Martin Shkreli has been in the news of late due to the interesting tactic of buying a biotech company and raising a drug price by approximately 5000%. Pills which had started at $13.50 and had only risen about 5 dollars suddenly find themselves at $750 per pill. While it is certain that there will be people out there who are prepared to pay that sort of figure in order to stay alive there will be a vast majority who simply cannot afford it. If my life depended on pills that cost $750 each then I would be saying my goodbyes. The likelihood that many potential customers would simply die is not good for the bottom line of any company. First rule of business, as any insurance company will tell you, is maintain the life of your customers.
So with the likelihood that many people simply could not pay one has to wonder how profitable it could possibly be to raise prices so high, especially when it also leads to you becoming one of the most hated men in the world. It may be that the figures do balance out and that Shkreli would really be able to lose a huge number of customers if enough people can afford to pay his exorbitant prices. It may be that there are more nefarious purposes behind his actions. A look into Shkreli’s past certainly suggests that nefarious purposes are not a thing that would slip his attention.
Shkreli’s success began when he was only 17. He suggested a particularly savvy deal in biotech which turned out to be so savvy that it led to an investigation for insider trading. Although the investigation did not find anything the continuance of suspicious circumstances accumulates a sensation of caution in relation to Shkrelin’s character. He was later discovered using multiple twitter accounts to give the appearance that his investments were better value than they actually might have been. For instance Fusion.net report a tweet worded “Damn Bruh, if Cohen is buying then your boy is buying too, nahmean.”
Fusion describe this as a seeming violation of securities law as well as of good taste. They make no mention of any action being taken though.
The rest of the article makes interesting reading as it mentions Shkreli being accused by the Citizens for Responsibility and Ethics in Washington of making inaccurate and misleading statements about the effectiveness of drugs in order to improve his position in regard to short investments.
Additional suspicious behaviour includes a very recent case in which he was sued for 65 million dollars by one of his own companies for allegedly using their funds to pay back customer losses in another company that he had recently opened. A tactic that has a flavour of Charles Ponzi all over it.
All told there are a lot of suspicious circumstances in Shkreli’s past which certainly seem to suggest that his approach is not the most ethical, but then can you really expect ethical behaviour from someone who is prepared to hike the price of a vital life saving medicine by 5000%. There is a line between purely unethical behaviour and behaviour that can draw criminal sanctions. So far Shkreli seems to have been quite free of criminal sanction but the question has to be considered, is this because he is an innocent who has never committed a crime, or is it pure luck?
The price rise he brought about seemed to have an immediate effect on the nasdaq biotech prices which dropped 4.41% on Monday. If you were the sort of person who was in the business of short selling then you could easily see the value in being able to effect this sort of change. It may be far fetched for someone with the limited set of thinking skills Shkreli demonstrates to anticipate the likelihood of major changes being announced in response to his actions but Clinton’s tweet was not completely unforeseable. Since then Shkreli has said that he will lower the price to one that is more affordable. There are times in Shkreli’s past where he has made similar price rises to drugs; it would be interesting to see how the nasdaq was affected the last time he made a price rise of a couple of thousand percent. Previously the rise was one that was only from about $1.50 to about $30. That is an increase that could be imagined as being payable. The current increase would make a year’s treatment for toxoplasmosis rise to over half a million dollars. The benefits of selling things cheaply are obviously not easy to understand in the world of Martin Shkreli.
Certainly with the list of interesting incidents above you could imagine anyone who was deliberately trying to influence stock prices would be getting gradually bolder and bolder. There is no doubt in my mind or the mind of most people that Shkreli’s ethics are more than questionable. Could this be the time that legal action eventually succeeds against him. It is difficult to say as I am not yet aware of legal action being proposed on the grounds of market manipulation. The information available about Shkreli on the internet shows that he is often the centre of controversies and legal actions for various courses of action that have surprisingly received little legal scrutiny.
There are people out there who wish to try and pursue Shkreli on any charges whatsoever, attempted genocide is one suggestion that I have heard. It seems that the evidence for a charge on market manipulation grounds would be favourable to anyone who is pursuing Shkreli. It is true that he probably has access to some incredibly talented lawyers but in the instance of biotech stock dropping by 4.41% across the nasdaq he has had an effect on a lot of other very powerful people. Where it may be that a blind eye is turned towards a lot of white collar crime the chances of that eye being turned full on in maximum scrutiny must be far higher where there are high powered victims of your actions. It is often in reaction to the greatest rogues that major improvements to legislation and legal infrastructure are made. If it hadn’t been for world war II there may have been no Human Rights Act or EU. Perhaps Shkreli deep down inside felt that the world of copyright and patent trolls was so egregious that he needed to force the hand of politics to introduce legislation to deal with it. Perhaps, but probably not.
I have to say I was highly amused by the Alessio Rastani revelations. Those of you who do not know who he is may have seen him anyway in the BBC report on the stockmarkets that is going around at the moment. Mr Rastani was the chap who stated that Goldman Sachs ruled the world and that traders were just in it for the profit. I believe his message was that it is a flawed system and we had better all start getting prepared for the inevitable crash because as far as he was concerned the coming financial doom that the stockmarket has in its future is an opportunity for wise investment and huge profit.
There seems to be a lot of conjecture today that he may be a hoaxer of some kind just trying to make the financial world look foolish. That is certainly fairly likely. The alternative is that he is a much rarer thing, an honest trader. It is not impossible. Everyone knows that we live in harsh financial times, as long as you have the understanding that the stock market is there to be drained dry to fill your pockets then you have some of the knowledge to ply your trade there. He didn’t say anything that we don’t already know. Anyone who has studied the subject knows that what he said described the modus operandi of the free market perfectly. What has shocked people is that someone has dared to speak about it.
Some people consider Alessio to be a fiend, others think of him as a modern folk hero. He is certainly only a fiend if he is alone in his beliefs. However, we all know he is not. Just as we don’t mention in front of the kids that Grandma has the big C we don’t mention in front of the proletariat that we are all having a whale of a time drinking their mortgages by the magnum. The first rule of the failure of capitalism is you don’t talk about the failure of capitalism. The second rule of the failure of capitalism is you DON’T TALK ABOUT THE FAILURE OF CAPITALISM. This is the topic of working class satirical comedians. No-one takes them seriously, they can say what they want, it will be ignored and forgotten before long. But what happens when the traders and the bankers start saying these things. Can it be so easily swept under the carpet?
Unfortunately it probably can. Alessio is only one voice. He isn’t telling us anything new, this is no revolution. But perhaps it is the first sign that change may be coming. Maybe the traders and the banks will start to take notice that they have been caught in the act. Before this it was all speculation by malcontents, they didn’t have the specialist knowledge to prove what they accused . Now however it is admitted. I have to wonder what will come first. Will the free market adapt itself to not screwing every penny out of the people or will the people start putting the heads of traders and bankers on sticks to serve as a warning to the future?
Heads on spikes will only come as a last resort when society has collapsed and when we can’t even feed or clothe ourselves anymore. I hope I am just being overly cynical when I say I have more faith in the free market to take us down that route than I have faith that it won’t.