4 ms·

Not OP but, it is my understanding Amazon Web Services is their biggest money maker, that's where I think that claim comes from.

by Grimm1 7y ago

jariel 7y ago
'Market cap' is not the best choice of metrics here, it's really a measure of investor surpluses, ignore the rest of the equation. Wallmart, Exxon, Amazon retail revenues completely dwarf the 'tech sector' - it's just that their margins are more narrow, in most cases, surpluses to consumers are vast. Honestly 'profit to investors' should be one of the last metrics most of us care about. Most individuals should be far more concerned about surpluses they receive through lower prices or higher wages, as they'll nary get any real material lift via investment income. In this way, it's kind of odd how 'market cap' is so widely used and perceived as some kind of great measure. It's good for investors, and unless you're an investor, it's bad for you. Every dollar that goes into the pocket of Amazon's investors should be a dollar in your pocket in the form of lower prices or better products/services. Have a look at the biggest companies by revenue [1] The only 'tech' companies on there are Apple and Amazon. Amazon makes the hardware, and most of Amazon's revenue is retail goods. There are not mostly software companies on that list. Actually, a lot of HNer discussions tend to veer into this magical surplus world as well, I'd encourage anyone to have a look at 'big revenue companies' because it gives a much clearer picture of how the world works outside our bubble. [1] https://en.wikipedia.org/wiki/List_of_largest_companies_by_revenue https://en.wikipedia.org/wiki/List_of_largest_companies_by_r...
- jariel 7y ago
  Edit: meant to write 'Apple makes hardware'.
- jldugger 7y ago
  I'm curious why you think revenue matters more than profits. Take two hypothetical companies, say ebay` and amazon`. They both provide a marketplace, but slightly differently. ebay` allows manufacturers to list directly on their market for a fee. Amazon` buys from manufacturers and sells on their market for a markup equivalent to ebay's fee. Are these two companies substantially different? I don't think so but the revenue frame of reference says they are,
  - jariel 7y ago
    Revenue will give an indication of the size of the business activity. Valuation is just a measure of profits, which can vary a lot. From an economic standpoint, what matters more will be revenue, it's a better indication of how meaningful what is done impacts the world. As for Ebay vs. Amazon - for 3rd party listings, it doesn't matter that much, it's all accounting, but when Amazon actually does buy and sell stuff, it's very material because of a) cash flows: they send off cash (or get huge credit) to buy stuff b) they have inventory, warehouses, workers c) they are the merchant of record and take on chargeback risk, returns etc.. At the scale that is meaningful. But I don't think that this comparison really highlights the difference between 'high margin' and 'high revenue' so much as for example AirBnB vs. Toyota. Even though Toyota is not worth that much more than AirBnB, it's considerably important to the economy whereas AirBnB is almost irrelevant.
- triceratops 7y ago
  > The only 'tech' companies on there are Apple and Amazon. And Samsung, Foxconn, and Alphabet. So 10% of the list.

Not OP but, it is my understanding Amazon Web Services is their biggest money maker, that's where I think that claim comes from.

by Grimm1 7y ago

Not OP but, it is my understanding Amazon Web Services is their biggest money maker, that's where I think that claim comes from.

jariel 7y ago

'Market cap' is not the best choice of metrics here, it's really a measure of investor surpluses, ignore the rest of the equation. Wallmart, Exxon, Amazon retail revenues completely dwarf the 'tech sector' - it's just that their margins are more narrow, in most cases, surpluses to consumers are vast. Honestly 'profit to investors' should be one of the last metrics most of us care about. Most individuals should be far more concerned about surpluses they receive through lower prices or higher wages, as they'll nary get any real material lift via investment income. In this way, it's kind of odd how 'market cap' is so widely used and perceived as some kind of great measure. It's good for investors, and unless you're an investor, it's bad for you. Every dollar that goes into the pocket of Amazon's investors should be a dollar in your pocket in the form of lower prices or better products/services. Have a look at the biggest companies by revenue [1] The only 'tech' companies on there are Apple and Amazon. Amazon makes the hardware, and most of Amazon's revenue is retail goods. There are not mostly software companies on that list. Actually, a lot of HNer discussions tend to veer into this magical surplus world as well, I'd encourage anyone to have a look at 'big revenue companies' because it gives a much clearer picture of how the world works outside our bubble. [1] https://en.wikipedia.org/wiki/List_of_largest_companies_by_revenue https://en.wikipedia.org/wiki/List_of_largest_companies_by_r...

jariel 7y ago
Edit: meant to write 'Apple makes hardware'.
jldugger 7y ago
I'm curious why you think revenue matters more than profits. Take two hypothetical companies, say ebay` and amazon`. They both provide a marketplace, but slightly differently. ebay` allows manufacturers to list directly on their market for a fee. Amazon` buys from manufacturers and sells on their market for a markup equivalent to ebay's fee. Are these two companies substantially different? I don't think so but the revenue frame of reference says they are,
- jariel 7y ago
  Revenue will give an indication of the size of the business activity. Valuation is just a measure of profits, which can vary a lot. From an economic standpoint, what matters more will be revenue, it's a better indication of how meaningful what is done impacts the world. As for Ebay vs. Amazon - for 3rd party listings, it doesn't matter that much, it's all accounting, but when Amazon actually does buy and sell stuff, it's very material because of a) cash flows: they send off cash (or get huge credit) to buy stuff b) they have inventory, warehouses, workers c) they are the merchant of record and take on chargeback risk, returns etc.. At the scale that is meaningful. But I don't think that this comparison really highlights the difference between 'high margin' and 'high revenue' so much as for example AirBnB vs. Toyota. Even though Toyota is not worth that much more than AirBnB, it's considerably important to the economy whereas AirBnB is almost irrelevant.
triceratops 7y ago
> The only 'tech' companies on there are Apple and Amazon. And Samsung, Foxconn, and Alphabet. So 10% of the list.