All happy families are alike; each unhappy family is unhappy in its own way. Tolstoy began Anna Karenina with that line. But one wonders if that is applicable all the time. One example: divorce.
It's the oldest tale in the book. You are rich; you are middle-aged; you are a man; crisis. You buy a Porsche; you drop some weight; you hit the gym; you get jacked. Chances are your one-time sweetheart does not seem so sweet or young to you anymore. Society rewards salt and pepper in men. Distinguished, it labels them. Women? Shit out of luck. Outcome: divorce.
"Growing apart," "falling out of love," "at different places in our lives," "irreconcilable differences" are all familiar ingredients in the celebrity divorce cocktail we have all consumed with practised disinterest. The Tolstoyian unhappiness in a family doesn't seem so unique after all.
Until it is.
Add the world's most valuable company and the world's richest man to the mix and you have yourself a divorce unlike any other where even a percent of the wealth parted is firmly in the three-comma category. "It's going to be a beauty," said one man who is himself no stranger to divorces. His divorces were of course characteristically messy, but this divorce may turn out to be the prime example of a fast delivery with all parties satisfied with the product.
The tale of love, marriage, divorce, billions, and Amazon stock price is our Story of the Day. Jeff Bezos, the world's richest man, CEO of Amazon, owner of The Washington Post, and MacKenzie Bezos, a novelist and one of the first employees of Amazon, are getting a divorce. From the first million he made in 1997 to the present moment when he is the richest man in the world, all of Jeff's wealth has been created as a married man.
137,000,000,000 dollars at stake. An 800,000,000,000 dollar company stands to get affected. The Bezoses live in a community property state, meaning the debts and incomes of the couple could be split down the middle in the divorce. Will MacKenzie become the richest woman in the world? What could be the impact on Amazon stock? Why is breaking up a hard thing to do? These and other questions answered today as we examine the anatomy of a centibillion divorce with me Rakesh Sharma on Moneycontrol.
To a lot of us in our 20s and 30s, the institution might seem redundant. An oppressive construct of the patriarchy. Ask the same to some captains of the industry, and you might be surprised by their answer. Warren Buffett, in the 2017 HBO documentary, 'Becoming Warren Buffett,' said there had been two turning points in his life. One when he came out of the womb and the other when he met his wife Susie. Of course, it's another matter that his marriage was almost a happy ménage à trois, with Susie on one side and Astrid on the other. "Marry the right person. I'm serious about that. It will make more difference in your life. It will change your aspirations, all kinds of things," he said at the 2009 Berkshire Hathaway annual meeting. He addressed the topic during a 2017 conversation with Bill Gates at Columbia University. "You want to associate with people who are the kind of person you'd like to be. You'll move in that direction," he said. "And the most important person by far in that respect is your spouse. I can't overemphasize how important that is."
Sheryl Sandberg agrees. As does Mark Zuckerberg. And Barack Obama. Despite the troubles in their marriages, so have Hillary and Bill Clinton, and Beyonce and Jay-Z. Psychologists from Carnegie Mellon University have even put out research that claims people with supportive spouses are "more likely to give themselves the chance to succeed." Having a conscientious spouse can boost your salary by $4,000 a year and increase your chances of getting promoted, claimed another study from Washington University.
Jeff Bezos probably agreed, too. Back in 1993, at age 30, when he interviewed a fresh graduate from his own alma mater Princeton University for a job at DE Shaw, a New York City hedge fund where he was VP, he clearly saw in her the qualities that resonated with what he wanted in a partner. As he would say years later, "I wanted a woman who could get me out of a third-world prison." Resourcefulness - something he and the young woman he interviewed, MacKenzie Tuttle, both valued. “I think my wife is resourceful, smart, brainy, and hot, but I had the good fortune of having seen her résumé before I met her, so I knew exactly what her SATs were,” Bezos said in a Vogue profile of MacKenzie in 2013.
MacKenzie herself was a bit more romantic in her retelling of their meeting - understandable considering she was an aspiring novelist who wanted the hedge fund job just to fund her writing. A writer who counted (and still counts) Toni Morrison, her creative writing instructor at Princeton, as a mentor; a writer whom the Nobel Prize-winning Toni Morrison described as “one of the best students I’ve ever had in my creative-writing classes.” Job in hand, MacKenzie then was not too far behind in falling in love. “My office was next door to his, and all day long I listened to that fabulous laugh,” she told Vogue. She took charge of asking him out to lunch. Within three months of dating, they were engaged. Three months after that, they were married in West Palm Beach, Florida. He was 30; she was 23; it was 1993.
An acknowledged wizkid of Wall Street, Jeff, around 1994, found for himself a new fascination: retailing on the internet. Selling books, specifically. He abruptly quit his high-paying job, bundled all his belongings into a moving van, and ordered the movers to set off West. He hopped into the car to write a business plan and choose a specific location. MacKenzie may never have needed to bail Jeff out of a third-world prison, but it was she who drove out west, to Seattle, to help her husband start a little company you may have heard of - Amazon.
MacKenzie was an integral part of the Amazon dream from the very beginning. “To me, you know, watching your spouse, somebody that you love have an adventure, what is better than that and being part of that? Couldn’t wait to hop in the car,” she said in 2013. During the early days of Amazon - when its office was in their suburban Seattle garage - she, as one of the first employees of the company, negotiated its first freight contracts from a Starbucks attached to a Barnes & Noble near their home. She has been there every step of the way, perhaps even postponing her writing debut in order to support Jeff in his dreams, and taking care of the family, which now has four children. An attack on Amazon was not merely something she could shrug off as par for the course. When Brad Stone wrote 'The Everything Store: Jeff Bezos and the Age of Amazon,' a none too complimentary tale of Bezos' rising star, MacKenzie was incensed enough to fact-check Stone in a scathing 1-star review posted on, where else, Amazon. "I worked for Jeff at D. E. Shaw, I was there when he wrote the business plan, and I worked with him and many others represented in the converted garage, the basement warehouse closet, the barbecue-scented offices, the Christmas-rush distribution centers, and the door-desk filled conference rooms in the early years of Amazon’s history. Jeff and I have been married for 20 years." Amazon was personal for her.
As Business Insider put it, "There would be no Amazon without MacKenzie. What happened to Bezos would not have happened without MacKenzie."
From all known accounts, Jeff was just as supportive when it came to his wife's writing career. “Jeff is my best reader,” she told Vogue, adding that he "would cheerfully clear his schedule for the day, read her manuscript in one sitting, and give her meticulous notes" on her work. Work that has been critically appreciated - her debut novel 'The Testing of Luther Albright' (2005) won an American Book of the Year award and her sophomore novel 'Traps' (2013) was also widely appreciated.
It was a marriage founded on the bedrock of partnership and mutual respect. For any marriage such as that to crumble is obviously a tragedy irrespective of how fabulously wealthy the parties involved may be. But what Jeff and MacKenzie have also ensured is to not let it all play out in public, not go the way of the tabloid, and remain what they have been to each other all their married life - respectful and loving. We wish them the very best.
And now to the ugly stuff.
DIVORCE (and a dash of Donald Trump because it is 2019 and life is just like that now)
Unsurprisingly, there has not been much room for ugly stuff. The Bezoses got ahead of the narrative. The National Enquirer, tabloid of the very worst kind, was about to release what it claimed was a trail "across five states and 40,000 miles, [tailing them] in private jets, swanky limos, helicopter rides, romantic hikes, five-star hotel hideaways, intimate dinner dates and ‘quality time’ in hidden love nests." Them being Bezos and his current love interest, Lauren Sanchez, a former media personality and soon-to-be ex-wife of a well-known Hollywood agent Patrick Whitesell. It was Bezos's Hollywood connections that brought the two in contact - Amazon Studios produced Manchester by the Sea, an acclaimed, Oscar-nominated film. Reportedly, it was love at first sight for Bezos and Sanchez. The National Enquirer, in typical fashion, also got a some images exchanged between the two. The Bezoses got wind of the situation, and released their joint statement before the Enquirer could release their "explosive" piece. Reports reveal that MacKenzie knew of the alleged affair. (Lauren and Jeff even appeared together at the Golden Globes.)
The joint statement read:
"We want to make people aware of a development in our lives. As our family and close friends know, after a long period of loving exploration and trial separation, we have decided to divorce and continue our shared lives as friends. We feel incredibly lucky to have found each and deeply grateful for every one of the years we have been married to each other. If we had known we would separate after 25 years, we would do it all again. We've had such a great life together as a married couple, and we also see a wonderful life ahead, as parents, friends, partners in ventures and projects, and as individuals pursuing ventures and adventures. Though the labels might be different, we remain a family, and we remain cherished friends."
The statement could well be Lesson 101 in the art of divorce announcement in the age of social media: Own the narrative. Keep it kind and loving. Leave out the blame. Don't wash dirty linen in public. In a world where privacy is an illusion and intimate photographs and devastating personal news can travel the world before you can scream "Thief," the opportunity to let the world know of something on your own is rare. As people so prominently in the public eye, it is even harder. The Bezoses managed it, and managed it well.
If "conscious uncoupling" was a gift that Goop-lady Gwyneth Paltrow and Yellow-man Chris Martin gave us, "loving exploration" was a Bezos gift to the lexicon. The statement also hinted at the possibility of this not being a messy divorce. The use of "We," the repeated use of the word "friends," the emphasis on wanting to remain partners in ventures and adventures, underscored the notion that the two want to keep it friendly. Nothing to see here, move along, thank you.
But of course, there is something to see - not the wealth, not how assets are going to be split, not what the future holds for Jeff, MacKenzie, and Amazon. Of course, we will come to that. But this being 2019, there is something else to see - Donald Trump.
The National Enquirer is no regular sleaze rag. It is one that has been used essentially as a Donald Trump propaganda machine. Its publisher David Pecker is an ally of the sitting President and has been instrumental in spreading positive stories about Trump and taking potshots at his rivals. Little wonder then that Agent Orange typed this out: "So sorry to hear the news about Jeff Bozo being taken down by a competitor whose reporting, I understand, is far more accurate than the reporting in his lobbyist newspaper, the Amazon Washington Post." Yes, it is 2019, and the publication that came out with such stunning headlines as "Hillary Clinton Lesbian Lovers Named in Secret Emails" is being compared with an institution of integrity that broke Watergate and brought a sitting American President down. Not just compared, but being declared better by a sitting American President. Let that sink in.
Donald Trump, man all too familiar with divorces, said "it was going to be a beauty." His first divorce settlement with Ivana Trump dominated tabloid headlines for two years, with Ivana walking away with about $25 million and some property and a line of advice about divorce to the First Wives in the film The First Wives Club: "Ladies, don't get mad. Get everything."
We bring Donald Trump into these proceedings because his beef with the Washington Post is only too well known. The Post, which regularly criticises Trump and keeps a meticulous record of his lies and misleading statements, has been at the receiving end of Trump's invective for a while now. His animosity with Bezos is also well documented in his little Twitter missives where he has claimed that Amazon is doing the US Postal Service a disservice, that it is "doing great damage to tax-paying retailers," and that the company ought to pay its dues and more. Sure, there is an argument to be made even by the most ardent left-leaning liberal that Trump has a point here, but it is evident also that the basis for Trump's disapproval of Amazon and Bezos has less to do with Amazon's trade practices than it is with the fact that Bezos owns The Post and is seen widely as a potential presidential candidate, and is well, a self-made actual billionaire a hundred times over. These are not petty asides, but probably constitute a large portion of the reason why Trump hates Bezos - this Agent Orange has a deep hue but a thin peel. In April last year, a source speaking to Vanity Fair characterized Trump’s animosity this way: “He gets obsessed with something, and now he’s obsessed with Bezos. Trump is like, ‘How can I f— with him?’"
The National Enquirer could well be one tool with which to achieve that goal.
But The Telegraph reported, "Last year it was revealed that Mr Pecker, chief executive of American Media Inc (AMI), had been granted immunity by US prosecutors in exchange for helping during the prosecution of Michael Cohen, Mr Trump's former lawyer, over hush payments to women during the 2016 election. One of them involved a $150,000 payment from AMI to Karen McDougal, a former Playboy model, to suppress her claims of an affair with Mr Trump. The Trump records were stored alongside similar documents pertaining to other celebrities' catch-and-kill deals, in which exclusive rights to people's stories were bought with no intention of publishing to keep them out of the news."
Speculation has been that Pecker and Co. might no longer be in Trump's good books. But the revelation of the Bezos story by The National Enquirer might hint at otherwise. Chris Hayes of MSNBC tweeted: "Given everything we know about how Pecker's National Enquirer has functioned as essentially an arm of Trumpworld, [the National Enquirer's report] prompts some questions."
This is not speculative fiction; this is just life in 2019 when a sitting American President has an ongoing investigation to look into whether he was a Russian agent or not. We have walked through the looking glass, and are firmly staying there.
Alexis Madrigal writing for The Atlantic said it best. I would not improve a single word.
"A presidential candidate rises on the back of a reality-TV program and his constant promotion of a conspiracy that the first black president wasn’t born in the United States. To protect himself, this candidate sets up a gentleman’s agreement with an old friend at the National Enquirer to buy up negative stories about him and kill them, which ends up forming part of the investigation into Russian interference in the election, all of which could somehow tie back into a tryst between the richest man on Earth (who also happens to own The Washington Post) and a helicopter pilot who was also once a local Fox News anchor.
You tell me which clause is the most implausible."
Honestly, tell me if you know.
THE MATHEMATICS OF THE DIVORCE
Vice, somewhat exaggeratedly, declared that the Bezos divorce could be the biggest divorce since Henry VIII divorced Katherine of Aragon. That particular divorce led to the creation of the Church of England. Could this one have similarly seismic changes? All hints point to No, chief among them the rather conciliatory joint statement issued by Jeff and MacKenzie.
Other than their marital home in Medina, Seattle, Jeff and MacKenzie jointly own four other homes: in Beverly Hills; Van Horn, Texas; Washington, D.C., and Manhattan, cumulatively worth over $165 million. Jeff is the 25th largest landowner in the U.S., according to Business Insider, and 28th according to The Land Report. The couple apparently do not have a prenuptial agreement.
They could file for divorce in any of these states, but if they choose to do so in Seattle, Washington, the law is clear. As The Daily Beast noted, " Divorces there are only granted based on “irretrievable breakdown” and considered “no fault,” as demanded by the Washington State Constitution. That means all assets and property not inherited or gifted to one spouse by name are considered “communal property” owned by both spouses and, as such, have to be divided equally."
Amazon is a public company of which Bezos alone owns controlling power through his 78.8 million shares—roughly 16.2 percent of the firm, valued at approximately $130.7 billion, according to The Street. The stock comprises more than 95% of his fortune. The Daily Beast says, "If Bezos has to give half of those shares to his ex-wife, it would dilute his ownership of the company." That could have a detrimental effect on the value of Amazon, which would ultimately not be in any ex’s interest, according to CNBC.
Still, if he has to split up his shares, he may lose control of the company. Seattle-based attorney David Starks told CNBC that he assumed that the Bezos’ had come to an agreement before announcing their divorce. “I have to imagine that some of the longest conversations and most legal mind power went into how to fashion a settlement that retained Jeff Bezos’ ability to remain a controlling shareholder in Amazon,” Starks told CNBC, suggesting that Tuttle may have agreed to give up claim to the stock or give up her voting rights to her shares in exchange for some other asset.
Joe Pinsker, writing for The Atlantic, notes, "When a couple in an equitable-distribution state doesn’t agree to a settlement, it gets worked out in court, and the judge considers a variety of criteria. One attorney says that generally, the longer the marriage, the closer the split will be to 50-50. But, she says, “if you’re divvying up 20 billion, and you’re getting 1 billion and someone else is getting 19 … a judge might say that’s enough for you.” Even if $1 billion isn’t equal, it’s still plenty to live on, the reasoning goes."
Steve Mindel, a family-law attorney in Los Angeles who works with high-net-worth clients, told The Atlantic, "In the case of the Bezoses, since they were married at the time that he moved from Wall Street to start developing Amazon, we would assume that everything in Amazon is going to be community property. There is another possibility that the stock could be transferred into a single entity over which the former husband and wife would have joint control; that arrangement might put Amazon's investors and corporate directors at ease, given that there wouldn't be two separate shareholders."
People use a variety of techniques to outfox the IRS - hide money in Gibraltar, Isle of Man, an island off the coast of Africa, Cayman Islands etc. But that is unlikely in the Bezos case.
In any case, CNBC claims a 50-50 split is unlikely, since reducing Bezos’s ownership of Amazon would ultimately impede both Bezos and MacKenzie from acquiring more wealth.
If things were to turn ugly, MacKenzie could receive about 8% of the total Amazon shares and might like to exercise control. As Brittain Ladd points out on Forbes, there are multiple scenarios for how that could get even uglier: she could conspire with any of the other biggies (Walmart, Google, Facebook, etc) to leverage her shares to acquire Amazon; she could retain these shares and become an advocate for positive change in Amazon, perhaps even fighting for higher wages, etc; she could sell her shares as a block trade to a big company and allowing a member from that buying company to secure a seat on the Amazon board and exercise control from the outside.
But if words are anything to go by, their joint statement indicates that the outcome could be pleasing to both, and not in a tearing hurry to occupy the pages of the Enquirer. To anyone looking for the drama of the Mel Gibson divorce (over 400 million) or the Bernie Ecclestone divorce (over 1.2 billion dollars) or the Wildenstein divorce (with the queen of cosmetic surgery Jocelyn 'Catwoman' Wildenstein getting over $3.8 billion from her art dealer husband), this might be a disappointment. For those who are not, which I am hoping is the large majority of the population, this may well be a lesson in grace.
Like one West Coast attorney noted, "Their divorce will be handled as quickly as an Amazon delivery."
WHAT'S IN STORE FOR AMAZON LEADERSHIP AND STOCK?
Bezos's position in Amazon is of course one he created himself. But his sustaining it is largely due to his being a good boss. As Matt Levine notes in Bloomberg, "One nice thing about Jeff Bezos is that he is just a regular shareholder of Amazon.com Inc. He’s a big shareholder—he owns about 16.1 percent of the stock, more than twice as much as the next-biggest holder—but he just owns ordinary common stock, with no special voting rights or agreements, and he has nowhere close to a majority. To the extent that he controls Amazon, it is because (1) he is the chief executive officer and (2) he is good at it. If a majority of the board of directors wanted to fire him, or if a disgruntled majority of the shareholders wanted to install a new board and management, they could, but this is not something that ever really comes up. Bezos’s situation is very different from that of Mark Zuckerberg, for instance; people do sometimes go around saying that Zuckerberg should not be CEO of Facebook Inc. anymore, but the only person who can do anything about that is Zuckerberg himself, since he is Facebook’s controlling shareholder by virtue of holding super-voting stock."
Larcker et al of Stanford Graduate School of Business, in a paper about CEO divorces noted that there are three potential ways in which a CEO divorce might impact a corporation and its shareholders: loss of control or influence; divorce can affect the productivity, concentration, and energy levels of the CEO; divorce can influence a CEO's attitude to risk.
"Unless you worry that he will get so distracted by the divorce that he cannot manage the company, this will be a non-event," Michael Pachter, an analyst at Wedbush Securities in Los Angeles, told Reuters.
Tom Metcalf, writing for Bloomberg, noted, "While Wall Street took the announcement in stride, investors will be watching to see if the divorce settlement affects Bezos’s control of Amazon. So long as the company is growing and returning profits, he’ll probably maintain their confidence, though a settlement could potentially put a dent in such Bezos side projects as the space exploration company Blue Origin."
According to some analysts, investors could in fact benefit from the divorce. If the couple has to sell Amazon shares as part of the divorce, those shares will become part of Amazon’s free float, according to ZeroHedge. As a result, Amazon’s weight in indexes like the S&P 500 could increase.
Index fund managers would then have to buy more AMZN shares to account for the change. Indexes typically use a company’s available float – rather than the number of shares outstanding – to determine weighting.
Amazon is considered one of the most highly liquid stocks traded in the US. Therefore, it’s unlikely that Jeff Bezos selling shares would impact Amazon’s share price significantly, the publication further notes. It added that may not be the case for other stocks if index managers liquidate other holdings to buy Amazon.
Quoted in the report, David Dziekanski, a portfolio manager at Toroso Investments, said that index managers may need to sell “a little of everything else” to buy Amazon.
Should there be a 50-50 split, MacKenzie Tuttle will walk away with well over $65 billion making her the wealthiest woman in the world.
10 billion dollars can buy you: Ralph Lauren's collection of 17 classic cars, a penthouse at Bloomberg Tower, a massive boat like Dennis Washington's Attessa IV, A vacation to outer space for family of four, your own private island, Manchester United and Real Madrid. And you have some change left. NOW REPEAT SIX TIMES.
This would place her over Francoise Bettencourt Meyers, the granddaughter of the founder of cosmetics manufacturer L’Oreal SA, who is currently the richest woman in the world, with a net worth of $45.6 billion.
The Bloomberg Billionaire Index compiles the list of the wealthiest people in the world, and has 66 women on it, as per the latest count. Only six women are self-made billionaires with the rest inheriting their wealth through death or divorce. MacKenzie will join that list. She did compare getting married to Jeff to winning a lottery, but not in the way you and I understand it. To her, the lottery was an understanding and encouraging spouse.
As Recode noted, "Then there’s the couple’s philanthropic efforts. After years of modest charitable giving for a couple of their economic position, the Bezoses announced in the fall that they planned to give away at least $2 billion through the Bezos Day One Fund. Some of the money would be earmarked for existing nonprofits that help the homeless, and some would go toward the creation of a network of free preschools in low-income communities."
Something tells us Jeff will be just fine.
Should there not be an equal split, and even if MacKenzie gets a percent of Jeff's wealth, she walks away with over a billion. Speaking purely in monetary terms, no one comes out of this the loser.