
Ethical Questions of Investing in Pot - aaronbrethorst
http://dealbook.nytimes.com//2015/01/12/ethical-questions-of-investing-in-pot/
======
chollida1
> So is cannabis socially responsible or ethically objectionable?

> The nation’s biggest banks — JPMorgan Chase and Bank of America — thus far
> refuse to allow marijuana companies to set up accounts. Even smaller local
> banks refuse to provide services to the industry.

The author seems to have made up his mind already. The reason banks don't
allow marijuana companies to setup accounts is regulatory and risk management
related, not ethical.

This whole article reads very much like a press release.

> The investment, in a firm called Privateer Holdings .... was heralded as a
> watershed moment for the fledgling cannabis industry, accompanied by
> positive headlines like the one in The Los Angeles Times: “Venture capital
> firm gives marijuana industry a shot of credibility.”

> In Silicon Valley, the deal was greeted as the latest disruptive change-the-
> world investment.

It isn't until well into the article that the authors notes:

> Legal marijuana businesses raised $104 million in 59 deals last year,
> according to CB Insights, a research firm that monitors deal-making.

It seems like the industry has had credibility for a while now.

I think its sad that the NYTime's Dealbook would put out a piece like this.

~~~
exelius
> The author seems to have made up his mind already. The reason banks don't
> allow marijuana companies to setup accounts is regulatory and risk
> management related, not ethical.

I seem to keep having to say this, but I'll do it again: companies are not
bound by ethics or morality. Applying them to a company is inherently wrong
because companies cannot have any goal other than shareholder value
maximization long-term. Here's why:

1\. Companies are not people, despite what the Supreme Court may say. They are
legal constructs built around a set of rules.

2\. Everyone who could potentially represent a company - a board member, an
executive - plays a role and can be replaced at any time should they fail to
perform their role adequately.

3\. Executives are appointed by the board with one responsibility: to maximize
the value of the company. This is the extent of a company's moral obligation:
companies have a moral obligation to their shareholders to make money (or at
least try in good faith to do so).

4\. Should the board of a company appoint executives with a different goal
than maximizing value, the share price will reflect this in the form of a
lower value.

5\. Assuming this is a public company, activist investors will accumulate
voting shares of a company that is not maximizing its value (or undervalued).
The activist investor will then either replace the board members with board
members who will appoint executives with the goal of maximizing shareholder
value, or they will pressure the existing board to do so themselves. Once the
share price has recovered, the investor sells its shares and makes a profit.
And the cycle continues.

So the reason banks don't allow marijuana companies to set up accounts is
purely risk and regulatory related. If it was a moral decision, well, morals
and ethics are different from person to person, so SOMEONE would do it. Or
some activist investor would take over a smaller bank and force them to do it.

Individuals can have morals and ethics. If they control a company and choose
to enforce their values through their company, well, that's their choice. But
if the ownership of the company changed, so would the values.

~~~
kybernetikos
> companies are not bound by ethics or morality.....

There are three mechanisms that can cause companies to prioritise ethics and
morality.

1\. The voting public encourage their representatives to change the regulatory
environment _based on their morality_. This is one reason why a whole host of
unethical companies don't exist. Companies on the margins of morality suffer
from extra risk that the regulatory environment will change too.

2\. The customers exercising their personal morality are reluctant to buy from
an unethical company, or boycott it, thus affecting the value of the company.

3\. Key individuals find that there are moral and ethical limits to what they
will do in pursuit of shareholder value, and they provide enough value in
other ways that replacing them would be a net loss for the company (or
activist shareholders actually share their views). Deliberately selecting your
leadership team for poor ethics is likely to have some downsides too.

> Individuals can have morals and ethics. If they control a company and choose
> to enforce their values through their company, well, that's their choice.
> But if the ownership of the company changed, so would the values.

Exactly, and individually speaking, in my ethics, in role of voter,
legislator, customer, shareholder, employee or executive of a company,
morality and ethics certainly do play into my decisions. I believe that it is
right that they should, and I expect the same of everyone.

In particular, you say

> [maximising value] is the extent of a company's moral obligation

Which is an assertion without evidence that I simply disagree with. Maximising
value might well be what is promised to the shareholders, but it's obvious
that just as with all promises there is a context and limits to that. No
shareholder would expect the CEO of a company to sacrifice their life if it
would increase the value of the company by a cent. Everyone understands that
the trust we have that the management of a company is trying to make money for
the shareholder exists in a context, and one of the large parts of that
context is morality.

Your earlier statement almost seemed to imply that we shouldn't hold companies
to standards of morality beyond the law, but that is just giving up. Expecting
immoral behaviour from people in particular roles is a self fulfilling
prophecy, and poisons the context.

------
tlb
One thing that surprised me about becoming an investor is how morally active
the investor community is. Before I knew anything about investors, I assumed
they were just making ROI calculations.

I don't just mean that they like to invest in upstanding people who treat
their employees fairly, because that's also justified economically. I mean
that most investors don't invest in things they don't want to be part of, even
when they think they'd make money.

For example, most investors won't invest in gambling, penny auctions or payday
lending, since those things generally take advantage of unsophisticated
consumers and seem like they're net-bad for the world.

On the other hand, it's easier to convince investors to invest in green
energy, STEM education, and developer tools because they want more of that to
exist and want to be part of it.

Investors cover the spectrum from very conservative to very liberal or
libertarian. But whatever an investor's personal beliefs are, they are a
significant factor in what they'll fund.

------
pdeuchler
No news here. This kind of thing happens all the time already. Catholic
teachers pension doesn't want to invest in Budweiser, a Seventh Day Adventist
run hospital fund won't want to invest in Tyson etc. etc. etc.

Is it really that surprising that people are choosy about what they invest in,
and that translates into professional investors also being choosy (whether on
behalf of their clients or themselves)?

~~~
exelius
Investors of this sort are an extreme minority. Nearly all professional
investors are effectively amoral and will do whatever makes the most money
(legally - because if it's illegal and you get caught, you lose money).

------
scardine
If we don't allow honest, regulated and tax-paying business to provide high
quality recreational drugs we are in fact giving an incentive for criminals to
fill this market need.

Our dumb war on drugs transfors a public health issue into a public security
issue.

Abusus non tollit usum: abuse does not take away use, i.e., is not an argument
against proper use.

------
pmalynin
If people are willing to buy, others are willing to make a profit. As people
have free will, I see absolutely no ethical issue here.

~~~
ezy
Eh.

One of the many libertarian lies is that all uncoerced transactions are
somehow value-neutral. For example, it's certainly a valid question whether
it's ethical to support a weapons manufacturer, for example, no matter who's
buying.

In this particular case, I think this is an ethical _positive_. I would
classify MJ funding as a net good, as it will encourage legalization --
prevent a lot of wasted resources and people.

~~~
jerf
An uncoerced transaction must result in each person getting something _they
personally_ value more than what they are giving up or the trade will not take
place, meaning that if you measure society by how much people believe they
have, all free transactions produce a net gain. That's not "libertarianism",
that's just micro-econ 101. (Any who deny the basic correctness of microecon
101 are so far lost to me that any discussion between us is pretty much
useless.)

That doesn't mean that if you use another measure that all such transactions
have a net positive value to society, though, and I don't feel even remotely
non-Libertarian for saying that... where "libertarianism" would come in would
be in arguing about what those standards should be and who gets to pick them.
A libertarian will be far more inclined to accept the two participant's
personal valuation and let micro-econ function with less constraint, but not
100%; 100% would make them anarcho-capitalists, an even rarer breed of person.

~~~
aqme28
I think you're misunderstanding what's being discussed. Two people trading
money for guns is a net gain specifically for those two people, but is not
necessarily a _societal_ gain.

~~~
jerf
Read my message again, more closely.

~~~
aqme28
If you're referring to _"...if you measure society by how much people believe
they have..."_, I still don't agree with you. Transactions can cause
externalities that can be a negative for third parties.

If you're referring to something else, then I'm curious.

~~~
jerf
(X -> Y) !-> X. Or, in English, "Saying if X then Y is not a claim that X is
'true'". So, _if_ you measure society by how much people believe they have,
_then_ blah blah blah, is NOT a claim that such a measurement is "correct"...
to the extent that a measurement even _can_ be "correct" or "incorrect",
rather than "useful" or "useless". Had you kept reading, you would have seen
an acknowledgement of that in my next paragraph (which is still there if you'd
like to check, HN posts can't be edited after an hour).

Incidentally, it's going to be very hard to understand any sort of serious
analysis of anything above the level of brute propaganda if you read (X -> Y)
as a claim that X is true... you ought to consider the possibility you've been
misreading lots of things for a long time. No sarcasm.

