The Prof G Pod with Scott Galloway - The Illusion of ESG Investing — with Tariq Fancy

Episode Date: March 17, 2022

Tariq Fancy, the founder and CEO of The Rumie Initiative and the former chief investment officer for sustainable investing at BlackRock, joins Scott to discuss how ESG investing acts as “a dangerous placebo that harms the public interest.” We also hear Tariq’s take on the current state of the markets. Follow Tariq on Twitter, @sosofancy. Scott opens with his thoughts about lobbying revenue reaching an all-time high, ad-supported streaming tiers, and Peloton’s move to the rundle.  Algebra of Happiness: knowing when to dial back.  Learn more about your ad choices. Visit podcastchoices.com/adchoices

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NMLS 1617539. Episode 146, the baby boomer generation began in 1946 i rolled up a newspaper the other day and my son handed me an iphone and called me a boomer now his iphone is smashed but that spider is dead there's boomers millennials then gen z so what's the next generation going to be fucked that's right. Fucked. Go, go, go! Welcome to the 146th episode of the Prop G Pod. My voice is deeper. I don't know if it's the testosterone or the bourbon I drank last night, but I like it. I like it. It makes me feel, I don't know, like I could do a voiceover or start a podcast that

might reach thousands and thousands of people. In today's episode, we speak with Tarek Fancy, the founder and CEO of Roomie, an education technology nonprofit that provides micro learning courses to communities with limited internet access. He's also the former chief investment officer of sustainable investing at BlackRock, which is what we want to speak to him about today. Tarek discusses how the notion of ESG investing is actually acting as a placebo effect that's harming our public interest. So Tarek struck me as really common sense, practical. Part of the conversation I enjoyed the most was his overview of the markets. And I came away from it grateful and inspired that people like him decide to go

into nonprofit and want to change the world. And I mean, this guy has literally given up millions to try and, and a conversation with him, he's trying to distribute these microclasses to girls in Pakistan. for how bright this guy is. And it's nice and inspiring that people with these types of options decide that, no, I'm going to try and do some good. Okay, what's happening? All sorts of interesting things are going down in the business world. So we're going to go through a few headlines.

Couldn't choose just one. You won't be able to stop at just one that piqued our interest and determined some winners and losers. First up, the Washington Post reported that the lobbying industry brought in a record $4 billion in revenues in 2021. That's the deficit. And what do you know? Our deficit is at its greatest point in history, which is basically just a giant fuck you to future generations such that we can maintain our fossil fuel consumption and ensure that we can continue to go to Chili's and take our cruises with Nana and Pop Pop. I think debt has gotten to a point where it really is becoming almost borderline criminal. We use it as an excuse to get out of recessions

because we don't want to actually disrupt the economy and let prices fall so the next generation gets the same type of opportunities that we garnered. We use it to pay more or pay for a more prosperous lifestyle than we can afford. And the only thing that passes for bipartisanship in D.C. right now is, bottom line, one thing, and that's reckless spending.

The top three spenders include the U.S. Chamber of Commerce at $66 million, the National Association of Realtors at $44 million, and the Pharmaceutical Research and Manufacturers of America at $30 million. And it's no accident that corporate profits, despite probably the greatest health crisis in history, are at an all-time high. It's no accident that the Forbes 400 is littered with people from the real estate industry because the real estate industry, guess what, is the most tax-advantaged industry. How did that happen? See above National Association of Realtors at $44 million. What can you do with real estate? Well, first off, you can lever up about 80%. Can you buy stocks and borrow $4 for every one in equity? No, you can't do that unless

you're some hedge fund and it's a crazy bubble. Can you sell an asset and then within six months, roll it into something else, tax deferred? No, you can't do that anywhere else. This is the most advantage, tax advantage industry in the world. And as a result, it's created tremendous wealth. Is that a bad thing? No. But when other industries don't have the same sort of tax advantages, you're essentially leaking capital and opportunity from other sectors into real estate. So kids, go into real estate. And so DC, come on, level the playing field. Stop it. Stop being such whores. The thing that strikes me about DC, we've known they're whores for a while. I can't get over what cheap whores they are, that just for a little bit of money, you can get access and be heard across our elected representatives. Citizens United has been

terrible for us. That, of course, was the Supreme Court decision that said that money was, in fact, voice and that free speech is your ability to give as much money as possible to the government. I want to be clear, it happens on both sides, whether it's police unions or teachers unions or lawyers who want more and more regulations such that we have to hire more, wait for it, lawyers. But it's totally out of fucking control.

And guess which companies also landed spots in the top 10 in terms of lobbying? The ones that need the most protection because they're mendacious fucks. Meta and Amazon.com at $20 and $19 million respectively. I'm being very profane this morning. I apologize. protection because they're mendacious fucks. Meta and amazon.com at 20 and 19 million dollars respectively. I'm being very profane this morning. I apologize because I haven't eaten

and I'm in a bad mood. By the way, pro tip to every person getting married, never let your partner be cold or hungry. When I look at the major blowups in my life across the key relationships in my life. It's usually two-thirds of the time can be reverse engineered to someone was cold or hungry. Invest in dual climate zones in your car. Always have a power bar. Bring one of those pashminas that doubles as a blanket. Never let anyone you love be cold or hungry. Boom. Sustainable relationships. Anyways, back to money and politics. These companies have notoriously tried to steamroll over government officials so they can continue to smear lipstick over business practices that damage the Commonwealth and promote anti-competitive behavior. We're in a

scarcity economy, which is just terrible. There's a scarcity strategy, and that is once I own a home, I want to make it harder for other people to buy homes. I'm going to become a NIMBYist. Once I have my degree, I'm going to applaud the dean when they keep rejecting more and more people. Once I've built a great company and I buy another company, I'm basically going to make them sign their life away so they can never compete with me. Have you seen any of the great entrepreneurs from any of these companies, these big tech companies, go on to start anything else? They can't because they have non-compete clauses or non-solicitation offers. All that shit should be illegal. The biggest trees are meant to spawn acorns that create other saplings. Oh my God, I just made that up. Hello, Maya Angelou here. Jesus Christ, I am Sting. I'm a poet. I am a poet. And plus,

what's that new woman I'm really into? Brandy something. Brandy Carla. Is that her? She's also a poet. Anyways, what else is happening? Some of the biggest names in streaming are introducing ad-supported tiers. Well, advertising is making a comeback. Disney+, for example, is launching a cheaper tier at the end of this year and noted that advertisers have been clamoring to get in front of the Disney Plus audience. Actually, I wouldn't doubt that. Fewer and fewer people of means or fewer and fewer kids whose parents have the means to buy them a bunch of shit they don't need are watching advertising. Why? Because advertising has become a tax that only the technologically illiterate or the poor have to pay. How do you know your life hasn't worked out that well?

You'll learn what medications you buy when you get older because you're watching a lot of advertising, which is increasingly what advertising is, a big lesson in how it sucks to get old. And I can see that all of a sudden that probably has swung too far. And there's probably an opportunity for pretty high CPMs and pretty serious cabbage if you offer selective advertising in the midst of streaming content. My suggestion to them would they not go full Monty and just litter it and pollute it as they do on Fox or some shows. If you make the mistake of just gardening around broadcast or ad-supported TV where it's literally how about a little bit of programming. How about some Kardashians with your commercials? It is that bad.

But I think this could actually be pretty lucrative. Disney+, which will reach its three-year anniversary at the end of this year, garnered roughly 12 million subscribers in the last quarter, bringing it to a total of nearly 130 million subscribers. Wow, 130 million people. Think about that. That is the 130 million people that a lot of advertisers want to reach. I would bet parents with kids, so they're younger, they're spending a lot of money on weird stuff that's expensive, and it's probably a higher income demographic. Hello, advertisers. However, according to the New York Times, the firm's streaming division lost roughly $600 million

during that same period. That's about 27% more than a loss at the same time last year. Disney Plus isn't the only one that's going to let advertisers in on the fun. HBO Max, which already offers an ad-supported tier that attracts 40% of its daily signups. We'll expand that tier to allow advertisers to purchase exclusive spots at the beginning of select films in the HBO Max library. Kind of like those ads you see in the movie theater when you make the mistake of showing up earlier and they say, rent the theater out. Or they say, you know, Bob Lesson, BMW,

come down and meet a guy in a shiny suit and give him your phone number and then he won't stop calling you about that new 330i. Notably, Apple and Netflix remain two key players without any plan to pelt viewers with ads. All of this points to something we've been talking about a lot recently, and that is there's so much money

pouring into content. This year alone, the top nine media and technology firms will spend roughly, get this, $140 billion, which is up about 10% year over year, according to Wells Fargo data. So much money going in and they've got so much investment. And at some point, they got to get the R on the ROI going here. They got to get a return. I guess the other week, Jim Miller shined a light on the fact that companies like Apple and Amazon, where streaming

is just one facet of their businesses, will do just fine in the current market because their operating lines are propping them up. They are going to sell a lot of iPhones. They're going to sell a lot of paper towels so they can lose two, three, five billion dollars on original content that is almost or near impossible to monetize at the extent they make those investments. On the other hand, you have Netflix, which for a long time has been the marquee player that faces new challenges as competition heats up and profits cool down. We're not so certain that being a standalone streamer is enough to signal to shareholders that this is a viable business. So what do you have? We talked about the fact that there are a ton of companies that have gotten taken to the woodshed in the last 60 months. And it's not just shitty companies like Robinhood or Rent the Runway that are off 80 or 90 percent or Virgin Galactic, which topped out at about 50 or 60 bucks a share.

And I think open today at six bucks a share. These are just bad businesses that could go to zero. There's also some great businesses, Roku, Twilio, Moderna, that are off 70, 80 percent. I mean, great companies that have just gotten absolutely plastered. Why? Because too much money poured into them and there's no way to sustain those shareholder prices. They were trading at multiples that just didn't make any sense,

even if they executed to perfection. I think we're about to see the same thing in streaming. And that is so much capital has poured in over the last few years. I bet we're going to spend more money on original scripted television this year than we spent in the entire decade of the 90s, at least. But at some point, you have to show a return on investment. I'm launching a show on CNN Plus, and we, I see we, CNN, are going to try and charge five bucks a month for all of this new programming, And then to watch Anderson Cooper talk about parenting and Fareed Zakaria give you an additional take.

I personally think just this not having ads across that great content is worth the five bucks, but there's just no getting around it. It's so challenging now. The expectations of consumers has basically been set by Netflix. What do I mean by that? When entrepreneurs come to me and they say, I'm thinking about B2B or B2C, I'm always, boss, go B2B, because B2C, the expectations of consumers have been set by Netflix. And what is that expectation? I expect for every dollar a month,

every dollar a month I give you, I want the equivalent of a billion dollars in original content. So if I give you $12 a month for something, I'm expecting something along the lines of $12 billion a year in content. And there's actually more than that. I think Netflix is approaching $20 billion expenditure in annual content spending. So it is near impossible to maintain that type of trajectory. So a lot of these new streaming platforms have been a big yawn. Even Peacock with The Office or Starship Commander, Jean-Luc Picard can't justify or can't convince consumers to pull out their credit cards because there's so much investment and so much content elsewhere. firms, a lot of layoffs, a lot of cutting back. I think in 12 to 24 months, we're going to start

to see a bit of an unwinding in the streaming space. We're going to see consolidation and, God help us, I also think we're going to see quite a few layoffs. Anyways, moving on to our last headline before busting into our interview with Tarek Fancy. Peloton is taking a page out of the Rundle book written by Dada. The company is bundling the cost of the bike and the cost of classes into one monthly fee for customers in select cities. I like this. Daddy like. Me gusto.

Son Rundle. Typically, you have to purchase the pricey bike and pay a monthly subscription of $39 to access these classes. But the new limited time pricing is expected to cost between 60 and $100 a month for the bike and subscription together. Peloton has literally been kicked in the gut repeatedly by Wall Street over the past year. I think it's down to, I think it hit, what did it hit? 150. Now it's down to 23. Jesus Christ. Oh my God. Hello. But it certainly has the potential to turn things around under Barry McCarthy's new leadership. According to Wall Street Journal, McCarthy said that he wants to dramatically shift capital spending from equipment to the digital interface and content.

Well, that'd be nice, right? Making shit is actually expensive, whereas getting people to pay for bits is less expensive. I think they get somewhere between 10 and 15 percent of the revenue from subscription, just fitness revenue. I'm excited about the rowing machine, but I keep talking about it and never get it. Anyways, this is sort of some of the primary innovation before electric in the automobile industry was leasing. And that was, they said, okay, we'll finance the thing. We'll figure out how much the thing is approximately going to be worth in three years. And we'll let you make a series of payments at low interest costs that amount to actually what feels like a great deal.

So you can go out and lease a Honda Accord for, I don't know, 200 bucks a month for zero down, which feels very reasonable. That really the innovation wasn't around the car. It was around payment strategy. So I think this is a little bit like that. And that is the innovation here really isn't around the product or the interface or customer service. It's around payment and trying to make it more accessible and also taking the business model of recurring revenue, which the market just absolutely loves. Okay. That's all for our headlines today. We'll be right back for our conversation with Tarek Fancy. TARC fancy. shifted their career trajectories? And how do they find their next great idea? Invest 30 minutes in an episode today. Subscribe wherever you get your podcasts.

Published by Capital Client Group, Inc. Hey, it's Scott Galloway. And on our podcast, Pivot, we are bringing you a special series about the basics of artificial intelligence. We're answering all your questions. What should you use it for? What tools are right for you? And what privacy issues should you ultimately watch out for? And to help us out, we are joined by Kylie Robeson, the senior AI reporter for The Verge, to give you a primer on how to integrate AI into your life. So tune into AI Basics, How and When to Use AI, a special series from Pivot sponsored by AWS, wherever you get your podcasts. Welcome back. Here's our conversation with Tarek Fancy, the founder and CEO of Roomie, an education technology nonprofit, and the former chief

investment officer of Sustainable Investing at BlackRock. Tarek, where does this podcast find you? I'm currently in Toronto. Toronto. Toronto, the friendly America. Great city. How long have you been in Toronto? I was born and raised here, so I've been kind of back and forth between the U.S. and Canada my whole life and back here since the pandemic started. Got it. So let's bust right into it. You previously served as BlackRock's chief investment officer of sustainable investing, but you left shortly after starting once you realized that sustainable investing, also known as ESG, is, quote, a dangerous placebo that harms the public interest.

All right, your turn. I would summarize it by saying that, you know, ESG today is a set of, you know, there's a bunch of tools and data and a lot of passionate people working in it, and that's all good. But it's combined into products and narratives that are dangerous. The products generally tend to claim that they have real-world impact, even though they don't. 99% of them are just sort of reshuffling already traded public shares and other things to give people slightly greener-looking baskets so they can charge fee increases. And the narratives are the most dangerous because they convince people that

we can create systemic change through individual action, through, you know, frankly, voluntary compliance rather than mandatory compliance, because companies will all do the good thing, the right thing these days, because they're suddenly magically discovered social purpose, even though the last few decades suggest that that is not occurring. I mean, it sounds like what you're saying is ESG has become sort of like, what's the term, greenwashing, that it's basically just marketing. It pretty much is, right? I mean, ultimately, the financial system is operating the way we should expect it to, right? It maximizes profit, right? And the fundamental purpose of the industry is to sit in between savers' capital, right, our bank deposits or pension funds managed on our

behalf, and to allocate that capital effectively to the most productive uses of it, right, that create jobs and, you know, grow the economy. And in that pursuit, all of the players in between are legally obligated and financially incentivized to maximize dollar value, right? That's just the way the system works. Nobody leaves money on the table. And what we're finding is that ESG is, for the most part, kind of tries to convince people that if you can measure environmental and social performance, you can use that to be a better investor.

Why? Because all of us good people are using our power as consumers to buy good products, to work at nice companies. And the reality you find is that it's an attractive thesis that I believed in. I drank the Kool-Aid when I was, that's why I joined. And in practice, I found that that would be sort of like trying to flatten the COVID curve by just relying on a few good people doing the right thing. The systemic crisis and flattening a systemic curve like that requires generally government action because that's where you get the change at the speed and scale required. That's exactly what for climate change, for example, what experts tell us we need to do. We need regulatory action to flatten the curve through a price on carbon, through vehicle

emissions limits, through building energy efficiency standards. And we're not doing any of them because, frankly, ESG is sort of this Panglossian view that the market will self-correct. I mean, really, that's what it is at the end of the day. ESG today is another free market self-corrects thesis by another name. I sort of got turned on to this problem by a friend sent me the marketing materials for a company called Aspiration, which was this private company raising tens or hundreds of millions of dollars. Basically, it's a debit card. And it has all this flowery language around doing good while doing better.

And you can not only get a portion of this debit card is donated towards ESG-related investments, but they offer these ESG funds, which include Southwest Airlines because of the efforts they're making to level up their environmental front. And I just read through this thing, and it struck me as just, and it's the former, I think, chief of staff or Elizabeth Warren, and it's just such incredible bullshit. And it's such hype to just simply raise money at an unsustainable valuation. I mean, it's literally like, it's as if these people said, people are fucking idiots. And if we use the term ESG over and over, we can raise money at a huge valuation and then cash out before anybody realizes we're just an overpriced fund investing in the same stocks everybody else invests in. How common is that? It's super common. I mean, you know, I'll give you an example. What

you mentioned, I've seen a ton of, and it reminds me of, I run a tech nonprofit now that I had funded before, I'd started before BlackRock for, you know, for education and microlearning. And one thing I saw in the tech space some years ago was you see this all the time, right? When there's a voguish idea, people just grab these words and pepper them in, right? It's crypto this, or it's blockchain that, or it's AI was the big thing some years ago.

And financial services, it's ESG, right? Originally, it still is kind of viewed as a defensive thing, right? Like you need to be able to check the box and everyone wants to say, talk about all the great ESG stuff they're doing, just like, you know, they want to talk about diversity and inclusion and a bunch of social causes where they see, you know, really no downside and appearing to be on the right side of it.

But substantively, there's nothing underneath it, right? I mean, the scary thing about it is that everyone who buys one of these products right i'm certain of this they believe for the most part especially the average person on the street they believe that in deciding to buy that product they're making a change in the world right because we all kind of every year we hear more and more words about the need to do this about climate change around growing inequality and so this gives them a way to feel it's almost like the indulgengences in the Middle Ages with the Catholic Church. And you get to pay a bit of money and you feel like you're doing something good to change the situation. In reality, the mechanics are a joke. Underneath all of these things, if you look, most of them have no particular reason

to believe that they would have any real world impact. All of these products, the financial products, you've had decades of research being done around it that is completely inconclusive. And what scares me more than anything else is that it just comes at the expense of the obvious answer, which is an unpopular answer, but it's regulatory action. I mean, capitalism, competitive markets like competitive sports, right? You know, you have referees that can be called on to, you know, regulate certain industries so that they don't harm the public interest. And I think what we've found is that since the financial crisis, you know, instead of actually an end of sort of this neoliberal narratives, right, that sort of say that the market will self-correct. We've had very little of any real reform around the financial sector. And there's growing sort of push coming out of that and big business that says, hey, listen, you can rely on us to do the right thing. This is this idea of stakeholder capitalism

that my old boss, CEO of BlackRock, Larry Fink, is a big proponent of. It's the capitalism version of good sportsmanship. It'd be like if this is a sport and there's referees and you don't want those referees coming back in because it means taxes and regulation. And obviously, Wall Street, the last thing they want is that. What you'll do in a very cynical way, to be honest, is you'll hold off taxes and regulation with one hand by creating a set of narratives that you can rely on good sportsmanship and that companies are going to discover what Fink calls social purpose and start doing the right thing. And then as you have, you know, that holding off regulation, both because of the marketing and messaging around it, and frankly, you know, frankly,

buying politicians behind the scenes, you then have this effort by Wall Street to say, there's this growing social angst and by a lot of companies and saying, listen, we can tap into that by putting green labels and names and things that haven't really fundamentally changed. The end result of that is every single year ESG words go up, ESG assets go up, what I call sustain a babble. The talk goes up, and then it goes up alongside emissions and inequality and all the things that in theory it's meant to do something about because there's no link between the two. And it just, you know, that schism is dangerous because it lowers young people's faith in capitalism and endangers a long-term existence of the entire system. You said that the climate crisis is the biggest market failure in history and that the government needs to incentivize the private sector in order for it to create meaningful change. What are some of the ways you suggest that the government do

this? So the simplest model around it, and I already know the objections people are going to offer, so I'll come to that at the end. The simplest tools are, above all else, a price on carbon, right? I mean, that's the argument by Bill Nordhaus, who won the 2018 Nobel Prize in economics. He'd been arguing this for decades. The simple idea is that there's a cost to pollution, right, whether you're dumping it into the river, you know, next to the of greenhouse gas emissions, it's the youngest and the poorest in the world who will inherit a probably amplified problem because prevention beats cure, and we're not really doing much to prevent it. And then in addition to the price on carbon, you have industry by industry regulations. If you look at vehicles, and if the government actually gave a reliable roadmap for charging on pollution and then said to different sectors, vehicles, you need to be EVs by this year. Buildings need to hit these standards. First of all, what's going to happen is it's going to cost people a lot of money. That's the reason that there's a fantasy

that's saying, well, it'll magically fix itself. It's because it is going to cost money to, Morgan Stanley says it'll cost $50 trillion to decarbonize the world economy. Goldman Sachs says $100 trillion. Those sound like big numbers until you consider that the same sources are saying that the cost of inaction will be greater, right? But then what you have is fundamentally a situation where we know the changes we need to make. There are systemic reforms that would flatten the emissions curve just like we did to very quickly flatten the infections curve. But they are unpopular. And in particular, when you have an economic system where the incentives are extremely short term, right, so the average CEO tenure is five years now? It's the highest it's been in decades. You have a situation where the most powerful interests have very short-term incentives. And in the short term, when you look at the actual challenge around climate, it's cheaper to market yourself as being green and to lobby to prevent the actual regulations that would

cost money and start fixing things than it is to actually make the long-term investments that would pay off in a decade or two to justify it. And so when you have short-term incentives that misalign with the long-term public interest, that is exactly where government needs to come in and sort of like referees in sports say, hey, we can't leave these loopholes open anymore, right? We need to move from voluntary compliance to mandatory compliance. Yeah, it always struck me as uniquely, I'm gonna even say American, but Silicon Valley-ish,

that, oh, we'll solve climate change and we'll become billionaires along the way. Wouldn't that be nice, that it'll be a couple of MIT grads who come up with some technology that we can buy shares in and get rich as we solve climate change. That strikes me as just delusional and dangerous.

And if you think about fossil fuels have been the gift that have kept on giving, have arguably created more stakeholder value, at least our monetization of these fuels. And to think that we're just going to unwind it and make more money feels like a fantasy. I'm being a long-winded summary of what you said more particularly. Can you tell us a little bit about your ed tech startup? Yeah. So Roombie, I started nearly 10 years ago and I had worked on basic investments to bring mobile phones into emerging markets back in my finance. My earlier part of my career as a vulture investor at a private equity firm in New York, very much the opposite end on the purpose versus profit scale.

But I'd seen the power of mobile technology in places like Kenya, which is where my parents grew up before immigrating to Canada. And saw that there was a lot of potential to use the spread of mobile phones for learning and for education. Because everyone, the youngest and the poorest globally, their computer of choice tends to be a smartphone. And so we built platforms around what we call micro learning. Micro learning is learning in five or six minutes snippets on your mobile phone. All of the engine is powered through a volunteer approach, right? So it's a 501c3 nonprofit. And like Wikipedia, you know, people with skills contribute on the platform and create micro learning content, and then it's all open and free. And what we found actually last year is that it's growing over 10 times a year. Learners, there's over 20% gains in learning

retention. And the coolest thing actually is an anecdotally refining and surveys that it actually competes with and replaces social media time. Because, you know, it's five or six minutes and you learn something. So you get a dopamine rush, which beats, you know, getting a dopamine rush from blowing up your mental health on Instagram. And so does it aggregate into some sort of certification or skills? What are you hoping is the end product here? So there's two models, right? The way we think about it is that because the courses are so short and easy and frictionless,

right? You can find it. You don't have to log in. You don't need an app. It's just super easy. That's part of the reason it's growing quickly. And then there's two models through which you would sort of learn through what we think of as almost top of the funnel learning, right?

Like you could go and learn all kinds of deep skills, but sometimes you need five minute courses to understand even where to go. And so you either go in and the default model is it's curiosity-driven, right? It's learner-driven. So you go and as you complete content, we keep optimizing for engagement. So we call it meme learning. If you were to go to Rumi.org, R-U-M-I-E.org, you'd literally see microcourses with animated GIFs and memes and other things. And it's actually because we find that by keeping the learning engaging, you get better outcomes. And then either you go through it curiosity-driven and AI kind of starts to drive what content it feeds up. So it's, again, kind of the social

media model, but bringing value to you instead of sucking out your brains to sell for advertising. And we're adding now, in conjunction with some universities, micro-credentialing courses. So, you actually do specific micro-courses in order, and it teaches you a core concept. In fact, one of the ones I'm working on soon for Earth Day is shows you how the system works, how the economic system works. It's taking the ESG themes and taking the themes around how to address climate change and breaking them into meme learning, right, so that more people complete it and figure out how we can drive change. And it's a nonprofit?

How are you funding it? Purely nonprofit. So we're funding it through me fundraising, much and partners, right? Sponsors and partners who, you know, want to see it grow into the Wikipedia of microlearning. Coming up after the break. You know, what worries me now is that it looks to me as a distressed person that the markets have been, to use Howard Marks' term, levitated by central bank policy for a long time. I would argue over a decade, but in particular, since the pandemic.

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Just go to Indeed.com slash podcast right now and say you heard about Indeed on this podcast. Indeed.com slash podcast. Terms and conditions apply. Need to hire? You need Indeed. So I want to back up just because you obviously spent a lot of time working for one of the most famous alternative investment managers in the world. I'd just be curious to get your take on

sort of the state of the markets right now. Nobody knows, but what's your view on what's going on in the market around a lot of these, you know, the growth sector and startups? When you look at the market, give us your headline view as the former CIO of a very well-respected firm. Well, you know, it's interesting. I'm pessimistic. And the pessimism comes less from the time I've spent recently at BlackRock and other places and more out of where I started my career. Because before I went and created a nonprofit for education, which was driven by the passing of a close friend and roommate, I worked in banking and hedge funds. And when I was doing PE investing, I did what's called distressed or vulture investing.

So we would raise long-term private 10-year funds in advance of what we perceive to be a coming crash. And so we raised a $3.5 billion fund in 2007. Again, we don't really know when exactly something's going to happen, but you can tell when the numbers don't add up. And what worries me now is that it looks to me as a distressed person that the markets have been, to use Howard Marks' term, levitated by central bank policy for a long time. I would argue over a decade, but in particular, since the pandemic, it struck me as stunning that the economy blew up and GDP growth went down and the markets completely dislocated and went up.

And sometimes it's a bit easier when you're a bit away from the system, because I'm running Rumi, and I'm doing learning, and I give a few calls to old friends of mine who work in the markets. And what I found fascinating was that all of them justified going back in and buying by one version or another of don't fight the Fed. It'd be Zerp, zero-interest-free policy, TINA. There is no alternative. And it's odd when you have credit analysis, credit analysts who are not doing credit analysis, right? Equity analysts were not doing equity analysis and they all seem to be

justifying an emotional pull to buy based on what looks like a, you know, someone else is going to come and buy this shit for me at a higher price slash a narrative that the markets only go up. That, to me, is dangerous, particularly when the one single thing that supports it, which is the most extreme version of the central bank put that we've seen in decades, when inflation hits double digits and the Fed has to go home, it strikes me like Wile E. Coyote running off a cliff, right? And there's been sort of a gust of wind by a giant fan that J-PAL is operating. But when that starts to disappear, we'll have news flow that says this and that about Russia and Ukraine and commodity prices and sanctions and a whole bunch of things that

throughout the course of this year will populate the news flow because people have to write headlines about why the market moves and there's no market to tell them exactly why. No one knows for sure. But my sense is that the markets are going to deflate and the most speculative asset classes, the narrative that underlies them is going to evaporate. And I'm not really sure what happens on the other end of that. So how do you protect yourself? I've always been told by my colleagues in the finance department at NYU that you always want to be on the market. And you might want to take down leverage when you think things get out over in front of their skis. And by the way,

I've been saying the market's overvalued for three years. And typically, when everyone agrees that the market is overvalued, it goes up another 30 or 40%. Everybody thought the market was overvalued in 1997 and 1998. But let's assume at some point, a fairly serious, violent correction is coming. How do you protect yourself? How do you try to, you know, what do you do? Is there any sort of prophylactic or Kevlar you can put on yourself other than moving to cash, which I would argue is a terrible investment right now? Yeah, cash is tricky. I mean, the time when cash makes sense is when the markets look so volatile that you're getting 7% of your cash inflated away a year. So that's not good. On the other hand, if the markets take

a 25% hit, that is good. The biggest problem is knowing when that's going to happen because you've been saying it for three years i've been saying it probably as long or more right and i often think to myself you know you stick your guns um and sometimes it gets hard over the years and sometimes people just put their gun away because they're so you know it's been too much and they've gotten it wrong so many times and. And the fallacy with that sometimes is that you are finally right in the end, because eventually the markets have to start to reflect fundamentals on some level, particularly when what seems like an irrational buyer, whether from a technical perspective in terms of how much money they're putting in the market, or from a narrative perspective, is perceived to be supporting the markets when they disappear, you know,

that's when there could be swings in the market, as we've seen already so far this year, that may have made it better to sit in cash or potentially in gold or certainly a more defensive outlook, I think, given that, you know, again, over the long term, you want to be in the market. That's right. But, you know, when you're heading into a year like this, I'm not sure if that's necessarily a great idea from a timing perspective. What are your views on cryptocurrencies? Boy, I've only tweeted once or twice on them ever in my life. And I instantly got like 17

bots basically responding. And in every single situation, the bot was responding with a Bitcoin price going up. That tells me that there's something that supports the underlying asset value of anything you buy. If it's a stock or a bond, it's the cash flow it produces. If it's a commodity, it's its value in the real world, right? Oil, wheat, they all have value. The one that defies that is gold. But gold does have a very long history of being a store of value, even though it has no particular day-to-day value, unless you're in India getting married tomorrow. The reality is that crypto has none of those things. And it's only signal is price, right? And what supports it seems to be, it's only signal is price, right? And it's only what supports it seems to be a narrative, right? It seems to be an extreme case of what Bob Shiller, the economist,

wrote in his latest book called Narrative Economics. He talks a lot about Bitcoin. And so to me, it really depends on when that narrative turns, right? That narrative is today managed very carefully through social media, online, all kinds of areas where you don't need to actually argue that there's any core value, your thesis underlying it could be Web3, which strikes me as being fantastical at best from a technical perspective. Long and short of it is that I would be worried and I wouldn't recommend anyone have their money in any of that stuff anytime soon. Long term, I do think that one or two will survive, right? Bitcoin or Ethereum or whatever as the brand value. But, you know, the entire thesis today seems to be not only will one or two survive, but all of them will,

which strikes me as ludicrous, right? You don't need all these different random invented coins with dogs' faces on them. And so to me, that strikes me as the most speculative area of the market that I am afraid a lot of good people are going to lose money on, but often, well, by no fault of their own beyond sort of buying into hype around a get-rich-quit scheme. Hype around a get-rich scheme. I like that. Tara Chancy is the founder and CEO of Rumi, an education technology nonprofit that develops and distributes free micro learning courses to communities with limited Internet access. He previously served as BlackRock's first ever chief investment officer of sustainable investing. He joins us from his home in Toronto. Tarek, thanks so much for your time.

Thanks for having me. Algebra of happiness. So getting older, we have mostly younger viewers and younger listeners. I don't need to worry about this, but it's always good to constantly reassess your relationship with not only others, but your relationship with substances as it relates to your age and your fitness. I like to drink and I like edibles. And I always think that I can manage those two things. And recently in the last few months, I've had a couple episodes where I've had a couple drinks and I take an edible to help me sleep. And I wake up in the middle of the night and I have what I think is a pretty massive drop in blood pressure and feel just awful and kind of pass out in my bed. Happened to me on a flight, which was really fucking scary. And the bottom line is I'm no

longer 25. I'm not encouraging 25 year olds to abuse alcohol or edibles, but you constantly want to look at how do I feel the next day? Thinking that you can get away with having two or three drinks every night because you were 27 and could pull that off. Once you're 37, it gets harder. Once you're 47, it becomes near impossible. And I think it's a bad idea on a regular basis to say, am I as fit? Am I as alert? Am I killing it as much as work?

As you can tell, I am not a teetotaling person that doesn't engage in substances. I like them. I enjoy them. person that doesn't engage in substances. I like them. I enjoy them. I think I'm good at them. I talk about them a lot so people think that I engage more than I do. But I think they can play an additive role in people's lives. And then we have a knee-jerk reaction that anyone who's involved in any substance has some sort of a problem.

However, however, it is important on a regular basis to ask yourself, is this adding to my life or is there something about my physicality or my physiology that's changed? And clearly as I get older, it's just not a good idea for me to mix alcohol and edibles. So I'm going to stop. I'm going to dial it down. And that's not a bad thing. That's not a bad thing. So take an audit. Take an audit of the substances that you ingest, whether it's trans fats, whether it's alcohol, whether it's THC, whether it's other stuff. And then ask yourself, would I feel better? Or would I be just a little less shitty at a bunch of different things if I kind of dialed it back? I'm not saying you have to go cold turkey. That works for some people. I wouldn't take that off the table. But you can also modulate. You can also just pull back. We're heading out of the pandemic. Hopefully this thing is going endemic. Make an investment in your health, your mental well-being,

make an investment in spending more time at work or with loved ones and being buck and strong. Be a monster and decide if you should dial back some of these substances. Our producers are Caroline Chagrin and Drew Burrows. Claire Miller is our associate producer. If you like what you heard, please follow, download, and subscribe. Thank you for listening to the Prop G Pod from the Vox Media Podcast Network. We will catch you next week on Monday Sunday and Thursday. He looks like a whiskey commercial. Seriously, I want to go out and buy Ballantines or something or, I don't know, have a drink with the ambassador to Finland. He just looks like

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