“Investors have one goal: make money.”
This is the stubborn one-liner that has time and time again cropped up in otherwise inspiring conversation at formal networking events, casual dinner parties or anywhere my trail of footsteps has led. Far too often, educated and otherwise profusely charismatic people fail to bat an eyelid as they single-handedly reduce investing to the skeletal shell of making money.
As you can probably guess, I disagree.
I object to the idea that investors, who by default have both money and therefore power, have only their royal selves in their sights.
Let’s talk about the principle of solidarity.
Solidarity emphasises the interdependence between individuals in a society, which allows individuals to feel that they can enhance the lives of others.
Solidarity exists in the world of investing. This article will proceed to uncover in what constellation it influences investment decisions and the broader impact on the economy and society as a whole.
How is interdependence relevant to business?
Making money of any kind stems from a band of interdependence between the parties involved in the transaction. If you require a service or product, you are dependent on those that supply it.
Turn the tables: you are offering a service, but your entire operation depends on whether or not someone values your service highly enough to pay the price you ask.
Supply and demand, baby. One is nothing without the other.
But you can make money, without doing good and enhancing the lives of others, right?
Taking it back to basics: enhancing the lives of others is point blank the mission of every business, or at the very minimum, the image they - not so nobly - attempt to convey. Their products will make you smarter, thinner, faster, happier; their services will make you feel alive, get you a long-awaited pay rise or wave an algorithm-based magic wand to help you locate that elusive soul mate of yours.
The fact is, those businesses that dish up real value to people’s lives, will win every time. The businesses that operate by façade and snake oil might make the odd investor a quick buck, but either underperform in the long-term or simply combust – think Theranos¹.
For those who don’t know the dark, twisted tale of Theranos, once upon a time Silicon Valley’s twinkling treasure, here’s a summary. Elizabeth Holmes - some say a clone of Mark Zuckerberg – drops out of college at nineteen. While some college drop-outs move back in with mom and dad, she goes on to create Theranos, a company promising revolutionary blood-testing technology: hundreds of tests on a single pinprick of blood. At the height of the company’s investor-hungry crusade, Holmes had pocketed $700M¹ in capital investment for the large-scale rollout of her legendary technology. She was Silicon Valley’s poster girl. It didn’t take long, however, for the façade to unravel and the holes in the company and the big blood testing dream to be laid bare. Her tech just didn’t cut it. It didn’t work.
She knew it and many of her investors knew it too. They couldn’t resist pouring money in to the pipe dream because, well, just imagine missing out on the next big thing in Silicon Valley. The juicy dollar signs blinded many investors and, ultimately, their “turning a blind eye” came back to bite them.
Even if your focus is only money, it will serve you to give a shit about others. Even if it’s just the humble subset of society that you can describe as your customers.
Investment funds have picked up on this and now eagerly broadcast how much good their stock picks do. One fund, for example, tells us that it is interested in making investments in companies which "contribute to the enhancement of the quality of life in America. Another tells us that it is interested in investing in companies that "make a significant contribution to society through their products and services and through the way they do business”²
The fact is, that, like any decision that gets our cogs turning, the decision in what to invest is multifactorial. While financials remain a sizeable part, they are far from everything, an investor has to consider. After all, we live in a world brimming with more than 300 million businesses³, many of which will have sturdy balance sheets and enthusing financial forecasts. Investors are going to need a little more than money on the brain, to endeavour to sift through this booming battalion of business opportunities.
Sometimes a stock simply won’t cut it just because. Many an investor avoids certain stocks because they do not appeal to their imagination: coffins, for example. Some people turn their noses up at the idea of buying stock in a coffin manufacturing company. At a $657 million market size⁴, 82% of which is monopolized by two companies⁵, combined with one of the only certainties we have, that people will keep dying, make investing in the market leaders a pretty economically viable idea. Clearly, investors don’t avoid these companies due to financial uncertainty but rather, something far more arbitrary: they would be depressed by its presence in their portfolio.
Or an investor simply doesn’t like the taste of the bubbly soda that a company sells². The point is, investment decisions are carved by an array of different forces, many more than just money: even factors you may have deemed arbitrary. It is not too great a leap, then, to assume that an investor’s ethical and moral ideology plays a role too: more often than not, investors want to be the change they want to see in the world. Investments in companies that promote sustainability, equality or diversity are growing year on year and are testament to the evolving priorities of investors.
Leveraging money for real, observable social change is an important driving force in most investment decisions.
And this is not just an investing style for the privileged with monopoly money: in fact, the two poles are far from mutually exclusive. Money and social change form a symbiotic relationship. Injecting change into society requires money and reaching a healthy ROI is catalysed through ideas, innovation and an unequivocal desire for social advancement.
The solidarity principle in investing offers a new way to think about the current economic system: a way of seeing companies not as obsolete cash cows but as mechanisms for change. They can simultaneously add intrinsic value to society and deliver robust ROIs nonetheless.
When investors raise their eyes beyond the sole focus of financial Narnia, they may stumble across financial opportunities that they may have been otherwise blind to.
Example: investment in women-led businesses. You can help close the economic gender gap and glean a nice pay-check at the same time. A study found that companies with a female founder performed 63% better than companies where the founders were all male. Female-owned businesses enjoyed approximately 72.3% growth from 1997-2014, while male-owned businesses only grew by 41.5% over the same period⁵
For many investment firms, bringing about solidarity through investment is already of the utmost importance. At the Global Collective we help connect investment firms with women-led businesses to both deliver calculated financial returns and foster a pioneering path to economic equality.
Solidarity is the association of various individuals and different groups working together for the well-being of our society. Don’t forget that there is exponential value in well-being and making meaningful societal change can be synonymous with a once-in-a-lifetime financial opportunity.
Heck, changing society for the better can be your competitive advantage.
References
¹https://de.wikipedia.org/wiki/Theranos#:~:text=Theranos%20(%CB%88%CE%B8% C9%9Br.,Privatinvestoren%20mehr%20als%20700%20Mio.
² Irvine, W.B. The ethics of investing. J Bus Ethics 6, 233–242 (1987). https://doi.org/10.1007/BF00382870
³ https://www.statista.com/statistics/1260686/global-companies/
⁴ https://www.ibisworld.com/united-states/market-research-reports/coffin-casketmanufacturing-industry/
⁵ https://thehustle.co/casket-industry-monopoly-batesville/
⁶ https://www.canadapost-postescanada.ca/blogs/business/ecommerce/the-powerof-female-small-business-owners-and-leaders