1 00:00:00,440 --> 00:00:02,800 Speaker 1: Larry Fink of Black Rock, chairman and CEO, joins us 2 00:00:02,880 --> 00:00:07,560 Speaker 1: right now, I truly believe the purposeful companies they're going 3 00:00:07,640 --> 00:00:10,360 Speaker 1: to be focusing on the long term impact on climate 4 00:00:10,440 --> 00:00:15,120 Speaker 1: change and how it impacts their company. It's a total 5 00:00:15,200 --> 00:00:20,720 Speaker 1: philosophical shift of what a corporations for. Everybody's calling it grainwashing, 6 00:00:21,079 --> 00:00:25,760 Speaker 1: and I disagree. When you have actions that sound good 7 00:00:27,080 --> 00:00:30,720 Speaker 1: but in effect they don't really amount to much in reality, 8 00:00:31,200 --> 00:00:42,680 Speaker 1: it's actually more dangerous than we think. Welcome to calling 9 00:00:42,760 --> 00:00:48,400 Speaker 1: bullshit the podcast about purpose washing, the gap between what 10 00:00:48,479 --> 00:00:52,360 Speaker 1: companies say they stand for and what they actually do 11 00:00:53,040 --> 00:00:55,360 Speaker 1: and what they would need to change to practice what 12 00:00:55,440 --> 00:01:00,160 Speaker 1: they preach. I'm your host time onto you, and I've 13 00:01:00,160 --> 00:01:03,920 Speaker 1: spent over a decade helping companies define what they stand for, 14 00:01:04,280 --> 00:01:07,560 Speaker 1: their purpose and then help them to use that purpose 15 00:01:07,600 --> 00:01:12,840 Speaker 1: to drive transformation throughout their business. Unfortunately, at a lot 16 00:01:12,920 --> 00:01:17,040 Speaker 1: of companies and organizations today, there's still a pretty wide 17 00:01:17,040 --> 00:01:20,839 Speaker 1: gap between word and deed. That gap has a name. 18 00:01:21,480 --> 00:01:26,399 Speaker 1: We call it bullshit. But, and this is important, we 19 00:01:26,520 --> 00:01:30,000 Speaker 1: believe that bullshit is a treatable disease. So when the 20 00:01:30,040 --> 00:01:33,600 Speaker 1: bullshit detector lights up, we're going to explore things that 21 00:01:33,640 --> 00:01:41,039 Speaker 1: a company should do to fix it. In this episode, 22 00:01:41,360 --> 00:01:44,920 Speaker 1: we're going to look at black Rock, the largest investment 23 00:01:45,000 --> 00:01:49,200 Speaker 1: management company in the world. They manage over nine trillion 24 00:01:49,280 --> 00:01:54,800 Speaker 1: dollars in assets and their global influence is undeniable. In 25 00:01:54,920 --> 00:01:59,960 Speaker 1: his annual letter to the heads of the smpanies, Larry Finn, 26 00:02:00,400 --> 00:02:04,160 Speaker 1: black Rock CEO, has stated that their purpose is to 27 00:02:04,200 --> 00:02:08,280 Speaker 1: help build a more equitable, financially resilient future, not just 28 00:02:08,400 --> 00:02:12,639 Speaker 1: for their customers, but for the planet to That's an 29 00:02:12,680 --> 00:02:19,040 Speaker 1: admirable and lofty goal, but is it true. That's exactly 30 00:02:19,080 --> 00:02:28,000 Speaker 1: what we're going to explore in this episode. To really 31 00:02:28,080 --> 00:02:32,160 Speaker 1: understand black Rock story, we need to understand how American 32 00:02:32,240 --> 00:02:36,440 Speaker 1: business has evolved over the last several decades. So we're 33 00:02:36,440 --> 00:02:39,520 Speaker 1: going to go back in time, all the way back 34 00:02:39,560 --> 00:02:42,680 Speaker 1: to the end of World War Two, when the US 35 00:02:42,760 --> 00:02:48,240 Speaker 1: economy began a period of rapid expansion. President Roosevelt approves 36 00:02:48,320 --> 00:02:51,400 Speaker 1: legislation to provide for America's war veterans in the Peace 37 00:02:51,440 --> 00:02:55,720 Speaker 1: to Come by law, federal loans, pre schooling, job insurance, 38 00:02:55,720 --> 00:02:59,040 Speaker 1: and complete rehabilitation are among the benefits to short every 39 00:02:59,080 --> 00:03:02,640 Speaker 1: man and woman in the The g I Bill helped 40 00:03:02,680 --> 00:03:07,400 Speaker 1: a generation of returning soldiers go to college, secure good jobs, 41 00:03:07,560 --> 00:03:18,680 Speaker 1: and buy homes. The manufacturing and services sector grew, and 42 00:03:18,760 --> 00:03:22,680 Speaker 1: companies were eager to sell to an expanding American middle class. 43 00:03:22,800 --> 00:03:26,440 Speaker 1: How many dreams can your shape in a minute? As 44 00:03:26,600 --> 00:03:34,560 Speaker 1: the people have done. There were a few other factors 45 00:03:34,600 --> 00:03:40,880 Speaker 1: behind that post war economic boom. First, many business leaders 46 00:03:40,920 --> 00:03:45,080 Speaker 1: believed that they had wider responsibilities to people and communities, 47 00:03:45,280 --> 00:03:49,960 Speaker 1: not just their shareholders. And second, the effective tax rates 48 00:03:49,960 --> 00:03:54,000 Speaker 1: on individuals and corporations were higher, which meant that all 49 00:03:54,080 --> 00:03:59,200 Speaker 1: of that wealth was being redistributed more efficiently. In the 50 00:04:00,120 --> 00:04:03,640 Speaker 1: ds CEOs, we're only making about twenty times more than 51 00:04:03,680 --> 00:04:08,960 Speaker 1: a typical worker, by that was three hundred and fifty 52 00:04:09,080 --> 00:04:13,320 Speaker 1: times more. And back in the fifties, union membership was 53 00:04:13,400 --> 00:04:18,440 Speaker 1: high and upward mobility was real for many Americans. And 54 00:04:18,600 --> 00:04:26,440 Speaker 1: then in it all came to a screeching halt. Gives 55 00:04:26,440 --> 00:04:29,400 Speaker 1: me the great pro pleasure to present to you today, 56 00:04:29,560 --> 00:04:35,360 Speaker 1: Professor Milton Friedman, the world renowned economist Milton Friedman, published 57 00:04:35,360 --> 00:04:38,159 Speaker 1: an essay in The New York Times that had a 58 00:04:38,320 --> 00:04:43,240 Speaker 1: colossal impact on American business. He introduced the concept of 59 00:04:43,320 --> 00:04:48,000 Speaker 1: neoliberalism that rejected the idea that companies should have a 60 00:04:48,160 --> 00:04:52,920 Speaker 1: social conscience. In Ohio, an old man failed to pay 61 00:04:52,960 --> 00:04:55,239 Speaker 1: his electric billity you may be familiar with the case, 62 00:04:55,800 --> 00:04:58,800 Speaker 1: and the electric company turned off the electricity and he died. 63 00:04:59,120 --> 00:05:02,760 Speaker 1: Who was respons Let's suppose that the electric company or 64 00:05:02,800 --> 00:05:06,280 Speaker 1: to follow the practice of never turning off anybody's electricity. 65 00:05:06,560 --> 00:05:09,839 Speaker 1: Who would pay the costs? The responsibility really lies not 66 00:05:09,920 --> 00:05:12,720 Speaker 1: on the electric company for turning it off, but on 67 00:05:12,800 --> 00:05:17,080 Speaker 1: those of this man's neighbors and friends and associates who 68 00:05:17,160 --> 00:05:20,040 Speaker 1: are not charitable enough to enable him as an individual 69 00:05:20,520 --> 00:05:25,000 Speaker 1: to make the electric bill. Friedman believed that a business 70 00:05:25,000 --> 00:05:30,160 Speaker 1: had only one social responsibility to make money or its shareholders. 71 00:05:30,720 --> 00:05:34,720 Speaker 1: To him, an executive that wanted their company to eliminate 72 00:05:34,720 --> 00:05:40,640 Speaker 1: discrimination or avoid pollution was and I quote, preaching pure 73 00:05:41,080 --> 00:05:47,240 Speaker 1: unadulterated socialism. Humanist capitalism, which said you had responsibilities to 74 00:05:47,320 --> 00:05:53,279 Speaker 1: your workers and your community was out predatory capitalism. The 75 00:05:53,440 --> 00:05:57,560 Speaker 1: dog eat dog short term approach to success was in 76 00:05:58,920 --> 00:06:03,119 Speaker 1: the point is, ladies and gentlemen, that greed is good. 77 00:06:04,640 --> 00:06:08,839 Speaker 1: In pursuit of ever larger profits, corporate leaders began to 78 00:06:09,000 --> 00:06:14,360 Speaker 1: hack away at internal costs. Greed is right, Greed works 79 00:06:15,040 --> 00:06:20,240 Speaker 1: paying the lowest possible wages, providing less training, less paid 80 00:06:20,240 --> 00:06:24,800 Speaker 1: time off, or none at all. Greed clarifies cuts through 81 00:06:25,000 --> 00:06:31,320 Speaker 1: and captions es of the evolutionary spirit. But the really 82 00:06:31,360 --> 00:06:36,760 Speaker 1: bad behavior happened at the regulatory level. Corporations lobbied relentlessly 83 00:06:36,920 --> 00:06:40,720 Speaker 1: to lower the corporate tax rate and weaken environmental protections, 84 00:06:41,080 --> 00:06:44,520 Speaker 1: which is why humans are now facing the existential crisis 85 00:06:44,560 --> 00:06:53,240 Speaker 1: of climate change. Okay, so where does black Rock fit 86 00:06:53,279 --> 00:06:57,080 Speaker 1: into all of this? More precisely, where does black Rock 87 00:06:57,200 --> 00:07:01,200 Speaker 1: CEO Larry Fink fit into all of this? Back in 88 00:07:01,240 --> 00:07:04,479 Speaker 1: the height of the predatory capitalism days of the late 89 00:07:04,560 --> 00:07:08,560 Speaker 1: nineteen eighties, Larry and seven other finance executives had an 90 00:07:08,600 --> 00:07:13,600 Speaker 1: idea to create a risk reduced asset management company, or 91 00:07:13,680 --> 00:07:17,520 Speaker 1: in plain English, a safer place for rich people and 92 00:07:17,600 --> 00:07:22,280 Speaker 1: big institutions to park and grow their money. At first, 93 00:07:22,800 --> 00:07:26,440 Speaker 1: pursuing Freedman's doctrine, black Rock just wanted to get as 94 00:07:26,440 --> 00:07:30,840 Speaker 1: big as possible, and they did, eventually becoming the largest 95 00:07:30,880 --> 00:07:37,840 Speaker 1: investment manager in the world. But then Larry Fink did 96 00:07:37,920 --> 00:07:44,200 Speaker 1: something really freaking bizarre. He started talking about the responsibilities 97 00:07:44,200 --> 00:07:47,240 Speaker 1: that business has had to help solve the big issues 98 00:07:47,280 --> 00:07:52,280 Speaker 1: in the world. He was advocating that businesses become purpose led, 99 00:07:52,760 --> 00:07:56,600 Speaker 1: an idea that was seemingly at odds with Freedman's philosophy 100 00:07:56,760 --> 00:07:59,560 Speaker 1: that had taken the Western world by storm. Back in 101 00:07:59,680 --> 00:08:03,679 Speaker 1: ninety seventy, black Rock chairman and CEO Larry Fink sending 102 00:08:03,720 --> 00:08:06,400 Speaker 1: a letter to the CEOs of the SMP five companies, 103 00:08:06,640 --> 00:08:10,280 Speaker 1: warning them not only about activism and short termism, but 104 00:08:10,280 --> 00:08:13,440 Speaker 1: also calling on them to focus more on long term growth. 105 00:08:13,960 --> 00:08:19,240 Speaker 1: And when Larry talks, CEOs listen. And suddenly he was 106 00:08:19,320 --> 00:08:22,480 Speaker 1: saying stuff that would make Milton Friedman sit up in 107 00:08:22,560 --> 00:08:27,120 Speaker 1: his grave. We are interested in long term results, not 108 00:08:27,280 --> 00:08:30,360 Speaker 1: short term results. Larry started talking about the need for 109 00:08:30,400 --> 00:08:34,320 Speaker 1: companies to take care of stakeholders and not just shareholders, 110 00:08:34,360 --> 00:08:36,920 Speaker 1: and he began hammering c e o s to take 111 00:08:36,920 --> 00:08:40,559 Speaker 1: a role in actively addressing climate change. Big news from 112 00:08:40,559 --> 00:08:44,280 Speaker 1: black Rock this morning, the world's largest asset manager now 113 00:08:44,280 --> 00:08:48,160 Speaker 1: announcing the firm will make investment decisions with environmental sustainability 114 00:08:48,160 --> 00:08:53,480 Speaker 1: at its core. And finally, in Larry led a coalition 115 00:08:53,520 --> 00:08:56,920 Speaker 1: of CEOs of nearly two hundred of the world's largest 116 00:08:56,920 --> 00:09:02,040 Speaker 1: corporations called the Business Roundtable, to publish a letter redefining 117 00:09:02,280 --> 00:09:06,320 Speaker 1: the true purpose of a corporation. You've effectively suggested that 118 00:09:06,360 --> 00:09:09,360 Speaker 1: it's not just profit that you're after as an investor, 119 00:09:09,559 --> 00:09:11,360 Speaker 1: but that to get to that profit, you think that 120 00:09:11,400 --> 00:09:13,959 Speaker 1: these companies need to have a social purpose, which is 121 00:09:14,000 --> 00:09:16,080 Speaker 1: a little bit stepping out. Well, no, I don't think 122 00:09:16,080 --> 00:09:19,520 Speaker 1: it's stepping out. I think I'm actually reconfirming what Milton 123 00:09:19,600 --> 00:09:23,040 Speaker 1: Friedman said. If you read his whole essay that everyone 124 00:09:23,080 --> 00:09:25,680 Speaker 1: talks about, he talks about that you need to be 125 00:09:25,679 --> 00:09:28,360 Speaker 1: connected in your community. I believe the companies that have 126 00:09:28,480 --> 00:09:31,720 Speaker 1: purpose are the best companies in the world because it 127 00:09:31,880 --> 00:09:37,240 Speaker 1: unites their employees, it connects the clients, it brings the 128 00:09:37,400 --> 00:09:42,360 Speaker 1: organization onto a common plane. Look, I love that Larry 129 00:09:42,400 --> 00:09:46,040 Speaker 1: think is saying this stuff and putting videos like this 130 00:09:46,320 --> 00:09:49,920 Speaker 1: on the black Rock website. We contribute to a more 131 00:09:49,960 --> 00:09:56,280 Speaker 1: inclusive and resilient economy that benefits more people. This is 132 00:09:56,280 --> 00:09:58,959 Speaker 1: how we remain true to our purpose of helping more 133 00:09:59,000 --> 00:10:04,440 Speaker 1: and more people experienced financial well being. But what we 134 00:10:04,520 --> 00:10:07,000 Speaker 1: need to get to the bottom of is does he 135 00:10:07,120 --> 00:10:10,320 Speaker 1: really mean it or is it just a bunch of bs. 136 00:10:16,320 --> 00:10:21,360 Speaker 1: So let's start digging for more context on how investors 137 00:10:21,720 --> 00:10:25,960 Speaker 1: and investment managers like black Rock can push companies to 138 00:10:26,000 --> 00:10:29,840 Speaker 1: clean up their act. I called up Andrew Behar. He's 139 00:10:29,880 --> 00:10:33,920 Speaker 1: the CEO of a nonprofit called As You Sow, which 140 00:10:33,960 --> 00:10:39,080 Speaker 1: supports shareholder advocacy. That's s ow, like the proverb as 141 00:10:39,120 --> 00:10:42,880 Speaker 1: you sow, so show you reap. He's also written a 142 00:10:42,920 --> 00:10:47,360 Speaker 1: book called The Shareholders Action Guide, Unleash Your Hidden Powers 143 00:10:47,400 --> 00:10:53,920 Speaker 1: to Hold Corporations Accountable. Andrew, thank you so much for 144 00:10:54,000 --> 00:10:57,520 Speaker 1: being here. My pleasure. We're here to talk about black Rock, 145 00:10:57,840 --> 00:11:01,079 Speaker 1: but having read your book, I wanted to start out 146 00:11:01,120 --> 00:11:04,360 Speaker 1: today talking about the work you're doing at As You 147 00:11:04,400 --> 00:11:07,600 Speaker 1: Sell Sure. So as You Say is at a five 148 00:11:07,600 --> 00:11:11,280 Speaker 1: O one C three nonprofit. We're found when you focus 149 00:11:11,320 --> 00:11:16,160 Speaker 1: on corporate accountability from the viewpoint of shareholders. So we 150 00:11:16,240 --> 00:11:22,880 Speaker 1: engage major companies generally SMPI companies as shareholders and we 151 00:11:23,000 --> 00:11:26,760 Speaker 1: bring to them a message around really around material risk 152 00:11:27,400 --> 00:11:30,199 Speaker 1: and as shareholders we want to see them improve. We're 153 00:11:30,240 --> 00:11:34,680 Speaker 1: advocating on behalf of the company creating more environmental, social 154 00:11:34,720 --> 00:11:38,000 Speaker 1: and governance policies and practices. So can you talk a 155 00:11:38,040 --> 00:11:42,200 Speaker 1: little bit more about how shareholder advocacy works, like what 156 00:11:42,320 --> 00:11:47,920 Speaker 1: the primary mechanism is SURE So the SEC has a 157 00:11:48,040 --> 00:11:54,000 Speaker 1: rule called fourteen A eight, which says that shareholders that 158 00:11:54,120 --> 00:11:56,439 Speaker 1: have a certain amount of shares for a certain amount 159 00:11:56,480 --> 00:12:01,920 Speaker 1: of time have legal standing to ask the companies certain things. 160 00:12:02,000 --> 00:12:06,880 Speaker 1: For example, as shareholders, as you so, approached Young Brands, 161 00:12:07,240 --> 00:12:10,280 Speaker 1: the parent company of Taco Bell, Long John Silver's, and 162 00:12:10,320 --> 00:12:13,960 Speaker 1: Pizza Hut, to advocate for the reduction of plastic in 163 00:12:14,000 --> 00:12:17,960 Speaker 1: their restaurants that ultimately ended up in the ocean. So 164 00:12:18,000 --> 00:12:21,400 Speaker 1: we went to the company and said, our brand, Young 165 00:12:21,440 --> 00:12:25,840 Speaker 1: Brands is being associated with the destruction of the ocean ecosystem, 166 00:12:25,880 --> 00:12:29,920 Speaker 1: and we have a solution. It's a really very simple 167 00:12:30,000 --> 00:12:33,319 Speaker 1: solution that's going to actually cost us a lot less 168 00:12:33,640 --> 00:12:39,280 Speaker 1: than this negative brand association. And we suggested this and 169 00:12:39,400 --> 00:12:42,920 Speaker 1: the companies they said, okay, well think about it. We escalated, 170 00:12:42,960 --> 00:12:45,960 Speaker 1: We filed the shareholder resolution. If you're not familiar with 171 00:12:46,040 --> 00:12:50,040 Speaker 1: that term. A shareholder resolution is a document a shareholder 172 00:12:50,040 --> 00:12:54,160 Speaker 1: can file six months before a company's annual meeting, which 173 00:12:54,200 --> 00:12:57,360 Speaker 1: is then put to a vote. There's a whereas clause 174 00:12:57,400 --> 00:13:02,120 Speaker 1: which says, whereas the company continues to use styrofoam, and 175 00:13:02,120 --> 00:13:04,120 Speaker 1: the styrofoam is finding its way into the ocean, and 176 00:13:04,160 --> 00:13:08,320 Speaker 1: it's causing this destruction, whereas we have all this evidence 177 00:13:08,360 --> 00:13:12,679 Speaker 1: and there's footnotes about what this destruction is doing. Therefore, 178 00:13:12,920 --> 00:13:17,559 Speaker 1: it's resolved that the company will write a report about 179 00:13:17,679 --> 00:13:23,239 Speaker 1: how this plastic use is impacting the ocean and potentially 180 00:13:23,240 --> 00:13:26,240 Speaker 1: having a negative impact to our brand, which is a 181 00:13:26,320 --> 00:13:30,400 Speaker 1: material issue for shareholders. These resolutions for change can be 182 00:13:30,520 --> 00:13:33,679 Speaker 1: a big pain in the butt for companies like young brands, 183 00:13:34,280 --> 00:13:37,520 Speaker 1: so there's a real incentive to settle the issue before 184 00:13:37,559 --> 00:13:40,520 Speaker 1: a vote. So then what happens is the company then 185 00:13:40,520 --> 00:13:42,240 Speaker 1: has a conversation with you and they say we'd like 186 00:13:42,280 --> 00:13:44,880 Speaker 1: you to withdraw, and you say, well, we'll withdraw if 187 00:13:44,920 --> 00:13:49,640 Speaker 1: you will pledge to change this practice. And sometimes the 188 00:13:49,679 --> 00:13:52,040 Speaker 1: company says okay, and sometimes they say no. And if 189 00:13:52,040 --> 00:13:55,000 Speaker 1: they say no, you talk to press about it, You 190 00:13:55,080 --> 00:13:57,960 Speaker 1: talk to other investors about it to get a better 191 00:13:58,040 --> 00:14:01,719 Speaker 1: understanding of the potential impact to the shareholder. Advocacy can 192 00:14:01,800 --> 00:14:05,480 Speaker 1: have in one alone, as you so met with a 193 00:14:05,600 --> 00:14:09,640 Speaker 1: hundred and eighty eight companies to discuss pressing global issues 194 00:14:10,080 --> 00:14:14,680 Speaker 1: climate change, ocean plastics, toxins and the food system, antibiotics 195 00:14:14,679 --> 00:14:19,720 Speaker 1: and meet racial justice, diversity, equity, inclusion, egregious CEO pay 196 00:14:19,760 --> 00:14:24,680 Speaker 1: all these different issues, and one point seven trillion dollars 197 00:14:24,680 --> 00:14:28,000 Speaker 1: of assets were voted yes. And as you so, resolutions right. 198 00:14:28,200 --> 00:14:30,080 Speaker 1: And one of the things that you pointed out in 199 00:14:30,120 --> 00:14:32,000 Speaker 1: your book was that there was a time when it 200 00:14:32,040 --> 00:14:34,960 Speaker 1: was pretty rare for shareholder resolutions to even get ten 201 00:14:35,040 --> 00:14:39,680 Speaker 1: percent of the vote. Today you said that they routinely 202 00:14:40,000 --> 00:14:43,960 Speaker 1: get twenty thirty even of the vote. So it seems 203 00:14:44,000 --> 00:14:47,200 Speaker 1: like this is picking up momentum. Would that be accurate? 204 00:14:47,720 --> 00:14:52,600 Speaker 1: The institutional share owners are voting much more frequently and 205 00:14:52,680 --> 00:14:57,960 Speaker 1: also much more for the resolutions and against management than 206 00:14:58,000 --> 00:15:00,160 Speaker 1: ever before. It kind of leads us into the a 207 00:15:00,200 --> 00:15:03,680 Speaker 1: black Rock conversation. Just this year, black Rock increased from 208 00:15:03,680 --> 00:15:09,480 Speaker 1: a sevent voting against management to So when black Rock flexes, 209 00:15:09,520 --> 00:15:13,880 Speaker 1: its power really ripples through the system. And the question 210 00:15:13,920 --> 00:15:16,520 Speaker 1: I always have is why don't you use it more often? Like, 211 00:15:16,640 --> 00:15:20,680 Speaker 1: for instance, Larry Fink's letters points out that there is 212 00:15:21,040 --> 00:15:24,640 Speaker 1: every company should have a climate transition plan that is 213 00:15:24,680 --> 00:15:28,520 Speaker 1: aligned with Paris that is a five percent emissions reduction 214 00:15:28,600 --> 00:15:30,240 Speaker 1: every year for the next ten years. I mean, he 215 00:15:30,280 --> 00:15:32,600 Speaker 1: puts it in his letter, but then he stopped short 216 00:15:33,080 --> 00:15:36,360 Speaker 1: and never says or will vote against your board or 217 00:15:37,040 --> 00:15:39,680 Speaker 1: will drop you from our managed funds. If he did that, 218 00:15:39,960 --> 00:15:43,440 Speaker 1: every company would have a Paris compliant transition plan overnight. 219 00:15:43,720 --> 00:15:46,160 Speaker 1: But why should any other CEO listen to what Larry 220 00:15:46,160 --> 00:15:49,320 Speaker 1: Fink has to say? What's special about Larry Fink? They 221 00:15:49,360 --> 00:15:55,040 Speaker 1: owned about seven to twelve percent of every company. Uh. 222 00:15:55,200 --> 00:15:58,760 Speaker 1: In case he didn't catch that, Andrew just said black 223 00:15:58,880 --> 00:16:04,440 Speaker 1: Rock owns a out seven of every company. He also 224 00:16:04,520 --> 00:16:07,800 Speaker 1: goes on to say that historically black Rock doesn't share 225 00:16:07,800 --> 00:16:11,840 Speaker 1: what they learn with other shareholder advocates. So on the 226 00:16:11,880 --> 00:16:15,160 Speaker 1: one hand, it seems like there's problematic behavior on black 227 00:16:15,240 --> 00:16:19,760 Speaker 1: Rock's part from a shareholder advocacy standpoint. On the other hand, 228 00:16:20,280 --> 00:16:24,720 Speaker 1: there's also some good behavior, specifically what Larry Fink is 229 00:16:24,720 --> 00:16:29,760 Speaker 1: addressing in his letters. And I've read his letters going 230 00:16:29,800 --> 00:16:33,840 Speaker 1: back to and I guess it's a fascinating read to 231 00:16:33,880 --> 00:16:36,880 Speaker 1: read them in sequence, because it feels like you're watching 232 00:16:36,920 --> 00:16:40,840 Speaker 1: the progression of Larry Fink's thinking. He starts out talking 233 00:16:40,960 --> 00:16:43,440 Speaker 1: mostly about the need for ceo s to make the 234 00:16:43,480 --> 00:16:47,800 Speaker 1: mental shift from thinking quarter to quarter to thinking longer term, 235 00:16:47,840 --> 00:16:51,920 Speaker 1: and that struck me as in itself a pretty unusual 236 00:16:53,000 --> 00:16:57,920 Speaker 1: stance for someone in finance. Would you call that accurate, 237 00:16:58,160 --> 00:17:01,880 Speaker 1: people truly understand finance, and they acknowledge that. They acknowledge 238 00:17:01,920 --> 00:17:05,200 Speaker 1: that it's true that really this whole idea of short 239 00:17:05,320 --> 00:17:09,840 Speaker 1: termism is an antiquated myth that needs to be overturned. 240 00:17:09,840 --> 00:17:12,679 Speaker 1: And when Larry Think says it, well, there's a lot 241 00:17:12,720 --> 00:17:15,040 Speaker 1: of gravitasks behind when he puts it in a letter. 242 00:17:15,200 --> 00:17:19,320 Speaker 1: So hopefully that's starting to sink in that actually what 243 00:17:19,359 --> 00:17:24,080 Speaker 1: investors want to invest in his companies who disclose honestly, 244 00:17:24,320 --> 00:17:27,320 Speaker 1: tell us exactly where you are, layout a trajectory for 245 00:17:27,400 --> 00:17:29,840 Speaker 1: where you want to go, and then tell us as 246 00:17:29,840 --> 00:17:33,080 Speaker 1: you're hitting your six month, one year to year milestones, 247 00:17:33,359 --> 00:17:35,159 Speaker 1: and if you don't hit your milestones, tell us what 248 00:17:35,240 --> 00:17:39,560 Speaker 1: course corrections you're gonna make. Investors will reward that we're 249 00:17:39,600 --> 00:17:42,240 Speaker 1: tossing out Milton Freedom. Uncle Milton's going under the bus. 250 00:17:42,640 --> 00:17:47,919 Speaker 1: It's a total philosophical shift of what a corporations for now. 251 00:17:48,080 --> 00:17:52,159 Speaker 1: What's happened since then is everybody's calling it grainwashing, and 252 00:17:52,280 --> 00:17:55,240 Speaker 1: I disagree. It's a philosophical shift that's going to take 253 00:17:55,320 --> 00:17:57,760 Speaker 1: some time to implement. And I believe that there we're 254 00:17:57,800 --> 00:18:03,040 Speaker 1: seeing is the actual emergence of a new economy, A 255 00:18:03,119 --> 00:18:07,040 Speaker 1: regenerative economy based on justice and sustainability, that's replacing our 256 00:18:07,080 --> 00:18:11,360 Speaker 1: current economy that's based on extraction and destruction. We're right 257 00:18:11,400 --> 00:18:15,240 Speaker 1: at this inflection point, right now, this minute, and that's 258 00:18:15,280 --> 00:18:18,800 Speaker 1: why people feel so much turbulence. They don't quite know 259 00:18:18,880 --> 00:18:21,199 Speaker 1: what to do with it. It's because we're just in 260 00:18:21,240 --> 00:18:25,399 Speaker 1: this birthing cycle and birth or messy. You actually wrote 261 00:18:25,520 --> 00:18:31,120 Speaker 1: a I found incredibly smart and very entertaining letter as 262 00:18:31,160 --> 00:18:35,320 Speaker 1: a response to Larry Fink's letters to c E O S. 263 00:18:35,720 --> 00:18:37,920 Speaker 1: Could you talk a little bit about what you said 264 00:18:37,960 --> 00:18:40,920 Speaker 1: in that letter and why you said it? Sure, so 265 00:18:41,320 --> 00:18:44,119 Speaker 1: you know, I read his letters, and I in my mind, 266 00:18:44,359 --> 00:18:46,600 Speaker 1: I think if only Larry had sent this to me 267 00:18:46,720 --> 00:18:49,239 Speaker 1: before he published it, I would have marked it up 268 00:18:49,280 --> 00:18:52,560 Speaker 1: for him and he would do much better. So I 269 00:18:52,600 --> 00:18:56,440 Speaker 1: took his letter. I literally put it into word. I 270 00:18:56,480 --> 00:18:58,880 Speaker 1: did exactly what I would have done if Larry had said, Hey, Andy, 271 00:18:58,920 --> 00:19:02,000 Speaker 1: can you mark this up for me? I finished the 272 00:19:02,080 --> 00:19:07,920 Speaker 1: sentences when he says companies should have a climate transition plan, 273 00:19:07,960 --> 00:19:11,560 Speaker 1: to report against it every year and have emission reduction 274 00:19:11,760 --> 00:19:17,399 Speaker 1: by I added, or we'll vote against your board and 275 00:19:17,400 --> 00:19:19,520 Speaker 1: if you don't get it done. In a year, we'll 276 00:19:19,520 --> 00:19:23,640 Speaker 1: remove you from our managed funds. Right. I just concluded 277 00:19:23,880 --> 00:19:27,400 Speaker 1: his sentences by adding action. I thought he brilliantly laid 278 00:19:27,440 --> 00:19:29,840 Speaker 1: out the problem, and so I just helped him a 279 00:19:29,880 --> 00:19:35,760 Speaker 1: little bit. Oh, I thought it was great, Andrew. We 280 00:19:35,880 --> 00:19:39,320 Speaker 1: have a thing on calling bullshit called the BS scale, 281 00:19:39,600 --> 00:19:43,200 Speaker 1: So on a scale of zero to one, zero being 282 00:19:43,400 --> 00:19:47,159 Speaker 1: zero bullshit, which means the company means everything it says, 283 00:19:47,760 --> 00:19:52,280 Speaker 1: and on being just complete BS. Where would you rate 284 00:19:52,359 --> 00:20:00,520 Speaker 1: Black Rock getting better? Larry's letters have been instrumental in 285 00:20:00,680 --> 00:20:05,080 Speaker 1: just awareness that climate change is this investing risk to 286 00:20:05,119 --> 00:20:10,120 Speaker 1: the entire system. They've been instrumental in actually this whole 287 00:20:10,119 --> 00:20:14,480 Speaker 1: idea of stakeholder capitalism. So I have to commend him 288 00:20:14,520 --> 00:20:19,120 Speaker 1: for what he's done. My problem is he didn't finish 289 00:20:19,160 --> 00:20:23,320 Speaker 1: the sentence with or we're going to vote against your board. 290 00:20:23,920 --> 00:20:25,959 Speaker 1: And if he did that, if he said and we're 291 00:20:26,000 --> 00:20:29,479 Speaker 1: going to use our power, then I would give him 292 00:20:29,840 --> 00:20:34,520 Speaker 1: square a zero. That's what we need. So I don't 293 00:20:34,520 --> 00:20:36,639 Speaker 1: have an exact number for you, but I'd say it's 294 00:20:36,640 --> 00:20:40,200 Speaker 1: a work in process, and they could do a lot more, 295 00:20:40,320 --> 00:20:43,959 Speaker 1: and they have the power to really make incredible change. 296 00:20:45,040 --> 00:20:47,640 Speaker 1: So what is the one thing Andrew that Black Rock 297 00:20:47,960 --> 00:20:52,880 Speaker 1: needs to do or change to better align its actions 298 00:20:53,119 --> 00:20:56,600 Speaker 1: with the purpose that Larry is talking about. They need 299 00:20:56,680 --> 00:21:01,399 Speaker 1: to stand with the other shareholders, stand with entire shareholder 300 00:21:01,440 --> 00:21:06,320 Speaker 1: advocacy community. Two vote with us. We spent a lot 301 00:21:06,359 --> 00:21:09,359 Speaker 1: of time and energy on this, and yet generally black 302 00:21:09,480 --> 00:21:11,560 Speaker 1: Rock says, well, we met with the company and we're cool. 303 00:21:13,000 --> 00:21:17,080 Speaker 1: Trust the shareholder advacy community support us. That would be 304 00:21:17,119 --> 00:21:19,639 Speaker 1: a shift in where we're heading and the speed at 305 00:21:19,640 --> 00:21:22,960 Speaker 1: which we could get there. Andrew, thank you so much 306 00:21:22,960 --> 00:21:30,080 Speaker 1: for being here today. Thank you very much. Folks. It 307 00:21:30,320 --> 00:21:34,320 Speaker 1: is time to make the call. Is black Rock really 308 00:21:34,359 --> 00:21:38,040 Speaker 1: taking action to contribute to a more equitable, financially resilient 309 00:21:38,119 --> 00:21:41,720 Speaker 1: future for all? Based on what I've heard so far, 310 00:21:42,600 --> 00:21:47,680 Speaker 1: I'm calling a qualified bs. I think there's some bullshit here, 311 00:21:48,160 --> 00:21:53,720 Speaker 1: but there are also some really positive signs. So what 312 00:21:53,840 --> 00:21:58,320 Speaker 1: should Larry do now? Up next, we'll hear some solutions 313 00:21:58,320 --> 00:22:02,720 Speaker 1: from some experts in in packed investing, including a black 314 00:22:02,840 --> 00:22:15,960 Speaker 1: Rock insider and whistle blower. All Right, before the break, 315 00:22:16,280 --> 00:22:20,439 Speaker 1: I called a qualified bullshit. There's still a gap between 316 00:22:20,440 --> 00:22:23,480 Speaker 1: what Larry think is saying Black Rock stands for and 317 00:22:23,560 --> 00:22:26,639 Speaker 1: the actions they're taking. So what should Larry and his 318 00:22:26,760 --> 00:22:31,359 Speaker 1: leadership team do about that. In this podcast, we don't 319 00:22:31,440 --> 00:22:34,280 Speaker 1: just curse the darkness. We also like to light a 320 00:22:34,320 --> 00:22:38,439 Speaker 1: few candles. So I've invited to impact investing experts to 321 00:22:38,480 --> 00:22:42,200 Speaker 1: propose some concrete things that black Rock could change to 322 00:22:42,359 --> 00:22:49,960 Speaker 1: actually do their story around sustainable investing. First up, I'd 323 00:22:50,000 --> 00:22:53,000 Speaker 1: like to welcome Matthew weatherly White. Matthew is a co 324 00:22:53,119 --> 00:22:56,000 Speaker 1: founder and former managing director of the cap Rock Group, 325 00:22:56,119 --> 00:22:59,600 Speaker 1: a multi family office based in Boise, Idaho, advising over 326 00:22:59,680 --> 00:23:03,080 Speaker 1: three billion dollars, roughly a third of which has been 327 00:23:03,080 --> 00:23:06,639 Speaker 1: deployed with an eye toward impact investing, which they define 328 00:23:06,680 --> 00:23:12,119 Speaker 1: as pursuing positive financial return while simultaneously creating durable, measurable 329 00:23:12,200 --> 00:23:15,719 Speaker 1: social and environmental value. Welcome Matthew. It's great to have 330 00:23:15,760 --> 00:23:18,040 Speaker 1: you here. Thanks for asking me to join this conversation. 331 00:23:18,040 --> 00:23:22,760 Speaker 1: I'm totally excited. We are also joined by Tarik Fancy. 332 00:23:22,880 --> 00:23:26,479 Speaker 1: Tarik has held multiple positions in finance at firms like 333 00:23:26,520 --> 00:23:30,719 Speaker 1: Credit Suites, First Boston, MHR Fund Management, and the Canada 334 00:23:30,800 --> 00:23:35,840 Speaker 1: Pension Plan Investment Board, and in seventeen, Tarik joined black Rock, 335 00:23:36,040 --> 00:23:39,560 Speaker 1: where he was the Chief Investment Officer for Sustainable Investing. 336 00:23:40,400 --> 00:23:42,359 Speaker 1: I actually loved that he has this in his bio, 337 00:23:42,400 --> 00:23:44,640 Speaker 1: so I'm just gonna read it. After trying to make 338 00:23:44,640 --> 00:23:47,320 Speaker 1: Wall Street more green from the inside, he realized that 339 00:23:47,359 --> 00:23:50,600 Speaker 1: there was no real social impact happening, rather just a 340 00:23:50,640 --> 00:23:54,119 Speaker 1: bunch of marketing tak Thank you so much for joining 341 00:23:54,200 --> 00:23:57,840 Speaker 1: us today. Glad to be here. Okay, so let's get 342 00:23:57,920 --> 00:24:01,120 Speaker 1: right into some ideas for black Rock. Matthew in two 343 00:24:01,160 --> 00:24:04,080 Speaker 1: minutes or less. What's the number one thing black Rock 344 00:24:04,160 --> 00:24:06,920 Speaker 1: should do to better do their story? I think that 345 00:24:06,960 --> 00:24:10,720 Speaker 1: you teetered up beautifully. There's this gap between what Larry 346 00:24:10,760 --> 00:24:14,040 Speaker 1: Think is saying very publicly in his annual letters and 347 00:24:14,720 --> 00:24:17,560 Speaker 1: what black Rock appears to be doing, and that really 348 00:24:17,560 --> 00:24:24,119 Speaker 1: begs the question. Is that gap structural, institutional, or operational? 349 00:24:25,040 --> 00:24:28,760 Speaker 1: And I think it's a little bit of all three. Right. 350 00:24:29,640 --> 00:24:31,480 Speaker 1: If I were already think, I would do one really 351 00:24:31,520 --> 00:24:35,639 Speaker 1: simple thing. I would change the new client form to 352 00:24:35,840 --> 00:24:43,840 Speaker 1: require investors to opt out sustainable and impact investing and 353 00:24:43,920 --> 00:24:48,320 Speaker 1: instead opt in, because I think if you make it 354 00:24:48,440 --> 00:24:51,480 Speaker 1: that explicit, rather than forcing people to opt into a 355 00:24:51,520 --> 00:24:59,320 Speaker 1: more inclusive, regenerative, equitable style of investing, if insaid, you 356 00:24:59,320 --> 00:25:01,760 Speaker 1: make people opt doubt, I think the proportion of people 357 00:25:01,800 --> 00:25:04,600 Speaker 1: who would choose to opt in to that sort of 358 00:25:04,600 --> 00:25:07,639 Speaker 1: the negative shadow world of investing, which is now the 359 00:25:07,920 --> 00:25:11,080 Speaker 1: ubiquitous approach. Right, everybody does that because everybody is being 360 00:25:11,119 --> 00:25:15,359 Speaker 1: asked to opt into sustainable impact investing. I think the 361 00:25:15,440 --> 00:25:19,040 Speaker 1: messaging alone would give Larry Fink so much power, so 362 00:25:19,119 --> 00:25:23,000 Speaker 1: much sort of political capital to force change within the 363 00:25:23,080 --> 00:25:30,560 Speaker 1: organization that that institutional operational hesitation slash resistance slash intractability. 364 00:25:31,080 --> 00:25:32,880 Speaker 1: I think it would sort of collapse by on its 365 00:25:32,920 --> 00:25:36,600 Speaker 1: own weight. When you look at organ donation for example, 366 00:25:37,160 --> 00:25:40,320 Speaker 1: and the percentage of people that opt into organisation donation 367 00:25:40,440 --> 00:25:44,160 Speaker 1: versus opt out of organization. It depends entirely upon how 368 00:25:44,200 --> 00:25:46,239 Speaker 1: the form is structured. And if you have to opt in, 369 00:25:46,280 --> 00:25:50,080 Speaker 1: it's like the people who are signing it opt into 370 00:25:50,080 --> 00:25:52,720 Speaker 1: how the organs donated. But if you make them opt out, 371 00:25:52,760 --> 00:25:57,240 Speaker 1: it's like eight. So just change the default setting. Essentially, 372 00:25:57,400 --> 00:26:00,760 Speaker 1: it's one of those really simple, really deceptive them guessing 373 00:26:00,760 --> 00:26:03,200 Speaker 1: that teople will say totally not possible. But I feel 374 00:26:03,240 --> 00:26:07,080 Speaker 1: like there's one thing I would do. Yeah, No, I 375 00:26:07,080 --> 00:26:11,399 Speaker 1: think that's a super cool idea. Reframe the whole conversation. Matthew. 376 00:26:11,480 --> 00:26:14,240 Speaker 1: That was great, Thank you, Okay, Taric, your turn in 377 00:26:14,280 --> 00:26:16,960 Speaker 1: two minutes or less. What's your idea to get black 378 00:26:17,040 --> 00:26:21,200 Speaker 1: Rocks actions better aligned with their stated purpose? Well, I mean, 379 00:26:21,200 --> 00:26:23,560 Speaker 1: I obviously know black Rock from the inside. I know 380 00:26:23,880 --> 00:26:26,160 Speaker 1: Larry personally and worked firm, and I think he's extremely 381 00:26:26,200 --> 00:26:29,320 Speaker 1: intelligent and talented. What I think he should do is 382 00:26:29,600 --> 00:26:32,600 Speaker 1: actually be honest about the limitations of what business and 383 00:26:32,640 --> 00:26:37,239 Speaker 1: financial markets can do without government regulation. And what do 384 00:26:37,280 --> 00:26:40,240 Speaker 1: I mean by that. I don't think that the financial 385 00:26:40,280 --> 00:26:42,960 Speaker 1: markets right now are structured in any kind of way 386 00:26:42,960 --> 00:26:46,560 Speaker 1: where they can address the climate threat because people are 387 00:26:46,600 --> 00:26:48,760 Speaker 1: still able to pollute and they don't pay the cost 388 00:26:48,800 --> 00:26:51,960 Speaker 1: of that pollution. The biggest issues surround the fact that 389 00:26:52,000 --> 00:26:56,040 Speaker 1: the entire system is structured to chase yield and profitability. 390 00:26:56,440 --> 00:26:59,399 Speaker 1: That's not just black Rock, that's every single firm, including 391 00:26:59,400 --> 00:27:01,280 Speaker 1: all the ones up worked at. And that's not a 392 00:27:01,320 --> 00:27:04,080 Speaker 1: bad thing. I'm not disparaging it. I'm being realistic about 393 00:27:04,080 --> 00:27:06,760 Speaker 1: a system that has been built with a chain of 394 00:27:06,920 --> 00:27:11,040 Speaker 1: legal and financial obligations that Larry himself can't intervene in, 395 00:27:11,600 --> 00:27:14,640 Speaker 1: and they're all around chasing profit. I think the most 396 00:27:14,640 --> 00:27:17,159 Speaker 1: important thing you can do is actually look and say, listen, 397 00:27:17,920 --> 00:27:20,159 Speaker 1: you know, we business leaders will lead as much as 398 00:27:20,240 --> 00:27:23,240 Speaker 1: we can, but we need referees. Just like a competitive 399 00:27:23,240 --> 00:27:27,560 Speaker 1: sports game has competition and there are rules and people 400 00:27:27,600 --> 00:27:30,800 Speaker 1: compete on a playing field. Well, right now, the idea 401 00:27:30,840 --> 00:27:32,560 Speaker 1: that I think that the players will figure it out 402 00:27:32,560 --> 00:27:34,920 Speaker 1: all on their own through good sportsmanship is the idea 403 00:27:34,960 --> 00:27:37,720 Speaker 1: he's peddling, and I think it's ridiculous, to be honest, 404 00:27:37,760 --> 00:27:40,800 Speaker 1: and I think that's burning valuable time. We clearly need 405 00:27:40,880 --> 00:27:44,879 Speaker 1: updated rules and referees for capitalism, and I worry that 406 00:27:44,960 --> 00:27:47,480 Speaker 1: instead of doing that, we're beholden to a set of 407 00:27:47,480 --> 00:27:50,640 Speaker 1: neoliberal theses that emerge in the eighties and have convinced 408 00:27:50,720 --> 00:27:53,040 Speaker 1: us that we don't need regulation, that the free market 409 00:27:53,040 --> 00:27:54,800 Speaker 1: will figure it all out, and that is to a 410 00:27:54,880 --> 00:27:56,960 Speaker 1: large extent, would impact investing in E. S G is 411 00:27:56,960 --> 00:27:59,200 Speaker 1: all about. These are all based on free market self 412 00:27:59,200 --> 00:28:01,680 Speaker 1: correct theories. And I think that the sooner he accepts 413 00:28:01,680 --> 00:28:03,760 Speaker 1: that we don't have time for that and the expert 414 00:28:03,760 --> 00:28:06,359 Speaker 1: they're telling us we need stomach reforms, the faster we 415 00:28:06,359 --> 00:28:10,640 Speaker 1: can actually create some real change. Right. I love that idea. Also, 416 00:28:10,960 --> 00:28:14,520 Speaker 1: thank you, Tarik. So it's my turn, and you know 417 00:28:14,640 --> 00:28:18,120 Speaker 1: I approach this with some trepidation because you guys are 418 00:28:18,160 --> 00:28:21,640 Speaker 1: the experts here. But my perspective is that black Rock 419 00:28:21,720 --> 00:28:26,600 Speaker 1: has done two important things. The first is the act 420 00:28:26,680 --> 00:28:30,359 Speaker 1: of actually publishing the letters that call for CEOs to 421 00:28:30,440 --> 00:28:34,360 Speaker 1: think longer term, to become purpose led to tackle specific 422 00:28:34,359 --> 00:28:38,280 Speaker 1: problems like climate change. The second important thing that black 423 00:28:38,400 --> 00:28:41,880 Speaker 1: Rock has done is getting members of the Business round Table, 424 00:28:42,080 --> 00:28:45,400 Speaker 1: which for our listeners is two CEOs from the world's 425 00:28:45,480 --> 00:28:50,160 Speaker 1: largest corporations, to basically publicly say that Milton Friedman was 426 00:28:50,200 --> 00:28:52,920 Speaker 1: wrong and that the purpose of a corporation has to 427 00:28:53,040 --> 00:28:57,800 Speaker 1: change from you know, merely enriching shareholders to seeing to 428 00:28:57,920 --> 00:29:02,000 Speaker 1: the needs of broader stakeholders. And I think the issue 429 00:29:02,240 --> 00:29:04,720 Speaker 1: right now is that nobody knows what to do next, 430 00:29:05,040 --> 00:29:09,320 Speaker 1: and so Larry Fink, having started this conversation, now needs 431 00:29:09,360 --> 00:29:13,200 Speaker 1: to lead it into action. And from my perspective, that 432 00:29:13,240 --> 00:29:16,680 Speaker 1: means using black Rocks money as a hammer to create change, 433 00:29:16,880 --> 00:29:20,640 Speaker 1: forcing fund managers to get transparent about where they're invested, 434 00:29:20,680 --> 00:29:23,600 Speaker 1: for instance, and I think it means making sure that 435 00:29:23,640 --> 00:29:26,160 Speaker 1: the entire financial industry has a set of measurements that 436 00:29:26,200 --> 00:29:30,240 Speaker 1: are adopted as the final answer fore s G investments. 437 00:29:30,280 --> 00:29:33,200 Speaker 1: I think black Rock needs to lead this, and in 438 00:29:33,240 --> 00:29:36,520 Speaker 1: a way, I think they need to designate themselves as 439 00:29:36,600 --> 00:29:40,680 Speaker 1: sheriff and actually start policing some of those metrics, calling 440 00:29:40,680 --> 00:29:44,520 Speaker 1: folks out who don't measure up, calling some out who 441 00:29:44,560 --> 00:29:48,480 Speaker 1: do measure up, and probably most importantly, calling themselves out 442 00:29:48,560 --> 00:29:51,640 Speaker 1: when black Rock itself doesn't measure up. I think that 443 00:29:51,680 --> 00:29:55,240 Speaker 1: would go a long way toward building trust. Can I 444 00:29:55,320 --> 00:29:58,600 Speaker 1: jump in and disagree with that? Of course, yes, please. 445 00:29:58,760 --> 00:30:01,800 Speaker 1: I think that the worst thing possible for society is 446 00:30:01,840 --> 00:30:06,720 Speaker 1: that black Rock place sheriff. Why is that? Because? I mean, 447 00:30:06,960 --> 00:30:09,920 Speaker 1: how would it have worked if we allowed in the 448 00:30:09,960 --> 00:30:12,920 Speaker 1: subprime crisis and the financial crisis, you know, ten fifteen 449 00:30:12,960 --> 00:30:15,240 Speaker 1: years ago, if we had said, hey, let's let the 450 00:30:15,240 --> 00:30:18,720 Speaker 1: financial banks and all be their own sheriff's. We tried that. 451 00:30:18,840 --> 00:30:23,000 Speaker 1: It's called self regulation. It doesn't work because when their incentives, 452 00:30:23,040 --> 00:30:26,480 Speaker 1: which are extraordinarily short term, right, their focus towards the 453 00:30:26,520 --> 00:30:30,120 Speaker 1: next few years and their bonuses, when those incentives don't 454 00:30:30,120 --> 00:30:33,440 Speaker 1: align with the long term public interest, for example, for 455 00:30:33,640 --> 00:30:36,680 Speaker 1: long term sustainability issues, you can be sure that a 456 00:30:36,760 --> 00:30:39,120 Speaker 1: system like that, it's going to put the capital where 457 00:30:39,120 --> 00:30:41,640 Speaker 1: their incentives are and not where we needed to go 458 00:30:41,680 --> 00:30:44,760 Speaker 1: as a society. A hundred years ago, an economist called 459 00:30:44,920 --> 00:30:48,520 Speaker 1: Arthur Pigou started coming up with the theory of externalities, 460 00:30:48,840 --> 00:30:51,280 Speaker 1: and the idea was that if you're creating private profit 461 00:30:51,320 --> 00:30:53,720 Speaker 1: in a way that hurts the public interest, you have 462 00:30:53,760 --> 00:30:55,680 Speaker 1: to pay the cost of it. In other words, you're polluting, 463 00:30:55,960 --> 00:30:57,440 Speaker 1: you have to pay a tax for that pollution or 464 00:30:57,520 --> 00:31:00,480 Speaker 1: fine or something. That is what changes in too that's 465 00:31:00,480 --> 00:31:02,840 Speaker 1: a market based mechanism because now you just fix the 466 00:31:02,880 --> 00:31:05,960 Speaker 1: rules of the game, the players within that compete to 467 00:31:06,080 --> 00:31:08,920 Speaker 1: score as many points or profits as they can within 468 00:31:08,960 --> 00:31:12,479 Speaker 1: a new paradigm. Well, okay, I hear that, Turk, and 469 00:31:12,640 --> 00:31:14,920 Speaker 1: I just want to clarify because I'm not saying that 470 00:31:14,960 --> 00:31:17,640 Speaker 1: black Rock should be able to regulate the entire industry. 471 00:31:17,680 --> 00:31:20,560 Speaker 1: What I am saying is that the industry needs a 472 00:31:20,640 --> 00:31:24,280 Speaker 1: set of metrics that everyone is aligned on to define 473 00:31:24,480 --> 00:31:28,400 Speaker 1: what is meant by E s G. Investing and what 474 00:31:28,520 --> 00:31:32,040 Speaker 1: the metrics are that the industry is going to align on. 475 00:31:32,760 --> 00:31:37,840 Speaker 1: And if black Rock took leadership in developing those metrics 476 00:31:37,960 --> 00:31:43,120 Speaker 1: and then policed those metrics, they would be seen to 477 00:31:43,280 --> 00:31:46,760 Speaker 1: be truly leading the action that needs to happen, as 478 00:31:46,760 --> 00:31:51,240 Speaker 1: opposed to saying it but not doing really anything about it. 479 00:31:51,800 --> 00:31:53,880 Speaker 1: That's a fair point. The only thing I'd say, though, 480 00:31:53,960 --> 00:31:56,360 Speaker 1: is that the issue isn't that Larry can do a 481 00:31:56,360 --> 00:31:59,080 Speaker 1: whole bunch of things to address climate change, but he's not. 482 00:31:59,760 --> 00:32:01,800 Speaker 1: The issue is that he can't do that, and he's 483 00:32:01,840 --> 00:32:05,440 Speaker 1: saying he can. That's the issue. What I saw inside 484 00:32:05,440 --> 00:32:08,080 Speaker 1: the system was that all the portfolio managers and capital 485 00:32:08,120 --> 00:32:10,880 Speaker 1: allocators are doing exactly what they should be doing. They're 486 00:32:10,920 --> 00:32:14,360 Speaker 1: chasing the highest yield, they're chasing the most profitability. They 487 00:32:14,400 --> 00:32:16,640 Speaker 1: should be doing that because that's not Larry Finks money. 488 00:32:16,800 --> 00:32:18,840 Speaker 1: The Night and a Half trailing the Black Rock manages 489 00:32:18,920 --> 00:32:21,880 Speaker 1: is on behalf of clients, most of his retirement money 490 00:32:21,920 --> 00:32:25,880 Speaker 1: from average people, and so that money he can't do 491 00:32:25,920 --> 00:32:28,640 Speaker 1: what he wants with it. That has to be invested 492 00:32:28,680 --> 00:32:32,760 Speaker 1: to maximize return measured in dollar value, not social values. 493 00:32:33,000 --> 00:32:35,360 Speaker 1: That's a legal construct. It's the idea of fiduciary duty. 494 00:32:35,400 --> 00:32:37,760 Speaker 1: There's no choice they have around that. Is there evidence 495 00:32:37,800 --> 00:32:41,600 Speaker 1: that says by incorporating environmental or social consequences, we are 496 00:32:41,640 --> 00:32:46,360 Speaker 1: by definition generating below market returns. I can tell you, 497 00:32:46,400 --> 00:32:49,360 Speaker 1: as a trained investor who was integrating environmental and social 498 00:32:49,440 --> 00:32:52,720 Speaker 1: considerations into the largest pool of assets and capitalism that 499 00:32:52,960 --> 00:32:56,000 Speaker 1: generally speaking, the idea that E s G is beneficial 500 00:32:56,040 --> 00:32:58,840 Speaker 1: to returns is for the most part of fantasy. Let 501 00:32:58,840 --> 00:33:00,600 Speaker 1: me give you an example, because this happened. I'm a 502 00:33:00,600 --> 00:33:03,560 Speaker 1: portfolio manager and I have to allocate capital and it 503 00:33:03,600 --> 00:33:05,960 Speaker 1: could be to renewable power, or it could be to 504 00:33:06,080 --> 00:33:10,080 Speaker 1: fossil fuels. Now absent to carbon tax, and we know 505 00:33:10,240 --> 00:33:12,200 Speaker 1: no Belt Prizewinn in conference telling us we need a 506 00:33:12,240 --> 00:33:14,960 Speaker 1: carbon it. We need something to correct the market failure. 507 00:33:15,200 --> 00:33:18,400 Speaker 1: Absent that the portfolio managers going to invest more in 508 00:33:18,480 --> 00:33:20,920 Speaker 1: fossil fuels and we need for them to write so 509 00:33:20,960 --> 00:33:24,160 Speaker 1: we need a carbon tax. What Larry's out there saying is, 510 00:33:24,400 --> 00:33:26,680 Speaker 1: which sounds similar to the sort of the broader thesis, 511 00:33:26,720 --> 00:33:28,800 Speaker 1: is that E s G is good and if you 512 00:33:29,080 --> 00:33:30,840 Speaker 1: have the right tools and you have the right data, 513 00:33:30,920 --> 00:33:32,520 Speaker 1: then you're going to do the right thing and invest 514 00:33:32,560 --> 00:33:34,400 Speaker 1: in it. And what I'm telling you is that when 515 00:33:34,440 --> 00:33:37,680 Speaker 1: it's more profitable for companies underpaid their workers to not 516 00:33:37,840 --> 00:33:41,400 Speaker 1: invest in renewable power, to not make long term sustainability investments, 517 00:33:41,640 --> 00:33:43,960 Speaker 1: and you have the executives who's going to top that 518 00:33:44,000 --> 00:33:47,040 Speaker 1: system with very short term incentives they're not paid to 519 00:33:47,080 --> 00:33:49,320 Speaker 1: care about long term issues. They're just not going to 520 00:33:49,400 --> 00:33:51,400 Speaker 1: do it. It's not because they're bad people, it's because 521 00:33:51,400 --> 00:33:52,959 Speaker 1: the system is not built for them to do it. 522 00:33:53,200 --> 00:33:56,120 Speaker 1: So they can consider E s G. But the issue 523 00:33:56,240 --> 00:33:59,120 Speaker 1: is the E s G thesis at its course, as 524 00:33:59,160 --> 00:34:02,280 Speaker 1: E s G is good for returns, which is financial 525 00:34:02,360 --> 00:34:07,120 Speaker 1: jargon proxy for saying being a good responsible company is 526 00:34:07,360 --> 00:34:10,560 Speaker 1: better for your profits. The problem is that's not true. 527 00:34:10,920 --> 00:34:12,520 Speaker 1: If the E s G data tells you that you 528 00:34:12,520 --> 00:34:16,160 Speaker 1: should invest in a company that's less responsible, they'll do 529 00:34:16,200 --> 00:34:18,799 Speaker 1: that because their produceries they have to do that. Think 530 00:34:18,800 --> 00:34:21,520 Speaker 1: of that sports analogy, right, You're on the field to 531 00:34:21,560 --> 00:34:24,080 Speaker 1: score as many points as you can. Now what we're 532 00:34:24,120 --> 00:34:27,720 Speaker 1: figured out is a dirty play actually scores more points. 533 00:34:28,280 --> 00:34:30,719 Speaker 1: You raise Milton Freeman, Right, We talked about Milton Freemen 534 00:34:30,760 --> 00:34:33,600 Speaker 1: all the time. He wrote in a free Enterprise Private 535 00:34:33,600 --> 00:34:36,680 Speaker 1: property system. In corporate executive is an employee the owners 536 00:34:36,680 --> 00:34:38,239 Speaker 1: of the business. So to your point, the FU share 537 00:34:38,280 --> 00:34:41,320 Speaker 1: responsibility comes in from that regard, etcetera. He has direct 538 00:34:41,360 --> 00:34:45,200 Speaker 1: responsibility to his employers. That responsibility is to conduct the 539 00:34:45,239 --> 00:34:48,759 Speaker 1: business in accordance with their desires, which generally will be 540 00:34:48,880 --> 00:34:51,399 Speaker 1: to make as much money as possible. And here's where 541 00:34:51,400 --> 00:34:54,520 Speaker 1: it gets interesting. While conforming to the basic rules of 542 00:34:54,600 --> 00:34:58,600 Speaker 1: the society, both those embodied in law and those embodied 543 00:34:58,600 --> 00:35:01,560 Speaker 1: in ethical custom. And I think that that little phrase 544 00:35:01,719 --> 00:35:05,240 Speaker 1: like it undermines so much of what we say Milton 545 00:35:05,280 --> 00:35:09,160 Speaker 1: Friedman said, because to your point earlier, if the government 546 00:35:09,239 --> 00:35:15,000 Speaker 1: changes the rules, imposes a carbon tax, enforces gender parity 547 00:35:15,239 --> 00:35:18,560 Speaker 1: in c suite, like, whatever the rule is, capitalism will 548 00:35:18,560 --> 00:35:21,719 Speaker 1: adapt and reflect that immediately. That's what capitalism does really, 549 00:35:21,719 --> 00:35:24,719 Speaker 1: really well. But to say that in the absence to 550 00:35:24,760 --> 00:35:26,799 Speaker 1: that it's not designed to do it, I totally call 551 00:35:26,880 --> 00:35:30,560 Speaker 1: bullshit on that. I think capitalism is an extraordinary optimization mechanism. 552 00:35:30,840 --> 00:35:33,200 Speaker 1: So you're saying that the market will self correct itself 553 00:35:33,200 --> 00:35:35,520 Speaker 1: on climate change, because that's effectively what we're saying, because 554 00:35:35,520 --> 00:35:37,799 Speaker 1: otherwise you need a rule change. No. No, I'm saying 555 00:35:37,840 --> 00:35:42,320 Speaker 1: that the market will reflect given the conformance the basic 556 00:35:42,400 --> 00:35:44,080 Speaker 1: rules to society, goes in bettered and law on those 557 00:35:44,120 --> 00:35:45,600 Speaker 1: in bettered and ethical custom. And that's why I think 558 00:35:45,640 --> 00:35:48,200 Speaker 1: that opt out idea is interesting, because the ethical custom 559 00:35:48,200 --> 00:35:50,839 Speaker 1: has no way of expressing itself in the markets right now. 560 00:35:50,960 --> 00:35:53,919 Speaker 1: There is no way for the general public to say, hey, 561 00:35:54,000 --> 00:35:57,560 Speaker 1: we think that corporations should be thinking more about climate 562 00:35:57,640 --> 00:35:59,920 Speaker 1: change absence selling some shares with you know whatever. That 563 00:36:00,000 --> 00:36:02,400 Speaker 1: so they're not gonna work. But if there was this 564 00:36:02,440 --> 00:36:06,120 Speaker 1: way to message the ethical custom and back it up 565 00:36:06,160 --> 00:36:09,439 Speaker 1: with the standards embodied in law, suddenly I think Wall 566 00:36:09,440 --> 00:36:12,480 Speaker 1: Street changes on a dime. I think that Harry. For 567 00:36:12,520 --> 00:36:14,960 Speaker 1: you to say that that Larry thinks sort of can't 568 00:36:15,000 --> 00:36:19,880 Speaker 1: act in accordance with his values or his stated objectives 569 00:36:19,880 --> 00:36:23,600 Speaker 1: in his letters because the regulatory framework doesn't let him, 570 00:36:23,640 --> 00:36:26,160 Speaker 1: I think that is effectively inviting regulation or is writing 571 00:36:26,160 --> 00:36:28,440 Speaker 1: reregulations or something, because it seems like I really want 572 00:36:28,440 --> 00:36:30,360 Speaker 1: to do this, but I can't. Therefore I need government 573 00:36:30,360 --> 00:36:32,480 Speaker 1: to act so that I can do this. I don't 574 00:36:32,520 --> 00:36:33,680 Speaker 1: know if he's saying that, but that's sort of the 575 00:36:33,680 --> 00:36:36,319 Speaker 1: framework that I hear. He's not saying that, but I 576 00:36:36,360 --> 00:36:39,080 Speaker 1: mean that's what even portfolio managers are told me. So 577 00:36:39,120 --> 00:36:41,560 Speaker 1: their point was, listen, I'll reduce my carbon footprint if 578 00:36:41,560 --> 00:36:43,880 Speaker 1: someone puts the tax on carbon. Everyone will, even if 579 00:36:43,880 --> 00:36:46,120 Speaker 1: you don't believe in climate change. But asking them to 580 00:36:46,200 --> 00:36:50,120 Speaker 1: voluntarily do it when the reality of the economics is 581 00:36:50,160 --> 00:36:52,360 Speaker 1: that it's actually profitable for them to do things we 582 00:36:52,360 --> 00:36:54,640 Speaker 1: don't want them to do, as society just doesn't work. 583 00:36:54,640 --> 00:36:56,640 Speaker 1: It's not because they're bad people, because the system is 584 00:36:56,680 --> 00:36:59,200 Speaker 1: built according to incentives and legal obligations and they're not 585 00:36:59,239 --> 00:37:01,479 Speaker 1: set up to give us outcomes that we need. What's 586 00:37:01,480 --> 00:37:04,000 Speaker 1: wrong with the idea though, of black Rock getting on 587 00:37:04,120 --> 00:37:09,040 Speaker 1: offense and spearheading a drive to change government regulation here 588 00:37:09,719 --> 00:37:13,520 Speaker 1: so he could say, listen, our experts and society tell 589 00:37:13,560 --> 00:37:15,440 Speaker 1: us we need systemic reforms, So they're going to have 590 00:37:15,480 --> 00:37:17,359 Speaker 1: to come through government because that's the only way we'll 591 00:37:17,360 --> 00:37:20,200 Speaker 1: flatten the curve fast enough. And you know what we're 592 00:37:20,200 --> 00:37:22,440 Speaker 1: gonna do is both come out and say that, which 593 00:37:22,440 --> 00:37:24,520 Speaker 1: he hasn't done. And again if he doesn't say that, 594 00:37:24,560 --> 00:37:27,200 Speaker 1: it misleads the public, and number two say hey, we're 595 00:37:27,239 --> 00:37:30,359 Speaker 1: gonna start using our lobbying efforts to actually say who 596 00:37:30,360 --> 00:37:32,200 Speaker 1: we need a price on carbon. If he did that, 597 00:37:32,200 --> 00:37:33,560 Speaker 1: I would say, hey, you know what, I think he 598 00:37:33,560 --> 00:37:37,640 Speaker 1: actually wants to fight climate change. I want to pivot 599 00:37:37,680 --> 00:37:40,440 Speaker 1: for just a second to a couple of other ideas. 600 00:37:40,480 --> 00:37:44,439 Speaker 1: In his letters, Larry talks about net zero as being 601 00:37:44,480 --> 00:37:48,160 Speaker 1: the goal that essentially getting our carbon production to zero 602 00:37:48,719 --> 00:37:54,480 Speaker 1: from producing more carbon than is absorbed to producing the 603 00:37:54,600 --> 00:37:57,799 Speaker 1: same amount of carbon that the planet absorbs currently, so 604 00:37:57,880 --> 00:38:00,759 Speaker 1: that net zero carbon is being added to the atmosphere. 605 00:38:01,520 --> 00:38:04,839 Speaker 1: What do either of you think about net zero as 606 00:38:04,840 --> 00:38:09,600 Speaker 1: a concept. The average CEO gets paid three times the 607 00:38:09,680 --> 00:38:11,640 Speaker 1: worker in that industry, so that's the highest has been 608 00:38:11,640 --> 00:38:15,319 Speaker 1: in decades. The average CEO also spends five years in 609 00:38:15,360 --> 00:38:17,799 Speaker 1: their role. That's the shortest it's been in decades. So 610 00:38:17,880 --> 00:38:19,640 Speaker 1: what you're saying is that the average CEO gets paid 611 00:38:19,640 --> 00:38:20,960 Speaker 1: a hell of a lot of money in a very 612 00:38:20,960 --> 00:38:23,200 Speaker 1: short period of time in five years what they might 613 00:38:23,239 --> 00:38:26,239 Speaker 1: have gotten ten or fifteen or whatever years before when 614 00:38:26,280 --> 00:38:28,520 Speaker 1: you have very short term incentives like that. And then 615 00:38:28,520 --> 00:38:33,960 Speaker 1: you say, okay, the goal is net zero, by I mean, 616 00:38:34,120 --> 00:38:38,920 Speaker 1: call me a skeptic, but yeah, Matthew, you did a 617 00:38:39,000 --> 00:38:43,359 Speaker 1: TED talk a little while back in which you say 618 00:38:43,480 --> 00:38:46,480 Speaker 1: that you believe that in the future all investing will 619 00:38:46,520 --> 00:38:49,400 Speaker 1: be E S G investing. I'd love to hear you 620 00:38:49,480 --> 00:38:52,400 Speaker 1: talk about where you think we are on that transition, 621 00:38:52,440 --> 00:38:57,640 Speaker 1: because it's certainly grown in popularity since you made that statement. Yes, 622 00:38:57,719 --> 00:39:00,239 Speaker 1: and my optimists had goes back to what I would 623 00:39:00,239 --> 00:39:02,799 Speaker 1: have Larry Phint do, right, which is really a gigantic 624 00:39:03,640 --> 00:39:07,799 Speaker 1: public statement of values. When I put my pastant's hat 625 00:39:07,840 --> 00:39:10,000 Speaker 1: on and say, well, if ten years ago you would 626 00:39:10,040 --> 00:39:13,080 Speaker 1: you would have said to me, well, two, we're gonna 627 00:39:13,080 --> 00:39:15,239 Speaker 1: have trillions of dollars pointed towards e s G. We're 628 00:39:15,239 --> 00:39:17,560 Speaker 1: gonna have hundreds of billions of dollars towards pointing towards 629 00:39:17,560 --> 00:39:22,000 Speaker 1: climate resiliency. The issues of gender parity and pay equity 630 00:39:22,239 --> 00:39:25,200 Speaker 1: and underrepresented minorities is all going to be sort of 631 00:39:25,200 --> 00:39:28,239 Speaker 1: on the table. I would have said, holy sh it, like, well, 632 00:39:28,280 --> 00:39:30,319 Speaker 1: if that's all there in ten years, we would have won. 633 00:39:30,719 --> 00:39:33,880 Speaker 1: We're there, We're good. Quite to the contrary, the problems 634 00:39:33,920 --> 00:39:37,520 Speaker 1: are more acute now then they were a decade ago, 635 00:39:37,840 --> 00:39:39,439 Speaker 1: and so I think sort of pick up a thread 636 00:39:39,480 --> 00:39:44,960 Speaker 1: that part laid down earlier. The failures are disorienting. I mean, 637 00:39:45,000 --> 00:39:48,719 Speaker 1: there's so persistent that it's dispiriting to me. So yes, 638 00:39:48,800 --> 00:39:53,280 Speaker 1: I do think that eventually, particularly relative to climate resiliency, 639 00:39:53,400 --> 00:39:56,040 Speaker 1: it will simply be unacceptable to make investments at some 640 00:39:56,080 --> 00:39:59,880 Speaker 1: point with utter disregard to the environmental consequences and just 641 00:40:00,040 --> 00:40:01,920 Speaker 1: pretended they don't exist. Like I think that will be 642 00:40:02,000 --> 00:40:05,440 Speaker 1: eventually just unacceptable behavior. In much the same way that 643 00:40:05,640 --> 00:40:10,600 Speaker 1: slavery was rendered unacceptable or colonialism was rendered unacceptable. Right, 644 00:40:11,239 --> 00:40:14,560 Speaker 1: and yet the time frame is so compressed right now 645 00:40:14,640 --> 00:40:17,480 Speaker 1: around climate chains that I really worry whether or not 646 00:40:17,680 --> 00:40:21,960 Speaker 1: the market response mechanism, blunted as it is by regulatory 647 00:40:22,000 --> 00:40:25,919 Speaker 1: framework and an ethical framework on Wall Street, is even 648 00:40:26,000 --> 00:40:28,279 Speaker 1: remotely able to respond in the time frame that we 649 00:40:28,320 --> 00:40:31,239 Speaker 1: needed to write. But I also I was reading an 650 00:40:31,320 --> 00:40:36,120 Speaker 1: article in preparing for this discussion about an attempt to 651 00:40:36,160 --> 00:40:41,879 Speaker 1: classify investment green investing essentially in the EU, and they 652 00:40:41,920 --> 00:40:45,840 Speaker 1: have three classifications, but it's essentially dark green, light green, 653 00:40:46,120 --> 00:40:50,600 Speaker 1: and then everything else. They were saying, in the current 654 00:40:50,680 --> 00:40:55,600 Speaker 1: investing environment, everyone wants to position themselves as either light 655 00:40:55,600 --> 00:41:00,720 Speaker 1: green or dark green, and because of that, it raises 656 00:41:00,760 --> 00:41:05,120 Speaker 1: the specter of just ongoing purpose washing. Absent any regulation 657 00:41:05,160 --> 00:41:07,640 Speaker 1: on what is a green fund or not, there's going 658 00:41:07,680 --> 00:41:09,719 Speaker 1: to be a race to the bottom, because you'd be 659 00:41:09,719 --> 00:41:12,279 Speaker 1: insane not to call your fund green if everybody else 660 00:41:12,400 --> 00:41:15,600 Speaker 1: is right. So the EU taxonomy does help in that sense, 661 00:41:15,640 --> 00:41:17,640 Speaker 1: because at least you have some rules around what it 662 00:41:17,680 --> 00:41:20,640 Speaker 1: means to be green, because otherwise it's not just funds, 663 00:41:20,680 --> 00:41:22,799 Speaker 1: it's anything, right. Imagine you go to the grocery store 664 00:41:22,880 --> 00:41:27,160 Speaker 1: anything else. If there's an environmentally green product that looks nice, 665 00:41:27,160 --> 00:41:29,160 Speaker 1: people will pay more fur it and prefer it. But 666 00:41:29,239 --> 00:41:32,640 Speaker 1: the challenges no one's actually going and saying, but is 667 00:41:32,680 --> 00:41:35,880 Speaker 1: this detergent truly sustainable? Right? I think one of the 668 00:41:35,880 --> 00:41:41,200 Speaker 1: biggest challenges in the whole attempt to taxonomyze and categorize 669 00:41:41,480 --> 00:41:44,360 Speaker 1: impact is that everyone sort of competing for market share 670 00:41:44,480 --> 00:41:46,480 Speaker 1: based on their own new taxonomy, and so we have 671 00:41:46,560 --> 00:41:51,600 Speaker 1: these huge dispersion of frameworks and measurement systems and set 672 00:41:51,960 --> 00:41:54,600 Speaker 1: to go back to tards idea that we need regulations, 673 00:41:54,600 --> 00:41:56,759 Speaker 1: which it drives a lot is. I totally agree and 674 00:41:56,760 --> 00:42:00,239 Speaker 1: I'm not like a huge fan of overregulating every but 675 00:42:00,280 --> 00:42:03,000 Speaker 1: we it has to happen. I want to go back 676 00:42:03,040 --> 00:42:05,960 Speaker 1: to black Rock. A little bit earlier in this episode, 677 00:42:06,000 --> 00:42:09,719 Speaker 1: I interviewed a guy named Andrew Behar, who is the 678 00:42:09,760 --> 00:42:14,480 Speaker 1: CEO of an organization called as You So, and he 679 00:42:14,680 --> 00:42:19,920 Speaker 1: pointed out that at the black Rock General shareholder meeting, 680 00:42:20,160 --> 00:42:25,600 Speaker 1: he challenged Larry Fink to actually implement some of the 681 00:42:25,640 --> 00:42:29,759 Speaker 1: great ideas that he talks about in his letters, and 682 00:42:30,120 --> 00:42:37,279 Speaker 1: Larry's response was, we are fully implemented and that that 683 00:42:37,360 --> 00:42:40,360 Speaker 1: gave me pots. That's one of the reasons that I 684 00:42:40,480 --> 00:42:43,720 Speaker 1: decided to feature black Rock is that seems like bullshit 685 00:42:43,840 --> 00:42:48,359 Speaker 1: to me, right, Tark, I assume you would agree with that. 686 00:42:48,920 --> 00:42:51,480 Speaker 1: I don't think it's necessarily bullshit, because this is the 687 00:42:51,520 --> 00:42:54,160 Speaker 1: point I'm trying to make, is that there's limits on 688 00:42:54,200 --> 00:42:57,040 Speaker 1: what he can do. You don't have a thesis to 689 00:42:57,080 --> 00:42:58,839 Speaker 1: say you should do it because it's good for the world. 690 00:42:59,640 --> 00:43:01,520 Speaker 1: You can't do that. You have to do it in 691 00:43:01,640 --> 00:43:05,000 Speaker 1: cheryl our interests. And if cheryl our interests is that 692 00:43:05,040 --> 00:43:06,880 Speaker 1: you can make more profit in the next few years 693 00:43:07,200 --> 00:43:09,799 Speaker 1: dumping chemicals in the river, and there's no reason to 694 00:43:09,840 --> 00:43:12,560 Speaker 1: ever believe that anyone's going to make them pay the 695 00:43:12,600 --> 00:43:15,759 Speaker 1: cost of that. There's no referee coming in saying you 696 00:43:15,760 --> 00:43:17,919 Speaker 1: can't do that and you're gonna pay a fine. Then 697 00:43:17,920 --> 00:43:20,239 Speaker 1: technically is a fiduciary you should be doing that. And 698 00:43:20,360 --> 00:43:23,440 Speaker 1: to your point, that's actually where the bullshit was, that 699 00:43:23,480 --> 00:43:27,200 Speaker 1: he's not giving the full context around his answer, going 700 00:43:27,239 --> 00:43:30,040 Speaker 1: out there and implying that you can do lots of 701 00:43:30,080 --> 00:43:33,160 Speaker 1: amazing things. I realized it wasn't gonna work, and I left. 702 00:43:33,480 --> 00:43:35,960 Speaker 1: This is like giving weak grass to a cancer patient. Right, 703 00:43:36,040 --> 00:43:38,800 Speaker 1: it's really nicely marketed. It sounds great, but there's no 704 00:43:38,840 --> 00:43:40,880 Speaker 1: reason to think it's going to stop the cancer. And 705 00:43:40,920 --> 00:43:42,400 Speaker 1: if the rest of the world doesn't know that and 706 00:43:42,440 --> 00:43:43,839 Speaker 1: it's going to take him a few years to figure 707 00:43:43,840 --> 00:43:46,799 Speaker 1: it out, then it's much worse because we're burning time. Right, 708 00:43:47,040 --> 00:43:49,000 Speaker 1: you're giving weak grass with cancer patient, and then you 709 00:43:49,000 --> 00:43:53,000 Speaker 1: can clean see clearly that the cancer patients delaying chemotherapy. Yep, 710 00:43:53,160 --> 00:43:57,239 Speaker 1: I like that. Okay, gentlemen, this has been fantastic. I 711 00:43:57,280 --> 00:44:00,440 Speaker 1: want to thank you both for being here today, and 712 00:44:00,840 --> 00:44:03,719 Speaker 1: to wrap this discussion up, I want to ask each 713 00:44:03,719 --> 00:44:07,680 Speaker 1: of you to give black Rock a BS score. So 714 00:44:08,560 --> 00:44:12,360 Speaker 1: on a scale of zero two, one being the worst 715 00:44:12,760 --> 00:44:17,960 Speaker 1: total BS and zero being the best zero BS, what 716 00:44:18,000 --> 00:44:21,080 Speaker 1: would you give black Rock? Matthew, why don't you start 717 00:44:22,520 --> 00:44:24,920 Speaker 1: During the course of this conversation, I have to admit 718 00:44:24,960 --> 00:44:27,680 Speaker 1: that my perspective has shifted. That's good, that's what we're 719 00:44:27,680 --> 00:44:30,160 Speaker 1: here to do. Yeah, I'm gonna I'm gonna give Tarag 720 00:44:30,200 --> 00:44:33,920 Speaker 1: a nod there, and it is a perspective has shifted 721 00:44:34,640 --> 00:44:39,720 Speaker 1: along two axes. First, I feel like my bullshit rating 722 00:44:39,800 --> 00:44:43,880 Speaker 1: has gone up because what I see now is Larry 723 00:44:43,920 --> 00:44:48,960 Speaker 1: Fink is actually exploiting his role as a perceived leader 724 00:44:49,480 --> 00:44:53,040 Speaker 1: while knowing full well without disclosing it, that he's he 725 00:44:53,120 --> 00:44:56,360 Speaker 1: can't do anything right. And so on one level, my 726 00:44:56,400 --> 00:45:00,759 Speaker 1: bs meters panded Hunters right. On the other hand, I'm 727 00:45:00,840 --> 00:45:06,279 Speaker 1: sort of more apathetic than I have been two structural impediments. 728 00:45:06,400 --> 00:45:09,799 Speaker 1: I wasn't quite willing to give Larry Fink or the 729 00:45:09,840 --> 00:45:13,360 Speaker 1: leaders at black Rock a little bit of room, a 730 00:45:13,360 --> 00:45:15,480 Speaker 1: little bit of empathy. I guess to work within the 731 00:45:15,560 --> 00:45:19,000 Speaker 1: system that's simply intractable, and so I'm gonna split my 732 00:45:19,040 --> 00:45:29,359 Speaker 1: score and go hundred slash like, fair enough, we'll work 733 00:45:29,400 --> 00:45:34,879 Speaker 1: with that. What do you reckon? Ah? I would say 734 00:45:34,880 --> 00:45:37,000 Speaker 1: that it's closer to a hundred dinners to zero. But 735 00:45:37,040 --> 00:45:38,919 Speaker 1: I would also add that I don't think it's black 736 00:45:39,000 --> 00:45:42,719 Speaker 1: Rock specific, right. If it's let's say it's for black Rock, 737 00:45:42,840 --> 00:45:44,840 Speaker 1: then I would argue the rest of the industry, and 738 00:45:44,880 --> 00:45:47,640 Speaker 1: I mean the financial service industry and Goldman Sachs list, 739 00:45:47,680 --> 00:45:49,920 Speaker 1: all of them, they're all in the same boat, right 740 00:45:49,920 --> 00:45:52,719 Speaker 1: because they're all effectively saying the same things. I think 741 00:45:52,840 --> 00:45:54,840 Speaker 1: we're out singled amount is by saying that you're the 742 00:45:54,920 --> 00:45:58,160 Speaker 1: largest one. And if that voice is being used to 743 00:45:58,320 --> 00:46:02,760 Speaker 1: pedal narratives that effectively just see your syrup to delay 744 00:46:02,840 --> 00:46:05,360 Speaker 1: the taxes and regulation that none of us want. I mean, 745 00:46:05,400 --> 00:46:07,239 Speaker 1: I'm a capitalis I don't love tax in regulation. But 746 00:46:07,360 --> 00:46:09,840 Speaker 1: at some point even Milton Friedman, I'm certain, would have 747 00:46:09,840 --> 00:46:12,440 Speaker 1: said we need a carbon tax because he's not stupid, right, like, 748 00:46:12,600 --> 00:46:15,319 Speaker 1: watch the planet get destroyed? And I would challenge them 749 00:46:15,360 --> 00:46:19,000 Speaker 1: to rethink what responsible business means through the lens of 750 00:46:19,120 --> 00:46:23,319 Speaker 1: your own younger employees. Are you serving their interests? I 751 00:46:23,360 --> 00:46:25,960 Speaker 1: think capitalism can solve these issues, but I also think 752 00:46:26,000 --> 00:46:28,800 Speaker 1: that capitalists themselves need to debate how that comes about 753 00:46:29,280 --> 00:46:31,279 Speaker 1: and not let there be one sort of version of 754 00:46:31,280 --> 00:46:34,399 Speaker 1: it being peddled from a few people talk that could 755 00:46:34,440 --> 00:46:38,280 Speaker 1: actually be endangering the entire system. The majority of millennials 756 00:46:38,320 --> 00:46:41,600 Speaker 1: today don't believe in capitalism. That concerns me, right that 757 00:46:41,640 --> 00:46:44,680 Speaker 1: because they're all of us. That's right, that should concern 758 00:46:44,880 --> 00:46:47,640 Speaker 1: everybody exactly, And I don't blame them, right unless they 759 00:46:47,680 --> 00:46:50,279 Speaker 1: see a system that is producing better social and environmental 760 00:46:50,280 --> 00:46:52,920 Speaker 1: outcomes and addressing the problems we have, they're going to 761 00:46:53,000 --> 00:46:58,720 Speaker 1: lose faith in the system and endangers the entire metaphice Okay, fancy, 762 00:46:58,840 --> 00:47:01,839 Speaker 1: Thank you so much for being here today. Really appreciate 763 00:47:01,880 --> 00:47:04,560 Speaker 1: you taking the time. Thank you. I enjoyed this chat. 764 00:47:04,600 --> 00:47:07,280 Speaker 1: And Matthew Weatherley White, thank you for being here today. 765 00:47:07,360 --> 00:47:21,920 Speaker 1: Really appreciate it. Really. Okay, it's time for my official 766 00:47:22,239 --> 00:47:27,360 Speaker 1: bullshit score, because there seems to be some intent to change, 767 00:47:27,640 --> 00:47:31,319 Speaker 1: but they definitely aren't there yet. I'm giving Black Rock 768 00:47:31,640 --> 00:47:37,080 Speaker 1: a fifty nine. To weigh in with your own score, 769 00:47:37,640 --> 00:47:42,440 Speaker 1: visit our website Calling Bullshit podcast dot com. We'll track 770 00:47:42,480 --> 00:47:45,560 Speaker 1: their behavior over time and see if they can't bring 771 00:47:45,640 --> 00:47:48,959 Speaker 1: that score down. You'll also be able to see where 772 00:47:48,960 --> 00:47:52,600 Speaker 1: Black Rock ranks on bullshit compared to the other companies 773 00:47:52,640 --> 00:47:58,480 Speaker 1: we feature on this show. So, if you're running a 774 00:47:58,560 --> 00:48:01,920 Speaker 1: purpose led business or you're thinking of beginning the journey 775 00:48:01,920 --> 00:48:05,440 Speaker 1: of transformation to become one, here are three things that 776 00:48:05,480 --> 00:48:09,880 Speaker 1: you need to take away from this episode. One. Defining 777 00:48:09,920 --> 00:48:14,080 Speaker 1: a purpose is an important step, but it's the beginning, 778 00:48:14,640 --> 00:48:18,560 Speaker 1: not the ending. Once you define it, it needs to 779 00:48:18,680 --> 00:48:24,600 Speaker 1: drive the actions you take, both internally and externally. Two. 780 00:48:25,080 --> 00:48:28,919 Speaker 1: Those actions can take many forms. In black Rocks case, 781 00:48:29,040 --> 00:48:32,960 Speaker 1: we've heard suggested actions like changing the default settings on 782 00:48:33,040 --> 00:48:37,520 Speaker 1: investment recommendations to E s G. Compliant unless the client 783 00:48:37,680 --> 00:48:43,120 Speaker 1: specifically opts out and actions like black Rock actually lobbying 784 00:48:43,320 --> 00:48:47,920 Speaker 1: for a carbon tax or partnering with shareholder advocates like 785 00:48:48,000 --> 00:48:51,600 Speaker 1: Andrew Behar to drive real change in the governance of 786 00:48:51,640 --> 00:48:55,239 Speaker 1: the companies and funds they invest in. The actions for 787 00:48:55,320 --> 00:48:59,279 Speaker 1: your company would undoubtedly be different, but the point is 788 00:48:59,719 --> 00:49:03,640 Speaker 1: it's the actions that make your purpose real for people. 789 00:49:05,080 --> 00:49:10,680 Speaker 1: And three, Transparency is a key aspect of being purpose lad. 790 00:49:11,320 --> 00:49:15,480 Speaker 1: In Larry's case, being super clear about what black Rock 791 00:49:15,680 --> 00:49:20,080 Speaker 1: can and can't do is another key to building trust 792 00:49:20,360 --> 00:49:26,480 Speaker 1: that he really means what he's saying. Larry, if you 793 00:49:26,600 --> 00:49:28,800 Speaker 1: ever want to come on the show to discuss anything 794 00:49:28,840 --> 00:49:31,520 Speaker 1: we've touched on in this episode, I want you to 795 00:49:31,560 --> 00:49:45,480 Speaker 1: know you have an open invitation. Thank you for joining 796 00:49:45,520 --> 00:49:50,080 Speaker 1: us today. Andrew Bhart, Matthew Weatherly White, and Taric Fancy. 797 00:49:50,760 --> 00:49:53,799 Speaker 1: You can find them all on social media. We've got 798 00:49:53,840 --> 00:49:58,760 Speaker 1: all their handles on our website, Calling Bullshit Podcast dot com, 799 00:49:58,760 --> 00:50:03,560 Speaker 1: and check out Andrew book The Shareholder Action Guide Unleash 800 00:50:03,600 --> 00:50:08,640 Speaker 1: your hidden powers to hold corporations accountable. And if you 801 00:50:08,760 --> 00:50:12,120 Speaker 1: have ideas for companies or organizations we should consider for 802 00:50:12,200 --> 00:50:15,919 Speaker 1: future episodes, you can submit them on the site too. 803 00:50:17,640 --> 00:50:21,000 Speaker 1: If our stock went up with you today. Subscribe to 804 00:50:21,040 --> 00:50:24,200 Speaker 1: the Calling Bullshit podcast on the I Heart Radio app, 805 00:50:24,480 --> 00:50:29,240 Speaker 1: Apple Podcasts, or wherever you get your podcasts. And thanks 806 00:50:29,280 --> 00:50:34,839 Speaker 1: to our production team Susie Armitage, Hannah Beal, Amanda Ginsburg, 807 00:50:35,320 --> 00:50:41,440 Speaker 1: Andy Kim, d s Moss, Mikaela Reid, Leena Beck Cilison, 808 00:50:42,000 --> 00:50:47,239 Speaker 1: Jeff Venton and Basil Soaper. Calling Bullshit was created by 809 00:50:47,280 --> 00:50:52,080 Speaker 1: co Collective and is hosted by me Tie Montague. Thanks 810 00:50:52,120 --> 00:51:00,359 Speaker 1: for listening, Ey,