Investing Hyper-Locally is a Smart Move
Local investing gains traction as we look thoughtfully at putting money in our communities, not Wall Street
It was a cold Thursday afternoon in January 2010. We’d just gotten home from work and my partner Marti was thumbing through the day’s mail. She tossed our IRA statements—unopened—on the dining room table and mumbled a profanity.
Marti started her career in banking and insurance umpteen years ago, and knew—from her time inside—that it was ugly. The Great Recession was icing on the cake; she’d had it with Wall Street.
I opened my statement and tried to lighten her mood, “The markets are up. Our 401Ks are coming back.”
“I don’t care,” Marti said. “I don’t know the companies I’m invested in. I don’t even want to open my statements anymore.”
I couldn’t believe what I was hearing. Like all financially fit lesbians (I’m lookin’ at you, Suze Orman), we have a Plan and a Number. Our Number is the amount of money we need in the bank before we can hang our “Gone Fishin’” shingle. My friend Charlie calls it “F-you money.”
But this was not the moment to mention the Number.
Marti’s comment pecked at me. I didn’t know all the companies that were in our portfolio either. I knew some of them—the big ones. But how many of us really know? Most of us send a share of our hard-earned money to Manhattan each month wrapped in faith that it will be used for good, not ill.
But as we all know, Wall Street has its own code of conduct. And using our money to expand the economy is not its primary goal. In her book Locavesting, Amy Cortese writes: “Of all the trillions of dollars madly flying through the financial markets, less than 1 percent goes to productive use, in other words, to providing capital to companies that will use it to hire, expand, or develop new products.”
What? Where does the other 99 percent of our investment money go?
Trading and speculation.
What’s more, only a small percentage of companies can access investor dollars. “In a well-functioning financial system, roughly one-half of the investment should go to roughly one-half of the economy,” writes Michael Shuman, director of research and economic development at the Business Alliance for Local Living Economies. “Today, every American, even stalwart advocates of community development, are overinvesting in Fortune 500 companies and underinvesting in local businesses key to local vitality. This is a colossal market failure.”
A month after Marti’s comment, I read an article in GOOD Magazine about a group of concerned citizens in East Jefferson County, Washington, who’d banded together to invest in their local businesses. It was called “LION,” the Local Investing Opportunities Network. They funded goat dairies. And paper makers. And schools. They were following Warren Buffet’s advice, “Invest in what you know.”
LION is a way for local investors to make an immediate and direct impact in their community. It’s a way for local businesses to obtain capital as banks keep tight lending standards. It is a way to build community and grow the local economy.
Madison is ripe for LION. We already buy local—through our CSA shares, our Dane County Farmers’ Market and Dane Buy Local. What if we could also invest locally?
Slow Money author Woody Tasch asks, “What would the world be like if we invested 50 percent of our assets within 50 miles of where we live?” In Madison, a group of LION investors is trying to find out. Through word of mouth, we have more than a dozen members and about $500,000 to loan. Some of our investors have $500, but that’s the beauty of LION: anyone with any amount can pool with others to fund a business opportunity.
Our investors are attracted to LION because—like Marti—they want to invest in companies they know. They want to help Madison grow its economy—its jobs, tax base and self-reliance. They want to take some of their money off Wall Street and put it on Willy Street and Monroe Street and across Fitchburg and into Black Earth. They are adding their bit of good to help Madison become an even more robust place to live and work and have a business.
Rebecca Ryan is a Madison-based entrepreneur and writer who helped launch LION in Madison. Learn more at LionInvesting.com.
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