Mar 17, 2022
We always appreciate research-based arguments here at the
Rational Reminder and when those arguments might rattle some
assumptions we get particularly excited. Today we have an
eye-opening conversation with finance professor Alex Edmans, in
which he discusses his idea of growing the pie and how social
change and value relate to investor decisions. Alex's work is
deeply rooted in skepticism and a critical method of assessing
evidence, an approach that has resulted in surprising and sometimes
paradoxical findings. We get into a fascinating conversation
dealing with employee satisfaction and ESG, with Alex challenging
some commonly held beliefs around socially responsible investing,
with the data to back it up. A strong theme that emerged during our
chat is the need for these conversations to be grounded in
research, instead of empty rhetoric, and Alex's data-rich
perspective is a great inspiration. Towards the end of the episode,
Alex talks about the practical, individual application of his
ideas, and how an empowered employee can add value on any level.
So, to hear all this and a whole lot more unmissable insight, join
us on the show.
Key Points From This Episode:
- Unpacking what Alex means by 'growing the pie' and
differentiating this from other similar-sounding goals.
- How to go about measuring the growth of the pie, and the pieces
that cannot be measured. [0:05:14]
- Alex addresses Milton Friedman's famous quote about
responsibility and profits. [0:06:48]
- The role of big asset managers in directing investment towards
more socially responsible causes. [0:08:56]
- Thoughts on the value of divestment as a means to effect social
- How much impact are typical ESG funds having currently?
- The subjective discussion around sustainability and Alex's
definition of what makes a company sustainable.
- The inconvenient truth about sustainable funds' performance
against the market. [0:20:56]
- Alex's research into the relationship between stock returns and
employee satisfaction. [0:22:23]
- How to take a quantitative approach to employee satisfaction as
an investor. [0:29:16]
- The practical application of information about happy workplaces
for investors. [0:32:51]
- Alex's input on the problems associated with executive pay.
- Counter-arguments to some of Alex's unpopular opinions and
- Tackling the tricky subject of board diversity at
- Finding trustworthy evidence in the contemporary climate and
combatting the post-truth era. [0:46:22]
- Using Alex's idea of growing the pie in everyday life; making
the world better on an individual level.
- The left-field study that Alex conducted linking Spotify
playlists to stock performance. [0:52:16]
- Alex's perspective on his role as a finance professor and his
purpose with regard to knowledge. [0:56:38]
- How Alex looks at success in his life and his goal of
positively impacting people. [1:00:12]