Zero Sum Empire

The Mueller testimony gets us talking about the decline in Americans’ ability to experience a common reality with other people, which we take as a harbinger civilizational collapse. Billionaires in the News is about risk assessment and the climate crisis. Recent moves by Chubb and Moody’s indicate that global warming-related risk is figuring into financial industry decision making more than it used to. We also take this to be a harbinger of civilizational collapse.

Chad introduces us to the Stryker siblings. They made their money from their grandfather’s medical device company. Their father, Lee Stryker, crashed his plane and died in 1976, and just four years later the film Airplane came out which features a main character named Striker trying to save a plane from crashing. Coincidence? Almost certainly. The Stryker siblings aren’t too bad as far as billionaires go. They give lots of their money to pretty good causes that address educational opportunity, conservation, human rights. They’re also big donors to the Democratic party, and their donations reflect a fairly centrist politics. On the political spectrum of the billionaire class, they’re basically Maoists. The issue we take up in relation to their activities is public-philanthropic partnerships (PPPs). PPPs are a post-2007 crash phenomenon where cities beg the super-rich for money to keep the streetlights on. Not good!

Joe introduces us to Victor Fung. Fung is a “global logistics” guy, which apparently means that he connects large consumer good corporations to sweatshop labor. If you’re a big corporation like Apple or Nike, it’s great to keep someone between you and your sweatshops. That way, when a factory burns down and kills a bunch of people you can say “Hey, we just hired this global logistics firm. They assured us everything was cool. We had no idea what the conditions in the factory were.” Joe talks about Taylorism and his techniques of Scientific Management a little bit. We get mad at the naked cruelty of capitalism.

I’ll be honest, we didn’t do our best pun work with the title for this episode. Dawn of the Dead was filmed in a mall, and we talk about malls…and we also talk about lead poisoning, so…it kind of makes sense? We promise to do better in the future.

We begin by reading a review of the new arcade/taco restaurant in Duluth. I’m hard on Duluth sometimes, but it’s actually a great place and you better learn to love it because global warming is going to force all of you to move here in the near future.

Billionaires in the news is a sampler this week. We talk about Tom Steyer’s presidential run, Ross Perot’s death, Noam Gottesman’s fake garage, and Jeffery Epstein. I’m excited to talk about Gottesman whenever he gets random-selected by the Big Wheel. He collects Francis Bacon and Lucian Freud paintings. Emanates a real “guy who unironically posts Joker memes” energy.

Joe introduces us to Herb Simon in the first billionaire segment (13:10). Simon owns the Indiana Pacers and Simon Property Group. His main business is shopping malls. He’s had some minor scandals involving gift card fees and corporate mismanagement, but we mainly discuss malls themselves. Joe tells us a bit about the history of malls and Victor Gruen’s architectural innovations. We talk about how dead mall infrastructure will be repurposed, and how the “Gruen effect” of trapping people in infinite consumer labyrinths is being distributed across social space as the traditional shopping mall disappears.

Chad covers Ira Rennert (37:00), who for many years was the largest private polluter in the US and the owner of the largest private residence. He also gave us the Hummer. Folks, this one is super depressing. Rennert has spent his life knowingly poisoning children for profit and funding “extremist” (read: violent terrorist) Israeli settlements. He pals around with John Bolton and Frank Gaffney. I won’t go into all of the gory details here, I’ll just say prepare yourself to feel extremely angry.

Thanks again for listening, and please subscribe, leave a review, share episodes that you like, and spread the word however you can.

Duluth: https://www.nytimes.com/video/climate/100000006428078/duluth-climate-change.html

Potatriots: https://potatriotsunite.com/ross-perot-left-100-million-to-the-trump-2020-campaign/

Gottesman’s Garage: https://www.nydailynews.com/new-york/ny-wealthy-curb-cutting-resident-20190709-bxtufzgiofeyhg6s2k72he6nge-story.html

American Mall video game: https://www.bloomberg.com/features/american-mall-game/

We begin with a disturbing revelation about Chad’s private life. Yes, it’s true, he owns an essential oil diffuser. Please don’t judge.

Billionaires in the News this week is a response to the NYT asking most of the Democratic presidential candidates whether they thought “anyone deserves to have a billion dollars.” It’s not a great question to begin with. It points the candidates toward making a moral judgment about what individuals “deserve” and away from a critique of the ways that wealth concentration promotes social forces that are incompatible with democracy.

Our first billionaire is Edward “Ned” Johnson III. His daughter Abigail is also on our list, so we covered her too. Ned’s father started Fidelity Investments, the largest provider of retirement investment accounts in the US. There’s a lot one could say about Fidelity, but Chad focuses in on Donor-Advised Funds (DAFs). DAFs are vehicles for charitable giving. Fidelity started the whole DAF game, and it turns out (surprise!) that they are ripe for abuse and misuse. Fidelity Charitable recently became the largest recipient of charitable contributions in the US, surpassing the United Way. However, there is no evidence that DAFs actually increase the overall amount of charitable donations. They introduce a disincentive to give out money, they are able to be used by the super-wealthy to avoid taxes, and they allow people to anonymize their giving to hide donations to hate groups and “think tanks.” Very bad stuff.

Joe introduces us to Maggie Knox (formerly Maggie Magerko), the heiress to the 84 Lumber fortune. This segment is a journey through three short films. First, we discuss 84 Lumber’s baffling 2017 Super Bowl ad that…tries to say something about immigration and walls? I’m not sure we ever get to the bottom of it. Then, we watch a terrifying ad for the family fun resort / tactical assault training camp at Nemacolin Woodlands. Last, we discuss Maggie Knox’s son PJ’s short film Beyond the Back Yard. I…can’t really describe it…you’ll have to see for yourself (links to all of these below).

84 Lumber Super Bowl ad: https://youtu.be/nPo2B-vjZ28

Nemacolin Woodlands: https://youtu.be/N9DujLpyRSU

Beyond the Back Yard: http://beyondthebackyardfilm.com/

Candidates on billionaires in NYT interviews: https://www.nytimes.com/interactive/2019/us/politics/billionaires-democratic-candidates.html

NYT exposé on DAFs: https://www.nytimes.com/2018/08/03/business/donor-advised-funds-tech-tax.html

This week we open up with a frank discussion of Chad’s recent bout of shingles (which is the reason we missed last week’s episode).

Our billionaire in the news this week is Jan Koum, creator of WhatsApp. He’s in the news because he just bought an $80 million house. Aside from buying mansions, Koum collects Porsches. That’s pretty much all he does these days. He proudly claims not to have any other ambitions. He’s not working on or investing in any new technologies. He doesn’t even have a job as far as we can tell. After studying so many self-aggrandizing and deluded billionaires, his lack of motivation is actually sort of refreshing.

Joe introduces us to Tom and Judy Love, founders of Love Travel Stops & Country Stores. They were innovators in the convenience store game. Judy once taunted LeBron James (check the vid below), but otherwise has stayed out of the public eye. Tom Love has been featured as a guest on Chickasaw.tv, and just this year was inducted into the Chickasaw Hall of Fame. Joe weaves a theory for us about American dietary habits. He argues that we love snacks, but we don’t care much about their quality, and he has the stats to back it up. It seems that we just want to shove sugar and salt into our big, dumb mouths.

Chad discusses George Bishop, a mysterious Texas energy billionaire. There are zero pictures and scant information about Bishop. However, he does offer us a chance to talk about the various ways LLCs are used to obscure identities and evade taxes, sport-fishing extortion schemes, the absolutely dire future we can expect regarding fossil fuel extraction, and the rapidly-growing world of Sharia-compliant finance. The conversation goes off in a bunch of different directions, possibly as a consequence of too many shingles meds, but we hope it remains interesting for our dear listeners nonetheless.

The Jan Koum Collection: https://youtu.be/RgjxLDVAYqE

Judy Love: https://youtu.be/xuYWJVgnKZ0

9 Habits of Gas-Buying Customers: https://www.convenience.org/Topics/Fuels/9-Habits-of-Gas-Buying-Customers

Chub Cay Airbnb (please go photograph George Bishop and send the picture to us): https://www.airbnb.com/rooms/25312947?source_impression_id=p3_1560730583_xuOJBJVh5QRy0eVL

Footin’ on the Pritz: Tom Benson and The Pritzker Family

Billionaires in the News: This week, Mackenzie Bezos became the world’s third richest woman and signed The Giving Pledge. The Giving Pledge is a public promise that billionaires make to donate at least half of their amassed wealth when they die. Bill Gates and Warren Buffet came up with the idea about ten years ago, and there are over 200 signatories so far. There are some issues with the pledge that we should all be aware of. Foremost among them, we think, is that heavy emphasis on philanthropy situates the responsibility for decision making about how wealth is distributed with billionaires, insulating the money from any democratic process.

Next, Chad talks about Tom Benson, the recently-deceased owner of the New Orleans Saints. We discuss the economic consequences of large public venues like stadiums, the ways that Benson extorted tax subsidies from Louisiana after Hurricane Katrina, and the consolidation and globalization of the facilities management industry in the age of private equity. I know that last item sounds boring, but it’s actually really strange and interesting!

Last, Joe introduces us to the (ELEVEN!) billionaire members of the Pritzker family. He takes us on a tour of the five “Reasonably Likely Outcomes if You Happen to Be the Scion of Billionaires.” We realize that in just eight episodes we’ve already come across three billionaire families connected to governorships. We fondly remember Rod Blagojevich, Harrison Ford’s Air Force One, and the 90s band Sonia Dada’s success on the Australian pop charts.

Further reading on the Giving Pledge:

https://www.insidephilanthropy.com/the-gift-adviser/2015/6/9/with-the-giving-pledge-the-devil-is-in-the-details.html

https://philanthropynewsdigest.org/news/with-giving-pledge-half-can-mean-different-things

https://givingpledge.org/

Stadium economics:

https://www.brookings.edu/book/sports-jobs-and-taxes/

https://www.theatlantic.com/business/archive/2012/09/if-you-build-it-they-might-not-come-the-risky-economics-of-sports-stadiums/260900/

Great article on Tom Benson and the Superdome:

https://www.nola.com/saints/2016/08/saints_subsidies.html

Sports fandom polling:

https://news.gallup.com/poll/183689/industry-grows-percentage-sports-fans-steady.aspx

Pritzker/Blagojevich FBI Wiretap recording:

https://youtu.be/-DBy6wR9XkU

Liesel’s big scene in Air Force One:

https://youtu.be/9-rsgdzXt6A

Sonia Dada’s “Lover (You Don’t Treat Me No Good No More)” (Warning: This is extremely 90s): https://youtu.be/eOzD69DmVO8

nanu nanu: https://youtu.be/Q_z98pAPHAo

First, we realize that we don't know what words like dude, buddy, bro, chief, and man are called. (I looked it up after the show. They're called "colloquial vocatives"). Billionaires in the News this week: Robert F. Smith. Smith is a billionaire who makes his money by investing in enterprise software. He recently pledged to pay off all of the college debt of the Morehouse College's graduating class of 2019. That's great for them, but highly visible philanthropic gifts reinforce the idea that social problems can be meaningfully addressed informally by promoting a sense of noblesse oblige in the super wealthy. Joe makes the very good point that philanthropic giving is chaotic in the sense that it is guided by the whims and experiences of individual rich people. That's a bad way to try and fix social ills. Anyway, Smith is married to a Playboy bunny, opposes closing the carried-interest loophole, and describes his so-called philosophy as "an unusual amalgamation of laissez-faire survival of the fittest and a progressive desire to open up opportunities for the disadvantaged in the world." In many ways, then, he is a pretty typical billionaire.

https://www8.gsb.columbia.edu/articles/columbia-business/private-equitys-philosopher

Next, we talk about our most well-known billionaire thus far: Sumner Redstone, owner of National Amusements. National Amusements is the parent company of Viacom, CBS, and other media properties. Redstone thinks he's immortal and immune to all disease. Here's a link to the Larry King interview Joe was quoting from. It's a real treat.

https://www.milkeninstitute.org/videos/view/a-conversation-with-sumner-redstone-if-you-could-live-forever-what-would-life-be-like?BackURL=%2Fvideos%2F

Last, we discuss Michael F. Price, a mutual fund manager who was famous in the 80s for taking over companies and bringing in CEOs to fire everyone, raise the stock price, and create value for shareholders. His most famous exploit was when he hired "Chainsaw Al" Dunlap to run Sunbeam, a small electronics company.

First, we set a long-term goal for the show: By 2021, get more listeners than the flat earth podcast. We can only do it with your help, so please either subscribe to our podcast or find a way to sabotage the flat earth people, whatever’s easier for you.

Then we talk about Jeff Bezos (do you say Beezos or Bayzos?), who unveiled “his vision” for space colonization. He imagines a future where a trillion human beings live in space and we make rocket fuel from moon ice. Those are really things he said. We reference a NYT article that states he unveiled a “moon lander,” however he did nothing of the sort. He unveiled an IDEA for a moon lander, and he had a life-size model of it on the stage behind him. There is no actual moon lander. I cannot stress this enough: he did not unveil anything aside from his own childish fantasy about the long-term extraterrestrial future of human civilization. Please take a moment to appreciate how strange it is that the world’s richest person did that, and that people listened and applauded like it was a normal occurrence. The fact that Bezos’ presentation took place against the backdrop of a world that is literally in the middle of a mass extinction event is an irony that should, in any sane person, produce alternating waves of horror and terror. Last, we speculate on the fantasy life of billionaires a little bit.

https://www.nytimes.com/2019/05/09/science/jeff-bezos-moon.html

Our two census entries for this week are Bernard Saul II and Riley Bechtel. Bernard Saul II is the most anonymous billionaire we’ve covered so far. As far as we can tell, he hasn’t spoken to the press since 1983. His family has been in business since 1852, and B.F. Saul Co. has been around since 1892. Saul leads into a discussion about Real Estate Investment Trusts (REITs), money laundering, rising urban rents, and the financialization of housing. Chances are that if you have a 401(k), you’ve invested in REITs that make money by investing in income-producing properties. Congratulations, you’re a landlord.

Here’s a quick explainer on the relation between REITs, rents, and laundering:

https://boingboing.net/2019/01/27/cz-edwards.html

John Hennessy Saul’s Descriptive Catalogue of Fruits

https://archive.org/details/johnsaulsdescrip18john_1/page/n1

Riley Bechtel is the heir to the Bechtel Corporation fortune. Bechtel is the largest construction company in the world. They built the Hoover Dam, the Chunnel, and the Riyadh Metro. They are responsible for some of the largest and most famous infrastructure projects in the world, and they’ve been around for about a hundred years. You know, it’s funny: We hear a lot about American defense companies, oil companies, chemical companies, drug companies, and internet companies getting involved in unethical and immoral activities in other countries, but we don’t hear as much about construction companies. Joe explains Bechtel’s involvement in privatizing the water supply in Bolivia. We’ve talked a little on the show about large-scale private-public partnerships around infrastructure and how private equity companies are moving more and more into this area. Important stuff to keep an eye on.

Stephen D. Bechtel, Jr.'s "Reflections on Success"

https://www.jstor.org/stable/pdf/20013444.pdf?casa_token=6Q3JfKAQCUQAAAAA:0IeBC0OXlm0FCPDESHQBsH0L5l8LpAgbW6dJ65JyXtvyv_PrDQzJ8m2OuOyIxl3ZTBJ8bymogfZKoxngm3H4njqfkJjlzIQrMNsBlNY_vONRUOIgGlA

Lots of stuff in this week’s episode. Keeping things a bit looser. First, we discuss the Milken Institute’s Global Conference 2019, where “thought leaders” celebrate “the power of ideas” and promote “shared prosperity.” We encourage you to flip through the conference program and take note of who they invited to speak (link below). Gives off a real “Garden of Earthly Delights” energy. It’s a garbage organization run by an actual criminal, Michael Milken, the “father of junk bonds.” At the conference, Milken did a keynote panel with Ray Dalio (see last week’s episode) where they talked about reforming capitalism. There’s an article from the LA Times that covers the panel, but as of now the video hasn’t been released online. We’re flagging this as another entry in our journal of recent instances of billionaires making a big public to-do about their ideas to reform capitalism. They’re coordinating their rhetoric as election season heats up to hedge against the outside chance that a left-of-center wave election happens.

Then we enter two Large Adult Sons into the census. Both of these guys inherited gigantic businesses from their fathers. First, we discuss Scott Simplot and the Simplot family. The Simplots are the Idaho potato farmers who supply McDonalds with most of its frozen French fries. We go deep on potatoes and discuss their history as part of a larger story about Native American genocide, colonialism, the Industrial Revolution, the Little Ice Age, and modern agriculture. Last, we talk about our other billionaire for this week, Ross Perot, Jr. Joe walks us through Perot’s exploits as the Magellan of helicopters, his feud with Mark Cuban, and the global logistics hub / residential community he built, Alliance, Texas. Oh, and also: one time Joe accosted Ross Perot, Sr. in a public restroom.

Refresh your memory on Michael Milken:

https://en.wikipedia.org/wiki/Michael_Milken

Milken Institute Global Conference Program: https://www.milkeninstitute.org/assets/Events/2019-Global-Conference-Program.pdf

LA Times coverage of conference panel:

https://www.latimes.com/business/la-fi-milken-conference-ray-dalio-20190502-story.html

Scott Simplot is a potato man:

http://www.cals.uidaho.edu/edComm/magazine/summer04/outstanding.html

Alliance residential areas:

https://www.alliancetexas.com/community/residential

Billionaires in the News: Billionaire Ray Dalio, CEO of the world’s largest hedge fund Bridgewater Associates, is worried that capitalism might not be working for the majority of people. So, he wrote a long essay about it and posted it to LinkedIn like any normal person would. Then he did interviews about the letter with NPR and 60 Minutes. The letter is a kind of Rosetta Stone that starkly lays out the peculiarities of the billionaire mindset. We didn’t want to get bogged down in a close reading here, but we’re planning a much more developed analysis of it in the near future. Spoiler alert: The letter is a defense of the status quo that targets people who see themselves as part of the “rational center.” Isn’t it funny how “political centrism,” the machine that brought you both Ray Dalio and the crises of capitalism he describes, is still assumed to be where levelheadedness and practicality reside in American politics?

https://www.linkedin.com/pulse/why-how-capitalism-needs-reformed-parts-1-2-ray-dalio?trk=portfolio_article-card_title

This week’s census entries (@ 14:00): Our two billionaires for this week are James Coulter and Leslie Alexander. Coulter runs TPG Capital, which is one of the largest private equity firms. He loves to say stuff like "Data is the new oil." We spend a lot of time talking about what private equity is and how it works. The cool thing about private equity is that it has about $2 trillion in assets under management, making it one of the largest sectors of the economy and no one except the super rich are allowed to participate in it. If corporations are people, then PE firms are vampires. Leslie Alexander is the former owner of the Houston Rockets who is mixed up in “securitizing” private student loan debt taken out by students to pay for-profit colleges. Securitizing means “bundling,” which means packaging and reselling debt to investors, which, as far as I know, has caused no problems whatsoever in the past. His student loan company, First Marblehead went bankrupt because of too many people defaulting on loans. The company rebranded as Cognition Financial and the website says they do “private student loan solutions you can trust,” so presumably they’ve fixed all the problems and everything is good now.

Episode notes:

I didn’t explain the Saudi/Blackstone infrastructure investing deal very clearly, so here’s an article that spells things out. I suggest making sure you read the “skipping deals” and “royal privacy” sections of the article. https://www.bloomberg.com/news/articles/2018-10-22/how-blackstone-landed-20-billion-from-saudis-for-infrastructure

Here’s a link to Josh Kosman’s book on PE: https://www.amazon.com/Buyout-America-Private-Destroying-American/dp/B005DI8VK0

This week on ZSE we start out by talking about the Notre Dame fire, the hypocrisies involved in philanthropic giving, and diagnose another billionaire brain disease we’re calling Ozymandias Syndrome. Why this mania among billionaires to carve one’s name into monuments? There’s a distinction to be made between, on the first hand, securing one’s legacy by performing good acts that serve the community of which one is ostensibly a member and, on the other hand, securing one’s legacy in durable media like architecture (think of the pyramids) that implicitly recognize the fleeting fragility of any particular culture. Just another piece of evidence that billionaires by and large do not recognize themselves as members of the communities from which they extract their wealth.

After Billionaires in the News we move on to our two census entries for the week: Stanley Druckenmiller and James “Jimmy” Haslam. Druckenmiller presents us with a problem that is sure to come up a lot: what happens when our random selector spits out a boring billionaire? One thing we can do is to dive into the means by which they made their fortune. Druckenmiller was a hedge fund guy, so we discuss a little of the history of hedge funds and how they are fundamentally unjust. A hedge fund, in a nutshell, is a financial instrument that allows people who are already rich to avoid paying taxes on their investment income. Once you reach a certain level of wealth, you’re essentially able to “opt out” of paying taxes like the rest of us by putting your money into things like hedge funds and taking advantage of the attending “loopholes” (they’re not loopholes, folks, they’re policies that are the result of large, sustained lobbying efforts).

Then, we move on to Jimmy Haslam. You may know him as the owner of the Cleveland Browns. What you may not know is that his company Pilot/Flying J Travel Centers was involved in an investigation of fraudulent billing practices over the last several years in which seventeen of his top management people were convicted (fourteen of whom have gone to prison). This wasn’t just your run-of-the-mill fraud case, listeners. I don’t want to spoil the story for you if you haven’t heard about this, so I won’t say any more here—but be prepared to feel some serious rage. One tidbit we didn’t mention in the episode is that Haslam and his company donated $500,000 to Trump’s inauguration campaign, and you can make of that what you will.

Here are the links we mentioned in the episode:

Summary of Haslam scandal: https://www.theringer.com/nfl/2018/4/2/17182368/pilot-flying-j-fraud-scandal-update-jimmy-haslam-cleveland-browns (This story includes a lot of the gory details that others leave out).

Extremely NSFW Secretly recorded conversations between Pilot Flying J executives: https://youtu.be/drSXVaETaag

News Report about Haslam’s knowledge of scheme: https://youtu.be/WYYisW_lYjI

FBI Affidavit laying out the facts of the case: https://www.documentcloud.org/documents/1672598-pilot-flying-j-affidavit.html

Episode Correction: The Browns' 0-16 season was in 2017, not 2018.