The Fraud Is Coming

Michael Burry is shorting some tech companies. With the market as frothy as it is, that’s not exactly prescience. Unless you’re as good a market gambler as Burry, I wouldn’t recommend it. (And if you were as good as Michael Burry – you would already have a lot more zeros in your net worth). It is still true the market can stay irrational longer than you can be solvent. But what Burry isn’t just pointing out the emperor has no clothes. He is pointing to financial engineering. Why is that important? Why does presenting the information in a slightly better fashion matter?

The pressure is on to show something. All the public companies in the AI orbit, with elevated stock prices because they’re part of the “AI-play,” need to show earnings. The non-public AI startups do not need to show earnings. Oracle, Broadcom, Micron, etc. need to show revenue. Immediately they do not need to show revenue, as they sign contracts. That’s future revenue, and the stock price goes up as a multiple of earnings. With expected future earnings rising, the value of the company increases, even though current earnings may not have moved. A company that trades at 15 times their earnings begins trading at 30 times their earnings, based on the expectation of making more money in the future. But at some point, the imaginary future money needs to become real money in the present to justify that multiple.

Could companies like Palantir and Oracle be over-stating their income by altering the way they treat depreciation? Maybe as much as 20%? That’s what Burry sees. When companies structure their earnings to provide a better light than what would otherwise be the case, we refer to that as lower quality earnings. It may be legal and within the GAAP (generally accepted accounting principles), but it suggests the actual earnings are inflated. This is completely legal, as long as it is disclosed. Eventually, the lower quality earnings should result in a lower multiple. But in the short term, investors may ignore it or simply accept the statements of the companies that the new accounting practices make more sense. Longer term, investors tend to give companies that do a lot of financial engineering side-eye. Eventually reality will set it and the fundamental reasons they aren’t doing well will overtake the financial engineering.

But where there’s that much pressure to push earnings, it means there is building pressure to fake earnings. This can be done by either aggressively booking sales when the sale isn’t really complete and moving liabilities off the balance sheet. I would suspect the former is already unfolding. When everyone is desperate for more data center space, more power, more networking, and more processors, booking a sale early may not seem like a big deal. You feel the actual sale will almost certainly close in the very near term. Or you can call the next firm in line, waiting to snap up the same scarce resource. So why not report it in this quarter to juice your numbers a little? But it doesn’t take long before some firms start booking speculative sales, to keep the line on the sales chart going up and to the right. One of two things will happen, either the auditors will stumble over this and realize there’s fraud going on, or (more likely) a short seller will sniff it out. The former is bad enough when firms are forced to restate their prior earnings, as some executives go ‘spend more time with family,’ and shareholders bring suits. But the latter is devastating, usually resulting in obliteration, with the fraud investigations coming later.

The other approach is to engage in balance sheet engineering. A loan or an obligation to make payments in the future are recorded as liabilities. There are ways to move the liabilities off the balance sheet of the parent company, for example, by using special purpose vehicles to actually carry the obligation. Company X doesn’t owe the money. The money is actually is actually owed by Able Baker, a joint venture between X and Y. Company X doesn’t record the liability, even though the counter-party (the lender) can collect from Company X, should Able Baker default. The auditors may miss this if Company X misrepresents the true nature of the obligation (commits fraud). No one will notice a thing as long as the market that props up Able Baker is healthy. Once that changes, and Able Baker defaults, Company X may find itself illiquid.

On overstated earnings or engineered balance sheets you can quickly build other frauds. For example, understating the risk of loans to those companies. Lenders may be aware that something fishy is going on, but continue to lend to the companies, collecting fees on deals that should never have been closed. Even in the best possible light, it means suspicious insiders put aside suspicions to chase the deal. After all, the entire market can’t be wrong. And everything looks good for now. If the demand for the underlying market dries up, the loans held either by the direct lenders or the positions investors have in that lender, are worth pennies on the dollar. (Or nickles, now that we’ve stopped minting pennies). Suddenly, the lender (now likely to be a private equity firm rather than a bank) is exposed to losses large enough to wipe out its equity. Investors that invest or lend to the private equity firms suddenly find their positions wiped out as well, creating significant counter party risk. Which can ripple through other sectors of finance through reinsurance products. And liquidity dries up as everyone becomes unsure of any of their counter-parties actual financial health. What threatened to bring down the entire house of cards in 2007/2008 was the overnight lending market between banks was shutting down.

What makes this especially troubling in the current environment is a confluence of factors. First is the inability to actually jail corporate executives of very large companies. Even if there is fraud, we fine the corporation rather than hold its officers criminally liable. Let me do the math for you. Let’s say you put together a 300,000,000 dollar deal where your bonus is 5%. If you commit the fraud necessary to close the deal, you will be paid 15,000,000 dollars. Should you even get caught, you will have to give most of it back but won’t go to jail. And you keep all the other bonuses you also received. It’s likely the government will settle with your former employer. And if you’re not caught, and the company goes under, they still owe you the 15,000,000. You can sue for it in bankruptcy court, or from the company that acquires your old employer. If the company gets bailed out with public money, contractually, they will still need to pay you the 15,000,000. But what if it isn’t fraud and it’s just making a bet you wouldn’t otherwise make? There is are incentives to take outsized risks. After all, they’re losing other peoples’ money. So you will likely make 15,000,000, or maybe as little as 3,000,000 on the off-chance you’re caught. You won’t go to jail. And you won’t lose any of your houses just because you lost your job.

But coupled to that is a president who is willing to pardon anyone who is a supporter. He has commuted or pardoned people for political advantage. Like CZ to make good with the crypto crowd. Or the violent protester from January 6. It could be that even though there is criminal fraud, having donated to the campaign, the ballroom, the inauguration, and made statements pleasing to the ear of the administration, is sufficient to insulate your from Federal prosecution. And if you’re in a state such as Texas, it might also insulate your from state prosecution. We may find that explicit fraud was committed, people knew and traded on the fraud, but the fraudsters supportive of the administration are pardoned. In other words, they get to walk away with a lot of zeros in their bank account and no accountability.

If it were “free money,” I wouldn’t care. But what happens when a PE firm, lending money for data center construction, suddenly finds itself the proud owner of a bunch of half built data centers? Or even finished data centers filled with useless, expensive, and rapidly depreciating assets because AI demand isn’t what many expected? And what happens to the pension fund that put 250 million into that PE firm? And multiple other PE firms who also couldn’t resist deals around AI? Or the bank that provides liquidity for the PE firm? It’s not “free money,” it’s coming from somewhere. And that somewhere could be a wide-spread, systemic problem. How does the Federal government backstop PE firms, who are not insured or regulated like banks? Does the government step in and buy stock in the fraudulent company, injecting good money after bad? How do we put possibly trillions of dollars of bailout into firms but let the fraudsters walk away with all their money? Does the government step in and buy the data centers? Do the fraudsters stay in charge if they made enough dulcet noises of support for the administration?

Let’s put together a package that “doesn’t cost the taxpayers a dime.” It involves backstopping the loans, purchasing shares in troubled companies, and buying some data centers. All with money is effectively printed by the federal reserve or raised from “investors” with guaranteed loans. Essentially, this injects a pile of money into the economy, which will fuel inflation. It would also expand the debt, causing even more worry about the US debt burden. A burden the US has every incentive to ease by devaluing the dollar and inflating its way out of the crisis. And like the COVID relief bills, a lot of that money will go into creating even more income disparity. Not only will the wealthy (including fraudsters) walk away with the money they made on the way to the crash, eventually they will reap the reward of the stimulus injected to moderate the economic damage. And while the previous administrations tried to put some limits on how either the post 2008 or COVID stimulus could be used, I doubt this administration will suffer that burden.

I don’t know if or when the AI trade unwinds. I suspect it’s ‘when,’ and the longer it goes on, the more I suspect it will unwind badly. There is little I’m hearing that makes me sanguine about an orderly end to this. On the spectrum there will be true believers to outright fraudsters. Like flies to shit, fraudsters are drawn to environments where people making money would rather not look too closely as long as money is being made. If anyone did look closely, the party’s over no one is making money. After all, a little ‘wiggle room’ makes the market possible. To repurpose Mao, this is the water in which the fraudster swims. Whether its repacking bad home loans, creating accounting practices at suspiciously rock-star energy companies, or the sales figures at ‘world leading’ telecom companies, no one wants the gravy train to come to an end. But rest assured, the longer the massive (and frankly stupidly large) sums of money are changing hands (or not actually changing hands) over various AI deals, the more openings fraud will find.

AI Wins the Shutdown

It’s Monday, November 10, and I’m going through the news. The shutdown may be coming to an end. Welcome news to some, although I believe the Democrats caved. The Republicans indicated they were willing to scorch the earth over ACA subsidies. These are the payments that help people buy health insurance, when they can’t possibly afford 15,000 or 20,000 a year in premiums. It seemed as though Republicans were willing to let air travel fall apart in front of the holiday season rather promote access to healthcare. All while the government feels they have enough money to possibly send $2,000 rebate checks from the taxes collected through tariffs. And the Democrats blinked. The government, assuming the house approves and the administration doesn’t have a spaz and veto the bill, will likely re-open.

What stocks do you think would be doing well on that news in the pre-market? They airlines? Yes, they’re up. Defense contractors? They’re mixed. What about health care? Mixed to net negative. What’s ripping? AI hardware and semi-conductor companies. NVIDIA is up over 3%, while the strongest airline, UAL, is up just barely 2%. The DOW and the SP500 are up largely because of just the AI and related semiconductor stocks.

On the Russel 2000, there’s more broadly positive price movement. The second tier defense contractors are doing well. When the Russel 2000 does well, it is a proxy for investors being more willing to take risk. In the sense that ending the shutdown is positive for the economy, taking on more risk through AI and smaller companies follows. With the gross dysfunction abated, it is more likely companies will make money. But the undercurrents of self destruction over providing health care to people is still there. One party is willing to burn it all down, including intentionally withholding food assistance to their base. They are willing to ignore their roll in checking even illegal acts. I don’t know if my outlook on the future is as sanguine as the other investors stepping up to shoulder more risk.

I feel like we’ve lost our ability to discern what is good and bad. All we know to do is calculate which option gives us more money. What you build is not important. Who you defraud is not important. What you destroy is not important. The dystopia you are creating is not important. And with enough money you can buy a legacy. All that matters is making as much money as possible. The invisible hand free of moral and ethical constraints. Even democracy and the constitution fall by the wayside if there is money to be made. Greed is not just elevated to ‘good,’ along with other good values. Greed is the only thing that matters.

Totalitarianism Is an Unneeded Expense

I covered nationalism and authoritarianism and why I think the latter is the serious issue. While you can’t have blood and soil politics without nationalism, in it’s weak form it isn’t a problem. Then I covered authoritarianism and that there is no acceptable level of authoritarianism. And why you can have authoritarianism even when the people choose it. We come to the third, but not to last, leg of the dictatorship table. Unlike a three-legged stool, dictatorships have probably four legs, maybe five, or even six legs. It takes a lot of work to dislodge the autocrat and the peoples’ thirst for an autocrat. People have a craving for order and strange fetishes a democracy will never really satisfy. Totalitarianism is just another leg. One that may not be critical in the modern age.

Total control has largely fallen out of favor. The Nazis, but more so the Soviets, really brought it home. (I will use the term Soviets broadly, encompassing the USSR and allied regimes, like East Germany, Hungary, Romania, or Yugoslavia). A totalitarian state is one where the totality of civic, artistic, and professional life falls under sway of the autocrat. There is no other party. There is no protest. There are no ‘liberal’ cities in opposition. There are no books sold at the store that are not approved. There are no films shown, records played, or news broadcast that isn’t approved by the state. In the Soviet period, especially in the 1930’s to the 1950s, possessing contraband items, expressing contraband ideas, or just running afoul of an apparatchik who desired your apartment could earn you a stint in a slave labor colony.

Modern dictatorships have not picked up the extreme totalitarian mantle. China is a hold-over from the old Soviet model, but even they realize they can’t have a modern society and truly perfect control. They’ve left that to the starving North Koreans. Which is why they allow a limited form of protest and discussion. Within narrow bounds you can make specific points, but no other power centers are permitted. Other dictators, like Orban, Erodgan, or Putin, have differing degrees of social and political control. Russia maintains a tighter control over its people than Turkey or Hungary, but they all have limits on expression and do not tolerate any challenge to their authority.

Autocrats are pulled toward totalitarian control. Dictators can’t help themselves. In little and big ways, their need to control manifests itself. Why has Trump injected himself into the Kennedy Center? Why does he threaten entertainers with investigations or arrest? Why does he use the FCC to intimidate news outlets? And also a late night comic by going after his parent company? Part of it is ego. Part of it is legitimacy with his own base of popular support. No more garish displays of love and acceptance, just proper entertainment like eulogies to fallen internet trolls and odes to the their gold-plated tin god. Part of it is calculated to discourage dissent, intimidate his opposition, and stifle debate. But the need to totally control is just is their insatiable desire for power.

The modern dictator slowly tightens the totalitarian noose, but never pulls it hard enough to completely choke the opposition. This ‘kindness’ accomplishes does two ends. First, it allows the dictator the fig-leaf of not being a dictator. How can we say someone is a dictator if there are still media outlets to oppose them? They’re not a dictator, they’re just the popular choice. When they go after a news outlet or nascent party, it’s over some fraud or a dense legal issue around permits. Because one or two independent sources still exist, other closures were obviously not for political reasons. It provides a handsome veneer over the rotten state of affairs. It allows their apologists to claim it is not a dictatorship or autocracy because control is not total.

Second it reduces the cost of staying in power. Those networks of informants, jails, collecting data, and surveilling cost resources. There is a degree to which the population naturally policies itself, if the regime has a degree of legitimacy. A true believer will rat out the person they see as a traitor or a threat. We like being cozy, safe, right, and righteous. For them, throwing someone in the gulag is for a better society is its own sick reward. Then there are those that can be cheaply coaxed into cooperation. Rat on your neighbor and you’ll be promoted to a better job. At the end of the day it still requires a network of informants, dossiers, and piles of “evidence.” Even in the AI age, that is not cheap. An algorithm might select, but cannot arrest, jail, or torture someone. That requires a paid human being in a jail that must be maintained. By some estimates, the cost of the internal security in Russia exceeded the cost of the military before the war.

It is impossible to put a minder in every home. In the Soviet era “samizdat” circulated even in the darkest days. These are well-worn, dog eared, hand-made, hand-copied, and hand-circulated books, essays, stories, works of art, and news that the Soviet boot heel could not smother. Despite the blaring of propaganda from radio, film, television, and even the PA system in the subway, it was impossible to snuff out the minds of millions of people. People developed the skill of being outwardly compliant but inwardly rebellious. An unseen mass that just needed a spark to set them off. And to the regime, these dangerous people were everywhere. The regime knew this and spent untold efforts to eradicate traces of “foreign” influence. They did so in a brutal and frightening campaign of terrorizing its own population. In the Stalinist peak, people were simply plucked off the street or out of their homes. Accused of some crime or another, it didn’t matter, they were headed to the gulag or a drunken firing squad.

The parallels in the US are obvious. We’ve seen the true believers reach out to quickly remove books form libraries and schools. The fantasies some have of their political opponents arrested, en-masse, are beyond troubling. An administration targeting public opposition with threats of investigation or being charged with the thinnest of crimes. Violently abducting immigrants, and not being too concerned if any citizens who are opposed are also arrested and roughed up. Threatening news outlets with law-suits or revoking press access because they made the dear leader unhappy. Or the sycophancy on display during public events. Or working with police to use excessive force at every opportunity on protesters. Or even taking over the reigns of culture at the Kennedy Center. If you don’t see it, you are pathetically and hopeless ignorant or are a willing participant who won’t admit to it.

A degree of social control is part of the picture, but it is no longer total. We will be allowed some degree of opposition. California exists as a foil to the goodness of the autocrat and his worshipers. A hell-hole of crime and liberal values that the core supporters can contrast to their own cozy sense of safety. The dictator doesn’t need to disappear California politicians from the street. It is enough to force his presence into their civic life. Soldiers standing around a Humvee in the middle of a park. The dictator keeps the protests in check by making it known accusation of excessive force are of no concern. South Park, until it becomes too much of a threat to the profits of its owners, can continue to make essentially obscene mockery of the dictator. The blogs and the “liberal” social networks can continue to exist. As long as it doesn’t actually threaten the hold on power, costly totality is not necessary.

Authoritarians Are Toxic

My previous post touched on nationalism. The weakest leg of the “fascism” or “Nazism” stool. My statement that those labels are grossly overused still stands. The second leg is authoritarianism. What most people decry as “fascism” or “Nazism” bears little resemblance to the ideas and ideology of either the Italian or Germany movements. But both those movements were deeply authoritarian. Authoritarians can have different excuses as to why they need power, and National Socialism or Fascism were movements appealing to Germans and Italians, respectively. Unlike nationalism, there’s no healthy level, or positive light, for authoritarianism. Authoritarians subvert the law, custom, and social order to enforce their will, and will do so with the full violence of the state. And once in power, the goal of an authoritarian is to remain in power. In many autocracies, they are willing to stack their citizens dead bodies like cord wood before losing power.

At what point is a country authoritarian? Is Singapore, with its strict laws and harsh punishments authoritarian? Or is Saudi Arabia authoritarian? Is a benevolent dictator or good king (about as real as unicorns and dragons), an authoritarian? Some believe one man’s authoritarian is another man’s hero. For example, a college president decides to send a message by suspending the rules and expelling anyone accused of sexual assault. A no-tolerance approach can be lauded as a positive step toward finally treating sexual assault seriously. But if we stop and think about it, authoritarians are never heroes. And if we’re honest with ourselves, we will see that we will have blind spots regarding the abuse of authority that we are willing to tolerate. Why is our relationship to authoritarianism so complex?

Prior to the 17th or 18th centuries there is largely no concept of modern authoritarianism. Many countries had monarchs and they were sometimes checked by a parliament or council. The average 18th century Russian would not have the lexicon or frame to discuss authoritarianism. They might say a policy is harsh, unfair, or unjust. But the idea that the government was constrained in any way would be alien. You might have more luck with the average Brit or American, who had varying levels of suffrage and civil rights. It isn’t until you get to the late 19th and 20th centuries that the notion of authoritarianism is a widely accept concept.

What changed is the belief that we have rights, even when those rights are in conflict with the state. In some cases these rights are simple and direct, for example, we don’t believe the state can imprison you, for no reason, and as long as it wants. In many countries the right to a trial is explicitly enumerated, there are legal precedents enshrining that right, and popular opinion that creates a politics that secures that right. In the US, the Constitution enumerates the right, the body of precedent protects that right, and the expectation of that right by the people checks the local, state, or Federal authority. That doesn’t mean a sheriff will never violate the law. But consequences ranging from criminal indictment to losing their next election have been real. This is an improvement over almost all of human history. But this is a recent 20th century concept for most of the world.

The authoritarian believes that just the authority of the state, or the needs of favored groups, is sufficient to set aside your rights. The college president that sets aside the due process to expel students accused of sexual assault is behaving as an authoritarian. The police officer that ignores a white supremacist carrying a gun at a protest, but arrests a black counter-protester with a gun, is an authoritarian. They are operating outside the law, and either granting special rights to a group they like or taking rights away from another. As citizens we have to understand we are not free of authoritarian tendencies. We all have a special group, special rights, or cases we think are too important to be left to anachronistic or ineffective laws.

If one sheriff arbitrarily abuses their authority, the country itself is not authoritarian. It is a continuum and we may never visit the extremes. As long as there are consequences for acting as an authoritarian, I would argue the country is the opposite of authoritarian. Someone who takes away the rights of people and then faces prosecution or loses their office, is evidence of a healthy response. But excusing or pardoning their behavior is the start of an authoritarian slide. When enough of the electorate indulges their authoritarian leanings, we slide away from a healthy democracy. Years ago an Arizona sheriff made headlines by violating the rights of people he arrested, resulting in the unnecessary deaths of some of his prisoners. When people like Joe Arpaio in Arizona find broad support, that is a canary.

When people no longer see authoritarians as dangerous, the political will to hold authoritarians accountable falls away. A large portion of the electorate is willing to punish their representatives at the primary ballot box, should they challenge the current administration. The Republican party’s lack of will to challenge unconstitutional behaviors by the administration is a reflection of an electoral reality. They are often followers more than leaders. Their willingness to approve judges and appointees that are clearly unqualified authoritarians is part of the peoples’ slide away from rule of law. Had it been imposed on a healthy population, there would have been a sudden backlash. A healthy population would think any destruction of rights could be applied against them. I would argue we are far from a healthy polity.

Authoritarians will always probe the limits of what is acceptable. They need to go just over the line, but not far enough to create a popular reaction that removes them from power. The ability to jail journalists or arrest people for non-violent political speech does not happen on the first day. It’s only when the window of public opinion has been moved to the point where that arrest is just over the line. And maybe the next time it isn’t just an arrest for speech, it’s to root out their “collaborators.” The slippery slope is not a logical fallacy in this case. It is part of the plan. To sudden a change too quickly creates problems for them. A steady slope rather than big steps is how the movement toward dictatorial rule is facilitated. It is the plan that has been repeated in many “backsliding” countries to date.

Authoritarians often accelerate their concentration of power by declaring emergencies. Many have the mistaken belief that democracy is only for peace time. They believe that during a crisis, a strong, dictatorial leader is needed. We consume plenty of entertainment where a ‘hero’ has to do illegal things, break the rules, or act without authority because of the emergency. The autocrat plays on this belief by bringing common social and economic problems forward as emergencies. Any excuse is valid to declare an emergency. The US courts have so far failed to deter the administration by deferring to the administration on whether an emergency exists. Is there a crime or immigration emergency that requires deploying troops to US cities? The learned judges in the US can’t say and will just take the administration’s word. Emergency measures are core to the dictator template. Whether it’s Turkey, Hungary, or Russia, emergency measures that strain any surviving laws and limits on power are constantly invoked.

Once the line is crossed, it becomes the new normal. Was it crossed? Yes. Was it legal? No, but it happened. Now on to the next distraction. Firing independent agency heads like the FCC, countering 90 plus years of precedent is dry, boring, and old news. That has been normalized. The window has been moved. The courts have been shaped. A plurality of the public supports it, but most are barely aware. Even the “liberal” press finds itself writing about the upside of troop deployments into cities to address a non-existent emergency. The mass firings of federal workers, and the data of those agencies turned over to the regime’s illegally appointed operatives, has now become old news. We rarely talk about our data. I sound like a broken record, still harping on some settled matter, like the lunatic at the bar screaming about a red card in a football match ten world cups ago. The very fact we have moved on from these issues shows how we can be lead down the road to dictatorship. The new “red lines” to cross have been moved so far that it’s sometimes hard to understand what will preserve the American rule of law and our basic rights.

One question, on the technical matter of the definition I stated above, does authoritarianism exist when legal means are used to empower authoritarians? Is a democratically elected authoritarian really an authoritarian? The answer is yes, in the same way we saw Italy, Germany, Pinochet’s Chile, Cuba, the USSR, etc. as authoritarian. The idea of “if that’s what the people want” is not a new “loophole”. I remember many on the left excusing communist countries as non authoritarian because there was a degree of consent by the population. That’s not a good argument. That form of apology ignores the violence and coercion used to shape that public will. Not willing to get your teeth kicked out over something you hate does not mean you consent. It doesn’t stand up to credulity, to say that North Korea is not authoritarian, even if most North Koreans like the regime.

States where authoritarians are cemented into power through legal means are still authoritarian. That these right exist is part of the modern mind and transcends specific situations. While it might not have been part of the 15th century mind, it is definitely part of the 21st century mind. The modern mind sees a right as being taken away, even if it is taken away through a legal process. Ideas like the equality of the sexes, racial minorities, or religious minorities before the law, and in all meaningful matters, is part of the modern mind. It might not be organically part of the a brain structure, the same way vision is part of our brain, but it is part of our mind. Even if the constitution of the United States is legally amended to provide the current administration with unchecked authority, that does not mean we would lose the notion of those rights.

Just as these ideas were created in the mind, they can be suppressed. Just as we have suppressed ideas from our past. Today’s kids are growing up in an era where adults have normalized the taking of rights. When they grow up, they may see this as normal. The change might take more than one generation, but I can imagine a world where teachers teach the fascist notion that the elected president should be supported in every way by good citizens. That society only moves forward if all members as bound together in the same struggle. And that blind obedience is what is expected. The popular will has been expressed and, like the sticks in the fasces, we must create an unbreakable whole. That was the road Italy was on in the 1920s. There’s plenty of polling to indicate upwards of around 70-80 million voting Americans are fine with this.

It is possible to have a degree of national love or national pride that is not pathalogical. However, there is almost no degree of authoritarianism that is healthy. How to deal with it is difficult. What happens after the current crisis, should the Democrats come to power? The next administration will find itself with a mess. Either it begins mass firings of the incompetent ideologues of the previous regime or they live with a mass of political saboteurs, leaking information and subverting policy. Democrats have based their legitimacy on opposing the illegal firing of staff. The are not likely to support mass firings. What do you do about senior military leaders that are ideologically opposed to the administration and push back on any order? Traditionally the military has avoided partisan politics, but the administration is pushing that taboo. And what happens when the courts find a 6-3 or 5-4 majorities to restrain the new administration, using the veneer of re-establishing old norms for brazenly political decisions?

The Republicans won’t lose their backers should they lose power. They will make the situation difficult for the new administration in a way the Democrats have failed to do for this administration. Part of which is a myopia that blinds them to the truth that adhering to laws in a lawless country can make little sense. The Republicans managed to attempt an insurrection in the way Democrats will not be able to do. There’s an unspoken asymmetry many pretend does not exist. The Republicans understand this and realize they can act with impunity because they won’t be subject to the same lack of norms. They learned this under the tutelage of Mitch McConnell, who realized he could cross norms and lie to the face of Democrats and not fear any consequences. They would negotiate with him in good faith, no matter how much bad faith he exhibited.

That’s the good scenario, where the party that facilitated authoritarian control of the government is rejected. The dark scenario is that they are not rejected. Or the power is ensconced in such a way that makes action by the other party virtually impossible. In which case any change in power becomes a brief respite between lurches toward a president that is, in effect, a 10th century king. Don’t the Americans have a ‘throw out the bums’ mentality that brings new people into power? Two simple statistics come to mind that make this feel different. About 79 million Americans voted for Donald Trump and around 90% do not regret their vote. I find absurd the idea that four years was enough to create a cultural amnesia about what Trump was and what he tried to do the first time. A large plurality has chosen to go down this path and does not want to change.

Beyond the abstract notion that rights are taken away, what is the problem? We are seeing it play out in small ways. When the authoritarian comes to power, corruption follows. Being in a position to stop business deals over politics becomes blocking business deals until you also get a ‘taste’ of the deal. The president asking for just under a quarter of a billion dollars for being prosecuted by the justice department may be a bridge too far, but giving his supporters sweetheart deals for private prisons, defense contracts, or government office space may not be. Ignoring insider trading by his supporters, assuming they contribute appropriately, will erode the quality and efficiency of the markets. We see a back-room channel through his crypto coins which are bribery behind a threadbare fig-leaf. Countries with this kind of corruption and authoritarianism have a non-abstract problem of dismal economic growth.

But that’s a feature. As it becomes harder to make money, and supporting the authoritarian is a way to make money, the authoritarian bakes in a base of support. It becomes easier to teach your kid to show up at the right rallies, donate to the right causes, and make the right friends than it is to teach abstract notions of rights. This ensures the poison spreads to the next generation. You can’t eat democracy, as newly liberated Russians would tell me. And that system of patronage helps the authoritarian retain power. The economic vassals formed through corruption have a natural interest in maintaining the status quo. Corruption may feed on self interest, but it is a key tool to retain power. We find ourselves with a vindictive FCC that can approve or deny deals for media companies. They allow the owners of compliant media companies to make lucrative deals. Had the president just ordered the Secret Service to arrest Jimmy Kimmel, there would have been a backlash. But now he has economic vassals that will help control the narrative for their own economic benefit.

In short, I don’t believe this is just part of the pendulum, or we’ve seen this before and come back from it. In an age of infinite access to information, enough of the people are willing to turn away from facts, reality, and their history to support an authoritarian. We can’t claim they were just simple pioneers, manipulated by fear of attacks by first Nations peoples. Or there was no education system to teach them basic civics. Or that books were expensive, and hard to come by, if they were literate at all. They believe setting aside our rights is acceptable. Or more correctly, they believe setting aside other peoples’ rights is acceptable. This is the freedom for my religion only crowd. Or maybe they derive pleasure to see people they don’t like hurt. There is a variety of motives, but I don’t see their support waning. They are fine seeing the law made into a cudgel of control. When they can’t deploy it as a weapon, they ignore it.

As I’ve said, we need to be honest with ourselves. There are things that irritate us to the point we might support suspending the law and the normal customs and just be rid of it. I would like to see militia leaders arrested and jailed. I would also like to see the incompetent, servile, political hacks in the bureaucracy drummed in the next administration. Even if it means mass firings at ICE. I would love to see the companies that benefit by supporting the autocrat (and may be ideologically aligned) be split apart. But either I am an authoritarian or I am one who believes in our rights. I can’t normalize what they do and I can’t just ignore the reality of what they leave behind. And that is why they are toxic. Because they pollute the water so that even if they lose power, it is befouled for whoever follows.

Nationalism is Not Fascism

While some things follow a disturbing parallel to the rise of the German National Socialists in the 1930s, I don’t think fascism or Nazi are quite the right labels. First, it’s been diluted to the point of uselessness. The ‘fascist’ HOA doesn’t like the rose bush I planted. The fascist coffee shop won’t give me a plastic straw. The Nazis on the county board made my grocery store charge me $0.05 per plastic bag. And so on. The problem is that the better labels are less sexy. They’re less evocative of righteous resistance.

Let’s start with nationalism, not as the most troubling aspect, but because it’s actually the least problematic label, and also falling to irrelevancy. During the Olympics, all the people who never follow any of the sports are suddenly cheering for their national team. Send someone abroad and they are almost guaranteed to chafe at some local law, regulation, or custom almost all in the host country find more than reasonable.

Most people forget that 200 years ago, there was no Italy (1861) and there was no Germany (1870). When the Italian fascists came to power, it was about 60 years after Italian unification. And the same for Germany. It was a sense of national self, stewing in the 1800s, that made those nationals possible. By contrast the French nation came to be in the 17th century. And prior to that most people saw themselves as Burgundian or Provencal and not French, except by language. And we are currently seeing resurgence of Welsh and Scottish nationalism in the UK, that seemed to be waning during the end of the 20th century, as the a series of governments seem to continuously stumble.

There are various reasons the nation state came to exist. One is industrialization. Having broader national boundaries provides economic and developmental benefits. It’s hard to run a rail road between two major cities if it is subject to the regulations of a series of principalities. Defense against invasion, trade regulation, and social services like education (which were entering the remit of governments) would be easier at a broader, national level. A love of being French, Italian, German, or British, even if you had a different dialect and diet from other parts of the nation, was a necessary ingredient to building the modern nation state.

Nationalism in itself is not an evil. Americans are right to admire things about their country, such as the entrepreneurial spirit, independence, belief in fundamental equality, and the idea that legitimacy comes from the people, not the church or a blood line. Where nationalism sours is in its utility as a trowel to shape an enemy. The golem could be in the form of immigrants, it could be racial, rumored foreign influence, or even the insufficiently nationalistic. It’s one thing to cheer your team at the World Cup, and it’s another round people up in mass arrests. Almost always this enemy isn’t an actual enemy, but just different and weak enough to attack with impunity. For this reason, we need to be aware of the dark and violent ends to which nationalism may be employed. Appeals to nationalism are a warning sign of dark motives.

Does that mean we rid ourselves of nationalism? An absence of nationalism is like an absence of ego. Someone completely without ego is kind of non-functional. And while the death of the self is a goal of meditation, you won’t last long in any society if you aren’t willing to assert your own needs and desires. Would you just let anyone cut in line in front of you, because you aren’t any more special than anyone else (including your beliefs about fairness and queuing)? Maybe hope that someone else would stick up for you? A nation with no nationalism, no sense of self, no belief in their distinctiveness, or that they contribute, won’t be a nation for long. Would you let the Russians just take over because you don’t believe your nation brings anything worth preserving to the world stage?

And while I don’t believe faceless bureaucrats in Brussels see the eradication of all nationalism as their goal, it does sometimes feel that way. That you could live in one Ikea decorated apartment in a major city, existing on a diet of kabobs, Thai, and curry, and move to another city’s Ikea decorated apartment with the same cuisines, without noticing you are in a new country, appears to be their ideal. Over time a national identity can expand in smaller and larger ways. It’s hard to imagine Germany without the Donner sandwich. In the span of a person’s life, the change may need to be moderated. Take the German who says they only like spicy, foreign food out of Germany for a year and they’ll be eating Spätzel the day after their flight lands. I was abroad for a year and developed a craving for KFC. I normally go years without eating KFC.

Like most normal people with a sense of self, most people have a sense of their national identity. Maybe they aren’t educated on all the fine points and interpretations of their nations’ sordid pasts, but come unification day, liberation day, constitution day or whatever, they wave a flag and happily watch a parade. They are proud of their distinctive contributions their scientists, poets, composers, philosophers, artists, or explorers made to shape the world. Even if the rest of the world doesn’t also acknowledge that contribution. They are part of that national self and often believe, in some small part, they contribute to a nation’s goodness. It is a part (to a lesser or greater degree) of who they are.

If you try to take that away, there are many who will react badly. You are denying them a sense of themselves. When you attack someone’s self, who they are, they will almost always take it as a deep, personal attack. An attack on their own existence, or right to exist. When we criticize any sense of empathy with “nationalist” claims because of where those ideas could lead, we forget maybe a majority of the country shares parts of that empathy. They can remember where they used to get decent fish and chips and it’s now a cell phone repair store. It’s next to the other cell phone repair store that used to sell pies. (Food, especially, is tied to national identity and a sense of self). No one seems to ever go in and out of those shops, except the young men loitering there all day. And while they also find the skinheads at protests revolting, they also see neighbors that share their concerns. While they aren’t passionate enough about pies and chips to march, they do understand the loss of part of their own identity.

One way to look at why fascism and not communism came to power in Germany after World War I is that Communism was internationalist. This is also why it made sense in Russia, a multi-ethnic empire. Germans were happy to feel German pride, as that was the path to unification. Italians were happy to feel Italian pride, and their basis for unification. While some of the fascist and Nazi leaders got their start in workers movements or self-declared soviets, they were never part of an international brotherhood of the proletariat. They were the German proletariat and the Italian proletariat. They felt betrayed by the forces of commerce and capitalism that put money, lucre, ahead of the Italian and German national interests. The takeover of industry by the state, to bend it to the needs of the international proletariat, is abstract. To make the economy and society more fair to Germans and Italians is more concrete.

This is the landscape we inhabit. A left that wants to actively minimize national distinction. This is not new and has been a feature of the far left from before World War I. A far right that is capitalizing on the push back as policies on immigration bring in new cultures. This is not new and has been a feature of the far right since before World War I. The closing of a German Christmas market is seen by one side as a sign of enlightenment by giving others a break from cultural imperialism, and by the other as evidence the national character (and by extension the individual’s self) is being killed. The sad truth is the vendors made so little money it was hardly worth the effort. But the “left infected” main stream press minimizes it, while the “far right” protesters over state it. And neither bothered shopping at the market.

And just like railroads were the kind of problem that made a nation more attractive than a string of independent duchies, more problems are regional. Easy commerce between Rotterdam and Prague means drugs, guns, and trafficked people can move easily between those same cities. Dutch police have to work with German police and German police have to work with Czech police. Your country could be picked off by the Russians, or you can create a defense pact with other countries. You could depend on your own electrical generation, or you can tie to a larger grid with better economies of scale. And so on. This does mean ceding local sovereignty to regional bodies, with the EU probably being ahead of the game. And this does mean you need to see yourself as part of a larger whole and not just German, Czech or Dutch.

As Europe ages, its relatively high wages will attract people to live and work there, providing much needed labor. The answer would be for Europeans to make more Europeans, but they seem to be unable to bring birth rates to anywhere near replacement rates. At this rate their adult populations will need to spend an inordinate percentage of their work-force on caring for the large, elderly populations. Without workers from Eastern Europe, the Middle East, Asia, and Africa, the demographics for Western Europe are not in line with much economic growth. And while some come to Europe for political freedom denied to them in their homelands, others are just coming to work. They are also from societies where membership is tribal and by blood. They don’t expect to become German, French, or Italian any more than they expect to grow wings. They want their local food, local dress, and local habits. Of course this means displacing some of their host country’s food and habits in the process to create these enclaves.

While Europe is the place where these changes are most easily seen, the trends are present in highly developed parts of North America and in Asia. The native birth rate in the US is not as bad as most in Europe, but below replacement. And the Koreans and Japanese wish their birth rates were as high as Europe’s. And the reaction in America and Asia to immigration being now worse than Europe’s. With the United States engaging in a virtual pogrom and the continued, quiet racism of Japan and Korea preferring robots over non-Koreans and non-Japanese. Even in the developed parts of China and India, the birth rates are dropping well below replacement. And the same needs for regional cooperation and governance are precipitating a shared notion of defense amongst historical enemies in Asia, while the US is choosing the path of least cooperation.

Center-left politicians have been failing and threading the needle on nationalism and have elected to throw a lot of baby out with the bath water. They have bent over backwards to make themselves bland and European, or bland an American, to not antagonize the ethnic minorities residing in their countries, and to avoid the horrific excesses of their recent past. They apologize profusely, taking part in cringe-inducing rituals such as land acknowledgements. They have ceded the ground on nationalism to the right. With nationalism itself considered the providence of those with terrible ideas about race and tolerance. And as more “regular” people see more change, more foreign enclaves, more cringey prostrations, that attack their sense of self, the more fertile ground the right has found.

I’m receptive to taking an unflinching eye to one’s past, but a portion of the left wants to reduce any historical accomplishment to just ‘theft.’ And that the US and Europe especially should have nothing to say on the matter. But if we apply the same logic to the past, there is almost no region that hasn’t, at some point, waged near genocidal war on another. Whether it’s the mongol invaders, the Huns, the Egyptians, Muslim armies across parts of North Africa and Europe, or even the Africans who migrated into Europe, displacing the Neanderthals. We are now reconstructing the rich spiritual tradition those Neanderthal tribes might have had. They were displaced by new arrivals from a foreign land, and made extinct. And while not Homo Sapiens-Sapiens, the Neanderthals were close enough to breed with the new arrivals. The difference with the present is we have pictures, documentation, and detailed stories. While all we have from the past are the barest of records and trinkets dug from the ground.

What should those politicians do, going forward? How do we stop this slide to an authoritarian right that seems to be infecting Asian, American, and European politics? At the very least, your desire for a better life (as problems and opportunities are more likely regional than just national) depends on constructing a solution to this problem. The first is losing the seemingly visceral reaction against nationalism. It’s important to understand you are proud and happy to be of your nation. And not follow that sentence with a ‘but’ to elaborate or qualify what you mean. Quite a few successful politicians on the left already do this but not emphatically enough. Second, you have to define a vision of nationalism that is conducive to a better future. For America, that nationalism should be based on ideas in the constitution and declaration of independence. They’re good ideas. They just need to be implemented more broadly.

Third, there needs to be a frank conversation on immigration. It can’t be ‘this is what you need to accept, otherwise you are a bigot.’ It must be about a future as Germans, Italians, or Americans, and how that future involves new citizens. That immigration is part of the story of economic growth. But growth as a stronger Italy, Germany, America, etc. It should never be along the lines of we need to become a more diverse, more multi-ethnic, and therefore must sacrifice our national identity to make room for other identities.

And that conversation can’t just be with the native population. It must be with the immigrant population as well. Parts of Europe are already starting this process, by making sure that (men especially) understand that women are truly free. Not covered up to be free from being ogled by men, but free to dress as they chose, be with whom they chose, and become educated as they choose. And that immigrants will send their children to non-segregated schools to learn the local language, local customs, and a reasonable indoctrination as good citizens. Assimilation need not be the eradication of their cultural heritage, but they should understand they need to become good citizens in the host country, not dwellers in alien enclaves. And if they aren’t there to become good citizens, there will be no place for them. Otherwise, in the future, there might not be room for those who actually do want to be good citizens.

Finally, the center left needs to deliver. If the perceived choice is between no change and immigration changing the character of your country, or no change and no immigration, you might choose no immigration. After all, you might still be on a slow, downward slide, but at least you’ll ‘have your country.’ More layers of bureaucracy are not necessarily the solution. More committees to make more reports to be further vetted by other committees to build a single public restroom in a park is not good government. It is bad government. Not addressing the needs of the people because too many layers exist make sure all possible concerns are addressed is terrible government. At some point just do things. Even if imperfect, something accomplished beyond re-paving the same roads legitimizes your power.

Finally, if you still believe nationalism is bad and there’s no good way to court it, I’ll leave you with the example of the Ukrainians. They are countering Russian aggression because of the belief their nation, their national identity, their families, their land, and their freedom to lives as the choose are worth fighting for. It is much cheaper to live as a vassal state to Russia, like Belarus or what Hungary might prefer. It is also easier to just emigrate abroad than live in the shadow of Russian aggression. Yet they continue to resist, paying a price few of us understand, to live as they choose. Nationalism is what is helping to keep them going and to help keep them free.

[One comment was that maybe I meant patriotism instead of nationalism. That’s arguable except that I would argue patriotism can’t exist without a state or cause. Someone could be a German nationalist and have a sense of pride or love for German culture, accomplishments, food, or art in Germany, Austria and Switzerland, but only be a Swiss patriot. French partisans, during World War II, were patriots, allied to the French government in exile. But some French felt they were patriots volunteering for the Charlemange SS Divsion. Even though their patriotic ideals were different, they were both likely French nationalists. Native Americans did their ‘patriotic’ duty, volunteering to serve in the US armed forces, but are probably not American nationalists, in the commonly accepted sense of the term. In fact, America is the example of a country with patriots who also love in addition to the one where they reside and may have served in the armed forces.]

Yes, But It’s not COBOL

Articles like these point to a multi-decade old language when something fails. Sometimes they don’t even wait for the post-mortem. There’s COBOL involved, so it must be COBOL. It’s old, right? First, let’s get one thing out of the way, and that’s the implication that the language is 60+ years old, so the computer it’s running on is old, right? No, it’s likely running on a modern IBM mainframe with modern tools. IBM makes the promise that if you write a mainframe program today, you can run it on future mainframes, without modification. That’s great for business customers because re-writing working software is expensive and time-consuming. These are highly reliable machines that are intended to run with down-time measured in seconds per year.

But the software failed, right? Because it’s old. That is complete balderdash. If you write a correct program today, it will continue to be a correct program 100 or 1,000, or 10,000 years from now. If you have an interest rate, and an amount, and compound that over a period of years, that answer won’t change. Because the program itself is applied math and logic. The rules of logic and math don’t change over time. Time itself isn’t the issue. What is the issue?

The issue comes back to maintenance. If I write a program that works today, it may not be completely correct. There may be bugs. Those need to be fixed and the effort I put toward fixing the bug impacts the long-term stability of the program. If fixing a bug is done under the gun, or on the cheap, it might cause what’s called “code entropy.” Code entropy is the de-evolution of a well written program into crap. Sometimes the bug fix must be rushed through, as customers are losing money by the minute. After that, we should go back and do a broader fix to the software. That may mean making changes to the underlying logic or other parts of the program. In doing so, we minimize the code entropy problem. But that maintenance cost money.

The next reason for maintenance is a change in requirements. This is especially true for systems that change every time there’s a change in the law. In some cases these changes are retro-active. This creates a lot of churn on short time-lines, and like bug fixes, and also results in code-entropy. The quick fix is rarely followed by the work to refactor the existing code, accordingly. The software entropy increases and the code becomes even harder to fix with the next change. Re-architecture of the old code costs money. Most places just indefinitely defer the maintenance on their old COBOL code.

Many commercial, private sector, companies rely on COBOL for high-volume transaction processing. It has many features more modern languages lack, like it’s English-like structure is legible to non-programming auditors. And modern features have been added to it, even if they have not been adopted by organizations using COBOL (especially the ones likely to skimp on maintenance). But it is not a truly modern language like Rust or Go, or even a middle-aged language like Java. And it exists in a specific computing environment (the mainframe) which is kept artificially expensive thanks to its monopoly supplier and small customer base. Getting trained on mainframe operations isn’t cheap and many companies don’t want to pay for it, as their newly trained people will leave for better offers.

Many of the problems people associate with COBOL are going to re-appear (and have re-appeared) when companies move to platforms like Java. I have been at many sites were Java programs on old, unsupported versions of Java are being poorly maintained. Or running on old, out of support application servers (programs that run Java code on servers). Databases that are so old and out of date that either the vendor has gone out of business or there is no longer a way to upgrade their database to the current versions. When out of date, poorly written Java code crashes, it just becomes a generic, bland, IT failure and mismanagement. But, because it doesn’t involve COBOL, it doesn’t get the headlines that are cheap and easy to score with an old language.

The biggest counter-example of “because COBOL” is the number of banks, brokerages, exchanges, payment processors, and insurance companies that quietly process about 80% of the worlds financial transactions on a daily basis. They have an incentive to perform routine maintenance. They have also quietly off-shored their software maintenance over the last few decades to places where a COBOL coding jobs is a good job. Offer most US software engineers a COBOL job and they will turn their nose up and assume you were joking. But in India, the Philippines, and China, COBOL is not the scarlet A that it is in the West.

I want to address something specific about the article posted above. It stated that because COBOL is by its nature defective or tool old, it cost the US 40 billion in GDP. That sounds like a lot, but in an economy generating trillions of activity, it is a rounding error. Second, re-writing that code has its own costs. That could be even more billions spent getting exactly to the same level of service provided today. There probably isn’t enough money in the world to re-write the existing, mission critical COBOL code into something else. That will take away from other budgets and, if not maintained, will result in the same problem just 10, 20, or 30 years in the future. And where will publications like FT get cheap headlines in the future, if COBOL goes away?

There’s a Bad Smell

If you don’t think something is very wrong, you’re not looking very hard. Recently, the cost of the average new car in the US topped $50,000. The median household income in the US (meaning the half way point, if you arrange all peoples’ incomes from lowest to highest) was about $83,000. The mean was about $66,000, suggesting a lot of skew from a bunch of very high incomes at the top end of the data set. So the “average,” under some definition of average, American household would pay about 70% to 80% of their income for the average new car.

If we go back 30 years, to the mid 1980s, median income was about 24,000 in 1985. (Not adjusted for inflation). If you adjust it for inflation, we have to face the ugly fact that 40 years has only taken us from $64,000 of 1985 median household income in today’s dollars to $83,000. Meaning that with all the advancements we’ve seen, and all the gains in productivity, our earning power grew just 35% or so. That’s less than a 1% improvement per year. But in the 1980s, a nice Buick or Dodge set you back less than $10,000. You could get economy cars for $5,000 – $7,500 price range. The average new car set a family back less than 50% of its income. Less than a third, if the bought an economy car. Even if you adjust for inflation, the average new car should be in the $25,000 to $30,000 range. To get to that that “less than 50%” range in today’s actual prices., you need an income of at least $100,000, if not slightly more.

This is the difference between purchasing power, wealth, and income. Partly it’s inflation, and partly it’s not inflation (to the degree inflation measurements aren’t arbitrary). The price of an “average” new car has risen faster than inflation. So has housing. So has medical care. So has education. If you could easily afford an average car in 1985, but struggle to buy an average car in 2025, you are poorer as far as cars are concerned. If you could afford to go to the doctor’s office in 1985 but not 2025, you are poorer along that axis. However, an IBM PC computer or original Macintosh cost maybe 10% of your 1985 median household income. Today, that (relatively) high-end computer is in the 3-4% category. We’re much richer on that axis. The necessary stuff is more expensive, but escapism is cheap.

I would argue that the things that matter, like food, housing, and transportation are why we feel poorer today. Setting aside the paltry growth in inflation adjusted median household income (while upper incomes have grown much faster than inflation), having to put yourself in deep debt to do “normal” things hurts.

The fact we are drowning in televisions, computers, and other gadgets doesn’t compensate for not being able to afford college. If I were to ask most people struggling to buy a house, would you rather have: more expensive TVs and computers or cheaper houses? They would opt for the house. If I asked the person trying to get one more year out of the ride that gets them to their job, if they wanted cheaper cell phones or cheaper cars, they’d opt for cheaper cars. Or a public transportation system that didn’t feel punitive in its cost and inefficiency.

You need transportation, you need a house, you need to go to the doctor and the dentist. Those seem more and more like luxury items. That’s what feels so wrong about today. I caught a passing notice about Paul Krugman saying China has passed the US in purchasing power parity. They may have. I haven’t read it. I’m a little tired of Krugman, who lost credibility with me as an economist, for focusing on too many nakedly partisan issues. But we all feel it. If you make more money next year, it doesn’t really feel like you got ahead. In fact, it feels like you’re falling further and further behind.

So you tell me, after 40 years of progress, with companies worth trillions of dollars, and with two people in a race to be the first trillionaire, does it feel like we’ve advanced? Do you feel wealthier? Does that seem like a system that’s working for the benefit of most people? Do numbers like GDP and a soaring stock market paint a rosy picture, so we we learn to ignore what our lying eyes are trying to tell us?

Social Media Is Not the Printing Press

If I read one more op/ed or article where social media is compared to the printing press, I’m going to barf. The latest one is in the NYT, and quotes a number of published important people about the inevitability of all of this. That it’s a fundamental technological change, like the printing press. And who would want the printing press stopped? Sure, it helped fuel hundreds of years of brutal religious wars, but look at where we are today. Mark Zuckerberg is on par with Johannes Gutenberg. We just have to accept the misinformation (also spread by the printing press), libelous material (also spread by the printing press), and the hundreds of years of brutal, bloody, and barbaric religious wars between illiberal regimes to get to something good.

First, let’s get some of the printing press mythology out of the way. Johannes Gutenberg did not invent the printing press. There were presses before Gutenberg, but they were based on techniques such as carving into wood to create images. To publish anything more than pictures with that technology was hard and expensive. Gutenberg’s innovation was to create type from cheap lead and make that type movable (settable) on the page. It was too expensive to make the lettering out of bronze or brass. Lead is plentiful, cheap, and easy to work. If the letters wear down, you melt the lead and stamp more letters using the bronze or brass stamps. It made publishing a book, using a press instead of monks and quills, a commercially viable project.

The internet itself may be the more correct printing press analog. But social media is not. Social media, unlike the invention of movable type, is a creation of law. Prior to the passage of section 230 in 1996, a site like X would have been effectively impossible. Why? Because X would have been held liable for the content of the posts, regardless of the author. Thanks to section 230, X can promote social media posts that libel, slander, threaten, defame, intimidate, or harass individuals with little or no legal exposure. If you want to go after the perpetrator, you have to go after an army of dimwits, hidden behind a degree of anonymity that makes prosecution difficult, if not practically impossible.

Yet many intelligent people confuse this legal loop-hole as a change in fundamental technology. What if the New York Times suddenly started printing non-factual, slanderous content? They would be sued. What if the Washington Post just printed screen shots from the Wall Street Journal as news? They would be sued. What if People magazine suddenly started telling teens that no one likes them and that suicide was a good thing? They would rightfully get sued and maybe criminally investigated. We dealt with this problem long ago with print publishers. It’s not insane to think a place publishing a piece of content or information is liable for that content or information.

But isn’t social media just the stuff regular people post? No, you ignorant fool, it is not. If you believe that lie, you are willfully ignorant of the reality around you. It is a mere fraction of what the rubes and the simpletons post. A large portion is the product of professionals who use features of the platforms to promote ideas. These range from intelligence agencies creating chaos to people trying to sell cosmetics. What you see as the product of ‘just regular folks,’ is a highly curated feed. Imagine a print publication that took submissions from anyone. Then those people vote on the submissions and the print publication goes forward with the issue. Their goal is to aggregate content that gets folks to pick up a copy and look at the ads. They don’t really care what’s in their published material. And the headline is something like ‘Donald Trump has Butt Baby with Satan.’ They would be sued. Because it’s print. If you print it on paper, you are a publisher.

But if you do it on social media, it’s not a problem. X or Facebook can run the exact same headlines. They can promote those same stories for the exact same reason, to push ads (and collect data to better target you in the future). Yet they have a pass. Intelligent people are confused by this, as if there is something inherent in some technology that makes X or Facebook incapable of being stopped. That whatever we do today, we would just wind up with new companies tomorrow. The internet would allow for the passage of information, but it’s the legal structures that have allowed for the creation of these massive, multi-trillion dollar companies that are poisoning democracy with the goal of shoving one more ad in front of your face.

If you took the stance that Facebook is acting as a publisher, with its algorithm to select and promote content, the same way the New York Times acts as a publisher, Facebook would cease. If they could get sued because your grandma re-posted a libelous story, they would not let your Nana do that. And if your rejoinder is that it’s not employees of Facebook that generate the content, well, not all the content in the NYT is a product of its employees. They may pay for Op/Ed pieces, where the person is not a staff writer. Okay, if you don’t pay for it, then it’s user contributed? Social media companies do compensate their “creatives” or “content providers.” X and YouTube, for example, have allowed people to build influence businesses by (in part) direct payments. So the social media companies are paying people for content, selecting which content to show, and collecting money through ad impressions. I really fail to see the legal difference between the NYT and Facebook from a liability perspective, except for the invented shield of section 230.

But revoking section 230 would throw a lot of baby out with the bathwater. What about a small, mom-and-pop site in the American Heartland just hosting Bible verses and some miscreant missuses it for nefarious purposes. You would shut them down? That’s the false choice we are presented. Either continue forward as is, or create legal quagmires on every main street between San Diego and Portland, Maine. We could amend section 230 to put the legal responsibility back on to what are essentially publishers. Or maybe we should amend other laws so genuine mistakes or oversights are not criminalized. We already don’t arrest UPS drivers and executives because they deliver illegal material or contraband. Nor do we throw the bank branch manager in jail because the money in their bank was used for criminal purposes (although they sometimes know – and in that case we do and should).

We act like we can’t possibly learn from the past with a new situation in the present. That we just have to repeat the same problems, over and over again, every time there’s a new change. This is a kind of powerlessness brought on by ignorance. It’s on a computer and it’s done by young, clever people who use words most people don’t understand. And it’s kind of magical, if the typewriter is the last writing instrument whose innards you still understood. Because it’s magic, and the magicians who benefit from it say it has to be this way, then it just has to be this way. Francis Fukuyama may be a genius in his area of expertise, but he bows to technology much the same way your grandma does.

There are other arguments, such as we wouldn’t have such a broad dissemination of information about the sciences, or social, or political events. But we do And with organizations that are subject to standard laws and norms for publishers. The internet drives down the cost of publishing and so opens the ability for smaller publishers to come forward. But they are still publishers. If Scientific American online publishes an article on their site threatening the city manager of Watkins, Illinois, they can be sued. It doesn’t matter if they paid for the article, or it was written by their staff, or it was freely handed to them. They are a publisher and chose to publish it. The same threat on X might go unnoticed as it may not even be in the top 10% of threats against people that day, promoted by the algorithm on X. If I set up a news outlet on the internet, and “publish,” I will be sued for the butt-baby thing. But if I’m “just a platform,” taking submissions from users, then I’m actively shielded. Even if it’s the same butt-babies, poorly veiled death threats, anti-vaccine fabrications and all else.

This collective delusion can’t continue in the context of a vibrant democracy. The more we delude ourselves into believing we are incapable of correcting our own creation, that the things the mind of man hath wrought are as unshakable as the strong nuclear force, and that it is as inevitable as the sun rising, the more we will seem like complete morons to future generations.

I often feel like the one guy point at the naked emperor, parading down the street, and wondering why no one else sees this for what it is. I think other people do. I think they’re afraid that if they do anything about the current situation, then their side gets hurt more. If we take away section 230’s protections, it will be the other side that runs amok. Or it will just be big publishers that squeeze out the little publishers. (As if we don’t already have a handful of social and traditional media companies, all owned by politically minded billionaires). But what if there’s a problem and we need to get our base out to protests? What if the other side comes to rule the information landscape?

So that’s where we are. Ignorance about the thing we created and fear its absence will leave our side worse off. And we have many, many instances in our history where fear and ignorance have ruled us, and maybe that’s the example from which we fail to learn.

Would You Do It for $20?

That’s a game you play with your friends. You know something makes your friend’s skin crawl. You ask them how much money would it take for them to participate in that skin crawling activity. The answers vary from “just no”, to “maybe I’ll do it for $1,000,” to “I’d do it for $5”. Then there’s the friend that cements their reputation as a nut, or shows off their nutty side, by just doing it. We got a glimpse of that recently with the Saudi comedy festival.

I don’t put comedians on a pedestal. I don’t think Bill Burr has any special insight into economics, politics, or society. But sometimes the best comedy is pointing out the world as it actually is. And you get a reminder that something we all tiptoe around as oversized, dangerous, and deep is actually small, harmless, and stupid. Even if media, culture, celebrities, and politicians are telling you it’s a great idea, or it’s a sacred cow, or it’s “dangerous,” for a minute you see it’s stupid and we were silly for thinking otherwise. I don’t mean in the “do your own research,” vaccine denying, tin-foil hat way. I mean in the way that we have sacred cows we tacitly or explicitly refuse to question, but should.

Three comedians walk into a racist, brutal, autocratic, fundamentalist regime that doesn’t respect human rights: Bill Burr, Whitney Cummings, and Pete Davidson. Pete Davidson is the easiest one to analyze. I don’t really think there’s a huge moral compass there. He seems like the kind of guy who just picks up on the vibe around him. He’s the friend that says “$20 – okay,” because he wants the $20 bucks. He has plenty of cash, but $20 more would be better. Do I care he went to Riyadh? Not really. It just cements my opinion of him as the gross kid.

Whitney Cummings is the queen of bad decisions. She can say, after the fact, that everyone around her made it seem like such a good idea, and the money was amazing, and that she made another bad decision. It’s one of a long line of bad decisions. It would make me wonder if she’d gained any insight about making bad decisions, or avoiding bad decisions, but it would track. She’d have a good five minutes in her next show about what a bad decision she made, and how bad she felt, as she enjoyed the really nice car she bought from said paycheck.

Bill Burr is the tough one. Because Bill Burr really doesn’t need the money. If it were revealed that Pete Davidson was declaring bankruptcy – that would track. Bill Burr is a smart guy. If not smart, insightful at the very least. He’s called out greed, evil, and hypocrisy on many occasions. Every once and a while an excerpt from his pod-cast pops up and he calls folks out for being the worst people. I think he’s also aware that condemning rape victims to be punished, or beating women for not wearing head-dresses, or treating foreign workers like slaves is bad. Pete and Whitney might not think about the fancy hotel they’re in as the product of slave labor. I’m not saying Bill wouldn’t stay there. I’m just saying I imagine his conscience would at least twitch.

And despite the assurances from people like Bill, that the Saudis are just funny people (as if we have no understanding of Saudis), and he could say what he thought, it doesn’t track. This isn’t like going to the Soviet Union and playing a show for a repressive regime, because it’s a closed society with little cultural exchange. Plenty of Saudis travel and live outside Saudi Arabia and plenty of Americans have lived in Saudi Arabia. It’s impossible to say he was ‘freer to speak his mind there,’ because the contract stipulations leaked and included specific topics there were off-limits. Other comics had their invitations rescinded for jokes. We know they were censored. I’m hoping Bill Burr pulled back because he was being censored. Otherwise, that would mean…

But this is where we are. Top, head-line comics, with plenty of money, will gladly play for a few dollars more to legitimize a country that is the embodiment of the backward stupidity they would otherwise ridicule. Or maybe it was always just a bit, like Michael Jackson using a falsetto when out in public, to make us think there was something there. Maybe they didn’t care what they said, or who they said it to, as long as the checks keep coming. If it means making fun of racists, bigots, and (Christian) fundamentalists, that’s fine. If tomorrow making fun of people of color, punching down on gays, Muslims, Jews, or free-thinking people makes more money, well, they can do those bits, too.

And to a larger degree we see companies, especially media companies, caving to pressure because already absurdly wealthy people could make more money “settling” with Donal Trump. We see colleges willing to give up intellectual freedom to preserve their jobs and money. These are institutions that should have a very real, necessary, and strong allergy to authoritarians. Media companies need that allergy because they need creative independence. Universities because they need freedom to think and explore ideas. Have they had to compromise in the past? Yes, and almost always those two industries have regretted it. It’s always a shameful part of their history they never hope to repeat again.

But that’s the beauty of Trump’s America and, in a smaller way, the Riyadh comedy festival. It lays bare the fact that the moral compass of people with money bends towards more money. Movie studios, TV networks, and publishers were always businesses first. But they couldn’t stop the editorial message coming from the creative people they needed to have a product to sell. Universities always needed to bend to their alumni, donors, and grantors, but couldn’t serve their purpose without giving academics broad liberty of opinion. And comedians have always had to put food on the table, pay the rent, and make a buck.

But the institutions, people, and companies with the greatest ability to do the right thing, to fight the right fight, and to stay on the right side of history, have shown they would rather just have the money. Even at the expense of what makes them valuable, hoping that it will all blow over as something else happens. And the next time Bill Burr is making fun of Donald Trump being an autocratic bigot you’ll forget he helped legitimize the kind of autocracy Donald wishes he had.

Maybe Whitney or Bill will do Trump’s next birthday gig, if the money’s right, and they’ll be free to speak their truth in any way that’s not prohibited in the contract.

Kreskin Not Needed

We don’t need a great fortune teller to explain what’s going to happen. We have been letting high income people and large companies avoid paying their share of taxes. Do they pay taxes? Yes. But it’s not unusual for a high income earner to pay at a 15 to 20% rate. Their employees might be paying at the 25-35% rate.

We recently had an anti-trust ruling on Google that, while they were a monopolist who caused a lot of market damage, stifled competition, and hurt their customers, nothing will happen to them. The same “nothing’ happened to Microsoft decades earlier. Nothing happened to Wall Street executives after the mortgage markets imploded due to their fraud. Nothing is likely to happen to Apple in its anti-trust case. Meta’s AI chat bots have lewd conversation with children, while admitting to basically stealing their training data from authors. Nothing will happen to them. Unusual options trades on thinly traded companies just before major announcements feel like they’re happening on an almost daily basis. No one is being picked up for insider trading.

What happens at the end of this, when we let major companies and the rich skirt on their tax burden, when we’ve destroyed the competitive business landscape to help make them a little more money, when we’ve gone into debt over and over again, in administration after administration, to cut their taxes or drive away burdensome regulations? What’s going to happen is that the people in the bottom 95% will be left to bear the burden of cleaning up after a party that they didn’t attend. They will own nothing, because anything worth owning will be held by the rich, who have super-charged the rate they accumulate wealth. They will use those piles of cash to buy anything worth having, from housing, to farm land, to water rights, to pristine wilderness.

The wealth gap between the top 1% and the bottom of the top 10% is becoming stupidly large. Never mind the middle 50% of Americans. And this is happening all over the world. A little faster in some countries, and a little slower in others. But at the end of the day, the super-rich will walk away just fine, but it will be rank and file citizens that will have to pay back the debt. At some point the acceleration of debt will be so unsustainable that either brutal austerity or massive inflation will follow.

And who owns that debt? Who do we need to pay back? It is the super-rich, the large investors, and the large corporations.