Friday , May 14 2021

Jeff Bezos says "Amazon is not too serious." You're right




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Yesterday, & nbsp;CNBC reported& nbsp; That Jeff Bezos, in & nbsp; a meeting of all hands earlier this month, said: & nbsp; "Amazon is not too big to fail … In fact, I predict that one day Amazon will fail. Amazon goes bankrupt. If you look at the big companies, their lifetimes are usually more than 30 years and not more than one hundred years. "& Nbsp; I was & nbsp; responding to an employee asking if the CEO had learned lessons after Sears and other big ones Retailers have recently filed bankruptcy. & nbsp;

There are some reasons why & nbsp; Bezos & nbsp; right As one retailer told me, "the nature of all retailers is eventually bankrupt." It's a cynical point of view but it reflects the reality: retailers go through cycles. Some types of retailers become popular, but they do not adapt and their businesses decline and eventually disappear. We see it again and again. Merchants that can change are the exceptions, and not the rule.

But Amazon is now the second largest trader in the United States. How is it possible that such a big thing fades away?

It is possible that the company may lose contact with its customer, but this seems very unlikely for Amazon. & Nbsp; That is the only & nbsp; It is known to be hyperfocused.

There is a different scenario that is rare for Amazon.

It is well known that Amazon is not judged by its profitability. If it were, & nbsp; the stock price would be a small fraction of what it is now. Amazon has done incredible work in many different things, and one of them is making sure that the financial markets value the company based on their revenue growth, with the assumption that profitability will come later. Amazon explains its low content& nbsp; benefits of & nbsp;saying he uses the benefit he does to invest in new ideas and experimentation to stay ahead. So far, the market has accepted Amazon's explanation. People who say that while Amazon continues to grow its income by 20-25% per year, the market will impose future profitability on the company and the stock price will continue to rise.

For more than 100 years before he died, Sears had everything for everyone and & nbsp; It has been successfully adapted to what its customers wished. Amazon has been great about it so far. It did not try to be better at retail than the people who managed to sell retail for a long time. Instead, improved skills that were not seen as retail skills. Amazona hammered in logistics and technologyThings that were not previously the main impellers of retail valueto offer better value to consumers. And as it has developed resources internally, Amazon has intelligently turned some of them into companies, such as Amazon web services, which today earns more money than the rest of Amazon.

But while Amazon surpasses the $ 200 billion revenue limit, it becomes harder to find revenue sources that will have the impact it needs on revenue growth. You can not, for example, duplicate the number of Prime subscribers in the country; There are not enough homes to do it and saturation is already too high. You need to find new sectors to bring online, as you did for the first time & nbsp; with books New industries are needed, such as supermarkets, healthcare, banking or automobiles, which have a relatively low penetration online and the potential for conversion in online sales to maintain their revenue growth. But the point is that it is difficult and uncertain. Amazon had Whole Foods for over a year and it does not seem that online conversion is happening, at least until now.

If Amazon does not find new sources of income growth in other industries, its expansion will be delayed. And because its stock price was so influenced by revenue growth, it will not continue to rise. That is the key to Amazon more than for most companies because many of their middle and upper level employees are encouraged & nbsp; by the stock of the company. An important part of its compensation, more than most other companies, is based on the increase in the price of the shares. If this happens, Amazon's employees, who are already highly sought after by other companies, will be more susceptible to other offers than ever. When they start to go out, stagnation in stock prices will hinder the replacement of Amazon and the entire wheel may stop spinning in a hurry.

You can say that Amazon is too much a part of everyday people's habits so that it disappears. This is true for a while, but when a company loses its best person, the ability to innovate also disappears. It does not happen long before it is overcome.

For companies that Amazon competes head-to-head, it was a very difficult path. Amazon's ability to access the cheapest capital without taking into account the benefits, combined with its ability to hire the best users, allowed it to dominate the industries. But Bezos is right and nothing goes on forever. The end to Amazon may be very far away-Or& nbsp; may it not be & nbsp; This year & nbsp; is being configured to be a great & nbsp; one for the US economy. But it does not have to be as good in this kind of environment as it does when times are tougher. When the lean years arrive, Amazon will be able to maintain its growth? And the financial markets will be so losing? How long the circumstances will continue to be aligned in favor of Amazon is the assumptionbut it is not forever.

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Yesterday, the CNBC reported that Jeff Bezos, in a meeting of all hands earlier this month, said: "Amazon is not too big to fail … In fact, I predict that one day Amazon will fail. Amazon goes bankrupt. If you look at large companies, their lifetimes are usually more than 30 years, and not more than one hundred years. "He responded to an employee asking if the CEO had learned lessons after Sears and other major retailers have recently filed bankruptcy.

There are some reasons why Bezos is fine. As a retail investor told me, "the nature of all retailers will end bankruptcy." It's a cynical point of view but it reflects the reality: retailers go through cycles. Some types of retailers become popular, but they do not adapt and their businesses decline and eventually disappear. We see it again and again. Merchants that can change are the exceptions, and not the rule.

But Amazon is now the second largest trader in the United States. How is it possible that such a big thing fades away?

It is possible that the company may lose contact with its client, but that seems very unlikely for Amazon. That is the only thing that is known to be hyperfocused.

There is a different scenario that is rare for Amazon.

It is well known that Amazon is not judged by its profitability. If that were the case, its stock price would be a small fraction of what it is now. Amazon has done incredible work in many different things, and one of them is making sure that the financial markets value the company based on their revenue growth, with the assumption that profitability will come later. Amazon explains its low content benefits for saying he uses the benefit he does to invest in new ideas and experimentation to stay ahead. So far, the market has accepted Amazon's explanation. People who say that while Amazon continues to grow its income by 20-25% per year, the market will impose future profitability on the company and the stock price will continue to rise.

For more than 100 years before he died, Sears had everything for everyone and successfully adapted to what his customers wanted. Amazon has been great about it so far. It did not try to be better at retail than the people who managed to sell retail for a long time. Instead, improved skills that were not seen as retail skills. Amazona hammered in logistics and technologyThings that were not previously the main impellers of retail valueto offer better value to consumers. And as it has developed resources internally, Amazon has intelligently turned some of them into companies like Amazon Web Services, which today earns more money than the rest of Amazon.

But while Amazon surpasses the $ 200 billion revenue limit, it becomes harder to find revenue sources that will have the impact it needs on revenue growth. You can not, for example, duplicate the number of Prime subscribers in the country; There are not enough homes to do it and saturation is already too high. You need to find new sectors to bring online, as you did first with the books. New industries are needed, such as supermarkets, healthcare, banking or automobiles, which have a relatively low penetration online and the potential for conversion in online sales to maintain their revenue growth. But the point is that it is difficult and uncertain. Amazon had Whole Foods for over a year and it does not seem that online conversion is happening, at least until now.

If Amazon does not find new sources of income growth in other industries, its expansion will be delayed. And because its stock price was so influenced by revenue growth, it will not continue to rise. This is key to Amazon more than for most companies because many of its high and middle employees are encouraged by the stock of the company. An important part of its compensation, more than most other companies, is based on the increase in the price of the shares. If this happens, Amazon's employees, who are already highly demanded by other companies, will be more susceptible to other offers than ever. When they start to go out, stagnation in stock prices will hinder the replacement of Amazon and the entire wheel may stop spinning in a hurry.

You can say that Amazon is too much a part of everyday people's habits so that it disappears. This is true for a while, but when a company loses its best person, the ability to innovate also disappears. It does not happen long before it is overcome.

For companies that Amazon competes head-to-head, it was a very difficult path. Amazon's ability to access the cheapest capital without taking into account the benefits, combined with its ability to hire the best users, allowed it to dominate the industries. But Bezos is right and nothing goes on forever. The end to Amazon may be very far away-Or may not be. This year it is setting up to be an excellent one for the US economy. But it does not have to be as good in this kind of environment as it does when times are tougher. When the lean years arrive, Amazon will be able to maintain its growth? And the financial markets will be so losing? How long the circumstances will continue to be aligned in favor of Amazon is the assumptionbut it is not forever.


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