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Businesses The Almighty Buck

Why Amazon Is Profitless Only By Choice 258

Posted by Soulskill
from the i-barely-remember-shipping-fees dept.
An anonymous reader writes "Eugene Wei, a former employee at Amazon and Hulu, explains why Amazon continues to post quarterly earnings statements with lots of revenue but no actual profit. Many of Amazon's retail businesses and platforms are quite profitable by themselves, Wei says, a fact that is hidden by large expenditures on investment for the future. He writes, 'If Amazon has so many businesses that do make a profit, then why is it still showing quarterly losses, and why has even free cash flow decreased in recent years? Because Amazon has boundless ambition. It wants to eat global retail. This is one area where the press and pundits accept Amazon's statements at face value. Given that giant mission, Amazon has decided to continue to invest to arm itself for a much larger scale of business. If it were purely a software business, its fixed cost investments for this journey would be lower, but the amount of capital required to grow a business that has to ship millions of packages to customers all over the world quickly is something only a handful of companies in the world could even afford. ... I'm convinced Amazon could easily turn a quarterly profit now. Many times in its history, it could have been content to stop investing in new product lines, new fulfillment centers, new countries. The fixed cost base would flatten out, its sales would continue growing for some period of time and then flatten out, and it would harvest some annuity of profits. Even the first year I joined Amazon in 1997, when it was just a domestic book business, it could have been content to rest on its laurels. But Jeff is not wired that way. There are very few people in technology and business who are what I'd call apex predators. Jeff is one of them, the most patient and intelligent one I've met in my life.'"
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Why Amazon Is Profitless Only By Choice

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  • "apex predators" (Score:5, Insightful)

    by Anonymous Coward on Sunday October 27, 2013 @08:36AM (#45250561)

    In the moral confusion promoted by global capitalism, "apex predator" became a term of approval - even among the prey.

    • by Anonymous Coward on Sunday October 27, 2013 @08:49AM (#45250593)

      I always read it as "total psychopath".

    • by Swampash (1131503) on Sunday October 27, 2013 @09:17AM (#45250717)

      Apex predators are an essential part of any ecosystem. When apex predators start failing that means the ecosystem is failing.

      So it's basically just another metaphor that doesn't work for business. When a Great White Shark dies, that's bad for the ocean. When a Sumatran Tiger dies, that's bad for the jungle. When a sociopathic CEO fails, I don't give a shit.

      • by bsolar (1176767) on Sunday October 27, 2013 @09:31AM (#45250751)
        Apex predators are "essential" in the sense that spontaneusly emerge in ecosystems. When apex predators starts failing it's bad only for the current equilibrium of the ecosystem, which will be replaced by a new equilibrium (not necessarly worse than the previous) in which there will be most likely another apex predator. Actually exactly the same applies in business.
        • by Anonymous Coward

          You are of course correct. However, evolution is a poor model to emulate in our corporate management. A recent example is the banking industry, pure evolution and Darwinism for companies is fine if you're prepared for global economic collapse their 'drives" might create. I prefer to liken capitalism to fire, something useful when carefully regulated and carefully tended and watched. As a species we should use our intelligence to avoid the Darwinistic penalty for mistakes.

      • by Shavano (2541114) on Sunday October 27, 2013 @09:46AM (#45250811)

        Apex predators are an essential part of any ecosystem. When apex predators start failing that means the ecosystem is failing.

        So it's basically just another metaphor that doesn't work for business. When a Great White Shark dies, that's bad for the ocean. When a Sumatran Tiger dies, that's bad for the jungle. When a sociopathic CEO fails, I don't give a shit.

        Another way it doesn't apply is that the thing that is essential to the predator's survival is an animal that is totally destroyed when so used. Jeff Bezos is a businessman. The thing his business survives on is the fact that customers come to him with their business. He makes a margin on that business. the customer survives the transaction.

        It is very un-predatory behavior.

        Viewed at another level, you might say that his company is trying to take revenue away from competitors, and has an ambition to take all their business and thereby destroy them. Well fine, but that's not like what a predator does either. A predator tries to get its prey, but then it fills its belly and is satisfied and doesn't hunt for a while. It doesn't constantly invest energy in trying to expand its food supply. In fact, it invests no energy in that, beyond chasing competitors out of its territory. It never tries to increase its territory beyond what it needs to keep its belly full and its belly is not infinitely expansible.

        So let's dispense with the bad metaphor. The behavior isn't predatory.

        It's a distinctly human behavior: empire building.

        • by dcollins (135727) on Sunday October 27, 2013 @11:23AM (#45251375) Homepage

          "It's a distinctly human behavior: empire building."

          This metaphor is no better. An empire is a bunch of kingdoms or geographic entities forged together into one institution. If Amazon were buying up/taking over existing brick-and-mortar stores, then empire-building would be a pretty good metaphor. But it's not -- it's consuming their custom and destroying those businesses entirely. So in that regard the predation metaphor is really better.

          • Re: (Score:2, Informative)

            by Anonymous Coward

            But it's not -- it's consuming their custom and destroying those businesses entirely.

            Except Amazon can't consume anyone's business. A customer decides where to spend money.

            By that virtue, I propose the metaphor of: Brick and mortar stores are too busy making out with their Monroebots to adjust to an ever-changing marketplace.

            DON'T. DATE. ROBOTS.

            • >Except Amazon can't consume anyone's business. A customer decides where to spend money.

              Yea. You don't understand how 'huge' business works.

              Once you're big enough you can afford lobbying solely in your favor. With size you can use the 'walmart effect' by buying so much production the manufactures are more dependent on your then the smaller shops. When it comes down to it, the most powerful influence of consumers is price. If you have a huge enough amount of capitol you can find ways to sell your product

          • If I can hearken back to "The Neverending Story" which seems most appropriate given the discussion on reading...

            It sounds like you're saying Amazon = "The Nothing"

        • Re: (Score:2, Insightful)

          by Anonymous Coward

          Another way it doesn't apply is that the thing that is essential to the predator's survival is an animal that is totally destroyed when so used. Jeff Bezos is a businessman. The thing his business survives on is the fact that customers come to him with their business. He makes a margin on that business. the customer survives the transaction.

          The predatory metaphor is not in relation to the customers. It is in relation to other businesses. The atoms in the prey animals survive just fine too, but we still call predators predators. Not that I necessarily think it's a very useful metaphor, but if it's a bad one, that's not because of the reason that you point out.

        • So let's dispense with the bad metaphor. The behavior isn't predatory.

          Let me formulate it in this way then (sticking to biology):
          Capitalism is analogous to evolution (survival of the fittest).
          In this respect, the monopolist is analogous to humans (the species that conquers them all).

          So, according to this reasoning, what Amazon is doing is completely "natural". (Not that I'm in favor of it).

          • by AK Marc (707885)
            Power is unstable. When everyone is equal (Animal Farm the day after the uprising, or 100 equal businesses), there is a power vacuum at the top. When one gets ahead, as one always will, for a variety of reasons, and the moment you have someone with any more power than the others, they will work to increase that gap. That's the "natural" way. People don't try to equal their peers, they try to dominate them. "All animals are equal, but some animals are more equal than others" Or the monopolistic practice
          • by 93 Escort Wagon (326346) on Sunday October 27, 2013 @03:02PM (#45252621)

            The guy picked the term "apex predator" not because it fit, but because it sounded cool.

            Hopefully Bezos took a shower before this guy decided to so thoroughly kiss his ass.

      • by game kid (805301)

        ...and that is why you don't call business an "ecosystem" [gnu.org].

    • Re: (Score:3, Interesting)

      In the moral confusion promoted by global capitalism, "apex predator" became a term of approval - even among the prey.

      It should be -- he's a visionary seeing where things are going and is making it happen. In this sense, capitalism is doing its proper, beneficial job: providing better, cheaper, more convenient services and products.

      People will find other things to do -- they always have. 150 years ago, if you had said only 2% of the population would be working farms instead of over 90, politicians would scream, "what the hell, what are they all gonna do, starve?". Yet populations skyrocketted as did health and food cont

  • by gweihir (88907) on Sunday October 27, 2013 @08:37AM (#45250563)

    For anybody that disagrees: The holy grail of capitalism, the "market" only works if there is competition. Amazon is aiming squarely at a monopoly and that is the most evil construct capitalism knows as it negates all positive effects that capitalism can have.

    • by EmagGeek (574360)

      Last I checked I could buy things online from thousands and thousands of different online retailers.

      That sounds an awful lot like competition to me (and there are browser addons that automatically search competitive online retailers for items you're looking at).

      • by Anonymous Coward on Sunday October 27, 2013 @09:03AM (#45250663)

        Amazon opting to be flat, effectively at 0% margin, is a game other businesses don't have the will to do, and Amazon doesn't have the will to do so indefinitely. The idea is to endure long enough to starve out competitors until monopoly acheived. At that point, rather obscene profit can be reaped. This is critical because much of Amazon's businesses is very intensive in up front investment to get logistics or infrastructure going. Competitors currently can compete because the logistics and infrastructure they built is already there. If competitors are forced out over time, it's really hard for a *new* competitor to emerge.

        I've seen it discussed in hosting versus EC2. While companies can operate cheaper or as cheap as EC2, they don't see money at that scale. I've seen at least one company talk very seriously about starting to close down hosting and reclaim investment in datacenter footprint since EC2 has made it impossible to profit. Once that move has been made, this company is unlikely to ever get back into the game again because it would mean having to build up a lot of expensive infrastructure with low likelihood of long term payoff.

        • by MightyYar (622222)

          effectively at 0% margin, is a game other businesses don't have the will to do

          One look at Amazon's share price should tell you why that is a simple mentality. The market rewards revenue growth handsomely. Amazon investors have won many times over. Amazon executives are paid handsomely. A company does not need to pay out dividends to be a good investment.

          • Re: (Score:2, Insightful)

            by Anonymous Coward

            A company does not need to pay out dividends to be a good investment.

            For institutional investors that can direct policy at a company because they have enough shares to have enough votes and/or seats on the board, I would agree with you.

            For individual investors looking to buy 10, 100, or even 1000 shares: that's delusional. Small-scale investors pretty much require dividend payments for a stock to be a good investment, otherwise you are simply speculating (read: gambling) that the institutional investors ar

            • by MightyYar (622222)

              For individual investors looking to buy 10, 100, or even 1000 shares: that's delusional.

              Look at the price history of the S&P 500 some time. Sure, it's even better with total returns, but letting a company reinvest money instead of returning it can most certainly be a good strategy for the small investor. If you have to consider taxes, then a growth strategy makes even more sense - I'd much rather pay the long-term capital gains rate (though the special qualified dividend rate kind of renders the point moot these days).

        • Re: (Score:2, Insightful)

          by gweihir (88907)

          Indeed. The classical strategy is this:
          1. Kill all competitors, even if it brings you to the brink of death yourself.
          2. Now that the competition is dead, raise prices arbitrarily high.

          This is one of the reasons why a completely free market does not work.

        • I think it's dumb every time I hear we need to lower big business taxes to foster innovation and create jobs. Tech companies produce tons of high paying jobs, make investors rich, and often don't pay a dime in taxes, instead investing in growth, creating even more jobs.

          As a public company, producing profits sucks to some extent. You have to pay taxes, investors ask for dividends or stock buy-backs, and you lose control over investing in growth as investors become addicted to taking your profits instead of

        • by bitt3n (941736)

          Amazon opting to be flat, effectively at 0% margin, is a game other businesses don't have the will to do

          This is baffling to me. Why doesn't Walmart compete with Amazon? Walmart has the cash to fight it out with them, and they certainly have the incentive, but it seems like they're getting beaten badly. Their site sucks relative to Amazon's. If it were just a question of a relentless desire to expand and dominate, it seems like there would be more competition between them. Is it really just a question of taxation? Does Walmart compete effectually in states where Amazon gets taxed?

          • Funny you should mention that:

            To Catch Up, Walmart Moves to Amazon Turf [nytimes.com]

            October 19, 2013
            " The country's largest retailer, which for years didn't blink at would-be competitors, is now under such a threat from Amazon that it is frantically playing catch-up by learning the technology business, including starting @WalmartLabs at Walmart Global E-Commerce, its dot-com division.

            The two retail behemoths, one the king of the physical store and the other the conqueror of the online world, are battling over e-commerce

        • by couchslug (175151)

          "Amazon opting to be flat, effectively at 0% margin, is a game other businesses don't have the will to do, and Amazon doesn't have the will to do so indefinitely."

          Keyword, "will". Other businesses CAN do it, it could be greatly to their competitive advantage, but not doing it is their CHOICE.

          I'd like to see more businesses compete to serve me.

        • by swillden (191260) <shawn-ds@willden.org> on Sunday October 27, 2013 @09:19PM (#45255027) Homepage Journal

          Amazon opting to be flat, effectively at 0% margin

          No, Amazon is not operating at 0% margin. Amazon is generating healthy profits from its business. But it is choosing to reinvest those profits rather than either pay them out as dividends or pile them up in the bank.

          The idea is to endure long enough to starve out competitors until monopoly acheived. At that point, rather obscene profit can be reaped.

          Since the basis of your argument is factually incorrect, there's really no reason to go into this, but I want to. Your conclusion "At that point, rather obscene profit can be reaped" is a common assertion of predatory pricing theories... but one that doesn't really seem to actually exist. In the last few decades courts have added a test for predation that requires that there be a realistic prospect of recouping the losses due to predatory pricing in the ensuing period of monopoly rents. After courts adopted that test, no antitrust litigation based on a predation theory has succeeded, because it's extremely hard for anyone to rationally believe that losses will be recouped.

          Why? Two reasons.

          First, predatory pricing is ruinously expensive. Far more so for the would-be monopolist than its targets. This is because in order for a company to be in position to execute such a play it must already own most of the market, which means that the net effect of the below-cost prices it sets get multiplied by the volume it already does, plus the new share that it acquires from its targets.

          Second, assuming the monopolist does manage to drive out all competition, and begins charging obscene prices, it becomes not only possible but very profitable for competitors to enter (or re-enter) the market. Actually, because of this, if the competitors have access to good capital markets it's unlikely that they'll be driven out of business at all, because everyone will recognize the higher prices which are to come and so capital will be available to enable the competitors to survive the price war.

          So-called "post-Chicago" theorists have been able to construct some narrow scenarios in which predatory pricing is rational, but they're very narrow and ultimately boil down to circumstances in which the competitors can be successfully bluffed by the would-be monopolist.

          Note that all of this is distinct from a different scenario, in which the big player isn't being anti-competitive at all, but is instead is just much more efficient, and therefore has much lower costs. That sort of "monopolist" can maintain healthy profit margins while pricing goods below what the competition can afford. This, however, is not harmful to consumers, in fact it's good for consumers. Of course there's the possibility that once the competition is driven out the monopolist will raise prices while retaining its low costs. Should that ever happen, then that would be an appropriate time for regulators to step in. I'm not aware of any real-world examples, though.

      • "Last I checked I could buy things online from thousands and thousands of different online retailers."

        Last I checked, and I checked very recently, very many of retailers were in fact reselling Amazon products at a price locked to that of Amazon. This means that in the mid to long term that either Amazon, or an Amazon-like, most probably from China, will take all the cake.

        When globalization works, long tail be damned, the winner takes all.

        The article forgets *why* Bezos is doing this: it is out of sheer pa

    • by wisnoskij (1206448) on Sunday October 27, 2013 @08:55AM (#45250617) Homepage

      It is hard to hate someone who provides such a great service.

      And I do not see any Monopoly like actions, like MS has done in the past. just peerless competition.

      I have not seen them stifling other competing services, just competing and winning against retail. It is not their fault that retail does not seem willing to change to compete, and that no one is decent launching Amazon-like services.

      It is like Steam, sure they have a monopoly, but it is not their fault.

      • by Anonymous Coward on Sunday October 27, 2013 @09:19AM (#45250725)

        It is hard to hate someone who provides such a great service.

        This. Amazon has changed business for the better. When I was a kid anything bought via phone or mail was "allow 4 to 6 weeks for delivery". Only with Amazon did this finally change to 2 or 3 days. Now Amazon is investing heavily to provide same day delivery. What a gigantic difference. Others now provide delivery this quickly but only because they can't compete with Amazon otherwise.

        So far Amazon has been a great example of Capitalism's good points (except for maybe refusing to collect state sales tax until recently). I'm surprised to see all this hate.

        • by Shavano (2541114)

          With same day delivery, Amazon is looking to be the replacement for your local retailer. Or rather, to make it work, maybe what they really need to be is the delivery service for your local retailer. They find the best price they can get for the item you want from a local retailer and deliver it the same day. No need to stock anything at all.

        • by gweihir (88907)

          The current state is not a problem and in fact is good. But if the article describes their end-game accurately, this "good period" will be limited and followed by utter evil.

        • Re: (Score:2, Insightful)

          by Anonymous Coward

          When I was a kid anything bought via phone or mail was "allow 4 to 6 weeks for delivery". Only with Amazon did this finally change to 2 or 3 days.

          How much of this is Amazon and how much of this is UPS and FedEx modernizing their services with the advent of newer technology? Amazon doesn't actually deliver anything, though they've made great strides in minimizing the time spent preparing the order. They certainly have a symbiotic relationship with shippers and the two have worked together to streamline the process, but a good bit of that 4-6 weeks was spent in transit, and eliminating much of that time is none of Amazon's doing.

        • It's fine and all to bash amazon for not collecting sales tax until you actually look at the stupidly high sales taxes some states have. Where I live it is 9.1%. It's annoying as hell when, for example, you buy a new laptop and have to pay an extra $100 above the asking price. We still pay income taxes and real estate taxes, in addition to taxes on vehicle registration. We also pay the highest taxes of any state for having cell phone service.

        • Amazon has changed business for the better. When I was a kid anything bought via phone or mail was "allow 4 to 6 weeks for delivery". Only with Amazon did this finally change to 2 or 3 days.

          This is incorrect. FedEx and UPS offered overnight service in the 1970s and 1980s. LL Bean (to pick just one example) used to offer free two day shipping on their catalog orders.

          Let's not rewrite history. If anything, credit for this should go to the shipping companies that saw a huge hole and filled it.

      • sweatshop (Score:5, Interesting)

        by Anonymous Coward on Sunday October 27, 2013 @09:39AM (#45250781)

        The Amazon warehouses are run like sweatshops [ft.com]. There are some other more detailed articles out there, if you can find them. The working conditions are horrendous and the pay abysmal, and nearly all of it temp work. So, while on the surface the service might be great, it comes at a cost. There is a reason they're able to undercut and drive out the local businesses which actually pay their employees and provide benefits.

        • Re:sweatshop (Score:5, Insightful)

          by Anonymous Coward on Sunday October 27, 2013 @09:59AM (#45250873)

          The Amazon warehouses are run like sweatshops [ft.com]. There are some other more detailed articles out there, if you can find them. The working conditions are horrendous and the pay abysmal, and nearly all of it temp work. So, while on the surface the service might be great, it comes at a cost. There is a reason they're able to undercut and drive out the local businesses which actually pay their employees and provide benefits.

          So those employees should file lawsuits regarding the OSHA violations that make their working conditions illegal.

          Oh, they're not doing anything illegal? It's just a low-paying job for what they get accomplished? All those employees should quit working for Amazon then, and get another job.

          There are no better jobs for people with their education level, you say? So if Amazon didn't exist they would be unemployed and even worse off, because they sure as hell wouldn't be able to find a job at those bookstores as the knowledgeable salespeople? Holy crap, Amazon should burn!

          Right now we have a very large amount of unskilled workers in the US. While there are a lot of people who are actually competing for those crappy temp jobs because they're not qualified for anything, the environment and pay is going to suck. The solution isn't to bitch at Amazon, those people wouldn't be any better off if Amazon didn't exist, they'd definitely be worse off. The solution is to do a better job at education. Once there are less people who are willing to take those jobs, Amazon, Wal-Mart, and others will be forced to raise salaries and improve working conditions in order to get workers. Things will get more expensive for the consumer, and most people are going to bitch about it, but we're going to be better off for it in the long run.

          • Re:sweatshop (Score:5, Insightful)

            by don (3029853) on Sunday October 27, 2013 @10:30AM (#45251049)

            The Amazon warehouses are run like sweatshops [ft.com]. There are some other more detailed articles out there, if you can find them. The working conditions are horrendous and the pay abysmal, and nearly all of it temp work. So, while on the surface the service might be great, it comes at a cost. There is a reason they're able to undercut and drive out the local businesses which actually pay their employees and provide benefits.

            So those employees should file lawsuits regarding the OSHA violations that make their working conditions illegal.

            Oh, they're not doing anything illegal? It's just a low-paying job for what they get accomplished? All those employees should quit working for Amazon then, and get another job.

            There are no better jobs for people with their education level, you say? So if Amazon didn't exist they would be unemployed and even worse off, because they sure as hell wouldn't be able to find a job at those bookstores as the knowledgeable salespeople? Holy crap, Amazon should burn!

            Right now we have a very large amount of unskilled workers in the US. While there are a lot of people who are actually competing for those crappy temp jobs because they're not qualified for anything, the environment and pay is going to suck. The solution isn't to bitch at Amazon, those people wouldn't be any better off if Amazon didn't exist, they'd definitely be worse off. The solution is to do a better job at education. Once there are less people who are willing to take those jobs, Amazon, Wal-Mart, and others will be forced to raise salaries and improve working conditions in order to get workers. Things will get more expensive for the consumer, and most people are going to bitch about it, but we're going to be better off for it in the long run.

            So, let Amazon, Walmart etc. do whatever they want, since it's just a bunch of uneducated, unskilled workers we're talking about? You're right about one thing, the solution is for these people to get education/skills in order to rise above these types of jobs. Luckily for the big companies, there will always be a supply of unskilled, uneducated workers, and since we're not going to bitch at Amazon for treating employees like subhumans, they will continue to do so. The same way a big chunk of Walmart employees are on public assistance, because the pay/hours are not enough on their own. So, we - the taxpayers, are footing the bill for welfare/foodstamps etc. so that Walmart can make more profit. In essence, we're subsidizing Walmart family's fortune. There will never be a point where the big companies are forced to raise salaries, because there will always be a supply of people who are unable to get a better job.

            • Re:sweatshop (Score:5, Insightful)

              by Gavagai80 (1275204) on Sunday October 27, 2013 @03:41PM (#45252857) Homepage
              What you do is you change the law so that what they're doing is illegal. Nothing else will make a difference anyway.
          • Re:sweatshop (Score:5, Insightful)

            by Anonymous Coward on Sunday October 27, 2013 @11:48AM (#45251515)

            Right now we have a very large amount of unskilled workers in the US. While there are a lot of people who are actually competing for those crappy temp jobs because they're not qualified for anything, the environment and pay is going to suck.

            It's worse than that. We also have a very large number of skilled workers who can't find employment in their fields, so they are also competing for those crappy temp jobs!

          • "There are no better jobs for people with their education level, you say? So if Amazon didn't exist they would be unemployed and even worse off, because they sure as hell wouldn't be able to find a job at those bookstores as the knowledgeable salespeople?"

            No, they would be having a decent pay doing basically the same for a local retailer, one of the very many there would be instead of Amazon as the one single behemoth.

            "While there are a lot of people who are actually competing for those crappy temp jobs bec

      • by houghi (78078) on Sunday October 27, 2013 @09:52AM (#45250839)

        The problem is that nobody can become competition, unless you have enough money already.
        Competition is always explained with a 19th century business model in mind where you talk about many bakeries in a city that will keep prices down.

        This is true if there are several parameters true.
        1) There is competition to start with and/or it is easy to start a new competitor. e.g. I can start making bread myself and start selling it.
        Reinheitsgebot in Germany was a law to prevent competition, not just high quality beer.
        2) You talk about only a minority of items. So not the whole chain from beginning till end and no crossover products.
        4) You need to have a big enough sample of competitions to prevent price fixing between competitors. When you have only a few competitors, they will devide the market into shares without any real incentive to rock the boat, thus no need of lowering the prices anymore.

        When your customer base a a few hundred or a few thousand people in a city, you can easily say that having say 10 or 100 bakeries for bread is enough to keep the competition going.

        When your customer base is 1.000.000.000+ people, having 10 companies means in reality not having real competition.

        I agree that it is not their fault (other than trying to be a monopoly is almost naturally for a company.) that does not make it right nor should it stop people from preventing this from happening.

        That however needs government rules and the people who pay the government are not willing to let that happen.

        One of the advantages of being a monopoly is that during the race towards the moment that they are a monopoly, you pay less. The moment it becomes a monopoly, not only will they be able to dictate the price (and that still might be low) they also dictate the product. So perhaps YOU are interested in price, I might be interested in other things.

        Look at the ISPs that are unwilling to invest in faster Internet for over a long period of time. Google will take over, because what they are interested in is selling your data and the more data you give them, the more they can sell.

        Having not enough competition will slow down innovation. And when I think of competition on a global scale, I imagine hundreds if not thousands of companies that I should be able to choose from.

        If that comes at a slightly higher price overall, I am gladly willing to pay for that.

        • If that comes at a slightly higher price overall, I am gladly willing to pay for that.

          You might be, and you even might be in a position to do so. However, the vast majority of people out there are not willing to pay a higher price for their morals. The truth of the matter is that Amazon is doing exactly what people want it to do. Because most people aim squarely for a smaller price on the items they buy. I'd take a guess and say that that is predominately due to the consumer mindset that we as a society have been forced into breeding. Just listen to some of the leading Fed economists and how

          • " The truth of the matter is that Amazon is doing exactly what people want it to do. Because most people aim squarely for a smaller price on the items they buy."

            Absolutly wrong.

            At least for the moment, what Amazon really brings is catalogue. While a reasonable price, that's not the main of it, but the fact that I gain access to products all over the world I otherwise wouldn't even know they exist.

            And Amazon is not going for low prices if at all possible. An anecdotal example: I just bought a (quite expens

        • by gl4ss (559668)

          there's some businesses that would have enough money to start to compete, but they choose not to.

          (walmart etc.)

      • Re: (Score:2, Insightful)

        by srichard25 (221590)

        You don't see any Monopoly like actions yet from Amazon because they are not truly a Monopoly yet. When MS was battling neck-and-neck with Apple, they were generally seen in a pretty positive light. It wasn't until they had destroyed all competition that they started abusing their monopoly status. I predict the same thing with Amazon. After Amazon has destroyed most of the local stores and there is no other alternative but to shop with them, will they still provide the same great service for the same lo

      • by PvtVoid (1252388)

        It is hard to hate someone who provides such a great service.

        Yes, yes, yes.

        I buy pretty much everything at Amazon these days, except for food and building materials. Brick-and-mortar retail is circling the drain at this point: every once in a great while, I attempt to buy something at a store in a local strip mall, and nine times out of ten, I come back empty-handed and horrified by how bad it's gotten out there. I'm beginning to suspect that Bezos has infiltrated retail stores with irritating morons purely to drive you to Amazon.

        Even more important, Amazon med

    • by pikine (771084) on Sunday October 27, 2013 @09:04AM (#45250667) Journal

      Trying to be the monopoly of the everything store is very difficult. Jeff Bezos likes to play the predatory strategy where price is lowered to a loss in order to drive competitor out of market. But you can't do that to every market simultaneously all the times, and given enough incentive, someone will always figure out how to enter the market by adding more value. Amazon will eventually crumble under its own weight if it continues down that strategy.

      A good strategy is to deliver exceptional value in a market, but you can only do that if you focus on only a few things.

    • Yes, the evidence suggests that Amazon is aiming for a monopoly. However, history suggests that they will fail. My study of history says that monopolies only arise when the government intervenes to suppress competitors (there may be some industries which are an exception to this, but Amazon is not in one of those).
    • by Shavano (2541114)

      You're confused. The holy grail of capitalism isn't "the market." It's the accumulation of capital. Ask any capitalist if that isn't what he's trying to do.

      • by gweihir (88907)

        And wrong. The problem is that most people calling themselves "capitalists" are not capitalists at all. They are greedy evil scum that tries to exploit the loopholes in capitalism.

        • by Shavano (2541114)

          If they own the means of production at which other people work, they're capitalists.

        • "The problem is that most people calling themselves "capitalists" are not capitalists at all. They are greedy evil scum that tries to exploit the loopholes in capitalism."

          And that's not the intended way for capitalism to work exactly how?

    • by Tom (822)

      You have capitalism and free market theory confused. They have things in common, but they aren't the same.

      Capitalism will always tend towards monopoly, because capitalism is about profit and monopoly rent is where the real profits are.

      For the free market, a monopoly is a death spell.

      But you can have a free market without capitalism, and capitalism withou a free market. It just happens that the synergies between them are such that you generally meet them together. But they don't have to, and that's why capit

  • Two words (Score:2, Insightful)

    by Anonymous Coward

    Tax avoidance

    • Re:Two words (Score:5, Insightful)

      by CastrTroy (595695) on Sunday October 27, 2013 @11:29AM (#45251427) Homepage
      Exactly. It makes very little sense for a business to post profits. Personally, I'd rather have a business hire more workers than pay money to the government (workers pay taxes anyway). Even if they aren't hiring people directly, they're usually using the money to create some kind of economic activity which will mean more jobs in some other company. If they post profits, it just means money is sitting in the bank doing nothing, while some of it is going to the government. If the government was smart, they'd tax revenues, and companies would have to figure out how to work the amount of taxes paid into their cost structure. Too bad human citizens can't just pay taxes on profits. I'd love to only pay taxes on money left in my account at the end of the year, regardless of what I chose to spend it on.
      • by rtaylor (70602)

        You don't really think the majority of the funds in your bank account sit in a random bank vault do you?

    • I say avoision.

  • They are a massive danger to society, as the basically consume everything, build monopolies, restrict choice, destroy the market. They are also fundamentally stupid, as they are unable to even perceive the massive damage they are doing.

    Basically, the only thing these people can do is build empires. One of the best known fact about empires is that they all collapse sooner or later. The larger they are, the worse the damage when they collapse as they will have killed anything that could take over when they ar

  • by will_die (586523) on Sunday October 27, 2013 @08:47AM (#45250587) Homepage
    The author is upset because Amazon has expanded beyond selling just books and invested earnings into expansion instead of giving back to the investors.
    • Considering he worked at amazon during the boom years my guess is he has a significant stake in amazon...
    • by timeOday (582209)
      You call this [google.com] 'not giving back to investors?'

      So long as Amazon's re-investment in itself results in solid growth, the stock continues a steady climb, which isn't so much different from paying a dividend.

    • Re: (Score:3, Insightful)

      by RawsonDR (1029682)

      The author is upset because Amazon has expanded beyond selling just books and invested earnings into expansion instead of giving back to the investors.

      Somehow you distilled the article down into something that it's not. Where does he come across as upset? He isn't even critical of Amazon.

      The author gives a seemingly simple explanation as to how Amazon conducts its business differently than everyone else. This apparently is unique enough that it garners lots of wild speculation by other observers and financial analysts, many of the same reactions I'm seeing in the comments here. (My) Simplified version:

      • Amazon happily accepts a lower average margin of
  • Apex predators. (Score:3, Insightful)

    by serviscope_minor (664417) on Sunday October 27, 2013 @08:59AM (#45250647) Journal

    People love to seem themelves as some sort of lion (apex predators, but sometimes killed by buffalo) or hawk or something. Excluding humans as predators, since humans will literally eat anything that moves, apparently no matter how toxic or dangerous, apex predators include a lot of things.

    For example whale sharks which are huge, slow moving an harmless to anything larger than plankton.

    Electric eels which while cool are small and live in muddy water has gills that don't work in water and eats small invertebrates.

    The black backed gull which basically is a honking great seagull and about as annoying.

    In Austrailia, cane toads are apex predators too. Too toxic to eat.

    The small and exceptionally pretty poison frogs are apex predators too. Again, far too toxic to eat.

    Murray Cod. Requires no further explanation.

    And so on. Apex predators include more than just fast moving birds and large felines.

  • by erroneus (253617) on Sunday October 27, 2013 @09:03AM (#45250665) Homepage

    As far as I can tell, Amazon is the only company which keeps Lasership going. There is a long history of Lasership problems and complaints. They use "private contractors" to deliver the last mile in the pizza delivery model. They are untrained and unqualified and when they steal things Amazon just ships another or refunds money without any issue. It's not just my experience but the experience of thousands of others. (Just google Amazon Lasership Complaints) I suspect its Lasership's minority owned status which keeps them afloat. But even then, the problem of Lasership seems excessive. After I moved and discovered that I am once again in a Lasership delivery area I have stopped ordering from Amazon and I would encourage everyone who wants to ensure a hassle-free online shopping experience to read up on Lasership, its connection with Amazon and to make the decision which is best for you based on what you learn. If you are not in a Lasership last mile delivery area, then shop with Amazon 'til you drop. But if you are, I would hope understanding what goes on there will discourage you from shopping Amazon.

  • by JazzHarper (745403) on Sunday October 27, 2013 @09:35AM (#45250765) Journal

    The article does not really address the end-game. Will Bezos ever allow the company to return value to the shareholders or is he truly "not wired that way"? There is no value in holding shares in a company that NEVER shows a profit. Shareholders can have lots of fun trading them, as long as the promise--or at least the hope--of future earnings is out there, but that's just a "greater-fool" game that usually ends badly.

    • Re: (Score:2, Insightful)

      by Anonymous Coward

      Sometimes, you need to be a dick to wall street and tell guys like Carl Icahn to go fuck themselves. There is a difference between returning profits to shareholders and gutting your entire company to give money to shareholders. Sometimes you need to think about longer term and not just about the next quarter, or even the next 3 years for that matter.

    • Re: (Score:2, Insightful)

      by Anonymous Coward

      I'm confused by your post - a company does not need to turn a profit to "retuen value" to shareholders.
      Indeed, since profits are taxed, it's actually quite smart not to declare any.
      Instead, investors find avlue through share price growth, and dividends, (if any).
      In many fical regimes, the first is by far the most favourably treated, and for good reason.

      • To an investor, the value of a share is the discounted sum of all future dividends. It is expected that companies will not pay dividends while they are in their growth phase. That does not detract from the valuation; it enhances it. However, if the company NEVER intends to pay any dividends, then one would purchase a share only with the intent of selling it to some greater fool. That is speculation, not investment.

    • by Bananenrepublik (49759) on Sunday October 27, 2013 @10:10AM (#45250915)

      That's wrong. If a company buys assets, then it's profits decrease, but it definitely doesn't make your stake in the company any less valuable. Since stock prices reflect both the current assets of the company (after all stocks express owenrship on these assets) and the expectation of future gains (that's the speculative part), it is quite sensible for the stock price to go up for a company that invests instead of making profits.

      • by kill-1 (36256)

        That's wrong. If a company buys assets, then it's profits decrease, ...

        No, the profit decreases only when the assets depreciate.

    • The end game is that you plow the profits back into the company until your growth tapers off, and then you start paying dividends. Call it the Microsoft Model.
      • Yes, that is the usual course of successful companies. The difference in this case is that Amazon's president, chairman and CEO all seem to be oblivious to the inevitable transition.

    • by u38cg (607297)
      People are still dumb enough to invest in gold. Happily, with increased population growth the supply of other fools is continually renewed.
    • by Z00L00K (682162)

      The Amazon brand is just the oil in the machinery that makes a lot of other businesses profitable. The day someone comes up with a machinery that don't need oil then oil as lubrication is dead meat.

      Another way of looking at it - by having low levels of profit you don't attract a lot of sharks trying to suck the money out of that business - and you avoid most of the competition too because they don't think it's a profitable business.

      Yet another way to compare it - the Amazon brand is the railroad tracks for

  • Although Amazon is a great business, it's a terrible stock. The reason is that its stock price is sky high. Compare Amazon's key statistics [yahoo.com] with those of Wal-Mart [yahoo.com]. Compare the "Valuation Measures" of the two, and you'll see two quite different stories.

    Although the two businesses may seem quite different - notably by Wal-Mart being primarily a brick-and-mortar and Amazon being online - I believe there are more similarities than differences: both are retailers that operate on a massive scale, with highly e

    • The same could have been said of many other companies. Apple. Google. Intel. Microsoft.

      Stocks are sold on the basis of a claim on future earnings. Earnings start with revenues. Amazon's revenue growth is spectacular. That is a rare attribute in the current economy.

      Sure it's speculative. It might flop. But dayumm look at that growth.

  • Amazon doesn't report profits for tax reasons, and they are involved in the same creative accounting every other well connected company is.
  • So here are two experiences that made me think "screw this, I wish I'd shopped at Amazon". This may just be a UK-specfic experience, but...

    1) Samsung Series 9 laptop from PC World, bought from their store in April, came with Windows 8 drivers (I think) that just never worked. Mouse pointer jerking around, it blue-screened within 5 minutes on one boot out of every two. I updated its drivers through Windows, through the Samsung driver update utility ... just hopeless. I tried to use it for about a month, tryi

    • by Tailhook (98486)

      Yesterday I bought smoke detectors from Amazon. There are perfectly ordinary smoke detectors, but there is one little problem; these are bit more expensive than some other, similar smoke detectors; a couple extra features the really cheap $9 smoke detectors don't have.

      Why should that be a problem? Unfortunately, because these aren't the cheapest conceivable smoke detectors, the Home Depots, ACEs and Lowes of the world won't stock them in store. The retailers almost never stock anything other than the low

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