Paradise at a Crossroads

I didn't have to think very long when I was asked to be a presenter at TEDx Maui. Hawaii in January? Are you kidding me? Beyond escaping New York in the depths of winter, I was truly excited about this event, Maui's first TEDx. And in doing some research for my talk, I began to appreciate just how fragile these majestic islands are.

Despite being blessed with an abundance of natural resources—volcanic soils, a year-round growing season, plenty of sunshine and cooling breezes—Hawaii imports roughly 90 percent of its food and energy. The lush land that conjures up visions of pineapples, coconuts and mangoes even imports 65 percent of its fruit! And Hawaiians pay the highest prices for gasoline and electricity in the country.

This dependency on imports is, in many ways, a legacy of Hawaii's colorful, controversial history, starting with the missionaries who came to the islands in the early 1800s. Their mission was to convert Hawaiians to Christianity, but they eventually became wealthy businessmen controlling huge tracts of land on which laborers toiled to produce sugarcane and pineapples for export. Today many of those plantations are idle, since sugarcane and pineapples can be produced more cheaply in Central America and elsewhere. The question—like the one faced by George Clooney's character in the movie The Descendants—is what to do with that land. The all-too-easy option is to turn it over to deep-pocketed developers eager to build more houses, resorts and shopping malls, which create more demand for food, energy and water.

A smarter approach would be to preserve the land for small farms, renewable energy projects and other ventures that can help make Hawaii more self sufficient and sustainable. I met many smart, committed and passionate people in Maui who are working towards those goals, from fellow TEDx speakers including Vincent Mina, an organic farmer and organizer, and Arthur Medeiros, a biologist working to restore Hawaiian ecosystems. Others, such as Dr. Pualani Kanaka'ole Kanahele and musician Paula Fuga, are at the forefront of a renewal of native Hawaiian culture and wisdom.

One challenge in creating a more robust local economy is capital: where does the funding come from? Here again, Hawaii is blessed with abundance: there is a lot of wealth on the islands. Yet much of it is invested on the mainland. That's why one of the most exciting initiatives underway is an effort to create a local stock exchange that would bring together Hawaiian investors and entrepreneurs. A local exchange would allow Hawaiians to keep more capital local, where it could be put to use funding homegrown companies that can lessen their dependence on imports—companies such as Pacific BioDiesel, which makes biofuel from local restaurant refuse (and powered the Jetta I rented from Maui's;Bio-Beetle), and the HaliiMaille Pineapple Co., a newly formed, locally owned venture that grows pineapples for the local market.  

A legislative working group recently concluded a several-month study on the viability of a Hawaii stock exchange. The working group has given a green light to the Friends of Hawaii Local Stock Exchange to create an "alternative trading system" for accredited investors (people with a net worth of $1 million or more, not including primary residence, or over $250,000 in annual income for each of the prior three years). Of course, the real value in a local exchange is when everyone, rich or poor, is able to have a stake in the local economy and be part of its growth. And that's the ultimate goal for the Friends of Hawaii Stock Exchange. But many regulators are wary of local exchanges and other new funding platforms and want to see them tested in a low risk environment first.

The old Honolulu Stock Exchange

Ironically, the concept is not new: Hawaii, like dozens of regions  across the country, had its own stock exchange for decades. The Honolulu Stock Exchange was instrumental in establishing the local economy and infrastructure, financing companies including Maui Telephone, the Bank of Hawaii, and Honolulu Rapid Transit Co. before it closed its doors in 1977 amid financial market consolidation.

As one of the most geographically isolated places on earth, Hawaii may be an extreme example. But in this age of globalization, climate change and scarcity, many communities across the country, and indeed the world, can relate to the need to become more self sufficient, to keep more capital local, and to rebuild their local economies. If Hawaii can do it, we all can. And I'm rooting for Hawaii.

Extreme Financial Markets are the New Climate Change

The front page NY Times story today, Market Swings are Becoming the New Standard, wasn't exactly a revelation—anyone who has watched their life savings whipsawed by global macro trends and speculation over the past few years knows that the markets have become unnervingly volatile. But what struck me about this article was the similarity to global climate change. 


Listen to Andrew Lo, professor of finance at the M.I.T. Sloan School of Management: 

“The last few years have been the most volatile for all of recorded history,” noted Lo. For evidence, he says that 10 of the biggest 20 daily upswings and 11 of the largest 20 daily drops since the beginning of 1980 to the end of last month have occurred in just the last three years.

Similarly, the past decade has included 9 out of the 10 hottest years on record, going back to 1880 when global temperatures were first tracked.  As wild fires rage in Texas and the northeast recovers from epic flooding, extreme weather has become the norm. Now, it seems, we can add extreme markets to the new normal.  


Certainly some traders are profiting richly off the volatility, but for most individual investors, it is stomach churning to watch their investments swing so wildly (and mostly downward). As the Times points out, volatility is a problem because it scares investors and companies alike from the markets and undermines confidence, which can reinforce negativity. Global events—from Europe's debt crisis to U.S. political dysfunction—have contributed to the volatility. So have high frequency trades fired off by computer algorithms and exchange-traded funds that can be flipped like pancakes. In other words, global financial change has manmade causes, just like climate change. And the perpetrators, whether polluters or high frequency traders, foist their external costs onto society at large. 


Against this backdrop are increasing calls for market reforms. Some observers are even suggesting the creation of a safe market for long term investors that would be walled off from high frequency traders and market manipulators. As I detail in my book, Locavesting, one way to do that is through the reintroduction of local stock markets like the ones that used to flourish across the country until technology and globalization made them obsolete. There are efforts to launch local exchanges in Lancaster, PA, Hawaii, and Toronto, among other places. They all seek to bring together a region's long term investors with its small businesses and entrepreneurs to create strong local economies.  Think of them as little bastions of productive calm amid a raging global storm.