Making Greed Great: How Hedge Funds Can Help Save the World

Date: Wednesday, April 30, 2014
Author: Chris Manthey, Huffington Post

"Greed is right. Greed works. Greed clarifies, cuts through and captures the essence of the evolutionary spirit. Greed, in all its forms--greed for life, for money, for love, knowledge--has marked the upward surge of mankind."

There may be no speech more famous or reviled in fiction than Gordon Gekko's "Greed is Good" in Wall Street, and certainly none less likely to hold a key to checking the power of corporate interests. But just as the Internet, conceived as a defense communications system, can now ignite revolution, romance or riches, so too could hedge funds make improbably great bedfellows for progressives accustomed to including them in the list of the usual suspects.

There is no shortage of prescriptions designed to cure what ails progressives, but most suggest a specific course of action or attitude rather than addressing the structure of the enterprise, which resembles the planned economies of communist governments. Large non-profit foundations play the role of the central committee, setting plan targets and selecting projects based upon their preconceptions and ideologies. Often heavily influenced by the fashionable rather than functional, progressives are further handicapped because these activities consume capital, whereas those of their corporate opponents create capital that can be used to lobby politicians, buy media, or legal protections. The lack of success they've had in taking action regarding dire and well-documented threats like global warming attest to the uneven playing field.

Hedge funds, despite their past success, face a more difficult future. Increasing competition has made it difficult to sustain the double-digit margins their clients seek, and it's the search for these types of margins that led to insider trading prosecutions. Their multimillion annual salaries make them a target for the 99%. Working with progressives could create profits and allow hedge funds to demonstrate a useful role in the economy, namely that they make corporations pay the price for their illegal or questionable behavior. The problem of externalities -wherein a company can pass costs like pollution onto the public- has always been a critical problem with free markets, and I'm convinced this is the best way to redress it. Well-designed corporate campaigns can create market movements from which hedge funds can profit. Our 2010 campaign against fish oil manufacturers and retailers who had PCBs in their product led to an immediate 18% drop in US sales of fish oil supplements. While this drop affected some manufacturers who had fewer PCBs, the industry as whole quickly agreed to measures to address the problem, and now millions of people are safer as a result.

Corporations and investors profit by planning actions, promoting the likelihood of future success, and profiting from stock price rises when the actions are successful- or even when they have simply convinced others they will be successful. This is merely that in reverse. Hedge funds working in tandem with progressives have another protection to claims of business interference: NAACP v. Claiborne Hardware. White hardware store owners sued in the 1950s after civil rights advocates organized a boycott of their store. The Supreme Court found that the exercise of the right to free speech in achieving NAACP's goal of social change was protected by the Constitution. In addition to financial resources and stock trading acumen, these hedge funds could in turn provide something sorely lacking in current progressive campaigns--the focus that only the gain or loss of large amounts of money seems to provide.

I found no takers when I explored this a few years ago, but evidently I didn't get to the right people, because William Ackman's Pershing Square is evidently pursuing this in a short against Herbalife. Personally, I know there are a lot of softer targets in the corporate world than Herbalife, whose sales come from suckers or people who think they will find other suckers, of which there is and always will be a worldwide glut. I also expected a massive counterattack by the status quo once it became public, but so far the reaction seems muted, maybe because it was started by a money man, not an activist. So now is the time to quickly achieve a critical mass and get the clout of our financial rulers behind progressive change rather than whining about how their power is not fair. If the financial meltdown didn't get them off their thrones, it's not going to happen in my lifetime unless innovative strategies are pursued. So contact me if you've got a couple of hundred million lying around. Maybe we can work together, or maybe you want to this on your own or with someone else; either way, I expect it to be fun, profitable and a viable means to break the corporate stranglehold.