https://hbr.org/2014/10/at-amazon-its-all-about-cash-flow/

They are essentially borrowing from their own customers (or maybe more accurately, vendors), at zero interest, to continually build the business.

He realized that insurance generated enormous carry, and if you were able to better utilize that (say, by buying other companies and improving them) then you had a pretty winning strategy.

Buffett has done well by choosing companies and people that are good at avoiding losing money.

If Amazon had a viable competitor, the profits of float investments would be the ammunition in the resulting price war. Amazon's margin is someone's opportunity.

I'd assume there would be advantages on that closer relationship vs a stand-alone insurance company simply investing in a publicly traded offering.

It really isn't a tax strategy any more than being unemployed with no income is a tax strategy. Amazon's strategy seems to be keeping margins low enough that it's hard for others to compete with them, in the hopes of great long-term profits.

While the stock may be valued on its revenue, that valuation is premised on the idea that Amazon will be making a lot of profits from that high revenue in the future. Investors aren't buying Amazon stock believing that it's avoiding profit as a tax strategy to funnel money to employees. They're buying Amazon stock believing that it's the future of retail and that being the future of retail will come with enormous profits.

Interestingly the Bank of England's Chief Economist has today attacked that principle of company law: http://www.bbc.co.uk/news/business-33660426

To quote from the article:

The Bank of England's chief economist has expressed concern that shareholder power is leading to slower growth.

Andy Haldane told BBC Newsnight that business investment had been lower than was "desirable" for years.

One reason was that a high proportion of corporate profits were being paid out to shareholders rather than reinvested in the company.

He said that in 1970, £10 out of each £100 of profits were typically paid to shareholders through dividends.

Today, however, that figure was between £60 and £70. Mr Haldane argued that left far less cash available for growth-boosting investment and that firms risked "eating themselves".

Corporate short-termism - a focus on immediate gains rather than long-term prospects - was a rising problem for companies and pre-dated the financial crisis, he said.

If so, then it's natural that stock price increases when revenue increases, albeit at a discount to actual profit depending on what your expected revenue:profit conversion ratio is.

The interesting part is the next step. Someone buys a stock expecting to benefit from the exchange (sell at a higher price that one purchased it for). Thus, if the stock price is correlated with revenue, and Amazon can increase revenue even without increasing profit, stockholders will still be happy.* Stockholders are looking for increased value for their stock, not any particular metric thereof.

*This is assuming Amazon finances the revenue increases through free cash flow (as mentioned elsewhere) rather than diluting stock

Apple has this weird problem of being so profitable that they have no clue what to do with all that money. And then everyone picks on them for their loophole-based tax mitigation strategies.

I'd say the optimal strategy is what Facebook and Google do with the double Irish Dutch sandwich http://conversableeconomist.blogspot.com/2014/07/double-iris...

(Some) taxes are definitely designed around incentives.

Thus, taxes on sins can produce higher revenues than taxes on more price sensitive goods or activities would.

What if the share price is not undervalued, the investors would get hurt if you do a buyback.

There are all sorts of strategies for optimization. Many involve lobbying Congress for special carve-outs.