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After the worst financial collapse since the Great Depression, three officials from the Financial Crisis Inquiry Commission visited Warren Buffett at his office in Omaha, Nebraska. They wanted to ask America\u2019s most successful investor about his 24 million shares in the credit-rating agency Moody\u2019s. The commission would later identify<\/a> Moody\u2019s and other rating agencies as \u201ckey enablers of the financial meltdown,\u201d for granting super-safe triple-A ratings to securities that were backed by junk mortgages. Trillions of dollars\u2019 worth of rotten financial instruments\u2014the fuel of the crisis\u2014\u201ccould not have been marketed and sold without [the rating agencies\u2019] seal of approval,\u201d the commission concluded.<\/p>\n\n\n\n During that May 26, 2010, meeting, Buffett deflected responsibility for Moody\u2019s actions. \u201cI knew nothing about the management of Moody\u2019s,\u201d he told the federal investigators, explaining candidly why he owned so much stock: Moody\u2019s faced practically no market competition.<\/p>\n\n\n\n \u201cThe single most important decision in evaluating a business is pricing power,\u201d Buffett said. \u201cIf you\u2019ve got the power to raise prices without losing business to a competitor, you\u2019ve got a very good business.\u201d The \u201cbig three\u201d rating agencies\u2014Moody\u2019s, Standard & Poor\u2019s, and Fitch\u2014controlled<\/a> 95 percent of the rating-agency market, an insurmountable advantage over would-be competitors. \u201cIf you\u2019ve got a good enough business, if you have a monopoly newspaper or if you have a network television station,\u201d Buffett concluded, \u201cyour idiot nephew could run it.\u201d<\/p>\n\n\n\n Warren Buffett is America\u2019s favorite tycoon. The business community hangs on his every word. The annual meetings at Berkshire Hathaway, Buffett\u2019s conglomerate, have been dubbed \u201cWoodstock for capitalists.\u201d Barack Obama and Hillary Clinton hailed his endorsements in their campaigns for president; even Bernie Sanders has supported Buffett\u2019s position on taxes. The press treats<\/a> him like a Kardashian, publishing quirky features about his bad eating habits, frugal spending, and hobnobbing with celebrities (an actual headline last November: \u201cKaty Perry Wants to Know What Warren Buffett Thinks of Bitcoin\u201d). An old cartoon show called Warren Buffett\u2019s Secret Millionaires Club<\/em> featured<\/a> the so-called \u201cOracle of Omaha\u201d teaching children how to get rich.<\/p>\n\n\n\n This Nation<\/em> investigation documents how Buffett\u2019s massive wealth has actually been built: on monopoly power and the unfair advantages it provides. Companies in Buffett\u2019s portfolio have extorted windfall profits, evaded US taxes, and abused customers. In the two specific cases discussed below, in the banking and high-tech industries, Buffett\u2019s investments have prompted federal investigations for anticompetitive or other illegal practices.<\/p>\n\n\n\n Buffett did not respond to repeated interview requests for this article, nor did he reply to questions submitted to his office at Berkshire Hathaway.<\/p>\n\n\n\n Buffett makes no secret of his fondness for monopoly. He repeatedly highlights the key to his personal fortune: finding businesses surrounded by a monopoly moat, keeping competitors at bay. \u201c[W]e think in terms of that moat and the ability to keep its width and its impossibility of being crossed,\u201d Buffett told the annual Berkshire Hathaway meeting in 2000. \u201cWe tell our managers we want the moat widened every year.\u201d<\/p>\n\n\n\n America isn\u2019t supposed to allow moats, much less reward them. Our economic system, we claim, is founded on free and fair competition. We have laws over a century old designed to break up concentrated industries, encouraging innovation and risk-taking. In other words, Buffett\u2019s investment strategy should not legally be available, to him or anyone else.<\/p>\n\n\n\n Over the past 40 years, however, the United States has not only failed to build bridges across monopoly moats; it has stocked those moats with alligators. Two-thirds of all US industries were<\/a> more concentrated in 2012 than in 1997, The Economist<\/em> has documented. Since the Reagan era, the federal government has abandoned antitrust enforcement, with markets for products like eyeglasses, toothpaste, beef, and beer whittled down to a few suppliers. This consolidation has vastly inflated<\/a> corporate profits, damaged workers and consumers, stunted economic growth, and supercharged economic inequality.<\/p>\n\n\n\n Buffett professes to be an innocent witness to this perversity, a passive investor observing markets from afar. He is feted as the conscience of American capitalism, a multibillionaire who speaks out<\/a> about taxing the rich (Democrats even named their tax-fairness plan the \u201cBuffett rule\u201d) and donates his fortune to charity. But Buffett\u2019s example has helped intensify US monopolization, as other investors mimic his approach of finding companies surrounded by moats. The ownership class has subsequently built up unwarrantedly large holdings, concentrating its investment in companies that further increase market power. In other words, Buffett isn\u2019t following America on the road to oligarchy; he\u2019s leading it.<\/p>\n\n\n\n Americans falsely look to these oligarchs to solve our problems, allowing them to amass more power. For example, the recent joint effort by Buffett\u2019s Berkshire Hathaway, Amazon, and JPMorgan Chase to transform<\/a> the US health-care system is vague and rather mundane\u2014most large companies try to drive down health-care costs by leveraging their size. But when three of the age\u2019s biggest monopolists follow the trend, it\u2019s uncritically treated as front-page news, sending health-care stocks plummeting. A stray press release from Buffett can move billions of dollars in his favor.<\/p>\n\n\n\n Bill Gates of Microsoft, Jeff Bezos of Amazon, and Warren Buffett control<\/a> more wealth than the 160 million poorest Americans combined. And Buffett doesn\u2019t mind working the system to keep it that way. His net worth as of January is $87 billion, but Buffett says he paid only $1.8 million in taxes in 2015\u2014a mere 0.002 percent of his wealth. According to Barclays, the new Republican tax law is projected to net his business a staggering $37 billion.<\/p>\n\n\n\n Warren Buffett should not be celebrated as an avatar of American capitalism; he should be decried as a prime example of its failure, a false prophet leading the nation toward more monopoly and inequality.<\/p>\n\n\n\n Y<\/strong>ou probably didn\u2019t realize that the same avuncular billionaire controls such diverse companies and products as See\u2019s Candies, Duracell batteries, Justin Boots, Benjamin Moore Paints, and World Book encyclopedias. But Buffett has transformed<\/a> Berkshire Hathaway, initially a relatively small textile manufacturer, into the world\u2019s largest non-technology company by market value. Berkshire Hathaway owns over 60 different brands outright. And through Berkshire, Buffett also invests in scores of public corporations. The conglomerate closed 2016 with over $620 billion in assets.<\/p>\n\n\n\n The money mainly comes from Berkshire\u2019s massive insurance business, composed of the auto insurer GEICO, the global underwriter General Reinsurance Corporation, and 10 other subsidiaries. Insurance premiums don\u2019t get immediately paid out in claims; while the cash sits, Buffett can invest it. This is known as \u201cfloat,\u201d and Berkshire Hathaway\u2019s float has ballooned from $39 million in 1970 to approximately $113 billion as of last September. It\u2019s a huge advantage over rival investors\u2014effectively the world\u2019s largest interest-free loan, helping to finance Buffett\u2019s pursuit of monopoly. \u201c[W]e enjoy the use of free money\u2014and, better yet, get paid for holding it,\u201d Buffett said<\/a> in his most recent investor letter. Indeed, as a 2017 Fortune<\/em> article noted, with almost $100 billion in cash at the end of that year\u2019s second fiscal quarter, Buffett\u2019s Berkshire Hathaway literally has more money than it knows what to do with.<\/p>\n\n\n\n The dominant narrative around Buffett is that he invests in big, blue-chip companies whose products he enjoys, like Coca-Cola or Heinz ketchup. But Buffett\u2019s taste for junk food cannot match his hunger for monopoly, and he scours the investment landscape to satisfy it. For example, he\u2019s a major investor in the most profitable company you\u2019ve never heard of\u2014one used by hundreds of millions of people worldwide, mostly without their knowledge.<\/p>\n\n\n\n The company is called Verisign, and it operates an essential backbone of the Internet: registries for the domain names .com and .net, among others. If you want to create, for example, MyWebsite.com, you buy the name from a retailer like GoDaddy. But Verisign controls the global registry for .com, so GoDaddy relies on Verisign to connect users to MyWebsite.com. Verisign collects a small fee for this service, usually less than $10 a year. But drawing that fee from an enormous pool of websites results in a massive revenue stream.<\/p>\n\n\n\n As of September 2017, two of Verisign\u2019s domain-name registries, the aforementioned .com and .net, accounted<\/a> for 145.8 million of the 330.7 million websites in existence, or nearly one in two. Take away the 144.7 million sites tied to a specific country (like .us, or .cn for China), and it\u2019s more like four out of five. Any company controlling 80 percent of a given market can safely be termed a monopoly, though a spokesperson for Verisign said in a statement that \u201cwe believe competition is thriving in the market.\u201d<\/p>\n\n\n\n The nonprofit Internet Corporation for Assigned Names and Numbers (ICANN), the registry industry\u2019s main regulator, granted Verisign exclusive contracts to operate .com and .net. Verisign can automatically renew the contracts as long as it meets certain performance metrics. The company was also initially permitted to raise prices gradually, despite the fact that the costs of managing a registry decline over time because the necessary infrastructure is already established.<\/p>\n\n\n\n \u201cIf you\u2019re giving a near monopoly in an industry where prices are falling, you would think that you would have terms in the contract to lower the price,\u201d said economist Dean Baker, a critic of government-granted monopolies. Instead, prices for .net domain names can rise 10 percent per year; they\u2019ve more than doubled since 2005, from $3.50 to $9.02 (Verisign\u2019s statement called this price \u201clower than most competing legacy [top-level domains]\u201d). Prices for .com domain names have also risen, though they are now frozen<\/a> at $7.85 per year, due to an amended contract executed in 2012. Competitors have offered to run registries at significantly cheaper rates, yet ICANN hasn\u2019t altered Verisign\u2019s contract terms.<\/p>\n\n\n\n Normally, companies with regulated prices aren\u2019t profit-making juggernauts. But in the third quarter of 2017, Verisign\u2019s operating income as a percentage of revenue hit 61.9 percent, putting<\/a> it near the top of all companies in the S&P 500. This number has climbed steadily since 2006. If the trend continues, sometime in the next decade Verisign will post the highest rate of profitability of any public company on earth.<\/p>\n\n\n\n That may explain why Buffett owns nearly 13 million shares of Verisign stock, worth $1.47 billion as of mid-January 2018. Buffett is famously averse to Internet stocks, but he does like a sure thing. So does the rest of the market: Verisign stock jumped nearly 44 percent in 2017. Buffett\u2019s seal of approval tends to boost fortunes on Wall Street, so more money flows into monopolies.<\/p>\n\n\n\n In 2016, ICANN arranged a blind auction to sell the rights to the .web domain name, seen as a promising competitor to .com. To the surprise of industry observers, an obscure company named Nu Dot Co outbid<\/a> six rivals for .web, offering a record-shattering $135 million. The mystery was clarified four days later, when Verisign issued<\/a> a brief press release announcing that it had provided all $135 million for Nu Dot Co\u2019s bid. Already in control of .com and .net, Verisign had wrested control of one of the only plausible alternatives. In its statement, Verisign said that \u201cWe intend to launch .web to bring choice and reliability to consumers world-wide.\u201d<\/p>\n\n\n\n Though there were signs of Nu Dot Co operating as a straw purchaser before the auction, ICANN refused to delay the proceedings. Competitors cried foul, arguing that they would have bid higher if they\u2019d known a deep-pocketed foe like Verisign was involved. \u201cICANN has a history of sweetheart deals with Verisign,\u201d said Jon Nevett, co-founder of Donuts, a competing registry that unsuccessfully sued ICANN to block the .web auction. (The case is now under<\/a> appeal.)<\/p>\n\n\n\n The Justice Department opened a yearlong investigation into the potential rigging of the .web auction, but in January, the department closed<\/a> the case. In a research note, JPMorgan Chase called Verisign\u2019s acquisition of the domain name \u201ca very good defensive strategic move, keeping .web out of the hands of the potential competitor.\u201d Verisign\u2019s monopolies remain well guarded\u2014and a continuing source of profits for Warren Buffett.<\/p>\n\n\n\n I<\/strong>n 2007, Buffett joked<\/a> in an investor letter: \u201cIf a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville [Wright] down\u2026. I have an 800 number that I can call if I get the urge to buy an airline stock,\u201d he added<\/a>. \u201d \u2018My name is Warren and I\u2019m an air-acholic,\u2019 and then they talk me down.\u201d<\/p>\n\n\n\n Nine years later, Buffett shook off his aversion to airlines. A 2016 stock-buying binge led<\/a> to Buffett holding approximately 47 million shares in American Airlines, 53 million in Delta, 48 million in Southwest, and 28 million in United, for a total investment of over $9 billion. One day in April 2017, Buffett made<\/a> $104 million on his airline holdings in a single trading session. The bet is not predicated on any one airline prospering: Buffett holds close to a 10 percent stake in all four major US carriers. (Investments controlling over 10 percent of company stock trigger various paperwork burdens and disclosures, and Buffett has said he likes to stay beneath that threshold.)<\/p>\n\n\n\n What changed between 2007 and 2016? With the blessing of federal regulators, the airline industry became an oligopoly. Four mega-mergers\u2014combining Delta and Northwest, United and Continental, Southwest and AirTran, and American and US Airways\u2014solidified major-carrier dominance in the United States. Today, four airlines control<\/a> 80 percent of domestic-seat capacity. In 93 of the top 100 airports, either one or two manage a majority of all seats sold.<\/p>\n\n\n\n Market concentration has resulted in higher profits for the airlines and for Buffett, but misery for the passengers: crowded planes, more connections, and a cascade of nickel-and-dime fees. Perversely, by making flying worse, airlines further loosen passengers\u2019 wallets, enticing those who can afford it to buy more legroom, or priority boarding to ensure that their bag gets in the overhead bin. Ancillary fees represented a little over 10 percent of the airlines\u2019 total revenue in 1995; today, it\u2019s more than 25 percent. The public wouldn\u2019t stand for such fleecing if they had a choice, but market consolidation forces customer acceptance.<\/p>\n\n\n\n And it\u2019s not just Buffett: Large index-fund providers like Vanguard and BlackRock have significant industry-wide airline holdings, a factor that may distort competition. \u201cIt\u2019s not crazy to think that the CEO of Delta has figured out that Buffett doesn\u2019t like it all that much for him to compete with United,\u201d says Martin Schmalz, an assistant professor at the University of Michigan\u2019s Ross School of Business. Schmalz, Jos\u00e9 Azar, and Isabel Tecu revised<\/a> a research paper last year showing that airfares on the average route are 3 to 7 percent higher under common ownership by large investors than they would be under separate ownership. \u201cThis is not collusion; it\u2019s not a crime,\u201d Schmalz adds. \u201cBut it\u2019s an antitrust problem that increases prices.\u201d<\/p>\n\n\n\n David Dao learned the harsh realities of monopoly air travel last April, after refusing to relinquish his seat to solve an overbooking problem on a United flight. Security agents violently dragged<\/a> Dao, a 69-year-old physician, down the aisle and out of the aircraft, breaking his nose and knocking out two teeth. The incident gave United a public-relations black eye\u2014video of Dao\u2019s ordeal was viewed over 9 million times, and United\u2019s CEO was hauled before Congress\u2014but it didn\u2019t damage the company\u2019s bottom line. The Department of Transportation declined to prosecute, United\u2019s stock price recovered after an initial dip, and seats remained filled to near capacity.<\/p>\n\n\n\n Throughout the controversy, Buffett stood by United. Assaulting Dao was a \u201cterrible mistake,\u201d he said to CNBC, but \u201cit wouldn\u2019t change the investment strategy.\u201d<\/p>\n\n\n\n B<\/strong>uffett has similarly defended Wells Fargo, his largest single investment, through one damaging scandal after another. In 2016, the bank was caught<\/a> signing up customers for around 3.5 million fake accounts. Since then, Wells Fargo has also been dinged for issuing clients unwanted insurance and home-warranty products, falsifying records to increase fees on mortgage applicants, overcharging foreign-exchange clients to ring up bonuses, initiating secret changes to mortgage terms for homeowners in bankruptcy, and repossessing the cars of service members while they were on active duty. The federal investigations and fines over this misconduct continue<\/a> to roll in.<\/p>\n\n\n\n Millions have been harmed by this mix of rank incompetence and outright fraud. But with the five biggest commercial banks\u2014Wells Fargo, Bank of America, Citigroup, JPMorgan Chase, and US Bancorp\u2014controlling<\/a> nearly half of all assets, as well as robust branch and ATM networks, it can be inconvenient or even impossible not to use their services.<\/p>\n\n\n\n Last August, Buffett called<\/a> Wells Fargo \u201ca terrific bank\u2026. There were some things that were done very wrong there, but they are being corrected.\u201d In October, he got tougher, blaming Wells Fargo\u2019s board of directors for failing to \u201cremove the stain\u201d on the business and musing about clawing back five years of compensation. But Buffett had supported the same board members for reelection just months earlier. It resembled his decision in 2014 to criticize<\/a> the board of Coca-Cola for excessive executive compensation, but to abstain from voting on the pay package. At the time, Buffett\u2019s son Howard sat on Coke\u2019s board.<\/p>\n\n\n\n In other words, while Buffett\u2019s wealth and the media attention he attracts enable him to create change inside the boardroom, he takes virtually no responsibility as a major shareholder for the companies he invests in. \u201cHe\u2019s following his wallet, not his conscience,\u201d says David Nelson, chief strategist at Belpointe Asset Management.<\/p>\n\n\n\n In fact, Buffett is completely enamored with the big banks whose actions sparked the Great Recession, despite a rap sheet as large as Wells Fargo\u2019s. Asked to name his favorite bank in a CNBC interview last October, Buffett replied: \u201cWhat\u2019s your favorite child?\u201d<\/p>\n\n\n\n As of last September, Buffett\u2019s financial-industry holdings approximate<\/a> an astonishing $66.9 billion\u2014more than 37 percent of his portfolio. He is Wells Fargo\u2019s largest shareholder, and he recently became the largest shareholder in Bank of America as well, the result of a post-financial-crisis deal allowing Buffett to convert an injection of capital into common stock. That conversion earned him $12 billion overnight. A similar crisis-era investment in Goldman Sachs spawned a $3 billion payday.<\/p>\n\n\n\n Buffett also holds major stakes in Bank of New York Mellon, US Bancorp, and M&T Bank. He has a hand in every major credit-card issuer: American Express, Visa, MasterCard, and Synchrony Financial, which provides private-label credit cards to retailers. While Buffett doesn\u2019t own stock in JPMorgan Chase, his top deputy Todd Combs sits<\/a> on the board, obviously aware of the activities of the leading competitor to his boss\u2019s banking investments.<\/p>\n\n\n\n You may think you have a choice of financial institutions, but when you pull out a piece of plastic to pay for anything, chances are you\u2019re enriching Warren Buffett.<\/p>\n\n\n\n I<\/strong>t would be one thing if Buffett were passive about investments he doesn\u2019t totally control but scrupulous regarding the businesses owned within Berkshire Hathaway\u2019s portfolio. But only 25 people work at Berkshire\u2019s headquarters, overseeing 63 companies and more than half a trillion dollars in assets. It\u2019s impossible for Buffett to be anything but an absentee owner, instructing portfolio managers to gain market share but ignorant of how they do it. And anyone who has watched Buffett operate over the past 40 years knows his preferred path to wealth: through monopoly.<\/p>\n\n\n\n Among his first investments were newspapers, including the 1977 purchase of the Buffalo Evening News<\/em>. Buffett immediately targeted the News<\/em>\u2019s rival, the Courier-Express<\/em>, by launching a Sunday edition. By 1982, the Courier-Express<\/em> was out<\/a> of business, and Buffett\u2019s local monopoly became his largest single investment. Even today, despite the Internet, Buffett owns 31 daily newspapers, most of them local monopolies.<\/p>\n\n\n\n A more brutal example involves Berkshire Hathaway subsidiaries Clayton Homes, the nation\u2019s largest mobile-home builder, and Vanderbilt Mortgage, its companion lender. A series of journalistic investigations in 2015 found<\/a> that<\/a> the companies targeted minorities with high-pressure sales tactics, issuing loans swollen with hidden fees. African-American, Native American, and Latino borrowers received higher interest rates, even if their fellow white borrowers earned less. When the loans failed, Clayton repossessed and resold the homes, earning more fees each time. The Consumer Financial Protection Bureau\u2019s complaint databases are littered with hundreds of comments about Clayton and Vanderbilt. \u201cThis type of behavior by any lender is despicable and absolutely intolerable,\u201d wrote one complainant.<\/p>\n\n\n\n Buffett has publicly defended<\/a> the businesses, which earned $744 million in 2016. He even tried to attack the credibility of a critical reporter, because the reporter\u2019s sister worked at a law firm that sued Clayton. In 2017, Buffett vowed<\/a> that Clayton Homes would grow, despite admitting that it foreclosed on one out of every 40 properties the previous year\u2014over three times the national average.<\/p>\n\n\n\n Last December, the House of Representatives passed<\/a> a bill to further deregulate the manufactured-home industry, eliminating consumer protections and disclosure requirements under statutes like the Truth in Lending Act. If the bill becomes law, Clayton Homes salespeople could legally steer borrowers to high-cost loans, which traditional mortgage brokers are barred from doing. As Maxine Waters, ranking Democrat on the House Financial Services Committee, said on the House floor, \u201cThis bill makes it easier for financial titans like billionaire Warren Buffett to earn even more profits, at the expense of some of the most vulnerable consumers in this country.\u201d<\/p>\n\n\n\n The disparity between Buffett\u2019s words and actions is an enduring feature. His main entry into the political arena involves a plea for tax fairness, to \u201cstop coddling the super-rich.\u201d But Buffett\u2019s third most valuable stock holding (after Wells Fargo and Kraft Heinz) is a $22.8 billion investment in Apple, perhaps America\u2019s most notorious corporate-tax evader, famous for stashing<\/a> profits in offshore tax havens.<\/p>\n\n\n\n Buffett takes full advantage of tax loopholes. He uses Berkshire Hathaway, a valuable tax shelter, for his investments. The Republican tax bill will save<\/a> Berkshire an estimated $37 billion, because the firm habitually defers its tax liabilities, which will now be paid off at a much lower rate. Even the infamous \u201dprivate-jet tax break\u201d in the bill is really an extrajudicial attempt to settle<\/a> a dispute between the IRS and NetJets, a private-plane company wholly owned by Berkshire Hathaway.<\/p>\n\n\n\n \u201cI think idolizing Buffett is unhealthy,\u201d says Robin Harding, Tokyo bureau chief for the Financial Times<\/em>, who offered a rare note of criticism of the billionaire investor in the business press last September. \u201cWe should lionize entrepreneurs\u2026who take bold risks by investing to make our lives better,\u201d Harding adds. \u201cBuffett\u2019s whole method\u2026is to minimize risk by building moats while investing to buy a greater share of what already exists.\u201d<\/p>\n\n\n\n Former Supreme Court Justice Louis Brandeis called businesses like Buffett\u2019s, which use other people\u2019s money to create personal fortunes, the \u201cMoney Trust.\u201d These financier middlemen \u201cbestride as masters of America\u2019s business world, so that practically no large enterprise can be undertaken successfully without their participation or approval,\u201d Brandeis wrote<\/a>. Buffett routinely takes advantage of opportunities unavailable to ordinary investors: The mega-<\/p>\n\n\n\n bank Goldman Sachs created<\/a> an internal \u201cbrain trust\u201d solely to pitch deals to people like Buffett. \u201cThe kind of trades he does today no one else can do\u2014you gotta be that big,\u201d explains David Nelson of Belpointe Asset Management.<\/p>\n\n\n\n Buffett\u2019s fortune reflects a change in whom modern capitalism serves. Former labor secretary Robert Reich, whose latest book, Saving Capitalism<\/em>, was recently adapted into a Netflix documentary, explained that the wealth generated through corporations used to be shared somewhat more with workers, communities, and the broader economy in what he termed \u201cstakeholder capitalism.\u201d \u201cThat changed in the 1980s, when the corporate raiders insisted that CEOs only focus on maximizing shareholder returns,\u201d Reich says. \u201cEven if companies wanted to be sustainable, they\u2019re not able to under the current system.\u201d<\/p>\n\n\n\n Amazingly, Buffett has spearheaded an effort to promote<\/a> \u201ccommonsense corporate governance principles,\u201d joining the CEOs of America\u2019s largest corporations, from General Motors to JPMorgan Chase. The group\u2019s manifesto states that \u201c[o]ur financial markets have become too obsessed with quarterly earnings forecasts,\u201d recommending that institutional investors make informed decisions about the direction of the companies they hold. But this is precisely what Buffett never does; he openly ignores management performance in favor of finding businesses with moats. This has become his perfect excuse: Buffett evades responsibility for abuses of market power, preserving his pristine reputation by passing the buck.<\/p>\n\n\n\n Nor does Buffett acknowledge his role in driving further monopolization. The investment-research firm Morningstar has created<\/a> the \u201ceconomic moat\u201d index to track the 20 companies with the highest walls around their businesses. The money-management firm VanEck sells an exchange-traded fund based on that index called \u201cMOAT.\u201d Companies like Valeant Pharmaceuticals scoop up lifesaving drugs that nobody else makes and jack up the prices; it\u2019s the moat strategy taken to its logical extreme. \u201cWe\u2019re seeing this almost spontaneous decision across whole industries that they\u2019re going to milk existing market positions rather than compete aggressively,\u201d Harding says.<\/p>\n\n\n\n What\u2019s the answer? First off, aggressive antitrust enforcement. \u201cWhat the framers of the antitrust laws\u2026were concerned about is unreasonable market power that gives companies the chance to engage in predatory behavior of consumers and political power,\u201d Reich says. Companies like Verisign, which exploit their monopolies, should face greater scrutiny. Dominant players in industries like airlines and banks should be downsized. Sprawling investors like Buffett also present concerns. \u201cIf we didn\u2019t allow Buffett to own substantial stakes in all air carriers, the problem would be significantly reduced,\u201d says the University of Michigan\u2019s Martin Schmalz.<\/p>\n\n\n\n We must also consider disproportionate capital concentration. The top 1 percent owns a significant portion of all wealth, and it increasingly makes money just from having money. Globally, 82 percent of the wealth generated in 2017 flowed to that top 1 percent, according to Oxfam. Through dividends, interest payments, and rising investments\u2014Buffett-style passive ownership\u2014the holders of capital capture about 30 percent of national income,according to research by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman<\/a>. \u201cIf you\u2019re well diversified and you just chill out, you will make a lot of money without doing much for it,\u201d says Matt Bruenig, founder of the People\u2019s Policy Project.<\/p>\n\n\n\n Bruenig has proposed a wealth tax, with the revenue directed into a stock-accumulating sovereign-wealth fund. Citizens could receive a direct dividend from the gains, the way Alaskans receive<\/a> a check from the state\u2019s Permanent Fund. Instead of someone like Buffett hoarding wealth to extract income, we would all benefit in service to a fairer society. And as with Norway\u2019s wealth fund, the government could involve itself more directly in corporate governance, as a countervailing force to shareholder tyranny.<\/p>\n\n\n\n Getting serious about taming monopolies also means ceasing the endless praise of Warren Buffett. Leading Democrats and the press have given him a pass for decades. But the path to solving America\u2019s inequality crisis goes through Omaha and the cuddly billionaire whose love of monopoly is contributing to national desperation. \u201cHe\u2019s a really good investor,\u201d David Nelson says of Buffett. \u201cI\u2019m not sure he\u2019s much of an example on anything else.\u201d<\/p>\n\n\n\n Excerpted from<\/em> https:\/\/www.thenation.com\/article\/special-investigation-the-dirty-secret-behind-warren-buffetts-billions\/<\/em><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"