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Financialization will not stop until all of America is like Boeing: a once great company doing real innovation turned into a financial engineering instrument to funnel wealth upwards... or until we have cultural pushback on the totally unbridled "shareholder primacy" concept that so many Americans treat as a dictate from god these days.
Shareholder primacy is a lunatic idea with appropriately lunatic (and totally foreseeable) outcomes.
> a once great company doing real innovation turned into a financial engineering instrument to funnel wealth upwards
That is a failure of the government. On one hand the government should not have allowed Boeing to become the gigantic monopolistic manufacturer that it has become after lots of mergers, including the famed one with McDonnell Douglass. That's a failure of the FTC. Once Boeing became a monopoly, it felt much less the invisible hand of the market, and it could afford to shift its attention from engineering excellence to milking the brand. That's where the FAA should have been a hawk, and it was not. After the 737-Max grounding, Congress got involved, and their report [1] looks quite thorough. I find this paragraph quite telling:
> Despite the sweeping and substantive problems that have been identified by this Committee’s investigation as well as various other investigations, both Boeing and the FAA have suggested that the certification of the 737 MAX was compliant with FAA regulations. The fact that a compliant airplane suffered from two deadly crashes in less than five months is clear evidence that the current regulatory system is fundamentally flawed and needs to be repaired.
First of all, Boeing wasn’t and isn’t a monopoly. In absence of these disasters there would’ve been no general appetite to break it up except from “socialists hellbent on destroying American greatness” or some such.
Second, were you advocating for stronger regulations when it would’ve mattered? Or is this just another exercise of pinning failure on everything except profit motive (which of course is the reason the regulators are so weak to begin with)?
> of pinning failure on everything except profit motive
I see. Profit motive is bad. The world would be so much nicer if people were just less greedy.
I do agree with that.
And then what? Will you appeal to people to just stop being greedy, and join in a brotherly harmony?
Or you will try to strengthen the state mechanisms that make greed less dangerous? For example, greed could make some people steal. Rather than appeal to people not to steal, we can (and do) have law enforcement that deters people from stealing.
Well, recently that deterrence started losing its potency. Do I hear you criticizing the human greed and deploring those who go in stores and steal in plain daylight to satisfy their greed?
Obviously I’m an advocate for stronger regulation. I am saying that cannot be sufficient against a cultural backdrop that glorifies greed above all else. So we should be both regulating more effectively and encouraging an ethical culture of obligation to more than just one’s own bottom line — especially in large scale and/or safety-critical business.
Given that most of us here on HN aren’t policymakers but we are creators and receivers of culture, I am focusing on the latter dimension.
Greed is not a virtue, it is a local vice that can be converted into positive outcomes through a system that constrains it. But the necessary prerequisite to constraining greed is seeing it as a vice, a thing to be constrained and not celebrated for its own sake.
I'm not sure what culture you are talking about that celebrates greed. Maybe you are thinking of Michael Douglas's character in the Wall Street movie, and his meme-like "Greed is good". The guy was the negative character, the movie's message was that greed is bad.
What you hear in America, at least, is a culture that celebrates hard work, and generally considers laziness a vice. Why are people willing to work hard? Because they want to succeed in life. That's what the American dream is, after all. You could try to look at it from the angle of "because they are greedy", and, in the end it comes down to dollars: people work hard because they want more of those green bills. But pretty much nobody perceives that as greed, they perceive it as the right compensation for hard work. And certainly nobody goes out there with the message "kids, be greedy; follow my lead, I was greedy in life and look how well I did in life".
What I have noticed though is that a lot of people deplore grid, just like you are doing. It's very easy to perceive that other people are greedy. But very few people perceive themselves as being greedy.
Well, duh, you could say. But here's the thing: in a culture that celebrated greed, people would be proud to call themselves greedy, and to perceive themselves as greedy. But that is just not the case.
Happy to hear counterarguments. Especially examples in popular culture where greed is glorified.
Extreme shareholder primacy is effectively an imperative to capture as much upside as possible and externalize as much cost/risk/downside as possible.
What is greed if not the systematic capture of upside and distribution of downside to others?
Then a culture that holds shareholder primacy in as high regard as the US’s does is de facto a culture that celebrates greed.
Very interesting. I'll have to look into this more.
It's disheartening to see the evolution of America. In the early 20th century, America was almost a socialist republic with a lot of pro-socialist ideas, policies, trends, etc. But then America morphed into this anti-socialist and anti-communist fervor. But now, many Americans openly and proudly support Russia. Companies and the government sold American manufacturing and supply chains to China.
And now, private equity owns America. America has been bought and sold. Even private equity has installed itself in the government All of the politicans and judges who probably couldn't even win their high school student council races now serve as senators, congressmen, and Supreme Court justices. It's not far fetched that they serve those who paid their way to election and appointment.
Finding the exact number is hard, but apparently private equity owns about 10-25% of all residential homes (determining the actual number seems quite slippery and in need of far more in depth research). These are homes. It's all sickening.
None of these people and now our government care about anything other than a spreadsheet that says they are worth more than they were last year. It's not hard to imagine the negative downstream effects that has on society.
Edit: Removed incorrect number from an incorrect headline.
So much here is wrong I'm kind of astounded.
> And apparently in 2023, private equity accounted for 44% of all residential home purchases.
Not true. The actual headline is 44% of _flipped_ single-family homes were purchased by investors. Not overall purchases, and not private equity (https://www.washingtontimes.com/news/2024/mar/15/in-shift-44...)
> but apparently private equity owns about 25% of all residential homes
Also not true. Investors do own about 30% of US housing, but when you remember that around that number of Americans rent it's not surprising at all. Most of those investors are not private equity firms.
You can just say things that might as well be random, but it would be helpful if you pointed to actual data instead of just claiming things are not true. I didn't just make up the numbers. I found them in articles. I could have and probably should have linked them, but I also wasn't claiming someone was wrong.
> So much here is wrong I'm kind of astounded.
Pedantically arguing about numbers that don't have any correction of enough magnitude that negates the point doesn't really imply being "astoundingly wrong" to me. Are you saying that private equity and investors (and whatever nebulous definition people want to give that separates the two) own an acceptable amount of housing?
> if you pointed to actual data instead of just claiming things are not true
I did. Follow that Washington Times link.
> Pedantically arguing about numbers that don't have any correction of enough magnitude
We are talking about an order of magnitude here. You claimed private equity owns more than 10x more homes than is.trur, because you believed the 44% figure straight away.
> Are you saying that private equity and investors (and whatever nebulous definition people want to give that separates the two) own an acceptable amount of housing?
Hard to define "acceptable", but yes, I believe around 30% of homes being owned by people other than those who live in them ok. Like, my mum, who owns exactly one property (for her eventual retirement, she gets housing through work right now) counts as an investor.
Well what % do they own? It doesn't seem like you even know
Do you know? It clearly isn't zero. And like I said, it's not the main point (it was literally a side point), and it is very hard to actually find an exact number, which should tell you something. If you find an exact number that's well backed, be sure to let us know.
> So much here is wrong I'm kind of astounded.
Let me nitpick too: is this really an accurate statement?
The first rebuttal (flipped homes) highlights an actual error, though does not comment on how this error impacts on the statement made by op.
It's not clear whether the second statement really highlights any issues, since it is not made clear why 25% vs 30% would change the argument. Nor is referenced how many of the investors are private equity firms.
So in summary I think your opening statement really doesn't hold, given the arguments you present. Would you disagree?
Is this really more an emotional argument dressed in pseudo-factual language?
Does your errata challenge u/bitmc's thesis?
Or must a layperson joining the chorus of critics making directionally similar points be utterly precise in every detail before their (obviously correct) broader points be taken seriously?
If someone claims private equity owns 25% of homes, and the figure is actually closer to 1%, then yes, the broad point is now wrong. Completely wrong. Catastrophically wrong.
Private equity shouldn't own any amount. Does it matter if the current amount is 10% or 25% or whatever? According to you, we must first agree on the precise size of the problem, before we even consider mitigation.
Good grief.
Why shouldn't private equity invest or build in rental property? We're quite happy for rental companies and small investors to own them.
> We're quite happy for rental companies and small investors to own them.
I’m not, actually. Housing is a human right. If profit weren’t a motive, price would necessarily drop. For those who still can’t afford it (or who choose not to – a valid personal decision), local government should own and maintain rentals at cost. Have the board be made up of and accountable to citizens.
Them owning apartment buildings remains fine.
They're now buying up residential single family homes. IIRC, 10% of homes in hot markets are being bought with cash, no questions asked (wave inspections etc).
These private equity funds then rent those homes, with no intention of ever selling.
Meaning families are competing with funds for the already limited stock. Meaning rentals are now becoming a fixture in neighborhoods.
Where are you getting those numbers? There are a few articles that cite '44% of flipped home purchases', but not 44% of total home transactions.
This source says that private equity owns 3.6% of apartments nationwide and 1.6% of rental homes: https://ourfinancialsecurity.org/2022/06/letters-to-congress...
It does seem that in my quick search, I came across the 44% number which was then later corrected by the Washington Post but not before a bunch of other articles picked up on the wrong tagline.
In terms of the actional numbers, like I said, it's looking harder and harder to actually know the real number, and I'm not The RAND Corporation. From what I can tell, the number is at minimum in the double digit percentages. But it seems like a very slippery number that depends on how you define private equity, corporation, institutional investor, etc. and of course what "home" means.
As far as I can tell, my point still stands aside from the incorrect 44% number (which is still alarming, in my opinion).
This response tells me you arrived at your conclusion well before you saw any data.
Why?
I'm sure that op read stuff before, and this is not the first time this topic was explored and maybe they came to a conclusion based on other data?
Just wanted to highlight that this comment displays so much bad faith, dressed in false objectivity.
Are you sure you are not saying this because of being subject to intense propaganda? Not saying that your response tells me that, but maybe something worth considering?
Because conceding the one data point that you present but doubling down on the conclusion screams confirmation bias. There have been numerous articles debunking this narrative. If you google "how many homes in america are owned by corporations" you get a slew of them[1][2]. There is no data to support this claim because it is not true. According to Freddie Mac[3] Institutional Buyers peaked something like 2.5% market share last year. And that is just of houses sold.
In order to fall for a claim as outlandish as "2 out of 5 houses are owned by private equity" you'd either need to be incredibly bad at numbers or looking for confirmation of an existing belief.
[1] https://www.strongtowns.org/journal/2024/2/21-going-after-co...
[2] https://www.theatlantic.com/ideas/archive/2023/01/housing-cr...
[3] https://www.housingwire.com/articles/no-wall-street-investor...