Modern Technology, Consciousness, and the Impact Economy

Charly Kleissner’s Keynote at the Silicon Valley Blockchain Society September 2018

Introduction

Thank you, Amit, for the kind introduction and for inviting me to this gathering; and thank you so much for your invaluable mentorship!
And let me also thank all of you here in the room for being here.
I am so thrilled to be back in Silicon Valley in a room filled with awesome technologists who want to make a difference.
We are at the beginning of an unprecedented global transformation, where humanity will have to figure out how to live sustainably within the carrying capacity of a finitely resourced planet. And we don’t have a whole lot of time to do that!
The status quo of adapting existing systems to deal with systemic issues like inequality, social justice, climate change and poverty is not going to be good enough.
During this transformation to an ‘impact economy’ all systems will have to change, especially the financial system.
The path to the new impact economy is being accelerated by the extraordinary pace of technological change and by the increasing consciousness and awareness of humanity.
Today I will make the case that indeed, modern technology and elevated awareness and consciousness are the two most important ingredients to birth the new impact economy.
In order to do that, let me talk about three things:
- First, I will share a few anecdotes about my Silicon Valley career.
- Second, I will share a few anecdotes about my Impact Investing career.
- And Third, I will talk about why the existing financial system is broken, and why modern technology and consciousness are the two most important ingredients to fundamentally change and fix that broken system.

SV Journey

I have a PhD in computer science. My PhD was about massively distributed systems (like distributed transaction and database systems) and how to make them more resilient in the context of failures. Many of you are working on a similar topic … so we have lots to discuss!
I immigrated to Silicon Valley in 1986 after Hewlett-Packard made me an offer to develop their distributed database system, which I did.
After Hewlett-Packard I switched to one more big company before doing the start-up thing. I switched to Digital Equipment Corporation, DEC, where I implemented an early form of smart contracts (but without block-chain) … the product was successful as part of the office suite of applications.
Then I entered the start-up world and participated in 3 successful start-ups, usually in the position of VP Engineering, VP Product Development or Chief Technology Officer, the main technical guy on the senior management team.
- The first Startup was NeXT, the company that Steve Jobs founded after he was fired from Apple.
- There I developed the operating system, which was called NextStep and OpenStep.
- When Steve sold NeXT to Apple for $400M, OpenStep became Apple’s operating system, System X.
- I left about 6 months before Steve sold the company to Apple.
- Let me tell you a couple of stories about Steve:
  - There are so many stories out there that paint a very diabolic picture of Steve.
  - Steve was certainly not a happy man, he was driven and mediocracy was never an option.
  - And he was not always kind to marketing and sales folks.
  - But we engineers had a symbiotic relationship with Steve: He depended on us, and we depended on him.
  - Story about a major release.
  - I am missing Steve now, because he would challenge the current way of doing philanthropy, and probably the way we invest, because that’s who he was.
  - Contrast that to Bill Gates, whom I commend for dedicating over 50% of his wealth to philanthropy, but he is doing it the old way, the way he did his business: Copy what he believes is good, and scale it up. But when you copy something that does not work, you create more problems.
  - Last time I talked to Steve was in 2005. I was trying to convince him to join me in supporting social entrepreneurs. He listened and commended me on what I was doing. He then explained that he is doing something that only he could do at this point in time. He was – of course – working on the iPhone, which shipped in 2007. And he said that that was his contribution to humanity. I understood and he certainly focused on changing the world his way. That phone changed the way that billions of people have been communicating with each other; and it spawned the Android platform, which is the onramp to the Internet for another few billions of people.
- Then I joined a company called Datamind.
  - Which was a data-mining company, based on neural network technology and genetic algorithms.
  - We had great technology, but at that time the applications were not obvious.
  - In the end we used our technology to predict buying behavior at the point of sales by analyzing what you bought and printing out coupons of additional items that you should have bought based on data analysis of people from the same zip code.
  - Our technology was based on similar algorithms as today, but today we have 2000 times faster CPU’s and more sophisticated feedback loops and learning algorithms.
  - Datamind ended up with a successful exit as well: The company was sold to ePiphany for $400M.
- My masterpiece in Silicon Valley was Ariba, a B2B e-commerce company:
  - It was the fastest growing company ever: from 0 in sales to $1B in sales in 4 years.
  - We took the company public in 1999; it was a very successful IPO.
  - In 2012 SAP bought Ariba for a little less than 5 Billion Dollars.
  - I diversified most of my stock before the 2001 crash, and that created the basis for our wealth.
  - I quit Ariba in late 2001 after the new CEO lied to me.
- Let me pause here and reflect on the adoption curve of new and radically different technologies like Internet based e-commerce at the time. The initial visionaries are making – what seems to be – outlandish predictions, then the market becomes overhyped, it then corrects and goes too negative on the other side; but ultimately it is much bigger than even the early visionaries predicted. You all are now in the overhyped, correction phase; but ultimately …

Let me now go into my second topic: My impact investing career

Why did we get into impact investing?
- After a significant liquidity event, marriages either fall apart (because one of the spouses is into meditation and mindfulness, and the other one is into yachts and Ferraris) or you re-invigorate your partnership with additional opportunities that you did not have before.
- Fortunately for me, my wife Lisa and I fell into the second category.
- After I quit Ariba, I had many opportunities, and I said no to everybody who had their ideas of what I should do and started to figure out what I wanted to do.
- At that time, I accelerated my mindfulness practice and I am still doing Yoga and meditation.
- When we asked ourselves the question of ‘what is the meaning of our wealth’ the answer became obvious quite quickly.
- For us wealth comes with responsibility to make a positive contribution to the planet and people; it cannot possibly be just to make more money.
- When we looked into philanthropy, we saw that the old way of doing philanthropy is as flawed as the way the pure capitalist investment model works: Philanthropy creates more dependencies, and contributes to corrupt systems, while not addressing systemic issues. And the normal investment model maximizes its profits at the expense of communities, the environment, and the spiritual well-being of its participants.
- That is why we started what is now called impact investing: we needed to align our wealth with our values, and we needed to contribute to the change of the existing system.
What is impact investing?
- Explain the 4 criteria: intentional; approach; financial, social & environmental returns; impact management & measurement.
- Examples
  - Cash (Bank of America, Wells Fargo vs. New Resource Bank)
  - Commodities (extractives like oil & gas vs. biodiversity, carbon offsets, renewable timber, water)
  - New types of investments (social impact bonds, social stock exchange)
  - New term sheets (demand dividend structures) and new funds (evergreen funds)
- Our Foundation (KL Felicitas Foundation)
  - 100% Impact Leader
  - Theory of Change: Change the financial system
    - Supply
    - Demand
    - Intermediaries
  - Toniic & 100%ers
    - Started 8 years ago
    - The objective was to build a global network of trust (Otto Scharmer, AirBnB)
    - 100%ers
      - Definition: principals, 100% commitment, willing to share
      - Non-hedgers
      - Our portfolio is an expression of who we are, an expression of the change that we want to see.
      - Instead of being driven by the fear of losing money, we are driven by the joy of making a positive contribution.
      - The 100% movement is growing rapidly and it is a global movement:
        Over 100 memberships today.
        Over $6B in committed capital to impact.
      - I hope I convinced you that we are not alone in this, and that we are at the beginning of a movement.
      - So, let me now move on to the third part of my remarks.

Impact Economy, AI, Blockchain & Consciousness

Here are some challenges and opportunities with the current system and how modern technologies and an increased awareness will make the difference:
- Lack of transparency versus full transparency: the big players are defining their proprietary ways of measuring Environmental, Social and Governance metrics, thus perpetuating their model of maximizing revenue from their clients without contributing to the impact economy … blockchain could make a huge difference there … Toniic’s T100 effort is a model in transparency.
- Lack of impact accountability versus full impact accountability … blockchain could make a huge difference there.
- Accidental impact versus intentional impact … this is where we need elevated consciousness & awareness to compliment technology.
- Centralized, isolated, small and fragmented efforts versus de-centralized, interoperable, collaborative, co-creative, harmonized efforts … this is where smart contract enabled impact investors could find other like-minded impact investors and impact aligned enterprises and funds.
- Old research paradigm versus new research paradigm. In the old research world, it is all about maximizing number of papers; in new research paradigm it is actually about making a difference; Toniic has started a research effort with …
- Modern Portfolio Theory versus Total Portfolio Theory … explain … this is where artificial intelligence (with machine learning) can make a huge difference by turning the current paradigm on its head … imagine if an artificial intelligence driven tool could suggest a portfolio that is driven by impact objectives ….
- Impact investing as an elitist activity versus an activity for all … tokenization of impact, crowd funding, social stock exchanges, movement building, and retail products will all have huge impacts on democratizing impact investing.
- Holding on to the old financing models like venture capital, pure equity, vanilla fund structures versus new financing approached like pay for success, impact term sheets, blended capital, ICOs, and STOs (Security Token Offerings).
I hope I gave you some ideas how modern technology will enable the change towards the new impact economy.
As we co-create the new impact economy
- Politicians will be able to push back on institutional capital and big industries who want to keep the status quo of the regulatory environment; such that fiduciary responsibility will include long-term responsibility towards people and planet.
- As we co-create the new impact economy, trustees and board members who sit on the investment committees of major endowments will align their endowments with long term goals like SDGs and they will start maximizing long-term sustainability as opposed to short-term gains.
- As we co-create the new impact economy, CEOs who knowingly pollute the planet will go to jail, and their companies will be held accountable for cleaning up their messes.
- As we co-create the new impact economy, CEOs everywhere will have to treat their workers fairly and with dignity.
- As we co-create the new impact economy, we will be able to get prepared as much as we should to change to an impact economy after the next recession will create a unique opportunity for acceleration.

Call to Arms

So, let me conclude by declaring that together we can co-create the new impact economy.
We will bring the investors to the table.
Others will bring the impact enterprises and impact funds to the table.
And we together will connect the two sides with an intelligent block-chain based infrastructure that will enable all parties to conduct fully transparent and traceable impact management activities including pre due diligence, due diligence, reporting, transacting and monitoring of investments.
We have given this effort a preliminary name: The ImpactSoul!
Please let Amit and I know if you would like to get engaged in co-designing and co-creating The ImpactSoul.
Thank you so much! I very much look forward to our conversations later today. Let’s open it up for a couple of questions!