Category Archives: Finance

I said it first

Twenty-two years ago, in fact.  I’d just finished shipping HyperCard, and was taking a three-month sabbatical to rethink things after a crazy two years.  What hit me during the HyperCard development phase was the inevitability of the collision of personal computers, networks, and media, and that copyright was the nexus at which they all would meet.  (Remember, this was before the CD-ROM, before AOL, before the MP3 format.)

So I started my own company, called Digital Goods.  I read a lot of economics and copyright law. I subscribed to Variety.  And I wrote two issues of a newsletter, the text of which is amazingly lost to the mists of time.

But I remember one central theory that thrilled me, and why I didn’t consider it an understatement to claim that the digital media emergence was a “revolution.” Put simply, with digital goods, the control of the means of production shifts to the hands of the consumer.

Marx and Engels made it pretty clear that it is revolutionary to change the control of the means of production, from the feudal class to the capitalists to the State.  Economists and philosophers have yet to grasp what kind of revolution comes from everybody carrying a factory in their pocket.


Jon Stewart ought to get a Pulitzer for his work this year.

Yes, it’s disappointing that most of the insightful political commentary in the past ten years has come from comedians.  But this isn’t new; look at Lear’s Fool.  Comedians can tell the truth in ways that other members of society can’t.

But the key moment in Stewart’s interview with Jim Cramer was when he made the most trenchant, salient point about the economic collapse and its effect on the middle class.  He acknowledged the existence of two financial systems: the Potemkin economy, where middle-class investors fund worthy companies and are rewarded with dividends and equity growth; and the racetrack economy, where Wall Street brokers and arbitrageurs take those investment dollars and lend, trade, promise, and bet them in increasingly abstruse ways.

Then he accused Cramer (and his ilk) of being the shill that acts as if he’s on the side of the former while sluicing their money to the latter.  And that, more than anything, is the crime of the century.

We know the financiers have a history and a penchant for making capitalism run amok.  Bubbles have been with us since the South Seas and the tulips, and crashes happen repeatedly and frequently.  Credit default swaps are stunning in their magnitude but structurally nothing new: banks traded things of intangible value with each other, and counted them as assets.  When their true worth (or lack thereof) comes to light, the assets go poof.  All this has happened before.

But the real damage this time was the suckering of the middle class into stoking the fire.  With our 401(k)s on the one side and our negative-amortization mortgages on the other, the middle class contributed huge amounts of real money to the financial system in fifteen years, and were rewarded with paper gains that were just as accurate as the account balances of Bernie Madoff’s clients.  And when the web of lies collapsed, the bankers made off with the real money, and the middle class is left holding the bag, in three ways: the real loss (or at best the opportunity cost) of the equity investments; the real loss in home equity, to the point of bankruptcy; and the crushing, long-term tax burden of bailing out the profiteers.

That’s the Pulitzer-winning story of the decade, and the New York Times and Barron’s and CNN are not getting to the bottom of it.

The funny guy is.

And that’s a tragedy.