Cleantech Investing For EcoGeeks

by Tom Konrad.  This story is cross-posted on EcoGeek.org

As lovers of green gadgets, EcoGeeks probably know as much about what’s new in clean technology (a.k.a Cleantech) as anyone on the web.  So if you’re an EcoGeek thinking about investing in companies which make the technology you know and love, you will probably take comfort in the old adage that you should invest in what you know.  An EcoGeek investing in clean technology companies will have an advantage understanding how a company makes money, and what is a needed innovation with a large  market,  and what is simply a bizarre curiosity.  More importantly, an EcoGeek knows that any maker of EVs will have to cope with endless competitors, and they’re the first to know when LED bulbs are bright enough for general use.

While knowledge of cleantech is the great strength of the EcoGeek investor, this knowledge most likely arises from a love of clean technology.  Just as "geek" implies technology expertise, it also connotes an obsession with technology which might interfere with the geek’s social life.  Unfortunately, an obsession with cleantech has the potential to blind the unwary EcoGeek investor to the pitfalls of investing in a cool technology which might not turn out to be such a great investment.

Investing in what you know is not the same as investing in what you admire.  People who invest in something just because they admire the brand often find themselves buying at the top.  Our aspirations and wants are in large part cultural, and others will be excited about the same things we are, at the same time.  When many investors are all buying at once, none are likely to get a good price.

To the extent that EcoGeeks are ahead of the curve with fashion, we can get in ahead of the crowd.  The rising popularity which follows can work in our favor, driving the price higher as other investors pile in.  To the extent that we live up to the geek stereotype, and what we think is great turns out to be hopelessly un-cool, we’ll find ourselves investing in things which never catch on.  Many innovations which help the environment are also quite unpopular, so it is very difficult to know if we’re blazing a path for others to follow (as turned out to be the case with hybrid cars), or simply lost in the woods (think Segway.)

That said, the EcoGeek who decides to invest in cleantech need not end up going EcoBroke. The trick lies in distinguishing between when we’re on the environmental cutting edge, and when we’re on the environmental lunatic fringe.  Most people on the lunatic fringe think that they’re the only sane ones, and the rest of the world is confused.  That may well be the case.  After all, those of us who were worried about Climate Change before 2003 or so were on the lunatic fringe, even though most people now accept that we were right.  But if we were investing in cleantech companies back then, we probably had a lot more losers than winners.  Anyone remember Astropower?  Or, if you’re impressed by the recent successes of Capstone Microturbine (CPST), you probably didn’t buy it in 2001.

The key to EcoGeeky investing is to know that we’re investing out of knowledge, rather than just buying a stock because we’re excited about the company’s green technology.  In the end, the key to all successful investing is to know ourselves at least as well as we know the companies we’re investing in.

DISCLOSURE: Tom Konrad owns CPST.

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