Came across this intriguing article about the Amazon.com empire recently, and thought I would comment on it.

The nutmeat of the article is : Amazon.com has a business model that does not require profits. That is to say, they don’t lose money, but their profits are very small for a company that big.

And yet, they survive, and thrive. Common business wisdom would say that this is impossible. So what is their magic secret?

The secret is that while their profits are not huge, their sales volume is stupendous and increases every year. And as long as that is true, Wall Street is quite happy to invest in Amazon.

This intrigues me, because it seems to mean that Amazon has found a way to escape the expectations of profit that cripple the good intentions of any publicly traded company.

It is not the ideal way, by any stretch of the imagination. It still requires constant expansion, and that is something which is inherently unstable in the long term. So far, Amazon has been able to keep expanding its sales volume by constantly moving into new territories.

That way, if you can maintain your sales volume in, say, books, plus then add literally any sales volume in, say, non-perishable groceries, you have increased total sales.

But seeing as currently, Amazon.com seems to sell roughly everything except cars, there is only so long that this strategy can hold out.

Another way to constantly increase sales volume is to keep your margins incredibly thin. Thus, your prices are damn near wholesale, and you can get lots of budget conscious Internet shoppers that way. You even develop a reputation as the place to go for the best price.

Again, none of this makes you a whole lot of profit, but it does give you very high sales volume.

A third way to keep volume high is to aggressively steal market share from other competing retailers. Low prices are a great way to do this, of course, but not the only way. Constantly improving customer service, website interface, and so forth helps a lot. That is one of the ways an online retailer has a huge advantage over a bricks and mortar retailer. They can refine the way they do things constantly.

It is a lot easier to update code than it is to change a store layout and retrain staff.

Amazon does all of these. And the result is that Jeff Bezos gets what I think he always wanted : a business that is entirely about serving people well with no ulterior motive.

In that, he is a Hacking Capitalism Hero. I have pondered the incredible advantage that eliminating profit could yield for a business for a long time. In fact, a large volume/low profit model is exactly what Hacked Capitalism strives for.

But presumably, eventually, Amazon will reach the limits of market volume expansion, and its investors will show up looking for that profit that has been on the horizon for a long time without ever coming closer. And then what, Jeff Bezos?

I mean, I can only assume that people invest in Amazon thinking that a place with such high sales volume must turn big profits eventually. It makes me wonder if Amazon’s strategies for attracting investment are entirely honest.

But I could be wrong. Perhaps Amazon is a “cult stock”, a concept I picked up recently and which I instantly fell in love with forever.

The idea is that a “cult stock” is one that has a group of highly dedicated investors who buy the stock not because they expect this will yield the highest personal profit, but because they simply like being a part of the mission and mystique of the company itself.

Imagine that. Investing in something simply because you think it is a cool thing to be a part of, or because you believe in what it is and what it does.

Economists are freaking out at this unwelcome injection of moral consideration into their nice neat and clean lines of self-serving bullshit about self-serving bullshit being great for everyone.

It also makes people a lot harder to predict. All of modern economics is based on self-interest. And when self-interest is further reduced to personal gain, in other words “whether or not a certain number goes up or down”, then suddenly, it is all just math.

But now people are truly hacking capitalism by asking whether or not a company is evil or not before deciding if they want their money going to it.

So perhaps that is what Amazon is doing. Certainly, if I had the money to express my economic and social philosophies via investment, I would be looking to back someplace like Amazon.

And with the rise of Kickstarter, you do not even need to have the price of one share in a publicly traded company in order to get in on the action. You can find a cause worth supporting on Kickstarter and then throw in whatever you can spare, and get what humans crave so strongly :

The feeling of being part of something bigger than themselves. Something good and noble and true.

Something that makes the world a better place.

Theoretically, you can build an entire successful business around a business model that does not require delivering profit to investors.

Just keep doing the right thing, and the investors will be happy, and you can make the world a better place by not destroying capitalism, but by being successful in it.

And being successful in a way that eliminates the mandatory sociopathy of the investor class.

That, to me, is what Hacking Capitalism is all about. Capitalism is an incredibly powerful force. It is arguably the most powerful economic force that has ever existed.

It does not need replacement, it needs fine-tuning. It needs optimization. Partly through government intervention. After all, someone has to be the referee in the game of life.

But also via people building and implementing radically different business models that change the entire way the game is played.

Hack capitalism, people. Make it BETTER.