Connection, experience, meaning

It can be hard to keep up with blogging. I hit a peak back in February but then slowed. Summer in Portland is not the best time to be sitting at a computer writing. I apologize for not posting more often but my inspiration/time ratio hasn’t been there, until today.

I just got another piece of junk mail from Office Depot. They purchased our name from the business license list after we opened TriLibrium and we’ve gotten bombed with their catalogs ever since, despite repeated requests to stop mailing to us. We are primarily a paperless firm and it is discouraging to consume more paper in their worthless catalogs then we’ve put through our printer in a nearly a year.

I hate Office Depot and other advertisers who bombard me with their junk mail. I don’t want it and yet they continue. Is this how they win over customers?

Permission based marketing is the rule these days. If your prospects don’t want to hear from you, don’t continue pestering them. You’ll waste your money and might actually create an “enemy.”

Here in Portland, I would venture to say there is a significant percentage of the population who despise getting junk mail and other unwanted and intrusive solicitations. If you are responsible for marketing, you must figure out a way to reach people in ways that don’t offend.

Jelly Helm, a casual friend and the former Creative Director at Wieden + Kennedy, gave a talk on advertising and the consumer culture back in December for the Oregon Council for the Humanities “Think & Drink” series. It was a great event and the one thing that really stuck with me was Jelly’s contention that advertising was dead and no longer worked.

People are essentially immune to advertising at this point he said. Advertising used to move products but no more. Given the current state of technology, people expect control over what reaches them.

Jelly claimed that consumers now make decisions based on meaning, connection and experience. If your company isn’t delivering on those intangibles, you will lose customers as someone does.

Finally, if you want to get off mailing lists and reduce the amount of junk mail you receive, this blog post had the addresses and websites so you can make it happen.

Misplaced Priorities

I was listening to a story on NPR this morning about the financial crisis in California. Their state budget gap is $24 billion and as usual, kids and the truly needy among us will be the hardest hit. In these situations, the government ends up making decisions that are pennywise and pound foolish.

For example, California is considering closing its poison control center for a savings of $6 million. The center gets over 2,000 calls per day, mostly from parents, concerned about something their child just ingested. Most calls end with simple wait and see or do it-yourself advice. Without this service, ALL of these parents will likely end up in an emergency room somewhere at a HUGE cost to parents and society. The government saves $1 on one side of the equation and the citizens will spend $20 on the other.

In the midst of this fiscal crisis, what really irks me is the 10,000Lb gorilla that no one ever discusses: Our insane military budget. We spend over $1 trillion per year on “defense”. Global military spending hit a record high in 2008, led by the US. Our annual military spending is roughly equal to the rest of the world combined, while the US and its close allies account for 2/3 of global military spending. No wonder we don’t have money for anything else.

One of my saddest days as an adult was at a tax update class for CPAs back in the 80s. It was sad because at the time, I didn’t have the guts to speak up. I was young and there were 40-50 other CPAs in the class. The instructor was giving an update about the fiscal situation in Washington DC and said something to the effect that there was no funding available for any domestic needs because the government was broke. I remember thinking how dishonest all of us were accepting this pathetic nonsense. All of were financial experts. The government had plenty of money but was spending half of all our funds on weapons and war. The same is true today.

It is time for us to speak up about this awful waste. No one disputes the need for a strong defense but we could do that with ½ the budget freeing up $500 billion annually for domestic services. Maybe a little of that can keep California’s poison control center open.

Pedalpalooza, biking and more

I love Portland. We are in the midst of Pedalpalooza, a 2-week long bike festival with over 200 events. Every day there are classes, events, parades and lots of special rides (pub rides, pizza rides, chocolate rides, naked rides, endurance rides, and many, many more). Last night I went on the Epic Pizza Ride.

I've been riding my bike more often. Today I rode my bike to a lunch appointment a little over 1 mile away, then hit the bank and the post office on the way back. I don't think it is a coincidence that I started riding more, especially for work, at the exact same time we started our carbon footprint analysis at TriLibrium. We are preparing our initial GHG report and I am certain travel will comprise over 80 percent of our emissions footprint. Riding a bike adds nothing to our footprint.

What gets measured gets managed.

This is yet another reason to do a GHG inventory report.

Preparing our greenhouse gas inventory report made me more conscious.

Biking is an easy and effective way to decrease carbon emissions, increase exercise, have more fun and unplug from the car culture.

Bike culture is so refreshing.

Best Congress Money can Buy

I've long supported the Green Party because they refuse to take corporate money as a matter of principle. I also appreciate the unwaivering commitment to peace, sustainability and democracy.

The Green Party has also been a long-time proponent of universal, single-payer health care system. Unfortunately, Americans aren't getting a fair and unbiased hearing on this proven approach. I believe that is due to the corporate domination of our political system.

Amy Goodman from Democracy Now did a story today on Senator Max Baucus (D) and some of the key people drafting health care reform. The original reporting was done by Max Dennison of the Montana Lee Newspapers Montana State Bureau. Here is what she reported in her story:

• Senator Baucus chairs the Senate Finance Committee. In the last six years he's raised nearly $15 million of which 23 percent came from insurance and health interests.

• Senator Charles Grassley (R), ranking Republican on the Senate Finance Committee received 23.5 percent of his financial support over the past six years from insurance and health sectors.

• Senator Charles Dodd (D), who is essentially running the Health Committee in the absence of Senator Ted Kennedy got 23 percent of his funds from the insurance and health sectors.

The Washington Post recently reported that almost thirty key lawmakers have personal investments totaling nearly $11 million.

• Senate Majority Leader Harry Reid has at least $50,000 invested in a healthcare index.

• Senator Judd Gregg (R), a senior member of the Health Committe has up to $560,000 of equities in major healthcare companies including Bristo-Myers Squibb and Merck.

• The family of Congresswoman Jane Harman (D) held at least $3.2 million in more than twenty health care companies at the end of 2008.

• Senator John Kerry (D), and his wife Teresa Heinz kerry hold at least $5.2 million in companies such as Merck and Eli Lilly.

• Senator Johnny Isakson (R) holds at least $165,000 in pharmaceutical and medical stocks.

• Senator Kay Hagan (D) holds at least $180,000 in more than twenty healthcare companies.

• Senator Chris Dodd's (D) wife serves on the board of four healthcare companies and received more than $200,000 last year in salary and stock for her service.

• Eight of the twenty-two member Senate Health, Education, Labor and Pensions Committee have financial interests in the healthcare industry. This committee was to hold a hearing today on healthcare reform.

Doesn't that look like a conflict of interest? Do you doubt their corporate ties and personal investments influence their decisions? This is absurd.

Power

I’d like to be writing about business but feel the health care situation is dire and that we have a unique opportunity to really solve this problem. I also know firsthand how the healthcare mess impacts TriLibrium, my colleagues, my family and our clients. This problem must be solved to bring America in to the 21^st century.

I used to be fairly oblivious to class power. I’ve always felt kinship with the underdog and have always been in solidarity with labor and the people who do the work. I think saving and investing has value, but the Wall Street mentality of large and fast returns to investors who in reality do nothing, is absurd. That mentality has lead to the current crisis which is creating so much turmoil in our communities.

The reason I was oblivious to class power was the myth I’d been taught that portrayed a level playing field for all people where one’s efforts, skills and luck determined one’s fate. What I failed to appreciate was how the rules of the game influence the outcome of the game. And in America, the game, the rules and the outcome are largely controlled and determined by the investing class through their political contributions.

When I talk about the owning/investing class, I’m referring to the top 1-10% of Americans who own and control a majority of the private assets and financial wealth in our country.

When you examine our system through the lens of class, you can see where the rules of the game define class power.

A social safety net helps the working class while diminishing the power of the owning class. Without a social safety net, workers are particularly fearful of job loss and accordingly, will do anything to keep their job since they know that job loss would mean economic ruin. Job loss without a social safety net means no food, no shelter, no health care and no education.

The owning class is vehemently opposed to a social safety net because (a) they don’t need it and (b) it gives power to workers to walk away from being exploited. This is one of the reasons corporate America and the owning class is opposed to universal health care. Job based health care gives those who control the jobs (owners and corporations) power over workers. Universal health care takes that economic weapon away from the owners.

I believe universal health care is vital to our future and that the only system that will work is a not-for profit, universal, single-payer system. I believe it is being blocked by rich and powerful forces who more than anything, want to keep this powerful control lever over American workers.

Tomorrow we’ll take a look at the money that might be influencing the people charged with deciding our future health care system.

Single Payer, not public option

What health care reform proposal is supported by a majority of doctors, an overwhelming number of nurses, has over 70 co-sponsors in the house but is off the table due to the corporate control of our economy and political system?

Single Payer Health Care.

The cost of health care is destroying businesses. In 2008 it cost a small business $12,700 to ensure a family of four. That is expected to rise by nearly $900 in 2009. Who can afford that? This is what the for-profit, private insurance system has delivered.

Add to that the administrative burdens to the employer, the out of pocket cost to employees plus the constant fear of being dropped, denied, or let go and other psychological cost as well and you have a system that is harming this country.

This must change and single payer is the solution. The so called "public option" being discussed by corporate supported Democrats doesn't go far enough to address the root problems in our health care system.

I believe the "public option" will fail to solve our problem and will actually be a major set back for those of us who simply want this problem solved.

Nick Skala, an expert and advocate for single payer recently was in Washington to speak to Democratic Progressive Caucus about single payer. Here is a story about his experience and a link to his video report.

The unfortunate problem is a federal government controlled by corporate interests and lobbyists. The industry spends far in excess of a $1 million per month and all the people making decisions about health care reform have received hundreds of thousands of dollars from the industry.

We need campaign finance reform as much as health care reform but that is another discussion for another day.

Corporate control of our system is one of the root causes of our collective predictments. Corporate media, corporate lobbysists, corporate agendas, corporate control. If you want to learn more about corporate domination, I recommend the movie "The Corporation" and/or When Corporations Rule the World by David Korten.

Water for Humans

Water for Humans is a non-profit social venture created and launched by fellow Bainbridge Graduate Institute colleagues Stan Brown and Rick McKenney. Their mission is to provide low-cost, clean water solutions to underserved populations while ensuring that water remains a local, public resource. They have two communities in Mexico where they will begin their fieldwork in early July.

Water for Humans has been working for over a year to get everything lined up. They are seeking $25,000 over the next four weeks to help fund and support their work as they ramp up their operations.

Water is expected to be the next scarce resource as we pollute and overexploit the very limited fresh water we have. It is predicted that 21st century wars could be about water. I'm proud of Stan and Rick for their efforts, commitment and vision. Check out their website and help Water for Humans with a contribution if you are inclined.

If you want to know more about the water issue, check out the following movie trailer.

Local banking, David Korten and more

I want to remind my Portland readers that David Korten will be speaking tomorrow night (Saturday) at the First Baptist Church at 12^th and SW Taylor.   There is a community celebration starting at 5pm, David’s presentation at 7pm and we step outside for the Starlight Parade after the talk.  It should be a fun evening.  Please bring your family and friends to learn about, discuss and implement the new economy.

The Sustainable Business Network of Portland (SBNP) is beginning a campaign to get people to move their money from multi-national banks designed to serve shareholders to local banks designed to meet community needs.  I recently moved my daughter’s college fund CD from WAMU/Chase to Albina Community Bank and ShoreBank Pacific.

SBNP used three simple questions to help you gauge how your bank relates to your community.

1. Is your money rooted in your community?  (The more a bank operates in multiple communities, the less commitment they have to yours).
2. Who owns your bank? (Where do the profits go and who controls it?)
3. Do your deposits create good loans in YOUR community?  (This can range from progressive lending policies to help underserved communities to predatory/subprime lending.)
   

Needless to say, the major banks all scored low on this assessment.  Moving your money to a community rooted bank will help your business community thrive.

How is Your Local Economy?

I just returned from the 7^th Annual BALLE (Business Alliance for Local Living Economies) conference in Denver.  I love collaborating with good folks who are working to change the system.  As I’ve written previously, the greatest leverage point in any system occurs when you change the system goals. 

As a BALLE supporter, our goal is the creation of a vibrant, verdant and sustainable local living economy.  We believe a local economy is more resilient, sustainable, human, fair and workable than the alternative.  For a million years of history, humans relied exclusively on a local economy to meet most of their needs.

In Denver, I had the chance to speak with Hunter Lovins who as usual, never fails to provide a great quote.  She put it succinctly when she said,  

“We don’t have a broken system in need of repair, but rather a failed system in need of replacement.” 

The current economic driver is to make money regardless of the environmental or social cost.  The paradigm we are working for is an economic system that meets our social, spiritual and economic needs within the constraints of our biological, finite world. The local economy is the perfect system.

Why is the human brain wired the way it is?  Our minds get stuck on certain beliefs (mental models) and we believe our beliefs are reality.  For example, why do most people think that if we can just return our economic system to the way it functioned a few years ago, all our problems would be solved.   As Hunter pointed out, the system our government is working to fix brought us this mess. 

BALLE promotes a different economic order.  Over 60 communities have BALLE chapters (Portland’s is the Sustainable Business Network of Portland) and these communities all feel they’ve benefited from a thriving local business community.

Since the global, corporate economy has left such a mess all over, I hope you'll join me in creating a sustainable living economy.

Storytelling

Accounting is the language of business.  As a CPA, one of my skills is the ability to read and interpret financial statements.  While most people look at just a couple numbers, to a trained expert, the financial statements are like topographical maps telling a complex and multidimensional story.

While thumbing through The Fifth Discipline Fieldbook, I came across the following:

"Accountants are the architects of an organization’s nervous systems.  They design the way the organization will sense what is going on inside and outside itself.  They create a context that determines the relevant questions to ask.  They search for ground where the organization can position itself for maximum strength and flexibility."

I love this paragraph.  Our firm designs and installs a significant number of accounting systems and this really captures the essence of my work:  The architecture of a firm’s nervous system.

The accounting system design will differ depending upon the values and goals of the system.  A triple-bottom-line mentality requires different reporting systems to capture and respond to the data and feedback.

An accounting system provides feedback to the organization and as they say, what we measure matters.  The current financial reporting framework reflects what matters to investors without saying much if anything to employees, customers, the community and other potential stakeholders. 

What if we redesigned the central nervous system to provide feedback on sustainability?  How would that influence behavior?

As you may recall from my earlier blog posts about system thinking, the key leverage points in any system are:

1. Change the dominant mind-set out of which the current system arose
2. Rearrange the parts of the system
3. Alter the goals of the system
4. Restructure the rules of engagement of the system
5. Shift the flows of information and communication of the system
6. Correct the feedback loops of the system
7. Adjust the parameters of the system

What story is your accounting system telling?  How would your company be different with a Triple-Bottom Line monitoring system?

Random thoughts

David Korten will be on KBOO Monday morning at 8am PST.  David Korten’s most recent book is Agenda for a New Economy, which I highly, highly recommend.  KBOO is a community radio station in Portland located at 90.7fm on the FM dial.  You can also find them here.

David Korten will be in Portland, Saturday, May 30^th at the First Baptist Church (12^th and SW Taylor) starting with a 5pm celebration and a 7pm lecture.  More information is here.

Congratulations to my friend Joel Garbon, and his co-author Jeane Manning, for winning the Silver Award by the Independent Publishers in the category “Most Likely to Save the Planet.”  Their book is entitled “Breakthrough Power: How Quantum-leap New Energy Inventions Can Transform Our World” which you can learn more about here.

Finally, I’ve been invited to join the BGI faculty next year to teach accounting and finance.  I’m honored and excited at this opportunity and look forward to helping the incoming graduate students learn the language of business.

Can we afford to cure cancer?

I read an op-ed some 20 years ago that really changed my vision.  The author was discussing how the bottom line consideration for so many policies and actions was jobs.  Jobs, jobs, jobs. 

With all this importance placed on the need for more jobs, she wondered whether our society could handle putting an end to crime as millions of jobs in enforcement, prosecution, defense, prison construction and operation, probation, security, etc., would be lost.  The cure for cancer would also eliminate millions of jobs in research, treatment, pharmaceuticals, insurance, etc.  What would happen to our economy if everyone gave up smoking? 

The author also highlighted our preoccupation with the phenomena by pointing out that Native Americans didn’t even have a word for job. 

While everyone and every being has to make a living, and I believe that most people appreciate meaningful work, are jobs the ultimate reason for our being?

I realize unemployment is really high yet I proposed a systems changing solution that would immediately solve the unemployment problem as well as slow our ecological catastrophe. 

I believe we need to slow down our economic engine to solve our ecological and human social problems.  How might we increase happiness, joy and fulfillment without consuming more of the Earth’s overly burdened resources?  This really isn’t too hard to imagine.

The Brundtland report first articulated the concept of sustainable development as the sweet spot between the three E’s of Economy, Environment, and Equity.

However, the economy and society are really subsets of, and dependent on the environment.  A better graphic looks like this.

I'll let you think abou that and remind you that nature bats last and of course, there are no jobs on a dead planet.

Time is of the Essence

My friend, Darcy Winslow, just returned from a trip to Antarctica.  Sponsored by BP Energy, she and Peter Senge took 50 young leaders to the remote continent to inspire and educate them about saving this place.  Darcy shared her slides and talked about her experience to a small group of friends last night.  The pictures and video were amazing, the message was ominous.  We are on the brink of peril.

So far, all the worst-case scenario predictions from a decade ago have been exceeded.  There is more carbon, more warming, stronger storms, greater sea-level rise, etc. than any of our early models predicted.  If the West Antarctic Ice Sheet was to break off, and there is a significant possibility of that occurring, sea-level would rise an estimated 12-21ft.  That is amazing!!! 

It is estimated that a 1 meter rise in sea-level rise would create 100 million refugees based on the fact that 20-25 percent of the global population live in coastal areas.  Can you imagine the chaos of a 12'+ rise?  The number of US residents alone living with 12’ of sea-level is staggering. 

So what do we do?

Business as usual is not acceptable.  Fundamental change is required.

The mental model most of us have is that our society is the absolute peak of human existence.  That any change means stepping off the peak and somehow represents going backwards.  This is a myth we must reject.

Rather than viewing these changes as giving something up, maybe we should view them through the lens of getting what we want.

In our current system, the primary driver seems to be making money.  We’ve developed a beautiful system for making rich people richer.  Just like in the times of the Pharaohs, those at the top of the pyramid live lavishly, those just below them live pretty well and those at the base, the largest section, suffer.

Is our purpose on this earth service to the modern day Pharaohs?

We have a human birthright to clean air, water and unpolluted bodies; To lifelong education and fulfillment, to meaningful work, to healthy food, health care, and a spiritual life.   We have EVERYTHING we need right now to do that. 

My guess is that everyone reading this right now has a higher standard of living than the wealthiest Kings and Queens from 150 years ago.  How much is enough? When do we change the goals of the system?

Spreading the Word

I spoke last week at the Western Regional Conference of the American Accounting Association. This was a group of accounting educators and researchers, most of whom hold PhDs and teach accounting to college students.  My talk was on Sustainability and the Triple-Bottom Line.

Since you are reading this blog I suspect you have an interest in sustainability.  Living in Portland and working in my regular circles, I usually assume a fairly high base level of sustainability knowledge in the people I meet.   Maybe you do as well. 

However, when I lecture or teach classes on sustainability, I’m typically shocked at how low the level of understanding is regarding the issues driving the need for change.  For example, I typically include something about peak oil as one of the phenomena driving change.  At this point, I usually ask the audience if they’ve heard of peak oil in order to gauge how to proceed with the discussion and I’m usually shocked that only 5-15 percent of the people are aware of peak oil.  No wonder change is happening so slowly.

While simply knowing this information isn’t usually enough to drive change, it is an important first step.  Accordingly, we must find ways to engage with more people, outside our normal boundaries.  I am going to schedule more classes and presentations so I can get out and engage more people.

Please contact me if you would like me to give a presentation or teach a class in your area or to your firm, or if you need help developing your own presentation so we can go out and help business leaders understand the urgent need for change.

Systems Thinking

“If a factory is torn down but the rationality which produced it is left standing, then that rationality will simply produce another factory.  If a revolution destroys a government, but the systematic patterns of thought that produced that government are left intact, then those patterns will repeat themselves. . . . There’s so much talk about the system.  And so little understanding.”

–Robert Pirsig, Zen and the Art of Motorcycle Maintenance

I am reading Thinking in Systems by the late Donella Meadows.  I highly recommend this book to change agents. 

Donella defines a system “as an interconnected set of elements that is coherently organized in a way that achieves something.”  Accordingly, a system must consist of three kinds of things: elements, interconnectedness and purpose.    

So what is our purpose as humans? What is the purpose of our economic system and our businesses? What is your purpose?  While these are existential questions, they greatly impact the world we see.

My friend, Sharif Abdullah, will sometimes ask groups to imagine a world in which children are the most valued treasure.  He invites participants to share what that world might look like – outstanding and varied educational opportunities, economic security for families, parents with time to engage, safe and healthy communities, rich age appropriate activities, time to be a kid, etc., etc, might be group responses. 

Sharif then invites people to imagine a world where our elders are the most valued treasure and the participants create a similar, albeit different list of an idyllic world.

Finally, Sharif invites people to imagine a world where making money is the most valued treasure.

As long as the dominant system goal is to make money, then all our other problems will be subjugated to this higher power.  

What if the bottom line isn’t the bottom line?

I saw Dr. David Suzuki last week and he suggested the real bottom line for a human economic system should be the ecological, social and spiritual well-being of all.  

What might our economy look like if that were in fact the goal of our system?

Successful Business Kit

We just published this book to help guide start-up businesses.  It contains useful information on:

1. The choice of legal entity
2. Registering with the tax authorities
3. Accounting and bookkeeping considerations
4. Payroll taxes and reports
5. Fiscal year-end considerations
6. Income tax considerations
7. Cash planning and forecasting
8. Credit and financing your business
9. Insurance considerations
10. Leading towards sustainability
11. Your role in the voluntary carbon market
12. LEED
13. Eco-balances
14. Selecting professional advisors

It is somewhat tailored for Oregon businesses but would be helpful for any start-up business.   

To request a copy, give us a call at the TriLibrium office.

Small Business Incentives in the Recovery Act

The $787 billion American Recovery and Reinvestment Act of 2009 provides nearly $300 billion in tax relief.  As a stimulus package, over $280 billion in tax relief is targeted for 2009 and 2010.  Keeping with the Obama administration view that small business is the principal engine for job growth, the act has some nice benefits for small to medium size businesses.  Please note that this is a high-level overview and you should probably see a CPA or qualified tax accountant for more information about your specific situation.

CAPITAL  EXPENDITURES

One benefit for small business is the ability to immediately expense major capital purchases through the use of Code Sec. 179 and bonus depreciation (Code Sec. 168(k)).  Code Sec. 179 is limited to small business as it begins to phase out when a company spends more than $800,000 on eligible purchases.

First-year expensing was once limited to $25,000 per year and then increased to $100,000.  In 2008, the limit was increased to $250,000, and the act extended this limit through 2009.    Businesses that qualify should take advantage of this opportunity because the limit reverts to around $125,000 in 2010 with a $500,000 phase-out and could go even lower in 2011.

NOL CARRYBACKS

The act allows corporations, partnerships and sole proprietors to carryback 2008 losses for five years rather than the two years allowed in the previous law.  NOLs can provide an immediate and significant cash infusion for a cash-starved business running at a current loss if they had income in any of the previous five years.

I was consulting with a business last week who was struggling with cash flow in this current economic environment and was able to identify over $40,000 of cash sitting in his 2008 loss.  His current CPA firm had been sitting on their S-Corp return for over 6 weeks (crappy service but that is a blog entry for another day).  I recommended he light a fire under them or bring it to TriLibrium to tap into this tax refund ASAP.

The five year carryback only applies to companies with average sales of less than  $15 million over a three year period.  It should also be noted that if a business has already filed their 2008 return and elected to forgo the carryback, there is a provision in the act that allows taxpayers to revoke that election by making a new election before April 18, 2009.

QUALIFIED SMALL BUSINESS STOCK

Owners of qualified small-business stock could previously exclude 50 percent of the realized gain on the stock if the stock was acquired when issued and held for five years.  The act increased the exclusion to 75 percent of the gain, for stock issued after February 17, 2009 through the end of 2010. 

I should also point out that start-ups should consider the benefits of Code Sec. 1244.  I see far too many lay people choose the LLC model without understanding the options and benefits of other forms of business.

S CORPS

I don’t want to go into all the details but will say that the act has some special rules that would apply to C corporations that converted to an S corporation in 2001 or 2002 and are facing downsizing and need to unload assets.

ESTIMATED TAXES

The safe harbor for estimated taxes was reduced from 100 percent to 90 percent of prior year’s tax, or 90 percent of the current year’s tax.  This safe harbor is limited to taxpayers with less than $500,000 of adjusted gross income, where more than 50 percent of income is derived from a business with an average of less than 500 employees in 2008.  This benefit applies only to 2009 but should lower estimated tax payments for many people.

Twin Crisis – One solution

In 1999 I marched at the WTO in Seattle with my then 5-year old daughter.  I’m proud that I took to the streets to protest the corporate agenda.  It was obvious to me back then that our world was headed in the wrong direction.  My chief concerns at the time were the large and growing environmental problems as well as corporate power.  Both problems have only worsened over the ensuing 10 years.

Right now, tens of thousands of protestors are again taking to the streets, this time in London at the G20 summit.  The twin crisis of climate change and global recession are at the heart of the matter.  Nothing less than the future of the planet may be at stake.  Are the world leaders listening to the people or the corporations?

The beauty of these twin problems is that it is possible to solve both of them simultaneously.  We can solve the recession and address climate change with a Green New Deal.  This is the beauty of sustainable business and a sustainable economy.   If we do this right, we fix both problems at the same time.  If we do it wrong, fixing one exasperates the other.  Given the corporate agenda, I fear that we’ll work to jump start the old economy - carbon emissions be damned.

Here is the problem – Climate change won’t wait and doesn’t give a damn about the global economy.

Just a month ago, the world's climate scientists met in Copenhagen and concluded that “the worst-case IPCC scenario projections are being realized.  … including global mean surface temperatures, sea-level rise, ocean and ice sheet dynamics, ocean acidification, and extreme climatic events.”

Steven Chu, the Nobel Prize-winning scientist who has been appointed Energy Secretary by Barack Obama, says: "I don't think the American public has gripped in its gut what will happen. We're looking at a scenario where there's no more agriculture in California. I don't actually see how they can keep their cities going either."  

If you think we have economic problems now, I think we’ll look back to now as great times if the people of LA, San Diego and SF are forced to leave their cities and places like Florida and NYC slip under the sea due to rising oceans.

A Green New Deal has the potential to put people back to work, solve our looming energy problems, clean up the environment, address climate change and refuel Main Street.   Time is running out.  We need to act now and we need bold progressive leadership.  

Where is the Change?

“You cannot solve a problem from the same consciousness that created it. You must learn to see the world anew.” Albert Einstein

I would love to see the economic crisis end. I think we all would. However, I have little faith in President Obama’s economic leaders because they come from the same mindset that caused the problem. They are the consummate insiders trying to restart their broken system.

I believe the root cause can be traced back to Wall Street and financial speculation. As I’ve written before, the solution resides on Main Street, not Wall Street.

Federal Reserve Chairman Ben Bernanke is a fairly traditional economist whose thoughts, beliefs and training have all been from the consciousness that created the problem. The same is true of Secretary Timothy Geithner. Both come from the world of banking that is at the core of this mess and because of their history, have mental models that can only see a solution in that arena. I believe it would be impossible for them to envision a world without our current monetary system (private bank that creates and controls money) or the behemoth financial sector from where they emerged.

As I’ve stated before, much of our financial services sector does little to add real value to our economy. Trading paper is not economic output despite what we’ve been led to believe.

I wonder where we’d be if we stopped focusing on the banks and instead focused on the American people. How far would $9 trillion go towards fixing our economic problems if we targeted that money towards Main Street instead of Wall Street?

I suspect their solution (buying worthless assets with taxpayer money) will cause as many problems as it might solve. I have a real fear of hyperinflation as the government floods the economy with more money to purchase worthless assets from private banks and investors. They’ll get the money, we’ll get the bill and in the end, will have nothing real and tangible to show for it except little pieces of paper.

“Insanity: Doing the same thing over and over again and expecting different results.” Albert Einstein

Taxes, AIG bailout and more

I was going to blog about taxes so I started researching the federal budget and looking for an image to post.  

I really wanted to discuss the residential energy-efficient property credit, which was extended through 2016 and which generally covers solar electric, solar water heating, fuel cell property, small wind energy and geothermal heat pump property.  I also wanted to discuss the non-business energy property credit for insulation, exterior windows, exterior doors, furnaces, water heaters and other energy-saving improvements to a main home which was not available in 2008 but returns in 2009.

However, the AIG bonus hysteria got in the way of a deeper discussion on taxes. 

First, I don’t believe anyone is worthy of a multi-million dollar income and lifestyle while we have needy children in our midst.  That is one of my beliefs and values.  I think billionaires are evidence of a flawed system.

While I’m opposed to the whole Wall Street bailout and the more than $9 TRILLION spent on this fiasco to date, what gets me is the missing perspective on the AIG bonuses.

AIG Bonuses = $165,000,000 ($165 million)

Missing Cash in Iraq = $12,000,000,000 ($12 billion – 73x more)

Official cost of Iraq war to date = $656,100,000,000 ($656.1 billion – 3,977x more)

Wall Street bailout to date = $9,400,000,000,000 ($9.4 TRILLION – 56,970x more)

The AIG bonuses amount to 2/1000^th’s of the cost of the bailout!

FYI:  Missing from the "official" cost of the bailout is government guarantee and insurance programs like the FDIC ($1.5 trillion), FHA ($.3 trillion) and the Federal Reserve ($7 trillion).

Return on Sustainability

Kudos to my Bainbridge Graduate Institute (BGI)colleague Kevin Wilhelm, for the publication of his new book Return on Sustainability.  Kevin shows the clear business case for sustainability and dealing with the climate crisis proactively.

Kevin highlights the risks and opportunities climate change poses for business.  As I've stated in previous posts, there are opportunities for companies that 'truly' embrace sustainability and Kevin digs into the details including:  enhanced brand value; improved customer, employee and shareholder relations; and better climate performance all at the same time.

As Kevin points out, climate change touches on every aspect of a business: Energy; transportation; innovation; waste; supply chain; employee retention and morale; investor pressure; brand value; customer loyalty; market opportunities; cost savings; tax; regulatory; carbon trading; and leadership.  

Given all that, don't you think a comprehensive strategic business plan should address climate change is a serious manner?  What we learn at BGI, and what I teach my clients is how to address sustainability and climate change in a comprehensive way.  Kevin's new book helps bring that understanding to a wider audience.

Treating climate change as an ancillary issue creates mostly costs for business whereas addressing sustainability comprehensively allows a company to capture the opportunities.

Think of the technological revolution back in the 80s.  Companies that embraced technology in a strategic and comprehensive manner left their competition in the dust.  Those who were slow on the uptake were forever relegated to playing catch up.

Single-Payer Health Care

We are over a year into this crisis and we have yet to see a single reform beyond massive government spending programs designed to restart the same system that created the mess.   Isn’t that akin to using a defibrillator on a 75-year old, 1,000lb, diabetic smoker?

While I’ve been advocating the elimination of Wall Street, the implementation of a Carbon Tax with a 100% dividend and the 32-hour work week, today I’ll weigh in on health care reform.

One fundamental change I support [and we don’t hear enough about] is the Single Payer Health Care system. 

Single-payer is the system that removes private insurance companies from the picture; the government pays all the bills, but health-care delivery remains private. People still get their choice of doctors and hospitals. Single-payer reduces administrative costs and eliminates expenses for-profit insurance companies add to health-care delivery. 

How nice it would be to never have to worry about health insurance again!

This would benefit everyone, including business.  Managing health care plans is an expensive proposition for business.   Beyond the high cost of coverage are the hidden costs of shopping for insurance, evaluating options, legal and tax compliance, HR overhead, employee benefit education and communication and other administrative costs.

Despite being closed out of the debate by corporate media, single-payer is developing critical mass.  H.R. 676 "Expanded and Improved Medicare for All," has 65 co-sponsors in Congress.  I myself won’t vote for a politician who doesn’t support universal health care.  Groups like Single Payer Action (I am a paying member) are growing and taking action.

I believe all of us suffer as a result of our for-profit health care system.  We need a system where everybody is in, and nobody is out.  Single-payer is the solution.  I hope you’ll take action (contact Congress, talk to people, get educated, tell your story, etc.)  right now, to help further single-payer.

I'm opposed to the Cap-and-Trade system

I believe we need to reduce greenhouse gas emissions and we need to do it quickly.  I also believe a market solution is the best solution. While I laud the goals of carbon reduction, I believe a Cap-and-Trade (CAT) system is an unnecessarily complicated scheme only Wall Street could love (and politicians afraid of the word “tax” and US citizens to dumb to understand CAT is a tax.) 

CAT is essentially a carbon tax wrapped into a security.  Do we really trust Wall Street and the financial speculators to responsibly handle a trillion dollar market created to equitably solve a social problem?  I don’t.

Instead, I support a simpler, more transparent, and easier to understand, straight-forward Carbon Tax with 100% dividend distribution to U.S. citizens.  With a 100% dividend distribution, this tax would be revenue neutral for the government since all proceeds would be returned to the people in the form of a rebate.

The tax would be collected as the fuels enter the US market and that would be it.  The additional cost would flow through the system and affect all CO2 emitters.  This would internalize the price of polluting, making it more expensive to emit CO2. 

Since all monies collected would be refunded, those that pollute less than average would actually get a net rebate while those who pollute more than average would be the ones ultimately paying more.

The tax code is regularly and successfully used to promote or discourage certain behaviors.   I believe a simple, revenue neutral Carbon Tax is the way to reduce carbon quickly and fairly.

A Carbon Tax is supported by both Al Gore and NASA scientist and climate expert Jim Hansen.

Classes for CPAs and business advisors

During May and June I will be teaching two classes which will qualify for Continuing Professional Education (CPE) credits for CPAs:  

• Sustainability for CPAs: What it means to you, your clients and the profession
• Advising the Startup Business

Both courses will qualify for 4 hours of CPE.  The classes will be offered in Portland and Lake Oswego.  The CPE sponsor is BrownBagCPE, a local group that provides live and affordable CPE in Oregon and SW Washington.

The feedback from the Sustainability Course has been outstanding.  Please contact me if you would like more information or have an interest in having this class taught in your area.

Last week I had lunch with a salesman from XYZ Company seeking TriLibrium's business.  XYZ Company is probably ranked third in an industry dominated by two giants. 

As I was looking at his card while getting ready to send a thank you note, I was thinking about XYZ Company as a business and my thoughts were: 

1.       Why should I care about XYZ?

2.      It must be a tough and competitive market battling the two giants, especially when you compete on price.

3.      What are you doing to be sustainable?

I sent my thank you and included the following note:

“… I was thinking about XYZ and your business strategy and how a company like yours could benefit by embracing sustainability as a strategic business driver.

The market place is rapidly changing and I believe the future will NOT resemble the past. 

·         Your next generation of employees (Gen Y) care deeply about who they work for and the values of the company

·         Your customers care about this as well and will be increasingly, at least partially, basing their decisions on these factors

·         Sustainability is an excellent differentiation strategy.  Do it now and be a leader, do it later and you will inevitably play catch up forever.

·         Managing carbon emissions and the cost of polluting will be rising and is likely to be regulated.

·         “True” sustainably driven organizations have the highest relative market values

In many ways, sustainability and traditional business and management approaches are as different as night and day.  Appending the strategic plan with “green” practices is helpful, important and appreciated, but ultimately doesn’t go far enough.

I think every business has an opportunity to embrace sustainability as a strategy.  Sustainability has the ability to be a disruptive business innovation and in that environment, you are either a leader or you risk being left behind. …”

As readers and visitors to this blog, I would appreciate your thoughts and comments. 

 

Let's Talk Energy

I attended The Natural Step breakfast meeting this morning.  The topic was Peak Oil and John Kaufmann, Senior Policy Analyst with the Oregon Dept. of Energy gave an amazing presentation.

If you are not aware of Peak Oil, then I highly, highly recommend you get yourself educated about the science and the implications.  I believe we may have already peaked, or that the peak is imminent.  He said the consensus is that we reach Peak in 2-5 years if we haven’t already.  Here are some resources for more information:  www.hubbertpeak.com, www.peakoilportal.com, www.theoildrum.com.

One of the key things I’ll share is that this crisis is urgent and that we ought to be using the precious liquid gas resources we do have to bootstrap our way to the next system.  It takes lots of fossil fuel to build electric trains, retrofit and build buildings for zero energy use, and put in the grid and generators that will provide clean and renewable energy in the future.  We have really squandered the last 25-30 years and we cannot afford to squander the next.

Every type of non-renewable energy source will peak and decline this century: Petroleum, natural gas, coal, uranium.  We currently get 4 percent of our energy from renewable sources (wind, hydro, solar, geothermal, bio, etc.) and almost none of that fuels our transportation.  96% of our energy supplies will peak or be exhausted this century.  Ninety-six percent!

I’ve never really thought about how much energy we use or what life might be like without it. I recently heard a couple of examples that put our energy use in context.

How much energy does it take to run a single 100 watt light bulb?  Have you ever been on one of those bikes hooked up to a light bulb?  It takes a very physically fit person biking at nearly full speed to power a single light bulb.  Multiply that by all the lights and electrical devices in your home and you probably have the equivalent of at least 50 human slaves working for you in the form of energy.

How much energy is in a gallon of gas? Try this, fill your tank with a gallon of gas and drive until you run out.  How much energy was in that gallon?  Try pushing the car home to find out.  Similarly, fill a chainsaw with a gallon and cut wood until you run out.  Now repeat using an axe or saw.  You’ll find that a gallon of gas can do the work of more than 100 men.  I had someone tell me today that 3 tablespoons of gasoline will do the equivalent work of one person working an 8 hour day.

 

“True” Commitment

I’ve been writing about the A.T. Kearney report that discussed their findings that the market rewarded “companies who show a ‘true’ commitment to sustainability.”  What is a ‘true’ commitment to sustainability and what does that look like?

To me, using sustainability as a strategic driver means you make that focus primary.  Making money and being financially sound are also important but if they become the primary focus or raison d’etre, I believe you’ll make short-term decisions and when the two conflict, you’ll likely make the wrong choice.

Another sign of “true” commitment is leadership and a continuous drive for improvement.  I toured Rejuvination's manufacturing facility this week and learned that they sit down each year and evaluate all areas of their business to ensure they are using the current best practices.  Is there a better chemical, process or material they should be using, if so, they change.  

One thing I’m beginning to use as a criteria between a deep and real commitment to sustainability and a lesser, questionable commitment is the greenhouse gas (GHG) inventory.

No GHG inventory and no plans to do one = Questionable commitment.  Are they just greenwashing?

Taking action to minimize your waste stream is important. The largest and arguably most dangerous waste streams are your unseen and unmeasured carbon emissions. 

Dr. James Hansen, the NASA scientist and climate expert, recently wrote that “our planet really is in peril” as a result of our carbon emissions.

Will 2009 be the year you do your GHG inventory, or are you prepared to be accused of greenwashing and lose your brand and market position?

Greenwashing

Yesterday I wrote about the A.T. Kearney report that discussed their findings that the market rewarded “companies who show a ‘true’ commitment to sustainability.”  What is a ‘true’ commitment to sustainability and what does that look like?

Let me start with a true story about a ‘fake’ commitment. 

I was recently introduced to an executive for a ‘green’ online website.   I was excited to meet her based on her business card and initial ‘image’.  I visited their website before our meeting and could immediately smell a fake.

Visiting their website I could instantly tell they didn’t get it.  While it was an aesthetically pleasing site with the appearance of some good branding, it was clear they didn’t get sustainability and I predicted failure.

•  They were promoting consumerism
•  Their online articles were fluff
•  There was no information about who they were, where they were located or an easy way to contact them
•  There was nothing about their story
• Nothing about their commitments or goals to social justice or sustainability
•  There was nothing there to make me care

I met with the executive and shared my thoughts in a polite manner.  I sent her a mini report after our meeting and here is part of her email response:   

“I Know, I know, we aren't transparent and all the other stuff you mentioned...but in this economy it is all about making money.”

I stand by my prediction.

While a company like this may temporarily grow, it won't be sustained as savvy consumers really figure out the motivations, and how sustainable is that?  A failing company takes lots of people down with it including vendors, employees and investors.

More to come tomorrow.

Green Winners and Real Sustainability

A recent report by the consulting firm A.T. Kearney found that “companies who show a ‘true’ commitment to sustainability appear to outperform their peers in the financial markets.”

Two key takeaways for me were the advantages derived from long-term thinking and that this premium value is only created by a “true” commitment to sustainability. 

Long-term thinking was 5+ years for public companies.  I guess that is an improvement for business leaders who have been primarily focused on quarter to quarter results.  But is this really the appropriate time horizon for sustainability?  No way!

I caution people about the use of the term sustainability.  It is a goal to strive for, but I believe true sustainability needs to be determined over the course of at least a few generations, if not centuries or millennia, and it is therefore misleading to say ______ IS sustainable.

Canada and many other countries actually have standards related to environmental claims.  Here is the standard for Canada:

The concepts involved in sustainability are highly complex and still under study. At this time there are no definitive methods for measuring sustainability or confirming its accomplishment. Therefore, no claim of achieving sustainability shall be made.
CAN/CSA-ISO 14021, Clause 5.5

According to Arie de Geus in his book the The Living Company, the average lifespan of Fortune 500 companies he studied was 40-50 years.  From birth to demise, whether the end comes in the form of failure, merger, being acquired or broken into pieces, the average was under 50 years.  It is well known that start-ups have an even higher mortality rate.  One study of Japanese and European firms, regardless of size, indicated an average life of just 12.5 years.   How sustainable are those numbers?

The book went on to highlight the attributes of companies who have been around for over 300 years.  There are actually companies operating today who have been around for over 700 years! Now that is starting to look sustainable.

In studying these long-lasting companies, four common traits emerged as important factors: 

1.       They were sensitive to their environment

2.       They were cohesive, with a strong sense of identity

3.       They were tolerant

4.       They were conservative with their financing

That last one seem particularly important right now.

Tomorrow I’ll comment about the report’s findings on the commitment to “true” sustainability.

Time to ACT

Dr. James Hansen, head of the NASA Goddard Institute for Space Studies and one of the leading experts on climate change wrote a Sunday op-ed for The Observer.

The picture is not pretty - "our planet really is peril" he writes.

Are we going to heed his warning?

"Our global climate is nearing tipping points.  Changes are beginning to appear, and there is a potential for explosive changes with effects that would be irreversible - if we do not rapidly slow fossil fuel emissions over the next few decades."

"If we do not change course soon, we will hand our children a situation that is out of their control, as amplifying feedbacks drive the dynamics of the global system."

I hope you have an emotional reaction to this information.  I did.  I woke this morning thinking what more can I do?

While there are a number of individual actions I can and will take, I still believe the greatest leverage point occurs at the system/paradigm level.  We must change our economic system to a sustainable system and we need to do it fairly quickly.

Dr. Hanson calls the trains carrying coal to power plants "death trains."  "Coal-fired power plants are factories of death" he writes.  Every product you buy or sell should make you think about the embedded carbon. 

How might we get off the "death train?"

A Hopi Elder Speaks

"You have been telling the people that this is the Eleventh Hour, now you must go back and tell the people that this is the Hour.  And there are things to be considered . . .

Where are you living?
What are you doing?
 What are your relationships?
Are you in right relation?
Where is your water?
Know your garden.
It is time to speak your Truth.
Create your community.
Be good to each other.
And do not look outside yourself for the leader."

Then he clasped his hands together, smiled, and said, "This could be a good time!"

    "There is a river flowing now very fast.  It is so great and swift that there are those who will be afraid.  They will try to hold on to the shore.   They will feel they are torn apart and will suffer greatly. 

    "Know the river has its destination.  The elders say we must let go of the shore, push off into the middle of the river, keep our eyes open, and our heads above water.   And I say, see who is in there with you and celebrate.  At this time in history, we are to take nothing personally, Least of all ourselves.  For the moment that we do,  our spiritual growth and journey comes to a halt. 

    "The time for the lone wolf is over.  Gather yourselves!  Banish the word struggle from you attitude and your vocabulary.  All that we do now must be done in a sacred manner and in celebration. 

    "We are the ones we've been waiting for."

-- attributed to an unnamed Hopi elder

Hopi Nation

Oraibi, Arizona

Economic bubbles

The cornerstone of the CPA profession is independence, integrity and objectivity.  I wish I could tell you that our financial system was going to be okay and that President Obama and our elected and appointed leaders in Washington were going to save the day.  Unfortunately, I'm highly skeptical and I have obligations to my friends, clients, family and readers to share my concerns.  Your future depends on understanding these matters.

Economic bubbles exists when asset price inflation rises beyond what income can sustain.  The ride up a bubble is exhilarating as everyone thinks they've found a fountain of gold and the ride down is devastating, as the economic system collapses and the artificially inflated values people assigned to certain assets retreat to their actual value.

One of the most famous bubbles was the Dutch tulip mania that peaked in 1637.  On the run up, people actually believed a single bulb was worth more than a house.  

We've actually experienced two bubbles in the past ten years (dot.com and housing).  These were partially fueled by cheap credit (corporate, governmental, private).

Ludwig Von Mises (1881-1973), an influential Austrian Economist wrote:

“There is no means of avoiding the final collapse of a boom brought about by credit expansion.

The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

If this is true, current government actions to expand credit (print a $Trillion and get banks lending again) will ultimately lead to the collapse of the US currency.  A collapse occurs when people no longer have confidence in a fiat currency. Historically, thousands of currencies have collapsed.  Given time, is it possible that they all will? 

It would be unfair to freak you out without providing a solution.  The first step is to get educated and then to take action.  Two items I'm imploring you to read/watch are 

1. Chris Martenson's Crash Course.  The first sentence on the home page reads, "Ready to learn everything you need to know about the economy in the shortest amount of time?"  
2. David Korten's Agenda for a New Economy: From Phantom Wealth to Real Wealth

I'm on Chapter 17 of the 20-Chapter Crash Course, and I'm in Section 2 of Korten's book.