When President-elect Joe Biden takes the reins on January 20, he will inherit a full slate of vexing issues. The heinous attack on the Capitol on January 6 and continuing rallies by angry demonstrators point to political and social unrest. Covid-19 continues to rage across the land and claim thousands of American lives daily. The epidemic itself has exacerbated and brought into sharp relief the widening inequality in income and wealth in this country. We can expect the Biden Administration to address the gaps through income-redistribution policies via the tax system and some targeted government spending.

As we embark on a new decade, one trend that Biden also faces is rising opposition to globalization—at home and abroad—which is often allied with nationalism. Millions of Americans have come to reject global capitalism as a force for the good. Anti-globalist sentiment here and overseas is invariably blamed on high (and growing) income inequality between the wealthy and those left behind by the 21st Century’s digital economy and the forces of globalization. But are money and gaps in income the real culprit?

I discussed these topics in a recent “Q Factor” podcast with Rawi Abdelal, a professor at Harvard Business School and a friend and advisor of mine. Extensive academic research that Rawi conducted in France, Germany and elsewhere led him to a contrarian explanation for the backlash against globalization: It is not income inequality that is the issue (and thus, state intervention for income redistribution may not save globalization). Instead, in a word, it is “dignity” that workers—and the unemployed—seek. He explains, “The survey data is crystal clear that people are satisfied with their jobs when they feel that their leaders care about them, and when they feel that they’re contributing to something important and meaningful.”

Content Employees

Interestingly, what Rawi has uncovered at the macro level—the critical importance of worker dignity—rhymes with what I have observed at the micro level, both as a business owner and as an investor in companies around the globe. As an employer, I have found that simply paying people more money provides no assurance that workers will remain happy or loyal. Instead, people want to feel valued, heard and provided with an environment in which they can learn, thrive, and reach their potential. They seek meaning and purpose from their jobs and tend to flourish when they feel engaged; engaged employees, in turn, help companies to perform better, and you cannot engage them simply by paying them more. As Rawi comments, labor wants to be viewed and treated as a partner, not just as a cost.

As an investor, I look for entrepreneurial enterprises with valuable intangible assets that are undervalued on or even absent from balance sheets under standard accounting rules. I prefer businesses with strong, healthy cultures that are typically imprinted on the firms by company founders. It seems obvious that a culture which places a higher value on workers’ dignity and treats them with respect will capture their hearts and minds, which leads to better company performance (one can study publicly available data to gain a sense of employee satisfaction). Good companies tend to invest heavily in their workers, which typically requires courageous and determined leadership with a long-term view: Wall Street may penalize such firms in the short run for their patient capital.

As a money manager who invests globally, my country and company investing is informed by my understanding of the global environment (which is why I listen to well-informed advisors such as Rawi), which includes local issues such as labor and income inequality. I find it fascinating that these macro issues—the social, political, and economic challenges that we face—are so intimately tied to micro qualities such as the leadership and cultures of companies we observe from the vantage point of bottom-up investing. Of course, income inequality and globalization and its discontents will remain stubborn challenges during this new decade. To hear Rawi’s perspective and insights on these issues, I invite you to listen to our Q Factor podcast.

Rawi Abdelal: The Roots of Anti-Globalism

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