Quote:
Originally Posted by Undertoad
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.
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Your example demonstrates that Amazon is making tremendous profits. But instead of claiming them in spread sheets, Amazon's profits are directed into something that only appears on spread sheets as a cost - investment and innovation. Innovations do not appear as profits until after that innovation is no longer innovative.
Never assume spread sheets report accurately. What an innovator does today means negative profits this and other years later. Ford is a perfect example. William Clay in 2000 wanted in all Fords an innovation developed in GM in 1972 (and still not in all GM cars today). Massive work done in and after 2000 meant Ford lost more money in 2007 then ever in Ford's history. So why did Ford have massive profits in 2010? Spread sheets only provide numbers that must be viewed with perspective.
Your Amazon example assumes monetary standards promoted in business schools are accurate. Business schools teach that activiities this year are reported on this year's spread sheets. That myth also explains why stock brokers are some of the worst investors on Wall Street. Actual value of any economic activity (ie a non-profit organization) is not always measured by myopic concepts taught in business schools. One is expected to appreciate that where reviewing this years financial reports.
Why was Enron so profitable when it was really scamming the economy?
Why did AT&T (when run by people who come from where the work gets done) finance a man to write computer chess programs? Why is that relevant to a telecom? Because spread sheets cannot measure value.
Because spread sheet (business school) concepts were ignored, the Bell Labs created the transistor, laser, fiber optics, structured programming language (ie C), communication satellites, discovered the Big Bang Theory, masers, PCM communication (that makes cell phones possible), Shannon's communication theory (math that makes all digital communication possible), computer speech (ie Siri), Unix (the basis of all other Operating systems). Most were developed more than 20 years before profits happened. These and so many others were some of the greatest accomplishments of those decades.
Because business school graduates make decisions from profit and loss sheets, then networking, WYSIWYG video displays, the graphical interface (ie Windows, mouse), structured programming, etc sat stifled in Xerox unless innovators stole the technology.
Due to profit and loss thinking, Chevrolet makes a hybrid where its engine cannot even recharge its battery. How dumb is that? Only smart when decisions are based in profits and cost controls rather than in value.
Profits are only a reward. Amazon simply directs their reward into new innovations rather than into a pile of cash. Only spread sheet myopia *knows* Amazon is unproductive. Spread sheets will not say profitable or unprofitable for generations.