Is ESG, Bitcoin Energy Criticism, Fascist?

The below is a direct excerpt of Marty’s Bent Issue #1077: “More Unsolicited Thoughts On ESG.Sign up for the newsletter here.

I know, I know, I know. Some of you may think Crazy Uncle Marty’s anti-ESG schtick is getting a bit nauseating. However, as you should have realized by now, I cannot control myself. When I think there is a good point to be made about the subject, I will make it. And that is what I am here to do today.

The above snippet comes from a blog posted yesterday by Aswath Damodaran, a professor of finance at the NYU Stern School of Business, which builds on a post he published last September that began to dissect the ESG movement in the capital allocation space and beyond to determine whether or not it is a productive framing to conduct business and life. I highly recommend you take the time to read both pieces because Aswath does an incredible job of breaking down the thesis behind the investment strategy, how it gets implemented in the real world, its failure to accomplish its stated goals, why it can never accomplish its stated goals, and a better framework from which to approach “doing good”.

To summarize the core argument that Aswath makes; ESG does not work because it ignores the existence of free will and reduces individuals and individual processes into uniform inputs in a rigid mathematical function that spits out an ESG rating. At its core, this type of grading/rating system cannot work because, again, it ignores the existence of free will and the subjectivity of “goodness” in the eyes of two different individuals. It is literally impossible to settle on a ratings system that people are able to agree on. And since that is the case, any ratings system that is brought to market will inherently carry the biases of those who construct it; governments looking to acquire more power over their subjects and corporations looking to leverage advantages provided by regulatory moats.

Not only that, when these investment strategies are applied, they do not produce a return profile that is desirable. So this movement is crowding smaller players out by increasing the cost to comply and producing bad returns for investors. A lose-lose for most economic actors.

Now, if this is the case why are so many people pushing for it? Well, as Professor Damodaran so eloquently describes in his latest post on the subject; because most individuals don’t want to take personal responsibility and extreme ownership over their impact on the world. Many are so lazy that they would rather have the government, capital allocators, and corporations make these decisions on their behalf and provide them with an “ESG-certified” label they can point at and say, “See, I’m doing my part!” Completely glossing over the fact that when these personal responsibilities are handed over to bureaucrats, bureaucrats are going to do what bureaucrats do – whether they’re political or corporate bureaucrats – manipulate the system in their favor while making everyone else worse off.

Politicians will attempt to gain more control and some corporations will attempt to leverage it to create an artificial moat around their businesses to artificially reduce competition. Which leads to another interesting line of discussion under the overarching ESG topic; is it a form of Fascism? I think you could make a very good case that yes, yes it is. And nothing made this clearer to me than a clip that was floating around Twitter earlier this week of Dave Smith educating a fellow panelist about how Mussolini defined Fascism.

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