Last Days Of The American Cowboy


Every culture has a mythology. It tells us about how we see ourselves. For example, America has two distinctly different worlds of work. On the one hand, we have highly educated and highly paid professionals… lawyers, doctors, financial experts, consultants. On the other hand today, we have highly structured and low paying work… clerks, cashiers, janitors, fast food workers, fulfillment centers, call centers. That’s the reality, but which one is our mythology? Neither! In our heart of hearts, we all want to be… Cowboys!

Cowboys? As in leather chaps, living with cattle, sleeping on the ground, and really bad food? Well… no, not exactly. But that’s the thing about mythology. It’s not meant to be real. It’s about image and style. And for American, Cowboys are a symbol of freedom. And Individuality.

When Americans think of independence, the lone, independent Cowboy, wandering America’s great open spaces on his trusty steed. Maybe our lack of remaining open spaces makes the image of the Cowboy even more important. Even the term “Cowboy” MEANS and independent outsider, a disruptor!

Remember the series Mad Men? If I said that Dan Draper was a Madison Avenue Cowboy, you would instantly know what I meant. He’s independent, he can look after himself, he has rugged good looks… you can see him as a Marlboro Man, smoking on his horse, just as the sun sets on 500 head of cattle. Cowboy.

But Cowboys have been gone for a very long time. Starting in the 1970s, that image of the independent, self-reliant worker evolved from Cowboy to  Independent Truckers. Cowboys had open spaces and Truckers had the open road. Cowboys got cattle to market, and Truckers hauled loads. As independent as they were, Cowboys would get together for annual cattle drives, and sit around the campfire swapping stories about rustlers (who could steal their livelihood). Truckers would form up into convoys, talk to each other on their CB (citizen’s band) radios, and swap stories of outwitting the smokies (who could steal their livelihood).

As Cowboys gave way to Truckers, Truckers must now give way to factory workers. Oh, Truckers will still live on, it’s a while before the robots take over. But they will no longer be Independent Truckers. In 2018, a new law took effect that requires Truckers to use an Electronic Logging Device or ELD. Now, wherever a Trucker goes, the ELD goes with him. And the Truckers ain’t happy.

In the old (old, old) days, Many Truckers were independent. They owned their own trucks, they took contracts, delivered goods, and hopefully made a profit. With a bit of luck, an experienced Trucker could make a good living. Knowing the best roads, where construction and congestion were, being a good judge of the weather, and knowing where local police were more… forgiving, made the difference between success and failure.

But GPS replaced experience, trucks became too expensive for independents to afford, and truck owners wanted to know more about what truckers were doing with their very expensive equipment. Big trucking companies did have reasons to worry. There are a lot of accidents with big rigs. Owners can be fined for many issues. Efficient fuel use is vital to making a profit. and of course, late deliveries mean that everyone is fined. Truckers once took (semi-legal) shortcuts, occasionally exceeded the speed limit, carried a bit more cargo than was strictly legal, or even took the occasional nap by the side of the road. Now every “irregularity” must be explained.

While Truckers always had to keep some sort of log of their activities (if only to track expenses), for most Truckers the ELD means you have “Big Brother” riding with you. The ELD may question you in real-time, as it tracks you minute by minute. Any variation from the set of actions the software believes that you should be performing, and you will get a call asking for an explanation. And you may be fined. The open road isn’t open anymore.

The Cowboy died away when America’s open range was closed off and turned into farms. Of course, technology had a hand in their demise. With steam locomotives, you could get cattle to market sooner, without losing weight from their long journey.

Once a computerized manager watches your every move, the old Trucker image soon fades away. ELDs will continue to take on management responsibilities, diminishing the role of the Trucker. Eventually, the long haul truck just becomes a component in a distributed factory. And Truckers become factory workers. The transportation industry is rebranding itself as Logistics, de-emphasizing people and vehicles, placing more value on software and data. The next logical step is to replace Truckers completely, with self-driving vehicles.

The ELD may give the trucking industry what it desperately needs, more reliable and less expensive methods of moving goods. But once the decisions of the ELD are valued more highly than the experience of the Trucker, it becomes a small step from telling the Trucker what to do to just driving the truck on its own.

Is this the Last Roundup for America? Is the Trucker headed for the same fate as the Cowboy? Tell us what you think!


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Is The Future Of Robotics… Just A Lot Of Garbage?

Garbage truck

By now it’s common knowledge, robots are on the rise. There are robot checkouts in some stores, industrial robots in factories, and warehouse robots that ensure the prompt delivery of your Amazon orders. When the bugs are worked out in self-driving vehicles, robotic trucks will dominate our roadways. Clearly, jobs will be lost. Still, robots may be able to avoid a national crisis. And that crisis is… our Garbage.

While it took decades for everyone to separating out our trash, an entire generation of Americas grew up with recycling. Still, few Americans understand that the foundation of our recycling system is our ability to send our garbage to China. Even fewer know that since 2013 China has regularly notified the world that they would enact new environmental standards to limit the importation of recyclables (the “Green Fence”). In 2018 the standards went into effect, and a year later… 90% of US recyclables are being rejected by China.

We now have a choice. Either store recyclables until we run out of space, throw it all into garbage dumps, or develop new technology and techniques to deal with recyclables (and garbage in general). However, China not only provided a location to send our garbage… THEY PAID US FOR IT! Money from China provided the financial foundation of America’s $100 billion recycling industry. Without this money, there is much less money for new recycling programs, and existing programs around the nation are collapsing.

Because we had the cheap, often profitable, option of selling recyclables to China, very little new recycling technology has been developed in America in the past few decades. From an engineering point of view, the bests option is simply to not produce all of the “recyclables” that we do. Most packaging could be redesigned to greatly reduce the total tonnage of recyclables. Go a bit further, and you can create new materials that will biodegrade so that this garbage goes away after sitting around for a while. Or you could re-engineer the whole supply chain so that it was cheap and profitable to domestically recycle our garbage.

But we did none of these things. We chose not to invest, and our recyclables took the risk-free path to China. Did I say risk-free? That’s not how the recycling industry feels now! With the sudden loss of income from China, recyclers have doubled or tripled the fees they charge to towns and cities. Many municipalities have already begun to scale back or eliminate recycling. Some towns are just sending materials directly to landfills. By the end of 2019, it’s going to get a lot worse.

Most of America’s recycling center are just sorting centers. The actual recycling process… turning recyclables into new products… is performed in China. Carefully sorted recyclables have a higher value per ton. Recycling centers did just enough sorting to make it profitable to send offshore. But when the new environmental standards were put in place, and China rejected low quality (dirty, poorly sorted, contaminated) recyclables, the new (higher) cost of sorting made the entire process too expensive.  in 2017 we had a nearly 100% acceptance rate. Now we have a +90% rejection rate.

What are our options? What can we do to save our recycling industry? We could develop new technology that makes it profitable to turn old plastics and paper into new products, but that is going to take years… if not longer. However, there are a few promising near-term options:

Robot Sorters: If our sorting centers were more efficient, more recyclables could be shipped to China. Not my favorite option, but it is at least a short-term solution. Most American sorting centers do work manually. China’s new regulations make manual sorting too expensive. It’s simple economics. If you want to move more products, lower their cost.

Other types of robots use technology that can be used in a sorting center. Sensors to “see”, other sensors to identify different types of metal, the ability to “feel” different textures. It’s just a matter of combing tech from several different existing robots into a new model that sorts garbage. A number of robotics firms are developing sorting robots that can sort more materials in less time, at a lower cost.

As soon as 2020, these robots could be rolled out. Undoubtedly, these robots will change the cost equation, and make recycling profitable again. If efficiency and profitability continue to rise, more of the garbage in our environment may be seen as money lying on the ground… and someone will pick it up!

Robot Garbage Trucks: Small towns in America and around the world are shrinking, and are desperate for ways to provide services with a falling tax base. In most of thee municipalities, the two largest city contracts are for school buses and for waste management. Cutting the cost of waste management has become vital to their survival.

Even before the new regulations from China, towns were testing technology to reduce the cost of waste management. Trucks with a robotic arm (to lift garbage cans) have been around for a few years, and these trucks reduce the usual two-man team (driver and garbage handler) to just one. That significantly cost costs.

These trucks have sensors to distinguish between the recyclable and the garbage bin. Most of the work to date has focused on just the garbage. Due to the new changes, putting these trucks on recycling duty might ease the cost of collecting, even if it did not specifically affect sorting.

Even Better Robot Trucks: Let’s step it up a notch! A fully electric robot vehicle would cost less to operate than a gasoline-powered truck, and it would generate less pollution. With two separate bins, the truck could collect garbage and recyclables in one trip, instead of the two trips (or trucks) that most waste management systems use. And of course, if the trucks were self-driving, a completely automated vehicle would add to savings.

Robotic Enforcement: There are essentially two different recycling methods. Single-stream and Multi-stream. Single-stream is preferred by many municipalities because it is simpler for end-users. Just put all recyclables in one bin. Multi-stream uses separate bins for metal, plastic, and paper. Multi-stream reduces sorting center work and limits cross-contamination. Consider placing an empty can of tuna on top of newspapers in a single-stream bin. If you didn’t wash out the can, fish juices will contaminate the paper.

And, of course, we will always have individuals who just won’t follow orders, and the wrong materials are in the wrong bin, or they just don’t separate out anything. Robotic trucks can use their “eyes” to look into bins, or even use high-speed cameras and the bins are emptied to examine the entire contents. Those who have not sorted their garbage can be automatically fined. It may sound petty, but if contaminated recyclables have no value, the entire community pays a higher price for waste management. Is it better to fine the entire community, or just a few offenders?

So. This is our future.

Not in 100 years. Our future, next week. Go call your mayor. Ask about your recycling program. Your city is probably scrambling for a place to store recyclables for the new couple of months. If not weeks. We’ve got to do something soon, and robots may be our best short term solution!

What do you think? Is your city grappling with the new garbage crisis? Have they found any new solutions? Let us know!




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Capitalism 2.0: Pay For What You Use!

Past Due

In the 2nd grade, my homeroom teacher loved to have unscheduled ethics tests. Her favorite was, “As you walk down the street, and you see a wallet lying on the ground. The wallet is filled with cash. What do you do next?” The answer she was looking for was, “I would go through the wallet, find the owner’s address, and return the wallet.” My class, however, was had a more nuanced Lord of The Flies response. “Finders Keepers!”, they would yell. I have come to realize just how valuable a similar education in ethics would be for today’s financial and political leaders. Starting with…

Capitalism, Democracy, and modern Charity evolved together. Each influenced and shaped the other.  Conservative politicians revere the political model the Founding Fathers of America created. Conservative Economists might want to re-familiarize themselves with the original economic model created by early American Capitalists. It is a far cry from today’s Capitalism. Especially how public land and resources are to be used.

One of the simplest ethical concepts of Capitalism is that some things belong to you, and some things don’t. Before the Enlightenment (i.e. before Democracy & Capitalism), Kings owned the world. But even Kings had limits. All classes enjoy certain rights.

The King owned the Commons (shared land), but individuals had specific rights, such as a right to hunt on certain days, or plant at a certain time of year, or consume a certain amount of water from a pond or lake. Rights to public lands were protected by the law.

While early America often ignored the rights of Native Americas, the rights of other American Citizens were acknowledged. As America filled up and green spaces diminished, even conservative voices demanded the protection of forests and the creation of parks.

The government, however, has a special power… Eminent Domain. This allows the government to take over public and private lands. The government may need that property for its own use (a military base, a highway) or it may transfer the land to a development group (to build a factory, access oil or minerals, etc.). But such a transfer must always be for the good of the public. And property owners MUST be compensated. It’s in the Bill of Rights!

The 5th Amendment states, “… nor shall private property be taken for public use, without just compensation.” If you want something that isn’t yours, you need to pay for it! The words of the Founding Fathers were carefully chosen, and shouldn’t be taken lightly.

Consider two businesses that are next-door neighbors. One-day business “A” realizes that they could save $20,000 a year if they dumped their garbage next door, on company “B’s” property. That’s $20,000 in extra profit, Capitalism at work!

Absurd, right? Company “A” cannot use the property of Company “B” without obtaining their permission and providing just compensation. Stealing someone’s property (or stealing its use, or degrading the value of that property) is anti-Capitalism! Taking property, or compelling labor without compensation was a big part of America’s rebellion against King George’s England.

But when the land belongs to many owners, perhaps the entire nation, some believe that these rules do not apply. “Public” land and resources are repeatedly given to private owners who then mismanage these resources, using the air, our lakes, and rivers as garbage dumps. That’s not Capitalism.

Capitalism (and Capitalists) fully account for all costs. In America, and in most developed nations, Capitalist are legally REQUIRED to account for all costs. Otherwise, they may be guilty of criminally misleading investors and shareholders, by understating financial risks. When the costs of a firm’s operations are forced upon others, these “others” are increasingly seeking restitution.

Consider tobacco. Billions in lawsuits and bad press, resulting in a major shift from Big Tobacco to “no tobacco”, or to small “Vaping” firms. Smokers may have voluntarily damaged their health. But what about secondary smoke? Non-smokers get polluted air, and small children get respiratory ailments. Tobacco-related healthcare issues cost America $300,000,000,000 annually. Penalties for tobacco firms have been relatively light. However, if big tobacco wants to dominate the new vaping industry, the next round of lawsuits will have MUCH higher penalties.

Consider the California utility firm PG&E. They failed to put the safety of the public and “other peoples” property ahead of their own profits. However, it is less clear if they violated any laws. Before they were cleared of liability in the 2017 fires, PG&E’s stock price was in freefall, and the firm had prepared for bankruptcy. After going through this process, if there are more fires this year (or the year after, or the year after) saying, “We didn’t know. And besides, it wasn’t illegal”, probably won’t cut it. Remember, not just land, but lives were lost.

When Americans have their private assets devalued without compensation, something has gone terribly wrong. In part, the fault lies with bad science, or at least early science.

A century ago, our understanding of the environment was limited. “The Solution for Pollution is Dilution”, was the formula for dealing with toxic waste. Scientists and Capitalists alike thought that with sufficient dilution (dump in a bigger lake or build higher smokestacks), pollution goes away. Dumping in the Ocean rather than the nearest lake, was a reasonable, even environmentally conscious, solution.

That was a century ago. We now know that dilution cannot solve these problems. When you dump toxins, you just send it “downstream”. Today, scientists and Capitalists both KNOW that pollution is merely passed on to our neighbors…. sometimes our very distant neighbors.

Global Climate Change has shown that we live in a closed environment. The toxins we push downstream eventually circle the globe and come back. EVERYONE is downstream, eventually. Your problem may be sent up a smokestack or down a river, but you are just transferring your problem to someone else, robbing them of their health and the value of their property. If we do not fully account for costs, we cannot know if a project is legitimately profitable.

Speaking of downstream, consider the 2017 Hurricane Harvey flood.  Houston had unprecedented, but not unpredicted rains. Environmentalists and Houston’s own City Planning warned of coming floods. Not just because of the complex science behind Global Climate Change. Houston’s direct actions ensured a future flood.

Houston encouraged and financed uncontrolled urban sprawl. Wetlands were turned into malls and housing. Once the wetlands and prairies that soaked up storm waters were paved over, it was inevitable that floodwaters would flow over concrete and asphalt, and head downhill… and into neighboring basements.

Scientists told Houston that they would create killer floods. A recent study by the University of Iowa determined that the excessive construction magnified the damage by 21 times, creating $125 billion in property damage and the deaths of 68 people.

Houston’s leadership sold the natural protection that the previous generations of Houston business owners and homeowner enjoyed… and needed! Yet, the City never compensated business or home owners for this sale. Nor did they even announce that they chose to make this enormous transfer of wealth, even after enginers form Houston’s City Planning department verified research on the looming disaster.

The Governor, backed by Senator Ted Cruz and fellow Texas “conservatives”, had a solution. Request $125,000,000,000 in Federal aid and have the rest of the nation pay for what looks a great deal like criminal neglect. And then, Houston can get back to paving over their wetlands. Is it just me, or are these “conservatives” acting like socialists?

True Capitalists, however, are standing up and demanding that projects must clearly state negative impacts: bad environmental policies, gaps in worker safety, failure to address sexual harassment, inequitable compensation, illegally holding back required benefits, punishing whistleblowers.  Having a clear statement… and accounting… of both positive and negative impacts are a vital part of the ESG (Environment, Social, and Governance) and Impact Investor movement.

Bad Capitalists have done grievous harm to the legacy of Capitalism. Luckily, however, Capitalism is self-correcting. Bad Capitalists have pushed in one direction. Now, a new generation of Impact Investors is pushing back. They want greater transparency and a more honest accounting of corporate operations. Hidden and unaccounted for costs are a red flag. That’s one of the reasons why Impact Investors are interested in “B” corporations. B Corps (and similar certifications) require independent third-party audits. These audits cover not just the obvious financial issues, but less obvious social costs as well.

With the extra little push from Impact Investors, Capitalism can not only become safer for investors, it can also return Capitalism to its roots as the single greatest source of optimism for a prosperous future! What do you think? Are you tired of your kids telling you that all Capitalism is evil? Have you heard that Impact Investing is just misguided socialism? Share your opinions with us!



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Capitalism & Social Good: The World’s Greatest Super Team


Charities and Foundations do good, across the globe. Schools, hospitals, museums, environmental groups, senior homes, and animal rights… not-for-profits get the job done! Not-for-profits have a special place in society because they do so much for society. But not-for-profits are struggling. Big changes in the economy could close many not-for-profits, shredding America’s social fabric. Can not-for-profits be saved? Will the good guys win in the end? Let’s dive right in and see!

For the last thousand years, Charity meant the Church. But 200 years ago, the Enlightenment arose. The age of Kings ended and the age of the citizen dawned. Citizen groups… fraternal orders, unions, public charities… offered alternatives to Church charity. The American Revolution rebelled against the King and separated Church from State, giving birth to a hundred constitutions around the world. It was also the age of Capitalists. Replacing Kingly decrees with Capitalist fundraising. And “good works”.

Early Capitalists were strange creatures. By day, Robber Barrons mercilessly crushing competitors, destroying unions, and manipulating financial markets. By night, donned the robes of Philanthropists… aiding the poor and forging a better world. J.P. Morgan, John Rockefeller, Cornelius Vanderbilt, Andrew Carnegie, the list goes on and on. It was their support that created the world’s great museums, libraries, hospitals, and schools.

Some truly wanted to do good. Others did good because their fortunes REQUIRED a better world. Andrew Carnegie built over 2,500 libraries across America. Not because it was a nice thing to do, but because Carnegie’s factories (the world’s most technologically advanced) needed literate workers! In fact, he needed more literate workers than the market could provide. So, he took steps to change the world on his own.

Henry Ford famously paid workers twice the standard wages of the time. Good guy move? Sort of. Henry Ford paid more but wanted more. Ford wanted to best workers AND he wanted workers that could afford to buy his products. Capitalism didn’t accidentally uplift humanity, it was a conscious and intentional outcome of capitalism since it’s earliest days.

Then there’s Milton Hershey, the Chocolate King. He didn’t just build an orphanage, but hired those orphans as managers, eventually gifting the orphanage with his candy empire. Why? Because Hershey believed in the Protestant Work Ethic. That work ethic says a lot more than, “Everyone should work hard.” This philosophy included support of the community, being charitable, and never becoming TOO rich. Up until the 1800s, protestant communities regularly had Jubilee years, when personal debts were forgiven.

Capitalism and Charity worked hand in hand. Some philanthropists funded charities directly, while others funded Foundations, ensuring that good ideas would survive long after an individual philanthropist passed away. While building bronze statues to immortalize yourself was popular at the time, funding social good was seen as a better way of achieving immortality by some of the world’s greatest Capitalists.

Capitalists regularly placed the good of the world before their own interests. Pharmaceutical companies cured the great killers, diseases that regularly claimed millions of lives. Often with minimal profits. A diagnosis of diabetes was a death sentence. Desperate victims would pay any price for insulin. Yet the patent for insulin production was sold in 1920 for just $1. Insulin creator Fredrick Banting said, “Insulin belongs to the world, not to me.”

Nor was banting was not the only scientists to give away his life’s work for the good of the world. The Polio vaccine was also given away for the same reasons. Altruism was not just an oddity in the medical world. John Walker, the inventor of the humble friction match, gave away his patent. John Walker went on to make a fortune selling his own brand of matches. But, it was his concern about protecting the people of the world from fires caused by earlier and more dangerous types of fire starters that caused him to give away his patent. Golden Age Capitalists regularly weighed personal vs. public good and often chose to put the good of the public first.

Compare entrepreneurs from a century ago to the ever-smirking Martin Shkreli.  He manipulated the price of insulin to boost profits, killing patients who could no longer afford insulin. Or, the sociopathic Elizabeth Holmes and her decade long, $7 billion medical scam, selling medical diagnostic equipment that never existed. Just a bunch of bad capitalists? Or did Capitalism itself become tainted, ignoring its own origins, and becoming something less than true Capitalism?

Capitalism and social good always worked together, but the relationship continues to evolve. Just like biological evolution, sometimes you end up with a dead-end. Like the Saber Tooth Tiger. At first, it makes perfect sense. Bigger tiger, bigger teeth. You get a superior predator. Up to a point.

Beyond that point, the biggest and most powerful may no longer be the most efficient. As Capitalism evolved along strange and unexpected paths, the assumption that Capitalism cannot help but do good, and the relationship between Capitalism and Social Good, may no longer ring true.

How did this happen? Through a thousand small changes. Globalization unanchored corporations from communities, and community resources… people, workers, the environment. Private corporations became public, driven by the short-term profit demands of stock analysts rather than the vision of a company owner.

Charities still work with philanthropists, but a new generation of billionaires is less interested in old Foundations and Charities. Instead, they want to change the world through their own efforts. With software that makes hailing taxis slightly easier. Or an app to vacation in someone’s apartment. Or maybe a better dating site. The social good expectations of new Capitalists have fallen very far indeed.

But there are exceptions. The 21st century gave birth to Impact Investment and… perhaps… Capitalism 2.0. Impact Investing (green investing, social good investing or good guy investing) isn’t just soft-hearted or misguided investing. It is a return to the Golden age of Capitalism, with a twist. In the last Century, social good was implied in Capitalism. In our less innocent age, Impact Investors come right out and tell you that they are so interested in social good. And that they will pay for it.

That payment might be a lower rate of interest or making an investment in an unusually risky project or even supporting a project that no one else understands… IF a project can materially improve the world. As Impact Investing becomes increasingly popular and research departments have more case studies to examine, it looks like Impact Investing is a profitable way to invest.

Good guy investments are good partially because… well… bad guy investments are bad! It seems too obvious to state, but when you consider the history of bad investments on Wall Street, maybe we do need to be reminded!

Bad investment ideas and bad investment partners often show up with very bad ideas, that have very tempting (and very unrealistic) returns. These investments often end badly. Ask tobacco investors. Firms that hide or distort information are bad for investors. Big oil and coal held back knowledge of Global Climate Change, and those firms may soon see a huge hit to their valuations. Sometimes you just have straight-out frauds, Bernie Madoff. For a long time, people thought that he was a legitimate stock trader, who just happened to deliver mathematically impossible returns.

B (Benefit) corporations are a recent innovation and a new type of corporation. They must explicitly state their “benefit” (reduced pollution, developing low-cost housing, education for the poor) as part of the certification process that gives them”B” status. Your goals are then enshrined in corporate filings, and your benefit (not your shareholders) will receive the first distribution of profits. Yet, the B Corp can be very attractive to Investors.

Companies like Danone. At $24 billion in sales annually, they are one of the largest food companies in the world. Or Natura, a Brazilian based cosmetics firm that acquired Avon in 2019, making them the world’s 4th largest cosmetics firm. Both firms have transitioned to B status, and many other major corporations are starting the process.

If your firm ever plans on attracting employees or investment dollars from Millenials or Gen Z, attaining B Corp certification should be a top priority. These generations are cynical and want a lot more social good than their predecessors. B Corp status will be as important in attracting human capital (in both definitions “capital”) as “Certified Organic” has become in attracting in consumer purchasing power.

But what about Charities and Foundations? If Charities do the heavy lifting in social good, they are n the businesses that Impact Investors should invest in! But there is a problem. Even “good guy” investors are primarily built to work with for-profit corporations. Impact Investors could lend money at zero or nearly zero interest, but they need to get back their capital so that it can circulate through other investments.  Government contracts are often very specific, and many exclude for-profits.

Banks can loan money to both for-profits and non-profits, but many lenders are less comfortable working with non-profits. Whether it is an Impact Investor, a Bank or a private lender, non-profits all lack a fundamental tool for raising capital… the ability to sell equity.

Interestingly, I’ve been working with a not-for-profit called Nicky’s Gardens of Hope, an organization created to build long-term residences for disabled adults. We ran into this very same issue. We could have incorporated as a not-for-profit or a for-profit. But each option created different limitations. Even a B Corp, was not able to address all of our issues.

So we created something new, BRRM (the Balanced Risk Revenue Model). This starts with a for-profit B Corporation and then combines it with a not-for-profit. The two operate in a unique, but highly efficient way. This resulting structure provides the benefits of both types of organizations while making it easier for Impact Investors to invest in it. By reducing these barriers to investment, Impact Investors can fund Charities as easily as for-profit corporations.

B Corps and BRRM are just the newest tools for Impact Investors to realign Capitalism with its originals goals. Impact Investors, B Corps, and BRRM could be the team-up that Capitalism has been waiting for… at least, that’s my Niccolls’ worth!

Want to be a superhero? Write a comment, tell us about your work with Impact Investors or look me up on LinkedIn!

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America’s Revolution Rolls On… Capitalism & Democracy Are Still Evolving and Improving the World!

During the recent G20 Summit in Osaka, Japan, President Donald Trump was asked what he thought about Vladimir Putin’s statement that “Western Liberalism” is becoming obsolete. Unfortunately, Trump didn’t know the difference between Classical Western Liberalism (the philosophy that created capitalism) and San Francisco liberals. 200 years later, Liberalism is still going strong, but cracks are showing in the foundation, and Capitalism and Democracy are being challenged. What do those challenges mean to a 21st Century citizen? Let’s dive in and see!

Before Liberal philosophy, we had Monarchies and rule by Kings. Monarchs controlled most (or all) of the nation’s political and economic power. Below the rulers were aristocrats, then military leaders, and other classes until we hit the “lower class”, peasants, serfs, slaves, etc. The class you were born into was the class you died in. Birth (and your subsequent class) determined your job, where you lived, if you went to school, who you would marry, and every other aspect of your life.

Liberalism said power comes from the people, not Kings. Citizens choose their leaders (Democracy) and choose where they put their money and labor (Capitalism). With Democracy and Capitalism as the new center of society, class systems began to fade away. Individuals would choose their own fate. In a “classless” society, education became universal instead of the privilege of just a few. Managers and Officers were no longer appointed based on birth, personal ability and ambition mattered!

Suddenly, individuals from the most humble background could rise up in society. Human capital became more valuable than land or Royal privilege. This didn’t happen all at once. It started with a series of writings that challenged the old order, which led to political movements, and eventually revolutions. Writings and politics started in Europe, but the first big revolution was here in America. America WAS the revolution!

Separated by an Ocean, English citizens (soon to be Americans) didn’t need a King. A decade later, France agreed and had its own revolution. How important was the American revolution? Over 50 nations have flags with three different color stripes, or a “Tri-Color”. France adopted the Tri-Color flag as a tribute to America’s “Red, White” & Blue” flag. For two centuries, America was literally the very model of Liberal philosophy.

The Age of Kings passed just a short time ago. We started World War I with a King in England, a Kaiser in Germany, the Tzar in Russia, an Emperor in Japan and scores of lesser monarchs. Just three decades later, after WW II, the Age of Monarchs was ending. Kings were retired to make room for the rights of the individual. Without Monarchs the world’s wealth exploded, life expectancy nearly doubled, and contagious diseases were eradicated. We even traveled to other planets! Strong evidence that humanity no longer needs Kings. Yet… there are those cracks in society.

Throughout the 20th century, Capitalism was an undeniable source of social good. Capitalism provided resources and economic drive to develop vaccines, to provide clean drinking water, build schools, and raise our standard of living enough to enjoy longer lives. But by the 21st century, Capitalism had changed.

Capitalism created outsourcing and automation, eliminating many higher paying “trades”. New technology is replacing high-paying jobs, like financial analysts and research professionals. Self-driving vehicles will take away well-paid jobs that do not require a college degree, while Artificial Intelligence will drain away employment from lawyers, doctors and MBA’s and other individuals with higher degrees.

The to Pew Research Center, one of America’s most prestigious sources of independent research, reports that U.S. compensation has been stuck since the mid-1960s. Capitalism once guaranteed growing prosperity. Now it is a zero-sum game, and it may soon only guarantee a jobless future.

More than the economy is at stake. We watched big corporations intentionally ignore the latest scientific evidence on global warming. Then we learned that scientists working for big oil companies made these same discoveries decades ago, and those corporations chose to keep the information secret, so as not to affect their stock valuations.

But big oil was not alone. Big pharma once sought to cure the ills of the world and is now responsible for 50,000 Americans a year dying from intentional over prescriptions of Opioids. Wall Street firms that once fueled the economic engines of the world placed profit in front of national or global good and collapsed the world economy. The #MeToo movement exposed how widely corporate America permits or even encourages sexual assault and rape, rather than confront powerful stakeholders and managers. For young Americans growing up today, they are in the age of Corrupt Capitalism.

A new generation of Capitalists imagines an improved Capitalism that makes the world better. Impact Investors have identified the problem. Corrupt Capitalism always tries to keep positive consequences (such as profits), while transferring negative consequences (pollution, social inequality, depletion of public resources) to the public, without any compensation. It’s cheaper to dump toxins in a river and let the people downstream deal with it than to reduce your pollution. Especially if you are never fined for damaging the world around you.

Formerly the poster child for the “evil corporation”, big oil is starting to reform. ExonnMobil has acknowledged that petroleum puts carbon into the air, and causes global warming. However, they still resist the idea that they should pay for the damage their products cause.

Impact Investors want to account for a corporation’s impact on the world, both good and bad. Corporations that improve the world, should be credited and have a higher value. Corporations that degrade the world, receive a penalty and are worthless. When the financial value of a corporation reflects their impact on the world, corporations are motivated to take more actions to improve the world. Not a bad concept!

Impact Investors represent over $300 billion of capital, just in the U.S. Another $18 trillion in investments are controlled by government pension funds that have agreed to the United Nations ESG (Environmental, Social and Governance) guidelines, which follows goals that are supported by Impact Investors.

Impact Investors and ESG principles have been supported by a new type of institution, the “B” Corporation. Corporations (for and non-profits) have been the instrumentality of Capitalism for the last two centuries. But lately has been an understanding that something else was needed, leading to the creation of the Benefit Corporation (or “B” Corp). The “B” is a social good… preserving the environment, developing low-income housing, inventing affordable medicines, improving social equality… above shareholder profits, normally the highest priority for corporations. B Corps require independent audits to confirm that they truly performing according to their “Benefit” goals.

B Corps and Impact Investors will be a force for good. But the B Corp is typically a For-Profit corporation. What about the Charities and Foundations that have driven so many good causes? The next stage in B Corps could be BRRM or the Balanced Risk Revenue Model. BRRM allows for-profits and Charities to work together while preserving the best aspects of both types of corporations. I could go on and on about BRRM, and I will, but in another blog.

Full disclosure… last year I started working with Nicky’s Gardens of Hope, a new Charity to care for Autistic and disabled adults, to develop their operations. While some incredibly good services for disabled adults exist, they are rare. For-profits are too often focused on shareholder profits and non-profits are often too dependent on government funding (which is unreliable at best). Instead of choosing one model or the other, we’re introducing BRRM as a third alternative, providing the best financial features of both worlds, while still keeping the needs of disabled adults foremost.

There are many other innovators out there, and many in the financial world that are converting from traditional investors to Impact Investors. Impact Investors are learning that when corporations intentionally generate bad outcomes (think tobacco, big oil, gun manufacturers), eventually negative value can wipe out earnings. Good investments in good people, doing good things… usually have few skeletons in their closets that can wipe out their value.

Capitalism has proven to be one of the greatest engines of change in human history. If we choose to use that power, America can change the world. Again. The tarnish on Capitalism and Democracy can be wiped away by new good deeds. A new generation of Capitalists wants to ready to return Capitalism to its origins, and possibly make the next decades the greatest in human history! I don’t know about you, but joining this American revolution is the best way I can think of to spend my 4th of July!

What do you think? Is it time for Capitalism 2.0? Tell us what you’re thinking!

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The Meatless Revolution Has Arrived!

Meatless used to mean deprivation! Going meatless meant sacrifice… for religious reason, because your cholesterol is high, you might even want to save the planet from global warming. Sacrifice! Today, though, a switch from meat to meatless is probably more because we don’t quite trust meat anymore. That has placed us on the verge of a new world of fake meat. Looks like meat, tastes like meat, it may even be meat…. from a lab! Lets dig right in to a heaping serving of the meatless future!

Meatless products are just that… products. These are products that are being demanded by consumers. Meatless food is no longer the domain of a hippie generation or vegans. Multi-billion dollar corporations are developing meatless products that look and taste a lot more like real meat.

In the 20th century, vegetarians were a mere curiosity. We thought their diets were funny or weird. Today corporate America is fascinated by their diets and their market potential.

Whoever can make the best tasting, nutritious, meat alternative will control a huge market. The US domestic beef industry is worth $60 billion, and the poultry industry is worth another $50 billion. And then there is the global potential for a high quality meat substitute. Nations that have recently become rich, especially those in Asia who come from a vegetarian tradition, might “upscale” their diets with fake meat instead of adding beef, pork and fish.

The rise of the vegetarians in America has been aided by changing demographics. Previous generations of immigrants mostly came from Europe, and brought their meat based cuisines with them. In 1960, 75% of immigrants came from Europe. Today it is a mere 8%.

Recent immigrants are more likely to arrive from Asia or India, nations with vegetarian traditions. America’s palette has slowly evolved, taking in new tastes and spices, incorporating “meatless” foods into mainstream eating. Some dishes merely use vegetables instead of meats. Others use tofu, tempeh and other meat substitutes to add protein. Still, most of these early attempts at meatless dining were more interested in a balanced diet than in duplicating the flavor of beef or chicken.

While our palettes were changing, our domestic agricultural industry was also changing. Family farms were giving way to farm factories. At home, few families were eating home cooked meals. Instead, take out, prepared foods, and microwavable meals became common. While this was very convenient, people began to wonder about the quality of this food. It was too processed, had too many strange ingredients, and factory conditions raised many questions about food quality and how well treated animals are in a “food factory”.

For several decades food producers have been focused on reducing the cost of meat. The most obvious way to reduce cost was to reduce space, but close confinement of animals creates the conditions for breeding disease. Big agriculture struck back with antibiotics. After a while, daily doses of antibiotics caused diseases to become resistant. More antibiotics were given, along with synthetic hormones to speed up growth, and a bit of genetic engineering to keep it all working.

Factory food animals might live and die without ever seeing the sun, or standing on real dirt and grass. Inhumane treatment of animals and rising questions about the safety of meat from factories has made us take a close look at our burgers and chicken nuggets. Many do not like what they see. An alternative made from plants is just what these suspicious consumers want.

The rest of the world, even the non-vegetarian world, eats a lot of plants. Especially in poorer nations. Not just the US market. Fake meat has mostly been a premium product for wealthy American and European consumers. Meat is usually more expensive than the nutritional equivalent from plants. Producing “meat” in a factory, at a lower cost than real meat, that’s the Holy Grail of fake meat.

In theory, it’s possible. It takes 2 to 10 pounds of animal feed to make 1 pound of meat. A factory might be able to make a pound of meat from the very ingredients used to raise animals… without the animals.

Think about it. We’ve been able to make fake leather, fake wood, and fake just about everything else in factories. And we can sell those products at lower prices than the real items, because nature is pretty inefficient. At least compared to a factory. Food engineers are hard at work developing the technology that can make more “meat” from less materials than the natural process of feeding a cow or a chicken. Some entrepreneurs are even trying to grow real meat directly from animal cells. Without the need for the rest of the animal… hair and feathers, skin, bones, and organs… scientists may be able to beat nature at its own game.

Globally, the world meat market is worth $1 trillion or more. Depending on how efficiently we can produce fake meat, greenhouse gasses could be dramatically reduced. Nutrition in the poorest nations could be massively improved, diseases reduced and life prolonged. But are we willing to make the switch to fake meat?

Major fast food chains think so! While their history with fake meat is on again and off again, they all seem to be moving towards some form of non-animal meat. Some early attempts failed. Some are only available at limited restaurants or are just temporary offers.

Consider McDonald’s. In their earliest days they had the “Hula burger (grilled pineapple), which was replaced by the Fillet O’Fish way back in the 1960’s. They do have adopted a permanent vegetarian burger option… but only in Finland. McDonald’s has been reluctant to widely introduce fake meat because the major suppliers (Beyond Meat, Impossible Burger) have not been able to keep up with demand. McDonald’s does not want to introduce an item that then become unavailable. However, once production issues are worked out, McDonald’s may take a second look at a meatless burger.

Other fast food chains are moving ahead. Burger King has committed to the Impossible Burger. It is only available at select restaurants today, but it will be available nationally later in 2019. TGI Fridays, Carl’s Jr., and Red Robin serve either the Impossible Burger or the Beyond Burger. Del Taco, a lesser known sort of “Taco Bel”, has started to offer impossible burger based taco’s and burritos. Little Caesars will be the first to offer a fake sausage option.

The food revolution is on! What about you? Have you been eagerly awaiting a meatless burger or fried chicken without the chicken? Or do you dead the coming of the meatless revolution? Tell us what you think!

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Impact Investing… The Next Wave Has Arrived

Impact Investing is a simple idea that is taking the world by storm. In the last few years there has been a wave of interest in Impact Investing, and a wave of actual investments. But what is Impact investing? Why is it important? And why is it so important now? Lets dive right in and find out!

Today, most Americans invest in stocks, either directly or through mutual funds or other financial “instruments”. Back in the 1970s few Americans owned stocks. But as the stock market continued to rise faster than inflation, money slowly moved out of safe but poorly performing bank accounts and into Wall Street. Pensions evolved into 401Ks, and their managers turned away from low interest US Treasury notes and invested in stocks, bonds and more exotic investments.

As money migrated to financial investing, individuals who selected haw the money was invested gained immense power. Some large individual investors, calling themselves “activist investors”, wanted to do more than move their money from one firm to another. They wanted to set conditions for their investment, setting goals and timelines for corporate changes. Big funds and big investors realized that their enormous economic power could change the world.

Every corporation has different goals, which are often usually stated or implied in their financial reports. By creating published rules for their portfolios of stocks, bonds, and investments, funds can follow “themes”. One fund might only invest in South African bonds. Another may only buy technology stocks. Yet another may have a mandate to select higher risks investments, with better that average returns. Once portfolios are assembled thematically, non-professional investors can pick one fund (that is professionally managed) rather than researching, buying and managing their own portfolio.

Consider the Teachers Insurance and Annuity Association (TIAA), the pension and insurance fund for teachers in America, with over $600 billion in assets! You can get a lot of companies to do what you want when you have that much money to invest. But TIAA is unique. TIAA may be answerable to millions of teachers, but those teachers are answerable to… kids.

Kids do ask the strangest questions. In the age of Google, they can ask very POINTED questions. Like… “Does teachers invest in guns?” “Why don’t you put more money into renewable energy?” “You invest in company ‘X’? Aren’t they big polluters?” “I saw a terrible new story about sexual harassment at company ‘Y’. The story said that your pension fund invests money in them. That’s not true, is it?”

These questions shaped how TIAA invested, over time divested itself of perfectly mainstream investments with questionable ethics. Later, NUVEEN became a TIAA company, and set up funds that were explicitly “Good Guy”, with over $20 billion worth of Impact Investments.

Did TIAA create Impact Investment? Not really. Unlike superhero movies, the origin story for Impact Investing involves more than just a spider bite.

TIAA and firms like it are one important thread in the story. But equally important is the rise of the Millennial. These young investors constantly face crises… the global financial crisis, climate change, China, globalization, school shootings (from Columbine to tonight’s latest shooting, these kids ARE Millennials), war between the Republicans and Democrats, immigration, school loans, government debt, their debt! The list is long.

Yet, the Millennial is used to the world… at least the on-line world… constantly innovating and changing to meet their needs. Shouldn’t their financial firms do the same? A quick search of the internet reveals search tools that rate firms by social value, by adherence to social investment principles, and similar “good guys” metrics. Organizations like GIIN (Global Impact Investment Network) promote and report on Impact Investment. New organizations are appearing almost every day.

A third thread leads to the United Nations. Since the creation of the United Nations in 1945, the relationship between world peace and the economy has been a regular item of discussion. After WWII, the world began rebuilding shattered nations. By the late 50’s, underdeveloped nations became the new battleground. Poverty, famine, and corruption were creating wars, revolutions, and mass migrations.

If poor nations could be developed, much misery could be avoided. But the lack of transparency in these nations led to corruption, unenforceable deals, and lost capital. Without transparency, there would never be enough deals from good governments and good companies to raise up the standard of living in poor nations.

The start of the new Millennia looked like the right to make a big move. In September of 2000, the United Nation hosted the Millennial conference in New York, and the Millennial Development Goals (MDG) were created. These eight goals promoted education, gender equality, health, human rights, and economic development. Few rejected these goals. Instead, some said that they lacked the funding. Enter the early pioneers of Impact Investment.

Of course, the UN did not stop with MDG. By 2015, MDG was expanded into 17 goals, called the Sustainable Development Goals (SDG). It also led to ESG:

  • Environment: Don’t intentionally do harm to the environment. Extra points for you if you have positive policies for recycling, and other environmental issues.
  • Social: Corporations and governments are responsible to their communities, both inside and outside their organizations. Support employment and education, and you’re a good guy. Grow through bribery, corruption, and sexual abuse, and… you’re not.
  • Governance: How do you run your organization? How many women and minorities are on your board of directors? Your senior management? How are whistle blowers treated? At a time when the US has nearly zero unemployment, well treated workers ARE a competitive advantage.

There are different estimates of the size of US Impact Investments. Should we just count the assets in funds that are explicitly “Impact Investment”? Or should we include all funds with similar goals? A common, but conservative, market estimate is at least $300 billion. A staggering amount, but it is only the beginning.

The US Social Investment Foundation uses a broader measure, including ESG. By the start of 2018, their measure of SRI (Sustainable, Responsible, & Impact investing) rose to $12 trillion. Yet another group, the PRI (Principles for Responsible Investment), tracks ESG signatories. The list, so far, includes over 1,200, asset managers, investment managers, and service professionals.

In just the US, ESG signatories include such prominent names as: the AFL-CIO, Alliance Bernstein, BlackRock, Kohlberg Kravits Roberts, Legg Mason, Mellon Capital, Neuberger Berman, Nomura Capital, Prudential Real Estate, Rockefeller Asset Management, and Turner Investment Partners. Add to this government retirements funds for Connecticut, (over $32 billion), Illinois, Los Angeles (nearly $60 billion), New York city and New York State. Europe has even more signatories, and more pension funds. Consider that the world’s government pension and insurance funds are valued at more than $18 trillion!

That’s a tsunami of money, and its washing up on the shores of nations around the world! If a tsunami can reshape the shoreline, this monetary tsunami will reshape politics and economies around the world. Or at least that’s my Niccolls’ worth! What about you? What do you think about the future of Impact Investing? Feel free to share you opinions here!

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Airplanes By The Numbers: The A380 Is Dead, The 737 Is Back In The Air, & The 787 is Grounded Again

As passengers squeeze into ever smaller seats for increasingly delayed flights, a war has been raging for between airline manufacturers. In America’s corner we have the Boeing Company, the world’s biggest Airplane manufacturer. In Europe’s corner we have AirBus, an amalgamation of Europe’s national airline industries from the 20th century. Each company had a different vision for the air travel industry in the 21st century. Ironically, both firms may have lost!

For decades, the 747 jet dominated national and international air travel. It was a revolutionary plane when it was launched in 1970, and became one of the most purchased airplanes in the world. Today, the design is old, the engines are inefficient, and it is limited to landing at larger airports. The world ha been waiting for a new solution.

But what sort of plane can replace the 747? The 747 defined the JUMBO jet. Larger than the earlier competition, it made air travel affordable. After the 747, everyone could afford to fly! Airbus had an idea for a 21st century sequel, the double-decker A380. By using two decks, the plane could be kept shorter and narrower, and still hold between 525 to 850 passengers (depending on configuration).

Boeing had other ideas. Boeing initially planned on building something similar to the A380, but quickly changed those plans. They could build a super-jumbo like the A380, but market data change their plans. Air travel was increasing, and delays at major airports were getting longer. The biggest airports were reaching the maximum number of daily flights, and a super-jumbo could only land at a few airports. Knowing this, Boeing looked at all of the smaller airports that still had available capacity, and focused on two planes, the 737 and the 787.

Boeing’s latest-greatest plane was the 787 jumbo, and their “market refresh” was the smaller 737 plane. The 787 was an all new, high-tech flagship plane that could replace the 747 in larger airports. The 737 is a venerable line of planes that were first launched in 1968, two years before the 747. These planes were upgraded to digital equipment, and new high-efficiency engines. They could still use many older spare parts, the repair crew didn’t need retraining and pilots could carry over their skills (and seniority) from previous 737 models. At least, that’s the way it was supposed to work.

The A380 is already out of the running. Boeing was right! Building a plane that can only land in the big airports was a bad idea. Big airports cannot get permission from their neighbors to expand in size, hours, or daily landings. New orders have not met expectations, and it was recently announced that the last A380 will be built and delivered in 2021.

Boeing should have been the big winner. But as everyone knows by now, the 737 is the subject of intense scrutiny following two fatal crashes. The “upgrades” were the problem. New engines make the plane “nose up” slightly, and can cause the engines to stall, crashing the plane. Software was supposed to fix the problem and adjust the say the plane flies. Keeping the “feel” of the plane remains the same from older planes to the latest upgrades. But the software may not have worked the way it was supposed to. Pilots did not receive extensive retraining since, “all 737’s fly the same way”. Automated features may “over steer” the planes, causing the crashes.

But there may be an even greater problem… over-delegation . Normally the Federal Aviation Authority (FAA) provides oversight of the development and construction of new planes. And after the first crash, the FAA might have made more demands before letting the planes back into the air. But in an age of increasing delegation and disinterest in government control, the FAA handed control over more safety management and reporting to Boeing. After the second crash in less than a year, will the FAA continue to allow Boeing to fix it’s own problems?

Meanwhile, the 787 has had problems of it’s own. Back in 2012 there were electrical fires, which were blamed on defective batteries. Last year one plane had a double engine failure. Luckily, this happened after the plane landed. Then, last week, multiple 787’s were grounded either due to problems with engines and GPS.

The 21st century opened with three innovative commercial airline designs. One is already gone. One is fully grounded. The last, is partially grounded, but has had repeated problems. Hmmm… I wonder what a bus ticket costs!

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ESG… Impact Investors Rank “Good Guy” Companies

Can you do WELL, by doing GOOD?

Wherever there are investors that are ready to put money into companies, you will also find analysts trying to figure out if that investment is a good idea. But what is a good investment? What is it that turns someone looking at a “good investment” that turns them into actual investors… individuals who are ready to put their money into a company? What gives an investor the confidence to fund a business?

First of all, investors wouldn’t be investors for very long if they didn’t get a return on their money. Most investors want to make at least the “average return”. That average always changes, but for the last century stocks have returned around 10% per year, and bonds have returned around 5%. Bonds are generally viewed as safer than stocks, and therefore have a lower return. Likewise, the more rock-solid and safe that a stock (or bond) is, the lower their return.

So far, so good. If you want to get a higher return, the trade-off is higher risk. Take on enough risk and the company you invested in may not make enough money to pay the return you expect, or it could even go out of business, costing you your entire investment. When investments pay more than what appear to be similar investments, there is usually more risk. But what makes an investment risky?

Unfortunately, there are no simple answers. Teams of research analysts work around the clock on every publicly traded corporation in America to answer this question, and they often arrive at dramatically different conclusions. And, of course, there are always dishonest corporations that hold back data or intentionally mislead investors.

The US and the UK put a lot of manpower and regulations into making risk information available and understandable. Few other nations have such high standards, and therefore are believed to have more hidden risk. That’s why the US and the UK attract so much foreign investment. Russia, Africa, and other less transparent nations lag behind. Wouldn’t it be great if there was some way, some universal and global way, to make it a bit less risky to invest?

Welcome to ESG: Environmental, Social and Governance. ESG won’t solve every problem nor will it de-risk every possible investment, but it does take a very big step towards creating a global standard (and cure?) for risk in investments.

While it is an over simplification, ESG basically promotes “good guy” thinking. When truly evil things are done in the world (polluting our environment, overcharging for critically needed medicine, abusing workers), we either find individual bad actors or we find that the corporation itself didn’t follow regulations and other rules. Corporations are regulated. They pay a ton of money for HR, Compliance and other internal groups that are supposed to sniff out bad people doing bad things.

Investment banks are regularly fined when they mislead investors. The Cigarette industry nearly collapsed due to their conspiracy to hide the dangers of their products. The asbestos industry DID collapse after their similar dishonesty was revealed. The drug companies that created the opioid crisis have just been fined $200 million. Oil and coal companies are being scrutinized. It does take a long time to discover endemic bad behavior, and when bad actors and bad corporations thrive, investors are often left with worthless investments.

If all corporations followed a universal set of ethics, risk would be easier to identify and track. It would be harder for bad players to hide. But corporations don’t want the world to know about their internal problems and shortcomings. Will they let the world know when they act selfishly or are just plain evil? They may not have a choice. Investors are better informed than in the past, and they are demanding to know how their investments are managed. Millenials are very clear that they want to invest in companies that support their personal interests and beliefs.

Even traditional investors are increasingly frustrated with the hidden risk in traditional corporations, and the idea that it’s only the “insiders” that can profit from big corporations. Investing in companies that support ESG has become very popular, and that interest is growing. In the US alone, ESG based assets totaled $8.7 trillion in 2016, a 33% increase from 2014. According to Oppenheimer, ESG based investments now represent 21.6% of all managed assets in the US, with a global total of $22.89 trillion.

WOW! ESG could define how capital markets work around the world. Lets look at the elements of ESG.

  • Environmental: The corporate world has generally accepted that the environment… has value. Degrading the environment creates negative value. Improving the environment creates positive value. Financial analysts know that when corporations illegally dump toxic chemicals, they are eventually found out. Regulators, courts, and shareholders will hold them accountable. Analysts now measure environmental value, incentivizing pro-environmental activities.
  • Social: Each corporation can make our world better or worse. A real estate developer that only builds luxury housing may be profitable, but generates little other value. A firm that builds housing for the poor, or hospitals, or schools… generates higher property values and new jobs… just like a luxury firm… but also does social good. Even when being a “good guy” only leads to a small positive value, it may be enough to sway some investors to the corporations that follow ESG.
  • Governance: Elizabeth Holmes created Theranos, a $10 billion fraud. Their board of directors was impeccable, two former secretaries of state (Henry Kissinger, George Schultz), Wells Fargo’s former Chairman, and more. But not a trace of medical experience. The brilliance of the board was intended to blind financial analysts to it’s complete lack of appropriate expertise. While this was obviously intentional fraud, many boards of directors are 100% multi-millionaire white men, over 60, with an MBA from an ivy league school. Is this the BEST board to… identify opportunities in China and India, understand the consumer preferences of minorities, attract new Millennials, sell to women (50% of every market)? If you want to attract ESG investors, you had better carefully consider the ethnicity of your board!

Even the United Nations has taken an interest in ESG. ESG could bring about a more equitable world and encourage investments in the least developed nations. It would even allow the developed world to put a value the untouched resources of the undeveloped world, which just might help preserve some of those resources for another generation or two.

Nor is the UN alone. The PRI is a group that trains and certifies groups in the Six Principles of Investment, that the United Nations developed. If ESG is how to be a good guy, then PRI is the Bro’ Code, for good guys. And then you have the GRI (Global Reporting Initiative), which promotes “Sustainability Reporting”, a similar set of standards. Especially, for the Environmental and Social aspects of ESG.

It looks like ESG is breaking out all over the world! What about you? Do you have investments in a portfolio or a retirement fund? Have you ever thought about the values of your fund, and what your fund managers expect from the firms they invest in? Maybe you should give it a bit of thought, or even call the people who manage your money and see if ESG is on their mind!

What do you think? Should ESG matter? Is this just a fad, or does it represent values that you want to stick by? Let us know what you’re thinking!

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Noah’s Ark Theme Park Fails

Remember the children’s story from the Bible, “Noah’s Ark?” That’s the one where 4,000 years ago a small middle eastern family builds the world’s largest boat, sails through the world’s most catastrophic flood, while managing the world’s largest animal rescue? You remember the one… where Noah saves two of every living creatures on earth and then repopulates the world?

Most Bible scholars agree that this is indeed a Children’s story. It was never meant to be a history lesson. Yet, some Christians believe that the Bible, including the story of Noah’s Ark, is an accurate historical document. Some firmly believe that Noah had dinosaurs on the Ark! Could the story of the Ark be true? Is there any possibility that the Ark could be real?

The Bible is filled with strange tales. The strangest, and most violent of which, are usually left out of Sunday sermons. But just about everyone has heard the story of Noah’s Ark. I mean, it’s got all those animals and kids love animals! Even kids from secular families know the story about the Ark. But a very few people who truly, TRULY loved this story want it to be true. When they grew up, they would build a real Ark.

Did you know that there have been several attempts to build an “authentic” replica of the Ark? that’s true! Except, of course, that none of these “replicas” had much to do with the Biblical boat. Some used a steel hull, others used modern tools and materials. None used the materials and tools from Noah’s time, because… well… that would be very difficult to do.

Still, regardless of the questionable practices, one Ark that been getting attention. The one in Kentucky called, “The Ark Encounter”, that was created by Biblical Creationist Ken Ham. But before we look at The Ark Experience, lets first take a look at why biblical scholars argue over the historical facts of the Ark. 

If the Bible is right the Ark was something like 500 feet long and built over 4,000 years ago. Bronze was still a relatively new material. However, to even have a hope of this Ark holding together for a few hours in a calm sea, it would take iron or steel nails. But iron barely existed, and steel would not be invented for a long, long time.

Given how little metal existed in the world, just the nails used to hold together the planks of the Ark represented a fantastic amount of wealth. Yet, the Bible tells us that the Ark, a boat the size of a cruise ship, was built by a poor family of 6 without any help or previous experience in building ships. A bit difficult to imagine?   

In reality, it’s a lot harder to imagine. In Noah’s time, everyone was a “subsistence farmer”. It took just about 1 farmer to make enough food for 1 person. Noah’s family would need to spend almost every hour of the day just to feed and clothe themselves. They would have very little free time, certainly not enough for the world’s biggest DIY project.

What does it take to build an Ark? According to the FAQ on the Ark Experience site, it took $135 million to make a replica of Noah’s Ark. Even allowing for inflation, Noah would have been too poor to pay even a few million for the lumber he would have needed. Since there wasn’t any steel, and he wouldn’t have been able to buy bronze tools, that means that this family would need to fell, strip, and finish these trees on their own to turn out the 3 million board feet that The Ark Encounter stated was needed for their replica.

Of course, that means that they would also need to mine the ore they would need for the millions of bronze nails to secure together the planks of the Ark. Dozens of lifetimes would be spent just moving all of these materials around, sharpening tools, and making new tools when old tools wore out. Quite a task for a family with very little time to spare after they feed and clothe themselves.

Another small task for the overworked Noah family is to be security guards for the greatest treasure of that age! Not the Ark… but the nails for the Ark. Millions of bronze nails, plus their tools, the copper and tin mines, and the foundry to refine and forge bronze, would be incredibly valuable. You would need to guard their metallic treasure day and night.    

With a family of just six, it would literally take thousands of years to accomplish the tasks that The Ark Encounter website tells us are needed to duplicate Noah’s task. Of course, Noah’s family was supposed to have built the Ark with their own hands, while the replica in Kentucky was built with steel, power tools, bulldozers and a lot of hired workers.

And the Ark Experience Ark doesn’t, well, float. The Bible clearly states that the Ark was covered in “pitch” to waterproof it. The Ark Project chose not to coat their replica because that would make it sticky and gross. If the replica was ever placed in water, even the people who manage the Ark Encounter would expect it to sink. With a rather inauthentic Ark, and enough work to keep a small family occupied for a thousand years, did the Ark Encounter prove anything? I think it did!

While it was hardly intentional, Ken Ham’s Ark Encounter conclusively proved that a small family 4,000 years ago, could not have built the Ark. It’s not just a question of how impossible it would have been for a bronze aged family to do all of the work (and find all of the resources) necessary to build an Ark. Even with $130 million, Ham’s team was unable to build the Ark without the use of modern technology.

Unfortunately, the investors who raised the $130 million for the Ark Encounter assumed that Ken Ham was a bit better at math than he actually was. Ken has rather deplorable skills at estimating the work needed for a carpentry job were no better at his skills in estimating ticket sales. The Ark Encounter might sink if it were set afloat on the Red Sea, but it has proved to be fully capable of floating on a sea of red ink.

Did Noah and his family build a giant Ark 4,000 years ago? It seems extremely unlikely! Then again Ken Ham is having quite a few problems building a theme park for a giant Ark today. Maybe we should just leave stories about floods and Arks to fairy tales? Yeah, that’s probably a good idea!

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