Social Capital co-founder and CEO Chamath Palihapitiya has plenty of thoughts about the investing world and the economy, in general. In this Motley Fool Live video recorded on Nov. 16, 2020, Tom Gardner, co-founder and CEO of The Motley Fool, and Bill Mann, director of small cap research, talk with Palihapitiya about why he thinks we're entering a new economic era.
Bill Mann: Do you believe, and it sounds like you might believe this and may also be trying to foment this, are we coming up on a new era of progressivism, a new progressive economy?
Chamath Palihapitiya: I think you have to think about stakeholders and not just shareholders. I think that we have to expand the aperture of duration of risks. The biggest thing that has constrained decision-making in America, that has made us, and we've seen in the pandemic, an incredibly unresilient economy is our focus on hyper-efficiency.
But if you peel the onion on hyper-efficiency, the reason was a bunch of idiotic shareholder activism that was optimized for current returns. Many created incentives that drove an entire class of CEO to be basically intellectually lobotomized. They stuffed the board with dummies and cronies. They then all of a sudden focus on short-term compensation plans. They then gerrymander their earnings through share buybacks and they refused the last thing is to ever leave. The average age of a CEO in 2000 was 42. Guess what the average age of the CEO is in 2000? Sixty-two.
Tom Gardner: They made no R&D investments.
Chamath Palihapitiya: These folks [expletive]-canned R&D investing. They basically pilfered and stole from the till. They then basically sold themselves private equity or did dumb capital allocation decisions, and then they refused to leave. We need a more progressive way of forcing change.
I think climate change is a great accelerant of this change. I think younger people. I think the fact that there's $30 trillion sitting in 401(k)s. All this stuff is going to push people to run companies differently. There's going to be the entire generational shift of people running businesses.
We have to remember. This is like the dirty secret. It's like if you're going to be concentrated, you have to be a superlative picker. Because as it turns out, very few companies drive excess returns. The median return is negative 50 percent. We are meant to lose. The aim is not set up to win. You have to be an extremely good picker or own the index.