Slow Money

Posted by on 06/10/10 in Behavior, Ethics, Nature, Risk, Stewardship

Let’s talk about Slow Food. No, not escargot or turtle soup. Slow Food is a movement and an organization (see www.slowfood.com), the mission of which is “to defend biodiversity in our food supply, spread taste education and connect producers of excellent foods with co-producers through events and initiatives.” To accomplish these feats of culinary behavior modification, Slow Food encourages people:

  • to be aware of one’s relationship with food and consciously act accordingly
  • to emphasize produce close to its natural state over heavily processed foods
  • to grow, harvest and process food in a manner that is sustainable
  • to take one’s time growing, cooking, and eating

Slow Food emerged as a global response to the increased reliance on fast food, synthetic (or heavily processed foods), and unsustainable growing practices. It also strives to acknowledge and counter that many people’s lives are extremely fast paced, leaving little time for family and friends to cook and/or eat meals together on a regular basis.

We began to wonder if there are lessons for investors (and their advisors) to be found in the Slow Food movement. After all, over the past century agriculture and finance both have contended with rapid growth, dramatic globalization, significant technological advances, a more diverse and demanding consumer base, and greater political influence, regulation, and impact.

We had considered advocating a “Slow Money” or “Slow Investment” movement, but decided against it. For no matter how much investors like to think they invest for the long haul, many if not most want to think that they (and their advisors) are faster than the rest—faster traders, faster forecasters, faster sector rotators, faster trend spotters, and of course faster good-deal-getters. If we told our clients we were embracing a “Slow Money” approach, they would likely wish us well and go find some “Moderately Fast Money.” It’s just human behavior.

So now that we have agreed not to launch a movement (yet), let’s see what the  Slow Food movement has to offer those of us who toil in fields of spreadsheets, plant allocation strategies, predict the economic weather, and harvest (hopefully) a sustainable bounty.

1. Self-Awareness
Are investors and advisors as conscious about their relationship with money as they could be? Is there an opportunity to better understand how one thinks of money, why one acquires it, and what role that money plays in one’s life?  As we become more self-aware of who we are as savers and spenders, as risk takers and risk managers, then we become more conscious of how to plan, how to manage adversity, and how to monitor our financial relationships with family, business, and philanthropy.

2. Conscious Action
Awareness enables us to take action that aligns with our values and objectives. We are less likely to get compelled to make investments that are counter to our interests or personality. For too many, investing remains a crap shoot, a series of random actions that are disjointed, inconsistent, and haphazard. Conscious action leads to a strategic approach grounded in our long-term needs, more likely to reinforce positive investing behavior.

3. Keep it Simple
As financial products have become increasingly detached from reality, strange things have emerged. The largest “bond” fund in the world consists primarily of derivatives with very few bonds in it, and often has significant portions of the portfolio shorting the very market it claims to represent. Variable annuities that require hundreds of pages of disclaimers and explanations sit in accounts of unsophisticated investors who STILL don’t understand what they do, yet have been assured that whatever it is, it’s guaranteed.  Structured notes in a thousand shapes and sizes generate huge returns for the investment banks that structure them, yet still claim to provide potential return streams that seem too good to be true.

These genetically modified investment products are conceived by people who actually are called financial engineers, as if to imply that there is a scientific rigor backed by the laws of physics under girding the whole system, rather than economic forecasts generated by actuaries and economists, propped up by very large sales teams, leverage and benign regulators.

But if one remembers that a stock represents ownership in a company and a bond represents a loan to a country, company or other municipality, then that is a good starting place. Like remembering that tomato sauce starts with tomatoes and should end with some basil, onion or garlic. But that corn syrup (what IS that?) doesn’t need to be there, nor does xanthan gum. When there are ingredients in your food that don’t make sense, it might be good to think twice before eating them. Same goes for investments.

4. Take Time
We have already agreed not to start a “Slow Money” movement, but it sure would be helpful if investors slowed down long enough to really think through what their money is for, to have the hard conversations about objectives and risk, about greed and other ulterior motives, about needs versus wants versus desires. It would be wonderful if advisors slowed down long enough to ask questions, to listen, to develop a thorough understanding, to teach and empower their clients. Wouldn’t it be something if regulators had time to monitor, product designers had time to stress test, managers had time to endure a difficult period before being fired, and markets had time to heal without program traders and fickle investors causing gyrations based not on fundamentals but on a rush to…well, we’re not sure what the rush is.

So next time you savor an heirloom tomato from a garden or enjoy a nice long meal with family, friends or colleagues, take a moment to reflect on other ways you can be more conscious with the monies you steward. We are all examples to each other. Thus as we act, we also influence. There’s a lot of power in that. It’s not fast, but in time it just might make a difference.