Financial Organics

When people started growing their own ‘organic’ vegetables and talking about natural foods, society was mostly ignorant and often condescending.  The ‘nature’ people all seemed a bit weird.  As primary producers (farmers, forestry, fisherman) our natural resources of a plentiful sea, clean air, lots of water and arable land meant we seldom questioned the slowly advancing chemical imprint.  If developing science meant improved productivity, who were we to question the rationale.  It’s different now.  We see the impact of inappropriate principles and practices when it comes to our environment and the economic consequences from unintended outcomes.  Primarily – sustainability and health.  Our reaction has been to question many of the methods and rationale behind productivity gains or short term profitability in the name of progress and at the expense of conscious capitalism (a more sustainable concept based on values to individuals and society).

We need to see this transition with money.  The global financial crisis germinated from a combination of economic ineptitude from central government and unbridled greed from Investment Bankers.  The politicians and bankers in America created scientifically modified products to sell to an unsuspecting consumer – which they succeeded at doing to such a devastating level that the world was forced to take its attention away from polar bears, whales and global warming, while it reverted to survival.  And I don’t mean to demean these causes.

In a 20 year study of New Zealand’s top companies (1984-2004) – (in comparison to Australia’s top 10) only four remained after 10 years and their value had fallen by $6.8 billion.  In contrast, seven of the top 10 ASX companies at the end of 1994 remain listed and their total market value has surged by A$437 billion.  Brian Gaynor of Milford Asset Management quotes: “There are a number of reasons for NZ company failure:

• The NZ economy is small
• Due to lack of overseas expertise they stall when attempting overseas growth
• Corporate governance has often been extremely poor
• Acquisition rather than growth has been a poor strategy (especially overseas)
• Companies have been quick to sell.”

A combination of poor management and short term thinking.  When I drill down to look at the Aussie companies (surviving) they are predominantly – mining and banking.  BHP, NAB, Rio Tinto, Western Mining, Westpac, ANZ.  Huge ‘value’ growth from the banks.

My question – to what end.  Is society really a better place because banks have provided synthetic credit.  Do we really need to be awash with credit to build a sustainable and happy society.  Whilst we (the finance industry) may not be directly killing people through – nicotine, food additives, farming practices or poisoned water catchments we are certainly creating a different kind of outcome.  In fact a mess really.  Anxiety, stress and chemical dependency of one type or another – due to financial mismanagement and unintended consequences.  Primarily through the availability of credit.

So what does financial organics entail.  The health equivalent of more broccoli and less chocolate? – Not necessarily.  Society is an organic whole: structured, organised, coherent, integrated, coordinated, ordered, harmonious – when the equilibrium is upset (which in my opinion through finance and money it is at the moment – just as we have experienced with food and farming) balance needs to be restored.

The change needs to come from the suppliers who’s value becomes more ‘organic’ and principled.  Conscious capitalism is an advancing concept and one which the banks will need to embrace – along with fund managers, insurance companies and finance providers.  Individually, financial advisers need to take responsibility for a more sustainable progression for their clients.  Happiness doesn’t come from having more money or having unlimited access to more money – it comes from having financial security and that’s an adviser’s role.

Those advisers who’s purpose becomes more aligned with clients’ real needs will not only enjoy the prosperity which comes from attracting and retaining more satisfied, organic (as in an organic society) clients, they will also achieve self fulfilment.  Not a job or a career – but a calling.

When the ‘product’ of farming was focused to productivity as opposed to the ‘market’ the end game was profit – so they piled on more fertilizer, used more water, cut down more trees and trashed the environment.  The equivalent has occurred within the urban landscape.  Whilst we may disagree with aspects of the Resource Management Act we only need a quick glance at the environmental impacts in India and China to acknowledge the need for an ‘organic’ society.

All successful investing and lifestyle sustainability is goal focused and therefore planning oriented.

All unsuccessful investing and lifestyle enjoyment is product and ‘to consume’ focused and therefore performance and perception oriented.

Living life ‘on purpose’ needs to become the goal and when it does, finances become – just a factor, and thereby non reliant on a benefactor.

The information provided in this blog is not intended to be a substitute for professional advice. You may seek appropriate personalised financial advice from a qualified professional to suit your individual circumstances.