Hidden Motivations

If you want to understand how and why money moves on Wall Street, you don’t have to dig too deeply. In fact you can find a perfect example of how the big players make and invest money by examining the recent announcement made by the Rockefeller Foundation. A little more than a week ago, this establishment declared that it is selling off all its oil investments.

That might sound strange to you. After all, the Rockefeller Foundation was created by John D. Rockefeller. And John D. made his fortune in the oil business. How can the Rockefeller Foundation divest out of oil if oil is the source of the foundation itself?

The Difference Between Us and The Big Money

Individuals like you and me look for balance when we plan out our future. Individuals generally like to make as much money as they can while enjoying their life. Companies, foundations, and endowments usually focus on one end of the spectrum or the other.

The mission of Standard Oil and its successor companies (ExxonMobil and Chevron) was and is to make money — full stop. That was true when Mr. Rockefeller was at the helm, and it’s true today. If they can produce and sell oil at a profit, that’s what they’re going to do. This is no secret.

The Rockefeller Foundation on the other hand isn’t an oil company, and it never was. It was built with the profits generated by Standard Oil, but the foundation itself doesn’t care about profits. It was created in 1913 by Mr. Rockefeller with a very different mission.

Its goal was and is to “promote the well-being of humanity throughout the world.” Its executives are not in business to make money. They are in the business of promoting the well-being of the human race. So, you see, the Foundation and the oil company have quite different marching orders.

If the CEO of the foundation turned in a great profit but didn’t do anything consistent with its mission, she’d be fired. If the CEO of the oil company did a lot of good for the world but lost money doing so, he’d be pounding the pavement.

Whether or not you think selling oil holdings promotes the well-being of humanity, the people who run the foundation think it does. That’s all that matters, and that’s why they did it.

By considering the organization’s mission, it’s easier to understand how the Rockefeller Foundation can do things the company that funded it would be dead set against. The same concept will help you understand why other large institutions do the things they do.

The Politics of Money

Companies exist to make money. Typically, they are politically agnostic. Other than trying to get legislation passed that helps them make more money, they tend to stay away from politics. The last thing they want is to alienate a potential customer.

You can easily tell if a company is successful or not by reviewing its financial statements. If the firm is growing its profits, it is considered a success. Having one major goal — grow profits — keeps the business managers laser focused.

But foundations and endowments get dragged into politics very easily. That’s because success for these organizations isn’t measured in profits. Public service money is managed to achieve social goals — just like the government.

They use their resources to advance a cause — not to make more money. It’s only natural, therefore, that foundations and other socially focused funds get very involved politically. They want to effect the change that is the basis of their very existence. They are obviously going to support those people in government who see things their way. And because success is measured very subjectively, many times the socially minded organization shifts focus and resources depending on who is in charge at the time.

At face value, it can be difficult to understand why foundations, charities, and other organizations invest the way they do. But if you take the time to understand what their bottom-line mission is and how they measure success, it will be easier for you to see the logic behind their actions.

Are you still baffled by the Rockefeller Foundation’s decision to dump oil? Why or why not?

Neal Frankle of Westlake Village frequents Santa Barbara often, but when he’s not in town, he’s helping his clients or busy as the editor of WealthPilgrim.com, MCMHA.org, and NealFrankle.com.