Shareholders generally like businesses to use their money on things only that business can do.

If the best thing the business can think to do with the money is put it in the stock market or a low-interest cash account, which anyone could do, investors usually demand that the money is returned to them (via dividends or share buybacks) so they can choose what happens to it.

Because "endowment" is a simply the non-profit term for "capital" in business.

Harvard's endowment is invested in profitable business to raise money. It's a non-profit so it doesn't pay out the profits. A profitable business invests its funds itself or returns them to the owner institutions, who chose whether to keep funding the business.

I'm not sure it would make sense for normal businesses, as owners want to, well, profit from the profits (share price rise, buybacks, dividends, sale of business at a higher valuation, etc).

However, in Mozilla's case, the owner of the corporation is a non-profit, and (to me at least) it'd make a perfect sense to set up something like this.

Normal businesses generally don’t have enough free money to do something like this. While the business has value by virtue of its assets, the amount of free cash is much less.

Software is an exception in this since you basically only have free cash, there are no physical assets as such.

> Normal businesses generally don’t have enough free money to do something like this.

And why don't they? Decades ago, having cash reserves was a Good Thing.

We need to get at the root of the issue and that is that companies have gotten used way too much on government bailouts and redistributing everything possible to shareholders/customers.

Err, no.

The problem started with people like Carl Icahn.

If your company has too much cash, someone will attempt take control to carve it up and get their hands on the cash.

So, every business basically runs fairly close to cashless or even carries debt in order to avoid corporate raiders unless they have SO much cash that nobody can even hope to buy them (see: Apple).

And then people complain that they're holding onto cash rather than 1.) Doing something "productive with it" or 2.) Returning it to the owners (shareholders)--the latter of which at least is not a wholly unreasonable position as it isn't really the company's money to hold on to at some level.

I imagine there's a way to setup a trust such that hostile takeovers can't access the money.

Just don't go public and people can't take over the company as easily. They would have to go to each investor and buy them out.

This merely changes the target.

I was thinking more of the corner store, with tons of inventory that make up a large part of their value.

But relatively it probably applies to bigger manufacturing companies as well. Hell, it probably applies to Amazon (the retailer, not AWS).

> Hell, it probably applies to Amazon (the retailer, not AWS).

That's perhaps the most genius thing in the Amazon system: the actual amount of cash bound in warehoused inventory is negligible - they only have the risk for stuff they directly sell. For all the other products, the sellers are on the hook towards the manufacturers.

Essentially they are an online Walmart with next to zero of the risk a real Walmart has because most of their inventory risk is shifted towards the "sellers"...

Most retail has net 90 day payments and forced returns where manufacturers have to accept unsold product. Walmart and other big retailers likely have little money tied up in inventory. They sell a product before they have to pay the manufacturer for it.

Walmart is tough on terms but meets obligations. I worked on a farm in high school that sold would sell them Fall stuff — pumpkins, cornstalks, etc.

They would pay net-10, which was unheard of, most of their big buyers habitually paid late. The local grocery chain would pay 60-90 days late on a 30 day invoice. The cash in hand was worth sometimes losing a little money.

Walmart is specifically famous for having some of the most onerous terms amongst all large retailers. Anecdotally, Walmart has asked for net 270 terms from a supplier I am accquainted with.

I additional to the "no one has the money for that" / "profits go to shareholders" angle, also consider the systematic perspective.

If every business has an endowment, what are those endowments invested in?

They are invested in the business or diversified, obviously. Look at any corporate balance sheet

Because having "leftover cash" that is not immediately redistributed to shareholders is seen as a Bad Thing (tm).

Because in the end, when shit hits the fan like with the 'rona, the government will be conveniently pressurable to bail you out. Personally, I rather have government bailouts than mass bankruptcies - but bailouts should come with "strings attached" like, let's say, a requirement to always keep one year of expenses at a reserve to avoid the need for future bailouts.

That’s only an issue for a public company.

Or equity held by the city your major offices are in..

> "leftover cash" that is not immediately redistributed to shareholders is seen as a Bad Thing (tm)

sort of a short sighted view if that's really the case - since the cash being in the company's books, or in an endowment, is still value owned by the owner. The small penalty of it being illiquid shouldnt be a problem.

I guess, from a shareholder perspective, why would I want my investment to invest in other things/companies? Then they might as well pay out the money, so I could invest it myself.

One reason is that it makes the enterprise more resilient, and that is valuable in many industries.

Look at how quickly oil and gas companies implode when there is a price shock.

True, and I personally think it's a good idea.

The stockholders though would probably say that they can just supply the capital themselves, if the business is in trouble.

And that is why government regulation is overdue to ensure a fair and level playing field without leaving the government on the hook in crisis scenarios.

Lawsuits. If the endowment becomes known it becomes a target.

There's probably ways to setup trusts such that they're independent of the business and the business has no control over the trust.

Bosch is such an example

Greed? For too-big-to-fail companies, also the thought that profits go their pockets and losses come out of ours.