The world is awash in complex financial products.
The founder of OpenInvest wants to help us get back to first principles of finance: know what you own, take responsibility and call the shots.
That and a twist – ensure all of it aligns with your values. That could mean investing in climate solutions or divesting from companies that support Trump, all with the swipe of your iPhone.
Meet Joshua Levin, Cofounder and Chief Strategy Officer of the fast-growing OpenInvest. He’s on a mission to transform our economy and democratize investing.
Brendan Doherty: I’ve been excited about your work since we met, particularly the idea of democratizing impact investing. Give us a short overview of what is OpenInvest and why it matters.
Joshua Levin: OpenInvest is a public benefit corporation with the vision to use technology to make values-based investing. We make it easier for you to fully express the things you care about and take actions that start telling your companies what to do.
Doherty: That’s awesome, especially that action quality. So how do people get to tell companies what to do, what does that look like?
Levin: People can vote on shareholder resolutions with a swipe just like it’s Tinder. For instance, if you don’t want Coach bags using animal fur or if you want Proctor & Gamble to adopt an LGBTQ anti-discrimination policy. In the past very few people voted because it was difficult. Now, most of us know how to swipe right and swipe left.
Doherty: [chuckle] It sounds like there could be a complex set of voting issues though. How do people know which way to vote, or even how to pick their portfolio for their values?
Levin: We make it easy for them. We want it to be even easier than the older way, which was picking from funds. You answer a few questions in your financial situation and then tell us what you care about and we’ll instantly launch a diversified portfolio that reflects your values and goals. Then you’ll receive alerts or prompts when there are opportunistic actions to take.
Doherty: Have you found certain issues that most resonate with folks?
Levin: Definitely climate change has been number one, but there’s others. That’s the point – everyone has a different view and it’s not uncommon in the financial world. We support everything from companies doing the most for refugees, to divesting from the prison industrial complex to even divesting from Trump. We’ve really seen a huge diversity – especially wider gender issues.
Doherty: What does divestment from Trump look like?
Levin: Most of the Trump Organization is privately held. So it’s a rolling screen that we update monthly based on what we see as the current moral bar for companies in how they support or don’t support Trump. Originally it was around companies who were funding his campaign and executives from certain companies that were openly supportive. Recently, it evolved to favor companies who were the first to withdraw from his business councils. Our world’s changing all the time. And if you’re in a fund you wait months or even a year for things to rebalance, but really your portfolio should be constantly updating based on financial data but also social and environmental data.
Doherty: I love how agile it is to both the cultural moments but also real time financial data. How does that impact an investment strategy though, from tax liability to long term growth?
Levin: I’ll give you a real-world example. After the Wells Fargo scandal, lots of people wanted to divest and they used our app to swipe them out of their portfolio. But we don’t just pull out Wells Fargo because that would be active management and hurt your diversification. Our system instantly breaks up your whole portfolio and trades other holdings that are correlated with Wells Fargo, every important characteristic from sector to market cap to historical risk factors – to restore you to near a beta one for the index we’re tracking. It is the first time that anyone can be an active owner but still have passive management of their portfolio.
Doherty: You’re deleting the middleman and getting rid of a lot of the friction.
Levin: This is only possible in the recent world. This would’ve created significant transaction costs in the past. I believe in the future the whole fund model is going away. You’re not going to go shop at Morningstar from a menu of funds with tons of complex as well as financial redundancies. You will just express your financial goals and your values, and you’ll rent a strategy from the cloud that will consistently optimize them on your behalf. And this will be the key as well to the mainstreaming of values-based investing because finally people will fully know what they own and they can take meaningful actions at their fingertips without hurting their finances.
Doherty: What we’re building at Forbes Impact is similar where we want to work with market forces to seek alpha returns while still reflecting our values. When that happens, there’s no real inhibitor to moving in a values-based direction. Tell me about you’re founding team and what makes them unique?
Levin: Two of them came from Bridgewater Associates, where they were building similar systems but at the very high-end of the market to produce alpha returns not values integration. I was at the World Wildlife Fund managing our sustainable finance program. People think of WWF as tigers and pandas, which is true – but they have a very large corporate engagement program where they advise over 100 of the world’s largest banks and investors on environmental data integration and developing new financial products. What I found was while we won a lot of battles, we were losing the war. The largest banks investors would say to us, “Hey you know we love this stuff, we’d like to do more but we can’t until our clients ask for it. We’re just intermediaries.” So then you look around and ask who are their clients? At the end of the day it’s you, me, your friends, your family. We own the financial system and ultimately, we own corporate America.
Levin: But people are so removed and disempowered that they’re not taking actions even as they protest in the streets and boycott companies.
Doherty: Where did you get this streak of a purpose-driven, service-driven narrative for yourself?
Levin: I’ve always been an idealist. I mean I can trace it back to being a teenager, I was very involved in fighting mass incarceration and the Rockefeller drug laws in New York. I always thought that you should go change the world. I’ve done all kinds of crazy stuff and earned my progressive credentials, but I feel that OpenInvest is my once in a lifetime opportunity to really transform the economy.
Doherty: Has there been any moment when you feared it wasn’t going to work?
Levin: Probably once every couple of weeks! [laughing]
Doherty: [laughing] Welcome to the club – I thought it was going to be daily.
Levin: I have zero doubt about the long-term potential or success both as a company and a movement that you and all of us are a part of. But to get there along the way you need to hit near term important milestones and that can be a rollercoaster for sure.
Doherty: You’re obviously answering to some important investors too.
Levin: Our biggest investor is Andreesen Horowitz, whose one of the leading Silicon Valley VCs. It was pretty inspiring for us to that they really got the big vision. For them, big vision means big market. Our partner there won’t even fund early stage startups in San Francisco that don’t have a world changing mission, because you just can’t hire engineers otherwise, it’s too competitive. I honestly love the pressure that VC backing brings because we don’t want to just become another asset manager. We’re in it to create a massive transformation and that’s the only thing that makes money for VCs as well – so it’s a good partnership.
Doherty: When you get up in the morning and put your feet on the ground, what is it that gets you going?
Levin: I really want to answer this honestly. The long-term vision is what I care most about but its long-term. So on a day-to-day basis what inspires me is mainstreaming this year. That finance no longer needs to be a cold commodity but is something that can represent you as a whole person, as a way for you to have tremendous influence and expression in the world. I’m just so excited to bring all of us in impact investing from early adopters to early mainstream. I think that’s what inspires me on a daily level.
Doherty: Did having children cause a shift for you?
Levin: It made me want to really bust my butt and work hard and build something. I used to have a great work life balance and lots of hobbies. But I think having kids clicked me into this moment where I wanted everything I do to be leading somewhere. I wanted to be building upon the next thing and creating something. I love gardening and baking bread but it takes time and energy, and now my kids put me in a mode of life where everything should be somewhat of a linear progression.
Doherty: For some this sounds dark but for me it’s one of my most life affirming exercises: I write my own obituary to use it as a guiding path for how I make decisions today.
Levin: Wow, impressive. A little scary but impressive.
Doherty: I mean it’s clarifying. My friend B.J. Miller has an extraordinary TED talk called What Really Matters At The End of Life. He’s an accomplished palliative care doctor and also a triple amputee who lost three limbs as a teenager. He personally cares for a very niche population and yet a universal population – people who are dying. The insights they offer have helped me try to reverse engineer my own life from those final moments.
Levin:: I mean even though we all have one death, we have life phases. I’m thinking of a friend of mine who just survived cancer. He said facing mortality, the stereotype is to just care about kindness, your kids, relationships – but he was like, “No.” He came out asking, “Why am I not a senator right now? Why have I not been working harder at my career? Why am I not achieving all these things?”
Doherty: I’m a huge believe in phases. We accept change in so many places – but we resist it in ourselves. There’s a through line inside all of us for sure but there’s different parts of us that are in the driver’s seat or the passenger seat or the backseat at different points in our lives. Switching gears, I like your idea of the world’s first digital democracy. Tell me about that?
Levin: In the U.S. for example, individual investors directly and indirectly own 82% of U.S. equity markets. So we have a type of collective control of the economy already. These CEOs work for you. They report to you. They’re waiting for your demands and no one’s doing anything. But it’s not your fault. It’s because the average American has up to 16 intermediaries between her and the company she actually owns. And about a hundred fee layers in there. And these are all remnants of a paper-based Wall Street supply chain. But these things are rapidly collapsing and getting eaten away by financial technology. It’s a return to first principles of finance. You know what you own, you take responsibility, and you call the shots.
Doherty: Who in your life would you consider to be an icon of impact?
Levin: The icon I’d like to honor is Max Weber. He was the ultimate student of what it means to live in the modern world. I frequently think about his warning that the great threat to modern man is – despite having a lot of stuff – a loss of a sense of meaning. Real meaning, by the way, doesn’t mean you can share selfies with your friends using a retro filter of your choosing. It means you have an actual personal influence over the direction of your society. Today, that society is global. But just as Moses could make a value judgment about the direction of his tribe, we desperately yearn for this connection. I believe this is the crises of our times, and it fuels everything from levels of anxiety and depression to mass shootings to extremism. We are adrift. This is the deepest problem that impact investing is solving. This is why everyone wants to work in the space. The middle class already owns and controls the world. It’s the job of impact investors to give them this power and create a new architecture of meaning at the global level.