I'm in the home stretch of my 24-city book tour for my new novel PICKS AND SHOVELS. Catch me in LONDON TODAY (July 1) with TRASHFUTURE'S RILEY QUINN and then a big finish in MANCHESTER TOMORROW (July 2).
If there's one area where tech has shown a consistent aptitude for innovation, it's in accounting tricks that make money-losing companies appear wildly profitable. And AI is the greatest innovator of all (when it comes to accounting gimmicks).
Since the dotcom era, tech companies have boasted about giving stuff away but "making it up in volume," inventing an ever-sweatier collection of shell-games that let them hide the business's true profit and loss.
The all-time world champeen of this kind of finance fraud is Masayoshi Son, the founder of Softbank, who acts as the bagman for the Saudi royals' personal investments. Remember last decade when the tech press was all abuzz about "unicorns" – startups that were worth $1b? That was Son: he would take a startup like Wework, declare its brand to be worth $1b, invest an infinitesimal fraction of $1b in the company based on that valuation (sometimes with a rube co-investor) and declare the valuation to be "market-based." A whole string of garbage companies achieved unicornhood by means of this unbelievably stupid trick:
Of course, every finance bro is familiar with Stein's Law: "anything that can't go on forever eventually stops." Sure, the Saudi royals could be tapped to piss away $31b on Uber, losing $0.41 on every dollar for 13 years, but eventually they're going to turn off the money spigot and attempt to flog their shares to retail and institutional suckers. To make that work, they have to invent new accounting tricks, like when Uber "sold" its failing overseas ride-hailing businesses to international rivals in exchange for stock, then declared that these companies' illiquid stock had skyrocketed in value, tipping Uber into the black:
Even companies that are actually profitable (in the sense of bringing in more revenue than it costs to keep the business's lights on) love to juice their stats, and the worst offenders are the Big Tech companies, who reap a vast commercial reward from creating the illusion that they are continuing to grow, even after they've dominated their sector.
Take Google: once the company attained a 90% global search market-share, there were no more immediate prospects for growth. I mean, sure, they could raise a billion new humans to maturity and train them to be Google customers (e.g., the business plan for Google Classroom), but that takes more than a decade, and Google needed growth right away. So the company hatched a plan to make search worse, so that its existing users would have to search multiple times to get the information they sought, and each additional search would give Google another chance to show you an ad:
But that was small potatoes. What Google – and the rest of the tech sector – needed was a massive growth story, a story about how their companies, worth trillions of dollars, could double or triple in size in the coming years. There's a kind of reflexive anti-capitalist critique that locates the drive to tell growth stories in ideology: "endless growth is the ideology of a tumor," right?
But spinning an endless growth story isn't merely ideological. It's a firmly materialistic undertaking. Companies that appear to be growing have market caps that are an order of magnitude larger than companies that are considered "mature" and at the end of their growth phase. For every dollar that Ford brings in, the market is willing to spend $8.60 on its stock. For every dollar Tesla brings in, the market is willing to spend $118 on its stock.
That means that when Tesla and Ford compete to buy something – like another company, or the labor of highly sought after technical specialists – Tesla has a nearly unbeatable advantage. Rather than raiding its precious cash reserves to fund its offer, Tesla can offer stock. Ford can only spend as many dollars as it brings in through sales, but Tesla can make more stock, on demand, simply by typing numbers into a spreadsheet.
So when Tesla bids against Ford, Ford has to use dollars, and Tesla can use shares. And even if the acquisition target – a key employee or a startup that's on the acquisitions market – wants dollars instead of shares, Tesla can stake its shares as collateral for loans at a rate that's 1,463% better than the rate Ford gets when it collateralizes a loan based on its own equity:
In other words, if you can tell a convincing growth story, it's much easier to grow. The corollary, though, is that when a growth company stops growing, when it becomes "mature," it experiences a massive sell-off of its stock, as its share price plummets to a tenth or less of the old "growth" valuation. That's why the biggest tech companies in the world have spent the past decade – the decade after they monopolized their sectors and conquered the world – pumping a series of progressively stupider bubbles: metaverse, cryptocurrency, and now, AI.
Tech companies don't need these ventures to be successful – they just need them to seem to be plausibly successful for long enough to keep the share price high until the next growth story heaves over the horizon. So long as Mister Market thinks tech is a "growth" sector and not a "mature" sector, tech bosses will be able to continue to pay for things with stock rather than cash, and their own stockholdings will continue to be valued at sky-high rates.
That's why AI is being crammed into absofuckingloutely everything. it's why the button you used to tap to start a new chat summons up an AI that takes seven taps to banish again – it's so tech companies can tell Wall Street that people are "using AI" which means that their companies are still part of a growth industry and thus entitled to gigantic price-to-earnings ratios:
People – who have had an infinitude of AI crammed into down their throats – are already sick of AI. Policymakers and financiers – credulous dolts who fall for tech marketing hype every! fucking! time – are convinced that AI Is The Future. This presents a dilemma for tech companies, who research the hell out of how people actually use their products and thus must be extremely aware of how hated AI is, but whose leadership is desperate to show investors that they are about to experience explosive growth through the miracle of AI.
The reality is that AI is a very bad business. It has dogshit unit economics. Unlike all the successful tech of the 21st century, each generation of AI is more expensive to make, not cheaper. And unlike the most profitable tech services of this century, AI gets more costly to operate the more users it has.
You can be forgiven for not knowing this, though. As Ed Zitron points out in a long, excellent article about the credulity and impuissance of the tech press, the actual numbers suuuuuck:
https://www.wheresyoured.at/make-fun-of-them/
Microsoft
Spending: $80b in 2025
Projecting: $13b in 2025
Actually: $10b comes from Openai giving back compute credits Microsoft gave to Openai, bringing the true total to $3b.
Meta
Spending: $72b in 2025
Receiving: At most $600m in gross revenue from selling "smart" Raybans, which might not actually be loss-leaders, meaning it's possible that they're making less than $0.00.
Amazon
Spending: $100b in 2025
Projecting: $5b in revenue in 2025
Google
Spending: $75b in 2025
Projecting: They won't say, possibly zero.
As Zitron points out: this industry is projecting $327b in spending this year, with $18b in revenue and zero profits. For comparison: smart watches are a $32b/year industry.
Now, what about Openai? Well, they're one of Masoyoshi Son's special children, of a piece with Wework and Uber. Openai is projecting $12.7b in revenue this year, with losses of $14b. Add in a bunch of also-rans like Perplexity and Surge, and the revenue rises to $32.3b. But…if you chuck them in, you also get total exenditure of $370.8b.
These are by no means the only funny numbers in the AI industry. Take "Stargate," a data-center initiative with a price tag of $500b. Actual funds committed? $40b.
These are terrible numbers, but also, these are some genuinely impressive accounting gimmicks. They are certain to keep the bubble pumping for months or perhaps years, convincing gullible bosses to fire talented employees and replace them with bumbling chatbots that will linger for years or decades, the asbestos in the walls of our high-tech civilization.
If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
Going to Defcon this weekend? I'm giving a keynote, "An Audacious Plan to Halt the Internet's Enshittification and Throw it Into Reverse," on Saturday at 12:30pm, followed by a book signing at the No Starch Press booth at 2:30pm!
https://info.defcon.org/event/?id=50826
Bezzle (n):
1. "the magic interval when a confidence trickster knows he has the money he has appropriated but the victim does not yet understand that he has lost it" (JK Gabraith)
2. Uber.
Uber was, is, and always will be a bezzle. There are just intrinsic limitations to the profits available to operating a taxi fleet, even if you can misclassify your employees as contractors and steal their wages, even as you force them to bear the cost of buying and maintaining your taxis.
The magic of early Uber – when taxi rides were incredibly cheap, and there were always cars available, and drivers made generous livings behind the wheel – wasn't magic at all. It was just predatory pricing.
Uber lost $0.41 on every dollar they brought in, lighting $33b of its investors' cash on fire. Most of that money came from the Saudi royals, funneled through Softbank, who brought you such bezzles as WeWork – a boring real-estate company masquerading as a high-growth tech company, just as Uber was a boring taxi company masquerading as a tech company.
Predatory pricing used to be illegal, but Chicago School economists convinced judges to stop enforcing the law on the grounds that predatory pricing was impossible because no rational actor would choose to lose money. They (willfully) ignored the obvious possibility that a VC fund could invest in a money-losing business and use predatory pricing to convince retail investors that a pile of shit of sufficient size must have a pony under it somewhere.
This venture predation let investors – like Prince Bone Saw – cash out to suckers, leaving behind a money-losing business that had to invent ever-sweatier accounting tricks and implausible narratives to keep the suckers on the line while they blew town. A bezzle, in other words:
Uber is a true bezzle innovator, coming up with all kinds of fairy tales and sci-fi gimmicks to explain how they would convert their money-loser into a profitable business. They spent $2.5b on self-driving cars, producing a vehicle whose mean distance between fatal crashes was half a mile. Then they paid another company $400 million to take this self-licking ice-cream cone off their hands:
Amazingly, self-driving cars were among the more plausible of Uber's plans. They pissed away hundreds of millions on California's Proposition 22 to institutionalize worker misclassification, only to have the rule struck down because they couldn't be bothered to draft it properly. Then they did it again in Massachusetts:
Remember when Uber was going to plug the holes in its balance sheet with flying cars? Flying cars! Maybe they were just trying to soften us up for their IPO, where they advised investors that the only way they'd ever be profitable is if they could replace every train, bus and tram ride in the world:
Honestly, the only way that seems remotely plausible is when it's put next to flying cars for comparison. I guess we can be grateful that they never promised us jetpacks, or, you know, teleportation. Just imagine the market opportunity they could have ascribed to astral projection!
Narrative capitalism has its limits. Once Uber went public, it had to produce financial disclosures that showed the line going up, lest the bezzle come to an end. These balance-sheet tricks were as varied as they were transparent, but the financial press kept falling for them, serving as dutiful stenographers for a string of triumphant press-releases announcing Uber's long-delayed entry into the league of companies that don't lose more money every single day.
One person Uber has never fooled is Hubert Horan, a transportation analyst with decades of experience who's had Uber's number since the very start, and who has done yeoman service puncturing every one of these financial "disclosures," methodically sifting through the pile of shit to prove that there is no pony hiding in it.
In 2021, Horan showed how Uber had burned through nearly all of its cash reserves, signaling an end to its subsidy for drivers and rides, which would also inevitably end the bezzle:
In mid, 2022, Horan showed how the "profit" Uber trumpeted came from selling off failed companies it had acquired to other dying rideshare companies, which paid in their own grossly inflated stock:
At the end of 2022, Horan showed how Uber invented a made-up, nonstandard metric, called "EBITDA profitability," which allowed them to lose billions and still declare themselves to be profitable, a lie that would have been obvious if they'd reported their earnings using Generally Accepted Accounting Principles (GAAP):
Like clockwork, Uber has just announced – once again – that it is profitable, and once again, the press has credulously repeated the claim. So once again, Horan has published one of his magisterial debunkings on Naked Capitalism:
Uber's $394m gains this quarter come from paper gains to untradable shares in its loss-making rivals – Didi, Grab, Aurora – who swapped stock with Uber in exchange for Uber's own loss-making overseas divisions. Yes, it's that stupid: Uber holds shares in dying companies that no one wants to buy. It declared those shares to have gained value, and on that basis, reported a profit.
Truly, any big number multiplied by an imaginary number can be turned into an even bigger number.
Now, Uber also reported "margin improvements" – that is, it says that it loses less on every journey. But it didn't explain how it made those improvements. But we know how the company did it: they made rides more expensive and cut the pay to their drivers. A 2.9m ride in Manhattan is now $50 – if you get a bargain! The base price is more like $70:
The number of Uber drivers on the road has a direct relationship to the pay Uber offers those drivers. But that pay has been steeply declining, and with it, the availability of Ubers. A couple weeks ago, I found myself at the Burbank train station unable to get an Uber at all, with the app timing out repeatedly and announcing "no drivers available."
Normally, you can get a yellow taxi at the station, but years of Uber's predatory pricing has caused a drawdown of the local taxi-fleet, so there were no taxis available at the cab-rank or by dispatch. It took me an hour to get a cab home. Uber's bezzle destroyed local taxis and local transit – and replaced them with worse taxis that cost more.
Uber won't say why its margins are improving, but it can't be coming from scale. Before the pandemic, Uber had far more rides, and worse margins. Uber has diseconomies of scale: when you lose money on every ride, adding more rides increases your losses, not your profits.
Meanwhile, Lyft – Uber's also-ran competitor – saw its margins worsen over the same period. Lyft has always been worse at lying about it finances than Uber, but it is in essentially the exact same business (right down to the drivers and cars – many drivers have both apps on their phones). So Lyft's financials offer a good peek at Uber's true earnings picture.
Lyft is actually slightly better off than Uber overall. It spent less money on expensive props for its long con – flying cars, robotaxis, scooters, overseas clones – and abandoned them before Uber did. Lyft also fired 24% of its staff at the end of 2022, which should have improved its margins by cutting its costs.
Uber pays its drivers less. Like Lyft, Uber practices algorithmic wage discrimination, Veena Dubal's term describing the illegal practice of offering workers different payouts for the same work. Uber's algorithm seeks out "pickers" who are choosy about which rides they take, and converts them to "ants" (who take every ride offered) by paying them more for the same job, until they drop all their other gigs, whereupon the algorithm cuts their pay back to the rates paid to ants:
All told, wage theft and wage cuts by Uber transferred $1b/quarter from labor to Uber's shareholders. Historically, Uber linked fares to driver pay – think of surge pricing, where Uber charged riders more for peak times and passed some of that premium onto drivers. But now Uber trumpets a custom pricing algorithm that is the inverse of its driver payment system, calculating riders' willingness to pay and repricing every ride based on how desperate they think you are.
This pricing is a per se antitrust violation of Section 2 of the Sherman Act, America's original antitrust law. That's important because Sherman 2 is one of the few antitrust laws that we never stopped enforcing, unlike the laws banning predator pricing:
Uber claims an 11% margin improvement. 6-7% of that comes from algorithmic price discrimination and service cutbacks, letting it take 29% of every dollar the driver earns (up from 22%). Uber CEO Dara Khosrowshahi himself says that this is as high as the take can get – over 30%, and drivers will delete the app.
Uber's food delivery service – a baling wire-and-spit Frankenstein's monster of several food apps it bought and glued together – is a loser even by the standards of the sector, which is unprofitable as a whole and experiencing an unbroken slide of declining demand.
Put it all together and you get a picture of the kind of taxi company Uber really is: one that charges more than traditional cabs, pays drivers less, and has fewer cars on the road at times of peak demand, especially in the neighborhoods that traditional taxis had always underserved. In other words, Uber has broken every one of its promises.
We replaced the "evil taxi cartel" with an "evil taxi monopolist." And it's still losing money.
Even if Lyft goes under – as seems inevitable – Uber can't attain real profitability by scooping up its passengers and drivers. When you're losing money on every ride, you just can't make it up in volume.
Image: JERRYE AND ROY KLOTZ MD (modified) https://commons.wikimedia.org/wiki/File:LA_BREA_TAR_PITS,_LOS_ANGELES.jpg
CC BY-SA 3.0 https://creativecommons.org/licenses/by-sa/3.0/deed.en
I’m kickstarting the audiobook for “The Internet Con: How To Seize the Means of Computation,” a Big Tech disassembly manual to disenshittify the web and bring back the old, good internet. It’s a DRM-free book, which means Audible won’t carry it, so this crowdfunder is essential. Back now to get the audio, Verso hardcover and ebook:
http://seizethemeansofcomputation.org
If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
Ticketmaster jacks us for billions so it can pocket millions
NEXT WEEKEND (June 7–9), I'm in AMHERST, NEW YORK to keynote the 25th Annual Media Ecology Association Convention and accept the Neil Postman Award for Career Achievement in Public Intellectual Activity.
Corruption is a system of concentrated gains and diffused costs: cheaters make a lot of money, and their victims each lose a little. The cheater has a much larger pool of money to spend on keeping the scam going, and the victims need to pay again to fight the cheater.
Actually, it's worse. The victim pays once when they are cheated, then, they pay a second time (in time and/or money) when they fight back against the cheater.
But in order to fight back effectively, the victims need to band together – it doesn't make sense for one victim to pony up to counter the cheater, because the cheater stole from a lot of people and can therefore spend far more than the victim lost and still come out ahead.
This is the third time the victim pays: they pay the "collective action" tax of locating other victims, agreeing to a common strategy for fighting back, and then coordinating with all those co-victims to keep the campaign up.
But actually, it's even worse. Because most corruption isn't just dishonest, it's incredibly wasteful. Corruption involves stealing ten dollars from you to make a dime for the cheater. The polluter who gives you cancer rather than cleaning up their industrial process costs you millions in medical bills – and maybe costs your family the lifelong trauma and expense of living with your death. They pocket an infinitesimal fraction of those costs. The rest is just wasted. They're setting your house on fire to spare themselves the cost of a match to light their cigar.
This is yet another way in which the deck is stacked in favor of corruption. A victim of corruption is placed in a condition of precarity and misery from which is it difficult to marshal a counteroffensive. The cheater, meanwhile, is made stronger and more comfortable by their corrupt activities. Immiserated victims must undertake the hard, ongoing work of acting together to be effective against the cheater. The cheater answers only to themself, avoiding the collective action costs that the victims pay every time they seek to act.
All of this is why we have governments. A government is (said to be) a democratically accountable way to meet the concentrated power of the corrupt with the concentrated power of the victims of corruption. Governments are many things, but they are especially a way of solving the collective action problem of enforcing the rules against cheaters. This is partially in service to justice – no one likes to be cheated, and a society of rampant and routine cheating is unstable and prone to collapse.
But it's also a matter of efficiency. While it makes a certain kind of selfish sense for the cheater to liquidate our dollar to make their penny, from a societal perspective, it's a catastrophe. Letting Wall Street slumlords corner regional markets in single family dwellings makes large amounts of money for their investors, but it costs those cities unimaginable amounts in public services as their housing stock decays, homelessness spikes, and schools and public services crumble for want of local taxes.
The paltry sums that Flint's creditors extracted by insisting on switching to a chlorinated water-supply that leeched lead out of the city's water infrastructure are crumbs compared to the vast, lifelong costs of giving an all the children in a city lead poisoning, to say nothing of the costs to the city as a city nor forever tainted by this unspeakably evil crime.
This is why inequality – and its handmaiden, monopoly – is so dangerous. The more concentrated private wealth becomes, the harder it is for the state to police, and the more likely it is that this private wealth will corrupt our officials. We see this all around us – for example, when Supreme Court justices receive lavish gifts from billionaires whom they later rule in favor of:
Through the neoliberal era – the past forty years of billionaire-friendly Reaganomics – we've seen increasing concentration in wealth, coupled to increasing collusion between the wealthy and the government to protect the corrupt against the public. Think of the IRS's long decay, in which it turned a blind eye to increasingly blatant tax evasion by the ultra-wealthy, while training its fire on working people who fudge a few bucks on their returns:
This emphasis on benefits cheating and indifference to corporate crime really highlights the drag that corruption places on a society's efficiency. Even if you believe that there's a lot of welfare fraud (there isn't!), the dollar in "undeserved" food stamps spent by a cheater costs society…a dollar. Meanwhile the dollar that a corporate criminal makes by skimping on workplace safety costs society thousands of dollars to care for the worker who is then maimed on the job.
This is very easy to see in the world of corporate environmental crime. The "social cost of carbon" measures the total cost of pollution: the injuries caused by marinating in fossil fuel extraction, processing and combustion byproducts; as well as the loss of life and property from climate events. These costs are blistering, so high that every MWh of renewable power we bring online saves us $100 in social carbon costs:
Governments that sleep on corporate crime are objectively governing badly. That's why the antitrust failures of every US presidential administration from Carter to Trump are so damning: they set the stage for later corruption that would not only be carried out on a larger scale than smaller firms could accomplish, but also for those large firms to corrupt the political process.
This is the Ticketmaster story. The superpredator that is today's Ticketmaster is the end-point of a series of ever-more corrupt mergers, waved through by every-more pliable presidential administrations. It was bad enough when Bush I allowed Ticketmaster to gobble up Ticketron in 1990. After all, the company had already proven itself to be a cesspit of corrupt, bullying activity.
The Ticketron acquisition kicked off a two-decade-long corporate crime-spree that produced a mountain of evidence proving Ticketmaster's nature as an inherently corrupt enterprise that acquired power for the purpose of abusing that power, at the expense of creative workers, the public, and the owners of venues:
Despite this, the Obama administration waved through an acquisition that was obviously far more dangerous that the Ticketron caper: the 2010 merger between Ticketmaster and the concert promoter Live Nation:
After a decade and a half of vertical monopoly power – Ticketmaster/Live Nation controlling ticketing, promotion and venues – the company has grown from a dangerous octopus with its tentacles twined around the industry into a kraken that is strangling every kind of live event and everyone who earns a living from them. This has produced an ever-more obvious string of scandals, most notably the company's assault on Swifties:
A combination of mounting public outrage (with Swifties at the vanguard) and the Biden administration's generational enthusiasm for smashing corporate power has led, at last, to a reckoning with the Ticketmaster kraken:
Ticketmaster is a famously opaque organization. When Rebecca Giblin and I were working on Chokepoint Capitalism, our book on monopoly and creative labor markets, we were able to speak on the record to insiders from every part of the industry, except live performance:
https://chokepointcapitalism.com/
As soon as we raised Ticketmaster/Live Nation with club owners and other events industry insiders, they'd go pale and quiet and tell us that they didn't feel comfortable staying on the record. TM/LN has a well-deserved mafia-style reputation for savage retaliation against snitches.
With the DOJ Antitrust Division chasing Ticketmaster through the courts, we're starting to get a rare, on-the-record glimpse of TM/LN's operations, as its internal documents find their pay into court records. In response Ticketmaster's spokesliars have embarked on an epic spin campaign, to "contextualize" these damning numbers and paint the company as a weak, low-margin business that has been unfairly set-upon by the bullies at the DOJ.
In his BIG newsletter, Matt Stoller offers a spectacular, must-read breakdown of these documents and the ensuing spin:
Stoller starts with Ticketmaster's insistence that it is barely profitable. Though this is true on paper, the numbers just don't add up. For one thing, anyone who's bought a ticket can see, printed on its face, TM's junk fees: "a 'service fee' without any obvious service [and] a 'convenience fee' that is anything but convenient."
Far more damning is a comparison between the price of a Ticketmaster ticket in the US vs the EU. The EU has legally mandated competitive ticketing, and the tickets there are far cheaper. A US ticket to see Taylor Swift will run you $2,600 – the same ticket costs $340 in the EU. As Stoller writes:
An American could fly to Paris, spend a few nights at a nice hotel, see a Taylor Swift concert, and fly back, for less than it costs to see that same show in the U.S.
How to make sense of this contradiction? How can Ticketmaster show such a low profit margin on its books but somehow end up costing event-goers such an absurd premium?
Start with the fact that Ticketmaster has three businesses, not just one. They sell tickets, but they also promote concerts (that is, front the money for personnel, travel and marketing), and they also own a bunch of the largest and most profitable venues in the country.
This allows them to play a shell-game that's very similar to (and possibly not actually different from) money-laundering, where money is shuffled between entities in order to shield it from creditors, suppliers or tax agents:
But this presents a problem for Ticketmaster. They're a publicly traded company and their investors demand high returns. And unlike performers or venue owners, investors have power over Ticketmaster management. Keeping "margin per ticket" number as low as possible lets Ticketmaster minimize the revenue it has to share with the people who actually do the work and invest the capital in live performances. But for investors, they need to show another number, one that's as high as possible, to keep the investors happy.
That number is "Adjusted Operating Income" or AOI. While gross margins are the difference between the face value of a ticket and the sum remitted to the venue and the performer, AOI factors in all the other revenue TM/LN books from that ticket, like kickbacks. TM/LN's AOI is very healthy: it's 37% on tickets and 61% on promotions.
Those sums delight TM/LN's investors, and they express their joy through lavish executive compensation packages. CEO Michael Rapino is America's fifth-highest paid CEO, at $139m/year (that's eight times the Fortune 500 average). His sidekick Joe Berchtold is America's highest paid CFO, at $54m. The total AOI for TM/LN is $732m/year – and 19% of that is being paid to two of its execs.
But LN/TM has a third line of business: operating venues. The AOI for these venues is just 1.7%. If this were a normal, cutthroat business, you'd expect those same return-focused investors to insist on their handsomely compensated execs selling off that low-margin turkey. But nevertheless, TM/LN keeps those venues on its books.
When those execs talk to the public, they use the poor profit margins of ticketing and the poor AOI on venues to plead poverty: "how can we be a monopoly when we're barely scraping by?"
But when they talk to the investors who decide whether to pay them 800% of the S&P500 average, they are more forthcoming.
Keeping the margins low on tickets – and making up the money with kickbacks and other corrupt payments – means that potential rival ticketing firms can't afford to get into the business. Without the venue and promotion business, those rivals wouldn't be able to command kickbacks. They'd have to subsist on the rock-bottom margins that are competitive with Ticketmaster.
Likewise those venues: ownership of key venues lets Ticketmaster/Live Nation force out credible rivals in important markets, and keep new ones from emerging, because again, they'd have to make a living on that paltry 1.7% AOI (or the even lower profit margins!).
As Joe Berchtold, the highest-paid CFO in America, told an analyst:
I don't think Concerts AOI per fan is a logical way to look at it. I think if you look at how we've talked about our business, we've talked about our business across the multiple pieces. So you have to look at it, what's the concerts plus sponsorship plus ticketing AOI per fan.
Berchtold is paid roughly $26,000/hour. Those words take roughly 25 seconds to utter, so that's a $7.20 explanation, but it contains a wealth of information – it's basically the DoJ's case in a nutshell.
But Stoller points out a curious fact that isn't captured here. Remember when I told you that TM/LN's NOI is $732m/year? What I didn't mention is the company's gross revenue: $16.7 billion.
When TM/LN talks about how shitty their business is, and therefore they can't be a monopoly, this is the trump card. How could a company creaming off a mere $732 million off $16.7 billion in gross revenue be a monopolist with "pricing power"?
This is where understanding corruption helps clarify our understanding and cut through the bullshit. Corruption is vastly wasteful. In order to extract $732m from $16.7b, TM/LN has to engage in a lot of wasteful and corrupt activities. They have to bribe other key players in the system, spend vast fortunes on lobbying, and generally do a lot of unproductive things with their money.
This is concentrated gains and diffuse losses. In order to command the highest salary of any American CFO, Berchtold has to cook up and maintain this process. In order to earn his $139m/year, Rapino has to play mafia don and keep everyone is his supply chain sufficiently terrorized or sufficiently greased to maintain omerta.
These two men take home a fifth of Ticketmaster's net income because they possess a rare and valuable skill. They are able to obfuscate a corrupt arrangement, enrobing it in layers of performative complexity, until the average musician, concertgoer, or lawmaker, can't understand it. Any attempt to unravel it will induce a deadly, soporific confusion. The investment industry term for his is MEGO (My Eyes Glaze Over), the weaponization of complexity. A skilled MEGO artist can convince you that the pile of shit they're peddling is so large that there must be a pony under it somewhere.
Here's Stoller, de-MEGOfying the TM/LN story:
Live Nation has a giant capital intensive unprofitable division of putting on concerts, from which it skims for its real cash flow. But this leverage among different subsidiaries means that it has an incentive to push up the cost of concerts overall, not just for its own profit. This incentive operates in two different ways. One, since ticket fees are based on the price of a ticket, Live Nation seeks higher prices for tickets so it can move more cash to its Ticketmaster subsidiary. And two, since Live Nation itself gets rebates by overpaying for venues, it has the incentive to push up the cost of shows. No one can undercut Live Nation, as it’s a monopoly.
You might think that this is a lot of mental energy to expend on understanding live performances. If you're not trying to see Taylor Swift, does any of this matter?
It assuredly does. Understanding how Ticketmaster's shell-game works is critical to understanding the similar shell-games played by many other kinds of monopolists, who have wrapped their tentacles around all the other parts of our lives. As David Dayen and Lindsay Owens write for The American Prospect, the companies that avoided monopoly prosecution by ripping off suppliers have bled those suppliers dry, and now they're coming for their customers:
From groceries to plane tickets, rent to cab rides, Amazon to Ticketmaster, we are living through the "Age of Recoupment," when the long con of lowering prices to secure monopolies flips enters it final stage: greedflating the shit out of customers, and using the monopolist's power over regulators to avoid consequences.
Today, everywhere consumers turn, whether they are shopping for groceries at the local Kroger or for plane tickets online, they are being gouged. Landlords are quietly utilizing new software to band together and raise rents. Uber has been accused of raising the price of rides when a customer’s phone battery is drained. Ticketmaster layers on additional fees as you move through the process of securing seats to your favorite artist’s upcoming show. Amazon’s secret pricing algorithm, code-named “Project Nessie,” was designed to identify products where it could raise prices, on the expectation that competitors would follow suit. Companies are forcing you into monthly subscriptions for a tube of toothpaste. Banks have crept up the price of credit, so customers who cannot afford price-gouging in their everyday transactions get a second round of price-gouging when they put purchases on credit. Expedia is using demographic and purchase history data to set hotel pricing for an audience of one: you.
When these companies end up in front of angry attorneys general, DOJ lawyers, or an FTC investigation, they'll use the Ticketmaster/Live Nation playbook to try and wriggle off the hook. They'll point to some barely-profitable (or money-losing) part of their business and say, "How could a monopolist possibly be running a business this shitty?"
If the DOJ makes its case against Ticketmaster, it will set a precedent, both in court and in policy circles, for understanding how a monopolist's corruption works. Monopolists aren't always businesses with gigantic margins. Like other criminals, their corruption can produce spectacular wealth and spectacular waste at the same time.
If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
Future Trends in Financial Accounting: Preparing for Tomorrow's Challenges
Introduction
In the fast-paced world of finance, where change is constant and innovation is key, financial accountants must always be prepared to adapt and evolve. As we peer into the future, it's evident that the landscape of financial accounting is poised for significant transformation. In this blog, we'll delve into the emerging financial accounting trends and impending challenges that will shape the future of the profession, equipping ourselves with the insights needed to navigate this ever-changing terrain.
Unveiling Future Trends in Financial Accounting
The journey ahead for financial accountants is illuminated by several noteworthy trends that are poised to redefine the profession:
Embracing Automation and AI: The integration of automation and artificial intelligence (AI) is revolutionizing traditional accounting practices. Routine tasks are being automated, allowing accountants to allocate more time and resources towards strategic analysis and decision-making processes.
Harnessing Data Analytics: With the proliferation of data, financial accountants have a wealth of information at their fingertips. By leveraging data analytics tools and techniques, accountants can extract valuable insights to drive business performance and inform strategic decision-making.
Transitioning to Cloud Accounting: The adoption of cloud-based accounting solutions continues to gain momentum. Cloud accounting offers scalability, flexibility, and real-time collaboration capabilities, empowering accountants to work more efficiently and effectively.
Prioritizing Sustainability Reporting: Environmental, social, and governance (ESG) factors are increasingly influencing financial decision-making. As such, there is a growing demand for transparent and standardized sustainability reporting, with financial accountants playing a pivotal role in integrating ESG metrics into financial disclosures.
Navigating Challenges on the Horizon
While the future of financial accounting holds great promise, it also presents several challenges that must be addressed:
Mitigating Cybersecurity Risks: With the digitalization of financial processes comes the heightened risk of cyberattacks. Financial accountants must prioritize cybersecurity measures to safeguard sensitive financial information and protect against data breaches.
Navigating Regulatory Complexity: The regulatory landscape is becoming increasingly complex, with new regulations being introduced regularly. Financial accountants must stay abreast of these changes and ensure compliance with evolving accounting standards.
Addressing the Skills Gap: As technology continues to reshape the accounting profession, there is a growing demand for accountants with advanced technological skills. Bridging the skills gap and investing in ongoing training and development will be essential for future success.
Upholding Ethical Standards: With the rise of automation and AI comes the need for heightened ethical awareness. Financial accountants must navigate ethical dilemmas with integrity and professionalism, ensuring that ethical considerations remain at the forefront of their decision-making processes.
Preparing for Tomorrow's Challenges
To thrive in the future of financial accounting, professionals must adopt a proactive mindset and embrace continuous learning and adaptation. Here are some strategies to prepare for tomorrow's challenges:
Invest in Professional Development: Stay abreast of emerging trends and technologies through ongoing education and professional development initiatives.
Embrace Technological Innovation: Embrace the opportunities presented by automation, AI, and data analytics to enhance efficiency and effectiveness in financial accounting processes.
Cultivate Soft Skills: Develop interpersonal skills such as communication and critical thinking to effectively collaborate with colleagues and stakeholders.
Foster Ethical Leadership: Lead by example and uphold the highest ethical standards in all aspects of financial accounting, earning the trust and confidence of stakeholders.
In Conclusion,
As we gaze into the future of financial accounting, it's clear that both opportunities and accounting challenges lie ahead. By embracing emerging trends, addressing potential challenges, and cultivating the necessary skills and mindset, financial accountants can position themselves for success in tomorrow's dynamic landscape. Let us embark on this journey with optimism and determination, confident in our ability to navigate the uncertainties of tomorrow and emerge stronger and more resilient than ever before.
Future Trends in Financial Accounting: Preparing for Tomorrow's Challenges
Introduction
In the ever-evolving realm of finance, where the rules of the game seem to change as swiftly as market trends fluctuate, staying ahead of the curve is imperative. For financial accountants, this means not only understanding current practices but also preparing for the challenges and embracing the trends that will shape the future of the profession. As we stand on the brink of a new era, it's crucial to explore the landscape of tomorrow's financial accounting trends and equip ourselves with the tools necessary to navigate it successfully.
Financial Accounting Trends: A Glimpse into the Future
The landscape of financial accounting is undergoing a transformation, driven by technological advancements, regulatory changes, and shifting global dynamics. To thrive in this environment, accountants must stay attuned to emerging trends that are reshaping the profession:
Automation and AI Integration: With the rise of automation and artificial intelligence (AI), routine tasks such as data entry, reconciliation, and reporting are becoming increasingly automated. This not only enhances efficiency but also frees up accountants to focus on more strategic initiatives such as analysis and decision-making.
Data Analytics and Predictive Insights: The abundance of data available today presents both a challenge and an opportunity for financial accountants. By harnessing the power of data analytics and predictive modeling, accountants can extract valuable insights to drive business performance, mitigate risks, and identify growth opportunities.
Cloud Accounting: The adoption of cloud-based accounting solutions is on the rise, offering scalability, flexibility, and real-time collaboration capabilities. Cloud accounting streamlines processes, reduces costs, and provides greater accessibility to financial data, enabling accountants to make informed decisions anytime, anywhere.
Sustainability Reporting: As environmental, social, and governance (ESG) factors gain prominence, there is a growing demand for transparent and standardized sustainability reporting. Financial accountants play a pivotal role in integrating ESG metrics into financial disclosures, providing stakeholders with a comprehensive view of an organization's long-term value creation.
Accounting Challenges on the Horizon
While the future of financial accounting holds promise, it is not without its share of challenges. As we prepare to tackle tomorrow's hurdles, it's essential to identify and address the following key challenges:
Cybersecurity Risks: With increasing reliance on digital platforms and interconnected systems, the threat of cyberattacks looms large. Financial accountants must prioritize cybersecurity measures to safeguard sensitive financial information and protect against data breaches that could have far-reaching consequences.
Regulatory Complexity: The regulatory landscape is becoming more complex and fragmented, with new regulations being introduced at a rapid pace. Staying compliant requires vigilance and adaptability, as accountants must navigate a maze of regulations spanning multiple jurisdictions while ensuring adherence to evolving accounting standards.
Talent Management and Skills Gap: As technology reshapes the accounting profession, there is a growing demand for accountants with advanced technological skills such as data analysis, coding, and proficiency in accounting software. Bridging the skills gap and nurturing talent will be essential to meet the evolving needs of the industry.
Ethical Dilemmas: With increased automation and reliance on algorithms, ethical considerations surrounding data privacy, bias, and transparency come to the forefront. Financial accountants must uphold the highest ethical standards and navigate ethical dilemmas with integrity and professionalism.
Preparing for Tomorrow's Challenges
To thrive in the future of financial accounting, professionals must embrace a mindset of continuous learning and adaptation. Here are some strategies to prepare for tomorrow's challenges:
Invest in Lifelong Learning: Stay abreast of emerging trends, technologies, and regulatory changes through ongoing professional development and education programs.
Embrace Technological Innovation: Embrace the opportunities presented by automation, AI, and data analytics to enhance efficiency, accuracy, and strategic decision-making.
Cultivate Soft Skills: Develop interpersonal skills such as communication, critical thinking, and problem-solving to effectively collaborate with cross-functional teams and navigate complex challenges.
Foster Ethical Leadership: Lead by example and uphold ethical principles in all aspects of financial accounting, earning the trust and confidence of stakeholders.
In conclusion,
The future of financial accounting promises to be both exhilarating and challenging. By staying attuned to emerging trends, proactively addressing accounting challenges, and cultivating the necessary skills and mindset, financial accountants can position themselves for success in tomorrow's dynamic landscape. As we embark on this journey into the unknown, let us embrace the opportunities that lie ahead and chart a course towards a brighter future for the profession.
In the interest of not turning this into a "shitting on that one prof I don't like" blog, I'd like to share an interesting "accounting trick" I learned about last semester. (This would be more detailed if I could remember which class it was from...)
Cash flows are not the primary focus of most businesses, but they're still important. A customer giving you $50 and a customer saying that $50 will arrive in a week are similar in many respects, but you can't reinvest that $50 until next week. The reverse is also true; paying $50 now means you can't do anything else with it.
You might reasonably wonder why this matters. What can you invest $50 in that will pay off in a week? Well...
Big businesses don't think about cash the same way ordinary people do. They can easily open lines of credit or take out loans. The amount of cash they have in their bank account isn't really measuring the amount of money they can spend. What matters is cash flows.
Think of a company as being like a tub with several drains in the bottom and some spigots up top. The drains are everything the company spends cash on—employee salaries, shareholder dividends, accounts payable, expenses that must be paid in cash, etc. The spigots are whatever mechanisms pump cash back into the company. The amount of water in the tub is equivalent to the amount of cash the company has on hand. As long as the tub isn't completely empty, everything is fine.
A certain amount of excess water is good; you never know when someone's going to knock a new hole in the bottom, or when one of the spigots might get clogged. But having too much water is a bad thing; it's sitting around, wastefully, not doing anything productive. Deadweight. A manager that can't find something profitable to do with a large excess of cash is not a good manager.
Over the generations, companies have found plenty of ways to make a bit of money from short-term investments. (For instance, buying various short-term market securities, or loaning money to other companies who miscalculated and ran out of water.)
And here we circle back to the core question. Cash flows are important, but volume isn't the only consideration—timing is, as well. If customers are mailing you cash and you need to mail cash to your suppliers, you might not get much time to use that cash.
But if customers pay electronically, it shows up days earlier, letting you slosh it through some short-term investments first. If you process $10k of payments a day, and process those payments two days faster, you've basically earned the company $20k that it can play with.
And now here's the "accounting trick" part. According to my textbook, some companies maintain check-writing centers out in the middle of nowhere, so the check spends extra days in the mail. Your PayPal or whatever still enters their bank account at the speed of internet, but the checks they send have to crawl out on artificially-delayed snail mail.
If the company writes $10k of checks this way per day, and their shenanigans add an extra three days between writing the check and cashing it, they've effectively created $30k for the company to play with. By, let me reiterate, making things less convenient for the people they send money to.
(Note that this is a flat sum, not a daily income or something. This only generates revenue insofar as that additional sum of money can be invested profitably.)
I don't know why this is so appealing to me. Maybe it's just the sheer audacity. Accountants or financial managers or whomever figuring out a way to directly profit off of making things more annoying for the people they do business with is just peak capitalism.
Are you aware of the different concepts of financial accounting? What are the different things to remember while preparing for your monetary accounts? What are easy accounting steps to implement to better the finances? 10 Financial accounting tricks to use in 2019
“As to the accusation of lavishness and extravagance in the expenditure of the Penitentiary, such a statement disappears before an honest examination of the facts ; for to sustain it, our detractors affect not to take into consideration that nearly a fourth of the sums voted under the name of Penitentiary is expended at Rockwood for the benefit of another institution. In other words, they charge against the current expenditure of the Penitentiary the entire outlay for the erection of vast and costly buildings for the use of another, and, to all intents and purposes, entirely distinct and separate institution. The Provincial Penitentiary is neither the least costly of institutions of the class, nor is it, on the other hand, amongst the more costly; it ranks, in fact, as will be shown, amongst those that are most economically managed. The question of cost will be considered hereafter, with statistical information taken from official documents.
The Mercury has a pet argument, which is repeated by him very often as a masterpiece of cleverness, I suppose. Here it is:—
“prison and reformatory management, together with prison inspection, entail upon the Province burdens amounting to $155,612 03.”
It is a good deal, but it is not all. All the asylums, hospitals, prisons and reformatories, under the inspection of the board , do cost a great deal more than that sum; and still it is no argument against the board. One thing may cost a large sum and be cheap; another thing may cost a sum, small in itself, and yet be very dear. The support of indigent and dangerous classes is everywhere a very heavy burden upon society, but it is an unavoidable one. I am really astonished at the short-sightedness of the writer of the Mercury on this point if, instead of expressing the above-mentioned sum in dollars, he had done it in farthings, he would have gathered such figures as to astonish every one of his readers disposed to be satisfied with his argument as it stands.
The Inspectors, it is said, do not give enough of detailed information in their reports, and those reports are not distributed widely enough. The answer to that charge is as simple as it is conclusive. The Inspectors have no control whatever in the printing and distributing of their reports, which are so printed and distributed under the supervision of the Printing Committee of the House of Assembly. No matter how concise are the appendices of those reports, where the details of information are to be found, they are always curtailed for the printers. Furthermore, it would appear that the British American, who utters that complaint, is, after all, very little interested in the question, as he is always asking questions, the answers to which are given, at length and in print, in reports evidently in his possession. It will be seen, hereafter, that the printing of Provincial Statutes, in full, has had a small influence on his knowledge of the questions he undertakes to expound.
In relation to the increase of the salaries of officers and guards of the Penitentiary, and of creating new offices, the answer is, that the Inspectors have no power to do it, and have in fact not done it. The salaries were, indeed, increased to the extent of nearly a fourth of the whole, several years before the appointment of our Board; and what those able and practical writers believe, in their conscience I suppose, to be a discovery, is nothing more than a display of ignorance.
On that score the editor of the British American puts on his best appearance and lets out a little of his constitutional knowledge. After having said, in the number of the 30th November last :—
"The additions made to the salaries of the guards by the Inspectors, apparently without any a authority, represents an annual expenditure of $6,720. He adds, on the 1st December. "Possibly there may be some authority which does not appear on the face of the statutes, for the deviations we have noted from the statutory provisions ; but we know of no authority, except Parliament itself, which has a right to override the enactments of " an act of Parliament.'”
For the peace of mind of the dutiful watchman of public interest and parliamentary privileges, I can happily inform him that the increase of salaries alluded to was ordered by His Excellency the Governor in Council, agreeably with the dispositions of the Act 18th Vic, chap. 89, (1855,) which is commonly called the Percentage Act . .
So the editor of the British American can enjoy a comparatively comfortable sleep! True, these horrid Inspectors do hold offices coveted by others; but they are not guilty of the usurpation of the powers of either the Parliament or the Executive.
As far as the number of subordinate officers is concerned, and the aggregate amount of their salaries, including the percentage, it has always been brought within the letter and intention of the law. True, the number of employes called guards is apparently more numerous, but. the number of a superior class, called keepers, is much less than allowed by the law —the transfer from one class to another less paid being in the interest of the institution. Astonishment is expressed at the increase of the salary of the Inspectors, as compared with that of the former Penitentiary Inspectors, who had nothing else to do than to look after the Penitentiary but the appointment of the present Board is not made in virtue of the Penitentiary Act alone, but agreeably to the Aet 20th Vic. chap. 28th. Moreover, the subsection on which the British American (the writer of the Mercury being a little wiser or more elevated in the estimation of himself, does not object to the salary of the Inspectors) bases his argument, has been formally repealed by an act of Parliament.
But the most astonishing of all those accusations, perhaps, is that to which the Mercury, in his issue of the 9th January, gives a form in the following terms :—
"We cut off all charges for materials and labor on account of the asylum at Rockwood, because the buildings in progress there afford one of the strongest illustrations of the waste and folly which have disgraced the management of the Board. Whatever fate awaits them, the Rockwood Asylum will be a lasting monument of their recklessness or incompetence. Year after year it has absorbed large sums. There is, however, absolutely no necessity for it; from its inception to this day it has been a job that would be ludicrous but for its costliness. The Inspectors cannot but be aware that for the accommodation of the insane prisoners, a ward of the Penitentiary would be ample; yet these buildings have been allowed to go on, year after year, although their inutility for Penitentiary purposes has been notorious from the outset. To reach the truth of the credit side of the amount, even approximatively, the $35,050.90g which are charged as for the Rockwood buildings must be transferred to the debit side, as representing so much materials and labor thrown away—literally wasted, thanks to these vigilant inspectors."
Ignorance and blundering are decidedly getting the better of bad faith in this passage, which evidently proves that one may have the venom of the serpent without its wisdom.
The erection of the Rockwood buildings, proclaimed by the writer to be unnecessary, ludicrous and foolish, owes its origin not to Inspectors, recent or ancient, not to the Executive Government, but to the will of the three branches of the Legislature, as expressed in an Act of Parliament passed in 1857, and embodied in Revised Statutes of Canada, chapter 108. In chapter 111 are contained the legal dispositions authorising convict labor to be employed in erecting the Rockwood buildings, and in the chapters already mentioned, and the chapters 109 and 110, is prescribed what is to be done with that lasting monument of the recklessness or incompetence of the Inspectors.
At the time of the organization of the present Board of Inspectors (in December 1859), the plans of the Rockwood Asylum, prepared by an able architect and approved by distinguished alienists, had been sanctioned by the Governor in Council, and the work was already in progress. Since that time all the sums expended at Rockwood have been voted by Parliament for that very purpose. The Inspectors have no more part in any censure that may be passed on the Rockwood buildings than in the eulogiums pronounced on them by the American Journal of Insanity, (page 240 of the XIX vol.), the highest authority among periodicals on the subject on this continent. All that the Inspectors have had to do with the work has been to render the cost of those buildings (costly in their nature) as little as possible, and, on that point, they have saved on a single item several thousand dollars, by a well-timed and well-directed alteration in the specifications of materials.
As, therefore, the Inspectors have only acted in obedience to the laws, and the orders of their superiors in this affair, it is only just and proper that the Mercury should restore to the credit side of our balance sheet (for the year mentioned) that sum of $35,050 90 which has been so unmercifully cut off by him be transferred to the debit side.
...
It is with such statements, and something added to them, compared with exaggerated deficits for our Penitentiary, that our detractors are arguing against the present Prison Board. If it was only an error it could be pardoned very easily; but what must one think of men like the writers of the Mercury, for instance, who, after having been shewn the exact truth, after having seen clearly the untruthfulness of their former statements, still repeat them, and continue, notwithstanding, precisely the same arguments for week after week ? I leave it to the conscience of honest people to frame the answer.
The same writer of the Mercury, feeling, after all, the weakness of such arguments, has tried to operate a diversion by accusing us of what he calls cooking accounts, by this is meant attempting to make people believe that the Provincial Penitentiary defrays its expenses out of convict labor, which is exactly the reverse of all we have thought and said on the question. In order to induce his readers to give credit to his assertion, he tries to bring the Board in contradiction with the Auditor General's accounts, by contrasting the administrative expose of the worth of the labor performed at the Public Works, entrusted to the authorities of the Penitentiary, and the balance-sheet published in the Public Accounts; without reflecting that the said balance-sheet is exactly the same as the one published in the very same report of the Board, which he quotes.
Those two pieces of information given by the Inspectors, in the same report (1862), at pages 21 and 183 of the French, 21 and 184 of the English copy, are simply the completion of one another. The first shows how many days of labor have been employed on public works, and the value of such labor, besides the number of days of labor on contracts, for which cash has been received. The second is the simple summary of cash transactions, in account current with the Province.
The administrative expose of page 21 is as fair and as candid as can be; the balance-sheet of page 184 is also perfectly correct, so correct that the Auditor General has published it, in the second part of the Public Accounts, page 92, with the simple alteration of changing the place of one item, on the same side.
The British American discusses the prices of 40 cents and 50 cents a day, affixed to the labor of our best working convicts, and, to show that we are not justifiable in making it so high, he says:—
"The highest contract price for convicts in the Penitentiary, that we heard of, is 35 cents per day.”
The only thing I can say is, that any one attempting to discuss such questions with the knowledge of what he has heard of, must necessarily commit many blunders, as we have already proved to be the case with the British American. For his information, then, we convey the intelligence that there have been at the Penitentiary several contracts at 40c, one at 45c, one at 50c. and one at 54 cents.
Let us now cast a look on the question of receipts and expenditure, beginning with the latter, in order to know whether there is or is not lavishness and gross mismanagement, as alleged by our detractors.
To facilitate the examination, it is necessary to classify the expenditure under different heads, namely: 1st, salaries; 2nd, provisions; 3rd, clothing and bedding; 4th, fuel and light; 5th, building and repairs; 6th, miscellaneous, which includes, as well understood, a variety of small items not comprised in any of the others.
It is well to explain, at first, that the Inspectors have no control whatever over the salaries; that they have scarcely any control over the supply contracts, which are given out by public advertisement; that, in fact, with very little exception, the responsibility of the Board is confined to the surveillance of the proper usage and consumption of articles.
It would be altogether too long to enter into a full discussion of the multifarious questions connected with feeding and clothing prisoners, and in warming, lighting and otherwise providing such institutions as penitentiaries, and to consider all that in relation with the climate, situation and habits of the people. The simplest way of dealing with the question will be to show, by figures taken from the proper sources, that, notwithstanding many disadvantages, the Provincial Penitentiary occupies a distinguished rank amongst institutions of the same nature; for I suppose that our adversaries do not mean to say that all penitentiaries are illmanaged, and that they ought to be appointed Inspectors of all of them.
I have no complete series of reports of the American prisons, so I make use of the most recent in my possession, giving, of course, the year and the mean annual population: that mean is established, for all in the same way, by adding the numbers at the beginning and end of the year and dividing by two.
The Provincial Penitentiary is the only one in which lunatics of different kinds are kept, fed, &c, &c. It has been the case for several years at Kingston. All the male lunatics of the so-called criminal asylum of Rockwood have been maintained out of the Penitentiary stores; it was only during the year 1862 that, a part of the new buildings at Rockwood having been temporarily tied up, the crowding of the insane ward at the Penitentiary was a little relieved. I give this information to explain to the reader that in the mean population of the Provincial Penitentiary, for 1862, are included 44 male lunatics, who, while they give no work, being added to the number of consumers, must necessarily be counted with them. This is a very important element in the calculation, which has been completely, overlooked by sundry writers on the subject the more so that, for several years past, the mean number of male lunatics so kept to the cost of the Penitentiary has been over sixty.”
- Letter of Mr. J. C. Taché, The Board of Inspectors of Asylums, Prisons and Hospitals and ITS ACCUSERS. Reprinted from the ‘Morning Chronicle.’ Quebec, 1864. p. 8-13.
