Today’s links How finfluencers destroyed the housing and lives of thousands of people: The real estate speculator bezzle has a very ugly third act. Hey look at this: Delights to delectate. This day in history: 2004, 2009, 2014, 2019, 2024 Upcoming appearances: Where to find me. Recent appearances: Where I’ve been. Latest books: You keep readin’ em, I’ll keep writin’ ’em. Upcoming books: Like I said, I’ll keep writin’ ’em. Colophon: All the rest. How finfluencers destroyed the housing and lives of thousands of people (permalink) The crash of 2008 imparted many lessons to those of us who were only dimly aware of finance, especially the problems of complexity as a way of disguising fraud and recklessness. That was really the first lesson of 2008: "financial engineering" is mostly a way of obscuring crime behind a screen of technical jargon. This is a vital principle to keep in mind, because obscenely well-resourced "financial engineers" are on a tireless, perennial search for opportunities to disguise fraud as innovation. As Riley Quinn says, "Any time you hear ’fintech,’ substitute ’unlicensed bank’": https://pluralistic.net/2023/05/01/usury/#tech-exceptionalism But there’s another important lesson to learn from the 2008 disaster, a lesson that’s as old as the South Seas Bubble: "leverage" (that is, debt) is a force multiplier for fraud. Easy credit for financial speculation turns local scams into regional crime waves; it turns regional crime into national crises; it turns national crises into destabilizing global meltdowns. When financial speculators have easy access to credit, they "lever up" their wagers. A speculator buys your house and uses it for collateral for a loan to buy another house, then they make a bet using that house as collateral and buy a third house, and so on. This is an obviously terrible practice and lenders who extend credit on this basis end up riddling the real economy with rot – a single default in the chain can ripple up and down it and take down a whole neighborhood, town or city. Any time you see this behavior in debt markets, you should batten your hatches for the coming collapse. Unsurprisingly, this is very common in crypto speculation, where it’s obscured behind the bland, unpronounceable euphemism of "re-hypothecation": https://www.coindesk.com/consensus-magazine/2023/05/10/rehypothecation-may-be-common-in-traditional-finance-but-it-will-never-work-with-bitcoin/ Loose credit markets often originate with central banks. The dogma that holds that the only role the government has to play in tuning the economy is in setting interest rates at the Fed means the answer to a cooling economy is cranking down the prime rate, meaning that everyone earns less money on their savings and are therefore incentivized to go and risk their retirement playing at Wall Street’s casino. The "zero interest rate policy" shows what happens when this tactic is carried out for long enough. When the economy is built upon mountains of low-interest debt, when every business, every stick of physical plant, every car and every home is leveraged to the brim and cross-collateralized with one another, central bankers have to keep interest rates low. Raising them, even a little, could trigger waves of defaults and blow up the whole economy. Holding interest rates at zero – or even flipping them to negative, so that your savings lose value every day you refuse to flush them into the finance casino – results in still more reckless betting, and that results in even more risk, which makes it even harder to put interest rates back up again. This is a morally and economically complicated phenomenon. On the one hand, when the government provides risk-free bonds to investors (that is, when the Fed rate is over 0%), they’re providing "universal basic income for people with money." If you have money, you can park it in T-Bills (Treasury bonds) and the US government will give you more money: https://realprogressives.org/mmp-blog-34-responses/ On the other hand, while T-Bills exist and are foundational to the borrowing picture for speculators, ZIRP creates free debt for people with money – it allows for ever-greater, ever-deadlier forms of leverage, with ever-worsening consequences for turning off the tap. As 2008 forcibly reminded us, the vast mountains of complex derivatives and other forms of exotic debt only seems like an abstraction. In reality, these exotic financial instruments are directly tethered to real things in the real economy, and when the faery gold disappears, it takes down your home, your job, your community center, your schools, and your whole country’s access to cancer medication: https://www.theguardian.com/world/2012/jun/08/greek-drug-shortage-worsens Being a billionaire automatically lowers your IQ by 30 points, as you are insulated from the consequences of your follies, lapses, prejudices and superstitions. As @pixelpusher220@dmv.community says, Elon Musk is what Howard Hughes would have turned into if he hadn’t been a recluse: https://mamot.fr/@pixelpusher220@dmv.community/112457199729198644 The same goes for financiers during periods of loose credit. Loose Fed money created an "everything bubble" that saw the prices of every asset explode, from housing to stocks, from wine to baseball cards. When every bet pays off, you win the game by betting on everything: https://en.wikipedia.org/wiki/Everything_bubble That meant that the ZIRPocene was an era in which ever-stupider people were given ever-larger sums of money to gamble with. This was the golden age of the "finfluencer" – a Tiktok dolt with a surefire way for you to get rich by making reckless bets that endanger the livelihoods, homes and wellbeing of your neighbors. Finfluencers are dolts, but they’re also dangerous. Writing for The American Prospect, the always-amazing Maureen Tkacik describes how a small clutch of passive-income-brainworm gurus created a financial weapon of mass destruction, buying swathes of apartment buildings and then destroying them, ruining the lives of their tenants, and their investors: https://prospect.org/infrastructure/housing/2024-05-22-hell-underwater-landlord/ Tcacik’s main characters are Matt Picheny, Brent Ritchie and Koteswar “Jay” Gajavelli, who ran a scheme to flip apartment buildings, primarily in Houston, America’s fastest growing metro, which also boasts some of America’s weakest protections for tenants. These finance bros worked through Gajavelli’s company Applesway Investment Group, which levered up his investors’ money with massive loans from Arbor Realty Trust, who also originated loans to many other speculators and flippers. For investors, the scheme was a classic heads-I-win/tails-you-lose: Gajavelli paid himself a percentage of the price of every building he bought, a percentage of monthly rental income, and a percentage of the resale price. This is typical of the "syndicating" sector, which raised $111 billion on this basis: https://www.wsj.com/articles/a-housing-bust-comes-for-thousands-of-small-time-investors-3934beb3 Gajavelli and co bought up whole swathes of Houston and other cities, apartment blocks both modest and luxurious, including buildings that had already been looted by previous speculators. As interest rates crept up and the payments for the adjustable-rate loans supporting these investments exploded, Gajavell’s Applesway and its subsidiary LLCs started to stiff their suppliers. Garbage collection dwindled, then ceased. Water outages became common – first weekly, then daily. Community rooms and pools shuttered. Lawns grew to waist-high gardens of weeds, fouled with mounds of fossil dogshit. Crime ran rampant, including murders. Buildings filled with rats and bedbugs. Ceilings caved in. Toilets backed up. Hallways filled with raw sewage: https://pluralistic.net/timberridge Meanwhile, the value of these buildings was plummeting, and not just because of their terrible condition – the whole market was cooling off, in part thanks to those same interest-rate hikes. Because the loans were daisy-chained, problems with a single building threatened every building in the portfolio – and there were problems with a lot more than one building. This ruination wasn’t limited to Gajavelli’s holdings. Arbor lent to multiple finfluencer grifters, providing the leverage for every Tiktok dolt to ruin a neighborhood of their choosing. Arbor’s founder, the "flamboyant" Ivan Kaufman, is associated with a long list of bizarre pop-culture and financial freak incidents. These have somehow eclipsed his scandals, involving – you guessed it – buying up apartment buildings and turning them into dangerous slums. Two of his buildings in Hyattsville, MD accumulated 2,162 violations in less than three years. Arbor graduated from owning slums to creating them, lending out money to grifters via a "crowdfunding" platform that rooked retail investors into the scam, taking advantage of Obama-era deregulation of "qualified investor" restrictions to sucker unsophisticated savers into handing over money that was funneled to dolts like Gajavelli. Arbor ran the loosest book in town, originating mortgages that wouldn’t pass the (relatively lax) criteria of Fannie Mae and Freddie Mac. This created an ever-enlarging pool of apartments run by dolts, without the benefit of federal insurance. As one short-seller’s report on Arbor put it, they were the origin of an epidemic of "Slumlord Millionaires": https://viceroyresearch.org/wp-content/uploads/2023/11/Arbor-Slumlord-Millionaires-Jan-8-2023.pdf The private equity grift is hard to understand from the outside, because it appears that a bunch of sober-sided, responsible institutions lose out big when PE firms default on their loans. But the story of the Slumlord Millionaires shows how such a scam could be durable over such long timescales: remember that the "syndicating" sector pays itself giant amounts of money whether it wins or loses. The consider that they finance this with investor capital from "crowdfunding" platforms that rope in naive investors. The owners of these crowdfunding platforms are conduits for the money to make the loans to make the bets – but it’s not their money. Quite the contrary: they get a fee on every loan they originate, and a share of the interest payments, but they’re not on the hook for loans that default. Heads they win, tails we lose. In other words, these crooks are intermediaries – they’re platforms. When you’re on the customer side of the platform, it’s easy to think that your misery benefits the sellers on the platform’s other side. For example, it’s easy to believe that as your Facebook feed becomes enshittified with ads, that advertisers are the beneficiaries of this enshittification. But the reason you’re seeing so many ads in your feed is that Facebook is also ripping off advertisers: charging them more, spending less to police ad-fraud, being sloppier with ad-targeting. If you’re not paying for the product, you’re the product. But if you are paying for the product? You’re still the product: https://pluralistic.net/2021/01/04/how-to-truth/#adfraud In the same way: the private equity slumlord who raises your rent, loads up on junk fees, and lets your building disintegrate into a crime-riddled, sewage-tainted, rat-infested literal pile of garbage is absolutely fucking you over. But they’re also fucking over their investors. They didn’t buy the building with their own money, so their not on the hook when it’s condemned or when there’s a forced sale. They got a share of the initial sale price, they get a percentage of your rental payments, so any upside they miss out on from a successful sale is just a little extra they’re not getting. If they squeeze you hard enough, they can probably make up the difference. The fact that this criminal playbook has wormed its way into every corner of the housing market makes it especially urgent and visible. Housing – shelter – is a human right, and no person can thrive without a stable home. The conversion of housing, from human right to speculative asset, has been a catastrophe: https://pluralistic.net/2021/06/06/the-rents-too-damned-high/ Of course, that’s not the only "asset class" that has been enshittified by private equity looters. They love any kind of business that you must patronize. Capitalists hate capitalism, so they love a captive audience, which is why PE took over your local nursing home and murdered your gran: https://pluralistic.net/2021/02/23/acceptable-losses/#disposable-olds Homes are the last asset of the middle class, and the grifter class know it, so they’re coming for your house. Willie Sutton robbed banks because "that’s where the money is" and We Buy Ugly Houses defrauds your parents out of their family home because that’s where their money is: https://pluralistic.net/2023/05/11/ugly-houses-ugly-truth/#homevestor The plague of housing speculation isn’t a US-only phenomenon. We have allies in Spain who are fighting our Wall Street landlords: https://pluralistic.net/2021/11/24/no-puedo-pagar-no-pagara/#fuckin-aardvarks Also in Berlin: https://pluralistic.net/2021/08/16/die-miete-ist-zu-hoch/#assets-v-human-rights The fight for decent housing is the fight for a decent world. That’s why unions have joined the fight for better, de-financialized housing. When a union member spends two hours commuting every day from a black-mold-filled apartment that costs 50% of their paycheck, they suffer just as surely as if their boss cut their wage: https://pluralistic.net/2023/12/13/i-want-a-roof-over-my-head/#and-bread-on-the-table The solutions to our housing crises aren’t all that complicated – they just run counter to the interests of speculators and the ruling class. Rent control, which neoliberal economists have long dismissed as an impossible, inevitable disaster, actually works very well: https://pluralistic.net/2023/05/16/mortgages-are-rent-control/#housing-is-a-human-right-not-an-asset As does public housing: https://jacobin.com/2023/10/red-vienna-public-affordable-housing-homelessness-matthew-yglesias There are ways to have a decent home and a decent life without being burdened with debt, and without being a pawn in someone else’s highly leveraged casino bet. (Image: Boy G/Google Maps, modified) Hey look at this (permalink) I Debunked Evolutionary Psychology https://www.youtube.com/watch?v=31e0RcImReY How “dark money” groups help private ISPs lobby against municipal broadband https://arstechnica.com/tech-policy/2024/05/how-dark-money-groups-help-private-isps-lobby-against-municipal-broadband/ What Will You Do If the Election Is Stolen? https://www.hamiltonnolan.com/p/what-will-you-do-if-the-election This day in history (permalink) #20yrsago Matt Jones: refactor the UI https://web.archive.org/web/20040527124940/http://www.diepunyhumans.com/archives/000346.html #15yrsago US corporations fighting to keep poor countries from getting patent-free access to green tech https://www.theguardian.com/commentisfree/cifamerica/2009/may/19/wto-climate-change-intellectual-property #15yrsago How digging up expense reports led a journalist to clobber British govt https://www.seattlepi.com/seattlenews/article/former-uw-student-shakes-up-british-government-888589.php?source=rss #10yrsago Surveillance state: the NSA doesn’t stand alone https://www.eff.org/deeplinks/2014/05/how-nsa-transforming-law-enforcement #10yrsago Kleargear ruins customers’ credit over online criticism, refuses to honor US judgment https://arstechnica.com/tech-policy/2014/05/embattled-retailer-kleargear-fights-back-against-online-review-defeat/ #10yrsago Science fiction and the law: free speech, censorship, privacy and surveillance https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2439423 #10yrsago Brussels: Water cannons turned on anti-TTIP protesters fighting the Son of ACTA https://www.techdirt.com/2014/05/16/water-cannons-turned-peaceful-ttip-protestors-brussels-as-public-barred-negotiations/https://www.theatlantic.com/technology/archive/2014/05/should-hackers-fix-cybersecurity-holes-or-exploit-them/371197/ #10yrsago 100 creeps busted in massive voyeurware sweep https://arstechnica.com/information-technology/2014/05/more-than-100-arrested-in-global-crackdown-on-peeping-tom-malware/ #5yrsago Massive, careful study finds that social media use is generally neutral for kids’ happiness, and sometimes positive https://www.pnas.org/doi/10.1073/pnas.1902058116 #5yrsago The government of Baltimore has been taken hostage by ransomware and may remain shut down for weeks https://arstechnica.com/information-technology/2019/05/baltimore-ransomware-nightmare-could-last-weeks-more-with-big-consequences/ #5yrsago The empirical impact of Lyft and Uber on cities: congestion (especially downtown, especially during “surges”), overworked drivers https://www.sfgate.com/technology/article/Uber-Lyft-San-Francisco-pros-cons-ride-hailing-13841277.php #5yrsago Facebook’s Dutch Head of Policy lied to the Dutch parliament about election interference https://www.bitsoffreedom.nl/2019/05/21/facebook-lies-to-dutch-parliament-about-election-manipulation/ #5yrsago Rogess: chess with roguelike combat https://pippinbarr.com/rogess/ #1yrago Rich People’s Gain is Worth Less Than Poor People’s Pain https://pluralistic.net/2023/05/21/rich-peoples-gain-is-worth-less-than-poor-peoples-pain/ Upcoming appearances (permalink) Media Ecology Association keynote (Amherst, NY), Jun 6-9 https://media-ecology.org/convention HOPE XV, Jul 14 (Queens, NY) https://www.hope.net/talks.html American Association of Law Libraries keynote (Chicago), Jul 21 https://www.aallnet.org/conference/agenda/keynote-speaker/ Recent appearances (permalink) Upstream podcast https://podscripts.co/podcasts/upstream/the-big-tech-con-w-cory-doctorow Libraries in Response https://www.youtube.com/watch?v=IUQZPn9ffSs Suur Futuroloogiline Kongress https://www.youtube.com/watch?v=6hITj793htg&t=398s Latest books (permalink) The Bezzle: a sequel to "Red Team Blues," about prison-tech and other grifts, Tor Books (US), Head of Zeus (UK), February 2024 (the-bezzle.org). Signed, personalized copies at Dark Delicacies (https://www.darkdel.com/store/p3062/Available_Feb_20th%3A_The_Bezzle_HB.html#/). "The Lost Cause:" a solarpunk novel of hope in the climate emergency, Tor Books (US), Head of Zeus (UK), November 2023 (http://lost-cause.org). Signed, personalized copies at Dark Delicacies (https://www.darkdel.com/store/p3007/Pre-Order_Signed_Copies%3A_The_Lost_Cause_HB.html#/) "The Internet Con": A nonfiction book about interoperability and Big Tech (Verso) September 2023 (http://seizethemeansofcomputation.org). Signed copies at Book Soup (https://www.booksoup.com/book/9781804291245). "Red Team Blues": "A grabby, compulsive thriller that will leave you knowing more about how the world works than you did before." Tor Books http://redteamblues.com. Signed copies at Dark Delicacies (US): and Forbidden Planet (UK): https://forbiddenplanet.com/385004-red-team-blues-signed-edition-hardcover/. "Chokepoint Capitalism: How to Beat Big Tech, Tame Big Content, and Get Artists Paid, with Rebecca Giblin", on how to unrig the markets for creative labor, Beacon Press/Scribe 2022 https://chokepointcapitalism.com "Attack Surface": The third Little Brother novel, a standalone technothriller for adults. The Washington Post called it "a political cyberthriller, vigorous, bold and savvy about the limits of revolution and resistance." Order signed, personalized copies from Dark Delicacies https://www.darkdel.com/store/p1840/Available_Now%3A_Attack_Surface.html "How to Destroy Surveillance Capitalism": an anti-monopoly pamphlet analyzing the true harms of surveillance capitalism and proposing a solution. https://onezero.medium.com/how-to-destroy-surveillance-capitalism-8135e6744d59?sk=f6cd10e54e20a07d4c6d0f3ac011af6b) (signed copies: https://www.darkdel.com/store/p2024/Available_Now%3A__How_to_Destroy_Surveillance_Capitalism.html) "Little Brother/Homeland": A reissue omnibus edition with a new introduction by Edward Snowden: https://us.macmillan.com/books/9781250774583; personalized/signed copies here: https://www.darkdel.com/store/p1750/July%3A__Little_Brother_%26_Homeland.html "Poesy the Monster Slayer" a picture book about monsters, bedtime, gender, and kicking ass. Order here: https://us.macmillan.com/books/9781626723627. Get a personalized, signed copy here: https://www.darkdel.com/store/p2682/Corey_Doctorow%3A_Poesy_the_Monster_Slayer_HB.html#/. Upcoming books (permalink) Picks and Shovels: a sequel to "Red Team Blues," about the heroic era of the PC, Tor Books, February 2025 Unauthorized Bread: a graphic novel adapted from my novella about refugees, toasters and DRM, FirstSecond, 2025 Colophon (permalink) Today’s top sources: Currently writing: A Little Brother short story about DIY insulin PLANNING Picks and Shovels, a Martin Hench noir thriller about the heroic era of the PC. FORTHCOMING TOR BOOKS JAN 2025 Vigilant, Little Brother short story about remote invigilation. FORTHCOMING ON TOR.COM Spill, a Little Brother short story about pipeline protests. FORTHCOMING ON TOR.COM Latest podcast: No One Is the Enshittifier of Their Own Story https://craphound.com/news/2024/05/19/no-one-is-the-enshittifier-of-their-own-story/ This work – excluding any serialized fiction – is licensed under a Creative Commons Attribution 4.0 license. That means you can use it any way you like, including commercially, provided that you attribute it to me, Cory Doctorow, and include a link to pluralistic.net. https://creativecommons.org/licenses/by/4.0/ Quotations and images are not included in this license; they are included either under a limitation or exception to copyright, or on the basis of a separate license. Please exercise caution. 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