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Today’s episode takes us to Silicon Valley connecting with Trae Stephens. You may have seen Trae on CNBC, or you may know him as one of the Partners at Founders Fund. It was an honor to have Trae on to share about his experiences—everything from his time in politics working for Congressmen and in Embassies to now working alongside Peter Thiel. Trae also shares about his life as a Christ Follower and how it shapes his view of the investing world.

In particular, Trae outlines what it means for an entrepreneur to be an outlier. He describes the difference between business ideas that fit into a certain pre-existing category and those that break every mold out there. He also shares cautionary advice about what not to do as an entrepreneur. His perspective as a venture capitalist is helpful to listen to for both investors and entrepreneurs alike.

But this podcast doesn’t stop there. As you know, we’re always approaching the conversation of entrepreneurship and investing from a faith-driven perspective. Trae is no exception. In this podcast, he talks about the different areas of theology and philosophy that inform his worldview. Specifically, he goes into detail about the innate tendency of all human beings to imitate something or someone. Here, he reminds us specifically of Ephesians 5:1, “Be imitators of God…”

When Trae talks about his relationship with God, you’ll hear both his personal faith journey—what it means to imitate Christ as a venture capitalist and how Silicon Valley opens the door for him to share his faith—and what he thinks about the global Christian movement. He invites listeners to consider what it would look like to be co-creators alongside God, with references to how God and Adam interacted in the Garden of Eden.

Our team had a blast catching up with Trae, as it felt like he covered dozens of topics with the fluency of an expert. His intellect and skill are on full display in this interview, but so is his spirit and heart behind what it means to be a faith driven entrepreneur and what faith driven investors can do to create value, not only for themselves, but for the world.

We hope you enjoy this episode and pray that it encourages you on your journey!

Useful Links:

Rene Girard Explains Mimetic Desires

Founders Fund

Trae Stephens Interview with Fortune

This article was originally published here.

Check out The Institute for Faith & Work for other quality content!

by Rev. Robert A. Sirico

We have all seen the various stereotypes of the Wall Street tycoon grinding the little guy under his thousand-dollar dress shoes on his way to the top.

In the popular imagination, it is almost inconceivable to think that someone could obtain economic success or wealth without exploiting the vulnerable. And of course, greed is operative in the free market, just as it is operative wherever humans exist in this life. However, it isn’t the essence of a free and vibrant economy.

The Meaning of Profit

One often hears that businesspeople are only interested in earning profits—what they can make from the deal.

Set aside for a moment this claim and ask yourself, “Should one invest one’s time, energy, talent, and wealth into a business in order to obtain a loss on the balance sheets?” For that you could have stayed home.

Profit is an indicator to you that you are achieving what you set out to do in a sustainable way. The opposite of profit is financial loss, and any business that consistently loses money cannot survive long. Indeed, no business or society can sustainably function where more resources are wasted than created.

Earning a profit is an indication that things are going as planned in meeting the needs of clients, and conversely, that when a profit is not attained, something is going wrong.

The art and talent required for profitability is seen in those enterprises that discover creative ways to make products and services available at accessible and attractive prices, while covering their own costs and then some. These are the companies that serve their clients, the reward for which is built right into the process.

Profit and the Zero-Sum Myth

It’s easy to fall into the trap of believing that one person gains in a market only if others lose and that if there are poor people, clearly it must be because the rich have taken more than their fair share of the pie, leaving the poor with the crumbs. If that’s the case, the obvious solution is to take the pie by force and divide it up equitably.

This is a zero-sum assumption that prevents people from ever asking whether the solution to poverty might be to grow the pie. In conversations with fellow clergy who take this view, I ask, if profits are morally dubious, are losses morally praiseworthy?

But consider that maybe the pie wasn’t always just sitting there—the exact same size from all eternity. Maybe some of those who are rich didn’t take more than their fair share; maybe they made more than their fair share.

If this is the case, profits aren’t inherently immoral any more than losses are a badge of saintliness. Profits suggest that a business is using its resources wisely; losses, that it is not. This isn’t to say that profits and losses are a business’s be-all and end-all, but they do serve as first-level indicators of whether a business is serving customers in an effective, sustainable manner.

So the next time you see the stereotype of the evil, exploitative businessman, remember that making a profit is actually a good thing that helps everyone, if done in an honest fashion.

Editor’s note: This post was adapted from Rev. Robert Sirico’s chapter entitled, “The Moral Potential of the Free Economy,” a chapter in For the Least of These: A Biblical Answer to Poverty.

This video was originally published here.

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Have you ever wondered what it looks like when HOPE invests in the dreams of families? This video will walk you through the process.

REGISTER FOR THE FAITH-BASED IMPACT INVESTING: GROWING THE FIELD EVENT ON SEPTEMBER 4

Faith-based investors represent trillions of AUM and have a long history as pioneers in sustainable investing. However, despite leadership in responsible investing strategies such as shareholder advocacy, divestment, and negative screening, faith-based investors, as a whole, have yet to pursue major impact investing portfolios. Earlier this year, the GIIN started a project to deepen engagement with the faith-based investing community and to understand the opportunities that would support more conscious and deeper impact allocations within faith-based investing portfolios. This webinar is part of a series of convenings to share insights from that work.

The GIIN team will start with an overview of key findings uncovered through surveys and interviews. We will share information on current activity, perceptions of impact, and opportunities to work more with faith-based investors.

In addition, Wespath Benefits and Investments—a leading institutional investor from the faith-based community—will share how they have successfully embedded an impact investing program in their portfolio and lessons learned for other faith-based organizations.

This webinar is part of a series of convenings designed to engage those stakeholders in the faith-based investing community, who are interested in moving more capital towards positive, measurable change for a more sustainable and equitable world. To this end, GIIN team also will share ideas on how to grow the field of faith-based impact investors, and an invitation to the faith-based investing community to workshop these engagement strategies at the upcoming GIIN Investor Forum.

Speakers:

• Sylvia Poniecki, Director, Positive Social Purpose Lending Program, Wespath Benefits and Investments

• Trent Sparrow, Senior Analyst, Impact Investments, Wespath Benefits and Investments

• Katrina Ngo, Senior Manager, Strategic Partnerships, Global Impact Investing Network

• Hannah Dithrich, Senior Associate, Research, Global Impact Investing Network

This article was originally presented at The Christian Economic Forum 2018.
Check out CEF for other quality content!

The Christian Economic Forum hosts a world-class Global Event each year to connect the top industry leaders and experts from around the world with other individuals who are compelled to act upon the principles of God’s economy. The following paper was presented at CEF 2018.

— by Johan Du Preez

Investments reward shareholders by increasing value (increased share price) and/or generating income (dividends). In short, we can refer to these as the economic benefits of ownership/financial returns from investments. A shareholder may be primarily interested in one or the other (value or income), or may want a healthy balance.

Increasingly, however, shareholders are also interested in the impact of the investment on the environment in which it operates. This we can label as the responsibility of ownership/impact of the investments.

When we view private equity investments from a Christian and therefore eternal perspective, we are challenged to view both the financial returns and the impact of ownership from the perspective of a steward representing the owner, rather than from a perspective of being the owner.

For the purpose of this paper, I assume that the economic benefits of ownership (financial returns) will increase the funding that is available for God’s work, and that the responsibility of ownership (impact) is evaluated from a biblical perspective. As such, it focusses on capital deployment “on behalf of God,” and the paper attempts to provide a very practical framework to facilitate discussion and decision-making in this regard.

Investment Strategies

Even though the above context should be easy for Christian private equity investment managers to understand and agree upon, the strategy to achieve this is bound to give rise to different opinions. In the end, there are many good and complementary (albeit distinctly different) strategies through which to ensure the biblical deployment of capital.

Absolute clarity about the strategy is important for commercial success (to avoid chasing after a thousand different things), for spiritual peace of mind (to avoid being guided by guilt and/or fear), and for personal well-being (understanding your role/calling in the investment space).

The potential trade-off between financial returns (economic benefits of ownership) and impact (responsibility of ownership) is illustrated in Figure 1.

• Financial returns (vertical axis) and impact (horizontal axis) can be either positive or negative.

• Negative financial returns represent donations – giving in excess of investment returns (it can also represent investments that unintentionally yield negative returns but I ignore that for purposes of this paper).

• Negative impact equates to exploitation of people or planet.

• The green area indicates investments that achieve the combination of positive financial returns and positive impact; this is the focus of the rest of this paper.

• Four quadrants are identified and named:

  • Mediocre – below benchmark on both financial returns and impact

  • Returns first – favouring returns over impact (and achieving above benchmark returns)

  • Impact first – favouring impact over returns (and achieving above benchmark impact)

  • No Trade off – the ultimate achievement (high financial return and high impact)

Hurdles and Frontiers

Expanding on Figure 1, we can set Hurdles and identify some Frontiers (see Figure 2). Frontiers are considered objective (and fixed), whilst Hurdles are subjective (and variable).

• The Financial return hurdle is the minimum Financial return the investment needs to achieve, regardless of measurable positive Impact.

• The Impact hurdle is the minimum measurable Impact the investment needs to achieve, regardless of Financial returns.

• The vertical axis is described as the Moral Frontier, i.e. we should operate to the right of it (avoiding negative impact at all cost). In practice this typically means having a negative list of things that will automatically disqualify an investment (such as sin industries, harmful environmental impact, exploitation of people, etc.)

• The horizontal axis is described as the Sustainability Frontier, i.e. we should operate above it (ensuring it is sustainable by achieving at least financial break-even).

• The orange line is described as the Stewardship Frontier, i.e. does the combination of Financial returns and Impact translate to good stewardship when viewed from a biblical investment perspective? (i.e. investments should be above and to the right of the orange line).

Post-investment Strategies

Clarity about the investment strategy (as briefly discussed above) is of utmost importance, but should also be complemented by stated objectives post investment. This is illustrated by Figure 3.

• An investment strategy to target the “Impact first” quadrant can be complemented by a post-investment strategy to enhance the financial returns of the investment without necessarily compromising the Impact (see Red arrow). This can be done by introducing some commercial thinking into the impact-driven business model (“Head” intervention).

• An investment strategy to target the “Return first” quadrant can be complemented by a post-investment strategy to enhance the Impact of the investment without necessarily compromising the Financial returns (see Green arrow). This can be done by introducing some impact considerations into the return-driven business model (“Heart” intervention).

The Tree of Life Foundation as a Practical Example

At the Tree of Life Foundation (TOL, a not-for- profit) we invest commercially to sustain ministries. Our end goal is to act as an “Investment Bank” for Christian Capital (providing a full spectrum of debt and equity solutions through an entity in which the shareholding is held by a non-profit), but as a first step we embarked on private equity investments in 2007.

Starting out we had to be clear about our initial focus, and we chose to adopt a “Return first” approach (driven by the experience of the key individuals, market opportunities, etc.). Due to our group structure (with the shareholding vesting in the Tree of Life Foundation), the profits from investment activities (and all the equity in the group) are available to fund Christian activities. Our task is therefore to decide what component of available capital should be re- invested as opposed to being distributed to Christian ministries. This is guided by our “dividend policy” that initially was set at “no dividend” and then gradually increased to the current policy, which states that 2.5% of Net Asset Value must be distributed to ministries annually (i.e., an “endowment mindset” allowing for sustainable giving with growth in real terms). The increase in dividend rate (distribution to charities) is an example of an increase in impact at group level (green arrow).

Getting back to the “Return first” strategy, it is very important for us to have a testimony in terms of biblical impact over and above the impact of giving away profits. In this regards we:

• Defined a negative list of industries we will not invest in (sin industries) and practices we won’t tolerate (exploitation of people or planet, management with questionable ethics, etc.). The criteria is not what is legal, but what is morally acceptable from a biblical perspective (the higher hurdle).

• Have a stated objective of introducing an impact component post investment.

The first bullet is self-explanatory, and easy enough to do. The way we handle the second bullet is to declare our intentions upfront (pre- investment) to the target investment company— we represent Christian capital and we therefore bring this worldview to the table when we join as a shareholder. This paves the way not only for robust discussions on ethical behavior, but also on remuneration, staff welfare, corporate giving, etc. We have been pleasantly surprised by the willingness of companies (in whom we invest) to embrace this, even in cases where such interventions caused a slight reduction in financial returns (i.e. where the green arrow points slightly downwards as it moves from left to right).

Summary

• Financial returns and Impact represent two biblical parameters of investment decisions.

• It is of paramount importance that the Christian investment manager is clear about both the focus of its investment strategy and the post-investment strategy for each investment.

• In the context of this paper:

  • The investment strategy is the chosen quadrant in which the targeted investment should find itself (Return first, Impact first, No trade off).

  • The post-investment strategy is the targeted intervention that the investment manager seeks to facilitate and unlock post investment (Red/Green arrows).

  • The latter strategy will differ from one investment to the next, but it is highly recommended that it is defined upfront during the process of making the investment.