 Welcome to Power Hour. I'm Alex Epstein. On today's episode, I'm covering a topic I've wanted to cover in depth for some time, and this is the destructive power of ESG. In the past, I've talked about this thing called the ESG movement. I've talked actually a lot about how corporations can try to navigate it, but I've never had a full show just devoted to understanding the movement and what's bad about it and how we as citizens can counter it. So just to give you a little bit of context on why I'm particularly motivated to talk about it now, I think that this phenomenon of ESG corporate standards, and we'll go into this during the interview that's about to come up, I think it's risen to the point where I think it's an existential threat to energy around the world. So one example that came up in the last week is Larry Fink, who, if you're in the energy industry or in finance, I'm sure you know him, he's the CEO of BlackRock, which I think is the leading private financial institution of the world. They're known above all for what are called passive investments, so index funds that track the market. And he just wrote a nearly 3,000-word letter in which he is basically telling the whole world, you have to go net zero, and I am going to kind of push you into that. And in my view, this letter is terrible. I think he mentions nothing about how valuable energy is, how fossil fuel uses growing globally because it's uniquely cost effective. He mentions nothing about unreliable solar and wind causing huge problems even on a small scale. On the small scale there on now, he talks nothing about climate-related deaths plummeting. He misrepresents climate-related damages as increasing. He doesn't talk about nuclear, the necessity of that. And he just claims, in my view, with no real evidence that the world is going to be net zero in less than 30 years. And most importantly, he is telling the whole world to do this. And this is not an idle thing. I mean, you might think, okay, if Biden says something like this, you know he's going to enforce it. But in many ways, people think of Larry Fink as more powerful than Biden. In one way or another, this letter is expected, and Fink's previous letters, they're expected to influence most energy companies and energy using companies around the world. And in my view, it's in a way that will be extremely harmful to those who produce energy and, therefore, to all of us. So this is a real phenomenon. And it's way beyond Fink. I mean, I hear a lot of people I know in the industry talking about they can't get insured or it's harder to get insured or bonded now. Banks won't lend. It's really this pervasive thing where the anti-fossil fuel movement has overtaken the financial world in a way that it really has the feel of policy to people. It seems like this is similar in some way to government, but at the same time, it's being done by private or semi-private entities. So it's not exactly the same as government. And so I have been studying this for a while, but there are some aspects of this that I don't fully understand. And so I really wanted to know what's going on here? How do we get to this state of affairs? And what can we do about it that's legitimate and that's consistent with a free society? That's not just us imposing government policies on private actors, but that's actually consistent with a free society. And I thought, well, there's one person I know who can really help me answer these questions. His name is Euron Brook. He's Executive Chairman of the INRAN Institute. He's host of the Euron Brook Show. And probably most notably for our purposes, he's a former finance professor. He's an active investor himself. And I know him pretty well because he used to be my boss when I worked at the INRAN Institute. And so I know Euron quite well. I know a lot about what he knows. And so I know a lot about the energy and environmental ideas behind today's ESG movement. But Euron really knows more than anyone I know about the wrong financial ideas behind ESG, today's ESG movement. And he's 100% committed to pro-freedom policies. So I thought he'd be a really good person to understand what's going on with this movement and how we can fight it, but in a way that's consistent with freedom, not in a way where we're just demanding more government control. So that said, Euron, welcome to Power Hour. Thanks for having me on, Alex. All right. Well, the show has been around for 10 years and your first appearance. Oh my God. That's right. I didn't think of that. Wow. Okay. Yeah. It started in 2011 when I was in the INRAN Institute. On it to finally make it on. So that's good. Yeah. Finally, it could get you on. Okay. Let's go back. I mean, maybe you want to say something introductory about this issue, but I'll give you my first question and then you can decide how you want to introduce it. But I'm interested because I know a bit about the theory behind this. I'm interested in at some point early getting the positive alternative to what's going on today. And I think a lot of that has to do with the shareholder value theory of the purpose of the corporation. So I'm interested in your take on this issue, but I definitely want you to cover that because I think it's always important to be clear on what positive or for, not just what negative we're against. Yeah, absolutely. So this whole ESG movement and came out of the stakeholder theory approach, which is probably 30, 40 years old and to some extent existed, you know, as far back as the 50s and was implemented to some extent in the 50s and 60s. But certainly in the 70s, 80s, 90s, the dominant approach to corporations and corporate values and certainly in the 19th century and early 20th century was the idea that corporations purpose is to maximize the value of shareholders. I mean, think about it this way. An entrepreneur might start a company for lots of different reasons. Some people start companies not because they want to maximize their wealth, not because they're trying to maximize profit. And in some of those companies are nonprofits, they organize in the form of nonprofit. And then when people give them money, they know exactly that they're not going to result in a profit. They know exactly what the cause, what the mission, what the vision of the company is. And if you start a company, a small company and you say, I don't really care about money, I've got this vision, but I need investors, I don't want to be a nonprofit, then people can give you money if they share your vision. The challenge is the once you go public, and now your shares are traded and now the people who own stock in a company, maybe 1000s, millions of people and a trading, there's no way for them to know every time what your vision is. There's no way for them to assess every time whether they agree, they don't agree with, I think this is a good idea or not a good idea. There is a common contract, if you will, in the stock market and always has been. And the idea is if I buy a stock in the company, the managers who work for me, because stocks represent ownership, they are going to maximize economic profit, not accounting profit, economic profit, which means maximize shareholder wealth. That's what they're doing. And that's the basis in which I'm buying this share. And that is a standard. Now, there are exceptions. There's something called B corps. I don't know if you've heard of B corps. Yeah, I have. Yeah, B corps are kind of somewhere between a nonprofit and a for profit. Now are those publicly traded? They can be, they can be, but they have to advertise their B corps because the whole way in which you trade them is completely different. And they're never going to go. I would have to be inclined to invest in one of those. Yeah, you wouldn't. You wouldn't want to, whether again, we'll get to BlackRock, maybe you are invested, if you're in an index fund, the kind of BlackRock is in charge of. So, you know, there is a legitimacy under corporate law for a standardized contract, which is called the C corp, which all these corporations have, and then anybody entering and exiting knows exactly what the rules of the game are. And most of these corporations in the United States are incorporated in Delaware for a reason, because Delaware has really solid corporate law. It has principles by which guide the behavior of managers. So, so we have this contract to facilitate the workings of a modern capital market, which means raising capital, which means the proper allocation of capital. How do you allocate capital when some managers might not this decade be maximized shoulder-weld, but they might be pursuing some other goal. What is their goal? How do you monetize their goal? How do you value a stock with something where you don't know what they're actually doing in terms of the finances, because they might be pursuing something else. So that's one side of it. There's a fiduciary duty. It's in the law, right? It's in the law. The fiduciary duty of managers to maximize shareholder wealth, particularly if they incorporate in Delaware, but also in most of the states, that's part of their responsibility. Another aspect of this, another way to look at this, is to consider shareholders as the owners of the corporation, their own assets of the corporation. After you pay off all the debts, shareholders are the ones who own the business. And when you have lots of shareholders, they nominate a board of directors to act on their behalf in order to do what to maximize their interest. Now, what interest do they all share in common? What is the only interest they can only really share in common? Given that they have different philosophies, they have different ideas, some of them might be environmentalists, some might be anti-environmentalists, they might be a whole array of different opinions. The one thing they share in common is that they invest in order to increase their wealth. And then a board of directors, high as a manager, and the manager's fiduciary duty is as an agent of whom? Of the shareholders. He's an agent. He's not an independent, you know, like a self-proprietorship. You can run your business anywhere you want to if you own 100% of it. But a manager is a, works on behalf of other people and his responsibility is to, is to, is their financial well-being. They used to, I always remember when they were talking about this, you know, the relationship between ownership and control, like the expression hired hand. And I found that useful, like they'll say the CEO is a hired hand in some ways that's demeaning and not appropriate. But I think it does really capture that. Like, I own this company, you are serving me. This is not for your status. This is not for your view of what's good for the world in general. I'm hiring you to create a certain type of value so that I can benefit from it. Absolutely. And, you know, CEOs don't last very long. If you look at publicly traded corporations in America, a CEO's lifespan as a CEO is quite short. It's a hard job. Very, very, very few people are good at it. And even people who seem good, maybe were good once or maybe were good at a level below the CEO. Once they get promoted, most of them are not very good at it and don't last in the job very long. So people complain about how much money they make. They make that money because they're very, very few people who can actually do that job. It is an incredibly difficult and involved and complex job with immense responsibility. When you're running a company that is publicly traded, which are large businesses. I mean, what interesting thing, before we get into stakeholder, but that can serve previous, it's very hard to continually make profit in the face of competition when that's your goal. It's not very hard to give away people's money. So, and so far as the purpose is not shareholder value, it's like, oh, I want to make the world a better place. Well, any worthless heir thinks that they do that through their foundation. If that were the standard, it would be easy. It just wouldn't create any value. Creating wealth is enormously difficult. It's enormously difficult. And wealth at the scale that some of these businesses created. And what is the job of the CEO? It's the coordinate, the allocation of labor, capital and ideas. Think about allocation of ideas. People don't talk about innovation. Create an environment where people want to innovate, a free to innovate, can innovate and rewarded for innovation. And if you combine all that, the amount of energy and the amount of thinking that has to go into creating the right kind of environment, the right kind of business to create wealth, to create values is immense. And it's a very, very rare talent, a skill that few people have it. And a lot of times you think somebody can do it, and they fail miserably. And a lot of we've seen CEOs fail miserably in America repeatedly. And it is interesting in the context of the shareholder wealth, there has been an evolution in the way people have thought about it. Coming out of World War II, there was definitely this perception of, there was no mechanism to make sure that these managers actually maximize shareholder wealth. Indeed, there was a famous book written in the 1930s during the Great Depression saying, we've got a real problem here. We've created these big corporations. Remember, capitalism is very young. So it's something that evolves. Nobody sat and invented capitalism, invented the corporation and then figured out how to maximize it. So in the 1930s, a book was written saying, we've got a real problem. How do we make sure these managers actually do maximize shareholder wealth? They might do something else. And it's very difficult for shareholders to organize and get rid of those managers. It's really complicated. And indeed, we saw the consequence of that in the 50s, 60s and into the 70s, where a lot of American businesses did things that did not maximize shareholder wealth, partially because they didn't have a lot of competition from overseas. So they could, they were very profitable without the kind of competition that requires you to be sharp, that exists, maybe starting in the 70s and 80s. But they, for example, created conglomerates. They grew in size. Managers were compensated not based on shareholder wealth or based even on economic profit. They were based on, they were compensated based on sales. So if you're compensated based on sales, what are you going to do? You maximize sales, even if you're minimizing, even if you're not maximizing profits. So all kinds of weird things happened and you can see a real decline in corporate productivity, real decline in corporate profitability, real decline in corporate stocks in the 1970s and they were being beaten in the 1970s by Japanese and German companies. And there was a real shift in thinking coming out of some academic papers that were written in the 1970s saying, here's a way to make managers have the same incentive as shareholders. Make them shareholders. It's kind of self, it's kind of obvious once it's said. And it was never a problem with somebody, it's never a problem in the early days when the, and it's never a problem today when entrepreneur stays a CEO because he's already a big shareholder. It's a problem when you bring in professional managers. So make them shareholders. So that's how we started with stock options, which are now out of favor. So now I think you're getting again problems in corporate world where you're getting people who are not incentivized and motivated to maximize shareholder wealth and are much more susceptible to things like ESG because you know what? If the stock price goes down, they don't suffer. So we moved away from stock options at our own detriment. I think the world is a worse place for not having stock options and not creating alternatives to make sure that managers and shareholders have the same incentives. Let me just bring up one more thing about shareholder value theory that I think is implicit and what you've talked about, but I think we need to make explicit, which is this idea of maximizing shareholder value. This is often caricatured as like short range thing doing, you know, just whatever you can to manipulate your stock price. Like, you know, some of this game stop stuff, like you're just trying to get that versus, you know, the way I think of it is shareholder value. You can talk about it, but it's basically the shareholder value is ultimately determined by the long-term profit stream of the company, which means it's really consistent with the value of long-term value creation. And long-term value creation involves a lot of thought and a lot of consideration of broad factors, including even like reputation, following the law. Like, so, you know, I want you to elaborate on that because I think it's, it's people have it totally wrong. They think, oh, shareholder value, that means I'm oblivious and short range, whereas I think actually stakeholder value, you're oblivious and short range. It's, so in a properly functioning stock market and game stop, maybe suggest that our stock market is not properly functioning, but in a properly functioning stock market, a stock price represents what the traders in the marketplace, the best traders in the marketplace believe is are the long-term cash flows of the company discounted to today based on how risky those cash flows are. So based on an estimate of how much, how certain I am about how much money the company will make into the future. And of course, the cash flows into the future are determined by productivity, long-term productivity, which means how much value can they create for a given unit of input, whether it's labor, whether it's capital, whether it's it's effort, ideas, all of that. And, but it also includes, and that of course includes, if they're going to get sued tomorrow, that's not good. They're going to get in trouble with the government tomorrow. That's not good. That affects cash flows. If regulations are going to go up, that affects cash flows. It affects the risk as well. All these things also affect the risk. If the manager is going to put all the money into a short-term gig that makes a lot of money today, but a lot less money tomorrow, then it's unclear how that affects your stock price. You'd have to measure the short-term gain versus the long-term pain, the long-term fact that you're going to have a lot less money. So all of this get captured by one number, and that's the beauty of a stock price. It gets captured by the price of the stock today. And yes, the price of stock today can be manipulated up and down, but that's why I say, in a properly functioning, on a regular basis, on a normal environment, that's what that stock price represents. So it's a great, it's a condensation of massive amounts of information. All these really, really smart people on Wall Street looking into the future, assessing the products that the company is going to launch, the profit margin on those profits, the quality of the management team going forward, who's going to replace the CEO, all of that, everything that's going to impact cash flows, and then assessing the risk associated with that and bringing it back down to one number. In that sense, it's a beautiful thing and it's a beautiful concrete manifestation of long-term thinking. So for example, people say, oh, the stock market is only about quarterly earnings. Well, it's surprising then for people when quarterly earnings might even exceed expectations sometimes. Sometimes you'll hear a company, quarterly earnings were higher than what the market expected, and the stock price goes down, and nobody gets why. Well, because maybe in the information that the market received that exceeded the short-term earnings, there was information about the fact that it was at the expense of long-term earnings. Maybe there was something in there telling us that, oh, yes, they made a lot of money now, but they're not going to make a lot of money later, and that's already priced, that gets immediately priced as soon as that information hits the market. So markets are amazingly long-term. Another good example I always use for that is biotech. Biotech is an industry where you don't see profits for a long time, sometimes decades, and the adventure capitalists invest, markets invest, you can IPO before you've ever made a profit, and the market's incredibly patient with these companies because they realize that when they generate a profit, it could be very large, but it takes a long time to do it. So no, I can't think of anything more long-term than markets, appropriately long-term, not fantasy-driven, not wind-worshipping, there's no risk in the world, it's only going to get better, but appropriately long-term and considerate of the risks involved. Markets are beautiful in that sense. And the reason I wanted to focus on all this is because, again, I think to understand the negative, we need to understand the positive, and a lot of what's plausible about stakeholder theory is that shareholder theory is misrepresented and people don't get, wow, we've got this amazing system where everyone is oriented toward value creation. I'll just say one quick thing about profit because we're talking about future profits or future cash flows. What is that? That profit means the simple version is you output more than you input, so what you can sell your products for is more than it costs you to create it. That means you're adding new value to the world, you're taking the resources in existence, and you're making them more valuable. And if you think about a lot of what I talk about with energy is, energy allows you to transform nature from a less valuable form to a more valuable form. And we have this whole system where everybody is being oriented toward that, people are being paid to do that, and that's a huge reason why we have a more prosperous society. We're bringing more value into existence because if we have a society where we're consuming value, which can happen like in Venezuela, so you take resources and then they keep shrinking in value, then everything gets worse. We have this amazing system. So in that context, let's talk about the stakeholder theory. I celebrate when companies report record earnings or record profits. It means they've created record value. They've created new stuff that didn't exist before. And all of our lives are better off every time a company reports great profits because it's a sign of great value creation. Go ahead. So stakeholder theory. Yes. So what is a stakeholder? I mean, nobody really knows, but the general definition of stakeholder is somebody who has a stake and interest in the company. And when you ask people, okay, so who's a stakeholder? And I used to ask my students this, so let's make a list of stakeholders. And it can be very long. You can get 40, 50, 60 different categories of stakeholders. So for example, employees are an obvious stakeholder. They have an interest in the company. They want it, hopefully want it to succeed because it provides them with a job. But you start getting into ambiguities if, for example, let's say I want to move the plant to Mexico. Oh, you make it noncontroversial. I'm in California. I want to move the plant to Kansas because moving the plant to Kansas, that's America first. They're moving it to Mexico. That opens up a whole political can of worms, which you won't go there. So I'm moving it to Kansas. And I need to make a decision whether this is good or not. Well, the employees in California clearly are against it. It's not good for them, they say, right, because they're going to lose their jobs. But what about the potential employees in Kansas? Are they stakeholders? Well, yeah, you could say that. So the potential employees in Kansas who would get jobs are stakeholders. What about suppliers are stakeholders? Obviously shareholders are stakeholders, bondholders are stakeholders, banks are stakeholders. Everybody who has a relationship with or has a potential relationship with a company is a stakeholder. Some people talk about society being a stakeholder. So the economy, the general well-being of people in our society. So everybody in that sense is a stakeholder. People close by may be more so than people far away, but everybody's impacted. So stakeholders is this amorphous, undefinable category that basically includes everybody. And you're supposed to, as a good manager, as a board of directors, as a manager, you're supposed to maximize stakeholder well-being. Not wealth even, well-being. Now, first, it's hard enough to figure out anybody's well-being. And so we don't talk about shareholder well-being. We talk about shareholder wealth maximization because I can measure that. I can't measure their well-being and they might not all agree on what their well-being is. So take it and now start with stakeholders. Now, I've got people who's the decision is going affect their well-being differently. I've got shareholders who want me to move to Kansas, their well-being goes up. Employees in California, well-being goes down. My dad is, well, the move might be risky so that bonds might go down so they're not happy, so there will be. I mean, this just, if you've got all these stakeholders, you now have to basically, you've got to create a utility chart, you've got to have pluses and minuses, then you have to weigh them. Do I care more about employees than about bondholders? Probably. Because they're employees, they're people, bondholders, they're financiers. Nobody likes financiers. I don't wait for finance. What about my suppliers? What about the employees of my suppliers? What about the customers of my suppliers who might get disrupted if my relationship with my supply, I mean, there's no end to it. And there's no mechanism by which to make decisions as a manager. So if I maximize the shoulder wealth, I know what my parameters are. I have one goal and that is to raise the stock price long term. What do I do if I'm a stakeholder theorist? How do I make any decision? And of course, what the stakeholder theorist would say yes, but you know, if you're just a shoulder wealth maximization, your employees are going to be unhappy and your suppliers will be in it because you don't care about them because you're just focused on shareholders. And that is such a ludicrous position to have because if I care about shareholder wealth, I care about creating value. I care about being successful as a business. You don't get successful. You don't make money by whipping your employees three days a week, like chaining them to their machines and whipping them. They're not maximum productive that way. And so the fact is that when you're focused on shareholder wealth, you treat your employees well. I mean, not super well, not they all don't get massages every day, but you treat them well enough to maximize productivity given how much you're paying them. And you treat them well enough so they don't jump to the competitors, your best employees. And maybe you treat them well enough so your worst employees leave or you kick them out. You've got a standard by which you measure what treating them well is, how they impact shareholder wealth. And the same is true of suppliers. You don't stop paying your suppliers because they're not your shareholders and therefore you don't care about them. No, because you care about shareholders, you treat your suppliers well. And that's true of every one of the stakeholders is treated appropriately when you have the standard of shareholder wealth. You have one standard and you treat all the stakeholders based on that. But stakeholder theory gives you no guidance as to what to do tomorrow, as to how to perform as a business. It creates confusion and I think ultimately ineptitude and that it has to because it provides no guidance for actually performing. So isn't it just that, you know, I mean, the proper way to think of these stakeholders and so far as they're all relevant, I mean, these are just considerations in value creation. So you consider them and you, they're, they're part of, they're part of how you pursue it. So you think about like, yeah, how do I relate to employees in a way that's going to help me create this value and how do I relate to suppliers? But they're, you're considering them as a means and that includes respecting their rights, but you're considering them as a means to the end of value creation and that's your responsibility. I think morally, if you look at the opposite, what it means is that you're, what, what leads to that as a goal? Like, oh, I'm just going to randomly, it's self-sacrifice. It's just saying that you have, that the owners have no right to create value and benefit from it. Whatever value they have should just be sacrificed to the world because there's no logic at all in saying, if I want to, if I want to make a profit, my goal should be the undefined well-being of a billion different people. It makes total sense to say, yeah, if I want to create value, I need to consider these different people who are related to my process. So this often happens with self-sacrifices. People take something that's a legitimate consideration and then they make it a goal because the goal is not to benefit, the goal is to sacrifice. But then they also lie about the goal, right? Because they never tell you it's about sacrifice and they tell you that if you focus on stakeholders, shareholders will be better off, shareholders will also be maximized to show the world. They tell you there's no conflict, right? Oh, we'll be creating values if we follow stakeholder theory. We'll still have robust companies that'll still be successful, all of this, but you can't. Once you establish the standard is sacrifice, you can't. It doesn't work and it cannot work. And the other thing to note is, and this is kind of a legal moral issue, but there is an issue of property rights here. Shareholders are owners. They get to decide. They get to make these kind of decisions in a public corporation as a particular kind of legal entity. A public corporation should not be allowed to not maximize shareholder wealth from a legal perspective. It's the fiduciary duty. That's what they came into being as a public company to do. So stakeholder theory is also trying to change the laws in order to make them make what they're advocating for feasible because they know it goes against kind of at least the understanding of corporate law that we've had in the past. All right. I want to jump into the current state of the energy world. So listeners of this show know my view of energy of the antifossil fuel movement, of the antifossil fuel finance movement. So I'm going to ask your questions specifically that I think he can shed additional light on. And so just we have this stakeholder theory approach. It takes this form of ESG, what I call ESG standards of evaluation. So companies are being evaluated by how well do you comply with these environmental, social governance metrics. And these metrics are determined by people I think who would generally be considered politically leftists in so far as it's legitimate term. And certainly in the environment world, the main standard is you're getting rid of fossil fuels. You're saying you're getting rid or you're dissociating with fossil fuels. And just a quote from Larry Fink's letter, he says, given how central the energy transition will be to every company's growth prospects, we are asking companies to disclose a plan for how their business model will be compatible with a net zero economy. So everyone there's this whole assumption now net zero economy is good. It's going to happen. And now all these companies are going to get evaluated. And Larry Fink and these others have a lot of power. So I'm curious about, I know to a lot of people in the energy industry, this seems coercive. I'm curious, how, how coercive is it? And part of that is how does government control of the economy, like there's a whole bunch of government control of the economy in terms of stock markets and all these things. And it's really hard for me to disentangle like what of this is really a free market phenomenon that might be immoral, but I need to fight against it purely morally versus what's a political phenomenon. So help me untangle this. Well, first, there's a sense in which it's impossible to untangle because the amount of government involvement is, is absurd. And it's, it's even the two of us who've done this for a long time and look into this and experts in our fields. It still I think surprises me the extent once I go outside of let's say an arrow field that I'm looking at the governments everywhere. So there's, there's, there's massive government influence on everything that is done. I mean, why, why does Larry think where he is today? Why does Larry think have this big massive financial institution? Well, to a large extent, because he gets huge investments from pension plans, which pension plans, many of them public pension plans, public pension plans, I would argue, shouldn't, wouldn't exist in a free market. We'd all have 401ks. We wouldn't have public pension plans. Public pension plans are perversion. They are a massive redistribution of wealth in a, in a, in a particularly corrupt way. And, you know, one day we can talk about why that is, but they wouldn't exist in a free market, not the way the structure today. Not only that, public pension plans have boards, significant percentage of membership on that board are public officials. So for example, the largest investor in the United States is CalPERS. It's the California State Employees pension plan. And then there's Colsters, which is the California Teachers Union pension plan. Those are the two biggest investments investors in the United States. The governor of California sits on the board of both of them. And a number of other political appointees sit on the board to decide investments of these big institutions. A lot of their money, they put in black rock. So aren't they also bailed out by taxpayers? Well, it will be one day because it's it can never, it's not going to make enough money to be able to pay out as the baby boomers retire. So it's some of them like defined benefit plans where they're like guaranteed to pay out a certain amount. So that just means that you can manage it terribly. And then I have to pay it as a taxpayer. And I, as a politician, when I want to get the teachers to vote for me, can increase the benefit without asking you the taxpayer. And by the time the benefit actually will get paid because I increase it of people who retire, let's say in the future, not today. So when the benefit will increase, I'll be long gone from office. And it's young people who will be paying for it, right? But the workers are not going to vote for you because you've just increased my pension benefit. I'm only going to retire 20 years. But I know now that you did it, I'll vote for you. And in 20 years, you're gone. I'm retired and taxpayers, their taxes will have to go up and don't to bail me out. That's the kind of scam that I think should be made illegal immediately. Defined benefits plans for public employees is a moral travesty and should be abolished immediately, but it won't be. So now think of Larry Fink. And I'm not saying this is what happens, but Carpus comes to Larry Fink and says, you want to keep getting our billions of dollars? Well, we now have ESG standards because we're not setting our standards based on what is going to maximize the amount of money for pensioners because we don't really care because we've got a backstop from taxpayers. Taxpayers are going to bail us out if we don't meet our quota. So if we only get 6% instead of 8%, who cares? And plus, we won't be there again. The trustees today won't be there when it gets into trouble and taxpayers will bail us out. So we're not focused on maximizing shareholder wealth, even though we should be if we care about our pensioners. We have political requirements. And one of the things that the governor of California has begun is zero emissions. And therefore, it would be wrong of the pension plan representing the state of California to invest in companies that are not pursuing zero emissions. But also, we want to make sure that companies that we invest with and make investment for us now have the same kind of standards we do so that we make sure that we're all on the same page because otherwise we're not going to give you money. Now, that could be what happened with Larry Fink. I don't know, but it also could be that Larry Fink is convinced by the environmentalist and he believes it. And he's dedicated to it. And it could be that he also believes in the stakeholder theory. Now, one wonders how somebody like that could have gotten as rich as Larry Fink has, believing all these things. But people can part man lives and they can be different things at different times. And he thinks, look, I really believe that the world is going to end or whatever. I really believe zero carbon is a good goal. I have power. I have economic power. It's not political power. It's economic power. But I have power. And I am going to use that power to achieve my aim. And he does, right? And that's what he's doing. Now, in a free market, you would think his investors, the investors who give Larry Fink money would say, wait a minute, we didn't hire you to do this and would pull the money out and go somewhere else. But then the investors have to be convinced that a zero carbon is not a good thing. Well, what about this? Okay, so I don't have any BlackRock, let's say Vanguard, which is committed to some of the same terrible things. And what you have, let's say I have a Vanguard index fund as part of my investments. So I'm trying to get a representative sample of the market. I sure as hell am not trying to get ExxonMobil to be a solar company or any of these companies to commit to net zero. But the way the system works is that as an investor, I don't have any say. They own these shares. And as far as I understand, the government has policies that requires them to vote these shares in a certain way, or at least they're voting these shares on. So BlackRock is, I forget what the statistics are, but it's just unbelievable. They're the largest shareholder at so many different companies. So in effect, the political views of their leaders become this dominant factor in companies that they don't like, that they don't even want to own. They just own them because they're index funds, and they just get to make them their private charitable fund. So there's no question that some of these SEC requirements that require them to vote and all this stuff has a huge impact. And then there is the fact that we live in a culture that to a large extent is bought into the environmentalist agenda. But also, or the alternative to that is people who just don't pay attention, right? I mean, the majority of the culture just doesn't pay attention. They don't really know. They put their money in a 401k, they give it to Vanguard, they assume it's an index, and they don't follow these things. It would be interesting if somebody sued Vanguard. I mean, that would be a really interesting, they sued Vanguard and said, wait a minute, we, you know, you'd have to have a position in Vanguard. And we gave you the money to maximize our wellbeing, and you're doing all this other political stuff, we didn't ask you to do this. That would be a really interesting lawsuit in the course. I don't know how we would go, but it would be, because I'm sure Vanguard discloses all of this and they would claim that. But I still think that there's, it would raise the profile of this issue to people. And of course- Okay, somebody who ever wants to do this, and you have resources, email me. Yeah. Alex at alexsepsine.com. Talk to Alex, because I think this is, I think this is a phenomenal idea of suing these fiduciaries. Same with BlackRock. BlackRock is a fiduciary. BlackRock represents you as an investor. Many of you who put your money in 401ks might have money in BlackRock without even knowing it. And you're not giving them the money for them to pursue a political agenda. You're giving them the money for them to diversify your holdings and stay out of politics. Certainly not a political agenda that's going to minimize. They, you know, they should be advocating for free markets, because that would maximize your wealth. But, you know, they probably should just be staying out of politics. But we live in a culture in which people don't care, they don't pay attention. People like Larry Fink have a lot of power. I don't think they would in a free market again, because they wouldn't be pension plans, and they wouldn't, you know, be giving this money out. I know that there are pension plans all over the world in Europe and everywhere that basically are saying, if you don't have ESG policy, we're not giving you money. We just won't give you money if you're a hedge fund, if you're a private equity fund, the pension plans won't give you money if you don't have an ESG policy. And they are forcing everybody to behave in a particular way, and again, pension plans, public pension plans are political entities. Now, can you go out and say this is all government's fault, and therefore there should be a law to stop Larry Fink from doing what he's doing? I don't think you solve these problems by adding regulations and adding laws. You solve it by getting rid of government involvement in these industries and freeing them up. But it's very tricky, it's a very, very tricky situation. This is what happens in a mixed economy, in a statist economy, the government indirectly starts having enormous impact on the private sector, on what is left of the private sector. What are, man, we've got so much to cover, and we've already spent a lot of time. Could you just summarize some of the other ways in which government improperly interferes in the financial world? Because I feel like there's just so much more. Well, there's so much there. But you could probably just rattle off a pretty great list. Yeah, but let me give an example of an explicit way they've done this explicitly, which is not even being subtly through all these. During the Obama administration, there were certain industries that the government basically told banks that they would view, if they lent them money, they would view it unfavorably. Now banks are heavily regulated. Everything they do is controlled, not the particular loan they give, but the kind of loans. And basically, there were certain industries, the gun industry, the private education industry, the pawn shops and paycheck lenders. Banks were not allowed to, were told, don't deal with those, not formally, not as a policy, not as a law, but just wink, wink, don't deal with them, particularly the big banks. And indeed, a lot of businesses, particularly the big banks, withdrew and they said, look, we just can't have your checking account here anymore. We just can't deal with you anymore. And they just left and abandoned those businesses. And luckily, some of the small and medium sized businesses didn't pay attention, right? And banked them, and banked them. But it was just horrific that banks would just walk away from a relationship, maybe 20, 30 year old relationship, because the government had basically hinted at them, kind of shown them the gun without actually pointing it. We have it, pay attention, behave. And it wouldn't be surprising at all if with a Biden administration, you got that with energy, right? If they came about and said, hey, don't do it. For example, just to give a Republican example, under Trump and previously under Bush, but particularly under Trump, because cannabis has become legal in many states under Trump, right? But banks were prohibited by their regulators from lending to a pot dispensary, right? So a lot of pot dispensaries only dealt with cash, because they couldn't deal with PayPal, they couldn't deal with the credit cards and so on, because these institutions were told not to deal with them. So the government has a lot of levers, it pulls. But look, the government is everywhere in the financial industry. It regulates every aspect of it, whether it's banks that everything is, who the CEO is, who's on the board of directors, can vetoed by the regulators, what kind of loans, the kind of loans that they can do, how much leverage they take. Every big business decision that a bank makes, or any financial institution makes, has to be approved by the government in one form or another. Every bank in the United States is regulated by seven different regulatory agencies. They can't even get one regulatory agency to do it all. They have a seven. The composition of the ownership of banks, but also who banks can own. In the GP Morgan days, this is before the Great Depression, a bank could own a non-bank company. So Citibank could own Exxon, right? Today Citibank can own Exxon and Citibank can sit on the board of Exxon. Now, that again creates, you know, it's kind of cool to have bankers on your board of directors, because they're pretty smart. They know business. They're highly motivated because they're your bankers, and now they own stock as well. And they sit on the board of directors, highly motivated. But since 1933, they're not allowed to. So the 1933-34 security laws that still hold are very, very involved and basically regulate, you know, almost every aspect of a financial transaction. You know, hedge funds that used to be unregulated in the old days, old days means 30, 40 years ago, barely any regulations. Today, you know, just recently in the last few days, I found out that there's a new regulation out on how hedge funds can market themselves. It's 500 pages long. You even start, right? So there's no aspect of the finance that is not regulated except that the government still doesn't tell BlackRock where they can invest and where they can't. So BlackRock still makes that decision. How much they can have in any particular position, the government dictates and what kind of reporting and how much information they have to give the government dictates, all of that's great lengths. But what companies they invest and they don't. But they might because that could be coming down the pipe in terms of, I think, particularly in terms of energy. All right. I'm looking at my list of questions. I'm going to try to convince you to come on again soon because I just have too many and it's just going to be great. But let me raise one final big topic. Maybe we can talk for 10 minutes and then I'll try to control you into coming again. What should companies do to fight it politically and non-politically? Because people are really, I mean, it's real, I'm laughing, but I'm laughing because it's so sad. I mean, just companies I know and companies I've worked with and companies run by people I respect. I mean, it's crazy to just hear we're a reliable company. We used to get one kind of story all here is we used to get people for insurance policies. We would get seven offers a year. People would be competing for our business. And now it's hard to find one person to insure us. And there's nothing that's changed in the business that affects the insurability of it financially. But people are just being pressured in all of these different ways like, hey, you need, if it's a coal company, forget it. You cannot be seen insuring a coal company. And it's this combination of government and definitely a lot of private stuff. Like, what would you recommend companies do? Or what types of strategies would you recommend? I think it's a very, very difficult situation to be because, I mean, the temptation is to lobby government to regulate insurance companies. They can't turn you down based on your industry. But that would be horrific. That would lay another layer of regulation on insurance companies and create all kinds of distortions and perversions. And government is now telling insurance companies what they should like and what they shouldn't like. That is completely off. I mean, ideally, you lobby government to get off the backs of these companies so they don't put pressure on them to not deal with coal or not deal with something with energy generally. So to the extent that there is pressure coming from government, you want to lobby government to stop that pressure. But that's hard, particularly when you get Obama administration or Biden administration, that that's part of what they ran on. That's part of their agenda. I think the only way to do it long term is through a PR kind of campaign that points this out to people. And I think what it needs to be pointed out is the cost. And it needs to be pointed out both to the shareholders of the insurance company. Hey, do you know your insurance company won't insure us even though they make money off of us? Then your insurance company is no longer trying to maximize your wealth that doing something political. And are you sure you want to support that? But to the, you know, the culture general, the culture generally, we need to change the attitude. They need to fight back against a Larry Fink and tell him that it's not his job, not his responsibility. Now, there's going to be pain, but there's going to be pain no matter what they do, right? So it's if they leave it alone, as you know, the energy industry, they don't do anything, they're going to get clobbered by the government. And if they stand up for themselves, they're going to get clobbered by the government. The question is, what is the moral thing to do? And ultimately, long term, what's the practical thing to do? Doing nothing, we know exactly what happens. And standing up and fighting, we don't know exactly what happened. They could win. And so it's clear, particularly given where we are, you know, with this great reset with the Biden administration, with just the general momentum around climate change and the evil of fossil fuels, we know where this is heading. You've got to stand up and fight, even if you land up losing, at least you lose fighting. But you've got to make the case that every American is losing. They're losing because the case you make, because energy becomes more expensive or scarce or whatever. But they're also losing because they think they're investing in these mutual funds. They think they're investing in 401ks. They think their pension plans care about them. But no, they don't. The pension plans, these investors, these 401ks, these mutual funds are not pursuing your interests, even though they sold your product on an assumption that they were. They are making political investments in your name. Remember, Larry Fink, I mean, he's a billionaire, but he's not investing his money. He's investing my money and your money. And lots of the people listening money. And if all of us say, wait a minute, Larry, you can't do that. We don't agree. We'll either pull it out or we're going to make a real big deal out of this. And when you realize if you're a cop or if you're a fireman or if you're a teacher and you belong to a union and there's a pension plan, you should be outraged, outraged that they are not trying to maximize your pension in the future. But instead, they are trying to pursue a political, some political ideological avenue. And if you're a taxpayer and you're going to have to bail out all these pension plans, you should be motivated to lobby your politicians to try to have the pension plan at least try to maximize wealth, maximize values. So the bailout is going to be as small as possible. So really, everybody out there and we're talking about 100s of millions of people, everybody really has a strong incentive that financial markets are focused on value creation rather than on, you know, an anti economic growth and anti human flourishing agenda of the ESG movement. Alright, that is a very good start. I have lots of questions that I want to keep talking about this in the future. So maybe I'll figure out how to maybe I'll convince you to come back. Tell the listeners where they can learn more about you and you have a podcast yourself. So I have a podcast called the Iran book show. It's both it's a primarily YouTube channel, but it's also an iTunes and all the podcasting apps. I do, I don't know about four, sometimes five a week. And they vary in length from an hour, 20 minutes to three hours, depending on the topic and depending on how many questions I guess so you can you can find me there. I also am the author of a few books equal is unfair is right there with with our common friend Don Watkins. And yeah, and of course I'm on Twitter and I'm a Facebook and I'm on every I think I'm on every social media platform in the English language. Um, known to talk. What's that? Yes, I'm definitely on Tik Tok. There are videos of me. I am on Tik Tok. And I have people who put me on every single platform. So it's there but but really if you want to engage with me, then it's Twitter primarily Twitter a little bit and Facebook stuff happens, but I don't really follow Facebook too much work. Twitter is nice because it's short. Yes, it is. It is short. Twitter has a lot of benefits. Let's hope we don't get kicked off soon because if we do, I'm sure we'll acknowledge their right to do it, but we'll be less impressed with their I'm not impressed with their standards and I'm not impressed with the non-objectivity of it. But so far I see no indication that at least I'm going to get knocked off. You're in a much more difficult situation, I think because because the the the you're much more focused and concentrated on one thing that where the politics of it are clear unequivocal where the position of the people there is clear. Mine is a you know, even though I share your views on energy, I cover a whole array and it's hard for them to focus on me as this bad guy on this one thing that's a hot button issue for everybody. I think I'll survive longer. I think I have very definite ideas of what they look for. I mean, my view just for anyone who cares is I think it's very hazardous like with anything scientific, like if you're trying to say something real, like if you say anything resembling like there is no global warming, then so that's why like every post I'll like climate change is real. But and it's and it's I know I'm very focused on climate danger, like declining climate related deaths and that kind of thing. But yeah, with COVID or other stuff, like if you if you take a position that's seen as okay, this is a direct contradiction to the scientists, they they're fact checkers in Indonesia or whatever be like, no, no. And then it'll be like, oh, this is we saved the world from your distortions. All right, you're on. Yes, a check to come back on again, so we can continue this. This is good content. All right. Thanks for coming on. Thanks.