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One of the big points for me was the way Jahn looks at operating cash flow.  Anyone who has been to business school has learned a variety of accounting conventions and financial ratios – which have become the goalposts and field markers in the game of business.  But how much sense do they actually make? Do they really tell us what’s going or are they several levels of abstraction away from the reality of the business?  Jahn would argue the latter.

What’s amazing is that most of us, at the level of ordinary domestic reality, know that so much cash is coming in, and so much is going out.  Pretty simple. Businesses, on the other hand, especially the big ones run by MBA-types, have a bewildering array of metrics, used in financial statements, that often obscure the truth more than illuminating it.  Think about Enron, widely celebrated as a runaway innovator and success until the sheer “creativity” of its financial metrics was revealed in all its shoddy glory.

Likewise, one of the supposedly radical innovations in Lean Manufacturing is the idea that workers become involved in working out their own solutions to problems, based on agreement about the metrics that matter. How radical is that? For most of our history as hunter/gatherers, or farmers, that’s been pretty ordinary stuff. Let’s put our heads together and figure out how to cut one of those mammoths away from the herd so we can eat.

But somehow, we’ve been lost in that Industrial Age Bubble, where ordinary logic is banished in the name of specialist management-think.  Somehow I think this is related to the clever MBA mindset (disclosure:  I have an MBA) that slices bits of mortgages into new instruments, puts it all into a blender, and creates derivatives whose risk characteristics and accountabilities  resemble some indistinct smoothie more than a piece of meat one can value and sink one’s teeth into.

Somehow the ordinary business of risk, interest, and trade gets lost in all this.  And we’ll likely deflate until we find the  ground again.

We talked about the role of the car in the ecology of the urban landscape.  At a time when there is so much discussion about saving the American auto industry, it’s useful to take a deeper look at what the car actually is. Bailout notwithstanding, what are all the other costs of auto transportation that we have subsidized, externalized, or ignored in the conversation?  The auto industry is already deeply subsidized in a number of ways.  Public monies are spent to build and maintain roads and bridges.  Enormous amounts of real estate are devoted to parking, and the runoff from those parking lots is a toxic stew of old oil and tire dust. Much of our foreign policy, subsidized through our taxes, goes to maintain advantageous relations with oil producing regions.  The effects of carbon emissions include global warming and health impacts. Our entire built landscape has been created in response to the existence of the automobile.

Steve likened the bailout conversation to the debate over suppression of forest fires. We now know that letting fires burn is good for the forest system.  If we let a forest become overgrown, the effects of fire, when it does inevitably happen, are far more devastating.

So too the auto industry.  The human consequences of a Detroit failure are enormous, and just become worse the more that the industry is protected from the true costs of auto addiction.

Is insisting on higher fuel efficiency standards enough?  Steve suggested that this is just becoming more efficient at doing the wrong thing.  Sure, it’s better to use less gasoline, but is that really the big question? We are talking about an interdependent system of transportation, land use, economics and sociology, in which the automobile, and the auto industry is one player.

The real challenge of our times is not to get things back to the way they were.  It’s to see through the current crisis and write a new story about how we live, work and do business.

Descartes has had such an impact on our culture that today we tend to think it “common sense” that each of us is an island – or at least we behave that way.  One of my teachers, Julio Olalla, was fond of pointing out that we tend to think of ourselves and our problems as our own isolated psychological case, when in fact we are playing out cultural scripts that date back centuries.  These scripts are passed on through family stories, cultural messages, official history, and the very words we use to describe our world.

Our culture has achieved incredible material success/excess because of our ability to view ourselves as separate – as if, like Archimedes, all we need is a place to stand and a lever big enough, and we can move the earth.  The only problem is, we are standing on the earth.  There’s nowhere else to stand, space fantasies notwithstanding. Despite our limited success at conquering nature, we are in danger of overbreeding, starving and poisoning ourselves with our own toxins.

Eastern philosophies, particularly buddhism, offer a radically different worldview, based on mutual causality. Western philosophy has generally focused on linear causality until very recently.  A causes B, which causes C.  Which is exactly why so many of our great inventions have brought about unintended consequences. Pharmaceuticals have conquered many diseases, which is a good thing, but are now polluting our water, subjecting fish, and ourselves, to unmetabolized birth control pills, anti-depressants, etc.  Only recently, with the development of Systems Theory, have we begun to see how phenomena emerge, sometimes unexpectedly and chaotically, from a variety of causes.

In a chaotic, interconnected world, we see that we cannot control everything, but instead influence a complex chain of events through intentions and small actions – even if we are not sure which ones matter.  This is why random acts of kindness are a good thing!  Thich Nhat Hanh, the Vietnamese buddhist monk and peace activist, has coined the term “InterBeing” to describe this mutual connectedness.  Rather than believe our own story about how things happen to us, he suggests we continually ask why things occur the way they do.  And, when we keep asking that question, we ultimately see there is no one to blame, including ourselves.

The way of leading business that I see emerging among “natural” entrepreneurs draws from this well.  Any complex product arises from a number of ingredients, that come from different places.  Each has an impact on the local economy that produces it, the local ecology, the health and well being of the people who live and work there.  Likewise for the way it’s manufactured, packaged, used and ultimately disposed of.

Today on my BlogTalkRadio Show, I interviewed Joshua Onysko, the founder of Pangea Organics. Pangea is the fastest growing organic skin care line in the world.  Josh has built Pangea from the ground up to be a business that acknowledges the connectedness of all players in the manufacture and use of the product.  Josh has even thought deeply about packaging.  Since cardboard packaging consumes millions of trees a year, Pangea’s products are packaged in downcycled paper fiber which is impregnated with seeds.  Plant your holiday gift pack wrapper and a Colorado Blue Spruce tree will grow.

Josh is using profits from Pangea to fund micro-financing efforts that go back to the people – mostly women – who grow the crops that supply Pangea with ingredients.  This creates stable livelihood for the growers, and a steady supply of quality product for Pangea.

The market for organic personal care products is growing at 22% per year. Why does this matter? Our skin is our largest organ, and absorbs 87% of what we put on it.  Cold processed organic soaps maintain the liveliness and efficacy of the ingredients so they can be available to the skin.

Josh pointed out that we are led to believe that healthy products are a luxury. In many cases, because of their effectiveness, organic products are actually cheaper per use, and infinitely better for long term health. Is a “cheap” bar of soap actually cheaper, when we consider the real cost of petroleum by-products, wasteful packaging, and unknown efffects of chemical ingredients?

All of this may sound like fringe thinking, but Josh summed it up when he said “the Fringe predicts the Future”. Business people and economists are beginning to see how many costs we have traditionally “externalized” – but on a small, crowded planet, all those “externalized” costs, like the pharmaceuticals in the water supply, ultimately find us.

General Mills mission is to “Nourish Lives, Nourish Communities, and Nourish the Future”.  But what does this really mean, and how will we know if General Mills is actually getting somewhere with this great idea?

Agreement about Metrics.

Having an intention about becoming sustainable requires a way to measure the fulfillment of that intention.  Which comes down to Data.

It’s striking how many conversations are going on about creating metrics, indices, datasets of sustainability.  Without these, we don’t have an agreement on what we even mean by the term sustainability. For example, in Kim’s work with the Global Reporting Initiative, there are 10 food companies meeting with various NGO’s to define social and environmental measures that these companies can use in their reporting, and even more importantly, in aligning their own internal efforts.  They are talking about issues like child labor, animal rights, fair trade practices, and impacts on indigenous communities.

Some things are easier and more objective to measure,  like energy and materials.  This has been the subject of “lean manufacturing” for a while now. Measuring positive or negative impacts on an eco-system – whether an eco-logical system or an eco-nomic system – is more challenging. It’s less subject to pure scientific or engineering analysis.  More subjective, more values-driven. Which is why it makes sense that there are collaborative groups across industries having these conversations.

We are going through a major cultural shift about what we value.  For companies in a particular industry, like food, it’s important to have that collective conversation.  The players in a given industry share suppliers, production technologies, and even the same industry analysts on Wall Street. Collaboration is essential, especially when it comes to shifting the value proposition for a whole industry, and dealing with issues that balance economic, social and environmental concerns.

Kim summarized the impact of metrics by paraphrasing what he had learned from the work of Dr. Steven I. Simon, who specializes in creating safety culture for large manufacturers.  But, the lessons are just as applicable to creating a sustainability culture.  Kim said that, when expectations are made clear and communicated, the response of people is to want to live up to those expectations.  The result is predictable behaviors – and predictable behaviors are the essence of culture.

We are going through a cultural shift – from one in which business “predictably” focuses on the financial bottom line – to one in which business “predictably” balances the concerns of multiple stakeholders, including financial interests.

Last week, I spoke with Graham Russell, Executive Director of CORE Colorado. CORE is a non-profit business association dedicated to promoting more environmentally and socially responsible business practices in Colorado and the Rocky Mountain West. CORE’s constituency tends to be small to medium businesses, and Graham is much more interested in reaching traditional businesses rather than preaching to the choir.

Much of the attention to sustainability in the business world is on the big companies. CORE, in conjunction with the University of Colorado at Denver Business School, recently undertook a survey of small-medium businesses to fill in the picture.  The study found a surprising amount of initiative and progress among businesses that don’t necessarily think of themselves as “green”.  The reasons for change vary – in some cases, business owners just feel it’s the right thing to do.  Others are driven by competitive and customer pressures.  A few cited compliance with regulation – but having said that, most small businesses hate regulation.

The picture is very different for big business. In my interview today, with Will Sarni, CEO of DOMANI Sustainability Consulting, he pointed out that many of the biggest industrial companies in the US have joined in the United States Climate Action Partnership to lobby the federal government for more greenhouse gas regulation.  For big companies, acting unilaterally to reduce emissions – if it raises costs – serves as a “prime mover disadvantage”.  So, they want a level playing field, at a new level.

Between big and small businesses, there are also big differences in the amount of “greenwashing” going on, being the act of making oneself sound more sustainable than one really is because it’s good PR.  According to Graham, greenwashing is big company branding issue.  Smaller businesses can’t afford the PR machinery to create the story in the first place. In the big companies, according to Will, greenwashing backfires pretty quickly given the ever increasing level of transparency in the marketplace.  Given the current economic climate, many companies that aren’t really sincere about sustainability are abandoning the story and just focusing on hanging on to their “base”.

Notable, and to me shameless, exception being Detroit’s Big Three, offering to come up with greener cars, if we will only save them. Like a drunk, showing up at church on Sunday and offering repentance, with a bottle hidden in his pocket.  The last so called “American” car I bought was a piece of junk, and I’ve been driving mostly Japanese, but “made in North America” cars ever since.  I have no sympathy.

But I digress….

I’ve been impressed with the thinking of Bob Willard on how companies evolve into sustainability.  He sees sustainability in business as a continuum.  Yes, a lot of companies start out ignoring sustainability, actively resisting it, then grudgingly complying with whatever it is they are pressured to do.  To me, greenwashing is a stage in which a company recognizes that someone out there – customers, employees, regulators, investors – cares about sustainability.  So, they are at least acknowledging those values by making sustainability claims, even if they aren’t sound.  Eventually, they realize it’s in their own self interest to be real about it, and move forward. I’m still impressed from my conversation with Don Beck two weeks ago, with his willingness to meet people where they are and open the way for them to evolve.

One big constraint on sustainability is that businesses are tending to view it as a cost, therefore something to be avoided.  Maybe we decide to endure the cost, because it’s the “right thing to do” and customers value it.  But the real opportunity for business, according to Will, is seeing sustainability as a top line focus. That is, innovating new products in the business to business, or business to consumer, markets that help customers save energy and reduce waste.  This involves rethinking the product itself, and creating new value.

A prime example, and well worth rethinking, is the automobile. One of the most mind-blowing ideas I’ve heard in the last year is the idea that electric cars can become an interactive part of an intelligent electrical grid.  One of the issues with wind power in particular is that it blows more at night, when demand for electricity is lowest.  And there’s nowhere to store the juice.  Except in millions of cars, with their batteries plugged in, resting in their garages for the night.

In today’s BlogTalkRadio Show with Dr. Don Beck – bio-psycho-social mapmaker and activist – we explored that question.

In Dr. Beck’s view, our greatest need is a remedy for the polarization in our society. We’ve tended to look at conflicting values like left vs right, free-market vs interventionist, as a kind of pendulum that goes back and forth.  There are trade-offs and compromises made between opposing poles. In fact, the better mental model is that of a spiral, in which each movement transcends and includes the previous movement.  The apparent opposites and value conflicts are really moves in a bigger dance, a pattern that reveals itself as it emerges.

Beck’s model, called Spiral Dynamics, imagines personal and cultural emergence as a response to increasing levels of complexity in our environment.  Today, we are at an unprecedented level of complexity, with 6.5 billion humans emerging from a variety of conditions and cultural stories.  Here there are Vikings with nuclear weapons, shamans on the internet, and hedge fund managers doing yoga.  It sounds like a giant halloween party in Times Square attended by all the people who have ever lived.  For a species in which, for most of our existence, most of us have known at most 200 people, this is quite an encounter.

How can we all live together and adapt to this situation? Beck practices what he calls “natural design”.  It’s not based on a “one size fits all” formula.  It’s based on curiosity, inquiry, mutual respect, and an understanding that we all respond intelligently to our particular life situation.

Don Beck has used this model to defuse conflict and create political and economic transformations in a number of troubled societies, including South Africa, Palestine, the Netherlands, and Mexico.

What are the implications for business leadership? Beck thinks that it’s critical to align the business’ cultural DNA with the “habitat”, the larger cultural and economic conditions. There’s no way to fake that – which to me fits in with the new sense that branding has to be authentic.  Authentic branding is not limited to product packaging and advertising, but to the totality of experience of everyone who touches the organization.  Collective karma, if you will.

We talked about race.  Working in South Africa, Dr. Beck developed a color scheme to describe the various sets of values, or vMemes, that he encountered there.  It was no longer an issue of black vs white, but a tapestry of purple, red, blue, orange, and green. As he said today, “It’s not the color of your skin that matters anymore, it’s the color of your mind.”

Can the US create a national political culture that honors everyone?  The blue states, the red states, the cities, the suburbs, the rural areas, even…….Alaska? If we recognize that different parts of the country have different life conditions, can we find a new framework that accommodates each and all of us?

And perhaps President-Elect Obama is just the right person to serve this transformational time.  His unusual background led him to be labelled “un-American” at one point in the campaign.  On the contrary, the fact that he didn’t fit any neat category – African father, raised by white mother and grandparents in multicultural Hawaii – required him to make choices about how to define himself, rather than to “know” who he was.  He had to “ask” who he was, and make a choice.

To my way of thinking, inventing and re-inventing oneself is as American as apple pie.

I interviewed Alex and David on my BlogTalkRadio show last week.  Their story is one of honoring and benefiting the land, the people who live on it, and the consumer.

For those of you who haven’t tried it, yerba maté is a stimulating beverage favored by South Americans over coffee by a 7-1 margin. It is made from the leaves of a mid-canopy rain forest tree found in Argentina, Paraguay, Uruguay and Brazil.  The thick, waxy, green leaves are harvested, dried and aged before being made into a tea.

Conventionally, maté is grown on big plantations.  The natural rain forest is cut down, and a monoculture crop is planted in the sun, sprayed with pesticides and fertilized.  Tribal people are displaced and turned into farm workers.

Alex and David met in college at Cal Poly State University in the mid 90′s, and shared the goal of creating a sustainable business.  Alex, who is from Buenos Aires, invited David to come to South America, and together they developed what they have termed a “market driven restoration business model”.  Instead of creating a large industrial process of clearcutting and replanting, Guayakí makes agreements with indigenous people to plant yerba maté under the canopy, preserving a diversity of forest life AND creating economic opportunities for the people to retain their lifestyle.  In fact, the term Guayakí is derived from the name of one of these tribes, and literally means “wild people”.

All this gets even better when you think about what maté is and how it is consumed. Traditionally in South America, maté is a “slow food”, consumed in a gourd using a special straw called a “bomba”, passed around a gathering of people.  Holding the gourd is like the North American native practice of holding a talking stick or stone – it empowers the holder to speak from her/his heart while the others listen and hear.  Drinking maté symbolizes hospitality, and the act of taking a pause with friends.  It’s a more grounded stimulant than coffee, with no acidity, creating a kinder, gentler buzz.

Just as interesting is the way the company is run. There are five partners, all good friends, located from British Columbia to Buenos Aires, with California in between, who make decisions by consensus.  Each has taken a role based on his passion and expertise, and so far, after twelve years, it works really well.  The company has been financed with a “patient capital” philosophy, attracting investment from several veterans of the natural foods industry.

For more, check out our interview.

Marsha challenged me on the use of the term “sustainability”.  She said that five years ago, sustainability was a good word, because it provoked reflection.  Now it doesn’t anymore, it’s become old hat, and when you use the word people think they get it.  This is a loss, since provocative questions and inquiry are at the source of innovation and new thinking.   The term Marsha likes, and a term that has come up for me in several conversations – including the one with Michael Brownlee about community, cited earlier, and a conversation I’m having with Don Beck of Spiral Dynamics fame – is RESILIENCE.

Resilience is a term that is used to describe any system – whether a body, a mind, a family, a community, a company, an economy – that is able to adapt, thrive, rebalance, and innovate in the face of changing circumstances.  Sounds like something we need more of these days, what?  Resilient leadership that sees the big picture, builds healthy collaboration and connection, and finds sources of renewal and inspiration.

Marsha made the comment that a Resilient Leader never makes a statement when a question will do.  Think about that….

Which leads us to the $5 word of the day, NEUROPLASTICITY.  Neuroplasticity has been the subject of several international conferences in the last year or so.  Brain science tells us that the typical “adult” mind functions by re-running tapes from the past in order to determine how to deal with challenges of the present.  This is useful if the environment is relatively stable.  As you may have noticed, ours is most definitely not stable.

On top of that, we have all been trained in school and at work to “have the answers”.  But, being in a conscious state of “not knowing” and inquiry is a key to having a youthful mind that can imagine new possibilities. And this is the way for business people to add value at a time when the rules of the game are continuously changing.

What gets in the way of neuroplasticity? Stress, naturally.  Multitasking, which degrades our ability to focus. And the big kicker for business leaders – concern for status. If you’re a high status individual, you might be worried about losing it, not seeming to be on top of things.  And likewise, if you’re a low status individual, you keep telling yourself a story that your ideas and actions don’t matter.  Either way, you’re not really confident and open.

How to promote a state of neuroplasticity? Marsha suggested practices like exercise, mindful breathing, meditation, creative play – as well as a practice of never making a statement, never having an answer when a question will do.  That resonates with my experience – being comfortable holding a question is a skill we can develop, that keeps us open, in literally in a state of wonder.

You can download the full hour-long interview at www.blogtalkradio.com/sustainableleadership

Dick has been a thought leader in the financial planning world for twenty-five years, including a stint as President of the Institute of Certified Financial Planners.  He is currently the editor of insidemoney.org, an online journal that addresses our personal and collective relationships with money.  Dick is also a regular columnist for Financial Advisor Magazine, and writes articles about money and what he terms “money forces” for various other publications.

He is something of an agent provocateur within the financial planning profession.  The conventional advice one gets from most financial planners is to save now for a comfortable retirement.  While this is undeniably good advice, it is based on an underlying assumption that money = security.  It evokes a paranoid mood, eg, “if you don’t save money now, you’ll be eating dog food in your old age”  The problem with the current financial meltdown is that you may have played by the rules, saved for a rainy day, and now your securities aren’t worth what you thought they were – so where’s the security? Money is not security. Money is one metric, along with happiness, health, and safety, in a larger idea of what “wealth” is.

So what does money have to do with sustainability?

When I was in school, we were presented with this concept of the “time value of money” as if it were an objective law of nature, equivalent to the law of gravity – ie decreed by God at the dawn of creation.  But money is actually a human invention.  And a very clever one at that.

Dick points out many positive, evolutionary aspects of money.  Money enables us to feed a high percentage of the 6.5 Billion people on the planet – not enough, to be sure, but astounding when you think about it. We have laws and rules about money that enable enemies to do business with each other.  Cross border ownership of resources, denominated with money, reduces the motivation for war.

So here’s the connection with sustainability:  Our debt-based money system inherently requires expansion and growth. Capital seeks the highest rate of return, at an acceptable level of risk.  That return derives from expansion of production and consumption. Economically, it’s a problem if we stay the same.  If we don’t get bigger all the time, we lose ground.

And, one of the results of our economic progress is that we actually become isolated from each other.  The elderly pay money to reside in an assisted living home.  Parents pay a third party to provide “child care” while they work, to earn money.

So debt has enabled a huge material benefit to many humans.  And, taken too far, it becomes an addiction. Financiers develop ever more sophisticated instruments to manage risk and squeeze out more returns – and sometimes it crashes, like recently.

I keep coming back to this theme about addiction – as a culture we are addicted to debt, to cheap oil, to novelty.  There’s a lot of good stuff there, but we have become immoderate, like a glutton who just can’t stop eating.

So how do we create an economic and monetary system that doesn’t demand endless increases in consumption?

I wish somebody would tell us the answer to that question right now.  But, just realizing that we created this system is a tremendous step in the right direction.  If we made it up, we can change it.