The problem and promise of purpose: Part 3
Many lofty pronouncements are likely driven by market opportunities rather than lofty morals.
Good morning. This is working theology.
Last time, we discussed how unclear comparisons and data make for unclear hypotheses, which make for unclear solutions to the problems proposed.
Today, we’ll talk about how leaders may have unclear intentions, intentions that may contradict the rhetoric we so often hear.
A recent opinion piece in The Wall Street Journal outlined the conflicts of interest when pursuing purpose, showcasing how BlackRock’s Larry Fink pushes companies in opposing ways. One activist investor argued that the purpose pandering at Royal Dutch Shell creates “too many competing stakeholders pushing it in too many different directions, resulting in an incoherent, conflicting set of strategies attempting to appease multiple interests but satisfying none.”
Larry Fink is one of the most powerful people in the world of finance, which means he’s one of the most powerful people in the world. His firm has $10 trillion in assets under management. Charlie Munger of Berkshire Hathaway recently equated him to an emperor.
I’m not one to presume to know others’ motives. Only God can weigh the human heart. However, it’s hard not to notice the correlation between the rise of profitable strategies and the rise in pontificating values. When there’s a market opportunity, new morals are sure to follow.
Right now, there’s a huge market opportunity in investing strategies related to environmental, social, and governance (ESG) issues. ESG investing inflows saw record numbers last year, and it could become a $1 trillion market by 2030, a market of which BlackRock is a major beneficiary.
Yet it’s interesting to note the conflicts of interest embedded not only in the firms but in the funds themselves. A surprising amount are composed of oil and gas companies. It’s even more surprising to see how many ratings firms are selling ESG badges “to the very firms they’re supposed to be unbiasedly scoring and ranking.” The end result is shareholders winning over stakeholders all the same, including those of BlackRock.
It seems that companies want the label but not the actual work required to earn the label. Why? Partly because the actual work is really hard.
A post from Fortune’s CEO Daily newsletter described how much that work will cost.
An army of McKinsey researchers have come up with a plausible estimate that they are releasing today. It’s a big number: $275 trillion in capital spending on physical assets by 2050, or $9.2 trillion a year. Of course, a lot of that investment is already happening. But McKinsey says the increase in investment needed would be $3.5 trillion a year. …
A separate study out this morning from Deloitte concludes insufficient action on climate “could cost the U.S. economy $14.5 trillion in the next fifty years,” and the loss of nearly a million jobs.
Spending $275 trillion is tough. Somehow, though, the numbers don’t seem to line up. I’m no mathematician, but spending $9.2 trillion per year to save $0.29 trillion per year doesn’t seem to make any sense. Who would spend $30 to save $1? What am I missing?
Maybe because selling the story is more valuable than doing the work. It made me think of an article I read recently on how Wall Street analysts sell hyped up math rather than facts. The closing paragraphs had a similar skepticism I carry these days:
We’ve disbelieved plenty in our long lives, but only because so many of the facts don’t tie out.
These strategies carry the stamp of scientific certitude, but Wall Street’s researchers, like all scientists, have an ethical responsibility to communicate the limitations of these supposedly systematically proven models to an aroused but insufficiently skeptical, public.
Yet much of their world is bullsh*t. And yes, maybe we’re a bit too blunt. But we don’t want them to sell you more of what isn’t working.
There’s another part of the story. Sure, there’s a carrot dangling in front of many business leaders to get in on the action when it comes to ESG, DEI, and more. But the other side is that there’s a stick chasing them toward the carrot. Many companies are fined if they don’t start running. They can be fined by people via lawsuits and less demand or by politicians via taxes and subsidies.
In 2018, Delta Airlines ended its relationship with the NRA, which led to the end of a tax break worth $40 million. In 2020, ADP was sued by a group supporting people with disabilities for ADP’s lack of support for people with disabilities. Consumers, especially young people, increasingly vote with their dollars regarding brands and their values. And governments intervene in markets more now than in the recent past, leading the writers of a recent edition of The Economist to label the trend “The Bossy State.”
I used to think I wanted my daily work to have a grand purpose, but I’ve been less enthused about that lately. It’s a symptom of being anxious, supposing that life has no purpose or greater meaning. A loss of religion for many, perhaps. Business leaders feel this not only from their employees and the public at large but likely from their own anxiety as well.
We substitute The Grand Purpose® for our careers, boycotting brands or demanding that our employers take on the role of parents to shelter us from a chaotic world. I think we need to give business leaders a break. It’s why they’re burned out. It’s why we’re burned out. We, they, can’t be perfect at everything—the perfect boss, therapist, politician, sociologist, financier, visionary, technologist, and so on all rolled into one human being. Life is messy and difficult. Cut them some slack. Cut yourself some too.
The truth is that life is the little nothings throughout the day, a chattering bird, a bag blowing in the wind, a meaningless small-talk chit chat with the woman at Trader Joe’s. Sure, it’s the larger things too—the grief of losing a child or grappling with an aging and demented mother—but sometimes there’s no greater purpose in those things either. At least none that we could comprehend.
Sometimes we limited, feeble creatures don’t know why things happen the way they do. And sometimes there are no solutions to our problems either. We’re creatures, after all. Maybe we should leave the meddling and The Grand Purpose® to the Creator.
I do believe that some of these developments will do some good in the end. There’s a promise beyond the problems. We’ll talk about that next time.
Thanks for reading.