I'm coming to DEFCON! On FRIDAY (Aug 9), I'm emceeing the EFF POKER TOURNAMENT (noon at the Horseshoe Poker Room), and appearing on the BRICKED AND ABANDONED panel (5PM, LVCC - L1 - HW1–11–01). On SATURDAY (Aug 10), I'm giving a keynote called "DISENSHITTIFY OR DIE! How hackers can seize the means of computation and build a new, good internet that is hardened against our asshole bosses' insatiable horniness for enshittification" (noon, LVCC - L1 - HW1–11–01).
Here's an open secret: the confusing jargon of finance is not the product of some inherent complexity that requires a whole new vocabulary. Rather, finance-talk is all obfuscation, because if we called finance tactics by their plain-language names, it would be obvious that the sector exists to defraud the public and loot the real economy.
Take "leveraged buyout," a polite name for stealing a whole goddamned company:
Identify a company that owns valuable assets that are required for its continued operation, such as the real-estate occupied by its outlets, or even its lines of credit with suppliers;
Approach lenders (usually banks) and ask for money to buy the company, offering the company itself (which you don't own!) as collateral on the loan;
Offer some of those loaned funds to shareholders of the company and convince a key block of those shareholders (for example, executives with large stock grants, or speculators who've acquired large positions in the company, or people who've inherited shares from early investors but are disengaged from the operation of the firm) to demand that the company be sold to the looters;
Call a vote on selling the company at the promised price, counting on the fact that many investors will not participate in that vote (for example, the big index funds like Vanguard almost never vote on motions like this), which means that a minority of shareholders can force the sale;
Once you own the company, start to strip-mine its assets: sell its real-estate, start stiffing suppliers, fire masses of workers, all in the name of "repaying the debts" that you took on to buy the company.
This process has its own euphemistic jargon, for example, "rightsizing" for layoffs, or "introducing efficiencies" for stiffing suppliers or selling key assets and leasing them back. The looters – usually organized as private equity funds or hedge funds – will extract all the liquid capital – and give it to themselves as a "special dividend." Increasingly, there's also a "divi recap," which is a euphemism for borrowing even more money backed by the company's assets and then handing it to the private equity fund:
If you're a Sopranos fan, this will all sound familiar, because when the (comparatively honest) mafia does this to a business, it's called a "bust-out":
https://en.wikipedia.org/wiki/Bust_Out
The mafia destroys businesses on a onesy-twosey, retail scale; but private equity and hedge funds do their plunder wholesale.
Now, you can't demolish that much of the US productive economy without attracting some negative attention, so the looter spin-machine has perfected some talking points to hand-wave away the criticism that borrowing money using something you don't own as collateral in order to buy it and wreck it is obviously a dishonest (and potentially criminal) destructive practice.
The most common one is that borrowing money against an asset you don't own is just like getting a mortgage. This is such a badly flawed analogy that it is really a testament to the efficacy of the baffle-em-with-bullshit gambit to convince us all that we're too stupid to understand how finance works.
Sure: if I put an offer on your house, I will go to my credit union and ask the for a mortgage that uses your house as collateral. But the difference here is that you own your house, and the only way I can buy it – the only way I can actually get that mortgage – is if you agree to sell it to me.
Owner-occupied homes typically have uncomplicated ownership structures. Typically, they're owned by an individual or a couple. Sometimes they're the property of an estate that's divided up among multiple heirs, whose relationship is mediated by a will and a probate court. Title can be contested through a divorce, where disputes are settled by a divorce court. At the outer edge of complexity, you get things like polycules or lifelong roommates who've formed an LLC s they can own a house among several parties, but the LLC will have bylaws, and typically all those co-owners will be fully engaged in any sale process.
Leveraged buyouts don't target companies with simple ownership structures. They depend on firms whose equity is split among many parties, some of whom will be utterly disengaged from the firm's daily operations – say, the kids of an early employee who got a big stock grant but left before the company grew up. The looter needs to convince a few of these "owners" to force a vote on the acquisition, and then rely on the idea that many of the other shareholders will simply abstain from a vote. Asset managers are ubiquitous absentee owners who own large stakes in literally every major firm in the economy. The big funds – Vanguard, Blackrock, State Street – "buy the whole market" (a big share in every top-capitalized firm on a given stock exchange) and then seek to deliver returns equal to the overall performance of the market. If the market goes up by 5%, the index funds need to grow by 5%. If the market goes down by 5%, then so do those funds. The managers of those funds are trying to match the performance of the market, not improve on it (by voting on corporate governance decisions, say), or to beat it (by only buying stocks of companies they judge to be good bets):
Your family home is nothing like one of these companies. It doesn't have a bunch of minority shareholders who can force a vote, or a large block of disengaged "owners" who won't show up when that vote is called. There isn't a class of senior managers – Chief Kitchen Officer! – who have been granted large blocks of options that let them have a say in whether you will become homeless.
Now, there are homes that fit this description, and they're a fucking disaster. These are the "heirs property" homes, generally owned by the Black descendants of enslaved people who were given the proverbial 40 acres and a mule. Many prosperous majority Black settlements in the American South are composed of these kinds of lots.
Given the historical context – illiterate ex-slaves getting property as reparations or as reward for fighting with the Union Army – the titles for these lands are often muddy, with informal transfers from parents to kids sorted out with handshakes and not memorialized by hiring lawyers to update the deeds. This has created an irresistible opportunity for a certain kind of scammer, who will pull the deeds, hire genealogists to map the family trees of the original owners, and locate distant descendants with homeopathically small claims on the property. These descendants don't even know they own these claims, don't even know about these ancestors, and when they're offered a few thousand bucks for their claim, they naturally take it.
Now, armed with a claim on the property, the heirs property scammers force an auction of it, keeping the process under wraps until the last instant. If they're really lucky, they're the only bidder and they can buy the entire property for pennies on the dollar and then evict the family that has lived on it since Reconstruction. Sometimes, the family will get wind of the scam and show up to bid against the scammer, but the scammer has deep capital reserves and can easily win the auction, with the same result:
https://www.propublica.org/series/dispossessed
A similar outrage has been playing out for years in Hawai'i, where indigenous familial claims on ancestral lands have been diffused through descendants who don't even know they're co-owner of a place where their distant cousins have lived since pre-colonial times. These descendants are offered small sums to part with their stakes, which allows the speculator to force a sale and kick the indigenous Hawai'ians off their family lands so they can be turned into condos or hotels. Mark Zuckerberg used this "quiet title and partition" scam to dispossess hundreds of Hawai'ian families:
https://archive.is/g1YZ4
Heirs property and quiet title and partition are a much better analogy to a leveraged buyout than a mortgage is, because they're ways of stealing something valuable from people who depend on it and maintain it, and smashing it and selling it off.
Strip away all the jargon, and private equity is just another scam, albeit one with pretensions to respectability. Its practitioners are ripoff artists. You know the notorious "carried interest loophole" that politicians periodically discover and decry? "Carried interest" has nothing to do with the interest on a loan. The "carried interest" rule dates back to 16th century sea-captains, and it refers to the "interest" they had in the cargo they "carried":
Private equity managers are like sea captains in exactly the same way that leveraged buyouts are like mortgages: not at all.
And it's not like private equity is good to its investors: scams like "continuation funds" allow PE looters to steal all the money they made from strip mining valuable companies, so they show no profits on paper when it comes time to pay their investors:
Those investors are just as bamboozled as we are, which is why they keep giving more money to PE funds. Today, the "dry powder" (uninvested money) that PE holds has reached an all-time record high of $2.62 trillion – money from pension funds and rich people and sovereign wealth funds, stockpiled in anticipation of buying and destroying even more profitable, productive, useful businesses:
The practices of PE are crooked as hell, and it's only the fact that they use euphemisms and deceptive analogies to home mortgages that keeps them from being shut down. The more we strip away the bullshit, the faster we'll be able to kill this cancer, and the more of the real economy we'll be able to preserve.
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 novel The Bezzle! Catch me TONIGHT in LA with Adam Conover at Vroman's, then on MONDAY in Seattle with Neal Stephenson, then Portland, Phoenix and more!
Vice died the way it lived: being suckered in by smarter predators, even as it trained its own predatory instincts on those more credulous than its own supremely gullible leadership. RIP, we hardly knew ye.
For those of you who don't know, Vice was a Canadian media success story. It was founded by a motley clique of hipsters, one of whom – founder of the Proud Boys – has since grown to be one of the world's great fascism influencers. Another perfected the art of getting young people to work "for exposure" even as he built a massive, highly lucrative media empire on their free labor:
Eventually, Vice transitioned to a string of progressively worsening corporate owners, each more dishonest, predatory – and gullible – than the last. The company was one of the most enthusiastic marks for Facebook's infamous "pivot to video" – in which Mark Zuckerberg destroyed half the media industry by tricking them into thinking that the public was clamoring for video content, based on fraudulent viewing numbers:
https://en.wikipedia.org/wiki/Pivot_to_video
Vice went all-in on video, spending hundreds of millions to finance Zuckerberg's doomed attempt to conquer Youtube. But unlike other the rubes who got zucked, Vice found greater fools to scam, convincing giant, slow-moving meidia companies that the best way to get in on the Next Big Thing was to shower them with vast sums of string-free money:
And yet, at every turn, through a succession of increasingly incompetent owners who bought the stumbling, declining Vice at fire-sale prices and then proceeded to hack away at the wages and tools its journalists depended on while paying executives salaries so high that they beggared the imagination, Vice's reporters continued to turn out stellar material.
This went on literally until the last moment. The memorial posted by 404 Media rounds up a selection of major stories Vice's beleaguered, precarious writers produced even as Vice's vulture capitalist leadership were pulling the rug out from under them:
True to form, those private equity scumbags locked all those workers out of the company's CMS without notice – and then forgot to lock down the podcasting back-end. That allowed a group of Vice veterans – Matthew Gault, Emily Lipstein, Anna Merlan, Tim Marchman and Mack Lamoureux – to gather for a totally unauthorized, tell-all session that they pushed out on an official Vice channel:
https://www.youtube.com/watch?v=TKT4OtDEJRA
It's a hell of a listen. Not only do these Vice veterans have lots of fascinating history to recount, but they also describe the conditions under which those blockbuster stories of Vice's final days were produced. As the "visionary leaders" of the company paid themselves millions, they halted payments to key suppliers, from Lexisnexis to the interview transcription service the writers depended on. Writers paid out of pocket to search PACER court records.
Not only did Vice's reporters do incredible work under terrible and worsening circumstances, but the Vice writers who got out ahead of the total collapse are also doing incredible work. 404 Media is a writer-owned investigative news publisher founded by four Vice escapees – Samantha Cole, Jason Koebler, Emanuel Maiberg and Joseph Cox, which is both producing incredible work and sustaining the writers who founded it:
https://www.404media.co/
All of which leads to an inescapable conclusion: whatever problems Vice had, they didn't include "writers don't do productive work" and also didn't include "that work isn't economically viable*. Whatever problems Vice had, they weren't problems with Vice's workers – it was a problem with Vice's bosses.
Which makes Vice's final, ignominious punishment at the hands of those bosses even more brutal, stupid and inexcusable. According to the leaked memos emanating from the company's investors and their millionaire C-suite toadies, the business's new strategy is abandoning their website in order to publish on social media.
This is…I mean, this,..
This is…
Wow.
I mean, wow.
The thing is, the social media business model is a giant rug-pull. They're not even bothering to hide their playbook anymore. For social media, the game is to encourage media companies to become reliant on third parties to reach their audiences. Once that reliance is established, the companies turn down – or even halt – the ability of those media companies to reach their audience altogether. Then, they charge the media companies to reach their audiences:
Now, this wasn't always quite so obvious. Back when Vice was falling for Facebook's "pivot to video," it wasn't completely obvious that the long con was to take your audience hostage and ransom them back to you. But deliberately organizing your business to be reliant on social media barons today? It's like trusting your money to Sam Bankman-Fried…in 2024.
If there was ever a moment when the obvious, catastrophic, imminent risk of trusting Big Tech intermediaries to sit between you and your customers or audience, it was now. This is not the moment to be "social first." This is the moment for POSSE (Post Own Site, Share Everywhere), a strategy that sees social media as a strategy for bringing readers to channels that you control:
Predicting that a social media platform will rug the media companies that depend on it today doesn't take a Sun Tzu – as cunning strategies go, the hamfisted tactics of FB, Twitter and Tiktok make gambits like "Lucy and the football" look like von Clausewitz.
The most bonkers part of this strategy is that it's coming from private equity bosses, who laud themselves as the great strategists of the 21st century, whose claim on so much of our global capital and resources is derived from their brilliant insight, which allows them to buy "distressed assets" like Vice, "restructure" them to find "efficiencies" and sell them on.
The reality is that PE goons – like other financiers – are basically herding animals. Everyone's hit on the tactic of buying up beloved media companies – from the 150-year-old Popular Science to modern publications like CNet – and then filling them with spammy garbage in the hopes that Google will fail to notice and continue to award them pride-of-place on search results pages:
The fact that these billionaire brain-geniuses can't figure out how to "turn around" a site whose workers a) produce brilliant, popular, successful work; and b) depart to found successful firms that commercialize that work tells you everything about their ability to spot "a good business opportunity."
PE – like other mafiosi – only have one business-plan, the "bust out," where you invade a business that produces useful things, force them to pay your chosen suppliers sky-high fees for things they don't need, extract massive fees for your "management" and then walk away from the collapse:
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:
