The most ENSHITTIFICATION-PROOF way to get the Enshittification audiobook, ebook and hardcover is to pre-order them on my Kickstarter! Help me do AN END RUN around the AMAZON/AUDIBLE AUDIOBOOK MONOPOLY and DISENSHITTIFY your audiobook experience in the process.
Trump's doing a lot of oligarch shit, and while some of it very visible and obvious, other moves, like throwing the door open to "stock buybacks" are technical and obscure, but it's worth paying attention to this, because this form of stock swindle stands to make billionaires a lot richer (and thus more powerful).
American companies are headed for the stock buying-backest year on record, having already pissed away $1.1 trillion in 2025:
So what's a stock buyback, then? On the surface, it's pretty straightforward: during a stock buyback, the company uses its cash reserves to buy its own stock. When they do this, the supply of shares goes down, so the price per share goes up.
Say a company has issued 1,000 shares, and they're selling at $1,000 per share. That company has a "market cap" of $1,000,000 (1,000 x 1,000). Now the company takes $500,000 out of its bank account and buys half of those shares. Now you have a million-dollar company with only 500 shares, so each of those shares is now worth $2,000 (1,000,000/500 = 2,000).
Why is this so bad?
Let's start with what capitalism's advocates claim about the power of markets. Markets, they say, are a kind of alchemist's crucible, a vessel that transforms self-interest to a public good. Capitalism's theory is that if we let people pursue their own profit, they will chase efficiency, because anything that lowers costs will leave more profit for capitalists to reap. But as those capitalists discover better, more productive ways to get goods and services to market, they face competition, who force them to accept lower profits, which makes everything cheaper and more abundant for us. That means that even the greediest capitalists have to find new ways to increase efficiency in order to recapture their profits. Lather, rinse, repeat, and capitalism can make more material abundance available that we can dream of.
This isn't just what capitalists say â it's also the thesis of Chapter One of The Communist Manifesto:
Marx and Engels were seriously impressed by the productive power of capitalism, but they had a prescient suspicion that capitalists hate capitalism, and would do whatever they could to interrupt this process. After all, if you can prevent competitors from entering the market, you can innovate just once, find a new way to make something that's cheaper and better, and never share those profits with your customers or workers, because you won't have to outbid your competitors. The alchemical reaction is halted at the point where capitalists are rewarded for their efficiency, and they are never forced to repeat that performance.
Monopoly isn't the only way that capitalists can thwart this transformation of greed into abundance. The finance sector is awash in illegal scams that let capitalists get rich without increasing efficiency or making anyone except for themselves better off.
Take "wash-trading": this is when a seller buys their own products, sometimes using an alias, other times using a shill. The idea is to trick people into thinking that something is valuable and liquid (that is, that you can easily find buyers for it), when it is really worthless and undesirable. Remember all those multi-million-dollar NFT sales? Almost every one was a wash trade, a way to pump and dump.
The problem here isn't just that the buyer is getting defrauded. It's also that the seller is being "allocated capital" (getting money) that gives them power â power to decide what else should be bought and sold in our society.
Remember the alchemy theory of markets: if you're a productive capital allocator (if you make things that lots of people desire), you are given more capital to allocate further. This is the market's "invisible hand": elevating the people with proven track records to positions of power over their neighbors and their society, on the basis that they have shown themselves capable of enriching us all, because (the theory goes), capitalism rewards people whose greed translates into a common benefit. As Adam Smith wrote:
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.
Wash trading creates misallocations of capital. It makes stupid people rich, and lets them allocate capital to projects that make us all worse off. The whole theory of markets â the reason we're all supposed to leave money that we could all use to make ourselves better off in the hands of the wealthy â is that wealth is the payoff for efficiency, and we are all better off when the most efficient allocators make investment decisions.
Modern theorists of capitalism tell us that this isn't alchemy, it's computing. The market is a giant "information-processing" system that incorporates trillions of "price signals" (how much we are willing to spend and how much we are willing to accept, for goods, services and labor). The market processes all these signals to direct allocation and production, ensuring that shortages are met with increases in supply, and that overproduction is tamped down by falling prices, and that inefficiencies provoke investment in process improvements.
Which brings me back to stock buybacks. Stock buybacks are a way to make a company's shares more valuable, even as the company itself becomes less valuable.
Think of it this way: imagine you've got a company with 1,000 shares, worth $1,000 each, and this company has $500,000 in the bank. The company is valued at $1,000,000 (1,000 x $1,000), and half of that valuation is based on its cash reserves ($500,000 in the bank), which means the other half must be reflected in the company's physical plant and "intangibles" (knowledge, contracts, efficient team structures, copyrights, patents, etc).
The company announces a stock buyback: they will withdraw the $500,000 from its bank account and buy half the shares. The company is now $500,000 poorer, which means that its shares should go down in value. After all, that $500,000 is capital that could have been mobilized to make the company more profitable: it could have been spent to hire new people, do R&D, or buy machines that lower the price of making the company's products. That $500,000 represented the company's future growth potential, and the company has just pissed away that potential.
This is a company whose future growth has gotten much more expensive, because it will have to borrow in order to fund any expansion. Its shares should be worth less than before. By zeroing out its cash reserves, the company has actually reduced its value by more than the value of those reserves, because it is now stuck in place, forced to fund expansion with debt rather than capital. It is at risk from "shocks" like higher rents or higher energy prices. It's a brittle, hollow vessel for the intangibles that made up the other $500,000 in valuation before the buyback. It will be worse at turning those intangibles into profits in the future.
But the buyback hasn't reduced the price of the company's shares: it has doubled that price. The company has made its shares more valuable while making itself less valuable. If you think that markets are a computer that calculates efficient allocation based on prices, this should freak you the fuck out, because as we all know, the iron law of computing is "garbage in, garbage out." The company is feeding an objectively â and grossly â false price signal into the computer's input hopper.
That's why stock buybacks were illegal until 1982, when Ronald Reagan's SEC changed its Rule 10-b to legitimize this form of stock manipulation and turn stock swindlers into billionaires:
At root, stock buybacks are just wash-trading, the company buying its own shares to move their price, without doing anything to justify that price movement. Before Reagan legalized stock buybacks, companies returned capital to their investors through dividends. Why would companies prefer buybacks to dividends? Because corporate executives hold tons of shares in their employer's company, and it's much better for them to push those share prices higher even as they gut the company's ability to function.
So why should you care about this? After all, statistically you own either very little or no stock. The richest 10% of US households own more than 93% of all stocks held by Americans:
Your 401(k) account might see a small boost from this stock swindle, but again, statistically, that 401(k) is unmeasurably infinitesimal compared to the holdings of America's oligarchs.
Stock buybacks are a way of making the stock owning class much richer, by swindling everyday investors â who don't understand that companies who drain their cash reserves are less valuable â into buying shares in the companies they loot.
And that's why you should care: in the first 8 months of 2025, Trump has allowed America's oligarchs to get $1.1 trillion richer. That's money that you don't have â you won't get the lower prices and higher wages and superior goods that $1.1t would have paid for if companies had spent it on process improvements. It's money they have, which they can spend on things that make you worse off â buying everything from Twitter to the presidency.
There's a lot to be furious about right now, like the masked fascist goons kidnapping our neighbors off the street, and the upside-down health system that is reviving the vaccine-controlled deadly pandemics of yesteryear. But the reason those fascist goons and antivaxers are able to decide how we all live our lives is that a very small number of very rich people converted their stolen wealth to illegitimate power, which they wield over us.
Anyone who lived through the 2008 crisis knows that finance is a deadly weapon. Let the finance sector run your economy and they will steal everything and leave you jobless, homeless and hungry. Trump is a casino guy, and he knows that the only guy making money in a casino is the owner, who gets to set the odds at the machines and tables. By opening the floodgates to trillions in stock buybacks, Trump is turning us all into the suckers at the table, and turning his oligarch investors into little autocrats, with the power to degrade our lives and steal our future.
Click here to pre-order my next book, ENSHITTIFICATION: WHY EVERYTHING SUDDENLY GOT WORSE AND WHAT TO DO ABOUT IT
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:
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I'm coming to DEFCON! TOMORROW (Aug 9), I'm emceeing the EFF POKER TOURNAMENT (noon at the Horseshoe Poker Room), and appearing on the BRICKED AND ABANDONED panel (5PM, LVCCâ-âL1â-âHW1â11â01). 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, LVCCâ-âL1â-âHW1â11â01).
It's amazing how many of the scams that have devastated our economy and everyday people owe their success to the fact that we assume that rich people know what they're doing, so if they're doing something, it must be real.
Think of how many people lost everything by gambling on junk bonds, exotic mortgage derivatives, cryptocurrency and web3, because they saw that the largest financial institutions in the world were going all-in on these weird, incomprehensible bets.
Then there are the people who are convinced that online advertising is built around a mind-control ray, because tech companies claim that's what they have ("I am an evil dopamine-loop-hacking wizard and I can sell anything to anyone!"), and because huge, sober blue-chip companies hand billions to these soi dissant svengalis. Sure, online ads are a swamp of clickfraud and garbage, but would these super smart captains of industry spend so much on online advertising if it didn't work super-well?
From our worms'-eye-view here on the ground, it's easy to assume that rich people and the people who sell them stuff are all on the same side. "If you're not paying for the product, you're the product," right? If Facebook is tormenting you with surveillance advertising, it must be doing so on behalf of the surveillance advertisers, for whom Mark Zuckerberg has bottomless reservoirs of honest, forthright impulses.
The reality is simultaneously weirder, and obvious in hindsight. The reason Zuck is tormenting you is that he's a remorseless sociopath who doesn't care who he hurts. He rips off everyone he can rip off, and that includes advertisers, who have seen steady price-hikes and lower-fidelity targeting, even as ad-fraud has skyrocketed while Facebook draws down its anti-fraud spending:
This is not to say that Facebook advertisers have your best interests at heart, that they aren't engaged in active deception in order to better themselves at your expense. Rather, it's to say that there's no honor among thieves, and Zuck is an equal-opportunity predator. Moreover, both Zuck and his advertisers are credulous dolts, so the mere fact that they are pouring money into something (advertisers: FB ads; Zuck: metaverse) it doesn't follow that these are real or important or the coming thing.
For me, the Ur-example of "rich people are dumb, even when it comes to money" is the private equity sector. I've written a lot about PE, and how destructive it is to the real economy, from Toys R Us to pet grooming:
And how they actually created the death panels that Sarah Palin warned us about (it's OK, though: these death panels are run by the efficient private sector, not government bureaucrats):
The devastating effect of private equity on the real economy is increasingly well understood, and a curious side-effect of this is that people assume that if PE is destroying their lives, they must be doing so on behalf of their investors, who are making bank.
But â like Zuck â PE bosses are just as happy to steal from their investors as they are to to steal from the workers and customers of the businesses they acquire on those investors' behalf. They swaddle this theft in performative complexity and specialized jargon, but when you strip all that away, you find more fraud.
All the misery that PE inflicts on workers, communities and customers are just a convincer in a Big Store con, a bid to make the scam seem credible. For a certain kind of investor, any economic activity that destroys communities and workers' livelihoods must be a good bet. This is the dynamic at work in the pitch of AI image-generator companies, who spend tens of billions on technology that there is no substantial market for:
AI image generators represent a high-profile, extremely visible example of "a job that AI can do." Nevermind that AI illustration went from a novelty to a tired cliche in less than a year. Even if you think that AI illustrations are a perfect substitute for commercial illustrations, that still won't come anywhere near making AI companies a profit. Add up the entire wage bill for every commercial illustrator in the world, hand it to Open AI, and you're not even gonna cover the kombucha budget for Open AI's staff kitchens.
Hell, all the wages of every commercial illustrator that ever lived won't pay back even a fraction of the money the AI companies spent on image generators. The pauperization of an entire class of creative workers is just a canned demo, a way to fool investors into thinking that there is a whole universe of similarly situated workers whose wages can be diverted to AI companies. This is the logic of small-time spammers, scaled up to the scale of the entire S&P 500. Smalltime spammers looked at AI and thought, "OK, I can generate as much botshit as I want on demand for free. Science fiction magazines pay $0.10/word. So if I generate a billion words, I'll get $100 million." But that's not how any of that works: sf magazines don't buy botshit, and even if they did, the entire market for short fiction adds up to what Sam Altman spends on a single designer t-shirt. The point of destroying these beloved, useful things isn't to make a lot of money by taking their markets â it's to convince dopey, panicked rich people to give you lots of money you can steal, because they think you can do this to every market and they don't want to miss out on the opportunity of a lifetime:
Take "divi recaps": after a private equity firm acquires a company (by borrowing money against its assets), it typically declares a "special dividend," emptying out the company's cash reserves and pocketing them. A "divi recap" is when PE then takes out another massive loan against the company's (remaining) assets and pockets that:
All of this happens under an opaque cloud, thanks to the light-to-nonexistent disclosure rules for PE. A public company has to open its books for the SEC, its investors, and the world. PE is private â and so are its finances. It is absolutely routine for PE bosses to put their spouses, kids, and pals on the payroll and hand them millions for doing little to nothing, all at the expense of their investors:
PE bosses charge huge fees to their investors â not merely the usual 2-and-20 (2% of the funds under management and 20% of any profits) â but also a wide variety of special one-off fees that pile to the sky. They also dip into their investors' funds to issue themselves massive loans that they use to make side-bets, without telling the investors about it:
PE investors are chickens ripe for the plucking: take "continuation funds," which allow PE bosses to soak the rich people and pension funds who supply them with billions:
Remember 2-and-20? 2% of all the money you manage, every year, and 20% of all the profits. You'd think that these would be somewhat zero sum, right? If you use some of your investors' cash to buy a company, and then sell off that company for a profit, you get the 20%, but now the pot of money you're managing has gone down by the amount you used to buy the company, and so your 2% carry goes down, too.
But what if you sell your portfolio companies to yourself, using your investors' own money? When you do that, you continue to hold the company on your PE firm's books, meaning you continue to get the 2% carry, and you can pocket 20% of the sale price as a "profit":
This is straight-up fraud, wrapped up in so much jargon that it can successfully masquerade as "financial engineering" ("financial engineering" is really just a euphemism for "fraud"). PE bosses keep coming up with new, exotic ways to steal from their investors. The latest scam is "tax receivable agreements":
https://archive.ph/RczJ9
On its face, this is a tax scam. When a company goes public, early investors generally hold stock in the original partnership or LLC; this company ends up holding a ton of shares in the new, public company. When they sell those non-public shares in the LLC, this creates a (potentially gigantic) tax credit.
A TRA hustle involves tracking down these LLC shareholders and convincing them to sign off on dumping the LLC's shares, which generates a huge tax credit for the public company. The hustler offers to split these credits with the LLC holders.
All of this is especially attractive to PE bosses, who often take a company private, do a bunch of "financial engineering" and then take it public again, leaving the PE firm as the owner of those LLC shares that can be converted to a TRA and a huge windfall â which the PE bosses pocket, because they (not their investors) are holding those credits.
This scam is really doing big numbers. KKR â the monsters who killed Toys R Us â just diverted $650 million in TRA loot, prompting a lawsuit from Steamfitters union pension fund, which had handed these jerks millions of its members' money to gamble with:
https://archive.ph/kqQvI
This highlights another very weird aspect of the PE scam: they are absolutely dependent on pension funds. To add insult to injury, PE funds are notorious union-busters â they use union money to buy companies and destroy their unions:
People who try to understand the PE business model often give up, because it seems to make no sense, leading many to assume that they're too unsophisticated to grasp the complex financials here. For example, PE is absolutely dependent on massive loans as a way of looting its businesses, but it also often defaults on those loans. Why do banks and investors keep making huge loans to PE deadbeats? Because â like the PE fund investors â they are credulous dolts.
The reason PE seems like a scam is that it is a scam. It is a fractal scam â every part of it is a scam. You might have heard about the "carried interest" tax loophole that allows PE bosses to avoid billions in taxes on the money they steal from their investors, creditors, workers and customers. Most people assume "carried interest" has something to do with "interest" on a loan. Nope: "carried interest" is a 16th century nautical tax rule designed for mercantalist sea-captains who had an "interest" in the cargo they "carried":
But rich people and other "sophisticated investors" (like pension fund investment managers) are no smarter than the rest of us. They are herd animals. When they see other rich people piling into some scheme or asset class, they rush to join them, which makes the asset price go up, which makes them think they're smart (until the inevitable rug-pull). When one plute jumps off the Empire State Building, the rest of them jump, too.
Which is why there's more money flooding into PE than at any time in history, $2.62T in "dry powder," handed over to greedy, thieving PE bosses in a poker game where everyone is the sucker at the table:
If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
Going to Defcon this weekend? I'm giving a keynote, "An Audacious Plan to Halt the Internet's Enshittification and Throw it Into Reverse," on Saturday at 12:30pm, followed by a book signing at the No Starch Press booth at 2:30pm!
https://info.defcon.org/event/?id=50826
Bezzle (n):
1. "the magic interval when a confidence trickster knows he has the money he has appropriated but the victim does not yet understand that he has lost it" (JK Gabraith)
2. Uber.
Uber was, is, and always will be a bezzle. There are just intrinsic limitations to the profits available to operating a taxi fleet, even if you can misclassify your employees as contractors and steal their wages, even as you force them to bear the cost of buying and maintaining your taxis.
The magic of early Uber â when taxi rides were incredibly cheap, and there were always cars available, and drivers made generous livings behind the wheel â wasn't magic at all. It was just predatory pricing.
Uber lost $0.41 on every dollar they brought in, lighting $33b of its investors' cash on fire. Most of that money came from the Saudi royals, funneled through Softbank, who brought you such bezzles as WeWork â a boring real-estate company masquerading as a high-growth tech company, just as Uber was a boring taxi company masquerading as a tech company.
Predatory pricing used to be illegal, but Chicago School economists convinced judges to stop enforcing the law on the grounds that predatory pricing was impossible because no rational actor would choose to lose money. They (willfully) ignored the obvious possibility that a VC fund could invest in a money-losing business and use predatory pricing to convince retail investors that a pile of shit of sufficient size must have a pony under it somewhere.
This venture predation let investors â like Prince Bone Saw â cash out to suckers, leaving behind a money-losing business that had to invent ever-sweatier accounting tricks and implausible narratives to keep the suckers on the line while they blew town. A bezzle, in other words:
Uber is a true bezzle innovator, coming up with all kinds of fairy tales and sci-fi gimmicks to explain how they would convert their money-loser into a profitable business. They spent $2.5b on self-driving cars, producing a vehicle whose mean distance between fatal crashes was half a mile. Then they paid another company $400 million to take this self-licking ice-cream cone off their hands:
Amazingly, self-driving cars were among the more plausible of Uber's plans. They pissed away hundreds of millions on California's Proposition 22 to institutionalize worker misclassification, only to have the rule struck down because they couldn't be bothered to draft it properly. Then they did it again in Massachusetts:
Remember when Uber was going to plug the holes in its balance sheet with flying cars? Flying cars! Maybe they were just trying to soften us up for their IPO, where they advised investors that the only way they'd ever be profitable is if they could replace every train, bus and tram ride in the world:
Honestly, the only way that seems remotely plausible is when it's put next to flying cars for comparison. I guess we can be grateful that they never promised us jetpacks, or, you know, teleportation. Just imagine the market opportunity they could have ascribed to astral projection!
Narrative capitalism has its limits. Once Uber went public, it had to produce financial disclosures that showed the line going up, lest the bezzle come to an end. These balance-sheet tricks were as varied as they were transparent, but the financial press kept falling for them, serving as dutiful stenographers for a string of triumphant press-releases announcing Uber's long-delayed entry into the league of companies that don't lose more money every single day.
One person Uber has never fooled is Hubert Horan, a transportation analyst with decades of experience who's had Uber's number since the very start, and who has done yeoman service puncturing every one of these financial "disclosures," methodically sifting through the pile of shit to prove that there is no pony hiding in it.
In 2021, Horan showed how Uber had burned through nearly all of its cash reserves, signaling an end to its subsidy for drivers and rides, which would also inevitably end the bezzle:
In mid, 2022, Horan showed how the "profit" Uber trumpeted came from selling off failed companies it had acquired to other dying rideshare companies, which paid in their own grossly inflated stock:
At the end of 2022, Horan showed how Uber invented a made-up, nonstandard metric, called "EBITDA profitability," which allowed them to lose billions and still declare themselves to be profitable, a lie that would have been obvious if they'd reported their earnings using Generally Accepted Accounting Principles (GAAP):
Like clockwork, Uber has just announced â once again â that it is profitable, and once again, the press has credulously repeated the claim. So once again, Horan has published one of his magisterial debunkings on Naked Capitalism:
Uber's $394m gains this quarter come from paper gains to untradable shares in its loss-making rivals â Didi, Grab, Aurora â who swapped stock with Uber in exchange for Uber's own loss-making overseas divisions. Yes, it's that stupid: Uber holds shares in dying companies that no one wants to buy. It declared those shares to have gained value, and on that basis, reported a profit.
Truly, any big number multiplied by an imaginary number can be turned into an even bigger number.
Now, Uber also reported "margin improvements" â that is, it says that it loses less on every journey. But it didn't explain how it made those improvements. But we know how the company did it: they made rides more expensive and cut the pay to their drivers. A 2.9m ride in Manhattan is now $50 â if you get a bargain! The base price is more like $70:
The number of Uber drivers on the road has a direct relationship to the pay Uber offers those drivers. But that pay has been steeply declining, and with it, the availability of Ubers. A couple weeks ago, I found myself at the Burbank train station unable to get an Uber at all, with the app timing out repeatedly and announcing "no drivers available."
Normally, you can get a yellow taxi at the station, but years of Uber's predatory pricing has caused a drawdown of the local taxi-fleet, so there were no taxis available at the cab-rank or by dispatch. It took me an hour to get a cab home. Uber's bezzle destroyed local taxis and local transit â and replaced them with worse taxis that cost more.
Uber won't say why its margins are improving, but it can't be coming from scale. Before the pandemic, Uber had far more rides, and worse margins. Uber has diseconomies of scale: when you lose money on every ride, adding more rides increases your losses, not your profits.
Meanwhile, Lyft â Uber's also-ran competitor â saw its margins worsen over the same period. Lyft has always been worse at lying about it finances than Uber, but it is in essentially the exact same business (right down to the drivers and cars â many drivers have both apps on their phones). So Lyft's financials offer a good peek at Uber's true earnings picture.
Lyft is actually slightly better off than Uber overall. It spent less money on expensive props for its long con â flying cars, robotaxis, scooters, overseas clones â and abandoned them before Uber did. Lyft also fired 24% of its staff at the end of 2022, which should have improved its margins by cutting its costs.
Uber pays its drivers less. Like Lyft, Uber practices algorithmic wage discrimination, Veena Dubal's term describing the illegal practice of offering workers different payouts for the same work. Uber's algorithm seeks out "pickers" who are choosy about which rides they take, and converts them to "ants" (who take every ride offered) by paying them more for the same job, until they drop all their other gigs, whereupon the algorithm cuts their pay back to the rates paid to ants:
All told, wage theft and wage cuts by Uber transferred $1b/quarter from labor to Uber's shareholders. Historically, Uber linked fares to driver pay â think of surge pricing, where Uber charged riders more for peak times and passed some of that premium onto drivers. But now Uber trumpets a custom pricing algorithm that is the inverse of its driver payment system, calculating riders' willingness to pay and repricing every ride based on how desperate they think you are.
This pricing is a per se antitrust violation of Section 2 of the Sherman Act, America's original antitrust law. That's important because Sherman 2 is one of the few antitrust laws that we never stopped enforcing, unlike the laws banning predator pricing:
Uber claims an 11% margin improvement. 6-7% of that comes from algorithmic price discrimination and service cutbacks, letting it take 29% of every dollar the driver earns (up from 22%). Uber CEO Dara Khosrowshahi himself says that this is as high as the take can get â over 30%, and drivers will delete the app.
Uber's food delivery service â a baling wire-and-spit Frankenstein's monster of several food apps it bought and glued together â is a loser even by the standards of the sector, which is unprofitable as a whole and experiencing an unbroken slide of declining demand.
Put it all together and you get a picture of the kind of taxi company Uber really is: one that charges more than traditional cabs, pays drivers less, and has fewer cars on the road at times of peak demand, especially in the neighborhoods that traditional taxis had always underserved. In other words, Uber has broken every one of its promises.
We replaced the "evil taxi cartel" with an "evil taxi monopolist." And it's still losing money.
Even if Lyft goes under â as seems inevitable â Uber can't attain real profitability by scooping up its passengers and drivers. When you're losing money on every ride, you just can't make it up in volume.
Image: JERRYE AND ROY KLOTZ MD (modified) https://commons.wikimedia.org/wiki/File:LA_BREA_TAR_PITS,_LOS_ANGELES.jpg
CC BY-SA 3.0 https://creativecommons.org/licenses/by-sa/3.0/deed.en
Iâm kickstarting the audiobook for âThe Internet Con: How To Seize the Means of Computation,â a Big Tech disassembly manual to disenshittify the web and bring back the old, good internet. Itâs a DRM-free book, which means Audible wonât carry it, so this crowdfunder is essential. Back now to get the audio, Verso hardcover and ebook:
http://seizethemeansofcomputation.org
If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
Ticketmaster jacks us for billions so it can pocket millions
NEXT WEEKEND (June 7â9), I'm in AMHERST, NEW YORK to keynote the 25th Annual Media Ecology Association Convention and accept the Neil Postman Award for Career Achievement in Public Intellectual Activity.
Corruption is a system of concentrated gains and diffused costs: cheaters make a lot of money, and their victims each lose a little. The cheater has a much larger pool of money to spend on keeping the scam going, and the victims need to pay again to fight the cheater.
Actually, it's worse. The victim pays once when they are cheated, then, they pay a second time (in time and/or money) when they fight back against the cheater.
But in order to fight back effectively, the victims need to band together â it doesn't make sense for one victim to pony up to counter the cheater, because the cheater stole from a lot of people and can therefore spend far more than the victim lost and still come out ahead.
This is the third time the victim pays: they pay the "collective action" tax of locating other victims, agreeing to a common strategy for fighting back, and then coordinating with all those co-victims to keep the campaign up.
But actually, it's even worse. Because most corruption isn't just dishonest, it's incredibly wasteful. Corruption involves stealing ten dollars from you to make a dime for the cheater. The polluter who gives you cancer rather than cleaning up their industrial process costs you millions in medical bills â and maybe costs your family the lifelong trauma and expense of living with your death. They pocket an infinitesimal fraction of those costs. The rest is just wasted. They're setting your house on fire to spare themselves the cost of a match to light their cigar.
This is yet another way in which the deck is stacked in favor of corruption. A victim of corruption is placed in a condition of precarity and misery from which is it difficult to marshal a counteroffensive. The cheater, meanwhile, is made stronger and more comfortable by their corrupt activities. Immiserated victims must undertake the hard, ongoing work of acting together to be effective against the cheater. The cheater answers only to themself, avoiding the collective action costs that the victims pay every time they seek to act.
All of this is why we have governments. A government is (said to be) a democratically accountable way to meet the concentrated power of the corrupt with the concentrated power of the victims of corruption. Governments are many things, but they are especially a way of solving the collective action problem of enforcing the rules against cheaters. This is partially in service to justice â no one likes to be cheated, and a society of rampant and routine cheating is unstable and prone to collapse.
But it's also a matter of efficiency. While it makes a certain kind of selfish sense for the cheater to liquidate our dollar to make their penny, from a societal perspective, it's a catastrophe. Letting Wall Street slumlords corner regional markets in single family dwellings makes large amounts of money for their investors, but it costs those cities unimaginable amounts in public services as their housing stock decays, homelessness spikes, and schools and public services crumble for want of local taxes.
The paltry sums that Flint's creditors extracted by insisting on switching to a chlorinated water-supply that leeched lead out of the city's water infrastructure are crumbs compared to the vast, lifelong costs of giving an all the children in a city lead poisoning, to say nothing of the costs to the city as a city nor forever tainted by this unspeakably evil crime.
This is why inequality â and its handmaiden, monopoly â is so dangerous. The more concentrated private wealth becomes, the harder it is for the state to police, and the more likely it is that this private wealth will corrupt our officials. We see this all around us â for example, when Supreme Court justices receive lavish gifts from billionaires whom they later rule in favor of:
Through the neoliberal era â the past forty years of billionaire-friendly Reaganomics â we've seen increasing concentration in wealth, coupled to increasing collusion between the wealthy and the government to protect the corrupt against the public. Think of the IRS's long decay, in which it turned a blind eye to increasingly blatant tax evasion by the ultra-wealthy, while training its fire on working people who fudge a few bucks on their returns:
This emphasis on benefits cheating and indifference to corporate crime really highlights the drag that corruption places on a society's efficiency. Even if you believe that there's a lot of welfare fraud (there isn't!), the dollar in "undeserved" food stamps spent by a cheater costs societyâŠa dollar. Meanwhile the dollar that a corporate criminal makes by skimping on workplace safety costs society thousands of dollars to care for the worker who is then maimed on the job.
This is very easy to see in the world of corporate environmental crime. The "social cost of carbon" measures the total cost of pollution: the injuries caused by marinating in fossil fuel extraction, processing and combustion byproducts; as well as the loss of life and property from climate events. These costs are blistering, so high that every MWh of renewable power we bring online saves us $100 in social carbon costs:
Governments that sleep on corporate crime are objectively governing badly. That's why the antitrust failures of every US presidential administration from Carter to Trump are so damning: they set the stage for later corruption that would not only be carried out on a larger scale than smaller firms could accomplish, but also for those large firms to corrupt the political process.
This is the Ticketmaster story. The superpredator that is today's Ticketmaster is the end-point of a series of ever-more corrupt mergers, waved through by every-more pliable presidential administrations. It was bad enough when Bush I allowed Ticketmaster to gobble up Ticketron in 1990. After all, the company had already proven itself to be a cesspit of corrupt, bullying activity.
The Ticketron acquisition kicked off a two-decade-long corporate crime-spree that produced a mountain of evidence proving Ticketmaster's nature as an inherently corrupt enterprise that acquired power for the purpose of abusing that power, at the expense of creative workers, the public, and the owners of venues:
Despite this, the Obama administration waved through an acquisition that was obviously far more dangerous that the Ticketron caper: the 2010 merger between Ticketmaster and the concert promoter Live Nation:
After a decade and a half of vertical monopoly power â Ticketmaster/Live Nation controlling ticketing, promotion and venues â the company has grown from a dangerous octopus with its tentacles twined around the industry into a kraken that is strangling every kind of live event and everyone who earns a living from them. This has produced an ever-more obvious string of scandals, most notably the company's assault on Swifties:
A combination of mounting public outrage (with Swifties at the vanguard) and the Biden administration's generational enthusiasm for smashing corporate power has led, at last, to a reckoning with the Ticketmaster kraken:
Ticketmaster is a famously opaque organization. When Rebecca Giblin and I were working on Chokepoint Capitalism, our book on monopoly and creative labor markets, we were able to speak on the record to insiders from every part of the industry, except live performance:
https://chokepointcapitalism.com/
As soon as we raised Ticketmaster/Live Nation with club owners and other events industry insiders, they'd go pale and quiet and tell us that they didn't feel comfortable staying on the record. TM/LN has a well-deserved mafia-style reputation for savage retaliation against snitches.
With the DOJ Antitrust Division chasing Ticketmaster through the courts, we're starting to get a rare, on-the-record glimpse of TM/LN's operations, as its internal documents find their pay into court records. In response Ticketmaster's spokesliars have embarked on an epic spin campaign, to "contextualize" these damning numbers and paint the company as a weak, low-margin business that has been unfairly set-upon by the bullies at the DOJ.
In his BIG newsletter, Matt Stoller offers a spectacular, must-read breakdown of these documents and the ensuing spin:
Stoller starts with Ticketmaster's insistence that it is barely profitable. Though this is true on paper, the numbers just don't add up. For one thing, anyone who's bought a ticket can see, printed on its face, TM's junk fees: "a 'service fee' without any obvious service [and] a 'convenience fee' that is anything but convenient."
Far more damning is a comparison between the price of a Ticketmaster ticket in the US vs the EU. The EU has legally mandated competitive ticketing, and the tickets there are far cheaper. A US ticket to see Taylor Swift will run you $2,600 â the same ticket costs $340 in the EU. As Stoller writes:
An American could fly to Paris, spend a few nights at a nice hotel, see a Taylor Swift concert, and fly back, for less than it costs to see that same show in the U.S.
How to make sense of this contradiction? How can Ticketmaster show such a low profit margin on its books but somehow end up costing event-goers such an absurd premium?
Start with the fact that Ticketmaster has three businesses, not just one. They sell tickets, but they also promote concerts (that is, front the money for personnel, travel and marketing), and they also own a bunch of the largest and most profitable venues in the country.
This allows them to play a shell-game that's very similar to (and possibly not actually different from) money-laundering, where money is shuffled between entities in order to shield it from creditors, suppliers or tax agents:
But this presents a problem for Ticketmaster. They're a publicly traded company and their investors demand high returns. And unlike performers or venue owners, investors have power over Ticketmaster management. Keeping "margin per ticket" number as low as possible lets Ticketmaster minimize the revenue it has to share with the people who actually do the work and invest the capital in live performances. But for investors, they need to show another number, one that's as high as possible, to keep the investors happy.
That number is "Adjusted Operating Income" or AOI. While gross margins are the difference between the face value of a ticket and the sum remitted to the venue and the performer, AOI factors in all the other revenue TM/LN books from that ticket, like kickbacks. TM/LN's AOI is very healthy: it's 37% on tickets and 61% on promotions.
Those sums delight TM/LN's investors, and they express their joy through lavish executive compensation packages. CEO Michael Rapino is America's fifth-highest paid CEO, at $139m/year (that's eight times the Fortune 500 average). His sidekick Joe Berchtold is America's highest paid CFO, at $54m. The total AOI for TM/LN is $732m/year â and 19% of that is being paid to two of its execs.
But LN/TM has a third line of business: operating venues. The AOI for these venues is just 1.7%. If this were a normal, cutthroat business, you'd expect those same return-focused investors to insist on their handsomely compensated execs selling off that low-margin turkey. But nevertheless, TM/LN keeps those venues on its books.
When those execs talk to the public, they use the poor profit margins of ticketing and the poor AOI on venues to plead poverty: "how can we be a monopoly when we're barely scraping by?"
But when they talk to the investors who decide whether to pay them 800% of the S&P500 average, they are more forthcoming.
Keeping the margins low on tickets â and making up the money with kickbacks and other corrupt payments â means that potential rival ticketing firms can't afford to get into the business. Without the venue and promotion business, those rivals wouldn't be able to command kickbacks. They'd have to subsist on the rock-bottom margins that are competitive with Ticketmaster.
Likewise those venues: ownership of key venues lets Ticketmaster/Live Nation force out credible rivals in important markets, and keep new ones from emerging, because again, they'd have to make a living on that paltry 1.7% AOI (or the even lower profit margins!).
As Joe Berchtold, the highest-paid CFO in America, told an analyst:
I don't think Concerts AOI per fan is a logical way to look at it. I think if you look at how we've talked about our business, we've talked about our business across the multiple pieces. So you have to look at it, what's the concerts plus sponsorship plus ticketing AOI per fan.
Berchtold is paid roughly $26,000/hour. Those words take roughly 25 seconds to utter, so that's a $7.20 explanation, but it contains a wealth of information â it's basically the DoJ's case in a nutshell.
But Stoller points out a curious fact that isn't captured here. Remember when I told you that TM/LN's NOI is $732m/year? What I didn't mention is the company's gross revenue: $16.7 billion.
When TM/LN talks about how shitty their business is, and therefore they can't be a monopoly, this is the trump card. How could a company creaming off a mere $732 million off $16.7 billion in gross revenue be a monopolist with "pricing power"?
This is where understanding corruption helps clarify our understanding and cut through the bullshit. Corruption is vastly wasteful. In order to extract $732m from $16.7b, TM/LN has to engage in a lot of wasteful and corrupt activities. They have to bribe other key players in the system, spend vast fortunes on lobbying, and generally do a lot of unproductive things with their money.
This is concentrated gains and diffuse losses. In order to command the highest salary of any American CFO, Berchtold has to cook up and maintain this process. In order to earn his $139m/year, Rapino has to play mafia don and keep everyone is his supply chain sufficiently terrorized or sufficiently greased to maintain omerta.
These two men take home a fifth of Ticketmaster's net income because they possess a rare and valuable skill. They are able to obfuscate a corrupt arrangement, enrobing it in layers of performative complexity, until the average musician, concertgoer, or lawmaker, can't understand it. Any attempt to unravel it will induce a deadly, soporific confusion. The investment industry term for his is MEGO (My Eyes Glaze Over), the weaponization of complexity. A skilled MEGO artist can convince you that the pile of shit they're peddling is so large that there must be a pony under it somewhere.
Here's Stoller, de-MEGOfying the TM/LN story:
Live Nation has a giant capital intensive unprofitable division of putting on concerts, from which it skims for its real cash flow. But this leverage among different subsidiaries means that it has an incentive to push up the cost of concerts overall, not just for its own profit. This incentive operates in two different ways. One, since ticket fees are based on the price of a ticket, Live Nation seeks higher prices for tickets so it can move more cash to its Ticketmaster subsidiary. And two, since Live Nation itself gets rebates by overpaying for venues, it has the incentive to push up the cost of shows. No one can undercut Live Nation, as itâs a monopoly.
You might think that this is a lot of mental energy to expend on understanding live performances. If you're not trying to see Taylor Swift, does any of this matter?
It assuredly does. Understanding how Ticketmaster's shell-game works is critical to understanding the similar shell-games played by many other kinds of monopolists, who have wrapped their tentacles around all the other parts of our lives. As David Dayen and Lindsay Owens write for The American Prospect, the companies that avoided monopoly prosecution by ripping off suppliers have bled those suppliers dry, and now they're coming for their customers:
From groceries to plane tickets, rent to cab rides, Amazon to Ticketmaster, we are living through the "Age of Recoupment," when the long con of lowering prices to secure monopolies flips enters it final stage: greedflating the shit out of customers, and using the monopolist's power over regulators to avoid consequences.
Today, everywhere consumers turn, whether they are shopping for groceries at the local Kroger or for plane tickets online, they are being gouged. Landlords are quietly utilizing new software to band together and raise rents. Uber has been accused of raising the price of rides when a customerâs phone battery is drained. Ticketmaster layers on additional fees as you move through the process of securing seats to your favorite artistâs upcoming show. Amazonâs secret pricing algorithm, code-named âProject Nessie,â was designed to identify products where it could raise prices, on the expectation that competitors would follow suit. Companies are forcing you into monthly subscriptions for a tube of toothpaste. Banks have crept up the price of credit, so customers who cannot afford price-gouging in their everyday transactions get a second round of price-gouging when they put purchases on credit. Expedia is using demographic and purchase history data to set hotel pricing for an audience of one: you.
When these companies end up in front of angry attorneys general, DOJ lawyers, or an FTC investigation, they'll use the Ticketmaster/Live Nation playbook to try and wriggle off the hook. They'll point to some barely-profitable (or money-losing) part of their business and say, "How could a monopolist possibly be running a business this shitty?"
If the DOJ makes its case against Ticketmaster, it will set a precedent, both in court and in policy circles, for understanding how a monopolist's corruption works. Monopolists aren't always businesses with gigantic margins. Like other criminals, their corruption can produce spectacular wealth and spectacular waste at the same time.
If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
Funeral homes were once dominated by local, family owned businesses. Today, odds are, your neighborhood funeral home is owned by Service Corporation International, which has bought hundreds of funeral homes (keeping the proprietorâs name over the door), jacking up prices and reaping vast profits.
Funeral homes are now one of Americaâs most predatory, vicious industries, and SCI uses the profits it gouges out of bereaved, reeling families to fuel more acquisitionsâââ121 more in 2021. SCI gets some economies of scale out of this consolidation, but thatâs passed onto shareholders, not consumers. SCI charges 42% more than independent funeral homes.
SCI boasts about its pricing power to its investors, how it exploits peopleâs unwillingness to venture far from home to buy funeral services. If you buy all the funeral homes in a neighborhood, you have near-total control over the market. Despite these obvious problems, none of SCIâs acquisitions face any merger scrutiny, thanks to loopholes in antitrust law.
These loopholes have allowed the entire US productive economy to undergo mass consolidation, flying under regulatory radar. This affects industries as diverse as âhospital beds, magic mushrooms, youth addiction treatment centers, mobile home parks, nursing homes, physiciansâ practices, local newspapers, or e-commerce sellers,â but itâs at its worst when it comes to services associated with trauma, where you donât shop around.
Think of how Envision, a healthcare rollup, used the capital reserves of KKR, its private equity owner, to buy emergency rooms and ambulance services, elevating surprise billing to a grotesque art form. Their depravity knows no bounds: an unconscious, intubated woman with covid was needlessly flown 20 miles to another hospital, generating a $52k bill.
This is âthe health equivalent of a carjacking,â and rollups spread surprise billing beyond emergency rooms to
anesthesiologists, radiologists, family practice, dermatology and others. In the late 80s, 70% of MDs owned their practices. Today, 70% of docs work for a hospital or corporation.
How the actual fuck did this happen? Rollups take place in âantitrustâs Twilight Zone,â where a perfect storm of regulatory blindspots, demographic factors, macroeconomics, and remorseless cheating by the ultra-wealthy has laid waste to the American economy, torching much of the USâs productive capacity in an orgy of predatory, extractive, enshittifying mergers.
The processes that underpin this transformation arenât actually very complicated, but they are closely interwoven and can be hard to wrap your head around. âThe Roll-Up Economy: The Business of Consolidating Industries with Serial Acquisitions,â a new paper from The American Economic Liberties Project by Denise Hearn, Krista Brown, Taylor Sekhon and Erik Peinert does a superb job of breaking it down:
The most obvious problem here is with the MergerScrutiny process, which is when competition regulators must be notified of proposed mergers and must give their approval before they can proceed. Under the Hart-Scott-Rodino Act (HSR) merger scrutiny kicks in for mergers when the purchase price is $101m or more. A company that builds up a monopoly by acquiring hundreds of small businesses need never face merger scrutiny.
The high merger scrutiny threshold means that only a very few mergers are regulated: in 2021, out of 21,994 mergers, only 4,130 (<20%) were reported to the FTC. 2020 saw 16,723 mergers, with only 1.637 (>10%) being reported to the FTC.
Serial acquirers claim that the massive profits they extract by buying up and merging hundreds of businesses are the result of âefficiencyâ but a closer look at their marketplace conduct shows that most of those profits come from market power. Where efficiences are realized, they benefit shareholders, and are not shared with customers, who face higher prices as competition dwindles.
The serial acquisition bonanza is bad news for supply chains, wages, the small business ecosystem, inequality, and competition itself. Wherever we find concentrated industires, we find these under-the-radar rollups: out of 616 Big Tech acquisitions from 2010 to 2019, 94 (15%) of them came in for merger scrutiny.
The reportâs authors quote FTC Commissioner Rebecca Slaughter: âI think of serial acquisitions as a Pac-Man strategy. Each individual merger viewed independently may not seem to have significant impact. But the collective impact of hundreds of smaller acquisitions, can lead to a monopolistic behavior.â
Itâs not just the FTC that recognizes the risks from rollups. Jonathan Kanter, the DoJâs top antitrust enforcer has raised alarms about private equity strategies that are âdesigned to hollow out or roll-up an industry and essentially cash out. That business model is often very much at odds with the law and very much at odds with the competition weâre trying to protect.â
The DoJâs interest is important. As with so many antitrust failures, the problem isnât in the law, but in its enforcement. Section 7 of the Clayton Act prohibits serial acquisitions under its âincipient monopolizationâ standard. Acquisitions are banned âwhere the effect of such acquisition may be to substantially lessen competition between the corporation whose stock is so acquired and the corporation making the acquisition.â This incipiency standard was strengthened by the 1950 Celler-Kefauver Amendment.
The lawmakers who passed both acts were clear about their legislative intentionâââto block this kind of stealth monopoly formation. For decades, thatâs how the law was enforced. For example, in 1966, the DoJ blocked Vonâs from acquiring another grocer because the resulting merger would give Vonâs 7.5% of the regional market. While Vonâs is cited by pro-monopoly extremists as an example of how the old antitrust system was broken and petty, the DoJâs logic was impeccable and sorely missed today: they were trying to prevent a rollup of the sort that plagues our modern economy.
As the Supremes wrote in 1963: âA fundamental purpose of [stronger incipiency standards was] to arrest the trend toward concentration, the tendency of monopoly, before the consumerâs alternatives disappeared through merger, and that purpose would be ill-served if the law stayed its hand until 10, or 20, or 30 [more firms were absorbed].â
But even though the incipiency standard remains on the books, its enforcement dwindled away to nothing, starting in the Reagan era, thanks to the Chicago Schoolâs influence. The neoliberal economists of Chicago, led by the Nixonite criminal Robert Bork, counseled that most monopolies were âefficientâ and the inefficient ones would self-correct when new businesses challenged them, and demanded a halt to antitrust enforcement.
In 1982, the DoJâs merger guidelines were gutted, made toothless through the addition of a âsafe harborâ rule. So long as a merger stayed below a certain threshold of market concentration, the DoJ promised not to look into it. In 2000, Clinton signed an amendment to the HSR Act that exempted transactions below $50m. In 2010, Obamaâs DoJ expanded the safe harbor to exclude â[mergers that] are unlikely to have adverse competitive effects and ordinarily require no further analysis.â
These constitute a âblank checkâ for serial acquirers. Any investor who found a profitable strategy for serial acquisition could now operate with impunity, free from government interference, no matter how devastating these acquisitions were to the real economy.
Unfortunately for us, serial acquisitions are profitable. As an EY study put it: âthe more acquisitive the company⊠the greater the value createdâŠthere is a strong pattern of shareholder value growth, correlating with frequent acquisitions.â Where does this value come from? âEfficienciesâ are part of the story, but itâs a sideshow. The real action is in the power that consolidation gives over workers, suppliers and customers, as well as vast, irresistable gains from financial engineering.
In all, the authors identify five ways that rollups enrich investors:
I. low-risk expansion;
II. efficiencies of scale;
III. pricing power;
IV. buyer power;
V. valuation arbitrage.
The efficiency gains that rolled up firms enjoy often come at the expense of workersâââthese companies shed jobs and depress wages, and the savings arenât passed on to customers, but rather returned to the business, which reinvests it in gobbling up more companies, firing more workers, and slashing survivorsâ wages. Anything left over is passed on to the investors.
Consolidated sectors are hotbeds of fraud: take Heartland, which has rolled up small dental practices across America. Heartland promised dentists that it would free them from the drudgery of billing and administration but instead embarked on a campaign of phony Medicare billing, wage theft, and forcing unnecessary, painful procedures on children.
Heartland is no anomaly: dental rollups have actually killed children by subjecting them to multiple, unnecessary root-canals. These predatory businesses rely on Medicaid paying for these procedures, meaning that itâs only the poorest children who face these abuses:
A consolidated sector has lots of ways to rip off the public: they can âdirectly raise prices, bundle different products or services together, or attach new fees to existing products.â The epidemic of junk fees can be traced to consolidation.
Consolidators arenât shy about this, either. The pitch-decks they send to investors and board members openly brag about âpricing power, gained through acquisitions and high switching costs, as a key strategy.â
Unsurprisingly, investors love consolidators. Not only can they gouge customers and cheat workers, but they also enjoy an incredible, obscure benefit in the form of âvaluation arbitrage.â
When a business goes up for sale, its valuation (price) is calculated by multiplying its annual cashflow. For small businesses, the usual multiplier is 3â5x. For large businesses, itâs 10â20x or more. That means that the mere act of merging a small business with a large business can increase its valuation sevenfold or more!
Letâs break that down. A dental practice that grosses $1m/year is generally sold for $3â5m. But if Heartland buys the practice and merges it with its chain of baby-torturing, Medicaid-defrauding dental practices, the chainâs valuation goes up by $10â20m. That higher valuation means that Heartland can borrow more money at more favorable rates, and it means that when it flips the husks of these dental practices, it expects a 700% return.
This is why your local veterinarian has been enshittified. âA typical vet practice sells for 5â8x cashflowâŠAmerican Veterinary Group [is] valued at as much as 21x cashflowâŠWhen a large consolidator buys a $1M cashflow clinic, it may cost them as little as $5M, while increasing the value of the consolidator by $21M. This has created a goldrush for veterinary consolidators.â
This free money for large consolidators means that even when there are better buyersâââinvestors who want to maintain the quality and service the business offersâââthey canât outbid the consolidators. The consolidators, expecting a 700% profit triggered by the mere act of changing the businessâs ownership papers, can always afford to pay more than someone who merely wants to provide a good business at a fair price to their community.
To make this worse, an unprecedented number of small businesses are all up for sale at once. Half of US businesses are owned by Boomers who are ready to retire and exhausted by two major financial crises within a decade. 60% of Boomer-owned businessesâââ2.9m businesses of 11 or so employees each, employing 32m people in allâââare expected to sell in the coming decade.
If nothing changes, these businesses are likely to end up in the hands of consolidators. Since the Great Financial Crisis of 2008, private equity firms and other looters have been awash in free money, courtesy of the Federal Reserve and Congress, who chose to bail out irresponsible and deceptive lenders, not the borrowers they preyed upon.
A decade of zero interest rate policy (ZIRP) helped PE grow to âstaggeringâ size. Over that period, Americaâs 2,000 private equity firms raised buyout warchests totaling $2t. Today, private equity owned companies outnumber publicly traded firms by more than two to one.
Private equity is patient zero in the serial acquisition epidemic. The list of private equity rollup plays includes âcomedy clubs, ad agencies, water bottles, local newspapers, and healthcare providers like hospitals, ERs, and nursing homes.â
Meanwhile, ZIRP left the nationâs pension funds desperate for returns on their investments, and these funds handed $480b to the private equity sector. If you have a pension, your retirement is being funded by investments that are destroying your industry, raising your rent, and turning the nursing home youâre doomed to into a charnel house.
The good news is that enforcers like Kanter have called time on the longstanding, bipartisan failure to use antitrust laws to block consolidation. Kanter told the NY Bar Association: âWe have an obligation to enforce the antitrust laws as written by Congress, and we will challenge any merger where the effect âmay be substantially to lessen competition, or to tend to create a monopoly.ââ
The FTC and the DOJ already have many tools they can use to end this epidemic.
They can revive the incipiency standard from Sec 7 of the Clayton Act, which bans mergers where âthe effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.â
This allows regulators to âconsider a broad range of price and non-price effects relevant to serial acquisitions, including the long-term business strategy of the acquirer, the current trend or prevalence of concentration or acquisitions in the industry, and the investment structure of the transactionsâ;
The FTC and DOJ can strengthen this by revising their merger guidelines to âincorporate a new section for industries or markets where there is a trend towards concentration.â They can get rid of Reaganâs 1982 safe harbor, and tear up the blank check for merger approval;
The FTC could institute a policy of immediately publishing merger filings, âthe moment they are filed.â
Beyond this, the authors identify some key areas for legislative reform:
Exempt the FTC from the Paperwork Reduction Act (PRA) of 1995, which currently blocks the FTC from requesting documents from â10 or more peopleâ when it investigates a merger;
Subject any company âmaking more than 6 acquisitions per year valued at $70 million total or moreâ to âextra scrutiny under revised merger guidelines, regardless of the total size of the firm or the individual acquisitionsâ;
Treat all the companies owned by a PE fund as having the same owner, rather than allowing the fiction that a holding company is the owner of a business;
Force businesses seeking merger approval to provide âany investment materials, such as Private Placement Memorandums, Management or Lender Presentations, or any documents prepared for the purposes of soliciting investment. Such documents often plainly describe the anticompetitive roll-up or consolidation strategy of the acquiring firmâ;
Also force them to provide âloan documentation to understand the acquisition plans of a company and its financing strategy;â
When companies are found to have violated antitrust, ban them from acquiring any other company for 3â5 years, and/or force them to get FTC pre-approval for all future acquisitions;
Reinvigorate enforcement of rules requiring that some categories of business (especially healthcare) be owned by licensed professionals;
Lower the threshold for notification of mergers;
Add a new notification requirement based on the number of transactions;
Fed agencies should automatically share merger documents with state attorneys general;
Extend civil and criminal antitrust penalties to âinvestment bankers, attorneys, consultants who usher through anticompetitive mergers.â
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A Day in the Life of a Financial Engineer: Insights into the Profession
Financial engineering is one of the most exciting and intellectually demanding careers in modern finance. It blends mathematics, programming, statistics, and financial theory to design innovative financial products, develop trading strategies, and manage complex risks in financial markets. Professionals in this field are known as financial engineers, and they work at the intersection of financeâŠ
How to Become an Algorithmic Trader in India: Skills, Courses & Career Path
Algorithmic tradingâalso known as algo trading or automated tradingâis transforming Indiaâs financial markets. With the rise of electronic exchanges like the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), trading is now faster, data-driven, and increasingly automated. From retail traders to hedge funds, everyone is exploring systematic strategies powered by code.
If youâre an engineering student, finance graduate, or working professional wondering how to become an algorithmic trader in India, this guide will walk you through the required skills, courses, and career path.
What is Algorithmic Trading?
Algorithmic trading involves using computer programs to execute trades automatically based on predefined rules. These rules can be based on:
Price movements
Technical indicators
Statistical models
Arbitrage opportunities
Machine learning signals
Instead of manually placing trades, the algorithm scans markets, identifies opportunities, and executes trades in milliseconds.
Why Algorithmic Trading is Growing in India
India has become a major hub for quantitative and algorithmic trading due to:
Advanced exchange infrastructure
Increasing retail participation
API-based trading platforms
Growth of fintech startups
Availability of historical market data
Regulations by the Securities and Exchange Board of India (SEBI) have also formalized algorithmic trading practices, making the ecosystem more structured and transparent.
Step-by-Step Guide to Becoming an Algorithmic Trader in India
1. Build Strong Foundations in Mathematics & Statistics
Algorithmic trading is rooted in quantitative thinking. Key topics include:
Probability theory
Linear algebra
Calculus
Time series analysis
Statistical inference
You donât need a PhD, but you must be comfortable with data analysis and logical reasoning.
Engineering, mathematics, physics, economics, or statistics backgrounds are particularly advantageous.
2. Learn Programming (Non-Negotiable Skill)
Programming is the backbone of algorithmic trading.
Most Important Languages:
Python â Most popular for quant research and strategy building
C++ â Used in high-frequency trading
R â Statistical modeling
SQL â Database management
Start with Python and learn:
Pandas (data analysis)
NumPy (numerical computing)
Matplotlib (visualization)
Backtesting frameworks
If you're serious about high-frequency trading (HFT), low-latency systems knowledge is essential.
3. Understand Financial Markets Deeply
Coding alone wonât make you a trader. You must understand:
Equity markets
Futures and options
Derivatives pricing
Volatility
Order book dynamics
Risk management
Study concepts like:
Black-Scholes model
Greeks (Delta, Gamma, Theta, Vega)
Arbitrage
Momentum strategies
Mean reversion
Without financial knowledge, algorithms become blind automation.
4. Learn Strategy Development & Backtesting
An algorithmic trader must know how to:
Generate trading ideas
Convert ideas into mathematical rules
Backtest strategies on historical data
Evaluate performance metrics
Important metrics:
Sharpe ratio
Maximum drawdown
Win rate
Alpha
Beta
Backtesting helps identify whether a strategy has real predictive power or just overfits historical data.
5. Master Risk Management
Many beginners focus only on returns. Professionals focus on risk.
Key risk concepts:
Position sizing
Stop-loss logic
Portfolio diversification
Value at Risk (VaR)
Drawdown control
Strong risk management separates sustainable traders from gamblers.
Courses to Become an Algorithmic Trader in India
Academic Path
You can pursue:
B.Tech (Engineering)
B.Sc in Mathematics/Statistics
B.Com (Finance focus)
MBA (Finance)
M.Sc in Financial Engineering
Top institutions like Indian Institute of Technology Bombay and Indian Statistical Institute offer strong quantitative foundations.
Professional & Specialized Courses
If you want industry-focused learning, short-term certification programs in:
Algorithmic trading
Quantitative finance
Financial engineering
Machine learning in finance
These programs focus on practical implementation, real datasets, and live trading systemsâideal for job-ready skills.
Look for courses that include:
Live strategy building
Python for trading
Derivatives modeling
API-based execution
Risk frameworks
Career Path of an Algorithmic Trader in India
There are multiple entry points into this field.
1. Quantitative Analyst (Quant)
Develop pricing models
Research trading strategies
Work in banks or hedge funds
2. Algo Trading Developer
Build trading infrastructure
Implement execution systems
Optimize speed and performance
3. Proprietary Trader
Trade firm capital
Develop in-house strategies
4. Retail Systematic Trader
Build personal strategies
Trade via broker APIs
5. Risk Analyst
Monitor algorithm performance
Manage exposure and volatility
Tools You Should Learn
Python
Excel (advanced)
Backtesting libraries
Broker APIs
Git
Linux basics
Advanced:
Machine learning
Deep learning
Cloud computing
Low-latency systems
Challenges in Becoming an Algorithmic Trader
Be aware of these realities:
High competition
Steep learning curve
Emotional discipline required
Strategy decay over time
Regulatory compliance
This is not a âget rich quickâ career. It requires long-term commitment and structured learning.
How Engineering Students Can Start Early
If youâre in your 2nd or 3rd year:
Start learning Python
Participate in trading competitions
Build small backtesting projects
Study derivatives markets
Intern with fintech firms
Since youâre from an engineering background (which is highly valued in quant roles), your analytical strength is already an advantage.
Future of Algorithmic Trading in India
With AI integration, alternative data usage, and faster exchange infrastructure, algorithmic trading will continue to grow.
Areas with high future potential:
Machine learning-driven trading
Medium-frequency strategies
ESG-based quant investing
Crypto algorithms (subject to regulation)
India is becoming a serious quantitative trading destination globally.
Final Thoughts
Becoming an algorithmic trader in India requires a powerful mix of:
Mathematics
Programming
Financial knowledge
Risk management
Discipline
Start with strong fundamentals, take structured courses, build projects, and focus on consistent improvement.
If youâre willing to invest time in learning and practice, algorithmic trading can offer intellectually challenging work, financial rewards, and global career opportunities.
The journey is demandingâbut for analytically driven minds, itâs one of the most exciting careers in modern finance.
The only source of knowledge is experience.â â Albert Einstein
Einsteinâs adage resonates deeply within the financial industry, where historical data serves as the foundation for risk assessment. However, what if our data, the very embodiment of âexperience,â is insufficient? Traditional stress testing methodologies, while valuable, often rely on past observations, potentially overlookingâŠ
