Our proposal for the MacArthur 100&Change ($100 million) grant was submitted this morning. Using the language of Virginia Tech’s Beyond Boundaries initiative, this is our ‘moonshot’ idea. If implemented it could fundamentally retool the global economy to provide everyone with a capital ownership stake in an inherently sustainable economy. Here is the executive summary of our proposal:

Boldly conquering global poverty will require an innovative economic paradigm that provides everyone on this planet with a personal ownership stake in the future. This project aims to transform our economic systems and promote sustainable enterprises by leveraging creativity and innovation. Our forward-looking mechanisms will enable all people to obtain a capital-based income that will supplement their labor income. Using the principles of binary economics, people will acquire capital with credit repayable with pre-tax future earnings of capital (future savings). The approach does not require coercive actions of government or a redistribution of existing wealth. As capital ownership becomes more broadly distributed, the economy will grow as people spend their newly acquired income on inherently sustainable goods and services. Our team’s alliance of academics and expanded-ownership pioneers will demonstrate how universalizing access to capital ownership can reduce inequality and advance sustainable development to create inclusive and sustainable prosperity for all.

In this post, I wanted to reflect a little on how we made it to this point.

My decision to advance a proposal came after listening to Regina Dugan speak at Virginia Tech in August. During her talk, Dugan commented that organizations are often limited not by what they can do, but by what they “believe” they can do. Having initially decided not to develop a 100&Change proposal due to the sheer scale of the grant and significant global competition, her comments and the Beyond Boundaries initiative made me rethink this decision.

I would put my ideas for how to spend this scale of funding into two categories. The first contains those ideas that could lead to siginfnicant progress, but largely within the existing development paradigm. One example would be the creation of an accessible and open data-rich sustainable water decision-support platform that could be expanded to include other sectors of the economy such as energy and agriculture. The second category contains those ideas that are potentially transformative in a macro sense, but are also currently on the fringe of mainstream thinking. One example, and the anchor of our 100&Change proposal, is the theory of binary economics that has been developed for over fifty years, but has yet to receive significant attention.

During her talk at Virginia Tech, Dugan commented that real innovations tend to occur when you feel uncomfortable about what you are doing – uncomfortable in the sense that there is no known pathway to success and there is a high potential of failure. While binary economics inspired the creation of employee stock ownership plans (ESOPs), its economic principles have yet to be fully implemented in a way that increasingly broadens capital ownership and creates a sustainable economy. Thus, some could argue that it is an unproven idea. Flying at Mac 20 was also an unproven idea until it was not. With regards to the high potential of failure, I view this in the context of a highly competitive grant competition, rather than failing in terms of the approach. Having spent many years exploring the approach with Prof. Robert Ashford, I feel confident it has the potential to reduce inequality and stimulate significant economic growth. The basic idea is that if everyone received an additional and growing income from capital ownership, they would spend this money on goods and services, stimulating further growth (‘binary growth’). Given the potential negative environmental impacts of this growth, our proposal developed an innovate way to finance the growth of inherently sustainable goods and services. The problem statement from our proposal clearly explains the combination of these two ideas.

Few people today produce enough to take care of themselves or their families. Labor, the main source of economic productiveness prior to the industrial revolution, has declined in relative productiveness as labor-displacing technology advances and becomes hyper-productive in comparison to labor [see the Second Machine Age]. These trends are driving the growth in inequality and the erosion in labor earning capacity, with the ownership of productive wealth being highly concentrated, and with most people owning little or nothing. Attempts to generate equitable growth via government stimulus or austerity programs have failed.

A second critical and related problem is the negative environmental impacts that accompany technology-fueled growth. The Rio+20 promise of a Green Economy has yet to truly materialize, but simply going green is not enough. A new, inherently sustainable industrial revolution is needed, where products and services are produced, used, and disposed of in closed-loop, hyper-efficient systems. A major challenge, however, is the creation of markets for these next-generation products and services. These markets need to provide all people with an equal opportunity to earn incomes from their labor and from a capital ownership stake in the inherently sustainable products and services they benefit from.

When put together, these two macro problems – i.e., inadequate income and the negative environmental impacts of growth – underlie most of the major challenges facing humankind. The fundamental problem addressed by this proposal is how to create Inclusive and Sustainable Prosperity for All.

Since we decided to advance a 100&Change proposal in the first week of September (four weeks ago!), I needed to recruit help to make this proposal happen. I decided to focus my sustainability seminar on the topic of binary economics and asked my graduate students to help structure the content of the 100&Change ‘pitch’ video. They willingly agreed to help and spent several weeks reading, learning, and struggling with the ideas before developing what I considered to be a firm understanding of binary economic principles. The pictures below capture some of the ideas we discussed during this learning process. We also developed a number of concept videos that can be viewed here and here.

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While my students helped develop the video (with technical support from TLOS), I was fortunate to have colleagues in the School of Public and International Affairs (SPIA), the Office of International, Research, Education, and Development (OIRED), and the Institute for Policy and Governance (IPG) who both understood the approach and worked hard to help craft a viable project (described below).

This project will make the ownership of capital – a critical and growing form of income – more inclusive by using future capital earnings (future savings) to finance broadening capital acquisition to provide growing numbers of people with capital income. The new capital income will target inherently sustainable goods and services, stimulating innovation and supporting long-term sustainability. As production becomes ever more capital intensive, providing everyone with an ownership stake in capital will be critical to broadly increasing purchasing power, reducing inequality, and fostering sustainable communities.

Because most people lack the capacity to generate past savings, there must be a shift to using future savings to finance new capital. Presently, almost all capital acquired by corporations is acquired with the earnings of capital, and much of it is acquired with borrowed money. The new mechanisms developed by the project team will open to all people the techniques of corporate finance that will broaden capital ownership and provide beneficiaries with a growing capital income. Because present demand for the employment of capital and labor is dependent on expected demand for goods or services in a future period, a voluntary pattern of steadily broadening capital acquisition promises more production-based consumer demand in future years and therefore more demand for a fuller employment of labor and capital in earlier years. Further, the targeted use of newly acquired capital income to purchase inherently sustainable goods and services will significantly expand the market for these goods and services, creating powerful incentives for innovation.

What is perhaps most interesting about this experience is that while I initially viewed the challenge of creating a 100&Change proposal as a moonshot, the more we worked on the idea and began to form the team, the more it became a realistic possibility. My graduate students proved to be the best critics of the ideas we were exploring and played an important role in framing the approach to the project. In many ways, as the proposal evolved, so too did the team’s confidence in what we could accomplished with binary economics. Our final 90-second video (below) is ‘one small step’ towards a broader understanding of the approach.

After completing our proposal, I started watching the other 100&Change videos on YouTube and realized that our approach could finance those ideas focused on the creation of inherently sustainable goods and services. Thus, if you find yourself wondering what inherently sustainable means, take a look at the available videos and get inspired.