A Moral Case for Investing

Dystopic Future Mega-corp

In the Parable of the Talents, a master entrusts three servants with equal portions of his wealth before leaving on a journey. Upon his return, he finds that two invested and grew their allotments, and rewards them accordingly. The third, however, is punished by the master for merely burying his in the ground.

Does this indicate a moral case for investing?

I'm not talking about ethical investing - the filtering of investments by ethical criteria - but investing in and of itself, as opposed to avoiding investing altogether.

It's probably helpful right now to define investing for the purposes of this piece as:

1. Entrusting the use of your money to another;
2. To be pooled into a venture;
3. With the anticipation of sharing in future profits or losses;
4. But not personal liability.

For example, buying stock in limited liability companies.

Let's start with an opposing definition: that investing is ultimately the harnessing of wealth to extract greater gain than an individual could achieve by themselves, at the expense of others and the environment. The evils that investing enables coming first to mind is quite common. That's to be expected. Tales of robber barons and misbehaving oil companies have given capitalism a bad name. These stories make it seem like you'd do well to follow the third servant and bury your money lest you participate in exploitation.

The truth is that the majority of capitalistic ventures are quite ho-hum. For every seemingly angelic Tesla or diabolic Monsanto, there are multitudes of manufacturers, financiers, and agricultural concerns whose activities are hard to morally categorise, and who seek capital not to leverage into bullying, but to expand their niche. Our views of real life corporations are informed by those in fiction, so to put it another way, the invest-able universe is less US Robots (huzzah!) or Weyland-Yutani (boo!), and more Spacely Sprockets or Dunder Mifflin (?).

If investing doesn't automatically mean doing bad, does it automatically mean doing good?

We can't get a clear answer looking at the investments themselves, so let's consider the alternatives; the opportunities we forego for every dollar we choose to invest.

Is it not enough to simply be a customer? Surely buying a tomato from a farmer helps them just as much as lending them money. However, it would be wasteful to buy something for consumption you didn't intend to consume. Let's say you like the idea of tomato farms, but dislike tomatoes. Apart from lending, your only other option to aid that business is donation.

Why not just donate the money you would otherwise invest? Charity has its place. However, the requirement to pay dividends, while appearing restrictive, expresses a commitment to prudence. It's one thing for an organisation to show that your dollars are being put to good work. It's another for them to honour a commitment to provide a return through performing it. Profit does not preclude benevolence. Not saying one or the other is superior, but charity and investment are intertwined and need not be either-or. A charity may build a school in a developing nation, while high-yielding bonds enable roads to be built to that school. You are allowed to expect your money to go to something 'good' and hope for a return on investment at the same time.

If the benefit to others is unclear, what about the benefit to ourselves?

Sure, there's the possibility of material benefit, but it cannot be guaranteed. Furthermore, the expectation of greater gains in shorter time-frames edges closer to the vice of greed. Expecting or receiving material gain is not by itself virtuous, just as making a loss is by itself morally neutral.

However, the subset of investing for reasonable returns in the long term requires an equally long-lasting and measured optimism. More than a few finance writers have put it as a belief that:

'... there are more people waking up in the morning saying "I want to be smarter and better than I was yesterday" than there are waking up saying "the world is doomed, I should build a bunker and hide out."'

Long-term investing is not only just for yield or the promise of dividends, but a bet on humans' propensity to try daily to scratch their itches and improve their lot.

To ante up on that bet requires the humble recognition that perhaps others could do better with your money than you could. (After all, is it really your money?)

In contrast, avoiding investing carries two borderline prideful assumptions:

1. That people make horrible, destructive decisions most of the time.
2. That you are the exception to 1.

There's a lot I haven't covered, like prudence, and over-extending oneself, but I'm addressing the broad absolutes of investing versus not-investing here.

The third servant didn't just remove his master's funds from circulation. He separated his consideration from the world by viewing digging a pit as safer than walking the funds to a bank. His master's ire and missing out on a reward are secondary to the real punishment: burying himself along with the money.