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You know what? Amazon, Werner and/or Benedict Evans can spin it anyway they want (like the kid who gets caught with his hand in the cookie jar) but the bottom l

by larrys 12y ago

You know what? Amazon, Werner and/or Benedict Evans can spin it anyway they want (like the kid who gets caught with his hand in the cookie jar) but the bottom line is they aren't making money and haven't pinned to a date they plan to do so. (So making arguments as far as one business unit vs. another don't matter many business operate the same way and in sum make money.) All the long winded explanation of the circumstances (such that Benedict gives in his writeup) hoping that people will be overwhelmed and not want to question what is going on (like a 20 page legal contract that can't easily be deciphered by non lawyers) I mean who even has the time to fully vet even what Benedict has "summarized" (not that it can be called that). There is a saying in negotiating which is "you can name the price if I can name the terms". In the case of Amazon it's like "Let me name the business model and I will also name the time frame toward profitability". One thing is for sure. Bezos may prove right in the end or not but there is no question he is operating according to his vision and doesn't look anywhere close to deviating from his (Benedict's words here) "lifestyle" business.

vasilipupkin 12y ago
your comment is at best a gross exaggeration. They are making money, but they are re-investing that money at a crazy rate into new businesses. That represents a huge bet, which their shareholders are willing to take on. The alternative would be to pay out cashflow from operations to shareholders in the form of dividends, or grow slower. But look at the stock price over the last 5 years - clearly, investors want to take on the bet
- vasilipupkin 12y ago
  Curious about the downvote. "spin it any way you want but they are not making money" is incorrect.
- jgalt212 12y ago
  Diminishing returns will be Amazon's downfall
- marincounty 12y ago
  I too am curios about the down voting, but this site is sometimes so polarized, or stifling with political correctness it's nauseating. Jeff Bezos can do no wrong in this market place; that is where we have a somewhat growing marketplace for certain professions. Professions that provide a livable wage, with a few dollars left over after rent in order to spend on Amazon. Besides Jeff's vanity projects(newspaper, drones, I don't fell like doing a bunch of research)--his business model has one glaring flaw. He needs cheap gas. There is good reason why have huge trucks that move a large amount of goods from one location to a more convenient location. Don't get me wrong I like Amazon. I am surprised he hasen't bought up some of the dirt cheap commercial Realestate and put in Amazon retail outlets. Outlets that just provide a place where customers could pick up their packages. Hell--he could automate them, and they could be open 27/7?
  - larrys 12y ago
    There is a saying "ask 10 doctors or lawyers get 10 opinions". Well this is my opinion based on 35 years of business experience and having graduated from an Ivy business school as well. And reading, operating and observing business from before most HN readers were born. In other words not just reading blogs or online comments or whatever. It's a pattern that I've seen. Having seen bullshit of different types previously. Sure I could be wrong "ask 10 doctors" but I do have a basis for my thoughts. Edit: Because of course being in business and making a profit for 35 years means nothing to the younger generation on HN.
    - TTPrograms 12y ago
      https://en.wikipedia.org/wiki/Argument_from_authority https://en.wikipedia.org/wiki/Argument_from_authority
  - morgante 12y ago
    > Outlets that just provide a place where customers could pick up their packages. Hell--he could automate them, and they could be open 27/7? http://www.amazon.com/gp/help/customer/display.html?nodeId=201530900 http://www.amazon.com/gp/help/customer/display.html?nodeId=2...
- jamestimmins 12y ago
  Makes me think of Peter Thiel's line: "we like to invest in businesses that aren't making a profit, because they know what to do with their money". Businesses that are paying back profits via dividends/buybacks are communicating that they have more money than they know what to do with (at least Thiel would say so).
  - dinkumthinkum 12y ago
    Some business are simply motivated by profit rather than making headlines with mercurial statements on TechCrunch.
    - cthalupa 12y ago
      Considering Thiel's net worth of 1.5billion, I imagine he's motivated by making a profit as well.
pdq 12y ago
There has been a distortion in the markets lately with the value of cash. Over the long term, buying a share of any company (Amazon, Intel, Walmart) has to give a return to the holder of that share. Otherwise, you are trading cash to hold onto a piece of paper and get it returned back as cash when you sell it. This invalidates the time value of money. In other words, if I am not getting a quarterly/annual dividend (ie a profit payout) on a stock, over the long term there is no incentive to hold onto that stock, because I could get a dividend from a different stock or some other investment in general.
- vasilipupkin 12y ago
  well, you are betting that you will get a dividend at a much later point in the future because of the growth you think you will realize. if Amazon makes $100 it can either give it to you now, or reinvest it and give you the reinvested result much later. It makes sense to give you the $100 now, if they don't see any good investment opportunities. But they think they do, and market agrees with them, hence massive growth in stock price over the last 3-5 years.
- jmccree 12y ago
  If the company can increase the value of your share by spending the money rather than giving it back as a dividend, why would they not? Buffet's Berkshire Hathaway is famous for never having given a dividend. Amazon is still seeing good revenue growth year after year, I see no reason not to continue down that path as long as they can afford the growth.
- ericd 12y ago
  It's also a unit of control, which has increasing value as the value of the company increases.
- thaumasiotes 12y ago
  By this argument, a bar of gold invalidates the time value of money. So does the existence of artwork.
  - eru 12y ago
prostoalex 12y ago
> but the bottom line is they aren't making money and haven't pinned to a date they plan to do so They have a healthy EBITDA, they're just choosing to reinvest their earnings, as they deem it's more efficient use of their capital than declaring a profit, paying a corporate profit tax off it, and then keeping the rest of the cash.

by larrys 12y ago

vasilipupkin 12y ago

your comment is at best a gross exaggeration. They are making money, but they are re-investing that money at a crazy rate into new businesses. That represents a huge bet, which their shareholders are willing to take on. The alternative would be to pay out cashflow from operations to shareholders in the form of dividends, or grow slower. But look at the stock price over the last 5 years - clearly, investors want to take on the bet

vasilipupkin 12y ago
Curious about the downvote. "spin it any way you want but they are not making money" is incorrect.
jgalt212 12y ago
Diminishing returns will be Amazon's downfall
marincounty 12y ago
I too am curios about the down voting, but this site is sometimes so polarized, or stifling with political correctness it's nauseating. Jeff Bezos can do no wrong in this market place; that is where we have a somewhat growing marketplace for certain professions. Professions that provide a livable wage, with a few dollars left over after rent in order to spend on Amazon. Besides Jeff's vanity projects(newspaper, drones, I don't fell like doing a bunch of research)--his business model has one glaring flaw. He needs cheap gas. There is good reason why have huge trucks that move a large amount of goods from one location to a more convenient location. Don't get me wrong I like Amazon. I am surprised he hasen't bought up some of the dirt cheap commercial Realestate and put in Amazon retail outlets. Outlets that just provide a place where customers could pick up their packages. Hell--he could automate them, and they could be open 27/7?
- larrys 12y ago
  There is a saying "ask 10 doctors or lawyers get 10 opinions". Well this is my opinion based on 35 years of business experience and having graduated from an Ivy business school as well. And reading, operating and observing business from before most HN readers were born. In other words not just reading blogs or online comments or whatever. It's a pattern that I've seen. Having seen bullshit of different types previously. Sure I could be wrong "ask 10 doctors" but I do have a basis for my thoughts. Edit: Because of course being in business and making a profit for 35 years means nothing to the younger generation on HN.
  - TTPrograms 12y ago
    https://en.wikipedia.org/wiki/Argument_from_authority https://en.wikipedia.org/wiki/Argument_from_authority
- morgante 12y ago
  > Outlets that just provide a place where customers could pick up their packages. Hell--he could automate them, and they could be open 27/7? http://www.amazon.com/gp/help/customer/display.html?nodeId=201530900 http://www.amazon.com/gp/help/customer/display.html?nodeId=2...
jamestimmins 12y ago
Makes me think of Peter Thiel's line: "we like to invest in businesses that aren't making a profit, because they know what to do with their money". Businesses that are paying back profits via dividends/buybacks are communicating that they have more money than they know what to do with (at least Thiel would say so).
- dinkumthinkum 12y ago
  Some business are simply motivated by profit rather than making headlines with mercurial statements on TechCrunch.
  - cthalupa 12y ago
    Considering Thiel's net worth of 1.5billion, I imagine he's motivated by making a profit as well.

pdq 12y ago

There has been a distortion in the markets lately with the value of cash. Over the long term, buying a share of any company (Amazon, Intel, Walmart) has to give a return to the holder of that share. Otherwise, you are trading cash to hold onto a piece of paper and get it returned back as cash when you sell it. This invalidates the time value of money. In other words, if I am not getting a quarterly/annual dividend (ie a profit payout) on a stock, over the long term there is no incentive to hold onto that stock, because I could get a dividend from a different stock or some other investment in general.

vasilipupkin 12y ago
well, you are betting that you will get a dividend at a much later point in the future because of the growth you think you will realize. if Amazon makes $100 it can either give it to you now, or reinvest it and give you the reinvested result much later. It makes sense to give you the $100 now, if they don't see any good investment opportunities. But they think they do, and market agrees with them, hence massive growth in stock price over the last 3-5 years.
jmccree 12y ago
If the company can increase the value of your share by spending the money rather than giving it back as a dividend, why would they not? Buffet's Berkshire Hathaway is famous for never having given a dividend. Amazon is still seeing good revenue growth year after year, I see no reason not to continue down that path as long as they can afford the growth.
ericd 12y ago
It's also a unit of control, which has increasing value as the value of the company increases.
thaumasiotes 12y ago
By this argument, a bar of gold invalidates the time value of money. So does the existence of artwork.
- eru 12y ago

prostoalex 12y ago

> but the bottom line is they aren't making money and haven't pinned to a date they plan to do so They have a healthy EBITDA, they're just choosing to reinvest their earnings, as they deem it's more efficient use of their capital than declaring a profit, paying a corporate profit tax off it, and then keeping the rest of the cash.