Thiel vs. Gawker: Liberalism, Coöpted
The news that Peter Thiel, the PayPal co-founder and venture capitalist, has been funding a series of lawsuits against Gawker Media prompted an outpouring of reflections on media ethics and censorship this week. Wealthy people suing media organizations is nothing new, of course, but Thiel’s story is different in that, rather than suing Gawker himself, he has been bankrolling a slate of plaintiffs. The strategy is the culmination of two profoundly important developments: the explosion in wealth at the top of the income spectrum, and the rise of third-party-funded litigation.
The wealth boom speaks for itself. Thiel is worth more than two billion dollars, which allows him to fund lawsuits with little concern for the financial fallout. But he is also able to do so because the practice of paying for other people’s lawsuits, which was once banned by common law, has become generally accepted practice. There are two forms of third-party funding: maintenance and champerty. In the Supreme Court’s definition, “Maintenance is helping another prosecute a suit; champerty is maintaining a suit in return for a financial interest in the outcome.” Common law frowned on these practices, as a Minnesota State Supreme Court decision had it, in order to prevent “officious intermeddlers from stirring up strife and contention by vexatious and speculative litigation.” But over the course of the twentieth century, litigation came to be seen as an essential tool for correcting ills and enforcing the law leading to the elimination, in most cases, of the proscriptions against champerty and maintenance.
Today, there’s a litigation-finance industry, in which firms like Burford Capital fund plaintiffs’ lawsuits (usually against deep-pocketed corporate defendants) in exchange for a major cut of the proceeds. More familiar are public-interest lawsuits, in which nonprofit organizations help individual defendants file suit. These types of suits have been common for decades; a 1963 Supreme Court decision involving a case backed by the N.A.A.C.P. gave these types of suits their imprimatur. Thiel describes himself as engaged, essentially, in this kind of public-interest litigation. He told the Times that he considered his funding of Hulk Hogan’s lawsuit against Gawker Media “one of my greater philanthropic things that I’ve done,” and said that he doesn’t expect to make money from the case.
There’s an intuitive difference between a nonprofit helping children desegregate a school system and a Silicon Valley billionaire working to put a media company out of business, but in structural terms it’s hard to draw a meaningful distinction between the two. And there’s no obvious legal argument that will stop Thiel-style campaigns while also preserving the ability of ordinary litigants to get redress when they believe that their rights have been violated. Nor, given Thiel’s wealth, is there any obvious financial check on him, or the thousands of other enormously rich Americans who could do the same thing. Thiel describes himself as a libertarian, but he has turned one of modern liberalism’s most important tools to his own ends. And there isn’t really anything anyone can do about it.
The T.S.A.: The Line Not Travelled
There were two big pieces of news about the perpetually embattled Transportation Security Administration this week. The one that drew the most attention was the dismissal of its security chief, Kelly Hoggan, who oversaw a series of screening mishaps and reportedly received secret performance bonuses even though he wasn’t performing all that well. The more interesting news, though, came on Tuesday, when airline officials at O’Hare International Airport, in Chicago, said that security-line waits there—which had reached an absurd two to three hours last week—had been cut down to as few as fifteen minutes.
The reason for this improvement was simple: the T.S.A. bumped a hundred employees from part-time to full-time status, added extra staff, and brought in new canine units to sniff passengers for explosives. The airlines also brought in additional people to work the lines, reminding people to take out their laptops and so on. The T.S.A. said that it will be adding another three hundred people at O’Hare in the coming months.
Unfortunately, this success doesn’t mean that our long queueing nightmare is over—O’Hare is just one airport, and the summer travel season lies ahead. But the improvements were a useful reminder that this problem is relatively easy to solve. The T.S.A. is understaffed given the security procedures that it has to carry out: the agency is processing ten per cent more passengers than it was in 2011, but its staff has been cut by fifty-eight hundred people. So we have to choose: change the procedures or add more staff (or, ideally, do both).
Either solution would probably work, but security concerns have made attempts to change practices, even those that are essentially just security theatre, politically unfeasible.
But there is no good reason not to hire more people, other than congressional tightfistedness. The ritual is familiar and tired: Congress underfunds government services, then complains that government can’t do anything right. (Some Republicans in Congress are even calling for the privatization of the T.S.A.) And in this case, that tightfistedness is especially misplaced, since the broader cost of the time passengers are spending in line dwarfs the cost of hiring more screeners. Congress may think it’s saving money, but passengers are paying the price.
The Uber-Toyota Pact: Disruption Defense
One of business journalists’ favorite tales is the one about the established company too hubristic and set in its ways to recognize the changes about to engulf it. Think Kodak flubbing the transition to digital cameras, or Blockbuster ignoring the threat posed by Netflix. Having heard these stories, the world’s biggest auto companies appear increasingly desperate to make sure they don’t become cautionary tales, too. This is apparent in the industry’s belated but significant investments in electric-car technology that can compete with Tesla’s, as well as in the partnerships that car companies have lately been signing with ride-sharing firms. This week, Toyota and Uber signed one of these deals, as did Volkswagen and Gett, an Israeli ride-sharing company that is popular in Europe. (G.M. has also made a similar pact with Lyft.)
In dollar terms, the deals aren’t huge, but they reveal a concern among car companies that the old paradigm, in which every household owned at least one car, might be disappearing, thanks to urbanization and other demographic changes, technological advances, and, perhaps, a secular shift in consumer attitudes toward the car. (Millennials, famously, seem less interested in car ownership than their parents were.) The partnerships allow car companies to hedge against the risks posed by that future. For one, since these deals are typically direct investments, car makers will reap some of the economic benefits if and when companies like Uber and Lyft go public. Ride-sharing services can also help to expand auto sales: the Toyota-Uber deal, for instance, will make it easier for Uber drivers to finance purchases of Toyota cars. And just as significantly, the car companies now have a voice in shaping the future of ride-sharing services, particularly with regard to coming developments like driverless cars.
What’s most interesting about these deals, though, is that car companies are making these investments even though ride-sharing doesn’t appear to be bringing about a decline in car ownership. In fact, car sales in the U.S. hit an all-time high last year. This suggests that car manufacturers are doing something that companies supposedly never do: think about the long term in the face of encroaching innovation.
Money Studies: Millionaires Unmoved
A familiar argument for low state income taxes holds that, if rates are too high, wealthy people will simply move. The fundamental assumption behind this argument is that rich people are able to pick up and go when conditions no longer suit them. But a new study, lead-authored by Cristobal Young, a sociology professor at Stanford University, finds that this image is largely a myth. The authors looked at every tax return filed by millionaires between 1999 and 2011 (some 3.7 million unique filers), and found that only 2.4 per cent of millionaires move in a given year, a lower rate than that of the general population. The study also found no evidence that millionaires are less likely to live in states with high income taxes.
In one respect, the study’s conclusions confirm what we already know—California and New York have no shortage of wealthy people, or of investment. But the study also shows that, even in the digital age, location matters. The authors point out that family commitments, such as school-age children, make it hard even for rich people to move. But it’s also, implicitly, because most organizations still require people to work at an office. Twenty years ago, many people believed that the Internet would eventually allow people to work from anywhere, but for the vast majority of Americans, including rich ones, that remains an idle fantasy.
What’s More
Why infrastructure investment has become such a mess in the U.S.
A UNESCO report looks at how climate change will affect iconic tourist sites.
Donald Trump’s energy policy doesn’t factor in climate change, calling for more fossil-fuel use.
I.M.F. economists issue a semi-mea culpa for the excesses of neoliberalism.
Is the U.S. economy really near full employment?
* This post was amended to correct the description of Burford Capital.
