Re:Fixing the ‘Brain Damage’ Caused by the I.P.O. Process
by opportune on Wednesday September 20, 2017 @07:05PM
(#15299147)
They're not "exceptional" they've just managed to find productive ways to reinvest their profits.
The reason their stock is valued so much is partly because if he wanted/needed to, Bezos could wake up one day and cut all programs focused on expansion and return the saved costs / new profits as dividends. The reason this doesn't happen is that the money is (thought to be) better spent on increasing the size of the business. There's no reason other companies couldn't do this, although I expect the main limit to this strategy is the extent to which you can productively reinvest capital. This is a function of foresight/luck (e.g. branching into AWS) but also of the market you're in: to what extent do you begin to experience diminishing returns as you spend more money on improving your product? I think that with logistics, as with Amazon and e.g. Walmart, the returns diminish very slowly, or even increase with money spent (economies of scale).
The reason their stock is valued so much is partly because if he wanted/needed to, Bezos could wake up one day and cut all programs focused on expansion and return the saved costs / new profits as dividends. The reason this doesn't happen is that the money is (thought to be) better spent on increasing the size of the business. There's no reason other companies couldn't do this, although I expect the main limit to this strategy is the extent to which you can productively reinvest capital. This is a function of foresight/luck (e.g. branching into AWS) but also of the market you're in: to what extent do you begin to experience diminishing returns as you spend more money on improving your product? I think that with logistics, as with Amazon and e.g. Walmart, the returns diminish very slowly, or even increase with money spent (economies of scale).