Re:AWS Drives More Than Half of Amazon's Operating Income
by ethbro on Friday February 01, 2019 @11:15PM
(#19060999)
This seems like a dilemma between a superior strategy, but only if executed with discipline.
In reality the majority of businesses which run on large margins get lazy, allocate capital ineffectively, and underinvest in R&D.
Thin margins force you be lean. Thick margins afford you the opportunity (and risk) not to be.
And how has that worked out for 440 companies that used to be in the F500 that no longer are there?
> In a downturn, a slight decrease in margins across the board will push a company on the razor's edge from profitability to unprofitability.
Except the reason their margins are so low is because they keep feeding capital into the business to fund new projects.
> Of course when revenues are growing like crazy and the economy is gangbusters it sounds great to cut margins for absolute growth but that's a booming economy. Things are very different in a downturn.
Yup, you're right, things are very different in a downturn. Great listen about how NetSuite navigated downturns: https://a16z.com/2015/05/15/a16z-podcast-why-saas-revenue-is...