A New York Times investigation found that DraftKings Inc. built a machine-learning model that scored customers by how much they would lose for each free bet or bonus they received. The model raised concerns that the company was targeting problem gamblers, with a data analyst saying “the best investment would be a problem gambler” due to financial logic. Bloomberg News Opinion Contributor and Lecturer at Yale School of Management, Gautam Mukunda argues regulations against predatory capitalism could protect good companies and steer entrepreneurs’ talents in socially beneficial directions.
this is a DraftKings story, but it’s not just a DraftKings story. And for DraftKings, I’d almost just want to ask the people who are doing this, if you told your mother that what you did was using the data science skills that you acquired over years of painstaking work to find people who are problem gamblers and extract the last bits of money from them and make it harder for them to sort of separate themselves from their gambling habit.
Would you feel proud of yourself? Like like like is that something that your mom would say, gee, I’m really I’m really glad you did that, son? I I sort of I sort of hope not. But I don’t think it’s not just a Draft Kings story, although the issues of gamble, you know, sort of online sports gambling and what it’s done are something we really should address.
It’s that it we have created a version of too much of American capitalism that’s sort of oriented around predation, around making life worse for your customers and your counterparties, gathering money for your sort of returns for yourself instead of creating wealth, which is what capitalism is supposed to be about.
In my opinion, what the most striking part of your piece was is basically the dichotomy between this aspirational capitalism and this predatory capitalism. And you had mentioned in in centuries past, we really um were better at reining that in. What are ways in which you see that possibly happening again in this age of globalization, in this age of having so much information about others at your disposal very quickly.
Yeah, I think there are two two thrusts that we could take. One is sort of issue by issue, area by area, right? We’d just say that look, it’s not, you know, I I would just say broadly, allowing online sports gambling nationwide, that was a Supreme Court decision. It was a catastrophically bad one and it should be reversed. But there are other like, you know, you see private equity companies that are monopolized in construction of fire trucks and then jacking up the prices.
There’s just no excuse for that kind of thing. Anti-trust was designed for that. We need to do that much more aggressively. But the broader one is the idea that we need to reorient the American economy around people who make things instead of sort of people whose idea of running a company is how do you squeeze it for numbers? That the the classic problem here is Boeing. We all watched what happened to Boeing and its slow recovery now. But like if you may if you are running an airplane company, you should think that your product is airplanes and not a stock price.
And that involves sort of a pervasive attempt to de-financialize the economy and make it sort of really put it in charge of people who are people who like to make things, as opposed to just people who are playing games with it.
But we’ve trained generations and you one could argue the backbone of American capitalism is the maximized profitability for shareholders full stop. Are you suggesting something different?
So I am because it’s it’s sort of very important to say this. I do this to my students, you know, every year. I’ll ask them, do you as a CEO in the United States have a fiduciary responsibility to maximize shareholder returns? And most of them will say yes, and they are wrong. That is a matter of black letter law. It is not something that is hotly debated in the law. You as a CEO have a have a responsibility to exercise your best business judgment in the interest of shareholders. That’s not the same thing.
Um and so so yeah, Paul, I would say very very simply, the model we have created that does this, it’s not just bad for workers and the environment and stakeholders and society. It’s bad for shareholders. Before we had this model of of short-term shareholder primacy, shareholder returns were better than they are now.
I’m going to ask a deeply philosophical question right now. So, how do you untangle the idea of American individual achievement that is obtained through that particular sort of edge that somebody might have. So, you had noted that that kind of edge to um take advantage of others um is what really is launching a lot of this really predatory capitalism. What needs to happen to be American identity, especially as it pertains to business to not say, I’m going to get my economic advantage at all costs, even if that means harming another person.
Yeah, and I think that is a it’s an ideological shift and it goes everywhere from schools, but the most important thing is incentives, right? That we need to shift the if you if you change incentives in such a way that this sort of behavior is not rewarded, the norms will start to shift with it too. It’s not just about incentives, but sort of saying like, you know, if if we find out that you as a company are treating gambling the way um the opio, you know, making gambling into the next version of the opioids epidemic in the United States, we should probably intervene before it gets that bad.
And if we go after the people who do it strongly enough, that will change incentives. But the broader question and I think it’s a it’s like a really powerful one, right? Is in the 1950s, Peter Drucker wrote about the fact, he said that if you were a top graduate of a business school, he said, you wanted to go to uh, you know, General Motors or, you know, or Ford, you wanted to go to a place that made things. He said, you would be ashamed, ashamed of yourself if you went to a place where you were just allocating capital.
And that’s a very different model of the world and it’s one one that’s that historically the United States has had that you can sort of see ways in which to go back where this idea that we really care about making great things, not just short-term returns.
