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The Energy and Passion of Impact Investing

| November 07, 2018
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Where is the energy and passion in investing?

Usually, investing is pretty staid stuff, at least at the "professional" level.  While the stock brokers of a prior era used to aggressively hawk stocks with a passionate pitch that "you don't want to miss this opportunity", today's advisors are more sober, dealing in risk management, asset allocation and expense ratios.  

(These are the building blocks of portfolio management, of course, and are undeniably important.) 

But, is there a place for passion in one's investment activities?  I think there is.

It's about physics...

Humor me for a minute while I digress into physics (yes, physics.)  I promise that it is relevant.

A friend and client recently posted a very interesting article to his blog titled The Quantum Physics of Marketing.  In this article, he equates the old "push/pull" style of marketing to Newtonian Physics (wherein all matter is essentially atoms and small particles.) He asserts that the "old school" is hit or miss, and what is really needed is vastly different from the old ways -- as different from normal marketing as Quantum Physics is from Newtonian.

From my rudimentary understanding, I can summarize Quantum Physics as being all about energy.  Essentially, what we believe to be "real" is mostly empty space.  Atoms aren't physical, but are made of energy.  And, importantly, energy affects physical matter.  So, OUR energy affects our surroundings.  Our energy is a big factor in our ultimate success or failure. 

And passion. 

Investor passion (i.e., energy) around impact investing is part of what will make it successful over the long term.  Energy drives innovation. Our collective visions of how to solve the world's most intractable problems will help to drive the solutions.  Our capital will find its way to these solutions.

Some will deride this all as hopelessly naive, of course.  But we already know that not every individual impact investment will be successful.  (That's why we diversify.)  Impact investing is, by definition, playing the long game.  When combined with prudent portfolio construction techniques and due diligence, we believe that investors have a very good chance of accomplishing both their financial and social objectives.

Energy drives solutions

In recent weeks, I have had two fun experiences that conveyed to me how energy drives solutions:

Last night, I had dinner with one of the earliest investors/innovators in what is now known as "microfinance".  He explained that, when they started decades ago, their main innovation when lending to very poor borrowers was trust local communities of women entrepreneurs to protect and motivate one another (to repay their debts.)  They weren't sure that it would work, but they had passion to try.  The results are now legendary, of course.  Defaults were minuscule, despite the borrowers having no experience with credit. Investors were well-rewarded.

And a few weeks ago, I was lucky enough to attend the Social Capital Markets (SOCAP) Conference is San Francisco.  More than 3000 passionate investors, analysts, fund managers and foundations shared their best ideas.  They discussed their worries and explored solutions to the World's problems. The energy was real, and their ideas were fresh.  And, I am certain that somewhere in that group was the next social investment innovator.

Think Differently

Remember, just a decade ago: 

Sustainability was an unknown concept and now is a mainstream business topic. 

Corporate Social Responsibility (CSR) was a fringe idea, and is now a "must have" for recruiting talent. 

Impact investing is still new(-ish), but fully represents a sea changein how investing is done.

So, I suggest that we think a little differently about our finances; that we listen to our own passions. And let them filter into our investment thoughts and activities.

What matters most to you? Where can we combine our energies to accomplish something better?

We'd love to hear your thoughts.

Scott

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