Here's an investing strategy: buy businesses which at their core are making the world a better place to live in; create wealth together with the business operators and employees, so when you invest, it becomes a win-win situation.
How? Answer: this Collaborative Fund blog post introduces the solution:
"There are multiple stakeholders in every company. Customers. Employees. Shareholders. Suppliers. Communities. Any sustainable business must acknowledge and nurture the needs of every one of those stakeholders, without preferring one dramatically more than others.
Squeeze your employees and your shareholders will benefit … for a while. Squeeze your shareholders and your employees will benefit … for a while. Squeeze your suppliers and your margins will grow … for a while. Give away your product and your customers will love you … for a while."
I recently read Elon Musk's biography so I'm going to use Tesla as an example to illustrate a solution:
- Tesla at its core is trying to combat climate change by providing an alternate solution to fossil fuel powered vehicles.
- They have made all their patents public and want more people to be improving their solution.
- The engineers and assembly-line workers at $TSLA work side by side in the factory and truly enjoy building world-class products.
- The $TSLA customers are some of the happiest customers in the world, as a matter of fact, the first 1000 Tesla Roadsters were sold without a test-drive.
- Wall Street is skeptical of Elon Musk's story telling and is not shocked when he talks about setting up colonies on Mars; yet, the shareholders of Tesla have enjoyed a >1000% return since 2011.
- Avanti Feeds manufactures and markets shrimp feed to the farmers, who use it in aqua culture to grow shrimp. Shrimp are purchased from the farmers and are further processed and exported to various countries.
- Shrimp and seafood is a much healthier alternative to white and red meat.
- Production of shrimp requires less water and consumes fewer resources than the production of salmon.
- It is a more predictable crop (than agriculture) and the evolution of farming methods ensures a yield even in disease ridden conditions.
- The farmers who work with Avanti are provided with the technical know-how of shrimp production to maximize yield and are provided with trouble-shooting teams in times of distress
- This leads to a low-cost high-quality input for the company for its shrimp export business
- The farmer families benefit from all the health and IT related CSR activities the company organizes in their neighborhoods
- This creates a Amazon-like flywheel for the operations of the company
- The Avanti brand has been trusted by its consumers and they are willing to pay a 15-20% premium to enjoy its product.
- The shareholders have immensely benefited from the performance of the company gaining ~10,000% since 2009
The examples of companies doing good and generating out sized returns for its stakeholders is plenty -- Starbucks, Costco, Infosys, TCS, Axis Bank, Page Industries and so on. In addition, I do not say that every company engaged in an inclusive businesses is a sound investment. A large majority of these businesses operate on 'duct-tape' solutions and thus do not last very long. Investors should always implement second, third, fourth level thinking to discern the true value proposition of the companies.
The Collaborative Fund blog continues to say,
"once seen as sacrificial to growth and returns, pursuing a social mission now plays a big role when attracting both customers and employees. We went from labeling do-gooders as the kids who got beat up at school to celebrating Elon Musk with Tesla and Solar City."
There are a lot of moving pieces to a "good" business. But when all of these pieces fit together, you do not have to worry about the macro conditions, because then, the world is your tailwind. And that is a sustainable competitive advantage.