Bane Capital
One of the French teachers in my public high school had a Ph.D. I was never assigned to her classes but she supervised one of my study halls, where she let us smug teens chatter away. We got to talking about how screwed up capitalism was. She didn’t usually join our conversations, but this time she did. “Capitalism is all but impossible to overthrow,” she cautioned. “What?” we cried, half in disbelief, half in challenge. “It can absorb anything,” she explained, “even anti-capitalist art like the music you love. Behind every protest song there’s a record company making more money than the musicians.”
John Lennon, working class hero — and capitalist tool? It couldn’t be! We huffed and puffed in frantic denial. But after replaying the argument in my head many times, I realized that Doctor French Teacher was right. It might have been the most valuable lesson I learned in high school, which otherwise was just a holding pen.
Economics is a fancy term for the production and distribution of goods and services. Capitalism excels at production — but is a disaster at distribution. And that’s not its only catastrophic weakness. Another is externalities, production costs producers don’t pay for. The most egregious example is environmental degradation. If it costs nothing to spew carbon dioxide into the atmosphere and mitigation would cost billions of dollars, why wouldn’t producers pollute?
Because it makes society, and perhaps life itself, unsustainable, that’s why.
That’s the reason I liken capitalism to nuclear power: they’re both forces that can obliterate society, and the only way to co-exist with them (which, like it or not, we must because they’re not going away) is to keep them tightly controlled.
Some capitalists understand this. For years environmental, social, and governance (ESG) investors have been trying to stop big corporations from sociopathic profiteering, with limited success. But last week, as you may have heard, a nascent ESG hedge fund elected two of its nominees to the Exxon Mobil board of directors.
The San Francisco-based hedge fund, called Engine No. 1, started on December 1, 2020. It operates “on the shared belief that a company’s ability to create long-term shareholder value depends on the investments it makes in jobs, workers, communities, and the environment.” Or, as founder Chris James put it, “Far too many companies fail to incorporate externalities into their business strategies.”
Engine No. 1 quickly attracted allies: the managers of investment juggernauts like Vanguard and BlackRock and of pension funds like the California State Teachers’ Retirement System. Together they garnered enough shareholder votes to swing the Exxon Mobil election their way, despite fierce resistance from the gas giant’s CEO.
Exxon Mobil’s board has twelve members, so the Engine No. 1 winners will be a minority. It’s unlikely Exxon Mobil or any other Fortune 500 company will change course based on this one election. If anything, I’d expect them to copy from the Republican Party Playbook and rig future elections so they never lose again.
But I’m hopeful. Now that an ESG fund has broken through, further success may come more easily no matter how many obstacles entrenched leadership puts in the way. And with government gridlocked, it may be more effective to work through the private sector, as its enormous power and reach can be instrumental to preserving a livable planet.
Strange bedfellows? Sure. But ideological purity is for teenagers. If you want to get something done — if you want to win — you work with people you otherwise don’t care to associate with. As it says in my favorite book of the Bible, a threefold cord is not quickly broken.
