Ain’t No Such Thing as a Free Lunch

“What’s mine is mine, and what’s yours is also mine” [Morning Reckoning] June 22, 2023 [WEBSITE]( | [UNSUBSCRIBE]( Ain’t No Such Thing as a Free Lunch - The concept of stakeholder capitalism or “free lunch” can’t die soon enough. - Stakeholder capitalism is nothing more than the exertion of ownership by non-owners. - Therefore, stakeholder capitalism is a gross violation of the sanctity of private property. [“Godfather Of AI” Reveals Stunning Prediction]( [Click here to learn more]( He’s a 35-year AI veteran who has worked closely on AI technology for decades… - In 1988, the National Science Foundation funded him to build an AI chess program. - He’s written and published academic papers on AI. - And he’s used AI to trade stocks as early as 2001. [But today, he’s stepping forward with a critical prediction that he says every investor needs to hear.]( Whatever you do, I’m urging you to not invest a single dime into AI technology until you see this man’s warning. [LEARN MORE]( Asti, Northern Italy June 22, 2023 [Sean Ring] SEAN RING Good morning Reader, Happy Thursday to you from a lovely Asti! “What’s mine is mine, and what’s yours is mine!” is a fun little reminder my mother used to lob at my father. I remember bristling at it when I was a kid, not because my mother was in any way mean-spirited about it or even because my father was resigned to it. But as an only child, that meant I’d have to share one day. To this day, I buy my wife a separate popcorn — not that we ever go to the movies anymore — and separate gelato when taking our passeggiata. Micah is the only person who ever (just ask my ex-girlfriends) gets a free share, and that’s because I feel like I’m giving it to my younger self. Petty personal preferences aside, it leads me to a big problem I have with a practice we’ll discuss today… Stakeholder capitalism. The system that allows non-owners to impose extraneous costs on the actual owners of a corporation. But I’ve gone ahead of myself. Let’s start with the definition of the term. What is Stakeholder Capitalism? Stakeholder capitalism is an economic approach that emphasizes the importance of considering the interests of all stakeholders involved in a business or organization beyond just the shareholders. Traditionally, capitalism's primary focus has been maximizing shareholder value, where the primary goal is to generate profits and increase the value of shares for the shareholders. However, stakeholder capitalism takes a broader view. It recognizes that businesses are responsible for considering the well-being of various stakeholders, such as employees, customers, suppliers, local communities and the environment. It acknowledges that these stakeholders also contribute to the success and sustainability of a company and should be taken into account when making business decisions. Under stakeholder capitalism, companies aim to create long-term value by addressing the needs and concerns of all stakeholders. This can involve fair treatment of employees, providing quality products or services to customers, fostering strong relationships with suppliers, being socially responsible in the community and adopting sustainable practices to protect the environment. Stakeholder capitalism promotes a more balanced and inclusive approach to economic growth, where shareholders' interests are considered alongside other stakeholders' well-being. The goal is to create a more sustainable and equitable form of capitalism that benefits shareholders and the broader society. My problem with the entire edifice is that the market usually corrects for companies' indiscretions like employee or client mistreatment. Of course, that doesn’t happen all the time. [There is MASSIVE change happening within our company]( And I want you to [hear about this – from me]( – otherwise this new policy could blindside you. This has gone into effect immeditaly, so I want you to understand exactly what it will mean for you. [So please, watch this video for my full announcement.]( [LEARN MORE]( Let’s take that son-of-a-bitch Jack Welch for example… [He utterly destroyed the Hudson River and its ecosystem for generations](. Nothing ever happened to him. Why? Because he was “too powerful.” And he “settled out of court.” But really, the EPA was toothless, and the New York State government was useless. Never rely on the government to protect the environment. Just ask the Russians where the Aral Sea is if you need proof. Unfortunately, Environmental, Social, and Governance (ESG) investing is just one of the cancerous outgrowths of stakeholder capitalism. The Pros and Cons of Stakeholder Capitalism Let’s try to remain dispassionate and lay out SC's lovely and lousy. Pros of Stakeholder Capitalism: Inclusive decision-making: Stakeholder capitalism allows for a more inclusive decision-making process by considering the perspectives and interests of various stakeholders. This can lead to better-informed and more balanced decisions considering the broader impact of business actions. I have no problem with this, as long as it’s unofficial. Long-term sustainability: By considering the interests of all stakeholders, stakeholder capitalism promotes the long-term sustainability of businesses. This approach encourages companies to focus on environmental sustainability, social responsibility and ethical practices, which can enhance their reputation and mitigate risks in the long run. Again, the market would ultimately correct bad behavior anyway. Enhanced reputation and brand value: Embracing stakeholder capitalism can improve a company's reputation and brand value. Consumers, employees, and investors increasingly prefer companies committed to social and environmental causes, leading to increased customer loyalty, employee satisfaction and investor confidence. Unfortunately, many people who’d approve neither buy the company’s products nor own its stock. Resilience to crisis: Companies prioritizing stakeholder interests are often better equipped to navigate and recover from crises. By maintaining positive relationships with employees, customers, and communities, businesses are more likely to receive support and cooperation during challenging times. This is common sense. Cons of Stakeholder Capitalism: Complexity in decision-making: Taking into account the interests of multiple stakeholders can make decision-making more complex and time-consuming. Balancing competing demands and priorities may require extensive deliberation, potentially slowing the decision-making process. You can’t make everyone happy. It’s that simple. Potential conflicts of interest: Different stakeholders may have conflicting interests, making it challenging to satisfy everyone simultaneously. Balancing the needs of shareholders with those of other stakeholders can sometimes lead to tensions or compromises that may only partially satisfy some groups. This is why you shouldn’t even try to keep everyone happy. Short-term profitability concerns: Critics argue that stakeholder capitalism may place less emphasis on short-term profitability and shareholder returns, potentially impacting the financial performance of businesses. This concern arises from the belief that prioritizing stakeholders other than shareholders could divert resources and attention away from maximizing profits. DEI (Diversity, Equity, and Inclusion) and ESG are two enormous wastes of capital. Lack of clarity and measurement: Determining different stakeholders' specific interests and priorities can be subjective and difficult to quantify. Without clear metrics or guidelines, measuring the success of stakeholder capitalism initiatives and tracking progress may be challenging. Again, this is one reason companies shouldn’t try to make this official business. Conflict With Private Property Allegedly, stakeholder capitalism doesn’t necessarily conflict with the concept of private property and ownership. In fact, private property and ownership rights are fundamental pillars of capitalism, including stakeholder capitalism. Instead, stakeholder capitalism expands the perspective of capitalism by recognizing that businesses operate within a broader societal context and have responsibilities beyond maximizing shareholder wealth. It acknowledges that companies rely on various stakeholders and resources to function effectively and sustainably. While private property rights allow individuals or entities to own and control assets, stakeholder capitalism emphasizes that exercising those rights should consider the interests of all stakeholders involved. It advocates for a more inclusive and balanced approach to decision-making, where the impact on employees, customers, communities and the environment is taken into account alongside the rights of property owners. Unfortunately, none of those participants other than shareholders (the property owners) pay for that privilege. Stakeholder capitalism calls for responsible and accountable management of a firm’s assets. It suggests that businesses should consider their actions' social, environmental, and economic consequences, even as they continue to exercise their ownership rights. I don’t know a single company that doesn’t. I’m not saying they always get it right. But that’s where the market comes in and corrects the company via a reduction in its share price. In essence, stakeholder capitalism wants to align private property owners' interests with society's broader interests (whatever they are). It’s supposedly a more nuanced and inclusive interpretation of capitalism. Stakeholder capitalism advocates the inclusion of various stakeholders in decision-making processes. Still, it does not necessarily imply that individuals who don’t own companies have direct control over how those companies are run. I’d argue the above paragraph is incorrect. Just ask Larry Fink of BlackRock, who’s currently trying to[force behaviors](. Larry has forgotten he’s only the fiduciary custodian of our funds’ assets, not the owner of them. If A Company Is Run Legally, Why Would Any Non-Owner Have a Say? In a traditional capitalist model, where the focus is solely on maximizing shareholder value, the decisions and actions of a company are primarily driven by the owners and shareholders. However, stakeholder capitalism argues that companies should consider the interests of all stakeholders, even if they don't have a legal right to influence decision-making. The goal is to ensure that business decisions reflect broader perspectives and consider the potential impact on stakeholders. And yet, the honest answer to the question I posed above is “absolutely none whatsoever.” A non-owner should never have a say in how a firm is run. That’s what the owners are for. That’s why owners pay for their shares. As Robert Heinlein wrote, “TANSTAAFL.” There ain’t no such thing as a free lunch. And that’s just what non-owning stakeholders want: a free lunch. But here’s what I say to traditional stakeholders: - Employees: Don’t like what the boss is doing? Quit and work for someone else. Or better, yourself. - Clients: Don’t like what the company is doing? Stop buying the products. - Townsfolk: The company is polluting your town? Sue their asses off. But if you’re in love with the company and want to push it in a different direction, talk to the boss. Talk to management. Talk to your line manager. These days, most companies go out of their way to listen to their employees, clients, and other stakeholders. It’s cheaper than dealing with a boycott. [Just ask Bud Light](. Think the Tinder guys wish they treated Whitney Wolfe Herd better? After they were done harassing her,[she founded Bumble and is worth over a half billion dollars](. Squeeze your suppliers too hard? They go out of business, and[companies like GM cry poverty](. (GM is chock full of pricks. I’ll never buy their cars.) The market will correct. It always does when left to its devices. The bottom line is this: stakeholder capitalism is a monster that Klaus Schwab invented to get into boardrooms without paying the entry fee. Wrap Up Stakeholders are shareholders without shares. Sure, they’ve got concerns. But that’s where good negotiation skills come in handy. Oh, and a big stick. Capitalism works fine when it’s not interfered with. Because, like with karma, what goes around will surely come around. What do you think? Let me know what you think by emailing me [here](mailto:feedback@dailyreckoning.com). All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com Twitter: [@seaniechaos]( [Rickards: “Look at this $1 bill…”]( [Click here to learn more]( There’s a very important reason Jim Rickards is holding this $1 bill… It has to do with [a critical 11-word message]( hiding in plain sight, right on the front. Without this message… Every dollar you own would be completely WORTHLESS. And as Jim points out… That could be EXACTLY what Joe Biden has in mind. [Click here to learn the TRUTH, and how to protect your money now](. [LEARN MORE]( In Case You Missed It… I’m (Almost) Tired of Tech Stocks Greg Guenthner, Editor [Greg Guenthner] GREG GUENTHNER Good morning Reader, The stock market is dragging me kicking and screaming into the artificial intelligence age. I’m at the beach this week with my extended family, doing my best to disconnect from stocks and screens. Instead of scanning for trades, I’m leaving my phone on the bedside table to catch some rays and dig in the sand with the kids. Taking a break from my screens also gives me time to think — a blessing and a curse these days. There’s no shortage of market action to ponder. Stocks have zoomed higher this year. New bubbles are emerging before the last bit of air escapes from the old. And I’m stuck writing about the next big thing in tech that’s dominating the market… Such is the plight of the trader. If I want to win, I have to travel with the hot money. These days, the hottest money is in the tech trade, specifically the AI boom. And no, I’m not exactly psyched about our new artificial intelligence overlords. But as we’ve previously discussed, the market’s lightning-fast pivot to AI is the main driver of the tech sector’s strong performance this year. C3.ai Inc. (AI) has made a mockery of prudent, value-minded investors, exploding higher by more than 370% year-to-date. Its emergence as the dominant speculative trading vehicle of 2023 has already attracted the YOLO crowd — the same kids who were slinging Gamestop and AMC options back in late 2020. As if we needed any more evidence that frothy market conditions have returned, The Wall Street Journal just profiled an 18-year-old investor [playing the AI boom over summer break](. “He’s one of many who bought the dip in tech stocks last year and has poured even more money into them during their meteoric rally this year,” the note reads, highlighting the college student’s recent purchases of APPL, META, and NVDA. Unfortunately, the article fails to mention whether this young Livermore is beating the mighty Nasdaq this year. But it does reveal that he isn’t above falling into the market’s most speculative traps, including the admission that he’s made “some ill-timed bets, including on bankrupt retailer Bed Bath & Beyond.” Yet, unlike the struggling old-school meme stocks, the AI boom is thriving — and potentially growing into a bigger tech moment. META just logged 52-week highs last week, while AAPL posted new all-time highs. In addition to embracing the AI movement, the two tech giants also just happen to be releasing new virtual/augmented reality headsets soon. Meta has the Quest 3, while Apple is debuting the $3,500 Vision Pro headset early next year. Is this where the bubble is headed? Is Silicon Valley trying to get us to strap out computers to our faces while our AI-enabled assistant reads our junk mail and fills our calendars with surprise performance reviews with human resources? [Zuckerberg] VR King Zuckerberg approaches! (Disclaimer: This photo is from 2016, so I think it’s fair to say we should have seen this coming… ) It all feels so dystopian. But I’m not one to run from reality — virtual or otherwise. So instead of throwing my phone and laptop into the ocean, I’ll attempt to jot down some of my squishier thoughts about what’s happening in the tech markets right now, and how these scenarios might play out in the weeks and months ahead. [Warning: Will “Bidenflation” Destroy Your Retirement?]( [Click here to learn more]( If you’re like most Americans, you’ve worked hard for decades to build your financial legacy. And now, as a result of Biden’s disastrous money printing policies, that’s all at risk. According to one top retirement expert, “Bidenflation” threatens to destroy your retirement and make your hard-earned savings worthless. That’s why you must take action right away to protect yourself… [Click here now to get the simple, step-by-step actions to survive “Bidenflation.”]( [LEARN MORE]( The Future No One Wants One argument against some of this new tech (specifically virtual/augmented reality) is that consumers simply aren’t interested. It’s true — VR headsets haven’t really moved beyond a niche market. I’ve never seen someone sitting at a Starbucks wearing a VR headset, whereas folks are on their phones and laptops all the time. But it only takes one breakthrough product to radically change our collective attitude about a particular technology. Apple didn’t make the first smartphone. But Steve Jobs made the first smartphone that everyone needed. VR has seen its share of early prototypes and moderate successes, from Google Glass to the game and experienced-focused Oculus. Perhaps we’re just very early in the cycle. I’m not an early adopter. But I’ve learned not to knock these innovations that don’t pan out right away. Room for One More? Artificial intelligence has been the one major tech theme to capture investors' imagination in 2023. But is there any room for VR on the hype train? I think it’s possible we get a bigger tech rotation into more speculative names. AI (the stock) has obviously attracted a ton of attention. Some of the smaller, even more speculative artificial intelligence names could also catch fire as Big Tech and the stronger performing names consolidate. VR joining the party isn’t that far fetched. Plus, the VR theme goes well with AI. There’s a ton of overlap with publicly traded companies associated with both. Apple is also an important piece to the VR puzzle. The biggest of the tech giants just made a huge foray into the VR/AR space. That alone tells me this segment isn’t going away anytime soon. [New “WiFi Crypto” Token is Going NUTS!]( Only a handful of crypto investors know about this… But there’s a tiny, affordable device… That’s paid investors real crypto – every day, with zero work… Just for having a working WiFi connection! It sounds crazy, but it’s true… And [this 3:28 video]( explains everything. [Click here to view it NOW](. [LEARN MORE]( Stealing Bitcoin’s Thunder Finally, I wonder how much speculative juice is left in this market. We endured an ugly bear market in 2022. But these same stocks that were at the forefront of last year’s meltdown are now among the top performers this year. But I have to imagine there’s a good chunk of Covid Bubble money that isn’t going to rush into the next frothy market theme. Just look at Bitcoin. While crypto posted a strong run to start the year, Bitcoin and Ethereum have gone nowhere since March. Meanwhile, tech is all the rage again. Have the crypto kids really tossed their tokens into the speculative scrap heap to buy AI stocks? It’s a theory that would be nearly impossible to prove. We’d also need to see a bigger move to confirm a Bitcoin breakdown. But it’s worth watching as Bitcoin approaches $27K again. If this rally fails, it’ll be another lower-high — and a quick test of $25K could be next. Markets (and life) are moving faster these days. I’ll try my best to keep things on beach time this week. But I can’t promise that these bubbly tech stocks will do the same… We’ll catch up with the action next week. In the meantime, do you agree with my thoughts on AI and tech? Let me know by emailing me [here](mailto:feedback@dailyreckoning.com). Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Sean Ring] [Sean Ring, CAIA, FRM and CMT]( is a former banker and financial educator and is the editor of the Rude Awakening. Sean has trained interns and graduates from Goldman Sachs, Morgan Stanley, Citi, Bank of America, Standard Chartered Bank, DBS (Singapore), the Abu Dhabi Investment Authority (ADIA), Bank Indonesia (the central bank), HSBC, Barclays, RBS, and BlackRock. He knows the global economy is being corrupted by forces that most people can't understand and has used his unique and worldly experiences to help people navigate the markets. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. 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