Afternoon Musings While Hurtling Across Europe at 300kph

(Holding court among the sharpest business thinkers in the world at Thinkers50 in London – with some obvious skepticism in the room!)

Advance apologies for the longer-than-usual blog post. I did my best to tighten it up, but there is just a lot to cover. So get comfortable, settle in, and remind yourself that I’ll return to my customary concision for my next post…

I’m sitting on a TGV train from London to Paris, having spent three marvelous days in meetings, interviews, discussion and debate. At the risk of falling prey to hyperbole, I cannot recall a block of time offering such a marvelous mix of intellectual challenge, professional confirmation and emotional gratification. So before the buzz departs, I’ll do my best to capture it, aware even as I begin that I am sure to fail. It was just that damn cool.

[As an aside, I am neither the first American nor surely the last, to marvel at the wonder of European train travel. Walking into St. Pancras Station in central London with no ticket and no idea of the schedule to Paris, a two-minute wait at the counter for a $185 ticket, a short walk through a bustling terminal and a efficient security passage… and I was comfortably seated within an hour. What followed was a spotless, eminently comfortable, 300kph trip through Southern England, the Chunnel and then Northern France to the Paris Nord train station, punctuated by a delicious 3-course meal with a surprisingly drinkable sauvignon blanc. Magical.

I am well aware of the precarious finances of the French government. I am equally aware of the strike-plagued national French train service and the parlous state of the quasi-socialist French system. And as both a capitalist and an American, I accept this form of taxpayer-subsidized service as fundamentally unsustainable.

However, in this moment, I am a deeply and unashamedly satisfied consumer of the very service whose long-term survival I question… and an equally bewildered tourist asking myself: “If my country can mobilize an entire social/economic/political sector for mass incarceration, why the hell can’t we figure out trains?”

Perhaps that is the wine talking?

Or the white chocolate cheese cake?

But I digress…]

The excuse for my trip was two-fold: a board meeting for the Africa-facing boutique investment and merchant bank I advise, Surya Capital, and an unexpected and slightly mysterious invitation to Thinkers50, the self-proclaimed (and very likely accurate) “Davos for business management”. And strung like pearls between these two: a concert at the O2 dome featuring Van Morrison and Tom Jones; a penetrating series of interviews with The Economist, HBR Germany, WSJ Europe and The Financial Times; a panel discussion at Environmental Technology Fund’s annual meeting with two smart and experienced investors on the evolution and future of sustainability investing; and of course the obligatory ramblings through the endlessly charming streets of Central London.

I have a dear friend who reminds me every time I visit that “When one tires of London, one has tired of living.” I couldn’t agree more.

Thinkers50

Imagine a room full of the world’s best pitching coaches passionately discussing the future of hurling a baseball and you sorta get the picture. Interesting, for sure. But arcane and other-worldly.

But. Well. It is also fascinating. I mean these guys are THINKERS. Deep, hard thinkers. And it shows. While not every conversation in which I engaged, or which I overheard, was scintillating and provocative, every person I met evinced a Spirit Of Inquiry that is sadly lacking in the “real” world. And if the first step on the path towards innovative solutions is to ask a question, these guys are definitely part of the solution. They are really, professionally, frustratingly good at asking questions.

What I found most interesting, however, was the subtle theme that stitched the day together: the evolution of business as a force for social and environmental benefit. This theme manifested itself in ways both sublime (“Do we need to redefine ‘progress’?) and blunt (“Is Capitalism to blame for inequality?”), and it pivoted on points that any impact investor would find familiar. Opportunity. Non-financial value. Evolution. Power. Access. Agency. Wealth creation. Terms we use every day as impact investors, and which are often the motivational feedstock for our work.

Yet the language of impact investing has either not yet penetrated this community, or has simply not yet been harnessed as a rubric for the layered lines of inquiry… which is both a bit depressing and utterly exhilarating. “Depressing” because of any group of leaders, I’d have hoped that this one would be intimately familiar with the idea of harnessing the power of capital markets to create measurable, durable non-financial value. And “exhilarating” because that relative ignorance represents a massive and exciting opportunity for all of us. After all, nearly every important social evolution has incubated in the world of abstract, academic, inquiry.

Saddle up, cowboys, we have a rodeo to ride!

I’ll write a follow-up blog on this meeting once I have cogitated more thoroughly. For now, I’ll just leave it at “I can’t wait to return in two years!” and move on.

Environmental Technologies Fund

(Disclosure: neither Caprock, nor any of our clients, nor I, have capital with ETF)

ETF has been investing in rapidly-growing companies, primarily in Europe, with a relentless focus on big, positive, environmental impact for longer than most venture funds have been in business. In other words, they were doing it long before it became cool to do so. This isn’t a pitch for ETF, so I’ll stop here on their team, experience and focus. But if you are interested in sustainability-focused innovation, ETF is a great place to start.

I was first invited to speak at their annual event three years ago. They asked me to attend because of the reputation that Caprock has built relative to coherent, sophisticated impact portfolio construction. Placing sustainable venture investing within the context of a broader approach to impact investing was a perspective they wanted in the room.

At the time, the general sense in the room was what I’ll call “thesis exploration, elucidation and validation”. Which may be unfair, as the ETF team has been putting up noteworthy performance for long enough that they should be well past this phase. But, well, that was my sense of the tone in the room. A general vibe of “sure, this makes sense, but prove it to me.” And my participation was really based on the simple fact that we are committed to the idea of using the capital markets to seek, identify, fund and scale solutions.

Pretty high level stuff, in other words.

What a difference a few years makes. The tone in the room this year was unambiguously positive, and there was no subtle question mark hanging over the conversations.

There was only one panel held during the day: me, a CIO from a large single family office and the CIO for a MUCH larger European pension plan (Chatham House Rule prohibits me from sharing their identity). Put simply, they are both totally committed impact investors, even though – fascinatingly – neither uses the term. – The SFO CIO told me that they no longer use the word “impact” because, for them, it is just the way they invest, and they no longer commit capital to conventional investments. It is just how they think. – The pension plan CIO told me that they can’t use the word “impact” because of the reflexive assumption that this will entail a performance sacrifice. While their experience is the direct opposite, they don’t want to deal with the PR headache associated with being perceived as “soft” investors. (When, oh when, will this discipline be released from this default presumption??)

And the body language in the room reflected the shift, with plenty of nodding heads and smiles, rather than the crossed arms and tucked chins that one sees so frequently in institutional investing circles. Which is really cool and really important, particularly since – as we’ve been writing about for nearly a decade – solving the Great Challenges we face will require institutional-scale capital to flow.

And what about the media?

Question: What do The Economist, The Wall Street Journal, The Financial Times and Harvard Business Review all have in common?

Answer: they all interviewed me last week.

But seriously, this would have been almost inconceivable just a few years ago. Some random dude from a small, western RIA focusing on an arcane discipline called “impact investing” and dedicated to the notion of the evolution of the capital markets? Riiiiiiight. Precisely zero interest.

But last week? Yup. And not only were they interested, every one followed up with an email saying that they would follow up with me on a few choice topics that surfaced during the interview. Crazy. And cool. And, most importantly, indicative of the amount of focus that is being pointed at impact investing now. Which raises the stakes for all of us, for with this level of attention, we can’t screw up.

Just sayin’.

A heartbreakingly tragic coda:

Having just returned from Paris and the shocking atrocity/tragedy of last week, I must say that while the capital markets can not hope to address the armies of anger and evil that are graduating from the world’s madrassas and mosques led by fanatic fundamentalists, we can all hope that by evolving capitalism to include non-financial value – access, environment, wealth, services, etc. – at least these fanatics will have one less target to shoot.

Feeling unbelievably sad and compassionate for my French family and friends,
Matthew