Putting Rocket Fuel in an Ordinary Car – Contextualizing Investment
Photo by SpaceX on Unsplash
I have a friend who bought a nice car that gets 50mpg. But it takes premium gasoline. If he decides to use the cheap stuff, he saves at the pump, but it costs him a couple hundred dollars at the auto shop. His car was made for a specific type of fuel. But it’s not just cars that function best in a specific context. Anyone who counts macros or is on Keto, Whole30, or any other kind of diet will tell you, you have to know your machine and what you put in it in order for it to function properly.
The same is true in the world of investing, especially when it comes to investing in emerging markets and economies. You have to know the context. All too often, well-intentioned businesspeople try to expand into or begin operating in underdeveloped economies both nationally and internationally. But when they do not understand the context into which they venture, and they try to implement solutions that work in another space, they flounder and can even cause more damage.
Humanitarian organizations that have on-the-ground understanding of cultures and contexts often lack the resources to implement sustainable solutions, leading to an abundance of under-funded, prolifically good-hearted NGOs with little recourse to solve the problems they understand.
Businesses attempting to break into CSR and SRI practices have the financial resources and human capital to make a difference, but oftentimes lack sufficient contextual understanding of issues or feasibility of their imagined solutions. The steps to understanding context bridge gaps that exist between these worlds and enables ethical business practices in emerging economies.
Understanding how to wield contextual knowledge is important. As faith-driven investors, a high degree of due diligence is a necessity. Without it, you’re walking blind into a social context you can’t fully understand. And even with it, you run the risk of opening yourself up to the opportunity to operate in a less-than-ethical manner that might increase your returns but stands in direct contrast to biblical principles of faith-driven investing.
For example, there was a skin-care company that wanted to branch into the market in the Egyptian economy. In this particular region, lighter skin was considered to be better; a sign of wealth and propriety, because those who could afford to either not work or work indoors (typically in a position that required a higher education level) would not be exposed to the sun as consistently and therefore maintained a lighter complexion than their compatriots of the same ethnicity who could not afford the same lifestyle. Armed with this knowledge, the company—desiring to maximize profits—began selling a skin cream called “Fair and Lovely,” which was marketed as a skin-lightening product. The cream itself had no effect on skin tone, yet because of context-specific marketing, did well for several years. But there was a clear ethical tension in the marketing campaign.
So how can understanding context be done right? According to Reuben Coulter, it’s a tricky line to walk—where investors come alongside local entrepreneurs as partners rather than saviors. He described the necessity of working with local, indigenous entrepreneurs who had the cultural and contextual knowledge of a community in order to successfully and sustainably implement solutions.
Acknowledging that there is no one-size-fits-all model for economic growth, Coulter explained that you cannot put rocket fuel in an ordinary car; what works in one context may not work for the next. He demonstrated the need for more partnerships with locals who have first-hand awareness of the problems and feasible solutions in a given context, and that by doing so, those local communities are given a powerful voice and opportunity to lead.
Bridging the gaps between local knowledge and business resources—tangible and intangible—leads to optimal and sustainable solutions. As investors begin to understand the contexts of their target recipient, they can more easily come alongside those implementing solutions. A gospel-driven desire to love people well (as commanded in the Great Commandment) is at the heart of this process. It demonstrates a level of understanding that comes from truly knowing and leads to compassion, reflecting the heart of the Lord through how we steward our finances intentionally.
If I attempt to use NASA’s rocket fuel in my little 10-year-old sedan, all I end up with is a catastrophically damaged vehicle. That isn’t to say that there is anything wrong with my car. Rather, it demonstrates my lack of understanding and awareness of the situation. The same logic applies to investing in emerging economies: everyone starts somewhere slightly different, and investors must understand the starting point—with all of its needs and resources—before they can attempt to move the car forward.
