@ TBH
2025-01-20 15:52:57
If you think I can’t blame the scale of devastation from the LA fires on the Federal Reserve - think again.
After the 2008 financial crisis, Tyler Cowen was fond of saying “we aren’t as rich as we thought we were”. If you ask him, (I did in a zoom call sometime in the last 2 years), he thinks this state of being was temporary. My belief is that 17 years later, this illusion still persists, but it is cracking. Instead of allowing the dead wood to burn through financial markets, QE, ZIRP, BTFP, TARP, foreign central bank swap lines, Repo, Reverse Repo, double-triple-just kidding-repo, and a variety mechanisms beyond comprehension have been deployed to create the impression of wealth. We are still much less wealthy than we thought we were even 4 years ago. Until 2021, this was confined mainly to the inflation of asset prices and the stealth inflation embodied in the deteriorating quality of consumer goods, but Covid stimmies injected enough liquidity directly into the consumer blood stream that CPI finally started blinking red. The public began to gain some awareness of a more concrete problem in the structure of our economy. The pressing problem of inflation exposed first order problems of real urgency. A real wake up call had arrived for those middle class and below on the socio-economic ladder. There is no shortage of material to read on this for the curious.
Now some of the bills are coming due for the top half of the economic spectrum. When a plane you’re on falls out of the sky, it doesn’t matter how big your bank account is. When wildfire driven by 100 mph winds hits a neighborhood with empty fire hydrants, adequate water isn’t available at any price. When you realize your 22 year old child has spent the last 16 years being indoctrinated into a camouflaged marxist worldview - parenting mulligans are not available. If you want to retire with a nest egg adequate to provide food, shelter and healthcare for the rest of your life, finding out at age 65 that a good portion of your portfolio has been allocated to ‘companies’ focused on not cutting down trees will not be a fun reason to put down for “why do you want to join the WalMart Team?”. The common thread across many of these items is what used to be called “mission creep”. Leveraging the modern love of the word diversity - I call it “A Diversity of Goals”. They are both deadly for any organization tasked with important and specific goals.
Boeing should be focused on building safe airplanes. Fire departments should be focused on minimizing the damage fire does in their communities. Schools should prioritize reading, writing, arithmetic, and critical thinking skills. Financial professionals should focus on their fiduciary duties.
How did everyone take their eye off of the ball? Everyone decided to add the goal of diversity in some way shape or form. Is it really that simple? No. Was it really that bad? Yes. In a recent podcast with Russ Douthat of the NYT, Marc Andreeson says some pretty shocking things. [Link to Transcript](https://www.nytimes.com/2025/01/17/opinion/marc-andreessen-trump-silicon-valley.html?unlocked_article_code=1.qU4.-gWN.t9SCSEN7crDR&smid=url-share)
> Andreessen: "I’ll speak for the group because there’s a lot of similarities between the different players here for the same pressures. I’ll just speak for the group.
> First of all, let me disabuse you of something, if you haven’t already disabused yourself. The view of American C.E.O.s operating as capitalist profit optimizers is just completely wrong.
> That’s like, Goal No. 5 or something. There’s four goals that are way more important than that. And that’s not just true in the big tech companies. It’s true of the executive suite of basically everyone at the Fortune 500.
> I would say Goal No. 1 is, “I’m a good person.” “I’m a good person,” is wildly more important than profit margins. Wildly. And this is why you saw these big companies all of a sudden go completely bananas in all their marketing. It’s why you saw them go bananas over D.E.I. It’s why you saw them all cooperating with all these social media boycotts. I mean, the level of lock step uniformity, unanimity in the thought process between the C.E.O.s of the Fortune 500 and what’s in the pages of The New York Times and in the Harvard classroom and in the Ford Foundation — they’re just locked together. Or at least they were through this entire period."
If you don’t believe this is the case, you weren’t paying attention. Centralized asset managers like Blackrock who are usually one of the largest shareholders in every company were sending out notices to CEOs and the markets trumpeting how much they prioritized DEI. [Blackrock, the ESG Bully - WSJ](https://www.wsj.com/articles/blackrock-takes-aggressive-posture-on-esg-proxy-votes-11619775002?utm_source=chatgpt.com)
> BlackRock Inc. has so far increased its support for shareholder-led environmental, social and governance proposals, and published a slew of criticisms of public companies that haven’t bent to its overall requests. …
> “BlackRock has strongly signaled that quiet diplomacy is not the only tool in its toolbox,” said Rich Fields, a partner at law firm King & Spalding who focuses on corporate-governance issues. “We expect more votes for shareholder proposals and against directors in this and future years.” …
> The firm is one of the top three shareholders of more than 80% of the companies in the S&P 500, according to S&P Global Market Intelligence, through its many funds. The money manager casts a long shadow on shareholder meetings where it can vote on behalf of its investors on board directors, executives’ pay packages and other company matters.
In all fairness, Blackrock is quickly moving away from its ESG focus as the level of nonsense here has become more obvious to larger audiences who are pushing back. (State pension funds dropping them over this was a great example of both Federalism and market forces at work.)
Read the entire transcript from Andreeson. He lays out a very compelling case for what happened when a new generation of employees/elites rolled into adulthood in the 2010’s. The between-the-lines punchline is “it got so bad that billionaires were starting to suffer!!”
If DEI could infect and inhibit performance of large for-profit companies, what do you think the impact was on organizations with far less accountability? If your budget comes from politicians who don’t have to balance budgets or produce concrete results, the amount of drift “off mission” could be and was severe.
Why did this happen? We thought we were so rich that we could afford to entertain these luxury beliefs. We could just add more goals to our plate without diluting our ability to accomplish the very important things these various organizations were supposed to be focused on. We aren’t as rich as we thought we were. We can’t afford for planes to fall out of the sky. We can’t afford for huge sections of large cities to burn down. We can’t afford for an entire generation of Americans to prefer marxism to capitalism. We can’t afford to waste money on feel good projects that have a negative return even before factoring in inflation.
The simplest immediate action to take is for stakeholders large and small in organizations of all sizes to say no more Diversity of Goals - no more Goals of Diversity. Don’t discriminate against anyone who can accomplish the organization’s goals, but the goals must come first. If it’s your church or your local fire department or the local school district - everyone can have an impact on their own community. One by one, we can reverse this trend. Be the change you want to see in the world.
Now - what I think is the root of the problem. Why aren’t we as rich as we thought we were? I just can’t help myself. You may not agree on the solution (I do) - but this description of the problem will give you pause.
[What's the Problem video](https://youtu.be/YtFOxNbmD38?si=bCciKqlCkeCeflGZ)