Author Topic: Views of an economy without growth  (Read 5653 times)

Viiksikarva

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Views of an economy without growth
« on: November 21, 2018, 09:10:31 AM »
Hi All,

First post the Forum. I was introduced to Mustachianism for approximately 6 months ago, and I since then I have changed quite a few things in my life for the better while boosting up my savings rate. In addition to the freedom that FI will eventually give, an equally important aspect of the journey, for me, is the environmental side of it (reduced emission and waste by consuming less).

Before I start writing about the topic that I have in mind today, I must say that most of the upcoming reasoning is based on Tim Jackson’s “Prosperity without growth”, that I have read for approximately two years ago. I don’t have it at my hand right now so most of this is based on my memory, so sorry for the inevitable mistakes, but hopefully the main idea is right. If my memory serves me right, I think that that the book shares a lot of the same philosophies with Mustachianism.

Living a FI life relies on economic growth (living off of passive income) and the size of the economy in turn is almost directly proportional to the use of nature’s resources. In my mind, this leads to a problem; despite all other actions taken to save the planet, the demand for ever increasing economy will eventually lead to doom (because of the strong coupling between resources and economy). The reason that this has become a real concern for me just recently, is the latest IPCC climate report. Before that, even though I have acknowledged that there is a problem, I guess I have just been pushing the subject to the side out of sheer laziness and ignorance. I don’t follow politics very much, but based on what I see, I feel like we will lose the game against climate change if all decisions are left to the politics. Actions on a level of individual persons are required. So, here comes my question to the Mustachian Community. It is divided to four parts:

1)
I don’t want to ask that will the economy perpetually keep on growing but should it continue to do so? The question of will it keep growing has been discussed at least here:
•   https://forum.mrmoneymustache.com/ask-a-mustachian/being-frugal-while-trying-to-rely-on-market-returns-driven-by-consumption/msg2036365/#msg2036365
•   https://www.mrmoneymustache.com/2012/04/09/what-if-everyone-became-frugal/

What kind of a world do You see in a scenario where the economy doesn’t grow? This obviously (?) would be best for the environment, but how would using money change? How would passive income work (I guess for example real estate investing would somehow work, but what would happen to your stock portfolio?)? As it was written in “Prosperity without growth” (found it from this summary, but I think it was in the book as well http://appli6.hec.fr/amo/Public/Files/Docs/170_en.pdf):

Growth is unsustainable but de-growth is unstable

2)
Do You see a way that the de-coupling could be done in the future and the economy could be allowed to keep on growing? The way I see it is that the economy is coupled to nature’s resources via energy usage (and of course raw materials, but with enough clean energy, recycling becomes a very viable option for almost everything) and thus the only way to allow for the economy to grow without consuming an ever increasing amount of nature’s resources would be to have an abundant source of sustainable energy (road to Kardashev type I civilization ;) ). Scaling of wind/solar/water energy to replace fossil fuels seems like a daunting task (http://4thgeneration.energy/how-much-energy-is-enough/) and since we are in a bit of a rush (IPCC report again..), I feel that nuclear is the way to go. Fission for now and fusion after it has been commercialized. I will blame the politics again, but because of the uncertainties and long time-scales of fusion research, governments are not willing to put in enough money to it despite the huge reward that commercially functional fusion would provide (based on some e-mails I’ve exchanged with people in this industry). And based on my brief research, the companies researching this subject are not willing to take the money of individual small investors. (As a side note, one of my post FI dreams is to be able help fusion research in some way, even though I don’t understand anything about nuclear physics (I’m currently working as a structural analysis engineer, so I could maybe work with the reactor structures)).


3)
In both scenarios (stagnant or growing economy), it is important to invest “greenly” (capital running away from “bad” companies would force them to change their habits to be more sustainable). The Mustachian way to go seems to be to invest in Vanguard passive index funds. The problem (in my mind) with that is that, for example VT has 6.3 % of its holdings in oil&gas (https://advisors.vanguard.com/web/c1/fas-investmentproducts/VT/portfolio), which I am quite sure is not a green investment. What kind of a greener alternatives for that would You recommend that really would make a positive climate impact?

4)
What other actions do You think everyone should take to tackle this huge climate problem we have (in addition to frugality)? Related to financial world or in general.

Disclaimer:
I understand that a typical Mustachian is already probably using much less of nature’s resources than an average citizen and is also better equipped to adapt to any given situation, and I am not attempting to attack against that. I guess I am hoping that You would provide me with a peace of mind by poking holes to my (and Tim Jackson's) reasoning and saying that everything will be fine :)

Ecky

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Re: Views of an economy without growth
« Reply #1 on: November 21, 2018, 09:32:28 AM »
I expect you're mostly right, but there are some potential exceptions - for instance, how we handle energy, which is a major part of the economy. The upcoming generation 4 nuclear reactors recycle their own waste and don't suffer from meltdowns like older reactors can. Solar energy collected in space could have near zero impact on the environment. Fusion reactors, if ever developed, could create abundant energy from hydrolized water and have no byproducts other than helium. If energy becomes far cheaper or virtually free, so does recycling, and it replaces a lot of resource usage.
« Last Edit: November 21, 2018, 02:36:45 PM by Ecky »

mozar

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Re: Views of an economy without growth
« Reply #2 on: November 21, 2018, 10:30:04 AM »
I used to worry about this a lot. Things you can do are not have kids, reduce meat consumption by 90%, drive/fly less, use renewable energy in your home. After that there are diminished returns.
I remember in the 80's reading about global warming and trying to warn people and people telling me I was crazy. So I'm glad that more people are getting on the bandwagon.
Humans will adapt like we always do. Society has successfully changed the sources of our energy several times.
Things are going to change but it's going to be a bumpy ride. Did you see the people in Venice eating pizza in a restaurant with water up to their knees? That's either adaptation or stupidity,  I don't know.
The "doom" that some people are afraid of has already happened. It will take the planet millions of years to recover from our existence.
If things are fine for you they probably will always be. How much you are exposed to climate change depends on your resources and where you live. Things are not fine for the people of northern California right now.
If it concerns you that government isn't acting the way you want it to, it's up to you to influence it by calling your local representatives, starting petition, or joining people who are already doing this work.
Also look up what the 4% rule works. It accounts for low growth. And finally remember that we are coming off one of the longest bull markets in history. There could be no or low growth for a decade or more. Hope that helps :)
« Last Edit: November 21, 2018, 10:35:54 AM by mozar »

ohmylookatthat

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Re: Views of an economy without growth
« Reply #3 on: November 21, 2018, 12:26:36 PM »
oh mama...you live your life in pure paranoia

Viiksikarva

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Re: Views of an economy without growth
« Reply #4 on: November 21, 2018, 01:56:56 PM »
Yeah, I am hoping to see an attitude change towards supporting more nuclear energy. In Europe the situation is going to the other direction. After the Fukushima incident some countries here have decided to gradually step away from nuclear. I guess the biggest of them being Germany, which has now increased the use of coal to fill the need that reducing nuclear energy has created. But hopefully this will turn out to be just a passing trend and the energy of the future will be generated using either those 4th generation fission reactors or fusion reactors (one of the biggest issues in those currently are within material technology).

I agree that the capability of humans to adapt to changing conditions might be underestimated in many cases. Another thing is that future is extremely hard to predict. By this I refer to the emission reduction requirements stated in the IPCC report; it assumes linear reductions in emissions. But there might be an unpredictable technological breakthrough, which allows a faster reduction rate. Of course we shouldn’t just rely on this. My favorite example of this is from late 19th century London (https://www.historic-uk.com/HistoryUK/HistoryofBritain/Great-Horse-Manure-Crisis-of-1894/), where the city was about to drown in horse s***, because there were so many of them. Many were sure that the limits on how big the cities could grow had now been reached and they didn’t see any real solutions to the situation. A few years later, cars... So hopefully we’ll see a similar thing happening with the emission reduction challenges.

Personally I feel that I am in a situation that I should be in a safe spot when it comes to the effects of climate change (geographically and financially (I should be able to protect myself against the effects)). And I am trying to constantly improve on the things mozar mentioned; I’ve sold my car (bike commuting now), moved to a smaller apartment, eating less meat and I don’t even see any kids around here. So hopefully that is enough. But maybe an another angle to my original question(s) would be that am I destroying some of that “eco-friendliness” by relying on passive income (that in turns relies on growth on so on)?

But thank you for the answers, it is always nice to get some good opinions on matters that are important to you :)

SunnyDays

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Re: Views of an economy without growth
« Reply #5 on: November 21, 2018, 05:03:53 PM »
I've thought about this over the years.  I can't really believe that a no growth future is possible, because frankly, people are greedy.  They want as much as they can get and it's never too much, regardless of the ultimate price the earth pays.  (People in general, obviously not everyone.)  Lots of people are just oblivious too, and just do what they've always done or what everyone around them does.  With the rise of the standard of living in 3rd work countries and their expectation that they can/should live like 1st world countries, I don't see a lot of hope.  Combine that with a quickly increasing world population, and there's even less hope, in my opinion.
I remember watching some TV show a long time ago about an Amazon tribe or some such people, who basically "worked" 3 hours a day collecting/hunting food, which was pretty abundant where they lived, although rather restricted in variety, and spent the rest of their day just relaxing and socializing.  They didn't need to commute to a full time job, have a car or a house much bigger than necessary and a bunch of toys to enjoy themselves.  I think we can either voluntarily adopt a much simpler lifestyle or have it forced on us because the earth is depleted.  The contrast between my grandparents' generation and mine is pretty big.  I can only imagine things in a few more generations.

Case

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Re: Views of an economy without growth
« Reply #6 on: November 22, 2018, 09:25:09 AM »
oh mama...you live your life in pure paranoia

I would say you live your life in pure ignorance. 

pecunia

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Re: Views of an economy without growth
« Reply #7 on: November 22, 2018, 10:04:29 AM »
Well - I think Case and oh my lookie here, were quite mean in their response and not providing any ideas but just statements showing closed minds.  OK that's their problem and let's not make it our problem.

Take a look at the Swedish flag.  Yeh, it's a cross.  It represents faith.  Now, that faith was Christianity, but you can have faith in other things too.  You know science and technology are moving along at a tremendous pace.  SunnyDays made some good points that I agree with.  I look at at a wee bit different.  I think the technology will allow us to have the time that those Amazonians he wrote of had.  People will use that time and think of new ideas.  Production of what people need is increasing.  Look at China and India.  People are moving from the old farms where they stayed behind Oxen to plow the fields to urban jobs where their education is increasing and their quality of life is increasing.

Think of all that brainpower being made available as people's lifestyle's are being made better.  They now have free time to think.  Given the will there's a way.  There will be innovative solutions to today's problems.  Have you ever heard of Norman Borlaug?  He was the initiator of the green revolution.  They say he saved a billion lives.  The world was looking at mass starvation, before his ideas.

https://www.huffingtonpost.com/david-macaray/the-man-who-saved-a-billi_b_4099523.html

I think you are right about the nukes.  I also think it may take another 10 years to educate people about the potential new reactors like the Molten Salt reactor.

https://en.wikipedia.org/wiki/Molten_salt_reactor

or the pebble bed reactor

https://en.wikipedia.org/wiki/Pebble-bed_reactor

These can use Thorium which is a fuel that will never run out and is really dirt cheap.

These can solve global warming when coupled with electric transportation.  OR  Some smart person will come up with something even better.

These innovations and others will provide investment opportunities.  There are vast parts of the world that need to be lifted out of poverty by education and technology.  Like all of us, these people want a better life for themselves.  As they work to better themselves, there will be growth.

Necessity is the mother of invention.  Enjoy the ride.

Viiksikarva

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Re: Views of an economy without growth
« Reply #8 on: November 22, 2018, 01:50:00 PM »
The no-growth-economy seems like a utopia for me as well, it would just be interesting if someone had the understanding and imagination to describe how this kind of an economy would work – surely the one based on eternal growth cannot be the only option, were just used to it because it is the only one we have.

I would also think that the rise of the people of 3rd world countries away from poverty is a positive thing. They don’t have to follow the same path that the rich countries have gone through. Maybe through education and the (potentially bad) example shown by the rich countries, they’ll just skip the consumerist habits and are more agile in making changes (for example, China and India, even though I’m not sure they can be labeled as 3rd world countries anymore (?), are doing much better work with emission reductions than the western world https://www.weforum.org/agenda/2018/09/why-there-need-for-speed-on-climate-action-paris-agreement/). And I am hoping to see the speed increase in the development of science&technology when people have more time (like the Amazonians), just as pecunia does. Maybe some of my thinking here is a bit naïve, but some optimism (I feel like I am an optimist, even though it might not seem like that based on these messages) is required; without that the world might look like a dark place. Even the “explosion” of the world’s population is slowing down, hopefully this video will shed some hope to You, SunnyDays:

https://www.youtube.com/watch?v=2LyzBoHo5EI

I must look into those different fission reactor types, haven’t realized that there is so much variety between them. But it seems that many times in the public discussion the matter is unfortunately simplified even more: nuclear=bad. The potential is not seen and the results of possible incidents are exaggerated (in fusion reactor the risk of a catastrophe basically does not exist and if I understood correctly, the modern fission reactors are also much safer than the ones that have suffered  from severe accidents). I think that the following blog post is spot on for this subject of exaggerated risks:

http://www.mrmoneymustache.com/2012/06/07/safety-is-an-expensive-illusion/

gerardc

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Re: Views of an economy without growth
« Reply #9 on: November 22, 2018, 03:01:32 PM »
Living a FI life relies on economic growth (living off of passive income) and the size of the economy in turn is almost directly proportional to the use of nature’s resources.

Problems with your assumptions:
- Returns aren't necessarily related to economy size. E.g. if you lend money to someone for 10% interest, you get a return with no growth. Capital itself is valuable. Another example: you own 50% of a company; the company doubles in value; the other owner liquidates then burns all his cash in frivolous purchases. No net growth overall, but passive income for you! Maybe everyone can't get passive income sustainably, but individuals can. There's not much real growth in the last 100 years anyway if you look at inflation-adjusted median wages.
- Worst case, we don't need passive income to be FI / to FIRE. Instead of saving 25X in 10 years, we'll save 40X in 15 years, and retire at 45 instead of 40. The market should at least sustain inflation.

Case

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Re: Views of an economy without growth
« Reply #10 on: November 22, 2018, 06:57:21 PM »
Well - I think Case and oh my lookie here, were quite mean in their response and not providing any ideas but just statements showing closed minds.  OK that's their problem and let's not make it our problem.

Take a look at the Swedish flag.  Yeh, it's a cross.  It represents faith.  Now, that faith was Christianity, but you can have faith in other things too.  You know science and technology are moving along at a tremendous pace.  SunnyDays made some good points that I agree with.  I look at at a wee bit different.  I think the technology will allow us to have the time that those Amazonians he wrote of had.  People will use that time and think of new ideas.  Production of what people need is increasing.  Look at China and India.  People are moving from the old farms where they stayed behind Oxen to plow the fields to urban jobs where their education is increasing and their quality of life is increasing.

Think of all that brainpower being made available as people's lifestyle's are being made better.  They now have free time to think.  Given the will there's a way.  There will be innovative solutions to today's problems.  Have you ever heard of Norman Borlaug?  He was the initiator of the green revolution.  They say he saved a billion lives.  The world was looking at mass starvation, before his ideas.

https://www.huffingtonpost.com/david-macaray/the-man-who-saved-a-billi_b_4099523.html

I think you are right about the nukes.  I also think it may take another 10 years to educate people about the potential new reactors like the Molten Salt reactor.

https://en.wikipedia.org/wiki/Molten_salt_reactor

or the pebble bed reactor

https://en.wikipedia.org/wiki/Pebble-bed_reactor

These can use Thorium which is a fuel that will never run out and is really dirt cheap.

These can solve global warming when coupled with electric transportation.  OR  Some smart person will come up with something even better.

These innovations and others will provide investment opportunities.  There are vast parts of the world that need to be lifted out of poverty by education and technology.  Like all of us, these people want a better life for themselves.  As they work to better themselves, there will be growth.

Necessity is the mother of invention.  Enjoy the ride.

I think you have missed the point.  My response was similar to the comment on purpose, and to indicate that it is ignorant to leave a terse opinionated critique with no content.  In addition, on this particular topic it is easy to ‘bury your head’ and assume climate change is not a problem, ignore all evidence, etc... and still live a happy life where it wouldnt have mattered to you whether it was real or not.  It does not make you less ignorant though, and if everyone were like this the world would be fucked. 

And btw, i was not critiquing the original poster.... i liked his post.  I was responding to the guy who gave the one-liner. 
« Last Edit: November 22, 2018, 07:00:19 PM by Case »

Ducknald Don

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Re: Views of an economy without growth
« Reply #11 on: November 23, 2018, 07:35:37 AM »
No growth isn't really an economic problem, there have been long periods in history where growth has been close to zero, sometimes over hundreds of years. The issue is that it doesn't solve the climate change problem, if we carry on as we are the planet will continue to warm. What we need to solve the problem is de-growth, the trouble is people won't accept get poorer without a fight.

I can't help thinking Fusion is a bit of a red herring, we have poured lots of money into it for decades with little to show. I know there has been steps forward because of discoveries around superconductivity but that still leaves some apparently intractable problems. The latest generation fission reactors also seem to have their own issues, all massively over budget and very late. I also worry that techno optimism will allow us ignore the fundamental problems.

On the issue of passive income I'd happily give up all mine if I thought it would avoid passing this problem on to my children's generation.

BicycleB

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Re: Views of an economy without growth
« Reply #12 on: November 23, 2018, 11:00:41 AM »
1. The economy should continue growing, but with better measurement. Currently we measure expensive mistakes as positives, while failing to measure pollution costs fully.
2. Enormous growth is possible through better efficiency, better recycling, etc. Additionally, per capita income growth is possible without population growth. We have plenty of room to grow better lives for most people, while using fewer resources and becoming sustainable. Those should be the goals.
3. I'm not in the business of recommending green investments per se, but you can find them. They're not an autopilot thing like broad market indexes, so I look forward to your report!
4. I think that a person should take actions that make sense to them, because there are many approaches, all valuable. When in doubt, greatest impact is probably through a mix of politics, friendships, wise personal living, and thoughtful investing (see 3).

tyler2016

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Re: Views of an economy without growth
« Reply #13 on: November 24, 2018, 07:32:58 PM »
Vanguard has a REIT index if you want to avoid oil and gas or invest in real estate but don't want to manage it.


There are also funds and ETFs available for investors that wish get the benefits of funds and ETFs but want to avoid profits from things they object to. Search the web for socially conscious or socially responsible investing.

This is almost heresy around here, but if you're willing to do some reading, you could also do your own stock picking. If you aren't willing to read a few thousand pages of books, I would avoid doing this. It takes a certain temparament to do this. I like to buy stocks of companies providing things and services that people need. People need food, so I own Kroger. Even if it stopped growing and paid out 90% of net income in dividends for the rest of my life, I would be happy. It is currently selling at around 7 times earnings, or about 14% yield.

Even if the economy stopped growing right now and stayed at it's current level forever, the 4% rule works. The S&P 500 P/E is around 21, which is more than a 4% yield.

Viiksikarva

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Re: Views of an economy without growth
« Reply #14 on: November 26, 2018, 11:23:49 AM »
Problems with your assumptions:
- Returns aren't necessarily related to economy size. E.g. if you lend money to someone for 10% interest, you get a return with no growth. Capital itself is valuable. Another example: you own 50% of a company; the company doubles in value; the other owner liquidates then burns all his cash in frivolous purchases. No net growth overall, but passive income for you! Maybe everyone can't get passive income sustainably, but individuals can. There's not much real growth in the last 100 years anyway if you look at inflation-adjusted median wages.

First I have I have to say that my understanding on the very basics of how the money circulates in the economy is at an embarrassingly low level (some of it based on Zeitgeist movies...) and therefore my following logic might not be that valid. In that example of lending money and receiving interest for that, I think that if we look at that closed system consisting of just me and the debtor, it might seem like no growth is required. But when moving away from that closed system and tracking down where that extra 10 % has originated from, my understanding is that it must be due to growth of the economy (although inflation through central banks creating money plays a role in that as well).

- Worst case, we don't need passive income to be FI / to FIRE. Instead of saving 25X in 10 years, we'll save 40X in 15 years, and retire at 45 instead of 40. The market should at least sustain inflation.

As simple as that basically is, I've still never really thought about it that way (that if I have enough saved, I can just live off of the capital instead of relying on growth). Thanks for bringing that up :)

I can't help thinking Fusion is a bit of a red herring, we have poured lots of money into it for decades with little to show. I know there has been steps forward because of discoveries around superconductivity but that still leaves some apparently intractable problems. The latest generation fission reactors also seem to have their own issues, all massively over budget and very late.

That might be true, but I think it is still not an excuse to not put effort into R&D of those fields. Because of the high reward of possible success.

3. I'm not in the business of recommending green investments per se, but you can find them. They're not an autopilot thing like broad market indexes, so I look forward to your report!

I've found a few ETF's that might be what I am looking for (CRBN and EFAX). In addition to that I have a small green investment at Loudspring (http://loudspring.earth/impact-eng), which unfortunately has so far proven to be a bit of a mistake (jumped abroad with my "green glasses" on without really looking deeper into what was going on).

BicycleB

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Re: Views of an economy without growth
« Reply #15 on: November 26, 2018, 12:16:56 PM »

I've found a few ETF's that might be what I am looking for (CRBN and EFAX). In addition to that I have a small green investment at Loudspring (http://loudspring.earth/impact-eng), which unfortunately has so far proven to be a bit of a mistake (jumped abroad with my "green glasses" on without really looking deeper into what was going on).

My personal opinion is that "green" investing is something you should do as an advanced practice only - learn the basics first. Read about index investing (https://jlcollinsnh.com/) and the costs of managed investments. Once you know enough that ordinary financial remarks are old news to you, explore green investing. Start the green research by comparing the fees of your green funds to those of the cheapest market index funds that are available to you. Until then, focus on living below your means in reasonably (not obsessively) green ways and investing a large portion of your income.

Being free from ordinary wage requirements will be valuable to any cause, including the ecology. Don't obsess en route, just do the basics.

Viiksikarva

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Re: Views of an economy without growth
« Reply #16 on: November 30, 2018, 08:28:44 AM »
My personal opinion is that "green" investing is something you should do as an advanced practice only - learn the basics first. Read about index investing (https://jlcollinsnh.com/) and the costs of managed investments. Once you know enough that ordinary financial remarks are old news to you, explore green investing. Start the green research by comparing the fees of your green funds to those of the cheapest market index funds that are available to you. Until then, focus on living below your means in reasonably (not obsessively) green ways and investing a large portion of your income.

Being free from ordinary wage requirements will be valuable to any cause, including the ecology. Don't obsess en route, just do the basics.

Yes, I agree that "green" investments might be considered less basic and harder than the most common passive index funds. That's one of the reasons I asked this question here, to get good ideas on how to do it. But as with nuclear energy (see earlier posts), I feel that something being hard is not a good enough reason to stop pursuing it.

And I also agree that one shouldn't be too extreme/obsessed with anything. I understand that my posts might send a message about me being obsessed about investing green, but this is not exactly the case as currently only under 10% of my portfolio can be labeled as green. Still hoping to increase this number with the guidance of you guys :)

MaaS

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Re: Views of an economy without growth
« Reply #17 on: November 30, 2018, 10:36:22 AM »
One thing to consider is that what really matters is earnings growth. Yes, a bigger total pie helps, but this can also be achieved by efficiency and cost reduction.

The advances in AI make it quite likely that in some point in the future, the same output will be achieved with less people and resources.

Most industries are pretty low margin. There's huge potential for earnings growth without rising revenues.

Viiksikarva

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Re: Views of an economy without growth
« Reply #18 on: December 03, 2018, 09:30:15 AM »
One thing to consider is that what really matters is earnings growth. Yes, a bigger total pie helps, but this can also be achieved by efficiency and cost reduction.

This is again something I haven't thought of earlier. Thank you.

Viiksikarva

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Re: Views of an economy without growth
« Reply #19 on: December 03, 2018, 09:31:57 AM »
As a summary, based on the conversation so far, we can say that no matter what, frugal lifestyle will be better for the environment and that most of us believe there can be economical growth without increasing emissions. I would still like to challenge You more on "green" investing. What is it and is it necessary? Will the market automatically correct itself to be more sustainable as climate awareness increases (if so, is the speed of that transition fast enough)? If it is necessary how would you approach it? For motivation to answer this question (http://static.newclimateeconomy.report/wp-content/uploads/2014/08/NCE_ExecutiveSummary.pdf):

"The next 15 years of investment will also determine the future of the world’s climate system."

And maybe the previous replies about de-coupling have been right (and Tim Jackson wrong..):
https://www.iea.org/newsroom/news/2016/march/decoupling-of-global-emissions-and-economic-growth-confirmed.html

merlin7676

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Re: Views of an economy without growth
« Reply #20 on: December 03, 2018, 01:02:05 PM »
Growth, by it's very definition, is both increase in size and development.

While we can improve development, increasing size (population, production, land, ect) here on Earth is becoming stagnant. 
But assuming both government and private industry manage to make space attainable, then it will continue.

Once we can harness asteroids for the metals and resources, open colonies on the moon and mars, build spaceships like we build airplanes now, ect we will have a second industrial revolution (or space revolution, call it what you will), lots of fortunes will be made.

pecunia

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Re: Views of an economy without growth
« Reply #21 on: December 03, 2018, 06:01:27 PM »

- SNIP -

Once we can harness asteroids for the metals and resources, open colonies on the moon and mars, build spaceships like we build airplanes now, ect we will have a second industrial revolution (or space revolution, call it what you will), lots of fortunes will be made.

We live on about 25 percent of the Earth.  There are a lot of minerals beneath the sea and in the seawater.  As the ice melts in Greenland and Antarctica there will be rock outcroppings exposed with sought after minerals and ores.  Development of both should be much cheaper than going off planet.

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Re: Views of an economy without growth
« Reply #22 on: December 06, 2018, 02:02:46 AM »
Growth, by it's very definition, is both increase in size and development.

While we can improve development, increasing size (population, production, land, ect) here on Earth is becoming stagnant. 
But assuming both government and private industry manage to make space attainable, then it will continue.

Once we can harness asteroids for the metals and resources, open colonies on the moon and mars, build spaceships like we build airplanes now, ect we will have a second industrial revolution (or space revolution, call it what you will), lots of fortunes will be made.

None of that looks likely to me, we barely made it to the moon fifty years ago and haven't been back since. To be honest this all looks like a distraction from the severe problems we face on our own planet.

Viiksikarva

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Re: Views of an economy without growth
« Reply #23 on: December 06, 2018, 03:17:32 AM »
...
Once we can harness asteroids for the metals and resources, open colonies on the moon and mars, build spaceships like we build airplanes now, ect we will have a second industrial revolution (or space revolution, call it what you will), lots of fortunes will be made.

None of that looks likely to me, we barely made it to the moon fifty years ago and haven't been back since. To be honest this all looks like a distraction from the severe problems we face on our own planet.

Agreed. Looking for solutions from space might be considered a hundred or a thousand years from now, but to solve today's problems, we need to take action here at earth.

I hope that the problem of the future won't be the scarcity of earth's resources (such as minerals), as that would mean that we have failed in the decoupling of economy growth and resource usage.

pecunia

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Re: Views of an economy without growth
« Reply #24 on: December 08, 2018, 09:04:36 AM »

Agreed. Looking for solutions from space might be considered a hundred or a thousand years from now, but to solve today's problems, we need to take action here at earth.

I hope that the problem of the future won't be the scarcity of earth's resources (such as minerals), as that would mean that we have failed in the decoupling of economy growth and resource usage.

What minerals could be so scarce that people won't develop an alternative?  Just a few years ago, I was concerned about peak oil.  Well, that turned out to be a red herring.  There will be no long term shortage of energy.  1) If oil does become scarce, we can use nuclear power to make any necessary liquid or gaseous fuels from some carbon feedstock.  2)  New supplies and methods have been found to extract oil from shale so there is still a lot of fuel.

I'd be more concerned about men's greed messing with the environment.  Man is running roughshod over the rest of the animal kingdom.  We've caused a lot of extinctions.  We're messing with the climate and the oceans.  Not too much of a reach to figure we may be messing with our own long term survival.

Maybe the cockroaches will do a better job of it after we are gone.

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Re: Views of an economy without growth
« Reply #25 on: December 13, 2018, 10:25:40 AM »

Agreed. Looking for solutions from space might be considered a hundred or a thousand years from now, but to solve today's problems, we need to take action here at earth.

I hope that the problem of the future won't be the scarcity of earth's resources (such as minerals), as that would mean that we have failed in the decoupling of economy growth and resource usage.

What minerals could be so scarce that people won't develop an alternative?  Just a few years ago, I was concerned about peak oil.  Well, that turned out to be a red herring.  There will be no long term shortage of energy.  1) If oil does become scarce, we can use nuclear power to make any necessary liquid or gaseous fuels from some carbon feedstock.  2)  New supplies and methods have been found to extract oil from shale so there is still a lot of fuel.

I'd be more concerned about men's greed messing with the environment.  Man is running roughshod over the rest of the animal kingdom.  We've caused a lot of extinctions.  We're messing with the climate and the oceans.  Not too much of a reach to figure we may be messing with our own long term survival.

Maybe the cockroaches will do a better job of it after we are gone.

What I meant to say was that if we feel the need to use every little bit of resource (minerals, oil etc..) that we can get our hands on, we've done something wrong. It would mean that the de-coupling remains a myth and that we've failed in building a more sustainable (circular) economy.

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Re: Views of an economy without growth
« Reply #26 on: December 13, 2018, 12:39:03 PM »
"What I meant to say was that if we feel the need to use every little bit of resource (minerals, oil etc..) that we can get our hands on, we've done something wrong. It would mean that the de-coupling remains a myth and that we've failed in building a more sustainable (circular) economy.

George Carlin said it best:

https://www.reddit.com/r/quotes/comments/33jmhl/george_carlin_on_our_planet/


BicycleB

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Re: Views of an economy without growth
« Reply #27 on: December 13, 2018, 03:50:03 PM »
As a summary, based on the conversation so far, we can say that no matter what, frugal lifestyle will be better for the environment and that most of us believe there can be economical growth without increasing emissions. I would still like to challenge You more on "green" investing.

Challenge all you like, but someone needs to dig deeper into the subject and report to the group. As the most interested person, I suggest that you lead on this matter.   :)

I'm interested too, but my prior research came to dead ends. I hope yours is more fruitful.

I would still like to challenge You more on "green" investing. What is it and is it necessary]

I have seen several kinds of green investing:
1. Actively managed mutual funds that primarily exclude "non-green" companies. For example, a fund might mimic the S&P 500, but exclude oil companies. I don't think these accomplish much in creating ecological change, but they have the drawback of costing more than passive index funds.
2. Actively managed funds that invest in activities designed to improve the ecology. I assume these have the cost drawbacks of the exclusionary funds above. As sector funds, they may have more volatile financial results than broad-based index funds. To the extent that they invest directly in new ventures, they have the advantage of possibly creating useful new economic activity, so they could be more influential ecologically than the exclusionary funds. Their risk/reward profile may be closer to venture capital than to large cap index funds. Their performance may be lower than other venture-type funds because of the discount I assume they get from morally motivated investors.
3. Individuals or groups who invest in polluting stocks such as oil companies, with the  intent of introducing shareholder resolutions to reduce anti-climate lobbying, avoid carbon-promoting projects, and generally "clean up" the investees' climate impacts. I am not up to date in this area. As with 2, I am very curious to see a good summary by an interested researcher.
4. Individuals who buy items or sponsor projects in local areas that should have good impact on the climate. For example, buying solar panels for one's home; lending a friend money for such panels; and so on. Of course, the financial return on these projects varies case by case, and they take time investment as well as financial investment.

Is it necessary? My guess is 2 and 3 and 4 above are good ideas for interested parties, but not sufficient without additional government action. In the presence of sufficient govt action, they would not be necessary. Since sufficient government action is not happening, 2 and 3 and 4 above are worth pursuing, unless you are willing to lobby government directly, or spend your money supporting groups that lobby.


I would still like to challenge You more on "green" investing. What is it and is it necessary? Will the market automatically correct itself to be more sustainable as climate awareness increases (if so, is the speed of that transition fast enough)? If it is necessary how would you approach it?

I researched 1, 2, 3 and 4 above moderately. Then I looked at direct donations toward groups that take environmental actions, or lobby for good policies by government. I chose to invest in passive index funds, and donate a portion of my income to these nonprofit groups. Details are forthcoming in @Malaysia41's thread on self-imposed carbon taxes.

https://forum.mrmoneymustache.com/throw-down-the-gauntlet/self-imposing-carbon-taxes-who's-with-me/

« Last Edit: December 13, 2018, 04:02:22 PM by BicycleB »

Kahooli

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Re: Views of an economy without growth
« Reply #28 on: December 13, 2018, 04:16:02 PM »
My biggest example of how economies could still thrive without resource usage: greater value placed on creative works and digital spaces. PLenty of examples - the universe portrayed in Ready Player One is a good example. Virtual, digital economies already exist. People already trade their money for digital items, and vice versa. As we are able to have less physical things but have access to more digital experiences we may shift what we value, while not completely destroying the consumer culture. We will consume things that cost little to make, are artificially unique or scarce, and have very little carbon footprint.

Viiksikarva

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Re: Views of an economy without growth
« Reply #29 on: December 17, 2018, 02:10:23 PM »
George Carlin said it best:

https://www.reddit.com/r/quotes/comments/33jmhl/george_carlin_on_our_planet/

Not really 100% sure why you wanted to link that. But point taken. Now that I think about, my main motivation is to try ensuring decent living conditions for me and the people around me. Can’t say that I would genuinely daily worry about something that is distant to me. But I also feel that it doesn’t really matter that what the underlying motivation is; only the action should count. And we’re all trying to find the best action here (in the realm of investing/money). One might say that it is really two-faced to even talk about capital gains and saving the planet at the same sentence, but it seems that since money pretty much controls the world, it should also be a good tool to try changing it.

Viiksikarva

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Re: Views of an economy without growth
« Reply #30 on: December 17, 2018, 02:20:19 PM »
Challenge all you like, but someone needs to dig deeper into the subject and report to the group. As the most interested person, I suggest that you lead on this matter.   :)

I'm interested too, but my prior research came to dead ends. I hope yours is more fruitful.
 

Good point there, I will try (and have tried) to dig deeper into this subject.

1. Actively managed mutual funds that primarily exclude "non-green" companies. For example, a fund might mimic the S&P 500, but exclude oil companies. I don't think these accomplish much in creating ecological change, but they have the drawback of costing more than passive index funds.

As I wrote earlier, I’ve found a few ETF’s that have a relatively low expense ratio (0.20%), that do just this. I don’t have any theoretical background on whether this is effective or not, but I would think that capital fleeing away from companies (in this case oil companies) would affect their profitability in long term and force them to change their habits to greener ones (if the scale of this movement was sufficiently large). These have been my main tools so far.
According to this article, the potential of green investing in this area are large (I just put this link under this section because it mainly talks about ESG-funds):
https://www.weforum.org/agenda/2018/03/could-this-be-the-best-way-to-tackle-climate-change-sustainable-investment/

2. Actively managed funds that invest in activities designed to improve the ecology. I assume these have the cost drawbacks of the exclusionary funds above. As sector funds, they may have more volatile financial results than broad-based index funds. To the extent that they invest directly in new ventures, they have the advantage of possibly creating useful new economic activity, so they could be more influential ecologically than the exclusionary funds. Their risk/reward profile may be closer to venture capital than to large cap index funds. Their performance may be lower than other venture-type funds because of the discount I assume they get from morally motivated investors.

I’ve also invested a bit to this company that helps start-ups with a positive climate impact (industrial optimization, filtration systems, clean energy etc.) to grow by offering them guidance and financing. The expense ratio of this arrangement is not that clear, so far it has been quite volatile (as you wrote) and not all of their action is that transparent. So, while I do believe in their mission and the positive impact they are doing, there are still way too many question-marks in the way for this to be really interesting channel for larger scale green investing (or I just have to accept the possibly lower profits in exchange for higher climate effect). These are experiences from only one company in this field, but surely there are many others that might do better.

Another thing I should start pursuing is a career in a company that has its goal aligned with emission reductions. This would probably be in the energy sector.

3. Individuals or groups who invest in polluting stocks such as oil companies, with the  intent of introducing shareholder resolutions to reduce anti-climate lobbying, avoid carbon-promoting projects, and generally "clean up" the investees' climate impacts. I am not up to date in this area. As with 2, I am very curious to see a good summary by an interested researcher.

This is interesting! And based on quick search, there’s a lot to be done:
https://www.independent.co.uk/environment/climate-change-fossil-fuels-lobbying-usa-transport-renewable-energy-environment-a8452941.html

Is it necessary? My guess is 2 and 3 and 4 above are good ideas for interested parties, but not sufficient without additional government action. In the presence of sufficient govt action, they would not be necessary. Since sufficient government action is not happening, 2 and 3 and 4 above are worth pursuing, unless you are willing to lobby government directly, or spend your money supporting groups that lobby.

I am also placing some hope on that the actions taken by individuals will eventually draw political attention (again if the scale is large enough) and thus invoke government action. If the government response is higher taxes for emissions, the profitability of emission-heavy companies decreases, creating a virtuous cycle (see 1.).

I researched 1, 2, 3 and 4 above moderately. Then I looked at direct donations toward groups that take environmental actions, or lobby for good policies by government. I chose to invest in passive index funds, and donate a portion of my income to these nonprofit groups. Details are forthcoming in @Malaysia41's thread on self-imposed carbon taxes.

https://forum.mrmoneymustache.com/throw-down-the-gauntlet/self-imposing-carbon-taxes-who's-with-me/

Thanks for the link, I’ve been looking for an answer to that “Who to Pay”-question. I must read that thread through. And this (investing to things that don’t bring in money, but “just” a better environment) might be a necessary path anyways; some of the required actions are not profitable in a traditional sense. Even though, care must be taken that people don’t justify their higher consumption by paying for their emissions (of course this is in general a good thing, but this “trap” built within it must be acknowledged).

Your research has been much more thorough than mine, thanks for sharing :)


BicycleB

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Re: Views of an economy without growth
« Reply #31 on: December 17, 2018, 02:33:40 PM »
Hi, Vihreat (sorry I haven't learned to type the umlaut yet). Thanks for the replies, will give more detail later fwiw. Anyway, you're on an excellent path; thanks for the new links.

Possibly the only useful comment I have left:

2. Actively managed funds that invest in activities designed to improve the ecology. I assume these have the cost drawbacks of the exclusionary funds above. As sector funds, they may have more volatile financial results than broad-based index funds. To the extent that they invest directly in new ventures, they have the advantage of possibly creating useful new economic activity, so they could be more influential ecologically than the exclusionary funds. Their risk/reward profile may be closer to venture capital than to large cap index funds. Their performance may be lower than other venture-type funds because of the discount I assume they get from morally motivated investors.

I’ve also invested a bit to this company that helps start-ups with a positive climate impact (industrial optimization, filtration systems, clean energy etc.) to grow by offering them guidance and financing. The expense ratio of this arrangement is not that clear, so far it has been quite volatile (as you wrote) and not all of their action is that transparent. So, while I do believe in their mission and the positive impact they are doing, there are still way too many question-marks in the way for this to be really interesting channel for larger scale green investing (or I just have to accept the possibly lower profits in exchange for higher climate effect). These are experiences from only one company in this field, but surely there are many others that might do better.

I like the investment that you chose in that, if well done, it could be very useful!

Re the idea that it has too many question marks to be an interesting investment channel - well, of course you are in charge of whether it's interesting to you! I feel the opposite, though. To me it's potentially very interesting, because it requires knowledge and puzzle solving beyond the simple choices of index investing. The risks are simply higher, so that it's unwise unless you learn enough to get a reasonable risk/reward ratio, or enough to balance out the risks and be reasonably confident of achieving your other investment goals. I chose not to go there yet, but this is exactly the type of research that I think an interested party could do.

If you ever dig deeper, please let us know. I would be happy to analyze / comment/ brainstorm in response, if that's encouraging.
« Last Edit: December 17, 2018, 02:36:40 PM by BicycleB »

Viiksikarva

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Re: Views of an economy without growth
« Reply #32 on: February 13, 2019, 11:24:53 AM »
Re the idea that it has too many question marks to be an interesting investment channel - well, of course you are in charge of whether it's interesting to you! I feel the opposite, though. To me it's potentially very interesting, because it requires knowledge and puzzle solving beyond the simple choices of index investing. The risks are simply higher, so that it's unwise unless you learn enough to get a reasonable risk/reward ratio, or enough to balance out the risks and be reasonably confident of achieving your other investment goals. I chose not to go there yet, but this is exactly the type of research that I think an interested party could do.

Now that I have thought about this, you're right. It is uninteresting because of my laziness of really digging deep into the numbers of this company.



During the time after the last posts on this thread, I've been trying to reach out to some researchers on this field (that is, the future of energy usage coupled to economical growth) to find out their views on this matter (so I wouldn't have to reinvent the wheel here). Unfortunately I have not received that many replies, at least not yet.

I've also been thinking about other aspects of green investing; small rental apartments. My logic for them being a "green investment" goes something like this:

1. Roughly 1/3 of an individual's carbon foot print comes from housing (at least in Finland)
2. The living area/person is approximately 40 square meters on average (again in Finland)
3. By buying small rental units (below average area, the smallest one that I own is 20 square meters), I can reduce the carbon footprint of my tenants
       -Assuming a linear relationship between housing emissions and living area, the total emissions of my tenant who is living in the 20 m^2 apartment are 1/6 (20/40*1/3) lower than average
4. Furthermore, by owning multiple apartments, I can be involved in making decisions regarding the energy efficiency of those buildings (better insulation, solar energy, etc..)

Any thoughts on this?

pecunia

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Re: Views of an economy without growth
« Reply #33 on: February 13, 2019, 12:28:14 PM »
Is it the individual's job to actively pursue investments good for the environment?  Other investors, perhaps a thousand times more will not be troubled by this extra condition that they will voluntarily place on their investments.  Your efforts will be no more than a drop into a pond.  The ripples of your efforts will soon fade to nothing.

If you want it to effect genuine change, the rules must be changed.  Capitalism will find a way to function within this narrower framework.  It is no different than other rule changes such as safety regulations on items sold or forcing fire escapes on buildings.  The market will adapt and thrive within the revised rules and the changes you wish to be effected will occur.

The trick will be to wisely and fairly make those rule changes.

BicycleB

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Re: Views of an economy without growth
« Reply #34 on: February 13, 2019, 07:25:28 PM »

I've also been thinking about other aspects of green investing; small rental apartments...

Any thoughts on this?

It has the advantage of avoiding "dirtier" investments, and that depending on the particular apartments, you could modify them for efficiency.

It has the disadvantage that work is required. Like Pecunia, I think that just owning them does little. Someone else would own them anyway.

Your best bet for housing impact would be refitting inefficient apartments. But you don't need to own them to do that. You could just do that as a business yourself.

If you buy apartments and pay someone to fix them, you could increase your impact by buying ones that need improvement, fixing them up and then selling them. But you have to make sure you can profit. Not all markets have profitable opportunities like this. In any case, it's not a passive investment, it's active.

Viiksikarva

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Re: Views of an economy without growth
« Reply #35 on: February 14, 2019, 03:04:10 AM »
Is it the individual's job to actively pursue investments good for the environment?  Other investors, perhaps a thousand times more will not be troubled by this extra condition that they will voluntarily place on their investments.  Your efforts will be no more than a drop into a pond.  The ripples of your efforts will soon fade to nothing.

If you want it to effect genuine change, the rules must be changed.  Capitalism will find a way to function within this narrower framework.  It is no different than other rule changes such as safety regulations on items sold or forcing fire escapes on buildings.  The market will adapt and thrive within the revised rules and the changes you wish to be effected will occur.

Personally I don’t like the idea of not doing something just because others don’t do it. To take the pond analogy a step further; the way I see it is that those small ripples are what eventually change the course of larger ships (or fish or whatever). Many drops, generating waves of same phase and direction, will amplify each other and eventually grow to larger waves that have a greater impact (whether on politics or directly to economy). I am hoping to create some conversation/action exactly on this forum (people interested in FIRE tend to have their economy in better shape than average, which means that the impact they can make with how they handle their capital is greater) because I think together we could create those larger waves. After all, in order to change and renew, even capitalism will need something that disturbs the status quo. The ripples in the pond can, however, be damped and eventually faded by the forces acting against them (resistance to change).

Mikhail Gorbachev said it the best:

A society should never become like a pond with stagnant water, without movement. That's the most important thing.

It has the advantage of avoiding "dirtier" investments, and that depending on the particular apartments, you could modify them for efficiency.

It has the disadvantage that work is required. Like Pecunia, I think that just owning them does little. Someone else would own them anyway.

Your best bet for housing impact would be refitting inefficient apartments. But you don't need to own them to do that. You could just do that as a business yourself.

If you buy apartments and pay someone to fix them, you could increase your impact by buying ones that need improvement, fixing them up and then selling them. But you have to make sure you can profit. Not all markets have profitable opportunities like this. In any case, it's not a passive investment, it's active.

That’s true, that kind of investing does require some work. But as housing is a big part of emissions, surely there is room for some improvements in efficiency. I need to look deeper into this.

But I do have to slightly disagree on that just owning those apartments wouldn’t have any effect. Since smaller apartments are more profitable for investors (not sure if this is a global thing, but this is the case in Finland), it has created more demand for them (OK, I have to admit that I have bought small apartments mainly because they are more profitable, not because they are “greener”, later on the “greenness” just came to my mind). As a result, a greater percentage of all new apartments are in the range of 20-40 m^2 (~200-400 square feet) and larger (old & new) apartments are a bit harder to sell. This ratio has risen for some years now. For me, this is an example of small ripples in the pond amplifying each other.

pecunia

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Re: Views of an economy without growth
« Reply #36 on: February 14, 2019, 05:41:15 AM »
"Personally I don’t like the idea of not doing something just because others don’t do it."

I like your sense of honor, but it may take more than a sense of honor for others to emulate yourself and jump into supporting eco friendly apartments with their pocket books.

On the other hand, it may be a good tool to market these apartments to a niche market.  There are others who value the environment and will pay a bit more for an environmentally friendly place.  I do not see that "ripple" from these people spreading to the mass population.

I live in the United States and drive a small car.  My input to the world is negligible when I see the huge trucks that are prevalent here.  I only see the masses of people and corporations becoming more environmentally friendly when the rules change.  Then they complain a bit and learn to live with it.

Maybe, you are just ahead of your time and in a few years the world will catch up.


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Re: Views of an economy without growth
« Reply #37 on: February 14, 2019, 08:34:05 AM »
If the apartments are more profitable than the stock market average and you like the business, that sounds like a good choice.

A disadvantage is that is it concentrates all your investment in your own country. A small amount of global investment might be good for risk reduction purposes. Your call though. Increasing your % in this "green" real estate seems like a good choice ecologically. Keep us posted.

Viiksikarva

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Re: Views of an economy without growth
« Reply #38 on: February 15, 2019, 02:07:39 AM »
I live in the United States and drive a small car.  My input to the world is negligible when I see the huge trucks that are prevalent here.  I only see the masses of people and corporations becoming more environmentally friendly when the rules change.  Then they complain a bit and learn to live with it.

Like I've written earlier, I realize my thoughts might be a bit naive at times, but then again I also feel that this is required; if I feel that all of my actions are worth nothing, I'll stop trying. Not saying that I know 100% how The Rules are changed, but I think the people trying something to shake the current state of things plays a big role in that. And trying those things with money (as it controls the world) should be most powerful method?

On the other hand, it may be a good tool to market these apartments to a niche market.  There are others who value the environment and will pay a bit more for an environmentally friendly place.  I do not see that "ripple" from these people spreading to the mass population.

This is a nice thought, thanks, I'll have to try it the next time I'm looking for a new tenant!

If the apartments are more profitable than the stock market average and you like the business, that sounds like a good choice.

A disadvantage is that is it concentrates all your investment in your own country. A small amount of global investment might be good for risk reduction purposes. Your call though. Increasing your % in this "green" real estate seems like a good choice ecologically. Keep us posted.

Currently I have about 40% of my net worth in real estate, and I plan to keep it at approximately that level (or maybe 50/50 real estate/stock market). The stock market currently provides me with some international exposure. I like real estate because it provides a relatively stable cash flow. ROI is roughly the same as the long time average of the stock market (ROE significantly higher due to the leveraging used in the apartments). Now all I would have to do is to figure out a satisfying distribution for the 50-60% stock market allocation :)