One of the most interesting parts of this is the choice to make Holdfast a C4. They really wanted to make this a political organization, and were willing to forgo a staggering amount of tax savings - in fact, $17m in tax donating away a $3b asset. Probably the least effective estate planning from a raw $ perspective in history.
Major props to the family for doing this - this is now the definition of "putting your money where your mouth is", and I hope this model is a success and serves as a template for others to follow.
Thanks for sharing the actual letter. Contrary to what the New York Times report (OP) would have you believe, Yvon's note doesn't say anything about climate change. Rather, it emphasizes "the environmental crisis," "defending nature," "the health and vitality of the natural world," and the Earth’s finite resources.
There is so much more to environmental conservation than just "climate change," and Patagonia has done much more around e.g. removing dams, minimizing PFCs in their products, recycling and increasing longevity of materials, and other actions that protect air, land, forests, rivers and oceans, and which encourage sustainable energy production.
Dear NYT and fellow readers, please don't throw this diversely interested company into some politically expedient climate change bucket. Their view on the environment is so much more.
Despite some of my issues with the company, they have a few really cool environmentally friendly programs. The "worn well" program is incredible, basically if you have a piece of patagonia clothing and return it through that program, they clean it up or recycle it and you get a free credit towards anything patagonia sells.
For kids clothes this is a boon, I would buy my daughter a patagonia jacket from the patagonia outlet at 40% off, she grows out if it and I trade it in for a new jacket and get $20-$30 off of the new jacket. Her old jacket gets cleaned and sold to some other kid who can use it(they have a worn well portal where you can buy used gear), great for peoples pocketbooks, great for the environment - win all around.
Yeah, I don't agree with 100% of their political positions (though, to be fair, it is rare that I agree with 100% of anyone's political positions, including my own), but they are really trying to change the way people consume their products. And, many of their products are truly built to last. I have two jackets (one insulated, one a fleece) that are 15+ years old and have been dragged through the dirt, mud, rain, and snow all over the U.S.
Long time HN reader, never signed up, until today.
It's humbling and refreshing to see someone disagreeing and acknowledging that it doesn't mean that they're right and the other side is wrong, and that it's ok to like 99% of someone else's agenda (my interpretation) without starting an I'm better than you campaign.
More of us should follow that line of thought, love your comment man!
Right now I'm wearing a pair of their twill jeans I've had for nearly 20 years now. There's a tiny bit of pilling in the knees you can only see close up. Otherwise they look brand new every time they come out of the wash.
A lot of their stuff isn't to my style, but I've had really solid luck with the stuff that is. I've got multiple pairs of long underwear and down vests and such from back when I snowboarded a lot, again, all of them held up really well.
Though on consideration, I would venture a guess that the purpose of each program might be as different as the governance of each company. Outcomes might be comparable, but I'd bet the arrival path and conversations were very divergent. Judging from this stark choice they've made in this post, the people at Patagonia are clearly thinking VERY differently than most boring and very profitable companies, and I presume that's not skin-deep.
And if so, maybe it's selling one short to glom them together in assessment, based mainly on outcomes instead of routes? I dunno, I could see someone defending either way of looking at it -- focussing on sameness because outcome's are the same, or differentness because paths to decisions differ :)
I happen to know someone who works in a H&M store. They throw out any returned items even if they haven't been worn once. It's cheaper than having to put the work into sorting them.
There is often a disconnect between management and lower levels. I suspect the store would probably get in trouble for this behaviour.
Not least because it opens the company up to fines for false advertising (e.g. Australian Competition and Consumer Commission regularly polices companies operating in Australia, which H&M does)
Employees perform the behaviors you incentivize. H&M can have an official policy that disagrees, but if their employees are incentivized not to comply, then they won't, and that's H&M's fault.
A former company that I worked for wanted their customers (Real Estate Agents) to fill out profiles. They wanted the account managers to encourage this behaviour so they tied the bonus/commission to having it filled out.
Needless to say, the customers had very little interest in filling out the profiles. I found all the account managers sitting around a table at a conference filling them out themselves instead of talking to the customers (as they should have been at the event).
A few even discovered they could fill the fields with '.' characters and game the system (they got caught and fired for crossing the line). The others just wasted valuable time they could have been selling products and got their bonuses.
I'm not sure how much of H&M clothes are really collected after use, but at least they have invested in a company that works on recycling fibers from clothes. They own over 10% of it. Probably some of what they collect goes to this Renewcell company for recycling.
Used Patagonia gear for kids (if you can afford it) is incredible. You know they’ll be dry and comfortable, it wears remarkably well, and it has resale value. All of my kids have cycled through Patagonia garments and each garment was sold eventually, bringing the cost of ownership well below what we’d pay if we bought them worse gear new.
It’s unfortunate that price prevents people from wanting or being able to invest in quality clothing that can last. If something is well made it seems like it can outlast cheaper garments several times over, and the environmental cost is reduced dramatically. Most garments like this really do cost a lot though; my nano puff hoody was around $350 CAD, for example. You can get stuff that looks the same for $50-$100. If I hadn’t experienced how nice it is first hand, I’d likely assume the nano is a waste of money and go with something cheaper too. Then of course at times in my life I couldn’t spend that much if I wanted to.
We have a bit of a crisis regardless. The garment industry is like a massive conveyor belt into landfills.
Yes "If you have an old Patagonia item that is just sitting around, we’ll give you credit towards your next purchase on a used or new garment." https://wornwear.patagonia.com/
The problem with this argument is that it requires a good deal more effort than dropping off a garment. I have to list it somewhere and deal with inquiries and postage. How often to garments get thrown out because people don't have the time or interest in going through this process.
Personally, I end up donating many items to avoid the need to deal with eBay/Gumtree (Australia/UK marketplace).
Quite literally references climate change in the third sentence of the letter?
> "As we began to witness the extent of global warming and ecological destruction, and our own contribution to it, Patagonia committed to using our company to change the way business was done."
The letter doesn't say the words "climate change" but that's clearly what they are talking about. Instead, they do mention "global warming" which is part of what is referenced by "environmental crisis".
I don't think "global warming" is more or less politicized than the phrase "climate change". Maybe because "global warming" is slightly antiquated, it's less likely to produce knee jerk reactions?
I agree that the letter is trying its best to be politically inclusive, and I appreciate it.
From what I heard it was the polluters who pushed us from "global warming" to "climate change" as the second is less emotive and less likely to be linked to them by people (especially after they paid so much for people to obscure things).
Read it again, it does mention climate change. Reflexive ctrl-f won't work because it words it: "global warming." It's in the very first paragraph:
> As we began to witness the extent of global warming and ecological destruction, and our own contribution to it, Patagonia committed to using our company to change the way business was done.
The New York Times didn't slip this in to mislead everyone.
That's interesting, I wouldn't have made the distinction. I'm not even sure there is a distinction (climate change is by far the greatest threat to the environment). What are your personal views on climate change, if you don't mind me asking?
Not OP, but I think there are very important environmental impacts that are not related to climate change. Take, for example, plastic in the sea - clearly a big issue for the environment, but addressing climate change will not impact this at all.
Other examples include destruction of habitats, NO2 in the air, dumping waste in nature and rivers, lead that gets into nature etc.
I've found that 'climate change' activism leads with wealth redistribution, social justice, and even socialism in a general sense. Biodiversity activism, on the other hand, tends to organize around reducing anthropogenic sources of CO2/CH4, establishing wildlife corridors, protecting watersheds, and so forth.
Both are valid and there's obviously a lot of welcome, positive alignment.
How are sea microplastics and climate change not related? Both involve fossil fuel materials being left somewhere they shouldn't when we are "done" with them.
Because as long as you don't burn them, they don't release any gases that contribute to the greenhouse effect. Could you explain any mechanism that make plastics in nature contribute to the climate catastrophe?
> climate change is by far the greatest threat to the environment
The effects of climate change will be uneven across humanity, and many of the worst effects might be second-order (e.g. instability caused by mass migration).
There are other types of environmental change, like accumulation of so-called "forever chemicals", which have the potential to have a more direct effect on the entire human population, and potentially over a shorter time period than climate change. It's not clear to me that climate change is the greatest threat we face.
My vague concern is that overly emphasizing "climate change" means all these brains are thinking on just one small bit of surface of this larger project. We talk a ton about carbon because it's the tangible thing that brownian motions equally through the atmosphere and we can undeniably quantify, but the whole ship leaks across a number of dimensions. We need eyes and minds on all the little edges of the larger wicked problem: both convincing and creating fellow humans that we can be happy and healthy without unconstrained growth. There's a lot of baggage to work through.
The sheer eighth grade math of it is that we can't be anything but cancer or conquerors (at whatever scale) unless we get that under control on this finite planet <3
>Yvon's note doesn't say anything about climate change.
So this is the standard level of reading comprehension on HN these days?
LITERALLY the third sentence in the first paragraph.
>I never wanted to be a businessman. I started as a craftsman, making climbing gear for my friends and myself, then got into apparel. As we began to witness the extent of ***global warming***...
I really like environmental causes around preserving natural wild places for future generations to enjoy and appreciate that patagonia (a brand that caters a lot to outdoorsy types) is backing this. Makes me want to support them.
Personally, I don't own any items from Patagonia. As company so, it is model to strive for. A pitty tgat not more companies can resist the worst incentives in capitalism.
It was an important clarification which got hijacked. The clarification is that some local climates might not meaningfully warm, they might even cool, but will experience other drastic changes. Even as the global temperature rises.
It’s a trick because nuance is easily exploited by people craven enough to exploit it. But it’s an important distinction for people who don’t understand why they’re having colder or wetter winters in temperate climate regions (example picked out of my locality).
I dislike "climate change" too, because it carries the idea that we can change it back. I think "global warming" was fine, but if i had to pick something, it would be "climate drift" i think.
Not sure why you are getting downvoted. Frank Luntz was the republican PR pollster that advised the Bush administration to replace "global warming" with "climate change" in all White house documents and speeches.
The idea was to make it sound less severe, to please the Oil&Gas lobby. For the most part it worked as you now have environmentalist on the other side of the fence using it too.
I agree with the argument that climate change is maybe not accurate as some regions might cool as well. I would prefer "climate emergency" if I was in charge of the PR.
“Climate drift” sounds like the name of an AI bot, made specifically to create a narrative that underplays the seriousness and gravity of the extremely dangerous and deadly feedback loops that are appearing now in the global climate system.
Drift carry the idea that we cannot change it back.
I don't think it underplay anything. I understand that we must act. But with this name your arguments won't be heard.
The climate denialists of today are those believing that if it gets too much, we will have to do some efforts for a decade and boom, back to 1970 climate. I want to engage that belief, hence 'climate drift'
The implication of “great extinction” is that we’re seeing a mass extinction event which we aren’t. At least not on the level of the major ones usually discussed.
I disagree. Climate always changes. Constantly. Warming is just one part of the climate change. Many other things change too so climate change is a lot broader term for this.
Weather changes. Climate is the accumulated average across years. It’s “yesterday it rained here” vs “we got an average of x litters of water per square meter during this month in the last ten years”. Climate changes, but by its own nature it should change really gradually.
The point is that weather is changing so much that even climate is changing quickly now. Or, in a car metaphor: not only our velocity is increasing, our acceleration is also increasing m.
I think a stronger word like “climate emergency” would have been more appropriate.
Weather changes. Climate is the accumulated average across years. It’s “yesterday it rained here” vs “we got an average of x litters of water per square meter during this month in the last ten years”. Climate changes, but by its own nature it should change really gradually.
The point is that weather is changing so much that even climate is changing quickly now. Or, in a car metaphor: not only our velocity is increasing, our acceleration is also increasing.
I think a stronger word like “climate emergency” would have been more appropriate.
Overall temperature increase is the part that is most directly caused by our activities, and which in turn causes all those other changes, so I think it's fair to emphasize that.
Too subjective. Objectively climate has always been changing and will always be changing. Earth has seen much warmer climate and much colder climate and everything in between since formation. Your definition of issues don’t really make sense unless it’s subjective because objectively climate change is just is, not good not bad, just fact and consequence of complicated system. Even in the past many centuries, if you look at history, plenty of empires fell because of climate change(floods, droughts, etc). We are accelerating the change but it would still be changing even if we didn’t exist.
It says a lot about America that doing things the right way and paying a whopping 0.5% in tax is a "staggering amount of savings" and "least effective".
Imagine the things we could do if more companies cared about giving back to the public good that enabled them to become what they are rather than using legal trickery to ignore the intent of the law.
I think "political" here referred to the fact that the way they set up the organisation allowed them to make political contributions, at a cost of having to pay $17m in tax more than they would've had to pay with a different setup.
Sure, but I think what OP was saying is that this says a lot about the US. For example in Germany, denying man made climate change is a fringe position. We just fight about how to stop it and at what cost.
Everything that happens or is done in public is political, and the more it affects the public the more political it is. C̶l̶i̶m̶a̶t̶e̶ ̶c̶h̶a̶n̶g̶e̶ The climate emergency is a deeply political topic as it affects basically everyone.
I firmly believe that I know better than the government where I should put my money to give back to society and will be more efficient in doing it. I give a lot relative to my income and intend to continue doing so, and also intend to minimize my tax burden so I can support the causes I care about not the ones other people vote for.
Sure but you are a tiny minority. Most people are outright selfish when it comes to (not only) money, hence laws are required. More often than not they create an alternate reality where they justify their actions by whatever mental trick their subconsiousness deems necessary (ie I pay enough already, it wont matter anyway, I put the money into kids etc etc etc).
I do not believe the government is any better at deploying money to meet a social good.And I believe it is people's own right to use their money to support what they believe in. So I will continue to work to pay as absolutely low tax as possible so I can support causes I believe in and allow others to do the same.
501c3 organizations have to be careful about the language they use when commenting on any government policy, even if they stay out of elections. It’s just hard to be overtly opinionated about things as a c3. The Sierra Club found this out the hard way when fighting a dam across the Grand Canyon. They converted to a c4 as well back then (well, the IRS forced them to).
I think it’s fine because non profits even under C4 grow tax free with a tiny excise tax on investment income (1.39% on realized gains and dividends, I think?)
so for a company with profits being the primary asset, itll grow even quicker, since there are no income taxable shareholders
They are not giving “everything” away presumably they have taken many millions of dollars out of the company over the years, enough to have built likely generational wealth outside of their Patagonia holding.
If own a single asset worth $1B and donate it all, I have no tax write off because I have no money
Write offs carry forward to future years - you still get the write off even if you do t apply it.
They don’t get a write off here because the organization (that they created for this) is a 501c4 non-profit. Donations to those are not considered tax deductible.
It's a bit sad to think that 0.5% tax is "staggering", and also to feel that it's important to not exclude government when making charitable donations.
> they really embody this notion that every billionaire is a policy failure.
If only more people realised this. Instead we do the opposite and worship the system which make them happen.
Very inspiring overall. I've always heard good things about the company but never knew of the founder. There's something about seeing one carry such dignified ideals throughout their life, without wavering to societal expectations, that is so admirable.
They created a company that people willingly buy over $1 billion of product from every year. Why shouldn’t creating that much value in the world result in the owners collectively benefiting? If that happens to be a million different people each having a $1000 stake or 1 family having a $1B stake, I don’t have a problem thinking that either is a valid outcome.
IMO, we should look at the value created and celebrate that rather than jealously fret over the concentration of the number of people who own it.
To be clear: I think what they did is admirable on both the building and the recent transaction. I respect them greatly for both parts.
And it's not even all the employees of this single company who created it. The entire structure of society, technology, law and order, transport infrastructure, etc, etc, enabled such a concentration of wealth.
It's good to see when beneficiaries realise it's not really 'their' money at all.
You speak as if almost all these societal benefits are not paid for by willful trading, and by taxes.
Did this particular billionaire evade taxes? used tons of governmental subsidies, or government-granted monopolies? Does this company look like it did not pay its fair share back?
Outcomes for the median person in places where rules do not allow or encourage such individual wealth are almost universally poorer than places that do. The very system that allows billionaires to exist also incentivizes the creation of wealth that benefits everyone.
The research I've seen on this shows the opposite, eg the scandinavian model.
Once you get past a certain level, the money itself no longer has any meaning, it's more about keeping score. We should look for ways to satisfy that drive without sucking wealth out of the rest of society.
All Scandinavian countries have billionaires. Sweden and Norway even have more billionaires per capita than the US. Scandinavian countries don't treat billionaires as policy failures. They merely have higher taxes across the board. In fact, the US tax system is actually more progressive because we don't have a VAT and much lower low and middle income tax brackets.
I tried "gini coefficient vs per capita GDP" and "gini coefficient vs per capita GDP" in wolfram alpha, but it just looks like a random scattering (other than the notable absence of high gini coefficient, high per capita income countries).
Clearly I've missed something, would you mind elaborating?
Taking a look at the raw data on Wolfram Alpha, it seems like a lot of the super low income countries are muddying the data. There are many low income countries with Gini coefficients all across the spectrum. I don't have the time to do it now, but you might find a pattern in the data if you filter out countries with GDP/capita <$5000 or <$10000.
For some reason, the plot defaulted to log for me. If you put it in linear mode, you can probably eyeball it. I mean we're looking for an obvious trend and it appears to just be completely random.
The socio-legal conditions that permit the building of wealth, like strong property rights and free markets, are necessary but not sufficient; so you wouldn't expect to see a correlation between them.
There are only a few countries that have a low Gini coefficient (more income equality) along with a high per capita GDP (more overall wealth) in north or western Europe such as Finland, Norway, or Belgium, which are very much the exceptions; for the most part, they all have a strong cultural background of being industrious, and in the case of Norway have a lot of oil.
According to the Wikipedia page on the Gini coefficient, the top 20 lowest Gini (highest income equality) countries are: Slovenia, Czech Republic, Slovakia, Belarus, Moldova, Ukraine, Iceland, Norway, Belgium, Finland, Kazakhstan, Algeria, Kyrgyzstan, the Netherlands, Denmark, East Timor, Sweden, Kosova, Malta, and Iraq. You'll notice that besides the northwestern European exceptions, they largely fall more on the "everyone is equally poor" side of the spectrum.
The US is in the bottom half of income equality, yet has one of the highest GDP per capita and the highest median household disposable income, which many agree is a very good way of measuring how wealthy ordinary people are.
To summarize, obviously having high income inequality does not cause a wealthy nation; but instead (going back to my original thesis) the factors that permit the building of a wealthy nation can cause high income inequality, which isn't a problem as long as the rising tide is lifting all boats. The few countries that are both wealthy and have low income inequality are virtually exclusively monoethnic societies that have a strong cultural emphasis on both the factors that are conducive to wealth-creation (like education and delayed gratification) as well as factors that forbid egregious displays of income inequality (like the Scandinavian Law of Jante).
I may go one step further and theorize that the same global factors that led to the rapid increase in wealth around the world in the past half-century or so did much to hide the failings of more egalitarian, "socialist" economic policies, much like the period of very low real interest rates of the last twenty years hid the failings of unprofitable VC-backed startups; and now that it looks like we are entering a more turbulent period with geopolitical instability and energy shortages, we may very well end up seeing a sharp reduction in the standard of living in countries like France or Spain as the ever-increasing redistribution of wealth in response to one crisis after another make it harder and harder to actually produce wealth.
Are you representing that conclusion as based on your set of axioms (which is fine and I can’t argue against) or suggesting that those axioms are universal?
Governments around the world have rules about companies, salaries, taxes and so on.
There exist a large number of billionaires.
Therefore, assuming most of them follow the rules, the rules allow such a concentration of individual wealth.
I'm not against innovators getting relatively rich, that's often the incentive to innovate, or at least to push through the 'perspiration' part of that activity, but there should be balance.
Sorry, I was unclear. I was referring only to the last point (that that amount of individual wealth is a policy failure) when asking about axioms.
I completely agree that the current rules at least allow such wealth accumulation, which if applied across 8 billion people means that many will choose that path.
Well of course we can disagree whether or not billionaires are good or bad. I realize people at one extreme subscribe to the 'red in tooth and claw' natural law view of how society should be organized, and others to the opposite 'we're all in this together' view.
Personally I think the existence of billionaires is a systemic failure, is morally suspect to say the least, and that such extreme inequality is bad for society and slows progress, ultimately.
Indeed, they did not create all that value alone. They also provided stable jobs for many thousands of employees along the way. We should also celebrate that and I was remiss to not mention it originally.
Created a billion dollar company that people buy from to enjoy the outdoors (at least some of the time for a large portion of the customers)(or at least signal)
Hey, since I played a roll in your success, can you please send me 10% of your paycheck every month? No doubt you won't protest since "the entire structure of society enabled" you to gain such wealth.
The failure is that we think Chouinard wholly created this value and deserves this extreme concentration of the wealth created by the Patagonia company instead of the many, many, many people that gave their lifetimes and labour toward furthering the goals of the Patagonia company.
So this boils down to us lacking a fair and effective valuation methodology for leadership, which includes psychological aspects that possibly can't be objectively quantified.
p.s. Possibly a feedback mechanism where each contributor votes a fraction back to the person/team in charge and valuation (compensation) emerges that way.
> many, many, many people that gave their lifetimes and labour toward furthering the goals of the Patagonia company
And they could leave at any point, they are paid for their work within 30 days. They take 0 risk.
As an entrepreneur for 20 years, I used to believe employees believe in companies and missions, but they don't, 99% of the time. They get paid for 30 days work, on time, and if they get a better offer they leave.
I'm sorry but that is 0 risk compared to what an entrepreneur does. People like yourself clearly have no idea how much responsibility and risk, and emotional strain an entrepreneur takes on, while employing people and paying them monthly. There is no comparison.
Don't expect people who take 0 risk to become millionaires. It's a ridiculous proposition. If that were the case "everyone" would be a millionaire, or a professional sports person, or an influencers, or whatever.
Taking risk, and building things yourself is much much harder. People who have never done it don't understand.
> As an entrepreneur for 20 years, I used to believe employees believe in companies and missions, but they don't, 99% of the time. They get paid for 30 days work, on time, and if they get a better offer they leave.
Did you offer those employees a chance to have a stake, to take a risk and share in the bigger reward than just their salary? I mean, in a meaningful way that had the potential to change their quality of life if it paid off? Were you willing to share the reward?
If you didn't offer such an opportunity, you can't complain that the staff didn't contribute to the level you hoped.
That's probably true, but it's not the point. People choose to become employees, and are taken care of in an extremely risk free way.
Just ask any freelancer how different it is to being an entrepreneur, even that change is a massive difference, you have to actually invoice and chase clients for payments, you have to take risk in whether you will actually be paid for work, etc.
Now just take it a step further for someone who is risking their capital, reputation, and time on creating something new, that might only make any revenue in 12-16 months, or never. And it might bankrupt them, lose their reputation etc. At a minimum that's 12-16x more risk than even a freelancer.
Oh and if insane people like myself didn't take this risk, the world would probably still be a foraging bunch of tribes. And you get hated for it for getting rich by exploiting people...
And you do? Everyone only has a small slice of what life is like. That is the life that you yourself lead. FYI I was a freelancer, chasing clients and invoices sucked, and was a waste of my time and skills.
You obviously have very strong opinions on how great entrepreneurs are, it is also coming across as "employees are lesser" as well which is not right.
There is nothing wrong (and a hell of a lot good) with not wanting to be a person that doesn't chase up invoices and worry about payroll, it lets you focus on doing a good job. Specialisation is a great thing, and would not be possible if everyone was busy marketing their own business/self.
> At a minimum that's 12-16x more risk than even a freelancer.
So they should get 12x the reward as the average? The average US wage is about $55k, so that would be, for a successful entrepreneur, 660k (and $0 for an unsuccessful one). I don't think anyone has a problem with this I certainly don't. I do have an issue with the ultra rich, like Bezos who have made 7.5 Billion a year since Amazon was founded, or 278,406 times the average wage from 1994 (26,939). Did he take 278,406 times the risk that an employee did. No. No he did not.
> Oh and if insane people like myself didn't take this risk, the world would probably still be a foraging bunch of tribes. And you get hated for it for getting rich by exploiting people...
And if everyone wanted to be an entrepreneur we would also still be like this. People need to actually do the day in day out grind work that is building things. 99% of this is done by employeed people. If everyone tried to do their own thing that would severely limit what can be done. You really need to stop looking down on your (and all) employees.
edit: fixed maths - Bezos has too much money for my math skills.
> There is nothing wrong (and a hell of a lot good) with not wanting to be a person that doesn't chase up invoices and worry about payroll, it lets you focus on doing a good job.
It has everything to do with this. Not wanting to be that person is fine. But then don't complain about people willing to take a lot more shit earning more than you. Generally, the stuff less people want to do (but is valuable to society), is better paid.
> like Bezos who have made 7.5 Billion a year since Amazon was founded, or 278,406 times the average wage from 1994
The guy created 400,000 jobs during the covid crisis, when most other businesses were either shut or going bankrupt. That's 1% of the US population. Going by your $7.5bn a year, that's $18 per new employee that year. You think he doesn't deserve that?
> The guy created 400,000 jobs during the covid crisis,
No he didn't. The business he founded did, the investors that invested in this business did, the customers that paid for services did. The people that made all of that happen were employees. He is not solely responsible for anything. For a long while he was responsible than many others in the organisation, but ever since he hired another person he was never responsible for anything on his own.
The idea that one person solely, directly lead to 400,000 people being employed is farcical. Did he really create a job spec, position, interview and do the paper work for 500 people each calendar day for two years?
:) It's not just the 400K jobs; I think that Amazon's logistics capabilities helped make the practicalities of soft lockdowns and limiting your outside trips substantially more bearable in the early part of the pandemic.
Amazon's deliveries avoided literally billions of in-person interactions during the peak uncertainties of C19. Bezos didn't start Amazon with that in mind, but it sure did help when called upon.
Then, people had the unmitigated gall to complain that Amazon made a lot of money during that time period. Well no shit; they provided a ton of value to hundreds of millions of people...
> So they should get 12x the reward as the average? The average US wage is about $55k, so that would be, for a successful entrepreneur, 660k (and $0 for an unsuccessful one). I don't think anyone has a problem with this I certainly don't.
That's not how averages work. If 1 in 10 of entrepreneurs succeed at all and 1 in a million succeed notably, all of those millions of $0 outcomes flow to the 1 in a million (or 1 in 50 million?) success cases to make the average come out to whatever it is.
If it worked like you suggest and 10% succeed, you'd have 10 @ $660K and 90 at $0K for an average of $66K.
The failure that is being talked about is the fact the we reward risk-taking much more than we reward effort. No one is saying there was no risk involved, rather what we're saying is the proportion of how much we reward risk vs. how much we reward effort is skewed in favor of risk. And the magnitude of this skew is unhealthy to society and leads to results that I (and others, clearly) don't consider fair.
To that I would add that the only risk we're rewarding in this way is the risk to capital. While we do pay more for jobs that are more risky in terms of safety, it's close to impossible to become a multi-millionaire by risking your life in your job. I would say that kind of risk is higher than the one taken by entrepreneurs, but entrepreneurs and investor have an easier (though not easy) path to getting outsized rewards for their risk.
It's OK to reward risk, and it's OK to reward effort, and it might even be OK to reward risk more than effort. But by how much more?
Fuck you buddy. You have no idea what I've done, what I've staked, what I won or lost, who I protect or what any of this means to me.
You're trying to justify keeping people out of your successes whilst complaining that they don't support you (and your business). How could they possibly deliver at the level you're expecting without the reward? Why bother?
Your narrative is as old as time and it’s always the same, and every time society listens to people like you seriously it ends up optimistically as zero innovation over regulated society, pessimistically genocide against anyone who’s ever accumulated anything (google kulaks).
So's yours. You're arguing that only might is right and that only greed works. You're simultaneously complaining that the people you're explicitly locking out of your chosen success path don't support you. Show me how you support them and I'll accept some of the rest of your argument.
> and it’s always the same.
Let me correct that for you: previous attempts to systematise broader opportunity have been corrupted by power. The bigger the attempt to make things fair, the further it's been corrupted. Those who don't care about fairness have abused the system for their own ends.
I still live in hope we can develop a system that decouples power from leadership, enables more people to have greater power over their own development, and better rewards collaboration and co-ownership. I acknowledge the failures from the past but I refuse to accept this is the only way life can be.
> So no, you have no idea of life or history.
I'm fairly interested in history and I have _a lot_ of ideas about life.
People really don't have the sort of freedom to make choices that you're assigning to them. There's a thousand mitigating circumstances that limit peoples' options and can preclude the sort of risk taking that you're valorizing and shaming employees for not taking.
I can't comment on how much harder it is for a person to be a bussiness owner as problably we don't live in the same country and we don't live under the same laws/regulation, otherwise I'd challenge that.
> They take 0 risk.
For wealthy worker problably, but for labor worker is not risky free.
> building things yourself is much much harder
Unless you work alone you don't build things yourself.
> People like yourself clearly have no idea how much responsibility and risk, and emotional strain an entrepreneur takes on
It seems like you don't have idea how hard it is to be in the bottom layer of the wealth distribution.
> Don't expect people who take 0 risk to become millionaires.
I don't think no one in this thread meant that. They are just advocating for better wealth distribution.
A billionaire is usually just someone who's done something like me but 1000x better. Where is your line? What's ok? 100m? 432m? Above that people are "too rich"? What if there's 10% inflation? Do you add that on?
Also - yes, there are rent seeking evil billionaires. The 2008 banking crises showed that. There are also rent seeking evil slum lords who own $50k worth of real estate.
The problem isn't wealth. It's rent seeking with no value add, with government lobbying sprinkled in.
> Where is your line? What's ok? 100m? 432m? Above that people are "too rich"? What if there's 10% inflation? Do you add that on?
Surprisingly, this is an answerable question. It's not that we directly take away money from current existing billionaires — rather, we create policies that make SMB owners and working class the beneficiaries of the policies we implement.
For example:
1) Be more labor favored rather than rent favored in terms of tax policy. Like you rightly said, rent seeking is currently too strong compared to wages, tax policy should penalize rent seeking. This is only contentious because rent seekers are already too large of a population and would not support this.
2) Business environments that favor small business over large business. Large business is a choice, not an inevitability. I would much prefer a dynamic city with many small businesses (maybe higher prices overall) than the current cookie cutter walmart landscape. This is doable by policy, specifically creating policy that subsidizes small businesses and make them easier to start and run and penalizing large corporations.
3) Labor protection instead of risk and asset protection. For example, the wallstreet bailout is a policy environment that favors risk and asset protection over labor protection.
It's not that I'm pro-labor - trust me, when labor laws become too strong to the point that business suffer, I'm pro-business. But right now the working class is powerless to the point of suffering, while large businesses are at a historic level of return, even through multiple recessions.
Speaking of large businesses vs small businesses, I want to state again that there's a huge difference between billionaires and millionaires. Repeating again - large businesses are a byproduct of economic policy and not an inevitability.
Economic policy is not about optimizing for GDP or growth, it's about the preference of how you want your economy to run. Do you want cities where walmarts eat all the local businesses? That's a economic policy choice. Do you want billionaires? That's also an economic policy choice.
And the policy decisions are not "oh, you have a billion dollars, now we tax you." It's instead "oh, you have 6 buildings? maybe your 7th building will impose additional taxes." Oh, you are a giant multi-national shopping chain? Maybe we'll force minimum wage and benefits on your workers so that you can't expand everywhere recklessly. Oh, that rises the price of bread by .50$? Sure, we can live with that tradeoff.
This is what is meant by billionaires are a policy issue. It's not limiting your ability to be an entrepreneur - actually, a environment that is good for large businesses is usually bad for small businesses and entrepreneurship (because it favors the incumbents).
I’m actually in agreement with you up to a point, but these policies won’t stop Elon or bezos becoming billionaires. They’ve built businesses that actually put a lot of value into society. They own shares in those businesses, that’s why they’re wealthy. Unless you tax their capital gains, yearly, you can’t stop them.
And that opens a massive can of worms. How does a paper billionaire pay taxes on paper wealth? Do you force them to take out loans? What if there’s a stock market crash. And they lose net worth? Do you refund their taxes?
> I'm sorry but that is 0 risk compared to what an entrepreneur does.
Most employees loan the company 45 days of labour. This is an "at risk" investment. If the company goes under, they may lose all of it. When multiplied by a large staff, this can be a very significant investment which would, if borrowed from a venture capitalist, be quite expensive equity. Yet, no equity is given.
Moreover, unlike founders and other investors, the employees are typically left in the dark about finances. When a company is in dire straits, venture asks for a large multiplier as return. Employees, that grant a "free" 45 day rolling line of credit do not enjoy this risk premium.
Where's the 45 days coming from? Very few employers in the US pay less frequently than monthly, and in 30 years, I've never had a W-2 job that paid other than every-2-weeks.
I receive a two-week paycheck with a one-week delay, plus five business days (a week) for the bank to verify my employer actually has the funds to cover it. So that's four weeks already. I'm not sure where the other 17 days come from, but it's important to note that most people would not quit on the spot if their paycheck doesn't clear; there's too much risk in that. This is how employees end up weeks to months behind on paychecks with employers stringing them along.
First, many employers pay bi-weekly, but deposit is delayed one cycle. You work, then at 2 week mark timesheets are submitted & approved, and then following week the auto payment happens.
Second, there is vacation time, which can be as much as 4-6 weeks accrued but not paid out. The average employee probably carries at least a week or three.
I hope this explains. Even though paychecks may be first in line, there is significant amount of the company's risk borne by employees.
That's wild, in Europe you get paid before the 28th of every month for that month's labour. Payment is by EFT direct to your bank account and arrives before the end of the month every month.
If you want to reduce the influence of money on politics, you're not going to achieve that by punishing billionaires, or by destroying the incentive structure that allows them to exist. If you want to reduce the influence of money in politics, you'll have to understand the specific mechanisms that create said influence, and address them by law.
Wealth is good. People acquire wealth by adding value. We want to incentivize people to add value. Of course, the "billionaires shouldn't exist" crowd understand little and less, and would happily have us destroy this system of incentives without even achieving their stated goals, because they, much like the "defund police" crowd, are more interested in appearing virtuous than in actually solving problems.
This incorrect view comes from objectivist thought. Namely, the trader theory of value. But it's false ideology.
Some wealth implies value add. SpaceX.
Other wealth was partly figuratively stolen due to incomplete laws that prevent market failure. Purdue Pharma, slave trader, hitman, oil company (global warming), sex trafficker, social media company (societal fragmentation), fast food company (costs on public healthcare), landowners (regulatory capture), porn company (victims of revenge porn), car company (health effects of tire dust).
I'd say it's more the norm nowadays that wealth is partly stolen, figuratively speaking. The distortions and market failures have become so large.
You seem to be suggesting that the mere existence of externalities somehow negates the fact that value was added, which is silly.
The existence of externalities doesn't negate the adding of value. Would we be better off without oil companies? Obviously not (just ask a European!) Hence it's impossible to say that they're not adding value, or that the people who create them aren't adding value.
I suppose it depends on how you define wealth, but I can't think of many people who became really fabulously wealthy without creating value for other people, except when government was involved in a monopolistic or rent-seeking way.
It's trivial to steal somebody's lunch money. It's much harder to become a multi-billionaire without making something that a lot of other people wanted to spend money on. (If those other people were forced to spend money on it by the power of the government, it's a different matter.)
Just because two people agreed to trade doesn't mean value was created.
First there's externalities. Global warming caused by oil companies. Stochastic terrorism and fragmentation of our polity caused by social media and news companies. Healthcare crisis caused by fast food companies.
Second the notion of voluntary trade is a fairy tail that's ignorant of the underlying neuro and psychological processes that go into decision making. The dopamine system is stupidly easy to game. It's like if we got a bunch of moths to kill themselves by flying into a bright light somewhere and we call that voluntary, as if we weren't merely hacking ancient circuitry. That's what's happening now with opioids, fast food, social media and more.
>Just because two people agreed to trade doesn't mean value was created.
Reminds me of that adage: "Economics is the idea that if I pay you a dollar to step on shit and you in turn pay me the same dollar to step on shit, that makes for a better world"
Money is just an arbitrary mean of distributing production. In a capitalist society (and at a lesser extent in a mercantile one too), having a lot of "things", in this case money and capital: we can call wealth, is power (this has implication for anarchist beliefs).
Democracy and in a limited way, socialism (pensions for the elderly, healthcare, subsidized public transportation, i know this is not the original meaning, but for this its good enough) counterbalance the power gap between wealthy people and non-wealthy people, but clearly in the western world (at least in my country), the counterbalance is weaker and weaker.
I don't think a random millionaire like Eric Finman should have more power than a random citizen, and yet he have.
I don't think the "billionaire shouldn't exist" crowd actually exist. But i'm part of the "billionaires shouldn't have this much power" crowd, since it feels like in my country, they own the press, the executive and 40% of the legislative power. The judiciary power is the only one that might be a bit free from influence, but i'm not certain.
Billionaires existing is ipso facto evidence of extreme inequality in allocation of generated wealth - so extreme that there is no feasible justification for it. Therefore, billionaires should not exist. A more verbose way to say the same thing is that society should be structured in ways that make it impossible to collect so much wealth produced by other people as economic rent.
Let me rephrase this: i don't think people saying 'billionaires shouldn't exist' are against their existence, but against the disproportionate amount of power they have.
Of course I see a difference between those two; I just don’t think it’s a problem. Over many decades, many millions of people transferred some of their power to Patagonia as a result of their belief that they’d rather have the Patagonia product than the amount of power that money represented. Millions were made better off, by their own value function.
Patagonia here is the exception, that's why we're all here talking about it!
I didn't want to give my bit of power to my health insurer, but guess what, I have to have healthcare to live and there's effectively one local hospital I can choose.
I didn't want to give my ~~~bit~~~ hefty chunk of power to the company that gatekeeps the patent on insulin, but I really didn't have much choice on that one.
I didn't want to give my bit of power to the telecom conglomerate, but did I have a choice? I need to be online to participate in today's society.
I didn't want to give my bit of power to Google, but... uhh actually I didn't give it to them, they stole it by spying on me.
The reality is that concentrations of power that are inherent to our system of free exchange inevitably congeal into something that looks a lot less free. All of these examples (and there are so many, most of our economy is like this!) don't really represent individual value functions, because when power gets concentrated enough, it becomes possible to take choice away.
Health insurance and medical care are all highly regulated industries with exceptionally high cost of entry; one could call it a broken market. It's not competitive at all. I always marvel at how much better the whole experience is when I take my dog to the vet than when I myself go see a doctor, and can't help but wonder if there wasn't so much state intervention (or even just wiser intervention) in medicine, my experience would be different.
Forms of insulin for which the patent has expired are affordable. The stuff under patent is expensive but objectively better at its job. One could argue that the forms in between (patent recently expired but not widely available as generics in the market) are again due to the result of onerous regulations keeping competition out of that market.
Telecommunications, at least the hardwired kind, is a natural monopoly and I wish some smarter incentive-structuring would take place in that market; maybe public ownership of the infrastructure with competitive private service providers operating on top of it. Wireless is generally more competitive and you can actually be online for less money than you think.
I'm not sure what your point was about Google? You certainly don't have to use their services.
I didn't want to seem long winded, but the market structures you describe are common to many if not most markets we have for goods and services, at least here in the US.
For example:
Food, agriculture, energy, media (print/radio/movies/home video), most commodities, productive inputs... there is little that you can buy that is not part of what I would loosely call a "conglomerate" -- that is, a concentration of capital so large and intense that it tends to influence the markets in which it operates. In fact, markets are today less competitive than they have ever been.
Those things that are (I would argue, seem) "competitive" here, like fashion, consumer products, and the like, are frequently as or more exploitative and influence markets (specifically, labor markets) abroad, up to and including slavery. Just because we don't feel that pain doesn't mean others are free of it.
This is because we have done nearly nothing, culturally, politically, economically, or psychologically, to stop the movement of power -- just as you described -- out of the hands of the many people and into the hands of the few entities that control such markets.
The free market, where each individual has the power of their dollar, is delicate indeed. Much more delicate than we have appreciated in the last several decades.
It’s a convenience for rich people to find their own ventures, but it’s not the only way for ventures to be funded. If the wealth was distributed among thousands more then those folks would still be looking to invest it, many in EV or space tech, and some might just pool their money into venture capital coops that perform the same function as individual rich folks etc. (allowing individual entities to be pitched to instead of each of thousands of investors.)
If it is invested by a wise rich person who can manage and grow businesses, then his employees/customers/investors/partners (and perhaps even their own trade partners) may well reach much more utility from the fruits of that wealth than the utility realized if the wealth ended up in less productive hands.
The problem is concentration of wealth to the point there are negative impacts elsewhere in society.
Bezos didn’t get rich in a vacuum. He did it by pushing warehouse workers to the brink of sanity and physical collapse. By making drivers per in bottles instead of taking bathroom breaks. Etc.
And then there’s Zuck. Does FB/Meta really provide value to society that warrants his wealth? Sire, within the confines of the rules we have in place it does. But that doesn’t mean we can’t question those rules.
> Does FB/Meta really provide value to society that warrants his wealth?
Do basketball players deserve to make 10x the salary of CEOs? (Average, from top Google result).
A market where by individuals have the freedom to allocate their dollars towards things they need and/or want (among plenty of options) has determined so.
No one gets rich in a vacuum. Slave labor is illegal. Hundreds of thousands of people are paid along the way - inside Amazon, outside, the government.
> Do basketball players deserve to make 10x the salary of CEOs? (Average, from top Google result).
The short answer: no, they don't, basketball has its own wealth distribution problem, but that's a problem within basketball rather than for society at large. (Non-superstar players are severely undercompensated, particularly when it comes to development leagues, college, and even high school.)
The shorter answer: we're not talking about CEOs, we're talking about owners and shareholders, so why even bring up CEOs?
There is a power imbalance between employers and employees, which is particularly severe in case of large corporations. Slavery is not the only way to economically exploit people, just the most direct one.
Should we cap the benefit at some particular monetary value? Wouldn't that disincentivize building companies past a certain point of success? Is that really what we want?
To answer the last two questions, yes. The expectation for companies to continue to grow no matter what, even when they're already massively profitable, is one of the biggest issues with modern capitalism. It's how you get the world's most profitable (non-financial) company switching its focus to nickel-and-diming its customers for services because it's run out of new human beings to sell iPhones to, and how you get every video game company switching to scummy fomo and gambling to maximize shareholder revenue instead of mindshare, and how you get every company jumping over themselves to sell your data even if you're already paying for the product. Companies should be able to get to the point where leaving money on the table for the good of their customers, and society, is a valid move.
No it wouldn't. It would cease to further incentivize them. Once you have enough money to live comfortably for the rest of your life, maybe you don't need external incentives for your behavior? Maybe you should be encouraged to simply do whatever you find most fulfilling, without financial reward?
> discourage (a person or course of action) by removing an incentive.
Regardless, though, how exactly would your proposal not prevent someone from building future companies? If stock is considered monetary wealth (the only viewpoint from which we have billionaires), they would be forced to... What? Give away their existing stock in order start a new successful company?
That will just lead people to outsource their wealth by whatever means, so that it doesn’t formally count as their wealth anymore, but they effectively still control it.
Then I hope we can couple it with a well funded IRS.
In theory this would be difficult to do unlike the games that occur now because you don't merely need to suggest that you're not earning the income. You can't give it to a family member or it gets it with a hefty gift tax. You can't stuff it into a shell corp because you still own the shell corp. You could donate it to a charity which you control which is a thing that happens now.
You don’t think that before the Constitutional Amendment to allow taxation of wealth is ratified that there will be 1000s of CPAs and attorneys looking for loopholes?
GRATs and IDGTs will look like quaint children’s toys compared to the schemes invented to receive the benefit without formally having $10^9 of net worth.
> You don’t think that before the Constitutional Amendment to allow taxation of wealth is ratified that there will be 1000s of CPAs and attorneys looking for loopholes?
Sure
> GRATs and IDGTs will look like quaint children’s toys compared to the schemes invented to receive the benefit without formally having $10^9 of net worth.
If you start and retain ownership of a company that is one worth day a billion dollars, you're a billionaire.
That doesn't mean you have a billion dollars in cash. It doesn't mean you have a billion dollars in hard assets. It means you built a functioning organization that is performing some valuable service in society, and some accountant has associated some value to that entire organization of more than $1,000,000,000.
At what point do you think founders should be punished for that accomplishment by having some of their ownership stake taken away from them?
The problem is that at the moment a billionaire can leverage their paper wealth into incredible loans and power without actually selling their ownership stake and realizing their billion in cash.
Sure, that would be a reasonable position, but most people the media characterizes as "billionaires" have not actually sold their company for a billion dollars. This is a fundamental misconception.
These listings of "net worth", etc. all include the nominal market value of their remaining ownership of whatever company they founded.
Jeff Bezos has a "net worth" of $160B. That's not because he sold Amazon for $160B. It's because Amazon is worth $2T and he still owns 8% of it.
At what point would you suggest the government should have taken away that 8% ownership so he would not become a billionaire?
Those billionaires don’t sell their shares but they do take extremely low interest loans that are non-taxed against those shares kicking their tax obligations into future generations while using liquidity to live as if they’ve sold the shares.
So I’d suggest the tax code be amended to account for that.
That's also a reasonable suggestion. It wouldn't stop them from becoming billionaires. The GP suggested "every billionaire is a policy failure". What's the policy success that prevents this failure?
"No one is allowed to start a company by themselves"?
"No one is allowed to join a startup unless they get more than X% equity"?
"Startup founders must give more than X% equity to their first N employees and/or investors"?
"Bootstrapped startups are not allowed"?
"Once a startup becomes more successful than X, the founder must sell"?
Ah but you see, once you are ready for your estate to take the money you set up a granter retained annuity trust.
So long as you don’t die, and your trust earns more than the IRS theoretical rate you can pass on the money almost tax free. While still getting loans against it.
This is correct; GP mis-typed the income angle. Instead of taking loans as typed, the grantor retains the right to receive an annuity stream over the trust's term.
> At what point would you suggest the government should have taken away that 8% ownership so he would not become a billionaire?
I'm not suggesting that.
It's ok if people are billionaires, if defined by having large holdings that, if liquidated, would shrink to non billionaire scales to give back to society.
It should not be possible for a single person to own 8% of the company the size of Amazon.
If you're starting from scratch, there are many ways to do so. For example, make issuing corporate charters contingent on being employee-owned - so if the company grows, so does the number of owners.
If you're starting with an economy with extreme concentration of capital to begin with, gradually ratcheting up progressive taxation on such concentrated capital seems like a straightforward way to force the owners to spread it around.
They don't sell it now they borrow money against the value of shares and get to keep the stock, not pay taxes because it is not income. Your plan would not work. No plan like this could work...
The economic system that creates billionares is the problem, not the billionaires themselves. But because the issue is that wealth suppresses wages, the easiest visualization and embodiment of wealth is billionaires.
> Why shouldn’t creating that much value in the world result in the owners collectively benefiting?
Billionaires make money from both value creation and value capture, but it can be argued pretty convincingly that value capture is how billionaires make their money rather than value creation. In fact, there's plenty of examples where value is created but not captured (open source being one of them) that lead you to realize that massive value creation isn't possible with just one person, but massive value capture is. Even superstar value creators like Einstein or Beethoven were ultimately just contributors to a larger scientific or musical community.
When considering economic policy, you have to think of it as value capture, value creation, and value distribution. And while it's nice to think of value capture as "the capture of the value you create", the reality is that value capture can be any systemic transfer of wealth. Gambling is a prime example of a transfer of value without any creation of it.
Billionaires are actually not the problem; the problem is that wealth captures too much value compared to wages, which then produces economic conditions of slavery.
This is a presentation of money that assumes there is no problem with other people not having that money.
The major issue is systemic instability and unnecessary poverty.
It is popular to presume that everything is not zero sum, but this is not the case.
I don’t see any good reason we should allow excessive potential energy to become the property of a class of people who want nothing more than excessive potential energy.
There is not some fixed amount of money in the world, though, and there hasn't been since at least the point the world abandoned the gold standard. We don't have to worry about someone sitting on all the money and stopping the economic activity that it would enable by doing so - governments and banks can literally create money out of thin air as necessary to keep the economy supplied with cash. The big limiting factor in how well off ordinary workers can be is the capacity of the actual, real economy of factories and stores to supply them with goods and services. That's why it's not a bad thing that people found successful businesses which are worth a large amount of money: by doing so they are, in general, directly making everyone better off by coming up with better, more efficient or higher quality ways of satisfying their needs.
Sure, they didn't do it alone, they had employees and the whole rest of society, but all those workers and the rest of society was there before and yet the business was not. Successful business enterprises don't just instantaneously spontaneously assemble because the world is capable of supporting them, they have to be created and if they cease to exist the world is worse off even though all the workers and buildings and so on still exist. (Also, the parts of society that enable successful businesses - and even basics like food and energy - are much more heavily made up of other businesses than I think people appreciate.)
This is the point. What’s important is how ownership and management of economic production is allocated. Who runs businesses? In capitalism they are largely owned and managed by the people that built those businesses. In communism and nationalised industries they are owned and managed by a government bureaucracy. In this case the owner transferred that control to a charitable trust.
Personally I believe each of these can have advantages in various situations. Some critical shared infrastructure and services I think do belong with government. Defence, healthcare, emergency services, perhaps some utilities. Charitable trusts have a place. But I also believe private citizens that demonstrate the ability to build and run businesses also have a place, a big place in the system. Private capital investment is a massive and highly productive and efficient force for economic good. Typical billionaires don’t spend billions on themselves. Millions yes, but most of those billions exist as shares that represent control of productive businesses that provide goods, services and jobs. If they spent it all on themselves they wouldn’t be billionaires for very long.
I don’t think it’s generally in the public interest or beneficial to society to confiscate businesses from their owners, and what? Give it to who? There is a legitimate concern that such control can lead to negative effects like exercise consumption or political influence, but the way you deal with that is to address those problems directly.
> In communism ... they are owned and managed by a government bureaucracy.
That depends on the degree of centralization of any given variety of socialism. The other option is that they are owned and managed directly by the workers.
True, and I have no problem with that. In fact such ownership structures are possible and do exist in many capitalist countries as well. There’s no law against it. Ultimately capitalism is founded on individual economic freedom, and that includes the freedom to enter into cooperative ownership structures and the sort of charitable trust structure Patagonia now enjoys.
The main reason I think we don’t see cooperative worker owned enterprises very often is that employees generally are not interested in assuming the level of financial commitment, responsibility and risk that goes with ownership.
>The major issue is systemic instability and unnecessary poverty.
Jon Stewart once put it in a different frame: he called better policy "revolution insurance". At least that frames it in a way as to what the rich have to gain instead of solely focusing it on what they have to lose.
The Fed is housed in a building named for a former chair, Marriner Eccles. He said something similar to Stewarts' formulation:
"It is utterly impossible, as this country has demonstrated again and again, for the rich to save as much as they have been trying to save, and save anything that is worth saving. They can save idle factories and useless railroad coaches; they can save empty office buildings and closed banks; they can save paper evidences of foreign loans; but as a class they can not save anything that is worth saving, above and beyond the amount that is made profitable by the increase of consumer buying. It is for the interests of the well to do – to protect them from the results of their own folly – that we should take from them a sufficient amount of their surplus to enable consumers to consume and business to operate at a profit. This is not “soaking the rich”; it is saving the rich. Incidentally, it is the only way to assure them the serenity and security which they do not have at the present moment." [0]
Without billionaires, the net result wouldn't be that their money would be distributed among the populace. The result would be that this wealth simply wouldn't exist at all. This is why the Soviet Union stagnated after they reached a certain standard of living. There is no incentive to take on risk when you aren't entitled to a proportional reward.
> There is no incentive to take on risk when you aren't entitled to a proportional reward.
This doesn't really reflect reality though. Did Bezos take on more risk than anyone working in a high risk job? What does $100 billion worth of personal risk look like, for a person who doesn't already have $100 billion in assets?
Bezos didn't take on $100 billion of risk from the start. He took on the risk of not having a job like any other startup founder. It just so happens that this risk created over $100 billion of value. If there were an artificial cap placed on wealth, Bezos would have extracted profits from Amazon earlier rather than reinvest money back into the company. Every other rich person would do the same, including his competitors and investors, so in the end, we'd all have less wealth.
This narrow argument depends on a total lack of opportunity cost and alternatives. The assumption is that it is somehow optimal for Bezos personally to extract maximal
personal wealth constructing a pseudo-monopoly before exiting. A secondary assumption is that Bezos personally is globally unique in his ability to do what he did.
Plenty of investors exit early, and the benefits accruing to a monopoly could theoretically just as easily be distributed to a collective as opposed to an individual, circumventing the billionaire issue.
It’s SV’s whole game to construct a NPV of a future monopoly, cash in, and move on, before the regulators come
in. This has nothing to do with wealth generation.
>The assumption is that it is somehow optimal for Bezos personally to extract maximal personal wealth constructing a pseudo-monopoly before exiting
I don't understand what you're saying. It's undeniable that Amazon revolutionized e-commerce and cloud computing. Otherwise nobody would be giving them money.
>the benefits accruing to a monopoly could theoretically just as easily be distributed to a collective as opposed to an individual, circumventing the billionaire issue
It does get distributed amongst a collective, and it's called equity. Theoretically, Amazon's first warehouse workers could have agreed to be paid in equity instead of cash, and then Bezos wouldn't have to take as much outside investment. If they had held on to this stock, they would easily be worth tens, if not hundreds of millions today. Obviously, this isn't practical in real life, so instead, this wealth got went to the investors that took on the risk.
A billion is a very disproportionate reward for, well, just about any kind of risk taken. I mean, people in highly dangerous occupations get paid way less, even as they risk their very life.
Dubious claim. I seem to remember certain mega-corporations driving independent retailers out of business in a race to the bottom in the last couple of decades.
The only issue with wealth/income inequality in countries like America is that some goods are artificially constrained or positional (mostly housing).
A mediocre salary of $40,000 is enough to buy so many goods from competitive markets (phones, cars, anything you can get off Amazon/AliExpress). This becomes very apparent when you go to lesser developed countries.
The major costs in people's lives do not come from the billionaire class. If you tax them into oblivion and give that money away, it will be soaked up by housing anyway (look how sharply housing costs have risen after the growth in real income the past 2 years).
It seems to me that your argument against taxing billionaires reduces to “we shouldn’t tax them because if the commoners have more money then residential housing will be more expensive.” I would argue that is more indicative of issues in the housing market rather than a good reason to continue to allow the extreme aggregation of wealth.
The sharp rise in housing costs in the past two years in some areas is down to complex confluence of factors, real income being one, artificial scarcity being another, the entrance at scale of corporate interests into residential housing being a third. Add historically low interest rates and fears of flooding, lack of water, and fire, and I’m not sure the increase in prices is such a simple relationship as indicated.
I’m also not suggesting we take the money and rain it down as stimulus checks. That was a desperate response —- we can do better.
This idea that a single person creates Star Wars is one gap in understanding of a healthy system. A person does not exist in my or your present state or create anything but for the work of millions if not billions of other people.
The solution has been repeatedly demonstrated and isn’t complicated. The benefits should accrue to the system that creates them in a balanced way. Limits on the return of capital, implemented as either voluntary donation or taxes and progressive income taxes.
People scoff at taxes vs representation but right now, today, they can avoid those taxes by donating that money.
The choice of "Star Wars" as an example is pretty ironic. There has been so much discussion about how Star Wars was a result of the work of so many people. And how George Lucas, who would be the candidate for "single person", when left to his own devices made worse quality Star Wars films.
In particular, there was:
- Marcia Lucas, credited for "saving Star Wars in the editing"
- John Williams
Not to mention all the people working on the special effects, the sound designer Ben Burtt, the list goes on.
The reality is that a "single person" doesn't create things like that. The "visionary/great man" ideal is just good PR.
> The "visionary/great man" ideal is just good PR.
I reject that proposition. It's how record labels (investors, etc.) gaslight their artists (founders, etc.) into signing bad deals.
The businessman ("anthropomorphized lawnmower"[1]) has excellent PR. What interests him is an ownership stake in your vision and execution.
> “From the beginning of [Dischord Records], people have said that the way we do things is unsustainable, unrealistic, idealistic, and we were just dreaming,” he said. “Well, the dream is now 35 years old, so they can go fuck themselves.”[2]
Both can be true, depending on the regime of operation.
A credible relationship (such as an individual bringing value) can be (and has been) exploited by individuals who want more money for themselves.
Another credible relationship (that the network is the value) can be exploited by individuals who control the choke points.
Your examples are where individuals control the choke points, introducing artificial controls and preventing the healthy accrual of benefits to the whole structure.
> largest expense billionaires have is investment in other people and companies
that's not an expense, but an investment, on which they (usually) get a return, increasing their net worth
> if billionaires squandered their wealth on short term self indulgence that would be one thing, but they don't
they do, just not enough to make a dent in their wealth because once it's grown so large, it's hard to spend it faster than its growth. If you have $1B growing at a modest 6% / year, that's $60M / year.
> They typically give it all away.
they don't (unless by "all" you mean "a small percentage"). Even the few who have pledged to give 50% away in their lifetime have not (since their fortune has continued to grow). There are exceptions of course (and MacKenzie Scott will probably be one of them).
Money is a representation of resources, those with more money can control more resources. I think it is undeniably a problem for any individual to have control over such a large portion of resources.
All of this wealth they have accumulated gives them immense power and control over our society. Billionaires largely use their wealth to create even more wealth for themselves or to influence people, they don’t “give it all away”.
> It only matters when billionaires convert that paper into food, housing, jets, etc, for themselves does it actually affect anyone.
Fair point. One thing noting is that overall asset value isn't always directly converted to product/services but rather it's used as leverage. Sometimes this leverage is intangible ("don't f with me, I'm going to sue you"), other times it's very REAL tangible leverage - see Peter Thiel and Gawker.
Look up regulatory capture for something that might change your mind about that.
Also the money they “give away” is given to their next generation typically not the public. Bill Gates would be the exception.
Opting out of fiat money (crypto is fiat in disguise) means living a rambo-like life of basic survival. Therefore a billion dollars sure means something. Not just paper.
If they give it away (many don't) they specifically choose where it goes, and often it's some legacy BS, like overpaying to get their name on a university library. Alternatively that money ends up going to their children and it stays in the family for generations.
They call it a “gift” but such large donations always come with some strings attached— sometimes social, sometimes economic, sometimes it’s just an implicit IOU. Huge “donations” are the way uber wealthy people covertly wield their soft power.
spoken like a true temporarily-embarrassed billionaire.
As others have commented on, the real issue is that, in order for someone to accrue that amount of money in the first place, there has to be such a systemic societal inequality in regards to access to resources that economic mobility is effectively a dream for a significant swath of the population.
People here talk about billionaires simply being rewarded for their effort/risk - a proposition that is simply laughable (so, unless you are promised riches beyond your wildest dreams, you won't invest in the economy and community? Seems to signify sociopathy more than anything).
And, yes, that is the implication: in order to have the propensity to accumulate that much money, far more than any one human would ever need to survive comfortably, you have to exhibit a significant amount of sociopathy and antipathy towards your fellow man; a willingness to usurp resources far beyond any natural need; if only because of some arbitrary internal itch.
Chouinard may be the exception that proves the rule -- a billionaire despite his intentions and efforts -- if only because the market happened to align with his convictions, rather than any intention to capitalize on any product for financial gain in and of itself. Even a broken market is right twice a day.
> spoken like a true temporarily-embarrassed billionaire
Until quite recently, the quip was "millionaire." What forced the change was American socialist icons embarrassed to find themselves on the wrong side of the barricade.
> in order to have the propensity to accumulate that much money, far more than any one human would ever need to survive comfortably, you have to exhibit a significant amount of sociopathy and antipathy towards your fellow man; a willingness to usurp resources far beyond any natural need
It isn't money; it's net worth. An old-fashioned market crash could vaporize most of the inequality in a week.
They don't give it away. They leverage their money to sway politics to their interests in ways that normal people have no hopes of.
Chip Wilson for example recently kickstarted a right wing political group in Canada with some seed funding of 350,000. Complete and utter pocket change to him, but well beyond what a regular person could hope to ever spend on their political interests.
I think it’s very interesting to see Americans are starting to realize that having the most million and billionaires is actually not a good thing for a society.
Those people got that rich by profiting wildly off the backs of others labor, instead of increasing the wealth and quality of life for everyone.
Countries like Australia and Norway don’t have many wildly rich people, and they also have very few extremely poor people.
I don’t think so. The very rich can really try things and build industries that we wouldn’t be able to do otherwise. Elon musk wouldn’t have been able to do anything he did without the money from PayPal. Same thing with the Rockefellers and the Hearsts in the early 20th century.
Wielding that amount of money/power is most often used for evil. Even if it were only used for good, it should be democratically controlled.
It's nice that Bill Gates uses his billions for tackling diseases, but he shouldn't be able to decide the fates of millions of people unilaterally. He's an individual wielding nation-scale power, and that's dangerous for everyone else.
The same is true for Musk, and it's especially true for the billionaires who are distorting our democracy (Thiel, Bankman-Fried, Bloomberg, Koch, Hastings, etc.)
Both Gates and Buffet promised to give away all their money, but they have only become richer. Gates uses his philanthropic trust to influence decisions that enrich his investments while convincing people he is doing it for good. How long are we supposed to wait for these guys to actually give away that money, or was it just a lie?
Giving away money is a form of undemocratic power, too. A billionaire recently gave away all of his money to the Republican Party in the US, for example.
Even if Gates gives his money to ostensibly non-political organizations, he's still deciding how an enormous amount of power is transferred.
Even Steve Jobs' widow, who is giving small amounts of hundreds of organizations, is reshaping society according to her own design. While I'm aligned with her values for the most part, it is still terrifying to think about all the Powell-Jobs' who have billions that they are spending on things that harm us all.
I don’t know the way around this, but I do think it’s good that power is not centralized in one governmental structure, even if that structure is Democratic, and I also think it’s good that there are a diverse set of philosophies determining how philanthropy should happen.
I don’t know that I love the idea of billionaires being the solution to those two problems, but I do think that some part of our resiliency as a nation is because the government doesn’t have total control over those things.
Not to mention the obvious conundrum that this may be great when the party you support is in power but not so great when they’re not.
> I don’t know the way around this, but I do think it’s good that power is not centralized in one governmental structure, even if that structure is Democratic
If your assertion is that nobody should wield nation-scale power, then I agree, and welcome to anarchism!
If your assertion is that billionaires are an effective check on governmental power, I'm... not seeing it. Particularly given how much power billionaires have to influence the government itself.
Nation-scale power is power to brutalize and kill with impunity. The individuals who wield it are called "politicians". They are dangerous for everyone else
What is the alternative here? The majority of the governments discretionary money is allocated toward the military. Should Bill Gates and Elon Musk being putting half their money to developing better jets and missiles? I think it is much better than their money goes to curing diseases, environmental causes, electric cars, and space. A few billionaires choosing to do nothing over than passing it down to children is a small price to pay.
No, we should have billionaires like in my comment above but it shouldn’t be easy to pass all of that to the next generation. Inheritance should be reasonably taxed and if the next generation has the chops to become a billionaire again then they are worthy of it and will actually probably contribute to rapid progress.
So your suggestion is to have governments collect more inheritance taxes on a billionaire's estate. Then those taxes will be used for military purposes, no?
Ironically, some of that military money would go back to Patagonia, through their discretely-held control of the current PCU contract, under which they provide a government-spec'd 7-layer uniform system to special operations units. They haven't always held the contract, and may not hold it in the future, but I always found that fact about Patagonia's business somewhat interesting, mainly due to the public obfuscation, and the perceived distance between the particular product, and Patagonia's "brand identity".
Now I need to go wash the fact that I just used "brand identity" in a sentence off my hands.
And other things but yes. You’ve contributed a lot in life, you still get to keep say 700 million but the next generation needs to prove themselves again (not that they need to with 700 million but it’s a start)
Maybe needing to be vastly rich to to cool things is the actual problem? Suppose there were higher levels of general financial security such that people could take more risks. Open source software generates huge positive externalities without fairy godparents.
Accomplishing things becomes a problem of cooperation instead of acquisition. Instead of "Can I buy the things and pay people to do work" we have "Can we agree to allocate resources and work together".
You're assuming that one lone visionary is essential to success, and that a level of coercion is necessary so he can make people do the work. We're software people here. We should know to reject "visionaries". They're just idea guys, the same guys we laugh at when they say "Here's my app idea, you build it and we can split the profits 50/50".
Software is one thing. Getting people to build ships that can transport tons and tons of materials around the world, dig lithium from a mine, send things into space, or clean the office buildings, or dig the fiber trenches, or run the power plants is a another. If money was too diffuse, then economic decision making would be too diffuse to be an organizing principal. Whether the people who end up with the capital required to make those decisions actually deserve it or are especially good at it vs anyone else is a whole different matter.
You just can’t achieve really big things with a medium amount of money. You can have the government do it but you never really see that much innovation. There’s a reason you don’t see a huge amount of innovation coming out of Europe.
That’s a false dichotomy. The percentage of people with bad quality of life is about the same in both places (for westernized Europe) and much worse for eastern Europe.
Officially the poverty rate is actually somewhat lower in the US than most countries in Europe. But it seems unlikely it's measured the same way, or that it necessarily translates to more people being unable to access basic services (health, housing, power etc.).
Yeah I’m in the camp where I want to see rapid progress above a decent quality of life for everyone. I feel like we’re rapidly approaching a point where technology can realistically solve all of our basic problems and want to get there as quickly as possible even if it means pain in the short term (probably our lifetimes). Obviously not everyone will agree with me but in the US even a grinding life isn’t all that bad relatively. You won’t go hungry, if you’re not drug addled you’ll rarely be on the streets for very long, if you have a mental condition or disability you get money from the government, minimum wage jobs are very, very easy to get, we have a problem with cops but on the whole our justice system actually lets anyone get justice etc.
I am really confused. Could you provide some data to back up your position that basically nothing is a big problem unless you are “drug addled”? How does one become “drug addled” if nothing is a problem?
I would be more convinced if you could also link to studies showing how early family life and local history have no impact on developmental brain processes and don’t create culture traps.
We would also need studies showing how additional government intervention in the family helps prevent the culture trap. What can the government do to make people value education and delayed gratification, which are perhaps the two traits best shown to enhance individual outcomes?
Most of the work on delayed gratification has been shown to not be measuring capacity for that but instead trust in potential future gains and personal security.
What the government could do to enable what you’ve called out is help ensure more people meet the necessary lower levels of Maslow’s hierarchy so that when kids show up to stuff marshmallows in their mouths they can feel secure enough in the probable truth of the statements and even simply the return of the researcher to assign any probability to the appearance of a second marshmallow.
Step one is something like don’t let babies be raised in abandoned projects where everything they have gets stolen regularly from before they can remember.
Funny you say this on the internet, an innovative (at the time, now it's just taken for granted) communications network funded by the US government for it's first decade. On that network you are using a technology (http/html) that was inveted at CERN (a large government funded research institute) in Europe.
These two things together have widely been credited with changing the world.
Inventing a technology and building a profitable business on top of it are very different things that require very different skill-sets. Besides, there is no evidence to suggest that private money cannot fund basic research of the type that the government does.
> there is no evidence to suggest that private money cannot fund basic research of the type that the government does.
The evidence is that it doesn't. Pharma companies rake in the money a ton but they're not the ones discovering new drugs, they're just the ones who ferry it to market.
We have no idea what innovation might have come because it was overrun by earlier deliberately monopolistic efforts driven by the aggressive and arguably unnecessary consumption of marginal human lives.
Just because the fastest way of building something can win doesn’t mean we should do it that way. In fact, we almost always shouldn’t do it that way, upon inspection.
People generally like the idea of democracies. Why shouldn't we let democratically elected representatives decide what cool things we want to do instead of leaving those decisions to individuals that happen to be very rich.
I don't get the hate for billionaires, but the two statements are not logically equivalent. A statement implied by the GP comment would be:
"Every person who ever created a successful company and retained ownership of a lot of it, causing them to become a billionaire, is a policy failure".
Presumably the GP only has a problem with that process when it results in someone becoming a billionaire. My guess is that they think people will still found successful companies even if it doesn't result in billionaires, or that the benefits from successful companies will come about some other way.
If an entity manages to obtain a massive amount of wealth, far surpassing its own needs, and there is a definite need for that money elsewhere, then that is a policy failure.
The obvious example is a single person who's a billionaire - a person doesn't need a billion dollars for a house and some food. But it could also extend to a company, or even a subsection of the government. It's just in that case measuring the need becomes several orders of magnitude harder (what should an F-35 cost anyway?)
As far as definite need, the GP probably had these needs in mind: Healthcare, food, housing, and an uncontaminated environment. I think the US is failing in these aspects in such a big way that I would agree and say "billionaires are policy failures".
When Amazon stock goes up by 10% and Jeff Bezos' net worth goes up by $16 billion, where did that money come from? Who did he take it from? Where did those dollars come from?
Trick question! There is no money, no dollars. This is purely notional value, and you can't feed or house or decontaminate anyone with it.
And that's the problem with your statement. Most "billionaires" are billionaires because they (or, yes, their grandparents) built an incredibly successful organization which is now "worth" multiple billions and they still own some of it. But they didn't become billionaires by taking dollars from other people - they became billionaires by creating this value literally out of thin air, taking it from no one and depriving no one of housing.
Consider these two scenarios:
Person A is a sleazy businessman and manages to insert himself as an intermediary in every financial transaction in the US through bribing legislators. Over the course of a few years, he extracts $6 from every citizen of the US while paying only $20M in bribes. Yes, this person now has literally $2B in dollars, and I agree he is a policy failure.
Person B is a scientist who develops an idea for a more efficient airplane engine. He obtains venture capital funding and starts a company. 10 years later, he retains 25% ownership of the company, which is selling jet engines to Airbus and doing $500M per year in revenue on $450M in expenses. He re-invests the profits in R&D and employs thousands of people. The accountants say he could sell his company to GE for $5B.
Person B does not have a billion dollars, yet the media would characterize them as a "billionaire". This person is not a policy failure.
We should make it harder for Person A to exist. We should make it easier for Person B to exist.
Apologies if this is an unpopular thing to ask -- but is a very wealthy person giving away his/her wealth to be held in trust in perpetuity (to accomplish some mission) an unambiguously good thing? Separate the question from this particular story today, that is not my intention to poke at specifically.
One thing I can see with wealth being transferred among generations, between actual people, is that people can die and their ideas (especially bad ones) can die with them. Even if the wealth is redistributed and misspent, it ends and turns over to someone else. New ideas and purposes for the wealth can take their place.
On the other hand, when a trust/foundation holds wealth, putatively forever, their mission might turn out not to be productive, or even good. I think of certain examples of charities which, by their holdings and activities, keep certain things in status quo and unable to change, which we would sometimes like to leave behind.
All this wealth transferring to entities that will not die and pass on their fortunes to other purposes. What does this cause in the long run that we haven't anticipated?
Like many things that are on my mind, our system is not just about incentivizing the good, but avoiding the inadvertent bad.
It's not really a concern so long as they are engaged in nonzero economic activity, in which case no money is permanently trapped within the vehicle. Money flows continuously in an economy and is only at rest in certain places such as bank reserves, mattresses, etc. But there is a very low incentive for it to remain at rest because our monetary system is inflationary. It certainly can be channeled into inefficient or unproductive economic activity (and often is), but the system ultimately keeps moving.
To get more concrete, if you have a charitable trust of the kind described in this article, then it will pay out salaries to employees and purchase various kinds goods and services. The recipients of those money flows will in turn put that money to work for their own ends: supporting a family with food, shelter, etc, paying other employees further along the value chain, acquiring other goods and services, and so on.
If someone accumulates this much wealth, they are well within their right to put it to work however they please. And doing so does not induce some permanent dysfunction in the system. In this case, I would argue that what the Patagonia founder has done is immensely commendable.
> It's not really a concern so long as they are engaged in nonzero economic activity, in which case no money is permanently trapped within the vehicle.
On the contrary, unspent money has no impact on the real economy. If money is permanently trapped in some bank account somewhere, it simply serves to mildly reduce inflation.
If the organisation spends it's money, and it's allocation of money is "bad", then it has a negative impact to the real economy.
Those employees could be working on something else productive, those goods and services could be applied to some other useful task.
People and corporate entities do not truly own land. That is a convenient illusion and a rhetorical trick we endure for perhaps no other reason than the momentum of precedent.
People and corporate entities rent land from governments and we call the rental rate 'property tax'. Furthermore, eminent domain is in part meant to defend against adverse situations of the kind you're describing.
IP law is designed to prevent indefinite squatting.
Not sure what practical difference that makes except in extreme circumstances like war. At an individual level government interference with your land
can be devastating. But in general land owning companies pretty much own that land. The government bit is a technicality and some tax.
> If someone accumulates this much wealth, they are well within their right to put it to work however they please.
We let them do whatever they want with it, because doing so has been advantageous for the rest of us. At the end of the day, rights are recognised by law, law is created and upheld by people, and people can change their minds.
I can imagine a future where we say "actually, this multigenerational NGO shouldn't use this much wealth to carry out this flawed mission, let's do something about it." Doing something wouldn't even have to mean taking their money by force: consider how the work of the Ford Foundation differs from the views of Henry Ford himself, and how that could have happened.
I completely agree with you that, at the end of the day, it's the actions and choices of people that determines our rights and laws and society as a whole.
But at the same time, it sounds like you are acknowledging the agency of others, while at the same time absolving yourself of agency.
I mean, of course other people in the future can change things. But what about today?
(Not to diss, I just found your phrasing about "advantageousness" a bit odd. For example, it seems like any historical regime could've used the exact same logic, even those that we would absolutely in hindsight not consider "advantageous". To be more concrete: yes it's true that, taking a Martian view, problems are likely to "fix themselves". But at the same time, as history shows, problems "fix themselves" in many different ways. Sometimes relatively smooth or peaceful ways and in other times in ways that involve massive war and genocide. And this too is up to people to decide. If, for example, the fascists act, organize, and spread their opinions more aggressively than non-fascists, they may come out on top, etc.)
Yes it could but that still wouldn't have some sort of deleterious effect on the broader system.
Money is economic kinetic energy. Assets are economic potential energy. And, by and large, any institution attempting to store and grow wealth through asset allocation will need to conduct continuous exchange operations back and forth between economic kinetic energy and economic potential energy, which is another way to describe investing.
This is, of course, a useful activity because it facilitates the transmutation of human self interest into productivity and social value. And, to the extent that such a system gives rise to negative externalities, it is the job of government to correct for that.
Good point. I really like how the quote in article itself frames it: "this notion that every billionaire is a policy failure".
I think wealth shouldn't have gotten concentrated to this degree in the first place. It's a structural failure that individuals can end up with control over that much money. If the economy was a software simulation, we'd call it buggy because it's clearly gotten some unbalanced positive feedback loops that lead to an unstable simulation.
But the system does have those bugs, and the wealth is concentrated today. So, relative to the other options (which is what every choice in life is), I think putting it in a trust is probably better for society than keeping it in the hands of the family.
Is a person swinging a hammer a good or bad situation? Depends on what they are swinging the hammer at.
Lots of people who are cheering this move by Chouinard probably have less kind things to say about Charles Koch, who has taken a lot of the wealth his private company has created and used it to fund nonprofits that promote causes typically aligned with conservative politics.
Opinions on this sort of thing typically align more with values than tactics.
I will say this is not a new thing, the great tycoons of 100 years ago created nonprofits too, some of which are still going strong. For example:
While the institutions may endure, the people running them do not, so it is possible for the mission to evolve with the surrounding culture. Doesn’t mean you will necessarily agree with them, though, even over time.
Koch still has a net worth of over $60B (doubled in the past 10 years), so no, the two are not comparable whether one agrees with Koch's political views or not.
If your ideas are abstract and roughly "climate isn't fucked" they seem pretty perennial. They're also open to interpretation.
That said, sure, lots of periods in history would've produced trusts that are truly appalling. Something to be addressed case by case, for now, though, and collective social will can always disolve what is ultimately a social contract.
At least in this particular case it's not necessarily a perpetuity; the funding of the C4 is entirely reliant on Patagonia's profits; if people decide that the outcome is undesirable they can just boycott Patagonia.
A good question worth considering, IMO. Take the Susan G. Komen Foundation as a present-day example of a foundation that, although founded with a righteous cause in mind, has (in some folks' estimation) lost its way, and/or become a somewhat negative force on cancer treatment, women's health, and charity efforts generally. https://en.wikipedia.org/wiki/Susan_G._Komen_for_the_Cure#Co...
Of course for a foundation that relies heavily on continuing donations, the "market" (so to speak, in this case arranged for the generation of social good) can send a corrective signal by cutting donations. For a completely self-sustaining trust, it stands to reason that society would have little chance to "fix" a wayward organization.
You are completely right. For example, the Tories in the UK now receive more donations from dead donors than living ones. How crazy is that?
Many of these structures, like trusts, take on a life of their own which is parasitic to the general public. Ergo they should not exist, or at least they should not be allowed to be political far into the future.
It could be, but the greater risk is that the children squander the wealth or divert it from its original purpose (assuming the original purpose was a good one), which I'd say from history is more likely to be the case. It also avoids a huge legal battle between heirs and other parties trying to grab pieces, again wasting much of it on lawyers etc.
If you think about it "squandering" isn't necessarily a bad thing.
It could he rephrased as "Lord Ben the 8th redistributed the families wealth to many other citizens, resulting in the family being reduced to the status of a regular family."
In other words its not like the heirs literally piled up all the money and burned it (removed it from the economy). Rather its used in the context that they spent it on goods and services, which in turn were supplied by others.
A fancy yacht purchase keeps boat builders employed (and a very diverse supply chain) then needs a crew, moorings, helicopter pilot, and so on.
Wealth is not a bad thing, spending wealth is not a bad thing, its the hoarding of wealth, and in some cases the way it was obtained, which are bad.
Of course when spent on social issues, aka politics, whether you consider it well or badly spent depends on your politics.
This is my issue with "trickle down" economics. It's only a trickle. If the rich people just swanned around and actually spent down their wealth then the rest of us would be better off.
I think it's generally a good thing, when you look at what rich people do with their money otherwise. There is definitely a risk of what you describe, but there have also been many good things funded this way, and I think on balance it's been strongly positive.
> when a trust/foundation holds wealth, putatively forever, their mission might turn out not to be productive, or even good
Now apply the same reasoning to corporations, which are also immortal and which (over time, since the abandonment of binding charters) are even less likely to pursue any goal except profit.
This is why the Rule Against Perpetuities[1] exists which limits the existence of a trust to a life in being plus 21 years. There are various flavors of the rule with plenty of exceptions and longer waiting periods after the last existing life-in-being depending on the jurisdiction. I believe charitable trusts are usually exempt. Matt Levine has written about the “SPY kids”[2] used when the ETF was formed.
Yes? That’s why I specifically noted it doesn’t usually apply to charities in my comment? Parent commenter was expressing concern about dead people exercising indefinite control over funds. The Rule Against Perpetuities was developed specifically to address that concern. We’ve since carved the rule up with all kinds of exceptions. As I also noted... I’m not sure where you think I’ve mislead you?
"As the company grew and became more successful, Bob found himself fending off one offer after another–large corporations that wanted to buy Bob’s Red Mill. But even though it would be immensely profitable for himself, Bob didn’t want to go down that road. After reviewing several options, Bob debuted an Employee Stock Ownership Plan (ESOP) on his 81st birthday and announced that everyone would become an employee-owner, with a goal for Bob’s Red Mill to become 100% employee owned."
I don't know anything about how these things work, but I like they way Bob's Red Mill did it.
The employee ownership model is quite different than what Patagonia has done here, but it's still a powerful and useful way to organize a company and try to make it more equitable for those who work there.
A magazine for my home state did the same thing that Bob's did, upon the founder's retirement at a similar age. [0]
The Publix supermarket chain is also employee owned, outside of the founders [1].
Mondragon is a massive employee owned conglomerate that was recently on the front page of HN [2]
It serves as a reminder that we don't need billionaires to have nice things. Any company could be organized this way; the fact that they are not is a misfeature of our systems past and present.
In fact, you could reorganize every company to be like this, today, but you would encounter a whole lot of angry billionaires and the people they train to be angry on their behalf.
In the past 15+ years, I've never bought a piece of clothing, even the so-called "performance wear", that's not made from natural fibers - such as cotton, wool, linen. I am not sure about bamboo fibers - they are heavily processed and mostly in countries with less control. Looking into how much junk the dryer collects after drying plastic wear is enough for a person with a brain to stop buying those unhealthy and not eco-friendly clothes! All the microplastics goes into the environment - locally or deep in nature - and includes your lungs and digestive tract. Wearing plastic clothes at home is the worst - there are enough studies showing you inhale the plastic particles, and they start corrupting your health slowly but surely! The so called "fleece" to me is horrific comparable only to glitter! I can't believe that this is the type of material most kids love, and we make sure their lungs are full of it from an early age! Even scarier is the new trend of recycled plastics used for stuff that touches your skin or stays in your home! Who guarantees that the plastics are not containing micro toxins such as heavy metals, or compounds that could be released in time?! I am not hijacking the topic - brands such as Patagonia and Prana should be avoided, not glorified!
I don't necessarily disagree with your conclusion, but let's not conflate "natural" with "inherently better." After all, asbestos is a naturally occurring "fiber".
Fair enough if we're constraining the discussion to just "plastics in the environment" instead of "impact to the environment."
My point is that simple dichotomies are often too blunt to be helpful. As an example, silk is a natural fiber. Is it better for the environment? Many would say no because of the relatively high environmental impact compared to synthetic silks.
Suffice to say, the way the wording framed it as "natural" vs. "plastic" is probably less useful as a general heuristic.
The entire clothing industry is fucked. All you can do is buy clothes that will last as long as possible and you'll wear until you use them as rags, or buy pre-owned clothes and do the same.
Buy from places whom manufacture clothing locally. Buy from places that manufacture clothing using deadstock (AKA the offcuts of fast fashion and fabric that is destined for landfill). Buy from places that make clothing they encourage you to "pass on" (either to your children, through their own "refurbishment" program or through secondary markets).
The garments you buy, even using organic cotton, use more resources to produce than plastic garbage you buy at Walmart or Target. The most impact you can have is using the clothes for as long as possible, and support business whom have sustainable-as-possible practices (without greenwashing).
It depends on the type of garment, and how you plan to use it.
For example if you're buying tshirts, ring-spun cotton is ideal. Thicker and heavier the weight (gsm), the better. Quality stitching, see if it's double-stitched along the bottom, or if it's made by hand - backstitched.
Silk and linen will last longer, but you also need to be more careful with them. You can't throw them in the dryer. Cotton is good for casual wear if it's heavy gsm, ring-spun and has good stitching but silk and linen will outlast you and your children. Seriously, you can buy suits from the early 1900's that just need new stitching.
Blended cotton is made to be stronger, but will age weirdly if you're using a dryer. The tension of the different blends of polyester and cotton will fuck up your garment over time. It's also not suitable for exercise or if you sweat a lot. If you're just wearing it around the house - blended is a great choice - but you'll need to be careful as most blended garments are made that way because they're cheaper to produce and "feel good". So you'll have more shitty manufacturing practices to look out for.
There are great $5 t-shirts mass manufactured in Bangladesh out there, and there are shitty $70 t-shirts made by hand in the US.
White and Black is a good choice, as both can be dyed or bleached (start with oxygen-based bleach like OxiClean before trying chlorinated bleach on fabric) to look like new.
This is just t-shirts. Dresses and skirts, jeans, dress pants, shoes, everything else has their own specific instructions. Most of the time the manufacturer knows better than any guide you read online about the product, read the tags. And I didn't even get started on wool tshirts designed for hikers.
Oil stains aren't the end of the world. Starting with white tshirts and ending up with black (or dark-colored) dyed shirts is a great way to prolong the life of an oil-stained garment you can't get the oil out of.
I feel crazy sometimes explaining to people that despite all the buzzwords, it’s still just plastic and not great for you.
When I visited the US I went to some very big outdoor stores and their range of clothing made from cotton and other natural fibres was absolutely tiny. Such a shame. (Just as bad at home to be fair)
What's good for you doesn't mean it's good for the planet. Cotton requires insane amount of water, land. On the other hand, there must be other reasons why cotton is not the best choice for outdoor wear.
Bamboo utencils, cutting boards, etc - all seems made from pieces glued together. How is this better?! I buy walnut cutting boards - they have anti-baceterial properties, too. Yeah, their shapes could be weird and they could be expensive, but they perform better than bamboo and are for sure safer.
Yep, same with bamboo flooring. It's literally tiny strips of bamboo glued together to look like a piece of real wood. Doesn't look as nice, and isn't cheap enough to justify its existence seeing as you can't sand it.
I bought a shirt which is 50% bamboo (not cheap cheap - about $80). It's horrible to wear, like it's been heavily starched. I still kick myself for not reading the label properly, as it's quite a nice shirt
All depends on Your definition of "performance". If it's "the best water resistance with the best vapour permeability and lowest weight", I'm afraid You'll always end up with something with Gore logo on it.
That being said, anything You're willing to compromise on brings You closer to the goal of having a natural fiber outdoor hard shell.
Personally, I'm currently experimenting with waxed fabrics. Commercially it's made by plenty of outfits like Fjallraven and Barbour, but the basic idea is pretty simple - take any mechanically resistant fabric You like (cotton, linnen, hemp, whatever blend seems like it could resist about 70 deg. Celsius), apply a wax (usually some mix of beeswax, parafin or microcrystalline wax, sometimes thinned with oils and solvents) and heat the whole thing (either with a hair dryer, heat gun or throw in a bag in a dryer).
The result is usually somewhat heavy, but surprisingly resistant and depending on what materials You start with, can be pretty cost effective.
I think for a rain jacket you have to compromise on the performance. It'll be a bit heavier, maybe just water-resistent and not waterproof, and likely expensive.
I'm currently reading Yvon's book "Let my people go surfing"[^1] and so far, I can highly recommend it.
The first, shorter half, is about how Patagonia grew, which is interesting from an entrepreneurial point of view. The second half is about their philosophies and contains a lot of wisdom on creating great, lasting products.
In my opinion, Patagonia's recent non-profit restructuring is one of few corporate arrangements that BESTS the Indian conglomerate TaTa's donation strategy; at TaTa, by corporate structuring/design/ownership, 2/3rds of all profits are donated to vetted non-profits.
The TaTa cousins (not actual name: the people running it) are able to keep a Top-100 marketcap entity functional with just a third of the profits. IMHO companies are definitely entitled to profits, when earned, but employees should be involved in some sort of profit-/ownership- sharing arrangement, perhaps after limited vesting periods.
MAD RESPECT TO PATAGONIA! I'll add their products to my Paul Newman's Own list (i.e. products where all/most profits are donated to charities, even if the price is higher [as long as quality/reputation is maintained]).
Patagonia mostly sells fossil fuel based products (polyester, etc). The idea of reserving all profits from such a company towards fighting climate change just makes sense to me.
We live in a fossil fuel based economy; the profit from fossil fuel based companies should be reinvested towards transitioning away from fossil fuels. This just makes sense.
I doubt more companies will follow suit, but if they do, that would be a sign of hope for the world. (Imagine, for example, if all the major oil extraction companies dedicated most of their profits to genuinely fighting climate change.)
edit: I've never gotten downvotes so quickly on a post. I don't mind downvotes, but would appreciate a thoughtful reply in response. Thank you. :)
Thousands of clothing items are an insignificant usage of oil; you are emptying a swimming pool into the ocean in South Africa and looking for sea level rise in Japan. Focusing on that misses core problems, but it does make good marketing and companies _exploit the hell out of that_ to see products. Spoken in plain language: It wouldn't make a difference even if all of Patagonia's clothes were made from bamboo. This is the simple science of the situation, yet people _vacuum_ this greenwashing marketing BS up like hotcakes.
Curbing emissions from power generation is the #1 most effective way to reduce c02 and we have the answers right now: Nuclear, Wind, Solar, and battery storage.
A few thousand jackets are a waste of time and is detrimental to causes that actually matter.
In terms of fossil fuel based clothing, specifically, they are a growing cause for significant harm in the environment, and clothing does cause real harm that has lasting consequences. Fossil fuel based clothing accounts for around 60% of our clothing. This isn't just a problem of "a few thousand jackets."
Microplastics regularly enter our water supply during laundering. This is a real problem that is causing real harm to our environment that will be very difficult to reverse.
In terms of how this relates to climate change; how Patagonia as a company spends it's profits will now be up to them. I hope they'll address climate change directly, especially in terms of real solutions, but who knows what they'll do?
However, I do know that if all fossil fuel based companies started re-investing all of their profits towards fixing the environment problems caused by their products, our world would be very different.
And yes, Patagonia is just a drop in the bucket in terms of overall clothing production, but that is not an argument against them taking action. I like the idea of every fossil fuel based company taking similar action, not just one company. I realize this is not realistic, but it is appealing to me, at least.
A note for all who might take issue with battery storage as too expensive, alternatives - albeit with lower efficiency - exist; hydro pumping, storing it in air turbines (8-9 hours, 95% efficiency iirc), even compressing air (this one goes to 85% efficiency iirc).
This is a pretty uncharitable reading of what they were saying, they were commenting on a general principle and how there was something about the economics of this that had potential if it were scaled up. They didn't imply that this particular instance was of particular significance; they were saying it would be if there were a general trend of this among _extraction companies_, and they conceded that this probably wouldn't happen.
There is a ton of waste generated by the clothing industry that ends up being pushed onto the third world. Endless amounts of waste through fast fashion generated by companies like Shein.. ask any young women. We can do more than one good thing at a time, and we have to, our existence depends on it.
>"We live in a fossil fuel based economy; the profit from fossil fuel based companies should be reinvested towards transitioning away from fossil fuels. This just makes sense."
These sentences seem like a non-sequitur to me, I'm not sure you're wrong, but why? Is it because transitioning away from fossil fuels is your top priority? If so, why?
Not GP but what makes sense about it for me is that it's a negative feedback loop that stabilizes in a desirable place. If we took the profits generated from a harmful activity, and used invested them into alternatives, than there's a self-correcting nature to it that's appealing. As those alternatives are realized, the pot of money becomes smaller and smaller, and vanishes altogether when the goal has been achieved.
I don't know how well this would work in practice, but it seems like something people could tinker with and possibly get to work.
honestly, this is why it's been a bit bizarre to me that oil companies haven't heavily invested in renewable energy.
the move away from oil is inevitable - they'd probably stand to make more money by being at the forefront of the change than they will by dragging it out.
I have noticed this as well. My conclusion is that they value power more than they value money. Sustainable energy is necessarily not a one-size-fits-all solution, but adapted to the local needs & opportunities of each community. It's necessarily more complex and less well suited to economies of scale; it doesn't favor a handful of gigantic multinationals, and probably would look more like hundreds of large regional corporations.
I think they're probably waiting for some kind of silver bullet that lets us transition to a sustainable source of very similar chemicals, derived from biomass or directly from the air, without fundamentally changing society or changing how our power structures function, and that they think they're gunnuh do it in just the nick of time. Sort of a greater fool theory of climate brinksmanship, passing on each solution in the hope you'll find the perfect one before time runs out, but you're in a research lab where the clocks have no hands.
I fear that it may be worse, and that they may think they can actually just push through ecosystem collapse with technological solutions, and just never transition off of fossil fuels.
I'm not sure if I necessarily agree with that statement completely, but the sentiment makes sense when you consider that some portion of the profits from fossil fuel consumption is associated with costs to unrelated third parties, i.e. externalities.
I'm more concerned about plastic fibers getting into the air via laundering (or simply regular activity of wearing them and little bits of plastic occasionally coming loose) than I am about the use of oil in the clothing.
I believe there should be more restrictions on the use of plastic in society, seeing as "Plastic Fibers Are Found in 83% of the World's Tap Water, a New Study Reveals"[1]
Polyester products sequester oil that might otherwise be burned, releasing carbon. Disposing of them appropriately is important, but that holds true for any article of clothing -- sea turtles don't like to choke on rubber or wool either!
Maybe the plastic garments are somehow more visible or well known, but I can assure you that they sell plenty of natural fiber clothing as well. Their hemp cotton blend is second to none in the summer heat.
Fossil fuel based clothing is one of the primary sources of microplastics in the environment, which harms our health, and the health of the environment. This is true whether or not the fossil fuel based clothing is from recycled materials. Unfortunately, 60% of human clothing is now fossil fuel based. This is a growth area for the fossil fuel industry; actively participating in it only perpetuates the cycle of harm caused by these materials.
They have been supporting grassroots environmental activists for a very long time. Back in the mid-90s our very small environmental group (6 to 8 people) received gear from Patagonia. It was quite helpful because we were doing non-violent protests in Clayoquot Sound, a temperate rainforest in the coast of British Columbia. They sent us excellent rain jackets, pants, and climbing gear and we were grateful.
> “What makes capitalism so successful is that there’s motivation to succeed,” said Ted Clark, executive director of the Northeastern University Center for Family Business. “If you take all the financial incentives away, the family will have essentially no more interest in it except a longing for the good old days.”
Pretty telling that a business school administrator has no concept of being motivated by anything other than pure profit. Always a depressing wake up call to remember that these kinds of people exist and that people actually take anything they have to say seriously.
And the statement is based on a falsehood... the two adult children remain on the payroll. Sure, they aren't getting a slice of the profits, but they do have a financial interest, at least enough to keep their jobs.
I’ve seen people shake and twitch with existential rage during negotiations that would result in their net worth possible going from ten figures to a marginally higher ten figures, and the same for the next order of magnitude. They were made either way, and they acted as though their life was at risk.
It is nothing but a greed impulse that most of us were taught to overcome during early childhood, but we give it license and credibility as some ultimate good.
This assumption promotes the behavior and at the same time assumes everyone in the room is playing for the same ultimate incentive.
The problem is a self-reinforcing positive feedback loop. It seems that only if you can avoid (or want) a tragedy of the commons should you solve that by introducing more self-reinforcing feedback loops.
> Capitalism does not reward hard work. Smart work, maybe, but not hard work.
I'd say a person successful/rewarded in a capitalistic society (defined by accruing more wealth than they started with and not just spending down some large family inheritance they were born into) probably has some combination of: luck, smart (intelligent) decisions, hard word, probably has a good "setup" going into the working world like parents didn't abuse them growing up and at least helped pay for their education, etc. Maybe that last one is just a subset of luck, we certainly do not choose our parents.
Sure, you can be missing one of the above list and do Ok, but probably not two. Statistically a smart, hard working person who had the world's crappiest upbringing probably won't be that successful compared with somebody who had all three going for them. But if you look at 20 "success stories" it is extremely rare the person didn't work hard. I think it's an important component of being rewarded in capitalism. It does a disservice to people to say "slacking off or working hard results in identical outcomes".
To support at least half of your point, you cannot be stupid and work hard and be successful. But a smart person who works hard will most likely do better than a smart person who doesn't work hard.
>you cannot be stupid and work hard and be successful.
Unless you are born into wealth, of course. One of your three/four criteria. Lots of examples of people grifting and grinding to fail upwards who have no special talent or intelligence of their own. Some are very powerful, even.
Capitalism is designed to increase the ceiling of the human experience. It is also designed to let people fall to the floor of the human experience.
Specifically, if there is a human that cannot participate in capitalism (strong enough, focused enough, educated enough, lucky enough, conforming enough), then capitalism pushes those people to the floor of the human existence.
I don't know how I find my self in the position of defending capitalism, it seems very not me, I've chosen a low paying career that provides me with a lot of creative control and free time.
I guess I can imagine what life would be like for myself if I didn't have to work, or if there was not a direct correlation between the work I did and the things I can have. I wouldn't work if I didn't have to.
Do I think we could be more generous in caring for those less fortunate than ourselves. Yes, because common sense suggests I too might be down on my luck one day.
Do I think we should should outlaw rent seeking in our society? Yes. Fuck Landlords. The earth belongs to everybody. Nobody should own land.
But don't get angry at Capitalism, get angry that our Democracies are not set up to give each voice equal power. Get angry that rich people can buy votes. Get angry that rich people can use their money to manipulate the media influence people.
Our democracies are too big and too removed from our day to day lives.
If you just replace "financial incentives" with "status incentives", he's fairly correct. I view a lot of community contribution as a pursuit for status and recognition, even if it's done behind an anonymous avatar that proxies for the person's ego, with the ultimate unconscious objective of attracting a mate who recognizes your high standing in the community as judged by your peers. Financial incentives are just a subset of that psychological process that economists focus on because it's liquid and quantifiable.
The beautiful thing about capitalism is that it takes that selfish part of our psyche and tries to point it in a direction that's productive, instead of pretending that such selfish motivations don't exist. Self-serving psychopaths have a hope of contributing positively to society by simply self-maximizing. In any other system that makes no allowance for healthy self-maximizing, they are only capable of destruction.
Obviously the outcome is a disaster when the profit motive doesn't align properly with what's good, so that's where regulations come into play.
Knowing there are people with that much money who are thoroughly motivated by the same ideals they were back when they were eating cat food, makes me feel less alone.
Pretty good illustration of the concept that no matter how much wealth you have, it's always the other guy that is rich:
"Even today, he wears raggedy old clothes, drives a beat up Subaru and splits his time between modest homes in Ventura and Jackson, Wyo. Mr. Chouinard does not own a computer or a cellphone."
...
"“I was in Forbes magazine listed as a billionaire, which really, really pissed me off,” he said. “I don’t have $1 billion in the bank. I don’t drive Lexuses.”"
Yeah, raggedy old clothes and a Subaru. Got it. Definitely middle class.
Dude just structured his wealth so that he can exercise political power, including giving money to politicians, long after he is dead.
I'm not unhappy about that, but come on, let's be clear about what it is. If the money was going to a different set of politicians, ProPublica would publish an article about how corrupt it was.
Nor am I unhappy about him being rich. I just don't buy the whole "I'm not rich, my houses in Ventura and Jackson Hole are fairly modest!" shtick.
I… what? Your complaint makes no sense. What are you objecting to?
Chouinard’s wealth was his ownership of Patagonia, which was valued >$1B. Not a liquid billion in a bank. There’s nothing that contests he has 2 modest houses and a beat up Subaru. I imagine many folks at that age with a successful career have a higher spend on housing and transportation, never mind founders of well known companies.
>> Chouinard’s wealth was his ownership of Patagonia, which was valued >$1B. Not a liquid billion in a bank
In other words, this specific billionaire's money was invested the same way as most of the other billionaires on the list that he was really, really pissed off about being included on.
> Barre Seid, a Republican donor, is the only other example in recent memory of a wealthy business owner who gave away his company for philanthropic and political causes. But Mr. Seid took a different approach in giving 100 percent of his electronics company...
The company was Tripp Lite, and he sold it to Eaton for $1.65B:
I'm sure he has an assistant, but he doesn't sound like the kind of person who would want an assistant following him around all day like some kind of butler/valet.
I'm curious about the ownership, profits, and dividends to ownership for a private company. Obviously, details on this are not easy to come by. It seems like Patagonia is self-sustaining from a cash flow perspective.
So Patagonia is 50 years old and did an estimated $1.5 billion in revenues in 2022 (according to Wikipedia). From the article, it seems like Yvon, his wife, and his two children held both ownership and control. It might even have been 100% within the family, given that NYT explicitly writes that, "the family irrevocably transferred all the company’s voting stock, equivalent to 2 percent of the overall shares" and "The Chouinards then donated the other 98 percent of Patagonia"
I wonder how much of the company's profits over the years were reinvested back into the company and how much went to Yvon and the other Chouinards. Seems like most or all of his wealth derives from Patagonia and he lives modestly but comfortably.
EDIT: Even at a 1% profit margin, at $1.5 billion, that's still $15 million.
so you just read an article about someone giving away a 1.5B revenue company, and paying 17+M taxes on it to give it political power, and you are here telling us they are not poor because they did get some revenue out of this company they have been running until they gave it away to charity? Are you ok?
Does anyone know of any companies where this strategy has worked?
Obvs lesser of the evils but the fear is that, at some point, the family or the fund, gets too far removed from the mission / founder (as is common with many companies) and ultimately chooses profits > environment.
Yes - I work at Arup (https://www.arup.com/), a large engineering design and consultancy firm. The founder (Ove Arup) and original 7 partners “sold” their shares to a trust in the 60s or 70s (for something like 1 GBP, so they were effectively donated). The main difference between Arup and Patagonia seems to be that the beneficiaries of the Arup trust are Arup employees, while the Patagonia trust has other aims.
I worked at a smaller firm previously that had a very similar ethos to Arup, but the original shareholders sold to a publicly held firm and it evaporated in short order.
The board that manages the trusts is mostly made up of folks who have spent much of their career in the firm, which helps to keep the trust from drifting too far from the mission. Obviously, there are changes with time, but we can make these changes for reasons other than next quarter’s financials.
(ps, if anyone is curious to see this from the inside, I am hiring devs! My burning need is C++ devs, but we are also hiring for skills all across the tech spectrum)
Hershey (all profits go to boys boarding school) is a case in point - but the argument there is actually the exact opposite - that dead hand control is keeping the mission from shifting to be more inclusive.
Patagonia's founder Yvon makes a significant appearance in the film 180° South [0]. In one of the scenes Yvon's chatting with the late Doug Tompkins [1] about Doug's activism, and it didn't seem like Yvon was particularly driven in the same vein. This act seems like a change of attitude for Yvon in some sense, based on what I recall from that film.
> This act seems like a change of attitude for Yvon in some sense, based on what I recall from that film.
From everything I've read, Chouinard has been passionate about activism for a long time. I haven't seen "180deg South", but my understanding of the difference between Chouinard and Tompkins is that Chouinard tried to use Patagonia as a way to effect change, while Tompkins sold his company (North Face) and used the money to effect change. Their approaches differed, but they were both motivated towards activism for the environment.
Here's the quote I'm thinking of from the movie. It's Yvon speaking of Doug, context is Doug's conservation efforts:
> We're really really different, we have the same viewpoint of the world
> and where it's going, different approach to it. He's more bothered
> probably about the end of society and mankind and stuff than I am
> because he wants to do something about it. And I, I'm just kind of a
> laid back zen buddhist and just say well, y'know I'll do what I can,
> and, so be it.
Thanks for digging up and pasting the quote. I think that's consistent with what my impression is, though. "we have the same viewpoint of the world and where it's going, different approach to it." and "y'know I'll do what I can, and, so be it." Chouinard is "doing what he can" and has been for a while. This is just the latest evolution of it. Patagonia has been contributing since to environmental causes since the 1980's and explicitly considering their environmental impact since at least the 1990's[0].
The concern I'd have with structures like this is capture of the trust/management that result in most of the company resources going towards enriching the employees and management, rather than whatever end goal was originally conceived for the profit.
It's not uncommon for these kinds of structures (with no central holder or pure profit motive to maintain accountability) to simply pay out the vast majority of profits in excessive pay for management and the like. It ends up being a company for the benefit of the few who happen to control it.
Hopefully I'm wrong, and they can continue to achieve there goals for the long term anyway :)
considering that the Yvon's goal was to prevent the $ from enriching anyone, including himself and his family, you can be pretty sure the trust was set up in such a way so as to prevent that
On Sam Harris's latest podcast he talks with Jonah Goldberg of The Dispatch and Jonah mentioned that The Dispatch is looking to hire a reporter who is focused on environmentalism but not climate change because not every environmental issue, let alone every storm or heat wave, is about climate change.
Hearing that was a breath of fresh air to me -- I miss the old days when learning about an environmental initiative meant learning about something other than climate change.
Here’s one I just listened to that you might like. Couple of retired dudes did their own data analysis and blew the whistle on waste dumping in UK rivers: https://overcast.fm/+G2W0NiFFQ
As a longtime Patagonia consumer, I’m happy to hear the founder doing this. One difficult but positive thing Patagonia could do would be to make fleece that sheds much less. I have fleece sweaters of theirs that are a few decades old and they are substantially lighter than when they were new. All those tiny little fibers dropped on trails, city sidewalks or flushed into waterways via the laundry drain and they won’t break down for many decades.
> The Chouinard family will guide the Patagonia Purpose Trust, electing and overseeing its leadership. Family members will continue to sit on Patagonia’s board ... The family will also guide the philanthropic work performed by the Holdfast Collective.
What are "Patigonia Purpose Trust" and "Holdfast Collective"? My brief Internet search didn't yield any obvious explanation of what these organizations are.
Very little and and what is donated likely will be spent inefficiently (as in many charities) or maybe even with negative efficiency (see greenpeace who is largely responsible for us not having cheap, green and reliable nuclear power).
I prefer to buy cheaper products and decide for myself how I should spend the price tag difference on charity, not trust clothing brand to do it for me.
Wouldn't the biggest impact for the environment be the company ceasing production altogether? I'm not trying to be a smart-ass here, just that even a company with highly ethically sourced items is still supplementary consumption and productions.
No, because the alternative is customers going to another company for a similar product. Customers don’t buy jackets they don’t need, so taking Patagonia off the table would in fact probably increase the overall impact to the environment since they’re the best in the market. Analogy: imagine in Tesla stopped production tomorrow. Would people stop buying cars?
But people want to prematurely replace their current items when they hear about something cooler all the time. In fact, this might be particularly acute with products like Teslas that function in some ways like a semi-Veblen good.
I don’t think so. I was chatting with a couple that worked at two separate companies, both of which manufacture and process things like fabrics and other materials for many different companies. They both said Patagonia is far and away the most conscientious customer they have and that they are very proactive about finding solutions to problems in the industry. They told me about how Patagonia would set up meetings to collaborate with these manufactures to figure how to develop more sustainable practices and use alternative materials, as well as some of the programs the company was doing to offset the harm they cause.
That’s why I think it’s far more important that a company like this exist, one that works in the industry and understands it, but wants to fix the issues with it. The alternative is that they drop out and another company fills the gap, one that isn’t interested in those goals at all.
I would prefer if billionaires gave their companies to their workers instead of using their money to further their political causes, even if they are the noblest ones.
>The Chouinards then donated the other 98 percent of Patagonia, its common shares, to a newly established nonprofit organization called the Holdfast Collective, which will now be the recipient of all the company’s profits and use the funds to combat climate change. Because the Holdfast Collective is a 501(c)(4), which allows it to make unlimited political contributions, the family received no tax benefit for its donation.
>That differs from the choice made by Barre Seid, a Republican donor who recently gave 100 percent of his electronics manufacturing company to a nonprofit organization shortly before
the company was sold, reaping an enormous personal tax windfall and making a $1.6 billion gift to fund conservative fights over abortion rights, climate change and more.[1]
>Here is how it works: Marble Freedom Trust is registered under a section of the tax code — 501(c)4 — for organizations that focus primarily on what the Internal Revenue Service calls “social welfare” and as a result are exempt from paying taxes. Such groups are allowed to engage in political advocacy, but their supporters are not entitled to deduct donations from their income taxes. Supporters can, however, donate assets that a nonprofit can sell and avoid capital gains taxes on the sale.[2]
So when pro-environment people donate 98% of their money to a 501(c)(4) they get "no tax benefit", but when a conservative person donates 100% of his money to a 501(c)4 he gets "an enormous personal tax windfall"? That doesn't make sense. It seems to me as if NYT likes to portray liberally-leaning people as selfless and conservatives as greedy, even when they do essentially the same thing.
You should read up on this a little more, because the quality of your question is poor. It cost the Chouinard family roughly $17 million gift tax on the stock donated to the Holdfast Collective, so yeah, not exactly a wind fall.
They paid $17.5M in taxes, and donated $3B. That's a tax rate of 0.58%. Why is the tax rate so low? Because 98% of the donation went to a 501(c)(4). They managed to avoid tax on 98% of their donation by using a 501(c)(4).
Now for Mr. Seid, he donated 100% of the money to a 501(c)(4), so he managed to avoid tax on 100% of his donation.
NYT says that when Mr. Seid avoided 100% of the tax, he got "an enormous personal tax windfall".
NYT says that when the Chouinard family avoided 98% of the tax (for a total tax rate of 0.58%) they got "no tax benefit".
How is avoiding 100% of the tax a massive tax benefit but avoiding 98% of the tax no tax benefit? The benefit that the Chouinard family got was 98% the size of the benefit that Mr. Seid got. How is something that's 98% of something massive not still massive or at least very large? NYT says 98% of massive is equal to 0.
The Chouinard family paid $17.5M in taxes, but if they hadn't used a 501(c)(4) they would have paid $875M, meaning they saved $857.5M in taxes, which could be considered a windfall.
They donated the company, they didn't sell it. That means they would have never paid 875M in taxes since a donation means they don't receive the underlying investment gains as they would have if it were a sale. His family is left only with voting rights, not equity.
Similarly Mr. Seid donated his company, didn't sell it. NYT says he got "an enormous personal tax windfall". Yes, the charity he donated it to then sold it. Does a person's tax windfall status depend on what the charity does with the stock after donation?
I guess you could say that NYT's position is:
* If the charity sells the stock, we'll consider the donor to have gotten "an enormous personal tax windfall".
* If the charity holds the stock and instead collects dividends from it for a long period, we'll consider the donor to have gotten "no tax benefit".
I don't think that's a logical position though. For one thing, what if the Patagonia-owning charity decides tomorrow to sell the stock? Does NYT retroactively go back and say the Chouinard family actually did get a tax benefit?
They literally sell oil. Oil with extra steps, which consume even more oil. All of Patagonia's profits are completely based on selling oil to people who load up into a huge SUV or get on a plane to go consume more oil as they wear their fashionable oil.
The modern sportswear industry (and fast fashion in general) has been an absolute catastrophe for the environment, and he certainly knows it. But yeah, whatever helps you sleep at night.
As a tiny niche product, sure. But the entire reason Patagonia became successful in the first place is Polar Fleece [0], a product that came about as a "cheaper" (that is, where the true cost is externalized to the whole planet through emissions) wool alternative that could easily be made from hydrocarbons.
>"89% of their fabrics are from "preferred materials", 100% of the down is responsibly sourced, and 100% of their cotton is grown organically."
Meaningless marketing terms. The "responsibly sourced down" and "organically grown cotton" has nothing to do with their climate impact.
Regardless, this isn't about social justice, or saving the penguins, or fair trade. It's just blind naked hypocrisy for a company that is 100% dependent on fossil fuels and petrochemicals to be profitable somehow acting like they are responsible environmental stewards.
Polyester fleece did not get popular because it was cheaper than wool, in fact it was quite a bit more expensive when introduced. It gained popularity because it was lighter, far more water-resistant, and did not shrink when washed.
>in fact it was quite a bit more expensive when introduced.
To the consumer, sure. That’s how Patagonia made their profits. But polyester is not, never has been, and never will be more expensive to produce than wool. The upcharge was a premium on what affluent consumers who wanted a better product could afford.
Oil itself isn't the problem. Climate change is about adding the carbon from fossil fuels to the air. If we could magically convert all remaining unburned coal/oil to an enormous cube of polyester, it would more or less immediately put a cap on global warming. Of course it would also cause worldwide famine, but my point is that global warming itself isn't a directly result of the extraction/use of fossil fuels, but specifically the burning of them.
