Chapter 03 · The social stock exchange
Giving and investing are different
Giving money and investing money answer different questions. A social segment that offers both on one website does not merge the questions. This chapter keeps them apart so that neither decision borrows the language of the other.
The question a gift is answering
A gift answers: do I want this outcome enough to pay for it, knowing the money does not come back? The quality of the answer depends on whether the organisation can show that similar money produced the outcome before, whether the budget is specific, and whether you can afford the gift without touching the emergency fund or the money that has a job in your plan. It does not depend on a yield. A gift that is ‘only’ 8% of your surplus can be wise. A gift that is sold to you as likely to come back with a return has left the category, and should be judged with the harder standard.
The question an investment is answering
An investment answers: is this claim, at this price, a sensible use of money I may need to grow, given what else I could own? The social purpose can be a reason you are willing to accept a lower financial return. It cannot be a reason to skip the price, the debt, the dilution, and the exit. Write the financial return you are giving up — compared with a plain fund you already understand — as the cost of the social preference. If you cannot write that cost, you do not know what the preference is costing you, and someone else is choosing it.
The sentence that usually signals a mix-up
| Sentence | What has gone wrong |
|---|---|
| It is a donation, but they say investors have done well. | A gift is being sold with an investment anecdote. Ask which instrument those investors held, and whether you are being offered that instrument. |
| It is an investment, so I need not care whether the programme works. | Then you are ignoring the constraint that may cap the profit, and the reputational risk you still own. |
| I will put the emergency fund here because the cause is good. | The emergency fund has a job that requires it to be there in a bad month. A cause does not change the job. |
| I should invest more than I planned, because a percentage was recommended. | A recommendation is not a budget. The plan’s cap on speculative or illiquid claims still applies. |
A practical split
Decide the year’s giving as a rupee amount while you are writing the household budget, not while you are looking at a particular story. When a specific organisation comes along, it spends part of that already-decided amount or it does not. Decide the year’s risky and illiquid investments as a separate rupee amount, with the same discipline. An organisation that is both a gift and an investment — rare, but the pitch will try — has to fit inside both budgets, not inside a new third budget created on the spot because the website was moving.
What to remember
- A gift does not come back. Judge the outcome, the budget, and whether you can spare the money.
- An investment has to clear a financial test. The social purpose is a reason to accept a lower return, which you should write down as a cost.
- Do not fund a gift from the emergency reserve because the story was urgent.
- Set the giving budget and the risk budget before you meet the organisation, not after the pitch.