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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

#101

Post by SilasX »

vasilipupkin wrote: post #64
SilasX wrote: post #51

Earlier quoted context omitted.

If you reinvest all profits, you're still turning a profit. To say otherwise is to confuse the issue, even if technically correct in some contexts.

Not really, because your re-investments could be profit-destroying. If you earn 100 dollars of profit and gave to investors, the investors now have $100. If you reinvest $100, the investors have a bet that some time in the future they will have more than $100. Clearly, the two are different.

Yes, in the future you might not be profitable. In the year that you turned a profit, you turned a profit, even if you decided not to pay it out as a dividend.

Re: Why Amazon Has No Profits and Why It Works

#102

Post by AndrewKemendo »

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.

This concept seems to elude people, but the value of a company that never makes a profit is precisely $0.

As others have stated profits = revenue - expenses. In this case they are positive on the right hand, even if slightly, so they are in fact making profits.

Your time horizon is also wrong and assumes that there needs to be a singular point where the top level goal becomes making profit, rather than profit being a byproduct of a top level goal of adding value.

I also disagree with your assertion that value comes solely from profit.

Re: Why Amazon Has No Profits and Why It Works

#103

Post by jgalt212 »

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…

Diminishing returns will be Amazon's downfall

Re: Why Amazon Has No Profits and Why It Works

#104

Post by apalmer »

jmccree wrote: post #93
sliverstorm wrote: post #85

Earlier quoted context omitted.

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.

Absolutely understand what you are saying. But isn't that by definition a hot potato Ponzi scheme?

I mean there are large monster e-commerce giants in other nations, it is a very real possibility that Amazon will have to battle with some company at scale who is also in the razor sharp margin mindframe.

Its not impossible to imagine a world where amazon gets into a war with an Asian e-commerce giant for domination of the worlds e-commerce needs. If this does come to fruition this battle will probably not be resolved until 2020 ish time frame... so its a real possibility that amazon could be in business for 30 years, never return a profit to its investors, and NOT end up ever ruling ecommerce.

Re: Why Amazon Has No Profits and Why It Works

#106

Post by ewoodrich »

aeturnum wrote: post #98

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?

Does that figure include durable goods? That, combined with clothing and grocery wouldn't make 8% too surprising.

Re: Why Amazon Has No Profits and Why It Works

#107

Post by exelius »

TrevorJ wrote: post #81
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.

The business model sounds a lot less 'new economy cloud magic' when you just call it what it is: Business to Business.

Right, but the "new economy" twist is that Amazon likely doesn't know most of these companies exist outside of them being in a database somewhere. It's providing services in a self-service, one-size-fits-all kind of way.

Re: Why Amazon Has No Profits and Why It Works

#108

Post by ericd »

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…

It's also a unit of control, which has increasing value as the value of the company increases.

Re: Why Amazon Has No Profits and Why It Works

#109

Post by smacktoward »

philwelch wrote: post #88
igravious wrote: post #77

Earlier quoted context omitted.

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?

In the 1990's, undoubtedly Gates.

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 fuzzier reputation these days (another parallel to Rockefeller?), but back then he was an absolute barracuda.

Re: Why Amazon Has No Profits and Why It Works

#110

Post by exelius »

swalsh wrote: post #95
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…

"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…

Amazon has actually been better at this kind of stuff than Google. Since their acquisition of Kiva Systems, they have built what is by far the best automated warehousing/logistics platform of any company in the world.

The future of EVERYTHING is going to be very reliant on AI and robots. My view is that the last 20 years have been the Internet revolution. The next 20 are all about AI and robotic automation. Both disciplines have existed for a long time, but they've hit a tipping point where price and effectiveness are putting them within reach of total ubiquity.

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