Robert Reich Offers Definitive Proof That He Is Not An Economist

[Updated May 30 via several suggestions from a friend (thanks, Don!).  First, Mr. Reich’s tweet was May 21.  I adjusted the two months in question to be March 20 – May 20.  Second there were minor discrepancies in the number of shares outstanding.]

Would it be possible to tax Amazon CEO Jeff Bezos $34.6 billion? And why would anyone ask a question like that? Let’s explore the mind of Prof. Robert Reich of U.C. Berkeley.

It began with the hashtag #RobertReichIsASociologist. That led to an innocent tweet.[1]

Reich tweet with dateThat’s $34.6 billion for those who tire of counting zeroes. Mr. Bezos almost certainly did not earn that as income. What in the world is Reich talking about?

Hypothesis 1: Mr. Reich is Confusing Amazon with Mr. Bezos

This is a common mistake made by those who have never taken baby economics, an accounting or finance course, and/or run a business in the real world. But it’s worth a look. From VentureBeat:[2]

Amazon today reported earnings for its first fiscal quarter of 2020, including revenue of $75.5 billion, net income of $2.5 billion, and earnings per share of $5.01 (compared to revenue of $59.7 billion, net income of $3.6 billion, and earnings per share of $7.09 in Q1 2019). North American sales were up 29% to $46.1 billion, while international sales grew 18% to $19.1 billion. Amazon’s leadership position in online retail and the cloud makes it a bellwether during the coronavirus pandemic. In short, revenue was up but profit was down.

$34.6 billion is 45.8% of Amazon revenue. Since Mr. Reich referred to “two months” and there are three months in a quarter, a logical standard is that his number is 2/3 (66.7%) of whatever number his is looking at. So it clearly isn’t first quarter revenue. However, Mr. Reich’s number is 75.0% of North American sales revenue. That, at least, is in the general vicinity.

But these revenues are not Mr. Bezos’s income. In fact, they are not even Amazon’s income, either. Income is profit. Mr. Reich’s figure is 13.8 times Amazon’s first quarter profit.

And even the profits don’t belong to Mr. Bezos.[3] They belong to all Amazon stockholders. Mr. Bezos owns 11.1 percent of the company.[4] Here’s the breakdown of ownership.

Who owns Amazon?

Who owns Amazon?

A friend pointed out that Mr. Reich was probably talking about capital gains.  And that seems to be correct. On March 20 Amazon’s market capitalization was $920.79 billion.  On May 20 it had risen to $1,220.38 billion, a gain of $299.59 billion.  Mr. Bezos’s share of that lis $33.34 billion, pretty close to Mr. Reich’s $34.6 billion.

If anything, this casts Mr. Reich in an even worse light. Those are capital gains that exist on paper only.  They are not income or even cash wealth.  There is no way those gains fit the “raked in” description used by Mr. Reich.

I have to add a link to an article penned by David Burge (Iowahawk) back in his blogging days.  “Feed Your Family on $10 Billion a Day.”  As far as I know Mr. Burge’s interests are hot rods, statistics, and fun. His knowledge of economics was sufficient to induce him to relocate from Chicago to Austin, TX. But with this one article he has proved he is a better economist than Mr. Reich.

Hypothesis 2: Mr. Reich is Talking About Mr. Bezos’s Salary

Can’t be that. According to the company’s 10-K filing with the SEC, Mr. Bezos was paid $1.68 million dollars in 2019. In fact, based on the performance of the company’s stock, the stockholders are getting a pretty good deal paying Mr. Bezos that little!

Mr. Reich once called himself an economist. If he ever took an economics course, he has forgotten everything he learned.

The Real Philanthropist

Here’s what Mr. Bezos said in his statement that accompanied the earnings report.[5]

If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small. Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit. But these aren’t normal circumstances. Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on COVID-related expenses getting products to customers and keeping employees safe. This includes investments in personal protective equipment, enhanced cleaning of our facilities, less efficient process paths that better allow for effective social distancing, higher wages for hourly teams, and hundreds of millions to develop our own COVID-19 testing capabilities. There is a lot of uncertainty in the world right now, and the best investment we can make is in the safety and well-being of our hundreds of thousands of employees. I’m confident that our long-term oriented shareowners will understand and embrace our approach, and that in fact they would expect no less.

Yeah, that sounds like a guy who doesn’t care about people. He’s hiring more employees, spending a ton to keep them safe, and delivering products to people trapped in their homes. Yet the humanitarian Robert Reich thinks he’s evil. There’s one person in this story that matches that description. It’s not Mr. Bezos. In fact, Mr. Reich besmirches the title “sociologist.”

  1. Robert Reich (May 21, 2020), Twitter. If he hasn’t deleted it, available at . Accessed May 28, 2020.
  2. Emil Protalinski (April 30, 2020) “Amazon reports $75.5 billion in Q1 2020 revenue: AWS up 33%, subscriptions up 28%, and ‘other’ up 44%.” Available at . Accessed May 28, 2020.
  3. Yahoo Finance (May 28, 2020). Available at . Accessed May 28, 2020.
  4. Craig Anthony (Feb 4, 2020) “The Top 4 Amazon Shareholders.” Available at . Accessed May 28, 2020. Also author’s calculations.
  5. Ibid.


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About Tony Lima

Retired after teaching economics at California State Univ., East Bay (Hayward, CA). Ph.D., economics, Stanford. Also taught MBA finance at the California University of Management and Technology. Occasionally take on a consulting project if it's interesting. Other interests include wine and technology.