Off-topic: Social Change Artists
This last week I was on vacation with some friends of mine in the Northern California foothills (Pinecrest Lake). My buddy John has a cabin up there that's been in his family for almost 80 years, and it's the perfect place for a bunch of aging dudes to act like idiots and talk politics. One issue came up that fascinated me: how much of a Social Change Artist are you? How far do you go to support your beliefs with respect to the economy, society, and the environment?
Diesel: It's Not Just For Breakfast
My buddy Eric (the wrench-head I've talked about before) drove us 3 hours across the Central Valley of California, up to Pinecrest Lake in his massive Chevy Subdivision Suburban. The things is so big it can fit 7 grown men and all of their luggage for the weekend; it's massive and is one of the most offensive vehicles ever made - second only to the Hummer.
But it's Green. Very Green. Eric swapped out the entire fuel system and the thing runs on vegetable oil. It costs some money to do this, but the emissions are very low, very clean, and smell like french fries (or egg rolls, depending on where you get the oil from).
All of Eric's other cars run on Biodiesel, which is made from ethanol, which is made from plants. Pesticide arguments aside, I commend Eric for at least trying to make a difference (his wife, too, who has to drive a 10 year old Jetta around which runs on french fries).
Converting your car to run on Biodiesel and vegetable oil is pretty simple, but does require some time and a little money. On the face of it, it seems a rather simple thing to do - heck after a while the costs even out (with fuel savings) and you start to make money. Seems easy enough to do...
Solar Surfer
Another friend who was up there with us (Mike) works with Solar Energy. His entire house is "solared up" with radiant heat built into the floor, solar water heating, and solar cell energy panels. This guy is completely wired up and almost totally free of the grid and is a complete solar fanatic.
I asked him to tell me more; specifically how much it would be to do that from scratch. Oddly enough, he had exact dollar figures for a typical American house:
Solar Water Heater
- Parts: $1900
- Installation:$800-1000
Solar Photovoltaic Array (power):
- Parts: $12,000
- Installation:$3000
That's a total of roughly $18,000 - which is pretty expensive to be sure. However, there are some things to consider - I'll use my house here as an example:
- I will save ~$200/month in electricity bills (it's really sunny here and my current bill hovers around $375/month). That's $2400/year and I get my money back in roughly 7.5 years.
- Installing Solar on your house raises your house value by (approximately) 20 times the annual savings of the system. Wow. If that's true (and this is based on what appraisers say) then my equity just jumped $40,000.
- If you buy the system using your home equity, the interest is tax deductible and represents savings in and of itself.
Bottom Line: The cost is almost negligible if you work the numbers. It gets better - you get all kinds of rebates, tax incentives, and general love from the government and utility companies if you go solar (especially if you're in California).
Eventually, you can begin to sell your own power back to the electrical company - in effect making money off of your solar investment. Over 40 US States have laws now that allow home owners to sell generated power back to the electrical companies:
As part of Governor Arnold Schwarzenegger's Million Solar Roofs Program, California has set a goal to create 3,000 megawatts of new, solar produced electricity by 2017. CSI supports this goal with financial incentives to promote cleaner energy for the state and help lower the cost of solar energy systems for consumers. By installing solar on your home or business, you can benefit from these incentives.
Hmm. Seems too easy.
Investing In The Green
Under a warm, Sierra Nevada starry sky, we were sitting next to the fire feeling... "very happy" and started talking about what we were willing to do to help out environmentally.
It was easy for Eric and Mike to step up and say "Biodiesel!" and "Me and Solar BFF!" but for the rest of us, well, we like to recycle (which in itself is questionable, aside from cans) and do what we can.
Lots of things went around the discussion circle:
- Using Working Assets (telephone company) to indirectly support environmental goodness
- Walking/Biking to work or taking public transportation. In Oakland my friend Kaveh uses Ride Share - an impromptu drop off and pick up point for people commuting into SF from the East Bay.
- Volunteering with the Sierra Club on their trash pickup days, etc.
But then we got to the good stuff :).
I asked my friend Todd:
What about your 401K (retirement account)? What do you invest in?
I then recounted a discussion I had with my wife when I got the job at Microsoft. It was the first time I'd setup a 401K in years, and I decided to go "moderately aggressive". I looked over the growth charts and did some forecasting, then decided on which fund I wanted to go with.
I then asked my wife if she wanted to look it over, and she said to me:
Which companies are in that fund?
Ummm... who cares? This is my retirement fund and we're talking money for the future here. I don't know and don't want to know. But I was curious...
Turns out that most of the companies were just fine with her. Except for 3 of them. I won't name them explicitly, but I can tell you that
- One of them manufactures genetically-modfied foods. Something that, over here in Hawaii, is not something that we support AT ALL. Yes I know the arguments - it's our preference :).
- One of them is a massive Bio-engineering firm that has been caught in some bad business dealings over the last few years.
- One of them is a massive oil company
Now we're not necessarily AGAINST any of these companies (well, I'm not - the wife... well another story there). But they and what they do certainly aren't inline with things we believe in.
The GMO one was an interesting discussion. I am on the fence with that since, well, they do some really good work with respect to world hunger etc. At least that's what they say.
However here, in Hawaii, one of these companies is one of the forces behind trying to patent the taro (the stuff that makes poi) that's grown here - right in the fields near my house.
Farmers are concerned that genetically engineered taro would be patented and that they might have to pay a license fee to grow it.
And in fact, farmers wishing to purchase huli, or breeding stock, must sign a licensing agreement with UH. The licensing agreement states that "UH owns the taro cultivar..." It prohibits farmers from selling or breeding the patented plants, and requires payment of a royalty to the University
This kind of thing makes it tough for mainlanders like me to live out here. Granted it's the University of Hawaii - but who do you think is funding this research? I'll leave that part out.
Back to the point. If you consider that your 401K will likely grow into the 10's or 100's of thousands of dollars level (and for some you lucky ones - millions), that's money you could likely be putting directly into the companies that you may oppose socially.
Are you willing to do something about that? If not - where do you draw the line? Why?
Although I find the whole concept of Bio-Diesel absurd (turning food in to fuel with 80% of the world starving/borderline starving... uh, hello?) and I have real issues with most environmental groups and agendas (Can you say token gestures, liberty stripping gestapo tactics, and in-bed with some corporations commiting the worst polluting activities), you do bring up some excellent and valid points.
Put your money where your mouth is. Would you buy a TV from China if you could buy American made (And that's what you value)? Do you find work camps disgusting and refuse to support products made in a country that uses them? Do you refuse to shop at Walmart for what it does to local mom and pop shops? Do you buy GMO products over organic products?
If you answered no to any of these then why would you invest in the same companies perpetrating these activities? It's no different, just a larger scale purchase decision.
On the GMO, I'm with your wife. No soup for them!
There are socially responsible mutual funds out there, but you're unlikely to see any in most company's 401(k) plans.
As for "how far would you go?". Gimping your 401(k) plan, as defiant as that may be, is letting the tail wag the dog. Yes, by contributing to your 401(k), you will inevitably be putting money into the pockets of companies you may not like. But by not doing so, you are giving up a substantial amount in the form of matched contributions and tax deferment on your contributions, capital gains, and dividends. On a month by month basis it may not seem like such a big deal, but compound interest has a funny way of magnifying things like this. By not investing in your 401(k) plan you will have drastically affected if / when you can retire and how much you will retire with.
The longer you have to work, the less time and money you have to enact real change in the world. And while I think it's great when people solar power their homes or convert their vehicles over to biofuel, in the end these changes are still small fries compared to the environmental damage that can be caused by large corporations and the governmental policies that control them. If you really want to leave a lasting impact, you need to enact change that goes further than the boundaries of your own home. And to do that you need two things: time and money.
In a perfect world, everyone would do a little and together we would clean up the Earth. In reality, the vast majority of people are too busy, too lazy, or too ignorant (this word may be too strong, but I couldn't think of anything better considering the overwhelming amount of scientific evidence) to do something about it. That means that the slack has to be picked up, either by contributing more towards the cause (which time and money allows you to do) or by educating others (again, time and money).
To put some numbers on the 401(k) decision. Assume you have $10,000 to invest in your 401(k). If it grows at an average rate of 8% annually for 40 years, that $10,000 will become $217,245.21. Assuming a 25% tax rate, you end up with $162,933.91 after taxes. Now, let's say you took that same $10,000 (which is now $7,500 after taxes) and invested it in a socially responsible fund. Let's neglect the fact that these funds usually have higher expense ratios, will often have a lower rate of return, and that their capital gains / dividends will be taxed each year at your tax level. That $7,500 investment turns into $162,933.91 (same as the 401(k) plan, but that's with a *lot* of very lenient assumptions in favor of the non-401(k) approach). Now, assuming a 15% capital gains tax rate (doubtful to still be so low in 40 years), you're left with $132.118.82 after taxes, a difference of over $30,000. And that's only for an initial $10,000 investment. You can imagine what the numbers look like with more realistic figures plugged in (and the training wheels assumptions taken off). We're talking about hundreds of thousands of dollars you'll be missing out on. Hundreds of thousands of dollars that can go to charities, education programs, environmental research, etc. That's what makes a real difference in the world. Not the 1% of your mutual fund that goes to the coffers of a large corporation that, among other things, hurts the environment.
@Lucas: Ups and downs on everything yes? In the end our token gestures, as you say, matter little compared to what we back financially :)
@Kevin: The whole idea behind being socially responsible to do what you feel is correct, no matter what it means to you. I understand the argument - I won't tell where I fall on it :) - but there are ways to forego retirement and invest in things you really dig; even if it's one company.
Which is the main question here: How far are you willing to go? Especially if you believe what scientists are telling us?
Or as my buddy Todd put it: "What price, your soul?"
I'm not sure I completely agree with that definition of being socially responsible as it's a bit rigid for my taste. Saying that you should never invest in a company if it goes against your beliefs sounds good, but if it comes at the expense of what you're fighting for I'd say that it's detrimental and more an act of self satisfaction than one of being socially responsible. If you truly believe in helping the environment, then you should strive to do the best you can to help it. That may mean going against your beliefs. Being socially responsible and being true to your beliefs don't necessarily go hand in hand.
For example, let's say there's a company that does everything and anything you are socially and / or morally against. Let's call this company EvilCorp. EvilCorp pollutes the environment, clubs seals, eat babies, etc. Now, let's say you're given an opportunity to invest $1 in EvilCorp which will net you $1,000,000,000. If we go by the "do what you feel is correct, no matter what it means to you" argument, you'd have to decline this offer because it wouldn't feel right to invest in EvilCorp. But by doing so you're hindering your ability to fight against EvilCorp in the future.
I realize that this scenario is contrived, unrealistic, and overly simplistic, but so is the proposed alternative. No, I don't think you should compromise your beliefs for your own benefit, but I can't say the same about compromising your beliefs with the intention of making reparations down the line. I don't think you lose your "socially responsible" badge by investing in polluting corporations if the gains you make by doing so are going towards fighting them.
If you can do both (avoid investing in these corporations AND come out with the time and money to fight for your cause) then more power to you, but I personally don't believe such an investment exists.
With that being said, I suppose this is a situation where one can't really say "Here. This is the line." when so much is uncertain (the amount of harm you're doing through your investments, how much of a difference it'll make financially for you). All I can base my decisions on are reasonable assumptions and guestimations. For me, it seems like it's a risk worth taking. For others, maybe not. I know that the amount of money we're talking about here is large enough to make a difference. What I'm not sure of is how much damage is caused during the interim period where I'm pumping money into these corporations.
Monstrous Harvest: "The World According to Monsanto"
www.treehugger.com/.../world_according
Triodos (http://www.triodos.com) is an example of a bank that evaluates the projects they invest in and only supports responsible and sustainable initiatives. I'm sure you have similar financial institutions at your side of the pond :-)
@Kevin: Very good points - the whole time I was reading your comment I was thinking "put your air mask on first" :).
It's a bit of a personal crisis isn't it? The denial of self-interest is really at the core of any religious belief, and, some would say, at the core of faith itself. The ability to turn off the mind and go with "your soul" is really what makes a good spiritual soup.
But, to bootstrap this from becoming a discussion on the existence of [Diety]; I appreciate your point - it gets to the core of what I'm asking about. The place where you and I differ, I think, is the money angle. For me, it doesn't require money to try and do something (in fact it requires the absence of it :) - I can give my time, and I can write blog entries.
I can throw my 401K out the window and it won't affect the things I'm able to do right now. You may counter and say "but you're compromising your future!" and I would agree. But from my point of view, so are the companies I'm opposing :).
@Rob: "Ups and downs on everything yes?" Always ;) There's always a trade off. Of course, being software engineers we're probably more prone to notice.
Kevin Pang brings up valid points, but, I'd argue, this boils down to principals as soon as you begin to question a company's values and how they reflect your own. You've already decided that you're not just interested in gains, but what you're contributing to. Classic and modern media is littered with the idea of ill-gotten (In the sense that they conflict with your values) gains now to do good later and the folly of such actions. "Money Now, Pay Later" sums it up pretty well.
To answer Rob's original question, I'm one who always weighs decisions against my values and more often puts my money where my values lie.
Yes, one could argue that's narcistic (just like they could on the other side of the coin making the argument void in my opinion), but I also feel that the only reason things are where they are (on a multitude of issues) is because so many are willing to compromise largely in the short term for a supposed long term redemption of their principals.
PS I picked on Walmart before because it's a very relatable and comparable scenario to the investment question. All purchases are investments after all. Does not reflect a particular view on my part.
PPS I've used "You" in the popular sense, not addressing Rob directly, through out.
Regarding the money issue: it's true that you don't have to have money to do something. Mother Theresa for example, was able to accomplish a great deal without much money by dedicating a large amount of personal time and effort. But, then there's Warren Buffet, who has a ton of money and is also able to accomplish a great deal through his donations to charitable causes (most notably the $40 billion or so he put towards the Bill and Melinda Gates Foundation).
So I suppose they are two roads to the same destination. Personally, I don't think I could accomplish as much good if I had to retire later and spend more time worrying about my family's financial situation. That's why I have no qualms about investing in in companies that don't mesh with my social values. The ends justify the means in this case. Obviously, everyone has different obligations, responsibilities, and varying degrees of dedication towards their beliefs. I suppose I can agree to disagree on which path is the better one. :P
Wow we have some "deep" discussion here. From what I've seen here I believe that Rob, Kevin and Lucas and probably anybody that really care to read this topic are fairly socially responsible individual. I agree with most of what you guys just said but I also look at it at another angle. The end does justify the means if you've set a realistic date for your goals and truly committed to your causes. If not then it's just another way of lying to self to make one feel better.
I think the biggest investment that you can have it is on yourself and your family. So while I do think it's important to be informed and make responsible investment (money wise) sometimes it's just a little far fetched to worry about that kind of stuff. Why? because let say company A is bad, well how do we know if company A is really bad? where do we get our source of information from. How do we know if that source can be trusted? The list goes on but I think you guys get the point.
So if company A might not be bad then we have missed our chance to invest in a good company. I am not suggesting to live our life constantly questioning everything we know but I think we can start with what we know. I believe in the butterfly effect therefore I believe that if we focus on the core group of our life then everything else just fall into place. When I said the "core group" I mean it's basically what closest to us starting from our own value, ourselves, our family, our friends, coworker... That's where I draw the line.
So given that massive oil companies "certainly aren't inline with things we believe in," I'm assuming you and your family wouldn't have any problems if all the oil companies stopped conducting business tomorrow?
@Lucas - I forgot to respond to this point:
>>>I find the whole concept of Bio-Diesel absurd (turning food in to fuel with 80% of the world starving/borderline starving... uh, hello?<<<
My buddy Eric is turning waste vegetable oil into Bio-fuel, to be clear. However your point is taken - but it's not exactly accurate.
The Corn lobby are the ones who keep trying to make people believe that corn is the best choice for ethanol:
wheels.blogs.nytimes.com/.../corn-ethanol-bi
Corn Lobby == Monsanto. Is this good, or bad?
The best source (from what I've read) is Saw Grass. It's a weed that grows all over the US, and would turn barren farm land into gold. No pesticides or fertilizers - just mow the stuff and it grows back very quickly.
@Mike: So far this has been a pretty good discussion, but I'll admit I've been waiting for someone to come and drop some ridiculous baited question.
We're in this situation, in large part, because we have a massive dependency on oil. Our economy is tanking, in large part, because of our dependence on foreign oil. We're in a jam, and we shouldn't be.
Bush just asked Congress to lift a ban on drilling offshore. He's also pushed for drilling in Alaska. I could go on - you see the point I hope.
Yes I can blame myself - I need to drive a car (as do you). but I'm not able to choose my fuel source, nor have I been able to choose a car that runs an alternate fuel source until a few years ago (a Prius, which is sitting in my driveway).
Oil sends us to war. Oil controls the world. Big oil dominates political decisions and has shaped the world the way it is today. Ignoring this Mike, and making me out to be a complainer makes you look like an idiot.
This is the kind of crap I'm talking about:
www.businessweek.com/.../b4052052.htm
I want oil companies to turn to fuel companies and help find alternatives.
Rob, you make good points, and I admit that was somewhat of a ridiculous question. I guess I'm just overreacting to what I've heard from so many people lately (not you) who eagerly paint oil companies as "evil" when clearly the situation is not so black and white.
I agree that we all need to do what we can to improve the situation both from the supply side (oil, energy, and transportation companies) and the demand side (us). It's a big mess and we're all in it together. I appreciate what you're doing to further the conversation.
@Rob: I didn't know about the Saw-Grass crop option. Makes one wonder why we don't do that ;)
I did know the corn option is complete BS. Surgar-cane, ruffage, waste grease, old tires, plastic containers...
Here in Montana a Canadian company offered to pay the state to harvest the under-brush in the Glacier Park National Forests for bio-fuel conversion. Seemed like a good option, plus it would bring some money into the state and help stop the annual 2,000,000+ acres fires we've been having almost every year this decade (don't get me started on the Foresty Service).
SO many options out there. Commerically viable for investment even ;)
@Mike
I'm not fool enough to think a company is "Evil" for its profit margins, only for its actions. If Profit was evil then Rob would be working for Satan himself ;) (And I would have been a former minion-in-training)
I work for an oil company, so my opinion is probably biased. However, while working for an oil company, I've started to understand just how much energy the world uses on a daily basis. It's staggering. Right now, oil production is key to the increasing standard of living world wide.
That being said, I really hope the future of energy is somethings besides oil. I'll find a new job. My personal preference would be nuclear power, and that battery technology would improve so that we all drove electric cars powered originally by nuclear.
The company I work for is very good at drilling for oil and natural gas. We don't have any competitive advantage at anything else. You might as well ask Wal-Mart or Kraft to start inventing breakthrough solar technology. So, we do what we do best and let the market decide if they want to buy our products or not.
Ask yourself this question, too: Do you want oil companies patenting proprietary alternative energy technology? Do you want the existing oil companies to have a monopoly on all energy technology? I'm guessing...no.
Thanks Jim - good stuff :).
>>>Right now, oil production is key to the increasing standard of living world wide<<<
Agreed. It's set the world power structure up the way it is. Unfortunately it's at the front of our issues right now.
>>>we do what we do best and let the market decide if they want to buy our products or not.<<<
That's the problem. It's not a fair market :). Many large Oil companies throw a TON of money to keep the market tipped in their favor. That's the bad part.
>>>Ask yourself this question, too<<<
I spose that's the problem in our type of economy - if not Big Oil, then whomever gets the patent first will probably dominate in the same way. And skew the market.
Last year when the gas price started to explode at an exponent rate I and my friend have a similar conversation about this. I told him I think it's a good thing in the features, because this will push the envelope to seek for alternative energy. Granted the move is long overdue but that's just human nature. We tend to ignore the obvious until is become a major problem. To me it's still a fair market, there are enough people in the us and there are enough people in the world that if we put our head together we can make a different. The problem is nobody care until it become a problem... So I am not sure the big oil company is the only one to blame here...
>>>The best source (from what I've read) is Saw Grass. It's a weed that grows all over the US, and would turn barren farm land into gold. No pesticides or fertilizers - just mow the stuff and it grows back very quickly.
I think this kind of sums up the issues: no pesticides or fertilizers? Where's the profit in that?
I think it is important to understand that oil companies aren't really polluting the world for the sake of it. It just so happens that a side product of their work is pollution. If it wasn't oil, it would be uranium. Have you the seen the environmental destruction in making Uranium? Let alone worrying about the safety and waste. (Not saying nuclear is bad, just that it pollutes as well)
When the oil runs out the energy companies will control whatever the alternative is. It's about power, politics and who controls who. You know, protecting "The [insert your nation here] way of life]".
Where I live, here in sunny and mountainous Bulgaria, the government has just given a multi-billion pound contract to construct a new nuclear power station. Why, because they can then sell this to neighbouring countries through their own corrupt businesses. Rather than invest this huge sum of money in energy efficiency programs and renewables. (The energy inefficiencies in poor countries is staggering.)
I am no expert on renewables, but this country seems perfect for renewables and even micro generation given the amount of sunshine and mountains. But micro generation only really works if you can sell your spare energy back to electricity companies. A concept that goes completely against the mentality of those in power.
Back to the original question. I would first of all say that we are talking about maybe 10% (a wild guess) of the world's population who can even afford to ask this question. But given that big business possibly makes most of it money off the other 90% (another wild guess - it's the relative proportions I am trying to get at) then it probably doesn't matter who you invest in.
Personally I think we should try to enact change locally and hope that through doing so this change then filters through to national and international programs. Unless you are an extremely charismatic and inspiring leader (I am thinking of the Che Guevara type here!) you are unlikely to change the world, but you could help keep your little part of it clean.
I know this sounds a little negative but having moved to a relatively poor country like Bulgaria I have come to the conclusion that the only way to save the planet is to increase (or more evenly distribute?) wealth. The gamble is of course that we don't destroy the planet in increasing said wealth!
@Rob
I hate to see this kind of fallout for such a great post, I personally enjoy when you share such experiences, haven't had a vacation in awhile and sorta came along for the ride.
You are sharing thoughts and experiences which is great and it's not mine or any others place to judge.
@Robin:
>>>I think it is important to understand that oil companies aren't really polluting the world for the sake of it<<<
Clearly :). Pollution isn't the issue - it's the hard-core lobbying that pushes cleaner alternatives into oblivion. We would already have ethanol/methanol by now (a push started in the 70s) and full solar if the oil lobby wasn't so strong.
Same argument goes for Corn/GMOs.
>>>I would first of all say that we are talking about maybe 10% (a wild guess) of the world's population who can even afford to ask this question.<<<
The US is mainly where this issue rests, though I know other countries have their problems. Most of the people who read my blog probably do well for themselves - but your point is taken.
>>>Personally I think we should try to enact change locally<<<
True. I'm not advocating revolution :) just mindfulness.
@Mike D: no worries - a post like this will pull all kinds of opinions. I think, for the most part, people are being pretty good about it :).
>>> True. I'm not advocating revolution :) just mindfulness.
He he. I was probably getting a bit carried away there. I think my main feeling regarding 401k investment is to place it where it makes most sense financially, basically agreeing with Kevin Pang's view. Perhaps you will use the extra 30k (or whatever) to save a child's life who then goes on to solve the worlds energy problems through some invention or other. A little far fetched but on the other hand why not?
>>>a post like this will pull all kinds of opinions.
Well at least now we know that SubSonic is in socialy responsible hands. Thumbs up on the Prius!
While not negating anything previously posted -- our biggest problem currently (at least in the US (mainland :) ) is our crumpling infrastructure. The random statistics I've heard are friggin' staggering -- on how much water and power is lost by the time it gets to our homes and work places. The US is looking pretty 3rd worldish when it comes to infrastructure -- but our highways are second to none (well maybe Germany). Trains? Forget about it that's too expensive. And unfortunately that's a job that only government can tackle. I say unfortunately because government won't react until some system vital to business collapses -- sometimes quite literally.
Have you seen the article in the June issue of Wired which says that many of the things we do aren't actually helping the environment? It's a pretty good read: www.wired.com/.../ff_heresies_int
What's better - wood burning stoves, or nuclear power? Buying a used ten year old car or a Prius? Organic foods, or genetically modified foods? Depends if you want to feel like you're making a difference vs. actually making a difference (at least according to the article, that is).