I'm on a 20+ city book tour for my new novel PICKS AND SHOVELS. Catch me TODAY (Feb 15) for a virtual event with YANIS VAROUFAKIS, and on MONDAY (Feb 17) for an event at KEPLER'S in MENLO PARK with CHARLIE JANE ANDERS. More tour dates here.
It's Saturday and I'm on a book tour, and the world is in chaos, and there are more links to write about than I could fit in to this week's newsletter, so time for a cubic linkdump, the 27th such:
https://pluralistic.net/tag/linkdump/
Let's start with the best thing I saw all week: a 3D-printed, spring-loaded, clockwork chess pawn that uses a magnet to sense when it has reached the end of the board and SPROING! turns into a queen:
https://www.youtube.com/watch?v=CSOnnle3zbA
The whole video is a fascinating account of the design process, from idea to prototype to finished item, but if you're impatient and want to skip right to the eyeball kick, it's at 12:27-12:35. And if you want to print your own, the files are $12 (cheap!):
Regrettably, not every tech project is a good one. This week, Google abandoned its AI ethics pledge. Unlike most AI ethics pledge, which are full of nonsense about not accidentally creating a vengeful god that turns the human race into paperclips, Google's AI pledge was actually very important, in that the company promised not to make AI that violates human rights, international law, or privacy. There comes a point where harping on Google's abandoned "don't be evil" motto can feel a little hacky, but in this case, I'll make an exception. My EFF colleague Matthew Guariglia tears Google a much-deserved new AIhole over this latest heel turn:
Not all bad technology is evil. Some of it is merely very, very stupid. How stupid? Check out Thom Dunn's Wirecutter review of The Heatbit Trio, a space-heater that uses Bitcoin-mining GPUs to generate some of its heat, very slightly offsetting the cost of warming your room – but at a rate that would take decades to recoup the $700 price-tag. Thom got some spicy quotes from Molly White for this one – possibly the first time she's been cited in a home appliance review:
Staying with crypto freaks for a moment here, Adam Levitin dissects the cryptocurrency "industry"'s latest chorus of aggrieved whining over "debanking":
As Levitin writes, banks aren't kicking cryptocurrency "companies" off their books because the government wants to punish them. Banks have a very good reason to want to avoid doing business with high-dollar scams that have highly correlated implosions, which is to say, times when everyone wants their money back from the cryptocurrency "company" the bank is handling charges for. For a longer explanation that gets into the nitty gritty of bank supervision, check out Patio11's excellent, detailed explainer:
As all the real heads know, "crypto means cryptography," and cryptographers continue to contrive privacy marvels. This week, Kagi – the best search engine, a million times better than Google – released a Privacy Pass authentication plugin, which lets you login to Kagi and run searches without Kagi being able to connect any of the searches you make with your account:
https://blog.kagi.com/kagi-privacy-pass
As an sf/crime writer who sometimes (often) searches for information on committing ghastly crimes and 'orrible murders, the fact that my favorite search engine will be technically incapable of tying those searches to my identity is quite a relief. Read my review of Kagi here:
If you're one of those marvel-contriving hackers, cryptographers, security researchers or tinkerers, you should really consider attending this summer's Hackers on Planet Earth (HOPE), 2600 Magazine's (now) annual (formerly biennial) hacker con. They've just posted their CFP – get those submission in!
https://www.hope.net/cfp-talks.html
Well, I have to post this and get ready for this morning's virtual book tour event with Yanis Varoufakis:
https://www.youtube.com/watch?v=xkIDep7Z4LM
But before I go, one more link: Kevin Steele's 2005 essay on Hypercard, "When Multimedia Was Black & White," an absolute classic, and a beautiful meditation on the art and promise of early hypertext:
I've known Kevin for most of my life, long before he helped found Mackerel, the pioneering Toronto multimedia company. Long after Mackerel, Kevin went on making wonderful things. In 2023, he published a monumental act of portraiture – a "sequential art" time-series of panoramas of Toronto's hip, ever-changing Queen Street West strip:
Comparing Kevin's more recent work with that lovely old essay reveals deep correspondences and the progress of a unique and creative soul.
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:
I'm on tour with my new, nationally bestselling novel The Bezzle! Catch me next weekend (Mar 30/31) in ANAHEIM at WONDERCON, then in Boston with Randall "XKCD" Munroe (Apr 11), then Providence (Apr 12), and beyond!
The headline was pure David and Goliath: America's small businesses had finally triumphed in their 20-year litigation campaign against Visa and Mastercard over price-gouging on fees, and V/MC were going to cough up $30B as reparations:
But if you actually delve into that settlement, the victory gets very hollow indeed. Here's the figure that didn't make the headline: as a part of this settlement, the sky-high fees merchants pay to process your credit-card transaction are going up by 25%:
The payments system is a hellish complex, rotten cartel, dominated by a handful of firms who have raised their already-high fees by 40% since the start of covid:
These companies who take 2-5% out of virtually every dollar exchange in the American company are wildly profitable, but their aggregate profits are still much lower than the profits of all the merchants they prey upon. More: the combined market capitalization of every company that accepts credit-cards is orders of magnitude larger than the payment processing companies. If we're just talking about sheer economic muscle, the "Goliath" here is "all the companies" and the "David" is "the three companies that process payments for them."
So, how is it that these puny middlemen are able to run circles around this massive retail sector? To learn the answer, you need to consider the fine technical details of the lawsuit and the settlement. That's something few of us are capable of doing on our own, because – as is ever the case with finance – the whole system is wreathed in an enormous amount of performative complexity. It's what finance bros call "MEGO," for "My Eyes Glaze Over." Finance loves things that are made complicated so that they'll be hard to understand – because so many of us will assume that they are hard to understand because they are complicated and just "leave it to the experts."
Thankfully, not all of the experts are on the side of finance. When I want a cheat-sheet for the lies buried in Uber's balance sheet, I look to Hubert Horan:
https://horanaviation.com/publications-uber
And when I want to understand credit markets, I go to Adam Levitin and his co-authors at the indispensable Credit Slips blog – and the Credit Card Interchange Settlement is no exception:
Formally, the fight over credit-card fees is over "interchange fees" – the fees charged to a merchant's bank by Visa and Mastercard. But of course, these fees are passed on to the merchants. If you've ever shopped for a credit-card, you'll know that some cards offer massive rebates to consumers (especially wealthy consumers with great credit scores). These gifts don't come out of V/MC's bottom-line: every time you use one of those Platinum/Emerald/Unobtanium cards, V/MC levy an even higher interchange fee. So ultimately, when a wealthy customer with a "good" credit card shops at a merchant, the merchant ends up paying more to process their payment.
But merchants aren't allowed to charge that back to their customers – and that's the crux of the lawsuit. It's why American merchants pay the highest interchange fees in the developed world.
Enter the $30b settlement. Under its terms, average interchange fees will go down by 7 basis-points (0.07%) over the next five years, while all fees will go down by 0.04% over three years – a reduction of about $3b/year. Additionally: merchants will now be able to levy small, extremely limited surcharges based on either the type of card or the card brand (e.g., "We charge a fee for Visa" or "We charge a fee for gold cards"). If merchants are able to levy these fees and figure out how to max them out, they stand to make another 3b/year.
In other words, the $30b settlement comes from $15b in guaranteed savings and $15b in possible savings, for just five years – while V/MC will continue to charge more than $100b/year in interchange fees.
This litigation began in 2005, with merchants outraged over the sky-high average interchange fee of 1.75%. Today, after the settlement, those fees have climbed by 25%, to 2.19% – and they'll start climbing again after just five years. A 20-year fight over high fees resulted in a victory in which the fees are even higher.
How did this happen? Levitin gives us some tantalyzing hints. Over the two decades of litigation, the credit card cartel were able to peel off different groups of merchants and settle with them separately. Some of those settlements were vacated by courts, and other ones are still pending, but fundamentally, the merchants were not unified in the way the credit-card companies are.
This shouldn't surprise anyone. Hundreds of thousands – millions? – of merchants are unable to coordinate strategies in the way that just two credit-card companies can. Indeed, when you have hundreds of thousands of companies, that represents many, many different kinds of businesses, each of which has different kinds of customers and different labor, inventory, cash-flow and profitability specifics.
But as an industry grows more concentrated, all the firms within that industry converge on a single, homogeneous style of operations. Walmart operates very differently from the mom-and-pop shops it forced out with predatory pricing and sweetheart deals with wholesalers – but Costco, Walmart and Sam's Club are all remarkably similar to one another. As a shopper, that means that if have needs that aren't well-served by a big box store, you're out of luck – and it means that a credit-card settlement that works for Walmart will probably work equally well for Costco and Sam's Club.
Think of the mobile phone duopoly of Apple/Google. These two "competitors" have nearly identical ways of dealing with their suppliers – both charging 30% fees for processing payments (and yes, that's a racket that makes Visa/Mastercard look like pikers). These two "competitors" are also one another's most important business-partners: the single largest transaction either company makes every year is with the other – the $26B that Google pays Apple every year to be the Ios and Safari default search engine, through which Apple exposes every one of its customers to Google's incredibly invasive, continuous surveillance.
Speaking of surveillance: consider the surveillance advertising duopoly of Google/Facebook. Not only do these companies extract the nearly identical (sky-high) fees from advertisers and dribble out the nearly identical (miserly) payouts to publishers – they also illegally collude to rig the advertising market, dividing it between themselves:
https://en.wikipedia.org/wiki/Jedi_Blue
The economists' term for this is the "collective action problem." It's a problem we want corporations to have. The problem with monopolies and cartels isn't merely that they're "too big to fail" and "too big to jail" – it's that a handful of companies can form a cartel to capture their regulators:
The surveillance industry is unified; the surveilled are not. The rewards from surveillance are concentrated. The costs of surveillance are diffused. This is as good a working definition of corruption as you could ask for: conduct that produces concentrated gains and diffuse losses.
Our generations-long failure to enforce antitrust law created monopolies that rippled out through whole supply chains. As David Dayen described in his brilliant 2021 book Monopolized, it's the story of US health industry:
First, pharma companies merged to monopoly and started to gouge hospitals on drug prices. So hospitals formed regional monopolies that could resist these pricing demands – and then turned around and started gouging insurance companies. So insurance companies merged, too. Every corner of health-care is now a monopoly or a cartel – from pharmacy benefit managers to hospital beds:
The only parts of the industry that aren't concentrated are the parts that can't concentrate: patients and health-care workers. The monopolized health care sector reaps the concentrated gains, and the patients and workers pay the diffused costs. Those costs are diffused, but they're still substantial – a literal matter of life or death:
Monopolization lets businesses solve their collective action problem, so they can run circles around less concentrated, less organized sectors. But concentration also lets companies solve the collective action problem of lobbying governments and capturing their regulators. A concentrated industry can maintain message discipline in front of regulators and legislators. A diffuse sector will always have credible defectors who'll say, "No, we can absolutely function with tighter controls – my competition is bullshitting you and I have receipts to prove it."
The surveillance industry's massive concentration is why America can't seem to pass a federal consumer privacy law. The last consumer privacy law Congress passed was 1988's Video Privacy Protection Act, a law that bans video-store clerks from telling anyone which VHS cassettes you're renting. But federal law is effectively silent on every other kind of invasion – your ISP, your TV, your car, your phone, your medical implant, your dishwasher and your smart speaker can all harvest your data, charge you for the privilege and sell it to anyone, for any purpose.
That silence didn't come cheap: whenever Congress moots a privacy law, the concentrated surveillance industry is all on the same page for the ensuing lobbying blitz, which it can afford thanks to the massive profits that an industry reaps when it eliminates "wasteful competition."
This is a point that leftists sometimes miss about competition law. The point of competition isn't merely to discipline companies into finding more efficient ways to run their businesses so that their prices go down. Sure, that's sometimes a good thing for the public.
But there's plenty of commercial conduct that we don't want to improve – rather, we want to extinguish that conduct. We don't want more efficient commercial surveillance – we want no commercial surveillance.
Without competition, an industry can outmaneuver the government. Think of IBM: the DOJ sued IBM for antitrust violations from 1970 to 1982. For 12 consecutive years, IBM spent more on lawyers to fight the DOJ's Antitrust Division than the DOJ spent on all the lawyers it employed to fight every antitrust violation in the country. IBM literally outspent the US government, year after year, for 12 years! That let them delay the DOJ's breakup long enough for Ronald Reagan to be elected, and then Reagan dropped the suit.
This doesn't just effect customers for a monopoly's products – it also (and especially) effects the workers for that monopoly. When employers don't have to compete for labor, they can pay workers less and save money they might otherwise have to pay for benefits and workplace safety. Those additional profits can be plowed into lobbying against pro-union laws, and to pay the eye-watering sums charged by scumbag union-busting law firms.
Look at the companies who've gone to the Supreme Court to get the National Labor Review Board abolished: these are giant corporations from heavily concentrated sectors with little competition to erode their profits. And while Tesla, Trader Joe's and Amazon all have very different businesses, they're all similar enough that none of them sees an advantage to courting workers by offering a unionized shop:
It's not just leftists who fail to grasp the relationship between competition and the ability of regulators to do their job. Libertarians miss this, too. Even if you're a fully Fountainhead-poisoned freedom-to-contract hobgoblin, you still want a government that can enforce those contracts and defend the property rights they invoke. For a government to force a corporation to abide by its contractual obligations, that government has to be more powerful than the corporation it is charged with policing. Which means that however large you're willing to let a monopoly or cartel grow, you're going to have to tolerate a government that's even larger:
The "$30b win" for America's merchants is, in fact, a loss. 20 years of litigation over high fees, and the fees are now much higher. But that loss is surely unevenly distributed. Walmart and Amazon and other retail giants are going to be able to bargain for all kinds of off-the-books rebates, promotions, and other sweetheart deals, meaning that they'll have even more unfair advantages over smaller, more disorganized retailers. That means more of those mom-and-pops will vanish, leaving shoppers with less choice and higher prices – and workers with less choice and lower wages.
The lesson of 40 years of pro-monopoly policy couldn't be clearer: you can either have an economy that is regulated by lawmakers who are at least nominally transparent and democratically accountable, or you can have an economy regulated by totally unaccountable and opaque monopolists. Fail to do the former, and you will always end up with the latter.
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:
On July 14, I'm giving the closing keynote for the fifteenth HACKERS ON PLANET EARTH, in QUEENS, NY. Happy Bastille Day! On July 20, I'm appearing in CHICAGO at Exile in Bookville.
With just days to go before my summer vacation, I find myself once again with a backlog of links that I didn't squeeze into the blog, and no hope of clearing them before I disappear into a hammock for two weeks, so it's time for my 21st linkdump – here's the other 20:
https://pluralistic.net/tag/linkdump/
I'm going to start off this week's 'dump with a little bragging, because it's my newsletter, after all. First up: a book! Yes, I write a lot of books, but what I'm talking about here is a physical book, a limited edition of ten, that I commissioned from three brilliant craftspeople.
Back in March 2023, I launched a Kickstarter to pre-sell the audiobook of Red Team Blues, the first novel in my new Martin Hench series, about a forensic accountant who specializes in unwinding tech bros' finance frauds:
One of the rewards for that campaign was a very special hardcover: a handmade, leather-bound edition of Red Team Blues, typeset by the typography legend John D. Berry:
https://johndberry.com/
Bound by the legendary book-artist John DeMerritt:
https://www.demerrittstudios.com/
And printed by the master printer JaVae Berry:
https://www.jgraphicssf.com/
But this wasn't a merely beautiful, well made book – it had a gimmick. You see, I had already completed the first draft of The Bezzle, the second Hench novel, by the time I launched the Kickstarter for Red Team Blues. I had John Berry lay out a tiny edition of that early draft as a quarter-sized book, and then John DeMerritt hand-bound it in card.
The reason that edition of The Bezzle had to be so small was that it was designed to slip into a hollow cavity in the hardcover, a cavity that John Berry had designed the type around, so that both books could be read and enjoyed.
I offered three of these for sale through the Kickstarter, and the three backers were very patient as the team went back and forth on the book, getting everything perfect. Last month, I took delivery of the books: three for my backers, one each for John DeMerritt and John Berry's personal archives, one for me, and a few more that I'm going to surprise some very special people with this Christmas.
Look, I had high hopes for this book. I dote on beautiful books, my house is busting with them, and I used to work at a new/used science fiction store where we had a small but heartstoppingly great rare book selection. But these books are fucking astounding. Every time I handle mine, my heart races. These are beautiful things, and I just want to show them to everyone:
As it happens, the next thing I'm going to do (after I finish this newsletter) is turn in the copyedited manuscript for the third Hench novel, Picks and Shovels, which comes out in Feb 2025 (luckily, I had enough time to review the edits myself, then turn it over to my mom, who has proofed every book I've written and always catches typos that everyone else misses, including some real howlers – thanks Mom!):
Of course, the majority of people who enjoy my books do not end up with one of these beautiful hardcovers – indeed, many of you consume my work exclusively as electronic media: ebooks and (of course) audiobooks. I love audiobooks and the audio editions of my books are very good, with narrators like Amber Benson, Wil Wheaton, and Neil Gaiman.
But here's the thing: Audible refuses to carry my books, because they are DRM-free (which means that they aren't locked to Audible's approved players – you can play my audiobooks with any audiobook player). Audible has a no-exceptions, iron-clad rule that every book they sell must be permanently locked into their platform, which means that Audible customers can't ditch their Audible software without losing their libraries – all the books they purchased:
Being excluded from Audible takes a huge bite out of my income – after all, they're a monopolist with a 90% market share. That's why I'm so grateful for indie audiobook stores that carry my books on equitable terms that Audible denies – stores like Libro.fm, Downpour and even Google Books.
This week, I discovered a new, amazing indie audiobook store called Storyfair, where the books are DRM-free and the authors get a 75% royalty on every sale:
https://storyfair.net/helpstoryfairgrow/
Storyfair is a labor of love created by a married couple who were sickened and furious by the way that Audible screws authors and listeners and decided to do something about it. Naturally, I uploaded my whole catalog to the site so they could sell it:
These books are DRM-free, which means that no matter who you buy them from, you can play them in the same player as your other DRM-free audiobooks. You know how you can read all your books under the same lamp, sitting in the same chair, and then put them in the same bookcase when you're done with them? It's weird – outrageous even! – that tech companies think that buying a book from them means that they should have the legal right to force you to read or listen to it using their technology exclusively.
If you let your Storyfair audiobooks touch your Libro.fm audiobooks, they won't get cooties! Audible is like a toddler that won't let their broccoli touch their peas – only that toddler is also a rapacious monopolist that keeps 75% of every sale.
The fight for fair audiobooks is one of those places where the different parts of my professional life cross over: activism, digital media, art, writing the web, and breaking down complex technical subjects for a mass audience. I've just signed up to a six-year project to combine all those facets in a structured way, in collaboration with Cornell University.
Cornell just named me as their latest AD White Professor-at-Large. This is a six-year appointment that involves a series of week-long visits to Ithaca to lecture, run seminars, meet with colleagues, collaborate on research, and do community performances:
https://adwhiteprofessors.cornell.edu/
We've tentatively scheduled my first visit for early September 2025, to coincide with the Ithaca Book Festival, and we've got big plans, roping in multiple departments at Cornell, the local alternative school and local colleges, doing talks at the fair as well as at the university, and (we hope!) squeezing in a stop in NYC on the way home for a day at Cornell Tech. I'm so excited (and honored) to be working with Cornell (and getting a chance to visit Moosewood Restaurant, whose cookbooks taught me how to cook!). Watch this space.
Authorship has always been a political act, but never moreso than today, with waves of book-bans sweeping the country. One of the heroes of those bans is Maggie Tokuda-Hall, who made headlines when she publicly excoriated Scholastic for demanding that she remove references to racism from her kids' books in order to make them more palatable to reactionaries:
Tokuda-Hall has stepped up the fight, co-founding Authors Against Book Bans, an org that provides training and support for author/activists so they can fight back against book bans at library board and city council meetings:
https://www.authorsagainstbookbans.com/
Authors Against Book bans is looking for members! I signed up last week, within seconds of having Tokuda-Hall give me the pitch when we ran into each other in Oakland at the Locus Awards. Are you an author? Sign up too! They're especially interested in branching out beyond YA and kids' authors (though they want those kinds of writers, too!).
Book bans affect us all. Even if you personally are never stymied when you visit your library and discover the book that you want to read has been removed by a swivel-eyed loon with terminal groomer-panic. The bans sweeping our country mean that our neighbors and loved ones are being denied literature by these cranks. There are people in your life who are losing out on the possibility of a life-changing literary adventure (which is why the far right hates these books – they want to be sure no one encounters the ideas between their covers).
The realization that you have to live in a society with people who are harmed by injustice, even if you personally escape that justice? It's the whole basis for solidarity.
Americans are living through a multigenerational project of stamping out solidarity and insisting that we only ever view ourselves as individuals, with no stake in the plights of our neighbors. That's how the US got the most expensive, least effective health care system in the world. And even if you are in the vanishingly tiny minority of Americans who are happy with their health care, you live amongst people who are being killed by the system around you.
The health system is a perfect example of how monopolization drives more monopolization, and how that comes to harm the public and workers. Health consolidation began with pharma mergers, that led to pharma companies gouging hospitals. Hospitals, in turn, engaged in a nonstop orgy of mergers, which created regional monopolies that could resist the pricing power of monopoly pharma – and screw insurers. That kicked off consolidation in insurance, which is why most Americans have a "choice" of between one and three private insurers – and why health workers' monopoly employers have eroded their wages and working conditions.
A new study in American Economic Review: Insights puts some quantitative spine in this tale, tracking the relationship between hospital mergers and skyrocketed health-care prices:
The researchers investigated 1,164 acute-care hospital mergers, finding that while the FTC only challenged 1% of these, they could – and should – have challenged 20% of them, based on the agency's own criteria for merger scrutiny. The researchers blame the rising costs of hospital care directly on these mergers, and point out that Congress has historically starved the FTC of the budget it needed to investigate these mergers. The annual additional costs to the American people from these mergers exceed the entire annual budget of the FTC.
It's not just hospitals: the entire investor class is hell-bent on spending their way to monopoly. Nowhere is that more true than in AI, where hundreds of billions are being poured into bids to attain permanent dominance through scale. Writing for their excellent AI Snake Oil newsletter, Arvind Narayanan and Sayash Kapoor inject some realism into the AI scale hype:
https://www.aisnakeoil.com/p/ai-scaling-myths
Narayanan and Kapoor challenge the idea that throwing more data at large language models will make the better: "With LLMs, we may have a couple of orders of magnitude of scaling left, or we may already be done." They are skeptical that this can be fixed with synthetic data (whose use is limited to "fixing specific gaps and making domain-specific improvements"). They also point out that if returns from data slow, then returns from adding more compute or making bigger models might also be throttled.
They reserve their most skeptical take for "AGI" – the idea that LLMs are going to achieve consciousness. This is a fundamentally unserious idea, one that they unpack in detail in their forthcoming book:
One thing I'm hoping for from the book is some analysis of the material usefulness of AI hype – what purpose does the hype serve? I mean, obviously, hype is useful if you're looking to suck up investor capital, or flip an investment to a greater fool. But there's a specific character to AI hype: namely, the claim that AI will displace labor, which is really a claim that a bet on AI is a bet on the increasing wealth of capital at labor's expense.
In other words, AI is a bet on oligarchy. In America, that's a pretty safe bet, and the odds just got even better, thanks to a string of brutal Supreme Court decisions that legalized bribery, banned most regulatory enforcement, and made being alive and unhoused into a crime (Poor Laws 2.0):
But amidst all those gimmes to the rich and powerful, there was one notable exception: the SCOTUS ruling on the Purdue Pharma bankruptcy. Purdue was the family business of the Sacklers, a multigenerational dope-peddling dynasty that went from super-rich to stratospherically rich by kickstarting the opioid epidemic with their blockbuster drug Oxycontin.
The Sacklers sold mountains of Oxy the old fashioned way: by lying. The lied about its efficacy and they lied about its safety, and they helped kill hundreds of thousands of Americans. Eventually, this caught up with them, and Purdue lost a bunch of court cases and was forced into bankruptcy.
That's where things get gnarly: the Sacklers took the already-sleazy world of elite bankruptcy to a whole new level, with a set of breathtakingly sleazy maneuvers that ensured that their case would be heard by the one judge in America who would let them off the hook:
That judge was Robert Drain and the Sacklers were the blow-off to a long and shameful career in public "service." The Sacklers incorporated a subsidiary in White Plains, NY (in Drain's turf) precisely 181 days before filing for bankruptcy, then claimed that this empty small-town office had been the company HQ for more than six months. Then they hid machine-readable metadata in their filing that tricked the court's database into assigning the case to Drain:
The reason the Sacklers were so horny for Drain? He was a notoriously generous source of "nonconsensual third-party releases." These would allow the Sacklers to permanently end every lawsuit against them without having to declare bankruptcy. Instead, they could take their (ruined, hollow) company through bankruptcy, throw a small fraction of their personal fortunes into the pot, representing fractional pennies on the dollar of what they owed to their victims, and walk away with tens of billions and eternal protection from any future suits.
In other words, they could stiff their creditors and keep the loot. Which is exactly what Robert Drain gave them – before retiring from the bench to get a two-orders-of-magnitude pay raise at a white-shoe firm that specializes in representing corporate mass-murderers like the Sacklers.
That's where it would have ended, but for a surprising ruling from the Supreme Court, which threw out the nonconsensual third-party release deal and put the Sacklers back on the hook to pay the victims of their many, many crimes.
As ever, the best source of analysis and explanation for elite bankruptcy shenanigans is Adam Levitin of the Credit Slips blog:
Levitin has a prediction for what's going to happen next. He rejects the predictions of Sackler apologists, who say that this is going to add years or decades to the already too-long wait for compensation that the Sacklers' victims have endured. Instead, Levitin says that the Sacklers will almost certainly transfer billions more from their personal fortunes to the settlement pot and beg for consensual releases from their victims. In other words, they'll go from dictating terms to asking for them.
So the settlement will stand, but it will be larger, and victims who don't want to take it won't have to – they'll be able to sue. In other words, this ruling "does not prevent deals in bankruptcy. It just changes the terms of what those deals."
This has implications for other mass-murderers and corporate criminals, like Johnson and Johnson (who tricked women into dusting their vulvas with asbestos):
Both J&J and BSA carved out nonconsensual third-party releases in the mold of the Sacklers' deal, and both briefed the Supreme Court, warning that if the Sacklers were forced to pay what they owed, J&J and BSA's victims would also be entitled to far larger sums. Go ahead and threaten us with a good time, why doncha?
The Sackler decision is a real bright spot at a dark time for corporate impunity. It's always nice to see big corporate bullies getting a bit of a comeuppance. Another one of those comeuppances was just delivered thanks to a classic fatfinger error.
A Microsoft engineer accidentally released the sourcecode to Playready, the company's flagship DRM product:
Microsoft's DRM doesn't do anything to protect the interests of creative workers or even the companies that employ them. As a Microsoft rep admitted on stage at a presentation in 2006, the purpose of Microsoft DRM is to prevent small startups from entering the market, ensuring that Microsoft and its "rivals" can safely divide up the world without worrying about disruptive competitors:
I was there that day and reported on the remarks, prompting both Microsoft and its rep to furiously deny that they'd ever said this, despite multiple witnesses who heard it. This was just a couple years after I gave a viral talk at Microsoft about why the company shouldn't use DRM:
By 2006, it was clear that the company was all in on DRM, and today, DRM is the centerpiece of Microsoft's anticompetitive strategy, and Playready is the centerpiece of Microsoft's DRM. The source-code leak is doubtless going to give rise to lots of grey-market tools for stripping DRM from all kinds of media:
You love to see it! Now I'm doubly looking forward to this summer's security conferences, including Defcon, where, for the first time, I'll be emceeing the charity poker tournament to benefit EFF:
This should be very fun – and funny – especially given how little I know about poker (I have been specifically selected on that basis, for the comedy value). Every player gets a custom EFF poker-deck, and the winner gets a treasure chest filled by EFF board member Tarah Wheeler, including "emeralds, black pearls, amethysts, diamonds, and more."
I like to close these linkdumps with something fun and uplifting, and I'd planned to end things with the poker-tournament, but then my pal Raph Koster announced that his game studio Playable Worlds had dropped its first announcement of Stars Reach, an open-world MMO like no other:
Raph is a legend in MMO design circles, whose credits include Ultima Online and Star Wars Galaxies. He wrote the definitive text on how games work, A Theory of Fun, that's does for games what Understanding Comics did for comics:
https://www.theoryoffun.com/
Stars Reach is stupidly ambitious. It consists of truly open worlds, modeled to an absurd degree of fidelity:
We know the temperature, the humidity, the materials, for every cubic meter of every planet. Our water actually flows downhill and puddles. It freezes overnight or during the winter. It evaporates and turns to steam when heated up. And not just our water — everything does this. Catch a tree on fire with a stray blaster bolt. Melt your way through a glacier to find a hidden alien laboratory embedded in the ice. Stomp too hard on a rock bridge, and watch out, it might collapse under your feet. Dam up a river to irrigate your farm. Or float in space above an asteroid, and mine crystals from its depths.
The game is fundamentally a climate story, whose lore has humanity seeded around the galaxy by a powerful alien race called the Old Ones, only to have humans bust through the planetary limits of every world they were given. Now the Old Ones are giving humans another chance to try smarter ways of sustaining ourselves on new worlds, with the aid of powerful robots call "Servitors."
Because this is a Raph Koster game, it's got a bunch of extremely satisfying play dynamics:
A classless skill tree advancement system, where peaceful play matters just as much as combat
An intricate player-driven economy where players can craft their way to fame and fortune
An accessible yet deep combat system, where you can choose whether to play using action aiming or more forgiving homing shots or lock-on targeting
In-world player housing that lets you build and customize your home and form towns… and enough room for everyone to have a house
A single shardless galaxy, with both space and ground gameplay… in fact, you can build that house on an asteroid, if you want
The ability for a group to govern a planet, and define its laws, whether you want a peaceful home or a PvP free for all
Stars Reach is not playable yet, but the company's looking for gamers to give them feedback and steer the development:
https://starsreach.com/
OK, that wraps up the week's links. I'm gonna get one more edition out on Monday, god willin' and the crick don't rise, and then I'll be off for a couple weeks. Enjoy your summer!
Support me this summer on the Clarion Write-A-Thon and help raise money for the Clarion Science Fiction and Fantasy Writers' Workshop!
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:
The Golden Rule (them what has the gold makes the rules)
For many Constitutional law scholars, last years' Dobbs decision on abortion rights at the Supreme Court came as a dismaying shock, because it showed conclusively that conlaw wasn't a realm of ideologically consistent intellectual foment, but rather, a matter of politics.
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:
Writing for Credit Slips, the finance law scholar Adam Levitin admits to feeling a bit of schadenfreude in that moment. The "blue collar" law scholars in "grubby" banking and money fields have always treated the conlaw set as "slightly clueless toffs":
As a field, conlaw fiercely resists the idea that their field is "largely a battle of normative opinions, without any quasi-objective touchstone or clearly right or wrong answers." Finance law, by contrast, firmly roots its understanding of outcomes in expediency and politics as much as the text of the law.
And of course, every conlaw scholar must know that - at certain points - the Supremes' most consequential decisions were political, overturning jurisprudence based on shifting cultural attitudes.
Think of Abraham Lincoln, whose anti-slavery laws were repeatedly struck down by the SCOTUS of the day. Lincoln's predecessors had filled the court with pro-slavery southerners who remained on the bench long after their home states had seceded from the Union:
That court ruled in Dred Scott that Black people were "so far inferior that they had no rights which the white man was bound to respect, and that the negro might justly and lawfully be reduced to slavery for his benefit":
Small wonder that the Supreme Court was considered "the last stronghold of Southern power." The court consistently ruled against Lincoln and Lincoln simply ignored their rulings:
Eventually, Lincoln hit on a very honorable solution to an illegitimate court that frustrated the political will of democratically accountable lawmakers: pack the court. He reorganized the Federal Circuits to purge federal judges who supported the Confederacy.
He also filled SCOTUS vacancies with loyalists. Even so, that didn't get him a majority - but he didn't need a majority - the political support and momentum of the anti-slavery movement flipped those recalcitrant judges. The law didn't change, but once those judges saw that they were standing athwart a vast social upheaval, those judges' formerly iron certainties about the law crumbled.
That wasn't the only time the Supremes discovered heretofore unsuspected flexibilities in their granite certainty about the Constitution. Under FDR, a pro-oligarch Supreme Court consistently struck down the wildly popular New Deal policies that won him a landslide electoral victory.
These decisions were widely denounced by legal scholars - and the public. As the court annihilated worker protections and programs to rebuild the shattered economy, FDR used the bully pulpit to call the court a "no-man's-land where no Government— State or Federal—can function":
FDR proposed age limits on judges - which was just a roundabout way of forcing the retirement of the long-serving judges who'd been appointed by the Gilded Age plutocrats whose greed had precipitated the Great Depression. Forcing retirements on the "nine old men" would open up seats for FDR to fill.
When the Supremes refused to countenance such a matter, FDR went to Congress and demanded the authority to appoint a new, younger judge for every over-70 judge who wouldn't retire (contrary to popular mythology, there is no law that sets the number of Supreme Court justices at nine and the number has fluctuated widely through the history of the US).
For the next 168 days, the only newsworthy subject was the legitimacy of the Supreme Court. It filled every newspaper, barroom and workplace conversation. The GOP was demolished in the 1936 election, which were seen as a referendum on the Supreme Court's legitimacy - a referendum that SCOTUS decisively lost.
Soon, it was clear that FDR had the majority he needed to let him appoint new judges. And then...The court found religion. They upheld a minimum wage law that was substantively identical to other laws they'd struck down just a little while before.
They upheld NLRB rulings that were basically indistinguishable from others they'd invalidated. They reversed themselves on interstate commerce and opened the door to regulating coal mines. Then they came for sweatshop garment factories. The political will to pack the court weakened - but FDR still got his court, without having to pack it. The law was subservient to politics.
In the decades since, we've allowed the myth of ivory-tower conlaw to grow unchallenged, maintaining the pretense - so beloved of the Federalist Society - that the law is a "textual" matter. The sleight of hand is obvious: every oppressor wants to claim that they're "normal" while their opponents are "political." Paying women less then men, or Black people less than white people, is "the market"; while demands for pay equity are "political."
Jurisprudence reflects politics and can only ever reflect politics. The law must deal in ideas like "fairness" and "reasonableness," and these concepts change and change again. Judges' authority only comes secondarily from their bailiffs and "peace officers" - a judge's true authority comes from their perceived legitimacy.
Judges and enforcers know this, even when they don't admit it, which is why they spend so much effort on set-dressing - robes and gavels and somber paneling and formal language. Deep down, they're theater kids with pretensions.
That's what makes the decision to bail out Silicon Valley Bank so distressing for finance law scholars like Levitin: they understand their law to be grounded in prudence and the SVB bailout is so reckless. That's why Levitin calls the SVB bailout "banking law's Dobbs moment."
SVB is a bank that increased its executive compensation in lockstep with the recklessness of their management, doubling CEO Greg Becker's bonuses as he decreased the bank's reliability:
That's what makes the bailout so dismaying. It involves an exotic (to put it mildly; "absurd" also springs to mind) interpretation of the FDIC's statutory authority and the contours of the Dodd-Frank Act, passed after the Great Financial Crisis to ensure that the public would never reward reckless banks for failure.
As Levitin writes, "I really don't know how one can teach prudential banking regulation after SVB. How can you teach the students the formal rules—supervision, exposure and concentration limits, prompt corrective action, deposit insurance caps—when you know that the rules aren't followed?"
In other words, as with Dobbs, we have enforcers and judges behaving as though they are certain that they can maintain legitimacy in the face of widespread dismay at their actions. The politics revealed by these choices are the politics of impunity, a bedrock belief that we don't matter anymore and we can all just go fuck ourselves.
That's why SVB's apologists are so unhinged. When they argue that we had to bail out SVB because otherwise depositors would pile into Jpmorgan and other already Too Big to Fail/Too Big to Jail banks, they excluded the possibility that we'd create public banks that would break free of this seeming necessity:
When they argue that giving $2B to SVB's investors (because they were also depositors in the bank they crashed) that it's not "bailing out investors," they're ignoring the possibility that if we're gonna make up new interpretations of Dodd-Frank, we could simply tack on a "no, fuck those guys, they get nothing" rider:
When they argue that they just want to save "small businesses" and "startups," they ignore the possibility that if we're going to find political will to save a bank whose balance-sheet was 90+% billionaire VC money, we might also find political will to impose conditions on the bail-ees. Like, if we're gonna save those depositors in the name of "saving jobs" we could make them sign legally binding pledges never to lay off another worker within 10 years of a stock buyback or dividend:
The fact that none of this is on the table tells us a lot about how elites view their position in society. Specifically, it tells us that they think that the majority of us should get nothing but scraps from their tables.
They haven't made a secret of this. 40 years ago, the antitrust bar underwent a hostile takeover by billionaires' lickspittles from the Chicago School of Economics, who explicitly argued that monopolies were good and demanded that judges ignore 75 years of jurisprudence and use antitrust law to defend monopolies:
The Chicago School's paymasters funded lavish junkets - the Manne Seminars - where 40% of the federal judiciary attended luxury re-education camps to teach them to love monopolies:
Today, those judges and the lawyers who appear before them argue that any "textual" interpretation of antitrust law - say, an interpretation that acts against monopolies - is laughable, ahistorical nonsense that "flies in the face of precedent." And yeah, it does:
It flies in the face of the illegitimate, corporate-purchased precedent that turned America into an oligarch's playground. It very strictly adheres to the new precedent that politics will (someday) force upon the law.
We see this in play with the copyright case against the Internet Archive, which a lower court badly fumbled yesterday, ruling against the right of libraries to scan their print holdings and lend them out because there is a "licensed" ebooks from publishers - ebooks that cost many multiples of the print editions and self-destruct after just a few lend-outs:
The politics here are obvious. As Brewster Kahle put it, this decision conceives of libraries as "customer service departments for corporate database products." The truth is that libraries are ancient, bedrock institutions. Libraries are older than copyright. They're older than printing. Than paper. Than commerce.
The realpolitik of this decision - and the publishing strategists at the Big Five publishers who support it - is that the party is over for us plebs, the age of public goods is behind us, and we should go back belowstairs and get used to tugging our forelocks again:
The law is political. The fight over these decisions to create socialism for the rich and rugged individualism for the poor is a political fight. Yes, we can and should call on Congress to amend the statutes to clarify them, in small words that even Supreme Court judges and Chicago-poisoned economists can understand. But that in itself won't make change - what will make change is the same thing that has always made change: politics.
[Image ID: A kraken strangling a coin-operated judge automata whose robes of office bear text reading 'to obtain a verdict/put a penny in the slot' and 'with costs.' He bears two signs reading 'VERDICT.']
I’m kickstarting the audiobook for my next novel, a post-cyberpunk anti-finance finance thriller about Silicon Valley scams called Red Team Blues. Amazon’s Audible refuses to carry my audiobooks because they’re DRM free, but crowdfunding makes them possible.
SVB's investors will get $2b in public bailout money
We were told that the Silicon Valley Bank bailout wasn't a bailout: in a bailout, it's the investors who get public money; but with SVB, it was the depositors. But, of course, the owners of SVB were also depositors in their own bank. All in all, SVB's owners are entitled to $2B in public money.
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:
When Biden said, "investors in the banks will not be protected. They knowingly took a risk and when the risk didn’t pay off, investors lose their money. That’s how capitalism works," he was ignoring the fact that this isn't how the law works.
Writing on Credit Slips, the incomparable Adam Levitin - the best source on bankruptcy law writing on the web today - breaks it down: "creditors of a subsidiary have no claim on the assets of a parent." That means that the FDIC has no claim on the assets of the now-bankrupt holding company that owned SVB:
Which means that when the FDIC makes all the depositors at SVB whole, they will transfer $2b to the "investors" whom Biden promised "will not be protected." If you're interested in the minutiae of this, Levitin's piece is short and clear - there's no automatic tort-based claim that would let the FDIC get the money back from the investors, because SVB isn't classed as a really big bank (a "G-SIB").
As for Dodd-Frank's "source of strength" doctrine, it "doesn't create any concrete financial liability—it's just exhortatory."
Bankruptcy law does give priority to regulators seeking capital to keep depositors whole, but that applies only when the bank makes "a specific promise to do so." All this means that "the FDIC seems to have accidentally guarantied $2 billion for the creditors of SVB Financial Group without any offsetting claim."
No source has been better for understanding the SVB debacle than Credit Slips, asking questions and raising issues that no one else has even noticed - like, why didn't SVB use CDARS or another reciprocal deposit service (where banks stash money on behalf of depositors with one another to keep balances below the insurable limit)?
I first found Credit Slips thanks to its outstanding coverage of the bankruptcy of the Sacklers, the intergenerational crime-family that made billions by starting and fueling the opioid crisis, and managed to keep those billions thanks to a series of breathtakingly corrupt, extremely complex legal maneuvers:
SVB's owners are attempting their own bankruptcy law hack, and Credit Slips is on the case, analyzing the bank owners' claim that SVB is actually a Manhattan company, despite being based in, you know, Silicon Valley:
In its filings, the company claims its "principal place of business" is its modest offices at 387 Park Avenue South (and not the massive headquarters building it maintained in Santa Clara, which SVB lists as its HQ on its "Bank Holding Company Report, Systemic Risk Report, Consolidated Financial Statement, and Parent Company Only Financial Statement for Large Bank Holding Companies."
SVB isn't incorporated in NY, it has no bankrupt NY affiliate and does not keep its principle assets in NY. Despite the obvious absurdity of its claim to being headquartered in New York, SVB's officers swore to it on penalty of perjury.
Why would they do this? They're judge-shopping. They evidently believe they'll get a better deal from a judge in the Southern District of New York than they would in the Northern District of California.
Like, maybe they think the SDNY will let them protect the $2b the FDIC has promised them.
SVB lobbied for lax regulation - including lower reserves - and failed to take basic steps to protect their depositors that comparable banks engaged in. They suborned their regulators, evading the prudent supervision that would have prevented a bank from taking shares in 3,000 of their depositors' businesses and building a balance sheet whose deposits were "90-100% uninsured ‘hot money’ deposits by venture capitalists to bet on unhedged long-term bonds":
https://mattstoller.substack.com/p/fire-the-fed
As Matt Stoller writes, SVB extended below-cost loans to insiders as part of its "white-glove" service, promised depositors personal audiences with top tier VCs each time they deposited $100m. All of this created the utterly foreseeable, absolutely preventable systemic risk that the public is now bailing out, to the tune of $175b.
Weighed against that $175b price-tag, the $2b that we're about to shower on the architects of this collapse may seem like small potatoes. But as the old saying goes, $2b here, $2b there, pretty soon we're talking real money.
This Monday (Mar 20), I’m doing a remote talk for the Ostrom Workshop’s Beyond the Web Speaker Series.
[Image ID: An old fashioned corner bank. Its sign has been replaced with the SVB logo. Peeking above the bank is an ogrish caricature of a capitalist in a top-hat, yanking on a golden, dollar-sign-shaped lever. He holds aloft a $100 bill, which he has plucked from a bouquet of C-notes poking out from the bank roof. Below him is a weeping, shattered Humpty Dumpty, sitting in a pool of tragic yolk.]
