Micah Saul: This project is built on a hypoth­e­sis. There are moments in his­to­ry when the sta­tus quo fails. Political sys­tems prove insuf­fi­cient, reli­gious ideas unsat­is­fac­to­ry, social struc­tures intol­er­a­ble. These are moments of crisis. 

Aengus Anderson: During some of these moments, great minds have entered into con­ver­sa­tion and torn apart inher­it­ed ideas, dethron­ing truths, com­bin­ing old thoughts, and cre­at­ing new ideas. They’ve shaped the norms of future generations.

Saul: Every era has its issues, but do ours war­rant The Conversation? If they do, is it happening?

Anderson: We’ll be explor­ing these sorts of ques­tions through con­ver­sa­tions with a cross-section of American thinkers, peo­ple who are cri­tiquing some aspect of nor­mal­i­ty and offer­ing an alter­na­tive vision of the future. People who might be hav­ing The Conversation.

Saul: Like a real con­ver­sa­tion, this project is going to be sub­jec­tive. It will fre­quent­ly change direc­tions, con­nect unex­pect­ed ideas, and wan­der between the tan­gi­ble and the abstract. It will leave us with far more ques­tions than answers because after all, nobody has a monop­oly on dream­ing about the future.

Anderson: I’m Aengus Anderson.

Saul: And I’m Micah Saul. And you’re lis­ten­ing to The Conversation.

Aengus Anderson: Today’s episode is with John Fullerton. And I have a spe­cial place in my heart for peo­ple who change direc­tions and rethink things they’ve been doing for a long time. And John Fullerton is one of these guys. He was the Managing Director of JP Morgan. He’s a guy who was very pow­er­ful in the finan­cial world, knew it inside and out. He worked there for eigh­teen years.

Micah Saul: Yeah, found­ed a few oth­er invest­ment com­pa­nies. And then, then he does the Capital Institute.

Anderson: And why don’t you tell peo­ple what the Capital Institute is, because it’s very much not like what JP Morgan does.

Saul: So, the Capital Institute is real­ly focus­ing on how to make finance serve dif­fer­ent goals. You know, the major­i­ty of the finance industry…well, it serves finance. It serves mon­ey. And the Capital Institute is inter­est­ed in resilience, sus­tain­abil­i­ty, jus­tice; yet still oper­at­ing in the finan­cial world. It’s a major shift from attempt­ing to grow mon­ey, to attempt­ing to grow sustainability.

Anderson: And as we’re talk­ing about attempt­ing to do dif­fer­ent things, the Capitalist Institute is real­ly attempt­ing to answer ​“what is cap­i­tal for?”

John Fullerton: So, I was read­ing in the project, and what went through my mind was I’m often torn with this idea that we live at this spe­cial moment, and you know it’s kind of arro­gant to think that—

Anderson: Right.

Fullerton: —we live at a spe­cial moment, and yet I real­ly think we do live at a spe­cial moment. So I’m intrigued that you’re doing this project which sug­gests that inde­pen­dent of the lit­tle bub­ble that I live in, there are peo­ple out­side that actu­al­ly agree with that. And it’s a pret­ty excit­ing idea to think that maybe this is a spe­cial moment. So any­way, I was just curi­ous how you decid­ed to do the project.

Anderson: Both my co-host and I have been talk­ing about that for a long time, and debat­ing whether or not it is. And so out of con­ver­sa­tions with my co-host, who’s a friend of mine, we start­ed think­ing God, we should real­ly pur­sue this with a big project. And I done two oth­er projects about the present and the past, and I thought okay, this is the chance to do the project on the future, and to real­ly have con­ver­sa­tions with peo­ple both about dif­fer­ent pos­si­ble futures, but also about the very premise of is this unique moment and does con­ver­sa­tion change things? 

You know, com­ing from his­to­ry, there are lots of schools of explain­ing social change. You have peo­ple who look at tech­no­log­i­cal deter­min­ism, or envi­ron­men­tal deter­mine. And I’ve spo­ken to oth­er peo­ple who are much more into intel­lec­tu­al his­to­ry, who will say no, you can actu­al­ly pin­point peo­ple who unleashed pow­er­ful ideas, and that real­ly does change things.

Fullerton: Copernicus.

Anderson: Exactly. It’s hard to beat exam­ples like that.

Fullerton: That’s the one that a lot of peo­ple in our space refer back to and say you know, imag­ine what it was like when Copernicus start­ed throw­ing these ideas out.

Anderson: Yeah, I mean it would be insane.

Fullerton: Yeah, and it was eighty years before Galileo proved Copernicus was right. So there was this life­time, lit­er­al­ly peo­ple’s life­times, to process it, yeah.

Anderson: So I’m kind of look­ing for the Copernicus of today. Like, who’s throw­ing out those ideas now [crosstalk] that just seem nuts.

Fullerton: Well, you did­n’t find them here. No, I think that’s what this kind of new econ­o­my con­ver­sa­tion is about, is a— I’m not sure if there will be a Copernicus. The ideas that I have come across are remark­ably not new. They’re just sort of new at this time, in many ways. But the whole rethink­ing eco­nom­ics is not some­thing that some­one just came up with, although I sup­pose Galileo could’ve said that peo­ple have been think­ing about is the Earth at the cen­ter of the uni­verse for a long time.

I guess my expec­ta­tion is there won’t be a Copernicus, but there’s this kind of bub­bling up from numer­ous dif­fer­ent direc­tions and dif­fer­ent per­spec­tives, an emer­gence of a new under­stand­ing of the human econ­o­my’s place on the plan­et, and—

Anderson: Yeah, and I think that sort of ties in with the very idea of con­ver­sa­tion. There are these times where you can pin down actu­al­ly a lot of peo­ple are talk­ing about this. Maybe they’re not all specif­i­cal­ly talk­ing to each oth­er. But there’s def­i­nite­ly like a buzz at cer­tain his­tor­i­cal moments. And I think they econ­o­my, you know— At this point I’m half a year into this project. So I’ve talked to a lot of peo­ple about the econ­o­my in dif­fer­ent ways. And it does feel like at least in some areas, that is emerg­ing as a con­ver­sa­tion. So that’s some of the background.

Fullerton: Yeah, I man I think so. I’m torn between the crowd I traf­fic in on a dai­ly basis is immersed in a con­ver­sa­tion, and yet the mainstream—you turn on the TV at night and it’s still hav­ing the old conversation.

Anderson: Rights.

Fullerton: And they’re not con­nect­ed. They’re just…different worlds. Imagine if I went on you know, the Kudlow Report, and start­ed throw­ing my ideas around. The guy would think I’d lost my mind. And he’s got the TV chan­nel and I don’t.

Anderson: Yeah, I want to book­mark that idea and get back to that lat­er in our conversation.

Fullerton: Sure.

Anderson: I’d like to start, though, with some­thing that I was read­ing— You were talk­ing about the choice, and sort of the choice between a future that is maybe eco­nom­i­cal­ly pros­per­ous, or one that is more envi­ron­men­tal­ly sound, and how do we rec­on­cile those two dif­fer­ent paths. And dif­fer­ent folks in this project have talked about one or the oth­er, but no one has framed it as sort of a choice. And no one has talked about how do you do decel­er­ate the cur­rent cap­i­tal­ist sys­tem in a way that makes you envi­ron­men­tal­ly sus­tain­able with­out hav­ing a real prob­lem socially.

Fullerton: Yeah, you just put your fin­ger on real nub. And I think it’s worse than most peo­ple real­ize, in terms of the chaos of this tran­si­tion from one state which is per­pet­u­al growth, to what Herman Daly calls a steady state. One of the ideas that I’ve been work­ing on and hope to con­tribute to this con­ver­sa­tion is an idea of finan­cial over­shoot, which I think goes as a corol­lary to eco­log­i­cal over­shoot. And I think, just to clar­i­fy, my view is that the choice is not ulti­mate­ly a choice.

In oth­er words we don’t real­ly have a choice, we have a choice between adjust­ing our eco­nom­ic sys­tem and not destroy­ing the plan­et, or we can choose to destroy the plan­et, which will destroy the eco­nom­ic sys­tem. But it’s ulti­mate­ly not a real choice. But this idea of finan­cial over­shoot, at least for me as a finance per­son, puts it all into very stark relief, which is if you accept that there are finite bound­aries to the plan­et— (And that’s not broad­ly accept­ed. I mean, it’s amaz­ing how most main­stream econ­o­mists will in a sense assume away that lit­tle prob­lem and assume tech­nol­o­gy or some sub­sti­tu­tion of goods and imports will solve scarce resource prob­lems.) But ulti­mate­ly, cer­tain­ly if you speak to any­one who comes from a physics or a eco­log­i­cal back­ground, there’s a lim­it to how much sub­sti­tutabil­i­ty can hap­pen. And ulti­mate­ly there’s this thing called the law of entropy that tends to inter­fere with end­less ideas of expo­nen­tial growth that demands mate­r­i­al through­put. So, if you accept the premise (as the famous Club of Rome study, forty years old now sug­gest­ed) that there are lim­its to phys­i­cal mate­r­i­al growth, if you then trans­late what that means to eco­nom­ics and finance, the finan­cial sys­tem has finan­cial assets that are val­ued based on some future pro­jec­tion of future cash flows. Probably the crit­i­cal assump­tion into the future cash flow assump­tion is the future growth rate assump­tion of the economy.

So if you start to mess with, much less under­mine, that growth expec­ta­tion, you’re going to require a reval­u­a­tion of the finan­cial assets in the entire eco­nom­ic sys­tem. And that’s most pro­nounced in areas like fos­sil fuel com­pa­nies. And there’s now research out that shows that if we are to stay with­in the two degree warm­ing lim­it that the sci­en­tists sug­gest is kind of the tip­ping point, you can trans­late two degrees of warm­ing into giga­tons of car­bon. And you can trans­late giga­tons of car­bon into [proven] fos­sil fuel reserves in the ground. And it turns out that we need to leave 80% of the [proven] fos­sil fuel reserves in the ground, let alone not go out and explore and find more fos­sil fuels.

And we did a quick, rough analy­sis and and came up with a num­ber like $20 tril­lion dol­lars as the the val­ue of that 80% of the fos­sil fuel reserves. So in oth­er words, we just went through an eco­nom­ic cri­sis trig­gered by a $2.7 tril­lion dol­lar sub­prime hous­ing cri­sis. And the strand­ed assets of fos­sil fuels, if we are to have the will to not pro­duce them, is an order mag­ni­tude greater than that. And so this tran­si­tion from an expo­nen­tial growth econ­o­my to a sta­ble, steady state, what­ev­er you want to call it, econ­o­my will require us absorb­ing these mas­sive finan­cial shocks, which makes them, to your ques­tion, the chal­lenge of how do you main­tain pros­per­i­ty through this tran­si­tion. You know, a real­ly real­ly hard ques­tion and I don’t think any­one has a real good answer for that yet.

Anderson: That’s a real­ly inter­est­ing way of putting it, too. I’ve talked to oth­er peo­ple on this project about ener­gy sys­tems, but not in that lan­guage at all. But I’m inter­est­ed in the idea that we would have to vol­un­tar­i­ly choose to not exploit these resources and that that makes a huge dent in basi­cal­ly our expec­ta­tions of growth.

Fullerton: That does­n’t dri­ve the expec­ta­tions of growth. In a sense it’s tak­ing the can­dy away that the child real­ly wants.

Anderson: Okay.

Fullerton: And then the child needs to adjust to a dif­fer­ent form of sweet, or a dif­fer­ent form of sat­is­fac­tion that is not can­dy. But it does­n’t mean that sat­is­fac­tion and pros­per­i­ty is not pos­si­ble. There’s no law that says we can only be pros­per­ous if we burn oil.

Anderson: Right. So there’s an inter­est­ing cal­i­bra­tion of expec­ta­tions that has to go on. 

Fullerton: Yeah.

Anderson: I was actu­al­ly talk­ing to Priscilla Grim, one of the Occupy Organizers—

Fullerton: Yeah. I’ve met her.

Anderson: —about this. And I was ask­ing, do you think we can recal­i­brate our expec­ta­tion mature­ly, in advance, through intel­lect, kind of look­ing at our prob­lems, or do you think this is some­thing that just sort of crash­es onto us and we have a tem­per tantrum because we’ve had it too well for too long?

Fullerton: What’d she say?

Anderson: She said, ​“I haven’t no idea.”

Fullerton: Yeah. You know, I don’t have any good answers to that. I guess I believe that this is going to be a tumul­tuous path. But with that, I hope, comes sort of a renewed sense of com­mon pur­pose that… You know, I remem­ber my dad, who passed away a year ago, fought in World War II. And I went on a trip with him sev­er­al years before he died, but late his life. We spent three days togeth­er dri­ving around. And I asked him to talk about his life a bit. And it was it was amaz­ing how through­out his entire life, and a hap­py mar­riage, two chil­dren, you know, all kinds of pur­pose­ful expe­ri­ence in his life, the one thing that he talked about was the war. And it was this immense­ly uni­fy­ing, com­mon, pur­pose­ful expe­ri­ence that hor­ri­ble as it was—and he was on a sub chas­er in Asia and he was on the inva­sion of D‑Day. I mean, he was in it. And yet that was what he remem­bered. So I guess my hope is that we, as we go into this increas­ing­ly tur­bu­lent peri­od, it actu­al­ly becomes the uni­fy­ing force that seems so miss­ing right now, par­tic­u­lar­ly in this coun­try. Maybe that’s just sort of naïve opti­mism, but…

Anderson: It seems like so much of that, and so much of this con­ver­sa­tion is each indi­vid­u­al’s read on human nature and what it’s going to do in a dif­fer­ent point in time.

Fullerton: Yeah. I don’t think any­one knows. I think that’s what’s excit­ing about this time. You know, there’s this idea, that you’re I’m sure very famil­iar with, in nature called emer­gence. And it’s very chaot­ic, and unpre­dictable. And yet some­how order emerges out of that process. And so I kind of go about my life on a…you know, I’ve got this sort of big long-term vision thing, and then I’ve got the just going to get to work every day, and I use the image of sort of pulling my stool up to the big rock with my chis­el and just start chis­el­ing away because that’s all I know what to do. And it actu­al­ly quite exhil­a­rat­ing. I don’t know if we ever get an answer to what’s going to hap­pen. We more just know that it’s time to pull up our stool and start chis­el­ing, and know that there’s no one part on the rock that is the answer. It’s this cumu­la­tive effect of a lot of smart peo­ple and dif­fer­ent types of ideas, from dif­fer­ent per­spec­tives, work­ing on what’s ulti­mate­ly one big rock that we’re wrestling with.

Anderson: And when I’m think­ing about the metaphor of the one big rock that we’re deal­ing with, there are a bunch of things that come to mind. And some of the most inter­est­ing con­ver­sa­tions I’ve had in this series have been with peo­ple who are real­ly big sys­tems thinkers. But all of these thinkers talk about glimps­ing these mas­sive sys­tems, some of which are nat­ur­al, some of which a man made, all of which are essen­tial­ly too com­pli­cat­ed for us to just grab onto and fix. We have bio­log­i­cal­ly evolved to deal with things that are tan­gi­ble, that are in front of us, and here are these new prob­lems that are sys­temic. Do you think that those prob­lems in a way could go so deep that they’re almost impos­si­ble for us to real­ly deal with? They have their own iner­tia, in a way.

Fullerton: You know, this is going to sound…presumptuous, but I actu­al­ly think col­lec­tive­ly we have a pret­ty clear under­stand­ing of the prob­lem. And that prob­lems like cli­mate change are real­ly symp­toms of the prob­lem. And the prob­lem boils down to—and again this goes back to Copernicus—this idea today that eco­nom­ic growth is the pur­pose of our econ­o­my, and the source of our pros­per­i­ty. It’s just a flawed idea.

And we actu­al­ly know that it is. I mean, we can give very tan­gi­ble exam­ples like you know, if I hap­pen to get sick in the mid­dle of this inter­view and have to go the hos­pi­tal, that’s good for eco­nom­ic growth. And yet obvi­ous­ly that’s not good for my well­be­ing, and not good for your inter­view. So we know that eco­nom­ic growth, and we’ve known this for years, is not the real path to pros­per­i­ty. I think what we don’t know yet is the very com­plex, inter­re­lat­ed, inter­con­nect­ed ram­i­fi­ca­tions of shift­ing from an eco­nom­ic sys­tem that served its pur­pose very well in a peri­od when we des­per­ate­ly need­ed eco­nom­ic growth and employ­ment, and that we had sort of lim­it­less or appar­ent­ly lim­it­less nat­ur­al cap­i­tal, Earth (what­ev­er you want to call it) to oper­ate in. 

But I actu­al­ly think you can trace many many of these big sys­temic crises to being symp­toms of the flawed idea that eco­nom­ic growth can go on indef­i­nite­ly, expo­nen­tial­ly, on a finite plan­et. That’s sort of my North Star. And then as a finance per­son, why do we think we need eco­nom­ic growth? Well, because the way our cap­i­tal sys­tem works is that cap­i­tal demands that growth. In order to gen­er­ate expo­nen­tial finan­cial returns on cap­i­tal, the eas­i­est path, let’s just say, is to gen­er­ate eco­nom­ic growth. It hap­pens to also pro­vide well­be­ing and jobs and employ­ment and all that good stuff. But as we’ve learned in this recent elec­tion, no one who’s deploy­ing cap­i­tal in the con­ven­tion­al Western cap­i­tal­ist sys­tem is doing it with the idea that it’s cre­at­ing jobs or cre­at­ing pros­per­i­ty. They’re doing it with the idea that it will gen­er­ate a return on finan­cial cap­i­tal, and we’ve just assumed that if all the cap­i­tal­ist do that effi­cient­ly and effec­tive­ly, the byprod­uct of that sys­tem will be full employment.

And you know, that broad­ly kin­da worked for a long time. Problems and equal­i­ty here, and some meet­ings and leg­is­la­tion there, but broad­ly speak­ing that was a bril­liant sys­tem that hap­pened to pre­sume no finite bound­aries on the plan­et. And that idea was per­fect­ly sound when the econ­o­my was one fifti­eth of the size it is today, and the pop­u­la­tion was you know, a bil­lion peo­ple not sev­en bil­lion peo­ple. So we need to rethink that, but that does­n’t mean that it’s not pos­si­ble to have a cap­i­tal­ist econ­o­my that does­n’t hap­pen to grow expo­nen­tial­ly forever.

What it does mean is that finan­cial cap­i­tal can’t grow expo­nen­tial­ly. That as rad­i­cal too cap­i­tal­ists as ​“the Earth is not the same in the uni­verse” to the church. Because if you’re in the cap­i­tal­ist sys­tem and you’re in the busi­ness of deploy­ing cap­i­tal, no one ques­tions what the goal is, which is gen­er­ate com­pound returns, risk-adjusted, blah blah blah. But if my frame­work is right, and that the growth of finan­cial cap­i­tal is com­ing to some degree—not exclu­sive­ly but to some degree—at the expense of the stock of nat­ur­al cap­i­tal (just to use sim­ple terms), that can’t go on indefinitely. 

That was true for the last five hun­dred years. It’s just that we’re now at the point where the real­i­ty of that truth is sort of biting—

Anderson: Right. And we’ve grown to fit the clothes.

Fullerton: Yeah. And all of a sud­den, we’re feel­ing the tug. And then we sort of reached the thresh­old and then we fall back. And you you could even describe the recent finan­cial cri­sis as a man­i­fes­ta­tion of hav­ing hit one of those bound­aries and falling back. And it’s not that it was caused by too much car­bon in the atmos­phere. But all of the finan­cial shenani­gans hap­pened in part because it got hard­er to deploy cap­i­tal in a much sim­pler, more straight­for­ward basis like going West and build­ing con­dos. Well, that’s already been done. So now what’re we going to do with our capital?

And the cap­i­tal base has only got­ten big­ger and big­ger. So you’re hav­ing to do this on a larg­er pool of cap­i­tal, which makes it that much hard­er to deploy productively.

Anderson: So you’re dri­ving things into abstraction.

Fullerton: You dri­ve it into abstrac­tion, and your chal­lenge only becomes hard­er every year you suc­ceed. Because next year there’s more finan­cial cap­i­tal you need to deploy and earn a return. And the nation­al cap­i­tal, which is the foun­da­tion of your eco­nom­ic sys­tem is in a sense being deplet­ed. It’s either being used up because we found all the cheap fos­sil fuels or found all the cheap min­er­als, or we’ve exploit­ed all the cheap seafront for devel­op­ment. So it just gets hard­er every year. It’s just arithmetic. 

Anderson: And that makes it sound like in its very DNA of what it is, it’s sort of a self-liquidating ideal.

Fullerton: Yeah. Which is dif­fer­ent, by the way, than than what Marx pre­dict­ed. So you know, this isn’t about well, we got­ta go back to Marxism or social­ism. I mean this isn’t at all about social­ism or cap­i­tal­ism. In fact the com­mu­nist sys­tem, the social­ist sys­tems, are equal­ly destruc­tive and unsus­tain­able, because they too are pred­i­cat­ed on growth. So this isn’t about an eco­nom­ic ide­ol­o­gy, this is about physics and arith­metic and entropy.

Anderson: When I think about this idea of growth being nat­u­ral­ized, and you were say­ing that we kind of know that you just can’t grow for­ev­er— But I think of all the things that I see in the media, and some of the peo­ple I’ve talked on this project, for instance of the head of the Mars Society, a guy named Robert Zubrin, who said even if we stay on Earth, there will be no resource prob­lems because cre­ativ­i­ty is infi­nite. Deep with­in there, and I think unques­tioned, is an assump­tion of growth. 

Fullerton: Well, I come back to— And again I sup­pose this is a faith that I have. You know, in my search for ​“sus­tain­abil­i­ty” (what­ev­er that means) I very much sign up in the camp that says well, let’s look to nature and nat­ur­al sys­tems for answers rather than rely­ing on our human inge­nu­ity to fig­ure out how we’re going to out­smart nature. I can’t defend that. That’s just a posi­tion, a point of view that I have that seems remark­ably com­mon­sen­si­cal. But if I were a PhD in physics, maybe I would have a dif­fer­ent view. But that’s where I come from. And so if I look to growth in nature, it actu­al­ly has unique qual­i­ties. And you know, our bod­ies, the trees out­side, grow phys­i­cal­ly and through ado­les­cence aggres­sive­ly for some peri­od of time. But then ulti­mate­ly that growth curve slows down and ulti­mate­ly every­thing dies.

I for­get who it was that said that expo­nen­tial growth is the ide­ol­o­gy of a can­cer cell. That real­ly res­onates with me. And so there is there is a bal­ance and har­mo­ny of how growth oper­ates in the world, and so whether it’s finan­cial cap­i­tal or busi­ness enter­pris­es, why do we think they will grow expo­nen­tial­ly when noth­ing in nature does?

Some of the work we’re doing now in what’s the vision for this eco­nom­ic sys­tem that can work, the lan­guage I like to use is regen­er­a­tive cap­i­tal­ism. Or a regen­er­a­tive econ­o­my. and there is an idea we’re explor­ing, which is how busi­ness enter­pris­es and economies as a whole mature from this expo­nen­tial growth, mate­r­i­al growth phase, into much more of a growth of their qual­i­ta­tive fac­tors. It’s almost to the point where under­stand­ing where the answers are is the easy part, and artic­u­lat­ing them and con­vinc­ing peo­ple that this isn’t a fal­la­cy and that it’s pos­si­ble that the Earth is not the cen­ter the uni­verse essen­tial­ly is the chal­lenge. It’s a com­mu­ni­ca­tions chal­lenge. It’s a world­view chal­lenge that from my expe­ri­ence, the old­er peo­ple are the hard­er it is for them to even enter­tain this conversation. 

And real­ly inter­est­ing for me, per­son­al­ly, I’ve found that peo­ple that are work­ing in finance have a par­tic­u­lar­ly dif­fi­cult time pro­cess­ing this. And my belief in the rea­son for that is that if you spend your career work­ing in finance, you’re sort of accus­tomed to this abstrac­tion dis­con­nect­ed from the real world, and you sort of live in the real world on the week­end maybe, and go camp­ing or go hik­ing. But your busi­ness world is dis­con­nect­ed from that much more than say, an indus­tri­al­ist would be. I find that peo­ple that are under 30 get this, and look at you like, ​“What’s the big deal?” And peo­ple that have sort of worked in the sys­tem and lived in the sys­tem are the ones that have the hard­est time.

Anderson: Something that I just real­ized we’ve used as an assump­tion this whole con­ver­sa­tion, that we should prob­a­bly talk about a lit­tle bit, is the notion that we don’t want the plan­et to heat up. Why not adap­ta­tion, you know? I mean why not just invest in Canadian land?

Fullerton: You know, this idea of the pre­cau­tion­ary prin­ci­ple that I’m sure you’ve heard lots of peo­ple talk about—

Anderson: I talked to Carolyn Raffensperger, actu­al­ly.

Fullerton: Oh, right?

Anderson: Yeah.

Fullerton: Is she the one that coined that term?

Anderson: Yeah.

Fullerton: Yeah. So that res­onates with me, right. So, I spent years in finance in the world of risk and risk man­age­ment. And it just appears to me to be com­plete stu­pid­i­ty to even sug­gest that when we’re deal­ing with the realm of com­plex­i­ty we don’t begin to under­stand, and yet one thing we know is that if we take all this car­bon that’s been sequestered nat­u­ral­ly over mil­lions of years in the ground and burn it and stick it in the atmos­phere and it’s not leav­ing the atmos­phere, and that caus­es the atmos­phere to warm, and that caus­es all these oth­er things to hap­pen and we’ve got mod­els that can pre­dict that, that we sort of go, ​“Eh, so what? Life’s going to change.” I just find that… It’s not an accept­able per­spec­tive, and I think it’s a ratio­nal­iza­tion for not inter­fer­ing with the way I want to go about my self­ish life tomorrow. 

The anal­o­gy would be like a novice stock trad­er com­ing into the stock mar­ket and say­ing, ​“Oh, stocks are real­ly volatile and peo­ple lose and make mon­ey all day long, so I think I’m just going to go and and short Apple Computer at two hun­dred dol­lars a share just for what the heck because maybe it’ll go down, and life’s volatile.” I mean, peo­ple don’t do that. They actu­al­ly assess risk, and they make ratio­nal judg­ments, and they mit­i­gate risk, and they man­age port­fo­lios, and they do things that are ground­ed in some idea of a ratio­nal approach to man­ag­ing an uncer­tain envi­ron­ment. And we take on risk for expect­ed gain, but this is sug­gest­ing we explode risk for an appar­ent loss. Like, that’s just not ratio­nal. That there’s noth­ing good that comes out of a six degree warmer plan­et that we know of. So why would we take risk to cause that to hap­pen intentionally? 

Anderson: What does a finan­cial sys­tem or an eco­nom­ic sys­tem that is mod­eled on nature look like?

Fullerton: I start with this prin­ci­ple of holism. It’s essen­tial­ly the idea how every­thing is inter­con­nect­ed, right. And we know that’s true in nature. And so the first thing I think to think about in terms of an eco­nom­ic sys­tem that oper­ates the way nature does is to under­stand that the human econ­o­my now is so large that it’s part of nature. So there’s no longer econ­o­my and envi­ron­ment. There’s one thing, and we prob­a­bly need a word for it. Because it’s the inter­ac­tion of the human econ­o­my and nat­ur­al sys­tems as one thing. And so I think that’s sort of for me the place to start.

There’s an impor­tant paper that was writ­ten years ago now called ​“A Safe Operating Space for Humanity” I think is the title of it. And it essen­tial­ly is a sci­en­tif­ic assess­ment of the ten crit­i­cal bound­aries that we need to respect if we’re not to throw the plan­et into some dif­fer­ent orbit. Not phys­i­cal orbit, but you know, it’s the car­bon cycle, the water cycle, the nitro­gen cycle, bio­di­ver­si­ty, things like that. And so for me, this idea of what does the econ­o­my look like, it’s an econ­o­my that respects those bound­aries. And those bound­aries should be deter­mined by the best avail­able sci­ence. Not by politi­cians, not by bankers. And so the effort on cli­mate change, the IPCC, is sort of our first attempt at cre­at­ing a glob­al sci­en­tif­ic con­sen­sus on one of these crit­i­cal bound­aries. And we prob­a­bly need the equiv­a­lent effort on the oth­er nine so that we have a set of facts that we can then all work off of in terms of how to gov­ern this thing called the human economy.

And despite all of the talk about inno­va­tion and cre­ativ­i­ty which I’m a huge believ­er in and advo­cate for— In fact, with­out that we’re doomed for sure. So no one should accuse me of being a Luddite, but that does­n’t mean I need to sort of throw my entire faith in some­thing that I don’t even see a pos­si­ble solu­tion for. So if you accept that as the con­straints on the eco­nom­ic sys­tem, new con­straints that did­n’t used exist, you very quick­ly have to reassess and reimag­ine all the com­po­nents of the eco­nom­ic system. 

And so what does that look like? For exam­ple, if investors are will­ing to invest in a com­pa­ny that does­n’t grow expo­nen­tial­ly for­ev­er but gen­er­ates a sta­ble dis­tri­b­u­tion of div­i­dends for…I don’t know ever, but some long peri­od of time, then that com­pa­ny can con­cen­trate on improv­ing the qual­i­ta­tive val­ues of its inter­ac­tion with its con­sumers. And that’s very dif­fer­ent than, ​“Well, if we move our plant to China we can low­er our labor costs there­fore we can grow our earn­ings there­fore the stock price can go up.” It’s much more, ​“Well, if we stay here in Cleveland, we can build much stronger com­mu­ni­ty that has all kinds of oth­er val­ues that ben­e­fit the com­mu­ni­ty and still stay in busi­ness because, turns out we actu­al­ly have a very viable com­pet­i­tive enter­prise.” And so it’s hard to sort of gen­er­al­ize these things too broad­ly, but for me ulti­mate­ly it comes down to let­ting go of this idea of expo­nen­tial growth of finan­cial cap­i­tal, and then that that unlocks all kinds of possibilities. 

Anderson: There are two thoughts that I sort of want to pull in from the fringes of the project.

Fullerton: Okay.

Anderson: One of them I want to bring in right now is a neo­prim­i­tivist named John Zerzan. His gen­er­al cri­tique was that you just can­not have a lev­el of tech­nol­o­gy with­out hav­ing a soci­ety that’s both hier­ar­chi­cal and is still destroy­ing things that are innate­ly valu­able. There’s an actu­al bias to tech­no­log­i­cal advance­ment itself. Can you rein this sort of growth engine in and still keep a lot of the tech­no­log­i­cal things that we want? Or are they always going to be destroy­ing [crosstalk] things that are valuable? 

Fullerton: I don’t think the answer is to sort of assume ​“there­fore all tech­nol­o­gy is a prob­lem.” And I’ve heard people—I’ve not heard them describe them­selves as neo­prim­i­tivists, but tech­nol­o­gy is a slip­pery slope. And my own expe­ri­ence with deriv­a­tives, which is a technology—you, know I can absolute­ly in a much longer con­ver­sa­tion explain how deriv­a­tives when we first cre­at­ed them cre­at­ed real val­ue, and served real pur­pos­es, and enhanced the effi­cien­cy and resilien­cy of the finan­cial sys­tem. And then the tech­nol­o­gy kin­da ran amok and it was abused and bad things hap­pened. And cer­tain­ly you could tell that same sto­ry for nuclear power.

But at the extreme, that means we all go back to liv­ing in caves. And seems to me there’s some­where between where we are or where we’re going and the caves, that might be the right bal­ance. And I think in nat­ur­al sys­tems, that comes from this bal­ance of resilien­cy and effi­cien­cy. And I’m not smart enough to know how to find it, but I know where we are. I know which direc­tion we need to head.

The whole ques­tion of the human place in life is pret­ty cen­tral to all this, I guess. And I cer­tain­ly come down on the side of of think­ing that we are one of many forms of life. We may be ​“supe­ri­or” in many ways, but we cer­tain­ly aren’t enti­tled in some way to destroy life for all the oth­er forms of life. I know you’re inter­est­ed in the idea of what good is and what what it’s not, and I’ve been very influ­enced by a col­league, Peter Brown. He wrote a book called Right Relationship which is real­ly ground­ed in Quaker ideas; human econ­o­my, rela­tion­ship with the bios­phere. And he’s a philoso­pher by cre­den­tial, and he was strong­ly influ­enced by Albert Schweitzer. A rev­er­ence of life is I think his def­i­n­i­tion of good. And he won the Nobel Peace Prize for that idea. I used to talk about the idea of the pur­pose of cap­i­tal in a sus­tain­able sys­tem, and I was asked in a con­fer­ence after we did this whole pan­el dis­cus­sion on the pur­pose of cap­i­tal. And this woman stood up and said, ​“So John, what is the pur­pose of cap­i­tal.” And I did­n’t have an answer, but just what came out of my mouth very much spon­ta­neous­ly was, ​“To sus­tain life.”

I’m not sure what good is, but I know I feel very strong­ly that doing things that counter the sus­tain­ment of life on this plan­et must be a def­i­n­i­tion of evil. You know, I sup­pose that’s point of view not a fact, but it seems pret­ty self-evident to me.

Anderson: So, we start­ed by talk­ing about social change and does con­ver­sa­tion mat­ter. I spoke to an anthro­pol­o­gist and his­to­ri­an who wrote a giant book called The Collapse of Complex Civilizations. And over the course of his con­ver­sa­tion, he laid out this air­tight case for why in the next thir­ty to six­ty years, X Y and Z fac­tors are going to lead this sys­tem to—

Fullerton: Collapse.

Anderson: —its end. And I mean, he’s one of the dark­est peo­ple I’ve met in terms of feel­ing like there’s noth­ing you can do to get out this. Obviously we’re here talk­ing about this. We must have some faith that con­ver­sa­tion matters.

Fullerton: right.

Anderson: But, do you think it does, and if so, why?

Fullerton: I am open to his point of view being cor­rect. I think we’d be naive to sug­gest that we know he’s wrong. Whether his point of view has a 10% prob­a­bil­i­ty of being real­i­ty or 50% or some­thing high­er, I don’t know. But I think we have to accept that it’s in the dis­tri­b­u­tion of poten­tial out­comes, and I’d actu­al­ly like to read his book but I’m sure he could make a very com­pelling case, know­ing the his­to­ry that he does and know­ing com­plex sys­tems and know­ing the facts that we’re fac­ing. It’d be much eas­i­er to con­struct the case that this is all going to col­lapse rather than the case that shows how it’s not going to collapse.

Anderson: Right, which is based on some­thing unknown.

Fullerton: Yeah. So, hav­ing said that, I go back to this idea of emer­gence. And when there was noth­ing but bac­te­ria on plan­et Earth, if you and I were hav­ing this con­ver­sa­tion and won­dered how there could ever be human life, we’d nev­er answer that ques­tion. Again, this maybe falls more into the faith cat­e­go­ry than the sort of sci­en­tif­ic or log­ic cat­e­go­ry, but while I do believe we live at a time that is a unique moment, I also believe that I don’t hap­pen to live in the time when this whole thing’s gonna come crum­bling down—boom—forever. I just find that to be incred­i­ble, not credible.

The issue is more how will this evolve and how will this emer­gence to a new sys­tem occur? And to your ques­tion about con­ver­sa­tion, intu­itive­ly I want to believe con­ver­sa­tions mat­ter. I like hav­ing con­ver­sa­tions, and I’m drawn into these con­ver­sa­tions. I spend a lot of time in these con­ver­sa­tions. So some­how I’ve cho­sen, even sub­con­scious­ly, to believe that con­ver­sa­tions do mat­ter. And I think again it gets to this idea of emer­gence. You know, I’ve learned from you today things that I did­n’t know. You may have learned a thing or two from me. And you’re going to go speak to some­one tomor­row. And that’s all part of this holis­tic, inter­con­nect­ed idea that none of us are smart enough to see how it plays out.

You know, in my work I get a lit­tle feed­back from peo­ple out there orbit­ing around the Capital Institute that tells me that the work we’re doing is influ­enc­ing and mak­ing some impact on some peo­ple that then do some­thing dif­fer­ent­ly than they would have oth­er­wise done. And you know, you add up the all of those small con­nec­tions, and that’s how net­works work. And that’s how sys­tems work. And we just don’t hap­pen to have the mas­ter plan, the schemat­ic, that shows us how it’s work­ing. So I’m a believ­er in the val­ue of conversation. 

I’m also, by the way, a believ­er in the val­ue of sto­ry­telling. We talk about these sort of abstract ideas on the future, and yet the future is evolv­ing in front of our eyes in lots and lots of projects. And so one of the things we work on at Capital Institute is some­thing we call our field guide to invest­ing in a regen­er­a­tive econ­o­my. And we’re try­ing to tell the sto­ries of projects and com­pa­nies that are demon­strat­ing the prin­ci­ples of a regen­er­a­tive econ­o­my, and par­tic­u­lar­ly show­ing how invest­ment can fuel and serve the emer­gence of those activ­i­ties. And a cen­tral part of our cul­ture is sto­ry­telling and con­nect­ing with artists, and cre­ativ­i­ty is the way to do this, not to aca­d­e­m­ic papers and whatnot.

Anderson: Are you opti­mistic at all?

Fullerton: Yeah. I am. I ask myself that ques­tion all the time. I can eas­i­ly become depressed about all this, but you know, I have three chil­dren, and I can accept that we live at a piv­otal point in his­to­ry and coin­ci­den­tal­ly hap­pen be born at the time when all of these forces are kind of reveal­ing them­selves and this idea of expo­nen­tial growth is going to be con­front­ed. But I just can’t accept the idea that oh, and by the way you hap­pen to live in a time when you and your chil­dren are going to get wiped off the face of the Earth for the first time in three bil­lion years. Sure there’s been plagues and stuff, but what we’re talk­ing about is orders of mag­ni­tude worse than any­thing that’s ever hap­pened in terms of the poten­tial impact. And I just, you know…it’s pos­si­ble, but what’s the prob­a­bil­i­ty of that? It just seems too far-fetched, so I’m con­tent to remain opti­mistic, real­is­tic. But it’s an opti­mism that’s not ground­ed in sort of hap­py talk and it’ll all be fine and tech­nol­o­gy will solve the day. It’s ground­ed in my life work of work­ing the rocks, so to speak. Which isn’t always fun.

Aengus Anderson: We’ve come in a great cir­cle here. We began by talk­ing about The Conversation, and we end by talk­ing about The Conversation. And in the mid­dle there we had kind of a detour through finance and eco­nom­ics and a cou­ple oth­er small questions.

Micah Saul: Yeah, just just a few like you know, minor points to be made. 

Anderson: Speaking of minor points, good lord John brought up some real­ly big new stuff for this project to explore.

Saul: Absolutely. We talk about these big recur­ring themes of sus­tain­abil­i­ty and envi­ron­men­tal col­lapse. But we talk about all of them from the per­spec­tive of an investor. It’s all about risk man­age­ment. It’s all about… Really, much of it is about cap­i­tal. And it’s about how every­thing can be viewed in terms of cap­i­tal. Which is a real­ly inter­est­ing way of look­ing at the world and one that I think makes maybe his argu­ments more effec­tive in our society. 

Anderson: Right. I think we’ve got a real rev­er­ence for peo­ple who work with mon­ey, and peo­ple who under­stand the mar­kets and eco­nom­ics on that very high lev­el. And so to hear some­one who thinks about those things speak about risk, and then apply that to the envi­ron­ment and say, ​“What we’re doing is risky, and it would be a bad invest­ment.” It feels like that that lan­guage real­ly prob­a­bly res­onates with us in a very dif­fer­ent way than sort of the bio­cen­trism that David Keith left us with. His claim that you can’t real­ly make the appeal to save nature or pre­serve any­thing envi­ron­men­tal unless you have, ulti­mate­ly, a deep val­ue for it that’s kind of non-quantifiable.

Saul: In some ways is going in the face of a lot of peo­ple that have been involved in the con­ver­sa­tion so far that real­ly cri­tique the idea of quantification.

Anderson: Which I think is inter­est­ing, right. Because Fullerton does seem like a bio­cen­trist in a lot of ways. But it does­n’t feel like his argu­ment is bio­cen­trist in any way. 

Saul: Because we’re talk­ing about risk, and we’re talk­ing about risk to our­selves, there’s a strong sense of anthro­pocen­trism in his argu­ment, though he’s arriv­ing at bio­cen­tric goals.

Anderson: Part of that is it con­nects back to this broad­er con­ver­sa­tion we’ve had about what can we know through sci­ence, and what can we man­age. I mean, Fullerton is clear­ly in the camp with peo­ple like Wes Jackson and maybe Frances Whitehead, who think there’s a lot that you can’t know, and you do the best you can but don’t rein­vent the wheel when it comes to the environment.

Saul: So, speak­ing of those big sys­tems, [you] men­tioned it briefly, but he does give us a dif­fer­ent way of look­ing at how the sys­tems are inter­twined. Again, it comes down to the notion of cap­i­tal, which I thought was real­ly inter­est­ing. Did you see a con­nec­tion with Tainter there, in some ways? By which I mean the econ­o­my and the envi­ron­ment, two mas­sive sys­tems, are con­nect­ed togeth­er via capital.

Anderson: Ah.

Saul: And dif­fer­ent types of cap­i­tal. There’s actu­al finan­cial cap­i­tal. But then he’s also talk­ing about that being built on the nat­ur­al cap­i­tal, the envi­ron­men­tal cap­i­tal. The nat­ur­al resources as being anoth­er form of capital.

Anderson: Okay, I think I see where you’re going with this. So, you’re think­ing Tainter was talk­ing about the idea of solar ener­gy, both pent up solar ener­gy and renew­able solar energy.

Saul: Yeah.

Anderson: And for him that’s kind of slang for basi­cal­ly every­thing that is run­ning through the eco­nom­ic sys­tem. Your tree is a source of the renew­able solar ener­gy. Your coal is a source of the pent up. Is that what you’re think­ing in terms of nat­ur­al capital?

Saul: Yes, exactly.

Anderson: There is an inter­est­ing con­nec­tion there. You know, we’ve talked to a lot of sys­tems thinkers who say well, every­thing is con­nect­ed to every­thing, and they’ve devel­oped that argu­ment well. Morton is sort of our poster boy for that. But Fullerton is talk­ing about two sys­tems specifically—

Saul: Yes.

Anderson: —that kind of can’t be dis­cussed sep­a­rate­ly. And he talks about holism, so you get the sense that he’s inter­est­ed in all of these oth­er sys­tems. But real­ly he’s think­ing about the econ­o­my envi­ron­ment as one block, built upon, ulti­mate­ly, nat­ur­al capital. 

Saul: In my mind, that’s one of the biggest things here. He’s able to say these oth­er sys­tems exist, but what is going to cause our prob­lems in the imme­di­ate are these two. Or rather, what we think of as these two, but is actu­al­ly just this one.

Anderson: Systems think­ing is daunt­ing, and I think it can also be very par­a­lyz­ing because it’s too big. And it feels like yeah, Fullerton’s sort of col­laps­ing that prob­lem down and he’s let­ting us see here’s the real red flash­ing alarm, and you need to turn that one off.

Saul: Right.

Anderson: And he does that in some intrigu­ing ways. We’ve talked a lot about growth in this project, right, and the fal­la­cy of expo­nen­tial growth. That’s been up a run­ning theme. Fullerton points his fin­ger right at it. But I think a lot of peo­ple when they point their fin­ger at it, they con­flate cap­i­tal­ism with an expo­nen­tial growth, or at least an end­less growth econ­o­my. Fullerton does­n’t do that. I think he’s the only per­son in this project who real­ly does­n’t do that. And I think the oth­er thing is that from my own bias, I con­flate cap­i­tal­ism with growth.

Saul: Oh, sure.

Anderson: So I’m less like­ly as an interviewer—just high­light­ing my own bias here. I’m less like­ly to go after that. So I thought it was real­ly good for me to have Fullerton go, ​“No. Those two things aren’t tied togeth­er. You can have a cap­i­tal­ist econ­o­my that func­tions in a way that is not pred­i­cat­ed upon expo­nen­tial growth.”

I mean, we’re not hav­ing a con­ver­sa­tion about eco­nom­ic ide­ol­o­gy, he says. It’s a con­ver­sa­tion about…what is it, physics and arithmetic?

Saul: Yeah. Exactly. That was such a great line.

Anderson: So, I mean it is a great line. But do you believe him? Can you have cap­i­tal­ism with­out the growth expec­ta­tions? Like, I’m not real­ly con­vinced of this. I don’t know if you can do that.

Saul: I don’t know that that’s some­thing I can answer. I guess I can imag­ine that it’s pos­si­ble? Growth as a good is so deeply ingrained in our soci­ety. I have no idea even how to imag­ine an econ­o­my, espe­cial­ly a cap­i­tal­ist econ­o­my, that does­n’t have that as a cen­tral tenet.

Anderson: And you know what, I think it real­ly high­lights how embed­ded we are in the sys­tem is that we just had this entire con­ver­sa­tion and nev­er once did we sug­gest that growth could be non-material, right? We were just talk­ing about growth as if it had to be material. 

Saul: Right.

Anderson: Whereas of course I think what Fullerton is say­ing, or oth­er folks like Korten have said, is that growth does­n’t have to be material.

Saul: You could grow in hap­pi­ness. You could grow in sta­bil­i­ty. You can grow in equal­i­ty. No, it’s fas­ci­nat­ing that even while we’re talk­ing about it and try­ing to dis­sect it, we’re still stuck in that world, you know, and we’re mak­ing those assump­tions just with­out even think­ing about them.

Anderson: Right. And then to won­der like could we deal with these oth­er types of growth with­out met­rics, right. And so maybe there’s a Douglas Rushkoff con­nec­tion there. What hap­pens when you have these oth­er forms of growth, but you still have a cap­i­tal­ist econ­o­my? Do you have to quan­ti­fy per­son­al growth? Do you have to quan­ti­fy health in all these? And what are the results of quantifying?

But we know there’s some­thing else real­ly big here that we have to talk about, so let’s just stop that last train of blovi­a­tion that I was on and let’s talk about the choice. 

Saul: What is that choice? The choice is…it’s the choice between… I think the eas­i­est way to say it is you can fix the envi­ron­ment and tank the econ­o­my, or you can let the envi­ron­ment die. And tank the economy.

Anderson: So, either way you end up with a tanked econ­o­my. And the ques­tion is, do you want an intact envi­ron­ment at the end of all of the social chaos?

Saul: Going back to that notion of risk man­age­ment, his argu­ment is this is a pret­ty obvi­ous choice here.

Anderson: It is if we’re ratio­nal actors.

Saul: If, right. Aha.

Anderson: I think it’s also a ques­tion of what kind of ani­mal are we? Are we a sole­ly reac­tive ani­mal? Are we the one that has to put our hand on the hot stove and go, ​“Oh! Don’t do that. That’s how we learn.” Or can we pick it up in advance? Especially with some­thing that’s an abstrac­tion, that’s not the hot stove. I mean, it’s a hyper­ob­ject. It’s glob­al warm­ing. It takes a lot of time into feed back and hurt you, and it does­n’t hurt you in a way that’s direct and it helps oth­er peo­ple. So it’s super com­pli­cat­ed. So, can you intel­lec­tu­al­ly get to a point where you have to sac­ri­fice a lot of things for this weird, intan­gi­ble, hypo­thet­i­cal thing called glob­al warm­ing to be avert­ed? Well, a lot of peo­ple in this project I think care about the envi­ron­ment. I won­der how many of them would make mas­sive life changes to pro­tect it.

Saul: What is the car­bon foot­print of this project?

Anderson: It’s enor­mous, right? Do you think this is some­thing that we can real­ly intel­lec­tu­al­ly get to? Or is Tainter right? We just have to heat it up so much that the prices of every­thing rise, and then we feel it?

Saul: I don’t know if we can do that as a ratio­nal thing, or if it does require that price mech­a­nism or some even nas­ti­er like…oh my god, my house just blew away in the storm. 

Anderson: And if that’s the case, I think we have to do some inter­est­ing revi­sions on how we think about our­selves as agents, right? Because if that’s true, then we don’t have the abil­i­ty to sort of antic­i­pate and cor­rect. We’re much more mechan­i­cal, in a way. And that’s not a con­clu­sion I think any­one wants to draw. This project keeps run­ning into the notion of agency and sort of free will, and dis­em­pow­er­ing ideas. And I think that’s a dis­em­pow­er­ing idea. And if we can fore­shad­ow a lit­tle bit to the next con­ver­sa­tion, I think we’re going to be pre­sent­ed with an idea and an argu­ment for a cer­tain type of moral behav­ior, in this case veg­an­ism, that is so strong, and most of us will nev­er end up veg­ans, and I think the only response then is to sort of revise how you view your­self and maybe think of your­self as a lit­tle bit more…mmm, moral­ly flex­i­ble? moral­ly incon­sis­tent? moral­ly ques­tion­able? than you want. 

That was John Fullerton, inter­viewed at the offices of the Capital Institute in Greenwich, Connecticut, November 6^th, 2012.

Saul: This is The Conversation. You can find us on Twitter at @aengusanderson and on the web at find​the​con​ver​sa​tion​.com

Anderson: So thanks for lis­ten­ing. I’m Aengus Anderson.

Saul: And I’m Micah Saul.