The Problem of Twelve

The Problem of Twelve
When a Few Financial Institutions Control Everything

The forces behind an economic and political crisis in the making

A “problem of twelve” arises when a small number of institutions acquire the means to exert outsized influence over the politics and economy of a nation.

The Big Four index funds of Vanguard, State Street, Fidelity, and BlackRock control more than twenty percent of the votes of S&P 500 companies—a concentration of power that’s unprecedented in America. Then there’s the rise of private equity funds, such as the Big Four of Apollo, Blackstone, Carlyle, and KKR, which have amassed $2.7 trillion of assets, and are eroding the legitimacy and accountability of American capitalism—not by controlling public companies, but by taking them over entirely, and removing them from public disclosure and scrutiny.

This quiet accumulation in the last few decades represents a dramatic transformation in how the American economy operates—a sea change that few of us have noticed and all of us need to consider. Harvard law professor John Coates forcefully calls our attention to what is sure to be one of the major political and economic issues of our time.

Read CGR Director Nicholas Lemann’s Letter to the Reader

The Problem of Twelve
  • ISBN: 9798987053546
  • Price: $17.00
  • E-book ISBN: 9798987053553
  • On Sale: August 15, 2023
  • Pages: 190


“Power without accountability, Coates argues, is always dangerous. And he is right.” New York Times

“A fascinating insight into a paradox at the heart of liberal democracies.” Financial Times

“A powerful argument for thoroughly revising how the chief players in the financial world are regulated.” Kirkus Reviews

“Capitalism is determined by who controls capital. John Coates draws on a lifetime of experience and study to make a compelling case that American capitalism part way into the twenty-first century is dominated by a dozen insufficiently accountable institutions. His pathbreaking analysis and recommendations deserve the attention of all who care about our economic future.” —Lawrence H. Summers, Frank and Denie Weil Director of the Mossavar-Rahmani Center for Business and Government, Charles W. Eliot University Professor, Harvard Kennedy School

“The political dangers arising from concentrated economic power are a recurrent theme in American history. Coates’ book provides an essential tutorial on the influence of a small number of private financial institutions, and the answers needed for our own reckoning with concentrated financial power.” —Tim Wu, author of The Curse of Bigness, former special assistant to President Biden for technology and competition policy

“The problem of concentrated power in a few hands is one that we should all be deeply worried about. John Coates provides a compelling account of how the growing influence of index funds and private equity is making this problem much worse in ways that most of us do not even realize, not least because the activities of the key players are shrouded in mystery. The book is a wake-up call for all who are concerned about the future of American capitalism.” —Oliver D. Hart, Lewis P. and Linda L. Geyser University Professor, Harvard University, winner of the Nobel Memorial Prize in Economic Sciences

“In this concise but broad-ranging exposition of how index funds and private equity funds are changing the nature of American capitalism, John Coates unpacks the complex economic and political effects of these financial intermediaries. He offers some sensible first steps in what he explains will be the long-term challenge of containing their negative effects without losing the substantial benefits that index funds, in particular, have produced for American households.” —Daniel K. Tarullo, Nomura Professor of International Financial Regulatory Practice at Harvard Law School, former member of the Federal Reserve Board

“This is a must-read for policy makers and policy influencers on both sides of the aisle. Coates lays out—with deeply informed, thoughtful, and near-forensic precision—the complicated balance of financial and political power in America, as well as ways to address the increasing concentration of wealth and the problems that presents for a thriving economy and democracy.” —Allison Herren Lee, Senior Research Fellow, NYU School of Law, and former SEC Acting Chair and Commissioner

The Problem of Twelve provides a beautifully crisp and clear framing of both the economic issues and policy options surrounding two of the giants of the modern financial landscape—index funds and private equity funds. Whatever your own leanings are in this area, you will find much here to challenge and inform your thinking.” —Jeremy Stein, Moise Y. Safra Professor of Economics at Harvard University, former member of the Board of Governors of the Federal Reserve


August 2023 Must-Read Books — Next Big Idea Club

Are index funds getting too powerful? — WBUR’s On Point

Power Play: How Just 12 People Control America’s Economic Destiny — WhoWhatWhy podcast

John Coates on the Problem of Twelve — Leonard Lopate at Large

The best new books on economics — Financial Times

The ‘Problem of Twelve’ redux — FT Alphaville

John Coates on The Problem of Twelve — Macro Musings podcast

Is greed still good? — Harvard Law Today

The Secretive Industry Devouring the U.S. Economy — The Atlantic

Outsized Control and Outsized Risk — Harvard Law Bulletin

An Eye-Opening, Cautionary Look At The Problematic Clout Of A Few Giant Index Funds — 3 Takeaways podcast

When a Few Financial Institutions Control Everything — Capitalisn’t podcast


“The Problem of Twelve” at the World Affairs Council of Greater Houston / watch the video

“What Happens When a Few Financial Institutions Control Everything?” at Columbia Law School / watch the video

“The Problem of Twelve” Harvard Law School Library Book Talk / watch the video

“John Coates on The Problem of Twelve” at the Stevens Center for Innovation in Finance / watch the video

About the author

John Coates
© Martha Stewart

John Coates is the John F. Cogan, Jr. Professor of Law and Economics at Harvard Law School, where he also serves as Deputy Dean and Research Director of the Center on the Legal Profession. He has served as General Counsel and Acting Director of the Division of Corporation Finance of the Securities and Exchange Commission; before joining Harvard, he was a partner at Wachtell, Lipton, Rosen & Katz, specializing in financial institutions and M&A. He has testified before Congress and provided consulting services to the Department of Justice, the Department of Treasury, and the New York Stock Exchange.