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Practicing Conscious Investing

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January 23, 2014 – Comments (0)

I've seen mixed reactions to the concept of Conscious Capitalism, both in Fooldom and elsewhere. The most common reaction tends to be disagreement with usage of the word "conscious." "Why, Bernie Madoff was a 'conscious' capitalist when he screwed people out of their retirements!" On a level I can see where this disagreement comes about. I'm more interested in the concept itself, however, rather than getting into arguments about semantics. 

Whether you call it conscious capitalism, conscientious capitalism, socially responsible business -- people get the general idea of what is implied and being discussed. For better or worse, John Mackey's Conscious Capitalism terminology has stuck with the mainstream and managed -- for the better, I believe -- to attract numerous leaders in the business community who seek to approach business in a new light. In my mind, conscious capitalist businesses are those who broaden their definition of success beyond financial gain, instead including employees, community members, customers, shareholders, and other stakeholders in the mission, practices, and purpose of the company. 

With that said, just about every business will have a broad vision or mission statement that encompasses many of the ideals of conscious capitalism. Coca Cola isn't just selling you drinks infused with loads of corn syrup, they are selling you happiness (of course!). Even Arch Coal -- a company that literally blows apart mountains in the Appalachian region -- lists "environmental stewardship" as a core value. 

I bring this up because just about every business will claim some measure of social responsibility. To do otherwise is a publicity death sentence. For investors who want to become stakeholders in businesses who share optimistic ideals and practices, simply finding companies that list warm and fuzzy values doesn't make the cut anymore. 

I see this as a challenge of the conscious investor -- investors who are determined to build a portfolio of businesses guided by passionate individuals focused on achieving long-term success for all stakeholders. These are businesses whose leaders are intent on improving the world through the tools of entrepreneurship, and offer more than the occasional lip service to their mission/vision statement. This means finding innovative leaders willing to admit they are wrong on occasion (e.g. Netflix's Reed Hastings with the Qwikster debacle), leaders who seek to empower all stakeholders, and leaders focused on long-term results rather than beefing up short-term results at the expense of long-term performance or company values. Finding people and businesses like this is, at least in my experience, easier said than done. It is, however, very much consistent with the Foolish method of investing. 

I am trying to improve my practice as a conscious investor. I try to ask myself this simple question before clicking "Buy" on an investment: "Is this company's leader someone I would want to work with?" In other words: do I really want to become a co-owner in this business? This can be a challenging (and even frustrating) question to answer honestly. However, I believe it is a question every long-term investor -- every conscious investor -- should ask with each of their current and prospective investments. 

Another helpful practice is to see how employees rate their respective workplaces on Glassdoor (a website where employees can anonymously rate wherever they work, in addition to rating the company's CEO). I recently realized the importance of giving a company's Glassdoor ratings a quick run-through before making an investment. After buying shares of a company that I saw as a promising long-term investment, I decided to check its Glassdoor ratings. To my disappointment, employees gave the company pretty dreary ratings. 2.8 out of 5 stars. 23% of employees approved of the CEO. And this is for a company that has listed happy employees as one of its core principles for over 50 years. There is a major difference between listing core principles and actually manifesting those principles in a recognizable way. 

Today, there are few excuses for investors to not invest consciously. We are becoming a stakeholder every time we invest in a business. With tools like Glassdoor, Twitter, online customer and investor relations, the veil between a company’s talk and walk -- perception vs. actuality -- is as thin as it has ever been for publicly traded businesses. 

Of course, simply practicing business from a conscious capitalist perspective doesn’t mean a company is destined to become a market-beating investment. Some conscious capitalist companies, such as Jamba Juice, have been laggard investments over the long run thus far. A company cannot sustainably expand its concept, or improve its capacity to serve various stakeholders, unless financial growth follows suit. Part of the challenge for conscious investors is to find businesses where the three key factors -- people, planet, and profit -- are aligned in a mutually beneficial manner. 

Many long-term investors are already conscious investors. I see conscious investing as the intense focus on becoming co-owners with innovative leaders manifesting visionary ideas into reality. This entails thinking more deeply about where we are investing our limited funds, who we are joining as co-owners, as well as the vision of the business in which we are becoming a stakeholder. Conscious investing is essentially synonymous with Foolish investing, utilizing various tools (such as Glassdoor and social media) to better understand who we are investing in.

These are just some musings for now. I consider myself a conscious investor, constantly trying to improve both my analysis and, of course, selection of the few companies in which I actually invest my money. Vision, culture, methods -- these are all important ingredients for a long-term investment success story. Here’s to finding the businesses that are improving the world and empowering their stakeholders along the way. 

Best,
David K

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