Stock Or Tribe Or Cult Or Church?

90 Hours A Week And Loving It! The 1983 sweatshirt slogan, based on a quote Steve Jobs gave to the media, was reportedly an exaggeration for all but the company’s software developers , but Apple’s early employees embraced it all the same. Besides the tangible reasons for working at Apple – things like salary and stock awards – Apple’s employees had the perk of feeling like part of a movement : the meteoric rise of a company ushering in the personal computing era. Investors also like to feel like part of a movement, or at least a tribe, as I experienced at both the Berkshire Hathaway and Markel meetings last month.

I believe we’ll see more investor tribalism going forward. Some may be centered on the company, some on the company’s cause, and some on the fact that a company embraces (or eschews) a cause outside of the company. This shift stands to move the definition of a company or a stock from a business or a security to that plus a set of values.

This will have good, bad, and confusing ramifications. Warren Buffett, many would argue, has made Berkshire Hathaway into a good cult. After the Berkshire Hathaway annual meeting, in my ensuing Forbes article on the future of Berkshire , I pondered the fact that Warren Buffett and Charlie Munger have created something (in Berkshire) that’s far more than just a stock that’s delivered 3,800,000% returns since inception: “The meeting exemplifies that you also feel like part of a movement – aiding and abetting the capitalist goodness that Buffett and Munger stand for: Finding good companies, good business models, good managements, and rewarding them, while steering resources away from less fit endeavors – becoming an agent of the evolution of capitalism through a Buffett-y process that helps the world in a way that quantitative investing, swing trading, passive indexing or even macroeconomic investing don’t.

” Berkshire has a je ne sais quoi powerful enough to draw 40,000 people to take an investing vacation to a sleepy midwestern city to attend the type of meeting that’s normally a boring affair reserved for guys in suits and the occasional activist. I believed this intangible draw was unique to Berkshire until I attended Markel’s annual meeting a few weeks later. Markel – often called a Baby Berkshire – is a $16 billion insurer-turned-investment-conglomerate that’s cut from the same cloth as Berkshire.

Fittingly, Berkshire is a major owner of Markel. Berkshire Hathaway and Markel have, perhaps far more so than other companies, cultivated their own tribes . Other companies have tribes, and for different reasons.

Pen a negative article about cult stocks like Apple or Celgene (when it was public), and your inbox comes alive. GameStop, AMC and some other meme stocks also had rabid followings. Berkshire Hathaway and Markel might stand for responsible capitalism.

Apple symbolizes cool, semi-aspirational innovation. Celgene was a misunderstood underdog. Meme stocks, to Millennial investors, were less about the stocks themselves – waning remnants of once-bigger businesses – but rather symbols of the power of Millennial retail investors to collectivize and “stick it” to institutional investors.

Millennials, and Gen Zs, for that matter, are not only heirs to a forthcoming $30 trillion in inheritance from their parents, and not only seem to dig rallying around causes, but they’re more apt to vote with their wallets and brokerage accounts. While they’re stereotyped by older generations in the workplace as promotion-demanding, easily offended snowflakes, these younger generations are not only the future, but see business and ideology – ESG-y issues in particular – as more interconnected than Gen Xers, Baby Boomers, or the Silent Generation do. Societies evolve.

In a political and legal sense, and in their sense of what’s right and wrong, tolerable and intolerable. With respect for the seriousness of the topic, it’s hard now to imagine slavery and segregation as ever being “normal” in the US, but at one point they were, or were at least common. There was always opposition to racist practices, which we’d now describe as egregious abominations, but long ago that opposing view was (at least among white Americans) closer to an activist belief than to a mainstream one.

Societal evolution isn’t always for what we in the Free West would term “the better,” either – Jews in 1930s Germany, Tutsis in 1990s Rwanda, women under Taliban rule and plenty of other groups who’ve found themselves under attack, persecution, or rights removal would attest to this. Of course, virtually all readers would see it as a step forward that the US is no longer segregated. Ditto that women can drive, vote, and run companies and countries.

Growing environmental awareness over the past hundred years has led to apolitical agreement that completely unchecked corporate behavior can lead to unacceptable negative environmental externalities. The point is that today’s society sees things like integrated buses, women voting, and baseline environmental protections as no-brainers. But yesterday’s society didn’t.

These were once divisive and hotly debated topics. As a Google search of recent headlines shows, a more current debate is whether companies should take a stand and speak out about social and political issues: Two things seem true: Better examples exist, and I’m not trying to take an anti-environment stance; my point is that the world has a lot of moving parts and unknowns and humans change their minds a lot, and humans have the capacity to be overconfident along with the capacity to not recognize when they’re being overconfident. And is it OK for what a company (or a stock) represents to change over time? Berkshire Hathaway and Markel have values, and have cult-y shareholder followings.

But their values of responsible capitalism are tightly tethered to shareholder primacy (the notion that a company should put its shareholders first). Their meetings are fun, and being a shareholder conveys at least some sense of identity. But both companies have, at least historically, delivered on their shareholder value proposition: Berkshire is up nearly 3,800,000% since 1965, and Markel 5,750% since 1987.

With Berkshire and Markel – and as a shareholder of both, I’m probably biased – company performance and values came first. The tribes followed. With meme stocks, the tribes came first or at least concurrently, and the companies – which didn’t inherently represent deep, soul-stirring forces – were more like focal points, and sometimes transient ones.

AMC used its meme stock status to issue $2 billion in equity, which saved the company from bankruptcy. The company-saving AMC “Apes” fell in love with CEO Adam Aron for doing an interview in his undies, but fell out of love – and launched a class-action lawsuit – after the company launched AMC preferred equity units (called “APEs”) to circumvent a ceiling on new common share issuance. They felt this move diluted loyal, company-saving Apes.

But what about those deep, soul-stirring forces? Especially when they fall outside a company’s main business, should a company move its Venn diagram to overlap with them? That Forbes piece by Hunter Johnson – whose title screenshot I shared – mentioned a Gartner study of 30,000 employees that found that 87% believe companies should take a stance on social issues directly related to their business, and 74% of employees said companies should take a stance on social issues not directly related to their business . But wait – surveys matter! The Wall Street Journal-University of Chicago poll in March found opposite ratios: 36% “yes” and 63% “no. ” So it’s not clear what the majority really believes – and the majority may not know what it believes – but we can frame both perspectives: Camp Millennial says yes : An ideal company does more than pursue profit in its direct business channels – it tries to make the world better.

“Better” may be hard to define or measure; it may take different forms, and it may be a check-the-box system to some and bespoke to others. But the supporting logic of this camp may be that society is evolving – and becoming wealthier, and more aware of global problems – and companies, as creatures of society, need to reflect societal shifts. If they don’t, they’ll no longer appeal to employees, customers, and many investors.

Camp Buffett says no : It’s fine for policymakers and individuals to advance causes outside of a company’s orbit – Buffett, in fact, has pledged 99% of his wealth to charitable causes, which will make him the single biggest charitable benefactor in human history – but companies themselves aren’t the appropriate vectors for non-company-related causes. With the blowback ESG has gotten in the past year and a half, it’s worth noting that “investing to make the world better” can be a broader idea than just the “ESG” acronym, and the ESG acronym is the most recent of several acronyms that attempted to represent this concept. Some critiques apply to both, but I tend to think that ESG , by trying to be broad-based and formulaic at the same time, is more trouble-prone.

Pretend Super Green Fair Trade Coffee Company wants to pay a little extra so its coffee pickers can have better lives. Pretend its customers want that, too, and are happy to pay extra. And its employees dig that, and at least some shareholders dig that.

All is well. Shareholder primacy and a social cause are in alignment. Super Green, in fact, must deal in fair trade coffee.

Anything else would be a betrayal, just as if LVMH decided to start selling Louis Vuitton handbags at Walmart. But must Super Green do other things, too, if a lot of customers/investors/employees expect that? If you’re the CEO or a board member of Super Green, and the employees say: “Hey, with a name like Super Green, we really should be using green power,” do you switch? Probably. Seems OK.

Or if your HR head says, “Hey, it’s wonderful that we pay coffee harvesters in Colombia fair wages. We should pay our American baristas above-market rates, too, because nobody can live on minimum wage in the US, and higher wages gave Costco better employee retention, for example, so virtue signaling aside, we could get a business benefit, too” do you pay more? You probably do. Now your PR guy interrupts your board meeting: “Guys, some advocacy groups are protesting outside.

They think a company as noble as Super Green is doing society a disservice by not speaking out in favor of abortion rights. Furthermore, two social media influencers – influencers who’ve helped us build the Super Green brand for years – want the same thing. If we don’t speak out, these guys may badmouth us, which will hurt sales.

” Now this is more difficult. Super Green is a coffee company. Even if you’re passionately pro-choice personally, you know that abortion is a divisive issue, and if Super Green is a public company of any size, it’s sure to have employees and customers and investors on both sides.

And if you’re not pro-choice, then what do you do? Fake it in the name of shareholder primacy? Leave the company because its “tribe” added a condition that excludes you? This would be an extreme case. But it’s scary from a corporate perspective. On one hand, businesses have to roll with society’s norms.

On the other hand, when those norms start to include expectations about taking stances on socially divisive issues, we get what Microsoft Excel calls a circular reference problem. We want to move forward, but do we want to make society even more splintered than it already is? On one hand, businesses have a history of exploitative actions – from using cheap child labor to dumping toxic sludge into rivers to misusing customer data – that boosted their near-term profits by unfairly offloading some cost, burden, or suffering onto the rest of the world. Regulation has been the strongest protection against these ills, but if companies can create negative consequences outside of their core businesses, it seems fitting and fair to expect them to have some level of engagement or care outside their core business, too.

On the other hand, while some issues like equal rights or not dumping toxic sludge have become unanimous no-brainers in current Western democratic society, many other issues like mask-wearing or abortion or immigration haven’t. And even within the no-brainers, the extent of appropriate response often remains contentious. Is it reasonable to expect a corporation – especially a corporation that has followed its diversity initiatives in good faith – to speak with one voice about contentions issues, or to judge which sides of currently contentious issues will become tomorrow’s no-brainers? Moving society forward has often involved people taking bold and controversial stances, but can we expect companies doing things unrelated to causes to a) know the right direction “forward,” b) know the right velocity of progress, and c) know the right endpoint? And should they hire consultants? Listen to activists – and if so, which ones? Poll their employees/customers/investors and side with the majority? The answers may be obvious to people with strongly held views – and many activist views are later proven “right” – but they are not obvious to most people and most companies.

Certainly, some companies will explicitly want to blend an avant-garde stance into their business DNA. But most companies, at their core, just want to keep up with society – meaning, for example, that a company in Europe, where ESG is more of a thing, would have to be a bit more ESG-y as part of its baseline than a US company would, or that “connecting with the local community” might mean sponsoring an LGBTQ event for a neighborhood deli in a progressive part of San Francisco and sponsoring a local Little League team for one in the rural Midwest. In fact, if a business doesn’t keep up with society, its resistance to doing so starts to look like a “cause.

” But are society’s expectations of companies becoming more reasonable – or less? And how should companies respond if they’re pressured to do something outside their comfort zone? I don’t have the answers, but I’d love to hear thoughts from readers. James owns shares of Berkshire Hathaway and Markel. BBAE has no financial interest in any company mentioned.

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