources in the Collapse or Sustainability of Societies”. The authors have developed a model that explicitly uses wealth inequality (rather than general wealth level) as a variable in modeling scenarios and testing the results. Here is a striking excerpt from their findings:

“It is important to note that in both of these scenarios, the Elites —due to their wealth—do not suffer the detrimental effects of the environmental collapse until much later than the Commoners. This buffer of wealth allows Elites to continue “business as usual” despite the impending catastrophe. It is likely that this is an important mechanism that would help explain how historical collapses were allowed to occur by elites who appear to be oblivious to the catastrophic trajectory (most clearly apparent in the Roman and Mayan cases). This buffer effect is further reinforced by the long, apparently sustainable trajectory prior to the beginning of the collapse. While some members of society might raise the alarm that the system is moving towards an impending collapse and therefore advocate structural changes to society in order to avoid it, Elites and their supporters, who opposed making these changes, could point to the long sustainable trajectory “so far” in support of doing nothing.”

3. The world of book reviews on the subject of economics is buzzing with a new volume that will be available to the public in April—Capital in the Twenty-First Century by French economist Thomas Piketty. In his research and analysis, Piketty focuses on the reasons that wealth inequality rises and falls and warns that we are in a period of rising inequality due to concentrations of inherited capital and the relationship between economic growth and return on capital. For those who see wealth inequality not only as unfair but as a short and long term hazard to our health and survival, Piketty offers a thought-provoking premise. John Cassidy of the New Yorker has taken a particular interest in Piketty's book and its findings as well as the author’s insightful and accessible style.

At so many levels, it’s unhealthy to accumulate and store vast amounts of wealth—whether in the form of houses or horses, stock options or liens on other people’s property. It can be tempting to see that as just an ideological statement in elevated rhetoric, but these and other experts are telling us that wealth inequality is actually dangerous to our health and well-being. Just like smoking.

If gross wealth inequality threatens our health, then at what point does wealth accumulation become a behavioral disorder like hoarding? At what point will there be a TV show about wealth hoarders? What would happen if Forbes renamed its famous list from "The Forbes 400—The Richest People in America" to "The Forbes 400—The Biggest Hoarders in America"?

Share this post

What Makes Something an Investment and Not Merely a Gamble?


In October 2013 I wrote a blog post in response to a New York Times interview with William Ackman, hedge fund manager. My purpose was to gently nudge myself and others to be critical consumers of the wisdom of hedge fund managers and of this one in particular. Ackman has been in the news again recently, and I am prompted to pursue a line of questioning that has been occupying my mind for some time: What exactly do we mean when we say we are investors, or when we say we’re making an investment? Do we all mean the same thing? The Ackman example seems tailor made for this inquiry.

On March 9, 2014, the New York Times featured a front-page article on Ackman and his efforts to ruin the company Herbalife. Among other things discussed in the October interview, Ackman was particularly proud of his $1 billion short sale of Herbalife stock due to his conviction that the company is a pyramid scheme that exploits its salesforce. Ackman has rallied individuals and organizations to expose what he considers shady dealings by the company, specifically, exploiting and manipulating people of color, primarily black and Latino, into joining a pyramid scheme that purports to provide good incomes and healthy products. He has paid for lobbying efforts with legislators and government entities including the SEC, and has recruited members of advocacy groups to participate in a letter-writing campaign urging regulatory action.

As of March 12, 2014, his campaign seems to have worked—the FTC has announced an investigation into the company’s practices, and, by the way, its share price declined 15% on the news. There are more than 500 comments on the New York Times website related to this article and undoubtedly thousands of other responses posted in cyberspace. Reactions range from nausea to bravo to so what. One person, referencing the fictional politician in the Netflix series House of Cards, quipped: “Frank Underwood would be proud.”

I was particularly amazed by one of Mr. Ackman’s comments in the most recent NYT article:

“Yet Mr. Ackman’s staff acknowledges that this crusade is really rooted in one goal: finding a way to undermine public confidence in Herbalife so that his $1 billion bet will produce an equally enormous return. Mr. Ackman has said he will donate any profits he personally earns to charity, calling it “blood money.” The clients who invest in his hedge fund, however, would still benefit enormously.”

Ackman claims a noble purpose—saving the world from the evil of Herbalife—and then he turns around and refers to any personal profits he might make as “blood money.” So which is it?

What about his clients? At what point, and by what logic, does Ackman’s “blood money” transform into respectable investment returns for his clients? Is this really an investment?

What a fascinating question! What makes something an investment? As I discussed in my recent newsletter, the term is so broadly used as to be almost meaningless, except that it possesses a certain aura of respectability and import. Ah, yes, an investment…..legitimate, admirable, and so on. But would you call Ackman’s strategy, and associated financial transactions, an investment?

Ackman sold shares of Herbalife’s stock even though he did not own the shares. He did this because he thought the price was too high and that it would (or should) decline. If he had owned the shares, he could have sold them and then repurchased them later when they reached a “fairer” price, but that doesn’t appear to be what he intended. There is no indication that Ackman ever planned to actually own shares of Herbalife. No, he simply wanted to profit from a decline in the share price in order to have more cash for himself and his investors.

The activity of selling shares you don’t own is called short selling. In order to make good on his sale, Ackman borrowed the shares from someone else and delivered them to the buyer or buyers to whom he sold. When he or others say he made a “billion dollar” bet on Herbalife’s stock price going down, he didn’t really commit one billion dollars in cash. He borrowed shares of the stock and then immediately sold the shares and got paid for the stock from the purchaser. Then he used the cash he got from the sale as collateral for the borrowed shares (which were still owed to the lender).

This is a very risky strategy. If the share price goes down, Ackman can “cover his short” by buying the stock, transferring it to the lender of shares, getting back the cash collateral, and realizing a big profit. However, if the share price rises, he will have to buy the stock at a price higher than he sold at (shorted). The cash he received when he made the short sale will not be enough to cover the purchase at the higher price, and he will have a loss.

The activity of selling shares you don’t own is common in the financial industry. It’s all handled electronically, so it’s relatively easy. Most of us, whether we know it or not, are complicit in this kind of betting. Brokerage firms such as Schwab and mutual funds such as Fidelity and Vanguard routinely lend the securities that are held in their custody. If you read the fine print, you will find language to this effect. Shares are loaned with cash as collateral; the lender can then invest the cash while the shares are on loan.

One example of a simple definition of the term “invest” is to commit capital to an endeavor with the expectation of future income. To whom did Ackman commit capital? From whom would future income be received? It seems clear that this was a bet, a gamble, a speculation. Question: does a high degree of risk in a regulated arena qualify something as an investment? Do we ever say we’re going to the casino to invest in a game of blackjack or roulette? What exactly is the difference between the short sale and the spin of the wheel or the deal of the cards?

Ackman and others would say the difference is that they are smarter and more sophisticated than gamblers. In the case of Ackman and Herbalife, there’s another significant difference. It turns out that money buys power and influence, so it’s possible to fix the game in a way that is not so easy in a casino. Still, the language and culture of Wall Street is rife with gambling references—betting, speculating, throwing money at, putting money on the table, etc. This language flows easily from the tongues and pens and keyboards of portfolio managers, researchers, politicians, economists, analysts, pundits, newscasters, and reporters. It is not uncommon to read or hear references to investors making “big bets”, as we have seen in the coverage of the Ackman story.

What, then, makes something an investment? I have found this question frustrating and exasperating while at the same time motivating me to look more deeply into the relationships, connections, and implications of my financial endeavors. I strive to pause and reflect on what it means to invest. I am clear that selling a stock short, bad mouthing the company, and buying influence does not for me constitute an investment. I am also clear that the simple definition cited above (committing capital with the expectation of income) is insufficient. At the moment, my personal working definition of investing is: a commitment of financial capital in expectation of a fair financial return in relation to my contribution, the efforts of others (particularly employees), and the extent to which the enterprise is operating within ecological limits.

For people who strive to express their personal visions and values in the way they work with money—AND for whom vision and values are more complex than short-term profit maximization, there is great value in defining for themselves what investing means. How do you personally define investing? What are you trying to accomplish? Where are the lines and gray areas?

I created an online survey to gather reflections on the language of finance and investing. If you feel these questions are important, please consider taking the survey or sharing your thoughts by email. I would love to hear from you!

Share this post

As I was reading the Sunday New York Times business section, I actually laughed out loud. I had turned to the inside of the Gretchen Morgenson finance piece entitled “A New Light on Regulators in the Dark”, and was reading the end when I noticed another article on the same page: “Mars, Venus and the Handling of Money”.

First, thank goodness I still read the Sunday newspaper in physical form. The irony might have been lost on me had I been scrolling along on my iPad. This way, though, it was clear. The Morgenson article was about how the guys really couldn’t or didn’t want to see the severity of the financial crisis as it unfolded in 2008. The other was about how women’s perspectives on money and the economy might actually have validity.

Morgenson had been reading the just-released transcripts of the Federal Reserve’s Open Market Committee (FOMC) meetings from 2008. During this time period, the Fed rescued Bear Stearns, stood by for the bankruptcy filing of Lehman Brothers, and bailed out AIG (American International Group). One would hope that this august body of financial experts would have fully considered the ramifications of their decisions, including a dangerous precedent of “too big to fail” (unless it’s Lehman Brothers).

Instead, the minutes reveal repeated failures by the likes of Tim Geithner (then-President of the Federal Reserve Bank of New York and later Secretary of the Treasury) and others to face up to the seriousness of the situation. Here’s a sample quote from Geithner: “Based on everything we know today, if you look at very pessimistic estimates of the scale of losses across the financial system, on average relative to capital, they do not justify that concern.”

Perhaps Geithner was referring to the perception of Wall Street's infallibility that existed up until the day it became obvious that its game was highly fallible. He certainly does not appear to have engaged in any thoughtful and hard-edged analysis of the leverage, financial engineering, and bubble mentalities that were prevalent. Not an excuse, but maybe an explanation. Perhaps the FOMC should have been more tuned in to the wisdom of Janet Yellen, Brooksley Born, and Sheila Bair.

Meanwhile, the author of the Mars and Venus article, M. P. Dunleavy, tiptoes when she could have galloped. She rightfully points out that women control a lot of money and that it makes sense for advisors to pay attention to them. She stops short, though, of positing that women might actually be better money managers than men. By better, I mean that women in general may take more holistic, long term views of their finances and succomb much less frequently to the impulsive call of testosterone.

And I say better because holistic and long term is simply the reality we live in. Not the delusional, self-destructive one we’ve built in the form of our financial system, but the reality of the world we live and breathe in, in which everything is connected in a careful balance over lengths of time so much greater than our own lives. It’s time we stop exploring whether money can work like that and time to start recognizing that’s the only way it will work.

Share this post

On the passing of Philip Seymour Hoffman


It’s been two weeks since Philip Seymour Hoffman died. In terms of the media cycle, that’s an eternity. News items come and go. There is fleeting intensity and then on to the next one.

For example, I live in Seattle, home of the recently crowned and first-time Super Bowl champion Seahawks. I’m glad we won the game, and I thought it was very nice when so many people gathered to welcome the team back to Seattle. There were some sweet Seattle moments such as the youtube video of the waves of exuberant fans waiting politely for the traffic light to change from red to green before resuming their victory march. Then it was over for me—a passing news item, an exuberant moment with bursts of pride, excitement, camaraderie.

The day of the Super Bowl was also the day that Philip Seymour Hoffman died. For me and others, this has not been a fleeting news item. Reflecting on Hoffman’s death has consumed the time I would normally spend thinking about economic news, creative breakthroughs in money and investing, or the like.

I’ve been asking myself why this is so. I’ve been wondering if there is some meaning in Philip Seymour Hoffman’s life and death that transcends professional and personal distances. I am not an accomplished actor nor am I addicted to drugs and alcohol. I have not struggled with the personal demons Hoffman apparently did, nor have I reached the peaks of professional accomplishment he has. And yet I feel a connection that I want to understand.

My understanding was advanced when I read Anthony Lane’s memorial to Hoffman in The New Yorker. He noted something that I now realize I admired in Hoffman, aspire to myself, and hold as an essential human quality. It’s the ability to be in the world but not of it, to shine with the glow of authenticity and personal truth while, in Hoffman’s case, traveling the paths of the mainstream film and theater industries.

Hoffman was not a classic leading man, nor was he in the somewhat amorphous category of “character actor”. He didn’t fit into a style box. He chose controversial, challenging, unflattering, complicated roles, and blew our minds with his enormous talent and commitment to his art. He could be like a chameleon in his roles and yet always true to his professional standards. Anthony Lane described it this way:

“What have we been robbed of, by his death? Not so much a movie star, I think, as somebody who took our dramatic taxonomy—all those lazy, useful terms by which we like to classify and patronize our performers, even the best ones—and threw it away.”

I admired Hoffman so much because he was not afraid to be different, unconventional and even unattractive. In his fearlessness he showed us the possibilities for accomplishment and excellence while being uniquely ourselves.

Share this post

A Rising Choir for More Integrated Perspectives

  • 10248702_h19685109
  • Kshama Sawant
  • pope francis
  • Philip Shepherd

We love economic growth, but we fail to make the connections between GDP and televised images of Chinese citizens wearing face masks because of the deadly smog in Shanghai. We hang our hopes on monthly job reports, but we fail to ask how many are at or below the poverty level. We hail 30% returns in the stock market, but choose to ignore or deny that those returns come from companies that are exhausting, if not abusing, their natural and human resources. We say things like, “When you invest, you have to leave your emotions at the door.” And, “It doesn’t matter unless you can measure it.” Why are we so sure about that?

We live our lives in the clutches of this fundamentalism. Not religious fundamentalism or political fundamentalism, but something just as powerful and insidious – financial fundamentalism! We are mesmerized by numbers. We are addicted to measurement. We rejoice when averages rise and moan when they fall, without really examining the stories behind the numbers. We embrace the gospel of more here and now, without worrying about the consequences later or elsewhere.

Thankfully, we seem to be waking up. People are speaking up, articulating their deep awareness of the complexity and connectedness of our lives and the decisions we make. It is fascinating and exhilarating to witness and join as these voices turn into a choir. Here are three voices I’m looking forward to hearing more from this year:

Janet Yellen

Our new Federal Reserve Board ChairWOMAN didn’t get to where she is by being an extremist, so we should not expect radical changes from the Fed under her watch. That said, she is different from her two most recent predecessors, Greenspan and Bernanke, and she brings a new perspective to the position—as a woman, as a Democrat, and as a Keynesian.

Says Gillian Tett of the Financial Times, speaking with Judy Woodruff on the PBS NewsHour:

“ … the key thing to understand about Janet Yellen … is that she's not just the first woman to hold this post, which is remarkable, but she's one of the first Keynesians to actually hold that post. She is someone who really cares a lot about the human face of economics. And as she herself has said many times, for her, unemployment is not just had a bunch of statistics. It's also very much about human lives.”

Kshama Sawant

In Seattle we have elected a Socialist to our City Council. Like Janet Yellen, Kshama Sawant holds a doctorate in economics, and I’d like to believe that the two of them would have a constructive conversation if they ever sat down together to talk completely off the record. That said, we’ll hear a much different public voice from Sawant than from Yellen. Both are important, but, frankly, I am really happy to be here in Seattle to witness and participate in the move to raise our minimum wage to $15 per hour. It was really quite thrilling to hear Sawant crying out for employee ownership of Boeing’s manufacturing plants, and to hear her suggest that, if Boeing wants to take its business elsewhere, we could just start making equipment for public transportation. In a city with a long and venerable history of labor activism and advocacy, there is a real possibility that Sawant could catalyze a revival of commitment to the rights of workers.

Pope Francis

Of course, there’s The Pope. It was personally affirming to hear his response to a question about gay people. “Who am I to judge?”, he said. Coming from the leader of the Catholic church, that’s quite a statement, even though common sense would lead us to ask what the big deal is. The Pope’s voice matters, and he has been using it since his inauguration.

In a recent profile in The New Yorker, James Carroll had this to say about Pope Francis:

“If, as Pope, Francis has tempered his opinions on matters of sexual morality, his advocacy for the poor has become even more acute. In last month’s exhortation, Francis expanded his critique of the world economy: ‘In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which becomes the only rule.’ This problem is fundamental to every problem: ‘Inequality eventually engenders a violence which recourse to arms cannot and never will be able to resolve.’“


And let’s not forget those voices in our own selves that are just waiting to be expressed and affirmed. I recommend two resources to help us cultivate our creative intuition and wider intelligence.

I am reading a book called New Self, New World. The author, Philip Shepherd, describes a fully autonomous brain that is located in the belly and functions differently than the head. We are culturally conditioned to live in our heads, the center of doing and acquiring, but we have a choice—we can choose to be more feminine, connected, and integrated. This book is helping me bring the voice of being and integration to the world of money and finance, a place where they have been marginalized and dismissed.

You may have heard of Drawing on the Right Side of the Brain because the original book was published in 1979. I recently decided to work my way through the book and am loving the whole process! One thing in particular—as I find myself drawing, I experience sparks of insight, new ideas, and new ways of expressing ideas. I now keep my “work” notebook right next to me as I draw. It turns out that the voice of my Right Brain comes in very handy as an ally in my journey away from financial fundamentalism to alignment, balance, and oneness.

Share this post
Temple of Zeus at Olympia Temple of Zeus at Olympia

Nearly every Sunday morning I find myself saying “Yes!” at least once during my scan of the New York Times. This time it was an opinion piece titled “Plutocrats Vs. Populists” by Chrystia Freeland. While being careful not to “diss” the rich and powerful, she raised the spectre of even more extremist politics and rancorous political debates as economic, social and cultural inequality persists and grows. She questions the relevance and future effectiveness of what she refers to as “the Silicon Valley school of politics—a technocratic, data-based, objective search for solutions to our problems…”. She adds: “Plutocrats inhabit a different world from everyone else, with different schools, different food, even different life expectancies. The technocratic solutions to public-policy problems they deliver from those Olympian heights arrive in a wrapper of remote benevolence. Plutocrats are no more likely to send their own children to the charter schools they champion than they are to need the malaria cures they support.”

Working with money and wealth while holding the intention of populism is a challenging proposition. Practical and philosophical challenges arise every second of every day. It isn’t easy and certainly not absolute. Most of us are walking contradictions. But there is an energy that emerges as we slog through the muck and mire of conventional practices and get to what is possible if we set aside the rules of plutocracy and make up our own.

Investing is about money, and talking about money touches all sorts of nerves and sensitivities. It opens us up if we let it. If we are willing, it is a very useful device for cutting through fluff and getting to essence. Follow the money. Use the trail of money as a vehicle to illuminate what is really happening in the world of investing and philanthropy. Not the promises, not the generalizations, not the rationale but the actual activities and relationships.

If I invest a dollar in your fund or your project or your business, show me where that dollar goes. How much is paid out in fees and intermediation? On what basis and under what circumstances and at what rates? How much actually gets to the underlying business or operating entity? On what terms? What does this business actually do? Is it adding to what I want and need to see growing in the world?

To be clear, this is not about holding the lucky recipient of an investment accountable to the beneficent provider. It is not about simply tracking deliverables or metrics. It is about using the flow of money as a vehicle for noticing and documenting relationships and connections, including power dynamics and fair play. In what ways do the flows of money in this relationship reflect my deepest values and ethics? Where are the contradictions? What do I need to do to move toward integration? Answering the questions of why and how money is being used can be one of the more direct paths to clarity.

It’s much harder to operate from Olympian heights when we know the people and places in the valleys. If we truly follow the money, the process becomes a powerful prompt for connecting and relating, for grappling with guilt and denial, for confronting the privilege and power of money and how we are using it. It’s invigorating and exciting, a true pleasure to engage at this level.

I work with wealthy individuals—primarily women—and foundations that are in the process of “walking out and walking on” of this command and control, father knows best world of investing and philanthropy and into a world of integrated capital (see “Walk Out Walk On” by Margaret Wheatley and Deborah Frieze). They know at a deep level that delivering solutions from Olympian heights is unnatural and unhealthy, that it perpetuates the myth of separation. They are drawn to populism in its most sacred sense because they know that every living being on this Earth is connected to every other being and that, in nature, there are no plutocrats.

Share this post

Perhaps I’m particularly enthusiastic about a fresh approach to finance because I’m so tired of the old way. The old way is simplistic and separated from real life. The new way is nuanced, complex, and comfortable with uncertainty. The old way came through loud and clear in a recent interview with hedge fund manager William Ackman in the New York Times Magazine.

I selected some quotes from the Ackman interview and decided to respond to them from the point of view of the many women (and men) who see money differently and who are increasingly willing to assert an alternative way of investing.

What he said: “I’m not emotional about investments. Investing is something where you have to be purely rational, and not let emotion affect your decision making—just the facts.”

What we say: “The more we can engage our whole selves in the investing process, the better decisions we’ll make. Intuition, feelings, emotional responses—all are to be trusted and encouraged. We need both brains—our heads and our guts.”

What he said: “It is a certainty that Herbalife is a pyramid scheme. We believe it’s harming a population of low-income, principally Hispanic people in the U.S. to benefit a handful of superwealthy people at the top of the pyramid.”

What we say: “So, you have shorted the stock of Herbalife so you can profit when or if the company goes out of business. Have you ever thought about funding values-driven enterprises that can provide better jobs to low-income people, foster innovation and creativity, and build strong local economies?”

What he said: “The bottom line is my obligation to the shareholders.”

What we say: “Claiming sole allegiance to shareholders is a copout. We think you really mean that your obligation is to make as much money as you can as fast as possible using any (legal) means.”

What he said: “We’re looking for very large profits… We’re looking to double our money over a several-year period of time.”

What we say: “In and of itself, making a lot of money is an insufficient and empty goal. It’s not enough. How is the money made? Who was helped? Who was hurt?”

What he said: “I’m going to give away the substantial majority of everything I’m able to create over my lifetime.”

What we say: “It’s superficial to think that all you have created can be measured and given away. Accounts and shares and units can be transferred, but the entirety of your work in the world—what you have created—is much more than numbers.”

What he said: “I love what I do. I don’t do it for the money. I work on behalf of investors that I like and want to do well for. I’m a competitive person. In order to catch up to Buffett, I’ve got 35 years to go.”

What we say: “Sir, you are no Warren Buffett.”

Mr. Ackman, you have bought and sold companies, which means you have bought and sold control over people’s lives and livelihoods. Perhaps you have created jobs, although that’s not really the M.O. of hedge funds. In your drive to amass enormous financial wealth, can you say how much of our human and natural resources you have extracted and exploited? We all do this, and it’s inconceivable that you don’t wrestle with these contradictions. A true gift to the world would be to wrestle with them in public.

Share this post

Hello, and welcome to my blog. I’m looking forward to reflecting on how money, the economy, and investing can and should be inextricably aligned with our best selves. I hope to enter into conversation with like-minded people so we can connect, inspire, and nourish each other. And I want to highlight the work of people whose voices are important, provocative, and fascinating.

If you have not read “A New Foundation for Portfolio Management”, I would encourage you to do so. In collaboration with RSF Social Finance, I authored this paper in 2011 when I was still affiliated with Portfolio 21 Investments. The premise is that Modern Portfolio Theory is based on faulty assumptions and that, even though professionals and academics readily acknowledge this, the investment community operates as though these assumptions were true. In a nutshell, scrutiny reveals generally-accepted investment theory to be a house of cards, which is why we need to think about investing with a whole new foundation.

A new foundation for investing includes recognition of ecological limits, political and social inequity, and wealth and income polarization. We need to redefine risk to include these factors. We must question assumptions about economic growth. And, perhaps even more disconcerting to devotees of the current system, a new foundation embraces the fact that every person and every investor is unique and that what is most important to one is not necessarily what drives another. The prevailing assumption that everyone wants to accumulate as much money as quickly as possible by any legal (usually) means does not hold.

On my own and working in collaboration with a fantastic group of people, I continue to push further in terms of questioning assumptions and challenging convention regarding both the content and the practice of investing. I am questioning whether it is possible to “invest” without perpetuating inequality and unsustainable growth. If so, I wonder how this can happen within the current configuration of investment advisory and asset management firms and what genuine alternatives could look like. As we consider how ecological, financial and social limits are affecting the kind of growth we have experienced for the past century, we may also need to question and rethink the nature and role of financial services.

These are not easy issues with which to grapple. But they are important, and I believe we need to grapple with them together. I am working on another paper on these topics, and I will be addressing them in this blog. I look forward to sharing this exploration with you.

Share this post