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And don't forget Amazon. They aren't venture backed but they have access to capital at cheaper rates than most countries due to their position as a stock marke

And don't forget Amazon. They aren't venture backed but they have access to capital at cheaper rates than most countries due to their position as a stock market darling. They use ultra-cheap money and a willingness to run negative margins which they refer to "reinvesting in the business" to bleed competitors dry. Few other companies on the planet have the ability to run negative or break-even margins the way Amazon does. Diapers.com example: "When Bezos’s lieutenants learned of Wal-Mart’s counterbid, they ratcheted up the pressure, telling the Quidsi founders that [Bezos] was such a furious competitor that he would drive diaper prices to zero if they sold to Bentonville. The Quidsi board convened to discuss the possibility of letting the Amazon deal expire and then resuming negotiations with Wal-Mart. But by then, Bezos’s Khrushchev-like willingness to use the thermonuclear option had had its intended effect. The Quidsi executives stuck with Amazon, largely out of fear. The deal was announced Nov. 8, 2010." https://slate.com/technology/2013/10/amazon-book-how-jeff-bezos-went-thermonuclear-on-diapers-com.html https://slate.com/technology/2013/10/amazon-book-how-jeff-be...

abigail95 3y ago
They have money because of AWS, which is a fantastic product in an extremely competitive market, competing against players who lose money like GCP and Azure. Amazon.com as a store makes next to nothing as profit. Who cares what he did to some diaper companies. Are consumers paying more or less because of amazon? Much less. They basically run amazon.com for no profit and consumers get fantastic deals and cheaper products and more reliable service than ever before. How much would you have to charge for same day delivery for that many products? Could you get close to Amazon? You would have to rip off you customers so badly just to stay alive.
- paulddraper 3y ago
  > Who cares what he did to some diaper companies. Going out on a limb here, but I'd say the diaper companies.
  - lotsofpulp 3y ago
    What happened to the diaper companies? Feel like I see the same brands of diapers still. Procter and gamble, Kimberly Clark, etc.
    - paulddraper 3y ago
      So...your concern is for branding continuity?
      - lotsofpulp 3y ago
        No, my concern was the claim that something happened to the diaper companies is false. Some middleman website might have lost out on being able to sell for more money to Walmart, but that was their choice to not to pursue a deal with Walmart. I am guessing what they were probably concerned about was guaranteeing themselves cashing out at least at Amazon’s offer because if Walmart found out Amazon was backing out of the deal, then Walmart would have had the power to push the price down. Either way, diapers.com was going to lose to Amazon/Walmart/Target/Costco in the long run, so if they were getting a high valuation simply for being a popular website as online shopping was ramping up, then their best move was to sell while the iron was hot.
- degreesoffun 3y ago
  > Who cares what he did to some diaper companies. Are consumers paying more or less because of amazon? Much less. They are probably generally paying less but Amazon isn't the surefire low-cost provider on the internet the way they used to be. I don't expect the trend of them raising prices to reverse as they gain market power. > How much would you have to charge for same day delivery for that many products? Could you get close to Amazon? You would have to rip off you customers so badly just to stay alive. It's not "ripping off" it's just charging customers the actual cost of the service they are getting.
  - nonethewiser 3y ago
    > I don't expect the trend of them raising prices to reverse as they gain market power. Except their competitors have followed suit with cheaper shipping and online shopping. They are the best, but not a monopoly.
- rurp 3y ago
  > consumers get fantastic deals and cheaper products and more reliable service than ever before. This hasn't been true for many years IME, and will almost certainly get worse over time. Companies like Amazon don't fight tooth and nail to monopolize industries because they want to be nice to people, they do it because it results in power they can use to increase profits over the long term. Less competition means that they can ratchet up prices for customers and squeeze sellers/suppliers more. There are only a handful of general stories online these days, largely due to Amazon's actions.
  - missedthecue 3y ago
    I have never ever seen an example where Amazon has ratcheted up prices on any product after getting x market share. In fact, I've seen the opposite. Looking at camelcamelcamel price history, many diaper products on Amazon are trending down since 2018-2019 (max price history). Surprising given inflation. It's too easy to enter the diaper (or whatever) retail market that such a tactic makes no sense.
- otikik 3y ago
  I care because once Amazon kills all their competitors then they are the only ones selling diapers. And then they can charge 10 bucks per diaper.
  - dynrzk 3y ago
    And then someone sees that people are buying diapers for 10 bucks and starts selling them for 5.
    - edmundsauto 3y ago
      The latency between the observation of a market opportunity, and actually realizing lower prices at the consumer level, is significant. Millions of people would be charged monopolistic prices for the year it would take. This also assumes Amazon doesn’t buy any competitor early on, such as happened with Warby Parker.
    - winphone1974 3y ago
      Except Amazon has the the diaper production locked up, and we're back where Amazon temporarily sells them for 2 bucks while you try and get your diaper factory off the ground.
    - otikik 3y ago
      What they will see is “geeze, if we try to sell diapers Amazon will crush us”
  - nonethewiser 3y ago
    Yet here we are in reality where they did kill the diaper competitor and we have MORE retailers shipping diapers at a competitive cost.
    - otikik 3y ago
      For now, and only because bezos allows it.
- joefourier 3y ago
  How on earth do GCP and Azure lose money when they (just like AWS) are ridiculously expensive? Like frequently >3x the competition for VMs and for bandwidth egress, I’ve sometimes seen 10x, or charging for things that competitors don’t.
  - qwytw 3y ago
    Well they don't. Azure doesen't in fact it's the complete opposite. Not sure about GCP though, but I'd also be surprised...
- qwytw 3y ago
  > who lose money like GCP and Azure Really? First time I'm hearing Azure is unprofitable. In fact "Intelligent Cloud" which I assume is mainly Azure is their most profitable business... If I understand it correctly (probably not) they actually have higher margins than AWS?
boeingUH60 3y ago
Quidsi founder Marc Lore sold his next company, Jet.com, to Walmart for $3.3 billion [1]. Both Quidsi and Jet.com were never profitable, meaning Lore was also playing the game of venture predation, so hardly any pity from me. To add, Lore's current startup is a premium food delivery service called Wondery that raised $350 million at at $3.5bn valuation last year [2], and it's not profitable too. None of Lore's companies have ever turned profits but he's made enough money to buy the Minnesota Timberwolves...he's the perfect example of venture predation, lol 1- https://corporate.walmart.com/newsroom/2016/08/08/walmart-agrees-to-acquire-jet-com-one-of-the-fastest-growing-e-commerce-companies-in-the-u-s https://corporate.walmart.com/newsroom/2016/08/08/walmart-ag... 2- https://techcrunch.com/2022/06/17/marc-lores-food-delivery-startup-wonder-raises-350m-3-5b-valuation/ https://techcrunch.com/2022/06/17/marc-lores-food-delivery-s...
- post-it 3y ago
  > Lore's current startup is a premium food delivery service called Wondery A brilliant strategy! Amazon already owns a Wondery[0] so they can't acquire his. [0] https://en.wikipedia.org/wiki/Wondery https://en.wikipedia.org/wiki/Wondery
  - psadri 3y ago
    I think his strategy is to exit to Amazon/Walmart/…
  - ttymck 3y ago
    Why can't they acquire it?
- pyrale 3y ago
  > Both Quidsi and Jet.com were never profitable, meaning Lore was also playing the game of venture predation I don't know about the books in this specific case, but losing money doesn't mean you're into venture predation. You could very well be losing money but also have sound unit-cost to price.
  - 3y ago
throwaway290 3y ago
> And don't forget Amazon. They aren't venture backed but they have access to capital at cheaper rates than most countries If we are talking about non-venture cases, OpenAI+Microsoft is doing the same with ChatGPT.
- cheschire 3y ago
  There's a nugget of an interesting concept here. I would like to know more, but I would also like to know more from the folks downvoting you as to why they disagree. Could you please expand on your thought? I know some recent conversation has been had about the potential that open source models have to "win" against Big Tech, so I'd love to know how your thought accounts for that as well.
  - throwaway290 3y ago
    It seems obvious, they are burning through Microsoft's money for now (it was said these chatbots cost way more to run than they make profit) to capture the market and be able to get thick margins later.
    - qwytw 3y ago
      > it was said these chatbots cost way more to run than they make profit Well if it's running on Azure and using massively overpriced Nvidia data center GPUs I can't imagine anything else would be possible. Then again it's not like there any incentive for OpenAI to increase efficiency as long they get 'free' Azure credits (and it's not like the real cost for MS is anything close to what they are supposedly investing into OpenAI. IRRC that 10 billion was mainly not in actual money)
      - throwaway290 3y ago
        The incentive surely comes from Microsoft, they didn't invest with no expectation of ROI:)
snake_doc 3y ago
Amazon isn't unique in this case. Your example is a bit of cherry picking. These tactics are common in retail (demonstrated by the fact that WMT, AMZ, and COST are the top 3 retailers in the world). > access to capital at cheaper rates than most countries due to their position as a stock market darling Last I recall, AMZ uses an internal WACC of 8-9%. That's really only marginally "cheaper" cost of capital than most other mega-cap firms, it's not really a big advantage. Its cost of capital advantage mostly comes from its access to cheap short-term credit in its retail cash cycle, not the equity market (like you suggest). > "reinvesting in the business" to bleed competitors dry. Few other companies on the planet have the ability to run negative or break-even margins the way Amazon does. Costco regularly runs negative or break-even margins in its merchandising. Its language for this is "reinvesting in value" or "reinvesting in price". It can do this, similar to Amazon, because of their membership business. Walmart also regularly runs break-evens/negative margins in select merchandising lines depending on geography and competition.
- deleted 3y ago
  [deleted]
- junofan 3y ago
  Yeah negative cash conversion cycle is Amazon’s legendary advantage. A country could compete by being as efficient with working capital as Amazon.
confoundcofound 3y ago
Amazon can finance at virtually interest-free rates due to their negative working capital.
daveguy 3y ago
> Diapers.com example: "When Bezos’s lieutenants learned of Wal-Mart’s counterbid, they ratcheted up the pressure, telling the Quidsi founders that [Bezos] was such a furious competitor that he would drive diaper prices to zero if they sold to Bentonville. How is this not a serious anti-competitive monopolistic practice? Did the Dept of Justice get involved?
- junofan 3y ago
  Threatening to compete harder is anti-competitive?
  - willcipriano 3y ago
    When China makes threats to dump steel at below cost in the US, politicians call it anti-competitive.
    - nonethewiser 3y ago
      You mean when China does dump steel? Literally subsidized by the government. Thats not really analogous to Amazon.
  - 93po 3y ago
    It's anti-competitive but extremely American/capitalist. The whole premise of our economy is to leverage wealth and advantage to build more wealth and advantage until you're the wealthiest and most advantaged. That Bezos continued to do this is part for the course. If we want true competition, we need a merit-based society instead of a wealth-based one.
    - junofan 3y ago
      I dunno. Bezos is pretty good at managing a company. A lot of people chose to bet on Jeff Bezos. He delivered phenomenal results for decades. I’m not seeing the societal failure.
      - 3y ago

abigail95 3y ago

They have money because of AWS, which is a fantastic product in an extremely competitive market, competing against players who lose money like GCP and Azure. Amazon.com as a store makes next to nothing as profit. Who cares what he did to some diaper companies. Are consumers paying more or less because of amazon? Much less. They basically run amazon.com for no profit and consumers get fantastic deals and cheaper products and more reliable service than ever before. How much would you have to charge for same day delivery for that many products? Could you get close to Amazon? You would have to rip off you customers so badly just to stay alive.

paulddraper 3y ago
> Who cares what he did to some diaper companies. Going out on a limb here, but I'd say the diaper companies.
- lotsofpulp 3y ago
  What happened to the diaper companies? Feel like I see the same brands of diapers still. Procter and gamble, Kimberly Clark, etc.
  - paulddraper 3y ago
    So...your concern is for branding continuity?
    - lotsofpulp 3y ago
      No, my concern was the claim that something happened to the diaper companies is false. Some middleman website might have lost out on being able to sell for more money to Walmart, but that was their choice to not to pursue a deal with Walmart. I am guessing what they were probably concerned about was guaranteeing themselves cashing out at least at Amazon’s offer because if Walmart found out Amazon was backing out of the deal, then Walmart would have had the power to push the price down. Either way, diapers.com was going to lose to Amazon/Walmart/Target/Costco in the long run, so if they were getting a high valuation simply for being a popular website as online shopping was ramping up, then their best move was to sell while the iron was hot.
degreesoffun 3y ago
> Who cares what he did to some diaper companies. Are consumers paying more or less because of amazon? Much less. They are probably generally paying less but Amazon isn't the surefire low-cost provider on the internet the way they used to be. I don't expect the trend of them raising prices to reverse as they gain market power. > How much would you have to charge for same day delivery for that many products? Could you get close to Amazon? You would have to rip off you customers so badly just to stay alive. It's not "ripping off" it's just charging customers the actual cost of the service they are getting.
- nonethewiser 3y ago
  > I don't expect the trend of them raising prices to reverse as they gain market power. Except their competitors have followed suit with cheaper shipping and online shopping. They are the best, but not a monopoly.
rurp 3y ago
> consumers get fantastic deals and cheaper products and more reliable service than ever before. This hasn't been true for many years IME, and will almost certainly get worse over time. Companies like Amazon don't fight tooth and nail to monopolize industries because they want to be nice to people, they do it because it results in power they can use to increase profits over the long term. Less competition means that they can ratchet up prices for customers and squeeze sellers/suppliers more. There are only a handful of general stories online these days, largely due to Amazon's actions.
- missedthecue 3y ago
  I have never ever seen an example where Amazon has ratcheted up prices on any product after getting x market share. In fact, I've seen the opposite. Looking at camelcamelcamel price history, many diaper products on Amazon are trending down since 2018-2019 (max price history). Surprising given inflation. It's too easy to enter the diaper (or whatever) retail market that such a tactic makes no sense.
otikik 3y ago
I care because once Amazon kills all their competitors then they are the only ones selling diapers. And then they can charge 10 bucks per diaper.
- dynrzk 3y ago
  And then someone sees that people are buying diapers for 10 bucks and starts selling them for 5.
  - edmundsauto 3y ago
    The latency between the observation of a market opportunity, and actually realizing lower prices at the consumer level, is significant. Millions of people would be charged monopolistic prices for the year it would take. This also assumes Amazon doesn’t buy any competitor early on, such as happened with Warby Parker.
  - winphone1974 3y ago
    Except Amazon has the the diaper production locked up, and we're back where Amazon temporarily sells them for 2 bucks while you try and get your diaper factory off the ground.
  - otikik 3y ago
    What they will see is “geeze, if we try to sell diapers Amazon will crush us”
- nonethewiser 3y ago
  Yet here we are in reality where they did kill the diaper competitor and we have MORE retailers shipping diapers at a competitive cost.
  - otikik 3y ago
    For now, and only because bezos allows it.
joefourier 3y ago
How on earth do GCP and Azure lose money when they (just like AWS) are ridiculously expensive? Like frequently >3x the competition for VMs and for bandwidth egress, I’ve sometimes seen 10x, or charging for things that competitors don’t.
- qwytw 3y ago
  Well they don't. Azure doesen't in fact it's the complete opposite. Not sure about GCP though, but I'd also be surprised...
qwytw 3y ago
> who lose money like GCP and Azure Really? First time I'm hearing Azure is unprofitable. In fact "Intelligent Cloud" which I assume is mainly Azure is their most profitable business... If I understand it correctly (probably not) they actually have higher margins than AWS?

boeingUH60 3y ago

Quidsi founder Marc Lore sold his next company, Jet.com, to Walmart for $3.3 billion [1]. Both Quidsi and Jet.com were never profitable, meaning Lore was also playing the game of venture predation, so hardly any pity from me. To add, Lore's current startup is a premium food delivery service called Wondery that raised $350 million at at $3.5bn valuation last year [2], and it's not profitable too. None of Lore's companies have ever turned profits but he's made enough money to buy the Minnesota Timberwolves...he's the perfect example of venture predation, lol 1- https://corporate.walmart.com/newsroom/2016/08/08/walmart-agrees-to-acquire-jet-com-one-of-the-fastest-growing-e-commerce-companies-in-the-u-s https://corporate.walmart.com/newsroom/2016/08/08/walmart-ag... 2- https://techcrunch.com/2022/06/17/marc-lores-food-delivery-startup-wonder-raises-350m-3-5b-valuation/ https://techcrunch.com/2022/06/17/marc-lores-food-delivery-s...

post-it 3y ago
> Lore's current startup is a premium food delivery service called Wondery A brilliant strategy! Amazon already owns a Wondery[0] so they can't acquire his. [0] https://en.wikipedia.org/wiki/Wondery https://en.wikipedia.org/wiki/Wondery
- psadri 3y ago
  I think his strategy is to exit to Amazon/Walmart/…
- ttymck 3y ago
  Why can't they acquire it?
pyrale 3y ago
> Both Quidsi and Jet.com were never profitable, meaning Lore was also playing the game of venture predation I don't know about the books in this specific case, but losing money doesn't mean you're into venture predation. You could very well be losing money but also have sound unit-cost to price.
- 3y ago

throwaway290 3y ago

> And don't forget Amazon. They aren't venture backed but they have access to capital at cheaper rates than most countries If we are talking about non-venture cases, OpenAI+Microsoft is doing the same with ChatGPT.

cheschire 3y ago
There's a nugget of an interesting concept here. I would like to know more, but I would also like to know more from the folks downvoting you as to why they disagree. Could you please expand on your thought? I know some recent conversation has been had about the potential that open source models have to "win" against Big Tech, so I'd love to know how your thought accounts for that as well.
- throwaway290 3y ago
  It seems obvious, they are burning through Microsoft's money for now (it was said these chatbots cost way more to run than they make profit) to capture the market and be able to get thick margins later.
  - qwytw 3y ago
    > it was said these chatbots cost way more to run than they make profit Well if it's running on Azure and using massively overpriced Nvidia data center GPUs I can't imagine anything else would be possible. Then again it's not like there any incentive for OpenAI to increase efficiency as long they get 'free' Azure credits (and it's not like the real cost for MS is anything close to what they are supposedly investing into OpenAI. IRRC that 10 billion was mainly not in actual money)
    - throwaway290 3y ago
      The incentive surely comes from Microsoft, they didn't invest with no expectation of ROI:)

snake_doc 3y ago

Amazon isn't unique in this case. Your example is a bit of cherry picking. These tactics are common in retail (demonstrated by the fact that WMT, AMZ, and COST are the top 3 retailers in the world). > access to capital at cheaper rates than most countries due to their position as a stock market darling Last I recall, AMZ uses an internal WACC of 8-9%. That's really only marginally "cheaper" cost of capital than most other mega-cap firms, it's not really a big advantage. Its cost of capital advantage mostly comes from its access to cheap short-term credit in its retail cash cycle, not the equity market (like you suggest). > "reinvesting in the business" to bleed competitors dry. Few other companies on the planet have the ability to run negative or break-even margins the way Amazon does. Costco regularly runs negative or break-even margins in its merchandising. Its language for this is "reinvesting in value" or "reinvesting in price". It can do this, similar to Amazon, because of their membership business. Walmart also regularly runs break-evens/negative margins in select merchandising lines depending on geography and competition.

deleted 3y ago
[deleted]
junofan 3y ago
Yeah negative cash conversion cycle is Amazon’s legendary advantage. A country could compete by being as efficient with working capital as Amazon.

confoundcofound 3y ago

Amazon can finance at virtually interest-free rates due to their negative working capital.

daveguy 3y ago

> Diapers.com example: "When Bezos’s lieutenants learned of Wal-Mart’s counterbid, they ratcheted up the pressure, telling the Quidsi founders that [Bezos] was such a furious competitor that he would drive diaper prices to zero if they sold to Bentonville. How is this not a serious anti-competitive monopolistic practice? Did the Dept of Justice get involved?

junofan 3y ago
Threatening to compete harder is anti-competitive?
- willcipriano 3y ago
  When China makes threats to dump steel at below cost in the US, politicians call it anti-competitive.
  - nonethewiser 3y ago
    You mean when China does dump steel? Literally subsidized by the government. Thats not really analogous to Amazon.
- 93po 3y ago
  It's anti-competitive but extremely American/capitalist. The whole premise of our economy is to leverage wealth and advantage to build more wealth and advantage until you're the wealthiest and most advantaged. That Bezos continued to do this is part for the course. If we want true competition, we need a merit-based society instead of a wealth-based one.
  - junofan 3y ago
    I dunno. Bezos is pretty good at managing a company. A lot of people chose to bet on Jeff Bezos. He delivered phenomenal results for decades. I’m not seeing the societal failure.
    - 3y ago