Greg Abbott, the Republican Governor for Texas tested positive for Covid-19. The news comes in the middle of the legal battles over banning vaccination and mask mandates in the state, despite opposition from both local officials and school districts.
According to NBC News, Abbott is fully vaccinated, there are reports he also received a 3rd booster shot and is currently receiving Regeneron’s antibody treatment (usually exclusive to those with compromised immune systems). Per his communication’s director, he is “in good health, and currently experiencing no symptoms.”
“Governor Abbott is in constant communication with his staff, agency heads, and government officials to ensure that state government continues to operate smoothly and efficiently”
-Mark Miner, the governor’s communications director
Perhaps a “bit” hyprocritcal? Abbott has access and benefits from any and all possible medical services necessary. Unfortunately the same privilege is not available to most ordinary Texans, where currently the state is experiencing a surge of new cases and hospitalizations
There’s a storm brewing and tech mega-monsters like Amazon, Google & Facebook know it
Practically since the day that Lina M. Kahn was appointed chair of the FTC, big tech giants have shown that they are worried. Both Amazon and Facebook filed suits asking that she recuse herself almost immediately.
Khan’s famous 2017 article; “Amazon’s Antitrust Paradox“, published in the Yale Law Journal was both the obvious initial catalyst to her becoming chair of the FTC and also Amazon being unhappy that she would be at the helm of the FTC while antitrust actions are being brought against them.
The idea of removing her would have obvious appeal for those that fear her dedication to a new antitrust stance at the FTC, one that no longer allows digital behemoths to skate, monopolize and grow unchecked. But there is likely little chance that they can get her off their metaphorical backs that easily.
As per the Guardian: “Khan does not have any conflicts of interest under federal ethics laws, which typically apply to financial investments or employment history, and the requests [for her recusal] are not likely to go far.”
The speed and seeming ease of the fall of Afghanistan to the Taliban this week shocked the world. First cities around the country fell, one after another, and then, just days later, the nation’s capitol Kabul was ready to go.
“The urgency bordering on panic laid bare how the president’s strategy for ending the 20-year U.S. military effort — leaving Afghan forces to hold off the Taliban for months as negotiators redoubled efforts to hammer out a peace deal — has undergone a rapid dismantling.”
Washington Post
The Kabul airport became virtually the last US controlled zone as scenes reminiscent of the fall of Saigon were broadcast over the weekend, showing the desperate scramble to evacuate remaining personnel.
In November 2017, with the administration of President Donald Trump rushing to get a massive tax overhaul through Congress, Sen. Ron Johnson stunned his colleagues by announcing he would vote “no.”
Making the rounds on cable TV, the Wisconsin Republican became the first GOP senator to declare his opposition, spooking Senate leaders who were pushing to quickly pass the tax bill with their thin majority. “If they can pass it without me, let them,” Johnson declared.
Johnson’s demand was simple: In exchange for his vote, the bill must sweeten the tax break for a class of companies that are known as pass-throughs, since profits pass through to their owners. Johnson praised such companies as “engines of innovation.” Behind the scenes, the senator pressed top Treasury Department officials on the issue, emails and the officials’ calendars show.
Within two weeks, Johnson’s ultimatum produced results. Trump personally called the senator to beg for his support, and the bill’s authors fattened the tax cut for these businesses. Johnson flipped to a “yes” and claimed credit for the change. The bill passed.
The Trump administration championed the pass-through provision as tax relief for “small businesses.”
Confidential tax records, however, reveal that Johnson’s last-minute maneuver benefited two families more than almost any others in the country — both worth billions and both among the senator’s biggest donors.
Dick and Liz Uihlein of packaging giant Uline, along with roofing magnate Diane Hendricks, together had contributed around $20 million to groups backing Johnson’s 2016 reelection campaign.
The expanded tax break Johnson muscled through netted them $215 million in deductions in 2018 alone, drastically reducing the income they owed taxes on. At that rate, the cut could deliver more than half a billion in tax savings for Hendricks and the Uihleins over its eight-year life.
But the tax break did more than just give a lucrative, and legal, perk to Johnson’s donors. In the first year after Trump signed the legislation, just 82 ultrawealthy households collectively walked away with more than $1 billion in total savings, an analysis of confidential tax records shows. Republican and Democratic tycoons alike saw their tax bills chopped by tens of millions, among them: media magnate and former Democratic presidential candidate Michael Bloomberg; the Bechtel family, owners of the engineering firm that bears their name; and the heirs of the late Houston pipeline billionaire Dan Duncan.
Usually the scale of the riches doled out by opaque tax legislation — and the beneficiaries — remain shielded from the public. But ProPublica has obtained a trove of IRS records covering thousands of the wealthiest Americans. The records have enabled reporters this year to explore the diverse menu of options the tax code affords the ultrawealthy to avoid paying taxes.
The drafting of the Trump law offers a unique opportunity to examine how the billionaire class is able to shape the code to its advantage, building in new ways to sidestep taxes.
The Tax Cuts and Jobs Act was the biggest rewrite of the code in decades and arguably the most consequential legislative achievement of the one-term president. Crafted largely in secret by a handful of Trump administration officials and members of Congress, the bill was rushed through the legislative process.
As draft language of the bill made its way through Congress, lawmakers friendly to billionaires and their lobbyists were able to nip and tuck and stretch the bill to accommodate a variety of special groups. The flurry of midnight deals and last-minute insertions of language resulted in a vast redistribution of wealth into the pockets of a select set of families, siphoning away billions in tax revenue from the nation’s coffers. This story is based on lobbying and campaign finance disclosures, Treasury Department emails and calendars obtained through a Freedom of Information Act lawsuit, and confidential tax records.
For those who benefited from the bill’s modifications, the collective millions spent on campaign donations and lobbying were minuscule compared with locking in years of enormous tax savings.
A spokesperson for the Uihleins declined to comment. Representatives for Hendricks didn’t respond to questions. In response to emailed questions, Johnson did not address whether he had discussed the expanded tax break with Hendricks or the Uihleins. Instead, he wrote in a statement that his advocacy was driven by his belief that the tax code “needs to be simplified and rationalized.”
“My support for ‘pass-through’ entities — that represent over 90% of all businesses — was guided by the necessity to keep them competitive with C-corporations and had nothing to do with any donor or discussions with them,” he wrote.
By the summer of 2017, it was clear that Trump’s first major legislative initiative, to “repeal and replace” Obamacare, had gone up in flames, taking a marquee campaign promise with it. Looking for a win, the administration turned to tax reform.
“Getting closer and closer on the Tax Cut Bill. Shaping up even better than projected,” Trump tweeted. “House and Senate working very hard and smart. End result will be not only important, but SPECIAL!”
At the top of the Republican wishlist was a deep tax cut for corporations. There was little doubt that such a cut would make it into the final legislation. But because of the complexity of the tax code, slashing the corporate tax rate doesn’t actually affect most U.S. businesses.
Corporate taxes are paid by what are known in tax lingo as C corporations, which include large publicly traded firms like AT&T or Coca-Cola. Most businesses in the United States aren’t C corporations, they’re pass-throughs. The name comes from the fact that when one of these businesses makes money, the profits are not subject to corporate taxes. Instead, they “pass through” directly to the owners, who pay taxes on the profits on their personal returns. Unlike major shareholders in companies like Amazon, who can avoid taking income by not selling their stock, owners of successful pass-throughs typically can’t avoid it.
Pass-throughs include the full gamut of American business, from small barbershops to law firms to, in the case of Uline, a packaging distributor with thousands of employees.
So alongside the corporate rate cut for the AT&Ts of the world, the Trump tax bill included a separate tax break for pass-through companies. For budgetary reasons, the tax break is not permanent, sunsetting after eight years.
Proponents touted it as boosting “small business” and “Main Street,” and it’s true that many small businesses got a modest tax break. But a recent study by Treasury economists found that the top 1% of Americans by income have reaped nearly 60% of the billions in tax savings created by the provision. And most of that amount went to the top 0.1%. That’s because even though there are many small pass-through businesses, most of the pass-through profits in the country flow to the wealthy owners of a limited group of large companies.
Tax records show that in 2018, Bloomberg, whom Forbes ranks as the 20th wealthiest person in the world, got the largest known deduction from the new provision, slashing his tax bill by nearly $68 million. (When he briefly ran for president in 2020, Bloomberg’s tax plan proposed ending the deduction, though his plan was generally friendlier to the wealthy than those of his rivals.) A spokesperson for Bloomberg declined to comment.
Johnson’s intervention in November 2017 was designed to boost the bill’s already generous tax break for pass-through companies. The bill had allowed for business owners to deduct up to 17.4% of their profits. Thanks to Johnson holding out, that figure was ultimately boosted to 20%.
That might seem like a small increase, but even a few extra percentage points can translate into tens of millions of dollars in extra deductions in one year alone for an ultrawealthy family.
The mechanics are complicated but, for the rich, it generally means that a business owner gets to keep an extra 7 cents on every dollar of profit. To understand the windfall, take the case of the Uihlein family.
Dick, the great-grandson of a beer magnate, and his wife, Liz, own and operate packaging giant Uline. The logo of the Pleasant Prairie, Wisconsin, firm is stamped on the bottom of countless paper bags. Uline produced nearly $1 billion in profits in 2018, according to ProPublica’s analysis of tax records. Dick and Liz Uihlein, who own a majority of the company, reported more than $700 million in income that year. But they were able to slash what they owed the IRS with a $118 million deduction generated by the new tax break.
Liz Uihlein, who serves as president of Uline, has criticized high taxes in her company newsletter. The year before the tax overhaul, the couple gave generously to support Trump’s 2016 presidential campaign. That same year, when Johnson faced long odds in his reelection bid against former Sen. Russ Feingold, the Uihleins gave more than $8 million to a series of political committees that blanketed the state with pro-Johnson and anti-Feingold ads. That blitz led the Milwaukee Journal Sentinel to dub the Uihleins “the Koch brothers of Wisconsin politics.”
Johnson’s campaign also got a boost from Hendricks, Wisconsin’s richest woman and owner of roofing wholesaler ABC Supply Co. The Beloit-based billionaire has publicly pushed for tax breaks and said she wants to stop the U.S. from becoming “a socialistic ideological nation.”
Hendricks has said Johnson won her over after she grilled him at a brunch meeting six years earlier. She gave about $12 million to a pair of political committees, the Reform America Fund and the Freedom Partners Action Fund, that bought ads attacking Feingold.
In the first year of the pass-through tax break, Hendricks got a $97 million deduction on income of $502 million. By reducing the income she owed taxes on, that deduction saved her around $36 million.
Even after Johnson won the expansion of the pass-through break in late 2017, the final text of the tax overhaul wasn’t settled. A congressional conference committee had to iron out the differences between the Senate and House versions of the bill.
Sometime during this process, eight words that had been in neither the House nor the Senate bill were inserted: “applied without regard to the words ‘engineering, architecture.’”
With that wonky bit of legalese, Congress smiled on the Bechtel clan.
The Bechtels’ engineering and construction company is one of the largest and most politically connected private firms in the country. With surgical precision, the new language guaranteed the Bechtels a massive tax cut. In previous versions of the bill, construction would have been given a tax break, but engineering was one of the industries excluded from the pass-through deduction for reasons that remain murky.
When the bill, with its eight added words, took effect in 2018, three great-great-grandchildren of the company’s founder, CEO Brendan Bechtel and his siblings Darren and Katherine, together netted deductions of $111 million on $679 million in income, tax records show.
And that’s just one generation of Bechtels. The heirs’ father, Riley, also holds a piece of the firm, as does a group of nonfamily executives and board members. In all, Bechtel Corporation produced around $2.3 billion of profit in 2018 alone — the vast majority of which appears to be eligible for the 20% deduction.
Who wrote the phrase — and which lawmaker inserted it — has been a much-discussed mystery in the tax policy world. ProPublica found that a lobbyist who worked for both Bechtel and an industry trade group has claimed credit for the alteration.
In the months leading up to the bill’s passage in 2017, Bechtel had executed a full-court press in Washington, meeting with Trump administration officials and spending more than $1 million lobbying on tax issues.
Marc Gerson, of the Washington law firm Miller & Chevalier, was paid to lobby on the tax bill by both Bechtel and the American Council of Engineering Companies, of which Bechtel is a member. At a presentation for the trade group’s members a few weeks after Trump signed the bill into law, Gerson credited his efforts for the pass-through tax break, calling it a “major legislative victory for the engineering industry.” Gerson did not respond to a request for comment.
Bechtel’s push was part of a long history of lobbying for tax breaks by the company. Two decades ago, it even hired a former IRS commissioner as part of a successful bid to get “engineering and architectural services” included in one of President George W. Bush’s tax cuts.
The company’s lobbying on the Trump tax bill, and the tax break it received, highlight a paradox at the core of Bechtel: The family has for years showered money on anti-tax candidates even though, as The New Yorker’s Jane Mayer has written, Bechtel “owed almost its entire existence to government patronage.” Most famous for being one of the companies that built the Hoover Dam, in recent years it has bid on and won marquee federal projects. Among them: a healthy share of the billions spent by American taxpayers to rebuild Iraq after the war. The firm recently moved its longtime headquarters from San Francisco to Reston, Virginia, a hub for federal contractors just outside the Beltway.
A spokesperson for Bechtel Corporation didn’t respond to questions about the company’s lobbying. The spokesperson, as well as a representative of the family’s investment office, didn’t respond to requests to accept questions about the family’s tax records.
Brendan Bechtel has emerged this year as a vocal critic of President Joe Biden’s proposal to pay for new infrastructure with tax hikes.
“It’s unfair to ask business to shoulder or cover all the additional costs of this public infrastructure investment,” he said on a recent CNBC appearance.
As the landmark tax overhaul sped through the legislative process, other prosperous groups of business owners worried they would be left out. With the help of lobbyists, and sometimes after direct contact with lawmakers, they, too, were invited into what Trump dubbed his “big, beautiful tax cut.”
Among the biggest winners during the final push were real estate developers.
The Senate bill included a formula that restricted the size of the new deduction based on how much a pass-through business paid in wages. Congressional Republicans framed the provision as rewarding businesses that create jobs. In effect, it meant a highly profitable business with few employees — like a real estate developer — wouldn’t be able to benefit much from the break.
Developers weren’t happy. Several marshaled lobbyists and prodded friendly lawmakers to turn things around.
At least two of them turned to Johnson.
“Dear Ron,” Ted Kellner, a Wisconsin developer, and a colleague wrote in a letter to Johnson. “I’m concerned that the goal of a fair, efficient and growth oriented tax overhaul will not be achieved, especially for private real estate pass-through entities.”
Johnson forwarded the letter from Kellner, a political donor of his, to top Republicans in the House and Senate: “All, Yesterday, I received this letter from very smart and successful businessmen in Milwaukee,” adding that the legislation as it stood gave pass-throughs “widely disparate, grossly unfair” treatment.
House Ways and Means Committee Chairman Kevin Brady, R-Texas, responded with a promise to do more: “Senator — I strongly agree we should continue to improve the pass-through provisions at every step. You are a great champion for this.” Congress is not subject to the Freedom of Information Act, but Treasury officials were copied on the email exchange. ProPublica obtained the exchange after suing the Treasury Department.
Kellner got his wish. In the final days of the legislative process, real estate investors were given a side door to access the full deduction. Language was added to the final legislation that allowed them to qualify if they had a large portfolio of buildings, even if they had small payrolls.
With that, some of the richest real estate developers in the country were welcomed into the fold.
The tax records obtained by ProPublica show that one of the top real estate industry winners was Donald Bren, sole owner of the Southern California-based Irvine Company and one of the wealthiest developers in the United States.
In 2018 alone, Bren personally enjoyed a deduction of $22 million because of the tax break. Bren’s representatives did not respond to emails and calls from ProPublica.
His company had hired Wes Coulam, a prominent Washington lobbyist with Ernst & Young, to advocate for its interests as the bill was being hammered out. Before Coulam became a lobbyist, he worked on Capitol Hill as a tax policy adviser for Utah Sen. Orrin Hatch.
Hatch, then the Republican chair of the Senate Finance Committee, publicly took credit for the final draft of the new deduction, amid questions about the real estate carveout. Hatch’s representatives did not respond to questions from ProPublica about how the carveout was added.
ProPublica’s records show that other big real estate winners include Adam Portnoy, head of commercial real estate giant the RMR Group, who got a $14 million deduction in 2018. Donald Sterling, the real estate developer and disgraced former owner of the Los Angeles Clippers, won an $11 million deduction. Representatives for Portnoy and Sterling did not respond to questions from ProPublica.
Another gift to the real estate industry in the bill was a tax deduction of up to 20% on dividends from real estate investment trusts, more commonly known as REITs. These companies are essentially bundles of various real estate assets, which investors can buy chunks of. REITs make money by collecting rent from tenants and interest from loans used to finance real estate deals.
The tax cut for these investment vehicles was pushed by both the Real Estate Roundtable, a trade group for the entire industry, and the National Association of Real Estate Investment Trusts. The latter, a trade group specifically for REITs, spent more than $5 million lobbying in Washington the year the tax bill was drafted, more than it had in any year in its history.
Steven Roth, the founder of Vornado Realty Trust, a prominent REIT, is a regular donor to both groups’ political committees.
Roth had close ties to the Trump administration, including advising on infrastructure and doing business with Jared Kushner’s family. He became one of the biggest winners from the REIT provision in the Trump tax law.
Roth earned more than $27 million in REIT dividends in the two years after the bill passed, potentially allowing him a tax deduction of about $5 million, tax records show. Roth did not respond to requests for comment, and his representatives did not accept questions from ProPublica on his behalf.
Another carveout benefited investors of publicly traded pipeline businesses. Sen. John Cornyn, a Texas Republican, added an amendment for them to the Senate version of the bill just before it was voted on.
Without his amendment, investors who made under a certain income would have received the deduction anyway, experts told ProPublica. But for higher-income investors, a slate of restrictions kicked in. In order to qualify, they would have needed the businesses they’re invested in to pay out significant wages, and these oil and gas businesses, like real estate developers, typically do not.
Cornyn’s amendment cleared the way.
The trade group for these companies and one of its top members, Enterprise Products Partners, a Houston-based natural gas and crude oil pipeline company, had both lobbied on the bill. Enterprise was founded by Dan Duncan, who died in 2010.
The Trump tax bill delivered a win to Duncan’s heirs. ProPublica’s data shows his four children, who own stakes in the company, together claimed more than $150 million in deductions in 2018 alone. The tax provision for “small businesses” had delivered a windfall to the family Forbes ranked as the 11th richest in the country.
In a statement, an Enterprise spokesperson wrote: “The Duncan family abides by all applicable tax laws and will not comment on individual tax returns, which are a private matter.” Cornyn’s office did not respond to questions about the senator’s amendment.
The tax break is due to expire after 2025, and a gulf has opened in Congress about the future of the provision.
In July, Senate Finance Chair Ron Wyden, D-Ore., proposed legislation that would end the tax cut early for the ultrawealthy. In fact, anyone making over $500,000 per year would no longer get the deduction. But it would be extended to the business owners below that threshold who are currently excluded because of their industry. The bill would “make the policy more fair and less complex for middle-class business owners, while also raising billions for priorities like child care, education, and health care,” Wyden said in a statement.
Meanwhile, dozens of trade groups, including the Chamber of Commerce, are pushing to make the pass-through tax cut permanent. This year, a bipartisan bill called the Main Street Tax Certainty Act was introduced in both houses of Congress to do just that.
One of the bill’s sponsors, Rep. Henry Cuellar, D-Texas, pitched the legislation this way: “I am committed to delivering critical relief for our nation’s small businesses and the communities they serve.”
Originally published on ProPublica by Justin Elliott and Robert Faturechi
Senate Finance Committee Chairman Ron Wyden said on Thursday he is revisiting proposed legislation that would crack down on the giant tax-free retirement accounts amassed by the ultrawealthy after a ProPublica story exposed that billionaires were shielding fortunes inside them.
“I feel very strongly that the IRA was designed to provide retirement security to working people and their families, and not be yet another tax dodge that allows mega millionaires and billionaires to avoid paying taxes,” Wyden said in an interview.
ProPublica reported Thursday that the Roth IRA, a retirement vehicle originally intended to spur middle-class savings, was being hijacked by the ultrawealthy and used to create giant onshore tax shelters. Tax records obtained by ProPublica revealed that Peter Thiel, a co-founder of PayPal and an investor in Facebook, had a Roth IRA worth $5 billion as of 2019. Under the rules for the accounts, if he waits till he turns 59 and a half, he can withdraw money from the account tax-free.
The story is part of ProPublica’s ongoing series on how the country’s richest citizens sidestep the nation’s income tax system. ProPublica has obtained a trove of IRS tax return data on thousands of the wealthiest people in the U.S., covering more than 15 years. The records have allowed ProPublica to begin, this month, an unprecedented exploration of the tax-avoidance strategies available to the ultrawealthy, allowing them to avoid taxes in ways most Americans can’t.
Wyden said ProPublica’s stories have shifted the debate about taxes at the grassroots level, underscoring a “double standard” that would have a nurse in Medford, Oregon, dutifully paying taxes “with every single paycheck” while the wealthiest Americans “just defer, defer, defer paying their taxes almost until perpetuity.”
Wyden said, “Now, the American people are with us on the proposition that everybody ought to pay their fair share, and in that sense, the debate about taxes has really changed a lot.”
The focus on recouping lost tax revenue comes at a critical time, Wyden and others say, as lawmakers look for ways to fund President Joe Biden’s infrastructure plan and other domestic spending.
Wyden had worried for years that Roth IRAs were being abused by the ultrawealthy. In 2016, he put forth a proposal that would have reined in the amount of money that could be stowed inside them.
“If I had my way back in 2016, my bill would have passed, there would have been a crackdown on these massive Roth IRA accounts built on assets from sweetheart deals,” Wyden said.
The proposal was known as the Retirement Improvements and Savings Enhancements Act. It would have required owners of Roth accounts worth more than $5 million to take out money over time, capping the accounts’ growth. It also would have slammed shut a back door that allowed the wealthy to move fortunes into Roths from less favorable retirement accounts. This maneuver, known as a conversion, allows a taxpayer to transform a traditional IRA into a Roth after paying a one-time tax.
Ted Weschler, a deputy of Warren Buffett at Berkshire Hathaway, told ProPublica he supported reforms to rein in giant Roth IRAs like his. Weschler’s account hit the $264.4 million mark in 2018 after he converted a whopping $130 million and paid a one-time tax years earlier, according to tax records obtained by ProPublica.
In a statement to ProPublica earlier this week, Weschler didn’t address any specific reform plan but said: “Although I have been an enormous beneficiary of the IRA mechanism, I personally do not feel the tax shield afforded me by my IRA is necessarily good tax policy. To this end, I am openly supportive of modifying the benefit afforded to retirement accounts once they exceed a certain threshold.”
Wyden’s proposal also targeted the stuffing of undervalued assets into Roths, which congressional investigators had flagged as the foundation of many large accounts. Under the Wyden draft bill, purchasing an asset for less than fair market value would strip the tax benefits from the entire IRA.
ProPublica’s investigation showed that Thiel purchased founder’s shares of the company that would become PayPal at $0.001 per share in 1999. At that price, he was able to buy 1.7 million shares and still fall below the $2,000 maximum contribution limit Congress had set at the time for Roth IRAs. PayPal later disclosed in an SEC filing that those shares, and others issued that year, were sold at “below fair value.”
A spokesperson for Thiel accepted detailed questions on Thiel’s behalf last week, then never responded to phone calls or emails.
The RISE Act was never introduced because, Wyden said, Republicans controlled the Senate at the time and made clear they opposed the effort. The proposal was also heartily opposed by promoters of nontraditional retirement investments. One of them wrote, at the time: “Everything about the RISE Act Proposal is opposed to capitalism and economic freedom.”
Following ProPublica’s story on Roths, Sen. Elizabeth Warren, D-Mass., said the way to address the gargantuan accounts would be a wealth tax, which would impose an annual levy on households with a net worth over $50 million.
Warren tweeted a link to the story and wrote: “Yes, our tax system is rigged with loopholes and tax shelters for billionaires like Peter Thiel. And stories like this will keep popping up until we pass a simple #WealthTax on assets over $50 million to make these guys pay their fair share.”
Yes, our tax system is rigged with loopholes and tax shelters for billionaires like Peter Thiel. And stories like this will keep popping up until we pass a simple #WealthTax on assets over $50 million to make these guys pay their fair share. https://t.co/6aP6l8tG3A
Daniel Hemel, a tax law professor at the University of Chicago who has been researching large Roths, said that Congress should simply prohibit IRAs from purchasing assets that are not bought and sold on the public market.
“There’s no reason people should be able to be gambling their retirement assets on pre-IPO stocks,” Hemel said.
He added that lawmakers should go beyond reforms targeting the accounts directly and address a potential estate tax dodge related to Roths.
If the holder of a large Roth dies, the retirement account is considered part of the taxable estate, and a significant tax is due. But, Hemel said, there’s nothing to stop an American who has amassed a giant Roth from renouncing their citizenship and moving abroad to a country with no estate taxes. It’s rare, but not unheard of, for the ultrawealthy to renounce their U.S. citizenship to avoid taxes.
Under federal law, U.S. citizens who renounce their citizenship are taxed that day on assets that have risen in value but are not yet sold. But there’s an exception for certain kinds of assets, Hemel said, including Roth retirement accounts.
Thiel acquired citizenship in New Zealand in 2011. Unlike the United States, New Zealand has no estate tax. It’s not clear whether estate taxes figured into Thiel’s decision.
A spokesperson for Thiel did not immediately respond to questions on Friday about whether estate taxes factored into Thiel’s decision to become a New Zealand citizen.
In his application for citizenship, Thiel wrote to a government minister: “I have long admired the people, culture, business environment and government of New Zealand, as well as the encouragement which is given to investment, business and trade in New Zealand.”
Patching the hole in the expatriation law, Hemel said, “should be a top policy priority because we’re talking about, with Thiel alone, billions of dollars of taxes.”
by Justin Elliott, Patricia Callahan and James Bandler for ProPublica via Creative Commons.
They said Google’s decision to block advertisers from seeing “Black Lives Matter” and other social justice YouTube videos was the last straw
By: Aaron Sankin
Following a recent Markup investigation revealing a secret Google Ads blocklist that hides Black Lives Matter YouTube videos from advertisers—but allowed them to find videos related to “White lives matter”—some small YouTube creators have pledged to leave the platform.
“I will not post any further content on the platform,” Carrie the One, a drag queen and YouTuber with a few dozen followers, said in an email. “I hope that by walking away from YouTube, we can inspire others to join us and put enough pressure on them to change course and do better for all of us.”
“I understand it’s one of the largest media sharing sites,” wrote another streamer who goes by the name Jambo and is mostly on Twitch, “but morals matter, and theirs are not for me.”
Both said that the decision was not hard for them because they hadn’t dedicated much time to YouTube content and didn’t depend on its ad revenue for their livelihood.
Google would not comment on the defections.
The Markup’s two-part investigative series, published earlier this month, dug into the Google Ads portal that allows advertisers to pick specific YouTube videos and channels for their ads. We found that Google’s blocklist missed most of the hate terms and slogans we checked but blocked equivalent social justice terms.
When we took our findings to Google, the company blocked all but three of the hate terms, but it also increased exponentially the number of social justice terms it blocked for ad searches, eliminating advertisers’ ability to search for 83 percent of the terms on our list, including “Black excellence,” “civil rights,” and “LGBTQ.”
The Markup also found discrepancies in how different religions were treated. When we first tested the portal last November, we found that terms like “Muslim parenting” and “Muslim fashion” were blocked for searches, whereas “Christian fashion” and “Christian parenting” were not—nor were the anti-Muslim hate terms “white sharia” and “civilization jihad.”
Rather than lift its ban on phrases containing “Muslim,” Google Ads now also blocks those and other innocuous words in combination with “Christian,” “Buddhist,” and “Jewish.”
As the investigation traveled on social media last week, with thousands of people sharing posts about it, dozens tweeted that they’d had enough and would quit the platform.
We spoke to eight YouTubers who said they were quitting, each with relatively small followings of less than 2,000 YouTube subscribers apiece. They said their decisions to leave the platform reflect a desire to push back at a powerful tech company they believe has done a poor job of listening to their concerns.
“I was pretty disgusted that a platform would use such thinly-veiled tactics and exhibit such overt disregard for the experiences and voices of marginalized folks,” Carrie the One said in an email.
“We know that racism, homophobia, transphobia, xenophobia, and islamophobia exist and thrive within the systems and structures that our society operates within, but to see those same forces INTENTIONALLY employed by a platform that claims to protect the same folks they are targeting was more than I felt like I could tolerate.”
Google would not respond to The Markup’s questions for the original investigation about why terms like “Black Lives Matter” were blocked—or why it expanded the block.
In response to questions for this story, Google spokesperson Christopher Lawton said in an email: “We know that many brands want to reach audiences who are interested in social justice causes and we want our creators who make videos about these topics to thrive on YouTube.”
He added that YouTube “videos about topics like Black Lives Matter, Black culture and Black excellence, can and do monetize on YouTube, along with topics related to a wide range of social justice issues,” meaning that if advertisers can find these videos despite the block, the videos themselves can run ads.
Graham Jenkins, a video game streamer who uploads on the channel 170Out, said the revelations in The Markup’s investigation pushed him over the edge.
“It’s been on my mind to move from YouTube for a little while now,” Jenkins said in an email. “This isn’t the first time that YouTube has blocked phrases like this but allowed right-wing content to stay unchallenged. I think there was an issue where they blocked LGBT content previously, but are quite happy to allow anti-LGBT videos to remain untouched.”
He was referring to research in 2019 by a group of YouTube creators that showed the platform was systematically demonetizing videos that contained LGBTQ content. YouTube was also criticized for knowingly leaving homophobic content accessible on its platform.
Jenkins said he would stop uploading new content to YouTube as soon as he found another platform that is free for videos of any length.
“Sadly, there are currently not any other strong distribution options out there to compete with YouTube…”
— streamer who goes by the handle Glam Shatterskull
That might not be so easy. Other YouTubers told The Markup that the platform’s massive reach and ease of use made the choice to stop posting there more difficult.
“Sadly, there are currently not any other strong distribution options out there to compete with YouTube,” said a streamer who goes by the handle Glam Shatterskull and previously posted video gaming content to the platform.
“I would love to see Twitch flesh out its video production offerings,” he said. “In the meantime I will most likely be building out my own website to host video content.”
These content creators weren’t the only ones with harsh words for Google following revelations about its advertising blocklist.
The method Google used to add previously unblocked terms to its blocklist in response to our investigation makes future similar watchdog reporting impossible.
The blocked terms are now indistinguishable in the code from the responses the portal gives for gibberish. Because we now cannot know for certain which terms are blocked, as opposed to the platform not finding any related videos, Google has shielded itself from future scrutiny of its keyword blocks on Google Ads.
This didn’t sit right with Sen. Ron Wyden (D–OR), who authored legislation in 2019 that sought to require tech companies to audit their algorithms for bias.
“Google clearly has a lot of work to do to block hateful videos from advertisers,” said Wyden, who said he plans to reintroduce the bill. “Hiding how it screens those videos is exactly the wrong way to respond to legitimate reporting.”
Lawton, the Google spokesperson, declined to comment on Wyden’s criticism.
ProPublica drops a second monumental article based on treasure trove of IRS, SEC & court data
Excellent reporting of tax injustices among the obscenely rich continues with a huge and revelatory piece on Peter Thiel and his “little” Roth IRA scheme. Going well beyond the previous article that detailed how Bezos, Musk, Buffet and others all use loans secured with share holdings to avoid income, and thus avoid paying tax the “Lord of the Roths” is even more explosive.
While the emphasis of the article on Thiel’s Roth IRA takes on the task of trying to somehow compare an “average” investor’s potential gains with the unimaginable magnitude of Thiel’s windfall, this is something that makes sense as a valid perspective, but the obscenity is nearly lost in the opaque fog of numbers beyond comprehension.
For example: your Peter is basically gifted 1.7 million shares by the company he was one of the founders of (along with Elon Musk and the rest of the so called “PayPal Mafia). That “purchase” costing less than $2000 based on the ridiculous price of $0.001 per share was used to found a Roth IRA.
The engineered numbers were no accident: at the time, in 1999, a Roth IRA account had a maximum allowable contribution amount of $2,000. Since the shares were “below fair value”, the fact of which was admitted by PayPal in an SEC filing from the time just before the company went public, the value increased massively, by 227,490% in the first year. Which increased the value of the paltry $2k up to $3.8 million.
Though obviously not enforced, regulations at the time forbade this kind of “stuffing”. Meaning, the initial trade that launched this scheme was possibly illegitimate, if not unlawful. Or, as ProPublica more kindly phrased it: “Investors aren’t allowed to buy assets for less than their true value through an IRA. “
As a matter of fact, according to the article, the “stuffing” was so successful that no further contributions were ever made into the account after that initial 1999 sum.
Since a Roth IRA allows a person to trade stocks within the account tax free, as long as no withdrawals are made, this large but still comprehensible sum was the start of a 20 year use of the tax statutes to build a fortune of over $5 billion without paying a single penny in tax.
Hitting $870 million in value by 2008, by 2019 the tax free enterprise, built on the less than $2000 initial contribution (stock “purchase”), ultimately ballooned to 96 sub-accounts with holdings of $5 billion.
Ok, so that’s the short summary of the mind blowing numbers. For a more detailed account, by all means visit the original article.
The numbers are outrageous, but the entitlement and arrogance is on a whole other level
The part of the story that should spark outrage is not in the numbers but begins where the almost inhuman greed, hubris and hypocrisy at this good fortune grows apace with the size of the tax free bonanza. Because Peter Tiel is not just any run-of-the-mill untaxed billionaire.
The endlessly expanding windfall he received, tax free, did not engender a mindset of charity or gratefulness at his miraculous providence.
Above: Photo Collage / Lynxotic
Instead Thiel, once the wealth lent him a position of power, preached and pushed the idea that the US government, the same one that he was able to avoid paying taxes to, was guilty of over-taxing people like him (and poor people too).
He spent millions of dollars in an effort to influence Republican politicians and groups that have anti-tax agendas, to change the laws in ways that would add even more advantages to his already preposterously privileged position. Then this: as per ProPublica: “In 2016, he became the rare Silicon Valley titan to endorse Donald Trump.”
And, in an arrogance that is as incomprehensible as the size his effortlessly expanding fortune, he espouses the belief that people like him are entitled to these kind of spoils because, after all, without him we might have to live without PayPal and….wait for it…. Facebook.
Yes, you heard that right. In 2004, Thiel used his IRA to buy $500,000 worth of shares in a, then private, company called Facebook, which was the first big outside investment in Zuckerberg’s soon to be massive monstrosity.
By using his IRA funds to buy shares of the start-up he was able to avoid tax on all the future gains of those shares. (ProPublica, in excellent investigative reporting, uncovered this tidbit by combing though Facebook court documents).
So, again, ostensibly, based on his well known statements, we are not only to congratulate him on his clever method of avoiding any taxation whatsoever on the first gambit with the PayPal shares, but we ought to effusively thank him for helping Facebook to become the dangerous purveyor of surveillance and phantom tollbooth Ponzi empire that is it today?
In perhaps one of the greatest illustrations of how power corrupts, this idea that because he was able to amass a fortune on such a massive scale without the burden of any tax whatsoever, he is somehow a hero to be emulated, is the real reason for us to be outraged.
That an average person might be lucky to turn $2000 into $250,000 over two decades, as was illustrated in detail in the article, while Thiel easily turned it into $5 billion, is outrageous, yes.
But the real “crime” is that it was done with zero benefit to anyone except him and other Silicon Valley insiders at companies like PayPal and Facebook.
Could it be argued that Facebook is a gift to humanity? Well, in 2021 that would be a tough argument to put forth without being laughed out of the room. And PayPal? It’s doubtful that Satoshi Nakamoto has to fear competition from any of the PayPal Mafia (including Mr. Musk) when the crown for greatest financial innovator of the century is awarded.
In a revelation that could have received more page inches, the article also exposes a second, possibly more plausible reason, regarding why Thiel went to great lengths to bankrupt Gawker Media, which he blamed for outing him as Gay. That politically convenient motivation could very well have covered up the real reason:
Again, as per ProPublica:
“In a story headlined, “Give Me Liberty or Give Me Taxpayer Money,” Gawker Media, citing anonymous sources, revealed that Thiel held his Facebook investment in a tax-free Roth.”
Companies built on greed and hubris create nothing and, in the end, die
Thiel believes he will live to be 120 years old. Based on his comments and writings he appears to believe that the world would benefit from that eventuality.
But when looking at the companies he helped to build, and the obscene fortune he was rewarded with for binging them into being, it seems like most of us, after accessing his life’s works and “accomplishments”, would be more thankful for the improbability of that dream coming true.
2087? That will be the year that either Utopia or Oblivion will have arrived for humanity and the planet earth. If by a miracle an earthly Utopia comes to be, it is highly unlikely that PayPal, Facebook or Mr. Thiel will have had any hand in bringing it about.
Above: Jack Dorsey & Elon Musk – Photo – various / tesla / Twitter / collage Lyxotic
Possibly staged “Twitter feud over BitCoin” leads to portentous upcoming event: “THE talk”
Although both Jack Dorsey, head of both Twitter and Square, and Elon Musk are long standing and staunch BitCoin advocates, a lot of chatter around the internet has painted Musk as having gone soft on the crypto currency.
Th narrative that has been put forth pits his loyalty to Bitcoin as somehow incongruous with his support for DogeCoin, the somewhat less serious AltCoin variant he has openly championed.
Intermingled with this straw-man charade, is the also over-hyped idea that the energy used by BitCoin mining is a factor in global warming and therefore a stain on Musk’s otherwise high profile positive sustainable energy resumé.
While many article have shown this argument to be blown out of proportion at best, apparently the whole world (China, if you’re listening) has seized on this talking point as a way to damage BitCoin’s popularity and pedigree.
The attempt to use this argument to undermine BitCoin’s adoption progress and futuristic pedigree appears to have already backfired, however. For example, at the recent BitCoin conference in Miami, Jack Dorsey announced plans to invest in a sustainable energy powered BitCoin mining facility.
Elon Musk has also stated via his twitter account that Tesla would resume accepting BitCoin payments, as soon as more miners switch to renewable energy. This coming after he had announced, to great fanfare, that Tesla would accept the cryptocurrency and then, in May, reversed the decision after backlash from those who pounced on the issue to try to tarnish Tesla’s sterling reputation as a proponent of the transition to sustainable energy.
Though not yet confirmed 100%, the Twitter exchange between the two titans implied that the “talk” would take place in conjunction with the “The B Word” BitCoin conference, which kicks off on July 21, 2021. Sponsored by Ark Invest, Square and Paradigm, the big name speakers and hype already building, along with the timing, coming on the heels of a huge peak then “crash” in the crypto markets, looks to be a watershed event for Bitcoin and cryptocurrencies in general.
Details on whether the exchange between the two will be live on stage or via video conference have, as of yet, not been revealed.
Twitter and Square CEO Dorsey tweeted Thursday about an upcoming “The B Word” bitcoin event, and Musk responded to it. It’s unclear if the event, which kicks off on July 21, will be virtual or in-person.
The potential for drama as the two discuss a topic on which they, for the most part agree, is a smart way to hype the event, both the conference itself and the monumental meeting for “THE Talk”.
Regardless of any fireworks or revelations coming out of the event and the meeting between these two incredibly influential business leaders, the upshot is that all of the above is a net positive for BitCoins progress toward more widespread adoption and acceptance.
Critical mass may already been achieved for crypto in the US
The overly manic focus on price fluctuations notwithstanding, there is a rapidly growing sense that the #1 cryptocurrency as well as all related coins and activities are reaching the point, in the US, that it will be impossible to return the genie to the bottle.
Any attempt to block or outlaw, in totality, the emerging world of crypto-finance, is likely to fail. Realizing this there appears to be a faint whisper of capitulation on the part of both the government in the US and among the “old guard” establishment, namely Wall Street.
Dorsey’s take, as quoted from his appearance at the BitCoin conference in Miami:
“Governments are trying to block cryptocurrency use to avoid losing hold of power”
“It can’t, and it never will.” — musing on the likelihood of Wall Street controlling bitcoin.
“That’s why we don’t deal with any other currencies or coins — because we’re so focused on making bitcoin the native currency for the internet.” — when asked about payments provider Square’s ambitions for bitcoin.
Marking the beginning of a new era of Hollywood tech glamour
Somehow it is slightly disconcerting to see iconic and historic movie theaters repurposed or simply demolished. The former is preferred. However, this is not just any renovation, not just any commercial repurposing.
This is a bold and strategic statement that Apple is not just the future of computing but the future of entertainment, enabler of creativity and the beating heart of digital communication.
In renovating, really rescuing the location, Apple has, seemingly, taken the deeper meanings to heart and tried, with a budget befitting the world’s largest company, to do justice to the majestic, historic landmark, even as they transformed it into a temple to all things Apple.
The link to Hollywood’s glory days is not inappropriate or hard to grasp, and there’s a nod to the innovative and pioneering spirit of those early days of film, and an attempt to draw a lane directly to the potential for Apple’s products and services to enhance creativity, entertainment experiences, and, well, life.
There’s also statement lurking in the transition, potentially a permanent one, which sees in-person pleasures like viewing a film on the big screen in opulent surroundings begin to fade into the past and a move into sales and learning nodes for devices and methods we can use to build and inhabit the metaverse.
In the press release from today the sub-head reads: “Historic theater has premiered new technology since 1927” – in an, apparently, heartfelt attempt to build a link between the technology of today and the entertainment marvels showcased at the theater during a bygone era.
The connections to Hollywood are no longer metaphoric
With Apple in the middle of a long transition away from just devices and hardware and into a service and communications company, the importance and multi-layered meaning of this location is unavoidable.
Creativity and communication, and most of all a deep bond with the emerging “creator class” that Apple itself had a huge role in bringing into being, are at the heart of the message they are sending with this location, the lavish and loving renovation and in the press release itself.
Once literally an underdog, first to IBM and later to the “evil empire” of Microsoft’s Kock-offs, Apple is still, oddly, often underestimated and misunderstood, or at least not understood until changes permeate society.
Nothing says, nay screams, that we are approaching a golden age of Apple than the new Apple Tower Theatre complex. That golden age will occur when the world catches up with the potential of having a professional film production studio in your pocket and all the other technical innovations still to come.
The great singularity of the Apple ecosystem
There is a hugely important convergence coming in the galaxy of Apple products, software and services, that is not yet halfway implemented. The next couple of years are bound to see powerful, sometimes confusing, always remarkable advances in the company’s offerings and the way that we interact with them.
And now, with the Apple Tower Theatre in LA, there is also a mecca which can be the end destination for any pilgrimage of the faithful. Also, with Hollywood creative talents literally around the corner, what better location could there be as a reminder for the power brokers that AppleTV+ is here to stay and plans to engage at all levels and intends to seek options on any deal.
Today at Apple Creative Studios will reach out to budding creativity everywhere
Strongly associated with the theater’s launch is also a enlargement and
Today at Apple Creative Studios – the project is a global initiative for “underrepresented young creatives” and is an ongoing part of Today at Apple which is hosted at Apple Stores worldwide.
As per the Apple press release:
“In collaboration with the nonprofit Music Forward Foundation, as well as Inner-City Arts and the Social Justice Learning Institute, Creative Studios LA will provide access to technology, creative resources, and hands-on experience, along with a platform to elevate and amplify up-and-coming talents’ stories over nine weeks of free programming.”
Apple: The overhead dome, which originally depicted scenes full of clouds and cherubs, had been painted over in a previous restoration. It now brightens the space with an atmospheric sky.
“Today at Apple will also offer public in-store sessions at Tower Theatre and virtual sessions hosted by Creative Studios teaching artists and mentors, including photographer and filmmaker Bethany Mollenkof, rapper and producer D Smoke, singer-songwriter Syd, and cellist and singer Kelsey Lu. Noah Humes and his mentor, Maurice Harris, two artists who worked on the mural outside Tower Theatre inspired by the spirit of Creative Studios LA, will also teach a virtual session. Everyone is welcome to register at apple.com/creative-studios-la.”
“Originally home to the first theater in Los Angeles wired for film with sound, the historic Tower Theatre was designed in 1927 by renowned motion-picture theater architect S. Charles Lee. That legacy of technological innovation continues today as the perfect venue to discover Apple’s full line of iPhone, iPad, and Mac, each of which has transformed modern-day filmmaking, photography, and music composition.”
“Upon the closing of its doors in 1988, the space has lain empty and unused. With the same level of care found in previous restoration projects, Apple collaborated with leading preservationists, restoration artists, and the City of Los Angeles to thoughtfully preserve and restore the theater’s beauty and grandeur. Every surface was carefully refinished, and the building has undergone a full seismic upgrade.”
Apple Tower Theatre Opens Thursday at 10 a.m.
The store team will welcome its first customers Thursday, June 24, at 10 a.m. Apple Tower Theatre will be open from 10 a.m. to 8 p.m. from Monday to Saturday, and 11 a.m. to 7 p.m. on Sunday, with team members ready to provide support and service to all visitors. For those wishing to order new products online, customers can get shopping help from Apple Specialists, choose monthly financing options, trade in eligible devices, receive Support services, and elect for no-contact delivery or Apple Store pickup.
This story was originally published by ProPublica.
ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for The Big Story newsletter to receive stories like this one in your inbox.
In 2007, Jeff Bezos, then a multibillionaire and now the world’s richest man, did not pay a penny in federal income taxes. He achieved the feat again in 2011. In 2018, Tesla founder Elon Musk, the second-richest person in the world, also paid no federal income taxes.
Michael Bloomberg managed to do the same in recent years. Billionaire investor Carl Icahn did it twice. George Soros paid no federal income tax three years in a row.
ProPublica has obtained a vast trove of Internal Revenue Service data on the tax returns of thousands of the nation’s wealthiest people, covering more than 15 years. The data provides an unprecedented look inside the financial lives of America’s titans, including Warren Buffett, Bill Gates, Rupert Murdoch and Mark Zuckerberg. It shows not just their income and taxes, but also their investments, stock trades, gambling winnings and even the results of audits.
Taken together, it demolishes the cornerstone myth of the American tax system: that everyone pays their fair share and the richest Americans pay the most. The IRS records show that the wealthiest can — perfectly legally — pay income taxes that are only a tiny fraction of the hundreds of millions, if not billions, their fortunes grow each year.
Many Americans live paycheck to paycheck, amassing little wealth and paying the federal government a percentage of their income that rises if they earn more. In recent years, the median American household earned about $70,000 annually and paid 14% in federal taxes. The highest income tax rate, 37%, kicked in this year, for couples, on earnings above $628,300.
The confidential tax records obtained by ProPublica show that the ultrarich effectively sidestep this system.
America’s billionaires avail themselves of tax-avoidance strategies beyond the reach of ordinary people. Their wealth derives from the skyrocketing value of their assets, like stock and property. Those gains are not defined by U.S. laws as taxable income unless and until the billionaires sell.
To capture the financial reality of the richest Americans, ProPublica undertook an analysis that has never been done before. We compared how much in taxes the 25 richest Americans paid each year to how much Forbes estimated their wealth grew in that same time period.
We’re going to call this their true tax rate.
The results are stark. According to Forbes, those 25 people saw their worth rise a collective $401 billion from 2014 to 2018. They paid a total of $13.6 billion in federal income taxes in those five years, the IRS data shows. That’s a staggering sum, but it amounts to a true tax rate of only 3.4%.
It’s a completely different picture for middle-class Americans, for example, wage earners in their early 40s who have amassed a typical amount of wealth for people their age. From 2014 to 2018, such households saw their net worth expand by about $65,000 after taxes on average, mostly due to the rise in value of their homes. But because the vast bulk of their earnings were salaries, their tax bills were almost as much, nearly $62,000, over that five-year period.
No one among the 25 wealthiest avoided as much tax as Buffett, the grandfatherly centibillionaire. That’s perhaps surprising, given his public stance as an advocate of higher taxes for the rich. According to Forbes, his riches rose $24.3 billion between 2014 and 2018. Over those years, the data shows, Buffett reported paying $23.7 million in taxes.
That works out to a true tax rate of 0.1%, or less than 10 cents for every $100 he added to his wealth.
In the coming months, ProPublica will use the IRS data we have obtained to explore in detail how the ultrawealthy avoid taxes, exploit loopholes and escape scrutiny from federal auditors.
Experts have long understood the broad outlines of how little the wealthy are taxed in the United States, and many lay people have long suspected the same thing.
But few specifics about individuals ever emerge in public. Tax information is among the most zealously guarded secrets in the federal government. ProPublica has decided to reveal individual tax information of some of the wealthiest Americans because it is only by seeing specifics that the public can understand the realities of the country’s tax system.
Consider Bezos’ 2007, one of the years he paid zero in federal income taxes. Amazon’s stock more than doubled. Bezos’ fortune leapt $3.8 billion, according to Forbes, whose wealth estimates are widely cited. How did a person enjoying that sort of wealth explosion end up paying no income tax?
In that year, Bezos, who filed his taxes jointly with his then-wife, MacKenzie Scott, reported a paltry (for him) $46 million in income, largely from interest and dividend payments on outside investments. He was able to offset every penny he earned with losses from side investments and various deductions, like interest expenses on debts and the vague catchall category of “other expenses.”
In 2011, a year in which his wealth held roughly steady at $18 billion, Bezos filed a tax return reporting he lost money — his income that year was more than offset by investment losses. What’s more, because, according to the tax law, he made so little, he even claimed and received a $4,000 tax credit for his children.
His tax avoidance is even more striking if you examine 2006 to 2018, a period for which ProPublica has complete data. Bezos’ wealth increased by $127 billion, according to Forbes, but he reported a total of $6.5 billion in income. The $1.4 billion he paid in personal federal taxes is a massive number — yet it amounts to a 1.1% true tax rate on the rise in his fortune.
The revelations provided by the IRS data come at a crucial moment. Wealth inequality has become one of the defining issues of our age. The president and Congress are considering the most ambitious tax increases in decades on those with high incomes. But the American tax conversation has been dominated by debate over incremental changes, such as whether the top tax rate should be 39.6% rather than 37%.
ProPublica’s data shows that while some wealthy Americans, such as hedge fund managers, would pay more taxes under the current Biden administration proposals, the vast majority of the top 25 would see little change.
ProPublica is not disclosing how it obtained the data, which was given to us in raw form, with no conditions or conclusions. ProPublica reporters spent months processing and analyzing the material to transform it into a usable database.
We then verified the information by comparing elements of it with dozens of already public tax details (in court documents, politicians’ financial disclosures and news stories) as well as by vetting it with individuals whose tax information is contained in the trove. Every person whose tax information is described in this story was asked to comment. Those who responded, including Buffett, Bloomberg and Icahn, all said they had paid the taxes they owed.
A spokesman for Soros said in a statement: “Between 2016 and 2018 George Soros lost money on his investments, therefore he did not owe federal income taxes in those years. Mr. Soros has long supported higher taxes for wealthy Americans.” Personal and corporate representatives of Bezos declined to receive detailed questions about the matter. ProPublica attempted to reach Scott through her divorce attorney, a personal representative and family members; she did not respond. Musk responded to an initial query with a lone punctuation mark: “?” After we sent detailed questions to him, he did not reply.
One of the billionaires mentioned in this article objected, arguing that publishing personal tax information is a violation of privacy. We have concluded that the public interest in knowing this information at this pivotal moment outweighs that legitimate concern.
The consequences of allowing the most prosperous to game the tax system have been profound. Federal budgets, apart from military spending, have been constrained for decades. Roads and bridges have crumbled, social services have withered and the solvency of Social Security and Medicare is perpetually in question.
There is an even more fundamental issue than which programs get funded or not: Taxes are a kind of collective sacrifice. No one loves giving their hard-earned money to the government. But the system works only as long as it’s perceived to be fair.
Our analysis of tax data for the 25 richest Americans quantifies just how unfair the system has become.
By the end of 2018, the 25 were worth $1.1 trillion.
For comparison, it would take 14.3 million ordinary American wage earners put together to equal that same amount of wealth.
The personal federal tax bill for the top 25 in 2018: $1.9 billion.
The bill for the wage earners: $143 billion.
The idea of a regular tax on income, much less on wealth, does not appear in the country’s founding documents. In fact, Article 1 of the U.S. Constitution explicitly prohibits “direct” taxes on citizens under most circumstances. This meant that for decades, the U.S. government mainly funded itself through “indirect” taxes: tariffs and levies on consumer goods like tobacco and alcohol.
With the costs of the Civil War looming, Congress imposed a national income tax in 1861. The wealthy helped force its repeal soon after the war ended. (Their pique could only have been exacerbated by the fact that the law required public disclosure. The annual income of the moguls of the day — $1.3 million for William Astor; $576,000 for Cornelius Vanderbilt — was listed in the pages of The New York Times in 1865.)
By the late 19th and early 20th century, wealth inequality was acute and the political climate was changing. The federal government began expanding, creating agencies to protect food, workers and more. It needed funding, but tariffs were pinching regular Americans more than the rich. The Supreme Court had rejected an 1894 law that would have created an income tax. So Congress moved to amend the Constitution. The 16th Amendment was ratified in 1913 and gave the government power “to lay and collect taxes on incomes, from whatever source derived.”
In the early years, the personal income tax worked as Congress intended, falling squarely on the richest. In 1918, only 15% of American families owed any tax. The top 1% paid 80% of the revenue raised, according to historian W. Elliot Brownlee.
But a question remained: What would count as income and what wouldn’t? In 1916, a woman named Myrtle Macomber received a dividend for her Standard Oil of California shares. She owed taxes, thanks to the new law. The dividend had not come in cash, however. It came in the form of an additional share for every two shares she already held. She paid the taxes and then brought a court challenge: Yes, she’d gotten a bit richer, but she hadn’t received any money. Therefore, she argued, she’d received no “income.”
Four years later, the Supreme Court agreed. In Eisner v. Macomber, the high court ruled that income derived only from proceeds. A person needed to sell an asset — stock, bond or building — and reap some money before it could be taxed.
Since then, the concept that income comes only from proceeds — when gains are “realized” — has been the bedrock of the U.S. tax system. Wages are taxed. Cash dividends are taxed. Gains from selling assets are taxed. But if a taxpayer hasn’t sold anything, there is no income and therefore no tax.
Contemporary critics of Macomber were plentiful and prescient. Cordell Hull, the congressman known as the “father” of the income tax, assailed the decision, according to scholar Marjorie Kornhauser. Hull predicted that tax avoidance would become common. The ruling opened a gaping loophole, Hull warned, allowing industrialists to build a company and borrow against the stock to pay living expenses. Anyone could “live upon the value” of their company stock “without selling it, and of course, without ever paying” tax, he said.
Hull’s prediction would reach full flower only decades later, spurred by a series of epochal economic, legal and cultural changes that began to gather momentum in the 1970s. Antitrust enforcers increasingly accepted mergers and stopped trying to break up huge corporations. For their part, companies came to obsess over the value of their stock to the exclusion of nearly everything else. That helped give rise in the last 40 years to a series of corporate monoliths — beginning with Microsoft and Oracle in the 1980s and 1990s and continuing to Amazon, Google, Facebook and Apple today — that often have concentrated ownership, high profit margins and rich share prices. The winner-take-all economy has created modern fortunes that by some measures eclipse those of John D. Rockefeller, J.P. Morgan and Andrew Carnegie.
In the here and now, the ultrawealthy use an array of techniques that aren’t available to those of lesser means to get around the tax system.
Certainly, there are illegal tax evaders among them, but it turns out billionaires don’t have to evade taxes exotically and illicitly — they can avoid them routinely and legally.
Most Americans have to work to live. When they do, they get paid — and they get taxed. The federal government considers almost every dollar workers earn to be “income,” and employers take taxes directly out of their paychecks.
The Bezoses of the world have no need to be paid a salary. Bezos’ Amazon wages have long been set at the middle-class level of around $80,000 a year.
For years, there’s been something of a competition among elite founder-CEOs to go even lower. Steve Jobs took $1 in salary when he returned to Apple in the 1990s. Facebook’s Zuckerberg, Oracle’s Larry Ellison and Google’s Larry Page have all done the same.
Yet this is not the self-effacing gesture it appears to be: Wages are taxed at a high rate. The top 25 wealthiest Americans reported $158 million in wages in 2018, according to the IRS data. That’s a mere 1.1% of what they listed on their tax forms as their total reported income. The rest mostly came from dividends and the sale of stock, bonds or other investments, which are taxed at lower rates than wages.
As Congressman Hull envisioned long ago, the ultrawealthy typically hold fast to shares in the companies they’ve founded. Many titans of the 21st century sit on mountains of what are known as unrealized gains, the total size of which fluctuates each day as stock prices rise and fall. Of the $4.25 trillion in wealth held by U.S. billionaires, some $2.7 trillion is unrealized, according to Emmanuel Saez and Gabriel Zucman, economists at the University of California, Berkeley.
Buffett has famously held onto his stock in the company he founded, Berkshire Hathaway, the conglomerate that owns Geico, Duracell and significant stakes in American Express and Coca-Cola. That has allowed Buffett to largely avoid transforming his wealth into income. From 2015 through 2018, he reported annual income ranging from $11.6 million to $25 million. That may seem like a lot, but Buffett ranks as roughly the world’s sixth-richest person — he’s worth $110 billion as of Forbes’ estimate in May 2021. At least 14,000 U.S. taxpayers in 2015 reported higher income than him, according to IRS data.
There’s also a second strategy Buffett relies on that minimizes income, and therefore, taxes. Berkshire does not pay a dividend, the sum (a piece of the profits, in theory) that many companies pay each quarter to those who own their stock. Buffett has always argued that it is better to use that money to find investments for Berkshire that will further boost the value of shares held by him and other investors. If Berkshire had offered anywhere close to the average dividend in recent years, Buffett would have received over $1 billion in dividend income and owed hundreds of millions in taxes each year.
Many Silicon Valley and infotech companies have emulated Buffett’s model, eschewing stock dividends, at least for a time. In the 1980s and 1990s, companies like Microsoft and Oracle offered shareholders rocketing growth and profits but did not pay dividends. Google, Facebook, Amazon and Tesla do not pay dividends.
In a detailed written response, Buffett defended his practices but did not directly address ProPublica’s true tax rate calculation. “I continue to believe that the tax code should be changed substantially,” he wrote, adding that he thought “huge dynastic wealth is not desirable for our society.”
The decision not to have Berkshire pay dividends has been supported by the vast majority of his shareholders. “I can’t think of any large public company with shareholders so united in their reinvestment beliefs,” he wrote. And he pointed out that Berkshire Hathaway pays significant corporate taxes, accounting for 1.5% of total U.S. corporate taxes in 2019 and 2020.
Buffett reiterated that he has begun giving his enormous fortune away and ultimately plans to donate 99.5% of it to charity. “I believe the money will be of more use to society if disbursed philanthropically than if it is used to slightly reduce an ever-increasing U.S. debt,” he wrote.
So how do megabillionaires pay their megabills while opting for $1 salaries and hanging onto their stock? According to public documents and experts, the answer for some is borrowing money — lots of it.
For regular people, borrowing money is often something done out of necessity, say for a car or a home. But for the ultrawealthy, it can be a way to access billions without producing income, and thus, income tax.
The tax math provides a clear incentive for this. If you own a company and take a huge salary, you’ll pay 37% in income tax on the bulk of it. Sell stock and you’ll pay 20% in capital gains tax — and lose some control over your company. But take out a loan, and these days you’ll pay a single-digit interest rate and no tax; since loans must be paid back, the IRS doesn’t consider them income. Banks typically require collateral, but the wealthy have plenty of that.
The vast majority of the ultrawealthy’s loans do not appear in the tax records obtained by ProPublica since they are generally not disclosed to the IRS. But occasionally, the loans are disclosed in securities filings. In 2014, for example, Oracle revealed that its CEO, Ellison, had a credit line secured by about $10 billion of his shares.
Last year Tesla reported that Musk had pledged some 92 million shares, which were worth about $57.7 billion as of May 29, 2021, as collateral for personal loans.
With the exception of one year when he exercised more than a billion dollars in stock options, Musk’s tax bills in no way reflect the fortune he has at his disposal. In 2015, he paid $68,000 in federal income tax. In 2017, it was $65,000, and in 2018 he paid no federal income tax. Between 2014 and 2018, he had a true tax rate of 3.27%.
The IRS records provide glimpses of other massive loans. In both 2016 and 2017, investor Carl Icahn, who ranks as the 40th-wealthiest American on the Forbes list, paid no federal income taxes despite reporting a total of $544 million in adjusted gross income (which the IRS defines as earnings minus items like student loan interest payments or alimony). Icahn had an outstanding loan of $1.2 billion with Bank of America among other loans, according to the IRS data. It was technically a mortgage because it was secured, at least in part, by Manhattan penthouse apartments and other properties.
Borrowing offers multiple benefits to Icahn: He gets huge tranches of cash to turbocharge his investment returns. Then he gets to deduct the interest from his taxes. In an interview, Icahn explained that he reports the profits and losses of his business empire on his personal taxes.
Icahn acknowledged that he is a “big borrower. I do borrow a lot of money.” Asked if he takes out loans also to lower his tax bill, Icahn said: “No, not at all. My borrowing is to win. I enjoy the competition. I enjoy winning.”
He said adjusted gross income was a misleading figure for him. After taking hundreds of millions in deductions for the interest on his loans, he registered tax losses for both years, he said. “I didn’t make money because, unfortunately for me, my interest was higher than my whole adjusted income.”
Asked whether it was appropriate that he had paid no income tax in certain years, Icahn said he was perplexed by the question. “There’s a reason it’s called income tax,” he said. “The reason is if, if you’re a poor person, a rich person, if you are Apple — if you have no income, you don’t pay taxes.” He added: “Do you think a rich person should pay taxes no matter what? I don’t think it’s germane. How can you ask me that question?”
Skeptics might question our analysis of how little the superrich pay in taxes. For one, they might argue that owners of companies get hit by corporate taxes. They also might counter that some billionaires cannot avoid income — and therefore taxes. And after death, the common understanding goes, there’s a final no-escape clause: the estate tax, which imposes a steep tax rate on sums over $11.7 million.
ProPublica found that none of these factors alter the fundamental picture.
Take corporate taxes. When companies pay them, economists say, these costs are passed on to the companies’ owners, workers or even consumers. Models differ, but they generally assume big stockholders shoulder the lion’s share.
For some of the nation’s wealthiest people, particularly Bezos and Musk, adding corporate taxes to the equation would hardly change anything at all. Other companies like Berkshire Hathaway and Walmart do pay more, which means that for people like Buffett and the Waltons, corporate tax could add significantly to their burden.
It is also true that some billionaires don’t avoid taxes by avoiding incomes. In 2018, nine of the 25 wealthiest Americans reported more than $500 million in income and three more than $1 billion.
In such cases, though, the data obtained by ProPublica shows billionaires have a palette of tax-avoidance options to offset their gains using credits, deductions (which can include charitable donations) or losses to lower or even zero out their tax bills. Some own sports teams that offer such lucrative write-offs that owners often end up paying far lower tax rates than their millionaire players. Others own commercial buildings that steadily rise in value but nevertheless can be used to throw off paper losses that offset income.
Michael Bloomberg, the 13th-richest American on the Forbes list, often reports high income because the profits of the private company he controls flow mainly to him.
In 2018, he reported income of $1.9 billion. When it came to his taxes, Bloomberg managed to slash his bill by using deductions made possible by tax cuts passed during the Trump administration, charitable donations of $968.3 million and credits for having paid foreign taxes. The end result was that he paid $70.7 million in income tax on that almost $2 billion in income. That amounts to just a 3.7% conventional income tax rate. Between 2014 and 2018, Bloomberg had a true tax rate of 1.30%.
In a statement, a spokesman for Bloomberg noted that as a candidate, Bloomberg had advocated for a variety of tax hikes on the wealthy. “Mike Bloomberg pays the maximum tax rate on all federal, state, local and international taxable income as prescribed by law,” the spokesman wrote. And he cited Bloomberg’s philanthropic giving, offering the calculation that “taken together, what Mike gives to charity and pays in taxes amounts to approximately 75% of his annual income.”
The statement also noted: “The release of a private citizen’s tax returns should raise real privacy concerns regardless of political affiliation or views on tax policy. In the United States no private citizen should fear the illegal release of their taxes. We intend to use all legal means at our disposal to determine which individual or government entity leaked these and ensure that they are held responsible.”
Ultimately, after decades of wealth accumulation, the estate tax is supposed to serve as a backstop, allowing authorities an opportunity to finally take a piece of giant fortunes before they pass to a new generation. But in reality, preparing for death is more like the last stage of tax avoidance for the ultrawealthy.
University of Southern California tax law professor Edward McCaffery has summarized the entire arc with the catchphrase “buy, borrow, die.”
The notion of dying as a tax benefit seems paradoxical. Normally when someone sells an asset, even a minute before they die, they owe 20% capital gains tax. But at death, that changes. Any capital gains till that moment are not taxed. This allows the ultrarich and their heirs to avoid paying billions in taxes. The “step-up in basis” is widely recognized by experts across the political spectrum as a flaw in the code.
Then comes the estate tax, which, at 40%, is among the highest in the federal code. This tax is supposed to give the government one last chance to get a piece of all those unrealized gains and other assets the wealthiest Americans accumulate over their lifetimes.
It’s clear, though, from aggregate IRS data, tax research and what little trickles into the public arena about estate planning of the wealthy that they can readily escape turning over almost half of the value of their estates. Many of the richest create foundations for philanthropic giving, which provide large charitable tax deductions during their lifetimes and bypass the estate tax when they die.
Wealth managers offer clients a range of opaque and complicated trusts that allow the wealthiest Americans to give large sums to their heirs without paying estate taxes. The IRS data obtained by ProPublica gives some insight into the ultrawealthy’s estate planning, showing hundreds of these trusts.
The result is that large fortunes can pass largely intact from one generation to the next. Of the 25 richest people in America today, about a quarter are heirs: three are Waltons, two are scions of the Mars candy fortune and one is the son of Estée Lauder.
In the past year and a half, hundreds of thousands of Americans have died from COVID-19, while millions were thrown out of work. But one of the bleakest periods in American history turned out to be one of the most lucrative for billionaires. They added $1.2 trillion to their fortunes from January 2020 to the end of April of this year, according to Forbes.
That windfall is among the many factors that have led the country to an inflection point, one that traces back to a half-century of growing wealth inequality and the financial crisis of 2008, which left many with lasting economic damage. American history is rich with such turns. There have been famous acts of tax resistance, like the Boston Tea Party, countered by less well-known efforts to have the rich pay more.
One such incident, over half a century ago, appeared as if it might spark great change. President Lyndon Johnson’s outgoing treasury secretary, Joseph Barr, shocked the nation when he revealed that 155 Americans making over $200,000 (about $1.6 million today) had paid no taxes. That group, he told the Senate, included 21 millionaires.
“We face now the possibility of a taxpayer revolt if we do not soon make major reforms in our income taxes,” Barr said. Members of Congress received more furious letters about the tax scofflaws that year than they did about the Vietnam War.
Congress did pass some reforms, but the long-term trend was a revolt in the opposite direction, which then accelerated with the election of Ronald Reagan in 1980. Since then, through a combination of political donations, lobbying, charitable giving and even direct bids for political office, the ultrawealthy have helped shape the debate about taxation in their favor.
One apparent exception: Buffett, who broke ranks with his billionaire cohort to call for higher taxes on the rich. In a famous New York Times op-ed in 2011, Buffett wrote, “My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.”
Buffett did something in that article that few Americans do: He publicly revealed how much he had paid in personal federal taxes the previous year ($6.9 million). Separately, Forbes estimated his fortune had risen $3 billion that year. Using that information, an observer could have calculated his true tax rate; it was 0.2%. But then, as now, the discussion that ensued on taxes was centered on the traditional income tax rate.
In 2011, President Barack Obama proposed legislation, known as the Buffett Rule. It would have raised income tax rates on people reporting over a million dollars a year. It didn’t pass. Even if it had, however, the Buffett Rule wouldn’t have raised Buffett’s taxes significantly. If you can avoid income, you can avoid taxes.
Today, just a few years after Republicans passed a massive tax cut that disproportionately benefited the wealthy, the country may be facing another swing of the pendulum, back toward a popular demand to raise taxes on the wealthy. In the face of growing inequality and with spending ambitions that rival those of Franklin D. Roosevelt or Johnson, the Biden administration has proposed a slate of changes. These include raising the tax rates on people making over $400,000 and bumping the top income tax rate from 37% to 39.6%, with a top rate for long-term capital gains to match that. The administration also wants to up the corporate tax rate and to increase the IRS’ budget.
Some Democrats have gone further, floating ideas that challenge the tax structure as it’s existed for the last century. Oregon Sen. Ron Wyden, the chairman of the Senate Finance Committee, has proposed taxing unrealized capital gains, a shot through the heart of Macomber. Sens. Elizabeth Warren and Bernie Sanders have proposed wealth taxes.
Aggressive new laws would likely inspire new, sophisticated avoidance techniques. A few countries, including Switzerland and Spain, have wealth taxes on a small scale. Several, most recently France, have abandoned them as unworkable. Opponents contend that they are complicated to administer, as it is hard to value assets, particularly of private companies and property.
What it would take for a fundamental overhaul of the U.S. tax system is not clear. But the IRS data obtained by ProPublica illuminates that all of these conversations have been taking place in a vacuum. Neither political leaders nor the public have ever had an accurate picture of how comprehensively the wealthiest Americans avoid paying taxes.
Buffett and his fellow billionaires have known this secret for a long time. As Buffett put it in 2011: “There’s been class warfare going on for the last 20 years, and my class has won.”
The online giant bans products related to drugs, spying and weapons, but we found plenty for sale; one of the items bought on the site left a grim trail of overdoses
By: Annie Gilbertson and Jon Keegan
Eric Falkowski said he made an easy living working a few hours a week making counterfeit prescription opioids before some two-dozen people overdosed and the authorities caught up with him.
He mixed fentanyl with active ingredients from Xanax and Tylenol and pressed the compound into pills that looked like Percocet, he said, down to the exact color and markings.
Where did he get the equipment? According to federal court records and Falkowski himself: Amazon.com.
“I purchased two pill presses on there. I also purchased the pill press dies, which are the molds to shape the pills and imprint them with whatever number they need be,” Falkowski said in a phone interview from prison, where he is serving a 22-year sentence for crimes connected to his counterfeit drug business.
“You search under the code on the pill … and it’ll just come up,” he added. “It really wasn’t that complex.”
Two people died after taking Falkowski’s pills, and another woman was found dead from an overdose on the property where he kept his makeshift lab, according to officials, law enforcement documents, and autopsy reports. More than 20 others were sickened by the pills but survived.
“Someone could wipe out a whole town” with these “poisonous pills,” said Derrick Helton, a former sheriff’s deputy for Rutherford County, Tenn., where the mass overdose took place. One of the fatalities was his sister Tiffanie Scott, a 33-year-old mother of a young daughter.
Amazon bans pill presses used to make prescription drugs. They’re included among 38 pages of third-party seller rules and prohibitions for its U.S. marketplace.
Yet an investigation by The Markup found that Amazon fails to properly enforce that list, allowing third-party sellers to put up and sell banned items.
Alongside its third-party marketplace, Amazon sells products to consumers directly, and The Markup found it was also selling banned items itself, revealing cracks in the largely automated purchasing system that feeds its massive product catalog.
We found nearly 100 listings for products that the company bans under its categories of drugs, theft, spying, weapons and other dangerous items, a virtual back alley where mostly third-party sellers peddle prohibited goods, some of which are used for illicit and potentially criminal activities.
Amazon’s Choice?
The Markup filled a shopping cart with a bounty of banned items: marijuana bongs, “dab kits” used to inhale cannabis concentrates, “crackers” that can be used to get high on nitrous oxide, and compounds that reviews showed were used as injectable drugs.
We found two pill presses and a die used to shape tablets into a Transformers logo, which is among the characters that have been found imprinted on club drugs such as ecstasy. We found listings for prohibited tools for picking locks and jimmying open car doors. And we found AR-15 gun parts and accessories that Amazon specifically bans.
Almost three dozen listings for banned items were sold by third parties but available to ship from Amazon’s own warehouses. At least four were listed as “Amazon’s Choice.”
The phrase “ships from and sold by Amazon.com” appeared beneath the buy button of five of the banned items we found, which two former employees confirmed means those products are, in fact, sold by Amazon. In addition, one of the sellers we were able to reach also confirmed it sold the items to Amazon.
Many of the items we found had been up for sale for months, some with positive reviews showing they had been sold, including some of the items sold directly by Amazon.
And Amazon led us right to the prohibited listings. When we typed “bong” into the website’s search bar, autocomplete suggestions included “bongs for smoking weed.” When we typed “pill press,” autocomplete suggested “pill press for making pills xanax.”
In a written statement to The Markup, Amazon spokesperson Patrick Graham said the company has “proactive measures in place to prevent suspicious or prohibited products from being listed,” and that the company stopped more than six billion “suspected bad listings” from posting last year, repeating the company’s remarks to Congress earlier this year.
“If products that are against our policies are found on our site, we immediately remove the listing, take action on the bad actor, and further improve our systems,” he said.
Graham did not respond directly to many of our specific questions, including how many of the banned items that The Markup found had been sold, why the company had not noticed some of them for months, why some were listed as Amazon’s Choice, and why many were stored in Amazon’s warehouses for shipment.
He did not respond at all to questions about why Amazon itself had offered banned items for sale.
Most of the banned listings we reported to Amazon have been removed, although at least three have popped back up.
The company removed the six specific terms that we mentioned from autocomplete, according to Graham, who said that feature is informed by “similar searches by other customers.” He wouldn’t say whether the company also removed all other banned items from autocomplete.
Graham also declined to explain why the company chose to allow 13 listings for banned items that we reported to the company to remain for sale. These products were specifically named as banned in Amazon’s rules, met the U.S. Department of Justice’s definition of drug paraphernalia, or were confirmed by two weapons experts to be a gun part or tool. Two of them were items that Amazon sells itself.
In addition to the nearly 100 listings for banned items we found for sale in the U.S. marketplace, we found several pill presses for sale on Amazon’s Canadian marketplace that were available for shipment to the United States. Amazon took them down after we reported them to the company, including a $4,100 TDP 5 Desktop Tablet Press, one of the models Falkowski used.
“Almost dead”
Michael “Shane” Shipley, 39, a native of Rutherford County, Tenn., was one of the people who died after taking Falkowski’s fake pills. He’d worked his entire adult life operating machinery at a local factory.
“I couldn’t even tell you what my dad’s death has done to my family,” his daughter Brittany Conway said in an interview.
Within a day of her father’s death, Conway said, she woke up in a hospital bed herself. She didn’t realize her father had slipped the counterfeit pills into his prescription bottle of Percocet at home and, distraught with grief, she had taken what she thought was a safe medication to help her relax.
“I went from up, talking—to almost dead,” Conway said.
Graham said Amazon’s policies allowed pill press sales when Falkowski was making counterfeit drugs in 2016. He declined comment on the overdoses and said, speaking in general, that the company is not responsible for harm from third-party product sales.
“We are not liable for those products because we do not make, distribute, or sell those products,” he said. He said that also applies to third-party products that are fulfilled by Amazon, which charges sellers to store and ship their items.
The company has successfully shielded itself from legal liability for harm caused by third-party products sold on its website by invoking Section 230 of the federal Communications Decency Act, which states websites are not responsible for third-party content that appears on their sites.
Last year, one federal appeals court ruled that Amazon may shoulder liability for a customer’s injuries from a defective product sold on its site, in part because the company “enables third-party vendors to conceal themselves from the customer, leaving customers injured by defective products with no direct recourse to the third-party vendor.”
Three million third parties from across the globe are now selling on Amazon’s platforms, according to e-commerce intelligence firm Marketplace Pulse. And third-party sellers have fueled the company’s explosive growth for years, according to a 2019 report to shareholders. Last year, Amazon third-party sales reportedly topped $200 billion—a sum that rivals the annual GDP of New Zealand.
Will It “Kill Someone?”
Multiple current and former employees, most of whom asked not to be named for fear of retaliation, said the company struggles to oversee that army of independent sellers.
“Because sellers have the ability to upload items themselves to the website, it makes it very difficult to police all of that without hindering the ability to do business,” said a former member of the product safety team who left the company in 2018. “Amazon knows there’s tons and tons and tons of stuff that shouldn’t be on the website.
“We basically would categorize risks based on their severity,” the former employee added. “Will this product injure or kill someone? Is it high legal risk?”
An Amazon executive acknowledged in the statement to Congress earlier this year that “bad listings” get through but said the company is working to shore up the slippage of “counterfeits, unsafe products, and other types of abuse” by requiring sellers of certain items to be preapproved, partnering with brands to pull counterfeits, and enhancing “proactive” tools to spot problems.
Yet Amazon’s sellers’ tools sometimes help, rather than hinder, the listing of banned items, The Markup found.
When we opened a new seller account and started listing a bong for sale, Amazon suggested we list it as a vase in home decor. We never posted it.
Last month, we successfully listed two banned items for sale: an AR-15 10-round magazine and an AR-15 armorer’s wrench. We removed them within minutes of confirming they had posted. We were able to evade detection by Amazon’s automated filters by purchasing a universal product code for the magazine and by both avoiding specific keywords and miscategorizing the items.
The listings went up even though we had no seller history and had already twice been prohibited from listing the same items using more precise descriptions.
Graham declined to comment on why we were able to post these items but said Amazon’s sellers’ tools “suggest listing categories to help sellers easily categorize their products, but sellers are responsible for choosing the correct category, as they know their products best.” He also declined to comment on why the tools suggested an incorrect product category for listing bongs.
Other media have exposed Amazon’s lax product controls, including three reports just last year: a CNN investigation that documented dangerous child car seats, a CNBC report that revealed Amazon was shipping expired food and baby formula, and a Wall Street Journal investigation that found thousands of unsafe, banned, and deceptively labeled products on the site.
Graham said Amazon investigated these “with urgency” and sought to improve systems when needed but gave no specifics.
Consumer advocates say the company isn’t doing enough to protect the public, and regulators need to step in.
“It’s clear there’s not a major prioritization or investment in resources in policing the terms of service or ensuring that prohibited products are not sold,” said Lori Wallach, a director at the nonprofit organization Public Citizen. “It may be more profitable to have the ‘wild, wild west’ of sales, but it’s also much more dangerous for consumers.”
“We categorically disagree with this claim,” Graham replied.
Automating Enforcement
When Rachel Johnson Greer joined Amazon in 2010 as a product safety program manager, she said she found many problematic products for sale, from unapproved treatments of erectile dysfunction to illegal police radar jammers.
“They were up for sale and selling happily away on Amazon,” Greer said.
She said some troubling products were sold directly by Amazon itself, which she and others said relies on a mostly automated purchasing process.
“Ships and sold by Amazon is Amazon. This is how it all started,” said Greer, who worked for the company until 2017. “They built algorithms to figure out which books they needed to buy and then how much.”
It was Greer’s job to put an end to sketchy sales, she said. Her team wrote programs to flag undesirable products and amassed a universe of terms to feed an automated policing system. She said the tool eventually could scan billions of line items in the catalog in about five minutes.
But it proved flawed, she said. The system by its nature was confined to known threats—things it had seen before. Greer said new problems emerged all the time and slipped right through initial safeguards, only to be flagged by customers after something went wrong.
“The biggest problem with Amazon’s system to begin with is that nearly everything is reactive,” she said. “The reality is when you have a system that relies on finding defects per million, that means that there will always be defects.”
She said some third-party sellers devised “clever, tricky ways to list products. And these rules couldn’t catch it because they hadn’t been written by a human who was thinking in clever, tricky ways.”
One current employee of the restricted products team wearily put it like this: “No matter how much we remove, there’s always more.”
Graham did not directly respond to these descriptions of the company’s difficulties in keeping restricted items off the site. Instead, he said more generally that Amazon strives “to make sure that all products in our store are safe” and “we continuously monitor the products sold in our stores.”
Yet we found an unproven treatment to fight cancer with electromagnetic frequencies that is banned by Amazon’s policies—a rife machine—had been on the site for five years. The listing was removed after we contacted Amazon.
While most of the specific banned listings we brought to Amazon’s attention were removed, similar items that we did not report to the company remained live, including some listings by the same third-party sellers.
Many of the sellers of the banned items that we found continued to sell banned products, including Lead and Steel, which sold gun accessories, and another company, which sold a compound that reviewers said they used as injectable drugs. When we asked Amazon about this in follow-up questions, those storefronts disappeared from Amazon.com.
Graham denied that injectable drugs were sold on its platform, saying they were not sold for that purpose but rather marketed for “research” in the listing. Of the two compounds we found, the World Anti-Doping Agency designates one, TB-500, as a “prohibited substance,” and the U.S. Anti-Doping Agency warned athletes about the risks of the second one, BPC-157, as not approved for human use. Customer reviews on the listing showed people were injecting the product.
Graham said the company removed the listings and would add them to its banned product list “out of an abundance of caution.” But as of publication, both compounds could be found for sale by other sellers on Amazon.com.
Amazon isn’t the only online retailer that has had to grapple with policing the unruly world of third-party e-commerce, where just about anybody can sell just about anything. Falkowski said he bought some of his drug-making supplies on another site.
Some marketplaces are known for thoroughly reviewing products before they go up.
Apple, which offers mobile apps from third-parties, checks the code before any app or update appears in the App Store, for instance. According to its site, Apple uses a combination of automated systems and hundreds of human experts speaking a total of 81 languages to review them before posting.
“We take responsibility for ensuring that apps are held to a high standard for privacy, security, and content,” Apple’s website states, “because nothing is more important than maintaining the trust of our users.”
Amazon’s users appear to know exactly what they’re buying, even when banned products are lightly disguised.
Lead and Steel listed a gunsmithing tool for an AR-15 as a “paperweight desk organizer,” posting a photo of the vise block holding paper clips and erasers.
Customers joined in on the ruse in reviews. “Helps when you need to do a hands free clean up of your desktop,” wrote one. “Locks items solidly into place, will Load plenty of paper clips or tacks.”
Another customer retorted, “Sorry. I’m not playing along. I can buy AR-15 parts all day on Amazon.”
To go along with the vise block, Amazon’s “frequently bought together” tool suggested other gunsmithing tools, showing at least one of Amazon’s automated systems received signals that it was not an office product.
Graham, the Amazon spokesperson, declined to explain why the items were still for sale, even though the “frequently bought together” tool seemed to recognize they were related to firearms.
Lead and Steel, which declined to be interviewed for this story, had sold at least four dozen vise blocks from that posting since it went up in December, according to reviews, until we reported it to Amazon, which pulled the listing.
On the Hunt for Honey Oil Equipment
Vic Massenkoff, a retired fire investigator from Contra Costa County, Calif. said he tried years ago to get Amazon to take down dangerous equipment—but said he was frustrated by what he sees as the company’s inaction.
He said he’d seen too many fires caused by the process of extracting highly potent hash oil, or “honey oil,” from marijuana using butane and in 2013 decided to investigate where the equipment could be found for sale. He said he found it on Amazon.com.
“There it was lined up, everything from the extraction tubes, to the grams digital scales, to the silicone pads, the silicone containers, to the digital thermometers,” Massenkoff said. “Everything you would need to set up shop.”
When he clicked on a listing for the glass tubes, Amazon’s recommendation engine suggested he buy the other items needed to make and use hash oil. He kept screenshots of the suggestions.
“There is no safe way to make butane honey oil,” he said in an interview.
He said he emailed Amazon from his work email to alert the company to the danger. He still remembers the reply: “Thanks for bringing this to our attention. We have assigned it to someone on our staff to research this.”
He said he got one other email from Amazon and then heard nothing.
Graham, the Amazon spokesperson, declined to say how the company handled Massenkoff’s complaint, for which he said The Markup had provided no “evidence.”
Amazon’s current rules ban the sale of equipment to make hash oil; we were able to find it on the site.
There’s a joke somewhere in here but it’s hard to see it through the tears
Woody Allen’s onscreen counterpart, Alvy Singer, complaining about Hollywood Award Shows in “Annie Hall” remarked that a category of award for “Greatest Fascist Dictator” would not surprise him, and that Adolf Hitler would probably win.
Amazon, viewed from some neutral future date or by aliens from another planet would surely win the award for “Greatest Company to Amass Wealth & Power by Intentionally Losing Money” award. Or maybe just “World’s Biggest Ponzi Scheme”.
For now the fawning books and articles on the greatness of “Bezos’ Behmouth” continue to pile up.
An exception to the fawning fan fiction is “Monopolized: Life in the Age of Corporate Power” by David Dayen. The author also commented cogently on the current situation with Amazon and MGM. His thoughts shed much needed light on the simple and yet sadly overlooked truth about Amazon: its core mission is to monopolize not just online sales but all transactions that take place in the economy where a “cut” of those transactions can be extracted.
What’s with all these awards? They’re always giving out awards. Best Fascist Dictator: Adolf Hitler. — Alvy Singer
This viewpoint, it would seem, can be traced back to a rare case where Jeff Bezos let his guard down and accidentally explained a core concept of the Amazon business model.
He said, simply: “Your margin is my opportunity”.
With this seemingly innocuous and widely misinterpreted phrase he unleashed the dogs of hell on the world of commerce. The MGM deal, according to Dayen, who is also editor of The American Prospect, is yet another attempt to gut an industry with techniques designed to use predatory pricing strategies to crush all rivals.
The sub-head from his article states: “The company wants to control pricing on everything, and funnel as many transactions to itself as possible.”
Meanwhile, somehow, this statement is finally being generally understood in its real context.
Yet what is astounding is that this is not a supposition or an accusation, but rather is a stated fact, and how this company has behaved and operated for decades.
Putting 2+2 together, the common interpretation that there is an “innocent” pro-customer meaning possible, is finally being seen for the absurdity that it is.
Simple, Effective and Disgusting: Selling below cost or at a loss to harm competition
We’ve seen how that goes. In this case, since Amazon does not make any data available on the profitability of various business segments, using nearly $9 billion to enhance its “free with Prime” business creates yet another loss-leader opportunity to destroy the margins of all other streaming platforms, who, like other businesses actually have to make a profit or at least break even, unlike Amazon due to its cross-subsidization of products and services.
Amazon wants to control all economic activity in the United States and the world. It wants a cut of every transaction. — D. Dayen
Amazon as “cross-subsidized content devourer” is how Dayen described the inevitable outcome of the deal in his article.
He also succinctly argues that by using its virtually unlimited power and resources to devour an ever larger share of the market, ultimately the result will be to drive up costs for competitors (for I.P., production and star power) and achieve the goal of squeezing the already slim margins for those poor schmucks (or rich schmucks like Disney, HBO, Netflix, etc.) that don’t have an unlimited budget for intentional losses.
The playbook is so obvious and familiar that it’s almost laughable. That is, if not for the death and destruction that always follow in the next chapters of this plot schema.
They pick on an established industry where no one will have sympathy for the rich victims – did anyone feel sorry for Borders or other large book retailers? Does anyone cry over the loss of Diapers.com or Quidisi? When Birkenstock complains does anyone listen?
How can gutting the streaming industry or unassailable giants like Disney and HBO be bad? Isn’t it just capitalism at its finest? Should we start preparing the award now for “Greatest Consolidator of Content in History”?
But what about the “loss leader” system? What about the ultimate outcome of less competition and higher prices overall, an obvious harm to consumers, regardless of how stupid and convoluted the route is to get there?
By moving the market in a way that will make streaming a terrible business for any company that has to compete with this, “oughta be illegal” script, margins will, if the gambit succeeds, face a similar fate to the one that anyone who used to be in the retail book industry, or any of the other entire industries that Amazon has received kudos for destroying, knows all too well.
Dayen also makes the point that, once this thinly veiled ploy is seen for what it is, the harm, not only to Amazon’s competitors but to the general public, should be obvious and impossible to ignore.
Citing the similarities with the recently brought antitrust action by the Washington, DC attorney general, it is exactly this kind of pernicious practice, that Amazon has not only gotten away with for decades, but Bezos has been lionized for “inventing”.
That lawsuit, which deals with an Amazon clause in 3rd party marketplace terms and conditions (since altered to disguise its true intent) that 3rd party sellers must sell anywhere outside Amazon’s marketplace at the same or higher price that they have listed on Amazon, is a sign of a gradual shift toward seeing the real meaning of Amazon’s behavior.
Since there are massive, exorbitant fees added to every transaction for all 3rd party sellers, the only way for them to make any profit at all is to tack on the cost of those fees, meaning artificially higher prices.
Amazon has ways to retaliate through “dark patterns” of its own special stripe, by manipulating buyers behaviors on its web site, making sure that sellers that don’t toe the line will get, essentially, zero sales.
For Amazon this kind of bullying and blackmail is a “win-win-win”. They see and have tattooed into their DNA all pain, suffering and loss for anyone other than the company (AMZN) as a gain for them.
3rd party sellers caught in hell trying to survive while paying fees up to 43% or more without recourse to try and recoup by selling anywhere else at lower prices?
Amazon congratulates themselves. Sellers undercutting each other, in spite of those fees in an effort to behave like a “mini-Amazon” and getting into a race to the bottom death match with each other? Yippee! Great for Amazon, when they are dead, there are always new victims waiting in line to enter the cage.
How about sellers that obtain goods illegally, counterfeit, illegal imports, stolen products, remainders and aftermarket overstock? They are GREAT for Amazon because they put even more pressure on the individual, honest sellers to immolate themselves trying to survive (and eventually die via pricing suicide) while Amazon can claim to be offering lower prices!
Oh, and when they “do their best” to stop all those illegal sellers, albeit at a snails pace, they are bailed out by section 230 and can point to their “partners in crime”, the counterfeiters, the knockoffs from China, the illegal imports and the stolen and aftermarket goods and say: “We tried our best, these are just a few bad apples” laughing all the way through every board meeting.
“Your margin is my opportunity”, indeed.
Above: Photo Collage by Lynxotic
There are no mitigating factors here. There is no “good guy” or customer obsessed hero. Just evil and the dead or dying. Wake the fuck up, America.
The praise and adulation continues, even as the $400 million yacht is being prepared for its maiden voyage
It’s as if Bezos is given award after award for the “genius” of selling 1$ bills for .75 cents. Championed for using a strategy that masquerades short term margin destruction as “customer obsession”, pretending that the dumping levels of pricing won’t in the long run flip into price gouging and the destruction of competition.
Somehow the massive detriment to consumers and the society at large is overlooked amid all the parties celebrating the “genius”.
But have the chickens finally come home to roost? Is anyone seeing a pattern of systematic use of the same tactics over and over, applied to each and every sector that Amazon chooses to “disrupt”? They didn’t get the nickname “grim reaper” for nothing. The problem is that it was meant as a compliment.
It is a sea change in the antitrust orientation, a sea change that is desperately needed, and with Lina Kahn and Columbia Law School professor Tim Wu, it might be just over the horizon. Could even have a chance to come about.
That change, so long overdue, could finally begin the process of dismantling the damage wrought and and still to come, if there is no interdiction.
The worm will eventually turn. When? After decades of obvious abuse and criminal behavior, completely and willfully ignored (too complicated to see).
Will there eventually be so many victims that they will outnumber the duped and the sycophants? Stay tuned.
This is a world where four major banks control most of our money, four airlines shuttle most of us around the country, and four major cell phone providers connect most of our communications. If you are sick you can go to one of three main pharmacies to fill your prescription, and if you end up in a hospital almost every accessory to heal you comes from one of a handful of large medical suppliers.
Over the last forty years our choices have narrowed, our opportunities have shrunk, and our lives have become governed by a handful of very large and very powerful corporations.
Today, practically everything we buy, everywhere we shop, and every service we secure comes from a heavily concentrated market.
Dayen, the editor of the American Prospect and author of the acclaimed Chain of Title, provides a riveting account of what it means to live in this new age of monopoly and how we might resist this corporate hegemony.
Through vignettes and vivid case studies Dayen shows how these monopolies have transformed us, inverted us, and truly changed our lives, at the same time providing readers with the raw material to make monopoly a consequential issue in American life and revive a long-dormant antitrust movement.
If you are stuck on the word ‘fiat’ this post can help you (everyone else too)
In a single, 14 word reply to a follower (@TheRealShifo) that asked “Yo Elon what do you think about the peeps who are angry at you because of crypto?” He gave a simple answer that is the often unmentioned, yet most important, question regarding crypto vs. fiat, government issued, currency such as the US dollar.
Looking around during the ongoing frenzy surrounding crypto and digital finance you’ll see countless ‘news” stories and blog posts comparing, or pretending to compare cryptocurrencies, especially the two biggest Bitcoin and Ethereum (as coin sometimes referred to as “Ether”) and they virtually always quote the “price” fluctuations of those coins as a certain number of dollars and cents.
Interestingly I have yet to see any of these “comparisons” use the reverse valuation method, such as, “the US dollar is currently worth .00002703 Bitcoin. Can you imagine everything using that as a standard – CNBC quoting stock prices in Bitcoin, your house is “worth” 32 Bitcoins (if you’re in California, for example).
The reason this comes off sounding strange and ridiculous is that all communication related to the US dollar, which has been a fiat currency since abandoning any “backing” (such as gold) and continuing on by decree (or fiat) of the government with no backing other than than decree, also carries a decree (tacit) not to undermine it in public.
So when Elon says:
“The true battle is between fiat & crypto. On balance, I support the latter.”
The true battle is between fiat & crypto. On balance, I support the latter.
Simple and straightforward and yet intentionally shrouded in mystery
Musk is directly comparing crypto, generally, and fiat currencies around the world that “float” against each other. And by inference, doing so in terms of the difference between a fiat currency like the US Dollar and a crypto currency, like Bitcoin.
A fiat currency is money that is not backed by a physical commodity like gold, but instead backed by the government that issued it. Most modern currencies, such as the U.S. dollar, euro, pound and yen, are fiat money.
from Wikipedia
The term fiat derives from the Latin word fiat, meaning “let it be done” used in the sense of an order, decree or resolution.
— common Definition
The fact that Bitcoin was created as a digital alternative to fiat money stands at the forefront of that point. The fact that it was designed precisely to counter the drawbacks and dangers of a system based on fiat paper money (or digital ledgers of those paper dollars such as your bank balance or any method to keep track of how many “imaginary” paper dollars you “have”) is exactly the real issue at hand.
photo credit: twitter
It’s no secret that many attack those goals and intentions superficially and dismiss the entire discussion with a wave of the hand. They willfully use the complexity of the cryptographic solutions, at the heart of cryptocurrency, as a way to gloss over the real and substantive problems being targeted.
They prey on the ignorance of the majority to try and discount out of hand any value at all for the movement and the various products.
Opening up the door to this exact exchange and characterizing it as a “battle” in one fowl swoop clarifies and simplifies the real issues and the real reason for the existence, and according to many, including Elon Musk, the need for monetary “reform” or change via a shift toward crypto.
Opening up the door to this exact exchange and characterizing it as a “battle” in one fowl-swoop clarifies and simplifies the real issues and the real reason for the existence of, and the need for, monetary “reform” or change via a shift toward crypto.
D.L.
The “price” of Bitcoin or any other crypto currency on any given day has almost nothing whatsoever to do with that debate.
Speculation abounds but not just in Crypto
The “price” is a function of, mostly, speculation and scarcity, due, in the case of Bitcoin to the mining cap, or at least a perceived scarcity. And additionally the various perceived advantages of crypto such as privacy, decentralization, use of block chain systems, etc.
But the price is like the smoke above the battlefield, not the reason for the battle or any indicator who is winning or who is on the side of might or right.
Two major questions that arise from this tweet and the potential shift toward a clearer and simpler dialogue on crypto are the following:
Is crypto generally, and Bitcoin / Ether more specifically established and entrenched enough to withstand the coming backlash from governments that feel threatened and other status quo institutions that will do whatever it takes to discourage or even stamp out crypto usage?
Will the very battle itself, that Elon Musk says is the current “true” battle, bring even more attention to the weaknesses and problems with the current fiat money system and thereby increase, perhaps inadvertently yet massively, the size of the battle and its stakes?
Alternative systems of trade have been tolerated in the US for some time now. How are those air miles doing? What about the chips and points for perks you got at the Indian Casino? Is it too late to outlaw all crypto without causing a revolution in the streets?
The other side of the (clipped) coin
It is truly surprising to see how little is to be found in the media about the deeper reasons for the rise of crypto. How it sometimes seems like direct criticism of fiat currency is almost taboo.
Naturally any internet search will find many “rabbit hole” sources for all kinds of information critical of the current monetary system, the same system the near total collapse of which in 2008 inspired the creation of bitcoin.
It appears that Elon Musk is emphasizing, in a subdued manner, exactly the way that the nonsense-furor over huge price gains or declines is completely missing the actual point. The “true battle”.
Many stories in the media and millions of private comments are currently following a kind of convoluted logic – first the popularity of crypto (which is linked to the unpopularity of the very messed up fiat system) artificially and massively increases prices in many crypto assets.
This “bubble”, a typical outcome of human herding behavior in financial markets, inevitably bursts or sees large setbacks. Then the coin or crypto system itself is blamed for the human stupidity and greed that caused the distortions of price, just like happened in the dot-com bubble and the 2007 housing bubble and subsequent crash.
The difference is that the crypto bubble, in an interesting way, is in reality due to a surge in skepticism toward fiat currencies, a boom in the prevalence of mistrust toward governments and a combination of fear and greed that is growing, not dissipating.
Although many have rightly criticized Elon Musk’s tweets and odd Saturday Night Live appearance, and there is a kind of mini-backlash (growing?) against all things Musk, in this case it is a healthy and wise tweet that we have shown above.
Reframing, or more aptly refocusing the discussion away from prices and speculative profits and back to the real reasons that cryptos were initially created and why it has gained such massive support is a welcome shift. That this reframing comes from the likes of Musk himself, is fitting and who better to put forth a message to simplify and clarify the nature of the real “battle” at hand.
The following video has some interesting data and arguments for, and mainly against, the fiat regime under which we have lived for most of the last century. Although, in a sense, a kind of advertisement for Gold and Silver, the overview is nevertheless accurate and does not exaggerate the dangers and issues that revolve around the fiat system.
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Lynxotic does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
Above: Christian Bale, playing Dr. Michael Burry in “The Big Short“
The more things change, the more they stay the same
Shorting in the stock market has gotten a bad rep recently among the “WallStreetBets” crowd on Reddit, and those that were in the run-up frenzy over Game-Stop and AMC, Koss, etc. This was, for the most part, due to a lack of understanding of what shorting is, how it works and why it adds liquidity and has other benefits to markets as a whole.
Many of the crowd from that frenzy has now moved on to the crypto frenzy, which has a lot of speculators worried after relatively large drops in many of the top coins. Similar to the misunderstanding of short positions many of the speculators in crypto are new arrivals and, for a short time, had no experience of the fact that volatile, fast moving instruments, such as shares in tech companies or “alt-coins” also go down faster than slow moving investments. They don’t “only go up” as was the “slogan” for the Game Stop crowd and others at the time.
Michael Burry, the genius founder of Scion Asset Management, the firm that was chronicled in “The Big Short” (both the book and the film) which tells the story of how Burry bet against the US housing market at the peak of the bubble and experienced massive success when his billion dollar bet paid off.
That bet was, as the name of the book implies, the longest of long shots, and in the movie the skepticism and outright scorn and derision that he experienced for even thinking of taking that gamble was shown and formed the backbone of the story.
The power of that story was how a man with knowledge and experience could see clearly, even with one good eye, what millions of “experts” either could not see or were too corrupt to admit or accept.
That the housing market and the products devised to profit off of it, mortgage backed securities, collateralized debt obligations, credit default swaps, and so forth, were about to take the entire world economy to the brink of doom.
A collapse did occur, and were it not for desperate and questionable bail-outs by the governments and the central banks around the world, could have collapsed the world economy to a level that would have taken decades to recover from.
Instead this “largest band-aid” in the history of the universe has been followed up by larger and larger ones until as of the writing some 14 trillion has been created to prop up the original “fix” and kick the can further and further down the road.
Fast forward to 2021 and see where Burry sees a big opportunity now…
Michael Burry, the same man who say the end of the housing bubble in 2006 and 2007, and bet big against the one market that no one, literally no one, believed could ever go down, appears to believe that the end of the road for the current speculative bubble ( at least in Tesla stock prices) is near.
Michael Burry’s Scion Asset Management has disclosed a major, half-a-billion dollar short position against Tesla Inc.
Scion Asset Management disclosed via a regulatory filing on May 17th that purchases were made for bearish put options on 800,100 shares in Tesla. In the disclosure was also the further information that, as of the end of the first quarter, the options had a value of US$534 million.
“my last Big Short got bigger and Bigger and BIGGER,” Burry said in a tweet from February, apparently referring to Tesla’s large surge in market capitalization. “Enjoy it while it lasts,” he continued.
It appears that, as of May 18th, he may have deleted his Twitter account entirely. Which, if true, may be over concerns that the SEC could have questions about the tweets, as wells as earlier tweets he made referring to other short position in GameStop Corp.
As can be seen in the tweet above, Elon Musk has announced that he is working with Dogecoin developers to improve system transaction efficiency. He feels, apparently that this ongoing development, an effort to improve energy efficiency, no doubt, is “promising.
This comes after both his silly kinda-sorta negative jokes from his Saturday Night Live appearance a week ago, and his subsequent announcement regarding bitcoin and issues with energy consumption (see below).
Regardless of those issues being about perception or reality, which is an ongoing hot debate within the crypto community, at least the issue of making crypto even more viable as a medium of exchange and store of value is being talked about in good faith serious tones.
This is an indicator of his highly positive attitude and beliefs regarding the future of Bitcoin, Dogecoin and cryptocurrencies in general.
PR nightmare abated and pre-empted by announcement that Tesla will no longer accept Bitcoin
In a sudden about-face Elon Musk announced that Tesla would not accept Bitcoin for its environmentally friendly electric vehicles after all. This, after the company made big news when it purchased $1.5 billion of the cryptocurrency which was revealed in an SEC filing.
In the first quarter report of 2021 the company revealed that it sold a portion of its Bitcoin and netted a $101 million profit. That number represented nearly a fourth of the reported total profits for the quarter.
An even larger contributing factor to the positive news at the time was the massive sales of regulatory credits were $518 million. In other words, profit from Bitcoin and government subsidies was basically 100% of the upside. Car sales, not so much.
Enter the massive media frenzy over the energy use “wasted” on Bitcoin mining and you have a PR disaster waiting to happen for Tesla and Musk. Naturally, clever lad that he is, it was prudent to cancel, at least temporarily the policy of allowing customers to pay with Bitcoin.
Odd thing is, there are many worse things sucking up energy than Bitcoin. And the mining will not stop or slow down because Tesla is not getting any for its cars. But the perception that there’s a “great cost to the environment” from crypto-mining is enough to make this sudden announcement mandatory from a PR standpoint.
Though not mentioned in the tweet where this policy change was announced, it is unlikely that Tesla will go forward with accepting Dogecoin, which was mentioned recently by Musk also, due to the perceived similarities in the mining process.
In the statement attached to Musk’s tweet he also states that they will potentially use a crypto currency if it can be used at an energy cost of less than 1% of Bitcoin per transaction.
This is a separate issue from the mining energy usage but it has also been a criticism that the energy expended to transact using Bitcoin is very high, compared to what is a separate question. Perception is at the root, but wanting more efficient crypto is certainly a laudable goal.
This part of the statement will no doubt lead to feverish speculation as to which cryptocurrency might meet his stated requirements.
Elon Musk’s support for cryptocurrency is, like his commitment to sustainable energy, a positive stance and, before his personal success became completely overblown, a courageous one.
Taking on the fossil fuel industry, it’s easy to forget, was no easy feat in the early days. And, similarly, the inevitable upcoming clash between crypto-adherents and governments (printers of fiat currencies) will need established eminent “super-citizens” to give crypto a chance of survival.
For that reason it is good to see that this does no represent a rejection of crypto itself on Musk’s part, but a necessary response to mounting criticism based on the perception of hypocrisy.
You can bet that, if there is a way to mine with sustainable energy sources (actually in many ways already happening) he will reverse his stance yet again.
In a sudden about-face Elon Musk announced that Tesla would not accept Bitcoin for its environmentally friendly electric vehicles after all. This, after the company made big news when it purchased $1.5 billion of the cryptocurrency which was revealed in an SEC filing.
In the first quarter report of 2021 the company revealed that it sold a portion of its Bitcoin and netted a $101 million profit. That number represented nearly a fourth of the reported total profits for the quarter.
An even larger contributing factor to the positive news at the time was the massive sales of regulatory credits were $518 million. In other words, profit from Bitcoin and government subsidies was basically 100% of the upside. Car sales, not so much.
Enter the massive media frenzy over the energy use “wasted” on Bitcoin mining and you have a PR disaster waiting to happen for Tesla and Musk. Naturally, clever lad that he is, it was prudent to cancel, at least temporarily the policy of allowing customers to pay with Bitcoin.
Odd thing is, there are many worse things sucking up energy than Bitcoin. And the mining will not stop or slow down because Tesla is not getting any for its cars. But the perception that there’s a “great cost to the environment” from crypto-mining is enough to make this sudden announcement mandatory from a PR standpoint.
Though not mentioned in the tweet where this policy change was announced, it is unlikely that Tesla will go forward with accepting Dogecoin, which was mentioned recently by Musk also, due to the perceived similarities in the mining process.
In the statement attached to Musk’s tweet he also states that they will potentially use a crypto currency if it can be used at an energy cost of less than 1% of Bitcoin per transaction.
This is a separate issue from the mining energy usage but it has also been a criticism that the energy expended to transact using Bitcoin is very high, compared to what is a separate question. Perception is at the root, but wanting more efficient crypto is certainly a laudable goal.
This part of the statement will no doubt lead to feverish speculation as to which cryptocurrency might meet his stated requirements.
Elon Musk’s support for cryptocurrency is, like his commitment to sustainable energy, a positive stance and, before his personal success became completely overblown, a courageous one.
Taking on the fossil fuel industry, it’s easy to forget, was no easy feat in the early days. And, similarly, the inevitable upcoming clash between crypto-adherents and governments (printers of fiat currencies) will need established eminent “super-citizens” to give crypto a chance of survival.
For that reason it is good to see that this does no represent a rejection of crypto itself on Musk’s part, but a necessary response to mounting criticism based on the perception of hypocrisy.
You can bet that, if there is a way to mine with sustainable energy sources (actually in many ways already happening) he will reverse his stance yet again.
Haters like Buffet and Mark Cuban’s cheerleading are off base and spreading confusion
Disclaimer first: This opinion article is not investment advice and does not advocate buying any investment vehicle or currency
There are so many misconceptions propagated far and wide these days that it’s hard to choose a place to start. First it’s important to recognize that crypto currencies are not stocks or companies, yes that’s obvious but one of the biggest “anti” argument these days is that there’s an absurdity to the aggregate total value of a “coin” being more than the market cap of the stock of a particular company.
“Ethereum is now worth more than Bank of America”, this nonsense comparison goes, as if the market cap of a stock and the price of a coin times the number of coins in existence has any meaning whatsoever.
Following this logic, however, beneath all the hype, both pro-crypto and anti-crypto, lies a hidden thread to an actual underlying truth.
Though based on obvious common sense, this thread is potentially confusing and convoluted, to say the least. But without seeing it clearly the misconceptions will just keep getting more ridiculous.
In order to illustrate the conundrum a bit of background is needed. For example:
Stocks, in the US are priced in dollars. But how are dollars priced? Isn’t just as accurate to say that when the “price” of the DJIA moves higher (3,4050 at this writing) it is the value of the dollar, in relation to the DJIA that went down?
While this requires a kind of mental gymnastics, these are only due to the constant bombardment meant to keep you from seeing this 100% valid way of viewing stock valuations based in dollars.
There’s another kind of tacit misinformation and that is stating that “inflation” is only relevant when it’s measured by the government. For example if the “bull market” that began in 2009 and continues into 2021 represented a huge increase in stock prices, that is asset inflation.
The inverse of asset inflation is a reduction in dollar value. Less shares of a given stock can be bought for the same number of dollars. The dollars are worth less.
And further, crypto, such as BitCoin is measured as having more or less value in dollars. Who is to say the massive rise in the dollar “value” of BitCoin is not representative of a decline in the “intrinsic” value of dollars.
The truth is often hidden in plain sight and that is what drives traditional markets
And that is precisely the point. BitCoin’s existence, which is locked in the mind of Satoshi Nakamoto (if he indeed exists) was indicated cryptically (no pun intended) to be a kind of answer to the instability of the global financial system as was evidence in the crisis of 2008. Taking place nearly concurrently with the birth of the idea of BitCoin.
Seeing the dollar as having a “stable” value and measuring a companies value, via it’s share price, is, let’s just say, perhaps 100 times more absurd than the Dogecoin dog.
Why? Because, for nearly a century the dollar is not backed or moored to anything but the government’s hope that it will retain value and laws that prohibit you and I from using other vehicles as “legal tender”.
The data (and opinions) on this are seemingly endless and yet absolutely critical to understanding our monetary system and where crypto may or may not fit in.
Horseshoe Nails and The Isle of Yap
Many interesting historical facts point toward the reality that money and coinage has always been just as much about the abstract belief in the system, more than any particular “intrinsic” value.
On the Micronesian Isle of Yap there was a functioning monetary system based on huge stones. A New York Times article, published in 1971 described the curious system:
“Every piece has an owner, and everyone knows who the owner is. Even when the money changes hands, it usually stays put. Yapese stone money is the largest and heaviest “coin” in the world.
In earlier days, brave islanders paddled by canoe 300 miles across open ocean to Palau where they cut slices from huge stalactites and brought them back as money. The value depended on how many men were drowned bringing them back. Nowadays, value is usually determined by measurements. We heard various versions, ranging from $10 radial inch to $42 a foot.”
Another article explains that many “wealthy” home (hut) owners displayed their money by leaving it leaning against the front of the house, where all could see the prosperity.
And, as for the prevention of fraud and corruption in any monetary system? Could any be more corrupt than the one that led to credit default swaps and mortgage-backed securities imploding and all the BS that nearly brought down the world’s banking system?
And that is not new either. In the 1800s traveling bank examiners journeyed throughout the US to check on the gold reserves claimed by various banks. More often than not, they found far less gold than was claimed (in today’s fractional banking system little attempt is made to reduce the leverage in the system).
A common, clever, trick to try to “leverage” what little gold was actually on hand was to pile gold coins and ingots on top of a bed of horseshoe nails, hoping that the examiner would weigh the entire concoction only, and never notice the bogus hidden attempt to bolster the weight.
Bitcoin’s system at least attempts to circumvent this typically human brand of fraud and corruption.
In the article “What is Cryptomining” on Techspot a chart was published to illustrate how Satoshi Nakamoto tried to solve the classic trust delimma with the proof of work mining system.
“For example, if Alice has $100 at the beginning of the day, she could promise Bob, Charlie, and David independently that she’d send them each $100 by the end of the day. While Alice could show them that she owns $100 and they’d all be content and agree to the transaction, Alice only has $100. Thus, if at the end of the day, the public ledger (which once finalized is set in stone, so to speak) includes 3 transactions initiated by Alice for $100, the system would be broken and no one would want to use it.
With a centralized system such as in modern day banks, there would exist a single ledger that can validate how much money a certain individual has, and thus it can guarantee that the customer cannot spend more than they own. When talking about a decentralized, peer-to-peer system, however, who’s there to stop a clever individual from spending their money multiple times quickly before getting caught?
To address this potential issue, crypto miners enter the playing field. Essentially, miners play the role of the decentralized banker, and will perform the required gruntwork to ensure that the system is functioning as expected without double-spending. In return for their work, they will be rewarded with some cryptocurrency.”
Buffet, Cuban, Musk & Munger
In clonclusion, Buffet, Munger and The Wall Street Journal may have knowledge and experience but they have also derived benefit from a system that favors those already holding capital, one that also has a tendency to crush those trying to build it.
So, it’s fairly obvious that they are “talking their book” and data mining to produce a self-congratulatory outcome, when they expound on all the reasons that they hate crypto (Munger even called it “disgusting”).
As for Musk and Cuban, what’ve they got to lose? At least they “get it”, at least they are open to the idea of a future that has crypto as a part of the financial system. But where will they stand if there is government resistance in a big way, and if attempts to stop the entire crypto movement or “de-fang” it in ways that make it less viable as a true alternative to the status quo? That, my friend, will be the 1000 BitCoin question.
In her new book, Klobuchar tries to connect the historical roots of antitrust actions to populism and her own ancestry. That’s not all, however. Although difficult, particularly for readers who are not legal scholars, there’s an important and deeper historic thread here that she is aiming to contribute to.
That job is to find a way to illuminate how the digital age, with all its challenges and complexities, can come to terms with the simple question of how to measure damage that is being done by big tech monopolies, through sheer size, power and lack of external accountability.
Moreover, there is an issue of how antitrust law and practice veered away from the remedies and goals, first established during the Gilded Age, toward a laissez-fair, anti-regulatory stance that gained steam in the Regan years.
That shift is, in many ways, to blame for the current extreme state characterized by dangerous levels of concentrated wealth and power by big tech.
This effort may seem like one that is doomed to being ignored by all but the already long-since converted. But, make no mistake, it is a topic that will grow, reverberate and become more relevant as the current administration in Washington consolidates and comes into its own.
“People have just gotten beaten down. I wanted to show the public and elected officials that you’re not the first kids on the block with this. What do you think it was like back when trusts literally controlled everyone on the Supreme Court, or literally elected members of the Senate before they were elected by the public?”
— Amy Klobuchar, in Wired interview with Steven Levey
When President Biden recently nominated Lina M. Khan to the Federal Trade Commission, in addition to Columbia Law School professor Tim Wu, who announced earlier this month he would join the National Economic Council, he set forth a clear path for an antitrust direction that has the potential to be more than just rhetoric and window dressing.
Khan is an unequivocal proponent of a new era of antitrust, one that is, not coincidentally, along the lines of what Klobuchar advocates. Likely sharing these ultra clear views from her long and celebrated research, Khan, along with Wu, is a key addition to Biden’s growing roster of Big Tech critics, and there is already a blueprint for actions and cases that will build to a crescendo over the next several years.
Biden’s call for the repeal of Section 230 of the Communications Decency Act, meanwhile, a hotly contested and possibly flawed legal shield some feel is exploited by Internet platforms, is another indicator of the tenor of the coming actions.
In a sense, with this bestselling book [on Amazon: #1 in Political Economy, #1 in Government Management, #1 in Business Law (Books)] the gargantuan task of connecting the culpability of massive, nearly infinitely powerful behemoths, each in it’s own territory, to the social and economic catastrophes that they’ve brought down on the world.
However, while politicians like Klobuchar may not have the charisma and energy to set a fire under the population, it is the very deeds themselves that will eventually conspire to ignite an uprising and put pressure on the government and the courts to take real, substantive measures. And with young, new faces and minds such as possessed by Khan and Wu, ultimately there is a bulwark of criticism against monopolist abuses building in government and among the public at large.
“I am never saying, ‘Get rid of their products.’ But let’s have more of the products that give you more choices. You can keep one product, but it’s better to have other products, because we’re not China.”
Amy Klobuchar in Wired interview with Steven Levey
In response to Klobuchar’s quote above Steven Levey in Wired wrote; “In other words, Facebook could keep it’s main app, but the public might benefit if Instagram and WhatsApp were not Mark Zuckerberg productions.”
While this kind of “moderate” view may not be the earth shattering remedy that would turn the juggernauts around in a heartbeat, from Zuckerberg’s perspective it would not be ideal, to say the least.
And, since we have seen the unfettered and viral growth of big tech, for at least a quarter century in some cases, and since there was a aura of hero worship afforded their leaders for most of that time, a break-up, such as that could ultimately turn out to be the beginning of more sweeping changes. A welcome outcome for those that have been harmed the various monopolistic structures that rule nearly all our lives, or at least it seems, at times.
Levey then asked Klobuchar why legislators so often embarrass themselves in hearings with irrelevant partisanship, clueless technical questions, and time-wasting grandstanding. Her response;
“Welcome to my life,” she says. “I get it—there’s going to be hearings that are irritating to people who know a lot. But that’s a great argument for tech to use because they don’t want this oversight.”
Amy Klobuchar in Wired interview with Steven Levey
In defense of using the word “antitrust in the title, while also advocating its eradication in future she responded:
“Well, I thought antitrust was an interesting word”. “It’s not only about this body of law; it’s also about not trusting anyone.”
Amy Klobuchar in Wired interview with Steven Levey
Perhaps it is more the course of history that led to the current and incredibly extreme situation and obscene dominance by big tech that is what should never have be trusted to arise in the first place.
Perhaps these firms will one day be seen, looking back from future generations, as a temporarily necessary, but evil mistake of history, as was the toothless interpretation of laws that led to their rise from “scrappy underdog startups” into malignant monopolies run amok.
Long-time adviser and spokesperson for the Trump campaign, Jason Miller, stated on on Fox’s “MediaBuzz” that the former guy would be “returning to social media in probably about two or three months.”
In typical fashion spokesperson says it will be huge
Next he bragged that his return to social media would be via “his own platform” and that this new network would garner “tens of millions” of users and in his opinion would also “completely redefine the game.”
“It’s going to completely redefine the game, and everybody is going to be waiting and watching to see what President Trump does, but it will be his own platform.”
—Jason Miller, Trump Spokesperson
This news comes at a time when the furor of constant rage tweeting from the former guy has finally died down. It remains to be seen if this announcement is credible as there are pending legal and financial challenges that could potentially stand in the way of such an undertaking.
Possible WW3 over Digital Ads with Zuck & Google Vs MSFT & Apple
Sometimes, in order to tackle a complicated subject it is necessary, first, to take a step back. For example, before tech and the internet became the dominant economic force it is today there were hundreds, even thousands of companies that had important roles to play in the economy.
Not they other companies are unimportant today, but the sheer scale of trillion dollar (and growing) tech companies such as Google, Facebook who combined represent a near monopoly in digital advertising, and Apple and Microsoft, each also with strangleholds in some markets, but on the outside in the war over digital ad income.
This disparity and imbalance is so massive as to be nearly unprecedented in history. And, now, as the first blind hero worship phase has ended, we are entering a phase where the nearly ubiquitous influence and dominance over lives and fortunes are finally being questioned.
Next up: The war erupting as a result of the extreme correlation between the entrenched and overwhelming dominance of Facebook and Google in digital ads, the income source of media producers, and the near demise of that industry.
The situation has finally become so critical and lopsided that governments are finally stepping in to enforce changes that could never happen while one side, the “dominant digital platforms” holds all the cards and power.
One new axiom that has emerged with the rise of big tech monsters is that only a monster can hope to prevail in a war with another monster. Enter Kong vs Godzilla.
In this emerging world war it is more complicated still; on one side are the parallel duo of Facebook and Google, with similarities in the way they dominate digital advertising, but also in that they share a “surveillance” based business model using private user data to control markets and traffic.
On the other side are Apple, which has staked a claim to user privacy as a means to clearly differentiate a positive product and service based model, Microsoft, that appears to simply want to play the underdog as a search engine alternative to google and a “smaller” player in the digital ad space.
And then, in a corner of distinction above all others, lies the power of world governments.
World governments are playing a pivotal role as a kind of referee – finally stepping in, as the dangers and damage caused already by the duo of Facebook and Google, have awakened the possible regulatory, anti-trust actions that only they can enforce.
First was the rumble down under, now, on to Europe and North America
Even as a kind of truce has erupted in Australia, with the government making specific alterations to the News Media Bargaining Code that, apparently, appeased Facebook enough to withdraw its universal ban on hosting Australian news product.
According to AP News: Google and Facebook, take a combined 81% of online advertising in Australia and initially condemned the code as unworkable.
That has rapidly changed, and the stand-off has come to at least a temporary end.
Also likely, is that the massive demand for an app offering direct access to some of the exact stories that Facebook banned sent a strong enough message that competition for viewers is only one click away.
Motivating the two sides to come to terms and for Facebook to back down from its draconian stance vis-à-vis the new law.
Even as the Aussie skirmish fades a new front in Europe is emerging
Microsoft announced on February 22nd that is was joining a coalition of European Publishers to promote an “Aussie style” code for digital platforms to remunerate news content producers.
In addition to Microsoft, groups involved include the European Publishers Council (EPC), News Media Europe (NME), European Newspaper Publishers’ Association (ENPA), and European Magazine Media Association (EMMA).
Previously, Microsoft had already Earlier this month, Microsoft was lobbying in support of other countries following Australia’s lead in creating legislation mandating that news outlets to be paid for articles published on the platforms in the United States, Canada, the European Union, and other countries.
“We welcome Microsoft’s recognition of the value that our content brings to the core businesses of search engines and social networks because this is where Google and Facebook generate the vast majority of their revenues.
It is crucial that our regulators recognise this key point, and don’t get misled into thinking that side deals on the basis of a stand-alone product are the same thing, because they are not at all and undermine the neighbouring rights that we have been granted. All publishers should get an agreement – no one should be left out”.
-CHRISTIAN VAN THILLO, CHAIRMAN OF THE EUROPEAN PUBLISHERS COUNCIL
EPC, NME, ENPA, EMMA, and Microsoft call for arbitration to be implemented in European or national law that requires search engines and media platforms that aggregate news pay for content based on the Publisher‘s Right set out in Directive 2019/790.
Pandora’s Box is open and spilling all over the highway
Interestingly, Microsoft is, in a roundabout and equally self-severing way (according to critics) is now the second trillion dollar tech monster to take a direct stance against Facebook and Google and the monopoly strangle hold the enjoy over the financial life-blood of advertising that is essential for journalism and news production to survive, let alone flourish.
Critics will point out that Microsoft’s Bing search engine with a tiny market share compared to Google (in chart above the ridiculous 90% plus monopoly can be seen) has nothing to lose and everything to gain by supporting government efforts to even the playing field. And Apple? Facebook has already declared war and alleged all sorts of evil motivations for the privacy controls being built into its operating systems.
But that kind of talk is a bit late and weak now that the ultimate tech monster showdown has already begun. The first crack in a flawed and destructive business model, one shared to a great degree by both Facebook and Google has seen its first failure. Many more are yet to come.
And, last but not least, Microsoft and Apple are positioning themselves as the “good guys” and siding with governments and the News production organizations, partly, in order to be seen in a more positive light in case various anti-trust and regularity battles loom between either of them and the governments that are, currently, also investigating all of the giants.
By the way, seen any of Amazon’s recent “we are good guys, despite what you might have heard, seen or experienced” commercials? Small tip: if you have to spend millions on commercials trying to convince people you are not an evil greed-obsessed avaricious crap-ass company then you probably are exactly that.
The horses are out of the barn so grab your popcorn and get ready for this to get strange soon. After Europe Canada and then the US is coming into the ring.
Odd facts that illustrate the world today where Elon Musk says BitCoin is “less dumb” than cash. He’s right. Cash also known a “fiat currency” is a piece of paper with a promise to pay on demand nothing in exchange when presented.
It does have a legal framework behind it, meaning you go to jail if you try to use your own version. There’s that.
The Tesla CEO said that investing in Bitcoin is a “less dumb form of liquidity than cash” after his company bought $1.5 billion of the cryptocurrency.
“To be clear, I am not an investor, I am an engineer,” he said on Twitter. “I don’t even own any publicly traded stock besides Tesla.”
The idea that Tesla and other companies are having concerns over the stability of cash, and concerns over the effectively negative interest rates in the mean time is clear.
Bitcoin may not be a solution that will be permitted by the Government (think gold in 1934). But a reckoning is a-comin’ and it will get interesting.
There is no doubt that Elon Musk is a genius who is doing great things. Perhaps it is his genius for finance that is most underestimated, however, considering his funding success throughout the years.
Some stats:
Regulatory Credits, aka, Carbon Tax credits, as per CNN:
It’s a lucrative business for Tesla — bringing in $3.3 billion over the course of the last five years, nearly half of that in 2020 alone. The $1.6 billion in regulatory credits it received last year far outweighed Tesla’s net income of $721 million — meaning Tesla would have otherwise posted a net loss in 2020.
“Based on our calculations, we estimate that Tesla so far has made roughly $1 billion of profit [on Bitcoin holdings] over the last month…To put this in perspective, Tesla is on a trajectory to make more from its Bitcoin investments than profits from selling its EVs in all of 2020…” source: Wedbush’s analyst Dan Ives
SpaceX income in U.S. Gov contracts and subsidies:
LA times estimated that already by 2015 Various Musk led businesses took in over 4.9 billion in government income:
“Tesla Motors Inc., SolarCity Corp. and Space Exploration Technologies Corp., known as SpaceX, together have benefited from an estimated $4.9 billion in government support, according to data compiled by The Times. The figure underscores a common theme running through his emerging empire: a public-private financing model underpinning long-shot start-ups.” – LA Times
“The research note titled SpaceX: Raising Valuation Scenarios Following Key Developments, listed the company’s recent $1.9 billion funding round and the “continued momentum in winning government contracts” (mainly from NASA and the U.S Department of Defense) as key reasons for its revision of SpaceX’s value. The note doesn’t bother to mention important financial details like SpaceX’s current revenue or estimated revenue for 2020 or even 2021. Or whether SpaceX is profitable or not.”
According to @elonmusk "Bitcoin is almost as BS as fiat money." So Musk regards both #Bitcoin and fiat as BS. I agree, I just think Bitcoin, which is digital fiat, is even more BS than the paper fiat issued by central banks. #Gold is not BS. It's real money and better than both!
On a crazy night Zuckerberg, KimDotCom and Guy Kawasaki all join rooms at the same time
Clubhouse, the red hot “social audio” app which is growing, even by invitation only by the millions per week. Part of the appeal is the up-close and personal audio interactions that happen among people from all walks of life; including big names. Last week it was Elon Musk “interviewing” the CEO of Robinhood (see video below).
KimDotCom is a bit of a crazy one, could be perhaps called infamous rather than famous, as the founder of “MegaUpload” and the New Zealand Extradition saga. There’s a strange kind of irony to having Mark Zuckerberg show up. Obviously it shows how Clubhouse is just too hot to ignore – it will probably spur rumors that he is circling the rooms with designs on acquiring or copying the app.
We have been testing Clubhouse for a future feature article and it is truly remarkable what the atmosphere is while using the app. The intimacy of group audio, combined with a kind of democratic algorithm / interface (for the most part), makes for a social media experience that is nothing like any other platform that has caught on.
In some ways it’s like being at a huge trade show like CES and going to a keynote or a panel discussion. However, the fact that it is live 24/7 365 days a year makes for more impromptu access, more spontaneity and more… chaos (sometimes for good or…).
I’m tryna see Mark Zuckerberg and Tim Cook in the same Clubhouse room
Clubhouse was launched, in what may be the most fantastically serendipitous timing ever, in March 2020. Tearing a page, ironically, from the Zuckerberg and Facebook playbook, it has been and continues to be an invitation only club.
After the session with Zuckerberg was over one of the “Stage” speakers coined the term “Digital Teepee” to describe the feeling of being in such an intimate setting with such a controversial figure like Mark Zuckerberg. Others speculated what his motivations might have been to join the club.
Here’s what Mark Zuckerberg said on Clubhouse about AR, VR, and Remote Work
In a nod to the “Trade-show” aspect the first affinity group was… Venture Capitalists
In an interesting twist, however, the initial focus for invites was not on college students, as was the case with the early days of facebook, but mainly consisted of venture capitalists.
Perhaps this was indirectly related to the fact that , Alpha Exploration Co., the company behind Clubhouse was launched after a $12 million investment came from Andreessen Horowitz after they had only been in existence for approximately two months.
The invitations are being handed out more liberally now and the “club” is growing at over a million users per week at the moment. The demand is so extreme, however, that invites are even being sold on eBay in the US and even on equivalent platforms in China and elsewhere.
In a first, in what will almost surely crash the app again, Netflix will be doing a promotional room (which has never happened before) to promote Zendaya’s new film‘Malcolm & Marie’ which will be live on Netflix tomorrow.
