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Why Amazon Has No Profits and Why It Works

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Re: Why Amazon Has No Profits and Why It Works

#181

Post by nikcub »

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…

> Costco comes to mind

That isn't a coincidence. According to[0] "The Everything Store"[1], the latest biography of Amazon, Bezos picked up the model for Amazon retail from Costco founder James Sinegal.

The first aspect was "value trumps everything" - where prices would be slashed and net margins thin. The second was the subscription model - Bezos learned that 70%+ of Costco's profit was from the membership fees. It was easier to charge a membership fee once and offer lower prices than it was to attempt to spread your profit margin across products and into the pricing.

Amazon slashed its prices and adopted the thin margin model in the future and then implemented Amazon Prime.

"The Everything Store" is a decent read, easy to flick through and some interesting cases and anecdotes within it. Ignore the negative reviews and give it a read if you haven't already.

[0] http://bobmorris.biz/what-jeff-bezos-learned-from-jim-sinega...

[1] http://www.amazon.com/The-Everything-Store-Bezos-Amazon-eboo...

Re: Why Amazon Has No Profits and Why It Works

#182

Post by dinkumthinkum »

jamestimmins wrote: post #146
vasilipupkin wrote: post #68

Earlier quoted context omitted.

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…

Makes me think of Peter Thiel's line: "we like to invest in businesses that aren't making a profit, because they know what to do with their money". Businesses that are paying back profits via dividends/buybacks are communicating that they have more money than they know what to do with (at least Thiel would say so).

Some business are simply motivated by profit rather than making headlines with mercurial statements on TechCrunch.

Re: Why Amazon Has No Profits and Why It Works

#183

Post by saryant »

caycep wrote: post #167
vinceguidry wrote: post #75

Earlier quoted context omitted.

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

Thanks. The Prize by Daniel Yergin isn't bad either.

The Prize doesn't get into Rockefeller's business decisions as much as Titan though. If that's what you're after, Titan is a better choice.

Re: Why Amazon Has No Profits and Why It Works

#184

Post by baddox »

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?

Perhaps less frightening when you consider that he manage to cut the end-user price of kerosene by 90%.

Re: Why Amazon Has No Profits and Why It Works

#185

Post by baddox »

veb wrote: post #148
smacktoward wrote: post #109

Earlier quoted context omitted.

Yeah, that was my thought too. > John offered three choices to rival refiners, cash, Standard Oil stock, or to get crushed ... is also a pretty good description of how Microsoft approached anyone they considered competition in the '80s and '90s: you either licensed your software to them ("cash"), sold your company to them ("stock"), or got destroyed by them. Gates' charitable efforts have earned him a warmer and fuzz…

Hmm, does his charitable efforts these days make up for the pain and suffering he caused back when he was a barracuda? (nice term, btw). I like to say yes. I think. I mean, he may have destroyed hundreds of people's livelihoods/jobs/companies, but his efforts these days are literally saving peoples lives. Does anyone have an opinion on this? I'm a firm believer people can change and while this might not be Bill Gates…

What pain and suffering did he cause, other than running his business better and offering a better product to customers than his competitors? He cut the price of kerosene by 90%, which must have vastly improved the quality of life for a lot of people.

Re: Why Amazon Has No Profits and Why It Works

#186

Post by baddox »

apalmer wrote: post #158
burgers wrote: post #134

Earlier quoted context omitted.

It isn't a ponzi scheme because Amazon isn't dependent on new share purchases to keep running. It is a fully functioning operation that is in the black. It just isn't generating any real profits above its costs. Amazon is worth money right now. Just like a lawn mower doesn't turn a profit on its own, but it is still worth something. In the long term view, which Amazon definitely takes, this current process is just th…

I am just pointing out that as a stock holder if the only value of buying AMAZON stock is that you expect that someone else down the line is going to pay you more to buy it than you paid for it then thats similar to how a Ponzi scheme works. I dont think Amazon is taking a bad approach but, realistically feel Amazon is not going to produce any other return for its investors for the next ten years until it completely…

> I am just pointing out that as a stock holder if the only value of buying AMAZON stock is that you expect that someone else down the line is going to pay you more to buy it than you paid for it then thats similar to how a Ponzi scheme works.

By that definition, literally every investment would be a Ponzi scheme. A savings account would be a Ponzi scheme.

Re: Why Amazon Has No Profits and Why It Works

#187

Post by baddox »

Pxtl wrote: post #56
macspoofing wrote: post #34

Earlier quoted context omitted.

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

If all the profit goes back into the company to expand the company, is it somehow not "profit"? Saying that Amazon doesn't make a profit depends on a misleading definition of the word "profit". Amazon's individual operations do generate a profit, except for the new bleeding-edge expansions into new businesses. Those things run at a loss, fed by the profitable wings of the company. And when they become profitable, the…

> Saying that Amazon doesn't make a profit depends on a misleading definition of the word "profit".

It's only misleading if you pick a definition of "profit" at random rather than investigating the definition being used in the article. As the article states, Amazon's gross profit is over 20%. And the article briefly hints that gross profit is not a very useful metric. It's certainly of little immediate relevance to Amazon's investors.

Re: Why Amazon Has No Profits and Why It Works

#188

Post by wilam »

AtmaScout wrote: post #130
TrevorJ wrote: post #79

Earlier quoted context omitted.

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

I wish this was on Netflix streaming. I find this type of history really appealing.

It's on Amazon Prime;)

Re: Why Amazon Has No Profits and Why It Works

#189

Post by mindcrime »

TeMPOraL wrote: post #153
pdpi wrote: post #35

Earlier quoted context omitted.

> The talk was about APIs, but Amazon views APIs as a general term: "Fulfilled by Amazon" is an example of a non-technical API. It's not a "non-technical API". We have name for those things: they're services. Amazon provides services, and that extends to both digital services (with which you interact via APIs — that P stands for Programming, damn it!), and meatspace services.

That's what I'm actually hoping will happen to services - that they will actually become function calls . For instance, why can't I install a local print shop as a system printer? I do some graphics work, then I click File->Print..., pick the "Printing Company XYZ", alter preconfigured defaults if needed, OK, and the next day a courier brings me my print job, all payments and address information transfer being handle…

I'm pretty sure Fedex Office does pretty much that, and has for quite some time now.

Re: Why Amazon Has No Profits and Why It Works

#190

Post by samstave »

psychometry wrote: post #169
samstave wrote: post #143

Earlier quoted context omitted.

I would equate only Musk to him with respect to creating lasting change.

What lasting change has Musk effected? The potential is certainly there, but the average person's life isn't much different than it would be had Musk never existed.

Uh, the private space industry?

Really, you don't see what is happening here?

Who else mounted a private space company able to dock with that of the global governmental effort that is the ISS?

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