unbundle the plot points in the journey
from the happiness of cash flow
to restoring integrity to all the capitalisms
A Paradigm Shift
There is an historical tale that can be told about the evolution of these different capitalisms beginning in the deepest, darkest recesses of prehistory, when Man first pick up a stick and lit a fire creating the economy of technology and trade that is our uniquely human way of being in the world.
In these aboriginal economies work was organized through personal connections, and that social structure for sponsoring enterprise through investment continues throughout time up to the present day in an investment decision-making system that we make call Family & Friends.
There came a time, at the dawn of civilization, when people figured out how to cultivate grains in order to produce abundant supplies of storable food. The work of large-scale grain agriculture is different from the work of hunting and gathering, fishing, herding and small scale farming. We see a priestly class of keepers of the temple granaries evolving as a new social structure for organizing the planning and the harvesting, storing the surpluses of the harvest, and sharing out these surpluses according to what the gods say is right. We see these morality-based social structures for investment decision making continuing also to the present day, sometimes still connected to religion and the will of the divine, through Church and sometimes not, as Philanthropy.
As grain agriculture supported larger and more stable populations, it also supported more diversity in work and wealth. Diversity brings choice, and also competition. With competition comes conflict. Celestial authority proved less effective at resolving earthly disputes between people, and we see strong men evolving into kings who exercise earthly power to resolve these earthy disputes, keeping peace in the realm and also supporting commerce and trade, through the King’s coinage. We are now in historical times, and there are many stories of kings that come down to us from distant and also not so distant times. Social structures for organizing enterprise through what we now call governments with the power to tax and spend for the public good continue to be important ways we organize enterprise.
The king’s coin is law only within the king’s domains. As people continued to prosper and spread across the surface of the earth, trade between kingdom became popular. This created the need for technologies to equalize the currencies of different kingdoms. There is evidence the Catholic Church served this function through much of the Middle Ages in European history, but at the time of the Renaissance, the private industry we know now as banking evolved, originally to serve the needs of aristocrats and their chartered agents. Today, as our world has become increasingly monetized, the need for banks to manage our money “as a technology communities use to trade debts” has become commonplace.
As long as commerce consisted primarily of what is essentially a wholesale-retail/import-export business, banks continued to be the height of capitalism. With the invention of the steam engine, and the industrialization of craftsmanship and the invention of the mass consumer market, however, equity was needed to organize factories of great scale and longevity, that generated cash flows in small increments over extended periods of time. What we know as the stock markets – and increasingly the capital markets, or even just, the markets – evolved to facilitate speculation on the popularity and longevity of these factories. This is the securities trading system that dominates popular thinking about investing today.
One consequence of industrial capitalism was the invention of retirement. That created the need and the opportunity for the invention of pension as actuarial risk pools for providing income security to society in retirement. With pensions, came superfiduciary stewards of large, purposeful and timeless aggregations of the shared savings of society.
Until about 40 years ago, pretty much everything our superfiduciary stewards are doing with society’s shared savings today was against the law. Until 1972, the law of fiduciary duty which prohibits fiduciaries from speculating with the other people’s money entrusted to their good judgment prevented pensions from speculating in securities.
Then, in 1972, the law decided that portfolio diversification could take the speculation out of securities trading, so that prudent portfolio management could be a prudent way for superfiduciaries to invest.
We now have some 40 plus years of experience with this rule of fiduciary prudence that lets persons speculation with our retirement savings. We have learned two things.
Investing pension savings as equity in the economy is good for the economy, good for retirement and good for society, more generally.
Investing pension savings in securities trading is not.
It is time for us to once again take up the question of fiduciary prudence in pension investing, this time creating by design of a new fiduciary social structure for investment decision-making people, places, processes and frameworks that are uniquely fit the the powers and purposes of pensions and endowments as fiduciary stewards of society’s shared savings.
This new social structure of fiduciary stewardship will bring people, places, processes and frameworks together to support investment decision making through negotiated agreement on strategies, possibilities and priorities for generating and sharing in the happiness of cash flow between enterprise and stewardship in pursuit of the fiduciary purpose to generate enough cash flow to support good stewardship, indefinitely, by investing in enterprise cash flow generation, directly.