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Dec 20
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Interviewing Joellen Nicholson, Impact Investor & Opportunity Creator

By Finance, Green Investing, Leadership, Stewardship No Comments

An Interview by Purposeful Finance

About Joellen Nicholson

Ms. Joellen Nicholson is the Vice President and Global Director of University Impact (UI), where she partners with universities in providing capital to social ventures that solve social and environmental problems.

Joellen started her career at Martha Stewart Living Omnimedia, a US omnimedia and merchandising company. In 2010, she moved to Cambodia where she co-founded and managed the scale-up of a manufacturing startup called Basik 855. In 2016, she launched the Gap for Good branded sustainability program for Gap, Inc. in five of its global markets. 

Later Joellen joined Nest, an NGO, as the Program Director where she supported over 100 global MSMEs (micro, small, and medium entrepreneurs) with business growth strategies and local compliance matters. 

Joellen has a Master’s in Social Innovation from the University of Cambridge and a Bachelor’s in Supply Chain Management and Marketing from Michigan State University. 

Joellen’s Early Career Path & Background


How has your career evolved? Could you share your early career path? 

I started my undergrad at Michigan State University studying international relations and switched to studying supply chain management and marketing. I wished there had been a University Impact around that time! 

My business career first took me to New York City, where I began my career in retail home and apparel at Martha Stewart and was a buyer there until I was moved into marketing. I had the fortune of being young during the first tech wave and helped to launch Martha Stewart’s website and E-commerce platform and formed partnerships with AOL and Yahoo right when the digital advertising wave began. 

Then, there was a tech boom, also known as the dot-com bubble. Even though workers were being laid off, I landed a full-time position in the National Hockey League (NHL), which transitioned my career into the sports world. My career took off from there as I became an expert in consumer and data marketing. 

Could you talk about how you started Basik 855 and what you learned from that?

During my career, I felt that my actions were not making an impact in people’s lives or having any international exposure. In addition, I am also very passionate about women’s livelihood creation. I strived to create better opportunities for women, whether that be here in the US or internationally. 

It was then that I started thinking about opening businesses overseas in developing and emerging economies. I researched the women’s livelihood in those areas, talking to emerging leaders about how they carry out their lives. I was working at an agency at that time and decided to take a sabbatical to use my skills to volunteer overseas. 

The sabbatical landed me in Cambodia for a three-month (or so I thought) volunteer trip to work with a small NGO producing artisan products. In the process, we realized that many of the NGO workers did not understand the retail business, how to price products and how to enter new markets during expansion.

How did you respond when you realized the business challenges with the NGO?

Our team decided to transition our NGO into a for-profit venture under Fair Trade principles, so I co-founded the company Basik 855. We launched our weaving center and transited our team of artisans out of their homes into a central workshop making hand-woven textiles, fashion, and home products and helped them to promote products to the marketplace. In addition, we hired a team of approximately 54% women to work alongside men as supervisors where they could thrive and be seen as women leaders.

After 2 years, I eventually came back to the United States where I was hired as a consultant at a global customer data science consultancy company while I still managed Basik 855. Eventually, it became difficult running a small business, setting up centers in different countries, and managing sourcing for Basik 855.

What happened to Basik 855 and what did you learn from the experience?

There was an inflection point when the artisan product sales were not growing as we expected because our products were too ahead of the market at the time, but expenses continued to increase.  Ultimately, we ran out of funding and were forced to close down Basik 855.  Stepping away from that chapter in my life after everything I did was tough. I would say that was my first foray into understanding the importance of the accessibility of capital. 

Transitioning to a Career in Impact Investing


How did that lead you to GAP and Nest, and what drove you to choose a career in impact investing?

The opportunity to return to the United States led me to find a position as a global director for Gap where I was able to combine my corporate background and previous experiences working with artisans to develop specific artisan business-focused programs. We made a significant impact by implementing innovative technologies to save water in the denim-making process and improve the sourcing process for materials.

This opportunity got me back on my feet and led me to work for an organization called Nest – a nonprofit that focused on Fair Trade Practices, sustainability and diversity – such as hiring a diverse workforce of artisans and craftspeople in the global market. I was able to combine my corporate background and previous experiences working with artisans to develop the first worker assessment program for artisans to create the workshop out of their homes.

What specifically did you do at Nest?

In Nest, I launched two major programs. One was an accelerator program, which was a year-long program for 10 artists in businesses around the world who would receive curated personalized programs to establish the workshops in their residences.  Our team would work side by side with them to assess their business progress and create business plans to help their business needs including funding.

Simultaneously, we partnered with Mastercard Center for Inclusive Growth to launch Nest’s Makers United program in Birmingham, Alabama, in order to establish an inclusive and greater gender equal environment to support small artisan business owners to grow their businesses.

For both of these programs, our work focused on strengthening artisan businesses and supporting their access to local and global value chains to sell products. At the end of the day, selling products was the path to a sustainable business that could provide jobs to artisan women. Being able to grow also requires capital, and a challenge for these artisan businesses was having the money to grow.

How did working with these women and small businesses shape your perspective on impact investing?

While these small businesses could not grow like tech businesses, they were creating great livelihood for themselves and their women employees. This financing inequality made me think about the importance of working with underserved small non-traditional business owners and what that means in the context of management and the impact that I could contribute to the financing area. At that moment, I knew that impact investing for me. This is what landed me here at University Impact – helping individuals gain access to capital, expanding these businesses, and creating jobs.

University Impact: Donor-Advised Fund


Could you touch upon how the donor-advised fund works at University Impact?  How do you think the non-profit world and the impact investing world intersect? 

University Impact is a donor-advised fund and a 501(c)3 nonprofit, which means that people are donating contributions to us to get a tax deduction when they give to organizations.I believe similar contributions are being made when you’re looking in the world of nonprofits, inclusive finance, and innovative finance. We are adept at bringing in a plethora of capital from a donor-advised fund.

In the 2021 Donor-Advised Funds Report, there was an estimated $160 billion in DAF charitable assets generated and a $35 billion total money in DAF grant dollars in 2020, which is a 10% larger increase than independent foundations.

So the question is, how could we direct some of this money across the financing spectrum beyond traditional grant making? 

Traditionally, it just came in the form of grant money from the US, so how does our team look at other areas we could be distributing this money to create a greater impact? That is what University Impact has tried to do to differentiate itself from traditional funds. 

We could have done a grant program that you can give to any kind of organization. There are plenty of 501(c)3 nonprofits that have good standing with the Boys and Girls Club, YMCA, and even your local church. 

However, our team is focused on answering what else there could be. How can we find organizations around the world that may need a grant, but also look at how they are impactful as business ventures? Our team focuses on doing recoverable grants, and credit guarantees for all different types of funding vehicles. That is how University Impact has built its financing structure.

Why go with a Pay for Success model?

When you look into the broader world, the Pay for Success model introduces a new way for governments to finance social services and target limited dollars to achieve a positive, measurable outcome. This likelihood opens up opportunities for impact investing to thrive, meeting SDG goals even beyond just ESG. 

In the public markets, organizations have a framework for understanding how to use our philanthropic dollars in more innovative ways. That is what’s truly exciting about the future of impact investing.

What advice do you have for students entering the impact investing space? 

I think the key thing is that it’s such a nascent space, most firms have the philosophy that even if you don’t have a finance background, it’s an area that can be learned. The terminology is hard, but a growth mindset is important to push through the uncomfortable to learn about finance and impact. 

So, I would say don’t shy away if you are interested in the space but not a finance person. But if you are a finance person, I want you to think about the space and consider the importance of impact in your work. In terms of skills, I believe that critical thinking and independent thinking are important – whether or not you question your own thinking.

 

DISCLAIMER: the opinions expressed in interview responses do not necessarily reflect the views of the interviewer, Scholars of Finance, or Purposeful Finance by Scholars of Finance. 

Jun 24
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Making The Most of Summer Internships: Part 1. Professional Tips & Advice

By Developing Others, Leadership, Mentorship, Planning, Resources One Comment

It’s summer internship season–new places, new faces, and hard-won opportunities await many students–including hundreds of our members nationwide. As an organization concerned with diversifying financial services, increasing equity, and promoting inclusion, we’re excited to see across-the-board increases in compensation for financial services interns, despite economic uncertainty. 

There’s ample advice on how to land coveted internships (and at Scholars of Finance, we spend a lot of time helping each other with recruiting, networking, and interviewing). But there’s comparatively less advice on what to do once you’ve started your internship. In this post, we’ve compiled advice from not only the SOF community, but across the finance industry (and even beyond) to answer common questions like:

  • What should I do now? 
  • What should I be preparing for next?
  • What do I need to accomplish?
  • How much should I learn this summer?
  • How do I make the most out of my internship?
  • How do I ensure a healthy work-life balance?
  • How do I make friends & professional connections?
  • How do I network with my new colleagues?
  • How do I get a return offer? 

Part 1.
Advice from The Scholars of Finance Community

Our Co-Founder & CEO, Ross Overline, says it’s important to focus on self-reflection and gratitude at the beginning of a new endeavor, including an internship. In a recent commentary on humility, one of our organizational values, Ross offered the following practical tips: 

  • Take an inventory of your strengths and your weaknesses, perhaps with 15 minutes of journaling time this week.
  • Ask a few people in your life for 360 feedback. Find out what your mentors, family, friends, and other peers think about you holistically. 

Stephen Sorenson, our COO, has also shared extensive advice about maximizing the value and impact of internships, including for SOF’s very own national interns. One practical piece of advice Stephen offers that we think is especially valuable is: 

  • Create a personal document where you can consolidate all of your personal and professional learning, including feedback from friends and family. 

If you’d like to implement Stephen’s advice, we love these Notion templates for personal development.

Our student members have some excellent advice, too. We especially appreciated these practical, self-reflective tips on managing up and taking control of schedules and priorities.

  • Be proactive as an intern (manage-up) and take control of your tasks/workload. As both a student and an intern, the onus is on each of us to coordinate, manage, and plan our schedules around upcoming work streams and sprints.
  • As leaders we all have a responsibility to allow for uncertainty in our schedules and be able to dedicate time to urgent projects within our planned days. Plan ahead of deadlines and allow extra time for things in your day. 

Of course, knowing what you need to do is different from actually doing it, so if you’re looking for ways to improve your executive skills like time management, planning, and prioritization, we love these two very short videos: How To Prioritize Tasks Effectively that explains prioritization using The Eisenhower Matrix; and The 7 Habits of Highly Effective People, Animated Summary that explains the connections between mindsets and habits. 

Part 2.
(Highly Curated) Advice from the Twitterverse

Twitter might be awash in bad takes, but it’s also packed with first-hand wisdom and refreshingly candid advice–and the topic of internships is no exception. We combed through Twitter to curate some of the best advice (‘best’ is a combination of mostly our own judgment and analysis, plus a little bit of how the rest of the Twitterverse reacted). 

  • Be a go-getter, but be smart & strategic about whom you reach out to, and also how, when, and why you reach out. We love this thread from Amy Cheetham, Partner at Costanoa Ventures, on how she broke into finance at J.P. Morgan using cold email. However, be sure to be mindful of everyone’s time as well.

    Our favorite tip, related to our value of humility: “Follow-up. Many times people will provide help or assistance and then the person they helped will never follow-up. Don’t be that person. Let the person know how they helped and thank them — maybe by keeping them in the loop you’ll build a long-term relationship.”

    “When should I follow up and what should I say?” is a frequent question students ask. Our recommendation is to follow up whenever you feel like you have something to share that conveys genuine gratitude; for example, if a mentor taught you a new skill and you then applied that skill successfully to a project, you might quickly write your mentor to let them know how that skill helped you, what you were able to achieve thanks to their help, and to reiterate your ongoing gratitude for their mentorship.
  • Systematize your networking process and make technology your friend, rather than relying on your memory. Patrick Malone, MD-PHD, drops some highly concrete advice in this thread on how to create a ‘personal CRM’ (CRM = contact/customer relationship management) in a platform like Notion to help keep track of connections to build long-term value.

Our favorite tip, related to our value of integrity: “One piece of advice for systematizing networking: maintain a personal CRM. For each person I connect with, I tag things like their background/expertise, location, and when we last connected so I’m reminded to reach back out to catch up.”

For a student in a finance internship, we could imagine how creating something like a simple conversation tracking spreadsheet, would help to recall important details about peers and mentors for future interactions. 

Part 3.
Recommended Reading

We hope this curation and analysis of advice helps you to have an impactful, rewarding, and successful internship experience. If you’re still hungry for more advice, we’ve compiled a list of recommended articles below. 

From all of us at Scholars of Finance, we wish you a purpose-filled, productive, and positive summer internship experience filled with new relationships, personal growth, professional development, and lots of fun!

Look out for a bonus part 2 post soon on personal growth & self-care tips for your internship! 

Aug 12
Love2

An Interview with Joe Martinetto, the COO of Charles Schwab

By Compassion, Financial Leadership, Future of Finance, Integrity, Purpose of Finance No Comments

In last week’s episode of the Investing In Integrity podcast, our CEO Ross Overline sat down with Joe Martinetto, the COO of Charles Schwab. They unpacked the broader economic system with an emphasis on financial technology including DeFi, cryptocurrency, and Joe’s leadership of the acquisition of TD Ameritrade.

It’s an insightful episode with a humble, servant leader that has found himself in the C-Suite at one of the largest financial institutions in the world. 

To aid in the digestion of Joe Martinetto’s lessons…, we decided to lay out an overview of some of the key points discussed throughout the episode.

 

Where Young Professionals Should Focus Their Time to Maximize their Potential:

Early in the episode, around the six-minute-mark, Joe starts to discuss the areas that young professionals should focus on to maximize their potential. 

In short, he says if you want to go into finance you need to pair up your soft skills and passion for finance with some hard data skills – especially computer science. Understanding how data is created, stored, manipulated, and analyzed will put you a step ahead of your peers and prepare you for a successful career in finance.

 

How to be a Good Team Leader and Strong Team Player:

This advice from Joe comes near the 11 minute mark in the episode… This one’s pretty simple.

If you want to do well in these areas, do two things:

  1. Treat people with respect
    1. This one likely doesn’t need too much explanation
  2. Learn to listen in the right way and be open to being influenced
    1. The goal here is to achieve the best outcome – not to win the argument. In finance, we’re working with some of the sharpest individuals in the world and sure enough they have some really good ideas. Listening in a way that allows you to be influenced is incredibly important as it enables the “best outcome” to be found. 

Aside from this, another important thing to consider as a leader is how you grow your followership within your company. Joe’s personal leadership style is servant leadership – this is our preferred leadership style too btw :). That said, there are pros and cons to all leadership styles whether they be hierarchical or “flatter” through servant leadership. The key takeaway here is that this should be an intentional choice. 

 

How to Minimize Risk:

This learning comes near the 30 minute mark in the episode.

Obviously he can’t share his input on one individual asset’s risk profile, but in general here are his thoughts:

  1. Don’t buy something that you don’t understand and you can’t place a value on
  2. From an organizational level, ensure there isn’t a single person who could cause serious damage to the firm from a financial perspective
  3. Become extremely educated on the instruments you’re purchasing and the risk exposures you’re taking

 

Crypto’s future in the financial sphere:

This section came near the 40 minute mark…

The short answer:

  • Time will tell.

The long answer: 

  • There’s likely room for it in the market and it’ll force financial firms to offer better service at lower prices to clients. Crypto may just be another lever that firms can pull down the road that will allow them to continue to increase their scale and further democratize investing. 

 

Jul 27
Love4

Finding Purpose in Finance

By Future of Finance, Integrity, Principles, Purpose of Finance No Comments

Defining finance is akin to defining nature itself: its functions and complexities are so broad in influence that it almost becomes too difficult to assign a straightforward definition. With businesses and people across the world threatened by the new coronavirus delta variant, companies going public at record rates, and new innovative solutions in every industry, the need for financial solutions has never been more apparent. As we see these recent developments and dynamic future trends, we must return to the basics and ask ourselves, what is the purpose of finance?

 

It can be easy to view the discipline as a means of financiers shifting around capital. Another view is that finance allows companies and individuals to progress in their endeavors, fueling the idea that finance “makes the world go round.” On a fundamental level, finance is the process of managing and raising money, but there is so much more to it.

 

Why Do We Need to Understand Finance’s Purpose?

As with our personal ambitions or in traditional altruistic lines of work, purpose drives action. But it is deeper than that. As Mission co-founder Bård Annweiler astutely states in Point of Purpose, purpose is the core of everything. Purpose gives us reason to work toward a cause and stay motivated. It allows us to create our identity, set goals, and communicate effectively. Purpose is our meaning in life.

 

The same can be applied to finance, and some would even argue that it is more important in finance considering the sheer impact it has on businesses, industries, and most importantly, people. By understanding the purpose of finance, we can truly maximize our role in the industry and orient its functionality to optimize for success. We can innovate beyond the imaginable, achieving feats at a scale never seen before. That said, when we lose purpose, we lose direction, which has dramatic ramifications when matters pertain to finance.

 

So, What is the Purpose of Finance?

In a broad sense, the purpose of finance is to be a means to provide and scale solutions. It allows businesses to grow, employ new workers, and build communities. It ensures that entire institutions remain intact and avoid devastating collapse. In this sense, finance is the mechanism which steers the direction of society at large. When viewing finance and its purpose, we must look past the idea that finance is solely about capital; rather, it is about how capital will impact people.

 

This is why ethics and morals are essential when applied to finance. With so much influence on the direction of society, it is in our hands to determine where society heads. In other words, it is clear that finance stewards capital which allow companies to grow, but how companies grow and which companies grow are determined by individuals’ decisions. This includes which industries we invest in and how well-run the companies we finance are. Additionally, with so many incentives linked to short-term gratification, it is easy to sometimes sacrifice our integrity or judgment when making decisions. This is why having values influence or even guide our decision making is of the utmost importance: when we are grounded in our morals and a general desire to make a positive impact, then not only will we benefit others, but we will benefit personally as well. The data supports this line of reasoning too. According to the McKinsey report “Profits with purpose: How organizing for sustainability can benefit the bottom line” by Sheila Bonini and Steven Swartz, “an investment of $1 at the beginning of 1993 in a value-weighted portfolio of high-sustainability companies would have grown to $22.60 by the end of 2010, compared with $15.40 for the portfolio of low-sustainability companies. The high-sustainability companies also did better with respect to return on assets (34 percent) and return on equity (16 percent).” Logically, this makes sense. By investing in our future and steering society in a beneficial direction, we are driving innovation as well as positioning ourselves for long-term success.

 

When we either forget the monumental consequences of our actions and finances, or when we have a poor use of judgment while stewarding capital, we have the potential to hurt millions of people. A classic example is the 2008 Financial Crisis: with a misalignment of incentives and a series of internal seemingly harmless manipulations in banks, employees were motivated by short-sighted decision-making. While the financial services industry was by no means the sole contributor to this financial and housing bubble collapse, even with significant governmental intervention, unemployment still rose to 10 percent and about 3.8 million Americans lost their homes due to foreclosure. In this sense, we lost sight of the purpose of finance. We lost sight of how we could harness our work to benefit the greater good. We lost sight of the impact our work has on society as a whole.

 

At a technical level, finance’s purpose is clear: to manage, raise, and invest capital; however, on a human level, which is arguably far more important, it is up to us to define its purpose. It is easy to become complacent in our understanding of finance’s purpose by viewing it solely from a technical perspective; doing so makes the job easier and more straightforward. Once we add purpose to the equation, however, each action we take has more weight, but we can also help others and ourselves more with this external understanding. With ethics and morals ingrained in our decision making, the purpose of finance soon becomes to steward capital for the greater good.

 

Going Forward

So, by understanding the purpose of finance and how consequential our actions are within this broad space, what can we do moving forward? On a macro level, institutions and governments can invest in solutions that are sustainable and benefit communities.

 

On an individual level, there are steps we can take to maximize finance’s purpose:

 

  • If you do not work in the financial services industry, seek to understand how finance impacts your life – you will find it is much more involved than expected. With this understanding, you will not only be better informed, but you can advocate for certain causes with attainable approaches.
  • If you have a junior level position in the financial services industry, continue to have your purpose drive your work. Again, when we lose sight of the impact of our work or why each of our job functions matter, we become complacent and begin to view our actions as solely transactional. Instead, keep your work people-oriented, and remind yourself of your mission every day.
  • If you are a finance leader, realize the importance and impact your work has on others. You have the potential to contribute to shaping the course of history, either for better or for worse. Never underestimate how your actions and decisions influence others, ranging from those working alongside you to the millions of stakeholders you are responsible for. 

 

By taking these actions, we will become one step closer to having finance work for everyone–and while the entire global population may not understand finance’s purpose to this degree overnight, we will make incremental success toward this end goal. After all, when it comes to societal awareness in the lens of finance, we are not in a sprint but instead a marathon.

Jul 15
Love2

An Antidote to Polarizing Controversy: Civility, Conversation and Compromise

By Compassion, Courage, Curiosity, Humility, Impact, Integrity, Principles, Resources One Comment

You may be sick of hearing about polarization, or perhaps experiencing it, but this (understandable) exhaustion eventually gives way to apathy which ultimately resigns our society to a deep, harmful division. So, I encourage you to read on, because hope is only lost when we give up on the challenges we face and become complacent. I truly believe that a major shift in bridging divides is possible, but only if each individual works at it, practicing new habits in their everyday interactions. In order to form these new habits, we must first remember and reflect on shared values. The six Scholars of Finance values provide a strong foundation and starting point for a much needed transformation in how we treat one another. In this blog post, I explore the different ways in which our principles guide us through the tough and often uncomfortable conversations with which we are consistently confronted, from a casual classroom debate to a workplace discussion about current events. I also take what I have learned from others who have had to toe the difficult line of controversy and compromise in politics, one of the most heated arenas for these conversations. 

 

Finally, I want you to know that I am no stranger to holding opposing viewpoints in tension. As someone who grew up in a conservative, Christian home and attended a liberal, secular school, I spent each day going back and forth between opinions, forming my own from what I heard my parents, teachers, and peers say. I write this not to force my own personal beliefs on anyone, but rather to help you navigate everyday situations such as my own with grace, humility, respect, and, hopefully, success.    

 

When it comes down to it, we are all human beings living on one, shared planet. When we look at the bigger picture, we can all realize that it is much more important to have respect for one another, to care for one another, and to work together for the greater good than to bombard our co-worker or family member with a barrage of statistics to explain our point of view and shut theirs down. However, holding respect for others’ viewpoints is often easier said than done. In fact, in the everyday interactions we have, we all fall into the trap of needing to be correct, of needing to convince others of our point of view, and of needing to get the last word in. Sadly, when these temporary desires take over, our values start to fade into the background, and we become creatures of the moment, easily swayed by the temptation to “win” the debate. However, this is something that when we assess rationally and outside of the heat of the moment we find to be unsustainable. If we live all of our lives trying to simply prove our point to others with the sole purpose of “winning” without listening to others’ perspectives, we will get nowhere. No one is right 100% of the time, so why go through life with that false perception, when we can instead learn and grow by listening to others? For a more concrete example of how this plays out and is a benefit to businesses, you can observe the 20% increase in innovation brought upon by diversity of thought, as discussed in a Deloitte article. In a workplace, we need to be able to harness those diverse perspectives effectively, and thus, respectfully. 

 

Each SoF Value has principles which speak to this issue quite well, and offer simple yet profound advice for how to live a life of civility, conversation, and compromise.

 

  • Integrity 
  •  Speak the truth at all times.  

This is the only way to get anywhere with difficult conversations. Both parties need to speak the truth, whether that be honestly sharing a personal experience, or backing up opinions with factual data.  

 

  • Compassion 
  • Foster relationships with respect and empathy. 

Maintaining respect throughout difficult conversations is absolutely critical. Without a foundational level of respect and empathy, conversations about hot button issues can quickly escalate to heated debates or even full-scale arguments.  

 

  • Humility 
  •  Ask for and share honest feedback regularly.  

Conversations within personal relationships or in the workplace will often necessitate a discussion about where things need to be improved, and are a perfect setting for practicing civility within difficult conversations. But we first need to be open to that feedback before beginning the conversation.  

 

    • Curiosity 
      •  Seek first to understand, then to be understood. 
  •  Pursue and embrace diverse perspectives.  

We live in an incredibly diverse world, and we should take advantage of how much we can learn from each other. We all grow when we step out of our comfort zones, hear a new perspective, listen carefully and begin to question our previously held views. Perhaps this leads to a change of mind, or simply solidifies our views if we have found that we disagree with the fundamentals of the opposite argument. No matter the outcome, the key is to listen to someone else’s reasoning behind their view before making a hasty judgement or interjecting with our own opinion.

 

  •  Impact 
  • Operate patiently and think long term.  

Ultimately, when we need to have a serious conversation with someone important to us (professionally, personally, etc.), there is no guarantee that everything will be worked out in a single chat. These discussions could take months or even years, and we need to be patient with ourselves and with one another. 

 

  • Courage 
  • Stand up for what you believe is right. 

While the best practice is to listen to others seriously and consider what they have to say, at no point in this process should you compromise your own beliefs and values. Compromise on common ground, but, if after carefully considering all perspectives with an open mind, you still hold the same views, don’t compromise on what you truly believe is right. 

 

In addition to our SoF values offering guidance, we can also learn from leaders within politics about how they handled polarization. I attended a Zoom lecture/Q&A with Condoleeza Rice, former Secretary of State and National Security Advisor, who gave incredible insight into this exact topic. She explained how critical it is to be a good listener in order to see where there is common interest and overlap, which should be the most important part of a controversial conversation. 

Chris Campbell, the former Assistant Secretary of the Treasury for Financial Institutions and majority staff director for the U.S. Senate Committee on Finance (which he held among other high ranking government roles), spoke to SoF students and shared his own experience balancing agendas and perspectives which were definitely at odds. He emphasized always being honest– no matter who it is you are speaking with, and to fight the instinct of thinking poorly of someone for simply having a different perspective. 

Lanhee Chen, a political campaign veteran, who served as the policy director for the Romney-Ryan campaign, maintains a similar perspective, and believes in beginning the process of these discussions by agreeing on a problem statement. For example, if both a Democrat and a Republican can agree that healthcare costs are too high in our country, that is a place of common ground from where they can begin, and then they can work together to find a solution. 

While it has been far easier to write this out than to put it into regular practice, I genuinely believe that if we listen carefully, assume best intentions and think well of the person across the table from us, and start from a place of common ground, we can actually begin to make progress. Remember, this doesn’t just apply to politicians; it applies to you while conversing with your dad who holds the exact opposite political views as you, to your colleague when you need to revamp your company’s sales strategy, and to your friend at dinner when she brings up the local elections. 

In summary, remember that you and everyone around you are merely humans. You are humans who make mistakes, who have had countless views thrown at you by the media, school, and family for as long as you can remember, and who are just trying to do the best for yourself and those around you. We are all going to mess up on this journey, but let’s mess up together, be understanding, and find common ground through civil discourse and legitimate compromise—and, most importantly, let’s do it all with genuine respect for one another. 

 

Further Reading + Resources: 

If you have questions, comments, or concerns, feel free to reach out to the author at: isabella@scholarsoffinance.org or bella17@stanford.edu.

Jun 08
Love3

Ethics and ESG Investing

By Green Investing, Integrity, Principles No Comments

The first time I learned about ESG investing was during a social impact course my freshman year of college, one required by our university for all of us future business leaders to learn about the way corporations influence the communities around them. It was a concept that brought together environmental, social, and governance factors under one investment thesis. I remember thinking: “This is the future of finance that I want to be a part of.”

 

Accelerated by the many socially impactful events that have occurred since the start of 2020, it seems that the trend towards ESG has only been moving forward. Demand from both consumers and investors for more transparent and responsible business practices is louder than ever, and financial institutions are offering an expanding line of ESG products that just a decade ago hardly even existed. It’s a promising turn towards a more sustainable future for business and capital markets. However, with that seems to be coming a slow dilution of the true values that underlie ESG. 

 

ESG stands for environmental, social, and governance. It encompasses the way that businesses interact with society, measuring their impact and the ways that they give or take away from the good of the whole. In practice, ESG can be a tool for investors to screen for companies that don’t align with their values. Is this business negatively influencing changes in our climate? Does this one have unethical labor practices? Do they take advantage of any marginalized communities, or are underrepresented backgrounds not welcome at this firm? These are some questions that may come up when deciding how “ESG friendly” a company really is. Part of the reason that ESG has been growing in popularity as an investment thesis is that it isn’t just a feel good tactic. Studies have shown that ESG factors have a direct impact on a company’s long term sustainability and profitability. For example, an article written by Credit Suisse’s Global Head of ESG Strategy references a study done on the impact of the COVID-19 crisis on ESG and non ESG indices in European markets. Those that were ESG focused fared better than those that were not. If a company doesn’t take into account the implications of real world events on their business operations it adds a layer of risk for an investor. 

 

The problem is, there is no standardized way of measuring a company’s level of ESG integration. Every financial institution does their analysis differently, and so the criteria of the research can vary. Not only this, but currently the information that firms themselves report isn’t standardized in the United States. ESG disclosures are optional, making it hard for investors to perform their due diligence, and hard for people to really understand what they’re buying into. It also makes it easy for companies to greenwash – as in, build up an image of being socially conscious or environmentally sustainable through clever marketing and branding, when in reality, their operations say otherwise. ESG seems to have become a buzzword, along with “sustainable”, “green”, and the like.  Ultimately, there needs to be a way to strip away the fluff down to common measurements and metrics of a company’s ESG integration. Although it’s a challenge to figure out how to translate something as complex as the societal impact of a firm into comparable data, it’s necessary to help consumers and investors like myself navigate their way through the weeds and decipher who is really taking action to back up their words. 

 

On one hand, it pains me to see some businesses use ESG as a profitable tactic. Although there are many profitable companies driven by values of corporate responsibility, there are some that use ESG in a way that seems artificial, motivated by money rather than morals. On the other hand, I ask myself, does it matter why a company is doing it as long as they are? The argument can be made that even greenwashing brings awareness to the importance of a business’s impact on the environment, and ESG factors, even if only lightly taken into consideration, are better to be seen as a business tactic than not seen at all. 

 

I chose to pursue a career in finance because I see that money has the power to create change. In my short time as a student in the industry, I’ve met people, some with a lifetime of experience and some who have only just begun their careers, who give me a lot of hope for the future. They motivate me to hold on to my values in such a competitive space, whether it be understanding the impact of my actions or doing my best to work with integrity. My time at Scholars of Finance has also influenced the way I approach my career. I’ve become more sensitive to the motivations behind my decisions and the way I interact with others; this month’s value of humility has really reminded me of how much more I have to grow. However, I’m worried that there may be a balance that needs to be made between staying true to what I believe in and working alongside the motives of others in order to make progress towards a future I hope to see. 

 

As much as I’d like it to be so,  I don’t believe ESG measures will be implemented in every company simply because it’s good for society. Often, they will be implemented because they help a business appeal to consumers, or standardized requirements have been passed, or future costs of climate change, government policy, or dissatisfied workers make it too expensive not to in the long run. 

 

I can’t say if I think the implementation of ESG measures are a good or bad thing. All I can say is what I do believe: In the end, this earth, along with the people in it, are what support a business. With the ESG movement comes more visibility for this relationship, more pressure for companies to put their money where their mouth is, and more movement towards standardized regulation and reporting in the ESG space. We’re entering an age where companies can’t ignore their dependence on all of their stakeholders, and today, these stakeholders have more power than ever to hold companies accountable. It may be a necessary evil to accept that some won’t be motivated by the common good. Some may not even care to make changes past the surface level. But ultimately, that’s okay, because eventually, those will be the ones left behind.

Jun 01
Love2

Humility

By Financial Leadership, Humility No Comments

At Scholars of Finance, we have six core values that are at the center of what we teach: Integrity, Compassion, Humility, Curiosity, Impact, and Courage. Each month, our members vote on the “Value of the Month”, which helps focus our discussions on topics pertinent to that value.

Humility was our value for May and we spent a lot of time thinking and talking about it as a community, so I wanted to share some thoughts on this value as we enter the summer. Here are our epithet and principles for Humility:

Humility

Know thyself

  • Serve a purpose greater than yourself
  • Cultivate gratitude for what you have 
  • Recognize both your strengths and limitations
  • Ask for and share honest feedback regularly

In today’s society, “Humility” is often synonymous with “Modesty”. According to Merriam-Webster’s dictionary, Humility is “the state of being humble.” Both it and humble have their origin in the Latin word “humilis”, meaning “low.” The definition of “humble”, in the dictionary, is “not proud or haughty: not arrogant or assertive”. Many people think it means having a “low” opinion of oneself – that it is the opposite of “arrogance”.

The Scholars of Finance view of humility, however, which we have been taught by our mentors and leading thinkers, philosophers, and spiritual teachers, actually places humility at the center of a spectrum between modesty and arrogance. It’s not thinking too highly or too lowly of oneself. That said, we believe humility can be summed up in two practical ways: 

  1. Accurate self-appraisal; and 
  2. Overcoming our ego. 

David Brooks captures both points beautifully in his book The Road to Character, when he writes, “Humility is accurate self-awareness from a distance. It is moving over the course of one’s life from the adolescent’s close up view of yourself, in which you fill the whole canvas, to a landscape view in which you see from a wider perspective, your strengths and weakness, your connection and dependencies, and the role you play in a larger story”. We view humility as overcoming our ego so we know the truth about ourselves holistically. I’ll unpack this using our epithet and principles.

Know thyself

In order to know ourselves, we need to see ourselves clearly. Our egos can be fragile, and fragile self-perception often gets in our way in life. 

When we read David Brooks’ writing, we see a few ways in which it is difficult for us to know ourselves. It is difficult to face our strengths and our weaknesses. We hear people say they are “self-made”, having difficulty acknowledging how everyone in their lives leading up to that point played some role in who they are now. Often, when we see “the role we play in a larger story” it can throw some of us into an existential crisis, facing how infinitesimal our lives may be in the grand scheme of things – in a world of eight billion people and in thousands of years of recorded history. 

The principles of Humility outline four critical components of a “system” that helps us to know ourselves, empowering us to overcome all of these potential obstacles. 

Serve a purpose greater than yourself 

To diminish the ego, we need to work against self-centered tendencies. The primary way we can do this is by focusing on serving a purpose greater than ourselves so our daily life is not “all about me”. Doing so keeps us focused on the bigger picture, so we don’t become self-obsessed or begin to think we are the center of the universe. When we focus on ourselves too much it can feed our egos. Conversely, a focus on others reinforces altruism and selflessness. It is the antidote in (and through) action. 

Cultivate gratitude for what you have

Greed, as we often discuss, is one of the largest risks to our character that we face in the finance industry, and the cause of many of the problems in the system we have seen throughout history. We do not believe “Greed is good”. Greed is thinking “I need more” or “I don’t have enough”, when we have more than we actually require. On the contrary, Gratitude is feeling, thinking, and/or knowing “I am content with what I have” or “I have enough”. Gratitude empowers us to experience contentment – this repels fear and anxiety, which can often be self-centric. Gratitude is our day-to-day shield against a relentless pursuit for more.

Recognize both your strengths and your limitations

Our ego – our sense of identity – often needs to protect itself, so we run from the less convenient realities about who we are. However, being open to even the hard truths about ourselves keeps us attuned to reality. Embracing these hard truths stops us from falling into a fragile-ego-protection trap, where we are blind to our own limitations. By recognizing both our strengths and limitations, it keeps us in the center of the spectrum we opened this post with and allows us to have an accurate sense of self. It ensures that we don’t become too modest or arrogant either. We have a full and balanced view of ourselves. 

Ask for and share honest feedback regularly

Lastly, we can only see a part of the picture of ourselves. Because we are an interdependent social species, how others perceive us is also important. While our self-esteem should be intrinsically sourced, others can and will often see strengths and limitations, realities about ourselves, that we won’t see on our own. They help us see blind spots and tell us how our behavior impacts others. By asking for and sharing feedback, it creates an environment where others will help us to stay in touch so our egos don’t blind us to difficult truths.

Conclusion

At Scholars of Finance, we need to take a wider perspective because of the impact investments have on the world. There are several truths about ourselves we need to remain constantly aware of. 

  • If we achieve our goal of instilling stewardship and integrity in the finance leaders of tomorrow, we will be managing billions of dollars one day and have great influence. We need to take this very seriously. 
  • We are in a culture and society that venerates wealth – in a system that has perpetuated increasingly divergent socio-economic disparity – and we can easily be influenced by our environment. 
  • Focusing on our own needs is healthy inasmuch as it equips us to be our best, but too much self-centric focus can stop us from seeing the bigger picture.
  • In Wall Street, greed can easily creep in, slowly, gradually over time, almost imperceptibly, and can undermine our better intentions and desire to help others. 
  • Our success in finance can get to our heads, our egos can get inflated as our sense of self swings toward arrogance, making us more prone to selfish behavior, greed, and ethical lapses.

Preparing for those risks is at the core of our mission at SOF and Humility is a value that requires a lifetime of constant cultivation. We never “arrive”, we only constantly improve (sometimes face setbacks), and continue to develop humility. It’s a plant that needs to be watered regularly to grow and thrive. So, our community encourages you to test the four principles. 

As we begin to enter the summer season and many of you begin new internships, or for the investors reading, you prepare to close deals, go back to the office, and continue to advance your careers, we invite you to join us in thinking about how you are exemplifying humility in your life and work. 

  • Revisit your mission and values – are they bigger than yourself? Do you have them written down and does your greater purpose resonate and feel real and personal?
  • Express daily gratitude, whether it be alone, with friends, or even asking others what they’re grateful for; list 5 things you’re grateful for today.
  • Take an inventory of your strengths and your weaknesses, perhaps with 15 minutes of journaling time this week.
  • Ask 10 people in your life for 360 feedback. Find out what your mentors, family, friends, and other peers think about you holistically. 

Doing these things will help you play to your strengths and manage your weaknesses, will strengthen your relationships, and will help you to do more good and make a greater impact on people. And in the spirit of humility, these practices will help us know ourselves so that we can overcome ourselves and be true stewards. 

As we venture into June and our value of the month is “Curiosity”, I would love to hear what you learn. Feel free to reach out and share your thoughts or questions. At SOF our greater purpose is to inspire character and integrity in the finance leaders of tomorrow. We’ve made progress but still have so much to learn. We would be grateful for your honest feedback.

Apr 16
Love3

Modern Integrity and Impact

By Impact, Integrity, Principles No Comments

“Something came up.” This is perhaps the most common requiem sung on behalf of failed commitments and unfulfilled responsibilities. And, perhaps relatedly, it is often one of the least heart-felt. Sure, it’s unfortunate that we had to abnegate our duties — but we had no choice. Unforeseen circumstances required us to take extraordinary measures in order to be present in some other space. While the failure is unfortunate, it does not reflect on our integrity or moral character. We did the best we could.

 

Perhaps. I want to argue that the sense of integrity which is not injured by such a decision is running on an antiquated operating system, and desperately needs to be upgraded to reflect our modern world. Such an upgrade to a fully modern interpretation of integrity will not only allow us to better keep our commitments, but will also feed into our ability to impact the world around us more generally. This modern integrity will ask much of us—I’ll leave it to you to decide whether it’s worth the while.

 

So what is “something came up” integrity? Well, to use the framework of human development pioneered by Harvard psychologist Robert Kegan, often it is a sort of integrity which presupposes a stage-3 communal self. This version of the self identifies as a set of relationships, all of which impose potentially unlimited obligations on us at all times. According to the communal mindset, integrity comprises in meeting whichever one of these infinite obligations presents itself in the moment. If multiple obligations happen to present simultaneously, we break the tie between infinities by following our emotions; i.e. we planned to give a talk, but then our friend’s goldfish died, and, well—something came up. Because we’re always under these infinite obligations, any commitment we make comes with a laundry list of asterisks attached—it becomes provisional.

 

This might sound reasonable—after all, even the most cold-hearted would probably agree that there are some unpredictable events in life that do indeed impose obligations that overwhelm the ones we formed in previous commitments. We probably should not walk over someone dying on the street in order to make it to our meeting on time. But, it can be overused, with dire consequences. How many marriages failed because “work came up” on one too many date nights? How many companies failed because personal matters came up for one too many mission-critical workers at the wrong place and in the wrong time? How many careers sputtered because “something came up” and impeded one too many crucial actions? Many of the best things in life depend on commitment, and I challenge you to think of one which hasn’t been jeopardized for someone you know by something that “came up” which wasn’t truly enough of an emergency to warrant it. Once you look for it, you’ll hear its somber tune all around you. We sing it every day.

 

Fortunately, there is an alternative. According to Kegan, the next stage in human development is the stage-4 institutional self. Here, obligations depend on context, which for all but a few is non-global. We might be a parent, child, boss, subordinate, friend, partner — but we are not subject to unlimited obligations coterminous with each role at all times. We can leave our work phones on silent while bonding with loved ones and tell our bereft goldfish-keeping friends that we will console them after our mission-critical work meeting. It might seem cold to draw boundaries like this, and perhaps even uncaring. But is the best way to communicate care to someone really the extent to which we’re willing to neglect duties that third parties are relying upon? As long as we keep boundaries firm all-around, no one should get shortchanged, and everyone will be able to count on us. Our voice will be one fewer added to the morbid chorus of something-came-up dirges.

 

Life will become more predictable, which is a prize of its own. The communal model of self is perfect for a small hyper-egalitarian community whose time constraints on work do not bind — exactly the kind that dominated before the invention of projectile weapons and agriculture. But in a world characterized by complexity where time constraints bind tightly, it’s simply not a viable way to make an impact. If we follow Professor of Neuroscience Karl Friston’s model of intelligent agent action and consider cognition to be guided by a process which seeks to minimize surprisal (free energy), we can get a clearer picture of why this might be.

 

Under a Fristonian model, there are two main sources of surprisal: goal-related and means-related. We can think of goals as expectations; we expect to eat every day, and if we didn’t, we would, at some level, be surprised. To ensure we don’t encounter this surprise, we take actions; we might go to a restaurant with some friends. Of course, this introduces potential surprisal as well — what if the restaurant turns out to have a pest problem, or a fight breaks out at a nearby table? As long as the expected surprisal penalty you incur by the means is less than the surprisal you’d suffer from not eating, you’ll take the trade. If it’s not, you’ll probably find yourself skipping lunch — and perhaps minimizing surprisal some other way, maybe by scrolling through social media.

 

What does this all have to do with impact and integrity? To the extent that actions are downstream of obligations, a sense of self guided by obligations which are clear, pre-determined, and context-dependent will pre-potentiate predictable actions. When we are able to fully commit to future actions, the amount of variance — expected surprisal — that those actions will “cost” is drastically reduced. Eventually, it might become so low that we take the actions almost unthinkingly; habits are the epitome of non-provisional commitment. While most of us can’t live a life constituted 100% of unthinking habits, we can extend the fundamental principle they depend on: that the derivative of success with respect to expected action surprisal cost is negative. 

 

This is a principle we all intuitively know: when we want to finish a big project, we might write down all the necessary tasks into a list, or maybe even vividly imagine ourselves completing them. We set clear expectations and align on goals and strategy. Computationally, it’s (not-so-simple) arithmetic. Predictability means less action cost means more goals met over the long run. If we wish to make an impact, the answer is clear: ditch stage-3, and embrace stage-4. If our goal is to change the world for the better, we can’t accept a life whose soundtrack is that oh-so-familiar song on repeat, whose commitments are provisional and wherein we pay out the nose in terms of expected surprisal for the actions we need to take to achieve our goals.

When we have a second to reflect, let’s ask ourselves: Do I show that I care for others by carving out and defending quality time with them, or by reneging on my commitments to third parties when something comes up for them? Do I let myself off the hook a little too easily when I don’t follow through? Do I minimize the expected surprisal cost of the actions I need to take to get things done, or do I vainly blaze a new trail through the jungle of chaos and unpredictability every day? Do I ever fail to reach my potential because I’m unsure, uncertain, or uncommitted? These are tough questions, but all we have to lose is our expected action surprisal cost — and an old earworm.

Mar 31
Love2

Integrity: You Only Have It When You Know You Don’t

By Integrity, Principles No Comments

At Scholars of Finance, we have six core values that are at the center of what we teach: Integrity, Compassion, Humility, Curiosity, Impact, and Courage. Each month, our members vote on the “Value of the Month”, which helps focus our discussions on topics pertinent to that value.

Integrity was our value for March. Here are our epithet and principles for Integrity:

Integrity

Do what’s right

  • Do the right thing, always
  • Build trust through transparency and accountability 
  • Honor your responsibilities and commitments
  • Speak the truth at all times

We utilize integrity in both a moral sense and as a barometer of trust. It both calls us to do what is “right” while also calling us to be trustworthy. These are mutually reinforcing. There are millions of pages written about what is “right”, which have culminated in an abundance of religions and moral philosophies informing how we collectively act. However, I will unpack the question of how to “define what is right” in a later blog post. For now, I will offer one example that I think is not overly controversial, builds trust, and happens to be one of our principles – to speak the truth at all times.

Many people I’ve spoken with over the years have shared that integrity, or honesty, is a core value of theirs. We rarely meet someone who claims they need to become more honest. And while I hope that this is simply a result of surrounding myself with honest people, I often wonder if this actually reflects a lack of self-awareness? Or something even worse, that our collective standard for honesty or truth is diminishing? According to the Pew Research Center, I’m not alone in wondering, as a majority of people (51%) think that misinformation online is a problem that won’t be fixed.

However, speaking the truth at all times, for many of us, seems like a “given”. It is presumed that we will do this and that we already do this. If we were a liar, how could we live with ourselves? Yet, taking time to reflect on this principle and just how profound and radical it is, opens our eyes to just how much room we have to grow in honesty. Dinner with a friend, his niece, and a couple of her classmates recently got me thinking about this. Since “Speak the truth at all times” was the principle we spent the following week reflecting on there was a timely opportunity to dig into it with our organization as well.

The young woman was a senior in high school. I was visiting my friend when she and her friends also happened to be visiting him as well (he’s a cool uncle worth visiting). They explained to me that their classmates cheat on tests rampantly. Everyone turns off their cameras on Zoom, gets on a group FaceTime, and they take the exam together. It’s become commonplace. I was a bit shocked.

As I felt myself begin to judge, the maxim “judge not lest ye be judged” came to mind. I realized that I am not one to judge because I am not perfectly honest. As I started to think about my own shortcomings, a couple of Zoom-related “white lies” that I have told struck me. I started talking to our students and some of my friends about these and many of them reported doing the same things. 

For one example, have you ever been distracted on a Zoom call, whether with work or email, been asked a question, and said something to the effect of, “Sorry, my (audio, wifi) cut out (or insert other technical difficulties), can you say that again?” I’ve done this more than once. When I ask this question on Zoom calls, almost everyone smiles knowingly or nods. 

When I shared this with one of my teammates last week, they shared an example of a small concession of the truth in their own lives too. Notably, one person shared that they will sometimes do 10 push-ups in the morning just to be able to tell people they worked out that morning – to seem productive and disciplined. But they acknowledged that the statement “I worked out this morning”, while true, generally implies they spent at least 20-30 minutes exercising, which was not the case.

Personally, I was hardly even aware that I was making small concessions of the truth. It reminded me that we stray from the truth in small ways, oftentimes almost imperceptibly. This can lead to much larger concessions of the truth over time. Simon Sinek talks about this snowball effect in his recent book The Infinite Game, which my mentor Anthony Paquette sent me – the phenomenon is called ethical fading. Ethical fading is a well-studied process by which we “slowly and gradually make moral or ethical concessions sometimes unconsciously which compound into increasingly significant ethical failures.”

This concept implicates us in a high-stakes relationship with honesty. We need to be thoughtful and diligent about cultivating integrity. Especially if we are going to be finance leaders and investors – making decisions with millions of dollars – where the upside to being dishonest has lured many down the wrong path (and into jail). Every one of us can benefit from taking the time to introspect on our integrity. If you’re reading this and thinking, “you’re wrong, I’m completely honest and none of this applies to me”, just set aside 30 minutes and ask yourself these questions:

  • Have there been any times in the last month where I have not been 100% honest, even in small ways?
  • Is there something I’ve been holding back from saying to someone that needs to be said?
  • Have I been 100% honest about how I feel about things with the people close to me?
  • Does my language sometimes imply more about what I’ve done than I actually have?
  • Has someone said something to me recently that made me defensive? Could there be some truth in their statement that I am overreacting to?

None of us are perfect, and that’s ok. What’s important is that we are willing to own up to the times when our integrity lapses. It’s how we approach these moments of ethical fading that can either lead to a slippery slope of low integrity decisions or a career built upon trust that is rightfully earned. 

I believe that all of us doing this in our own lives can inspire many more to do the same. Just like talking about mental illness can break the stigma and fuel recoveries, talking about ways our honesty has slipped can break the stigma of failure and fuel deeper relationships, whether with loved ones or teammates. Counterintuitively, it builds trust with others as people recognize your self-awareness and conscious effort to hold yourself to a high standard of integrity. 

With that, I hope you haven’t judged me as you’ve read my confession about my own shortcomings (being honest about this stuff does feel vulnerable!) and I also hope that you’re feeling even just a little motivated to examine areas in your own life where you can grow in integrity. And, if you’re really inspired, I hope you’ll talk about it with others to get accountability and grow with them too.

Mar 12
Love1

Impact and Decision-Making: Analyzing the Economic Impact of the American Rescue Plan Act of 2021

By Financial Leadership, Humility, Impact No Comments

As an active member of Scholars of Finance, I have learned about the importance of having core values in decision-making and everyday life. One of our core values at Scholars of Finance and our Value of the Month for February was Impact. As the COVID-19 pandemic drags on, Congress recently passed a $1.9 trillion stimulus known as the American Rescue Plan Act of 2021. President Biden signed the bill on March 11th and it acts as another COVID-related stimulus that will impact the lives of American citizens and influence our economic trajectory.

On the surface, a bill intended to help others during a time of need sounds like it would receive bipartisan support after a year-long crisis. However, for the American Rescue Plan Act of 2021, that is not the case.

Primary Provisions

The American Rescue Plan Act of 2021 aims to address many issues ranging from unemployment, small business assistance, vaccine rollout, education, and a range of others including:

  • $1,400 direct payments for individuals making up to $75,000/year and couples making up to $150,000/year (being phased out at $80,000/year and $160,000/year)
  • An extension of $300/week in unemployment benefits up until September 6th
  • Household relief of up to $3,600 per child for families with children
  • $350B in state and local aid
  • $15B to assist small businesses through the Emergency Injury Disaster Loan Program
  • $125B in aid to K-12 schools to reopen
  • Tens of billions in funding for a nationwide COVID-19 vaccination program
  • And many more

However, the bill sparked debate in Congress over the enacted shortcuts and its $1.9 trillion price tag.

Political Opposition

The road to legislation for the American Rescue Plan Act of 2021 was far from smooth. The bill faced opposition from Republicans and some Democrats citing their disapproval of Democrats’ use of the budget reconciliation process bypassing the Senate filibuster to pass the bill and its expensive nature. Senate Minority Leader Mitch McConnell (R-Ky.) has stated that the proposed stimulus is “wildly expensive” and “largely unrelated to the problem”. Jared Golden, a House Democrat from Maine, voted against the bill, defending his vote stating, “I won’t support trillions more in funding that is poorly targeted or in many cases not necessary at this moment in time”. The high cost of the bill has been the main issue Democrats faced in getting it passed, however, the bill received a lot of support from the Democratic party.

Democratic Support

Despite Republican opposition, most Democratic leaders voiced their support for the bill. Senator Bernie Sanders (I-Vt.) has described the bill as “The most significant piece of legislation to benefit working families in the modern history of this country.” House Speaker Nancy Pelosi (D-Ca.) also stated that the bill “Goes a very long way to crushing the virus and solving our economic crisis.” Democrats who supported the bill cited its significance after a year-long crisis and as a preventative measure for the future.

Next Steps

On March 6th, the Senate passed its version of the bill – which did not include the initial $15/hr minimum wage proposal after it was struck down by the Senate Parliamentarian – in a party-line vote. Democrats then successfully passed the bill in the House with another primarily party-line vote on March 10th, and President Biden signed the bill into law on Thursday, March 11th. With the current round of unemployment benefits from December’s stimulus running out in the next couple of weeks, President Biden aims to “Get checks out the door starting this month to the Americans that so desperately need the help” in what will be the third round of stimulus checks since the pandemic started. 

The Effects on the Economy and Markets

With the economy still recovering from the COVID-19 pandemic that caused an economic shutdown about a year ago, the purpose of a stimulus such as this one is to accelerate economic and GDP growth to get the economy back on track. In addition to the stimulus bill, Chairman of the Fed, Jerome Powell, stated that the Central Bank does not plan to raise interest rates (currently at a record low 0.25%) any time soon. However, the proposed stimulus coupled with a relaxed monetary policy from the Fed has raised some concern about inflation and its spillover effects into the bond and stock market. 

One voice of concern comes from Former Treasury Secretary Lawrence Summers. Summers recently stated in an Op-Ed article that “The proposed Biden stimulus is three times as large as the projected shortfall. Relative to the size of the gap being addressed, it is six times as large”. His article raises a cautionary warning of inflation which has been reflected in the rising yields of treasury bonds in recent weeks and a decline in tech stocks. However, Nobel Laureate, Paul Krugman, responded by stating that the recession caused by the COVID-19 pandemic should be considered “A natural disaster than a normal recession,” and that any fiscal stimulus should be viewed as necessary “Disaster relief”. Krugman additionally argues that concerns over inflation are exaggerated, as stimulus checks are likely to be saved and not immediately spent, therefore providing consumers with stability and expanding their capabilities for future spending. 

On Wednesday, March 10th, the Dow Jones Index reached new highs breaking 32,000 showing signs of delight at the bill’s passage in the House, and continued to reach record-highs on Thursday. However, the effects of the stimulus on the economy will not be immediately observable. In the coming months, economists will be on the lookout for several indicators such as unemployment, treasury yields, inflation, vaccine rollout, and many others. Monitoring these trends will influence whether or not the Fed will have to take action and raise interest rates earlier than anticipated if inflation gets out of control.

Conclusion

Is a $1.9 trillion bill a necessary relief needed to provide citizens and the economy with the support they need, or should the inflationary concerns take precedence? As we have seen, it is up for debate. 

Nonetheless, as a member of Scholars of Finance, I know that my decisions impact those around me. Although they may not be as large-scale as those of politicians and financial leaders, having a values-based approach has undoubtedly helped guide my decision-making. Learning how to implement the values of Integrity, Compassion, Humility, Curiosity, and Courage into my decision-making has enabled me to achieve another core value — Impact. For politicians deciding on the American Rescue Plan Act of 2021, reflecting on their values and their responsibilities as public servants to citizens hopefully helped guide them in their decisions and best serve the country. By upholding the values of Curiosity and Compassion, politicians can seek to understand society’s needs and act accordingly. With Humility, they will be able to reflect upon the responsibilities they accepted and their role to serve on behalf of the greater good of all people. Through Courage and Integrity, they can build trust through honesty and speak up for what is right. Altogether, enabling them to have a positive Impact on the people they serve. As the world and society continue to evolve, I urge everyone to reflect on the impact they have had, wish to make, and the legacy they want to leave behind.

 

“I believe I have a personal responsibility to make a positive impact on society.”

— Dr. Anthony Fauci

 

Sources: 

 

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To make a direct donation in Bitcoin send BTC to the address below.
3Qkv1gccndjqM5LT7YBh5YwLCbXiyyoEwW 3Qkv1gccndjqM5LT7YBh5YwLCbXiyyoEwW
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Send your donation
To make a direct donation in Bitcoin send BTC to the address below.
3Qkv1gccndjqM5LT7YBh5YwLCbXiyyoEwW 3Qkv1gccndjqM5LT7YBh5YwLCbXiyyoEwW
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Send your donation
To make a direct donation in Dogecoin send DOGE to the address below.
DLnbog4NokcoVviZeB9CyRtWagbA3R1vEp DLnbog4NokcoVviZeB9CyRtWagbA3R1vEp
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Send your donation
To make a direct donation in Dogecoin send DOGE to the address below.
DLnbog4NokcoVviZeB9CyRtWagbA3R1vEp DLnbog4NokcoVviZeB9CyRtWagbA3R1vEp
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Send your donation
To make a direct donation in Bitcoin Cash send BCH to the address below.
qrd0tq9n7azr52phqe0cf5uvayhxz0mv25pd0es88s qrd0tq9n7azr52phqe0cf5uvayhxz0mv25pd0es88s
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Send your donation
To make a direct donation in Bitcoin Cash send BCH to the address below.
qrd0tq9n7azr52phqe0cf5uvayhxz0mv25pd0es88s qrd0tq9n7azr52phqe0cf5uvayhxz0mv25pd0es88s
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Send your donation
To make a direct donation in Litecoin send LTC to the address below.
M8WsuTTdnbTkb3DPJFmzE3iefXDYkgNdq M8WsuTTdnbTkb3DPJFmzE3iefXDYkgNdq
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Send your donation
To make a direct donation in Litecoin send LTC to the address below.
M8WsuTTdnbTkb3DPJFmzE3iefXDYkgNdq M8WsuTTdnbTkb3DPJFmzE3iefXDYkgNdq
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Send your donation
To make a direct donation in Filecoin send FIL to the address below.
f1nitkcsb5eon7agkjxl3irfmkkljm7wtbo7e4osq f1nitkcsb5eon7agkjxl3irfmkkljm7wtbo7e4osq
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Send your donation
To make a direct donation in Filecoin send FIL to the address below.
f1nitkcsb5eon7agkjxl3irfmkkljm7wtbo7e4osq f1nitkcsb5eon7agkjxl3irfmkkljm7wtbo7e4osq
(function() { var qs,js,q,s,d=document, gi=d.getElementById, ce=d.createElement, gt=d.getElementsByTagName, id="typef_orm_share", b="https://embed.typeform.com/"; if(!gi.call(d,id)){ js=ce.call(d,"script"); js.id=id; js.src=b+"embed.js"; q=gt.call(d,"script")[0]; q.parentNode.insertBefore(js,q) } })()
Send your donation
To make a direct donation in Zcash send ZEC to the address below.
t1XFGudFg5Hx1uQjFfU8oZ9P97ZdMtffxfK t1XFGudFg5Hx1uQjFfU8oZ9P97ZdMtffxfK
(function() { var qs,js,q,s,d=document, gi=d.getElementById, ce=d.createElement, gt=d.getElementsByTagName, id="typef_orm_share", b="https://embed.typeform.com/"; if(!gi.call(d,id)){ js=ce.call(d,"script"); js.id=id; js.src=b+"embed.js"; q=gt.call(d,"script")[0]; q.parentNode.insertBefore(js,q) } })()
Send your donation
To make a direct donation in Zcash send ZEC to the address below.
t1XFGudFg5Hx1uQjFfU8oZ9P97ZdMtffxfK t1XFGudFg5Hx1uQjFfU8oZ9P97ZdMtffxfK
(function() { var qs,js,q,s,d=document, gi=d.getElementById, ce=d.createElement, gt=d.getElementsByTagName, id="typef_orm_share", b="https://embed.typeform.com/"; if(!gi.call(d,id)){ js=ce.call(d,"script"); js.id=id; js.src=b+"embed.js"; q=gt.call(d,"script")[0]; q.parentNode.insertBefore(js,q) } })()
Send your donation
To make a direct donation in Ethereum send RTH to the address below.
0xa6E72617C51581D25F04151F156d913988d6cAcF 0xa6E72617C51581D25F04151F156d913988d6cAcF
(function() { var qs,js,q,s,d=document, gi=d.getElementById, ce=d.createElement, gt=d.getElementsByTagName, id="typef_orm_share", b="https://embed.typeform.com/"; if(!gi.call(d,id)){ js=ce.call(d,"script"); js.id=id; js.src=b+"embed.js"; q=gt.call(d,"script")[0]; q.parentNode.insertBefore(js,q) } })()
Send your donation
To make a direct donation in Ethereum send RTH to the address below.
0xa6E72617C51581D25F04151F156d913988d6cAcF 0xa6E72617C51581D25F04151F156d913988d6cAcF
(function() { var qs,js,q,s,d=document, gi=d.getElementById, ce=d.createElement, gt=d.getElementsByTagName, id="typef_orm_share", b="https://embed.typeform.com/"; if(!gi.call(d,id)){ js=ce.call(d,"script"); js.id=id; js.src=b+"embed.js"; q=gt.call(d,"script")[0]; q.parentNode.insertBefore(js,q) } })()
Send your donation
To make a direct donation in Ripple send XRP to the address below.
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XRP Address:
rw2ciyaNshpHe7bCHo4bRWq6pqqynnWKQg rw2ciyaNshpHe7bCHo4bRWq6pqqynnWKQg
XRP Tag:
914351319 914351319
Send your donation
To make a direct donation in Ripple send XRP to the address below.
XRP Address:
rw2ciyaNshpHe7bCHo4bRWq6pqqynnWKQg rw2ciyaNshpHe7bCHo4bRWq6pqqynnWKQg
(function() { var qs,js,q,s,d=document, gi=d.getElementById, ce=d.createElement, gt=d.getElementsByTagName, id="typef_orm_share", b="https://embed.typeform.com/"; if(!gi.call(d,id)){ js=ce.call(d,"script"); js.id=id; js.src=b+"embed.js"; q=gt.call(d,"script")[0]; q.parentNode.insertBefore(js,q) } })()
XRP Tag:
914351319 914351319