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122 sats \ 3 replies \ @Undisciplined 8 Mar \ on: Mixing Business With Investing Pleasure (WSJ, Jason Zweig) econ
I just made a connection between something from labor economics and the futility of this sort of virtue investing.
We all know the argument about how capitalism pushes back against prejudicial hiring practices: greedy profit maximizing owners bidding up labor prices to parity, yada yada yada.
There's an extension of this idea that points out that prejudicial hiring doesn't even hurt wages, even if most of the firms are committed bigots. As long as there are enough positions available in non-discriminating firms, wages will still approach their marginal value product, but the minority workers will be highly concentrated in the firms willing to hire them. Sorting allows the bigoted capitalists to pay no penalty and keeps the non-bigoted from reaping any benefit.
Similarly, as long as the overwhelming majority of investors don't give a shit about ESG or DEI, those things (aside from their impact on productivity) will not affect share price. All that will change is who owns shares of which company.
Yup! Precisely.
I first looked at this more closely during some divestment campaign at uni. It never really made economic sense why university endowments ought to divest from this or that disfavored sector/company. You ain't "stripping them of capital" or "hitting them where it hurts—their wallets!"
You just shift the ownership profile
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Unfortunately, debating logic with the virtue signalers doesn't work. For them, the performance is the point.
What's frustrating is that they'll never just simply acknowledge it, despite all their actions revealing the truth.
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I think the naive expectation is that it’s a reduction in demand for their shares. It seems reasonable on its face, until you consider the reservoir of risk neutral capital out there.
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