Paul Tudor Jones re Just Capital

This is a story about capitalism. It's a system I love because of the successes and opportunities it's afforded me and millions of others. I started in my 20s trading commodities, cotton in particular, in the pits. And if there was ever a free market free-for-all, this was it, where men wearing ties but acting like gladiators fought literally and physically for a profit. Now fortunately I was good enough that by the time I was 30 I was able to move into the upstairs world of money management, where I spent the next three decades as a global macro trader. And over that time I've seen a lot of crazy things in the markets and I've traded a lot of crazy manias. And unfortunately I'm sad to report that right now we might be in the grips of one of the most disastrous certainly of my career. And one consistent takeaway may be: never in well now. Over the past 50 years, we as a society have come to view our companies and corporations in a very narrow, almost monomaniacal fashion with regard to how we value them. And we have put so much emphasis on profits, our short-term quarterly earnings and share prices, at the exclusion of all else. It's like we've ripped the humanity out of our companies. Now we don't do that conveniently reduce something to a set of numbers that you can play with like Lego toys. We don't do that in our individual life. We don't treat somebody based on or value them based on their monthly income or their credit score. We have this double standard when it comes to the way that we value our businesses, and you know what? It's threatening the very underpinnings of our society. And here's how you'll see this. Chart is corporate profit margins going back 40 years, percentage of revenue. You can see that we're at a 40-year high of 12.5%. Now hooray if you're a shareholder, but if you're the other side of that and you're the average American worker, then you can see it's not such a good thing. Now increased profit margins or higher profit margins do not increase societal wealth. What they actually do is they exacerbate income inequality, and that's not a good thing. But intuitively that makes sense, right? Because if the top 10% of American families own 90% of the stocks, as they take a greater share of corporate profits, then there's less wealth left to the rest of society. Again, income inequality is not a good thing. This next chart made by the Equality Trust shows 21 countries from Austria to Japan to New Zealand. On the horizontal axis is income inequality: the further to the right you go, the greater the income inequality. On the vertical axis are nine social and health metrics: the more you go up, the worse the problems are. And those metrics include life expectancy, teenage pregnancy, literacy, social mobility, just to name a few. Now those of you in the audience who are Americans may wonder, well where does the United States lie on that chart? And guess what, we're literally off the chart. Yes, that's us with the greatest income inequality and the greatest social problems according to those metrics. Now here's a macro forecast that's easy to make: that gap between the wealthiest and the poorest, it will get closed. History always does it, and typically happens in one of three ways: either through revolution, higher taxes, or wars. None of those are on my bucket list. Now there's another way to do it, and that's by increasing justice in corporate behavior. But the way that we're operating right now, that would require a tremendous change in behavior. And like an addict trying to kick a habit, the first step is to acknowledge that you have a problem. And let me just say this: the profits mania we're on is so deeply entrenched that we don't even realize how we're harming society. Here's a small but startling example of exactly how we're doing that. This chart shows corporate giving as a percentage of profits, not revenues, over the last 30 years. Just juxtapose that to the earlier chart of corporate profitishness, and I ask you, does that feel right? Now, in all fairness, when I started writing this I thought, wow, what does my company, what does Tudor do? And I realized we give 1% of corporate profits to charity every year. And I'm supposed to be a philanthropist? When I realized that, I literally wanted to throw up. But the point is, this mania is so deeply entrenched that well-intentioned people like myself don't even realize that we're a part of it. Now we're not going to change corporate behavior by simply increasing corporate philanthropy or terrible contributions. It's going to—and oh by the way too, we've since quadrupled that. But we can do it by driving more trust behavior, and one way to do it is actually trusting the system that got us here in the first place, and that's the free market system. About a year ago, some friends of mine and I started a nonprofit called Just Capital, and its mission is very simple: to help companies and corporations learn how to operate in a more just fashion by using the public's input to define exactly what the criteria are for just corporate behavior. Now right now there's no widely accepted standard that a company or corporation can follow, and that's where Just Capital comes in. Because beginning this year and every year, we'll be conducting a nationwide survey of a representative sample of 20,000 Americans and find out exactly what they think are the criteria for justice in corporate behavior. And this is a model that's going to start in the United States but can be expanded anywhere around the globe. And maybe we'll find out that the most important thing for the public is that it create living wage jobs, or make healthy products, or help not harm the environment. At Just Capital, we don't know, and it's not for us to decide. We're but messengers. But we have 100% confidence and faith in the American public to get it right. So we'll release the findings this September for the first time, and then next year we'll poll again and we'll take the additive step this time of ranking the 1,000 largest US companies from number one to number 1,000, and everything in between. We're calling it the Just Index. And remember, we're an independent not-for-profit with no bias, and we will be giving the American public a voice. And maybe over time we'll find out that as people come to know which company is the most just, human and economic resources will be driven towards them, and they'll become the most prosperous, and help our country be the most prosperous. Now capitalism has been responsible for every major innovation that's made this world a more inspiring and wonderful place to live in. Capitalism has to be based on justice, has to be. And now more than ever, with economic divisions going wider every day, it's estimated that 47% of American workers can be displaced in the next 20 years. I'm not against progress. I want to drive this car and the jetpack just like everyone else. But I'm pleading for recognition that with increased wealth and profits has to come greater corporate social responsibility. If justice is removed, said Adam Smith, the father of capitalism, the immense fabric of human society must in a moment crumble into atoms. Now when I was young and there was a problem, my mama used to always shake her head and say, "Have mercy, have mercy." Now's not the time for the rest of us to show them mercy. The time is now for us to show them fairness. And we can do that, you and I, by starting where we work and the businesses that we operate in. And when we put justness on par with profits, we'll get the most wonderful thing in the whole world. We'll take back our country. Thank you.