I am delighted to find businesses that are ethical and treat their communities and employees well as a matter of doing good while doing well. These businesses are rewarded in the marketplace for being good citizens and profitable. They are also what might be described as “long term greedy,” realizing that helping their community thrive will help their business in the long run.
It is a virtuous circle, and the moral nature of business and capitalism has a long history of being addressed by greats such as Adam Smith in both The Wealth of Nations and The Theory of Moral Sentiments, and theologian Michael Novak in his book The Spirit of Democratic Capitalism.
Larry Fink Wants to Use Coercion to Recreate Capitalism in His Image
Now Larry Fink of ETF giant BlackRock has demanded that CEOs institutionalize the pursuit of their “social purpose” and the welfare of all so-called stakeholders, and put this on par with making a profit for shareholders while serving their customers.
This seems to me to be a convoluted and coercive solution to the problem a Progressive investor might have with indexing. But, it is easy to solve this problem without turning our companies into social welfare agencies. Become a stock picker or hire one to sell the stocks of companies that don’t meet your standards, and buy the stocks of companies that do. But this would be bad for BlackRock’s index business, so Larry leans on coercion to force companies to abide by his ideals while he can still rake in the fees his company gets from having $6 Trillion under management.
His plan would distract companies and employees from their productive functions to make them hold meetings, write reports, and push paper so that they can show they are keeping up with a new kind of enforced corporate political correctness. Something tells me that value creation and serving customers and shareholders would take a back seat. Larry would have made a great regulator during the Obama Administration.
Don’t Kill the Golden Goose or There Will Be No Wealth to Redistribute
One of the things that has always dumbfounded me is that the Left is so hostile to capitalism. The reality is that wealth must be created before it can be redistributed. So a sensible Progressive should want the economy to do well and create as much wealth and prosperity as possible so they will have it to redistribute. Killing the Golden Goose means no more golden eggs.
If Larry needs to assuage his conscience for being a rich capitalist, why not simply give his money to causes that support his values like Bill Gates and Warren Buffett are doing? I guess it’s cheaper to spout nonsense and hang on to his dough. It doesn’t sound like he is living up to his social purpose. But then I guess that depends on who the judge is.
Putting layers of useless guidelines, regulation, and bureaucracy on society so people are spending most of their time shuffling paper and ignoring their productive functions is a recipe for economic malaise at best. Forgive me if I hope people like Mr. Fink are kept as far from the levers of real power as possible.
Where Are the Pragmatists? Two Parties Filled with Fringe Lunatics Doesn’t Leave Voters a Decent Choice
One of the things that stuns me in our current political reality is that both sides are kind of nuts and dominated by their extremes. As bad as Trump is in many ways, at least his policies are focused on unleashing the creativity of the American people through cutting the suffocating regulation of the Obama years. If the Democrats could decide to be pragmatic and business friendly, they could really have something going. But the Far Left seems in control and wants to pursue the socialist policies that Hugo Chavez used to destroy a prosperous Venezuela. Doesn’t seem very promising.
“I think part of the popularity of Berkshire Hathaway is that we look like people who have found a trick. It’s not brilliance. It’s just avoiding stupidity.”
— Charlie Munger
Zone of Competence 
Carl (@carl4light) said:
I voted for neither Trump or Clinton, so I’d appreciate consideration of my remarks as not being dismissed as someone on the left who is hostile to capitalism…
I have been wondering about the cost of this last bull market…investors such as I have certainly appreciated returns since 2009, but as companies restructure, replace pensions with 401k’s and cut salary positions and replace with contract labor without benefits, where goes the working class that don’t invest in the market. Do we need a working class or is income inequality and loss of a middle class a hallmark of capitalism at it’s best? Is maximally unrestrained capitalism compatible with a the best interests of the nation as a whole? Is it ever worth sacrificing profits and shareholders interests in the name of providing viable opportunities for the working and middle class to thrive with peace of mind and benefits and employee benefits.
You earlier discussed Rene Girard’s work. My sense is that the greater income inequality, the more violent our nation will become.
JC said:
Thanks for your comment, Carl. Believe it or not, I share your concerns. While I don’t believe income inequality per se is quite as big a problem as a lot of people do, I do think that we need an economic system where the vast majority of people can do well and succeed with hard work. Robber barons with hundreds of billions of dollars while the average person can’t hardly make it is not a sustainable system.
I do think about Charlie Munger’s comments in the interview from December 20, 2017, about Ricardo’s error in that trade helps both sides, but helps the poorer side more, and yet because of the tragedy of the commons, we couldn’t have stopped China’s rise even if we had wanted to do so.
I actually see the fall of the Iron Curtain and the entry of all of the billions of people into the global market economy as being the source of a lot of our issues today.
As much as I wish it weren’t so, to me, the immense magnitude of the post World War II economic boom in the US was the aberration, because billions of people were imprisoned in Communism and not competing in the global economy, and we had a huge head start on the rest of the industrialized world as our industrial base was not destroyed by the war. We had no competition. I think this was the reason that for several decades we had a situation where line workers at industrial concerns could make better livings than most of the college educated.
Who knows what the future brings, but if the dystopian predictions of not enough work for the average person and machines making a few obscenely rich are accurate, we will have to have high redistributive taxes to keep society from imploding. But I’m not ready to surrender the future to pessimism yet. I believe in my fellow Americans, just like Warren Buffett does. We have had problems for the last couple hundred years and have overcome them. And who knows, maybe we will have one or several internet-type, positive Black Swans to improve the lot of everyone.
The one thing that can help is innovation and robust economic growth. That’s why I think that the otherwise misguided Trump Administration’s biggest success is leaning against the Obama Administration’s massive overregulation and hostility to business.
Carl (@carl4light) said:
Hi JC, I appreciated your reply. The post WWII global economy factors you raised is something I’ve not considered, but if what you say is true, then I’d expect greater and greater growth of international markets relative to US and consequently greater and greater strain and difficulty competing for the US workforce. Back to the points I raised in my original reply, the NY Times op-ed, The Real Reason the Investor Class Hates Pensions by DAVID WEBBER, MARCH 5, 2018, parallels my general impressions discussed earlier.