Daniel McLaughlin | On June 11, 2020

Jeffrey Preston ‘Jeff’ Bezos, entrpreneur, founder and CEO of Amazon
(Photo by Steve Jurvetson) (CC BY) (Resized/Cropped)

Jeff Bezos is the richest person in the world, even after giving his ex-wife 36 billion dollars in a divorce settlement. He must have big stacks of large bills filling his living room. Actually, no, he doesn’t. Most of his wealth is paper profits, unrealized gains on his stock holdings of Amazon.com Inc. As that stock price goes, so goes his wealth.

Bezos founded the company in 1994, working at a computer sitting in a bare office. The company went public during the dotcom wars of the late 1990s and survived the subsequent bubble crash. As the founder, he is the largest shareholder, and as the company gained traction and customers, the stock price started to shoot up. Rapidly rising prices mean that early shareholders can quickly become millionaires, and, obviously, eventually billionaires.

Because Bezos is classified as the richest, he gets a lot of the notoriety, but he is not the only upstart in the billionaire club. Many founders and early investors of the current tech titans have stock holdings worth billions of dollars. A constant question floats in the air whether or not it is fair or good or right that so few people could hold so much money, and its a valid question.

The answer is manifold. First and most obviously, none of those people hold billions of dollars of money. They hold stock ownership of a valuable firm. The price of that stock is bid up by people offering their money holdings to buy the stock, but that money goes from the buyer’s bank account to the sellers bank account, without ever going through the bank accounts of the original stock holders. The price of the stock is bid up because people perceive that the value of the company is increasing. In general, the more value that a company offers to customers, the more sales they make and, hopefully, the more profits. Current selling prices are based on the future expected cash flows of the company, and obviously investors like the potential at this point.

The next answer is a question: what is fair? Is it fair that customers have to pay money to buy goods and services? Yes, obviously. Is it good that a company can offer a service that nobody else provides better or faster or cheaper? Yes, obviously. Is it right that no company can force a customer or user to buy or use their product or service? Yes obviously. If all transactions are voluntary, not fraudulent, and give value for value received, each transaction is fair and good and right. So the total of all of the fair, honest, voluntary transactions is also fair, honest, and voluntary. Billionaires who provided billions of dollars of service have gotten their money fairly and honestly. They owe no apology to anyone.

That, however, doesn’t mean that all billionaires got all of their money fairly or honestly, and this is where critics do have a valid point. When a company is subsidized by the government, that is not a fair transaction. It takes money from the taxpayer to make people more wealthy. When the government makes laws to protect companies from competition, that is not fair, and it hurts potential competitors, as well as customers who have to pay higher prices and get worse products and services. When criminals in business enterprises are not appropriately punished for their crimes, that is an affront to justice and to the people who rely on the justice system.

If anyone is going to be angry about billionaires and unfairness, be angry about the right things. The only problem with Bezos or anyone else’s wealth is the extent to which they used anything other than voluntary commerce between consenting adults.

Originally published on Townhall Finance.

Daniel McLaughlin

Daniel J. McLaughlin is the author of “Compassion and Truth-Why Good Intentions Don’t Equal Good Results.” Formerly a finance executive, he is now focused primarily on writing on economics, business, and politics. You can find him at daniel-mclaughlin.com.