1 00:00:00,400 --> 00:00:03,720 Hello and welcome you are listening to Patrick Boyle on 2 00:00:03,720 --> 00:00:08,080 Finance, a podcast exploring ideas from quantitative finance, 3 00:00:08,320 --> 00:00:11,640 examining events occurring in markets right now and financial 4 00:00:11,640 --> 00:00:15,400 history to see what lessons can be taken away, including 5 00:00:15,400 --> 00:00:18,200 interviews with some of the most interesting people in the world 6 00:00:18,200 --> 00:00:20,960 of finance. To learn more about the podcast, 7 00:00:20,960 --> 00:00:30,400 visit on finance.org. Sam Altman, the CEO of Open AI, 8 00:00:30,400 --> 00:00:34,600 told the Wall Street Journal last year that AI means that a 9 00:00:34,600 --> 00:00:37,120 lot of people are going to lose their jobs. 10 00:00:37,360 --> 00:00:41,440 So he was probably not awfully surprised to lose his job as the 11 00:00:41,440 --> 00:00:46,000 CEO of Open AI last week. There was probably no one better 12 00:00:46,000 --> 00:00:49,520 prepared for such an outcome. I imagine that he kept his 13 00:00:49,520 --> 00:00:53,880 personal items in a little box next to his desk at work so that 14 00:00:53,880 --> 00:00:57,400 nothing would be accidentally left behind in the office when 15 00:00:57,400 --> 00:01:01,920 he eventually got the call from HR, and that he immediately fled 16 00:01:01,920 --> 00:01:05,880 to his bunker in New Zealand, probably expecting all of the 17 00:01:05,880 --> 00:01:10,320 other Silicon Valley CEOs to be waiting there to greet him. 18 00:01:10,760 --> 00:01:15,160 It turns out that all of the drama ad Open AI was a storm in 19 00:01:15,200 --> 00:01:17,920 a teapot. Yesterday morning, we learned 20 00:01:17,920 --> 00:01:22,200 that in a dramatic reversal, Altman will be reinstated under 21 00:01:22,200 --> 00:01:26,080 the supervision of a new board that contains only one member 22 00:01:26,080 --> 00:01:30,160 from the prior board and Open AI's largest investor. 23 00:01:30,160 --> 00:01:34,600 Microsoft is expected to have a larger voice in Open AI's 24 00:01:34,600 --> 00:01:39,280 governance going forward. A lot of the goings on at Open 25 00:01:39,360 --> 00:01:42,760 AI relate to its strange corporate structure, which 26 00:01:42,760 --> 00:01:45,440 relate to how it was initially funded. 27 00:01:45,760 --> 00:01:49,600 There are lessons that can be drawn from the chaos at Open AI 28 00:01:49,800 --> 00:01:53,760 that apply to the recent trends we've seen towards stakeholder 29 00:01:53,760 --> 00:01:58,720 capitalism. Open AI was founded in 2015 by a 30 00:01:58,720 --> 00:02:02,320 group of high profile entrepreneurs and researchers. 31 00:02:02,520 --> 00:02:07,160 Among them were Sam Altman, Reed Hoffman, Elon Musk, Peter Thiel, 32 00:02:07,440 --> 00:02:10,800 Amazon Web Services, and a few others. 33 00:02:11,000 --> 00:02:15,240 Its stated mission was to advance artificial intelligence 34 00:02:15,400 --> 00:02:18,800 in a way that would benefit society as a whole, 35 00:02:19,080 --> 00:02:22,800 unconstrained by a need to generate a financial return. 36 00:02:23,240 --> 00:02:26,160 They announced that they would freely collaborate with other 37 00:02:26,160 --> 00:02:30,640 institutions and researchers by making their patents and 38 00:02:30,640 --> 00:02:35,160 research open to the public. The founders pledged over $1 39 00:02:35,160 --> 00:02:39,680 billion to the venture, but actually only contributed around 40 00:02:39,680 --> 00:02:44,760 $130 million, the majority of which came from Elon Musk. 41 00:02:45,360 --> 00:02:49,840 Open AI was able to hire some of the top researchers in the space 42 00:02:49,840 --> 00:02:54,120 early on, despite paying a lot less than Facebook and Google, 43 00:02:54,360 --> 00:02:58,080 partially because researchers said that they were excited by 44 00:02:58,080 --> 00:03:01,440 the opportunity of working with some of the top people in the 45 00:03:01,440 --> 00:03:03,960 field and. Because they believed in the 46 00:03:03,960 --> 00:03:07,680 mission of the company. After three years, Elon Musk 47 00:03:07,680 --> 00:03:12,160 left his board seat claiming a conflict of interest with Teslas 48 00:03:12,400 --> 00:03:16,840 AI R&D endeavors relating to autonomous driving. 49 00:03:17,280 --> 00:03:20,960 Insiders say that Musk pitched that he should be running the 50 00:03:20,960 --> 00:03:24,160 company. And when Altman and Open AI's 51 00:03:24,160 --> 00:03:28,600 other founders rejected this proposal, Musk walked away, 52 00:03:28,840 --> 00:03:33,360 reneging on a massive plant donation, which left a nonprofit 53 00:03:33,360 --> 00:03:37,800 with no ability to pay the astronomical fees associated 54 00:03:37,800 --> 00:03:41,120 with training AI models on supercomputers. 55 00:03:41,520 --> 00:03:44,960 Unable to balance its research goals with its budget 56 00:03:44,960 --> 00:03:49,880 constraints, Open AI made the announcement of creating Open, a 57 00:03:50,040 --> 00:03:55,480 ILPA, separate legal entity that operates as a capped profit 58 00:03:55,480 --> 00:04:01,360 corporation in 2019, the profits being capped at 100 times any 59 00:04:01,360 --> 00:04:03,880 investment. The company explained this 60 00:04:03,880 --> 00:04:07,680 decision saying we need to invest billions of dollars in 61 00:04:07,680 --> 00:04:12,160 the coming years into large scale cloud compute, attracting 62 00:04:12,160 --> 00:04:17,160 and retaining talented people, and building AI supercomputers. 63 00:04:17,519 --> 00:04:22,840 This transition from nonprofit to for profit required Open AI 64 00:04:22,840 --> 00:04:27,200 to balance its desire to make money with its stated commitment 65 00:04:27,200 --> 00:04:31,480 to ethical AI development. They said that the cap on 66 00:04:31,480 --> 00:04:35,560 profits was there to prevent investors from being enticed to 67 00:04:35,560 --> 00:04:40,200 try and grab limitless wealth by deploying software that could be 68 00:04:40,200 --> 00:04:43,560 very harmful. I'll let you decide whether that 69 00:04:43,560 --> 00:04:47,520 was a real concern they had or a good way of marketing and 70 00:04:47,520 --> 00:04:51,360 investment in the firm. This unconventional structure 71 00:04:51,360 --> 00:04:55,480 meant that Open AI had a board of directors, which in theory 72 00:04:55,480 --> 00:04:58,920 controls the entire corporate structure, which includes the 73 00:04:58,920 --> 00:05:03,480 charity and the capped profit company, but which, unlike other 74 00:05:03,480 --> 00:05:06,680 boards, is not accountable to shareholders. 75 00:05:06,920 --> 00:05:10,760 The directors are in fact not allowed to own any stock to 76 00:05:10,760 --> 00:05:14,640 prevent a conflict of interest because they are specifically 77 00:05:14,640 --> 00:05:17,880 not supposed to be aligned with shareholders. 78 00:05:18,280 --> 00:05:23,040 The nonprofit's principal beneficiary is humanity, not 79 00:05:23,120 --> 00:05:26,560 open AI investors, according to their website. 80 00:05:26,840 --> 00:05:30,000 Which may mean that they are accountable to everyone, 81 00:05:30,080 --> 00:05:33,000 including you. Or it may mean that they're 82 00:05:33,000 --> 00:05:37,920 accountable to no one, the company's operating agreement to 83 00:05:37,920 --> 00:05:42,320 investors says in writing. It would be wise to view any 84 00:05:42,320 --> 00:05:47,200 investment in Open AI in the spirit of a donation, with the 85 00:05:47,200 --> 00:05:50,880 understanding that it may be difficult to know what role 86 00:05:50,880 --> 00:05:54,560 money will play in a post AGI world. 87 00:05:54,960 --> 00:05:58,960 Documents like this that were written by an actual lawyer 88 00:05:59,120 --> 00:06:02,520 highlight the problems that we're starting to see from the 89 00:06:02,520 --> 00:06:06,960 combined popularity of science fiction in Silicon Valley and 90 00:06:06,960 --> 00:06:10,200 widespread micro dosing of hallucinogens. 91 00:06:10,760 --> 00:06:15,360 OK, so while the Open AI investor documents write about 92 00:06:15,360 --> 00:06:19,840 the unknowable role that money will play in a post AGI world, 93 00:06:20,160 --> 00:06:23,760 we haven't gotten there yet. And in the real world, where the 94 00:06:23,760 --> 00:06:28,560 role of money is reasonably well defined, Open AI is an 95 00:06:28,560 --> 00:06:32,880 unprofitable company and is expected to need to raise a lot 96 00:06:32,880 --> 00:06:37,640 more money over time from investors like Microsoft to keep 97 00:06:37,640 --> 00:06:40,120 up with the high costs of building more. 98 00:06:40,440 --> 00:06:44,520 Sophisticated chat bots. Despite this lack of 99 00:06:44,520 --> 00:06:49,000 profitability, the company is valued by investors at $86 100 00:06:49,000 --> 00:06:54,240 billion, and Bloomberg reported last weekend that some investors 101 00:06:54,240 --> 00:06:58,240 were considering writing down the entire value of their Open 102 00:06:58,240 --> 00:07:05,520 AI Holdings 20. $86 billion of value evaporated in a weekend, 103 00:07:05,680 --> 00:07:09,560 and the reason given by the board was that Altman had not 104 00:07:09,560 --> 00:07:12,360 been consistently candid with them. 105 00:07:13,160 --> 00:07:17,520 With billions of dollars in jeopardy, some investors started 106 00:07:17,520 --> 00:07:21,720 exploring legal action. But the problem with that is 107 00:07:21,720 --> 00:07:26,200 that it's not clear how to sue a board whose legal duty was to 108 00:07:26,200 --> 00:07:29,640 the safety of humanity, not to investors. 109 00:07:30,000 --> 00:07:34,000 Microsoft may have been willing to sign the wacky documents like 110 00:07:34,000 --> 00:07:38,480 they did and pretend that the board, which answers only to 111 00:07:38,480 --> 00:07:43,360 humanity, were in charge. But because Open AI requires 112 00:07:43,360 --> 00:07:47,440 investors to write large checks to fund the ongoing losses at 113 00:07:47,440 --> 00:07:52,160 the company, Microsoft were easily able to exert control, 114 00:07:52,360 --> 00:07:56,160 which is what they did. They pushed for Altman to be 115 00:07:56,160 --> 00:08:00,440 reinstated while also offering him a role at Microsoft. 116 00:08:01,040 --> 00:08:05,160 Altman quickly confirmed that he and Greg Brockman, another Co 117 00:08:05,160 --> 00:08:08,800 founder who left on Friday, would join Microsoft. 118 00:08:08,800 --> 00:08:12,680 Open a is key partner. Former colleagues would have an 119 00:08:12,680 --> 00:08:17,280 open door to follow and join a new AI unit, according to 120 00:08:17,280 --> 00:08:22,320 Microsoft chief Satya Nadella. As much of A win as this might 121 00:08:22,320 --> 00:08:25,480 have appeared for Microsoft, people were saying that they had 122 00:08:25,480 --> 00:08:29,160 managed to buy the hottest AI firm for zero. 123 00:08:29,480 --> 00:08:32,840 This might not have been the optimal outcome for them, as 124 00:08:32,840 --> 00:08:36,440 they would likely have had to deal with antitrust regulators 125 00:08:36,440 --> 00:08:40,159 and lawsuits from other Open AI investors. 126 00:08:40,840 --> 00:08:45,200 Now the board doesn't answer to the staff at Open AI either. 127 00:08:45,400 --> 00:08:48,480 Other than that, the staff make up some of humanity. 128 00:08:48,880 --> 00:08:52,600 But the staff do all of the work while the board attend 129 00:08:52,600 --> 00:08:55,480 occasional meetings where they worry about the future of 130 00:08:55,480 --> 00:08:58,880 humanity. Not a lot would be going on at 131 00:08:58,880 --> 00:09:04,440 Open AI without employees. The majority of Open AI 700 or 132 00:09:04,440 --> 00:09:08,800 so employees signed an open letter to the board demanding 133 00:09:08,800 --> 00:09:12,280 that the board resign and that they rehire Altman. 134 00:09:12,560 --> 00:09:16,440 The letter stated that the board had told the employee leadership 135 00:09:16,440 --> 00:09:19,240 team. That allowing the company to be 136 00:09:19,240 --> 00:09:23,080 destroyed would be consistent with the mission. 137 00:09:23,480 --> 00:09:27,400 The employees said that unless their demands were met, they 138 00:09:27,400 --> 00:09:31,400 would resign from Open AI and join the new subsidiary of 139 00:09:31,400 --> 00:09:34,720 Microsoft being headed up by Altman and Brockman. 140 00:09:35,160 --> 00:09:38,680 As a side note to all of this, you have to wonder what the 141 00:09:38,800 --> 00:09:42,960 employee contracts at Open AI look like that the entire staff 142 00:09:42,960 --> 00:09:46,240 could leave to work for a major investor in the company. 143 00:09:46,520 --> 00:09:51,000 Leaving Open AI as an empty shell, typically, executives 144 00:09:51,000 --> 00:09:55,040 like Altman would have contracts that prevent them from hiring 145 00:09:55,040 --> 00:09:58,720 key staff once they're no longer at the firm, and staff would 146 00:09:58,720 --> 00:10:03,160 have signed Ndas, preventing them from taking any technology 147 00:10:03,160 --> 00:10:06,320 with them. The press are reporting that 148 00:10:06,320 --> 00:10:11,400 this mass revolt by open AI staff was the primary reason for 149 00:10:11,400 --> 00:10:15,880 the boards about face. So while the board on paper only 150 00:10:15,880 --> 00:10:20,760 reports to humanity, investors and employees won out. 151 00:10:21,280 --> 00:10:25,800 The Open AI story is a bit of a crazy one, where Microsoft and a 152 00:10:25,800 --> 00:10:30,200 number of other sophisticated investors agreed to put billions 153 00:10:30,200 --> 00:10:35,160 of dollars in and employees got stock grants all at an $86 154 00:10:35,160 --> 00:10:40,480 billion valuation without the contractual or fiduciary rights 155 00:10:40,480 --> 00:10:42,960 that investors might normally expect. 156 00:10:43,520 --> 00:10:47,360 Open AI is not the only company with this type of structure 157 00:10:47,480 --> 00:10:50,280 either. Anthropic, A rival company 158 00:10:50,280 --> 00:10:54,480 started by a group of former Open AI employees, has set 159 00:10:54,480 --> 00:10:59,240 itself up as a public benefit corporation, a legal structure 160 00:10:59,240 --> 00:11:02,680 that is meant to insulate it from market pressures. 161 00:11:03,240 --> 00:11:07,760 The Open AI case highlights a trend that we've seen in recent 162 00:11:07,760 --> 00:11:11,080 years in favour of unusual corporate governance. 163 00:11:11,440 --> 00:11:15,400 I wrote about this issue in my corporate finance textbook as 164 00:11:15,400 --> 00:11:18,720 while there's been a general move towards better and better 165 00:11:18,720 --> 00:11:22,960 corporate governance over time, bad corporate governance has 166 00:11:22,960 --> 00:11:26,760 been a growing issue, particularly in Silicon Valley, 167 00:11:26,960 --> 00:11:30,960 where companies like Google, Facebook, and Snap structured 168 00:11:30,960 --> 00:11:35,200 their IPOs such that founders were left with unchallenged 169 00:11:35,200 --> 00:11:38,440 power to do almost anything that they want. 170 00:11:38,800 --> 00:11:42,600 At these firms, founders were given special shares with 171 00:11:42,600 --> 00:11:46,400 special voting powers, meaning that they don't have to listen 172 00:11:46,400 --> 00:11:50,200 to investors whatsoever. Investors looked at these 173 00:11:50,200 --> 00:11:54,200 companies and felt that the founder CEO had such a great 174 00:11:54,200 --> 00:11:57,880 track record that there was little consequence to having 175 00:11:57,880 --> 00:12:01,920 poor corporate governance. Berkshire Hathaway, Warren 176 00:12:01,920 --> 00:12:06,360 Buffett's company has a similar unusual structure where the A 177 00:12:06,560 --> 00:12:09,520 shares get more votes than the B shares do. 178 00:12:09,800 --> 00:12:13,560 The different voting rights were allegedly put in place so the 179 00:12:13,560 --> 00:12:18,040 company and its leadership would not be beholden to investors 180 00:12:18,040 --> 00:12:22,120 seeking short term profit. This structure at Berkshire 181 00:12:22,120 --> 00:12:26,960 Hathaway has kept Warren Buffett in firm control, even as he has 182 00:12:26,960 --> 00:12:29,840 given away more and more of his shares to charity. 183 00:12:30,160 --> 00:12:35,000 The A shares can be converted to B shares, but B shares can't be 184 00:12:35,000 --> 00:12:40,120 converted to A shares. Starting in 2006, Warren Buffett 185 00:12:40,120 --> 00:12:43,720 began giving away large amounts of Berkshire Hathaway stock to 186 00:12:43,720 --> 00:12:46,960 charities. But prior to donating them, he 187 00:12:46,960 --> 00:12:49,920 converts his A shares to B shares. 188 00:12:50,120 --> 00:12:54,120 Since Class B shares have diminished voting rights, this 189 00:12:54,120 --> 00:12:58,520 has the effect of preserving his voting control, even as his 190 00:12:58,520 --> 00:13:01,960 percentage ownership of Berkshire declined over the 191 00:13:01,960 --> 00:13:05,400 years. While investors might feel that 192 00:13:05,400 --> 00:13:08,040 there's little consequence to having poor corporate 193 00:13:08,040 --> 00:13:11,840 governance, this could be short sighted since you're buying 194 00:13:11,840 --> 00:13:14,520 shares of companies in perpetuity. 195 00:13:14,880 --> 00:13:18,760 Leaders who might be doing a great job today but are not 196 00:13:18,760 --> 00:13:23,040 accountable to shareholders can take value destructive paths in 197 00:13:23,040 --> 00:13:26,040 the future without answering to anyone. 198 00:13:26,440 --> 00:13:30,960 Meta's Reality Labs division, which houses its efforts to 199 00:13:30,960 --> 00:13:37,640 build the Metaverse, has lost around $46.5 billion since 2019. 200 00:13:38,000 --> 00:13:42,480 Would Mark Zuckerberg have been able to waste this much money if 201 00:13:42,480 --> 00:13:46,280 he was accountable to investors? Under a normal corporate 202 00:13:46,280 --> 00:13:49,560 governance structure, there's a good chance that he would have 203 00:13:49,560 --> 00:13:52,680 been pushed out by shareholders a few years ago. 204 00:13:52,680 --> 00:13:56,760 As the losses were mounting, there have been numerous studies 205 00:13:56,760 --> 00:14:00,280 on the relationship between corporate governance and 206 00:14:00,280 --> 00:14:03,360 investment performance. Gompers ET al. 207 00:14:03,360 --> 00:14:07,520 Found that companies with stronger shareholder rights have 208 00:14:07,520 --> 00:14:11,680 higher profits and trade at higher multiples than companies 209 00:14:11,680 --> 00:14:15,400 would weak governance. A few years ago, the Business 210 00:14:15,400 --> 00:14:19,360 Roundtable and Nonprofit Lobbyist Association, whose 211 00:14:19,360 --> 00:14:23,960 members are CEOs of major U.S. companies, put out a press 212 00:14:23,960 --> 00:14:28,320 release saying that corporations should be run to protect all 213 00:14:28,320 --> 00:14:33,400 corporate stakeholders, defined to include customers, society 214 00:14:33,400 --> 00:14:37,080 and employees, rather than following the conventional 215 00:14:37,080 --> 00:14:40,200 objective of maximizing shareholder wealth. 216 00:14:40,680 --> 00:14:44,280 This is what's become known as stakeholder capitalism. 217 00:14:44,680 --> 00:14:48,920 Critics of shareholder wealth maximization celebrated this 218 00:14:48,920 --> 00:14:53,080 announcement as an acceptance of their long term belief that 219 00:14:53,080 --> 00:14:57,000 focusing on shareholder wealth had brought about income 220 00:14:57,000 --> 00:15:01,000 inequality, the outsourcing of manufacturing jobs, and other 221 00:15:01,000 --> 00:15:03,800 societal costs and externalities. 222 00:15:04,240 --> 00:15:07,640 Traditionalists viewed this announcement as foolish and 223 00:15:07,640 --> 00:15:12,120 caving into the woke mob. Cynics argued that it meant 224 00:15:12,120 --> 00:15:16,200 nothing was just PR, and that everything would continue on as 225 00:15:16,200 --> 00:15:18,640 normal. Now, to most people, these 226 00:15:18,640 --> 00:15:22,880 arguments might appear to not matter whatsoever, but they do 227 00:15:22,880 --> 00:15:26,880 matter because the various stakeholders in a company have 228 00:15:26,880 --> 00:15:30,680 very different interests. Actions that benefit one 229 00:15:30,680 --> 00:15:34,280 stakeholder group can be reasonably expected to make 230 00:15:34,320 --> 00:15:36,920 other stakeholder groups worse off. 231 00:15:37,440 --> 00:15:41,360 These conflicts of interest mean that a board that is supposed to 232 00:15:41,360 --> 00:15:45,800 represent everyone often represents no one other than 233 00:15:45,800 --> 00:15:49,280 themselves and their own specific objectives. 234 00:15:49,760 --> 00:15:53,280 As what the motor And wrote a great blog piece on this topic a 235 00:15:53,280 --> 00:15:55,880 few years ago. He looked at the different 236 00:15:55,880 --> 00:15:59,760 models of corporatism. Cutthroat corporatism, where the 237 00:15:59,760 --> 00:16:04,600 end game is stockholder wealth maximization at almost any cost. 238 00:16:05,040 --> 00:16:08,800 Crony corporatism, where companies focus less on 239 00:16:08,800 --> 00:16:12,480 efficient operations than on connections to government, with 240 00:16:12,480 --> 00:16:16,240 the objective being tilting the scales of competition in the 241 00:16:16,240 --> 00:16:20,280 companies favor. Managerial corporatism Where the 242 00:16:20,280 --> 00:16:24,280 interests of executives Dr. the direction of a company and. 243 00:16:24,360 --> 00:16:28,320 Investors and other stakeholders are ignored and finally 244 00:16:28,320 --> 00:16:32,680 constrained corporatism where companies preserve the primacy 245 00:16:32,680 --> 00:16:36,160 of shareholders while constraining how they interact 246 00:16:36,160 --> 00:16:40,960 with other stakeholder groups. Constrained corporatism is what 247 00:16:40,960 --> 00:16:45,080 we mostly see where companies are restricted in their actions 248 00:16:45,080 --> 00:16:49,160 by the legal and regulatory constraints, self-imposed 249 00:16:49,160 --> 00:16:52,360 constraints and market driven constraints. 250 00:16:52,880 --> 00:16:56,400 The motor and describes stakeholder capitalism as 251 00:16:56,520 --> 00:17:00,840 confused corporatism, which on the surface might look like 252 00:17:00,840 --> 00:17:05,319 constrained capitalism, but due to the multiple objectives with 253 00:17:05,319 --> 00:17:09,040 no clear ranking of importance, leaves you with a structure 254 00:17:09,040 --> 00:17:13,520 which is destined to fail. The events at Open AI over the 255 00:17:13,520 --> 00:17:16,359 last week really highlight this issue. 256 00:17:16,960 --> 00:17:21,440 Open A is new board will consist of three people, at least 257 00:17:21,440 --> 00:17:26,680 initially, Adam D'Angelo, the chief executive of Quora and the 258 00:17:26,680 --> 00:17:30,760 only holdover from the old board, Brett Taylor, a former 259 00:17:30,760 --> 00:17:35,240 executive at Facebook and Salesforce, and Larry Summers, 260 00:17:35,240 --> 00:17:39,560 the former Treasury Secretary. The board is expected to grow 261 00:17:39,560 --> 00:17:43,320 from there. Open AIS largest investor 262 00:17:43,320 --> 00:17:48,440 Microsoft is also expected to have a larger voice in open AIS 263 00:17:48,440 --> 00:17:52,600 governance going forward, and this may include a board seat. 264 00:17:52,920 --> 00:17:56,600 If we want companies to behave better in their interactions 265 00:17:56,600 --> 00:17:59,840 with society. Putting boards in place that are 266 00:17:59,840 --> 00:18:03,760 not accountable to anyone other than a vague concept of the 267 00:18:03,760 --> 00:18:07,400 greater good is probably not the best approach. 268 00:18:07,880 --> 00:18:12,920 The Volkswagen emissions scandal from 2015 highlights that bad 269 00:18:12,920 --> 00:18:16,280 corporate behaviour can harm shareholder value. 270 00:18:16,600 --> 00:18:21,120 Volkswagen was hit with huge fines, recall costs and a 271 00:18:21,120 --> 00:18:23,840 damaged brand. Because of their illegal 272 00:18:23,840 --> 00:18:29,000 behaviour, a board focused on shareholder value is able to 273 00:18:29,000 --> 00:18:33,360 make decisions that are good for society as a whole, especially 274 00:18:33,360 --> 00:18:37,040 when constrained by the legal system and a reasonable code of 275 00:18:37,040 --> 00:18:40,240 ethics. It may be far from perfect, but 276 00:18:40,240 --> 00:18:42,920 it does appear to be better than the alternatives. 277 00:18:43,400 --> 00:18:45,880 Thanks for tuning into this week's podcast. 278 00:18:46,000 --> 00:18:48,920 If you have a friend who might find these interesting, I'd 279 00:18:48,920 --> 00:18:52,040 appreciate if you could send them a link and help the podcast 280 00:18:52,040 --> 00:18:54,160 grow. Talk to you again soon. 281 00:18:54,360 --> 00:18:57,360 Bye. If you enjoyed this episode, be 282 00:18:57,360 --> 00:19:00,240 sure to subscribe so you're notified when a new episode is 283 00:19:00,240 --> 00:19:02,480 posted. Thank you to everyone who is 284 00:19:02,480 --> 00:19:04,560 supporting this content on Patreon. 285 00:19:05,000 --> 00:19:07,760 If you enjoyed this content, you can find more like it on 286 00:19:07,760 --> 00:19:12,280 YouTube, on the Patrick Boyle on Finance channel or follow us on 287 00:19:12,280 --> 00:19:15,480 Twitter at Patrick E Boyle. Thanks for listening. 288 00:19:15,480 --> 00:19:15,880 Bye.