The Price of Eggs

by Tim Weinhold (originally published Oct 19, 2016)

A few months back I began buying eggs for $8.00 per dozen. And therein lies a morality tale for chickens and investors. For many years, though, I bought eggs from my local supermarket for $1.99. They carried more expensive eggs, of course, but why pay more. An egg is an egg. Then a nutritionist friend began to educate me about the harmful effects for humans, and for the planet, from all the hormones and antibiotics fed to factory-farmed animals. So I switched to organic eggs for $2.99.

Then I learned that most U.S. eggs come from chickens confined for their lives to shoe-box-size cages. Meaning a hen might live her whole life never seeing sunlight, nor stretching her wings. That sounded dreadful. So I started buying “cage-free organic” eggs for $3.99 per dozen. And feeling virtuous. Now my eggs were free from harmful chemicals, plus I was no longer complicit in the grim cage confinement under which most chickens lived and died.

But that was before my youngest daughter, Hayley, moved here to Seattle after working on an organic farm in Missouri. Not only is she a big believer in organic food, she is passionate about only eating “happy meat” — meat from “pasture-raised” animals allowed to spend their days outside foraging naturally for food. Hayley was unimpressed with my choice of cage-free organic eggs. Why? Because, she informed me, virtually all cage-free eggs come from chickens housed in industrial aviaries — row upon row of hens stacked high in enormous warehouses. The conditions are cramped and dirty and most of these hens still live virtually all their lives indoors.

In fact, a group of animal welfare scientists and egg farmers recently released a report documenting that, “hen mortality was much higher in the aviary system.” The (relative) freedom of movement meant germs were passed more easily. And confined but un-caged hens were aggressive, in some instances becoming cannibalistic. The report also concluded that the aviary system was worse for the health of human workers.

All of which is why Hayley buys her eggs, and her meat, from Skagit River Ranch here in Washington. Their website says, “We have 3 principles we hold dear to our hearts:

1. Humane treatment of animals.
2. Sustainable farming by being a good steward of the land.
3. Certified Organic practices with no chemicals or pesticides.”

Convinced that meat from animals raised under such conditions was indeed healthier, I followed my daughter’s lead and started buying my meat from Skagit River Ranch. But not my eggs. I believed my cage-free organic eggs were entirely healthy and, more to the point, that $8.00 a dozen seemed like a very high price when supermarkets still sold eggs for $1.99. Plus I had tried the $8.00 eggs and they tasted just like my $3.99 eggs. Case closed.

Then one day I rashly mentioned to Hayley that I was still buying $3.99 eggs. As if patiently but firmly schooling a none-too-bright youngster, she said, “Dad, every time you buy eggs you’re not just choosing whether the eggs taste good for a price you like. You’re choosing how you want chickens to be raised. Buying $8.00 eggs is a choice for humane treatment of chickens. Buying $3.99 aviary eggs tells the egg industry to keep right on abusing chickens.”

She was right, of course. And I was busted. With every egg purchase, I was most definitely telling the industrial egg farmers to ‘keep up the good work.’ Except that it isn’t good work — it is work that in good conscience I could not defend. And yet I was supporting their inhumane production processes just to save myself a few bucks. Violating my conscience evidently comes awfully cheap. I told my daughter she was right and I was wrong. And that I admired her integrity in making the $8.00 ‘humane treatment’ choice despite the meager wages she earned at her entry-level job. Ever since I’ve been buying my eggs from Skagit River Ranch.

Choosing Our Future

Permit me to switch subjects for a moment. We’re just a few weeks away from our next presidential election. Presidential campaigns always stir our passions, but this one may set a record. Virtually no one is neutral. Everyone seems strongly (rabidly?) anti-one-candidate or the other. Which means almost all of us are convinced that our preferred candidate is a far better choice than their opponent.

Now, suppose you’re talking with an acquaintance about why you favor your candidate and why their adversary would be a disaster. What if your acquaintance said, ‘You know, votes don’t matter. Who the next president is doesn’t matter. So I’m going to make a little money instead. I’m planning to auction my vote on Craigslist to the highest bidder.’

Most of us would respond, ‘Are you crazy? You can’t do that. Of course votes matter. Of course who the president is matters. Very different futures will play out for our country depending on which candidate is elected. You are duty-bound to cast your vote wisely for the future you want.’ If, despite our advice, they went ahead and sold their vote, most of us would consider them irresponsible, and a traitor to their citizenship.

Votes absolutely do matter. Over the years, in fact, a great many of our soldiers have given their lives to ensure that America continues to be a nation where its people are free to vote. That ability to choose is the very essence of what makes democracy so special.

Now, what if that acquaintance wasn’t simply an ordinary voter like you and me. What if they had been a superdelegate to either the Republican or Democratic convention. Then their vote wouldn’t count as just one among tens of millions. No, their vote would have been especially weighty — one of just a few thousand determining our final two candidates for president. If they had sold off such an important vote, we would likely consider them not just irresponsible, but reprehensible.

Marketplace Elections

Back to chickens. Ever since Adam Smith first rhapsodized about the ‘the invisible hand,’ economists have loved markets. That’s because markets are effectively a giant, constantly-updating election by which we choose whether we want more or less of the multitude of products which business offers. Instead of finding ourselves limited to one vote every four years for the future we want (or want to avoid), via our purchases we cast a great many votes every day. Each purchase is a vote for more of that particular product and its associated business practices. And all our non-purchases are votes against the products and practices we deem not worth our money. Then, wonder of wonders, the market tallies up our votes and responds accordingly, giving us more of what, collectively, we’ve favored and less of what we’ve chosen to avoid.

Which means my daughter’s critique was even more incisive than she may have realized. Every time I bought my eggs for $3.99 I was voting — whether consciously or not — for a future in which chickens continue to spend their lives crammed into dirty, disease-prone industrial warehouses. And every time Hayley ponied up $8.00 for eggs from free-range, pastured chickens she was voting for an entirely different future for chickens, and for our planet. And, shame on me, I was selling for a few bucks the vote I should have been casting for that better future.

Which brings us to where this piece was headed all along. Investors are the superdelegates of the market economy. Consumers cast millions upon millions of small votes, to which companies listen and respond attentively. But investors get to cast really big votes. Their yea or nay, buy or sell, votes directly drive a company’s stock price — the very thing to which CEOs and their boards pay closest attention. If investors vote ‘no confidence,’ management is all but guaranteed to reverse course, and quickly. But if investors vote supportively for ‘more of the same,’ then that’s exactly what they’ll get.

Unfortunately Wall Street, and business academics, and, yes, mutual funds, have together convinced a great many investors that the only relevant criterion for their vote is maximized return. From this view, there are neither helpful nor harmful products and practices that will be reinforced for good or ill by investment choices. No, the only vote to be cast is for whichever investment will pay the greatest return.

This is, of course, the moral equivalent of saying the only thing that matters about an egg is its price — regardless of the cruelty imposed on chickens. And the equivalent of saying the thing that matters most about a piece of clothing is its price — even if that means it will be sewn by meagerly-paid women locked in fire-trap factories in Bangladesh. And that the only criterion for whether to own a tobacco stock is its dividend — not the fact that the company aggressively peddles cancer sticks to poor children in Indonesia.

Of course votes matter. Not just our political votes but our business votes. Fortunately, more and more consumers recognize that their purchase decisions are practically and morally consequential. So they increasingly cast their purchase votes in favor of the ethical, sustainable future they want for themselves and their children. Including, for some of us, by buying $8.00 eggs.

Isn’t it time for investors to do the same? Isn’t it time to give up the willful pretense that investing is morally trivial? In fact, investing is moral — or immoral — activity of the highest order. It directly shapes the decisions of business leaders and, in turn, the products and practices that so shape our world. Which means it’s high time investors (and their brokers and advisors) quit selling their superdelegate votes for a pittance. And began casting these oh-so-important votes in favor of a future where people and planet (and chickens) aren’t trashed for just a bit more profit.

Unless otherwise noted, Eventide is not an investor in companies discussed in this or other of our ‘faith and business’ columns, nor is there meant to be an endorsement, explicit or implied, of the entirety of any company’s business model, much less of all of a company’s business practices. Rather, aspects of the business model or practices of particular companies are discussed only to help illustrate contemporary examples of larger ‘faith and business’ topics.

The material provided herein has been provided by Eventide Asset Management, LLC and is for informational purposes only. Eventide Asset Management, LLC serves as investment adviser to one or more mutual funds distributed through Northern Lights Distributors, LLC, member FINRA. Northern Lights Distributors, LLC and Eventide Asset Management are not affiliated entities.

4674-NLD-10/12/2016