The Amazon mega-billionaire doesn’t even fund the foundation that bears his family’s name. In a twist from the usual philanthropic pattern, that’s the previous generation’s job.
Jeff Bezos didn’t build one of the biggest fortunes in history by following convention. He’s unlikely to pass it on via the normal philanthropy and generational transfers.
Take the Bezos Family Foundation, for example. Where the Facebook equivalent named after Mark Zuckerberg and his wife is an active part of that family’s posterity planning, this particular charity has as little to do with Jeff as possible.
Instead, it’s all about helping his parents change the world in their own style. And they use their own money.
Granted, Jackie and Mike Bezos are billionaires in their own right. They invested less than $250,000 in “friends and family” Amazon stock two years before the IPO.
Back then, the insider ante on what’s now an $1,800 stock was $0.17. Since then, that nominal stake has reached a value above $30 billion counting splits.
Jeff got hugely rich, holding 79 million Amazon shares outright today even though he keeps cashing out about $1 billion worth a year.
But he wasn’t the one to start the foundation that bears the family name. That was up to Mom and Dad.
“Peripheral” billionaires
Taking care of the relatives can be a headache and a delight for many of the world’s wealthiest people. One way or another, money becomes available to liberate loved ones from jobs they hate and gives them a way to participate in a sibling or child’s entrepreneurial glory.
That’s what Bezos did in the early days. Mom and Dad got a chance to buy pre-IPO stock in Amazon and they took it. They got pretty good advice.
The first tranche was pure “mad money.” The rest of the stock went straight into a revocable trust in Jackie’s name, making her trustee and beneficiary for life. Jeff evidently wanted to make sure Mom was taken care of.
Shortly after that, the first tranche rolled into a series of trusts earmarked for Mike as well as Jeff’s siblings and a general generation-skipping pool for what’s now 11 grandkids. Assuming that they haven’t made huge distributions, that means about $8 billion for Mike, $5 billion for the brother and sister and another $1 billion to make sure the next generation is comfortable.
All of this has happened without Jeff’s financial input. The immediate needs of the House of Bezos are settled.
Just to make sure there were no hard feelings, Jeff sold 30,000 pre-IPO shares each to his brother and sister. While they probably sold at least some of that stock over Amazon’s bumpy lifetime, in theory that’s up to $54 million per household at today’s price.
Naturally these early transactions vaulted the family into ultra-high-net-worth status. Each has to wrestle with the high-level decisions of a “normal” multi-millionaire or billionaire, but with Mike and Jackie making sure the kids are taken care of, the dynastic question won’t even need to be asked for decades to come.
That leaves philanthropy. For better or worse, Mike and Jackie took care of that too. Like any “normal” billionaire, they started a family foundation in their name. They’re interested in education so that’s what the Bezos foundation does.
To fund scholarships and teaching technology development, they’ve donated 500,000 Amazon shares from their revocable trusts over the years, about 3% of their overall initial stake.
They’re the only donors. The foundation doesn’t chase outside money. While Jeff, his wife and the other kids sit on the board, they don’t have a direct financial interest.
It’s Mom and Dad’s charitable toy, the equivalent of a donor-advised fund handed to the kids in order to teach them how to handle a family fortune responsibly. Maybe when Jackie and Mike step away, the younger generations will step up.
It doesn’t really matter. They’re living like their own billionaires. Jeff lives his life, they live theirs. Everybody’s rich.
Secrets of the Bezos Foundation
That said, it’s more likely that Mom and Dad have sold quite a bit of their stock over the years to fund their own needs.
The Foundation “only” holds about $45 million in Amazon stock. As shares get sold, Mike and Jackie write a lot of checks to high schools, community groups and any other cause that makes them happy.
They spent $23 million last year and replenished the treasury with another 25,000 shares. It could probably go on like this for the rest of their lives.
Professional fees are a little high given the simplicity of the structure, but on the other hand the tax liability for getting it wrong is going to be enormous. It’s worth it to make sure everything is right.
Dig into the grants and there’s no obvious ideological axe to grind. Again, it’s hard to say if the pattern of donations is extremely efficient, but then again, Mike and Jackie don’t have any outside donors of their own to answer to.
They don’t need to be efficient. All they need is for the foundation to make the difference they want to see in the world, so if that means nourishing pet technologies and niche teacher exchange programs, that’s their definition of success.
It isn’t a lavish operation. They don’t have to pay in-house development executives or vanity officers. There’s no internal payroll at all.
Merrill Lynch takes a commission to sell the Amazon stock the foundation liquidates to make its grants. An accounting and a legal firm handle the paperwork on retainer. And while the foundation pays $400,000 a year for philanthropic support, that’s still not even a 1% drag on the overall distributions.
There isn’t even an office. The address on record is a UPS Store mail drop in suburban Seattle.
All in all, the foundation may or may not help Jeff Bezos sleep better at night. It doesn’t matter. If Mom and Dad want to spend their life on cruises or writing checks to high schools, all that matters to him is that they’re the ones having fun.
As for his “fun” and posterity, it’s all on an entirely different order of scale. They’ve had at most 13 million Amazon shares to play with over their lifetime. It all went into revocable trusts early on so their estate planning aspect is covered — incidentally guaranteeing that every member of Jeff’s immediate family is going to be comfortable.
He no longer has to worry about keeping relatives happy. Mom and Dad took care of that.
On the other hand, even though he’s been selling about $1 billion worth of Amazon a year to fund his lifestyle and roll into his own presumably more diversified financial footprint, the question now is what he wants to do.
He could fund 30 Bezos Family Foundations a year purely on current cash flow. His entire stake in the company would keep that grossly expanded philanthropic network going for a century without any additional funding.
That’s a staggering amount of wealth. Normally it simply goes to the kids and they have to figure out how to spend it.
Bezos never does anything in the conventional way, much less without a plan. Having been liberated from the immediate concerns — family, legacy, a little charity — whatever he does will be historic.
He’s taken to simply handing favorite charities Amazon stock like spare change to a panhandler. It’s not about tax efficiency. He blew through all lifetime gift tax limits years ago.
