This week not only did social media come a buzz, so too did the main stream when it was announced Mark Zuckerberg and his wife were marking the occasion of the birth of their child by starting a philanthropic organization named in their child’s honor. They also declared they pledged to give 99% of their Facebook™ shares (worth some $45 Billion) to help fund its mission. Yet, one little item or detail seemed not to go unnoticed by some (which I am of this crowd.) Rather, it stood out like a sore thumb. That detail was: rather than what is typically structured as a nonprofit (i.e., what one expects to see and is traditionally administered when charity is involved) this “Initiative” was structured as an LLC. i.e., Can be used for both profit and maybe more importantly – political influence.
Here is a quote from the Facebook post they wrote to help illustrate their intentions. It was this passage which both caught my eye, as well as made me think deeper as to just what didn’t sit squarely in my mind at first take. To wit:
“The Chan Zuckerberg Initiative is structured as an LLC rather than a traditional foundation. This enables us to pursue our mission by funding non-profit organizations, making private investments and participating in policy debates — in each case with the goal of generating a positive impact in areas of great need. Any net profits from investments will also be used to advance this mission.”
The line “making private investments and participating in policy debates” sounds innocuous enough. However, most (if not all) of those who spend their every waking moment glued to social media wondering if they too can keep up to this weeks misanthropic escapades of the Kardashian’s are the first to take to Facebook and any other social media outlet and bash, excoriate, and what ever else can be thrown around to pummel any Wall Street Billionaire or for that matter Billionaires in general from influencing public policy. Unless you’re deemed “their Billionaire.” Then have at it; as hard, as messy, and/or dirty as you like. Blindfolds will be supplied freely to blind-eyes everywhere.
Do not let this point be lost. If one thinks for a nanosecond people with enormous wealth don’t factor such things into any form of estate planning as well as everyday living planning – I have some ocean front property here in Kentucky you can have at a discount.
Why do I say such a thing? Well, I’ll use one of the most overused examples of “Look it’s not like I’m trying to skirt something I’m actually glad to pay” known to the wealthy as to show “Hey, I’m just one of you with a bigger bank balance by golly, gee whiz.” Again, from the same post as above, to wit:
“By using an LLC instead of a traditional foundation, we receive no tax benefit from transferring our shares to the Chan Zuckerberg Initiative, but we gain flexibility to execute our mission more effectively. In fact, if we transferred our shares to a traditional foundation, then we would have received an immediate tax benefit, but by using an LLC we do not. And just like everyone else, we will pay capital gains taxes when our shares are sold by the LLC.”
And there’s that inference again that I pointed out in the first that made me think deeper. Or, as some might say, “Made me go hmmm.” That inference? “…but we gain flexibility to execute our mission more effectively.” I’ll construe: in a world that is driven by politics and political donations – I bet it does. And will.
Again, let me remind you, this is all conjecture on my part. However, like I stated earlier, I’m not the only (although one of the few) that feels there’s more to all this than what’s been bandied about by the main stream media et al.
Two examples of such “heart-fullness” voiced were the immediate comparisons to the philanthropy of both Warren Buffett and Bill Gates. Many of the observations posited by the media was how Mark (I’m using the personal’s only for ease) has seen the value in sharing one’s wealth and all the good it can do, and wants to do the same. It’s a fair point. However, I’ll posit there are a few other additional points no one likes to point out. Yet, that doesn’t mean they aren’t there.
Let’s take Warren for one. What’s lost on the general public (as well as many others) is the obvious double standard of how he is both viewed as well as reported on in the press. He too is giving all his fortune away. Makes for great press and keeps him in that almost blinding limelight of ole “Uncle Warren” when he’s doing or making any type of investment or doling out advice. He gives political causes great sound bites or quote lines similar to “I need to pay more taxes!” and more. Yet…
When it comes to those taxes on lower wage earners or the outright cost of employing people who need to pay them. It’s a far different tune. All that you saw reported nearly ad nausea during that period was what seemed like a video loop stuck on continuous play. That or footage of him playing the ukulele surrounded by the Fruit Of The Loom™ ensemble belting out tunes at his investor meeting. What you didn’t see reported anywhere (for there was no warning as per the story) was a complete Fruit Of The Loom factory that had been the mainstay of an area in Kentucky for decades: closed and all its textile operations sent to Honduras leaving hundreds unemployed. Good jobs at good wages. Only not here, that’s too expensive. They’re now in Honduras.
Another example would be how you never see ole “Uncle Warren” demonized for the sin of all sins: being connected with fossil fuels. e.g., Oil.
Koch Brothers and a pipeline? Vilified as a scourge or pariah on the Earth. (I’m not taking a side nor endorsing one side or the other. I’m simply pointing out a demonstrable difference as viewed via the light of the media and reports – nothing more. Use you’re own insight as to ascertain any meaning or not) Warren’s investment into the trains which carry that same oil that seemed to derail weekly for a time causing environmental catastrophes? If his name was mentioned is was at a whispers breath. If that. But hey – He’s giving away all his Billions – He’s one of the good guy’s. Not some greedy capitalist. Right?
Then there’s Bill Gates as of late. Again, his foundation may be doing great work. Yet, then again, it doesn’t hurt to make sure you profess as loud and as much as possible: “Hey, I’m giving everything away, don’t think or call me some greedy capitalist.” i.e., “Hey, go after those people’s money – not mine. I’m one of you! See!!”
It has been reported that he’s publicly stated to have taken all his philanthropy cues from Warren for they have been very close friends for years now. But Gates has done something even more head scratching than even Buffett. Lately Gates has publicly stated that it’s going to take both socialism and climate change advocates favorite tax (e.g., a carbon tax) to solve the ills of the world. Calling the private sector “inept.”
Nothing like self inoculating oneself with the right combo of political antibodies once one’s made their wealth via capitalism. Especially if one wants to keep both its use, as well as their new-found media persona intact. Kills two birds with one stone is all I’ll say. Almost like going for a political flu shot and receiving a double dose on the house. Again, all conjecture on my part, however, does one think for a moment Bill would say such things when he was developing privately what Microsoft™ was able to do for the public sector at large? That’s a decision for you to ponder and come to your own conclusions.
Which brings us back to Zuck and his latest philanthropic proclamation. As Gates learned and emulated Warren with his own brand of philanthropy. So too must Mark be watching and learning also. I may be critical of Zuck on many differing issues , but what I would never imply is that he is not a shrewd businessman. He’s demonstrated that in spades. Which by the way is exactly the basis for why as I stated at the beginning I’m not quite buying what’s being sold.
I also believe it is exactly for these reasons one should look for clues as to what might be on the horizon in other ways. For this could portend or, be a precursor that those “storm clouds” myself and a few others have been sighting are indeed becoming more obvious to Silicon Valley than many will let on. Here’s my reasoning…
You know the one thing Mark Zuckerberg with all his Billions can’t do today without causing a media sensation throughout Wall Street? Hint: Sell.
Let me express it this way: How would you think it would look to analysts, the financial media, stockholders, et al if Zuck announced he too decided to sell a Billion $dollars worth of stock when only weeks ago it was reported Mark Andreessen sold out nearly all (73%) his holdings in Facebook? This coming on the heels of the August 24th historic plunge in the markets. Think it would be seen in a “favorable” light? Neither do I.
You know what else an observant business Silicon Valley person might contemplate?
If we were in fact at the edge of a bubble in the Valley – how would one be able to sell at the top without bringing on some negative feedback loop in their stock price? After all, if history is any guide part of the problem for many during the dot-com burst was they never sold at the top. Many rode it all the way down to oblivion, and only a choice few (like Gates) made it through.
However, Bill had an operating system that was needed regardless of the economy’s state. Mark only has an operating platform that needs to sell ads. And if ads go dry – so too does your stock value and personal wealth. See AOL™ for clues.
With this newly formed “Initiative” any selling is now wrapped into a wonderful meme of “We’re not selling to profit. (or preserve) It’s for charity. And we’ve stated openly we were going to do just that. So, nothing to see here, please move along, thanks so much.”
Are you beginning to see why something seemed “more than what meets the eye” at first blush?
You know what else might be on the horizon that I’m more than sure will be brought up if things do begin to turn sour in the Valley? Mark’s near unrestricted power of authority to make acquisitions.
Right now he doesn’t need Board approval to spend. He’s been very shrewd in keeping that ability solely within his own purview. However, as I’ve written many times previous, “You’ll know everything in the Valley has changed once you see Wall Street calling for that oversight.” I believe that ship has already began to sail and will be coming much sooner than later if we have more hiccups like the one’s we saw in Aug. or if Facebook shares begin going the wrong way.
Yet, you know where that privilege will probably remain, unfettered, as well as with more influencing authority? Hint: “Initiative.”
Look, I’m fully aware this is a lot of conjecture, as well as speculation and more on my part. I’m also of the belief that there is truly some real intention to do good with one’s wealth. Especially once one has a child for it really does change perspective on everything you never would contemplate until. That said, I’m also of fact and well aware that there is nothing wrong with capitalizing on events no matter how they present themselves in manners, and ways, as to promote or protect one’s wealth. As well as image.
What caught my eye was, again – the structure. e.g. LLC. It was once you ask a few questions and ponder “why” while looking at the event horizon that only a very few of us are stating or trying to bring attention as it nears does one look closer at what might also be driving the reasoning behind such announcements.
Yes, it may be a wonderful vehicle for charity in the name of his daughter. And – it might also be a tell-tale vehicle for those willing to look as the first sign of a vehicle trying to “get-out-of-Dodge” before or, as fast as time will allow without causing others to panic first clogging the exits leaving themselves stuck. After all, what’s one to think about the “eyeball for ads” business when one of the other undisputed “eyeball” counted sights Yahoo™ is openly contemplating this weekend if it should sell its internet business?
Remember, also, this year is the first year that the once Holy Grail of “IPO’s to the promised land” have been mired in quicksand. (Just look at Square™ and Match™ for the latest clues) Funny how things like this happen when there’s no longer QE to fuel it. That, and the Federal Reserve has all but declared without question that a rate hike will in fact take place (unless they don’t) nearly forsaking corporate profits to $Dollar denominated purgatory.
Again this exercise could all be for naught and there may be nothing to ponder or, extrapolate. And Mark, Bill, and Warren may indeed have no ulterior motives to their philanthropic activities other than what they’ve stated. And that’s fine with me. Yet, there’s two sayings I’ve lived by most of my adult business life that have served me well. The first comes from Andrew Carnegie, “I no longer listen to what men say – I watch what they do.” The second I learned on my own after being blindsided by someone I thought was a friend, “It’s not what people do too you that’s the problem. It’s the way you have to treat everybody coming after that’s the problem.”
If you think the Carnegie quote is just some antiquated insight that no longer fits today’s circumstances or maybe can’t see how the second could apply to the circumstances of today. Need I remind you of another person who had philanthropy at the core of their decisions of just “doing good” where his actions were to be taken beyond reproach? Lance Armstrong.
Questioning is a prudent exercise regardless of the individual. Especially when they’ve proclaimed politics is going to be one of their predominate activities. For if it’s a business – I don’t have to buy or participate. When it’s political – I might not have a choice.
Charitable or not.
© 2015 Mark St.Cyr