Jeff Bezos' Wealth

By Arturo Macias @ 2022-12-04T15:21 (+2)

Wealth: its nature and sustainability

Jeff Bezos has recently declared that he intends to donate the vast majority of his wealth (see  here). Jeff Bezos does not have a hundred billion dollars sleeping in a bank account. His wealth consists mainly of the ownership of Amazon.

The naïve meaning of “Donate” would be to sell Amazon, lose control over the world's most important firm, and spend the money on bednets and grants. Bezos has enriched himself by developing and implementing a series of processes that have massively facilitated direct interaction between consumers and producers. In many ways, Amazon is the most important interface between the economy of bits and the economy of atoms. It is an extraordinary agent of progress and a severe threat to a healthy competitive market. A great power in search of fulfilling its great responsibility.

Any proposition for the use of that wealth that focuses on what to do with the money but ignores where it comes from is wrong from the beginning. This is obviously true in the case of a company as strategic as Amazon, but also in the case of more normal businesses: transferring power in exchange for money is always bad practice: you soon find yourself with none (“non bene pro toto libertas venditur auro”: once you are a slave, the gold earned by selling your liberty can easily be extorted from you).

Healthy competition: Platforms as ecology managers

The case of Amazon is especially interesting because its business is intermediation. If the platform performs this task in a neutral way that respects the principle of a "level playing field", and gives rise to a competitive market, the effects in terms of productivity and equality will be much higher than the weaponization of the platform to capture market segment. 

Lisa Khan, current chairman of the Federal Trade Commission, began her academic career with a harsh criticism of Amazon behavior (Khan, 2017). I cannot judge to what extent the criticism is justified, but from a utilitarian perspective, long before thinking about the Amazon’s profits, the main social interest is that the immense volumes of value that are intermediated on the platform are so with transparent rules that favor competition and progress. I tend to think that, for a mature company with Amazon's competitive advantage, this is also its enlightened self-interest.

Power and wealth: The moral imperative of ethical lobbying

Milton Friedman proposed as a general criterion of business ethics, "maximize benefits within the Law", and as general rule I believe that a competitive market leaves a limited space to deviate from that maxim. 

However, Friedman's principle has a sunken hypothesis: that the Law is given, and it takes care the general interest. But firms spend large sums in affecting lawmaking and often with purely individualistic goals. In my opinion, although it is legitimate and necessary for a company to take care that the regulation does not harm it in relative terms with respect to its competitors, it is morally required not to participate in lobbying activities aimed at privileging a sector (or a social class) against the general interest. Greed is not good at Congress.

The logic of the market is Darwinian and by requiring a company to prioritize criteria other than profit maximization there is a risk that whoever follows the advice loses relevance to the extent that she follows it. However, the political use of economic power is much more discretionary and there is far more room for a sustainable ethical position.

The republican succession of heroic entrepreneurs

For large firms owned by its founder a main issue is how to manage the inevitable dilution of control that a system with egalitarian inheritance (in opposition to primogeniture) and how to replace the power of an extraordinary founder with an institutional structure that offers a governance less spectacular but more sustainable.

In the case of a platform, transparent rules, the creation of dispute arbitration bodies, and the participation of users in the design of the operation rules seem steps that would ease the transition between the founder’s omnipotence and the institutional (and probably regulated) future which certainly awaits Amazon. Bezos' first duty is to seek a successor, and no human successor should amass the kind of power he has. The political example of Washington is also valid for business.

Conspicuous donations

Well, finally we come to the bednets and the grants. Amazon is a successful company, and over time, its growth will level off, and the marginal return on investment will equal the cost of capital. Then, it will generate a free cash flow in excess of its investment needs, and that excess can be used to fund yachts and opera houses, or in satisfying urgent or existential human needs (or if you ask me, in satisfying both at the same time). It is that future stream of income, not the market value of the company, that is available for altruistic projects. The present value of both is similar, but the time structure of expenditure suggested by both perspectives is totally different.

Conclusion: building an effective and sustainable altruistic elite

The last decade has seen some disappointment with the rise of meritocracy in the United States. Palladium Magazine has been the publication that has most consistently developed the theory that the (self-)annihilation of the American WASP aristocracy has given rise to a meritocratic rat race and the formation of a specialized and hyper-competitive pseudo-elite equally capable of extraordinary technical refinements and monstrous political mistakes.

The argument seems plausible to me: however, it is easier to point out the void than to fill it. The American elite was united by a religious (Protestantism) and political (economic liberalism and republicanism) ideology, and by a series of tastes and rituals that were reinforced by that ideology, and that created powerful social bonds. A WASP aristocratic restoration is impossible, among other things because the socio-economic conditions of national capitalism in which that elite was optimal no longer exist, but also because the beliefs of that class are largely outdated beyond recover. 

The reactionary and identitarian games (be it the woke revolution or the Trumpist reaction) of the last two decades are not only sterile, but also unnecessary. The countries of the West are vastly more equal from the perspectives of race, gender and sexual orientation than at any time before and the progress has been explosive. It is economic inequality and a certain stagnation of median income where the consequences of globalization and social apathy have manifested themselves in recent decades. The natural way to deal with these problems is to deepen the instruments we already have: more competitive markets and a welfare state designed according to the principles of incentive compatibility.

The Western elite needs to regain its self-confidence, and the rehabilitation of utilitarianism in the form of Effective Altruism has the immense advantage of being an ideology that is solid, modern (or even better: classical, that is, eternally young), universalistic and existentially optimistic.

However, to be an ideology capable of articulating an elite, efficient altruism has to emphasize the sustainability of that elite itself and of the society it leads. Of course, what is not sustainable cannot be effective (I am not going to argue for this statement: any argument will always be weaker than the confident affirmation of this self-evident principle).

If the effective altruism proposal to Jeff Bezos and his heirs is “sell your company to a Japanese zaibatsu or a Russian oligarchic family and spend the money on bednets and grants”, success would be worse than failure.

On the contrary, the effective proposal for the high corporate owner’s aristocracy is: i) the preservation of their own existence with a sustainable birth rate, a sense of social purpose and focus on wealth preservation, ii) support for a republican corporate governance inclusive of all stakeholders, and in the case of platforms, designed to foster a competitive ecology, iii) genuine altruism in the use of political influence, iv) the use of business surplus more for conspicuous (and effective!) altruism than for conspicuous consumption or display. Let it be clear, however, that utilitarianism recommends moderation, never asceticism.

These principles, like utilitarianism itself, may seem old, but in reality, they are as eternal as the teachings of Epicurus or Aristotle.

References

Khan, Lisa, “ Amazon's Antitrust Paradox” , The Yale Law Journal, 2017

Also posted in "Less Wrong" and "Progress" Forum".