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Rob Johnson:
Welcome to Economics & Beyond. I’m Rob Johnson, President of the Institute for New Economic Thinking.
I’m here today with an old friend, John Fullerton, formally a senior executive managing director at JP Morgan. In approximately 2010, he founded something that I find to be very inspiring called the Capital Institute. Over the course of this conversation we’ll talk about many of his ideas, but upcoming courses that I would encourage you to explore and enlist in. There’s just a whole lot of ideas, especially in light of what we’ve learned in the pandemic that would make you think he had a heck of a crystal ball 11 years ago when he formed the Capital Institute. John, thanks for joining me.
John Fullerton:
Hey, Rob. Great to be with you.
Rob Johnson:
It’s been how do I say, we walked down a lot of paths together for a long time.
John Fullerton:
Been a while, but it’s great to be back in touch.
Rob Johnson:
Let’s talk about this. You’re trained places like University of Michigan, my father’s alma mater. You’re very solid, I would say strong professional at JP Morgan working first in the realm in derivatives when I think is when we met. Then after that in the private equity wing there. So you’re quite grounded. You have an MBA as well as I recall. So you’re quite grounded in business and financial theory and financial practice. But I remember knowing you around the time of the great financial crisis, that there were little things going on in your mind that were uncomfortable. You were sharing those with me. Tell us about, what was it that stirred you? What did you see that you didn’t like and how has it unfolded since that time?
John Fullerton:
Little things stirring is a good way to say it. Actually, I always like to say I worked for what I call the old JP Morgan. It was a very different culture, very different firm than anything that exists today. I was very lucky I rode the derivatives wave sort of first generation derivatives professional when that whole business first opened up and really transformed the financial system really before derivatives became kind of a dirty word. It was a very exciting time, but gradually over the course of my nearly 20 years at the firm, the culture in the firm eroded. The business got more competitive. I grew a bit restless and anxious.
So I was actually questioning the financial system and the culture of finance before I left. One of the last things I did was I moved into private equity and began thinking about investing capital in alignment with social and ecological purposes. So for example, my first private investment I made was in a charter school management company. So I was already thinking about what we now call impact investing, that was back in 1997. So I guess I’ve been wrestling with this idea that we now refer to as the future of capitalism for decades.
Left the firm in 2001, took the summer off. Then the first day I was back in Manhattan, I happened to have a meeting in lower Manhattan at 9:30 in the morning, which turned out to be September 11th. So that experience, I came from the subway back to the street, literally the moment the second plane hit. That really pushed me into a very deep introspective period. I started reading tons of books that bankers don’t normally read. That’s what really put me on the path that I’m on today.
Rob Johnson:
I do remember I was coming down the west side highway. At the time, I was no longer in finance. I was working in the music business and I had come back from the Ann Arbor Blues and Jazz Festival the night before, was going down to visit a friend on Liberty Street when my mother called me and said, “Did you hear about what happened?” She was in Detroit. I said, “No.” She said, “Well, the plane crashed into with the World Trade Center.” I said, “No, I’m just half an hour from there now.” Then I come around and then I saw the second one hit. Then I turned my car around at about 47th Street right away and got out Dodge as they say. But that was a was traumatic-
John Fullerton:
I stood there in front of City Hall for probably a half hour trying to figure out what was happening. I remember walking toward it thinking there must be something I can do to help people. Then I remember hearing this voice that said, “Turn around and get home,” and I started walking home. Took me all day to get home.
Rob Johnson:
Wow. Well, how do I say sometimes the social circumstance shake us up and they stir us into what you might call the shadows of where our discord was hiding, but it brings it out to the surface. I think the kind of things that you explored [inaudible 00:06:04], I remember you sharing readings with me, people like Fritjof Capra, Wendell Berry, Gaia theory, as I recall was… but you were not giving sermons, you were exploring as a curious person, trying to see a different pattern than the one you were being told was true.
John Fullerton:
Yeah. It’s a little bit like everything they taught you at business school isn’t true or whatever that expression is. But probably the most shocking thing I read that really just shook my world permanently, once you see this, you can’t unsee it, was a book written in 1973 by a group of MIT system science PhD students called Limits to Growth. I remember when I first talked to you at INET very early on, I think we probably talked about that. Limits to Growth was ridiculed at the time as Neoma enthusiasm, alarmism. There’s research that’s documented much more recently that their by today’s standards very rudimentary systems model pretty much nailed it accurately. It’s sort of common sense that exponential growth on a finite planet can’t continue forever.
We’ve rationalized our way into thinking that by technology and enhancements and innovation, we can overrule the laws of physics and the laws of thermodynamics in particular. I think we’re now realizing and climate change is just the most obvious example of this, but we’re realizing that there are what the sciences called planetary boundaries and we’re in the process of breaching many of them. That triggers all kinds of feedback loops in a system that are threatening to life, as we know it on this planet.
What I found in my wrestling with this question is that the neoclassical economic framework, literally doesn’t contemplate limits of the material expansion of the economy. I’ve studied the history of neoclassical economics. By the way, this has nothing to do with socialism versus capitalism or neoliberalism versus more socialist variations of capitalism. This is much more fundamental. It’s fascinating and a bit terrifying to learn that the roots of neoclassical economics go back to Newtonian physics and the belief in simple cause and effect relationships in what’s now understood as a complex world where simple cause and effect explains very little of it.
Furthermore, we then layered on top of Newtonian physics framework the statistical uncertainty using econometrics and probability theory. Which is very well suited to random events, but not interconnected non-linear causation. So we’re now sitting in a world that we understand is non-linear and interconnected complex causes. Our fundamental economics is built on a foundation that’s designed for a different set of assumptions.
Rob Johnson:
This is Newtonian not quantum physics, as they say.
John Fullerton:
Yeah, never shifted to quantum. I went back and you can find in Irving Fisher’s textbooks, the assumptions that he made from the mechanical assumptions of, for example, the energy law translates in economics and according to his textbook to utility. So there was just an assumption that energy translates to utility in economics. It’s interesting work and leisure, like work is viewed as a negative and leisure as a positive. So there’s all these assumptions that were just made up out of thin air, but we’ve never gone back and rebuilt neoclassical economics in accordance with the way the world really works, which gets to my work.
I’ve started with the premise that human beings are living systems. I don’t think that’s controversial. As you said earlier, Gaia theory the idea that the entire biosphere is a self-organizing, self-fueling, self-adjusting, miraculous living system. That’s now increasingly accepted in the science. I wouldn’t say it’s uncontroversial, but it’s increasingly accepted. The thing about living systems is that they, by definition sustain themselves over long periods of time. Otherwise, they wouldn’t be living systems, they’d be dead systems.
So my question has been that I’ve been holding since I started this work is what would an economic system design look like if it was designed around the patterns and principles of living systems. It leads you to some fairly radically different conclusions than what would be the conventional economic paradigm. Regardless of whether it’s a more socialist, friendly economics or a more free market, friendly paradigm.
Rob Johnson:
I remember in my own studies, I had a wonderful teacher an emeritus professor in graduate school named Lester Chandler. He introduced me to something that has become somewhat more popular now, of a critique of Adam Smith by a man they called the Earl of Lauderdale and the Lauderdale paradox as it is called. My friends, John Bellamy Foster and Robert McChesney credit because they wrote a nice article on this, which I’ll put on the website along with this episode. But the Earl of Lauderdale said, “What do you mean air and water are free and have no value? If you shut them off, we all die.”
What came back, it was particularly some of the French economists backing the framework that we now call neoclassical economics or classical economics. They came back and they said, “Well, it’s free. It’s not scarce.” So they defended exchange value as value, not use value. I think the reason McChesney and Bellamy Foster and others brought it up though, like I said, Lester Chandler woke me up to the fight, but they brought it up because they said the underlying assumptions and I’m moving towards regenerative economics now. The underlying assumptions was at the time of Adam Smith, 1790s, there was plenty of water and air relative to the size of the population and the use of resources. But as that changed, we’re no longer in that place and it’s complicated fiercely by these things being about the common good, not commodities for one or another.
John Fullerton:
Well, and really Herman Daly and ecological economics, which I would put as the foundation of what I’m calling regenerative economics. Herman first introduced the idea of scale into macroeconomics. He told me once and I have not checked this, but I assume it’s true, if you go into any classical economics textbook, macroeconomics textbook, you won’t find the word scale or the concept of scale or limits to scale. So like the simple analogy, if you go into the woods and cut down a tree, burn for your cooking, no problem. But you go into the woods enough times and cut down trees and you don’t have a forest anymore.
So the issue of scale matters profoundly. Again, I think whether it’s the pandemic or climate change or the biodiversity crisis, all of these things are symptoms of our inability to get our heads around the urgent context of the scale of the metabolism of the human economy, relative to the metabolism of the biosphere as a whole.
Rob Johnson:
Donella Meadows has written books on systems thinking. I know William Hines runs a group called NAEC at the OECD for new approaches to economic challenges. There are lots of people Santa Fe Institute, Don Farmer and others on complexity. I guess my sense is the mathematics that was used in neoclassical was that Newtonian taught mathematics. If you’re a better mathematician, you can find different models which have different implications and things like amplifying feedback loops. So it’s a very different which you might call confidence around normative recommendations when you become a better mathematician.
But one of the things that I’m concerned about, and I really want to dig in now with you about regenerative economics, seeing the holistic system, seeing all the cross currents, seeing all the public goods, the externalities as economists would call them is a part of it. But the others to see the economy of the resistance to the evolution of the framework and how that interrelates to the resistance, to the change of ideas. Because if you’ve got a better paradigm and when you do sell that paradigm and people say, “That looks more like the truth.”
Some people have stranded assets and lose a lot of money and they start fighting back. Then we go to what Naomi Oreskes calls the merchants of doubt.
John Fullerton:
Well, and that’s playing out in real-time right now for sure. But Rob, as you probably know, I’m actually not a mathematician and part because I’m not equipped to, but in part, because I think one of the mistakes we’ve made in economics is we’ve dropped too quickly into modeling theoretical frameworks that we think are better than prior ones before we’ve gotten clear on first principles. So I’m a huge advocate of getting clear on first principles before trying to then map and then model the economy. There’s a whole branch of complexity science that is to my understanding, somewhat neutral to the design of complex systems.
The core idea of regenerative economics is that regeneration is the actual process that living systems exhibit, that enable them to be sustainable over the long period of time. So it is a real thing that describes real systems in the real living world, from the microscopic to literally the cosmic. There’s a wonderful book called Journey of the Universe written by Mary Evelyn Tucker of Yale and Brian Swimme, who’s a cosmologist. I have eight principles of my regenerative economics and the book is short. It’s maybe a 100 pages.
I literally underlined sentence in the book about the planet and the universe that references one of those eight principles. I think I underline 50 or 60 sentences in a short book. What that tells me is that the people that actually understand the ever complexifying, ever creative, ever evolving universe, much less the planet are describing that same regenerative process that enables your body to be alive today and us having this conversation. Because our bodies are regenerating at a cellular level on average every seven years.
So there is this real thing in real living systems called the regenerative process. I’ve done my best as a non-scientist to describe that process in the context of a human economy. I think the analogy is that, that’s kind of what I propose as our compass to guide the new map making we need to do to better understand how to design a system that’s actually sustainable over the long run.
Rob Johnson:
I know that in the healthcare realm, this regenerative awareness is people like Dr. Mark Hyman and others are really very moved by that large perspective and framework.
John Fullerton:
In fact, the truth is this paradigm is now affecting all domains of knowledge. So in healthcare for sure the language they often use is integrated medicine or integral medicine. Which is not dismissing the Western reductionist specialist functional or specialist skillset, but it’s bridging it with a more holistic understanding of what creates the conditions for health in the first place. It’s a bridging of Eastern and Western approaches to medicine, but in education. There’s a recognition that the siloed disciplines leave tremendous gaps between the expertise, the disciplines.
So transdisciplinary educate is now understood as sort of cutting edge approach to education. That’s the same idea of taking a more holistic approach. I believe it certainly is affecting agriculture. If you think about agriculture as the foundation of any human economy, regenerative culture is now very much a lively topic and very promising approach to create an agriculture system that’s actually sustainable as opposed to extractive and destructive and the built environment. There’s a versioning field of regenerative architecture that takes a holistic view on everything from building design, house design to entire city design.
So this is a paradigm shift and I, and others will put our necks out and say that this is the era that follows the modern age and this reconnection with who we are and where we fit into the bigger picture, into the planet, into the earth, into nature. We are a part of nature, not apart from nature is the next big development in human civilization that we’ll look back on and see as being as big a shift as the shift from the medieval period to the modern age.
Rob Johnson:
When I think about this, I’m moved by some of the psychological research by people like Jonathan Hymn, who’s now at NYU and others about the relationship between emotion, particularly fear and making progress. So when people talk in abstract terms that are distant complex, perhaps confusing, when someone else talks, what I’ll call dogmatically and simply about a false paradigm, sometimes they win. I remember Steven Toman, one of my favorite philosophers. He was a student of Dickstein at Cambridge University in England. He wrote a book called Cosmopolis and he said, from the 30 years war to the present, we had the Cartesian enlightenment that applied to social science.
In some realms it’s been very, very illuminating, but in some places it’s false specification creates big fault lines. He said in almost every time, World War The Great Depression, the culmination of the civil rights movement with Martin Luther King’s murder and all of these things, what happens is people get afraid and they lurch back to the familiar rather than forward to what they see is where we have to go. So I just put that little story in our conversation, because I think the combination right now, that’s on the horizon and makes you look so prescient or allows the world to see how present you are, I think is a better way to say it is, there are all these things that were not explained by the core paradigm that regenerative economics can see.
But the other side of it on that coin is these new things. Climate, pandemic in particular are quite scary. Some people will be inclined to lurch back to the familiar, unless we can figure out not only how to see it, but how to evolve society’s social structures in the context of power forward in order to realize the potential of your vision. Obviously one could counter argue that your vision, if it’s not adhered to might mean we’re not a regenerative society and life ends on planet earth.
John Fullerton:
Or at least modern society ends as we know it. I tend not to be a life will end, or humanity will go extinct. But humans are unique in other species in that we have complexified our existence to higher degrees than other species. There’s no reason why we haven’t overshot and we’ll have to fall back to a lower level complexity before we can continue the journey of human evolution. There’s no reason I’ve ever learned that says it always has to be an upward march without corrections. You’re right-
Rob Johnson:
You can make a wrong turn, make a u-turn and go back to the previous intersection.
John Fullerton:
In past we’ve done that. It’s just the consequences may not have been as dramatic. The consequences in the past tended to be more individual or national at most, but not truly systemic. But we start messing with the carbon cycle and the water cycle and the other geophysical realities of the earth and start bringing on pandemics that are likely caused by the human footprint encroaching in wild places that it never has before and the consequences become truly globally systemic. As you said, we fall back to lower levels of complexity, lower levels of consciousness as a natural kind of a psychological fight or flight kind of reaction.
My hope Rob is that the idea of regenerative economics is really profoundly simple. You either accept that the human economy needs to behave like other living systems, or you make the case that the human economy is the one exception to the rule, that all living systems that sustain themselves, follow these similar patterns and principles. Because the scientists, well, we would debate language. There’s no way to describe complexity in eight principles. So we may have a debate about whether that’s the right way to say it, but the basic idea that complex living systems work in a certain way is not up for question.
So the only question is, is there an argument that the human economy will not need to behave the way other living systems do? I would challenge anyone to make the case that if after billions of years living systems have evolved to follow these same patterns and principles like the principle of symbiotic win-win relationship among the parts. Our cardiovascular system works with our brain and works with our muscular system in order for our entire body to work in a healthy, productive way. The brain doesn’t compete with the cardiovascular system.
So if that’s a pattern that exists in nature, how is it that we think that the competitive paradigm is the natural course for human economies, as opposed to a more collaborative paradigm?
Rob Johnson:
I’ve recently come across us through a friend of mine on the west coast, a group that’s name is HeartMath. It’s not HeartPath. It’s HeartMath.
John Fullerton:
That rings a bell actually.
Rob Johnson:
They have talked about work. They have an app and a system related to meditation called Inner Balance, where they go to the heart because they think the heart transmits to the brain, rather than it being a one way street in the other direction. What you might call spawns or invigorates cooperative behavior and alleviates fear. They believe this, not like what you might call romantic parables. They believe this based on scientific testing and evidence over and over again and I just found it fascinating.
John Fullerton:
Well, you mentioned another one of the principles I talk about is balance. That’s one of the eight principles and balance means many, many things. Each of these principles has multiple layers, right? So at one level balance in a living system is the balance between masculine and feminine energy. It wouldn’t be hard to make the case that our certainly Western economies that do not balance Western and, sorry, masculine and feminine energy. I don’t mean men and women on boards of directors. I mean, left brain, right brain, masculine and feminine energy. It’s sort of common sense that a healthy living system needs to balance masculine and feminine or there’s not going to be a continuation of the system.
Rob Johnson:
I got to let you know, I got hit with that like a ton of bricks about two weeks ago. Some friends of mine and I went over to see Bill Moyers, who in legendary times worked with Joseph Campbell, The Hero with a Thousand Faces.
John Fullerton:
That’s right. They did the great [crosstalk 00:31:08].
Rob Johnson:
When we got there, I said, “Bill, what are you reading?” He said, “Oh, there’s a new book at Harvard, by a woman named Maria Tatar and it’s called The Heroine with 1001 Faces.” It’s taking all of that mythological paradigm and taking it out of masculine frameworks and saying, “There’s something else going on here.”
John Fullerton:
Beautiful.
Rob Johnson:
Needless to say, I have daughters and sisters and things who are all getting that book for Christmas.
John Fullerton:
Yeah, who remind you. No, but it’s so true. I mean, think about intuition is a form of knowing that our Western, particularly in economics paradigm either dismisses or slanders. But intuition is profoundly important, particularly at times like this, when we’re so confused. But another example of balance, which goes directly to the heart of conventional economics that is very factual, very practical is there’s a process ecologist called Bob [inaudible 00:32:20] and he measured the the tendency for living systems to be resilient and efficient.
Those are opposing qualities. So the more efficient something is the more streamlined, the less diverse it is. Whereas the more diverse it is, the more resilient it tends to be. He discovered from empirical studies, this isn’t theory, this is empirical studies that healthy living systems exist in this balance, what he calls the window of vitality between resiliency and efficiency. If it’s too efficient, it becomes brittle and it breaks. If it’s too resilient, it’s sort of suboptimal and primitive. Of course, economics is about the pursuit of efficiency.
Rob Johnson:
Though I give credit, one of my recent guests, Marcus Bruno Meyer from Princeton just wrote a book on resilience that’s come out. Mark Wolf named it as one of the best books for the EFT. So I think, how would I say, the inspiration of our time, global supply chains, whatever is forcing a reevaluation or a recognition of the kind of dilemmas that you’re raising.
John Fullerton:
But the key is that that living systems are not optimizing resiliency either. They actually are skewed toward resiliency rather than efficiency. But the reason why we need new books on resiliency is because our brains are wired to think that efficiency is what we’re supposed to be optimizing for. But the principle is balance even though it’s skewed toward resiliency. So again, the lessons are all there in living systems and getting clear on first principles. To me is again, the compass, the roadmap we need.
Because if we now try to make everything super resilient, we’ll find that the economy bogs down and we will graduate to a much lower level of complexity. That’ll translate into a lower level of energy use, lower level of standard of living that are possible, lower levels of convenience. All kinds of things will be much lower than we want if we really want to maximize resiliency. So it’s a balance. It’s the balance.
Rob Johnson:
One of the areas that comes to my mind relates to our past discussions and some of my reading on your website is the role of the insights of indigenous people.
John Fullerton:
Absolutely.
Rob Johnson:
Because there are some modern environmental writers who say, yeah, they looked at it differently, but that’s because the world was different. Number one, and others will say, “No, we’ve got to,” which Michael readopt that I think you and I have the discussed a book together, Jeff Nixa’s book, The Lost Art of Heart Navigation. He sourced his interest in the western part of Michigan around indigenous rituals and indigenous people. But others cite one of my podcasts with Elizabeth Colbert, the writer from the New Yorker and others writes fabulous books said, “I don’t know how germane indigenous thinking is. A.
Now we come back to this, what I’ll call media jost when you act like you’re going back, you look like a fuddy duddy, not like you’re going forward. Even though those guys were way ahead of where we are now in the vision of regenerative economics. Who do you cite indigenous writers? Black Elk Speaks. I mean, I’m just throwing them out there. Who do you cite that has sparkling insight now?
John Fullerton:
There’s a beautiful book called Braiding Sweetgrass. I’m having a mental block. I know the author’s name, but I’m blanking on it, but it’ll come to me. But here’s how I think about it, Rob. Put it this way. I do believe the source of this regenerative thinking that I and others are now expressing goes back to indigenous wisdom. In fact, it’s interesting if you go back and read Neo-Confucianism, you’ll find a lot of parallels as well, a much more holistic approach. So it’s really wholism that is what’s been lost in the modern age. The rise of reductionist logic at the expense of keeping track of the whole is what got us what I would call lost.
In the sweep of human history, the modern age is a blip. I think in our pursuit of reductionist knowledge, we’ve lost track of our ability to see and understand the whole. For sure the indigenous wisdom, it’s almost like it needs a translation. Because it is so old, it may seem out of context in a modern age. But what’s that famous poet for all our traveling we’re back to where we began or something. I’m terrible at remembering poetry, but I could dig it out. But the way I see it is that we’ve always known we are indigenous at our core. So we have in our consciousness this wisdom.
The indigenous as I understand it, don’t have a separate word for nature because they understand that humans are part of nature. So how could nature be a separate thing? I think not out of any malice, but we’ve gotten a bit lost and are reconnecting with who we really are, which is to me not going backwards, but spiraling forwards to a much higher level of knowledge and wisdom. It will need to be modernized for the current context. But the basic premise that we are in relationship with mother earth, which is at the heart of indigenous knowledge, is what we have to remember and relearn. How that manifests is the great challenge of this era.
But it’s most certainly not. We just need to invent new forms of energy and then keep doing what we’ve been doing in the past. If we had free energy broadly distributed to everyone today, we would destroy ourselves faster than we’re destroying ourselves right now. We need to relearn our place in the universe really.
Rob Johnson:
That’s right. I think your book on Braiding Sweetgrass is Robin Kimmerer. Is that right?
John Fullerton:
Thank you. Yeah.
Rob Johnson:
My guess is that TS Eliot was the poet.
John Fullerton:
It is absolutely TS Eliot.
Rob Johnson:
That one resonated with me. I looked up Robin Kimmerer because I want to read that book myself.
John Fullerton:
No, it’s beautiful.
Rob Johnson:
I’ll tell you a gentleman who I found fascinating I had as a guest on this podcast months ago is Ervin László. He’s a Hungarian who synthesizes in his Akashic field discipline as he calls it Eastern philosophy with science.
John Fullerton:
Nice.
Rob Johnson:
It’s really fascinating because he thinks as you referred to a little bit earlier, how intuitiveness brings things out. There’s a channel of discovery that isn’t ground out through logic. It comes from those which might go higher spiritual channels, and yet to use your regenerative, they are wholly integrated with that conscious body that’s marching around like a mechanical engineer or in an economist. He doesn’t want to throw out the mechanical engineering or economics because it’s a part of the illumination.
John Fullerton:
Exactly.
Rob Johnson:
But we’re not on a healthy path unless we can integrate the two.
John Fullerton:
That’s why some people are referring to this as the integral age. I like to use the regenerative age. I personally don’t think we get to get to the integral age if we don’t master the regenerative age. But honestly, my search has been an intuitive driven search, certainly not a mathematics or analytical driven search. We were talking before the recording, my success on Wall Street in Japan and my discovering the arbitrage between of all things, Yen swaps and Yen bond futures, was an intuition much more than I didn’t work out the math first. It was all intuition.
So I think we’re trying to solve these problems relying on only half our brain and as Wes Jackson says so beautifully, one of my teachers, there’s nothing wrong with the reductionist method so long as we don’t confuse the method with the way the world actually works. So we need both.
Rob Johnson:
When I was in the hedge fund business, I always felt like I sat next to the Michael Jordan of traders and Stanley Druckenmiller. He used to just go up and down, up and down and up and down, always making money in the 30 year bond.
John Fullerton:
Oh, really?
Rob Johnson:
I said, “How do you do this?” He says, “I don’t know. I just feel it. It’s really being good to me.” It was almost like he had an unconscious trust relationship that the bond was letting him see where it was going. He was being playful. I’m not mocking him at all, but his intuitive awareness was just uncanny. I mean, and and I think that’s a level of greatness. George Soros used to tell me when we were trading currencies and what have you, “You can tell when you’re wrong, because you get things like nausea or lower back aches. The body tells you before the mind realizes, but you got to listen to it.” So I think some of these, how would I say, these intuitive realms that you’re exploring are quite present among-
John Fullerton:
That’s a way to understand indigenous wisdom, right? You don’t literally need to try to understand the literal meaning of a rain dance or whatever. These are ways to express something that’s much more intuitive rather than analytical, I think.
Rob Johnson:
One of my board members and founders, Bill Janeway, who’s always venture capitalist, Warburg Pincus and so forth, he says, “When you’re really doing innovation, you can’t operate like an economist because you can’t know the outcome and you have to have failures and successes.” Yes, you may know a lot of things about the techniques and things, and you may have visions of the outcome, but you don’t know that it’s coming. You have the courage to explore at the risk of failure.
John Fullerton:
Well, and that’s one of the cool things about living systems is that, in fact after I read Yolana [inaudible 00:44:38] book, I was tempted to add a ninth principle, which is chance or uncertainty or unknowable. But unlike our understanding of Dawin where it’s random chance, when you add diversity with this unknown variable, you get new possibilities, new potential that is impossible to know in advance.
The reason I remain hopeful about our current predicament and I’ve seen this in my investment practice. So I know this is real, at least on bench scale projects. But the idea of aligning with these patterns and principles and not picking one or two, but literally creating the conditions for the health of a whole system by aligning the entire system with the way living systems work, is that living systems unlock immense potential that no one could have foreseen. Including the potential for life itself.
I mean, life didn’t use to exist on this planet and it does now. The example I like to use because it’s so basic is if one of the principles is right relationship, symbiotic relationship, think about the potential unleashed when two oxygen molecules and one hydrogen molecule… two hydrogen, one oxygen get together in right relationship. You have water. Well, before water you would never have imagined life. But that’s true in business enterprise and in constructive relationships between the private sector and the public sector.
You unlock potential that previously was unknowable and unseeable. So the arithmetic on dealing with climate change in a realistic way is daunting. But one of the principles is innovation, adaptation and response, responding to changing context. There’s tremendous opportunity for solutions that we currently don’t see because we haven’t aligned with these same patterns and principles. There’s plenty of examples of that showing up in the real world as we speak. So it’s very hopeful.
Rob Johnson:
Well, I share the possibility of hope, but they always say, I go always back to Gerald Jampolsky’s book, Love Is Letting of Fear and I’ll just bring up a current episode. There are a lot of people in West Virginia that are afraid to give up in the coal sector, but almost every environmental study that I’ve read IPCC or whatever suggests that we’ve got to stop using coal. But I heard from a friend of mine who knew I was from the Detroit area, a story recently where he said he was talking about what can we do to transform West Virginia?
The fellow said, “My father and his brother were coal miners.” My father thought things were exciting in Detroit. He went to Detroit and then with automation, globalization, he got crushed and committed suicide. My father stayed a coal miner and he said, “The world won’t take care of West Virginia anymore than it took care of Cleveland in Detroit, given our politics.” That ignited something in me as my friend was nudging me with this story. That if we’re thinking about what you might call a new vision and wholesome transformational dynamics, we’ve got to get to a place where we innovate in being more inclusive in understanding the winners and losers in the transition than we were in the case of machine learning, automation or globalization, particularly vis-à-vis the size and scale of China.
Because I see the hope on the horizon, I see you can see some of the ways in which we can do better. But to get from here to there, we’ve got to stop the resistance and the fear which impedes it. Some of which is justified by experience.
John Fullerton:
Well, I mean, I’m glad you raised the inclusive issue. Again, let’s get back to the basics of how living systems behave as a point of departure. One of the principles that I talk about is called empowered participation. That’s not an idea I made up. That’s from reading about living systems. What that means is that all parts of the system are empowered to participate in the health of the system. So for example, going back to the human body, our feet and our toes are empowered to participate in the circulation of oxygen. That’s not just because our body feels sorry for our toes and wants to help out our toes, and take care of our toes. It’s because if our toes aren’t healthy and our feet aren’t healthy, we can’t fulfill our potential as human beings.
So what we have to learn is that the health of humanity is harmed when the coal miners in West Virginia are not empowered to participate in some new way in the economy we need. So it’s not a charity thing. It’s not a bleeding heart liberal thing. It’s a systemic health thing. If we don’t understand now, just look at what happened with our politics and the whole Trumpian response. We’ve neglected in a sense the parts of the system, the parts of our body, so to speak for so long and allowed it to atrophy so poorly that we saw a response. It wasn’t a rational, healthy response. It was an angry, violent response.
Rob Johnson:
But Trump did come out and say things like the system is rigid. He spoke to the Detroit Economic Club and he said, “Shame on the big three management for not preserving jobs in this country.”
John Fullerton:
Absolutely.
Rob Johnson:
He looked at the TV camera in 2015 in Miami and said, Jeb Bush may be a good governor. I have a home here.” He was a good governor. I’m paraphrasing. But he said, “They’re not cheering for him and booing for me because the people in the audience are the RNC donors and those are the people we have to defeat.” Now, what person ever had the intuition to take on the core donors of their own party when they sought the nomination and prevailed. But it’s the illness of our cumulative neglect in our society. Something that Alex Gibney and David Sirota are talking about in Meltdown, which is their eight hour podcast on the great financial crisis and the loss of trust and faith and expertise in governance in America.
John Fullerton:
I couldn’t agree more.
Rob Johnson:
Trump is a symptom of that. The next leader, if despair were to continue, if the neglect of West Virginia analogously around the country continues, we’re still in that cauldron.
John Fullerton:
Absolutely. I’m glad you raised the financial crisis again, Rob, because I’ve recently become quite intrigued with this whole cryptocurrency phenomenon after trying to resist it and reject it for a couple years. There’s a couple interesting things I’ve learned. One is just to observe that Bitcoin arose the year after the financial crisis. Although obviously it was in the works for a while before that. But what I learned is quite interesting is that it actually arose as a protest against mismanaged, corrupt, emerging economies. So if you live in a country that is horribly mismanaged with depreciating currencies, you are going to find something like Bitcoin very interesting.
The DeFi movement really I think is a response to the lost trust of the financial system. I think the financial crisis was sort of the final stake in the heart of any notion of trust in the financial system. So now it’s moving into this DeFi crypto sphere, which it’s going to going to have all kinds of problems. It’s the same speculative casino moved into deregulated, decentralized crypto world. But what’s fascinating is that the blockchain technology actually seems to enable the possibility of a more regenerative financial system, if the regenerative principles are wired into the DNA of new currencies.
There are some really thoughtful people in the crypto world who are very intrigued with the idea of coding directly into new currency, the patterns and principles of living systems. So this is a long way of saying, I think the shot has been fired. Society has lost trust in the banking system and in institutions broadly. We’re now in this unknowable, scary, volatile, what happens with that energy as it reorganizes itself into something that can either go really poorly or hopefully be much more healthy. My bet is that if we can land the idea that healthy living systems behave in certain ways that we understand will actually be able to co-create a system that reflects that and will do a better job than just trying to regulate a system that’s now dominated by lost trust and malfeasance, to be honest.
Rob Johnson:
Many of my friends that were in the financial sector were concerned after the great financial crisis about the reputation of finance. One of the CEOs of a major bank said to me, “You’re watching all of these apps being built. People are going to manage their own portfolio on an app.” I said, “Well, what do you think of that?” He said, “They don’t trust us at our various outposts, our branch offices to manage portfolios on their behalf anymore. So they’re going to go try and do it on their own and God bless them, but they might really, really suffer or be subject to fraud or what have you.” Because it’s out there.
John Fullerton:
I mean, Robin Hood is terrifying to me, the whole Robin Hood phenomenon, but it’s a direct reaction against the demand. So we in finance have brought it on ourselves and I’m sure it’s not going to be pretty. It’s going to go through convulsions, but that’s the way living systems react to radical changing context. They reorganize themselves and it’s likely to have some violent repercussions.
Rob Johnson:
Well, I think from my perspective on behalf of my audience and myself, John, I appreciate how you’ve devoted your life to trying to see that positive path, envision it, understand the underpinnings. You’re quite aware of the emotional contours. I don’t know that many people that have really dug in and gone to that place and committed their life to that. So I want to applaud you, but also thank you for that. When I see what you might call the heart based integration that you’ve brought together with your experience and your awareness of the paradigms, the frameworks, and so forth, when you’ve been able to go into yourself and feel the discord, we talked at the outset about. What were those little things, getting under your skin, disturbing you and feel the discord and acknowledge it and explore it.
That’s a kind of confidence that I wish every human being could have. Because you are going to be more satisfied with your life. You’re going to have prouder children and grandchildren, and you may darn well help this world get to a better place as a result of that energy, that courage, that insight and how you focused yourself.
John Fullerton:
Well, thanks Rob. Coming from you as someone who I admire greatly, who’s obviously committed your life to the pursuit of a better and more just society, that means a lot to me. I appreciate it. We’re only at the beginning of this journey. I know there’s lots of people in your community out there who know the current economic system is messed up and broken. There’s a Nobel prize waiting for some smart young academic who’s going to figure out how to turn regenerative economics into a formal theory. I have no doubt. So I would encourage people to join this effort.
One way they can do that, I’ll just make a shameless plug. We’re actually launching our first ever course on regenerative economics in March of next year. Rob is going to be a participant in it. We’ve got a group of thought leaders to help us dialogue around this challenge. That’ll be the first of several courses. There’ll be a regenerative finance course to follow and someday if our plans culminate in the creation of a cryptocurrency that embeds living systems in the DNA of the economy itself. So it’s an exciting journey and I welcome everyone to join. You can find out information about it on our website at capitalinstitute.org.
Rob Johnson:
Well, I look forward to working with you in building and delivering that course as we turn to 2022. After talking to you today at the end of this year, I’m inspired to create something called the noble prize, N-O-B-L-E and you would be the first recipient.
John Fullerton:
Oh, that would be great.
Rob Johnson:
[inaudible 01:00:38].
John Fullerton:
Well, Mr. Nobel was wise enough to know that economics was not a science when he set up the Nobel prizes.
Rob Johnson:
That’s right. He understood the dynamite. Very good. Thanks for being here, John. To you too, and let’s get together next year for another chapter.
John Fullerton:
Yeah, we’ll talk early in the year. Stay healthy.
Rob Johnson:
Check out more from the Institute for New Economic Thinking at ineteconomics.org.
