 No, just give me a second, right? All right, well, let's get started. Welcome, everyone. The Columbia Business School chapter of the Adams-Mitt Society is very excited to kick off our lecture series this academic year. The Adams-Mitt Society brings together MBA students, academia, and business professionals to discuss the foundations of free markets. Beyond acquiring expertise in management, we believe future business leaders should also come to understand and be able to defend the nature of the economic system that fosters job creation, wealth generation, scientific innovation, and the alleviation of global poverty. That is the system of capitalism. We invite you to become a member of the Adams-Mitt Society and gain access to the inexpensive network of other MBA students and alumni who, like you, value serious discussion about the moral, social, and economic benefits of capitalism. Today's session will be a 30 to 40-minute lecture from our guest speaker, followed by a Q&A session running through approximately 8.15 p.m. Eastern time. We ask attendees to keep your cameras on and microphone muted throughout the presentation. For the Q&A session, please raise your hand and unmute yourself when it's your turn. You can also submit questions in the Q&A chat section in Zoom. Today, we will discuss the most popular acronym in our business school journey, ESG, Environmental, Social, and Governance Considerations. ESG tends to have different meanings in different contexts, ranging from investment allocation to marketing strategy to regulatory policy. While there are different interpretations of ESG, one thing is clear. ESG has come to signify a moral impetus in business, the aspiration to do good for society more explicitly and assertively than in the past. ESG has gained significant momentum over the last few years. According to Armando Senra from BlackRock, the largest asset manager in the world, ESG investments could grow from a hundred billion investment category today to one trillion by 2030. This volume and growth make ESG the most economically impactful outcome of social activism in recent history, which brings a very important question. Are ESG and capitalism morally compatible? How should business leaders think about ESG and its impact to free markets? To explore this topic, we welcome our guest speaker, Jaron Brook. Jaron Brook is the founder and director of the Hedge Fund BH Equity Research. Jaron is an MBA and finance PhD from the University of Texas at Austin. He was an award-winning professor at Santa Clara University and the former executive director of the Ayn Rand Institute. Jaron is a renowned free market speaker and author of the 2012 National Best Seller Free Market Revolution. How Ayn Rand's ideas can end big government among other titles. And without further ado, please welcome Jaron Brook. Thank you, Francisco. I really appreciate the invitation to come and speak before you guys. I mean, now's not the time to talk about it, but it would have been a lot more fun to do this in person at Columbia and I'm kind of horrified by the fact that you're not allowing guests in. But it is what it is. We'll use Zoom. I'm kind of tired of the Zoom thing, but we'll use Zoom and we will make the best of the situation. ESG investing is becoming huge, as Francisco has said. It's affecting every aspect of the investment world. It is affecting the way businesses and corporations are run. It is investors are now using the banner of ESG to put pressure on managers to change behavior. Often these are minority investors, but they're using the moral authority, if you will, of ESG. ESG has also become something politicians are extremely interested in. There's a real effort from politicians both in the United States, but even more so in places like Europe to kind of codify what ESG is and how it should be applied and to make sure that it achieves the purposes necessary. What is the context in which kind of ESG arises? I think it's really important to think about what led to the rise of ESG, what it represents and what it's coming up against. What is the alternative to ESG? You know, when I went to business school, it's a long time ago. In the late 1980s, to get my MBA, it was pretty much accepted in the business school, certainly in the finance department, maybe less so in the management department, but certainly in the finance department, it was pretty much accepted that the purpose of a publicly traded business was to maximize shareholder wealth, that the purpose of business was to make money, to produce profits for its owners while sticking to the law and while engaging in broadly ethical behavior. But this idea of making money was almost uniform, again, with the exception of the management department, we can talk about that later, why management? Maybe that was the beginning of this, I think, ESG trend. And the idea was, and this comes really, Milton Friedman maybe expressed this best, the idea was that the responsibility of business was not to something amorphous like society. The responsibility of business was to make money and that making money was a good thing, that making money actually served a purpose. Now, this view was already under attack back in the late 1980s and has continuously been under attack since then. It has come under a variety of different guises, the social responsibility of business, stakeholder theory. And now I think it has hit a home run, if you will, with ESG, ESG is really just an extension of the idea of social responsibility and primarily of the stakeholder theory. But why is this? From the beginning of time, really, certainly from the beginning of capitalism, there has been a deep-seated suspicion of the profit motive. What is profit about? Profit is about maximizing benefit to you. That has been deemed greedy, selfish, self-interested and generally immoral. So while from the beginning, capitalism, people understood, almost everybody understood, the benefits capitalism produced, they were always very suspicious of the motivation of those who participated in capitalism. They were always suspicious of this motivation, the motivation to succeed, which meant make a lot of money, grow the business. And there was always, there's always been this conflict. On the one hand, capitalism is very successful. On the other hand, it is viewed with this intense suspicion. But let's think for a minute about the profit motive. How does one generate profits? What brings about profit? Why, for example, is Apple so profitable today? What does it do in order to generate profit? And I would argue that overwhelmingly almost every business has to do these things to generate profit. Where does profit come from? Profit comes from the idea that the world is not a zero sum game. It comes from the idea that trade is beneficial to both parties. That indeed, trade is a win-win relationship. When I buy my iPhone and spend $1,000 on that iPhone, why do I do it? Why do I spend $1,000 on this phone? Well, because the iPhone is worth more than $1,000 to me. I'm willing to give up the money because the iPhone adds more value to my life than $1,000 worth if I kept them. I am better off. Now, I'm not going to go into a whole song and dance about how much the iPhone is actually worth to me. Because, but I think you can imagine, right? It's obviously not a phone. Nobody uses it. Almost nobody uses it as a phone. It's a camera and it's a GPS and it's an entertainment center. And it's a communication device that mostly we use now for video. It is this amazing product that has changed my life, changed my world, changed the way I relate to other people. I relate to the work. I relate to entertainment in profound and deep ways. Now, most of you don't know this because you're just born with iPhones attached to your hip. You never lived in a world without it. You grew up with it. But as somebody who remembers what life was like before an iPhone, this is a profound change in life for the better. And how much is an iPhone worth to me? How much is the ability to sing a lullaby to my child from anywhere in the world while I'm traveling? I've always traveled, right? From anywhere in the world before they go to sleep. How much is it worth to me to have it my fingertips? Every available piece of music that's ever been produced? How much is it worth to me to have a GPS in any faraway country that I might be going to and be able to get anywhere I need to get almost seamlessly, almost with no effort? I remember the days, I know very few people do, of driving with a map, not safe, not fun, getting lost often, pretty scary world, but you will never experience that because of products like the iPhone. How much is it worth to me? Thousands and thousands and thousands of dollars, tens of thousands of dollars. I mean, don't tell Apple, I don't want a price increase, but it has improved my life by many tens of thousands of dollars. That's why I'm willing, happy even, to pay a thousand dollars for an iPhone. I gain tremendously from the iPhone. What does Apple, has Apple given anything up? No, it too has gained, it has made a profit, a significant profit, profit margins and iPhones are pretty high. Have Apple employees lost? No, they're making, last I looked, salaries at Apple were pretty high. Have the Chinese suppliers of Apple lost? Again, no, whatever they're being paid might be low by our standards, but by the standards of China, people are hustling to get those kinds of jobs. Apple products, I think an iPhone has products inside of it from 40, 50 something countries. All of those are based on this idea of trade. All of those ideas are based on the idea that I am paying somebody to either do work or for a product. I'm paying them less than what the product is worth to me and more than what their time is worth to them. So all of these relationships, because they're voluntary, because they're inherently, they're part of this capitalist system, they're win-win relationships and therefore people are better off for them. So the profit motive which drives Apple, Apple is trying to make money if it wasn't, it could sell the phones for a lot cheaper. This profit motive has made all the products that we have available today in our world around us available to us. It has made the lives of customers significantly better and we know that because they keep going back and buying more products. It has made the world a richer place and all you have to do is look at global statistics about global poverty and you can see the increase in wealth across the board, across the board. Inequality globally, maybe in the United States it's increased globally has decreased dramatically over the last 40 years because of globalization and the exploitation of some capitalism across the world. Indeed the exploitation of the profit motive across the world. So capitalism or the profit motive has brought about a significant enhancement in the quality of life of billions of people. It is a product of incredible productivity on the part of companies that produce. You can't gain profit in a competitive world without producing something of great value to others. You can't succeed unless you create value. Now that value creation requires thought, it requires effort, it requires work, it requires organization, it requires the kind of skill and talent and focus that managers at large businesses, managers that we love to hate actually perform. If you look at from an investment perspective, if you look at the S&P 500, God, since 1982, it's basically 1982, the S&P 500 was under 1,000 just to give you a perspective on how much it's grown since then. How can one complain about the investment efficacy of the system that we have? Now we can improve on it. My ideas of improvement I think are different than ESG's. We can improve it on it, but the fundamental focus that managers have on profit has produced amazing results, amazing consequences and who has benefited from this? Well, who owns stocks? Well, pension plans, BlackRock, for example, a big pusher of ESG, we'll talk about that in a minute. BlackRock's money is pension money. These are people who've worked hard, put money aside for one case and have invested in, have made really good money over the last 40 years. An ability now to retire if they're baby boomers to leave money for their children to live a good life is stunning. I mean, we always think, oh, the people who invest in the stock market are the rich. Well, partially the rich because they became rich by investing in the stock market because the stock market has done so well because of the profit motive. And partially the middle class because their pensions have done really, really well and they can now retire in pretty good shape, not because of social security, which has, I mean, just compare the returns of social security with the returns of the S&P 500 over the last 40 years and you'll be shocked by how poorly social security is providing benefits. So the profit motive has done pretty well under a highly regulated mixed economy. So let me say two words about capitalism and then I want to move to stakeholders and ESG in particular. Capitalism is a system of free markets. It's a system of freedom. It's a system where businesses are left free to pursue profit, to produce, to create, to build, to meet. It's a system where government has no role in the economy. Real capitalism, pure capitalism, laissez-faire capitalism is a system in which the government is hands off where there's a separation of state from economics. Kind of a system doesn't exist in the world. We have today in America, not capitalism, but a mixed economy, a mixture of some freedoms and many, many regulations. A system that works pretty well, but it works particularly good when the government keeps its hands off and those sectors in the economy that have done phenomenally well are particularly those sectors where the government has not intervened. Technology, for example, which is the least regulated business in the US. So when I say capitalism, we really don't have capitalism. What we have is kind of this mixture of capitalism, some freedom and a lot of state intervention. And it's quite a bit of redistribution. So a lot of intervention in the economy. And it's this balance we already have that restricts, I think, even as we talk today, competition and innovation and real progress in economic growth. It's one of the reasons I think the US economy, in spite of the success of the stock market, is so stagnant, so stagnant. So let's think now about what the alternative being presented, not so much for capitalism, but the alternative being presented today in the guise of capitalism. Kind of, you know, the whole ESG movement is saying, we don't want government intervention, although they're gonna get it. We want the market to put pressure on companies to behave in particular ways. What are they asking companies to do? Well, they're asking companies to do is to stop focusing on profit. To stop having this one dimension for decision-making, which is maximizing long-term shareholder wealth, which has been the traditional thing that business is focused on, at least over the last 40 years. If you want to, you know, there's a period in American history from the 50s to the 80s, where I don't think business was quite as focused on the profit motive. If you're interested in why and what they were focused on, I'm happy to answer that in a Q and A. But the last 40 years for the most part, businesses have been focused on profits and maximizing long-term shareholder wealth. That has allowed them to be focused to have one mission, one goal. Every decision gets decided by whether and how it contributes to maximizing long-term shareholder wealth. What the stakeholder theorists and what ESG is trying to do is introduce, is to take the profit motive and make it just one of many goals that the government should pursue. Shareholders should become one of many stakeholders in business. Indeed, recently, the business round table, this is a lobbying group of the largest businesses in the United States, declared that the purpose of business is not to maximize shareholder wealth, but to maximize stakeholder well-being, whatever the hell that means. What does that mean? That means that every stakeholder in a business should have a say above and beyond the fact that they negotiate for the best terms that they can produce. So employees and suppliers and bondholders and the community and anybody who has any relationship with the company, the environment, all now have a stake in the company, all now have a stake in the decision-making of the company, all now get to be equal with shareholders in deciding the future of the company and deciding decisions. What should the next iPhone look like? Well, employees, we should find out what employees think or we should think about what impact the particular design will have on employees. What impact the particular design would have on suppliers, on environment, on everybody who we might ever touch. Now, let's take a decision that a business actually has to make. Let's assume you're running a company and you have an opportunity to relocate your manufacturing plant to Mexico. And if you relocate the manufacturing plant to Mexico, you actually have an opportunity to increase profitability, to make more money, to improve shareholder wealth. Let's assume that that is a given. So taking into account all the different factors that go into it, it's good for shareholders to move the plant to Mexico. But you don't wanna make decisions based on shareholder wealth maximization. You wanna make decisions based on stakeholders. So you poll the stakeholders. You ask your suppliers whether they want you to move the plant to Mexico. Now some suppliers say, yeah, cool, you're gonna be more profitable, I'll supply you more stuff, this is great. Other suppliers are not too crazy about it because the fact is you'll probably fire them and get suppliers in Mexico. You'll ask your employees, same thing. Some of them will call with it. Most of them are negative because they're afraid it's their jobs that'll be lost as you move to Mexico. Should you poll the potential new employees in Mexico? Do they fit into the equation? What about the community? Community might say no because you're gonna close a plant here and that'll be a downer. What about the new community in Mexico where you're gonna have this new plant? Do they get a voice? What about your bondholders? Everybody else, so let's say you have, I've done this many times in exercise with class where you put up all the different stakeholders. And we give them a plus or a minus where pro this decision, anti this decision. How do you make the decision? You add up the pluses, you add up the minuses. What's your algorithm for making a decision about how to move forward? Who's more important? What stakeholder theory does is it paralyzes. It makes it impossible to make any kind of decision where shareholder worth maximization is clear and equivocal. I mean, it's difficult. It's hard to calculate the present value of future cash flows and to estimate those and to know the impact on all the different elements. And of course, if you're maximizing shareholder wealth, do you care about what your customers think? Yeah, that's where the revenue is gonna come from. Do you care about what your suppliers think? Yeah, because you want good relationship with your suppliers because you want them to be on time and you want them to be able to respond if you have an emergency. Do you care what your employees think? Well, of course, you want them to be at maximum production. So the stakeholder idea falls apart. It's un, you can't implement it. It's impractical. And it turns businesses into political games. You know, the decision-making is made based on who can pound on the desk the loudest, the strongest, who can manipulate managers the most. Now ESC is just a form of stakeholder, of the stakeholder idea. It's a way of making it sexy. And it's a way primarily of elevating above all else, so-called environmental concerns, primarily climate change, carbon emissions, the idea of air and water pollution, biodiversity, deforestation, energy efficiency, waste management, water scarcity. I mean, you can make the whole list spot at ours. You know, I'm not sure where the end of this is. What the ESC and E is for environment, S is for social, G is for governance. What the environmental lists are trying to do here is so convent a political process because if they want cleaner and cleaner water, you know, we have an environmental protection agency. We can argue about whether it's good or not that we have it. We can argue about whether they're efficient or not, but they can just impose regulations on all of them. If they want climate change, they could organize a common tax. They could do a lot of things that would impose on business a standard whereby business would have to cooperate. They could use the law, but they haven't been able to. Because the fact is that politically, these ideas are not acceptable. People don't like them. People don't vote for them. Well, let's circumvent democracy. Let's circumvent the political process. And let's go straight to the companies and use the shareholders. Use particularly big shareholders like BlackRock to force companies to behave in this way. So BlackRock has announced that it is not going to focus on profitability. It's going to focus on ESG. Social, by the way, is things like data protection or privacy as if companies are not motivated around that already. Gender, diversity, whatever that means, employee engagement, again, whatever that means, community relations, human rights, labor standards, governance is both composition, bribe and corruption, executive compensation, lobbying, whistleblower protection and things like that. The environment one is really what is really being pushed to the forefront, though. That and, I'd say, gender and diversity kind of are the two big issues that ESG is pushing. Instead of using politics where it's unpopular, the idea is let's let some big investors like BlackRock dictate, BlackRock is the largest, I think, constitutional investor in the world, certainly in the US, dictate to companies, use their votes, use their influence, use their ability to sell or buy shares, to try to manipulate companies into abiding by these principles. And it's not just BlackRock. Every hedge fund, every mutual fund company out there, every private equity fund is now being pressured by institutional investors, by pension plans, primarily, to live up to have an ESG policy, to shift from a shareholder world maximization perspective to this focus on the environment and social and governance and using so-called free markets to be able to establish that. I think this is incredibly corrupting. It's legal, it's not much that can be done to stop it from a, you know, I think any kind of perspective, although my view is that pension plan holders should sue BlackRock. As if I had a 401k that was managed by BlackRock, I would sue them. I gave my money to BlackRock, not to pursue the CEO BlackRock social agenda. I didn't give my pension plans money so that they could pursue their politics. I gave the pension plan money in order to maximize my wealth over the long run. I gave them money so that I could retire. This is using the political views, the political ideas, the political motivation of a few people at the top to dictate policy for millions of people who've given their money. I think it's unjust, I think it's immoral. And I think somebody should start a class action lawsuit and see what happens because I don't think it's what pensioners want. Just most of them are just ignorant of what is actually going on. They don't understand this. So I think it's a violation of the investment funds mandate to be pursuing this agenda that is removed from maximizing shareholder wealth. Who are the shareholders? The pension plan owners, the people who gave BlackRock the money for the pensions. And it's unbelievably destructive to the system that we have today that has produced such amazing results and produced an amazing increase in the standard of living and amazing increase in the quality of life and amazing reduction in poverty around the world. It is a direct attack on all of that, but it's an attack that uses so-called market processes instead of using the traditional route, which is politics and therefore gives actually certain elites like the people who run these investment funds far greater power than they have in the political process because by fear, they can just declare this is how it's going to be. So my view has always been that managers should have no politics. Business should not be involved in politics or in any kind of social agenda. But it's just to be focused on achieving financial success. Investment funds should try and maximize the risk return relationship for their investors. Not try to push for particular social aims or social goals. Once shareholders get their money, whether through dividends or whether through selling the stock or whether through just the wealth effect, they can then contribute money to any social cause they want. They can put pressure on politicians. They can send money to PACs and lobby and do what they want. Businesses should stay out of that game. There's so responsibility as Mr. Friedman said a long time ago is to make money, do it morally, do it responsibly, do it in a way that does not alienate the people who you're trading with, but that's all part of maximizing shareholder wealth. If you alienate your customers, you're not going to maximize shareholder wealth. If you alienate your employees, you're not going to maximize shareholder wealth. If you alienate the so-called community, you're not going to maximize shareholder wealth. So we need to fight the CSG movement. I think the only way to fight it is to take up the morality of the profit motive. It's rights, it's just for companies to pursue profit. It benefits all of us when they do, but they're not, they are producing, they're creating, they're making. I mean, we don't have enough of an appreciation for how much business actually creates in the world around us. We don't have enough of an appreciation for the value that business creates for us and for the people in these businesses and what they do. So ESG is just a new way of bringing in old ideas. It's a new way of effectively attacking the profit motive. It's a new way of trying to undermine capitalism and free markets. It's, I fear, a particularly effective way because our investment funds have grown so big and they have become so powerful. And again, why have they become so big? Why have they become so powerful? Is that a consequence of capitalism or something else? I would argue it's not a consequence of capitalism. You can ask me why BlackRock even exists. It doesn't exist because of capitalism. It would never be this big under capitalism. But we need to resist the urge of ESG. We need to resist stakeholders. And we need to do it by celebrating the success and the virtue of the profit motive. Thanks, guys. And I'll take any questions you might have. Thank you, Yaron. I have a question to get us started here. I know you mentioned that essentially the ESG movement is a way to circumvent the due process, so to speak. But I was also curious to hear your perspectives about how it affects the principal agent conflict within a corporation, right? I mean, the principal being the shareholders and the agents being different constituents but particularly management. Because one thing that we have observed in multiple dimensions, I would say, is executives riding the ESG wave and gaining personal value, personal reputation, personal connections even within their given circle of influence and maximizing their influence by spousing ESG. So to what extent is it expected that management will drive or managers, in this case, or leaders of corporations who can benefit personally in an indirect way from ESG relative to the principals? I'm wondering if you have perspectives on that. Absolutely. Really, that was my point about talking about BlackRock, right? You've got a massive agency problem at BlackRock. You've got the people who give BlackRock the money who are dispersed and generally ignorant of investing. Pensioneans all over the country. We're talking about trillions of dollars. And then you've got an agent who they thought they had hired to maximize the value of their savings. And yet the agent can now say, I'm sitting on $3 trillion. I can use this to virtue signal to the world how fantastic of a human being I am, how really, really cool I am. And if he believes in this stuff, right? Let's say he believes that he's doing good. I get to do good based on my standards. If I had to actually ask these people who gave me money what they thought was good, they may have a wrong answer, but I'm smarter than them. I'm better than them. I have no knowledge about them. And I don't have to win political power and I don't have to enforce authoritarianism. I can just make a decision that is for them. I'm not gonna take their money. It's not his money, right? This is one of the agency problems, right? It's not his money. I'm gonna take their money and invest it in ways that promote me, that make me look better, that maybe I'll make less money, but at that point he's so rich it doesn't matter. The extra dollar doesn't matter. What really matters to him is prestige and social standing and his feeling of doing good. Of course, you know, BlackRock is a publicly traded company, right? Now, this relates to shareholders as well. BlackRock only has people who are giving it pension money to invest, but you've got another agency problem with shareholders. Shareholders invest in a company, not because most shareholders are diversified. They invest in a company with expectation that the company's goal, mission, focus will be to maximize their wealth, their returns. All right, risk return, you know, put them on the efficient frontier in portfolio management theory. And yet, and they elect a board, and that board is supposed to monitoring managers to make sure that managers are doing that job. But the board is now being captured by, you know, what would you call it, philosophical social interests, political interests. Shareholders are diffused, very hard for them to organize to replace somebody on the board. And managers can get away with anything. And in this case with BlackRock, again, they can get away with advocating for ideas that are not necessarily consistent with what their shareholders would like. Now, shareholders can sell their stock. It's easy for shareholders to get out. And if I were a shareholder in BlackRock, I would sell and get out of there. But again, most shareholders are diversified. Most shareholders investing through ETFs and mutual funds, and they have BlackRock whether they like it or not. But this also leads me to the question that I planted, which is what happened in the 50s, 60s, and 70s and changed in the 1980s. In the 50s and 60s and 70s, you had a major agency problem, massive agency costs. Managers in that period, typically had no stock in the company, no options. They were buddies with the board of directors. Their compensation packages were often related to revenue or sales, market share. So what does that give you? It gives you a massive incentive to grow the company, increase sales, and not to maximize shareholder wealth necessarily. And what you've got during particularly in the 60s, what you've got is American businesses becoming massive conglomerates, hugely diversified, low risk, low innovation, low profitability, but massive in terms of revenue and incompetent managers ruling over all of this. And not caring because the bonus structure was associated with sales, not with sharehold, not with stock. What you got in the late 70s and early 80s was revolution in managerial compensation. What you got is the beginning of stock options. And stock options, I know today they viewed as this negative thing that everybody's running away from, which is bizarre to me. Stock options aligned the interest of managers with shareholders. Because if shareholders do well, then so do managers. And today they do more stock grants than options, which is fine. The point is if you give managers stock or compensation related to stock value, you bridge the agency problem. You minimize the agency costs. When you don't, you exacerbate agency costs. And today we're moving away from stock grants, we're moving away from option plans. We're moving more and more and more to compensation. I mean, boards are actually evaluating COs now based on ESG. So based on non-financial parameters. So managers have now a strong incentive to virtue signal to the world and how wonderful they are. And their compensation might be tied to that more than it is tied. Remember, shareholders own the company. The residual claim holders. Managers at their agents. Managers don't feel obliged to do that anymore. And in particular when some of the owners, like BlackRock, are nudging them, are pushing them and claiming to represent all the other shareholders and they have a huge advantage because you and I as shareholders are small. BlackRock gets to be big, even if it's not a majority owner, it's big. And it can have disproportionate influence on all of this stuff. Let me recommend a movie to everybody. I think everybody in business should watch this movie. It was made in, I think, 1991. It's with Danny DeVito and Gregory Peck. And it's a movie about finance. There's very rare that there's a movie about finance. It's almost never the case that I would recommend a movie about finance, but this one I think is really, really, really good. It teaches people about these kind of issues. It's called Other People's Money. Other People's Money. It's a must movie, I think, for anybody in a business school. It deals with the question of agency, the agency problem. It deals with stakeholder versus shareholders. And some of the speeches in it are just brilliant and, and I think completely consistent. And it pits Gregory Peck, who represents stakeholder capitalism and versus Danny DeVito represents shareholders against one another in a really brilliant way. So highly recommended. And then of course, you know, I am the chairman of the Ironman Institute. I'll put in a plug to read Ayn Rand. Anybody in business should read Ayn Rand, particularly Atlas Shrugged. There are very few successful CEOs of the last 50 years who did not, who have not attributed at least part of their success to having read Atlas Shrugged. Thank you, Jaron. I know, Jade, you had a question you want to ask. Yes, thanks, Jaron. I posted in the chat, but my question is pretty broad. I was curious to your answer about what's the best way to police the tragedy of the Commons, you know, whose job is it and how do you balance responsibility between developing and developed nations? Yeah. So I'd start with saying that I think the tragedy of the Commons is a massive exaggeration. So I just want to put things in perspective because your generation, or the, you know, the last couple of generations have been raised on this notion that the world is in crisis, that the environment is degrading all, degrading all around us. They're all going to die and the world's going to end. I think in 10 years, according to Greta, but, you know, there are various estimates, but things are horrible, really, really, really horrible. And that's just complete BS. No matter what you think about climate change and all this, it's just not true. We drink the cleanest water we've ever had. And I talk here globally, not just in the US, globally. We have the lowest rates of poverty we've ever had globally. We breathe the cleanest air we've ever had globally. Remember that in the cave, you had smoke from the fire, which was not exactly healthy. In, I don't know, 17th century London and in the farm, you had, you know, manure from all the animals around you, everywhere, sewer, rats, plagues, you know, the environment from a human being's perspective was horrible. Until the 21st century. Life is pretty good from a human being perspective. Life is kind of longer, you know, unless, unless you decide to take, to take drugs, right. So in America, you know, life expectancy is declining, but because of the, because, because of drugs, not because of anything else, right, because of painkillers that people are odying off of. But if you look at the underlying life expectancy, if you take that out, it's expanding dramatically. We cure diseases, we live better lives. The environment around us is, is amazing. It's amazing. Again, clean air, clean water, and you know, it might be getting warmer. But the likelihood that this warming is going to lead to some massive catastrophe. There's no evidence of that. There's no reason to believe that. You know, by every measure, human life and the environment in which humans live is improving, not getting worse. So first I want to just start a tragedy of the comments for the most part human beings are good for the commons. The commons are much better than they were in the past. We have, you know, the cleaner the better. And by the way, the more capitalist the society is, the more freer society is the cleaner it is. All you had to do is go to East Berlin after the wall came down and you would see how filthy, how polluted everything was because when nobody owns stuff. So when the commons is everything, i.e. nobody owns it, nobody cleans it, nobody takes care of it. And that's basically my solution to the comments. My solution to the comments is to privatize it as much of it as possible. Every country that has a high rate of private ownership of stuff, land and everything else has a good environment. It's when nothing something is not on when something is in the comments. Does it get ignored or burns, you know, so let's take the Amazon. One of the reasons the Amazon Forest Farmers going they burn it, they cultivate the crop and they leave and then they go burn another package and it's because they have no property rights. They have no piece of land that they can call theirs that they can cultivate year after year after year. So they have to keep going out and be outlaws invading the commons which is the Amazon Forest and taking it but imagine if the Amazon Forest was private. Imagine if we auctioned off the Amazon Forest tomorrow. A lot of environmentalist groups would buy big chunks of it and commit to never developing it. Huge players would enter the field and they wouldn't let people come and burn them because it was theirs. Right now, nobody has an incentive to stop it. The best incentive to preserve the environment is private property you see that in Africa. Remember there is elephants and parts of Africa and indigent species because poachers even though they made hunting elephants illegal poachers come in and they kill large numbers of elephants. In those countries, some countries have privatized the elephant stock. So landowners own the elephants on their land and what these people now have is an incentive not to allow the elephants to be killed. And what they do is they don't ban hunting. Now, I'm not a big fan of hunting elephants. I think it's pretty bizarre and I don't see the point of it but some people are going to do it no matter what. But if it's private, you know, manage the number of elephants, you control the hunting and you don't allow poaching because you have now an economic interest in not allowing the poaching because it's your elephant stock. You have private ownership of it. You're seeing that expanded to other animals in Africa and wherever it's tried it has worked and in those places the elephant stocks are increasing. So generally, you see the same thing in fisheries in Iceland where they privatized fishing rights and they can be sold in an open market. Anywhere where you privatize things, things become more abundant. And then the question is, what do you do about climate change? Basically you invest in nuclear if the government really cared about climate change. The only thing that needs to be done regarding climate change is eliminate the barriers to building nuclear power plants. It's zero carbon. It's plenty of electricity. It doesn't depend on wind and sunlight. And it's the solution and it's very telling in my view that so many environmentalists and so many governments are anti-nuclear. One wonders if the real goal is getting rid of CO2 emissions or the real goal is something else, much more malevolent. So anyway, the whole issue of the commons is one where you want to minimize the commons where you want to privatize as much as you can and let contracts between individuals regulate the use of that land or the use of that property. It's the same thing. It's externalities, the way to solve externality problems is to internalize them. It's to make them internal, that is, to privatize the costs and privatize the benefits. Yeah, I know Hudson Hoyle, you had a couple of questions. I don't know if you're able to unmute and speak or I can read your questions. I just allowed him to talk so you can mute yourself, Hudson. Oh, you got a baby in the background. I'll read the question. Yeah, no worries, Hudson. We can read the question. There's plenty of research to support the consequence of climate change. Some of these comments are just short of misinformation. I'm not arguing against climate change. I agree with you. There's plenty of research to support climate change. To support the, what do you call it, the catastrophic consequence of climate change? There is almost no research to support that. No research is valid. No research that takes into account the fact that human behavior can change over time. No support, no research to support the idea of technologies that could prevent these things. I mean, think about flooding, think about rising sea levels. In Amsterdam, they built a dike to prevent being flooded by rising sea levels five, 600 years ago. We have far better technology than they did back then. Is that taken into account in these catastrophic estimates? One of the interesting things about the impact of climate change is that over the last 100 years, the number of people globally who have died as a consequence of climate events, hurricanes, heats, cold, climate stuff has dropped by 90%, 90%. So what we don't take into account when we look at these horrific consequences of climate change is the fact that we as human beings can't change our environment to meet our needs. We don't have to suffer from heat up to a point, of course, because we do have air conditioning. That's why people live in Vegas and in Phoenix and places like that. And if more of the country becomes like Vegas and Phoenix, we'll have to produce more air conditioning. But it's not like we're going to die because it gets warmer. And indeed, the positive impacts of the globe getting warmer, for example, more land gets available to grow food in places like northern United States and Canada. So the catastrophizing of climate change is just, it's another millennial, it's panic that is unjustified, and it takes your eye off the ball. So it takes your eye off of solutions. It's stead, it's just like COVID panic with regard to COVID results in bad decision making, I think panic with regard to climate change is resulting and will result in bad, bad decision making. So we got two more questions from Hudson. Do you believe some issues require the collaboration of the private sector, individuals directing their personal wealth and dividends of capital gains to tackle issues like climate change seems ineffectual. I don't think it's ineffectual. I mean, there are individuals taking capital gains and dividends and investing it in going to Mars. You know, which is going to cost billions and billions and tens of billions of dollars. If there's no reason not to expect individuals, if this is a crisis, if this is a challenge to do that, maybe even to put their money together into a fund to, I don't know, come up and look at, look at Bill Gates investing in nuclear power plants. So imagine if the government got behind in terms of reducing regulations and making it more feasible. Imagine all the private capital flow into nuclear power plant development, both for profit and non for profit. All the entrepreneurs that would go into that field, you would have a nuclear revolution on your hand you would have so much nuclear power energy I mean today, there's so many innovations in nuclear power. Unfortunately, the United States is not going to benefit at all from them because all of that is going to place like China and France, who are willing to invest in those kind of power. So, and then I think we need to come up with creative ways in which companies can raise money for not profit, you know, we now have, what is it called be corporations right be corporations are set up in a corporate structure where in advance they're saying we're not here to make money. We'll make some money, but that's not a primary focus. And then you know you're investing in in that social agenda that they are pursuing. Maybe they'll find a way to make some money off of it. Maybe they won't, but that's okay because they're not a C Corp. They don't have a fiduciary legal obligation to shareholders. So there are lots of ways in which to organize and coordinate capital free of government intervention and free of an attempt by certain people with power to manipulate corporations to do what some people think is the right thing to do. Hudson has his hand up so I assume you can now speak. So you can unmute you can hear me okay. Absolutely. Thank you so much Mr Brooke for answering my questions apologies for the background noise earlier. Just one brief follow up point and then a question for you. So I think a lot of the counters on the climate change around the kind of the minimal impacts to people based on rising temperature levels was focused on us citizens which I may agree that we will be less impacted but there are quite different circumstances for people in emerging economies or the developing world. My question is that if there is the sentiment I love a comment you made earlier about companies are beholden to shareholders right they are the owners and what if there is a change that in the interest of how investors and shareholders money is being directed. I think Harvard Business School has published statistics as high as 77 to like 87% of investors now want companies to be more ethical and is that just also posturing and people don't and that those are geared towards impact is that investor ignorance or what what are your thoughts there. I think it's a combination of ignorance not understanding what ethical means I don't know what ethical means in this context I mean my view of ethical probably be different than yours Hudson. And I think it's very dangerous to run corporations based on polls. And the problem with shareholders just voting is that there's too much shareholder being represented by big investors like black rock. And look black rock is as big as it is because of public pension plans. And I think it's very public pension plans remember a managed some extent at least by politicians. I just worry about politicizing all of American business by giving black rock the power or groups like back black rock to dictate to managers how their company should be run in the name of shareholders, but really they haven't pulled their shareholders they or they haven't pulled their pension plans and the pension plans themselves the people running them are politicians I mean the culprits the largest pension plan in the United States on the board since the governor of California. I don't want the governor of California dictating to corporations how they should be run. Now he is because culprits is very influential corporate governance. And I think that's a real disaster. And I'd like to see these kind of issues dealt with, you know, outside of the, the putting pressure on businesses to change the way let businesses maximize shareholder wall. And if you want to then start a different kind of business like be corpse that I mentioned, or, you know, I'm not in favor of this because I don't believe in regulation and I don't want government intervention. But I think it's much healthier to go through the process of political debate and discussion and political rules than it is to impose these things on on businesses by institutional investors that I don't think really represent shareholders. Let me address also quickly the question you had about or the comment you made about third world countries, because I'm much more concerned about them than about Americans Americans, you know if you raise energy prices in the United States if you double them because we go to, I don't know, and you have some blackouts human there, because we go to solar and wind. It'll be bad, but you know, but not that many people are going to die. But the fact is that people in place like Africa and certain parts of Asia. They need cheap energy to survive. They need more cheap energy if we ever want them to be successful. They need a lot of energy, cheap and reliable. If we ever want them to become rich, which is what I want them to be. I don't want them to be poverty in the world. I want people to be rich all over the world. The only way to do that is for them to be able to invest in cheap energy. That energy today means natural gas. And it doesn't mean solar panels and wind solar panels in the world are unbelievably expensive. They're unbelievably unreliable, and they will lead to Africa and the rest of the developing world staying poor. So again, I don't buy this idea that the real impact of climate change is on third world countries. In my view, the damage done by alternative energy, the damage done by taking our focus away from profit motive will be greater poverty all over the world. It is capitalism and the profit motive that has allowed well over a billion people to rise from poverty in the last 30 years. If you take that profit motive away, if you undermine it, fewer people rise to poverty and some people will fall back into poverty. And if you force them into using expensive and inefficient sources of energy, which is what almost everybody in the climate climate change side is advocating for, it would be a disaster. And this is why China and India don't want to have anything to do with alternative energy, because they know because it's their people are going to suffer. And indeed at the end of the day Africa is in the same position Africa doesn't want windmills and solar panels Africa wants natural gas and as quickly and as cheaply as possible. They want to be able to frack they want to be able to produce cheap energy so they can rise up from poverty. So no, I think it's only rich people sitting in a comfortable sofas in Sweden. You know, with a nice fireplace running and lots of electric all the lights turned on, watching the snow outside, only they are the ones panicking for the Africans about climate change Africans. What Americans want is to get rich, not get rich rich but to get to alleviate their poverty and to get to be successful. For that they need electricity for electricity they need to burn carbon fuels right now. The best thing for Africa right now is more carbon fuels not less. So it's it only comes from a perspective and much of social policy comes from the perspective of middle class and rich people in developed countries who feel sorry for the poor and think they don't know how to fix their problems. Keep rich people away from poverty poverty takes care of itself if you give poor people freedom, and if you give people the opportunity to rise up from that poverty and that opportunity requires cheap energy not unreliable energy. I think Jade you had a question or you're probably going to wrap up after after that question. I've been saying isn't China the largest producer of wind and solar it is, but it's also the largest by far producer of coal. And most of the energy in China by a by a huge margin is produced by coal, a tiny fraction of what they produces wind and solar, but a tiny fraction in China is a lot relative to other countries because a solar and wind is a tiny fraction everywhere in the world. Thanks, Aaron. Last question here. It's just about the upcoming ESG disclosure mandates that are most likely coming to public companies it seems just curious. I guess what your thoughts are on the negative consequences of these mandates and whether you think they can help the smaller individual investor, because it's providing more transparency of information, even that understanding that there is very little correlation between disclosing ESG mandates or between ESG mandates and return of shareholder value. I mean one of the one of the fascinating things is if you if you look at BlackRock and other investors and you look at the ESG portfolios. And you just take a standard the 20 largest positions in an ESG portfolio versus the 20 largest positions in a regular diversified portfolio of other companies just not sold as ESG just sold as regular. You find that there's something like 80 to 90% overlap between the two. So ESG, luckily, in my view is meaningless. For the most part right now it's a marketing gimmick. I'm actually really, really worried when it stops being a marketing gimmick. When people start taking it seriously and start really implementing ESG and start forcing people to divest from I don't know oil and gas and divest from banks that maybe give loans to oil and gas and you can see the chain reaction. You know, I don't think anybody should buy the stock of. What's the power company that does like ski, ski stuff. Ski gear. I, you know, so so down down jackets and things like that, right, you should divest from them because you know what, every down jacket is made Patagonia is a good example. Every Patagonia jacket is made from plastics, which are basically products of the oil and gas industry. There would be no down there would be no jackets waterproof all those jackets, none of them would exist. If not for the oil and gas business if if they didn't use some refined product and of course they're all using electricity which is almost all produced by natural gas coal and and fuel so you actually took ESG seriously and these disclosures are going to push us in the direction of taking it seriously. It will have really grave consequences I think on the US economy I think it's a real disaster. I think what is saving us today is the fact that nobody actually takes it seriously is the fact that it's just a marketing gimmick for the most part. But but again, the more we actually do this, the worse off we become. So, that's my counterintuitive answer is, no, I want this to stay loose and superficial and meaningless and for the portfolios to be very similar. You know, maybe the one portfolio doesn't invest it used to be that the socially responsible companies didn't invest in tobacco and firearms, but basically everything else was the same right. So what harm did that do no real harm, but imagine if now they take it seriously, a significant number of people really don't want to divest from oil and gas. Oh my God, I mean, right now we've got energy prices going through the roof. If the energy companies believe that they cannot raise money in order to invest in more oil and gas production. We're looking at ever increasing oil and gas prices, and then ever decreasing quality and standard of living in the United States, not to mention the third world which I talked about. Right. So, I am, I am really worried about the obsession with both the catastrophe notion of climate change, and this idea that ESG is the way to solve all these social problems. I'm really worried about the fate of the world, the global economy, the fate of this country, and the fate of energy production, because the extent to which human life today depends on electricity is underappreciated. Right. I live in Puerto Rico, and life here when Maria came and knocked out the electricity grid here. Life here was pretty unbearable. Unless you were rich, by the way, this goes to Hudson unless you were rich and then you could buy diesel generating you could do stuff. But if you were poor, once you knock out the electricity it was unbearable and people died not from the hurricane but from the lack of electricity. But that's the world we're heading into we're heading towards a world where we outlaw cheap electricity. And that's a world where the poor people of the world will suffer the most rich people will manage. I can put solar panels on my roof, and I'll do fine, but how many people are they can actually afford solar panels. And I can do solar panels because I live in Puerto Rico, but you know some places in the world don't have sunlight as much as we do here so I fear for the world in which we live. We have more years taken seriously, and the more climate change is catastrophized. Okay, now I think we're so we're on that note I think we're approaching the end of this of this lecture. I just last question for people that want to follow your work your thoughts, what are where can they find you. I encourage everybody to read Ayn Rand, A-Y-N-R-E-N-D, you can find a lot of material on Ayn Rand at Ayn Rand.org, we have a lot of educational programs and the books are fantastic and I think you'll enjoy them. Even if you disagree with ideas, don't take it as, you know, it's generally in life, don't only read stuff that you agree with, try to, you know, broaden horizon is a good thing. And then if you want to follow my work, I've got a YouTube channel, your on book show, just put my name on YouTube. You can follow me on Twitter and on Facebook and all the usual places just put my name on Google and there's a ton of material that'll come up. I've got a couple of books that some of you might feel if find interesting equal is unfair is one of them and free market revolution is another. You also have a book defending a book in the morality of finance, which is if you have any finance majors out there, I'd recommend that and you can find all of that on Amazon. So just put your on book on Amazon and you'll get all these books. Perfect. Well, I think we can we can wrap things up. Thank you, or you're on for your time. I know this perhaps is not going to be the is the first but not the last time that we're going to, you know, interact with you and perhaps even the Einstein Institute more broadly. As we, you know, go through the academic year and invite more lectures. I know you're, you know, the discussions and the content was highly stimulating. I can speak for myself and perhaps for for the rest of my classmates that these are ideas that we don't get exposed to or, you know, access to in academia here at Columbia Business School or other business schools for what matter. So we certainly welcome, you know, your perspectives, the defense of capitalism and our particular emphasis of the Manhattan Institute and Adams Beach society in particular is the moral defense of capitalism. I know and run has very, very specific and very enriched views on on the morality of capitalism. One of the things you guys might be interested is I give a talk called the morality of capitalism. It's on YouTube, the variety of different versions of it on YouTube. You know, and, of course, I'm happy to come to Columbia in person one of these days to deliver it in person that would be fun. Absolutely. I think for at least for sure next term we're going to have we're going to be able to host events in person. So thank you all for joining us. More more events will come through campus groups and, you know, through Slack channel in Columbia Business School. So we encourage people to reach out and if you have any topics of interest to to share it. I know ESG became the main topic because of everything that we're hearing in our classes. So to the extent that there are other topics we talked about environmentalism, talked about the morality of capitalism, other things that, you know, we can help, you know, connect with with engaging speakers as your own, please, please let us know. Thank you. Thank you, your own again and have a good night. Thank you. Thanks, guys.