Book Review: Evicted: Poverty and Profit in the American City

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“Residential stability begets a kind of psychological stability, which allows people to invest in their home and social relationships”. – Matthew Desmond Matthew Desmond, an American sociologist wrote this brilliant book Evicted: Poverty and Profit in the American City whilst living near the families whose lives he wrote about. The book also won the 2017 Pulitzer prize for General Non Fiction. This ethnographic study was an eye-opening read about how tragic our systems are in not giving a helping hand to the poor. From the stories I read, it felt like those being evicted had limited options legally or otherwise and were being ‘kicked when they were down’ – seemingly, everything can be profited from including homelessness. I really enjoyed the humane way in which Matthew Desmond described the Landlords & their own conflicts in choosing to evict their tenants, sometimes during the Christmas season in the freezing cold of Milwaukee.

In my review, I focus on scarcity and “material hardship” and what that does to the decisions, quality of life and stability that low-income families experience.

Some of my favourite lines from the book are below with my thoughts:

On material hardship

 “This – the loss of your possessions, job, home, and access to government aid-helps explain why eviction has such a pronounced effect on what social scientists call “material hardship,” a measure of the texture of scarcity. Evicted families continue to have higher levels of material hardship at least two years after the event.”

Stable housing or shelter is one of our basic human needs. In the stories, the renters could not afford to put their belongings in storage and so ended up losing their possessions too, once evicted. This affected their ability to attend interviews or look for ways to better their life. Sometimes, it was hard to get out of the trap of addiction or slip back into addiction due to sheer hardship and brutality of being homeless. I cannot really even imagine what this does to one’s state of mind.

On residential instability

  • “Residential stability begets a kind of psychological stability, which allows people to invest in their home and social relationships. It begets social stability, which increases the chances that children will excel and graduate. And it begets community stability, which encourages neighbors to form strong bonds and take care of their block.”
  • “Instability is not inherent to poverty. Poor families move so much because they are forced to.”
  • “It takes a good amount of money and time to establish a home. Eviction can erase all that.”

Housing authorities (in the US) count evictions and unpaid debt as strikes – so to read that those with the greatest need are systematically denied help is really sad. It just doesn’t make any sense. Sometimes, tenants were evicted for complaining there was no hot water. Poverty also drowns out your voice.

On opportunities for growth

America is supposed to be a place where you can better yourself, your family, and your community. But this is only possible if you have a stable home.”

“A good home can serve as the sturdiest of footholds. When people have a place to live, they become better parents, workers and citizens.”

This is such an important book which throws light on how the need for housing and the need for profit clash, resulting in much psychological devastation for the poor. While the broad consensus is that families should spend no more than 30 percent of their income on housing,  it is difficult for renting families to meet this goal with rising rents. In London, where I live, rents rise each year and certainly salaries do not keep pace with rising rents. Yet, the public housing situation in the UK seems more humane.

Empathy for the Needy

I recently came across The Core Values of César E. Chávez and this one caught my eye: A Preference to Help the Most Needy – A concerted effort to support programs that reach the most needy, the most dispossessed, the most forgotten people in society no matter how difficult the challenge that choice may bring.

The book enlightened me to the many privileges I take for granted such as knowing where I will sleep at night. I highly recommend reading it. Any book that awakens me towards empathy for the less privileged and gratitude for mine is a great book.

Further reading:

Evictionland - Curbed.com

America’s Insidious Eviction Problem - The Atlantic

Evicted - Matthew Desmond

Nonviolent Communication and Corporations - Medium

 

 

The rise of ESG Investing

I met a financial advisor for a coffee a few weeks ago. He wanted to pick my brains about ethical investing. He said he wanted to be 'more green' and wanted my advice on building ethical portfolios for clients. He seemed to think ethical investing was merely about avoiding tobacco and arms; it's moved on a lot, I said, as I rolled my eyes, questioning whether he was willing to be truly committed and informed about the world of ethical investing. I came across this great piece of investment research by Calvert Research and Management called 'The Rise of ESG Investing' which talks about the latest trends and client drivers. It also talks about financial advisors and their attitudes towards ESG. The study is US based. However, I think it translates well to the UK market too. I marked out some interesting bits and listed them below with my comments.

On Millenials

Born between 1980 and 2000, Millenials command wealth, a social conscience and power. By 2020, it is estimated they will make up 46% of the workforce. This is a generation with sway and swag, who hold social responsibility, social justice, equality and environment causes as top priorities.

Research quoted in the report states that 53% of millennials make investment decisions based on social responsibility factors, compared to 42% of Gen Xers, 41% of baby boomers and 39% of seniors. I don't see too many millennials in my advisory practise and I really enjoy seeing them when I do; but it is encouraging to see the younger generations voicing themselves so clearly.

ESG Takeaways

Advisers should incorporate basic ESG questions and filters into their initial discussions of goals and objectives with current and prospective clients and take a proactive approach to identifying needs and interests. 

I strongly agree. I don't push ESG investments as a 'right' or 'preferred' way of investing; it is not for everyone, and yet, the client has a right to make an informed decision - ESG or not. I imagine advisors enjoy offering a broader menu of options to clients and those who have worked hard to acquire expertise & conviction in ESG investing reap the benefits in attracting investors interested in responsible investing.

For many advisers, portfolio performance is a non-issue when it comes to ESG considerations. It ranks near the bottom of the reasons advisers utilize it; for non-users, ESG's limiting of investment options ranks near the top of considerations. Just 29% of advisers believe there is a positive correlation between corporate financial performance and ESG factors. While manager selection for ESG strategies may be limited compared to the broader universe of funds and managers, the menu is increasing in size. Overall, investment research broadly suggests that the performance of socially conscious funds has a "positive tilt relative to the overall universe of funds". While returns may not be a real hurdle, there is an increasing breadth of options - and potential strategies - that advisers can utilize.

Returns aren't a hurdle. True.

There are around 113 funds that meet the ESG/Ethical criteria as regulated funds for clients in the UK so yes, the universe is smaller. Also, the menu of available investment options excludes passive funds (there are a few, but they don't meet enough criteria to be included in any meaningful way) which means clients may pay a bit more for an ethical portfolio which necessarily includes actively managed funds and consequently higher fees than passive funds. However, more and more, I see a greater abundance of options including with company pensions, such as the L&G Future World fund focused on climate change, which is encouraging.

Adviser usage of ESG factors

The strongest indicator of adviser utilization of ESG factors was the level of client interest in social and environmental issues and, secondarily, the adviser's own knowledge of responsible investing as well as their performance of the importance of evaluating ESG factors for client portfolios.

I have met clients who are keen to invest ethically but then are put off by an adviser's own biases; I believe this is more to do with the advisers own level of felt competence in the area than the facts of whether ESG is an inferior strategy as an investment option or not. 56% of advisors cite client demand as the main reason to utilize ESG. Among advisors who don't use ESG investments, 58% said their clients are not interested in ESG factors, 29% said it leads to limited investment opportunities and 22% said it leads to poor or limited returns; I hear that last one most often too when I talk about it informally with advisor colleagues.

ESG factors brought up most often in client meetings

Among all ESG factors, the "E" - environmental - draws the most client interest. In our survey, 39% of advisers said that clean technology was one of the most commonly prioritised ESG criteria in client meetings, followed by climate change (35%) and emissions and waste (26%). 

An ethical investment questionnaire now has so many factors to it including pornography, human rights violations, genetic modifications, product stewardship and animal welfare.  It has definitely moved on from a simplistic negative screen of avoiding tobacco and arms companies. The survey also lists under social and governance issues the factors most frequently mentioned were human rights (22%) and corporate transparency (16%).

Knowledge stands in the way

Just 38% of responding advisers in our survey answered "Yes" to our question, "Do you feel knowledgeable when it comes to ESG investing?" Aside from client demand, advisers cite moral/ethical reasons as the secondary driver for their use of ESG.

38% is quite a large number. So, for clients who are looking to invest ethically or with ESG in mind, going to a knowledgeable advisor on ESG makes sense.

Further resources:

Ethical investing: Positive and negative screening criteria

Three myths about Ethical Investing

Sustainable tourism: A week in Morocco

Growing a Culture of Social Impact Investing in the UK

My Favourite Books I read in 2017

My intention for 2018 is to read every day, meditate every day, cut back on social media time and be more like Cal Newport who inspires me with his writings on 'deep work'. January is a digital detox month and my brain already feels so much clearer. I cheated a little bit though and have sent the odd tweet. For the most part, though, I have been 'good' and spent more time offline with friends and on the phone. I digress. Back to my favourite books listed below. Oh, I only read non-fiction - so there’s no lists for fiction if that is your thing.

Non-Fiction

Your Money or Your Life by Joe Dominguez,‎ Vicki Robin, Monique Tilford and Mark Zaifman

A very sneaky book...in the sense, that it is non-prescriptive and yet, it gets you to follow some basic steps such as methodologically tracking all your income & expenses, which ultimately leads you to reflect, introspect, get clear and make different decisions with both earning, spending and using money. You start seeing money as an exchange of life energy and have a logical way of seeing this- see my post - Frugal is Freedom for more on it. Also, if you are interested in FIRE (Financial Independence, Retire Early), this is a good book to read.

Misbehaving: The Making of Behavioural Economics by Richard Thaler

If you had any illusions about how rational we humans are with money, this book sets you straight. Interesting research, great anecdotes and useful to learn the psychology behind money decisions.

Finance for Normal People: How Investors and Markets Behave by Meir Statman

Having heard Meir Statman speak on podcasts, I grabbed this book as I found his insights worthwhile. He talks about the emotional, expressive and utilitarian uses for money. We compartmentalize money into buckets, have incredibly foolish behaviour with it, take mental shortcuts, are overconfident investors and so much more. Meir helps investors reflect on what they really want from their investments focussing on what is the money for  - retirement, children's education, socially responsible investing and so on. He also advocates automating investments. Overall, a worthwhile read and useful especially if you invest and want to understand yourself as an investor better.

Non-Investment related

The Nonviolent Life by John Dear

What is a nonviolent life and how can we be nonviolent to ourselves, others and join a global movement to impact the world? John Dear, a Nobel Peace Prize nominee attempts to answer this question and does so beautifully. Bear in mind, he is a Christian and so teachings of Jesus (whose message of nonviolence was radical for his time- love your enemy, what?) are sprinkled liberally through the book which I actually enjoyed. I bought the book for myself and gifted it to a few friends.

Sapiens: A Brief History of Humankind by Yuval Harari

First of all, Yuval Harri practices Vipassana, also known as Insight Meditation and does 60-day silent retreats; he plans his working year around that and schedules it first. For this, I already hugely admire him. Secondly, I find history very dull and could never get into it in college or school. However, this book - I could not put down. I also like that he weaves relevant connection to our present day issues whether it be talking about colonialism, racism or money stories; worth buying and savouring every page. There is no thirdly.

The New Jim Crow by Michelle Alexander

I heard about this book via Miki Kashtan, an international Nonviolent Communication teacher whom I deeply admire and trust. The book made me quite angry & disgusted. No, the book didn't do that, I chose to. I felt quite angry on reading the book and yet, I was glad to have read it - we need to be better educated about crime and 'justice'.  The book shines a light on racial segregation, colour blindness, how the prison system in America almost substitutes slavery. It is very thought-provoking and well worth the emotional aggravation you may feel on reading it.

A Guide to the Good Life: The Ancient Art of Stoic Joy by William Irvine

A great manual for life, if you are interested in Stoicism, then even better. It talks about reducing worry and focusing only on things we can actually control (not very much). I love the challenge of letting go of the 'illusion' of control we have and learning a philosophy that helps you have a truly joyful life. I became interested in Stoicism through the work of Tim Ferris and so glad I bought this book, highly recommend.

Evicted: Poverty and Profit in the American City by Matthew Desmond

Winner of the 2017 Pulitzer prize for non-fiction, it is an incredible read. Matthew Desmond is an ethnographer, he lives in communities in the United States that struggle with housing and tells an honest, heart-breaking account of incredible characters who struggle to keep a roof over their head. The struggle with homelessness is so real, the landlords have a lot of power with eviction and it seems the system almost obstructs survival for tenants who fall behind. Residential stability is important for psychological stability and community stability. Families lose so much with eviction. I read recently that this book also made it to Barack Obama's recommended book list for 2017.

Further reading:

My favourite books on Money and Personal Finance

Don't do anything that isn't play

If you have been reading my blog for a while, you will know my obsession with the teachings of Marshall Rosenberg, creator of Nonviolent Communication. Another teaching related to money and work  landed in my news feed recently. I found it simple, beautiful, practical and inspiring. I hope you enjoy it too.

When I advise, “Don’t do anything that isn’t play!” some take me to be radical. Yet, I earnestly believe that an important form of self-compassion is to make choices motivated purely by our desire to contribute to life rather than out of fear, guilt, shame, duty or obligation. When we are conscious of the life-enriching purpose behind an action we take, then even hard work has an element of play in it. By contrast, an otherwise joyful activity performed out of obligation, duty, fear, guilt or shame will lose its joy and eventually engender resistance.

Many years ago I began to engage in an activity which significantly enlarged the pool of joy and happiness available to my life, while diminishing depression, guilt and shame. I offer it here as a possible way to deepen our compassion for ourselves, to help us live our lives out of joyous play by staying grounded in a clear awareness of the life-enriching need behind everything we do.

Translating Have to, to Choose to

  • Step 1

What do you do in your life that you don’t experience as playful? List on a piece of paper all those things that you tell yourself you have to do.

List any activity you dread but do anyway because you perceive yourself to have no choice. When I first reviewed my own list, just seeing how long it was gave me insight as to why so much of my time was spent not enjoying life. I noticed how many ordinary, daily things I was doing by tricking myself into believing that I had to do them.

The first item on my list was “write clinical reports.” I hated writing these reports, yet I was spending at least an hour of agony over them every day. My second item was “drive the children’s car pool to school.”

  • Step 2

After completing your list, clearly acknowledge to yourself that you are doing these things because you choose to do them, not because you have to. Insert the words “I choose to . . . ” in front of each item you listed. I recall my own resistance to this step. “Writing clinical reports,” I insisted to myself, “is not something I choose to do! I have to do it. I’m a clinical psychologist. I have to write these reports.”

  • Step 3

After having acknowledged that you choose to do a particular activity, get in touch with the intention behind your choice by completing the statement, I choose to . . . because I want . . . . At first I fumbled to identify what I wanted from writing clinical reports. I had already determined, several months earlier, that the reports did not serve my clients enough to justify the time they were taking, so why was I continuing to invest so much energy in their preparation?

Finally I realized that I was choosing to write the reports solely because I wanted the income they provided. As soon as I recognized this, I never wrote another clinical report.

I can’t tell you how joyful I feel just thinking of how many clinical reports I haven’t written since that moment thirty-five years ago! When I realized that money was my primary motivation, I immediately saw that I could find other ways to take care of myself financially, and that in fact, I’d rather scavenge in garbage cans for food than write another clinical report.

The next item on my list of unjoyful tasks was driving the children to school. When I examined the reason behind that chore, however, I felt appreciation for the benefits my children received from attending their school. They could easily walk to the neighborhood school, but their own school was far more in harmony with my educational values.

I continued to drive, but with a different energy; instead of “Oh, darn, I have to drive the car pool today,” I was conscious of my purpose, which was for my children to have a quality of education that was very dear to me. Of course I sometimes needed to remind myself two or three times during the drive to refocus my mind on what purpose my action was serving.

As you explore the statement, “I choose to . . . because I want . . . ,” you may discover — as I did with the children’s car pool — the important values behind the choices you’ve made. I am convinced that after we gain clarity regarding the need being served by our actions, we can experience those actions as play even when they involve hard work, challenge, or frustration.

We also cultivate self-compassion by consciously choosing in daily life to act only in service to our own needs and values rather than out of duty, for extrinsic rewards, or to avoid guilt, shame, and punishment. If we review the joyless acts to which we currently subject ourselves and make the translation from “have to” to “choose to,” we will discover more play and integrity in our lives.

International peacemaker, Marshall B. Rosenberg, Ph.D., is the founder of the Centre for Nonviolent Communication, author of Speak Peace in a World of Conflict, the international bestseller, Nonviolent Communication: A Language of Life, and several booklets.

Loss aversion bias and checking your portfolio

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How often should you be checking your investment portfolio? Does it matter? From the viewpoint of behavioural biases, there is evidence that experiencing losses leads to poor choices. Loss aversion - our intense dislike of losses can cause us to lose even more if we pay attention to our portfolio losing money. It hasn’t been an issue in the last eight years of a rising equity market and yet, being willing to accept a drawdown or loss is an integral part of managing behaviours needed to be a successful investor.

In the book, The Smarter Screen by Economist Shlomo Benartzi with Jonah Lehrer, an experiment helps shed more light on this:

In one lab experiment by Richard Thaler, Amos Tversky, Daniel Kahneman and Alan Schwartz, subjects were more likely to invest in a bond fund when feedback was given more frequently. Unfortunately, these low-risk bonds also generated lower returns over the long haul. As the scientists noted, “ Providing such investors with frequent feedback about their outcomes is likely to encourage their worst tendencies...More is not always better. The subjects with the most data did the worst in terms of money earned.

Ten years ago, most clients got paper valuations twice a year and so, tended to look at their portfolio valuations twice a year. We now have access to information everywhere, thanks to our magical devices.

The abundance of feedback is not necessarily a good thing especially with medium to long-term horizons in mind- such as a retirement plan twenty years away. Being willing to ‘do nothing’ or hold bonds or investments that may temporarily lose value is necessary for being a successful investor - to avoid impulsive decisions and following the herd.  

Investing is simple, but not easy. Being self-aware and getting to know your own behavioural biases is useful if you want to hold onto your wealth from investing.

Further resources: