On the Depoliticization of Markets: Woke Capital Vs. Woke

On the Depoliticization of Markets: Woke Capital Vs. Woke

The following commentary/analysis is one I wrote in my capacity as a senior fellow at “the nation’s oldest consumer protection agency,” Consumers Research, where, among other things, I compile a weekly letter for public pension-fund managers.  I am sharing it here today because I thought it might be useful to some of you.


The Confusion I Helped Create

The following subject is one I have never broached in print before and only once or twice in real life.  It has never before been relevant or necessary.  More to the point, it is somewhat unseemly, boastful.  That said, the time is now ripe, and its discussion here serves an important purpose.

The vocabulary used today in the popular discussion of ESG – especially among those opposed to the practice – did not exist just a few short years ago.  My book, The Dictatorship of Woke Capital, is, for all practical purposes, the dictionary of the ESG discussion, the encyclopedia of the arguments against it, and the roster of the players involved on both sides.

This is not to say that I created the language or formulated the arguments on my own.  I was aided diligently by and borrowed heavily from a variety of sources, including (and especially) Justin Danhof, who was, for many years, the most prominent resistor to the use of shareholder activism to politicize capital markets.

Most people – even those who have become significant players in the ESG game, both for and against – don’t realize any of this.  And that’s fine.  In the grand scheme of things, it doesn’t really matter.  I didn’t write the book to get credit or receive accolades (although some accolades have nonetheless been given).  Still, when opponents of ESG argue that it constitutes a scheme to enact public policy issues favored by elites and resisted by voters, it is worth noting that this case largely did not exist before I wrote that it is “the top-down antidemocratic means by which some of the most powerful and best-known men and women in American business are endeavoring to change capitalism, the securities markets, and the fundamental relationship between the state and its citizens—and to ‘save’ the world.”

One phrase that I did NOT introduce/invent is, perhaps, the most controversial in this entire discussion, “woke capital.”  As I note in the book’s introduction, the “‘dictatorship of woke capital’ [was] the title that the editors of First Things gave [Senator Tom Cotton’s] righteous speech from the Senate floor” on June 19, 2019, in which he condemned Disney CEO Bob Iger’s attempted interference in the Georgia legislature’s debate over abortion.  A handful of other writers – most notably Ross Douthat and Matthew Walther – had used the term previously as well.

What I did do, however, was tie that term, “woke capital,” to the financial markets, to ESG, and to the broader stakeholder movement.  I don’t regret doing so, but I do regret that the decision has led to no small amount of confusion.  The simple truth of the matter is that “woke” and “woke capital” are two entirely different things, despite sharing much common history.

I like (in my conceit) to think of my book as a successor, of sorts, to Tenured Radicals, which was written by my publisher, Roger Kimball, just over three decades ago.  As the subtitle explains, Tenured Radicals is about “How Politics Has Corrupted Our Higher Education.”  The Dictatorship of Woke Capital, in turn, is about how politics has corrupted Big Business and especially capital markets.  “Woke,” by contrast, is an ideological predisposition.  All three – the political corruption of education, the political corruption of capital markets, and wokism – are the result of the same ideological evolution, the conscious decision on the part of Marxist intellectuals in the wake of World War I to abandon their sage’s crackpot economics and to focus instead on cultural revolution.  But the first two are the results of introducing politics to institutions not previously politicized, while the last is a political phenomenon in and of itself.  It just happens to be the political phenomenon most often manifested in contemporary corruption of said institutions.

Clearly, the confusion here is understandable, but that’s not to say that it should also be tolerated.  The stakes are simply too high.  In the concluding chapter of my book, I detail the short, medium, and long-term consequences of the politicization of everything, the last of these being the point at which the “dictatorship” in the book’s title becomes literal rather than metaphorical.

I also express my hope that business and capital markets can be rescued from this morass, given the recency of the efforts to politicize them.  In order to do so, however, we MUST get this right.  We MUST be clear that politicization is the problem here, not the specific ideology of the politics involved.  Or to put it in book-related terms: the problem is woke capital, not woke.  Focusing on woke – or any other ideology, for that matter – will only accelerate the politicization of this vital institution, making the problem substantially worse.

Just over a week ago, Fortune published a commentary piece by Brian Potts in which the author called out Strive Asset Management for what he sees as a failure to live up to its promises:

Strive quickly attracted capital from investors thanks to its unique marketing approach: claiming that Strive’s suite of exchange-traded funds (ETFs) are “anti-woke” and “anti-ESG.” These claims are so integral to the wider Ramaswamy brand that they earned him the title “CEO of Anti-Woke, Inc.” in the media, even as he stepped down from running Strive to run for U.S. president.

However, the company I co-founded, Goods Unite Us, compiles and tracks corporate and executive political contribution data from the U.S. Federal Election Commission–and we dug into Strive’s funds and found that they are filled with companies that support Democrats and pro-ESG agendas.

Eight of the top 10 corporate holdings in Strive’s Growth ETF overwhelmingly support Democratic politicians and PACs. And a majority of the top 10 holdings in Strive’s three flagship funds (tickers: STRV, STXG, STXV) primarily support Democratic–rather than Republican–politicians and PACs.

In fact, many of Strive’s funds look eerily similar to funds BlackRockState Street, and Vanguard have offered for many years.

Potts is confused.  And in his confusion, he draws several conclusions that make it appear that he is not operating in good faith.  I don’t know him, of course, and I will presume, unless and until I’m proven wrong, that he is operating in good faith.  Still, this confusion gives the opposite impression.

The first thing Potts is confused about is the very subject of the above section of this essay, the difference between woke capital and woke.  Those of us who wish to push back against and eradicate “woke capital” are not concerned with the personal predilections of corporate executives.  What these executives do with their money is their business.  If – like Marc Benioff and Tim Cook – they use corporate/shareholder funds to promote their political positions, then that’s a problem.  But what they do on their time, with their resources, is not our concern.  Indeed, that’s the whole point of the movement, to encourage investors to get back to caring about business and executive performance rather than politics.

The second thing Potts is confused about is the difference between Vivek Ramaswamy the entrepreneur and Vivek Ramaswamy the political entrepreneur.  Just because Vivek has built his personal brand on battling woke doesn’t necessarily mean that the company he founded was ever intended to do the same.  Potts writes that Strive claimed that it was “anti-woke” and “anti-ESG,” “claims [that] are…integral to the wider Ramaswamy brand….”  Yet he offers no evidence whatsoever that Strive made such claims.  We know that Vivek has said those things about himself, but there is no evidence that he or anyone else said that about Strive.  This is a rather nifty sleight of hand on Potts’ part, conflating the two, assuming that common knowledge about Ramaswamy himself is enough to cover his otherwise unsubstantiated claims.

Moreover, speaking of the development of the language and concepts involved in this debate, unlike Potts, I actually sat in a Zoom meeting with Vivek, in which he discussed the company he wanted to build.  When he described what he wanted to do, I said: “What you’re talking about is not opposition to ESG, but indifference to it.  It’s not anti-ESG; it’s post-ESG.”  “Post-ESG,” he said in response, “That’s right.  I like that.”

The third thing Potts is confused about is the difference between Ramaswamy and the company he founded.  Vivek was the name that attracted the angel-investors.  About that, there is no doubt.  He was also the visionary behind the project.  Again, about that, there is no doubt.  As I have always maintained, the pushback against politicized capital markets was very fortunate to have Ramaswamy join the cause.  He had both the personal resources to sell the Strive project – charisma, intelligence, entrepreneurial spirit – and the financial resources to see the extremely long and tedious project through the early (and expensive) regulatory gauntlet.  His unique combination of personal attractiveness and financial assets made him THE indispensable piece of this puzzle.

At the same time, Ramaswamy had no experience running a financial company, no history of managing portfolios, and no background in shareholder activism/engagement – which is why he hired people to do all of that for Strive.  Among Strive’s early hires, two people have played outsized roles.  The first of these is Justin Danhof, the firm’s executive vice president and head of corporate governance.  You may know Justin from his former role as the director of the Free Enterprise Project.  Or…you may remember him from my mention of him in the third paragraph of this essay.  In my book, I wrote of Danhof’s place in the pushback against the politicization of capital that “It might be an exaggeration to compare Justin to Leonidas at Thermopylae, but only because Leonidas had 299 other Spartans, while Danhof has been almost entirely on his own.”  He’s the guy who coined the phrase “back to neutral” as the goal for the post-ESG business world.

The second of Strive’s early hires who has done yeoman’s work in pushing back against this politicization is Matt Cole, who is now the company’s CEO and CIO.  I first met Matt in the early summer of 2021, after my book had made its splash but before Vivek’s book was even released.  Matt had spent most of his career at CalPERS, an early ESG adopter, and he and his wife (Anastasia, who went on to do the early marketing for Strive) wanted to do something different.  They wanted to figure out a way to use their skills and experience to resist the subordination of shareholder rights and needs to the political predilections of executives and asset management titans (like CalPERS).  They too wanted business and capital markets to get back to doing what they are supposed to do.  Vivek and Strive sought Matt out, not because of his political positions (which, to this day, I don’t even know) but because of his vision for a post-ESG investment company.

In the week-plus since his piece was published by Fortune, Matt has been pushing back against what he calls Brian Potts’ “misleading claims” about Strive and asking the author to produce corroboration for those claims:

BRIAN’S MISLEADING CLAIM #1: Strive has a misleading marketing approach “claiming that Strive’s suite of exchange-traded funds (ETFs) are ‘anti-woke’ and ‘anti-ESG.’”

MY ASK: Show me the examples where *Strive* has marketed its suite of exchange-traded funds as “anti-ESG” or “anti-woke” since day one of the company. There is not one example in your article…

BRIAN’S MISLEADING CLAIM #2: “Based on our review of Strive’s funds, one might reasonably accuse Strive of being both closet indexers–and closet Democrats.”

MY ASK: Show me one tangible example where Strive implied our passively managed index funds aren’t designed to be what they are, index funds. Our website explicitly states: ““We believe in engagement, not divestment. Strive’s products don’t exclude corporations that advance stakeholder interests. Instead, we leverage our vote and voice to maximize shareholder value.”

BRIAN’S MISLEADING CLAIM #3: Strive is one of many fund managers making “claims that are not supported by reality.”

MY ASK: Show me one claim made by Strive with documentation that is not supported by reality.

Potts, for his part, has responded that he has corroboration, which he will produce at a later date.  Like Cole, I eagerly anticipate his evidence.

The final bit of confusion from which Brian Potts suffers is likely the most serious of all, his confusion about the effect that the politicization of business and markets can have on society.  In his essay, he proudly notes that he founded a company called Goods Unite Us, which tracks the political donations of business executives.  Goods Unite Us is a company motivated primarily by the progressive frustration with corporate money in politics.  The firm says it monitors political donations to bring “more accountability and transparency to our political process.”

This is all well and good, I suppose, and not all that different from what some groups opposed to ESG do.  The problem is that Goods Unite Us doesn’t appear to care about the differences between business-related corporate political activity and non-business-related activity.  It doesn’t appear at least to distinguish between pecuniary political expenses (lobbying for lower taxes, business-friendly policies, etc.) and non-pecuniary political expenses (environmental and social justice activism, for example).  It treats all political contributions as equal.

To be clear, Goods Unite Us is an expressly political effort.  It is not about protecting shareholders, and it is not about keeping business focused on business.  It is, as the company’s website puts it, about empowering “people to become political consumers and investors….”  While I sympathize with the desire to see a core political belief enacted – in this case, the end of corporate participation in politics – I have serious reservations about the methods Potts and his company are using to do so.  The fact is, we know how this ends.  We know how the politicization of everything turns out.  And it’s not pretty:

[A]t the risk of being overdramatic, the fate of a civilization may well rest on the outcome of this particular battle, which is precisely why those who would make business and markets part of “the political” are fighting it so totally, so remorselessly.

There is a profound irony here and a profound warning. Carl Schmitt understood that this value development and self-identification would create political disorder. He also explained how order might be restored in such a society, where multiple friend-enemy factions had developed.

Democratic sovereignty necessarily elevates one faction over another. This, in turn, eliminates substantive equality, exacerbates disorder, and calls into question the legitimacy of the sovereign. The only way to remedy all of this, Schmitt argued, and thus to restore order, is to trade sovereign democracy for a sovereign dictator.

Carl Schmitt was a living, breathing oxymoron. He grew frustrated with and tired of trying to rationalize the inefficiencies and ineffective­ness of the Weimar Republic, and so he chose to pledge his allegiance to those who would restore order. And he became “the crown juror of the Third Reich.”

By pledging his fidelity to the Nazis, Schmitt both fulfilled his pre-Nazi philosophical theories and, at the same time, sacrificed his personal credibility. He became a significant part of the problem he identified and professed to find intolerable.

Conflict in politics is normal and, in a state in which the people serve as the sovereign, is inevitable. But the knee-jerk demand for order in the face of this conflict is, quite simply, the path to dictatorship and the subjugation of those whose values differ from the majority.

When those who hold the most power in society determine to end conflict by waging total war and destroying those they’ve identified as enemies, society loses everything, not just its variety but the very mecha­nism by which variety is created in the first place.

It is frustrating – and ironic, I suppose – that this part of my book is the one part that has largely been ignored in the construction of this debate.  In any case, as I note in the final three sentences of this chapter (and of the book):

Depoliticize business.

Depoliticize markets.

Back to neutral.

Stephen Soukup
Stephen Soukup
[email protected]

Steve Soukup is the Vice President and Publisher of The Political Forum, an “independent research provider” that delivers research and consulting services to the institutional investment community, with an emphasis on economic, social, political, and geopolitical events that are likely to have an impact on the financial markets in the United States and abroad.