Friday, May 02, 2008

Tulips, part II

So, we’ve established that, with a little creativity, almost anything can be considered an investment. Tulip bulbs mesmerized the Dutch.

A recent example in the extreme was a young man who listed his “soul” on eBay.
The buyer was a priest who was touched by the young man’s plight. The young man thought he had a buyer (the Devil), but was considering other offers.

There is a serious point that I want to make about all this. It’s the most important point that we can make about money.

The entire issue is contained in the difference between value and purpose. Value is subjective ex. the price of real estate, gold, diamonds, currencies, clothing. Analysis of companies - price-earnings ratios, product pipeline, competitive advantages, market share – those are value issues.

When you consider purpose, you evaluate companies based on their broad footprint. Those companies that consider their environmental impact, promote human rights, animal welfare, corporate transparency, fair workplace practices; that fight discrimination, and are in partnership with their employees, shareholders and stakeholders, are purpose-driven. Purpose is never subjective. It is the essence of social investment - profit and principle.

The one-dimensional view of money, the “how much”, considers only profits. It is what allows companies to do end-runs around product safety, tolerates deceptive lending practices, allows lead-based paint in toys. The three-dimensional view brings in the interests of the consumer, the borrower, protects the children. If this seems simplistic to you, please explain to me why these issues are not dealt with - why campaigns are run on these platforms, and have been for years, and yet the problems persist.

The measure of how little progress we have made, is easily illustrated. Over 90% of every investment dollar is in an unscreened portfolio. Over 82% of the entire S&P 500 violates one or more principles of social conscience.

Warren Buffett, a legendary investor in the long history of Wall Street, knows value. So much so, that he is presently the richest man in the America, with a net worth of $62 billion. He sure can create value for his investors.

But Berkshire Hathaway is the largest stockholder in PetroChina, the engine behind the genocide in the Sudan. When asked about this, Mr. Buffett says that it is not his business to tell the government of China what to do. Mr. Buffett is not purpose-driven.

In my role as an advisor, I’ve seen the disconnect between value and purpose. Value dictates that in times of War, we invest in weapons manufacturers, oil companies. Value taught me that “War is good for the Economy”, and old Wall Street adage. Purpose precludes this. The lack of transparency in mutual funds, allows protesters to march on Washington, while owning Halliburton.

There are many angles from which to view the same disconnect. Every morning, I maneuver around 100 foot cranes, as New York City is bulldozed to make way for hotels and high rises. But affordable housing disappears, our leaders veto funds to shore up our crumbling bridges and tunnels, we have a third world education system, and we stand by as the Administration spends $12 billion a month on the War effort, mortgaging America’s future. The disconnect.

I’m not sure that the Dutch obsession with Tulips allowed the deterioration of their infrastructure, or put that little Dutch boy in the position of plugging that dyke –

-but it makes sense to me.


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