The Faces of Divestment: Ron Conway, Leonardo DiCaprio, Al Gore, and Snoop Dogg
Insights from the early adopters, about the future of investing
TL;DR - Aligning your ethical and financial gains will become the mainstream behavior. There will be many opportunities to support it, and my team is building a tool to make gun divestment easier.
I am a designer and entrepreneur, building an investing app called Hello Money. Like you, I read a lot of different things, and sometimes dig into a topic to connect the dots and see a trend.
The topic I am nerding out about right now is divestment.
I first saw the word in the news couple years ago, when California teacher’s pension fund was urged to divest from gun stocks in response to the Sandy Hook shooting. Another burst of news came after San Bernardino. But it wasn’t until a steady stream of fossil fuel divestment stories appeared with big numbers, that I started to connect the dots.
After reading 70+ articles about this trend, I’m coming away with a working theory about where the future of investing is headed.
But perhaps the best way to explain the insight is to tell you about the real people who are actually doing it.
Meet the unlikely early adopters of divestment: An actor, a Vice President, a rapper, and a VC.
Who Is Leo?
- 41 year-old American
- (Finally) Oscar-winning actor and film producer
- Estimated net worth $245M
Were you surprised when Leonardo DiCaprio gave a passionate speech about climate change as he accepted the Oscar, a moment he had been waiting for 22 years? I was.
The gist of his speech was this: He doesn’t take anything for granted, be it the Oscar or this planet; and we should stop procrastinating, and do something together.
The Oscar was hardly the first time Leo used his influence to amplify the message. He is one of the few people admired by the general public and the head of state alike, and Leo the activist utilizes his unique position.
He started Leonardo DiCaprio Foundation back in 1998, which has awarded over $45M of grants to 78 projects concerning oceans, forests, wildlife, and climate.
Leo joined in People’s Climate Change March in 2014 alongside 400,000 people in NYC, and has spoken at numerous events including: UN Climate Summit, US State Department’s Our Ocean conference, and World Economic Forum in Davos.
Investor and Divestor
His activism started with donating money and performances, like narrating for the film The 11th Hour. But it has evolved: Leo actively employs his own fortune to make the point now.
Last fall, Leo invested in a trash-hauling startup called Rubicon Global. He had invested in other environmentally focused startups before, including an electric car maker, and a synthetic diamond startup Diamond Foundry. As a limited partner of Obvious Ventures, Leo invests in more environmental solutions companies.
He also joined Divest/Invest, an initiative to drop fossil fuel from your investment portfolios.
Fossil fuel divestment is growing fast. Over 500 organizations and 2,000 people have pledged to remove fossil fuel from their $3.4 trillion assets.
And this is not just a tree-hugger movement any more. Leo is joined by pension funds, universities, and investment firms that are worried about the business and financial risk of the fossil fuel industry. Even The Rockefeller Brothers Fund, built with profits from Standard Oil Co., has joined in.
Cliff notes: Scientists have calculated how much fossil fuel we can use before raising the global temperature by 2 degrees and causing an irreparable damage to our environment. This means fossil fuel energy companies may be valuing themselves based on the natural resources they will never be able to use. It's making many investors nervous.
Based on his pledge to divest, Leo and his foundation will go through a process to eliminate coal, oil, and gas businesses from their investment portfolios.
What Triggered Leo?
Leonardo DiCaprio is a celebrity who dates supermodels… But when it comes to environmental activism, I don’t suppose he was so different from many of us: A concerned consumer unsure of what to do.
Clearly, that’s no longer the case. He knows how to use his resources, including his own investments, to make a difference.
Watching his oscar speech, I wondered what triggered the change: What propelled him to become such a vocal thought leader?
Turns out, the trigger was his meeting with then-Vice President Al Gore at the White House in 1998, same year Leo started his foundation.
Let’s find out how Gore, the influencer’s influencer, operates.
Who Is Gore?
- 67 year-old American
- 45th Vice President of the United States (1993–2001)
- Estimated net worth $200M
After losing the 2000 presidential election, Al Gore reinvented himself as a climate crisis activist and prolific businessman.
An Inconvenient Truth was a No. 1 international best seller. The movie version won two Oscars, and audiobook won a Grammy. Gore was awarded the Nobel Peace Prize in 2007 for his impact.
Peace Prize to Money Prize
There are two things less known about his activism.
First, it started early. Influenced by Silent Spring, Earth Day, and the Club of Rome report, Gore has been fighting climate change since he started his congressional career in 1976.
Second, his approach has changed since the days of An Inconvenient Truth. Instead of using words, Gore uses money to make his point now. (See the pattern now?)
Gore was worth between $1–2 million when he ran for President in 2000. He’s much wealthier now, thanks to the acquisition of Current TV, a partner position in the Silicon Valley venture capital firm Kleiner Perkins, and a board seat at Apple. Bloomberg estimates his net worth to be $200 million.
And he is utilizing his wealth on an intriguing experiment: He is out to prove the financial and business validity of divesting from the harmful industries.
Gore is now the chairman of Generation Asset Management, an investment firm whose core idea is called sustainable capitalism.
The firm believes sustainability risks and opportunities directly affect long-term business profitability. According to The Atlantic:
If some tenets of “long term” and “value based” investing are extended to include the environmental and social ramifications of corporate activity, the result can be better financial performance, rather than returns that are “nearly as good” or “worth it when you think of the social benefits.”
But does it work? It has. Generation has outperformed the market in the past decade.
Between summer 2005–June 2015, Generation portfolio returned 12.1% per year, while MSCI World Index returned 7% and professional money managers scored 7.7% before fees.
With $12 billion under management, Generation currently focuses on serving a rather select clientele of financial and political authorities with large assets and influences.
Although I can’t put my money in their fund yet, I am excited. Gore’s work with Generation is really about disproving the age-old bias: That social good and financial gain are mutually exclusive.
The global head of McKinsey agrees:
They have created a real demonstration vehicle for the idea that if you are broad-minded and care about externalities, you can actually add shareholder value. Many people have talked about this, but now they have done it.
I hope their investment approach is made available to a larger audience soon. A robo-sustainable-advisor perhaps?
Fossil fuel is the current front-runner among divestment campaigns, but there have been others, and there will be more.
In the U.S., the topic emerging now is guns. Let’s meet two early adopters of gun divestment.
Who Is Snoop?
- 44 year-old American
- International rap star and actor
- Estimated net worth $135M
No Guns Allowed
Snoop’s 1993 debut album Doggystyle defined the West Coast gansta rap.
Its song Serial Killa goes: “One gun is all that we need, to put you to rest […] Now you dead then a motherfucker, creepin’ and sleepin’.”
His own record includes felony gun and drug charges from 2007.
Then in 2012, Snoop surprised many when he rebranded himself with a new name and religion. He even released a song No Guns Allowed that he sang with his 13-year-old daughter. This time, the lyrics read:
Let the music play, me don’t want no more gunplay. When the bodies hit the ground, there’s nothing left to say, ay, ay. Me don’t want to see no more innocent blood shed.
When asked about his transformation, he told The Guardian that instead of making music about his past, he decided to make songs about the life he’s living as a father in his 40s.
Afterwards, he established a partnership to raise awareness about the ongoing battle with gun violence, also called No Guns Allowed.
Gun Free Investing
Since 2014, Snoop has been the voice of Unload Your 401K, a website where you can examine your 401(k) plan for gun stocks. In their PSA video, he says “I’m unloading for my loved ones that I’ve lost,” “I’m going all in for gun free investing.”
I am curious whether Snoop owns a 401(k) account himself. There is not much known about the specifics of how he plans to divest either.
However, he is no newbie to investing. Around the same time he established No Guns Allowed, Snoop started to be serious about investing in startups.
He’s invested in about 15 startups as of 2014, including Ustream, Reddit, Secret, Philz Coffee, and Robinhood, the zero-commission stock trading service. He was even seen with Larry Page, wearing a Ralph-Lauren vest and Warby Parker glasses. Dorky!
All of this may be confusing, but consider this: Snoop is a church boy turned gangster pimp turned gangsta rapper turned businessman.
Unlike the innocently violent image he has cultivated, he is “a successful businessman who sees opportunities in one of the fastest-growing sectors,” according to this Fast Company article. His investment agent Nick Adler said in the interview:
The real strategy is business. There is an element of innovation. We’re going to associate our name with things that are changing the game. You saw the devaluation of music, an industry that got ravaged by tech. How can we be a part of the next frontier?
Sounds like being Snoop comes with certain fluidity which often defies our expectations. He sees himself uniquely qualified to be the voice against gun violence (and others agree), and it makes sense to confront what almost destroyed him, be it guns or tech.
Speaking of tech: This next person probably has an insight or two about being a part of the tech frontier.
Who Is Conway?
- 64 year-old American
- “Super angel” investor
- Estimated net worth $1.6B
As the founder of SV Angel and early-stage investor in Google, Paypal, Facebook, Twitter, and 600+ others, Conway is Silicon Valley’s most prolific investor.
He is also a prolific philanthropist, focused on health issues, local Bay Area improvements, and most recently, gun control.
A strong advocate for local issues, he had little interest in national affairs until December 2012. According to this report, Sandy Hook changed it.
The shooting occurred while the Conways were hosting their well-attended Christmas party. Guests happened to include Gabrielle Giffords, the congresswoman who had survived an assassination attempt by a gunman.
Since then, Conway has been active in the gun control fight. He is now on the advisory board of Sandy Hook Promise, an organization founded by the parents of the victims.
Like everyone profiled in this post, he actively uses his influence to gain support. He helped Sandy Hook Promise collect over 200,000 signatures for their campaign, including those of Britney Spears, Ryan Seacrest, Jack Dorsey, and Marc Benioff. You could say he’s an influencers’ influencer, like Gore.
Demand Your Advisor
Alongside Snoop Dogg, Conway is the voice of Unload Your 401K. “It’s time to go to your financial advisor and demand that there are no gun investments in your 401(k),” said Conway in the video.
I am curious how he plans on divesting his investments and how his advisor is able to help him, but I could not find any references yet.
I also wonder, what does the legendary investor think of divestment as an investment approach? Does he think of it as a sort of nice-to-have add-on, a must-do hygiene, or does he see more benefit in divestment than preserving personal integrity?
What Do These Early Adopters Know?
After reading the stories of these four people, I came away with the following:
- Early adopters start with donating their money and connections, but increasingly move toward using their investments to make their point.
- Fossil fuel divestment is making a strong case of business and financial concerns beyond ethical issues, first among the divest movements.
Projecting it farther out, I’d say:
Aligning your ethical and financial gains will become the mainstream behavior.
Fossil fuel movement may not be a one-off event, but rather, a harbinger of a bigger trend in investment behavior for the years to come.
Investment Behaviors Change
Investment behavior is not a monolithic thing with absolute criteria set in stone. It changes over time. As pointed out in this story by The Atlantic, previous examples of market success have shifted behavior:
- Peter Lynch of Fidelity in the early mutual-fund days, with “invest in what you know” approach
- Warren Buffett of Berkshire Hathaway with his emphasis on the long term value
- David Swensen of Yale with his returns from unconventional investments
- John Bogle of Vanguard with his advocacy of low-cost indexing
The divestment movements indicate that there will be another shift in investing behavior: An emphasis on the long term outlook.
Long Term Outlook
If you’ve seen The Big Short, you agree: Our business and financial system is suffering from short-term thinking.
As The Atlantic article points out, when average tenure for Fortune 500 CEOs is only 5 years and Wall Street analysts demand quarterly profit guidances, business managers and the finance industry cannot afford to focus on long-term reinvestment into the business or society.
Even those in the system are warning against it: CEO of Blackrock and the global head of McKinsey are among the growing number of industry insiders that have warned short term thinking is destroying businesses and entire economies.
Aiming to steer our society toward a more sustainable future, the new breed of divestments highlight the importance of long term outlook.
And whether you’re ethically motivated or purely business minded, it will matter more.
Warren Buffett once said the cigarette business was a great one to invest in. Seven years later, he changed his position, saying “The economy of the business may be fine, but that doesn’t mean it has a bright future.”
If Buffett or fossil fuel movement are any indication, this notion is changing our investment behaviors: Divestment movements are evolving from a simple form of protest, to a proactive strategy to de-fund short sighted businesses and reallocate our financial resources.
As divestment becomes a more popular way of investing in the coming decade, there will be many opportunities for innovation.
Bridge the 80% Gap
In his book The Tipping Point, Malcolm Gladwell says a social epidemic requires the special few who act as connectors, mavens, and salesmen. These early adopters above, and thousand others who are less in the public view, are starting to fill in these roles.
But in order for divestment to reach the mainstream 80%, some practical issues need to be addressed.
Time consuming. Even if you are the celebrities and teacher’s pension funds with high net worth and strong resources, it can take you 2–5 years to retool your portfolio.
Costly research. Divestment is quite difficult to implement if you don’t have a money manager or advisor who can do a lot of research and explain the choices for you.
Accessible financial products. Fossil fuel free index is only available for high net worth individuals or institutions. Generation’s portfolio is not accessible to us yet.
Lack of off-the-shelf funds and self-service solutions makes divestment still inaccessible to the public at large. As an entrepreneur in the investing space, I predict there will be a host of services and tools to bridge the gap in the next 10 years.
Living in the Future
Paul Graham is a cofounder of YCombinator, a famed startup accelerator. As someone who has backed ideas like AirBnB and Dropbox in its early days before others saw their potential, he knows a thing or two about both innovations and how they can be accelerated.
When it comes to coming up with innovative startup ideas, he says living in the future makes it much easier. And in his essay about Ron Conway, he says being pro-social and benevolent yields a better profit in a transparent and connected world:
In a sufficiently connected and unpredictable world, you can’t seem good without being good. As often happens, Ron discovered how to be the investor of the future by accident. He didn’t foresee the future of startup investing, realize it would pay to be upstanding, and force himself to behave that way. It would feel unnatural to him to behave any other way. He was already living in the future.
And Graham predicts the same trend will extend beyond the startup investing world:
Fortunately that future is not limited to the startup world. The startup world is more transparent and unpredictable than most, but almost everywhere the trend is in that direction.
In the coming decade where long-term outlook and a concern for the collective sustainability is ever more emphasized, more of us will realize that we can profit by allocating our investments in pro-social enterprises.
While DiCaprio, Gore, Snoop, and Conway don’t have much in common at a first glance, they all understand this directionality. That’s the message from these early adopters.
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Hello Money team is building a tool to make gun divestment easier. Visit goodbyegunstocks.com and we'll notify you when it launches in a few weeks.