
Who’s afraid of Jeff Bezos? - ddfisher
http://blog.samgerstenzang.com/post/56847377794/whos-afraid-of-jeff-bezos
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snowwrestler
It's a good question: who in technology is afraid of Bezos?

While a lot of technology leaders might admire Bezos for his leadership of
Amazon, I wonder how many fear him. Most of what Amazon does, does not compete
with technology companies. In the few places they do, they're not a
juggernaut.

For example, despite years of effort, the Kindle Fire has not significantly
harmed the market share or margin of the iPad. Google and Samsung have done
far more damage to Apple. And Amazon's media sales are not much of a threat to
Apple: they haven't stolen significant share, and Apple does not try to make
money on content anyway.

I think there are a lot of people who do fear Bezos, but they are mostly
retailers and hosting companies.

~~~
selectiveshift
> Most of what Amazon does, does not compete with technology companies. In the
> few places they do, they're not a juggernaut.

Since when is AWS not a juggernaut...

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ankitml
Rackspace is slowly eating AWS up. Their customer service is unmatchable.

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toomuchtodo
I've found their customer service to be great, but pathetic from a technical
perspective (i.e. they're very nice and apologetic when shit goes south, but
its still going to be a while before they figure out how to fix it).

And slowly eating up AWS? No. That's Digital Ocean eating the lower end of the
market. Rackspace outsources their CDN to Akamai, and their Cloud experience
is damn near abysmal.

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lvs
There's a lot of overlap between business commentary and sports commentary.

~~~
michaelwww
What does that have to do with the price of tea in China?

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tempestn
Sports commentary has been called (paraphrase) 'a business built on talking
about the results of a weighted random number generator'. I expect that parent
is using this comparison to express a judgement on the value of the article...

~~~
michaelwww
True story: I just woke up with a dream. In it, I was suggesting to political
commentator William Kristol that Jeff Bezos was the new Steve Jobs who could
fill the void left by Jobs passing. Never underestimate the power of the
narrative ;-)

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forkandwait
Reinvest in infrastructure and put quality ahead of everything, including
dividends and share price? Wow, what a concept...

~~~
wellboy
Well nobody else is doing it apparently. Everybody gets seduced to pursue
vanity metrics once they go big, that's the art in it.

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curiouslurker
I will make the bold claim that within 10 years amazon will fall apart at the
seams like a cheap suit in a storm. You cannot run a non profit forever no
matter how large your market share is or how obsessed you are about customers.

The culture (from what we can glean from the excerpts of the new book on
Bezo's) is also toxic and is unlikely to produce an enduring successful
company. Senior execs can't pass gas without Bezos' permission? When he steps
down, there is unlikely to be the continuity that produces great enduring
companies.

~~~
hacknat
They are hardly a non-profit. He is maybe the most aggressive CEO in the US
right now for putting money back into the company.

Amazon's cash flow is insane, if they put the brakes on reinvestment right
now, they would be making billions and billions per quarter.

~~~
hncommenter13
1\. I'm not so sure about that. According to the most recent financial
statement[1], AMZN hasn't generated much in the way of net cash from
operations over the past 12 months. Worse yet, they're spending an amount in
excess of that on investments (some of which is really capitalized operating
expense, like internal software development, that companies like MSFT expense
directly). In fact, for the 12 months ended 6/30/2013, the only reason ending
cash was greater than beginning cash was because they undertook financing
transactions (selling stock, issuing debt, etc.) See the section that
discusses "free cash flow," which is in itself a non-GAAP measure, as it omits
non-avoidable expenses like operating lease payments, principal repayments on
debt, etc. In other words, even that measure doesn't really represent
distributable cash.

2\. Unlike SaaS companies that sign multi-year contracts as their main source
of revenue, the vast majority of Amazon's revenue is products, for which
revenue is recognized almost immediately. Over time, then, the cash the
company collects should roughly correspond to its GAAP income, unless services
that are paid up-front for consumption over time increase as a % of its
revenue (e.g., reserved instances, annual subscription fees, etc). In other
words, it is unlikely to profitlessly generate cash; the two should rise or
fall together.

3\. Amazon is a fearsome competitor. But ORCL makes vastly more money. In
fact, when Walmart's revenues were the size Amazon's are today (in the early
80s, roughly, adjusting for inflation), it was far more profitable then than
Amazon is today--despite having to operate stores and truck fleets.

[1]
[http://edgar.sec.gov/Archives/edgar/data/1018724/00011931251...](http://edgar.sec.gov/Archives/edgar/data/1018724/000119312513303204/d542614d10q.htm)

~~~
hef19898
There are quite a few companies I know that exist for decades now who are
living on a (relativly) low margin and cash flow focus. Most of them are
retail discounters. And by coincidence these very companies are eating up
market share from other retailers.

The whole eCommerce business of Amazon is very supply chain heavy, and here
they are among the best (along companies like Apple and McDonalds).

On the other hand I know more than one company with incredible margins who are
bleeding money for years now. And they are not doing well. Agreed, Amazon will
be facing the challenge of slower growth. Wether they can pull another
strategy and execute on it only time will tell. But untill they hit this point
Amazon is in very strong position.

Maybe a little anecdote regarding Wal-Mart. Back the day, Wal-Mart invented
things like cross-docking. That basically reduced the inventory levels in
their warehouses to zero (well, not quite, but in theory items were no longer
stocked but transfered from on truck to another). Things like that made Wal-
Mart the giant they used to be. And then Amazon recruited a lot of Wal-Marts
supply chain and logistics people when they started to built there own network
of fullfillment centers.

Regarding the operation of a private fleet of trucks, well back in the 80s it
was quite common. But these days are more or less gone. That was replaced by
specialised 3rd and even 4th party logistcs providers.

Regarding point 2: These two metrics (cash flow and profit) and as much
related as you think. Imagine you sell a product for 100 on day one. Your
customer pays you on day 2. And you pay your supplier 80 for that product on
day 30. Perfect from a cash-flow perspective, now you can invest without going
to a bank.

Profit is a completely different matter now. Imagine your operating cost is
10, then you are cash-flow positive AND profitable. If your operating cost is
30, then you are still cash-flow positive but you are losing money. In theory,
a company can live eternally on a positive cash-flow and zero profit (or very
low profit). As long as shareholders buy it, that is.

Excuses for the very simple explanation, but I hope the general point more or
less came across.

~~~
hncommenter13
Point 1. Yes, low margin/cash-generative businesses exist, like grocery stores
and well, pretty much all of hardline (and much softline) retail. AMZN has not
yet generated much profit or much distributable cash flow, relative to their
revenue scale (and normalizing their expense base, for things like leases and
capitalized software).

My point regarding Walmart was that, even with many of the historical expenses
(like trucks) that they no longer bear, they were still more profitable
throughout their history than Amazon has ever been. Why?

Point 2. I don't think we disagree, as I'm referring to the long term, not the
short term. In most circumstances, a business can't be both unprofitable and
cash-flow positive indefinitely, unless there is something very strange
happening with the accounting (like unusual tax losses a la GE Capital).

Profits and free cash flow can and do diverge for short periods in the
company's lifecycle, but they ultimately must converge in terms of
sign/direction.

~~~
hef19898
over the whole life cycle of a company, ok. Not on the exact mumbers but
wether wether profits and cash flow are positive or negative. Chancea are that
in the worst case the short term effects already killed the company in
question, though.

Regarding Amazon, they are profitable enough. Cool thimg is they are building
the fullfillment centers by the dozens, payed from free cash flow. And thats
pretty amazing I think. But you are right, in the long run Amazon will most
likly hit a growzh cieling. When they do they will have to changw strategy.

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saabster27
Let's not overlook Jack Ma of Alibaba. When it started Taobao in China to
compete with eBay China, eBay had 85% of the online auction market in China.
Within a few years, eBay was forced out of the China market completely. And if
one looks at Taobao closely, its model is much friendlier to small businesses
and that's the main driver of its success. I wouldn't be surprised if Taobao
starts competing with eBay globally within the next few years. And then there
is alibaba.com...

~~~
r00fus
China is not a normal market. It's clear that the communist party has their
hands in all the pies, and where they can promote Chinese companies, foreign
ones will suffer intense competition or be forced out of the market.

I'll start paying attention when Taobao actually competes outside of China
before proclaiming it's success over eBay.

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altoz
Marissa Mayer's going to be on this list shortly.

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eulerphi
She's pretty and smells good but I think we need some more solid proof.

~~~
jmduke
Think about how much you hear about Yahoo in 2013.

Think about how much you heard about Yahoo in 2011.

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ajkjk
Everytime I hear about Yahoo it's because we're all collectively cringing at
yet another ridiculous thing they did. Or is that not how everyone feels?

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TheLegace
It's funny that's the case. But Yahoo is picking up on demographic that's
slowly but surely adapting the Internet. My mom being a great example. She's
been on the Internet as long as I have, but I would say she's adapting now.
Unfortunately using Facebook, but also Youtube and all of her services from
Yahoo(mail, news, search).

Say what you will about Marissa Mayer(I don't know enough about her). But
she's making right decision on who her market is and although growth may be
slower, I can see a larger number of people retiring that are going to be
spending all sorts of time on Yahoo. Since HN is the anti-thesis of the Yahoo
demographic, I think there is a more nuanced and emotional approach that Yahoo
is taking. But I could be wrong.

edit: Also if anyone from Yahoo read this, please fix the problem with Yahoo
mail and Chromium in Linux. My mom is annoyed by being asked to upgrade(Safari
or Firefox) and asked to change the theme.

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badman_ting
Well, whoever doesn't had better start. His empire is huge and just getting
started. And he is by all accounts a formidable thinker. I have a lot of
respect for him, as opposed to biz-mag dorks like Ballmer.

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snambi
If everyone is is afraid of Amazon, then Amazon should be afraid of everyone.
Potentially any one of them can topple amazon. The truth is, amazon hasn't
killed any companies other than certain old bookstores. Have they killed
walmart, costco, ebay, target, macys ? Nope, not even close.

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area51org
Not much new here — who doesn't already realize this — and Heroku does not
belong on the list of EC2 competitors, given that they actually host on EC2.
There's a big difference between IaaS and PaaS.

~~~
jordanthoms
Well, AWS has been making moves more towards Heroku PaaS territory with
elastic beanstalk, rds, etc.

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stevewillows
I admire Bezos tactic of reinvesting in new markets. It's something that the
other 'kingpins' in the article haven't done as well. Beyond that, he's done
quite well in these markets.

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beautybasics
Larry-Sergey

& Google is far more feature proof company

Amazon

\- Solves easy problems at large scale

Google

\- Solves complex problems at large scale

~~~
forkandwait
Google -- solved a single very important problem really well by applying a
well known tool (SVD and graph networks) to a novel example, also made
android, otherwise not very exciting.

Furthermore, brick and mortar problems are hard -- things break, rot, get
lost, require staff to move them around, etc. Not to poo-poo Google or any
other pure software company, but it isn't harder because its on a computer,
it's actually easier.

~~~
gbog
> not very exciting

So you are "unexcited" by Glass, Loons, Earth/map/streetview, Go, etc.?

~~~
sliverstorm
They don't really make any money on those things, at least yet.

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chatman
Surprisingly, no mention of Washington Post. That keeps him firmly up there in
the zone of evil.

> Congratulations, sir

The tone seems like that of a Bozo fanboy.

~~~
samg
Please read the post with a heavy dose of sarcasm mixed with admiration :) I'd
very much like to see formidable challengers arise.

And I actually wrote this post a week before Bezos bought the WaPo, although I
think it only underscores the point.

~~~
chatman
Before you write anything again on Bozo or Amazon, please read
[http://stallman.org/amazon](http://stallman.org/amazon). If you have already
read it, fine.

~~~
hef19898
I just read through that link. What a nice list of naive points. Well, maybe I
miss some context on the UK angle, i can make some comparisons with the german
one.

The sweatshop warehouses, yeah. And you really think when you order a bokk by
your local book store the people in the warehouse sending are treated any
better? In this part of logistics, and I'm not at all proud of that, one of
the easiest ways to cut costs (and everyone operating a warehouse will do that
since logistics is regarded by most people as costs) is HR. The part of being
ordered around by a computer, welcome to logistics in the 21st century. And
that part is true for truck drivers, too. How are books delivered to your
local book store again? If you think the boys and girls delivereing parcels
for UPS and the like are treated any better, forget it. Most of them aren't
even employed by these companies anymore, they are mere sub-contractors.

And at least were I live, the credit of killing local, independant book stores
goes to big bookstore chains and not Amazon. Quite ironic that these chains
are now trying to get a share of the eBook market using the same DRM
techniques everybody is blaming Amazon for.

And this tax evading scheme. Hell I worked for big company that operated at
the same site for more tha a decade before they payed ANY taxes there. The COO
was quite sad they finally had to. Most european big corps are doing the very
same thing with branches in, say, Delaware.

All that is not to say I consider all this to be good or even OK. It's just
the way it is. Classical case of hate the game, not the player. But I don't
think Benzos is troubled a lot by all this.

