The veteran money manager remains a “propagandist” for GMO but has otherwise let the firm’s leadership “get on with it” — even as a dominating run for U.S. growth equity stocks for much of the past 15 years has proven a tough backdrop for GMO’s hardcore value style.
Grantham’s focus today on big, destabilizing, systemic challenges effectively leaves him at the forefront of an ever-growing army of impact investors, eyeing venture capital as the corner of the asset management universe best positioned to address issues threatening “our very survival,” he said.
The $1.5 billion Grantham Foundation for the Protection of the Environment, set up in 1997, is Grantham’s vehicle for seeking out and supporting the “heroic new ideas” needed to address those challenges — a task which he sees as not necessarily out of reach for the U.S. venture capital industry.
Venture capital is something the U.S. does very well at a time when American capitalism is otherwise “nothing to write home about … fat and happy … designed for the unusual enrichment of a relative handful of capitalists,” Grantham said.
VC, by contrast, is “actually doing a useful job,” driven by people who are extremely concerned about issues such as climate change, Grantham said.
If he were looking to launch a new investment management firm today, Grantham said he would either launch a venture capital firm focused on green tech or a green tech startup itself.
“Over the past 25 years, I’ve become persuaded that there are … very, very serious issues, any one of which is much more serious than messing around with stocks, and they are matters of our very survival,” he said.
The broader backdrop for the global system, meanwhile, is “fraying at the edges” now, said Grantham, in part because the rich and powerful continue to accumulate ever greater wealth and power — an outcome Joseph Schumpeter, one of his heroes in the economics pantheon, predicted would eventually lead to the bogeyman of Schumpeter’s day — a socialist backlash.
That tendency of capitalism to concentrate wealth in a few hands “can do things a lot worse than socialism and if we’re not careful, it will,” warned Grantham, noting “the line between where we are now and mild fascism is not a big journey.”
Workers in the U.S., meanwhile, are disgruntled — and not without reason, Grantham said.
“Labor has been screwed by capital, fairly profoundly in the U.S., where almost all the benefits of the last 50 years (have) accrued to the benefit of the rich,” he said. Henry Ford would have said “‘If you don’t pay a decent wage, dudes, how are they gonna buy my car. ‘We’re committing the mistake that Henry Ford did not,” he said.
Asked where he finds himself now on the spectrum between hope and despair, Grantham conceded to oscillating lately between “substantial pessimism and substantial optimism.”
“I can get pretty pessimistic as you appreciate some new problem. And I can get pretty optimistic when I finish meeting with some brilliant new group who have some idea that may save our bacon,” he said.
Grantham said he has restructured his foundation over the past three or four years in order to double down on finding and supporting those ideas.
For the foundation’s first 22 years, Grantham said he and Ramsay Ravenel, the foundation’s president and CIO, focused 90% of their time on grant-making and only 10% on investing. But then, “three or four years ago, as we built up our own team, we decided that actually the best example we could set and the most use we could be was to drive our mission much harder with our foundation, and in order to do that, and scale up quickly, our main effort for that three-, four-year window moved to investing over grant-making” — with a current split of 75% investing to 25% grant-making, he said.
The foundation’s enhanced investment operations target four buckets, which should eventually claim 25% each of the foundation’s capital.