Social Venture Capitalists, Where Are You?

I was reading yet another story about the impact that venture capital companies are having on the economy of Boston.  Good (scientific and technological) ideas emerge from the laboratories at MIT, Harvard and other Boston area universities. Venture capital firms swarm the best of these, offering start-up funding and a lot of advice on how to get new products to market and convince others to invest in them.  The venture capital firms have learned a lot over the past few decades about picking winners and losers.  They know what to look for. They  measure their success in terms of the private investment capital they can attract (often by going public) and the increasing valuation of the companies they create, when they are later bought and sold. They don't actually have to make money in the short term to be considered a long-term success.

There are a lot of us around who know how to help companies, communities, organizations and agencies build social capital.  That is, we know how to help companies improve corporate-stakeholder and corporate-community relations.  We know how to build trust where only suspicion once reigned.  If you can do this, you can multiple the return to capital realized by the venture capitalists AND produce fairer, more sustainable results. We know how to help extractive industries like mining and forestry, for instance,  avoid the endless legal battles and costly delays that make it hard to get started and harder to function in a cost-effective way. They need to change the way they interact with host communities, regulators, and people likely to be affected by what they do.  We can show them how to do that.

The largest hydroproject in Chile was just stopped by the courts because the companies involved did not make sufficient efforts to engage residents (including indigenous communities) in thinking about what to build, where to build and how to minimize impacts (by making smarter locational and design decisions).  They never got around to talking about compensation for adverse impacts that could not be mitigated. Secret corporate decisions led to harsh public opposition.  Legal and political advocates were able to delay and ultimately stop what looked to be a done deal. Huge oil and gas projects proposed in the Arctic are likely to be stalled in the same way, and appropriately so, if companies don't invest sufficient time, effort and money now in building trust, sharing decision-making responsibility, and minimizing social and environmental impacts.   Oil, gas and mining interests in Africa are sitting on huge new finds, but they face long stalemates if they don't  figure out how to build social capital. If local interests don't stop them, international NGO's like Greenpeace will.  The old models that ignored the need to build social capital (i.e. good working relationships with those likely to be affected by what is being proposed) no longer work.

At the local level in the United States, its much the same story. Energy companies know that we need more electricity to support a growing economy; yet, efforts to initiate fracking (natural gas exploration), the siting of renewable energy facilities (like wind farms and large solar arrays) and large scale mixed use development projects in many cities are facing increasing opposition. What's sad, is that it would not be that difficult to help the companies involved generate the social capital required to permit (appropriately-sized sited) projects go forward without obstruction. Think in terms of Community Benefit Corporations.  Any developer proposing to build any large project in a city or in a region would create a private corporation. This legal entity would own a portion of the assets created by the project.  It would then distribute shares in that project to every resident or stakeholder. These shares would not be worth anything at the outset, but if the project goes forward with community and stakeholder support, the shares would gain in value.  Thus, the developer and the community have a joint interest in finding a version of the propose project that everyone can support. Shareholders, or course, would be able to speak at annual meetings.  They wouldn't have to plead for an opportunity to address the owners (to complain about unexpected social and environmental impacts), because they would be the owners.  The directors of each Community Benefit Corporation would include a certain number of members identified by the investors, several selected by elected officials and some chosen by the full membership of the shareholders.  (Rural Electric Cooperatives in the United States have been doing this for an awfully long time.)  This is just one option for building shared commitments and restoring levels of trust.

Building social capital in something that most venture capital investors know nothing about.  There are, however, organizations (mostly not-for-profits) with the knowledge and experience to provide investors with the advice and assistance they need.  Increasing social capital translates into greater economic returns.  It also translates into more socially and environmentally responsible development and restores trust that has been so eroded by the manipulation of public opinion by secret investors operating under made-up names implying they care about what happens to the average person. They don't.  The political deadlock we are in now is caused fundamentally by a lack of trust. We can work to restore trust, increase the chances for development (of the appropriate kind) to proceed, enhance the growth of the economy and cause the benefits of new development to be shared in a fairer way.  We just need to complement our fascination with venture capital (and an economy of start-ups) with a purposeful commitment to the creation of social capital.  And the people with all the money need to acknowledge they need the help of advisors from the not-for-profit world who have been creating social capital for years. 

Preparing for Climate Change Requires Collective Risk Management (CRM)

If I told you that your coastal city will probably face rising sea levels, more very hot summer days, and increasingly intense rain and snow storms, would you expect someone to do something? What exactly? And whose responsibility is it to take appropriate action?  Even if  the city wants to do something, what can they do to minimize the worst effects?

The Science Impact Collaborative at MIT has prepared risk assessments for four coastal communities in New England.   Here’s what one looks like (please click the images to view them in full screen format):

By downscaling global circulation models (and checking forecasts against actual meteorological data from local measuring stations) we can generate local forecasts for the near term (about 20 - 30 years in the future), the medium term (about 50 – 60 years into the future) and what we are calling the long term (about 80 – 90 years in the future).  All the towns we looked at are very likely to get hotter and wetter.  You can see all the details about the forecasting methods and our findings at necap.mit.edu.

If I boil all the results down, and tell you that annual rainfall is going to increase 5 inches a year (or about 10%) over the next several decades, the number of times extreme rainfall happens (more than 4” in 48 hours) will double, sea level will increase between two and five feet, and the number of days with 90 degree temperature in the summer will increase from about three to as many as 30, would that worry you? After all, the worst effects might not happen during your lifetime (although they are very likely to happen during the lifetime of your children).   My assumption is that your first reaction would be, “What does this mean for me?”   Well, it means that if you live in a low-lying area, your house is going to be flooded periodically, and you are likely to be without electricity for extended periods.   If you live very near the shore, erosion might make your house uninsurable and unsellable.  If your mobility happens to be limited (by age or illness), you might need to evacuate periodically. And, you may have to stay in an air-conditioned location for long stretches in the summer. It could be that you will be at greater risk of suffering from airborne diseases of various kinds. In general, you can probably expect to be inconvenienced and even endangered on a regular basis.  Your drinking water supply could be at risk.

If everyone in your city is upset enough about all of this, you could press your elected officials to do something.  They could raise taxes and invest in various improvements to the town infrastructure (including roads, electricity transmission lines, drinking water, waste treatment systems, and even water-proofing public buildings).   They might buy a lot more emergency response equipment and arrange to have more trained personnel available.  They might try to reduce the vulnerability of coastal properties by building seawalls or other blockades, although these are very expensive. They could impose new zoning and development restrictions or “buy out” property owners in the most vulnerable areas.  They could adopt revised building codes requiring everyone to build new houses up on stilts or with first floor “breakaway panels” so that water can run through without destroying the whole structure.  Some of these are things that individual property owners can do on their own, most require permission of the local government or collective efforts.

In our surveys, many people are pessimistic about the ability and willingness of their local officials to take action.  They are not optimistic that officials will take climate change risks into account when they make new infrastructure investments today.  It makes no sense, for example, to build a wastewater treatment plant by the harbor (even if the town already owns the land there), if that facility is likely to be flooded out or destroyed multiple times during its 30-40 year life. But, if no one pays attention of the kinds of risks we have outlined, that’s just what will happen.  Can you imagine having to invest multiple times in rebuilding the same facility because no one bothered to take climate risks into account when they chose the site or designed the facility in the first place?

If we publish a list of possible actions your town can take to prepare for climate risks, along with a price tag for each possible move, it’s probably fair to say that there will be substantial disagreement about what should be done.  Some people won’t want the town to take any action.  Some will be indignant about having restrictions placed on what they can do with their own property (even though they will certainly expect to be rescued at town expense in the next big storm and will blame officials if they can no longer purchase property insurance because the town failed to take obvious risk reduction steps).  Until and unless the whole town gets together, educates itself about the likely risks, inventories possible adaptation strategies and reaches agreement on the best way to proceed, nothing is going to happen.

Our work has focused on designing and testing low-cost strategies for preparing coastal communities to take collective risk management decisions.  It turns out not to be that hard.  In a couple of hours, we can help large numbers of residents attending regularly scheduled meetings of organizations, social clubs, homeowner associations or business groups, to learn what they need to know and see how easy it is to generate informed agreements when people listen to each other and take each other’s views seriously. If this is something you want to your community to do, learn more at the New England Climate Adaption Project, the Science Impact Collaborative, or the Consensus Building Institute. 

You've Got to Go Slow to Go Fast

[On the occasion of the twentieth anniversary of the Consensus Building Institute, April, 2014]

I don’t like to put things off. I’m for getting everything done as quickly as possible.  And even though I’m trained as a planner, I’ve always been more focused on the present than the future.  So, when we started the Consensus Building Institute (CBI) in 1983, I was committed to moving quickly to launch a not-for-profit organization that would offer mediation and other neutral services in as many locations as possible, as quickly as possible.  We didn’t have a business plan. What I told prospective clients was that we could help them address almost any kind of conflict by (1) talking with all the disputants privately and confidentially, (2) organizing training or other capacity-building activities that would prepare them to engage in joint problem-solving, (3) undertaking background research that might shed light on relevant lessons learned elsewhere, and (4) facilitating face-to-face conversations or problem-solving efforts that could lead to mutually advantageous outcomes.  It took some years for me to realize that people and organizations dealing with difficult conflicts are not inclined to move quickly in new and different ways, even though I was convinced we could be of immediate assistance. Most had no idea about the ways in which professional neutrals can add value.

Twenty years later, CBI operates in a different way.  We now tell potential clients that they must “go slow to go fast” (an argument, by the way, that I eventually introduced in my book Breaking the Impasse in 1987).  Why? Why can’t people, groups and organizations move quickly to deploy consensus-building services or switch from a zero-sum approach to a mutual gains approach to decision-making?  There are three important answers to this question that our first twenty years have taught us.  First, doing things in a new way is likely to seem risky (even if the old way of doing things isn’t working).  Second, no one in a position of power wants to give up control, and many think that the addition of a professional neutral means that someone will be taking over from them.  Third, even if we have identified a champion in an organization, fully committed to consensus building, that individual needs time to bring their organization along.

Doing Things in a New Way Seems Risky

Even though the advantages of consensus building may be clear to us, we need to help clients understand exactly how this new way of working will unfold.  They need to feel confident enough about what we are proposing to explain it to others (who may be skeptical).  Whatever dangers or threats they see, must be addressed, carefully and slowly. We need to get people to understand that consensus building is not just a good idea in theory but that there are ways in practice of minimizing any risks attached to moving in a new direction or doing things in a new way.

People in Power See Mediation As a Threat

People still confuse mediation or consensus building with arbitration. That is, they think neutrals will impose judgments rather than helping the parties reach informed agreements. People in the middle of disputes or conflicts tend to think in win-lose terms.  So, they are unlikely to believe, at the outset, that all-gain solutions are possible.

Consensus building Requires Organizational Not Just

Individual Commitment

Even in the short run, someone who wants to advocate consensus building needs to sell others in their organization on the idea.

We want to leave problem-solving capabilities in place that do not hinge on our involvement going forward.  In a sense, we want to put ourselves out of a job by building our clients’ problem-solving capabilities.  (I know some people think that’s not a good business strategy, but I disagree.  Satisfied clients we have empowered to handle things on their own are much more likely to recommend us than those dependent on us, and often they want us to partner with them on complicated projects.)

I’m excited to be part of this wonderful effort to help CBI look ahead twenty years.   Now that we know that we have to go slow to go fast, I’m confident we can use build our knowledge base and enable a wide array of new clients to apply consensus building to water, food, energy and other disputes in our increasingly constrained world.