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: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 6th2012.

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.

Further Reference

This interview at the Conversation web site, with project notes, comments, and taxonomic organization specific to The Conversation.


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