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

Re: Why Amazon Has No Profits and Why It Works

#91

Post by superuser2 » Fri, Sep 05, 2014, 7:12 PM UTC

sliverstorm wrote: post #85

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…

So if they will never pay dividends, why is their stock worth anything?

Because you can sell it?

Re: Why Amazon Has No Profits and Why It Works

#92

Post by jmccree » Fri, Sep 05, 2014, 7:14 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…

If the company can increase the value of your share by spending the money rather than giving it back as a dividend, why would they not? Buffet's Berkshire Hathaway is famous for never having given a dividend. Amazon is still seeing good revenue growth year after year, I see no reason not to continue down that path as long as they can afford the growth.

Re: Why Amazon Has No Profits and Why It Works

#93

Post by jmccree » Fri, Sep 05, 2014, 7:17 PM UTC

sliverstorm wrote: post #85

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…

So if they will never pay dividends, why is their stock worth anything?

Because you can sell it for more than you bought it for. Look at Warren Buffet's Berkshire: You would have doubled your money in 4 years if you bought in 2010. They've pretty consistently increased the value of their shares without paying a dividend in 50 years or so.

Re: Why Amazon Has No Profits and Why It Works

#94

Post by vinceguidry » Fri, Sep 05, 2014, 7:19 PM UTC

igravious wrote: post #77

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…

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?

Rockefeller was a human hurricane, a truly unique individual. He practically invented the modern corporation. He was also a product of his time. I don't think a comparison to any of today's tech giants could be anything more than laughably superficial.

There are plenty of ruthless people in business even today. But Rockefeller was driven by the belief that cooperation in business, rather than competition, was the way forward for society. The business he built reflected that. Eventually the world learned from his model and now business isn't quite so cutthroat.

But it took Rockefeller to create this new order. Someone so genius at business that there was no stopping him from doing anything he wanted to do. Not even the full might of the federal government could bring him low. Maybe they could have eventually, but the government's position on monopoly softened after it realized what the economies of scale it generated meant for our wartime industrial efficiency. There were other titans in that time period. Rockefeller stands above them all.

Re: Why Amazon Has No Profits and Why It Works

#95

Post by swalsh » Fri, Sep 05, 2014, 7:22 PM UTC

ChuckMcM wrote: post #46

macspoofing wrote: post #34

Earlier quoted context omitted.

That's all great but at some point they still need to turn a profit.

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…

"Interestingly enough, after reading that, I realized that Google doesn't stand a chance in hell of beating them at commerce."

I used to work for a strapping start-up. Our competition had a lot more money, and people than us... but it didn't really matter because we were smarter in how we approached building the product.

The future of eCommerce is going to be very heavily dependent on AI & robots. Product Suggestions > inventory management > ware house > packing > delivering.

AI makes your customers buy more, and robots make delivering it cheaper.

As good as Amazon is at creating this infrastructure, google has demonstrated a mastery in AI, and they're purchasing every robot company around. The competition is on, and I wouldn't count them out.

Re: Why Amazon Has No Profits and Why It Works

#96

Post by vinceguidry » Fri, Sep 05, 2014, 7:23 PM UTC

WalterBright wrote: post #80

vinceguidry wrote: post #75

Earlier quoted context omitted.

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.

Well, at the time, the kerosene market was declining and there was nothing bringing it back. Right after the breakup, Henry Ford finally perfected the automobile, and Standard Oil came right back.

Re: Why Amazon Has No Profits and Why It Works

#97

Post by swalsh » Fri, Sep 05, 2014, 7:24 PM UTC

sliverstorm wrote: post #85

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…

So if they will never pay dividends, why is their stock worth anything?

never is a long time.

Re: Why Amazon Has No Profits and Why It Works

#98

Post by aeturnum » Fri, Sep 05, 2014, 7:25 PM UTC

Am I the only one shocked that online sales make up only ~8% of US retail activity? I buy everything I can online, and expect to maintain that trend as much as possible. Is this just a case of me being relatively young and affluent, or are there sectors of the economy that will never go online?

Re: Why Amazon Has No Profits and Why It Works

#99

Post by mseebach » Fri, Sep 05, 2014, 7:32 PM UTC

hnnewguy wrote: post #82

AndrewKemendo wrote: post #48

With Amazon, Bezos is deferring that profit-producing, investor-rewarding day almost indefinitely into the future. This prompts the suggestion that Amazon is the world’s biggest ‘lifestyle business’ – Bezos is running it for fun, not to deliver economic returns to shareholders, at least not any time soon. Sorry but that is ridiculous. Look at the stock price for Amazon. Anyone who has invested in Amazon has seen an a…

> Anyone who has invested in Amazon has seen an amazing unprecedented ride upward Only if they sell to realize those gains, and that can only occur if they can find a buyer who has an even greater expectation of profit in the future. This concept seems to elude people, but the value of a company that never makes a profit is precisely $0.

Amazon makes a profit, it just invests all of it in itself, returning you a more valuable stock instead of a dividend. Investors let them do it because the investment made with the profit is worth more than the cash would be.

Even with all that, the value of a company that doesn't turn a profit isn't 0, it's the value of it's assets, and Amazon has a lot of those.

Re: Why Amazon Has No Profits and Why It Works

#100

Post by WalterBright » Fri, Sep 05, 2014, 7:33 PM UTC

vinceguidry wrote: post #96

WalterBright wrote: post #80

Earlier quoted context omitted.

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.

Well, at the time, the kerosene market was declining and there was nothing bringing it back. Right after the breakup, Henry Ford finally perfected the automobile, and Standard Oil came right back.

Market share isn't the same thing as market size. The point being, SO was losing to competitors.