By Hal Brill (originally published in the Natural Investing News, Spring 2007)
I brewed myself a cup of coffee today. No big deal, except that until a few weeks ago I had never done that. Coffee occupied a blurry place in my psyche – I liked it but also feared the bean. One too many jittery, heart-racing experiences had taught my body to minimize consumption, and I figured if I didn’t know how to make it myself I would only be exposed when I went out to eat.
The blend I had this afternoon was some fresh Starbucks beans that arrived recently via UPS, a gift from the company after our recent tour. It achieved exactly what they hoped, sealing my fate. I’ve become not only a coffee drinker, but a convert Starbucks fan. YIKES! How can this be? Is there something in the brew that has weakened my innate mistrust of anything corporate?
My tale begins in January, 2007, when my buddy Cliff Feigenbaum of the GreenMoney Journal forwarded me an email from Starbucks. He was invited to join a group of journalists in Costa Rica to tour Starbucks sustainable coffee operations. All expenses paid! Fortunately for me, Cliff couldn’t clear his schedule so he offered me the Allison and I have wanted to visit Costa Rica (who wouldn’t?), so it was easy to say yes.
In the last two newsletters I’ve discussed the wonder solution to all our problems: scenario planning. I brilliantly summarized my argument this way: we cannot predict the future, trends don’t help us much, knowing which one possible future will occur is impossible, horrible predicted scenarios grab all of our attention. Given all of that, we still need rational planning. We need some way to make decisions in a meaningful way that can guide our actions now, to best position ourselves for whatever future may come about. Scenario planning to the rescue! I went on to explain what scenarios are, and outlined six that I’ve been working with, from dystopia to utopia: Mad Max, 12 Monkeys, The Long Decline, The Long Boom, Ecotopia, Star Trek. (If you missed the first two halves, email me and I’ll send you the complete article.)
In this the third half, I’ll discuss how you could develop scenarios for you and your community. I’ve mentioned some of the benefits of using scenarios: it helps us maintain a sense of possibility, keeps creativity engaged, keeps us rational and not too emotionally reactive, and fights despair without being too Pollyanna. Sounds good, and it’s not hard to do either!
DOING SCENARIO PLANNING
Begin by determining the question you want to consider. In my example I took two trends as a given: rising energy costs brought on by peak oil and global climate change. Those two trends are a virtual certainty, and huge! We can’t wish our way out of them. When you work your own scenario planning you can choose other factors, such as technology changes in your industry or the emergence of a new competitor or
As I’m sure you remember from the last post, I was discussing the wonder solution to all our problems: scenario planning. As you no doubt recall, I brilliantly summarized the first half of my argument in this way: we cannot predict the future, trends don’t help us much, knowing which one possible future will occur is impossible, horrible predicted scenarios grab all of our attention. Given all of that, we still need rational planning. We need some way to make decisions in a meaningful way that can guide our actions to best position ourselves for whatever future may come about. Scenario planning to the rescue! To resolve your curiosity, this article will finish what it started, and give you the real scoop on what scenario planning is, and why you should care. Scenarios are short, and creatively-titled, stories that incorporate the significant interactions of major trends, such as rising energy prices, growing fundamentalism, and continued drop- ping prices of computer processing. Playing with the various ways that significant trends can move and interact, a few major scenarios are created. I’ve developed six scenarios with energy and economic and social impacts as our main focus of attention.
Before I unveil my six, I want to throw one more curve into the mix, a common bell curve. We can use this tool to help us visually conceptualize how the various scenarios might relate to each other.
By Michael Kramer This article first appeared in the April 2008 edition of the Natural Investing newsletter
As you may know, our company, Natural Investments LLC, constantly monitors the field of socially responsible mutual funds and evaluates them with our NI Social RatingSM. This puts us square in middle of an ongoing dialogue among SRI professionals about different approaches to being “socially responsible”. Two of the main schools of thought are “avoidance screening” and “best-in-class”. The first seeks to avoid entire industries that are viewed as harmful, while the second includes companies in problematic industries but invests only in the companies that are judged to be the best in their sector for environmental and social performance. The appropriate approach, it seems, depends on one’s personal and societal goals.
Kinder, Lydenberg & Domini (KLD) is a leading corporate social research firm that has created numerous SRI indices that represent both approaches. Their flagship Domini 400 Social Index practices avoidance screening. But their newer products, such as the KLD Global Sustainability Index, include the industries’ best companies in most sectors rather than exclude them. Since indices typically put more emphasis on larger companies, the results can bring about odd situations where, for example, Royal Dutch Shell is the second largest holding of the Global Sustainability Index.
Lately almost every day someone has asked me some variation of the following question: “Hey Christopher/ financial advisor/money dude/human, I’ve been reading about Peak Oil/falling dollar/pending terrorist attacks/ trading account deficits and I’m thinking about selling my stocks/bonds/mutual funds/house/child and then moving to Costa Rica/buying gold/joining the Hare Krishnas/taking hunting lessons. What do you think?” I don’t intend to denigrate anyone’s opinions here, but when everyone is asking you essentially the same question, one begins to develop some theories along with the stock answers. So this article is about one of the strategies I use: scenario planning.
Scenario planning helps decision makers by introducing them to significant interactions of major variables, and presents those interactions in the form of short, meaningful, memorable, and creatively titled stories, known, surprise… as scenarios. Developed by military planners and used extensively by large corporations, most notably Royal Dutch/Shell, it’s a useful tool for thinking about big trends occurring in the world, and how to make sense of the future. But let me back up a little and explain some of the context of why I think scenarios are interesting and important.
The place I start when talking about scenarios is what I call the “key point”: we cannot predict the future. Accepting the fact that we cannot predict the future is essential for understanding portfolio management, asset allocation, in fact all kinds of planning and decision making processes and tools. When I’m talking with people face-to-face I usually make a funny little fist
As you’re reading this article, go ahead and cross your arms as you usually would. If you notice, you can accomplish this effortlessly, without really thinking about it. Now, release this position and cross your arms again, only this time put the other arm on top. How awkward was that?
Human behavior is full of habitual practices, which is why doing something as simple as crossing your arms a different way isn’t a simple task. We have similar habits in many aspects of our lives, from how we brush our teeth, cook our food, and study for tests to how we treat people, dress, and shop. We also have very different tendencies when it comes to moving beyond our comfort zone and embracing change.