Low-Impact Investing

Imagine you are paid to tell wealthy investors where to put their money.  Three years ago you believed in modern portfolio theory and the so-called efficient frontier.  But around the end of 2008 all asset classes started moving in unison – southward – and then governments started throwing around hundreds of billions of dollars to, well, er….  Anyway, markets recovered through the end of 2009, but now they look random and you have no idea what to tell your clients to expect for annual portfolio returns.  You have a problem.

Imagine you’re a wealthy client.  You’ve lost faith in your advisor, but you don’t know where else to go for good advice, since most of the honest ones are sitting in a corner, rocking back and forth like apes taken too soon from their mothers.  Maybe you’re even a little guilty about making a pile during the funny money years and then watching millions of your countrymen lose their homes.  Again, you have a problem.

Now imagine a miracle product that would satisfy both the investment advisor and his client.  It would let the advisor tell the client he was winning every quarter.  It would make the rich client feel like investment is still a noble enterprise, and it would make him feel smart for being able to post quarterly wins again.  How would you design such a product?

Well, the old definition of winning would have to be replaced, or at least supplemented, by a new standard, and the new standard would have to be vague enough to allow any reasonably smooth talker the chance to claim victory even when financial returns are sub-par.  Enter Impact Investing.

Impact Investing is a poorly-defined investment style (not really an asset class) that asserts a non-financial bottom line, specifically a social or environmental benefit that the investor should value as highly as they once did financial returns.  In practice, it is a filter: Impact investors will look for investment opportunities that have some plausible non-financial benefit, and will exclude those for which such benefits cannot be claimed.  (Of course, it will take most companies around 6 minutes to start publicizing phantom social responsibility achievements, so what will really matter is not objective social or environmental results, but how confidently and empathetically your advisor can relay company press releases.)

For the investment advisor, Impact Investing is a license to practice incompetence while distracting clients with dubious claims to success- “Sure, your portfolio performance hasn’t matched the old, unenlightened benchmarks, but you may have saved an Indri lemur or two.”  Impact Investing will generate new revenues and pacify rattled clients, so investment advisors are about as happy to offer it as obstetricians were to offer Thalidomide back in 1957.

For the client, Impact Investing means a clean conscience and the sort of predictable, every-child-gets-a-gold-star victories that let him hold his head up in polite and ignorant company.  Less thoughtful clients may even believe that Impact investments will deliver best available returns while still saving the world – they will watch their portfolios languish until they figure out that a few hot funds don’t outweigh an unlikely investment thesis.

Recommendations:

  • If you are a fund manager, start an Impact Investing fund immediately.  Investment advisors will flock to it, and you’ll breathe easier knowing that you’re playing tennis with the nets down.
  • If you’re an investment advisor, and can stomach treating your clients with such cynical bad faith, allocate 10-20% of your clients’ assets to this new style.  And call it an asset class.  Simpler that way.
  • If you’re a client, run like hell from anyone who claims to advise on Impact Investing, since they are charlatans who are admitting that they can’t stand on their measurable investment returns.
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Mobile Trends for the Next 10 Years

Seen (linked to) on GigaOM this morning, here is an interesting collaborative presentation containing a wide range of projections for mobile communication and computing.

Some ideas (a backlash against constant connections) aren’t news, while others (huge data traffic from networked pets) are way out.

The ongoing backlash against living through the Internet (if you’re reading this you’re probably a target) should intensify quickly if connected tablet computers (Apple’s rumored ‘iPad’) take off.

I’d bet on:

  1. Bluetooth earpieces for all-day wear (not implantable, though)
  2. Augmented reality helping us rediscover our sense of physical place, and also history
  3. Social networking will move to making introductions (or at least recommendations) based on immediate proximity (a start…)
  4. Mobile medical monitoring for health (including psychological health) and spiritual pursuits.
  5. Mobile imaging will combine with cheap, custom 3D manufacturing for instant knock-offs of products people see while out and about.  Yes, that’s the bonus weird projection.

250,000 Units? Why Bother?

The Twittering classes are speculating about how many Nexus One phones Google will sell, after a guesstimate by Flurry that put first-week sales at around 20,000 units.  250,000 units in the first year seems to be most retweetable annual projection.

Let’s say the speculators are correct.  Why would Google spend over a year to launch a phone that would sell at a rate approximately 99% lower than the iPhone?

My guess?  Google wants consumers to pressure both carriers and phone manufacturers so that nothing comes between us and the full suite of Google applications and services.  They want the press and a couple hundred thousand owners to tell us what we’re missing on tens of millions of other phones.

Phone makers change their phone’s features for various reasons, including simple product differentiation, carrier demands and engineering pride.  The phones we see have garbage applications and weird interfaces to make us spend more money on services, to satisfy backroom marketing deals or just because a development team wanted to keep a few more paychecks coming.  Verizon designs their phones to create billable user mistakes, Apple and AT&T keep Google Voice out of iPhone’s App Store, and Motorola tries create a hip phone by designing their Blur interface around social networking services.  These designs get in the way of Google’s grand plan to organize the world’s information. 

Probably most consumers don’t know why their phones come with certain features and not with others.  With Nexus One Google is betting that we will see what we’re missing and then figure out why, and then we will start do demand more Google on every phone made. 

Google doesn’t need to make money on Nexus One.  They probably don’t want to compete with their licensees.  All they need is for 250,000 people to see what is possible, and for everyone to hear about it.