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Slow and steady wins the race

The need for speedy profits has brought the world’s financial system to its knees. Financial high-flier Woody Tasch believes his Slow Money movement, which invests in sustainable agriculture, can put the economy back on its feet.

For Slow Money to take hold, though, it has to appeal beyond the investment sphere to consumers at large. One way to live the principles of Slow Money in daily life is to support local and independently owned retailers and manufacturers, says Michael Kanter, co-founder of Cambridge Local First (CLF), a Cambridge, Massachusetts, trade association. Local businesses employ local residents and vendors, reinvest profits in local enterprises and support local philanthropic causes. “Doing business and shopping locally is economically reinforcing the environment where you live,” says Kanter, co-founder of Cambridge Naturals, which sells in the neighborhood of $2 million in nutrition and body care products annually (and has operated out of a single store in Cambridge for 35 years). “It fosters a commercial feedback loop. I’m attracted to the concept of Slow Money because it speaks to the same passion of a changing economy and of people living more in community that Local First advocates.”

Other indications of a crossover between the Slow and local movements abound. In Pennsylvania, for example, the state funds a $120 million loan and grant program to support locally owned, independent grocery stores and promote the distribution of fresh foods to low-income communities. According to Stacy Mitchell, author of Big-Box Swindle, the Pennsylvania Fresh Food Financing Initiative (FFFI) has made $42 million in grants and loans over the past four years to finance 58 local grocery projects; one-third are single-location retailers, while the rest are locally owned chains. For local retailers, Mitchell writes on her website, newrules.org, “the fund not only overcomes the higher costs of opening stores in these locations. It solves what may well be a more pivotal factor driving the grocery store gap: independent retailers, unlike chains, lack access to sufficient capital.”

Better access to healthy and affordable food is exactly what Tasch hopes Slow Money will provide. In fact, Tasch named his initiative after Slow Food, the popular movement launched in 1986 by Italian Carlo Petrini to protest the opening of a McDonald’s fast food restaurant in his home city of Rome. Slow Food has more than 83,000 members worldwide, one of whom is Tasch. But the use of the term wasn’t all for brand recognition. Tasch argues that much of the environmental, social and economic strife we suffer is rooted in two fatal flaws: Our economy still exalts extraction and consumption when what we need are systems that prioritize preservation and restoration, and we’re addicted to speed.

We live in “the age of hockey sticks,” Tasch says, when progress is assessed by growth rates. How fast can we get to work to get more things done in one day? How fast can we grow gross domestic product? How fast can we compound the financial returns on our investments? A yearning for growth is not, on its own, a bad thing, says Tasch. “It’s just the market we have now—one of maximizing growth and minimizing risk—while it worked well in the industrial age, it is no longer the market we need.”

In his book, Tasch writes, “GDP growth driven by subdivisions and highways and Mustangs and 727s made sense in a pre-smog, pre-urban-blight, pre-sprawl world. Buy low/sell high made sense in a world that could not conceive of a $400 billion [in revenue] Wal-Mart, a $53 million Christmas bonus, a $400 million golden parachute or a China that is building one coal-fired power plant a week and more roads in 2008 than it had [built] in the preceding 50 years.”

Societies in the developing world have grown so much so fast, Tasch argues, that we’re bumping up against the structural limits of our social, economic and natural life systems. “We are several decades into a growth process that can’t last more than 100 years,” says Tasch. “Global warming, hurricanes every week and 400 parts per million of carbon in the atmosphere demonstrate the limits of the Earth’s natural ecosystems to tolerate maximum population or industrial growth.” To speed up food production, we’ve genetically modified grains, juiced crops in the ground with chemicals and depleted aquifers. American corn farmers, for example, can grow more corn faster than at any point in history, but the results are widespread degradation of soil fertility, a dead zone in the Gulf of Mexico and obesity epidemics side by side with persistent hunger.

“Nothing can grow forever,” Tasch explains. “Thomas Malthus was right: Ultimate expansion is not a good thing. The Earth isn’t expanding indefinitely. We only have so much soil, water and air. Technology alone is not enough to ‘innovate us out of the problem.’ I’m tired of the standard response from free market economists, that ‘the market demands growth.’ I say, No. Let’s create a new market. The alternative is not no growth. But we can have a market where growth can be slower, where the return horizon is longer and slower and where the risk [profile] and rate of return are different. That is Slow Money.”

And that’s why Tasch’s fund won’t demand the standard triple digit returns common to venture capital, or even double digit returns still dreamed about on Wall Street. Tasch will seek only 4 to 8 percent annual returns on Slow Money. “I’ve resolved that you can’t make a ton of money doing this, but our expectations have to change.”

So far, the ideas behind Slow Money have some impressive supporters. “The financial system is abstract, and it got too far disconnected from the real economy and it’s just come crashing down,” says John Fullerton, a 20-year veteran of Wall Street who managed various capital markets businesses of the firm J.P. Morgan in Tokyo, New York and London, and was part of the team that managed the bailout of long-term capital in 1998. He left in 2001 and went through what he calls “a fairly deep questioning of the financial system that I’d been a part of and thrived in.” He’s now a private investor with a focus on sustainable agriculture and alternative energy systems. He’s also a director of Investors’ Circle and an advisor to Tasch’s Slow Money organization.

“A critical investment challenge now is the need to differentiate between only investing to maximize returns and investing intentionally in areas that need capital for the good of the planet and people,” Fullerton says. “If I have surplus capital, should I only invest it to maximize my returns? If you have this [priority], then sustainable agriculture doesn’t get funded because its value is not accurately priced into markets. So it gets ignored.

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