Overcoming the Class 5 Rapids

This has been quite a year so far for the global economy. The collapse of the mortgage market and much of the rest of the loan market in the U.S. has spread around the world. Energy prices have soared, reacting not just to global demand and supply fears but to the extremely weak dollar (which came about in part because of the mortgage collapse), as this country slowly awakens to the ramifications of our energy gluttony. Food prices, driven in part by the diversion of farmland toward biofuels, have skyrocketed, literally starving whole communities around the world and throwing local commerce into chaos. Those of us who make a living advising others on sound, sustainable investing have the sensation of riding a class 5 rapid.
People are, for a lot of good reasons, afraid – afraid that their life’s savings will be destroyed, afraid that their son or daughter will not find the money to go to college, afraid that the son or daughter will never own a home, afraid that the shortages around the world will result in violence, and afraid that if there is a sure way out of the rapids, it’s not that obvious.
There is no question that lurking behind much of the mortgage crisis is runaway competition in the private sector to build the biggest tower, house, or boat or to simply amass the greatest fortune. This is not new in the world. When I first started learning to invest at the Bank of Boston in 1969, I had a mentor named Harold who bought me a book about the Tulip Mania in Holland. Harold said that if I learned nothing else, I should learn about bubbles and greed and how to avoid them. Having worked in the profession through bubbles and greed for almost 40 years, I admit that both are really hard to avoid. They have a way of sucking you in. Your fear is that you will be left behind. And in fact, during the very end of 1999 I was fired as advisor to two clients who were angry that I had not purchased enough tech stocks in their portfolios. As a long-term financial advisor in a market with a short-term mentality, you walk a very thin line between prudent diversification and being left behind.
Sustainable, socially responsible investing should mean that you look at the world and the market with lenses sensitive to a complete social and ecological picture. I was brought up in rural New England by parents very invested in a “waste not, want not” culture. Waste of anything was seen as almost as large a sin as sex or swearing. It’s in my DNA, so when I see people running water down the drain as they wander around the kitchen or allowing food to go bad I have to check myself and realize I am not their parent. I gain some of my greatest feelings of satisfaction when I prod a kitchen appliance into service for decades. My Oster blender is older than my oldest son, who has ten year old twins.
In the U.S., where the mortgage foolishness originated in the vacuum of slack regulation, we have income disparity not seen for a century. College graduates have flocked to Wall Street to make money for decades. Business schools raked in alumni dollars and built sparkling, sprawling campuses with the most up to date equipment while other schools fought to make ends meet. “Making it” as a family too often has meant not just one heavy, over-powered vehicle but more than one, and, often several homes.
In Trillium Asset Management we have often imagined a more sustainable world. Occasionally, over the years, we have discussed the word “sufficiency.” It is very controversial as a concept because it presumes that there is a way to judge what “enough” is. Caught in a competitive, Darwinian economy, people often lose sight of basic needs or fairness and simply compete. Some competition is good and leads to innovation, but at what point do we have sufficient ability to transport ourselves comfortably? How many chairs do we really need? How high a ceiling in our house’s entry hall? How many shoes? Where is it all going to end? Who will be brave enough to jump off the treadmill with pride, not fear? Ever since the Reagan era made it “fun to be rich again,” it has been considered trite to count your blessings, but that is something else we need to learn to do.
If we swallow our fears and look around us with clear eyes, we might realize that we are destroying the very thing that made this country as successful as it was in the twentieth century – the middle class – and have blinded ourselves to the incredible wealth that we enjoy relative to much of the rest of the world. It is common to measure generational progress by asking the question “are you better off than the last generation?” Perhaps we should also ask “what have you done to make the world better off?” or “what have you contributed to the community around you?” Ironically, if the world and communities are stronger, you and your children should be too.
I recently read a book by Swedish novelist Henning Mankell called Chronicler of the Winds. Set in war-torn Africa, it follows street kids and vividly describes their existence. One of the boys, age 10, muses “If anyone had asked (sic) what was the fundamental need of every human being, I would have known the right answer at once: a roof and an ID card. That was what a person needed, in addition to food, water, a pair of pants and a blanket. It was by having a roof over their heads and ID cards in their pockets that human beings differed from the animals.”
Socially responsible investors have worked hard for humane, fair and environmentally sound practices within companies around the world. This deliberate, patient work has reaped positive results that our readers have witnessed over our 25 years of activism. The current bubble/deflation economy threatens to undermine these values and goals as fear of losing everything permeates the media and corners are cut to save money. I believe that we need to affirm our basic values and stand proud and tall and continue to fight for them. We have choices to make – let’s make the right ones.
Actually, I believe, too, that we may have begun to turn the corner. Out of the darkness often comes the light. If we are listening, we might hear the truth about the planet’s limitations. We will continue to compete and innovate toward energy conservation, local food supplies and whatever it takes to help the global community. If we as socially responsible investors hold to our values and stand tall, I believe we can and shall overcome the class 5 rapids. I also believe we will remain adequately clothed, housed and fed!