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Amazon and the "profitless business model" fallacy

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Re: Amazon and the "profitless business model" fallacy

#11

Post by graeme »

dangrossman wrote: post #6
hayksaakian wrote: post #2

Think about it this way. Profits are dollars that leave the company. By sitting on low profits, Amazon turns all its cash towards itself.

That's the opposite of what those words mean. Profits are dollars that stay with the company. Dollars that leave the company are expenses, some other company's profits. I don't find redefining profit to mean its opposite enlightening here. They're spending cash now in hopes of future profits -- that seems clear enough in plain english.

A certain portion of profits will leave the company as taxes. Investing the money now means that amazon gets to use 100% of those dollars.

Re: Amazon and the "profitless business model" fallacy

#12

Post by sidcool »

I believe in Jeff's long term vision theory. He is even building a $42 million giant clock called the '10,000 Year Clock' atop the Mount Washington in Nevada. This is to portray his long term vision.

(I feel guilty to mention, but this reminds me something of the 1000 Year Reich sorts)

Re: Amazon and the "profitless business model" fallacy

#13

Post by darksaints »

Out of all the articles I have read on the issue, this one most accurately sums up the views and opinions of the upper half of the organization. Nobody is scared. Nobody is feeling defensive. Nobody thinks the business as a whole is on the wrong path (although there are definitely a few ventures that some feel are in the wrong).

I don't have the most broad corporate employment history, but as far as it extends, I've met tons of people who feel like they could join a competitor to their own employer and win against them within a decade or so. I have never met a single person who worked at Amazon that has felt that way about competing against Amazon. Even if that competitor had the pocketbooks of Wal-Mart. To me, that speaks volumes about a business strategy.

Re: Amazon and the "profitless business model" fallacy

#14

Post by gizbot »

Strangly, this was the business model of cable companies for the longest time. They never turned a profit. When they expanded, they could use the increased income stream to go deeper into debt. The profits and extra capital went into more expansion. Eventually, they ran out of room to expand, and where are they now?

Someday, Amazon will need to face the brutal reality of profit.

Re: Amazon and the "profitless business model" fallacy

#15

Post by epa »

quaunaut wrote: post #7
dangrossman wrote: post #6

Earlier quoted context omitted.

That's the opposite of what those words mean. Profits are dollars that stay with the company. Dollars that leave the company are expenses, some other company's profits. I don't find redefining profit to mean its opposite enlightening here. They're spending cash now in hopes of future profits -- that seems clear enough in plain english.

Money not spent is money that isn't working for you, but instead is just sitting in reserve, at best accruing interest. Amazon is betting it can get a much higher return, and so far, has been right.

"profit" and "money" are two very different things.

"profit" is how much you are making at the end of the year, this is to be reinvested if you are efficient (as you suggest is good, i agree)

"money" is the what is sitting in the bank, not being utilized.

Would you say that a company who is breaking even is utilizing their cash properly? no, they don't have any cash to utilize, therefore profit and cash are different things.

Re: Amazon and the "profitless business model" fallacy

#16

Post by epa »

graeme wrote: post #11
dangrossman wrote: post #6

Earlier quoted context omitted.

That's the opposite of what those words mean. Profits are dollars that stay with the company. Dollars that leave the company are expenses, some other company's profits. I don't find redefining profit to mean its opposite enlightening here. They're spending cash now in hopes of future profits -- that seems clear enough in plain english.

A certain portion of profits will leave the company as taxes. Investing the money now means that amazon gets to use 100% of those dollars.

net income != taxable income

Re: Amazon and the "profitless business model" fallacy

#17

Post by [deleted] »

aresant wrote: post #3

" I sell a used book on Amazon, it takes a cut of the transaction, I am the one packing and shipping that item to the buyer. " In true Amazon "dominate all retail by making it accessible to consumers" their relatively new "Fulfillment By Amazon" service drastically simplifies consumer reselling by eliminating the need for the consumer to do the "packing and shipping". It's an amazing service, and they are getting dar…

[deleted]

Re: Amazon and the "profitless business model" fallacy

#18

Post by yetanotherphd »

hayksaakian wrote: post #2

Think about it this way. Profits are dollars that leave the company. By sitting on low profits, Amazon turns all its cash towards itself.

No, dividends are dollars that leave the company. Profits are an accounting measure of how much the value of the company increased. Since these accounting measures don't try to fully measure future income, heavy investment will appear unprofitable in accounting statements.

Re: Amazon and the "profitless business model" fallacy

#20

Post by Zombieball »

gizbot wrote: post #14

Strangly, this was the business model of cable companies for the longest time. They never turned a profit. When they expanded, they could use the increased income stream to go deeper into debt. The profits and extra capital went into more expansion. Eventually, they ran out of room to expand, and where are they now? Someday, Amazon will need to face the brutal reality of profit.

How did cable companies run out of room to expand?
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