(Following is the text of a presentation made in October, 2006 at a global economic conference in Beijing.)
Financial decisions are an integral part of all of our lifestyle choices. In the workplace, we balance the amount we are paid with our skills, work environment, hours worked, commute time, and so on. We also consider what we are asked to do in our jobs, and examine whether our work is consistent with our personal standards. Our consumption and investment decisions involve a similar balancing. These kinds of considerations extend far beyond the workplace into all aspects of our economy. They bring to us the clear recognition that value is far more than a measure of exchange.
Economies
Viewed in a broad sense, an economy is any system of creation and exchange. Economic systems that prosper are open systems that are not tied to the notion of a zero sum game, where winners take from losers.
One measure of economic activity is the movement of money. Money has no intrinsic value, but is a convenient means of exchange and communication that is also used as an expression of value. Just as no two individuals value everything in their lives in an identical fashion, they do not assign financial values in the same way.
I recently read an article about mindfulness in our day-to-day purchasing activities. The author used watches as an example. He said that we can buy a perfectly good timepiece very inexpensively, and that to buy an expensive one was indicative of greed and arrogance. Many expensive watches are hand made with painstaking care by craftsmen who took years to learn their art. I doubt if they would share the author’s viewpoint.
In this country, teachers and nurses are not paid very much money for the work that they do. That is not the case everywhere. In some areas, they are accorded high respect and compensation. Does that mean that their work is less valuable to our society? If not, why has that inconsistency evolved?
There are subsistence farmers in Africa who live on the equivalent of less than $300 a year. There are families in California who make $25,000 a year yet are considered below the poverty level and have difficulty buying food because of the high cost of living. I wonder what the subsistence farmer would think of what we consider as necessities in our complex society. The cost of a new Xbox for Christmas could feed a child overseas for six months; the cost of a business suit would provide care for several years. Such disparities make perspective difficult to develop.
We could explore countless examples, but all would point to the reality that systems of exchanges and rewards have evolved over time as an amalgam of individual choices and environmental happenstance. They exist at macro, societal levels, and micro levels as well, down to each family or workplace. They will evolve in other, hopefully more balanced and compassionate directions in the future. The daily choices we all make influence that process of evolution.
Money enhances security, providing resources for basic necessities, safety, and comfort. And we can use some to have fun with, and we can donate to charities to help less advantaged people or to protect the environment. But it can represent many other things. Money is often viewed as an end in itself, a measurement of power, strength and success. Our universities even measure the success of their graduates by how much money they make and the status they achieve.
When these notions get out of perspective, feelings of craving, greed, and fear may become extreme. Clinging to the desire to have more, produce more, and give more causes a lot of suffering and distress. Much of that thinking stems from the false perception that we can control things. Systems constrict. People and nature are seen solely as productive resources and are unduly exploited.
When one individual, company, or society disadvantages another financially, it is a violent act that can have long-lasting effects. Living without, in poverty, arouses anxiety, anger, and ignorance. Unfortunately, much of the activity that takes place in markets is driven by greed and desire to dominate. Commodity prices often reflect this. When there is a perceived imbalance between supply and demand in essential commodities, producers and traders aggressively bid prices continually higher, without consideration of the impact on people who need these commodities for their livelihood. The lack of consciousness is puzzling. However, when people get together and agree on resource sharing in a manner that responds to everyone’s needs, feelings of cooperation and mutual trust are established. Everyone can gain, and we see profit as a by-product of mutually beneficial activities. As we examine our behaviors in the workplace, we can challenge our intentions, and strive to develop practices that are mutually beneficial and minimally exploitative.
The conflicts in our economic systems affect us in subtle ways. For example, a lot of issues also come up around gift-giving. If we think about how much we need to spend and are expected to give, and lose sight of what we are celebrating, we create a lot of stress. It is troubling to look at giving as an obligation, or to view how much we give or receive as a measure of our personal worth. There can be a real joy in sharing and involvement when we have a deep sense of appreciation and openness. I think that if we practice generosity this way, we will feel more at ease, and we will bring positive influences to ourselves and to society, creating a sense of coherent community.
What We Buy
Similar issues can influence our buying decisions. Every time we purchase something, whether for personal or business use, we can challenge our old habits and remind ourselves to maintain perspective. One of the ways we can do this is by looking deeply at how much the things we are buying really cost. When we become more aware of the consequences and implications of our actions, we will naturally gravitate toward more harmonious behavior. Each of us can make small changes that will add up to a big difference.
How much does it cost? That’s one of the first questions that come to mind for most of us when we go shopping. And usually, that means what is on the price tag. But there are many other costs that are not so evident.
It is important to look deeply at the true cost of the things we buy. A product may appear inexpensive at first glance; however, we need to consider what went into its manufacture, the impact on people, and the environment. There are also costs associated with its environmental impact when we dispose of it. Without looking further, we often fall prey to instant gratification. Someone else in another place or in the future may pay dearly for our careless decisions. We know, for example, that foods and cotton that are grown with the use of chemical fertilizers and pesticides take an enormous toll on the environment. Our present methods of producing energy and fuels do so as well. These chemicals seep into the water table and can create dead zones, where nothing can live. Chemicals in increasing quantities are now present in the air, in every form of life, and much of our food.
There are many things available to us that minimize this impact on the environment: Organically-grown foods and fabrics; recycled paper products; chemical-free, environmentally friendly building materials; paints, furniture, and carpet; solar heaters and hybrid cars are a few examples. We can buy locally grown flowers and plants, use cloth shopping bags, and choose products that come in recyclable packages. We should also consider the working conditions of the people who make the products we buy. It may take a little extra time and effort to examine all of these elements. The choices we make are of great importance and have lasting effects. We can examine same questions in the workplace as we put policies and practices in place that will impact many other people and various aspects of the environment. At individual and collective levels, we simply must adopt a broader notion of cost.
We can also challenge why we are buying. Is our purchase something we really need or want? How much did the ad or “image” influence us? Are we putting financial stress on ourselves and our families? Is our acquisitiveness about our needs, or our insecurities? Greater simplicity can be very appealing.
We may need to make sacrifices to accord our behavior with our beliefs. It takes courage to maintain our values in the face of peer pressure to do otherwise. The philosopher Martin Buber summed it up eloquently:
“The widespread tendency to live from the recurrent impression one makes instead of the steadiness of one’s being…originates…in men’s dependence on one another. It is no light thing to be confirmed in one’s being by others, and seeming deceptively offers itself as a help in this. To yield to seeming is man’s essential cowardice, to resist it is his essential courage…. One must at times pay dearly for life lived from the being; but it is never too dear.” (1)
We live in a large, complicated society, and do not always have the choices we would like. I am fortunate to live in an area where I can buy electricity that comes from wind energy, and that nearby stores sell organically grown foods. Many people do not have those choices. But no activity is one-sided, as people only produce things others will buy. Conversely, if company managements take a broader approach to understanding cost and value, better products will be developed.
Globalization
Many businesses have expanded by diversifying globally. There are costs to the environment that we often do not consider. Products are shipped over long distances, mostly in ships that dock at deep-water ports. The construction and use of these ports causes enormous damage to the ecosystem. Many of the ships burn bunker fuel that discharges pollutants that are highly toxic to the environment. The ships may also transport feral plant and animal species to areas where they are not adapted, which has further environmental consequences. These are all issues that can be addressed and solved, but only if we are willing to bear a certain financial cost to mitigate our impact on the environment.
Global trade encourages interaction among different cultural and economic systems. A lot of well-meaning people are opposed to global trade, many on the general principal that each system should function independently, that each geopolitical boundary is somehow sacrosanct. If I live in a community that has a stream as its boundary, is it wrong for me to trade with people on the other side of the stream? Why is a lake or an ocean or an arbitrary land boundary any different? We can learn much from the exchange of information with other cultures. This is an important part of global trade. It is not a matter of the activity itself, it is the way that the activity is conducted that should be of concern.
We make too much of cultural differences. Perhaps I have more in common with some people in China or Vietnam or France than I do with my next door neighbor. Arbitrary boundaries and imposition of intergovernmental restriction do not seem to serve any valid purpose. Humanity is all one.
Influence - Boycotts and Sanctions
We often feel that we have a clear view of how various conditions could, and should, be improved. And that often moves us to actions. We may want to ban together, to form an alliance, to convince company managements to change their behaviors, whether that involves workers rights, environmental protection, or any number of issues. Sanctions and boycotts have been used on several occasions with those objectives in mind. But are they really the best thing to do?
At a recent meeting of a peace group, a question about boycotts and economic sanctions was asked. The question was, if a diversified company makes many worthwhile products, but also produces bombs, is it a violent or a non-violent act for us to boycott the company? Most people quickly agreed that our act would be non-violent, but I saw it differently. I think that if we boycott the company, it is a form of economic violence to the people who are employed there, and to the shareholders of the company. A boycott deprives them of income. Most of them have nothing to do with the production of bombs. Even those that do may not favor it.
Let us suppose the company makes armaments as well as wonderfully helpful medical equipment that contributes to saving many lives. Then suppose I get in a bad accident, have a back injury, and am taken to the hospital for an MRI. As I am wheeled in, I look up and see a sticker on the MRI that identifies it as being made by that company. If I truly believe in boycotting, I have to say “No, I can’t go into that MRI. It is made by the company I am boycotting.” Otherwise, mine is a morality, or ethic, of convenience.
That kind of thinking has extensive repercussions. If a boycott becomes widespread and “successful”, how many other people will be deprived of medical care because MRI’s and other equipment will no longer be produced by this company? The same is true of broad-based economic sanctions. We may have the best intent, but we must look far beyond our own individual, momentary actions and objectives if we are to truly act responsibly.
Connection and Harmony
Everything in our ecosystems and in our society is interconnected. We all depend on nature and on each other in our daily lives. We can look around at the objects in our home, and see that all elements of nature and many people have been involved in their creation. A table is made of wood from a tree that depended on the air, the sunshine, the rain, and the earth to grow.
The tree was cut by a logger, who would not have been there had it not been for all of his ancestors. The wood was then processed and shaped into a table and transported to the store where we purchased it. Many other people were involved in the construction of the lumber mill and the store, the making of the trucks that shipped it to us, the refining of the fuel to run the trucks, and so on. We depend upon millions of people we will never meet to make our lives more comfortable. Money was paid for the time and skill they invested in their activities. Exchanging money is one of the many ways that we connect with the rest of the world. It has become a fundamental means of communication. It is a very powerful relationship tool.
Investing
We are fortunate to have well-developed markets that allow us to choose among a wide variety of investments. Many of these alternatives are in the form of shares in publicly traded companies, which allow everyone the opportunity to participate in their ownership. We have the ability to be part of new technological or medical developments that enhance our well-being and comfort, and of other products and services that we find appealing. We can invest in companies with high ethical standards, and in companies that support human rights and the environment. We may also choose not to invest in companies that manufacture certain items, or engage in certain kinds of activities.
If earning high returns on our investments is a priority, we may place a lot of pressure on companies to grow rapidly and produce higher profits. That kind of pressure can influence managements to compromise their ethics and integrity for the sake of financial profit. It is important to balance our financial expectations with our values.
It is helpful to recognize that there is little difference between performing an activity and investing in it. We share responsibility for the results and the process by which the results are achieved. We cannot say that we are simply bystanders, earning a profit without responsibility for the way in which that profit is earned.
It is often difficult to choose specific products or services to invest in, as many companies are engaged in a variety of activities. Many questions arise as we go through this process of evaluation. The difficulties arise when we look deeply, not just at the top tier. A clear answer will not always emerge. Judgments must be employed. The deeper our awareness, the better our judgments will be.
The same company that produces energy-saving devices and medical equipment may also produce weapons and bomb delivery systems. Drug companies make life-saving compounds, yet they also make and encourage consumption of toxic substances that would be unthinkable if people had healthy habits. A leading beverage company diverts water from arid, impoverished areas. A major packaging company is committed to recycling, but sells containers for products that we may consider undesirable. Some banks and insurance companies that provide useful and necessary services are also involved in predatory lending practices and sell financial products that no one should buy. The leading maker of hybrid cars is an outspoken opponent of tighter emission regulations.
On a broader scale, if we invest in treasury bonds, we support public health, education, and welfare programs. We also finance wars. Several countries that oppose U.S. foreign policies and activities buy U.S. government bonds to stabilize their currencies, so they are helping to finance the other activities they outwardly protest.
When we consume, we can make individual choices a little more easily. When we invest, though, we often cannot choose specific products or services to invest in. We must invest in all of the activities of the companies that provide those products or services. We need to sort through a lot of these contradictions to have a reasonable chance of knowing what we are really participating in.
Intent is an important factor to consider. Is the company’s apparent intent to be the biggest and strongest in order to dominate markets and drive others out of business? This can be viewed as a form of violence. Providing excellence, however, without usurping another’s rights, is not the same thing. More people will buy an excellent product. That is not about dominance, it is about rational choice. Large size is often associated with abusive power. But power can be used constructively, and size is not intrinsically good or bad. A certain scale is often necessary to serve markets effectively. And sometimes, size is simply a matter of preference.
The value of a company is measured by more than responsible practices. It is important to evaluate financial performance and stability, assess management’s effectiveness, and to be patient in our investing activities. Financial valuation is a learned process. Patience within markets is essential, as market fluctuations are typically emotionally driven. A company must be attractively priced relative to its future prospects to be an attractive investment. The Internet bubble that peaked in 2000 and its subsequent collapse taught many investors that lesson in a very expensive way.
Taking a broad market, non-selective approach, or looking only at a company’s financial performance, are somewhat indiscriminate ways to invest. It takes some effort to look more deeply and to act from our beliefs. And we may miss out on some investments that would be financially profitable by doing that. Financial analysts value companies on their ability to produce cash flows. It would be a big step in our evolutionary process to also consider the future costs of behaviors that cause damage to people and the ecosystem.
By selecting our investments carefully, by writing letters to CEOs and Board members, and through other forms of shareholder activism, we can encourage companies to engage in ethical practices and socially and environmentally sustainable activities. I think we need to promote constructive dialog and action. We can be clear that, while we are seeking reasonable profits, our interests are not limited to immediate financial rewards. This is a legacy we can leave to future generations.
We can choose our behavior, and live mindfully, but we can’t require that others think and act the same way. Some aspects of our individuality are diluted as soon as we choose to function within a society. Similarly, when we invest, we have compromises to make, as we are investing in the behavior and values of other people. We need to look deeply into those activities so we can understand the degree to which we are conceding. If we stay at a surface level, we really don’t know.
Ron Beasley is a retired investment advisor. He managed investment portfolios for individual clients from 1993 to 2015, with an emphasis on social and environmental responsibility. Contact ronbeasley@sbcglobal.net. for additional information.
Copyright © 2006, Ronald W. Beasley. All rights reserved.
(1) Martin Buber, Essay, 1965, Elements of the Interhuman; Psychiatry: Journal for the Study of Interpersonal Process, Vol.37, Aug. 1974, pp. 240-253
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