A Plan For The Billionaires

Mat Sherman
Nov 16 · 10 min read

I have many thoughts on the topic of billionaires and I know many others do as well. Before I go deep into the topic, I just wanted to get some statements I know to be true out of the way.

  1. There are good billionaires and there are bad ones
  2. They became billionaires by becoming good investors of resources
  3. The Government is a historically questionable investor of resources

There are good billionaires and bad billionaires

There are people who use their power and wealth to take advantage of other people everywhere. These people could have a net worth of $500,000, $5,000,000, or even $5,000,000,000. Just like there are good cops and bad cops. Good teachers and bad teachers. There are good people and bad people, and it turns out that some of those bad people are billionaires. They use their money to make themselves more wealthy, they use it to control political events, and they give little back to the world that isn’t in their own self-interest. These rent-seeking billionaires deserved to get taxed into oblivion.

With all of that said, there is a whole class of billionaires who became one by providing a lot of value into the world through a company and invest a lot of their wealth back into the world. They employ thousands and donate millions/billions. I am specifically referring to tech founder. because that’s the cloth I’m cut from so this blog post will be referring largely to those types of billionaires. Tech CEOs. of course, I know they are just a subset of the whole billionaire class.

These billionaires should not be roped into the same category listed above, but they often are. Let’s look at some who get vilified the most.

Bill Gates

The whole reason I am writing this post is because of an outrage over Bill Gates joking about if he was paying $100B in taxes, how he wouldn’t have much left. He then mentioned he was joking after. A quote got taken very out of context, and he has become the target of thousands of billionaire haters….very public haters, may I add. I’d say Bernie’s tweet made it worse. (It also could have been the nail in the coffin for his presidency, but that’s another post.)

In the comments, many were saying that Bill Gates was the wrong person to pick a philanthropy fight with. I agree. In 2000, Bill and Melinda Gates launched a foundation together to fight the world’s problems. He’s donated billions of dollars to causes he cares about and is very public about doing so. In the documentary “ Behind Bill’s Brain “, you can see how he thinks about deploying capital into the world. It’s fascinating.

Mark Zuckerberg

Mark Zuckerberg is 29 years younger than Gates, but has also set up a massive foundation to give away all of his wealth by the time that he passes away. Through investing in education, science, and opportunity, they are doing their part to put money into the world that doesn’t yield a financial return for them.

Lebron James

Lebron James isn’t a billionaire, but he’s on his way, with a net worth of nearly 500M. Lebron James started a school in his hometown of Akron called the I Promise School, which is a dream for kids growing up in the neighborhood. He could be putting this all into self-serving ventures, but he instead gives back.

Now, I know there are less than perfect examples of billionaires who don’t give back like the Koch Brothers and Rupert Murdoch. But remember, good people, bad people. But this post is an argument for the good ones.

I mention these examples because there seems to be a sentiment that all billionaires are bad and they don’t care about anyone else but themselves. Or in other words “Billionaires shouldn’t exist”. It’s a term I’ve heard again and again in the last year, largely coming from liberals who follow the schools of thought laid out by Bernie Sanders and AOC. This is concerning to me. It really is. And I am worried for the future of the United States of America, so after thinking hard about it, I think I have a solution.

Before we get into it, how does someone amass so much wealth in the first place? Let’s get into how someone becomes a billionaire in the first place

How does one become a billionaire?

The way most tech entrepreneurs become billionaires is by owning a % of a company they founded, and where that company is worth tens or hundreds of billions of dollars. For example, Jeff Bezos doesn’t have $108 billion sitting in a bank account. He has shares in Amazon that equal $100 billion in assets. Taxing him 70% would mean he would need to surrender shares in his own company to pay the taxes. Is that what we want? Some would say yes, if they were on the side of eliminating all billionaires. But I believe differently. I believe that billionaires are excellent investors of resources. And if we disincentivize them from building and employing, they won’t.

Billionaires are great investors of resources

See, these people didn’t grow up being billionaires. They started off with an idea and a work ethic (I have a note about privilege below, don’t worry). They maybe got some customers and found an investor who gave them some money. For example sake, let’s say it was a $1,000,000 investment. These founders needed to figure out how to invest that $1,000,000 so they could grow the business in a positive direction. Whether buying ads, hiring a COO, or getting a new office, these CEOs needed to invest this money to see an ROI. ROI (Return on investment) meaning they made more money than the money they took in as an investment.

If they invest their resources properly, they can raise more money. If they just raised a seed round, the next round would be an A round. Let’s say they raise $5,000,000 in the A round. If they invest properly and grow the company, then they’ll be able to take more and more investors and money, because the founder is proving that they know how to invest $$$.

Continue this for a decade, and some companies have raised billions of dollars. Look at Airbnb for example, who raised billions in venture capital. They didn’t get just money in a lump sum. They earned it by showing they can invest money and get a return, time and time again. The CEO of Airbnb, Brian Chesky, is a billionaire because of this. His company is worth 38 billion dollars, he owns a chunk of Airbnb, which makes him a billionaire. Did he step on top of his employees to get there? No. He built a great company with the rest of the team, who also own equity in the company.

A quick note on privilege

Life sure isn’t fair, and if you are born into poverty, your chances of being a billionaire are almost zero. It seems unfair, and it is. I get it. I would like to see the elimination of poverty and will explore solutions to that later in this post. Everyone deserves a shot on goal. So I’ll say again, solving poverty matters and always will.

If everyone has a base, from there, the winners are the ones who can best invest their resources, period. I am aware that some billionaires grew up more fortunate than some people who aren’t billionaires. I also want to recognize that there are many people who grew up very wealthy who aren’t even millionaires anymore. If you grew up with a base, a huge reason you aren’t a billionaire is that you aren’t as good of an investor of resources. Resources = time and money. This is the basis of capitalism. Those who invested their resources properly get rewarded.

With all of that said, the nation DOES focus on solving income inequality so I want to go down that path for a second. The way many people want to solve income inequality and also get rid of the billionaires is with taxes… High taxes for high earners and tax subsidies for low earners. I think taxes are a great thing and we all should pay our fair share, but I want to dive into what the point of taxes are in the first place.

What Is The Point of Taxes?

Taxes are revenue for the government. The government taxes US citizens, then the governments invest their revenue into areas they think America needs it the most. Education, infrastructure, technology, warfare, and anything you can name. The government has invested tons of money into a lot of big problems in America, and sometimes the result has been positive, like the spearheading of Obamacare or investments into our highways. Often times, it hasn’t been. In fact, I’d argue that the government is only an average investor of resources (at best), not a great one by any means. As an example, let’s look at poverty.

The Government As An Investor

The government spent more on welfare in 2018 than ever before, but poverty has never been worse. In fact, in many cities, it’s getting significantly worse. From food stamps to Medicaid, hundreds of billions of dollars are being poured into solving poverty, with very little return in exchange. I don’t blame the government. It’s a hard problem to solve, but nevertheless, they aren’t being very capital efficient with their revenue. Why would they be? They have no incentive to be, unlike for-profit companies.

Another thing the government isn’t known for is its constant innovation. Because the government doesn’t have any competition for domestic affairs, it doesn’t need to build the latest and greatest innovations to keep up with the competition. This is okay though because America is a capitalistic society and we have private companies providing the innovation. But, I’m afraid that if this anti-billionaire banter continues, this may not be the case for much longer.

Could the government invest Bill Gates’ money better than Bill Gates?

This is where the buck meets the horn. The liberals want to tax the hell out of the billionaires so the government can solve big problems in our country, specifically income inequality. But, the billionaires are taking their fortunes and investing it into our country too. I outlined some examples above.

See billionaires can invest resources anywhere, not just in the states. They can move to other countries where the tax rate isn’t so high, and still experience the same level of success. I have a theory that if the anti-billionaire movement wins, and the majority of America will think being a billionaire is a bad thing. Then the billionaires will leave and the would-be billionaires will never even have a chance. But I want to bring this back to the core question of this article.

If you are going to bet on someone to solve America’s problems, are you going to bet on the person who turned a couple million dollars into hundreds of millions of dollars? Or are you going to pick the government, who has turned trillion-dollar investments into even more debt over decades? I have a feeling that Bill Gates can invest Bill Gates’ money far better than anyone else can, especially the government.

A Proposed Solution

The government thinks that it can spend the money better than the billionaires can to solve the nation’s biggest problems. At the same time, I agree there are rent-seeking billionaires who likely haven’t invested a penny into their country since they “made it”. So, my proposed solution is this.

Instead of the gov taxing 70% on a marginal tax for billionaires, make them put 15% and invest it how they wish into the different areas of the country. In tech, they call this a request for startups.

The government tells the billionaires “we want to solve these 22 problems. Please invest 15% of your liquid assets and help us solve these problems.” Then the government gets. the. fuck. out. of. the. way and lets the billionaires do what got them to be billionaires in the first place. By investing their resources intelligently, for the betterment of America.

So you know, liquid assets are pretty much money that you can deploy anytime. It’s money sitting in your bank account, not money tied to a stock of a company you started. The government should not be forcing business owners to sell parts of their company to pay taxes. So the “liquid” difference matters.

What’s the alternative?

The alternative to this is raising taxes and then the billionaires leave! Many will think “good, we didn’t want you here”, but billionaires build companies. They supply thousands of jobs. They bring innovation. If they just leave, we won’t just lose all of that revenue. Most importantly, we lose the entrepreneurial fabric that makes this country great. The American dream will truly die.

Right now, the American Dream is attainable, we just need to fix poverty. But if you eliminate capitalism from the mix, the dream disappears for everyone. Everyone gets everything. Free college. Free Healthcare. Free Free Free. And Average. And everyone who wants to build empires will leave. America will crumble.

I don’t want to see this happen and I hope…I really do hope… that our country can see that not all billionaires are bad people and we need them more than they need us. So instead of scaring them off with 70% marginal taxes, let’s make them put their money to work on their terms. I don’t want to know the alternative if we don’t.

Thanks to James Gallagher and Saptarshi Nath for editing drafts of this post.

Originally published at https://callmemat.substack.com.

Call Me Mat

A collection of my thoughts on things

Mat Sherman

Written by

Founder and CEO at PubLoft

Call Me Mat

A collection of my thoughts on things

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