Why are there so many billionaires leading money-losing companies?

Uber lost $708 million in 6 months, but its CEO/founder is worth billions. Is Silicon Valley a pyramid scheme?

Why are there so many billionaires leading money-losing companies?
(Credit: Getty/Ronstik)

In a financial report released last week, ride-hailing app company Uber reported a staggering $708 million loss for the first three months of the year. Since the company was founded eight years ago, it’s burned through almost half of the $15 billion in private venture capital that it has raised.

But despite the mounting losses, the departure of more than a dozen company executives over the past year and a string of controversies that would send the typical company plunging into an irreversible death spiral, Uber CEO and co-founder Travis Kalanick’s net worth is immense.

According to Forbes, Kalanick is worth $6.3 billion, making him the world’s 226th wealthiest billionaire and the 35th richest magnate of the global tech industry. That makes him richer than Wal-Mart heiress Christy Walton and Liu Qiandong, founder and head of Chinese e-commerce and retail giant JD.com, which recently reported $11 billion in quarterly sales and its first profit as a publicly traded company.

Kalanick’s bounty seems largely immune (so far) to Uber’s string of mishaps, including allegations of about its workplace being hostile to women, a bitter legal fight with Google over allegedly stolen self-driving car technology, scrutiny over the company’s attempt to deceive government officials, and other controversies concerning its treatment of drivers.

So how does a 40-year-old computer programmer heading a beleaguered and unprofitable company have a net worth greater than the gross domestic product of Barbados?

The short answer is: hopes, dreams and aspirations. Specifically, those of the Uber’s financial backers, who believe in the gospel that Uber is on its way to killing the global taxi industry.

Under normal startup circumstances, a business faces intense pressure to attain profitability within a short period of time. According to the U.S. Small Business Administration, 1 in 5 new businesses goes under in the first year while nearly half fail within the fifth year. According to a 2015 study from Babson and Baruch Colleges, the typical entrepreneur provides nearly 60 percent of the funding needed for his or her business.

But in the world of Silicon Valley, profitability takes a back seat as deep-pocketed investors throw money at long-term aspirations. For years private investors have assigned sky-high valuations to tech industry startups in a bid to find the next Amazon or Google nestled in some Northern California office building or garage. Billionaire investors, private equity firms and sovereign wealth fund managers are willing to take considerable risks that mushroom the wealth of founders and CEOs to astronomical levels.

Kalanick is a billionaire because private investors have assigned a value to Uber based on its future potential; that’s where the hopey-dreamy stuff comes in. The company is currently valued at a sky-high $68 billion according to CBInsights, more than half the value of global aerospace behemoth Boeing. Because Kalanick is a primary shareholder of Uber, his net worth is boosted by this potentially irrational valuation, making him a “paper” billionaire.

Though what he does with his equity is not publicly known, Kalanick can potentially leverage this net worth to grow his personal fortune by using his stake in Uber to engage in other business endeavors, like buying real estate or investing in securities, all based on what private investors think his startup is worth.

In the typical scenario, an executive at private equity firm considering an investment in a private startup might compare the numbers offered in a business plan with those of a comparable publicly traded company and examine operating costs, profit margins and overall capital structure. If the startup has a prospectus with targets that seem viable compared with those of an existing competitor, investors will have some degree of confidence that they’ll wind up with a windfall of profit once the company is acquired or it files an initial public offering.

But because of the strange nature of the tech industry, there often isn’t a comparable company upon which investors can base their assessments. When Amazon was raising money in the early 1990s, there was no existing competitor with a similar business model, so early investors had to make estimates and assumptions to base their hopes on. It is interesting that very few individuals invested in Amazon prior to its initial public offering.

In retrospect, offering seed money to Amazon was a no brainer. Internet commerce was growing by a staggering 2,300 percent a year in 1994, and Jeff Bezos saw that light early and famously drew up a business plan during a road trip to Seattle. Venture capital firm Kleiner Perkins Caufield & Byers was one of a few private investors that gave Bezos money early on, and it reaped a fortune after Amazon filed its initial public offering in 1997 just as the dot-com bubble peaked.

But the success of tech companies like Amazon.com and Google are few and far between. Often the decision by private investors whether to invest in a technology startup is based on assumptions, best estimates and industrywide averages of publicly traded companies in the same sector.

While private equity firms have special access to review a startup’s books, CEO- founders have much more latitude in selling their plans and manipulating their numbers than the heads of established publicly traded companies, who face more regulatory scrutiny.

Once startups make their way to the public markets through initial public offerings, founder-CEOs can continue to reap billions from their company’s valuations without the companies making a dime in profit. Tesla CEO Elon Musk, who’s worth an estimated $16 billion, the head of Snap, Evan Spiegel ($4.7 billion) and Twitter’s Jack Dorsey ($1.8 billion) are notable examples of rich CEOs who head unprofitable companies.

These founder-CEOs can spend good portions of their lives as billionaire heads of money-losing companies as long as investors keep believing that these companies may someday strike it rich. But there’s always a make-or-break point, and paper billionaire are always at risk of sinking their fortunes with investors losing their shirts. One thing is almost certain: Even if Uber crashes and burns, Kalanick would likely walk away from the wreckage a very wealthy computer programmer.

 

Taking Trump’s Tweets Seriously

Meet the creator of the Twitter bot that transforms the president’s tweets into formal White House statements.

Katie Martin / The Atlantic

ELAINE GODFREY

4:52 PM ET

After Donald Trump’s election, many Americans wondered whether he’d stop tweeting from his personal account as he’d pledged during the campaign. He didn’t. In fact, in the first 100 days of his presidency, Trump sent more than 500 tweets from his @realDonaldTrump handle. According to an analysis done by The Washington Post’s Philip Bump, those 500 tweets contained 18 explicit references to the TV show Fox & Friends, more than 100 jabs at the media, and the phrase “FAKE NEWS!” four times.

Trump’s personal account has nearly 32 million followers, almost twice as many as the official @POTUS account, and his spokespeople say he tweets because it’s the most direct way to reach his supporters. But Trump’s tweets about the news are often themselves newsworthy: In the past few months, the president has contradicted his own spokespeople, posted unsubstantiated allegations against former President Obama, and most, recently, taken the words of London Mayor Sadiq Khan out of context in the aftermath of a deadly terrorist attack.

In a Monday interview on Today, White House special counselor Kellyanne Conway downplayed the importance of Trump’s social media habits and condemned the media’s “obsession with covering everything he says on Twitter,” and Trump adviser Sebastian Gorka reminded New Day host Chris Cuomo that Trump’s twitter is “not policy, it’s not an executive order. It’s social media. Please understand the difference.”

While it’s true that Trump’s tweets don’t carry any legislative weight, they do appear to come directly from the phone of the president of the United States. Why shouldn’t they be treated as official presidential statements? It’s a question Russel Neiss has been asking himself.

Neiss is a St. Louis-based software developer who, over the weekend, created @RealPressSecBot, a Twitter bot that transforms the president’s tweets into official statement format, like this:

I spoke with Neiss about his bot—and why he believes Americans should treat Trump’s tweets as real presidential statements. Our conversation has been condensed and edited for clarity.


Elaine Godfrey: How did you come up with the idea for the bot?

Russel Neiss: [Former Obama staffer] Pat Cunnane tweeted on June 4 that he mocked up one of the president’s tweets about the London attacks in a traditional presidential format. It struck me as a really powerful image, the idea being that essentially, at their core, these tweets are literally presidential statements for media use.

Putting it in the traditional format made it all the more jarring between what we’ve expected to see from those formal press releases—and the kind of stuff we see coming out of the president’s Twitter account on a regular basis.

So, when my kids took a nap on Sunday afternoon, I took 40 minutes and put [the bot] together.

Godfrey: How does it work? Are you going to go back and reformat previous tweets?

Neiss: Twitter has an application programming interface (API), that allows programmers to interface with the platform. I’ve created a Python script, a small computer program, that triggers that API, and says “Hey, Twitter, give me the last couple of Trump tweets.” Then it takes the text, runs it through an image processing library, converts the text to the nice format as an image file, then posts it to Twitter.

Now it’s basically tweeting in real time. Every five minutes, it scans the president’s Twitter feed for new tweets. We’ve had some requests from folks who have wanted to see some of the classics, but there’s something more pure about just focusing on going forward.

Godfrey: Do you see Trumps tweets as presidential statements? Should Americans treat them as such?

Neiss: We have a press secretary who is being constantly undermined by his boss’s tweets, and we have surrogates who say they can’t speak for the president. At this moment, the best thing we have is the man’s Twitter account.

That classic quote from the campaign that you have to take the president seriously but not literally? Everyone’s been telling Trump not to tweet, and he continues to tweet, and so I think it’s important to take him seriously, even if not literally. These are serious words coming out of the highest office holder in the land, and all that this bot does is just give those messages the proper honor they deserve.

Godfrey: Do you think it’s harmful that Trump is using Twitter as a sort of replacement for more formal presidential statements?

Neiss: I think it’s fine for Trump to tweet. Obama maintained a personal Twitter account. I’m sure that Clinton would have tweeted had Twitter existed at the time. Presidents always use alternative media to get their message out. This idea of going around the mainstream media is completely understandable and legitimate.

But one of the really interesting things about this president, is that it does not appear that these things are filtered through any formal vetting process. As such, it creates this really interesting world to see the thoughts and objectives of this particular president. These are statements of the president. Putting those tweets in this format emphasizes that, more than just saying it.

Godfrey: The account already has 65,000 followers. How long are you planning to keep it active?

Neiss: It’ll run for as long as Trump keeps tweeting. Maybe come 2020, or sooner, when the next president is inaugurated, we’ll turn it off.

https://www.theatlantic.com/politics/archive/2017/06/taking-trumps-tweets-seriously/529221/

Facebook and Twitter ‘harm young people’s mental health’

Poll of 14- to 24-year-olds shows Instagram, Facebook, Snapchat and Twitter increased feelings of inadequacy and anxiety

girls on their phones
Young people scored Instagram the worst social medium for sleep, body image and fear of missing out. Photograph: Mark Mawson/Getty Images

Four of the five most popular forms of social media harm young people’s mental health, with Instagram the most damaging, according to research by two health organisations.

Instagram has the most negative impact on young people’s mental wellbeing, a survey of almost 1,500 14- to 24-year-olds found, and the health groups accused it of deepening young people’s feelings of inadequacy and anxiety.

The survey, published on Friday, concluded that Snapchat, Facebook and Twitter are also harmful. Among the five only YouTube was judged to have a positive impact.

The four platforms have a negative effect because they can exacerbate children’s and young people’s body image worries, and worsen bullying, sleep problems and feelings of anxiety, depression and loneliness, the participants said.

The findings follow growing concern among politicians, health bodies, doctors, charities and parents about young people suffering harm as a result of sexting, cyberbullying and social media reinforcing feelings of self-loathing and even the risk of them committing suicide.

“It’s interesting to see Instagram and Snapchat ranking as the worst for mental health and wellbeing. Both platforms are very image-focused and it appears that they may be driving feelings of inadequacy and anxiety in young people,” said Shirley Cramer, chief executive of the Royal Society for Public Health, which undertook the survey with the Young Health Movement.

She demanded tough measures “to make social media less of a wild west when it comes to young people’s mental health and wellbeing”. Social media firms should bring in a pop-up image to warn young people that they have been using it a lot, while Instagram and similar platforms should alert users when photographs of people have been digitally manipulated, Cramer said.

The 1,479 young people surveyed were asked to rate the impact of the five forms of social media on 14 different criteria of health and wellbeing, including their effect on sleep, anxiety, depression, loneliness, self-identity, bullying, body image and the fear of missing out.

Instagram emerged with the most negative score. It rated badly for seven of the 14 measures, particularly its impact on sleep, body image and fear of missing out – and also for bullying and feelings of anxiety, depression and loneliness. However, young people cited its upsides too, including self-expression, self-identity and emotional support.

YouTube scored very badly for its impact on sleep but positively in nine of the 14 categories, notably awareness and understanding of other people’s health experience, self-expression, loneliness, depression and emotional support.

However, the leader of the UK’s psychiatrists said the findings were too simplistic and unfairly blamed social media for the complex reasons why the mental health of so many young people is suffering.

Prof Sir Simon Wessely, president of the Royal College of Psychiatrists, said: “I am sure that social media plays a role in unhappiness, but it has as many benefits as it does negatives.. We need to teach children how to cope with all aspects of social media – good and bad – to prepare them for an increasingly digitised world. There is real danger in blaming the medium for the message.”

Young Minds, the charity which Theresa May visited last week on a campaign stop, backed the call for Instagram and other platforms to take further steps to protect young users.

Tom Madders, its director of campaigns and communications, said: “Prompting young people about heavy usage and signposting to support they may need, on a platform that they identify with, could help many young people.”

However, he also urged caution in how content accessed by young people on social media is perceived. “It’s also important to recognise that simply ‘protecting’ young people from particular content types can never be the whole solution. We need to support young people so they understand the risks of how they behave online, and are empowered to make sense of and know how to respond to harmful content that slips through filters.”

Parents and mental health experts fear that platforms such as Instagram can make young users feel worried and inadequate by facilitating hostile comments about their appearance or reminding them that they have not been invited to, for example, a party many of their peers are attending.

May, who has made children’s mental health one of her priorities, highlighted social media’s damaging effects in her “shared society” speech in January, saying: “We know that the use of social media brings additional concerns and challenges. In 2014, just over one in 10 young people said that they had experienced cyberbullying by phone or over the internet.”

In February, Jeremy Hunt, the health secretary, warned social media and technology firms that they could face sanctions, including through legislation, unless they did more to tackle sexting, cyberbullying and the trolling of young users.

https://www.theguardian.com/society/2017/may/19/popular-social-media-sites-harm-young-peoples-mental-health

How to Build an Autocracy

inauguralspeechtrump

The preconditions are present in the U.S. today. Here’s the playbook Donald Trump could use to set the country down a path toward illiberalism.

It’s 2021, and president Donald Trump will shortly be sworn in for his second term. The 45th president has visibly aged over the past four years. He rests heavily on his daughter Ivanka’s arm during his infrequent public appearances.

Fortunately for him, he did not need to campaign hard for reelection. His has been a popular presidency: Big tax cuts, big spending, and big deficits have worked their familiar expansive magic. Wages have grown strongly in the Trump years, especially for men without a college degree, even if rising inflation is beginning to bite into the gains. The president’s supporters credit his restrictive immigration policies and his TrumpWorks infrastructure program.

Listen to the audio version of this article:

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The president’s critics, meanwhile, have found little hearing for their protests and complaints. A Senate investigation of Russian hacking during the 2016 presidential campaign sputtered into inconclusive partisan wrangling. Concerns about Trump’s purported conflicts of interest excited debate in Washington but never drew much attention from the wider American public.

Allegations of fraud and self-dealing in the TrumpWorks program, and elsewhere, have likewise been shrugged off. The president regularly tweets out news of factory openings and big hiring announcements: “I’m bringing back your jobs,” he has said over and over. Voters seem to have believed him—and are grateful.

Anyway, doesn’t everybody do it? On the eve of the 2018 congressional elections, WikiLeaks released years of investment statements by prominent congressional Democrats indicating that they had long earned above-market returns. As the air filled with allegations of insider trading and crony capitalism, the public subsided into weary cynicism. The Republicans held both houses of Congress that November, and Trump loyalists shouldered aside the pre-Trump leadership.

The business community learned its lesson early. “You work for me, you don’t criticize me,” the president was reported to have told one major federal contractor, after knocking billions off his company’s stock-market valuation with an angry tweet. Wise business leaders take care to credit Trump’s personal leadership for any good news, and to avoid saying anything that might displease the president or his family.

The media have grown noticeably more friendly to Trump as well. The proposed merger of AT&T and Time Warner was delayed for more than a year, during which Time Warner’s CNN unit worked ever harder to meet Trump’s definition of fairness. Under the agreement that settled the Department of Justice’s antitrust complaint against Amazon, the company’s founder, Jeff Bezos, has divested himself of The Washington Post. The paper’s new owner—an investor group based in Slovakia—has closed the printed edition and refocused the paper on municipal politics and lifestyle coverage.

 

CONTINUED:

https://www.theatlantic.com/magazine/archive/2017/03/how-to-build-an-autocracy/513872/

Opposition to Trump’s anti-Muslim travel ban mounts on eve of court deadline

inauguralspeechtrump

By Patrick Martin
7 February 2017

A three-judge panel of the Ninth Circuit Court of Appeals, based in San Francisco, will hear oral arguments Tuesday on the travel ban on visitors from seven Muslim-majority countries imposed by the Trump administration January 27 by executive order.

The hearing was announced Monday evening, shortly after the administration filed legal briefs with the appeals court seeking to overturn the decision by Judge James Robart, a federal district judge in Seattle, who issued a temporary restraining order blocking enforcement of the Muslim ban.

The three judges include William Canby Jr., appointed by Jimmy Carter; Richard Clifton, appointed by George W. Bush; and Michelle T. Friedland, appointed by Barack Obama.

The hour-long hearing, with 30 minutes for each side, will take place at 6 pm Tuesday, Eastern Time, or 3 pm Pacific Time, with a recording of the hearing released to the public after the conclusion of the arguments.

The states of Washington and Minnesota brought the suit charging that the executive order issued by Trump is unconstitutional because of its brazenly religious character. They also argued that it damages the interests of citizens of those states as well as institutions such as universities and corporations whose students and employees are affected by the ban.

Fifteen more states, with a combined population of more than 100 million people, filed an amicus brief Monday supporting the position of Washington and Minnesota. The brief was drafted by attorneys for California, New York, Pennsylvania and Massachusetts.

Connecticut, Delaware, Illinois, Iowa, Maine, Maryland, New Mexico, Oregon, Rhode Island, Vermont, Virginia and the District of Columbia joined in supporting the brief. The state of Hawaii filed a separate motion in support of Washington and Minnesota.  Nearly all these states are governed by Democrats.

The 15-state brief detailed the impact of the ban on the educational and health care systems in many of the states. California Attorney General Xavier Becerra said that medical school programs would “risk being without a sufficient number of medical residents to meet staffing needs,” and that more than 2,000 students set to enroll in the state’s college and university system would be affected.

The main argument presented by the Trump administration was the claim that the states have no legal standing to challenge the executive order, and that the president’s power to control immigration is conferred both by the Constitution and federal law and is absolute and unreviewable by any court.

“Judicial second-guessing of the president’s national security determination in itself imposes substantial harm on the federal government and the nation at large,” Justice Department lawyers wrote in legal papers defending the executive order.

At the court hearing last Friday, Washington state Solicitor-General Noah Purcell responded by saying, “They’re basically saying that you can’t review anything about what the president does or says, as long as he says it’s for national security reasons. And that just can’t be the law.’’

Aside from the obviously authoritarian character of the administration’s claim, this is the diametric opposite of the position taken by Republican state attorneys general in 2015 when they argued—successfully—before the Fifth Circuit Court (based in New Orleans) that they had standing to challenge President Obama’s executive order exempting several million long-settled undocumented immigrants from deportation.

The Trump brief also urged the Ninth Circuit to reject out of hand any arguments based on religious discrimination, since the text of the executive order does not explicitly call for a ban on Muslims. Trump’s numerous statements declaring that he wished to impose a Muslim ban, and his seeking advice on how to word such a ban so that it would pass legal muster, could not be considered by the court, the brief argued, because this would involve investigating the motives of the executive branch, and would thus breach the separation of powers. The contrast between this argument and Trump’s own conduct, tweeting imprecations against Judge James Robart and all but branding him a terrorist sympathizer, is stark.

The brief filed by Washington and Minnesota replied that “courts have both the right and the duty to examine defendants’ true motives,” and cited precedents linked to previous Supreme Court decisions in relation to discrimination against gays and other disfavored minorities.

The states’ brief pointed out that the claims of urgent national security dangers were undermined by the sheer breadth of the order: “For several months it bans all travelers from the listed countries and all refugees, whether they be infants, schoolchildren or grandparents. And though it cites the attacks of September 11, 2001 as a rationale, it imposes no restrictions on people from the countries whose nationals carried out those attacks. It is at once too narrow and too broad… and cannot withstand any level of scrutiny.”

The issues of imperialist foreign policy underlying the legal recriminations were spelled out in an affidavit filed Monday by ten former top figures in the national security establishment, mostly from Democratic administrations. The document was signed by two former secretaries of state, John Kerry and Madeleine Albright, former defense secretary and CIA director Leon Panetta, former national security adviser Susan Rice, her former deputy Lisa Monaco, former homeland security secretary Janet Napolitano, and four former CIA directors or deputy directors: Michael Hayden, Michael Morrell, John McLaughlin and Avril Haines.

Noting that four of these officials “were current on active intelligence regarding all credible terrorist threat streams directed against the US” as late as January 20, 2017, the statement declared: “We all are nevertheless unaware of any specific threat that would justify the travel ban established by the Executive Order issued on January 27, 2017.”

Trump’s executive order will “disrupt key counterterrorism, foreign policy and national security partnerships that are critical to our obtaining” intelligence necessary to combat terrorist groups like the Islamic State, the statement declared. It went on to warn that individuals in the seven targeted countries who cooperated with US intelligence and military operations would now be endangered.

Newly installed Pentagon chief James Mattis reportedly ordered emergency measures for the protection of Iraqis who collaborated with the US military occupation by acting as translators or providing intelligence. The entry of these Iraqis into the United States under a special visa program was halted by the Trump order.

A separate amicus brief was filed by 97 giant corporations, including a who’s who of Silicon Valley: Facebook, Microsoft, Intel, Uber, eBay, Apple, Google, Twitter, Airbnb and Snap. The corporations argued that the order “inflicts significant harm on American business, innovation, and growth,” and by disrupting the movement of employees and potential customers “is inflicting substantial harm on US companies.”

Legal commentators expect the Ninth Circuit, which is the most liberal of the circuit courts in the US, to endorse Robart’s decision in some fashion, followed by an appeal by the Trump administration to the Supreme Court. In the event of a 4-4 split, which was the result of the previous immigration enforcement lawsuit by Republican-controlled states in 2015, the circuit court’s decision would stand.

Whatever the long-term result of the legal conflict, however, the temporary restraining order remains in effect this week, with as many as 100,000 people holding visas for entry into the United States from the seven countries targeted by the White House.

Meanwhile, more evidence has emerged of the racist and bigoted character of both the executive order itself and its enforcement by Immigration and Customs Enforcement. A report in Newsweek quoted Los Angeles immigration lawyer Stacy Tolchin, who describes how ICE agents separated Muslims from non-Muslims during detention proceedings at the airports in the period before the court order halting the travel ban was issued.

“They are segregating Muslims from the non-Muslims when they’re being detained, holding them in separate rooms,” Tolchin told Newsweek. “I think it shows what the real intent of the travel ban is.” The magazine reported that several other lawyers “corroborated Tolchin’s account, saying those who identified themselves as Christian or Jewish did not seem subject to the same treatment at the border.”

Report: Donald Trump denied Twitter spot at tech meeting

…because they didn’t give him a “crooked Hillary” emoji

The president-elect was reportedly miffed that a political stunt was blocked by the tech giant

Report: Donald Trump denied Twitter spot at tech meeting because they didn't give him a "crooked Hillary" emoji
(Credit: Getty/Chip Somodevilla)

Donald Trump — the man who will one day be in charge of formulating policy, as well as directing the FBI, CIA and NSA — excluded his favorite medium of communicationfrom a roundtable with tech giants because he was reportedly holding a grudge about not being able to get away with a campaign stunt.

Back in November, the Trump campaign wanted to develop a “crooked Hillary Clinton” emoji, which The Sun described as a giant bag of cash with angel wings. That, of course, is hilariously ironic, considering Trump’s cabinet appointments all come from the “highest-paid” and “most donations” list. But it was a no-go for Twitter, which said in a statement: “We believe that political advertising merits a level of disclosure and transparency that branded political emojis do not meet, and we ultimately decided not to permit this particular format for any political advertising.”

The Trump team held that against the tech company, according to Politico, denying them a spot at the table in an important meeting, according to Politico:

Twitter was one of the few major U.S. tech companies not represented at Wednesday afternoon’s Trump Tower meeting attended by, among others, Apple’s Tim Cook, Amazon’s Jeff Bezos, Facebook’s Sheryl Sandberg, and Tesla’s Elon Musk — an omission all the more striking because of Trump’s heavy dependence on the Twitter platform. With some 17.3 million followers of his account, the president-elect has made Twitter into the de facto press channel of his transition operation.

Trump spokesman Sean Spicer said that Twitter was cut out because “the conference table was only so big.” Trump’s table had room for his three children, in a remarkable conflict of interest.

At the meeting, Trump told tech executives — whose combined market value was more than $3 trillion — that “I’m here to help you folks do well.”

 

Jeremy Binckes is the cover editor at Salon.com.

The Collective Unconscious Is Creating Creepy Clowns

People just want to be scared about something…

Photo Credit: Shutterstock / tobkatrina

First, let’s get one thing out of the way: There are no clowns skulking around America’s neighborhoods, looking for children to abduct.

Since the first reports of creepy, potentially murderous clowns began surfacing across South Carolina in August, there have been supposed sightings in at least 10 states, as well as parts of Canada. Social media has been recast in its timeless role as the Perennially Loud and Wrong Town Crier, helping spread misinformation and “clown threats” across Twitter, Facebook, Instagram and Snapchat. Inside HigherEd reports that clowns have appeared at “the universities of Connecticut, Iowa, Massachusetts, Miami, Missouri at Columbia and Texas at Austin,” as well as “Bloomsburg, Butler, Sacred Heart, Texas A&M, Syracuse Universities [and] Mississippi and York Colleges.” Yesterday morning, White House press secretary Josh Earnest actually had to answer a reporter’s question about how the administration is addressing the clown epidemic.

“I don’t know that the president has been briefed on this particular situation,” Earnest answered, presumably with a straight face, and even acknowledged it’s “something that I’ve read about in some of the news coverage.” He went on to suggest that the reporter check in with “the FBI and DHS and see what they have to say,” because talking to reporters about imaginary clowns is definitely a good use of federal agents’ time, I’m sure.

Most of the reports have been revealed as pranks, obviously. The New York Times noted late last week that at least 12 people had been arrested for “clown hoaxes,” and there have been multiple arrests since then. Other cases have turned out to be a combination of real clowns and irrational panic, as when a 12-year-old Virginia boy with autism dressed up early for Halloween, only to become the subject of a viral social media post and a local news segment. Somehow, police dispatched to all the remaining sightings have found no red noses left behind at the scene and not a single oversized floppy shoe for the crime lab to study. Benjamin Radford, whose books on urban legends and the paranormal include the recent Bad Clown, explains how the lack of forensic evidence is less about stealthy criminal clowns than overactive imaginations.

“The problem is that when police investigate, they never find anything,” he toldUproxx. “These mysterious phantom clowns that these children, and occasionally adults, report—they don’t exist. There’s never any evidence of them, and more importantly they never actually harm anyone. This is one of the keys to understanding the phenomenon. It’s always just missed. It’s always, ‘A clown lurched at me but I ran away.’ It’s a potential menace. It’s not an actual menace.”

The only mystery here is how long the clown menace will continue to be a story before it fades from popular consciousness, like satanic ritual abuse, recovered memories and razor blade-stuffed apples before it. Imaginary clowns aren’t the cause of the mass anxiety we’re currently experiencing, they’re just the latest symptom and manifestation of it—and not for the first time, either. Scary clown sightings have trickled in from around the country since the early 1980s, when “stranger danger” first became the national concern that launched a thousand social panics. But the question remains, after 30-something years of clown sightings here and there, why the sudden peak in reports?

“I believe that the surge in phantom clown sightings in 2016 are a reflection of the fears and uncertainties in American society at the present time,” Robert Bartholomew, who writes about social delusions, fads and popular myths, toldLehighvalleylive.com. “I think they are part of a greater moral panic about the fear of strangers in an increasingly urban, impersonal and unpredictable world. Phantom clowns are essentially the bogeyman in a different cultural guise.”

That sounds about right. There is a huge part of America that virtually runs on fear, even in the best of times. An astounding part of the population is adept at, and secretly in love with, scaring the shit out of itself and dreaming up justifications for a paranoia that’s already embedded in its consciousness. In the worst of times, that fear is intentionally rattled by those who recognize its usefulness for their own ends. These operators know that nothing grips the imagination of far too many Americans quite like an imagined monster, come to threaten your home and take your kids away. When a fear-prone populace finds itself in a particularly frightening cultural moment—for reasons real or imagined—the hivemind can run amok.

“I know people are fed up,” one Florida sheriff said at a news conference late last month. “They’re tired of seeing demonstrations and riots. They’re sick and tired of terroristic threats. Now they’ve got to deal with these damn clown things going on.”

That statement, which stops just short of a rant about “law and order,” makes it seem like this is all psychic collateral damage caused by Black Lives Matter and immigrants, in tandem with terrorists crossing across our borders pretending to be refugees. The quote is a particularly good example of the thinking and rhetoric that propels these moments of social panic into arising. It suggests the blame lies with some “other” (instead of faulty systems and power mongers) and helps rile up those who need only the slightest nudge to buy into the idea in a moment of social unrest and economic insecurity. The sheriff’s theory ignores that menacing cartoon clowns are a projection of the contrived fears of a populace that can’t connect its own traumatization with the people who use it against them and essentially retraumatize them for social, political and economic gain.

It also denies the fear of those who are afraid of very real things, from long-term state-backed terror to a rising tide of audible hate from multiple corners, and the way those issues might create an environment that’s inhospitable for everyone, even those who think it’s none of their concern. What’s more, it contributes to that fear in a way that pushes it toward a tipping point where the paranoia ultimately demands the projected, amorphous image of fear become fully embodied.

In the 1980s, bubbling hysteria about faceless marauding satanists eventually led to witch hunts that put real people in jail and ruined actual families and lives. If prankish teenage behavior becomes a reason for irrational national fear, punitive measures could follow. A case in Virginia that ended with two African-American teens being arrested and their mugshots splashed across the Internet for “chasing children while wearing a clown mask,” is a reminder of whose youthful indiscretions are most likely to count against them in the harshest way.

And like always, the hysteria feeds upon itself. Schools in Reading, Ohio, were closed after a woman claimed a clown physically attacked her. The Phillipsburg school district in New Jersey went into lockdown status after a “clown-related threat” appeared on social media. New Haven, Connecticut, schools announced a ban this Halloween on clown costumes and—wait for it—other “symbols of terror.” The police presence has been beefed up in Syracuse, Houston, St. Louis, and Winston-Salem, to name just a few places.

In Utah, police actually thought it necessary to use Facebook to gently suggest that maybe people should think twice before shooting at clowns. (Q: “Can I shoot or take action against someone that is dressed up like a clown?” A: “That’s not a simple yes or no question. It has a lot of variables to it.”) The police may be right, since there have been previous reports of people haphazardly firing guns into wooded areas where clowns were reportedly seen.

Yet, as Radford reminds us, “The fact is, to date, there are no confirmed reports of any clowns actually abducting, harming, killing [or] molesting kids. There just aren’t. There are zero.”

Amidst the other glaring reasons for the precipitous climb in clown hysteria, if you merely skim the surface of the fears plaguing the nation, is the season itself, which will culminate with the celebration of Halloween and the conclusion of a seemingly infinite and frightening election. There’s a chance the imagined clowns will pack up their imaginary cars and leave public consciousness with a proverbial whimper. All the better to make room for some other fabricated stand-in for American jitters about everything but the very real problems staring us in the face, before the clown car, at some point down the road, rolls back in again.

“By the end of November, it will become part of folklore,” Radford told Uproxx. “[But] this will happen again. I guarantee you this will happen again. It may be five years, it may be ten years, but someday, probably in my lifetime and certainly yours, there will be two or three more of these clown panics. They will be identical. There will be stories of clowns that are luring children. There won’t be anyone actually arrested for abducting kids.”