Aligned Investing

Posted by Missy Proctor, WB '03

Sean is so cute. Gawd, what a hunk! And he has like this super brain. His whole head steams. Anyways, he invests my Trust Fund for me. I told him I want it values-aligned, ok? Nothing but Prada. He told me to ask Daddy. I told him screw Daddy. It is my Trust Fund and when Daddy is gone you are going to be working for me, Sean. And Daddy is older than dirt. So, we compromised, half Prada and half Gucci. That way I am diversified: Shoes and handbags. I think a person's trust fund investments make an important fashion statement, don't you? Next Sean is going to work on my Foundation. I am thinking we will invest in high interest loans to poor people, you know, those payday loan places? We can help the poor and make, like 35% off them. Pierre says I am gonna win the Ayn Rand Philanthropy prize 'cuz I am a social investor who looks out for #1.

Comments

[klaus]

The use of the word "donors" in philanthropy is interesting.

Imagine a cyber-dystopian version of the 19th-century-capitalist-turned-philanthropist. Instead of shares in fossil fuels you're trading shares in human organs harvesting.

And then some fuckbag says this:

In this simplified world, if the foundation invests in a human organ harvesting company, then any temporary setbacks to the foundation is met with additional resources provided by the human organ transplant company. Likewise, if the foundation invests in an alternative to human organ harvesting, it will only receive additional assets if it succeeds in its mission and any setbacks will be amplified by less and less assets flowing into the foundation.

In addition to receiving the profits, ownership in a stock also gives the owner voting rights over the company’s decisions. If I were running a foundation like the one in our example, I might prefer to obtain voting rights over the conduct of the human organ harvesting company than over the alternative to human organ harvesting company with the idea that the alternative to the human organ harvesting company are already being run by people who will come to agree with my worldview.

So what’s the right decision? I don’t know.

Yuck. Fu.

[The Happy Tutor]

Each trade or profession has its own language for its own reasons. Sean is going beyond traditional investment analysis(where risks are diversified and balanced with returns)to think through a risk/return/diversification analysis of a portfolio whose goals are dual: financial return and social return. I believe this will, as you suggest, Klaus, soon expose the contradictions and moral paradoxes of capitalism and its epiphenomenon, large foundations funded by the very wealthy, in a winner take all world. But you have to play the game where the game is now. Foundations have hundreds of billions invested in stocks and bonds. Should they or should they not leverage that investment in line with their mission, and if so how?

Their mission is not to blow up capitalism, generally. I think Sean's post was a useful step towards a financially savvy discussion of social investment. Lucy Bernholz, to whom he is responding, paints with a broad moral brush. Sean is a professional money manager. My point as a bystander and goad, is that the langauge of "social return" and the language of money meet either in contradiction, paradox, or public relations/marketing hype.

To really leverage foundation assets for social change, it seems to me, they should be invested as seed capital in new organizations, for profit and nonprofit, that provide truly innovative alternatives to the status quo. Buying and selling shares in tobacco companies, pharmaceuticals, financial services, organ harvesting, etc. is the free market system as we know it, not an alternative to it, or a real change in it.

Window dressing, can social investing be more than that?

[deadissue]

If your payday loan business takes off, I'm investing in bullet-proof glass futures!

[The Happy Tutor]

Buy prison stocks.

[deadissue]

Indeed!