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Undertoad · 04-02-2015, 10:18 AM

For the most part, a company decides whether it makes a profit. The market decides whether it makes the kind of money needed to make a profit. What companies are rewarded by is revenues.

Amazon, for example, famously refuses to make a profit. They could make a profit at any time. Amazon takes all the money that might go into profits and puts it right back into the company, to develop new innovations, and new markets. As a result their gross revenues, i.e., sales, are geometrically increasing.

History will show that this was the correct model. Everyone declared for years and years that "Amazon is not profitable therefore it is not a viable company!" Everyone was wrong. Some people are still saying this. They are wrong.

Amazon could have been profitable at any time in its history. But that would have ended its growth and terminated the ability for it to generate profits in the future. Instead it has gone from being a book store, to being an everything store, to being a major blue chip internet infrastructure company and a tremendous developer of new products. It took until 2009 for the financial market to realize this and reward it with higher stock prices. If you bought AMZN in the beginning of 2009 you would have seen it rise by a factor of ten by the end of 2013. Amazon has rewarded its stockholders by not being profitable.

~ I learned this by going to MBA school so maybe not all time spent there is a waste ~

04-02-2015, 10:18 AM	#73
Undertoad Radical Centrist Join Date: Jan 2001 Location: Cottage of Prussia Posts: 31,423	For the most part, a company decides whether it makes a profit. The market decides whether it makes the kind of money needed to make a profit. What companies are rewarded by is revenues. Amazon, for example, famously refuses to make a profit. They could make a profit at any time. Amazon takes all the money that might go into profits and puts it right back into the company, to develop new innovations, and new markets. As a result their gross revenues, i.e., sales, are geometrically increasing. History will show that this was the correct model. Everyone declared for years and years that "Amazon is not profitable therefore it is not a viable company!" Everyone was wrong. Some people are still saying this. They are wrong. Amazon could have been profitable at any time in its history. But that would have ended its growth and terminated the ability for it to generate profits in the future. Instead it has gone from being a book store, to being an everything store, to being a major blue chip internet infrastructure company and a tremendous developer of new products. It took until 2009 for the financial market to realize this and reward it with higher stock prices. If you bought AMZN in the beginning of 2009 you would have seen it rise by a factor of ten by the end of 2013. Amazon has rewarded its stockholders by not being profitable. ~ I learned this by going to MBA school so maybe not all time spent there is a waste ~