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0 pointsrunnerup3y ago0 comments

I don’t understand how this is affecting AMZN’s cash flow though. Seems like both their costs and revenues would scale similarly with inflationary effects, leaving a similar profit margin %.

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Nzen3y ago

I don't know, so I'll offer a plausible, to me, story: Consider that AWS is Amazon's income [0]. VC funded companies may well be a significant portion of its customer base. Hence, if its customers are tightening their belts, they may take short and long term measures to limit their spend on AWS. Amazon presumably prepares for this by lowering twitch's budget.

[0] https://www.investopedia.com/how-amazon-makes-money-4587523

nonethewiser3y ago

I think it’s more about expectation for growth being lower, not present cash flow.

marcosdumay3y ago

Executives remuneration is often linked to the stock price. So if the price goes down, executives gain less.

If they can keep the price higher for a while longer, they get time to ensure their income and jump ship safely.

kneebonian3y ago

Once you realize that sometime in the past 10-20 years the economy started having nothing to do with actual goods and services and instead turned into some sort of weird game played by the powerful and the rich it makes more sense.

Personally I peg it happening sometime around 2008 when it became clear the rules didn't matter, consequences were for the poor and party hearty. Explain how else a company like Uber that was losing money on every ride was able to raise billions in VC funding.

Think of it like that and it makes more sense.

this_user3y ago

All of that is a direct consequence of low interest rates. If money is cheap and easy to borrow, there is less pressure on a business like Uber to turn an actual profit. Instead, investors will encourage them to grow aggressively in the hopes of capturing the market. Once liquidity dries up, there will be more pressure to actually make money.

But the economy is working as intended and it's actors are merely reacting to incentives. The question is whether the wrong incentives have been set that have created large sectors of the economy that are completely dependent on permanently low interest rates.

vuln3y ago

> Once liquidity dries up, there will be more pressure to actually make money.

No. They IPO and the investors get their money while retail investors hold the bag of poop thinking they just got _in_ on something.

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paulryanrogers3y ago

VCs want to capture markets. That's why they pour money into launching what could be the next market leader, even if the model won't work at predatory prices. Because once they own the market they can raise the prices to whatever they want.

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