In the race to attract the best employees, American companies have always played to win. Apple pays millions to poach star executives and Nvidia spares no expense to hire top AI researchers. Why? Because hiring the best and brightest on skill and ability is the secret sauce to American innovation.
Sadly, some companies have rejected the practice of hiring on skill and ability and are now hiring on the basis of race and gender.
My investment firm, Azoria, has identified three dozen S&P 500 companies with explicit racial and gender hiring targets. Early next year, we’ll launch an ETF fund that invests in every S&P 500 company — except those that use these hiring targets.
The premise is straightforward: companies that hire on skill and ability will outperform those that hire on race and gender.
Best Buy is one of the three dozen companies we won’t be buying. It’s a $20 billion business that has a written policy that “1 in 3 new corporate salaried positions” are “to be filled by BIPOC.”
Companies like Best Buy label these hiring targets as “inclusive,” but the truth is that they hurt everyone, especially the very people they claim to help.
When Best Buy says “one in three new . . . positions” will go to BIPOC Americans, they’re implying that Americans of color can’t ascend to these roles without special treatment.
We don’t support this type of thinking. It diminishes the qualifications of minority applicants and spreads the divisive lie that their success is only possible through lowered standards rather than their own merit.
Supreme Court Justice Clarence Thomas — a brilliant black legal scholar — has spoken about the cloud that affirmative action cast over his achievements, unfairly branding him as a token and implying he couldn’t succeed without special treatment.
We saw a similar phenomenon in 2022 when President Biden announced he would nominate a black woman for the Supreme Court — no matter what. Then he announced Ketanji Brown Jackson, an extremely skilled legal scholar, even if many conservatives, including myself, disagree with her legal opinions.
By framing her nomination as the fulfillment of a racial and gender hiring target, Biden unfairly saddled her with the label of being a “diversity hire.” She doesn’t deserve that.
My own mother struggled with the same. She is a legal immigrant from South America who worked her way through community college. She always felt uneasy applying to companies with affirmative action programs because she wanted to be hired based on her accomplishments—not a diversity checkbox.
My dad also felt uneasy when applying to identity-obsessed companies but for a different reason: he’s white and feared his race would be used against him.
No matter which side of this race and gender game you fall on, this reverse caste system breeds fear and insecurity, and that’s unacceptable.
Every American deserves dignity in employment — neither reduced to an arbitrary diversity checkbox nor excluded for failing to meet one.
These policies don’t just hurt employees. Shareholders, too, are paying the price for these racial and gender hiring targets in the form of lower stock returns.
Why? Because exceptional companies are run by exceptional people. Skilled employees build world-class products and services, generating cash flow that gets reinvested to fuel growth.
These hiring targets forced companies to prioritize identity politics over hiring the best and brightest Americans from all walks of life, hurting their ability to innovate and deliver profitable products and services to customers.
The negative effects of these hiring practices are clear-cut.
Over the past year, a portfolio of the three dozen S&P 500 companies with racial and gender hiring targets has returned just 12%, compared to the S&P 500’s 30%. Over two years, this portfolio has delivered 17%, compared to the S&P 500’s 60%, according to our own internal analysis.
Throughout both periods, 70% of these companies underperformed the plain-old S&P 500 index, which means that the overall S&P 500 would have been even higher if these companies had not been included.
Firms like Blackrock and Vanguard haven’t adapted to this new reality. They continue to invest in all S&P 500 companies, even those that use racial and gender hiring targets that hurt stock returns.
Azoria recently completed a $25 million investment round by institutional investors from both sides of the aisle to create an investment firm rooted in free-thinking and meritocracy. Our forthcoming Meritocracy ETF (ticker ‘SPXM’) will be publicly available to investors who want to avoid S&P 500 companies that use racial and gender hiring targets.
By excluding the stocks of these anti-meritocratic under-performers, Azoria seeks to help investors outperform the plain-old S&P 500.
To be clear, we won’t banish these anti-meritocratic companies forever.
Those who see the light and abandon their hiring targets will be added back into the fund, allowing our investors to benefit from their renewed commitment to meritocracy; and those who continue to run their companies like high school Model UN tournaments will be left out.
America’s great companies now face a choice: they can continue using racial and gender hiring targets and pay the price financially or restore meritocracy and do right by their shareholders and employees.
At Azoria, we’re betting on merit. We believe in an America where talent, skill, and hard work — not identity — define success.
James Fishback is CEO and co-founder of Azoria