Corporate virtue signaling and holiness investing

From Jim’s blog: Holiness and corporate performance

Notoriously, corporations that are Social Justice converged behave in ways that are not only evil, but self destructive, leading to loss of shareholder value.


It is difficult to objectively assess social justice convergence, but we can expect it to have a pretty good correlation with the company’s business model – a green energy company is going to be full of social justice warriors, and receive lots of investment from fund managers who are trying to earn brownie points from the government, rather than brownie points from investors, whereas a gun company is probably trying to make good money by making good guns.


“Watts Up With That” recently did a ten year comparison of such companies, and found that over ten years, holiness investing lost nearly all your money, while sinfulness investing doubled your money.


Twelve years ago, holiness investing consisted largely in investing in providing mortgages for single women, Hispanics, and blacks. And all that money disappeared also.


However, while holiness investing is terrible for investors, it works extremely well for management, as for example Jon Corzine, the world’s most regulated and regulating financier, who without informing his customers proceeded to use their funds to rescue Greece.



There are a couple of issues here. There is a conflation with SJW-management with ‘holiness investing’; they are not the same. A ‘green energy’ company does not imply SJW-management. The “Watts Up With That” study is methodologically flawed because they are comparing small, speculative solar companies with major $100+ billion-dollar companies like Exxon Mobile and Altria. One of the companies on the ‘green group’, Ballard Power Systems Inc. (USA), is a micro cap stock.Also, there is likely a survivorship bias: the ‘sinner’ companies have been around for a long time, whereas many of the solar stocks are only a decade or so old.

Notoriously, corporations that are Social Justice converged behave in ways that are not only evil, but self destructive, leading to loss of shareholder value.

Hmmm…but the empirical evidence shows this is not so. From what I have seen, publicly traded companies fail not because of political correctness (or what some called ‘convergence’), but due to adverse businesses conditions, accounting fraud, and or due to taking on too much debt. In 2014-2015 the drilling, fracking, and mining sectors imploded, mainly due to such companies taking on too much debt to expand when oil prices were high, only to be crushed by the debt when oil and natural gas prices inexplicably plunged. Fracking is like the opposite of ‘holiness’, yet that was no help. Google, Apple, Tesla, Amazon, Salesforce, Microsoft, and Facebook have outperformed the S&P 500 considerably. But interestingly, such tech companies, despite attempts at holiness signaling, are frequent targets by the left over issues such as taxes (Amazon, Google, and Apple taking advantage of tax loopholes), wages (Amazon & Tesla not paying workers enough), privacy (Facebook ads being intrusive), sexism (the Google memo, etc), etc. Had you shorted these companies because of purported convergence, you would have lost tons of money. You cannot let politics guide your investing decisions; rather, you have to look at the fundamentals of the company. As insufferable as Tim Cook is, shorting Apple stock (which is up 40% in the past year alone) would have been a dire financial move.

Other companies probably have similar policies as Google but get much less media coverage. As James Damore can attest, Google’s corporate culture is compromised, but I don’t think it’s uniquely bad. Had an engineer at Boeing, for example, circulated a similar memo, that employee likely would have been fired, but it would have generated much less media attention. As discussed here, Google is so large and important, but also being that Google is headquartered in Silicon Valley, their actions get considerably more scrutiny and media coverage than non-internet, non-Silicon Valley companies.

Deferring to the HBD investing thesis, high-IQ companies and high-IQ employees generate so much value and are so strong in terms of profits and earnings, that they can withstand possible loss of shareholder value from virtue signalling. It’s not that virtue signaling makes such companies strong; rather, it’s a byproduct of having a high IQ and being liberal, I suppose.

But then why do companies virtue signal? Why is Google pulling ads from ‘controversial’ YouTube videos and channels, when this could hurt Google’s earnings? I’m sure Google has some reason for blocking ads. Maybe advertisers complained. Or stupidity on the part of management. Maybe both. Scoring virtue points may justified from a risk-reward perspective if it brings additional revenue from pro-social justice advertisers and good press. But everyone, including many on the left, can agree that Google needs to be more transparent in their content and ad policies.