Why conscious investments?
One of the most powerful things within the conscious business movement would be if a lot more investors decided to ship in for the long-run and let their capital work for something great for us and our coming generations. Investments can be the golden ticket to do more good in the world. Imagine if we all would stop chasing the quick buck, what would be the effects around the world? We see it here and there but we are talking about the big shift. Pension funds, investment firms, but also the average investor. You and me. There are tons of fact that focusing on creating really good stuff with a purpose and manage the company around this will generate much more profit in the long-run vs the normal short-term race. Purpose that leads to profits. The book Firms of Endearment: How World-Class Companies Profit from Passion and Purpose is a great example of research behind this. What the f..k is the problem? Why is not everyone buying into this?
One major thing to mention is that the focus on patient capital and the long-run is crucially important. Short term profits can easily be generated, just look at the investment community today. Most likely, the strongest reason why even the most graceful CEOs and leaders get carried away in the chase for more and more short term profits is the pressure investors behind the company put on them. The question why we invest in the first place would probably be a good start in many boardrooms. The underlying problems are probably the temptation to get more and have more instead of doing more good. Success is often measured in money and who could blame people from wanting to be successful.
We also often hear about the heroes in the investment community like Warren Buffett who has decided to give most of his money back to non-profit organisations. To use his money to create something good in the world. We love that and all the other initiatives like this. This is a reason why we have faith that capital can and should be a force for good. But we honestly believe that Warren and others could have done it even better. Sure, Mr Buffett is an old man with an extraordinary track record of creating returns on his investment. We are talking about the man often called "Wizard of Omaha" or "Oracle of Omaha". In fact, the investor that decided to invest in Buffetts investment company Berkshire Hathaway back in the days are wealthy people today.
But, again, we think that even Warren should have asked himself these questions more often; why do I invest in the first place? Is there a way to make more positive impact in the world with my capital? Just to make it clear again, we like Buffett and the integrity he has. There are tons of people in the investment community with more short-term views and hunger to make that extra quick buck. Greedy people that leave the moral obligation on the shelf. But why living your life investing in companies that use less good things like fossil fuel and other things that the world doesn´t need instead of unleashing the potential in capital from day one? It feels like the investment community doesn´t believe it´s possible. Like we said, there are plenty of research behind this so it should be a no-brainer.
Jeff Cherry, investor and founder and executive director of the Conscious Venture Lab, have insightful thoughts on this:
We hear this often in our business: “I want to build a business that allows me to give back.” Although I understand the sentiment and generally love when entrepreneurs want to engage community stakeholders, I hate the terminology “giving back.” It implies that you took something in the first place. But more importantly, I believe it focuses entrepreneurs on using profits for philanthropic efforts that don’t support their purpose and business strategy. This is an unsustainable way to create meaningful change. And this is the critical difference between a business which has imbued a mission of social justice into the DNA of its operating model, and more superficial models that give away “greedy” profits.
“Conscious capitalist” was first coined by Muhammad Yunus, the Nobel Prize- winning founder of Grameen Bank. Recently my friend Raj Sisodia, the Franklin Olin Distinguished Professor of Global Business at Babson College, along with John Mackey, CEO of Whole Foods Market, codified this business model in their book, “Conscious Capitalism: Liberating the Heroic Spirit of Business.” In the words of author and TEDx star Simon Sinek, “People don’t buy what you do, they buy why you do it. And what you do simply proves what you believe.”
This is the opportunity — the bright Blue Ocean of opportunity — that is being overlooked on a daily basis by a large number of investors. Now, as an investor myself, I should be happy about this. The myopia with which some investors view companies provides me with what we call asymmetric information — a situation in which one party, namely me, has superior information compared to another. This allows me to identify big winners before the rest of my investor colleagues. However, as a citizen and human being, this troubles me. This myopia hampers the most efficient allocation of capital, both in terms of societal and financial performance, which constricts our ability to solve some of our most intractable problems.
We are probably optimistic and a bit naïve at times but we believe that the investment community will move the needle in coming years and become a bigger force for good. Are you with us to make the big shift and invest in the world which our children to grow up in and shape after us? It´s going to be a bumpy ride but a meaningful and exciting one!