We don’t know if a stock exchange on the west coast will succeed, but we do know that if it does, American capitalism will become more dystopian.
Adam Bluestein wrote a really interesting article called “Silicon Valley Is Quietly Building Its Own Wall Street” about the new Silicon Valley stock exchange for the Medium blog “Marker”.
Now, I don’t know a ton about the specifics of finance. I read finance news when it comes up on my Google News feed, but I’m no expert. So I’m going to quote bigly from Bluestein’s blog, and give some broader analysis throughout.
For context, the article frequently references a guy named Eric Ries, who is a rich, Silicon Valley grifter who wrote financial self-help books and does speaking events.
“The LTSE is a controversial new exchange that, Ries argues, will create a fundamental shift in the capital markets. Founders and CEOs will be able to focus on long-term value creation, innovation pipelines, and sustainability goals, while retaining tighter control over the destiny of their companies. But to its critics, the LTSE is either an unnecessary marketing exercise for a handful of Silicon Valley players, or a ploy to let companies profit from public markets while avoiding the accountability of market forces.”
Currently, I’ve been looking to move back to Seattle, where I’m from, so I’ve been looking into jobs there. Because of that, I’m very familiar with meaningless business words that say absolutely nothing. So I don’t know if things like “innovation pipelines” means anything. I also don’t know what they mean by “value creation”, and they probably mean something completely different than I would.
The point is: the important detail is that they’re making a stock exchange for the tech industry in the Bay Area. The rest might be important to some people but is just fluff to me.
“When it launches […] the LTSE will be the 14th U.S. exchange registered for trading securities, but only the third active exchange that is approved for both trading and listing of public companies. That means, instead of IPO’ing on the NYSE or Nasdaq, companies will now have the option of listing shares, aka “going public,” on the LTSE.”
This stock exchange may end up being a weird offshoot, but considering it will be the third stock exchange in the US, and the first outside of New York, it has the potential to be very big.
“The LTSE has raised $70 million from a who’s who of Silicon Valley VCs: Andreessen Horowitz; Collaborative Fund; Peter Thiel’s Founders Fund; Initialized, the firm run by Reddit cofounder Alexis Ohanian; and Obvious Ventures, an early-stage VC firm co-founded by Ev Williams (founder and CEO of Medium, which Obvious is also an investor in). LinkedIn co-founder Reid Hoffman, now a partner at venture firm Greylock Partners, is also in, along with AOL founder Steve Case. But Ries himself is the biggest shareholder in the for-profit exchange; before the LTSE’s most recent funding round, he held a 29% stake.”
Wow, quite the rogue’s gallery of a bunch of scumbags! We know all of the many ways Peter Thiel is a scumbag. Also Reid Hoffman is the man behind the Iowa Caucus’s failed Shadow app and a DNC capitalist henchmen.
“Ries’s most controversial proposals have to do with how companies can incentivize long-term shareholders. The specific mechanism is up to the company — they might offer a progressive dividend, create different share classes, or implement a system of time-phased or “tenure” voting, where the longer you hold your shares, the more your vote counts in matters of company governance. So, in an election of new board members, long-term investors might get two votes, while latecomers get only one. Such an arrangement, Ries argues, helps founders with a big vision fend off mettlesome investors long enough for them to realize that vision.”
This is the most wtf detail. What this idea would functionally do is stratify classes within the financial investment classes. It’s carving up what was previously the same class – financial investment leaches – into different levels within that class.
In other words, this is west coast (known for its “new money”) capital’s biggest, and maybe first materially tangible, attempt to create an “old money” capitalist class that is stratified as separate from the “nouveau riche” capitalists.
However, the divide between the two on this stock exchange would be even more of a structural stratifier than on the east coast. Traditionally, the only divide between old and new money was just cultural signifiers. The new rich spend money like poor people would if they had money, and the old rich spend money like people who have always had money would. That’s the most perceivable difference between the two.
With this new stock exchange, the new-old divide is stratified in the structure of investment. The old money get a bigger say in the corporation. The article even specifically says that there would be “different share classes”.
There are several bad things about this. For one, by forming structural gradients between classes and pseudo-classes, and carving up classes into sub-classes, it hurts the left-wing and helps the right-wing.
For one, capitalism is aided by carving up classes because those classes no longer have the natural class interests that a more united class base would have. If there were two widely united classes, then the working class will inevitably succeed. The working class necessarily outnumbers the upper class.
By making “lower tiers” of the capitalist investment class, it allows an upper class of capitalists to continue accumulating even more wealth, and it allows the “lower” financial capitalist class to retain their capitalist class character, rather than being priced out into salary labor.
In other words, this is a strategic structure that functions to both accelerate the contradictions within capitalism, while at the same time, providing security within the capitalist class to prevent it from collapsing. It incentivizes class collaboration, which is indeed, a foundational element to fascist ideology.
“Ries makes no apologies for doing capitalism. “We as a society made the decision to convert exchanges from nonprofits to for-profits,” he says. “I don’t know if that was a great choice, but we did.” LTSE’s backers share wide-ranging motives, he says: “No matter who you are, I guarantee you will have strong ideological disagreements with at least some of our investors. [But] for all of our disagreements, we share common concerns about the future direction of our country and of capital markets.” And they’re committed long-term — everyone’s shares vest over 10 years.”
I just included this part because it’s lol-worthy. He presents this like he’s saying something so profound and new. And yet, he’s just regurgitating the most basic, capitalist ideological pablum. It’s always capitalists who don’t understand capitalism, then occasionally get insight into it, and act like they just discovered something.
Anyway, here’s one more passage from Bluestein, then I’ll conclude:
“Ries and his surrogates are carefully managing expectations. “It could be a while until we have a critical mass of listings,” he says. “We hope that by being in the room in all of these decision-making processes and influencing these companies, whether they list or not, we can start to see more companies who are taking a 21st-century approach. In the next year, you’ll start to see the impact of our work start to become evident.” Whether the LTSE becomes a legitimate rival to the big two exchanges, or as critics suggest, a sandbox for West Coast oligarchs, is ultimately up to the market to decide. It’s capitalism, after all.”
Alright, so by the end of the article they cut through the tech PR jargon and got to what we here at Underground Mall HQ want to talk about.
For one, it ends with a false dilemma. Will it become a rival stock exchange to NY? Or will it be a sandbox for West Coast oligarchs? The answer is, if it succeeds, both! Because they’re actually the same thing. NYSE and NASDAQ are both legitimate stock exchanges, and because of that, two of the biggest sandboxes for oligarchs.
But we can imagine some likely futures that emerge with something like this. One thing that would happen if the LTSE is successful, is it would shift some elements of the finance industry to the west coast.
In the US, the political and finance industry is in the east and the tech industry is in the west. If finance begins moving closer towards the tech industry, it gives them more power.
What I see happening with this is there will be two power centers in the US. These power centers will collaborate, because it’s beneficial to them. But there will come a point where it’s no longer useful to collaborate.
The tech world and political world have different interests that often, and historically, overlap, but are growing more and more disparate with time. For example, as we learn from the development of imperialism, capitalism doesn’t benefit from nation-states, they benefit from the widest, broadest, most malleable workforce imaginable.
I’ve written extensively about the potential future of “civil war” between the state and the tech industry before. In fact, it was one of the first posts on this blog.
Whatever the potential, future impacts of this may be, what we do know for sure is that, if this is successful, it will reinforce and stratify the highly dysfunctional class dynamics of American capitalism.