Regeneration Talk - The Economy that Regenerates

Thank you, Giuseppe.

Hello, everybody.

Hello, and thanks to be, thanks to be here. Hello, Mr. Fullerton, too.

Pleasure to be here as well.

So before we start with the numbers and the models, I'd like to begin with something that we can say more personal. I asked you both to give me some images that can represent the moment when you shift your mindset. What can, what can we call like an epiphany? So I would like to start with Mr. Fullerton. So I asked the production team to put the first

Yeah, so this is the old J.P. Morgan building on the corner of Wall Street and Broad. That's where I went right out of college. And so the beginning of my epiphany really was walking away from not only that firm, but my career on Wall Street really, which occurred when J.P. Morgan was acquired by Chase Manhattan Bank in 2001. OK. That summer, or that fall actually, I happened to be back in New York for the first time since I had left Wall Street, and emerged from the subway to witness the second plane hit the Trade Center. And obviously, that experience, being so close, shook me to my core, and probably triggered some shift inside of me that set me on my current course. There was another event along the way during that summer, my summer off. I joined some friends sailing across the Atlantic Ocean, and believe it or not, we were hit by a humpback whale, destroyed the rudder. We had to be rescued by the Canadian Coast Guard, my good friends the Canadians. And believe it or not, I was reading Moby Dick at the time. So, the universe tapped me on the shoulder, is the way I've interpreted it. And I started reading books that bankers don't read. This is the famous visualization of the Limits to Growth scenario analysis, that essentially said that we could not continue going on as we were; the exponential growth-based economic system would lead to systemic collapse. And that book, that thesis struck me as a spear in the chest. It meant that everything I learned and believed after 20 years on Wall Street was no longer possible to continue, even if it was possible in the past. In sum, as Kenneth Boulding said in the 1970s, anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist. And so I embarked on this search, really, for understanding our economics at a much deeper level, and how it got to be where it was, and what pathway our economy needed to follow to find a pathway to what we would call sustainable, a sustainable future. And the epiphany really hit while I was on an impact investment project. This is a view of the Montana grasslands in central Montana, and I was learning about— think of it as regenerative agriculture, but on the large landscapes of the grasslands. And while my colleague was explaining to me what was wrong with all the plants and how a different management system of animals, holistic management, could change and make the system healthier. It sort of hit me that if this idea of holistic thinking, holistic decision-making can work in the context of the grasslands, a living system, an ecology, what if we thought of the economy as a living system? And why wouldn't this same holistic thinking be not only relevant, but essential to apply to the economic system. Because we had seen, and I had seen with my own eyes, that this methodology, this approach, this way of seeing, actually worked to generate unseen potential on the world's grasslands. And so, that was pretty much the course that set me on my course.

Let me say, long story short, thank you very much for sharing with us. And I would like to ask also Mr. Illy, uh, the, the moment when the epiphany happened about, uh, regenerative agriculture, and especially how he connected coffee and climate vulnerability. Uh, also, there is also an image that I remember I have read on your last book, The Regenerative Society, and talks about monumental cathedrals, medieval cathedrals, and the constructors, their mindset. So please, Mr. Illy, tell us something more about this powerful metaphor and also about your evolution path.

Well, I think it all started when I was at the university in Lausanne, they call Polytechnique. And it was in the, in the early '80s, and Switzerland was very much, let's say, up front any other country in the research on environmental sustainability, etc. And they were ringing the alarm bell. And this is, uh, something which for some reason resonated with my with my, my high M wired, basically. And, uh, because I'm a great nature lover, whatever I do in life in my free time, I do it in open nature, no matter if you see or, uh, or mountain. And, um, and so I started caring and reading. And, uh, so that means, uh, it's more than 40, 40 years ago. And then the second moment has been when I entered Illy Caffè, when we clearly understood that we needed to transfer knowledge to coffee growers in order to get the right quality we were seeking for, knowing that Illy specialized to produce only one blend of the highest possible quality. So when we started working hand in hand with coffee growers, we also understood their substantial sustainability problems, which are not only environmental ones. They are most of all economical because of the thin margins and the very limited capacity to invest. And this living income being barely sufficient to send kids to school and these kind of situations. We are talking about a world of 12.5 million micro-growers cultivating 85% of the coffee land. So this, this has been really eye-opening. And at that time, my father, who was a scientist as I am, and a mentor for me, brought me in California to, to see an economist, Brian Arthur. Brian Arthur is the economist who invented the theory of incremental returns, which followed the Moore Law, which did apply very effectively to the, to the digital economy. And my— the question of my father to Professor, uh, it was, uh, can we do something in order to improve the state of the world? Because I think it's unethical for such a prosperous industry as coffee to basically rely upon poverty in producing countries. And my father was a very serious and robust man, but this time he had a tear, which really shocked me. Um, then there has been a third part when we announced together with Jeffrey Sachs, the co-chair of the Regenerative Society Foundation— we have been working together since 30 years— and we did announce, he did announce in 2015 at the Universal Exhibition in Milan that 50% of the suitable land for coffee agriculture will be wiped out by climate change by 2050. So this rang a very, very, very strong alarm bell. So we must do something, otherwise we are going to run out of business. And so in 2018, I took a sabbatical as a scientist and entrepreneur, and I had the fortune to discover the wonder of regenerative agriculture, and since then pioneering regenerative agriculture and then expanding the regenerative principles and practice to the rest of the economy. So this is more or less my, my, my, let's say, my journey and my epiphany.

That's a beautiful story, Andrea. I didn't know your connection to um, to Brian and Santa Fe Institute. Yeah, I, um, I too have a connection. Mine, mine, the short version is, uh, Stuart Kauffman, who, who was one of the early Santa Fe Institute, um, uh, scientists, is one of my important teachers. So,

okay, complexity science.

Yeah, yeah,

excellent.

Yeah,

yeah, my father was, uh, passionate about the theory of complexity. And when I was in my mid-career, around when I was turning 50, I went to my friend Ian Golding, who has been the founder of the Martin School at Oxford. And he told me, oh, you know, you don't have to go to business school. This is useless for you. You have to study— you have to study science of complexity.

Yeah.

And I asked Jan, where, where should I go? Where can I find a university? He said,

no,

no, no, no, there, there are no university teaching this science. So can you do something for me? And basically Jan Golding did organize a tutorial program for me at Oxford University, which lasted for 6 months.

Nice.

It has been, uh, uh, like opening my head with a, you know, a can, a can of tomatoes. From then, since then, I see the world with completely different eyes. And it's very, very important, John, because I think this recognizing the complexity of the system leads us forcefully to adopt the systemic approach, which is exactly the opposite of what is currently done in managing sustainability at any level— governmental, intergovernmental, worldwide. So trying to cut the salami in slices doesn't work. Right. And this is where trying to adopt a systemic approach toward the real, let's say, process underlying sustainability, which is regeneration, could at least bring a theoretical and also practical model to— because so far we are not reaching good results.

Right.

There has been a lot of advocacy, many, many initiatives, large investments, but results are not there. The climate is out of control. We are probably worse than any of the possible IPCC predictions.

And

then we have another terrible problem, which is the social one with the, you know, Polarization, immigration, democracy, we have— we didn't solve any of the problems yet.

I just jump back in on the complexity point though, just to emphasize it, because, you know, that was the epiphany of reading Limits to Growth, is that it was written by 4 PhD students in the 1970s studying complexity at MIT, And I remember thinking, I had no idea you could get a PhD in complexity. Like, I'd heard of complexity, but I didn't know it was like a discipline. And now the word complexity is popular, but most people, when they talk about complexity, they're not talking about living systems complexity. There's 2 kinds of complexity, right? There's living systems that are complex, But there's also complex systems that collapse because they don't have the genius of how living systems work. So we need to learn about complexity, but we also need to learn about the unique kind of complexity that continues, doesn't collapse. And that's a whole different challenge. And as you said, I think it begins with learning how to see. It's about learning how to see what everyone sees, but in an entirely new way. Which is a different kind of education than we're accustomed to.

Let me jump in, just considering your idea of complexity and the framework that you showed right now. Those personal journeys can help us to look at what is happening now, and maybe the backdrop has become even more urgent. And we are going out a summer of extreme events, like including the recent catastrophic flooding on the Nepal-Tibet border, but also the fact that it was a summer really hot in Italy. One of the expressions more said is, it's really hot, it's hot. And maybe this can bring us into the same perspective. But there is also a new UN report released, I guess, yesterday that tells us something quite stark: crossing 1.5 degrees is now considered unavoidable. So the question is how far we will overshoot, for how long, and how much we will still be able to recover. afterwards, because some losses will not simply be revisable. And maybe this one, this consideration, it's about also complexity. And I would like to introduce 2 numbers that can be read differently. Okay. Because numbers, as we know, can tell very different stories depending on how we read them, basically. And According to the International Energy Agency, the first number I want to show you is $2.2 trillion that are going into clean energy. And the second one is $1.2 trillion that are still going into oil, gas, and coal. So I would like to start with the first one and maybe ask Mr. Illy How we can read this kind of numbers? At first sight, it could be— sounds like good news for regeneration, but is it enough?

Absolutely. To answer if it is enough, I would need to know the trend, the compound average growth rate, because if it doubles every 5 years, that means that growth is exponential. And that means that soon we are going to reach the so-called tipping point, and which will cause an avalanche and run out of business oil and gas very, very, very, very soon, much faster than originally expected. Because this is one of the problems of our society and economy, is that we keep modelizing in a linear way, and complex systems are not linear, are discontinuous, and, and they cannot be planned with equations. So, but the typical behavior of a complex system would be the one that I described: exponential growth, tipping point, and then boom, it's a, it's a, it's a complete avalanche. Another aspect, which the fact that you spend twice as much in regenerative agriculture— excuse me, in in renewable energy means that more than acknowledging that the market did understand the necessity to reallocate resources, because this is not the way we, we got to the $2.2 trillion. The reason why we got the $2.2 trillion is because renewable energy is cheaper than fossil fuels. The thing that shall be considered is that the marginal cost of, of renewable energy is zero because you don't have to extract anything. It's not like oil that you have to extract and then you have a final cost of what you extracted and transported, etc. This is not the way renewable energy works. renewable energy works like the cloud. It's in the air, it's in the ether, and you just intercept energy and immediately convert it in something usable. Which means, like it did happen for ITC, that the margin for still dramatically reducing the cost of energy per megawatt is is very, very, very promising, which goes along with the fact that it will going to— it is going to increase exponentially.

Well, thank you, Mr. Illy. And of course, this trend could be also really positive if it reaches a tipping point, as you said. But I would like to see the other side of the coin. and looking at the $1.2 trillion of investment that still are going to fuels. And I cannot understand how, according to what Mr. Illy already said, how this kind of investment can appear still rational. And I would like to ask this to Mr. Fallerton. Help us to understand why this is also this trend that is going on with the other one that we already say.

Well, as, as, um, you know, as Andrea said, the, the economics have shifted, but it's also, uh, much more complicated. You know, the, the— there is still a huge built infrastructure that is dependent on or designed for fossil fuels of all kinds. And there's transportation, which is different than electricity, fixed-place electricity. So it's a complicated equation. But to answer your question, why is it, you know, I think the future of energy is now clear, and oil and gas executives are definitely not stupid. But there's 2 different kinds of oil and gas companies. One are the public companies, the big public companies and private companies in the private sector. And the other are state-owned actors, nation-states that are actually the largest producers of oil and gas and coal are state-owned entities, they're state-controlled entities. And so we've often looked to these companies as the boogeymen, but in fact, the boogeymen includes many nation-states. And we immediately think of places like OPEC, but it also includes places like the United States and Canada, and obviously Russia. And the dependency of these economies— so there's the dependency of the oil and gas companies to continue doing what they do. And if you think about the lifetime of an oil executive, a CEO, is, you know, somewhere between 3 and 10 years. They say to themselves, if we don't keep our reserves, replenishing our reserves and producing the same amount of energy we did last year, the stock price goes down. And so there's this inertia built in to keep playing the game. At least until they're no longer in the chair. And quite frankly, there's been a tremendous amount of malicious behavior going back to the 1980s and even 1970s about misinformation about climate change. So it's a very— It's a very rough game that these people are playing. But the thing that we're not acknowledging is that if we are to move off oil and gas for real, there's— there was work done by Carbon Tracker over a decade ago that calculated how much oil needed to be left in the ground, how much fossil fuels need to be left in the ground, the concept of unburnable carbon. And at the time I put an estimate on this, it was $20 trillion of value that was on company and nation-state balance sheets. And we've not even yet begun the conversation of how these economies and companies— and I'm frankly less concerned about the companies, they're capable of managing themselves, they should be liquidating— But we haven't even begun the conversation of how these economies are going to transition off of their dependency on fossil fuels. And some of these economies have nuclear weapons. So it's one thing to look at the annual investment and why doesn't this go to zero quicker, but we haven't even begun to organize the response that will be necessary to keep the social cohesion of these countries from exploding and the chaos of that spraying around the rest of society. So, you know, my point is we're not even yet even in the right conversation, I'm afraid.

It's a really complex topic, this one. You also bring in the political aspect and the cohesion, so it's not just an environmental question, but as Mr. Illy said, we have to look also at the social cohesion. In order to involve also the community that is attending our talk, we asked them to make a question to you both, and I would like to read one of them that comes from one of our founding companies of the Regenerative Society Foundation. And I'm gonna read it, and it's going basically on what Mr. Folleton started to say before. The question is, what is the main obstacle hindering a full-speed shift to regeneration in today's finance world, in your opinion? I would like to start with Mr. Fatherton, please.

I think it gets back to what Andrea said earlier. It's, it's we need to learn a new way to see. We look through— we've been taught how to think by Newton. Is, is the way Stu Kauffman says it. Uh, we think of things in fract— we fragment, we break things down into parts. Reductionist method has brought us great progress, the Scientific Revolution, but we need to learn how to see the whole. We've forgotten how to see the whole. Uh, and we see things in parts as opposed to relationships. So just as a very quick example, because I know we're short on time, Gregory Bateson, who's one of the leading— was one of the leading thinkers in this way of seeing, used to put his hand up and, and he would say, what do you see? And of course everyone would say 5 fingers or a hand. And he would say, no, you're missing the 4 relationships that define and create the essence of a hand as to what a hand really is. It's the relationships. And so as we And when I think about that for the economy and for business, I like to, by analogy, our businesses are like our fingers, but commerce is the relationships between our fingers. And so we need to shift our thinking to understand we need a healthy commerce, the relationships between the businesses, because that's the way a forest works. That's the way a coral reef works. That's the way a family works. And so that's a whole different way of seeing our business challenges. And of course, we only have business schools. We don't have commerce schools. So we're not even having, again, the conversation, the essential conversation that I think we need to be having.

Looking at the companies, I would like to ask Mr. Illy, if a company genuinely wants to make a regenerative choice today, What does it need in order to understand which choice is actually regenerative and which not? We understand that it's a complex system, we have to change our mindset, the way we look at things in a different way, but how can we help companies, those companies that want to go into regeneration, to make those, this kind of choices? Do we have the metrics? Do we have the reasoning? What we need to do that? How can we help them?

This is quite a question. They— you, you said the right word, understand. They need to understand how dots are connected, right? And, um, when, uh, you speak about a regenerative invest— excuse me, a conventional investment you basically only measure the financial returns, the net present value. When you measure a regenerative investment, you take in account all the intangible part of the social environmental impact, which is intangible but shall be translated in money as well. And so we need to understand which are the key drivers And how they are interconnected. So let's break down in, in pieces. Environment, you have to consider at the same time land use, water depletion, biodiversity loss, emissions, and pollution. When it comes to, uh, the society, the social impact, you need to take into account education, income, health, and happiness. So, and then you have to also understand how these are interconnected. For instance, the theory of One Health makes clear that environmental health leads to human health. This is just an example. So for some of these measurables which are probably 8 or 10 more measurables compared to simply measuring financial returns. We would need the KPIs and we would need the models to, once we measure the impact, how to translate, uh, this into value. I give you the most difficult, uh, example. If you want to measure well-being So, and what, what, how can you measure well-being? I said, okay, let's start thinking about like AI would do. And I, I invite you to, to ask ChatGPT or Claude or any other software how to translate well-being in finance. They say, oh, probably, uh, people who is benefiting more well-being would be more productive, so we'll have a higher income. This is already economic value. Probably the benefit of well-being would be spending less in healthcare. And so this is another, you know, economical advantage. And then you actualize this for something which is less risky, therefore with less— a lower cost of money, and you find out that even something so intangible like well-being does have a financial value. This is what is missing for now, but it's missing why? Because, uh, because it's just a question of time. We got many KPIs. For instance, Illy Caffè got a, a loan from a bank with 2 KPIs which drives a lower spread. Which are carbon emissions and gender parity. If we overperform in those KPIs, we will have a lower cost of money. This is the clear demonstration about how you can start building value through regenerative investment instead of the old stereotype by detractors that regenerative sustainability only distracts value and destroys in most cases.

Can I just add on to that real quick? So I agree with everything Andrea just said, and one of the ways that we like to think about this regenerative paradigm is that in addition to doing the best we possibly can using our our conventional business tools, measures, metrics, etc., there's a recognition that there's potential we can't see in advance. We literally call it regenerative potential. And it's like, think about going back to living systems we all innately understand. When we have a child, when a child is born, we have no idea what the potential of that child is. But we nourish the child, we take care of the child, we create conditions for the child to succeed. And then something happens. And it's better than any KPI we could have ever— if we put KPIs on our kids, we're in big trouble. Some people do. It doesn't work out well. And so there's, you know, again, it's not instead of, it's in addition to doing all of the things we know we need to do, If we think about creating conditions for health, for thriving, we will allow the living system to surprise us. And that only happens if we align with the patterns and principles of how life works, which is why I'm always emphasizing the patterns and principles as opposed to the metrics, because the metrics can only take us so far. The challenge is bigger than we can get our heads around. So the escape hatch, if you will, is to create conditions and manifest potential for value, for wellbeing, for thriving that we won't know in advance. And that's almost like a leap of faith. But I've seen it with my eyes. I've seen it on the grasslands. I've seen it throughout regenerative agriculture. I've seen it in companies that I'm involved in. I've seen it not work in companies. Think about the dissatisfaction that exists with most employees in most companies today. Imagine if you create conditions where employees are engaged and excited about what they're doing, and they come up with new ideas that the boss is never going to think of. So that's another example of productivity that'll translate into productivity or new business lines. But no one will have a KPI for that in advance. The KPI is creating conditions for health.

Well, on this one, I would like to introduce another topic that we in the Regenerative Society, we think it's relevant, and it's common language. You talked about stereotypes, the need to understand and embrace complexity. And also the fact that regeneration is a word we hear more and more, but we don't always mean the same thing by it. And one of the things we want to build through these talks is a common language, what we can call like a regenerative lexicon that grows from the conversations themselves. So I would like to share a few words with you and just ask you to explain us or tell us what that means in the regenerative paradigm. I would like to start with Mr. Illy with 3 words that I heard quite frequently and are circularity, conservation, and restoration. I would like to ask to Mr. Illy, what does each mean and why we have to read them in this order? Why it is important to read them in this order?

First of all, I would like to define regeneration, which people would be surprised, but it's a biological process of cellular reparation In order to maintain the cell in good health, or should the cell die, cellular replication to regenerate life where it is gone. Why is it important for our life? Because we are part of nature. And we rely upon the so-called ecosystem services for 100% of our living factors, from the air you breathe, the water you drink, the food you eat, the fabric you wear, the material you use, the energy you consume. Everything is about the 2 classes of ecosystem service, provisional or regulating. The— how the world works in terms of homeostasis, in terms of climate regulation, water and air purification, to the biological defenses against pathogens and disease is another class of ecosystem services. And these ecosystem services are produced by ecosystems. There are high-capacity ecosystems like forests and oceans, mid-capacity and low-capacity. They— we rely upon them. It's like we would be on a budget, that each and every individual on the planet needs to have a certain amount of natural capital for its life. This number is not yet known, to my knowledge at least, And we would very, very rapidly try to define this budget, how much we need for a living. So the problem is that we consume much more than nature can regenerate because we have our economic model, which we inherited. We launched with the Anthropocene, with the Industrial Revolution, one century and a half ago, which is an extractive model and linear. So then not only you keep extracting fresh resources from the biosphere and also the geosphere like they were infinite, and logically they are not infinite, but the other problem being linear is that at the end of the, let's say, the consumption, you have scrap, pollution, and whichever poisons that go back to nature, poisoning it and hindering regeneration itself. So this is why we crossed 7 out of 9 of the planetary boundaries according to the model of Professor Johan Rockström. Can we go back to the safety zone? Not with this extractive linear model. This is why The economy has to evolve, and I specifically say evolve, not transition, because this is not a transition from point A to point B. It's an evolution, changing the course of evolution towards a model which is circular in order to dramatically reduce our footprint, consuming much less resources and at the same time regenerating natural capital.

I would like to switch to other 2 words that I read on the last book of Mr. Fallerton, Regenerative Economics, and I was quite impressed by the distinction between business and commerce. So I would like Mr. Fallerton to tell us which is the main difference between them, and I know that it's quite connected to relationships. Between companies and communities also.

Yeah, and I just want to pick up on Andrea's definition of regeneration as well, if I can. The critical word that he said at the beginning, but I want to underline it, is process. It's an actual real process. It is not just an adjective to bolt onto a sentence that we want to sound, you know, forward-thinking. It's an actual literal process that operates at a biological level, at a cellular level. And so the premise that my whole regenerative economics worldview framework is based on is that that cellular level in an economy is the organizations that make up the economy, both the businesses and the non-business organizations. And so the place to begin with a regenerative economy is to make the cells regenerative. Of course, businesses, organizations are made up of human beings, which are living systems, living organisms. So, but it is a human artifact or a human construct that we're talking about. The economy is not inherently a part of the biological world, it's a human construct. So in many ways, the economy is almost like a language that we use, and my argument is we need to base that language on the science of living systems and the design function— or the design principles of living systems, because the human economy unlike mathematics or French or Italian, any other language, actually has this feedback loop into the real world. And so it's profoundly— it's a profoundly important language if we use language as an analogy. To get back to the business and commerce, it's really what I was referring to earlier. The word business actually You know, I went— I did— I wrote a piece on this if anyone's interested in my Substack. But I went to the root of the word, and it's actually quite interesting. And I don't remember it all off the top of my head, but the idea of— or the root of a word implies a thing, whereas the root of commerce, the first part of that word, obviously, com, means together. And so commerce is something that is a process. Again, it's a flow, it's a relational dimension. And because of our Western reductionist thinking, we've focused on what's really the abstraction. You know, a human body is not a self-contained thing. It's highly interdependent with the world around it, beginning with our own gut microbiome. And I would argue a business is the same thing. It's actually not— it is a whole that needs to be managed, but it's also a part of a much bigger whole, a relational whole. And if we just focus on the part, which is what essentially finance forces us to do, the finance algorithm that drives decision-making in business, in mainstream business, is designed essentially to make the value of the firm, the stock price, the equity value of the firm go higher independent of all of the things that it's dependent upon. And so again, it's a shift in the way we see, and it's not an incremental change, it's a radical transformation. I use the metaphor metamorphosis. It's like we need to mature the economy and the way business works from an overstuffed fat caterpillar that can't grow further in the traditional way to a beautiful butterfly. And yet we don't really know what the butterfly looks like yet. But it turns out in living systems, when they reach the limits of their ability to grow in a certain way, They complexify. Think of the difference between a bed of weeds transforming into a perennial grassland transforming into a mature rainforest or any kind of forest. The key, and this is proven empirically, scientifically, is that a rainforest or any kind of forest learns how to create more wealth, more well-being, more complexity using less resources because it learns how to work as a single ecosystem. And so my vision for commerce is that we learn to mature out of the logic of the weed to grow at the expense of everything around it, to the logic of a coral reef or a forest, which actually creates more wealth using less resources than a bed of weed does.

Wow, thank you very much, Mr. Fullerton, for this contribution. And before leaving the conversation, I would like to bring the 2 perspectives together from the Regenerative Society Foundation and also the Capital Institute. I would like to make this question to both of you: if you want to bring regenerative economics into real investment decisions. What could Capital Institute and the Regenerative Society Foundation build together? So maybe, I don't know who wants to start, Mr. Illy or Mr. Follettone, just tell us what can we do together in order to accelerate this understanding, this mindset shift?

Do you want me to go first? I'll extend an invitation. So we're actually very passionate about this commerce idea And my colleagues, I partner with a firm called EnRhythm, which is very much focused on bringing this living systems paradigm into organizations. And they had the idea that we need to reclaim the concept of the chamber of commerce. Again, focusing on this idea of commerce. And I believe Before we can figure out how to do regenerative investments, I mean, I spent honestly over— I was doing impact investing before I left JP Morgan. And I've spent 20 years trying to find projects to invest in to show what this looks like. And the closest thing I've come to finding one is, interestingly, one of my students is a partner in a firm in Canada called Regenerative Capital Group, I think. And they're investing in, as an ecosystem of small, mid-sized businesses that are going through a generational change. But it's a holding company that invests in a portfolio of companies that are going to learn how to work together in commerce. And so, for us, the beginning point is to help this create capacity for this mind shift to be possible. And none of us knows how to do this. This has never been done before. And so why not create a chamber of commerce and invite business organizations and other forms of organizations? Because a lot of what business needs to learn, it will learn from other sectors, and vice versa, what other sectors need to learn will learn from business. And so We're launching, and would love to have the Regenerative Society Foundation as a partner, this idea of a regenerative Chamber of Commerce. And we would imagine it would have regional chapters, but we would all, to use one of my teacher's expressions, learn to learn together. We all need to learn a new way to see, and none of us has the answers to that. And so why don't we Create a regenerative chamber together, and and and begin the learning journey in in a think of it as the mycelial network of the regenerative economy.

Very good. My turn?

Yeah, Mr. Illy, please. We have to connect the dots here.

So first of all. I'm so happy that we share the same common ground, and the focus on understanding and learning is so essential. Just to give you an example, because maybe the, the, the idea to rely upon a cellular reparation or duplication for our entire life, something that doesn't resonate so immediately, let's say, in people's mind. But then let's consider how many cells there are on the planet.

Yeah.

And there are 10^30 cells. And if you would align all cells around the equator, you would circumvent the, the Earth for 25 trillion times, just to give you an idea of how How the the fabric of the of of the of the world is made of of sense. So this is the the and I'm so happy that we gave me this rationalization of a process. This is what makes the regenerative world real because it's a process, whereas sustainability is an adjective. Okay, beautiful. Sharing this this. common ground, we would— I would be pleased to try to make any possible effort to have millions, hundreds of millions of people sharing the same culture, understanding what I described, the ecological wheel, how it rotates.

Mm-hmm.

But then my dream, uh, let's say there is a— to let's say, fully exploiting the complementarity. Because RSF, as you can hear from my words, and it's my bias because I'm a chemist by background, did focus on, let's say, the scientific part, whereas John, as an ex-banker, did focus more on the, on the, on the economic and financial part. I think the two The 2 approaches can be combined together, they can converge. My dream would be to offer to corporations what I did describe before. Are you willing to consider becoming a regenerative company, yes or no? Of course the answer would be, why not?

Hmm.

So what is a regenerative corporation? A regenerative corporation, in addition to prosperity, It creates well-being seriously by regenerating the natural capital. So how can this be translated?

And social capital.

Yes. Well-being. This is what I was meaning as I was kind of oversimplifying, but I'm fully in agreement with you. So how can this be translated in something that you can On a— what is talking the business language— on a bankable project. You go to a bank and say, I'm going to spend $1 million for this investment, and the— what is special about it is it's regenerative. And the bank has to learn how to understand and understand the return on capital, let's say, of that investment. This is what I think I dream we would do, because don't forget also the geographical scope. John is leading regeneration from the United States of America, and I'm trying to lead it from Europe. So if the 2 countries come together sharing the same model, they could still have a big chance to influence the rest of the world.

Mm-hmm.

And I'm sure that we can find also friends in Asia to join our, let's say, journey and try to make something global. Mm-hmm. Because if we go to a university, like for instance, I would have access to the Bocconi University. I'm sure, John, you would have access to absolute premier university in the United States. And we ask them to modelize a model that eventually gives birth to a spreadsheet that you can use in order to assess the return on investment of a regenerative investment, this would be something as practical as doing business every day.

Yeah, I'll just say that the challenge with the existing universities, as you know well, is they are steeped in the reductionist— I mean, just to use one example, So we talk about finance and I use the phrase the finance algorithm. And first of all, finance, which is the dominant discipline now in most business schools, right? I mean, they don't say that, but it is. It's where the power lies. And for lots of reasons, including the donors that give the buildings back to the universities in the United States, at least finance is a brand new discipline. I mean, when I started in business, finance was barely on the map. It's brand new in the scheme of things. And it's built on the same Newtonian foundation as neoclassical economics. And one of the critical things that it ignores is that Newton assumed that time was reversible. The equations work both ways. It turns out in the real world, time is path— or reality is path-dependent. And so you can't just take a present value of future cash flows and move them from the future to the present and then the present back to the future when the consequences of our behavior today make the future possibility different than it was before our actions today. And that simple, basic, common sense understanding that a 9th grader, a 6th grader would say makes sense is actually devoid of the foundational framework that we make financial decisions with. Now, if I go and explain that to a finance professor, they'll start rolling their eyes at me because it's not the way they see the world. Even though they're smart people. And in economics, it's the second law of thermodynamics that they forgot to include, as Herman Daly and Gheorgescu-Roegen taught us 50 years ago, and it's still not in economics. Yeah. So bringing the universities into this project is a challenge. And my experience is, yes, let's invite them, But we are going to face some pushback because this is radical, what we're talking about. And how many university professors or business leaders have done what you did, Andrea, which is to take a sabbatical and go learn what they're not teaching you in business school? Just as your professor told you, you can't learn this at business school. What you need to know.

I agree with you, and my approach would be kind of business in a sense, pragmatic, and try to bridge, because what you described is the ideal world. But we, in order to reach the ideal world, we probably need to bridge from the current completely, let me say, uneducated, let's say, approach to— and simply demonstrate that Regenerate, it creates value, uh, monetary value.

Yeah.

I wanted to remember that at least I, I don't know the current evaluation today of Tesla, but Tesla is worth, although it sells many more less, many, many less cars compared to, to them, is worth as the same of all other automotive groups, Toyota excluded. Why that? How is it possible that the company is evaluated such an insane value? Hmm. Because markets believe this is the car of the future. And so if we, if we can say that the future is not sustainability but regeneration, because it's, it's process and not objective, and it's therefore objective, uh, it might mobilize an insane amount of money. And I still remain optimistic about that, and I hope that you remain optimistic too, otherwise you wouldn't do what you're doing.

I do remain optimistic. I remain optimistic because I've experienced regenerative potential. It's not a theoretical thing, and, um, I've experienced it in my own life, my personal life. And I've experienced it in investment projects, not just in agriculture. The question is, how do we create the conditions where that becomes the normal course, like it has delivered the evolution of life on this planet and even in the universe, like it's a proven thing? So that's my reason to remain optimistic. But I love where you started. It's a cathedral project. We're talking about.

Yes.

The cathedral project.

So the metaphor of the cathedral is that there are 2 workers and one man interviewing them. What are you doing? And the first worker, pissed off, answers, don't you see I'm laying down bricks? And the second worker watches to the sky and says, I'm building a cathedral.

Yeah,

which everybody knows is a work which can last centuries. Sagrada Familia in Barcelona, 2 centuries already, not finished yet.

You know, Andrea, you know, I was in Milano earlier this year and I had the chance to walk down to the Duomo. And honestly, I had the— and I'm having chills remembering this. I I had the same insight, which is I'm in the cathedral building business. And I forget, I read, I looked up how long it took to build that cathedral. It's definitely centuries. That's a different timeframe than quarterly earnings.

Yes, exactly.

We have to set up another conversation to go deeper into this, also those topics. And thank you. especially to go deeper into our collaboration between Capital Institute and Regenerative Society Foundation. Before leaving you both, thanking you for your time, I would like to read another question because our community is so hot right now. Let me read it, this one that comes from a founder of a company of the Regenerative Society Foundation. I was reflecting on a quote John Eftelington once shared with me, ever since The Limits to Growth was published, we have been planting seeds of science and research for 50 years. Now it's harvest time, and we will harvest the innovation, energy, and business models needed to tackle climate change. Do you think this perspective is overly optimistic, or is there truth to it?

So, so John is a, is a dear friend and colleague and Of all of the great things he's done, what I admired most was when he did a product recall on his triple bottom line idea. Literally wrote a piece in the Harvard Business Review declaring a product recall because in a sense it wasn't working. That's overly simplistic, but that's what he did. And it's funny you mentioned him. Because I just got an email from him yesterday. He is moving his thinking. He began focused on the business and he spent 25, 35 years as the godfather of sustainable business. More recently, he's shifted to markets. And so if you look at his Substack, its name is something markets, I forget what it is. And his email said he's recognizing that he needs to move to the system level, to economics. And so, you know, I think he's a technological optimist at heart. And so I think that's the source of his— of that quote. But I'm— again, I think this project is way bigger than we've got our heads around yet. We are— We are laying bricks for the cathedral and we don't even yet have the design clear in our head. And so if I'm being honest, I would say, you know, in our lifetimes it's going to be a difficult struggle, but we're going to make progress and see new possibilities emerging that will cause unexpected things to happen, both positive and negative. But we're in a— we got to get real about what we're— I mean, this is bigger than the shift from the medieval age to the modern age. You know, Copernicus looked up and said, that's not a sunrise, that's the Earth rotating. And we're just beginning— and we still call it a sunrise, by the way. And we're just beginning to think about how an economic system, a political economy, can evolve into a next stage of maturity, which is a— it's a massive project. It's a cathedral project. And I don't think it takes 6 centuries, but I don't think we've got all the pieces ready to go and we just need to start using them.

Yes. Something we didn't talk about which in my opinion will— is definitely part of the solution, not the problem, more than the problem, is AI. Because if our brain is linear, because we have a very, very short evolutionary history with something 200,000, 300,000 years, and we have only 4 dimensions in our brain, right, left, up and down, day and night. Until 4 variables, a system is linear. After the 5th becomes complex. Hmm. AI doesn't have any problem whatsoever in dealing with complexity, and it can quickly organize, let's say, the problem definition, the factor analysis in a way that we can easily understand. So I believe that AI is a terrific tool for problem solving. in addition to process optimization. So this is why I'm so confident. I don't like to— I don't like generally to speak about artificial intelligence. I prefer to speak about augmented, because this can help human intelligence to overperform. And, um, if this is the case, we might exponentially increase our capacity to solve problems, including the ones that we created in the last 2 centuries Yeah,

well said. Just to pick up on that, I actually believe— I mean, Fritjof Capra, after thinking about living systems for 50 years, concluded that life is intelligence. Life is intelligent. And isn't it interesting that the internet showed up just in time to connect, create connectivity and empowered participation, which is a principle of living systems? We've abused the tool with extractive business models, but the tool is incredible. And now AI shows up just when we're essentially at wit's end to how the hell do we work through this complexity. So I couldn't agree more. How we use that tool, I don't think we're off to a great start in terms of using it for good as opposed to allowing it to run roughshod over so much that matters. But just as another example of what we don't yet have in place, going back to John Elkington's point, when we designed the current world economic order, it was the post-World War II context. We knew nothing about any of this stuff then, or at least the people at the table didn't. And so there isn't a sector or an institution of the commons And it's 100% clear to me that there needs to be an institution of the commons, both the natural commons and the technological commons. Like, the internet should be a commons. And if it were a commons, we wouldn't have allowed Facebook's business model to destroy our kids. So we need to build an entire new sector of the economy which will enable the human economy to be self-organizing and self-governing in a way that it currently is impossible. So, this project is, again, in early stages. That to me is exciting. That is the life work of, I think, the next generation is to work through this and use tools and technologies that didn't exist when I was in my 20s. But we need to get clear about what we're— the challenge ahead of us. And business obviously plays an essential role in this. But it can't be done by individual businesses on their own.

This, this, uh, just to maybe finish our conversation, this point that you mentioned now, you need to be clear where we are. I had a very interesting conversation with Professor Rockstrom. She said, you know, if, okay, we have to regenerate ecosystem for our life, But there is a priority list. Now ecosystems are destroyed not by, uh, bad men deforesting or overexploiting, but by the effects of climate change. So first priority, first decarbonize and fix climate. Otherwise there would be no way to regenerate or restore or conserve ecosystems because they are going to wet out. Secondly, in the meantime we decarbonize, try to conserve as many possible healthy living ecosystems. And only last, once the situation will be rebalanced, start restoring ecosystems which have been depleted in the past. Because otherwise, nowadays, if you restore with large reforestation projects or like this, you might enter the risk that they get destroyed by, you know, wildfires, droughts, or whichever accident caused by climate change. So this is the priority list according to Professor Rockstrom, which very much goes along. So if the world is now Talking about decarbonization, we shall consider not only decarbonization because we also need to consider that carbon is a cycle. It gets emitted, but then it gets fixed. And the only possible way to fix carbon for now is in the biosphere. So this is why we shall focus on the second half of you know climate change, which is fixing and maintaining the nature capacity to fix carbon and conservation at the same time. This is a way by which the regenerative— our 2 organizations can be on the, you know, upfront, on the frontier of what needs to be done in the, let me say, sustainability agenda.

Yeah, and I just again want to emphasize what you just said about the carbon cycle. How many people think about climate change as a carbon cycle problem, not an emissions problem? Very few. This was the big epiphany of my work on the grasslands. The grasslands are the second largest carbon sink after the oceans. And the grasslands are grass, not forests, because they're dry, brittle, arid, tough places. The Sahara Desert used to be a grassland. And we actually know how to manage grasslands to regenerate and build soil rather than release soil. So part of the emissions challenge is the carbon sink challenge, both oceans first and foremost, because they're so massive. And a lot of that can be done. I agree with you, the forest fire risk of restoring fires or restoring forests is a huge impediment. But 2/3 of the land-based planet is grasslands. And we burn them, but they don't burn naturally. We burn them to create more health. But, and this is where one of the conventional wisdom pieces gets us in trouble. Most people think that if they want to work on climate change, they should stop eating meat. But what we really need to do is manage the animals, the herbivores that have a symbiotic relationship with the grasslands, again, right relationship, in a different way. The problem is the industrial meat system, not the cows. And it's incredibly hopeful what can be done by managing grasslands holistically with animals Working symbiotically. And again, I've seen that with my own eyes. I know it's real. I've invested in that with my own money. I know it's real.

Soil organic carbon enrichment. And soil has a— you nourish the soil microbiota, part of the 10^30 cells in the world, which is responsible for fertility, for resilience, for the natural defenses against pathogens and pests. Good for agriculture, good for, you know, nature restoration, and 3 times the capacity of the atmosphere in terms of soil sequestration.

Yeah,

so there is room for more than one more conversation.

I would like to thank you both, Mr. Illy and Mr. Fallerton. Today what we have tried is to move from the idea of regeneration to something more concrete we can say. And we also close with some investing suggestions that it's not quite normal in a talk. So thank you very much for your generous contribution. And thank you as well to everyone who joined us live and those who sent in the conversation those questions. Our next regeneration talk will be on 29th September, and Mr. Fallerton and Mr. Illy talked about well-being but also regenerative AI, and those will be 2 of the main topics of the next regeneration talks. About well-being will join us Lorenzo Fioramonti, professor at the University of Surrey and former Italian Minister of Education. will be in conversation with Chevalier Frédéric Tzao, chairman of the Tzao Pao Qi Group.

Beautiful.

Yeah, so together we will explore a simple but fundamental question: what will society look like if we measured well-being and not just GDP? Thank you for being with us and see you at the next Regeneration Talk. Bye-bye.

Thanks. Bye-bye, everyone. Happy birthday, Andrea.

Thank you, thank you. Goodbye, everybody.