As you probably know, there have been many layoffs across the tech sector in recent months. At the same time, unemployment is close to a 50-year low, at 3.2%. Employers are raising wages to attract employees for low-wage jobs. Why is the tech sector in trouble? I’m no financial or corporate expert, so I can’t explain what is going on.
But something caught my eye as I read a story about Salesforce, which was both very successful and yet laying off 10% of its employees.
The company has been dogged by five activist investors in recent months, and is being pressured to cut costs, but the layoffs continue in spite of a stellar quarter. In fact, Benioff bragged to Swisher in bombastic fashion: “We had a great quarter. Yeah, it’s probably I think, it’s probably the best quarter of a software company ever.”
I clicked the link to see who those five activist investors who were demanding more cost cutting, no matter how it hurt morale at the company.
The first was Elliott Management. It rang a bell, but at first I didn’t remember why. More googling and soon I see the name Paul Singer.
Singer is a billionaire. Singer is a big supporter of charter schools. Singer is a rightwing Republican. Singer loves Eva Moskowitz’s Success Academy charter chain; in addition to giving SA millions, he served on its board.
An article in Mother Jones a decade ago called Singer a “vulture capitalist” and a “fundraising terrorist.”
A few years back, the U.K. Independent said that Singer had destroyed Peru’s economy and was threatening Argentina’s. Again, “vulture capitalist.”
Singer has been called a “doomsday investor.” When he takes over, he sucks out the lifeblood.
This guide to “vulture funds” was published only a month ago.
I have been trying to understand the connection between vulture investing and the aggressive charters that suck the lifeblood out of their host, the public school system.
What do you think?
Diane Ravitch's blog 
What am I thinking? Where are the assassins that fight for the real working class? Alas, only in the movies. It turns out assassins for hire work only for ruthless billionaires and dictators like Putin.
Do these very smart techers not investigate teir potential investors?
I don’t think that companies can control who buys their stock.
This was the tactic of corporate raiders. They buy enough to make demands, pick off the parts of the company they like, break it up, destroy it.
A lot of household names in the old economy were destroyed by corporate raiders like Michael Milken. The corporations tried to fight them off but lost.
GE was picked apart by Jack Welch, who sold off the appliance division but kept the insurance biz. Ron Perelman got Revlon after it was stripped. Lots of rich malefactors who destroyed American manufacturing.
Like Lee Iacocca, eh!
Lots of smart people from Silicon Valley are losing money now with the failure of The Silicon Valley Bank. Some of them have more money in the bank than the FDIC will insure. Smart people were victims of Bernie Madoff. As for the stock market, it’s a risk, even if people believe they are savvy investors. That’s why teachers cannot afford to allow Wall St. to get away with reckless investments and why defined pensions are best for them.
Well said, westcoast.
I agree about Singer(Campbell Brown and Dan Senor ), I am not sure how much of the slow down in tech is due to keeping stock returns up. However the endless quest for returns above all other stakeholders , shareholder primacy, was nurtured at GE by Jack Walsh . With boatloads of of other CEOs coming out of GE boards in his 2 + decades as CEO. He cooked the books quarterly to show increased returns. He laid off, outsourced , closed plants and made acquisitions that on paper gave him a quarterly win every quarter. As much as was necessary to show increased returns as he made a Zombie out of what was one of Americas great Manufacturing Corporations. In the end if you were a long term holder of GE stock you got clobbered when the Ponzi Scheme collapsed. Although Wall Street holds him up as a God !
” The Man Who Broke Capitalism ” By David Gelles
The essence of capitalism is maximizing profit, a Milton Friedman view of economics, winners and losers, maximizing profits encourages efficiency, “warfare”!in the marketplace, the existence of SA forces public schools to compete, drives out ineffective schools, and as a byproduct creates billionaires who are the guardians of the state. Reduce federal efforts to reduce poverty, only a stingy government can drive the poor in the work force.
A Soylent Green world
Bernioff explained what’s going on, saying that he was “having to explain the unexplainable.” Churn and burn is not explainable. Trying to explain greed is like trying to explain lust. Sinners gonna sin. What requires explanation is the deregulation that allows these brutal attacks against Americans.
Bravo! Well said.
A Pipe Dream Perhaps. But wouldn’t it be KARMA if the vulture hedge funders investing in charters. Were hobbled by the complete collapse of SVB/Silicon Valley Bank.
SVB serviced high-tech start-ups. As well as their investors.
$209B in assets. 16th Largest in USA. Deeply-Integrated into Silicon Valley High Tech. It EVAPORATED in 14 hours!
Nobody was overseeing this bank.
Roblox/Video Game Company. 5% of its $3 BILLION cash was held at SVB. Now-Bankrupt Crytpo Lender BlockFi. $227 Million with SVB. ROKU $487M of its $1.9B w/ SVB. Aerospace Rocket Lab 8% or $38M w/SVB. CA Bank Regulators Turned A Blind Eye!
SVB CEO Greg Becker.
Personally led the bank’s Half-Million-Dollar PUSH.
To reduce oversight.
Pressed Congress to reduce scrutiny of his financial institution.
Citing the “low risk profile of our activities and business model”!!!!
This is EXACTLY the crooked Cash Cow Charter Schools depended on.
One of SVB’s board members had been a board member of a charter school. “We take responsibility,” was one of the 5 SVB corporate values. Never has there been a more meaningless utterance.
SVB will get a bailout. But not college students drowning in debt.
At a conference I spoke with a corporate charter school supporter- he argued charter schools provided “competition” for public schools, both have to improve outcomes or not survive , I asked him if he supported charter police departments, he stumbled, a “defund the police” supporter loved my idea …
How about competing fire departments? NYC did have multiple fire departments in the early 19th century. Two or three would arrive at a fire, fight each other over whose job it was, and as they fought, the buildings burned down.
Massachusetts Is Sweating Silicon Valley Bank Collapse.
Because MA has the 2nd Most SVB branches after CA.
SVB bought Boston Private Bank & Trust in 2021.
Re-branding it as SVB Private.
SVB was THE MAJOR FUNDING for Israeli Tech companies!
SVB had a branch in Tel Aviv. Now hundreds of Israel’s firms are being slammed.
A lot of charter school money is in the wind.
SVB will be bailed out by the federal government. All investors.
But the college students drowning in debt will not be bailed out.
To be precise, it will be bailed out by FDIC. Like, I believe, any other member bank. But I’m no expert.
The FDIC insures deposits up to $250,000. SVC has some deposits that exceed that amount.
Heather Cox Richardson pointed out in her latest post that some banks fail every year. What made SVC different was that it was large and affected the tech sector.
Heather Cox Richardson explains SVC here: https://heathercoxrichardson.substack.com/p/march-12-2023?utm_medium=email
I think one factor in all the coverage is that it’s called “Silicon Valley Bank”.
“Fiduciary responsibility to shareholders”
Rather than building businesses to answer needs, fill gaps, support a country or enable people to have livable lives – that is not the goal of “the Market”.
Dumb down the informed citizenry (kill public schools so only the ‘haves’ can educate their children in the ways of capitalism) so the huddled masses will not understand how things actually (or should) work. An informed citizenry is a people who understand that they are being duped and drained (transfer of wealth to the rich sound familiar?), so make sure they remain ignorant and fearful, and willing to work for nothing and be grateful for it. Never mind that without income there is no one to buy products to fuel the economy – it doesn’t matter in a country that no longer makes products when you’re a fat-cat who makes money off of global investments and arbitrage – that house of cards (just like world oil supply) won’t come collapsing down in your lifetime, so what do you care? You have the gates on your community to protect you from the “ick” that is the working poor (er, I mean, “working class”).
“Corporations are people” with the power to “speak” and “Vote” with their property (money) and our bought and paid for Supreme Court calls it “free speech” rather than its true name “bribery”. As a result, corporations are people, yet face no punishment, incarceration nor death penalty for their crimes.
Take the case of PG&E brutally burning to death 80+ human beings in the no-longer existent town of Paradise – and they continue to pay their fines by over-charging their remaining customers because they own a private monopoly on power.). Or when they blew up an entire working-class neighborhood in San Bruno. (or poisoned Elkhorn slough. or, or, or….). All this because it was more important to pay their executives huge salaries and bonus packages, and impress their shareholders with huge profits at the expense of basic maintenance of their infrastructure, that could have prevented decades of “collateral damage” to deliver basic requirement for life in modern civilization at a profit. (OH, and heaven forbid you would like to disconnect from “the grid” and provide your own power through sustainable means such as solar. In California, you simply can’t – PG&E isn’t about to let you mess with their golden cow and they have their “Public Utilities Commission” and the Governor playing ball with them.)
For those of you outside of California, simply substitute “Norfolk Southern”, “Enron”, “BP”, “Lehman Brothers” or countless other scandal-rich corporate darlings – stories that are quickly dropped by the media as the next one emerges. Speaking of media – Trump and received billions in free advertising in 2016 not just on Fox but across the media with ZERO critical thinking applied – “It may not be good for America, but its damn good for CBS,” said Les Moonves of CBS on the rise of Der Furor in 2016. You just can’t get news any longer – you get pundits.
So yeah, the four most evil words in this country:
Fiduciary responsibility to shareholders.
Pitchforks
Look at what’s happened to newspapers. To be sure, physical newspapers are dying out no matter what. But the online cousins of the print editions still survive, but for who knows how long?
In Colorado the Rocky Mountain News is long gone. The Denver Post survives as a print edition, but with a massively reduced circulation. The online edition is hanging on. But this is in spite of the vulture capitalists who bought the Post and fired just about every good writer and reporter there. The vulture capitalists (VCs) have done this all over. They buy businesses, fire as many people as they can get away with, then bleed the asset dry until it collapses. Then they move on to the next victim.
Again, news is a special category vulnerable to these vampires, but it’s anything they can get their hands on. They care nothing about anything but money. To paraphrase Wilde, VCs know the price of everything and the value of nothing.
I think there’s much more to life than maximizing profits.
The people who don’t understand that are miserable…and want to make sure others are, as well.
Too much money in the hands of too few. And hired guns (“politicians”) to make sure it stays that way.
Shareholders have been driving this economy for decades. Products and workers producing the goods no longer matter. These “vulture capitalists” not only want to avoid taxes, they want to dominate markets as well. Bernie Sanders frequently states that the three wealthiest people in the world hold more resources than the bottom 50%. Greed is not good, it is an existential threat.
Insurrection…. bleed the masses for the benefit of the wealthy paying no taxes… “Let them eat cake…”
Any ideas what comes next?
Hopefully it won’t be like the last time. Do NOT want to bail them out again. “Too big to fail” would put me in the “once fooled/twice a fool” camp.