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Door comes off 10-week-old 737 Max mid-air
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this post was submitted on 06 Jan 2024
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Financialization.
88% of all S&P500 companies (2017 data) now have their top shareholders as one of the Big Three institutional investors (BlackRock, Vanguard, or State Street). This number was 25% in 2000.
Almost every major American corporation you can think of, with few exceptions like Amazon, Facebook, Tesla, Walmart etc., are practically owned by institutional investors. People like Jeff Bezos, Mark Zuckerberg, Elon Musk are really the few exceptions left of individual capitalists you see in America, and even their controlling stakes in their own companies are slipping.
The rest of Corporate America are owned by the “faceless” bourgeois class who invests in the corporate assets through institutional investors while being divorced from making key decisions about the companies. The only purpose left is for the line to go up, even if it means all the established corporations are stripped bare in the process.
This is what financial oligarchy really means (I really don’t think most people truly apprehend the significance of this).
The same thing is happening with Hollywood. If you’re interested in the nitty gritty details, read this paper titled Financialized Hollywood: Institutional Investment, Venture Capital, and Private Equity in the Film and Television Industry
The upshot is that all the major media companies: Disney, Time Warner, CBS, Comcast, Netflix, Verizon, AT&T are all essentially owned by the same Big Three (BlackRock, Vanguard and State Street), collective owning an average of ~15% controlling stake in those companies and wield disproportionate amount of influence.
I have a prior career in equity research and M&A. It was always shocking to me how little direct involvement there was with institutional investors. They typically just try and find competent people to sit in their place on the board, but these board members are so disconnected from the businesses themselves. Most board members sit on the boards for multiple companies and are involved with any one company for a day or two each quarter, and that’s about it.
I am also very curious to see how the growth of passive investing, index funds, managing investments by sector/asset class, really any sort of investing other than single business-level among institutional investors impacts the future of capitalism. Vanguard invests almost entirely this way. 40 years ago this type of investing was much more rare, now it’s the dominant form. They aren’t interested in the performance of a single company, only the performance as a sector / asset class / economy.
I have been doing some research into this (also where I got the figures above from), and it seems that the institutional investors generally don’t actively engage in the decision making process (i.e. leaving it to the board of directors), but what they found is that the board of directors could already have adjusted their behavior, on their own, to track with the investors’ goals.
https://www.cambridge.org/core/journals/business-and-politics/article/hidden-power-of-the-big-three-passive-index-funds-reconcentration-of-corporate-ownership-and-new-financial-risk/30AD689509AAD62F5B677E916C28C4B6
I read a fascinating paper on the financialization of CISCO systems, them completely abandoning R&D to entirely focus on stock buybacks, thus leaving the US without any domestic 5G and internet of things capabilities, which the paper explains, is why the US and its little pet Canada, went ballistic against Huawei. Because theyre basically incapable of competing against Huawei! So their basic reaction is to try and protect domestic industries even though those industries have long stopped making anything. Its a fucking circus.