On the menu today: Earlier this week, billionaire Patagonia founder Yvon Chouinard — a self-described socialist who contends that every billionaire represents a policy failure — announced that “Earth is now our only shareholder” and that he was transferring control of his company to a newly founded environmentalist organization. Of course, the move allows Chouinard and his family to avoid paying hundreds of millions of dollars in federal capital-gains taxes and estate and gift taxes. This week, Chouinard and Patagonia got the world to believe the narrative they wanted it to believe.
Yvon Chouinard’s Devious Narrative
Chouinard popped up on my radar screen back in autumn 2019 — a lifetime ago, considering everything that’s happened since then — when I noticed him on the cover of Fast Company magazine, under the eye-catching headline: “CAPITALISM IS DEAD. LONG LIVE CAPITALISM.” The cover further explained that Chouinard “and a brigade of bold leaders are fighting for a fairer, more sustainable way forward.”
In an interview for the story, Chouinard stated that:
I’m an avowed socialist. I’m proud of it. That was a dirty word just a few years ago until Bernie Sanders brought it up. It was equated with communism and that whole thing. Yet the countries around the world that are most squared away are all socialistic countries like those in Scandinavia. I’m not talking about Venezuela, which is a disaster. That’s not a socialistic country. That’s a . . . I don’t know what.
Chouinard’s net worth, at that time, was estimated at $1.2 billion, and it remains around that level today.
In that Fast Company article, Chouinard painted himself as the world’s first accidental billionaire, declared that he’d never intended to make such a fortune, and lamented the “growth, growth, growth” philosophy of American business. “We’re a billion-dollar company . . . and I don’t want to be a billion-dollar company,” he moaned. “The day they announced it to me, I hung my head and said, ‘Oh God, I knew it would come to this.’ I’m trying to figure out how to make Patagonia act like a small company again.”
And you thought you had problems.
It is quite difficult to believe that Patagonia became a multi-billion-dollar company — and Chouinard a billionaire — by accident. What did Chouinard think would happen when he opened 30 stores and started selling $299 backpacks, $519 sleeping bags, $549 wading boots, and $699 parkas? Chouinard wants to convince readers — and perhaps himself — that he’s above the petty desire for profits, and that he doesn’t care about Patagonia’s being, as GQ Style put it, “fashion’s favorite outdoor brand.”
(Note that not all of that fortune was built selling backpacks and boots to well-off naturalists. Back in 2020, I learned that Patagonia — green, crunchy, proud, progressive Patagonia — has been a contractor for the Pentagon for decades, supplying cold-weather gear. There’s nothing wrong with that, but I just wonder how well that aligns with Patagonia’s insufferably rustic, progressive image.)
This week, the 83-year-old Chouinard made splashy headlines again, declaring that “Earth is now our only shareholder.” He announced that he was transferring ownership of the privately owned company to two institutions: “100 percent of the company’s voting stock transfers to the Patagonia Purpose Trust, created to protect the company’s values; and 100 percent of the nonvoting stock had been given to the Holdfast Collective, a nonprofit dedicated to fighting the environmental crisis and defending nature.” Patagonia is current valued at about $3 billion, and its profits are about $100 million per year. Those profits will go to the Holdfast Collective, “a 501(c)(4) not-for-profit organization that can advocate for causes and political candidates in addition to making grants and investments in our planet.”
Three weeks ago, another billionaire, electronics-manufacturing mogul Barre Seid, announced a similarly styled move that ensured the organization headed by conservative activist Leonard A. Leo will have plenty of resources for many years to come:
Seid donated 100 percent of the shares of Tripp Lite to Mr. Leo’s nonprofit group before the company was sold to an Irish conglomerate for $1.65 billion, according to tax records provided to The New York Times, corporate filings and a person with knowledge of the matter.
The nonprofit, called the Marble Freedom Trust, then received all of the proceeds from the sale, in a transaction that appears to have been structured to allow the nonprofit group and Mr. Seid to avoid paying taxes on the proceeds.
The moves mean Chouinard won’t have to pay the federal capital gains taxes he would have owed had he sold the company, an option he said was under consideration. On a $3 billion sale, that bill could be more than $700 million. It also helps Chouinard avoid the U.S. estate and gift tax, which is a 40 percent levy on large fortunes when they’re transferred to heirs. . . . Using a 501(c)(4) and trust lets Chouinard and his family continue to effectively control the company (family members will remain on its board under the new ownership structure).”
So under this new arrangement, Patagonia keeps making and selling all of its goods, and after everyone gets paid, the rest of the profits go to help the Holdfast Collective influence environmental policy and elect candidates who support aggressive moves to combat climate change.
In an interview with the New York Times, Gellert said that Chouinard and his family “really embody this notion that every billionaire is a policy failure.”
It’s a free country, and Chouinard and his family are free to do whatever they like with the company they built, as long as they follow the law. I don’t doubt that billionaires have their share of challenges in life, too. (As the wise philosopher Notorious B.I.G. declared, “Mo money, mo problems.”)
But there are two inconvenient truths illuminated by the actions and statements of Chouinard.
The first is that a surprising number of enormously wealthy people don’t like to acknowledge that they are enormously wealthy; they’re almost embarrassed by that fact. In fact, sometimes enormously wealthy people have a compulsion to tell others how little money means to them. (In a sign that Fast Company is the publication for rich people with no self-awareness, Chelsea Clinton infamously told the magazine, “I was curious if I could care about [money] on some fundamental level, and I couldn’t.” You know who’s incapable of caring about money? Really rich people.) These people often want others to believe that they spent their lives pursuing noble, creative, giving activities, and somewhere along the line, they just accidentally tripped and fell into Scrooge McDuck’s Money Bin.
They also often loudly insist that they don’t want to get wealthier and imply or outright state that there’s something wrong with people who do pursue wealth. But these self-proclaimed socialist billionaires and multi-millionaires don’t mean it. They like getting rich as much as the rest of us. They don’t think of themselves as greedy, just as most of us don’t think of ourselves as greedy. We work hard. We’re full of good ideas. We want to provide for our families, ensure that our kids can go to the college of their choice, enjoy retirement, and take those dream vacations.
Certain rich people, however, want you to feel guilty about your dreams of getting rich one day — and they do not see any contradiction in their thinking.
The second inconvenient truth is that even self-described socialists will make moves to avoid capital-gains, gift, and inheritance taxes. Chouinard and his legal and financial teams could have taken an alternate path that would have put $700 million more into the U.S. Treasury. The billionaire decided that money would be put to better use by the Holdfast Collective than by Uncle Sam. That’s fine, but that’s just what all of us tax-cut-loving, non-socialists think, too!
In an August essay on LinkedIn, Patagonia CEO Ryan Gellert complained that other companies that claim to support the environment were fighting against the tax increases in the Inflation Reduction Act:
Once again, both the U.S. Chamber of Commerce and the Business Roundtable are trying to block the will of the people and our government from making meaningful progress because the organizations don’t want their members to pay their fair share of taxes. The Inflation Reduction Act calls for a domestic corporate minimum tax rate of 15 percent applied to companies with revenue of more than $1 billion. Patagonia believes all companies should pay their taxes. We support the 15 percent minimum tax as a mechanism to accomplish that goal.
These guys keep telling the world that it’s morally wrong to take legal steps to minimize your tax bill, but then they turn around and make these moves to avoid hundreds of millions of dollars in taxes.
Just about everybody hates paying taxes, but only some of us are honest about it.
ADDENDUM: I think Dan McLaughlin is right — the fight over abortion in the 2022 midterms will be only slightly more intense than the fight over what role abortion will play in the 2022 midterms. If Republicans underperform in November, a lot of disparate forces — Democrats, not-so-pro-life GOP voices, and a healthy chunk of Donald Trump supporters who don’t want him blamed for any Republican under-performance — will be eager to argue that the Dobbs decision was a loser for the GOP, and/or that the party should back away from its pro-life stance.
The easiest way to combat this narrative is . . . to elect a lot of pro-life Republicans!