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."