drill down on the principal plot points in the journey
from the happiness of cash flow
to restoring integrity to all the capitalisms
the new future story
we need already
in pensions and endowments
as stewards of income security
for retirement, for education,
and for our shared future, forever, generating enough cash flows to support good stewardship, indefinitely, by investing in enterprise cash flow generation, directly
a new future story of stewardship by superfiduciaries
The evergreen method of investing starts with a new philosophy of stewardship that starts by seeing in the economy a number of different social structures for enterprise design through investment decision making.
Each of these different social structures aggregates surpluses saved by individuals for a specific purpose, and deploys those aggregations as capital to fund enterprises that are recognized as aligned with that purpose.
Stewardship is not an integral part of the securities trading structure, as is commonly taught today. It is, instead, its own social structure with its own purpose and its own right and responsibility to be true to that purpose.
The purpose of stewardship is well visualized by the “faucets and drains” model of the pension plan as an actuarial risk pool whose purpose is to keep its risk pool properly full and flowing by properly balancing two sources of cash inflow – from worker earnings and from investment earning – and two uses of cash outflows – plan expenses and benefits to plan participants.
Endowments are not technically actuarial risk pools, but they also have the need to maintain the levels of their endowments by balancing inflows against outflows.
Thinking about the variability of cash flows leads us to conceive of the economy as a network of connections between people that is always changing, evolving and adapting – and also always expanding – as times change and we, the people, evolve prosperous adaptations to life’s constant changes.
Where do you sit, on this network?
This network is indeterminate over time, constantly changing, adapting, evolving and expanding, but it is not chaotic. There is underlying all the change in people. places and choices, a certain constancy that reflects the constancy of human experience against a fixed and unchanging configuration of domains for human choice and action. We have one way of thinking about these domains but there is an interesting conversation to be had about what this structure might be that can guide our stewardship investors in thinking about where they should be looking to make investments in new enterprise as times change, and people make new choices within these different domains.
a new future story of peace-aligned enterprise design through prudent stewardship investment decision-making
The technical model for the evergreen method of enterprise design through investment decision-making comes from Real Estate, and also from US -style tax credit partnerships for financing Affordable Housing and Renewable Energy.
In these models each enterprise – whether it is a hi-rise office tower, an apartment housing complex or a wind farm – is designed to be financed on a stand alone basis. This gives us a standard configuration for what goes into the making of every enterprise. The details always vary, but the component parts are always the same.
There are always consumable supplies, that have to be replenished, and durable systems that are used repeatedly over time. There are always routines that are executed for using systems to convert consumables into the new artifacts that are sold to customers to generate revenues. There are always workers and experts who execute the routines that generate revenues. There is always leadership that holds the enterprise together and keeps it true to its identity. And there are always sources of capital.
The first step in enterprise design is to customize this framework.
Next comes the writing of future history. Here again there is a template that applies to every enterprise. This is the flourish and fade of popular choice that is the pulse beat of prosperity. It is important for good stewardship that the enterprise design properly approximate this pattern.
Then there is the integrity of the enterprise, and the completeness and cohesiveness of its knowledge of its work, and the artifacts it makes and others buy and use, the networks of connections it maintains and the routines it executes for generating cash flows. These determine the competitive strength of the enterprise, and its ability to hold onto its place in the economy.
Then, we shift to the numbers. Investment is made in money and money is, in the words of Michael Mainelli “a technology communities use to trade debts”. An accounting has to be made for the debts being created and traded within the enterprise.
This is where budgets can be negotiated that infuse values into the enterprise consistent with good stewardship.
Lastly, we look at the prudence of the overall structure. Does the design strike a good balance in the allocation of risk and reward as between the enterprise team and its stewardship sponsors?
We look at this as an enterprise earn-back structure. It empowers the enterprise leadership and team to earn back a larger share of the cash flows they generate through their work as the enterprise delivers a minimum prudent fiduciary return to their stewardship sponsors. With larger shares in the cash flow – or rather, with the delivery of a prudent fiduciary return (the obverse and reverse of the same fact pattern) – they also earn back more discretionary authority over the work they choose to do and the way they choose to do it.
The relationship between enterprise and stewardship never comes to a complete end, unless their is an agreement to a final settlement. That is why we call this structure “evergreen”. It just keeps going, automatically self-renewing, unless the parties agree to go their separate ways. However, the sharing formulas – the equity splits in cash flows – step down as fiduciary minimum return breakpoints are passed, until an evergreen sharing in cash flows is reached.
This is essential to prudence in stewardship investing because it aligns the interests of stewardship with investment in the future of the economy, society and prosperity, not in the perpetuation of a past that is no longer really fit to function or right for its times, as times change, and we, the people, evolve prosperous adaptations to life’s constant changes.
a new future story of civic engagement in adaptively evolving community standards for enterprise design through prudent superfiduciary investment decision-making
Good stewardship must be accountable to the people, and fiduciary duty to fiduciary prudence is the legal means by which such accountability is enforced, but fiduciary prudence is not a legal standard so much as a standard of practice. It is determined by reference to a fiction that the law calls The Hypothetical Reasonable Man.
The new future story of evergreen gives us a place and a process where people can come together to create The Hypothetical Reasonable Man – and to take the measure of fiduciary prudence – as part of the collaborative act of designing a regenerative enterprise through evergreen prudent superfiduciary investment decision-making.
The process begins with an exhibition of the enterprising idea.
What has changed?
What has changed in the world about us that is creating the need that is also the opportunity for this enterprising new idea to enter into the economy and become a popular choice with the people?
Why is this new choice a good fit to these changing times? Why will it become popular with the people? How popular will it become? How long will it remain popular? How will it change the network configuration of the economy, both locally and globally?
Do we, the people, agree this is a good idea for our stewardship money to sponsor?
The exhibition that presents the idea demonstrates the importance of Art & Design in this new process of civic engagement in prudent fiduciary stewardship, because Art shows us what can be, before it even is, and the essence of fiduciary prudence is exactly that, seeing what can be, before it even is, and not becoming part of what can be that is not fit to the fiduciary purpose.
In the case of stewardship investing, there are both fiscal and physical impacts that must be considered. The fiscal impacts are perhaps best measured in numbers, using math, but the physical possibilities can only be explored through the imagination, and Art is the language of imagination.
This also brings into focus the importance of history and the Humanities to the process of civic engagement in adaptively evolving community standards of fiduciary prudence for superfiduciary investors. Through history and the Humanities, we can see how the choices people have made fit the times in which they made those choices, which can help us develop our own abilities to understand authentically how the choices people will make will fit the times in which they will be making. And this is what prudent investing is all about.
Universities are great places in which to stage these exhibitions and to host the process of civic engagement in superfduciary prudence more generally, both as a physical venue for the physical coming together of people engaged in the process, and as a hub for a Social Media outreach that expands the possibilities for public participation.
Each enterprising idea that has been fully presented through exhibitions (on site and on line) can then be studied by university academics and other experts who can put the perceptions and anticipation of the enterprising idea into authoritative context in many dimensions: historical, technological, societal, political, commercial, etc.
Students, led by faculty, can then prepare charettes for leading the enterprise team, potential stewardship investors and other interested persons in exploring various aspects of the enterprising plan and the possibilities for fiscal and physical impact on society and the economy.
We look to students to run these charettes as a powerful new way of re-connecting education to the development of young people into good citizens and as a better way of learning – by teaching – and to create a fiduciary experience in which there are no authorities with social standing to affect deliberations: the ideas are what must be the only important thing in these salon discussions. Having student conduct these salons, we believe, can be a powerful way of keeping the salons open and the participants open-minded, open-hearted and open-handed, openness in a fiduciary space being the true path to prudent stewardship.
After the physical impacts are considered through art, reflection and conversation, the fiscal impacts must be assessed through numbers, and these numbers must be considered both within the four corners of the contemplated investment and within the larger context of the prospective investors overall fiduciary portfolio and purpose.
Some of these numbers can be explored publicly, but much will be appropriate for consideration in confidential conversations, away from the public, flowing out of the civic engagement portion.
Accountability for the investment will include continued consideration of the physical impacts and high level portfolio impact considerations of the numbers.
a new future story of civic engagement in prudent stewardship of prosperous adaptation to life’s constant changes
talking with stewards about peace and prosperity