Monday, February 11, 2008

BGI, Joseph Stiglitz, and Matthew Wright


My trip to BGI this past weekend for Winter Intensive #2 was yet another amazing experience, refreshing of my internal battery of goodwill and sustainable thinking as well as challenging me to be honest with my reason for being there. The first thing that sticks out to me from this Intensive's experience were the speakers that graced us with their presence on Thursday, Friday, and Saturday evenings. Continuing BGI's "...in Residence" program were the following:
These three people joined the BGI community for the weekend, inspiring us with their unique experiences and perspectives on social entrepreneurship, environmental stewardship, and social justice. It is almost too much to add that Friday afternoon brought Joseph Stiglitz, Nobel Laureate and author of numerous books on globalization including Making Globalization Work and Fair Trade for All (image from http://daryld.com/) into our midst and Saturday evening's guest was Congressman Jay Inslee, author of Apollo's Fire and proponent of clean energy, cap & trade system for carbon dioxide emissions, and general sustainable optimist.

What I found most interesting about these speakers, perhaps a common thread that ran from one-to-the-other, was a commitment to what they were doing. For me, this was most evident in Jensine Larsen and Peter Thom. There was a quiet strength within Jensine's soft-spoken description of the vision that took her from a shy, home-schooled mid-western girl to a world-traveling journalist doggedly pursuing her vision of bringing local women's voices to the global stage. Her work required a persistence and conviction that can only be admired and learned from.

Peter had a slightly different character and vision than Jensine, though equally driven by the desire to "right a wrong". His exposure to extreme poverty while consulting for McKinsey in South Africa, specifically the lack of access to potable water, planted the seed of a company that would become Ethos Water. The company is building a brand of bottled water (purchased by Starbuck's two years ago) dedicated to giving a portion of profits to organizations in the developing world addressing potable water needs. I appreciated his frank acknowledgment of the contradictions inherent with seeking to build a bottled water (a resource intensive process) brand that helps those in less fortunate situations.

Joseph Stiglitz was quite a speaker, and regaled us with stories of economic policy and international advisory adventures. While I tried not to think too deeply about his comments regarding the United State's economic prospects, I thought his main points were of interest (none of this seems earth-shattering);

  1. Subprime mortgages (yep, everyone's talking about this, and have been for a while): The resets of these mortgages to payments that buyers cannot bear is painful, and the pain has not fully been experienced. The bad debt expenses some of the banks have taken are a big problem.
  2. Subprime mortgages were wrapped into other financial instruments and sold (with very little transparency) to other institutions. Therefore the people that wanted to loan paid off did not own them; there is no incentive for those who originated the loan to make sure they were manageable since they were going to sell them anyway. In fact, it created a built-in incentive to deceive the the mortgage buyer about the mortgage's liquidity. International groups that said they understood the risks associated with these mortgage-backed securities did not understand the risks, therefore they were grossly underestimated. The fallout; banks no longer trust each other and intra-bank lending has dried up.
  3. Macroeconomic issues. The household savings rate has been near zero over the past few years. People took billions of dollars in equity out of their homes, in some cases to support a lifestyle their shrinking median income could not sustain. With home prices now stagnating or dropping (depending on the geography), consumers are less confident and the ~70% of the economy that depends upon consumer spending is feeling it.
Moving right along, Congressman Inslee regaled us with his vision of a clean energy future. I found it interesting to hear him talk, as I have not had many opportunities to experience political leaders speak very often. I found the rhetoric fairly "easy", considering the audience. One of my classmates asked the question I was thinking about, what do you say to your compatriots in the House that come from coal states? The CO2 cap-and-trade system he supports for a region with little coal-fired generation is an easy sell. What about selling it nationally?

In summary, the weekend (I did not even mention our classes) was chock full of incredible learning and inspiration. Care to join us?

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