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Wednesday Morning Rant [Joe Mannix]

Revolving Door

Many have observed and commented on the "revolving door" between government and industry. Commentary often focuses on things like major regulators going to work for the industries they regulate, in order to help those industries "navigate" the regulatory environment. Evergreen examples in this category involve FDA officials working for pharmaceutical companies or former high-ranking military officers working for defense contractors.

Recently, more people have come to realize that the intelligence services also have their (former) tentacles everywhere. Ex-CIA and FBI agents are peppered throughout industry. In some industries like Big Tech, it's easy to understand why - especially given the level of "cooperation" between the state and that industry. In other industries like brewing - Anheuser-Busch CEO Brendan Whitworth was former CIA, for example - the reason for the revolving door is less clear but it is nonetheless fully in place.

It is pervasive. Last week, the New Yorker committed one of its rare acts of near-journalism in the form of a lengthy feature article about OceanGate and its late CEO Stockton Rush. In the article, the author describes the careful structure that OceanGate used to ensure that its paying passengers were never called "passengers" and were all, after a fashion, made into crew members:

Although it is illegal to transport passengers in an unclassed, experimental submersible, "under U.S. regulations, you can kill crew," McCallum told me. "You do get in a little bit of trouble, in the eyes of the law. But, if you kill a passenger, you're in big trouble. And so everyone was classified as a 'mission specialist.' There were no passengers -- the word 'passenger' was never used." No one bought tickets; they contributed an amount of money set by Rush to one of OceanGate's entities, to fund their own missions.

An interesting and fairly clever structure to help reduce liability potential for the domestic part of OceanGate's operations (only the parent company that built the vessels was onshore - the expedition company and the foundation were offshore). The structure also helped to reduce any interference in operations by the US Coast Guard. It is therefore unsurprising to learn that Rush acquired some subject matter expertise by appointing a former USCG officer to his board:

... OceanGate had a retired Coast Guard rear admiral, John Lockwood, on its board of directors. "His experiences at the highest levels of the Coast Guard and in international maritime affairs will allow OceanGate to refine our client offerings," Rush announced with his appointment, in 2013. Lockwood said that he hoped "to help bring operational and regulatory expertise" to OceanGate's affairs. ...

This is utterly unsurprising and totally typical. The article implies - though does not state - that Lockwood came up with this tight liability avoidance structure and operational practices like not launching Titan missions from or operating in US territorial waters. The author does not show any evidence for that implication, but that also probably doesn't matter. Even if OceanGate didn't need Lockwood, they had him - probably for insurance and contacts should they be needed.

This is, however, yet another small data point in just how far the revolving door reaches. That door doesn't empty into just big tech platforms and major corporations, but into any business doing anything large, remotely interesting or shady. If you're in the business of doing anything more than selling stationary from a single storefront, it behooves you to have some "regulatory expertise" on your staff.

And, of course, there is a bottomless well of "regulatory experts" available to you - so long as you ensure that former (or "former") state agents wet their beaks.