do you know what you own?

Invest like it’s 1899

(Listen to part 1 and part 2 on our podcast.)

The year is 1860. It’s about a year before the official start of the Civil War and the 33-member nation known as the United States hasn’t even had her 100th birthday yet. Much of the land that would one day join the union was still separated by vast, uninhabited plains, mountains, and natives. The United States government was actively working to expand its railroad infrastructure to meet the growing demand. Although the steam locomotive had reached American soil 30 years before, the network of railway lines was still relatively small, connecting only major cities and hubs. But it was quickly expanding across the greater countryside of what would one day become the continental US.

This was the dawn of the golden age of railroad construction — a five-decade heyday of track-laying and expansion. At the outset, the 33 United States claimed about 35,000 miles of railroad infrastructure. But by 1916 — just 50 years later — that network was expanded by a factor of 7 to over a ¼ million miles of railroads connecting every major city and territory of the now 48 united states of America. But I’m getting ahead of myself.

In 1860, railroads were still pretty new. They were expensive and difficult to make and while the work was supported by and somewhat sponsored by the US government, the hammer-swinging was conducted almost entirely by private companies. Private companies facing myriad complexities. If the land didn’t pose a great enough problem, there was the constant reality of weather, the inefficiencies of communication, the hostility of natives, and the endless need for construction supplies. These capital-hungry railroad companies attempted to lure investors with lofty promises and idealistic visions, “Here, give me your money for this railroad bond” or “buy stock in this company that’s working to build the railroads!” The advertisements must’ve been endless.

But the railroads posed a great problem to the average investor: how do I know where my money is going? These were mega-ton projects, conducted hundreds — or thousands — of miles away, spanning unfathomable distances and facing seemingly insurmountable complexities. How could any reasonable person stay informed as to the quality or safety of their investment? (And remember - Alexander Graham Bell wouldn’t obtain his patent for the first telephone for another 16 years.)

This is where our story begins. When the 48-year-old native of Massachusetts named Henry Varnum Poor formed Poor's Publishing and published a short book: “History of the Railroads and Canals of the United States” — this was the first-of-its-kind attempt at arming investors with data to help them make informed investment decisions. The following decades of Poor’s booklet updates that followed served as an official guide aimed at helping readers to make informed investment decisions by monitoring the performance of the railroad industry.

Fast forward a few decades, Poor’s Publishing house eventually changed ownership and joined forces with Luther Blake’s Standard Statistics Co. and began regularly publishing index information about top holdings in the US stock market. By 1923 they had weekly data on 233 U.S. companies and, by 1957 the index was finally expanded to its current extent of 500 companies and was renamed the S&P 500 Stock Composite Index.

So … cool history lesson, but what’s the point?

The apple has fallen far from the tree

The S&P 500 stock index, born as an informational booklet on railroad companies, was born to empower investors with knowledge. Today, it’s the cornerstone of passive investing — a widely-adopted investment strategy that essentially says not to pay attention to what you own as long as it’s diversified. Isn’t that interesting.

In modern times, the index has really made investing simple. Just buy the S&P and watch your money grow — all for insanely low fees. The more people that jump on the train (pun intended) the cheaper and easier it gets.

And somewhere in the last 65 years, we’ve collectively come to believe that that’s a good plan. After all, the data backs it up. And I’m not arguing the returns are there. But it’s done a few things to us, as investors. I’ve observed two major shifts:

1. We’ve forgotten that investing is a way we participate in and profit from the actions of a business — and the way that business makes money is important. Which has led to …

2. We have no idea how our money is invested. It’s basically a blackbox. Put your money in one side, it grows — we don’t know how — and more comes out the other side. Poof - it’s like magic! And this really doesn’t bother us.

But I think this disconnect here is obvious. And I think it betrays the intent of Henry Varnum Poor.

Taking the blinders off

So let’s make this practical.

Do you know what companies you own?

Have you ever thought about it? Your 401k is full of them. So is your brokerage account.

If you had the chance, would you like to find out?

Here’s why I’m passionate about this. Because Biblical stewardship has to be more than good returns from low-fee ETFs. It has to be more than diversifying and saving and accumulating as much as possible for my unknown future.

Here’s the bad news: It might be worse than you thought.

Proverbs 1:10-19 gives a pretty haunting warning against partaking in wrongfully-acquired financial gain - it’s the passage that talks about the wicked man calling to you saying, “throw in your lot among us, we’ll have a shared purse and profit from unjust gain.” In our modern world, a mutual fund or ETF is analogous to the “shared purse” described here. This passage goes as far as assigning moral culpability for scenarios of mere financial participation. This means that investing in companies that are profiting by doing bad things assigns to me a level of responsibility for those actions.

Okay pause — take a deep breath.

If you’re reading this, I think it’s safe to assume that you know the Bible defines you and I as stewards of God’s resources. And, furthermore, I’m guessing you want to be a good steward — no, a great steward.

But let’s face it: the tools of modern investing have drawn a large curtain between you and I and the companies we’re investing in. Most of us have no idea what we own or what they’re doing with the money. In fact, I’d even say most of us don’t even feel moral responsibility for it. Not that we’re lazy or negligent — not at all! — we just haven’t ever thought about it.

Developing a Biblical investment framework

Let’s do a little thought experiment. Say, for a minute, that you have two investment options. Both are good strong companies with long histories and healthy financials. But one of them manufactures a product that’s harmful to people and they’re known for mistreating their employees. The other is just the opposite, manufacturing a good product that helps save lives and they do so while respecting and honoring their employees.

Which company would you rather own? Which would rather see grow and flourish?

What if it was actually possible to invest this way? Not just theoretically, but in practice. What if there were people - teams, whole investment companies - dedicated to integrating Biblical morals and ethics into investing? What if they spent years developing a framework for identifying companies that are creating real value and promoting human flourishing, while also maintaining a strong financial position and being positioned in the market with the potential for investor gain? Wouldn’t that be something?

What if you didn’t have to check your values at the door when building your investment portfolio? What if there was actually a way to worship with your investments? To invest with integrity? To honor the Lord with your wealth?

Is there any value you hold so dear that you’re unwilling to compromise on it to make a profit?

“But hold on now…” — ownership v. patronage

“But Nick - if I can’t buy Starbucks or wear Nikes or watch Netflix or shop at Walmart, how am I gonna live??”

I want to give a lot of room to this question - because answer this well and I think it’ll change the way you work, play, shop, and eat. We must carefully draw a distinction between patronage of a company and ownership of that company.

Let’s say I walk into my local convenience store. On the shelves you’ll find a wide array of products: milk and water, snickers and chips, jumper cables and emergency blankets, and then also things like adult magazines, tobacco products, alcohol, and lottery tickets. If I walk straight to the fridge section and grab a gallon milk, pay for it, and walk out, I’ve done 2 things: by purchasing milk, I’ve encouraged the shop owner to stock more milk on the shelves. And by not purchasing tobacco or adult magazines, I’m — in a way — discouraging them from stocking those things on the shelves. But as an owner or investor, I’m sharing in the profits that come from all the products.

What about taxes? The government is funding things I’m morally against. Should I just stop paying taxes?

Another great question. Gratefully, scripture draws a distinction between the government and the stock of a company. To put it bluntly, the IRS isn’t passing an offering plate or asking for your investment. They have a confiscatory ability to take your money whether you like it or not. And whatever they do with it is up to the people in charge. But good news. You have the ability and the right to vote into office those who share your values and will vote into effect the changes you want to see.

Jesus also addressed this in the famous “render to Caesar” passage — and it’s really helpful here. Caesar put his likeness on coins and Jesus said “if he likes his money so much, then let him have it” but you and I bear another’s likeness. We were crafted in the image of Someone else and the invitation is to find true joy and life by rendering ourselves to Him. Jesus also makes it clear that we are not morally culpable for the actions of a government that confiscates our money and does dishonorable things with it. By no means was the Roman government sensitive to the moral concerns of its constituents.

So patronizing a company, investing in a company, and remittance of taxes are categorically different things.

Recovering the power of knowledge

So what now? Do we all just devote ourselves to becoming experts on ethical investing? Pouring heart and soul into finding companies worthy of our hard-earned dollars? Well, maybe in a perfect world, but obviously that’s far from practical.

Finding a trustworthy steward

If this is the first time you’ve ever considered these things, then commit the matter to prayer. Talk with your spouse and share this with them. If it’s in your hearts to change the way you’re stewarding God’s resources, then consider the next step; namely, talking with your financial planner or investment manager.

Bear in mind that most advisors follow conventional investment techniques focused on buying “the whole market” or maybe tilting slightly more toward particular segments or categories but never really paying attention to what companies they’re actually purchasing.

But there’s a growing number of faith-based investment companies that are doing really great work out there. These companies have demonstrated competence and integrity in their investment philosophy and process and have really earned my trust.

Investing with joy

Before closing, I want to acknowledge that we can have truly great intentions of saving and investing for our futures and trusting God’s faithfulness in the process — those are not mutually exclusive. But something terrible has happened to us in the last 50 years or so: modern investing is a very foggy experience. Like 19th-century railroading, there’s a long way between my investment and my knowledge of how I’m getting a return. Regrettably, this has lead many of us to unknowingly and unwittingly encourage and contribute to behaviors and long-term outcomes that we did not choose and likely would not have. But the story’s not over. And we don’t have to burn the whole house down and start from scratch. Instead, we can choose to make small changes over time that compound and produce lasting change. We, as modern Christian investors, can choose to invest with integrity, blending Biblical values and ethics in with our portfolio allocations. Investing is changing — and it should bring us great joy that we have the chance to be a part of it.