Running Scared
The title of this column could definitely lead me down a multitude of rabbit holes but since it’s Monday, I will try to keep it contained and discuss how businesses have been running scared.
Even though this is not really a new thing, companies are readjusting their business models to conform to what I like to call, “The Strain of the Day”. The “strain” is the latest talking point of the media, politicians and lastly business leaders. Agendas are constantly changing and yes, companies must adjust or be left behind, but I think this time, it is a little different.
Climate change is a thing, I do believe that. I also believe that we probably will be living in an all electric society at some point. I don’t think it will happen in my lifetime, but surely in my kids lifetime. We may want to fight it but it is going to happen so thats that.
With that in mind, I find it very interesting watching major corporations pivot to this acceptance of an all electric future. Big case in point: All the major oil companies have announced mandates to shift to a more climate friendly future. A carbon neutral future. I guess they want to get in front of the abandoning of fossil fuels wave and be the first on their block to achieve neutrality. Yeah ok. I find it pretty funny to see companies that have been blamed for the destruction of the planet to be front and center fighting greenhouse gas emissions. They are running scared and not in the way you think.
I will explain. Every major oil company answers to one group above all else, their shareholders. Not the individual shareholders that own big oil for the relative safety of the earnings and modest, consistent dividends but the major shareholders like Blackrock and Vanguard. The big institutional shareholders are all becoming more and more concerned with ESG corporate mandates and have decided that they are going to use their power to force change at the corporations they hold. The “you don’t tow the line we will dump you” strategy in all it’s glory is at work here. Activist investors have nothing on Larry Fink on a good day.
The power of ownership is driving a monumental change in how business is done in this country and around the World. Corporations fear that power and have no choice but to listen and acquiesce.
I do have a problem with several parts of this mantra and I will go over a few of them here.
First, I would like to go specifically to the challenge of electrifying this country and completely dumping any form of fossil fuel to power it. There are so many holes here that it would take several Substacks to hit them all. However, I will give you a taste. The electric grid in this country can not handle what it has now, fully electrifying this country will put a burden that it won’t be able to handle. Oh wait, Joe Biden’s Infrastructure initiative addresses this directly doesn’t it? Yes, it does but the money allocated won’t be anywhere near what is needed and the fact that it will be next to impossible to add more delivery in many areas of this country it just seems like that money will not be effective. Next item on this list of stupidity is where is the power going to come from? Wind? Not a chance in hell and not because locals find the wind turbines unpleasant either. There just isn’t enough wind to power this country’s grid no matter how they develop it. Same thing with solar power but I do think at some point, solar power panels will be mandated on all new home construction and the industry will bring pricing down enough to allow most homeowners the ability to afford installation. Some hope there, but will that be enough? Another issue, and it is the dirty little secret the environmentalists put their hands over their ears when it’s mentioned is the destructive mining that is used to get the components of all those batteries that will be needed to power this electrified country. To get lithium, you need to mine it. It is mined mainly by strip-mining. Heres the Catch 22. The investors who have forced Blackrock et all to become more ESG conscious will now have to make a decision, will they allow big fund managers to invest in mining companies that mine for lithium or will they put up another hissy fit? Without capital investment, you can not mine anything and the end result is supply chain disruptions and price hikes and so on.
You see my point? Companies are running scared and changing direction with the hopes that they will meet a mandate that has more holes in it than anything they have encountered previously.
The second point is more about the political realm. We all know and love our politicians. We know they have the backbone of a clam (none) and they can shift their allegiances with a simple drop in the polls. That is just a fact but what I have seen lately is a major shift away from leadership and that is very surprising considering where we are in the political calendar.
Before I ramble on about this I would like to say one thing: I give credit to The Squad. Their political beliefs haven’t shifted at all. They believe in what they believe in and they have not run scared. They have not hidden. They are out there alone, and they are rowing their little boats away from this country and hoping to have a few more boats follow them over the edge and into the abyss. I give them credit while I say “Good riddance” See ya.
What is apparent at this point is that the Democratic party, after taking it on the chin and a couple to the gut, has made a small, almost imperceptible, step back towards the center. The electorate has sent a clear message and like spineless fish, they have wiggled their way back onto the hook. The question is, where does that leave President Biden?After getting elected as a moderate who will bring this country back together, President Biden smelled the political winds and headed left. Obviously a bad move on his part but it is early, I think. Even a President can run scared and shift his political sails mid-term, Bill Clinton did it. The difference between them however is vast. Clinton was a smart operator, knew his enemies well and used people to bring those enemies closer and maneuvered as well as any President since LBJ. Biden, not so much. He stumbles constantly, the lessons he learned while being Congress for 47 years are some hazy memory now and he is powered by a left that may not be all that. He is a politician however and they have this uncanny ability to slither back regardless of party affiliation.
My fear with all of this is that our adversaries can sense this “running scared” syndrome and they will look to take advantage of it. We are a country and an economy that is in the midst of an upheaval of sorts and smart operators know that upheaval is usually the best time to strike. Don’t get ahead of yourself here, I am not necessarily talking about some military interaction, I am just saying that when a nation or a company runs scared there will be opportunities for competitors to take advantage. Businesses, I believe, are more nimble and C-Suite executives have an uncanny ability to create and recreate almost at will. My worry there is this overall re-creation might leave this country with a need and no one there to supply it.