This is causing a big problem for those who believe in capitalism.
To exercise their vision and keep companies out of the hands of Wall Street, entrepreneurs need a controlling stake. If their vision succeeds, this can create fortunes of unimaginable size. Of the 8 “centi-billionaires” listed by Forbes on May 19, 5 were American tech executives.
They’re not the responsible, prudent men they were in the good old days. Jeff Bezos is living out the wildest fantasies of in-your-face wealth, buying giant mansions and super-yachts with his girlfriend – he divorced his wife last year. Bill Gates has been “outed” as a hound, a sexual predator, as he goes through a messy divorce. Elon Musk is just being an asshole, manipulating crypto-currency markets with his tweets. Larry Ellison buys islands and moves thousands of people around the country if you dare try to tax him. Mark Zuckerberg, not yet 40, seems the most responsible of the bunch.
It’s not just the ultra-rich giving wealth a bad name. The merely insanely rich are also being shown to be grade-a assholes. As I explained in my recent SPAC piece, these people create companies out of cash, buy operating tech companies, win even if they lose, and turn other people into billionaires before they’ve really accomplished anything.
Austin Russell, for instance, is 26. His company, Luminar, is just one of several trying to build Lidar systems that will help make cars autonomous, self-driving. So why is he worth $2.2 billion? It’s because a SPAC took Luminar public, and investors have yet to catch on that sales of $5.3 million in three months, don’t justify a $7 billion market cap.
That’s the thing about tech fortunes. Easy come, easy go. People get rich for doing next to nothing. Why shouldn’t you? The Fed has been fighting tech deflation for a decade by printing money. Congress has only occasionally seen fit to match that with demand for new goods and services, essential to growth. The result is a ton of louche money. With all assets being overpriced, speculators have created their own, in the form of cryptocurrency. There are now almost 10,000 of these imaginary currencies, worth $1.6 trillion on May 19. Problem is that a few days earlier they were worth over $2 trillion. This is the future of money?
The point is that with so much money lying around, under the control of so few people, in instruments of questionable value, faith in the system is dying. Wallstreetbets, which cynically treats the whole market as a casino (and is probably manipulated by big traders) is just the tip of the iceberg.
And there’s another problem, which I’ll get to tomorrow.