The Sun Shines on in Kentucky

Chick-Fil-A for everyone.

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David and Sarah are coming to you from live from the University of Kentucky answering the most pressing legal questions:

-Is wokeism a religion?
-Can an employer only hire like-minded people?
-Will Biden push ESG investment practices?
-What does Gruyere cheese have to do with the law?
-When should schools outsource discipline to the criminal system?
-What was one NYT author thinking? Or smoking?
-And will David possibly reveal his darkest secret yet?

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  1. Randall Briggs

    The volume difference between this episode and the previous one is notable, and not in a good way.

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    Witt Case

    I just find it interesting that most people who decry woke-ism place the title on others who may or may not claim the label. Just a thought I had while listening to the pod.

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    Ceich62

    Am I the only one who has never heard of “land acknowledgement”?

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    Philbnichols

    Sarah [or David, if you're still 'checkin the threads'], George Will in this article recommends a suggestion from Cato's Clark Neily to have a lottery for plea bargains in order to decrease their 'industrial' use. Is this a potential good idea? https://www.washingtonpost.com/opinions/2023/03/10/government-overreliance-plea-bargaining/

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    Benjamin.Lusty

    I'm not sure if this is the right place to ask this, but although I recall a few episodes where David discussed his military service, was there an episode where he discussed why he decided to join mid-career? I thought for a long time that my window to serve was closed, but my state national guard is now actively (and rather desperately, it seems) recruiting for new JAG officers and I am still in the age window. I would love to hear David discuss why he decided mid-career to join, and what that was like for him as an older recruit to the military and an established professional. BTW, thanks y'all for the great show and all y'all for the great comments.

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    1. Randall Briggs

      I've never heard David discuss that subject, but I believe that he has written about it, either here or where he was before--National Review, I think.

      As a U.S. Army retiree, I wish you well if you chose to follow that path.

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    Ben Connelly

    Ok so I came back to comment because something Sarah said bugged me. It’s a bait and switch to say that the administrative state isn’t going away because crazy libertarians want private fire departments. I understand the argument you’re making, but it’s illogical to say that we aren’t getting rid of the administrative state because we aren’t getting rid of public fire departments when fire departments aren’t a part of the administrative state. I’m sure you can come up with examples that are a part of the administrative state that would better serve your case.

    The reason this bugs me is that statists use it all the time. “I like paying taxes because I’m glad we have roads and national parks and mail delivery and trash collection,” or “You libertarians are crazy for wanting to dismantle the administrative state, we need government to do important things for society like roads and police and fire departments.”

    I have to invoke Russ Roberts here, who always points out that if those public goods that everyone likes and basically agrees on (setting aside the fact that mail and garbage actually could be done quite well by the private sector) were ALL that government did, it would be incredibly cheap, incredibly small, and incredibly popular. Our taxes would be minuscule and everyone would go, “Man it’s awesome that we get all these national parks for 10 cents a month in taxes.” You can’t on the one hand say that in a complex society we need a massive administrative state and then justify that by giving the examples of the noncontroversial stuff that everybody likes. Our debates aren’t over private fire departments. They are over things like healthcare and social safety nets.

    This bait and switch is akin to going “we can’t get rid of the DH in baseball, because we aren’t going to stop having pitchers.”

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    Ben Connelly

    Why on earth would there need to be a law saying that schools can refer kids to law enforcement for certain infractions? If kids break an existing law (ie assaulting someone) they can be referred to the criminal justice system. And if the kid is just acting up in class that’s not a crime and the school can and should deal with it themselves. What is the point of this kind of law other than “kids are bad and should be neither seen nor heard”?

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  8. Andrew M

    Wait. The pregnancy crisis centers will provide services to pregnant women who engaged in extramarital sex or who have previously had an abortion, but don't want to hire women in the same situation? It seems to me that the women they don't want to have on their staff would be the ideal people to help spread their message.

    I'm reminded of the parable of a person who has dug theirself into a hole so deep they can't get out. All around the edge if the hole stand their friends and family shouting advice. Suddenly, one of their acquaintances jumps down into the hole. The first person asks, "why would you do that? Now we're both stuck down here."

    The second person replies, "Because I've been here before, and I can show you the way out."

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      Sarah Isgur vertical-nib Author

      I thought this exact same thing!! But I actually think it’s that their *current* employees aren’t allowed to have abortions or have extramarital sex. But I’m not 100% sure.

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      1. Andrew M

        I can see that. However, if they don't fire anyone purely for those reasons they have nothing to worry about, and my original point would still apply: they would have someone on staff who could more readily relate to the clients who come seeking help.

        I'm not saying a woman who has never had an abortion can't empathize with one who has, but a woman who previously had an abortion might be more trusting of a pro-life advocate who also has had an abortion. I can only see a benefit to the pregnancy center, and don't understand why they would fight against it.

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  9. Aaron H Frank

    Do clients of investors in ESG funds or shareholders of ESG companies have grounds for a lawsuit? Can't they just take their money elsewhere? If CalPERS doesn't like the way their investments are performing can't they move them? Of course, what if you are receiving a pension through CalPERS and you don't like their investment strategy?

    Many of the bourbon distillers of the late 19th and early 20th century were teetotalers, including my great grandfather. They were also Jewish. Marni Davis wrote an entire book about the Jewish Bourbon Trail called "Jews and Booze". Great Grandpa was a bourbon distiller for almost 30 years and only stopped (at least officially) because of Prohibition.

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    1. General Darden

      Aaron: employees within CalPERS do not have a choice as long as they are working: CalPERS is it, unless you choose to not get the tax benefit of pre-tax retirement and invest in a ROTH IRA. There is a personal price to doing so -- and there are clear barriers to doing that. But CalPERS has incredible sway int he corporate world through decrees and preferences, and public companies, in general, like stable shareholders who put in large amounts of cash for long periods of time and don't really bother management. That is the pernicious and slippery slope of ESG: investors force you to do something you might not otherwise do because their preference is a practice you would not otherwise consider optimal for long-term shareholder return.

      And as to your great grandfather, Mazel Tov! When I once toured the bourbon trail, a Jewish friend told me that story and said that in his family (from Cincinnati) they often went to a distillery to observe Purim and once, Passover, and he always thought it funny that many of the Moms and Dads had "darker punch" than the kids.

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      1. Aaron H Frank

        Thanks for your thoughtful reply. I appreciate it. There is a lot of drinking associated with Purim.

        I am surprised about Passover though. Most Jews won't have anything with corn during Passover. Your friends must be Sephardic.

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      Estoppel Enjoyer

      Probably, but not related to the new regulation. Under the Biden rule, the basic law that fund managers have to act as fiduciaries is in effect. Fund managers could be sued by shareholders if they make investment decisions for collateral social benefit at the expense of material financial considerations. Biden’s rule does not change that, and merely says that managers can use ESG as a factor in the process of *determining* what’s in the best financial interest of clients. Say, the risk that climate change poses long-term to a certain company might discount the fact that their earnings last quarter were particularly good, or a company’s repeated sexual harassment scandals might be a barrier to future business success because a failure to recruit top female talent will harm the productivity of their employee base. The Trump and Biden rules only differ in that the Trump rule was ambiguous as to whether those considerations were lawful, and Biden’s
      rule clarifies that they *are*.

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      1. Aaron H Frank

        Thanks. I appreciate your thoughtful reply.

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      2. General Darden

        "Fund managers could be sued by shareholders if they make investment decisions for collateral social benefit at the expense of material financial considerations." And how is that proven in the moment? That is, at best, a determination made 5-, 7- and 10-years post hoc, no? It is sorta like the Surgeon General saying in the 1950s that it is okay to smoke because it will keep post-menopausal women skinny. Once the practice becomes "norm'ed," it is very hard to state that practice is therefore bad until harm - and often irreparable harm - has been done.

        Furthermore, it requires you have a basket of stocks to which to compare the lesser-performing stocks. The assumption is that some firms will choose not to toe the ESG line today and will continue into the future. I think that is a fallacious assumption: there is no reason to think that would be the case. Over time, corporate business practices tend to a "norm," and if the norm is always changing progressively to the left because of a vocal minority or a governmental bureaucratic mindset, then what is the "counter" example?

        The only way to stop ESG as a guiding principle is to encourage the Labor Department to abandon the rule. Allow individual entities, if they so prefer, to force change, but do not use the heavy hand of government to enforce an unproven, dangerous "invest for social good" theory.

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        1. Aaron H Frank

          Many years ago a friend in the financial services industry talked about creating a "sin fund". It would be alcohol, tobacco, and fire arms companies. These days it would probably include petroleum producers as well even though the big oil companies are some of the biggest investors in alternative fuels.

          Even back then he said it would never have been approved.

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          Estoppel Enjoyer

          That’s just not how the law works. If you think there aren’t armies (plural) of plaintiff’s-side lawyers combing through mutual fund investment decisions looking for proof of an abrogation of fiduciary duty, you’re sorely mistaken. The fact is that any time a retirement fund does poorly, it has a chance of getting sued, and their document retention rules guarantee that every single thought that went into security selection will come to light.

          It is indeed difficult to prove whether a fund manager violated their fiduciary duty in selecting investments. That’s always true. Did they use the best research analytics? Did they exercise due diligence when evaluating a company’s financial statements? That’s what litigation (and the SEC) are for.

          What the Biden rule says is: sometimes, your fiduciary duty *requires* you to consider ESG. How do you evaluate a coal company? Sure, it’s doing well now, but as climate change gets worse the market is going to transition to cleaner energy, thus hurting the coal company. How do you measure a manufacturer who operates factories in China with Uyghur slave workers? Sure, it’s profitable, but what if it triggers a boycott? The Biden rule acknowledged that previous guidance from the Trump admin, which was quite anti-ESG, left it ambiguous whether those kinds of considerations were valid, and it created a chilling effect.

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          1. General Darden

            I value your comment. I understand your advocacy.

            Here is what I - a non-lawyer, but an MBA - find somewhat quease-inducing: What the Biden rule says is: sometimes, your fiduciary duty *requires* you to consider ESG.

            Any investment professional today already is looking at ESG factors. To use your examples, a coal investment is heavily burdened today by knowledge and reasonable expectations that future regulations will reduce the commercial appeal of fossil fuels. A solar panel company with manufacturing in Xinjiang should be shunned already. That is called * risk *.

            What I object to is the use of government-dictated moral statements about what is right and wrong to consider for those guidelines/risk criteria. If I think that fossil fuels like coal do not contribute to climate change because the industry is already heavily regulated w/r/t emissions, why should I have to check an ESG box to signify that? On Governance, there is a voluntary move already by many companies to diversify their Boards and management ranks, but if a high-performing company doesn't meet it, do I have to discard that option because I fear not having the blue-check equivalent of ESG compliance under the Department of Labor guidelines? And don't get started on Social because there is a whole Pandora's Box of what should be considered as advisable versus objectionable.

            I think we just move down a very slippery slope with ESG checking at the Federal level. It should be left to individual investors to determine their own criteria. Isn't that why Vanguard or T Rowe has removed themselves from the industry associations advocating for this - because the demands and requirements became so onerous that viewed it as a straitjacket that removed too much judgment and risk assessment that they viewed as their strategic advantage?

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  10. Chapajoe

    I have a comment for Sarah’s guest. Though I don’t know what Ukraine war podcast you were listening to (and the details might make a difference), if a pair of Russia military experts are debating a pair of military strategy experts, I don’t think it’s right to consider the strategy experts generalists. Clausewitz had a whole bee in his bonnet about military genius. Military strategy (at least according to military strategy schools) is an expertise all its own. I think what you heard might have been a debate between experts from different fields—not foxes and hedgehogs, but two rival prickles of hedgehogs, each with its own area of expertise.

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