Today’s Solutions: October 24, 2021

Excerpts from “Reconnoitering” in Inquiries into the Nature of Slow Money: Investing as if Food, Farms, and Fertility Mattered by Woody Tasch. Reprinted with permission of the publisher, Chelsea Green Publishing.

Ode Editors | November 2008 issue

If there had been a manual of civilization way back when, it might have read: Never start a ten-thousand-year epoch of agriculture-dependent civilization without first understanding soil fertility, biodiversity, carrying capacity, and the relationship between economics and ecology.
Which is to say: We could not, in those early days of Mesopotamia, or even much later, in the early days of the steam engine and the joint stock corporation, have anticipated the limits of agriculture or the limits of economics. We could not have been expected to understand, when the first clay tablets were being scribed with shepherd’s inventories and the first wheat fields were being cultivated, how agriculture would pave the way from hunter-gathererdom all the way to Wall Street. Any more than Descartes could have been expected to anticipate Thoreau or Einstein. Any more than the Wright Brothers could have been expected to anticipate the bombing of Dresden or the advent of the stealth bomber. Any more than Henry Ford, exuberant with the opportunities of mechanical horsepower and the prospects of manureless cities, could have been expected to anticipate, a scant one hundred years hence, the 405 in Los Angeles during rush hour or suburban sprawl or the aggregate particulate emissions of 500 million tailpipes.
And it would have taken an oracle of Delphic capabilities to have foreseen that as the whole planet geared up and heated up and sped up in the twentieth century, responding to the triple-threat explosions of population growth, technological innovation, and financial markets, the future would hinge in such significant measure on a very different triple threat: the small, the local, and the slow.
* * *
In relation to a tree or a mountain or a river or a valley or a phalanx of armored vehicles, a person is small. In relation to the night sky and the universe of which it is a part, the earth is very, very small. In relation to history, a footnote is small. In relation to Wal-Mart, which has $350 billion in sales, Patagonia and Stonyfield Farm, each with hundreds of millions of dollars of revenues, are small. Butterworks Farm, with a $1 million yogurt business operated sustainably from one 325-acre farm and a herd of fifty cows, is very much smaller yet, but is large compared to many of its neighboring farms, for whom such revenues or branded-product success are enviable.
This is the beauty of the word small. You cannot use it absolutely. It only exists in relation. It forces qualitative judgment. It implies appropriate scale and challenges the intelligence to figure out just what in the world that means.
Similarly with the word local. Is local a specific number of miles from Point A to Point B? Is it a specific political or contractual designation? How does it relate to a bioregion or a watershed? In the word local are connotations of rapport, relationship, rootedness, and the kind of responsibility that is the reciprocal of anonymity and absentee ownership. In the word local is a hint of the possibility of localization, that which is bubbling up in the wake of globalization. The quantitative imprecision of the term does not diminish its importance. As with the word small, its importance lies precisely in a reliance on qualitative distinctions:
Most of the “conspicuous developments of economics in the last quarter of a century” (referred to by Professor Phelps Brown) are in the direction of quantification, at the expense of the understanding of qualitative differences. . . . For example, having established by his purely quantitative methods that the Gross National Product of a country has risen by, say, five percent, the economist-turned-econometrician is unwilling, and generally unable, to face the question of whether this is to be taken as a good thing or a bad thing. He would lose all his certainties if he even entertained such a question: Growth of GNP must be a good thing, irrespective of what has grown and who, if anyone, has benefited. The idea that there could be pathological growth, unhealthy growth, disruptive or destructive growth is to him a perverse idea which must not be allowed to surface. A small minority of economists is at present beginning to question how much further “growth” will be possible, since infinite growth in a finite environment is an obvious impossibility; but even they cannot get away from the purely quantitative growth concept. Instead of insisting on the primacy of qualitative distinctions, they simply substitute non-growth for growth, that is to say, one emptiness for another.
Which brings us around to that all-important, qualitative-distinction-laden word slow.
“Money only knows one speed,” the scion of one of America’s wealthiest families said during a public discussion. “Money only goes fast, faster, fastest. Try to slow it down, and you’ll just end up with sloppy investing.”
To which someone responded, “I couldn’t agree more with the first half of your statement. Left to its own devices, money will go fast, faster, fastest. It is up to us to design ways to slow it down. That would not be sloppy investing, in my book. That would be wonderfully intelligent investing.”
In relation to what, in comparison to what, would slow money be . . . slow?
Consider this: From the beginning of human history to the year 1900, the world economy grew to $600 billion in annual output. Today, the world economy grows by this amount every two years; global output reached $66 trillion in 2007. Here are some of the numbers:

  • $3 trillion circulate through currency markets every day.
  • Trading volume on the New York Stock Exchange, which averaged 3 million shares per day in 1960, crossed the 100-million share mark in 1982, the billion-share mark in 1997, the 2-billion-share mark in 2001, and the 5-billion-share mark in 2007.
  • Revenues of Wall Street broker-dealers rose from $20 billion in 1980, to $76 billion in 1990, to $325 billion in 2000.
  • To make the list of the top twenty-five hedge-fund managers in 2002 required personal compensation of at least $30 million; in 2006, $240 million.
  • A share of Berkshire Hathaway that cost $8 in the 1960s was worth over $100,000 in 2007.
  • Mickey Mantle’s salary for the 1968 season was $100,000; in 2007, Roger Clemens got paid $20,000 per pitch.
  • In 1982, the world had 12 billionaires; in 2000, 298; in 2008, 1,125 with a combined net worth of $4.4 trillion.
  • In the United States, the wealth gap has nearly doubled since 1980, hitting levels not seen since the 1920s. The top 0.1% of Americans collectively enjoy almost as much income as the bottom 50%, with the average income in the top group 440 times that of the bottom half.3 In China, the wealthiest 10 percent own more than 40 percent of all private assets, and inequalities are widening.4 On a global scale, the richest 2% own more than half of all household wealth.
  • U.S. foundation assets grew from $32 billion in 1980 to $550 billion today.
  • The U.S. venture capital industry exploded from an average of $3 billion invested per year in the 1980s to a peak of $100 billion invested in 2000, and then settled in the range of $20 billion per annum, with this money invested in three or four thousand high-tech companies out of the more than 500,000 new corporations started every year—that is, invested only in those with a shot at being “the next Google,” growing to billions of dollars of market capitalization in a few years.
  • We have passed the billions-of-computer-instructions-per-second barrier, on our way, by 2015, to the rarified atmosphere of ten tera-instructions per second.

The analogy of a rocket accelerating to reach escape velocity from Earth’s gravitational field has some relevance. Venture capital targets companies that are ready to “take off.” But this is only a small part of the overall acceleration in financial markets:
Computerization mothered a new dimension of financialization. . . . Just as rocket science took men into space in the 1950s, another exotic mathematics—in this case, capital asset pricing, options theory, and price and volatility models—took finance into a hitherto unexplored galaxy of profits. Turning money into equations and digital impulses—shifting to the megabyte standard, in economic journalist’s Joel Kurtzman’s term—allowed it to jump time and geography, creating the transnational netherworld in which traders in New York, London, and Paris warred electronically over Belgian francs and Thai baths and global arbitrage fed on shoals of cyberdecimals.
The speed of financial markets, and the short-term thinking that it breeds in CEOs and investors, is both a reflection of and a cause of a broader disorientation in the culture at large. Accelerating money and accelerating computers are one thing; far more mundane manifestations of speed have profound consequences for our perception. Even 65 miles per hour—far, far slower than a snail’s pace relative to cyberspeed—can disconnect us from our surroundings: “Some would argue that covering more ground exposes the speeding driver to more of what is real. But, ironically, the faster we go, the less we truly see. Speed insulates us from organic detail, and space becomes not homes, neighborhoods, and individual lives, but a disembodied medium through which we move. Though more is seen, less is observed, for the depth of our understanding is inversely proportionate to our velocity.”
The acceleration of information and financial markets amplifies such questions about the relationship between information and knowledge, between economics and nature. For as financial time contracts, how can we maintain a healthy relationship to natural time? The contrast is striking: natural time versus money time, seasons and generations on the one hand, fiscal-year quarters and product life cycles on the other; the time it takes water to flow through soil and aquifer versus the time it takes money to cycle through mutual fund and derivative; the time it takes to create soil and oil versus the time it takes to deplete them; currency swap and collateralized debt obligation and arbitrage versus protozoa and mycorrhizal fungus and earthworm.
* * *
Fifty trillion dollars of derivatives is quite a monument to financial ingenuity, but at what risk do we dare to outsmart an ear of corn?
Farmer Gene Logsdon observes how the imperatives of money’s speed play out in his field:
No ear of corn has ever heard of 6 percent interest, much less 12 percent. To keep pace with that kind of inflation, the farmer is forced to squeeze every kernel of production he can from the soil. He increases applications of toxic chemicals known to adversely affect soil microorganisms. He buys heavier and heavier machinery, which compact his soil, so that yields drop. He applies increasing amounts of fertilizers to bring yields back up. These strategies all seem to reach points of diminishing returns. . . . Blending the opposing forces of economics and ecology into a productive farm demands supreme skill. No scientist, no ecologist, no chemist, and God knows, no bureaucrat or social scientist is going to do it. An experienced, informed farmer is the only chance.
The diminishing returns of industrial agriculture run beyond the cornfield to the entire system: drastically declining numbers of “experienced, informed” farmers; increasing crop losses due to pests despite dramatic increases in pesticide use; ethical, environmental, and nutritional problems of animal confinement units and factory feedlots; collapsing fisheries; disappearing bees. Here are some of the numbers:

  • In 1950, there were 25 million U.S. farmers; today, there are 2 million; 163,000 “mega-farms” produce 60 percent of the nation’s food.
  • In 1980, the biggest poultry processing plants in the United States handled 16 million birds a year. Today, according to one industry observer, “you need 1.25 million birds a week just to break even.”
  • 230 pounds of synthetic nitrogen is applied to a typical acre of U.S. corn; as much as 50 pounds enters the surrounding environment, contributing to groundwater eutrophication.
  • Despite a tenfold increase in pesticide use since 1945, crop losses due to pests have almost doubled. The National Academy of Sciences listed 440 pesticide-resistant insects in 1986 and the number is rising.
  • Over the last fifty years, world irrigated area tripled. Half the world’s grain crop is grown on irrigated acres, and the United Nations Food and Agriculture Organization (FAO) projects a 20 percent increase in irrigated acreage by 2030. However, aquifers are being depleted: In India, water tables are falling by up to 20 feet per year; in Northern Africa, aquifers are being depleted five times faster than they can recharge; in China, water tables have fallen by up to 300 feet, and the World Bank reports that water use exceeds sustainable flow by more than 600 million tons per year; in the United States, the Ogallala Aquifer, which supplies one in five irrigated acres, is being overdrawn by 170 million tons, or 3.1 trillion gallons, per year.
  • The FAO reports that global grain yields per acre are increasing by only 1.3 percent per year, barely half the rate of 30 years ago and much more slowly than demand is growing.
  • 65 percent of U.S. grain is used as livestock feed.
  • Concentrated animal-feeding operations (CAFOs) account for 40 percent of the world’s meat production, up from 30 percent in 1990. China’s CAFOs produce 40 times more nitrogen pollution and 3.4 times the solid waste of industrial factories. Effluent from U.S. CAFOs contaminates groundwater in 17 states. Heavy subtherapeutic use of antibiotics by livestock producers accounts for nearly half of all antibiotics used worldwide, producing new strains of antibiotics-resistant bacteria.
  • The industrialization of food production—large-scale monoculture, genetically modified varieties, and the consolidation of seed production by agribusiness companies—has resulted in dramatic declines in the biodiversity of cultivated crops. In 1900, there were 7,000 varieties of apples in the United States; today, less than 1,400 remain. According to the Global Crop Diversity Trust, 95 percent of cabbage, 91 percent of corn, 94 percent of pea, and 81 percent of tomato varieties were lost during the twentieth century. In less than a century, India’s cultivation of 30,000 indigenous varieties of rice is shrinking to less than 100, with the top 10 expected to account for over three-quarters of the subcontinent’s rice acreage.
  • Worldwatch and FAO estimate that 76 percent of global fish stocks are overfished, with 366 out of 1,519 fisheries worldwide collapsing.
  • Beekeepers in the United States and Europe have suffered dramatic losses, some as high as 70 percent, from what is being called “colony collapse disorder,” with causes under investigation including crowding, inadequate nutrition, pesticide exposure, infection, and the combined effects of prophylactic antibiotics and miticides.

There is little dispute about the numbers. The only real dispute is about what story accompanies the numbers. Are these merely the unfortunate side effects, or “externalities,” that accompany economic growth? Are these problems that will be handled, each in turn, by technological fixes? Or, are these serious, structural cracks in the foundation of industrialization? Are these feedback loops calling into question the linear fallacies of economic growth?
And then there are the numbers and the stories of the soil.
Every second, a dump-truck load of topsoil is carried by America’s rivers into the Caribbean; every year, millions of tons of topsoil erode from farmers’ fields in the Mississippi River basin. “An estimated 36% of the world’s cropland is suffering from a decline in inherent productivity from soil erosion,” reports Lester Brown, one of the world’s leading ecosystem monitors. Globally, we are losing more than 10 million hectares of arable land each year, with soil loss exceeding new soil production by 23 billion tons, resulting in the loss of 0.5 percent or more of the world’s soil fertility, annually.
Worldwatch Institute calls it “the quiet crisis of the world economy.” Let us call it Peak Soil.
The phrase Peak Soil is currently being used by anti-biofuel advocates, highlighting the problems of diverting arable land from food production to fuel production. The phrase hints at something more ominous than the current controversy about ethanol, however.
Peak Soil suggests the exhaustion of a resource that is ultimately far more vital to civilization than either oil or ethanol. “Societies that deplete natural stocks of critical renewable resources—like soil—sow the seeds of their own destruction,” writes David Montgomery, professor of earth and space sciences at the University of Washington. “Technology, whether in the form of new plows or genetically engineered crops, may keep the system growing for a while, but the longer this works the more difficult it becomes to sustain—especially if soil erosion continues to exceed soil production.”
Beyond a small number of geologists, environmentalists, and organic farmers, the idea of Peak Soil seems as inconceivable today as global warming seemed two generations ago. One is tempted to ask with all incredulity: Could we really run out of dirt?
Which leads us back to Question Two in the Terra Madre of All Final Exams. The question is not only a question of erosion, it is a question of fertility. It is a question of nematode and protozoa, a question of fungi and bacteria, a question of microorganisms too numerous to count. Studying virgin prairie soils and cultivated soils in Missouri in the 1930s, soil scientist Hans Jenny found that after sixty years of cultivation, farm soils had lost a third of their organic matter, even in the absence of soil erosion. Our understanding of the soil has not advanced much since then.
“Soil science is in its infancy,” geneticist David Suzuki wrote in 1998. Our attention remains focused on what goes on above the ground. To paraphrase organic farmer Eliot Coleman, we are so busy feeding the plants that we have forgotten to feed the soil. (And he’s talking about compost and manure, crab shells and seaweed and crop residues and peat, not empty, synthetic calories of the N-P-K kind.)
* * *
Each gram of fertile soil contains hundreds of billions of bacteria and actinomycetes, hundreds of thousands of fungi and algae, and tens of thousands of protozoa, nematodes, and other microfauna. That was each gram of fertile soil. Let soil quants extrapolate this to shovelfuls, yards, tons, and acre-feet. I see your trillions, and I raise you trillions and trillions more: How many trillions of microorganisms are in the soil for every dollar of derivatives that circulate the globe?
Earthworm numbers are less stratospheric. There can be as many as two million earthworms in an acre of fertile soil. Or should we measure them in pounds per acre (estimated at from 356 to 612 by one researcher in New Zealand)? Or should we measure them in burrow-miles per acre (estimated at 1,100)? Or should we measure them in castings per acre (estimated at 33 to 40 tons)? Darwin estimated that 50,000 earthworms carry 18 tons of soil to the surface of an acre.
The number of earthworm species is a moving target. Edwards and Lofty estimated 1,800 species in their 1972 work, The Biology of Earthworms. According to encylopedia.com, the number is 2,200. According to compost-bin.org, the number is more than 4,400, in three categories: endogeic, anecic, and epigeic. Amy Stewart reports 4,500 species (739 genera, 23 families, several suborders and superfamilies, and two orders).
“There is no better soil analyst than the lowly earthworm,” Sir Albert Howard wrote in his introduction to a reprint of Charles Darwin’s final work, The Formation of Vegetable Mould through the Actions of Worms with Observations on Their Habits.
Referring to “the war in the soil” and “the battle of organic and inorganic,” Howard offered that it would be the earthworm that would interpret Mother Earth’s final “decision.”
Howard’s war in the soil harkens back to Gene Logsdon’s evocation of farmers reconciling “the opposing forces of ecology and economics.” These opposing forces manifest themselves as a battle between SOM (soil organic matter) and SCM (supply-chain management):
There is a growing consensus outside the industry that the crisis may already be beyond growers’ ability to fix. Despite the media’s focus on the feral pigs as the killer vector in the spinach outbreak, for example, researchers have identified dozens of other “nodes of risk” where pathogens could have breached the industry’s safety systems. And, as with the meat business, many of those nodes were created by the very technologies and business practices that allow the industry to deliver ever greater volumes of produce year-round at declining costs. “There guys are in supply chain mode,” says Trevor Suslow, a University of California at Davis microbiologist and a leading expert in food safety investigations. “And when you’re in that mode, when your objective is to fill orders, you tend to stretch your system—in terms of capacity and throughput, but also in terms of what you can really handle while paying attention to all the details of quality and safety.”
Third-generation Japanese American peach grower Mas Masumoto echoes the challenges of reconciling his role as a farmer with his role as a business manager. “Once you start hiring a lot,” he recalls his father’s advice, “you’re not just a farmer anymore.” Expenses per acre and yields and aspects of the work that are “easily quantifiable” battle with his awareness that “simple linear formulas do not apply in farming.” He minimizes this tension by keeping his farm small enough so that he and his father can do most of the work, except for pruning and harvesting. He speaks of what he calls “synergism,” through which the gifts of nature almost magically add up to a whole that is greater than the parts, but he also speaks of war: “I sometimes picture my farm as a battlefield with troops of people struggling with nature in a hundred-year war.”
It is a struggle to keep the “culture” in “agriculture.” The modern era is replacing “culture” with “business,” producing a high-yielding hybrid activity called “agribusiness.” This is an activity defined by commodity producers and commodity markets and global trade, by industrialization, mechanization, and what some have even called “chemicalization.” For multigenerational farm families who have a visceral attachment to and intimate knowledge of a certain piece of land and certain way of life, or, even, a certain variety of peach, the march toward larger farms and larger markets and larger machines comes at a cost for which no financier can compensate.
Lest we too easily dismiss them as remnants of an agrarian past, let us consider the possibility that such farm families, and the communities of which they are a part, are microorganisms in the soil of the food system. They are the humans who care for the humus. They do not survive, well, the heavy application of the synthetic nutrients of industrial economics. They are as susceptible to arbitrage and futures contracts as an actinomycete to Round Up and Malathion. And without them, not only soil health, but also cultural health, indigenous culture, and local economies—the social and environmental relationships that promote the health of families, communities and bioregions—all are at risk.
We find ourselves, now, between the Scylla of finance and the Charybdis of fertilizer. We are presiding over the unprecedented accumulation of financial capital, on the one hand, and the continuing erosion of social and natural capital, on the other.
We need the kind of reconnoitering that no expert can provide. We need to reconnoiter outside the realms of market share and shareholder, above the top line and below the bottom line, away from soil war and toward soil peace. We need to reconnoiter between our hearts and our minds.
No economist, no soil scientist, no investigative journalist, can show us the way. There is no GPS that will guide the bees back to the hive. There is no price/earnings ratio, no SROI that will show us the way back home. Do we reckon our whereabouts with economic statistics or earthworm sensibilities? Do we believe more in ownership or usufruct? Chrematistics or oikonomia? Lowest price or highest quality? Profitability or fertility? Thomas Malthus or Milton Friedman? How do we make our way between these possibilities?
* * *
When John Maynard Keynes wrote, “Words ought to be a little wild, for they are the assault of thoughts on the unthinking,” and James Joyce wrote, deep in the innards of Ulysses, “that the language question should take precedence of the economic question,” they put their fingers on one of the great wounds of the modern era: We need to discover ways of thinking and speaking that can put economics in its place.
In our devotion to money, market, and machine, we are destroying not only the fertility of the soil, but the fertility of our imaginations.
What is, in the farmer’s field, a struggle between economics and ecology becomes, in the investor’s mind, a struggle between quantity and quality, portfolios and possibilities, numbers and words.
* * *
Asserting a connection between such luminaries as Thoreau and Tolstoy and Gandhi and a bunch of early-stage companies in the first decade of the twenty-first century runs the risk of seeming na•ve, as well-intentioned but ineffectual as an old hippy at an annual shareholders meeting of Intel.
Yet social investing can best be understood, with its historical roots in Quakerism and anti-apartheid divestitures, as an expression of a centuries-old ethos of nonviolence in the context of modern fiduciary capitalism. Of necessity, this expression manifests itself in partial adaptations, pragmatic mutations, and imperfect applications. Lots and lots of half steps. After all, who can ignore how daunting it is to look at the Fortune 500 or the Russell 5000 and think: What would I invest in if I really wanted to do no harm?
Our “inescapable duty,” to use Wendell Berry’s words, is to avoid acting like deer in the headlights, and to move forward, undeterred by ambiguity. Our success in moving beyond half steps, in finally defining a new destination and taking the first full steps in its direction, depends on acknowledging, without scapegoats and without undue recrimination, the violence of the modern economy.
By prioritizing markets over households, community, place, and land, the modern economy does violence to the relationships that underpin health and that give life-sustaining meaning—family relationships, community relationships, relationships between consumers and producers and between investors and the enterprises in which they invest, relationships between companies and the places in which they do business, relationships to the land and in the soil. Such relationships are attenuated, or, in the extreme, deracinated, by the modern, global economy.
The extent to which the modern economy depends on broken relationships was revealed by a story told a few years ago during a small retreat of business leaders. Going around the table to introduce one another, a young entrepreneur of Middle Eastern descent told a tale of broken relationships:
My most recent software company had its offices in the World Trade Center. On 9/11, we were pretty much wiped out, most of our records gone. When we started trying to put some of the pieces back together, I made the rounds to my directors. These were many of the leading investment bankers on Wall Street, individuals with whom and for whom I had made many, many millions of dollars in my previous ventures.
One of them said to me, “Why don’t you have Osama fund your re-start?”
At that moment, I realized that I had no relationships with these people. I realized that there had been nothing but commercial ties between us. The money connections were not real relationships.
As he spoke, it became clear that while many of us had been aware for some time of the manner in which the modern economy depends on and produces broken ecological relationships, we had not been fully cognizant of the corollary damage done to social relationships. Although we understood the concept of ecological footprint, we did not fully understand the footprint of broken social relationships.
It is no accident that an economy based on broken relationships would find it easy to support, and to depend on, the building of nuclear weapons, the waging of wars in distant lands, the selling of cigarettes, the flying of trillions of air miles, the commodification of leisure, urban and suburban sprawl, gated communities and favelas, toxins in the food and water, and kids who watch an average of four hours per day of TV, paying more attention to it and to instant messaging than to people in the room. Much of this violence is overt. Much of it is implicit, indirect, made palatable by the fundamentals of consumerism and made invisible by veils of intermediation.
As it has been practiced and understood, socially responsible investing can do little to address root issues of consumerism and intermediation. SRI is confined largely to damage control: an exercise in improving corporate governance and minimizing damaging “externalities,” while not affecting core elements of a company’s activities, culture, or mission. At its worst, SRI seems an exercise of fueling a bulldozer with biodiesel: We are greening our fuel, but are we preventing subdivision of the farm?
Despite successes of shareholder-advocacy campaigns and occasional spikes in public awareness, there is little in the nature of fundamental systemic change that can be accomplished via broadly diversified portfolios of mature public companies, managed by SRI brokers and advisors who compete with the financial returns and performance benchmarks defined by the very same extractive or destructive economic activities that are the objects of SRI reform.
To look at some of the growth statistics provided by the Social Investment Forum, you would conclude that SRI is making substantial inroads into the capital markets. From 1995 to 2005, assets under management using one or more of the three core socially responsible investment strategies—screening, shareholder advocacy, and community investing—rose from $639 billion to $2.29 trillion. During that same period, the number of socially screened mutual funds rose from 55, with assets of $12 billion, to 201, with assets of $179 billion.
Despite the dramatic increase in the number of socially screened mutual funds, however, the overall increase in SRI assets is far less impressive when viewed against the increases that occurred in total investment assets under professional management in the United States from 1995 to 2005—from $7 trillion to $24.4 trillion. Even if one considers SRI’s percentage of total assets, roughly 10 percent, to be impressive, and even if one takes at face value a recent study by Mercer Consulting indicating that three-quarters of all money managers think that social investing will pervade the financial sector within a decade, the imperfections inherent in SRI cannot be ignored.
Critics of SRI point out that its pursuit of competitive returns leads inevitably to watered-down screens, resulting in the fact that some 90 percent of the Fortune 500 companies make it into an SRI portfolio. For instance, a fast-food company or an oil company or a mining company may be deemed “best of class” for some of their corporate governance practices, but this does not address the basic problem that Paul Hawken identifies: “If you are going the wrong way, it doesn’t matter how you get there.”
The core issue that the SRI industry is not confronting is the macro problem of economic growth, which manifests itself at the micro level of individual portfolios and individual investments as the problem of competitive returns. Professional managers are measured on their financial performance, and it is no different for those who incorporate social and environmental criteria. The result: elaborate strategic machinations and metrics designed to demonstrate that you can “do well while doing good,” which in other parlance might be called “having your cake and eating it too.”
“The industry has hooked people on the idea,” Hawken wrote in a controversial 2004 critique, “that SRI funds should do as well as or better than other mutual funds, and then they have to demonstrate it, which leads to portfolio creep—the dumbing down of criteria and the blurring of distinctions between what is or is not a socially responsible company.”
To fully consider the social and environmental responsibility of a company, qualitative distinctions and exogenous factors must be considered with respect to its business. Is a company promoting conspicuous consumption? Is it furthering a global brand at the expense of local enterprise? Is it directly or indirectly exacerbating rural-urban migration? Is it benefiting from the utilization of natural resources at an unsustainable rate? Is it reducing cultural and biological diversity?
We must ask such questions humbly, never forgetting that, in Aristotle’s words, the perfect is the enemy of the good. We must be critical but not too critical of the environmental and governance-related failings of mature corporations. We must be critical but not too critical of the environmental and governance-related failings of start-up companies that explicitly embrace the triple-bottom-line.
At the Jessie Smith Noyes Foundation, one of the pioneers of mission-related investing during the 1990s, finance committee banter often circled around the “Viederman Three”: the fictional three companies that were pure enough to pass muster with the foundation’s president, Stephen Viederman. Such banter expressed humility at the difficulties of clearly posing and answering questions about socially responsible business practices.
In mature public companies and venture capital-backed companies, with the mandate to maximize shareholder returns built in like a kind of permanent pedal to the metal, response to questions of social and environmental responsibility are highly constrained. Philanthropy is similarly constrained in its approach to such questions, as the culture and imperatives of grant making define agendas and priorities. What does that leave? Up until now, that has left only SRI mutual funds and NGOs, fighting rear-guard actions against particular companies or particular corporate practices—an advocacy posture that entails pushing a very big stakeholder rock up a very steep fiduciary hill.
Such advocacy inevitably depends more on sticks—imposing fixes on companies through negative feedback—than on carrots, since NGO-led advocacy is inherently adversarial and investor-led advocacy in almost no cases represents more than a tiny percentage of a mature corporation’s capitalization.
But it all comes down to the carrots.
If you are not a shareholder (and in a very few cases even if you are), it is easy to rant against the excesses, omissions, malfeasances, lack of full accountability, and unenlightened self-interest of global corporations.
Thank Gaia, it is also easy to plant carrots.
As figurative carrots, take the thousands of companies that are started up each year by entrepreneurs who see their companies as agents of cultural and environmental restoration. Fair trade companies. Inner-city child care companies. Solar and wind companies. Educational ventures. Publishing ventures. Companies developing medical products and services for niche markets and developing countries. Companies whose products and services promote health and wellness. And, of course, organic food companies. They are “carrots” because they offer a forward-looking, non-adversarial, even celebratory complement to advocacy “sticks.” Providing start-up capital and growth capital to such enterprises is like planting carrots.
But we cannot talk about carrots as metaphor without also talking about non-fiction carrots. Take those, for instance, of one Eliot Coleman, who, with his wife, Barbara Damrosch, and a steady crop of interns who come from near and far, runs Four Season Farm in Harborside, Maine.
These carrots, the smell and texture of the soil in which they are so densely planted, the almost meticulously tended beds they are grown in, their hue and translucence, their sweetness—all conspire to arrest the unsuspecting consumer, in much the same way as Brunello sipped in Montepulciano (at roughly the same latitude, 44 degrees north or so, which is very surprising to most folks, given how different the climates are in mid-coastal Maine and Tuscany). They give such pleasure and awaken the senses, suggesting questions that have everything and nothing whatsoever to do with socially responsible investing: When did we forget our connection to the land? How can this taste so damned good? What are all these tastes, anyway? Why doesn’t all food taste like this? How much longer would I live if I ate like this every day? Who cares about longevity—that’s another numbers thing! This is all about quality?! How does he tend this place so artfully? When I pull one of these carrots, why does the earth release it so easily? Why does the earth smell and feel so good? Where was it that I was in such a rush to go yesterday? When did we lose our way? Can I take you home with me? How about a hug? Why can’t I live here?
Of course, everyone can’t live on an organic farm. And everyone isn’t Eliot Coleman any more than everyone is Joni Mitchell.
But that doesn’t mean we all have to keep doing the same thing over and over again, hoping for a different outcome. We don’t have to keep sending our money into distant, invisible portfolios, while wondering why Main Street is dying, our food is irradiated, and geneticists in China are breeding square apples. We can find ways to build the soil of the local food systems.
This is the beauty of Slow Food. It gives us a way to engage that is proactive, and even celebratory. It taps into and follows a beautiful energy that shifts, quickly and fundamentally, away from anti-McDonald’s and anti-globalization and toward pro-heirloom variety and pro-terroir and pro-artisan and pro-small farmer, pro-biodiversity and pro-localization and pro-community.
This can also be the beauty of slow money.
U.S. Census data shows that 60 to 80 percent of net new jobs are created by small businesses. Yet the provision of capital is skewed to high-tech start-ups, on one end of the continuum, and microenterprise in developing countries, on the other. Less than 1,000 venture capital firms steer roughly $20 billion into 3,000 or so companies per year in the United States; more than 200,000 U.S. angel investors (high net-worth individuals investing their own money) steer roughly the same amount into another 50,000 high-tech companies. At the other end of the continuum, financially and geographically, is the micro-finance industry, which provides loans of between $100 and $1,000 or so to micro-entrepreneurs among the world’s poor in developing countries. Micro-finance intermediaries are growing at what Forbes calls a “fever” pace, with 40 new funds started since 2005 and some $17 billion in loans outstanding worldwide.
Meanwhile, back at home in the country that has gotten used to being called “the world’s breadbasket,” the category “small food enterprise” does not exist. Capital markets seem ready to leave SFEs unrecognized and languishing, neither fish nor fowl in the territory between investing and philanthropy, between developed global economy and developing local economies.
In The Soul of Capitalism, William Greider heralds the importance of “thousands of small and independent enterprises pursuing the new ideas and nature-friendly products” that will shape the future of the economy, and points to scores of farmer-owned enterprises that are developing new household cleaners, waxes, water-based resin paints and coatings, lubricants, and other products from soybean, canola, and other oils. Paul Hawken echoes Greider’s sentiments: “Ecological restoration can probably be carried out more naturally and surely by smaller enterprises, than by larger, unwieldly corporations. The diversity of the small business sector must be encouraged. . . . [We must] liberate the imagination, courage and commitment that resides within small companies.”
Pointing out that the average large company is 16,500 times the size of the average small company, and that the 1,000 largest companies account for 60 percent of America’s GNP, with the balance accounted for by 11 million small business, Hawken concludes: “We humans have yet to create anything that is as complex and well-designed as the interactions of the microorganisms in a cubic foot of rich soil.”
* * *
Perhaps the economic activity that comes closest to the spirit that Hawken is invoking is a CSA. Compared to the rest of the industrial food system, CSAs are simple, small, diversified, direct, and local, balancing financial, social, and natural capital in ways that are beyond, or below, the capacity of most commercial enterprises.
CSAs link farmers with a few dozen, a few hundred, or, in a very few cases, a thousand or more local consumers. In commercial terms, they are tiny. The Robin Van En Center for CSA Resources lists 1,208 CSAs in the United States, with other estimates indicating 1,500 to 2,000, with more than 100,000 total shareholders—with share meaning, literally, share of the harvest. If we use $500 to $750 as a rough estimate of average share cost, this means that total CSA gross revenues in the United States come to roughly $50 to $75 million. Median CSA farm size is fifteen acres, with seven acres of cropland.
Is it socialism? Is it capitalism? CSAs defy such choices.
“Microbial life in the soil is our bank. If we extract life faster than we reinvest, the soil becomes finite,” says Paul Muller, one of the owners of Full Belly Farm, in Guinda, California. Full Belly’s CSA, more than fifteen years old, delivers its shares, which cost $17 per week, to approximately 1,500 shareholders, mostly in the Bay Area. “Our customers are also our bank,” he continues.
They are our storehouse of financial capital. What is really important about CSAs is that these relationships allow us to leave behind the export model, which for years was all there was in farming. You grew food, but you went to the market to buy your groceries. In fact, one of our neighbors has been raising cattle for 50 years, and until last year he had never eaten any of his own beef. In the old export model, you never knew the buyer. You didn’t realize the full value of your produce, so you couldn’t reinvest. With the CSA model, we are in a position to reinvest, to keep money moving locally, and this has a revitalizing effect on rural communities that desperately need it. More than that, the CSA creates direct feedback loops between consumers and the growing of their food. The value of these information-rich relationships is hard to overstate.
So, we begin a crude taxonomy of the restorative economy and the local food systems that are critical to its health: small farms, small food enterprises, a culture that values relationships and qualitative distinctions as much as it values transactions and metrics, soil that is valued for its organic matter and biodiversity, food that is valued for its freshness and absence of toxic residues, communities that value making a living over making a killing, investors who value a carrot in the hand as much as two futures contracts in the bush.
If family farmers are the microorganisms in the soil of the restorative economy, then local entrepreneurs are its earthworms. We don’t quite know what to make of either of them in purely financial terms, just as we don’t yet understand much about what Mas Masumoto called the synergisms of the farm. But we know how important they are to the cultural and ecological web, just as a farmer who knows his land can tell so much—though the science be yet in its infancy—from the feel, the smell, and the taste of his soil.
It just may be that all the financial metrics and taxonomic sophistication in the world will not compete for meaning, and for direction, with the feel, the smell, and the taste of the soil. It is not easy to say such a thing with a straight face in this day of professional disciplines and computational firepower. We find ourselves in the position of having to fight our way back, through veils of urbanization and industrialization and securitization and institutionalization, to the most basic of insights, the most basic of affirmations.

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