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Mr Rodgers makes some very good points in his letter. Definitely where it comes to board membership and the ethics of inisiting on 'balanced' board make up. H

Mr Rodgers makes some very good points in his letter. Definitely where it comes to board membership and the ethics of inisiting on 'balanced' board make up. However I'm not sure about the inherent logic in Paragraph N: 'The May 13, 1996 issue of Fortune magazine analyzed the ethical mutual funds" which invest with a social-issues agenda, and currently control $639 billion in investments. Those funds produced an 18.2% return in the last 12 months, while the S&P 500 returned 27.2%. The investors in those funds thus lost 9% of $639 billion, or $57.5 billion in one year, because they invested on a social-issues basis. Furthermore, their loss was not simply someone else's gain; the money literally vanished from our economy, making every American poorer.' Is this is implying that if you make an investment choice for personal reasons (maybe invest in a family business) and the company returns 10% rather than 20% that you could have received from a different investment that you have lost 10%. And that you have made the world poorer with that choice. The logic seems a bit hokey to me.

thaumasiotes 13y ago
> Is this is implying that if you make an investment choice for personal reasons (maybe invest in a family business) and the company returns 10% rather than 20% that you could have received from a different investment that you have lost 10%. And that you have made the world poorer with that choice. The logic seems a bit hokey to me. The idea that in that circumstance you've suffered a loss is the concept of the opportunity cost, one of the most basic ideas economics has to offer. The idea that by doing so, you've made the world poorer is on less firm ground, but it's not exactly arcane reasoning. It's the same logic that backs the claim that high-GDP countries are richer than low-GDP ones -- they have more money. The general idea here is that if you start with $812 billion, and you turn it into $755 billion, you've lost money ("become poorer").
robzyb 13y ago
Paragraph N is actually valid reasoning. Although, as with anything worth discussing, its not quite as simple as that. If you invested in a family business that returned 10% instead of 20%, then you haven't really made the world poorer, you just haven't made it as much richer as you could have. The other side of the coin, though, is that an investment has to be measured in far more than just dollars. Investing in that family business might very well make you happy. And the happiness might be worth those 10% gains that you are forgoing.
_mulder_ 13y ago
This also struck me as odd but for slightly different reasons. Namely, I don't think the statement takes into account possitive externalities that may arise from 'ethical' investing. Perhaps this lost money is just reallocated with a much longer payback? Consider investing in renewable energy, perhaps they are not as efficient as fossil fuel power generation methods, but renewables have other positive externalities (lower pollution (arguably)) that may pay back this 'lost money' in the future by way of increased life expectancy, or just creating a greener, healthier, more pleasant world. The same could be true of other ethical initiatives, including hiring from minority groups. Perhaps the fortunes of poor neighborhoods could be increased if a company set about hiring its staff from such a neighborhood as one of it's business policies. A generation down the line that neighborhood could be producing the next entrepreneurs. Point being, money doesn't account for everything...yet.

thaumasiotes 13y ago

> Is this is implying that if you make an investment choice for personal reasons (maybe invest in a family business) and the company returns 10% rather than 20% that you could have received from a different investment that you have lost 10%. And that you have made the world poorer with that choice. The logic seems a bit hokey to me. The idea that in that circumstance you've suffered a loss is the concept of the opportunity cost, one of the most basic ideas economics has to offer. The idea that by doing so, you've made the world poorer is on less firm ground, but it's not exactly arcane reasoning. It's the same logic that backs the claim that high-GDP countries are richer than low-GDP ones -- they have more money. The general idea here is that if you start with $812 billion, and you turn it into $755 billion, you've lost money ("become poorer").

robzyb 13y ago

Paragraph N is actually valid reasoning. Although, as with anything worth discussing, its not quite as simple as that. If you invested in a family business that returned 10% instead of 20%, then you haven't really made the world poorer, you just haven't made it as much richer as you could have. The other side of the coin, though, is that an investment has to be measured in far more than just dollars. Investing in that family business might very well make you happy. And the happiness might be worth those 10% gains that you are forgoing.

_mulder_ 13y ago

This also struck me as odd but for slightly different reasons. Namely, I don't think the statement takes into account possitive externalities that may arise from 'ethical' investing. Perhaps this lost money is just reallocated with a much longer payback? Consider investing in renewable energy, perhaps they are not as efficient as fossil fuel power generation methods, but renewables have other positive externalities (lower pollution (arguably)) that may pay back this 'lost money' in the future by way of increased life expectancy, or just creating a greener, healthier, more pleasant world. The same could be true of other ethical initiatives, including hiring from minority groups. Perhaps the fortunes of poor neighborhoods could be increased if a company set about hiring its staff from such a neighborhood as one of it's business policies. A generation down the line that neighborhood could be producing the next entrepreneurs. Point being, money doesn't account for everything...yet.