Psst! Want to know the “dirty” little secret of the current economic crisis? Just grab a fistful of earth and, while you’re holding the lifeblood of the planet, try to think of its connection to financial markets.
If you’re baffled, don’t worry.
Woody Tasch, the guru of socially responsible investing, says the problems associated with the economic meltdown are as basic as soil fertility. The 58-year-old chairman emeritus of Investor’s Circle, a network of angel investors, venture capitalists and foundations working toward a sustainable economy, looks to our multi-layered food system as a metaphor for the rest of the economy.
“Industrial agriculture views the soil as a medium in which to prop up plants in order to force feed them synthetic chemicals and maximize yield. Industrial finance views companies as a medium in which to force feed capital and maximize yield,” Tasch says.
But even more perilous than the “greed is good” philosophy is what Tasch considers the root cause of our economic problems: the speed at which money flows — or more appropriately, “zooms” — around the planet. Tasch is referring to a host of statistics, such as the record 100 million shares traded on the New York Stock Exchange in 1982 exploded to 5 billion by 2007.
“When money is viewed as nothing more than a vehicle for making more money as quickly as possible — when you have legions of financial experts doing nothing but maximizing rates of return to different asset classes, you’re going to get piles of financial wealth that have very little connection to real life activity,” Tasch says.
Add to this the notion that “fast money” becomes so complex and you end up with what Tasch refers to as the “ultimate abstraction,” derivatives. Despite a value estimated at $50 trillion, Tasch says that not even an investment bank CEO can fully understand, much less manage, them.
The same holds true for those factory-farm, highly processed hamburgers that fill our guts; no one really knows where the meat originates. And though Tasch is quick to lament the nutritional problems associated with this kind of food system, there are broader, even more insidious issues to contend with.
The focus on output built into industrialized agriculture has left us with vast monocultures of crops with little of the diversity our grandparents enjoyed. While this has dramatically increased the production of certain basic grains and commodities since World War II, Tasch says the weaknesses of the system are starting to pile up. Whether it’s toxic runoff, increased CO2 emissions from long-distance shipping or excessive processing, the side effects of agribusiness are endangering human and planetary health.
Tasch, however, decries the traditional means of dealing with these challenges. Rather than simply steering money in new directions, he believes we need to slow money down. Hence the title of his recently published book, Inquiries into the Nature of Slow Money: Investing as if Food, Farms, and Fertility Mattered.
A Small Epiphany
Tasch’s “slow” philosophy can be traced to one of his earlier mentor’s, E.F. Schumacher, whom he discovered a few years after graduating from Amherst College — as an English major. (Tasch, who still writes poetry, is a rare breed among venture capitalists having found a way to integrate the normally disparate fields of literature and investing.) After reading Schumacher’s classic Small is Beautiful, Tasch discovered the value of “meta-economics,” the need for humanity to rediscover a set of values that superseded economics.
“That made sense to me; it was almost like business was too important to leave to businessmen or financing to the financiers,” Tasch says.
No surprise that this poet of the financial world has coined phrases like “nurture capitalism” or “the war on terroir.” But more than just catchy neologisms, these terms reflect Tasch’s underlying mission to transform the world of investing so its impacts can more directly and positively enhance the lives of ordinary Americans. This includes small-scale investors and entrepreneurs as well as anyone who values “triple bottom line” approach to accounting — one that considers environmental and social issues as well as profit.
Tasch’s slow money epiphany draws many of its ideas from the Slow Food movement. In fact, as Slow Food founder Carlo Petrini writes in the foreword to Tasch’s book, “If we use money like synthetic fertilizer, we will get artificial growth, which can only last for a while, but which lacks sustaining relationships with the earth. If we use money like manure, we may have a chance to create an economy built on lasting, healthy relationships. We may create a new breed of investors who refuse to accept unnatural returns.”
To facilitate this paradigm shift, last year Tasch established a nongovernmental organization, called Slow Money, specifically designed to get investment capital flowing to small food entrepreneurs. But the goal is not just to reconstitute local food systems worn away by industrial agriculture, but more significantly to create a new type of economy by tapping into the tens of thousands of small food enterprises — including family farms, niche organic brands and Slow Food restaurants.
Tasch likens the economic meltdown to a person lying in the middle of the street bleeding. “We’re saving the patient with these bank bailouts and stimulus packages, which of course we have to do. But that’s different from figuring out why the patient wasn’t healthy in the first place.”
For Tasch, the crisis is a twofold problem. The first involves getting through the initial collapse, by whatever means necessary. However, it’s the second and more challenging one, which involves evaluating and ultimately addressing the inherent structural problems, with which Slow Money is concerned.
Not that Tasch is suggesting that fund managers will readily forego the NASDAQ for Joe Foodie’s financial market. He’s quick to admit that the downturn has left some investors risk averse and unwilling to embrace new ideas. However, during his six months speaking around the country, Tasch senses what he calls a “strong latent demand” for alternatives.
“I can’t fully quantify it yet, but it’s measurable in percentage points. Because food is obviously extremely tangible, people understand that nurturing diversified agriculture has so many social, environmental, health and even national security benefits (think food security) which work across so many different levels including job creation,” he said.
Mo’ Money for Slow Money
Originally, Slow Money had intended to function as some “radical venture fund” concerned with local food systems by raising $50 million or $100 million. But following internal discussions and public talks, it became clear to Tasch that making structural fixes in the economy was at odds with the old VC model. So instead of having high-net-worth individuals providing capital to a few dozen small enterprises, it was decided that a more grassroots model was in order.
Tasch set into motion a series of slow money institutes (in Washington, California, Vermont and New York) composed of farmers, food entrepreneurs, donors and investors to discuss what needed to be done to boost local food economies. The result is the Slow Money Alliance, whose principles include restoring the soil, investing as if the planet’s carrying capacity mattered and putting an end to infinite-growth capitalism.
No doubt these are dreamy goals, but the former treasurer of the Jessie Smith Noyes Foundation knows a thing or two about raising money to help cure society’s ills. (Since 1992 Tasch has moved $130 million to 200 early stage companies and venture funds focused on sustainability.) He’s working 12-hour days to back up these ideas with tangible, realizable endeavors, such as creating a local “food municipal bond,” which could be used to invest in a wide range of local food activities and enterprises, delivered with a tax-exempt return.
Another initiative calls for a new type of philanthropic foundation, which would demand that assets get invested in for-profit businesses that consider social and economic justice as part of their bottom line.
“Right now we have a situation in American philanthropy where the $500 billion of assets are basically all invested in Monsanto. But what if a new generation of philanthropists could be given an easy alternative? You could say, ‘Look, you can put your money into an old-fashioned 501(c)3 fund or into this new one we’re calling 501(c)3i, with the “I” standing for integral.’ Wouldn’t that be cool since the task at hand is to reshape the economy?”
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