Sustainicity: we sure hope you're listening, Apple.

It's tax time.

Perhaps like columnist James B. Stewart in today's New York Times, http://www.nytimes.com/2012/01/28/business/a-personal-and-painful-tax-reality-common-sense.html?_r=1&ref=business you are curious about your effective tax rate in the wake of Republican primary squabbles? Or rather like me, you are simply rooting around, pulling together the bits and pieces of paper that describe your income for the year recently ended. I suspect for many of us, this is the one time each year that you really look at those financial account statements that arrive regularly in real and virtual mailboxes.

I couldn't help notice that my little shares of Apple, Inc closed yesterday at just under $450 a share, retaking their position, according to the Wall Street Journal, as the "most valuable company." http://online.wsj.com/article/BT-CO-20120125-710558.html.

Nearly a dozen years ago, those of us who were big fans of Apple products were thought of as simple-minded or simply incurably romantic, with an impractical attachment to products that were beautifully designed and had user interfaces that were, well, simple-to-use.  I remember vividly the conversation I had with my stockbroker at the time, calling from my car and suggesting he purchase some shares on my behalf.  He disagreed, Apple was too pricey.  The recently introduced iPod http://www.youtube.com/watch?v=kN0SVBCJqLs was a fad.

I countered, "indulge me. I just want some."

The small investment turned out "pretty good."  And in the wake of recent news coverage of Apple's supply chain challenges, I wrestle more-and-more with my continued longing for all things Apple.  http://www.nytimes.com/2012/01/26/business/ieconomy-apples-ipad-and-the-human-costs-for-workers-in-china.html?src=mv&ref=general.

How might this relate to sustainicity, the notion that social capital and economic capital are linked? How might it affect an innovative company like Apple and its ability to create long term value for investors like me?

I offer a subtle-yet-powerful example.

As the global media lit up with the story of Chinese factory workers and Apple's supply chain, accompanying a link to January 25th article, I saw this email from a savvy sophomore at one of the nation's elite innovation institutes, "Maybe you've seen this or (sic) might be in the paper tomorrow... but yeah.  Do you still want an iPad?"

If companies like Apple do not appreciate the economics of reputational risk, they may want to ask their future workforce.  Great products are built on equally great supply chains.  They merit nothing less. Manufacturing costs saved in developing nations may offset the cost of brilliant design and savvy innovation, for a time.  But when a 19-year-old techno-wiz asks, "Do you still want an iPad?" Apple investors around the globe may feel a little chill.

U.S investors may even want to take their gains and enjoy the 15% tax rate while it lasts.

Are you listening, Apple?

Sustainicity: a recent example

I am sometimes puzzled by the challenge of explaining the idea of "social capital" to the very smart people I know who earning their livings by thinking about clever ways to redeploy financial capital. When complex mathematical models are used to explain how investments have performed in the past, there does not seem to be any limit to the ability to synthesize complex variables and predictive statistics.  Tinkering with models to limit such recent nastiness as "tail risk" continues to be a legitimate way forward, with "past performance no guarantee of future results."

Mercifully noted.

Truth-be-told, many sophisticated investment consultants; the folks who, for substantial fees, advise investment committees for pension funds, college endowments, foundations  and the like, are puzzled by the ideas that link financial performance with social outcomes.  The idea that an investment's impact on society could be predictive of its ultimate return is met with indulgent sighs.  A nice idea perhaps, even desirable in a Panglossian  "best of all possible worlds..."

We do live and invest in this world, as I am frequently reminded by savvy investors. The societal impact of business activity and capital allocation belongs to the realm of social scientists, policy makers and preachers.  To spend time modeling social outcomes and relate them to financial outcomes is often viewed as politically naive or impossibly complex.  Or as a cynical attempt to monetize morality.

I disagree.

And apparently so does the American Academy of Pediatrics, which recently published policy guidance on the long term impact of childhood stress---the kind that arises in communities weakened by poverty and other "negative externalities," as the economists like to call them.  The guidance begins with Frederick Douglass' sage observation, "It is easier to build strong children than to repair broken men."

http://pediatrics.aappublications.org/content/129/1/e224.full

A spot on synopsis of the report was provided in a recent column by Nicholas D. Kristof,

http://www.nytimes.com/2012/01/08/opinion/sunday/kristof-a-poverty-solution-that-starts-with-a-hug.html?_r=1&ref=nicholasdkristof

This sort of thinking explains nicely why Adam Smith wrote The Theory of Moral Sentiments (1759) before his more frequently cited (An Inquiry into the Nature and Causes of) the Wealth of Nations (1776).

Adam Smith may well have appreciated sustainicity.

Sustainicity: a working definition

Something has happened to the perfectly good word "sustainability" lately.   It seems to still mean "property of being sustainable"  and yet it is being applied across so many areas that I feel a groan rising up each time I see this perfectly serviceable word used in increasingly meaningless ways.  I thought a new word might be needed.  A new word that would apply whenever someone recognized the that financial sustainability and social sustainability were interdependent and interlinked.  What does it mean to build financial capital, without building social capital? Sustainicity is a word that doesn't exist yet.  It's not in Wikipedia. Yet.  It's not in the dictionary. Yet.

So I claimed it.

As the 2012 election season heats up here in the United States, I am eager to see how the candidates include my notion of "sustainicity" in their campaign rhetoric and platforms.  I am especially gladdened when I read something that truly surprises me.  David Brooks' reflection on Rick Santorum's performance in the Iowa caucuses delighted me by challenging me to consider this candidate from a different perspective.  Brooks piece is here:

http://www.nytimes.com/2012/01/06/opinion/brooks-a-new-social-agenda.html

And just yesterday, Gail Collins counterpoint as she reviews Santorum's 2005 book:

http://www.nytimes.com/2012/01/07/opinion/collins-it-takes-a-santorum.html

I hope to reflect on this challenging tension between economic and societal health from the perspective of an individual who has worked at the juncture of those two poles for years.  By challenging my own thinking as a person of deep faith in both God and rational thought, I hope to define a sustainicity movement...perhaps a movement of one, or one plus my Facebook and Google+ pals.  Or just my family as they monitor my posts for signs of decrepitude.

Sustainicity. It starts here.