Atelier WeekNotes w/c 25 Nov and all of Dec 2024

Welcome. Apologies. The plan. 0/DETECTING. Talk: Navigating a rapidly changing world. Domineering finance: we missed the moment.

I am writing newsletter of #weeknotes of starting the Atelier of What’s Next (a studio for initiatives at the frontier of generating a better future). For my rationale for starting the Atelier see here.

First, welcome! Since my last WeekNote the subscriber base has gone up by a surprising amount. Thank you to everyone who has signed up and has been patient for their first WeekNote. I'd love to hear what happened to get this bump. Was 'Exploring What's Next' added to some list of SubStacks to follow? Was someone recommending it?

Perhaps something else is in play. I had noticed that some of the email addresses read as a little unlikely ('sorta_name_793547@hotmail.com'). SubStack now has a message "We're investigating reports of increased inauthentic signup behavior."

If you are a genuine subscriber, hello! (If not, how come you are reading this? Perhaps responding to SubStack newsletters can be a modern version of the Turing test.)

A reminder on the purpose of the newsletter:

1. The practice of writing regular notes and updates will require me to go through some kind of regular action learning cycle. More on #weeknotes here.

2. Doing that on Substack means I can test ideas here, while being a little away from my own website and social media presence. I’m giving myself permissions to be rough around the edges.

Also, for a fuller introduction to the Atelier of What's Next, a studio for initiatives at the frontier of generating a better future, go here.

Second, apologies! This is the first WeekNotes in, erm, a month and a half. I've missed 4 working weeks (I wasn't working the w/c 23 Dec). What happened? Well, life. My family challenges had another spike. With the three close family bereavements in the last 4 years, the run up to Christmas is always difficult. This year especially so, as it would have been my late wife's 50th birthday on Sun 22 Dec.

Combine that with lots of Christmas drinks (taking up evenings, and, cough, some mornings for recovery) and, well, I fell out of the habit. I'll come back to the implications below.

Third, the immediate plan. I'm going to use this WeekNote to catch up on activities in the weeks before Christmas. (I'm typing on a series of trains from London to Burgandy, where I will be having New Year with some old friends).

Then I intend to write to two more WeekNotes before I start work in 2025. The first will look backwards, tracking the performance of the Atelier in 2024 and any lessons for the future. The second will look forwards, at shifts in the world that I am perceiving, and the intentions for the Atelier.

This week covers:

0/DETECTING
Talk: Navigating arapidly changing world

• Can a sector transition without government-led industrial policy?

• Corporate disclosure: change lever, tickbox, or hushed up?

• Can cultural creatives enhance and extend the more technocratic efforts for urgent transition?

• How to thrive in a digitally-enabled world, given that AI is both a bubble and a revolution?

• What is the research and teaching that accelerates on-going ‘industrial revolutions on a deadline’ in a Brittle, Anxious, Nonlinear, and Incomprehensible (BANI) world?

Domineering finance: we missed the moment.

Merry Christmas and Happy New Year!

How can the Atelier of What's Next be of service to you, and your purposes? We'd love to hear from you. Perhaps you have a challenge or idea to put in the studio. Maybe one of our existing topics appeals to you. What if you love to make new things happen by being part of the studio? Or if you have feedback or comments that would improve this deck. Either click the button below or email davidbent@atelierwhatsnext.org.

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0/DETECTING

Talk: Navigating arapidly changing world

I was invited to give a short provocation to the end-of-year staff day at the UCL Institute for Sustaianble Resources (where I am an Honorary Lecturer). I used some experiences from the last year to come up with a series of questions:

• Can a sector transition without government-led industrial policy?

• Corporate disclosure: change lever, tickbox, or hushed up?

• Can cultural creatives enhance and extend the more technocratic efforts for urgent transition?

• How to thrive in a digitally-enabled world, given that AI is both a bubble and a revolution?

• What is the research and teaching that accelerates on-going ‘industrial revolutions on a deadline’ in a Brittle, Anxious, Nonlinear, and Incomprehensible (BANI) world?

Can a sector transition without government-led industrial policy?

This is drawn from my experience in Aotearoa New Zealand, where the new-ish right-of-centre government is pulling back on active climate policies, and relying on just emissions trading.

But exporting industries are still under pressure. Their clients want to reduce ‘Scope 3’ emissions, which means demanding reductions from Kiwi companies. There are upcoming carbon border adjustment taxes, which will add costs for industries using fossil fuels. Plus, many people in New Zealand have a fear of a debt being imposed if the country misses its Climate COP Nationally Determined Contribution (NDC).

(Sidebar: this last is surprising, as part of how the Paris Agreement got agreed is because NDCs were, well, nationally determined, and without enforcement. I don't know any other country that worries about this, and I was never got to the bottom of the legal mechanism.)

As a result, financial institutions beginning to explore: how do we support sectors to transition without active government policy? (Hence the trial workshop using Influential Trajectories while I was over in August.)

The specific question there was: is the global renewables electricity revolution so strong that New Zealand can electrify its rural economy with active public-civil society collaboration and without any proactive government policies?

The more general question: In a world of Trump, and rise of climate-denying, fossil fuel-sponsored populists across Europe, can a sector transition without government-led industrial policy?

Corporate disclosure: change lever, tickbox, or hushed up?

The Universities Superannuated Fund (USS) is the pension fund for university lecturers and researchers. As it happens, USS has a brilliant sustainable finance practitioner and advocate, Russell Picot, as its chair of the investment committee.

Russell, and others, are worried that the scenarios companies are using for climate-related disclosures are ‘precisely wrong rather than broadly right’ (something I unpacked earlier in the year here). So, USS teamed up with the University of Exeter to create a challenging set of scenarios that we can use to get corporates to up their game.

The bigger picture is that a lot of people have put a lot of reliance on corporate disclosure to drive change. There are aalready many voluntary and regulatory requirements (Taskforce for Climate-Related Disclosure (TCFD), EU Corporate Sustainability Reporting Directive (CSRD), ESG ratings firms’ questionnaires), with more in the pipeline (Transition Plans, Taskforce for Nature-related Financial Disclosure (TNFD)).

(Sidebar: these will create lots of data for Masters and Doctoral students!)

Historically,(1) Sustainability investors and campaigners have seen proper disclosure as vital; AND,(2) Companies have found ways to avoid transgressing and also any kind of learning or lightbulb moment.

The incoming Trump administration likely to support the existing anti-ESG backlash, which has been significant in the US in particular. .

So, what will happen to corporate disclosure: can it be a change lever, will it stay a tickbox (at best), or will companies go quiet about their sustainability activities ('greenhushing')?

Can cultural creatives enhance and extend the more technocratic efforts for urgent transition?

The specific here is my experience with Hard Art, “A cultural collective standing in solidarity in the face of climate and democratic collapse.”

They have an ambition that, after the General Election in 2029, there is so much bottom-up democratic renewal that the Hard Right has far less appeal and communities want profound climate action.

Is that crazily, unrealistically ambitious?

Yes.

And.

There are players in Hard Art with success in social movements and a history of being ahead of the curve. (Also, I am very dubious of the Labour and Conservative attempts to play Reform at their own game; all that does is legitimise Reform's narrative that immigration is out of control and a problem.)

More generally, after 40 years of ‘There is No Alternative’ (TINA, the Thatcherite slogan for the neoliberal project), do we struggle to imagine anything else? Has optimising the status quo run out of road? How do we generate the on-going support for many decades of tricky transition?

Hence the big question: Can cultural creatives enhance and extend the more technocratic efforts for urgent transition?

How to thrive in a digitally-enabled world, given that AI is both a bubble and a revolution?

This is a bonus item that I didn't get time to cover in the UCL ISR talk (I was only given 5 minutes).

Two experiences I had of AI this year:

• Climate Policy Radar, a “startup using data science and AI to build tools that unlock global climate law and policy data". An actual positive use-case of AI, which doesn't hallucinate. Explained by their Director of Policy here.

• Digital twins of gorillas, trained with ecological knowhow, and given money to pay for what the gorillas would want (should want?), based on what the digital twin has learnt. This is supposed to aid conservation (especially by giving local people incomes which are related the the gorillas). It raises whole host of strategic, financial, ethical and philosophical questions (to put it mildly). But it does exist.

It is boringly obvious that tonnes of money is being put into AI, and also that some of the uses look weird to us today (“Any useful idea about the futures should appear to be ridiculous” — Dator's Second Law of the Future).

As Azeem Azhar says, in his broadly tech-optimist Exponential View newsletter, AI is already making a huge difference (usually deep in the digital back offices of tech giants, not in the stuff we see) and has revolutionary potential.

At the same time, as Cory Doctorow says in his broadly Big Tech-critical Pluralistic newsletter, "AI can't do your job, but the AI salesman can convince your boss to fire you and replace you with an AI anyway". Also, it is hard to see how many of the supposed uses of AI will be profitable in the long-term.

So, we have emerging revolutions, and investment bubbles, and scams happening, all at the same time.

Economic history tells us that we should expect bubbles (and scams) when industrial revolutions are happening. Bill Janeway argues (in 'Doing Capitalism in an Innovation Economy') that investment bubbles are necessary when there is a new technology.

People don't know how to use and monetise a new technology (especially a General Purpose Technology like AI). So, there has to be a lot of exploring the frontier of possibility. Many efforts turn out to be deadends, but you only find that out by trying. (Afterwards, the deadends look obvious and a waste, but that wasn't necessarily the case before.) Eventually, the viable uses are found, and investment concentrates there. The investment bubble is what allows an economy to probe the frontier for what works.

Hence the big question: How to thrive in a digitally-enabled world, given that AI is both a bubble and a revolution?

Two subsidiary ones:

• What will happen when the AI investment bubble bursts? Is the global finance system robust enough to keep capital flowing when that happens?

• Who will be the main beneficiaries from AI (assuming there are benefits)? The wider citizenry, through many uses, often invisible to us, which make life easier and cheaper, both directly and through many spillover effects? Or, the AI owners, by earning huge returns by sucking up all the value (and severely limiting the positive spillovers) from what becomes the infrastructure of modern life?

Implication: What is the research and teaching that accelerates on-going ‘industrial revolutions on a deadline’ in a Brittle, Anxious, Nonlinear, and Incomprehensible (BANI) world?

My conclusion was that there is an obvious context for research, teaching and impact now: Brittle, Anxious, Nonlinear, and Incomprehensible (BANI) world (aka 'polycrisis').

There is a race between:

• Accelerating impacts of climate-biodiversity crisis, social disjunction and geopolitical breakdown.AND

• Increasing capacity of humankind to adapt, through ‘technology’ and ‘technique’, to the challenges we face.

Hence the question: What is the research and teaching that accelerates on-going ‘industrial revolutions on a deadline’ in Brittle, Anxious, Nonlinear, and Incomprehensible (BANI) world?

WHAT NEXT

• Bring these questions to my 2025 planning.

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Domineering finance: we missed the moment

In mid-November I attended a talk on 'Rethinking finance, investment and sustainability' by Prof Dirk Bezemer, and hosted by the UCL Institute for Innovation and Public Purpose (IIPP). The talk itself was in two parts. (The summary below is from my memory; any errors are mine rather than Prof Bezemer's!)

The minor part showed that companies that green bonds had no meaningful difference in their environmental performance than other companies. A finding that chimes with every cynical take on corporate sustainability and sustainable finance.

Except that the methodology relied on pairing a green bond firm with a similar one (same industry, size and location) and seeing if their environmental performance diverged within a number of years (from memory, 2 years). So, there could be other explanations:

• The green investments need more time to have effects on environmental performance (a point raised in Q&A and accepted by Dirk). If so, the environmental performance will diverge in the future.

• The green investments could be the norm in that industry, which some companies fund through green bonds and others through some other means (eg retained earnings, which is where most investment comes from). (This only occurred to me afterwards.) If so, the environmental performance of both paired companies would improve (perhaps with a lag), and not diverge.

The major part was on the scale and role of finance in our modern economies. The standard story in mainstream economics is that financial firms act as intermediaries, matching savings with investments that are made into productive assets in the real economy, and so drive GDP growth.

If this is true, why have financial assets and liabilities also grew 50% faster than GDP since 2000, vastly exceeding net investment?

For Bezemer, there are three parts to the answer:

1. The economy is both a monetary production economy and a financial circular flow (Marx, Keynes, Kalecki, Schumpeter, Graziani, Schmitt, Parguez, Minsky).

2. Financial investments (creation of gross assets and liabilities) lead to autonomous and self-reinforcing expansion of the financial circulation, not to capital goods investment (Minsky, Perez).

3. Corporate investment is mostly from retained profit and intercorporate capital markets (‘credit clubs’, Kalecki).

In the mainstream economics story, investing in the secondary market (where traders buy and sell shares or loans, based on their judgement of future returns) decreases yield or increases price, leading to more productive investment by companies.

In reality, investment in secondary markets is as much by (leveraged) investment funds. The result is increased security prices and volumes of liabilities, and does not flow into productive assets in the real economy. The scale of the financial system grows massively (with those involved getting hugely rewarded), in a way that is completely detached from the real economy -- a process known as financialisation. This includes being detached from from the investments in productive assets that transition us to a Net Zero carbon economy.

This conclusion aligns with a recent LRB article by John Lanchester (a novelist who wrote one of the best guides to the late 2000s financial crash), who goes hard:

"The total value of all the economic activity in the world is estimated at $105 trillion...The value of the financial derivatives which arise from this activity...is $667 trillion. That makes it the biggest business in the world. And in terms of the things it produces, that business is useless. It does nothing and adds no value. It is just one speculator betting against another and for every winner, on every single transaction, there is an exactly equivalent loser....

"...the thing they’re doing in [secondary market] finance is useless. I mean that in a strong sense: this activity produces nothing and creates no benefit for society in aggregate, because every gain is matched by an identical loss. It all sums to zero. The only benefit to wider society is the tax paid by the winners; though we need to remember that the losers will have their losses offset against tax, so the net tax benefit is not as clear as it might at first seem."

For Bezemer, the way forward is to create ‘mission’: long-term, dependable, and clearly directed policy plans for which are ‘market-shaping’ (the talk was at Mazzucato's IIPP after all). Also, to concentrate on those market actors which have a high degree of control over both the expansion in finance and also in the nature of the investments in productive assets for the real economy -- see diagram:

In the Q&A afterwards, my question was about how to really make a structural change. Economic historians like Carlota Perez (in Technical Revolutions and Financial Capital) and Karl Polyani (in The Great Transformation) argue that a massive financial crisis is needed. That gives a chance for a double movement, where regulation and social protections re-align the financial markets with investing with productive assets in the real economy.

But, we had a financial crisis in the late 2000s, and there was no double movement. My question: did we miss our chance?

Prof Bezemer's response: probably yes.

This matches with Cambridge history Prof Gary Gerstle, who in the Past Present Future podcast on the 2008 presidential election, calls Obama the last neoliberal president. Gerstle’s perspective: Obama saved Wall Street (and anyone with stocks recovered their losses by 2012), but left Main Street in the lurch. "People noticed that the elites in America were benefiting in ways that ordinary Americans were not." Obama was preserving the old economic order.

We all live downstream of that choice, which fuelled the populist anger that helped Trump to power (and a whole host of national populists around the rich countries).

The consequences of preserving the old economic order are huge.

WHAT NEXT

• Really, really unclear, especially with billionaires funding populists, creating great conditions to accelerate the process of financialisation. (The populists promise to address the anger to get elected, but then follow their funders' desires to deregulate and remove social protections.)

If you got this far, Merry Christmas and Happy New Year! Again!