Paul Tudor Jones Criticizes 'Narrow, Myopic, Transactional View' That Companies Exist Only To Maximize Profits

Veteran hedge fund manager Paul Tudor Jones came down heavily on the belief that a company’s main goal is to generate profit.

Profit As The Sole Motive Is Toxic

Talking at the “JUST Capital” event held by CNBC on Wednesday, Jones said a narrow focus on profits was detrimental. He explained, “When you just look and say that the only thing that a company has to worry about is making a profit, it gives that company a pass not to pay attention to pay equity, not pay attention to gender equity, not to pay attention to racial equality.”

Jones added, “Not to pay attention to a whole host of social factors that at the end of the day are the basis and the foundation of a strong, vibrant society.”

Milton Friedman’s View Is Myopic

In a scathing criticism of the theories of Milton Friedman, the American economist who propounded the view companies exist solely to maximize profits, Jones said such thinking was “very narrow, myopic and transactional.” He went on to blame Friendman’s 1970’s ideas for undermining social and civil rights demands throughout the 1960s.

Pandemic Has Exposed Societal Fragility

Jones, whose investment acumen came to the fore after he predicted the 1987 stock market crash, is the chair of JUST Capital, a market intelligence firm that bases its metrics on worker pay parity, customer relations, and environmental impact. “When the pandemic hit, it’s no wonder that the greatest social problem manifested itself in the country with the most fragile social infrastructure,” remarked Jones. He lauded the Business Roundtable’s decision last year to redefine the purpose of a corporation to include employees, customers, and other stakeholders.

Investing In ESG Funds Is Prudent

Environmental, Societal and Governance (ESG) Funds have been outperforming the S&P500 index and have returned 3% above the benchmark. The coronavirus pandemic has further strengthened that trend and record U.S. Q1 inflows. Investments in ETFs tracking ESG indices have doubled from $22.1 billion in 2018 to $56.8 billion at the end of 2019.

According to CNBC, Jones believes that allocating money to companies that pursue good governance, practice sound environmental policies, and institute equity in hiring, is the prudent way to invest for the long-term.

Image: Screenshot of online event