Investing against social interest

[Ten oz]

Lately I have become more active in market investing. In the past I have invested in solar and wind turbine industries. Things I was hopeful about for the future. Mostly I have gained percentages on my investments not much greater than a typical savings account. More recently I have been putting money into industries that I view as far less desirable. Industries that are bad for the environment and that produce products I believe are bad for society. These investments have been exceedingly profitable.

Thus far I have justified this in my own mind with the following equivalency; an athlete who disagrees with a specific set of rules that govern a sport still must play the game as it is structured. So while I may advocate against various industries those objections are played out politically. In terms of investment I am merely doing the most profitable for myself within the confines of the system as it exists.

Am I fooling myself? Does investing money in things I politically/socially object to make me a hypocrite?

[Phi for All]

If you're investing to make the highest return possible, you're doing it the right way.

 

If your aim is to invest in industries and markets you'd like to see flourish, so they can take the place of older, inefficient, yet established industries, then you're doing it wrong. For the emerging industry/technology/market it's two strikes, since you're helping the old stay strong while denying investment in the new.

 

As far as the athlete analogy goes, I think it's a spirit vs letter-of-the-law type of thing. You didn't say you were doing this to make the most ROI possible while still obeying the law, you said, "In the past I have invested in solar and wind turbine industries. Things I was hopeful about for the future." In spirit, it sounds like you wanted to use the stock market as a way to help businesses you believed in, in hopes of supporting a better future.

 

I think you just need to decide why you're investing. Maybe splitting your investments between old and new, in a non-conflicting way, is the answer?

[John Cuthber]

Part of the reason is that "dirty" industries are, by that very fact, not covering their costs so they are likely to be profitable.

[Ten oz]

@ Phi for all, return on investment is my focus. It always was only I limited which industries I invested based of my personal views of those industries. I stopped doing that and my returns improved. However I feel guilty about it. Like John Cothber pointed out some of these industries pass their costs on to the government and future generations. So I am trying to decide for myself what's ethical. If I should proceed. The expireince as also opened my eyes (even more so) on just how different corporations priorities are than that of the general public.

[Delta1212]

I can double your money in a week, but to do it, I will have to kill someone for every million dollars I receive. You'll never know who they are, no one will ever know they didn't die of natural causes and I already have a number of investors lined up, so a modest investment probably won't affect whether anyone lives or dies, anyway.

 

Do you invest with me?

[Ten oz]

I can double your money in a week, but to do it, I will have to kill someone for every million dollars I receive. You'll never know who they are, no one will ever know they didn't die of natural causes and I already have a number of investors lined up, so a modest investment probably won't affect whether anyone lives or dies, anyway.

Do you invest with me?

Good point.

[studiot]

Tenoz,

 

In your statement of return you are ignoring another factor, called risk.

 

Savings accounts carry the lowest rate of return because this return is less risky and even sometimes carries some sort of guarantee.

 

Renewables are slightly better since they are subject to a measure of risk.

 

High rate of return investments such as arms, diamonds mines, oil and so forth offer still higher returns sometimes, but as oil investors are finding at the moment, not always.

[Ten oz]

Tenoz,

 

In your statement of return you are ignoring another factor, called risk.

 

Savings accounts carry the lowest rate of return because this return is less risky and even sometimes carries some sort of guarantee.

 

Renewables are slightly better since they are subject to a measure of risk.

 

High rate of return investments such as arms, diamonds mines, oil and so forth offer still higher returns sometimes, but as oil investors are finding at the moment, not always.

The majority of my money is in CDs. I don't invest anything in the stock market that I can not afford to lose. I have been investing on and off for about 15yrs. My personal experience is that the market provides higher rates of return than savings accounts do at all levels of risk. It is just a matter of time. Oil for example is current low. It won 't stay low forever. So a patient investor could make money there. Buy cheap and wait for a rebound then sell. That said laddering CDs is a safer more consistent means of saving. It just doesn't grow money the same way.

[Delta1212]

ROI may be your focus in investing, but it's clearly not the only thing you care about or you wouldn't be asking this question.

 

What this boils down to is, and it's something you have to consider for yourself as it pertains to each company or sector of the market that you are investing in, considering everything that a business does, both beneficial and detrimental to other people, are you ok with paying somebody to do those things if it makes you money.

 

If you invest in a (hypothetical) companies that produces food for impoverished regions of the world but increases the risk of cancer for local farmers through the types of pesticides they use, you are both paying them to feed some people and give cancer to others.

 

So you have to decide how much it is worth to you to fund every aspect of any given business and where the line rests for you as far as being uncomfortable underwriting a given practice no matter how much it makes you, or whether such a line even exists. There's no one-size fits all set of ethical guidelines here, but you also can't go in with blinders on about what you are doing.

[Phi for All]

So a patient investor could make money there.

 

This is, of course, applicable to emerging industries as well. We more or less assume that a new technology, such as solar energy or solid-state lighting, will eventually take the place of older, more limited technologies. It's practically a given with efficiency and sustainability as an ongoing focus.

 

The problem is which companies to invest in. Having a great product alone doesn't make a business, and even with high-powered backing, there's no guarantee you'll be as successful as the tech you're making. I'm hopeful that electric cars will become the norm within a decade, but I'm not sure I could tell you if Tesla is a better investment than General Motors in the long run. Chevy's coming out with the new 200-mile-range Bolt, but Forbes says buy Tesla while gas is at an all-time low.

 

And that may be a partial answer for you. Don't invest in oil companies if you don't like the way they do business, but instead invest in an automobile company that's at least trying to push hybrid cars instead of gas-guzzlers.

 

If you can't pick up the boulder and set it down where you want it to go, just get it rolling and start nudging it in the right direction.

[Ten oz]

@ Phi for All, I actually am invested in LEDs. I missed the boat on Tesla but have been researching various battery makers who specialize in technology for long range auto mobiles. Problem is, as you pointed out, it isn't always clear which of these companies will succeed. Great products and market success are not the same thing. I do research but at the end of the day certian companies are more of a sure thing.

 

I think in starting this topic I had hoped, or rather naively assumed, most would say the game already has a set of rules in place to play by and that is how it needs to be played. That separately I could lobby for changes but ultimately would be foolish to behave as if those changes I desired already existed. That dichotomy, the world as is vs the world hoped for, allows for a person to be honest toward both. Investing is no sure thing and adding ethical challanges only lowers the probability of success.

 

I am starting to see that perhaps I am wrong. Perhaps I am a hypocrite. We aren't talking about millions of dollars. I am investing against my principles for the difference between a 3% and 10% return on investment in many cases. It is the right way to invest per the current system. So perhaps I shouldn't be investing? Because I can't imagine feeling comfortable handicapping my position by evaluating companies by personal principle rather than earnings reports. It just isn't how the game is structured.

@ Delta1212, what you describe is very difficult. For example I am concerned about global warming but at the end of the day sometimes I still must board a plane fly, climb in a car and drive, eat food produced at the expense of the natural environment, and etc. I am still part of this world regardless of my personal beliefs about the world. Is buying gasoline to put in my car any worse than buying stock in an oil company?

Edited January 13, 2015 by Ten oz

[Delta1212]

Which is why I said that what you are and aren't willing to support and how much that support is worth to you is something you have to decide for yourself. I'm not condemning any of your decisions, nor am I claiming that I, myself, will make ethically flawless decisions either.

 

But it's important not to pretend that just because you want something, lots of other people are doing something with negative consequences to get it, and you would never be able to detect your own direct contribution in all the noise, there aren't any consequences from your actions.

 

There are. You just have to decide how much of a contribution to what situation you are willing to make in order to get what you want.

[swansont]

There are thousands of companies in which one might invest, just on the US stock exchanges alone, so declining to invest in e.g. a tobacco company owing to moral qualms doesn't really impose much of a limitation on your choices. But it also depends on how widely you cast your moral net. Publicly traded companies are tasked with making money. They may do things that are legal but not necessarily moral/ethical by your standards.

[Ten oz]

@ Delta1212, I appreciate the comments you have made. My response was not argumentative. I was just playing out the pros and cons.

 

@ Swansot, tobacco companies are actually doing well right now. After years of well earn negative press and stiff taxation electronic cigarettes have given them a boost. I am not fan of tobacco but I do see promise in E-cigarettes because they seem to remove the dangers of second hand smoke. Whatever health risks are involved using an E-cigarette seems isolated to the user. To me that makes it more of a personal choice and less of a public hazard. I also see the E-ciggarette as having lots of room to grow as marijuana slowly become legal across the country. While I am not fan of marijuana use I rather see it legal than see my government continue to imprison people for it. So such an investment, tobacco companies, isn't as obviously unethical as they may seem. There is good with the bad.

 

To be more specific the companies I personally struggle with in terms of investment are oil and military contractors. Both are currently low. The cost of a barrel has fallen and long military actions are ending. Unfortunately I do not believe either will last. Oil always spikes and my government always finds a reason to fight. It is sad but true. So presently I see a huge buying opportunity in the market. Acting on that opportunity though would mean betting against outcomes I would prefer in order to make money on outcomes I suspect are more likely.

[swansont]

tobacco companies are actually doing well right now.

 

Which is beside the point. I was saying you can find other opportunities that do well, even if a morally questionable investment would do well.

 

You could have invested in Aluminum a year ago and seen almost a 40% return. Airlines, over 60%, likewise with semiconductor memory.

http://news.morningstar.com/stockReturns/CapWtdIndustryReturns.html

 

The choice is not between morally questionable companies and well-performing ones. It's not either/or.

 

And even with those numbers, that's the area as a whole. There are even better performers when you look at individual companies.

[iNow]

I missed the boat on Tesla but have been researching various battery makers who specialize in technology for long range auto mobiles. Problem is, as you pointed out, it isn't always clear which of these companies will succeed.

If it was, everyone would invest in those and make a killing.

 

"Prediction is very difficult, especially about the future." - Niels Bohr

 

I am investing against my principles for the difference between a 3% and 10% return on investment in many cases.

No, you're still investing within your principles, it's just that your principle about having some financial well-being and cushion in your future is being placed at a higher priority than your principle of helping change our culture away from pollution and similar ails via targeted market investments.

[overtone]

There is also an ethical obligation, in a modern society, to support oneself reliably in the face of old age and other hazards - to prevent oneself from burdening others.

 

That said, if your economy is so arranged that all the profits and gains are paid to evildoers you cannot invest profitably without ethical deficit - in fact, you cannot work for a living without ethical deficit. Everything you do contributes to the gains of evil.

 

So one approach would be to invest in some asset that sums in value one's entire society, to avoid "voting" for the bad, and then put one's efforts into seeing that society reward the ethically better.

[Ten oz]

Which is beside the point. I was saying you can find other opportunities that do well, even if a morally questionable investment would do well.

 

You could have invested in Aluminum a year ago and seen almost a 40% return. Airlines, over 60%, likewise with semiconductor memory.

http://news.morningstar.com/stockReturns/CapWtdIndustryReturns.html

 

The choice is not between morally questionable companies and well-performing ones. It's not either/or.

 

And even with those numbers, that's the area as a whole. There are even better performers when you look at individual companies.

I don't disagree with any of that. Problem is I can't, most can't, predict that Aluminum will be up 40% in a year. By buying both aluminum and tobacco ( in theory I don't own stock in either) I have a greater chance of success. Instead of all my eggs on one basket it is better to diversify. The more I limit my field the less likely my odds at success become. So I fully acknowledge that it is possible to make satisfactory return on investment with clean businesses but feel that doing so is more difficult and by virtue of being more difficult also comes with more risk. So the risk vs reward table gets changed.

[Ten oz]

So after some consideration and research I have found serval companies I would like to invest in that have business models that I can feel good about. I will begin the process of selling off shares in companies which I view as having a negative impact and moving that money elsewhere. Whie there is nothing wrong in a formal or legal sense with any of my investments at the end of the day I do not feel comfortable benefiting from things that a bad. For example the death of the King of Saudi Arabia yesterday pushed a couple of the oil companies I have money in up. The death of a leader and the temporary instability that creates made me money. That doesn't seem right to me. So I with move my money elsewhere.

[iNow]

If you wait until this time next year, you'll likely have twice the impact when drawing out of oil and into green / socially conscious groups.

[Ten oz]

If you wait until this time next year, you'll likely have twice the impact when drawing out of oil and into green / socially conscious groups.

I do not doubt that one bit. It is a buyers market for oil right now and a lot of people will make a lot of money next year but I don't personally feel comfortable with it. I bought in when the market was even lower. I have made money so I am not losing anything.

[Harold Squared]

Lately I have become more active in market investing. In the past I have invested in solar and wind turbine industries. Things I was hopeful about for the future. Mostly I have gained percentages on my investments not much greater than a typical savings account. More recently I have been putting money into industries that I view as far less desirable. Industries that are bad for the environment and that produce products I believe are bad for society. These investments have been exceedingly profitable.

Thus far I have justified this in my own mind with the following equivalency; an athlete who disagrees with a specific set of rules that govern a sport still must play the game as it is structured. So while I may advocate against various industries those objections are played out politically. In terms of investment I am merely doing the most profitable for myself within the confines of the system as it exists.

Am I fooling myself? Does investing money in things I politically/socially object to make me a hypocrite?

You are being fooled by wind and solar which are pretty much blind alleys as far as meaningful contributors to industrial scale energy production. Maybe you should invest more locally, in a resale shop or velomobile dealership? That way you can see more readily what is going on in the business and hopefully intervene if needed? Just my $0.02, may you prosper always.

[Delta1212]

@ Delta1212, I appreciate the comments you have made. My response was not argumentative. I was just playing out the pros and cons.

Oh, I didn't think it was, and didn't mean to come across as if I had interpreted it that way.

 

I think it's important to remember that if the rules we wish the world worked by were the easiest and safest rules to follow, those would already be the rules to game. The only way we're going to see the rules change is if enough people are willing to put in the effort to play the game (be it financial, political or otherwise) according to the ideal instead of just perpetuating the system as it currently stands.

 

In many cases, that does mean taking on a handicap, but it is rarely a truly insurmountable handicap, and if no one ever takes it on, nothing will ever deviate from the trajectory it's already on.

 

I don't fault people who play by the rules as they exist, but I reserve my respect for the people who play by the rules as they'd like them to be.

 

So good on you.

Edited January 24, 2015 by Delta1212

[mothythewso]

The solution's simple; invest in Phillip Morris, take your profits, contribute to lung cancer research. Ethical dilemma solved.

Carried to the absurd; J D Rockefeller was a "Robber Baron", used totally disreputable business practices, devastated the environment, and yet his philanthropic activities are lauded. How is he considered now, a villain, a hero?