The Resilient Investor (2015)
The Invisible Heart of Resilience
How Becoming Personally Resilient Helps Create a Resilient World
YOU MAY RECALL THAT WE MADE A RATHER BOLD CLAIM IN THE introduction, stating, “the strategies that best prepare you and your family for a range of future scenarios are inherently beneficial to the systems upon which civilization and all life depend.” In this final chapter, we explore the roots and the far-reaching consequences of this idea. We conclude by envisioning how a brighter future could take shape as more people begin using the lens of resilience to guide their decisions.
For those with even a cursory interest in economics, there is likely a familiar ring to the idea that pursuit of personal interests yields societal benefits. We touched on this in chapter 3 when we laid out the show me the money strategy, a values-neutral approach to asset allocation derived from Adam Smith’s “invisible hand of the market.” Unfortunately, it has become all too evident that a civilization based solely on competition and maximizing self-interest does not always create the desired benefits or distribute them equitably. In fact, it can frequently cause great harm to people and nature.
Nonetheless, as we have developed and worked with the RIM, we’ve come to appreciate the nugget of truth in Smith’s teachings. What he lacked—or at least what is lacking in the way he is interpreted today—is a big enough perspective on what is meant by the pursuit of an individual’s best interests. By expanding the definition of what self-interest really means, the essence of Smith’s teachings may take on newfound relevance in a world searching for answers to complex challenges.
Here’s why: In our experience, when investors broaden their goals so that they focus not solely on their financial assets but their personal and tangible ones as well, they tend to utilize strategies (such as those described in this book) that enhance the health of the community and the environment. Conversely, investments that harm the fabric of society fall out of favor because they make us less resilient. Many people realize (to take two obvious examples) that a deteriorating global environment and extreme levels of inequality are detrimental to everyone, and they understand the folly of profiting financially while furthering negative trends.
We have coined the term invisible heart to reflect this larger view of self-interest. It does not ignore the financial realm but recognizes that a hand left to its own devices can be used for healing or can cause harm. A hand needs a heart to guide it. We are all connected in more ways than we can fathom; as more people recognize this, the ancient and universal wisdom of the Golden Rule—to not harm others—becomes a foundational principle that guides our decisions.
Here is our expression of the invisible heart principle:
When investors take a comprehensive approach to enhancing their self-interest, one that is larger than solely personal or financial, the invisible heart of resilience exerts a tendency to enhance societal well-being.
Throughout this book we have seen how becoming more resilient empowers individuals and prepares them for an uncertain future. Now we can appreciate that the effectiveness of these strategies is strengthened by the fact that we are also investing to support community and environmental relationships on which we all depend.
The invisible hand implies that there is no need to consciously decide to be of service—the mere fact that one is successful in the market implies that one has done something beneficial for society. But as we have seen, there are many entrepreneurs today who are deliberately combining their profit-making ambitions with their zeal to make a difference in the world. This is not just about such practices being good for business; it is about creating the societal and environmental conditions necessary for people of all economic classes to thrive. The invisible heart builds on these intentions, enabling investors to use all three of our asset types (personal, tangible, and financial) to yield larger benefits. Embracing the triple bottom line of “people, planet, and profit” is what makes true resilience possible.
For decades we and our colleagues have been urging investors to adopt this bigger perspective. Today there are ever more opportunities to strengthen communities and revitalize ecosystems. All three of the strategies that we included in the RIM (close to home, global economy, and evolutionary) were designed to bring about positive outcomes in the larger world that we inhabit. For some time each of them has been tracking upward on a slow-but-steadily-rising growth curve, and over the past decade they have all seen a surge in both popular interest and institutional adoption.
Let’s imagine that this continues and even accelerates as the invisible heart unfolds its beneficence. What would our world look like if all nine baskets get filled to overflowing by enthusiastic, resilient investors?
Close-to-Home Investing: Creating Resilient Communities
In many communities all it takes to get inspired about the power of localism is to visit the weekly farmers market. Besides the fresh and delicious food, we often find local musicians, nonprofit groups, and, most of all, plenty of opportunity to bump into your neighbors and catch up on their doings. New weekly markets are popping up in ever smaller towns, while the long-established ones keep growing—in Boulder, Colorado, around 18,000 people show up every week! Munching on sweet corn-on-the-cob, we can begin to savor the value of creating strong, resilient local economies.
A fully realized close-to-home future will grow from these early shoots. Today even Boulder’s thriving market provides less than 1 percent of the food consumed in the county; might that double in five years? In 10, grow tenfold? A group called Local Food Shift aims to do just that with its 10% Local Food Shift Pledge. Of course, except in our darkest futures, total local self-sufficiency is not the goal; each region will cultivate and produce its own most abundant resources and products while continuing to engage with the global economy in a more balanced way than we do today. As the climate costs of long-distance transportation are factored into our markets, we may see revitalized regional and interregional commerce, offering exciting opportunities for growing all kinds of businesses.
In chapter 3 we sketched out some appealing, even essential, ways that people can invest using a close-to-home strategy. As more of us make a diligent commitment, here are some ways that we envision it showing up in our communities.
An emphasis on personal resilience practices means that people will invest more of their time and attention in their homes and families. More people will look for ways to personally supply their basic needs such as energy and food, store rainwater or reuse graywater for irrigation, retrofit for energy efficiency, and add solar panels.
Neighborhoods will take on renewed importance. People will invest more time getting to know their immediate environment and collaborating on projects that build social and tangible assets for all, such as open space and gardens. Systems such as “time banks,” as well as local currencies, will help foster the exchange of skills and locally produced goods.
Green building is likely to become the norm for commercial development and private homes, as the resultant energy savings increase over time; regional sourcing and reuse of materials may also support local economies.
Building on today’s fledgling efforts, new mechanisms will facilitate local investment, including community banks and loan funds, and perhaps the long-sought dream of local stock exchanges. Cities, counties, and states may join in these efforts by issuing publicly funded bonds for agricultural and green development purposes or by establishing publicly owned banks, as modeled by Bank of North Dakota.1
It is worth noting that some of the most innovative solutions to issues such as climate change and poverty are taking root in cities, home to more than half of the world’s population. The title of a recent book, If Mayors Ruled the World, encapsulates the idea that cities “are the primary incubator of the cultural, social, and political innovations which shape our planet.” Author Benjamin Barber proposes a world Parliament of Mayors, which would “enable cities to have a stronger voice in global affairs, provide a worldwide platform for the sharing and transfer of urban best practices, and establish a more democratic basis for addressing global priorities than has ever existed.”2
Much of the promise of the close-to-home strategy plays out at the regional level. As local economies connect to create regional networks and more capital stays closer to home, the possibilities for culturally appropriate economic development and collaborative stewardship of local natural resources are boundless. Expect to see energy systems decentralized through utility cooperatives and the production of biofuel, wind, small-scale hydro, and solar power as well as proactive climate adaptation (desalination in drought-hit coastal areas, forest and streamside restoration in flood-prone areas). All of this builds resiliency as people exchange information, work together on projects, and, most of all, celebrate the land they call home.
Sustainable Global Economy Investing: Creating a Resilient Economy
Let’s envision a future where people say, Enough! We are not content to orient our lives or our society solely around the pursuit of wealth. Other ecological and human values are equally important, and we want them all represented when we participate in the market. How might the global economy respond to an infusion of workers, consumers, and investors, all expressing their values through their financial decisions and expecting more—much more—from corporate interests?
One place we could look for change would be in the workplace itself. The pendulum is swinging back toward sharing both the responsibilities and the rewards of business. Surveys of the millennial generation show a marked desire to have their work reflect a sense of higher purpose. CEO salaries would come down from the extraordinary heights they have reached today. Discrimination of all stripes would diminish, while progressive companies that promote a healthy workplace will continue to attract the best talent.
We would also expect to see an expansion of how best to organize a business. Gar Alperovitz points out that there are already “more than 11,000 companies owned entirely or in significant part by some 13.6 million employees” and that cooperatives have “at least 130 million members (more than one in three Americans).”3 The 1,000-and-counting certified B Corporations, including the authors’ firm and the publisher of this book, will continue to grow at a rapid pace and will attract long-term investors who embrace their larger mission. “Conscious capitalism”4 is another expression of the quest to embed a sense of higher purpose into corporate culture.
In the tangible realm, we would expect to see increased awareness about purchasing decisions. Information about any product or service is becoming ubiquitous, fed by peer-to-peer reviews and mobile technology. Companies will compete on a variety of factors, striving to demonstrate an authentic commitment to social and environmental values. This in turn bolsters the already-solid case for SRI, as companies that succeed at meeting genuine human needs become even more profitable while those that are seen as part of the problem are shunned.
With the workplace, marketplace, and investment arena all becoming values-oriented, the progression toward increased transparency and accountability will continue, including the evolution of more-uniform global standards. As SRI started gaining momentum in the 1990s and investors demanded that their investments take environmental, social, and governance issues into consideration, an entire industry emerged to monitor corporate behavior. Today companies find it much more difficult to hide behind a veil of secrecy, but compliance is still largely voluntary. It is likely that more of this kind of information will be required by regulatory agencies because this will be deemed as pertinent to disclose as financials are today.
Similarly, there will be increased pressure on government to step up to the policy plate, moving us forward on a wide range of issues. Wealth inequality, already a hot-button topic, will not abate until steps are taken that go beyond what is considered politically feasible today. Climate change is sure to reach a tipping point; even today many companies are clamoring for the United States to “put a price on carbon” so that businesses can know what the ground rules are. Once in place, today’s wave of investments into renewable energy and efficiency solutions will grow exponentially, leading directly to an enduring increase of “green jobs” that helps to rejuvenate the middle class.
This society-wide embrace of a shared responsibility for the planet—and one another—could lead to solutions for today’s seemingly intransigent problems. Tax reform could address inequality, penalize polluters, and reward productive innovation. The GDP, already seen by many as an insufficient indicator for measuring general well-being, would be dethroned by more-complete measures of how we are doing as a society.5 All of this would, in turn, support even more private and public innovations that move us strongly in an upward direction, one that blends right into the transformative and the evolutionary.
Evolutionary Investing: Creating a Resilient World
What then might a surge of evolutionary investing bring to the future? This could be a very short section because the only possible answer is Who knows? Complexity theorist Stuart Kauffman, in Reinventing the Sacred, puts it this way: “This web of life, the most complex system we know of in the universe, breaks no law of physics, yet is partially lawless, ceaselessly creative.…This creativity is stunning, awesome, and worthy of reverence.”6
This is the story of life itself, a strategy with a 3.8 billion-year track record. Putting attention and capital into evolutionary investing is a conscious decision to participate in this ageless process, helping spur the evolution of our society into something new. Here we follow the promising threads of profound and gentler technologies, re-envision governments and economies to be more responsive and respectful, and challenge ourselves to see what is over the horizon, boldly following the true north of our inner compass.
If significant numbers of people embrace this strategy as a piece of their overall resilient investing plan, the pace of innovation and the discovery of new solutions would surely accelerate. The generative potential of human society will foster new forms and structures that better meet the social and ecological imperatives of our time.
Although the outcomes of emergence cannot be predicted, inquiring minds yearn to glimpse at least the contours of what might appear. Science-fiction writers and futurists immerse themselves in these ideas, offering portraits of worlds and societies that most of us find difficult to imagine. We have already discussed the fact that virtually every field of human activity is ripe for reinvention, as our technologies, social contracts, and individual consciousness continue to unfold.
Rather than speculate on specifics, let’s focus on what an evolutionary perspective suggests about the overall direction of change. To do this we call on several compelling models that map out a progression of developmental stages seen in both individuals and societies. Psychologist Clare Graves’s research in this area has been popularized through Don Beck’s spiral dynamics model and Ken Wilber’s integral theory. In its simplest expression, human and social development suggests an inner evolution: An infant is completely self-absorbed, or egocentric. As we grow we identify with our family or tribe and become ethnocentric. Today a growing number of people have moved to the next stage and identify primarily as worldcentric.
A recent application of this theory applies it to economies. In MEMEnomics: The Next-Generation Economic System, Said Dawlabani asserts that our current economic system is in a process of decay, being replaced by a new, emerging system designed around natural principles that is better at distributing wealth and the benefits of innovation. It is both local and global at the same time, relying on a vast infrastructure of informed global citizens.7
Central to societal evolution is the increasing penetration of technology into all realms of our existence. The ability to publish, share, and spread new ideas has never been easier; in the realms of politics and the economy, the power of networked individuals will continue to grow. Likewise, this global perceptual system is seeping through many of the walls of corporate and government secrecy. While we have seen that these capacities can be abused, the democratization of information holds the promise of fueling the emergence of more-egalitarian values, such as we’ve seen in recent years with the focus on wealth inequality and the unmasking of the security state.
Jeremy Rifkin starts his latest book by saying, “The capitalist era is passing…not quickly, but inevitably. A new economic paradigm—the Collaborative Commons—is rising in its wake that will transform our way of life.”8 Indeed we can see the old model of competing self-interests, one fostered by “invisible hand” precepts, shifting toward an invisible heart approach of lateral networks that reward one’s contribution to the common good. More people are coming to realize how entwined we are “with one another and with the geochemistry of the planet in a rich and complex choreography that sustains life itself.”9 This growing empathic awareness exerts an irrepressible tug, calling on each of us to play our part in ensuring the well-being of future generations and the biosphere.
With all three strategies rooted in ecological principles, we will see a regeneration of our planet’s life-support systems. It is within our reach to alleviate poverty, hunger, and drinking-water shortages and to guarantee healthcare to all of humanity as a basic right. As more people take on a worldcentric identity, it is quite possible that we will shift some power away from the nation-state and toward both local and global entities that are better scaled to manage the tasks at hand. If it all comes together, we will find our way through the ultimate quandary of our times, building a thriving society that leaves vibrant habitats, healthy rivers and oceans, and a stable climate as our legacy to our children.
These musings are of course only a sliver of what is possible in a future where each of the three resilient investment strategies becomes widely adopted. We have barely touched on the synergies between any two, much less all three of them. Indeed it is the powerful combination of all of them that will allow civilization to thrive—a world of strong regional economies, interacting with a more just and sustainable market economy, all moving toward a new system that emphasizes participation and collaboration. This is our vision of a resilient future, one that each of us can help create through our investment decisions.
In the end we are right where we started. The future is uncertain, and any pretense of knowing what’s to come will be eviscerated by events we cannot imagine. And yet, we are all here, one day following another, called upon to make decisions and respond to changing times as best we can. We know that the challenges facing humanity are formidable. But if we were to sum up the promise of resilient investing, beyond its narrow purpose of serving investors, it is a framework that helps each of us contribute our unique gifts to the world. And that is a comforting thought to end with, knowing that we are all in this together, doing our part, and staying connected.