I focus on the incentives that cause numbers to go up or down. Incentives are simple to see. Describing them with equations is very complex and of questionable value. I don’t know when it will happen but AMZN (amazon.com) will trade for under $5.00 per share, stay between $2.00 and $5.00 then finally go out of business. Their innovations will survive but AMZN will be gone.
How do I know such a thing? This is a common fate of companies which come up with great ideas but are very late in making profits. It is somewhat common to all innovative companies. There is a process I call the second rat gets the cheese scenario.
During the 1980’s a corporation called U.S Surgical developed the non invasive system of surgery that is commonly used today. They sold the products used in using this surgical technique. Once the system was perfected, Johnson and Johnson started doing basically the same thing. U.S. Surgical like Amazon.com never earned a meaningful profit. Everything was for the future. With only expenditures and no profit, U.S. Surgical could not compete with a large company that actually did make a profit.
All of Amazon’s brilliant ideas and innovations are available to be used by any retail outfit in the world. Amazon.com has spent countless dollars developing its ideas. Everyone else gets them for nothing. It is like the second rat gets the cheese analogy.
Who will end up burying Amazon.com?I am thinking it will be Walmart. At the opportune moment, Walmart, will just take what Amazon.com has built and go with it.
Amazon has an upper hand as long as its stock price stays at astronomical levels. When that changes, and it will, Walmart will make its move.