What is a Civic Investor?
This is an effort to reconcile the self-interest that is inherent to capitalism and investing with the civic duties that I have as a citizen.
The patio at Morningstar's office in Chicago, overlooking State Street.
What is a citizen? For some, it's as simple as the legal status that allows them to vote every four years and to quote the First Amendment during arguments on social media. For others, it means a career as a politician or government bureaucrat. But many people never think of themselves as citizens or contemplate their civic duty, and, instead, spend life identifying with tribal affiliations, such as race, religion, sports teams, or political parties.
For me, a citizen is someone actively engaged in strengthening civil society and encouraging the same behavior in others, regardless of tribal affiliation. Citizens recognize the virtuous circle: They depend on a healthy society to be productive citizens, and a healthy society is the product of active and engaged citizens.
I spent much of my formative years reading Locke, Rousseau, and Rawls, and their development of the social contract theory had a big impact on how I see myself as a member of society. According to social contract theory, civil society exists to protect humans' natural rights (e.g., life, liberty, health, and property, according to Locke), but the citizen exists to strengthen civil society. Remove the citizen and, eventually, society breaks down and regresses to a more base state. Many people, on both the left and the right, seem to care more about “winning” in the political realm and restructuring society according to their vision. Both sides often ignore the individual citizen.
While Locke and the others did most of the heavy lifting developing the idea of the social contract, Emerson took it to a more personal level, focusing on the relations between citizens, rather than relations between a citizen and government. He defined politics as “the relationship between neighbor and neighbor.” Emerson talked about two “norms” — the norms of truth and tenderness — that were meant to guide the conduct of each citizen and to encourage the development of civil society in ways that were not dependent on any particular system or government.
The norm of truth is to act with candor, especially in political speech, and to foster a willingness to listen to such speech from others. Emerson's truth was most concerned with the honest expression of motives, values, and opinions, and with cultivating an environment where citizens are capable of truly listening to those expressions, even if they appear to threaten their way of life.
The norm of tenderness is the cultivation of gentle respect, openness, and responsiveness toward other citizens. Just as a person must be dehumanized before being victimized, practicing tenderness allows the individual to recognize the common humanity linking all people together, and opens them to experience and appreciate the varieties in human life and culture. For Emerson, it was not enough for citizens to view their status as a simple instrument for protecting and advancing their own natural rights, nor was it healthy to disregard the obligational bonds of citizenship in pursuit of an individualism premised on an extreme view of self-reliance.
In other words, dependence on a single government or institution makes society vulnerable to disruption or dissolution, while complete self-reliance removes the citizen from society and breaks the virtuous circle. Strengthening the relationship between "neighbors" creates a lattice effect that can absorb shocks before permanent damage is done to civil society.
What does investing have to do with all of this?
In the same way that political parties are obsessed with winning instead of governing, the investment world is obsessed with generating the highest returns instead of the best outcomes. Portfolio managers feel threatened by passive investing and take unnecessary risks trying to beat the index. Individuals spend time looking for that one hot stock that will make them rich, instead of saving more, reducing expenses, and maintaining a diversified portfolio. Excessive trading, high fees, portfolio churning, trendy product launches; to many people, both inside and outside the industry, this qualifies as investing, the same way that some people think demonizing liberals or conservatives qualifies as civic duty.
To me, investing is ownership. Ownership in the security I purchased, but also ownership in the future. Being a citizen means recognizing your “ownership” in society. Buying an asset means you believe that asset will be worth more in the future. But what good is that if the future itself is worth less than the present?