December 11, 2024 • 27 mins
Jerry’s expertise provides a rare window into the, sometimes, exclusive world of investment strategies, encouraging us to question who truly benefits from the current financial system and how we can make smarter choices on our financial journeys.
Through the lens of corporate giants like Walmart, we dive into the moral and economic dilemmas surrounding minimum wage debates. Do higher wages lead to healthier, less stressed workers, or do they risk job losses and drive inflation? We unpack these arguments, focusing on how economic security can empower individuals while challenging corporations' role in perpetuating income inequality. This discussion sheds light on how capitalism shapes the lives of everyday workers and explores potential paths toward a fairer future.
We also examine the intricate ties between poverty, capitalism, and corporate power in government and society. Drawing from historical and contemporary debates on welfare and minimum wage laws, we debunk persistent myths that blame poverty on individual failure. Inspired by Matthew Desmond’s Poverty, by America, we delve into how corporate interests influence societal values and political decisions. This conversation urges us to rethink our roles as consumers and citizens in a system that often prioritizes profits over people. Join us for an eye-opening discussion that challenges conventional narratives and explores solutions to systemic inequality.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Adam Gercak (00:05):
In a world where health inequality continues to
widen, understanding thedynamics of investment and
corporate behavior is morecrucial than ever.
While many of us rely oninstitutions like 401ks to
secure our financial future, aselect few enjoy the privilege
of personalized financial advice.
Today, in this episode of Sparkof Change, I continue my
conversation with Jerry Jarzabekas we delve into the strategies
(00:27):
high net worth individuals useto maximize returns.
We'll unpack the factorsinfluencing investment decisions
, examine the role in corporateethics and explore how these
choices shape broader societalissues.
Together, we confront thepressing question who really
benefits from this system?
Who profits from thedesperation of millions when it
(00:52):
comes to investing?
Most of us don't have theluxury of turning to wealth
managers or financial plannersfor guidance.
Professionals like Jerry, withtheir expertise in spotting
promising opportunities,typically cater to those with
significant wealth.
However, perhaps Jerry can shedsome light on how he and other
financial advisors evaluate acompany's potential.
(01:12):
What factors do they weighbefore recommending?
Jerry Jarzabeck (01:16):
a stock to their clients.
Adam Gercak (01:16):
When it comes to that diligence you do on
companies, you want to have agood balance sheet and things
like that.
What does that mean?
So?
Jerry Jarzabeck (01:23):
when you think about a company, I mean
obviously you want to have goodearnings.
You want to have a company thatis providing a service product
that there's demand for.
So they are whether that bethere you think about as their
sales, their revenues.
You want to have those, thosegood earnings.
You want those earnings to beclean, meaning you don't want a
(01:44):
lot of financial manipulation,and there's certainly things
companies can do to boostearnings in the short term which
don't really make them a bettercompany.
It's more financial engineering.
You want to look out for thosetypes of things.
Lower debt is better when timesget tough, even for individual
people, even for us.
You know, the less leverage youhave, the less liabilities you
(02:06):
have you know the easier.
You can get through those toughperiods.
And there's other things thatyou want to look at too.
Is their earnings repeatable,sustainable?
I think those are probably verythe most important things is
quality of earnings, low debt,low leverage, and you can.
You know there's other things.
You can keep going here.
You want great management.
(02:27):
You want people that have justlike I described.
It's nice when the people thatare running these companies have
been running them for a whileand have been through tough
times and you've seen howthey've reacted running these
businesses.
What did they do when timeswere tough?
So the more things you canstack up like that in your favor
, the better you can feel.
Adam Gercak (02:43):
If you're like me, you don't have someone like
Jerry to guide your investments.
Instead, if you've worked incorporate America, chances are
your 401k is invested in anindex fund.
These funds are popular becausethey are often seen as a
low-cost, efficient way toinvest in the broader market.
They're designed to track aspecific market index, like the
S&P 500, without attempting tooutperform it through active
(03:05):
management, which helps keepfees low.
An index fund is essentially abasket of stocks that reflects a
specific market segment.
For example, an S&P 500 indexfund tracks the performance of
the 500 largest companies listedon US stock exchanges.
The biggest funds in America's401ks are dominated by index
funds like the S&P 500 index,the Vanguard 500, the Fidelity
(03:29):
500, the Schwab 500.
These funds include majortechnology companies like Amazon
, apple, microsoft, google andMeta, healthcare giants like
UnitedHealth Group and Pfizer,and big box retailers like
Walmart and Kroger.
But even people with wealthmanagers like Jerry aren't
(03:50):
completely removed from indexfunds.
Jerry and other financialadvisors often incorporate them
into their strategies because oftheir stability and reliability
.
The difference is Jerry usesindex funds as part of a broader
, more personalized approachtailored to the specific goals
of his clients.
For the rest of us, these fundsare often the entirety of our
(04:10):
investment strategy.
So when Jerry is doingdiligence, my question is what
does Jerry consider a badcompany?
And I took an example right outof the newspaper A Kroger ad
and FTC hearing admitted toraising prices beyond
inflationary and basicallyadmitted through milk and eggs
that they were gouging people bykeeping those prices above
(04:32):
inflationary things to make moreprofit.
How does that jive into youranalysis when you're looking at
a company to put someone's moneyin?
Jerry Jarzabeck (04:42):
I think legal liability is a concern.
So you do want to be aware ofthat because, again, those are
things that can affect the stockprice, can affect the market
outlook, and so it does matter,not just on a moral basis or a
socially, environmentallyconscious basis those things are
, I think, much moreindividualized, how people are
(05:05):
going to think about them, butin terms of a stock price and in
terms of a company, thosethings can absolutely be bad for
performance.
So I think whenever those typeof stories happen and you hear
about different lawsuits orcongressional hearings, even as
we're discussing, I think youwant to take all of that into
account.
I won't say that necessarilysays no on a stock.
(05:28):
I mean Meta has been a greatexample.
They were involved so much inthe 2016-2020 election and lots
of reasons Mark Zuckerbergtestifying in front of Congress.
I mean it was a verychallenging environment for the
company, but we ended up at somepoint.
We had an opportunity to buyinto Meta, what we thought was a
(05:48):
very bargain price because it'sa stock that had dramatically
been affected by that, and wealso thought those were issues
that they could work through.
So we knew we were steppinginto a company that was a little
bit controversial, meta, whichis a parent company of Facebook,
instagram, whatsapp.
Hugely profitable, butdefinitely controversial with
(06:11):
some of their business practices.
Sure, but we did end up buyingthat for clients in the
portfolio.
Adam Gercak (06:15):
Jerry's career hinges on maximizing returns for
his clients.
A strong track record is hislifeline building trust,
fostering long-termrelationships and attracting new
investments.
With 31 years of experience, heknows the stakes are high.
Fail to meet a clientexpectation and he's out of a
job.
Unlike Jerry, most of us aren'tfinancial experts with time or
(06:40):
resources to delve into complexinvestments.
We don't have a personaladvisor to guide our financial
future.
Instead, we rely on our 401kplans.
401ks were introduced in theRevenue Act of 1978.
These privatized retirementplans allow employees to
contribute a portion of theirpre-tax income to retirement
(07:00):
savings.
Employers often match thesecontributions, incentivizing
long-term savings.
But unlike traditional pensions, 401ks are portable, allowing
employees to take theirretirement savings with them
when they change jobs.
While some companies stilloffer traditional pensions,
particularly those with strongunions, they're becoming
increasingly rare Unions, a oncepowerful force in protecting
(07:24):
workers' rights and ensuringwage growth, have declined
significantly since the Reaganera.
The 1981 firing of the airtraffic controllers marked a
turning point, signaling adecline in union influence and a
shift in the balance of powerbetween labor and management.
Given this historical context,in the current landscape of
401ks and declining union power,it begs the question is
(07:47):
capitalism at its core, aperpetual struggle between
employees seeking higher wagesand companies aiming to minimize
labor costs.
Jerry Jarzabeck (07:56):
I think you said it.
That's the battle, that's thepush and pull of this situation.
That's the push and pull ofthis situation, and I think the
economy certainly will play intothat.
As we were coming out of COVID,I think there was a lot of
power for labor, for workers,and it was rightly so.
(08:17):
It was a situation where Ithink that's absolutely true
what you said Companies want topay you the least they have to.
Adam Gercak (08:39):
Workers want to make as much as they can for
doing the job that they aredoing.
So I think you're right.
That's a fundamental aspect ofour system.
When you think about that part,especially from the company
perspective, that couldcertainly be a negative of
capitalism.
Is it true that the system welive in, to put it as simply as
I can, is corporate profits riseis labor costs fall?
Jerry Jarzabeck (08:48):
And I guess that is true.
I mean, the markets reallydon't think about enough, ever
being enough, and I do agreethat that is a negative part of
the system, that we're in.
Adam Gercak (09:01):
You know, they've tried to raise minimum wage
across the board several timesand their stock price takes a
hit, and then they back off ofit because they can't lose that
much value.
How does that score?
Is that a moral dilemma ofcapitalism?
Jerry Jarzabeck (09:13):
That was a part of the book that I found
fascinating and I never reallyconsidered.
In general, a lot of my clients, especially small business
owners that have dealt withWalmart as customers.
They share stories about it's avery profit-driven business.
Yeah, they are trying to again.
(09:37):
Even for their suppliers,companies they work with, they
are trying to pay the leastamount they have to.
They have done a good job ofconvincing consumers that they
pass along those savings.
So that is sort of if you thinkabout Walmart just for a second
as being neutral, say Walmartis just a profit machine,
(09:59):
meaning Walmart is trying tomaximize profits.
So the way they do that, theyneed to sell more and more and
more items and they have to beable to sell those at a lower
and lower cost and everythingthat goes into that.
Adam Gercak (10:11):
Right, okay, all the way down the supply chain.
Jerry Jarzabeck (10:13):
That's right.
So, if you think about it,Walmart is neutral.
There's no moral decisionWalmart's making.
It's very simple for them.
But the reason why that worksis because consumers believe it.
We believe the low prices.
That's their slogan, everydaylow prices.
So it's really the consumersthat make that work Right,
(10:33):
Because if we decided to shopsomewhere else or and there
definitely is competition, okaythen that would change Walmart's
behavior.
Adam Gercak (10:42):
So if consumers that means us change our
behavior, then that would changeWalmart's behavior.
But in a world of inflation,where people feel like they're
being squeezed, are consumerseven able to change their buying
behaviors?
Jerry Jarzabeck (10:55):
That decision is not happening.
In fact, as times get tougherand during this inflationary
environment we've been in,Walmart has benefited from this.
Their stock price has been,they've been one of the top
performing companies.
People, consumers reallybelieve in the Walmart story.
So when that happens, Walmarthas no incentive to change.
Adam Gercak (11:15):
And for them, for them, in this environment.
It's profitable for thembecause if times were better,
where people had more money,they wouldn't be going to
Walmart.
Jerry Jarzabeck (11:23):
Correct, Because that's how it is right.
When you have more money inyour pocket, you can base
decisions on different things.
You can decide hey, maybe Idon't necessarily want to shop
at Walmart, I want to go toanother retailer that I think
treats its employees better.
Adam Gercak (11:37):
So what happens when poor workers receive a
raise?
Desmond gives us a possibleanswer.
Back to the book.
When poor workers receive araise, their health improves
dramatically.
Studies have found that whenminimum wages go up, rates of
child neglect, underage alcoholconsumption and teen births go
(11:59):
down.
The chronic stress thataccompanies poverty can be
detected on the cellular level.
One study found that up to5,500 premature deaths that
occurred in New York City from2008 to 2012 could have been
prevented if the city's minimumwage had been $15 an hour during
that time instead of just over$7.
A higher minimum wage is anantidepressant.
(12:22):
It's a sleep aid, a stressreliever.
Vocal segments of the Americanpublic, those with brain space
despair, seem to believe thepoor should just change their
behavior to escape poverty.
Get a better job, stop havingchildren, make smarter financial
decisions.
In truth, it's the other wayaround.
Economic security leads tobetter choices.
(12:45):
Truth, it's the other wayaround.
Economic security leads tobetter choices.
An argument has been made thatif we raise the minimum wage,
the cost of goods will go up.
It's math, after all.
I've heard this argument somany times and it's become
common knowledge.
Raise the minimum wage and welose jobs.
Products get more expensive,Big corporations eat up the
little guy.
I've heard the same argumentmade in a 2016 clip of Genevieve
(13:07):
Wood, a senior advisor andspokesperson for the Heritage
Foundation, a conservative thinktank in Washington DC.
She's known for her commentaryon political and cultural issues
, often appearing on CNBC toadvocate for conservative
principles.
Here's a portion.
Genevieve Wood (13:21):
This is not hypothetical.
I mean, we've seen this done.
Seattle has tried it.
Right here, right outside ofWashington DC, a Maryland suburb
, did it and what happened?
Well, the McDonald's, forexample.
They're put in for kiosks,which eliminated four jobs of
people that would have beentaking orders.
Look, I mean, this is notsomething that, again, we don't
know what happens, we do, and tothe point of like, we haven't
(13:42):
had a raise in seven years.
Nobody should be in a minimumwage job for seven years.
It is an entry level job,people who don't have skills.
It's their opportunity to gettheir foot in the door and, as
you rightly pointed out, this isa lot more about suburban
teenagers than it is a singlemom.
Most minimum wage workers afterone year on the job get a raise
(14:03):
after one year, some less thanthat.
But the idea that people aremaking $10 to $15 an hour for 10
years in a row, they're in thewrong business.
That's not the way it works.
Adam Gercak (14:14):
I thought capitalism was just economic
Darwinism.
Only the strong survive.
Like Jerry said, a strongbalance sheet, good management
that's worth investing in.
I don't see anywhere inanything that a business has the
right to survive.
This is capitalism, after all.
But Desmond offers a differentview on raising the minimum wage
(14:35):
.
Back to the book.
If we increase the wages of thepoorest workers, that would
increase unemployment In allprobability.
Yes, was the answer economistsgave to this question for years.
In 1946, the American EconomicReview published a paper
entitled the Economics ofMinimum Wage Legislation by
George Stigler, a 35-year-oldeconomist at the University of
(14:58):
Minnesota.
Economists have not been veryoutspoken on this type of
legislation, stigler wrote.
It is my fundamental thesisthat they can and should be
outspoken, and singularly agreedthat raising the minimum wage
was a bad idea.
Stiegler believed that ifemployers had to pay workers
more, they'd hire fewer of them,spurring unemployment among
(15:19):
those who otherwise would havehad bad jobs, but jobs
nonetheless.
The young economist arrived atthis conclusion not by relying
on facts but by drawing onhypothetical data, a numerical
story he invented to illustratehis theory.
The prediction that raising theminimum wage would lead to
higher unemployment rates becameeconomic orthodoxy.
(15:39):
Yet it remained untested fornearly 50 years.
Then, in 1992, 10 years afterStigler was awarded the Nobel
Prize, new Jersey raised itsminimum wage, while neighboring
Pennsylvania did not.
This created a naturalexperiment that could be
leveraged to evaluate the effectof the wage increase on jobs.
To do so, david Card and AlanKruger, both economists at
(16:02):
Princeton, surveyed 410 fastfood restaurants in each state
before and after the wage hike.
They found that fast food jobsin New Jersey did not decline
after the state raised itsminimum wage.
At least in this case, stiglerwas wrong.
In the years since, economistshave churned out hundreds of
similar studies, the bulk ofthem supporting the main finding
(16:24):
of Card and Kruger's bombshellpaper by showing that increasing
the minimum wage has anegligible effect on
unemployment.
You can find studies thatsupport both positions, but the
bulk of the evidence suggeststhat the unemployment effect of
raising minimum wage isinconsequential.
Our entire way of thinking ofthe minimum wage is anecdotal,
(16:48):
completely non-scientific, andthe guy who came up with that
idea won a Nobel Prize.
This is just nuts.
And that clip of Genevieve alsohad the stench of blaming the
poor.
No one should work a minimumwage job for 10 years.
Sounds a lot like.
Go get a better job.
You lazy bum.
Back to the book, because it'sperhaps we've been trained since
(17:10):
the earliest days of capitalismto see the poor as idle and
unmotivated.
The world's first capitalistsfaced a problem that titans of
industry still face today how toget the masses to file into
their mills and slaughterhousesto work for as little pay as the
law and market allow.
Once you got the poor intofactories, you needed laws to
protect your property and lawmento arrest trespassers and court
(17:34):
systems to prosecute them andprisons to hold them.
If you're going to fashion aneconomic system that required
the movement of labor, capitaland products around the globe,
you needed a system of tariffsand policies to govern the flow
of trade, not to mention astanding army to uphold national
sovereignty.
But big money required biggovernment.
(17:55):
But big government could alsohand out bread.
Realizing this, earlycapitalists decried the
corrosive effects of governmentaid long before it extended to
the so-called able-bodied poor.
Fast forward to the modern eraand you still hear the same
neurotic arguments.
The idea is to protect one kindof dependency, that of the
worker on the company, bydebasing another, that of the
(18:18):
citizens, on the state.
The irony of capitalism is thatwork, which early Americans
rejected as a barrier toindependence.
Wage slavery, they called it,is now seen as our only means of
acquiring it.
When President FranklinRoosevelt, originator of the
American safety net, calledwelfare a drug and subtle
destroyer of the human spirit.
(18:39):
Or when Arizona Senator BarryGoldwater said in 1961 that he
didn't like how his quote taxespaid for children born out of
wedlock and complained aboutprofessional chisels walking up
and down streets who don't workand have no intention of working
.
Or when Ronald Reagan,campaigning for a presidential
nomination in the late 70s, kepttelling audiences about a
(19:01):
public housing complex in NewYork City where you can get an
apartment with 11-foot ceilingsand 20-foot balcony, a swimming
pool and gymnasium.
Or when, in 1980, the AmericanPsychiatric Association made
dependent personality disorderan official diagnostic category.
Or when conservative writerCharles Murray wrote in his
influential 1984 book LosingGround that we try to provide
(19:23):
more for the poor and producemore poor instead.
Or when President Bill Clintonin 1996 announced a plan to end
welfare as we know it, because aprogram created a cycle of
dependency that has existed formillions and millions of our
fellow citizens exiling from theworld of work.
Or when President DonaldTrump's Council of Economic
Advisors issued a reportendorsing work requirements for
(19:45):
the nation's largest welfareprograms and claiming that
America's welfare policies havebrought about a decline in
self-sufficiency.
Or when Kansas Senator RogerMarshall, in June of 2021, said
that the number one impedimentto a state's slack labor market
was unemployment insurance thateffectively meant paying people
more to stay home than to go towork, that they were rehashing
(20:06):
an old story.
You call it propaganda ofcapitalism, a story that has
been handed down from generationto the next and that our
medicine aid to the poor ispoison.
Half the country, it appears,believes that social benefits
from government make people lazy.
My brother has a critique ofthis book because in the
(20:26):
beginning of the book they talkabout what poverty is and not
necessarily talking about themoney line that we're talking
about, talks about its pain,it's all these things.
And my brother said it's kindof rich from a guy that has
enough money to publish a booksaying what poverty is or isn't.
It's pretty rich from thatperspective, isn't?
You know it's pretty rich, youknow from that perspective.
(20:46):
But as you go through wentthrough the book and they start
talking about how hard stillpoor people work.
You know people are talkingabout good financial decisions
and they don't always have theaccess to those better financial
decisions because of the waycredit works and the way you
know you're going.
You know the scarcity mindsetlooks like.
How do we go about fixing thatfrom people that don't
(21:07):
necessarily agree, becausethere's plenty of people out
there that think giving peopleSNAP benefits or Medicaid is
going to create dependency onthe government and make people
lazy.
What is your thought orcritique or affirmation of that
statement?
Jerry Jarzabeck (21:22):
I think there definitely is an attitude out
there and I see it a lot.
People are so lucky to getgovernment handouts and you
mentioned some of the specificones.
Adam Gercak (21:33):
Yeah.
Jerry Jarzabeck (21:35):
That it's almost like wow, how great is it
for them.
And I'm not even beingfacetious.
People tend to talk about thatlike, oh, look at them getting
their benefits and they don'thave to work and they get all
these different things from thegovernment.
I think when you read the bookwe've just read and and
obviously other parts of ourlife when we have real world
(21:57):
experience, those are terrible.
You know situations thesepeople are in you know you would
not want to trade with them.
The average person, who's who'swho's doing okay, would not want
to trade those situations.
So I do think that is a bigissue that we have.
I don't know how we make peoplemore aware and just more
(22:17):
understanding of each other.
Right, I wish we could.
I think that's a big part ofwhat the book's getting at and I
guess more people reading thebook would be a start.
Adam Gercak (22:26):
I'm envious of a position of a guy like you, but
I'll explain it.
So you've got a large portfolioof customers.
So, in essence, in the marketyou have buying power, you have
the ability, you and yourbrethren in your company have
the ability to move markets theway you see fit Because you have
(22:47):
so much buying power with allthese different types of
portfolios.
Right, if, say, your companydecided, hey, we will not invest
in your company and ourcustomers will not invest in
your company until you dot, dot,dot, whatever that is, raising
your minimum wage, we're notgoing to do that and hurt them
for being successful in this.
Right, take their money out,sell them, sell a bunch of their
(23:09):
stock, make it go down to bendthem to your will.
Do you think that's apossibility?
Do you think that's somethingthat is legal or should be Well?
Jerry Jarzabeck (23:19):
it is legal.
Adam Gercak (23:20):
Okay.
Jerry Jarzabeck (23:21):
It's definitely legal Um, but there has been um
and there's been movementsalong those lines in the
industry.
But I would say right now theyare very much out of favor.
There have been times when ithas been more in favor and
you've kind of seen a movementand sometimes it's more issue
focused.
We saw that with the BlackLives Matter movement and back
(23:45):
in 2020.
And that really became aimportant issue for the market
even I mean it was.
It became a very big issue.
You know representation itbecame a real thing.
It was part of how we looked ata company.
You wanted to know what theirboard of directors looked like.
You wanted to know what theirsenior management looked like.
(24:05):
You know it was companies wereputting in DEI positions
diversity, equity, inclusion.
Adam Gercak (24:13):
Yeah.
Jerry Jarzabeck (24:21):
But that has swung the other way.
There's examples of companiesgetting rid of those departments
, even closing it and justfolding it in the human
resources positions and takingthose positions out of the
C-suite.
Adam Gercak (24:34):
And that point really confuses me, because
what's the number one tenet of agood portfolio is diversity,
right?
You don't want to have all youreggs in one basket right.
I agree with that so if we getrid of diversity, not only in
your financial planning aspectbut in the types of people you
have around you?
Don't you lose a little bit ofpower that way?
(24:57):
Or inclusion of some kind?
Jerry Jarzabeck (25:01):
If you're running a business, the more
different ideas that you have atthe table in leadership should
be beneficial.
I agree with that.
I think you're right on that,but I think there's again.
It gets to that attitude ofthat sort of I did it on my own
attitude Right.
When people begin to sense thatsomebody got a position because
(25:23):
of diversity, equity andinclusion, I think they quickly
go the other way.
Adam Gercak (25:31):
So, to answer the question, who profits from the
desperation of millions?
Corporations, yes, but also us.
We profit every time ourinvestment portfolios grow,
every time we snag a deal atWalmart, every time we summon an
Uber or DoorDash, free primeshipping on Amazon.
That's exploitation in action,not in some distant country, but
(25:55):
right here at home.
We're not just bystanders tothis system, we are the
beneficiaries, complicit in acycle that trades human dignity
for convenience and low prices.
Next time I sit down with mystate representative, joe Miller
, and we talk about governmentand elections and so much more,
(26:15):
is it far off for a regularperson like myself or like
anybody else, to say if you'vegot a large corporate donor,
you're beholden to them?
Is that far off?
Jerry Jarzabeck (26:24):
No, I think that's accurate.
I think that that's not anuncommon thing to be honest with
you.
I think it happens more thanpeople believe.
But I will say there arelegislators on both sides of the
aisle who say OK, thank you.
Thank you for helping me getelected, but know that I'm not
always going to agree with you.
Adam Gercak (26:46):
This episode of Spark a Change was written and
edited by Adam Gerchak, Musicprovided by Pixabay.
Links to where you can buy thebook Poverty by America, written
by Matthew Desmond, isavailable in the show notes.
A special thank you to MatthewDesmond and his team who
provided a copy of the book touse for this series.
This has been a production ofSurvive Everyday Media.
(27:07):
Thank you.
In a world where health inequality continues to
widen, understanding thedynamics of investment and
corporate behavior is morecrucial than ever.
While many of us rely oninstitutions like 401ks to
secure our financial future, aselect few enjoy the privilege
of personalized financial advice.
Today, in this episode of Sparkof Change, I continue my
conversation with Jerry Jarzabekas we delve into the strategies
(00:27):
high net worth individuals useto maximize returns.
We'll unpack the factorsinfluencing investment decisions
, examine the role in corporateethics and explore how these
choices shape broader societalissues.
Together, we confront thepressing question who really
benefits from this system?
Who profits from thedesperation of millions when it
(00:52):
comes to investing?
Most of us don't have theluxury of turning to wealth
managers or financial plannersfor guidance.
Professionals like Jerry, withtheir expertise in spotting
promising opportunities,typically cater to those with
significant wealth.
However, perhaps Jerry can shedsome light on how he and other
financial advisors evaluate acompany's potential.
(01:12):
What factors do they weighbefore recommending?
Jerry Jarzabeck (01:16):
a stock to their clients.
Adam Gercak (01:16):
When it comes to that diligence you do on
companies, you want to have agood balance sheet and things
like that.
What does that mean?
So?
Jerry Jarzabeck (01:23):
when you think about a company, I mean
obviously you want to have goodearnings.
You want to have a company thatis providing a service product
that there's demand for.
So they are whether that bethere you think about as their
sales, their revenues.
You want to have those, thosegood earnings.
You want those earnings to beclean, meaning you don't want a
(01:44):
lot of financial manipulation,and there's certainly things
companies can do to boostearnings in the short term which
don't really make them a bettercompany.
It's more financial engineering.
You want to look out for thosetypes of things.
Lower debt is better when timesget tough, even for individual
people, even for us.
You know, the less leverage youhave, the less liabilities you
(02:06):
have you know the easier.
You can get through those toughperiods.
And there's other things thatyou want to look at too.
Is their earnings repeatable,sustainable?
I think those are probably verythe most important things is
quality of earnings, low debt,low leverage, and you can.
You know there's other things.
You can keep going here.
You want great management.
(02:27):
You want people that have justlike I described.
It's nice when the people thatare running these companies have
been running them for a whileand have been through tough
times and you've seen howthey've reacted running these
businesses.
What did they do when timeswere tough?
So the more things you canstack up like that in your favor
, the better you can feel.
Adam Gercak (02:43):
If you're like me, you don't have someone like
Jerry to guide your investments.
Instead, if you've worked incorporate America, chances are
your 401k is invested in anindex fund.
These funds are popular becausethey are often seen as a
low-cost, efficient way toinvest in the broader market.
They're designed to track aspecific market index, like the
S&P 500, without attempting tooutperform it through active
(03:05):
management, which helps keepfees low.
An index fund is essentially abasket of stocks that reflects a
specific market segment.
For example, an S&P 500 indexfund tracks the performance of
the 500 largest companies listedon US stock exchanges.
The biggest funds in America's401ks are dominated by index
funds like the S&P 500 index,the Vanguard 500, the Fidelity
(03:29):
500, the Schwab 500.
These funds include majortechnology companies like Amazon
, apple, microsoft, google andMeta, healthcare giants like
UnitedHealth Group and Pfizer,and big box retailers like
Walmart and Kroger.
But even people with wealthmanagers like Jerry aren't
(03:50):
completely removed from indexfunds.
Jerry and other financialadvisors often incorporate them
into their strategies because oftheir stability and reliability
.
The difference is Jerry usesindex funds as part of a broader
, more personalized approachtailored to the specific goals
of his clients.
For the rest of us, these fundsare often the entirety of our
(04:10):
investment strategy.
So when Jerry is doingdiligence, my question is what
does Jerry consider a badcompany?
And I took an example right outof the newspaper A Kroger ad
and FTC hearing admitted toraising prices beyond
inflationary and basicallyadmitted through milk and eggs
that they were gouging people bykeeping those prices above
(04:32):
inflationary things to make moreprofit.
How does that jive into youranalysis when you're looking at
a company to put someone's moneyin?
Jerry Jarzabeck (04:42):
I think legal liability is a concern.
So you do want to be aware ofthat because, again, those are
things that can affect the stockprice, can affect the market
outlook, and so it does matter,not just on a moral basis or a
socially, environmentallyconscious basis those things are
, I think, much moreindividualized, how people are
(05:05):
going to think about them, butin terms of a stock price and in
terms of a company, thosethings can absolutely be bad for
performance.
So I think whenever those typeof stories happen and you hear
about different lawsuits orcongressional hearings, even as
we're discussing, I think youwant to take all of that into
account.
I won't say that necessarilysays no on a stock.
(05:28):
I mean Meta has been a greatexample.
They were involved so much inthe 2016-2020 election and lots
of reasons Mark Zuckerbergtestifying in front of Congress.
I mean it was a verychallenging environment for the
company, but we ended up at somepoint.
We had an opportunity to buyinto Meta, what we thought was a
(05:48):
very bargain price because it'sa stock that had dramatically
been affected by that, and wealso thought those were issues
that they could work through.
So we knew we were steppinginto a company that was a little
bit controversial, meta, whichis a parent company of Facebook,
instagram, whatsapp.
Hugely profitable, butdefinitely controversial with
(06:11):
some of their business practices.
Sure, but we did end up buyingthat for clients in the
portfolio.
Adam Gercak (06:15):
Jerry's career hinges on maximizing returns for
his clients.
A strong track record is hislifeline building trust,
fostering long-termrelationships and attracting new
investments.
With 31 years of experience, heknows the stakes are high.
Fail to meet a clientexpectation and he's out of a
job.
Unlike Jerry, most of us aren'tfinancial experts with time or
(06:40):
resources to delve into complexinvestments.
We don't have a personaladvisor to guide our financial
future.
Instead, we rely on our 401kplans.
401ks were introduced in theRevenue Act of 1978.
These privatized retirementplans allow employees to
contribute a portion of theirpre-tax income to retirement
(07:00):
savings.
Employers often match thesecontributions, incentivizing
long-term savings.
But unlike traditional pensions, 401ks are portable, allowing
employees to take theirretirement savings with them
when they change jobs.
While some companies stilloffer traditional pensions,
particularly those with strongunions, they're becoming
increasingly rare Unions, a oncepowerful force in protecting
(07:24):
workers' rights and ensuringwage growth, have declined
significantly since the Reaganera.
The 1981 firing of the airtraffic controllers marked a
turning point, signaling adecline in union influence and a
shift in the balance of powerbetween labor and management.
Given this historical context,in the current landscape of
401ks and declining union power,it begs the question is
(07:47):
capitalism at its core, aperpetual struggle between
employees seeking higher wagesand companies aiming to minimize
labor costs.
Jerry Jarzabeck (07:56):
I think you said it.
That's the battle, that's thepush and pull of this situation.
That's the push and pull ofthis situation, and I think the
economy certainly will play intothat.
As we were coming out of COVID,I think there was a lot of
power for labor, for workers,and it was rightly so.
(08:17):
It was a situation where Ithink that's absolutely true
what you said Companies want topay you the least they have to.
Adam Gercak (08:39):
Workers want to make as much as they can for
doing the job that they aredoing.
So I think you're right.
That's a fundamental aspect ofour system.
When you think about that part,especially from the company
perspective, that couldcertainly be a negative of
capitalism.
Is it true that the system welive in, to put it as simply as
I can, is corporate profits riseis labor costs fall?
Jerry Jarzabeck (08:48):
And I guess that is true.
I mean, the markets reallydon't think about enough, ever
being enough, and I do agreethat that is a negative part of
the system, that we're in.
Adam Gercak (09:01):
You know, they've tried to raise minimum wage
across the board several timesand their stock price takes a
hit, and then they back off ofit because they can't lose that
much value.
How does that score?
Is that a moral dilemma ofcapitalism?
Jerry Jarzabeck (09:13):
That was a part of the book that I found
fascinating and I never reallyconsidered.
In general, a lot of my clients, especially small business
owners that have dealt withWalmart as customers.
They share stories about it's avery profit-driven business.
Yeah, they are trying to again.
(09:37):
Even for their suppliers,companies they work with, they
are trying to pay the leastamount they have to.
They have done a good job ofconvincing consumers that they
pass along those savings.
So that is sort of if you thinkabout Walmart just for a second
as being neutral, say Walmartis just a profit machine,
(09:59):
meaning Walmart is trying tomaximize profits.
So the way they do that, theyneed to sell more and more and
more items and they have to beable to sell those at a lower
and lower cost and everythingthat goes into that.
Adam Gercak (10:11):
Right, okay, all the way down the supply chain.
Jerry Jarzabeck (10:13):
That's right.
So, if you think about it,Walmart is neutral.
There's no moral decisionWalmart's making.
It's very simple for them.
But the reason why that worksis because consumers believe it.
We believe the low prices.
That's their slogan, everydaylow prices.
So it's really the consumersthat make that work Right,
(10:33):
Because if we decided to shopsomewhere else or and there
definitely is competition, okaythen that would change Walmart's
behavior.
Adam Gercak (10:42):
So if consumers that means us change our
behavior, then that would changeWalmart's behavior.
But in a world of inflation,where people feel like they're
being squeezed, are consumerseven able to change their buying
behaviors?
Jerry Jarzabeck (10:55):
That decision is not happening.
In fact, as times get tougherand during this inflationary
environment we've been in,Walmart has benefited from this.
Their stock price has been,they've been one of the top
performing companies.
People, consumers reallybelieve in the Walmart story.
So when that happens, Walmarthas no incentive to change.
Adam Gercak (11:15):
And for them, for them, in this environment.
It's profitable for thembecause if times were better,
where people had more money,they wouldn't be going to
Walmart.
Jerry Jarzabeck (11:23):
Correct, Because that's how it is right.
When you have more money inyour pocket, you can base
decisions on different things.
You can decide hey, maybe Idon't necessarily want to shop
at Walmart, I want to go toanother retailer that I think
treats its employees better.
Adam Gercak (11:37):
So what happens when poor workers receive a
raise?
Desmond gives us a possibleanswer.
Back to the book.
When poor workers receive araise, their health improves
dramatically.
Studies have found that whenminimum wages go up, rates of
child neglect, underage alcoholconsumption and teen births go
(11:59):
down.
The chronic stress thataccompanies poverty can be
detected on the cellular level.
One study found that up to5,500 premature deaths that
occurred in New York City from2008 to 2012 could have been
prevented if the city's minimumwage had been $15 an hour during
that time instead of just over$7.
A higher minimum wage is anantidepressant.
(12:22):
It's a sleep aid, a stressreliever.
Vocal segments of the Americanpublic, those with brain space
despair, seem to believe thepoor should just change their
behavior to escape poverty.
Get a better job, stop havingchildren, make smarter financial
decisions.
In truth, it's the other wayaround.
Economic security leads tobetter choices.
(12:45):
Truth, it's the other wayaround.
Economic security leads tobetter choices.
An argument has been made thatif we raise the minimum wage,
the cost of goods will go up.
It's math, after all.
I've heard this argument somany times and it's become
common knowledge.
Raise the minimum wage and welose jobs.
Products get more expensive,Big corporations eat up the
little guy.
I've heard the same argumentmade in a 2016 clip of Genevieve
(13:07):
Wood, a senior advisor andspokesperson for the Heritage
Foundation, a conservative thinktank in Washington DC.
She's known for her commentaryon political and cultural issues
, often appearing on CNBC toadvocate for conservative
principles.
Here's a portion.
Genevieve Wood (13:21):
This is not hypothetical.
I mean, we've seen this done.
Seattle has tried it.
Right here, right outside ofWashington DC, a Maryland suburb
, did it and what happened?
Well, the McDonald's, forexample.
They're put in for kiosks,which eliminated four jobs of
people that would have beentaking orders.
Look, I mean, this is notsomething that, again, we don't
know what happens, we do, and tothe point of like, we haven't
(13:42):
had a raise in seven years.
Nobody should be in a minimumwage job for seven years.
It is an entry level job,people who don't have skills.
It's their opportunity to gettheir foot in the door and, as
you rightly pointed out, this isa lot more about suburban
teenagers than it is a singlemom.
Most minimum wage workers afterone year on the job get a raise
(14:03):
after one year, some less thanthat.
But the idea that people aremaking $10 to $15 an hour for 10
years in a row, they're in thewrong business.
That's not the way it works.
Adam Gercak (14:14):
I thought capitalism was just economic
Darwinism.
Only the strong survive.
Like Jerry said, a strongbalance sheet, good management
that's worth investing in.
I don't see anywhere inanything that a business has the
right to survive.
This is capitalism, after all.
But Desmond offers a differentview on raising the minimum wage
(14:35):
.
Back to the book.
If we increase the wages of thepoorest workers, that would
increase unemployment In allprobability.
Yes, was the answer economistsgave to this question for years.
In 1946, the American EconomicReview published a paper
entitled the Economics ofMinimum Wage Legislation by
George Stigler, a 35-year-oldeconomist at the University of
(14:58):
Minnesota.
Economists have not been veryoutspoken on this type of
legislation, stigler wrote.
It is my fundamental thesisthat they can and should be
outspoken, and singularly agreedthat raising the minimum wage
was a bad idea.
Stiegler believed that ifemployers had to pay workers
more, they'd hire fewer of them,spurring unemployment among
(15:19):
those who otherwise would havehad bad jobs, but jobs
nonetheless.
The young economist arrived atthis conclusion not by relying
on facts but by drawing onhypothetical data, a numerical
story he invented to illustratehis theory.
The prediction that raising theminimum wage would lead to
higher unemployment rates becameeconomic orthodoxy.
(15:39):
Yet it remained untested fornearly 50 years.
Then, in 1992, 10 years afterStigler was awarded the Nobel
Prize, new Jersey raised itsminimum wage, while neighboring
Pennsylvania did not.
This created a naturalexperiment that could be
leveraged to evaluate the effectof the wage increase on jobs.
To do so, david Card and AlanKruger, both economists at
(16:02):
Princeton, surveyed 410 fastfood restaurants in each state
before and after the wage hike.
They found that fast food jobsin New Jersey did not decline
after the state raised itsminimum wage.
At least in this case, stiglerwas wrong.
In the years since, economistshave churned out hundreds of
similar studies, the bulk ofthem supporting the main finding
(16:24):
of Card and Kruger's bombshellpaper by showing that increasing
the minimum wage has anegligible effect on
unemployment.
You can find studies thatsupport both positions, but the
bulk of the evidence suggeststhat the unemployment effect of
raising minimum wage isinconsequential.
Our entire way of thinking ofthe minimum wage is anecdotal,
(16:48):
completely non-scientific, andthe guy who came up with that
idea won a Nobel Prize.
This is just nuts.
And that clip of Genevieve alsohad the stench of blaming the
poor.
No one should work a minimumwage job for 10 years.
Sounds a lot like.
Go get a better job.
You lazy bum.
Back to the book, because it'sperhaps we've been trained since
(17:10):
the earliest days of capitalismto see the poor as idle and
unmotivated.
The world's first capitalistsfaced a problem that titans of
industry still face today how toget the masses to file into
their mills and slaughterhousesto work for as little pay as the
law and market allow.
Once you got the poor intofactories, you needed laws to
protect your property and lawmento arrest trespassers and court
(17:34):
systems to prosecute them andprisons to hold them.
If you're going to fashion aneconomic system that required
the movement of labor, capitaland products around the globe,
you needed a system of tariffsand policies to govern the flow
of trade, not to mention astanding army to uphold national
sovereignty.
But big money required biggovernment.
(17:55):
But big government could alsohand out bread.
Realizing this, earlycapitalists decried the
corrosive effects of governmentaid long before it extended to
the so-called able-bodied poor.
Fast forward to the modern eraand you still hear the same
neurotic arguments.
The idea is to protect one kindof dependency, that of the
worker on the company, bydebasing another, that of the
(18:18):
citizens, on the state.
The irony of capitalism is thatwork, which early Americans
rejected as a barrier toindependence.
Wage slavery, they called it,is now seen as our only means of
acquiring it.
When President FranklinRoosevelt, originator of the
American safety net, calledwelfare a drug and subtle
destroyer of the human spirit.
(18:39):
Or when Arizona Senator BarryGoldwater said in 1961 that he
didn't like how his quote taxespaid for children born out of
wedlock and complained aboutprofessional chisels walking up
and down streets who don't workand have no intention of working
.
Or when Ronald Reagan,campaigning for a presidential
nomination in the late 70s, kepttelling audiences about a
(19:01):
public housing complex in NewYork City where you can get an
apartment with 11-foot ceilingsand 20-foot balcony, a swimming
pool and gymnasium.
Or when, in 1980, the AmericanPsychiatric Association made
dependent personality disorderan official diagnostic category.
Or when conservative writerCharles Murray wrote in his
influential 1984 book LosingGround that we try to provide
(19:23):
more for the poor and producemore poor instead.
Or when President Bill Clintonin 1996 announced a plan to end
welfare as we know it, because aprogram created a cycle of
dependency that has existed formillions and millions of our
fellow citizens exiling from theworld of work.
Or when President DonaldTrump's Council of Economic
Advisors issued a reportendorsing work requirements for
(19:45):
the nation's largest welfareprograms and claiming that
America's welfare policies havebrought about a decline in
self-sufficiency.
Or when Kansas Senator RogerMarshall, in June of 2021, said
that the number one impedimentto a state's slack labor market
was unemployment insurance thateffectively meant paying people
more to stay home than to go towork, that they were rehashing
(20:06):
an old story.
You call it propaganda ofcapitalism, a story that has
been handed down from generationto the next and that our
medicine aid to the poor ispoison.
Half the country, it appears,believes that social benefits
from government make people lazy.
My brother has a critique ofthis book because in the
(20:26):
beginning of the book they talkabout what poverty is and not
necessarily talking about themoney line that we're talking
about, talks about its pain,it's all these things.
And my brother said it's kindof rich from a guy that has
enough money to publish a booksaying what poverty is or isn't.
It's pretty rich from thatperspective, isn't?
You know it's pretty rich, youknow from that perspective.
(20:46):
But as you go through wentthrough the book and they start
talking about how hard stillpoor people work.
You know people are talkingabout good financial decisions
and they don't always have theaccess to those better financial
decisions because of the waycredit works and the way you
know you're going.
You know the scarcity mindsetlooks like.
How do we go about fixing thatfrom people that don't
(21:07):
necessarily agree, becausethere's plenty of people out
there that think giving peopleSNAP benefits or Medicaid is
going to create dependency onthe government and make people
lazy.
What is your thought orcritique or affirmation of that
statement?
Jerry Jarzabeck (21:22):
I think there definitely is an attitude out
there and I see it a lot.
People are so lucky to getgovernment handouts and you
mentioned some of the specificones.
Adam Gercak (21:33):
Yeah.
Jerry Jarzabeck (21:35):
That it's almost like wow, how great is it
for them.
And I'm not even beingfacetious.
People tend to talk about thatlike, oh, look at them getting
their benefits and they don'thave to work and they get all
these different things from thegovernment.
I think when you read the bookwe've just read and and
obviously other parts of ourlife when we have real world
(21:57):
experience, those are terrible.
You know situations thesepeople are in you know you would
not want to trade with them.
The average person, who's who'swho's doing okay, would not want
to trade those situations.
So I do think that is a bigissue that we have.
I don't know how we make peoplemore aware and just more
(22:17):
understanding of each other.
Right, I wish we could.
I think that's a big part ofwhat the book's getting at and I
guess more people reading thebook would be a start.
Adam Gercak (22:26):
I'm envious of a position of a guy like you, but
I'll explain it.
So you've got a large portfolioof customers.
So, in essence, in the marketyou have buying power, you have
the ability, you and yourbrethren in your company have
the ability to move markets theway you see fit Because you have
(22:47):
so much buying power with allthese different types of
portfolios.
Right, if, say, your companydecided, hey, we will not invest
in your company and ourcustomers will not invest in
your company until you dot, dot,dot, whatever that is, raising
your minimum wage, we're notgoing to do that and hurt them
for being successful in this.
Right, take their money out,sell them, sell a bunch of their
(23:09):
stock, make it go down to bendthem to your will.
Do you think that's apossibility?
Do you think that's somethingthat is legal or should be Well?
Jerry Jarzabeck (23:19):
it is legal.
Adam Gercak (23:20):
Okay.
Jerry Jarzabeck (23:21):
It's definitely legal Um, but there has been um
and there's been movementsalong those lines in the
industry.
But I would say right now theyare very much out of favor.
There have been times when ithas been more in favor and
you've kind of seen a movementand sometimes it's more issue
focused.
We saw that with the BlackLives Matter movement and back
(23:45):
in 2020.
And that really became aimportant issue for the market
even I mean it was.
It became a very big issue.
You know representation itbecame a real thing.
It was part of how we looked ata company.
You wanted to know what theirboard of directors looked like.
You wanted to know what theirsenior management looked like.
(24:05):
You know it was companies wereputting in DEI positions
diversity, equity, inclusion.
Adam Gercak (24:13):
Yeah.
Jerry Jarzabeck (24:21):
But that has swung the other way.
There's examples of companiesgetting rid of those departments
, even closing it and justfolding it in the human
resources positions and takingthose positions out of the
C-suite.
Adam Gercak (24:34):
And that point really confuses me, because
what's the number one tenet of agood portfolio is diversity,
right?
You don't want to have all youreggs in one basket right.
I agree with that so if we getrid of diversity, not only in
your financial planning aspectbut in the types of people you
have around you?
Don't you lose a little bit ofpower that way?
(24:57):
Or inclusion of some kind?
Jerry Jarzabeck (25:01):
If you're running a business, the more
different ideas that you have atthe table in leadership should
be beneficial.
I agree with that.
I think you're right on that,but I think there's again.
It gets to that attitude ofthat sort of I did it on my own
attitude Right.
When people begin to sense thatsomebody got a position because
(25:23):
of diversity, equity andinclusion, I think they quickly
go the other way.
Adam Gercak (25:31):
So, to answer the question, who profits from the
desperation of millions?
Corporations, yes, but also us.
We profit every time ourinvestment portfolios grow,
every time we snag a deal atWalmart, every time we summon an
Uber or DoorDash, free primeshipping on Amazon.
That's exploitation in action,not in some distant country, but
(25:55):
right here at home.
We're not just bystanders tothis system, we are the
beneficiaries, complicit in acycle that trades human dignity
for convenience and low prices.
Next time I sit down with mystate representative, joe Miller
, and we talk about governmentand elections and so much more,
(26:15):
is it far off for a regularperson like myself or like
anybody else, to say if you'vegot a large corporate donor,
you're beholden to them?
Is that far off?
Jerry Jarzabeck (26:24):
No, I think that's accurate.
I think that that's not anuncommon thing to be honest with
you.
I think it happens more thanpeople believe.
But I will say there arelegislators on both sides of the
aisle who say OK, thank you.
Thank you for helping me getelected, but know that I'm not
always going to agree with you.
Adam Gercak (26:46):
This episode of Spark a Change was written and
edited by Adam Gerchak, Musicprovided by Pixabay.
Links to where you can buy thebook Poverty by America, written
by Matthew Desmond, isavailable in the show notes.
A special thank you to MatthewDesmond and his team who
provided a copy of the book touse for this series.
This has been a production ofSurvive Everyday Media.
(27:07):
Thank you.
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