As I type this, it’s the afternoon of Good Friday here on the eastern seaboard of the US, Passover is about to begin, and we are deep in Ramadan. April is chock full of other spiritually significant observances as well. Alongside religious holidays, secular rites of spring are being celebrated in the northern hemisphere, autumnal festivities are being savored in the southern hemisphere, Earth Day is fast approaching, and all are occurring amid disasters and atrocities of every description the world over.
The pandemic drags on. Supply chains are in tatters. Crimes against humanity are proliferating. Ecosystems are fraying and approaching cascade failure. Governments are antagonizing their own citizens. Persistent chemicals and microplastics are accumulating in living organisms from pole to pole. Climate change and its effects are accelerating. Workers of all types and skills are rejecting locally degrading working conditions and an overarching system that drives the cost of labor to zero to concentrate wealth in the pockets of CEOs and investors. Previously undiscovered wonders are changing our understanding of the universe and life within it.
Is this a moment to grieve, or to rejoice?
Both, I think. Underlying and unifying both religious and secular rites, there is an invitation to let go of the known season, established perspective, prescribed expectations, and to open ourselves to embrace unfamiliar new mindsets — even multiple new awarenesses.
As is the case with any true profundity, the proposition is simultaneously simple and staggering: emerge from the grim comfort of narrow certainty to the white-knuckle emancipation of previously unimaginable possibility.
Some weeks ago, Rev. Judy Arnold preached a sermon in our church in which she noted that human beings are notoriously poor at recognizing endings and beginnings, and often get the two confused. As I contemplate the birds singing and trees blooming outside my window and the news of floods, war crimes, domestic violence, and political and economic oppression, it seems to me that truism extends to every facet of human experience — including investing.
That suggests that whether we want it or not, this moment is a gift: we are presented the opportunity to accept both spiritual and natural world invitations: shed the existing financial system and participate in transformation.
(Re)setting expectations
As we all know, the stock disclaimer in financial matters is some variation on past performance is not an indicator of future results; of course we include that disclaimer in our communications about Reinventure’s track record. Yet it is also worth occasionally taking conscious note of the fact that financial benchmarks and expectations are backward-looking, calibrated to the past.
What would it mean for financial decision makers at every scale from the very largest market-makers to individual retail investors to acknowledge that the models of the past no longer hold (leaving aside the legitimate debate over whether they ever did)? How would that realization free us to recognize an end and embark on a beginning?
This is neither a hypothetical nor a rhetorical question.
There is strongly indicative evidence that public markets are losing their appetite for blockbuster IPOs, especially for companies that don’t know how to generate a profit; there is also a growing body of analysis concluding that the much-vaunted and nearly universally exalted chimera model of venture capital has actually suboptimized returns and cost the economy trillions of dollars in the US alone. What would it look like — what would it require of those of us in the capital spheres, and what would it offer us in exchange — to let go of widely embraced but increasingly problematic, counterfactual, anachronistic frameworks? How would that liberate us to reset our expectations and practices for the better?
As Rev. Arnold pointed out in her sermon, it doesn’t come naturally or easily to most of us to make the leap from the old to the new, even when we know it is in our own best interest. Too often we have to be compelled.
Rejoice, a knife to the heart
In this first contact novel, Steven Erikson posits that an extraterrestrial entity along the lines of Iain M. Banks’ Special Circumstances tires of the persistent depravity and degradation of human affairs on earth, and intervenes by abruptly disrupting and categorically thwarting nearly all forms of aggression and exploitation — eliciting howls of protest both public and private.
The titular knife to the heart is the aliens’ abrupt, absolute, and totally nonnegotiable immobilization of both criminal and normative — heretofore de jure — depredation. The alien entity simply refuses to make a distinction: extractive or violent abuse of any kind is peremptorily quashed.
This should be — and is! — cause to rejoice. And yet even those who welcome the existential disorientation of seeing the existing order summarily incapacitated are presented with an equally existential and immediate challenge: what now?
“Obvious in retrospect. Obvious before, you’d think. But it’s so easy to just not see the obvious, even long past when it ought to be reasonable.” — Ann Leckie, Ancillary Sword
Assertions that the existing order is already long debunked and discredited can seem quite heretical and shocking, even though the evidence has been accumulating for decades.
As numerous researchers have found, and as Ann Leckie deftly spun in fictional form, we are especially blind to and dismissive of the evidence when our own identity is validated and burnished by a narrative that characterizes a predatory status quo as morally justified (e.g., best practices, meritocracy; might makes right):
“When you’ve spent [most of your adult life] thinking of yourself as the most gloriously powerful being in the universe, I imagine an encounter like that comes as quite an unpleasant shock. Really, after something like that you need to redefine who you are.” [Ancillary Mercy]
For those of us accustomed to thinking of ourselves as the smartest people in the room, wholly deserving of our achievements and positions of relative ease, this quote delivers a particularly sharp sting.
How do we respond?
The flight to safety option is to double down on the status quo — refuse to let go. There are abundant examples of people and institutions committed to entrenching their positions, across all manner of professional and personal spheres. The venture capital sector has set successive records in 2020, 2021, and Q1 2022 for both raising and deploying capital, and yet in the main has retreated to what it perceives as safe footing in the form of even bigger pattern matching bets on overwhelmingly homogeneous teams. LPs have fueled this retrenchment by pouring ever larger commitments into marquee venture funds in spite of multiple sources flashing bright warning lights and sounding klaxons. Once you consider the current and historical indicators, it’s not hard to see that this way leads to harrowing disaster.
A more cynical approach is to continue to go through the motions of participating in the crumbling system in a bid to capture as much as possible for as long as the opportunity exists — ride it out. You don’t need me to point out those examples. No doubt you have heard people touting this position in terms that are couched as sober, responsible, even wise.
A significantly less popular option is to heed the signs, observe the data, attend to the change in season (both literal: climate, weather; and figurative: era) — make the leap. Recognize that the status quo is already derelict, and never was fully sound. Redefine who we are by recalibrating to the present and looking to the future. It’s not easy, but it has the advantage of being the only way forward through this crisis.
Into the new
What will a new financial system look like that is equitable, sustainable, and prosperous? Or better yet, regenerative? What role and identify will you have in that system?
I don’t claim to have the answers. My experience of navigating confluences where endings and beginnings meet is like scuba diving in estuarial passages: visibility is variable and poor, compounded by disorienting eddies and random junk. It’s important to check your bearings often. It’s also best to go with trusted companions.
For our part, the Reinventure Capital team is striving to practice our role in a just and vibrant new system by investing exclusively in US-based companies led and controlled by BIPOC and/or female founders at breakeven and poised to grow profitably, and then working with them to grow even more profitably into economic engines that create wealth and opportunity. We actively seek to learn and iterate alongside trusted companions, and I am grateful to the many peers and allies who are diligently embodying and generously sharing a wide variety of models of that better, healthier system.
Are you working to embrace an equitable, sustainable, and prosperous new financial system? Please contact us to explore how we might join forces. And please share how you are navigating the endings and beginnings, so others can join you as well!
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Photo credit: Elnias / FreeImages
*While there’s no such thing as a guarantee in investing and no one can reliably predict the future, Ed’s prior track record delivering 32% IRR to investors provides direct evidence that it is indeed possible to consistently invest for both financial returns and system change. If you are an accredited investor and would like to learn more about investments that can advance social, racial, and gender equity by supporting high-value companies led by people of color and/or women, please contact us to start that conversation.
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