TRANSCRIPT: Wealth in the 21st Century: An Economy indexed on Nature: Martin Stuchtey

Read the full transcript of Professor Martin Stuchtey’s talk titled “Wealth in the 21st Century: An Economy indexed on Nature” at TEDxBerlinSalon 2024 conference.

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TRANSCRIPT:

What if I told you that our current conception of wealth is indexed on a system that may lead to our extinction? And what if I told you that, for once, there is now an opportunity to index our wealth onto a system that will ensure our continuance? Well, you may ask, what is wealth? Of course, wealth is relative.

Wealth is where we are in time. For the Aztecs, wealth was cacao beans. For the conquistadors, it was gold. For the Florentines, it was art. For the Inuit, it was “inam,” enough to share. Interesting. For my grandfather, it was the number of birds on a given morning. And for me, as a boy, it was hours spent with my grandfather.

Now, wealth actually says something about who we are as a human being, as a civilization, as an epoch. So, let’s ask the same question differently. Are we still in the epoch where our established conception of wealth applies? Or have we moved on? Have we passed a threshold?

In school, we learn these dates, these big dates, the thresholds when we pass them, such as the era of enlightenment. And I sometimes wonder, the people back then, did they actually know that they were passing a threshold, that they were part of something bigger, that they were holding very alternative futures in their hands? And we don’t know.

What we do know, however, from literature sources is that even back then, they knew that there were tensions deep in society. And we also know that there are tensions deep in society today. You can feel it.

You can feel it in this room. You can hear it in the talks. And thank you, my co-presenters. It’s wonderful to be part of that cohort. You can feel it in Berlin, which is one of those places from where the era of enlightenment actually broke into the world.

These tensions, they are about politics. They are about religion. They are about art. But typically, they also have to do something with economics, the way in which we index, we mint, and we share wealth, or in my language, the way in which we turn resources into wealth.

The State Shift

Resource economics, I’m a geologist, and I’m an economist by training, and so resource economics gives me a real thrill. So it all starts with geology. After some years as a mountain soldier, I moved on to be a geologist in Africa, and geology is this very slow business. I mean, nothing happens. For millions of years, nothing. And all of a sudden, something does happen, and that we call a state shift.

And I wouldn’t have thought that within my life I would be witnessing a state shift, that you would be witnessing a state shift, and we do. Climate is probably a 3 to 5 million year anomaly even now. We live in a 424 ppm world. We as a species haven’t lived in this atmosphere.

And then there’s biodiversity. That might well be a 50 million year anomaly. We are losing species at a rate faster than in some of the mass extinctions. When I was born, since then, we’ve lost 70% of the vertebrates. We are consciously erasing the hard drive of life. Welcome to the “eromoscene,” the age of loneliness. One hungry super species, soon lonely super species.

Now science tells us quite clearly that we are now charting or that we are stepping into uncharted territory. Uncharted for our economic wealth, uncharted for our human well-being, uncharted for our continuance. And the science actually is so big, it’s so stochastic, it’s so different, that we don’t really know what to do with it.

Daniel Kahneman, who only died two weeks ago, he actually had a word for that. He called it “availability heuristics.” When we don’t have a memory available, we don’t know how to act on it. Another word that he used is, “what you see is all there is.” A “Vaziati” problem. This is a “Vaziati” problem. And the only thing that we can do is not to react to it and to ignore it.

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Towards a Nature-Based Economy

Well, and that’s what I did. So I became a consultant. I was one of the large leading consultancies for more than 20 years. I was a senior partner, managing partner, and I loved it. I mean, how can you not love it? Reach, learning, big projects, air miles.

Then there was 2005 and 2006. I hunkered down under Katrina in Florida, the warm winter in Europe. I read the Stern report from the venerable Professor Lord Nick Stern. And I decided that for the rest of my years, the rest of my energy, the rest of my senses, I will only put into solving one problem, which is about climate resources and nature. It’s the most relevant problem. It’s the most vexing problem. But it’s also the most interesting problem to solve.

Now, there was a journey. It started with trying to make systems better, project by project, client by client. But very soon it became clear that the sum of local optima that we are creating are not adding up to the system that we really need. So, a recycling plant is not a circular economy, or better fertilizer is not a better food system.

And so I moved on, and I tried to build better systems, first by writing books about the circular economy, but more importantly, by starting a company, a wonderfully spirited company, which is about building these low-carbon or net-zero circular regenerative systems. And it is wonderful when the system boundary all of a sudden becomes the scope of your work, and you can not just work within, but also about the system.

But here again, all of a sudden I realized there are farmer protests, there is polarization, and there is anxiety in front of an ecological stagflation. They are looking at us, and they are saying, “this future, this transformation that you’re describing, that will have losers. And I know who they are. That will be me, because it’s always me.”

And so that’s why I decided again to move on, and this time to redefine what is better. And I think we can do this. We have a company. We started a company, which is called “Nature Fintech” in modern lingo, which is just about redefining how we are indexing, minting, and sharing wealth based on nature. I am convinced the only way to solve the climate and the nature riddle is by redefining wealth.

Isn’t it interesting? 75% of the screensavers that are most popular on Unsplash is in fact nature. So this thing that we revere and this thing that we need is also the thing that we at the same time plunder, and we never reinvest. How is this?

Enlightenment Era Debates on Wealth

Let’s go back to the days of the Enlightenment. The philosophers back then could very quickly agree that we need to move from ignorance to reason and from traditional hierarchy to individualism. They couldn’t really agree on a joint concept of wealth.

There were some that said wealth is all about owning a social contract, Jean-Jacques Rousseau. Some said, look, wealth is subjective. There is no common standard for wealth, David Hume. And some said wealth has always to be linked to something that has intrinsic value, and Francois Cuisnet said the only thing that has intrinsic value is nature.

Well, and there were others, the classicals like Adam Smith and then his neoclassical successors who said, look, wealth, that is the sum of privately held goods priced at market prices. Now, and guess who won out?

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This created a “meters economy” where we may be starving to death because everything we touch turns into gold. And that “meters economy” is the only economy we know. It’s the only economy that our central bankers, our ministers of finance, our CEOs, our professors at business school, our economic correspondents know. And it’s an economy where wealth actually is linked to our financial system.

And that financial system, again, it’s indexed on our real economy. And that real economy, that industrial economy is set by resources. And because the financial system actually needs to grow at an exponential rate or with a positive expectation of return, we are forced, as Daniel Schmachzenberger says, we are forced to exponentiate our resource use. And that is a system that is unstable. And that is a system that is inconsistent with human continuance. It’s inconsistent with the biosphere.

We need a system where we are indexed not on the extraction of resources. We need a system where we are indexed on the resources we hold. Now, and that’s why we need to move towards a nature-based economy that is actually anchored on the resources we hold. And I’m convinced that this nature-based economy actually will come. But it will come far too slow.

Building a Nature Fintech Company

And that’s why we decided actually to be impatient. And together with a group of wonderful colleagues, we started a nature fintech together with geospatial data scientists, with agronomists, with ecosystem modelers, ecologists, software engineers, with financial engineers, with lawyers, with accountants.

And we’ve built this company. We’ve built this technology. There are some 15,000 hectares under management. There are some 15 investors into nature capital. There are some 150 nature stewards using this.

One of the nature stewards is Ian. Ian comes from South Africa, and he grows table grapes. And Ian, like so many, has two choices. Either to continue to degrade his land more and more, the biodiversity, the water, the soil, the carbon sink that he owns, or he has the option actually to reinvest into it, shadow trees, pollinator insects, water storage, hedgerows.

Now, guess what he will do? He will only be rewarded for the first model. And he will therefore remain in this death spiral in which we all sit.

Now, let’s take Ian on a journey into a nature-based economy. Let’s make him the first entrant into the nature-based economy, and let’s change the way we are indexing, minting, and sharing wealth.

First, let’s index. Let’s give the piece of land, the plot that he has, a nature capital account, a digital representation of the biodiversity, the water, the soil, and the carbon he holds at a certain moment. In the past, that would have been an impossible endeavor. Now, it isn’t anymore due to bioacoustics, to sensors, to metagenomics, to imagery recognition, particularly, of course, due to remote sensing that allows us to see how the canopy line, how carbon flux, how soil moisture evolves, and due to deep learning models that allows us to bring all of these data together in such a way that we can build models that we can apply almost everywhere on the planet.

Now, this has created a nature capital account, an account on a biophysical account for Ian. This has created an index, and this is the anchor on which we can build the nature-based economy.

Now, let’s mint wealth. Whenever Ian, because there is an opportunity to create contracts, whenever Ian now delivers a biophysical unit of nature improvement or a biophysical unit of nature preservation, that actually has a legal identity. And that legal right that can be transferred between actors of the economy.

And that is not just a proof of payment. That is not just sort of a credit, an offset credit. It’s, in fact, because it is indexed to real nature, it’s an asset. It’s a tangible asset to use the technical language. And that’s a big moment. It’s a very big moment. That’s the moment when nature turns from cost to wealth.

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And now let’s help Ian actually to share that wealth, because now that right actually starts to travel through the economy. And it can be used as a means of payment. It can be used as a collateral. It can be used as a legal tender. And every time it is still linked to Ian.

And so Ian is, in fact, sort of always part of it, and he is pulled from the margins of the economy where nature sits and the billions sit that actually steward it for us. He is pulled into the middle of the economy.

Ian is part of something really interesting, because he is part of a transition from an extractive economy to a regenerative economy where we start reinvesting in nature, where we are closing the nature funding gap and where we are bringing my grandfather’s birds back. And on the other hand, he is part of a journey from an inequitable to an equitable economy where we start rewarding those who are actually providing the world and the living conditions that we all need in our future.

So it closes the nature gap and it closes the equity gap. And when we were looking for a name of this new contract, we call it “nature equity.” And the question is, who needs nature equity?

The Potential of Nature Equity

And we think people do. There are the coffee brands now who start buying nature equity to ensure the shadow trees actually persist, because it’s the only way to have moisture in the soil and to get coffee in a dry summer. And there are many dry summers ahead.

There is the citrus company that is buying nature equity to ensure that the “fame boss” in South Africa prevails, because that’s where the pollinator insects are fed, outside the orchard bloom. Or there is the tech company that is buying nature equity in order to ensure that the peatland is staying intact because they are retaining the water that they need for their server farms.

Or there is now governments buying nature equity because it’s a way to secure the solvency of destinations, particularly those who are the biodiversity superpowers. Is it likely or is it possible that now nature equity actually could be used as a collateral by banks or by central banks? Absolutely. That would be a step into a nature-based currency.

That would be a “Bretton Woods 2.0,” a moment where we actually index our wealth, not to something that is not correlated with social well-being, such as the dollar or such as gold, but it would be correlated to our well-being, which is nature.

So I think science, then the nature-steward communities who are collecting the data, the accountants, the engineers are making us a gift, a gift to escape the downward spiral, a gift to escape the zero-sum game, which is actually breeding the tensions that are holding us in our societies right now. I think it’s not a move or a departure from good economics. I think it’s a return to reason.

Conclusion

So in the past, this would have been a vision, and now it’s at least technically a possibility. It’s the possibility to build a nature-based economy. And if you think about it, that is an enlightenment moment. Thank you.