Dan Ariely on How To Win Big by Betting on Human Capital
Odd Lots
Bloomberg
4.5 • 2K Ratings
🗓️ 3 June 2021
⏱️ 46 minutes
🧾️ Download transcript
Summary
Dan Ariely is one of the most famous behavioral economists in the world. And in his latest act, he's attempted to apply his research to investing. His five-year-old firm Irrational Capital searches out companies that foster human capital: that companies which do a better job of nurturing their employees see stock market outperformance. In this episode, we talk about why human capital matters, how to measure it, and what kind of investment returns he's seen by betting on it.
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| 0:00.0 | Adlots is brought to you by Apollo. When it comes to building and financing stronger businesses, |
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| 0:30.4 | Hello and welcome to another episode of the Adlots podcast. I'm Joe Wisenthal. |
| 1:00.4 | And I'm Tracy Alloway. So Tracy, something I've noticed before is we talk about ESG |
| 1:07.5 | investing sometimes. And of course, as we've discussed in the past, it's become this huge industry. |
| 1:13.7 | The thing that I always think about in ESG is the E environment. There's a lot of talk about |
| 1:19.7 | climate and so forth. And it really is like, I don't really know anything about what the S of |
| 1:23.7 | the G are all about. Yeah, that would be the social governance part of the equation. And |
| 1:29.3 | it's absolutely true. When you think about the ESG space, most of the action tends to be on doing |
| 1:34.5 | things to combat climate change. There's quite a bit, but not as much about things like gender |
| 1:42.0 | equality. But beyond that, like the sort of social aspect, you just don't hear about that much. |
| 1:50.0 | Yeah, exactly right. And the sort of like the connection between these social aspects and |
| 1:56.0 | returns is always interesting. Right. And it's always sort of one of the central questions of |
| 2:00.0 | all the sort of ESG is like, how much is it about investing with one's values? People want to invest |
| 2:07.0 | in companies where they feel comfortable with the values of the company versus searching out |
| 2:11.6 | sort of ESG signals that can actually deliver alpha and somehow generate higher returns. |
| 2:18.6 | Yeah, I think that's a really good way of framing it. And it's sort of unclear at this moment of |
| 2:23.6 | time whether or not you would expect outperformance of a good company because more people hopefully |
| 2:31.0 | are interested in participating in a stock of a company that's doing good things. Or if the company |
| 2:38.3 | itself is sort of outperforming because it's more conscientious on things like the environment or |
| 2:44.3 | gender or wealth inequality and things like that. Exactly right. So let's just get right into it. |
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