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> and aren't expected to make a profit Sorry to be harsh, but this "no profit" trope specifically when it comes to Amazon needs to die in a hot fire. "“Percen

by mbesto 7y ago

> and aren't expected to make a profit Sorry to be harsh, but this "no profit" trope specifically when it comes to Amazon needs to die in a hot fire. "“Percentage margins are not one of the things we are seeking to optimize. It’s the absolute dollar free cash flow per share that you want to maximize, and if you can do that by lowering margins, we would do that. So if you could take the free cash flow, that’s something that investors can spend. Investors can’t spend percentage margins.” “What matters always is dollar margins: the actual dollar amount. Companies are valued not on their percentage margins, but on how many dollars they actually make, and a multiple of that.” “When forced to choose between optimizing the appearance of our GAAP accounting and maximizing the present value of future cash flows, we’ll take the cash flows.” Jeff Bezos is very focused on this “absolute dollar free cash flow metric.” You will see many people talk about Amazon’s focus on “growth” vs. margins, but the right focus is instead absolute dollar fee cash flow."[0] Amazon optimizes for FCF and continually reinvests its "profits" back into the company. Check out their FCF: https://www.marketwatch.com/investing/stock/amzn/financials/cash-flow https://www.marketwatch.com/investing/stock/amzn/financials/... > Amazon is similar to many of the modern tech companies in that they're super well funded So you mean Amazon is funding their growth with their customers cash flow? I don't get how that's a problem. If you want to talk about Uber, Lyft, WeWork...that's another thing. The unit economics are just simply not there. Amazon should not be in the same discussion as those companies. [0] - https://25iq.com/2014/04/26/a-dozen-things-i-have-learned-from-jeff-bezos/ https://25iq.com/2014/04/26/a-dozen-things-i-have-learned-fr...

snarfy 7y ago
When you reinvest your profits back into the company, your net profits are zero and you don't pay any taxes. This is where the distortion comes in. It's government subsidized growth. At this point it's grown over all the competitors and affects the market.
- notyourwork 7y ago
  I think that’s a completely different issue from ops concern regarding not turning a profit.
- parasubvert 7y ago
  Re-investment for the long term is government subsidized growth? That's a new one. I have to disagree pretty strongly that this is a distortion of anything, it's capitalism 101 in the face of a progressive corporate profit tax. If the US government wants to tax all business activity regardless of profit, they can do what the rest of the Western world has done and introduce a VAT. Amazon is otherwise doing a masterful exercise of long term planning and competition.
  - nine_k 7y ago
    They are financed by investors initially, and are not paying back in cash. They re-invest their profits, in other words, keep them to themselves. The investors are paid back by the rising stock, which means by more investors who want to buy the stock and raise the price by their demand. This is indeed brilliant, and overpowers any org that needs to return part of its profits back to investors, lenders, etc.
    - parasubvert 7y ago
      Not paying a dividend in favour of being a growth stock is an old play... Microsoft famously took 28 years to begin paying a dividend (2003).
- sjy 7y ago
  Is that right? Shouldn't the reinvestment involve a significant amount of capital expenditure which is not immediately deductible?
  - snarfy 7y ago
    It's a fairly common tactic with farmers. Buy next year's supplies using this year's profits and pay no taxes on profits.
- mbesto 7y ago
  If what you're suggesting is so exploitable (e.g. government subsidized growth) then why don't their competitors do the same? You're aware that most F500 don't pay taxes right?

by mbesto 7y ago

snarfy 7y ago

When you reinvest your profits back into the company, your net profits are zero and you don't pay any taxes. This is where the distortion comes in. It's government subsidized growth. At this point it's grown over all the competitors and affects the market.

notyourwork 7y ago
I think that’s a completely different issue from ops concern regarding not turning a profit.
parasubvert 7y ago
Re-investment for the long term is government subsidized growth? That's a new one. I have to disagree pretty strongly that this is a distortion of anything, it's capitalism 101 in the face of a progressive corporate profit tax. If the US government wants to tax all business activity regardless of profit, they can do what the rest of the Western world has done and introduce a VAT. Amazon is otherwise doing a masterful exercise of long term planning and competition.
- nine_k 7y ago
  They are financed by investors initially, and are not paying back in cash. They re-invest their profits, in other words, keep them to themselves. The investors are paid back by the rising stock, which means by more investors who want to buy the stock and raise the price by their demand. This is indeed brilliant, and overpowers any org that needs to return part of its profits back to investors, lenders, etc.
  - parasubvert 7y ago
    Not paying a dividend in favour of being a growth stock is an old play... Microsoft famously took 28 years to begin paying a dividend (2003).
sjy 7y ago
Is that right? Shouldn't the reinvestment involve a significant amount of capital expenditure which is not immediately deductible?
- snarfy 7y ago
  It's a fairly common tactic with farmers. Buy next year's supplies using this year's profits and pay no taxes on profits.
mbesto 7y ago
If what you're suggesting is so exploitable (e.g. government subsidized growth) then why don't their competitors do the same? You're aware that most F500 don't pay taxes right?