Capitalism Means Policing Big Companies

I wonder how important liability protection is in big companies being bad.

On the one hand I recognize there are some problems with abuse of the legal system. I can see why people would want to limit their liability risk / exposure in business and investing. And how unlimited liability would tend to make people with assets less willing to invest or start companies.

But in terms of principle, liability protection seems like an unwarranted special privilege people get for filling out the right government forms and engaging in a few simple rituals. Like, you fill out some forms and follow some rituals and then except in some pretty rare circumstances if your company kills 20 people or destroys the value of 20 lifetime earnings or whatever, you don’t have to use any of your other assets to help make up for that mistake.

Liability protection sounds important but:

Imagine Amazon got frequent enforcement actions until they went out of business or reformed. But the CEO and other executives were personally immune to enforcement and got golden parachutes. Repeat for most big companies. That’d be big progress. The executives would be unhappy and things would change.

Would the same people (or others) go start another bad company and get rich off it in bad ways before letting it die in a bunch of enforcements and lawsuits that they’re immune to? Could they repeat the same trick that worked for them with Amazon? No that wouldn’t be effective. Once enforcement mechanisms worked well, enforcement would happen much earlier in a company’s timeline. In other words, if enforcement was working in the past (just against companies not individuals), then Amazon never would have gotten so much wealth in the first place.

Maybe they could abuse the lack of personal liability to make a series of much smaller companies that do some abuses before enforcement catches on, but they wouldn’t get pre-enforcement results anything like Amazon, Uber or Airbnb.

Also, in a hypothetical good system without personal liability for company actions, enforcers could still take back any profits recently withdrawn from the company, including some things that are sometimes seen as salary, such as executive bonuses. The company, which is now bankrupt, didn’t really have profits for you to withdraw. Even without personal liability, you can’t defraud people, transfer the money to your personal bank account right before the police arrive, then keep it while the bankrupt company has unpaid debts. If the look-back period for reversing profit-withdrawals is longer (say 1 year) than the lag time for enforcement actions (say 1 month), then a series of fraudulent small companies won’t work either. All you’d be able to keep from them is a fair/normal salary. (You could attempt covert withdrawals of profit in many forms, e.g. by having your company overpay your friend for his products, or by paying your friend a regular rate for consulting work that he never does, or by buying from suppliers who send kickbacks to you personally. But that’s all subject to police potentially catching you.)

Good points. You convinced me better enforcement would be a big help even without changing liability protection.

Minor comment: I think enforcers already can & at least sometimes do “claw back” profits and fraudulent transfers when they do enforcement actions. Such claw backs aren’t near enough in cases like Theranos or crypto-scams to make the victims whole, but I don’t know how much more going after the other wealth (unrelated to the fraud companies) of the investors & managers would do. Maybe not much or maybe a lot.

Another example of bad actions by a large company:

Bed Bath and Beyond just sent me a marketing/spam email with no unsubscribe link. Previously I believe they sent me some with unsubscribe links and I did unsubscribe. I think the law (reasonably) says you have to include unsubscribe links, and this is an example of a big company initiating force. This stuff is poorly policed by the government. And it says something about their internal company culture that this could happen at all (what sort of decision making processes and safeguards against abuse do they have?).

On a related note, they didn’t used to sign you up for their email lists unless you opted in. They’d have a checkbox at account creation and default it to checked. Now they just start spamming you with no warning which is problematic. Normally they have unsubscribe links though. Sometimes those links require you to log in and look through some account settings, which is not OK. Unsubscribe links should work without signing in or looking through multiple settings, just by clicking a button or two.

On a related note, there’s something really wrong with these companies who send you automated email and won’t read your replies. They send from unmonitored email addresses and you can only contact them in other ways (e.g. a ticket system or web form, which often requires logging in first and then leads back to having an email exchange anyway, although now a lot of the best customer support is on social media instead which is its own brand of wtf – like I believe the best platform for getting YouTube support is currently Twitter).

The day after complaining about Bed Bath & Beyond sending me spam email with no unsubscribe link, I saw much worse. They’ve been involved in very serious fraud lately like lying to investors about their financials. The company is a mess (closing 150 stores) and their CFO just killed himself shortly after a lawsuit about the fraud was filed.

My purpose in this post is to check if I understood a particular aspect of this article correctly, and to relate it to another discussion here.


Now, I think basically every large corporation is awful – similarly bad to the government.

I read “awful” and “bad” in this sentence as in line with the concept of significantly flawed rather than with the concept of thoroughly evil. I think it could be read either way in isolation but in context of other parts of the article and other things Elliot has written I think my interpretation is OK.

To me at least, being significantly flawed implies big corporations and the government have big opportunities for improvement. Whereas being thoroughly evil implies we’d be better off if they just ceased to exist.

So I don’t think Elliot meant that, for example, the world with people as they are today would be a better place without every large corporation or without the government. Just that they all have room to be doing a lot better than they currently are.

I didn’t find anything I think is incompatible with this interpretation of “awful” and “bad” (significantly flawed rather than thoroughly evil) and did find this statement which I think is compatible:

Our government is already good enough to be compatible with a much better society and it has mechanisms to allow reform and progress.


I don’t think Elliot’s view of the world is dark and depressing.

Maybe people make the mistake of thinking it is because they don’t consider possible meanings of emotionally triggering words in sentences like the first one from the article I quoted. They have an emotional reaction to words like “awful” and “bad”, and just go with that emotion.

Needing to scrap every large corporation and the government and replace them in order for the world to get better would indeed be dark and depressing. It’s both really unlikely to actually happen and would result in tons of really bad stuff in the process if it did. If that’s what emotions tell you “awful” and “bad” imply and you don’t question that, then the article seems dark.

However, knowing that every large corporation and the government have significant flaws is helpful & offers at least the possibility that the flaws could be gradually improved without a hugely deadly and disruptive wholesale replacement. It’s not dark & depressing.

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Yeah of course. And to answer a comment received elsewhere: I don’t think bigness of companies is inherently bad. I just think there are systemic problems affecting huge companies today. (Including e.g. some small companies are left alone by the government, other huge companies, and other types of power, but no huge companies are left alone.)

The main thing I’d clarify is that I meant “awful” and “bad” primarily in a specific way: initiating force (primarily fraud). There are some other systemic issues with huge companies but they don’t merit policing.

Here are two ways my viewpoint could be considered dark:

  • It makes factual claims (about companies) which are more negative than many people believe.
  • It extrapolates from some negative facts/examples to make more general claims (about companies).

And I do this without taking the other side, like a Marxist, who thinks e.g. that the companies are the bad guys but the workers are the good guys. So, unlike a typical libertarian or Marxist, my view lacks any large group of good guys. It doesn’t offer a large tribe or in-group to praise and be happy with. Most people seem to want to have some bad guys (out-group, enemy tribe), but they also really want to have some good guys (in-group, their own tribe). I’d guess it’s lack of in-group that is seen as dark; just attacking some groups generally doesn’t bother people (unless you attack their tribe, and especially if you attack their tribe without offering a replacement tribe).

EDIT: Wanting an in-group may be responsible for why so many Objectivists are so pro-business or are friendly with libertarians, even though Atlas Shrugged says lots of businesses are really bad. They might even admit that many big companies today are more like Associated Steel than Rearden Steel but want to believe some famous individuals like Musk and Bezos are Galt’s Gulch material (a belief that IMO would stand up to very little scrutiny of those individuals) and try to find some kinda group, like Silicon Valley startups, that they can view as broadly good (whereas I recently suggested a lot of them are taking on legal risk, by initiating force, on behalf of their investors who want to keep cleaner hands – I guess the main libertarian defense would be there are so many laws you have no choice but to do that if you want to run a business, but I think they keep violating laws that would exist in minarchy not just bad laws). (lol the previous sentence is very long, but actually surprisingly readable for its length.)

lol, I think the only way Musk could be Galt’s Gulch material is if he was purposely pulling a Francisco

I think Matt Levine is right that Musk actually doesn’t know how mergers work.

Matt Levine has repeatedly brought up the idea that everything bad that happens at companies is securities fraud. And there are a lot of real lawsuits along these lines. Here it is again, yesterday, with many links:

Everything is securities fraud

You know the drill. A public company does a bad thing. When the bad thing becomes public, the company’s stock goes down. Shareholders sue the company for securities fraud. The lawsuits are always the same: “You told us in your public filings that you were not doing a bad thing, so we bought your stock. But you were lying, and when the world found out you were doing the bad thing, the stock went down and we lost money. We were defrauded out of our money by your lies.” Everything bad — polluting, sexual harassment, animal abuse, making a buggy video game, social media companies failing to safeguard user privacy, social media companies having a negative effect on society, lax information security practices leading to data breaches — can also be characterized as securities fraud, if a public company does it.

This is highly relevant to the idea of “only” prohibiting force, including fraud, and thinking that’s a tiny government. “Fraud” may be a really big category.

Is this contest fraud?

On the one hand, they try to present it as similar to the Netflix Prize, which was a real contest, with real rules, that paid out the full amount based on objective, measurable criteria. Basically they had software evaluate every entry, the highest score won, and everyone knew exactly what would get a higher score.

But it’s not like the Netflix prize. It’s not objective. They are going to pay attention to their friends, people with high social status, and people who are culturally similar to them. They judging is basically arbitrary and they will give money to whoever they feel like – or not – without explanation, transparency or accountability.

But they aren’t hiding that very well. They admitted it sort of openly in the contest rules. But they didn’t say it anything like my description. Their description will trick many people who think it’s much fairer, objective and unbiased than it is. Many people with essentially no chance will think they have a chance and do unpaid work. And they suppress dissent and calling them out for this on their forums while the forums lie that they are open to free speech – which is another element of potential fraud. People might think if there was a problem and anyone knew it, it would be criticized on their public forums, but that actually isn’t allowed (it’s allowed in limited ways by people with the right social status, right friends, or right culture fit, but not by e.g. me).

In summary, they present the contest as one thing, but actually admit it’s something quite different in the details and fine print section, but without directly and openly saying what it is.

So is the contest fraud or just a nasty, dirty, dishonest trick but if people are fooled that’s their own responsibility? How do you decide? What are the right criteria? To what extent may headlines be misleading if the fine print is less misleading?

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I think in terms of legal, moral / technical, and practical.

Legal - I’m not a lawyer but I’d guess the contest is not legally fraud. The details are in the rules and my guess is they’d pass legal muster as adequate disclosure.

Moral / technical - I think the contest meets the technical definition of fraud. They are trying to mislead people into working for them in ways they probably wouldn’t if the contest was openly described as you did.

Practical - I think a lot of ‘marketing’ meets the technical definition of fraud. People in our society are kinda used to this / expect it, although some people incorporate it into their decision making much better than others. I don’t think this contest is more fraudy than other marketing people are exposed to on a regular basis.

Because of that, short of a plan for a major reworking of society’s current tolerance of technical fraud (legally or culturally) I don’t think it’s practical to treat this contest as fraud.

Would it be fraud in an ideal capitalist/minarchist society with current social norms around communicating/marketing/lying? How should the law work in a better world?

PS The contest is funded with crypto money so there’s likely fraud involved there which is worse than what’s normal in our society. I think e.g. running ads for a crypto company is worse than running ads for Amazon or Kraft. Wanting people to stop accepting ad money from Johnson and Johnson seems impractical currently but wanting them to stop advertising crypto, today, seems like a reasonable position to me. (For example, one of the chess organizations I watch keeps doing crypto sponsorships and I think they shouldn’t.)

The premise of the contest seems to be that you persuade them non-interactively. You write an essay and that persuades them or not. That’s unreasonable. And they didn’t even bother writing several essays explaining their views that you’re supposed to try to change or making an FAQ.

The best arguments often involve multiple steps and have branching parts where it makes sense to interact with the people you’re trying to persuade. You can’t just predict everything they’ll think and perfectly guess which parts of your argument they will or won’t understand. You can’t figure out what parts to clarify and elaborate on, and what details to omit, just by making guesses about people who won’t have a conversation with you.

I don’t think they understand that authors always have to make tons of decisions what about to include and exclude, and they always have to leave out many things and leave in many ambiguities. Even with very strong cultural similarity, these things are very hard and often fail. See e.g. miscommunications between family members, co-workers, or anyone else you’d expect to be similar to each other.

Short answer: I don’t know.
Longer explanation: One reason I don’t know is I don’t think an ideal capitalist/minarchist society is actually compatible with current social norms around communicating/marketing/lying. I can only imagine a society with different norms & different laws (below).

If technical fraud was uncommon and unexpected then you could have laws with a ‘reasonable person’ standard that could be practically / economically enforced. Like determine by a jury: If a reasonable person reading the ad would think X and think you intended your ad to convey X, but the truth is Y and X vs Y is relevant to a reasonable person’s decision, then you have committed fraud.

I wasn’t aware of that. The main relevance I can think to the contest is that there’s more of a risk they won’t pay you because they lost all their money in crypto and can’t than there would be with a contest not funded by crypto.

Or do they actually intend to pay out exclusively in crypto? The page states prize figures in dollars, so if they’re not actually paying dollars but instead paying crypto that would change my assessment of whether it’s legally and practically fraud.

The FTX crypto exchange fell apart and is being sold (likely very cheaply) to a competitor (who was the proximate cause of the collapse, by noisily selling half a billion dollars of FTX’s crypto tokens).