My Thoughts On: How the Internet is Getting Worse, and the Rich Stay Rich

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I’m also looking for someone to help make a fun logo. Anyways, onto today’s thoughts.

On How Big Tech is Making the Internet Worse

On Thursday, Meta, the parent company of social media sites like Facebook and Instagram released a new social media platform called Threads: a direct competitor to Twitter in just about every facet. As of writing this on my train back to Maryland, Threads has 90 million new users.

If you’ve been using Twitter in any capacity, you may have noticed last week that they instituted a temporary policy on the number of tweets you can view a day. Non-subscription (or non-verified) users could only view 600 tweets a day, while verified users could only view 2,500 tweets a day. Hit that 600 views? Straight to Twitter jail.

For the last decade +, these big name, Big Tech run social media platforms have been in high-growth mode at all costs. Everything they’ve done has been aimed at driving user growth and user engagement. They did this by providing their service for free, allowing just about anyone and everyone (seriously, The Taliban were being verified on Twitter) to create a profile, share content, message their friends, plan a coup, etcetera etcetera. But for big publicly traded companies, free isn’t exactly an optimal long term business strategy. Eventually, you gotta turn a profit to please investors and keep the lights on.

Over the past year all of these big platforms collectively decided enough was enough. Time to monetize the user base. And if you’ve been watching, it’s been making the internet noticeably awful:

Besides Twitter:

• Reddit, as it gears up for an IPO, recently started charging for the use of its API, which effectively kills any third party apps and makes moderation of the site much more difficult.

• Instagram and Facebook continue to force feed as many ads as possible to users as they scroll.

• Attempting to Google anything nowadays results in 5-10 sponsored ads above anything relevant.

While not social media platforms, these companies are likewise attempting to finally make a profit.

• Netflix has begun throttling password sharing, requiring users to be in the same physical “household” or else necessitating families buy multiple subscriptions.

• Even the average cost of an Uber ride rose 92% between 2018 and 2021 after years of Uber being an affordable alternative ride option.

Tik Tok, which I’ve luckily never downloaded, will hit that hump sooner rather than later too. My prediction? This is going to get quite cyclical. Social media platforms are going to continue to grow fast, try and monetize, and inevitably lose user support each decade. As each one fails, new ones, like Threads will arrive just in time to suck up to all the angry users. But I think they are all doomed to the same fate. Big Tech will always view the internet as unsold billboard space, and a lucrative source of data to sell rather than the creative space we’ve seen it be.

So now here we are, entering a stage of the internet where creative content and ideas that were once quite shareable, entertaining, and informative, are beginning to be siloed into whatever subscription-based platform they originated on. The internet used to be the coolest street on Halloween. Magnificent decorations and king sized candy bars available at every house. Now the lights are being turned off, and it’s getting weirdly quiet out there. Maybe that’s why I’m writing this.

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On How the Rich Stay Rich

One of the arguments I often hear parroted about taxing the rich more is that “well, their wealth isn’t actually real, it’s just mostly unrealized stock value”. And that’s technically correct. A lot of a billionaire’s net worth can be attributed to the unrealized value of their asset holdings. Unrealized, meaning that it’s not actual liquid money they can use unless they sell the asset; making it a “real” gain.

But there’s a loophole here, and quite a big one, and it allows those with excessive amounts of wealth to maintain that wealth while reducing their tax burden. And it’s a demonstrable example of how completely different money for people worth billions works compared to the rest of us. Because the truth is, those with very high net worth’s aren’t living off a salaried taxable income, nay, they are actually living off of a lot of debt.

It’s a concept called “Buy, Borrow, Die”, and it’s used by the rich to avoid paying taxes while increasing familial wealth for future generations. And it’s hurting the rest of us.

Here’s how it works. You have a bunch of money; maybe millions, maybe billions. You use that money to buy a huge amount of an appreciating asset (stock, real estate, etc.). Rather than selling that asset and being taxed on the realized value it now has, you instead take out a loan against the value of your unrealized asset. Still following? Basically, as long as your assets are appreciating in value at a rate greater than the loan interest rate, you come out ahead.

This Wall Street Journal article (from 2021) mentions how Merrill Lynch had “quoted an interest rate of 3.2% to clients with at least $1 million in assets” while those with greater than $100 million in assets “can get a rate as low as 0.87%”. The wealthier you are, the sweeter the deal from the bank.

So you have a bunch of large, low interest loans. At this point you may be thinking, “why would I want to create all this debt for myself that I will eventually have to pay off?” Here’s the fun part: you don’t pay it off. Instead, you live a long and easy life, subsisting off loans taken out against your enormous assets with very favorable interest rates.

Then you die.

You just die. And by some mathematical wizardry conducted by your expert accountant, leveraging tools like philanthropies and trusts, your offspring end up inheriting a much smaller portion of that debt, which they can easily pay off with a chunk of the ever growing value of your family’s assets. And because your pile of money just keeps growing, you are able to comfortably lobby the government to cut back on things like estate taxes, so the number of taxable events you run into remains small. Thus, your family remains rich and the cycle continues generation to generation, the wealth compounding on itself over and over and over again.

Here is a somewhat related real-world example in action:

In 2022 Elon Musk bought Twitter for $44 billion dollars. A chunk of that was financed by debt that Twitter now has to pay, but before he sold his Tesla shares for the rest of his purchase, Musk considered taking out a large loan of $14 BILLION dollars against the value of those Tesla shares. While he ultimately employed different strategies to complete the purchase, his initial strategy is a high-profile example of how an extraordinarily wealthy individual can quickly make billions of dollars appear like ~ magic ~.

To me, this is where the argument I mentioned at the beginning falls apart: how can one argue that a billionaire like Musk’s net worth is actually not real “because its, well, just unrealized stock value” then watch that same billionaire turn this “imaginary” value into very real and very useable money, all while reducing his tax burden?

I think everyone reading would agree paying taxes sucks, but it's also the process in which we collectively invest in our shared society. By allowing these tax avoidance mechanisms to exist, we effectively bleed the rest of the country dry by handing the bill to the middle class of Americans. A middle class whose share of economic wealth continues to be outpaced by the top 1%. As of 2023, the top 1% own more wealth than the entire middle 60% of Americans. That’s not sustainable.

So wealth inequality continues to soar, and I strongly believe a major contributor to this issue are tax avoidance mechanisms like “Buy, Borrow, Die” that only exist for individuals with incredibly high net worth’s. Wealth (in the form of housing, business ownership, fine art, etc) continues to be hoarded by a tiny fraction of the population, while the rest of us cover the costs to keep the country running.

I’ll close with this: In researching this topic, I came across a guide on how to properly use the Buy, Borrow, Die strategy. Here is my favorite line: “The main flaw with buy, borrow, die is that it requires a certain amount of money to take advantage of this approach”. Don’t have millions laying around to try this strategy yourself? Guess you better stick to mutual funds like the rest of us.

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A Closing Note

As a heads up, I’ll likely be writing quite a bit about wealth inequality. I see it as one of the most pressing crises we face as a society today. The hoarding of wealth by a tiny fraction of the population hurts all of us. It’s a crisis that cuts across political beliefs, cultural and ethnic backgrounds, and geographies. I truly believe many of the issues we face today are downstream effects of that wealth hoarding, and more specifically, the attempts by these ultra-rich individuals to maintain their wealth, power, and influence.

But don’t just take my word for it. If you really want to see the extent of this issue visualized, take a look at this scale and scroll right. Spoiler alert: you’re going to be scrolling for quite awhile.

See you next week,

Michael