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The Mad King
On a certain $44 billion transaction.

November 26, 2022

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There has always been friction between corporations and democracy. As Rachel Maddow notes in her eloquent podcast Ultra, in the 1940s, it was good for certain large American businesses and the Congressmen who supported them to bolster Hitler’s murderous fascist regime—just as it was very good for certain German businesses, many of which benefitted from Jewish slave labor. Nothing has changed. Despite being creatures of the democratic state, big business didn’t care then that democracy had enabled its existence, and it doesn’t care now. The elite merchant class has always to a large extent seen democracy as an impediment to its power.

Even in a democracy, a corporation is an island unto itself, a “person,” for apparent lack of anything better to analogize some words on sheets of paper with, governed by laws, yes—but in every other respect, subject to the whims of the Chief Executive. (While many corporations have active Boards of Directors, there are too many examples to count of clueless Boards, useless Boards, and inept Boards, suggesting that true power in a corporation lies elsewhere.) When that Executive knows what he or she is doing, the lack of mandatory checks and balances can facilitate stupendous growth and profits. But as with all things, there are tradeoffs, and the freedom to win big in some cases comes with the cost of losing big in others. In essence, the idea of the corporation affords executives the opportunity to lead benign dictatorships, if they can literally manage it.

But what happens when they are not so benign? What happens when the dictator is malevolent, or a bad faith actor? Sure, it can be expected that unsuccessful companies will post losses and ultimately reveal ugly balance sheets. The second-order effects in such circumstances must also be considered, however. Mistreatment of minority employees and contractors. Lobbying—often successful—for policies that are not in the public interest, which stick around even if the corporation that begged for them does not. Retirement accounts zeroed out when the shareholding faithful realize, too late, that the words “fiduciary duty” never even occurred to the men and women with whom their hard-earned funds had been entrusted. Environmental catastrophe. And in the most extreme examples, threats to national security.

The past few weeks have come with a whirlwind of news surrounding the sudden and largely unexpected implosion of FTX, a cryptocurrency exchange comprised of hundreds of shell corporations, many of them nominally based in the Caribbean. Sam Bankman-Fried, FTX’s now infamous founder who presided over the uncontrolled detonation of his fake-money empire, whose face was plastered on billboards throughout downtown San Francisco only a few weeks ago, has tumbled down a very long and extremely steep reputational staircase from “curly-haired wunderkind” to “incompetent fraudulent slob.” The press accounts from only days apart are enough to give a reader whiplash.

The FTX case, while entirely predictable, is still remarkable for a few reasons. First, the enormity of the losses has been largely misreported in the press based on a supposed internal “balance sheet,” really just an Excel spreadsheet based on nothing but shoulder shrugs to my understanding, that listed what is at best a guesstimate of $9 billion in liabilities. Yet numerous entities in the Delaware Bankruptcy Court formally listed liabilities of $10 billion - $50 billion, potentially an order of magnitude larger. Second, both Bankman-Fried’s parents and his second-in-command-slash-ex-girlfriend’s parents are esteemed professors of law and economics at respected academic institutions: Stanford Law in the case of Professors Bankman and Fried, and MIT in the case of Professors Ellison and Ellison. Third, as has also been widely misreported in the press, FTX is not “the canary in the coalmine” when it comes to cryptocurrency. This type of episode, complete with the requisite “hacking” allegations, already took place on a large scale in the case of also-bankrupt-foreign-entity Mt. Gox in 2014—it’s just that most everyone has long since forgotten about it. No, FTX is the coalmine when it comes to cryptocurrency, or at least a substantial portion of it. It is the canary only when it comes to everything. Because everything about Silicon Valley and the economy at large looks a lot like FTX these days.

If you have been paying any attention at all, it’s actually looked a lot like FTX for years. Silicon Valley was once the place where Apple invented personal computing, Aldus and Adobe invented desktop publishing, Xerox invented laser printing (perfected by HP), and real innovation was taking place everywhere. The sheer magic that is the Apple product line is owed to decades of fantastic innovation that took place between Santa Clara County and San Francisco County in California. That’s why Apple products say, “Designed by Apple in California.” Beyond admitting that they don’t actually manufacture much here, it really does mean something that American ingenuity in this small region really did make it all possible. But Apple has become the self-sustaining castle on a mountain surrounded by a vast wasteland.

Now, the Valley is the place where MBAs think they can make more money than on Wall Street. It’s where finding creative ways to break laws, and then securitizing those violations of law, has become synonymous with success. Airbnb—which I have described previously as having set off a new era in bonkers venture capital mega-rounds—invented the breaking of residential zoning laws. Uber and Lyft invented the violation of taxi regulations and many labor laws. Facebook perfected the violation of privacy laws worldwide. Cryptocurrency companies invented the mass violation of money transmission laws. And then there’s the biggest problem of all, which is less a company, and more a single person: Elon Reeve Musk.

I should clarify that I think my classmate Mark Zuckerberg of Facebook fame is a criminal who should be tried at The Hague as well as in the United States and belongs in prison, ideally for the rest of his natural life. I don’t like him, for a long list of reasons on which I have elaborated at length on more than one occasion. I flew to London to testify before British Parliament about the dangers he poses and he methods he uses to conceal his illegal activity. (I also contacted various members of Congress but it could not be bothered to listen.) So when I say that I think Elon Musk is worse and poses a larger threat to the world, that should carry a certain weight.

It’s hard to know where to begin with Musk because it’s rare (but not unheard of, see Trump, Donald J.) that a narcissitic sociopath is enabled for so long that he literally comes close to taking over the entire planet on which we live and depend. Yet that is the situation in which we find ourselves. While Trump was merely a President who despite his best, albeit stupid and clumsy, efforts tried to rid himself of the constraints the Constitution placed on his office two and a half centuries ago, Musk, born in South Africa, could not become our President. Instead he simply appointed himself king of the world, or to use his precise term, Technoking. The problem is that by taking him seriously at all, the global media convinced most people to simply respond by saying, “okay.”

It’s not okay. While there have been plenty of think pieces about Elon Musk since his exceptionally-hostile-just-kidding-I-meant-to-do-that acquisition of Twitter weeks ago, few (if any) reporters cover Musk’s empire full-time, and doing so may not be humanly possible at this stage. As a consequence, very few articles have noted the vast array of capabilities Musk now commands. Elon Musk controls a global network of eight million mobile cameras and one million microphones, mostly in the U.S. but also in every developed country, each of which can be pinpointed and activated with GPS precision. He controls a network of satellites relaying internet data to various locales that increasingly pollute the night sky, wreaking havoc for astronomers, who unlike him, are actual scientists. And he also now controls one of the world’s major social media platforms, relied on disproportionately by journalists and political dissidents, who make its steady drumbeat of atomized information so valuable.

So, who needs to be President anymore? Have no doubt that even as he spreads Russian propaganda and far-right hate speech, going so far as to reinstate Donald Trump’s Twitter account, the CIA must be intensely jealous of the rides in the Technoking’s worldwide technological kingdom. (Who needs franked envelopes, as Nazi agents once used for their propaganda in the United States, when you have Twitter?) And the Chinese Ministry of State Security, also acutely aware of Musk’s abilities to spy on citizens at home and abroad, has also no doubt been vying for access by pulling a variety of levers it has at its disposal, one of which is a certain Tesla factory based in Shanghai that is absolutely critical to Tesla’s future. (Trick question: where does a stateless billionaire consider “home?”)

That’s one problem. The next problem is that as has been well-documented, including in my 2020 PlainSite Reality Check report on Tesla, is that Elon Musk has the wit, charm and maturity of a not-particularly-bright fourteen-year-old who thinks he’s owed something. While I am not a physician, it seems undeniable that he suffers from Narcissistic Personality Disorder, and not just a little bit. Next to Trump, Musk is arguably the most toxic narcissist on Earth, constantly engaging in DARVO (Deny And Reverse Victim and Offender) manipulation to evoke pity for his horrific plight as billionaire and humble savior of mankind. (P.S. Going to Mars will not save mankind. Just ask Aldous Huxley, who pointed that out in 1958 in Brave New World Revisited, while simultaneously pointing out in advance just how much of an idiot Musk is when it comes to issues of population and genetics.) When combined with Problem One, the giant multimedia international surveillance apparatus, Problem Two becomes gulp-inducing.

Problem Three is an offshoot of Problem Two, which is that Musk has a unique and burning desire, no doubt a symptom of his NPD, to save the very world he is steadily destroying. This has led to such situations as involving himself in the rescue of boys trapped in a cave in Thailand while calling an actual rescuer “pedo guy,” and inserting himself into the middle of the war in Ukraine on the side of the aggressor, Vladimir Putin.

Mark Zuckerberg, to be fair, once came close to his level of off-the-chart mendacity, by offering to name his children after Chinese President Xi Jinping in exchange for some political favor, but except for vapid proclamations and lies to Congress, Mark largely keeps his mouth shut. He is at least aware to some limited degree of of how awkward, inarticulate and out-of-touch he is. Elon is not.

The sum total of these Problems is the reality we must face: that we are all subjects of the Mad King in a world where he has substantial influence, at least at the present moment. His defective cars, loaded with buggy “self-driving” software that can definitionally never be fixed, can and will crash into some of us on the road, even if we are driving vehicles designed before Elon was alive. His satellites will impair basic science research that could help all of us. His lies, racism, and bigotry on the social media platform he now controls will inevitably get some of us killed. And his false hope about “curing autism” with brain implants will crush the spirits and likely finances of families who need real medical solutions, not snake oil.

That’s the bad news. The good news is that Elon Musk is not likely to remain King, mad or otherwise, for long. That’s because FTX has shown us how extremely likely it is, almost to a near certainty, that Musk has already sown the seeds of his own destruction. One can drill down on that notion by simply asking the question, how did Elon Musk become so powerful in the first place?

The answer to that is incredibly simple, and it is of a piece with today’s Valley of Theranos (CEO Elizabeth Holmes indicted and convicted) and short-lived scooter company Bird (financials restated, likely now bankrupt) and FTX. It’s two words: securities fraud. Elon Musk, who has been sued more often for securities fraud than any human being ever to walk the face of the Earth, made the fortune that enabled him to buy (and as we shall likely soon see, bankrupt) Twitter with money from one of capitalism’s great levers, if not its greatest: the stock market. He sold a fabulous story about solving climate change through electric cards to the public, and then he let (or perhaps cajoled) the options market go to work, pumping up the share price to unthinkable extremes while regulators sat back and, in his thinly-veiled telling, gave him a blow job.

They might as well have, and accordingly, they should all be fired for it. The 2018 consent decree he signed with the SEC, which he soon recanted in violation of the agreement, has amounted to a worthless piece of paper. Musk has violated it openly and repeatedly, not just in one way, but in several. No one monitors his posts on Twitter. He routinely provides false and misleading information that is material to investors. The “independent” chairwoman of his Board of Directors admitted last week under oath that she doesn’t know how she monitors Musk’s compliance. And there is an entire ecosystem of stealth public relations lackeys at work on his behalf whom journalists are very much aware of, but refuse to name. (As it so happens, I am suing their ringleader, Omar Qazi, along with Musk and Tesla. You may have heard of Qazi simply as The Tesla Fan Who Wanted To Drive Cars At Children, and did.) Just as with Sam Bankman-Fried, it’s an obvious situation of the emperor having no clothes, but seemingly no one can summon the courage to say what everyone knows. The editors are afraid of libel accusations. The regulators are afraid of losing in court or not getting that next cushy position as law partner. The intelligence agencies are afraid of losing access to a valuable asset. And the lawyers, scum of the Earth, just want to bill a few more hours to the once-richest man in the world before he turns on them.

Elon Musk’s securities fraud is such a rarefied achievement that law enforcement doesn’t even know what to do about it or even how to describe it. Many of the people whose full-time job it is to hold people like Musk accountable don’t even know what a “gamma squeeze” even is, despite it being central to Musk’s supposed net worth. It’s not the kind of thing you’ll hear Kai Ryssdal talking about on Marketplace as part of his folksy banter. Too complicated. Who cares. And there’s certainly no chance any editor would take a gamble on allowing a piece of about Musk’s extended hours trading, admitted in black and white in SEC filings. (Why extended hours? Because volume is thin, which makes it easy to artificially modify share price with small trades—useful if you want to send the price up.) Instead, the New York Times has published one false piece after another, claiming that under Musk’s leadership Tesla has made unique innovations to bypass the chip shortage (false) and the Musk’s frequent talk of bankruptcy is just proof of his stellar management style (also false), as opposed to a clear sign that the man cannot run a business without resorting to fraudulent acts. Along the same lines, there has been virtually no coverage of the four prospective class action lawsuits over “Full Self-Driving,” or the lawsuit in Santa Barbara County where a judge already ruled that Tesla plausibly engaged in false advertising over “Autopilot.” And coverage of the fact that Tesla’s “deliveries” metric is a sham based on errors and constantly-shifting definitions, including sales of used cars, in order to “beat expectations” each quarter, inflating the stock price? Despite overwhelming evidence, journalists and editors won’t run the story. Even though it’s provable, it’s just too complex.

What Bankman-Fried, Musk, and for that matter, Elizabeth Holmes all have in common is the parade of enablers who have publicly and loudly vouched for their respective emperors’—or given the corporate context, dictators’—fashion sense. It’s abundantly clear at this point that from Clinkle to Theranos to Tesla, Stanford University has a deep and serious fraud problem. Not that Harvard and MIT fare much better given their ebullient enthusiasm for Jeffrey Epstein’s cash and connections, and now the FTX link to the latter institution. It’s also clear that the press cannot keep up, and neither can the government. That doesn’t leave much else.

As Maddow highlighted in Ultra, as was pointed out by former federal prosecutor O. John Rogge, our legal system may be designed to solve problems within our democracy, but it is often simply not capable of solving a threat to democracy itself. What FTX should bring is a true reckoning of just how much is wrong with our version of capitalism in the United States, because we have obviously received notice that such a reckoning has come due.

If it doesn’t happen extremely soon, we should worry. Because when Twitter, Tesla and the whole Musk kingdom inevitably implodes FTX-style and Elon Musk is revealed for the Mad King that he truly is, the bill isn’t just going to break us—it’s going to break the bank.

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