Why Jeff Bezos Isn't As Rich As You Think

Bob thinks we should just confiscate all the wealth from all the billionaires in America to pay for government programs. But even if that were possible... would it even work?

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CREDITS:
Written by Seamus Coughlin & Jennifer Maffessanti
Animated by Seamus Coughlin
Produced by Sean W. Malone

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LINKS:

[FEEonline]

Since many of you seem to be just now showing up due to the DarkViperAU rebuttal, first... Welcome to the channel. Secondly, here's the comment I left over there in response to his video:


"I don't normally comment outside my own channel, but as the maker of the original video being criticized, I figured I might as well respond to the points made here.

Firstly, let me stipulate that the Common Sense Soapbox series (of which is one episode, originally released over a year ago and not "recently") is an animated comedy series not meant to be a singularly comprehensive source for every argument or fact that would be necessary for a complete picture of how the economy (or just one business) works. I feel it's important to recognize that in no way was the original video an attempt to cover that much ground. Instead, we were responding to a couple commonly-repeated claims about confiscating the total wealth of billionaires and using it to fund the government.

With that said, let me address some of your points:

1) Yes, you are correct that stocks are generally considered "liquid" assets, and yes, Bezos can sometimes arrange for what is - by most standards - a very large sale, generating capital that he can use for some other purpose (say, starting another company). You are, however, missing a really critical set of words from the text that you quoted:

"Pre-arranged trading plan"

Arranging a large trade to liquidate some assets won't throw everyone into a panic if it's done intentionally, carefully, and for reasons that make it clear to other investors and stockholders that it has nothing to do with the relative stability of Bezos' companies (ie. Amazon). This going to come back up a lot in my overall reply, but this is emphatically *not* true if the liquidation happens as the result of government confiscation.

But that's fundamentally what the video is about -- Not a carefully planned trade, but the hypothetical confiscation of Bezos' (and other billionaires') wealth by government, in order to finance government programs. It's basically the most extreme version of "eat the rich", and that extremity is important as I'll explain at the end.


2) You are also correct when you go on to say that Bezos could trade his Amazon stock for something else of value if he wanted because "Amazon is a very well-respected company", but that is *only* true because there's a lot of broad trust in Amazon -- which is a direct result of Bezos' leadership and history of making smart, sane, profitable choices.

This brings us to the next section of your video and, unfortunately, to the underlying flaw running through most of your arguments.

In the crazy scenario of the government seizing all of Bezos' shares of Amazon, that act *alone* would radically upend the trust other investors would have in Amazon, both because it would remove Bezos' leadership, knowledge, and decision-making prowess from the equation *and* because it would signal to almost everyone that the government's respect for property rights has disappeared.
It would also put the government in a position of power / ownership over the company itself (in the tradition of other fascist or socialist states).

So... Sure, in theory the government wouldn't have to sell off all those shares immediately to get money to pay for government programs, but a) they would if they wanted to use it to pay for a big spending push; and b) that's not the biggest problem.

The more important issue is that the appropriation of Bezos' wealth would devalue the company all by itself.

Again, this scenario isn't built around a planned sale made by the highly-trusted CEO of an incredibly stable, effective, and extremely profitable company. It's the politically-motivated state takeover of private property. These are very, *very* different ideas.

Here you are making the mistake of assuming that major changes to policy conditions and to Amazon's leadership structure would have no meaningful effect on the value of Amazon as a company, but it should be obvious why that's not true.

No one in their right mind would buy more stock in a company that had just been nationalized by the Federal government and forcibly stripped of one of its most important assets -- the founder and CEO who built the company from scratch. To the contrary, they would be well within their rational faculties to be concerned that the government was destroying something that has created trillions of dollars of value and turn it into a mess of mismanagement and failure that plagues every other government-run enterprise.

The whole problem here is the state confiscating shares. To say that this will have no effect on stock price and no effect on the company's longer-term performance is, to put it as charitably as I can, naïve.

This is also why I think you're missing the mark on why Amazon would ultimately experience layoffs.


3) A government-takeover of Amazon or even a partial nationalization of Bezos' shares (which are substantial, albeit currently a minority) will cause all sorts of major problems. Even in the short term, a dramatic decline in the value of the company would mean a lot less available capital for the company as a whole. This would probably affect future investments, new projects, and fledgling initiatives first, but as the fall-out from the confiscation and the leadership vacuum grew, it would start affecting almost everything else.

Again, the hypothetical scenario being discussed is not just "a different bunch of people" owning Bezos' 11% in a planned transfer of ownership.

It's the same kind of nationalization that's wrecked countless socialist economies around the world. It would be akin to the Venezuelan government taking over the oil industry and within a few decades running it into the ground.


This isn't a small problem.


4) As for the last part where we get to the liquidation of all asset valuations of all the billionaires in the US, the video isn't conflating anything. We're simply discussing the reality of the total net present value of all their assets in (literally stated to be magical) terms of turning all that into usable cash with which to run government agencies or programs.
This section of the video is expressly recognizing that this kind of liquidation is impossible to do, but we need to show that even if you could do something like that, you would get only enough money to pay for roughly 56% of Federal spending from 2019.

And again, we're quite clear on the fact that this is literally impossible. Taking all that money at once can't be done -- but if it could be, you could only get enough cash to pay for half a year's worth of government programs, and you could never do it again.

This isn't a conflation of anything. It's the statement of a hypothetical scenario in order to explain the scale of all billionaires' combined on paper wealth in relation to government spending -- which, as I said at the beginning, is the central point of the video. The extreme case can't pay for a year of current spending, let alone a fraction of what some people propose to spend on new initiatives. And if the extreme case can't do it, a marginal tax increase sure won't help either.

At some point, we have to come to grips with spending.

But on to your final point...


5) The worst claim you make in this video is that government-confiscated businesses would simply collect 100% of the pre-existing profits, thus making it possible to have state-owned businesses generating more revenue than businesses that only have corporate taxes taking part of their revenue.

This is just a continuation of the same mistake you made earlier.

Businesses are not just machines that continue to operate exactly the same way under different management, different incentives, and different legal rules.
They're organic, human-driven organizations that respond to the changing conditions around them and which are actually relatively fragile. Even running a small team, what I've found over the years is that just a little bit of poor vision, bad strategy, weak processes, or even just mediocre culture can easily derail the work we're trying to accomplish. It's exceptionally hard to scale processes to the size of a company of a few hundred people, let alone to one that employs a million people like Amazon.

When the state takes over the ownership, the business will most likely die in relatively short order -- as we've seen time and time again, all over the world. To that end, the government won't be making profits *at all*.

And like the Post Office, Amtrak, or going back centuries the state-run railroads, a government-owned Amazon will take heavy losses year after year. And if it survives, it will only be thanks to whatever remaining tax revenue (and monetary expansion / borrowing) the government can marshal instead to keep it afloat.

You keep assuming that Amazon just *is* profitable and will always be comparable to what it is today, no matter what.

That's not how this works. Under different conditions, it will be a different company entirely.
And under some conditions... it will be dead.


Cheers,
Sean Malone
Creative Director, FEE
Co-creator / Producer, Common Sense Soapbox"


I'm happy to continue the conversation here if you guys would like, but I'm probably going to hit a wall for responding on DarkViperAU's channel relatively quickly.

[QueueWithACapitalQ]

2.5 trillion? That’s almost enough to pay off my student loan debt

[rwbimbie]

*_A trillion here, a trillion there, pretty soon, you're talking real money_*
US Government

[aliensoup]

You forgot to mention, devaluing the net worth of companies billionaires co-own devastates the value of middle-class retirements and investments. Punishing billionaires punishes everyone else participating in that part of the economy - employees, investors, and the peripheral companies and their employees that depend on it.

[amberreed]

Has Scrooge McDuck's money swimming been a PUN this entire time...
And I'm only NOW figuring it out?

[TheRealGuywithoutaMustache]

"Jeff Bezos isn't as rich as you think."

Me: Wait! That's illegal!

[arthurlau]

2.5 trillion. Yeah

Run the government under 8 months.
How much those scums are spending?!!!!?

government spending is really huge in the US

[RatedB]

before even watching: "Well yeah he just got divorced"

[MrRunescapy]

Good economic insights, but maybe next time don't make the opposition a wimpy nasal character - I'm sure it's harder to convince people who think the same way as that character when they're portrayed like that.

[Vandal_Hawk]

The very reason America became rich was in spite of government, not because of it.

[sirnikkel]

This channel is the embodiment of the *«ACKCHYUALLY»* meme.

[nocturne]

I'd also raise the ethical question of whether it's permissible to tax wealth TWICE, seeing as those assets would have been acquired with income that was already taxed.

[mrow]

I remember when a news article came out saying Trump took out loans to start new hotels. The comments on it were along the lines of "Trump's not a billionaire! he has to take out loans to build something". When I tried explaining to them, the same thing as your video.... lets just say the reactions were priceless.

[psyxypher]

I'm focused on Government spending because MY INCOME TAX IS 30% AND I WORK PART TIME.

[jeffersonianideal]

Yes, but is Jeff Bezos as rich as he thinks?

[jjavvz]

Interviewer: So how much money do you have?

Jeff Bezos: Yes

[Stoicismisourgreatestteacher]

This is why people need to understand the difference between "net value rich" and "liquid rich". Besos loses a ton of money on prime. The cost of a month on prime is about the same as a standard delivery charge. So if you order more than once a month you're saving money at his expense.

[sandakureva]

In my case, because I manage my finances well enough, I have a few grand in liquid wealth... and a negative net worth, owing to my massive student loans.
Being fair, I was also smart with those. I only have about as much in loans as a nice car would cost. Far better than many of my peers, who have the price of a very large house.

[ixaldorran]

The most important thing I learned from this video is that Scrooge mcDuck's money bin was a play on words all this time.