Paul Tudor Jones Breaks Down America’s Most “Just” Companies

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Paul Tudor Jones Breaks Down America’s Most “Just” Companies
Image source: CNBC Video Screenshot

Following is the unofficial transcript of a CNBC interview with Billionaire Investor & JUST Capital Co-Founder Paul Tudor Jones and Accenture Plc (NYSE:ACN) Chair & CEO Julie Sweet on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) today, Tuesday, January 11th. Following is a link to video on CNBC.com:

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Legendary Investor Paul Tudor Jones Breaks Down America's Most "Just" Companies

ANDREW ROSS SORKIN: JUST Capital is out this morning with a new list of the companies that are the most “just” companies in America. Members of the JUST 100 are ranked based on issues like paying a fair wage, creating jobs, cultivating a diverse and inclusive workplace and sustainability. Joining us right now to talk about this year's list is legendary trader and JUST Capital co-founder Paul Tudor Jones and Accenture chair and CEO Julie Sweet. Accenture, we should mention is ranked number 17 on this year's list of just companies. Thanks for joining us both. Paul, I want to start with you. Good morning. Speak to what this JUST list is for those who don't know about it, and how you decide on the rankings.

PAUL TUDOR JONES: Well, the JUST list takes the 954 largest companies in America and we rank them according to what the American public thinks is the most important issues with regard to what they want to see corporations do. So, we polled the American public every year. We've been doing it every year since 2014. We take the results of those polls and then we take those metrics of which they're 20 and we rank every single company against those metrics. And what we're trying to do is to create a competition for goodness and let the free market whether it's customers, employees, communities, management, whatever, providing them the information so that they can again probably corroborate what those companies are doing and move towards those companies that are more in sync with the values and the thoughts and the ideas of the American public. By the way, forgive me for not on the front-end saying hello to you. It's such a great way to start the year. Seeing you as when I feel a little needy if I'm being honest that I wasn't part of the Joe and Becky and Andrew grand reunion.

SORKIN: Well, thank you. Thank you for the comments and Happy New Year to you. Before we get to Julia one quick question. Alphabet is at the top of this list this year. What were the biggest shifts in terms of what you saw what the American public when you polled them were you thinking about and how do you think that will reflect itself in terms of returns? Because one of the things that has been interesting is you've made the argument that the more just a company is the better the returns ultimately will be.

JONES: Well, the data has been clear on that ever since we started polling. There's, every single company that is in the JUST 100 and particularly in the top 20 which Julie's company is one, they are really good on the most important metrics which are generally pocketbook issues and work related. The number one component is pay a fair and living wage. So, all these companies pay extraordinarily well relative to the rest of corporate America. So, by definition, when you see these companies in the top 10, they've got workforces that are taken care of by far and away on a variety of fronts relative to the rest of, the rest of corporate America. The most important thing though is that being just and being in line with Americans’ views on what is just is great business. It’s fantastic business. These companies on average in the JUST 100 earn 4.5% more than the rest of corporate America. They, they have so many things that they do such as they give 19 times more to, to local communities. They emit 26 million tons less carbon than the rest of the list. They provide pay gap disclosure much more so than the rest of the list. And I think most importantly, their stock price generally outperforms the S&P 500, the Russell 1000. And they also pay 20% more in dividends. So, there's economic and financial things that they do better on and they're also social issues that set them apart in a way that make them the most valued companies in America. You can't have a value proposition for investors and shareholders in the long run unless you're taking care of and providing a value proposition for the other stakeholders, employees, customers, communities, the planet.

SORKIN: Paul, that's a nice segue for me to bring joy into the Julie into the conversation. Julie, you're number 17 on this list. You have a workforce of about 670 is almost 675,000 employees and one of the most diverse boards I should mention in corporate America. I'm hoping you can maybe speak to, to those in the audience this morning, business leaders and others, who are skeptical about some of these, some of the priorities that may be listed here where people say, is this just everybody trying to be woke or is this marketing or is this packaging? Because I think you've been thinking about this for a very, very long time.

JULIE SWEET: Thanks, Andrew. It is great to be part of your reunion and great to be here with Paul who I just want to recognize as a early leader in spotlighting these issues. I think Paul got it exactly right. This is great for business, not just good, but great for business and for our people. People, let's just take the the tight labor market. Last quarter, we announced we hired 50,000 people in a single quarter. We are a talent magnet and we believe that that is very much related to the fact that people want to go to companies that create value, right, have the right pay equity, pay the right salaries, but also lead with values who have sustainability. So, we've added $140 billion in market cap since the pandemic began while meeting our commitment to get to 50/50 gender parity by 2025. We're at 46%. You know to be net zero by 2025. We are at 50% renewable energy in our facilities. You know, our core business strategy is to not only do this for our stakeholders but also for our clients and we believe that our results are intertwined completely with our commitment to being a just company and that's why these types of metrics are so important. And I, you know, and I think it's exciting to continue to see that competition for goodness.

SORKIN: Part of what the JUST 100 list seems to be suggesting is not just the numbers should be good, but just, just even a basic disclosure is important. That's something that I think you've taken to heart. You've, you've announced this 360-degree value reporting experience and I also think it's something that you've been promoting to your clients as well. Again, to the skeptics out there who are running businesses who say, you know what, why do I want to disclose this stuff? First of all, it's it's, it's more paperwork. Second of all, it may not put me always in the best light. What do you tell them?

SWEET: Transparency builds trust, right? And we see that absolutely every day. I know when we first set, first publicly disclosed our inclusion diversity metrics back in 2015, we were the first company in our industry to do so, our numbers weren't great and yet our recruiting improved in all of our diverse categories because transparency builds trust. We just launched our 360-degree value experience which you noted and what we did there was, we said we are going to report against every major ESG framework. We took 15 months to get all the data because we believe whether it's investors, clients, or people, that kind of transparency, makes people want to partner with you and join you.

SORKIN: Hey, Paul, I just want to speak to the returns issue and also just operating a business. I remember having conversation with Stephen Schwarzman, from Black, from Blackstone. This was right after the Business Roundtable chose to shift what they decided was going to be the purpose of a business, not just about profits, but to also include so many other constituent parts, if you will. He said that he wasn't willing to sign on to that statement, not because he didn't believe in all those other constituencies but because he thought that you needed to actually focus on only one thing that if you could actually nail the profit piece, you'd be able to nail the other pieces. What do you make of that?

JONES: Well, I think history's proven that that's wrong. It's economically wrong. A great example, the problem with what Milton Friedman said that the only business purpose for a company is to generate a profit is that if that's your only motive, it creates the ability to be amoral in your decisions. And a classic example of that would be Purdue Pharma, right. Their only business purpose was to make a profit and then the consequence of that was an opioid crisis that killed 400,000 Americans. So, you can't have, you cannot distinguish between a business purpose without bringing in ethics and morality and the social consequences of your actions. So yes, making a profit actually, you can't even to say that making a profit is economically the greatest way to create a production system because again, we lost 400,000 workers in that opioid crisis. We lost four and a half million jobs between 2003 and 2011 to China because the fact that the only purpose at that point in time was to make a profit. And if I look at the second most important component of what the American public says for a company’s justice is to create American jobs. Jobs in this country. So again, I would argue that there's a variety of both social and economic things that have proven what Milton Friedman says is patently false—

SORKIN: But Paul, we’ve been talking all morning and I don't know if you were watching the program earlier, we were talking about Intel and this debate over Intel and what's happening in China. They do obviously a lot of business in China. They've been effectively muzzled by the Chinese government. You had Senator Rubio this morning or yesterday criticizing them for, for effectively taking some of their language back which had been critical at least acknowledged why they've made some of the comments they made. How do you think that companies in this day and age are supposed to deal with these moral and ethical dilemmas that may actually have bottom line impact?

JONES: Yeah, I don't think that everything's black or white. Clearly, they're going to be shades of grey. Clearly, they're going to be benefit cost tradeoffs. The most important thing that I think the just dialogue does is that that is it brings in those shades of grey, right. It brings in the idea that a business purpose is not just to make a profit. If we did that, clearly it has huge social consequences that are not great for our society. Look at where we are today. We had the greatest income and wealth disparity in the history of this country and with that comes the greatest divisiveness that we've had with capitalism under threat, a third of millennials think that communism is better than capitalism. So clearly, we have to do something differently than we've done and I think we've seen great strides over the past few years towards a much, a much more just economy. And we've seen corporations do I think a much better job of trying to take in the social consequences of their actions and what they do. Again, I think that the best thing that we can see is we've seen wage growth go up, right? It's the number one issue for Americans with regard to companies is pay a fair and living wage and last year, you saw an explosion in wage growth, which is a good thing, particularly since profit margins over that same timeframe have went from six to 12%. So yes, letting worker share more and corporate revenue is a good thing and it's good for business also.

SORKIN: Hey, Paul, I just want to pivot and with Julie as well, I want to pivot to the economy right now. Last time we talked, we were having conversations about what the Fed was going to do next, obviously, Jay Powell on the hill. What do you think the Fed is going to do next and how are you thinking about the outlook in terms of equities and bonds for the year?

JONES: Well, I think Jay Powell is going to play catch up. The last time that we had an unemployment rate 3.9%, Fed funds were 1.75% on the way to two and a half percent and 10-year rates were 3% versus where they are right now. So, he's gonna play catch up. And he's got a lot of catching up to do and I think that's why you're seeing them talk about quantitative tightening because I don't think he can catch up fast enough to try to deal with the inflation problem that he has right now. I kind of feel with regard to the markets, it's a bit like, remember in “Animal House,” where right before the scene with the deathmobile, one of the guys that they're all sitting around, and the guy goes, it's over man, Wormer just dropped the big one. And I think that's kind of where we are right now with Fed policy. We're getting ready to see a major shift and it's going to have a lot of consequences for a variety of asset prices.

SORKIN: So what are you doing about it, though? I mean, would you be in equities right now? We, you and I've talked about crypto, you caught it around 10,000, it's now Bitcoin that is, is at something like 40,000? What do you do?

JONES: Well, I think a lot of it again, you have to watch what the central bank does. Clearly all the inflation trades of the pandemic era are going to be challenged right now. If you just think about where we were again the last time the employment rate was here, the PE and the Nasdaq was around 26 or 27. It is 38 today, so assuming fast forward and we're back at 2% on Fed funds, and two and a half or three on 10-year rates, what's the multiple on the Nasdaq going to be? Is it going to still be 38 on a trailing basis or is it going to be back at 26 or 27? And if so, obviously that has huge consequences for the—

SORKIN: What do you think it's gonna be?

JONES: I don't know what it's gonna be. I know that, I think it's gonna be tough sledding for the inflation trades, the pandemic going forward. So, the things that perform the best since March of 2020 are going to probably, probably perform the worst as we go through this tightening, tightening cycle. But on a relative basis, I don't know that whether that means they go down or up. I think they're going to be, they're clearly going to be challenged right? When we if you can just fast forward two years and we're at 2% on rates again, you have to think about what are the price of assets that today are dealing with, you know, zero free money while they're still adding to balance sheet. I mean, it's gonna be a different story 18, 24 months out.

SORKIN: Hey, Julie, what are you seeing? We just spoke with Jamie Dimon yesterday on this network, he seemed remarkably bullish about the rest of the year. You have your tentacles into so many businesses around the globe.

SWEET: No, it's a great question because we're all watching the latest round of volatility. And what I would tell you is that the leading companies around the globe are headfirst, going straight for continued compressed transformation, right? They are looking at all of this uncertainty and saying we're going to be in control. They're doing digital transformation and to connect to our earlier conversation, they're embedding sustainability in that transformation because they know that's the path to profitable growth. Our research shows that the winners of tomorrow are those who are going to do the digital transformation and sustainability so you see companies like SHISEIDO, global beauty company, bold ambition in skincare and they're investing to upskill their people, put sustainability in their products and enhance inclusion and diversity. Best Buy, digital leader today, they announced 1,000 new jobs in the US and committed to 30% diversity. I can go on and on because the leading companies, the ones that you want to make the bets on are full steam ahead on compressed transformation with sustainability embedded.

JOE KERNEN: Hey Paul, it's good to see you and I, you know, just looking at your career in terms of, you know, so many things that you've done, and I'm just thinking because I respect what you think about commodities so much. I'm just wondering whether you think that we're at a point here where we could see something ugly in the next five years and whether for financial assets, you would just maybe downgrade the overall return because of what seems to be an inflection point or a second derivative that we switched with the Fed. And I guess what I'm saying is, do supply chain issues if they abate, do commodities come back under control or with the Fed's balance sheet where it is right now, can they not get out without some pain in the next five years? We crossed the Rubicon on, on how bad we may have messed things up monetary wise.

JONES: It's a, it's a really good question. I mean, here's, here's one way to frame it. Commodities relative to financial assets are so incredibly undervalued and one would think on a relative basis as we go through this tightening, that commodities would outperform financial assets by a wide margin. Another way to think of it is the stock market relative to GDP in the United States is about 200, 210, 215%. The stock market relative to GDP for the rest of the world is 54%. So, we value equities in the United States almost four times more than the rest of the world values their equities relative to their GDP. Now, there's a critical reason for that. And the reason for that is that in the US, we have a contest of ideas both in our political system and, we’ve seen that in spades right now, but in our capitalist system also in that contest of ideas, compare and contrast that to China where effectively you have one man now Xi Jinping dictating all policy, it's a extraordinarily, for me, it's the great leap backward for that country because they don't have that contest about deals when you've got one person at the top where everyone has to subjugate their thinking to that person. So, again, US equities are really extraordinarily valued relative to GDP because the fact that we have that dynamism. Capitalism and democracy go hand in hand and that dynamism is one reason why if you were going to make a bet on economy for the future, clearly, you'd bet it here in the United States rather than any other country in the world. Having said all of that four times valuation relative to the rest world's extraordinary, right. And yes, the real trick here will be can the Fed unwind what by many appearances are a financial bubble without there being huge negative economic consequences and we'll, we'll watch and see, it'll be interesting to see. I'm nervous because we're at such lofty heights.

SORKIN: Paul, we have to leave the conversation there. I want to thank Julie. Congratulations being among the JUST companies. Paul, thank you—

JONES: Here, here.

SORKIN: This list this morning. It's great to see both of you. Hope to see you all in person very, very soon and we should mention that you can watch right here on CNBC over the next several days, we're gonna be featuring more JUST 100 interviews with a number of CEOs including UPS’ CEO, Delta’s CEO, HP’s CEO, Dow and so many more, you could check out the full JUST 100 list and look through all the data and numbers. You can scan your code, scan the flow code on the screen right now or visit cnbc.com/just100.

 

 

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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