May 21, 2010
Understanding Cash – It’s all about value…
After watching this video from an old professor from college I found myself suddenly urged to blog on the topic of money and cash flow:
EBS recently hosted a presentation at our office about “Navigating the Road to Sustainability” which included presentations from Shayna D. Eskew of Green Property Solutions, Ken Kurtzig of iReuse and Matt Macko of Environmental Building Strategies. The night went well and ended up being a success with closing semi intoxicated discussions about Commercial Real Estate Valuation techniques and the difference between the dreaded word “payback” and the more robust Net Present Value.
The video above demonstrates how people feel about cash and the different types of cash – needless to say an interesting topic for everyone because we all have it and usually want more of it… But how does cash relate to sustainability and the decisions that are affecting our planet, our lives and our species vitality.
My hypothesis: Feelings of cash correlate directly with assumptions of sustainability investments.
At the end of the day a dollar is a dollar right? One dollar from one source is no different than the physical and power characteristics of a dollar from another source. They both empower a user with the ability to buy something with a market value of $1 – think McDonalds here…
But what happens when those dollars come from different sources and what happens when those dollars are accounted for dirrerently is at the heart of the sustainability adoption problem we are having.
When people value the cash they have in their 401K or child’s college savings account differently than they value the cash they have in their wallet (otherwise known as disposable income) you inherently have a problem of conscience. People will be unwilling to invest those 401K dollars (assuming all things being equally liquid of course) in investments outside of what they are dedicated to do – save up for retirement, child’s college savings, etc, etc. That creates a problem with energy efficiency and clean energy adoption because right now, no one has CASH on hand. Very few people have “disposable income” and let’s face it, the question of “do i have cash” is the number one we think of needing when we think about traveling, doing projects, or buying things. Energy Efficiency is no different – cash is king. No one has it and no one is willing to part with their savings, retirement or child’s savings account to invest in it. This is true even with the transparency of data out there telling us that investments in sustainability, energy efficiency and conservation practices yield the greatest return on investment possible in today’s society.
Yes you heard me say it – Sustainability offers the greatest Return on Investment – better than stocks, bonds, mutual funds, savings accounts, 401Ks, kitchen + bath upgrades to your overvalued McMansion, or corporate’s advertising budget. For proof look to the study I performed at the end of 2009 comparing the Return on Investment in Google stock being equivalent to that of a lighting retrofit.
Google is all too often considered one of the greatest investments of the 21st century but when you compare a purchase of it’s stock at IPO and sale of that stock 5 years later (end of 2009) to that of a lighting retrofit, you will find that the Returns are virtually equal. Roughly a 200% ROI (5 year horizon).
The video above about perceptions of money compared to our understanding of sustainability valuation helps answer the question of why we can’t adopt faster and saturate quicker as we move toward our goals of being a net zero energy economy, and a carbon free economy.