It may be more important to have counter-role models than role models. These are people who show you the inverse, what not to do. Not long ago, a friend forwarded me a transcript of an interview between two fellows who served as exemplary counter-models: Matt Stoller and David Dayen, author of a recent book titled Monopolized: Life in the Age of Corporate Power.[8] The interview and Dayen’s book turned out to be a great blessing in disguise as it provided so many examples of that which is the precursor to numerous problems — foundationally poor arguments. Chief among them, the imbecilic presumption that complex issues can be laid at the doorstep of a single cause. They seem to be writing in the style of Tarbell, but without her gusto and integrity. She leaped to some shaky conclusions, but most of the underlying information was accurate or, at minimum, well researched. On this point Dayen and Stoller fall flat.
The interview begins with Dayen’s stating that people inherently know “something is terribly wrong.” Though they cannot describe it, he says, “they understand the system is rigged.” In Monopolized, he laments how “we toil in this age of monopoly…of plutocrats…of soaring inequality and broken democracy…of middle-class despair and sawed-off ladders to prosperity” before proclaiming that a minority of firms controlling “most economic sectors today helps explain virtually all the challenges America faces.”[9] All the challenges, every single one? He does not seek to avoid sensationalism, nor is he hesitant to overstate his case.
He goes on in the interview to describe a woman in Tennessee who needs access to internet for her husband’s health, “Turns out there was a gap in her wifi conductivity, because she lives out in this rural area and they are literally forbidden from getting broadband by a law that the telecom industry got passed.” This appeal to heartstrings is said without reference to where or what law. There is no discussion of why telecom firms would want to ban broadband. There are many cases where local authorities and incumbents make it overly difficult for new internet service providers to enter a market, but the presumption that rural areas want to ban broadband or that adequate connections would otherwise be inevitable would be difficult to support.
Buffett, the Opioid Profiteer?
Dayen wholly undermines his argument by pointing to Berkshire’s holding of Teva Pharmaceuticals as proof of monopolistic evils. He alleges “Buffett has had a huge investment [in Teva]… one of the manufacturers of generic opioid based products. Buffett knows well that there’s no better way to put a moat around your business than to sell an addictive product.” Aside from the repulsively disingenuous assertion about why Berkshire purchased Teva shares, the author fundamentally misunderstands how Berkshire works and impressively misattributes both the purchaser and timing of the Teva investment.
What people say tells us more about them than what they’re trying to get across.† In this case it tells us the author shouldn’t be trusted as far as he can be thrown.
†Wittgenstein’s Ruler as defined by Taleb and championed by Paul Portesi.
First, Teva was purchased by Buffett’s portfolio managers, to whom he gives free reign because of his investment philosophy — the investment manager should be given a ‘free hand.’ Which is to say, the lack of a ‘free hand’ is a detrimental to the manager’s ability to deploy his/her competence. Second, the size of the investment was miniscule relative to Berkshire’s portfolio, never amounting to more than roughly half a percent of assets. Third, and most egregious, the opioid crisis came to the forefront in 2016–17, when in mid-2017 President Trump declared it a national emergency.[x] Berkshire started buying in the fourth quarter of 2017, after Teva’s stock price had already lost eighty percent of its value, declining from ~$69 in July 2015 to ~$14 in October 2017.
Compounding the error, Dayen refers to Buffett as a “large investor in Amazon” because “he understood the monopoly that Amazon was putting together, so he purchased a large share of their stock.” Again, a non-ambiguous detail (made clear by Buffett himself) is that Amazon shares were purchased made by one of the two associates.[xi]
Dayen’s arguments have no identifiable basis in reality. To say Berkshire’s Teva and Amazon investments were “large” would generously be called a stretch. More accurately, utterly false. At the time of purchase, each made up less than half of one percent of Berkshire’s total portfolio. This fellow wrote a book and never bothered to question the premises and assumptions that held up his view. He either (a) gained surface level knowledge and understanding, which was taken out of context without pause, or (b) writes without regard to sincerity.
Doer-Describer Problem
The common theme it seems is a lack of respect for entrepreneurs and good operators, a trait that can only be found in those who have done neither. At least not well. This is the “Doer-Describer” problem. Most doers don’t have time to describe. Most describers are describing something they’ve never done.
Everyone wants to be the next Tarbell but they don’t know how to do the work— how to get down in the mud to figure out what’s really going on. All they’re doing is shooting arrows at the backs of those ahead. They say corruption. I will not disagree. But let’s talk about who, what, when, and where. If they can’t support their allegations and if they can’t discuss them without devolving into a wholesale degradation of entrepreneurship and risk-taking, they are grasping at straws with words that will not last.
Of Systemic Importance
The legitimate question is, can a firm become too large, too ingrained in the regular goings on of the population or government, or otherwise take actions that come to pose a regional or national systemic risk? This came to me when my friend Jaffer Ali, an entrepreneur with vast retail and e-commerce experience, raised something along these lines. For instance, as Amazon’s e-commerce and web services divisions have become increasingly relied upon by civilians and governments, is there a point at which they become too important? That is, a threshold where that single point of failure engenders unacceptable system-wide fragility. Similarly, with Google, how much transparency is needed about their dealing with foreign powers? Or what about their ad practices?
This type of inquiry requires no fallacious presupposition about Jeff Bezos’s secretly oppressive intent. As the reader can see, it gets at a substantive potential problem without diluting the case with unjustifiable accusations.
[8] Warren Buffett: America’s Folksiest Predator. Dave Dayen’s new book “Monopolized” shows how Buffett has normalized monopoly power. (August 2020) www.mattstoller.substack.com/p/warren-buffett-americas-folksiest
[9] Monopolized. Dayen, David. (The New Press, 2020)
[x] www.washingtonpost.com/politics/trump-declares-opioid-crisis-is-a-national-emergency-pledges-more-money-and-attention/2017/08/10
[xi] www.cnbc.com/2019/05/03/berkshire-hathaway-has-been-buying-shares-of-amazon-warren-buffett.html