Montecito Journal: "Impact Investing - A New Way to Change the World"

An Article By Peter L. Brill, M.D. “Impact Investing—A New Way to Change the World,” Montecito Journal vol. 22/issue 6 (11-18 February 2016): 30.

Have you ever become discouraged by the incredible list of problems the world faces today: overpopulation, pollution, hunger, global warming, lack of clean water, religious intolerance and cultural struggle for dominance, nationalism and nuclear brinkmanship? I know I have.  Some blame it on technology. And yet somehow, with the growth of technology and society, we have arisen from the mud to perform great feats. Would you really, out of a sense of romanticism, want to go back to a simpler era without antibiotics? Are capitalism, technology and education, the great pillars of progress, now faltering in the road? I look at the great amount of money spent on philanthropy (3/4 of a trillion dollars in the U.S. alone) which does an enormous amount good for individuals (scholarships, food, emergency medicine, for example) and which certainly needs to continue; but, is this type of giving really capable of creating the kind of change strong enough to overcome the obstacles that the world faces? In Africa, there are wonderful people doing wonderful things with the finest motives.  But, on the other hand, Dambisa Moyo, author of Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa, demonstrates convincingly that the money governments and charities have poured into Africa have actually made things worse. You can understand how I have become discouraged.

Recently, two things have lifted my spirits and sense of hope. I would like to tell you a story. I saw a film at the Carmel Film Festival called The Man Who Saved the World. It’s a true story of Stanislav Petrov, a Russian Colonel who commanded the Russian early-warning center in 1983. Under his watch, five missiles, one at a time, appeared to be launched from the United States toward Russia as picked up by an infrared satellite. A second satellite had a way of visually confirming missiles from the United States Unfortunately, the missiles appeared to be launched from the terminus of the United States, meaning the edge of day and night, which made visualization difficult or impossible. Petrov should have alerted retaliation. Had he done that, the mutual annihilation of all life in the world would have likely begun. We are probably alive today because this man decided to wait until the missiles were over his country, and likely to destroy great parts of it if they struck, so that they could be confirmed by local radar. Fortunately, it was a glitch in the Russian computer systems. Subsequently, I found similar events have happened 20 times, ten on each side. Details of these events are found in Eric Schlosser’s book, Command and Control: Nuclear Weapons, the Damascus Accident, and the Illusion of Safety.

Who was Colonel Petrov and why, in the end, did he endanger his country to save the world?  Is there a part of human-kind that prizes the spark of life, a spiritual core, or was this a special man who had such a wonderful love of life that he couldn’t push the button? Colonel Petrov was a career officer who was completely alienated from his mother and brother. They never talked or spoke. Even the mention of his mother caused him to become so outraged that he would throw the movie makers out of his apartment. In stark contrast, his relationship with his wife was a Russian love story. He had fallen madly in love with his wife who then began to die horribly of cancer. It was on the shoulders of this man that the fate of the world rested. A tragic man, a man sanctioned by his superiors for failing to act, losing his dying wife after the nuclear crisis, and finally becoming an alcoholic.  He was ultimately honored by the United Nations and got to meet his idol, Kevin Costner, on his trip to the United States.

What could have caused this tragic man to do what he did? Is there any other explanation than there is good in all of us, and that deep down inside almost all of us honor life and that we sense that connection? There is no question that cooperation is better for everyone. Sure, you might benefit from momentary selfishness, and too much selflessness can doom a marriage or harm your life. But in the long run, we either survive together or we die together. What we need to do is fan the flames of that desire to care for each other. I tell you this story because this man symbolizes for me that the deep human connection with each other and life causes good to arise in the most impossible circumstance.

As evidence for this human connection, there is a certain force and truth to our response to human suffering. When we see one homeless person die on the street, we feel pain.  When we see a thousand die of an endemic disease, it shocks us.  When we see a million die from the ravages of war, something brings us to a deep level of despair. Could the world survive if we neglected one billion people and just let them die so that the rest of us can grow rich? If every thought is solely for ourselves or to benefit our own group, what will happen in the long run? I think we know the answers to these questions: we just don’t know how to bring about the changes necessary to alter our shared destiny.

This brings me to the second story. There is a movement to use capitalism to bring positive change to the world. It goes under lots of names. Conscious capitalism and impact investing are just two. I am a physician and psychiatrist, who attended business school, and worked with individuals, marriages and organizations throughout my career. I retired early after selling a couple of companies I started. Since then, I have been on the board of a number of nonprofits and contributed lots of money. I had even been a partner of a nonprofit that tried to help other nonprofits. I had faced the greatness and limitations of these organizations. There are wonderful people who work for and give to these organizations; but, I came to believe that most of these organizations can’t alter some of the key problems we face. That is not to say they aren’t beneficial and necessary or that people ought not to give money to them. I just don’t believe they are a strong enough lever to bring about substantial ongoing change to the problems that discouraged me.

This is when I discovered impact investing. I became aware of a new method of using capitalism to bring about change. There is a focused endeavor, amounting currently to about a trillion dollars and growing at approximately 30% per year. Millions of people are being helped, jobs are being created, and lives are being significantly altered. A good example of the potential of impact investing is the solar lantern which replaces the kerosene lamp in homes of the poor. Kerosene creates health and fire hazards, is a high-priced and on-going expense, and gives off too-little light to allow for extended home-based work or study. Clearly, the advantages of the solar lamp make it a positive alternative to kerosene; but, what is the best way for these solar lamps to enter homes? Of course, a foundation could buy 1,000,000 lamps and distribute them. But, by creating a business that has franchises, jobs are created, solar lamps are repaired, and much more capital supports a much larger distribution. 

I know it’s hard to believe in capitalism after all the negative stories we read. Capitalism can be horribly destructive and sometimes even become criminal. I am not naive. Just look at the transgressions of Volkswagen. But impact investing fosters organizations that are brought about for the dual purpose of doing good while making money to sustain that good. How else can you really sustain change in the long run if you are dependent on continual funding by governments and foundations? Their priorities naturally change. A business dedicated to doing good, that supports itself, is sustainable. Not only that, but because this is a relatively young, non-uniform market, many impact investments can be better investments than the traditional ones.

Over the next few months, this column will introduce key people in the field of impact investing, and present examples of how powerful a lever this new approach is, offer the objective measurements that show the good it does, and share stories that will lift your heart. We can make a difference; we can bring about change. I hope you can join me as we search for good and solutions.

Source: Montecito Journal