Investor Virtue Signaling In A Capitalist Country Is Fascinating

Virtue signaling is the public expression of opinions or sentiments intended to demonstrate one’s good character, social conscience, or the moral correctness of one’s position on a particular issue.

I don’t mind virtue signaling if the person also lives by their beliefs. It is natural to want to demonstrate to the world one’s beliefs, especially about a cause one truly believes in.

For example, I believe the #1 minority we should help is the ~15% of the population born with a disability of some sort. As a result, I incorporate the topic in relevant posts and donate accordingly.

The problem lies in being overly virtuous to the point of making other people feel morally inferior. Virtue signallers enjoy the privilege of feeling better about themselves by doing very little. Even worse is when people’s actions are inconsistent with their beliefs.

Before we get to the curious case of investor virtue signaling in a capitalist country like America, let’s review some common examples of virtue signaling in day-to-day life.

Examples of virtue signaling with inconsistent actions:

  • Politicians who talk about how important it is to support public schools while sending their own kids to private schools.
  • University administrators who talk about how important it is to help people from all races and socioeconomic backgrounds, yet keeps class sizes artificially small to retain exclusivity. Then they create a personal score system to throttle certain races.
  • Vegetarians who rail against carnivores, yet wear leather shoes.
  • Department of Building inspectors who condemn homeowners for remodeling without permits, yet take bribes from developers who want to cut corners and boost profits.
  • Rich people who say how unfair it is they pay so little in taxes, yet don’t voluntarily pay more taxes themselves.
  • People who believe that all content should be free online without ads, yet don’t work for free themselves.
  • Personal finance personalities who say that it’s important to make personal finance education accessible to all, yet charge $2,000+ for courses.
  • Proponents of more housing (Yes In My Backyard), yet object to new housing being built in their neighborhood.
  • Supporters of illegal immigrants who get upset when illegal immigrants come to their city
  • People who want to defund the police, yet expect the police to come ASAP when they need help

The list goes on and on. Virtue signaling is commonplace. Just don’t obnoxiously force your views on others while not following your own beliefs. If your actions follow your beliefs, you’re good to go. If not, get out of town.

An Example Of Honorable Virtue Signaling

After all these negative examples of virtue signaling, what about some positive examples?

Here is one that is both sad and honorable.

The parents of a killed bakery owner sought clemency for the murder of their daughter after she was carjacked. Because the deceased strongly believed in restorative justice instead of incarceration or further punishment, her parents want to let him go.

If you are willing to die for your beliefs, there is no greater sacrifice. The problem with this scenario is what if the carjacker decides to kill someone else?

Investor Virtue Signaling Is An Interesting Phenomenon

Investor virtue signaling is when an investor publicly expresses disdain over a particular investment usually due to ethics or moral reasons. That’s fine given we live in a free country with capitalism at its core. We are free to say and invest in whatever we choose.

However, as investors, we all want to make a return on our investments. Otherwise, why bother taking any risk? Hence, it strikes me as odd when an investor who has other investments believes one way of making money is more noble than another.

Yes, of course, profiting off of slave labor or anything illegal is wrong. But if an investor owns publicly-traded stocks and starts to virtue signal against others who invest in publicly-traded stocks, I start to scratch my head. The same goes for real estate investors who virtue signal against other types of real estate investors.

If you are participating in capitalism, please don’t rail against capitalism! Depending on the type of investor virtue signaling, it makes me wonder whether the investor virtue signaler truly understands the nature of investing.

The Nature Of Investing Revolves Around Supply And Demand

Everybody who has been investing for as long as I have knows that investing can be a treacherous activity. Investing always consists of a two-sided marketplace where if one side wins more, the other side loses more or doesn’t win as much, and vice versa.

One of the most important variables that makes asset classes more valuable is when demand for the asset outstrips supply. The more scarce an asset is, often, the greater its value.

For example, real estate in prime locations that are harder to build new homes in tends to be more valuable than real estate in areas with endless land to build. Think real estate prices in San Francisco and Manhattan compared to real estate prices in Boise.

Public companies that seldom issue new shares tend to be more valuable than companies that always issue new shares to fund operations. A classic example is $SNAP, which has paid out a total of $8.2 billion in Stock Based Compensation since its 2017 IPO, yet has lost $9.2 billion since. Its share price has gone nowhere.

A one-of-a-kind piece of art tends to be more valuable than a piece of art that was recreated a thousand times. A cryptocurrency with a fixed supply will be more valuable than a cryptocurrency with an endless supply. The list goes on.

As an investor who understands the concept of scarcity, one of your goals is to buy as much of a particular scarce asset as possible and hold it for as long as possible. Over time, you and your family will likely make a fortune.

Example Of Investor Virtue Signaling

Since 2016, I’ve been an investor in private real estate funds like the ones offered by Fundrise. My goal is to diversify my concentrated real estate holdings in expensive San Francisco and earn more passive income given I became a dad in 2017.

One way to do so is by investing online in individual private real estate deals in the Sunbelt. Another way to do so is to invest in private real estate funds that focus on the Sunbelt and Heartland region. I decided to do both because I envisioned the future of the spreading out of America.

After interviewing Ben Miller, CEO of Fundrise for an hour on my podcast, I received this comment on my post about the interview from D.

Love your posts Sam but this is one thing I disagree with on ethical terms. It appears Fundrise is really Blackstone, et.al. These are parasitic organizations that are financializing American real estate. The future generations will have limited chance of the American Dream of home ownership.

I can see good profits can be made but I personally do not support this type of investing on an ethical basis. If you feel this is not the case I would love to hear your argument.

The Right To Think And Invest How We Want

I’m totally OK with D not wanting to invest in Fundrise or any private real estate funds. This is the beauty of living in America. He has the power to speak his mind and do what he wants.

Nobody is holding a gun to a seller’s head either and forcing them to sell to Fundrise or any other institutional investor. Meanwhile, Fundrise has the right to seek real estate investment opportunities to try and make a profit for its investors. Fundrise focuses on build-to-rent, which offers new supply of housing to renters. That’s capitalism.

Given D’s beliefs, I asked him what he does for a living and what he invests in. My assumption was that he worked at a non-profit, the government, or at a school, and did not invest in real estate. Otherwise, his comment would be viewed as inconsistent investor virtue signaling.

Here was his unexpected response, which I appreciate, because most people who feel strongly about a topic often don’t share their backgrounds or viewpoints. They are more like drive-by shooters.

Libertarian Real Estate Investor

I am a pharma consultant – in an industry that is overly profit motivated. I lean libertarian and I believe strongly in freedom. But that does not mean I would invest in anything at all that makes money. If heroin were to be legalized and I could make a larger profit I still would not put my money into it.

I personally do not buy into the ESG/Woke/Climate BS but I am concerned about vampire squid like Blackrock destroying the American Dream that my grandparents helped build here. Money is a means to an end. More is not always better. Who wants to be wealthy behind guarded gates worried their children will be kidnapped from private schools? We must tread carefully or what kind of country will we leave to our grandchildren?

As for my investments, they are mainly real estate. I personally do not like stocks though I do have a 401k so I am stuck in either stocks or bonds. I invest mainly in certain Dow and some value though I am leaning more toward safe bonds/CDs as interest rates are up and I am nearing retirement.

So there it is, nothing fancy and I am not a SJW but I am someone who believes we reap what we sow. “Our constitution was made only for moral and religious people. It is wholly inadequate to the government of any other.” John Adams

Maximum Profits Based On Personal Beliefs

Whoah! I did not expect D to be a real estate investor who earns money as a pharmaceutical consultant!

Big pharma companies have a team of experienced pharma consultants who help conduct clinical trials and brainstorm new ways to serve their target audience to maximize profits.

As one commenter pointed out, Pharma is one of the most controversial for-profit industries today. Actually, pharma could be the most controversial industry of them all.

Once a pharma company develops a drug, it regularly earns 90%+ profit margins off of sick people who need the drug the most.

If pharma companies could lower the cost of their drugs, they would literally save millions of lives every year. But for the sake of profit, pharma companies keep drug costs high to make more money. Again, that’s capitalism.

No Problem With Pharma Consultants

I’m sure there is a lot of good work involved in being a Pharma consultant. After all, drugs help alleviate pain, slow down negative symptoms, and improve the quality of people’s lives.

There are always new diseases to counteract. A pharma consultant can help guide big pharma companies’ resources to better combat pain and suffering.

In a capitalistic society, pharma companies should earn a profit if they are creating a product that is meeting demand.

However, if I was a pharma consultant who invest in real estate, I would not virtue signal about the ills of institutional investors buying real estate from willing landowners.

I highly doubt D is spending most of his time trying to convince big pharma to sell their drugs cheaper to help save more lives. Instead, I’m sure the main goal of a pharma consultant is to help pharma companies make maximum profits.

If you listen to my interview with Ben, Fundrise’s main business isn’t buying and flipping existing homes either. It is focused on developing housing for rental income given the rising demand for housing.

I would much rather have a piece of land developed to meet housing demand than be left undeveloped.

Hard To Be A Real Estate Investor Against Other Real Estate Investors

If D’s main investments are in real estate, then it doesn’t make sense for him to be publicly against other real estate investors.

Sure, it’s fine to privately rail against other real estate investors who make investing in real estate more expensive for other real estate investors. But to virtue signal publicly about the ills of real estate investing when you are also a real estate investor is nonsensical.

Whether D and other real estate investors know it or not, every piece of real estate they purchase reduces the supply of real estate for others to purchase. As a result, the price of real estate for a similar property in a similar area tends to go up at the margin.

Surely some of the reasons why D is investing in real estate are to boost his wealth, increase his semi-passive income, and take care of his family. As a personal finance writer who wants more people to achieve financial freedom, I think these are great reasons.

Nobody Is Forcing Us To Do Anything

The best thing about living in America is that we are free to do what we want within the confines of the laws. We also can’t force anybody to do anything they don’t want to do. Misery will ensue if we try to constantly push our agenda onto others.

So to those who want to virtue signal, go right ahead. But for the love of an honest politician, be CONGRUENT with your beliefs and actions!

As a personal finance site, let’s agree that investing is a core topic. As long as we have investments, virtue signaling about which investment are morally superior is unproductive.

For those who like to virtue signal when they are doing the exact same thing they are virtual signaling against, I hope this article helps shine a light on a blind spot.

And to D, I appreciate you sharing your thoughts. Keep sharing your opinions when you disagree. Dissenting feedback is one of the best ways to learn!

Reader Questions and Suggestions

Why do people virtue signal? Do some people honestly not realize they are being inconsistent with their beliefs and actions? If so, why do you think this is? What goes on in the head of an investor virtue signaler?

If you’d like to invest in real estate more strategically, check out Fundrise. Fundrise manages over $3.5 billion for over 400,000 investors. It has diversified private real estate funds that predominantly invest in residential and industrial properties in the Sunbelt region.

In addition, one of the most interesting funds I’m allocating new capital toward is the Innovation Fund. The Innovation fund invests in:

  • Artificial Intelligence & Machine Learning
  • Modern Data Infrastructure
  • Development Operations (DevOps)
  • Financial Technology (FinTech)
  • Real Estate & Property Technology (PropTech)

Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I’m extremely bullish about. The investment minimum is also only $10, as Fundrise has democratized access to venture capital as well. Most venture capital funds have a $200,000+ minimum. 

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