6 ms·

> This is still $150M of pure gravy every single year. The issue is rate of return. They are evidently spending $4.85bn on Xbox per year. The US federal intere

> This is still $150M of pure gravy every single year. The issue is rate of return. They are evidently spending $4.85bn on Xbox per year. The US federal interest rate is 3.5% so if you just put that money in US bonds you would get about $175M per year of much purer simpler gravy.

hx8 3mo ago
Exactly. The inflation rate is about 3%, so the people at Xbox worked very hard all year to have about the same value they put into it.
- evan_ 3mo ago
  Only if you count the value of the games produced as $0
  - hx8 3mo ago
    Wouldn't a fair way to count the value be all of the money selling them produced minus all of the money you spent producing them?
    - slg 3mo ago
      No, because the customers bought the games. That means the customers valued the games at some value higher than the purchase price. There's a ton of surplus value for society produced as part of this process that doesn't end up on a company's balance sheet.
  - mvdtnz 3mo ago
    That's pretty accurate when you consider the unfiltered slop produced by studios like Bethesda, Blizzard, Activision, King and most other Microsoft XBox studios.
  - Kirby64 3mo ago
    So, even worse than 0, if we’re saying the value of games is not measurable but substantial?
  - senkora 3mo ago
    It's a question of "value created" vs "value captured". They captured about as much value as the risk-free rate of return. Value that is created but not captured (e.g. the value of consumers enjoying games and consoles above and beyond the price that those consumers paid) is typically not considered when making business decisions.
- londons_explore 3mo ago
  All the people were paid a salary for the work they did. And there was still money leftover .
  - azertify 3mo ago
    That is an ideal way of seeing this. As a for-profit company their priority is shareholder value, so the focus isn't "people paid and games were made", it's the money left-over, and even more importantly that the number must grow.
delecti 3mo ago
But the revenue is coming out of the same org. That $5bn revenue only exists because of the $4.85bn expense. That money doesn't exist to put into bonds unless it's coming out of the games org. They can only make their margin percent look better by making their absolute margin $150mm worse.
skeeter2020 3mo ago
Russ: "Anyway, next thing you know, we IPO, stock triples in a day and AOL gobbles us up. All of a sudden, I'm 22 years young and I'm worth 1.2 billion. Now a couple decades later, I'm worth 1.4. You do the math." Richard: "Okay. Well, that's a gain of $200 million over 20 years. Um, 16.66 repeating. That's less than 1% return. Inflation is, like, 1.7. I think CDs are 2%. So that's less than a CD."
- theeyescanner 3mo ago
  [flagged]
- kridsdale1 3mo ago
  I liked your reference. And if Russ is blowing $100M a year on lifestyle and still has those numbers then he’s winning at life.
  - tommit 3mo ago
    > winning at life What a take. Of a character that is, albeit incredibly entertaining to watch, not displayed in a good light at all. Alternatively, he's everything that's wrong with the system. He's certainly not generating any value to society. But yeah, in a purely individualistic take, he's certainly winning at life. While making everyone else's a bit worse.
- _carbyau_ 3mo ago
  I know this is a TV show reference and a point about investment strategy but... If I had 1.2 billion dollars I wouldn't care what investment strategy I had. I've got enough to spend $30k a day for 100 years. At any age, that'll do.
  - bluGill 3mo ago
    In generally spending increases to cover income. 30k per day sounds like a lot, but it isn't hard to spend that once you get used to having that much to spend. Your mansion with the heated indoor pool is expensive to maintain. Plus you probably have a vacation mansion someplace. Then you see a nice yacht and think "why not" - more costs. You aren't flying coach to get to all those things - and one day you realize your bills are more than the 30k/day you have to spend and you are broke despite being objectively rich. It sounds like a nice problem to have, but it appears to be very stressful from what I can tell. (I'd still like to have it, and like most I think that I personally wouldn't get that far over my head)
junofan 3mo ago
You’re saying that they should take the money people pay to buy Xboxes and put it in T-bills instead of delivering Xboxes? What happens when people ask where the Xbox they ordered is?
gopher_space 3mo ago
Another point of view is that your people are so good that their division turns a profit under mismanagement. It costs MS negative hundred mil to keep the whole thing spun up on a bad day.

hx8 3mo ago

Exactly. The inflation rate is about 3%, so the people at Xbox worked very hard all year to have about the same value they put into it.

evan_ 3mo ago
Only if you count the value of the games produced as $0
- hx8 3mo ago
  Wouldn't a fair way to count the value be all of the money selling them produced minus all of the money you spent producing them?
  - slg 3mo ago
    No, because the customers bought the games. That means the customers valued the games at some value higher than the purchase price. There's a ton of surplus value for society produced as part of this process that doesn't end up on a company's balance sheet.
- mvdtnz 3mo ago
  That's pretty accurate when you consider the unfiltered slop produced by studios like Bethesda, Blizzard, Activision, King and most other Microsoft XBox studios.
- Kirby64 3mo ago
  So, even worse than 0, if we’re saying the value of games is not measurable but substantial?
- senkora 3mo ago
  It's a question of "value created" vs "value captured". They captured about as much value as the risk-free rate of return. Value that is created but not captured (e.g. the value of consumers enjoying games and consoles above and beyond the price that those consumers paid) is typically not considered when making business decisions.
londons_explore 3mo ago
All the people were paid a salary for the work they did. And there was still money leftover .
- azertify 3mo ago
  That is an ideal way of seeing this. As a for-profit company their priority is shareholder value, so the focus isn't "people paid and games were made", it's the money left-over, and even more importantly that the number must grow.

delecti 3mo ago

But the revenue is coming out of the same org. That $5bn revenue only exists because of the $4.85bn expense. That money doesn't exist to put into bonds unless it's coming out of the games org. They can only make their margin percent look better by making their absolute margin $150mm worse.

skeeter2020 3mo ago

Russ: "Anyway, next thing you know, we IPO, stock triples in a day and AOL gobbles us up. All of a sudden, I'm 22 years young and I'm worth 1.2 billion. Now a couple decades later, I'm worth 1.4. You do the math." Richard: "Okay. Well, that's a gain of $200 million over 20 years. Um, 16.66 repeating. That's less than 1% return. Inflation is, like, 1.7. I think CDs are 2%. So that's less than a CD."

theeyescanner 3mo ago
[flagged]
kridsdale1 3mo ago
I liked your reference. And if Russ is blowing $100M a year on lifestyle and still has those numbers then he’s winning at life.
- tommit 3mo ago
  > winning at life What a take. Of a character that is, albeit incredibly entertaining to watch, not displayed in a good light at all. Alternatively, he's everything that's wrong with the system. He's certainly not generating any value to society. But yeah, in a purely individualistic take, he's certainly winning at life. While making everyone else's a bit worse.
_carbyau_ 3mo ago
I know this is a TV show reference and a point about investment strategy but... If I had 1.2 billion dollars I wouldn't care what investment strategy I had. I've got enough to spend $30k a day for 100 years. At any age, that'll do.
- bluGill 3mo ago
  In generally spending increases to cover income. 30k per day sounds like a lot, but it isn't hard to spend that once you get used to having that much to spend. Your mansion with the heated indoor pool is expensive to maintain. Plus you probably have a vacation mansion someplace. Then you see a nice yacht and think "why not" - more costs. You aren't flying coach to get to all those things - and one day you realize your bills are more than the 30k/day you have to spend and you are broke despite being objectively rich. It sounds like a nice problem to have, but it appears to be very stressful from what I can tell. (I'd still like to have it, and like most I think that I personally wouldn't get that far over my head)

junofan 3mo ago

You’re saying that they should take the money people pay to buy Xboxes and put it in T-bills instead of delivering Xboxes? What happens when people ask where the Xbox they ordered is?

gopher_space 3mo ago

Another point of view is that your people are so good that their division turns a profit under mismanagement. It costs MS negative hundred mil to keep the whole thing spun up on a bad day.