Mainstream vs Underground
The lines between the two get more blurred everyday. People who work in legal industries like to consider themselves “morally superior” to those that work in illegal industries. It extends to how the mainstream news loves to portray blue collar crimes as the worst types of crimes. But, in all reality, crime happens in our day to day lives and it’s hidden in plain sight. Today, we’ll be explaining how financial firms and drug cartels aren’t all that different.
So, what’s the difference between a Private Equity fund and a drug cartel?
Truthfully, not much.
Both institutions have a hierarchy and they work in markets that rely on supply and demand.
Let’s first take a look at how these organizations are structured from a high level.
|Dug Cartel||Private Equity Fund|
|King Pin (Head of the Cartel)||Chief Executive Officer/ Originator|
1. The King Pin and CEO/originator are roles that are both similar because they are the leaders that create the strategy and work on expanding the business.
2. Lieutenants and Vice Presidents are the equivalent of middle management and carry out the vision of the leader.
3. Hitman and HR are all about poaching talent and making sure their organization stays on top.
4.Falcons and Analysts are both people who carry out the grunt work and typically get the shaft when if comes to salary compensation (respective to the CEO/King Pin of course)
These organizations are eerily similar. The key difference is in the product they work with. Financial markets are “regulated” institutions and are thereby considered safe and legal to work in which allows PE firms to flourish. Drug cartels have never been regulated and therefore deemed illegal. The funny thing is that both organizations operate in a very similar capacity. PE works on buying equity in companies and flipping the company for a hefty profit typically onto the retail investors to make large returns. It becomes a game of hot potato as many firms invest in companies that never make profit and sell retail investors on the idea of future returns that are never guaranteed, but nonetheless the retail investors fall for it. PE firms furthermore compete with rival firms in cornering more of the market share and making sure they get the best deals. Drug cartels also work on gaining as much market share through making sure they get the best products and secure the proper trafficking channels. The cartels work on getting cheap supply and up selling to end customers. This is why cocaine is largely originated from Colombia at a super low price and then brought to the US market where the product sees over 500% price increases.
The best way to put the hypocrisy is through this example.
The Financial Firm:
If I sell you a stock that I know is complete crap, you have the option of whether to buy it or not.
If you buy it, then it is now your liability and whatever happens is on you even though the equity was a load of hot garbage.
The Drug Cartel:
If I try selling drugs that are known to be bad for you, you also have the option of whether to buy it or not.
BUT, if you buy it, I am considered a criminal because I have now ruined your life by providing this drug.
So, ruining someone financially is legal but getting someone high on drugs isn’t. Don’t both ruin lives? Just goes to shows the double standard.
The scary part is how both drug cartels and financial institutions like PE firms have huge influence in government. For drug cartels, there are many insiders and bribes that allow them to operate in plain sight. In many Latin American countries, it is common for the cartel to pay off police officers to not report crimes. Additionally, cartels may sometimes partner with local government officials that may offer to take out another government official the cartel doesn’t like… sounds similar to political campaigning in America minus the violence. Financial firms have huge Political Action Committees (PAC) that pour billions of dollars into getting political figures and legislation enacted for them. I like to call it an indirect bribe because what else do you call spending that amount of money trying to get your way.
“I might not be the president of Mexico, but in Mexico I’m the boss.“El Chapo
El Chapo was absolutely correct. The same can be said with financial firms that can puppeteer governments by holding the fate of the economy in their hands. Just take a look at the 2008 financial crisis and the bailouts the banks got. Capitalism is great, but when we start getting so many too big to fail institutions, it’s the average Joes that truly suffer.
So, the next time you see the war on drugs and other criminal activity on the news, ask yourself, why are we pursuing those criminals and not the ones that are out in the open on Wall Street. Kim Stanley puts it best and it might just explain why the limelight isn’t on the financial institutions.
“Money equals power; power makes the law; and law makes government.”-Kim Stanley