Jeffrey Ubben is an American businessman and Founder of Inclusive Capital Partners. He recently retired as CEO of ValueAct Capital, a hedge fund focused on environmental, social and corporate governance (ESG) and impact investing. Ubben is an activist board member of Exxon Mobil.
Prior to founding ValueAct Capital in 2000, Mr. Ubben was a Managing Partner at Blum Capital Partners for more than five years. Mr. Ubben is a director of The AES Corporation, where he is a member of the Compensation and Financial Audit Committees, Enviva Partners, LP, where he is a member of the Compensation and Health, Safety, Sustainability and Environmental Committees, AppHarvest, and Nikola Corporation.
LISTEN AND SUBSCRIBE
SPEAKER
Jeff Ubben
Founder & Managing Partner
Inclusive Capital Partners
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darsie: (00:07)
Hello everyone, and welcome back to SALT Talks. My name is John Darsie. I'm the managing director of SALT, which is a global thought leadership forum and networking platform at the intersection of finance, technology and public policy. SALT Talks are digital interview series with leading investors, creators, and thinkers. And our goal on these SALT Talks is the same as our goal in our SALT Conference series, which is to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. And we're very excited today to welcome Jeffrey Ubben to SALT Talks, somebody who both is investing and making a lot of money for his clients over his long track record, as well as driving social impact and increasingly so in his latest ventures. But I'll read you a little bit more about Jeff's background, but he's a man who needs no introduction.
John Darsie: (00:58)
Jeffrey Ubben is the founder and managing partner of Inclusive Capital Partners. Mr. Ubben began his investing career at Fidelity Investments where he worked alongside legendary investor, Peter Lynch, and ran the Fidelity Value Fund. The Value Funds assets under management grew more than tenfold during Ubben's tenure as portfolio manager. In the year 2000 after five years at Blum Capital in San Francisco, Mr. Ubben founded ValueAct Capital and pioneered concentrated active value investing. During almost 17 years as the sole portfolio manager of the VAC flagship fund, assets under management grew from approximately 65 million to more than 15 billion. When portfolio manager at VAC, Mr. Ubben, served on more than 15 public company boards and generated net annual returns of 15%. And over that same time period, the S&P 500 annualized return was about 5%, so dramatic out-performance there.
John Darsie: (01:58)
At Inclusive Capital or In-Cap, Mr. Ubben seeks to make long-term equity investments in companies while working actively with managements and boards to responsibly and creatively address environmental and societal problems. Mr. Ubben serves on the boards of Duke University, the World Wildlife Fund, The Nature Conservancy's NatureVest, and the E.O. Wilson Biodiversity Foundation. He has a bachelor's degree from Duke University and as someone who grew up in Durham, but likes a lighter shade of blue, I won't hold that one against you, Jeff. He also has an MBA from the Kellogg School of Management at Northwestern University. And hosting today's talk is Anthony Scaramucci, the founder and managing partner of SkyBridge Capital, a global alternative investment firm. Anthony is also the chairman of SALT. And with that, I will turn over to Anthony for the interview.
Anthony Scaramucci: (02:48)
John, thank you. And Jeff, amazing career. It's interesting this week Fidelity Magellan converted to an ETF. Can you imagine that? I mean, we're sitting here and you and I grew up in this industry with the legendary Peter Lynch, and of course you were running the legendary value fund as a mutual fund, but we seem to have bifurcated now, right? We're going ETF or hedge fund. It's just interesting, we're going to get to it in a second, but before we get there, tell us where you grew up and what your family and your upbringing was like.
Jeffrey Ubben: (03:26)
Okay. That's a little bit too much to me. I'll do it fast. I grew up in Chicago. I grew up in the business. My dad started a money management company after leaving Allstate. I think it was in the late '60s or early '70s. He was a growth investor and the NIFTY 50 crashed. And I remember that it made an impression on me for sure. By the way, I interned for him during my high school years. And I started calling companies when I was 17. So I've been calling companies for 43 years.
Anthony Scaramucci: (04:05)
Any brothers and sisters, Jeff?
Jeffrey Ubben: (04:08)
One sister.
Anthony Scaramucci: (04:11)
Okay. So you had a love affair then with your dad's business. You could have probably gone in any direction that you wanted. What attracted you to the money management business?
Jeffrey Ubben: (04:22)
You get paid to learn every day you come in and you fill yourself up with information from some new industry or some new executive, that is almost unfair, to get paid to learn. So I'm just... If you're intellectually curious, it's the best business in the world times 10.
Anthony Scaramucci: (04:48)
See, you and I are in total agreement on that. I always tell kids that this is the business of understanding other businesses. So man, if you love business, you can learn about the insurance business, biotech. You pick the business, you can get steeped in it from Wall Street or from the investment management business. Tell us about your investment philosophy and your perspective and what are some of the lessons that you've learned along the way from your days at Fidelity to where you are now?
Jeffrey Ubben: (05:18)
When you're at Fidelity, I was dogging and chasing Peter Lynch down. You had mentors like Rich Fenton, and it was just call companies, call companies, call companies. Don't talk to, I don't know, don't talk to other managers even very much. It's all about independent thought and stay away from the herd. It's one of the reasons I went from Boston to San Francisco. The market opens up before I wake, so I get the last call. It's like you said, we're in the understanding business, not the information business. So much of the money management has moved to the information business to the point where algorithms are not trying to beat the next algorithm to some sort of data point that drives a short-term stock price. And that has commodified this world and it's shortened time horizons and there's no transaction costs and stocks, all of which creates an arbitrage, time arbitrage, that means the long-term guy can still win, I think, but it's confusing for sure relative to where it was 20, 30 years ago.
Anthony Scaramucci: (06:32)
So you started Value, you gave a speech and subsequently wrote a letter to your limited partners about organizational culture. And so I'm a very big believer in that by the way, I think we have the same desk, same phone, same computer terminals, but what separates our businesses is the culture. Tell us about the culture at ValueAct and tell us about why you are so hell-bent on organizational culture.
Jeffrey Ubben: (07:02)
I'm a 100% build-your-talent guy. I think there's a marketing aspect to money management where you tend to see people buy resumes or plug holes. I've never done that. I've hired people. I started ValueAct when I was 39 and everybody I basically hired was late twenties, early thirties at the oldest. And so the idea for me is distribute the equity broadly and early, get no drama and no jump all around succession. I mean, we're telling companies about management succession and how they should pursue it. We should do it ourselves. Get buy-in on a succession plan and stick to it. And in the end, the pie grows, even though my share is shrinking, the pie grows and we get smarter as a team.
Anthony Scaramucci: (08:06)
Well, I agree with it. It's akin to baseball or football. You know what I mean? You're drafting and building from the inside, you're using a firm system. You're not trying to bring in free agents. If you look at how these championship teams are made, it's all the same. So I give you a lot of credit on that. I'm going to go to the active investing and being an activist. And you're a value investor, obviously. So how was your active investing different from other hedge fund activists?
Jeffrey Ubben: (08:40)
In Fidelity, you would be frustrated with a company's management. You would say, "What if you sold this business and focused on your core business? What if you focused on return on capital versus pure growth?" Whatever the situation was they would say, "If you don't like what we're doing, you can sell the stock." I mean, I was told that to my face often enough. So we put Act in the name, Anthony, in 2000, and that was really not a thing, it's harder to remember because we've come so far. But the idea of an owner in the boardroom that understands how the shareholder thinks has a sense of urgency.
Jeffrey Ubben: (09:19)
And like I said, I'm paid to know this company. I mean, nobody else in the room really is paid to do their own work on the company and whose board they serve. So I bring new information to the room, all of which seemed to me to be a perfect way to make idiosyncratic return. You become your own catalyst, and it was pretty rich in 2000, there was still a lot of... The management primacy era of governance was ending and there was a lot of mismanagement as a result. So 2000, 2010 was very fun.
Jeffrey Ubben: (10:00)
We always focused on putting a principal on the board. We didn't outsource our board work and we really always have had a long-term time horizon, a three to five-year time horizon. I thought there was going to be more of that, more practitioners like us. And it turns out the hedge fund activists really shortened up the time horizon. They really shoot for one year quick wins in my opinion. And that's where the industry has gone too much. One of the reasons I left the industry, I left the neighborhood so to speak, and I started Inclusive.
Anthony Scaramucci: (10:36)
2013, ValueAct takes a 1% stake, $2 billion, 1% stake in Microsoft. You turn that position into a board seat and you help to put the company back on a sustainable growth pattern. And you and I are old enough to remember Microsoft in the '90s, its initial public offering. It was a roaring stock that sort of flat-lined for a period of time, you saw something there. Now that stock is once again in the pantheon of a tech hall of fame. Tell us about that position. Tell us about your activism there and tell us where things are in Microsoft today.
Jeffrey Ubben: (11:19)
I mean, it was a culinary event for activist investing. We actually, to a certain extent, all we really did is rally the shareholders who were ridiculously frustrated with the flat line. And we made sure the directors picked up the phone when about 25% of the shareholders, maybe it was 10 different shareholders called them. I mean, there was this disconnect between what the directors thought they could do since there was a dominating founder in the boardroom and it was a kind of a traumatizing experience for them. And they felt, I think, without any power. And the shareholders were kind of walled off, not really knowing what they could do about this. And once you create this conversation and the shareholder finds their voice, it got really easy. I mean, once the directors knew what how frustrated the shareholders were, and they could essentially act on behalf of the shareholders, they did. So it was nothing more than that.
Jeffrey Ubben: (12:29)
Now, their company was run by a monopolist of sorts. And so he was not customer-friendly, it's like the first ESG I've ever seen. The CEO is customer-unfriendly, employee-unfriendly and planet-unfriendly. And with the flip of a switch, Sachi came in and he put customer first, employee first. And of course with his Net Zero program, put the planet right up there as well. And now with the flip of the switch, the company has prospered.
Anthony Scaramucci: (13:06)
I know you can't talk about future positions, and I don't want you to talk about where the puck is going for ValueAct as much as I want you to talk about the components or the DNA of what you're looking for in a future sizable stake like the one you made in Microsoft. So what are the components that you think about?
Jeffrey Ubben: (13:30)
I mean, it went from financial engineering in the early to mid-2000s, because balance sheets were lazy, costs tracks were lazy, you hadn't consolidated industries as much. So I'm your classic profit maximizer during those years, and with a longer term focus, but that was the opportunity. By 2013, 2014, that stuff was less easy, hedge funds were all activists in their own right and people were self-actuating company or self-actuating on the cost structure and their balance sheet and interest rates were low. And so they made sure that they got debt on the balance sheet. The next, I would call, the next phase of my time at ValueAct 2013 to '17, we started to transition to business model change which is a little harder.
Jeffrey Ubben: (14:29)
Adobe was one where we really advocated for a move from a license upgrade business to a subscription business. And it was hard for them because it was going to hurt the earnings for two or three years, but it's a better business in terms of the way customers are onboarded and you can put it in the cloud and you can watch how they use the product. And you can grow your audience because it's $30 a month instead of 3000 for a license. And that's a kind of a different... In Microsoft was that too, we basically had to unhook the productivity suite from the Windows operating system, because operating systems over time will be free instead of keeping them attached. So you were taking down Excel and Outlook as you stuck to the Windows model. And that's really fun because you're changing industries and that's to a certain extent what we're doing at Inclusive Capital. We're trying to be leaders in industry change around business models.
John Darsie: (15:35)
So Jeff, jumping in, in 2017, you were at ValueAct for 17 years as a sole portfolio manager and walking the walk that you talked about in terms of company culture, you decided to turn the flagship fund over to your handpicked successor. You started the spring fund, which is now part of Inclusive Capital, which is your new firm. What prompted you to make that change and to form Inclusive Capital?
Jeffrey Ubben: (16:02)
To reverse the harm I had done as a profit maximizer? I didn't like the neighborhood that I was in. I think we did it differently. Our time horizon is three to five years. We get paid on three to five-year performance, not one-year performance, but the ability to get the long-term back for companies was really concerning for me. And the more I studied these new constraints, natural and social capital, we have a planet that's pushing back. We have no water in California, so how are we going to grow tomatoes? For instance. We have no middle class in our country, so how are we going to get fair wage jobs back? So for me, this idea of environmental and social investing, which is less share repurchase and more long-term investments to make your company sustainable and earn a premium, was the new value lever. I mean, that's the way I saw it. That's the way I do see it.
John Darsie: (17:13)
And so, we've had other impact investors on this show and at our conferences and for them, obviously the social and environmental component is very important, but a lot of them also make the distinction that investing with these factors in mind actually is going to help drive returns into the future. Could you tell us how thinking about the environment, thinking about societal impact, you think that, if you do think, this will help drive returns in the future.
Jeffrey Ubben: (17:39)
I mean, when you think about, Anthony will get this, when you think about value investing, whether it's with a shareholder activist hat or environmental social activists hat, the stock price is the catalyst. When the stock price is low, it's creates the pressure for change. It also creates the risk reward as a new investor in the company. I guess over the last three years, the higher the stock price, the higher it goes. So value investing has been more difficult, but generally speaking, since I have all my own money in the fund, I prefer to buy stocks that are lowly priced rather than high price. And so during the shareholder activists run, the financial metric is typically like the metric that people are watching to cause a low stock price. The mergers are half their industry competitors, they have a portfolio of it, doesn't make sense, whatever it may be, and you break it up or you steep the company sole or you fix the margin.
Jeffrey Ubben: (18:49)
In this new world where we have these new constraints, you're starting to see externalities separate apart from financial metrics, impact stock prices. When you look at Big Oil for instance, in 2019, their returns were pretty darn good. These were not bad years, but the stocks were already hitting 30-year lows. So you can see that the license to operate was starting to impact the stock price. And to me, that's the new lever, because if I can go in there and change their capital allocation process and use what I think will be probably pretty stable hydrocarbon cash flows for a number of years, just because of the demand supply situation we have today, where you're in disinvestment mode in an age of austerity, so to speak. There is a big opportunity to make a stock price it's had an all time low with a probably predictable cash flow over the next 10 or 15 years, a very different company. That's an easy credit return I want to go and get.
Jeffrey Ubben: (19:52)
At very high levels, I think the carbon is a liability today, but the carbon creates an opportunity, I think, to turn it into an asset, if you're a carbon emitting to reduce or avoid it. And because there's a price signal for carbon, I think there's a whole new investment opportunity for these mature businesses. And that's a whole different way of thinking about it. The ESG world screens carbon out. And I go find carbon because I think I can find a new investment opportunity around reducing it since carbon is going to get an explicit price over the next five or 10 years.
Anthony Scaramucci: (20:32)
Makes sense. Jeff, what are your most exciting investment themes right now? What do you think of market indices and their current levels?
Jeffrey Ubben: (20:46)
I mean, you have 3 million indices in 40,000 stocks, you have 60,000 ESG ETFs and 40,000 stocks. So you've grown passive, as you said to open this largely, and those that have big investments in ESG ETF. So even the S&P 500 got the honor of owning Tesla for 6% of their portfolio at a $650 billion market value. That's a lot of risk, man. So there's tremendous risk being taken with very little acknowledgement of it and the ESG passive flows are creating ESG darlings that are fraught with risk, but I don't mind it because if NextEra trades at 35 times earnings and I'm on the board of AES and we traded 12 times earnings, we look like them, we're a power producer and we own some utilities.
Jeffrey Ubben: (21:53)
When I'd like to make AES look like NextEra, I got 20 PE points to go grab and get it off the screen and into portfolios that are getting funds flow. So it is a disorienting time. I see my value guys retiring, just like they did in 2000. We saw a number of retirements in 2000, Julian Robertson and others who said, "I don't get it." And so you've got that same thing going on now. And that's typically a good sign for some sort of inflection.
Anthony Scaramucci: (22:31)
I remember when Julian gave up the goose, you may not remember this, maybe you do. He was short USAir and it was coming up at his face and he says, "Okay, I'm done with this." And he bought all that great land in New Zealand. And then of course after he left, USAir crashed, it was sort of ominous that he had gotten the things right from a fundamental basis, but sometimes the markets go awry. Both you and your father had been very involved donors. You don't simply write checks, but you're actually active in these not-for-profit organizations. Was he an influence on you in that regard?
Jeffrey Ubben: (23:14)
You can't take it with you. And he put himself on a glide path to zero, I mean-
Anthony Scaramucci: (23:23)
By the way, I need to interrupt Jeff, because my kids keep telling me that I can take it with me because they don't want me to spend it, okay? Just so you know, okay? There's a lot of influence from these millennials. They put a lot of pressure on us, old men, but go ahead.
Jeffrey Ubben: (23:36)
Yeah. Maybe we screw that up if we [inaudible 00:23:40]. We should get it out of that state. But when I started getting a paycheck from Fidelity, he requires me to get 10% of my money away. And that's hard to do when you're just making your way, get into your first paycheck. And you're with, you have young kids with your wife making your way, but you do that. I remember he's like, "Where are you going to give it this year?" And I was like, "I'm going to give it to PBS, because the kids are watching Sesame Street." And he was like, "What? You better do some work on where you're going to have impact on certain non-profits and allocate your time as well as your money." So that stays with me.
Jeffrey Ubben: (24:29)
We have a foundation attached to Inclusive Capital and we're trying to try to marry philanthropy markets and policy because there's these things that fall through the cracks, and education, affordable housing. And so, to attach it to my business rather than it be the sideshow is also a new thing for me. For whatever reason, people invest aggressively and do harm without paying attention to what they own. And then they try to fix the harm they did with their donations, and it's a net zero sort of outcome. So everybody should think about what they own and are they investing in so that their donations don't offset their investment problems.
Anthony Scaramucci: (25:20)
Well said.
John Darsie: (25:21)
Jeff, I want to jump back in here. Because I know you've been innovating, not just around investment strategy, but also around fund structure. Could you tell us how you're innovating around fund structure with Inclusive?
Jeffrey Ubben: (25:34)
We did go to three to five year lockups and three to five year payouts at ValueAct, so we don't get paid until the end of five years. Your money compounds, compounds, compounds, and at the mark to market at five years, we move the promote, if there is a profit from the LP to the GP, that I thought that was a good innovation because it aligns our LPs interests with our time horizon. The innovation at Inclusive is that we have this flex capital. So one of the problems with hedge funds is you sell Microsoft at a $4 billion profit, and then how do you recreate a $4 billion idea?
Jeffrey Ubben: (26:18)
So either return the capital and never get it back it seems, or you sit on cash and you get paid a management fee for that. So we designed this flex capital, it sits on the side and we can draw it and then we can return it. It's committed, but there's no fees on that piece of the... And it's half the asset base that we're trying to raise for the new firm. So it just seems much more... It's like private equity, but we're being on public companies and we don't want to carry all this cash, we don't want to charge for it. But we don't want to... The co-invest model is not interesting to me because you pass the hat and investors say yes or no. And they hired me for a reason. They liked my ideas. So I should be able to just drop when I want it, rather than ask them if I can use it. So that's the innovation, if that makes sense.
John Darsie: (27:13)
All right. It makes a lot of sense. I want to dive back into the question about investment themes. So I'm going to editorialize a little bit here. I think there's different types of ESG. There's the type of ESG that's going through the motions ESG, and there's the type of ESG that's really driving a lot of change. And I know you're focused on the latter as opposed to the optics around it. I don't think that you need the money. You really want to drive social change and environmental change here. So what are the themes that you think right now, are most exciting in terms of both their return profile and in terms of their potential societal and environmental benefit? And how are you deploying capital into those types of names?
Jeffrey Ubben: (27:56)
It turns out the valid value is kind of a moving thing. In the early 2000s, there was a lot of value in software because we came off this bubble, tech bubble and maybe people had bought all the software licenses they needed for a period of time. My first new investment was Gardner Group post the crash, and Gardner was selling kind of vendor ratings to companies that was like six bucks a share down from 40. So tech and software and free cashflow asset-light businesses were quite available and interesting, but now we are 20 years later and that whole asset-light world, that digital economy, especially with COVID and work from home, and low interest rates has revalued to, and it's very crowded to the 50 multiples and where we see the value is in the real economy. The people that are growing the food, people that are actually producing the energy that moves cars and trucks and heats homes.
Jeffrey Ubben: (29:09)
The materials that are required to get product to market, you can do your Jordache or a quarter, and Jordache can be valued at $60 billion, but somehow has got to get to you. And for whatever reason, asset-intensive, capital-intensive companies that are doing the real stuff are for sale. So the value and the value investor in me is looking at capital-intensive businesses, which I haven't really done that much of until recently. The cool thing is that those companies that need to attract capital are starting to do so. I mean, the stock PIPE world really is moving capital into balance sheet oriented businesses to address some of these big problems. Like, can we grow our food locally? We have a controlled environment agriculture company which just went public this week called AppHarvest.
Jeffrey Ubben: (30:13)
The hydrogen economy is being launched. The EV economy is being launched by [Spark Pipes 00:30:19]. So there's a lot of speculation, but these are largely companies that would not be otherwise venture capital funded. And that now we're accessing long-term money like Fidelity and Norges Bank to execute on this stuff. So the legacy companies that have the car parks, that have the workforce, they have the global footprint, they do project management well, and then these newer companies that are running to the goal as pure place, that's how we're building our portfolio to manage the risk. We're finding founders that need big balance sheets. We're getting the money and we're working with the big companies to access their capital to do some of the same stuff.
John Darsie: (31:06)
That's great. I want to elaborate on your carbon theme that you talked about, which I think is super interesting. So we did our most recent SALT conference in Abu Dhabi. We spend a lot of time in the region, in Saudi, in Kuwait, in the UAE. And I find it fascinating how aggressively those countries are investing in technologies that are disrupting their own sources of revenue. So in the UAE, for example, they're investing heavily in sustainable energy and they're trying to innovate around carbon in addition to diversifying their economies. I know that you travel around the world and talk to all types of investors, including investors in the Middle East. What's your experience in talking to them about how they're thinking about sustainability and innovating around their carbon-based businesses?
Jeffrey Ubben: (31:52)
I mean, I'm on the AES board and we have a big business in Chile, and we have a ton of free energy in the middle of the day in Chile, because there's been a bunch of solar energy build out. And what can you do with that? Green ammonia is a fascinating idea. If you take the traditional fertilizer company, like CF Industries in North America, it trades at eight times [inaudible 00:32:24] because they're making carbon heavy fertilizer and they don't have a growth opportunity because you don't want to do a greenfield and fertilizer grows slowly and you'll upset your local market. So what do you do? You buy shares back. So you're buying shares back in a no-growth business. It's always going to trade at eight times because you're not really creating value if you're buying shares back in a no-growth business. So what do you do?
Jeffrey Ubben: (32:50)
Well, it turns out that they admit 18 million tons of carbon. They sit in Louisiana with their biggest plant, which sits on aquifers that could be filled up with carbon. So to move a bunch of capital into carbon capture and watch carbon prices go to 40, 50, 60, $70, they could generate a billion dollars, that's $50 times 18. They could generate a billion dollars with new investment, which wasn't even available to them until carbon... So green ammonia trades at $700 a ton, gray ammonia, which is sourced from gas trades at $300 a ton. So there is a price signal. It's a very small market, but farmers are asking for carbon-free fertilizer, increasingly you can do something with maritime shipping which is what I think they're looking at in Chile to change geopolitics away from Singapore. Los Angeles and Rotterdam, it have new ports that can fill up boats with green ammonia as a transport fuel. I mean that, this is a whole new way of thinking about a fertilizer company.
John Darsie: (34:05)
All right. I don't know, Elon Musk, I don't know if you've studied this. It sounds like you have, because you're so involved around carbon, but he announced a prize for somebody who comes up with a new novel innovative carbon capture solution. Are there any emerging technologies in that space that you think could be really exciting?
Jeffrey Ubben: (34:24)
I mean, carbon is such a small part of the atmosphere. Direct air capture is... I'm rooting for him, believe me, I'm rooting for him, that changes everything. But if you think about the way everything's interconnected, I mean, to use forestry to capture carbon to put it in the ground, obviously within these aquifers that have been emptied out, that's a business. I think there's going to be a tremendous amount of innovation around carbon capture. We're involved in a biomass company that grows, that takes tree wastes in Southeastern United States and makes a wood pallet out of it and shifts it to coal plants all over the world to decarbonize coal.
Jeffrey Ubben: (35:15)
And to me, that looks like a kind of a transition business until we get hydrogen up and running to move renewables to longer ration storage, which is probably 2040, 2035. But what if we can put like [inaudible 00:35:32] our customer in the UK is putting the carbon from the plant that burn wood pallets into the ground. And all of a sudden we have a forest that's growing and it's capturing more carbon. And the carbon that we're burning when we make the energy goes into the ground work, we got a net sink business. That's a really cool idea. So there's a carbon pricing, explicit or implicit, voluntary or involuntary, is what we need to give us that signal to spend the money and that's happening.
John Darsie: (36:08)
So my last question is, from a public policy perspective, we have smart people in the private sector like yourself, who are driving capital and driving change in these areas that we desperately need it. From a public policy perspective, what can we do to incentivize investment in these areas and to drive change and accelerate change?
Jeffrey Ubben: (36:27)
You need to get these companies to put the money behind it. And Big Oil, for instance, they'd been obfuscating or fighting all of this stuff around carbon pricing because they thought it was an extra cost, but if they start to think the way I'm thinking, and they started to advocate for this stuff, then all of a sudden the fight turns into a back scratch because it generates returns. It becomes a competitive advantage if you're putting money behind these new solutions that are getting rewarded with subsidies, or in fact, they're going to be a penalty if you don't address and reduce. So the policy has been slow, but the companies have been fighting it. If we get the companies that put the money behind it, then policy will become easy which is where we started-
John Darsie: (37:23)
All right. So we're going to subdue the companies and really force their hand in terms of investing in these areas?
Jeffrey Ubben: (37:28)
Yeah. Which is exactly where we started, which is, if I can get companies to invest more not less, a normal company should never do a shared purchase from you. And they need to reallocate the hydrocarbons to these other capital-intensive carbon avoiding technologies, because there's a return attached to it. Then policy will just fall right into place. You can't... This idea that everybody should own an ED by 2035 in California, it makes Gavin Newsom look great, but the economics aren't there. So you got to give me some economics, you got to give the utility the ability to invest in a ED infrastructure, so I don't have range anxiety, or you got to get... You got to do something with... The vehicle is way too expensive for middle America. So Gavin is going to be long gone, just like a CEO is going to be long gone. If they're throwing out these fancy targets in 2035, we need economics to fall in place to create the incentives for it to happen. We can't just do it by EDA.
John Darsie: (38:33)
Yeah. That's something that we believe in very heavily, is trying to create incentives that drive capital and areas and not try to dictate outcomes from a top-down level. It's much more effective, but Jeff, thanks so much for joining us. Anthony, you have a final word for Jeff before we let him go? This has been a fascinating conversation.
Anthony Scaramucci: (38:49)
I just want to congratulate you on your career. And I'm looking forward to your exemplary investment results ahead. And John and I are very jealous of your sun tan. I just had to get that in there before-
Jeffrey Ubben: (39:03)
That's the sun, the sun rises in the East [inaudible 00:39:06].
Anthony Scaramucci: (39:06)
No, no, no. You're looking fit and tan, and I'm sitting here in 24 inches of melting snow. So I just have to let I'm a little bummed out about that.
Jeffrey Ubben: (39:15)
It is 62, you're right. You're right.
John Darsie: (39:18)
Jeff, he's jealous, because of COVID, he hasn't been able to get his normal spray tan. So he's feeling very-
Anthony Scaramucci: (39:25)
Well, it's not only that. I have like copper wire growing out of my ears now because I've been living in my basement. But other than that, I'm doing fine, Jeff. You continue to enjoy that California sunshine.
Jeffrey Ubben: (39:37)
All right, man. Nice to see you.
Anthony Scaramucci: (39:38)
And congratulations on everything.
Jeffrey Ubben: (39:40)
Thanks, Anthony. Thanks for having me.
John Darsie: (39:43)
Thank you everybody for tuning in to today's SALT Talk with Jeff Ubben, formerly of ValueAct where he made his name as well as at Fidelity, and now at Inclusive Capital or In-Cap. It's great to see talented investors like Jeff, turning their attention almost exclusively to social environmental impacts and how you can drive capital to create better outcomes for our society and for our planet. And just to remind you, if you missed any of this talk or any of our previous talks, you can access our entire archive as well as sign up for any future SALT Talks at salt.org\talks.
John Darsie: (40:16)
Please spread the word about these talks, especially ones like this. We love them. People spread the word about our environmental and social impact SALT Talks, because we think it's important to educate people and continue to drive capital into those types of solutions. So please spread the word, we're on social media, please follow us there and retweet us and share all of our material. Now we're on YouTube, our channel posts all these episodes. We're up to, I think more than 12,000 subscribers today. So it's been gratifying to see that growth as we pivoted to a digital model during the pandemic. We're also on Facebook. We're on Twitter, Instagram and LinkedIn. And on behalf of the entire SALT team, this is John Darsie, signing off from SALT Talks for today. We hope to see you back here soon.
