“So, What Exactly Are You Doing?”

Explained: The TransCap Initiative as a Meso Space

I recently published two articles as part of the “In Defense of Theory” series that explore the concept of the Space as a mental model for organizing innovation work and of the meso layer as a critical stratum in the systems innovation sphere. This article illuminates the concept of a Meso Space through the lens of the TransCap Initiative.

The most pressing and tangible sustainability challenges of the 21st century — such as climate change, social inequality, environmental pollution, and biodiversity loss — are complex systemic problems. They call for systemic intervention strategies designed for complex contexts. This is also true for how we deploy financial capital, a powerful lever of change.

So what does a systemic investment approach designed for complexity and attuned to sustainability transitions look like?

The answer is not obvious. In fact, I believe it doesn’t exist yet. What we do know is that ESG investing — the most prevalent sustainable finance strategy — is not going to drive transformative outcomes. But beyond that, we need inquiries to help new systemic investment logics discover, develop, and diffuse themselves. The TransCap Initiative is such an inquiry. This article explains why I keep referring to it as a Meso Space.

The Fundamentals

Let’s start by briefly recapping some fundamentals.

Based on the axiom that complex systemic challenges call for systemic solutions, the TransCap white paper puts forward a hypothesis of what an investment logic at the intersection of systems thinking, complexity science, and finance practice could look like. This hypothesis stands on the intellectual shoulders of some of today’s greatest minds in the fields of economics, political science, business management, and social innovation (see appendix).

Any systems innovation work must make assumptions about how change happens in the world. The TransCap Initiative does that on two levels. On one level sits the question of how money as a lever of change needs to be deployed in real-economy systems in order to unleash transformative change. This question relates to the transformation capital investment logic and sits at the level of individual systems, for instance, the neighbourhood of Ladywood in Birmingham (UK). I refer to our emerging response to this question as our theory of change:

Investing in a systemic way designed for complexity is a more promising approach to generating sustainability outcomes in complex adaptive systems than following the inherently unsystemic paradigms, structures, and practices of traditional finance orthodoxy.

The other question is about how elements of a systemic investment logic — once developed, tested, and validated — diffuse beyond their initial testbeds. This question thus relates to TransCap as an innovation initiative and sits “above” individual systems, at the meta-level. I call our emerging response to this question impact pathway.

The distinction between theory of change and impact pathway is important because most innovations don’t diffuse on their own. So we must construct scaling conduits to ensure that they don’t remain beautiful exceptions but can be adopted by others in different places, contexts, and system scales.

Diffusion along the impact pathway is a prerequisite for what the TransCap Initiative ultimately wants to achieve: to shift mindsets and practices in the world of finance with regard to the adoption of systemic principles and methods so that capital investments can more effectively address today’s most pressing sustainability challenges.

Mission and Work Programme

Developing, testing, and refining the theory of change and constructing an impact pathway is the mission of the TransCap Initiative. The work programme is what operationalises this mission. It rests on three pillars:

1) Conceptual Development

The transformation capital investment logic is not a robust methodology yet. What’s hypothesized in the TransCap white paper only serves as a point of departure for the journey of exploration and discovery that lies ahead. That’s why we need to develop original knowledge and innovation to make the ideas, practices, and methods embedded in the TransCap design space actionable. This will require philosophizing, theorizing, researching, designing, and creating, all done through collaborations with some of the world’s foremost systems innovators.

2) Prototyping

Notwithstanding the importance of conceptual development work, it is impossible to bring a systemic investment logic to life with conceptual work alone. Theoretical and practical work must come together in a virtuous circle, whereby the (emerging) theory guides the practice and the (emerging) practice advances the theory.

So it is vital that the TransCap Initiative does hands-on, on-the-ground testing in real places and value chains, through a diverse portfolio of experiments that spans different system types, system scales, challenges, thematic areas, and focal topics. I call these experiments prototypes.

For example, we are partnering with the UN Development Programme and the Ministry of Foreign Affairs of Finland (Hanoi Embassy) on developing a systemic investment programme addressing plastic waste management in Vietnam. What we hope to generate through this process is a multi-year, multi-asset-class investment facility suitable for public-sector and multilateral financial institutions. And in Birmingham (UK), we are partnering with Dark Matter, CIVIC SQUARE, ThirtyPercy Foundation, and Lankelly Chase on developing a civic-led systemic investment orthodoxy. This prototype has a special focus on future-fitting the built environment (particularly housing) and will focus on private-sector, public-sector, and civic investors in the UK (more about his here).

Every prototype is designed to test a subset of elements of the TransCap design space. This work is often organised in individual projects. In some cases, however, it may also develop as a fractal of the initiative, i.e. a “space within a space” with a special focus on a specific system. What’s important is that all prototypes, no matter their idiosyncrasies, are connected through a learning and sensemaking layer so that they can cross-fertilise each other and help us understand what’s working, what’s missing, and what needs to be refined.

Prototypes serve three basic functions:

  • To generate positive impact for the people depending on the systems in which the work takes place (“manage millions”);
  • To provide the reference transactions, proof points, and investment opportunities required for field-building (“connect billions”); and
  • To supply the themes, plots, settings, characters, and stories that form the ingredients of the narrative work (“inspire trillions”).

For a prototype to effectively serve these functions, it must actually move money through the composition and capitalization of investment portfolios. Seeing is believing, and only if we demonstrate concretely how the ideas of systemic investing manifest themselves in real-world transactions will we instil a sense of possibility and agency in those who have to be convinced.

3) Field Building

Building the field of systemic investing is about developing, activating, and nurturing a community of practice. It remains to be seen whether this community is going to pervade the financial sector as it exists today, come into being as a new alternative financial system that operates alongside the incumbent structures, or do both.

In any case, the community of practice must cover the entire “capital stack” and span different disciplines, geographies, and system scales. It must be open, diverse, and committed to a set of common values. And it must be enabled and energized to behave as an actual community, not just a network.

The Space

The challenge, then, is to design a “container” capable of holding and enabling this work. I call this container a Space.

In the article “Embrace the Space”, I describe what a “Space” is and how — as a mental model for organising work — it’s different from a “Project” and a “Platform”. In essence, you can think of a Space as an “initiative” whose purpose is to orchestrate people to come together, imagine the future, and collaborate to make that future happen.

Jennie Winhall and Charlie Leadbeater, in their seminal publication on systems innovation, call this the “Washing Machine”, where “insiders and outsiders, new and old, challenge and possibility can come together to find new, collaborative solutions.” Another way to think of a Space is as an umbrella under which lots of things happen — a modern-day version of the ancient Roman forum.

“In addition to its standard function as a marketplace, a forum was a gathering place of great social significance, and often the scene of diverse activities, including political discussions and debates, rendezvous, meetings, et cetera.” Forum (Roman), in Wikipedia

The principal purpose of a Space is to enable engagements — encounters, conversations, collaborations, exchanges — and extract insights and strategic intelligence from these. As such, a Space is multi-faceted and can adopt several identities and operating modes, e.g. as open innovation programme, think tank, venture incubator, knowledge network, research cluster, capital facilitator, and social movement.

The Forum Romanum in Rome — the ancient version of an innovation Space (via Unsplash)

This plurality distinguishes a Space from a “Project”. A Project is an endeavour that pursues clearly defined objectives according to a detailed execution plan and in a linear and sequential fashion. Spaces do operate with work plans and budgets but in a much looser and more adaptive fashion, recognising that work plans are subject to emergence and prone to evolve in unexpected directions. Spaces do pursue a set of objectives but have a more qualitative relationship with these; they put more emphasis on the articulation and ongoing renewal of intent(s). And Spaces do contain projects, but they also host structured conversations, research inquiries, physical gatherings, writing practices, podcast and video productions, and perhaps even operate physical spaces.

Here are some of the characteristics that make the TransCap Initiative a quintessential innovation Space:

  • Using the TransCap white paper as a point of departure, it inquires into a systemic investment logic through a plethora of research, innovation, prototyping, and field-building engagements;
  • It convenes, orchestrates, and activates a diverse community of partner organisations to innovate, experiment, and learn together;
  • It manages its scope and resources dynamically, adjusting both in response to what emerges from the work;
  • It invests heavily in a learning infrastructure to generate insights and extract strategic intelligence; and
  • It is orchestrated and stewarded by a “Backbone” (a term borrowed from a 2012 article in the Stanford Social Review), whose principal purpose is to energise and empower the community of partner organisations.

Another defining characteristic of the TCI is that it will likely undergo morphological evolution. What I mean here is that what the TCI looks and feels like will evolve over time, and will do so in a discrete rather than a continuous fashion. In the beginning, perhaps for the first 3–4 years, the emphasis will be on developing concepts, gaining practical experience, building the team, developing the operational infrastructure, and activating the innovation community. During this initial phase, the TCI will operate as an open innovation initiative.

Over time, as the work matures, our focus will shift toward refining the theory, building repeatable methods and tools, developing standards and handbooks, refreshing the research agenda, and designing and implementing scaling protocols. This is when the TransCap Initiative will think and act more like a platform.

Finally, with the artefacts and experiences of the platform phase, mainstreaming systems thinking throughout the world of finance and/or accelerating the development of an entirely new financial system might become potentialities. At that stage, the initiative might strive to become a social movement, focusing on disseminating narratives, connecting innovation clusters, showcasing impacts, influencing communities of practice, and connecting with institutional mechanisms.

All of these stages are distinct morphologies because the fundamental nature of the work changes. Orchestrating an open innovation initiative is very different from catalysing a social movement, for instance. So each stage requires its own set of mindsets, skills, resources, and execution strategies.

The TransCap Initiative is more like a butterfly than a mammal. It won’t grow linearly and in only one direction but instead pass through several morphological stages over its lifetime.

The Meso Dimension

As I explain in “Meso Matters”, the meso layer is an increasingly important stratum in the systems innovation sphere. Complex societal challenges require that the micro and macro levels of innovation interact in novel ways, with a different quality. Such interaction must be facilitated by a “bridge” sitting on the meso level, a kind of “connective tissue” between “ivory-tower institutions, corporations, and governments and the ‘trench folks’ of innovators, entrepreneurs, community organizers, free spirits, and ordinary citizens.”

The article goes on to identify six basic functions of Meso Spaces. The TransCap Initiative is designed to play all of these:

  1. Convener — creating an intellectual, social, and collaborative “home” for all those interested in building the field of systemic investing; scouting for and engaging new partners; instigating collaborations.
  2. Sensemaker — developing and nurturing a learning capability to extract insights and generate strategic intelligence from across the TCI’s portfolio of work through learning protocols and sensemaking sessions.
  3. Coherer — ensuring that individual engagements are internally coherent and that the transformation capital investment logic can be “continuously architected”.
  4. Impact Guardian — protecting the impact pathway from mission drift through ground rules, commitments to shared principles, and selectivity in partner engagement, among others.
  5. Balancer — surfacing and confronting imbalances of power, influence, and representation by involving the un- or under-represented, engaging facilitators, and moderating the social dynamics throughout the Space.
  6. Scaler — putting a diffusion mindset at the heart of each piece of work by shaping mindsets, linking the work to institutional mechanisms, and leveraging storytelling to diffuse the systemic investing narrative.

Putting it in Perspective

Everything written above is one big hypothesis. The work of the TransCap Initiative takes place against a backdrop of fundamental uncertainty, so any long-term plan is going to be outdated pretty quickly. So my ideas — what the TCI is, what it does, how it’s organized, and who’s part of it — are going to change over time, and sooner than the certitude of this article may suggest.

What’s important is that everybody who’s part of this journey not only accepts this but embraces it. What’s even more important is that we don’t waste a lot of time planning but continue to get into the weeds.

Appendix — The Intellectual Foundations

The transformation capital investment logic rests on the following intellectual pillars:

  • The literature on systems theory — for instance, Donella Meadows’s work on leverage points, John H. Holland’s characterization of complex adaptive systems, and Eric Beinhocker’s application of systems thinking to economics — which encourages us to see the human world as a web of interconnected parts driven by feedback loops, shaped by non-linearity, and governed by fundamental uncertainty.
  • Mariana Mazzucato’s advocacy for mission-oriented innovation and Kate Raworth’s 21st-century economic framework Doughnut Economics, which provide mental models for articulating intents and introducing directionality into systems change work.
  • Dave Snowden’s Cynefin Framework — a compass to choose the right managerial strategies depending on whether the domain is simple, complicated, complex, or chaotic — which provides a blueprint for how to conceptualize intervention strategies for innovating in complexity.
  • The emerging theory and practice of systems innovation — including concepts such as theory of change, systems mapping, innovation portfolio composition and sensemaking, field building, and Chôra Foundation’s seminal work on “spaceforms”— which serve as a growing repository of knowledge, experience, and inspiration.

In addition, the TransCap Initiative has borrowed heavily from two fields of inquiry in conceiving its impact pathway:

  • Robert Shiller’s work on narrative economics — the argument that economic policies and practices are strongly influenced by social and cultural narratives — which provides a scientific corroboration of Donella Meadows’s argument that the most potent levers in driving systems change are mindsets and paradigms.
  • Individual inquiries into the diffusion pathways of ideas and innovation artefacts — such as Cass R. Sunstein’s “How Change Happens”, Derek Thompson’s “Hit Makers”, and the concept of Explosive Percolation — which give us clues for how to design scaling principles into the initiative from the start.

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This publication explores the theory and practice of systemic investing for catalysing sustainability transitions in the places where we live, work, and play.

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Dominic Hofstetter

Dominic Hofstetter

I write to inform, inspire, and trigger new strategies for tackling climate change.

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