254 Charley Cummings - The silver bullet of regeneration is accounting

A conversation with Charley Cummings, founder and CEO of Walden Mutual Bank, about building a cooperative bank, owned by the customers, and why starting a bank might be the most impactful thing you can do in your regional food system and much more.

Why would Charley after founding a successful, local, animal protein, direct to consumer, grass fed and finished businesses decided to start a bank, and not a bank build for an exit no a mutual one basically a cooperative owned by the customers?And to make matters worse the last mutual bank in the US was started over 50 years ago. It is safe to say the regulators weren’t really going easy on Charley when starting his bank.

---------------------------------------------------

Join our Gumroad community, discover the tiers and benefits on www.gumroad.com/investinginregenag. 

Support our work:

• Share it
• Give a 5-star rating
• Buy us a coffee… or a meal! www.Ko-fi.com/regenerativeagriculture

----------------------------------------------------

More about this episode on https://investinginregenerativeagriculture.com/charley-cummings.

Find our video course on https://investinginregenerativeagriculture.com/course.

----------------------------------------------------
The above references an opinion and is for information and educational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

Find out more about our Generation-Re investment syndicate:
https://gen-re.land/

Listen to the Hungry for Regeneration podcast here!
Apple Podcasts: https://podcasts.apple.com/us/podcast/hungry-for-regeneration/id1744733331
Spotify: https://open.spotify.com/show/5zGoQCbW45EIR9zvIqVpLr?si=851f097a65404667

https://www.freshventures.eu/

https://investinginregenerativeagriculture.com/2023/02/21/bart-van-der-zande-2/
https://investinginregenerativeagriculture.com/2024/03/22/chris-bloomfield-daniel-reisman/

https://foodhub.nl/en/opleidingen/your-path-forward-in-regenerative-food-and-agriculture/

Transcript

Speaker 1: 0:00

Why would you, after founding a successful local animal protein direct to consumer grass-fed, grass-finished all the good stuff business decide to start? Wait for it. A bank and not just any bank built for an exit like one of these fancy fintech companies know, a mutual one which is basically a cooperative owned by the customers and the depositors. And, to make matters worse, the last mutual bank in the US was started over 50 years ago. It's safe to say that the regulators weren't going easy on our guests of today, and for good reasons, when he started his bank. Why starting a bank might be the most impactful thing you can do in your regional food system. That's what we're going to talk about, plus why accounting is so incredibly interesting, where you bank really really matters, while there are no silver bullets in regeneration, and why long-term investment options, specifically for land, are fundamental.

Speaker 1: 0:51

Enjoy, this is the Investing in Regenerative Agriculture and Food podcast investing as if the planet mattered, where we talk to the pioneers in the regenerative food and agriculture space to learn more on how to put our money to work to regenerate soil, people, local communities and ecosystems, while making an appropriate and fair return.

Speaker 1: 1:24

Why my focus on soil and regeneration? Because so many of the pressing issues we face today have their roots in how we treat our land and our sea, grow our food, what we eat, where and consume, and it's time that we, as investors big and small and consumers, start paying much more attention to the dirt slash soil underneath our feet. To make it easy for fans to support our work, we launched our membership community and so many of you have joined us as a member. Thank you. Our work created value for you and if you have the means and only if you have the means consider joining us. Find out more on comroadcom slash investing in RegenAC that is, comroadcom slash investing in RegenAC or find the link below Welcome to another episode today with the founder and CEO of Walden Mutual Bank. Welcome, charlie.

Speaker 2: 2:23

Thanks so much for having me Con.

Speaker 1: 2:26

And to start with a personal question, I always like to ask at the beginning I mean, we're going to get to why you started the bank, but that's a different. That's the, let's say, the meat of this discussion. But also, how did you get into because it's a very specific focus bank? How did you get into, let's say, the local food scene? How do you get into regenerative agriculture and food? Everybody ask them why soil? Why, from all the career paths you could have chosen and probably other fintech companies you could have started, why one that focuses so much on the few inches of topsoil beneath our feet?

Speaker 2: 2:59

Well, so I grew up on Cape Cod, which is this sort of beautiful summer destination. I grew up scooping ice cream and frying seafood, and there was a proposal in the early 2000s to put the first offshore wind farm in the country off the coast of Cape Cod in Nantucket Sound.

Speaker 1: 3:20

And this became this. This is the US, just for international listeners. Yeah.

Speaker 2: 3:23

Yes, yes, the first one in the country.

Speaker 1: 3:24

people think okay, you didn't have one before? This is a whole different podcast about energy systems, why it took so long. You're getting there. But, there was an interesting proposal, let's say, for putting one wind farm in a very progressive area, normally where the progressive people were going on holiday.

Speaker 2: 3:41

Indeed, yeah, and this became one of the most contentious energy projects that the US has seen in many decades, much more so than a nuclear power plant, and in fact you had some of the most notable progressives that Kennedy family amongst them come out against this project, saying quite openly we're all for wind energy but just not here, not in our backyard.

Speaker 1: 4:10

So the needy effect was ridiculously strong yeah.

Speaker 2: 4:14

Yeah, this is where I learned the definition of the term NIMBY. But we were talking about standing on the beach and at arms length, a quarter inch on the horizon was the visual impact we were talking about, and people made so many funny arguments like this is the you wouldn't put a wind farm in the Grand Canyon and all of this stuff. And when, to me, the alternative was quite literally a coal plant in someone else's backyard, it just. I had a really hard time reconciling that, and so I spent a lot of time many years later in California's Central Valley, which is the most agriculturally productive area on the entire planet, and that was really sort of my entree to industrial agriculture and it was so interesting relative to this experience with this proposed offshore wind farm, which, by the way, never got built.

Speaker 2: 5:16

So they won, they won, and it just became clear to me that and this is true of banking too when it comes to all things energy, agriculture, waste, all things, natural resources when it's sort of out of sight, out of mind, it's someone else's problem somewhere else, and that leads to such negative consequences. To me, hunger Games was such a this is a horribly dystopian view. Setting aside the competition, with people killing each other. Just the setup of the society portrayed in that movie, where you have these rural sectors toiling on behalf of the urban elite and they have different sources of information, different educational systems, different access to capital. To me there were elements of that movie that were just a little bit too real.

Speaker 1: 6:28

So first time, somebody brings the Hunger Games up, but in this whole 250 plus, but it's a very I mean, I'm not thinking about it surprised that it hasn't come up before, because that's what we've been partly creating.

Speaker 2: 6:42

So that's why I've become such a fervent believer in regionalized food systems, but would also apply that same lens to energy, waste, all things natural resources. Because again, when it's someone else's problem somewhere else, that just leads to really terrible consequences environmentally, but also in the long term, potentially socially and politically.

Speaker 1: 7:08

It. Just it needs to be touchable, almost in your face, for us to take good care of it. Like as soon as it's out of sight, it just doesn't hit us hard enough to really do something about it. And then why did you? Because you had experience in energy, or at least saw that whole battle. Then what brought you to food? Because, also in energy, there's a lot of work to be done. Let's say, as you alluded to before, but what made you focus on I'm always saying quote unquote the other big transition we need? Of course there's waste and other streams, but let's say food and energy seem to be the two big systems that need a massive transition. Why you ended up in the Central Valley?

Speaker 2: 7:50

to begin with, Well, I was working for a venture backed composting company, and so I was traveling up and down the 99, which is sort of the primary highway there, and, as I said, this is the most agriculturally productive place on the planet. People don't realize what that means, but this valley produces like 50% of the country's major cash crops, from tomatoes to raspberries to strawberries, and 80 to 90% of the world's almonds and walnuts and things like that. Just like crazy numbers. And yet you visit these communities. And two things were very sort of stark observations for me. One was there's nowhere to eat in the valley except for Arby's and McDonald's, and that's such a weird dichotomy that the people who live there can't really literally enjoy the fruits of their labor. And two, these communities are bearing the brunt of this industrial food system in a way that in urban areas we are not at all. And so you walk through some of these towns that have, for example, an egg laying facility, and the smell of ammonia on the just walking down the sidewalk to me was completely overwhelming, like not not just uncomfortable to be outside, like really pervasive, and for the people who live there it's just an accepted part of living in that community. And to compare that to the political power of folks that live in Hyannisport that didn't want to see this wind farm 10 miles off the coast. It's just like I've just found that really hard to reconcile.

Speaker 2: 9:43

So my wife and I moved back East in 2013,. She started working on an organic vegetable farm. We read a handful of books together. That was a few years after Michael Pollan's divorce dilemma came out and we were both just really motivated to understand the local food ecosystem and dig into what was missing. So around the time she started farming, I started putting together plans to start Walden Local, which is a brand of local, sustainable meat pasture based meat. So we bought a truck in 2013 and started buying whole animals and distributing them to at first 50 pilot families. That sort of bought into essentially shares of these animals and then spent eight or nine years growing it. So fast forward to today. The company serves about 30,000 individual families from Central Jersey to Portland Maine, with a monthly delivery of grass fed beef pastures, pork, chicken, lamb and then increasingly, a variety of other ancillary products like raw milk, cheeses and grass fed butter and things like that.

Speaker 1: 11:11

The good stuff. Yeah, why the animal protein side? Because you said specifically you could also start farming. Started farming, I mean, your wife, did you read a number of books? I think many people are in that phase, maybe now as well. Maybe some are listening as well, like how did you narrow down the folks? And then we get to how that led to a bank, which is not such a logical step, or at least not one that you hear every day. But how did you narrowed it down, like the of the 10th of options?

Speaker 2: 11:41

you probably had to start animal protein, one gets back to the question you asked before, which I didn't answer, which is why soil? So People don't realize that, yes, animals eat plants, but plants also eat animals and ruminant animals, animals that eat grass, like cows and sheep, play this amazing role, from an ecosystem services perspective, of building soil and specifically holding carbon in the soil. So if you look at just from a very high level perspective, there's three times the amount of carbon in the soil as there is in the entire atmosphere, plus all plant and animal life combined. Let me just say that one more time there's three times the amount of carbon in the soil relative to all plant and animal life, plus everything we've put in the atmosphere since humans came into the existence. Three times the amount. And so what any sort of carbon strategy really has to address? Soil's potential as a carbon sink. Another way to think about soil from that perspective is 50% of what's emitted in terms of CO2 is remains in the atmosphere, and then the other 50% 25 gets absorbed by the ocean and 25% gets absorbed by land, by soil, and so we spend all of our time talking about the portion that is flowing into the atmosphere, but look at what is being absorbed by the soil. If that 25% goes to 30 or 40%, that is a sea change in terms of our ability to, you know, to sort of handle carbon on an ongoing basis. So, anyway, a lot more to say about that.

Speaker 2: 13:47

But that pasture-based animal agriculture, I think, is a huge part of the climate solve, but also maybe a more local answer was this isn't a particularly productive place to grow monoculture row crops. If you want to be a corn or soy farmer, massachusetts and New Hampshire are generally not at the top of your list. We have hilly, rocky soils, we have a short annual growing season. We have actually the Boston. People don't realize this, but Boston gets more annual rainfall than Seattle. Seattle has more rainy days, but we get about 12 inches of additional rain here.

Speaker 2: 14:41

Anyway, all those things combined make it Perfect grassland, yeah, yeah, it's actually in fact one of the most productive places, certainly in the US, to grow perennial pasture, and that makes it a really amazing place to grow ruminant animals, animals that eat grass. There's also this element of farms tend to be smaller in the Northeast and they're actually very close to urban areas. So compare that to, say, the Midwest. Not only is it not possible here to put together 10,000 contiguous acres very easily, but they tend. The farms that are here tend to be pretty close to urban areas, and so the business that we've built at Wild and Local sort of reflects all of those things, and it makes a lot of sense in this region of the country relative to other options. From a land use perspective. I sort of had the theory that this is the highest and best use of available land here.

Speaker 1: 15:57

And do you remember when it clicked for you the role of ruminants in rebuilding soil, storing water capacity, carbon soil carbon, et cetera? Because I don't think Central Valley is such a grazing area, let's say it's something. You've seen massive examples of holistic, managed grazing there. Do you remember? Was it the omnivorous dilemma? Was it then barber? What was the trigger? Because it goes against, I mean, not on this show, particularly because we've had many, many people on the grazing side, but let's say, in the general public it's still very much the cow and not the. How Do you remember when that clicked with you if there was a specific moment, specific documentary, specific visit to some place?

Speaker 2: 16:43

There were a couple of books that my wife and I read on our way back from California moving back east. One was omnivorous dilemma. Another was Kristen Kimball's book about her very much romanticizes small scale farming in the northeast. I'm blanking on the name of it, but she's an amazing writer, just a really fun book to read. But even more than that, because of those books we started engaging with local farmers and tasting their products. And it was really this. We met this amazing local farmer named Steve and he raised pasture, raised chickens and pigs and cows. I think he's actually originally from Australia and he just had this amazing way of describing what he was doing to the land and why it created a better tasting product. We brought home a couple of chickens and cooked them for some friends of ours. It just the taste really blew us away.

Speaker 1: 18:02

After eating, not amazingly, let's say after 99 in Central.

Speaker 2: 18:07

Valley. The contrast was interesting and there was just this really positive moment where we're talking about Steve and all the things he's doing and it was just sort of like great food and great conversation and that sounds so silly but it's. I had had other experiences and I'm sure you've seen that too where we're all if we're trying to change other people's behaviors, we're often sort of my first impulse is like sort of put all the negative things in front of them around the consequences of their behavior and make them feel guilty about it. But then I look at my own behavior and I'm like actually, for example, you look at the methods that PETA uses and show people the terrible consequences of industrial agriculture and animal suffering and such. It's the same in the abortion movement.

Speaker 2: 19:19

Ultimately, those images they're fleeting. People are affected by them for 20 years. Then a day or two later they're totally forgotten. It's hard to change behavior that way. It's hard to change fundamental beliefs. What I've seen changing minds because it's changed my own mind is just the inspiration that comes from really positive experiences and the positive alternative. Anyway, I don't know if I answered your original question or not. You got me going for too long, but that was the original inspiration.

Speaker 1: 20:00

Absolutely. Then running a successful meat delivery and meat processing and marketing company, obviously you start a bank. That's just the most logical thing to do. You spare time. How did that come about? What's the step there? To say, okay, we actually need to start financing in this space around us much more than current banks or current offerings in the Pacific Northwest are doing.

Speaker 2: 20:31

Well, it came from a couple places. One our mission at the bank. It's a little cheeky, or our ethos, rather, is to grow your change. It's a little cheeky because it's a double entendre. Obviously, we want to help people grow their savings, but also grow their ability to change this. In our case, local food ecosystem. The mission underlying that is we enable anyone to make positive and lasting change to our local food ecosystem.

Speaker 1: 21:08

You mean local Hudson Valley. I said Pacific Northwest, obviously completely the other side, upstate, new York, hudson, that area.

Speaker 2: 21:16

Yeah, we're really focused on New York and New England.

Speaker 1: 21:21

Okay, well, your change started specifically focused on, say, I have savings and I live there and I want to move part of that or eat all of that. Do I move everything and do I cut my credit cards and lines with the big evil banks or what's the? Is it a radical transition in that sense or is it partly?

Speaker 2: 21:39

It can be anything and we take depositors from anywhere, so you don't have to live in the region to be a depositor at the bank. But we're focused from a lending perspective on our local food shed Do you see a lot of people from outside to join in.

Speaker 1: 21:53

Yes, yes.

Speaker 2: 21:55

Surprisingly, surprisingly so, and perhaps that's because people are keen to the fact that where you bank actually really matters, and what I mean by that is when you bank at one of the top five largest banks in the US, and this is true internationally as well.

Speaker 2: 22:15

I just don't know the specific players as well. $100,000 in a bank account with one of the top five banks is equivalent to the average Americans carbon impact for an entire year driving, flying, eating, purchasing whatever and the reason is because the top five banks in this country are the single largest investors in fossil fuel development $1.2 trillion since the Paris Accords were signed and ultimately, that's your money. And so trying to devise an alternative for a depositor that wanted to have an impact with their deposit dollars, the same way that people have shown a desire to do with investment dollars, that was a big part of the impetus. The other part of it was at Walden Local. We were so often in a position of lending to various entities in our supply chain, not just farms, but also value added manufacturers and different distribution parts, you came sort of a bank by default.

Speaker 2: 23:24

Yeah, and that wasn't really the business we intended to be in, but it did suggest there was a pretty interesting gap in the existing lending infrastructure.

Speaker 1: 24:08

And so how difficult is that to start? It's not that you wake up one day, obviously, and you have a bank. What's the process like to? I can't imagine very long, but when you came to this realization okay, we need to start our own bank. To the moment you officially opened for depositors to be able to wire and then open accounts and wire their money in how long did that take?

Speaker 2: 24:34

About two years start to finish, not that bad. Well, it seemed pretty bad at the time.

Speaker 1: 24:40

I don't know if I would recommend the process to someone else, but there's obviously a If somebody would ask you okay, I mean another region where local food starts to become very important like, how would you do it? Or maybe you do it yourself? I'm imagining there are some tricks or some things you know. Okay, these are the steps to do, or it's anyway such a I mean starting a bank, especially in this climate, sounds like a long journey.

Speaker 2: 25:09

I think it might be a little bit faster if we tried to set up again and do it again. We would do some things differently and obviously there are a lot of lessons learned. However, we didn't make it easy for ourselves I mean the reason, and that was largely a result of the regulatory process to get the charter over the finish line and under any circumstance that's a long, arduous process.

Speaker 1: 25:35

So you just need to know it's gonna take two years. You just need to be aware. Were you aware that it was gonna take two years, or you thought faster?

Speaker 2: 25:42

No, I think our expectation was more like a year, but we made a series of choices that made the application much more difficult from a regulatory standpoint. So one of those was being focused on a much larger geographic area than a typical new bank is being digitally oriented, so we don't actually have cash services. We have a physical location, but it's not really a bank branch. And then three were structured as a mutual. A lot of people have become less familiar with that term over time, but it's essentially a cooperative structure in which the bank is ultimately owned by its depositors, and there hasn't been a new mutual started in the US in about 50 years. So that combination of things, particularly the mutual element of it, just was flashing red lights at regulators to really dig in and understand this Really. So I mean from their perspective. It should be an arduous process. You don't want to allow anyone to just start a bank and open it tomorrow. It's important that there's a pretty big set of hurdles to jump over there, but we didn't make it any easier for ourselves.

Speaker 1: 27:10

So where are you now? We're talking summer, I mean Northern Hemisphere, summer 2023. World and Mutual Bank. How would you describe it now in terms of size? In terms of what kind of numbers can you share? Just to give us an idea of what we're talking about in terms of the bank?

Speaker 2: 27:27

Yeah, we opened for depositors about six months ago. We're probably somewhere around 60 million or so in assets. We've got a really amazing loan portfolio of, I think, some of the most notable entrepreneurs and companies across the entire value chain, so everything from production farms to manufacturers, to distributors, to some awesome consumer brands, and then also things that are sort of on the periphery of that ecosystem but help support the functioning of the whole have you invested in compost, yet, considering you're old-time, we've done a couple composting opportunities.

Speaker 2: 28:11

We have this amazing dog treat business that sort of up cycles waste streams from area farm and food businesses, so I think we're off to a good start.

Speaker 1: 28:25

And I mean six months is, of course, long and short at the same time. What's your biggest surprise?

Speaker 2: 28:38

I think Everything about banking takes patience, and that is not a quality that comes to me very easily, and there's an element of that as, just also for good reason, the industry is pretty risk averse and the safety and soundness of the bank is a key consideration, not just for regulators but for our management team and board. And so the push-pull between wanting to do sort of new, innovative things and move quickly on them and also sort of constraining ourselves to obviously protect depositors and the overall sort of nature of the bank itself, that's been an interesting journey.

Speaker 1: 29:41

Coming from a company, you're, of course, managing founding yourself, managing yourself and before that, in a VC backed startup where probably everything like break it and then ask for permission which is not the case, as you do with the bank you do that once. That was the end of the story.

Speaker 2: 29:58

Exactly, and I had a lot of experience in a heavily regulated industry. We co-operate a slaughtering processing plant up in Vermont and there's a USDA inspector on site every single day and you can't operate without them, and so that regulatory relationship is obviously really important. So I sort of had this concept of, oh, I know what that means, but banking is really different. It's not accurate to say that banks are heavily regulated. It's more that banks are essentially public utilities, and so the regulators are if you're doing it right partners in the enterprise. I mean, they are a key stakeholder, in the same way that investors or depositors or borrowers are, and so that mentality, I think, has served us well. But that has definitely been a lesson learned.

Speaker 1: 31:07

And I mean you cannot say a conclusive yes, probably. But your thesis that this piece was missing or is missing in the food system, specifically where you operate, like that there was missing a local bank focused on the local food scene. What would be your answer now? Like it's, that has been absolutely true. You said we have an amazing loan portfolio. I'm assuming they couldn't raise against those terms somewhere else, like have you filled a gap with the bank in the first six months? Do you have the feeling like you had a lot of interesting additionality? Let's say, yes, absolutely.

Speaker 2: 31:42

There are so many opportunities we see where, despite what we think is a really solid underlying business, they, for whatever reason, have had trouble getting an audience with this sort of normal bank, and so that's why we're here, so that that gap definitely exists and is maybe even larger than I had thought previously. There's so many people that are really eager to work with a lender that is not just not just sort of understands this ecosystem but is really deeply immersed in it, and so we're able to bring a lot of resources and people to bear in a lending relationship. That sort of harkens back to the way a bank maybe was 100 years ago, but certainly the larger institutions have gotten away from where. You know, we've got some amazing expertise in our network. If you're an operator that is having issues with distribution or inventory management or marketing, we're just so very easily able to connect them with other folks in our broader network, and that sort of serves the whole ecosystem well.

Speaker 2: 33:07

We're also trying to connect borrowers and depositors in a way that has not been true at a bank for a long time. So our depositors are generally sort of farmers market shoppers. As a proxy, there are people who are engaged in the local food movement. They want access to these types of farms and businesses. They want to go visit them, they want to go to events. They want, you know, discounts, samples, whatever. And then you look at these businesses and farms. They want any opportunity to engage with that segment. These are their core customers and so wherever we can facilitate those connections again also, I think sort of serves the ecosystem well long term.

Speaker 1: 35:16

And I saw on our website, you're launching a 100-year product. What's up with that? What's up with the local impact certificate of deposit? It's a mouthful or a local impact CD. Why is that such a revolutionary process? As I saw, I think it's the first of a kind. What's the reasoning behind launching that and what is it exactly, and where does it serve the system?

Speaker 2: 35:42

Yeah, so one thing we see on the farm side is land values are such that oftentimes the income profile of a small farm cannot support a loan for the land that amortizes over 10 or 15 years and generally Simply in plain English, the prices.

Speaker 1: 36:10

For whatever reason, speculation, land right. The price has gone up quite a lot and the productive capacity to serve a loan to in 10, 15 years is just not there.

Speaker 2: 36:21

Yeah, the annual payments do get bigger. Or the monthly payments end up being greater than what you could expect from a cash flow.

Speaker 1: 36:30

So you cannot borrow money to a farm, to buy to a neighbor or to expand, because it's just from a banking perspective and coming back to that, the bank needs to be sound it just doesn't make sense to write a loan.

Speaker 2: 36:41

Generally, banks don't want to write 30-year loans unless they are selling them right away. So, for example, consumer mortgages most banks sell the bulk of the consumer mortgages that they generate right away because there's a very active market in the form of Fannie Mae and Freddie Mac. That sort of helps banks essentially manage their balance sheet. So I guess, backing up a second, what banks fundamentally do is take what are ultimately short-term on-demand deposits and magically transform them into long-term loans. That's like the bank's fundamental role in the economy. And so it's very difficult to justify a 30-year loan from a sort of safety and soundness perspective, because you have to know that you have 30-year money to support that loan. And this isn't just in the case of a run-on deposits, it's more just understanding how to match those two-duration loans.

Speaker 1: 38:00

It's not the role as a bank to hold those loans, it's the role to create them. But then you need to, like a mortgage, sell it somewhere else and not to hold them on your balance sheet for 30 years.

Speaker 2: 38:14

It's very hard for a bank to take that risk, because if interest rates change, if your deposit-based changes, it's just a long time and it's something we've heard a lot actually on the land side, I think globally as well, of course.

Speaker 1: 38:27

Many places suffer from high land prices. And then what to do? Id are forced into extremely extractive, extracting even more value from the solo to pay a shorter-term loan 10 years it's still a lot, but it's nothing infarming or you need to find solutions, either with Lantrust or getting out of that wheel, or come up with other solutions to lengthen that time from 15 years on.

Speaker 2: 38:53

Yeah, lantrust and conservation easements and stuff are applicable in some situations. Not all property has, or rather some property has, more conservation value than others, and so in some cases that can't bridge the whole gap. But ultimately, a very straightforward way to reduce the monthly payment required is to extend the maturity of the loan. And so the question was well, how can we write 30-year loans, or at least experiment in writing loans that long and holding them on our books? Because there's no way you could sell these.

Speaker 2: 39:35

Well, if we had longer-term money we could do that, and so the 100-year CD is intended to allow us to write loans that long, potentially even longer than 30 years, and for the depositor, it's kind of an interesting addition to a fixed income portion of a portfolio, because a lot of people want what say you're really happy about getting five percent in a US treasury right now. More than likely you won't be getting that same interest rate a year or two years from now, and so a lot of people at the sort of height of a rate cycle would like to extend the Duration of their first fixed income portfolio. Some I'm probably losing the people that are less familiar with the investment world, but when between the gap between the land and the investment world.

Speaker 1: 40:35

So we need to go deep sometimes.

Speaker 2: 40:38

Well, the point is it's a, it's a. It can be an interesting addition to a larger portfolio like that, but also for the sort of smaller average investor, this is a risk free investment. It's backed by the full faith in credit of the US government through the, the fdic, and it compounds over a very long period of time, and so you can either just leave it and let it sit and watch A relatively small investment become quite large. So I think a hundred thousand dollar investment turns into an eight point five million dollar Total over a hundred years, and so that can be an interesting vehicle.

Speaker 2: 41:28

The magic of compounding interest, yeah yes, for a reason I don't know, it can be an interesting charitable giving tool that doesn't expose the charity to any sort of variability, if you like, if you had put it in the stock market. But also it can function much like an annuity, where you can pull the interest off Penalty free, so you could, you know, every year pull out the interest, or you could wait 20 years and pull out all the interest. So it's actually a more flexible sort of structure than it initially appears.

Speaker 1: 42:09

And then it allows you to do all kinds of different things with time, basically in farm. So where?

Speaker 2: 42:17

are you?

Speaker 1: 42:17

now with this product, or what's the current status? Again asking we're in summer of twenty twenty twenty three. What's your, what's the current level of the current status you're at?

Speaker 2: 42:30

We are. We are just booking the first ones now. We did start wait listing people because we were sort of at our limit. It looks like we're going to be able to release a few more people off the wait list, sort of booking them over the course of next week or so, but I think we've gotten a good response from it. It pays for seven, five and, yeah, I think it's been a really interesting mix of people, some some larger, some smaller, using it for very different purposes.

Speaker 1: 43:05

Have you already been able to do things on the land side or start conversations there and enable things that otherwise wouldn't be possible?

Speaker 2: 43:13

Yeah, we've got a couple pending pending loans at really long amortization, so it's sort of come together nicely.

Speaker 1: 43:20

Very interesting and then what would be your? Of course we're not giving investment advice, but let's say where I was like to say let's do this in the real theater, maybe in New York, with a, with an audience of the city of wall street. What would be your main message you want to give to them? If it's a room full of Quote, unquote finance, people managing their own money, other people's money, like of your journey so far, two and a half years plus, and actually all the years before building up a business in a local food scene, what's your main message to the finance world?

Speaker 2: 43:55

Well, I'm assuming I'm talking to an audience of people that care about impact and they're trying to be there, so they're excited, but maybe a bit new to space, so excited after the evening there.

Speaker 1: 44:06

They've heard a lot of interesting People and stories, but if we want them to remember one thing because of course I'm gonna remember a lot, like you said, you have to experience it to really change something. What would be that main message we like to Say during their head and they cannot, cannot forget the next morning when they go back to work and hopefully do something?

Speaker 2: 44:24

Well, you have to give me two, but one. One is the cash portion Is your portfolio, that is, your banking relationship Is incredibly impactful and, in fact, probably the most impactful purchasing decision you make as an individual, and so so your electric car, forget about all the Saturday morning shopping at the farmers market. Your Depending on how much you have a way.

Speaker 1: 44:53

So yeah, but it's a massive one we often Don't consider.

Speaker 2: 44:58

okay, don't forget about your banking relationship it's because it's out of sight, out of mind, but where you bank really matters. So that's message number one is is you know how can you achieve impact with Jumping as simple as a banking relationship? I think the second is Everybody's looking for silver bullets when it comes to carbon and when it comes to making agriculture more sustainable, and I am pretty sure there aren't any. I don't know that to be true, but if you look at corollaries elsewhere, it sure seems like this isn't going to be solved overnight and it's not going to be solved by a single technology or a single entity, and biochar was going to save us all Disappointed.

Speaker 2: 45:53

There are a lot of people that talk that way and I just and there's also an investment culture that sort of swarms around A single idea and then it doesn't pan out and then you sort of see swarming to the next one, and so I think that's just an important caution to have in mind is there's, there's not going to be a silver bullet.

Speaker 2: 46:18

That being said, is a silver bullet?

Speaker 2: 46:22

The one that I would make a bet on Is accounting, and the reason is because what's measured is what's managed, and if we start paying attention to the depletion of natural resources or negative externalities like Pollution of air and water, and and those companies are forced to Integrate that into their financial statements, that really changes the world and there is a there are a number of efforts underway on that front, from the account that the sustainable accounting standards board to be court To the impact weighted accounts project at Harvard Business School, and I'm really excited about that because I think that's really what Moves the needle and changes our collective understanding Of what matters, because without that we're just sort of flying blind and the entirety of the impact Investment movement Is just a collection of Sort of disparate, sometimes made up Metrics that don't, that don't matter and don't provide any sort of commonality or comparability.

Speaker 2: 48:13

And as long as that's the case, an annual impact report from a public company Gosh, it sure looks. It sure looks like a marketing Pamphlet More than an audited set of financials. And imagine if those two things are One in the same.

Speaker 1: 48:35

At least naturally, could be the answer for the question actually to a magic one, question I would like to ask. So if you could change one thing over time overnight, sorry what would that be? If you had the magic power to do one thing in this case is really one what would you do?

Speaker 2: 48:56

As it relates. Well, that's, that's my answer, but I'll give you another one. Besides changing accounting, if we could sort of blow it all up and start over, my answer for agriculture would be the same as energy, and that's that We'd have a much more decentralized and therefore resilient system. You know, we saw in the midst of the pandemic, the consequences of putting Five percent of US pork production Under a single roof, not a, not a single roof, not a, not a single company, a single building. And then, when that plant had to shut down, look at the consequences from a larger market perspective. It just, it just created this panic, and so whoever thought that was a good idea Should, should probably move on to a new career. But I think, fundamentally, a more decentralized system would avoid some of the negative externalities that the current structure has where it.

Speaker 2: 50:06

It can't be someone else's problem somewhere else, because it's right in front of you and a lot of people would say well, that is going to make food dramatically more expensive, and that's sort of an elitist thing to say, because not everyone can buy their food at farmers markets, and I find that argument really frustrating, because no one has taken the time to deconstruct what we pay for food today and there's a lot of people that a lot of people part of the movement that try to say well, look at the cost of, you know, a sticker Relative to A cucumber on a per ounce basis and it's actually much, much cheaper. And our whole perspective on what is expensive and and cheap in food is wrong, and everyone should be willing to spend more, like 15 or 20 percent of their food Instead of 10 like we are now, and I find those arguments to be Hard to justify. Instead, what I hang my hat on when someone says wasn't that more expensive and Is it easy to say from upstate New York?

Speaker 1: 51:31

How do we feed the rest of the US and the rest of the world and make it? I want to, I want to like.

Speaker 2: 51:38

Back away one step and just look at what we spend in the US On agricultural subsidies and corn and soy alone. Many billions of dollars, but, just as an example, in 2020. The federal farm subsidies, which are, by and large, go to large companies in three crops wheat, corn and soy Total three hundred and forty dollars per household in 2020. So and that doesn't include Ethanol subsidies, which are like many multiples of that and we're paying people to grow corn to then Put it into Automobiles. To the budget no one let's say the food budget is there if we wanted to.

Speaker 1: 52:36

I mean just but.

Speaker 2: 52:37

But my point is like those are those are your dollars too.

Speaker 2: 52:41

You paid those. You paid for that. You paid for that three hundred and forty dollars With your money in taxes, and but you didn't Total it as part of your budget. And when Hurricane Florence came and Destroyed the pork industry in North Carolina and flooded Maneuver lagoons With toxic consequences and cost billions of dollars to clean up, we didn't add two dollars to the cost of our pork chops, but those were also your dollars. You paid taxes and you paid for that cleanup and that was a direct consequence of the way that we decided to raise food.

Speaker 2: 53:31

And so, just because it's coming from the other pocket, it's sort of disconnected and it's so hard to respond to someone who says, well, we have the most Efficient and lowest cost food Production system in the world and it's, I kind of say, like but we'll buy what metric Like which?

Speaker 2: 53:54

Why are you allowed to count those dollars but not these dollars? Because it's the same. And so when you say Pork chop from a pasture raised animal, from a small farm you know, twenty miles from my house, is more expensive From the one that came From this plant in North Dakota that represents Five percent of total production In the country, I don't really know what you mean like yes, the sticker price on the product is More, but when you look at the entirety of the system and I'm not even talking about pricing negative externalities that we don't currently price, I'm talking about the ones that we like Hurricane, florence, like we actually paid for that, those were real dollars and if you total those up, the food system doesn't look as inexpensive as it is at first glance, not even talking about the healthcare part of things.

Speaker 1: 55:00

I think Rockefeller did an interesting study or paid for an interesting study, and I think that the total cost of the food system in the US is three times what you pay, let's say, at the counter, and most of that is social cost in terms of healthcare. Not even the huge environmental cost it was very limited, but a massive one, of course, is healthcare. We're running a full and nutrient density series on that topic. If you want to know more, just go to the website. The healthcare piece is a big one, but you're saying even just the direct out of pocket out of another pocket, but out of pocket costs to clean up a lot of this mess, and the subsidy piece is so big that you could argue this is so much more affordable if we would have to and most people don't know, most people don't know we spend $340 per year per household on simply subsidies for our first three crops.

Speaker 2: 55:54

So the healthcare element of it is super interesting too, because by and large, the crops and products we're subsidizing we're not eating. Well, one, we're not eating if they go into ethanol, but two, when we do eat them, they're contributing to all kinds of long-term health problems, from diabetes to obesity. And so I feel like I've had that argument so many times and it's just, at the end of the day, the sticker price one is X and the other is Y, and it's hard to get out of that direct comparison. But if you sort of back up two steps and look at the entirety of the system, our existing food system is incredibly expensive and we are all paying for it.

Speaker 1: 56:52

And a question I would like to ask to switch the seeds, you had a magic wand. Now you no longer have that. But what if you were in charge of quite a considerable amount of money let's say a billion dollars to invest and it could be extremely long-term? So the only rule is it has to be invested. Part of it maybe can be used for a bit of lobbying on the side, but let's say, most of it has to be put to work and at some point come back. Not asking dollar amounts, not asking specific ones, but I'm asking mainly this question to see what practitioners like yourself are focusing on. What would you prioritize if you had not seen a limited amount of money, but this is still I mean, with current inflation it's going down a bit but still a large sum of money. What would you?

Speaker 2: 57:41

do so. I think there are some important enablers of change. One is accounting. Two is a long-term view. So this is the why that the bank is structured as a mutual. It's because it gives our impact model teeth from a governance perspective. We didn't set up the bank to sell it and so we didn't want a structure that was all. The incentives were aligned around selling to a larger institution and walking away from the impact we wanted to have in five or 10 years. But by and large, a lot of that impulse comes from an underlying investor urge that generally investments should have, whatever the number is, five to seven year time horizon and you're talking about someone with someone or some people with a very large investable amount of capital. In that case, to me, taking a long-term view and in many cases, investing in entities that are intended to be perpetual, from cooperatives to mutuals to increasingly they're long familiar to other countries but very new here these perpetual trust structures or employee-owned firms that have a really long-term view.

Speaker 2: 59:27

I think that's ultimately what gets us away from the quarterly earnings per share, shareholder value paradigm, dominant paradigm that we currently find ourselves in. And I would honestly point the finger to the largest investors in the world universities, hospitals, pension funds.

Speaker 1: 59:56

They should be doing long-term stuff by definition.

Speaker 2: 1:00:00

Yeah, all of these places are theoretically perpetual investors and they're the ones demanding a sort of five to seven or at most 10 year fund cycle. And why those entities they prefer to pay what are ultimately really just rent seeking intermediaries along the way to own the same underlying business? So the pension fund invests in the VC, the VC takes the company public, and then the pension fund invests in the hedge fund which owns the underlying business, and then the private equity firm takes it private again and the investor is an LP in the private equity fund.

Speaker 1: 1:00:53

It's an EP.

Speaker 2: 1:00:55

Yeah, you're just and there's an element of the universe just being so large that not every investor can make direct investments. I get that, but the investment management business has just become so incredibly large that it's created this huge gulf between investors that would otherwise make long-term direct investors investments and the underlying companies. And so because of that insulation, that layer of intermediaries, you get away from an intimate understanding of those companies impact on a broader set of stakeholders, not just shareholders. So I think having more longer term, semi-perpetual investors making direct investments and there are some trends towards this would generally be a good thing.

Speaker 1: 1:01:54

Would you somehow then use that billion if you would be in full control to get others to follow that? Would there be ways to because of course a billion is a lot and it's nothing at the same time to somehow nudge these or pull them in the hospitals, insurance companies, pension funds? What would be ways to turn that one into a hundred billion or even more, without adding layers and management fees, and all of that obviously?

Speaker 2: 1:02:26

It depends who, I guess. Maybe back up a second. If we're talking about a university, for example, I'm not sure we want to change that one to a hundred. I look at McKenzie Bezos and the way she approached her wealth versus the sort of no, no.

Speaker 1: 1:02:53

I'm saying how do you use that one to get another 99 to follow you? Not saying turn that one into a hundred billion, but how do you use that to make university comfortable, to also do long-term investment and come alongside you? I got you. Not saying how to a hundred ask that billion, because that would be a whole different discussion.

Speaker 2: 1:03:13

I got you. Well, my point is, I think there's something really interesting to be said about sort of spending down an endowment like that, and in some ways that can inspire others to sort of take the same approach. I think it comes back to measurement, though. The folks that are sort of on the leading edge of this are embracing new measurement tools from an impact perspective and increasingly trying to align around a set of common standards. I think that, ultimately, will enforce some discipline on this larger set of investors who might follow you, but it will also inspire others to do the same.

Speaker 1: 1:04:10

That's a final question. It's a question I like to ask, inspired by John Kemp, who always asks it's slightly different on general agriculture. But what do you believe to be true about regenerative agriculture that others don't believe to be true? Where are you contrarian when you're among your peers? You mentioned a few things on accounting, etc. But I'm guessing there might be other things.

Speaker 2: 1:04:41

So a lot of people in the sort of movement a food movement, generally speaking try to apply this lens of wanting to work on the sort of biggest lever, if you will, as it relates to climate change or other environmental issues, and of course there's an element of that in everything I've described earlier around soil and carbon and such.

Speaker 2: 1:05:13

But I am very weary of extrapolation to say that this thing matters and this thing doesn't, or this is the only wedge that matters when it comes to carbon, and I feel like I hear that a lot and it reminds me in the energy world of there were so many people 10, 20 years ago saying if you look at the way the energy industry has developed over the last 200 years, energy transitions take generations and IE, you need to be patient.

Speaker 2: 1:06:10

And look at how long it took us to transition from wood to coal and then coal to natural gas, and so don't expect that adoption curve to look any different. And now fast forward sort of 10 or 20 years, since people were saying that really loudly. And in fact renewables are growing much, much faster than any of those folks imagined and certainly much faster than if you just extrapolated the same line. And so what I think I think what I'm honing in on that I believe that maybe others don't is I'm just very weary of people presenting technologies or market forecasts as sort of laws of thermodynamics that cannot be changed 10 years down the line, isn't?

Speaker 1: 1:07:01

this will happen, yeah.

Speaker 2: 1:07:07

And then also, to take that one step further, this idea you referenced it earlier when we were talking about food being expensive or not this idea that you can't feed the world with organic food or you can't feed the world with pasture based meat.

Speaker 1: 1:07:25

Wow, and you're really bringing up the three points. This is a whole different topic. No, that's a whole different one.

Speaker 2: 1:07:33

But my point is I spend zero time thinking about that or talking about it because it just doesn't matter.

Speaker 2: 1:07:44

You're literally taking a line.

Speaker 2: 1:07:45

It's the equivalent of looking at a graph and taking a line and just extrapolating a linear extension of the line and being like see can't make it work and I just there are so many conflicting variables in this equation that you can't do that.

Speaker 2: 1:08:08

You can't make those expansive statements around what works or what doesn't, or what moves the needle or doesn't on a global scale, and so my reaction to that and I think I'm finally answering your question is just doing right by what makes sense in my own backyard and in this region of the country, for all the reasons I described earlier, there are some really interesting. What I see is the highest and best use available land in this region and that's what makes sense here, and many other people will come to a different conclusion in different areas of the country and different areas of the world, and that's why I don't think we're going to have a single solution here. But so I spend very little brain power trying to extrapolate that as a solution for the rest of the world or really trying to come up with I don't have the hubris to suggest that I have the solution for the whole world, other than accounting.

Speaker 1: 1:09:22

Yeah, I think there's some underlying principles that seem to make a lot of sense.

Speaker 1: 1:09:27

That might not work everywhere, and I think there's a shared conclusion that the current food system and energy system is not serving us in all the way.

Speaker 1: 1:09:37

If you would do accounting properly, it would come to a conclusion that it doesn't make a lot of sense. But what will replace it, or what that transition looks like, is going to be messy. It's going to be very different in many places, but it's going to probably involve turning sunlight into something we can eat in some way or form. And as long as you keep those first principles front and center, soil will play a very important role, not everywhere, but most places and turning sunlight into something useful will be an important job to do. If it's energy or I mean it's all energy at the end but if it's energy that we consume directly or energy we use for heating, moving and cooling and things like that. So I think it's a very fair point. But yeah, it goes against the different camps or tribes, I would almost say, in this space and also outside that are really shouting about the one solution they have and everything else is irrelevant, which is an interesting struggle to see, but it's a waste of brain power and it just delays transition anyway.

Speaker 2: 1:10:46

It does. Some of that is a generational thing. I feel like there's more young people that have this generally amazing and inspiring desire to work on something that matters, but it very quickly goes to a sort of judgment of like only a couple of things really matter and that just can't be the case.

Speaker 1: 1:11:14

Although we're saying your soil really matters. I mean everything.

Speaker 2: 1:11:19

Yes, soil really matters.

Speaker 1: 1:11:22

But if you want to eat, yeah, that's the no. It's an interesting.

Speaker 2: 1:11:26

But so does the ocean. I mean, so do so. You know I made the point about soil capturing 25% of what's emitted and looking at how do you change that number, the other 25?

Speaker 1: 1:11:41

goes in the ocean. Yeah, and the other 50. 25 in the ocean.

Speaker 2: 1:11:45

There's still the other 50% in the atmosphere we don't talk a lot about. There are two problems here when it comes to carbon. One is the stock of existing carbon in the atmosphere, which is its own.

Speaker 1: 1:11:55

I could just see each other looking at the time, Not like do I want to go there or not, but I could just. You cannot see it because this is audio only. So okay, let's go for it. There are two problems.

Speaker 2: 1:12:05

You baited me. There's the stock of the existing carbon in the atmosphere, and that is already enough of a problem that it will cause, or is already causing, significant changes to our environment. But then there's also the flow of carbon, and so that's how do we address adding additional carbon to the atmosphere? And then there's this other element of what is absorbed and by what and over what period of time, and so those we generally are mostly arguing about the flow, but those other two elements of the problem matter just as much, and soil is only one component of one of the three of those. So I also would not. I don't mean to suggest it is the silver bullet, it's just one of this larger set of tools that I think we have.

Speaker 1: 1:13:08

Yeah, and then we're getting into a whole different one on cooling and heating and carbon being only a part of a dead-hole discussion, but that's for another time and the water cycle series we're actually running. But I want to end it here and be conscious of your time and thank you so much for the work you do and for coming on here to share about accounting, about banking, and making it interesting and fun to listen to, because that could be a very boring piece, or people might imagine is boring, but setting up a bank might be, in this context, the most impactful thing you could do in your regional food system.

Speaker 2: 1:13:46

I appreciate that. Well, thank you so much for having me, and I hope all of the folks who are listening come and join us as depositors. We'd love to have you.

Speaker 1: 1:13:55

Moving Bank is probably one of the most impactful things you can do, for sure, if you are not already banking somewhere, let's say with a conscious.

Speaker 2: 1:14:04

I appreciate that. So yeah, we're at waldenmutualcom.

Speaker 1: 1:14:08

I'll put the links below and see you next time. Thanks so much, Con. Thank you so much for listening all the way to the end. For the show notes and links we discussed in this episode, check out our website Investing in RegenderWagerculturecom. Forward slash posts. If you liked this episode, why not share it with a friend or give us a rating on Apple Podcasts? That really helps. Thanks again and see you next time.