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A naïve business school student, presented with the behavior of the company Meta over the last ten years, would have an obvious question: Why on earth did the company waste tens of billions of dollars on this “metaverse” nonsense? It flushed something like $80 billion down the toilet building something that looked worse than the video game Second Life in 2006.
The answer to this question, of course, is that Mark Zuckerberg has a death grip on the company, and he convinced himself that the metaverse was the Next Big Thing. Thanks to Meta’s dual-class structure, which grants Zuckerberg’s shares ten times more voting power than any others, he cannot be outvoted even if one person bought up all the other shares. He has just 14 percent of total shares, but 61 percent of the voting power.
These dual-class structures are very popular for tech companies these days. Snap, DoorDash, and Alphabet have them, as well as SpaceX, of course. Elon Musk controls 85 percent of the votes in that one. It’s a safe bet that should Anthropic and OpenAI go public as planned—if they can do so before their AI bots turn the entire galaxy into gray goo—their megalomaniac founders will also have dual-class death grips.
This kind of fake-public company should not exist. Every public share should be valued the same. Dual-class shares should be banned outright, or even better, heavily taxed in proportion to their control over the company. If founders want to keep their companies as an unaccountable dictatorship, they can remain private.
The reason founders like Zuckerberg set up a dual-class structure is that they want all the benefits of being publicly traded with none of the drawbacks for them personally. Being publicly listed comes with enormous benefits: Presence on a trusted and (at least theoretically) well-regulated market open to investors around the world unlocks trillions in potential investment. In the case of Meta, that has meant tens of millions of index fund investors and retirement savers pouring their savings into Meta stock, which has increased almost twentyfold since its IPO. Anthropic and OpenAI have no problem attracting investment, but going public allows them to cash in on it.
Related: Big Tech crashes headlong into American democracy
Going public used to mean surrendering some power and playing by the rules. The company would be owned in a real sense by “the public”—really a minority of rich people, but still a very different situation than a single person holding total power. The company founder might end up as the first CEO, but if he drove the company into a ditch, wasted billions on some madcap scheme, or proved unable to keep pace with changing markets, shareholders could throw him out and get someone better.
This has happened hundreds of times in the history of public markets—indeed, half the point of a public stock market is to provide a sharp incentive for companies to be managed in an honest and professional manner, so that investors can trust their money will be treated well. It’s one of the foundation stones of the capitalist growth model.
Dual-class shares make a hash of all this. Now we have publicly traded “shares” that in many cases represent no meaningful ownership stake whatsoever. It’s arguably inaccurate to call them shares at all, as nothing is being shared. All that one receives is a dividend—Meta did not issue any of those until 2024, incidentally—and an object associated with the company whose price might theoretically go up.
There are two big reasons why modern shareholders do not generally complain about dual-class shares. The first is that they are just speculating and not interested in trying to manage the company. Second, and relatedly, is the cult of the founder. For the last quarter-century, investors have been hypnotized by tech company hypergeniuses like Steve Jobs whose companies surely cannot succeed without their visionary leadership—which is one reason why Silicon Valley oligarchs are so rich. Some guy in a turtleneck or hoodie sets up a business as his personal dictatorship, and a sort of investor cult grows up around him for that exact reason. Dorks on Reddit put their money into Tesla and SpaceX precisely because it’s Elon Musk’s personal plaything, and Wall Street learns that you “don’t bet against Elon.” The job of the investor becomes to plonk their money down and not think too hard about whether a 100-to-1 price-to-earnings ratio makes any economic sense whatsoever, and sure enough, the number goes up.
I think the economy would benefit on net if these guys could be thrown out when, for instance, they make a catastrophically stupid business decision and set $80 billion on fire. But more importantly, it would go some distance toward deflating this cult of the founder. If nobody can set up a dual-class dictatorship, then it is impossible to create that authoritarian mystique. Silicon Valley centibillionaires would be exposed as what they are: businessmen, largely well past their prime, with a marked adultery habit, who are right about some things and wrong about others—just like anyone else.
It would be quite straightforward to get rid of dual-class shares. They could be banned outright by Congress with a new law; or arguably the SEC or IRS already has the power to ban them through regulations. Currently, they are not legal to create in extant companies; they have to be present from the start.
Better still, Congress could impose new taxes on the percentage of corporate control. Dividend and capital gains taxes could be levied in proportion to voting rights, or dual-class shares could be taxed directly. For instance, California’s Proposition 40, the billionaire wealth tax on the ballot this fall, seemingly applies to the portion of voting control. If that holds, and Mark Zuckerberg were living in the state, he would have to pay not $12.5 billion (5 percent of his market wealth of $250 billion), but $57 billion (5 percent of 61 percent of Meta’s entire market capitalization). Doesn’t that thought put a smile on your face? The fact that billionaires could escape by moving to another state is why this should be done nationally.
Now, all this is not to say that shareholder capitalism is fine and dandy. Whether it was corporate raiders in the 1980s, or private equity today, financiers doing hostile takeovers and looting thriving companies to death is far from ideal. The idea that Anthropic and OpenAI can cash in at all in public markets, given that their companies are stealing everything in creation in the service of flirting with destroying humanity, is absurd.
But this is just another aspect of America’s poor regulatory structure. The fact that it’s potentially profitable to buy up a functioning company and bleed it dry means something has gone very wrong. We are crying out for a thorough overhaul of our entire financial system. And there are few ways to make that easier than by taking the Silicon Valley oligarch class down a peg or three.
