Amazon: Fact and Fiction

            

        We recently, of an evening, had drinks (outside, appropriately distanced) with friends. I don’t remember how we got there, but one of them launched into a diatribe against Jeff Bezos and his wealth. I was surprised by the depth of partisan bias and outright economic ignorance displayed. First, the complaint was that Bezos had personally, “Made more than a trillion dollars this year.”  Pointing out that the “trillion” figure might possibly represent Amazon’s retail sales but not net profit was of little avail. 

    My explanation (I do have a Master’s in Business) was met by “Well you’re a Democrat, you would say that.” (??) I then soldiered on, explaining that Bezos draws a relatively small actual salary ($81,840, far less than Donald Trump’s annual compensation for fucking up an entire nation) and that to get more cash he must either borrow or sell Amazon stock. Again, disbelief. I also pointed out that Bezos spends a billion annually in space research, which benefits us all, while donating millions to educational charities.

         As a personal observation, I think the antipathy displayed reflects Bezos’ ownership of the Washington Post which is, shall we say, not on Trump’s Christmas card list? The ignorance, however, reflects something even more “Trumpish” – the willingness to slander based on partisan motives and eyes closed to more egregious shenanigans by the other guys. So, here are some truths – data, not bullshit.  

        Jeff Bezos’ net worth is about $180 billion, which is significantly less than a trillion! In truth, Amazon’s gross sales revenue for fiscal 2019 was just about $201 billion with a net profit, after salaries and all other expenses, of just over $12 billion and change. Clearly the “trillion” was just invented, since the entire US budget for 2020 is less than $5 trillion.

        I have seen other opinions on Facebook (although not this outrageous) from both sides of the aisle, skewering Bezos for his success and portraying him as a scrooge who is abusing … whatever … these folks are short on data . Quickly: Jeff Bezos was publicly schooled in Florida, won a scholarship to Princeton and used his talents to build a retail giant. Those who attack him most vociferously fall into two categories, generally.

        Those of the Right, like my friend (yeah, you can be friends and politically disagree) attack Bezos because he is wealthy and Trump dislikes him. In reality, Jeff Bezos is the anti-Trump. He is entirely self-made, inherited nothing, hurting no one in the process. He pays his bills, raised starting pay to $15 hourly while others argued against it, offers much better starting benefits than the majority of other US employers and, remember, owns a newspaper which prints much commentary opposed to the Trumpian debacle.

        Those of the Left who criticize, do so on the premise that being rich/generating wealth is criminal. Like Amazon or don’t, but it has been a lifeline to millions during this pandemic with no change in service or cost. Like Bill Gates before him, Bezos has begun a program of charitable giving in the scale of millions annually, excluding the Blue Horizon space research billion dollar annual outlay. The Koch foundation has bragged about a total of “over a billion” in charitable giving over the last decade, a sum which equals Bezos annual Blue Horizon outlay alone. The Kochs could have done more had they not donated another half-billion, plus, to Right wing political causes.   

        As of 2018, the Walmart heirs (also staunch Republican donors (they spent multi-millions supporting Bush 43) had a combined wealth of $163.2 billion, which was more than Jeff Bezos, Bill Gates, and Warren Buffett. In fact, they were worth over $70 billion more than the second-richest family in the United States, at the time, the Kochs. From 2014 to 2018, they gave less than half as much annually to charity as Bezos does.

        The Waltons have been rich for a long time, as have the Kochs. The Waltons' wealth comes from their inherited controlling stake in Walmart. While some Walmart workers live in poverty, the Waltons rake in billions every year from the company in dividends and sales of their Walmart shares. A fair way to evaluate Jeff Bezos non-personal spending would be after he leaves control of Amazon and then see how he uses his wealth.

        So, how did Jeff Bezos become so successful? By starting with a $300,000 loan and the idea that, in the age of data and internet, people would buy books on-line, and expanding as it became obvious that the concept of e-tail was the future.  

         Going public: Amazon’s IPO was at $18 per share, and he sank most of his own money into his own stock. From an initial share price @ IPO $18/share, Amazon now trades at $3,142.07.  Along the way, with multiple splits, (an effective 12 for 1 split). All initial Amazon investors have seen the value of their investments increase, however, Amazon invests all profits back into the business, paying no dividends, ever. Taxes are paid when stock is sold. Even so, with a net profit margin of 5% , Amazon is in the “low/average” range for Us corporations. For an example, the median US Drug manufacturer’s net income is   13.8%, over twice as high as Amazon.

        Bezos now owns 53 million shares, which, multiplied by share price totals $175.7 billion. He started with far fewer shares, but Amazon stock has split three times, twice at 2 for 1 and once at 3 for 1. He now has (as everyone else smart enough to buy in at $18 per share IPO has) 12 times as many shares as he originally had. He inherited nothing, he defrauded no one, and he offered anyone the same chance to grow their investment. How dare he? Any person smart enough to invest $10,000 in Amazon when it went public, would today have seen that reasonable investment become over $1.75 million. This is, however, just the stock value, since Amazon pays no dividends and never has, instead reinvesting profits back into the company. Those (like Bernie Sanders) who whine about Amazon’s taxes being low can’t grasp that if all profit is spent on infrastructure (effectively) it isn’t taxable as net income.

        Meanwhile, Walmart paid out $12 billion in dividends on retail sales of products, 70 to 80% of which are made in China. Just about half of these dividends are paid to Walton family members.  Understand, Jeff Bezos must sell Amazon stock to take value out of his corporation, unlike the Walton heirs and the Kochs who can do literally nothing productive and draw (individually) mega millions and in several cases over a billion annually, in dividends.

        Why does Donald Trump hate Jeff Bezos? Because he (Bezos) did what he did without tax fraud, fatherly money laundering, or cheating vendors and contractors. Oh, and no multi-bankruptcies, either. Like it or not, the America we know was built by entrepreneurs and risk takers, most of whom risked much to gain what they did. Subsequent generations, in some cases were born into wealth; among these are the Kochs, Waltons and Bushes as examples. Some were con-men who were eventually found out – Jay Gould, Glenn Turner, Donald Trump.

        Those who “rate” Amazon poorly do so on a criteria scale by which no mass retailer fares well, primarily because any such “rater: has an axe to grind. Example: Amazon took flack after claims surfaced related to employee mistreatment in China. In fact, any high-volume retailer who runs corporate facilities in China must be majority Chinese owned. Walmart imports 70 to 80% of their non-food retail goods from China and their facilities are Chinese owned; they faced the same sort of claims as Amazon. Walmart’s “fix”? Arm waving and promises. Amazon’s? Leave China. The truth? Employee surveys show that Amazon employees are, as a group, as content, or slightly more so, as employees at Expedia, Boeing or Microsoft.      

    Sour grapes, anyone?