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.
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:
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.
Root Capital is a well-established nonprofit social investment fund that focuses on small farm businesses in the developing world. They lend capital, provide training, and build the local market ecosystems that can help these small and growing businesses thrive. Like many others, Root Capital is rallying around the idea of resilience as a practical and powerful way to respond to the uncertainties of our changing climate. Their new Issue Brief addresses this head-on; it’s called Investing in Resilience: A Shared Value Approach to Agricultural Extension. As they note in the Executive Summary:
The science is clear: climate change is coming. What is less clear is how climate change will impact specific farmers, supply chains, or countries over different time horizons, and how stakeholders should prepare for these impacts. . . . This issue brief focuses on scaling the use of climate-smart practices among smallholder farmers by working through local agricultural enterprises, such as farmer cooperatives or processors. Aggregating hundreds or often thousands of dispersed smallholder farmers, these enterprises represent a significant, but often overlooked, channel for delivering “last mile” agricultural extension – that is, services that provide farmers with the information and skills they need to improve their farming practices.
Here’s a biomimicry-inspired vision for creating a global network of community credit organizations as an evolutionary new underpinning for the global financial system, currently centered on huge banking outfits. It’s by Jamie Brown-Hansen, managing director of Biomimicry Switzerland. Community Credit: The Next Generation of Financial Architecture
Alex Steffen recently gave a keynote talk at The Nature Conservancy’s annual trustees meeting that could serve as a statement of purpose for the Dreamers and Drivers among us who continue to believe that we can find our way through the eye of the historical needle. It’s in the form of a talk to a conservation gathering a hundred years from now, looking back:
We’ve lost so much. We came far too close to losing nearly everything. If things went on as they were, we might have.
Instead, we live today on a healing planet. Yes, much has been lost, but much was saved or restored or reinvented, and what was saved and healed and made anew has become a powerful legacy.
Those gifts became the seedbeds from which sprouted our new world. That we have so much left from which to coax a long and bountiful tomorrow is no accident. Those seeds of hope were saved and planted and tended to by people who made the decision that they would live as if the future mattered. As if nature mattered. As if we mattered.
These were visionary people. Responsible people. Courageous people. All around the world, our best ancestors took up the challenge of leaving a different, bolder legacy, one not of error and loss, but of leadership, stewardship, innovation.
Take five minutes to soak in Steffen’s vision of how we became the ancestors who, “when they understood the planetary crisis they faced, their answer was not cynicism or surrender, but to seek out others and together meet that crisis with action.” It’ll perk you up for another day of doing what we can today to assure that our descendants have a future worth living in. (That final link is another compelling essay, in which Steffen makes the moral case for not giving in to despair.)
We all recognize the plusses and minuses wrought by the industrial revolution. But how many of us are tuned into the potentially even more transformative potentials of the current Industrial Evolution? The venerable eco-media site Grist is putting a new, more human spin on some of the same territory covered by the folks at Singularity (the techno-zeal of which can sometimes be more than a little discomfiting, even as it inspires). Grist’s Industrial Evolution series starts with this statement of purpose:
What if we were on the brink of a sustainable tech revolution, and we didn’t even know it? Not the kind of revolution that would put solar panels and low-flow shower heads in every home in America, but one that would fundamentally change how our technologies interact with the natural world?
Thanks to recent advances in biotechnology, we can now engineer biological systems like machines. And thanks to advances in sensor technology, wireless networking, and materials engineering, we can build machines that act biological. Together, these trends could usher in a more sustainable future — one where our built world seamlessly integrates with the environment, rather than disrupts and destroys it.
But that will only happen if we develop these new technologies in a conscientious and responsible way. In this series, we speak with a group of individuals who are doing just that. They’re scientists, artists, and thinkers, and they see a high-tech, sustainable future on the horizon.
There are ten articles in the series so far, with more continuing to be rolled out. Check it out!
There seems to be no shortage of “practical visionaries” with big ideas about how we’re reshaping our global and local economies to be more just, ecological, and responsible. A joint initiative of EcoTrust and e3 (economists for equity and the environment) called Future Economy is producing reports that seek to answer the key question about such initiatives: are they mostly hype and hope, or are they something really new that’s emerging and can make a large-scale difference?
The first minute or so of this video gets at the purpose here:
Hovering around the edges of the ongoing global conversation about climate change is the (specter)(promise) of geoengineering. Many of us are (cautiously hopeful)(deeply unsettled) by the whole idea. How about you?
This is one of those topics that every (informed)(caring) human will want to stay in touch with over the coming decade or so. It’s hard to imagine a 2025 scenario short of total breakdown in which the need to compensate for our decades of feet-dragging hasn’t pushed geoengineering into the center of public discourse.
In the spirit of staying informed, this recent interview with Oliver Morton of The Economist is one of the best quick overviews that I’ve seen in the past year or so. For starters, he reminds us that climate is not the first global system that we’ve purposefully engineered:
We’ve long urged readers to expand their view of investing to include focus on growing local economies and their own personal and tangible assets; we often use the phrase “weaning off Wall Street” to evoke these broader horizons. Still, we and most of our clients remain substantially invested in the stock market, even as we seek ever more ways to diversify into all nine zones of the resilient investing map. In the spirit of looking beyond such readily visible horizons, though, let’s hear from a couple of financial pros who have taken a more radical leap, revamping their entire approach to financial assets in ways that led them to walk away from Wall Street and never look back.
RSF Social Finance has gone all the way, divesting of all publicly traded stocks and bonds, rejecting the institutional standard for setting interest rates, and—interestingly, the hardest of all to complete—severing their ties to too-big-to-fail banks. President and CEO Don Shaffer explains:
(As) Einstein famously said, “We cannot solve our problems by using the same kind of thinking we used when we created them.” Wall Street is tethered to only one kind of growth, the most relentlessly efficient kind. . . . Are there other ways to structure investment portfolios that are valid for the 21st century?
Shaffer challenges the idea that we need to accept our embeddedness in the system as it is:
What this means in practical terms is that Gore and his Generation colleagues have done the theoretically impossible: Over the past decade, they have made more money, in the Darwinian competition of international finance, by applying an environmentally conscious model of “sustainable” investing than have most fund managers who were guided by a straight-ahead pursuit of profit at any environmental or social price.
Convincing quotes from three experts all seem to agree this flies in the face of conventional wisdom. Where have they been? When we wrote Investing With Your Values in 1999 (published by Bloomberg, not exactly a fringe outfit), there was already a solid track record of clear parity and frequently out-performance by SRI funds; our own Jack Brill had completed a 5-year New York Times mock-management quarterly feature, running a strong second with the only SRI portfolio. Indeed, the co-authors of our new book were in the audience at the annual SRI Conference in 2005 when David Blood, who had recently launched Generations Investment Management with Gore, told the gathered crowd, “You were right. You’ve been right for 25 years. Incorporating social, environmental, and corporate governance considerations into the stock selection process adds value.” We were happy to welcome Blood to the club in 2005, and we’re surely excited that Generation’s first ten years of results can be added to the steady stream of mainstream reports confirming and expanding on the message that socially and environmentally responsible firms outperform their values-neutral peers.
UPDATE: Fallows generously excerpted this post as part of his ongoing followup thread on the Gore article that features reader feedback. We’re flattered and pleased to be part of that dialogue.
One of Generation’s favorite metaphors also struck us close to home: the idea that looking beyond the narrow question of financial performance to consider a broader “spectrum” of information provides a stronger foundation for making investment decisions. Each of our last two books has explicitly aimed to expand our view of investing,