For any business that is searching for a 21st century compass, try this idea on for size. Let’s call it a ‘Doughnut‘. Its worldwide goal is to ensure that no-one is left in the central hole, falling short on life’s essentials, while simultaneously ensuring that human activity doesn’t overshoot the outer crust by putting too much pressure on Earth’s life-supporting systems. In other words, the aim is to meet the needs of all within the means of the planet.

It’s an ambitious goal for our times because, as the red wedges show, we are currently transgressing both the Doughnut’s social and planetary boundaries: billions of people fall short on life’s essentials while we have already overshot at least four planetary boundaries. Moving into the Doughnut’s safe and just space is the challenge of our century.

Over the past six years I have introduced this Doughnut diagram to a wide range of companies – from social enterprise startups to brand name multinationals – asking them what they plan to do in response to it. And I’ve been fascinated by the very diverse reactions it elicits.

I call the five main responses set out below The Corporate To-Do List because it reveals the vast range of things that companies are ready and willing to do.

1. Do nothing

‘Yes, the state of the world is unfortunate, but the business of business is business, and since everything that we are doing is nearly legal, we’ll carry on until price or regulation forces us to change.’ This first response is of course the oldest but it has long passed its expiry date.

2. Do what pays

‘OK, we’ll cut our carbon emissions if it cuts costs, and we’ll get green certification if it boosts sales.’ This is a first step, yes, but its approach is far too incremental for the speed and scale of change needed.

3. Do your fair share

‘We commit to matching national or science-based targets for cutting greenhouse gas emissions.’ Getting more serious now, but as anyone knows when left holding the restaurant bill after friends have chipped in for a big meal out, what we think is our ‘fair share’ rarely adds up to what’s actually needed.

4. Do Mission Zero

‘We aim for net-zero carbon emissions and zero deforestation in our supply chains.’ Now that’s transformative. But why settle for being 100% less bad when you can break through the ceiling of imagination and start to do good?

5. Be generative

‘The very way we do business sequesters carbon, cleans the air, pays living wages, and builds community – we’re here to make good things happen for society and for the living world.’ This, of course, is just the kind of enterprise that can help bring humanity into the Doughnut.

These five responses cover a very wide range of reactions. The key question, of course, is what determines how far down this to-do list of transformation any particular company can or will go.

Why do some businesses still seem to be driven by the last-century question – ‘How much financial value can we extract from this?’ – while others are focused on this century’s far bigger quest – ‘How many benefits for society and the living world can we generate in the way we design this?’

Such powerfully opposing questions – one extractive, the other generative – reveal one of our era’s greatest psychological dramas: the ongoing transformation of what business is, and is for.

To understand why, get on the psychotherapist’s couch and look deep within your company to see what really makes it tick. Because – as described by the brilliant corporate analyst Marjorie Kelly – deep in the heart of every business there are five key design traits that profoundly shape what it can do and be in the world: its purpose, governance, networks, ownership and finance.

First, what’s your business purpose? Is the company’s stated purpose a narrow financial one (‘We aim to be the biggest car manufacturer in our sector’) or a bigger-than-us, living purpose (‘Our aim is to make mobility sustainable’)? Purpose is key, of course, but it has to be backed up by the other four traits of enterprise design.

Second, how is your business governed? What, for instance, are the metrics used to assess company and employee performance? A tight weekly focus on turnover, market share, and profit margins, for example, is likely to crowd out longer-term transformative action to cut carbon emissions and pay living wages throughout the supply chain.

Third, how is your business networked? Who are its customers, suppliers and allies for change? Are they aware of and aligned with your business values and purpose, or are they caught in a business culture that works against them? And how can you turn those relationships around?

Fourth, who is the business owned by? Whether an enterprise is owned by its employees, by a founding family, by values-based investors, or by the stock market will have far-reaching consequences. Why? Because how a business is owned deeply determines the answer to the final question.

Fifth, what’s the quality of finance? Do the funders have that last-century focus on high and fast financial returns (acting more like share traders than shareholders), or are they committed to investing in social and ecological benefits along with a fair financial return? Finance may lie at the bottom of this list but, like most things in psychotherapy, what lies deepest drives it all.

Taken together these five enterprise design traits reveal a good deal about why some businesses can help to bring humanity into the Doughnut, while others still profit by pushing us out of it.

The rise of corporate schizophrenia

With these traits in mind, it becomes easier to see why some companies seem to behave like split personalities. Aspiring to do good in the world, they start by rewriting their purpose, and perhaps adjusting some of their governance metrics and networks to match. But if their ownership and finance remain unchanged then they will likely find themselves pulled in two.

Perhaps that is just what happened to Unilever in early 2017. The company’s purpose – set out in its Sustainable Living Plan – clearly aims to contribute to a better world, and is backed by an ambitious set of measurable targets to measure progress in that direction. Unilever is also a member of business and NGO networks that call for strong action on climate change and water security.

But when it comes to ownership and finance, the company is still largely owned by shareholders whose predominant question seems to be stuck in the last century: can I get a higher return, sooner? And it seems that this is what gave rise, in February last year, to the hostile takeover bid by Kraft Heinz and 3G Capital. That bid was successfully fended off but the vulnerability remains – in a growing number of companies – of having purpose, governance and networks pointing in one direction, while ownership and finance pull in the other.

To become a Doughnut enterprise – one whose core business activity helps to meet the needs of all within the means of the planet – it’s clear that companies need to align all five of these design traits, from purpose through to finance, so that they can deliver generative results. Which is why ongoing innovations in enterprise-ownership models and in values-based banking are so important.

Time’s almost up for this session on the corporate psychotherapist’s couch, so let’s ask one last question: how do the current design traits of your business or enterprise hold back its ability to help bring humanity into the Doughnut? And what would it take to change that? Now there’s something to add to the to-do list.

Written by Kate Raworth, Senior Visiting Research Associate, Environmental Change Institute, Oxford University

The views expressed in this article are those of the author alone and not the World Economic Forum.

The post Kate Raworth: Doing Business in the Doughnut appeared first on P2P Foundation.

System Reset is a feature-length documentary which explores this story of change in our economy. Shot in London, Amsterdam and Barcelona, this film is a DIF 2018 exclusive. It features some of the leading thinkers in materials, economics, the commons movement, FabLabs, digital citizenship, urban planning and architecture. Don’t miss your opportunity to see them collectively weave a picture of how our economy could operate.

The post System Reset to Sustainable Manufacturing appeared first on P2P Foundation.

Radical Help is about new ways of organising living and growing that have been developed with communities across Britain.

Hilary Cottam. photo by Charlie Hopkinson ©

The British welfare state transformed our lives. The model was emulated globally, setting the template for the ways we think about social change across the world. But this once brilliant innovation can no longer help us face the challenges of today.

Radical Help argues that our 20th century system is beyond reform and suggests a new model for this century: ways of supporting the young and the old, those who are unwell and those who seek good work At the heart of this new way of working is human connection. When people feel supported by strong human relationships change happens. And when we design new systems that make this sort of collaboration feel simple and easy people want to join in.

The vision is big but Radical Help is a practical book. It shows how we can make change and how we can make a transition now towards a new system that can take care of everyone.

For more information:

• www.hilarycottam.com

• @HilaryCottam

• View Hilary’s TedGlobal talk

Book image: Virago/Little Brown

The post Book of the Day – Radical Help: How We Can Remake the Relationships Between Us and Revolutionise the Welfare State appeared first on P2P Foundation.

Economic Man vs Humanity: a Puppet Rap Battle

An economist, a songwriter and a puppet designer walked into a recording studio.

What came out? An economics puppet rap battle, of course.

In a one-of-a-kind collaboration, puppet designer Emma Powell, musician Simon Panrucker, and renegade economist Kate Raworth have created a surreal musical puppet adventure to challenge the heart of outdated economic thinking.

Their 7-minute video stars puppets pitched in a rap battle with their economics professor. The project’s aim is to equip economics students and teachers with a playful but insightful critique of Rational Economic Man, the outdated depiction of humanity at the heart of mainstream economic thought.

A synopsis of the storyline:

Dissatisfied with the model of man presented in their economics lesson, three students visit their professor and embark on a rap battle to debate the very nature of humankind. While the professor argues that Economic Man – a rational, self-interested, money-driven being – serves the theory well, the students counter that a more nuanced portrait reflecting community, generosity and uncertainty is now essential. A musical puppet adventure challenging the heart of outdated economic thinking ensues.

Kate Raworth is the author of the internationally acclaimed book Doughnut Economics: seven ways to think like a 21^st century economist (Penguin Random House, 2017). ‘One of the most dangerous stories at the heart of 20th century economics is the depiction of humanity as rational economic man’ she says, ‘He stands alone, with money in his hand, ego in his heart, a calculator in his head and nature at his feet. In making this video, we wanted to make clear – as playfully as possible – that this absurd portrait is deeply out of date.’

The project was funded by the Network for Social Change and the video is being disseminated widely online. A full set of the lyrics is available for teachers and students who want to bring the details of the debate to life in the classroom.

Twitter: @KateRaworth    Facebook: facebook.com/doughnuteconomics    Website: www.kateraworth.com

The post Video of the day: Puppets take on Economic Man appeared first on P2P Foundation.

David Ronfeldt: How and why four cardinal forms of organization — tribes, hierarchical institutions, markets, and networks (TIMN) — explain social evolution. How and why space-time-action cognitions (STA:C) explain people’s mindsets.

For a theoretical framework to be worthy of a political manifesto, it must offer something new and better than alternative frameworks. TIMN can do that, by proclaiming quadriformism.

I suppose a manifesto should also mention those alternatives — but not at length. Yet, a good comparative analysis should exist somewhere for back-up purposes. This note starts to serve as that back-up analysis.

For indeed, TIMN is not the only theoretical framework about past, present, and future societal evolution that is built atop four cardinal elements, with the fourth anticipating the emergence of a new sector in the decades ahead. Three others are vying for attention (actually, it’s TIMN trying to vie, for the others are already rather well-known). They’re from:

• Kate Raworth, a British “renegade economist” based at Oxford — her analysis is based on four “means of provisioning”.

• Michel Bauwens, a Belgium-born social activist-theorist who heads the P2P Foundation, lives mostly in Thailand and Belgium — his theory sits atop four “relational modalities”.

• Kojin Karatani, a Japanese Marxist philosopher and literary theorist who has taught at various Japanese and American universities — his framework depends on four “modes of exchange”.

What’s striking is that, working separately, we have all come up with similar frameworks, and we’ve done so at different times without knowing about each other’s frameworks at the time (though Raworth had some knowledge of Bauwens’ views). My first publication on TIMN was in 1996, Bauwens’ on P2P in 2005, Karatani’s on “modes of exchange” in 2014, and Raworth’s on “doughnut economics” in 2017. The similarities begin with the fact that all our frameworks rest on four fundamental forms of organization and/or interaction. The four that each of us identify, though differently conceived, match up impressively. Moreover, we all argue that our four are always present, always necessary, in any society, and that societies vary according to how the four forms are combined and which one dominates at the time.

Furthermore, the three of us most interested in social evolution across the ages — Bauwens, Karatani, and myself — all argue that our respective sets of forms have existed since ancient times, and that each form has grown most powerful in a particular era, thus coming to define the nature of societies in that era. Indeed, the evolutionary progressions each of us identifies correlate very well, despite some disparities. Moreover, in looking ahead, three of us — Bauwens, Raworth, and more qualifiedly, myself — explicitly foresee that a commons sector will arise alongside the established public and private sectors, vastly transforming the design of societies. Karatani is less explicit about the emergence of a commons sector, but his vision of future transformations implies something similar.

Another parallel to notice: The four-form frameworks that Bauwens, Karatani, and I advance may seem simple at first, perhaps too simple — but actually they enable plenty of complexity. To varying degrees, we each recognize that our respective forms (or modes) are both material and ideational in nature. That each embodies different standards about how people should behave and society should function. That each enables people to do something — to address some problem — better than they could by using another form. And that each form has bright and dark sides, making each useful for doing ill as well as good. Furthermore, we all recognize that the forms co-exist, interact, and vary in strength over time, making for great variations in how the forms may be combined and emphasized in particular societies. All of which amounts to plenty of complexity; these are not simplistic frameworks. Which is why I groaned inwardly when, years ago, a friendly contact who was genuinely interested in TIMN and its potential, nonetheless quipped, “Of course, you can’t sum all of human history in four letters.” More about these matters later.

In the next posts, I will review Raworth’s, Bauwens’, and Karatani’s frameworks — in that order because it proceeds from the least sweeping and abstract of the three, to the most. Then I turn to pointing out TIMN’s comparative advantages for theory and practice.

One advantage I’d mention right now: TIMN is not based on or committed to any ideology. It leaves room for the endurance of conservative as well as progressive positions along a new quadriformist spectrum. The other three frameworks all belong, to varying degrees, on the Left, even aspiring to a final future triumph of the Left over the Right. So far, to my disappointment, I’ve found no theorists on the Right who are pondering the future within anything like a quadriform framework.

SOURCES:

David Ronfeldt, Tribes, Institutions, Markets, Networks — A Framework About Societal Evolution, RAND, P-7967, 1996.

Michel Bauwens, P2P and Human Evolution: Peer to peer as the premise of a new mode of civilization, draft book manuscript, 2005.

Kojin Karatani, The Structure of World History: From Modes of Production to Modes of Exchange, Duke University Press, 2014

Kate Raworth, Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist, Chelsea Green Publishing, 2017.

TO BE CONTINUED: THIS IS THE FIRST OF FIVE POSTS ON THE TOPIC

Reposted from the author’s blog

Photo by TonZ

The post Materials for Two Theories: TIMN and STA:C appeared first on P2P Foundation.

It’s time to reclaim the mantle of “Progress” for progressives. By falsely tethering the concept of progress to free market economics and centrist values, Steven Pinker has tried to appropriate a great idea for which he has no rightful claim.

Michel Bauwens: Historical change is complex and gives rise to conflicting interpretations, on the one hand, there are many doom-driven scenarios by environmentalists and those rightfully concerned about climate change; but a one-sided vision of negative developments can lead to paralysis and loss of hope; on the other side of this polarity, are people like Steve Pinker, who rightfully point to a dramatic slide in human violence (this seems well established), but in a context of a entirely positive story of capitalist and liberal development, which entirely ignores the shadowside of these extractive developments.

In the context of this debate, it is a very welcome fact to encounter the critical work of Jeremy Lent, who insists on the stories that Steve Pinker leaves out. We very strongly recommend reading his well documented rebutals and augmentations. My own conclusion is that capitalism, for a while tamed and regulated by the popular power of labour and other movements, did achieve a number of material improvements, at least for part of the world population, but at an increasing unsustainable material cost to the environment and the other beings we share the world with, while also bringing social tensions to a dangerous breaking point. The options are therefore not a simplistic continuation of the western development project, but either a significant drawdown of the human footprint, in the context of retaining the maximum of civilisational complexity, while extending basic health and other welfare services to every human being.

The work of Kate Raworth brings a very good summary of that conundrum, with her ‘doughnut economics’ bringing together material limits together with a clear vision of what still needs to be done to achieve a dignified life for every human being. At the P2P Foundation this summer, we will be working on mapping out environmental and social externalities, to create accounting and accountability for the production and maintenance of human life. What we need is a production system that internalizes both social and ecological externalities, positive and negative. Our economic system needs to become socially predistributive (not merely correcting inequalilties after the fact), and ecologically regenerative (not merely repairing the damage previously done). This article was originally published in Jeremy Lent’s blog and is reproduced here his explicit permission.

Jeremy Lent: In Enlightenment Now: The Case for Reason, Science, Humanism, and Progress, published earlier this year, Steven Pinker argues that the human race has never had it so good as a result of values he attributes to the European Enlightenment of the 18^th century. He berates those who focus on what is wrong with the world’s current condition as pessimists who only help to incite regressive reactionaries. Instead, he glorifies the dominant neoliberal, technocratic approach to solving the world’s problems as the only one that has worked in the past and will continue to lead humanity on its current triumphant path.

His book has incited strong reactions, both positive and negative. On one hand, Bill Gates has, for example, effervesced that “It’s my new favorite book of all time.” On the other hand, Pinker has been fiercely excoriated by a wide range of leading thinkers for writing a simplistic, incoherent paean to the dominant world order. John Gray, in the New Statesman, calls it “embarrassing” and “feeble”; David Bell, writing in The Nation, sees it as “a dogmatic book that offers an oversimplified, excessively optimistic vision of human history”; and George Monbiot, in The Guardian, laments the “poor scholarship” and “motivated reasoning” that “insults the Enlightenment principles he claims to defend.” (Full disclosure: Monbiot recommends my book, The Patterning Instinct, instead.)

In light of all this, you might ask, what is left to add? Having read his book carefully, I believe it’s crucially important to take Pinker to task for some dangerously erroneous arguments he makes. Pinker is, after all, an intellectual darling of the most powerful echelons of global society. He spoke to the world’s elite this year at the World’s Economic Forum in Davos on the perils of what he calls “political correctness,” and has been named one of Time magazine’s “100 Most Influential People in the World Today.” Since his work offers an intellectual rationale for many in the elite to continue practices that imperil humanity, it needs to be met with a detailed and rigorous response.

Besides, I agree with much of what Pinker has to say. His book is stocked with seventy-five charts and graphs that provide incontrovertible evidence for centuries of progress on many fronts that should matter to all of us: an inexorable decline in violence of all sorts along with equally impressive increases in health, longevity, education, and human rights. It’s precisely because of the validity of much of Pinker’s narrative that the flaws in his argument are so dangerous. They’re concealed under such a smooth layer of data and eloquence that they need to be carefully unraveled. That’s why my response to Pinker is to meet him on his own turf: in each section, like him, I rest my case on hard data exemplified in a graph.

This discussion is particularly needed because progress is, in my view, one of the most important concepts of our time. I see myself, in common parlance, as a progressive. Progress is what I, and others I’m close to, care about passionately. Rather than ceding this idea to the coterie of neoliberal technocrats who constitute Pinker’s primary audience, I believe we should hold it in our steady gaze, celebrate it where it exists, understand its true causes, and most importantly, ensure that it continues in a form that future generations on this earth can enjoy. I hope this piece helps to do just that.

Graph 1: Overshoot

In November 2017, around the time when Pinker was likely putting the final touches on his manuscript, over fifteen thousand scientists from 184 countries issued a dire warning to humanity. Because of our overconsumption of the world’s resources, they declared, we are facing “widespread misery and catastrophic biodiversity loss.” They warned that time is running out: “Soon it will be too late to shift course away from our failing trajectory.”

Figure 1: Three graphs from World Scientists’ Warning to Humanity: A Second Notice

They included nine sobering charts and a carefully worded, extensively researched analysis showing that, on a multitude of fronts, the human impact on the earth’s biological systems is increasing at an unsustainable rate. Three of those alarming graphs are shown here: the rise in CO₂emissions; the decline in available freshwater; and the increase in the number of ocean dead zones from artificial fertilizer runoff.

This was not the first such notice. Twenty-five years earlier, in 1992, 1,700 scientists (including the majority of living Nobel laureates) sent a similarly worded warning to governmental leaders around the world, calling for a recognition of the earth’s fragility and a new ethic arising from the realization that “we all have but one lifeboat.” The current graphs starkly demonstrate how little the world has paid attention to this warning since 1992.

Taken together, these graphs illustrate ecological overshoot: the fact that, in the pursuit of material progress, our civilization is consuming the earth’s resources faster than they can be replenished. Overshoot is particularly dangerous because of its relatively slow feedback loops: if your checking account balance approaches zero, you know that if you keep writing checks they will bounce. In overshoot, however, it’s as though our civilization keeps taking out bigger and bigger overdrafts to replenish the account, and then we pretend these funds are income and celebrate our continuing “progress.” In the end, of course, the money runs dry and it’s game over.

Pinker claims to respect science, yet he blithely ignores fifteen thousand scientists’ desperate warning to humanity. Instead, he uses the blatant rhetorical technique of ridicule to paint those concerned about overshoot as part of a “quasi-religious ideology… laced with misanthropy, including an indifference to starvation, an indulgence in ghoulish fantasies of a depopulated planet, and Nazi-like comparisons of human beings to vermin, pathogens, and cancer.” He then uses a couple of the most extreme examples he can find to create a straw-man to buttress his caricature. There are issues worthy of debate on the topic of civilization and sustainability, but to approach a subject of such seriousness with emotion-laden rhetoric is morally inexcusable and striking evidence of Monbiot’s claim that Pinker “insults the Enlightenment principles he claims to defend.”

When Pinker does get serious on the topic, he promotes Ecomodernism as the solution: a neoliberal, technocratic belief that a combination of market-based solutions and technological fixes will magically resolve all ecological problems. This approach fails, however, to take into account the structural drivers of overshoot: a growth-based global economy reliant on ever-increasing monetization of natural resources and human activity. Without changing this structure, overshoot is inevitable. Transnational corporations, which currently constitute sixty-nine of the world’s hundred largest economies, are driven only by increasing short-term financial value for their shareholders, regardless of the long-term impact on humanity. As freshwater resources decline, for example, their incentive is to buy up what remains and sell it in plastic throwaway bottles or process it into sugary drinks, propelling billions in developing countries toward obesity through sophisticated marketing. In fact, until an imminent collapse of civilization itself, increasing ecological catastrophes are likely to enhance the GDP of developed countries even while those in less developed regions suffer dire consequences.

Graphs 2 and 3: Progress for Whom?

Which brings us to another fundamental issue in Pinker’s narrative of progress: who actually gets to enjoy it? Much of his book is devoted to graphs showing worldwide progress in quality in life for humanity as a whole. However, some of his omissions and misstatements on this topic are very telling.

At one point, Pinker explains that, “Despite the word’s root, humanism doesn’t exclude the flourishing of animals, but this book focuses on the welfare of humankind.” That’s convenient, because any non-human animal might not agree that the past sixty years has been a period of flourishing. In fact, while the world’s GDP has increased 22-fold since 1970, there has been a vast die-off of the creatures with whom we share the earth. As shown in Figure 2, human progress in material consumption has come at the cost of a 58% decline in vertebrates, including a shocking 81% reduction of animal populations in freshwater systems. For every five birds or fish that inhabited a river or lake in 1970, there is now just one.

Figure 2: Reduction in abundance in global species since 1970. Source: WWF Living Plant Report, 2016

But we don’t need to look outside the human race for Pinker’s selective view of progress. He is pleased to tell us that “racist violence against African Americans… plummeted in the 20^th century, and has fallen further since.” What he declines to report is the drastic increase in incarceration rates for African Americans during that same period (Figure 3). An African American man is now six times more likely to be arrested than a white man, resulting in the dismal statistic that one in every three African American men can currently expect to be imprisoned in their lifetime. The grim takeaway from this is that racist violence against African Americans has not declined at all, as Pinker suggests. Instead, it has become institutionalized into U.S. national policy in what is known as the school-to-prison pipeline.

Figure 3: Historical incarceration rates of African-Americans. Source: The Washington Post.

Graph 4: A rising tide lifts all boats?

This brings us to one of the crucial errors in Pinker’s overall analysis. By failing to analyze his top-level numbers with discernment, he unquestioningly propagates one of the great neoliberal myths of the past several decades: that “a rising tide lifts all the boats”—a phrase he unashamedly appropriates for himself as he extols the benefits of inequality. This was the argument used by the original instigators of neoliberal laissez-faire economics, Ronald Reagan and Margaret Thatcher, to cut taxes, privatize industries, and slash public services with the goal of increasing economic growth.

Pinker makes two key points here. First, he argues that “income inequality is not a fundamental component of well-being,” pointing to recent research that people are comfortable with differential rewards for others depending on their effort and skill. However, as Pinker himself acknowledges, humans do have a powerful predisposition toward fairness. They want to feel that, if they work diligently, they can be as successful as someone else based on what they do, not on what family they’re born into or what their skin color happens to be. More equal societies are also healthier, which is a condition conspicuously missing from the current economic model, where the divide between rich and poor has become so gaping that the six wealthiest men in the world (including Pinker’s good friend, Bill Gates) now own as much wealth as the entire bottom half of the world’s population.

Pinker’s fallback might, then, be his second point: the rising tide argument, which he extends to the global economy. Here, he cheerfully recounts the story of how Branko Milanović, a leading ex-World Bank economist, analyzed income gains by percentile across the world over the twenty-year period 1988–2008, and discovered something that became widely known as the “Elephant Graph,” because its shape resembled the profile of an elephant with a raised trunk. Contrary to popular belief about rising global inequality, it seemed to show that, while the top 1% did in fact gain more than their fair share of income, lower percentiles of the global population had done just as well. It seemed to be only the middle classes in wealthy countries that had missed out.

This graph, however, is virtually meaningless because it calculates growth rates as a percent of widely divergent income levels. Compare a Silicon Valley executive earning $200,000/year with one of the three billion people currently living on $2.50 per day or less. If the executive gets a 10% pay hike, she can use the $20,000 to buy a new compact car for her teenage daughter. Meanwhile, that same 10% increase would add, at most, a measly 25 cents per day to each of those three billion. In Graph 4, Oxfam economist Mujeed Jamaldeen shows the original “Elephant Graph” (blue line) contrasted with changes in absolute income levels (green line). The difference is stark.

Figure 4: “Elephant Graph” versus absolute income growth levels. Source: “From Poverty to Power,” Muheed Jamaldeen.

The “Elephant Graph” elegantly conceals the fact that the wealthiest 1% experienced nearly 65 times the absolute income growth as the poorest half of the world’s population. Inequality isn’t, in fact, decreasing at all, but going extremely rapidly the other way. Jamaldeen has calculated that, at the current rate, it would take over 250 years for the income of the poorest 10% to merely reach the global average income of $11/day. By that time, at the current rate of consumption by wealthy nations, it’s safe to say there would be nothing left for them to spend their lucrative earnings on. In fact, the “rising tide” for some barely equates to a drop in the bucket for billions of others.

Graph 5: Measuring Genuine Progress

One of the cornerstones of Pinker’s book is the explosive rise in income and wealth that the world has experienced in the past couple of centuries. Referring to the work of economist Angus Deaton, he calls it the “Great Escape” from the historic burdens of human suffering, and shows a chart (Figure 5, left) depicting the rise in Gross Domestic Product (GDP) per capita, which seems to say it all. How could anyone in their right mind refute that evidence of progress?

Figure 5: GDP per capita compared with GPI. Source: Kubiszewski et al. “Beyond GDP: Measuring and achieving global genuine progress.” Ecological Economics, 2013.

There is no doubt that the world has experienced a transformation in material wellbeing in the past two hundred years, and Pinker documents this in detail, from the increased availability of clothing, food, and transportation, to the seemingly mundane yet enormously important decrease in the cost of artificial light. However, there is a point where the rise in economic activity begins to decouple from wellbeing. In fact, GDP merely measures the rate at which a society is transforming nature and human activities into the monetary economy, regardless of the ensuing quality of life. Anything that causes economic activity of any kind, whether good or bad, adds to GDP. An oil spill, for example, increases GDP because of the cost of cleaning it up: the bigger the spill, the better it is for GDP.

This divergence is played out, tragically, across the world every day, and is cruelly hidden in global statistics of rising GDP when powerful corporate and political interests destroy the lives of the vulnerable in the name of economic “progress.” In just one of countless examples, a recent report in The Guardian describes how indigenous people living on the Xingu River in the Amazon rainforest were forced off their land to make way for the Belo Monte hydroelectric complex in Altamira, Brazil. One of them, Raimundo Brago Gomes, tells how “I didn’t need money to live happy. My whole house was nature… I had my patch of land where I planted a bit of everything, all sorts of fruit trees. I’d catch my fish, make manioc flour… I raised my three daughters, proud of what I was. I was rich.” Now, he and his family live among drug dealers behind barred windows in Brazil’s most violent city, receiving a state pension which, after covering rent and electricity, leaves him about 50 cents a day to feed himself, his wife, daughter, and grandson. Meanwhile, as a result of his family’s forced entry into the monetary economy, Brazil’s GDP has risen.

Pinker is aware of the crudeness of GDP as a measure, but uses it repeatedly throughout his book because, he claims, “it correlates with every indicator of human flourishing.” This is not, however, what has been discovered when economists have adjusted GDP to incorporate other major factors that affect human flourishing. One prominent alternative measure, the Genuine Progress Indicator (GPI), reduces GDP for negative environmental factors such as the cost of pollution, loss of primary forest and soil quality, and social factors such as the cost of crime and commuting. It increases the measure for positive factors missing from GDP such as housework, volunteer work, and higher education. Sixty years of historical GPI for many countries around the world have been measured, and the results resoundingly refute Pinker’s claim of GDP’s correlation with wellbeing. In fact, as shown by the purple line in Figure 5 (right), it turns out that the world’s Genuine Progress peaked in 1978 and has been steadily falling ever since.

Graph 6: What Has Improved Global Health?

One of Pinker’s most important themes is the undisputed improvement in overall health and longevity that the world has enjoyed in the past century. It’s a powerful and heart-warming story. Life expectancy around the world has more than doubled in the past century. Infant mortality everywhere is a tiny fraction of what it once was. Improvements in medical knowledge and hygiene have saved literally billions of lives. Pinker appropriately quotes economist Steven Radelet that these improvements “rank among the greatest achievements in human history.”

So, what has been the underlying cause of this great achievement? Pinker melds together what he sees as the twin engines of progress: GDP growth and increase in knowledge. Economic growth, for him, is a direct result of global capitalism. “Though intellectuals are apt to do a spit take when they read a defense of capitalism,” he declares with his usual exaggerated rhetoric, “its economic benefits are so obvious that they don’t need to be shown with numbers.” He refers to a figure called the Preston curve, from a paper by Samuel Preston published in 1975 showing a correlation between GDP and life expectancy that become foundational to the field of developmental economics. “Most obviously,” Pinker declares, “GDP per capita correlates with longevity, health, and nutrition.” While he pays lip service to the scientific principle that “correlation is not causation,” he then clearly asserts causation, claiming that “economic development does seem to be a major mover of human welfare.” He closes his chapter with a joke about a university dean offered by a genie the choice between money, fame, or wisdom. The dean chooses wisdom but then regrets it, muttering “I should have taken the money.”

Pinker would have done better to have pondered more deeply on the relation between correlation and causation in this profoundly important topic. In fact, a recent paper by Wolfgang Lutz and Endale Kebede entitled “Education and Health: Redrawing the Preston Curve” does just that. The original Preston curve came with an anomaly: the relationship between GDP and life expectancy doesn’t stay constant. Instead, each period it’s measured, it shifts higher, showing greater life expectancy for any given GDP (Figure 6, left). Preston—and his followers, including Pinker—explained this away by suggesting that advances in medicine and healthcare must have improved things across the board.

Figure 6: GDP vs. Life expectancy compared with Education vs. Life expectancy. Source: W. Lutz and E. Kebede. “Education and Health: Redrawing the Preston Curve.” Population and Development Review, 2018

Lutz and Kebede, however, used sophisticated multi-level regression models to analyze how closely education correlated with life expectancy compared with GDP. They found that a country’s average level of educational attainment explained rising life expectancy much better than GDP, and eliminated the anomaly in Preston’s Curve (Figure 6, right). The correlation with GDP was spurious. In fact, their model suggests that both GDP and health are ultimately driven by the amount of schooling children receive. This finding has enormous implications for development priorities in national and global policy. For decades, the neoliberal mantra, based on Preston’s Curve, has dominated mainstream thinking—raise a country’s GDP and health benefits will follow. Lutz and Kebede show that a more effective policy would be to invest in schooling for children, with all the ensuing benefits in quality of life that will bring.

Pinker’s joke has come full circle. In reality, for the past few decades, the dean chose the money. Now, he can look at the data and mutter: “I should have taken the wisdom.”

Graph 7: False Equivalencies, False Dichotomies

As we can increasingly see, many of Pinker’s missteps arise from the fact that he conflates two different dynamics of the past few centuries: improvements in many aspects of the human experience, and the rise of neoliberal, laissez-faire capitalism. Whether this is because of faulty reasoning on his part, or a conscious strategy to obfuscate, the result is the same. Most readers will walk away from his book with the indelible impression that free market capitalism is an underlying driver of human progress.

Pinker himself states the importance of avoiding this kind of conflation. “Progress,” he declares, “consists not in accepting every change as part of an indivisible package… Progress consists of unbundling the features of a social process as much as we can to maximize the human benefits while minimizing the harms.” If only he took his own admonition more seriously!

Instead, he laces his book with an unending stream of false equivalencies and false dichotomies that lead a reader inexorably to the conclusion that progress and capitalism are part of the same package. One of his favorite tropes is to create a false equivalency between right-wing extremism and the progressive movement on the left. He tells us that the regressive factions that undergirded Donald Trump’s presidency were “abetted by a narrative shared by many of their fiercest opponents, in which the institutions of modernity have failed and every aspect of life is in deepening crisis—the two sides in macabre agreement that wrecking those institutions will make the world a better place.” He even goes so far as to implicate Bernie Sanders in the 2016 election debacle: “The left and right ends of the political spectrum,” he opines, “incensed by economic inequality for their different reasons, curled around to meet each other, and their shared cynicism about the modern economy helped elect the most radical American president in recent times.”

Implicit in Pinker’s political model is the belief that progress can only arise from the brand of centrist politics espoused by many in the mainstream Democratic Party. He perpetuates a false dichotomy of “right versus left” based on a twentieth-century version of politics that has been irrelevant for more than a generation. “The left,” he writes, “has missed the boat in its contempt for the market and its romance with Marxism.” He contrasts “industrial capitalism,” on the one hand, which has rescued humanity from universal poverty, with communism, which has “brought the world terror-famines, purges, gulags, genocides, Chernobyl, megadeath revolutionary wars, and North Korea–style poverty before collapsing everywhere else of its own internal contradictions.”

By painting this black and white, Manichean landscape of capitalist good versus communist evil, Pinker obliterates from view the complex, sophisticated models of a hopeful future that have been diligently constructed over decades by a wide range of progressive thinkers. These fresh perspectives eschew the Pinker-style false dichotomy of traditional left versus right. Instead, they explore the possibilities of replacing a destructive global economic system with one that offers potential for greater fairness, sustainability, and human flourishing. In short, a model for continued progress for the twenty-first century.

While the thought leaders of the progressive movement are too numerous to mention here, an illustration of this kind of thinking is seen in Graph 7. It shows an integrated model of the economy, aptly called “Doughnut Economics,” that has been developed by pioneering economist Kate Raworth. The inner ring, called Social Foundation, represents the minimum level of life’s essentials, such as food, water, and housing, required for the possibility of a healthy and wholesome life. The outer ring, called Ecological Ceiling, represents the boundaries of Earth’s life-giving systems, such as a stable climate and healthy oceans, within which we must remain to achieve sustained wellbeing for this and future generations. The red areas within the ring show the current shortfall in the availability of bare necessities to the world’s population; the red zones outside the ring illustrate the extent to which we have already overshot the safe boundaries in several essential earth systems. Humanity’s goal, within this model, is to develop policies that bring us within the safe and just space of the “doughnut” between the two rings.

Figure 7: Kate Raworth’s Doughnut Economic Model. Source: Kate Raworth; Christian Guthier/The Lancet Planetary Health

Raworth, along with many others who care passionately about humanity’s future progress, focus their efforts, not on the kind of zero-sum, false dichotomies propagated by Pinker, but on developing fresh approaches to building a future that works for all on a sustainable and flourishing earth.

Graph 8: Progress Is Caused By… Progressives!

This brings us to the final graph, which is actually one of Pinker’s own. It shows the decline in recent years of web searches for sexist, racist, and homophobic jokes. Along with other statistics, he uses this as evidence in his argument that, contrary to what we read in the daily headlines, retrograde prejudices based on gender, race, and sexual orientation are actually on the decline. He attributes this in large part to “the benign taboos on racism, sexism, and homophobia that have become second nature to the mainstream.”

Figure 8: Racist, sexist, and homophobic Web searches, US, 2004–2017. Source: Steven Pinker, Enlightenment Now, 2018.

How, we might ask, did this happen? As Pinker himself expresses, we can’t assume that this kind of moral progress just happened on its own. “If you see that a pile of laundry has gone down,” he avers, “it does not mean the clothes washed themselves; it means someone washed the clothes. If a type of violence has gone down, then some change in the social, cultural, or material milieu has caused it to go down… That makes it important to find out what the causes are, so we can try to intensify them and apply them more widely.”

Looking back into history, Pinker recognizes that changes in moral norms came about because progressive minds broke out of their society’s normative frames and applied new ethics based on a higher level of morality, dragging the mainstream reluctantly in their wake, until the next generation grew up adopting a new moral baseline. “Global shaming campaigns,” he explains, “even when they start out as purely aspirational, have in the past led to dramatic reductions in slavery, dueling, whaling, foot-binding, piracy, privateering, chemical warfare, apartheid, and atmospheric nuclear testing.”

It is hard to comprehend how the same person who wrote these words can then turn around and hurl invectives against what he decries as “political correctness police, and social justice warriors” caught up in “identity politics,” not to mention his loathing for an environmental movement that “subordinates human interests to a transcendent entity, the ecosystem.” Pinker seems to view all ethical development from prehistory to the present day as “progress,” but any pressure to shift society further along its moral arc as anathema.

This is the great irony of Pinker’s book. In writing a paean to historical progress, he then takes a staunchly conservative stance to those who want to continue it. It’s as though he sees himself at the mountain’s peak, holding up a placard saying “All progress stops here, unless it’s on my terms.”

In reality, many of the great steps made in securing the moral progress Pinker applauds came from brave individuals who had to resist the opprobrium of the Steven Pinkers of their time while they devoted their lives to reducing the suffering of others. When Thomas Paine affirmed the “Rights of Man” back in 1792, he was tried and convicted in absentia by the British for seditious libel. It would be another 150 years before his visionary idea was universally recognized in the United Nations. Emily Pankhurst was arrested seven times in her struggle to obtain women’s suffrage and was constantly berated by “moderates” of the time for her radical approach in striving for something that has now become the unquestioned norm. When Rachel Carson published Silent Spring in 1962, with the first public exposé of the indiscriminate use of pesticides, her solitary stance was denounced as hysterical and unscientific. Just eight years later, twenty million Americans marched to protect the environment in the first Earth Day.

These great strides in moral progress continue to this day. It’s hard to see them in the swirl of daily events, but they’re all around us: in the legalization of same sex marriage, in the spread of the Black Lives Matter movement, and most recently in the way the #MeToo movement is beginning to shift norms in the workplace. Not surprisingly, the current steps in social progress are vehemently opposed by Steven Pinker, who has approvingly retweeted articles attacking both Black Lives Matter and #MeToo, and who rails at the World Economic Forum against what he terms “political correctness.”

It’s time to reclaim the mantle of “Progress” for progressives. Progress in the quality of life, for humans and nonhumans alike, is something that anyone with a heart should celebrate. It did not come about through capitalism, and in many cases, it has been achieved despite the “free market” that Pinker espouses. Personally, I’m proud to be a progressive, and along with many others, to devote my energy to achieve progress for this and future generations. And if and when we do so, it won’t be thanks to Steven Pinker and his specious arguments.

Photo by alex mertzanis

The post Steven Pinker’s Ideas About Progress Are Fatally Flawed. These Eight Graphs Show Why. appeared first on P2P Foundation.

In some cases, it can pretty objectively be argued that a company is really making something the world needs; if they’re innovating on renewable energy or a cure for a terminal illness, for instance.

In most situations, assessing whether the company has a net positive impact on society is nonetheless difficult. Some devout defenders of entrepreneurship might argue that any company that creates jobs is already making the world better by default, even if the impact of the company’s products is neutral. This view can, however, be challenged, especially if the employees of the company consist mostly of “scarce resources” like programmers or designers, who are high in demand. Opportunity cost needs to be taken into account.

The Upright Project, a company that measures the net impact of companies, argues that if a company mainly employs people from this group of “scarce resources”, its impact is, by default, negative: if this particular company wouldn’t exist, these people would immediately find jobs elsewhere in companies that might produce something more valuable. In other words: if a company is taking these scarce resources off the job market, it better do something useful with them.

Companies that reach profitability are, of course, providing value to certain stakeholders: their customers, employees and shareholders — and to society in the form of taxes. However, if this value is created by burning fossil fuels or convincing people to smoke cigarettes or buy more things they don’t need, it can be argued that the net value is negative.

I’ve been a tech entrepreneur for almost 7 years. What drives me to startups and for-profit entrepreneurship is the scalability of my impact. If I was a doctor or a teacher, my work would certainly have a high positive impact, but it would only benefit a small group of people. If I build a company that manages to develop a cure for a common disease or create educational technology that helps millions of kids in developing countries learn to read, the impact of my work touches a vastly larger group of people even though the amount of hours I put in is the same. That’s powerful.

During all these years, I’ve struggled when trying to figure out how to make sure that our business — or any business — is truly serving society, not taking more than it’s giving. I’ve come to the conclusion that the answer lies in how the company is structured, and what kinds of incentives it offers its management.

Why being “mission-driven” is not enough

Many modern technology companies are created by teams of young, idealistic founders who truly want to make the world a better place. Their business ideas are often born from a genuine desire to fix a certain societal problem. In an ideal scenario, they can align their purpose and their profits: every dollar they make also advances their cause. Think of a company that produces solar panels or makes an app to buy food that would otherwise go to waste. On the surface, this sounds like a perfect equation: as the company’s business scales, so does its positive impact.

Unfortunately, this genuine willingness to be mission-driven is not enough. The world is complicated. What sounds like a business model that generates a purely positive impact can have surprising negative side effects. As the company grows bigger, it might need to venture into business areas that are no longer aligned with its original mission in order to sustain growth.

If a company is structured in a traditional way, it still needs to ultimately listen to the demands of its stockholders. If the stockholders are primarily interested in maximizing their profits — and this is often the case for any company that is public or has sold more than 50% of its equity to venture capitalists — the company’s management is incentivized to put its social mission on the backburner and focus on profits and growth instead.

Let’s take a few examples to illustrate this problem. My work is in the field of the sharing economy and peer-to-peer marketplaces, so I’m choosing my examples from this industry. I’m picking three companies that seem to have genuinely mission-driven founders who have always heavily emphasized the social impact side of their business: Airbnb, Lyft, and Etsy.

Airbnb

Airbnb is a pioneer of the so-called sharing economy. Their claim has been that we have lots of underutilized space that should be put to better use. If people use the extra space in their homes to turn them into hotels, we will need less new hotels, and the space for hotels can be used for something else.

It sounds great on paper. Unfortunately, reality isn’t quite so straightforward. The hotel industry is seeing more profits than ever. My theory is that instead of decreasing the demand for hotels, Airbnb has simply expanded tourism — because of more affordable places to stay, more people choose to travel. This also means a lot more flights, and with them a lot more emissions. And Airbnb doesn’t even want to disrupt hotels anymore; it just announced that it is now offering its platform to hotels as well, helping them find more guests.

But doesn’t it still mean that Airbnb increases the utilization of existing spaces? Not necessarily. According to some studies, 40% of Airbnb’s revenues come from professional landlords. They have turned the apartments they own, formerly available for permanent rental, into vacation rental homes. This means there are fewer apartments available for people living in a city, all the while vacation rental apartments are empty half of the time during the off-season. Because of this, rental prices have gone up in some cities, pushing less well-off people into the suburbs.

This is, of course, not what the founders originally intended; it’s simply a side effect of their business model — something economists call an “externality”. But there’s no denying that it’s an important factor when considering whether Airbnb’s impact on society is net positive.

Lyft

For a long time, the Lyft founders have been working towards a noble goal: reducing congestion and car ownership. On the surface, it sounds that Lyft’s business model is doing just that. Who wants to own a car in a city when I can summon a personal driver in a matter of minutes, for a relatively affordable cost? Lyft’s main competitor, Uber, has the same effect, but it’s been Lyft that has made its claim to fame by focusing on this positive aspect of its business model.

However, like Airbnb, Lyft is also causing externalities it probably didn’t expect. Several recent studies show that Uber and Lyft actually increase congestion in cities. Because of their affordability and convenience, they often convert people from biking, walking and public transport. Meanwhile, between rides, Uber and Lyft drivers spend on average 50% of their time alone in their cars, adding to the problem of congestion.

Etsy

Etsy was born as a statement against the world of mass-produced goods, best represented by Amazon. Etsy wanted to get more people to buy hand-crafted goods while providing an income to micro-entrepreneur crafters.

Etsy went further than Airbnb and Lyft to emphasize its position as a company that puts its mission before its profits. It acquired a B Corp certificate, which obliged it to submit annual proof that it meets rigorous standards of social and environmental performance, accountability, and transparency. In a speech to his employees, Etsy CEO Chad Dickerson read the Milton Friedman quote about profit maximization as a sole responsibility of a business, and said: “You’re all free to hiss”. Then he hissed himself, showing his distaste for Friedman’s thinking.

Similarly to Airbnb and Lyft, Etsy decided to raise lots of venture capital to accelerate its growth. Eventually, this meant that Etsy needed to offer investors a way to liquidate their investments, which meant going public in 2015.

In 2017, a hedge fund called Black-and-White Capital saw an opportunity to make profit. It started buying Etsy stock, after which it launched an activist campaign, accusing the company of careless spending and demanding that Dickerson be ousted as a CEO. The company’s board proceeded to fire Dickerson, along with 8% of the company’s staff.

Friedman 1 — Dickerson 0.

Etsy used to have a “Values-Aligned Business” team, which oversaw the company’s social and environmental efforts. The new CEO Josh Silverman dismantled this team. Etsy also gave up its B Corp certificate. Even before going public, it had started allowing the sales of manufactured goods on its platform.

These moves have been applauded by Etsy stockholders: it has tripled its share price within the past year. But Etsy is no longer the same company it used to be.

The ultimate solution: remove the incentive to maximize profits

An attentive reader might have noticed a pattern in the three stories above. All three companies had a clear way to tackle the negative externalities caused by their business models. Airbnb could ban professional landlords and only allow people to rent out the places they themselves live in and their second homes. Lyft could make its services less attractive during peak hours by volunteering to pay a congestion tax that would increase its prices. Etsy could reinstate the B Corp certificate, ban manufactured goods, and monitor the origin of goods sold through its platform more carefully.

In reality, these companies are not in a position to do so because of their company structure. They can’t escape Friedman. The main incentive for their management is to grow the business and maximize shareholder profit. All the proposed solutions are in conflict with this goal as they could have a significant negative impact on revenue and growth for these companies. And that’s why we most likely won’t see them happen.

Their structure. Their incentives. Perhaps therein lies the answer to the original challenge: how to build companies that are a force for good in society.

One can’t argue with Friedman since he is simply stating the facts: this is how companies are structured, and this is what their duty is. But what if we change the structure and duty?

In her excellent 2017 book Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist, economist Kate Raworth explains that we need to build an economy that lifts people out of poverty and brings them well-being while respecting the natural ceiling for growth caused by the limited resources of our planet. She believes that in order to achieve this, we need to make fundamental changes to our society and to our organizations. She writes:

“The most profound act of corporate responsibility for any company today is to rewrite its corporate bylaws or articles of association in order to redefine itself with a living purpose rooted in regenerative and distributive design and then to live and work by it.”

The key insight here is that we don’t need to create companies that maximize profits at all costs. In their articles of association, we can write that their profits are only a means to pursue their social mission, not an end goal in themselves. In some cases, this means that the company might make decisions that deliberately decrease its profits or slow its growth if its management feels that it is the right to do, all things considered.

Such company structures can be created without changing our current legislation, and some pioneering tech startups are already adopting these structures. Kickstarter, the world’s largest crowdfunding platform, paved the way in 2015 by reincorporating as a public benefit corporation, and stating it will never sell or go public. By remaining independent from the control of outside stockholders, it can be sure that its management is forever incentivised to put its mission first.

Putting our money where our mouth is

Our company, Sharetribe, helps entrepreneurs and organizations create their own peer-to-peer marketplace platforms. With our technology, you can essentially create something like Airbnb, Lyft, or Etsy. Like these three companies, we also have a social mission. In our case, it is to democratize the sharing economy by making platform technology accessible to anyone. We truly admire these three companies and the tremendous technological and cultural innovations they’ve made. However, we’re also worried about the negative consequences of their pursuit of even higher growth. Our thinking is that if we make their innovations available to local platforms operated by small businesses, social enterprises, co-operatives, non-profits or even cities, we can reap the benefits of the sharing economy without causing many of the downsides.

When our founders travelled the world telling people about this mission, many asked whether there was a risk that we would become another profit-maximizing platform giant ourselves. What if we started generating unintended negative externalities as well, and our shareholders wouldn’t allow us to do anything about them? At the time, we didn’t have a good answer. After all, we’ve had a traditional startup structure, and we’ve recognized that if we raised any more money with that structure, the final decision would no longer be in our hands. Even if we decided not to raise money, there was no way for us to make a binding commitment to our stakeholders that we wouldn’t do so in the future.

This made us worried and frustrated.

Finally, we decided to do something about it. A few weeks ago, the Finnish Trade Registry approved our new articles of association that officially transition our company into a structure called steward-ownership. We are the first company in Finland and one of the first tech startups in the world to do so. Steward-ownership is a company structure designed to ensure that our company’s profits are purely a means to pursue its mission, and forever removes any personal financial incentive of profit maximization from the company’s management. Unlike B Corp certificates, the steward-ownership structure is protected with a foundation structure and can never be dismantled once introduced.

From now on, it’s in the best interest of our management to put our social mission first, even if that means slowing down our growth. Everyone working in the company is incentivized, first and foremost, to make decisions that benefit not just the owners of the company, but all other stakeholders, the environment, and society at large. After this change, we can finally — confidently — say that our company will always be a force for good in society.

How does our steward-ownership model work in practice? That is the topic of another post.

***

If you’re inspired by this story, it is now possible to join us on our journey! We have just launched an equity crowdfunding campaign that is unlike any other crowdfunding round seen before due to our new structure. It’s now possible for anyone from around the world to invest in Sharetribe and own shares in our company, for amounts starting from 500 euros. Check out the campaign here.

A mandatory regulatory disclaimer: remember that investments in unlisted companies like Sharetribe always carry a risk of losing capital. Invest responsibly. Because of financial regulations, certain restrictions in terms of who can invest apply to residents of the following countries: United States, Canada, Australia, Hong Kong, Singapore, Japan, New Zealand, and South Africa. You will find more information about this on the investment platform.

This post was originally published in Better sharing
Photo by Volkan Olmez on Unsplash

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Since the 2008 global financial meltdown and bailouts, trust is disappearing: in banks, stock markets, corporations, governments, religious institutions, experts, academia, political parties’ rhetoric and even the Internet and social media. This mistrust has fueled global populists across the political spectrum, with ubiquitous signs at their rallies, “Where’s MY Bailout?”  We see the rise of cryptocurrencies becoming bubbles, as many seek alternative stores of value and mediums of exchange they hope will prove more trustworthy than central banks’ fiat currencies: dollars, yen, euros, pounds, pesos backed only by their governments’ promises.

Trust is a precious commodity which undergirds all humanity’s markets, trading and exchange. Trust does not scale easily, abiding in face-to-face, handshake interactions in humanly-scaled communities, based on common agreements, shared infrastructure, resources and culture. Trust does not reside in packages of software, apps, AI, big data or social media platforms, as we learned in 2016. So trust was sought in the blockchain platforms first developed by the mysterious computer expert, Satoshi Nakamoto in 2009 for his bitcoin. Now, over 1000 blockchain-based start-up companies and blockchains underlie the over 1,500 cryptocurrencies traded on electronic exchanges including Coinbase. These computer-based distributed ledger blockchains are designed to engender trust by allowing person-to-person ability to verify each transaction or contract with a permanent record open to all.

Crypto promoters aspire to create global-level trust in the value of cryptocurrencies due to this transparency and their protocols limiting finite amounts to be issued, to create artificial scarcity. This vision is sullied by the many cases of criminality, hacking, stealing, frauds and other shenanigans. Nevertheless, faith and trust in these cryptos remains strong, since proponents say central banks also manipulate their fiats — which is true!  We see fiat money being printed on TV shows! Yet fake visuals of cryptos, such as the shiny golden colored coins are also shown with news about bitcoin. This is a “bit-con” since bitcoin is a digital algorithm, a string of computer code which is unlikely to become a ubiquitous medium of exchange or a store of value.

Still, the allure to libertarians, hackers and speculators is that cryptos exist with no middleman, for peer-to-peer global private use with no governments, no banks or financial intermediaries and few outside rules except those imposed by issuers. Millions of hackers worldwide soon began solving the ever more complex mathematical puzzles needed to claim their next block of newly minted bitcoin. These “miners” now use some 30 terawatts annually of fossil-generated electricity, equivalent to the consumption of a country the size of Ireland, plus gobs of computer power. They are now affecting the Earth’s climate as I described in “Hey COP23: Bitcoin Miners Exploding CO2 Emissions!”

The loss of trust in fiat dollars, pounds, yen, euros, pesos we always use to pay each other cannot be replaced by cryptos—in spite of the current hype, as traditional financial markets now trade bitcoin futures and ETFs concocted by eager Wall Street players.  Nations including Russia, North Korea and Venezuela under international sanctions for violating norms, are now issuing their own cryptos to escape financial controls set by governments for fiat currency transactions. How will this war between governments and libertarian hackers’ cryptos versus fiats work out?

Clearly, trust in all forms of money is fading. Today, people barter more goods and services on electronic platforms, swap and match, often directly without any use of currencies on platforms like Freecycle, and for everything from baby-sitting, sharing garden tools, spare rooms, vacation homes to finding their true love matches! The familiar fiat currencies we still spend our lives earning, investing and saving for our retirement are losing their dominance in our lives and with that their role as a promised store of value. For example, few fiat currencies remain stable, as we see on FOREX trading screens daily. Even our US dollar has lost about 80% of its value over the past 30 years— due to inflation, budget deficits, interest payments to bond-holders on our national debt, which recent tax cuts may increase by another $1.5 trillion.

Most US and European citizens register disbelief when they learn that all their national money in circulation is created out of thin air by private banks when they create loans and is therefore only backed by other peoples’ debts, not gold or any other commodity of value! Governments in Britain, the USA and most countries gave their sovereign power to coin their own national money away to their private banks and allowed them to charge interest on their loans as well, as Ellen Brown explains in “Web of Debt”, (2010). Our TV Special “The Money Fix” details on how this happened in the USA with founding of the Federal Reserve in 1913 and the rise of local currencies, barter and credit circles.

Governments’ policies became ever more erratic, swinging between obsolete textbook policy prescriptions: either “stimulation “(quantitative easing QE, i.e. money-printing, tax cuts, lowering interest rates, buying dud mortgage-backed securities) or “austerity “(cutting safety nets, education, healthcare, public services, selling off public assets) while continuing to bail out too-big-to-fail firms without prosecuting their reckless executives. Ethical Markets dissects such obsolete economic policies and offers more realistic alternatives (www.ethicalmarkets.com).

Today, failing policy levers are being bypassed by the rise of cryptos, crowdfunding, peer-to-peer lending, electronic barter, information-based direct trading I describe in “FINTECH: Good and Bad News for Sustainable Finance”.  They reveal the stunning truth: Money Is Not Wealth and worse, it is no longer a reliable store of value!  All those dollars we pinched to save for our retirement are losing their value until we use them to buy something useful, and shift our investing from obsolete, polluting, unsustainable corporations into trustworthy, sustainable, well-managed and transparent enterprises so we can monitor their performance and social impacts ourselves.

As the shock of this reality sets in, it reveals how most financial market players try to make money out of money, trading stocks with each other which are tradeable contracts issued by big companies as explained by law professor Lynn Stout in “The Shareholder Value Myth”, (2012). The latest Wall Street bubbles are index-based stocks and ETFs, reaching additional levels of abstraction. I first unraveled these truths in “Creating Alternative Futures” (1978,1996) and “The Politics of the Solar Age” (1981,1986). I described the essential unpaid tasks underpinning the cash-based sectors measured in GDP and incomes of mostly male “breadwinners”. Textbooks designated their wives to perform all the work of maintaining households, raising the next generation, caring for elders, volunteering in community service —all unpaid, as in this diagram (Cake). Economic textbooks described all this vital productive work I called the Love Economy as “non-economic”!

Feminists emerged worldwide to insist this work be recorded and paid, as in Marilyn Waring’s “If Women Counted” (1990); lawyer Riane Eisler’s Caring Economy campaign and Kate Raworth’s “Doughnut Economics” (2017). I documented how thousands of communities around the world starved by their central governments of fiat currencies by austerity programs, simply created their own local currencies, like the famous “Berkshares” issued by the Schumacher Society and circulated, even by local banks in Great Barrington, MA. These townsfolk realized that using their own local currencies and credit could clear their local markets and employ their people meeting local needs. Photographs of thousands of such local currencies issued all over North America and Mexico are catalogued in, “Depression Scrip of the United States 1930” (1961). They taught a key lesson: money cannot be a store of value –it must circulate in the community in order to meet needs and create jobs and prosperity. To assure these currencies were not saved, but spent, they all carried expiration dates and require stamps to re-validate them regularly affixed until they finally expired.

So this myth of money as a store of value is now threadbare. Electronic platforms open up new possibilities for direct barter, with all the fintech exchanges now disrupting traditional finance and banking. These innovations offer hope that both cryptos and fiats may eventually be properly managed and regulated in the service of decentralized prosperity and focus on the new model; the UN’s Sustainable Development Goals (SDGs) now ratified by 195 governments. Accountants are renovating their models for information-based economies  where services account for some 80% of production: from unpaid voluntary work to intellectual property, R &D, design, brands, networks, “infostructure” (broadband, internet) and institutions, described in “Capitalism Without Capital” (2018). The International Integrated Reporting System (IIRC) models six forms of capital: finance, built facilities, intellectual, social, human and natural capitals, which then measure the extent to which companies and governments enhance or degrade all six forms. This accounting revolution also from the Sustainable Accounting Standards Board (SASB); the Chartered Institute of Management Accountants www.cimaglobal.com, (ICAEW) finally discloses and internalizes all those “externalities” into companies’ balance sheets and provides full spectrum accounting— beyond money as the single metric. Honest money: currencies fully backed 100% for example, by kilowatt hours of renewable electricity, productive assets and services can continue to be useful as mediums of exchange. Expert Shann Turnbull in “Is A Stable Financial System Possible”, shows why currencies cannot be a predictable store of value, i.e. money is not wealth.

Cross-posted with permission from Ethical Markets.

Photo by reynermedia

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Kate Raworth recognises that a dramatic new mindset is needed if we’re going to address the economic challenges of the 21st century. Her iconic book, Doughnut Economics: seven ways to think like a 21st-century economist, argues that our economic activity should operate in a space that’s above a social foundation, and below an ecological ceiling. What this means in practice is that essential human rights and quality of life are delivered to everyone, but within the means and resources we have available on the planet. The doughnut of Kate’s analogy is a playful metaphor for a serious and urgent challenge being faced by the world’s population. Triodos Bank caught up with Kate to ask more about her perspective on modern economics, and how we can create a system that works within the limits of her theory.

Sharing instead of redistributing

Your economic model is now six years old. Have we made any progress?

We have. I consider the Sustainable Development Goals (SDG’s) to be an essential step. They are much more ambitious than their predecessors, the Millennium Goals. They compromise the systems that sustain life on earth and are designed for all countries, not just the South. The SDG’s are a positive development, but I think we should be able to break through the ceiling of our imagination. The question is: can we design a system to improve things? That, in my opinion, should be our ambition: to develop activities that are distributive and generative from the start.

What exactly do you mean by ‘distributive by design’?

We usually talk about redistributing the wealth that is initially in the hands of a small group of people. That is the core of the 20th century model: redistribution of income afterwards, through e.g. progressive taxes and other means. This means that certain groups can keep questioning this redistribution over and over again. The distributive concept of the 21st century is about choosing to design our activities in such a way that they share the value from the start, instead of redistributing it afterwards.

Distributive by design starts with the question: who owns the wealth? The 21st century is not about redistribution but about sharing the sources of wealth from the start. And it is not just about the money, but also about land, companies, the ability to create money. What about the ownership of technology, who will own our robots? How do we treat our knowledge? Does it not make sense that innovative ideas originating from publicly funded research should be accessible to everyone?

The core of the challenge, then, is in reinventing the way we create value in our economy and share it from the start. You can do this with alternative forms of ownership of companies, like employee-owned companies or co-operations. Or you could anchor it as a target in the company’s Articles. Another way of integrating the sharing of value in the design is not to freeze them in patents but instead let them circulate freely among the commons. That way they travel through society, research communities can use them and develop them further. Another way still is to work with local currencies that connect and empower new initiatives.

Money with patience

The economy should not just share value. It should also be generative?

Yes. We seem to find it normal that a company focuses on realizing but one kind of value – financial profit – and in addition, keeps it for itself and its shareholder. It is very much the mentality of the 20th century: how much money is in it for me? You could describe it as an extractive economy, as over-exploitation taking away valuable resources from the community.

The 21st century, generative model has a different baseline. The question now is: how many kinds of value can I integrate in my company’s design to make sure that I can give value back to society and the environment? I keep meeting entrepreneurs, designers, urban developers, etc. who adhere to this new mentality with such vigor! As social entrepreneurs they want to create value that flows back to the community, forms of value that are easier to share. As a company, why would you strive to only reducing your negative impact on the environment when you can just as easily generate a positive impact? So instead of reducing emission of greenhouse gases, you start generating renewable energy and you share it with your surroundings. The same goes for the social domain, whereby companies actively contribute to the wellbeing of their neighbourhood or community.

What role do you see for the financial world?

That is the million-dollar question. First, we should investigate how to collect money in a 21st century way. That leads us to ethical banks, money with patience, and at first even philanthropy, to get things going. All of those are important sources for money because their values are in line with those of the companies they are supporting. Within the existing 20th century money industry we could do this through our pension funds. Could we restructure them so that they become value-driven? Can we enable people to change to such ethical pension funds? Besides that, we obviously need clear legislation. But I focus mostly on finding new forms of financing that are suited for 21st century businesses.

And that is where Triodos Bank comes in. The bank pays attention to these new kinds of entrepreneurship that are essential for the future. Triodos consciously uses money to create positive social, ecological and cultural change. It is an excellent example of a company with a lively target, aimed at distributive and generative companies whose values go way beyond the financial profit that stays within the company.

Between the markets and the commons

How would you rate the potential of our digital networks?

We underestimate their power. They enable citizens to get organized on different levels and at minimal costs. Take Wikipedia, the citizens’ encyclopedia. Or Linux, an open source operating system used by organizations all over the globe. These are tools which allow citizens to build their own networks.

At the moment, a few companies hold monopolies, like Facebook and Amazon, but it does not necessarily have to stay that way. People can be active in different networks. We can be on Facebook, but at the same time join local networks and exchange information and knowledge about our city. I foresee a big increase in open-source networks for specific cities and communities. We underestimate what these networks could mean for citizens who want to collaborate and connect.

The new possibilities to work digitally and open source are leading to a whole new generation of innovative entrepreneurs who have begun to operate on the border between the markets and the commons. Your company may be small, but if you share your ideas with the commons, you will have access to a global research team. New business models will see the light. And they are successful precisely because they are open source. We are looking at an immense quest for alternatives, which might explain why my book was so well received. More and more people are looking for an alternative concept of what our economy should look like and which purpose it should serve.

Kate Raworth is a renegade economist focused on exploring the economic mindset needed to address the 21st century’s social and ecological challenges, and is the creator of the Doughnut of social and planetary boundaries. She is a Senior Visiting Research Associate at Oxford University’s Environmental Change Institute, where she teaches on the Masters in Environmental Change and Management. She is also a Senior Associate at the Cambridge Institute for Sustainability Leadership.

Original source: Triodos Bank

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“Doughnut Economics proposes 7 fundamental shifts needed in today’s economic mindset if we – humanity – want to give ourselves half a chance of thriving together on this living planet in the 21st century.”

This model ‘allows us to see the state in which we now find ourselves’. Source: Kate Raworth and Christian Guthier/The Lancet Planetary Health

Review

George Monbiot: “We cannot hope to address our predicament without a new worldview. We cannot use the models that caused our crises to solve them. We need to reframe the problem. This is what the most inspiring book published so far this year has done.

In Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist, Kate Raworth of Oxford University’s Environmental Change Institute reminds us that economic growth was not, at first, intended to signify wellbeing. Simon Kuznets, who standardised the measurement of growth, warned: “The welfare of a nation can scarcely be inferred from a measure of national income.” Economic growth, he pointed out, measured only annual flow, rather than stocks of wealth and their distribution.

Raworth points out that economics in the 20th century “lost the desire to articulate its goals”. It aspired to be a science of human behaviour: a science based on a deeply flawed portrait of humanity. The dominant model – “rational economic man”, self-interested, isolated, calculating – says more about the nature of economists than it does about other humans. The loss of an explicit objective allowed the discipline to be captured by a proxy goal: endless growth.

The aim of economic activity, she argues, should be “meeting the needs of all within the means of the planet”. Instead of economies that need to grow, whether or not they make us thrive, we need economies that “make us thrive, whether or not they grow”. This means changing our picture of what the economy is and how it works.

The central image in mainstream economics is the circular flow diagram. It depicts a closed flow of income cycling between households, businesses, banks, government and trade, operating in a social and ecological vacuum. Energy, materials, the natural world, human society, power, the wealth we hold in common … all are missing from the model. The unpaid work of carers – principally women – is ignored, though no economy could function without them. Like rational economic man, this representation of economic activity bears little relationship to reality.

So Raworth begins by redrawing the economy. She embeds it in the Earth’s systems and in society, showing how it depends on the flow of materials and energy, and reminding us that we are more than just workers, consumers and owners of capital.

This recognition of inconvenient realities then leads to her breakthrough: a graphic representation of the world we want to create. Like all the best ideas, her doughnut model seems so simple and obvious that you wonder why you didn’t think of it yourself. But achieving this clarity and concision requires years of thought: a great decluttering of the myths and misrepresentations in which we have been schooled.

The diagram consists of two rings. The inner ring of the doughnut represents a sufficiency of the resources we need to lead a good life: food, clean water, housing, sanitation, energy, education, healthcare, democracy. Anyone living within that ring, in the hole in the middle of the doughnut, is in a state of deprivation. The outer ring of the doughnut consists of the Earth’s environmental limits, beyond which we inflict dangerous levels of climate change, ozone depletion, water pollution, loss of species and other assaults on the living world.

The area between the two rings – the doughnut itself – is the “ecologically safe and socially just space” in which humanity should strive to live. The purpose of economics should be to help us enter that space and stay there.

As well as describing a better world, this model allows us to see, in immediate and comprehensible terms, the state in which we now find ourselves. At the moment we transgress both lines. Billions of people still live in the hole in the middle. We have breached the outer boundary in several places.

An economics that helps us to live within the doughnut would seek to reduce inequalities in wealth and income. Wealth arising from the gifts of nature would be widely shared. Money, markets, taxation and public investment would be designed to conserve and regenerate resources rather than squander them. State-owned banks would invest in projects that transform our relationship with the living world, such as zero-carbon public transport and community energy schemes. New metrics would measure genuine prosperity, rather than the speed with which we degrade our long-term prospects.

Such proposals are familiar; but without a new framework of thought, piecemeal solutions are unlikely to succeed. By rethinking economics from first principles, Raworth allows us to integrate our specific propositions into a coherent programme, and then to measure the extent to which it is realised.

I see her as the John Maynard Keynes of the 21st century: by reframing the economy, she allows us to change our view of who we are, where we stand, and what we want to be.

Now we need to turn her ideas into policy.” (https://www.theguardian.com/commentisfree/2017/apr/12/doughnut-growth-economics-book-economic-model)

More Information

Short video presentations:

Part 1 of six: https://www.youtube.com/watch?v=Mkg2XMTWV4g ; more at https://www.kateraworth.com/animations/

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