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The previous discussion had a good top comment: https://news.ycombinator.com/item?id=6620885 https://news.ycombinator.com/item?id=6620885 >However, things are
by SilasX 5y ago
The previous discussion had a good top comment:
https://news.ycombinator.com/item?id=6620885 https://news.ycombinator.com/item?id=6620885
>However, things are not that simple. Sometimes some expenses which are about building for the future and investing into new growth are not capitalized. This is the case because for some expenses the benefits are so uncertain and difficult to quantify that the SEC requires that they are reported as ordinary expenses instead of capital spending. These types of expenses tend to involve R&D and may include certain administrative expenses associated with growth initiatives.
That shows why GAAP has legitimately different standards of profitability than an investor or HN comment might.
When people bring up “haha, Uber/Amazon has never even been [GAAP] profitable! What a joke!”, it’s usually to make the point that, “investors are dumb, this enterprise isn’t even capable of value creation because they can’t sell outputs for more than production costs, what a scam”.
But that doesn’t follow at all from GAAP-non-profitability. If a company would have been profitable but for regularly dumping fortunes into speculative projects, that’s still great news for investors. It means they could one day give up on that speculation and go back to taking those easy profits from value creation.
- foobarian 5y agoI always wonder if this is why they make us fill out time sheets. I also always gently propose to our management chain to share the money we save on taxes by doing the timesheets as an extra incentive, but so far I was not successful :-)
- throwoutway 5y agoDepends on the projects in your time sheets. My time sheets were various businesses (customer) that I was billing time against
- sokoloff 5y agoAny time that your company is obligated to capitalize results in them paying more current taxes, not less. (Time that is expensed fully this year is already tax-deductible.) The reality is (at least in the US and probably elsewhere), that it's not an option to just decide to expense or capitalize everything and so the timesheets might be better viewed as the mechanism the company has chosen to remain compliant with the law and not something that's optional/subject to incentive pay.
- foobarian 5y agoRight, I didn't think of the compliance angle. In my case the leadership justification is that doing timesheets "saves us money on taxes." Given how much most of us dislike doing the timesheets I thought it would be nice if they told us exactly how much that savings is, and if a large number possibly we would all be more enthusiastic about doing them.
- leobg 5y ago“Tesla loses money on every car they sell” was another popular one. People seriously believed it.
- triactual 5y agoThis one actually blew my mind at the time. Tesla had a wait list ten miles long and an obviously superior product (safety, speed, comfort, space, the whole electric thing, etc.). Sometimes, a business isn’t as complicated as people make it.
- leobg 5y agoCompletely agree. A Tesla is one of those rare products were going back to the previous state of technology feels like moving to a Third World country. Sans the adventure and possibility for self realization, that is.
- gumby 5y agoOf course they did for many years, supported only by government incentives.
- chii 5y agoinvestors aren't dumb - the economies of scale hasn't happened yet at that time, but would eventually. The gov't incentives and subsidies are just icing, not the core, of the investment thesis in tesla investors.
- gumby 5y agoI'm simply addressing the factual assertion in your post. People believed it as it was true.
- leobg 5y agoEven if that had been true, the claim the Tesla loses money on every car they sell implies that they would do better not producing cars at all. This is the kind of story you cling to when you desperately want to believe something. (The bigger question is: Why did these people want to believe that Tesla is a failure? I think the potential answers to that can teach us a lot about psychology, incentive structures, social media and what Nietzsche called The Use And Abuse Of History.)
- TaylorAlexander 5y agoThere’s so much news where people read a headline and believe it uncritically. I always thought it was silly that people accused Amazon of being unable to make a profit when they were obviously intentionally investing their would-be profits in to growth. A lot of people don’t really care if what they say is accurate.
- nerdponx 5y agoI wonder if the "they aren't profitable" myth is strategically beneficial to promulgate.
- pempem 5y agoThose accusations and headlines, I would argue, came from competitors who were unable to find the same trust and leniency from the market and needed to show a profit every earnings call.
- tchalla 5y agoIn short, it is difficult to infer and different growth CapEx and maintenance CapEx from financial data.