Friday, June 15, 2007

The Universal Investor

From The Naked Corporation:

The Universal Investor owns a cross section of economy because they are so big or because that is their asset allocation. It no longer makes sense to pick winning and losing companies, their fundamental interest is in the health of the economy overall, which includes its long-term sustainability. Responsible fund manager should not only ensure that corporations operate in peak form but that the economy does too. It makes sense to consider a company's impact on the whole economy rather than on just its own bottom line. Corporations that captures short term gain at the expense of heavy external costs shouldn't be tolerated by the prudent universal owner.
I like this idea. When people become long term Universal Investors they naturally align themselves with what is best for the entire world economy over the long run.

I am not sure if explicit in the idea, but I would extend it to the entire world economy. A Universal Investor mutual fund could be created that invested as broadly as possible in the world economy. It could buy index funds such as the S&P 500 and its counterpart in each country around the world along with other financial instruments to mirror the state of the world economy as best as possible.

Some believe that people become rich at the expense of the poor, but a Universal Investor can only get rich if everyone gets rich as everyone gets the same "average" return. The only way to improve returns is to make the economy more productive through improved education and technology.

Competition is only beneficial to the extent it helps the overall good. A company that benefits at the at the expense of another (or one that wins zero sum games) is not valuable to a Universal Investor.

Over utilization of natural resources is detrimental to returns, so a Universal Investor believes in environmental stewardship. Business ideas that are not sustainable such as overfishing and over harvesting of forests have no benefit to the Universal Investor.

Promoting peace has a positive return on investment for the Universal Investor as wars destroy their assets.

One of the issues with privatizing Social Security is how to invest the money. One solution would be to allow people to only invest in the Universal Investor mutual fund. This give everyone a stake in health of the global economy and take care of the problem of an investor losing all of their money on a risky stock that doesn't pan out.

The more people become Universal Investors the better it will be for the environment, the world economy and world peace.


MensaRefugee said...

Reminds me of Communism...

Fat Knowledge said...

I could see how it would remind you of Communism. Ironic since it is globalized capitalism.

MensaRefugee said...

I dont see any difference between it and communism.

Fat Knowledge said...


I have to admit, I am no expert on Communism, so I don't really now how to do a comparison. I read the Communist Manifesto a long time ago and it didn't make much sense to me (and there were all those French words that I can never spell) so I gave up on really trying to understand what it meant. And Communism in theory is different than the Communist practiced in states, so it gets tricky to really nail down what people mean when they use the term.

But, I believe that in Communism there is no ownership or capital, whereas this concept requires it.

While Communism says "from each according to his ability, to each according to his need", this system gives everyone the same rate of return. People would also make differing amounts of money to invest with, so this doesn't seem to go along with Communism either.

And, this would just be one investment option among many. I believe that Communism requires the whole system to be Communist, that it can't just be a small section of a capitalist setup.

I can't quite tell from your comment, but it appears that you might be thinking that the Universal Investor idea is a bad one. If so, I would love to hear what you think is bad about having more Universal Investors.

MensaRefugee said...

Well, FWIW imo the problem with communism, and to a lesser extent socialism is not what the detailed analysis of it all (that the economists did) had to say.

But rather it was a fundamental utopian vision of perfectability. This scheme points towards another utopia which eliminates competing goals and needs of people, groups etc. Seeing how last time around such utopia was disaster squared - Im very negative towards new utopias.

Have a go at "A Conflict of Visions" By Thomas Sowell. Brilliant book.

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