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Francis Koster: Rescuing Your Local Economy

Success stories for sustainable communities
Tuesday, June 7, 2016, 10:12 AM

"Locally there are lots of nice, tidy, quarter-of-a-million-dollar investments sitting there that the large companies will not do because their overhead is too high. So one of my themes is look in your own backyard -- focus on fiscally-conservative, sound investments and focus on local employment. You will be surprised at the opportunity that just leaps out at you."

So says Francis Koster, author of the new books Rescuing Your Local Economy and Rescuing School Kids who specializes in identifying community investment opportunities that offer attractive returns for the capital provider as well as long-term benefits for the local residents. Chris and I have interviewed Francis several times over the past few years and are continually impressed by his inventive and scrappy approach to finding fresh, sustainable solutions for many of the long-term Three E challenges we face. He's one of the voices we respect out there at the vanguard, identifying real answers to today's structural problems.

In this podcast, Francis highlights a number of the case studies he's collected at his website, The Optimistic Futurist, where motivated individuals have improved their local schools, roads, food, water supply, etc. while earning double-digit returns. These models can be adopted in nearly any community, which is the purpose behind Francis' work.

Here's just one example: 

Most of these locally implementable solutions will appeal to the entire political spectrum. Local officials and civil servants are desperate to find things that bring the extreme ends of the political continuum together.

For example, if you talk about hoping to foster local small business, everybody is familiar with the notion of a gift card. You can go into any of the major pharmacies or large box stores and buy a gift card. Some communities have made local gift cards that are good at any local owner-operated store. So if there’s a local bookstore, local dry cleaner, local food market and so on and so forth, each of them joins the local gift card network and agrees to accept the gift card.

And what the research has shown is that if a shopper comes in with a local gift card, they typically spend 40% more than the gift card has as face value. So by agreeing to accept a local gift card, small businesses entice people to come in and then they spend 40% more. And all of that money stays local.

Click the play button below to listen to Chris' interview with Francis Koster (59m:51s)


Chris Martenson: Welcome to this Peak Prosperity podcast, I am your host Chris Martenson. Yes the world is full of predicaments and yes this program spends a lot of time illustrating and illuminating these predicaments, maybe too much time. So let’s balance that out; today we’re going to discuss what’s going right, what we can do and what positive developments already exist. Well at least some of it, there’s actually a lot that’s going on that’s going very well and going very right. And so today we welcome Francis Koster back to the program to discuss these developments. Francis runs the website the OptimisticFuturist.org. He’s one of my favorite people to speak with because he dedicates himself to answering a very difficult but very important need. What are the new business models we need to invest in today to meet the coming future defined by the crash course with some degree of grace? Now Francis received his doctorate from the program for the study of the future at the University of Massachusetts in 1982 where he studied the public policy implications of likely national and global futures and their impact on the United States; so he’s a systems thinker, a futurist love this He focused his attention on issues concerning the basic life support systems of air, water, food, energy, environment and the public health consequences of how society meets its needs in these areas. And he spends his time scouring the world for sustainable and reproducible business models that deliver positive returns on investment to all the stakeholders. Most of these are deployed right at the local level and are a rich source of local investing ideas, something I know a lot of you are interested in.

So at the OptimisticFuturist.org you will find well documented case studies of these successes so that interested investors can learn how to reproduce them in their own communities. So if you want to send your capital to Main Street instead of Wall Street, Francis’s work is a great place to start. Most importantly his case studies prove the point that to make a better world today we do not have to wait for some new technology to be invented tomorrow. Everything we already need in terms of technology, processes and understanding we already have them; we just need to use them. And since we last talked he’s been busy, he’s got two new books out. One called Rescuing School kids, America’s Success Stories and the other is Rescuing Your Local Economy, Success Stories For Sustainable Communities. Francis, a great pleasure to have you back –

Francis Koster: Thank you very much for the honor.

Chris Martenson: Well let’s start at the beginning. You know it’s been a while since you and I have been together on this program. Why don’t you give our listeners a quick summary of your mission, your background and how you came to this interesting work?

Francis Koster: You may remember that I was with the Peace Core for several years in Africa and saw some things that left quite a thumb print on my soul. And realized when I came back that there were many alternative futures for the United States that weren’t very desirable. And we should do everything we could do to avoid some of the things that were going on around the world. For example one of the things I observed was that land, which was owned and held in trust by a tribe in Africa was out of fairness rotated. So if you had a particularly fertile field and you got two or three good prosperous years out of that the chief was honor bound to rotate the land and give somebody else a shot at prosperity. The downside of that of course was that nobody put in irrigation ditches or windbreakers or planted lagumes to increase the soil content and so forth.

So one of my good friends as a Peace Core volunteer actually put in a system of land title so that people could be assured that once they acquired land would stay in their family and they could safely invest in it. After leaving the Peace Core I went to the University of Massachusetts to do my doctorate, as you described. While I was there I was studying why leaders don’t listen to warnings. And it turns out that the more economically secure you are, and the more senior in age you are the more you have to defend among your current world view. So it’s hard for mature people of means to hear threats because they don’t feel as threatened. On the other hand I learned that the best group of people to listen to threats about basic life support systems were females of reproductive age and that is because they were almost by instinct fretting about the health of the children and grandchildren and so forth. You want to bring about change it was often best to educate the daughters or wives of a mature leader and to whom he would listen. And then you could sometimes see change.

So while I was working and doing all that research my doctoral committee said “Fran we hear you about there are ways to deliver warnings, but we’re not satisfied yet that you’ve got this right. What other ingredients in delivering a warning about a threat to the basic life support system do we need”? And I did several more years research and what I came up with was you have to deliver a warning even if it’s about a global problem or a national problem; you have to deliver it with a locally implementable solution. In other words, if I tell you the sky is falling and there’s not a damn thing you can do about it, you would repress the warning. But if I say the sky is falling and here’s an umbrella and oh by the way here’s a way to make umbrellas that will protect your family, even though you don’t make the umbrella you let the warning in. And so once I proved that sociologically my dissertation committee said to me “Well we want you to pick a national problem that you think is coming that nobody else is paying attention to and develop a warning for that”. So at that time it was Massachusetts, New England got 90% of all their energy from imported oil; so I said okay I think there’s some danger that OPEC will cut off the oil supply to New England and to the rest of the world and it will devastate the economy. So what I’m going to do is figure out locally implementable solutions that I can tell you so that you will pay attention to the threat from the potential OPEC oil. And that led to something called the Franklin County Study which was a study of Franklin County Massachusetts and all the available but untapped energy resources that could turn into local employment. So I wrote my dissertation on that, well Ronny Reagan liked it so much he wrote a newspaper column about local self-reliance and strengthening local economies.

About two weeks after I published my dissertation OPEC pulled the plug on New England’s oil and I was the only one who had been thinking about what to do. So I wound up going from graduate student to meeting with Governor and other state leaders and saying “This is something that you can do”. And it included everything from teaching unemployed carpenters how to light punk sticks and enter an aging New England farmhouse and when the wind or breeze blew the punk smoke in one direction you walked in the other until you found out where the air was entering the house. Today they would use some kind of heat camera, but we did it back then with punk sticks that led to an enormous reduction in wasted energy and employed multiple hundreds of people in the effort.

So the bottom line is my career was shaped by a bunch of accidents having to do with how do you deliver a success warning and the answer is you have to have a locally implementable solution or else people will not hear the warning.

Chris Martenson: Well I love this of course, everything I’m doing is about how to create the warning and also warnings are useless without actions; so how do we create the actions? Now well this is just very interesting local news itself, I live in Franklin County. So of all the things I’m right here and I’m well aware we’ve got trees and a little bit of water and that’s about it. And so that’s fascinating; I’m going to look that up and see if I can find that because that’s just too close for coincidence, that’s wonderful.

Now this locally implementable solution obviously you had good timing, you know you put this thing out and then of course OPEC came along and did what you said it might do. These locally implementable solutions are really the piece that I’m finding in our listenership they have a lot of action for – and a lot of energy around. And so let’s start with this idea of rescuing local economies which is the title of your book. First of all tell us why you wrote this book and then second do local economies need rescuing?

Francis Koster: The motivation behind the book was I wrote a prior book, a third book called Discovering the New America and it was a collection of success stories covering the waterfront. Healthcare, education, the economy, so on and so forth. And it didn’t sell very well and I realized that I made a grave mistake. I didn’t – I had in my mind the audience of people who were curious about the same kind of subject. And I took some advice and the next two books were focused on very clear target audiences. So the local economy book Rescuing the Local Economy was clearly aimed at local elected officials, public service people, schoolboard members and chambers of commerce and so on and so forth; that’s the target market. And there are a number of things that have been done around communicates that the rest of the nation can learn from.

Chris Martenson: Well let’s turn to some of them those. I’m very interested in how we do these because again we have a lot of people who are less interested in sending their money to Wall Street and a lot more interested in sending their money to Main Street. Both Adam, Tegret and myself are what we would call local investors at this point having made a sizable investments in local businesses. So I’m interested in that angle but let’s start with where you let off; so civil servants, chambers of commerce, other people who are the movers and shakers at the local level what was it that you were trying to – what message did you have for them?

Francis Koster: You don’t have to wait for the national political debate to subside. You don’t have to pick a side on the political spectrum from left to right. Most of these locally implementable solutions will appeal to the entire political spectrum. And local officials and civil servants are desperate to find things that they can bring the extreme ends of the political continuum together. So if you talk for example about hoping to foster local small business everybody is familiar with the notion of a gift card. You can go into any of the major pharmacies or large box stores and buy a gift card. Some communities have made local gift cards and they’re good at any local owner operated store. So if there’s a local bookstore, local dry cleaner and a local food market and so on and so forth each of them joins the local gift card and agrees to accept the gift card and then they’re sold. And when they’re sold the buyer pays money and it’s put in an account and then whoever buys the card uses it on all of the local gift cards. And the research at the local stores – and what the research has shown is that if they come in with a local gift card they typically spend 40% more than the gift card has as face value. So by agreeing to accept a local gift card small businesses entice people to come in and then they spend 40% more and all of that money stays local.

Chris Martenson: Now these ideas are these – what I’m familiar with at my local level is people in leadership will think of things like oh can I attract big business so they’ll bend over backwards to see if they can attract a company so it’s sort of a one off piece or they might think more broadly and say well can we create more of an incubator environment, is there sort of a structural thing to create a place where innovation will occur or something like that. Are you, in your book, are you really talking about the specific actions or creating the environment that would be conducive for say businesses to flourish?

Francis Koster: Specific actions, you brought up incubators. If I could speak about that for a minute?

Chris Martenson: Please.

Francis Koster: Incubators are fascinating and when you look at the history of incubators there are some number that fail and some number that exceed and when you look at the failures what you find is some local official said “You know we ought to try and create an incubator to grow new businesses”. There’s an unused building on the outskirts of town some place why don’t we set that up as a not for profit incubator and maybe the county can provide the free electricity or something. And maybe when we get the local school or community college or whatever to bring in some mentors and we’ll open it up. And those tend to fail and they tend to fail for a couple of reasons one of which is it takes a long time to grow a business to the point where it’s independent and the local elected officials often grow impatient because they put a few thousand in or some number of dollars and then next year it shows up in the budget and again next year it shows up in the budget again. And by the end three or four years they’re tired of giving the subsidy.

On the other hand the ones that succeed tend to be located near the customers of the business being fostered. So if there is someone who is trying to set up a business in local tailoring curtains and they take the space and they start making curtains. You want that to be a near a dry goods store or someplace that sells curtains; and so they build a good relationship with their customer. I could go on at length about examples of that but there’s a second generation of thinking now about incubators and that is what’s called accelerators. And in this case you go to locally owned businesses which are succeeding but struggling and you call them together with a number of major local leaders and you say to the struggling small business person, “What can we do to help you succeed”? And we’ll have – and I’ve sat in on a couple of these sessions you’ll have people say “I can’t seem to get a loan” or “The broadband in my area is terrible” or “We need a bigger parking lot” or things that the chamber of commerce would not likely to think of as a band aid that they can offer.

So the function of the accelerator is to take businesses which are they are viable but they’re struggling in their growth trajectory and you simply ask them “How can we help”? And then the role of the incubator board becomes that of a match maker. Oh, you need XYZ. I know John over the next city over, he makes XYZ, I’ll bet he’d be willing to mentor you. And the track record on that kind of dynamic is quite good.

Chris Martenson: Now Francis is that happening anywhere?

Francis Koster: Kentucky has a wonderful example of it.

Chris Martenson: Really you know I was in Louisville a couple years ago, I loved it. Well it’s got the decaying postindustrial you know, the mills are gone right on the Ohio River kind of thing falling apart but on the other side there was some really exciting new businesses coming up, a great local food and local bourbon, really nice art – all kinds of stuff happening. What’s your example, I loved Louisville; so what do you got from there?

Francis Koster: The accelerator was the example from Louisville. If you’re asking me for specific example of a company I’m afraid I couldn’t give you one.

Chris Martenson: Okay if it was operating when I was there something right is happening, you could feel the resurgent energy coming up and there were a lot of young people there getting motivated and excited. Now I’m sure you’ve seen the statistic that came out that said that new business formation has been absolutely one of the worst periods the last five years, it’s been awful. As a small business owner I can tell you you can knock me over with a feather if anybody from local or state government said “How can I help you”? I would be very shocked and a little suspicious. I’m finding that the business environment is getting harder and harder, is that something you ran across when you were looking –

Francis Koster: I did and that leads us into topic of financing small business. We’ve had significant consolidation called the financial industry in the United States, the six largest banks can’t remember what the number is they control 90X percent of all loans and so on. They don’t make small loans. I can’t remember what the cut off is but I think its $50,000.00; some number like that. So a typical small business owner who is trying to get started may be customizing automobiles he’s not looking for something over $50,000.00; he may just need a weld – a torch. So he has to come up with separate sources of funding. And there are a number of different techniques to identify local money and in some cases what is now become known as the shark tank, you see it on television. Some communities run that kind of an event where community owned banks, community owned credit unions and local individuals of means come together and get pitched too. And that has made a remarkable difference allowing the companies to grow until they get big enough that the other banks are willing to work with them.

Another example of that is many small businesses and by small now we have to define our terms in the United States small business sis defined according to the industry, but in many cases it employees 100 people or more or 300 people or more, or have a budget of million dollars, that’s what the common rhetoric – the actual definition of small business is. But we’re not talking about that, we’re talking about micro-businesses. And when one is setting up micro-business typically there are two personalities involved. The subject matter expert and a financial person. And you know it might be the father in law, who knows where the money comes from but it’s typically not the subject matter expert. And a large amount of discord emerges over time as a subject matter expert is asked to perform more and more roles from accounting to scheduling to bookkeeping to welding, just – and not all of us are really good at a broad spectrum of things. And meanwhile the financial guys watching the books and wondering what he’s going to give is [Inaudible 00:22:31].

So a way to assist with that which is quite a conscious strategy is to found the business on the notion of partial employee ownership. In that case you can invite people to join your companies team in exchange for shares of stock and whatever you were going to pay them. All of the literature shows that companies which share employee ownership vastly outstrip those that do not share employee ownership. They have far lower rates of layoff in hard times. They have far higher retention rate of trained employees and their morale vastly exceeds a similar work environment where the employees do not have shared ownership.

Chris Martenson: You know for a period of my life I worked at a company called SEIC at the time the largest employee owned company in the world. And Bob Beister thn CEO and founder, he kept only 1% of the company for himself under the idea that if he distributed the shares and made everybody that worked there a part owner that good things would happen. And it was a very different and much more dynamic company in terms of people’s sense of loyalty and just how much hard work they would put into it. It was a very different experience and then you know when you hear somebody like Charlie Munger, the right hand man of Warren Buffett say that you can’t really overestimate the importance of aligned incentives and that humans really operate by incentives. So this idea of really giving the proper incentives to people seems like a time tested idea that has to be pulled out and represented.

Francis Koster: Exactly and it is possible to craft the employee ownership agreement so if they want to take the company public they can, but the share – the employee owners are participants in that process, not victims of it.

Chris Martenson: Indeed. Well you know one of the areas that I’m seeing a lot of interest in and both Adam and I and the companies we’ve invested in his is a meat CSA and mine is a small boutique chocolate maker, both are involved in food. I’m seeing a lot of interest in food and investing in food, Louisville was an example of that but I have numerous examples right here in Franklin County. I’m seeing this all over the place. You know there was an article in the New York Times about a year and a half back that said you can’t make money at this and that everybody is failing at it. It was very sort of a dour point of view. But when I talk now with people like the Kaisers who run Singing Frog’s Farm or Joel Saletin, there are lots of farms and places that are doing it right, are making money, are delivering better, higher quality food. I know you’ve really focused on that as a core piece of rescuing your local economy. Talk to us about the importance of local food and the role that it’s beginning to play?

Francis Koster: There are – I come at it as a futurist who is worried about the basic life support systems. A couple statistics to bear in mind are the United States imports now over 90% of all seafood, 90% of all seafood. It’s seldom inspected when it is delivered to our ports. And of that which is inspected 40% is rejected. It’s seldom inspected and when it is, 40% is rejected. Think about that.

So here we have a local industry potential which is aqua culture. It’s done in two different fashions. One is open pond and tends to go towards catfish and things like that and the other is closed systems. And closed systems can actually be organic and so it’s possible to grow inspected organic fish. And when it’s able to be certified as organic it contains a premium price point and the way you do that is by changing the nature of the food that the fish eat. So if they are fed algae, if you stop and think you pick a vegetarian fish like a tilapia or there’s a dozen other brands you grow algae which has been chosen for its nutrients that naturally vegetarian fish eat – the food that they were evolved to eat and the flesh of those fish is vastly higher in nutrients and vastly lower in contaminants than things that are raised in Third World nations and fish farms and they have a higher price point. And this can be done inside abandoned factory buildings with eight foot ceiling and the local economic development authority cannot figure out what to do. And the trick to that is you take and change the zoning from industrial to agriculture. You re-zone an abandoned factory to agriculture space. And it reduces the taxes so much that you can enter the profitability zone.

Chris Martenson: And so are there examples now where we have people in the true profitability zone?

Francis Koster: Yes my senior citizen memory is going to have me struggling here but there are some in Minneapolis, there’s one in Virginia where the fish output is in the millions of pounds a year, millions of pounds a year.

Chris Martenson: We have an example like that right here run by Josh Goldman of Australis; they’re growing [Inaudible 00:28:52] specifically picked for their Omega 3 content and it’s a very fast growing fish and he does really, really elaborate fish breeding and genetics programs for a variety of reasons. It’s a stunning display and it’s all done in a couple million gallon tanks right in Turner Falls using water coming through the Connecticut River and all that but again it’s happening and building from the outside looks like a warehouse.

Francis Koster: After we go off air if you’ll send me the story I will put it on my website.

Chris Martenson: Love to; yeah he’s a great guy. He’s really – he managed to get into all the – he’s in 5,400 separate retail locations in the United States right now with his product. And he started right here at Hampshire College and probably one of those hippies with long hair growing a few tilapia in a tank outdoors into this really world class operation; it’s really astonishing what he’s managed to do there.

Francis Koster: That is a replicable model and the supermarkets tell me that they cannot get enough locally produced food. And the primary reason for it is that their business model requires them to deal in very large volumes of food, delivered in very predictable ways. And the typical small farmer or the back to the lander or whatever is not accustomed or does not have the productivity to meet the entirely legitimate logistical needs of a very large customer. So the solution to that is essentially a digital famers co-op where farmers come together, they approach a food chain, a local market or some local consumer of food. And say “Tell us what you need to buy when” and then they parcel it out among their members. So if they need – the output of 20 acres of something, they can parcel it out among four or five farmers and each will produce five acres and it will be harvested on time and delivered appropriately. And you can get diversification of risk because the different fields aren’t subject to the same risk as if it was single. And that it’s possible to do barcode tracking and it enables the local food producers to share in such things as centralized moisture monitoring, centralized soil condition monitoring, centralized refrigeration, delivery trucks that are routed according to barcode that says “Okay we’re ready to go” and so forth.

Chris Martenson: Now this is doubly interesting to me because I’m also concerned about food security at some point in the future; so I think the extent to which we can have local food production is the extent to which we can be somewhat more resilient depending on local conditions. But secondarily I know you have this in the book, the nutrient value of our industrial farm include – I mean it looks like an apple, it looks like a peach, it looks like a piece of broccoli but the nutrients in there, the macro and micro nutrients that actually make that a useful food substance have just been dropping through industrial agricultural practices; so it’s almost like a Vernier agriculture. It looks like food, but increasingly it’s not really behaving like food.

Francis Koster: The food that your mother fed you and me back in the day had considerably more nutrients than the food that you might feed your child today. And one of the prejudices in the local food movement is that of being against freezing; so it turns out that when you harvest food locally it begins to degrade in its nutrient content rather rapidly. And after four or five, six days the nutrient content is not what you would expect. But if you freeze it, it is what you would expect. And many small and struggling local food producers have a prejudice against freezing their food; so that’s an area of potential improvement. And one of the reasons or one of the solutions to that is co-op owned food handling and freezing facilities.

Chris Martenson: And is there a business model there?

Francis Koster: There are several. Again I would invite you to go to my website; I just can’t remember the names of them. If I could return to the matter of nutrients in fish.

Chris Martenson: Yeah.

Francis Koster: When you buy salmon and it says “Atlantic Salmon” on it you are led to believe that it was wild caught, but it isn’t. It’s farm raised in the Atlantic Ocean. And when it’s farm raised in the Atlantic Ocean it is fed fish food which is actually made from soy. So the United States government subsidizes the soy farmer. We have vast acreage of soy, it’s made into fish food, it’s fed to the fish and it’s very high in Omega 6. And salmon by heritage and evolution used to eat little fish, which were high in Omega 3. So what we have done is taken a fish which has an unconscious brand of being healthy which it deserves if it’s wild caught and it does not deserve if it’s farm raised because the farm raised fish if you test it has very high Omega 6 and the wild caught fish has very high Omega 3. And it is the Omega 3 that your doctor is telling you “I want you to eat more fish”.

Chris Martenson: Another instance of unintended consequences which seem to abound in this whole arena. I’d like to turn now to the idea of energy and water, these are two big areas for my listeners is well, to really think about how we get to more sustainable local energy and water and things like that. Now I’ve solved that for myself in my own little homestead; so you talk about local implementation. I’ve got solar thermal [Inaudible 00:35:29] I’ve got a second well with a hand pump, I feel pretty well set. But how are communities beginning to think about building in sustainability and more resilience for themselves with respect to energy and water?

Francis Koster: This is to a surprising extent governed by local legislation. About 40% -- I’ll take this from several different angles. About 40% of all energy in the United States is consumed by not for profits.

Chris Martenson: Really?

Francis Koster: I know the geography generally speaking where you live what are the biggest institutions around you?

Chris Martenson: Well they’re all universities and government buildings.

Francis Koster: Okay they’re all either not for profit or government owned. The incentive system for alternative energy, for clean energy in the United States is what?

Chris Martenson: The incentive system? Well I get some tax credits, there’s some local feed and tariff things. There’s things like that and then –

Francis Koster: The majority of them are linked to the tax code; so the 40% of the United States the current national policy and in many cases the local policy incentivizes for profit buildings through practice clean energy and disincentives the tax payer supported buildings, the not for profits to practice clean energy. So it’s a huge sector of the marketplace. Now there are some techniques that can be used to work around this but they are a little sophisticated and by and large your local superintendent was not in that game. They have entirely different expertise. But it is possible for example, depending on the community and the state for a school to say we want to convert to solar energy or some percentage of our building to renewable energy. We don’t have the investment capital, but I worked out a deal with the county commissioners where we can lease the adjacent two or three acres to a solar company and buy the power from them. And the for profit LLC that pays taxes can take advantage of those tax incentives and that’s a marriage of the for profit motivation at the local level and the not for profit that needs the lower energy rates and so forth.

Now there’s a second wrinkle to this which is if you take accelerated depreciation or renewable energy and so forth and take the full tax credits all of which are available currently to for profit entities. At the end of the time and you say to the investor, “Look we’re going to guarantee you 15-18%, 20% tax free on your investment but at the point you have reached that you need to donate the facility to us”. At which point the solar farm transfers to the school system and the tax advantage investor gets a charitable donation. And the charitable donation is calculated by the net present value of the future earnings stream of that commodity; so if the solar system – the solar energy that is being obtained from the solar field or wind field or whatever is going to continue to rise the net present value of a rising cost is considerable. And the tax advantage deduction taken by the for profit LLC can really put the investor in a very, very handsome place and the local tax payer winds up with free energy.

Chris Martenson: So let me make this extreme to make sure I understand this because this sounds very exciting to me; so let’s imagine the way this all worked out that I as the investor had depreciated this thing to zero – I’m just making this an extreme. Depreciate this to zero, plus I’ve earned my 18% back on this but at the moment I’ve taken that to zero, I’ve got my 18% we then take an NPV calculation and say “Oh my gosh this thing is now worth a lot of money” and I hand that over to a non-profit. And I take that the net present value amount as my donation for that year.

Francis Koster: That’s exactly right but also left out all the earnings you’ve got from the school system for paying for the energy before you donated it.

Chris Martenson: Yeah that sounds pretty excited. So again is this, are we going to find this in your book I hope or is this –

Francis Koster: Book and there are several good examples of this on my website also the Appalachian Renewable Energy Institute in Boone, North Carolina has a couple of geniuses up there who are eager to work with people.

Chris Martenson: That’s a fantastic idea; I know we’re going to have people interested in that one. And there will be other ideas that good and like it in rescuing your local economy, success stories for sustainable communities. I love it and of course you can find more at the Optimisticfuturist.org.

But I want to turn now to your second piece which was around education. I don’t know where you had time to write all of these books. But Rescuing Your Local Schools; let’s talk about this. First of all right from the beginning listen you’re talking to somebody, I ended up homeschooling my children. I was fairly turned by the ideas of John Taylor Gotto and I do think that our public school systems leave a lot to be desired depending on how you measure them ranging from a little to a whole lot. So you waded into I think one of the toughest areas you can wade into which is a giant system with a lot of moving parts and a lot of difficulties ranging from almost none in really well operating school districts to extraordinary and almost intractable other ones. What caused you to tackle this one, it sounds like a big one?

Francis Koster: Our society has changed a great deal. When I went to school I was raised Catholic, I went to a Catholic school. And back in the day it never occurred to anybody to call that a charter school. It was a parochial school and the norms and values that were passed along by the priests and nuns were value driven. We can still and frankly that’s probably – I probably remember more of those than I do the math and English I was taught.

When you look at the challenges that schools are being asked to solve right now about 9 out of 10 Americans today are educated in k-12 public schools, 9 out of 10. We have about 50 million students in that and about 6 million teachers and administrators. So of our population we’ve got about 56 or 57 million people working in schools, that’s about one-fifth of our population. Just think about it k-12 is one-fifth of our population. In the past 30 years it’s been a huge change in the people that go through those schools. We have a huge rise in the number of single family homes, single parent homes. We have a rapid rise in the number of neurological birth defects; I can talk more about that later. Whatever rapid rise in obese students, we have a rapid rise in students who speak English as a second language.

So the student body that assembles in kindergarten, first or second grade is often lacking in socialization towards good behavior because it’s a single parent home where people are overwhelmed. There are people who either because of pollution or other impacts have a lot of neurological birth defects, learning difficulties. A large number of obesity because of the diet and we say to the teachers, “Why is it that you’re not doing as good a job at teaching the students as was done in my day” and the answer is they’re not teaching the same population that the majority of American adults think they are. The schools are put in a huge role as social workers that is largely unfunded, unrecognized, unappreciated and often the subject of criticism if a teacher reaches out to say “Johnny didn’t have breakfast again this morning, mom what’s going on” and the teacher can be the subject of great hostility when that starts to occur. So I said if we are changed – if the population of students in k-12 has changed dramatically and the teachers are being asked to play different roles, what are the most significant things we can do to the schools outside the classroom that would impact what happens inside the classroom? And I found some really fascinating things.

One of the ones that really tickled me was hand washing.

Chris Martenson: That sounds so 1850’s of you.

Francis Koster: It turns out the number of children who wash their hands during the course of the day has declined. And as a consequence somebody has crud on their hands and they sit down at computer terminals or other shared facilities and they cause the spread of various kinds of infections. There was a wonderful study done of what happens when students are lined up and made to wash their hands first thing in the morning, after recess, before lunch and before they go home, absenteeism drops dramatically. And so student test scores go up dramatically just because of hand washing.

Chris Martenson: Hand washing, that didn’t occur – that’s one of those things that I put in the back of my mind. I thought we had that one covered, fascinating that needs to be brought to the front again. That sounds simple.

Francis Koster: But whose job is it to coach the kids to wash their hands?

Chris Martenson: Well I guess that falls to the schools now.

Francis Koster: It didn’t use to and teachers don’t get paid to do it. Another big one, most people don’t know this but neurological disorders like autism, ADHD and so on and so forth are much more prevalent in boys than girls, did you know that?

Chris Martenson: I did know that; yes.

Francis Koster: The reason for it is as any of our significant females in our lives will tell us boys mature slower than girls and that means that the wiring in the brain evolves over longer time and as a consequence if you do something to mess with the evolving brain, if your brain has windows of opportunity to be hurt the boys windows are open longer than the girls. And as a consequence if boys are exposed to different kinds of unhealthy stuff and it could be alcohol and drugs, but it also could be air pollution, which has a significant impact on the developing male brain. It’s going to show up in the test scores of the schools. And the school will be graded as a failing school when in fact; it’s got too much air pollution. The teachers could be doing a great job of teaching.

For example in Michigan they took standardized tests and the test results and correlated them with the air pollution of the neighborhoods the schools were located in. And then the first result they said oh the polluted schools or the schools in polluted neighborhoods score poorly and the rebuttal was of course those are poor people. They don’t live in so on and so forth – of course they score poorly; so the researchers said okay we’re going to correct for socioeconomic status. And they went back and found middle class schools with middle class parent’s intact families, same number of books and same house hold income and they split them into two groups. The one that had air pollution around the schools and the one that didn’t. And the ones that did have air pollution scored 17% lower than the ones that didn’t.

Chris Martenson: Well I bet people really didn’t want to hear that, right?

Francis Koster: I’m told there’s quite a fuss about that. There’s two categories, pollution of course, outside air pollution and indoor air pollution and this is another technique for local action. Many times as the city manager and school board is complaining about rising school taxes they’ll note that the energy cost of the school is quite high. I don’t know and many people don’t know that after salaries, energy is the second largest item for a school. So if you’re trying to control your budget you try to control the energy use. And if you live in a part of the country where you either have to heat or cool the school what you tend to want to do is cut down on what’s called the air exchange rate. How much fresh air do you bring in to the school and how much fresh air you bring in is either very hot if you live in the south or very cold if you live in the north. In either case you have to spend energy to bring it up to standards. So if you cut down on the amount of fresh air that’s brought into the school your energy bill goes down. The consequence is that CO2 air pollution rises in the school and those school test scores go down. A huge area of potential is to check indoor air quality in local schools and there are now pieces of technology available that you can do this with. Interestingly enough I know of several people that have been trying to do it and they can’t get permission from the local school board to do it so they’re plotting and scheming about surreptitious testing or indoor air quality. I’ve started a new project in this area; we could perhaps talk about later.

Chris Martenson: This is fascinating because here we are talking about improving schools but we haven’t talked about tests and test scores and improved testing and all that; you’ve talked to me about breakfast, air quality, environmental toxins and things like that. And you make it sound like these are actually pretty big deals.

Francis Koster: There very big. And the blessing of them is that the solutions are locally implemented.

Chris Martenson: I like that. Now I have to ask, maybe you don’t know are there any countries, not in the United States that understand this and have already –

Francis Koster: Yes, some of the testing that led to the early discoveries happened in Scandinavia. And they published their early results which were challenged from other countries around the world and now replicated in the United States; so they’re still – the body of knowledge is actually expanding. For example student diet, removing soda beverages from the vending machines in the schools, it turns out to be a real challenge because for many schools the only discretionary spending money the principal has is that which is derived from the vending machines. And the vending machine people want to sell high profit items which are basically high sugar items; so the principal is in a moral dilemma. He can sell apples and make less money or he can sell soda and that’s a real challenge.

Chris Martenson: Well I was listening to a piece with an actual – let’s call him a beverage industry lobbyist and reading between the lines they don’t just want to sell high margin items in schools, they know that they need to get people addicted to their substances by a specific age or else they’ve lost them. It’s really no different than what the tobacco industry was doing. Yeah I mean I was going to ask, I wasn’t reading too far between the lines but that’s certainly how it sounded to me.

Francis Koster: The more I get into this, the more personally outraged I get by the creation, deliberate creation of various forms of addiction for profit.

Chris Martenson: Yep, it’s a really big deal. And I know in my own personal life having cut sugars out it made a huge impact on my life and there’s so much data for anybody that cares to look at nutritionally what we’ve done to ourselves as a country; maybe that’s a third book for you. But I know you’re picking away at it pretty deeply in this book on schools and rescuing the students.

So you know a lot of people will say that there’s really not a lot we can do, this is just a giant system, what are you going to do? For many people they’ll pick their kids up and move them to a safer school district or whatnot because it can be hard fighting the machine. Talk to us about what people realistically can do and I want to hear that progress can be made in this story.

Francis Koster: The first opportunity is that many of these challenges have no cost, teaching somebody to wash their hands and can be parceled out to the PTA and so on and so forth and they have yearlong impact. For example there was carefully controlled study where they taught kids to wash their hands one year and they watched their behavior for the next three years and the infection rate did not go back up, whereas with the control study it went up. Then the second year they reversed it and the school that used to wash their hands didn’t, they were not coached and the one that didn’t wash their hands was coached and infection rates continued to go down in both of them; no cost.

In the area of renewable energy as I mentioned the 40% is a huge opportunity to make money for local private investors who want to do something, I call them empathetic investors where they can point to the solar system or the storm windows or the window film or changing LED lights or whatever is done and say I did that. And the reward of being able to claim moral high ground to your children should not be underestimated as a social motivating factor.

Chris Martenson: Yes if you can make money at it do good and actually be part of the solution. Yes people are hungry for that right now. And of course we have the people who will take the other side of this and say we don’t have to change anything, it’s all working fine. I agree with your original supposition that massive change is already upon us, we have to respond to it either intelligently or not at all but when you look at the overall macro trends of really just internally to our country the rise of the single parent households, the levels of obesity, the rise of certain incidents of various fairly dramatic neurological diseases on and on and on. There’s a variety of things we need to respond to but then externally the world is becoming a far different, far more competitive place and it’s just the whole external landscape has changed as well. And so we do obviously to me it’s very clear, we need to change with that or we risk getting stuck in the past. Some people will tell you we don’t need to change, it’s all working great. How do you respond?

Francis Koster: Talk to their wife and their daughter. It’s highly likely that the person that says we don’t need to change is a Middle Age white male with a secure income.

Chris Martenson: Interesting.

Francis Koster: A little tangent here many of the things that we talk about from a public health perspective are in fact worse in places like China and India. And the presence of dramatic air pollution and polluted water reduces IQ and that’s another subject we could spend time talking about but it’s well documented. And what is happening right now in China where they had the one child policy for many years. A married couple could only have one child and a lot of resources were heaped on that one child and the air pollution is now making that one child markedly dumb. And as a national or global political issue it has not been recognized and it has all kinds of moral dimensions to that.

Chris Martenson: Well I was thinking China the whole time you were talking about the air pollution because the pictures from that place are stunning and as they are from a variety of other places in the world. But China is really at the top of that list; so Francis I realize that it was just too much to try to cover both of these fine, fine books because we are out of time here. The first book that we discussed is about rescuing local economies, it’s just packed with stuff. I would invite people to find that and to read it as well Rescuing School Kids, both fantastic. I assume that people can find links to those at your sight the optimisticfuturist.org. But otherwise how would people –

Francis Koster: There available on Amazon and any of the major electronic marketing platforms.

Chris Martenson: All right. I was looking at the reviews and things on Amazon; it’s being very well reviewed. So that was the rescuing of the local economy book. So well thank you so much for your time today. We’re going to have to continue this; I really invite people to visit your website and to read these books because there are lots of things that we can do, people who want specific anecdotes, ideas and business models to follow well you have a lot of them and you’ve been accumulating them over the years. First thank you for your time, second thank you for doing the work –

Francis Koster: Thank you for the opportunity to talk about it.

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cowtown2011's picture
Status: Bronze Member (Offline)
Joined: Sep 12 2011
Posts: 40
Home schooling

Good job on the podcast, very inspiring.

It would be great to have you (Chris) do a podcast or write up on your home schooling experience. I've recently kept my four year old out of pre-kindergarten for a variety of reasons. We worked with him for a set amount of time each day and so far so good. I've come to realize that kids can learn without the help of school. Take for example how they learn to talk without any schooling or formal teaching. 

Keep up the good work.

efarmer.ny's picture
Status: Bronze Member (Offline)
Joined: Jan 7 2012
Posts: 60
Excellent Interview

Thank you for this interview! I'll be requesting both books from the library. (My day job is in a small private school.)

@cowtown2011 - definitely look into home schooling to see if it is a fit for your family. We have successfully homeschooled five children K-12. I'm defining success as the fact that three of the five received some type of college degree, the fourth a one-year certificate in her field of interest. The fifth is still considering his post high-school options.

robshepler's picture
Status: Silver Member (Offline)
Joined: Apr 16 2010
Posts: 105
Thanks Chris!

Great info for building community!

Oliveoilguy's picture
Status: Platinum Member (Offline)
Joined: Jun 29 2012
Posts: 578
Hand Washing

Great interview....one of the best yet. Who can argue against hand washing when the results are demonstrated. Francis is a real solution oriented guy....I'm buying both his books and can't wait to share with my teacher friends.  Got a little confused on the solar investment scheme ......would appreciate one of you money guys to explain that one in detail....Almost sounded too good to be true.

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