By Derrick Crowe
February 22, 2019
Writing in the Feb. 21 edition of The New York Times, Will Wilkinson is begging us not to abolish billionaires. As part of his case, he cites the existence of good billionaires.
Consider Dr. Gary Michelson, a spinal surgeon and inventor worth an estimated $1.8 billion. He lives in Los Angeles. Dr. Michelson holds hundreds of patents on medical devices and procedures that have made spinal surgery more effective. He got rich by making it so that people with spinal injuries could walk again or suffer less debilitating pain.
Eh, not quite.
First of all, the use of Dr. Michelson is quite clever. Not only has he taken the Giving Pledge, which commits signers to giving half of their wealth away, but he’s also a major contributor to the California Democratic Party. So waving him around for people like Alexandria Ocasio-Cortez to attack feels a bit…planned.
Michelson certainly seems like a benign, even nice, billionaire, but he did not, technically, get “rich by making it so that people with spinal injuries could walk again or suffer less debilitating pain.” Nor does he hold those patents anymore. To put a fine point on it, he got rich by suing Medtronic, the world’s biggest medical device company, and then selling them the patents. That $1.35 billion deal created Michelson’s billionaire status.
Medtronic is a highly profitable company whose CEO makes around $20 million a year–roughly 239 times what his average employee makes. They have shipped their corporate headquarters to Ireland to dodge U.S. taxes and outsourced their manufacturing to China and Malaysia. In 2008, it was forced into a settlement with the federal government after it defrauded Medicare out of hundreds of billions of dollars. The company makes, among other things, a line of insecure, wi-fi enabled, cloud-connected pacemakers that endanger patient privacy and, paraphrasing one recipient, monetize people’s pulses.
The very high value that Medtronic saw in Michelson’s patents wasn’t simply social or humanitarian, either–or even their actual monetary value. As The New York Times put it, “The medical device business is filled with small start-up companies trying to generate excitement about their new products and technologies, hoping to build market share and to attract deep-pocketed buyout offers. It has been fraught with allegations of bribes, exaggerated claims, and other unethical behavior.” The company also bragged that the acquisition “gave the company more leverage over competitors.” It also required an antitrust clearance from the government. In other words, Medtronic planned to use the patents to build toward monopoly power in the market and extract rents.
So, when Wilkinson writes the following, he’s maybe, I don’t know, omitting some key information:
But there’s a big moral difference between positive-sum wealth production and zero-sum wealth extraction — a difference that corresponds to a rough-and-ready distinction between the deserving and undeserving rich. The distinction is sound because there’s a proven a way to make a moral killing: improve a huge number of other people’s lives while capturing a tiny slice of the surplus value.
Does Wilkinson understand what “surplus value” means? Again, Medtronic’s CEO makes 239 times what his average employee makes, and it has billions to throw at deals like this specifically because it locates its manufacturing in places where you can get away with gouging your workers. The putative “tiny slice of the surplus value,” it turns out, is actually quite a bit of surplus value–created by those employees!–just transferred from a giant for-profit medical industry conglomerate to another’s hands.
So again, while Michelson seems to be a stand-up guy, the $1.8 billion he has in hand has less to do with society saying, “thank you” to an inventor and more to do with what an extremely profitable and questionable company could do with his inventions.
Furthermore, even the guidelines for the Giving Pledge themselves illustrate the problem with billionaires. Under the pledge, Michelson could devote himself to truly philanthropic pursuits…or he could dump half the money into political groups that advocate for tax cuts for billionaires. And whether we have to suffer the consequences of that latter as a society should not depend on how truly charitable Dr. Michelson is feeling today.
The existence of a “good” billionaire does not address the fact that billionaires are the product of a broken, rotten system.
So again, abolish billionaires.