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Apr 22, 2021

Axios Capital

I've never been so happy to be mildly achy: I received my second vax shot yesterday. Here's hoping the whole Axios Capital readership will be fully vaxxed soon!

  • In this week's newsletter: What to make of the Super League fiasco; how green finance went mainstream; how banks aren't lending, or hiring senior Black executives; the hottest experiential artist; excessive executive pay; and much more. All in 1,532 words, a 6-minute read.
1 big thing: Greed is bad

Photo: David Cliff/Anadolu Agency via Getty Images

The 48-hour rise and fall of the European Super League is the perfect encapsulation of how anti-greed sentiment has changed the rules of capitalism.

Why it matters: The highly complex structures of capitalism are built from the mostly base motivations of individuals chasing money. That's been condemned and celebrated in equal measure — but has also largely been accepted.

  • Not everyone makes most decisions on the basis of financial considerations, and no one makes all their decisions on that basis. But, in aggregate, economies tend to behave as though people generally act that way.
  • When entrepreneurs get the opportunity to become dynastically wealthy by taking their startups public, for instance, it is almost certain they'll end up doing exactly that.

The big picture: The structure of European soccer does not maximize profits. It creates a lot of l0w-interest matches that are hard to monetize (Osasuna vs. Eibar, for instance) and many fewer of the big-name match-ups like Manchester United vs. Barcelona that are avidly watched around the world.

  • The Super League was an attempt to create many more of the real money-spinners, with the profits, naturally, mostly accruing to the owners of the super-elite clubs.
  • That violated the sense of fair play that underpins most sport, as I explained on Tuesday. Even if the Super League was Pareto-optimal, thanks to its "solidarity" payments to lower-ranked clubs, it wasn't fair. And that brazen unfairness led to its almost-immediate death.

What's new: A small group of 12 ultra-elite soccer clubs had access to the finest strategy, polling and public relations advice that money can buy. The deal they unveiled on Sunday night was years in the making. But they and their advisers missed something big — that society as a whole is now willing to forego wealth if it means more equality.

  • Brexit made almost everybody in Britain worse off, for instance — but it also hit the rich London cosmopolitans and bankers the hardest.
  • The Fed is openly embracing the prospect of higher inflation — something that erodes wealth and hits rich savers, while inflating away the debts of the poor.

The bottom line: If Peter Thiel is right that "monopoly is the condition of every successful business" — and a lot of Americans would agree with him on that — then every successful business should start getting worried.

  • When the source of a company's profits is manifestly unfair, those profits are more likely than at any time in decades to be facing existential threats.
2. Greed is green

Illustration: Aïda Amer/Axios

The U.S.-hosted climate summit has now begun, ahead of the bigger U.N. climate change conference in Glasgow in November.

  • One major theme has already emerged: Investing in a zero-carbon future has moved from being a contrarian strategy with virtue-signaling upside, to being the central investing thesis for most giant financial institutions.

Driving the news: A new financial coalition calling itself Gfanz is coordinating the deployment of trillions of dollars in quasi-permanent capital — much more than is currently being mooted by President Biden's environmentally disappointing infrastructure plan.

The big picture: Environmentally responsible investing over the past decade or so has in large part been a trade that's long tech and short fossil fuels. That trade has been enormously profitable — and has made it hard for investors to cling to their prior beliefs that constraining one's investment universe means giving up total returns.

  • Instead, the opposite argument has become mainstream among institutional investors — that the only way to avoid catastrophically negative investment returns as a result of climate change is to invest in net-zero resilient projects.
  • That's why the second session this morning is devoted to climate finance and private investment. Senior private-sector financiers like Jane Fraser of Citigroup and Brian Moynihan of Bank of America are appearing alongside heads of state, the heads of the World Bank and the IMF, and a high-profile U.S. delegation led by Treasury Secretary Janet Yellen.

The bottom line: What we're seeing is a pro-climate cartel of the richest and most powerful individuals in the world, led by the president of the United States, saying very clearly that they're going to try their hardest to rig the scales in favor of green investment.

  • The White House is determined to corral "market forces" to meet its emissions targets. That's code for "invest in sustainability, and we'll ensure you make lots of money."
3. The fall and fall of bank lending
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Data: Federal Reserve via FRED; Chart: Axios Visuals

Banks are taking in record deposits — they now have a record $16.8 billion, as of the most recent Fed report — but they're not doing a good job of turning around and lending them out.

By the numbers: Total bank loans and leases are now just 61.5% of the American deposit base. For the biggest banks, as Bloomberg's Shahien Nasiripour reports, that number falls to 53.7%, a new all-time low.

  • What are the banks doing with the rest of the money? Simple: They're either keeping it in cash on deposit at the Fed, or they're buying public securities.

The big picture: Part of the idea behind the government's stimulus checks was that they would either be spent or saved — and that if they were saved, they would become bank deposits which would then get loaned to individuals and businesses, thereby further boosting the economy.

  • That didn't happen: Bank loans have been falling even as deposits have been rising.
4. Racial disparities of the week
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Data: Bank diversity reports/Axios research; Chart: Will Chase/Axios. Note: Full breakdowns couldn't be obtained for JPM and Wells.
In our survey, just 19% of Black respondents and 42% of Latinx respondents indicated a prime credit score, compared with 60% of white respondents.
— Financial Health Network, FinHealth Spend Report 2021

White Americans are three times more likely than Black Americans to have a prime credit score. They're also disproportionately likely to end up in senior management at a giant bank.

  • By the numbers: At Wells Fargo, 87.3% of senior management is white, and only 2.8% is Black. At Morgan Stanley, 83.2% is white, while just 2.2% is Black.
  • If those numbers were in line with the U.S. population as a whole, then 76.3% would be white and fully 13.4% would be Black.
  • "We understand that we have more to do to fully reflect society," says Jeff Brodsky, Morgan Stanley's chief human resources officer.
5. Vincent's price
Expand chart
Table: Axios Visuals

While the art world's elite fund the highbrow Superblue project, and VCs shower Meow Wolf with $158 million, it turns out that the artist leading the world in high-tech immersive exhibitions has been dead for 130 years.

What's new: There are five competing Van Gogh exhibits traveling the U.S., writes Axios' Selene San Felice, all using projections, screens, music, selfie rooms, virtual reality technology and sometimes even smells to create immersive experiences.

  • By the numbers: All of the Van Gogh projects charge higher admission fees for their facsimiles than the greatest Van Gogh museums in the world do for access to the original masterpieces.
  • In Las Vegas, tickets cost $60 each — or $70 if you want to go in the early evening. And they're selling out.
  • In New York, the Metropolitan Museum, with its dozens of spectacular Van Goghs, is free to residents of New York state and no more than $25 to anyone else. Tickets for the city's immersive Van Gogh show, by contrast, start at $40 and rise to as much as $100 if you want a flexible arrival time and the ability to jump the queue.

What they're saying: “It’s the Museum of I Scream,” says artist and critic William Powhida, who points out that Van Gogh did not manage to sell any paintings during his lifetime. "There's an irony to seeing an artist whose work didn't have that kind of economic value be turned into a tourist attraction."

Selene's thought bubble: I visited "Van Gogh Alive" at the Dalí Museum and thought it was a fun way to learn about the artist and feel like I was inside his work. Now I feel more like I got the fancy version of the Shrek 4D ride at Universal.

6. Why is this man smiling?

Photo: Mandel Ngan/AFP via Getty Images

John Legere earned $66,538,207 as CEO of T-Mobile in 2018, and another $27,756,690 in 2019. Then, in April 2020, he stepped down as CEO.

  • Legere's pay for his partial final year in the job: $137,195,887.
  • Exiting GameStop CEO George Sherman might have made even more in his final year. Reuters estimates his exit package at $179 million.
7. Coming up: Endeavor's IPO

Illustration: Aïda Amer/Axios

Axios' Hope King writes: Famed Hollywood agent Ari Emanuel, profiled by Connie Bruck in the New Yorker this week, will take his entertainment and talent agency company public on Wednesday.

Why it matters: Emanuel pulled plans twice in 2019; this time seems that it's for real.

  • Endeavor Group aims to raise about $511 million at a $10 billion valuation.
  • Flashback: In 2019, Endeavor hoped to raise $619 million at a possible $7.8 billion valuation, but the IPO was pulled after WeWork imploded and the IPOs of both Uber and Peloton disappointed.
8. Building of the week: Coventry Cathedral

Photo: English Heritage/Heritage Images/Getty Images

Coventry Cathedral was built in the late 14th and early 15th Centuries, before being severely damaged by German bombing in 1941.

  • British architect Basil Spence won the competition to rebuild it, retaining the bombed remains and connecting them to the new building by means of a high porch.
  • His red sandstone building with distinctive zigzag walls, consecrated in 1962, won immediate praise. Its internal artworks are by major British 20th Century artists, including John Piper, Jacob Epstein and Graham Sutherland.