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I don't understand the argument that they don't profit. All of their people get their pay. Instead of sitting on giant piles of cash they use it all to invest i
by sosuke 10y ago
I don't understand the argument that they don't profit. All of their people get their pay. Instead of sitting on giant piles of cash they use it all to invest in more stuff. That sounds like a great idea!
I never understand it when I hear such and such company has billions of dollars of cash just sitting around. If they spent that money wouldn't that help themselves and the economy?
Truly I am no economist.
Edit: I kept reading and I have to stop. I have too many counter arguments to each paragraph and I know I'm missing some larger picture they want to paint because of it. Without a significant investment of time which they've obviously devoted. I feel like they just really want to have an anti-trust lawsuit and are trying to fit the argument to available companies.
- gowld 10y agocompanies have billions of dollars in cash often because they are waiting for a tax holiday before they move it from where it is to where they want to use it
- caminante 10y agoedit: ha! your edit nails it. You share a feature with the author in that neither of you are economists! ;-) I skimmed the writing to create a skeleton of the argument. The claims and solutions are wild. No, AMZN doesn't have a "free pass to grow without any pressure to show profits." This is evidenced by investor reactions to their Q4 earnings call. Her solution is a solution in search of a problem: More specifically, restoring traditional antitrust principles to create a presumption of predation and to ban vertical integration by dominant platforms could help maintain competition in these markets. If, instead, we accept dominant online platforms as natural monopolies or oligopolies, then applying elements of a public utility regime or essential facilities obligations would maintain the benefits of scale while limiting the ability of dominant platforms to abuse the power that comes with it.
- pitaj 10y agoPlease don't use code blocks to quote. Use `>` meme arrows instead.
- icebraining 10y agoThey were quote characters in email before they were used in memes :) http://www.catb.org/jargon/html/email-style.html http://www.catb.org/jargon/html/email-style.html
- awfgylbcxhrey 10y agoBack when I first came to HN, comment quotes were usually in italics, and pre-formatted blocks have been used for all sorts of (ab)uses. I came back recently and now everyone seems to think this is Reddit or 4chan.
- Lazare 10y ago> I don't understand the argument that they don't profit. All of their people get their pay. Instead of sitting on giant piles of cash they use it all to invest in more stuff. "Profit" is a technical term with a specific meaning; in this context it's the money left over after paying wages, rents, interest, and investing in the business. So there's not much of the argument to understand; they get a lot of money, then they spend it, so there's nothing left to return to the investors which means by definition there's no profit. > I never understand it when I hear such and such company has billions of dollars of cash just sitting around. If they spent that money wouldn't that help themselves History is littered with examples of successful companies who spent large sums of money and got nothing in return. If Apple had a clue how to spend $100 billion usefully they would, but they don't. Their existing business are mature; they're selling all the phones they're making. They could build a bunch of factories and triple production, but to what end? They could start a chain of pizzerias, but why would that be a good idea?
- paulddraper 10y agoThey could make a phone with an audio jack.
- rahimnathwani 10y ago"Profit" is a technical term with a specific meaning; in this context it's the money left over after paying wages, rents, interest, and investing in the business. Investments aren't fully deducted from profits in the current period. So if you're measuring profit over any finite period, investments during that period may not have been fully reflected in reduced profits. For example, if a business buys a printer this year for $500, the business's profits will not be $500 lower than if they had not bought the printer. They would likely by $166 lower (assuming 3-year straight line depreciation). they get a lot of money, then they spend it, so there's nothing left to return to the investors which means by definition there's no profit. You're confusing cash flow with profit. When you return money to investors, you return cash, either in the form of dividends, or in the form of share buy-backs. You don't need profits in order to return cash (e.g. you could borrow money secured on your factory, and then pay that money straight to shareholders) and having profits doesn't mean you have cash (e.g. you might have just spent a load of money on new machinery, which would reduce your cash flow without as large a reduction in current year's profits).
- lend000 10y agoChipotle is a great example of why it's a good idea to save money -- they would be deep in debt right now if not for their impressive pile of cash they had saved up while the times were good.
- paulsutter 10y agoThe track record shows that Amazon has been good at investing in their business. That's something that doesn't show up in accounting profits or cash flows, but over time in the growth of the business. As for all these comments, sure there are companies that squandered vast sums in misguided attempts to invest in their business. And there are companies that admitted they had no idea how to invest in their business and sat on the cash. Neither of those examples are of any use in determining whether Amazon is investing wisely or foolishly. Some analysts think that Amazon doesn't actually make money, others think they invest but invest poorly, others think they are brilliant geniuses who invest perfectly. Most of whom are at least a little bit wrong. Which goes to show that even the "experts" don't really know.
- sumanthvepa 10y agoI suspect even Amazon doesn't quite know how it's investments will perform at the time they make them. There seems to be a lot trial and error in the process, but they seem to have figured out how to be efficient at doing it.
- aserafini 10y agoBingo. They run a lot of experiments. Their culture is, try a lot of things, we know a lot of them will fail but some of them (we don't know which) will be home runs (Kindle, Prime, AWS). Failure of an individual experiment is acceptable because Jeff Bezos knows you can't run a lot of experiments without a lot of them failing. Contrast to most other companies where involvement in a failed project ends your career.
- caseysoftware 10y agoYes and having $billions in the bank (or in cash flow) allows you to experiment to the tune of $millions with little risk. And realistically, they're touching enough industries and have enough smart people that even their "exhaust" is useful.. see AWS. ;)
- pdonis 10y ago> I don't understand the argument that they don't profit. It's more specific than that. The argument is that investors in Amazon don't profit, because practically all of the money Amazon makes gets used either to pay employees and meet operating costs or to invest in growing the business. So what's left over for shareholders is almost nothing--yet people are falling all over themselves to become shareholders. That is the odd situation that the paper is trying to understand.
- TeMPOraL 10y ago> So what's left over for shareholders is almost nothing--yet people are falling all over themselves to become shareholders. I've been having an impression that almost nobody buys shares for dividents - that almost everyone plays on first derivative, i.e. buying stocks low and selling them high.
- pdonis 10y ago> I've been having an impression that almost nobody buys shares for dividents I don't think that's a correct impression. Lots of people live off the income from the investments in their retirement accounts. If those accounts are holding stocks, the income is dividends.