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I think we are fundamentally in agreement on this. Amazon's success can be attributed to two things; aggressive tax avoidance and employment policies, the second you cover at the end. Where is the money coming from? Believe it or not it is literally produced out of thin air based on the assumption the Lending Bank will make good on the default, after 2008 a very dangerous assumption. So Ed West Inc goes to the bank to borrow 1 million bucks to set up a new concern. As his corner shop has done well the bank lends the money at a suitable (for the bank) interest. The loan is 10 year term at 20% interest per annum. Ed West Inc is OK with this as they believe their product will enjoy very high margins. Assuming all goes well in 10 years the bank will have had the capital plus about 2.75 million profit. They also make money because this 2.75 million 'future profit' can be marked as an asset for the bank and then used to either generate more loans or get into leveraged dealing. If they do this enough we rerun 2008 again, profits have been taken but the losses are paid by the general population. That last bit is why some worry as the next crash will be at least an order of magnitude bigger than 2008 and too big to fix.Going back to my poor management comments. If a business needs to trick people into believing their products are best by advertising then it is because they haven't kept ahead of the competition or something better has come along to replace it. Management failing in both cases. A good example is Reckitt Benckiser and Gaviscon. For years the company suppressed research that looked into the causes of ulcers as every ulcer patient brought the stuff week in, week out. RB got idle and thought they'd have an easy life for ever. Enter Barry Marshall and Robin Warren who proved ulcers were bacterial, could be treated with common medication and whoops there goes RB stock. The pair got the 2005 Nobel Prize for that.
I think we are fundamentally in agreement on this. Amazon's success can be attributed to two things; aggressive tax avoidance and employment policies, the second you cover at the end. Where is the money coming from? Believe it or not it is literally produced out of thin air based on the assumption the Lending Bank will make good on the default, after 2008 a very dangerous assumption. So Ed West Inc goes to the bank to borrow 1 million bucks to set up a new concern. As his corner shop has done well the bank lends the money at a suitable (for the bank) interest. The loan is 10 year term at 20% interest per annum. Ed West Inc is OK with this as they believe their product will enjoy very high margins. Assuming all goes well in 10 years the bank will have had the capital plus about 2.75 million profit. They also make money because this 2.75 million 'future profit' can be marked as an asset for the bank and then used to either generate more loans or get into leveraged dealing. If they do this enough we rerun 2008 again, profits have been taken but the losses are paid by the general population. That last bit is why some worry as the next crash will be at least an order of magnitude bigger than 2008 and too big to fix.
Going back to my poor management comments. If a business needs to trick people into believing their products are best by advertising then it is because they haven't kept ahead of the competition or something better has come along to replace it. Management failing in both cases. A good example is Reckitt Benckiser and Gaviscon. For years the company suppressed research that looked into the causes of ulcers as every ulcer patient brought the stuff week in, week out. RB got idle and thought they'd have an easy life for ever. Enter Barry Marshall and Robin Warren who proved ulcers were bacterial, could be treated with common medication and whoops there goes RB stock. The pair got the 2005 Nobel Prize for that.
