Changing the System from the Inside

Radio Netherlands’ Jonathan Groubert recently interviewed David Neubert for his radio show The State We’re In. The topic of the day was “Changing the system from the inside.”

“For over a decade,” Groubert starts, “David Neubert’s life was entirely about money; making as much of it as possible.” But somehow between that lifetime and this one, Neubert has reevaluated the pursuit of cold hard cash, and he now sees investing as something that can change the world.

Neubert says the first time he knew he needed to change something was when he got his first million dollar bonus and knew that he should have been happy but wasn’t.

“This is it,” he says. “I should be happy now. I did what they tell you on TV, and what makes everybody happy, and I wasn’t. And that was the first sign, like, oh this isn’t working.”

Neubert says he tried to get away from finance but it was what he was good at. He taught fifth and sixth graders at a New York City public school but concedes, “There was something about the intellectualism of the finance stuff that I did like. Finance is actually what I’m good at. It’s something I’ve learned to love. I like math. I like games.”

The impetus for starting was Rupert Murdoch’s right wing news network, FOX, which was deliberately politically biased. He realized there was no left leaning financial media and decided to start a publication that questions markets and the business world but still helps people do things like save for their retirement and buy a home.

What is socially conscious investing?

“Socially conscious investing differs from socially responsible investing in the following way,” Neubert explains. “Socially responsible investing is, you only invest in companies that you know to be doing the right thing, or you at least exclude companies that are doing the wrong thing. Socially conscious investing is, I’m going to invest and then express my own ethics or morality through my investments. It’s a broader term.”

He also stresses the importance of shareholder activism. Neubert personally won’t invest in tobacco or defense companies, but he owns a big oil company like Chevron (CVX – $97.68) and tries to get it to change its behavior by voting his shares. “Socially conscious investing is more about being conscious about what your own personal ethical view is and expressing it,” he says.

Can you still make money?

“Definitely,” David says.

He continues, “Most of the studies I’ve seen, even for the most narrow definitions of socially responsible investing where you really exclude, say more than half the companies in the world, their returns tend to be the same as the rest of the market in the long run. What they tend to experience is more volatility.”

How big of an investor do you need to be to affect corporate behavior?

David says that small, individual investors are surprisingly in the best position to elicit change:

“Corporate management listens to individual investors more than they’ll listen to hedge funds or big investors because companies want small investors to own their shares. Small investors tend to be more long-term in their views, tend to be more loyal to the company, so if you go to the meeting and say, look I own ten shares and this is what I think, they assume that there’s thousands of people just like you and you’re speaking for them, and they will listen.”

Neubert continues:

“Corporations were created to make life better.” He explains that they are a legal invention that allowed people to take risk without being personally liable. “It was a positive aspect, it created more risk taking and more creativity in society.”

However, “what’s happened over time is that the legal system has been changed to give corporation more power and to make them less beholden to the public. And I would like to go back to a time when corporations were beholden to the public.”

To hear the radio program, click here.