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How did Amazon succeed with a “buying the business” strategy?

Posted by John T. Reed on

Stock investors believe sales growth automatically means future profits and rising stock price. This was the story of the late 1990s dot-com boom of which Amazon was the leader. Most dot-coms flopped in 2000. The public still believe rapid sales growth = earnings and stock price growth.
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In fact if you buy the business like Amazon and Uber and Lyft, that produces TWO things: rapid sales and market share growth and growing losses. The public is simply still too ignorant and credulous to understand that buying the business is fraud and Ponzi-scheme like.
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Another factor is VCs running around looking for Harvard dropouts in tee shirts at whom they can throw tens of millions. With that seed money, you can buy the business in various field for years—maybe long enough to get your IPO out before you run out of that cash or the public realizes you never made a profit and never will.
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What Amazon did, was sustain the buy-the-business sales growth for decades. He is now running into obstacles to continued growth like unions, foreign governments that stop him like in India, and the fact that once you have a market share of 45% or so and you confirm that Mars is unpopulated there is simply nowhere left to sell to at too-cheap, or any other, price. This is the same problem Ponzi schemes have.
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Cancer cells grow really fast. But nowadays, they typically end up in a creamatorium. High growth is doomed by running out of territory, market, human body if you are a cancer cell. When you are a one-trick pony—high growth—you eventually run into the walls, ceiling, and floor. You have to switch to making a profit to become like a GE or Sears or IBM and be a leading blue chip for a century. There is no growth-forever long-term business strategy. There cannot be. Do the math.
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I tried to link to a web article that explained the “buying the business” mistake or fraud. I could not find any. That, is perhaps, why this keeps working. Even the world-wide web is ignorant.
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I’ll define it. Buying the business means increasing your sales and market share buy undercutting your competitors via low prices and/or Lexus-level service that your competitors cannot match because it would force them to lose money. It forces you to lose money, too, but you spin it as investing in the future or some other song and dance.
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Buying the business means paying people to buy your product. An early critic of Amazon captured it succinctly: Amazon sells dollar bills for 90¢ with overnight shipping.

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