FE5.6 - Making a Living

Introduction Voiceover:
00:00:00
You are listening to season five of



Introduction Voiceover:
00:00:03
Future Ecologies.



Adam Davis:
00:00:07
So I had a really profound experience during the



Adam Davis:
00:00:09
pandemic, reading the work of David Abram. Spell of the



Adam Davis:
00:00:13
Sensuous and Becoming Animal. He taught me a few things. One of



Adam Davis:
00:00:20
them is that the same word we use for the arrangement of



Adam Davis:
00:00:25
letters, is the word that we use for magic. It's a spell. We



Adam Davis:
00:00:31
spell words, and you cast a spell. And the reason that



Adam Davis:
00:00:37
that's relevant right now is because he is a magician. For



Adam Davis:
00:00:42
him, the magic is in the actual experience. And he taught me



Adam Davis:
00:00:50
that in magic, what we think of as conventional magic, the magic



Adam Davis:
00:00:54
is not the trick. The magic is the experience of the trick.



Adam Davis:
00:01:00
It's the experience that you actually have — the sense of



Adam Davis:
00:01:02
awe, wonder, even fright, because something happened that



Adam Davis:
00:01:05
was so unusual. And that experience is so profound that



Adam Davis:
00:01:11
it sort of shocks you out of your ordinary way of seeing



Adam Davis:
00:01:14
things. And if you can bring just a little bit of that



Adam Davis:
00:01:19
experience of magic into your experience of nature, by just



Adam Davis:
00:01:25
listening a little more, listening a little longer... and



Adam Davis:
00:01:29
then seeing the world that's also making the sound, and then



Adam Davis:
00:01:34
feeling the air. That experience is magic. But it's also



Adam Davis:
00:01:42
participatory. You no longer are an observer of it, you're a



Adam Davis:
00:01:47
participant in it. David was one of my most important teachers in



Adam Davis:
00:01:53
making me understand that that experience, that participatory



Adam Davis:
00:01:58
experience — of not being separate from the living world,



Adam Davis:
00:02:01
but you and the world being one thing, not two things — That is



Adam Davis:
00:02:07
very much the way things were before the written word. So



Adam Davis:
00:02:12
that's David's work, and I was really moved by it. But the



Adam Davis:
00:02:18
thing that he never does, is talk about the magic of numbers.



Adam Davis:
00:02:24
There's two great systems. One is letters. The other is



Adam Davis:
00:02:28
numbers. Letters, and words have a relationship with magic and



Adam Davis:
00:02:34
experience and participation. But numbers are the things that



Adam Davis:
00:02:38
we use to determine what counts and what doesn't.



Mendel Skulski:
00:02:46
Recorded and produced on the unceded



Mendel Skulski:
00:02:48
territories of the Musqueam, Squamish, and Tsleil-waututh



Mendel Skulski:
00:02:51
Nations, this is Future Ecologies. I'm Mendel Skulski.



Adam Huggins:
00:02:57
I'm Adam Huggins. And on today's episode, Making a



Adam Huggins:
00:03:00
Living, we're hearing from Adam Davis.



Adam Davis:
00:03:04
And I'm a managing partner at a company called



Adam Davis:
00:03:07
Ecosystem Investment Partners.



Adam Davis:
00:03:10
I think there is a real possibility that this could be



Adam Davis:
00:03:14
the most boring episode you've ever done. After all your great



Adam Davis:
00:03:18
work on the sacred of nature, the amazing science of nature,



Adam Davis:
00:03:23
and poetic exploration of these things, today, we're going to



Adam Davis:
00:03:27
talk about permitting and money. It could be a disaster.



Adam Huggins:
00:03:31
I couldn't be more excited right now.



Mendel Skulski:
00:03:34
It's been a long time coming.



Adam Davis:
00:03:39
I really believe that a great motivation for



Adam Davis:
00:03:43
finding a career that has meaning and purpose is doing



Adam Davis:
00:03:47
work that doesn't. My first real job in San Francisco was working



Adam Davis:
00:03:52
on Fisherman's Wharf at a place called Sourdough Puffs, where we



Adam Davis:
00:03:58
deep fried bread, basically, dough in vats of oil. And that



Adam Davis:
00:04:06
was appalling, appalling work. It was... the cleanup at the end



Adam Davis:
00:04:10
of the day was just, you know, you felt exactly as greasy as



Adam Davis:
00:04:14
you would think you would feel. I worked as a cashier in a



Adam Davis:
00:04:19
cafeteria, actually in the Museum of Modern Art in San



Adam Davis:
00:04:22
Francisco, which was a really fun job. I was doing some



Adam Davis:
00:04:25
painting and exploration of art myself. And so being around the



Adam Davis:
00:04:29
art every day was great. The work itself was was nothing. It



Adam Davis:
00:04:34
was operating a cash register. Then I got a more serious job as



Adam Davis:
00:04:40
an assistant legal administrator at a building maintenance



Adam Davis:
00:04:43
company. I worked for a woman who changed smoked cigarettes



Adam Davis:
00:04:47
inside — because you could, back in the day. And she was well



Adam Davis:
00:04:52
meaning, but cynical beyond imagining. She had been through



Adam Davis:
00:04:56
the corporate world long enough that she just knew that it



Adam Davis:
00:04:59
wasn't going to really make a difference either way. And so I



Adam Davis:
00:05:02
reported to her for maybe six months in a fluorescent lit



Adam Davis:
00:05:05
room, reeking of cigarette smoke, and then quit that one. I



Adam Davis:
00:05:12
guess I was working at a picture framing shop when I got fired. I



Adam Davis:
00:05:16
was planning a two month motorcycle trip with my then



Adam Davis:
00:05:20
girlfriend, now wife. And so I gave them about two months



Adam Davis:
00:05:24
notice before the trip, and I got fired the next day. So I was



Adam Davis:
00:05:29
now out of a job planning on leaving for this trip. And a



Adam Davis:
00:05:33
friend of mine knew about a composting company that was just



Adam Davis:
00:05:37
getting started, called American Soil Products in Berkeley,



Adam Davis:
00:05:41
California. I got introduced to Bob Beatty, who was the



Adam Davis:
00:05:45
proprietor. Bob started American Soil Products to transform



Adam Davis:
00:05:51
organic waste into useful landscape products, and I was



Adam Davis:
00:05:54
the first employee in August of 1985, and immediately fell in



Adam Davis:
00:06:00
love with it.



Adam Davis:
00:06:02
At first it was the materiality of it, you know, I one of the



Adam Davis:
00:06:06
things I loved about art was literally the materials and the



Adam Davis:
00:06:11
tools like the physical feel of the oil paint, the linseed oil



Adam Davis:
00:06:16
that you'd mix with pigment, or the turpentine that you'd use to



Adam Davis:
00:06:20
thin it — the canvas itself, stretching the canvas. And so



Adam Davis:
00:06:24
being out at the composting yard, with piles and piles of



Adam Davis:
00:06:28
these different organic materials. You know, sandy loam



Adam Davis:
00:06:33
that came from the excavation of the BART tunnels; cocoa bean



Adam Davis:
00:06:38
holes from Ghirardelli chocolate, big, massive piles of



Adam Davis:
00:06:42
cocoa bean holes that smelled like cocoa and was wonderful;



Adam Davis:
00:06:46
cedar bark, piles of cedar bark, like stretchy orange orangutang



Adam Davis:
00:06:50
fur; and then all kinds of compost from yard waste. And we



Adam Davis:
00:06:56
blended all these together under the direction of a soil



Adam Davis:
00:06:58
scientist named Lou, who was the head of the chemistry department



Adam Davis:
00:07:03
at Contra Costa College. We blended these things together,



Adam Davis:
00:07:06
each of which had been useless. People had actually had to pay



Adam Davis:
00:07:11
to get rid of them. But if you blended them together, they



Adam Davis:
00:07:15
became productive and fertile. Our customers came to include



Adam Davis:
00:07:20
the leading landscape gardeners and landscape architects. People



Adam Davis:
00:07:23
would come by and want a specific blend for a rooftop



Adam Davis:
00:07:27
that was lightweight, or something for rhododendrons that



Adam Davis:
00:07:30
was more acidic, or specialized soil amendments. We sold to the



Adam Davis:
00:07:34
Conservatory of Flowers in Golden Gate Park, which is a



Adam Davis:
00:07:37
spectacular thing. We even sold some material to Biosphere Two —



Adam Davis:
00:07:43
that was an experiment in offworld living. And they wanted



Adam Davis:
00:07:46
to have a very particular soil, for some reason. We got a call,



Adam Davis:
00:07:50
I think I was the guy who took the call in our funky trailer,



Adam Davis:
00:07:56
in an abandoned paint factory yard in an industrial section of



Adam Davis:
00:08:00
Berkeley... seeing and exploring the whole notion of what was



Adam Davis:
00:08:05
waste. What does it mean for something to be waste? Realizing



Adam Davis:
00:08:09
that there's this fine line between something that you buy



Adam Davis:
00:08:14
and pay for, and then something that you have to pay to get rid



Adam Davis:
00:08:17
of. Organic waste turned out to be a huge part of the waste



Adam Davis:
00:08:22
stream in California. And this is what I started to learn as I



Adam Davis:
00:08:26
spent time in the composting business, is that we were



Adam Davis:
00:08:30
throwing away as a state, something like 50 million tons a



Adam Davis:
00:08:35
year of stuff, of which 20% or 10 million tons was just



Adam Davis:
00:08:43
branches, leaves and grass.



Adam Davis:
00:08:47
In our little composting yard in Berkeley, we were doing a few



Adam Davis:
00:08:51
1000 tonnes a year. And we thought we were fabulous. We



Adam Davis:
00:08:55
were having so much fun. We were saving the world. We had organic



Adam Davis:
00:08:58
gardens at the edge of our composting piles. A couple of



Adam Davis:
00:09:02
the guys who worked on the site began to keep chickens, and then



Adam Davis:
00:09:06
we had goats. And then school buses would come by and look at



Adam Davis:
00:09:10
the organic gardens and see the animals. It became like a



Adam Davis:
00:09:15
community gathering place. It was really fun. But it was when



Adam Davis:
00:09:19
I learned that we were actually throwing away 10 million tons a



Adam Davis:
00:09:24
year of this stuff, that I realized that what we were doing



Adam Davis:
00:09:30
needed to go to scale if it was going to make a difference. I



Adam Davis:
00:09:33
had a daughter — my wife and I had a daughter — and I really



Adam Davis:
00:09:36
needed a steady job. I needed a check that came every two weeks,



Adam Davis:
00:09:40
and I needed health insurance. And so I ended up working for



Adam Davis:
00:09:44
Oakland Scavenger Company which had just been acquired by Waste



Adam Davis:
00:09:48
Management where I spent 10 years of my life. And talk about



Adam Davis:
00:09:54
materiality, right? I mean, compost is one thing, but the



Adam Davis:
00:09:58
waste stream? The American waste stream is astounding in its



Adam Davis:
00:10:04
variety. The things people are done with and no longer want,



Adam Davis:
00:10:08
that they throw away is everything under the sun. It was



Adam Davis:
00:10:14
a great, great training ground for the fundamental question of



Adam Davis:
00:10:18
where things come from and where they go.



Adam Davis:
00:10:22
I had come from, you know, Berkeley and the hippie



Adam Davis:
00:10:24
community. And I had lived in Ithaca for five years, and



Adam Davis:
00:10:26
hitchhiked around, and I was sort of part of that tribe. And



Adam Davis:
00:10:29
we had a definition of garbage that basically is the set of



Adam Davis:
00:10:34
previously useful things that we choose to waste, right? And we



Adam Davis:
00:10:39
really choose to waste them by throwing them in a pile and



Adam Davis:
00:10:42
commingling them. So it's when you mush together all these



Adam Davis:
00:10:46
different things, that that's when garbage is created. Because



Adam Davis:
00:10:50
of course, glass isn't garbage. And paper isn't garbage. And



Adam Davis:
00:10:54
even branches and leaves aren't garbage. But if you mix them all



Adam Davis:
00:10:57
together, then you created this thing you can't do anything



Adam Davis:
00:11:00
with, and that's garbage. So it's a moral definition. But the



Adam Davis:
00:11:04
garbage men, mostly men, at Waste Management, Inc. had a



Adam Davis:
00:11:10
more pragmatic definition, which is simply the set of things that



Adam Davis:
00:11:14
costs you more to go get than it's worth. It costs you more to



Adam Davis:
00:11:19
deal with it, than the thing is worth. So when you have



Adam Davis:
00:11:24
something in your hand, call it an aluminum can, there's a



Adam Davis:
00:11:27
moment of choice, where you can say, I'm going to do something



Adam Davis:
00:11:31
with it, or I'm going to throw it away. Now, if there's a



Adam Davis:
00:11:34
recycling system, it goes into the recycling system. If there



Adam Davis:
00:11:37
isn't, it goes in the garbage. It turned out that the economic



Adam Davis:
00:11:41
definition of garbage carried a lot of weight. I had an



Adam Davis:
00:11:47
opportunity because of all the money and systems and so on,



Adam Davis:
00:11:51
that existed in this giant company to create structures



Adam Davis:
00:11:56
where you could make more money doing the right thing than the



Adam Davis:
00:11:58
wrong thing. You could make more money by recycling something



Adam Davis:
00:12:02
than throwing it away. There were some tailwinds, which is



Adam Davis:
00:12:05
that people wanted it, cities wanted it. There were actually



Adam Davis:
00:12:08
mandates now in law for recycling. But in order to do



Adam Davis:
00:12:12
that, there were some structural problems. The economics of this



Adam Davis:
00:12:16
were really challenging, right? The sunk costs in existing



Adam Davis:
00:12:19
landfills and existing garbage trucks mean that taking one more



Adam Davis:
00:12:24
ton of stuff and putting it in the landfill has very little



Adam Davis:
00:12:27
additional cost. But at the beginning, taking that same ton



Adam Davis:
00:12:31
and putting it into a recycling system meant new containers, new



Adam Davis:
00:12:35
trucks for recycling, new processing centers, and then



Adam Davis:
00:12:38
something to do with all the material that had been



Adam Davis:
00:12:40
collected. So really challenging to get started against the sunk



Adam Davis:
00:12:45
cost of the existing system. And that I think, is part of what



Adam Davis:
00:12:49
we're up against with all of our environmental concerns.



Adam Davis:
00:12:57
Basically, I became a student of incentives and contract



Adam Davis:
00:13:01
structures. How do you reward the environmental good more than



Adam Davis:
00:13:06
the environmental bad? So what's a fair way to allocate costs and



Adam Davis:
00:13:11
create rewards, so that you're rewarding the behavior that you



Adam Davis:
00:13:15
want? And I really got to go to school on this through many,



Adam Davis:
00:13:18
many municipal contracts, including some really big ones



Adam Davis:
00:13:21
like city of Oakland. The law that we were operating under the



Adam Davis:
00:13:25
integrated Waste Management Act basically had a hierarchy, which



Adam Davis:
00:13:29
had the first priority is not making waste, right, waste



Adam Davis:
00:13:32
reduction. Then the second priority is recycling and



Adam Davis:
00:13:36
composting. And then the third priority is landfilling or



Adam Davis:
00:13:39
incinerating what's leftover. But the way the contracts worked



Adam Davis:
00:13:42
was exactly the inverse. You got paid the most and most



Adam Davis:
00:13:45
predictably to throw things away. Because that was the



Adam Davis:
00:13:48
existing infrastructure. You got paid less and less predictably,



Adam Davis:
00:13:53
to recycle and compost. Partly because people had this notion



Adam Davis:
00:13:57
that somehow you were making money on the back end of it,



Adam Davis:
00:14:00
right? You were making money on selling the aluminum cans, so



Adam Davis:
00:14:03
they shouldn't subsidize the recycling. Although you were



Adam Davis:
00:14:06
making much less than landfilling. And then you got



Adam Davis:
00:14:08
paid nothing at all for waste reduction. There was no



Adam Davis:
00:14:11
incentive to not produce waste. Energy and energy efficiency.



Adam Davis:
00:14:16
It's the same question. Which is, how do you reward utilities



Adam Davis:
00:14:23
to produce less energy, to be more efficient when they get



Adam Davis:
00:14:26
paid by the kilowatt, right? But the same thing was true with



Adam Davis:
00:14:29
toxics. And the same thing was true with water. And the same



Adam Davis:
00:14:32
thing was true with other material forms.



Adam Davis:
00:14:35
So along the way, at a conference called the Industrial



Adam Davis:
00:14:38
Ecology Conference, I happen to sit at a small table, and I was



Adam Davis:
00:14:42
seated across from a woman who started talking about the value



Adam Davis:
00:14:47
of nature — literally the economic value of what nature



Adam Davis:
00:14:52
does. At first, I didn't really understand what she was talking



Adam Davis:
00:14:55
about. But her basic point was that in theory, we know that



Adam Davis:
00:15:01
nature is valuable. But for an individual landowner — for



Adam Davis:
00:15:04
someone who owns land — if you cut the tree down it's worth



Adam Davis:
00:15:08
money. It's worth money as lumber or paper. But if you



Adam Davis:
00:15:12
leave it standing, it's worth zero. And what she was saying



Adam Davis:
00:15:17
basically is that's inaccurate. Leaving the tree standing has



Adam Davis:
00:15:21
value. It's called ecosystem services. So this was 1997. That



Adam Davis:
00:15:29
phrase wasn't around in common parlance, I hadn't heard it. And



Adam Davis:
00:15:34
it turned out that this woman was named Gretchen Daily. She



Adam Davis:
00:15:37
was a conservation biologists at Stanford. Because while people



Adam Davis:
00:15:41
had been talking about ecological economics, probably



Adam Davis:
00:15:44
for 25 years in academia, they had been talking about it in a



Adam Davis:
00:15:49
pretty theoretical way. Theoretical exercises to get



Adam Davis:
00:15:52
people to say what they thought they would pay for a park, or



Adam Davis:
00:15:55
how you would replace a natural function if somehow it went away



Adam Davis:
00:15:58
— notions, basically. And Gretchen was saying, it's not



Adam Davis:
00:16:02
going to do. Things are getting bad out here on the surface of



Adam Davis:
00:16:06
the world, and we're going to have to pay people to leave the



Adam Davis:
00:16:10
trees standing. We're gonna have to recognize the financial value



Adam Davis:
00:16:15
of what nature actually does. And what she really taught me



Adam Davis:
00:16:19
was very humbling, because I realized that after having



Adam Davis:
00:16:22
worked in recycling, and environmental economics,



Adam Davis:
00:16:26
basically applied environmental economics, for 15 years, I had



Adam Davis:
00:16:31
never really thought about what the goal was. I mean it's almost



Adam Davis:
00:16:35
embarrassing to say, but I just took it for granted that



Adam Davis:
00:16:38
recycling was a good in and of itself, energy efficiency was a



Adam Davis:
00:16:42
good in and of itself. But of course, those things are a means



Adam Davis:
00:16:47
to an end, not an end in themselves. But what is the end?



Adam Davis:
00:16:51
What is the object of the game? The object of the game is the



Adam Davis:
00:16:57
healthy living world itself, that provides life support



Adam Davis:
00:17:02
services for us, right? It's not an abstract idea. It's a very



Adam Davis:
00:17:07
real material truth. The living world provides a stable climate,



Adam Davis:
00:17:14
resilient living systems, clean water, and other fundamentals



Adam Davis:
00:17:18
that are life support. When we recycle, we rely less on the



Adam Davis:
00:17:24
four primary extractive industries. And there's really



Adam Davis:
00:17:26
only four. Oil, ag, timber, and mining. Those are the four



Adam Davis:
00:17:32
places where all this stuff comes from. If you could pay



Adam Davis:
00:17:37
people to not cut the tree down in the first place, right? If



Adam Davis:
00:17:40
nature was valuable in and of itself, that would create a



Adam Davis:
00:17:44
price signal that would go through the whole system, and



Adam Davis:
00:17:47
help to more accurately reflect the value of nature itself. It



Adam Davis:
00:17:53
was a very abstract idea back in 1997. I really became fixated on



Adam Davis:
00:17:58
it, because there was something so fundamentally powerful about



Adam Davis:
00:18:03
making real the theoretical understanding of the value of



Adam Davis:
00:18:07
nature — so that people could actually get paid in real places



Adam Davis:
00:18:11
for doing real things. For stuff that we know is valuable. It



Adam Davis:
00:18:15
just seemed like such an enormous opportunity, and such a



Adam Davis:
00:18:19
powerful lever inside the system, I couldn't think of a



Adam Davis:
00:18:22
better thing to get involved with. But I came home from that



Adam Davis:
00:18:26
meeting. And I was hanging out with my wife in the backyard.



Adam Davis:
00:18:30
And I said, I'm going to create a career doing value of nature



Adam Davis:
00:18:35
stuff, ecosystem services. And she basically, you know, looked



Adam Davis:
00:18:39
at me very tolerantly and said, that's good.



Adam Davis:
00:18:47
There are a lot of things in our lives that are sacred, or



Adam Davis:
00:18:52
inherently valuable, in such a way that applying a price to it,



Adam Davis:
00:18:58
or a monetary value to it, seems to cheapen or degrade the thing



Adam Davis:
00:19:04
itself. And yet, we don't bristle at art and music being



Adam Davis:
00:19:10
paid for. There's a market for music, there's a market for art.



Adam Davis:
00:19:15
But we would never say that art is only worth money, or music is



Adam Davis:
00:19:19
only worth money. They are worth money, but there's also



Adam Davis:
00:19:23
something else much different going on. So in nature, natural



Adam Davis:
00:19:29
systems are valuable. We know this. We know that they're



Adam Davis:
00:19:34
valuable. And this bright line between, I would say, spiritual



Adam Davis:
00:19:39
value and economic value is necessarily going to make people



Adam Davis:
00:19:44
uncomfortable. The other part of it is that the idea of not doing



Adam Davis:
00:19:52
it, not putting a number on it, simply won't work in the current



Adam Davis:
00:19:57
moment, and it's deeply sad in some ways that that's true. But



Adam Davis:
00:20:02
I believe it is really true... that every acre of the world is



Adam Davis:
00:20:09
already valued for what we can build on it or take from it.



Adam Davis:
00:20:14
There is a known property owner for all the land in Canada, and



Adam Davis:
00:20:20
all the land in the United States, and most of the land



Adam Davis:
00:20:23
every place in the world. There's a process called



Adam Davis:
00:20:27
appraisal, where people can put a dollar figure on that land



Adam Davis:
00:20:32
based on what it can do for us, without reference to the natural



Adam Davis:
00:20:37
world — housing, and natural resources. Building on it and



Adam Davis:
00:20:42
taking from it. And because that's true, we have to fight



Adam Davis:
00:20:46
back. We have to say that not building on it or taking from it



Adam Davis:
00:20:52
is also worth money — for people who own it, for people who can



Adam Davis:
00:20:56
benefit from stewarding it, and restoring it, and managing it.



Adam Davis:
00:21:00
Those people have to be able to make more money, or at least get



Adam Davis:
00:21:04
something from doing something other than wrecking it. And



Adam Davis:
00:21:07
that's the same economics as recycling. Appraising land for



Adam Davis:
00:21:17
water purification, for biodiversity, for flood



Adam Davis:
00:21:22
protection, the other functions that natural systems provide is



Adam Davis:
00:21:28
new, just like recycling was new just 50 years ago. There were no



Adam Davis:
00:21:33
economics for recycling 50 years ago. and now it's commonplace.



Adam Davis:
00:21:39
It was the official policy of the United States to drain



Adam Davis:
00:21:43
wetlands, on purpose, for most of our history. It wasn't until



Adam Davis:
00:21:47
really 1970 that we changed our policy to say actually, those



Adam Davis:
00:21:51
things are really valuable, and we should stop wrecking them.



Adam Davis:
00:21:55
But there's still a department in our federal government called



Adam Davis:
00:21:57
the Bureau of Reclamation. And what reclamation means is



Adam Davis:
00:22:02
draining wetlands, or creating dams and putting water on dry



Adam Davis:
00:22:07
land, to reclaim it for economic use — for people.



Adam Davis:
00:22:10
Assorted Environmental Protesters: [Chanting] No means no!



Adam Davis:
00:22:14
What do we want? Change? When do we want it? Now!



Adam Davis:
00:22:19
This is what democracy looks like!



Adam Davis:
00:22:20
The conservation movement is noble, and I believe



Adam Davis:
00:22:26
in it, and I'm part of it. I mean, I want to protect the



Adam Davis:
00:22:32
things I love. And the beauty of the natural world is so sort of



Adam Davis:
00:22:36
obvious to me and so important that of course, you want to



Adam Davis:
00:22:40
protect every bit that you can. But the context is that in the



Adam Davis:
00:22:46
United States, the population has doubled since I was born.



Adam Davis:
00:22:50
There was 180 million people in 1960, there's 340 million now.



Adam Davis:
00:22:55
Vancouver was 600,000 people when I was born. It's 2.7



Adam Davis:
00:22:59
million today. This is going on everywhere. There's 8000 million



Adam Davis:
00:23:05
of us now. And we're consuming more per person, not less.



Adam Davis:
00:23:11
Conservation misses the mark in a few ways. You win temporarily,



Adam Davis:
00:23:17
but then you lose over time, right? You can protect this



Adam Davis:
00:23:19
little bit here and this little bit here, but there's these



Adam Davis:
00:23:22
enormous forces coming at you. And you can never really fully



Adam Davis:
00:23:26
hold the line. So it's the right impulse. It's a noble impulse.



Adam Davis:
00:23:31
But it's insufficient to the task. Conservation because of



Adam Davis:
00:23:35
where it came from, tends to see the natural world as like the



Adam Davis:
00:23:43
backdrop, or the stage set for the human play. And so what you



Adam Davis:
00:23:49
do is you make a park, right? You take a piece of nature, and



Adam Davis:
00:23:52
you put a fence around it, and you make it safe. It's a



Adam Davis:
00:23:56
wilderness, right? And then meanwhile, the human drama goes



Adam Davis:
00:23:59
on over here separately. So there's actually two groups of



Adam Davis:
00:24:04
people, the conservationists, and the environmentalists. And



Adam Davis:
00:24:08
they're quite different. Sometimes it's often as if



Adam Davis:
00:24:10
they've never met each other. The conservationists are about



Adam Davis:
00:24:13
taking land out of the economy. And the environmentalists are



Adam Davis:
00:24:18
about stopping the bad things going on in the human economy.



Adam Davis:
00:24:22
But governments who ultimately make the rules for all this, are



Adam Davis:
00:24:27
in an impossible situation. They can't really fix it for us just



Adam Davis:
00:24:31
with policy. Because on the one hand, they have endangered



Adam Davis:
00:24:37
species protection, they have clean water laws, they have



Adam Davis:
00:24:40
clean air laws. And the basic message there is "Stop it. Stop



Adam Davis:
00:24:45
doing bad things. Not so much. Not here, not there. Not now."



Adam Davis:
00:24:48
Right? But on the other hand, they need job creation, and



Adam Davis:
00:24:51
economic development, and GDP, and there's growth — real need



Adam Davis:
00:24:55
for growth, somehow.



Adam Davis:
00:24:57
So conservation is necessary. It's contributed a ton of good



Adam Davis:
00:25:02
things to most of our lives, right? I love the parks near



Adam Davis:
00:25:05
where I live. But as a solution for the overall problem that we



Adam Davis:
00:25:10
face now, with increasing scarcity of the life support



Adam Davis:
00:25:13
services that nature provides, conservation — just stopping bad



Adam Davis:
00:25:17
things — is not going to achieve what we need to achieve.



Adam Davis:
00:25:22
There are shelves and shelves of books that are, I think, in the



Adam Davis:
00:25:25
category of "Nature is Amazing". And I love those books. I read



Adam Davis:
00:25:30
them all the time, And every time I do, I'm learning



Adam Davis:
00:25:32
something new about some amazing facet of the natural world. I



Adam Davis:
00:25:37
mean, I just read this book about eels called the Book of



Adam Davis:
00:25:39
Eels. Have you read this thing? It's stunning. It's stunning,



Adam Davis:
00:25:44
what els go through. 100 years, they live up in some stream. And



Adam Davis:
00:25:49
then they wake up one morning, and they realize it's time, and



Adam Davis:
00:25:51
they change color, and they go down the stream. And they're go



Adam Davis:
00:25:54
out into the Atlantic Ocean, and they swim across the entire



Adam Davis:
00:25:57
Atlantic Ocean to the Sargasso Sea, where they disappear into



Adam Davis:
00:26:01
this cloud of seaweed and mate in secret. And then all of a



Adam Davis:
00:26:05
sudden, baby eels are born, and they're carried on currents to



Adam Davis:
00:26:08
rivers all over the world. And then they migrate up these



Adam Davis:
00:26:10
streams, and they can live for 100 years, up on the top of



Adam Davis:
00:26:14
these streams. And it's happening all over the world,



Adam Davis:
00:26:17
and almost all the eels come back to the Sargasso Sea. And we



Adam Davis:
00:26:22
don't know how or why this works. It's amazing. Really,



Adam Davis:
00:26:27
it's amazing. But everything is amazing, right? And so the other



Adam Davis:
00:26:33
category of books, is that "Nature's in Big Trouble". The



Adam Davis:
00:26:37
environmental story is one of two things — this amazing thing



Adam Davis:
00:26:40
is getting wrecked, or the good environmentalists against the



Adam Davis:
00:26:44
bad producer of goods and services, right? The bad people



Adam Davis:
00:26:48
who make oil, the bad people who mine, the bad people who do



Adam Davis:
00:26:53
these things, this economic activity, while we, the good and



Adam Davis:
00:26:56
noble people, try and protect the amazing flowers and the



Adam Davis:
00:26:59
amazing orcas. And this storyline is so tired, it is no



Adam Davis:
00:27:05
longer helpful. And I'm not saying that there aren't any bad



Adam Davis:
00:27:09
people. There are bad people in the world. But most people



Adam Davis:
00:27:12
aren't. Even the people who are mining something. They're not,



Adam Davis:
00:27:16
like, trying to hurt you or hurt the natural world. They're



Adam Davis:
00:27:20
trying to provide the goods and services that we all use. We're



Adam Davis:
00:27:25
sitting in a room full of incredible technology, right?



Adam Davis:
00:27:28
All this stuff was mined. When you start to really grok where



Adam Davis:
00:27:33
things come from and where they go, the simple narrative that



Adam Davis:
00:27:37
there are bad people who are damaging the world, while we are



Adam Davis:
00:27:40
trying to save, doesn't really hold water. It doesn't really



Adam Davis:
00:27:44
work. And plus, even if you were right, so what? You know, like,



Adam Davis:
00:27:48
what are we going to do? How are we going to influence these



Adam Davis:
00:27:52
enormous systems?



Adam Huggins:
00:27:54
Yeah, if it held water, it would be a dam.



Adam Huggins:
00:27:59
Sorry...



Adam Davis:
00:27:59
[Laughing] No, that's great. Levity is helpful.



Adam Davis:
00:28:02
Thank you. I'm getting very sincere here.



Mendel Skulski:
00:28:04
I think this is the perfect moment for you to



Mendel Skulski:
00:28:07
recapitulate what... what is the big idea?



Adam Huggins:
00:28:09
Yeah I was gonna say, let's hear about the stuff



Adam Huggins:
00:28:11
you do now.



Adam Davis:
00:28:18
So, I came across this definition fairly recently,



Adam Davis:
00:28:23
and was fascinated to learn that the word "bank" comes from the



Adam Davis:
00:28:27
Italian word Banco, which meant table. And so back in early days



Adam Davis:
00:28:34
of commerce, the bank was a table, on which exchanges



Adam Davis:
00:28:40
occurred. But there turns out there's a much older word, which



Adam Davis:
00:28:43
is Old Norse, or Old German, I don't know how to pronounce it,



Adam Davis:
00:28:47
but Banki, B A N K I. And that meant a curve, like the curve of



Adam Davis:
00:28:55
a river bank. And we use that kind of expression today, when



Adam Davis:
00:29:00
we talk about an airplane banking into a turn. A river



Adam Davis:
00:29:05
bank would pile up as sediment would accumulate on the inside



Adam Davis:
00:29:11
curve. So river beds and plains, flood plains, accumulate



Adam Davis:
00:29:17
material from upstream, which makes fertility. So I guess



Adam Davis:
00:29:21
that's a good source of a word for a place where we keep that



Adam Davis:
00:29:26
which we value.



Adam Davis:
00:29:30
In the work that we do, we create things called mitigation



Adam Davis:
00:29:33
banks. That's the term of art. And people often think of them



Adam Davis:
00:29:37
when they first hear of them as financial institutions of some



Adam Davis:
00:29:41
sort. But they're not, they're places. They're like parks or



Adam Davis:
00:29:46
other protected areas. But they are a store of ecological value



Adam Davis:
00:29:52
that comes through restoring degraded landscapes — wetlands,



Adam Davis:
00:29:56
streams, habitat for endangered species — and then where you



Adam Davis:
00:30:00
measure what happens.



Adam Davis:
00:30:04
So if ecosystem services theory is correct, and what nature does



Adam Davis:
00:30:09
is valuable, how would we know? How would anyone actually get



Adam Davis:
00:30:13
paid? The first thing that you need to be able to do, and I



Adam Davis:
00:30:19
know some of the listeners are gonna hate this too, is you need



Adam Davis:
00:30:22
to be able to put a number on it. You gotta do it. And I'm



Adam Davis:
00:30:26
gonna go to the medical metaphor. If you're not feeling



Adam Davis:
00:30:29
well, and you go to the doctor, the doctor is going to do a



Adam Davis:
00:30:33
test. And what they're looking for is the absence, presence, or



Adam Davis:
00:30:38
concentration of something, right? Some indicator of



Adam Davis:
00:30:42
function. So whether it's red blood cells, or cholesterol, or



Adam Davis:
00:30:47
lipids, or anything else, they want to know if your health is



Adam Davis:
00:30:53
being affected by something that's out of range, right? It's



Adam Davis:
00:30:56
out of the healthy range. As above, so below, right? The same



Adam Davis:
00:31:00
things that happened in your body are also happening out in



Adam Davis:
00:31:03
the bigger world. Now they're happening at a much different



Adam Davis:
00:31:05
scale, and much different pace. So it's much bigger out there



Adam Davis:
00:31:09
and much slower. Which is one of the reasons it took us a long



Adam Davis:
00:31:13
time to understand this. But you can actually look at indicators



Adam Davis:
00:31:17
of functions of natural systems — so the health of a wetland,



Adam Davis:
00:31:21
the health of the stream. There are chemical, physical and



Adam Davis:
00:31:24
biological things that you can measure, and know something



Adam Davis:
00:31:28
about the system. That's not to say that we know everything, but



Adam Davis:
00:31:32
we don't know everything about how your liver works either,



Adam Davis:
00:31:34
right? But we know how to do some things that are helpful in



Adam Davis:
00:31:38
a crisis. Like if you were going to fix it, what would that mean?



Adam Davis:
00:31:42
What would you be going for, and how would you know it if you saw



Adam Davis:
00:31:45
it? In some systems, the living things actually are the things



Adam Davis:
00:31:50
that you would measure. So it's not the fish in and of itself,



Adam Davis:
00:31:54
any more than it's the red blood cell itself. Like, the red blood



Adam Davis:
00:31:59
cell in your body is great. But really, it's the whole



Adam Davis:
00:32:02
proliferation of them, it's the concentration of them. Do you



Adam Davis:
00:32:05
have a sufficient amount of red blood cells? It's the same with



Adam Davis:
00:32:09
the Delta Smelt in the Delta. If they're going away, it's because



Adam Davis:
00:32:13
something is fundamentally wrong. And that's why the law



Adam Davis:
00:32:16
steps in and says "You can't make it go extinct. Because



Adam Davis:
00:32:20
that's an indicator that the entire thing is falling apart."



Adam Davis:
00:32:29
The term of art is a functional acre. So you're measuring either



Adam Davis:
00:32:33
the biodiversity, the water quality, the flood protection,



Adam Davis:
00:32:38
the functions that are provided by that acre. And you can tell



Adam Davis:
00:32:42
that something that's degraded doesn't have much function. But



Adam Davis:
00:32:45
something that's been restored has more function. You can



Adam Davis:
00:32:48
measure the uplift, and you can compare that to natural healthy



Adam Davis:
00:32:51
systems called "reference ecosystems" or a "reference



Adam Davis:
00:32:54
system". And that would be one way of thinking about what



Adam Davis:
00:32:57
you're trying to do.



Adam Davis:
00:32:58
So the measurements part of it, the science is part of it. But



Adam Davis:
00:33:01
the real thing you need if you're going to be able to make



Adam Davis:
00:33:04
money or invest in this stuff is a customer — someone has to want



Adam Davis:
00:33:08
to buy it. And it turns out, there's really only two types of



Adam Davis:
00:33:11
customers for nature and what nature does. The first type of



Adam Davis:
00:33:15
customer is someone who needs compliance with an environmental



Adam Davis:
00:33:20
law. If the law says you cannot have a permit that will damage a



Adam Davis:
00:33:26
natural system, unless you restore an equivalent amount or



Adam Davis:
00:33:31
more, than that creates a demand for restoration. So that's what



Adam Davis:
00:33:36
happened in the US, after the passage of the Clean Water Act.



Adam Davis:
00:33:40
The idea was called No Net Loss. So we're going to allow some



Adam Davis:
00:33:44
loss, but not net loss. We're not going to allow the entire



Adam Davis:
00:33:47
system to be degraded further. But what we can do is say "if



Adam Davis:
00:33:51
you impact something, you have to make up for at least that



Adam Davis:
00:33:54
amount in the same watershed — before you get a permit."



Adam Davis:
00:33:59
At the beginning, everyone was trying to do their own



Adam Davis:
00:34:02
restoration. So every highway department, every housing



Adam Davis:
00:34:05
development, every mining project, every energy project



Adam Davis:
00:34:08
was going out and hiring consultants and trying to figure



Adam Davis:
00:34:10
out how to restore some amount of wetlands or streams that had



Adam Davis:
00:34:14
a scientifically verifiable relationship to the thing that



Adam Davis:
00:34:18
they were impacting. So there was tons of trial and error,



Adam Davis:
00:34:21
lots of experiment. But pretty quickly, there were



Adam Davis:
00:34:24
entrepreneurs who said "we could probably do that more



Adam Davis:
00:34:27
efficiently and effectively than all these random people doing



Adam Davis:
00:34:30
it, if we just specialize and focus on it and get better at



Adam Davis:
00:34:33
it." And so that's when mitigation banking was born.



Adam Davis:
00:34:36
People would bank a bunch of restoration. And then they had a



Adam Davis:
00:34:40
ledger. The credits on that ledger are meaningful things. I



Adam Davis:
00:34:45
know people have a lot of reaction now to carbon credits



Adam Davis:
00:34:48
or other types of credits that don't have sufficient evidence



Adam Davis:
00:34:55
to demonstrate that they really make up for the problem. I would



Adam Davis:
00:34:59
say that at the beginning, that was probably also true of



Adam Davis:
00:35:03
mitigation banks. But over 30 years of trial and error and



Adam Davis:
00:35:07
meaningful improvement in the regulatory policy, the credits



Adam Davis:
00:35:11
now actually do meaningfully make up for the impacts that



Adam Davis:
00:35:15
occur. The reason why I can say that with confidence is that the



Adam Davis:
00:35:18
standard that they're held to is higher than the standard for any



Adam Davis:
00:35:23
type of other public protection. There's three fundamental parts



Adam Davis:
00:35:27
of a credit. One of them is the science part — ecological



Adam Davis:
00:35:30
success criteria, the measurable stuff we were just talking



Adam Davis:
00:35:33
about. But then you'll also have legal and financial assurances



Adam Davis:
00:35:37
for durability over time. This was one of the big criticisms of



Adam Davis:
00:35:41
banks, is that you could protect something, but what guarantee



Adam Davis:
00:35:44
did the public have that it wouldn't get messed up later?



Adam Davis:
00:35:47
So, there are permanent conservation easements or deed



Adam Davis:
00:35:51
restrictions that mean that land can never be converted out of



Adam Davis:
00:35:54
this use of conservation. But there's also a financial



Adam Davis:
00:35:58
endowment for long term monitoring and maintenance, that



Adam Davis:
00:36:02
goes into the credit. So the thing that's generated off the



Adam Davis:
00:36:06
land is not just science-based restoration, that measures



Adam Davis:
00:36:10
ecological uplift, but also legal and financial assurances



Adam Davis:
00:36:13
that make sure it's durable over time.



Adam Davis:
00:36:16
And actually, people often will say that mitigation excuses



Adam Davis:
00:36:22
damage, or it allows damage. It somehow makes the damage



Adam Davis:
00:36:26
possible. And this is fundamentally incorrect, for two



Adam Davis:
00:36:30
reasons. One is without the mitigation, the road would still



Adam Davis:
00:36:33
be built. The alternative to No Net Loss is net loss. There



Adam Davis:
00:36:39
would be damage, if there was no restoration. We know this for a



Adam Davis:
00:36:42
fact. It's happening everywhere around us. And the alternative



Adam Davis:
00:36:46
to holding people to a standard and making the mitigate is not



Adam Davis:
00:36:50
holding them to a standard. It's not stopping it. Not



Adam Davis:
00:36:53
realistically. At least when you have some restoration, you're



Adam Davis:
00:36:57
making up for some of the damage that does occur.



Adam Davis:
00:37:03
But even more so or at least as importantly, because restoration



Adam Davis:
00:37:07
is held to a high standard, it's not cheap. The fact that you



Adam Davis:
00:37:11
need to buy mitigation means that damage is more expensive



Adam Davis:
00:37:16
than it used to be, right? So it used to be cheap to damage



Adam Davis:
00:37:19
stuff. Now it's more expensive. So there's real incentive to not



Adam Davis:
00:37:22
damage or damage as little as you possibly can. Because of the



Adam Davis:
00:37:27
existence of required mitigation.



Adam Davis:
00:37:30
As, really, an industry began to grow of companies that did



Adam Davis:
00:37:36
restoration professionally — they don't do anything else. The



Adam Davis:
00:37:40
activities they do are real estate, design, permitting, and



Adam Davis:
00:37:44
construction of restoration projects. As the industry grew,



Adam Davis:
00:37:50
then it became obvious that those skills — of real estate,



Adam Davis:
00:37:55
design, permitting, and construction — could be used to



Adam Davis:
00:37:57
solve other problems. Not just compliance, but actually solve



Adam Davis:
00:38:01
problems for the second type of customer, which itself is trying



Adam Davis:
00:38:05
to restore things — government. Matter of fact, the largest



Adam Davis:
00:38:09
expenditure on environmental health is of course, government



Adam Davis:
00:38:12
agencies themselves that are trying to, at a societal level,



Adam Davis:
00:38:16
make up for the total impacts, the cumulative impacts that



Adam Davis:
00:38:20
society has created. This is no criticism of government



Adam Davis:
00:38:25
agencies, I'm really not slamming these people. But the



Adam Davis:
00:38:28
resource agencies are staffed, really, with a lot of



Adam Davis:
00:38:32
environmental scientists and natural resource scientists. And



Adam Davis:
00:38:35
for them to be expected to go out and do real estate deals and



Adam Davis:
00:38:39
construction projects, at the same time that they're also



Adam Davis:
00:38:43
regulating — really complicated for them. And so the ability to



Adam Davis:
00:38:49
contract, not just through grants that pay people for an



Adam Davis:
00:38:53
effort to try something, but to actually buy a credit that



Adam Davis:
00:38:56
represents a finished result. That's the new transition that's



Adam Davis:
00:39:00
going on. Where the skills and capacity of the mitigation



Adam Davis:
00:39:04
banking industry are now being contracted by government



Adam Davis:
00:39:09
agencies that have mandates to restore really big, important



Adam Davis:
00:39:13
natural systems. And it's been really hard to actually get the



Adam Davis:
00:39:17
job done. The gap between planning and doing is enormous.



Adam Davis:
00:39:23
There's lots of planning, there's lots of big ideas. But



Adam Davis:
00:39:25
to actually get projects finished on the ground is



Adam Davis:
00:39:28
extremely hard.



Adam Davis:
00:39:32
If you can align reward so that every unit of restoration that



Adam Davis:
00:39:37
you do is worth money, then people will do more restoration.



Adam Davis:
00:39:40
The reason that there's a financial model is because what



Adam Davis:
00:39:43
nature does is worth money. And the reason that that's true, is



Adam Davis:
00:39:49
because money is the thing we use for value. That's what it



Adam Davis:
00:39:55
is, right? Money is this thing, that you know... it's this



Adam Davis:
00:39:58
infinitely malleable substance that we can attach to anything



Adam Davis:
00:40:02
that we value, including art and music, but also, you know, a



Adam Davis:
00:40:06
piano, or a new car.



Adam Huggins:
00:40:10
Or a wetland



Adam Davis:
00:40:11
Or it turns out, a wetland. But because what nature



Adam Davis:
00:40:16
does has been so systematically ignored, misunderstood, and



Adam Davis:
00:40:20
undervalued for so long, it's a radical idea, still, to say that



Adam Davis:
00:40:27
a wetland is valuable. People think, well, that's what



Adam Davis:
00:40:30
nonprofits do. You need a grant for that, you need philanthropy.



Adam Davis:
00:40:35
So what is philanthropy? It's people who made their money



Adam Davis:
00:40:39
doing traditional economic activity, and then they give



Adam Davis:
00:40:43
some away later. But where did that money actually come from?



Adam Davis:
00:40:47
It didn't come from the value of nature. It came from mining,



Adam Davis:
00:40:51
oil, ag and timber, or biotech, or iPhones, or Facebook, or



Adam Davis:
00:40:57
something. Some form of economic activity, that's where the money



Adam Davis:
00:41:01
came from. Look, it's a noble thing to give money away. I



Adam Davis:
00:41:05
can't criticize people who do that. It's noble. But I do think



Adam Davis:
00:41:09
that saying that things that are funded by philanthropy are



Adam Davis:
00:41:14
inherently more ethical than things that are funded by



Adam Davis:
00:41:17
investment is incorrect.



Adam Davis:
00:41:24
When we started Ecosystem Investment Partners in late



Adam Davis:
00:41:27
2006, there were probably between 700,000 mitigation banks



Adam Davis:
00:41:31
around the US. But generally, they were pretty small and



Adam Davis:
00:41:36
opportunistic. They were certainly undercapitalized —



Adam Davis:
00:41:39
there was no source of capital in the business at all. So who



Adam Davis:
00:41:43
was it? It was farmers and ranchers that had low wet ground



Adam Davis:
00:41:46
on a corner of their property that they couldn't really farm



Adam Davis:
00:41:49
or make use of. And so someone turned them on to mitigation



Adam Davis:
00:41:53
banking and said "this could be worth money". There were also a



Adam Davis:
00:41:56
lot of developers who had been forced to buy mitigation, who



Adam Davis:
00:42:00
thought they might like to try and sell some mitigation



Adam Davis:
00:42:03
instead. So they weren't ecologist or scientists, they



Adam Davis:
00:42:05
were entrepreneurs. But there were some successful early



Adam Davis:
00:42:09
banks, where people with business and real estate skills



Adam Davis:
00:42:12
tried to, you know, do ecological stuff. But there was



Adam Davis:
00:42:17
no source of capital. Because I had come to learn the business



Adam Davis:
00:42:20
through consulting, I got invited to some conferences, and



Adam Davis:
00:42:24
I had the great good fortune of meeting a guy who had had a



Adam Davis:
00:42:27
successful career in private equity, which I knew nothing



Adam Davis:
00:42:31
about. I really didn't know what private equity meant. Turns out,



Adam Davis:
00:42:34
it means just not public equity. It means not stocks, but other



Adam Davis:
00:42:38
forms of ownership that are private. Anyway, this guy, Fred



Adam Davis:
00:42:42
Danforth, when I started to tell him about mitigation banking, he



Adam Davis:
00:42:46
had already been doing stream restoration, about four and a



Adam Davis:
00:42:49
half miles of stream restoration on his own ranch — which is very



Adam Davis:
00:42:54
expensive and painstaking work. So the whole notion that you



Adam Davis:
00:42:58
could possibly make money, doing the same thing that he was



Adam Davis:
00:43:01
paying a fortune to do, was intriguing. And he had all this



Adam Davis:
00:43:05
experience in structuring money — being able to access big pools



Adam Davis:
00:43:11
of private capital, if you could make a fair return. And then we



Adam Davis:
00:43:15
had another stroke of luck by meeting my partner today, a guy



Adam Davis:
00:43:19
named Nick Dilks, who was working at the Conservation



Adam Davis:
00:43:22
Fund, which is one of the largest land conservation groups



Adam Davis:
00:43:26
in the US. He had probably done a million acres of conservation



Adam Davis:
00:43:30
real estate transactions. So Nick really knew land, Fred



Adam Davis:
00:43:34
really knew how to structure money, and I had some experience



Adam Davis:
00:43:38
with mitigation banking, and had been thinking about incentives



Adam Davis:
00:43:41
and contracts for a long time.



Adam Davis:
00:43:43
So we started this thing called Ecosystem Investment Partners.



Adam Davis:
00:43:46
We raised a pilot round of capital, if you will. It was $27



Adam Davis:
00:43:51
million, which seems like a big number. For a private equity



Adam Davis:
00:43:55
fund, it's a really small number. It's like too small to



Adam Davis:
00:43:57
actually run a fund. But we raised that amount and invested



Adam Davis:
00:44:01
it in three projects. At the time, the average size of a



Adam Davis:
00:44:05
mitigation bank around the US was probably 100 acres. So these



Adam Davis:
00:44:10
were big projects for the time. They were 2000 acres each. One



Adam Davis:
00:44:14
in Louisiana, one in Virginia, one in Delaware. So we were able



Adam Davis:
00:44:19
to do well enough on the three of them together, that in 2012,



Adam Davis:
00:44:24
we were able to actually go to the market and raise a full



Adam Davis:
00:44:28
institutional round of capital, which was $180 million. That was



Adam Davis:
00:44:33
significant in a bunch of ways. First of all, I think it was the



Adam Davis:
00:44:36
first time that a private equity fund for ecological restoration



Adam Davis:
00:44:41
had ever been tried. The second reason it was really significant



Adam Davis:
00:44:46
is that the lead investor was a public pension fund. So it was



Adam Davis:
00:44:51
the New Mexico Education Retirement Board.



Adam Davis:
00:44:55
When a pension fund invests in a private equity group, you know



Adam Davis:
00:45:01
that that investment meets pure fiduciary standards. So it's



Adam Davis:
00:45:07
objective analysis of risk and reward. That's fundamentally



Adam Davis:
00:45:11
different than socially responsible investment or impact



Adam Davis:
00:45:15
investment, both of which are important. But a lot of times



Adam Davis:
00:45:18
those words are code for below market rate. right? So you'll



Adam Davis:
00:45:23
take something below market rate, because of the



Adam Davis:
00:45:25
environmental or social good, which is fine. But the problem



Adam Davis:
00:45:29
is that the big pools of money in the world exists in things



Adam Davis:
00:45:33
like pensions or endowments that can't choose because of social



Adam Davis:
00:45:38
or environmental attributes — because it's not their money!



Adam Davis:
00:45:42
That's what a fiduciary means. You're investing somebody else's



Adam Davis:
00:45:45
money. And it turns out, the people that they're investing



Adam Davis:
00:45:48
for are teachers, firefighters, people who are going to retire



Adam Davis:
00:45:51
maybe 30 years from now. And so when you're investing their



Adam Davis:
00:45:55
money in these public pensions, you have to invest in a way



Adam Davis:
00:46:00
that's as smart as you can so that the retirement money will



Adam Davis:
00:46:03
be there for them. That moment went up public pension invested



Adam Davis:
00:46:08
in an ecological restoration investment firm meant that these



Adam Davis:
00:46:13
decades — of trial and error, and improvement in policy,



Adam Davis:
00:46:17
improvement in science, improvement and practice on the



Adam Davis:
00:46:19
ground — had led to a place where a pure fiduciary could



Adam Davis:
00:46:23
look at that activity, and say "It makes sense. This is a



Adam Davis:
00:46:28
reasonable risk adjusted decision that I'm making. Just



Adam Davis:
00:46:32
like investing in timberland or farmland, or mining or other



Adam Davis:
00:46:36
things." Ecological restoration ascended to that place.



Adam Davis:
00:46:42
Ecological Restoration had arrived.



Adam Davis:
00:46:46
So with that $180 million, we invested in eight major



Adam Davis:
00:46:50
projects, including some of the largest privately funded



Adam Davis:
00:46:53
restoration projects ever done in the US. Tens of miles of



Adam Davis:
00:46:59
stream restoration in Appalachia, in particular,



Adam Davis:
00:47:03
Kentucky and West Virginia. 17,000 acres of coastal



Adam Davis:
00:47:07
Louisiana on the land bridge that separates Lake



Adam Davis:
00:47:10
Pontchartrain from the waters of the open gulf — and actually



Adam Davis:
00:47:13
filling areas that had subsided and eroded below sea level back



Adam Davis:
00:47:19
to create healthy marsh. And 23,000 acres in northern



Adam Davis:
00:47:24
Minnesota, about an hour north of Duluth, in what is actually



Adam Davis:
00:47:29
the t shirt I'm wearing today, the Sax-Zim bog. In the 1920s,



Adam Davis:
00:47:33
as people tried to farm that area, they had cut ditches. So



Adam Davis:
00:47:37
we restored over 80 miles of ditches in this remote



Adam Davis:
00:47:42
landscape. And it worked. The hydrology began to return, and



Adam Davis:
00:47:48
water that had taken three hours to go through the site began to



Adam Davis:
00:47:52
take three days. And by slowing everything down, and returning



Adam Davis:
00:47:56
the natural hydrology, the health of the system began to



Adam Davis:
00:48:00
come back. And we could make money doing this stuff, because



Adam Davis:
00:48:05
of the need for compliance with the Clean Water Act.



Adam Davis:
00:48:09
And it is amazing what nature will do if you just give it a



Adam Davis:
00:48:12
chance, right? If you just bring back some of the fundamental



Adam Davis:
00:48:15
conditions to allow health, it's like restoring blood flow. And



Adam Davis:
00:48:18
then all of a sudden, the healing process begins, and the



Adam Davis:
00:48:21
seed bank that was not functioning for 100 years starts



Adam Davis:
00:48:26
to come back. Those seeds are still alive underground. It's so



Adam Davis:
00:48:29
exciting.



Adam Davis:
00:48:30
But so to answer your question about how we do it... the skill



Adam Davis:
00:48:34
sets that it takes to do this are sort of unusual, right? I



Adam Davis:
00:48:38
mean, it definitely involves money — knowing how to organize



Adam Davis:
00:48:41
and responsibly manage capital. So there's lots and lots of



Adam Davis:
00:48:45
reporting, but there's also real estate, and in particular,



Adam Davis:
00:48:49
conservation real estate. So looking for pieces of land that



Adam Davis:
00:48:54
aren't necessarily priorities for traditional development, or



Adam Davis:
00:48:57
traditional ag or timber. There's also really deep



Adam Davis:
00:49:01
understanding of policy. You need to understand environmental



Adam Davis:
00:49:03
law. And of course, the science. You need to understand both



Adam Davis:
00:49:07
engineering, as well as hydrology, botany, fisheries,



Adam Davis:
00:49:11
you know, whatever the issues are in that particular location.



Adam Davis:
00:49:14
So we made a pretty conscious decision early on that we would



Adam Davis:
00:49:17
never be able to hire all those people in-house, especially if



Adam Davis:
00:49:21
we were going to work in a bunch of different states. So the



Adam Davis:
00:49:24
fundamental idea was to hire enough staff that understood the



Adam Davis:
00:49:28
basics of this stuff, and then partner with the local experts —



Adam Davis:
00:49:33
the best people we could find in each ecology.



Adam Davis:
00:49:36
One of the hallmarks that I'm really proud of is an innovation



Adam Davis:
00:49:41
which seems obvious in retrospect, but no one was



Adam Davis:
00:49:45
doing, which is to identify the contractors that actually do the



Adam Davis:
00:49:50
physical work, and bring them into the design conversation.



Adam Davis:
00:49:55
The design and the implementation had always been



Adam Davis:
00:49:57
in separate rooms, and still are for most projects. So you don't



Adam Davis:
00:50:01
have the benefit of the experience of the people who



Adam Davis:
00:50:04
actually do the work. And so you have designers designing sort of



Adam Davis:
00:50:07
theoretical answers, without someone to say "that's not going



Adam Davis:
00:50:10
to work," or "maybe if you tried it like this." But in the people



Adam Davis:
00:50:14
who are actually doing the work, there's tons of knowledge and



Adam Davis:
00:50:17
tons of experience, but we need to lift up and sort of ennoble



Adam Davis:
00:50:22
those jobs, which are a huge part, both of the work but also



Adam Davis:
00:50:27
should be part of the movement, right? Because there's now



Adam Davis:
00:50:30
meaningful employment coming from ecological restoration. If



Adam Davis:
00:50:34
you talk to those people, you'll find that a lot of them worked



Adam Davis:
00:50:38
in traditional civil engineering-type construction,



Adam Davis:
00:50:42
roads, bridges, parking lots. And they find so much meaning



Adam Davis:
00:50:47
and purpose in restoring the natural places that actually



Adam Davis:
00:50:52
near where they live, compared to the type of work that they



Adam Davis:
00:50:56
did before. In Appalachia, we have people that used to work in



Adam Davis:
00:51:01
coal mines that are now restoring some of the streams



Adam Davis:
00:51:05
that were damaged by coal mining activity. In the Gulf coast of



Adam Davis:
00:51:09
Louisiana. There are people that used to work on oil rigs that



Adam Davis:
00:51:13
are now restoring some of them coastal marshes that support the



Adam Davis:
00:51:16
fisheries where they grew up fishing.



Adam Davis:
00:51:19
The ability to make a living doing ecological restoration is



Adam Davis:
00:51:23
really meaningful for people. It elevates jobs that are often



Adam Davis:
00:51:28
considered menial. It gives people more skills, more



Adam Davis:
00:51:33
engagement, more involvement, more learning, and seeing



Adam Davis:
00:51:37
results that they can personally care about. It's really about



Adam Davis:
00:51:42
providing specialized training for equipment operators, and



Adam Davis:
00:51:45
laborers who work in restoration and giving the specialized



Adam Davis:
00:51:49
skills to work in sensitive areas. But then also learning



Adam Davis:
00:51:53
from the people who are seeing things on the ground every day.



Adam Davis:
00:51:58
And building better trust between the construction folks



Adam Davis:
00:52:02
and the regulators, who are very defensive about any activity on



Adam Davis:
00:52:07
the ground that involves yellow equipment —understandably! The



Adam Davis:
00:52:12
permitting process to get permission to damage something



Adam Davis:
00:52:16
is easier than the permission process to be allowed to restore



Adam Davis:
00:52:20
something. And you would think, how can that possibly be? But



Adam Davis:
00:52:24
when you're building a road, or you're building a pipeline, or



Adam Davis:
00:52:29
permitting even a mine, you're often working in an area that is



Adam Davis:
00:52:34
somehow zoned or slated for an economic development. Whereas



Adam Davis:
00:52:38
when you're doing restoration, you're going to the sensitive



Adam Davis:
00:52:41
areas. You're going to the areas where the endangered species



Adam Davis:
00:52:44
want to be. So there's lots of reasons why regulatory agencies



Adam Davis:
00:52:50
have had trouble figuring out how to give permission for



Adam Davis:
00:52:55
environmental restoration in a responsible way. It's really a



Adam Davis:
00:52:59
challenge.



Adam Davis:
00:53:04
When environmentalism came along, it was really critical



Adam Davis:
00:53:08
that we stopped the most egregious behavior. But now



Adam Davis:
00:53:11
we're at a point where we have lots of environmental laws, but



Adam Davis:
00:53:13
things are still going badly. So we need to internalize the



Adam Davis:
00:53:17
externality. We need to make that damage part of the cost of



Adam Davis:
00:53:22
doing business. And that's where I see this going. What we're



Adam Davis:
00:53:25
doing is in a microcosm of the natural world — which is



Adam Davis:
00:53:29
wetlands, under one section of law, in the United States.



Adam Davis:
00:53:33
right. But even that is billions of dollars of activity. And it's



Adam Davis:
00:53:38
creating an industry, an ecological restoration industry,



Adam Davis:
00:53:41
that's actually tapping into the largest pools of private capital



Adam Davis:
00:53:45
and public capital in the world. So they're now seeing that you



Adam Davis:
00:53:49
can make a fair rate of return through ecological restoration.



Adam Davis:
00:53:52
That's important. Because if ecological restoration is



Adam Davis:
00:53:55
valuable, then they're going to want to do more of it. And the



Adam Davis:
00:53:58
amount of capital that you have to work with will not be



Adam Davis:
00:54:01
limited. It's not limited by agency budgets, or philanthropy.



Adam Davis:
00:54:07
It's actually the endless pool of capital, which is the



Adam Davis:
00:54:11
investment capital of the world. But even more important than



Adam Davis:
00:54:14
that, is that it's a mechanism by which you can measure damage



Adam Davis:
00:54:19
and require offsets for it. And that doesn't have to be limited



Adam Davis:
00:54:22
to wetlands or streams. That could be a principle that you



Adam Davis:
00:54:26
begin to apply more broadly, across environmental regulation



Adam Davis:
00:54:30
and across the economy.



Adam Davis:
00:54:31
I mean, it's a little bit of a fantasy today, to think that the



Adam Davis:
00:54:36
ecological restoration industry can provide a model that can be



Adam Davis:
00:54:40
used for, you know, more sustainable production of all



Adam Davis:
00:54:45
goods and services. But why not? I mean, what the heck. You know,



Adam Davis:
00:54:50
the approach that we're taking now, which is basically fines



Adam Davis:
00:54:52
and fees, and then, you know, trying to stop people by



Adam Davis:
00:54:56
punishing them if they stray out of bounds... like, that's good,



Adam Davis:
00:54:59
we should do that, for sure. But it's not really getting us where



Adam Davis:
00:55:02
we need to go. We need to do something that sends an economic



Adam Davis:
00:55:06
signal so that the basic impulse is to do the right thing,



Adam Davis:
00:55:11
because it's more profitable than doing the wrong thing. And



Adam Davis:
00:55:14
if you can get that mechanism right, you don't have to be an



Adam Davis:
00:55:18
advocate anymore. You don't have to protest anymore, because the



Adam Davis:
00:55:21
machine will do it in order to be profitable. It may seem



Adam Davis:
00:55:25
fantastic to even think that thought, but I'm telling you,



Adam Davis:
00:55:29
we're seeing billions of dollars of institutional capital come



Adam Davis:
00:55:33
into ecological restoration, and make the impacts — that are



Adam Davis:
00:55:39
happening — less damaging and more responsible than they were



Adam Davis:
00:55:43
before. We're seeing it.



Adam Davis:
00:55:45
That's why I got involved with money, because it was obvious



Adam Davis:
00:55:49
that all the money was in the bad stuff — the things that were



Adam Davis:
00:55:53
wrecking the world that I love. And so how on earth can you get



Adam Davis:
00:55:58
the money to line up with what you care about? You have to



Adam Davis:
00:56:03
think about the economics, about the contract structures, about



Adam Davis:
00:56:07
the regulations, about the deals. People have to make a



Adam Davis:
00:56:11
fair return on investment. They have to. It's not a variable.



Adam Davis:
00:56:19
It's a constant in the equation. And it's a discipline. It



Adam Davis:
00:56:23
requires a discipline of thought, which actually has been



Adam Davis:
00:56:28
a constant challenge for my scattered mind, but also a



Adam Davis:
00:56:32
really refreshing practice, like, you know, Aikido or



Adam Davis:
00:56:37
something... like a martial art. Like, you have to just do it



Adam Davis:
00:56:40
over, and over, and over again, and think about it day after



Adam Davis:
00:56:43
day. But the discipline of making a return through



Adam Davis:
00:56:47
something that is really good, is so rewarding, because...



Adam Davis:
00:56:55
that's where the problem is, and that's where the solution is.



Adam Davis:
00:56:59
It's... it's so funny, but it's in the money somehow.



Adam Davis:
00:57:02
And so, last thing I'll say, we need not leave behind the



Adam Davis:
00:57:11
sacred, the miraculous, the poetic, the ancient ways of



Adam Davis:
00:57:16
experiencing the living world, the unique. Those things are the



Adam Davis:
00:57:24
reason why I do what I do. Someone told me a long time ago,



Adam Davis:
00:57:31
a mentor in the garbage business. He said, "If you want



Adam Davis:
00:57:34
to solve a problem, you got to go where the problem is, can't



Adam Davis:
00:57:40
just be a critic from the outside." But being next to it



Adam Davis:
00:57:43
in it near it allowed me to understand it, and contribute to



Adam Davis:
00:57:50
solutions, at least in some way, at some level. And that's how I



Adam Davis:
00:57:55
feel about money. You know, last thing I wanted to be was a



Adam Davis:
00:58:00
business guy. And to actually be a partner in a private equity



Adam Davis:
00:58:05
fund, are you kidding? Like that was not on the radar screen. I



Adam Davis:
00:58:10
didn't do it to make money. I make money to do what I do. It's



Adam Davis:
00:58:15
all the difference in the world, between those two things.



Adam Davis:
00:58:19
If you go out of business trying to save the world, then you're



Adam Davis:
00:58:22
out of business. But if you can make money through good things,



Adam Davis:
00:58:28
then the more good you do, the more money you make. And that is



Adam Davis:
00:58:33
the trick.



Adam Huggins:
00:58:56
This episode was produced by Mendel Skulski and



Adam Huggins:
00:58:58
myself, Adam Huggins with the voice of Adam Davis.



Mendel Skulski:
00:59:02
And with music by Thumbug, Local Artist, Yu Su,



Mendel Skulski:
00:59:07
and Sunfish Moon Light.



Mendel Skulski:
00:59:16
Special thanks to Ian Wyatt and Mood Hut records, to Alé Silva



Mendel Skulski:
00:59:21
for the cover art, and to our interns, Ava Stanley, Aila



Mendel Skulski:
00:59:25
Takenaka, and Alex Janz.



Adam Huggins:
00:59:29
Future Ecologies is an independent podcast



Adam Huggins:
00:59:31
supported by listeners just like you. Join our community for as



Adam Huggins:
00:59:35
little as $1 each month, and your return on investment will



Adam Huggins:
00:59:39
be early episode releases, exclusive bonus content, access



Adam Huggins:
00:59:43
to our Discord server merch, and best of all, we get to keep



Adam Huggins:
00:59:46
making the show for you.



Mendel Skulski:
00:59:48
And keep it ad free for everyone.



Adam Huggins:
00:59:50
So if you think what we're doing has value, you



Adam Huggins:
00:59:53
can prove it.



Mendel Skulski:
00:59:54
at futureecologies.net/join



Adam Huggins:
00:59:59
but money isn't everything. So, please leave us



Adam Huggins:
01:00:02
a rating and review wherever you listen, and share it widely.



Mendel Skulski:
01:00:05
It really helps.



Adam Huggins:
01:00:07
'til next time.



Mendel Skulski:
01:00:08
'til next time.



Adam Huggins:
01:00:09
Thanks for listening