If we could do only one thing to optimize mental health, I would vote for creating resilient communities. Thus, I was excited to read Michael Shuman’s Local Dollars, Local Sense: How to Shift Your Money from Wall Street to Main Street and Achieve Real Prosperity—A Community Resilience Guide.
I was intrigued by the subtitle, and I was impressed that it had a foreword by Warren Buffett’s son, Peter. But mostly, I was looking for some real ways to invest locally, rather than in Big Business.
Here’s what I learned about…
The Stock Market
It’s rickety. I knew that, because I’ve read The Crash of 2016. I’ve also lived through a Great Recession.
Unless Americans change their investment habits—and fast—millions will be shocked to find themselves retiring in abject poverty.
Local Living Economies
Straight from the book:
“We now know three simple rules about local economies that, if followed assiduously, will allow a community to prosper:
- Rule 1: Maximize the percentage of jobs in your local economy that exist in businesses that are locally owned.
- Rule 2: Maximize the diversity of your businesses in your community, so that your economy is as self-reliant and resilient as possible.
- Rule 3: Prioritize spreading and replicating local business models with outstanding labor and environmental practices.”
Locally-owned businesses is where it’s at. This is how we create resilient communities. It’s not all about business, of course, but that is certainly an important component.
Every unnecessary import opens your country, region, and community to nasty surprises that lie ahead.
(So doomsday, right?)
Socially Responsible Investing
Socially responsible investing (SRI) is not as socially responsible as one might hope. Different funds have different filters, but mostly, it’s about getting rid of the *really* bad corporations, such as those involved in tobacco, gambling, and weapons.
When I look at the socially responsible fund available through TIAA-CREF, where our current retirement accounts live, I see companies such as Gilead Sciences Inc (Big Pharma), PepsiCo (obesity producer), Starbucks Corp (killer of local coffee shops), and Nike (tax evader).
And here’s why:
Like all other funds, [SRI funds] invest almost exclusively in Fortune 500 companies and are totally disconnected from local living economies.
This what my financial adviser has been trying to tell me for a couple of years now, but I suppose I had to read it in a book to believe it.
Shuman’s point is that SRI doesn’t help small communities unless you invest in such a way that the money is helping local business. That’s not going to happen through the stock market…
Local investing is in its infancy. One of the hurdles is that only accredited investors (rich people) can invest outside the confines of SEC-registered securities. These regulations were put into place to protect people with less money, but according to Shuman, they stifle the local investing potential.
He suggests several ways to get around this, including:
- Cooperatives, or member-owned businesses. Think food co-ops, REI, Nationwide, electrical utility co-ops, credit unions… The book also includes a local agricultural investing example from Sweden!
- Pre-Sales: Want to open a bakery? Ask people to invest by paying upfront and getting their payback in bread.
- CDs in local banks for specific causes. For example, you can buy an Equal Exchange CD. (Too bad interest rates aren’t what they used to be…)
- Slow Money investment clubs. Or any investment club, for that matter. “The SEC has given a pass for investment clubs to operate without formal approval, on one big condition: Every single member must be actively involved in every single investment decision.”
- Self-directed IRA. With a self-directed IRA you can invest in everything from real estate to horses. It sounds kind of high-maintenance, but might be fun for people who know what they’re doing.
All in all, the book is full of cool examples, some dead ends, but not a whole lot of options for the average rural Iowa dweller. I am however inspired to dream up some local cooperative ideas and possibly start a Slow Money investment club. First, however, I need to focus on Shuman’s final advice:
Investing in Yourself
After all that, Shuman asks the question, “Does it make sense to invest in anyone else’s business, bank, project, or fund until I have thoroughly invested in . . . myself?”
Good point. I must say we’ve hit most of the self-investment suggestions he provides:
- Become your own banker: I.e. saving money to pay for big stuff, so you don’t have to borrow money and pay interest. This is how we’ll be buying our next car.
- Become your own landlord: I.e. owning your own home. And yes, we’re paying that mortgage off as fast as we can!
- Become your own utility: Oh man, I wish! We certainly have an energy efficient home, but I would love to generate our own electricity. I’ll explore this more during Energy/Utilities month.
- Invest in your potential: With five post-secondary degrees between us, you’d think we’d be done with school. But no. On January 25, I’m starting an MBA at the University of Wisconsin–La Crosse. I’m excited!
Generally speaking, investing in yourself is the best thing you can do—anything that improves your own talents. Nobody can take that away from you. –Warren Buffett
I would also add that investing in yourself includes eating real food, exercising regularly, observing a day of rest, getting enough sleep, and living slowly (I’m working on it, okay!). Un-health is expensive—and not very fun.
* * * * *
As I followed links from Local Dollars, Local Sense, I did find a new online resource for local investing that seems promising: Local Investing Resource Center. I’ll also be looking into Vested by Calvert Social Investment Foundation. Mosaic looks cool too, but there aren’t any projects to invest in right now.
P.S. Huge caveat by the author: “No one should read this book as suggesting that we each should pull all our money out of the stock market and put it all into our neighborhood diners or bookstores.” Shuman suggests moving five percent of your money from Wall Street to Main Street each year.
News and Events
- Yoga Calm: I’m doing a 20-hour practicum to become a Certified Youth Instructor!
- Guest lecturing in Dr. Shedinger‘s class, Darwin, Drugs, and the Divine, on January 19, 2016.
- Speaking at Westminster Presbyterian, Des Moines, IA on January 31, 2016.
Her Lost Year
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