You can express your values through many decisions. You care about the health and well-being of your family and planet, so you might decide to buy organic, ride the bike to work, avoid bottled water, recycle, and shop locally.
That?s a great start, but where does your money sleep at night?
?Impact investing? and ?social finance? are shifting the dominant financial paradigm of opaque, anonymous, and indirect investments that is based only on quantification of gain. Three women who are working in this movement are featured here.
?Finance is the mother of all human systems. There is no system that humans have ever built that is faster, more global, or more powerful. Finance is our most effective instrument for catalyzing positive change for people and planet.? ~?Donna Morton, Change Finance
What are two key investment trends?
1. Demographics continue to shift in the financial markets.
In America, there is a massive wealth transfer from older white men into the hands of women, wives, and daughters, including millennials.
Yet the financial industry is dominated by men. Currently, only 2% of CEOs on Wall Street are women, and 78% of management teams on Wall Street are exclusively men. Only 3-10% of venture capital goes to women-led enterprises, although opportunities for women are rising as the power dynamics are shifting and as more girls are encouraged to envision entrepreneurial endeavor.
2. Interest is increasing in investment options that align with values, including environmental and social benefits.
Most significant is the divestment from fossil fuels?$5.5 trillion has already been divested from this sector. Impact investors are no longer okay with simply minimizing harm by screening out oil, guns, and other areas with negative externalities through socially responsible investing. Increasingly, investors are focused on ensuring that they are creating a positive social or environmental impact.
?Money and power are not what make us happy. Love, relationships, and connection is what brings joy.? ~?Deb Nelson, RSF Social Finance
This is not a Zero Sum Game
Initially, it can be painful to uncover the ethical messiness and tangible destruction in the wake of conventional investments. In this game there are winners and losers, more for me is less for you, and we compete for limited resources. It is not uncommon for an investor to discover that some of her money is invested in the production of bombs and bullets. Do not feel guilty or ashamed?transfer the investment and feel enlightened!
?What you can measure you can manage, yet not everything that matters can be measured.? ~?Amberjae Freeman, Swell Investing
In truth our security is interwoven: positive, productive connections and investments are the foundation of true wealth.?When making a financial decision, assess the value of often unmeasured things, like relationships, environmental impact, and health. Money is not the only measure of value.
Amplify the influence of your money with impact investing.
Pioneers in this field are developing financial relationships that are direct, transparent, and personal. At RSF Social Finance, borrowers and grantees are a diverse group of entrepreneurs with one thing in common: a social mission that drives what they do and how they do it. Organizations that borrow from RSF are working toward social, economic, and ecological benefit. Most of their largest investors and donors are women, which has had a large impact on their integrated and collaborative approach.
?An integrated approach to dealing with money is the first step to transitioning from an extractive economy to a regenerative economy.? ~? Deb Nelson, RSF Social Finance
?Integrated capital? refers to the variety of support received, including money, mentors, and relationships. RSF collaboratives use philanthropic funds to provide integrated capital to projects that support purpose-driven entrepreneurs who also value things like fair trade, soil health, women?s leadership, biodynamics, and local food.
Deb describes how her work focuses on ?creating financial relationships instead of conducting financial transactions.?
What are options for investing in alignment with your values?
Socially responsible investing (SRI) is predominantly about screening out ?bad? companies who participate in business that you don?t morally agree with. Impact investing takes screening a step further by analyzing the impact of each company through environmental, social, and governance (ESG) factors. Evidence shows that ESG factors, when integrated into investment analysis and portfolio construction, offers investors long-term performance advantages. Money managers are rapidly expanding research and expertise of ESG factors as tools for analyzing risks and opportunities.
Donna Morton says, ?We are a force that catalyzes financial activists to create this shift to move our money out of harm into healing. Use finance as an instrument for driving change. Where capital flows, momentum occurs. Our fund enables investors to drive impact, creating an economy in service to life through financial activism.?
Consider the following portals to improving the performance and impact of your investments:
Aspiration is offering conscious banking with no fees and amazing impact. Check out their offer and their amazing story.
RSF Social Finance?is a non-profit, financial-services organization offering investing, lending, and philanthropic services to individuals and enterprises. RSF has over one thousand clients and over $200 million in consolidated assets. They have formed a growing community of motivated, values-driven investors, donors, and entrepreneurs. Each dollar that circulates through the relationships created by RSF Social Finance multiplies to create true wealth that is meaningful, because it effects positive change as it creates value. Minimum investment is $1,000. Deb Nelson was interviewed here.
Change Finance is a majority women-owned and -managed financial company offering exchange traded funds (ETFs) that are truly fossil-free. Their methodology is informed by the United Nations Sustainable Development Goals (SDGs). Change Finance provides impact-focused, performance-oriented investments using the SDGs. Donna Morton was interviewed here.
Crystal Arnold is the founder of Money-Morphosis and the Money-Wise Women podcast. After graduating from Southern Oregon University in 2007 with a degree in international economics, she has designed and facilitated workshops, community events, and discussion panels about money. She has inspired thousands of people to have a healthier relationship with money. Her courses serve to financially empower participants. Her written work has appeared in journals, magazines, and in the book called Reinhabiting the Village. She is currently Director of Education at the Post Growth Institute, and coauthoring a book called ?Offers and Needs Markets: A Process to Reveal and Mobilize Community Wealth.? She lives in Oregon with her husband and two children.
What images come to mind when you think of investing for good? Tree huggers willing to sacrifice financial returns for purpose, perhaps?
It?s time to bust that myth wide open.?
As it turns out, investing for good can be more profitable than traditional investing. What does that mean for you? Even if your heart isn?t into saving the planet, it still makes financial sense to have a look at socially responsible investing.?
Green Alpha Advisors is a Colorado asset management company taking a bold approach to sustainable investing. Garvin Jabusch (CIO), Betsy Moszeter (COO) and Jeremy Deems (CEO)?sat with us for an in-depth interview to share with our readers why sustainable investing makes sense, even if you?re only looking for better returns.
Because it?s about investing in?What?s Next…
Green Alpha believes that sustainable investing makes more sense than traditional investing. Why? ?Because it?s about what?s next,? says Deems.
Green Alpha?s philosophy is simple: the companies solving the world?s biggest problems are the ones that will drive economic growth. Put another way, there is no commerce without an ecosystem. Those companies tackling the largest global systemic risks such as resource scarcity, climate change and widening inequality are the companies that will thrive in the future.
Q&A with the Green Alpha team
1) Why not just invest in an S&P 500 fund and forget about it?
Garvin Jabusch: The reason why people are in those broad market index funds is that they?ve been told that?s the best way to invest, and also, they?re just ubiquitous, and they have performed well. And they are extremely cheap. On that level, broad market index funds make sense. If you can pay 10 basis points (0.1%) for a fund, I can get why that looks attractive and why I?d want that.
But what if you want to invest in the Next Economy and de-risk your portfolio from resource degradation and climate disruption, how do you make portfolio choices? Well, not by selecting from an index list, but by starting from scratch and building a new model of an economy that works from the floor up…but these portfolios need to, over time, perform the equivalent or better than the index. And that?s the point. The S&P 500 and other legacy economy benchmarks are not the future and therefore not as interesting in terms of returns generation going forward.
2) Why aren’t the S&P 500 and other legacy economy benchmarks the future?
Garvin Jabusch: Because indexing is purely indiscriminate. If you buy an index, it does not matter what a constituent company does. You don?t care in the least what the company does to make money or how they will continue to make money and grow going forward. You just buy it because it?s in the index.
Think about the S&P 500. It contains 60 fossil fuel stocks. If you believe, as we do, that fossil fuels are going to be less and less important as a source of energy for the global economy, then why would you invest in these companies??This is where tree huggery has nothing to do with it. -?Garvin Jabusch
From last year, 2017, when electric vehicles started emerging and growing in a meaningful way, and as renewables continue to take over the power grid, it?s hard to see a source for growth for fossil fuels in the long term. And therefore why would you want to own those?
Well, you own those because you?ve indiscriminately purchased the S&P 500 for years. If you watch any of these finance channels, this is what we?re told:? just buy the cheapest index you can. So this is the paradigm we?ve inherited. Modern portfolio theory and the efficient market theory says you can?t do any better than the index so just find the cheapest index and own it.
But all that disregards the fact that the index is full of the legacy economy and the sources of large-scale systemic risks, that, by definition make poor long-term investments.
3) What?s the Blindfold Test?
Jeremy Deems: Every time investors buy an index, they bid up the prices of those companies in the index. Exxon is trading around 23x earnings yet has had shrinking revenue 5 of the last 6 years. That?s expensive. That?s way too high of a multiple for a shrinking company.
People are throwing gobs of money into the S&P 500. That means 1.5% of every dollar towards the Exxon share price even though it’s a shrinking company. – Jeremy Deems
But a funny thing happens when you blindfold the names of companies in the S&P 500 and start looking at fundamentals. ?On the one hand, here?s Exxon, one of the largest companies in the world. It has shrinking revenues and prospects from an industry standpoint, and it?s trading at a 23x multiple. Is that a buy? The answer from most equity analysts would be “NO.”
Then you hide the name of a Solar company that trades at or below book value and has been experiencing 30% growth, the same analyst would say that?s an undervalued stock. ?Fundamentals matter, both at a macro level as well as a stock-specific level.
4) Won?t Next Economy companies come into the S&P 500 eventually anyway?
Garvin Jabusch: Yes. Index turnover is a thing. These new economy companies will come into the S&P 500 eventually. But if you have a long term investment horizon, wouldn?t you want to own these companies before they get added to the S&P 500, so you get to enjoy the majority of the gains?
The S&P 500 has the 500 largest companies in the U.S. A material portion of their growth phase is behind them by the time they get added to the index. Then, once they are in the index, if they start decreasing in size, they have to shrink quite a bit before they get kicked out.
Betsy Moszeter: Most investors don?t understand that by buying solely the biggest companies, you?ve missed on the growth that got them there. And you lose money on all the shrinkage as index turnover is very slow. Activity in the stock market, in general, tends to lag what?s happening in the economy by a few years. Investing specifically in indexes managed like the S&P 500 lags that even further.
Garvin Jabusch: As an investor, you?re interested in investing in economic changes, which are happening more rapidly than at any other time in history. The rate of change is increasing, as well as the change itself. For long-term equity growth, it is critical to be on the right side of change.
5) How do you know which Next Economy companies will make it into the S&P 500?
Garvin Jabusch: We don?t know. But we do know what industries and sectors are likely to be represented, so it?s a question of selecting leaders among those that we can get for decent valuations. And we also know that there are 60 or more companies in the S&P 500 that will be shrinking going forward.
6) How about risk? How does your portfolio risk compare with S&P 500?
Garvin Jabusch: This is one of my favorite questions. What we do differently is all about a redefinition of risk.?It?s about ignoring the legacy concept of modern portfolio theory which defines risk very strictly as correlation with the benchmark. Today, almost everyone in asset management very much believes in modern portfolio theory.
But here?s the thing. When the economy was evolving less rapidly, you could say that the economy in the 1950s still looked like the economy in the 1940s. And the economy in the 1960s still looked a lot like the 1950s. Change was happening, but it was slow.
The 1950s is when modern portfolio theory was popularized by a guy named Markowitz and his famous book. And at that time, it did work. You could count on looking back 10 years and seeing what asset mixes looked good and had relatively good risk adjusted returns.
The old way is broken…
Markowitz?s efficient frontier thesis was brilliant, but it has come to be interpreted as ?just index, because you?ll never do better.? So you have the nearly universal belief that indexing is the best way to invest in public markets. So much so that even managers trying to reflect a sustainable economy end up merely trying to hammer an index into something “green.” So in order to arrive at something they can label a “sustainable portfolio,” and also stay correlated with the big benchmark, what they do is peer rank, using a questionnaire, the sustainability of companies in every industry.
This fails of course, because in reality, it’s absolute not relative sustainability that matters. ?Relative rankings are meaningless. It is absolute performance that leads to transformation and drives valuations. If you own big indexes with all of their fossil fuels, you may think you’re investing passively, but in fact you’re not. You are actively betting on systemic level collapse. I wonder if Markowitz would even agree with the present application of his theory.
You can?t just look backwards anymore…
The economy 10 years from now won?t look an awful lot like the economy today. We?ve already seen that happen in the last 10 years. So modern portfolio theory fails and yet we all live by it because it?s the paradigm we?ve all accepted. It?s all we?re taught in business school and it?s all we see on CNBC, and that?s why we remain in broad market indices.
Modern portfolio theory is your daddy?s and your granddaddy?s investing and it?s busted now and it?s time for everyone in GenX all the way to GenZ to throw out the inherited paradigm and start afresh.? -??Garvin Jabusch
7) Then what does redefinition of risk mean?
Garvin Jabusch: There?s this perception that the S&P 500 is the place to go for low risk equity exposure. Yet, if you think about what you are exposed to, you have tons of present and future systemic risk.
A redefinition of risk means no longer defining risk as correlation with the S&P 500. The S&P 500 itself is extremely risky. It is riddled with systemic risk to the global economy, starting with fossil fuels but also including things like glyphosate makers that are depleting farmland with deleterious water practices, and with all kinds of short term resource exploitation as opposed to long term resource management.
It?s time for the definition of risk in investing to correlate with actual risk to the economy, and not with mathematical beta risk to some benchmark. -?Garvin Jabusch
So if the index itself is quite risky in fundamental real terms, not in math correlation terms, but in fundamental real terms, then defining correlation with it as ?low risk? is nonsensical on its face.
This is what we need to subvert and get the whole world to recognize. Risk isn?t volatility versus a benchmark. It?s what actually has the power to undermine the global economy.
8) How do politics come into play?
Jeremy Deems: On the one hand, it doesn?t matter which party or individual in control of an administration or congress. It?s about the economics. ?If a technology makes more economic sense at scale, then eventually, despite best efforts to block progress, better economics wins out. Look at Iowa and many of the Mid-Western states and their mass adoption of wind power due to the clear economic advantage to produce cheap power. Just try to take their wind power away and see what happens.
Above all, it?s about the economics…
We do manage political risk over the medium to long term. How do certain changes affect an industry and its long term innovation curve? This is not a one or two-term thing.?Simply put, our approach is this: In order to have a vibrant economy, we must have a planetary ecosystem that is capable of supporting it. We can?t have any kind of commerce without an ecosystem. We invest in the Next Economy, one in which our footprint is dramatically reduced, therefore allowing our planet to support our economic systems.
It turns out that a petrochemical-based ecosystem is too hard on the planet to support economic growth when you think about the number of people we have to feed and the fact that everyone seeks better standards of living.?You can?t do that with an energy source that you dig up at great expense, burn it once, and don?t get to use again. That is a resource constraint. This is not a left or right issue. That is economics not working. That?s the crux of a Next Economy thesis. It?s got to be a circular economy. Waste has to have value until you literally can?t make anything else out of it.
We now have better alternatives to powering our economy from both an economic and environmental point of view. It’s critical to move capital towards these solutions and furthermore, these innovations represent massive levels of wealth creation.? -??Jeremy Deems
9) Has the U.S. lost global clout?
Jeremy Deems: Yes, there are significant U.S. political headwinds. There?s an entrenched interest in Washington to not disrupt the fossil fuel economy. This makes sense. People circle the wagons around what?s worked in the past.
Yet, here we are, with a clean tech revolution. We have the opportunity to take the lead, not only with IP (intellectual property), but also with technology production. Yet we?ve chosen not to. Or we?ll slap tariffs on things and say we can?t compete. Well, the reason we can?t compete is because we chose not to.
How un-American is it to say that we can?t compete with China who did subsidize solar (why is that a bad thing)? That?s why their process is now less expensive. We, on the other hand, choose to subsidize fossil fuels. We made our bed, and now we?re whining about it. -Jeremy Deems
Meanwhile, some folks who aren?t in the fossil fuel business are investing in some of the most efficient solar panels and wind turbines in the world. We should have been investing in this as a nation all along and competing harder.?President Xi has gleefully stepped in as the world leader in renewable energy. He has clearly taken leadership right away from the United States. From China?s point of view, it is gaining credibility, cheap and clean power, and market share, all while attracting new talent. China is now encouraging technological innovation the way the United States had done for most of the 20th century.
The silver lining…
Jeremy Deems: But there?s a silver lining. There?s been an interesting development. And now we have the data to point to it, which we didn?t have a year ago.
People in general have decided that theircapital might be more important than their vote. We are seeing a digging in by the most progressive companies in this country to fight for What?s Next. Some of the largest companies in the world are now striving towards. or have already achieved. 100% renewable energy sourcing. This is a tough country to do that in right now, yet it proves that the economics are better.
The cost curve on solar, wind, and storage units has plummeted, despite headwinds to keep it from doing just that.
We?ve definitely seen empirical evidence that what?s happening in Washington is also having a positive impact in the US private sector, but also globally. Some firms are saying:? we?ll do business elsewhere. Others are doubling down on doing things on their own.
In the future, when we look back at this, even the tariffs, we will see that this was fuel on the fire for change more than perhaps it would have been otherwise. -?Jeremy Deems
People have been galvanized into the B Corp spirit – to use business as a force for good. But also, in terms of a cultural and competitive performance point of view, companies and investors want to take a leadership role in investing in What?s Next, in investing for good.
10) How have your portfolios performed over time?
Betsy Moszeter: Our portfolio returns are completely solid. Without a ton of disclosures added, I can?t comment on them specifically in a written interview, so I encourage you to look up the actual results posted on our website.
The Next Economy Index
Our oldest product is 9 years old. ?We call it the Next Economy Index. The Index contains all of those companies we love that are creating solutions to one more of our greatest systemic risks,. They’re well-run companies with strong management teams, that are trading at a good price relative to their peers for their proven and expected good growth rates. The Index itself is a great portfolio; further, the stocks that make it into the Index are then eligible for the rest of our portfolios, which each have unique portfolio construction goals.
Performance figures for the Next Economy Index Portfolio is sourced from the Green Alpha Partners website.
Sierra Club Green Alpha portfolio
We also have a Sierra Club-branded portfoliothat is 7 years old. We are the only financial services company allowed to use the Sierra Club proprietary social and environmental screening criteria to build investment portfolios. This is a mash-up of Green Alpha?s forward-looking investment approach, and screens it against the Sierra Club?s rigorous criteria, including evaluation of a company?s operating history.
Performance figures for the Sierra Club Green Alpha Portfolio is sourced from the Green Alpha Partners website.
Growth & Income
Our Growth & Income portfolio is more than 5 years old and it looks at those companies in the Index that tend to be larger cap, stable companies paying higher-than-market dividend yields. This appeals to a wide variety of clients looking to benefit from both the growth of sustainability-oriented companies, and the relatively high dividends that these companies pay out. Most of our clients who select this portfolio reinvest the dividends to benefit from the compounding effect on their wealth creation.
Performance figures for the Growth & Income Portfolio is sourced from the Green Alpha Partners website.
Shelton Green Alpha Fund
Finally, our the mutual fund that we sub-advise is called the Shelton Green Alpha Fund (ticker: NEXTX) and it is 5 years old. Managing increasingly larger accounts as we grow, our company moves more money in the economy and, therefore, has greater impact. We also strongly believe that every investor should have access to high-quality investment portfolios. While we offer relatively low minimum account sizes on the portfolios I described previously, the mutual fund has our lowest minimums and is our best ?democratizer.? People can start investing with as little as $500 and have a well diversified equity portfolio. It?s also a great option for employers to include in a 401(k) plan, as employees are increasingly demanding access to quality ESG investing vehicles or else they won?t participate in the company?s plan.
Next Economy Select Pis offered as a separately managed account or as a mutual fund called the Shelton Green Alpha Fund (ticker: NEXTX). Performance figures sourced from Green Alpha Partners’ website.
Blake Jones, co-founder of Namaste Solar and Clean Energy Credit Union, was growing frustrated with the poor financing choices available to his customers. Turns out you can get better financing for a t.v. or couch than you can for solar panels. So he set out to do something about it. Jones and his team are launching the Clean Energy Credit Union. Their goal: to offer the lowest interest rates to consumers looking to purchase renewable energy products and services.
A Gradual Epiphany: From Oil & Gas to Clean Energy
How did Blake Jones, a visionary leader in the renewable energy movement, go from working in oil and gas, to launching an employee-owned cooperative solar installation company, a solar purchasing cooperative, an impact investing fund, and now the Clean Energy Credit Union?
Blake Jones, Boulder, CO
?It was a slow awakening?, says Jones. ?I was working in the oil and gas industry right out of college when I went to work for a subsidiary of Halliburton. I was in love with the oil and gas industry. It sounds strange to admit that. I had read a book calledThe Prize, by Pulitzer Prize winning author Daniel Yurgin, about the history of oil.
I thought oil was the neatest thing and made the world go round. I was ambitious, wanted to make a lot of money, and wanted to work abroad. And I got all of those things.
But fortunately I had an older brother who is passionate about renewable energy. He helped me open my eyes to some of the disadvantages of our over-dependence on fossil fuels and what it does to our planet.?
Over time, Jones shifted his passion for oil and gas towards renewable energy. He went to work in Nepal for 3 years, installing solar systems in remote villages along the foothills of the Himalayas. ?And I loved it?, says Jones.
It was here that he learned about renewable energy technology and small business management.?After theRenewable Energy Standard passed in Colorado in 2004, Jones came back to co-found Namaste Solar.
Namaste Solar: Employees Are Owners and Decision Makers
Namaste Solar?s employee-owned cooperative model is their secret sauce and the reason they?ve seen a 50% compound annual growth rate over their 13-year history, while other solar companies have struggled.
??we were all on the same page about the different kind company we wanted to start. We thought, if we?re going to do this, we?re not going to start a conventional company. ? Everyone at Namaste Solar thinks and acts like an owner.?
Jones and his team started Namaste Solar as a 100% employee owned, democratic workplace. In the early years of the company, everyone made the same salary, including the CEO. Today, there?s a 6-to-1 cap on highest-to-lowest total pay. Every employee gets an equal vote in important decisions, like who to elect to the board. Their one-person-one-vote model makes employees feel like true contributors.
?We are completely transparent. Every bit of company information is shared, including pay ? which stands to this day. And we donate 10% of our profit each year to the community.?
According to Jones, their secret sauce of employee ownership, democratic workplace, and extreme transparency has attracted many people who are passionate about both solar and proving there?s a better way to do business than the conventional norm.
Namaste Solar is now known as prime example and champion of theB Corporation movement, the idea that the power of business can be used to solve social and environmental problems.
The Dark Side of Solar
Namaste Solar is now 13 years old, employs 175 people and brings in $50 million in revenue per year. ?
But it hasn?t been easy. They have done very well in an industry that has seen a lot of shake-out. While the solar industry has been super-hot, the market is so competitive that many solar companies have gone bankrupt.
?There?s a dark side to solar?, says Jones. ?It turns out that most of our competitors are not profitable. But they can raise a lot of money on Wall Street because their top line is growing so quickly. The focus for these companies is on land grabbing market share.? ?
This makes for strange competitive dynamics since Namaste Solar is going up against companies that are solely focused on expanding total sales through aggressive marketing by using money raised from Venture Capitalists, rather than trying to run a profitable business.
Finding Investment to Fund Sustainable Growth
Yet, it turns out there is a path to raising capital for growth from people who believe in sustainable growth.
In the beginning, Namaste Solar was 100% employee owned.
?Being na?ve first-time entrepreneurs, we thought that if we took external capital we?d lose control. We were getting a call every 2 weeks from Venture Capital or Private Equity firms, offering lots of money but it had strings attached. They wanted us to grow quickly and provide a liquidity event in the next 5 years.?
Because they sought to keep control of the company with their employees, they made it a core value that they will never have external investors. ?In hindsight, that was a little misguided or misinformed?, says Jones.
They started meeting other like-minded companies, some of them through the Certified B Corporation community and theNational Center for Employee Ownership. They met large and successful cooperatives like Organic Valley and Equal Exchange and learned that they could raise capital without losing control. ?These cooperatives had issued a class of non-voting preferred stock, which means that external shareholders would not be able to change the company?s philosophy or direction.
?When we saw that model we thought, why didn?t we think of that??
Namaste Solar can how raise capital via a class of stock that doesn?t have voting rights and allows them to keep their cooperative model and governance structure intact. Seeing that cooperatives could successfully find mission-aligned investors showed Jones that it could be done. ?
Beyond Solar: Creating Momentum for Impact
One of the most interesting things about the interview was how this community of social entrepreneurs helps each other out, even when they compete.
Since founding Namaste Solar, Jones launched an impact fund that invests in private companies that provide social or environmental impact. He also co-founded Amicus Solar Cooperative, the first purchasing cooperative in the U.S. for the solar industry. The purchasing co-op is jointly owned and managed by its 48 member-companies.
And now, with the launch of Clean Energy Credit Union, any individual or contractor selling renewable energy products (from any renewable energy provider) will be able to access the lowest rates in the market.
Jones and his team have proven over and over that their sustainable and democratic approach to product, services and capital raising can and does work.
We’re here with Mitchell Joachim, co-founder and director of research at Terreform ONE, located at the New Lab building in Brooklyn. Terreform ONE?is an architecture and urban design research and consulting group that promotes smart design in cities.
By the way, if you haven?t seen New Lab, check them out. This refurbished old shipyard in Brooklyn is home to the new manufacturing. The building houses a community of entrepreneurs working in advanced technology. Thought leaders in robotics, AI, connected devices, nanotechnology, urban tech, and more collaborate in the coolest work sharing space we?ve ever seen.
About Mitch + Terreform ONE
In addition to running Terreform ONE, Mitch is also an Associate Professor of Practice at NYU.?He was an architect at the offices of Frank Gehry and I.M. Pei. He’s been awarded?a Fulbright Scholarship and fellowships with TED, Moshe Safdie, and Martin Society for?Sustainability at MIT. He was chosen by Wired magazine for “The Smart List? and selected by?Rolling Stone for ?The 100 People Who Are Changing America?.
Terreform ONE is on the cutting edge of smart urban design. For example, when the United Nations mandated that insect sourced protein is a major component in addressing the global food crisis, Terraform One responded by building a?dual-purpose shelter and modular insect farm. The structure provides food for communities and serves as a shelter at the same time. Check their other projects?here.
What?s your origin story? How did you get into eco-architecture and smart design?
In architecture school in the 90?s, we were very interested in a movement called Deconstruction, which involved a lot of reading of European philosophers like Derrida, Heidegger and DeLanda. Things that were interesting but were very selfish.?We wore a lot of black, we were angry, and we spoke in tongues. This was architecture for other architects.
We were concerned about the environment, the world. We were concerned about making things fantastic, beautiful, and fabulous and different. But we didn?t see our contribution to climate as being an issue.
I realized that my call in life wasn?t to make things dark and creepy. It was to actually answer some of these problems that architecture itself causes. For example, over 40% of all energy used in the US is in buildings, or the built environment. So we can do better.
Turns out that my reason was not only for energy conservation, but there was also a quest for a new aesthetic. What is a real, organic architecture?
The variances that I had been trained on like Frank Lloyd Wright are just decoration. They?re mimesis. They are copying nature but they are not actually nature.?Other versions still mimic ideas in nature. They?re pulled in and still use glass, steal and aluminum. But they are not working with the stuff of life.
On the other hand, fitting into an ecosystem?s metabolism and building structures and systems that have no distinction between the landscape and the building… that?s interesting to me.
What do you say to the Negative Nellies who claim it?s too late, that the damage to the environment is done?
The Negative Nellies have good reason to be upset because the impact that we?ve made on the climate, the impact we are feeling right now, happened 20 years ago. So even if we changed today, we would not feel those effects for 20 years.
We?ve been told about the warming of the atmosphere since 1953, I think first with the Keeling Curve. Science said 3 decades ago that it was unstoppable, and that we needed to reduce, reuse and change the way we live. But it?s like the frog boiling in water ? doesn?t know it?s boiling until its too late.
But I also think it?s like driving a car when you know you?re going to get into an accident. The brakes will help, steering will help, even if we know it?s going to happen. The Negative Nellies throw their hands up in the air and let go of the steering wheel. But we, as humanity, should fight until the very end. We should use all of our powers to stop or reduce the damage that we know is coming.
What can businesses do to reverse the trend?
Most countries and most people operate from a single predicate: growth. Make more money, more jobs, and extract more resources. And do it without any limits. Capitalism is very much a part of that. We have influenced an entire epoch with this line of thinking.
But business can also be a force for good. If the economy is self-sufficient, self-sustaining, and circular, if what it takes away it gives back in other forms, if it?s not so selfish, if there?s some thought and compassion, then it can be good.
The first and last thing we need to do is have principles. Not make money for money?s sake, but have a purpose to your business. For example, to protect your family, the species, the environment.
Capitalism without morals is a serious issue. Caring, thinking, learning, and making smart decisions about what to do with your money is important. Not just making money for money?s sake. Because that?s the emptiest thing you can do.
So the top 3 things we can do as individuals are:
Be aware. That?s the most important thing we can do. Be aware of what is happening around you and how you live in the world.
Get educated. There are people called scientists. Listen to the things that are being told to you by people who actually know what they are talking about.
Once you are aware and educated, act. But act in ways in that make sense for you and your lifestyle and world around you. It doesn?t make sense to recycle and compost if no one in NYC is recycling or composting. But you can act by taking a vote when a recycling and composting program comes up for a vote.
Americans are a group of people that don?t like being told what to do. They will do it when they are excited to choose it. That?s why becoming aware and educated is so important.
They sell plastic.? Yet they are one of the most beloved companies in America. ?The Container Store started out as a single store in Dallas with only $35,000 in capital. Kip Tindell worked tirelessly to build his investment into the big name retail chain it is today. Fast forward to 2017. Today, The Container Store brings in $795 million in revenue, spent 18 years on the Fortune 100 Best Companies list, and offers fantastic wages for staff that feel “valued and respected”. It is safe to say that he has succeeded.
But how was all of this possible? To find out, we spoke to Kip Tindell himself.
Kip is a believer in?“1 Equals 3”, or more specifically, one great person is equivalent to three good people.
By creating an environment where employees are well-trained and treated as humans rather than assets, productivity and profits soar. It all starts with the training. While the average retailer provides 8 hours of employee training, The Container Store provides 273 formal training hours.
He goes on to explain, “I’m not an advocate of paying mediocre people well. I’m a big advocate of paying great people well, and if you pay somebody who’s getting three times the productivity twice as much, everybody wins.”
Employers win because they pay two salaries for the work of three people. Employees win by getting much higher pay than the industry average. Consumers win because they are being helped by capable, motivated and well-trained staff. The Container Store recognizes the benefits of investing in their people and offering incentives in the right places.
In fact, a well-trained staff forms the basis for Kip?s next key to success: ?Man in the desert?. ?Imagine you are stranded in a desert, about to collapse from heat exhaustion. ?Suddenly, you see a man in an oasis. ?What should this man offer you in your time of need? ?This question can be directly linked to how retail staff can make or break a business. ?Many people would be content with water and shade. ?But businesses cannot thrive with customers who are merely ?content?. ?Instead, the man could offer you a sports drink to help replenish electrolytes, or a satellite phone to tell your loved ones that you are alive. ?It is when a salesperson exceeds expectations that people become lifelong customers.
Kip knows that if someone comes in with a poorly organized closet and walks out with a few shelves, chances are the closet will still be poorly organized. ?On the other hand, if the salesperson takes the time to truly understand and solve the problem, the customer will feel proud of their purchase and will share their experience with others. In other words, every happy customer is working for you as free advertisement. ?In fact, it is better than an ad because people trust their friends and family a lot more than a stranger on tv, the web, or a billboard.
Kip?s third and final key to success: ?Communication is Leadership?. ?Kip believes that everything can be solved with proper communication, so he communicates everything to almost all of his employees at all times. ?It seems obvious, but it is very easy to overlook how often you are keeping someone informed. ?The amount of information necessary and relevant also has to be balanced, so that the person isn?t overwhelmed with things irrelevant to their jobs.
In his words,
?Nothing makes you feel more part of something than when you know everything?s communicated to you. If everything?s not communicated to you, you feel excluded. ?You don?t really feel a part of it.? ?
Lack of communication can be easily misinterpreted as a lack of compassion. ?When managing teams of people, it is essential to keep everyone feeling appreciated since this is when we do our best work. People don?t mind putting in extra effort when they feel successful and part of a larger purpose.
The three keys to success all share a common theme: treat everyone as you would treat yourself. ?
There is a reason that ?the golden rule? is repeated over and over to every kindergardener, and it?s not because Charlie won?t share the Legos. ?It?s because humans are instinctively social creatures. ?There are benefits to treating your employees as people and going the extra mile for your customers. Kip Tindell has figured this out and made these conscious business concepts essential ingredients of The Container Store culture and brand.
Check out more great interviews and videos from leaders in conscious capitalism, in the new feature film?Prosperity