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  • I would like to talk to you about business.

  • The thing that everyone on Shark Tank

  • thinks they have a great idea for,

  • even this guy.

  • Our cakes... are made of foam,

  • and they're rentals.

  • -Wait! -(AUDIENCE LAUGHING)

  • So, I can neither have my cake, nor eat it too?

  • I am in, here is a million dollars.

  • (AUDIENCE LAUGHING)

  • Small start-up businesses like that

  • hold a special place in America's heart

  • and politicians from across the political spectrum

  • love to talk about how important they are.

  • Small business is the backbone of the American economy.

  • Small businesses are the backbone

  • of this nation's economy.

  • BOTH: Small businesses are the backbone of our economy.

  • BOTH: Small businesses are the backbone--

  • ALL: Small businesses are the backbone of our economy.

  • ALL: Small businesses are the backbone of our economy.

  • ALL: Small businesses are the backbone of our economy.

  • -(AUDIENCE APPLAUDING) -It's true.

  • "Small businesses are the backbone of our economy"

  • is that rare thing that every politician agrees on.

  • It's that, support the troops,

  • -Ted Cruz can go fuck himself... -(AUDIENCE LAUGHING)

  • ...and South Dakota senator John Thune can get it,

  • -he can get it! -(AUDIENCE LAUGHING)

  • Now, look, it can feel like we're in a golden age

  • of small business start-ups, but that isn't actually the case.

  • The rate at which new businesses are been created

  • has actually being steadily falling

  • since the 1970s. And I would argue that

  • one of the reasons for that, is that big businesses,

  • have been getting even bigger,

  • which brings us to our main topic tonight,

  • "Corporate Consolidation."

  • Recent years, have seen

  • record highs for mergers and acquisitions.

  • As you would know, if you've ever watched

  • the thrilled reactions they get on business news.

  • M&A has been hot, continues to be hot.

  • An exciting year for M&A.

  • A few blockbuster deals being announced.

  • They call it "Merger Monday," on Wall Street.

  • It is shaping up to be another "Merger Monday."

  • They don't call it "Merger Monday" for nothing.

  • -Media mega "Merger Monday." -"Merger Monday."

  • M-- M-- M...

  • "Merger Monday"?

  • -At last we have one, I say... -♪ Hallelujah

  • Okay, that was obviously a little nauseating, but also,

  • pressing a button on TV is a little bit dangerous

  • because someone could take that footage

  • and then loop any sound that they want under there.

  • Now, obviously I'm not immature enough to do that

  • but if I were it would look like this.

  • "Merger Monday"?

  • At last we have one, and I say...

  • (FART NOISE)

  • -(AUDIENCE APPLAUDING, CHEERING) -(BLOWS)

  • The point is--

  • This point is, all this merger activity

  • has all made some sectors of our economy

  • ridiculously consolidated.

  • NEWSCASTER: The United States has gone from having

  • ten large airlines back in 2000 to just four today.

  • And those four mega airlines now dominate

  • more than 80 percent of the U.S. market.

  • Yeah, we down to just four major airline choices,

  • and no that does not include jetBlue because that

  • is not actually an airline.

  • It's just a very expensive way to eat those weird blue chips...

  • -(AUDIENCE LAUGHING) -...which are, and this is true

  • -just sliced Grover arms. -(AUDIENCE LAUGHING)

  • Look, and airlines here are just the beginning.

  • The rental car business

  • is now 90 percent dominated by just three companies.

  • The U.S. beer industry is 70 percent controlled by just two companies,

  • and online search engines are of course as we all know

  • dominated by one major player. That's right say it with me,

  • -Bing. -(AUDIENCE LAUGHING)

  • That's right. Bing, the best way to Google something.

  • In fact, look, full disclosure here.

  • Even our own parent company, Time Warner

  • is currently trying to merge with AT&T,

  • which makes this story a little dangerous for us to do.

  • Although you know, that is presuming

  • that AT&T executives manage to get there shitty service

  • working long enough to see it.

  • -(AUDIENCE CHEERING) -AT&T,

  • it's the top telecom company around

  • alphabetically and nothing else.

  • -(AUDIENCE APPLAUDING) -Look, even some brands,

  • that you might think of as indie

  • now have multinational owners. Burt's Bees?

  • It's-- it's not run by a backward bee fucker

  • -called Burt. -(AUDIENCE LAUGHING)

  • It's run by Clorox.

  • Tom's of Maine, the deodorant

  • which did so little to deodorize your freshmen year roommate.

  • (AUDIENCE LAUGHING)

  • That's not owned by Colgate-Palmolive.

  • And then there was Goose Island.

  • Now, their ads feature beardy brewers rubbing

  • -hops on their faces. -(AUDIENCE LAUGHING)

  • But what they don't mention

  • is that Goose Island is owned by Anheuser-Busch,

  • and that farm that you just saw

  • is located at 822 Budweiser Loop.

  • It's presumably just passed Bud Light lime-a-rita boulevard.

  • Basically, if you see the mass grave of Clydesdale horses,

  • turn left and you're there.

  • -(AUDIENCE LAUGHING) -And it says something

  • about the rapid rate of mergers that even Jim Cramer,

  • occasionally finds himself in disbelief

  • at one happening.

  • Watch him react to a mega merger in the aluminum can industry.

  • Ball Corp's acquisition of Rexam

  • is taking the number of competitors

  • in this space down to, get this,

  • -from three to two. -(AUDIENCE LAUGHING)

  • How did they let that happen?

  • -(AUDIENCE LAUGHING) -Yeah.

  • It's not great when a business casual Louis C.K.

  • with a sound effects board

  • is saying, "Holy shit this was a really bad idea."

  • -(AUDIENCE LAUGHING) -But,

  • but "how did they let that happen?"

  • Is actually a really good question.

  • And the answer is interesting, because we've had

  • anti-trust laws on the books for more than a century.

  • And I'm not saying that every single merger is bad.

  • Sometimes businesses getting bigger can lead

  • to greater efficiencies and improvements.

  • The tension is between allowing that

  • and preventing them from doing real harm.

  • So it's a-- it's a balance.

  • But since the late 1970s, that balance

  • has tipped decidedly in favor of being merger friendly,

  • which has led to real problems.

  • And let's start with the obvious,

  • for workers, mergers can often mean big layoffs,

  • but it's not just employees that can suffer,

  • consumers can too, as Jim Cramer explained,

  • in that aluminum can segment

  • in an inexplicably sarcastic tone of voice.

  • I always say competition, while great for you, a consumer,

  • is it enough amount of profits.

  • Sometimes a business would be a total monopoly

  • with no competition whatsoever, and while that's the ideal,

  • it's very rare to see a genuine monopoly,

  • -because of course, it's against the law. -(AUDIENCE LAUGHING)

  • Which brings us to the next best thing, an oligopoly,

  • where a handful of companies control an entire industry,

  • co-existing peacefully

  • without much in the way of price competition.

  • -That's a weird tone to use... -(AUDIENCE LAUGHING)

  • ...to describe something that's clearly awful.

  • It's rare to see genuine bestiality because of course it's against the law.

  • Which brings us to the next best thing,

  • having sex with the stuffed animal

  • while looking at pictures of a real horse.

  • (AUDIENCE LAUGHING)

  • And-- And for sense of what it can look like

  • when a handful of companies co-exist peacefully

  • without much in the way of price competition,

  • just look at airlines.

  • In 2012, one airline executive told an industry conference,

  • Consolidation has allowed us to do things like

  • ancillary revenues, which is jargon

  • for all those fees that drive you fucking crazy!

  • Now, American was the first major airline

  • to charge you for your first checked bag back in 2008,

  • and back then people could not believe it.

  • NEWSCASTER: American Airlines will soon charge $15

  • for the first checked bag.

  • That on top of a fee of $25

  • -for your second one. -Fifteen dollars? Holy cow.

  • I'll have to put my underwear in my pocket.

  • (AUDIENCE LAUGHING)

  • Yes!

  • First, that is clearly a delightful man.

  • Although, it does makes you wonder whether he

  • fills his bags full of underwear and nothing else.

  • -(AUDIENCE LAUGHING) -But-- But within months,

  • most major airlines had followed American's lead

  • and it was essentially industry standard.

  • And it is easy for that to happen

  • when there's only a handful of big players.

  • In fact since then they have added and increased bag fees

  • multiple times, often moving in tandem,

  • which is how those fees have gone generating around

  • 540 million dollars a year a decade ago,

  • to 4.2 billion dollars now.

  • And that is infuriating. After all,

  • if I wanted exorbitant fees

  • that keep getting raised all the time despite shitty service,

  • I'd become a customer of AT&T.

  • -(AUDIENCE LAUGHING) -Yeah.

  • -Fuck you AT&T! -(AUDIENCE LAUGHING)

  • Even if you take over you'll never be my real dad!

  • (AUDIENCE LAUGHING)

  • And, look, you-- you may well be angry

  • with the service you get from airlines

  • but thanks to consolidation,

  • they don't really need to give a shit

  • about what you think.

  • And if you don't believe me?

  • Remember that awful video that went around earlier this year.

  • NEWSCASTER: The shocking images of a passenger

  • caught in a travel nightmare.

  • A man visibly shaken as he's yanked

  • and then dragged of a United jet by law enforcement.

  • All after refusing to give up his seat.

  • Yeah, that's the most horrifying thing

  • you can possibly see on an airplane,

  • unless your in-flight movie is The Boss Baby.

  • A movie that combines the unbearable smugness

  • of Alec Baldwin with an unbearable smugness

  • -of a baby. -(AUDIENCE LAUGHING)

  • Now, in the wake of that incident,

  • people said it was a PR nightmare

  • and there was talk on Twitter of boycotting United.

  • The problem is on certain routes they're the only option.

  • So, a boycott is gonna be pretty hard to pull-off,

  • and that is arguably why their CEO

  • was later able to open his earnings call for that quarter,

  • by describing a period in which, I will remind you,

  • a passenger had his teeth knocked out

  • on one of United's planes, like this.

  • OSCAR MUNOZ: Welcome to a terrific second quarter, strong financial

  • results and even uh, more incredible

  • operational results. And as you think of our customers,

  • I want to thanks them for their continued loyalty and support.

  • We continue to find new and better ways to service them

  • and make the more comfortable on our airline.

  • -(AUDIENCE LAUGHING) -And you know what?

  • Is it really any wonder that their earnings stayed solid.

  • United, is sometimes the only way to get

  • to where you are going.

  • Which actually explains their new slogan,

  • "You wanna fuckin' roller blade to Houston? Shut up and get in!"

  • (AUDIENCE LAUGHING)

  • And when and industry gets too consolidated,

  • any company trying to compete with them

  • or survive in their supply chain, can get crushed.

  • Now we all know about Amazon, Walmart or Google,

  • but there are less obvious examples of this too.

  • Take eye-wear. Now if you go into a Lens Crafters,

  • you'll see frames by brands like um,

  • Prada, Dolce & Gabbana, Burberry and Ralph Lauren.

  • All of which it turns out,

  • are made by an Italian company called Luxotica,

  • which incidentally also owns Lens Crafters and Sunglass Hut

  • and Pearle Vision and runs Target Optical,