When large companies embrace progressive orthodoxies that alienate a majority of their customers, it often creates an opening for competitors in the market to capture that audience. For example, if Disney launches a national crusade to teach six-year-olds about sexual orientation and gender identity, this should create an opportunity for, say, Universal Studios to step up and fill the void with its theme parks. Or for Paramount Pictures to do the same thing with its films. (Disclosure: The Daily Wire has announced plans for kids entertainment content.)
Here’s the problem: There’s more to the Disney story than a cowardly CEO who bends the knee merely to placate his millennial employees. The real story is that Disney’s top shareholders effectively encourage similar behavior as well. It’s true that a CEO doesn’t work for their employees (that’s obviously backwards), but a CEO does work for their shareholders. So when the shareholders express a view on social issues, the CEO is beholden to follow them. Disney’s top three shareholders are BlackRock, State Street, and Vanguard — three of the largest asset managers in America that collectively manage over $20 trillion — and they are using the funds of everyday American citizens to tell CEOs to adopt ideological values under the banner of Environmental, Social, and Governance (ESG) and Diversity, Equity, and Inclusion (DEI) principles. I wrote about this earlier this year in the context of BlackRock’s activism at Exxon, the world’s largest oil company.
That’s the invisible hand that guides much of today’s woke corporate behavior. It also accounts for why Universal Studios won’t actually end up trying to steal market share from Disney — it comes down to who owns the actual companies and the identity of their shareholders. The parent company of Universal Studios is NBC Universal, which is in turn owned by Comcast. Two of Comcast’s top shareholders are Vanguard and BlackRock, and State Street is its fourth largest shareholder.
Same story at Paramount Pictures: Among the top shareholders of its parent company, Paramount Global, are none other than BlackRock, State Street, and Vanguard. So though they should be competing in the market against Disney, in reality, they’re just beholden to the same ESG-linked asset management cartel that actually tells those companies how they’re supposed to behave.
It turns out this is also the case in much of Silicon Valley. Until recently, three of the top four shareholders of Twitter were BlackRock, Vanguard, and State Street as well. Large technology companies appear to compete with one another in the marketplace of products, but the real problem is that together they wield a monopoly on ideas — often propagated by the world’s largest asset managers, which further fuel that ideological hegemony around a narrow set of progressive political ideas. That’s in part what contributes to the culture of censorship that now pervades social media and the technology industry more broadly. It’s an ideological cartel that punishes the defector and makes dissent nearly impossible. I’ve written about this extensively in The Wall Street Journal and elsewhere in recent years.
If existing firms won’t compete against one another in the marketplace of ideas, the next best alternative might appear to be the emergence of startup companies to challenge those incumbents. But that’s easier said than done, especially in Silicon Valley where there are profound network effects that serve as a barrier to entry for any new competitor. Twitter is hard to compete with because it already has hundreds of millions of users; a new social network can only succeed if it achieves similar scale, creating a virtually insurmountable chicken-and-egg problem. There’s a reason why Parler, Gab, GETTR, and TRUTH Social have struggled to date.
State action against this ideological cartel may eventually be inevitable, though this approach is likely to be both underinclusive — that is, unlikely to address the entire problem — and overinclusive – that is, likely to create unintended consequences and market distortions that we cannot necessarily anticipate in advance. Problems created by the market should, all else equal, be solved by the market, not by the state, whenever possible.
This is what makes Elon Musk’s decision to become Twitter’s largest shareholder so consequential. He recently announced that he owns nearly 10% of the company. He was unapologetic about his vision for the company to respect free speech principles on its platforms. Unlike Twitter’s other large shareholders, he is also outspoken against the growing repressive ESG paradigm in the asset management industry. He recently wrote (on Twitter, of course), “I am increasingly convinced that corporate ESG is the Devil Incarnate.”
The most important part of Musk’s decision to buy up Twitter shares is that he paves a path forward for driving change not only at Twitter, but also at nearly every company in corporate America by addressing the invisible root cause of much of corporate wokeness. It starts with the “shareholders” of these companies. I say “shareholders” in scare quotes because in a very real sense, firms like BlackRock, State Street, and Vanguard are not the true shareholders of companies — the true shareholders are the everyday citizens whose money is managed by these firms — but they pose as the “shareholders” in capital markets today. Of course, Elon Musk is an actual shareholder of Twitter, and he is representing his view accordingly.
Using shareholder activism to change Twitter’s behavior is at once more practical and achievable than building a market alternative to Twitter, because it avoids the network effect problem. It is also far more elegant than legislation, regulation, or state action that is easily shaped and then evaded by the companies that are regulated by it, while inadvertently creating unintended barriers for others.
The question remains whether Elon Musk will simply become a part of the managerial class that governs Twitter by joining its board or whether he will ultimately challenge it. I’m hoping for the latter, though I wouldn’t be surprised by the former. Regardless of if he succeeds at truly turning Twitter into a free-speech platform, by exercising shareholder power to do so, he has paved the path for the most effective way to drive changes to corporate America’s behavior that everyday citizens are craving to see.
The views expressed in this opinion piece are the author’s own and do not necessarily represent those of The Daily Wire.
Vivek Ramaswamy is a New York Times bestselling author and a successful entrepreneur who has founded multiple successful enterprises. A first-generation American, he is the founder and executive chairman of Roivant Sciences, a new type of biopharmaceutical company focused on the application of technology to drug development.