22 Aug Toeing a Fine Line
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.
No Rest for the Weary
I am torn today between the fable of “The Dog and his Shadow” and various admonitions about resting on one’s laurels.
The fable is about greed and learning to be grateful for what one has. The dog, who has a large chunk of meat in his mouth, sees his shadow in a stream and, thinking it’s another dog with another chunk of meat, tries to take that meat, thereby doubling his haul. Naturally, he drops his meat in the stream, and it (along with the shadow meat) is carried away by the current, leaving him with nothing.
As for resting on one’s laurels, Wittgenstein compared it to resting while walking in the snow: “You doze off and die in your sleep.”
Over the last week, those of us who seek to restore fiduciary primacy to business and capital markets have witnessed a handful of significant victories.
First, as noted in last week’s edition of this newsletter, Robby Starbuck, the filmmaker-turned-consumer-activist, had targeted Harley-Davidson for its profound drift away from its customers, employees, and shareholders on a number of social and cultural matters. As is often the case, Starbuck got results:
Harley-Davidson has been forced into backtracking on their DEI policies after being targeted by a conservative activist.
The $6 billion-a-year firm known for its macho and rebellious image faced backlash after campaigners exposed its diversity, equity, and inclusion (DEI) efforts and urged riders to steer clear of the American icon….
In a statement released on Monday, the company said they had renounced DEI and other initiatives that had caused bikers to abandon the legendary brand.
This is a big deal, and it’s a victory for Harley-Davidson’s legitimate stakeholders.
Second, yesterday, BlackRock, the world’s largest asset manager and the elephant in the room in any discussion of ESG, released a report showing that its support for Environmental and Social (E&S) shareholder proposals fell to a record low this past shareholder season:
BlackRock Inc. reduced its support for shareholder proposals on environmental and social issues for a third straight year, arguing that many of the efforts lacked merit and harmed long-term financial interests while doing little to improve companies.
The world’s biggest asset manager backed 4% of 493 such proposals in the 12 months through June, New York-based BlackRock said in a report Wednesday. That’s down from 7% a year earlier and more than 20% in the same period through mid-2022.
Again, this is a big deal, and it constitutes a significant victory for the forces of goodness and light.
Finally – and this may seem a bit esoteric, but I’ll explain it all in a minute – last week, Johns Hopkins University released a statement, saying that it has no intention whatsoever of taking an “official” university position on the social and political events of the day:
As leaders of Johns Hopkins University, we are often called upon in the face of global, national, or local occurrences to issue public statements on behalf of the institution. These requests are usually grounded in a sense of connection to the values and purpose of our university and our common humanity, and on the occasions when we have issued such statements, we have attempted to choose our topics and words carefully….
To begin, the very idea of an “official” position of the university on a social, scientific, or political issue runs counter to our foundational ethos—articulated most clearly in our Statement of Principles of Academic Freedom—to be a place where competing views are welcomed, challenged, and tested through dialogue and rigorous marshaling of evidence. The university is the site, more than any other institution in our society, where the process of truth-seeking through intense and open contestation is given pride of place. Although institutional statements may feel warranted, consoling, or, at times, even necessary to guide the university through difficult moments, experience has shown that they can be counterproductive, and even at odds with our core mission. These statements can too easily fuel a perception that there are approved or endorsed “institutional” views on political or social issues, which may, in fact, conflict with the views of members of our community. They risk interfering with our truth-seeking function and compromising the ethos and credibility of the institution in the process.
This too is a big deal and a significant victory. Together with the BlackRock and Harley-Davidson news, it is an enormous chunk of meat, for which we should all be grateful and which we sure as heck don’t want to drop in the stream while chasing our shadows.
Nevertheless…
To avoid dozing off in the snow, I should note that these victories, while significant, are still somewhat superficial.
The problems at Harley-Davidson, for example, start at the top. As I also noted last week, the company’s CEO, Jochen Zeitz, sees himself as an environmental warrior (or terrorist, if you prefer). His vision for the company and for capitalism in general is blinkered and based on a Gnostic perception of his knowledge and skills. As long as he and the directors who hired him are still in charge at Harley-Davidson, its customers, employees, and especially its shareholders all remain compromised.
Likewise, while it’s nice that BlackRock has cut its support for E&S shareholder proposals, the real power in the effort to coerce corporate behavior lies not in the votes, but in the engagement. Larry Fink will never admit it, but a big part of the reason why BlackRock is able to vote against these proposals is that they are irrelevant to his larger ambitions. He gets what he wants as a precondition to his vote. Corporate executives negotiate with him specifically to keep him from voting in favor of certain initiatives. He can afford to vote against the proposals, in many cases, because he’s already extracted concessions equal to or more significant than those demanded by the proposal. In other words, the report issued the other day is PR and little more.
Finally, on the question of Johns Hopkins’ institutional neutrality, again this is nice, and it’s significant in the current academic atmosphere. Still, while the statement released last week addresses current questions about academic neutrality, it fails to get to the heart of the matter, the question of why American academic institutions have become so politicized in the first place. As I note in The Dictatorship of Woke Capital, this is, in fact, a Johns Hopkins problem first an foremost, and it has serious implications for the politicization of society more generally and even of business and capital markets specifically:
[In 1873] wealthy Quaker bachelor and railroad magnate named Johns Hopkins died, leaving the enormous sum of $7 million (the equivalent of roughly $150 million today) to found a hospital and university. This university was to be like no other in the United States. Whereas Harvard was founded to train Unitarian and Congregational clergy, Yale was founded to teach theology and religious languages, Dartmouth was founded to teach Christianity to Native Americans, Princeton was founded to serve as a seminary for Presbyterian ministers, and so on, Johns Hopkins was founded not just to teach but to “discover” as well. Johns Hopkins was founded specifically and purposely to create or uncover new knowledge. In his inaugural address, Daniel Colt Gilman, the University’s first president, declared that its mission would be “To educate its students and cultivate their capacity for lifelong learning, to foster independent and original research, and to bring the benefits of discovery to the world.” Or, as Johns Hopkins University puts it today, its job is not to teach its students the knowledge of the world, but to uncover “knowledge for the world.”
Modeled after Germany’s famed Heidelberg University, Johns Hopkins, in turn, became the model for the American research university more generally, an institution designed to produce new knowledge and to embrace “progress” as a defining value. In the physical sciences, this was and is both understandable and admirable. In the specific case of Johns Hopkins, the University’s benefactor wanted the hospital to be on the cutting edge of medicine and for the medical college to train physicians capable of keeping it there. And, for the most part, that has been the case.
Unfortunately, at the time, the standard Western post-Enlightenment philosophical weltanschauung still clung to the notion that a “science of man” could be developed to mimic the natural sciences. David Hume conceived of himself as the “Newton of the mind,” while Saint-Simone and Hegel both professed to discover the “science” of history. This “historicism,” plus that which Friedrich Hayek later called “scientism,” were the beliefs that human affairs were merely extensions of the physical sciences.
Historicism was the epistemological ethos of the German university during the nineteenth century, so it is no surprise that Hopkins, modeled on the finest such university, would be similarly enmeshed in this tradition.
Johns Hopkins is and always has been ground zero for the politicization of American academia and, by extension, the rest of the nation’s institutions of cultural transmission, including business. A statement of neutrality on current issues will not rectify this larger issue.
Those of us who wish to reverse that politicization should be grateful today for the large chunk of meat with which we find ourselves blessed but, at the same time, should be careful not to doze off in the snow.
