Why does Jeff Bezos need enough money for a thousand lifetimes?

Andrew Watson
September 10, 2020

An intriguing question from my millennial son studying Psychology and Business and just finishing his first module on sustainability. Amazon's decision to continue systemic, aggressive and deliberate tax avoidance in the age of the worst economic crisis brings this great question into sharp focus. 

Codified into Rethinking Capital's language and concepts of intangible assets, liabilities and risks, what is Amazon doing in taking this decision?

  • Damaging its reputation by a decision to do the wrong thing, exacerbated in the current economic climate.
  • Failing to recognise that Amazon has a constructive obligation to conform with social norms.
  • Creating a possible liability and impairing its social license.
  • Failing to properly discharge the fiduciary, employment and other duties of its decision-makers to manage its assets, liabilities and risks. 

It could be said that Amazon hasn't actually made a conscious decision to continue to aggressively avoid paying tax. But to our minds, a decision not to make a decision (what we call a non-decision) is also a decision. Indeed, good governance should require a Board to consciously make decisions in tax and other controversial areas periodically. If the decision is to continue and justify the decision on the grounds of paying all tax that it is legally required to pay (blah, blah!), then so be it, notwithstanding that this trotting out an excuse is in itself a yet another decision that further damages reputation--thereby repeating the four-part logic above. 

As a thought experiment, let's imagine that good governance legally required Amazon's board to make a decision on its tax strategy and consider each of its decision options, recognising that we're really all in this economic crisis together and being a fortunate beneficiary of the age of Covid-19 comes with social responsibility. Taking the parallel of Novo Nordisk giving away free insulin during the Pandemic, it becomes clear to Amazon's board that some organisations are doing more of the right thing and that other decision options are possible. 

So let's imagine that Amazon examines the option to temporarily reduce its transfer pricing rate (the means by which tax is artificially avoided through over-pricing the value of intangibles) from around 6% of net revenues to say 2% or 3%. I don't know how much additional tax Amazon would pay but it would be material and would make a serious statement of Amazon's recognition of its social responsibility. 

How would this decision option be codified? What would Amazon be doing?

  • Reducing risk to reputation by a decision to do the right thing, exaggerated in the current economic climate in which Amazon and Jeff Bezos take a deliberate lead.
  • Recognising that Amazon has a constructive obligation to conform with social norms, particularly now.
  • Investing to eradicate that liability and into its social license as an asset?
  • Properly discharging the fiduciary, employment and other duties of its decision-makers to manage its assets, liabilities and risks. 

When decision options are properly codified and represented through an intangibles lens, it becomes apparent how doing the right thing is properly rewarded. We'd even argue that doing the right thing becomes a legally enforceable obligation of decision-makers.

And yes, it may mean that Jeff Bezos may only have just enough to live off for 999 lifetimes. But it's fair to assume that he'll just about get by in this one.

History will one day tell the story (whilst laughing) about how society lost control of the first phase of the networked world to the modern equivalent of feudal landlords. Had we really thought it through, online shopping, search, taxis and social media really should be publicly owned social enterprises and not run for short-term profit at all costs. Each will inevitably be broken up, just like John Pierpont (JP) Morgan's domination of railroads in the first stages of the industrial revolution. The sooner that Jeff Bezos and his equivalents recognise this and adjust their behaviours, the better for society and their investors.

They are, after all, just lucky beneficiaries of a moment in history. And with that comes a legal and moral responsibility to show the way and do the right thing. 

I dare Amazon to try this decision on for size. Winston Churchill used to say that he would write a note summarising both sides of an argument and 'try them on, like hats'. I promise that this hat will feel good, though very strange first time around.

Andrew Watson

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