Only Buy Companies You Hate...says Dilbert

The Wall Street Journal published a truly pithy investment strategy piece this past week which made quite an impression.


http://online.wsj.com/article/SB10001424052748704025304575285000265955016.html

Dilbert cartoonist Scott Adams argues that you should invest in the companies that you hate the most. He says that moral bankruptcy is a great leading indicator of success (think BP), and the best companies (think Apple) can get you to "balance your wallet on the end of your nose and bark like a seal", as you purchase products that you utterly hate (think iPad2).

I found this advice most interesting especially in the context of what we are trying to do here at Impact Investment Exchange.

Let's first review Adam's financial advice...and then ponder our relevance...

"When I heard that BP was destroying a big portion of Earth, with no serious discussion of cutting their dividend, I had two thoughts: 1) I hate them, and 2) This would be an excellent time to buy their stock. And so I did. Although I should have waited a week...."

"I hate BP, but I admire them too, in the same way I respect the work ethic of serial killers. I remember the day I learned that BP was using a submarine…with a web cam…a mile under the sea…to feed live video of their disaster to the world. My mind screamed "STOP TRYING TO MAKE ME LOVE YOU! MUST…THINK…OF DEAD BIRDS TO MAINTAIN ANGER!" The geeky side of me has a bit of a crush on them, but I still hate them for turning Florida into a dip stick."

Adams proceeds to lay out different investment methods to prove out his theory, and it goes something like this:

1. Technical Analysis
"... is like forecasting market moves with chicken droppings."

2. Investing in Well-Managed Companies
"The problem with relying on this source of information is that CEOs are highly skilled in a special form of lying called leadership. Leadership involves convincing employees and investors that the CEO has something called a vision, a type of optimistic hallucination that can come true only in an environment in which the CEO is massively overcompensated and the employees have learned to be less selfish."

3. Track Record
There are two truths in investing: 1) Past performance is no indication of future performance, and 2) You need to consider a company's track record. And this is what we know, and these points are opposites. So any investment decision can be argued by selecting either point 1) or 2)...

4. Invest in Companies that You Love
Adams did this once, and went bankrupt, yet his financial advisor Wells Fargo did well for itself, and he hates Wells Fargo, so he suggests next time, why not just invest in Wells Fargo.

5. Do Your Own Research
Adams invested in the much loved WebVan (the credit and delivery grocery business concept), which is considered to be one of the largest dot-come flops in history.

.....So you may ask, how does impact investing fit into Dilbert's satire? Well, if traditional investors love companies with financial returns, and they hate companies that focus on social or environmental returns (distracting them from financial returns) namely social enterprises, then they hate social enterprises, and so they should invest in them....according to Dilbert.

But joking aside, if we do consider this line of reasoning, in a more serious manner, I think I would make a light reference to some of the research that suggests that increased investment in environmental and social governance actually increases performance for the company. Or we could look to HIP Index (a mega/large-cap equity portfolio that ranks S&P100 companies depending on their Human Impact + Profit performance) which has outperformed the S&P 100 since its inception...What would Dilbert have to say about that?

Lets end on one more investment tip from Dilbert.

"Recently I bought something called an iPhone. It drops calls so often that I no longer use it for audio conversations. It's too frustrating. And unlike my old BlackBerry days, I don't send e-mail on the iPhone because the on-screen keyboard is, as far as I can tell, an elaborate practical joke. The other day I was in the Apple Store, asking how to repair a defective Apple laptop, and decided, irrationally, that I needed to have Apple's new iPad. The smiling Apple employee said she would be willing to put me on a list so I could wait an indefinite amount of time to maybe someday have one. I instinctively put my wallet on my nose and started barking like a seal, thinking it might reduce the wait time, but they're so used to seeing that maneuver that it didn't help. My point is that I hate Apple. I hate that I irrationally crave their products, I hate their emotional control over my entire family, I hate the time I waste trying to make iTunes work, I hate how they manipulate my desires, I hate their closed systems, I hate Steve Jobs's black turtlenecks, and I hate that they call their store employees Geniuses which, as far as I can tell, is actually true. My point is that I wish I had bought stock in Apple five years ago when I first started hating them. But I hate them more every day, which is a positive sign for investing, so I'll probably buy some shares."

My Top Ten

I went to a medical conference recently, and one of the speakers asked the audience to share leaders that they admired. From an audience of both men and women doctors, only male leaders were called out, and I found myself annoyed for not being able to bring to mind all my lady heroines.

So to a broader audience, I would like to share the women, of past and present, who inspire me.

1. Anne Frank 1929-1945
“Despite everything, I believe that people are really good at heart,” from our diary about the Holocaust, a book that challenged us to challenge assumptions about people and power.

2. Florence Nightingale 1820-1910
Known as the “lady with lamp,” Florence Nightingale was instrumental in changing the role and perception of the nursing profession. She has also been attributed as one of the first to practice evidence-based medicine.

3. Helen Keller 1880-1968
Helen became deaf and blind as an infant. Overcoming the frustration of losing both sight and hearing, she campaigned tirelessly on behalf of deaf and blind people.

4. Dorothea Dix 1882-1887
This was my first heroine in childhood, and I remember how I inspired I was, as a ten year old writing a book report on this woman. Dorothea Lynde Dix was a social reformer for the treatment of the mentally ill, completely changing the way mentally patients were treated through out Europe and the US.

5. Audrey Hepburn 1929-1993
Leading female actor of the 1950s and 60s, Audrey Hepburn defined feminine glamour and dignity, and was later voted as most beautiful women of the twentieth century. She committed her life post acting to humanitarian works.

6. Benazir Bhutto 1953-2007
Benazir Bhutto was the first female prime minister of a Muslim country. She helped to move Pakistan from a dictatorship to democracy in 1977. She focused on social reforms, in particular helping women and the poor. She was forced out of office on corruption charges; and assassinated two weeks before a general election in which she was a leading opposition candidate.

7. Susan B. Anthony 1820-1906
Susan Anthony campaigned against slavery and for the promotion of women’s and workers rights. She began campaigning within the temperance movement and played a pivotal role to introduce women’s suffrage in the Y.S..

8. Katharine Hepburn 1907-2003
I was named after Katharine Hepburn. An iconic actress of twentieth Century film, Katharine Hepburn helped redefine traditional views of women’s role in society through her acting and her lifestyle.

9. Amelia Earhart 1897-1937
Amelia Earhart was the first woman to fly across the Atlantic in 1928, just one year after the first ever crossing made by Charles Lindeburg.

10. Sheryl Sandberg
Known informally as one of three most influential people in Silicon Valley, Sheryl is the COO of facebook and one of my modern day heroines.

What’s in a name anyways?

I learned something very interesting this evening at dinner with my two lovely friends from Burma. These women are doctors who are training here in Singapore and then hope to set up private practices to serve their people, who have very limited access to medical care.

What I found so interesting was their practice of naming children, and how that impacts gender equality in their country.

When I asked whether it was considered more delightful to have a daughter or a son, both responded that little girls and boys are met with equal delight. When I inquired further as to why this may be so in a region where little boys tend to reign as the little princes, they said it was perhaps due to the lack of importance of a family name. Actually, children can be named one syllable if the parents desire. There is no family name, and so males do not have the honor and responsibility of passing on the family lineage. I said it was perhaps harder to keep track of families with no common thread, and they said, indeed it was, but that most families keep elaborate family trees.

As we ventured into religion, the topic became more animated, because in Buddhism, men are believed to be superior to women. For instance, my friends told me that they, as women, are forbidden from climbing to the highest steps on the temples. This became quite an interesting discussion...

Where is the alpha female?

Stemming from a discussion with Durreen about a recent women’s leadership meeting that she attended, I started to think more about the what role women can play to support other women.
McKinsey sponsors this Women Leadership conference where they bring together women professionals for a networking and management-training event. Now I consider myself an experienced “networker,” although I refer to it as “connector.”

I attended this McKinsey event in Stanford GSB, and one of the exercises at this event was to map out your mentors with various instructions. I had a page full of mentors, but realized that with very few exceptions, they were all men. If I were to do this exercise today, my map would look very different, with many female mentors on the list.

One of the insights from the women’s leadership meeting referenced by Durreen was that women don’t support one another. We can trace this back to our childhood recess activities where, in an overwhelming generalization, girls talk in small groups while boys play. What often happens is that on the first day of school (or work), the males take time to determine who is the alpha male, and once that is established, then everything is peaceful.

In the meantime, women do not determine who is the alpha female, they sit in small groups to discuss this, they examine the contenders, they pick their sides, there will be tremendous infighting, and they may end up with no leader to emerge from all of this activity. Meanwhile, the men are off to the races.

What needs to change is not necessarily the evolution of an alpha female commando, but what if we were to support each other more, and how might that happen, what are the constraints, and what might that look like….

It’s a different type of capital markets

The World’s First Stock Exchange was in Bruges, Belgium in the 14th century.

Since then the stock exchange has undergone transformational change and evolution. Having spent several years on Wall Street, I have my own personal impressions of the Wall Street exchange and the bank’s trading floors and capital markets. I experienced one version of it first hand.

It is particularly exciting for me to be returning to capital markets where businesses with social and environmental impact are invested in, given a valuation by global research firms, a rating or score card by ratings agencies, and even traded. It is a joy to help build an alternative capital markets where social and environmental companies are not viewed as inefficient business models.

Not so typical a start-up…

When you walk in, IIX looks like a typical Silicon Valley start-up, but’s it actually very different.

In just two weeks, I have seen the spectrum of people who come through our doors. IIX does have the ability to influence the policies and mindsets of governments, a staggering ability that we cannot imagine in the U.S. where we are paralyzed by so many differing opinions. Whilst this difference of opinions often leads to innovation, it also stunts the growth of movements. However, Asia may just be the region where social enterprise can truly take off to achieve scale. The big question is whether IIX’s approach to sustainable development might be able to influence governments, often governments led by a small group of elite, who seem open for guidance.

The Economic Development Board (EDB) of Singapore, the Singapore development agency, decided 20 years ago to make Singapore’s private banking system better than the Swiss banking system, and they seem to have achieved their goal. They have also very systematically made Singapore into a successful regional air transport hub. While not all of their initiatives have been so successful, they do make a commitment to be the best. They have now decided that being the Asian regional hub for the social sector would add to their core capabilities as a nation.