Legendary hedge fund manager Paul Tudor Jones II gave a dire warning about the growing gap between the rich and the poor in the US during a sold out TED Talk in Canada this week.
“Now here’s a macro forecast that’s easy to make and that’s that the gap between the wealthiest and the poorest it will get closed. History always does it. It typically happens in one of three ways — either through revolution, higher taxes or wars. None of those are on my bucket list,” PTJ said, according to a video of the event viewed by Business Insider.
During his talk, Tudor Jones, who has an estimated networth of $US4.6 billion, praised capitalism.
“It’s a system I love because of the successes and opportunities it has afforded me and millions of others.”
Over the last several decades, however, there’s been a shift.
Tudor Jones continued: “I’ve seen a lot of crazy things in markets … And unfortunately, I’m sad to report that right now we might be on the grips of certainly one of the most disastrous certainly in my career.”
According to Tudor Jones, the problem has to do with how companies nowadays derive their value from profits, quarterly earnings, and their stock price.
“It’s like we’ve ripped the humanity out of our companies,” he said, explaining that we don’t value people based on their monthly income or credit score. “We have this double standard when it comes to the way we value businesses. You know what? It’s threatening the very underpinnings of our society.”
Right now, corporate profits in the US are at all-time highs. This, he said, is increasing income inequality.
“Higher profit margins do not increase societal wealth. What they actually do is exacerbate income inequality, and that’s not a good thing.”
He explained that if the top 10% of American families own 90% of the stocks, then they will take a greater share of those corporate profits and there’s less wealth for the rest of society.
Tudor Jones said that income inequality in the US is “literally off the charts” and that’s going to come along with “the greatest societal problems” such as lower life expectancy, teenage pregnancy, and lower literacy rates.
His solution is to advocate for justice in corporate behaviour.
Tudor Jones recently formed a not-for-profit called Just Capital with a mission to help companies by using the public’s input to find out the criteria that would define justice.
“Now capitalism has been responsible for every major innovation that’s made this world a more inspiring and wonderful place to live in,” Tudor Jones said. “Capitalism has to be based on justice … I’m not against progress. I wasn’t a driverless car and a jetpack like everyone else, but I’m pleading for recognition that with increased wealth or profits should come, has to come … greater corporate social responsibility.”
This year, they will survey 20,000 Americans and plan to release those results in September, Tudor Jones said.
“Maybe we will find out the most important thing for the public is create living wage jobs or make healthy products or help, not harm the environment,” he explained. “At Just Capital, we don’t know. It’s not for us to decide. We are but messengers. We have 100% confidence and faith in the American public to get it right.”
They plan to issue the survey every year. Eventually, they will rank the companies in order based on the data the collect.
The hope, he explained, is that human and economic resources will be attracted toward those just companies and that they will be the most prosperous.