Playing in the Gray (with Kimberly Kay Hoang)

"Spiderweb Capitalism" is a tale of greed without a villain.

Sep 23, 2022

It’s A Wonderful Life, that staple of holiday entertainment, is, at its core, a film about contrasting approaches to banking. George Bailey, played by the preternaturally earnest James Stewart, believes that banks exist for the public good. They are intended to help the community by providing affordable loans to increase home ownership. The antagonist, Henry F. Potter, is a ruthless, greedy jerk, who believes banks are there to enrich him personally. He would foreclose on every last one of his neighbors if it netted him an extra dime. (That Potter bears an uncanny resemblance to Dick Cheney—who was five years old when the film came out in 1946—underscores his obvious villainy.)

Potter is a cinematic embodiment of avarice—like Ebenezer Scrooge in A Christmas Carol, Harry Lime in The Third Man, Gordon Gecko in Wall Street, and Veruca Salt in Willy Wonka and the Chocolate Factory. It’s easy to despise all of these people—not because they’re greedy assholes, but because it’s obvious that they are greedy assholes.

In real life, no one wants to be the bad guy. So the grotesquely wealthy have devised a method of operation in which the individuals who help them accumulate, invest, and increase their vast wealth know so little about the big picture that they don’t see themselves as villains. They are merely cogs in the big machine, and as long as they focus on their specific job, they can sleep soundly at night, pretending they are George Baileys when what they really are are servants of Mr. Potter.

In her fascinating and important new book, Kimberly Kay Hoang—a professor of sociology and today’s guest on the PREVAIL podcast—coins a phrase for this elegant structure: “spiderweb capitalism.” She explains:

Spiderweb Capitalism is a story of a new sort of social grouping that is composed of financial actors who keep their actions secret not only from the public, but also from each other. They have highly compensated “agents” or “fixers” to cover their tracks for them. They do not seem to have a sense of social cohesion. They might have orgies and other secretive get-togethers in an effort to try to establish mutual trust, or at least mutual hostage, but they don’t know whether someone out there is going to pull out a camera. To put it another way, there doesn’t seem to be a “code” that serves as a basis of social solidarity.

She draws a distinction between ultra-high-net-worth individuals—the ones who have the “fuck-you” money; the big spiders—and the merely high-net-worth individuals, the smaller spiders who use their expertise in law, accounting, finance, and so forth to enable their ultra-well-heeled employers. Spiderweb Capitalism examines, in painstaking detail, how this web works in emerging and frontier markets, particularly Vietnam and Myanmar.

And while Hoang is a professor at the University of Chicago, her book is not the product of some detached academic poring over spreadsheets while safely ensconced in an ivory tower. She’s a sociologist, not an economist. She’s all about the field work. To research her first book, a study of the role of sex work in the emerging markets of Southeast Asia, she worked for a year and a half as a hostess at a bar/restaurant in Vietnam frequented by sex workers and their clients. She got as close to the operation as she could while maintaining journalistic distance, and she interviewed hundreds of people, gathering data. The result was Dealing in Desire: Asian Ascendancy, Western Decline, and the Hidden Currencies of Global Sex Work, which is both the winner of seven scholarly book awards and a very good read. Spiderweb Capitalism employs the same rigorous methodology, in which Hoang embeds herself with her subjects, interviews everyone she can, and makes sense of the data. But in the new book, she goes from sex workers to prostitutes of a different kind.

To navigate the modern-day Wild West that is the frontier markets of Southeast Asia, financial operatives must “play in the gray.” This expression comes from one of Hoang’s first interview subjects, a young and wealthy financial professional she calls Alan, who tells her, “To make money anywhere in Asia, you need to master the art of ‘playing in the gray.’” She writes:

That is a craft. The people who can play in the gray, he explained, know how to finesse the very boundary between legal and illegal activity. They are front-running the market and the law—getting ahead of the formal regulatory process by starting to build or operate without the proper permits, registration, or tax receipts, but with the tacit protection of officials who are often lubricated by gifts or bribes. That is what makes this a frontier or emerging market.

The genius of the web the ultra-high-net-worth individuals have constructed is that, as the old saying goes, the left hand doesn’t know what the right hand is doing. This is by design. The Delaware attorney doesn’t know about the banker in Luxembourg, the account manager in Grand Cayman, or the functionary in Yangon who facilitates a deal by treating a government official to a night at a brothel. There is a surfeit of plausible deniability. This way, no one has to feel bad about contributing to income inequality, tax evasion, bribery, and the various other unseemly activities that would have driven George Bailey to drink. The Mr. Potters of the world need gray-players like Alan to maximize their profits. Lavishly compensated, and with an appetite for risk, the various and sundry Alans are happy to oblige.

“After doing so many interviews, I was asked to present some of this work back to a handful of financial firms where I had done some of these interviews,” Hoang tells me. “And I remember presenting, and I was very nervous, because I thought, ‘Oh my gosh, they’re going to find the piece of yarn that’s going to unravel the entire ball, and I’m going to have to go back and do more interviews.”

But that’s not what happened.

“The reaction was, ‘Wow. Nobody’s put this together for me to see.’” Not only that, but no one even pushed back on her assessment. No one challenged her description of how the financial spiderweb functioned. “They were like, ‘This is totally accurate. But, again, because I don’t really know what’s happening over there, I don’t know what these other people are doing, I’m not the villain of the story.’” Because how can someone be a bad guy, when all he’s doing is setting up holding companies or managing bank accounts in Cyprus?

This feels like something distant, but because of the interconnectedness of the global financial market, it isn’t. As Hoang discovered, even the stodgiest investment vehicles have a position in emerging markets. Chances are, your retirement fund (if you’re lucky enough to have one) has at least some money invested in countries like Vietnam.

There may not be villains in the story of spiderweb capitalism, but there certainly are victims: the rest of us.

LISTEN TO THE PODCAST

S4 E3: Playing in the Gray (with Kimberly Kay Hoang)

Greg Olear talks to Kimberly Kay Hoang, a professor at the University of Chicago and the author of “Spiderweb Capitalism: How Global Elites Exploit Frontier Markets,” about her field work as an ethnographer, the difference between high-net-worth and ultra-high-net-worth individuals, the similarities between high-net-worth individuals and sex workers, the concept of “playing in the gray,” tax havens offshore and otherwise, the psychology of gambling with enormous stakes, and how Prada makes the best handbags. Plus: a new airline in Florida.