Woke, Inc.

CHAPTER 1

The Goldman Rule

IN ONE OF MY FAVORITE EPISODES of South Park, two sleazy salesmen try to sell shoddy vacation condos in the glitzy ski town of “Asspen” to the lower middle-class residents of South Park. Their sales pitch is simple: “Try saying it, ‘I’ve got a little place in Asspen.’ Rolls off the tongue nicely, doesn’t it?” Eventually, the residents open up their checkbooks.¹

This is exactly what happened when recruiters from Goldman Sachs used to show up on Ivy League campuses in the early 2000s. You didn’t join Goldman as a summer intern for the $1,500-per week-paycheck, though that wasn’t bad. Or for the possibility of a $65,000-a-year full-time offer for a 100-plus-hour-a-week job. You did it for the privilege of saying: “I work at Goldman Sachs.” There was something intoxicating about working at the most elite financial institution in America. For analysts who worked for Goldman in its day, the rush you got from saying you worked there was the equivalent of how today’s graduates feel when they say they work for a “social impact fund” or a “cleantech startup in the Valley.”

In the spring of 2006, I was a 20-year-old junior at Harvard College, and I fell for the trick. I joined Goldman Sachs that summer as an intern.

By the end of June, I knew that I had made a terrible mistake. People walked around Goldman Sachs with polished black leather shoes, pressed shirts, and Hugo Boss ties. I was selected to work in the firm’s then-prestigious investment division, where the essence of the job wasn’t so different from what my boss at a hedge fund had explained to me the prior year: to turn a pile of money into an even bigger pile of money. Yet at Goldman, we carried out that mission in a more genteel way. The managing directors at Goldman—the bosses at the top of the food chain—wore cheap digital watches with black rubber wrist straps, prominently juxtaposed against their expensive tailor-made dress shirts. It was an unspoken Goldman tradition.

One of the many vice presidents who worked in the cubicle diagonally across from mine would make a small scene every time he needed to use the restroom, dashing out and walking fast to and from his desk, just to show everyone how busy he was. I was the only one with a direct view of his computer screen; he was usually surfing different news sites on the web. Six weeks into the internship, I hadn’t learned a single thing—save for the polite suggestion from my superiors that I wear nicer shoes to the office.

The hallmark event at Goldman Sachs the summer I worked there wasn’t a poker tournament on a lavish boat cruise followed by a debauched night of clubbing, as it had been at the more edgy firm where I’d worked the prior summer. Rather, it was “service day”—a day that involved dressing up in a T-shirt and shorts and then dedicating time to serving the community. Back in 2006, that involved planting trees in a garden in Harlem. The co-head of the group at the time was supposed to lead the way.

I welcomed the prospect of a full day spent at a park away from Goldman’s cloistered offices. Yet when I showed up at the park in Harlem, very few of my colleagues seemed interested in… well, planting trees. The full-time analysts shared office gossip with the summer analysts. The vice presidents one-upped each other with war stories about investment deals. And, of course, the head of the group was nowhere to be found.

It was supposed to be an all-day activity, yet after an hour I noticed that very little service had actually been performed. As if on cue, the co-head of the group showed up an hour late—wearing a slim-fit suit and a pair of Gucci boots. The chatter among the rest of the team died down, as we awaited what he had to say.

“Alright, guys,” he said with a somber expression, as though he were going to discipline the team. A moment of tension hung in the air. And then he broke the ice: “Let’s take some pictures and get out of here!” The entire group burst into laughter. Within minutes we had vacated the premises. No trees had been planted. Within a half hour, the entire group was seated comfortably at a nearby bar that was well prepared for our arrival—pitchers of beer ready on the tables and all.

I turned to one of the younger associates sitting next to me at the bar. I remarked that if we wanted to have a “social day,” then we should’ve just called it that instead of “service day.”

He laughed and demurred: “Look, just do what the boss says.” Then he quipped back: “You ever heard of the Golden Rule?”

“Treat others like you want to be treated,” I replied.

“Wrong,” he said. “He who has the gold makes the rules.”

I called it “the Goldman Rule.” I learned something valuable that summer after all.

NEARLY A DECADE and a half after I learned that whoever has the gold makes the rules, the Goldman Rule had only grown in importance. In January 2020, at the World Economic Forum in Davos, Goldman Sachs CEO David Solomon declared that Goldman would refuse to take companies public unless they had at least one “diverse” member on their board. Goldman didn’t specify who counted as “diverse,” other than to say that it had a “focus on women.” The bank just said that “this decision is rooted first and foremost in our conviction that companies with diverse leadership perform better” and that board diversity “reduces the risk of groupthink.”

Personally, I believe the best way to achieve diversity of thought on a corporate board is to simply screen board candidates for the diversity of their thoughts, not the diversity of their genetically inherited attributes. But that wasn’t what bothered me most about Goldman’s announcement. The bigger problem was that its edict wasn’t about diversity at all. It was about corporate opportunism: seizing an already popular social value and prominently emblazoning it with the Goldman Sachs logo. This was just its latest version of pretending to plant trees in Harlem.

The timing of Goldman’s announcement was telling. In the prior year, approximately half the open board seats at S&P 500 companies went to women. In July 2019, the last remaining all-male board in the S&P 500 appointed a woman. In other words, every single company in the S&P 500 was already abiding by Goldman’s diversity standard long before Goldman issued its proclamation. Goldman’s announcement was hardly a profile in courage; it was just an ideal way to attract praise without taking any real risk. Another great risk-adjusted return for Goldman Sachs.

Goldman’s timing was also impeccable in another way. Its diversity quota proclamation stole the headlines from a much less flattering event: Goldman had just agreed to pay $5 billion in fines to governments around the world for its role in a scheme stealing billions from the Malaysian people.² In what has become known as the 1MDB scandal, Goldman paid more than $1 billion in bribes to win work raising money for the 1Malaysia Development Berhad Fund, which was supposedly meant to fund public development projects. In actuality, Goldman turned a willfully blind eye as corrupt Malaysian officials immediately turned the fund into their own private piggy bank, buying art and jewelry. Some of that money literally ended up funding The Wolf of Wall Street.³

Goldman’s effort to change the narrative didn’t go unnoticed. As one Redditor on the now-infamous forum WallStreetBets observed, “They want to make sure that any IPO they bring to market has a brown or black person on the board of the company they are IPOing, but are perfectly okay with ripping off millions of Malaysians by engineering a slush fund for an oil tycoon’s jewelry collection and private jet.”⁴,⁵ Well, yes. Welcome to the woke-industrial complex.

Large banks like Goldman Sachs are particularly adept at playing the woke capitalist game. But in reality, by 2020 it was the prevailing business model in corporate America. Stakeholder capitalism—the trendy idea that companies should serve not just their shareholders but also other interests and society at large—was no longer simply on the rise. It had been crowned as the governing philosophy for big business in America.

At the end of 2018, the Business Roundtable, the top lobbying group for America’s largest corporations, overturned a 22-year-old policy statement that said a corporation’s paramount purpose is to serve its shareholders. In its place, its 181 members signed and issued a commitment to lead their companies for the benefit of all stakeholders—not only shareholders, but customers, suppliers, employees, and communities. “Multi-stakeholder capitalism is the answer to addressing our challenges holistically,” Walmart CEO and Business Roundtable Chairman Doug McMillon said.⁶

In the years that followed, the Business Roundtable’s CEO members dutifully recited their new catechism. “We uniquely appreciate the new definition of a corporation and the critical mindset it represents for business,” said Beth Ford, CEO of Land O’Lakes. “The role of business is larger than the already high calling of providing value to those who buy our products and services,” said Scott Stephenson, CEO of Verisk Analytics. “Verisk is an inclusive workplace that values diversity and perspectives.” Of course, “diversity and perspectives” is different from a diversity of perspectives.⁷ Larry Fink, CEO of BlackRock, the world’s largest investment firm, issued an open letter to CEOs describing a “Sustainability Accounting Standards Board” that would tackle issues ranging from labor practices to workforce diversity to climate change. Scores of others followed.

If the turn of the decade was a tipping point, then the murder of George Floyd, a black man, at the hands of a white police officer in May 2020 broke the dam. Companies ranging from Apple to Uber to Novartis issued lengthy statements in support of the Black Lives Matter (BLM) movement. In a surprising about-face, L’Oréal rehired a model it had fired for her comments about “the racial violence of white people.” Well-respected companies like Coca-Cola implemented corporate programs teaching employees “to be less white” and that “to be less white is to be less oppressive, be less arrogant, be less certain, be less defensive, be more humble” and that “white people are socialized to feel that they are inherently superior because they are white.”⁸ Starbucks said it would mandate anti-bias training for executives and tie their compensation to increasing minority representation in its workforce.

In 2021, the new trend became unstoppable. In response to Georgia’s new voting rules this year, Delta’s CEO declared that “the final bill is unacceptable and does not match Delta’s values,” failing to explain why Americans should care whether a voting law matches the values of an airline company.⁹ Coca-Cola’s CEO added: “Our focus is now on supporting federal legislation that protects voting access and addresses voter suppression across the country,” a statement that sounded more like that of a Super PAC than a soft drink manufacturer.¹⁰ Biotech industry leaders called on CEOs to “actively consider alternatives to investing within states that have enacted voter suppression laws” and to encourage “alternative venues for conferences and major meetings.”¹¹ Hundreds of other companies issued similar statements.

Fifteen years ago, stakeholder capitalism might have represented a challenge to the system. Today, it is the system—and its tolerance for dissent is vanishing. Al Gore recently declared that stakeholder capitalism is “the proven model for business” and that corporate executives who fail to act accordingly could be sued for violating their fiduciary duties.¹² Marc Benioff, billionaire founder of Salesforce.com, proclaimed that shareholder capitalism is “dead.”¹³ Politicians on both sides, from Elizabeth Warren to Marco Rubio, have jumped on the bandwagon. Today the case is basically closed. In 2018, New York Times columnist Ross Douthat called this trend “woke capitalism.”¹⁴ I call it “Wokenomics”—a new economic model that infuses woke values into big business.

In late 2020, on the 50th anniversary of Milton Friedman’s famous 1970 defense of shareholder capitalism, a few economists made a meek last-ditch attempt to resist this trend by defending “the Friedman Doctrine.” But their arguments were at best persuasive only to other economists accustomed to speaking in the parlance of economic efficiency, lacking the moral sheen of the other side. For example, Harvard economist Greg Mankiw argued in The New York Times that corporate executives are unlikely to be well equipped with the necessary skills to serve society and that there is no “metric” to determine how well executives are serving society as a whole.¹⁵ University of Chicago economist Steven Kaplan cited the US auto industry in the 1960s and 1970s as a cautionary tale about stakeholder capitalism: by treating their unions and employees as partners and stakeholders, US automakers significantly underperformed Japanese competitors.¹⁶

These economists miss the main point. The real problem with stakeholder capitalism isn’t that it’s inefficient. The deeper threat is this: it’s the Goldman Rule in action. The guys with the gold get to make the rules. Not just market rules, but moral rules too.

Speaking as a former CEO myself, I’m deeply concerned that this new model of capitalism demands a dangerous expansion of corporate power that threatens to subvert American democracy. For corporations to advance social causes, they must first define which causes to prioritize and what position to take. Yet that isn’t a business judgment; it’s a moral one. America was founded on the idea that we make our most important value judgments through our democratic process, where each citizen’s voice is weighted equally, rather than by a small group of elites in private. Debates about our social values belong in the civic sphere, not in the corner offices of corporate America.

I’d love to hear Larry Fink’s favorite stock picks, but as a citizen I don’t particularly care for his views on racial justice or environmentalism. Democratically elected officeholders and other public leaders, not CEOs and portfolio managers, should lead the debate about what values define America. Business leaders are supposed to decide how much to spend on a manufacturing plant or whether to invest in one piece of technology or another—not whether a minimum wage is more important for society than full employment or whether reducing America’s carbon footprint is more important than the geopolitical consequences of doing so. CEOs are no better suited to make these decisions than an average politician is to, say, make the R&D decisions of a pharma company.

To be clear, that doesn’t mean that citizens, including CEOs, should refrain from speaking up strictly in their personal capacities. Corporations may not be people, but CEOs definitely are, and it’s a good thing when citizens personally engage on civic issues. But there’s a difference between speaking up as a citizen and using your company’s market power to foist your views onto society while avoiding the rigors of public debate in our democracy. That’s exactly what Larry Fink does when BlackRock issues social mandates about what companies it will or won’t invest in or what Jack Dorsey does when Twitter consistently censors certain political viewpoints rather than others. When companies use their market power to make moral rules, they effectively prevent those other citizens from having the same say in our democracy.

Curiously, today the most ardent supporters of stakeholder capitalism are liberal. Many progressives who love stakeholder capitalism abhor the Supreme Court’s 2010 ruling in Citizens United v. Federal Election Commission because it permits corporations to donate to political campaigns and influence electoral outcomes. Al Gore, one of the principal proponents of stakeholder capitalism, has described this ruling as “obscene” and proposed overturning it through a constitutional amendment.¹⁷ Joe Biden, Hillary Clinton, and Barack Obama have all made similar comments.

Yet stakeholder capitalism is Citizens United on steroids. It not only permits corporations to influence our democracy, it demands that they do that by advancing whatever social values they choose. Ironically, those who most vehemently proclaim that “corporations aren’t people” are the ones who now demand that corporations act more like, well, people.

Advocates of stakeholder capitalism say it’s totally consistent to oppose corporate contributions to political campaigns while still demanding that corporate leaders pursue social agendas that are good for society at large. Yet this argument ignores why it’s bad for corporations to influence elections in the first place. It’s not just the election that matters, but what the election symbolizes: the idea that every person’s vote counts equally in our democracy. That’s what’s special about an election. That’s what makes capitalist influence over elections so troubling—because when dollars mix with votes, everyone’s vote no longer counts equally. When they pick which politicians to support, they’re just pursuing their self-interest, and it’s no different when they pick which “social goals” to prioritize too. Either Al Gore doesn’t understand that, or else his new business interests as an ESG investor make that an inconvenient truth.

The damage to democracy is further-reaching. The heart of our democracy isn’t just about casting a ballot in November. Rather, it’s about preserving democratic norms in everyday life, including free speech and open debate. When companies make political proclamations, employees who personally disagree with the company’s position face a stark choice: speak up freely and risk your career, or keep your job while keeping your head down. That isn’t how America is supposed to work, yet that is a reality for many Americans today.

Even worse, partisan politics is now infecting spheres of our lives that were previously apolitical. Our social fabric depends on preserving certain spaces as apolitical sanctuaries, especially in an increasingly divided polity like ours. Until earlier this year, Major League Baseball used to offer one of those rare sanctuaries: fans were bound together by their love of baseball—whether black or white, Democrat or Republican. Thanks to the MLB’s dramatic protest of Georgia’s new voting rules earlier this year, that sanctuary has vanished.

Democracy loses twice: corporate influence pollutes the public debate about moral questions, and social solidarity is eroded as apolitical institutions slowly disappear. Stakeholder capitalism poisons democracy, partisan politics poisons capitalism, and in the end we are left with neither capitalism nor democracy.

In practice, liberals love stakeholder capitalism only insofar as companies advance social goals that they personally find appealing. Most liberals dislike the Supreme Court’s ruling in Burwell v. Hobby Lobby Stores for permitting a corporation to limit health insurance coverage of certain contraceptives for its employees. But they cheered when Goldman Sachs issued its diversity edict for American companies that want to pursue an IPO. At core, Goldman’s diversity edict is Hobby Lobby on steroids too. Hobby Lobby is a family-owned arts and crafts store whose policy applies to its own employees, whereas Goldman’s quota system applies effectively to every public company in America. If liberals dislike Hobby Lobby on principled grounds, they should shudder at the raw societal power exercised by behemoths like Goldman Sachs.

Wokenomics is crony capitalism 2.0, and here’s how it works: big business uses progressive-friendly values to deflect attention from its own monolithic pursuit of profit and power. Crony capitalism 1.0 was straightforward by comparison: corporations simply had to make campaign contributions to legislators in return for favorable legislative treatment. Here’s an example: big Wall Street banks hire lobbyists to exert influence in Washington, and in return they get favorable regulations that codify their status as gatekeepers who enjoy oligopoly status in taking companies public. The regulations are so complex and onerous that they prevent upstart competitors from getting in on the action, keeping the oligopoly intact. Championship-level players of this game like Goldman Sachs top it off with a flourish, by lending their executives to serve as US treasury secretaries (Steve Mnuchin under President Trump, Hank Paulson under President George W. Bush, and so on). And it pays off in the end: winners like Goldman Sachs get bailouts in tough times like 2008, while less adroit competitors like Lehman Brothers are hung out to dry by Hank Paulson. That much is simple enough.

But crony capitalism 2.0 is far trickier. It uses a different playbook from that used by version 1.0—one that’s designed to escape public notice. In January 2020, when David Solomon first issued Goldman’s diversity proclamation at the World Economic Forum in Davos, it was at a time when Bernie Sanders and Elizabeth Warren, two of the biggest critics of the US government’s 2008 bailout of Goldman Sachs, were presidential frontrunners. Having supplicated to the swamp uni-party of crony Republicans and centrist Democrats for decades, the moment had arrived for Goldman Sachs to begin placating the identity-politics-obsessed far left, just as that wing of the Democratic party had begun to accrue greater political power. Their new CEO is woker than woke, and he’s a DJ on the side too. That’s how the 2020 edition of crony capitalism looks; Hank Paulson is outmoded by comparison.

TO BE SURE, many CEOs who promote stakeholder capitalism do it genuinely. Ken Frazier, the former chairman and CEO of Merck, is a pharma industry leader I greatly admire for his company’s accomplishments in the treatment of cancer and other diseases. In 2020, he publicly declared that it’s important for businesses like Merck to “stabilize society” amid rising economic inequity and racial injustice, saying it was time for “industry to step up to the plate.” In a public interview in October 2020, he said: “What makes me worry ultimately is when people don’t believe in our institutions, they don’t believe in our system, they don’t believe there’s fundamental fairness, then I think our society begins to come apart.”¹⁸ Earlier in 2021, Ken was one of corporate America’s most powerful voices against Georgia’s new voting rules.¹⁹

Having met Ken myself, I can attest that he truly believes these things. He’s an authentic leader; several employees at my company who used to work for Merck truly revere him. Merck is also a fundamentally different company from Goldman Sachs: its employee base is motivated by improving patient care rather than by the number of green pieces of paper that end up in their bank account at the end of bonus season. Personally, I don’t necessarily think that one of those is inherently better than the other, though they are fundamentally different.

But Ken misses the point that his own acts, however well intentioned, may actually contribute to the public’s loss of faith in our system. Many Americans no longer believe in our institutions precisely because CEOs and other leaders use their institutional seats of power to crowd out the voices of ordinary Americans. When CEOs tell people what they’re supposed to think about moral questions, then people stop believing that their own opinions really matter. In other words, they stop believing in the system.

Ken and I debated this issue in an email exchange last year. He quoted George Merck, his company’s founder, who said that “medicine is for the people, not for the profits,” and asked me whether rejecting stakeholder capitalism means putting profits ahead of patients.

My answer was no. In the long run, the only way for a pharmaceutical company to be successful is by serving patients first. But putting patients first also means putting them ahead of fashionable social causes. It means that we don’t care if the scientist who discovers a cure to COVID-19 is white or black or a man or a woman. It means that we don’t care if the manufacturing and distribution process that delivers cures most quickly to patients is carbon neutral.

Ken may self-identify as liberal, but his view actually reflects conservative European social thought, which was skeptical of democracy and convinced that well-meaning elites should work together for the common good, as long as the common good could be defined by them. In the Old World, that often meant some combination of political leaders, business and labor elites, and the church working together to define and implement social goals. But America was supposed to offer a different vision: citizens defining the common good through the democratic process—publicly through open debate and privately at the ballot box—without elite intervention.

That’s what makes America great. That’s what makes America itself.

But today, with the advent of Wokenomics, we are slowly receding back to the pre-American Old World model on the global stage. Even the Vatican is getting in on the act. In December 2020, Pope Francis issued an implicit endorsement of stakeholder capitalism by launching a “Council for Inclusive Capitalism” in partnership with the Vatican. The council “boasts over $10.5 trillion in assets under management, companies with over $2.1 trillion of market capitalization, and 200 million workers in over 163 countries.”²⁰ This council endorses not only equality of opportunity but also “Equitable Outcomes” and “Fairness Across Generations on the Environment.” There’s a page on its website dystopically titled “Our Guardians,” which includes a creepy-looking photo of billionaires like Marc Benioff of Salesforce, large corporate CEOs from Wall Street to big pharma, and descendants of the Rothschild banking family in Europe surrounding the Pope and making a pledge to “change capitalism for good.”²¹ The American vision of separating church from state, and democracy from capitalism, has been supplanted by this new global vision of mixing them all with one another—leaving us with none of them in the end.

In 2019, I attended a closed-door forum hosted by J.P. Morgan for a select group of startup company founders. It was the first time I’d been invited to join their ranks, so I attended with curiosity. Jamie Dimon, CEO of J.P. Morgan, spoke to the audience during dinner. Another CEO asked him: “Would you ever consider running for president?” Dimon didn’t miss a beat: “I would love to be president. I just don’t like the idea of running for president.” The audience laughed—not because it was obviously outlandish, but because it was obviously true.

Dimon couldn’t have better summarized the motives of many CEOs who embrace stakeholder capitalism: it allows them to exercise quasi-political power without having to go through the hassle of getting elected. Yet that hassle is part and parcel of democracy itself.