7 ms·

The case of Amazon amazes me. This is the company that famously refused to worry about what investors thought 20+ years ago and just kept on being unprofitable

by gumby 4y ago

The case of Amazon amazes me. This is the company that famously refused to worry about what investors thought 20+ years ago and just kept on being unprofitable (and instead, investing heavily in growth) to the considerable benefit of investors who stuck with them. Google is crazy too: they will spend more on stock buybacks than they will save through the layoffs, yet are investing nothing in fixing their actual, deep structural problems.

refurb 4y ago
This is completely unsurprising. I worked for a company like this as well. It’s easy to ignore investors when you’ve had an upward trajectory year after year. They’ll put up with almost anything when the stock price keeps going up. But as soon as your growth slows or stops, reality hits like a ton of bricks. Investors have lots of place to put their money. If Amazon cant deliver what these investors want, they’ll put their money elsewhere. Amazon is free to ignore them, they’ll just have to deal with the consequences of that. I mean, as an employee, would you stick around for less compensation? No, most people would find a better paying job.
- tiedieconderoga 4y ago
  Amazon was in a somewhat unique position where they could ignore their investors, because they were raking in plenty of money. Choosing to reinvest that money in the business caused some consternation, but the consistent revenue and growth let them ride out periodic misadventures and hits to the stock price. It turned out to be a good move in the long run, because they weren't bluffing about their business fundamentals.
- gumby 4y ago
  > Amazon is free to ignore them, they’ll just have to deal with the consequences of that. The consequences aren’t necessarily that significant: mainly the cost of raising further cash from the markets, which doesn’t look like Amazon will have to do for many years, if not decades.
  - mavelikara 4y ago
    > The consequences aren’t necessarily that significant: mainly the cost of raising further cash from the markets, which doesn’t look like Amazon will have to do for many years, if not decades. Many people who decide on these things, though, are mostly compensated in stock. They need a good price to sell their stock at.
  - triceratops 4y ago
    If the stock price doesn't go up Amazon (and every other company compensating with RSUs) will have to fund raises out of their own pockets. Yes I'm aware stock-based compensation is also an expense. But as I understand it, that expense = the initial value of the grant. So if the stock price goes up it's like the employee got a handsome raise funded entirely by Wall Street.
  - mandevil 4y ago
    Amazon (at least used to, when I last looked at joining them) had a cash compensation max of around 175k-200k for essentially all engineers, with all comp greater than that coming as equity (with, according to what I heard, a 15% per-year assumed increase in the stock price factored into your comp package). So the employees really do care about the value of the stock, since a very large % of their comp comes from that going up.
    - coredog64 4y ago
      Amazon revised the bands last year (at the height of pandemic comp craziness), so it’s now theoretically possible to get something like $300k in base. But the second half is correct. Amazon comp assumes 15% IRR. This wasn’t true for 2022, and it’s not true for 2023, leading to lots of complaints on Blind.
    - mh8h 4y ago
      Amazon also sets compensation targets, and if the stock price goes high enough for the employee to reach the compensation targets without new stock grants, no new stock grant is given. So there is no motivation to stay for long, even when the stock is doing well.
lamontcg 4y ago
Amazon loved layoffs 20+ years ago, it was yearly and part of their topgrading.
- gumby 4y ago
  Good point. I didn’t mean the stack ranking thing, which is also degrading, stress inducing, and bad for morale! Much less the scandalous hire-to-fire. I was specifically addressing the phenomenon described in the article, where the threat of the large number in future is demoralizing and destructive. Reasonable people can consider them facets of the same phenomenon.
osigurdson 4y ago
I believe the intoxicating idea that companies will not need employees soon is driving more of this than we think. Once the hype wears off things may normalize again. I say this as a heavy chat GPT user. I really love it but not nearly like sending and email to a senior engineer: “please make X” - which then turns into the senior engineer scheduling meetings with the required teams / individuals - navigating the technical and (unfortunate) political issues, coming up with a design and implementing it - getting things done in other words. I don’t know what future versions of GPT will look like but the current one is light years away from having that level of capability. Even a simpler task like fixing a bug cannot remotely be handled by ChatGPT. It is almost like LLMs are a new dimension - we used to have X and Y, now we also have Z. Yet, we are thinking that this is just more “Y”.
- whatyesaid 4y ago
  If it was about LLMs then it wouldn't have to be preemptively rushed. Like, they could wait a year or two, their bank account isn't going anywhere. The users and data of big tech are the real value. By waiting a year for LLMs to take effect you evaluate properly, long term lose nothing, and don't have to go through massive hiring to compensate. It's not about LLMs. The real reason is these companies have been overpopulated and produced basically no visible changes in 5 years. Google search is worse with auto-generated results not written by humans, YouTube has become super rabbit hole instead of discovery, Twitter shipped NFT profile pictures and Spaces.
  - osigurdson 4y ago
    I think the Occam's razor hypothesis is the stated one: economy looking cloudy, money getting more expensive. However, I'm certain LLMs are part of it as well - when you are the one writing the cheques you certainly do want to believe in a future where no more cheques need to be written while maintaining the same revenue. I suspect it is more likely that the benefits will accrue to start ups as they will not have so much inertia working against them in terms of leveraging AI. People with ideas and limited means will likely be the primary benefactors due to AI amplification I think.
  - 4y ago
zeckalpha 4y ago
Day 2!
paxys 4y ago
Reason is simple. Back in the day the founders – armed with majority voting power and "fuck you" money in the bank – were in charge at these companies. Now it is the standard board-approved bean counting Harvard MBA CEO who has no choice but to buckle under investor pressure or risk getting fired.
- Mizoguchi 4y ago
  Zuckerberg has absolute control of Meta, he is the one calling all the shots. Bezos doesn't have total control on Amazon but sits on the board and has the most voting power amount shareholders, so was the case with Benioff until a few years ago when he started dropping stock to buy expensive toys like Time, but he is still the single largest owner of Salesforce. So, many of the original co-founders of these companies are still there, they just have much different goals and interests than their younger selves.
  - tarsinge 4y ago
    I heard Zuck is behaving more like a majority shareholder than a CEO in day to day operations and management, Meta restructuring is handled by a consulting a firm. Could be wrong though.
cperciva 4y ago
Looking at their corporate filings, it looks like between Dec 31 2021 and Dec 31 2022 Amazon sold off about half of their "marketable securities". I don't know exactly what those were, but that sort of change makes me think "company is facing a cash flow crunch" -- just like when SVB started liquidating their marketable securities.
eek2121 4y ago
If stock buybacks were against the law, corporate taxes were higher, capital gains taxes were higher, and loopholes were closed, we wouldn't see this. The only way to earn more money in the environment I described would be to actively focus on growing your business, which means only letting people go you don't absolutely need. In my area, Amazon has tripped up so bad I can't even have the basic necessities delivered to my house due to a staff shortage (they throw an error at checkout claiming multiple items can't be delivered to my address...items I've ordered for at least 4 years straight on a monthly basis without issue) so I am going to go from spending tens of thousands per year with Amazon to zero. I am in a city in the United States. Amazon will happily sell, ship, and deliver some no-name brand item from a third party seller within 2 hours of ordering, but they can't be bothered to do the same with the stuff I ordered. If they weren't making money off me (which I doubt, I spent $23,967 on Amazon last year, and their products are only slightly cheaper than local stores...like CENTS), why were they willing to sell to me to begin with? I've switched to a combination of Costco/Walmart for most of my stuff, and will soon be independent from Amazon completely, all because they refuse to deliver my core products that they've delivered for years on a monthly basis without issue (toilet paper, a 12 pack of my favorite energy drink, my favorite brand of protein shakes, etc) Really Amazon? (note the error I receive says that the item cannot be delivered to my address, and to select another. It is a residential address tied to a house and I've ordered the exact same item month after month. they also blocked subscribe and save.) Sorry, this is a rant, please carry on.
- cuteboy19 4y ago
  The first line itself struck me as amazing! What is the purpose of a company? Do you think a company would exist/ be funded if the company did not pay back the investor in some way? We may argue that this particular buyback was ill timed, but still, banning all buybacks is a very very strange idea
  - medvezhenok 4y ago
    You might be surprised to learn that companies still existed/exist under communism, with not a single investor around ;)
throwaway2037 4y ago
"their actual, deep structural problems" Can you be more specific? One guess: OpenAI + Microsoft Bing will eat their search advertising dollars.
- pas 4y ago
  that is one potential worry, but they are losing the cloud game, they are absolutely bad at products, UX, support, etc. at this point I think Android and Chrome are their most high-quality things. Calendar is okay too, but it does what it did 10 years ago, oh, sure, it has Meet integration too (which sucks, and 720p) Maps' mass transit things are getting better, but it's not going to save Alphabet
  - aix1 4y ago
    Since you mention support, customer service is just atrocious. My Pixel 5 phone is still under warranty and has developed a battery fault. I contacted Google support: 1. No option to repair, only replacement and only by post (unnecessarily inconvenient given that it's just a straightforward battery swap that any number of local shops can do -- I did this myself in the past except that this phone's still under warranty and I'm too pressed for time to be sourcing parts etc). 2. I got repeatedly prompted to confirm that I was using the charger that came with the phone (this seemed to suggest there might be warranty implications if I wasn't -- not sure this is even legal in the UK). 3. I had to consent to a page worth of legalese, including granting Google permission to access my phone usage data -- wtf is that? In the end, I chose to walk into a third-party repair centre and just pay for an out-of-warranty repair. Took an hour, £50 ($60) and a voided phone warranty -- IMO a great deal compared to getting warranty service from Google.
  - klibertp 4y ago
    A little bit off topic, but I have to vent somewhere... I don't know about Chrome, but if Android is their most high-quality thing, then at the very least they are also losing in developer experience. The churn in libraries and frameworks there is, from what I've seen, only second to Web frontend, and bugs in newer things are really embarrassing. "Ready for production" (they claim in the FAQ) Jetpack Compose is great when it works, but even the Android Studio-generated Compose template crashed the IDE several times, while manually setting it up crashed Kotlin compiler[1]. WorkManager and Room are important things that bugged out for me, too. And I'm at it for just 5 months - there's got to be way more dragons that I'm yet to see. [1] https://issuetracker.google.com/issues/249653885 https://issuetracker.google.com/issues/249653885
phpisthebest 4y ago
That time period was also Founder Lead.... Once Bezo's shifted his focus from Amazon to other things they had to start being a real business.
cpufry 4y ago
sowing days are out, reaping days are in
dakial1 4y ago
This is because now corporate finance leads those companies, and its strategy is usually focused towards moving the numbers in the way investors read them (SOX rules for Earnings Report) and using all the tricks in the book to pass some short term sensation on improvement, which result in the carrot they are all after. The bonus. Amazon had the no profit strategy because Bezos had ideals and as the Czar of the place, finance would not convince him to change strategy (But I bet they tried, must have been a fund meeting to watch). Now he is worried about his yacht and pet projects, so he let finance rule the place for the benefit of his stock price. Same with Google. L&S don't have their ideals anymore and just want their money protected. Finance has this covered. There is no care for the brand nor its other stakeholders anymore. They basically became another IBM, Microsoft, etc...

by gumby 4y ago

refurb 4y ago

This is completely unsurprising. I worked for a company like this as well. It’s easy to ignore investors when you’ve had an upward trajectory year after year. They’ll put up with almost anything when the stock price keeps going up. But as soon as your growth slows or stops, reality hits like a ton of bricks. Investors have lots of place to put their money. If Amazon cant deliver what these investors want, they’ll put their money elsewhere. Amazon is free to ignore them, they’ll just have to deal with the consequences of that. I mean, as an employee, would you stick around for less compensation? No, most people would find a better paying job.

tiedieconderoga 4y ago
Amazon was in a somewhat unique position where they could ignore their investors, because they were raking in plenty of money. Choosing to reinvest that money in the business caused some consternation, but the consistent revenue and growth let them ride out periodic misadventures and hits to the stock price. It turned out to be a good move in the long run, because they weren't bluffing about their business fundamentals.
gumby 4y ago
> Amazon is free to ignore them, they’ll just have to deal with the consequences of that. The consequences aren’t necessarily that significant: mainly the cost of raising further cash from the markets, which doesn’t look like Amazon will have to do for many years, if not decades.
- mavelikara 4y ago
  > The consequences aren’t necessarily that significant: mainly the cost of raising further cash from the markets, which doesn’t look like Amazon will have to do for many years, if not decades. Many people who decide on these things, though, are mostly compensated in stock. They need a good price to sell their stock at.
- triceratops 4y ago
  If the stock price doesn't go up Amazon (and every other company compensating with RSUs) will have to fund raises out of their own pockets. Yes I'm aware stock-based compensation is also an expense. But as I understand it, that expense = the initial value of the grant. So if the stock price goes up it's like the employee got a handsome raise funded entirely by Wall Street.
- mandevil 4y ago
  Amazon (at least used to, when I last looked at joining them) had a cash compensation max of around 175k-200k for essentially all engineers, with all comp greater than that coming as equity (with, according to what I heard, a 15% per-year assumed increase in the stock price factored into your comp package). So the employees really do care about the value of the stock, since a very large % of their comp comes from that going up.
  - coredog64 4y ago
    Amazon revised the bands last year (at the height of pandemic comp craziness), so it’s now theoretically possible to get something like $300k in base. But the second half is correct. Amazon comp assumes 15% IRR. This wasn’t true for 2022, and it’s not true for 2023, leading to lots of complaints on Blind.
  - mh8h 4y ago
    Amazon also sets compensation targets, and if the stock price goes high enough for the employee to reach the compensation targets without new stock grants, no new stock grant is given. So there is no motivation to stay for long, even when the stock is doing well.

lamontcg 4y ago

Amazon loved layoffs 20+ years ago, it was yearly and part of their topgrading.

gumby 4y ago
Good point. I didn’t mean the stack ranking thing, which is also degrading, stress inducing, and bad for morale! Much less the scandalous hire-to-fire. I was specifically addressing the phenomenon described in the article, where the threat of the large number in future is demoralizing and destructive. Reasonable people can consider them facets of the same phenomenon.

osigurdson 4y ago

I believe the intoxicating idea that companies will not need employees soon is driving more of this than we think. Once the hype wears off things may normalize again. I say this as a heavy chat GPT user. I really love it but not nearly like sending and email to a senior engineer: “please make X” - which then turns into the senior engineer scheduling meetings with the required teams / individuals - navigating the technical and (unfortunate) political issues, coming up with a design and implementing it - getting things done in other words. I don’t know what future versions of GPT will look like but the current one is light years away from having that level of capability. Even a simpler task like fixing a bug cannot remotely be handled by ChatGPT. It is almost like LLMs are a new dimension - we used to have X and Y, now we also have Z. Yet, we are thinking that this is just more “Y”.

whatyesaid 4y ago
If it was about LLMs then it wouldn't have to be preemptively rushed. Like, they could wait a year or two, their bank account isn't going anywhere. The users and data of big tech are the real value. By waiting a year for LLMs to take effect you evaluate properly, long term lose nothing, and don't have to go through massive hiring to compensate. It's not about LLMs. The real reason is these companies have been overpopulated and produced basically no visible changes in 5 years. Google search is worse with auto-generated results not written by humans, YouTube has become super rabbit hole instead of discovery, Twitter shipped NFT profile pictures and Spaces.
- osigurdson 4y ago
  I think the Occam's razor hypothesis is the stated one: economy looking cloudy, money getting more expensive. However, I'm certain LLMs are part of it as well - when you are the one writing the cheques you certainly do want to believe in a future where no more cheques need to be written while maintaining the same revenue. I suspect it is more likely that the benefits will accrue to start ups as they will not have so much inertia working against them in terms of leveraging AI. People with ideas and limited means will likely be the primary benefactors due to AI amplification I think.
- 4y ago

zeckalpha 4y ago

Day 2!

paxys 4y ago

Reason is simple. Back in the day the founders – armed with majority voting power and "fuck you" money in the bank – were in charge at these companies. Now it is the standard board-approved bean counting Harvard MBA CEO who has no choice but to buckle under investor pressure or risk getting fired.

Mizoguchi 4y ago
Zuckerberg has absolute control of Meta, he is the one calling all the shots. Bezos doesn't have total control on Amazon but sits on the board and has the most voting power amount shareholders, so was the case with Benioff until a few years ago when he started dropping stock to buy expensive toys like Time, but he is still the single largest owner of Salesforce. So, many of the original co-founders of these companies are still there, they just have much different goals and interests than their younger selves.
- tarsinge 4y ago
  I heard Zuck is behaving more like a majority shareholder than a CEO in day to day operations and management, Meta restructuring is handled by a consulting a firm. Could be wrong though.

cperciva 4y ago

Looking at their corporate filings, it looks like between Dec 31 2021 and Dec 31 2022 Amazon sold off about half of their "marketable securities". I don't know exactly what those were, but that sort of change makes me think "company is facing a cash flow crunch" -- just like when SVB started liquidating their marketable securities.

eek2121 4y ago

If stock buybacks were against the law, corporate taxes were higher, capital gains taxes were higher, and loopholes were closed, we wouldn't see this. The only way to earn more money in the environment I described would be to actively focus on growing your business, which means only letting people go you don't absolutely need. In my area, Amazon has tripped up so bad I can't even have the basic necessities delivered to my house due to a staff shortage (they throw an error at checkout claiming multiple items can't be delivered to my address...items I've ordered for at least 4 years straight on a monthly basis without issue) so I am going to go from spending tens of thousands per year with Amazon to zero. I am in a city in the United States. Amazon will happily sell, ship, and deliver some no-name brand item from a third party seller within 2 hours of ordering, but they can't be bothered to do the same with the stuff I ordered. If they weren't making money off me (which I doubt, I spent $23,967 on Amazon last year, and their products are only slightly cheaper than local stores...like CENTS), why were they willing to sell to me to begin with? I've switched to a combination of Costco/Walmart for most of my stuff, and will soon be independent from Amazon completely, all because they refuse to deliver my core products that they've delivered for years on a monthly basis without issue (toilet paper, a 12 pack of my favorite energy drink, my favorite brand of protein shakes, etc) Really Amazon? (note the error I receive says that the item cannot be delivered to my address, and to select another. It is a residential address tied to a house and I've ordered the exact same item month after month. they also blocked subscribe and save.) Sorry, this is a rant, please carry on.

cuteboy19 4y ago
The first line itself struck me as amazing! What is the purpose of a company? Do you think a company would exist/ be funded if the company did not pay back the investor in some way? We may argue that this particular buyback was ill timed, but still, banning all buybacks is a very very strange idea
- medvezhenok 4y ago
  You might be surprised to learn that companies still existed/exist under communism, with not a single investor around ;)

throwaway2037 4y ago

"their actual, deep structural problems" Can you be more specific? One guess: OpenAI + Microsoft Bing will eat their search advertising dollars.

pas 4y ago
that is one potential worry, but they are losing the cloud game, they are absolutely bad at products, UX, support, etc. at this point I think Android and Chrome are their most high-quality things. Calendar is okay too, but it does what it did 10 years ago, oh, sure, it has Meet integration too (which sucks, and 720p) Maps' mass transit things are getting better, but it's not going to save Alphabet
- aix1 4y ago
  Since you mention support, customer service is just atrocious. My Pixel 5 phone is still under warranty and has developed a battery fault. I contacted Google support: 1. No option to repair, only replacement and only by post (unnecessarily inconvenient given that it's just a straightforward battery swap that any number of local shops can do -- I did this myself in the past except that this phone's still under warranty and I'm too pressed for time to be sourcing parts etc). 2. I got repeatedly prompted to confirm that I was using the charger that came with the phone (this seemed to suggest there might be warranty implications if I wasn't -- not sure this is even legal in the UK). 3. I had to consent to a page worth of legalese, including granting Google permission to access my phone usage data -- wtf is that? In the end, I chose to walk into a third-party repair centre and just pay for an out-of-warranty repair. Took an hour, £50 ($60) and a voided phone warranty -- IMO a great deal compared to getting warranty service from Google.
- klibertp 4y ago
  A little bit off topic, but I have to vent somewhere... I don't know about Chrome, but if Android is their most high-quality thing, then at the very least they are also losing in developer experience. The churn in libraries and frameworks there is, from what I've seen, only second to Web frontend, and bugs in newer things are really embarrassing. "Ready for production" (they claim in the FAQ) Jetpack Compose is great when it works, but even the Android Studio-generated Compose template crashed the IDE several times, while manually setting it up crashed Kotlin compiler[1]. WorkManager and Room are important things that bugged out for me, too. And I'm at it for just 5 months - there's got to be way more dragons that I'm yet to see. [1] https://issuetracker.google.com/issues/249653885 https://issuetracker.google.com/issues/249653885

phpisthebest 4y ago

That time period was also Founder Lead.... Once Bezo's shifted his focus from Amazon to other things they had to start being a real business.

cpufry 4y ago

sowing days are out, reaping days are in

dakial1 4y ago

This is because now corporate finance leads those companies, and its strategy is usually focused towards moving the numbers in the way investors read them (SOX rules for Earnings Report) and using all the tricks in the book to pass some short term sensation on improvement, which result in the carrot they are all after. The bonus. Amazon had the no profit strategy because Bezos had ideals and as the Czar of the place, finance would not convince him to change strategy (But I bet they tried, must have been a fund meeting to watch). Now he is worried about his yacht and pet projects, so he let finance rule the place for the benefit of his stock price. Same with Google. L&S don't have their ideals anymore and just want their money protected. Finance has this covered. There is no care for the brand nor its other stakeholders anymore. They basically became another IBM, Microsoft, etc...