The Ethics of Investing (2010)
This is the second of a three part series on random thoughts regarding the creation and pursuit of wealth; a stream of consciousness from a financial free spirit and friend – PK – who has spent years investing other people’s money while making a lot of it – and a name for himself – in the process.
This free-flow largesse of information and thought progression took place a few years ago via long distance calls between Singapore and Mumbai, and a few conversations into the subject, PK upped the ante from the mere making of money to the ethics of investment choices.
The new global reckoning, he said, demands accountability from every investor. For money to make more money, the investor needs to understand the whys and wherefores of every investment decision, its consequences in a larger context of space and time, its effects on other people, your children … possibly even on the green pigeon in the tree in the neighbor’s yard.
Because no longer can you take, plunder and enjoy. It eventually comes back, if not to you, then to the next generation, or the next or the next.
Abuse the environment and the ethics of it will revisit you.
Think about this, said PK. When India and China reach the level of affluence of today’s ‘developed’ countries, do we know what exactly will be required to fuel this explosion of growth, these ever multiplying numbers of cars, air conditioners, television sets ? We are talking finite resources – finite space, finite raw material – as opposed to infinite opportunities. It will no longer be an abundance of natural resources and a shortage of labour but quite the opposite – an abundance of labour and a shortage of natural resources.
Natural Capitalism is the philosophy behind the book Natural Capitalism : Creating the next Industrial Revolution by Paul Hawken, Amory Lovins and L. Hunter Lovins, based on a fundamental premise that societies are changing, generating both upheaval and opportunity while the natural resources and ecological systems providing vital life support services are getting rarer and more expensive. Traditional business models must give way to a newer kind of free enterprise that embraces all forms of capital – financial, manufactured, natural and human.
Only if and when nature and people are correctly valued, will competitive advantage and profitability grow; will waste and pollution be reduced – even eliminated; will there be greater employment together with an unprecedented growth of innovation and morale.
Through a network of intimate, interactive services within the global economy, the chain of responsibility will firmly link supplier, producer and consumer.
PK posed the question and supplied the answer. Why should this be a matter of consideration for a potential investor? Because one is likely to be at the expense of the other. And that brings you to short-term goals and long-term goals because this is when you need to think clearly, to ask yourself what exactly do I want from my money ?
The point is here, concluded PK, is that this is the space and time to build a new world order. Not necessarily a better one, but a different one. He spoke of James Lovelock and the Gaia Theory as an analogy between science and finance, between the mathematics of nature and the mathematics of commerce.
When NASA began its quest to determine if there was life on Mars, James Lovelock (independent scientist, researcher and ideological pioneer in the development of environmental awareness) was part of the group chosen to arrive at a definition of ‘life’.
Lovelock developed his (now famous) Gaia Theory (based on mathematical calculations) that Earth is a self-regulating system with a comfortable (and self adjusting) climate and chemical composition for organisms.
In other words, on any planet with flourishing life, that life will have control over the atmospheric composition. This is because life will alter its surroundings in order to optimize them.
This is the same with money and resources, growth and investment, said PK. Think about it, understand it. Mathematics governs the world and the existence of every living thing. We can use it to arrive at simple economic formulae for the environment.
Dan Brown’s thriller The Da Vinci Code has easy, casual illustrations of mathematics in nature, PHI – one point six one eight – the Divine Proportion, the Creator’s fundamental building block. Plants, animals, even human beings all possess dimensional properties that replicate – with miraculous precision – the ratio of PHI to 1.
Example. Bees. Divide the number of female bees by the number of male bees in any beehive in the world. Answer ? PHI.
Spirals in a seashell. The ratio of each spiral’s diameter to the next ? PHI.
Sunflower seeds which grow in opposing spirals. The ratio of each rotation’s diameter to the next ? PHI.
Spiraled pinecone petals, leaf arrangement on plant stalks, insect segmentation, the human body. Created of building blocks whose proportional ratios always equal PHI.
The distance from the tip of the head to the floor divided by the distance from the belly button to the floor ? PHI. The distance from shoulder to fingertips divided by the distance from elbow to fingertips ? PHI. Hip to floor divided by knee to floor ? PHI.
Spinal divisions. PHI. Finger joints. PHI. Toes. PHI.
Stradivarius used PHI to determine the exact placement of the f-holes in the construction of his famous violins. The PHI ratio is evident in the works of Bartók, Debussy, Schubert, in Mozart’s sonatas, in Beethoven’s Fifth Symphony. In the structural proportions of the Greek Parthenon, Egyptian Pyramids, the UN Building in New York.
The five-pointed star, the pentagram, or pentacle, an ultimate expression of the ‘Divine Proportion,’ where the ratios of line segments all equal PHI.
Why can’t we see this simple beauty, this blueprint of cause and effect and change accommodating change in finance ? demanded PK. If you understand the economic implications of a mutually supporting relationship between man and his environment, we are closer, globally, to inter-dependence without politics. Individual responsibility is greater in a globalised world.
The knowledge of money is a black talent, and not necessarily a blessing, so each person has to take responsibility for his investment choices. Are social values and business sense are mutually exclusive ? Can we make investments with conscience and still make money ?
Singapore’s first Socially Responsible Investment (SRI) Fund, The Unifem Fund, was offered by the United Overseas Bank together with the Singapore chapter of the United Nations Development Fund for Women (Unifem) in 1999, in the belief that social consciousness translates into long-term corporate profitability. It screened companies for gender equality in the workplace, women-friendly health programmes and on-site or subsidized child-care schemes and did not invest in companies deriving 33% or more of their earnings from alcohol, pornography, gambling, weapons or tobacco.
However, the Fund was terminated in 2008 and this is perhaps as good time as any to ask if ‘ethical funds’ perform as well as ‘ordinary’ investments and if investment styles impact performance.
According to PK, investment decisions should evolve from a moral and ethical appreciation of the inter-dependence between man and his earth, from trees to fruit to the smallest worm … and the mutually supporting cycles of omission and commission that govern the responsibilities and obligations between the two.
He quoted Peter Senge, author of The Fifth Discipline who wrote I believe that the only real alternative to our ‘take, make, and waste’ society lies in a revolution of aspiration and inspiration. The aspiration must come from us, from seeing the world we intend to leave our children and their children. The inspiration will come from shared understanding of the principles for an economic system consistent with how nature works, and from seeing that it can be done.
(To be continued).
Picture googled off the Net, from mindfulmoney.co.uk.