How the Good Investors are moving the needle

I’m hooked on a 7-season show called The Good Wife. That gave me the idea for my blog title! The post essentially reproduces from CNN Money

They don't just want to grow their money: They want to achieve social and environmental goals through their investments. It's called "impact investing".

"Impact investing is hitting the mainstream," says Jackie VanderBrug, investment strategist at U.S. Trust, a division of Bank of America. "We're hitting a tipping point." She and her team recently surveyed 684 individuals with investable assets worth $3 million or more. Among the millionaires, dozens were Millennials between the ages of 18 and 35.

The overwhelming majority of Millennials surveyed -- 93% -- believe that a company's social and environmental impact is key to their investing decisions. That's up from 74% two years ago, according to the study.

In some ways, it's not new. Students have long protested at universities to end investments in coal or against governments like South Africa during the apartheid era. Last year, the universities of Columbia and Southern California both dumped their investments in prison stocks after student protests.

Now the impact investors want to see companies make an impact in a positive way.

Yaay! Now their older peers also agree. This year, 51% of Baby Boomer investors believe impact investing is key to where they park their cash, up from 46%. Former Vice President Al Gore is one impact investor. His investing firm, Generation, manages $12 billion and says, "sustainability values should be completely integrated in the investing process".

Experts admit there are challenges:

1. Defining "impact investing" is a challenge. It includes a wide swath of subjects, from gender equality and renewable energy to affordable housing and environmental policies. So they don't all appeal to the same people.

2. How it benefits investors is sometimes hard to measure. Fixing abstract problems like gender inequality through private investment don't have easy yardsticks for success.

3. Impact investing is often confused or conflated with philanthropy -- many investors don't want to blend the two, either for moral reasons or tax purposes (you can write off philanthropic donations when you file your taxes)

Still, companies are becoming more transparent, experts say. Last year, over 7,000 companies issued corporate responsibility reports, which are audited by a third party. That's up from only 27 such reports in 1992. And some people are trying to tackle the challenges facing impact investors. Christina Alfonso is the CEO of Madeira Global, a firm based in New York that specializes in data analytics that pertain to ESG -- environmental, social and governance.

Her firm focuses on scoring private equity companies on a framework that has a scale of 0 to 100.

One often-cited socially responsible company is Starbucks. It seeks to buy coffee grown in an ethical manner. It also helps employees pay for college, among other initiatives.

"We've seen that non-financial factors can play a significant role in a company's financial performance as consumers and investors increasingly support businesses that consider social impact as well as profitability," says Alfonso.

Choosing a career: J. K. Rowling or baker

 

A profession that is scalable is one in which you are not paid by the hour and thus subject to the limitations of the amount of your labor. It is a very simple way to differentiate among professions. Some professions, such as dentists or massage professionals, cannot be scaled: there is a cap on the number of patients or clients you can see in a given period of time. You work by the hour and are (generally) paid by the hour. .Furthermore your presence is necessary for the service you provide.  Your revenue, no matter how highly paid you are, depends on your continuous efforts. Moreover, this kind of work is largely predictable: it will vary, but not to the point of making the income of a single day more significant than the rest of your life

 

Other professions allow you to add zeroes to your output (and your income), if you do well, at little or no extra effort. This is an idea person who sells an intellectual product in the form of a transaction or a piece of work and the former is a labor person who sells you his or her work. On Wall Street, a trader does the same amount of work while buying hundred or a million shares. J.K. Rowling does not have to write each Harry Potter book every time someone wants to read it, while a baker needs to bake every single piece of bread to satisfy each additional customer

 

The idea person’s job sounds like a better choice than the labor person’s job but is there a downside. Most dentists, massage professionals and bakers (labor types) can do reasonably well, or even very well, over a thirty years career. They will never get rich in a single day. Hard to find a dentist who is consistently without patients. It’s a totally different story (pun intended!) with the ideas types like authors. For every J.K. Rowling, selling millions of books, thousands upon thousands of wannabe writers have tried and failed.

 

This is not to discourage bold choices but to know the odds. About twenty five years ago, my two kids were in their teens and we were living in India. They were both in school and getting good grades. They were also were good at their favorite sport, tennis.  Good enough to play in India’s junior national circuit. I dreamt that I would find the resources so that, someday, one of them would hold the trophy on center court Wimbledon! Then one summer, I took my wife and kids to Mumbai for our summer vacation. There, we visited an outlier friend. He had quit school to become an entrepreneur and became so successful that his brother and he are extraordinarily wealthy. Conversation turned to plans for my kids and I expected him to encourage me to go all out to support my kids becoming the next Federer or Serena.  After all he did not get to where he was getting paid by the hour! Instead, he said “Consider the odds of their becoming the champions you are hoping for. They are very good students so focus on their studies.” I took that advice, we migrated to America, and today they pursue successful careers in computer design and medicine.

 

Do dream and pursue those dreams. Just be smart about it. How about having your cake and eating it too! Pivot to being an idea person writing a book, after securing yourself financially by working as a labor person?

This post was mostly an idea from Nassim Nicholas Taleb's book The Black Swan

66,800 people in 65 nations, What They Think

 

TIME recently reported the results of a Gallup International poll. The following were the top five concerns

1.      Corruption Not surprising, since most of the countries surveyed have weak democratic institutions, rule of law and civil societies   

2.      Rich Poor Gap Dominates current political conversation in America. This concern is top of agenda for President Obama, Pope Francis, Warren Buffett. The divide is very visible in America and India, countries I live in and travel to. Some wealth distribution and reduction of inequality is needed to buffer the next few years of job destruction and evolution. 95% of all new wealth created in the US recently has gone to only to 1% of the population

3.      Unemployment Technology and population growth drive this concern. We’re in a race between computers and people – and we need to make sure the people win quoting Google’s Eric Schmidt. 230 million white collar jobs will be transformed or eliminated in the next ten years

4.      Environmental issues  Reached a crisis and yet there are uninformed but influential opposing forces. In a recent interview, the Dalai Lama when asked to name what issue the US could be paying more attention to he named climate change

5.      And finally Religious Fundamentalism Shia-Sunni in the Middle East,  Muslim- Christian in Africa, to name just two, resulting in millions of refugees

It’s worth waiting for the second cookie

Here is a simple puzzle. Do not try to solve it but listen to your intuition. A bat and a ball cost $1.10. The bat costs one dollar more than the ball. How much does the ball cost? The answer that comes to mind is 10 cents. Intuitive, appealing, and wrong. The correct answer is 5 cents. Many thousands of university students have answered this puzzle and the results are surprising. More than 50% of students at Harvard, MIT, and Princeton gave the intuitive wrong answer! And at less selective universities the wrong answer was in excess of 80%. Many place too much faith in their intuitions and avoid cognitive effort

Now let’s move from university students to four-year-olds. In one of the most famous experiments in the history of psychology, Walter Mischel and his students gave these children a choice between one cookie which they could have at any time or two cookies for which they had to wait 15 minutes. They were to remain alone in a room facing a desk with only two objects: a single cookie and a bell that the child could ring at any time to call in the experimenter and receive the one cookie. The children’s behavior observed through a one way mirror had the audience roaring with laughter. About half the children managed waiting for 15 minutes and picked up two cookies. Ten or fifteen years later a large gap had opened up between those who had resisted temptation and those who had not. The resisters were better at cognitive tasks, less likely to take drugs and scored higher on tests of intelligence.

Genes, parenting or other influences could possible explain the differential cognitive effort in these students and children.  Both are examples of the better outcomes from delayed gratification, avoiding impulsive decisions. A college freshman’s choice of more difficult courses (science, technology, engineering or math) could land a better job after graduation. A more secure retirement results from the discipline of savings taken out of every pay check

Adapted from Thinking, Fast and Slow a 2011 book by Nobel Memorial Prize winner in Economics Daniel Kahneman

Just seven minutes a day to health bliss!

The following are highlights of an exciting fitness regimen I read on pages, 72-73, in India Today, Aug 11, 2014

Journal of the American College of Cardiology’s simple new guideline: run at slow speed for just 7 minutes a day and cut down on your health risks. Scientists studied over 55,000 adults over a 15-year period. Runners had a 30% lower risk of death from all causes and a 45% lower risk of death from heart disease or stroke. They lived, on average three years longer compared to non-runners.

The article discusses how running benefits the brain (beta endorphins release creates high), lungs (more oxygen with each breath), arteries (keeps open preventing heart attacks), stomach (immunity boost by improving blood flow), calories (pushes up peptide YY, appetite suppressants), bones (strengthens, enhances stability, delays arthritis) and blood (arteries elastic, lowers sugar level).

The American College of Sports Medicine also recommends a 7 minutes set of high-intensity workouts-with just body weight, a chair and a wall. The article lists twelve 30 seconds exercises performed in rapid succession with 10-second rests in between

To make you feel guilty for not doing this, you can buy a snazzy wristband that gives you a mild electric shock if you slack off at the appointed workout time. Check out this new technology from Mahesh Sethi’s start up Pavlok

Guess which among a 2014 Accenture survey of 6 countries-Australia, Canada, India, S. Africa, UK and US had the highest (80%) number of consumers who desired to buy fitness monitors? Surprise: India

Have a healthy productive day

·       We’re in a race between computers and people – and we need to make sure the people win quoting Eric Schmidt Google at Davos, Switzerland

·       The forces of globalization and technology  tend to wipe out middle-income jobs

·       230 million white collar jobs will be transformed or eliminated in the next ten years

·       Nobel laureate Michael Spence has shown that when the American economy opens itself to free trade net job creation is basically nil

·       What’s threatened are not Ph.Ds or burger flippers but the jobs in between … middle class jobs

·       It’s been fifteen years since the American family got a raise

·       This is not just a wallet issue. It makes us feel bad too. Behavioral economics tells us that our sense of well-being isn’t absolute but rather is pegged to how the Joneses are doing

·       Majority of the jobs created in the next ten years will require at least two years of college if not more

·       Most importantly, some wealth distribution and reduction of inequality is needed to buffer the next few years of job destruction and evolution

·       95% of all new wealth created in the US recently has gone to only to 1% of the population

 

Above is summary of a commentary by Rana Foroohar, economist

How Morningstar ***** Rates Stocks

Morningstar star ratings for stocks are based on the stock’s price/fair value ratio and fair value uncertainty rating. To earn a 5-star rating, a low-uncertainty stock needs to trade at a 20% discount to MS fair value estimate, while the same stock would earn a 1-star rating if it traded at a 25% premium to fair value. These discounts and premiums widen as the uncertainty rating increases. A 3-star rating reflects our view that a stock is more or less fairly valued, while 2- and 4-star ratings reflect moderate levels of overvalu- ation or undervaluation, respectively.

What happens when overachievers turn to self-help books to try and achieve more? First, you've helped someone's lucrative book contract! Next, those books often talk about flat abs that are so difficult to attain unless you are an Olympic swimmer or under the age of 10! They are just markers of inadequacy that you will never be or, importantly, need to be. They mock you just like the fancy cookbooks with recipes for things like coq au fin that you will never learn to spell, much less make. This could be bad for self esteem. Take care of that first. ..... adapted from an article in TIME by Kristin Van Ogtrop, editor of Real Simple and author of Just Let Me Lie Down

THE ART OF SHOE THROWING

Harish Bhat explores the finer aspects of the ‘art’ of shoe-throwing. The forgotten art of shoe-throwing has seen a dramatic revival. In earlier days, shoes were thrown after newlyweds for good luck. Thereafter, Nikita Kruschev taught us that throwing and banging shoes on the high table at the United Nations produces a remarkable effect. Imelda Marcos may have never thrown a shoe herself, but she owned hundreds of glorious pairs, and must have collected many more as her countrymen threw shoes at her in anger. Like all art forms, shoe-throwing has also evolved. In recent times, shoes have been thrown at US president George W Bush and India's homeland security minister P Chidambaram and other well-heeled personalities. For all aspiring practitioners of this splendid art form, here are some words of advice. Choose your shoe prudently. It is best to throw a shoe that you don’t really want. Alternatively, you could choose to throw your wife’s shoes: more choice there. The gender of the shoe is not really important, and indeed a good high heel can send a very potent message. You must practice the throw several times in advance — the idea is not to hit the target, but to just miss. My time-tested formula — grasp the shoe firmly, rotate your arm in a wide sweeping arc, sight the target and throw aiming exactly 17 inches to the left. If you are targeting a politician, increase this gap to 80 inches or more: they are known for constantly shifting positions. Throw both shoes. After all, what can you hope to achieve with the second residual shoe once the first has been taken away by the authorities? You could even throw your neighbour’s shoe if you wish. This requires a quick bending action and a sleepy shoe-clad neighbour. And finally, dont throw shoes for flimsy reasons as getting rid of your old shoes. Every shoe, however smelly or torn, must be thrown only for a great and noble cause

Who gets to "pick"? Al Gore or Baida Gaikwad ?

Times of India report from PUNE: "Don't burn our bread," urged Baida Gaikwad, a wastepicker from Pune, while expressing her concern over the use of Waste to Energy' (WtE) in
Germany. Baida addressed panels of trade unions and United Nations on the impact of WtE technologies on her livelihood and that of thousands of wastepickers across India, including 6,500 in Pune.

Baida, along with Poornima Chikarmane and Nalini Shekar of Kagad Kach Patra Kashtakari Panchayat (KKPKP), the Pune-based association for ragpickers, made a presentation at Bonn (Germany) Climate Change Talks - June 2009, organised by the United Nations Framework Convention on Climate Change.

Wastepickers in Pune are worried about the impact of the civic body's efforts to use quick-fix solutions like Refuse Derived Fuel (RDF) to control the garbage processing menace, on their livelihood.

"The recycling sector provides livelihood and employment to about 1 per cent of the total population in developing countries. The workers in this sector live and work on the fringes of the economy. They go about their business of collecting paper, plastic, metal, glass and other recyclables. Their livelihoods are under threat from technology providers hawking quick-fix solutions, like RDF, plasma, pyrolysis, gasification and other euphemisms for incineration. Cloaked in the guise of renewable energy, they claim carbon credits for sending toxic gases into the atmosphere" said Laxmi Narayan of KKPKP.

KKPKP has 6,500 member of which 1,500 are also members of Solid Waste Collection and Handling (SWACH), an autonomous enterprise of waste-pickers.

PMC's plan to opt for RDF technology for processing garbage is meeting stiff resistance from environmentalists who have warned of hazardous consequences for health and environment.

December 2008 Comptroller Auditor General's report on Municipal Solid Waste in India recommends providing legal recognition to rag pickers so that recycling work becomes more organised and also ensures better work conditions for waste-pickers. RDF technology is inconsistent with the livelihood needs of the recycling workers. In fact, it destroys livelihood and poisons the food chain as has been witnessed in Gundhumguda, Andhra Pradesh, says New Delhi-based solid waste expert Gopal Krishna.

"The use of technologies, which displace wastepickers and threaten their livelihood, should be avoided as these technologies go against the principle of recycling because the incentive to segregate is absent," adds Laxmi Narayan.

Story of Stuff

Enjoy! http://www.storyofstuff.com

THE REAL PRICE OF GOLD

The following is an environment update from me. Respecting your time, I've heavily shrunk an article from the National Geographic

In the U.S. an activist-driven "No Dirty Gold" campaign has persuaded many top jewelry retailers to stop selling gold from mines that cause severe social or environmental damage, but such concerns don't ruffle the biggest consumer nation, namely India, where a gold obsession is woven into the culture. For all of its allure, gold's human and environmental toll has never been so steep. Part of the challenge, as well as the fascination, is that there is so little of it. In all of history, only 161,000 tons of gold have been mined, barely enough to fill two Olympic-size swimming pools. Now the world's richest deposits are fast being depleted, and most of the gold left to mine exists as traces buried in remote and environmentally fragile corners of the globe such as the Peruvian Andes and Indonesian rain forests . Mercury used to separate gold from rock, spreads poison in both gas and liquid forms. UNIDO estimates that one-third of all mercury released by humans into the environment comes from artisanal gold mining. Two to five grams of mercury are released into the environment for every gram of gold recovered—a staggering statistic, given that mercury poisoning can cause severe damage to the nervous system and all major organs. Even vast, open-pit mines run by the world's largest mining companies wreck the environment in a different way. A typical wedding ring requires the removal of more than 250 tons of rock and ore. No other metal generates so much waste per ounce.No technology can make the massive waste generated by mining magically disappear. A mere 16 hours shift, at a big mine inside the Indonesian rain forest, accumulates more tons of waste than all of the tons of gold mined in human history. The waste comes in two forms: discarded rock, which is piled into flat-topped mountains spread across what used to be pristine rain forest, and tailings, the effluent from chemical processing is piped to the bottom of the sea.

Will we still enjoy buying gold? Saving the environment can no longer be the concern of only tree hugging, sandal wearing, tofu eating bearded types.

Wealth since the dawn of civilization

The 75 richest people since the dawn of civilization makes interesting read: Here is a selection of names including rank, wealth in recent USD billions and source of wealth. And off course my wisecracks! 1st John D. Rockefeller, (oil), 318 billions. 2nd Andrew Carnegie, (steel), 298 billion. 3rd Nicholas II of Russia (monarchy), 253 billion. Is not Putin richer? 5th NIZAM OF HYDERABAD, (Ruler), 210. I was his neighbour before I moved to US (kidding!). 7th Henry Ford, (motor car), 188 billion. No surprise his successor has not asked for federal bailout money. 8th Marcus Licinius Crassus, (Roman Senator and contemporary of Julius Caesar), 169 billion. What happened to JC, Brutus and Mark Anthony ... were they busy either writing speeches or chasing Cleopatra instead of raiding the mint? 9th Basil II, (Byzantine Emperor), 169 billion again. 12th Amenophis III (Egyptian Pharaoh), 155billion; think some is still there in the pyramids? 15th Elizabeth I (House of Tudor), 142 billion. 16th John D. Rockefeller, Jr, (oil), 141 billion .... how did he blow 180 billions that his # 1 kin started out with ? 17th Sam Walton (Walmart) 128 billion ... imagine how much more if he did not offer everyday low prices! 20th CLEOPATRA (ancient Egypt/Ptolemaic inheritance), 95 billions; dream mix of beauty & wealth! 27th Sultan of Brunei, (Ruler), 80 billion; yeah, I've seen pics of his fancy jet! 31st. Carlos Slim, (Mexican telecom tycoon), 72 bil. 37th BILL GATES, (Microsoft), 58 billion. 40th MUKESH AMBANI, (Reliance/India), 55 billion .... wow ! to be on the same list as Cleopatra. 41st Warren Buffet, (Berkshire Hathaway), 52 billion; good job Warren for joining Bill in the world's biggest charitable endowment. 42nd LAKSHMI MITTAL, (steel/India), 51 billion. Looks like that mega shaadi (wedding) for your daughter did not make a dent! 48th ANIL AMBANI, (Reliance Communications/India), 45 billion. 55th Paul Allen, (Microsoft co founder), 40 billion. His recipe for success: Room with a dude like Gates and don't waste time at Harvard. 68th K.P. SINGH (DLF/Indian builder), 32 billion 75th Prince Al-Waleed bin Tal, (Saudi ruling family), 29 billion.

Source of information: "Outliers", by Malcolm Gladwell

India Untouched

A Times Of India report summary


NEW DELHI: India is failing its rural poor with 230 million people being undernourished. Malnutrition accounts for nearly 50% of child deaths in India and every third adult is reported to be thin. According to the latest report on the state of food insecurity in rural India, more than 1.5 million children are at risk of becoming malnourished because of rising global food prices. Foodgrain harvest during 2008-09 is estimated to be a record 228 million tonnes. However, the requirement for the national population would exceed 250 million tonnes by 2015.
India ranks 94th in the Global Hunger Index of 119 countries, the report said.
Brought out by the United Nations World Food Program, the report points to some staggering figures. More than 27% of the world's undernourished population lives in India while 43% of children, under 5, in the country are underweight. The figure is among the highest in the world and is much higher than the global average of 25% and also higher than sub-Saharan Africa's figure of 28%. More than 70% of children suffer from anaemia and 80% of them don't get vitamin supplements. According to the report, the proportion of anaemic children has actually increased by 6% in the past six years with 11 out of 19 states having more than 80% of its children suffering from anaemia. Percentage of women with chronic energy deficiency is stagnant at 40% over six years with the proportion in fact increasing in Assam, Bihar, Madhya Pradesh and Haryana during the same period. The report also questioned the government's definitions of hunger and poverty. "The fact that calorie deprivation is increasing during a period when the proportion of rural population below the poverty line is claimed to be declining rapidly, highlights the increasing disconnect between official poverty estimates and calorie deprivation," it said.
Almost 80% of rural households do not have access to toilets within their premises. The figure exceeds 90% in states like Chhattisgarh, Jharkhand, Orissa and MP.
The proportion of stunted children at 48% is again among the highest in the world. Every second child in the country is stunted, according to the health ministry's figures. Around 30% of babies in India are born underweight

Behind every man .......

Barbara Walters did a story on gender roles in Kabul, Afghanistan, several years before the Afghan conflict. She noted that women customarily walked five paces behind their husbands. She recently returned to Kabul and observed that women still walk behind their husbands. From Ms. Walters' vantage point, despite the overthrow of the oppressive Taliban regime, the women now seem to walk even further back behind their husbands, and are happy to maintain the old custom. Barbara approached one of the Afghani women and asked, 'Why do you now seem happy with an old custom that you once tried so desperately to change?' The woman looked Ms. Walters straight in the eyes, and without hesitation said..."Land Mines". No matter what language you speak and where you go: BEHIND EVERY MAN, THERE'S A SMART WOMAN.

Dr Robert Langdon responds to my request!

I requested the fictional Dr. Robert Langdon, the fabled Harvard symbologist (Tom Hanks plays him in the movie version of Dan Brown's Angels & Demons) to help me understand the symbols of Indian political parties and here is his response!!!

Q: Why is the Samajwadi Party's symbol 'Cycle'? A: Because after a ban on English and use of computers, that's all we'll be able to afford

Q: Why is the Congress party's symbol 'Hand'? A: To remind Indians that our fate is forever in the hand of one family

Q: Why is BJP Symbol 'Lotus'? A: Lotus is the symbol of Sarawasti and learning. BJP will educate us through the wisdom of Varun Gandhi and Pravin Togadia.

Q: Why is Mayawati's symbol 'Elephant'? A: It's a self portrait.

Q: Why is Jayalalitha' s symbol 'Two leaves'? A: Because that's what remained after Amma ate up all the fruit

Q: Why is DMK's symbol 'Sun'? A: So that Karunanidhi can justify promoting his 'suns' through his numerous wives over others in the party!

Q: Why is Lalu's symbol 'Lantern'? A: Because there's no electricity in Bihar

Q: Why is CPM's symbol 'Hammer and Sickle'?
A: Because that's what you will be using if they come to power

Q: Why is Sharad Pawar's symbol 'Clock'? A: Because his time, as Mahamantriji, never seems to come

Q: Why is Shiv Sena's symbol 'Bow and Arrow'? A: I can tell you, but then I'll have to shoot you Have a nice day Lava