Post-Growth Entrepreneurship UvA PDF

Post Growth Entrepreneurship Dr. Melanie Rieback University of Amsterdam - Faculty of Economics and Business melanie@nonproﬁt.ventures [email protected] Jan 9, 2023 https://timjackson.org.uk/about/press-kit/ Tim Jackson Jan 28, 2023 Meso-Level (Business) Feb 1, 2023 Redirecting Cashstreams The Post Growth Economy is self funding "Streaming..." by consul78 is licensed under CC BY-SA 2.0. We can’t rely upon subsidies and tax breaks Revenue from sales should be sufficient Non-extractive companies redirect cash from the commercial economy into the Post Growth economy But the relationship shouldn’t be adversarial The commercial ecosystem is our ally Everyone benefits from more social and less extractive businesses Jan 28, 2023 Social Procurement We vote for the world that we want to live in with our Euros "Invoice, Public Resource's big box of standards, the ofﬁce, Hackney, London, UK.jpg" by gruntzooki is Companies/governments have licensed under CC BY-SA 2.0. more money to spend than consumers do Supporting the Post Growth Economy becomes as simple as making purchasing decisions Social procurement policies: small changes create large ripples Jan 28, 2023 Social Compliance Compliance drives procurement decisions - but "Law Books" by Wesley Fryer is licensed under CC BY 2.0. this is often fear driven Chasing minimum standards never leads to optimal real-world outcomes Laws and regulations are fairly open to interpretation Similar to the interpretations of biblical texts The compliance field needs reinvention Compliance officers can be change agents There should be no difference between the Compliance, CSR, and Ethics departments Jan 28, 2023 Ethical Supply Chains "Fairphone 3 _ Angle" by Fairphone is licensed under Case study: Fairphone Case study: Tony’s Chocolonely CC BY-SA 2.0. It’s hard (if not impossible) to architect ethical supply chains from the top-down Jan 28, 2023 Breaking Down The Problem Use reductionist engineering thinking to break down problems "RGB LED" by ﬂakeparadigm is licensed under CC BY Build solutions from the bottom up Forget the Fairphone: can we build a fair LED? Or a fair diode? 2.0. If so, then we can make 1/400th of every cellphone in the world “fair” This is how it starts. We solve small atomic problems together. Jan 28, 2023 Back to Fairphone Fairphone setup a supply chain for Tungsten "into the gold mine" by arripay is licensed under CC BY-SA 2.0. vibration motors Fairphone has functioned (top-down) as a broker, to improve supply chains (bottom-up) Fairphone partnered with Glencore, Tesla, and Signify Success with gold and cobalt Tesla uses Fairphone’s cobalt for car batteries Apple has some of Fairphone’s gold in their phones Jan 28, 2023 Emergent Ecosystems We can combine small atomic entities "Hoberman Sphere, Chuck Hoberman 1995" by Ryan to form decentralized networks with Somma is licensed under CC BY-SA 2.0. larger emergent qualities We’re already familiar with this phenomenon - it’s called the Internet In other words: we don’t have to individually compete with tech giants Our ecosystem will collectively make the impact Jan 28, 2023 Revisiting the SDGs ‘Drawdown’ by Paul Hawken describes the 100 most effective ways to reclaim carbon from our atmosphere https://drawdown.org/the-book All 100 of these solutions already exist - the tech has been developed and proven The problem: these technologies haven’t been deployed on a sufficiently large scale yet Doing so would reverse climate change The point: climate change isn’t a technology problem, it’s a business model problem Jan 28, 2023 Revisiting the SDGs Example: Onshore Wind Turbines "Wind Turbine" by SustainableDevelopment is licensed The #1 most effective way to reclaim carbon from our atmosphere according to Drawdown is onshore wind turbines under CC BY 2.0. There’s a chicken-and-egg problem with their financing We can break down the wind turbine into smaller pieces? Can we leverage non-extractive ecosystems to tackle capital intensive problems? Jan 28, 2023 Technology Problems vs. Business Model Problems It’s really easy to fall in love with X(LCC)@i7-7820X@SR3L5___Stack-DSC10363-DSC10395_- technology _ZS-DMap" by FritzchensFritz is marked with CC0 1.0. (Trust me, I know. I’m a "Intel@14nm@@Skylake@Skylake- computer scientist.) But I’d like to postulate: what if most of today’s social and environmental problems are business model problems and not technology problems? Jan 28, 2023 Macro-Level (Economy) Feb 1, 2023 Governments Mariana Mazzucato’s book ‘The https://marianamazzucato.com/books/the-entrepreneurial-state Entrepreneurial State’ The government is the world’s largest VC We are socializing the costs, but privatizing the benefits Exits are a governance nightmare Extractive companies avoid paying taxes “Unicorns” = taxpayer subsidized monopoly forming Jan 28, 2023 Global Development Extractive business is counterproductive to global "File:Back to farm 02.jpg" by Youth4agric is licensed development Companies started with foreign under CC BY-SA 4.0. capital extract cash out of the country again Hotel chains to micro-finance VCs reinforce Western bias This is (yet another) example of Western colonization Jan 28, 2023 Universal Basic Income (UBI) Socialism is good for capitalism Social safety nets create a friendly climate for taking entrepreneurial risk https://www.rutgerbregman.com/books In the absence of social safety nets, people overcompensate by hoarding personal wealth The UBI is a program in which everyone unconditionally receives a basic living wage. Supporters of the UBI span the entire political spectrum, from Martin Luther King to Milton Friedman to Pope Francis Jan 28, 2023 Modern Monetary Theory (MMT) Modern Monetary Theory says that any government with its own sovereign currency can use fiscal policy to pay off debts in that currency https://stephaniekelton.com/book/ Governments are not like households, who need to balance their income and spending The only limit on a government’s ability to print money is inflation The real issue is the political activity of deciding which spending programs should be prioritized MMT could pay for a UBI MMT has instead bailed out banks (2008) and reversed dips in the stock market (2020) Jan 28, 2023 Central Banks Central banks (US Federal Reserve, European Central Bank, etc..) control fiscal policy https://www.simonandschuster.com/books/The-Lords- of-Easy-Money/Christopher-Leonard/9781982166632 “Quantitative Easing” (QE) = low interest rates + money printing + financial asset purchase Unprecedented amounts of money printed by the “Fed” (16 trillion) and ECB since 2020. The stock market rallied to all-time highs -“everything bubble”, “unicorn bubble”, housing prices, etc.. Citizens didn’t get “bailed out” much Billionaires gained $1.7 million for every $1 of new global wealth earned by a person in the bottom 90% Historic levels of inflation followed - this hits poor and middle classes the hardest Our economic situation was created by a conscious set of (political) choices Jan 28, 2023 Dutch Central Bank (DNB) Those stimulus tools, deployed over several years when inflation was too low, were now likely to push the ECB losses-it-pays-price-decade-money-printing-2022-11-29/ https://www.reuters.com/markets/europe/ecb-warns- and some of its shareholders, such as the central banks of Germany, the Netherlands and Belgium, into the red … This might eventually force some of these central banks to seek a bailout that would raise questions about their independence and raise the ire of taxpayers. … The Dutch national central bank has openly acknowledged the risk that it might need a recapitalisation by its government, though finance minister Sigrid Kaag later cautioned this was "not yet on the table". Jan 28, 2023 Part VI: Finance and Investment Feb 1, 2023 Investing is a Political Act Who you invest with makes a large difference Example: George Soros vs. Robert "File:George Soros - World Economic Forum Annual Meeting Davos 2010.jpg" by Copyright by World Economic Forum. swiss-image.ch/ Photo by Sebastian Derungs. is licensed under CC BY-SA 2.0. Mercer In the USA, companies + individuals can make unlimited (non-disclosed) political donations This influences both legislation and government funding, and it massively shapes our societies (around the world) Billions of dollars of “other people’s money” is powering these operations We can choose to give these fund managers our money - or not Feb 1, 2023 Understanding Money Flows Asset owners: pensions, insurance, banks, sovereign wealth funds, family "Pipes" by Jonas B is licensed under CC BY 2.0. offices (single-/multi-), endowments, foundations, HNWIs, etc.. Often called: “Institutional Investors” and “Limited Partners” in deals Asset managers: mutual fund, hedge fund, wealth manager, VC, etc.. Money flow: LP-> AM->Company->Citizens->LP Feb 1, 2023 Extraction in Finance How is cash extracted by the "Amsterdam Zuidas" by udo geisler is licensed under finance industry? Fees Dividends CC BY 2.0. Investment Facilitated by: Stock buybacks Mergers & Acquisitions Feb 1, 2023 Stock Buybacks “Activist” hedge fund managers take small but "Investors News tips - Stock Market Quotes & Financial News.jpg" influential stakes in companies by Investorsnewstips01 is licensed under CC-BY-SA-4.0 They influence the company to buy back shares of its own stock This leaves fewer shares in circulation thus increasing the price of a single share CEO often agreeable, due to equity compensation “Activists” might try to replace CEOs and Board Members who get in the way Other LPs might vote to support this activity (This also happens in Social Enterprises) This is value destruction - not value creation Company will layoff staff, defund R&D, sell parts of the company to free up more cash for buybacks Feb 1, 2023 Case Study: Apple Since 2012, Apple has performed $500bn worth of buybacks, making it the market leader "IMG_9169" by blakespot is licensed under CC BY 2.0. Steve Jobs was opposed to buybacks Warren Buffett encouraged Tim Cook to use Apple’s $100bn cash to buy back stock Carl Icahn also wrote a letter to Tim Cook in 2013 encouraging buybacks David Einhorn sued Apple to use its excess cash for buybacks < 2 years later, Icahn sold his Apple stock for $2bn in profit Warren Buffett’s ROI around $100bn Einhorn made > $1bn of profits Feb 1, 2023 Case Study: Meta In 2020, a lawsuit was filed by a Michigan "Facebook HQ privacy settings are set pretty high. This sign is the closest you can get to the ofﬁces. #geektours #paloalto" by Pension Fund, over the timing of buybacks performed in 2017+2018 ﬁverlocker is licensed under CC BY-SA 2.0. Zuckerberg wanted to sell $75 million worth of shares to fund the Chan Zuckerberg Institution According to lawsuit, the buybacks were likely designed to facilitate stock sales by Zuckerberg and other insiders, including Sheryl Sandberg and Peter Thiel, who sold their stock in 2019 Why are buybacks not considered market manipulation and/or insider trading? Feb 1, 2023 Engine No. 1 Engine No. 1 is a small hedge fund in California who took a minority position of US$250 million trucks" by North Charleston is licensed under CC BY-SA 2.0. "North Charleston Fire Department takes delivery of new AUM in ExxonMobil They asked ExxonMobil to shift investment from gas/oil into renewables. ExxonMobil disagreed. Engine No formed a coalition with pension funds (CALPERS, CALSTRS), big 3 investment firms (Blackrock, Vanguard, State Street) and ISS They managed to replace three members of the Exxonmobil Board of Directors Next step: Transform 500 ETF (ticker: VOTE) Feb 1, 2023 “Woke” Finance War Growing right-wing backlash against “woke capitalism” "File:Amsterdam Gay Pride 2008 03.jpg" by Екатерина “Woke” = ESG, DEI, stakeholder capitalism Criticism: corporate elites putting “activism” over Борисова is licensed under CC BY-SA 4.0. fiduciary duty 17 “red states” are proposing bills to punish Wall Street firms for ESG investing Texas, Florida, West Virginia: pension funds must divest from ESG (Desantis: $13bn divestment attempt, Blackrock) Dec 2022: Vanguard pulled out of net-zero alliance Texas bill cost taxpayers $300-$530 million in 6 months Counter-criticism: Republicans putting “activism” over fiduciary duty Feb 1, 2023 “Anti-Woke” Activism Cash may be rerouted to right-wing asset managers, like Strive Asset Management Shares can be used for Engine No 1 style board takeovers on “woke companies” https://www.vivekramaswamy.com/woke Not hypothetical: Activist Investor (and Republican Donor) Nelson Peltz is now fighting for a board seat at Disney If successful, CEO can be replaced - resources of Disney can be leveraged for conservative political agenda (Including donations to politicians who rerouted assets to right-wing asset managers in the first place) The finance war is not just an “American problem” Capital is global - a US pension fund can also target European companies Feb 1, 2023 Leveraged Buyouts (LBOs) Example: Elon Musk’s LBO of Twitter Firing content moderation team "Elon Musk at the 2015 Tesla Motors Annual Meeting" Replatforming Trump by jurvetson is licensed under CC BY 2.0. “Twitter files” Leveraged buyout = purchasing a company with debt, using corporate assets as collateral and paying off debt with future cashflow What else could you do with LBOs? “Exit to Steward Ownership” LBO a pharmaceutical company, and release patents into public domain Finance is a powerful tool, whatever your political and philosophical views Feb 1, 2023 ESG Investing So what is ESG investing? Environmental, Social, Governance "Seed Financing" by michael.heiss is licensed under Often divestment from “sin stocks” (weapons, tobacco, alcohol, etc..) CC BY-SA 2.0. Helped overturn Apartheid in South Africa Increasingly targeting gas + oil Rationale: “pricing in systemic risks” (including climate risk) ESG has seen attractive returns Feb 1, 2023 The Problem With ESG Conflicts of interest EU Taxonomy: gas and nuclear energy in the "Green Ink" by davidgljay is licensed under CC BY 2.0. EU’s list of sustainable investments Impact metrics (MCSI, Domini 400, S&P, Sustainalytics, etc..) Lots of focus on E, a bit on S E and S are symptoms, G is the root cause Fix the G, you get E and S for free G is hardest to greenwash with - that’s why it’s largely ignored We need to focus on governance Compensation, fee structures, and proxy voting Feb 1, 2023 “Show me the incentive and I will show you the outcome.” - Charlie Munger Feb 1, 2023 Non-Extractive Finance To eliminate the greenwashing https://www.stockio.com/free-icon/oden-icon-set-reinvestment in sustainable finance, create non-extractive investment funds (and financial service providers) How? 1. Reform fee structures 2. Nonprofit entity forms 3. Steward Ownership Feb 1, 2023 Reforming Fee Structures Nonprofit finance has a "Jack Bogle, John Bogle, Vanguard Group" by ValueWalk is surprisingly storied legacy: licensed under CC BY-SA 2.0. John Bogle (Vanguard) Other examples: Snowball Impact Management Impact Shares Feb 1, 2023 Reforming Impact VC Impact VC funds could be so "Diversity Mask" by Spiva Arts is licensed under CC BY 2.0. much better if non-extractive: Diversity Equity Inclusion (DEI) funds Steward ownership funds Most (well meaning) impact funds likely haven’t given this issue much thought yet Feb 1, 2023 Bootstrapping Funds It’s difficult for new (small) fund managers to start Family offices and NGOs can help launch funds, "Diversiﬁcation - Investing" by 401(K) 2013 is licensed but institutional investors need to get on board for real size and traction Diversification rules are a problem: a pension fund under CC BY-SA 2.0. might have a minimum tranche size of 100 million and must be less than 10% of your total portfolio BlackRock can snap their fingers and create a $1bn fund tomorrow Can a pension fund diverge from Modern Portfolio Theory to cultivate more diverse ecosystem of smaller GPs? Would regulators allow this? Can large Asset Owners create “incubation programs” for new funds? Feb 1, 2023 Institutional Investors Institutional Investors are driving the "Mit Münzen gefülltes Glas mit Aufschrift PENSION symbolisiert Sparen für Rente by Marco Verch is licensed under CC-BY 2.0. agenda They are super risk averse, and fearful of doing anything non-conventional Non-extractive finance would be beneficial for investors Low fees Better risk-adjusted returns by reducing conflicts of interest between GPs and LPs But there are cultural barriers to overcome Feb 1, 2023 Pension Fund Activism People should understand what "XR Die-In Zuidas Amsterdam 27 March 2019” by Extinction their pension funds are investing in Rebellion NL is licensed under CC-BY 2.0. UK: ‘Make My Money Matter’ Employees can lobby corporate pension funds (through worker’s council or trade unions) Pension fund activism run by NGOs (like Extinction Rebellion) can move the needle Feb 1, 2023 Shareholder Engagement Divestment vs. engagement "0625 The Vault Boardroom" by bsabarnowl is licensed Prominent NGOs: As You Sow under CC BY 2.0. Interfaith Center on Corporate Responsibility (ICCR) Shareholder Commons ShareAction Follow This Feb 1, 2023 Example: As You Sow https://www.asyousow.org/2022-shareholder-impact-review Feb 1, 2023 “Corporate Gadflies” Some private individuals file dozens(!) of shareholder resolutions per year "Tiny Fly" by MattX27 is licensed under CC BY-SA 2.0. John Chevedden (>1000 proposals) James McRitchie and Myra Young (~50 proposals/year) - corpgov.net Proposals submitted by gadflies win 47.8% shareholder support on average “Where else can someone that’s never gone to law school beat a $2 billion law firm?’’ We can maximize proxy votes instead of maximizing for returns Feb 1, 2023 Share Capital Requirements % shares to file resolution https://uitgeverijprometheus.nl/boeken/prooi-e-boek/ UK: 100+ shareholders, 100 GBP (on average) USA - 2k USD for 3+ years FR - 0.5% Norway - 0% NL - 3% This is a hangover from TCI’s attack against ABN-AMRO (2007) Jan 9, 2023 Proxy Advisory Services Asset owners don’t know how to vote without extensive research Market leaders: ISS and Glass Lewis "Scantron" by brianc is licensed under CC BY 2.0. Duopoly with > 95% market share in the proxy advisory market 20% of shareholders’ votes are cast within three days of a recommendation from proxy advisory firms (= no due diligence by asset managers) Alternatives? Shareholder Support (2002-2017): proxy advisory services company in the Netherlands As You Vote Feb 1, 2023 “Pass-Through” Voting Index funds (US$15 trillion) are "I voted" by quinn.anya is licensed under CC BY-SA problematic for corporate governance INDEX act (USA) Broadridge “ProxyVote” BlackRock’s “Voting Choice” 2.0. Tumelo Universal Proxy Card We can bring democracy into corporate governance Feb 1, 2023 Legislators and Regulators Support those doing things right Less bureaucracy targeting "European Commission Flags" by libereurope is greenwashing This buries well-meaning social licensed under CC BY 2.0. enterprise and impact organizations in paperwork Create fit-for-purpose “non-extractive business” entity forms Reward companies/funds with non- extractive models Engage those doing things wrong Make it harder for the most toxic violators Feb 1, 2023 Conclusion "Roadtrip Road Castilla SPAIN Sunny Blue Sky Castilla Y León Driving at Cistierna" by xurde is licensed under CC BY-SA 2.0. We’re now building the post-pandemic “new normal” Let’s not feel hopeless about the state of the world, there’s a lot that we can do EVERYONE can harness business/ finance as a tool to change the world First you need to understand the possibilities, the rest is personal choice Good luck! Feb 1, 2023 Group Assignment Due Feb 12: How can we promote environmental and social responsibility through shareholder activism? We will assign 2 publicly listed Euronext (AEX, AMX, AScX) companies to groups of 3 students. Each group will: 1. Write a letter to the CEO or Board providing advice 2. Provide a slate of voting advice for last year's AGM proxy ballot (similar to ISS) 3. Write a question to hypothetically ask at next year's AGM Feb 1, 2023 Questions? Feb 1, 2023

Post-Growth Entrepreneurship UvA PDF

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