Why Amazon Has No Profits and Why It Works • Hacker News Board

Re: Why Amazon Has No Profits and Why It Works

#71

Post by vasilipupkin » Fri, Sep 05, 2014, 6:46 PM UTC

vasilipupkin wrote: post #68

larrys wrote: post #62

Earlier quoted context omitted.

You know what? Amazon, Werner and/or Benedict Evans can spin it anyway they want (like the kid who gets caught with his hand in the cookie jar) but the bottom line is they aren't making money and haven't pinned to a date they plan to do so. (So making arguments as far as one business unit vs. another don't matter many business operate the same way and in sum make money.) All the long winded explanation of the circums…

your comment is at best a gross exaggeration. They are making money, but they are re-investing that money at a crazy rate into new businesses. That represents a huge bet, which their shareholders are willing to take on. The alternative would be to pay out cashflow from operations to shareholders in the form of dividends, or grow slower. But look at the stock price over the last 5 years - clearly, investors want to ta…

Curious about the downvote. "spin it any way you want but they are not making money" is incorrect.

Re: Why Amazon Has No Profits and Why It Works

#72

Post by benedictevans » Fri, Sep 05, 2014, 6:48 PM UTC

AndrewKemendo wrote: post #65

redthrowaway wrote: post #50

Earlier quoted context omitted.

At no point was anyone suggesting that the purpose of Amazon is to tickle Bezos' fancy, and it would require a painfully literal reading of the article in order to think that's what the author was doing.

Perhaps I am dense but how else could you possibly interpret the quote that I cited? Suggesting - even if lightly - that Bezos is running Amazon for "fun" and as a "lifestyle business", especially in the light of the great analysis done above it, indicates that the author looks at any business that has very long term goals as inferior to those who are solely focused on turning profits back to shareholders.

To paraphrase, "this prompts the suggestion that X is the case. However, it is not". It's a rhetorical question.

Re: Why Amazon Has No Profits and Why It Works

#73

Post by vasilipupkin » Fri, Sep 05, 2014, 6:49 PM UTC

pdq wrote: post #69

larrys wrote: post #62

Earlier quoted context omitted.

You know what? Amazon, Werner and/or Benedict Evans can spin it anyway they want (like the kid who gets caught with his hand in the cookie jar) but the bottom line is they aren't making money and haven't pinned to a date they plan to do so. (So making arguments as far as one business unit vs. another don't matter many business operate the same way and in sum make money.) All the long winded explanation of the circums…

There has been a distortion in the markets lately with the value of cash. Over the long term, buying a share of any company (Amazon, Intel, Walmart) has to give a return to the holder of that share. Otherwise, you are trading cash to hold onto a piece of paper and get it returned back as cash when you sell it. This invalidates the time value of money. In other words, if I am not getting a quarterly/annual dividend (i…

well, you are betting that you will get a dividend at a much later point in the future because of the growth you think you will realize. if Amazon makes $100 it can either give it to you now, or reinvest it and give you the reinvested result much later. It makes sense to give you the $100 now, if they don't see any good investment opportunities. But they think they do, and market agrees with them, hence massive growth in stock price over the last 3-5 years.

Re: Why Amazon Has No Profits and Why It Works

#74

Post by chriskelley » Fri, Sep 05, 2014, 6:50 PM UTC

vinceguidry wrote: post #66

exelius wrote: post #24

I listened to a talk by Amazon's CTO, Werner Vogels, where he was explaining that Amazon's entire strategy is to build an infrastructure for itself, then rent that infrastructure out to its competitors. That way, increased competition can actually fuel your growth. The talk was about APIs, but Amazon views APIs as a general term: "Fulfilled by Amazon" is an example of a non-technical API. Likewise, I think Amazon's s…

> I listened to a talk by Amazon's CTO, Werner Vogels, where he was explaining that Amazon's entire strategy is to build an infrastructure for itself, then rent that infrastructure out to its competitors. This was the game played by John D. Rockefeller. He had so much infrastructure built up by the time they split up Standard Oil, that each new state Standard Oil immediately had everything it needed to keep operation…

Great write-up, really piqued my interest in Rockefeller. Any good reads you can recommend?

Re: Why Amazon Has No Profits and Why It Works

#75

Post by vinceguidry » Fri, Sep 05, 2014, 6:51 PM UTC

chriskelley wrote: post #74

vinceguidry wrote: post #66

Earlier quoted context omitted.

> I listened to a talk by Amazon's CTO, Werner Vogels, where he was explaining that Amazon's entire strategy is to build an infrastructure for itself, then rent that infrastructure out to its competitors. This was the game played by John D. Rockefeller. He had so much infrastructure built up by the time they split up Standard Oil, that each new state Standard Oil immediately had everything it needed to keep operation…

Great write-up, really piqued my interest in Rockefeller. Any good reads you can recommend?

http://www.amazon.com/Titan-The-Life-John-Rockefeller/dp/140...

Re: Why Amazon Has No Profits and Why It Works

#76

Post by hnnewguy » Fri, Sep 05, 2014, 6:55 PM UTC

notatoad wrote: post #21

johnrob wrote: post #6

From: http://paulgraham.com/good.html : In Patrick O'Brian's novels, his captains always try to get upwind of their opponents. If you're upwind, you decide when and if to engage the other ship... In this case, Amazon is upwind of becoming a giant, profitable company. They could have taken profits earlier but it would have shrunk their overall pie.

Where "becoming a giant, profitable company" is another way of saying "paying their shareholders". Amazon is making money, for all intents and purposes they are profitable. They've just found something more interesting to do with that money than pay dividends. The opponent in this scenario is the shareholders, they're the ones who want to take the money away from Amazon. It's a very interesting dynamic, certainly not…

>The opponent in this scenario is the shareholders, they're the ones who want to take the money away from Amazon.

Take the money away from Amazon? The shareholders are Amazon. It isn't Amazon's money, it's the shareholders. If/when they want dividends instead of re-investment (which doesn't seem to be the case yet), they are entitled to it.

Re: Why Amazon Has No Profits and Why It Works

#77

Post by igravious » Fri, Sep 05, 2014, 6:58 PM UTC

vinceguidry wrote: post #66

exelius wrote: post #24

I listened to a talk by Amazon's CTO, Werner Vogels, where he was explaining that Amazon's entire strategy is to build an infrastructure for itself, then rent that infrastructure out to its competitors. That way, increased competition can actually fuel your growth. The talk was about APIs, but Amazon views APIs as a general term: "Fulfilled by Amazon" is an example of a non-technical API. Likewise, I think Amazon's s…

> I listened to a talk by Amazon's CTO, Werner Vogels, where he was explaining that Amazon's entire strategy is to build an infrastructure for itself, then rent that infrastructure out to its competitors. This was the game played by John D. Rockefeller. He had so much infrastructure built up by the time they split up Standard Oil, that each new state Standard Oil immediately had everything it needed to keep operation…

Blimey. Fascinating. Sounds like a rather frightening and ruthless individual.

Am curious. What would your nominations be for the Rockefeller of the tech (software/hardware) world? Ever thought about that?

Re: Why Amazon Has No Profits and Why It Works

#78

Post by gatehouse » Fri, Sep 05, 2014, 6:59 PM UTC

mkaziz wrote: post #52

ChuckMcM wrote: post #46

Earlier quoted context omitted.

As the article points out, they don't. By running the business this way they are constantly building / growing new businesses but during a downturn they just build more slowly (rather than lose money). It is a very different way of operating but one which has provided some interesting benefits for them. Nominally a business uses profits to either pay dividends or fund unexpected opportunities (like buying some small…

If they don't want a profit, what's their motivation for existing?

Since they are a publicly traded company, the ownership can be fluid. As a shareholder you can stay in or cash out whenever you want, if you want to simulate a profit you can sell shares periodically. So the separation between the company's internal finances and the exchange of shares on the stock market is what allows this to happen and still make sense.

Re: Why Amazon Has No Profits and Why It Works

#79

Post by TrevorJ » Fri, Sep 05, 2014, 7:00 PM UTC

chriskelley wrote: post #74

vinceguidry wrote: post #66

Earlier quoted context omitted.

> I listened to a talk by Amazon's CTO, Werner Vogels, where he was explaining that Amazon's entire strategy is to build an infrastructure for itself, then rent that infrastructure out to its competitors. This was the game played by John D. Rockefeller. He had so much infrastructure built up by the time they split up Standard Oil, that each new state Standard Oil immediately had everything it needed to keep operation…

Great write-up, really piqued my interest in Rockefeller. Any good reads you can recommend?

The documentary series "The Men Who Built America" is a really well done overview of some of these guys.

Re: Why Amazon Has No Profits and Why It Works

#80

Post by WalterBright » Fri, Sep 05, 2014, 7:01 PM UTC

vinceguidry wrote: post #75

chriskelley wrote: post #74

Earlier quoted context omitted.

Great write-up, really piqued my interest in Rockefeller. Any good reads you can recommend?

http://www.amazon.com/Titan-The-Life-John-Rockefeller/dp/140...

I read Titan. Interestingly, it documents how SO's market share was declining steadily throughout the anti-trust trial, and Rockefeller was unable to stop it.

It runs against the conventional story of SO being an inevitable monopoly.