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I loved the concept of index funds at first glance. But Blackrock et al convinced me that there must be a better way. It's the responsibility of capital holder

I loved the concept of index funds at first glance. But Blackrock et al convinced me that there must be a better way. It's the responsibility of capital holders to employ their capital intelligently, not to hand it off to some faceless corporation and hope it gets invested well. This means owning shares in companies you understand, and then voting in their annual meetings (this can be done asynchronously). Capital is power, and deferring all of yours to Larry Fink is a horrible idea, even if you agree with him on most things. Owners should always, always act like owners.

jncfhnb 3y ago
People don’t have time or expertise to be owners, especially at their irrelevant share of ownership.
- FredPret 3y ago
  Then they have no business investing in whatever it is they're investing in. Everyone should do a minimum amount of due diligence on the companies that they own and that make up their retirement / house purchase / kid's university fund. If not that, then it's better for most to accumulate capital by paying off their home loan or some other scheme that they understand. The answer cannot be to hand off all power to a single megacorp that owns a significant chunk of the US economy and whose CEO gets to dictate the entire boardroom agenda for the whole country.
  - bombcar 3y ago
    https://johncbogle.com/wordpress/wp-content/uploads/2019/08/niri-6-03.pdf https://johncbogle.com/wordpress/wp-content/uploads/2019/08/... The problem is that most people are too small to have a material impact. The best the smalls can hope for is to invest in companies that are majority owned and run by owners you agree with.
    - FredPret 3y ago
      I take your point. But I don't see how diffusion is a problem; it's simply decentralization. I think the main problem is disengaged owners who think they can buy-and-forget. If every owner paid even a modicum of attention (even just skimming the annual report) and every owner voted their opinion, we'd see a much better corporate America after one single year.
      - jncfhnb 3y ago
        If every person worked collaboratively on things pretty much everything would work better but collective action is intrinsically difficult to achieve.
  - jncfhnb 3y ago
    Seems dubious. Most wealth is held by wealthy interests that prioritize staying wealthy. The collective will of small investors is negligible. And it’s not worth your time to invest in individual companies vs just doing an index fund. It would be nice if there were index funds that promised to vote for socially positive issues on votes. That may be more impactful than social good indices.
    - FredPret 3y ago
      According to this [0], 51% of stocks are held by the 1%. So you are correct that the rich control corporations. But 49% voting power is far from negligible. Even a small minority of voters who care about an issue and raise a stink about it can swing a big change. Most shareholders, including rich ones, are happily coasting along on autopilot. If someone with even a single share stands up in an annual meeting and makes a good point, I would pay attention. The parent comment I replied to originally said that return to office is pushed at regular by a fund (Blackrock) that owns office space as well as shares in companies like say Apple or Google, even if that is a suboptimal choice for Apple and Google. If there's a bloc of even 5% of ownership arguing against this at an annual meeting, it would be a major improvement in the state of affairs. Corporate America runs the world. We can't just relegate all important decisions to big owners by default - at the very least give them hell! [0] https://www.nytimes.com/2021/01/26/upshot/stocks-pandemic-inequality.html https://www.nytimes.com/2021/01/26/upshot/stocks-pandemic-in...
      - robjan 3y ago
        You're talking about activist investing [0]. It's possible but you still need a significant holding to actually have any leverage. Joe Blogs who owns 100 of 10000000 shares is not going to be allowed to talk at the AGM [0]: https://en.m.wikipedia.org/wiki/Activist_shareholder https://en.m.wikipedia.org/wiki/Activist_shareholder
      - jncfhnb 3y ago
        Why would it make a difference if 5% spoke up?
SketchySeaBeast 3y ago
> It's the responsibility of capital holders to employ their capital intelligently, not to hand it off to some faceless corporation and hope it gets invested well. Would this mean that billionaires would have to manually manage their portfolios themselves? I assume not because they could hire a non-"faceless" firm. Ultimately, this feels like an objection to BlackRock that would prevent the average person from having a chance but do nothing to stop the problem of large companies and already powerful individuals gaining more power.
- FredPret 3y ago
  I'm saying lots of "powerless" individuals actually have quite a bit of power, they just choose to let others take the wheel. If all of middle and upper-middle class America skimmed their annual reports and voted their shares, things would change a lot. Boardrooms right now are full of people that somehow get in and stay in automatically. CEO's tend to dominate proceedings, when really they should dance to the tune set by the board, the composition of which should reflect the shareholders, which for a big corp is probably about half of the USA.
  - SketchySeaBeast 3y ago
    My 5 shares out of the companies 100,000,000 give me little power and is a huge investment of my time to vote intelligently with, and I have little way to coordinate my decisions with hundreds of thousands of other minor share owners. It would end up with the retail investors going with the path of least resistance or it'd be democratic noise. I also don't care to use that power - my only goal is to retire one day by investing in the market as a whole through broad market ETFs. I have no interest in individual companies or how they vote. I, and the majority of other retail investors, are simply interested in financial security. Are we wrong to have that goal? Why do we need to start playing boardroom games that we can't and don't care to win?
    - FredPret 3y ago
      Because they are not games. Correct decisions are crucial to the running of the company, and thus your financial stake in it.

jncfhnb 3y ago

People don’t have time or expertise to be owners, especially at their irrelevant share of ownership.

FredPret 3y ago
Then they have no business investing in whatever it is they're investing in. Everyone should do a minimum amount of due diligence on the companies that they own and that make up their retirement / house purchase / kid's university fund. If not that, then it's better for most to accumulate capital by paying off their home loan or some other scheme that they understand. The answer cannot be to hand off all power to a single megacorp that owns a significant chunk of the US economy and whose CEO gets to dictate the entire boardroom agenda for the whole country.
- bombcar 3y ago
  https://johncbogle.com/wordpress/wp-content/uploads/2019/08/niri-6-03.pdf https://johncbogle.com/wordpress/wp-content/uploads/2019/08/... The problem is that most people are too small to have a material impact. The best the smalls can hope for is to invest in companies that are majority owned and run by owners you agree with.
  - FredPret 3y ago
    I take your point. But I don't see how diffusion is a problem; it's simply decentralization. I think the main problem is disengaged owners who think they can buy-and-forget. If every owner paid even a modicum of attention (even just skimming the annual report) and every owner voted their opinion, we'd see a much better corporate America after one single year.
    - jncfhnb 3y ago
      If every person worked collaboratively on things pretty much everything would work better but collective action is intrinsically difficult to achieve.
- jncfhnb 3y ago
  Seems dubious. Most wealth is held by wealthy interests that prioritize staying wealthy. The collective will of small investors is negligible. And it’s not worth your time to invest in individual companies vs just doing an index fund. It would be nice if there were index funds that promised to vote for socially positive issues on votes. That may be more impactful than social good indices.
  - FredPret 3y ago
    According to this [0], 51% of stocks are held by the 1%. So you are correct that the rich control corporations. But 49% voting power is far from negligible. Even a small minority of voters who care about an issue and raise a stink about it can swing a big change. Most shareholders, including rich ones, are happily coasting along on autopilot. If someone with even a single share stands up in an annual meeting and makes a good point, I would pay attention. The parent comment I replied to originally said that return to office is pushed at regular by a fund (Blackrock) that owns office space as well as shares in companies like say Apple or Google, even if that is a suboptimal choice for Apple and Google. If there's a bloc of even 5% of ownership arguing against this at an annual meeting, it would be a major improvement in the state of affairs. Corporate America runs the world. We can't just relegate all important decisions to big owners by default - at the very least give them hell! [0] https://www.nytimes.com/2021/01/26/upshot/stocks-pandemic-inequality.html https://www.nytimes.com/2021/01/26/upshot/stocks-pandemic-in...
    - robjan 3y ago
      You're talking about activist investing [0]. It's possible but you still need a significant holding to actually have any leverage. Joe Blogs who owns 100 of 10000000 shares is not going to be allowed to talk at the AGM [0]: https://en.m.wikipedia.org/wiki/Activist_shareholder https://en.m.wikipedia.org/wiki/Activist_shareholder
    - jncfhnb 3y ago
      Why would it make a difference if 5% spoke up?

SketchySeaBeast 3y ago

> It's the responsibility of capital holders to employ their capital intelligently, not to hand it off to some faceless corporation and hope it gets invested well. Would this mean that billionaires would have to manually manage their portfolios themselves? I assume not because they could hire a non-"faceless" firm. Ultimately, this feels like an objection to BlackRock that would prevent the average person from having a chance but do nothing to stop the problem of large companies and already powerful individuals gaining more power.

FredPret 3y ago
I'm saying lots of "powerless" individuals actually have quite a bit of power, they just choose to let others take the wheel. If all of middle and upper-middle class America skimmed their annual reports and voted their shares, things would change a lot. Boardrooms right now are full of people that somehow get in and stay in automatically. CEO's tend to dominate proceedings, when really they should dance to the tune set by the board, the composition of which should reflect the shareholders, which for a big corp is probably about half of the USA.
- SketchySeaBeast 3y ago
  My 5 shares out of the companies 100,000,000 give me little power and is a huge investment of my time to vote intelligently with, and I have little way to coordinate my decisions with hundreds of thousands of other minor share owners. It would end up with the retail investors going with the path of least resistance or it'd be democratic noise. I also don't care to use that power - my only goal is to retire one day by investing in the market as a whole through broad market ETFs. I have no interest in individual companies or how they vote. I, and the majority of other retail investors, are simply interested in financial security. Are we wrong to have that goal? Why do we need to start playing boardroom games that we can't and don't care to win?
  - FredPret 3y ago
    Because they are not games. Correct decisions are crucial to the running of the company, and thus your financial stake in it.