They probably tell the new hires the same thing they tell themselves:

* It's always a gamble, but if you'd received $x0,000 of options 3 years ago, they'd be worth $x00,000 now.

* You'll own 0.00x% of the company, and if you owned that much of Facebook you'd be a multimillionaire.

* Companies like Amazon don't make a profit, and the stock market is fine with it. They know Bezos could turn a profit if he wanted to, but he's putting all the money to work growing the business.

* A company's IPO price isn't its all-time peak price; Google's stock increased 9x from their IPO price.

You'll note that, if you look carefully, nowhere in those points did I promise WeWork options would ever be worth anything.

Doesn’t deter from your point at all. But Google’s stock has increased over 27x since IPO 15 years ago.

"We have free lunch, a ping-pong table and a VR room with monthly fitness days"

Actually they don't have free lunch, which is quite strange for Silicon Valley companies

They (We) does have mandatory enforced veganism, however.

https://www.bloomberg.com/news/articles/2018-07-13/wework-te...

Actually it's pescatarianism, for whatever reason seafood doesn't count as meat.

Maybe it's because fish don't scream when you stab them, but idk.

Yeah, that's just horrible. We're emptying the oceans at an alarming rate. If they want to do it right, they shouldn't allow fish either.

Fish can't scream.

The Bloomberg article preview describes enforced vegetarianism, not veganism.

They are an NYC (does anyone still call it Silicon Alley?) company.

Mostly we're trying to get SF to rebrand as New New York.

Old Silicon Valley (companies primarily engaged in the design and production of silicon) doesn't do free lunch.

Neither does Apple.

We all know there is no such thing as a free lunch.

(In seriousness, it is neither a Silicon Valley company nor a tech company. All it has in common is that it is using VC funding and SV-style brand marketing to grow to spectacular proportions relative to its underlying revenues)

Profitability and the value of the equity aren't necessarily related, though. Amazon was unprofitable for many years, but its stock still increased in value.

Thats because Amazon was only unprofitable due to Capex and R&D. Their operating margin is fantastic, it was this promise that enticed investors! WeWork on the other hand is very ugly.

This is what seems to not be understood by a lot of investors and people commenting on investments. Amazon could have turned a profit years earlier if they wanted to. Instead it made more sense to continue spending all of their money on expansion and R&D.

It's the same with Tesla. They are selling a shit ton of cars at good markup. If they wanted a profit, they could have one. They just don't want one right now.

Tesla can't achieve profit even after extreme cuts across the board, including capex. Their capex minus D&A has been declining for a while and is negative.

https://twitter.com/TESLAcharts/status/1123186053811032064?s...

Is a tweet tagged with `$TSLAQ` really a good source?

>It's the same with Tesla.

Can you show you get this from? I see it repeated on these boards, ad nauseum, that Tesla is spending their "profits" on R&D and building infrastructure.

But in reality, you can see from their financial statements that Tesla's CAPEX spending is embarrassingly small for an auto company, and shrinking. They spent $2BB in 2018 and are on pace to spend half that in 2019. As a sibling comments states, their spending doesn't even cover depreciation of assets. For comparison, Ford spent almost $10BB on CAPEX last year, GM spent $10.8BB, VW spent over $12BB.

>If they wanted a profit, they could have one. They just don't want one right now.

You can't honestly believe this, can you? What are they waiting for? Why do they keep raising funds? Where is the money going?

Exactly. This was true of Tesla back when they made only the S & X and blew their R&D dollars on Model 3/AP/Batteries but the Model 3's margins are incredibly bad with sky-high ops costs while they are digging a hole like a car stuck in mud. They are promising FSD (to paid customers), Semi & Roadster (To reserved customers), and a Model Y that will surely eat into Model X sales, meanwhile they are clearly reducing spend in these departments. Without a Model S/X Refresh (That Elon is repeatedly saying will never ever happen) or dramatic reduction in BOM / assembly (which, maybe the Model Y is supposed to bring? maybe? Pigs can fly?) There is no route to profitability.

I agree, but want to emphasize that it's not necessarily sinister: they simply have no money to do the things they've promised. That's best case. Worst case is sinister.

I agree, for the most part, FSD seems simply outlandish and by this point they already had promised coast-to-coast. There really wasn't any real path to their promises.

It’s B not BB.

Thanks. Bad habit to hammer that key twice.

Yeah, no. There's a fundamental difference between Tesla and Amazon in terms of their profit potential. Super misleading to say that Tesla 'just doesn't want to profit rn'

Not understanding is one option; not trusting is another.

It is presumably quite easy to shuffle operating expenses into the earnings report as capital expenses if a company really wants to, and the 'development' in R&D can hide a bunch of things.

I'm happy to be wrong, but 'Oh, they can make money the minute they choose to, but at the moment they are choosing not to' is a concerning argument. Apple might have gone from "give the money back to shareholders" -> most profitable company in the world -> broke by the time Amazon turns a serious profit for its shareholders. It is yet to be disproven beyond all doubt that Amazon is competitive by virtue of having abysmal profit margins.

Huh? Clearly you are clueless about Tesla's financials.

Tesla's gross margin is a piddly 18%. They also need money to build and maintain service centers, super charger networks (all needed because Tesla doesn't have a dealer network or a gas network).

Then there is debt servicing, working capital, maintaining their plants, inflationary effects of labor wage (as their labor pool gain experience). All these are not discretionary R&D.

Tesla is fundamentally unprofitable and Musk suddenly has realized this and hence the major pivot to FSD (which is about 15 years away)

No, it's not. Not at all. Cash flow for each of the companies is VERY different.

TESLA:

https://www.marketwatch.com/investing/stock/tsla/financials/...

Amazon:

https://www.marketwatch.com/investing/stock/amzn/financials/...

Tesla differs because they no-longer make reasonable profits on the Model 3 and the better build and more cohesive design of the 3 has eaten the S & X sales.

The retail margins are about the same as walmart. They don't have some magic sauce in selling things.

AWS is their real money maker.

It's a bit harder to see from the present, but the magic sauce they added 25 years ago was selling things on the Internet. Obvious today, and obvious in hindsight, but the road to here is littered with companies that tried the same but didn't make it.

Aws was a blip on the rader for years when amazon was still one of the richest companies.

Look at their retained earnings on the balance sheet. It really only started going up when aws started getting more popular. Amazon always had an insane valuation.

Walmart is a good comparison. Amazon is in the volume game just like them.

Very true which is why they focused on free cashflow as a measure of profitability which could be immediately realized if they stopped investing their profits in to growth and market domination.

Though, certainly AWS has been a massive benefit for them. Allowing them to truly be disruptive and industry leading while generating massive revenues, growth, and most importantly profitability, however small compared to their overall revenue, to continue to justify their pitch.

Note that capex is capitalized and amortized over time (it doesn’t affect profitability when the investment is made).