Post Growth Entrepreneurship PDF

Post Growth Entrepreneurship Dr. Melanie Rieback University of Amsterdam - Faculty of Economics and Business melanie@nonproﬁt.ventures [email protected] Jan 9, 2023 Open Source License This slide deck is licensed under the Creative Commons (CC BY-SA 4.0) https://creativecommons.org/licenses/by-sa/4.0/ Jan 9, 2023 Post Growth Entrepreneurship Dr. Melanie Rieback University of Amsterdam - Faculty of Economics and Business melanie@nonproﬁt.ventures [email protected] Jan 9, 2023 Post Growth Entrepreneurship Non-Extractive Business for Idealists Fundamental questions: Is growth good? What is ﬁnancial extraction? Who is the startup ecosystem working for? Jan 9, 2023 Post Growth Entrepreneurship Objectives Achieve system change vs. ﬁghting symptoms Provide actionable alternatives for: Entrepreneurs Corporations, governments, NGOs Financial industry Jan 9, 2023 “The revolution starts in our heads.” - Unknown Feb 1, 2023 Outline of this Course the ﬁnancial institutions" by Fibonacci Blue is licensed under CC BY 2.0. Part I - Introduction "Protester plays role of a banker at rally to demand accountability from Setting the stage Who am I? Making business personal Business as activism / art / spirituality / creative expression Jan 9, 2023 Outline of this Course Part II - Status Quo "The arch at the Quad at Stanford University" by Fiore Power is licensed under CC BY 2.0. Questioning business Financial extraction + growth Silicon Valley Model Capital/Scale/Exit Startup Ecosystem Business education Incubators + business schools Jan 9, 2023 Outline of this Course Part II - Status Quo "Installing solar panels" by OregonDOT is licensed Social enterprise under CC BY 2.0. Building blocks What is wrong? (greenwashing) How to fix it? Jan 9, 2023 Outline of this Course "Home Kanban: our fun project methodology" by Rob Enslin is Part IV - PGE Methodology licensed under CC BY 2.0. Micro-level (personal) Meso-level (business) Macro-level (economics) Jan 9, 2023 Outline of this Course Part V - Infrastructure "Serendipity" by *S A N D E E P* is licensed under CC BY 2.0. Reinventing: The Startup Ecosystem Investment and Finance “The New Normal”: how can we move forward together? Jan 9, 2023 Who Am I? Feb 1, 2023 Who Am I? "Melanie Rieback at the SingularityU The Netherlands Summit 2016" by Sebastiaan ter Burg is licensed under CC BY 2.0. Feb 1, 2023 Making Business Personal Jan 16, 2023 Business as Activism "Fridays for Future 25.01.2018 Berlin" by fridaysforfuture is NGO’s and Nonprofits: the problem with donations/subsidies licensed under CC BY 2.0. We want financially self-sustaining platforms for activism You can talk to businesses, but they won’t necessarily listen Use business to infiltrate the power structures Jan 11, 2023 Business as Art Business as a mixed "Art in Colors" by Ishrona is licensed under CC BY 2.0. media for art Avante-garde business? Efficiency is overrated. Be playful instead. Jan 11, 2023 Week 1 Assignment https://juliacameronlive.com/books-by-julia/the-artists-way-a-spiritual-path-to-higher-creativity/ Jan 11, 2023 “Science fiction is activism because it's imagining the world to come” - Unknown Jan 16, 2023 Business as Spirituality Eastern Religions: https://greendragonbooks.com/product/the-tao-of-leadership/ Buddhism: “Right Livelihood” Pema Chodron, Thich Nhat Hanh Mindfulness Taoism: “A leader is best when people barely know he exists, when his work is done, his aim fulfilled, they will say: we did it ourselves.” Jan 11, 2023 "Yad and Sefer Torah" by Rachel-Esther is licensed under CC BY-SA 2.0. Semitic Religions: "Sheikh Zayed Grand Mosque: Colonade V" by andryn2006 is licensed under CC BY-SA 2.0. Business as Spirituality Jan 11, 2023 Business as Spirituality "Silhouette of Christian cross near foggy" is marked with CC0 1.0. Christianity: "Lend, expecting nothing in return" (Luke 6:35) Laudato Si (Pope Frances) “The principle of the maximization of profits, frequently isolated from other considerations, reflects a misunderstanding of the very concept of the economy.” Jan 11, 2023 Business as Spirituality Ancient Greeks and "British Museum. Ancient greek vase" by talliskeeton is licensed Romans: Aristotle called usury the most under CC BY 2.0. unnatural and unjust of all trades “Money is be used for exchange, not the breeding of money from money”. In Rome, Cicero, Cato and Seneca made similar censures Jan 11, 2023 Business as Self Expression "File:The Monomyth - Joseph Campbell.jpg" by RegHarris4Wiki is Hero’s Journey: 12 step template - Joseph Campbell licensed under CC BY-SA 4.0. As entrepreneurs, we write our stories with our actions (not words) Create “dramatic unity” between our North Star of Purpose and our everyday operational actions We can aim to make our story a noble quest rather than a tale of greed and tragedy Jan 11, 2023 Business as Self Expression Synchronicity and Scavenger Hunts https://www.elizabethgilbert.com/books/big-magic/ Aspiring founders want to start a company, but don’t have a business idea Get quiet. Create some space. Pay attention to what you’re curious about. Notice it. Investigate it. As you explore it, you will receive the next clue. Entrepreneurship is a scavenger hunt Jan 11, 2023 Part II: Status Quo Feb 1, 2023 Questioning Business Financial Extraction "Chicken" by cheetah100 is licensed under CC BY 2.0. The Story of the 11th Round Written by Bernhard Lietaer Extended by Charles Eisenstein (Sacred Economics) Jan 9, 2023 “Extraction is the original sin of business” Feb 1, 2023 Financial Extraction Multiple Layers Micro: Personal debt https://johnperkins.org/books Meso: corporate equity and debt financing Macro: international development loans Jan 9, 2023 Growth Macroeconomic Growth https://timjackson.org.uk/ecological-economics/pwg/ Gross Domestic Product (GDP) Why is this our measurement of national wealth? Question: can we achieve prosperity without growth? Jan 9, 2023 Growth Curves in Business Kate Raworth Conference is licensed under CC BY-NC-ND 2.0. "TED2018_20180411_2BH9397_1920" by TED TED talk: ’A healthy economy should be designed to thrive not grow’ Question: can we move from exponential growth curves to flat ones? Jan 9, 2023 "Create equity" by Global X is licensed under CC BY 2.0. "Homeless woman rummaging through a trash can" by Franco Folini is licensed under CC BY-SA 2.0. Silicon Valley Jan 9, 2023 The Silicon Valley Model 1.Capital 2.Scale 3.Exit Jan 9, 2023 Capital Seed financing, VC licensed under CC BY-SA 2.0. "Money" by 401(K) 2013 is rounds, angel investment, convertible loans, etc.. Investors now have control VC is overhyped Jan 9, 2023 Scale "Daytime Dynamo Rocket Launch" by NASA Goddard Photo and Video is licensed under CC BY 2.0. What exactly are we scaling? Is VC an accelerator? 90% of startups fail Jan 9, 2023 Exit Financial value is pulled out of "File:SmileDirectClub Rings the Nasdaq business Bell 1.jpg" by SDCSteve is licensed Startups are like farmed chickens under CC BY-SA 4.0. The startup ecosystem as a casino for investors Exits are destructive Jan 9, 2023 The Startup Ecosystem Valuations "One Dollar Bill Macro" by Gamma Man is licensed Apply the stock price from the latest funding round to all outstanding shares under CC BY 2.0. Satirical blogpost from 37signals (Basecamp) Less funny: Kleiner Perkins put $20 million into Snapchat (May 2014 - no revenue) for a tiny ownership stake, valuation $10 billion (up from $2 billion) Jan 9, 2023 Pump and Dump Startups have become unprofitable cashing-out shell operations "Stock Graph" is marked with CC0 1.0. The mega investments of Softbank shook Silicon Valley “Pump and dump” obliterates the basic economics of industries, and causes them to evolve artificially and incorrectly Jan 9, 2023 “Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done…” - John Maynard Keynes Feb 1, 2023 Pump and Dump Startups have become unprofitable cashing-out shell operations "Stock Graph" is marked with CC0 1.0. The mega investments of Softbank shook Silicon Valley “Pump and dump” obliterates the basic economics of industries, and causes them to evolve artificially and incorrectly Jan 16, 2023 Who Pays For This? Question: when unprofitable "Grandparents" by premus is licensed under CC BY 2.0. companies are bleeding cash - whose money are they spending? Pension funds contribute 65% of the capital to the US VC market 90% of VCs fail to keep pace with the stock market since 2000 Institutional investors typically allocated 90% of IPO shares Jan 16, 2023 Unicorns Generated by OpenAI’s Dall-E, using the prompt ‘unicorn Unicorns = 1 billion USD valuation with rainbow dollar bills’ Here’s a dirty secret: 90% of unicorns are cash losing Let’s call Unicorns what they really are: pension fund subsidized monopoly forming Jan 16, 2023 Who is Winning Here? "Cuban Cigars" by ankarino is licensed under CC BY 2.0. LPs are bleeding cash both pre- and post-IPO, and 90% of startups fail. Who is winning? VCs live off the “fee stream” (2 and 20) Normal people bear the risk, fund managers always win Jan 16, 2023 Term Sheets Matter Hypothetical situation: Unicorn startup raises several "Signature Contract Close Up Tool Edited 2020" by rounds of VC to great fanfare chimpwithcan is licensed under CC BY 2.0. Mistakes are made, growth slows, valuation decreases Company sells for hundreds of millions, which still seems like great accomplishment Founders + employees earn nothing, investors get everything This is due to “liquidation preference” Jan 16, 2023 Liquidation Preference The principle behind liquidation preference (“liqpref”): Investors put 100k in company for 50% of "Is there a sale on? @ Lowestoft, Suffolk" by timparkinson is licensed under CC BY 2.0. shares Company is sold for 150k Euros 50% (75k Euros) goes to founders 50% (75k Euros) goes to VC Investor loses 25k Euros from exit This is obviously not fair Liquidation preference protects against this scenario Investors receive preferred shares, with liqpref=1 When company sells for 150k Euros, investors now get 100k Euros, 50k Euros for founders Jan 16, 2023 Multiples + Participation VCs generally ask for “multiples” of liqpref, due to risk Investor puts 100k Euros into company "Calculator and Coins" by Images_of_Money is for 50% of shares, with liqpref=3 licensed under CC BY 2.0. Company sells for 500k Euros First 300k Euros of sale goes to investor No participation = 300k is all the VC gets Preferred participation = VC also gets 50% of remaining amount (100k Euros) VC gets 400k Euros, founders get 100k Euros Jan 16, 2023 Preference Stacks “Preference stacks” across multiple investment rounds Benny's Chop House is licensed under CC BY-SA 2.0. A Round = FFF (100k Euros) "Benny's Chop House Chocolate Layer Cake" by B round = VC (tens of millions), with preference VC is paid ahead of earlier investors On disappointing exit, not only founders but FFF get nothing The larger the B or C round, the more likely ALL the money goes to the VC Jan 16, 2023 Why Founders Accept This "Playing hardball" by theilr is licensed under CC BY-SA 2.0. VCs play hardball They offer $$$ with T&Cs If you don’t accept, they will go to your competitor Startup incubators generally don’t mention any of this Jan 16, 2023 Business Education Jan 16, 2023 Education "Educational Outreach" by ZionNPS is licensed under CC BY 2.0. General Education Democracy requires a good education Under increasing financial pressure, school shifted from enriching people’s lives towards job readiness training The private sector externalizes costs of job training onto public school system But human interaction, relationships, and connection is the real point Jan 16, 2023 Business Schools EC10 Walkout "Harvard Yard" by niklas.tenhaef1 is licensed under Occupy Wall Street organized a walkout on EC10 at Harvard University, the ‘Introduction to Economics’ class of Professor Gregory CC BY-SA 2.0. Mankiw. They then started Rethinking Economics and the Post Crash Economics Society to brainstorm about updating the economics curriculum Why haven’t there been any walkouts from our MBA programs? Jan 16, 2023 Business Schools Prof Martin Parker (Univ of Bristol) wrote ‘Why We Should Bulldoze the Business https://www.plutobooks.com/9781786802408/shut- School’ Capitalism is assumed to have beaten all down-the-business-school/ other economic models. Students learn massive edifice of how things are, rather than how to organize differently Hidden curriculum: accounting, finance, MIS, marketing, HRM, Innovation, Operations/logistics, International Business, Strategy, Business ethics and CSR Jan 16, 2023 Startup Incubators Batavia Industrial Center "Downtown Batavia, NY" by joseph a is licensed The Mancuso family created the Batavia Industrial Center (BIC) to revitalize the under CC BY-NC-SA 2.0. local community in Batavia, New York The Mount Hope Hatchery moved into the BIC: “These guys are incubating chickens. I guess we’re incubating businesses.” In the 1990s the BIC generated about 5,000 local jobs. Jan 16, 2023 Startup Incubators High-Tech Incubators "Downtown Batavia, NY" by joseph a is licensed Nolan Bushnell, founder of Atari and Chuck E Cheese is the pioneer of the high-tech incubator under CC BY-NC-SA 2.0. After Bushnell sold Atari, he created Catalyst Ventures, which churned out small businesses for his ideas Catalyst did decently for Bushnell: 7 of 14 made money, 2 broke even, 6 had losses This was an investment vehicle for Bushnell. As long as startups sold to larger companies - even if not profitable, the goal was achieved. Jan 16, 2023 “I am a manufacturer of economic inequality” - Paul Graham (Y Combinator) Feb 1, 2023 Conflict of Interest Startup Incubators "2022 - Venture event ENX 1385 (52470563923)" by Our startup ecosystem faces a Web Summit is licensed under CC BY 2.0. financial conflict of interest - most incubators take equity in their startups. Profiled as “business educators” Teachings and activities mostly revolve around VC and exits Jan 16, 2023 Conflict of Interest Business Schools Santander" by University of Salford is licensed under CC BY 2.0. "University of Salford signs partnership agreement with Business schools at universities share a similar financial conflict of interest as incubators Large business schools: endowments Smaller business schools: subsidies and tuition Jan 16, 2023 Social Enterprise Feb 1, 2023 Social Enterprise Systemic problems require systemic solutions "Cow" by wwarby is licensed under CC BY 2.0. Blaming individuals/consumers is counterproductive Consumer choice implies the availability of viable and cost-effective alternatives, and only collective action can realize this Example: vegetarian “meat” Jan 16, 2023 “System change not climate change” - Extinction Rebellion Feb 1, 2023 Regeneration vs. Extraction Kate Raworth: 3 way companies can "Regeneration" by russellstreet is licensed under think about social impact: “doing less bad”, “doing no harm”, and “doing CC BY-SA 2.0. good (Re-)generation not extraction Social enterprise consists of a wide variety of regenerative concepts and communities Michel Bauwens’ P2P Foundation wiki Jan 16, 2023 Building Blocks We will highlight some building blocks of social enterprise: "building blocks" by nerissa's ring is licensed Social mission Low-profit / non-profit entity forms under CC BY 2.0. Self-ownership / Steward ownership Stakeholder governance / cooperatives Sustainable / regenerative / circular Transparent / participatory / inclusive Local / decentralized Charitable / cross-subsidizing Jan 16, 2023 Social Mission Commitment to social "Triple Bottom Line's chinese translation" by Z7504 is mission and Triple Bottom Line licensed under CC BY-SA 4.0. Writing this into statutes to make it legally binding Attempt to overcome shareholder primacy ‘B Corp’ movement pioneered this Jan 16, 2023 Low-Profit Entity Forms Official legal entity forms "locked steel" by Darwin Bell is licensed under Feature asset locks, which limit financial extraction from companies Examples: CC BY 2.0. B corporation, L3C, public- benefit corporation (USA) Community Interest Companies (UK) gGMBH (Germany) BVM (Netherlands) Jan 16, 2023 Non-Profit Entity Forms Foundations as companies Examples: universities, hospitals, "DSC00628, Copenhagen, Denmark" by jimg944 Wikipedia is licensed under CC BY 2.0. Foundation-owned companies Hybrid forms are common in social enterprise Examples: Zeiss, Bertelsmann, Heineken, Ikea, Bosch, Rolex, Tata Group, Carlsberg, Patagonia 100% foundation-owned companies are popular in Denmark Jan 16, 2023 Steward Ownership Led by Armin Steuernagel (2017) and Purpose Foundation "Pills" by List_84 is licensed under CC BY 2.0. “Self-ownership”, profit rights separated from voting rights Golden share: “poison pill” (single voting share) that blocks sale of companies Hundreds of companies including: Ecosia, Einhorn, Buffer, Ableton Jan 16, 2023 Cooperatives Co-ops are a form of stakeholder governance "Oneota co-op rocks." by Jason Riedy is licensed Usually worker owned or employee owned under CC BY 2.0. Stakeholders collectively own the tools of value creation “Platform cooperatives” provide an alternative to “platform monopolies” Example: Drivers Cooperative (NYC) vs. Uber “Exit to Community” - Zebras Unite Jan 16, 2023 Sustainability Ecological sustainability "Sustainability" by mripp is licensed under CC BY 2.0. Climate change and biodiversity loss Resource usage (reduce, reuse, recycle) Regeneration Ecological regeneration Rebuilding non-monetized human relationships and the Commons Circularity Cradle-to-cradle approach Jan 16, 2023 Inclusive Conference" by OregonDOT is licensed under CC BY Transparent "Sustainability" by mripp is a"2011 Diversity Sharing financial data, KPIs, and strategic information internally 2.0. under CC BY 2.0. Participatory Expanded circle of people making business decisions Inclusive Diversity, equity, and inclusion (DEI) Jan 16, 2023 Local Local Business focused on stimulating local geograph.org.uk - 1566393.jpg" by Betty Longbottom is "File:Age Concern Community Shop - High Street - ecosystems Example: community shops and pubs, licensed under CC BY-SA 2.0. community banks Decentralized Horizontal organization (Buurtzorg) Note: separate issue from blockchains, cryptocurrency, decentralized finance (DeFi), and Distributed Autonomous Organizations (DAOs) Jan 16, 2023 Charitable 2014-04-06 9829.JPG" by Biswarup Ganguly is licensed under CC BY 3.0. Companies may give a percentage of "File:Orphans - Debmalya Seva Mission - Orphanage - Howrah their profits to charity Yunus Social Business “No-dividend companies for solving human problems” Type 1 = all profits reinvested into the company with a social mission Type 2 = all non-reinvested profits donated to charity Cross-subsidization models Ex: Arvind Eye Care Center, Aga Khan University Hospital Jan 16, 2023 What’s Wrong With Social Enterprise? Social enterprise is (usually) still extractive "greenwash at the gas station" by margonaut is Greenwashing Social mission statements cover up licensed under CC BY 2.0. harmful business models Mission drift Impact watered down over time in favor of growth, often due to pressure from (impact) investors Hypergrowth doesn’t lead to more impact Case study: Elon Musk Jan 16, 2023 Profit’s Double Meaning There’s 2 meanings embedded in "PROFIT is our MOTIVE" by pheezy is licensed the word ‘profit’: 1. Reinvestable margin under CC BY 2.0. 2. Financial extraction This creates confusion: “OF COURSE my business needs to be profitable to survive!” “Not-for-profit” is equally confusing This illustrates the problem with the Triple Bottom Lines Jan 16, 2023 Post Growth Entrepreneurship Dr. Melanie Rieback University of Amsterdam - Faculty of Economics and Business melanie@nonproﬁt.ventures [email protected] Jan 9, 2023 Individual Assignment Part 1: (due Feb 5) Design and plan the structure of a ﬁctional "non- extractive company" by: Creating a Sustainable Business Model Canvas; Designing an experiment to test a ﬁctional Minimum Viable Product, using the MVP Experiment Canvas; Write a "PGE Playbook" compatible Bootstrapping Plan for your ﬁctional company of 500 words (1 A4); Jan 23, 2023 Individual Assignment Part 2: (due Feb 5) Write a 1500 word report (excluding references) describing how you would reinvent the University of Amsterdam Entrepreneurship curriculum (3 A4s) Jan 23, 2023 Impact Investment Impact VCs fund social enterprises They may also cater to underserved "Private Sector Solutions; Alimi Impact Ventures Climate-Smart Agriculture 2018" by UNCTAD is communities licensed under CC BY-SA 2.0. Problem: Impact VCs have the same “2 and 20” fee structure as commercial VCs ‘Carried interest’ embeds the growth imperative into social enterprises These fee structures can be reformed: Snowball IM Jan 23, 2023 Impact Exits “Selling your B corporation to "Exit" by jpataki is licensed under CC BY-SA 2.0. Unilever” Celebrating exits is ironic when we are claiming to build companies for the long-term Claim: selling to large corporations helps achieve social mission faster Retirement: CEO can create a “succession plan” to replace themselves with someone like- minded Jan 23, 2023 Philanthropy and CSR Philanthropy is one way we justify Environmental Protection is licensed under CC BY "WES Ribbon Cutting" by Massachusetts Dept. of hoarding wealth Philanthropy does not fairly nor effectively redistribute money in society 2.0. Reputation laundering and tax relief Philanthropy frequently takes the form of political donations Corporate Social Responsibility (CSR) is “philanthropy for companies” Jan 23, 2023 Eliminating Extraction At a basic level, EVERY company can call itself a social enterprise, "Farmers' Market" by NatalieMaynor is licensed because it is fulfilling a genuine need in society under CC BY 2.0. Financial extraction from a business can be used to judge how ”mission oriented” a company is, whether it calls itself a social enterprise or not. Eliminating extraction can potentially make every company a mission- oriented activistic organization Jan 23, 2023 Creating Bespoke Solutions The social enterprise ecosystem is not "Collaboration artwork is ﬁnished" by dorofofoto is unified and coherent It is like the parable of the blind licensed under CC BY 2.0. men and the elephant Each movement is working towards the same thing, but from a different angle Approaches can be evaluated for strengths and weaknesses We must avoid tribalism and silo- forming, and work together to create bespoke solutions Jan 23, 2023 Part III: Post Growth Entrepreneurship Feb 1, 2023 The Limits to Growth In 1972, the Club of Rome and MIT https://www.clubofrome.org/publication/the-limits-to-growth/ published a controversial report called ‘The Limits to Growth’ It resented a computer simulation (World3) of exponential economic and population growth given a finite supply of resources Offered 12 scenarios (including “Business as Usual”) Predicted that limits would be reached by 2072 Jan 23, 2023 https://timjackson.org.uk/ecological-economics/pwg/ Post Growth Economics https://www.postgrowth.org/ Jan 23, 2023 Degrowth Movement Thought leaders: 19th century anti-industrialists https://www.jasonhickel.org/less-is-more Décroissance: Nicholas Georgescu-Roegen and André Gorz (1972) + Serge Latouche E. F. Schumacher - Small Is Beautiful (1973) Jason Hickel Jan 23, 2023 Doughnut Economics Kate Raworth wrote ‘Donut Economics: DoughnutEconomics is licensed under CC BY-SA 4.0. Seven Ways to Think Like a 21st Century ”Environmental doughnut infographic" by Economist’ (2017) The “doughnut” is two concentric rings: 1. Social foundation - so no one falls short on life's essentials 2. Ecological ceiling - so humanity does not collectively overshoot the Earth’s life supporting planetary boundaries We need to “remain within the doughtnut” Jan 23, 2023 New Economics More Thought Leaders Douglas Rushkoff https://rushkoff.com/books/throwing-rocks-at-the-google-bus/ Charles Eisenstein Mariana Mazzucato David Graeber Christian Felber Wellbeing Economy Alliance Institute for New Economic Thinking Jan 23, 2023 “We can build the Post Growth Economy one startup at a time” Feb 1, 2023 Definition of PGE Photo by PPD on Pixnio s licensed under CC0. “Post Growth Entrepreneurship is the practice of creating and running non-extractive businesses” Jan 23, 2023 Main Elements of PGE Exponential Growth 1. Bootstrapping 2. Flat growth VS 3. Non-extraction Flat Growth Jan 23, 2023 Beyond the SDGs Sustainable Development Goals (SDGs): 17 interlinked goals serving as blueprint for a Published by the United Nations into the public domain sustainable future Lots of social enterprises focus on the SDGs This is a small niche, we need to think broader We must also consider everyday mundane “boring but necessary” businesses, that have no relation to SDGs ANY organization can optimize for social impact Eliminating financial extraction is the key Jan 23, 2023 Ethics By Design In cybersecurity we have: “security by design” You build security in from the beginning - "The core" by hendriko is licensed under CC BY 2.0. you can’t slap it on like a band-aid later It’s the same with ethics You can’t take something inherently unethical and slap a “CSR band-aid” on, and think it’s now ethical. “Ethics by design” is built in from the start This requires a new startup or spinoff Once we have ethics by design, we must guard and maintain it rigorously Jan 23, 2023 Compensation Caps To eliminate financial extraction, you need caps on compensation Photo by Reafon Gates: https://www.pexels.com/photo/ Middle class salaries and a pension US$75k/year for optimal happiness take-it-easy-painted-road-1570264/ Avoid equity compensation “Fair compensation” for CEOs is tricky “Balkanende norm” (~200k Euros) Compensation ratios 10:1 - used to be normal for CEOs 250:1 - now normal for CEOs 450:1 - Elon Musk This is all industry/location dependent Jan 23, 2023 Who Is PGE For? TobiasSchumann(WMDE)derivative work: Dgultekin, Startup founders CC BY-SA 3.0, via Wikimedia Commons Established companies Governments Nonprofits/NGOs Incubators Creative sector Jan 23, 2023 Bootstrapping Jan 18, 2023 Bootstrapping Why Bootstrapping? "Army boots" by liftarn is licensed under CC BY-SA 2.0. Bootstrapping creates solid and independent businesses But most incubators don’t teach it We will discuss why it’s a great approach for (social) entrepreneurs Jan 18, 2023 “Make bootstrapping sexy again” Jan 18, 2023 Capital is a Distraction Money teaches "Cat" by be creator is licensed under CC BY 2.0. entrepreneurs bad habits Capital harms product/ market fit Starting “lean” creates a solid foundation Raising capital is a lot of work Jan 18, 2023 Extraction Hurts Businesses Extraction of cash from a company is a competitive "California Oil and Gas" by blmcalifornia is marked disadvantage on the market with Public Domain Mark 1.0. Cash that is extracted can’t be reinvested in: R&D, higher pay, lower prices, better quality Ikea is a good example of a (non-social) non-extractive business Jan 18, 2023 Network Effects + Economies of Scale “Network effects” and “economies of scale” are widely misunderstood "Social Network" by neil cummings is licensed under Startups rush to gain market saturation, and “defeat” the (dominant) players on the market, CC BY-SA 2.0. assuming that business is “winner take all” and a zero-sum game We think: “Once we’re big enough, our business model will sort itself out” This “one big push” is hard to pull off Jan 18, 2023 Playing Darts There’s 2 ways that I can approach a game of darts: "Darts" by rafael-castillo is licensed under CC BY 2.0. 1. Stand across the room, and throw the dart 2. Walk across the room with my dart, and place it in the middle of the target This analogy describes the difference between capital-fueled hypergrowth vs. bootstrapping Jan 18, 2023 Software Engineering In software engineering, we build a machine can #iterate — #agiletourlille #sketch… http:// "Software development is upside down @allankellynet — bit.ly/2eduWZ5" by ﬂexbox is licensed under CC BY 2.0. have similar concepts: Waterfall model Agile DevOps Lean Startup is the “agile of business” What is “DevOps for entrepreneurship”? Jan 18, 2023 Bootstrapping Principles "Concept principles" by psd is licensed under CC BY 2.0. Jan 18, 2023 Stone Soup Parable A poor man picks up a stone and uses it "Day 140 - Made up soup" by Phil and Pam is to collect ingredients from farms, to make a soup for everyone to share licensed under CC BY 2.0. Entrepreneurship works similarly: The poor man had a vision - his task was to convey his vision to others, collecting complementary elements It succeeded! His vision was realized, and all stakeholders were happy in the end. Jan 18, 2023 My Version of the Parable Jan 18, 2023 Talk To Everyone Who Will Listen Talk to anyone who will listen to you "Conversation" by ibm4381 is licensed under CC BY 2.0. You will gain increasing clarity as you repeatedly tell your story People are mirrors who reflect things back Listening is important Ask people about their pains, and inquire what solutions they would (and currently do) pay for Steal the best bits of feedback, and integrate them into your MVP If you don’t know where to start, read ‘The Mom Test’ Jan 18, 2023 Preach To Your Choir We don't need to convince everyone "Christmas Choir #2" by It's No Game is licensed under (including the 1% and politicians) Some people will never agree with our ideas, and that’s fine Start with those who understand and are CC BY 2.0. enthusiastic Mobilizing our “choir members” gets us started As we find success, our project will gradually move into the mainstream Read: ‘Crossing the Chasm’ Jan 18, 2023 Start Small Think big, start small "Austin through a magnifying glass" by oddharmonic is Moonshots ambitions are fine - but every journey begins with a single step licensed under CC BY-SA 2.0. Read ‘The Lean Startup’ Don’t put too much energy into early stage ideas Don’t get too focused on building technology Don’t make a detailed business plan A Business Model Canvas is better Jan 18, 2023 Refactoring Keep overhead low to start Find a service that launching customers want to "New York City - Home of the Repeating Patterns" by pay for kevin dooley is licensed under CC BY 2.0. “Refactor” as your business grows: Refactor repeating activities into a process Create a small piece of automation to perform a repeating process This is all financed by reinvestable margin These small pieces of automation will gradually and organically evolve into a supporting platform You will step back and realize you’ve developed a solid revenue base + critical mass of IP + processes + staff Jan 18, 2023 PGE Playbook Act I: How To Get Started Make sure that you’re not starved for money when starting. If you are, get a part-time job to earn enough money per month to take the edge off your desperation. It’s hard to build something with patience and integrity when financially desperate. Understand that no matter how ambitious you are you need to start TINY and grow organically. Growth must be financed by turnover! Avoid unnecessary overhead (offices, equipment, internal employees) - you won’t need this at the beginning. Setup your legal entities and Statutes to be as non-extractive as possible. (Consult a PGE knowledgable lawyer.) This is essential to avoid mission drift later. Jan 18, 2023 PGE Playbook Act I: How To Get Started (2) Start with the pain in the market. What kindof service you can offer that someone would be willing to pay for? Get them to put their money where their mouth is. As long as customer requests align with your values and interests, leverage freelancers (and your own time/energy) to fulfill those services, paid by your launching customers. Start out doing everything by hand - give everyone involved concierge treatment. Pair producers with consumers. Make sure that both are treated like kings! The key to success is finding arrangements that are win-win-win. (Win for the Producer, Win for the Consumer, Win for the Platform). Business is the fine art of getting interests aligned. Business is NOT a zero-sum-game, where someone wins and someone loses. Jan 18, 2023 PGE Playbook Act I: How To Get Started (3) Perform lots of experiments (MVPs). Expect that some percentage of what you try will fail - and that’s okay. Fail, fail again, fail fast. Collect validated learning. Pivot to follow the pain in the market. Repeat and remain flexible. Rely upon word-of-mouth and “evangelism” (conference talks, workshops, media coverage, etc..) for marketing. If what you’re doing is sufficiently valuable to your ecosystem, this is the only advertising you should ever need. Start to refactor processes when you see frequently occurring activities. This is financed by margin on your revenue. Build a piece of automation when you see frequently repeating processes. This is financed by margin on your revenue. Jan 18, 2023 PGE Playbook Act I: How To Get Started (4) Isolated bits of automation will evolve into a supporting IT platform over time. With time and patience, you’ll discover that you’ve built an entire platform of IP + processes + staff - all financed by reinvested margin. This platform will make things progressively smoother - and your margin will improve. This is when network effects and economies of scale kick in. Focus on delivering quality and maintaining a stable happy ecosystem - NOT on growth! Growth should be a byproduct, not an objective. As you progressively hire staff (supported by customer revenue), you can delegate more and more of your responsibilities to others, to create room for strategic thinking and creative projects on your side. Jan 18, 2023 PGE Playbook Act I: How To Get Started (5) If you’re patient (and pivot when something isn’t working), then the critical mass of what you’re building will gradually increase over time. One day, you’ll look back and realize that your progress isn’t so slow anymore. Over time, you will (slowly) start displacing the (less socially inclined) market leaders. Exiting is not an option. (If you setup things right, this should be impossible.) If/when you ever get bored of your company, delegate more and more of your work to your staff until you’re no longer needed. Create a succession plan. Then decrease your hours (or leave completely) in order to focus on something else. Congratulations.. you’ve built a non-extractive business of integrity that will live on for long after you’re gone. Be proud of yourself, and realize that you’ve left a positive legacy in this world. And if enough of us do this together, we can change the world for the better! Jan 18, 2023 PGE Playbook Act II: Serial Entrepreneurship Think about your next steps: what non-extractive passion project do you feel called to start? Can you find a commercial service to provide, grounded in the pain of a market? Can you get it launching customers? Go through the bootstrapping process again - your old business will continue growing (aided by support staff), and you can spend your time and energy bootstrapping the new initiative. Your original company can even help to support your new one, as long as it’s win-win. Rinse and repeat! Don’t forget to also take time off. Even heroes need rest sometimes! :-) Jan 18, 2023 Possible Non-Extractive Companies Here’s a few ideas, that are by no means exhaustive: Non-Extractive SW Development "Hippy-Dippy-Kaleidoscope-640x960-115319d3" by Non-Extractive Music Streaming Andrew Norrie is licensed under CC BY 2.0. Non-Extractive Carbon Offsetting Non-Extractive Circular Waste Handling Non-Extractive Accountancy Firm Non-Extractive Law Firm Non-Extractive Childcare Platform Non-Extractive Food Delivery Platform Non-Extractive Bank Non-Extractive Insurance Company Non-Extractive Pension Fund These are just a few examples. The possibilities are endless… Jan 18, 2023 Business Model Recipes Pick any kind of company, and "cookbooks 009" by Polka Dots and Pastries is licensed imagine a non-extractive social version of it Hypothetically work through its under CC BY 2.0. bootstrapping process on paper We can create a “cookbook” of such “business model recipes” Some people suggest recipes, other people may decide to “cook” them Jan 18, 2023 What Does This Look Like In Practice? Feb 1, 2023 PGE Startup Bootcamp 5 days in Terschelling (Feb 2020) Left brain + right brain Combination of traditional startup bootcamp and personal development retreat Diverse organizer team Jan 23, 2023 Journey Jan 23, 2023 Journey Jan 23, 2023 Location Jan 23, 2023 Location Jan 23, 2023 Ideation Jan 23, 2023 Check-In Jan 23, 2023 Community Jan 23, 2023 Nature Jan 23, 2023 Peer Learning Jan 23, 2023 Presentations Jan 23, 2023 Art and Culture Jan 23, 2023 The New Normal Jan 23, 2023 Online PGE 10 Week Incubation Program Jan 23, 2023 2022 Cohort Jan 23, 2023 Monicah Muhoya (PGE 2021) Jan 23, 2023 Part IV: PGE Methodology Feb 1, 2023 Micro-Level (Personal) Feb 1, 2023 Personal Qualities Different leadership qualities: "Teen helping little child at drinking fountain" by tsayrate Vulnerability is licensed under CC BY-SA 2.0. Patience Communications Listening Self-care Require new business literature Jan 23, 2023 https://brenebrown.com/hubs/dare-to-lead/ Vulnerability Jan 23, 2023 https://www.guilford.com/books/The-Lost-Art-of- Listening/Nichols-Strauss/9781462542741 https://www.nonviolentcommunication.com/product/nvc/ Communication Jan 23, 2023 https://www.blackswanltd.com/never-split-the-difference Negotiation Jan 23, 2023 Emotional Validation ‘Group Hug’ by Chris Eason licensed CC BY 2.0, via Flickr Founders of non-extractive startups need a community The traditional startup ecosystem provides emotional validation for: raising investment, fast growth, exits We need to celebrate founders who make different choices Jan 23, 2023 Meso-Level (Business) Feb 1, 2023 Collaboration vs. Competition Charles Darwin: “Survival of the fittest” vs. “survival of the "Headwaters Forest Reserve, CA" by mypubliclands is friendliest” Social Darwinism popularized by sociologist licensed under CC BY 2.0. Herbert Spencer, in support of unrestrained capitalism during the Industrial Revolution Darwin argued that friendliness, partnership and communication are the key to evolutionary success, not being large, strong, or aggressive. Suzanne Simard’s TED talk: “How Trees Talk to Each Other” makes a similar point Jan 23, 2023 Business is Creative Alignment Business is the creative art of getting interests aligned "Alignement Louvre (2)" by jfgornet is licensed under In Dutch: “concullega” (where “concurrent” = competitor, “collega” = colleague) CC BY-SA 2.0. Cooperating is usually better for everyone This requires moving from a scarcity to an abundance mindset. Most markets are big enough - there’s generally enough customers to go around Jan 23, 2023 Implementing Non-Extraction Non-extractive companies require legal “belts and braces” to stay non-extractive There is no purpose-fit entity form (yet) "do it yourself revolution" by hannes.a.schwetz is We can use: hybrid entity forms, Golden licensed under CC BY-SA 2.0. shares, Statute text We can try to hack something together using contract law The open source community did the same (i.e. GNU GPL, Creative Commons) If we DIY it, we might inspire politicians to create purpose-fit non-extractive business entity forms Jan 23, 2023 Sales and Marketing A good product-market fit "Melanie Rieback at the SingularityU The Netherlands Summit 2016" by Sebastiaan ter Burg is licensed under CC BY 2.0. is the best marketing tool “Evangelism” fits social enterprise better than traditional marketing and sales Doing the “right thing” gets you earned media Jan 23, 2023 Management Horizontal management https://www.reinventingorganizations.com/ is both effective and stakeholder friendly Holocracy Sociocracy Teal Jan 23, 2023 Intellectual Property Most incubators discuss "open source" by frankh is licensed under CC BY 2.0. patents, copyrights, and trademarks Patents are generally counterproductive for startups Open-source is better Business model: give away the product and sell the services Jan 23, 2023 Law “I realized the true function of a "MK Gandhi, Attorney" by Ben Sutherland is licensed lawyer was to unite parties riven asunder” -Mahatma Gandhi When conflicts arise, you should under CC BY 2.0. favor mediation over legal threats Legal contracts are human relationships condensed onto paper Visual contracts, formal relational contracts, and human readable contracts are up-and-coming Jan 23, 2023 Pricing Different pricing for different Community Eye Health licensed CC BY-NC 2.0 on Flickr classes of customers The Aravind Eye Hospital in Madurai. INDIA.by Cross-subsidization of charitable projects Note: cross-subsidization is abused in the commercial sector for predatory pricing. Same mechanism, very different intentions Jan 23, 2023 Taxes Non-extractive business "Tax Bill" by 401(K) 2013 is licensed under CC BY-SA 2.0. shouldn’t require any tax breaks Paying tax supports society and contributes to a better world Social safety nets, paid by our taxes, reduce entrepreneurial risk Founders benefit from this, so we should contribute back to the system Jan 23, 2023 Retirement Founders want to cash out, because it - Pest Side - Budapest - Hungary" by Adam Jones, Ph.D. - Global Photo https://www.cnvc.org/"Elderly Man Soaks Up the Sun along the Danube “solves the money problem” for them Archive is licensed under CC BY-SA 2.0./resource/book-chapter-1 In PGE, founders are middle class Good salary + pension (This should be enough to retire) We can also leverage our company to create new opportunities We try to keep things reasonable/ proportional in relation to everyone else “Entrepreneurial risk” is overrated Jan 23, 2023 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 PDF

Document Details

Tags

Related

Summary

Full Transcript

Upgrade to continue