A fairly vacuous article, but here's the takeaway: > The company is taking losses to invest in the future, and Amazon’s 10 percent stock drop today shows that

A fairly vacuous article, but here's the takeaway: > The company is taking losses to invest in the future, and Amazon’s 10 percent stock drop today shows that some investors are uncomfortable with that. While its tough to be sure exactly what motivated that drop, the reasoning sounds accurate. More importantly, it shows a huge part of why public corporations in the US are so broken and may actually be hurting the US's competitiveness. In a recent study (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1959125 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1959125) entitled "The Dark Side of Analyst Coverage: The Case of Innovation", the researchers found that publicly traded companies who attract the attention of financial analysts are less innovative. Why? Share prices. For many in upper management of these companies, their compensation is tied to share prices. Management works hard to keep their share prices high. Further, if share prices drop too much, the Board might decide it's time to start firing their "inefficient" managers. In a worst-case scenario, if a company has value but their share prices continue to drop, they leave themselves vulnerable to a hostile takeover, thus risking everyone's job. In a publicly traded company, everyone is working together to prop share prices up. How do they do that? Amongst other things, they're much more risk-averse. Taking a risk is a strong signal to the market that you might fail and they reward you with lower share prices. That's why the above paper found that public companies produce fewer patents and of lower value: everyone is so focused on short-term goals that long-term opportunities are at odds with their mandate of maintaining shareholder value. Curiously, it looks like public corporations can share the same defect that democracy does: people can vote. Sadly, democracies produce mediocre politicians because average voters have average intellect (duh) and can't evaluate brilliant candidates (http://www.livescience.com/18706-people-smart-democracy.html http://www.livescience.com/18706-people-smart-democracy.html). Rhetoric takes the place of thoughtfulness and we see this with corporations, too. Frankly, I have no idea how to avoid these dilemmas but pretending they don't exist is surely not good.