How Investors Look at the Generation Investment News

Following my article on the implications of the so-far-very-profitable “sustainable capitalism” approach of Al Gore’s Generation Investment firm in London, and the previous call-and-response you’ll see further down on this page, some more reader response.

First, from a veteran of the U.S. high tech industry who is now a professor in Israel:

Like Felix Salmon, I have an active BS detector that begins to buzz when the success of what is essentially a technical advance (usually something that I encounter in a popular treatment of an engineering breakthrough, like recent stories on i-phone sized cameras with 16 different lenses and imaging chips) is defended by one number and a lot of good intentions. 

The Institutional Investor article which you link to leaves me feeling much better about the likelihood that Generation is really doing well for fundamentally sound reasons, and will have a broader impact.  It does make the case that others are following similar directions.   

A theme in these two articles which caught my interest is that European investors and governments take a broader, more philosophical approach to capitalism than does the US.  (Leaving aside the London Whale and similar stories.)  

In the world that I see, European support for research in science and technology, this is definitely true.  The EU's programs, such as Horizon 2020, have broader boundaries, and their goals combine technical excellence with sustainability and industrial exploitation.  "Welfare capitalism" is accepted, e.g. Airbus.  In the US, the NSF and DARPA seem to care most about continuing US scientific and military dominance on steadily shrinking uncertain budgets.  Perhaps each side of the Atlantic is still thinking in terms that have not changed much since the 1950s.

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And from an American with extensive experience in big-project investments (and also environmental projects):

It is going to be a stretch just to get investors to put their money into things that are good for the world and also yield no more than the level of returns that the investors are otherwise accustomed to (especially at no greater than customary risk to the investors).  In fact, it is also going to be quite difficult just to find such investment opportunities for them, and to structure them so that they actually are good for the world and also actually do yield even customary returns with customary levels of risk.  

It may be possible to invest in things that are good for the world and also produce HIGHER than customary returns at no more than ordinary levels of investor risk.  But people familiar with finance and investing will so skeptical of that proposition that even if Generation has indicated that it has already accomplished this (to some extent), the cognoscenti are likely to think:  Really?  To what extent, exactly? And how scalable/replicable is this – currently – even if Generation has actually accomplished it (to some extent).

Cut through Salmon’s screed, and those are essentially the questions he’s asking.  A subsidiary set of questions, to which he also alludes, arises around how acting largely like a hedge fund buying and trading securities – not investing in projects directly, or in start-up companies – actually advances the “good for the world” cause.

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On politics, from a reader in California:

I know that Mr. Gore has done a lot to bring the climate change issue to the fore and that with Current TV he promoted progressive ideas, but this Generation thing is a bit of a head-scratcher.

Here is a man who had built the mechanism and personal brand to influence tens of millions of Americans to take action (i.e., vote) on progressive ideas. One would think that he could have carved out a larger roll for himself being involved in the public discourse and getting people more active in politics.

But instead he chooses to get into investment management? Seriously? It seems that the guy he really admired was not Gandhi but Mitt Romney. And meanwhile, after building Bain, Mitt Romney longed to attain to the status and influence that already belonged to Al Gore as a trusted political voice and leader.

I can’t help but think that the 52 year old Gore could have used his energies much better than running after pension funds to play with their money and get returns that were 2-3% higher than average. Whooopde do. I wish he had instead worked in building coalitions to elect leaders that make a difference.

I have responses on many of these points but will save them for an upcoming round. For now, thanks to these and other readers. Again the point of my article was to try to get the “sustainable capitalism” concepts into broader discussion, and scrutiny, by the non-financial-pro part of the public. So responses pro and  con all advance the cause.