Money is a social responsibility. Investors lack the tools to shoulder it
A philosophical essay on the reasons why the wealthy cannot assume their social responsibility, and why this might soon change
When I was young, my father hung up a portrait of a Native American man on his office wall, accompanied by the following quote: “When the last tree has been cut down, the last fish caught, the last river poisoned, only then will we realize that one cannot eat money.”
As a child, I thought this made a lot of sense. Money did not taste particularly good (yes I tried it; to my defense I was little). Buildings were springing up in my neighborhood, and nature was getting less and less room to flourish.
I survived trying to eat a bank note. The neighborhood has transformed from farmland to suburban sprawl. The quote still hangs in its place. But my thinking has evolved.
Money does not mechanically lead to the demise of nature and the planet. Money does destroy many resources at the moment, but that might get better soon.
The reason for all this is that money does not exist. Let me explain.
Money is a social contract
At its core, money is a store of value. Societies started to use tokens like cowrie shells, wampum beads, or even massive disks of limestone in order to create a representation of value in their daily lives. These were tokens that had little value of their own but that could be exchanged for any imaginable good or service.
So indeed one cannot eat money, and this is by definition. If one could, then money would have high intrinsic value, which it should not.
At this point you might think about precious metal coins and wonder whether these were not highly valuable. Metal coins were created in order to hedge against inflation. If one could create money out of thin air, for example by fishing for shells or printing paper, an oversupply of money in relation to value would mean that the value per piece of money goes down. This would mean that money lost its purpose of storing value.
Precious coins cannot be created out of thin air. Nevertheless the value that a coin can buy must always be larger than the value of the metal the coin is made of. Otherwise people would just hoard the coins and use an alternative currency for trade.
Money is hence a social contract in the sense that it is the resolution by a community to use a pre-agreed token with little intrinsic value as a universal store of value and means of trade.
In an era of intensifying global trade (against all odds) and strong global currencies, this community includes all of humanity, and all living and non-living resources that humanity depends on.
Money is social responsibility
Money was hence created by human communities to store value and simplify trade. In a larger sense, it is a tool to ensure and grow material prosperity.
Money is a tool. Let that sink in.
A hammer is a tool. Its purpose is getting nails into walls. It was created to get more nails into walls, better.
On the flip side, a person with a hammer has the responsibility to use the hammer well. They should use the hammer to get nails into walls, or do perform some other useful duty. They should not, however, use the hammer to damage somebody else’s skull.
It is worthy of repeating, so we’ll say it again: money is a tool. Its purpose is to create material prosperity. Whoever has money also has the responsibility to create prosperity, and to avoid inflicting harm with it.
If a person does not have any money, they do not have any of the social responsibility that comes with it. The more money they have, the more responsibility sits on their shoulders.
Freedom and responsibility
It is important to note that money is also freedom. A person can do with their money whatever they like, within legal boundaries. This is fundamental because it guarantees effective trade and makes acquiring money attractive.
People have the freedom to use their money however want. However, if they use it to inflict excessive harm, then they violate the social contract that made money possible at the outset.
Such harm can happen within legal boundaries. This includes investing in a company that violates human rights, or spending it on an unnecessary private jet with high carbon emissions. This behavior might benefit the investor or buyer, but be detrimental to wider society.
When people with money do not deploy their cash responsibly, trust in the social contract erodes. The general population reacts with anger. Riots and social unrest ensue. Examples include the Occupy movement between 2011 and 2016, protests in South America in 2019, and the French riots in 2023.
Many people’s anger is not just about their living conditions and economic uncertainty anymore. It is not just jealousy of the supposedly lavish lifestyle of the richest segment of society.
Recent phenomena, exemplified by the Celebrity Private Jet Tracker, show that people are also tracking the actions of the wealthy. In 2019, the richest one percent emitted as much carbon as two thirds of humanity through their consumption, according to Oxfam. Such statistics are no longer shrugged off.
In an era of many crises, fueled by wars, environmental disasters, disease and famines, deploying capital must always keep in mind the bigger picture. This does not mean saying goodbye to all personal comfort; it does, however, involve conscious decisions about where to put one’s money so that it is not only of personal but also of collective benefit.
Consuming vs. investing
Most attention is placed on the consumption habits of the richest people. This is most tangible and easy to imagine for most people. Nevertheless, only reveals part of the bigger picture.
Consumption consists of many small decisions which mostly play out in the short term. Should I buy tomatoes in January? Where can I find ergonomic keyboards? Where can I buy mattresses with free delivery?
Once bought, the tomatoes will be on my carbon budget. The rare earths for my keyboard will have been mined. The mattress delivery person will have been paid.
My consumption habits will have some impact on what the businesses I do or do not buy from decide to produce in the future. But for the most part, the effects from my purchase decision will have played out by the time I reach the checkout register.
Investing is a different, and potentially more impactful, picture. On the whole, investment decisions are made less often, play out over longer time spans, and have a larger impact over time.
Three years ago, I invested in Bitcoin. I made a single decision, and still hold my positions. The only problem? Bitcoin is highly polluting because Bitcoin mining devours lots of energy and much of that comes from coal.
To be fair, I never mined Bitcoin myself. By putting some of my savings into Bitcoin, however, I made the supply of coins scarcer, hence driving up the price, which might have enticed miners to grow their business in order to earn greater rewards.
The resulting emissions that I caused are quantifiable but are not included in standard carbon footprint calculations. Worse yet, I am continuing to cause emissions because I still hold my positions.
Investment is crucial for the growth of an economy. People with extra money can decide whether their capital flows into sustainable businesses or harmful endeavors.
Money is responsibility. Investors have the responsibility to choose sustainability over harm. If they do not, they violate a social contract with terrible consequences.
These days, however, large sums of cash are still being invested in companies that pollute a lot of nature or violate human rights. What is going wrong?
Quantifying impact
I and my team talked to dozens of investors to find the idea for building Wangari. One resounding finding was that most investors truly care about sustainability. However, they feared that if they invested in greener businesses, they might have lost out on some fantastic gains they made recently in the oil- or defense sector.
Many of these investors failed to see that they have a double responsibility. By handling their clients’ money, they have a responsibility to deliver financial returns back to them. On the other hand, by the very act of handling money, they also have a responsibility towards greater society and its resources.
If investors do not meet their responsibility towards society as a whole, not only will this end in climate disasters and humanitarian catastrophes. It will also erode public trust in their clients and ultimately in money as a storage of value. Did anybody ask to bring the guillotines back?
The financial tools to understand the gain that an investor (or their client) might make from a stake in a business are well established. Understanding the financial and non-financial gains that society as a whole might make from this investment remains challenging.
At Wangari, we believe that we can help investors, and ultimately the market, build this understanding. The next blog post will be about the products we aim to build for investors. In the coming weeks and months, we will be documenting our progress in navigating this complexity.
Feedback loops and holistic money
When humanity wins, it will give some of its prosperity back to a business, in the form of consumption or investment. When humanity loses, businesses bite the dust. This type of dynamics can play out over years, even decades.
Yet it cannot be neglected. In many cases, such feedback loops might be quite significant. Investors need to understand these dynamics in order to shoulder their double responsibility for their clients and for humanity.
If they do not shoulder their responsibility toward their clients well, they will lose clients and go broke. If they do not shoulder their responsibility towards humanity, they will burn up the planet and end up in the ashes. It is a delicate balance of both, and one side is currently neglected — simply because it is more complicated to quantify.
With money comes responsibility. If we understand this, then we will never need to cut down the last tree, catch the last fish, and poison the last river.
We will not have to let them eat cake (or bank notes). When we navigate the technical complexities of holistic financial modeling, and when we finally assume our monetary responsibility towards humanity, then we can continue growing prosperity for every human on Earth.