Basically the stated premise "I shouldn't invest in a place I wouldn't buy from" holds little water. The two actions have little equivalence. It would be a bit like saying "I won't buy a used item if it was originally purchased at Walmart".
I don't understand this. Please explain. Maybe I don't know enough about investing, but I don't see why the premise "I shouldn't invest in a place I wouldn't buy from" holds little water.
First of all, I should be clear - when it comes to moral or ethical questions there are few absolutes or rules. So really, the two could be equivalent in that sense if someone chose to view it that way. However, my point is the two are not equivalent at all in real effects on the business whose behavior you are trying to change.
Shopping at Walmart directly contributes to their business by increasing their revenues and profits. If no one shops at Walmart the company goes out of business, or perhaps they have to change their business practices. If enough people don't shop at Walmart it matters to Walmart. So if you don't like how Walmart does business then not shopping there is potentially an effective way cause change. Sure, you are diluted amongst millions of shoppers - but there is at least a direct connection from your action to a negative impact on Walmart's bottom line.
Not purchasing Walmart shares has no such effect at all. You are not buying shares from Walmart. You are buying shares issued by Walmart long ago from a secondary market. Walmart already got the money from that issue of shares long ago and your purchase has no impact on them. So, roughly it is like buying a used bike from someone who originally bought the bike from Walmart. Walmart doesn't care if that person sells the bike used to you or anyone else, they already got the revenue from the bike. Whether you buy the used bike or not will not in anyway encourage them to change how they run their business.
Now, there are secondary affects. But what they are with regards to you purchasing the shares is not at all clear. Here are just some:
- Buying Walmart shares increases the price which means if they want to issue new shares in the future that price might be slightly higher resulting in more money going to Walmart at some point in the future.
- Not buying Walmart shares lowers the price and as a result the voting share members might encourage the board to increase profits by lowering costs (i.e. crush their suppliers more and lock more workers inside the building during midnight shifts, exactly the behaviors you were trying to prevent).
- Buying shares increases the price, potentially encouraging the board to continue the practices they are already engaged in that you don't like.
- Not buying Walmart shares lowers the price, and if it goes low enough they will eventually just take the company private - potentially a net benefit to the very business people at Walmart you don't want to reward.
So, as you can see the end result of buying or not buying a share of Walmart is unclear. It may be a net social good or not. On the other hand not shopping at Walmart is much more directly connected to the social good you are trying to achieve.
Finally, consider the Koch brothers. They've made lots of money with questionable ethics. And now they use all those profits to try to steer public policy to even nastier levels of bad. Money, sadly, is power.
There is another growing movement out there full of people who make lots of money but spend very little. Unlike Mustachians they do not have early retirement as their goal despite their constrained spending. They give almost all their money away. They work in whatever industry their skills give them the greatest income and then direct that income at charities for as long as they can productively work. In many ways these folks have an outsized impact, potentially saving far more lives than someone who decides they don't want to work in banking, or law, or the defense industry because of a "ethical concerns". You can make as many witty protest signs you want and stand in front of the White House for a year, but the investment banker making 350K and giving 300K of it away actually did a whole lot more to make the world a better place. Again, money is power - for good this time.
Since it is not clear that whether you buy or don't buy particular equities has any net impact on those businesses but it definitely has a net negative impact on your returns perhaps you'd be better served by just index investing and using the additional returns reaped for more direct social good?
You can still very sensibly boycott business by choosing where you shop and what you buy - that does have direct effect. But picking and choosing equities based on ethics is unlikely to have any effect but will cost you money. Money that could be used for more direct social good.