Part II:Retirement Investing
In Part I of this series I focused on localizing credit card processing, working from the assumption that consumers love credit cards, but the fees associated with those transactions are in many cases leaving our community.
Credit card transaction fees are primarily something to worry about for small business owners; the topic of Part II, however, affects all of us. When we save for retirement, we are ultimately contributing our money into a system over which we have little control, and with varying degrees of transparency. It is time to regain control over that system, and think about localizing our retirement assets by putting them to work in our communities.
Before we dive into one of the biggest systems, I just want to reiterate that the hope of this series is not necessarily to provide solutions, but to spur conversation about moving forward locally on global-scale problems.
System 2: Retirement
I love New England for many reasons, but one of them is that people here “retire” to building (or re-building) their houses, volunteering, doing something they love, etc. It is a real work ethic that I admire and seek to emulate. Yet I’m on the retirement treadmill, and I think that many of you probably are too; you are on it if you currently or have ever contributed to a 401-K, 403-B, or have purchased a mutual fund. And I increasingly – as they say in politics – don’t like the optics of this.
Through a series of financial revolutions in our broader economic “system,” we are incentivized not to save money in our local institutions in CDs, savings accounts, or other vehicles, but instead in securities traded primarily on Wall Street in New York. In the interest of full disclosure, I began my career on Wall Street, but over the past five years, we have all felt the results of the negative potential of the market.
We as consumers have come to see Wall Street for what it really is: A store that sells us products that have a chance of increasing (or decreasing) in value over time, though we have no control over those movements, and we’re charged a fee no matter how they move, which supports people who have some more information than we do, but not really all of the information they need.
Worse, we the people do not play by the same investing rules as larger, institutional investors. Often these entities rely on ever-more complex quantitative modeling that is increasingly removed from actual data.
But, you say, we have no other option: If I want my money to grow, I have to invest on Wall Street. That may be true, but WHAT IF we localized investing. What would that look like? Could we set up an exchange of locally traded New Hampshire companies that issue securities invested in by local people who are interested in earning a decent rate of return, but who don’t want to send those fees to someone in lower Manhattan, and instead want to keep them in New Hampshire?
Could we design a mutual fund that allows entry-level investing in entrepreneurs from New Hampshire? Instead of fearing that “angel” or “venture capital” funding is beyond the ordinary person’s reach, we could gather a consortium of $100 investors into a pool that collectively creates a sizeable resource. This fund could come with a bargain: move or start your business in the Monadnock Region, and there is a large, community-supported source of financing (and customers) waiting for you.
When we think of investing, we think of investing out, when our dollars can do so much more here at home. I am not suggesting isolationism, or that you shouldn’t have balanced investing, I just think we have to start thinking about investing in ourselves, and tying our future to our community where we have a voice and can make a difference.
Too big to tackle you might think? There is no reason we can’t. I’ll leave you with a quick story I read recently: It is the story of the founding of Goldman Sachs, one of the largest investment banks in the world. It is the story of Mr. Goldman and Mr. Sachs, who began their business in the 19th Century by helping small, local New York businesses to get short-term funds to meet obligations through what is now known as “commercial paper.” In other words, they started small; they started locally. We can do that here.