Bob Massie

Archive for the ‘Business and Sustainability’ Category

It’s Time to Stop Playing Games and Avoid the Looming Icebergs

In Business and Sustainability on March 20, 2009 at 5:19 pm

Given the general meltdown in the economy, some people archly are suggesting that the time has come to forget about “secondary” issues like sustainability. Since some of these same critics didn’t want to pay attention when markets were riding high, we shouldn’t be surprised.

So this might time for a quick review of Sustainability 101.

First, let’s sort out the mishmash of terms that entangle the field – strategy, responsibility, citizenship, and sustainability, and the newest and most popular contendor, “ESG” factors (for “environment, social, and governance”)

In one sense, these approaches share a fundamental concern: they all ask: what are the ingredients or pathways for lasting value for a firm?

“Corporate strategy” is about picking goals and then reverse-engineering the steps to get there. It has traditionally encompassed all the traditional areas of business – marketing, production, finance, innovation, human resources, and so on. Most firms – driven by stale accounting rules, quarterly earnings expectations, and compensation structures – focus their strategies on the short to medium term.

“Sustainability” is about understanding the long term structural evolution in the interactions of markets, societies, and the physical world.

This raises a few questions.

1) Is it primarily a question of short-term vs. long-term?

No. Time is an important element. But it also a question of where leaders are focusing their attention.

Let me use an analogy. Traditional business strategy is like a group of people playing certain kinds of competitions — musical chairs, shuffleboard, ping pong – on the deck of an ocean liner. As long as the ocean liner plows steadily forward in a calm sea, people can afford to concentrate on the immediate challenge of winning the game and advancing in the tournament.

But let’s say the ocean liner runs out of fuel, enters a storm, strikes an iceberg, or come under attack by pirates. At that point, the conditions of play on the deck change, either slowly or abruptly. Some of the skills that could lead one to succeed at winning tournaments may be less helpful in coping with these more systemic assaults.

Indeed, one could argue that the more one concentrates on the short term goals of winning a particular game, the less one is inclined to look up and notice where the ship as a whole is headed.

So, one way to look at the difference in terms is that traditional business strategy is about mastering the skills to win games on deck. Sustainability is about reacting to the conditions that surround the ship. Both are important.

Following this analogy, in the short-term people can do quite well and win a string of victories on deck without paying attention to where the ship is headed.

But lasting success – and in some cases, survival — for the firm, the economy, or the planet means also cultivating an awareness of what is happening in the greater surroundings.

2) So then what is “corporate responsibility” or “corporate citizenship”?

People employ these terms loosely to suit their own purposes, and this often creates confusion. Sometimes the terms are used superficially, sometimes more profoundly.

To go back to the ocean liner image, CSR or citizenship can mean everything from insisting that people obey the rules of shuffleboard or wear dress whites to more comprehensive ideas such as making sure that everyone has the chance to play. It can mean obeying the law or rethinking every aspect of business practice.

“Sustainability” is a far more comprehensive idea than citizenship or responsibility, because it focuses on interdependence and on the future. Sustainability analyzes the underlying structural conditions that advance or hinder the creation of lasting value in ways that won’t ultimately sink the ship.

3) What are some recent examples?

Let me offer three that are on people’s minds right now: the subprime mortgage collapse, the US auto industry’s strategic failures, and the transition to clean technology investment because of climate change.

Take the subprime mortgage crisis. As we know, too many people focused on technical financial innovations such securitization, leveraging, and hedging. It was very exciting and for some people very profitable in the short term. But as people became more excited about the games on Wall Street, forgot to ask very basic questions about the long-term health and sustainability – in both senses of the world – of their assumptions. Was the ship leaking? Where was it headed? This is the classic problem with any bubble; one forgets the fundamentals. Thinking about sustainability rigorously is another way of looking more deeply at the fundamentals of wealth creation and distribution in a society.

Or take the American auto companies. The auto companies, despite their global operations, lived in an insular and self-reinforcing mental world.

• They chose to build their profit structure off of high margin SUVs that appealed to the US market and they ignored the clear global signals about energy and product development.

• They tried to bend the American and global consumer back towards what had worked in the mid-20th century rather than accepting what was coming in the 21st.

• They also ignored a major social dimension to their cost structure, which is our exclusionary system of employer based health care. Every other country that makes cars relies on a more equitable distribution of health care risks and costs through national health insurance. The irony is that because of their narrow world view of the auto leaders, they could not even perceive their own corporate interest, so their cost structures required them to build in employer based health insurance costs into every car. If they had cooperated with the labor movement as a whole, which had been asking for national health insurance for 50 years, their cost structure would have been more competitive.

Finally, let’s look at climate change. The evidence has been growing for more than twenty years that this was a serious, potentially devastating structural problem that would affect virtually every industry, region, and investment portfolio in some way.

Yet up until very recently for years leaders on Wall Street took the position that said, in effect, “if this were an important question we would already have thought of it.” That’s the self-defeating aspects of the proponents of efficient market theory; because they assume that all relevant information is already known, they can actually be reluctant to accept new ideas and new realities.

It took outside groups like Ceres and the Investor Network on Climate Risk — huge institutional investors, activist and environmental groups — to point out that the both the physical and financial assumptions had changed.

Now we are seeing the realities of carbon pricing and clean technology are reshaping the technological and financial world. By looking at the emerging structural conditions revealed by sustainability, some companies – many of them European and Japanese companies – were able to get the jump on innovation.

Many Americans still haven’t absorbed the message. Scientists have agreed that we have to return to the level of 350 parts per million of CO2 in the atmosphere. To do trillions of dollars are going to flow from old to new practices. Many venture capitalists feel that such a transition is going to be more significant in terms of the realignment of wealth and productivity than the computer or the Internet.

So what lies ahead?

Of course right now everyone’s focus – in government, in business, in investment, and in communities in the US and around the world – is on the urgent task of trying to stop the damage cause by the false assumptions of the past. That will take awhile. The real question is whether, as we come out of this, we will be able to draw any lasting lessons.

The normal human tendency will be to think “now that we come through that awful period, we finally have everything right.” But that’s not going to be the case. The underlying structural conditions will continue to evolve, in some instances even more rapidly, which means that paying attention to sustainability will be even more important.

For business leaders, managers, directors, and fiduciaries, this means, to go back to the analogy of the ship, that board members will need to stop paying so much attention to the games on deck and start watching for icebergs. They will need to spend more time looking out at the horizon and offering what may be disturbing advice, rather than falling into groupthink. More and more directors realize that this is fundamental duty that they owe to shareholders, beneficiaries, employees, and other stakeholders. A recent study showed that more than 70% of corporate board members agree that they need to be paying attention to these long-term questions. But they don’t yet have all the tools for doing so.

One tool, of course, is long-term scenario planning. Another that is being widely adopted is that of trying to set goals and measure sustainability performance through generally accepted indicators like the Global Reporting Initiative. This helps everyone — directors, managers, investors, customers, and public officials. Such reporting is now becoming widespread; a recent study by KPMG said that three quarters of the world’s 250 largest corporations have not introduced this practice. I think eventually it will be integrated into traditional financial reporting and required of all publicly traded firms. That would be very helpful for everyone, though I am sure some people will complain that they don’t see any reason to do this because they never had to do it before.

At the same time, we are still in the early stages of understanding the connections between the interdependent evolution of structural conditions on the planet — which includes topics as diverse as population growth, biodiversity, water use, income disparity, and energy – to the prosperity of firms, industries, nations and humanity as a whole.

But we need to do so, and quickly. If we are only paying attention to the games on the deck, our global ship is likely to hit a rock or an iceberg at some point. And then we will be battling to get into the lifeboats and trying to figure out how, with all our skills and technology, we could have been so blind.


Overturning the Tables

In Business and Sustainability, Education, Politics, Theology and Spirituality on March 17, 2009 at 2:03 pm

Some of you have perhaps been wondering what happened to me over the last few weeks – did he simply stop writing? The answer is no – I transferred my writing to a few other listservs and also to the Massachusetts blog known as “Blue Mass Group” where I have been making the case against some very foolish policies in the state under the name of “bmass”. You can look those up if you like – and comment on them. Some of this debate came to a head when I had the opportunity to preach at St. James in Cambridge, my wonderful home parish, and I discovered the readings were from Exodus and John. I haven’t preached in nearly two years, so it was a challenge and a joy. This is what I said.

A sermon preached by the Rev. Dr. Robert Kinloch Massie at St. James’s Episcopal Church, Cambridge, Massachusetts, on March 15, 2009

I. Introduction: The Daily Struggle To Remember

Every week or so at my house Anne and I endure an abrupt ritual of panic. We are about to go out the door and suddenly …. I can’t find my wallet! I know I had it somewhere, in a pair of pants, but those pants seem to have jumped up and run off to a dark corner. So for a few minutes Anne and I have to rush around, playing hide and seek with a pair of trousers.

Other times it is the car keys. I have noticed that car keys seem to anticipate when I am about to leave? Just before I need them, they quickly slide under a pile of old magazines and again, Anne and I get to play hide and seek.

Has that ever happened to you? I am always pleased to read when such very human problems pop up in the Bible. One sheep wanders off, and the shepherd has to leave the ninety-nine and go running after it. [Matthew 18:12] A woman loses a coin in her house, and she has to turn everything upside down and sweep the whole place out until she finds it. [Luke 15:8]

We lose important things all the time. Why do you suppose that is?

Three reasons. We get distracted, we forget, and we lose what is important under a pile of junk.

Today, I want to propose that just as we often lose physically important things we can also lose spiritually important things. We do this all the time… and for the same reasons. We get distracted, we forget, and lose what is important under piles of junk.

Jesus knew this and spent a lot of time trying to point it out to people. In the Sermon on the Mount, for example, he suggested that people spend too much time worrying about the details of daily life – and by the way, in a community far less affluent than ours. “Do not be anxious about what you shall eat or what you shall drink … [or] what you shall put on.” [Matthew 6:25] “Seek first the realm of God and the righteousness of God, and the other things will be yours as well.” [Matthew 6:33]

To the spiritual pundits he said: you are worrying so much about appearing more holy than other people that you have forgotten what holiness is really about. Forget the long prayers, he said, use few simple words and even better, do it in secret. [Matthew 6: 5-14]

In Jesus’ day people worried a lot about what they had done wrong, so they spent a lot of time and money calculating how to please God with exactly the right behavior. And out of those anxieties arose a whole God-pleasing-calculation industry, much of it built on animal sacrifice. Those things don’t matter, Jesus said; what God wants is mercy, and not sacrifice.” [Matthew 12: 1-7]

II. The Demons of Mess

In pointing this out, Jesus was not inventing something new – he was drawing attention to the gems that existed in Hebrew scripture. “I desire mercy and not sacrifice” is a quote from the prophet Hosea [6:6]. His message was: don’t get distracted, don’t forget, don’t lose what is important under a pile of junk.

And today, in this season of Lent 2009, we need to hear that lesson again, more than ever, in both our personal and our public lives.

Anne and I don’t watch a lot of TV but some months ago we came across an remarkable program called “Clean House.” How many of you have seen that?

For those of you who don’t know this show, this is how it works. A crew of specialists shows up to rescue a family whose lives are being wrecked by the demons of consumption and disorder. Their houses and their lives are a mess.

And when I say “mess,” you have to multiply whatever is in your head by fifty. One small house had boxes to the ceiling in every room. The parents were losing tempers, their minds, and their marriages. One sad eight year old son was reduced to trying to do his homework on the only remaining tiny patch of clear real estate on the dining room table that was not covered with junk.

In another show, a woman who had gained a lot of weight after having children had filled not just her closet but most of her bedroom with hundreds of shoes. And not just any shoes. She had hundreds of pairs of expensive designer shoes, that her husband bought on his slim salary to express his love and she was hoarding them in the hope that one day they would fit.

Some of the men in these families filled up rooms and garages with golf clubs, ancient magazines, weight equipment, sports memorabilia, and old appliances that reminded them of their dads.

And by the way I just want you to know that when you all come over to our house, none of you is allowed to go into the basement.

What makes these shows so fascinating?

1) They tempt us to judge, so that we can feel superior just like the Pharisee in the Temple, “Lord I thank thee that my house isn’t as cluttered as that family of messy tax collectors.” [Luke 18: 9-14]

2) They attract our sympathy, because the physical and emotional transformations that take place as the TV team persuades the owners to give up their stuff, sell it at a yard sale, and then use the money to remake the home – are often fascinating and deeply moving.

3) And finally they signal something we know but can’t express: the physical mess in these people’s lives is an outward and visible warning about inward and spiritual chaos.

Like many of us, the people are in a kind of bondage both to their memories and their dreams, they are anchored to illusions about the past and the future. They have been captured by the absurd mixture of insecurity and greed create by a consumption economy run amok. Watching one of these shows, Anne turned to me and said, “we turn to stuff to fill the empty places in our hearts.”

In others words, we get distracted, we forget, we lose what is important gets buried beneath a pile of junk.

So how do we fix this? Our readings today give us an idea.

One way to stop losing the wallet and the car keys is to keep putting them, day after day, in the same place.

And one way not to lose ourselves spiritually is keep ourselves and each other of what is important, every morning, every Sunday, in the same place.

This isn’t easy. Today’s first reading gives us an example. You would think that the people who had followed Moses into the desert would be able to keep track of what was important. After all, God had helped them escape from soul-stifling, bone-crushing slavery in Egypt – and they were on their way, if they could stay focused, to the Promised Land.

But what happens? Moses goes up the mountain for a little facetime with God — and the next thing you know, when he had been gone a short time, his followers get distracted. They forget about Egypt, they forget about Moses, they forget pretty much about everything. They tell Moses’ brother, “Get up, and make us some new gods who shall go before us. As for this Moses, who brought us up out of Egypt, we do not know what has become of him.” [Exodus 32: 1] They gave all their jewelry to Aaron who melts it into the shape of a golden calf, which, when you think about it, is kind of the ultimate symbol of meaningless junk.

This is one of the earliest management problems on record. And so God tries to simplify things by sending Moses back with a two page memo, although the memo wasn’t on paper, it was stone. He says, okay, I understand that living together can get complicated, so I am going to distill what is important into a few basic rules. Four of them are about our relationship with God. Six of them are about our relationship with other. Ten in all. One for each finger.

And, as we know from human history, that pretty much solved the problem, we know those Ten Commandments by heart. Right?

Well, the truth is – they are not that easy to remember. I mean, ten things is a lot , especially when some are long and others are short, especially when some say you should do this and should do that. But years ago, when I was a chaplain at Grace Church School, a wonderful teacher taught me the easy version in verse. So this is the congregational participation part. Repeat after me:

Above all else, love God alone
Bow down to neither wood nor stone
God’ name refuse to take in vain
The Sabbath rest with care maintain
Respect your parents all your days
Hold sacred human life always
Be loyal to your chosen mate
Steal nothing neither small nor great
Report with truth your neighbor’s deed
And rid your mind of selfish greed.

The kids in my fourth grade loved this. We used to do speed trials. I think the record was 12 seconds for 10 commandments. I will post it on the webpage, and we will see if anyone can beat that.

III. Frustration, Repentance, and “Godly Grief”

But you know, despite the simplicity of these Ten Commandments, in Jesus’s day people still got distracted and forgot. In fact, they asked Jesus if he could give them an edited version. Ten’s too much, give us two.

So Jesus did: “Love the Lord your God with all your heart and soul and mind and strength and love your neighbor as yourself,” [Luke 10:27]

Maybe we begin to see why Jesus occasionally got frustrated. We sometimes gloss over this aspect of Jesus’s ministry – because his core message was one of endurance and patience and love — but to me those flashes of annoyance make him seem fully human.

He explains things, repeatedly, in the most vivid way, with the most memorable stories and parables, and people still look at him blankly and say, in essence, what do you mean by that?

And so he tries again, with a new story, or a new angle. But sometimes he says, “you have eyes, but you do not see, ears but you do not hear.” [Mark 8:18]

On another occasion he shakes his head and says:

“To what shall I compare this generation? You are like children, sitting in the marketplace and calling to each other, “We piped to you and you would not dance, we wailed for you and you would not mourn.”[Matthew 11:16-18]

No matter what approach we try, no matter how we try to draw your attention to what is important underneath the pile of junk, you get distracted. What will you listen to?

And every now and then Jesus’ frustration boils over into anger, an anger designed to produce what St. Paul called “godly grief.” [2 Corinthians 7: 9-10] That’s a great phrase for Lent. Godly grief is when we are reminded of something a bit painful in a way that produces repentance.

The gospel passage from today is an example of Jesus acting in a way that was designed to induce godly grief. We know that these actions were centrally important to his followers because it appears in all four gospels.

It is hard for us to appreciate the power of the Temple today or the shocking nature of Jesus’ behavior. The Temple of Solomon was not just a place of national reverence. It was a place of immense spiritual power. For at the center of the Temple was a hidden room, called the Holy of Holies, which only one person could enter only once a year. In this room, in total darkness, sat the Ark of the Covenant. The Ark of the Covenant, as you know from your Bible and from Raider’s of the Lost Ark, was said to contain the original tables described in Exodus. According to Jewish tradition, in and around this object and this room, hovered the actual power of God.

It was sort of like the core of a nuclear reactor combined – times a million. Think about it. The creative force of God, who brought forth not only humanity, not only this world, but God “who stretched the spangled heavens infinite in time and place and flung the suns in burning radiance through the silent fields of space” could be encountered there.

But what did Jesus see when he arrived there in the courtyard surrounding this place?

It has become the Temple Livestock Exchange. When Jesus approached this immensely powerful place, what he saw was disturbing. Inside the courtyard was a market where people bought and sold animals in order to slit their throats, drain their blood, and burn their bodies in the hope this would earn them spiritual points. A place where some leaders paraded around to show off who was more important, more holy, more special, more deserving than whom. A place where you had to change regular money into Temple money, at high rates, at the table of a money-changer. In the version in Matthew he quotes both Isaiah and Jeremiah: “My house shall be called a house of prayer, but you have made it a den of thieves.” [Matthew 21:21, Isaiah 56:7, Jeremiah 7:11] So he drew together some cords into a whip, scattered the coins, turned the tables over, and drove the changers out.

We don’t use animal sacrifice any more — in fact we despise it — so it seems as though what Jesus doing makes sense. But this act was probably the single most direct political and economic act of disruption in his ministry. Some scholars feel it was the principal reason that the religious authorities began to plot his death. It is as though Jesus had been offered a public tour of the White House, and then taken the opportunity to run into the Oval Office and shove the President’s desk through the smashed windows and right out into the Rose Garden.

Jesus did this to make a point. In his view, in his zeal of the moment, the people of faith had followed too much the devices and desires of their own hearts, and in his view the whole spiritual enterprise had become buried under a huge, horrific pile of junk. It was time to clean house. So he did.

But the question for us in this Lenten season is not whether the people in the Temple courtyard had gone off track. The question is in what manner we – not only individually but collectively – are going off track.

IV. The Modern Moneychangers

I could suggest a number of ways, but I am going to close by zeroing in on one. In this state we have reached a level of despair, dishonesty, and denial so severe that our elected officials are about to approve a proposal that says, in essence, in order to save some of us, others of us must be destroyed. Holly’s email signature line quotes the wonderful phrase from Paul Farmer, “the idea that some lives matter less is the root of all that is wrong with the world.” I agree with that. I fear that many leaders are about to act as though they do not.

What do I mean? Our frightened, confused, and avaricious officials have are about to expand predatory gambling in order to cover a budget short fall. There is no sugar coating this. They believe that because we are experiencing temporary financial difficulties we should permanently crush tens of thousands — if not hundreds of thousands — of people.

Many of you may not have not given this a second’s thought, but if not, I would like you both to trust me and to find out for yourself. I have been down this path of raising concerns before they were not commonly recognized many times before. I began fighting the outrage of South African apartheid more than 35 years ago, before many Americans had ever heard of that country. I spoke out on climate change more than 20 years ago, before many Americans knew anything about the dangers of greenhouse gases.

And now, in 2009, I want to tell you that we are facing one of the worst decisions that will be made in this generation, that makes a mockery of the very word Commonwealth. This decision is being supported uncritically by many members of the Senate, the House, by cabinet secretaries, by the unions – most disgracefully by the teacher’s union — by the Globe, by the Herald, by Treasurer Tim Cahill . It is even being supported by my friend, Deval Patrick, the governor for whom we pray, as we should, each week.

What would we have thought of Franklin Roosevelt if he had proposed that the solution to the Great Depression was to set up a million one-armed bandits all across the United States to “raise public revenues” at the very moment that people were plunging into financial despair? Yet nearly a million for more sophisticated and dangerous machines have already been scattered around our nation today.

What should we think that after a decade of casino capitalism in which our savings were destroyed by the equivalent of high tech slots on Wall Street our leaders are proposing to hurl many of our brothers and sisters into even deeper financial ruin?

What are we thinking when, after telling our teens to work hard and to save, we encourage them to slide effortlessly from the video games of their youth to the tens of thousands of video slot machines and video lottery terminals that they are planning right now to drop all across this state?

Do not be deceived. This is not about fun or free choice.

This is not about social gambling, or playing poker with your friends, or having an office pool over basketball.

This is the deliberate exploitation of poor and middle-income people dressed up as fiscal salvation.

Gambling is our modern golden calf. Our dance around it is the idolatry of “something for nothing.” Slot machine manufacturers are like 1950s cigarette companies. They are lying about the addictive nature of their product, even as they exploit the research showing how the lights and sounds and near-misses of slots cause our brains to emit the euphoria inducing neuro-transmitter of dopamine. This is why a national commission called these devices the “crack cocaine” of gambling.

The actual phrase that the slot industry uses for what they hope will happen is that a person will “play to extinction,” that is, will drain their financial assets. These machines are reverse ATMs, designed to remove money from your account as fast as you can push a button. Many addicts – including young people – now rely on adult diapers so that they don’t have to get up from a “hot” machine.

This is a sleeper social justice issue, and today I am asking you to wake up. I know that at St. James we are busy with many challenges – real challenges, worthy challenges — to serve the hungry and to help prisoners, to rebuild our space and to save our planet and to remember, and always to remember to love our neighbors as ourselves. But if we do not awaken to this danger in time, isn’t it also true that our food lines will grow longer, our prisons fuller, and our democracy more vulnerable to its addiction to the golden calf?

I started this sermon on a light note, about wallets and car keys and cleaning the junk out of our houses. What Jesus told us is that sometimes the junk in our collective life gets piled so high that the divine light by which we are intended to see each our begins to falter, and we are at risk of losing what we most value about our communities.

In Lent we are called to examine our lives, in peace if possible, in godly grief if necessary, and then to follow Jesus. We are to follow even unto to the contemporary courtyards of power, right up to the tables of flashing lights and spinning dials of the mechanical moneychangers.

They are deceptive and cruel.

They are immoral and unjust.

And it is our responsibility – acting with the humility and the strength that only the Spirit can provide – to insure that they are swiftly overturned.


The Untimely Death of An Ancient “Monster:” How Deregulation Led To Crisis More Than 170 Years Ago

In Business and Sustainability, Politics on February 11, 2009 at 11:21 pm

I found a fascinating lesson from the past about the present in an article written 53 years ago about a massive struggle that most of us have completely forgotten: the battle between Andrew Jackson and the Bank of the United States. Pulitzer Prize winning author Bray Hammond, in a piece published in American Heritage, argued that early nineteenth century Americans, thrilled with the power of “steam and credit” had a huge, relentless tendency to speculate. Hammond wrote that the young country needed a central bank to help curb the mounting swells of leverage that were fueling irrational investments. Andrew Jackson, however, felt a central bank was an attack on democracy, and he fought – successfully – to destroy it. His action unleashed even more speculation, which no force could deter, that eventually led to the Panic of 1837, a terrible recession that threw hundreds of thousands of American out of work.  Hammond does not blame Jackson directly – he says that Old Hickory was misled by his advisors, who deliberately duped the president.

In other words, a bubble might have been avoided through modest restraint – but a government ideologically committed to market fundamentalism stepped in to deregulate at exactly the wrong time. Sound familiar?

When I read this piece, I realized that the United States, like most countries, rotates around the same economic track over and over again.. Many historians have pointed this out – but somehow we have trouble learning it as a society. The older generation that remembers fades away and a new generation, full of optimism and exhilaration, unwilling to look backwards for any inspiration or guidance, rushes off the precipice again. So read this quotation and imagine what our world would have been like if we had read this article four or five years ago, and realized that we were speeding towards a similar conflict between the relentless drive of wild economic enthusiasm and the sobering restrictions necessary to stable growth and balanced prosperity.

Hammond’s piece had this initial summary: “Andrew Jackson battled the Bank of the United States with all his furious confidence. Was his victory the nation’s loss?”

“Andrew Jackson smote the bank fatally at the moment of its best performance and in the course of trends against which it was needed most. Thereby he gave unhindered play to the speculation and inflation that he was always denouncing. To a susceptible people the prospect was intoxicating. A continent abounding in varied resources and favorable to the maintenance of an immense population in the utmost comfort spread before the gaze of an energetic, ambitious, and clever race of men, who to exploit its wealth had two new instruments of miraculous potency: steam and credit. They forward into the bright prospect, trampling, suffering, succeeding, failing. There was nothing to restrain them. For about a century the big rush lasted. Now it is over.

And in a more critical mood we note that a number of things are missing or gone wrong. To be sure, we are on top of the world still, but it is not very good bookkeeping to omit one’s losses and count only one’s gains. That critical move was known to others than Jackson. Emerson, Hawthorne, and Thoreau felt it. So did an older and more experienced contemporary, Albert Gallatin, friend and aide in the past to Thomas Jefferson, and now p-resident of a New York bank but loyal to Jeffersonian ideals, “the energy of this nation,” he wrote to an old friend toward the end of Andrew Jackson’s administration, “is not be controlled; it is at present exclusively applied to the acquisition of wealth and to improvements of stupendous magnitude. Whatever has that tendency, and of course an immoderate expansion of credit, receives favor. The apparent prosperity and the progress of cultivation, population, commerce, and improvement are beyond expectation. But it seems to me as if general demoralization was the consequence; I doubt whether general happiness is increased; and I would have preferred a gradual, slower, and more secure progress. I am, however, an old man, and a young generation has a right to govern itself…” In these words, Mr. Gallatin was echoing the remark of Thomas Jefferson that “the world belongs to the living.” Neither Gallatin nor Jefferson, however thought it should be stripped by the living. Yet nothing but the inadequacy of their powers seems to have kept those nineteenth century generations from stripping it. And perhaps nothing else could.

But to the extent that credit multiplies man’s economic powers, curbs upon credit extension are a means of conservation, and an important means. The Bank of the United States was such a means. Its career was short and it had imperfections. Nevertheless, it worked. The evidence is in the protest of the bankers and entrepreneurs, the lenders and the borrowers, against its restraints. Their outcry against the oppressor was heard and Andrew Jackson hurried to their rescue. Had he not, some other way of stopping its conservative and steadying influence could doubtless have been found. The appetite for credit is avid, and Andrew Jackson knew in his day, and might have foretold for ours. But because he never meant to serve it, the credit for what happened goes rather to the clever advisors who led the old hero to the monster’s lair and dutifully held his hat while he stamped on its hea d and crushed it in the dust.

Meanwhile, the new money power had curled up securely in Wall Street, where it has been at home ever since.”

From “Jackson’s Fight With the “Monster””by Bray Hammond, A Sense of History: The Best Writing From the Pages of American Heritage, [New York: American Heritage Press, 1985] page 184-185

“BREAKING NEWS”: Why the New York Times and Harvard Should Merge

In Business and Sustainability, Education, Politics on February 7, 2009 at 4:33 pm

The business model – which is another way of saying the underlying purpose – of just about everything is changing right now, and that includes the university and the newspaper.

Consider these parallels:

What is the purpose of a newspaper?

To establish a network of fact-seekers (correspondents) who pass information to a group of quality control processors (editors) who repackage the information for consumption as articles (and books) for a group of people (readers and other learners) eager to find out what is going on in the world.

What is the purpose of a university?

To establish a network of fact-seekers (researchers and students) who pass on information to a group of quality control processors (faculty members) who repackage the information as articles (and books) for a group of people (students and other learners) eager to find out what is going on in the world.

So what is the difference between these two institutions?

Most of them are rooted in history and the physical (and thus economic) limits to the collection and transfer of information.

Universities were invented in the ancient world and again in the Middle Ages.  They were designed to collect elite learners around a library, which is a big building full of information packaged into scrolls or books — the earliest form of a server. As libraries got bigger, information became harder to locate, which launched the new profession of librarians. And because the increasing quantities of information became difficult to navigate on one’s own, universities created separate, epistemologically bounded “disciplines” with professional guides and explorers, known as “professors.”

Newspapers were invented in the age of greater literacy and decentralized printing to communicate information rapidly. But to gather that information they needed to disperse correspondents, send information back to a centralized group of editors, who sorted it into “news” articles that were redistributed back to a dispersed group of learners. Getting the newspaper delivered to your front door is perhaps the earliest form of the Internet.

Of course, there were and are some important differences.

Journalism, in its rush for the new, is often seen as the “first draft of history.” Academic research, through its slower, more deliberative pace, weighs information comparatively, over a longer arc of time, disconnected from some of the passions of the moment.

But both of these are really points on a continuum. Journalists have found that in addition to breaking stories, they need to do analysis. Academicians have discovered that in addition to reviewing the past, they need to pay attention to the the future.

And everybody writes articles, whether for academic journals or magazines or blogs.

What are some of the other similarities that might move the notion of such a merger from a bizarre idea to a practical possibility and then to a necessity?

• Students in universities are eager to keep to track of what is happening so that they can find their way in the world outside their institutions.

• Adults outside instiutions often want to share discoveries and wisdom and continue learning in greater depth throughout their lives.

• Currently both universities and newspapers rely on the same old-fashioned and restrictive business model: they try to channel the flow of information into a bottleneck which they control, and then they charge people for access to the information. We know that some forms of learning can only take place among actual human beings learning from each other in “meatspace” (though I prefer the term “meetspace.”) But as both the news and the human intellectual genome bottled up in colleges are increasingly released on to the Internet for free, the justification for these forms of restriction will begin to fall. And more and more are recognizing that global free education is a right, not a privilege. Equally important, it is possible.

• Newspapers are trying to shore themselves up by competing with universities for endowments. Universities are trying to earn more money by competing for readers with newspapers. Newspapers take money for corporations for advertising. Universities take money from corporations for research. Why not set good, strong, ethical guidelines — bring the two together, so that both are enabled to become less reliant on commercial interest?

Here’s the thought experiment: if Harvard University formally merged with the New York Times, then every Harvard student could potentially become a reporter for the paper as they roamed the world.

And every reporter could take time off and be refreshed as a teacher, a learner, a researcher not driven by deadline. And every professor could become a potential Paul Krugman (though admittedly, Krugman is formally at Princeton).

Both institutions are committed, in theory, to objectivity and fairness, in other words, to veritas. And now “all the news that is fit to print” can no longer be contained on a few sheets of reprocessed dead tree.

Yes, yes, I know that there will be debates about quality and access, about the role of advertising, about competition (what about other newspapers and other universities?), and especially about the other purposes of education – such as passing on the values of moderation and citizenship. Those debates should happen.

But there are 6.5 billion people on the planet – including more than 420 million people in India under the age of 18. 96% of the world’s human eyeballs are not American. The current model is only slightly better at passing on information to the majority of humans as the European monastery was for teaching the great masses of serfs and peasants.

If everything were working fine, the idea of merging information-gathering and information-processing entities might be absurd.

Instead, as universities struggle and newspapers collapse, it may end up being our future.

In an era when it would be cheaper for the New York Times to buy a Kindle reader for every subscriber rather than to keep cutting down trees, when more and more people get their news on Google than through a subscription to any one paper, and when universities are trying to blow up the walls and silos that keep their brilliant employees from solving multidisciplinary problems and to share the courses openly on the Internet, we need to rethink how information and education are linked — from scratch.

If Harvard President Drew Gilpin Faust doesn’t call publisher New York Times publisher Arthur Sulzberger, Jr. soon, he should call her. And then some very, very interesting things will happen.

And remember – you read it here first!

Infrastructure spending for families

In Business and Sustainability, Politics, Things I Wrote Before on January 12, 2009 at 3:48 am

This is an op-ed that appeared in several forms on the Internet and was published in the Boston Globe on December 13

Barack Obama  intends to invest in public infrastructure and boost green technologies. These powerful ideas should be more directly connected.As many have noted – such as the newly established Green Justice Coalition – we could solve many problems at once by stopping the waste of energy and dollars flooding out of American homes.

Think of this as “infrastructure spending for American families.”We need to break free from our paralysis. When energy prices rise, we can’t afford efficiency improvements. When prices drop, the payback seems too long. This is the business-crushing vacillation between “shock and trance” to which Obama referred two weeks ago.

So how do we make repairs despite fluctuations in the price of oil and gas? The solution is simple and elegant: The state could set up a leveraged investment fund to help families make changes immediately.

Here’s how it would work. The state would allocate a small amount of money to guarantee a fixed interest rate for private investors. Sixty million dollars would be enough to pay a mouth-watering 6 percent on $1 billion. The money would be disbursed at zero percent to anyone willing to make an investment in insulation or heating systems. Renters could split the benefits with owners. The loans would be paid back directly from the savings.

Such a program would achieve five goals at once.

First, it would create local jobs – from blowing insulation and training energy auditors to installing super-efficient boilers. These jobs would swiftly pay back the original investment by government, since workers would pay both state and federal taxes. There would be an additional multiplier effect as both families and workers had more money to spend. And $1 billion could generate as many as 10,000 jobs in Massachusetts. It would also reinvigorate training and other youth programs such as YouthBuild.

Second, it would improve housing values. We have efficiency stickers on appliances; why not on houses? States should fix this through mandatory disclosure of the likely energy costs – or savings – of any home for sale. An energy audit would thus become a routine part of routine home inspections. Homes with upgraded efficiency would instantly be worth more.

Third, it would increase disposable income for families. Right now the state scrambles every winter to find millions for fuel assistance. Economically this is like burning crumpled dollar bills to keep poor people warm. Morally it holds low- and middle-income families hostage to the profit demands of energy companies. It would make far more sense to invest some of those dollars in permanent change to cut energy use.

Fourth, it would bring new technologies rapidly to scale. Did you know that you can install a one-cylinder co-generation unit – known as the Freewatt system – in your basement that creates hot water, heat, and slices your electric bill?

One homeowner in Somerville insulated his house and dug a 250-foot well in his tiny backyard. He uses the stable temperature of the ground water to heat and cool his house for less than $150 a month. There are many revolutionary technologies ahead, but to bring the unit costs down, you have to push the volume up.

Fifth, it will drive down greenhouse gas emissions. In Massachusetts, approximately 1 million homes burn nearly a billion gallons of heating oil every winter. Cutting emissions from this single sector by 25 percent would lower Massachusetts emissions by at least 3 million tons a year.

Is this really possible? Yes. We need the Patrick administration to set visionary residential energy-efficiency targets, which so far it has failed to do. And we need President-elect Obama to take his two good ideas – investment in infrastructure and green technology – and press them into one.

It will not help American families over the long run if we get to drive down big roads in new cars, only to park them in front of cold houses.

The most fundamental infrastructures for individuals and families are the places we live. We have the ability to create savings that will last for generations while safeguarding our planet.

The question now is whether we can muster the will.

/\/\ END/\/\

What Surfing Can Teach Us About Managing the Unexpected

In Business and Sustainability on January 5, 2009 at 3:34 pm

I originally posted this in November on the Harvard Business Review blog – this was my first effort for them, after they invited me earlier in the fall – Posted by Bob Massie on November 17, 2008 8:31 AM; Originally posted at Harvard Business Review

Five years ago, right after the collapse of Enron, World Com, and the other mega-collapses of the Lost Decade, I attended a somber discussion at Harvard Business School. Three distinguished panelists — Harvey Goldschmidt, at the time a commissioner of the SEC; James Turley, the chairman and CEO of KPMG; and Professor Krishna Palepu, director of the HBS Division of Research — spent more than an hour before an audience of several hundred concerned business leaders dissecting two questions.

First, how could these collapses have happened? And second, why didn’t people perceive it in advance?

At the end of the discussion, I asked a question from the floor. Were we not neglecting a third, equally important question: what huge, hard-to-see and potentially threatening wave was roaring towards us at that very moment?

The question did not inspire much discussion, though in retrospect we all can think of emerging tsunamis that later emerged — from wobbly securitization and ballooning credit default swaps to erratic energy demand and deepening climate risk — that have damaged our economy.

What lessons can we draw from this repetitive myopia to which we are all inclined? More specifically, how can we learn to anticipate what lies around the next bend in the road?

First, we should acknowledge that capitalism oscillates between two conflicting convictions. We believe that the future will be like the past and that change is inevitable.

Too often when markets run into problems, we start off with the first assumption. We treat market malfunctions as isolated symptoms– a momentary cold rather than a chronic illness. Only after the symptoms recur — again, again, and again — do we start to accept that there may be a pattern. Then we suddenly switch, often abruptly, to the second view: we are in the midst of a sea-change.

Statisticians want us to believe that behaviors all revert to the mean. Entrepreneurs want us to believe that the past is irrevocably being left behind. Efficient market theorists tell us the prices embody all available knowledge. Scientists tell us that knowledge is constantly being expanded and rewritten. So what is a leader interested in the future to do?

Second, to predict the future, we paradoxically need to read more about the past. Only by learning about how societies have pivoted rapidly in response to new ideas and changing material conditions can we learn to detect such patterns early.

For example, when I was a high school student, the single greatest certainty in American foreign policy — the assumption from which all other predictions flowed — was that Communist totalitarianism would be a permanent feature of the world map. There would always be a Soviet Union, and, by extension, a Warsaw Pact, a Cold War. Our military, political, diplomatic, and commercial policies all flowed from this inescapable certainty. And this view was maintained until just a few months before the fall of the Berlin Wall.

To go back a bit farther, it’s difficult to remember that New England, now almost entirely represented by Democratic elected officials, was once a vast and unassailable Republican peninsula. Or that the American South was made up for nearly a century of right-wing, states-rights, white supremacist Democrats — members of the same party that gradually morphed, from Wilson to Roosevelt and from Kennedy to Clinton, into the one that just nominated and elected an African-American president.

More strange twists and turns in our national and international economy lie ahead. We know that our capital markets failed us because they didn’t capture important underlying forms of value — but we don’t know what they will be replaced by. We know that we are witnessing deep structural changes in the global economy — through the globalization of information and trade, through climate change and population growth — but we don’t yet know how these pieces will interconnect. We know that big pieces of the wisdom we have inherited about how the world works don’t apply any more — but we don’t know which ones.

Instead of paddling around in circles as though we were in some calm lake, we need to learn to act like surfers — to place ourselves in the rising and falling swells, paddling forward while glancing occasionally backwards, so that we will be ready when the big wave comes. If we do that, we will stand up at the right moment, establish our balance, take a deep breath, and ride the exhilarating force of history all the way to shore.

Bob Massie has been a leading innovator in the fields of investment, finance, corporate responsibility and global strategy. Having received his doctorate from Harvard Business School in 1989, he has been, at different moments in his career, a professor, minister, historian, author, and statewide political candidate. The former executive director of Ceres and the co-founder of the Global Reporting Initiative, Massie is currently an advisor to many organizations and entrepreneurial projects around the world.