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The self-interested (or selfish) investor

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One of the founding principles of capitalism is that humans are not motivated by benevolence but self-interest. It is personal gain that motivates our actions and generates wealth for everyone, through the stimulation of trade between people with different skills.

In The Wealth of Nations (1776), Adam Smith wrote about the motivation of butchers, brewers and bakers. He argued that what they provide, they provided out of self-love (the desire for money), not out of any sense of benevolent duty.

In the 17th to 19th century when life was being categorised as nasty, brutish and short (Hobbes, 1651), great thinkers were sowing the seeds of modern thinking on liberty under the law (Coke, 1604), the primacy of the people (Locke) in government (albeit ‘the people’ narrowly defined as wealthy white men) over absolute monarchs and the rights of man (Paine, 1791).

Markets were viciously competitive but also deeply corrupt. There was no safety net, so any work or business was literally in a fight for survival. The limited liability corporation was emerging from monastic and guild rights but would have been condemned by Smith.

Modern democracy was in its infancy, for sale and dysfunctional. Anyone who has read Dickens will know the parlous state we were in by the middle of the 19th century.

This is the context in which Adam Smith was writing. When the very basic needs for survival food, clothing and shelter are barely being met, benevolence will be in short supply. Only the very rich could afford to be benevolent and even then were often cruel or selfish or both.

Many economists distort Smith’s treatise to fit modern free market thinking, ignoring the nuance of his work or its place in history. It was, and is, about and of its time. We can be certain he wouldn’t write about modern bankers, bookies and business managers in the same way as he did the 18th century butchers, brewers and bakers.

The same economists also dismiss charity and altruism as an ‘optical illusion’, where the motivation remains selfish, even if it’s not monetary gain that is being sought. Feeling good and assuaging guilt for excessive wealth are the underlying and ultimately selfish motivators here.

While much of what Smith wrote still holds true, you have to be careful not to pick-and-mix his theories. It is not the whole of the story and presents, in the wrong hands, a very negative perspective on human nature. It is an argument that can be a compelling theory of human behaviour but is dismissive of the sacrifices many people make to help others.

It is often used as a license to do what the hell you like.

If all human behaviour is motivated by self-interest, what can be wrong with maximising your own self-interest? For example, “If you feel good by giving millions to cancer charities, which is your selfish interest, why can’t I invest in tobacco firms that benefit my selfish interest?” A child could point out the logical fallacy in that argument.

We are not rational beings, driven only by our own self-interest. Love, charity and generosity can often harm the self-interest of the giver, but is given freely all the same. Love, charity and generosity also have the added benefit of helping others. Again, a child understands this.

Often, we do not have all the information, and expertise sometimes, to assess whether something optimises our self-interest or not. We are often misled by others. Often those who mislead us are credible political, religious, academic and business leaders. They often use psychological warfare, in the form of highly targeted marketing, to do so.

While many free market economists argue that the pursuit of self-interest benefits the greatest number in that it creates the greatest wealth, this is manifestly not the case by the many exercises in free market ideology in the developing world. It normally leads to rampant debt, unstable currency fluctuations and civil disorder. Sound familiar?

There is no self-interest gain to be had by risking your life to help others – yet many hundreds of thousands of people do so. There is more to humanity than that. Even if the self-interest motive were true, part of being civilised is rising above our strong animal instincts and using our considerable brains. Nasty, brutish and short cannot be our crowning glory.

Libertarians will often scream ‘property rights’ and free access to the law of redress. But this is as unrealistic on a global scale as communism. The world is full of different political and economic systems and there is not capitalist utopia with the nation state. Nor would it be utopian.

So what has this got to do with investment? The license that Smith gave to people to act in their own self-interest at the expense of others is writ large in investment.

As long as people feel that the best way to maximise their self-interest is through a healthy return, even when it kills others or harms tomorrow’s generations, we’re in trouble.

The man who discussed moral sentiments and founding father of capitalism, Adam Smith, would not approve.

Further reading:

Pick-and-mix dogma is unethical and intellectually dishonest

Capitalism’s woes will not be solved by 16th or 19th century economic theories

Enslaved by free markets

Free markets need to be free

Simon Leadbetter is the founder and publisher of Blue & Green Tomorrow. He has held senior roles at Northcliffe, The Daily Telegraph, Santander, Barclaycard, AXA, Prudential and Fidelity. In 2004, he founded a marketing agency that worked amongst others with The Guardian, Vodafone, E.On and Liverpool Victoria. He sold this agency in 2006 and as Chief Marketing Officer for two VC-backed start-ups launched the online platform Cleantech Intelligence (which underpinned the The Guardian’s Cleantech 100) and StrategyEye Cleantech. Most recently, he was Marketing Director of Emap, the UK’s largest B2B publisher, and the founder of Blue & Green Communications Limited.

Economy

How Going Green Can Save A Company Money

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going green can save company money
Shutterstock Licensed Photot - By GOLFX

What is going green?

Going green means to live life in a way that is environmentally friendly for an entire population. It is the conservation of energy, water, and air. Going green means using products and resources that will not contaminate or pollute the air. It means being educated and well informed about the surroundings, and how to best protect them. It means recycling products that may not be biodegradable. Companies, as well as people, that adhere to going green can help to ensure a safer life for humanity.

The first step in going green

There are actually no step by step instructions for going green. The only requirement needed is making the decision to become environmentally conscious. It takes a caring attitude, and a willingness to make the change. It has been found that companies have improved their profit margins by going green. They have saved money on many of the frivolous things they they thought were a necessity. Besides saving money, companies are operating more efficiently than before going green. Companies have become aware of their ecological responsibility by pursuing the knowledge needed to make decisions that would change lifestyles and help sustain the earth’s natural resources for present and future generations.

Making needed changes within the company

After making the decision to go green, there are several things that can be changed in the workplace. A good place to start would be conserving energy used by electrical appliances. First, turning off the computer will save over the long run. Just letting it sleep still uses energy overnight. Turn off all other appliances like coffee maker, or anything that plugs in. Pull the socket from the outlet to stop unnecessary energy loss. Appliances continue to use electricity although they are switched off, and not unplugged. Get in the habit of turning off the lights whenever you leave a room. Change to fluorescent light bulbs, and lighting throughout the building. Have any leaks sealed on the premises to avoid the escape of heat or air.

Reducing the common paper waste

paper waste

Shutterstock Licensed Photo – By Yury Zap

Modern technologies and state of the art equipment, and tools have almost eliminated the use of paper in the office. Instead of sending out newsletters, brochures, written memos and reminders, you can now do all of these and more by technology while saving on the use of paper. Send out digital documents and emails to communicate with staff and other employees. By using this virtual bookkeeping technique, you will save a bundle on paper. When it is necessary to use paper for printing purposes or other services, choose the already recycled paper. It is smartly labeled and easy to find in any office supply store. It is called the Post Consumer Waste paper, or PCW paper. This will show that your company is dedicated to the preservation of natural resources. By using PCW paper, everyone helps to save the trees which provides and emits many important nutrients into the atmosphere.

Make money by spreading the word

Companies realize that consumers like to buy, or invest in whatever the latest trend may be. They also cater to companies that are doing great things for the quality of life of all people. People want to know that the companies that they cater to are doing their part for the environment and ecology. By going green, you can tell consumers of your experiences with helping them and communities be eco-friendly. This is a sound public relations technique to bring revenue to your brand. Boost the impact that your company makes on the environment. Go green, save and make money while essentially preserving what is normally taken for granted. The benefits of having a green company are enormous for consumers as well as the companies that engage in the process.

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Energy

5 Easy Things You Can Do to Make Your Home More Sustainable

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sustainable homes
Shutterstock Licensed Photot - By Diyana Dimitrova

Increasing your home’s energy efficiency is one of the smartest moves you can make as a homeowner. It will lower your bills, increase the resale value of your property, and help minimize our planet’s fast-approaching climate crisis. While major home retrofits can seem daunting, there are plenty of quick and cost-effective ways to start reducing your carbon footprint today. Here are five easy projects to make your home more sustainable.

1. Weather stripping

If you’re looking to make your home more energy efficient, an energy audit is a highly recommended first step. This will reveal where your home is lacking in regards to sustainability suggests the best plan of attack.

Some form of weather stripping is nearly always advised because it is so easy and inexpensive yet can yield such transformative results. The audit will provide information about air leaks which you can couple with your own knowledge of your home’s ventilation needs to develop a strategic plan.

Make sure you choose the appropriate type of weather stripping for each location in your home. Areas that receive a lot of wear and tear, like popular doorways, are best served by slightly more expensive vinyl or metal options. Immobile cracks or infrequently opened windows can be treated with inexpensive foams or caulking. Depending on the age and quality of your home, the resulting energy savings can be as much as 20 percent.

2. Programmable thermostats

Programmable thermostats

Shutterstock Licensed Photo – By Olivier Le Moal

Programmable thermostats have tremendous potential to save money and minimize unnecessary energy usage. About 45 percent of a home’s energy is earmarked for heating and cooling needs with a large fraction of that wasted on unoccupied spaces. Programmable thermostats can automatically lower the heat overnight or shut off the air conditioning when you go to work.

Every degree Fahrenheit you lower the thermostat equates to 1 percent less energy use, which amounts to considerable savings over the course of a year. When used correctly, programmable thermostats reduce heating and cooling bills by 10 to 30 percent. Of course, the same result can be achieved by manually adjusting your thermostats to coincide with your activities, just make sure you remember to do it!

3. Low-flow water hardware

With the current focus on carbon emissions and climate change, we typically equate environmental stability to lower energy use, but fresh water shortage is an equal threat. Installing low-flow hardware for toilets and showers, particularly in drought prone areas, is an inexpensive and easy way to cut water consumption by 50 percent and save as much as $145 per year.

Older toilets use up to 6 gallons of water per flush, the equivalent of an astounding 20.1 gallons per person each day. This makes them the biggest consumer of indoor water. New low-flow toilets are standardized at 1.6 gallons per flush and can save more than 20,000 gallons a year in a 4-member household.

Similarly, low-flow shower heads can decrease water consumption by 40 percent or more while also lowering water heating bills and reducing CO2 emissions. Unlike early versions, new low-flow models are equipped with excellent pressure technology so your shower will be no less satisfying.

4. Energy efficient light bulbs

An average household dedicates about 5 percent of its energy use to lighting, but this value is dropping thanks to new lighting technology. Incandescent bulbs are quickly becoming a thing of the past. These inefficient light sources give off 90 percent of their energy as heat which is not only impractical from a lighting standpoint, but also raises energy bills even further during hot weather.

New LED and compact fluorescent options are far more efficient and longer lasting. Though the upfront costs are higher, the long term environmental and financial benefits are well worth it. Energy efficient light bulbs use as much as 80 percent less energy than traditional incandescent and last 3 to 25 times longer producing savings of about $6 per year per bulb.

5. Installing solar panels

Adding solar panels may not be the easiest, or least expensive, sustainability upgrade for your home, but it will certainly have the greatest impact on both your energy bills and your environmental footprint. Installing solar panels can run about $15,000 – $20,000 upfront, though a number of government incentives are bringing these numbers down. Alternatively, panels can also be leased for a much lower initial investment.

Once operational, a solar system saves about $600 per year over the course of its 25 to 30-year lifespan, and this figure will grow as energy prices rise. Solar installations require little to no maintenance and increase the value of your home.

From an environmental standpoint, the average five-kilowatt residential system can reduce household CO2 emissions by 15,000 pounds every year. Using your solar system to power an electric vehicle is the ultimate sustainable solution serving to reduce total CO2 emissions by as much as 70%!

These days, being environmentally responsible is the hallmark of a good global citizen and it need not require major sacrifices in regards to your lifestyle or your wallet. In fact, increasing your home’s sustainability is apt to make your residence more livable and save you money in the long run. The five projects listed here are just a few of the easy ways to reduce both your environmental footprint and your energy bills. So, give one or more of them a try; with a small budget and a little know-how, there is no reason you can’t start today.

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