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Apologies if this is an unpopular thing to ask -- but is a very wealthy person giving away his/her wealth to be held in trust in perpetuity (to accomplish some

Apologies if this is an unpopular thing to ask -- but is a very wealthy person giving away his/her wealth to be held in trust in perpetuity (to accomplish some mission) an unambiguously good thing? Separate the question from this particular story today, that is not my intention to poke at specifically. One thing I can see with wealth being transferred among generations, between actual people, is that people can die and their ideas (especially bad ones) can die with them. Even if the wealth is redistributed and misspent, it ends and turns over to someone else. New ideas and purposes for the wealth can take their place. On the other hand, when a trust/foundation holds wealth, putatively forever, their mission might turn out not to be productive, or even good. I think of certain examples of charities which, by their holdings and activities, keep certain things in status quo and unable to change, which we would sometimes like to leave behind. All this wealth transferring to entities that will not die and pass on their fortunes to other purposes. What does this cause in the long run that we haven't anticipated? Like many things that are on my mind, our system is not just about incentivizing the good, but avoiding the inadvertent bad. Am I totally off / this is not a concern?

rebelos 4y ago
It's not really a concern so long as they are engaged in nonzero economic activity, in which case no money is permanently trapped within the vehicle. Money flows continuously in an economy and is only at rest in certain places such as bank reserves, mattresses, etc. But there is a very low incentive for it to remain at rest because our monetary system is inflationary. It certainly can be channeled into inefficient or unproductive economic activity (and often is), but the system ultimately keeps moving. To get more concrete, if you have a charitable trust of the kind described in this article, then it will pay out salaries to employees and purchase various kinds goods and services. The recipients of those money flows will in turn put that money to work for their own ends: supporting a family with food, shelter, etc, paying other employees further along the value chain, acquiring other goods and services, and so on. If someone accumulates this much wealth, they are well within their right to put it to work however they please. And doing so does not induce some permanent dysfunction in the system. In this case, I would argue that what the Patagonia founder has done is immensely commendable.
- kinnth 4y ago
  I think he/she more specifically means assets like land or IP. Those assets, especially land/buildings could become stagnant.
  - rebelos 4y ago
    People and corporate entities do not truly own land. That is a convenient illusion and a rhetorical trick we endure for perhaps no other reason than the momentum of precedent. People and corporate entities rent land from governments and we call the rental rate 'property tax'. Furthermore, eminent domain is in part meant to defend against adverse situations of the kind you're describing. IP law is designed to prevent indefinite squatting.
    - quickthrower2 4y ago
      Not sure what practical difference that makes except in extreme circumstances like war. At an individual level government interference with your land can be devastating. But in general land owning companies pretty much own that land. The government bit is a technicality and some tax.
    - bombcar 4y ago
      “The dead cannot bind the living, only mildly inconvenience them.”
- strken 4y ago
  > If someone accumulates this much wealth, they are well within their right to put it to work however they please. We let them do whatever they want with it, because doing so has been advantageous for the rest of us. At the end of the day, rights are recognised by law, law is created and upheld by people, and people can change their minds. I can imagine a future where we say "actually, this multigenerational NGO shouldn't use this much wealth to carry out this flawed mission, let's do something about it." Doing something wouldn't even have to mean taking their money by force: consider how the work of the Ford Foundation differs from the views of Henry Ford himself, and how that could have happened.
germinalphrase 4y ago
I’ve heard this exact same argument levied at the Gates Foundations (despite acknowledging the good they do), so you’re not the only one.
- kQq9oHeAz6wLLS 4y ago
  I'm still suspect of his motives in buying up so much farmland... hopefully it's just investment like many people think.
insane_dreamer 4y ago
It could be, but the greater risk is that the children squander the wealth or divert it from its original purpose (assuming the original purpose was a good one), which I'd say from history is more likely to be the case. It also avoids a huge legal battle between heirs and other parties trying to grab pieces, again wasting much of it on lawyers etc.
- bruce511 4y ago
  If you think about it "squandering" isn't necessarily a bad thing. It could he rephrased as "Lord Ben the 8th redistributed the families wealth to many other citizens, resulting in the family being reduced to the status of a regular family." In other words its not like the heirs literally piled up all the money and burned it (removed it from the economy). Rather its used in the context that they spent it on goods and services, which in turn were supplied by others. A fancy yacht purchase keeps boat builders employed (and a very diverse supply chain) then needs a crew, moorings, helicopter pilot, and so on. Wealth is not a bad thing, spending wealth is not a bad thing, its the hoarding of wealth, and in some cases the way it was obtained, which are bad. Of course when spent on social issues, aka politics, whether you consider it well or badly spent depends on your politics.
  - _carbyau_ 4y ago
    This is my issue with "trickle down" economics. It's only a trickle. If the rich people just swanned around and actually spent down their wealth then the rest of us would be better off.
jsolson 4y ago
Depends on the trust? If your ideas are abstract and roughly "climate isn't fucked" they seem pretty perennial. They're also open to interpretation. That said, sure, lots of periods in history would've produced trusts that are truly appalling. Something to be addressed case by case, for now, though, and collective social will can always disolve what is ultimately a social contract.
elliekelly 4y ago
This is why the Rule Against Perpetuities[1] exists which limits the existence of a trust to a life in being plus 21 years. There are various flavors of the rule with plenty of exceptions and longer waiting periods after the last existing life-in-being depending on the jurisdiction. I believe charitable trusts are usually exempt. Matt Levine has written about the “SPY kids”[2] used when the ETF was formed. [1]https://en.m.wikipedia.org/wiki/Rule_against_perpetuities https://en.m.wikipedia.org/wiki/Rule_against_perpetuities [2]https://www.bloomberg.com/opinion/articles/2019-08-09/the-spy-kids-are-all-right https://www.bloomberg.com/opinion/articles/2019-08-09/the-sp...
- pyuser583 4y ago
  According to the Wikipedia article, that doesn’t apply to charities.
  - elliekelly 4y ago
    Yes? That’s why I specifically noted it doesn’t usually apply to charities in my comment? Parent commenter was expressing concern about dead people exercising indefinite control over funds. The Rule Against Perpetuities was developed specifically to address that concern. We’ve since carved the rule up with all kinds of exceptions. As I also noted... I’m not sure where you think I’ve mislead you?
jefftk 4y ago
I think it's generally a good thing, when you look at what rich people do with their money otherwise. There is definitely a risk of what you describe, but there have also been many good things funded this way, and I think on balance it's been strongly positive.
aidenn0 4y ago
At least in this particular case it's not necessarily a perpetuity; the funding of the C4 is entirely reliant on Patagonia's profits; if people decide that the outcome is undesirable they can just boycott Patagonia.
wwqrd 4y ago
Could the same argument not be levelled at the original incorporation?
munificent 4y ago
Good point. I really like how the quote in article itself frames it: "this notion that every billionaire is a policy failure". I think wealth shouldn't have gotten concentrated to this degree in the first place. It's a structural failure that individuals can end up with control over that much money. If the economy was a software simulation, we'd call it buggy because it's clearly gotten some unbalanced positive feedback loops that lead to an unstable simulation. But the system does have those bugs, and the wealth is concentrated today. So, relative to the other options (which is what every choice in life is), I think putting it in a trust is probably better for society than keeping it in the hands of the family.
snowwrestler 4y ago
Is a person swinging a hammer a good or bad situation? Depends on what they are swinging the hammer at. Lots of people who are cheering this move by Chouinard probably have less kind things to say about Charles Koch, who has taken a lot of the wealth his private company has created and used it to fund nonprofits that promote causes typically aligned with conservative politics. Opinions on this sort of thing typically align more with values than tactics. I will say this is not a new thing, the great tycoons of 100 years ago created nonprofits too, some of which are still going strong. For example: https://mellon.org https://mellon.org While the institutions may endure, the people running them do not, so it is possible for the mission to evolve with the surrounding culture. Doesn’t mean you will necessarily agree with them, though, even over time.
- insane_dreamer 4y ago
  Koch still has a net worth of over $60B (doubled in the past 10 years), so no, the two are not comparable whether one agrees with Koch's political views or not.
pyuser583 4y ago
It’s a fair question. I think of religious establishments that exist with huge sums of wealth with few actual congregants. The Catholic Church has this reputation, but the Episcopalian Church is probably a better example, because it has so few memebrs. A local Indian tribe is flush with cash despite from casinos despite having few actual members. Best example is the American Prohibition Party. It was endowed by some rich guy 100 years ago, so it’s still around. I have a hard time seeing anything pernicious in these examples. Living people donate wealth to silly things all the time. It’s hard to find a powerful institution that has power only because of some wealthy person long ago.
javadocmd 4y ago
A good question worth considering, IMO. Take the Susan G. Komen Foundation as a present-day example of a foundation that, although founded with a righteous cause in mind, has (in some folks' estimation) lost its way, and/or become a somewhat negative force on cancer treatment, women's health, and charity efforts generally. https://en.wikipedia.org/wiki/Susan_G._Komen_for_the_Cure#Controversy_and_criticism https://en.wikipedia.org/wiki/Susan_G._Komen_for_the_Cure#Co... Of course for a foundation that relies heavily on continuing donations, the "market" (so to speak, in this case arranged for the generation of social good) can send a corrective signal by cutting donations. For a completely self-sustaining trust, it stands to reason that society would have little chance to "fix" a wayward organization.
iroh2727 4y ago
You are completely right. For example, the Tories in the UK now receive more donations from dead donors than living ones. How crazy is that? Many of these structures, like trusts, take on a life of their own which is parasitic to the general public. Ergo they should not exist, or at least they should not be allowed to be political far into the future. https://www.mirror.co.uk/news/politics/dead-tories-prop-up-theresa-13121992 https://www.mirror.co.uk/news/politics/dead-tories-prop-up-t...
notacoward 4y ago
> when a trust/foundation holds wealth, putatively forever, their mission might turn out not to be productive, or even good Now apply the same reasoning to corporations, which are also immortal and which (over time, since the abandonment of binding charters) are even less likely to pursue any goal except profit.

rebelos 4y ago

It's not really a concern so long as they are engaged in nonzero economic activity, in which case no money is permanently trapped within the vehicle. Money flows continuously in an economy and is only at rest in certain places such as bank reserves, mattresses, etc. But there is a very low incentive for it to remain at rest because our monetary system is inflationary. It certainly can be channeled into inefficient or unproductive economic activity (and often is), but the system ultimately keeps moving. To get more concrete, if you have a charitable trust of the kind described in this article, then it will pay out salaries to employees and purchase various kinds goods and services. The recipients of those money flows will in turn put that money to work for their own ends: supporting a family with food, shelter, etc, paying other employees further along the value chain, acquiring other goods and services, and so on. If someone accumulates this much wealth, they are well within their right to put it to work however they please. And doing so does not induce some permanent dysfunction in the system. In this case, I would argue that what the Patagonia founder has done is immensely commendable.

kinnth 4y ago
I think he/she more specifically means assets like land or IP. Those assets, especially land/buildings could become stagnant.
- rebelos 4y ago
  People and corporate entities do not truly own land. That is a convenient illusion and a rhetorical trick we endure for perhaps no other reason than the momentum of precedent. People and corporate entities rent land from governments and we call the rental rate 'property tax'. Furthermore, eminent domain is in part meant to defend against adverse situations of the kind you're describing. IP law is designed to prevent indefinite squatting.
  - quickthrower2 4y ago
    Not sure what practical difference that makes except in extreme circumstances like war. At an individual level government interference with your land can be devastating. But in general land owning companies pretty much own that land. The government bit is a technicality and some tax.
  - bombcar 4y ago
    “The dead cannot bind the living, only mildly inconvenience them.”
strken 4y ago
> If someone accumulates this much wealth, they are well within their right to put it to work however they please. We let them do whatever they want with it, because doing so has been advantageous for the rest of us. At the end of the day, rights are recognised by law, law is created and upheld by people, and people can change their minds. I can imagine a future where we say "actually, this multigenerational NGO shouldn't use this much wealth to carry out this flawed mission, let's do something about it." Doing something wouldn't even have to mean taking their money by force: consider how the work of the Ford Foundation differs from the views of Henry Ford himself, and how that could have happened.

germinalphrase 4y ago

I’ve heard this exact same argument levied at the Gates Foundations (despite acknowledging the good they do), so you’re not the only one.

kQq9oHeAz6wLLS 4y ago
I'm still suspect of his motives in buying up so much farmland... hopefully it's just investment like many people think.

insane_dreamer 4y ago

It could be, but the greater risk is that the children squander the wealth or divert it from its original purpose (assuming the original purpose was a good one), which I'd say from history is more likely to be the case. It also avoids a huge legal battle between heirs and other parties trying to grab pieces, again wasting much of it on lawyers etc.

bruce511 4y ago
If you think about it "squandering" isn't necessarily a bad thing. It could he rephrased as "Lord Ben the 8th redistributed the families wealth to many other citizens, resulting in the family being reduced to the status of a regular family." In other words its not like the heirs literally piled up all the money and burned it (removed it from the economy). Rather its used in the context that they spent it on goods and services, which in turn were supplied by others. A fancy yacht purchase keeps boat builders employed (and a very diverse supply chain) then needs a crew, moorings, helicopter pilot, and so on. Wealth is not a bad thing, spending wealth is not a bad thing, its the hoarding of wealth, and in some cases the way it was obtained, which are bad. Of course when spent on social issues, aka politics, whether you consider it well or badly spent depends on your politics.
- _carbyau_ 4y ago
  This is my issue with "trickle down" economics. It's only a trickle. If the rich people just swanned around and actually spent down their wealth then the rest of us would be better off.

jsolson 4y ago

Depends on the trust? If your ideas are abstract and roughly "climate isn't fucked" they seem pretty perennial. They're also open to interpretation. That said, sure, lots of periods in history would've produced trusts that are truly appalling. Something to be addressed case by case, for now, though, and collective social will can always disolve what is ultimately a social contract.

elliekelly 4y ago

This is why the Rule Against Perpetuities[1] exists which limits the existence of a trust to a life in being plus 21 years. There are various flavors of the rule with plenty of exceptions and longer waiting periods after the last existing life-in-being depending on the jurisdiction. I believe charitable trusts are usually exempt. Matt Levine has written about the “SPY kids”[2] used when the ETF was formed. [1]https://en.m.wikipedia.org/wiki/Rule_against_perpetuities https://en.m.wikipedia.org/wiki/Rule_against_perpetuities [2]https://www.bloomberg.com/opinion/articles/2019-08-09/the-spy-kids-are-all-right https://www.bloomberg.com/opinion/articles/2019-08-09/the-sp...

pyuser583 4y ago
According to the Wikipedia article, that doesn’t apply to charities.
- elliekelly 4y ago
  Yes? That’s why I specifically noted it doesn’t usually apply to charities in my comment? Parent commenter was expressing concern about dead people exercising indefinite control over funds. The Rule Against Perpetuities was developed specifically to address that concern. We’ve since carved the rule up with all kinds of exceptions. As I also noted... I’m not sure where you think I’ve mislead you?

jefftk 4y ago

I think it's generally a good thing, when you look at what rich people do with their money otherwise. There is definitely a risk of what you describe, but there have also been many good things funded this way, and I think on balance it's been strongly positive.

aidenn0 4y ago

At least in this particular case it's not necessarily a perpetuity; the funding of the C4 is entirely reliant on Patagonia's profits; if people decide that the outcome is undesirable they can just boycott Patagonia.

wwqrd 4y ago

Could the same argument not be levelled at the original incorporation?

munificent 4y ago

Good point. I really like how the quote in article itself frames it: "this notion that every billionaire is a policy failure". I think wealth shouldn't have gotten concentrated to this degree in the first place. It's a structural failure that individuals can end up with control over that much money. If the economy was a software simulation, we'd call it buggy because it's clearly gotten some unbalanced positive feedback loops that lead to an unstable simulation. But the system does have those bugs, and the wealth is concentrated today. So, relative to the other options (which is what every choice in life is), I think putting it in a trust is probably better for society than keeping it in the hands of the family.

snowwrestler 4y ago

Is a person swinging a hammer a good or bad situation? Depends on what they are swinging the hammer at. Lots of people who are cheering this move by Chouinard probably have less kind things to say about Charles Koch, who has taken a lot of the wealth his private company has created and used it to fund nonprofits that promote causes typically aligned with conservative politics. Opinions on this sort of thing typically align more with values than tactics. I will say this is not a new thing, the great tycoons of 100 years ago created nonprofits too, some of which are still going strong. For example: https://mellon.org https://mellon.org While the institutions may endure, the people running them do not, so it is possible for the mission to evolve with the surrounding culture. Doesn’t mean you will necessarily agree with them, though, even over time.

insane_dreamer 4y ago
Koch still has a net worth of over $60B (doubled in the past 10 years), so no, the two are not comparable whether one agrees with Koch's political views or not.

pyuser583 4y ago

It’s a fair question. I think of religious establishments that exist with huge sums of wealth with few actual congregants. The Catholic Church has this reputation, but the Episcopalian Church is probably a better example, because it has so few memebrs. A local Indian tribe is flush with cash despite from casinos despite having few actual members. Best example is the American Prohibition Party. It was endowed by some rich guy 100 years ago, so it’s still around. I have a hard time seeing anything pernicious in these examples. Living people donate wealth to silly things all the time. It’s hard to find a powerful institution that has power only because of some wealthy person long ago.

javadocmd 4y ago

A good question worth considering, IMO. Take the Susan G. Komen Foundation as a present-day example of a foundation that, although founded with a righteous cause in mind, has (in some folks' estimation) lost its way, and/or become a somewhat negative force on cancer treatment, women's health, and charity efforts generally. https://en.wikipedia.org/wiki/Susan_G._Komen_for_the_Cure#Controversy_and_criticism https://en.wikipedia.org/wiki/Susan_G._Komen_for_the_Cure#Co... Of course for a foundation that relies heavily on continuing donations, the "market" (so to speak, in this case arranged for the generation of social good) can send a corrective signal by cutting donations. For a completely self-sustaining trust, it stands to reason that society would have little chance to "fix" a wayward organization.

iroh2727 4y ago

You are completely right. For example, the Tories in the UK now receive more donations from dead donors than living ones. How crazy is that? Many of these structures, like trusts, take on a life of their own which is parasitic to the general public. Ergo they should not exist, or at least they should not be allowed to be political far into the future. https://www.mirror.co.uk/news/politics/dead-tories-prop-up-theresa-13121992 https://www.mirror.co.uk/news/politics/dead-tories-prop-up-t...

notacoward 4y ago

> when a trust/foundation holds wealth, putatively forever, their mission might turn out not to be productive, or even good Now apply the same reasoning to corporations, which are also immortal and which (over time, since the abandonment of binding charters) are even less likely to pursue any goal except profit.