Heated Debate About The Motive of ESG

PBD and the Biz Doc Interview the authors of one of their favorite books, W, Chan Kim and Renee Mauborgne, Blue Ocean Strategy Authors. In this clip, they have a Heated Debate About The Motive of ESG

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The ultimate Contribution capitalists make to society Is creating a job that allows an Individual to not lean on the government To take care of them which means taxes For me goes lower God willing the the politicians are not Irresponsible with money and they're not Spending it constantly which obviously We all know politicians are very Responsible with money they don't ever Overspend money they're very good at Always wanting to lower taxes for us Hence I'm being extremely sarcastic here Um but but but but but the other part That's kind of confusing lately here's What happened China you guys will Appreciate this Renee when we were going Through the process of uh talking to Investment bankers and selling the Company We had this one meeting in Fort Worth And not for forget it This was a family office that had I Think 21 billion dollars of money that They were responsible for and so they Wanted to buy a company and the constant Criticism they kept getting was The fact that uh uh a percentage of Their advisors were not Black Or Hispanic and they were 99 white and this Is a topic that's coming up a lot lately I'm sure people are calling you guys About it and you guys are helping them

Out you know so so so I said so where Are you going with this says look we Have a thousand resume we looked at this Is our problem only three B people Applied that were Black Or Hispanic to Want to become investment bankers in Fort Worth okay where they're at what do We do about it and so they they kind of Express indirectly their frustration and And for a moment it was almost like we Were not in the room did you feel that Was like they were like talking to each Other and then all of a sudden they Buttoned up and they fixed their ties But for like do you know what I'm saying I felt invisible for a moment I'm like Do you want me to step outside or you Have your staff meeting and we'll come Back and then and then the part where They went uh Chan is you know uh for us Are one of our chief reputation officer Morale at the time she's now the President she CR she got a report from Newsweek that was reported on Newsweek On our Dei score and we had a very high Dei score and you know they were Interested about our di score so it's Okay we can get that for you so they Looked at the DI score and their Conversation was we value this asset to Buy it because it allows us in a Marketplace to see him a company that Has a high Dei score hypothetically Right okay and then we're on a flight

Back and I'm sitting there saying I Don't know if that should be the reason For a company to make an investment just To please the government with a certain Score that they have so recently one of The candidates that's creating a lot of Uh Ruckus and he's being talked about Everywhere he's like the Andrew Yang uh Of the right Vivek ramaswani I don't Know if you guys are following him or Not so Vivek I actually you know first Time we had him on the podcast and I'm Listening to him like okay this guy's Got an interesting angle he's taken he's At three percent right now this morning I saw the reports he's ahead he's right Behind Nikki Haley and he's a percent Ahead of uh uh who's a lady from uh uh Arizona father was a uh Um Carrie like McCain is it McCain I'm Sorry she's not Arizona where's she Based out of is she Arizona or no McCain Is where's McCain from Uh uh is she the one that's from the Project the uh Lincoln project McCain She's from Do you know that or no anyway so she's Two percent vivec is at three percent I'm sitting there watching this and Renee all he talks about is how Catastrophic ESG is okay and how it's Causing companies to make decisions that Just doesn't make sense recently Bud Light made a bogus of a decision the VP

Of marketing and she says I'm a Businesswoman I said if you're a Businesswoman you know 85 percent of Your customers are men who drink Bud Light why would you want to Target a Certain audience and then story comes Out that she was trying to help increase The ESG score because Anheuser-Busch has Won the lowest ESG score but that's a Dumb move to make because you just hurt Your business you lost six billion Dollars in valuation and then the CEO Had to come out who's a former CIA Harvard Business School Military Marine Zach luck you know we're going to go Back to our horse commercials because That's who our audience is and we're Going to Target our military folks you Know those who love America so do you Think some do you think the direction We're going right now with these you Know ESG Dei never been in so many Investment banker meetings but everybody Wants to know what our ESG how Responsible we're being with the society And the economy and Di all this stuff And uh it makes capitalism capitalists a Little bit confusing because who are we Pleasing now and why are you concerned As well with the direction ESG and Di is Going I know it's a little bit of a technical Question I don't know which one of you Guys wants to take it but I'd love to

Hear your thoughts yeah Jen go ahead No Patrick obviously it's a really uh Sensitive issue and you're right I think There are a lot of people and Vivek Ramaswamy is one of them really uh Pushing back obviously he was a very Successful entrepreneur before that and What he's saying is reality is you know We need to build excellent companies and We need to build it based on economics And if we're geared too much towards That and you know he took on some Different examples like in the energy Industry by you asking me to do ESG You're effectively asking me to kill my Business Um and and kill that and so he's really Pushing back on does this really make Sense to an economy Um you know I'm gonna Dodge that partly As you can understand as well Um and maybe Chan will Dive Right In Um but that is why and I just go back to Non-disruptive it allows us in that Sense to recognize as Chan articulated Much earlier that that pressure is Really coming down from different forces Um for whether it's D ESG or on Dei it's A reality now there is a big wave of People I think increasingly saying whoa Whoa whoa have we taken this too far This is not making sense Um we need to think about Merit first we

Need to think about other things Um and I and I'm happy to share with you Um you know an idea we have for Non-disruptive creation and education That could help that I think Um But on the other hand you know when You're pursuing now disruptive Creation In that sense it gives you an angle in The economic pursuit to also show you're Not doing social harm and it's not Perfectly aligned in the ESG language And the Dei language but it can show a Different metric of what you're doing in That space and that's also why we Believe it's important but Chad maybe You want to touch that hot button issue Um Foreign [Music] Agents and they become a big government So to speak So we cannot deny Obviously become powerful Of course they make a laws so they say Hey governor a business you don't listen To me I'll punish you this way then you Become more unconfident that happens now Why not ends First of all they become so powerful And some very things we need to be Business but okay not our business Leading US Government we should leave Them they need our help maybe the good

Intention You don't know what the real motivation Is brown struggle when you see any good Intelligence think about it darling This is where many subsequences In night our bill what mechanism Government has Doing a great jobs that's obvious people Crying for jobs So it's a disruption okay Greek but God We don't have destruction they know it And who will like disruption reception Anyway So they say hey but what are the Mechanism oh we need to impose them this Mechanism holder yes [Music] And also the other side of it you guys Hope this was a responsibility you know You pay the value we should allocate That well with all good invention But eternity mechanism they have Oh it should be gender issue hey you Need to have some woman some Hispanic What else they can do So we need help for government so to Speak we need to give them alternative Way Nearly without going that direction it Does not come to suggestion they always Go that way we know government very well Right Now Machiavellian approaches sometimes Government does

So now we need to educate government as Activity talked about hey why should you Destroy the jobs you don't have to look At entrepreneur this is where you can Make more money by doing So hey You know think about it rather than Talking those Forcing annotated storm voicing making Money that's better way of doing it It's like for example We talk about Tom's idea hey New York City guys coming entrepreneurs are Coming everybody coming in We need to create job here right yeah we Welcome knows it's not the price but you Know it's create a lot of social Instability But now we want to tell you the Disruptive opportunities That job growth is very important Entrepreneur here are the examples here The question when you go back your home You ask a thousand questions similar Like one Don't be obsessed with one idea think of An alternative task to Innovation and Growth Israel Ronnie and Chan talked about him he Subject creation so can you think about It now I'm not going to score for you I'm not going to force you you cannot be The idea what we will do Make our fund available for those good

Idea to work my job Trading job without disruption even if You double incentive to do the money now To the government I mean no one loves it because teachers Don't have anything full to do them Control mechanism because there's better Cry everybody say German And people not even happens medically Well of course they should but now that I'm deceiving Express ridiculous Bureaucracy we're creating approach so Now we suggest to say hey don't do it Let's do it this way reading is like a Manner this way you can create economic Growth and profit at the same time so Think about non-disceptible Opportunities here's what book says Here's what is the way to do it any Other you know thinking about this way To incentivize but if you have an Interactive opportunity in front of you Well then I call on this vaccine Busy people needing the leading the way Now if government is leading Penis people are sitting on you know Back of the car that could be very risky Enterprises in it now we need to change Your order and how can business incent By themselves to driving Well we need to have a means Theory a New thinking process where That should happen then disruptive Creation is way put the beans up front

But government is playing Sponsor all or the incentive incentive Role push the resources behind make the Push Now we need those many ideas I'm not Saying that this application is Dissolution I will never say that anywhere Anyway these are only had for your Information this is only sure we we came Together we've never did it together Perhaps you said I want to see China Okay we are also equally curious to see The path right it's such a you know plan For pollution it has been very moved Across for a long time didn't see your Face even though we saw in a photo well It's fun to see real real bigger which Is it today I want to stop right here Rene You know I was just gonna go back to Something Patrick you said very early in The conversation when we were talking About you know the applicability of blue Ocean far and wide you know even you're Talking about you know your local church Um or a local church And I think that you know maybe this Pressure is coming down and there's also A wave pushing against it saying we're It's going too far But in the interim it's the reality Companies are up against and it's a very Real reality and some of the biggest

Um people that control a lot of the Equity in capital Are making their investment decisions of Where to invest Pension funds in this in Those companies so the pressure is Coming from all different directions And it might mean from a company point Of view in a very practical sense Um to start thinking about how do I blue Ocean Source employees differently Do I need a different approach in terms Of where I'm looking for my employees so That I can achieve the Excellence I need And be able to meet this new Differentiated quota And are there different sources that I Have to go to to be able to make that Happen so for example for the diversity Equity inclusion So for some companies that that might be The challenge for them then Um given the reality that it's coming Down on everyone I think very very hard And from different forces Because to deny it and simply bucket yes We can do that you can make that Movement if that's what you feel but That might take longer than the pressure The immediate pressure coming down and The question is I want to push for Change like this gentleman Vivek Ramaswamy is doing and a number of other People of course but at the same time I Need to deal with current reality and

You know a blue ocean approach as well To the employment HR policies of a company and how we do That sourcing could be a solution to you There too yeah you know trust me we God Knows how many meetings we've had about This to try to find a way on how to Create our own blue ocean I I'll turn it Over to you but I want to say something Before I turn it over to you you know uh I lived in Iran 10 years And then we escaped Iran to come to U.S And when we escaped was because we were Forced to do things we didn't want to do Okay And the people who don't like to be Forced they leave The people who cave in and they're like Well I'll just kind of conform to be Enforced they stayed It's not in our DNA to conform and to be Forced to do what we don't want to do And we lived in Germany for two years Refugee camp then we came to the states Here and then after the Army I choose to Go into the financial services And I realize most people who start a Business is because that have fallen out With the boss at the prior company Because they made a decision that they Didn't want to pursue the the part with This is you can go to Subway and if you Don't like it write a negative real Yelp Review the manager may contact you to

Find a way to make it a positive review You can go to DMV and write a negative Review no one cares there is no Accountability you can write as many go Find me a DMV in America with five star With more more than 100 reviews I will Give them ten thousand dollar donations I'll send them lobsters for everybody For a day enjoy yourself for treating People well government employees don't Are not typically good and I've been a Government employee before being in the Military so I know what it is to be a Government employee so yeah the only Thing I'll say to that is my concern is I don't want to uh abide by the force And I know the whole thing about what Either 301 signatories 51 uh million Dollars of asset under management The Net Zero asset initiative whatever they Call it so everybody's worried about not Getting access to that money but I just Don't think that's the right way of um Dealing with entrepreneurs and Capitalists but again I'm that's my Thoughts I'll transition to whatever Question Tom has yeah and I think when You You have to some people think capitalism Is a dirty word it's really freedom and Liberty in a business construct governed By appropriate regulations and laws and You have things that come down like Sarbanes-oxley that added a lot of cost

To going public but it was there to Fight financial fraud and make sure the Playing level was fair legal and Equitable and so those things are good Even though I've been through a sarbox IPO and it was not fun it was more Expensive but I understood logically why All those elements and controls were Present then you go to something where You have this unintended consequence in Slippery Slope like carbon credits Carbon credits which there is a lot of Fraud in carbon credits where it's just A bunch of money spinning around where You're faking By oh I bought carbon credits over here Over there did that really take carbon Out did that really uh plant so many Hundreds of hectacres of um of trees in The Amazon that have been previously Stripped for farming you know did Something really happen there and the Answer the answer is no so you have the Unintended consequence and the slippery Slope of all the things you're supposed To be doing end up being virtue Signaling what and nothing happens like When we were on the plane coming from Fort Worth I really felt that all that Private Equity Firm wanted to do was Under the pressure of Dei they looked at Us as an opportunity to make an Acquisition that was basically Profitable but also first virtue

Signaling so they could check a box and It's like wait a minute you know PHP When he had the vision to start it he Recruited from an open market and gave Open opportunity and guess what happened You end up 51 percent female what a Surprise 50 of the babies born or female So when you do it in a fair normal and Just way in an open market as Pat did You end up with a Workforce that exactly Reflected the the population and in all Of its one wonderful diversity so I Think there's don't you think there's a Lot of virtue signaling that happens Here that is an unintended consequence When you try to put a force point in There you're going to get virtue Signaling and even fraud as opposed to Allowing things to happen you know Organically with incentive You know Tom what you're signaling to me And I appreciate so much your passion Imagine your what you're saying is um I Want to push back on what I see Because I want to disrupt what I see Happening right now Because for me it doesn't make sense It's not how we built our business it's Not how great companies are built and What we said is what happens when you Push back on disruption and you decide To disrupt the existing order They're gonna not just say like welcome They're going to push back

So what if instead you start thinking About what would be a non-disruptive way To go about Articulating this Vision we have of how You build greatness And making that non-destructive market So big I mean Square Reader today is one Of the biggest markets right one of the Biggest sexiest players out there versus Existing credit card payment systems And they didn't take it on and so I'm I'm being philosophic in that But maybe just the counter punch as well It could be one way obviously and I see Where you're coming from But maybe the other thing is to start Thinking ourselves okay look we don't Like this we know a lot of other Business people that don't like this we Don't feel it's fair We feel it's virtual signaling we don't Feel we build great companies in the end We don't feel we'll hire as many people And help as many people as we can Because your service and your product Obviously helps so many people right Your education helps people your Insurance products help people so maybe We need a non-destructive approach to Get around that to grow and I add something about Renee said it Could be please yes so very important to This thing I did not realize it Keep on using virtue as kind of good

Thing to do Based on this type of thing we never Talked about the virtue But is never really important purchase Very subjective topic you can be Purchase them as a person How can you have been installed or Writing about virtue and impaired to say It's philosophical topic when we are Talking about Social good good for society you never Think about blood sugar so that's Distinguish between when we are talking Such a good versus virtue what do you Mean by Social Circle Only talking Peace but good It's not necessarily doing Making people happier That's not we are doing we are doing Business manner Then you don't have to destroy you don't Have to it shouldn't be so don't ask Question destruction is necessary well Is that really necessary Then all of a sudden you start to see New ideas or don't have to The model Creator ideas opening TV so happen to help Society At the same time you make lots of money You swim in Blue Ocean No competition Yes who are the Bingo is For making money you go to place where

Nobody's in and you go non-destructive Way There's no resistance so it happens to Be good So For business to begin with second also Do not destroy good for society in that Qualified manner we are talking about We are not talking hey people to society No that's not what we are talking so I Just want to make the distinction Semantics So yeah I would say two things I would Say two things I would say one uh uh I understand why Renee this is not a Topic to talk about because you know who Your customers and I respect it because You're I don't know if this makes sense You're doing exactly what I would do Because you know who your customer is Some of your customers that reach out to You for Blue Ocean are the ones that are Part of the esgdi community and why Would you give a message that would lose Some of those customers I get it I Respect it so I totally understand why Renee you wouldn't touch that because Maybe five of the biggest companies you Guys consult for they wouldn't want to Do that part yeah I would say the other Part with this is the following thing is On the social good side You know what my argument is on the Social good side this is my argument for

The social good side I understand if you want me to use a Portion of my money To for the social good of the country if I'm not paying any taxes But if I'm paying taxes and I'm giving You the money it's your job to take that Money and do something social good Because that's the government's job if That's what you're doing you're taxing Me for you to do good don't add Additional restrictions for me to do Good my job is to create a company my Job is to create a job a company that Creates jobs innovates makes things Smoother better for everybody else That's not something that and then you Want to tax me as well and then you also Want to tell me what to do with the Money that I'm not being taxed on to Force me to not your next thing you know Is you want me you want to tell me who For me to marry and how for my private Life how many kids to have I'm not for That I'm a guy that's uh subscribes to Andy Grove's book of only the paranoid Survive and as an entrepreneur and Immigrant and a capitalist I'm gonna Stay paranoid and uh that's not gonna Change but I respect your position where You're going with this so if you like This clip and you want to watch another One click right here and if you want to Watch the entire podcast click right

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