Wednesday, March 2, 2016

Blood and Gore

I enjoyed this Atlantic piece by James Fallows on Al Gore's investment firm more than I expected to. Particularly interesting is the surprisingly detailed description of the process that the firm uses to choose the firms in which it invests.

The key weakness of the piece is that no attempt is made to separate out two very different stories about the firm's financial success: One is that they have shown that, magically, you can have it all: high financial returns while investing only in ethically and environmentally friendly companies. In that story, the firm's performance provides evidence that the tradeoff that the literature highlights between monetary returns and other goals does not have empirical bite. The other, very different, story is that Gore's firm earns above-market returns because they focus on bread-and-butter issues that other investment companies do not emphasize enough, such as corporate governance and executive compensation, they pay relatively more attention to the long run than do other firms, and they are relatively more activist shareholders. Under this story, their returns would be still higher if they did not add in the focus on ethically and environmentally friendly firms. Of course, it could all just be good luck too, an aspect that the story neglects but which merits attention given the firm's relatively small size.

One odd bit. Fallows notes: "No one [at the firm,which is mostly in the UK] seems to call him `Vice President Gore'; they viewed my reflexive use of the term as a weird Americanism." I think Fallows needs to get out more. Only a beltway journalist used to flattering politicians would bother with this sort of foolishness. Gore has been out of office for 16 years!

Another odd bit: Why doesn't the firm pay Laura Tyson to be on their advisory board?

You have to read the article to understand the title of the post. Truly an opportunity missed.

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