The Economics of Succession
You can't make a Tomelette without breaking a few Greggs
One king, one crown.
Kendall Roy, season 4 episode 7
Succession, one of my favorite tv shows ever, has just ended three months ago to this day, but I took really long to do this post so I’m gonna post this anywyas. The show is a dark comedy (it really is!) about the Roy family, the fictional owners of a media conglomerate with a conservative news organization as its beating heart.
What can this clan of filthy rich conservative media moguls tell us about the economy?
Post contains spoilers for seasons 1 to 3, and mild spoilers for season 4.
Coronation Demolition Derby
Succession follows the Roy family, owners of media/entertainment conglomerate Waystar Royco - including ATN, a conservative news network. The company’s founder, CEO, and President is Logan Roy, the aging patriarch of the Roy family. At age 80, Logan seems poised to relinquish command of the company, and leave it to his secondborn and right-hand man, Kendall. However, a failed plot against his father leaves Kendall on the outs, and the top spot is up for the taking - key contenders besides him include his younger brother and COO Roman, various Waystar executives (at times-COO Frank, CFO Karl, Chief Counsel Gerri), as well as his only daughter Shiv, a longtime liberal political operator, plus her middle management husband Tom Wambsgans (assisted by estranged once-removed Roy cousin Greg).
Season One mostly deals with Logan having a stroke in his 80th birthday, and the resulting fallout after Kendall moves (and fails) for the top spot; Ken’s friend and business associate Stewy appears to be working with rival media right wing media mogul Sandy Furness, and the two of them plan on taking over the conglomerate.
Season Two follows Logan’s plans to avert this “bear hug” by making his own move on Pierce Group Media, a liberal news conglomerate that will require finessing the (liberal, refined, polite) Pierce family. This fails, and leaves the Roys scrambling, while each of the three main siblings make a play for CEO of Waystar, and the oldest sibling, Connor, starting a presidential campaign.
Season Three sees a (peaceful) resolution to the Sandy-Stewy “bear hug”, as well as some political intrigue in a presidential election year. Logan seems determined to sell Waystar Royco to GoJo, a Swedish streaming giant with a mercurial owner, a move his children oppose and plot to stop.
Season Four deals with the resolution of the GoJo deal, which split the family in two camps, and all is up for grabs in the aftermath of the death of Logan Roy (oops). The presidential election takes place, further dividing the family. Plus Cousin Greg, whom you are supposed to hate, pours La Croix to wash out some wasabi he got into the eyes of an ATN employee.
We hear for you
People come to us because we don’t sell them on anything. No packet of f***ing bleeding heart, United Nations, Volvo, gender-bender horseshit.
Logan Roy, season 1 episode 4
Let’s start with an easy one: all the Roys are fighting for something - the top spot. It’s uncertain (especially after a couple of episodes) that Kendall is going to get it.
Waystar Royco, the company every Roy (and a few others, such as Tom Wambsgans or Gerri Kellman) wants to lead, was originally a media company: tv, magazines, newspapers. It later expanded to include movie studios, tv shows, cruises, parks, hotels, and further off ventures such as electronics, video games, or even satellites. The company has been sluggish in recent years, with tepid revenue growth and some of its operations being increasingly unprofitable - especially those consisting of manufacturing and technology. There are clearly some gains to scale, or at least some know-how that is transferrable, say, between filmmaking and TV and whatnot, but not to satellite launches or game consoles.
The company’s prospects seem grim, considering the dire landscape for media in general (moreso traditional companies), the elevated age of conservatives who turn on ATN, and the general unprofitability of most of its ventures. How to turn the company around is different, with each sibling having a different set of ideas: Kendall wants the firm to focus on emerging ventures and digital media (bad bet), Roman intends to dump most parts of the company, keep ATN for political influences but make it appeal to younger audiences (sriracha instead of oatmeal, so to speak), and focus on social media and new technologies, and Shiv proposes dumping news and focusing on entertainment. Logan Roy, meanwhile, just thinks about bulking up: media startups, legacy operations like Pierce Group Media, or streaming colossus GoJo (the deal then turns into a merger and later into a purchase the other way around). Media concentration definitely has an impact on the quality of content, the quantity of titles released, or the journalism industry as a whole. And film studios owning film reviewers would definitely be for their own benefit (though not in reality),
But let’s focus on ATN, the news empire. It’s considered the most important part by basically everyone (except Shiv, for whatever reason), but is news that important? Yes, absolutely. Movies may not increase violence (in fact, they decrease it, due to less time outdoors and lower alcohol consumption), but they definitely influence behavior. MTV’s show about teen moms reduced teen pregnancy, for crying out loud (or maybe not. Debatable). But conservative news media is extremely influential. Because of how Fox News (the real life ATN) was introduced, there was a lot of randomness on when different US counties got the network - and when they did, they voted more conservative. Their elected representatives took notice: after Fox News was introduced to a US county, its representatives moved to the right. The media, overall, is extremely influential on behavior: mostly as a byproduct of exposure, but also due to crowding out other potential behaviors (think about violence in movies - popular violent movies, and perhaps even video games, reduce violence because people are drinking alcohol outside less often).
And nobody understood the media better than Logan Roy, who grew a small newspaper business into a multi-billion conglomerate. He also saw future trends: entertainment and tech swallowing the news whole. But was he irrepleceable? Kind of. For starters, the dynastically rich tend to be less competent than peers in similar positions, simply because they’re likelier to get their jobs through connections - the dreaded “nepo babies”. But business owners do have some juice that their offspring don’t - in a large number of US firms, when the founder or owner of a business died, the company performed worse, pointing to a set of skills or talent being lost.
This is also why, when Logan died unexpectedly, the company’s stock (Waystar Royco is owned in large part by the family, but not to a majority) declined. That’s dad, to quote Roman Roy. The immediate translation of information about the company into its share price is also part of a thorny debate on something called the Efficient Markets Hypothesis (more technical introduction here). The EMH states that financial markets use all information about companies’ expected future earnings, which has three corollaries: first, it’s impossible to predict future stock prices, since you’d need to know information that isn’t known yet. Second, nobody without “secret” information can outperform the market as a whole, so stock market analysts are borderline useless. Third and last, any information gets incorporated into prices as soon as available, such as the death of one Mr Logan Roy (this happens twice in the show!). The EMH is extremely controversial, but it kinda stands to scrutiny, mainly because disproving some implications is extremely difficult due to the data required. And there’s a lot of back and forth on whether it’s actually been debunked or if its critics don’t properly account for other factors, such as economic cycles and interest rates. Eugene Fama, who won a Nobel Prize for the EMH, has said of his co-laureate and longtime sparring partner Robert Shiller seeing the 2009 financial crisis coming “Right. For example, Shiller was saying that since 1996”
Ludicrously capacious bags
So, the news is, tomorrow we’re all gonna try to look for jobs in the same branch of Target
Roman Roy, season 3 episode 5
The Roy family is rich. Very rich. All of them have several hundred millions, or even a few billions, to their names - Connor Roy blows 500k in Napoleon memorabilia [sigh] like it’s a 5 dollar latte. Unsurprisingly, all the Roys (except Shiv, for some of the show) work at the family company, making them “nepo babies” - the subject of a semi-recent post. I’ve also written elsewhere about housing and economics inequality. But thse mostly center the normal rich and the upper middle class (more Modern Family and Parasite - the 9.9%), so what’s going on with the ultra rich? Are they different from the regular rich, or everyone else, in some special way?
The first thing to know is that inequality is defined, roughly, as how much more of the pie goes towards the rich than towards everyone else - in a perfectly equal society, the richest 10% would get around 10% of all the money and property, and we can say a society is more or less inequal based on how much of a deviation there is from that. As a matter of fact, societies aren’t very equal in how they distribute their incomes or their wealth, and most measures of inequality have gone down globally over time. There is some debate over the numbers, but not over the direction.
Over the past 50-odd years, and even 100 years, what has happened is that the incomes of the rich have grown faster than everyone else, and the richer they are, the more those incomes have grown - the inflation-adjusted incomes at the 99th percentile (i.e. the richest 1%) have grown around 2% a year, while the incomes of the 99.9th percentile at ~3.5% a year, and of the 99.999th percentile at 6% yearly. This runs contrary to what used to happen previously, where the poorest saw the most growth and the middle class saw robust increased - meanwhile the poor have basically no improvement, and the middle class have seen their income grow slowly.
Because gender differences are important to the show, especially through the characters of Shiv and Gerri, and because it’s something I care about, then it gets a small shout-out. Income and wealth inequality are smaller among women than among men, but this is mostly attributable to the fact that there are fewer ultra-rich women than ultra-rich men - women like Siobhan Roy face an uphill struggle in the commanding heights of the economy. The same is true for race: while the typical Black person has lower (much) net worth than the typical white person, whites as a group have a lot more wealth, and a far higher share of incomes, simply because the ultra-rich are nearly entirely white (I mean, just ask Chris Rock about his neighbors).
In a nutshell, this means that the rich are keeping increasingly large shares of what society makes in a year, and growing this share more quickly the richer they are. In principle, this isn’t necessarily bad - the rich might be more productive or more educated, or make better decisions because of more information. There is, for the top 1% of incomes, some evidence that this is true - for example, when owners of corporations die, their firms tend to perform worse, signaling that there is some know-how being lost (and rich fund managers underperform). The issue is that this is mostly circumscribed to people who are “regular rich”, and not ultra-rich; your average successful dentist or lawyer, not the titans of industry.
For normal people, and even the normal rich, your money comes from your work: you make a salary, and spend and invest that. If you’re successful enough, you can even invest in housing, stocks, or other assets, and make some passive income. For the ultra rich, however, their money almost entirely comes from their ownership of things that have gained a lot in value. If you already have wealth, growing it is relatively easy; if you don’t have it, it’s really really hard to build it.1 The rate of return of capital plays a massive role: owning things has become increasingly profitable. Ownership of things has become increasingly concentrated, and the things that are owned themselves have become very concentrated too, meaning that the rich are getting even richer than they “should”. However, generally speaking, rich people do indeed pay more taxes than poor people, but they also evade more of their taxes: in the (very “woke”) Scandinavian countries, regular taxpayers ripped the taxman off to the tune of 3% of their liability, but the top 0.01% did so by a fraction ten times higher - around 30%.
So being rich means that you get to be richer, and that your kids get to be rich as well: mobility between socioeconomic classes has declined dramatically in the US, except for children of immigrants. In fact, inheritances are extremely lopsided in favor of the already wealthy, with massive implications for racial inequality (they’re all white). And if you’re not lucky enough to be a nepo baby, you can at least be the opposite: children of poor people also inherit their parent’s poverty. In fact, the US’s threadbare social safety2 net is one of the biggest explanations for why it has such high persistence of poverty and high inequality - when people are given access to free healthcare at 65, their finances improve. And, relatedly, the rich tend to live longer than the poor, and have for a really long time too. There is a case that inherited wealth helps the economy, since these patterns are not necessarily true indefinitely and may have benefits for intergenerational consumption.
One last aspect of Succession that I find fascinating is how it depicts the culture of wealth and the wealthy: the show spawned the (almost certainly fake) “quiet luxury” trend, of wearing expensive but incospicuous clothes - such as a 2,500 dollar Loro Piana sweater. Nothing is a better example than the “ludicrously capacious bag” line, where Tom Wambsgans mocks Cousin Greg’s date for wearing a very expensive, but tacky, Burberry bag. This plays into economist Thorstein Veblen’s idea of conspicuous consumption, purchases that are meant to signal status - or in this case by hiding it.
Lastly, this ties into the show’s seeming conflict between “Old Money” and “New Money” - a division between families with longstanding generational wealth and families with more recent windfalls, which largely owes to different patterns of saving and investing. Old Money is usually asset rich and cash poor, while New Money is cash rich and asset poor - the Roys themselves are New Money, since Logan used to be middle class, and are trying to buy out their liberal, Old Money, New England equivalent, the Pierce family, who don’t feel like running their ancestral news operation anymore. But the Roys themselves are Old Money compared to newcomer Lukas Matsson, who wants to gut their company of all its dead weight (including the firebreathing right-wing pundits) and turn it into a content mill for his streaming services. One could compare Matsson to the dollar princesses, rich American heiresses who married into solvent but illiquid British nobility to help preserve their estates - including Consuelo Vanderbilt, who’s multibillion dowry to the Duke of Marlborough saved Blenheim Palace.3
Conclusion
So, Succession: rich people bad, the media bad, tech industry bad. Kendall Roy, however, is babygirl, and Shiv Roy did nothing wrong. Much to think about.
Also I didn’t actually write the second line as a reference to the show’s ending, it was just a good joke.
Fun fact: Blenheim Palace is the only non-royal, non-eclesiastic building that is allowed to be called a palace. It was also a gift from Queen Anne to Lady Sarah Marlborough, a friend of hers, which is a minor plot point in my favorite movie, The Favourite.
That subheadline is everything