Transcript for John Fullerton

Gino Borges:

It’s the Joseph Campbell-esque moments that we all share in common, the archetypal psychic and material moments that we all have in common. While the details may be different for each and every one of us, we do have a lot in common that we share as a human community. Given that we’re all at some level experiencing some form of blessing with an abundance of resources that often extend beyond our individual needs and our family’s needs. What are we being called to do? To live intentionally and to live in a way that feels more meaningful, not just for ourselves, but also for our fellow human beings.

I’m very excited to be joined by John Fullerton, who’s been on one of these journeys and he’ll be sharing a lot more about that inner journey that took him from a very conventional Wall Street role to what he’s doing now with the Capital Institute.

John started his financial career at JP Morgan on Wall Street.  No need to explain who JP Morgan is, but what’s probably more exciting for this conversation will be that migration from JP Morgan to the focus on regenerative finance, which from my understanding and reading of John’s work has been happening over the past decade. John is the founder and president of the Capital Institute, which is a nonpartisan collaborative focused on a regenerative economy. He’s also the author of Regenerative Capitalism: How Universal Principles and Patterns Will Shape the New Economy, is a fellow Toniic member, a great organization started by Charly and Lisa Kleisner. He’s also a principal in Level Three Capital Advisors, which is John’s holding company for impact investors and his own personal impact investments.

John, start with a little bit about that journey, about what started turning inside of you in the mid 2000s, or maybe even before that. A sense of denial? A sense of coming to and just what was happening internally inside of you? What led to you really making that shift and starting that journey?

John Fullerton:

I left JP Morgan, had been restless there. I moved around different parts of the firm. Each time I made a move, it postponed the “itch” as it will.  I actually began thinking about aligning capital and purpose while I was doing private equity investments. In 1997 I made my first impact investment, which was in a charter school management company called Edison Schools. I’ve been thinking about this issue for a long time that fundamentally changed the culture of Morgan and made it very clear that the culture, which is really the main reason that I stayed there so long, it’s a wonderful culture and quite unique on Wall Street. It became very clear that that was overrated. It had been dying for years, but it was now clearly over. And so, I really left with no plans and no idea what I wanted to do next and certainly no grasp of the environmental crises. I said to myself, I was going to take the summer off and then think about it in the fall. I started thinking about getting involved in the charter school movement and ultimately decided that wasn’t for me, but while I was in that journey, rebuilding what I wanted to do next, I experienced 9/11 up close and personal.

That experience really shifted everything for me and pushed me into my deep-think period, my walk in the woods, or my climb up the mountain or whatever you want as a metaphor. I read a ton of books during those next five to seven years and I was dabbling in impact investing during that time. In particular, True Investor’s Circle in those days, but really trying to figure out what the hell was going on in the world.

Gino Borges:

Not all of us have the existential experience of being in a Wall Street context. Was there something where you’re sitting at a board room, high up on the 37th floor of Manhattan? Help us understand what happens in the inner Wall Street world.

John Fullerton:

An epiphany moment occurred for me the year earlier. It was in 1995. The Wall Street Morgan, which I would say was high ethics and high integrity and genuinely we had a sense that we were sort of special. It wasn’t this kind of money hungry, do whatever’s legal to make money kind of thing. We felt that there was a higher calling to our work, which isn’t to suggest we were doing God’s work, but there was a way of doing business and the financial system was central to the integrity of the global economy. Then you needed banks that you could trust. We all generally believed in that and there’s a lot of truth to that in those days, but increasingly at a personal level, I felt I was working toward this goal of what our culture defined as success for us and what that meant, even in Oregon, but certainly in Wall Street culture was running a bigger business and making more money.

I remember that epiphany moment. I had recently been put in charge of our global commodities and commodity service business at a pretty young age. I was now a mister big-shot at a young age and I had to fly to Singapore or Hong Kong, I guess it was to meet the team that was based there. It turned out I had to fly on Father’s Day just because the way this calendar works and these were the days when managing directors get flown around first class. Here I am sitting in Singapore Air First Class chair, a New York Timeson my lap. I had two young children at home, one newborn and one two-year-old at the time and you don’t get much time to read the Sunday paper when you have two young kids at home.

I should have been happy as a clam because I got all this time and I got first class and “I’m Mr. Big and I’m going to meet the troops” and I was miserable. It was because I wanted to be home with my family and without pursuing the “golden ring” and I looked down at the newspaper and on the right hand column there was an article about how corrupt and mismanaged the  federal low income housing system was. The message was lots of big problems in the world that need fixing. On the left hand column was an article about Walter Annenberg long before the giving pledge. For those who don’t recognize names, he was a big media guy.

He made front page news because he had just decided to donate the bulk of his fortune, which I think was $350 million, which in those days was equivalent to $1 billion. He gave it to three or four educational institutions. It’s all good. He was the American dream, right? He lived the success story and business tycoon turned philanthropist in your retirement and then get to read about yourself in the New York Times. I remember just having this visceral reaction that I didn’t want to be that guy. There was plenty of money in the world and plenty of problems that needed work. And while I’m still young, I wanted to get to work on the problems rather than climb this ladder of success to turn into my version of Walter Annenberg someday, and I say that with no disrespect to Walter Annenberg. He was an exemplar of the success story of our society. In many ways I say to people, I quit Wall Street that day. It just took me another four years to muster the courage to actually walk away.

Gino Borges:

After you had this summer off, what in particular resonated with you that drove you into thinking about money more from a multi-stakeholder three-dimensional approach? There’s a heavy leaning toward understanding bio-mimicry principles from my readings of what you’ve shared with the world. Where did that shift sort of occur?

John Fullerton:

I remember starting to write a paper early on in that period called Social Capitalism. I’m thinking that I was inventing some new idea and then someone said to me, have you ever met Jed Emerson? The conversation we had in the investment committee when we did the Edison Schools investment. We invested $22 million in an early stage company and had the exact same conversation in our board and our investment committee that you could’ve read about Ford Foundation having. Can you make money, sacrifice, return, all that stuff? So this idea of a more holistic approach to value creation somehow it was intuitive for me, and I would say it was in the deep think learning period after I left that I discovered complexity science and living systems and bio-mimicry and holism and all of that just really resonated with me.

I’d forgotten or neglected to mention I was holding this tension between the invisible hand of capitalism, which I had been trained to believe in and generally believed in. Of course there is some truth to it. But also the golden rule that is central to virtually every major religion in the world. I actually started a discussion group at my local church and this had to be back in the late 90s called Christianity and Capitalism: oil and water. It was about the question of reconciling the invisible hand and the golden rule.

Frankly, that conversation was pretty amateur and didn’t really go anywhere, but it became very clear that there’s a lot of interest in it. A bunch of us Wall Street warriors showed up. It was a men’s group and it was very clear that that was an important question. And even though we didn’t resolve it at all in that thing, I would say that that’s sort of reconnecting my spiritual beliefs and the wisdom contained in all of the world’s religious systems seemed completely out of alignment with how capitalism was playing out. Then when I learned about living systems science and complexity science and, in a sense, modern science as opposed to the science we’re taught in school, it just became very clear to me that modern science is actually amazingly in alignment with the old wisdom traditions of east, west, and indigenous.

And that’s made clear, for example, in new cyclical. It dawned on me that either the human economy was the thing that was out of whack and it had nothing to do with socialism or capitalism. Essentially it became clear that modern science and wisdom were essentially saying similar if not identical complimentary ideas like the importance of relationship to health. I had just spent 20 years in a culture where relationship became increasingly an afterthought. In fact, Wall Street moves from a relationship culture to a transaction culture during my career there, thinking we were making progress. That was reflective of the modern competitive global market system. In fact, we were moving it further away from how living systems actually work.

Just to complete my earlier thoughts, it became very clear to me that both our wisdom traditions and our science were in alignment and capitalism without an alignment. I’m pursuing a really simple idea, which is that if our economic system is to be sustainable over a long period of time, there’s either two things that are true, either we convince ourselves that the human economy is the only exception to the rule that says all systems that sustain themselves behave in accordance with these principles or we need to move the human economy into alignment with these patterns and principles. That seems like a pretty simple, obvious no brainer to choose from. The hard thing is to figure out what that actually looks like and even harder, how we get from where we are to where we need to be.

Gino Borges:

Is that the genesis and the basis for what the Capital Institute is? Is that the outward manifestation and the field working, grounding these ideas and trying to do the transition? Maybe you can outline a little bit about how that got started and where it’s at right now.

John Fullerton:

Sure. Yes, but we didn’t get started there. I’ve been wrestling with this question for years. I remember the first thing I wrote, my coming out of the closet, if you will, was I wrote a paper on EF Schumacher, the relevancy of EF Schumacher to 21st century in 2007. I was just wrestling with some questions and my friends thought I’d lost my mind and then the financial crisis happens. Then all of a sudden more than I deserve credit for, people suddenly thought I had predicted it. Of course I didn’t predict the crash any more than most people, but it just reinforced to me that something was seriously wrong in the same way that 9/11 convinced me at a visceral level in a way that no one could convince me otherwise. That was a horrible thing that happened, but it also reflected something much deeper that none of us still understands.

To me, these are all connected and they all have meaning beyond the meaning of the financial crash. It was not simply that a bunch of mortgage fraud leads to a bad place. The meaning of that was that the entire system is broken and unsustainable and will collapse, and did collapse, but for the bailout by the central banks. It’s a much deeper problem than most people who have analyzed it would say. Most people would say, “well, the banks didn’t have enough capital and there was fraud in the mortgage market” but to me that’s it. The collapse is a symptom of a much deeper issue. So after the financial crisis, I had the courage to stick my head out and launch an organization with no real plan, no clear vision, really. Really just a container for the question. What it is and what it was meant to be and what it is now and what it’s going to be is less important than it being a container for the questions.

Gino Borges:

How does that misalignment happen? How can we be here? We are creatures of the Earth and yet we can create extensions that are out of alignment with the very source that brought us into being. Take us through what you’ve discovered. You had a pretty significant write up on this, but where did the imperative and the motivation to become misaligned with the very source of our being start to originate?

John Fullerton:

That’s a great question. I’ll share my current understanding of it. I probably would have answered this differently a year ago than I do today. So this is by no means a finished product. I have a new colleague, Joe Brewer. Some people may have seen his work. He’s pretty prolific on Medium in particular and he’s working from the context of cultural evolution, which is a big idea. Essentially trying to understand the evolution of human culture. I would start by saying, to get a handle on trying to answer your question, we need to be able to zoom out to longer timeframes than we’re normally accustomed to thinking in.  Particularly, if you come out of the financial world, it’s a long time. Long-term finance can be a year. Next quarter is a long time away.

Even ignoring the problems of Wall Street, I think most of us think our basic frame of reference is somewhere from our parents’ childhood to maybe our grandkids when they’re kids, right? Not when they’re old, but I don’t know how many years that is, but it’s a couple of generations. It’s nothing in the scheme of human culture. To get a handle on your question, going back in history is critical and in the context of Western culture the big shifts are what we call eras. There was the ancient era and the medieval era, and now the modern era. Unless we force ourselves to think about it, most of us probably assume that we’re in the modern era and that’s it.

Then there’s nothing coming after the modern era because we are now modern. Lots of people have been thinking about this and writing about this and it turns out, that’s probably not true. I think that is our unquestioned framing when we think about these things. The answer isn’t socialism versus capitalism, which is all in our current framing.  At the very least, I think we need to go back and understand what caused the shift from the medieval era to the modern era. I do think the roots of the answer of your question are in that; there were plenty of problems with the medieval period. This is a Western culture perspective, there’d be a different story for Eastern and Middle Eastern, but from a Western culture perspective we moved out of a world where it’s been written that essentially we humans didn’t need to think for ourselves because the church did the thinking and the Pope told us what to do.

Most of us were basically subsistence farmers and if we had a moral worldview, it came from the Church, and truth, therefore, was told to us. Copernicus comes along and posits that the earth is not the center of the universe. The Earth is rotating around the Sun. That puts into question the whole church-centered, God-centered, “Pope has a direct line to God” worldview. Suddenly we’re being taught that we can think for ourselves and the elite scholars were discovering all kinds of stuff. Out of that came the kind of individualism and reductionist analysis. We can figure stuff out and if we can see it, it must be real. In order to solve the old problem, which was, we’re not even thinking for ourselves, we’re just living in this mythical reality.

The church, because it was a big powerful institution, was subject to the same corruption that all powerful institutions are. It wasn’t perfect, and it lacked all of the knowledge that we gained in the modern era. It couldn’t possibly have had complete truth. In fixing that problem, we created the current problem. It’s not to say that the modern age is bad, and the modern age is wrong. The reductionist analysis is not incredibly valuable. By reducing what’s complicated into the parts, you lose sight of the whole. And so now, we’re having to fix the problems of the modern era with our next era of staging, which some people are now calling the inner era.


The challenge is that the problems of the medieval era weren’t life threatening to everything on the planet. They were threatening to certain cultures, inhibiting growth and development, but they weren’t threatening. This is the first time from my reading of history that literally the life on this planet is at stake as opposed to life in one culture or one region or one island.

Gino Borges:

I’ll just add that the Cartesian split was a big part of it. You see how it’s reified in our language, how we actually separate ourselves from the outer world. The idea of the subject-object split is a huge invention that is complicit in all of our language and our framing of things. Before that the outer world, the natural world used to be thought of from a phenomenological perspective. It was always unfolding. There was no static phenomena to be studied or observed that was separate from me. I just didn’t even know about. I would participate in the world from a unifying, evolving, unfolding, more of a poetic existence. I’m not saying that life was easier, but it definitely was different in terms of perspective taking. All of a sudden we separated the natural world from ourselves by objectifying it.  I put some huge scare quotes around objectifying it because that’s an illusion by itself. That, in itself, turned mother into a commodity. When the mother Earth became a commodity, that in essence started leading to the potential for misalignment.

John Fullerton:

I totally agree with that. That’s part of the break between the medieval era to the modern era. There were many good things about that. But it contained within it the seeds of our destruction.

Gino Borges:

Let’s fast forward to where the Capital Institute now is working on putting resources and thought into this theme of regeneration. I see that word being used more and more by people in impact who are looking to evolve beyond our current understanding of what it means to be impactful. But people who want to go the next step are using the term regenerative. Maybe you can unpack that one, what it means and why it’s important to go in that direction.

John Fullerton:

It does seem that it’s become a term that people are latching onto. I like to use my good friend, John Elkington’s story, as an example. He coined the term triple bottom line 25 years ago. I would argue that idea of triple bottom line is at the heart of impact investing and B Corp’s and ESG and probably just about anything else in this space. He actually wrote a piece in Harvard Business Reviewlast year where he did a product recall on the term triple bottom line, which is brilliant. Very clever, only an Englishman could do, but if you read the piece, it’s very short. He essentially says that even though the idea was meant to trigger transformational change, it’s been watered down into an accounting idea. We got our tape measures out and our calculators out and we’re trying to put numbers on it all. Once you do that, you reduce it to numbers.

It loses its power. Of course, the other thing I would argue, I think he would agree with this, is that the triple bottom line concept is great, but when push comes to shove, there’s still really only one bottom line. Particularly under stress, there is really only one that matters. Businesses do pretty much what they need to do to keep that one working. If they can do two and three at the same time, great. He acknowledged that it’s not working for what he intended it for. I strongly have felt for years that the impact investing idea “does well by doing good” was pretty shallow, made you feel good and rah rah rah.

I’m all part of it, but it wasn’t really probing nearly deep enough into the systemic issues of how our economy works and how powerful and destructive capital can be. For me the word regenerative, I first experienced through my work in managing grass lands. I have a partnership with the Savory Institute and Allen is very passionate about this idea of shifting from reductionist decision making to holistic decision making. He’s applied it on the large landscapes and proven that if we shift to a more biomimic approach to managing large landscapes the way the buffalo used to roam, it’s not only good for the buffalo and the landscapes, but it also is more economically viable for ranchers to manage their herds that way.

This wasn’t a theory; I literally have been out on a horse and seen it. I’ve invested in it and it’s proven that the regenerative potential that’s laying dormant in all the world’s grasslands can be realized in the real world, including translating into measurable ecological benefits, measurable carbon sequestration and more profitable ranching business. Starting 10 years ago, they weren’t really using the word regeneration. They were using the word holistic. It was about holistic management.  I bumped into the Regenesis Group – Bill Reed and colleagues – they were applying the idea of regeneration to real estate development, something that you know a little bit about.  So there is clearly a thing called “regenerative real estate development.”

Again, I saw through real investment projects with a guy named Dan. He introduced me to Regenesis, real value creation in real estate. The opportunities, and potential that came out and was realized, that a typical real estate developer wouldn’t have seen through a conventional lens. I’m starting to put the dots together and say, well, if this can work in the context of a large landscape, I knew it worked in the context of a more traditional crop farming operation. Regenerative agriculture was a thing. And, now I see it’s also working in the context of the built environment. It became very clear to me that it was real and that if you follow a system science approach, these are just different systems of the human economy.

If it works on those systems and it was true, it had to be relevant to the entire human economy. I feel like our unique contribution at Capital Institute is to see how this regenerative process is already at work in the real economy and moving it from the context of agriculture or the context of the built environment to a broader context of the whole economy. I would say the real path finder in this work is Jane Jacobs, although she’s most known for applying it in the context of neighborhoods and cities. But if you read her work, she was clearly thinking about its application broadly to economy. Interestingly, I only learned this recently, Bucky Fuller, died in 1983 and his final book is called Grunge, which was his critique of capitalism. In it he talks about regenerative universe. This is not a new idea, but for whatever reasons, no one has really pushed it in a serious way to be a set of design principles for the entire human economy, not just segments of the human economy that are closest to living systems. The way we’re trying to accelerate the manifestation of this idea in the world, and I say accelerate because it was happening long before I came along. But there is now a global movement of efforts that are aligned with this living systems idea. One of the principles of living systems is community in place.

We launched a network last year called the regenerative communities network. We use the word community importantly because it’s about communities, not economies and abstraction that economists use to put numbers on something. But what really matters, and again, this is based on what the principals tell us are actually whole communities. If people are interested, there’s a distinct effort that you can find on our website and then click on network, you’ll see it. We now have seven places around the world that we’re working with to manifest regenerative community. By the end of this year, it’ll probably be 15, and there’s a pipeline of 50 that we’re in touch with potentially wanting to join. There’s probably another 5,000 initiatives that we even know about. I mean, we can see dots on a map that we don’t have a chance to connect so think of it as a bunch of networks invisible to the real world, like the mycelium and the soil.

It’s happening. Our theory of change is, if we can connect these together,  learn together, it’ll accelerate change faster. So we’ll have an infrastructure building up from the bottom that will create resiliency as the world’s crises continue to unfold and spin out of control and cause more damage and where impact investors need to play in this is to shift the focus from “I do renewable energy” or “I do education.” “I can measure my impact this way” to recognizing the capital’s purpose is to be in service in our lifetime. The purpose of capital is to be in support of this emergence of regenerative communities. So anytime we can align our own investments into that transition, in my opinion, that’s the highest and best use for our capital.

Place-based investing is the way that manifests. I would predict place-based investing will be a thing. Maybe Wall Street will call it an asset class so they can go raise capital and charge fees for it. It’s kind of like, let’s all pick some places that are important to us and dig in around that place across the full spectrum of what’s needed in that place, not determined by us all knowing capital, determined by the people who actually are leading that regenerative process in that place. And, if the returns on that are high, fantastic. And if they’re not so high, that’s okay too. We need to figure out how to flow capital into that because that’s really what has to happen, which isn’t to say that we don’t need to put up wind farms and solar panels like crazy.

But if we just put up wind farms and solar panels like crazy and don’t reconstitute the DNA of how we operate human economies, we’re just postponing the crash that we’re heading toward. Say if we had carbon free and money free energy tomorrow for everyone on the planet, we would collapse faster then we’re going to collapse if we keep on the path we’re on. Climate change and carbon emissions are just one symptom of a much deeper problem. If you want to really get depressed, study the species extinction, desertification, and no more insects. So it’s a much deeper issue than just climate change. Even though climate change is the big issue that we’re all increasingly focused on.

Gino Borges:

I feel like I want another call just on place-based investing. I think there’s a lot more to learn there because most investments absolutely neuter the place. You know, this is just the world that we live in, that we’re obsessed with. It’s fascinating how you came to that conclusion and are working in that space. I feel like that warrants a whole conversation. I do want to ask you though, the comment you made where you said during stressful times a triple bottom line company really becomes one kind of company focused on the financial and not the ecological and the social. But do you think we’ve reached a point in time where those ecological values and social values and governance values in some businesses actually become the actual strategy, not a peripheral thing, but actually become much more robust?

I’m really going after challenging the concessionary compromising of these values which the traditional product has. Do you think there’s enough critical mass out there, enough of a subculture, enough value-oriented investors that there’s enough of a tailwind to support businesses who embed those values within their business actually becoming more valuable as a differentiator? Curious on what you see in your space in terms of the deals that come through your pipeline, your portfolio. When you’re out there talking and seeing and reading, do you think we’ve reached that time or not yet? And the ones that do, are they able to do it or just few and far between?

John Fullerton:

What I said earlier is probably way too absolute. To make a generalization that there’s no such thing as a triple bottom line company, that’s wrong. I go back to my Morgan experience.  I think there’s a difference between big public companies and what they in a sense need to do given the system they’re sitting in versus a private company, and particularly, a private company with a very enlightened capital source. Lots of different things can be done, or said differently. Patagonia can do all kinds of things Citibank can do, and so certainly a private company owned by the right, either person or group of investors, I think can do a lot of things, which by the way, I think is one of the really hopeful opportunities. One of the interesting facts I just learned recently is that, and this going to big companies, is that 75% of global GDP is represented by companies that still have a meaningful family involvement in the business. For example, the Walton’s still own 45% of Walmart.

Yeah, that’s a no brainer. I’ll say it very bluntly. Should they decide to exercise the responsibility that they are not currently exercising, that company could transform overnight. We saw what happened when the Rockefeller family decided to engage with Exxon even though they owned a very small percentage and probably didn’t know, whether they owned it or not didn’t matter. The reason they had power was that it was a moral authority of the company and its origin. The Ford family owns a meaningful percentage of and bigger control of Ford. All of these public companies, and if this statistic is right and it came from a wealthy family that’s a part of a participant in a family-owned business, global network, it was a real number. Think about the potential of those families engaging with the businesses that they still have influence on in a way that’s very different than the typical passive shareholder. I think that’s a really powerful opportunity.

Circling back to your question, if I were to describe what happened to JP Morgan during the last 10 years of my career there, it was that the financial pressures got higher. It got harder to be the good above the fray. AAA bank, we only do first class business in a first class way, and there was pressure for earnings and return on equity. The context we live in is like a world where money is our value system. For an individual company, whether it’s a beautiful little startup in Costa Rica, or Citibank, to buck that trend is pretty hard.

Any thought that a blossoming, beautiful little business on their own can change this is shortsighted. What we really need to do is wrestle with understanding why the system is what it is and how we need to shift the system so that the beautiful little companies flourish and the big businesses that are in conflict with the way the world needs to be, either through bankruptcy or change or social outcasts or regulation or new laws are put out to pasture.


Gino Borges:                 I love the pasture metaphor, having been a dairy farmer.

John Fullerton:

Gino, you’re kind of a microcosm. Each one of your projects is place-based communities. I’ll do a little advertisement for what they bring into their communities. You didn’t use the term regenerative, but what intrigued me when I studied it, is it’s highly regenerative. That’s a longer story for another day. I would say your business model is proof that regenerative is a thing that actually works in the context of real estate, but interestingly in the social side of it, more than the logical side of it. So regeneration is not an ecological idea. It’s a social and ecological idea rooted in ecological reality, but it applies equally to all of the social dimensions of human community and culture.


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