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  • Episode 96 – John Fullerton, Founder, The Capital Institute, on Regenerative Economics
Stewardship & Sustainability Series
Stewardship & Sustainability Series
Episode 96 - John Fullerton, Founder, The Capital Institute, on Regenerative Economics
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John Fullerton, founder of The Capital Institute, is a global thought leader in regenerative economics. In this episode, you’ll hear John describe the eight principles of a regenerative economy that he has articulated via several publications, including the booklet: “Regenerative Capitalism: How Universal Patterns and Principles Will Shape the New Economy” (2015). In his more recent piece, “Finance for a Regenerative World,” he evokes the epic and monumental choices that we face as a society, quoting scripture: “You cannot serve both God and Mammon [greed/power/empire/domination].” Citing Thomas Berry, Buckminster Fuller, Dana Meadows, E.F. Shumacher, Kenneth Boulding, Jane Jacobs, Willis Harman, and Rudolf Steiner as his “intellectual heroes,” John lays out a comprehensive framework for an ethics based, equality focused, stewardship oriented, and heart-centric economic system.

In a profoundly poignant and pertinent thought experiment, John asks: “What if we considered the human economy as a living system?” From this inquiry, he has researched various ecological disciplines and biological sciences, arriving at the analogous characteristics required (or endemic to) a regenerative economic system – these are his eight principles: (1) Seeks balance, (2) In right relationship, (3) Views wealth holistically, (4) Innovative, adaptive, responsive, (5) Empowered participation, (6) Honors place & community, (7) Edge effect abundance, (8) Robust circulation.

Asserting that our current economic system is both insolvent and bankrupt from the standpoint of ecological laws of nature, John further exhorts us: “We’re at a pivotal, epic, defining moment ~ we’re at the end of the Modern Age… We either grab on to this regenerative paradigm… or we go back to another dark age.”

John Fullerton is an unconventional economist, impact investor, writer, and some have said philosopher. Building on and integrating the work of many, he is the architect of Regenerative Economics, first conceived in his 2015 booklet, “Regenerative Capitalism: How Universal Patterns and Principles Will Shape the New Economy.”

After a successful 20-year career on Wall Street where he was a Managing Director of what he calls “the old JPMorgan,” John listened to a persistent inner voice and walked away in 2001 with no plan but many questions. A few months later he experienced 9-11 first hand. The questions crystalized into his life’s work with the creation of the Capital Institute in 2010 where his work reflects the rising evolutionary shift in consciousness from Modern Age thinking to Integral Age thinking. Capital Institute is dedicated to the bold re-imagination of economics and finance in service to life. Guided by the universal patterns and principles that describe how all healthy living systems that sustain themselves in the real world actually work, the promise of Regenerative Economics and Finance is to unlock the profound and presently unseen potential that is the source of our future prosperity and the reason for hope in our troubled times.

During his Wall Street career, John managed numerous capital markets and derivatives businesses around the globe and was JPMorgan’s Oversight Committee Representative that managed the rescue of Long Term Capital Management in 1998, and finally was Chief Investment Officer for Lab Morgan before retiring from the firm. A committed impact investor, John is the Chairman of New Day Enterprises, PBC, and the co-founder of Grasslands, LLC. He is a board member of First Crop, the Savory Institute, and Stone Acres Farm, is an advisor to numerous sustainability initiatives, and is a member of the Club of Rome. John speaks internationally to public audiences and universities, and writes a monthly blog, The Future of Finance.

RESOURCES:
https://capitalinstitute.org/
https://capitalinstitute.org/8-principles-regenerative-economy/
https://capitalinstitute.org/regenerative-capitalism/
https://capitalinstitute.org/wp-content/uploads/2019/09/Regen-Finan-RVSD-ACT-1-Interactive.pdf
https://capitalinstitute.org/wp-content/uploads/2020/08/ACT-IV-FINANCE-FOR-A-REGENERATIVE-WORLD.pdf
https://www.facebook.com/CapitalInstitute
https://twitter.com/CapInstitute
https://www.linkedin.com/company/capital-institute/
https://www.linkedin.com/in/john-fullerton-a5abbb4/

TRANSCRIPT

[Start of transcription 00:00:10.0] 

Aaron:                        Welcome to the Y on Earth community podcast. I’m your host Aaron William Perry and today we’re visiting with the founder of Capital institute John Fullerton. Hey, John!

John:                           Hey! Good afternoon Aaron.

Aaron:                        How are you doing today?

John:                           I’m good. I’m good. Merry Christmas. Happy holidays.

Aaron:                        Merry Christmas. Happy holidays to you as well. Really, looking forward to our discussion today about regenerative economics and finance and obviously a very, very important topic right now. 

John:                           I hope so. 

Aaron:                        Yes. 

John:                           John Fullerton is an unconventional economist, impact investor, writer, and some have said philosopher. Building on and integrating the work of many, he is the architect of Regenerative Economics, first conceived in his 2015 booklet called, “Regenerative Capitalism: How Universal Patterns and Principles Will Shape the New Economy.”

After a successful 20-year career on Wall Street where he was a Managing Director of what he calls “the old JPMorgan,” John listened to a persistent inner voice and walked away in 2001 with no plan but many questions. A few months later he experienced 9-11 first hand. The questions crystalized into his life’s work with the creation of the Capital Institute in 2010 where his work reflects the rising evolutionary shift in consciousness from Modern Age thinking to Integral Age thinking. Capital Institute is dedicated to the bold re-imagination of economics and finance in service to life. Guided by the universal patterns and principles that describe how all healthy living systems that sustain themselves in the real world actually work, the promise of Regenerative Economics and Finance is to unlock the profound and presently unseen potential that is the source of our future prosperity and the reason for hope in our troubled times.

During his Wall Street career, John managed numerous capital markets and derivatives businesses around the globe and was JPMorgan’s Oversight Committee Representative that managed the rescue of Long Term Capital Management in 1998, and finally was Chief Investment Officer for Lab Morgan before retiring from the firm. A committed impact investor, John is the Chairman of New Day Enterprises, PBC, and the co-founder of Grasslands, LLC. He is a board member of First Crop, the Savory Institute, and Stone Acres Farm, is an advisor to numerous sustainability initiatives, and is a member of the Club of Rome. John speaks internationally to public audiences and universities, and writes a monthly blog, The Future of Finance.


So, John welcome to the show and really, a pleasure to have this opportunity to speak with you and I want to dive right in by asking you what is regenerative economics and regenerative finance?

John:                           Well, it’s pleasure to be with you Aaron and with your audience and a privilege I should say. I think this is an idea whose time is finally coming so it’s a great privilege to be able to share my contribution and thinking on it. You know the idea of regenerative economics is quite simple, it is that our current economic system is obviously a, fraught with problems and most of the work we see trying to fix those problems are largely kind of incremental fixes. One could say even closing the barn door after the horses left and the idea of regenerative economics is really a departure from incremental change to say what if we consider the human economy as a living system and we looked to real living systems in the real world such as your body and my body or ecosystems and discern the patterns and principles that make them sustainable and then apply those same patterns and principles to the human economy. What would that teach us about the direction we need to move the economy and then applying those same patterns and principles to our financial system on the assumption that the financial system actually needs to work in service over regenerative economy. 

So it’s essentially living systems science which happens to be remarkably aligned with our indigenous wisdom I should add. Applying that knowledge to economics as opposed to accepting the unquestioned assumptions of economics.

 [05:03]

Aaron:                        Yes, thank you I am, I’m so excited to ask you a number of questions today because it seems clearly that we’re at a stage now where our economic activity at the global scale you know is undermining the very life support systems upon which we all depend and so this is not an academic exercise. This really is a fundamental issue, challenge, and the opportunity that we’re facing as a species at this juncture in time. You know I’m curious to ask you, you just mentioned indigenous wisdom. What is your view as an individual human being on where we stand right now as a species and how we got here and I’m sensing there’s a bigger kind of arc of time in history that informs some of your thinking.

John:                           Yeah. Absolutely and I’m a student of that question and still, still searching but I’ve come to believe. I used to think this idea was sort of arrogance of the present moment that you know we humans always think that our moment in time is the most important blah, blah, blah and so I rejected that. I resisted that. I didn’t rejected, I resisted that for years and I’d slowly come to believe and believe very strongly that we are at a pivotable, you know, epic defining moment. It’s not a moment necessarily that last a year or three years or even 25 years. It may last longer than that. It’s probably started in the 60s but I’ve come to believe we are at the end of the modern age. I have to put it bluntly, the modern age with all of its great advances and progress in science and the arts and in economic design that grew in the context of the modern age, the scientific, the age of science really and we’ve reached its natural limit just as we reached natural limits of the middle ages and the ancient period before that and I’m speaking just to Western culture. And there’s no reason to think that history ends with the Western modern age. What was that book that someone wrote years ago? The End of History

Aaron:                        Uh huh. 

John:                           Talk about an arrogant idea. So I think we’re in this transition and I always like to say to people. Well, you know when the enlightenment happened the people living through that period no one told them it was the enlightenment.

Aaron:                        Yeah.

John:                           It was probably just a very exciting, dynamic and scary time because a lot of what people thought to be true was being questioned and re-assessed. And so I think we’re in a very exciting moment like that with very serious consequences depending on how we handle it. You know there’s a lot of people talking about the integral age and that’s probably. Were already speaking integrating our knowledge together is going to define this next age whatever it gets called once the historians write the history, but I do believe increasingly that we’re you know maybe this is a sub-age before the integral age but we either grab on to this regenerative paradigm and get out of the hole were in or I believe we go back into another dark age. And I don’t say that lightly. 

I mean, I actually literally mean that but another dark age doesn’t mean the end of humanity. We’ve been through a dark age before and there’s no reason to suggest we couldn’t go into another one but I think we’re at the moment in time where we, we are going to collectively choose whether that happens based on our actions and behaviors and the way we see ourselves in the world in the next, certainly in the next half century if not next 10 years.

Aaron:                        Yeah. Thank you for sharing that and what you’re saying really resonates with me and my perspective but I have to ask sort of on behalf of some of my you know skeptical colleagues back in grad school when we were talking about sustainable economic development and these sorts of things. 

[10:00]

Aaron:                        That okay, there’s been these like Malthusian, Neo-Malthusian cycles, right? The club of Rome being sort of well-known example of one that’s been sort of pegged or labeled neo-Malthusian and there’s a point of view that says, well new technologies and innovations will always overcome otherwise apparent limits to growth. Right? It’s often the phrase that’s used and I don’t agree with that perspective but I’m curious when you get those kinds of questions or that kind of push back what do you generally say in response? 

John:                           Well, for sure there is, it’s actually a requirement of modernity to have that point of view, right? So it’s embedded in the world view of modernity that we will solve whatever problem that comes along and I guess what I would say is, I studied that question quite deeply. Much deeper than most of the folks who rejected very quickly. 

Aaron:                        Yeah.

John:                           And it sounds like you have as well but there’s literally no evidence to suggest that. Well, let me back up one step further so you mentioned the club of Rome and the limits to growth study which has been you know incredibly influential on my own thinking. Which won’t surprise you and it turns out that the limits to growth models that were written or created in the 70s. 1970s, have been tested many times since then and there’s a quite authoritative research paper done by an Australian academic. I can’t remember his name, maybe within the last five years or so and they pretty much validated the limits to growth models which were extremely primitive by current complexity model you know comparison. They pretty much validated what they’re kind of studying you know business as usual scenario suggested back in 1973 or whenever they published the book.

So, first of all limits to growth was not wrong, it’s actually remarkably prescient and the reasons for that are quite technical and complicated but you know the simple example is that yes we have all kinds of technological progress but we tend to use that. To use more energy, more space, more land, more and so we don’t capture the technological advances to address the problems that we’re trying to resolve. We push ourselves to a higher living standard and you know so for example with all of the advances in the automobile we still get 20 miles a gallon on a combustion engine even though the thing goes wicked fast and wicked far and with the whole much of technology and this is well documented in something called the rebound effect which goes back to the coal age and the real killer is that even if we were to capture the efficiencies for example in our energy use. That leads us with more money and here’s where the crux of the matter comes in to a finance guy, with more money we buy more stuff or invest more which has a ecological foot print. So the more the techno optimist are right the more we actually exacerbate our problem which is that our money, our investment capital the way we use it today to grow the economy makes the problem worse. So in other words we’re chasing our tail and we can never catch it.

Aaron:                        Right, so there’s a compounding feedback loop effect in that type of system.

John:                           Yeah and compounding is an important word with the pandemic has taught us what that actually means but it is a slow. It’s a slow but steady, you know impossible energy to confront if you have a system that is unsustainable and compounding. It’s only a question of time and as my friend Vincent Stanly likes to say when, it’s like when the way you go bankrupt slowly and then quickly.

Aaron:                        That’s really interesting yeah. Well, and you have articulated a framework that presents us an alternative pathway to the trajectory that we’ve been on for many decades, many generations now.

[15:08] 

Aaron:                        And I’d like to invite you if you would to walk us through the regenerative economic framework that you’ve articulated and if you don’t mind speak to the eight principles that identify and describe that framework. 

John:                           I always struggled to do this concisely so maybe I’ll just talk about a couple of them as examples but I think the first and most important idea is to recognize the limitations of modern age scientific thinking which is this idea of the reductionist method. Where we take what’s complicated and reduce it into pieces and parts that we can get our heads around and in many ways whether you’re talking about our health care system, our education system, our legal system or our economy they’re all the result of this reductionist method which was the key to the scientific revolution and all of the quote progress that we’ve made. 

And you know my colleague Peter Brown likes to say that economics is bankrupt and it might be more accurate to say that economics is insolvent and insolvency means where you have liabilities that become bigger than the assets. So I’m not one to throw out all of economics and suggest that it’s all bad but I am one to suggest that the, the limitations and the flaws of far economic thinking are now so profound and so great that they outweigh the many considerable strengths that economic thinking has. So, if you have a bankrupt way of thinking and seeing the world you kind of have to go back to first principles and so again as I mentioned earlier the core idea is to assume and assert that the human economy which after all is made up of human being which are by definition living systems. 

To assert that the human economy to be sustainable needs to behave the way other living systems behave and it turns out the scientist who have studied living systems, while this is not as black and white as the law of gravity it’s more complex but the living systems scientist will concur or have concurred that there are general patterns and principles that describe the way living systems work. Like for example the importance of symbiotic win-win relationships in living systems so for example you know the cells in every organ in our body are working in symbiotic relationship with each other and they become part of a bigger whole. They themselves are whole and their part of a bigger whole called an organ which is part of bigger whole called for example the cardiovascular system which again is part of a bigger whole called our human body. And our human body isn’t even, all of us because there’s the whole consciousness and spiritual piece of it in our self and our souls. So, but the idea is that the construct of living systems are these right relationships where the parts add up, the whole is greater than the sum of the parts and parts work toward the health of the whole. 

Now we could talk for another hour just on that one principle. There is no living system scientist that would disagree with what I just said, they might say differently. They probably say it better but they wouldn’t disagree with it and by the way there’s no indigenous culture in the world that would say that’s wrong. They would undoubtedly say it better and more, in a more elegant and mythical way but the idea of our relationship with mother earth is not a new idea. And yet if you apply that to our economic thinking you find all kinds of examples where we operate in extractive relationships as opposed to generative or constructive relationships and nowhere more so than in wall street and in fact the entire, and here’s where the principles are so critical. We in finance you know the sustainable finance movement is largely about creating increased transparency in markets.

[20:07]

John:                           So that investors can better adjudicate which company should do well and which one shouldn’t and so this whole ASG movement has a reason to address that very relevant need but the problem is there’s no amount of transparency that can fix a broken relationship between owners of big enterprises and those big enterprises. And because of the pursuit of efficient capital markets and I’ll come back to efficiency in a second we now have an ownership model which isn’t an ownership at all. It’s basically massive funds trading stock but no one actually owning big companies and if they own them they own an interest in them for anywhere from a nanosecond to a month to a year but unlike, say a private company where there’s a family that owns the business there really isn’t any relationship much less a right relationship between the owners of enterprise and enterprise in the most powerful institution that humans have ever created the public corporation.

So, by getting clear on the principle of right relationship we can see that our entire structure of corporate ownership in the biggest companies in the world is in conflict with living systems and we can then debate whether that’s terrible, not so great, not so bad or fine but we have to acknowledge that the way we set things up is in conflict with the way the living systems actually work because there is no relationship there. And so the idea of getting clear on principles is to identify at a root cause level where the sources of change need to come from. The other principles, I’ll just mention them by name briefly and then maybe talk about one other one but the other one’s are the idea of balance. Systems need to be in balance. The idea of place in my language, arts, community and place. Living systems exist in place and so human economy needs somehow to be connected to and relevant to place both geological reality and cultural history of place. You think about globalization that has run rough shot over that principle and no wonder the globalization turns out isn’t working so well because it’s in conflict with that principle. 

Another principle from living systems is known as the edge effect and you know we hear a lot about the importance of diversity. Diversity happens in living systems at the edges between different systems. So for example where a river meets an ocean is a marsh and a marshland is filled with diversity and diversity is the source of life. It’s also where danger exists but living systems have an abundance of life at the edges. So what does that say about a human economy in the edge between for example one industry and another where the edge between the public sector and the private sector or the film profit sector and the public sector? 

Another principle is and here’s one that I kind of made up in the context of human economies. In my language its holistic wealth. So when economy is largely about the at least the way we thought about it, it’s the creation of wealth and yet we’ve reduced that to the creation of money. We think that the purpose of economy is to get money and so this is a reminder that the true wealth is not money. Money is a human artifact but wealth needs to be holistically understood. And then another one is again in my language robust circulation. This is the idea that in economy be like a living system needs to behave like healthy metabolism. If not merely circular thinking, although circular flows are important. It’s actually much more important to think about metabolism as needing healthy inputs so the food into the system needs to the right food and healthy food not toxic food. The waste going out of the system can’t spoil the nest so too much CO2 in the atmosphere is in conflict with living systems principles. It can’t possibly be in alignment with a sustainable economy and so forth. I did want them, just. I don’t know if I, I probably having mentioned all eight of them but I’m, you know I don’t want to sort of blab on here too long.

[25:02]

John:                           You get the idea they’re all on our website.

Aaron:                        Yeah. It’s great John and just to interject you’ve articulated six of the eight leaving two remaining. One is empowered participation and one is innovative-adaptive responsive. So I just, since we’re going through I figured why not round it up.

John:                           Yeah. Put them out there. I mean innovative responsive that sort of a completely non-controversial one right? I mean I think but again the importance of small business and entrepreneurs in contrast with the importance of monopolies and big industrial powerful giants. We have public policies that tend to support the monopolist because they have lobbying power much more than we support entrepreneurs and small businesses. This is not just an opinion that wow we should do it differently, this is saying, well that’s actually the way the living systems work. So we need to do it differently. And empowered participation, I’ll just comment very quickly you know this one is quite profound. 

Again this is a description of real living systems. A quality of real living systems and what’s true about them is that all parts of that system are empowered or self-empowered to participate in the health of that system. That’s not just good for that part. That’s good for the health of the system. So for example I always, when I give talks I say well if my feet are not empowered to participate in the circulation of oxygen in my body that’s terrible for my feet but that’s also terrible for me because I won’t be able to walk and if I can’t walk I can’t fulfill my potential as a human being. So this gets to this whole issue of inequality. Inequality is no longer simply a moral question that we can have difference opinions on. It’s actually a direct threat to systemic health and you know all you have to do is look at what’s happening in the world in the last 12 months to see that that’s actually true. But living systems principles would tell us that inequality that is so extreme that it disempowers the participation of the broad you know populations of the world. Communities of the world to contribute to and receive benefits from the system means that systemic health is undermined and ultimately it’ll hurt all parts of the system. 

So I think we’re seeing that play out in the real world and rather than debate whether we can afford to you know, whether we need to do austerity or whether we can afford the debt we need to start by saying what we can’t afford to have half of the planet disempowered from the health of the economy. That economy will not survive. 

Aaron:                        Yeah. Thank you very much for running through that and of course for emphasizing the critical importance of the empowered participation and look just because there’s an ecological reason behind why empowered participation is critical that doesn’t mean that there’s not also a moral restoration, right? 

John:                           Absolutely. Isn’t it wonderful that they’re aligned? 

Aaron:                        Yes. Yes. 

John:                           So we don’t have to debate the moral because you know for some reason, you know I mean obviously, I’m pretty confident most people that have tuned in to this conversation would have a shared view on the moral question but that isn’t a shared view across the world or we wouldn’t be, we wouldn’t tolerate the current levels of inequality. And I think a lot of the people in the capitalist system that tolerate it would really prefer not be there. They would just argue that fixing it you know the cure will be worse than the disease as opposed to literally thinking that this extreme inequality is a positive attribute. 

Aaron:                        Yeah. It’s so interesting. That kind of, gets at that the question I want to ask you and I’ll formulate it with a couple of steps here. By the way just love the edge effect and abundance piece as one of the eight principles because it reminds me of my permaculture studies. Some.

John:                           Cool. Yeah.

Aaron:                        20, 25 years ago, right? And that was a really important piece that Bill Mollison articulated and the robust circulation of course reminds me of the work by our mutual departed friend Bernard Lietaer with his book, Future of Money and I want to chat about in a few minutes. But as you were describing the metabolism metaphor for this robust circulation requirement it made me think that. 

[30:00]

Aaron:                                    The hyper accumulation of financial resources might be very much like the hyper accumulation of toxins in a body or an ecosystem and I wanted to ask you to riff on that for a little bit.

John:                                       Yeah. So, what I. I mean you introduced a couple of thoughts you know, key thoughts. One is that first of all I should say these are not, these eight are not the kind of correct answer. They’re a map as Nora Bateson reminded me recently, the map is not the territory which is a famous expression that goes back. I forgot who wrote that but they’re a map that is useful to me. It’s proven to be useful to others but it doesn’t mean that it’s correct and an accurate map. It’s a tool that can be used for our collective learning. And secondly, it’s not linear that you know we’re dealing with a complex system so it’s not like, let’s go with principle number one, check, principle number two check. They’re all inter-relate together so, the idea of wealth accumulation being in conflict with circulation is also in conflict with imbalance. It’s also in conflict with empowered, or rather on our community and place because if all the money is sitting in an account on Wall Street it’s obviously not circulating out into the capillaries of the system. So, the massive accumulation of wealth in a very few hands is probably in conflict with all eight principles if we really thought through it but you know the term narcosis I think I’m saying it correctly? Where you know blood clots? What, you know whether its toxins building up we could have an interesting debate about whether money is a toxin. I think it’s probably a both end you know. 

Money used in a constructive way is a very valuable tool but money used either inappropriately or just sitting is actually you know it’s in violation of the circulation requirement. So yeah. I mean and people have understood this for a long time, right? I mean, the whole idea of the Georgia’s economics idea of taxing lands speculation. What so that people wouldn’t hoard land take it out of the constructive use of a broad number of people and so you know a lot of these ideas are actually just reminding us of what we’ve always known but have seem to have forgotten in a current late modern age context. Which seems like it’s inevitably true but isn’t necessarily inevitably true and hasn’t always been true. But I think you know West Jackson once said that you know we have to keep money out of carbon trouble and what he meant by that and here’s sort of tying money to toxin idea. If we’re honest when individuals or institutions have a lot of money they tend to use more carbon or they tend to burn more carbon. It’s not intentional it’s just that with, it’s an individual, their lifestyle if it’s an institution, they’re ambitions tend to be energy intensive and when we have a fossil fuel based energy system that means their carbon, burning carbon intensive. So in a sense money is toxic and you know if you’re a super wealthy individual and you’re flying around in your private jet to go to dinner and you’re having yacht parked in two parts of the world you know you’re burning a lot of carbon and so yeah, it is toxic but it’s also toxic because its taking that money out of circulation where its desperately needed for the health of the whole system.

Aaron:                                    It’s really interesting. It reminds me of the way sugar works in a body that has cancer. 

John:                                       Yeah.

Aaron:                                    Right and that respected it. It sort of accelerating the damage.

John:                                       Exactly. 

Aaron:                                    The principle of right relationship seems to be so fundamentally important and you and I it seems both have some connection to indigenous wisdom and what’s part of my personal ethnic heritage actually Mohawk Indiana but not too far from where you’re located right now.

John:                                       Yeah.

Aaron:                                    And the deep original instructions of so many of the indigenous cultures around the world stressed this right relationship as fundamental and in prayer and ceremony we acknowledge our all our relations meaning the water, the insects, the animals, the winged ones, etc., and all the humans.

[35:12]

Aaron:                                    And I’m wondering how did we think about you know getting now from the what that you’ve articulated into the how. How do we go about helping to transform these psycho-spiritual alignment of millions of human beings who have grown up essentially steeped in this neo-liberal market mythology or religious ideology? How do we transform that? 

John:                                       Well, if I was, I had an answer to that if I was any good at what I do. I would, we would have fixed it by now but I guess a couple of thoughts come to mind and I don’t have a good answer. I’m holding that question and wrestling with that question literally every day of my life. I’m a big believer in the power of story. Again not a new idea but humans appear to have always learned and evolved through story not through analysis and facts and figures so, this isn’t to suggest that the academic rigor undermining this is not critical because I think it is because we generally need to be roughly right rather than not but then it needs to be translated into story. And that’s the reason we’ve, you know the first thing we did at Capital Institute, the first project we did was a series of stories. Story telling project it’s called the Field Guide to Investing in a Regenerative Economy and it was essentially seeing the regenerative economy emergent in the real world. Even though the practitioners running these projects didn’t think of it that way. 

Which is fascinating to me because what that tells me is that regenerative economy is already happening. It’s just we don’t see it as that and therefore we see as a nice project that someone’s doing something good but if you use the eight principles and look at it you suddenly see the pattern appearing in everything from organic farms to permaculture to projects, there’s amazing project on an island of Newfoundland called Faroe Island. To initiatives in Costa Rica to initiatives in South Africa and if you see things through the regenerative lens you see kind of a universal pattern appearing even though it’s unique in every context. Just like every snowflake is unique, every snowflake looks like a snowflake. So, I believe that the pressures of the current system are so great now that it’s forcing this shift. So in a sense it’s less about what’s you’re theory of change. How are we going to affect this, we you know Aaron and John because we think we’re so smart we’re going to have plan and we’re going to implement our plan it’s more nudging and helping coax the system to revolve in a direction that it wants to evolve. 

This gets a little bit maybe spiritual but I believe the system doesn’t want to collapse into a new dark age and there are plenty of forces that are leaning it toward that but the greater those forces appear and the greater pressure that results the more the pressure enables us to solve and find our new path. And you know what the systems scientist tell you about a system is that whether it’s a living or any system it only changes in response to pressure. So, if you put a pot of water on a stove it sits there until you turn up the heat and then it starts to get warm and then if you have top on its glued on it won’t move it will blow up and collapse but if the top isn’t on it well eventually boil. But it only in response to pressure, so you know I think the, I think the how is. I think a couple of things about the shift from the “what”, to the how but first thing is to recognize that the “what”, is very different than the goals. Or in my mind the goals are the “what” and principles are the how. 

[40:00] 

John:                           So, whether it’s STG’s or planetary boundaries or stay inside the doughnut these are all very useful goals that define where we need to be but they don’t tell us how to get there other than you know stop doing this and start doing that but those are, if you start doing this and stop doing that you’re really responding to symptoms. You don’t have a self-organizing system that doesn’t create those problems in the first place and I believe and you know I ran around talking about principles like I’m blue in the teeth and I just have this instinctive, it’s almost, well it’s an instinctive belief that if we don’t pause and get clear on first principles we will be running around chasing symptoms until we collapse and only by getting clear on first principles do we actually enable ourselves to identify which direction we need to go and what we need to address and there’s another truth, truism about systems is that they’re only as good as the weakest link. 

So if we have eight principles or we have 10 or we have six and we figure out which one’s we’re most violently in conflict with and use our reduction, reductionist reasoning which is a useful skill to have to figure out which ones of those is going to hurt us the most, the quickest then we know what to do but if we don’t get clear on the principles we’re likely to spend 20 years fixing a symptom that isn’t really the root cause of the problem. So, I don’t know I’m blabbing along here again but I take great comfort in my awareness of the emerging regenerative actions that are happening organically. Not because someone organized it in central office and is now rolling it out and scaling it out like a solution to our problem but because it’s happening in an organic way in response to these pressures and so the real question is can we accelerate that process and can we enhance that learning that we need to do together and so that leads you in a very different direction than how do we scale out this solution. It leads you into you know using networks to connect people shared learning, shared stories and in a sense getting out of the way of trying to solve the problem as an arrogant egotistical human. 

Aaron:                        Yeah. Something like that.

John:                           Very interesting, very interesting John and you know I have to ask you a question that comes from my personal experience just over the last couple of months. A friend reached out to me who is in the finance realm and who’s doing some really beautiful projects in sustainable food and so on and he sad hey, we’re launching a 50 million dollar fund to invest in regenerative agriculture technologies and systems and on one level I thought to myself oh, beautiful, let’s bring some resources, let’s bring you know some sugar into that ecosystem but then I have this other reaction was that was like well, wait a minute how do we know that the way you’re going to make presumably 10 plus or minus investments is going to be in such manner that its actually helping to re-enforce things like empowered participation, robust circulation and the balance that you’re speaking to, right? Because a lot of the traditional in sort of venture capital and private equity models don’t yet have that baked in. 

There’s a lot of wonderful, innovative work happening with B corporations and I think the social enterprise movement is super exciting but that essentially requires it seems primarily leadership from the privately owned and not necessarily venture backed enterprises. So I’m just curious when getting down into kind of the weeds and nuts and bolts of allocating capital toward good innovations. How do we go about funding, financing and scaling those things you know in such a manner that we’re not just you know creating the next amazon and I hate to say it and it’s not to knock you know Bezos or Amazon per say but a lot of my pals in finance who might even also be very converse in regenerative principles are also thinking how do I get to be the next Jeff Bezos? Right?

John:                           Well, I have to challenge you on one thing. I doubt many of your pals in finance are very articulate in regenerative principles. 

Aaron:                        More so than some. You know I know.

John:                           Really, okay. So, this is hard. Really hard and I think I sort of view my calling is to work in this tension between finance ideology that I do understand. I get it you know.

[45:14]

John:                           No one can tell me I’m you know some tree hugger and I don’t get the Wall Street works so it’s sort of like a burden that I carry and yet I have this clarity increasingly of where we need to be and it’s you know where rubber meets a road is where in a capitalist system like the one we live in is how invested in capital is deployed and then how the enterprises that it is deployed in are managed. And the truth is that usually lots of well-intended enterprises end up being extractive due to the demands of capital and you know you only need to look at Google and Facebook to see how that happens and in fact you know if we follow the eight principles we would conclude that an advertising business model is in conflict with the principles. 

So, it shouldn’t be you know I would go so far as to say that it basically shouldn’t be allowed to exist because its toxic and how we get there is hard and complicated but to tell a you know an investor who sees most of the home runs of the last 10 years created through an eyeball advertising extraction business model that that’s not okay is not going to be well received and yet you know. Funny I was just re-reading the ‘parable of the cave’ and it makes me feel like you know like Plato was right. It’s like we’re all this cave and we don’t see the reality.

Aaron:                        Right.

John:                           And we kept playing our game but we’re missing.

Aaron:                        Interpreting shadows right? 

John:                           Yeah and so, you know I think. I think it’s very possible to invest in regenerative agriculture in a way that is truly regenerative. I’ve done it personally. I created a company with the Savory Institute called grasslands and grasslands to this day is regenerating large landscapes and making money in the process. The only reason to remain hopeful that this is doable as opposed to the greed and power of finance will never allow this to happen and this is really important. The whole idea of regeneration is that it unlocks potential. Right? So, whether it’s your potential as a human being you know if you take someone and take him off of an assembly job that is cogged in a wheel and allow them to express their true genius. Their true essence they contribute and create you know enormously more than they ever could as a cog in a wheel and that’s true. 

That’s the regenerative potential in real life happening and so the hypothesis is that if we align our economies with these living systems principles which happened to be aligned with our indigenous wisdom then we will unlock potential that we don’t see today and we need that potential as our new source of prosperity since the old game of extractive-exponential growth on our finite planet has run its course and so if that potential is real that means investors if they invest in the right stuff like regenerative agriculture can actually realize attractive returns in the process because they’re unlocking potential and if you built soil in agriculture as opposed to destroy soil. If our policies are anywhere near reasonable that will actually create not only ecological value and social value for the farming family but financial value for the investors. 

But it’s a much narrower pipeline to direct capital into which means a lot of capital is in stuff that is causing damage which means a lot of capital should be divested from a lot of things that are causing damage and invested in things that are truly regenerative and the truth is a lot of those this are going to be social enterprises or you know in our current framework, philanthropic because we essentially extracted for centuries from natural capital and social capital and so this is massive imbalance and we know that balance is of living system principle. So we need to invest in living system ecologies and social systems and that’s going to mean an order of magnitude different philanthropic allocation or recirculation of money into things that don’t all generate financial returns. 

[50:14]

John:                           But many of them will. 

Aaron:                        Yeah.

John:                           We just need to be much more discreet about how we allocate capital. 

Aaron:                        Well, let me ask you this. You know my friend Erick Lumbarte was on a recent episode talking about the work he and his colleagues are doing in the social enterprise movement globally and of course our mutual friend Woody Tash has been doing a lot of wonderful work in the slow money movement where communities have deployed tens of millions of dollars in zero percent interest rate loans to local farmers and this sort of thing and I’m wondering you know in the social enterprise model to be designated a social enterprise the business necessarily has to give at least 50% of its profits to non-profit and social and environmental work. Do you see that from the investor perspective investing in regenerative enterprise is necessarily means you’re going to see yields, profits, returns that are lower than some of the other extractive yield potential out there? 

John:                           Yeah. Yeah and I think we can’t sugarcoat it if our, you know, if our expected financial returns that we’ve gotten used to. So here’s how, the average is and then the generalization actually gets you into trouble, right?

Aaron:                        Yup.

John:                           So it is true that a lot of the current capital system is extractive. Both of natural capital, whether it’s the environment or polluting rivers. Sorry, whether it’s the atmosphere that we’re polluting or rivers we’re polluting. We’re simply cutting down forest and turning grasslands into cornfields it is by definition extractive and there’s a profit in that and if we can’t do that anymore and that’s very profitable or else equal the economic system will be less profitable and returns on capital will be lower. But that doesn’t mean that only extractive activities generate high returns on investment and you know a great example, if I can doing a little research on this now, but you know not every company goes the direction of amazon or Facebook that is massively successful. You know there’s a great little company. It’s not little anymore in Canada called Shopify which essentially provides the backend engine of a lot of e-commerce and you know I’m sure it’s not perfect but you could argue, you know you could say well, it’s enhancing consumerism and that’s a problem well that’s probably true but if its displacing you know Walmart consumerism with small businesses that are circulating money in their communities then I would argue it is a positive but what Shopify is doing is its essentially making the you know, the none critical activities of that small business easy by doing it in sort of in a kit on the web. 

And so I can order my wool that comes from holistically managed ranch in Argentina that goes through a small company that then fulfills the order on Shopify and Shopify makes money. The company solves the problem and so if I invest in Shopify which I happen to be an investor in I can feel good about their success. And if they were to you know convert and start using an advertising business model rather a fee, a transaction business model then I have to reassess that but there’s no reason to think that investors can’t earn extraordinary returns from innovative businesses. I mean look at anyone who owns Tesla stock you know, don’t get me started on that it’s insane but they’ve done just fine and that’s been a critical innovation as no matter what you think of Elon Musk. You know he is, he has done something that no government was ever going to do which is to you know dream the impossible and it a reality. That’s regeneration happening in real time. Now, whether that company is governed the right way and blah, blah and we could debate it for long time but anyway. I think, I think the devils in the details at the end of the day and we need to create many, many, many more regenerative projects and then educate capital to finance them.

[55:04] 

John:                           And social enterprises will be a piece of it you know the beauty of what Woody Tash’s vision is that it’s all happening in place and so it’s amplifying that one principle and it’s democratizing the flow of capital into little small projects or in you know the way we’re going to solve this is not by writing trillion dollar checks at a time it’s going to be by a much more diversified and a decentralized set of solutions. So, not that slow money is the solution but it’s an example of regenerative economy emergent in the real world even though Woody doesn’t use or at least didn’t used to use the phrase regenerative. Certainly not when he started it. 

Aaron:                        Yeah. Thank you John: it’s a wonderful hearing your feedback and perspective on those topics. Let me remind our audience that this is the Y on Earth community podcast and I am your host Aaron William Perry. Today we’re visiting with John Fullerton the founder of Capital Institute and you can connect with John and his team and his work at capitalinstitute.org there are a handful of great white papers and resources including one called regenerative capitalism, another called finance for our regenerative world. I’ll include links in the show notes of course. And you can also find that Capital Institute on Facebook under the name Capital Institute. On twitter it’s Capinstitute and on LinkedIn it’s Capital-Institute. You can also find John himself on LinkedIn and that handle has lots of random letters and numbers so I’ll just include that in the show notes. 

I’d like to thank our sponsors and partners and one of the things we’re now experimenting with Y on Earth community is a Y on Earth approved ecosystem of regenerative economic relationships in which we’re inviting companies that are B certified or social enterprises or meet those criteria to share their goods and services through our network providing discounts to our audience and also providing a portion of proceeds back to Y on Earth a non-profit. And many of these are included in our list of sponsor and supporters and that includes Earth Coast Productions, the Lidge Family Foundation, Alpine Botanicals, Purium, Earth Hero, Liquid Trainer, Vera Herbals, Growing Spaces, Soil Werks, Earth Water Press, 1% for the Planet, Dr. Bronner’s, and Wele Waters. Of course a huge shout out to our monthly contributers who have decided to give an amount of their own choice every month. If you haven’t yet joined and you’d like to you can go to yonearth.org and click on the donate button and get that all set up. If you want to give at the $33 or greater level per month we’ll also send you jars of the Wele Water’s CBD infused aroma therapy soaking salts for your own health wellness practice and of course a big thanks to those folks out there in our stewardship circle who are also helping to underwrite our podcast series and our community mobilization work for regeneration, climate action and neighborhood resilience and culture of kindness. And John I just, my pages are full of notes here. 

I imagine we could probably have several of these conversations and only then really be scratching the surface on this topic and set of topics which is so important and I want to circle back to reference to Bernard Lietaer’s work because he’s a dear friend and I really enjoy honoring him now that he has transitioned out of this life. And my, one of my favorite books The Future of Money, of course presents four near-term scenarios. One being wonderful. The other’s being pretty tough, troubling if not downright horrifying and in here you’re referencing an item that he co-authored and I’m just flipping through my notes here to get to it called Money and Sustainability the Missing Link. Of course, Bernard was part of the technocratic team creating the convergence mechanisms when the various national currencies in Europe converted into the euro right? So, understood some of the deep systemic attributes of currency and financial capital and when you’re principle of robust circulation comes to mind it makes me think of his requirement for demurrage or negative interest in certain currency types to avoid that hyper accumulation and keep things flowing. 

[01:00:10]

Aaron:                        And I’m just I’m curious of course we’ve seen strange mark of behavior in the last eight quarters we’re experiencing negative interest rates in certain sectors but I’m curious do you see those kinds of technical attributes as necessary across the board or as things we’ll see in certain places, certain sectors what do you think about this negative interest idea?

John:                           You know I don’t, I do think having a well let me also first pay tribute to Bernard a little bit because he’s, he was a brilliant mind but also just a, determined and passionate you know. He was on to this idea and he wasn’t popular. A lot of his career and he was sort of lonely in the wilderness but stuck to his guns and I’ve only had a couple of conversations with him before he died, myself, I never met him in person and but what we shared actually, which I thought, which you we’re going to ask me about. So I’m sort of ducking your question right now.

Aaron:                        Good. Good. 

John:                           He, his book the last one you mentioned, one that has the words sustainability in it.

Aaron:                        Yup.

John:                           His co-author was a woman named Sally Goerner. Who is actually one of my teachers and was the science adviser for Capital Institute for a number of years. And in that book I discovered this, really it’s an epiphany for me and Bernard learned from the same living systems scientist really, his name is Bob. A moment of mental block, it’ll come back to me but anyway.

Aaron:                        No sweat yeah we can include it in the show notes. We’ll follow up on that.

John:                           He, through studying actual living systems, empirical studies. He discovered that living systems have a quality that balances efficiency and resiliency and there’s this beautiful diagram that you can find in the web or in my papers that looks like an upside down U but its skewed toward one side a bit and it shows at the top of the U is what he calls or I’m sorry the academics name is Bobby Lianowitz and Lianowitz showed that there was this window of vitality that said, that any living system that has sustained himself balances efficiency with resiliency but that balance point is actually skewed towards resiliency. So, it hit me like a brick, right?

Aaron:                        Yeah. 

John:                           Economics is all about efficiency like the whole point of economics is to maximize efficiency and the whole point of investment is to maximize the efficient return on capital which means the risk adjusted return on capital. So we’ve got a system designed to conflict directly with one of the principles of living systems. So I generalize this into the principle of imbalance because it applies as much efficiency and resiliency as it does to the feminine and the masculine. With lots of things that need to be in balance but you know we wonder why we’ve basically blown up the global economy and globalism because of this very effective and endless pursuit of efficiency whether it’s the financial crisis which was a collapse of the brittle system that became too efficient any many ways or the long term capital crises 10 years earlier and Bernard pointed this out in the context of money systems. 

And what few people know is that yes he worked on the euro but he was actually proposing the euro as a complementary currency and the politicians said we’ll go all in and give up our domestic currencies and just adopt the euro. And so now their stuck in a rigid system and have no ability to respond to the crisis because they have they’ve given up their own currency. So they can’t appreciate a currency and adopt, adopt/adjust to the new context. So it drove him crazy basically his whole professional life because he invented this idea that then was misappropriate. So anyway, that’s a long introduction to Bernard’s wisdom and really genius around monetary issues but I believe.

[01:05:05]

John:                           I essentially have taken his idea on money systems that need to be diverse  to have a resiliency and so he’s been this big proponent of complementary currencies and extended it to the entire economy. Now, with respect to you know having a policy that would essentially penalize simply hoarding money. I think it probably is a part of the solution but I always hesitate to have firm ideas about money because it’s so bloody complicated. It would need to be part a broader solution set and I guess what I would say is I don’t share Bernard and other people’s view that it’s all about our money system and if only we had the right money system everything would be fine because you know people often point to the fact that we have interest bearing debt as our money system and therefore it needs to earn a return but they’re missing the point that you know if we only had equity investment. 

Just because equity investments don’t have a coupon like a debt investment does, doesn’t mean they don’t need to earn a return and so equity investors don’t invest in let’s say expect a return just like a debt investor. So the real problem is investment not money and I do think. I do think how we you know, it’s almost like investment you know if you go back to like the basics of GDP. If you say that endless growths of GNP or GDP is now a problem because of just from climate change alone well investment is a component of GDP and so if we have to limit consumption that means that we have to limit invest or there’s some tradeoff between them. So, I think, I think we need to rethink investment in a way that’s way more profound and fundamental than anyone is really has even began to do and so demurrage on money, eh, it’s a technical detail relative to a more profound you know, what do we do when there’s too much investment capital on the planet. 

Aaron:                        Yeah.

John:                           I mean it’s another way, sorry to interrupt. It’s another way of saying there’s probably too many people on the planet. 

Aaron:                        Yeah. We have some big challenges.

John:                           What are we going to do about that you know?

Aaron:                        Yeah. Thank you for your reflections on that I agree with you in general and in principle that where we’re hopefully headed is that just a matter of technical solutions but is very much a matter of deep cultural and psycho-spiritual evolution and I was struck to sort of wrap up our discussion for today John, I was struck in your paper finance for a regenerative world that on you know page six there’s this what looks like a medieval or older wood cut called the worship of mammon and I recall from new testament scripture if I’m, if my memory is serving me correctly that it may have even been Jesus Christ who says you cannot have two masters, you cannot serve both God and mammon and in a strange way after I’ve been thinking about this a lot lately with the novel that I mentioned to you that I’m writing but today when I saw this image reading through this paper it struck me. My gosh. 

What we’ve done perhaps inadvertently and ironically out a Judeo-Christian western milieu primarily is we have globalized the worship of mammon. The greed money impulse and I’m not sure I’m formulating a question for you John but I’m just curious if we’re getting in to kind of the mythic level of story in articulating what’s happening and what’s at stake. If indeed you know we’ve created this global scale systemic obsession or hyper focus on mammon. What do you know you see as a way to heal that? Maybe what I’m asking is how has that shown up in your own personal journey. You know going from Wall Street into the work that you’re now doing. What caused that change for you? 

John:                           Well that’s a longer conversation. I guess what I would tell you is it was an instinct. An instinctive calling not a rational, logical decision. 

[01:10:05]

John:                           I had to leave. I just felt, I’ve been restless for years and the merging with Chase kind of gave me the excuse to walk away much easier but I’ve just felt a need to. It’s weird because when I left I had no idea what I was searching for, literally, and but I had this itch that I had to scratch which essentially meant, the metaphor I, the only metaphor I can describe and I thought about this many times is, it felt like you know, you know if you’re like in a row boat in big long beach and it’s foggy and sort of little chilly and you just get in the boat and start rowing out and that’s what I feel like I’ve been called to do and search for something that I don’t know what it is and along that search I discovered the problem. It’s literally that, and I didn’t discover it because I sort of set out a PhD program to explore a question. I discovered it very much through this process of synchronicity, meaning a series of coincidences found me or I noticed them until the problem really found me and so it is a very kind of spiritual journey that I feel like I’ve embarked on and I guess to answer your question I do think this is not a technocratic problem to solve. You know, what at the heart of this is the, sort of going back to the modern age, you know. The modern age impulse was a response or reaction to the prior age right? 

Where it was sort of this largely Judeo-Christian the church is the truth and God speaks directly to the church and the church tells us all what to do and we go about our business and if we behave we go to heaven and if we don’t we go to hell. And so the scientific revolution and the whole enlightenment was a reaction to that.

Aaron:                        Yeah.

John:                           And so we separated our science and our understanding from this whole spiritual realm understandably but it turns out I think it’s a both end and so we are now separated from that higher truth that has existed since the beginning of humankind as far as I can tell and we’re going to have to sort of reintegrate with that and I think most people that I know who are in this regenerative movement would sound as if it was some kind of a spiritual quest more than a technocratic solution to a problem.

Aaron:                        Yeah. Yeah. Absolutely beautiful.

John:                           I have to guess I find that in your novel. 

Aaron:                        I really, I appreciate that John. So appreciate you taking the time to visit with me and with our Y on Earth community audience today and before signing off I just want to open the floor to you is there anything else you’d like to say to us, to the audience, to posterity.

John:                           Wow. You know I guess I would just want to end on a very hopeful note. I am you know, one, particularly at the end of 2020 can get pretty bogged down in a lot of dark reality and I obviously don’t have the answers but I can share that I have gone directly into that vortex of darkness myself. Feel I have a pretty realistic assessment of how dark it is and I see these events that happened whether its 9/11, the financial crises, now the pandemic really as lessons. We’re being forced, you know Donald Trump, burning maid off, all these things are being forced on us to see, they’re like shoved in our face so that we can no longer ignore them and they all hold critical lessons. The pandemic being that we’re all interconnected obviously and that my health and my freedom is connected to your health and your freedom and so, there’s no such thing as my freedom in disconnected from your freedom. And we haven’t learned these lessons yet but the lessons are there for us to grasp and so you know as hard as it is and as tough as it is to deal with I’m actually genuinely hopeful.

[01:15:06]

John:                           Not optimistic, but hopeful that we’re actually going to come through this and that we’re learning the stuff we need to learn just in time hopefully to avert what would be otherwise a very dark period ahead and I believe that and I live my life with that belief. So, I just like to share that with everyone and hopefully that’s some tonic for a tough year at the end of a very tough year. Not that next year’s going to be easy but anyway thank you Aaron for having me. It’s been a wonderful conversation. Let’s continue it in the future. 

Aaron:                        Beautiful. Thank you John. I look forward to it and thanks again for visiting with us today. 

Speaker 3:                  The Y on Earth community stewardship and sustainability podcast series is hosted by Aaron William Perry, author, thought-leader, and executive consultant. The podcast and video recordings are made possible by the generous support of people like you. To sign up as a daily, weekly or monthly supporter please visit yonearth.org/support. Support packages start at just $1 per month. The podcast series is also sponsored by several corporate and organization sponsors. You can get discounts on their products and services using the code YONEARTH. All one word with a “y”. These sponsors are listed on the yonearth.org/support page. If you found this particular podcast episode especially insightful, informative or inspiring please pass it on and share it with a friend who you think will also enjoy it. Thank you for tuning in. Thank you for your support and thank you for being a part of the Y on Earth community. 

[End of transcription 01:17:00]

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