"A diamond is forever." What a lovely phrase. My, look at that gorgeous diamond on that woman's hand. Her fiance must really love her. She's so proud of it. Look how it sparkles.

I wonder if she'd be so proud if she knew that somebody in a forgotten West African nation may have had his hands chopped off in a battle over that bauble on her finger?

Is all that glitters evil?
I recently read some fascinating books on the topic of "blood diamonds," a.k.a. "conflict diamonds." The books Blood Diamonds and Glitter & Greed and the report on Sierra Leone from Human Rights Watch detail the role diamonds have had in the horrible civil wars in Sierra Leone, Angola, and the Congo. These books level detailed allegations against DeBeers Group -- a subsidiary of Anglo American PLC (NASDAQ:AAUK). They claim that its century-old near-monopoly of diamond production and distribution artificially inflated the price of diamonds, resulting in economically driven African civil wars. Tens of thousands of innocent civilians were murdered, mutilated, and displaced in these battles. The list of DeBeers' alleged offenses goes beyond even that -- offenses driven by greed, by the desire to inflate the value of an inherently worthless gem.

Based on the evidence presented, I firmly believed these allegations to be true. It turned my stomach reading about the suffering of people seemingly forgotten by the developed world. The thought that DeBeers manufactured the "tradition" of giving a diamond to one's betrothed while innocent civilians were being killed for those same gems made me sick. I resolved never to invest in Anglo American PLC.

A viral attitude
 Then it struck me that I could not stop there. Since DeBeers, via Anglo American, controlled nearly 80% of the world's diamond production and distribution, there were other culprits as well. Anybody that supported the diamond myth was accountable as well, including any firm that sold diamonds. I added Tiffany & Co. (NYSE:TIF) and Zale (NYSE:ZLC) to my do-not-invest list. I had to pass up on Blue Nile (NASDAQ:NILE) -- no matter how great a business it is -- and sell my shares in Costco (NASDAQ:COST).

This newfound sense of moral outrage metastasized, and soon I found myself in a conundrum of my own making. I learned that diamonds weren't always of gem quality, and that 80% of them were used for industrial purposes. They were used as abrasives, thermal insulators, in electronics, and in optics. That added hundreds, if not thousands, of companies to my list. Furthermore, there was no way to know the entirety of which firms used diamonds in their manufacturing.

Then I asked myself if an investing boycott on any company associated with diamonds went far enough. If I was to be true to my principles, shouldn't I refuse to use or buy anything that diamonds had a part in creating? Now this was getting silly. It was one thing to be morally outraged at DeBeers, but locking myself out of buying something that may have been cut with a diamond was ridiculous. I had to take a step back and reconsider my position.

And so a thesis was born. I realized there was no such thing as socially responsible investing (SRI).

SRI and moral relativism
What is socially responsible investing? That depends on how you define it. In its broadest sense, SRI is applying personal beliefs, values, and morals as additional criteria when deciding which companies to invest in and which to avoid. The Social Investment Forum's 2003 Report on Socially Responsible Investment Trends showed that 11%, or $2.16 trillion, of U.S.-invested assets were in companies defined as "socially responsible."

Some may not agree with me on this, but I think the process of choosing which companies to invest in based on moral values is inherently flawed. The reason is that most of modern society is governed by moral relativism -- the belief that positions of right or wrong are not absolutes, but can be determined by each individual, and that morals and ethics can vary from one situation, person, or circumstance to the next. Morality thus becomes a slippery slope.

But there is a fundamental flaw in this philosophy, at least to me. Investing is an absolute decision: You invest or you don't. You can't base an absolute decision on a relativist philosophy and hope to have any consistency. You may say, "Better to draw some line than none at all." I say, "Wrong."

You are either supporting something corrupt or you are not. And as for the logic of cutting off the head of the problem, I'd argue that Anglo American and its stock are just the tail. And you don't kill the dog by cutting off its tail. True, you may make yourself feel better by saying, "I won't invest in Anglo American, but not investing in Tiffany is silly." But the truth is that any time you buy a diamond, or a product made with diamonds, you support DeBeers, prolong the diamond myth, and subject innocent people to suffering. And by investing, you're supporting those companies, and thus enabling all the same.

Suppose you want to invest in the chemical industry. What are you going to do, invest in the firm that pollutes the environment the least? If it pollutes at all, why invest at all?

Under moral relativism, anywhere you put your foot down and refuse to invest will be an arbitrary decision that inherently lacks definitive meaning. And isn't socially responsible investing supposed to have meaning?

Thus, my conclusion: There is no such thing as a strictly "moral" company, and therefore socially responsible investing is a misnomer, if not an outright myth.

Activist shareholding investing
 This is not to say that a company cannot have terrific people running it or that a company's products cannot be of the highest quality. The Fool's Hidden Gems newsletter even seeks out companies with outstanding, ethical management. Furthermore, investors can send important messages by choosing which company's products they will buy and which stocks to purchase. Look at the number of hybrid vehicles being manufactured now. The message got through to the car manufacturers that people want more environmentally friendly autos.

Thus, I would re-name SRI "Activist Shareholder Investing," because this more accurately describes the goal of the investor: to reward companies that respond to an investor's agenda. You may argue this is all a matter of semantics, but it removes hypocrisy from the investor's philosophy.

I'm not trying to disparage people who have chosen the SRI route. Investing-wise, a lot of SRI mutual funds have done extremely well over the past few years. But we live in a world where individuals must take action to relieve the suffering that exists. In my opinion, basing investment decisions on a set of rules that is ultimately arbitrary is a cop-out. We can do better.

Fool contributor Lawrence Meyers likes to stir the pot, and owns none of the companies mentioned in this article. The Motley Fool has a disclosure policy .