Democratizing Economics | Ethical Investing | Leveling up in our Leadership
Author: Felipe Witchger
Felipe organizes community. He leads a co-op that is laying the foundation for a new economy, helping community institutions level up. By developing leaders, Felipe organizes overlooked communities to build broad community wealth. He especially loves building sandcastles with his 4- and 6-year old kids.
Shifting our investments to local, direct investing is really about buying “livable future insurance”.
The concept is basically that we’re dramatically under-calculating the devastating impacts of super storms, heat waves, hurricanes, & all climate related disruptions over the next 20-40 years. The interesting thing is that many of us will be drawing down our retirement savings on a similar time horizon. I think collectively we’re grossly under-calculating the risk of climate, inequality and related disruptions will have on the stock market. The 8% average annual returns of the past 90 years are not what we’re going to see going forward. Not if you believe the most recent IPCC report.
When you add on to this the reality of health care and long-term care costs, food system instability, other unexpected disruptions — the world will be fundamentally different 20-40 years from now. Whether you’re a technologist (with VR and AI), or a malthusian (finite limits of world’s resources) — the world will be different.
But what are we doing to re-think our retirement savings strategies? Our long-term investing? How are we investing for a livable future?
Here’s my proposal
Durham’s Angel Investor / Slow Money Circle
Investing in Black & Latinx Entrepreneurs
We believe the traditional advice on investing needs to be re-thought given current realities with carbon, inequality, refugees, healthcare, elder care, and mass criminalization of black and brown bodies. We need to be more thoughtful about the structures of sin and evil we are complicit in perpetuating by following status quo investment advice.
We believe the stock market is riskier than most people think, and that we need deeper economic, power, financial, & ruthlessly critical analyses to help us create a livable future for our grandkids and their grandkids.
We believe that understanding racism, all of it’s systemic, institutional, interpersonal impacts is fundamental for white folks to do the work to begin to see the ways we’re all bound up in the structures and extractive mindset that keeps us apart, disconnected from deeper work, where we’re from, and where we’re going.
We believe in the redeeming power of real, deep relationships and contemplative practice, especially based on trust, mutual respect, mutual accountability, grace, and mercy.
We need new vehicles, platforms, communities, learning groups, cohorts to do the important, hard thinking on how do we really divest and where do we reinvest? What alternatives are we building?
Capitalism tends toward the concentration and centralization of wealth and we see it all the time in various sectors and industries we’re in (for example John Oliver’s recent piece on Private Equity’s recent entrance into manufactured housing). Can we democratize these sectors, create co-ops, employee ownership structures that can scale?
What collaboratives of deep thinkers are you engaging with to build this next generation of people moving their money in strategic ways to build the power we need for a more just and livable future to be possible?
“Now the other thing we’ll have to do is this: Always anchor our external direct action with the power of economic withdrawal.” – Martin Luther King, Jr.
“Imagine a monopoly game with 8 people. Then imagine 4 of the people are forced to leave the room until all the properties are purchased. Those 4 people are invited back in and asked to keep playing. How do you think they’ll do?”
“That’s what it’s like to be black.”
Geraud Staton tells a story like this during his February 2018 Equity in Entrepreneurship talk at ReCity – an innovative co-working space in Durham. Geraud leads LaunchDurham as part of his role at the Helius Foundation, where he helps necessity-driven entrepreneurs grow their businesses and give it their best shot.
To me, this feels like some of the most meaningful work we can do if we want to get serious about racial equity.
Three years ago I met Traveon Smith, Founder of LGC Security because a charter school leader told me she wanted to give him a chance to bid on the security services their school was going to need that year. I was running a purchasing cooperative in Washington DC that helped churches and schools find high-performing local service providers. That Spring one of my projects was helping eight charter schools find a more responsive and reliable security services provider. A week after we released our Request for Proposals, Traveon from LGC sent me his bid. I decided to sit down with him and tell him a bit more about what the schools and our co-op were looking for and to get a sense of his company, his experience, and why he was so eager for this opportunity.
It turns out LGC was selected by one school that summer. Then another that Fall, and three more that Spring. By 2017, Traveon had landed more than $2 million per year in security contracts from charter schools and was about to win a bid to serve Howard University. His team had grown from 3 to more than 100 full-time staff.
The way I helped Traveon and LGC wasn’t to give them a handout, it was simply to help better understand the needs of the clients he wanted to serve. I gave him insight about how they thought about their schools and what I head learned was most important to them. Then he did the rest. He won their businesses. He’s had to work extremely hard to earn their renewals and referrals and it still isn’t easy. But now he has a business. He’s built some wealth for his family and is offering good employment for more than 100 people that look like him.
When I think about the twenty public and private-sector leaders I’ve met with in Durham over the past few months, I’ve heard racial equity come up over and over again. But when I ask about what action they’re taking or organizing as a collective, it feels like there is less happening than we’d like.
I want to propose a locally-focused purchasing cooperative owned by and led by Durham leaders. The cooperative would be a collaboration between non-profits, faith institutions, education leaders, property owners, and our largest anchor institutions: universities, health care, and public sector. The focus of the co-op would be three-fold:
(1) Help community institutions (i.e. churches, small business, non-profits and any others) save money and be more intentional on contracting for facilities, construction, and professional services.
(2) Build spaces for large buyers to meet, discuss, and hear trusted peers talk about good experiences with local, minority- and women-owned firms. The purpose being to help spread the word about newer and smaller firms that are hungry to grow.
(3) Support entrepreneurs in coming together to hear about the landscape of upcoming projects, build trust with peers, perhaps new collaborations, and discuss shared challenges. The purpose would be to direct folks to existing resources and identify gaps.
We recognize Durham and our region is undergoing incredible growth. Construction firms consistently tell me how hungry they are for more skilled workforce.
My hope is that by building a collective vehicle that organizes more of our purchasing, we connect more of the dollars we spend with high-performing businesses owned by people of color.
In the past 4 years, I grew a buying co-op of community institutions that collaborated on utility bills and saved $100,000 to what is today a group of 75 that now shifts $16,000,000 per year and intentionally contracts together with 57% of their spend now going to minority owned businesses.
Working with Durham and other area leaders I believe we can be more intentional with our purchasing and contracting and over the course of a few years shift more than $1,000,000,000 to minority-owned firms.
My aim is to start small, begin with where we’re at today, but gradually build a vehicle for each of us to become more intentional in making our purchasing a force multiplier for change.
I believe you have a hunch about your most important project. The one that if it really succeeds could really make a difference. It could contribute to something extraordinary.
I’m writing because I want to invite you into a caring community that has also glimpsed this part of themselves and knows they need more support and encouragement to work on this most important project.
As an organizer, I see my work as bringing people together, helping to create and hold the space where we can listen and help each other see what’s really holding us back.
In this blog, I hope to share some of what I feel might be my most important work — reflections on co-op economics, heterodox economics, better ways of thinking about our retirement and college investing and personal finance…
But also to share other ideas and reflections on what I’m trying to do with a young small organization that is desperately trying to find where it can have the most powerful impact — on the economy, in our schools, in our religious communities, in how we collaborate.
The journey has been way more emotional and rigorous than I expected. The stakes keep feeling higher and the fear and anxiety grow. But our potential to do good in a deep and meaningful way is growing as well. My missteps and shortcomings as a manager — something I once thought I’d be great at and really enjoy — are also giving me lots to reflect on. I believe that in sharing all this with you, you might have some advice and suggestions for me.
My hope is that by writing an invitation to you every month (and perhaps a couple other quick notes in between) will feel compelling to you — so much so that you’ll write back and engage.
Once I hear from enough of you that you’d like to take a leap with me, I’d like to launch an intensive workshop. This would be a curated cohort that will combine the best of what I’ve been learning from a truly transformational leadership workshop I went on in early 2018, mastermind groups I’ve been a part of over the past year, a couple coaches and colleagues who have been shaping me, and my desire — my desperate desire — to see more of you deeply committed and ruthlessly pursuing what you feel might have the biggest chance at really making a very real and significant contribution.
I believe our economics can embody a greater democracy.
I believe our economic institutions can be more democratic and fair.
I believe the plurality of thought in economics would bring great benefit to society.
I believe in culture and that our culture is the sum of the ideas floating around inside of it.
We all know it’s much easier to take in others’ ideas than it is to create and share the unique combination of ideas your experiences bring to bear.
I believe we need to be talking more about certain ideas.
I believe George Saunders rightly characterized our media situation with his essay, “Braindead Megaphone”.
I believe our most important work is really matters.
I also know how easy it is to be distracted.
I believe that you spending more of your time on your most powerful work will change you.
I believe that creating tension is essential to producing work and creating change.
In organizing, we call it an “agitation”.
“Agitation is the art of challenging a person to be true to their values, true to self and to act on those values out of their own self-interest. It is the art of pointing out the contradictions between what a person professes and how she or he acts.” ~Gameliel National Training Manual
I also believe new kinds of connection are possible.
New curated cohorts learning together can cement new relationships that move us deeply.
I believe in coaching, good feedback, holding up a mirror, reflecting back to each other what’s most important and what we see.
This is the heart of it: Learning to see.
Learning to see inside ourselves.
Learning to see beyond the next turn.
Learning to really see the other. Be with them and help them see themselves.
Together with my co-founder, Merald Holloway, I have been gradually building the basis for a buying co-op here in Durham & beyond.
On Thursday at 6pm, Merald and I will join some really remarkable entrepreneurs:
Geraud Staton (Helius Foundation) – watch the first 2 minutes of this video and you’ll be blown away by the inequity in black business ownership in Durham, where we once were and where we are today. Geraud’s one of the most pioneering contributors to this space.
Keith Daniels and Tom Droege (Resilient Ventures) – a mix between an angel and VC fund, aimed specifically at helping black entrepreneurs in Durham, NC, and beyond.
Rob Sheilds & Zenzele Barnes from ReCity Network (see previous roundtable events here), will be hosting and facilitating an interactive community conversation that I hope will re-invigorate our imagination of what we can be doing together to really move the needle.
Might you be able to join us on Thursday and ask a hard question, that deepens our collective thinking on this?
I’m inviting you for two reasons:
(1) I think you have something to contribute & believe the conversation can help us imagine more about what kinds of partnerships and collaborations are possible.
(2) Geraud, Keith, Tom, Rob, Zenzele, and Merald are grounded in the reality we live in, but are taking big leaps to do the hard tangible work to push us forward.
I’ve been inspired by their grounded-ness, audacity, and hope this conversation can help move us collectively in the right direction.
In 2018, our coop aggregated $16 M in contracts. 60% went to minority owned businesses. Here’s my invite to you… let’s come together to actualize the flourishing of ALL entrepreneurs in our community by implementing anti-racist spending decisions at our community institutions.
When I think about what’s happening in our world, I see wealth consolidation, growing inequality, I see more homeless folks.
Do my investments in corporate America and all the publicly traded companies that are part of the S&P 500 have anything to do with that?
1. I feel trapped.
I’m stuck in the mainstream retirement investing paradigm.
And I want out.
I did all the things I was told. I made smart choices and took advantage of employer’s matching contribution. I put extra money into Vanguard S&P 500 Index Funds. I even put money into the best Socially Responsible Investment (SRI) funds I could find: Calvert, Pax, Domini, TIAA-CREFF.
Every time I review my investments though, I get frustrated with how entangled I am in the same exploitative economic system I believe is at the root of so many of our problems.
I feel the intense dissonance from what I say I believe in and where my money actually is. It’s a similar dissonance to those times when I eat a burger, even though I know if I skipped it, I would save enough energy to charge my iPhone for 4.5 years.
It’s cognitive dissonance.
The challenge with investing is: where are all the good “happy” meat options?
2. Angry at “Those” People
“Today will be the last day for Stow, Melanie… [and a list of names were read]”
“Please clean out your offices by 5pm.”
I was 22 and it was my first Friday of my first full-time job. I was thrilled because I had basically landed a dream job as an energy researcher at one of the top firms in the world. As the meeting came to an end, I realized that dozens of colleagues were being laid off. Stow was the renewable energy expert I was most excited to work with. He had co-authored the definitive paper on emerging energy technologies. Melanie, a single mother with a son in Iraq, who worked with me on getting settled in on the job, selecting benefits, and everything else.
As I searched for answers, I found many colleagues distraught, but they calmly explained that while we had been a private company, we were recently acquired by a larger publicly traded firm, and the lay-offs were likely an effort to please investors by positioning for company for better quarterly returns.
This was a key moment in my awakening. The 401(k) options my employer offered got me started on this path. It was a path I wasn’t sure I wanted to be part of, but everybody in my life told me it was the right, smart thing to do.
I think this is how most of us start.
The injustice of how Stow and my other colleagues were treated jolted me to realize the world was really run by those shareholders – those big banks and folks on Wall Street.
As I’ve continued to reflect on, ask questions, and learn about investing, I realize my ownership of mutual funds and index funds means I’m also one of “those” people.
3. Entangled. We are all Those People
Merely by following the advice of the smartest people around us (as I did, when I was counseled by people I trust and that share my values), we go with the mutual and index fund options we’re offered.
I bet you’re just as entangled as I am. The reality is everyone who owns a mutual fund – even the socially responsible investment (SRI) funds — we own shares of these publicly traded companies that are beholden to our desire to grow shareholder value and deliver a return – ideally on par with the rest of the market.
Because that’s what you and I want when we review our investments, right?
We want the hard earned $250 that we eek out of our monthly budget to turn into $750,000.
With the power of compound interest, we know that if we start when we’re 30 and retire at age 70 and earn an 8% annual return along the way, we’ll get to $750,000.
If we earn an average of 9% return, we’d have more than $1,000,000.
If the average annual return is 5%, then it’s only $362,000.
That’s the power of compound interest (all with the same $250/month for 40 years). It’s also why there’s a whole industry around retirement planning, savings, and so much information about investing.
4. Disconnected. What do we want from our investments?
Well, clearly we want to retire. That’s something that in the past was part of the deal we got when we signed up with an employer — a pension. Today, it’s something we have to build on our own and that’s why 401k and 403b and Roth IRAs and financial advice and investing has become so much more focused on the mass market. We’re getting messages all the time about what we should and shouldn’t do. My hope is that you might take a step away from all of that and join me in asking some bigger questions.
What do we want to be part of?
I still have yet to receive a Google Ad or sponsored social media content that actually takes me to an investment option that really aligns with my values and conscience.
When I think about what’s happening in our world and our country, I see wealth consolidation, growing inequality, I see more homeless folks.
Do my investments in corporate America and all the publicly traded companies that are part of the S&P 500 have anything to do with that?
As a student of economics, a person of faith, and a co-op entrepreneur, I wish I was encouraged to wrestle with these questions more seriously in light of my faith. In the absence of hearing it from the pulpit, I invite you to think with me about these questions as a matter of conscience.
5. Hopeful. Alternatives are Becoming More Accessible
Though I’ve been wrestling with these questions for nearly 10 years — about our mainstream investment paradigm, socially responsible investing (SRI), and alternatives that make sense for me – I’m feeling more hopeful than ever about the options that are emerging.
One of the most inspiring recent things I’ve seen is the movement towards “Community Capital” spurred by recent changes in securities law (JOBS Act), allowing more people to participate in crowd-funding platforms that allow you to make equity investments in small businesses.
Resources that I’ve recently come across include:
Locavesting, a website (and book) pointing to many local, alternative and community capital options
Investibule, a platform for small firms looking to raise money
NC3 – a network & collaborative bringing together champions of community capital to more local, social entrepreneurs
I admit, some of this takes work. I also believe it’s a tremendous opportunity.
I see it as an opportunity for:
new relationships, (i.e. slow money networking)
to re-weave the fabric of our local communities,
building more equitable, prosperous, and just future for our kids and grandchildren,
economic democracy, cooperatives, ESOPs, and other employee-owned firms,
you and I to have a much more meaningful and authentic impact with our investments.
What possibilities could you imagine if half the people you knew took half of their investments and channeled them in ways that really resonated with their values and vision? What would that world look like?
What path are you looking for?
Drop me a line and let’s discuss. My hope in writing this is that it starts a discussion and leads to new things.
“Do not go where the path may lead, go instead where there is no path and leave a trail.” — Ralph Waldo Emerson
Will you join me?
I’m eager to build and contribute to communities of people that want to ask, wrestle with, and live into these tensions with more integrity.
Today, we are 75 member-owner community institutions. We collaborate on $15,000,000+ in contracts each year. Yet the most important thing we’ve created doesn’t show up in the numbers.
We’ve built an incredible amount of trust with our members. What’s surprising to me about this is that most of the trust-building has happened not because of anything the staff did, but because of the conversations we facilitated between members. When decision-makers are talking to peer decision-makers about a similar challenge, the value they create and insight they’re able to offer builds something special
“I’ve noticed some patterns that may become more common in the co-ops to come.”
He’s reflecting on his experience as a reporter:
“They will create value not just with the services they offer to members, but with the connections they enable among members—and the efficiencies members discover together.
This rings true for my experience. For example, at the founding meeting of our co-op in 2014, I remember sitting next to Troy Watson and her telling the room of 50 founding and prospective members and others gathered, “While the savings are helpful, it’s the connections I value most.”
I think this continues to be the experience many of our members have. While we help them manage risk and reduce cost in some of their contracts, it’s the personal connections we’re able to help them make with peers that they value most.
“Their specialty will be in fostering trust on trustless networks…”
As I think about where we grow next — whether through building out an online platform for users to co-create value and connection building on something like MARVL.org or whether through developing a new co-op using a similar model in another region — Nathan reminds me that the focus of our work must be in fostering trust.
That’s the specialty of what a co-op can offer and offer with great integrity.
Michael Schrage’s insight about how innovative companies change their customers has stuck with me. And it’s changed the way I understand the work my organization does.
Successful innovations go beyond the quid pro quo; they’re targeted investments in the customer’s future value.
Most customers believe that “the market” sets the terms of engagement for service delivery.
At CPA Co-op, we shape an experience for customers where they have the power to reset the terms to align with their interests.
If we organize a group of customers with a collective contract value (or the promise thereof) that provides sufficient motivation for service providers, the nature of the relationship can be re-shaped.
CPA Co-op plays the role of building these trusted relationships with service providers and customers, synthesizing insights gleaned from both sides, and then negotiating the terms that facilitate this market shift.
CPA Co-op’s Process follows 6 basic steps:
Listen well to customer challenges, probing for areas of dissatisfaction that could be improved
Understand service providers’ business model, where they want to go, and what they look for in a good customer relationship
Craft a group solicitation process that is fair to vendors and brings in proposals that meet key customer interests
Organize a group evaluation meeting (and others if helpful) where customers openly share concerns, bad experiences, fears and also what they will need to move forward / how they’d like to make it happen.
Facilitate the meeting in such a way that people share openly and respond to other’s concerns and fears. The process builds trust. Then ask them who they want to select and propose a path forward that meets their needs and will be within reason for vendors.
Follow-through by negotiating the new framework with finalist service providers and then threading the needle with each individual customer, by drawing on specific customer stories, and/or additional group meetings to clinch the deal.
Justin, a customer and member-owner of CPA Co-op, named the dynamic for me this week, “Each time the co-op organizes a group RFP process, you change the game.”
As I look back on the origins of our work, I see the common thread of our group processes driving change.
Our first group energy aggregations in 2011 and 2012, re-wrote the energy supply services agreement, mitigating the most significant risks for customers.
Our trash & recycling negotiations in 2013 and 2014 eliminated fees and auto-renewal provisions.
Our landscaping efforts in 2014 gave explicit expectations for turf height and specific scope of work during each visit.
Our solar work in 2014 pushed developers to give rates below what anybody else was offering.
Our janitorial process in 2015 integrated best practices for transparency in wages and profit margins to even the smallest customer types and opened opportunity for women and minority-owned businesses to access much large contracts.
Our copier work in 2016 brought dramatic savings, incorporated service guarantees with real teeth, and cut unfair profit-making provisions from service agreements and leases.
Our security efforts in 2016 brought accountability for chronic scheduling errors, and built opportunity for local, black-owned firms to show how quality guards could re-shape a school’s culture.
In 2017, our solar work flipped the standard contract, delivered more value to customers than anything anybody in DC had previously offered, and opened the door to roof replacements as part of even small solar projects.
At the core of each of these processes was a well-facilitated group space that built trust between participants and delivered practical insight.
If we can continue to do this in new areas, I think we create a new type of member worldview that believes they have the power to reshape any industry.
If we keep building this, I believe we’ll have the keys to an unstoppable vehicle for innovation and social change. We’ll have innovated something that changes the game on what’s possible for groups of customers acting together.
“Successful innovations go beyond the quid pro quo; they’re targeted investments in the customer’s future value.”
Because of this realization, I propose we invest significantly more resources in organizing group processes to help customers change the game in the contracting areas they identify as priority areas for improvement.
As I was walking with my 5-year-old daughter Micaela last night, I asked her:
“Do you still want to be an artist?”
“I want to be an artist, a songwriter, a painter, and an art teacher.”
I want her to make good on that dream.
That’s why I’m here.
I’ve spent the last 28 days doing the hard work of writing everyday.
The scariest thing I wrote was a letter to Micaela.
I knew I was doing something right because the morning after I posted it online, I wanted to take it down. I was scared of what I said. Scared of what I committed to doing.
Scared because it felt like the stakes were higher.
The motto of the workshop I’m just finishing is:
“Do the Hard Work First | Embrace Emotional Labor | Dance with Fear”
I didn’t understand this third part “Dance with Fear” until the feeling I got as I woke up on Sunday morning. The feeling of wanting to quickly revise and take down the letter. The feeling of uncertainty. Is that really who I am? Is that what I want?
What am I for?
Those are the questions I want to wrestle with here.
The clearer I get, the more I believe I’ll be able to make my art.