The Resilient Investor lays out a dynamic framework that anyone can use to enhance personal, community, and societal resilience. But the book is only a starting place; this blog will keep you current with our latest thinking, and plugged into the exciting, evolving global conversation around facing our uncertain future.
We’ll be digging deeper into several core areas—living resiliently, new opportunities across the Resilient Investing Map, and a range of viewpoints on future scenarios—and we’ll also be engaging with others, sharing the best of what we come across online and adding our two cents to their thoughts. We’re hoping to spur some conversation around these topics, so feel free to chime in, either in comments or by sending us an email. Thanks for joining us!
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A central underpinning of The Resilient Investor is the recognition that in our increasingly complex world, it’s nearly impossible to predict how the future will unfold. That remains true, but a team of researchers at Northeastern University is using complex non-linear math to try to shed some light on a key modern problem: predicting when a natural or social system will hit a “tipping point” that triggers rapid breakdowns in its natural resiliency:
Using statistical physics, Northeastern network scientist Albert-László Barabási and his colleagues Jianxi Gao and Baruch Barzel have developed a tool to identify that tipping point—for everything from ecological systems such as bees and plants to technological systems such as power grids. It opens the door to planning and implementing preventive measures before it’s too late, as well as preparing for recovery after a disaster.
Then, says Jianxi Gao, one of the researchers who developed the method, “you can begin to tackle how to manipulate that resilience—how to enhance resilience or restore resilience. These are not easy questions, but our theory, by giving us a picture of the entire system, paves the way to the answers.” A video about their work (embedded below) is especially evocative.
While this is only a start, it’s just the sort of previously unimaginable leap of understanding that will likely come more and more frequently as computing power increases, taps into the distributed data now gathering in the cloud, and moves inexorably, though at a still-uncertain pace, into increasingly functional artificial intelligences. Along the way, say resilient investors who favor the Breakthrough/Driver perspective, we’ll find that these kinds of complexity models will become more common, and offer practical insights that have been beyond our grasp.
While much of what we share here features innovative community initiatives or leading-edge financial world developments, it’s important to remember the foundational role of the top row of the Resilient Investing Map, your Personal Assets. And up there, most of our energy goes into Zone 1 (family, health, relationships) and Zone 2 (work and lifestyle). So here’s a little nudge to keep some juice flowing in your Zone 3 as well (personal/spiritual growth, learning, inspiration).
This recent essay from James Shelley is the sort of thing that can be worth a few minutes of your time; we recommend that you find a few channels of inspiration and insight that you can turn to on a regular basis, ones that take you out of your normal areas of expertise and personal or career focus, and offer the chance to think anew about how you’re shaping your life.
Here, Shelley fleshes out a concept dubbed micro-ambition, a “passionate dedication to the pursuit of short-term goals:”
To be ‘micro-ambitious’ means embracing the present opportunity — whatever it is — and making of it everything you can. After all, just as the present is a coalescence of your past so far, rest assured that the next thing will be built on the foundations you lay today. So build well. Go ‘all-in’ on whatever opportunity you have now. ….
The next opportunity worthy of your attention will probably show up in your peripheral vision, some unpredictable consequence of having “put your head down” to invest your best effort in the present enterprise. Micro-ambition is all about focusing on projects… not crossing some imaginary, arbitrarily defined ‘finish line’ in the future.
Being dedicated evolutionaries, we like this nugget: “Micro-ambition assumes from the outset that continual learning and self-reinvention are par for the course.” He goes on:
Regardless of where your paycheque comes from, do you think of life as a racetrack or a labyrinth? Are your current projects a means to an end, or a chapter in a twisting, unpredictable plot? In reality, of course, these are not absolute dichotomies. (There are plenty of careerists who leverage their position to create incredible opportunities and plenty of freelancers who fret over the legacy of their careers.) This is ultimately a question of attitude. How do you approach the present?
This sort of reflection may seem like a distraction, or useless philosophizing, especially if it’s coming in from an angle that isn’t quite in your usual wheelhouse. But making immediate practical use of new perspectives isn’t always the point. The more important payback from time invested in stepping off your usual trail and taking in something unexpected is that making a habit of doing so will, over time, introduce some other pathways that you do find a deep resonance with, ones that continue to shape your life over time. This is the delight and reward of your Zone 3 investments; they don’t all pay off, but the ones that do are especially valuable.
Did you hear the joke about why the farmer crossed the road? The punchline is that she wanted to go to the bank to ask about getting a loan. Not very funny, except that by the logic of bankers and Wall Street, the idea that a farmer would qualify for financing might elicit a guffaw or two. Small-scale farming is considered a high-risk, low-return activity that any prudent investor should steer clear of.
And yet, wending their way across the highway to the farm, who’s that? Why, it’s a gaggle of Slow Money investors, taking action on their desire to build local food systems. Are they just being charitable, driven by idealism to donate a bit towards keeping a neighborhood farm alive? Not at all—they actually are investors, doing exactly what a traditional investor does. They are considering their own financial situation and how it fits into their overall portfolio. They are asking lots of questions, getting to know the business, assessing the risks, and looking for ways that not only their money, but their expertise, could help assure the success of their investment. And they are negotiating a deal that works for both parties.
Wall Street “professionals” can’t relate to this new breed of more creative and engaged investors because
Last quarter my article on “Deep Retrofits, Broad Paybacks” generated several questions about how these types of retrofit add value to a house over time. How does a deep energy retrofit compare to something like a kitchen remodel? Is it worth the cost of doing the retrofit? If I spend $50,000 on a deep retrofit will it add $50,000 to the value of my house? Probably not. Or, it depends. Maybe. Possibly. It’s a tricky question, with some complex answers.
Let’s start with whether you plan to sell your house soon or not. If you are planning to sell in the next few years, or are forced to sell, the ROI picture is probably pretty bleak. We can draw some clues from other big remodel projects. Looking at the numbers might scare you. At mid-range national averages for 2015, adding a steel door is the only remodel project that adds value. That is, you’ll recoup a little more than you spent to buy and install it. (Move quickly before a toddler dings up that new door!) All of the other remodel projects are a losing proposition. It’s even worse for upscale projects, where the best ROI is upgrading to fiber-cement siding, and it doesn’t recoup even 85% of the $15,000 average cost of the project.
But anyone spending $100,000 on a deluxe kitchen upgrade isn’t doing it to make money when they sell – they’re doing it to improve their quality of life while living in the house. A temporary reduction in full value because of a quick sale isn’t anyone’s best financial plan. I think this will be true for deep retrofits as well.
Some remodels do add value even when a house is sold soon after,
Joel Makower of GreenBiz.com summarizes the concept succinctly:
The term has no official definition, but at its core, the circular economy is about “keeping the molecules in play.” In such a system, products are made primarily from benign and nontoxic ingredients — “nutrients” that can be returned safely to soil or water or, in the case of more durable components, placed back into service again and again. Toxic ingredients are not verboten; they can be used as needed in products or processes so long as they, too, are continuously cycled back into productive use and kept out of the waste stream. And, of course, as much of this as possible should be powered by renewable energy.
That all sounds like a generations-old greenie dream, but in the past couple of years, it’s gained adherents among corporate giants looking to capture some of the lost value in their products and packaging materials—one accounting found $11 billion of value in trashed U.S. packaging materials alone (see image above). The 2015 World Economic Forum’s annual conclave in Davos, Switzerland, affirmed its commitment to a 2-year-old initiative called Toward a Circular Economy, which will work with policy makers and the financial community to spotlight and scale current circular economy efforts, especially in the developing world. Makower’s valuable overview continues:
Here’s another radio interview about our book and system, again featuring the dulcet tones of co-author Michael Kramer, guiding the interviewer and audience through a quick introduction to what we’re all about. You can listen below, or on Soundcloud. For more MoneyLife interviews, see their site.
It’s an all-too-familiar scenario: a prized corner of your local landscape is suddenly up for sale, slated for houses or a hotel. Maybe it’s a place where generations of locals have had informal access, or perhaps it’s always been kept tantalizingly private. Either way, the new plan is a step too far. . . . and it sure would be great if it were saved by a conservation group, or for a state park, or maybe just by a public-minded conservationist.
But nowadays, we don’t have to wish for a savior: a community effort in New Zealand recently made history by crowdfunding over $2 million to purchase an 18-acre beach and open this pristine beauty to the public! The effort caught wider public attention, thanks both to the novelty of the initiative and its location near a popular National Park, and attracted donations from 40,000 people—along with a modest commitment from the New Zealand government—to outbid nearly a hundred other prospective buyers.
That’s what we call some inspired Zone 4/9 investing, coming together to protect an important tangible asset for the people, using the latest evolutionary finance models! Chalk one up for the power of creative thinking by two locals who organized the crowdfunding effort after a holiday conversation. “At 10:57 last night we delivered a pristine piece of beach and bush into the hands of all New Zealanders to look after and to cherish and to treasure and enjoy forever,” announced Duane Major, one of the two, after the successful fulfillment of their ambitious dream.
The Resilient Investor has won the 2016 Axiom Business Book Awards Gold Medal in the “personal finance” category! Nearly 500 books were entered for Axiom awards this year, in 22 categories; we’re honored to be among the winners. Golds in other categories went to one of our favorite future-thinkers, Philip Tetlock, and to Jeremy Balkin’s recent book on impact investing.
“This year’s Axiom Award-winning books offer the freshest ideas from the world’s brightest minds,” said a spokesman from the Jenkins Group, one of the sponsors of the awards; other sponsors include Independent Publisher Magazine and Inc. magazine. Winners came from a blend of established New York publishers, university presses, and independent and self-publishers of various sizes. Women are also well-represented, with 26 female authors among the 100 total authors and co-authors.
We’ve always known that our book offered a fresh and timely perspective on personal finance and life planning; it’s especially rewarding to be recognized by an award that spotlights “cutting-edge books that help people young and old succeed in a fast-changing world.” The Resilient Investor is a concise introduction to our approach; in under 150 pages, it offers an engaging new framework that can help build personal, social, and ecological resilience in the face of today’s unprecedented challenges and opportunities.
One of the best performers in this space is the little-known Parnassus Endeavor Fund (PARWX), a 10-year-old fund with $1.4 billion in assets managed by Parnassus Investments’ founder Jerome Dodson. . . . It emphasizes holdings that are considered outstanding places to work in terms of labor standards, diversity, benefits and leave policies, and employee health and safety. The fund is also one of a small group of funds that by policy does not hold companies engaged in the production, manufacturing, or refining of fossil fuels, while its broader environmental, social, and governance (ESG) criteria excludes alcohol, firearms, tobacco, gambling, nuclear power, and non-medical animal testing while prioritizing companies with outstanding track records in community relations, board and executive compensation and independence, and environmental issues.
Read the rest of Michael’s contribution on the Forbes site (his is the final one in the list). As always, it’s rewarding to see our approach getting some notice in the mainstream financial press!
We live in a VUCA world: volatile, uncertain, complex, ambiguous. Are you poised to adjust nimbly to changing circumstances as they arise? Because while we may not know quite how or when changes will crop up, it’s clear they’re coming—who foresaw oil prices dropping so precipitously, or US political polarization devolving so rapidly and dangerously?
A recent piece by Eric McNulty in Strategy+Business, Leading in an Increasingly VUCA World, offers the best concise overview of VUCA and how to respond that we’ve seen (well, other than in our book!). McNulty stresses:
VUCA isn’t something to be solved; it simply is. Attempts to simplify complexity, or to break volatility, uncertainty, and ambiguity down into smaller and smaller parts in hopes that each can be decoded and countered will not make them go away — there are too many elements beyond the control of traditional centers of power and authority. It is a network phenomenon and can’t be mastered through industrial age structures and practices.
We absolutely agree. That’s why we formulated the integrated planning tools laid out in The Resilient Investor, centered on a “map” of our lives that provides a foundation for making clear and responsive choices within this VUCA landscape. Personal and social resilience is enhanced when we cultivate all our assets (personal, tangible, financial), each of these engaging with our communities, the global financial system, and evolutionary initiatives that are making things better.
McNulty offers three tips for personal VUCA preparedness. The first two will be familiar to our readers.
OK, so you’re totally on board with The Resilient Investor‘s goal of being “ready for anything”—you’ve clarified your own idea of where the world seems to be headed, while also realizing that you don’t really know when or how one of the countless wild cards in play might change the game in fundamental ways. You get that focusing significant energy Close to Home will pay off no matter how the future unfolds; perhaps you’re also committed to pushing our society in those enticing Evolutionary directions.
And yes, you recognize that there is a chance of painful disruptions to life here on American Easy Street. Maybe you think any hiccups are unlikely to be severe . . . or you harbor a secret dread that’s too nebulous to really figure out how to address. You certainly aren’t into being a serious Prepper, stockpiling supplies, fine-tuning a “go-bag,” and overlaying that kind of dire filter onto your day to day life. If it comes to that, you figure we’re all toast, or we’ll all be in it together, and there are better ways to spend your time in the here and now. But you also have a niggling sense that you could be a little more prepared for a societal speed bump: it’s not so hard to imagine some sort of grid snafu (cyber-attack or solar flare) or regional weather or terror event that could make things rough for a week, or maybe even a few. Just-in-time supply chains, vulnerable water supplies, our reliance on fuels and electricity. . . yeah, there are a few weak links out there.
While we’ve pointed to writers and resources that aim to help you prepare for various Breakdown scenarios, if you don’t really identify as a “Doomer,” you’ve probably held off on digging into all that very deeply. Well, here’s a less-scary entry point for those of you that have been thinking you really consider doing something: a well-curated collection of The Best Emergency Preparedness Supplies from the good folks at Sweethome/Wirecutter.
Scandinavians have grappled with social challenges more diligently than most of the rest of the world, and it’s no different in the realm of resilience. The Stockholm Resilience Centre has long been the global leader in researching and teaching about the nuts and bolts of what resilience is and what it can offer to communities, planners, and the world. They’ve just compiled their most-requested new papers of 2015, and you’d be hard-pressed to find a better syllabus for getting up to speed with the most current municipal experiments and global thinking in resilience. Topics range far and wide, with a special emphasis on recent practical attempts to implement resilience, along with the important question of how we can or should assess or measure resilience. If you’re active in local or regional resilience planning or Transition Town programs, you really do need to jump on over to the SRC website and peruse this collection.
Here’s a taste of the topics covered; their site includes a full-page summary of each one, some with video and most with a sidebar of related papers and links:
Learning to apply resilience: First in-depth analysis of a resilience assessment put into practice
Don’t fence me in: Managing ecosystems for predictable outcomes may backfire, new study warns
Beyond measure?: Reducing resilience to a few measurements can block deeper understanding
Planetary Boundaries: Guiding human development on a changing planet
Five factors for successful management of natural capital: Strategies for successful governance, for both people and ecosystems
Kudos to the Centre both for funding this important work, and for offering such complete summaries of each paper to help guide visitors to the ones that are most relevant for them. Great work!