Not content with owning education, entertainment and the media, the left moves onto business. Learn more in this special Conservative Business segment.
Not content with owning education, entertainment and the media, the left moves onto business. Learn more in this special Conservative Business segment.
The Corruption of Business
Conservative Business (a Conservative Historian Tale)
December 2022
I recently attended a healthcare technology conference called HLTH, phonetically, of course, “health.” I love these types of spellings. Sort of like the social media company Sprinklr spelled S-P-R-I-N-K-L-R. Where is the “e.” It’s gone. Thinking this is a combination of new organizations trying to be edgy while also end-running those pesky trademark and URL issues.
Those who would go after HLTH, much less an e less Sprinklr, will be finding obstacles to their lawsuits (the owner of Sprinkler.com is, shockingly enough, not a social media company but a lawn sprinkler provider).
I have attended several conferences on technology over the years ranging from a small half-room ballroom with two speakers and about eight tables to the Healthcare Information Management Systems Society, HIMSS, and even the Consumer Electronics Show in Las Vegas. HIMSS boasts 40,000 attendees, and the CES, much more than that.
At HLTH, with about 10,000 attendees, what struck me as so different was that for nearly 40% of the sessions, what was missing from this technology conference was technology. Instead, there was a dominance of diversity equity and inclusion sessions or DEI.
There was a lot on Social Determinants of Health or SDOH. And one of the dominant themes of the event was health equity. But, for obvious reasons, they do not acronymize Health Equity because that might imply a patriarchal dominance.
Marketplace economics? Clear patient outcomes? Lowering costs through technology? None of that. More typical was one panelist who introduced herself not with degrees, accomplishments, or management experience but rather as a gay Latina and then recited the woes she has encountered within our current health system for her.
If you removed any reference to technology and instead named the conference the Academic Conference for Inclusion and Diversity, or ACID, conference, no one would know the difference.
As with education, Hollywood, government, and the media, woke has won again. But this feels a lot different. What funds universities is the false narrative of the necessity of college education and scared parents reading all those college grads vs. high school grads salary stories. There are endowments funded by nostalgic alums whose greatest moment was that kegger at the Sigma Chi party, followed by nighttime encounters with fellow students. At no point do people step back and ask whether comparative literature, geology 101, or a course on the horrors of the white patriarchy colonials actually help one get or keep a job. Sure there are also some business schools and medical schools when actually discussing things like anatomy are valuable, but they are the exception to the rule. And, of course, colleges are staffed with a combination of academics and activists who could never design a product, conduct market research, write up a contract, operate a piece of equipment, or sell water to a person dying of thirst.
That is the modern academy. A fertile, if a fetid, breeding ground for leftist ideology.
Public school districts are woke because the public union teacher’s run the show, so progressivism is in the DNA. Hollywood entertainment, at least the non-business side, tends to be staffed by the dramatic. These are performers, actors, singers, and writers. The drama is the thing, and what is less dramatic than a market research report or a balance sheet? How does that compare to Shakespeare or Star Wars?
Journalists are the same genus as entertainers, if of a different species. They, too, are motivated by the dramatic, but there is a much more frightening element. Unfortunately, too many journalists enter the profession “to change the world.” A breed of which we should all be petrified.
But business is different. Business is dollars and cents, competition, efficiency, and production.
This is not to say that an actor or reporter does not work hard, but in the business, the nature of the work is different. Staying up late at night to finish a script or learn a line is not the same as burning the midnight oil to get the books ready for a 10K filing or producing PowerPoints on a margin erosion.
And in my unbiased eyes, business is vital to society in a way that a superhero movie or a sociology department is not. Why? Because business is where the cash emanates.
The success of a business is not chicken and egg stuff as much as those like Barack Obama would have us believe. There was commerce, and only then was their government. Can government assist and support commerce? In some isolated cases.
The Erie Canal made it easier to move goods, as did the later Interstate Highway system. But Americans had commerce prior to the Erie’s construction in the early 1800s. When the Interstate Highway System was built in the 1950s, the United States had already been the number economy in the world for 75 years. Commerce produces the funds; everyone else then consumes those funds. The key concept in all this is that once commerce produces those funds, who gets to allocate them?
The famous speech in Oliver Stone’s 1987 movie Wall Street by fictional 1980s LBO specialist Gordon Gekko, as voiced by the masterful actor Michael Douglas, states, “The point is, ladies and gentlemen, that greed -- for lack of a better word -- is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms -- greed for life, for money, for love, knowledge -- has marked the upward surge of mankind. And greed -- you mark my words -- will not only save Teldar Paper, but that other malfunctioning corporation called the USA.”
In the context of the movie, as voiced by the corrupt Gekko, Stone’s point was that greed was a bad trait and should be excised. He provided a counterpoint to Gekko in the person of a noble baggage handler, played by Martin Sheen. Stone got it wrong. The problem was that Gekko was a scammer and a criminal. Did he save Teldar Paper? Who knows? We know that when he made his bets, he broke the rules; he cheated. But his cheating was such that he was only caught when his protégé Bud Fox was wired and Gekko foolishly blurted out all his misdoings.
In a different podcast, I noted of the Seven Deadly sins that these traits are hard-wired into our DNA.
Bring home a stuffed animal for two kids and watch a nice gesture soon turn into a bitter tug of war. Any parent knows that in addition to the words mama, dada, and no, is the word “mine.” Gluttony is overeating food, but we have to have food. Lust is too much sex, but we are not yet at the test tube stage where we can survive as a species unless some man and woman couple is not, well, coupling. These are born out of natural inclinations. And so is greed. Marriage is a system that channels lust productively. Better, more nutritious food is a system that channels gluttony. The beauty of capitalism is that there is a system that channels greed productively. The better the business, the more money that can be made, but the money needs to be made under the rules.
But what we have today is a misallocation of resources not due to some nefarious, underhanded, and criminally Gekkoan enterprise but rather the play on people’s conscience. One of the recurring themes of this podcast is the difference between what is intended and what is known will happen.
For example, teacher’s unions always demand smaller class sizes, which sounds like a good policy on paper. Better student outcomes are the intent. But a good teacher can handle 30 students better than a bad one managing 25. So what is known is this. Smaller class sizes mean districts will have to hire more teachers, which means more dues-paying members in the obligatory teacher's unions. That is the known.
Do the hundreds of Health Equity presenters at the HLTH conference make a difference in their communities? There were many statements about inequities and the disadvantaged but precious little on actual outcomes. What is known is that for many of the advocates and activists, their funding, their actual salaries, and their living are predicated on there being an issue and they being the ones who can solve it. Taking over the academy was easy. There was always a bit of the quasi-socialist inherent in that realm. Hollywood too. These are artists, after all.
But business was more formidable. Business, or at least the best version of it, is solving an issue that affects enough people that a person can make a living by solving that problem. People do not want to swim a river or go three miles to the ford? Build a bridge and charge a toll for the walk across. Want to catch more fish? Build a better net.
Want to go from A to B faster and more cost-effective than, let’s say, a horse? Build an automobile that is more efficient and cost-effective than a horse. And not just the bridge owner or the fisherman benefit. The person building the bridge or sowing the net benefits as well. And because our bridge owner paid the builder, he paid the farmer for this food. It all emanates from business and commerce.
Like math, there is a purity to business and, of course, Adam Smith’s invisible hand when millions of individual decisions are made; everybody wins. That is why for 4700 years, humanity was mired in agricultural, monarchial systems. Dead at 40, killed by famine or an army. Capitalism broke this nearly five-millennium wheel.
The problem is not the millions of decisions but rather the ambitions of a chosen few that wish to warp and denigrate the economic system for their own gains. These would be the Elizabeth Warrens of the world who never saw a business they did not want to regulate or a company they did not want to control. And Warren is very much a creature of the academy.
The problem is that the system, for the most part, worked fairly well. So instead of the left going at full throttle takeovers like colleges and universities, they needed something else, well, two somethings actually. First, they needed to appeal to people's conscience to make businesses more engaged with social causes. That is why many companies now pay lip service to DEI and sustainability or environmental protection. The other goal was to move the goalposts from a profit motive to something like a charity. And to do so, they needed to change the terminology. Shareholders, the true company owners, are putting up the risk to (drum roll please) stakeholders, where everyone. Regardless of risk or exposure, it has a vested interest.
Yet here is the problem, papered over by the success of this nation and the stupidity of other countries.
Companies still need to make money. That would need to have more revenue than their costs or something that CEOs once concerned themselves with called profit. Remember all of those activists at HLTH? The ones who need donations to make their living though they are not, as far as I can see, producing real value? Another entity needs to make money so they can get paid.
And who are the stakeholders exactly? Here is the part of Gordon Gekko’s speech that is often not quoted, “Well, ladies and gentlemen, we're not here to indulge in fantasy but in political and economic reality. America, America has become a second-rate power. Its trade deficit and its fiscal deficit are at nightmare proportions. Now, in the days of the free market, when our country was a top industrial power, there was accountability to the stockholder. The Carnegies, the Mellons, the men that built this great industrial empire, made sure of it because it was their money at stake. Today, management has no stake in the company! l together, these men sitting up here own less than 3 percent of the company. And where does Mr. Cromwell put his million-dollar salary? Not in Teldar stock; he owns less than 1 percent.”
Who is the most powerful person in business? Tech titans like Mark Zuckerberg? Philanthropists such as Bill Gates? It could be the super-rich hybrids whose business holdings extend over several industries and possess media platforms, like Jeff Bezos or Elon Musk. What about government officials such as Treasury Secretary Janet Yellen or Fed chair Jerome Powell?
Even to casual observers, every name I have listed should be a known entity, but for my money, the most powerful person is probably someone most people have not heard, and that would be BlackRock founder and CEO Larry Fink. You may or may have heard of him, and all of those Twitter users losing their minds about Elon Musk may not have heard of him, but every Fortune 1000 CEO knows him, as do those government officials I have named. Fink does not own a popular social media property, has not revolutionized computing or telephony, has not discovered a new mode of transportation or a cure for Cancer, or capitalized on some production process. What he does is allocate capital.
A LOT of capital. Did I say a lot? As of the second quarter of 2022, the New York City-based asset management company had total assets under management (AUM) of around 8.5 trillion U.S. dollars. The total assets under the management of BlackRock Inc. almost doubled between 2016 and 2021, reaching a value that makes them the world’s largest asset management company. By comparison, the United States GDP is 23 trillion dollars. Healthcare itself, a behemoth industry in the United States, has total revenue of $4 trillion. In other words, if Fink really wanted to, he could screw with any company, industry, and the US government itself. The writer of the Conservative Historian almost never finds a common cause with Elizabeth Warren. Still, even I, the small government ideologue, am just a little daunted at the scale of BlackRock. That is why when Fink takes a position, it matters.
In his 2022 open letter entitled “Power of Capitalism.” Fink states, “Stakeholder capitalism is not about politics. It is not a social or ideological agenda. It is not “woke.” Instead, capitalism is driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper. This is the power of capitalism.
In today’s globally interconnected world, a company must create value for and be valued by its full range of stakeholders in order to deliver long-term value for its shareholders.” Note how Fink switches effortlessly from one to another.
Later he addresses the state of Environmental, Social, and Governance issues or (yes, I know, another acronym, ESG “It’s been two years since I wrote that climate risk is investment risk. And in that short period, we have seen a tectonic shift of capital.3 Sustainable investments have now reached $4 trillion. Actions and ambitions towards decarbonization have also increased. This is just the beginning – the tectonic shift towards sustainable investing is still accelerating. Whether it is capital being deployed into new ventures focused on energy innovation, or capital transferring from traditional indexes into more customized portfolios and products, we will see more money in motion.”
So when flying across the land and sea in his Gulfstream, or maybe Fink has a full-blown 737, does he sit up there and fear for the life of the planet and the fate of humanity? Maybe. Only he knows for certain.
It is Fink’s intent that is mandating any company in which he invests to demonstrate sustainability bona fides will help mother Earth. But what is known is that sustainability does not currently have a cost-effective basis. Green is more expensive., again today, than fossil fuels. Since this is a given, it would also be a given that a more extensive, better-funded organization, the kind that Fink likes, the only kind that would move an investment portfolio as comprehensive as BlackRock’s, now has an artificial advantage over other funds. The more ESG, the better for BlackRock.
Fink’s letter extends over 3,700 words, but there is one that is not present; nuclear. Not once does this paragon of the environment even mention the one technology that could solve the fossil fuel issue within 5-10 years.
And here he inadvertently gives the game away, “Engineers and scientists are working around the clock on decarbonizing cement, steel, and plastics; shipping, trucking, and aviation; agriculture, energy, and construction. I believe the decarbonizing of the global economy is going to create the greatest investment opportunity of our lifetime.” Maybe, but most certainly not if nuclear is at the center.
It would cost about $1-2 billion per plant so if $100 billion were spent, heck, $200 billion, less than half President Biden’s cost for student loan transfer, we could solve the fossil fuel problem. That is not really what will benefit Fink. Instead, companies must retool green technologies, some good, most bad. Hence, the trillions he envisions above. That is the game. He is using ESG as a moat against disruptive companies that might impact those in which he has invested. And the biggest disruptor of them all would be 70-year-old nuclear.
The same principle applies to the government as a critical stakeholder. I noted that capitalism works when capital is channeled under the rules. The problem is that government often makes the rules, and then government, in the wrong hands, can break the rules when it sees fit. This is where I may see Warren’s point, but I would never adhere to her relatively simple policy; she, and her colleagues, gets to decide what is too big and what is too powerful. And her career does not fill one with any trust that she will objectively wield power. On the contrary, she will do so to continue to aggrandize power to her party and herself.
The rise of a figure such as Donald Trump was not created in a vacuum. When those of us on the right saw the blatant use of the IRS to penalize conservative organizations under the Obama Administration and to see former Director Lois Lerner take the fifth and then ride off into the pension-funded sunset, it brought anger. Added to that was the seemingly ineffectual response to this behavior. Ok, they get to break the rules so let us fight fire with fire or government with Trump.
I do not believe that Barack Obama allowed and enabled his IRS to do this just out of some nefarious mean streak. The reality was worse. He wanted to penalize conservative organizations with the primary taxation body of the US government. Why? Because he felt he was in the right.
The ends justified the means, even if it meant that game was now rigged. And the right’s reaction was to create their own strongman tactics in the person of Trump.
We recently had an episode involving an erstwhile billionaire and financial media darling, Sam Bankman-Fried. After Fortune (a magazine that once had steady corporate reporting but in the past ten years has become People Magazine for people who like business) called him the next Warren Buffet two months ago, Bankman Fried lost billions and is now hiding out in the Bahamas. He was also the second-largest donor to Democrats in the last election, hoping to influence the regulatory world. And he expressed many of the platitudes that would create leftist love. I will go into this story in more detail in a future podcast.
That is a problem with the concept of forcing businesses to adhere to social justice principles and sustainability measures as dictated by the left. There is an arbitrary nature to these things as we have seen the migration from global warming to climate change – as if the climate has not, and always will, change. There is the migration from equality of opportunity to the redistributionist concept of equity. And there is now a migration of too many businesses, including and especially those within the finance sector, to migrate from competition to favorable governmental regulation and rent-seeking, or a concept in economics that states that an individual or an entity seeks to increase their own wealth without creating any benefits or wealth to the society. Normally these practices would be seen for what they are, but not when covered under the false patina of social justice.
This is not only bad policy; it is bad business. Someday in the not-so-distant future, as our non-competitive companies wallow in fulfilling this or that social justice dictates, the honey pot of profits as it exists today, built on competitive, market-responsive companies, will go dry. And then poor businesses will be a part of a poor country, and we will wake up and find ourselves, as Gekko stated, a second-rate country.