Antiusurpation and the road to disenshittification
THIS WEEKEND (November 8-10), I'll be in TUCSON, AZ: I'm the GUEST OF HONOR at the TUSCON SCIENCE FICTION CONVENTION.
Nineties kids had a good reason to be excited about the internet's promise of disintermediation: the gatekeepers who controlled our access to culture, politics, and opportunity were crooked as hell, and besides, they sucked.
For a second there, we really did get a lot of disintermediation, which created a big, weird, diverse pluralistic space for all kinds of voices, ideas, identities, hobbies, businesses and movements. Lots of these were either deeply objectionable or really stupid, or both, but there was also so much cool stuff on the old, good internet.
Then, after about ten seconds of sheer joy, we got all-new gatekeepers, who were at least as bad, and even more powerful, than the old ones. The net became Tom Eastman's "Five giant websites, each filled with screenshots of the other four." Culture, politics, finance, news, and especially power have been gathered into the hands of unaccountable, greedy, and often cruel intermediaries.
Oh, also, we had an election.
This isn't an election post. I have many thoughts about the election, but they're still these big, unformed blobs of anger, fear and sorrow. Experience teaches me that the only way to get past this is to just let all that bad stuff sit for a while and offgas its most noxious compounds, so that I can handle it safely and figure out what to do with it.
While I wait that out, I'm just getting the job done. Chop wood, carry water. I've got a book to write, Enshittification, for Farar, Straus, Giroux's MCD Books, and it's very nearly done:
Compartmentalizing my anxieties and plowing that energy into productive work isn't necessarily the healthiest coping strategy, but it's not the worst, either. It's how I wrote nine books during the covid lockdowns.
And sometimes, when you're not staring directly at something, you get past the tunnel vision that makes it impossible to see its edges, fracture lines, and weak points.
So I'm working on the book. It's a book about platforms, because enshittification is a phenomenon that is most visible and toxic on platforms. Platforms are intermediaries, who connect buyers and sellers, creators and audiences, workers and employers, politicians and voters, activists and crowds, as well as families, communities, and would-be romantic partners.
There's a reason we keep reinventing these intermediaries: they're useful. Like, it's technically possible for a writer to also be their own editor, printer, distributor, promoter and sales-force:
But without middlemen, those are the only writers we'll get. The set of all writers who have something to say that I want to read is much larger than the set of all writers who are capable of running their own publishing operation.
The problem isn't middlemen: the problem is powerful middlemen. When an intermediary gets powerful enough to usurp the relationship between the parties on either side of the transaction, everything turns to shit:
A dating service that faces pressure from competition, regulation, interoperability and a committed workforce will try as hard as it can to help you find Your Person. A dating service that buys up all its competitors, cows its workforce, captures its regulators and harnesses IP law to block interoperators will redesign its service so that you keep paying forever, and never find love:
Multiply this a millionfold, in every sector of our complex, high-tech world where we necessarily rely on skilled intermediaries to handle technical aspects of our lives that we can't – or shouldn't – manage ourselves. That world is beholden to predators who screw us and screw us and screw us, jacking up our rents:
(Maybe this is a post about the election after all?)
The difference between a helpmeet and a parasite is power. If we want to enjoy the benefits of intermediaries without the risks, we need policies that keep middlemen weak. That's the opposite of the system we have now.
Take interoperability and IP law. Interoperability (basically, plugging new things into existing things) is a really powerful check against powerful middlemen. If you rely on an ad-exchange to fund your newsgathering and they start ripping you off, then an interoperable system that lets you use a different exchange will not only end the rip off – it'll make it less likely to happen in the first place because the ad-tech platform will be afraid of losing your business:
Interoperability means that when Amazon rips off audiobook authors to the tune of $100m, those authors can pull their books from Amazon and sell them elsewhere and know that their listeners can move their libraries over to a different app:
But interoperability has been in retreat for 40 years, as IP law has expanded to criminalize otherwise normal activities, so that middlemen can use IP rights to protect themselves from their end-users and business customers:
https://locusmag.com/2020/09/cory-doctorow-ip/
That's what I mean when I say that "IP" is "any law that lets a business reach beyond its own walls and control the actions of its customers, competitors and critics."
For example, there's a pernicious law 1998 US law that I write about all the time, Section 1201 of the Digital Millennium Copyright Act, the "anticircumvention law." This is a law that felonizes tampering with copyright locks, even if you are the creator of the undelying work.
So Amazon – the owner of the monopoly audiobook platform Audible – puts a mandatory copyright lock around every audiobook they sell. I, as an author who writes, finances and narrates the audiobook, can't provide you, my customer, with a tool to remove that lock. If I do so, I face criminal sanctions: a five year prison sentence and a $500,000 fine for a first offense:
In other words: if I let you take my own copyrighted work out of Amazon's app, I commit a felony, with penalties that are far stiffer than the penalties you would face if you were to simply pirate that audiobook. The penalties for you shoplifting the audiobook on CD at a truck-stop are lower than the penalties the author and publisher of the book would face if they simply gave you a tool to de-Amazon the file. Indeed, even if you hijacked the truck that delivered the CDs, you'd probably be looking at a shorter sentence.
This is a law that is purpose-built to encourage intermediaries to usurp the relationship between buyers and sellers, creators and audiences. It's a charter for parasitism and predation.
But as bad as that is, there's another aspect of DMCA 1201 that's even worse: the exemptions process.
You might have read recently about the Copyright Office "freeing the McFlurry" by granting a DMCA 1201 exemption for companies that want to reverse-engineer the error-codes from McDonald's finicky, unreliable frozen custard machines:
Under DMCA 1201, the Copyright Office hears petitions for these exemptions every three years. If they judge that anticircumvention law is interfering with some legitimate activity, the statute empowers them to grant an exemption.
When the DMCA passed in 1998 (and when the US Trade Rep pressured other world governments into passing nearly identical laws in the decades that followed), this exemptions process was billed as a "pressure valve" that would prevent abuses of anticircumvention law.
But this was a cynical trick. The way the law is structured, the Copyright Office can only grant "use" exemptions, but not "tools" exemptions. So if you are granted the right to move Audible audiobooks into a third-party app, you are personally required to figure out how to do that. You have to dump the machine code of the Audible app, decompile it, scan it for vulnerabilities, and bootstrap your own jailbreaking program to take Audible wrapper off the file.
No one is allowed to help you with this. You aren't allowed to discuss any of this publicly, or share a tool that you make with anyone else. Doing any of this is a potential felony.
In other words, DMCA 1201 gives intermediaries power over you, but bans you from asking an intermediary to help you escape another abusive middleman.
This is the exact opposite of how intermediary law should work. We should have rules that ban intermediaries from exercising undue power over the parties they serve, and we should have rules empowering intermediaries to erode the advantage of powerful intermediaries.
The fact that the Copyright Office grants you an exemption to anticircumvention law means nothing unless you can delegate that right to an intermediary who can exercise it on your behalf.
A world without publishing intermediaries is one in which the only writers who thrive are the ones capable of being publishers, too, and that's a tiny fraction of all the writers with something to say.
A world without interoperability intermediaries is one in which the only platform users who thrive are also skilled reverse-engineering ninja hackers – and that's an infinitesimal fraction of the platform users who would benefit from interoperabilty.
Let this be your north star in evaluating platform regulation proposals. Platform regulation should weaken intermediaries' powers over their users, and strengthen their power over other middlemen.
Put in this light, it's easy to see why the ill-informed calls to abolish Section 230 of the Communications Decency Act (which makes platform users, not platforms, responsible for most unlawful speech) are so misguided:
If we require platforms to surveil all user speech and block anything that might violate any law, we give the largest, most powerful platforms a permanent advantage over smaller, better platforms, run by co-ops, hobbyists, nonprofits local governments, and startups. The big platforms have the capital to rig up massive, automated surveillance and censorship systems, and the only alternatives that can spring up have to be just as big and powerful as the Big Tech platforms we're so desperate to escape:
This is especially grave given the current political current, where fascist politicians are threatening platforms with brutal punishments for failing to censor disfavored political views.
Anyone who tells you that "it's only censorship when the government does it" is badly confused. It's only a First Amendment violation when the government does it, sure – but censorship has always relied on intermediaries. From the Inquisition to the Comics Code, government censors were only able to do their jobs because powerful middlemen, fearing state punishments, blocked anything that might cross the line, censoring far beyond the material actually prohibited by the law:
We live in a world of powerful, corrupt middlemen. From payments to real-estate, from job-search to romance, there's a legion of parasites masquerading as helpmeets, burying their greedy mouthparts into our tender flesh:
But intermediaries aren't the problem. You shouldn't have to stand up your own payment processor, or learn the ins and outs of real-estate law, or start your own single's bar. The problem is power, not intermediation.
As we set out to build a new, good internet (with a lot less help from the US government than seemed likely as recently as last week), let's remember that lesson: the point isn't disintermediation, it's weak intermediation.
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:
Private equity ghouls have a new way to steal from their investors
Private equity is quite a racket. PE managers pile up other peoples’ money — pension funds, plutes, other pools of money — and then “invest” it (buying businesses, loading them with debt, cutting wages, lowering quality and setting traps for customers). For this, they get an annual fee — 2% — of the money they manage, and a bonus for any profits they make.
On top of this, private equity bosses get to use the carried interest tax loophole, a scam that lets them treat this ordinary income as a capital gain, so they can pay half the taxes that a working stiff would pay on a regular salary. If you don’t know much about carried interest, you might think it has to do with “interest” on a loan or a deposit, but it’s way weirder. “Carried interest” is a tax regime designed for 16th century sea captains and their “interest” in the cargo they “carried”:
Private equity is a cancer. Its profits come from buying productive firms, loading them with debt, abusing their suppliers, workers and customers, and driving them into ground, stiffing all of them — and the company’s creditors. The mafia have a name for this. They call it a “bust out”:
And they’re coming for more. PE funds are “rolling up” thousands of Boomer-owned business as their owners retire. There’s a good chance that every funeral home, pet groomer and urgent care clinic within an hour’s drive of you is owned by a single PE firm. There’s 2.9m more Boomer-owned businesses going up for sale in the coming years, with 32m employees, and PE is set to buy ’em all:
PE funds get their money from “institutional investors.” It shouldn’t surprise you to learn they treat their investors no better than their creditors, nor the customers, employees or suppliers of the businesses they buy.
Pension funds, in particular, are the perennial suckers at the poker table. My parent’s pension fund, the Ontario Teachers’ Fund, are every grifter’s favorite patsy, losing $90m to Sam Bankman-Fried’s cryptocurrency scam:
Pension funds are neck-deep in private equity, paying steep fees for shitty returns. Imagine knowing that the reason you can’t afford your apartment anymore is your pension fund gambled with the private equity firm that bought your building and jacked up the rent — and still lost money:
But there’s no depth too low for PE looters to sink to. They’ve found an exciting new way to steal from their investors, a scam called a “continuation fund.” Writing in his latest newsletter, the great Matt Levine breaks it down:
Here’s the deal: say you’re a PE guy who’s raised a $1b fund. That entitles you to a 2% annual “carry” on the fund: $20,000,000/year. But you’ve managed to buy and asset strip so many productive businesses that it’s now worth $5b. Your carry doesn’t go up fivefold. You could sell the company and collect your 20% commission — $800m — but you stop collecting that annual carry.
But what if you do both? Here’s how: you create a “continuation fund” — a fund that buys your old fund’s portfolio. Now you’ve got $5b under management and your carry quintuples, to $100m/year. Levine dryly notes that the FT calls this “a controversial type of transaction”:
These deals “look like a pyramid scheme” — one fund flips its assets to another fund, with the same manager running both funds. It’s a way to make the pie bigger, but to decrease the share (in both real and proportional terms) going to the pension funds and other institutional investors who backed the fund.
A PE boss is supposed to be a fiduciary, with a legal requirement to do what’s best for their investors. But when the same PE manager is the buyer and the seller, and when the sale takes place without inviting any outside bidders, how can they possibly resolve their conflict of interest?
They can’t: 42% of continuation fund deals involve a sale at a value lower than the one that the PE fund told their investors the assets were worth. Now, this may sound weird — if a PE boss wants to set a high initial value for their fund in order to maximize their carry, why would they sell its assets to the new fund at a discount?
Here’s Levine’s theory: if you’re a PE guy going back to your investors for money to put in a new fund, you’re more likely to succeed if you can show that their getting a bargain. So you raise $1b, build it up to $5b, and then tell your investors they can buy the new fund for only $3b. Sure, they can get out — and lose big. Or they can take the deal, get the new fund at a 40% discount — and the PE boss gets $60m/year for the next ten years, instead of the $20m they were getting before the continuation fund deal.
PE is devouring the productive economy and making the world’s richest people even richer. The one bright light? The FTC and DoJ Antitrust Division just published new merger guidelines that would make the PE acquire/debt-load/asset-strip model illegal:
Today (Jul 20) 16h: Signing, Tor Books booth #2802 (free advance copies of The Lost Cause — Nov 2023 — to the first 50 people!)
Tomorrow (Jul 21):
1030h: Wish They All Could be CA MCs, room 24ABC (panel)
12h: Signing, AA09
Sat, Jul 22 15h: The Worlds We Return To, room 23ABC (panel)
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:
[Image ID: An old Punch editorial cartoon depicting a bank-robber sticking up a group of businesspeople and workers. He wears a bandanna emblazoned with dollar-signs and a top-hat.]
Having an property plan in place is all properly and good, however one specific caveat: selecting the incorrect fiduciary generally is a recipe for catastrophe. One doesn’t should look far for examples of a testator’s needs not being carried out in keeping with plan. In his Tuesday afternoon presentation on the 53rd Annual Heckerling Institute on Property Planning, “Why Can’t My Brother-In-Legislation Bob Be the Executor of My Property? Concerns Involving the Collection of The Correct Fiduciaries,” Stuart C. Bear, accomplice, shareholder and the president of Chestnut Cambronne in Minneapolis, made his case for why property planner ought to be including a better degree to the providers they supply shoppers by educating them on methods to choose the right fiduciaries.
In line with Bear, fiduciary choice “shouldn’t be as simple as asking the consumer who she or he needs to appoint as his or her fiduciaries.” Shoppers usually default to a partner or little one, nonetheless, as practitioners, we must always interact shoppers in a considerate dialogue and discover the opportunity of naming an unbiased third occasion or company trustee. It’s vital to weigh the advantages of utilizing a trusted particular person the household is aware of properly versus a impartial third occasion that gained’t be swayed by feelings.
Educate the Shopper on Completely different Fiduciary Roles
Bear suggests beginning by explaining to the consumer, in layman’s phrases, what every completely different fiduciary position entails. Subsequent, it’s vital to contemplate whether or not one particular person can put on a number of hats (for instance, because the legal professional the truth is, well being care agent, trustee, and so on.) or if multiple fiduciary is likely to be a greater match.
Bear advises discussing the next with shoppers:
The skillset vital for every specific position (i.e., an executor ought to be enterprise savvy and arranged—for instance, quite than merely placing a property available on the market, must know to seek the advice of a realtor and contemplate finest timing to listing the property).
The burden on the chosen fiduciaries of fulfilling their duties.
The truth that the primary consultant might not have an obligation to behave, and doesn’t formally have to say no to behave, in sure roles (i.e., a well being care agent).
Talking to a purported consultant and seeing if he’s prepared to behave within the proposed position.
Stepping outdoors the bounds of household assemble—Shoppers have a tendency to consider equity and sometimes default to the beginning order of their youngsters, however the logical candidate to deal with issues must be a powerful advocate.
Practitioners Position in Fiduciary Choice
Full disclosure. In line with Bear, the practitioner’s position is to firstly observe the American School of Belief and Property Counsel Commentary on Mannequin Guidelines of Skilled Conduct Part 1.2 and talk about the capabilities private consultant, trustee or different fiduciary will carry out within the consumer’s property plan, together with the chance that the lawyer for the fiduciary might owe duties to the beneficiaries of the fiduciary property. Practitioners must also be alert to the multiplicity of relationships and difficult moral points that will come up.
Perceive the consumer. In an effort to make a considerate advice concerning fiduciary choice, Bear asks his shoppers a collection of probing questions to higher perceive the household dynamics, together with:
Do the kids get alongside?
In the event that they get alongside, how usually do they see one another? (Have they got a relationship outdoors of household capabilities organized by the mother and father?)
Do the kids get together with one another’s spouses? Do the spouses get alongside?
Are the kids able to working collectively?
How would a toddler react if one little one was chosen over the opposite?
Are the kids in related monetary scenario?
Have they got time and capability to meet the obligations?
Have they got the monetary and private abilities required for the position?
Is there a enterprise accomplice or member of the family who youngsters respect who is likely to be a greater match?
Drafting the Paperwork. Even when a consumer on the outset says he has a fiduciary in thoughts, Bear’s rule of thumb is to go away that subject clean till the aforementioned educating of the consumer on fiduciary choice is full. He additionally defined that he prefers a sturdy energy of legal professional (POA) to a springing energy POA, reasoning decline in capability is normally gradual and the consumer can use the assist in resolution making lengthy earlier than he’s discovered incapacitated. Some shoppers might not know that it’s doable to have a POA turn into efficient instantly upon signing. It’s additionally a great way to know if somebody is a correct fiduciary—if a consumer is anxious that delegating some management to a person might result in stealing or different points, it’s a crimson flag that possibly they should rethink their choice whereas they nonetheless can.
Bear additionally harassed the significance of together with language to permit for belief protectors and successor trusts, particularly for conditions that will name for a impartial third occasion to step in. One other rule of thumb talked about in his presentation is to encourage the consumer to specify inside his paperwork his choice with regard to fiduciary compensation.
Household Conferences
Bear rounded out his presentation by recommending organising a household assembly on the workplace to share this data particularly when: (1) belongings are distributed unequally between youngsters, (2) particular belongings are distributed to particular youngsters, (three) there’s a second marriage or blended household, or (four) there’s a hierarchy within the nomination of fiduciaries. Being upfront about why sure selections have been made can (hopefully) forestall future discord.
Read the full article
BU Law emerita professor Tamar Frankel explains why state regulatory bodies should impose fiduciary duties on broker-dealers, whose services involve both “sales talk” and the managing of securities of investors who often lack knowledge or expertise of the transactions. Frankel reiterates points she made during testimony before the New Jersey Bureau of Securities and makes the case for the long-overdue regulation of broker-dealers as fiduciaries.
Successful fiduciaries live their vision We've all been there, the PTA meeting, soccer game or dinner party, and the inevitable question comes up: "What do you do?" And we all know that there are different levels of answers.
7 Services that a Registered Investment Advisor (RIA) Provides
7 Services that a Registered Investment Advisor (RIA) Provides
Investing is serious business. How well you manage your investments can make the difference between a comfortable retirement and working ‘till you drop. Most people use a financial advisor of some kind.
Back in the day, people opened an account with a major investment firm and used a broker who would call and make recommendations to buy or sell. They were essentially stock and bond salesmen…
Digital Assets Act Allows Access to Decedent’s Online Accounts
During your lifetime, you were an avid user of social media. You couldn’t resist the occasional tweet, Instagram shots, Snapchat bits, LinkedIn updates, and let’s not forget the family recipes and life moment alerts you so dutifully posted on Facebook. How many emails do you send or receive in a day? Each time you set up an account…
Firminy Capital Sarl, based in Capellen, Luxembourg, was established by a partnership of South African businessmen in 2007. Dedicated to protecting its clients' illiquid assets, Firminy Capital Sarl provides securitization opportunities and also serves as a fiduciary that oversees the funds of several estates.
A fiduciary is an individual or entity that has been given the legal right to hold the assets of another individual or entity. The person for whom the fiduciary holds assets is called a principal. Often, children and the elderly require fiduciary services. Other examples of fiduciary relationships include those between a director and her shareholders, a guardian and her ward, or a lawyer and her client.
Due to the significant responsibility of a fiduciary to account for the assets of a principal, U.S. law states that it is illegal for a fiduciary to make a profit from a principal's assets without the principal's express informed consent. In fact, of all the duties of care acknowledged by the United States legal system, the fiduciary duty is the most strictly legislated. A fiduciary also may not knowingly enter into any relationship that may result in a conflict of interest between the fiduciary and her principal.
