The Investor Seth Klarman, in a Rare Interview, Offers a Warning. Davos Should Listen
Comment of the Day

January 24 2019

Commentary by Eoin Treacy

The Investor Seth Klarman, in a Rare Interview, Offers a Warning. Davos Should Listen

Thanks to a subscriber for this article by Evan Osnos for The New Yorker may be of interest.

In his view, companies that operate with integrity rarely get enough credit for it from investors or the press. “You have people who are princes, who have good values, who treat people right. We don’t tend to pay a lot of attention; we don’t get a lot of stories about them. The surveys of the most admired businesses—how much do those evolve over time based on your market cap? What’s in vogue and in favor is ‘admired.’ ” He has watched, with chagrin, as Wall Street firms pocketed billions in fees and commissions by steering clients to bad deals that they dismiss as “O.P.M.”—Other People’s Money. “Talking about clients as though they are to be taken advantage of rather than to be honored, and respected, and cherished, as your lifeblood—it’s disgusting, but you see that in individual behavior.” He added, “When one person does that, it’s bad for all the rest of us.”

He told me, “I don’t think it’s too late for business leaders to start doing the right thing for their employees, their clients, and their communities.” And if they don’t? It could lead to regulations that, in his mind, would go too far in constraining corporate behavior. In his speech, he said, “When capitalism goes unchecked and unexamined, and management is seduced by a narrow and myopic perspective, the pendulum can quickly swing in directions where capitalism’s benefits are discounted, and its flaws exaggerated.” Klarman hopes that politicians in Washington will hear his message, but, more to the point, he wants fellow-practitioners to hear him. “If every businessperson, or enough businesspeople, don’t act as stewards of more than just the bottom line, somebody’s going to come along and do it for them.

Eoin Treacy's view

The rising tide of progressives, socialists, unions, social justice advocates and totalitarians are all clambering for the mantle of biggest redistributionist in a crowded field. That’s not a trend individual to a single country, it’s a global phenomenon.

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