Touching the Shark: Advice on Impact Investment

If “lean-in” was last year’s corporate slogan, then this year, one must be careful how far one does without tempting the fates.

The minute the Future of Jobs/4th Industrial Wave Report was released online by WEF a few weeks before Davos, boardrooms around the world began to tilt. If the delegates at Davos agreed on one thing, it is that inevitably the consumer and labor markets are bound to cause a massive shift in economic reality just as technology did at the end of the last century. 
The theme at Davos this year speaks directly to the anticipation and concerns business people rightfully have about the high velocity, high-tech, innovation-centric marketplace. Larry Downes and Paul Nunes, who blog for Forbes, insist that we have entered a new and slightly scarier stage: “big bang disruption.” “This is not disruptive innovation,” they warn, “It is devastating innovation.”

It appears that to succeed in the next five, ten or twenty, we must decide to between disruption or be disrupted. Venture capitalist Josh Linkner warns in a new book ‘The Road to Reinvention,’ that “fickle consumer trends, friction-free markets, and political unrest,” along with “dizzying speed, exponential complexity, and mind-numbing technology advances” mean that the time has come to panic as you’ve never panicked before.

It behooves us then to heed the following examples of disruption from Industrial history.

Morrison-Knudsen, an engineering and construction firm, got its start in 1905 helping build more than a hundred and fifty dams all over the world, including the Hoover Dam. Beginning in 1988, a new CEO, William Agee, looked to new products and new markets. After Bill Clinton’s election in 1992, he bet on mass transit. A better bet now for sure, but then, it was too early. He proceeded to direct the construction of both commuter and long-distance train cars through two subsidiaries, MK Transit, and MK Rail. These disruptive businesses proved to be a disaster. Morrison-Knudsen announced in 1995 that it had lost three hundred and fifty million dollars. The company had mostly collapsed — not because it did not disruptively innovate, but because it did and failed.

However, there’s another chapter to this story.

Nearly twenty years later, under the Company’s P3 Division we are cleaning up several abandoned mines in the Ruby Valley and Pilot Mountain areas of northern Nevada. The sites are located in both Shoshone Tribal areas as well as federal lands. They are re-mediating all toxic soils, restoring creeks, ponds, and lakes to their natural state and building several upgraded roads for the Tribes access in the area for commerce, hunting, and fishing. The $450 million contract is being performed under an agreement with the Nevada Bureau of Mines; the EPA; the Department of the Interior; the BLM and the Tribe.

The lesson? First, Morrison-Knudsen pivoted and learned from earlier failures, and perhaps, more importantly, this time around decidedly has taken a double bottom line approach of profit and people.

Time, Inc., founded in 1922, auto-disrupted, too. In 1994, the company launched Pathfinder, an early new-media venture, as an umbrella Web site for its magazines at a cost estimated to have exceeded a hundred million dollars. The site was abandoned in 1999. Had Pathfinder been successful, it would have been greeted, retrospectively, as evidence of disruptive innovation. Instead, as one of its producers put it, “it is like it never existed.”*

The financial-services industry disrupted the securities market by selling products like subprime mortgages, collateralized debt obligations and mortgage-backed securities, some to a previously untapped customer base. Another fundamentally disruptive move. I think we all know how that one ended.

Forget the Wow, Show me the How

Almost forty years ago in the late 1970s the term “Information Economy” indicated the beginning of an era where information and technology were supplanting manufacturing as the core of innovation and economic growth. That tipping point, according to most pundits is 2020. Coaches will charge somewhere in the ballpark of 10k to inform you that in addition to actually producing and profiting you ought to optimize the amount of meaning and fulfillment your employees and customers feel every day.

Intention & Impact

By now most larger, multi-national companies are in the early stages of exploring the demands of the new market are. Some critics blame this on the failure of these organizations and their leadership to understand the psychological underpinnings of the changing demands of consumers and employees.

The disconnect between economic life and existential life, (defined as a life motivated by a search for meaning), has been raised and answered in a radical way by everyone from theologians like Trappist monk Thomas Merton to civil rights leaders like Mahatma Gandhi, from authors like Tolstoy to physicians like Albert Schweitzer. Their answers vary, but invariably the tendency is to see the meaning and a “normal” contemporary life as being incompatible.

“Meaning”, or purpose, is driven by three particular and somewhat connected needs. Meaning comes from making an impact through our work, facing challenges and growing as individuals, and having healthy relationships with those around us.

The ready access to international economics business people now has a complex but not an entirely new phenomenon. The thinking person is challenged to derive meaning amidst media saturated with conflicting images of this dichotomy. Some regard the very act of questioning the value of “money culture” as treasonous, ignoring the deleterious effect of wealth while still others preach a stilted, disempowering view of Capitalism as the “Great Satan.”

Where does one find balance?

Commentators and pundits believe that purpose or impact will be what will soon mark the difference between those investors that can weather these changes and make a difference from others who will just fall off the map. This attrition is bound to include the communication experts and marketers whom to this point, have been peddling “purpose-driven agendas” with verbiage alone. Even if the majority of CEOs understand that a new ethos is the new driving force of the economy and see that understanding the importance of purpose — for employees, clients, and customers , that is not the entire story. Change must go further.

Just like the Industrial Age built the infrastructure needed to birth the Information Economy, advancements in cloud/distributed computing, AI, predictive analytics and the “Internet of things” fuel a new kind of company and by extension, a new ethos. However, beware, verbiage prevails. No matter what analyst tells you about Uber, WhatsApp, Airbnb and the like, these are, but small contributions on a global scale and they are have yet fully realized actual, appreciable economic impact on the macro-level. The same way advances of the Information Economy build up to the 4th Industrial Revolution, the inflection towards a more consumer-centric economy is still dwarfed by corporatism.

Being cautious and tempering the “wow” of the purpose-driven, or intentional, impact economy is not pontificating. It is called being realistic. My advice is that businesses should strive to do the opposite of “wow” and concentrate entirely on the mechanics of “how”.

It is too easy to invest in solar panels when the sun is shining, or even worse if you live in Southern Calfornia. Beware of optimism, and getting sold on wow. Get a hold of “how”. An opportunity to participate in actual sustainable growth on what you actually can do, right now today not what you might be able to do tomorrow. The urgency you possess as a leader should be “now-focused” on the people and planning, and not on dreams. If this sounds counter-intuitive to the endless drone of entrepreneurial, start-up blather you are hearing, congratulate yourself for actually listening. Kudos.

According to Imperative 2015 Workforce Purpose Index (WPI), 50% of CEOs are Purpose-Oriented leaders. These leaders see work beyond the level of ego or even social status and see the potential for global impact on humanity’s biggest issues. Global investors that understand the complexity of the economic climate and realize that being early adopters, not of gadgets, but of an intentional ethos realize that is not just “a massive business opportunity,” but impactful at the global level, and critical to their growth. *

To give you a sense of this, consider what’s happening at the top of the pyramid, at Apple.

The gadget-maker has been the world’s most valuable listed company for almost five years, mostly thanks to the sale of over 700m iPhones. However, some wonder if the bestselling smartphone’s streak may be ending. Apple’s quarterly earnings, reported today, should show whether demand for its hottest product has cooled. Suppliers have issued stark warnings of declining orders for parts such as chips and cameras. The many iPhone-owners who hurried to upgrade to the current models, 6 and 6s, don’t need another just yet. A slowdown would be fine if Apple had another product anywhere near as popular and profitable.

Apple needs extra horsepower sooner than that. Will it come from purpose, or intentionally driven productization — probably not. Even for a renowned innovator, that is easier said than done. Its smartwatch has not yet taken off. It is interesting to note that it is truly game-changing idea-a planned electric car- does not offer immediate hope. Steve Zadesky, the project’s head, quite recently, citing personal reasons; and no iCar will be in the markets before 2020, if at all.

As CEOs look to transform and thrive in the 4th Industrial revolution, they should focus their efforts on understanding not just how they bring meaning to their current customers and employees but what impact they have generationally and globally.

How are they helping the developing world, making an impact on those most affected by war, terrorism and food security? Smart investors will use center on relationships, impact, and growth to extend naturally their existing strengths and redefine global economics.