Book Review: Morgan Simon’s “Real Impact” is a guide to socially responsible investing

“Per­fect” may be the ene­my of “good”, but “bet­ter” ain’t always its friend.

Fun­da­men­tal­ly, that is the most damn­ing praise for impact investor Mor­gan Simon’s Real Impact: The New Eco­nom­ics of Social Change.

Simon’s book is a guide to bet­ter divest from harm­ful indus­tries and busi­ness­es while invest­ing in and found­ing endeav­ors that align with social­ly respon­si­ble val­ues. It’s also a cri­tique of phil­an­thropy as it exists today, in the form of char­i­ta­ble non­prof­its and eth­i­cal-as-brand­ing for-prof­it enterprises.

While in Sier­ra Leone in 2003, Mor­gan noticed that aid, in gen­er­al, makes mon­ey for lots of mid­dle income folk deliv­er­ing it with­out fix­ing the under­ly­ing sit­u­a­tion and usu­al­ly keeps the recip­i­ents depen­dent on out­side funds. Some­times, well-mean­ing gifts make the local pop­u­la­tion more depen­dent when they can’t start busi­ness­es to com­pete with the free food and cloth­ing del­ug­ing their communities.

Non­prof­its can do harm, and invest­ments that do good can also do well.

Green ener­gy can be more prof­itable than fos­sil fuels with no oth­er con­sid­er­a­tions giv­en, and still give a return to investors while work­ing with­in com­mu­ni­ties to, for exam­ple, install wind tur­bines in Oax­a­ca, and share the pro­jec­t’s prof­its fairly.

So, Simon argues, we as a soci­ety should invest in self-sus­tain­ing busi­ness­es that make the world a bet­ter place and insist on bet­ter met­rics for mea­sur­ing that, which Simon then lays out in some detail as well as rules of thumb for how peo­ple inter­est­ed in such work ought to go about it.

All of this con­vinc­ing as an improve­ment over the cur­rent situation.

But is it enough of an improve­ment to matter?

We’re going to come back around to that, but as deep a prob­lem is the ques­tion of who this book is even for. It’s writ­ten in tone for a wide audi­ence, but rel­e­vant to only a nar­row slice and mean­ing­ful to much less.

When half of all Amer­i­cans own no stocks at all and would have trou­ble com­ing up with $400 in an emer­gency. There’d be more of a mass appeal for the idea of social­ly respon­si­ble invest­ing if wealth inequal­i­ty was­n’t such a prob­lem in this coun­try. Ten per­cent of fam­i­lies own 92 per­cent of stocks, and the top 1 per­cent of Amer­i­cans own more wealth than the bot­tom 90 percent.

In terms of gen­er­al advice, mov­ing from your sav­ings accounts in banks with ques­tion­able prac­tices into cred­it unions and pri­vate debt funds is a good one.

But you don’t have to be in “There Is No Eth­i­cal Con­sump­tion Under Cap­i­tal­ism” camp to feel like Simon’s incre­men­tal­ism is most­ly about peo­ple who were dealt a Roy­al Flush at birth feel­ing less guilty than it is embark­ing upon the rounds of prac­ti­cal prob­lem-solv­ing that she calls for in her book.

Put anoth­er way, even the best and most effi­cient phil­an­thropy can only plug a leak­ing dike. Pub­lic pol­i­cy is what builds or blows up the dams. The Koch Broth­ers, Robert Mer­cer, and oth­er con­ser­v­a­tive plu­to­crats fig­ured this out and have been blow­ing up dams for years, with an enor­mous return on their investments.

Ear­ly on, Simon quotes James Carville’s Clin­ton cam­paign mantra: “It’s the econ­o­my, stu­pid.” What she seems blind to is that his slo­gan was about win­ning an elec­tion and the notion of Amer­i­cans pool­ing their resources to get things done.

Even more fatal­ly dam­ag­ing to Simon’s book is her own men­tion of the prove­nance of Amer­i­can impact invest­ing: Quak­ers refus­ing to invest in slav­ery in 1758. Yet, a hun­dred years lat­er, there were more peo­ple enslaved, slave cot­ton was cen­tral to the glob­al econ­o­my, and slav­ery was more prof­itable than it had ever been.

Two years after that, Abra­ham Lin­coln won the pres­i­den­cy, and more was done to end slav­ery in the sub­se­quent five years than all the five score prior.