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Gabelli100 | Oct 05, 2020 |

Joel Greenblatt: Common-Sense Solutions to Building an Economy that Works for All

By Claire Curry

Thomas Paine’s “Common Sense” was one of the most influential writings in American history. Its arguments and Enlightenment-era ideas at the start of the American Revolution helped pave the way for the Declaration of Independence in 1776 and shaped the foundations of the United States of America.

“Paine didn’t take the view of attacking unfair taxes or exploitation,” said New York Times best-selling author and legendary value investor Joel Greenblatt during a Gabelli School virtual lecture on Sept. 29. Instead, “he said, ‘Who is this king guy and who picked him?’ Questioning the king’s right to rule in the first place really goes back to looking at problems from the beginning and saying, ‘Is this right at all?’ ‘Does any of this make sense?’”

In his book, which, in part, shares the title of Paine’s famous work, “Common Sense: The Investor’s Guide to Equality, Opportunity, and Growth,” Greenblatt similarly looks at the roots of modern-day problems and proposes disruptive new approaches to solve them. Solutions that, in his opinion, simply make sense.

Greenblatt shared his thoughts with Donna Rapaccioli, Ph.D., dean of the Gabelli School, and David Cowen, Ph.D., president and CEO of the Museum of American Finance, which co-sponsored the Gabelli School Centennial Virtual Speaker Series’ event along with the CFA Society of New York.

Making Quality Education Accessible to All

One critical area that Greenblatt sees as offering great potential for change and economic equality is education. It’s an area he has a personal interest in as an educator himself—he has served as an adjunct professor at Columbia University for more than two decades—and as a successful professional in global investing who is eager to give back.

“Teaching a man to fish is the most efficient way to help people,” he said. “As an investor, it seemed to me that education is the best way to help people make it on their own.” Greenblatt cited a few statistics: college graduates earn 70 percent more than non-college graduates and high school graduates earn 30 percent more than dropouts.

Yet, he added, only one out of eleven black, Hispanic, or low-income students living in our nation’s top 50 cities make their way to college. “One out of eleven is not a good number. The current system is not working for ten out of eleven kids who grow up in an urban environment. So, what do you do for them?”

He did some research and discovered a school in one of Brooklyn’s lowest-income communities that was doing something very right. Against all odds, more than 90 percent of the students at PS 172 were passing state math and English tests, including English-language learners. Fascinated by what was happening there, he asked then-principal Jack Spatola for the secret. His answer: setting high expectations and believing that every student can be successful.

Taking Charge with Charters

Inspired and eager to provide students in low-income communities with more choices and opportunities, Greenblatt and his business partner John Petry opened their first charter school in 2006. The intent was to get it up and running, then replicate the model to achieve scale.

“We were looking for systemic solutions,” he explained. “The big audacious goal was to open 40 schools to show that it could be done again, again, and again and that given the right supports, kids could achieve at high levels.”

Today, the investors run a network of 46 schools serving 20,000 students, and the results are measurable. According to Greenblatt, the students’ combined math and English scores are outperforming every school district in the state.

Another solution that Greenblatt believes would address the disadvantage of the ten of eleven students who don’t make it to college is what he calls “alternative certification.” Such programs could provide a different route to qualify for higher-paying jobs and, at the same time, increase diversity in the workforce.

His idea is to create standardized tests or courses that large companies like Microsoft and Google could use in lieu of a college degree requirement to recruit candidates for higher-paying career opportunities.

“Every company can set its own standards for what tests or courses they will look at,” he said. Over time, the programs would have a ripple effect, creating an “ecosystem” of resources and support, opening the door to more new businesses and jobs. “I’d call this a low-cost diploma that eventually would get better and bigger and disrupt the current system,” he said.

Low- to No-Cost Solutions Over the Long Term

During the Q&A session, Greenblatt explored several other topics from the perspective of a long-term investor and current managing principal and co-chief investment officer of Gotham Asset Management in New York City. These included the advantages of increasing the earned income tax credit which he said has the potential to raise billions of children out of poverty over time and ultimately, would cost “less than free.”

Addressing a question about the role immigration plays in the economy, Greenblatt said that the U.S. is “blowing it” in skilled immigration, pointing out that immigrants are credited for founding 51 percent of U.S. startups worth over a billion dollars. In fact, he said that immigrants and their children are responsible for founding 216 of the Fortune 500 companies.

“For every skilled immigrant we take in, we will collect between one-half million to $1 million and create two new jobs for people who are already here,” he said. “It’s a free goldmine.”

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