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Banks and investors make money by doing nothing; they write a check, they get a check back for more than the original.

That's grossly unfair but I think you know that. Without the initial capital there would be no Zappos to speak of.

The conclusion that people should be drawing is the same one we see time and again on HN, choose your investors carefully.

The banks and investors are investing in enough places that the risk is pretty minimal. Some people would tell you the ones who simply invest money are putting the most on the line. In the case of the majority of investors, this is completely rediculous.

I think the class warfare comments detract from your point.

Yes, the investors and board are their to maximise the return. The job of the CEO is to sell the vision to them and keep them on board. That the company sailed into a headwind not of their own making and the board got jumpy is yet another challenge on the way to large growth.

The board members would probably have lost personal money and dented their careers if Zappos had lost it's funding lines. They certainly do not 'make money by doing nothing'.

If they didn't maximise the change that they got their check back tomorrow, a lot of stuff would fall in a heap as people took stupid risks.

Getting out a broad brush and painting 'corporate america' is not an insightful analysis.

"Banks and investors make money by doing nothing" this is false. Weeding out bad wanna be founders, for example, is important, difficult and something VCs spend a lot of time doing. If being a VC was so easy they would be paid like janitors.

"Therefore, they don't care if the employees or customers are happy" You are wrong, they do. Customers write the check and employees deliver what they write it for, obviously they have some influence on whetter the check arrives or not (and how big it will be)..

"they only care about maximizing the chance that they get their check tomorrow" They care about maximising profit, this obviously involves planning for the long term. (A company expected to earn more money in ten years will be worth more right now.)

"This article explains a lot of Corporate America." You don't get corporate america. Hacker news is great for technical news but there is a surprising amount of this kind of simple/uninformed anti-market rhetoric.

Banks and investors make money by doing nothing

Marx thought the same thing, and decided that to remedy the situation the lower class should steal the capital from the upper class. Marx was wrong, and so are you.

Cynicism about capitalism is popular in this recession, but that speaks less about the failures of capitalism and more about the fickleness of public opinion. Allocation and management of capital is a bit harder than throwing money at things and expecting it to stick, as millions of American investors have discovered over the past two years. Anyway, it seems ironic to have this pseudo-communist whining on a board run by a venture capitalist.

> Anyway, it seems ironic to have this pseudo-communist whining on a board run by a venture capitalist.

Huh? Why are you trying to call people 'communists' now? Please don't try to turn this into some sort of political mud-slinging contest.

The bottom-line in this discussion is that Zappos's culture and customer service was the thing that set it apart from other retailers. It was the reason that people wanted to shop there. To try and marginalize the effect this has on Zappos' bottom-line because it can't be easily quantified in terms of dollars and cents on a quarterly earnings reports by calling it a 'social experiment' or 'insignificant' is short-sighted at best.

> Allocation and management of capital is a bit harder than throwing money at things and expecting it to stick, as millions of American investors have discovered over the past two years.

That may be true, but investing money in a business does not make you an expert in that business's core competency.

Correction: I called the GP post a 'pseudo-communist rant' I'm not saying jrockway is necessarily an actual communist, or even a pseudo- one... rather that he has, whether on purpose or not, stated a classically Communist belief about capitalist political economy.

That is, I wanted to point out that the claim being made--that capital owners, in capitalism, add nothing to the capital they own--is fundamental to a philosophy we now understand to be old, bad and dangerous.

It is ok to call a piece of text communist if it contains ideas or opinions that are typically communist. That capital markets in general are unnecessary, (very) ineffective at capital allocation (as opposed to the alternatives) and/or immoral is something almost only communists/hardcore socialists believe today. (It was actually once a widely held belief. A belief reflected in the nature of some new deal programs, Mussolini's economic policy or post-colonization economic policy in the third world to mention some examples.)

It's astonishing that this got downmodded. Marxists did think that banks and investors did nothing (or, at least, that they did whatever they did badly and should be replaced with an elite of planners.) Pseudo-communist rhetoric (as in rhetoric without any real connection or commitment to communism per se) is indeed very popular in a recession.

They're not doing nothing; they're risking their money. Risk is hard to get right every time.

when you ignore risk stupid ideas start making sense, like jumping a bus with a motorcycle. it must seem grossly unfair that the head of a corporation is wealthy if you ignore all the people who failed and the risk that person took making that company successful.

What risk? The risk of a person who would be broke if it failed? That is a big risk and he certainly deserves to be wealthy if it works out. The risk of a person who loses 0.00001% of his wealth in the absolute worst case? That's no risk at all, the people who are working for the company are risking vastly more.

risk and reward are commensurate in a free market, otherwise someone will arbitrage until it does. the man who risks only .00001% of his wealth only stands to gain .000001% of his wealth. yes, banks are able to diversify their risk over a huge number of borrowers, thus they are able to offer much lower rates than would ever be realistic in a scenario that 1-to-1 matched specific borrowers and lenders. they thus make more capital intensive ventures more accessible.

>risk and reward are commensurate in a free market, otherwise someone will arbitrage until it does

Would you mind providing a citation that proves this? Also I'd like to know what you mean by "free market". Are you speaking hypothetically here, or relatively?

>the man who risks only .00001% of his wealth only stands to gain .000001% of his wealth.

Nonsense, how do you come up with such a number? How much the man stands to gain is unbounded. If for example, some investor's .00001% was $100k, with which he bought 20% of a company that ended up being the next goggle then he would make billions from thousands.

if if if