But how do we know if any given business is doing good? How can we evaluate a product line, experimental drug, or a new service offering to quantify whether it promotes or hinders wholeness and wellbeing? These complicated questions begin to crystalize when we focus on the concept of value. As a result, our investment philosophy works from a fundamental axiom: good, healthy businesses add value to their customers and to the world.

Business as an Engine

The whole idea of value, and the dynamism it empowers, keeps economies humming. When a builder takes materials like lumber or concrete and adds value (craftsmanship, design expertise, construction management, etc.), they sell a house and make a profit. When a family believes that the value they’ll receive from a home (stability, family memories, increased equity over time, etc.) to be greater than the price they pay, then they hand over their money confident that they’ve gained more than they’ve given. The element of value creates a fluid dance. Good business happens when everybody wins, when everybody finds value via the transaction. When everybody gets to dance.

If we return to the metaphor of a humming economy, businesses provide the engine. Businesses generate new wealth and opportunities by creating value for their owners, for customers, for all their stakeholders, and for society at large. Adding value is a prime way that businesses can serve the common good and help their neighbors flourish.

Back to Genesis

This core need to always add value emerges from God’s Genesis mandate: for human work to help create a more beautiful world. God made humans his stewards and caretakers, tasked with extending Eden’s goodness over the whole of creation. God commissioned Adam and Eve to use their skills and labor to make the world more verdant, more inhabitable, more productive. In other words, God intends for humans to add value wherever we go, wherever we work. 

Even if one is not persuaded by the particulars of the Christian vision, we still find much common ground. When we coalesce around the core conviction that a healthy society requires capital to be deployed in ways that do good rather than harm, then supporting businesses that add value becomes an elemental responsibility we all share.

Extracting Value

Unfortunately, too often businesses lose sight of this essential purpose. Too often, rather than adding value, businesses extract value. Whether strip-mining that ravages the environment, predatory lending practices that wreck families, or pornography that exploits the vulnerable, businesses that only extract profit ultimately degrade and dehumanize. These businesses do not contribute to human flourishing. They only take. They extract. 

Plunder is profit taken at another’s expense, profit made by exploiting others. Good businesses don’t extract or plunder. Instead, healthy businesses seed new possibilities, relieve suffering, and work to create a beautiful future for everyone.

When the tobacco industry began taking heat for targeting the young and the poor – and for blatantly disregarding customers’ health and wellbeing – numerous investors backed away. They often made their divestiture based on ethical concerns (or due to pressure from those with ethical concerns), and these moral quandaries were ultimately grounded in questions of value. Investors began to interrogate whether tobacco companies were adding anything good (any value) to society, or whether they were merely taking, extracting. 

At Eventide, we search for businesses that add rather than extract value. We want to invest in companies that help humanity to flourish. We want to invest in companies that help rather than those that harm.

Want a Good Investment?

In our view, good, healthy businesses, ones that add value, are the best long-term investments. The subprime mortgage crisis and the mind-boggling cryptocurrency scandals are easy examples of how businesses that extract from their customers ultimately prove to be bad for investors too. A greedy, myopic, short-term vision rarely pays off in the long run.

In The Ultimate Question (a groundbreaking work based on research done at Bain Consulting and published by Harvard Business School Press¹), Fred Reicheld describes how too many businesses “have come to believe that increasing [profits and shareholder value] requires exploiting customer relationships….” Working from this assumption, “[t]hey cut back on services or product quality to save costs and boost margins. Instead of focusing on innovations to improve value for customers, they channel their creativity into finding new ways of extracting value from customers.” However, Bain’s research revealed how this extracting instinct is upside down. The companies that excelled at adding value for their customers also had markedly superior performance, outpacing other companies in both sales and earnings.

At Eventide, we believe that when we invest in businesses that add value, we do two things at the same time. We fulfill our responsibility to help create goodness and beauty in the world. And we make wiser, better long-term investments.