John Fullerton



Gino Borges:

It’s the Joseph Campbell-esque moments that we all share, the archetypal, psychic, and material moments that we all have in common. While the details may be different for each and every one of us, we do have a lot that we share as a human community. We’re all experiencing, at some level, some form of blessing with an abundance of resources that often extend beyond our individual needs and our family’s needs. We are being called to live intentionally and to live in a way that feels more meaningful, not just for ourselves, but also for our fellow human beings.

I’m very excited to be joined by John Fullerton. He’ll be sharing a lot more about that inner journey that took him from a very conventional Wall Street role to what he’s doing now with the Capital Institute.

John started his financial career at JP Morgan on Wall Street. John is the founder and president of the Capital Institute, which is a nonpartisan collaborative focused on a regenerative economy. He’s also the author of Regenerative Capitalism: How Universal Principles and Patterns Will Shape the New Economy, a fellow Toniic member, and a principal in Level Three Capital Advisors, John’s holding company for impact investors and his own personal impact investments.

John, start with a bit about that journey from Wall Street to Regenerative Capitalism. What started turning inside of you in the mid 2000s? What led to you making that shift and starting that journey?

John Fullerton:

I left JP Morgan where I had been restless. I had moved around different parts of the firm, and each time I made a move, it postponed the “itch” as it will.  I actually began thinking about aligning capital and purpose while I was doing private equity investments. In 1997, I made my first impact investment in a charter school management company called Edison Schools. I’d been thinking about this issue for a long time that fundamentally changed the culture of Morgan. The culture, the main reason that I stayed there so long, was wonderful and quite unique on Wall Street, but it was clearly overrated. That culture had been dying for years, but it was now clearly over. I left with no plans and no idea what I wanted to do next. I had no grasp of the environmental crises at the time. I was going to take the summer off and then think about it in the fall. I started thinking about getting involved in the charter school movement and ultimately decided that wasn’t for me. Amidst rebuilding what I wanted to do next, I experienced 9/11 up close and personal.

That experience really shifted everything for me and pushed me into a deep-think period, my “walk-in-the-woods,” or my “climb-up-the-mountain.” I read a ton of books during those next five to seven years. I was dabbling in impact investing during that time through True Investor’s Circle but also trying to figure out what the hell was going on in the world.

Gino Borges:

Not all of us have the existential experience of being in a Wall Street context. Was there a particular changing moment, high up there on the 37th floor of Manhattan? Help us understand what happens in the inner Wall Street world.

John Fullerton:

An epiphany moment occurred for me the year earlier. It was in 1995. The Wall Street Morgan was known for high ethics and high integrity, and we genuinely had a sense that we were special. It wasn’t this money-hungry, “do whatever’s legal to make money” kind of thing. We felt that there was a higher calling to our work, not to suggest we were doing God’s work, but there was a way of doing business. The financial system was central to the integrity of the global economy. There was also a  need for banks that one could trust. We all generally believed in that, and there was a lot of truth to that in those days, but increasingly at a personal level, I felt I was working toward a goal of success that was culturally-defined for us, not just in Wall Street but across the country.

I remember that epiphany moment. I had been put in charge of our global commodities and commodity service business at a pretty young age. I was now “Mr. Big-Shot” at a young age. I had to fly out to Asia to meet the team that was based there. It turned out I had to fly on Father’s Day just because the way the calendar works. These were the days when managing directors were getting flown around first class. I saw myself: sitting in a Singapore Air First Class chai with a New York Times on my lap. I had two young children at home, a newborn and a two-year-old at the time. You don’t get much time to read the Sunday paper when you have two young kids at home.

I should have been happy as a clam because I got all this time to myself. I got first class and “I’m Mr. Big going to meet the troops,” but I was miserable. I wanted to be home with my family, not out pursuing the “golden ring.” I looked down at the newspaper to see an article in the right hand column about how corrupt and mismanaged the federal low-income housing system was. The message was that lots of big problems in the world need fixing.

In the left hand column was an article about Walter Annenberg, long before the giving pledge – he was a big media guy. He made front page news because he had just decided to donate the bulk of his fortune, about $350 million – equivalent to $1 billion in those days. He gave it to three or four educational institutions. And, it was all good. He was the American dream. He lived the success story: business-tycoon-turned-philanthropist in retirement and then gets to read about himself in the New York Times. I remember having this visceral reaction that I didn’t want to be that guy. There was plenty of money in the world and plenty of problems that needed work. I thought that “while I’m still young, I want to get to work on the problems rather than climb this ladder of success to turn into my version of Walter Annenberg someday.” I say that with no disrespect to Walter Annenberg. He was an exemplar of the success story of our society.

In many ways I say to people, I quit Wall Street that day. It just took me another four years to muster the courage to actually walk away.

Gino Borges:

After you had this summer off, what drove you into thinking about money from a more multi-stakeholder, three-dimensional approach?

John Fullerton:

I remember starting to write a paper early on called “Social Capitalism.” I’d thought I was inventing some new idea when someone asked me, “have you ever met Jed Emerson?”

We invested $22 million in an early stage company and had the exact same conversation in our board meeting as the conversation we had in the investment committee when we did the Edison Schools investment. It was the conversation you could’ve read about Ford Foundation having. Can you make money, sacrifice, return… all that stuff? This idea of a more holistic approach to value creation was somehow intuitive for me. It was in that deep-think learning period after I left Morgan when I discovered complexity science, living systems, bio-mimicry and holism. All of that resonated with me.

I’d forgotten or neglected to mention, I was holding this tension between the invisible hand of capitalism and the Golden Rule. I had been trained to believe in, and generally believed in the invisible hand because there is some truth to it, of course. At the same time, the Golden Rule is central to virtually every major religion in the world. I actually started a discussion group at my local church in the late 90s called Christianity and Capitalism: oil and water. It was about the question of reconciling the invisible hand and the Golden Rule.

Frankly, that conversation was pretty amateur and didn’t go anywhere, but it became very clear that there’s a lot of interest in it. A bunch of us Wall Street warriors showed up. It was a men’s group, and it was very clear that it was an important question. Even though we didn’t resolve it at all in our time together, I realized my spiritual beliefs and the wisdom contained in all of the world’s religious systems seemed completely out of alignment with how capitalism was playing out. Then, when I learned about modern science as opposed to the science we’re taught in school, it just became very clear to me that modern science is actually amazingly in alignment with the old wisdom traditions of East, West, and the Indigenous.

It dawned on me that the human economy was out of whack, and it had nothing to do with socialism or capitalism. Essentially, it became clear that modern science and wisdom were saying similar, if not identical complimentary, ideas like the importance of relationship to health. I had just spent 20 years in a culture where relationship increasingly became an afterthought. In fact, Wall Street moved from a relationship culture to a transaction culture during my career there, thinking we were making progress. That was reflective of the modern competitive global market system. In fact, we were moving further away from how living systems actually work.

Just to complete my earlier thoughts, it became very clear to me that both our wisdom traditions and science were in alignment; capitalism without an alignment. I’m pursuing a really simple idea: if our economic system is to be sustainable over a long period of time, there’s either two things that are true. Either we convince ourselves that the human economy is the only exception to the rule that says all systems that sustain themselves behave in accordance with these principles or we need to move the human economy into alignment with these patterns and principles. That seems like a simple, obvious no brainer to choose from. The hard thing is to figure out what that actually looks like. Even harder, how do we get from where we are to where we need to be?

Gino Borges:

Is that the basis for what the Capital Institute is? Is that the outward manifestation grounding these ideas?

John Fullerton:

Yes, but we didn’t start there. I’ve been wrestling with this question for years. I remember the first thing I wrote in 2007, my coming-out-of-the-closet if you will, was a paper on the relevancy of E.F. Schumacher to the 21st century. I’d been wrestling with some deep questions; my friends thought I’d lost my mind. Just then, the financial crisis happened. More than I deserve credit for, people suddenly thought I had predicted it. Of course, I didn’t predict the crash any more than most people, but it reinforced to me that something was seriously wrong in the same way that 9/11 convinced me  of that at a visceral level, in a way that no one could convince me otherwise. That was a horrible thing that happened, but it also reflected something much deeper that none of us still understand.

These events are all connected, and they all have meaning beyond the financial crash. It was not simply that a bunch of mortgage fraud leads to a bad place. The meaning of that was rather the entire system is broken, unsustainable, and will collapse (did collapse aside from the bailout by the central banks.) It’s a much deeper problem than most people who have analyzed it would say. Most people would say, “well, the banks didn’t have enough capital and there was fraud in the mortgage market, but that’s it.” To me, the collapse is a symptom of a much deeper issue. So after the financial crisis, I had the courage to stick my head out and launch an organization with no real plan and no clear vision. It was rather just a container for the question. What the Capital Institute was meant to be, what it is now, and what it’s going to be is less important than it being a container for the questions.

Gino Borges:

How does that misalignment happen? How did we get here? We are creatures of the Earth, and yet we can create extensions that are out of alignment with the very source that brought us into being. Where did the imperative and the motivation to become misaligned with the very source of our being start to originate?

John Fullerton:

That’s a great question; I’ll share my current understanding. I probably would have answered this differently a year ago than I do today. This is by no means a finished product.

I have a new colleague, Joe Brewer. Some people may have seen his work. He’s pretty prolific on Medium in particular, and he’s working from the context of cultural evolution, a big idea essentially trying to understand the evolution of human culture. To answer your question, we need to be able to zoom out to longer timeframes than we’re normally accustomed to thinking.  Particularly, if you come out of the financial world, a long time can mean many things. Long-term finance can be a year, or next quarter is a long time away.

Even ignoring the problems of Wall Street, I think most of us think our basic frame of reference is somewhere from our parents’ childhood to maybe our grandkids and their kids, right? It’s a couple of generations, and it’s nothing in the scheme of human culture. Going back in history is critical, and in the context of Western culture the big shifts are what we call ‘eras.’ There was the Ancient Era and the Medieval Era, and now the Modern Era. Unless we force ourselves to think about it, most of us probably assume that we’re in the Modern Era, and that’s it.

It seems there’s nothing coming after the Modern Era because we are now modern. Lots of people have been thinking and writing about this, and it turns out, that’s probably not true. That is our unquestioned framing when we think about these things. The answer isn’t socialism versus capitalism – our current framing.  At the very least, we need to go back and understand what caused the shift from the Medieval Era to the Modern Era. The roots of the answer to your question are in that; there were plenty of problems with the Medieval Period. This is a Western culture perspective; there’d be a different story for Eastern and Middle-Eastern, but from a Western culture perspective we moved out of a world where it’s been written that essentially we humans didn’t need to think for ourselves because the Church did the thinking, and the Pope told us what to do.

Most of us were basically subsistence farmers. If we had a moral worldview, it came from the Church, and truth, therefore, was told to us. Copernicus comes along positing that the earth is not the center of the Universe. The Earth is rotating around the Sun. That puts into question the whole Church-centered, God-centered, “Pope-has-a-direct-line-to-God” worldview. Suddenly, we’re being taught that we can think for ourselves, and the elite scholars were discovering all kinds of stuff. Out of that came individualism and reductionist analysis. We can figure stuff out. If we can see it, it must be real. In order to solve the old problem, we needed to think for ourselves rather than live  in this mythical reality.

The Church, as a big powerful institution, was subject to the same corruption that all powerful institutions are. It wasn’t perfect, and it lacked all of the knowledge that we gained in the Modern Era. It couldn’t possibly have had complete truth. In fixing that problem, we created the current problem. It’s not to say that the Modern Age is bad, or the Modern Age is wrong; however, the reductionist analysis is not incredibly valuable. By reducing what’s complicated into parts, you lose sight of the whole. Now, we’re having to fix the problems of the Modern Era with our next era of staging, which some people are now calling the Inner Era.

The challenge is that the problems of the Medieval Era weren’t life threatening to everything on the planet. They were threatening to certain cultures, inhibiting growth and development, but they weren’t threatening. This is the first time from my reading of history that literally the life on this planet is at stake as opposed to life in one culture, one region, or one island.

Gino Borges:

The Cartesian Split was a big part of it. It’s reified in our language, how we actually separate ourselves from the outer world. The idea of the subject-object split is a huge invention that is complicit in all of our language and our framing of things. Before that, the outer world, the natural world used to be thought of from a phenomenological perspective. It was always unfolding. There was no static phenomena to be studied or observed that was separate from me. I just didn’t even know about. I would participate in the world from a unifying, evolving, unfolding, more of a poetic existence. Life wasn’t necessarily easier, but it definitely was different in terms of perspective. All of a sudden, we separated the natural world from ourselves by “objectifying it.”  I put quotes around objectifying it because that’s an illusion by itself. That, in itself, turned Mother Nature into a commodity. When Mother Earth became a commodity, that led to the potential for misalignment.

John Fullerton:

I agree with that. That’s part of the break between the Medieval Era to the Modern Era. There were many good things about that, but it contained within it the seeds of our destruction.

Gino Borges:

Let’s fast forward to where the Capital Institute is now working on putting resources and thought into this theme of regeneration. I see that word being used more and more by people in impact who are looking to evolve beyond our current understanding of what it means to be impactful. People who want to go the next step are using the term ‘regenerative.’ What does it mean, and why is it important to go in that direction?

John Fullerton:

It does seem that it’s become a term that people are latching onto. I like to use my good friend, John Elkington’s story, as an example. He coined the term ‘triple bottom line’ 25 years ago. I would argue that idea of triple bottom line is at the heart of impact investing, B Corp’s, ESGs and probably just about anything else in this space. He actually wrote a brilliant piece in Harvard Business Review last year where he did a product recall on the term ‘triple bottom line.’ Very clever! Only an Englishman could do it, but if you read the piece, it’s very short. He essentially says that even though the idea was meant to trigger transformational change, it’s been watered down into an accounting idea. We got our tape measures out and our calculators out, trying to put numbers on it all. Once you reduce it to numbers, it loses its power.

Of course, the other thing I would argue, and I think he would agree with this, is that the triple bottom line concept is great, but when push comes to shove, there’s still really only one bottom line. Particularly under stress, there is really only one thing that matters. Businesses do pretty much what they need to do to keep that one working. If they can do two and three at the same time, great. He acknowledged that it’s not working for what he intended it for.

I strongly have felt for years that the impact investing idea “doing well by doing good” was pretty shallow – to make you feel good. It doesn’t probe nearly deep enough into the systemic issues of how our economy works and how powerful and destructive capital can be. I first experienced the word ‘regenerative’ through my work in managing grasslands. I have a partnership with the Savory Institute, and Allen is very passionate about this idea of shifting from reductionist decision-making to holistic decision-making. He’s applied it on the large landscapes and proven that if we shift to a more biomimicry approach to managing large landscapes, similar to the way the buffalo used to roam, it’s not only good for the buffalo and the landscapes, but it is also more economically viable for ranchers to manage their herds that way.

This wasn’t a theory; I have literally been out on a horse and have seen it. I’ve invested in it, and it’s proven that the regenerative potential laying dormant in all the world’s grasslands can be realized in the real world, including translating that into measurable ecological benefits, measurable carbon sequestration and more profitable ranching business. Starting 10 years ago, they weren’t really using the word ‘regenerative.’ They were using the word ‘holistic.’ It was about holistic management.  I bumped into the Regenesis Group – Bill Reed and colleagues. They were applying the idea of regeneration to real estate development, and now there is clearly a thing called “regenerative real estate development.”

I saw through real estate investment projects.  Dan at Regenesis introduced me to real value creation in real estate. Opportunities and potential was realized in a way that a typical real estate developer wouldn’t have seen through a conventional lens. I’m started to put the dots together and say, “well, if this can work in the context of a large landscape…” I knew it worked in the context of a more traditional crop farming operation. Regenerative agriculture was a thing. Now I see it’s also working in the context of the built environment. It became very clear to me that it was real. If you follow a systems-science approach, these are all just different systems of the human economy. If it works on those systems and it was true, it had to be relevant to the entire human economy.

I feel like our unique contribution at Capital Institute is to see how this regenerative process is already at work in the real economy and moving it from the context of agriculture or the context of the built environment to a broader context of the whole economy. The real path finder in this work is Jane Jacobs. She’s most known for applying it in the context of neighborhoods and cities. But if you read her work, she was clearly thinking about its application broadly to economy. Interestingly, I only learned this recently. Bucky Fuller died in 1983, and his final book is called “Grunge,” his critique of capitalism. In it, he talks about a regenerative universe. This is not a new idea, but for whatever reason, no one has really pushed it in a serious way to be a set of design principles for the entire human economy, not just segments of the human economy that are closest to living systems. There is now a global movement of efforts that are aligned with this living systems idea. One of the principles of living systems is community in-place.

We launched a network last year called the Regenerative Communities Network. We use the word community importantly because it’s about communities, not economies and abstractions that economists use to adhere numbers. This is based on what the principals tell us are actually whole communities. If people are interested, there’s a distinct effort that you can find on our website and click on Network, you’ll see it. We now have seven places around the world that we’re working with to manifest regenerative community. By the end of this year, it’ll probably be 15, and there’s a pipeline of 50 that we’re in touch with, potentially wanting to join. There’s probably another 5,000 initiatives that we don’t even know about. We can see dots on a map that we haven’t had a chance to connect. Think of it as a bunch of networks invisible to the real world, like the mycelium and the soil. It’s happening.

Our theory of change is that if we can connect and learn together, it’ll accelerate change faster. We’ll have an infrastructure, building up from the bottom that will create resiliency as the world’s crises continue to unfold and spin out of control, causing more damage. Impact investors need to shift the focus from “I do renewable energy” or “I do education” or “I can measure my impact this way” to recognizing that capital’s purpose is to be in service in our lifetime. The purpose of capital is to be in support of this emergence of regenerative communities. Anytime we can align our own investments into that transition, that’s the highest and best use for our capital in my opinion.

Place-based investing is the way that manifests. I would predict place-based investing will be a big thing. Maybe Wall Street will call it an asset class so they can raise capital and charge fees for it. Place-based investing is a way we can all pick some places that are important to us and dig in and around that place across the full spectrum of what’s needed in that place, not determined by us all owning capital but determined by the people who are actually leading that regenerative process in that place. If the returns on that are high, fantastic. If they’re not so high, that’s okay too. We need to figure out how to flow capital into that because that’s really what has to happen, not to say that we don’t need to put up wind farms and solar panels. But if we just put up wind farms and solar panels like crazy and don’t reconstitute the DNA of how we operate human economies, we’re just postponing the crash that we’re heading toward.

If we had carbon-free and money-free energy tomorrow for everyone on the planet, we would collapse faster than we’re going to collapse if we keep on the path we’re on. Climate change and carbon emissions are just one symptom of a much deeper problem. If you want to really get depressed, study the species extinction, desertification, and insects. It’s a much deeper issue than just climate change, even though climate change is the big issue that we’re all increasingly focused on.

Gino Borges:

There’s a lot more to learn there because most investments absolutely neuter the place. This is just the world that we live in, that we’re obsessed with. It’s fascinating how you came to that conclusion and are working in that space.

The comment you made about stressful times in a triple bottom line company really becomes a company focused on the financial rather than the ecological and the social. Do you think we’ve reached a point in time where those ecological values, social values, and governance values in some businesses become the actual strategy, not a peripheral thing, but actually become much more robust?

Do you think there’s enough critical mass out there, enough of a subculture, enough value-oriented investors that there’s enough of a tailwind to support businesses who embed those values within their businesses actually becoming more valuable as a differentiator? Do you think we’ve reached that time?

John Fullerton:

What I said earlier is way too absolute. To make a generalization that there’s no such thing as a triple bottom line company is wrong. I go back to my Morgan experience.  I think there’s a difference between big public companies and what they in a sense need to do given the system they’re sitting in versus a private company, and particularly, a private company with a very enlightened capital source. Lots of different things can be done or said differently. Patagonia can do all kinds of things Citibank can do. Certainly, a private company owned by the right person or group of investors can do a lot of things, which is hopeful.

One of the interesting facts I just learned recently is that 75% of global GDP is represented by companies that still have a meaningful family involvement in the business. For example, the Walton’s still own 45% of Walmart.

That’s a no brainer. I’ll say it very bluntly. Should they decide to exercise the responsibility that they are not currently exercising, that company could transform overnight. We saw what happened when the Rockefeller family decided to engage with Exxon even though they owned a very small percentage and probably didn’t know whether they owned it or not. It didn’t matter. The reason they had power was that it was a moral authority of the company and its origin. The Ford family owns a meaningful percentage of and bigger control of Ford. All of these public companies, and if this statistic is right (it came from a wealthy family that’s a part of a participant in a family-owned business, global network), it was a real number. Think about the potential of those families engaging with the businesses that they still have influence on in a way that’s very different than the typical passive shareholder. That’s a really powerful opportunity.

Circling back to your question, if I were to describe what happened to JP Morgan during the last 10 years of my career there, it was that the financial pressures got higher. It got harder to be the good above the fray. A AAA bank, we only did first class business in a first class way, and there was pressure for earnings and return on equity. The context we live in is a world where money is our value system. For an individual company, whether it’s a beautiful little startup in Costa Rica, or Citibank, to buck that trend is pretty hard.

Any thought that a blossoming, beautiful little business on their own can change this, is shortsighted. We need to wrestle to understand why the system is what it is and how we need to shift the system so that the beautiful little companies can flourish and the big businesses that are in conflict with the way the world needs to be, either through bankruptcy, social outcasts, regulation or new laws are put out to pasture.

Gino, you’re a microcosm. Each one of your projects is a place-based community. You didn’t use the term ‘regenerative,’ but what intrigued me when I studied it, is that it’s highly regenerative. That’s a longer story for another day. I would say your business model is proof that regenerative is a thing that actually works in the context of real estate, but interestingly in the social side of it, more than the logical side of it. Regeneration is not an ecological idea. It’s a social and ecological idea rooted in ecological reality, but it applies equally to all of the social dimensions of human community and culture.