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Companies have a lot of tools at their disposal to hide things on their balance sheet for a while. However when that happens it typically means the numbers are

by JCM9 1y ago

Companies have a lot of tools at their disposal to hide things on their balance sheet for a while. However when that happens it typically means the numbers are bad. Really bad. If they weren’t, they’d do everything they can to highlight how great the investment is going. Same reason why seemingly every CEO on the planet is making hand wavy statements about how their company is leading with AI and it will revolutionize their industry, and yet almost nobody is willing to break out this amazing stuff in their P&L. Funny how that works.

zerosizedweasle 1y ago
Even if this isn't Enrony, this sounds so Enrony (if you know anything about the Enron accounting scandal) "How Microsoft has managed to avoid disclosing such basic details is baffling. The company in its financial reports identifies OpenAl as an equity-method investment. That means OpenAl, by definition, is a related party of Microsoft under the accounting rules. Microsoft, however, doesn't identify OpenAl in its financial reports as a related party, and doesn't say anything about its transactions with OpenAl in its related-party disclosures."
- deleted 1y ago
  [deleted]
- KoolKat23 1y ago
  If its equity accounted it won't be considered a related party as far as I understand. Related party in IFRS isnt what you think it is. Its the equivalent of "extended family".
  - kgwgk 1y ago
    https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/financial_statement_/financial_statement___18_US/chapter_26_related_p_US/265_common_related_p_US.html https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/fin... 26.5 Common related party transactions In order to comply with the related party disclosure requirements, a reporting entity must identify all of its transactions with related parties.[…] 26.5.1 Disclosure of related party equity method investments Equity method investees are, by definition, related parties of the equity holder.
    - KoolKat23 1y ago
      It's not a related party that's the point.
      - kgwgk 1y ago
        “Equity method investees are, by definition, related parties of the equity holder.” suggests otherwise. You may need to elaborate your point.
        KoolKat23 11mo ago
        No, these are separate subjects with specific definitions (it's a specific name not a phrase of speech). I struggle to explain it briefly as it's an entire subject and I might be lambasted here for wrongly simplifying as it's nuanced. Ill give it a go (it's been 15 years since the textbooks). Equity accounted for investments imply it's treated as one and the same as the business, the individual entries will be included with the rest of the entries related to the business being reported on. Related parties are considered external and are basically reported "at arms length". This still doesn't necessarily mean they're providing you with the consolidated results to make matters more confusing. Separately, They're required to report intercompany transactions with related parties (specific meaning) as there is a lack of visibility on the innerworkings of that related party business (it's external and not included) and the potential conflict of interest exists as they're related and could be used to skew the ratios/reporting of the reported entities results.
        kgwgk 11mo ago
        What do you object to exactly? 1) OpenAI is an “associate” of Microsoft in the IAS 28 sense (which is the reason why it accounts for the investment using the equity method). 2) OpenAI is a related entity to Microsoft in the IAS 24 sense because of (1) If you disagree with the points above how does that fit with the relevant standards? ——— For what it’s worth ChatGPT tells me the following: If Microsoft has significant influence over OpenAI (as implied by equity-method accounting), then: OpenAI is a related party of Microsoft; and Microsoft must disclose the nature of the relationship and any material transactions between them (e.g., cloud services, licensing, revenue sharing). ——— IAS 24 - Related Party Disclosures https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2022/issued/part-a/ias-24-related-party-disclosures.pdf?bypass=on https://www.ifrs.org/content/dam/ifrs/publications/pdf-stand... A related party is a person or entity that is related to the entity that is preparing its financial statements (in this Standard referred to as the 'reporting entity'). […] (b) An entity is related to a reporting entity if any of the following conditions applies:[…] (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). […] A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged. —- IAS 28 - Investments in Associates and Joint Ventures https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2022/issued/part-a/ias-28-investments-in-associates-and-joint-ventures.pdf?bypass=on https://www.ifrs.org/content/dam/ifrs/publications/pdf-stand... The following terms are used in this Standard with the meanings specified: An associate is an entity over which the investor has significant influence. […] An entity with joint control of, or significant influence over, an investee shall account for its investment in an associate or a joint venture using the equity method except when that investment qualifies for exemption in accordance with paragraphs 17-19. ——— Edit: I wrote about IRFS below but US GAAP seems similar. What are the “specific definitions” you mention? https://www.ey.com/content/dam/ey-unified-site/ey-com/en-us/technical/accountinglink/documents/ey-frd02230-161us-06-27-2025.pdf https://www.ey.com/content/dam/ey-unified-site/ey-com/en-us/... An investor and its equity method investee are considered related parties under ASC 850 and should disclose material intra-entity transactions as related-party transactions. https://arch.bdo.com/getContentAsset/b40b6cee-4d4f-4182-bf43-2807426391f6/bb620d56-5e9c-4774-8d17-fb9323eefdf4/Equity-Method-of-Accounting-Under-ASC-323-BDO-Blueprint-08-25.pdf https://arch.bdo.com/getContentAsset/b40b6cee-4d4f-4182-bf43... DISCLOSURE REQUIREMENTS Related-party transactions An equity method investment and an investment accounted for using the fair value option are related parties to the investor, as defined in ASC 850. The investor must provide disclosures about related-party transactions with such entities, including: The nature of the relationship A description of transactions, including the amounts Amounts due to or from the investee.
- moralestapia 1y ago
  AFAIK Microsoft didn't put any kind of liquid money into OpenAI, it's something like "you can use up to nB USD of our resources for free", not sure how that should go into accounting. It could even be a liability without much juggling.
  - zerosizedweasle 1y ago
    Yeah, Enron didn't really put any money into its related parties, it just used to them to move things around. I don't think it is Enron, but related parties shenanigans give me the chills.
  - JCM9 1y ago
    Accounting mostly focuses on the value of things, not “liquid money.”
    - moralestapia 1y ago
      [flagged]
      - tiahura 1y ago
        0
      - jasomill 1y ago
        IANAA, but AFAIK income from bartering is taxable on the basis of the fair market value of the goods or services bartered at the time of exchange.
        JCM9 1y ago
        Yes. You don’t need to be moving $ to have a profit or loss. You could take your salary in sacks of potatoes. You still owe the government taxes on the fair market value of your pile of potatoes. A while back there was a big fuss because executives were caught not paying tax on the fair market value of extra perks they were getting like use of the corporate jet on the weekends for trips to the beach house. Anything that’s not purely a business expense is considered compensation and is taxable.
- philipwhiuk 1y ago
  A play about Enron's financial scandal was recently back showing in London. Feels somewhat prescient.
jgalt212 1y ago
> Companies have a lot of tools at their disposal to hide things on their balance sheet for a while. That's why some analysts ignore most company-provided metrics and just focus on cash-flow. You need inside and outside of the house fudgers to mess with that metric.
- actionfromafar 1y ago
  But isn’t there some of that? Microsoft buys services for prices it might influence the sticker price of
  - jgalt212 1y ago
    sticker price, or amount of cash that actually changes hands?
brookst 1y ago
I think you’re calling out two different phenomena: 1) the gold rush mentality leads to bad investments (at least in the short term), and 2) in a hype bubble companies are incentivized to attach everything to the hype, even if it’s not real (many companies talk AI but aren’t seriously investing). Both are true in many cases. But to the extent companies are making major investments that are strategically correct but won’t make money for years, it’s still the right move to hide stuff in financial statements. Markets don’t reward long term investments. Everything has to be short term, and if it’s not paying off instantly, short term investors get no value and want it stopped. Net result: lots of PR about AI, but almost every company is incentivized to downplay it financially.
- JCM9 1y ago
  You’re not wrong, but the point of the article is that for a publicly traded company there’s an expectation of more transparency. The size of the losses is getting to a point where it can’t just be kept hidden inside a handwavy “other” line item.
- adventured 1y ago
  > Markets don’t reward long term investments. Everything has to be short term, and if it’s not paying off instantly, short term investors get no value and want it stopped. The AI investment bubble is almost entirely about making long-term, extremely expensive investments. That's what the gigantic datacenter build-out is about, not short-term investments and short-term returns. They're telling everybody, persistently, that they're making huge long-term bets, and the market is rewarding them like crazy. See: Oracle's run due to long-term bets on AI (it's certainly not short-term results causing the stock to do that, their short-term growth has been mediocre). Amazon for two decades repeatedly told investors they were making extremely expensive, long-term investments in build-out (eg their fulfillment build-out era), where the primary payoff would be far into the future. The market bought into the long-term on the basis that it was attached to Bezos at the center (that he'd be there to deliver that long-term result). The same is true about Elon Musk with Tesla: they have endlessly made outlandish long-term proclamation to drive their stock. Tesla: robot super business, self-driving taxi business, et al - these are 10-20-30 year long-term claims by Tesla and the market has aggressively rewarded it. That's because they think Musk will/might be there to guide it to actuality. In most cases investors don't buy in because they know the CEO & team won't be around even seven years from now. Markets (investors) reward long-term if they can be made to believe in the long-term. The issue is that most companies are not believable on long-term statements, they don't have a leadership that will be around for any long-term delivery. Buffett, Bezos, Musk, Zuckerberg were/are long-term attachments so the market has been willing to buy in on various long-term bets.
niwtsol 1y ago
AWS is a great example of the opposite, started around ~2006, it was originally deemed an "internal project" so they did not break it out. It was also really really tiny compared to retail revenue (amazon.com). They didn't actually start to break it out until 2015 and that is after wall street was somewhat demanding for it as it was well known it had experienced exponential growth and was generating billions for amazon. Were they trying to had bad numbers? Negative, they were trying to hide how awesome it was doing because it gave them the ability to make further gains w/ first mover advantage before competitors could react. https://www.channelfutures.com/cloud/amazon-com-breaks-out-aws-cloud-revenues-for-first-time-in-q1-report https://www.channelfutures.com/cloud/amazon-com-breaks-out-a...
- JCM9 1y ago
  Fair. There are counter examples, although those are pretty rare. Usually publicly traded companies don’t hide when they’re doing really well. The inverse true now with AWS. Lots of press about analysis on how AWS is in “last place” on AI and while AWS leadership has been doing a lot of hand waving to say they’re not, it’s a pretty safe bet this week’s earnings call won’t have any hard financial numbers to counter press that they’re way behind.
  - JustExAWS 1y ago
    In the grand scheme of things it doesn’t matter. As long as companies are building infrastructure on AWS and AWS can host third party models like it’s doing now with Bedrock. In my experience - and I’ve run comparisons against the various models for projects (consulting) - their in house Nova models usually give me the best results on the spectrum of speed/quality/cost I need for a given project.
- bcrosby95 1y ago
  The difference is Amazon was being quiet about AWS, whereas everyone is hyping up how game changing their AI is.
- manquer 1y ago
  It wasn’t the opposite . By 2015 they were trying to hide how much of the group growth and profits were largely contributed by just AWS , i.e. they were hiding the e-commerce margins . Without AWS and subscriptions, Amazon is quite an unprofitable company. Both overall growth and margin driven by AWS(and prime) while E-commerce revenue remains outsized because they count GMV as revenue which is iffy even when they own the merchandise, but being largely a marketplace these days GMV is very misleading metric. It would be like Stripe decided to count their revenue as $1.4T the amount they processed this year as revenue rather than $10-20B they actually got after paying the banks, merchants , VISA etc . This 20B is not profit either just the pie from which salaries cloud costs etc have to be paid to get to actual profit.
andsoitis 1y ago
> Companies have a lot of tools at their disposal to hide things on their balance sheet for a while. However when that happens it typically means the numbers are bad. Really bad. If they weren’t, they’d do everything they can to highlight how great the investment is going. There are many legitimate reasons to not disclose an investment on your balance sheet: - materiality: immaterial compared to overall position - classification: research-phase or contingent on future event - control & ownership: if you don't have significant control or ownership - off-balance sheet arrangements: SPVs, JVs, lease agreements that don't meet consolidation criteria (disclosed in notes, but not recognized as assets or liabilities due to limited exposure) - strategy or confidentiality: minimize visibility to protect competitive information or negotiations; must still comply with disclosure rules so details might appear in aggregated or summarized form - regulatory or accounting policy differences: IFRS vs. US GAAP have different recognition and measurement bases - held-for-trading or short-term nature: e.g. marketable securities might be short-term trading assets so would be grouped together in a single line item, rather than disclosed separately
- JCM9 1y ago
  Yes. The point of the article though is that the list of usual excuses is becoming hard to justify here.
- fluidcruft 1y ago
  Sounds like you are suggesting there are a lot of legitimate reasons to mislead shareholders. OpenAI is private and that's one thing. Microsoft is not.
afavour 1y ago
I wonder if this is how it felt shortly before the dot com crash. So enraging that my livelihood is likely to end up threatened by people just flat out lying and they will not experience any consequences for it.
- deleted 1y ago
  [deleted]
- JCM9 1y ago
  “Irrational exuberance.” There are parallels here of folks getting so caught up in the hype that they forgot business fundamentals. Everytime folks say “but this is different” and every time it’s not.
  - CamperBob2 1y ago
    It's certainly different this time; machines have never been able to do anything like what they can do now. You might as well argue that the Industrial Revolution or the Internet itself wasn't "different this time." But the phrase "this time" requires a lot of hand-waving. The current generation of models is obviously a bubble, which means that businesses based on them are also participants in a bubble. The market seems to be pricing in various unspecified future miracles. Given the history of AI to date, the miracles needed to justify current valuations might arrive next week, next year, or 30 years from now. They will arrive, though. That part is no longer up for debate by anyone who's been paying attention since AlphaGo, never mind Vaswani.
    - afavour 1y ago
      But that isn’t different than previous bubbles, either. The first dot com crash was an over investment in online shopping. And yet we all online shop for everything now. Same with the video games crash in the 80s, now a wildly successful industry.
    - drw85 1y ago
      I don't think anyone is questioning current or future capabilities. It's more of a question if it will ever actually be profitable or marketable without subsidizing most of the cost of running it. We're seeing the same with streaming services right now. 5-10 years ago, everyone thought they needed their own streaming service and heavily invested into building one and acquiring licenses or producing content for it. Now we're seeing the part where they are trying to make it profitable by raising prices/adding ads or both. I'm not sure if OpenAI will ever be able to just run by themselves. Without major outside investments to subsidize the cost of actually having users use their services.

by JCM9 1y ago

zerosizedweasle 1y ago

Even if this isn't Enrony, this sounds so Enrony (if you know anything about the Enron accounting scandal) "How Microsoft has managed to avoid disclosing such basic details is baffling. The company in its financial reports identifies OpenAl as an equity-method investment. That means OpenAl, by definition, is a related party of Microsoft under the accounting rules. Microsoft, however, doesn't identify OpenAl in its financial reports as a related party, and doesn't say anything about its transactions with OpenAl in its related-party disclosures."

deleted 1y ago
[deleted]
KoolKat23 1y ago
If its equity accounted it won't be considered a related party as far as I understand. Related party in IFRS isnt what you think it is. Its the equivalent of "extended family".
- kgwgk 1y ago
  https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/financial_statement_/financial_statement___18_US/chapter_26_related_p_US/265_common_related_p_US.html https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/fin... 26.5 Common related party transactions In order to comply with the related party disclosure requirements, a reporting entity must identify all of its transactions with related parties.[…] 26.5.1 Disclosure of related party equity method investments Equity method investees are, by definition, related parties of the equity holder.
  - KoolKat23 1y ago
    It's not a related party that's the point.
    - kgwgk 1y ago
      “Equity method investees are, by definition, related parties of the equity holder.” suggests otherwise. You may need to elaborate your point.
      - KoolKat23 11mo ago
        No, these are separate subjects with specific definitions (it's a specific name not a phrase of speech). I struggle to explain it briefly as it's an entire subject and I might be lambasted here for wrongly simplifying as it's nuanced. Ill give it a go (it's been 15 years since the textbooks). Equity accounted for investments imply it's treated as one and the same as the business, the individual entries will be included with the rest of the entries related to the business being reported on. Related parties are considered external and are basically reported "at arms length". This still doesn't necessarily mean they're providing you with the consolidated results to make matters more confusing. Separately, They're required to report intercompany transactions with related parties (specific meaning) as there is a lack of visibility on the innerworkings of that related party business (it's external and not included) and the potential conflict of interest exists as they're related and could be used to skew the ratios/reporting of the reported entities results.
        kgwgk 11mo ago
        What do you object to exactly? 1) OpenAI is an “associate” of Microsoft in the IAS 28 sense (which is the reason why it accounts for the investment using the equity method). 2) OpenAI is a related entity to Microsoft in the IAS 24 sense because of (1) If you disagree with the points above how does that fit with the relevant standards? ——— For what it’s worth ChatGPT tells me the following: If Microsoft has significant influence over OpenAI (as implied by equity-method accounting), then: OpenAI is a related party of Microsoft; and Microsoft must disclose the nature of the relationship and any material transactions between them (e.g., cloud services, licensing, revenue sharing). ——— IAS 24 - Related Party Disclosures https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2022/issued/part-a/ias-24-related-party-disclosures.pdf?bypass=on https://www.ifrs.org/content/dam/ifrs/publications/pdf-stand... A related party is a person or entity that is related to the entity that is preparing its financial statements (in this Standard referred to as the 'reporting entity'). […] (b) An entity is related to a reporting entity if any of the following conditions applies:[…] (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). […] A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged. —- IAS 28 - Investments in Associates and Joint Ventures https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2022/issued/part-a/ias-28-investments-in-associates-and-joint-ventures.pdf?bypass=on https://www.ifrs.org/content/dam/ifrs/publications/pdf-stand... The following terms are used in this Standard with the meanings specified: An associate is an entity over which the investor has significant influence. […] An entity with joint control of, or significant influence over, an investee shall account for its investment in an associate or a joint venture using the equity method except when that investment qualifies for exemption in accordance with paragraphs 17-19. ——— Edit: I wrote about IRFS below but US GAAP seems similar. What are the “specific definitions” you mention? https://www.ey.com/content/dam/ey-unified-site/ey-com/en-us/technical/accountinglink/documents/ey-frd02230-161us-06-27-2025.pdf https://www.ey.com/content/dam/ey-unified-site/ey-com/en-us/... An investor and its equity method investee are considered related parties under ASC 850 and should disclose material intra-entity transactions as related-party transactions. https://arch.bdo.com/getContentAsset/b40b6cee-4d4f-4182-bf43-2807426391f6/bb620d56-5e9c-4774-8d17-fb9323eefdf4/Equity-Method-of-Accounting-Under-ASC-323-BDO-Blueprint-08-25.pdf https://arch.bdo.com/getContentAsset/b40b6cee-4d4f-4182-bf43... DISCLOSURE REQUIREMENTS Related-party transactions An equity method investment and an investment accounted for using the fair value option are related parties to the investor, as defined in ASC 850. The investor must provide disclosures about related-party transactions with such entities, including: The nature of the relationship A description of transactions, including the amounts Amounts due to or from the investee.
moralestapia 1y ago
AFAIK Microsoft didn't put any kind of liquid money into OpenAI, it's something like "you can use up to nB USD of our resources for free", not sure how that should go into accounting. It could even be a liability without much juggling.
- zerosizedweasle 1y ago
  Yeah, Enron didn't really put any money into its related parties, it just used to them to move things around. I don't think it is Enron, but related parties shenanigans give me the chills.
- JCM9 1y ago
  Accounting mostly focuses on the value of things, not “liquid money.”
  - moralestapia 1y ago
    [flagged]
    - tiahura 1y ago
      0
    - jasomill 1y ago
      IANAA, but AFAIK income from bartering is taxable on the basis of the fair market value of the goods or services bartered at the time of exchange.
      - JCM9 1y ago
        Yes. You don’t need to be moving $ to have a profit or loss. You could take your salary in sacks of potatoes. You still owe the government taxes on the fair market value of your pile of potatoes. A while back there was a big fuss because executives were caught not paying tax on the fair market value of extra perks they were getting like use of the corporate jet on the weekends for trips to the beach house. Anything that’s not purely a business expense is considered compensation and is taxable.
philipwhiuk 1y ago
A play about Enron's financial scandal was recently back showing in London. Feels somewhat prescient.

jgalt212 1y ago

> Companies have a lot of tools at their disposal to hide things on their balance sheet for a while. That's why some analysts ignore most company-provided metrics and just focus on cash-flow. You need inside and outside of the house fudgers to mess with that metric.

actionfromafar 1y ago
But isn’t there some of that? Microsoft buys services for prices it might influence the sticker price of
- jgalt212 1y ago
  sticker price, or amount of cash that actually changes hands?

brookst 1y ago

I think you’re calling out two different phenomena: 1) the gold rush mentality leads to bad investments (at least in the short term), and 2) in a hype bubble companies are incentivized to attach everything to the hype, even if it’s not real (many companies talk AI but aren’t seriously investing). Both are true in many cases. But to the extent companies are making major investments that are strategically correct but won’t make money for years, it’s still the right move to hide stuff in financial statements. Markets don’t reward long term investments. Everything has to be short term, and if it’s not paying off instantly, short term investors get no value and want it stopped. Net result: lots of PR about AI, but almost every company is incentivized to downplay it financially.

JCM9 1y ago
You’re not wrong, but the point of the article is that for a publicly traded company there’s an expectation of more transparency. The size of the losses is getting to a point where it can’t just be kept hidden inside a handwavy “other” line item.
adventured 1y ago
> Markets don’t reward long term investments. Everything has to be short term, and if it’s not paying off instantly, short term investors get no value and want it stopped. The AI investment bubble is almost entirely about making long-term, extremely expensive investments. That's what the gigantic datacenter build-out is about, not short-term investments and short-term returns. They're telling everybody, persistently, that they're making huge long-term bets, and the market is rewarding them like crazy. See: Oracle's run due to long-term bets on AI (it's certainly not short-term results causing the stock to do that, their short-term growth has been mediocre). Amazon for two decades repeatedly told investors they were making extremely expensive, long-term investments in build-out (eg their fulfillment build-out era), where the primary payoff would be far into the future. The market bought into the long-term on the basis that it was attached to Bezos at the center (that he'd be there to deliver that long-term result). The same is true about Elon Musk with Tesla: they have endlessly made outlandish long-term proclamation to drive their stock. Tesla: robot super business, self-driving taxi business, et al - these are 10-20-30 year long-term claims by Tesla and the market has aggressively rewarded it. That's because they think Musk will/might be there to guide it to actuality. In most cases investors don't buy in because they know the CEO & team won't be around even seven years from now. Markets (investors) reward long-term if they can be made to believe in the long-term. The issue is that most companies are not believable on long-term statements, they don't have a leadership that will be around for any long-term delivery. Buffett, Bezos, Musk, Zuckerberg were/are long-term attachments so the market has been willing to buy in on various long-term bets.

niwtsol 1y ago

AWS is a great example of the opposite, started around ~2006, it was originally deemed an "internal project" so they did not break it out. It was also really really tiny compared to retail revenue (amazon.com). They didn't actually start to break it out until 2015 and that is after wall street was somewhat demanding for it as it was well known it had experienced exponential growth and was generating billions for amazon. Were they trying to had bad numbers? Negative, they were trying to hide how awesome it was doing because it gave them the ability to make further gains w/ first mover advantage before competitors could react. https://www.channelfutures.com/cloud/amazon-com-breaks-out-aws-cloud-revenues-for-first-time-in-q1-report https://www.channelfutures.com/cloud/amazon-com-breaks-out-a...

JCM9 1y ago
Fair. There are counter examples, although those are pretty rare. Usually publicly traded companies don’t hide when they’re doing really well. The inverse true now with AWS. Lots of press about analysis on how AWS is in “last place” on AI and while AWS leadership has been doing a lot of hand waving to say they’re not, it’s a pretty safe bet this week’s earnings call won’t have any hard financial numbers to counter press that they’re way behind.
- JustExAWS 1y ago
  In the grand scheme of things it doesn’t matter. As long as companies are building infrastructure on AWS and AWS can host third party models like it’s doing now with Bedrock. In my experience - and I’ve run comparisons against the various models for projects (consulting) - their in house Nova models usually give me the best results on the spectrum of speed/quality/cost I need for a given project.
bcrosby95 1y ago
The difference is Amazon was being quiet about AWS, whereas everyone is hyping up how game changing their AI is.
manquer 1y ago
It wasn’t the opposite . By 2015 they were trying to hide how much of the group growth and profits were largely contributed by just AWS , i.e. they were hiding the e-commerce margins . Without AWS and subscriptions, Amazon is quite an unprofitable company. Both overall growth and margin driven by AWS(and prime) while E-commerce revenue remains outsized because they count GMV as revenue which is iffy even when they own the merchandise, but being largely a marketplace these days GMV is very misleading metric. It would be like Stripe decided to count their revenue as $1.4T the amount they processed this year as revenue rather than $10-20B they actually got after paying the banks, merchants , VISA etc . This 20B is not profit either just the pie from which salaries cloud costs etc have to be paid to get to actual profit.

andsoitis 1y ago

> Companies have a lot of tools at their disposal to hide things on their balance sheet for a while. However when that happens it typically means the numbers are bad. Really bad. If they weren’t, they’d do everything they can to highlight how great the investment is going. There are many legitimate reasons to not disclose an investment on your balance sheet: - materiality: immaterial compared to overall position - classification: research-phase or contingent on future event - control & ownership: if you don't have significant control or ownership - off-balance sheet arrangements: SPVs, JVs, lease agreements that don't meet consolidation criteria (disclosed in notes, but not recognized as assets or liabilities due to limited exposure) - strategy or confidentiality: minimize visibility to protect competitive information or negotiations; must still comply with disclosure rules so details might appear in aggregated or summarized form - regulatory or accounting policy differences: IFRS vs. US GAAP have different recognition and measurement bases - held-for-trading or short-term nature: e.g. marketable securities might be short-term trading assets so would be grouped together in a single line item, rather than disclosed separately

JCM9 1y ago
Yes. The point of the article though is that the list of usual excuses is becoming hard to justify here.
fluidcruft 1y ago
Sounds like you are suggesting there are a lot of legitimate reasons to mislead shareholders. OpenAI is private and that's one thing. Microsoft is not.

afavour 1y ago

I wonder if this is how it felt shortly before the dot com crash. So enraging that my livelihood is likely to end up threatened by people just flat out lying and they will not experience any consequences for it.

deleted 1y ago
[deleted]
JCM9 1y ago
“Irrational exuberance.” There are parallels here of folks getting so caught up in the hype that they forgot business fundamentals. Everytime folks say “but this is different” and every time it’s not.
- CamperBob2 1y ago
  It's certainly different this time; machines have never been able to do anything like what they can do now. You might as well argue that the Industrial Revolution or the Internet itself wasn't "different this time." But the phrase "this time" requires a lot of hand-waving. The current generation of models is obviously a bubble, which means that businesses based on them are also participants in a bubble. The market seems to be pricing in various unspecified future miracles. Given the history of AI to date, the miracles needed to justify current valuations might arrive next week, next year, or 30 years from now. They will arrive, though. That part is no longer up for debate by anyone who's been paying attention since AlphaGo, never mind Vaswani.
  - afavour 1y ago
    But that isn’t different than previous bubbles, either. The first dot com crash was an over investment in online shopping. And yet we all online shop for everything now. Same with the video games crash in the 80s, now a wildly successful industry.
  - drw85 1y ago
    I don't think anyone is questioning current or future capabilities. It's more of a question if it will ever actually be profitable or marketable without subsidizing most of the cost of running it. We're seeing the same with streaming services right now. 5-10 years ago, everyone thought they needed their own streaming service and heavily invested into building one and acquiring licenses or producing content for it. Now we're seeing the part where they are trying to make it profitable by raising prices/adding ads or both. I'm not sure if OpenAI will ever be able to just run by themselves. Without major outside investments to subsidize the cost of actually having users use their services.