The Missing Fourth Strategy: Show Me the Money!

As we have built the framework for the RIM, you may have noticed that we laid out four future scenarios in chapter 1 but are offering only three investment strategies. What's up with that?

There is indeed a strategy that meshes with a muddle-through-down scenario, one that is as familiar to us as water is to fish. But just as a fish might not realize that it's surrounded by water, we seldom notice just how immersed we are in business as usual. With this approach, which we call show me the money, we do three things:

● Position ourselves to “get ahead” in the job world

● Seek to find a “good deal” when we go shopping

● Select investments using solely financial metrics

Show me the money offers easy-to-understand guidance on how to allocate our personal, tangible, and financial assets. It comes across as a good and proper way to live in the modern world, so much so that it is hard to think of it as a strategy per se. It actually functions more as a subconscious default response; we rarely stop to consider that it is just one possible choice among many. Our purpose in shining a light on show me the money is to acknowledge how deeply this economic norm is embedded in our psyche and to help us notice how and when we use it. Being a resilient investor requires that we have the flexibility to choose among various strategies, depending on the situation, but we cannot do that if we are not even aware of our habitual responses.

Life was not always this way; and even today there are many indigenous societies and outliers of mainstream culture that have not bought into show me the money as an organizing principle. How did the rich diversity of human motivations, from altruism and empathy, to devotion and service, to love and the Golden Rule all become secondary to the pursuit of wealth? Simply put: it works—or at least it has worked, for lots of people, over the past couple of centuries.

Amid growing prosperity, the ease of going along with the dominant paradigm was one of its great self-sustaining virtues; those who looked beyond the simple bottom line or questioned whether a market economy actually does produce the greatest social good were easily dismissed. As millions of people were lifted from subsistence living, a great body of economic work emerged to justify the dominance of this single-minded approach. Foremost among these precepts is the dictate to trust the market.

For investors and corporations, this unquestioned faith in Adam Smith's “invisible hand” justifies any and all pursuit of private gain, since the precept holds that this is the most efficient route to bring about the greatest good for all. Arguments abound about what Smith really meant and how his ideas play out in a world vastly different from the agrarian times in which he lived. Nonetheless, by focusing on their own gain, most Americans feel assured that they are just doing their part, for the economy and the country as well as for their families and community.

Another legacy of this approach is what we might call “bowing to the bottom line”: prioritizing the maximization of profits and the minimization of costs. This bottom-line focus is one that we can all identify with when we put a price on our services or go shopping for the best deal. With this strategy, issues such as how and by whom a product was made, or whether there was an effort to protect the environment or workers, are given lip service or simply ignored.

As show me the money has become more deeply engrained, its effects have become more insidious. David Stockman, who led the Office of Management and Budget under President Ronald Reagan, condemns the “financialization” of our society as “corrosive,” turning the economy into a “giant casino.” Its extreme excesses, such as the securitization of shaky mortgages, are widely cited as the trigger that precipitated the economic collapse of 2008.

The fundamental reason why we do not include this strategy within the framework of resilient investing is its lack of accountability for the many social, environmental, and even spiritual externalities that show me the money leaves in its wake. These costs may be unintended, but they are nonetheless severe and are indeed borne by governments, the nonprofit sector, and society at large. This blanket neglect of responsibility is why we cannot recommend it as a strategy. Today, with our heightened awareness of the ways in which our personal decisions play into the various crises of our times, it has become more and more difficult to pretend that we can wash our hands of the suffering of others.

On the other hand, we recognize that all of us are participants in business as usual; it is unavoidable. We must be mindful of our financial situation, stretch our dollars as much as we can, and make decisions that are smart for ourselves and our families. So although we are concerned—very concerned in fact—that show me the money is exerting a downward pull on a muddle-through scenario, we hold our criticism for the strategy, not for those of us who sometimes, or even mostly, have adopted this approach to life.

Fortunately, there are other choices. Our three resilient investment strategies—close to home, sustainable global economy, and evolutionary—all include a built-in ethic that encourages us to balance our financial considerations with a wider range of desired outcomes.

We need to work toward a time when more people feel empowered to make choices that do consider the good of society and the world. Every time we go against the grain and invest in ways that are not solely motivated by making the most money, we are helping to do just that.