 Next to the stage, we'll be hearing from Jed Emerson and Laura Tyson in a fireside chat. Jed, a senior fellow at Impact Assets, a non-profit financial services firm, is an internationally recognized author and thought leader in the field of impact investing. Laura Tyson comes from a different background, an American economist and former chair of the U.S. President's Council of Economic Advisors during the Clinton administration. She also served as director of National Economic Council, and is currently a professor at the Haas School of Business at the University of California, Berkeley. The pair actually came together at Haas in 1998 where Tyson was the dean and hired Emerson to teach students and have since remained in dialogue. Today we get to see them do just that. Both of these folks have been doing the work long enough to see what they say is an optimistic trend towards a more sustainable economy. They recognize that they must start by looking at themselves, their students, and the future we're working to build. They believe this starts with dialogue and are here to do exactly that. Please welcome to the stage Jed Emerson and Laura Tyson. So shall we sit here, here and here? Good morning. Good morning, good morning. We'll try to make this feel like it's close and intimate because it isn't really close and intimate. And I know Jed very much wants to have a dialogue that he feels it's very important for us to actually explore ourselves in terms of the purposes we have for being involved with social capital. So let me just emphasize that Jed is one of the creators of the space we now call social capital. It didn't have that name. It didn't have the name Impact Investing. It started out a little bit. The name I remember is Triple Bottom Line. I met Jed in the late 1990s. There were a large number of students at Berkeley, not surprisingly, interested in business and social responsibility. And I tried to find people who could come in and teach and do research and help those students progress. And I found Jed, and that was one of the great contributions of my time as dean at Haas. So we work together. We have both been part of a dramatic growth in Impact Investing, even the term Impact Investing, which is a relatively new term, as I'm sure all of you know. But we've been together on and off 20 years. 20 years we've seen an explosion of investing for Impact, whether it is through ESG funds or it's through private equity funds or it's through venture capital funds, a lot of different kinds of doing it. So you might say, gee, this is terrifically good news. And you might also say that another piece of good news is whereas when Jed and I started, when Jen started, there was a lot of notion of whether there were trade-offs between financial returns and social returns. There's been a whole bunch of evidence now to suggest that those trade-offs don't exist. And that evidence grows over time. Interestingly enough, investors don't quite necessarily believe that. For example, millennials, something in a recent survey, 60% of millennials are already making investment with an impacted mind. 59% of those investors say, I'm trading off financial returns for social returns. I'm willing to do it. And mostly they're wrong, mostly they're wrong. So I just want to point that out because those are all good news things. But Jed has written a book where he wants us to think hard about the current state of affairs. He expresses concern. He expresses frustration. He expresses disappointment. He said, what's happened to the field that he helped create is that everybody's working on tools and measurements and metrics, and they've gotten away from purpose. So our conversation is going to be largely about the book and about purpose. And I thought I would start with just the particular notion of capital. So capital is something that Jed in the book refers to as resistance. He refers to as redistributive justice. He refers to as a social construct. And I want to start with just help us think through what you mean and how you think about capital. You know what economists think. Capital means of production. There's something called social capital, which is a bunch of norms. There's financial capital. What's your constructive capital? I think that the constructive capital is really grounded in this idea that we decide what capital is and how we want to think about it, how we want to structure it, how we want to deploy it, how we want to understand its performance. And I think part of the challenge and the conversation is that for most of us, we largely accept the definition of capital that's given to us by Wall Street that is framed by traditional economics that basically says capital is driven by these set of econometrics and we can't understand qualitative aspects of capital. Whereas I think that in truth, every generation has moved through its own understanding of the nature of capital, the purpose of capital, the construct of capital, and that that's really what we need to regain a conversation around in our community and not to accept what is given to us as the terms of capital, but rather to say these terms are really the end product of a whole host of conversations and deliberations and discussions that primarily economists and financiers have had and that they're asking us to embrace and adopt and in fact we have the opportunity before us to look at our understanding of capital within the context of history, within the framework of cultural understandings and again that social construct that we can come together and define what for us is capital and how we want to deploy it, how we view its value, how we want to use it to actually create the world that we want to be in today. So we were both listening to the presentation just before and what you've just said right away links me to the discussion of what is the source of capital because again what history or might say is that what happens is we generate something called a surplus. There is the value of what is produced and then there is the surplus beyond what is produced. Somebody because of the structures of the system owns that surplus. They have the right to own that surplus. They save out of that surplus and they create the financial wealth which becomes the capital. So our definition of capital is embedded in the structure. Do you agree? I think broadly speaking that's true but I would also say that how we understand that surplus and how we understand the rights to capital shifts based on the cultural context. So for example when we think about how we used to value publicly traded companies 50 years ago when most of those companies owned factories, made things, had employees versus how we value companies today when intangible assets, intellectual property, contract employees, the whole structure is fundamentally different and we've come to this place by choice and by decision that some people have made that others of us have to basically be responsible for cleaning up after. So I think that the opportunity we have is to really not only look at our understanding of the purpose of capital today but to step back and understand what has brought us to this place. The various traditions, both wisdom traditions and cultural traditions that basically have brought us here because that's how we can really think differently about capital and the purpose of capital. It is not simply that our generation because we're the latest is the smartest, the best, I know we're the best looking but I think that we need to have conversations that are informed by the wisdom of generations that have come before that have grappled with exactly these same issues because I think that the question of purpose and meaning and value is not something that we ourselves are grappling with. This to my mind is the central kind of challenge of humanity and for us to enter into our conversation today with a largely ahistorical perspective of those issues and ideas and notions, I would argue we actually know how to think about this and we could together in dialogue with each other create and discover new possibilities for the purpose of capital that are consistent with the challenges that we're facing today and we're not really doing that. One of my biggest frustrations with the state of conversation with an impact investing is that everybody has moved to positions of pitch. Everybody has a killer app, they've got the killer fund, they have the best answer and we end up in these situations understanding ourselves from each other's answers that we're trying to convince each other of as opposed to saying and really understanding that truth with a capital T, we all have our own kind of small T truth but truth with a capital T is what we discover in our interactions together and that this is how we advance the deeper meaning of purpose and meaning and value is in collaboration with each other and not simply adopting for ourselves a posture that says I have the answer and my job is to convince you of my righteousness because we're just not going to get there and I think this is part of my frustration with the current state of play. So let's think about this. I mentioned millennials so we certainly know and I'm at an educational institution so I feel this in a real way and also I have a son who's a millennial so basically there really is I think the millennial generation at least in the US really thinks very seriously about I want impact, I question the structure in which I am functioning can I make a difference so what happens here so that's a positive I think a lot of them will go out and try to create things to sell their ideas that's what they'll do I'm going to start a sustainable firm so they are out pitching finding apps and doing the other things we're all part of the structure but isn't that that desire while you're in the structure to use the structure to change it don't you have some sense that that's happening? Well I think that's largely what has brought us where we are today a lot of folks, entrepreneurs saw opportunities understood challenges in different ways and have moved to advance them what I think most concerned about is less that process of development within our community than what has happened with the entry of the large financial institutions, the large firms that come into the space and say we're the experts we know finance, we know how to make money, this impact thing we'll just work that out along the way and where they basically view our community and this process of discovery that we've all been a part of for 20 or 30 years as basically a market opportunity an opportunity for their firms to aggregate more capital to charge more fees to come in and as was said earlier not challenge the fundamentals of modern financial capitalism but rather simply use those with a modified kind of impact patina to make us all feel better about doing well and good and part of what I argue in the book is that you to my mind cannot be an impact investor and not have a type of a critique of modern financial capitalism than in fact a part of being an impact investor, the difference between traditional investing and impact investing is you're trying to impact something and what you're trying to impact is not like our pursuit of social justice it's the fact that we operate within an economic order that is founded upon injustice it's founded upon extraction it's founded upon the idea that the asset owner if you believe in that concept at all basically has a right that is dominant to that of stakeholders and so I think what I'm trying to say in this research is basically many many generations of communities have decided to take a different approach to our understanding of meaning and purpose of capital and we can do that too and the fact that we are operating within a set of constructs that have been created in the last two to four hundred years does not mean that the experience of humanity over the last 15,000 years is irrelevant to our current life and situation and all I'm saying I'm not even like the book doesn't talk about solutions it doesn't give you five points to purpose there's no call to action what I'm saying is can we just stop for a minute and listen to the history that we carry into this current conversation and the knowledge and the wisdom and experience that generations before us have developed so I think the call to action is to think and to read and to read history and to read philosophy and to read justice and to read things that are much of the field out there doing this kind of thing they're not reading it I mean they're in the fray basically saying what kind of asset will appeal to my investors now I will say the good news here is maybe if we make sure the investors really know this stuff that they will then put pressure look the black rocks of the world the black stones of the world because there is pressure coming from the investors to the companies to them to behave more sustainably so there's a lot of responsibility of the investors to read your book and then to actually make those messages clear to the firms that are actually trying to figure out ways to satisfy the investors for meaningful impact investments so can I just add one thing so all of that is true and when we do all that and we have our impact portfolios and we're fully deployed and we're monitoring our investments I think what we're finding is people are still looking at each other and saying that's it this is what we're supposed to do and what I'm trying to say is actually in order to be successful as an impact investor we often think about everything in terms of our self relative to the returns that I want the kind of themes I want to be active in how I define impact and in fact there's a whole different way that we could position ourselves relative to the other if you will that could open ourselves to becoming as transformed by impact as those we seek to have an impact upon more of a question of moving from this idea of kind of ignorant impact broad impact to deep and ultimately mutual impact where you become open to the process of transformation and change as much as you're asking others to be involved in that process as well and I think although you would not say it's how to the book has a very nice continuum of impact from what you'd call kind of cheap Pantena impact all the way to broad mutual impact and the broad mutual impact is the investment is changing you as well as the other, whatever the other is so I think that's a nice important part of the book so let me go to the issue of capital as resistance and a form of restorative justice because I think it's important to talk about justice then, what is justice you know there is the observation that justice is in the eyes of the beholder there are different views of justice so a very important book historically speaking by Michael Sandell at Harvard says that there are three kinds of ways of lenses of looking at justice there's utilitarianism justice is justice exists when we serve the largest number of people possible with material well being that's justice justice is a kind of sense of what is virtuous justice kind of as related to moral norms or religious norms or justice is primarily about liberty and by the way it's my asset it's my wealth I'm going to decide what to do with it thank you very much and so I wonder what do you think about justice what do you mean by justice right well in the book we use a term that I think more and more folks are using and looking to actually bring into practice and that is the concept of restorative justice I think that when we talk about justice it doesn't really work if this is the inequity and then you say okay we're going to treat everybody evenly from here out that doesn't really do it you need to basically rebalance and reengage and restorative justice speaks to the idea that the process of restoration cannot be something that I simply do to you but it's something that we together kind of create in advance as we move into this other situation of relationship that we have to challenge and change the relationships of power of hierarchy of ownership the whole concept of ownership needs to be revisited and that it is through that again this is why the concept of dialogue and engagement and connectivity is critical to our ability to be successful much less to have significance because it's out of that process that we restore humanity to each other and that it's out of that process of humanizing each other and getting out of this idea of separation that your success comes somehow at the cost of my success but in fact we together can become more whole and more realized and more healed by engaging in this restorative process of inquiry okay so by that definition you kind of started out with a sense of inequity and so right away what it raises is what is a just distribution because justice is about the distribution that's what it's about and your definition of just may not be the same as mine so I go again to the liberty view of justice if I am truly a libertarian type and there are lots of them down in Silicon Valley who would say look I basically I worked hard for this the company did really well I made hundreds of millions of dollars that is a just outcome and if I feel a little bit bad about people that opportunity maybe I'll invest in helping to create training for them to get that opportunity that might be my response or I might create a universal basic income and give you a little bit of my income but the notion of what is equitable in terms of distribution is key to what you're talking about it seems to me well part of it is the equity around distribution and part of it is also the equity of participation and engagement and when I talk about in part the purpose of capital is to act as a fuel for freedom for the individual to pursue their actualization of self in the context of community and planet and what's missing from the conversations today in terms of can you do well and do good how do we think about this the previous speakers comment that we need to understand how the government and that that will be the solution I think kind of forgets that's kind of how we got here to begin with it's certainly interactive I used to be a community street social worker and part of why I ended up moving into social enterprise and this part of the conversation was out of a frustration with how the governmental system was functioning in the 80s and how we were able to do our goal, our vision the opportunities before us and use capital as a fuel to enable us to do that but we will not be successful if we view again our success as separate from each other that we cannot to be the victor standing on a charred planet because the earth is something somebody else is responsible for is simply not an acceptable outcome that to reach nirvana you have to ensure that all of your colleagues, partners and other sentient beings have reached nirvana and that you cannot be liberated if anybody else is oppressed and so this is kind of where I think we need just to fundamentally reframe our understanding of what this conversation is about and this is why a lot of the book kind of looks at various ideas traditions and understandings that we have together through an impact lens I won't pursue as an economist what I would pursue related to that is somewhere Jed says strongly there is no such thing as an externality now the problem with externality as a concept for what you're talking about is that is definitely between me and the other I'm doing something, I'm affecting the other somebody like the government has to come in and mitigate that effect and you're saying two things, the government isn't doing it and two, that's the wrong way to think about it, I need to always be thinking about my effect on others so how does this work from an economist perspective though because I totally get that and that thinking in the large part is what's kind of brought us to this place where we need to have a different way to understand how to think about economics as you were saying distribution I don't know if it's brought us to this place I think you also said and I agree with this, part of what's happened here when you were a street organizer is that for a considerable period of time after World War II the advanced industrial economies actually moved to actually put in a number of policies, social welfare policies to deal with inequities pro-education, pro-health policies, that wasn't true in the US but things to say we understand their externalities my health affects your health my education affects your education my lack of income and poverty both reflects your lack of income and poverty but also affects your quality of life and my quality of life the government was the way to try to handle this in the absence of stepping back of government from doing that basically we've had more nonprofits, more social enterprises more for-profits social enterprises because we've had to create a civic reaction to an absence of solving that problem that's how I would think about it and so I know you sit on a few boards within the financial services industry as you all are thinking about these opportunities and how to engage and respond to on the one hand customer demand but also set the terms of the new capital if you will are you having these kind of discussions in those contexts and what needs to happen to shift the understanding of purpose at the fiduciary level so gradually what is happening subject to different kinds of fiduciary rules in different societies is more and a growth in the interest of what you might call alternative investments and these oftentimes show up on lists of alternative investments they're not just financially returns investments again what I think is happening and when I'm optimistic about it what I say is it's the investors themselves that are coming to the firms and saying you have to do this okay they're saying to the big corporates of the world you have to pay attention to climate you have to pay attention to gender diversity you have to pay attention to lack of discrimination if you don't we will you will show up in the press or on some ranking is having a really bad ranking and then investors will say I will I won't invest in you so then the firms say to the financial firms that serve them hey we've got to actually have our financial instruments our bonds at our stocks and the other our private equity funds we have to have them focused on what we are trying to do to meet investor demand so I my optimism is investors have to drive this okay they the firms are going to respond and they are responding but it's not going to come from them you know they're so what's happened over the years is that there has been I think the growth of other stakeholder voices so that the voice the primacy of the shareholder has been certainly curtailed by the growth of stakeholder interest so when Larry thinks says basically that you have to have a social purpose as well as financial returns that's a pretty big statement to the companies whose equities he's holding or trading for them right and as example of that in in the US in the late 1800s fiduciaries within the state of New York were not allowed to invest in anything other than bonds issued by the state of New York and it was in fact the fiduciaries who push back on the regulators and said wait a minute we have a broader responsibility we have broader opportunities so they were the ones who shifted and I think what I'm trying to say in the book is that each of us as individuals we are the market and we need to be super clear around this question of purpose and meaning because that is the foundation of the instruments the strategies and the approaches that we then bring to the management of our wealth so the investors have to do some history cultural philosophical Buddhist reading now I'm sorry we're going to run out of time but one really important question us versus the other we versus them I am very concerned right now that the world seem to be moving much more towards a kind of tribalism we heard our president last night say nationalism that you care about your group there's a lot of in-group loyalty but there's a lot of not us so how do you really talk about the importance of connecting at a moment in time when we seem to be moving in the opposite direction on that one so what shall we do about that well I mean I think that the opportunity we have this is a very scary point in time for a lot of us and the opportunity we have as individuals is not to become yet even more isolated and fearful and hurt and angry but rather to rise up and to simultaneously go higher and deeper as we explore the question of meaning and purpose for ourselves and as we place our own experience of that within the broader context of humanity and you really have almost a lifting of a weight off your shoulders when you view it in that context as opposed to self or tribe in opposition to the broader flows and we are going to continue some of this conversation later today at 5.30 in room 5 and the book is actually free you can get free e-book copies because I am less interested in selling books than I am in trying to influence the conversation so I hope you do check that out and participate in these conversations it's fantastic Jan is really again one of the creators of why we're here today and he's saying to us let's go through the next big set of questions and the fact that it's an e-book for free shows that he is living the message so thank you very much thank you so much Laura it's been a pleasure thank you