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Mark Warner has a different background than his colleagues in the Senate, one more common in Silicon Valley than Washington’s halls. Before Virginians elected him U.S. Senator in 2008, and governor six years before that, Warner was a venture capitalist and entrepreneur. He co-founded Nextel, a wireless company now owned by Sprint, and invested in hundreds of startups. Today, he’s worth hundreds of millions of dollars.

When I sat down with Sen. Warner this week for Big Technology Podcast, I wanted to learn why his colleagues talked a big game about regulating Big Tech but had done little so far. They risked losing credibility by persistently calling out tech executives and then sitting on their hands. And given Warner’s background, he was the perfect person to ask.

Our conversation covered familiar territory — techno-optimism, tech illiteracy, and lobbyists — but then turned to stock trading. Members of Congress can trade individual companies’ stocks while professing to check their excesses, a stunning conflict of interest that pits their portfolios’ prospects against the country’s. The practice is commonplace, supported by party leadership, and may influence the legislative process. Warner said it should end.

“Members ought to restrict themselves from playing in the market,” he told me. “If you take these jobs of responsibility, you have to be willing to give up something.”

Warner is part of a broader awakening inside Congress around trading individual stocks, an issue that looms over the federal legislature’s push to regulate Big Tech, and its relationship with big business overall. Democratic House Speaker Nancy Pelosi, known as the House’s best trader, has long favored members being free to trade. But after years of acceptance, there’s finally a movement inside the building to stop this legalized form of corruption. 

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Among stock traders, it’s common knowledge that you can’t consistently beat the market if you don’t have an edge. Firms that do it regularly tend to find themselves in hot water for insider trading, like Steven Cohen’s SAC Captial, or on top of a Ponzi scheme, like Bernie Madoff. Then there’s Congress. Federally elected legislators are often privy to the details of big-spending packages and potentially catastrophic events, like Covid-19, well before their constituents. They have an edge. They’re not supposed to trade on that knowledge but — wink wink — they do. 

“There were members of Congress day trading from their congressional office, and day trading in large volumes,” Brian Baird, a former member of Congress who served from 1999 to 2011, told me. “The idea that, in no way, shape, or form did the knowledge acquired from their public servant role influence their trades — it's just absurd. Human beings don't work that way.”

“There were members of Congress day trading from their congressional office.”

Some of the most egregious stock trading in Congress occurred when several Senators dumped large volumes of stock in Winter 2020, right after Congress was briefed on the magnitude of the Covid threat. Sen. Kelly Loeffler sold millions in stock. Her fellow Georgia Sen. David Purdue made a windfall by dumping and buying back stock. Sen. Richard Burr offloaded more than $1.6 million in stock ahead of the market crash (and then made a suspicious call to his brother-in-law, who promptly called a broker). Loeffler and Purdue lost their races, the Department of Justice investigated Burr, and the public became more attuned to their representatives’ trading habits.

Loeffler, Purdue, and Burr disclosed their investments in compliance with the Stock Act, a law Baird originally introduced in 2006, which requires timely disclosure of trades by federal representatives. The law didn’t prevent members of Congress and the Senate from trading individual stocks — that seemed too aggressive at the time — but it ensured the public would learn about their behavior. In that regard, it worked. Nobody’s missing it now.

“The ability to trade, and particularly on a day trade basis, even if you’re not doing anything wrong, it looks bad,” said Sen. Warner. He said he keeps his investments in a trust that doesn’t buy individual stocks. 

Today, momentum is building to finish the job Baird started. Democratic Sen. Jon Ossoff, who replaced Purdue in the Senate, introduced legislation this week along with Sen. Mark Kelly to ban members of Congress and their families from trading stocks. The bill would force them to put their assets in blind trusts. And if they violated the law, they’d be fined their entire salaries. Republican Sen. Josh Hawley, after failing to unite with Ossoff, introduced his own stock trade ban for members of Congress. Bridging the gap between parties won’t be easy, but the bipartisan interest is a radical change from just a few years ago, where such bans were inconceivable. 

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Nancy Pelosi’s argument for allowing stock trading is that federal representatives should not be restricted from participating in the economy. “We are a free-market economy,” she said in December. “They should be able to participate in that.”

But as Pelosi’s colleagues consider regulating the tech giants, her family’s been trading their stocks. Last July, her husband Paul Pelosi made $5.3 million by exercising call options to buy shares of Alphabet. His transactions took place just a week before the House Judiciary Committee advanced its slew of antitrust bills aimed at Big Tech. The market didn’t think much of the bills, sending Alphabet’s stock up, and Pelosi cashed in. “The speaker has no involvement or prior knowledge of these transactions,” Pelosi spokesperson Drew Hammill said at the time.

Congress can participate in a free market economy without this apparent conflict of interest. Putting their assets in blind trusts, as Ossoff proposed, would solve the problem while allowing them to participate in the market. Even limiting federal representatives to broad index funds would help. The S&P 500 returned nearly 27% in 2021, for instance, a fine result for anyone. Restricting members to more general funds could give them the market's upside, help them focus on the entire economy, and remove the temptation for impropriety. 

As he leaned back in his chair in his Washington DC office, Sen. Warner, a seasoned investor, brought the point home. “The stock pickers, you look at their averages against the actual returns of the market over the last five or ten years, and time and again picking a market-based fund is both cheaper and probably has a better return.” And that is exactly why Congress should limit itself to that option, unless it has something to hide. 

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News Briefs

Federal Judge Steps Aside From High-Profile Amazon Case, Citing Financial Conflict (WSJ)

It’s not just Congress. Federal judges are trading stocks in companies they preside over as well. This week, U.S. District Judge Liam O’Grady stepped down from a nearly two-year Amazon case because his wife owned — and sold — $22,000 in Amazon stock as it took place. O’Grady called it “almost insane” that his wife’s investments would’ve caused him to steer the case in Amazon’s favor. Which is itself insane.  

Why Apple’s iMessage Is Winning: Teens Dread the Green Text Bubble (WSJ)

Apple has considered making iMessage available on Android several times, but has always decided against it. The reason? iMessage is a “lock in” that keeps people on iPhones so they won’t turn into dreaded “green bubbles” if they go to Android. Apple executives say this plainly in internal documents made public during its case with Epic Games. And the strategy is working, young people say they won’t date people who show up as Android users in their texts. 

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The Financial Independence Retire Early (FIRE) movement reckons with inflation. Amazon Prime pricing may rise. A thoughtful metaverse exploration. The FTC will get a second crack at Facebook. An excerpt from the forthcoming Davos Man book about Marc Benioff. We’re putting too much news behind paywalls. A California man with an AR-15, loaded magazines, and a hit list including Dr. Fauci and Joe Biden was arrested en route to Washington.

Quote Of The Week

“This might suggest that decentralization itself is not actually of immediate practical or pressing importance to the majority of people downstream, that the only amount of decentralization people want is the minimum amount required for something to exist.”

• Signal founder Moxie Marlinspike on Web3’s illusion of decentralization

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This Week On Big Technology Podcast: Tech Regulation’s Make Or Break Moment — With Sen. Mark Warner

As noted above, Senator Mark Warner takes us inside the battle to regulate Big Tech on this week’s podcast. Elected in 2008 and serving his third term in the U.S. Senate, Sen. Warner joins Big Technology Podcast to discuss whether we should regulate Big Tech and how the companies are fighting back — overtly and covertly. In the second half, we also discuss whether members of Congress should trade individual stocks.

You can listen on Apple, Spotify, or wherever you get your podcasts.

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See you next Thursday!