WEBVTT - The ESG Backlash 0:00:05.760 --> 0:00:08.000 Welcome to Chilliance. I'm Joel Webber and I'm Eric. I'll 0:00:08.080 --> 0:00:16.479 tunis Eric. You're in a different location than usual, and 0:00:16.640 --> 0:00:20.480 you've tested positive. I did, yeah, and finally got you. 0:00:20.560 --> 0:00:23.360 How you doing? I held out longer than most. I 0:00:23.400 --> 0:00:25.760 had a good run, Joel Um. A lot of people 0:00:25.800 --> 0:00:28.560 around me got it, and I, in fact, the team 0:00:28.600 --> 0:00:31.159 called me the COVID dodger for a while because I 0:00:31.200 --> 0:00:33.239 had come close to it and never gotten it. But 0:00:33.920 --> 0:00:36.680 it just shows you cannot outrun it for forever, and 0:00:36.720 --> 0:00:41.160 so stem I am the COVID dodger and still COVID free. Yeah, 0:00:41.440 --> 0:00:43.760 I'll give it to you. You're you're the chosen one, Okay. 0:00:43.800 --> 0:00:48.040 So Eric, we've long talked about e s G on 0:00:48.080 --> 0:00:53.279 the program Environmental Social Governance. It's it's a space that 0:00:53.440 --> 0:00:56.480 you've expressed caution about a business week. We've done a 0:00:56.520 --> 0:00:58.840 lot of reporting about it, both on the positive and 0:00:58.880 --> 0:01:01.840 the negative, and we've got a couple of interesting guests today, 0:01:02.400 --> 0:01:07.399 the Vague Ramis Swami and Anson Fraris, who the VIK 0:01:07.680 --> 0:01:09.600 has written a book called Woke Inc. That came out 0:01:09.680 --> 0:01:12.480 last year. But the two of them have a new 0:01:13.000 --> 0:01:16.080 uh financial company called Strive that's coming out. How did 0:01:16.080 --> 0:01:19.680 you find out about them? Yeah, just through some people 0:01:19.720 --> 0:01:22.440 in the industry. I've got a conversation UM with the 0:01:22.560 --> 0:01:25.920 VEC and um, this is a fascinating situation. This is 0:01:26.000 --> 0:01:29.600 a part of how I think the stock market and 0:01:29.680 --> 0:01:32.200 companies have become sort of a battleground for the cultural wars. 0:01:32.600 --> 0:01:35.440 And as you know, I my whole thing about E 0:01:35.640 --> 0:01:39.640 s G is not so much the virtue signaling, although 0:01:39.640 --> 0:01:42.160 there's a lot there, but more just I don't want 0:01:42.160 --> 0:01:45.360 investors to have a nasty surprise. Um. We all, that's 0:01:45.400 --> 0:01:48.480 our whole mission is just to avoid investors buying something 0:01:48.480 --> 0:01:50.560 they don't realize they're buying. And I think this year 0:01:50.560 --> 0:01:53.040 we saw E s G. Clearly people are now seeing 0:01:53.040 --> 0:01:56.440 that it's overweight tech and underweight oil and it's underperforming. 0:01:56.440 --> 0:01:59.000 And that was That's been my main mission overall. Although 0:01:59.000 --> 0:02:00.560 I think in E s G s k is it 0:02:00.640 --> 0:02:03.160 becomes weird when you put your values into the stock 0:02:03.200 --> 0:02:05.240 market and everybody's values are different, So how do you 0:02:05.480 --> 0:02:09.840 standardize that. It's just a it's a really complicated space 0:02:09.880 --> 0:02:12.840 full of inconsistencies. But then on the other side you've 0:02:12.880 --> 0:02:15.480 got black Rock and Vanguard now have seven percent ownership 0:02:16.000 --> 0:02:18.960 of the stock market, of all stocks, they have a 0:02:18.960 --> 0:02:22.160 lot of power concentrated in a small number of people. 0:02:22.200 --> 0:02:25.400 And Elon Musk was just on Twitter talking about this. 0:02:25.680 --> 0:02:27.280 I'm gonna go into the details. He got a few 0:02:27.280 --> 0:02:29.160 things wrong, but one thing he did say, and I 0:02:29.160 --> 0:02:31.600 think he's right, is you know, have somebody like Larry 0:02:31.600 --> 0:02:34.919 Fink who probably owns point o one percent of all 0:02:34.919 --> 0:02:37.280 these stocks, yet he has voting power that is seven 0:02:37.320 --> 0:02:41.320 percent um, And so how much power are we going 0:02:41.360 --> 0:02:45.200 to put. It's concentrated into certain people. And because they've 0:02:45.240 --> 0:02:46.799 come out a little bit on the E. S. G 0:02:46.960 --> 0:02:50.320 front um, there's been a little bit of a pushback, 0:02:50.600 --> 0:02:53.040 and today we're we're going to talk to somebody who 0:02:53.080 --> 0:02:59.120 has a plan to push back, this time on brilliants 0:02:59.520 --> 0:03:06.120 but g backlash the vic ants and woke neutrillians. Thank you, 0:03:06.240 --> 0:03:10.680 Thanks guys. Okay, can you explain what you're up to 0:03:10.880 --> 0:03:13.920 because this is gonna be kind of a surprise for 0:03:13.919 --> 0:03:15.920 a lot of people that you want to take on 0:03:16.000 --> 0:03:19.840 black rock. Yeah. So, so thanks for the opportunity. And 0:03:20.040 --> 0:03:22.480 this is the beginning of a long journey. We see 0:03:22.480 --> 0:03:26.280 that eyes wide open. We're addressing what I see as 0:03:26.320 --> 0:03:30.680 a fiduciary breach in the asset management industry where the 0:03:30.680 --> 0:03:33.480 three largest asset managers in the world, and it's Black Rock, 0:03:33.560 --> 0:03:36.520 but it's State Street in Vanguard too. What they're doing 0:03:36.560 --> 0:03:40.880 today is they're using the money of everyday citizens of 0:03:40.920 --> 0:03:45.960 their clients to advocate for policies in corporate America that 0:03:46.200 --> 0:03:50.320 most of their clients disapprove of. That is a fiduciary breach. 0:03:50.800 --> 0:03:54.000 It is not representing the best interests of their clients. 0:03:54.320 --> 0:03:57.200 And it's happening on a systematic scale. Where here's the problem. 0:03:57.200 --> 0:04:00.240 It's not happening at a small scale. These largest terms 0:04:00.320 --> 0:04:03.320 in the world have so much concentrated power that they're 0:04:03.320 --> 0:04:07.360 only representing one viewpoint in the boardroom. That that's also 0:04:07.560 --> 0:04:10.400 verging on what the Arizona Attorney General actually is recently 0:04:10.440 --> 0:04:13.760 called the largest antitrust violation in history. Those were his words. 0:04:14.160 --> 0:04:16.080 Where if you if you run through this thought experiment, 0:04:16.160 --> 0:04:20.360 and you imagine the CEOs of Exxon and Shell and Conical, 0:04:20.400 --> 0:04:24.400 Phillips and Chevron getting together in a room and deciding, 0:04:24.440 --> 0:04:27.440 for example, that they wanted to cut gas production and 0:04:27.520 --> 0:04:30.359 gas prices spike as a result. That would be the 0:04:30.360 --> 0:04:33.480 stuff of movies, right you see handcuffs, you see antitrust violations, 0:04:33.520 --> 0:04:37.080 price fixing allegations. Yet when the largest owners of those 0:04:37.120 --> 0:04:40.560 competing firms effectively mandate them to do the same thing, 0:04:41.040 --> 0:04:43.240 somehow we as a culture have come to celebrate that 0:04:43.360 --> 0:04:46.400 as E S G. And our mission is to restore 0:04:46.440 --> 0:04:48.120 the voice of what we see as the every day 0:04:48.160 --> 0:04:50.920 So it is in the actual client, the firefighter, the nurse, 0:04:50.960 --> 0:04:53.160 the doctor, the business owner whose money Black Rock is 0:04:53.200 --> 0:04:55.920 investing to say that we bring a different message to 0:04:55.960 --> 0:04:59.200 Corporate America's boardrooms that those citizens and those clients actually 0:04:59.240 --> 0:05:02.480 want us to deliver, which is to pursue product excellence 0:05:02.839 --> 0:05:06.760 over politics. That's our message. Okay. So, and the plan 0:05:07.120 --> 0:05:10.919 essentially is to offer sort of replica E T f 0:05:11.000 --> 0:05:13.760 s that would you know, Engine number one is a 0:05:13.880 --> 0:05:16.120 firm that you almost remind me of the inverse of them. 0:05:16.400 --> 0:05:19.320 They're a firm that is small putting out. They have 0:05:19.360 --> 0:05:21.920 a beta product called vote. It's just basically the S 0:05:22.000 --> 0:05:24.640 and P or you know, market beta large cap something 0:05:24.680 --> 0:05:27.960 like that, five basis points. It's basically like I VV, 0:05:28.560 --> 0:05:31.160 except they are going to vote in a very E. 0:05:31.400 --> 0:05:33.800 S G. Activist kind of way. So they're saying put 0:05:33.839 --> 0:05:36.080 your money with us and we'll go do this. You're 0:05:36.080 --> 0:05:38.920 almost the opposite saying we're going to do these replica products, 0:05:38.960 --> 0:05:41.120 but give us your money and we will vote. So 0:05:41.160 --> 0:05:44.000 the companies just act like themselves and will keep all 0:05:44.040 --> 0:05:47.680 the will separate church and state completely. Is that? Do 0:05:47.720 --> 0:05:49.279 I have that right? And you're going to actually have 0:05:49.440 --> 0:05:52.120 a full line of products that are sort of, um, 0:05:52.240 --> 0:05:55.840 very similar to Black Rocks. But promise this new voting 0:05:57.240 --> 0:05:58.719 a way of a way of voting that is a 0:05:58.720 --> 0:06:01.400 little more I guess, um, not anti E s G, 0:06:01.520 --> 0:06:04.680 but just more focused on profits. Yes, So, Eric, what 0:06:04.760 --> 0:06:06.800 We're entering the registration process soon and so I'm not 0:06:06.839 --> 0:06:10.680 going to talk specifically about product about product details here, 0:06:10.720 --> 0:06:12.760 but what I will say is that yes, we will 0:06:12.760 --> 0:06:14.719 be launching E T F S. Yes, as we said 0:06:14.720 --> 0:06:16.120 in the press release, the first one is coming the 0:06:16.120 --> 0:06:18.919 third quarter of the year. But the key hallmark difference 0:06:19.000 --> 0:06:22.200 of our firm and everything that we do well, the 0:06:22.279 --> 0:06:26.480 key differentiator for our mission is bringing a different voice 0:06:26.680 --> 0:06:30.560 and vote to corporate America's boardrooms, bringing a vote, a 0:06:30.640 --> 0:06:34.760 pro excellence voice that is distinguished from the stakeholder capitalism 0:06:34.839 --> 0:06:38.200 voice represented by the Big Three, including Black Rock today, 0:06:38.480 --> 0:06:40.520 and no one is bringing that voice to the table. 0:06:40.520 --> 0:06:43.160 And it's not just focusing on profits, right, That's that's 0:06:43.160 --> 0:06:46.479 a Melton freemnite phrasing of the problem. One of the 0:06:46.520 --> 0:06:49.960 things that I think shareholder capitalism as a philosophy lacked 0:06:50.480 --> 0:06:53.559 was any guidance to companies on how they are actually 0:06:53.600 --> 0:06:57.120 supposed to go about this task of maximizing value for shareholders. 0:06:57.400 --> 0:06:59.960 And so we we phraise it. More precisely, we stand 0:07:00.040 --> 0:07:02.880 for this movement that we call excellence capitalism as a 0:07:02.960 --> 0:07:06.440 counterpart the stakeholder capitalism, where what excellence capitalism says is 0:07:06.720 --> 0:07:11.160 focus exclusively on delivering excellent products and services to your 0:07:11.200 --> 0:07:16.280 customers above all other agendas, including political and social agendas. 0:07:16.400 --> 0:07:19.040 And that's different than stakeholder capitalism, which says you're supposed 0:07:19.040 --> 0:07:21.400 to take into account twelve or twenty stakeholders at the 0:07:21.400 --> 0:07:24.160 same time. Which stakeholders, you might ask, No one knows 0:07:24.160 --> 0:07:26.040 the answer. It seems to be what Larry Fink or 0:07:26.080 --> 0:07:28.000 the CEOs of Van Garden State Street decide on a 0:07:28.000 --> 0:07:31.560 given day. That's the problem we're addressing. Okay, so wait, excellence, 0:07:31.800 --> 0:07:34.480 how do you define excellence? Then? Yeah, and so this 0:07:34.520 --> 0:07:36.040 is gonna be you know, we're gonna have our own 0:07:36.160 --> 0:07:39.240 voting guidelines. We're gonna have our own statement of unpacking 0:07:39.240 --> 0:07:41.760 what excellence capitalism means. Yeah, I could do that here, 0:07:41.760 --> 0:07:43.920 but we could go on for hours. But mission orientation, 0:07:43.960 --> 0:07:46.840 for example, is something that's very high on that list. 0:07:47.120 --> 0:07:49.800 Having a clear mission, staying true to that mission in 0:07:49.800 --> 0:07:51.800 a way that doesn't deviate from that mission. I'll give 0:07:51.800 --> 0:07:54.520 you an example. Excen's mission stated mission I'm gonna get 0:07:54.520 --> 0:07:56.160 this almost right. For the last number of years, for 0:07:56.160 --> 0:07:58.280 the last number of decades, has been to be a 0:07:58.320 --> 0:08:01.840 successful oil and gas company. Black Rock, in their letters 0:08:01.920 --> 0:08:05.440 to Corporate America's CEOs, think about the presumption embedded in this. 0:08:05.480 --> 0:08:08.360 By the way, one asset manager writing an annual letter 0:08:08.400 --> 0:08:11.240 to America's CEO s just that this the hubrist break 0:08:11.280 --> 0:08:13.600 into that as a separate conversation altogether. But in that 0:08:13.680 --> 0:08:16.320 letter he says, pursue your purpose, but in the same 0:08:16.400 --> 0:08:18.280 letter will tell them all of the ways in which 0:08:18.280 --> 0:08:20.480 effectively they need to change their purpose to not be 0:08:20.520 --> 0:08:23.160 an oil and gas company to meet these carbon emation caps, 0:08:23.320 --> 0:08:26.240 to meet the standards of the Sustainability Accounting Standards Board. 0:08:26.480 --> 0:08:29.520 And our message to Exxon will be different if you're 0:08:29.560 --> 0:08:32.040 an oil company, be an excellent oil company. We will 0:08:32.040 --> 0:08:33.400 not tell you not to be an oil company. Be 0:08:33.440 --> 0:08:35.480 an excellent oil company. And guess what. If there's a 0:08:35.520 --> 0:08:37.840 different company that's a solar company, our message to you 0:08:37.880 --> 0:08:41.560 will be equally equally powerful. Be an excellent solar company. 0:08:41.559 --> 0:08:43.120 We will not tell you not to be a solar company, 0:08:43.200 --> 0:08:44.840 but we will not tell oil companies not to be 0:08:44.880 --> 0:08:48.079 oil companies. Disney, let's just take Disney, a company that's 0:08:48.080 --> 0:08:49.959 been in the news recently. I think it bears mentioned. 0:08:50.440 --> 0:08:52.400 It's it's a top of mind for me. Frankly, I 0:08:52.440 --> 0:08:54.120 bring up Disney several times, even in the book that 0:08:54.160 --> 0:08:57.120 I wrote last year. And you know, Disney is a 0:08:57.160 --> 0:08:59.440 company that I think has veered from its mission in 0:08:59.440 --> 0:09:01.520 the near term. It has veered from its mission of 0:09:01.559 --> 0:09:04.400 serving its customers, where it took political stances in recent 0:09:04.400 --> 0:09:08.240 weeks that survey data suggest over sixty percent of its 0:09:08.240 --> 0:09:12.040 customers were alienated by. If we're a shareholder of Disney 0:09:12.240 --> 0:09:14.920 in the future, our message to Bob Chatpick would be 0:09:14.960 --> 0:09:18.560 clear three words, knock it off and focus on serving 0:09:18.600 --> 0:09:21.760 your customers today his top three shareholders, as I understand it, 0:09:21.840 --> 0:09:24.480 or black Rock State Street in Vanguard, they're not delivering 0:09:24.480 --> 0:09:27.719 that message. If anything, if you lead read through their language. 0:09:27.840 --> 0:09:30.600 If anything, they're delivering the opposite message to engage on 0:09:30.640 --> 0:09:33.600 political issues like the contingents ones that he's engaged in. 0:09:33.920 --> 0:09:35.520 So so that gives you some sense of the difference 0:09:35.520 --> 0:09:39.880 of what our pro excellence message stands for. And so, Mum, 0:09:40.040 --> 0:09:41.800 I got a copy of your book late last week. 0:09:41.840 --> 0:09:44.520 I read through some of it. It's a UM, it's 0:09:44.600 --> 0:09:47.680 very well written. Um. And the stuff about you know, 0:09:47.720 --> 0:09:50.320 you're growing up and stuff I think was really interesting. Um. 0:09:50.360 --> 0:09:52.319 Some of the stuff you talk about here does resonate 0:09:52.360 --> 0:09:54.640 with me a little bit. We've had we've had E 0:09:54.720 --> 0:09:57.000 S G Debate podcasts, probably three of them in the 0:09:57.000 --> 0:09:59.560 past couple of years, and sometimes I bring up this 0:09:59.600 --> 0:10:02.400 hipoc or the issue, which is that people will buy 0:10:02.400 --> 0:10:05.600 an E. S G. T F and they won't own 0:10:05.800 --> 0:10:08.760 Amazon and x On. Yet they're going to take five 0:10:08.840 --> 0:10:12.120 vacations that year. Uh, they're gonna still shop at Amazon. 0:10:12.679 --> 0:10:18.600 And this interesting. It's this interesting I guess difference between 0:10:18.600 --> 0:10:22.199 how someone acts in their own life and how they 0:10:22.280 --> 0:10:24.560 sort of present themselves. And I think E. S G. 0:10:24.640 --> 0:10:26.960 T s almost in a way let them off the hook. 0:10:27.360 --> 0:10:28.960 And in your book you talk about how some of 0:10:29.000 --> 0:10:32.480 these CEO s um in the Goldman Sacks and some 0:10:32.559 --> 0:10:36.000 of these big companies, by by taking these virtuous stances, 0:10:36.559 --> 0:10:39.200 they're able to sort of like cover up or keep 0:10:39.240 --> 0:10:42.480 the light off of the things they do that might 0:10:42.520 --> 0:10:44.800 not be be in conflict with that. You bring up 0:10:44.840 --> 0:10:47.080 State Street and the Fearless Girl, which is the statue 0:10:47.080 --> 0:10:50.040 for she and yet they had lawsuits about not paying 0:10:50.040 --> 0:10:53.520 female employees as much, and you go through several examples, 0:10:53.559 --> 0:10:55.960 and that's one of my other problems with E s 0:10:56.000 --> 0:10:58.000 G in general. I feel there and the and the 0:10:58.080 --> 0:11:00.800 virtue virtuousness of some of the eos is there is 0:11:01.200 --> 0:11:04.640 hypocrisy in almost every case UM, and I think that 0:11:04.720 --> 0:11:07.880 does not pass. I think people sense that. UM. On 0:11:07.920 --> 0:11:10.560 the flip side, I think people want companies to to 0:11:10.679 --> 0:11:12.840 do good things too. So I don't know, I just 0:11:12.880 --> 0:11:14.160 want to throw that out there and see what you 0:11:14.240 --> 0:11:16.520 have to say about that. Yeah, I think your spot on. 0:11:16.559 --> 0:11:18.040 And first of all, I want to congratulate you guys 0:11:18.040 --> 0:11:20.440 on actually opening up the E s G debate because 0:11:20.440 --> 0:11:21.720 I think I think that's one of the things that's 0:11:21.720 --> 0:11:24.880 been lacking, is just debate in the public square, small 0:11:24.960 --> 0:11:27.600 personal funny story of mine that might have subconsciously led 0:11:27.640 --> 0:11:29.360 me to this mission. A couple of years ago the 0:11:29.400 --> 0:11:31.400 Manhattan Institute might have been a year and a half ago. 0:11:31.559 --> 0:11:34.079 Manhattan Institute invited Larry Think and I to have an 0:11:34.080 --> 0:11:36.760 open debate on stakeholder capitalism. I tend to think that 0:11:36.840 --> 0:11:39.120 debate is a good thing. Agree or not. Let's get 0:11:39.120 --> 0:11:41.000 the ideas out in the open, and we're a better 0:11:41.040 --> 0:11:44.480 society for it, I accepted, He declined. I think that's 0:11:44.480 --> 0:11:46.200 part of for me, the motivation of putting this to 0:11:46.240 --> 0:11:48.760 the market, to actually let the market decide and let 0:11:48.760 --> 0:11:51.520 the actual participants in that market be able to have 0:11:51.600 --> 0:11:54.160 that debate in the marketplace of ideas. Now to your 0:11:54.240 --> 0:11:57.400 question hypocrisy, I think your spot on, and I think 0:11:57.440 --> 0:11:59.200 one of the things that I would encourage you to 0:11:59.240 --> 0:12:01.720 ask every E s G linked asset manager in the 0:12:01.800 --> 0:12:05.680 US is how they're implementing those same policies, say in 0:12:05.800 --> 0:12:09.120 China or via their Chinese funds. You take the Xon 0:12:09.280 --> 0:12:12.000 example that we talked about before. I am willing to 0:12:12.040 --> 0:12:14.800 wager a bet that most of those projects are proceeding 0:12:14.880 --> 0:12:16.880 the ones that they're talking about dropping off the coast 0:12:16.920 --> 0:12:21.679 of Mozambique or elsewhere, which are expensive, expensive projects, right, 0:12:21.720 --> 0:12:24.000 I mean, like, just to stay with this for a second, 0:12:24.040 --> 0:12:27.040 this idea of excellence, Like you're gonna drop billions of 0:12:27.080 --> 0:12:29.440 dollars on a project that you might not see a 0:12:29.440 --> 0:12:32.839 return on that investment for years and in that time, 0:12:32.920 --> 0:12:35.240 like you know, you mentioned solar before, the cost of 0:12:35.280 --> 0:12:37.719 solar has only come down, Like is that going to 0:12:37.800 --> 0:12:40.600 be the best use of excellence? Yeah? And and by 0:12:40.640 --> 0:12:42.920 the way, if you just take take a look at 0:12:42.920 --> 0:12:45.360 where we are today, if Exon had stuck to its 0:12:45.360 --> 0:12:48.200 plan of increasing oil production, with oil prices being what 0:12:48.240 --> 0:12:50.720 they are, there's no doubt that both x IN and 0:12:50.760 --> 0:12:52.840 the externalities for the U S would have been better off. 0:12:53.040 --> 0:12:55.800 If anything, Russia's collecting higher oil and gas revenue with 0:12:55.880 --> 0:12:58.320 the recent oil and gas spike because of the lack 0:12:58.360 --> 0:13:00.600 of US reliance and the reliance of S companies and 0:13:00.640 --> 0:13:02.880 being able to self sustain on energy production. But the 0:13:02.920 --> 0:13:04.600 point I was gonna bring up in response to Eric's 0:13:04.640 --> 0:13:07.200 remark was, guess who gets to pick up those projects? Now? 0:13:07.440 --> 0:13:10.040 It's firms like petro China, and then guests who also 0:13:10.080 --> 0:13:13.080 owns approximately seven percent of petro China. Some of the 0:13:13.120 --> 0:13:15.640 same E s G kings who are proclaiming that ex 0:13:15.640 --> 0:13:17.760 Son should actually get out of the oil and gas business, 0:13:18.000 --> 0:13:21.360 and so that hypocrisy E s G for the China. 0:13:21.440 --> 0:13:24.000 For me, that's not a hypocrisy that I think we 0:13:24.040 --> 0:13:26.520 can abide. And I think we see that regularly with 0:13:26.559 --> 0:13:28.800 these firms doing what they need to do to be 0:13:28.840 --> 0:13:31.960 able to capture profit for themselves at their parent company 0:13:32.000 --> 0:13:34.920 by expanding into the Chinese market, but leaving even the 0:13:35.000 --> 0:13:37.679 US holders, their clients, of some of their U S 0:13:37.720 --> 0:13:40.719 funds holding the bag as a consequence. And I think 0:13:40.760 --> 0:13:44.320 that those are conflicts of interests that run really, really deep, 0:13:44.840 --> 0:13:47.400 and the hypocrisy is something that it's really worth paying 0:13:47.400 --> 0:13:50.160 attention to here because in many cases, these firms aren't 0:13:50.160 --> 0:13:52.600 even doing what they say they're supposed to do. I 0:13:52.600 --> 0:13:55.040 don't even know what s G means today. Nine weeks ago, 0:13:55.160 --> 0:13:58.319 weapons manufacturers didn't count as E s G. Somebody decided 0:13:58.360 --> 0:14:00.360 nine weeks ago, in the last few weeks that should 0:14:00.720 --> 0:14:04.240 the definition immediately changes. Our main objection is that it 0:14:04.280 --> 0:14:08.760 should not be a concentrated group of monarchs, really European 0:14:08.800 --> 0:14:12.880 style monarchs on American soil deciding what does and doesn't 0:14:12.920 --> 0:14:15.839 count as the moral thing to do. We should sort 0:14:15.880 --> 0:14:19.280 those questions out as citizens through free speech and open debate. 0:14:19.520 --> 0:14:22.200 But if you're using client capital do it you better 0:14:22.320 --> 0:14:26.040 darn well represent the interests of those clients in your 0:14:26.040 --> 0:14:29.280 shareholder advocacy efforts and in your shareholder voting. That's what 0:14:29.320 --> 0:14:38.640 we're setting out to do. Well, you know, you brought 0:14:38.720 --> 0:14:42.920 up the idea of the shareholder capital, the stakeholder capital, 0:14:43.080 --> 0:14:46.360 that being I think that conversation has taken place in 0:14:46.360 --> 0:14:49.000 the public square, and where it landed was, you know 0:14:49.080 --> 0:14:55.760 what we have over indexed on on appeasing shareholders at 0:14:55.760 --> 0:14:58.640 the expense of stakeholders, right, and and that is you know, 0:14:58.720 --> 0:15:01.280 I think E. S. G sort of in the current 0:15:01.320 --> 0:15:03.880 form rose out of this way of like how do 0:15:03.960 --> 0:15:07.640 we attempt to validate some of these other stakeholders? Right? 0:15:07.920 --> 0:15:11.200 So I'm curious, like, in your in your version of 0:15:11.280 --> 0:15:17.000 excellence here, how much stakeholder capitalism do you think is 0:15:17.040 --> 0:15:20.320 appropriate for any business to account for? Because this could 0:15:20.320 --> 0:15:23.040 come at the expensive employees. We're in a tight la 0:15:23.320 --> 0:15:26.800 labor market. We're seeing what how how powerful labor labor 0:15:27.120 --> 0:15:29.160 is all of a sudden, right, Yes, so I think 0:15:29.160 --> 0:15:30.880 you make some valid points. I think that it was 0:15:30.880 --> 0:15:33.200 in the aftermath of the two thousand eight financial crisis, 0:15:33.200 --> 0:15:35.480 and I write about this extensively in the book. It 0:15:35.560 --> 0:15:37.400 was in the aftermath of the eight crisis that there 0:15:37.440 --> 0:15:40.960 was a demand for a new look for American capitalism. E. 0:15:41.120 --> 0:15:44.960 S G and stakeholder capitalism filled that void. However, I 0:15:45.000 --> 0:15:47.960 don't think that debate took place amongst the everyday citizens. 0:15:48.000 --> 0:15:50.080 It took place amongst a handful of c e O 0:15:50.160 --> 0:15:53.400 s and asset managers in cloistered corner offices, some of 0:15:53.440 --> 0:15:56.440 whom approached that in very well intentioned ways. But even 0:15:56.480 --> 0:15:59.359 those well intentioned acts, I think I've had adverse consequences 0:15:59.680 --> 0:16:02.760 by using the actual client capital, the firefighters, the nurses 0:16:02.800 --> 0:16:06.360 of small business owners, as a tool to implement an 0:16:06.400 --> 0:16:09.520 agenda that most of those end users of capital disagree with. 0:16:09.800 --> 0:16:12.520 And that's created a new negative externality as a consequence, 0:16:12.600 --> 0:16:16.600 which is political division, which is rampant institutional mistrust, especially 0:16:16.640 --> 0:16:18.280 when they look at the hypocrisy of some of those 0:16:18.320 --> 0:16:20.360 same actors. And I think that might be one of 0:16:20.400 --> 0:16:24.239 our greatest social crises of all, is that institutional mistrust, 0:16:24.600 --> 0:16:28.240 that political divide, that partisan divide, that we see tearing 0:16:28.240 --> 0:16:30.640 our country apart. That's a big part of what we're 0:16:30.680 --> 0:16:32.720 setting out to fix by now taking this in the 0:16:32.720 --> 0:16:35.640 new decade in a new direction, to de politicize the 0:16:35.640 --> 0:16:38.800 private sector so that it's actually a place where we 0:16:38.840 --> 0:16:41.720 can come together in transacting in that private sector, whether 0:16:41.880 --> 0:16:43.800 or not we're black or white, whether or not we're 0:16:43.800 --> 0:16:47.000 Democrat or Republican, and a political private sector can actually 0:16:47.040 --> 0:16:50.840 solve that problem created by stakeholder capitalism by bringing us 0:16:50.840 --> 0:16:54.640 all together again. And to answer your question very specifically, 0:16:55.080 --> 0:16:56.720 we have a theory of the case here. Okay, I'm 0:16:56.760 --> 0:16:58.160 not saying that this should be the only theory in 0:16:58.160 --> 0:17:00.240 the public square, but this is the theory that we 0:17:00.280 --> 0:17:01.880 believe in and that we want to represent, and we 0:17:01.880 --> 0:17:04.040 think a lot of clients agree with us too. Is 0:17:04.119 --> 0:17:06.320 how do you sort out the debate about who which 0:17:06.320 --> 0:17:09.560 stakeholders interests to prioritize. That's a tough question. I'm empathetic 0:17:09.560 --> 0:17:12.160 to that decision. I've been a CEO before for seven years. 0:17:12.840 --> 0:17:14.600 I understand that that's a tough seat to be in. 0:17:14.800 --> 0:17:16.399 I had to make some of these decisions about what 0:17:16.440 --> 0:17:19.320 I said after the George Floyd incidents back I'm really 0:17:19.320 --> 0:17:22.480 empathetic to how you trade these factors off. Our theory 0:17:23.000 --> 0:17:26.199 at Strive and with our theory of excellence capitalism is 0:17:26.240 --> 0:17:29.280 that the number one stakeholder is the customer, and you 0:17:29.359 --> 0:17:32.520 focus exclusively on delivering excellency in products and services to 0:17:32.560 --> 0:17:34.760 your customer. Now, of course, do you need great employees 0:17:34.800 --> 0:17:36.600 to be able to achieve that goal. Of course you do. 0:17:36.720 --> 0:17:39.720 That goes without saying, but maybe it bears bears mentioned too. 0:17:40.000 --> 0:17:42.520 But that's that's our theory, and we think that's more useful. 0:17:42.760 --> 0:17:45.600 We also think it's more unifying. Unifying companies with their 0:17:45.640 --> 0:17:48.000 customers is also something that actually we think is going 0:17:48.040 --> 0:17:50.280 to do a better job of unifying companies with their 0:17:50.320 --> 0:17:52.480 workers too. I'll tell you one of the things that 0:17:52.520 --> 0:17:54.560 we hear is the workers are demanding. This is something 0:17:54.600 --> 0:17:59.120 that you'll frequently hear from CEOs who make proclamations. The workers, 0:17:59.280 --> 0:18:01.679 like the customers and citizens of this country, are not 0:18:01.720 --> 0:18:05.199 a monolithic body. In fact, they're often very representative of 0:18:05.240 --> 0:18:08.159 their customer base. The workers you hear on social media 0:18:08.440 --> 0:18:11.880 and on Twitter are not necessarily representative of the actual 0:18:12.000 --> 0:18:14.879 true workforce or the actual true customer base. And I 0:18:14.920 --> 0:18:17.120 think that's why when you look at this Twitter disconnect 0:18:17.160 --> 0:18:20.400 between how the Disney issue got adjudicated versus an actual 0:18:20.520 --> 0:18:23.840 survey of Disney's customers. You get the results of where 0:18:23.880 --> 0:18:27.119 most of the citizens, customers, and workers really are. We 0:18:27.119 --> 0:18:29.680 think we're actually gonna be better representing those views through 0:18:29.680 --> 0:18:32.840 our mission at Strive. Yeah, it's interesting. So we actually 0:18:32.880 --> 0:18:35.760 had a note saying that, um, we encourage Vanguard and 0:18:35.760 --> 0:18:37.920 black Rock to democratize the voting. We had a note 0:18:37.960 --> 0:18:41.560 that said, not all your investors live in Williamsburg, UM. 0:18:41.640 --> 0:18:44.399 And this because the loudest voices in E. S G 0:18:44.520 --> 0:18:47.280 and the media are in New York City and they 0:18:47.480 --> 0:18:51.520 tend to think similarly. And that's fine, but there this 0:18:51.560 --> 0:18:53.919 is a company that has investors all over the country. 0:18:53.920 --> 0:18:56.080 So we showed this huge map and they have thirty 0:18:56.080 --> 0:18:59.760 million investors. I think at least Vanguard does, UM and 0:19:00.040 --> 0:19:02.240 there's so I want to get your take on two things. 0:19:02.280 --> 0:19:05.199 One is just this idea of instead of doing what 0:19:05.240 --> 0:19:08.520 you're doing, what about if they were to somehow democratize 0:19:08.560 --> 0:19:10.959 the voting process. Now a lot of the votes are 0:19:10.960 --> 0:19:14.520 boring and administrative and people could care less, but maybe 0:19:14.560 --> 0:19:17.520 they pull the investors to find out where their heads 0:19:17.520 --> 0:19:20.400 are at you know, just capital uh, which is Paul 0:19:20.400 --> 0:19:23.600 Tutor Jones company did this and the polling brings up 0:19:23.640 --> 0:19:28.160 some interesting things. It puts UM worker pay number one. Basically, 0:19:28.200 --> 0:19:31.560 all the top things are, hey, CEO should get paid less, 0:19:31.560 --> 0:19:34.320 workers should get paid more. Then like number five or 0:19:34.359 --> 0:19:37.720 six is climate change stuff. And I guess I would 0:19:38.000 --> 0:19:40.840 be curious if your take on UM just what if 0:19:40.840 --> 0:19:43.959 these companies tomorrow said we're gonna pull and we're going 0:19:44.000 --> 0:19:46.240 to get the consciousness of our base and we're gonna 0:19:46.280 --> 0:19:48.720 vote accordingly. Would you like shut down immediately or you 0:19:48.760 --> 0:19:51.040 think that that wouldn't solve the problem? Well, look, I 0:19:51.040 --> 0:19:53.240 think that would be forward progress and I would applaud 0:19:53.280 --> 0:19:56.520 it if it happened. I think that voting and focusing 0:19:56.520 --> 0:19:59.560 on the shareholder vote alone, though, is in some ways 0:19:59.680 --> 0:20:02.520