Davos Man, page 4
“During those endless Sundays14 in the station wagon,” Benioff wrote, “I was struck by my father’s work ethic and unwavering integrity. There was no funny business whatsoever with the financials or inventory.”
He was also struck15 by the haphazard way that his father managed information—what was selling best and where, which fabric was needed when. His father did the books by hand, a process that kept him leaning over the kitchen table late into the evening.
By the time he was a teenager, Benioff was dismantling and rebuilding rudimentary computers. He taught himself to code while producing his own video games. He persuaded his father to allow him to build him a customer database. This was the inspiration for what would become Salesforce, a dominant player in the software niche of customer relationship management, a company that would eventually be worth more than $200 billion.
As Silicon Valley origin stories go, this one traced the usual route: technologist recognizes a problem, develops a solution, gets wildly rich, the end. But Benioff presented Salesforce less as a vehicle for profit than a way to generate social impact.
He had joined Ellison’s company, Oracle, fresh out of the University of Southern California. Less than four years later16, when he was only twenty-six, he had reached the vice president ranks. He enjoyed a special relationship with the boss17, sailing on Ellison’s yacht in the Mediterranean. But then Benioff suffered a crippling loss of morale, prompting him to take a three month sabbatical. In southern India, he met a woman known as “the hugging saint.”18
As Benioff recounted the experience years later, he told her about his business interests and how they seemed “in some way connected to the existential confusion” that consumed him. Through a cloud of incense, she gazed at him intently. “In your quest to succeed19 and make money,” she told him, “don’t forget to do something for others.”
This, Benioff later wrote, was how Salesforce took shape.
From its incorporation in 1999, he pledged that it would devote 1 percent of its equity and product to philanthropic undertakings, while encouraging employees to dedicate 1 percent of their working time to voluntary efforts. Salesforce employees regularly volunteered at schools, food banks, and hospitals. They joined the relief efforts in the aftermath of Hurricane Katrina, and ranged as far as the Tibetan plain to work in refugee camps.
“There are very few examples of companies doing this at scale,” Benioff told me. “The example they always gave was Ben and Jerry’s Ice Cream.” He said this with a chuckle, amused by any comparison to the aging Vermont hippies who had brought the world Cherry Garcia. “Most companies in our industry have never really given back at scale.”
This was not about public relations, Benioff insisted, but a product of societal demand.
“Doing well by doing good20 is no longer just a competitive advantage,” he wrote. “It’s becoming a business imperative.”
Benioff was by many indications a true believer, not just idly parroting Davos Men talking points. When the state of Indiana21 proceeded with legislation that would have allowed businesses to discriminate against gay, lesbian, and transgender employees, Benioff threatened to yank investments in the state, forcing a change in the law. He had shamed Facebook and Google for abusing the public trust and called for regulations on search and social media giants.
“I’m trying to influence others to do the right thing,” he told me during an interview in the middle of 2020. “I feel that responsibility.”
I found myself won over by his boyish enthusiasm, and his willingness to talk at length without preconditions, and absent public relations minders—a rarity for Silicon Valley.
Benioff’s philanthropic efforts had been directed at easing homelessness in San Francisco, while expanding health care for children. He and Salesforce would collectively contribute $7 million toward a successful 2018 campaign for a local ballot measure that levied fresh taxes on San Francisco companies like his own in an effort to stem homelessness, a stance that put him crosswise22 with other technology CEOs.
“As SF’s largest employer we recognize we are part of the solution,” he declared on Twitter (a platform he at one point considered buying). The new taxes were likely23 to cost Salesforce $10 million a year.
That sounded like a lot of money, ostensible evidence of a socially conscious CEO sacrificing the bottom line in the interest of catering to societal needs. But it was less than a trifle alongside the money that Salesforce withheld from the government through legal tax subterfuge.
The same year that Benioff backed the special levy to address homelessness in his hometown, his company recorded revenues exceeding $13 billion while paying the modest sum of zero in federal taxes24. Salesforce deployed fourteen tax subsidiaries scattered from Singapore to Switzerland, moving its money and assets around in a masterful display of accounting hocus-pocus25 that made its taxable income vanish.
Benioff did not invent this tax avoidance contrivance. He inherited it from his Davos Man forebears, who, over decades, deployed hordes of lobbyists to turn the United States into their refuge.
During the Clinton administration, the Treasury opened up a loophole26 that enabled executives at multinational corporations to engage in large-scale chicanery without risk of seeing the inside of a penitentiary. They were permitted to set up subsidiaries in foreign countries that beckoned with low taxes—Ireland was a popular choice—and then legally transfer their intellectual property there. Their new international outposts charged the rest of the corporation exorbitant licensing fees to use the intellectual property. The net effect: on their American earnings statements, the wealthiest corporations looked like money losers, paying taxes accordingly.
In the decade and a half after Clinton’s Treasury bestowed this gift27 on American corporations, their effective tax bills plunged from over 35 percent of their revenues to 26 percent. So-called profit shifting28 has been costing the American Treasury $60 billion a year in lost taxes.
Compared to this legalized form of tax evasion, the $10 million that Benioff had helped secure to attack homelessness in San Francisco amounted to a rounding error. Benioff’s individual compensation29 the following year would exceed $28 million, most of it in stock grants and stock options. These sorts of pay packages were a key driver for the astronomical housing prices of the San Francisco Bay Area, a primary cause of the very homelessness that Benioff was intent on eliminating.
Benioff and his wife, Lynne, appear genuinely concerned about the state of American education and children’s health. They have demonstrated their concern with their checkbook. But what happens to programs like Medicaid and Head Start—key sources of health care and early childhood education for low-income Americans—when the largest companies pay no federal taxes? What happens to mass transit, to job training, to roads and highways, to public-health research?
Benioff’s version of compassionate capitalism airbrushed key “stakeholders” out of the picture: The government was missing. His endless talk of the ohana did not include labor unions. At the center of his vision for his company—at the core of Davos Man thought in general—was the assumption that the wealthiest people could be relied upon to do the right thing, sharing the fruits of their success. The occasional flinging of a few gold coins would protect their palaces from any mobs showing up at the gates.
Under Davos Man’s logic, the wealthy are magnanimous, so unions are an unnecessary intrusion on business, and taxes represent money seized by the government; money that could otherwise be showered on the fortunate people who would benefit from his philanthropic undertakings. This was an idea that went back to Carnegie and the rest of the Robber Barons, whose grandiose public works projects—libraries, museums, concert halls—were proffered as societal compensation for their lopsided share of the economic gains, and their violent suppression of labor uprisings.
Davos Man had updated this logic by denigrating government. Public sector bureaucrats would predictably squander taxpayer dollars through inefficiency and lack of discipline, the billionaires argued. Whereas they could efficiently target their philanthropic pursuits at clearly defined missions. Having earned their money through the rough-and-tumble of the competitive marketplace, they were tightly organized and nimble, making them better able to engineer impact with their money. Through this framing, Davos Man deftly rendered his discretionary dollops of generosity as recompense for grand-scale tax evasion.
Benioff had derived his wealth by helping make the world more unequal, arming the largest corporations with a tool kit that helped them enrich their shareholders. He relished his identity as a digital disrupter intent on turning business into the driver for social transformation. But his philanthropy, his genuine likability, and his empathy obscured the central reality of his enterprise: he was an enabler, a beneficiary, and a reinforcer of the world as it was.
If Ellison was his main guru in the early stage of his career, Benioff had more recently gravitated toward the teachings of Klaus Schwab, the founder of the World Economic Forum.
Benioff credited Schwab30 with introducing him to “stakeholder theory,” calling it “one of the greatest intellectual contributions to the world of business.”
Schwab was the master of ceremonies at Davos. A dour economist with ramrod-straight posture, he spoke forcefully and slowly, in a thick German accent bordering on farcical, as if every word were among the most meaningful uttered in history.
Born in 1938, Schwab had come of age in Europe’s postwar reconstruction. He was steeped in the principles of social democracy, endorsing the notion that government should play a central role in the marketplace, protecting workers against joblessness while providing universal health care and pensions. He was an unwavering devotee to the project of European integration and the dream of a continent mobilized through collective action. During a graduate sojourn at Harvard in the late 1960s, Schwab became enamored of the corporate management theories in vogue in the United States. He sketched out stakeholder theory as the means to express what he came to portray as the optimal arrangement—business and government working cooperatively to promote higher living standards.
This was the spirit that animated what Schwab first called the European Management Forum, a gathering of academics, business executives, and government officials that he organized in 1971, when he was only thirty-three.
He picked Davos as the venue because the remote and placid setting seemed conducive to a focused interchange of ideas. A compact though oddly charmless village, Davos sat in a valley surrounded by arresting peaks. In Victorian times, it had served as a sanitorium for people suffering tuberculosis, and later as a haven for intellectual debate. Einstein had given a presentation31 on relativity there. “High up in the mountains,”32 Schwab wrote, “in this picturesque town known for its clean air, participants could exchange best practices and new ideas and inform each other of pressing global social, economic, and environmental issues.”
The first iteration33 drew 450 participants from more than two dozen countries. Over the years, as heads of state increased in number, security intensified, reinforcing the sense of achievement in simply making it in. Davos attendees became increasingly global, and the Forum expanded, launching regional meetings in China, Africa, the Middle East, India, and Latin America. To better reflect its wider scope and identity, the organization adopted a new name: since 1987, it has called itself the World Economic Forum.
Today, the Forum regularly convenes panels of experts and executives while producing a blizzard of reports—on digital transformation, on the future of health care, on advanced manufacturing, on seemingly everything.
But the meeting in Davos remains the center of the Forum’s orbit.
The Forum long ago outgrew its Davos confines, exhausting the meager supply of hotel rooms, and forcing grown professionals to share glorified dorm spaces in bare-bones chalets for upward of $400 a night, or otherwise commute from neighboring villages while relying on Forum shuttle buses, whose schedules appear as closely guarded as the North Korean nuclear launch codes.
Despite the outward appearances of glamour, attending the Forum has become a supreme and unending torment of logistical hassles, astonishing costs, and physical deprivation—exhaustion, dehydration, hunger, and angst. But this is also central to the experience, a feeling of overwhelming befuddlement tinged with elation that you are somewhere that is supposed to signify your own importance in the momentous sweep of history—a ridiculous yet highly effective means of motivating people to keep showing up.
“The anxiety of exclusion pervades,”34 the journalist Nick Paumgarten once described it. “It is the natural complement to the euphoria of inclusion. The tension between self-celebration and self-doubt engenders a kind of social electricity.”
Because the most powerful people on earth regularly attend, other powerful people feel a compulsion to come, which reinforces the Forum’s intrinsic value. This is Schwab’s keenest insight into the human condition, his understanding of the magnetic pull of power itself. He has constructed a happening that demands space on the calendars of the most overscheduled people, an event where the interests of Bill Clinton, Mick Jagger, and Greta Thunberg all somehow intersect in time and space.
As the Forum has grown, so have Schwab’s entrepreneurial inclinations, operating alongside the idealistic pursuit that first inspired the gathering. Like most Davos Men, Schwab has mastered the art of holding two irreconcilable positions at once, unencumbered by the typical constraints of rank hypocrisy. He blithely disregards the obvious contradictions between the pristine values he publicly champions—inclusion, equity, transparency—and the unsavory compromises that he makes in wooing people with money and influence. He has leveraged shameless dedication to canoodling the powerful into an extraordinarily lucrative enterprise whose product is access to the people the Forum convenes.
Schwab’s movements through the Congress Centre unfold like military exercises, a coterie of agitated minions accompanying him everywhere. On his travels, he demands the privileges of a visiting head of state, complete with welcoming delegations at the airport.
At the Forum’s headquarters in Switzerland—a glass-fronted campus looking out on Lake Geneva—a hallway connecting two wings is lined with photos of Schwab posing with world leaders. When a Forum employee who was late for a meeting once pulled into Schwab’s spot in the parking lot, aware that the boss was overseas, he caught wind of it, and insisted that she be fired, relenting only after senior staff intervened to save her.
Schwab has frequently told his colleagues that he anticipates receiving a Nobel Peace Prize. In the mid-1990s, when the Forum convened a gathering in South Africa, Schwab delivered a speech in front of Nelson Mandela at the closing plenary in which he cribbed from Martin Luther King Jr. “I have a dream,” he said dramatically.
“Several of us almost threw up,” recalled Barbara Erskine, who then ran the Forum’s communications.
But if Schwab is something of a ludicrous character, he is also begrudgingly admired as a savant. “He has a knack, an incredible knack to smell the next fad and to jump into it,” said one former colleague.
He recognized early on that the Forum had to distinguish itself from the run-of-the-mill business conferences, where people sat around talking about money. In defining a high-minded mission—“Improving the State of the World”—Schwab turned attendance into a demonstration of social concern.
He reinforced the value proposition through relentless networking, making Davos an indispensable venue for business. He enticed multinational corporations to pay hundreds of thousands of dollars a year for the privilege of serving as “strategic partners,” securing access to exclusive lounges and private conference rooms inside the Congress Centre. There, executives encounter one another along with heads of state, investors, and other people capable of improving the state of their balance sheets.
Schwab choreographs bilateral meetings at which heads of global banks and energy companies can personally beseech presidents of countries for preferential tax treatment and access to promising oil fields. Consulting giants and software companies make plays for government contracts by speaking directly with the decision-makers. Top executives can fly in and meet a dozen heads of state in the course of four or five days, sitting across tables in soundproof rooms, beyond the purview of securities regulators, journalists, and other hindrances.
The core activities of the Forum—the sober speeches and panel discussions—have long been eclipsed by the extracurricular events that dominate Davos outside its official auspices.
Regular participants at the Forum boast about having attended zero panels and never setting foot inside the Congress Centre—a cynical mark of sophistication.
Schwab feigns unhappiness, bemoaning the supposed dilution of the experience as Davos fills with private parties. “We do not welcome them,”35 he once said. “They detract from what we are doing.” But he does not complain about the attendant perks.
Despite the Forum’s status as a not-for-profit organization, Schwab and his wife, Hilde Schwab—the organization’s cofounder—have adeptly positioned themselves to benefit from the gusher of money moving through it. Audi has long served as the Forum’s exclusive shuttle partner, using Davos as a showcase for its newest vehicles, while supplying the Schwabs with cars at steep discounts. The Forum budget covers his globe-trotting, and the catering and security services at his palatial home in the Cologny neighborhood of Geneva—the Beverly Hills of Switzerland—where Schwab frequently hosts extravagant dinners.
Over the years, the Forum has spent almost 70 million Swiss francs (nearly $80 million) to purchase land in the area, including two parcels bridging Schwab’s home and the Forum headquarters, making them contiguous. Even in the 1990s, when the Forum employed only a few dozen staff, Schwab’s salary was tied to the pay for the secretary general of the United Nations, supplying him roughly $400,000 a year.
