You do realize when we talk about jeff bezos being a billionaire, it doesn't mean he has his billions in gold/cash in a vault somewhere? The overwhelming majority of his wealth is tied in various financial assets (eg. equities) that certainly do get affected when "businesses go into shock". Sure, he'll be in a much better position to weather such "shocks", but it's still in his best interest to ensure that the economy doesn't crash.
Technically, yeah! Functionally, though, if the Even Greater Depression arrived tomorrow? He'd still be the richest man alive, and probably even more powerful than he already is right now thanks to how Amazon and AWS would get to take over more failing social institutions.
Sure, a falling tide lowers all boats, but Bezos will still comfortably afford his gigayacht. It's a setback for Bezos, and maybe he wants to avoid it in order to maximize profit and utility and whatever, but it's an existential threat to him in the same way spilling a glass of milk or losing a round in a video game are. Even extreme social unrest has been priced in, at however much a luxury bunker in New Zealand costs.
Other people, when the Big Crash arrives, will -- in a totally economically rational way! -- commit suicide in order to ensure their spouses and children aren't bankrupted by their medical bills. Uh, in greater numbers than they already do. Many will starve, or at least go very hungry. In greater numbers, I mean. Should be a good time for the owner class to buy up all the housing stock for cheap, too.
I don't think the owner class is worried about it. I think they actually might be excited.
Bezos does not have his cash in hand, for the most part. To the extent that he does have cash in hand, he has already paid taxes on that cash. To the extent that he has not paid taxes on his wealth, he is fully incentivized by the share price of AMZN.
What a lot of high wealthy individuals are doing is using their portfolios as collateral against lines of credit. The LOCs give them cash to fund their lifestyle, and they don't have to liquidate their portfolios and take the capital gains charges (at least in the short-term).
Someone can have both holdings and cash in this situation.
This has been possible lately because rates are so low, so the interest doesn't cost borrowers that much.
Generally though, most 'middle-class loans' have an end date.
But I don't feel like digging around SCF data, so this is just a hunch. Having said that, my hunch is that middle class households are much more indebted than wealthy households.
Difference is just the volume of money and when the term is due.
> Someone can have both holdings and cash in this situation.
Ya, I understand this. This is exactly my point, though. If he's taken out loans against his shares, he is even more incentivized by the value of those shares than if he had not done so.
To the extent that he has pure (unencumbered) cash positions, he's paid taxes. To the extent that he has unrealized gains or loans against unrealized gains, he is incentivized by share price appreciation.
This was in response to the a comment suggesting that because Bezos had already cashed out, he didn't care about the value of his shares anymore.
It's about the fraction of global wealth that they control.
That's how they benefit from crisis and catastrophe.
Maybe the dollar value of their pile declines, but the percentage of global wealth they control increases, as the poor and less wealthy get hurt proportionately more.
LOCs are often open-ended, so as long as they're at minimum paying the interest, the lender doesn't care. Presumably it will be cleared up eventually on death with the estate.
> Bezos does not have his cash in hand, for the most part.
Sounds good to me.
That just gives more reason to go against, there's quite a few Western comforts that could use a bit more opposition, Amazon being one of them.
You're making the case that it is virtuous to be aligned with popular sentiments on issues, which is a position that dissolves any ethical or political principles in the name of conformity.
https://tenetpartners.com/top100/most-powerful-brands-list.h...
Apple, Google, Amazon, Microsoft all in the top 10.
Exxon way more popular than Netflix.
if you're measuring outcomes by relative income/wealth, then you can also argue that the "Even Greater Depression" wouldn't affect the average person either, because everyone would stay in the same place (on average).
>probably even more powerful than he already is right now thanks to how Amazon and AWS would get to take over more failing social institutions.
We just had a huge pandemic and recession. Did he take over "failing social institutions" did he "take over"?
>It's a setback for Bezos, and maybe he wants to avoid it in order to maximize profit and utility and whatever, but it's an existential threat to him in the same way spilling a glass of milk or losing a round in a video game are. Even extreme social unrest has been priced in, at however much a bunker in New Zealand costs.
Surely he'd prefer to be the leader of a global megacorp, travel anywhere in the world, partake in various space-related adventures, and not be trapped in a bunker? You're right he won't ever have to worry about his basic needs, but I wouldn't characterize it as "spilling a glass of milk or losing a round in a video game". I'd be pretty pissed if the US government somehow revoked by right to leave the country.
>Other people, when the Big Crash arrives, will -- in a totally economically rational way! -- commit suicide in order to ensure their spouses and children aren't bankrupted by their medical bills. Uh, in greater numbers than they already do.
I'm not sure why this is being brought up, other than for the shock value.
>I mean. Should be a good time for the owner class to buy up all the housing stock for cheap, too.
Similar to your fears about amazon taking over, this seems to be unsupported by the data. The great recession lasted from Q1 2008 to Q3 2009, according to the fed. However, this doesn't seem to correlate with institutions buying up houses?
https://cdn.vox-cdn.com/uploads/chorus_asset/file/22647043/S...
I suspect that you don't understand why I'm bringing up the human consequences for the same reason you've claimed that "the "Even Greater Depression" wouldn't affect the average person either, because everyone would stay in the same place (on average)". Bezos and his peers can lose hundreds of thousands of dollars of abstract net worth every day for decades before they even notice, let alone have the material conditions of their lives change in the least; the modal person will be dead of exposure in a few days. It's somewhat incredible that you'd even try to make the argument, actually.
>Surely he'd prefer to be the leader of a global megacorp, travel anywhere in the world, partake in various space-related adventures, and not be trapped in a bunker?
Aww, shucks, I'm confident Bezos will be able to continue his worldly lifestyle until things go very poorly indeed. That said, the very existence of the owner class's anxiety-bunkers is a sign that they're not entirely behind keeping the global economy running and serving the people, don't you think? If there's only one escape pod and it's for the command staff, only us crew need suffer the consequences of their tactical decisions.
>I'd be pretty pissed if the US government somehow revoked by right to leave the country.
I never mentioned this, and I'm not sure what relevance this has to anything either of us has said. I'm beginning to believe you're not arguing in good faith.
>Similar to your fears about amazon taking over, this seems to be unsupported by the data
AWS didn't even need a pandemic to achieve running most of the DoD. Not sure if you've been following the housing market, but Zillow didn't need an economic crash to go all in to rent(al)-seeking behaviour. At least they seem to be dropping the ball on that one, but think of how much more effective buying up all the houses will be once everyone's underwater on their mortgage and unemployed? I'm also a little surprised that you'd show me a chart that shows that this historical low of landlord house purchasing represents a fall to 20%. Since you're so familiar with CoreLogic's data sets regarding this, I'm sure you're aware that in 2000 it was between 5 and 10%, and trended upward until only recently. Unsupported by the data, my eye; you're just closing yours to the important parts of the story.
>The great recession lasted from Q1 2008 to Q3 2009, according to the fed. However, this doesn't seem to correlate with institutions buying up houses?
The other way to phrase this, of course, is "having ballooned in the past eight years, the proportion of home sales to landlords snaffling up housing stock continued to rise, even during an economic crisis, and rose precipitously after the crisis was 'over'".
Bezos isn't even the richest person alive today. That would be Musk.
https://www.msn.com/en-us/money/companies/elon-musk-is-now-n...
I guess my read is that if Bezos got his title from a company that didn't exist, in modern, sell-everything form, until 22 years ago... (and in +AWS form, until 19 years ago)
And if the current holder got his title from a company that didn't have a physical product until 12 years ago...
It's probably a bad bet to say "Obviously, these people are going to be the richest forever."
Obviously, but again, the point isn't who's at the very top of the leaderboard. The point is that the material situations of the top, say, 500 richest easily allow for what we plebes would parse as insane economic loss in real wealth, and they'd be basically OK with it. Perhaps they'd no longer be in the top two digits, but they have only really lost in the sense of a high score, not lost in the sense of total dispossession and now your life's over.
If SpaceX was somehow destroyed, reputationally and materially, Musk would still have Tesla, and all his other ventures and economic instruments. Likewise Amazon could go belly-up due to a sudden locavore craze and a drone uprising, and AWS would continue making money hand over fist. My point is that the owner class is thus not actually seriously incentivized to prevent an economic crash, and in fact their apocalypse-bunkers indicate that they're pricing in the clearly non-zero chance of it happening.
Lastly, the numbers you're using about the ages of these mega-corps? Good point about that -- the Hudson's Bay Company once owned more land than any other company ever, acted as first contact to uncontacted Natives, and now they are a department store. That said, I don't think Amazon or Tesla will fall from grace in the near term. Blithely assuming that the HBC, like many a corporation, would have a 20 year lifespan or even just wane in power in 20 years, would have been a bad bet in 1700.
When the DotCom Bubble burst AMZN's stock when down 90%:
* https://www.cnbc.com/2018/12/18/dotcom-bubble-amazon-stock-l...
He didn't seem to freak out then and kept chugging along.
Short of the (zombie) apocalypse happening, I doubt it will ever drop that much again, and so I doubt Bezos would care about any kind of draw down that could realistically happen.
by what metric?
If you own a shipping port, it's in your best interests for thing to get worse right now and not better. You end up being able to charge premiums to jump queues, and end up making more profit by doing less work. Those guys are incentivised to ride the crashing economy all the way to the bottom, and not to lift a finger to slow it down.
And Bezos might be as well. Amazon quite likely could profit handsomely off a freight crunch that sees container prices go through the roof. There are very few retailers or wholesalers who'd have the bargaining power to get those queue jumping premium services for lower prices than their competitors, and when Amazon Prime becomes the only way to buy manufactured goods out of China, they can push the margins higher that other importers who either can't negotiate rates the way Amazon can, or who just can't get stock into the country at all.
Just off the top of my head, the Swiss:
don't make airplanes (no Boeing, Embraer)
don't make cars (no GM, Ford, Toyota, etc)
have big consolidated banks (UBS & CS)
have large trading firms (Glencore, Trafigura)
etc....
My point is not to nitpick (I actually agree with your post) , but to show that even in a tiny country like Switzerland (smaller than Chicago), it is hard to do that.
<null>.
UBS Switzerland. [1]
Glencore. [2]
[0]https://www.pilatus-aircraft.com/en
[1]https://swissfirma.com/largest-swiss-companies
[2]https://www.topmba.com/jobs/15-fortune-500-companies-headqua...
GM and the rest of Detroit got their rear ends handed to them because they'd underinvested in fuel-efficient engine designs (the lost 70s) and grown lazy in reliability.
Lean manufacturing may have allowed Japanese manufacturers to price more competitively and be more agile, but at the end of the day, they increased their sales because they made better cars.
You're leaving out some pressures which caused Detroit to be un-competitive in the small car space, including high labor costs.
The whole point of the startup culture is that they can do things better than a large company.
And, quite often, they can. But not always.
A semiconductor plant, for example, is not a startup thing because the capital cost is so gigantic.
However, most fields are not that bad. Even bio equipment just isn't that expensive relative to the cost of the people to use that equipment.
The bigger problem, right now, is that investors don't want to fund anything which requires more than 18 months before flameout/unicorn. That blocks startups that have a 5+ year horizon.
What if there was inflation?
As long as the capital-owning class is holding equity (stocks, real estate) they benefit from inflation.
I'm not sure that follows in extreme cases. I don't even think it follows in baseline cases (2% inflation yoy).
Raising prices leaves customers with limited resources, as wages do not follow at anywhere near the same rate.
If inflation brings prices up, consumers can only spend on specific items, prioritizing necessities over entire verticals of goods. For the vast majority of companies, it's bad.
Take a look at a sampling of the top 50 or so companies by market cap. There's computing & telecom (Apple, Google, Facebook, Microsoft, NVidia, Intel, Comcast, AT&T, Verizon, Broadcom, Cisco), which is fundamental to obtaining products & services these days. Retail (Amazon, Walmart, Costco, Target, Home Depot, and Lowe's). Financial services, necessary for paying for things (JPMorgan Chase, Wells Fargo, Visa, Mastercard, Bank of America). Critical enterprise software (Oracle, Salesforce). Health care (United Health, Johnson & Johnson, Eli Lilly, Pfizer, Abbott Labs, Merck). Oil (Exxon and Chevron).
Of the top 50, the only ones that I think would be seriously vulnerable are Tesla, Netflix, and possibly branded foodstuffs (Coke/Pepsi/McDonalds). Sure, it'll be devastating to the vast majority of companies - but it's companies like restaurants, niche hobby stores, luxury activities, etc, not the staples that make up the S&P 500.
Billionaires have relatively very little cash in hand. Their billions typically are in form of business equity, and so they very much care of the businesses go into shock.
“ In 2014, for example, Oracle cofounder Larry Ellison disclosed he had used 250 million of his Oracle shares as collateral to secure a $9.7 billion personal line of credit.”
Source: https://www.businessinsider.com/american-billionaires-tax-av...
A credit card with a $5000 limit is not $5000 cash in hand. It's a 'line of credit' for $5000 and whether I actually have the cash to pay that back is a different story. I might actually have $0 cash in hand to pay that back and many people don't until their next paycheck arrives.
Any guesses how far the Oracle share price (of ~$100) has to drop before the bank will actually use that collateral to get their cash?
This practice also comes with all sorts of tax benefits as well.
If they really need to pay some of it back then the company might decide to buy back some shares.
And realistically, like the old adage says: If you owe the bank $1M it owns you, if you owe the bank $1B you own the bank.
The little guy had cash in hand for maybe 24 hours (and even then probably just a certified check). Maybe a little later, say 10 years in they get a home equity line of credit and the bank takes back the previously paid off part of the house as collateral again.
I don't doubt repossession of the little guy's house is easier and happens more often than a Bezos loosing his collateral :) and for every Bezos there are probably quite a few small and medium business owners that put their businesses as collateral to get that line of credit and that did get repossessed.
In this situation it is almost reasonable to want a small crisis to shake out your upcoming competitors and buy some more land or other things of real value at a discount.
They don’t, though, that’s the entire point.
> and even if they lose it all it almost doesn’t make a dent in their net worth. > In this situation it is almost reasonable to want a small crisis to shake out your upcoming competitors and buy some more land or other things of real value at a discount.
A small crisis will in fact not cause them to lose significant amount of cash, but will cause them to lose significant amount of their net worth. Nobody wants that.
Newer, smarter Asian companies will displace stupid old American ones, just as the Americans crushed the Europeans.
Rather, it seems like to me the reliance of having a few owners or a few institutions with consolidated power in the form of money or assets is a recipe for disaster. If anything, it's time to disperse the wealth and responsibility of production to as many firms as reasonably as possible. I'd rather have 20 smaller companies making the same thing than 3 big ones that supposedly make them cheaper due to scales of economy which imo is wrong and that most big firms are in diseconomy of said scales now (prices imo reflect this). Basically, we need to both economically and politically Switzerfy the economy (more dispersed institutions, less central control where reasonably possible).