News Information and Media Site: Byers Market Interview: Chamath Palihapitiya says billionaire bailouts betray capitalism

April 10, 2020

By DYLAN BYERS in Los Angeles &

AHIZA GARCÍA-HODGES in San Francisco

Good morning. 🗣️ Top talker: More than 16 million Americans have lost their jobs in the past three weeks, forcing a debate between White House health and economic officials over how soon to re-open the economy.

🥚 It's Good Friday. Markets are closed.

Join the Market: 🗞️ Newsletter | 🎙️ Podcast

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Market Interview

Chamath Palihapitiya: Billionaire bailouts are a betrayal of capitalism

Moving the Market: Venture capitalist Chamath Palihapitiya made waves on Wall Street yesterday when he told CNBC that the U.S. shouldn't bail out billionaires and hedge funds during the coronavirus pandemic. "We've disproportionately propped up poor-performing CEOs and boards," the billionaire investor said. "You have to wash these people out."

• The big picture: Palihapitiya's comments, which went viral, defy conventional wisdom about the government's role in propping up the American economy at a time of national crisis. They are also gaining appeal at a time when the pandemic has brought America's income inequality into sharp relief.

In an interview with Byers Market, Palihapitiya elaborated on his argument: Billionaire bailouts amount to a betrayal of capitalism, he told me. "It's not capitalism, it's socialism," he said. "You're giving a safety net to the rich, which is socialism, while demanding haphazard rugged individualism from the poor."

• Of the $10 trillion that the U.S. government is injecting into America's economic system, Palihapitiya says, just 3 percent is going into the pockets of American taxpayers. Roughly half of the remaining money is being used on corporate bailouts.

• This creates "a perverse incentive" for corporate leaders "to play fast and loose, knowing that the government will always be there to bail them out," Palihapitiya says. It also rewards bad leadership, "delinquent" boards and "zombie companies."

• "In capitalism, it should be all about pugilism, and the smarter, faster, better person should win," Palihapitiya said. "In social policy, the opposite philosophy should dominate. ... Instead what we've done is flipped that around and that's what's perverse."

What's next: Palihapitiya proposes that the U.S. government let failing businesses fall into pre-packaged bankruptcy. Pre-packaged bankruptcies preserve pensions, he says, and employees often end up owning more of the company while shareholders take the hit.

• Palihapitiya then proposes giving 50 percent of the new equity to the pension fund, 25 percent to the employees and 25 percent to the secured bondholders. "That is how capitalism should work," he says.

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New Leaders

The titans we're waiting for

Big in the Bay: Recode's Teddy Schleifer lists the 11 Silicon Valley and Seattle tech titans "who could make the biggest financial impact" in the fight against coronavirus "if they choose to do so."

• The big picture: These individuals "have the money, the corporate power, the political relationships, and the celebrity to shape the country's response to the pandemic."

The Eleven: Jack Dorsey, who has pledged $1 billion to coronavirus relief and other efforts ... Bill Gates, who has pledged $100 million and is the face of tech's response to the crisis ... Larry Ellison, who has "an unusually close relationship with the Trump administration."

• Plus: Marc Benioff ... Laurene Powell Jobs ... Larry Page and Sergey Brin ... Jeff Bezos ... Steve Ballmer ... Michael Dell ... Eric Schmidt ... and Dustin Moskovitz.

💸 How to Give It 💸

Jack Dorsey has given $2.1 million to the Mayor's Fund of Los Angeles to support programs for victims of domestic violence, which has increased during the outbreak.

With that gift, plus last week's $100,000 gift to America's Food Fund, Dorsey has now given just over 0.2% of the $1 billion.

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Bad times in Burbank

Bob Chapek starts furloughs

Talk of Tinseltown: Bob Chapek has started to furlough employees at Walt Disney Studios and other Disney divisions one week after announcing that the cost cutting measure was necessary to curb the economic toll of the coronavirus pandemic.

• Disney said last week that it would furlough employees whose "jobs aren't necessary at this time," but did not specify which divisions would be hit. Chapek has also cut salaries for executives.

The big picture: Nearly every aspect of Disney's business has been hurt by the coronavirus pandemic, from parks and cruises to film and TV production. Long seen as one of the most powerful entertainment companies in the world, the company is now at an effective standstill.

• One bright spot is Disney+, the company's new streaming service, which this week reported more than 50 million subscribers globally.

In a statement, Disney said "the COVID-19 pandemic is having a devastating impact on our world with untold suffering and loss, and has required all of us to make sacrifices."

Market Links

• Sundar Pichai rebrands Google Hangouts (Verge)

• Susan Wojcicki tightens up on COVID conspiracies (BBC)

• Terry Jimenez starts cuts at Tribune Publishing (Poynter)

• Jim Bankoff asks Vox readers for donations (WWD)

• Peter Naylor joins Snap from Hulu (Information)

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Knock Out

Dana White gets shut down

Talk of TV Land: Dana White, the president of Ultimate Fighting Championship, was forced to cancel his upcoming mixed-martial arts event at the request of Gov. Gavin Newsom and top execs at Disney and ESPN, NYT's Oskar Garcia and Kevin Draper report.

• The event, scheduled for April 18, was set to take place on Native American tribal land in California in an attempt "to get around stay-at-home orders that have been issued in nearly every state."

The big picture: There was no upside for Disney in being tied to an event that flouted the recommendations of public health officials. And as Garcia and Draper report, Disney has "extensive economic ties" to California and "substantial influence" over UFC via ESPN.

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Remotely funny

'Saturday Night Live' returns

Talk of 30 Rock: "Saturday Night Live" will be back this weekend in a surprise return from its coronavirus-induced hiatus, NBC said Thursday. The show will include remotely produced content from cast members at their respective homes.

• "'Saturday Night Live" will air original content on Saturday, April 11 at 11:30 p.m. ET on NBC," the network said. "Material will be produced remotely as 'SNL' practices social distancing."

The show will include a version of "Weekend Update" and other sketches from cast members, although it was not immediately clear whether the performances will be live. On Thursday, SNL tweeted a photo of the show's cast members on a video chat.

• SNL, like most major broadcast shows that feature guests and audiences, has been on hiatus since mid-March. The show has also had to deal with the death of a longtime producer, Hal Willner.

The big picture: Late-night shows have been trying to adapt to social distancing by using video-conferencing to conduct interviews and produce sketches. As NYT's Dave Itzkoff has noted, the results have been "charmingly unpolished."

NBC is owned by NBCUniversal, the parent company of NBC News.