Updated title on original source:
"Jack Dorsey is giving up at least 50% of his stake in Square to help underserved communities"
Update: This post has been updated to correct that Dorsey will commit 10 percent of the entire company, not just his equity as previously stated. In addition, our calculations were off and I regret the error.
This is commendable. Actually intending to making the world a better place (in the non HBO-Silicon-Valley-Show-way).
It was reported that he would be giving up 30-50%(now at least 50% apparently) of his own stake. Which comes out around 10% of the entire company, depending on what number is actually correct.
Does anyone else feel like it's the government's responsibility to help all the needy sections of the society, and billionaires intervening only abets and condones all the deliberate/unintentional mistakes of the former, and lets them escape it?
Volunteering and donations are a much bigger thing in the US than in Sweden. Here we just tax everybody more, and that mostly takes the place of benevolent billionare philanthropists.
The top 50% of Americans are better off than the top 50% of people in Sweden. That's 160 million people doing better than Sweden, I call that an extraordinary success. The bottom 1/3 are better off in Sweden than in America however, not much debate on that.
Swedes in America also do better than Swedes in Sweden.
There is greater opportunity for success in America than there is in Sweden as well. The US has a far greater diversity of culture overall. The US economy is far richer, 45% of all global wealth is concentrated in just 4.6% of the world's population. US universities are far superior to Sweden's.
The Swedish household debt to income ratio is far worse than America's, at twice the rate of the US household levels. They've been taking on debt far beyond their means to fake some of that standard of living.
Some masses of people are better off in Sweden, some are not.
Sweden's unemployment rate is higher than the US. Their system was also a disaster for decades before they launched numerous reforms of the prior formulation of their welfare state, improving its overall free market friendliness.
> The top 50% of Americans are better off than the top 50% of people in Sweden. That's 160 million people doing better than Sweden, I call that an extraordinary success.
Are you suggesting the median American is wealthier than the wealthiest Swede?
The top 50% specifically would not be the median at all.
The net median wealth per adult is higher in America than in Sweden however. That number was roughly equal as of 2013, since then US real estate and equities have gone up significantly. US median wealth tends to be heavily influenced particularly by real estate (with US real estate values nearly back to the all-time highs).
I'm suggesting the top 50% in America are better of than the top 50% in Sweden. Not that the median is better in America.
In nearly every respect. Access to culture. Economic opportunities. University opportunities. The types of businesses you can build. The variety of industries and jobs you have access to. The sheer scale of things you can work on or have access to economically or otherwise. The research and innovation, the scale of the scientific output you can be part of. The cultural output you can tap into or contribute to that will be consumed in pretty much every corner of the globe. And on it goes.
Sweden does amazingly well for 7 or 8 million people. America does amazingly well for ~160 million people. Sweden isn't going to scale - their population has increased by 2 million in 55 years or so (they can't scale much for obvious reasons). I consider America's accomplishment, that it has benefited so many more people to such a high degree, to be drastically more impressive. In the US, the top 50% are better off than Europe's top 50%, and the bottom 50% in the US are also better off than Europe's bottom 50% (see: Eastern Europe).
> I'm suggesting the top 50% in America are better of than the top 50% in Sweden.
I'm asking you what that sentence means. Comparing groups is a tricky business. The richest half of Americans are better off in total? In the mean? In the median? Does it mean that the Pth percentile American is richer than the Pth percentile Swede, for all P>50?
I'm ignoring, for the moment, the ambiguity in which Americans are the "top" ones and what if means to be "better off". (wealth? income? education? lifespan? self-reported happiness?)
Maybe it would help if you point to some actual numbers by some social scientists that back up your claim.
Surely the shift in the net median wealth based on real estate prices rather than any meaningful change in the real assets held by the average Swede or American in the past couple of years calls into question the validity of net median wealth as a meaningful measure of prosperity...
Not that there's much doubt about the relative prosperity of the top 10% of US citizens compared with the top 10% of Swedes, especially if they're not living somewhere like SF or NY, but I can't help thinking the people in the lower brackets notice the difference more. It's not like a Swede who's sufficiently smart to go to Harvard (and wealthy enough to pay for the course) can't go there if they're dissatisfied with the free higher education on offer in their own country. The parents whose kids are vastly more likely to die in infancy in the US than Sweden have rather fewer options.
I think you're probably underestimating Europe's "access to culture" too...
Anyone else find it slightly revealing, and obviously disappointing, that any conversation about wealth nowadays only seems to encompass financial wealth, as though all other forms of wealth [1] were either redundant or meaningless. I often wonder when i see headlines like "1 percent of the world's people control 50 percent of its wealth" how the other forms of wealth are distributed and if indeed having more of one predisposes you to have less of all the rest?
[1] - Whatever they may be, spiritual, happiness, obviously off the top of my head, i've ran out here because it's not a topic i usually hear discussed, any other suggestions?
> The top 50% of Americans are better off than the top 50% of people in Sweden
So just hope you're not in the bottom 50%?
We should also think about what "better off" actually means. Maybe a healthy society cares about more than just individual income and "opportunity for success." Sweden, and just about every other modern country has much better health care and public services, and a much saner attitude toward work and leisure, even in spite of attacks on the welfare state in recent decades (the idea that it was some kind of disaster and had to be saved by the capitalists is nonsense).
The top 50% of Americans are better off than the top 50% of people in Sweden. That's 160 million people doing better than Sweden, I call that an extraordinary success.
But it has little to do with the differences in the two economic systems. The USA is rich because Europeans discovered a very large geographically isolated land mass that was only thinly populated by pre-literate people with technology that was primitive even by ancient standards. How would you not expect such abundance to produce an extremely wealthy society?
Sure, settling a continent and building infrastructure up from nothing is hard work, but Europeans had a couple of millenia worth of practical experience and how-to manuals on the best way to go about this, and cheerfully reinstituted slavery, which had worked out so well for the Roman empire. Without denigrating all the genuine hard work and innovation deployed by many generations of settlers (and not only from Europe), their labor was far from the only economic input. The US has vast tracts of agriculturally productive land, huge mineral wealth, and extremely favorable strategic geography. If you could go back a few thousand years, wave a historical magic wand and give ocean-capable shipping and navigation to the Romans or Han Chinese, they too would have established a mighty economic and military empire on the North American land mass.
I'm broadly pro-capitalist, but I can't take you seriously when you ignore the massive economic advantage of being practically handed an entire continent to play with. You would have to be staggeringly incompetent not to become a world power.
The bottom 1/3 are better off in Sweden than in America however, not much debate on that.
Not only does Sweden not have the same sort of permanent underclass that the US seems intent on cultivating, they probably don't spend as much of their wealth on security services designed to protect the property of the well-off from the poor, whereas something like 1/5 of America's labor force is devoted to guard labor: http://tuvalu.santafe.edu/~bowles/GarrisonAmerica2007.pdf
While the US is certainly wealthier in fiscal terms, this country does have some massive quality-of-life problems, and there's an almost pathological antipathy to measuring the cost of economic externalities - another symptom, I suggest, of having so much land available.
No. The assumption that government should fix everything is selfish and lazy. It absolves us of personal responsibility, and gives us someone to blame when things go wrong. I'd feel sorry for the politicians, except they do more than anyone to perpetuate this.
The government is too bird's-eye-view to understand the details of different communities. I do think, however, the government should have some kind connection with a group of people in each state to get a status on things. And each state should have groups in different communities representing it to report up to the state-level group.
I feel like USA is already kinda designed that way, but something is making it not work... at least, it's not working for the poor.
Surely both can and should do their bit.
Governments have the scale and power to run systemwide education, healthcare and crime reduction programmes; wealthy entrepreneurs have the freedom to try experimental schemes or artistic programmes that many people think sound like a waste of money.
So you'd rather have a middleman coercively distribute funds or amass more debt, and take some of the funds in overhead, rather than be able to direct your money where it's deserved, especially in an age when you can use the internet to set up payments and research deserving institutions? If you abdicate responsibility -- the poor are some distant entity's problem -- you are not being virtuous. By the way, it's not ONLY billionaires that can help with the needy. Your time is also valuable--for example, you could visit some lonely elderly people in a nursing home. If you pay it forward, people will help you out when you're in need. Your friends and family become your "social safety net."
The @TwitterOSS got really hammered by the layoffs. They were real people, not just "high tier engineers". I take offense as some of my friends, real people, lost their jobs.
You shouldn't make light of other people's misfortune.
I had friends at Twitter OSS too and the ones I knew are pretty well poised to do whatever they want at this point. They definitely are high tier engineers.
It sucks, one of them got me my job, but they're going to be in pretty high demand.
Part of helping underserved communities would be to move some of the business outside the Valley and major metro areas. Find the mid to small cities and spread the wealth.
...well, the line between spreading the wealth and gentrification is a bit fuzzy.
I'm not convinced what's happening in SF, and starting to happen in Oakland, is actually desirable by the residence that were there before tech people showed up.
I think it's much better that Jack donates to help public schools, libraries, arts & crafts, other recreational activities in underserved communities.... without sending the gentrification catalyst into them.
This is quite true, the way companies hyper-concentrate is not really given much thought it seems. There are obviously benefits to concentration when it comes to fostering innovation but like everything I imagine there is a point of diminishing returns beyond which the benefits turn to negative.
A similar phenomenon can be seen in the DC area, all the companies are hyper-concentrated in NoVa creating a miserable commuting situation for hundreds of thousands of area residents, meanwhile a city like Baltimore a mere 40 miles away is completely ignored when it comes to locating offices.
Depending on how he does this and the basis of the equity, this move may be an amazing tax shield, worth WAY more than it seems.
{edit} - I actually think this is exactly the strategy being applied by him and his team of tax strategists - He's using this "donation" as a tax shield and keeping the money in a foundation, which he can use to help "the underprivileged" as he pleases, instead of just paying an amazing amount of tax like Zuck did.
It's not a tax shield if you don't get to keep the money.
Of course, if you were going to donate anyway, then sure, it's more tax efficient to give appreciated stocks. But calling it a tax shield makes it sound like you can stand to gain personally by doing this.
> But calling it a tax shield makes it sound like you can stand to gain personally by doing this.
One (with that much wealth) absolutely stands to gain a ton from it.
A family member of mine works in financial trusts / estate planning for multi-millionaires (many times over) and this is one of the things I've heard from them used to limit tax exposure while maximizing the most typical goal - not personal wealth (these people have more money then they will ever be able to spend, that isn't the concern for them) - but rather maximizing family wealth.
And once you're extremely wealthy, it's amazing how large your family becomes.
Essentially - many charitable foundations are absolutely charitable in their fundamental mission, and best case are helping thousands of people with most of the money directly helping - however what happens in practice, is this foundation then has family members work for it earning somewhere between a reasonable to a completely insane salary depending on any number of factors.
Sure, but the salary they draw from the charity will be taxed. It may be taxed at a slightly lower rate than capital gains if they don't earn much, but not extremely so.
Not exactly - you've also got to consider the tax consequences on cashing out directly so with the charity, the money only gets taxed once instead of twice.
Scenario a:
Bob starts Hooli - his stock is now worth 100 million. He wants to give half to his family. He cashes it out and pays long term capital gains on it - at 15% he is left with 85 million. He pays out half to his relatives, but don't forget, there is 35% gift tax when you gift someone more than ~15k So of that 42 million, only about 27 million will actually make it to it's intended target.
Scenario b:
Instead of directly cashing out, he starts the foundation with the 100 million. (using that to offset his entire income that year with a charitable tax deduction most likely). He wants to pay out half to his family still - this time he is starting with 50 million which will similarly be taxed at let's say 35% (income tax) - leaving 32.5 million to pay out. Also consider the case where he exercised a large cash performance bonus upon cashing out, that 5 million he will potentially not have to pay any taxes on either because he was able to make a large tax deduction from his "charitable" gift to the foundation.
It is not a simple thing - depending on how exactly the money flows, there are ways to prevent a significant amount of double taxation. (Also a couple years ago gift tax was 55% so it would have been 19 million (scenario a) vs. 32.5 million (scenario b) in post tax money. What makes things an order of magnitude more complicated, is on top of all this one has to consider timing. Tax rates change significantly all the time (55 vs 35% on gift tax in 2010 vs 2015) - some of which are known far in advance, some changes may be a surprise - so in estate planning where the goal is to maintain wealth for many generations to come - strategies like this start to make a lot of sense
Define "keep." This much money does him no good sitting in a bank account. I'm sure he intends to invest it. One option would be to cash out, take a huge tax hit (in CA) and then reinvest. That is pretty foolish if you have this kind of money. The better option is to form a company. Even better, form a non-profit. Sign over the stock to the non profit. The non-profit then re-invests the money. Make yourself an employee. Set your own salary and make yourself the CEO. Now he has reinvested the money and hasn't taken any tax hit EXCEPT on his income (which would have been taxed regardless of what he did). The other billions he has are sitting there earning interest tax free until he decides to take some out.
On that taking some out bit... So, as the CEO of this non-profit, he could have the company buy a jet, build an office, schedule company retreats, etc... All of this would be tax free.
I could go on, but I think that the point is clear. Non-profits are an EXCELLENT way to avoid tax hits in this sort of scenario. It's a numbers game. Once your net worth has a B at the end of it, forming an entirely new business just to avoid taxes becomes a much more sensible solution.
Any tax benefit from putting money into a foundation is limited to the money put into the foundation. So if you put $1 into a non profit, the government forgoes collecting the tax on just that dollar.
The way this can be used to protect money from taxes is to establish a foundation that then employs you and your descendants. The money paid out is taxed, but the principle can sit there untouched.
Exactly true, however he's donating STOCK not money. So he's avoiding the taxation on the stock gains that he would have seen, which could easily have been upwards of 50%. Then, yes, he can be employed by and can expense costs to his foundation - so that money that he's not being taxed on is still within his control.
However, the bigger deal is that he can use that foundation to wield significant power and to distort public policy to his benefit.
Foundations of course, can invest in for profit companies, whose goal it is to generate returns for the foundation.
Foundation -> invests in a holding/investment company -> invests in a property company -> invests in a special purpose vehicle that owns a $100m NYC penthouse. Check.
For other organizations that are split into a for-profit/non-profit, check out Planned Parenthood and the Lance Armstrong Foundation. Genius move, really.
Let's not assume the worst here and consider the intent/effect is to effect influence on public policy toward his philanthropic or otherwise closely held goals.
More. 20% (federal LTCG ) + 3.8% (medicare) + 12.3% (CA) + 1% (CA mental health surtax over $1mm/yr). 37.1% (more like 35% since you can deduct state on federal).
vs. 15% and no state tax if you lived in other states before recently. or, 0% up to $10mm gains if you held a stock for 5Y and bought it before 2012.
That's 20% on stock you haven't liquidated. If you own a few hundred million in stock, that's a hefty CASH tax bill you have to pay for gains that haven't materialised.
Isn't this what Sarah Palin did for her daughter... they setup a non-profit "foundation" for teen pregnancy awareness or some such and then paid Bristol Palin some absurd salary as the head of the NP.
Who is "they"? The foundation that paid Bristol isn't run by Sarah.
IMO, $262,000 is a lot to pay a spokesperson for a year's work, but at the same time, it's very little to pay someone who comes with a ton of free PR due to who her mom is.
Since the article ends my mentioning Missouri, it is worth mentioning that his cofounder Jim McKelvey used his Square success to found Cultivation Capital, which is a VC focused on parts of the midwest often ignored by the coastal VCs (e.g. Missouri, Indiana, Southern Illinois, etc.)
he should use that to save Twitter but good on him for getting his priority straight and putting human lives over some glorified text publishing app that gives the world an insight into our most mundane daily mental noise that we otherwise would've never spewed if it wasn't for such social media platforms.
My first reaction was that funding artists, musicians, and business is probably not the greatest charitable good that can be done with his money... but then I reconsidered -- It might not be the greatest good, but it is more good than leaving the money in the bank. So... OK, I'll give it a mild thumbs up.
If someone gives a fortune away for something that deems noble, I would give it a double thumbs up even if I don't completely agree with the recipient. Myself, I would have probably directed that money somewhere else, but I still plaud Jack's initiative.
In addition to that, I've always had mixed feelings about him: yes, successful entrepreneur and apparently smart person, but I saw him in person at an event and I made my (bad) opinion about his personality. This gesture somehow fights against that opinion. I might start to like him after all.
It appeals to me personally. My personal income in NYC is much higher than the average for the area I live in, and it seems to me that many younger people around me have aspirations modeled on those they see in popular media/instagram/youtube. Photography, sound production, graphic design, illustration... these are real, if difficult careers.
Funding artists, musicians and businesses, especially in underserved communities is absolutely the best way to reduce poverty.
The world doesn't have a jobs problem, it has a funding problem. It requires capital to accomplish most tasks of notable quality. Plus it circulates the money better.
Is there an honest belief that wealthy people keep their money sitting idle in bank accounts? That would explain a lot of the hyperbolic language around the politics of envy - it's a pretty easy (although nonsensical in reality) leap to assume the wealthy accumulate money just to keep it out of the hands of "the people."
I'd prefer these announcements wait until the stake has been distributed.
I think it's been over a year since reddit said the community would receive a 10% stake in the company (or maybe it was just a direct payout of 10% of the amount raised in a previous round). I haven't heard anything about it since.
Can anyone who's been though an IPO comment on what happened to the early employees with their 0.1% stake (of the original 10 million shares)? Everyone understands that they'll get diluted with new rounds, but when I read that Dorsey's giving away 40,000,000 shares I wonder what happened to the poor sap who started with 10,000. Do companies typically issue more options or RSUs to existing employees? How many?
Varies from company to company. But every startup I've been in, and a couple of larger companies, gave "refresher" grants to folks annually. That keeps employees from being fully vested and helps skew equity toward the employees who are contributing the most.
The split definitely helps nudge a new hire to be happier with the offer, all things, being equal, because many hires are still unknowledgeable about the fact that the number of options is irrelevant (like you say), and there is also the subconscious satisfaction of seeing big numbers next to our names that is hard to fight.
I must be hugely cynical because my first thought was "what has this guy done to commit so much to public benefit." There is an unnatural or questionable amount of money for people to give up isn't there?
Jack Dorsey's net worth is approximately 2.4 billion [1]. Back when Bill Gates stepped down as CEO of Microsoft, he did so not to retire, but to take on the responsibility of spending his money in the best possible way for society. [2]
It's pretty easy to imagine a situation in which increasing your net worth can't really earn you more to experience or nice things. I'd wager Dorsey's already at that point, but maybe still wants to create things.
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[ 3.0 ms ] story [ 163 ms ] threadUpdate: This post has been updated to correct that Dorsey will commit 10 percent of the entire company, not just his equity as previously stated. In addition, our calculations were off and I regret the error.
This is commendable. Actually intending to making the world a better place (in the non HBO-Silicon-Valley-Show-way).
The top 50% of Americans are better off than the top 50% of people in Sweden. That's 160 million people doing better than Sweden, I call that an extraordinary success. The bottom 1/3 are better off in Sweden than in America however, not much debate on that.
Swedes in America also do better than Swedes in Sweden.
There is greater opportunity for success in America than there is in Sweden as well. The US has a far greater diversity of culture overall. The US economy is far richer, 45% of all global wealth is concentrated in just 4.6% of the world's population. US universities are far superior to Sweden's.
The Swedish household debt to income ratio is far worse than America's, at twice the rate of the US household levels. They've been taking on debt far beyond their means to fake some of that standard of living.
Some masses of people are better off in Sweden, some are not.
Sweden's unemployment rate is higher than the US. Their system was also a disaster for decades before they launched numerous reforms of the prior formulation of their welfare state, improving its overall free market friendliness.
Are you suggesting the median American is wealthier than the wealthiest Swede?
The net median wealth per adult is higher in America than in Sweden however. That number was roughly equal as of 2013, since then US real estate and equities have gone up significantly. US median wealth tends to be heavily influenced particularly by real estate (with US real estate values nearly back to the all-time highs).
I'm suggesting the top 50% in America are better of than the top 50% in Sweden. Not that the median is better in America.
In nearly every respect. Access to culture. Economic opportunities. University opportunities. The types of businesses you can build. The variety of industries and jobs you have access to. The sheer scale of things you can work on or have access to economically or otherwise. The research and innovation, the scale of the scientific output you can be part of. The cultural output you can tap into or contribute to that will be consumed in pretty much every corner of the globe. And on it goes.
Sweden does amazingly well for 7 or 8 million people. America does amazingly well for ~160 million people. Sweden isn't going to scale - their population has increased by 2 million in 55 years or so (they can't scale much for obvious reasons). I consider America's accomplishment, that it has benefited so many more people to such a high degree, to be drastically more impressive. In the US, the top 50% are better off than Europe's top 50%, and the bottom 50% in the US are also better off than Europe's bottom 50% (see: Eastern Europe).
I'm asking you what that sentence means. Comparing groups is a tricky business. The richest half of Americans are better off in total? In the mean? In the median? Does it mean that the Pth percentile American is richer than the Pth percentile Swede, for all P>50?
I'm ignoring, for the moment, the ambiguity in which Americans are the "top" ones and what if means to be "better off". (wealth? income? education? lifespan? self-reported happiness?)
Maybe it would help if you point to some actual numbers by some social scientists that back up your claim.
Not that there's much doubt about the relative prosperity of the top 10% of US citizens compared with the top 10% of Swedes, especially if they're not living somewhere like SF or NY, but I can't help thinking the people in the lower brackets notice the difference more. It's not like a Swede who's sufficiently smart to go to Harvard (and wealthy enough to pay for the course) can't go there if they're dissatisfied with the free higher education on offer in their own country. The parents whose kids are vastly more likely to die in infancy in the US than Sweden have rather fewer options.
I think you're probably underestimating Europe's "access to culture" too...
[1] - Whatever they may be, spiritual, happiness, obviously off the top of my head, i've ran out here because it's not a topic i usually hear discussed, any other suggestions?
So just hope you're not in the bottom 50%?
We should also think about what "better off" actually means. Maybe a healthy society cares about more than just individual income and "opportunity for success." Sweden, and just about every other modern country has much better health care and public services, and a much saner attitude toward work and leisure, even in spite of attacks on the welfare state in recent decades (the idea that it was some kind of disaster and had to be saved by the capitalists is nonsense).
Why do you say that like it's a good thing?
Also, it's not like America went and gobbled up wealth from all the other countries. America largely created the wealth in-house.
A society should be judged not based on which serves the wealthiest half the best, but how it treats its most disadvantaged.
That's not to say that capitalism hasn't done great things for us, I just think we've let it run a bit amok here in the States.
I commend billionaires for their charity, but I condemn the tax system which makes it voluntary.
The fact that the bottom 160 million Americans are worse off than the bottom 4.3 million Swedes is the point.
But it has little to do with the differences in the two economic systems. The USA is rich because Europeans discovered a very large geographically isolated land mass that was only thinly populated by pre-literate people with technology that was primitive even by ancient standards. How would you not expect such abundance to produce an extremely wealthy society?
Sure, settling a continent and building infrastructure up from nothing is hard work, but Europeans had a couple of millenia worth of practical experience and how-to manuals on the best way to go about this, and cheerfully reinstituted slavery, which had worked out so well for the Roman empire. Without denigrating all the genuine hard work and innovation deployed by many generations of settlers (and not only from Europe), their labor was far from the only economic input. The US has vast tracts of agriculturally productive land, huge mineral wealth, and extremely favorable strategic geography. If you could go back a few thousand years, wave a historical magic wand and give ocean-capable shipping and navigation to the Romans or Han Chinese, they too would have established a mighty economic and military empire on the North American land mass.
I'm broadly pro-capitalist, but I can't take you seriously when you ignore the massive economic advantage of being practically handed an entire continent to play with. You would have to be staggeringly incompetent not to become a world power.
The bottom 1/3 are better off in Sweden than in America however, not much debate on that.
Not only does Sweden not have the same sort of permanent underclass that the US seems intent on cultivating, they probably don't spend as much of their wealth on security services designed to protect the property of the well-off from the poor, whereas something like 1/5 of America's labor force is devoted to guard labor: http://tuvalu.santafe.edu/~bowles/GarrisonAmerica2007.pdf
While the US is certainly wealthier in fiscal terms, this country does have some massive quality-of-life problems, and there's an almost pathological antipathy to measuring the cost of economic externalities - another symptom, I suggest, of having so much land available.
It's also unreasonable to think everyone that's in a difficult situation got there by their own mistakes and have the ability to get out without help.
The government is too bird's-eye-view to understand the details of different communities. I do think, however, the government should have some kind connection with a group of people in each state to get a status on things. And each state should have groups in different communities representing it to report up to the state-level group.
I feel like USA is already kinda designed that way, but something is making it not work... at least, it's not working for the poor.
You shouldn't make light of other people's misfortune.
It sucks, one of them got me my job, but they're going to be in pretty high demand.
I'm not convinced what's happening in SF, and starting to happen in Oakland, is actually desirable by the residence that were there before tech people showed up.
I think it's much better that Jack donates to help public schools, libraries, arts & crafts, other recreational activities in underserved communities.... without sending the gentrification catalyst into them.
A similar phenomenon can be seen in the DC area, all the companies are hyper-concentrated in NoVa creating a miserable commuting situation for hundreds of thousands of area residents, meanwhile a city like Baltimore a mere 40 miles away is completely ignored when it comes to locating offices.
{edit} - I actually think this is exactly the strategy being applied by him and his team of tax strategists - He's using this "donation" as a tax shield and keeping the money in a foundation, which he can use to help "the underprivileged" as he pleases, instead of just paying an amazing amount of tax like Zuck did.
Of course, if you were going to donate anyway, then sure, it's more tax efficient to give appreciated stocks. But calling it a tax shield makes it sound like you can stand to gain personally by doing this.
One (with that much wealth) absolutely stands to gain a ton from it.
A family member of mine works in financial trusts / estate planning for multi-millionaires (many times over) and this is one of the things I've heard from them used to limit tax exposure while maximizing the most typical goal - not personal wealth (these people have more money then they will ever be able to spend, that isn't the concern for them) - but rather maximizing family wealth.
And once you're extremely wealthy, it's amazing how large your family becomes.
Essentially - many charitable foundations are absolutely charitable in their fundamental mission, and best case are helping thousands of people with most of the money directly helping - however what happens in practice, is this foundation then has family members work for it earning somewhere between a reasonable to a completely insane salary depending on any number of factors.
Scenario a:
Bob starts Hooli - his stock is now worth 100 million. He wants to give half to his family. He cashes it out and pays long term capital gains on it - at 15% he is left with 85 million. He pays out half to his relatives, but don't forget, there is 35% gift tax when you gift someone more than ~15k So of that 42 million, only about 27 million will actually make it to it's intended target.
Scenario b:
Instead of directly cashing out, he starts the foundation with the 100 million. (using that to offset his entire income that year with a charitable tax deduction most likely). He wants to pay out half to his family still - this time he is starting with 50 million which will similarly be taxed at let's say 35% (income tax) - leaving 32.5 million to pay out. Also consider the case where he exercised a large cash performance bonus upon cashing out, that 5 million he will potentially not have to pay any taxes on either because he was able to make a large tax deduction from his "charitable" gift to the foundation.
It is not a simple thing - depending on how exactly the money flows, there are ways to prevent a significant amount of double taxation. (Also a couple years ago gift tax was 55% so it would have been 19 million (scenario a) vs. 32.5 million (scenario b) in post tax money. What makes things an order of magnitude more complicated, is on top of all this one has to consider timing. Tax rates change significantly all the time (55 vs 35% on gift tax in 2010 vs 2015) - some of which are known far in advance, some changes may be a surprise - so in estate planning where the goal is to maintain wealth for many generations to come - strategies like this start to make a lot of sense
On that taking some out bit... So, as the CEO of this non-profit, he could have the company buy a jet, build an office, schedule company retreats, etc... All of this would be tax free.
I could go on, but I think that the point is clear. Non-profits are an EXCELLENT way to avoid tax hits in this sort of scenario. It's a numbers game. Once your net worth has a B at the end of it, forming an entirely new business just to avoid taxes becomes a much more sensible solution.
The way this can be used to protect money from taxes is to establish a foundation that then employs you and your descendants. The money paid out is taxed, but the principle can sit there untouched.
However, the bigger deal is that he can use that foundation to wield significant power and to distort public policy to his benefit.
Foundation -> invests in a holding/investment company -> invests in a property company -> invests in a special purpose vehicle that owns a $100m NYC penthouse. Check.
Check out Ikea; it's a non profit.
It's possible he may not be Lex Luther, _lex.
[1]: https://en.wikipedia.org/wiki/Capital_gains_tax_in_the_Unite...
vs. 15% and no state tax if you lived in other states before recently. or, 0% up to $10mm gains if you held a stock for 5Y and bought it before 2012.
IMO, $262,000 is a lot to pay a spokesperson for a year's work, but at the same time, it's very little to pay someone who comes with a ton of free PR due to who her mom is.
In addition to that, I've always had mixed feelings about him: yes, successful entrepreneur and apparently smart person, but I saw him in person at an event and I made my (bad) opinion about his personality. This gesture somehow fights against that opinion. I might start to like him after all.
The world doesn't have a jobs problem, it has a funding problem. It requires capital to accomplish most tasks of notable quality. Plus it circulates the money better.
I think it's been over a year since reddit said the community would receive a 10% stake in the company (or maybe it was just a direct payout of 10% of the amount raised in a previous round). I haven't heard anything about it since.
As the company grows and the value of the stock goes up, it becomes difficult to give granular stock options.
Rarely publicized because it doesn't mean anything. Owning 5/1000 shares or 50/10000 is the same.
It's pretty easy to imagine a situation in which increasing your net worth can't really earn you more to experience or nice things. I'd wager Dorsey's already at that point, but maybe still wants to create things.
[1] https://en.wikipedia.org/wiki/Jack_Dorsey
[2] http://money.cnn.com/2006/06/15/technology/microsoft_news/