Garbage Land: On the Secret Trail of Trash - Book Review

As a follow up to my blog Recycling: Does it Make a Difference, I decided to take a look at Elizabeth Royte's book Garbage Land: On the Secret Trail of Trash. I wanted to get a broad picture of what our garbage is and what happens to it. Royte offers an adventure (albeit somewhat sensationalized) of tracking all forms of waste from her household to the collection trucks, the various sorting facilities, and eventually to the dump.

Tracking the Garbage
Royte embarks on a mission to sort, categorize, and weigh all of the trash that her household (her husband and one child) for an entire year. In the process, she follows her recyclables, compost-able materials, hazardous materials (e.g. TV's and computers), sewage, and her garbage to the places where they are either turned into new products or landfilled.

She visits any site where she is allowed access (and to some that don't) to document a process that starts at the household. Most Americans don't give a thought to their garbage besides when the day it is picked up and making sure that they don't miss it. However, Royte seeks to describe how various waste streams make their way around the world.

She does a thorough job at covering the major waste streams in a Western society and looks at the economics and environmental impacts of each often uncovering the good and bad of waste and even something as seemingly innocuous as recycling.

The Ugly Side of Recycling
Recycling has become pretty synonymous with being a liberal environmentalist trying to save the world. However, to the surprise of many, recycling may not be as benign as one may think. We see nice happy stories like Nike creating basketball courts from used shoes and we get to buy post-consumer recycled paper. Recycling only extends the life span on these products but they are only making a brief pit stop before eventually heading to the landfill.

The most insidious "recycling" is probably that of e-waste. Electronics have many precious metals like gold and copper in the circuit boards. But environmental regulations and the high cost of labor in America makes it uneconomical to extract these metals (it is cheaper to just buy virgin materials from mines).

Thus, the electronics get shipped on container ships from the United States to China (which would otherwise be empty because of the tremendous import/export imbalance). It is economical because the cost of labor and environmental regulations in China are significantly lower than in the United States

In China, villagers will use chemicals such as cyanide to leach gold from the electronics and are exposed to many other chemicals such as mercury from monitors and lead solder. We think that we are helping othe world by recycling our electronic goods, but in reality we are pushing the environmental and health costs to third world nations willing to recover these materials. See the Basel Action Network (BAN) Photogallery and Digital Dump Trailer for more information.

Zero Waste
In the last few chapters Royte discusses the possibility of a world with "Zero Waste". Despite her recycling habits and her attempt to reduce as much waste as possible, she still ended up disposing of approximately 4.65 pounds of trash per week (which is 19.5 times lower per person than the national average according to an EPA statistic).

The fundamental problem is that we have externalized the costs of waste and pollution and therefore the costs to dispose of items costs much less than the damage that is done to the environment (this is measured by the amount it would cost to replace or restore the natural function that an environment previously had). The only real solution towards creating a truly sustainable society is to design the goods we used to not produce any waste.

Virtually all products sold today are designed with a Cradle to Grave philosophy: it will eventually find its way into a landfill. However, William McDonough proposes in his book, Cradle to Cradle: Remaking the Way We Make Things, that we need to design our products such that the "waste" products will be the "nutrients" for another system, whether that is natural or created by man. Only then will we be able to live with "Zero Waste".

My Thoughts
Garbage Land is a great primer for people who are unfamiliar with the recycling and garbage industry. My main criticism is that it feels more of an adventure rather than a scientific paper with strong supported facts and evidence. At one point she said the methane "smelled like rotten eggs". Methane gas is actually odorless and is the main component in natural gas. However, mercaptans (sulfur based molecule) are added to natural gas to give it the "rotten egg" smell. I was upset that she couldlet a fairly well known fact slip through.

After reading this book I was reminded at a slogan that was on a paper towel dispenser in a bathroom at my office which simply has the words:

"Green is using only what you need"

I think that this sentence pretty much sums up sustainability and the conclusions reached in Garbage Land. It isn't about buying a green product just because it is available. It means reducing your consumption, and if no other options are available, then try your best to buy an eco-friendly product. We need to reduce our consumption of products, especially those that are designed to be disposable.

Although the amount of waste produced from municipalities seems tremendous, it does not clearly convey the amount of waste that was generated to make the products that eventually end up in landfills. According to Paul Hawken, author of Natural Capitalism and the The Ecology of Commerce, for every 100 pounds of product that is sold, at least 3,200 pounds of waste was created. McDonough also has a similar statistic that municapial waste is only 5% of the total waste that gets created to produce and deliver your product.

The easiest way to decrease your environmental and save money in the process is to consume less. This way you can get more satisfaction out of the things that you do have and also enjoy some of the simple joys in life.

Related Blogs:

• Recycling: Does it Make a Difference?

Related Links:

• Basel Action Network

Recommended Books:

• Garbage Land: On the Secret Trail of Trash - Elizabeth Royte
  
• Cradle to Cradle: Remaking the Way We Make Things - William McDonough
• The Ecology of Commerce - Paul Hawken
• Entropy: A New World View - Jeremy Rifkin
  
• Ishmael: An Adventure of the Mind and Spirit - Daniel Quinn

The Pardox of Choice: Why More Is Less - Barry Schwartz - Book Review

Western Civilization has been flooded with so many choices in every aspect of our lives. Whether it is cleaning supplies, college course curriculum, or even finding something as simple as a pair of jeans. We have typically associated choice with an increase of freedom and the ability to steer our life in the direction that we so choose.

However, paradoxically we have become a victim to the plethora of choices out there and it is affecting us psychologically. The extra choices do not liberate us, but instead cause us to agonize over decisions and regret any "bad" purchases that were made.

Barry Schwartz's "The Paradox of Choice" is an excellent book that looks into the choices we make, the psychology of making choices, why we suffer from the choices we make, and lastly, what we can do about choice to live better lives.

Maximizers vs. Satisficers
Barry Schwartz identifies two different types of purchases: Maximizers and Satisficers. The key difference is that maximizers will strive to make the "best" purchase possible, while the satisficers are content with a purchase that is "good enough", which is to say that it meets their basic requirements. Typically maximizers are less satisfied with their purchases and also have more regret. It is okay to be a maximizer when shopping for products that are really important for you. It is only dangerous when you attempt to maximize every aspect of your life.

The Psychology of Choice
Barry Schwartz has a PhD in psychology and gives many psychology examples on how people will make decisions to buy products and their perception of gains and losses. Below, I have outlined a few of the key areas which he mentions that affect our decision to choose. The main purpose of these different factors is that the subjective value can be much different than the objective value. Typically the studies compare things that are equal in objective value, $20 for example, but then see how the different factors change the subjective value.

Accounts
Suppose that you have not yet paid for a concert ticket ($20) but lost a $20 bill the day before the concert. Would you still pay to the concert? What if, instead, you bought a concert ticket for $20, lost it, and had to pay another $20 for the concert ticket?

Although these two scenarios are identical objectively, subjectively they are much different because we tend to filter money different accounts. In the first case, the $20 loss was filed into a "general" account. But for the second scenario, the lost cost was $20 and the "real" cost of the concert ticket would then be $40. In the study that Schwartz cites, over 90% of people would be willing to buy the concert ticket in the first case, yet only 50% would do it in the second case.

Anchors
The idea of an anchor is to create a high price item in the store, a "deluxe" or "luxury" model, and then offer a more standard one. For example, a $100 pair of jeans may seem like a lot, but when compared to $200 pair of jeans, it looks like a bargain. Although not many of the $200 jeans will be sold, they will "anchor" the $100 jean products which leads to higher sales.

Like I wrote in The Dangers of Shopping, it is important to make sure that the purchase is needed and affordable on an absolute scale, not comparing it to the cost of the "high end" or "retail price". Otherwise, we can always justify a purchase as long as it isn't the "most expensive" model out there.

I personally witnessed a shameless example of anchoring at the Guess Factory Outlet store in Vacaville, CA. I asked them if they carried any products from their regular Guess stores and they said "No, the products are made specifically for the Guess Factory Outlet." What really disturbed me was that EVERY price tag had a MSRP (Manufacturer's Suggested Retail Price) and the "discount" price printed on it. Despite the fact that it was made specifically for the outlet, they framed it by posting an artificially high number to make it seem like it was a "bargain".

Gains and Losses
I thought the psychology of loss and gain was the most interesting part of the book and it really sets up the framework for why we agonize over choices. Briefly summarized, we feel more pain for a $100 loss than we feel happiness for a $100 gain. When choosing between a set of choices, there is seldom an option that is superior in every criteria. By not picking the "losing" option, we are giving up a trade off and thus a loss.

The studies explored in the book show that the more choices there are, the more trade offs or "losses" must be taken when making a decision. Because the pain of loss is greater than the happiness in gains, when confronted with too many choices, the buyer/consumer will often not make any decisions. This is true even when it is clear that there is an advantage by picking ANY choice (for example, employers would not pick his/her portfolio of 401(k) funds when there were too many choices, even though they knew they got an employer match).

The Green Factor
Within recent years, environmentalism has become a hot issue in the media and in people's everyday lives. There is now the option to offset your carbon emissions related to electricity use, buy organic produce,

However, by adding these options, it has further multiplied the number of choices that consumers must deal with. What is more important?

• Greenhouse Gases or aerosols?
• Organic or local?
• Water pollution or air pollution?
• Lower energy uses in CF lightbulbs or no mercury in incandescent light bulbs?

All of these decisions are contributing to a phenomena known as "green fatigue". This is the idea that people are tired from making green and eco-friendly decisions. With so many different factors that can affect the environment, anyone trying to be green must factor these into their purchasing decisions.

Strategies for dealing with choice
In the last chapter of the book, Schwartz suggests multiple ways and details how we can cope with the the abundant choices and making decisions. I have listed his suggestions below.

1. Choose When to Choose
2. Be a Chooser, not a Picker
3. Satisfice More and Maximize Less
4. Think About the Opportunity Cost of Opportunity Cost
5. Make Your Decisions Non-Reversible
6. Practice and "Attitude of Gratitude"
7. Regret Less
8. Anticipate Adaptation
9. Control Expectations
10. Curtail Social Comparison
11. Learn to Love Constraints
    

I plan to create a mini-series and at his suggestions in depth in future blogs. I will say though, that all of the advice seems very practical and is based on the scientific research that has been conducted which looks at the psychology of choice. By simply understand why we act the way we do, we can strongly reduce the negative affects that choice has on our lives.

My Thoughts
I think that this is a great book that has cleared up a lot of things in my life. I am one that is more of a maximizer rather than a satisficer. If I find out that I "could have" saved more money by doing X action, I tend to regret my purchase and am mad that I didn't make the best purchase possible. I will look to follow the steps that Schwartz has recommended, and that I outlined above. I need to be able to not regret my purchases and be happy when I have made a "good enough" purchase.

Although Schwartz suggests that you should worry less about your choices, I believe that it is still important to scrutinize your purchases, especially if it is above your hourly wage (see The Dangers of Shopping). However, it becomes dangerous when the cost of extra scrutiny goes beyond the cost of your time and mental health. The main thing is to "Choose when to choose". This of course will depend on your values and what you think needs to be the "best" and what you can be satisfied with "good enough".

You should only sweat the small stuff if the sweat that you put out is at least equal to the amount of sweat you might get back. An adage that would be appropriate here is "Penny wise, pound foolish". If you look at scrimping pennies on your small purchases, you might be overlooking the larger picture. The time you spend with your penny-pinching could be directed to something that will increase your well being or even make more money.

I really think that reading this book has the potential to make you much happier in life. You will look at life differently and your choices can bring true excitement and happiness. I plan to start a mini-series of blogs related on psychological issues of choice and discuss how just being aware of the psychology of choice can change your outlook and spending on life.

Recommended Books:
The Paradox of Choice: Why More Is Less - Barry Schwartz
GoogleBook: Paradox of Choice (Sample)

Recommended Movies:
Barry Schwartz talk at Google

The Ethics of What We Eat: Book Review

The Ethics of What We Eat

"Nothing will benefit human health and increase the chances for survival of life on earth as much as the evolution to a vegetarian diet.
-Albert Einstein

"The Ethics of What We Eat" by Peter Singer was the first book that truly influenced my decision to become vegetarian. Peter Singer is a philosopher and presents the ethics of food ranging from vegetarianism, local food, organics, and many other food issues.

Singer divides the book into four sections. The first three examine three different families who have different diets and how ethical their food choices are. The last section dissects the defenses for eating meat and serves as a guide to making ethical food decisions.

Three Families, Three Diets
Singer looks at three families which represent a fairly large proportion of the American population. The groups are as followed:

• SAD - The Standard American Diet
• Conscientious Omnivores
• The Vegans

Briefly, SAD represents a high meat/dairy/egg diet with lots of food, conscientious omnivores are those who will make decisions to eat organic, or humanely grown meat whenever possible, and vegans who will eat no meat products at all. Singer goes into detail about each family's eating habits and reasons for making certain purchases. He provides a good overview of the ethical
implications for the major categories from factory farmed meat to organic local vegetables.

Freegans - The Most Ethical Eaters?
Singer even describes a group of people who call themselves "freegans", people who won't pay for their food. These people will go "dumpster diving" in order to get food thrown out by stores.
My initial reaction was disgust, but as I read more I saw that it could be the most ethical form of food consumption out there.

I was reminded of my friend who would take everyone's food at a table who didn't want it and even would take a stranger's food that had been left on their plate. In America this is completely unacceptable from a social perspective. However, ethically it is right on many accounts. A few of the "freegans" are quoted below describing why they don't buy into the food industry:

"What's better about dumpstering is that you're not buying into the whole process of consumption. Even buying organic food involves being part of the consumer economy. Dumpstering really does break the consumer chain".

"dumpstering has an ethical dimension... We're saving food that would otherwise totally go to waste - perfectly good food. We're recycling it."

Although this is something I could probably never justify doing, it is interesting to see their perspective and the ethical reasoning behind it. It is a shame that so much food is being wasted not only at stores and restaurants, but within homes where perfectly good food is thrown away.

How can we eat ethically?
There are so many issues that it can be hard to determine what exactly we should eat and what factors are most important. Singer summarizes his thoughts on this sense of being overwhelmed:

"When one ethical concern is heaped upon another and we struggle to be sure that our purchases do not contribute to slave labor, animal exploitation, land degradation, wetland pollution, rural depopulation, funfair trade practices, global warming, and the destruction of rain forests, it may all seem so complicated that we could be tempted to forget about everything except eating what we like and can afford.

When we feel overwhelmed, it is important to avoid the mistake of thinking that if you have ethical reasons for doing something, you have to do it all the time, no matter what."

Singer insists that we should not be fanatical about our ethical food decisions, but should do what we can within reason. He lists a few reasons why it would be justifiable to not eat ethical foods:

• The Paris Exemption
• This allows you to eat whatever you want for those "special occasions" like if you are in Paris or want to go out to a really nice place.
  
• The Hardship Exemption
• Under this exemption a person is allowed to eat non-ethical food if the cost of the more ethical food would cause economic hardship on the person/family. It should also be noted that eating ethically does not necessarily mean that it will be more expensive. Non-processed foods and raw foods that are vegan/organic can be cheaper than their non-ethical equivalents.

Of course there are other reasons why a person might not choose ethical foods, but these are the two main reasons that Singer gives.

My Thoughts
I am a currently an lacto-ovo vegetarian, which means I will eat dairy and egg products. I intend to become a "vegan at home" and try to be a vegan when I eat out whenever possible. However I will allow myself to eat a vegetarian (dairy and eggs) when I go out if there are no reasonable vegan options available.

I have also decided to include the possibility of invoking a "Paris Exemption" to eat meat for any meal that is over $50. This lets me enjoy meat on those very special meals, like if I ever decided to go to Chez Panise in Berkeley. What is interesting, is that as I have progressed through my vegetarian diet, I have had less desire to even want to institute the "Paris Exemption" and eat meat, even at a restaurant like Chez Panise.

Whatever your food choices are, remember that every food choice you make will have an impact, whether it is positive or negative. If you want to change your eating habits and choose a more ethical options, it does not have to be an all or nothing. Small changes in your diet can result in a big difference for your health and the environment.

Related Blogs:

• Food Labels: Fat, vitamins, and CO2?
• Earth Save: Website

Recommended Books:

• The Food Revolution: How Your Diet Can Help Save Your Life and Our World - John Robbins
• The Ethics of What We Eat: Why Our Food Choices Matter - Peter Singer

Recommended Movies:

• The Future of Food

Water Wars: Fighting over the Source of Life

Water as life

“Water is life's mater and matrix, mother and medium. There is no life without water.”
-Albert Szent-Gyorgyi

In industrialized nations, we often take life's most precious resource for granted. A human will die within a matter of 3-4 days without water. Yet we have electric pumps pressurize water which delivers it to our homes for a minuscule fraction of our income. Why is it then that so many people have simply ignored the issues with water? There are many issues that revolve around water that will impact not only our ability to have fresh water for drinking. For example: What will happen...

• ... when the Ogallala aquifier in the Midwest is depleted and can no longer provide cheap and plentiful water for the water intensive crops?
  
• ... to Southern California and Arizona, where communities exist only because of water subsidies from "neighboring" watersheds?
• ... to cropland which is experiencing desertification?
  

These are all problems that might be faced by our society in the near future. Vandana Shiva author of Water Wars: Privatization, Pollution, and Profit, looks at the history of water and how we can attempt to to become sustainable once again.

History of Water
Major cities and states throughout history have been centered around fresh bodies of water. This is because water provides a function vital to life. In the past people have typically managed water resources on a community level. Water usage has limited human expansion based on available water in a given region. However, in recent years has humankind been able to extend itself outside of nature's bound by using fossil fuels to extract water in massive quantities.

The most recent and startling change to the way water is regarded is the privatization and industrialization of water. Water has been turned into a commodity where it should be treated as a resource for all to use. Global corporations have privatized many water systems and are making money off of poor third world citizens.

Shiva argues that this is completely unethical because water is necessary for life. Imagine if corporations were able to control access to oxygen and then ask people to pay money to be able to breath. Although it sounds extreme, this essentially what companies are doing with water. Water is a critical resource for survival and companies have turned it into a commodity for their own profit.

Although water for U.S. citizens is still cheap, it is not affordable for many third world country people where water has been privatized. In many cases the people drink Coca Cola instead of water because it is a cheaper. Every has the right to breathe and has the right to affordable, if not free, water.

Water Conflicts - Resource Wars
With the industrialization, commercialization, and privatization of water, many conflicts have been bred. The most difficult aspect about water it is not a static resource and flows through many cities and even through many countries. A body of water's origin may be in a distant country. If the country decided to dam and divert the water before it reaches a downstream country, the lower country may not have any water access at all.

The Aral Sea is one of the most drastic examples of how water usage can completely change the landscape and ecosystem. The picture below shows the Aral sea has lost more than 1/2 of it's area because the water was diverted for irrigation purposes.

As I outlined in my blog post about the game Fuel of War, water has been the source of conflicts, better known as water wars. Many conflicts have arisen in India and even the Israeli/Palestinian conflict can be partially or wholly attributed to water rights. Many times religions warfare is the facade to cover the true pretext of the conflict. Water wars are a subclass of the broader category known as resource wars (Read Resource Wars: The New Landscape of Global Conflict by Michael Klare for more information on resource wars).

Water wars can be considered the most important resource war out there. Most of the focus in the world has been on oil prices and how our lives would change. Without oil our high energy lifestyle cease to exist. But without water, our life will cease to exist.

My Thoughts
Water wars often are forgotten when one looks at resources and other commodities. However, as I learned the hard way, (see blog post Am I ready for peak oil), access to water should not be taken for granted.

There are many ways in which individuals can make a difference. First, stop supporting beverage companies by buying their bottled water which can cost more per gallon than gasoline!
Assuming a 1L bottle costs $1.50, the equivalent cost is $5.69/gallon, $1.50 more than gasoline in most places. Also, take a look at Pablo's calculations of the environmental impact of Fiji Water. Not only will you reduce your environmental impact but your wallet will thank you.

Most of this water is simply the same as tap water and merely bottled. Many studies have shown that tap water is just as safe and in some cases bottled water has more bacteria colonies than regular tap water.

The second way of reducing your water usage is related to your diet. Most crops grown in the world are done so unsustainable with massive inputs of water and fossil fuels. These crops are then fed to animals to produce meat. It takes anywhere from 1500-2500 gallons of water to produce 1 lb of meat whereas a pound of potatoes, tomatoes, or wheat require less than 25 gallons of water per lb.

If each person in the United States reduced their consumption of beef by just 1 lb a year and substituted that with potatoes, the amount of water saved would be 735 billion gallons of water each year. These savings would be in addition to all the pollution that is prevented from animal waste and reduction of fossil fuel use for fertilizer.

There are many ways that you can reduce water consumption and the ones mentioned above are only a few. I hope that you will find a way to reduce your water consumption in whatever way that you can. Remember, water gives us life and we should not waste it.

About the Author
Vandana Shiva is a PhD physicist but later went to research science, technology, and environmental policy. She is most well known for her activism and writings in the fields related to agriculture, food production, biodiversity, and genetically modified organisms.
For more information about Vandana Shiva, see her article in Wikipedia.

Related Blogs

• Fuel of War: Game or Virtual Reality?
• Am I ready for peak oil...absolutely not
  

Recommended Books:

• Resource Wars: The New Landscape of Global Conflict - Michael Klare
• Water Wars: Privatization, Pollution, and Profit - Vandana Shiva

Recommended Movies:

• The End of Suburbia
• The Power of Community: How Cuba Survived the Peak Crisis
• A Crude Awakening

Socially Responsible Investment: Can it beat traditional mutual funds?

Wouldn't it be great to make money and do good for the world? What if you could make more money by investing in socially responsible causes? I think without a doubt every person in the world would love the ability to make more money and feel good about it.

I recently read The SRI Advantage: Why Socially Responsible Investing Has Outperformed Financially by Peter Camejo which investigates evidence which claims to show the benefits from socially responsible investing.

The SRI Advantage - Mini Book Review
The hypothesis that Peter Camejo presents is that socially responsible mutual funds perform better than other mutual funds that have similar risk profiles and size (small/mid/large capitalization). The book challenges the notion that Socially Responsible Investment may "feel good" but only by sacrificing performance.

The fundamental idea is that if a person were to invest in socially responsible stocks then the performance is better. The screening is what any other active fund manager would be doing, but looking at social and environmental aspects to determine a "bad stock". The idea is by only investing in socially responsible companies, it will minimize risk. The case study that they often cite is the tobacco industry. In this case, the lawsuits related to health issues hurt their stock. Thus, if a fund were to screen out companies like this, it would have a better profile that is less susceptible to future losses.

Each fund has its own criteria for determining whether or not a company should be screened out. Some of these screens include the following:

• Tobacco use
• Alcohol
• Military defense
• Gambling
• Animal testing
• Environment
• Human rights
• Labor relationships
• Community Investment
  

The book cites many studies that have been performed, and many show a correlation between socially screened funds outperforming other comparable mutual funds. There is not a strong consensus that the performance is greater because many index funds for socially responsible funds and indices have only been created within the last 20 years. Their performance has not been completely proven to outperform non-screened funds.

One aspect that the book did not address are the fees associated with the mutual funds. This topic is discussed in the next section and will explain their importance.

Why are expense ratios and mutual fund fees so important?
The old adage goes something like "nothing comes for free". The same is true is for mutual funds and there are costs associated. However, some funds come at a lower price than others. Before I start talking about specific mutual funds, I need to define a few key terms.

• Expense Ratio: Cost to pay the fund manager and other operation expenses related to running the fund. This percentage is the amount of money you pay from your total principal EACH YEAR to support the fund. Typical expense ratios are over 1% and can reach even 2%. This means that each year you have to pay up to 2% of your portfolio each year to support the manager.
• Sales Fee: The fee you have to pay the fund to purchase the mutual fund (% of initial investent). Typically between 0-5%. If the sales fee was 5% and you invested $10,000, only $500 would go to pay the fee and only $9500 of your money would be invested in the fund.
  
• Redemption Fee: The fee you have to pay the fund to sell your fee (% of the redemption/sale price). Typically 0-2%. If the sales fee was 2% and you cashed out your fund for $10,000, you would have to pay $200 and would net $9800.
  

As you can see, these fees are not trivial by any means. If you are buying and selling "loaded" funds frequently (those which have sales or redemption fees), the fees can add up very quickly. Picking a mutual fund based on the fees can be as important, if not more important than having a socially-screened fund or past performance.

Social Index Funds:
To find out information about socially screened I looked at the Social Investment Forum for general information about the funds and Morningstar and the prospectuses for the various funds for information regarding the fees and expense ratios.

There were many different funds with varying expense ratios and fees. One fund that stood out was the Calvert Alternative Energy fund which had a sales fee of 4.75% and an expense ratio of 1.85! I chose a few SRI funds to represent some of the more economic choices, but as you will see that even these funds still cannot compare to the low costs of owning a Vanguard fund or similar no load, low expense ratio fund. Although the fees for the SRI funds are similar to typical actively managed mutual funds on the market, they cannot compete with very low expense ratios of Vanguard funds.

Analysis
Using the SEC Mutual Fund Cost Calculator, I compared some socially screened index funds and compared them to two Vanguard funds which have are "no load" and have much lower expense ratios compared to the SRI funds. Here are the assumptions I made for the calculations.

• $10,000 initial investment
• 8% annual rate of return (constant for all funds)
• Investment is sold after 10 years
  
• Fees as displayed in the table below
• The redemption fees that are listed for funds are not applicable because the funds are held for over 30 days.
• These stocks are not necessarily in the same class of funds but were chosen to illustrate the effect of fees and operating costs of a fund.
  

	Calvert Social Index A	Calvert Social Index C	Domini Social Equity Fund	Vanguard Total Stock Market Index	Vanguard U.S. Growth Fund Investor
Sales Fee	4.75%	0.00%	0.00%	0.00%	0.00%
Expense Ratio	0.75%	1.75%	1.15%	0.15%	0.50%

Assuming a 8% constant rate of return on investment and an initial investment of $10,000, here are the results for investing some different funds. The "Final Value" represents how much the investment of $10,000 is worth in 10 years after paying the operating costs and fees. The "Effective Rate of Return" is the average annual rate of return over 10 years after the fees have been factored in.

	Calvert Social Index A	Calvert Social Index C	Domini Social Equity Fund	Vanguard Total Stock Market Index	Vanguard U.S. Growth Fund Investor
Final Value	$18,873	$17,723	$18,846	$21,268	$20,534
Effect Rate of Return	6.56%	6.10%	6.76%	7.84%	7.46%

Clearly, investing in a no load, low expense ratio fund has clear advantages when compared to one a "better-performing" socially responsible investment. I calculated what type of interest rates the Calvert Social Index A would need to be if it were held for 10 years to compete with the Vanguard Total Stock Market Index. The Calvert Social Index A Fund would need to have a rate of return of 9.2% (before fees and taxes) to compete with a fund that got 8% in the Vanguard Total Stock Market Index.

My Thoughts
Although I think it is a great idea to support "socially responsible" companies, however you may define "socially responsible", I think that the data is not conclusive yet to see if socially responsible investing is worth it in pure economic terms. They have cited some studies which have shown that SRI funds have outperformed non-socially screened funds. However, many of these studies are based on index funds that are very young.

Upon examination of the website "Social Investment Forums", it is clear that the majority of these funds DO NOT outperform their respective comparison indexes just like the majority (90%) of actively manged mutual funds. Until there is stronger evidence that socially responsible investing is more effective than traditional investment, I personally would not invest in them from an economic perspective.

Even if one assumes that they can perform as well or even better than a non-screened fund, there are still the fees, including the annual operating cost (expense ratio), the sales fee, and the redemption fees which all must be calculated into it. Unfortunately, because these funds are screened, it means that they are actively managed which invariably leads to higher fees, in particular the expensive ratio.

In short, why would you want to give your hard earned money to fund managers who cannot outperform the index or even other funds in a similar class. The advice I'm going to give isn't anything revolutionary, but I will say it again because many investors think they can beat the market by giving their money to a fund manager.

Invest your money in a no load, low expense ratio fund like those offered by Vanguard. Only invest in an socially responsible fund IF AND ONLY IF you can find one a no load, low expense ratio fund. Otherwise your too much of your money will be going to the fund manager. Even then, be sure to diversify your investment so that you don't have all of your eggs in one basket.

Disclaimer: This blog should not be considered professional financial advice. Please consult your CPA for more information about investing decisions.

Related Blogs:

• Microlending: Socially Responsible Investing

Related Links:

• Vanguard
  
• SEC Mutual Fund Cost Calculator
• Morningstar
• Social Investment Forum

Recommended Books:

• The SRI Advantage: Why Socially Responsible Investing Has Outperformed Financially - Peter Camejo
  
• The Bogleheads' Guide to Investing Taylor Larimore
• A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, Ninth Edition - Burton Malkiel
• Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence - Joe Dominguez, Vicki Robin

Your Money or Your Life: Book Review

Making a dying

"This is a wonderful book. It really can change your life"
-Oprah Winfrey

Your Money or Your Life by Joe Dominguez and Vicki Robin is without a doubt is the most influential book that I have read. It challenges and triumphs over the common belief that happiness can be bought. The book forces you to really to be self-critical and determine what actions in your life are worth keeping and those that are completely against your values and beliefs. Consider the following questions:

• Do you wonder where all of your money "disappears" before your next paycheck?
• Do you want to work in a field that is your true passion instead of the job you took for the money?
• Do you want to retire early so you can focus on what is important to you?
  
• Do ever feel excited about shopping but feel guilty when you get home?
• Do you buy something and then never use it after a week or two?
  
• Do you spend more than you earn?
  

If you answered "yes" to any of these questions, then you need to read Your Money or Your Life!

What is Money Anyways?
We typically view money as something we can buy material goods with. Most of the time we forget that in order to get this money you have to use the most precious resource of all, your life energy. If you are 40 years old, you have approximately 329,601 hours left to live based on average life expectancies. It seems like a lot until you calculate that you need to invest 1500 hours to get that luxury car. Is it really worth ~1/200th of your remaining life for some metal and four wheels that costs even more of your life energy to drive, maintain, and insure? This is an example of the questions that you will automatically question once you start following steps towards "Financial Independence".

9 Steps Towards Financial Independence
The first question you might have is "What is Financial Independence?". The 9 steps all lead to this point which means that you will be able to live without having to work for an income. That means your assets (saved money) earn enough interest to support your living costs. Once you have reached financial independence, you will be able to do what is important to you without having to worry about money. That can mean taking a pay cut to work at a job that aligns with your values or quit outright and volunteer for your passion.

I've listed the 9 steps in the Your Money or Your Life program below. If you want more information on the specifics of each step, refer to the summary of Your Money Or Your Life online.

Step 1: Making Peace With The Past
Step 2: Being In The Present -- Tracking Your Life Energy
Step 3: Where Is It All Going? (The Monthly Tabulation)
Step 4: Three Questions That Will Transform Your Life
Step 5: Making Life Energy Visible
Step 6: Valuing Your Life Energy -- Minimizing Spending
Step 7: Valuing Your Life Energy -- Maximizing Income
Step 8: Capital And The Crossover Point
Step 9: Managing Your Finances

A Penny Saved is a Penny Earned
Steps 2-4 are the core of the program. These steps make you track every penny that enters or exits your life and evaluate your expense categories based on three questions:

• Did I receive fulfillment, satisfaction and value in proportion to life energy spent?
• Is this expenditure of life energy in alignment with my values and life purpose?
• How might this expenditure change if I didn't have to work for a living.

The book doesn't tell you how much you should spend on each category such as food, clothing, and transportation. Instead, you must look at each category, and evaluate your expenditures based on your answers to the three questions above.

One of the mantras of the program is "no blame, no shame". The purchases in the past are exactly that, in the past. You shouldn't be ashamed or blame yourself for your previous purchases. The purpose of tracking your life energy is to see if the purchases were appropriate. If they weren't, then you can make changes in the next month. The process is ever evolving and your expenses will naturally move towards your optimal amount of spending.

It seems like a lot of effort to track every penny that you spend or earn, but it is important because it will show you where all your expenses are going. There are a variety of tools (Quicken, Wesabe, Mint) there that can help you with this.

Next Steps
After tracking your income and spending, the next steps include minimizing spending and maximizing income. Your spending will eventually level out and will show you where you get the most value from what you spend. After finding the optimal amount of spending, it is then important to maximize your income so that you can achieve financial independence faster. Once you achieve financial independence, you will be able to live life according to your values without worrying about "making a dying".

Conclusion
Most Americans today are too interested in affluence, material wealth, and "keeping up with the Jones's". Despite all of the new technologies and gadgets that we now have, polls consistently show that we were not as happy as we were 30-40 years ago. Marketing has conditioned us to think that our self-worth is derived from what we drive, what we wear, and most importantly, how much money we make. This is so far from the truth. We should value our friends, community, and self-worth for what we have accomplished in life.

Your Money or Your Life completely shatters the idea that you need material wealth to be happy and I truly think that everyone in America really should read this book. There are many actions that readers can take to bring their values back into their lives.

Most people in the society today will benefit from "down-shifting" from their current high-paced, high-stress lifestyles. Voluntary simplicity is a movement that is gaining popularity not only because it saves money, but it affects what should be most important of all, the quality of life.

There are tons of used copies of this book floating around including on Amazon.com and Half.com and it is also available at most public libraries. Try to find it used or free at a library before you buy it!

In my next post related to Credit/Debt/Finance I will discuss how Your Money or Your Life has affected my spending habits and ultimately my life. Hopefully the book will have the same impact on your life as it has had on mine.

Related Links:

• Your Money Or Your Life Website
• New Road Map Foundation
  
• Get Rich Slowly Blog
• Free Money Finance Blog
  

Recommended Books:

• Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence - Joe Dominguez, Vicki Robin
• Affluenza: The All-Consuming Epidemic (Bk Currents) - John de Graff

Recommended Movies

• Maxed Out

Resources

Don't know where to find information? The pages linked below will give you a good sources to learn more about the subjects of this blog.

Recommended Books

Recommended Movies

Recommended Books

Below are the recommended books for each major category. I have personally read every one and whole-heartedly recommend them. The list is sorted in order of importance (in my opinion).

Lastly, to decrease the environmental impact and to save money, please try to find "alternative" methods to get your resources. Check the book out from your local library if possible. If you have to buy it, try getting it from a local used book store. If you do end up purchasing a book, be a resource to your friends and lend it to them to spread the awareness.

Corporation

• No Logo: No Space, No Choice, No Jobs - Naomi Klein
  

Credit/Debt

• Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence - Joe Dominguez, Vicki Robbins
• Affluenza: The All-Consuming Epidemic (Bk Currents) - John de Graff
  
• The Bogleheads' Guide to Investing Taylor Larimore
• A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, Ninth Edition - Burton Malkiel
  

Environmentalism

• Collapse: How Societies Choose to Fail or Succeed - Jared Diamond
  
• Cradle to Cradle: Remaking the Way We Make Things - William McDonough
• The Ethics of What We Eat: Why Our Food Choices Matter - Peter Singer
  
• Entropy: A New World View - Jeremy Rifkin
  
• The Ecology of Commerce - Paul Hawken
  
• Ishmael: An Adventure of the Mind and Spirit - Daniel Quinn
  

Media

• STATIC: GOVERNMENT LIARS, MEDIA CHEERLEADERS, AND THE PEOPLE WHO FIGHT BACK - Amy Goodman

Peak Oil

• The Party's Over: Oil, War And The Fate Of Industrial Societies - Richard Heinberg
  Review
• The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the Twenty-First Century - James Howard Kunstler
• Resource Wars: The New Landscape of Global Conflict With a New Introduction by the Author - Michael Klare
  
• Energy at the Crossroads: Global Perspectives and Uncertainties - Vaclav Smil
  

The Party's Over - Richard Heinberg: Book Review

The Party's Over: Oil, War And The Fate Of Industrial Societies - Richard Heinberg

The Party's Over is a great overview for people unfamiliar with peak oil. You haven't heard of Peak Oil? Well that's okay, because the media won't touch this topic with a 10 foot pole. It doesn't fit into a typical sound byte and of course the public does not want to hear that their consumer lifestyle will have to change dramatically in the coming years.

Whenever the media covers oil it typically talks about when "oil will run out". However, the important issue is not when oil will run out, but when oil production peaks. This is the point where approximately half of the world's oil has been extracted but the rate of extraction has peaked and will continue to decline.

The United States already experienced peak oil in the 1970 where oil production in the U.S. reached a maximum and led to the energy crisis of the 70's. The United States produced 9.64 million barrels of crude oil per day in 1970 and in only 5.83 million barrels in 2000 (U.S. Energy Information Administration). The reason why the United States was able to recover from this disaster was that other sources of oil were available in the world, in particular, the Middle East.

Heinberg briefly chronicles human interaction with energy through its history and show how human civilization has come to depend on energy as it does today. Then he presents the reasons for why peak oil WILL happen and counters critiques by free market economists who dismiss that it will be a great problem. Lastly, he addresses the consequences of peak oil by addressing the following questions:

• What will happen when the world production of oil peaks and there is no other source of energy?
• Will highly touted renewable energy sources such as solar, wind, biomass (ethanol and biodiesel), hydrogen, and hydropower be able to save us?
• What about reverting back to coal and natural gas?
• What about innovation and technologies to increase efficiency?

Heinberg addresses all of these topics thoroughly and then proceeds to explain how dependent we are on oil. Some Americans believe that only their driving habits will affected by the decline in oil supplies. However, in today's globalized world, virtually everything has oil for energy or input stock ranging from food (fertilizers), clothing (synthetic materials), and anything that is transported over long distances.

In the last chapter Heinberg suggests possible ways that people can better prepare themselves for peak oil when it does come.

This book is a MUST-READ for anyone who needs an overview on the peak oil issue.

Recommended Reading:

• Energy at the Crossroads: Global Perspectives and Uncertainties
• Collapse: How Societies Choose to Fail or Succeed
• Resource Wars: The New Landscape of Global Conflict
  
• The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the Twenty-First Century

Recommended Movies:

• The End of Suburbia
• The Power of Community: How Cuba Survived the Peak Crisis
• A Crude Awakening