Archive for April, 2013

A theory fails a reality test

Sunday, April 28th, 2013

 

There’s a joke among economists, “We can see that this works in practice, but we’re not sure it works in theory.”

Unlike in real sciences, economists hold on to theories long after the actual data has swept them aside.

A blogger offers a good example of a theory and the data that falsifies it.

Quote:

There’s a good reason why almost all major economies abandoned free market economics. It’s that such economies didn’t and couldn’t avoid mass unemployment.

Read the entire article here:

 UNEMPLOYMENT & THE FREE MARKET

 


Can fossil fuel companies be in a socially responsible fund?

Saturday, April 27th, 2013

I was recently sent a survey by a socially responsible investing (SRI) advising group, asking what approach I preferred for including or excluding fossil fuel extracting, refining, and marketing companies from SRI portflios. In a nutshell, the choices were 1) drop them all now, 2) drop them all soon, or 3) keep them all.

I’d have liked to have seen at least one question about trying to rank the fossil fuel companies from worst to best (least bad), and using conscious selection of ecologically better companies for candidates to include in the portfolio.
A set of ideas I learned from listening to prominent eco-activist groups is:

  • You don’t have much influence on a company if you just wag your finger and say “You’re bad.” You give them no way to respond except to shrug.
  • You can influence them by saying “We didn’t invest in you, but did invest in company X, because they follow policy Y and you don’t. If you adopt Y, you’ll be on the ‘includable’ list.”
  • Keep the target moving forward. Whatever the most progressive practices in the fossil fuel industry are, push everyone to adopt them.

Eco-active groups have tons of data on who and which policies they dislike most, and why. I think we in the SRI corner of the investing industry need to start using that.

 

Another aspect is that I want this fund’s Social Responsibility definition to be free of b.s. and hypocrisy. As an individual and a founder setting the culture of a company, I make an effort to be a responsible consumer. At this point in our society, though, fossil fuels are woven into everything we do, even when we try to live a low-footprint life. For me, it doesn’t make sense to say “no fossil fuel companies, no way” when in fact I use fossil fuels every day. Instead, I try to use as little as possible, try to use greener energy when possible, and as described above, try to get the fossil fuel portion of my energy needs from companies that are at the leading edge of responsibility in their industry.

An easy example here is coal companies. Coal is by far the dirtiest, highest-CO2-producing fuel we available commercially. It also tends to be one of the dirtiest, most ecologically disruptive to mine. Coal companies would be off my “ok to invest” list until such (hypothetical) time as they can make “clean coal” a technological reality rather than a hollow misleading public relations slogan. They have a lot of work to do to get there.


The March 2013 Capital Drain newsletter was posted last week.

Friday, April 5th, 2013

Hi,

I’ve just (last week) posted and emailed the March 2013 Capital Drain newsletter. If you’re on the direct mailing list for that, you should be receiving it now.

If you’re not yet on the list, but would like to be, send me an email.
If you just want to read the letter, follow this link: March 2013 CapDrain.

I hope you’ll enjoy it. You can sample from the past several years of newsletters on this page.

As you know, I’ve been away from the blog for a while. I had to move my home and the company on short notice, but I’m settled and productive again. In many ways the new place is a delight, but I’ll miss my frequent visits with favorite people and businesses in Redwood City and neighboring towns.

-R

To get an email notice of new blog posts, including notice when each newsletter is released, subscribe: