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REDEFINING NORMAL IN TRADITIONAL INDUSTRIES – FINANCE

A War Strategy for a Livable Planet

 

To achieve greatness, one needs vision, passion and belief. Business and especially finance sector still largely lack the texts that would voice those passions and direct the sustainable way ahead. In this interview with the SHIFT 2017 Keynote Speaker Alan Laubsch, you can find the seeds of a finance manifesto: manifesto for Natural Capital Markets for a more sustainable alternative to regular capital, and a new culture of heroism driven by purpose.

 

A former risk analyst at JPMorgan, Alan was always intrigued by the different systems he encountered. He could see the systems that run the world, the algorithms and models that work behind the scenes*. When the 2007 Financial Crisis hit and JPMorgan’s statistical models measuring risk practically collapsed, he started to wonder how the risk assessment systems could have failed so miserably. At the same time the debate about climate change was heating up in the USA.

 

*Please see Algorithm Inequality track of SHIFT 2018 for more information about the dark side of algorithms

 

“I started to focus my attention on bubbles, because similar structures of thinking were prevalent in both spheres. I concentrated  especially on the carbon bubble, and published my research Adaptive Risk Management [1], [2]. I realized that we are in an escalating climate crisis with the same root cause as the financial crisis: human underestimation of risk. Finally last year, I had had enough of only studying, analyzing and writing about risk, and vowed to act on my research findings.” Alan proceeded to found the Natural Capital Alliance as an investment bank for nature and to the Natural Capital Markets group at blockchain startup Lykke.

 

Nature Needs a Banker

 

From Alan’s point of view, we are fighting for a livable planet: “Picture Planet Earth, our home. It’s now threatened by a Death Star of a flawed economic system that undervalues nature. Nature is considered ‘an externality’, meaning it’s not part of economic models.” As an example to make his point, he mentions China – the economic miracle where cities are now so polluted that it’s hard to breathe. By quoting the wise words of Stanford professor Paul Ehrlich he says: “if Earth is not part of your models, maybe you should use a different model.”

 

“Unpriced carbon emissions are definitely at the root of cause of the global climate crisis.” Alan says, but proceeds to underline deforestation as the main escalator for climate change. “But, shockingly, deforestation is the world’s top source of carbon emissions. Therefore, our highest priority must be to protect the remaining rainforests, and restore nature’s most effective climate superheroes – mangrove forests.”

 

He explains what most people don’t understand about mangroves: in addition to normal photosynthesis, these wooden superheroes grow concentrated along shorelines, spreading their roots into the water, filtering it. This allows sea grasses and coral reefs to thrive. Oceans are responsible for 83% of global carbon sequestration [3] and if the mangroves are cut down, the whole ecosystem will collapse, releasing unbearable amounts of methane and CO2 to the atmosphere. “Two thirds of global mangroves have been destroyed in the last three decades, mostly for charcoal, shrimp farming and development. Mangroves face extinction unless we act now”, Alan cautions.

 

Arming Up: Reprogrammed Money Only for the Crazy Ones?

 

Alan is disenchanted by the current one-sided economic system and wishes to redirect the money flow back to the nature. “The root cause of the crisis is in undervalued natural capital. We aim to change this by reinventing money – to incentivize the protection of vital ecosystems, such as mangroves.”, Alan explains and continues ”In the current capital markets, we are literally in a matrix, programmed by credit-based money: he who controls money, controls the world. So – let’s program money with a purpose which incentivizes positive ecological action.”

 

TREE (Heyerdal Climate Pioneers) is a digital token Alan has helped design. It enables anyone to protect a vital ecosystem with a press of a button on Lykke Wallet and in exchange gain a token that represents a planted mangrove three in Thor Heyerdahl Climate Park in Myanmar. The park is managed by international non-governmental organization WIF (Worldview International Foundation) that aims save the future by restoring the mangrove forests. [4], [5]

 

In Alan’s vision money with a purpose is in the form of cryptocurrency. ”Bitcoin was a pioneer, and its blockchain technology is forming the basis for a next generation of the internet. Think of blockchain as a global internet based notary service. It enables us to reinvent a financial system without intermediaries, powered by peers. And it democratizes the creation of new forms of money as awards for positive action. For example, SolarCoin incentivizes the production of solar energy, while TREE incentivizes the planting of mangrove trees. Given that the technology underlying blockchain is open source, the value of these currencies lies in their respective communities. Strong, vibrant communities support growing currencies.”

 

”Some might think that digital currencies are for crazy people now. But with blockchain wallets doubling in count every year, we will see the financial landscape transform in the coming decade. Every service and asset can be digitized as a token and become a form of payment. We will evolve to a global barter society, Lykke is building a global marketplace where anyone can exchange any token against another.

 

Fight Back with Curiosity, Compassion, and Competence

 

Confronted with the Death Star, Alan says: “We are not outnumbered. What we need to do is to organize and fight smart. One hundred companies in the world are responsible for 71% [6] of all carbon dioxide emissions. But it would take an investment of only 1% of world GDP per annum for a decade, to transform the climate net positive by restoring and protecting the world’s most vital ecosystems.”

 

He pinpoints that the warriors who are working on this challenge of seemingly incomprehensible magnitude, need a special mindset: “We need to think like pioneers. The key thing is not to let fear paralyze you. Fear itself is good when it sparks positive transformation.” This way of thinking is something Alan adopted from big wave champion Chris Bertish, who crossed the Atlantic on a Stand Up Paddle board in 2017 [7] – a challenge of a seemingly incomprehensible magnitude for an individual. “Chris has two essential ingredients about him: Curiosity and Compassion. When these are nurtured, anyone can develop superpowers. But what is needed still is hard work: ‘The art of the hero wasn’t about being brave; it was about being so Competent that bravery wasn’t an issue’”, Alan finishes off his philosophy for climate change warriors, by referring to Christopher McDougall’s words in Natural Born Heroes. [8], [9], [10]

 

These three C’s of a climate change warrior lead to a fourth one: Change. According to Alan it’s not beneficial for us to stay where we are or go where we have already been. ”We have benefitted from prosperity and growth in the great age of credit based money. But this system is reaching its limits. I don’t advocate going back to primitive forms of money like gold, but we can reprogram money to make it real by linking it to natural capital to incentivize positive actions.”  

 

The Vision in the War Strategy: Create Sustainable Millionaires

 

The components of the war strategy for a livable planet can be found in Alan’s deep aspirations. As long as he can remember as a child, he wanted to save the whales. It’s no surprise that the life long passion for the ocean and its inhabitants led to an epiphany: ”Out of all ecosystems, I’m most inspired by coral reefs. What you have to understand about coral reefs, is that it’s a home that works on synergy. In nature, what happens 99% of the time is cooperation.” Inspired by the endangered reefs, Alan crafted the goal for Lykke Wallet. “At Lykke, our goal is exactly that: to build a structure, a home for a diverse ecosystem of cooperation.”

 

Now, Alan started to see banking and nature as something than just mere opposites. ”Why not look at nature as a bank? Carbon Neutral was a good start, but not enough. Let’s pledge to get Net Positive by investing in nature. For the price of an iPhone, anyone can be Climate Positive for life.” says Alan visioning the world where nature is an integral part of the economic model.

 

“We can mobilize the 1% of GDP needed every year by making natural capital an attractive investment proposition. In the future, the cost of all externalities like carbon emissions will be embedded in the price of consumption. And individuals and companies will invest in natural capital to be Net Positive.” In other words in Alan’s vision the way we can win this war is by making money sustainable. ”Now is an opportunity for pioneers to invest in natural capital as an emerging asset class, which may well outperform traditional assets over the next decade. And wouldn’t it be great to see the world’s first truly sustainable billionaires?”

 

Catalyst on a Mission

 

But where does Alan’s grit come from, to work towards this goal that seems almost impossible to fathom? He says: “One evening as I put my daughter to sleep, she asked me: ‘Daddy, what would it feel like to be the last white rhino? Your family and friends have been killed. You’re all alone and have no one to play with. You’re just walking, alone.’”

 

He describes that as a lightning strike moment, and makes it very clear why he is fighting for the planet. “Young people see what’s going on. They are not programmed by money. I’m ashamed of the world that we leave them. Let’s not let the suffering of the last white rhino be in vain, but let’s activate ourselves, right now.” Alan says, he encourages to see through the paralysis of fear by reminding that one day we’re leaving the world behind us. “It’s our ultimate responsibility now to fight for the future of the world. All future generations are watching.”

 

In Alan’s mind there’s light at the end of the tunnel. His way to become a believer in money with a purpose started with an interest in bitcoins. ”In 2013, I became interested in bitcoin, and in 2014 eco hero Todd Lemons inspired me to imagine a cryptocurrency backed by carbon credits. Then, joining Lykke felt like boarding a rocket ship powered by purpose”.

 

He portrays the experience of executing the pioneering war strategy for the planet to be the battle of minds and as a fight for what you believe in. “The best feeling is to be on a mission and to put all energy into something you believe in. Most of the world has been excluded by capitalism. Now it’s time to pioneer the transition ‘from ego-systems to eco-systems’, as Otto Scharmer says.” To define his own pursuit even more, he sketches his place in the battle to be the dot connector. “My mission is to pioneer natural capital and connect people as a global force. I want to be a catalyst and connector to accelerate the transformation.”

 

Clearly Alan is not alone with his worries for the planet we leave behind. ”I feel blessed to meet so many people now who are activated by purpose, and driven by love.” He also emphasizes that there’s many ways to find the passion needed to get over the fearful paralysis. “ I’ve studied and learned from many religions, although I belong to none of them. One of my favorite lessons was from a rabbi who explained to me that Kabbalah says “the light that comes from the dark is the most powerful one.”

 

Watch Alan Laubsch on SHIFT’s Youtube Channel.

 

Notes:

[1] FNA. (2017). Alan Laubsch. Retrieved from FNA: https://blog.fna.fi/alan-laubsch/

[2] Laubsch, A. (2016). Adaptive Risk Management: Powered by Network Science. Maryland: Society of Actuaries, Casualty Actuarial Society, and the Professional Risk Managers’ International: https://www.soa.org/essays-monographs/2015-erm-symposium/mono-2015-erm-laubsch.pdf

[3] The Blue Carbon Initiative. (2017). Mitigating Climate Change Through Coastal Ecosystem Management. Retrieved from The Blue Carbon Initiative: http://thebluecarboninitiative.org/

[4] Worldview International Foundation. (2017). Thor Heyerdahl Climate Parks. Retrieved from Worldview International Foundation: http://www.wif.care/heyerdahl-climate-parks/

[5] Torshenov, A. (2017, October 18). Interview with the Lykke Team – Alan Laubsch. Retrieved from Lykke: https://www.lykke.com/city/blog/team-interview-alan

[6] CBS Pittsburgh. (2017, July 11). 100 Companies Are Responsible For 71% Of Global Carbon Emissions. Retrieved from CBS Pittsburgh: 100 Companies Are Responsible For 71% Of Global Carbon Emissions: http://pittsburgh.cbslocal.com/2017/07/11/companies-carbon-emissions/

[7] The SUP Crossing. (2017). The SUP Crossing. Retrieved from The SUP Crossing: http://www.thesupcrossing.com/

[8] McDougall, C. (2015). Christopher McDougall. Retrieved from Christopher McDougall: http://www.chrismcdougall.com/

[9] McDougall, C. (2014, December 16). No, Heroes Aren’t Born. They’re Built. And This Is How You Become One. Retrieved from Outside Online: https://www.outsideonline.com/1928051/no-heroes-arent-born-theyre-built-and-how-you-become-one

[10] Goodreads Inc. (2017). Natural Born Heroes Quotes. Retrieved from Goodreads Inc: https://www.goodreads.com/work/quotes/42459905-natural-born-heroes-how-a-daring-band-of-misfits-mastered-the-lost-secr

Text: Roosa Laaksonen, Miia-Tatjaana Salakka, Mari Männistö - based on an interview with Alan Laubsch