The Marchant theory of investing

Some of us, especially those in the 'second curve' of their careers, are fortunate to have two things they can invest: time and money. I have included both as they are both scarce resources and need to be thought about carefully. I have developed my own theory about investment which applies to both time and money. It draws on the triple bottom line theory which is usual applied to companies and governments but can, I believe, be adapted for personal use too. So what are my three criteria?

1. ECONOMIC 

This is the obvious one but it still worth thinking about. In deciding on the required rate of return on an investment, or indeed on the level of remuneration for a job it is important to think about the real risk attached to the income both in terms of fluctuations in levels, it's durability and any reputational risk that could come from being associated with an organisation. These factors generally explain why people look at investments from a portfolio point of view. So far, all predictable. The interesting part comes from looking at the trade off between an economic return and my next two criteria.

2. IMPACT

We all want to feel that what we do makes a difference and this applies to our use of time and how we invest and spend our money. This impact could be at the organisational level or societal. Let me explain. If you invest in small start up companies, as I have done, you can see clear direct impact through increased employment, product development and positive change in markets. If you give to a charity then you can see societal impacts such as the roll out of solar lights in Africa or increased activity at cancer centres. In many cases you can see both organisational and societal impact and of course there are potential negative impacts which gives rise to things like ethical investment funds or disinvestment movements. I find it helpful to be clear what impacts I would like to help develop and increase and those which I would want avoid and use this as a screen for my use of time and money.

3. INTEREST

I have come to realise the importance of being clear what activities you enjoy and therefore look forward to and those which you don't. I realise this is a luxury and am incredible lucky to be able to pick and choose what I do but I do think that many people in the latter stages of their careers can actively take this into account. It does involve being clear about what interests you and two tests I apply are; do I look forward to doing it and secondly, am I learning from the experience. This second point is really important. I am a big fan of the importance of continuing to learn and stretching yourself. I even came across a psychological term for this used by Carol Dweck, apparently it's called a 'growth mindset'. Education doesn't stop at leaving school or university and experience doesn't stop on leaving an executive career.

If I take these three criteria they can be applied to different types of 'investment'. I will explain three classic ones and then look at new one to me that hits all three criteria. Firstly, investing in quoted shares is primarily an economic decision although I believe that having a societal impact screen is also important, even if it's only a decision on what not to invest in. Secondly, support of charities obviously scores highly on the impact scale but I also think that it is important that you support charities that interest you and where your time or money can make a real impact on the cause. Thirdly, investing in start up companies (so called Angel investing) whilst primarily driven by a hope of an economic return is usually guided by the level of interest in the business area and technology of the new company and an assessment of the impact your investment and mentoring can have. This explains why over three quarters of the investments I have made are in the energy related space.

And so to the new 'investment' opportunity I have recently come across: support of social enterprises. These are organisations that are using business principles to maximise social impact rather than maximise profit. They are often called not for profit but an alternative way to look at it not for loss too.

Under a new government scheme there is tax relief for loans to some of these organisations which means that all three of my criteria can be met; a modest economic return for an impact on an organisation and an issue facing society in an market or place that interests you. What's not to like. I have just closed my first such 'investment' in a community bakery and hope to do more.

The real trick is to look across the portfolio of your investment in time and money and make sure there is a balance between all three criteria; economic, impact and interest so that personally your are achieving a good triple bottom line.