Pluralistic: 10 Aug 2020


Today's links



Warren Buffet, monopolist (permalink)

Monopolized: Life in the Age of Corporate Power is David Dayen's new book about the concentration of industry in America and around the world; one interesting implication of monopolies is that they are intensely individual phenomena.

https://thenewpress.com/books/monopolized

That is, despite being driven by vast social forces, monopolies have monopolists: named, well-known individuals whose personal choices directly lead to misery, hardship and death for millions.

People like Warren Buffett, America's folksiest monopolist.

Buffett isn't shy about this. His whole deal is backing companies with "moats" – that is to say, companies that don't have to worry about competition (cue Peter Thiel, saying the quiet part aloud: "Competition is for losers").

Buffet is in nearly every chapter of MONOPOLIZED. In an interview with Matt Stoller, Dayen explains how this came to be.

https://mattstoller.substack.com/p/warren-buffett-americas-folksiest

What kinds of monopolies does Buffett love? Well, if you can't afford dialysis or if you lost a loved one to opioids, chances are Buffett made a buck. A classic Buffett moat is health/pharma, which are easy to monopolize thanks to the captive audience and/or addiction.

If your town only has one newspaper, that might be Buffet's doing – and if not, it was the doing of one of his buffettistas, using his playbook to buy one paper and then crush its rivals with anticompetitive tactics.

If you own a mobile home and lost money the instant you bought it and get worse off every year in a trailer park, that's probably Buffett, who understands that when someone is desperately clinging on at the brink of homelessness, you can really squeeze 'em.

If you own a .net or .com domain that you're paying big bucks to renew every year, that's Buffett, working through Verisign, one of the world's most profitable companies, thanks to its government monopoly on the to biggest TLDs.

If your favorite craft brewer was driven to its knees and bought up for pennies by the Brazilian private equity firm 3G, that was Buffett, who drove the purchase of beer monopolist AB Inbev. Buffett's also behind megamergers like Burger King/Tim Horton's and Kraft/Heinz.

And while Buffett rarely buys tech businesses, he was big, early on Amazon: "I had to understand the product and business." Dayen translates: "he understood the monopoly that Amazon was putting together, so he purchased a large share of their stock."

Buffett's also big on Moody's part of the hyperconcentrated bond-rating market: "I know nothing about credit rating. The only reason I bought it is because there are only three credit rating agencies and they serve the whole country, and they have pricing power."

Buffett's ideal investment is a monopolist, one that makes money so reliably, irrespective of poor quality or high prices, that "even your idiot cousin could run it."

Buffett doesn't just seek out monopolies: he creates them, he cheerleads them, he normalizes them. Buffett, perhaps more than anyone else on Earth, has legitimized the idea of monopolies.

As Dayen points out, "Buffett would be the best informant for an antitrust authority that you could find, because he's already looked into the economy and found the companies that have the most inordinate market power. And so all you’d need to do is subpoena him and say, all right, tell me about this company that you bought and why you bought it. And you would say, well, they have this incredible pricing power. Well, there you go."

Monopolies esoteric, so let's put some sinew and blood onto those bones. Zephyr Teachout's new book "Break 'Em Up" has a great chapter on "chickenization," the labor practice named for the way the poultry-processing monopolists do business.

https://pluralistic.net/2020/07/29/break-em-up/#break-em-up

If you're a poultry farmer, here's how your life works. The three poultry processors have divided up America so there's only one processor in range of your farm. That processor tells you how to run your business.

They design your coop. They sell you your chicks. They tell you when and what to feed them. They tell you when to turn on the lights and when to turn them off. They tell you which vets to use, and which meds the vets can prescribe.

They experiment on you: some farmers are given experimental chick breeds, or experimental feeding or lighting schedules.

But through it all, they don't tell you how much they're gonna pay you.

You find that out when you send your chickens to the plant – they just…decide. If the price is too low, you go broke. Chickenizers tune the process to keep farmers at the brink of bankruptcy. If you complain, they stop buying your chickens.

If you complain in public, they tell all the other farmers that if they do business with you, they'll stop being able to sell their chickens, too.

Chickenization isn't just for chickens. It's the Uber model, the Shipt model, the model of any "gig work" that tells you what you have to buy and spend, but not what you will earn, with the pretense that you are an "independent contractor."

https://pluralistic.net/2020/07/14/poesy-the-monster-slayer/#stay-on-target

Chickenization is coming to vast swathes of the workforce, and lockdown will accelerate it, because if your job can be done anywhere in the world, your employer can shop for the cheapest labor, anywhere in the world.

And even though you're working from home, bossware lets your employer (excuse me, the company you "contract to") control and script your movements down to the keystroke, watching your facial expressions and listening to your mic.

https://pluralistic.net/2020/07/01/bossware/#bossware

That's where the Wizard of Omaha's love of "moats" gets us: chickenized worlds, run by bossware, where he gets rich, and we cling on by our fingernails.



Uber lost $4b in H1/2020 (permalink)

If you only follow one person on Uber, make it Hubert Horan, a transport analyst who's been writing about the sector for 40+ years and has written 23 articles analyzing Uber's financials and the impossibility of the firm ever attaining profitability.

https://www.nakedcapitalism.com/2020/08/hubert-horan-can-uber-ever-deliver-part-twenty-three-ubers-already-hopelessly-unprofitable-economics-take-a-major-coronavirus-hit.html

Uber has never, ever been profitable, and it never will be. When the company IPOed and its investors dumped their stock on suckers, its prospectus – the S1 – revealed that the company's path to profitability:

Replacing every public transportation journey in the world with an Uber ride.

https://www.axios.com/uber-ipo-mass-transit-competition-db5b2876-a1dd-4e52-9693-3771891e835b.html

Short of that, the company is and always will be a money-loser.

The only reason it exists is that the Saudi royals decreed that they would diversify their income, and gave Softbank an unlimited investment budget. Softbank backs companies that it thinks can monopolize a sector, allows them to lose money for years – decades!

Softbank assigns its companies absurd, unsupportable valuations, in the hopes of scaring off competitors. If the monopoly rents never materialize, Softbank flogs the company to rubes who were wowed by those sky-high valuations. That's the Uber story.

In the past four years, Uber has lost $23.2 billion. In the first half of 2020, Uber lost $4B. In 2019, Uber lost $5.1B. That means it's losing money faster in 2020, despite no one riding in its money-losing unlicensed taxi-cabs (Uber subsidizes about 40% of every ride).

Uber's got $7.8B on hand. At that rate, it will be broke by mid-2021.

Horan: "But if anyone still thought that Uber could somehow magically reverse its multi-billion dollar losses, the coronavirus should have put their fantasies totally to rest."

"The coronavirus has crushed the major drivers of urban car services demand, including business travel and discretionary urban entertainment (clubs, restaurants, etc.). Their customers remain highly concerned about the health risks of all forms of public transportation."

Lots of businesses were made unprofitable by the pandemic – Disneyland, MLB, United Air – but they were wildly profitable beforehand. Uber lost money before the lockdown. They lost more after. They are toast.

Not even Uber Eats, a predatory company that is destroying restaurants that were profitable, and might be profitable again if they survive, is losing the company massive sums, the financial economy destroying the productive economy.

Eats loses money faster than the car service! Its "adjusted EBITDA is 25 margin points worse than car services, even after the big coronavirus driven boost in food delivery demand."b

And even as we prepare to dance on Uber's grave, remember that Uber chickenized a vast cohort of precarious workers who will be sucked down with it.

Incredibly, Uber CEO Dara Khosrowshahi is claiming the company will be profitable by the end of 2021. The press is repeating this claim despite the fact that he has no documented plan to make this happen and all his past profitability predictions were false.

(Image: Tarcil, CC BY-SA, modified)



Dragon's Lair skeleton Dirk pin (permalink)

Dragon's Lair wasn't a fun game, but it was an amazing game, and worth the $0.50 premium it commanded for its jaw-dropping laser-disc graphics, especially Don Bluth's superb character designs.

https://en.wikipedia.org/wiki/Dragon%27s_Lair

Etsy seller Nerdmatters commemorates Bluth with this terrific $10 Skeleton Dirk pin that comes with a holographic sticker.

https://www.etsy.com/listing/657285957/dragons-lair-dirk-skeleton-enamel-pin

Nerdmatters has a pretty fabulous store. I came for the Skeleton Dirk, but I stayed for the Pink Hologram Princess Leia Glitter pin.

https://www.etsy.com/listing/652414159/pink-hologram-princess-glitter-enamel

Both come with elaborate, pitch-perfect packaging from an alternate universe in which they are the official product.



This day in history (permalink)

#10yrsago Bill Ayers's To Teach: The Journey, in Comics, a humanist look at education https://boingboing.net/2010/08/10/bill-ayerss-to-teach.html

#5yrsago Kansas officials stonewall mathematician investigating voting machine "sabotage" https://www.kansas.com/news/politics-government/article27951310.html

#1yrago Adversarial Fashion: clothes designed to confuse license-plate readers https://adversarialfashion.com/collections/all

#1yrago How facial recognition has turned summer camp into a dystopia for campers, parents, counsellors and photographers (but not facial recognition vendors) https://www.washingtonpost.com/technology/2019/08/08/summer-camps-turn-facial-recognition-parents-demand-more-smiles-please/?noredirect=on#click=https://t.co/3CpoqSYybP

#1yrago Pressed about Amazon deforestation, Bolsonaro proposes only shitting on alternate days to remediate climate change https://www.bbc.com/news/world-latin-america-49304358

#1yrago The FBI keeps boasting about all its "domestic terror" arrests, but it can't name a single one https://www.propublica.org/article/fbi-domestic-terrorism-arrest-data#166140



Colophon (permalink)

Today's top sources: Naked Capitalism (https://www.nakedcapitalism.com/), Super Punch (https://superpunch.net/).

Currently writing:

  • My next novel, "The Lost Cause," a post-GND novel about truth and reconciliation. Friday's progress: 517 words (41820 total).

Currently reading: The Deficit Myth, Stephanie Kelton

Someone Comes to Town, Someone Leaves Town (part 12), https://craphound.com/podcast/2020/08/03/someone-comes-to-town-someone-leaves-town-part-12/

Upcoming appearances:

Latest book:

Upcoming books:


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