You’ve probably heard of Vivek Ramaswamy.
The whip-smart Republican presidential contender.
Vivek Ramaswamy and family. Source: Lifestyle Asia
He’s a 38-year-old billionaire who, if elected, promises to pardon Trump. In fact, some see him as younger, bolder Trump.
He has many conservative positions finding favour with supporters. For example:
- Opposes affirmative action and critical race theory.
- Considers abortion a form of murder. But should be dealt with at state level.
- Seeks to abolish or gut federal agencies, presumably because many have become woke or useless, reducing their workforce by 75%.
- Pledges to achieve ‘semiconductor independence’ by 2028.
- Has criticised the ‘climate cult’. Asserting in a debate that ‘more people are dying from climate policies than actual climate change’. And that ‘human flourishing requires fossil fuels’.
- Wants to raise the voting age from 18 to 25, except for those working in the military or ‘first response’ services such as the police.
- Seeks to tie the US dollar to gold.
Ramaswamy made his money working with biotech portfolios in hedge funds. Then going on to found Roivant Sciences.
Roivant’s strategy was to buy patents for drugs that had not yet been successfully developed. Then bring them to the market.
If you doubt the American immigrant dream, Ramaswamy’s background and success suggests it is still very possible.
Born in Ohio in 1985 to Indian Hindu immigrant parents, his father worked as an engineer and his mother a geriatric psychiatrist.
He attended the local Hindu temple with his family, was influenced by his Christian piano teacher, and went on to attend Catholic high school. He graduated as valedictorian in 2003.
Later, he graduated from Harvard in 2007 with a Bachelor of Arts. And from Yale Law School in 2013.
Reportedly, by the time he attended Yale, he was already worth $15 million from his activities working with hedge funds and biotech.
Strive Asset Management
In early 2022, Ramaswamy co-founded Strive. A wealth management firm based on the premise that shareholders are more important than stakeholders.
Strive has launched a campaign to promote excellence over politics in corporate boardrooms. Source: Oil & Gas 360
Chief executive Matt Cole summarised the position: ‘The corporate ESG movement has been value-destructive and politically motivated.’
The fund claims shareholder capitalism has outperformed stakeholder capitalism by over 3% p.a. over the past 35 years.
They believe failing to prioritise shareholder interests and using capital to advance other stakeholder interests is a major fiduciary breach.
This is where things get interesting for investors.
One thing that bugs me is when company management starts focusing on activist areas that are not in the interests of shareholders.
We invest in companies to produce returns. Growth in the business and share price. Ongoing income development via dividends.
When boards and management ‘go woke’, the deal with shareholders often goes broke.
Let me give you an example, closer to home.
BHP [ASX:BHP] is the largest mining company in the world and the largest company in Australia by market cap.
BHP is worth more than A$220 billion. Almost the size of the entire economy of New Zealand.
BHP has made vast profits from extracting key manufacturing resources like iron ore over many years.
Yet it also faces upcoming challenges. Around 60% of BHP’s revenue typically comes from China.
On the back of an overbuilt property market and demographic challenges, China appears to be slowing fast.
As a shareholder, I’d like to see BHP aggressively focused on finding new markets and recovering from any revenue slump that may result.
Yet BHP — along with some other large Australian corporates — has been helping to bankroll the Yes campaign for the Voice referendum.
The Voice referendum
This is set to take place on the same day as the New Zealand general election: Saturday, 14 October.
It proposes to ask Australians to vote ‘yes’ or ‘no’ on this:
‘A Proposed Law: To alter the Constitution to recognise the First Peoples of Australia by establishing an Aboriginal and Torres Strait Islander Voice. Do you approve this proposed alteration?’
Regardless of what you think of the Yes campaign, you have to ask why BHP is supporting it?
Yes, the Company operates on the traditional lands of indigenous people. They may well be stakeholders. But it does not appear to be in the interests of shareholders to donate money toward a political case. One that could in fact end up complicating the business.
Further, on current polls, the outcome of the Voice referendum looks to be a resounding ‘no’ from the Australian people. Especially since more than half of the voters in at least four states must vote in favour.
But BHP’s manoeuvre is just the tip of a rather grating iceberg.
We’ve seen listed companies support various unrelated causes with no benefit (and sometimes detriment) to shareholders. These causes range from transgender rights, LGBT+ rights, climate change, and so on.
Under the model and strategy of Ramaswamy’s Strive Asset Management, such firms would be un-investable, Their meanderings into politics and the culture war could potentially cause investors to lose 3% or more of their money. Compared to other firms solely focused on shareholder value.
It makes sense.
Business should be separate from politics. By all means, business should be ethical. But those ethics extend to serving their owners — not disparate and minority interests.
As shareholders, we have to keep pushing back on boards and managers who find themselves compelled to virtue-signal rather than focus rigorously on the bottom line.
Frankly, if you’re a board member or executive with an axe to grind — run for public office.
Yes, you may not earn as much. But you can pursue your views on your voters’ dime. Not mine.
Editor, Wealth Morning
(This article is the editorial content of this periodical. It is the author’s personal opinion and commentary. It is general in nature and should not be construed as any financial or investment advice.)