AMZN - Amazon.com Inc.

[rpadebet]

In my comment above about it only costing $75M to build out a FC I forgot to link:

 

 

http://www.businesswire.com/news/home/20141028005388/en/Governor-Quinn-Senator-Durbin-Amazon-Announce-Plans#.VFEZb4vF-EQ

 

 

So AMZN has about 50 of these in the U.S. and let's say they actually cost $200M, including robots, etc.

 

 

That's $10B of property to run their U.S. business.

 

 

Walmart has 3400 supercenters in the U.S. that cost about $25M to build in the suburbs.  That's $85B they've spent.  And Walmart still has to operate distribution centers as well.  Walmart handles goods twice, AMZN doesn't.  AMZN doesn't have retail staff at all.

 

 

I don't know how anyone can't see the long-term cost advantage selling goods solely online and increasingly automated affords AMZN.

 

JAllen,

I think investors intuitively do understand that AMZNs model has an in built cost advantage. But since we cant be sure of it from the numbers they report, I can completely understand why some would want to put it in the "too hard" pile. There are many other investments which are easier to understand, so I do get that part.

 

On the other hand, I am pretty pissed myself that the price hasn't got down as as much as I would like. It's already close to $300 again. They reported seemingly awful numbers and the guidance wasn't spectacular either. There were so many negative articles everywhere, yet what we got was a -8% move on day 1 and steady climb after that. I am guessing current holders of the stock mainly get it or they have balls of steel!

[GregS]

On the other hand, I am pretty pissed myself that the price hasn't got down as as much as I would like. It's already close to $300 again. They reported seemingly awful numbers and the guidance wasn't spectacular either. There were so many negative articles everywhere, yet what we got was a -8% move on day 1 and steady climb after that. I am guessing current holders of the stock mainly get it or they have balls of steel!

 

Isn't this stock a total B----?!  There are so many investors who love this company but hate the price that every dip will be bought and I always think it will look expensive.  I'm not going to see a price I want until everyone hates it and abandons it, and then it will take some major stones to buy.  Sharpening my pencil anyway, just in case.

[JAllen]

Either it costs less to sell a bunch of retail products without stores and more robots, or it doesn't.

 

 

As we've discussed quite a bit, AMZN has lots of expenses that are more akin to growth expenses than maintenance expenses, the biggest of which I believe are the digital video content expenses - somewhere in the range of $1-2.5B.  These obscure AMZN's profits, intentionally so.

[JAllen]

Waiting to see when the profits appear on AMZN's financials reminds me of Buffett's quote: "You pay a high price for a cheery consensus".

 

The greatest returns will be earned by those that see things others don't.  And that's what I invite others to do with AMZN.  Look and you will see, is what I say.

 

Think of how many things AMZN is working on that aren't generating much revenue, that are widening AMZN's moat, and add up to be huge expenses:

 

• Third-party Digital Video Content: $1.75B
  
• Original Digital Video: $400M
  
• Selling millions of Kindle books below cost for $9.99: this is not talked about at all: $1B
  
• Kindle hardware R&D: $200M
  
• Employing dozens if not hundreds of seasoned engineers for Prime Air: $50M
  
• Building the Dash: $30M
  
• Giving the Dash away $50M
  
• Fire Phone Development: $100M
  
• Licensing digital music and giving it away: $150M
  
• Building multiple FCs in India: $300M
  
• Operating Losses in India + China + Brazil: $1B
  
• Building AWS datacenters before they really need them to ensure high service levels and performance: $500M
  
• Building 15 sortation centers over the last three years: $400M
  

This is something like $4-5B and most of these are estimates, but veteran software engineers cost serious money.

[JAllen]

Continuing with that last note: "but veteran software engineers cost serious money."

 

AMZN has 60 positions, or three pages of job openings for just Prime Air alone.  Many of these positions are Senior or Research positions.  Most of these jobs are for starting salaries of $100-$200K, some more, excluding stock-comp. 

 

Are these maintenance or growth expenses?

[JAllen]

They've been working on Prime Air for multiple years now.

 

 

Look at the individuals working there, next to this person's: http://www.linkedin.com/in/gurkimchi

 

 

AMZN is a collection of mature retail, book and IAAS businesses, combined with numerous startups backed by lots of capital, super smart engineers and a super long-term outlook. 

[Liberty]

So I've been keeping an investing journal for a little less than a year (76k words since February -- guess I'm prolific). I write various thoughts about various things, keep notes and links, quotes and excerpts, etc.

 

I recently wrote some thoughts about Amazon. Nothing ground-breaking or super insightful, but I figured, why not shares them? So here we go:

 

I’ve been thinking about Amazon (AMZN) lately. I’ve been following the company for years, but it’s always been in the ‘too hard pile’. As a customer, I really like the business and can clearly see what value it offers. Convenience, low prices, huge selection (‘infinite shelf space’), reviews, third party sellers, etc.

 

But as an investor, even as the lower prices that the stock has been trading at lately, and even if I think the company will keep growing rapidly for many years to come and don’t care that they’re not GAAP-profitable as long as their growth capex gets good ROI, I have to wonder if it’s a business that I want to own in the first place — before doing any valuation work at all.

 

The thing that Amazon is really good at is retailing. But retail in general is a terrible business. If there’s one thing that the Sam Walton biography has made clear it’s that you have to run incredibly fast just to stay in the same place, and any good idea you have will be copied by competitors. It’s really hard to differentiate yourself and have pricing power since what you’re selling, others are selling too. So you’re left with price as the main thing that brings customers in. If you’re the low-cost operator, this can be profitable, but it’s still a tough low-margin business where you have to execute perfectly all the time just to do well and keep the wolves at bay.

 

Bulls seem to think that Amazon will just repeat the Walmart story, but I don’t think it’s that simple. When Walmart started, a very large part of the US was probably under-retailed, and margins were very fat so there was a lot to cut. Today, most of the US is probably over-retailed and overall margins are a lot lower.

 

Amazon is also a leader in cloud services (AWS), but that too is a commodity business. They’re selling computing power and storage, something that Microsoft, IBM, Google, etc, can also sell, and these competitors have deep pockets and sometimes empire-building tendencies. Amazon never knows when a competitor will go crazy and invest large amounts that they’ll have to match, or when someone will cut prices, etc. It’s another tough business where, over time, prices are bound to gravitate toward the marginal cost of computing power and storage.

 

They’re also trying to get into content with video streaming and such, but they don’t have the scale of Netflix and this is another really tough business where almost everything comes down to scale and price (except for differentiated original content, but that’s expensive and always a gamble — can’t predict what will be successful, especially without a track record). If someone else can spread its fixed costs over more users than you can, they’ll always make more money, which they can reinvest in more content, etc. Amazon could do well by using its other businesses to bootstrap this, but it’ll be hard against Netflix and the big content companies and cable companies, and in the meantime costs are very real.

 

Then they have their consumer electronics businesses. They’re pretty terrible at those, with weak designs and software, and no critical mass for their ecosystem or a particularly strong brand with consumers in that area (What does it tell others if you have an Amazon device? That you’re cheap?). The only reason the Kindle reader initially succeeded was that Amazon has a near monopoly in ebooks, and I doubt it’s a very profitable franchise. The Fire tablets aren’t exactly setting the world on fire, and the Fire Phone seems like a total flop despite being a pet project of Bezos, obviously something that he spent a lot of time and energy on (what’s the opportunity cost of that, on top of the $ cost)…

 

So you basically have two bad businesses that Amazon is good at, another tough one that Amazon might end up being OK at, but it probably won’t reach a scale large enough to matter terribly compared to the overall size of the company, and one potentially good business (if you can sell differentiated products that people buy as integrated products, rather than commodity hardware sold near the marginal cost of the parts) that Amazon is bad at.

 

So if I look at it like that, I’m a lot less tempted. I think that it’s my love for the company as a customer that sometimes clouds my judgement a little. The company could still do very well over time - in fact I feel like they probably will - and many people have made a lot of money in retail. But it’s still definitely in the ‘too hard’ pile for me. If I’m going to pay up for something, I want it to be operating in a more attractive business than commodity retail and commodity server rental over the internet (remove the word ‘cloud’ and it sounds less sexy).

[dwy000]

But if this is the growth spend that is sucking up all the profitability and cash flow, how do you shut these off without killing growth or having customers go elsewhere?  Either these items are supporting revenue growth and can't be shut off - or if not, then they aren't getting any return for the spend and should shut if off now.  If they stopped spending $2bn+ on media content, how many customers would they lose?  If very few, then they are wasting money on media content.  If a lot, then they can never stop this spend.

 

There will never be a point at which a company (any company, not just Amazon) can say "we are no longer investing for growth".  Once you start investing, that spend becomes the new normal because everyone else has to spend to match it.  Right now, WMT, EBAY, BABA, Google etc are all investing staggering sums for growth investment but still manage to make very healthy profits.  If Amazon stops and they all continue, what happens to Amazon's business?

[dwy000]

So I've been keeping an investing journal for a little less than a year (76k words since February -- guess I'm prolific). I write various thoughts about various things, keep notes and links, quotes and excerpts, etc.

 

I recently wrote some thoughts about Amazon. Nothing ground-breaking or super insightful, but I figured, why not shares them? So here we go:

 

I’ve been thinking about Amazon (AMZN) lately. I’ve been following the company for years, but it’s always been in the ‘too hard pile’. As a customer, I really like the business and can clearly see what value it offers. Convenience, low prices, huge selection (‘infinite shelf space’), reviews, third party sellers, etc.

 

But as an investor, even as the lower prices that the stock has been trading at lately, and even if I think the company will keep growing rapidly for many years to come and don’t care that they’re not GAAP-profitable as long as their growth capex gets good ROI, I have to wonder if it’s a business that I want to own in the first place — before doing any valuation work at all.

 

The thing that Amazon is really good at is retailing. But retail in general is a terrible business. If there’s one thing that the Sam Walton biography has made clear it’s that you have to run incredibly fast just to stay in the same place, and any good idea you have will be copied by competitors. It’s really hard to differentiate yourself and have pricing power since what you’re selling, others are selling too. So you’re left with price as the main thing that brings customers in. If you’re the low-cost operator, this can be profitable, but it’s still a tough low-margin business where you have to execute perfectly all the time just to do well and keep the wolves at bay.

 

Bulls seem to think that Amazon will just repeat the Walmart story, but I don’t think it’s that simple. When Walmart started, a very large part of the US was probably under-retailed, and margins were very fat so there was a lot to cut. Today, most of the US is probably over-retailed and overall margins are a lot lower.

 

Amazon is also a leader in cloud services (AWS), but that too is a commodity business. They’re selling computing power and storage, something that Microsoft, IBM, Google, etc, can also sell, and these competitors have deep pockets and sometimes empire-building tendencies. Amazon never knows when a competitor will go crazy and invest large amounts that they’ll have to match, or when someone will cut prices, etc. It’s another tough business where, over time, prices are bound to gravitate toward the marginal cost of computing power and storage.

 

They’re also trying to get into content with video streaming and such, but they don’t have the scale of Netflix and this is another really tough business where almost everything comes down to scale and price (except for differentiated original content, but that’s expensive and always a gamble — can’t predict what will be successful, especially without a track record). If someone else can spread its fixed costs over more users than you can, they’ll always make more money, which they can reinvest in more content, etc. Amazon could do well by using its other businesses to bootstrap this, but it’ll be hard against Netflix and the big content companies and cable companies, and in the meantime costs are very real.

 

Then they have their consumer electronics businesses. They’re pretty terrible at those, with weak designs and software, and no critical mass for their ecosystem or a particularly strong brand with consumers in that area (What does it tell others if you have an Amazon device? That you’re cheap?). The only reason the Kindle reader initially succeeded was that Amazon has a near monopoly in ebooks, and I doubt it’s a very profitable franchise. The Fire tablets aren’t exactly setting the world on fire, and the Fire Phone seems like a total flop despite being a pet project of Bezos, obviously something that he spent a lot of time and energy on (what’s the opportunity cost of that, on top of the $ cost)…

 

So you basically have two bad businesses that Amazon is good at, another tough one that Amazon might end up being OK at, but it probably won’t reach a scale large enough to matter terribly compared to the overall size of the company, and one potentially good business (if you can sell differentiated products that people buy as integrated products, rather than commodity hardware sold near the marginal cost of the parts) that Amazon is bad at.

 

So if I look at it like that, I’m a lot less tempted. I think that it’s my love for the company as a customer that sometimes clouds my judgement a little. The company could still do very well over time - in fact I feel like they probably will - and many people have made a lot of money in retail. But it’s still definitely in the ‘too hard’ pile for me. If I’m going to pay up for something, I want it to be operating in a more attractive business than commodity retail and commodity server rental over the internet (remove the word ‘cloud’ and it sounds less sexy).

 

Agree with it or not, that was one of the most insightful posts I've ever seen on this board.  Any time you want to put up a stream of consciousness it's fine by me.

[rpadebet]

+1 on a good post Liberty.

 

"commodity server rental" ;D, if most people called it this way, AMZN stock would be definitely cheaper and so would lot of other "cloud" companies.

 

I wouldn't jump to judgement of this being a commodity business this soon in the cycle though. There are already capital barriers to entry in this business. Yes, you need very deep and very big pockets to get into this space. Its unlikely you will be disrupted by a startup.

 

I look at it more like a utilities business. What they sell is server and storage space (non sexy), but once someone buys into it, its difficult to move away from it or for that matter to move to a competitor. The margins wont be super high because some deep pocketed competitor will always threaten to under cut you on price, so you cant raise prices when the industry is growing and clients are being accumulated. But once most of the client base is on one cloud or the other, in my opinion they are "stuck" just as you are with your utility company.

 

Most older enterprises are stuck with IBM right now, not because of their great pricing or servers, but because of all the enterprise specific apps, analytics etc which have been developed on them all these years. Same story will repeat with the cloud guys I feel. AMZN or others can and should actually give away stuff for free now to get the enterprise customers on their platform. Give them API's and tools to build their own apps. Once they do and are used to it, they are a captive. That's when you can charge them.

 

I think it was the Netflix guys who said, they paid a "early adopter" tax to get onto AWS and they don't want to go through it again to migrate to MSFT or GOOG cloud.

 

AMZN's focus on developers for their AWS platform is very sound business strategy. Its kind of like the earlier MSFT model or recent AAPL/Android App store model. If most developers are comfortable coding on AWS and more apps are developed on AWS, more clients get onto AWS which leads to more developers and more apps. It's a trap almost.

 

[rpadebet]

The way I see the "cloud wars" progressing is as follows:

 

There are only a handful of companies which can compete, rest will be priced away soon. Of these companies

 

1)AMZN: Has the first mover advantage. Biggest 3rd party cloud platform. Very aggressive and doesn't care about initial profitability. So in all likelihood they will become the low cost platform of the future.

 

2)MSFT: Has the most exciting prospects for Azure. Not only is it relatively small now, but MSFTs current business allows them to invest a flood of cashflow into building the scale . They are currently entrenched into enterprise through Windows, Office and .Net platform, so they will likely have an easier time convincing existing clients to move over to their cloud. Already existing network of .Net platform  developers can be easily "trained" to develop apps for their cloud. I personally think MSFT will do the best in this space going forward.

 

3)GOOG: Has the biggest existing cloud and server farms but they themselves use most of it. Very deep search cash flows allows them to invest heavily. But I don't see how without a first mover advantage or existing relationships in enterprise, they will be able to get their client base.

 

4)IBM and others: They are at the table, but I think they are on the menu.

[dwy000]

Good summary Rpadebet.  I would tend to agree with the classifications.  Google will be a factor if only due to the amount they have to spend on themselves, to get 3rd party revenues is just a plus for them.  I think MSFT will win most of the growing enterprise and big customer business.  IBM will play in the same space but probably specialize - likely healthcare, government, banking.  AMZN will own the low end - startups, developers, small business.

[Liberty]

How stuck are they really, though? If Google cuts its rates by 50% and Amazon doesn't, will people stick with it? Do they have any pricing power, or are people only "stuck" as long as price is materially the same as competitors (is the only real friction the hassle of migrating? it's kind of like you would keep a stock at a higher price than you would buy it because of the friction of taxes)?

 

As far as I know, a lot of the capacity is used as web servers and storage, not to run complex custom software built specifically for one cloud provider (in fact, any smart IT leader should make things platform agnostic if at all possible). Moving web servers and storage somewhere else isn't very hard since it's all standardized on a few platforms that will run wherever.

 

But I haven't really dug deep into this, so I could be wrong.

[bargainman]

How stuck are they really, though? If Google cuts its rates by 50% and Amazon doesn't, will people stick with it? Do they have any pricing power, or are people only "stuck" as long as price is materially the same as competitors (is the only real friction the hassle of migrating? it's kind of like you would keep a stock at a higher price than you would buy it because of the friction of taxes)?

 

As far as I know, a lot of the capacity is used as web servers and storage, not to run complex custom software built specifically for one cloud provider (in fact, any smart IT leader should make things platform agnostic if at all possible). Moving web servers and storage somewhere else isn't very hard since it's all standardized on a few platforms that will run wherever.

 

But I haven't really dug deep into this, so I could be wrong.

 

The cost of migration is definitely significant. It is not easy to move something from AWS on to another platform.  Making things platform agnostic is easier said than done.

 

I find it interesting that you claim to Amazon is at a disadvantage in Amazon prime space because of scale.  It's interesting because Amazon is all about scale that is what they focus on.  The greater the scale the greater the pricing power meaning they can drive pricing down even further and cost down even further. That is the virtuous cycle that Jeff Bezos is always talking about.

 

 

[KCLarkin]

How stuck are they really, though? If Google cuts its rates by 50% and Amazon doesn't, will people stick with it? Do they have any pricing power, or are people only "stuck" as long as price is materially the same as competitors (is the only real friction the hassle of migrating? it's kind of like you would keep a stock at a higher price than you would buy it because of the friction of taxes)?

 

As far as I know, a lot of the capacity is used as web servers and storage, not to run complex custom software built specifically for one cloud provider (in fact, any smart IT leader should make things platform agnostic if at all possible). Moving web servers and storage somewhere else isn't very hard since it's all standardized on a few platforms that will run wherever.

 

But I haven't really dug deep into this, so I could be wrong.

 

Moving servers isn't difficult. Storage, especially databases, can be more difficult. There is also some proprietary lock-in with things like DynamoDB and SQS. In many cases, the cost of servers is very low compared to the engineering effort required to migrate to a new platform.

[LC]

A. Damodaran weighs in: http://aswathdamodaran.blogspot.com/2014/10/if-you-build-it-revenues-they-profits.html

[rpadebet]

A. Damodaran weighs in: http://aswathdamodaran.blogspot.com/2014/10/if-you-build-it-revenues-they-profits.html

 

I admire this man a lot. I liked this twitter valuation. This isn't as sophisticated as that. For starters, he makes no adjustment for 3p/1p sales split. I think before you compare operating margins with other retailers you need to adjust for "like" revenues. Just doing that in his own sheet, I get the stock price around $275. So current price is fair and reasonable price as I keep saying

[Liberty]

How stuck are they really, though? If Google cuts its rates by 50% and Amazon doesn't, will people stick with it? Do they have any pricing power, or are people only "stuck" as long as price is materially the same as competitors (is the only real friction the hassle of migrating? it's kind of like you would keep a stock at a higher price than you would buy it because of the friction of taxes)?

 

As far as I know, a lot of the capacity is used as web servers and storage, not to run complex custom software built specifically for one cloud provider (in fact, any smart IT leader should make things platform agnostic if at all possible). Moving web servers and storage somewhere else isn't very hard since it's all standardized on a few platforms that will run wherever.

 

But I haven't really dug deep into this, so I could be wrong.

 

Moving servers isn't difficult. Storage, especially databases, can be more difficult. There is also some proprietary lock-in with things like DynamoDB and SQS. In many cases, the cost of servers is very low compared to the engineering effort required to migrate to a new platform.

 

Maybe. I'm still not convinced it's going to be a good business over the long term. And by that I don't mean that they won't make money, just that, like retail, it sounds like renting servers over the internet could be low-margin, high-competition, hard to differentiate, etc. That's not a 1-foot hurdle for sure.

[KCLarkin]

How stuck are they really, though? If Google cuts its rates by 50% and Amazon doesn't, will people stick with it? Do they have any pricing power, or are people only "stuck" as long as price is materially the same as competitors (is the only real friction the hassle of migrating? it's kind of like you would keep a stock at a higher price than you would buy it because of the friction of taxes)?

 

As far as I know, a lot of the capacity is used as web servers and storage, not to run complex custom software built specifically for one cloud provider (in fact, any smart IT leader should make things platform agnostic if at all possible). Moving web servers and storage somewhere else isn't very hard since it's all standardized on a few platforms that will run wherever.

 

But I haven't really dug deep into this, so I could be wrong.

 

Moving servers isn't difficult. Storage, especially databases, can be more difficult. There is also some proprietary lock-in with things like DynamoDB and SQS. In many cases, the cost of servers is very low compared to the engineering effort required to migrate to a new platform.

 

Maybe. I'm still not convinced it's going to be a good business over the long term. And by that I don't mean that they won't make money, just that, like retail, it sounds like renting servers over the internet could be low-margin, high-competition, hard to differentiate, etc. That's not a 1-foot hurdle for sure.

 

For sure, the current core business of EC2 and S3 is a commodity business. Still, AWS will have a cost advantage given it's scale. The most obvious strategy would be to offer higher value services on top.

 

TBH, it is starting to look like Bezos is trying to escape commodity hell by randomly launching new ventures. The Amazon bulls keep pointing out the long runway for the ecommerce business. But if the ecommerce business is so great, why are they investing in all this other stuff?

 

Liberty, you have convinced me.

[Palantir]

How could it be that Google would cut its pricing by 50% and AMZN wouldn't? All vendors are in a price war here...

[Liberty]

For sure, the current core business of EC2 and S3 is a commodity business. Still, AWS will have a cost advantage given it's scale. The most obvious strategy would be to offer higher value services on top.

 

High value services on top would be ideal. But I don't really see it. Software is hard. I don't see Amazon suddenly becoming a software company competing directly with IBM, Microsoft, Oracle, etc.

 

There's a real possibility that others will capture a large part of the value of AWS by running services on top of the commodity layer.

 

TBH, it is starting to look like Bezos is trying to escape commodity hell by randomly launching new ventures. The Amazon bulls keep pointing out the long runway for the ecommerce business. But if the ecommerce business is so great, why are they investing in all this other stuff?

 

That's the central question for me. What's the great business that Amazon could be really good at? Some people might be comfortable with retail and server rental and such, and that's fine. But for me to invest, I think I would need to see them succeed in a good business first, at least at the kind of multiples of potential FCF that they're selling at... (if the stock was super cheap, maybe that would compensate for the bad business aspect)

 

Liberty, you have convinced me.

 

Now that's something you don't hear often on the internet :D

 

Glad my thinking out loud was helpful. Cheers!

[Liberty]

How could it be that Google would cut its pricing by 50% and AMZN wouldn't? All vendors are in a price war here...

 

Not sure I understand your question. That's exactly what I was saying, that they don't have pricing power, don't have control over what they charge. If someone in the space significantly lowers pricing, everybody else has to follow suit.

[LC]

Liberty you say you want to see them succeed at a "good" business, I have two counterpoints:

-Succeeding at retail is really hard! Shouldn't this be a compliment of management team, versus succeeding at something where they own the patent and have no competition?

-Most businesses aren't good businesses. Most are commoditized in one way or another. Being the low-cost operator in a commoditized business is the best position to be in.

 

My issue with Amazon is growth related. I'm curious where you guys think the growth will come from? The US market is pretty tapped out, no? It's not like there's a state in the Union which has never heard of Amazon before. So is it a matter of pricing power in the US? I don't want to make an investment hinging on that. If the case is that they are the low-cost operator, raising prices defeats that purpose.

 

So you look either domestically to offering new services (which they have I suppose a 50/50 record with) or expanding retail internationally. I don't think the investment works if you're depending on Amazon to get into another line of business domestically which will dramatically move the needle. So you're really looking at international retail expansion.

 

How is everyone thinking about that? How will it be working with Euro/Asian delivery servicers? How competitive are those markets? How do those people shop? Population density in Europe and developed Asia is probably higher than in the US, I presume. Would retail-by-mail even work as well there? These are the questions holding me back.

[Palantir]

How could it be that Google would cut its pricing by 50% and AMZN wouldn't? All vendors are in a price war here...

 

Not sure I understand your question. That's exactly what I was saying, that they don't have pricing power, don't have control over what they charge. If someone in the space significantly lowers pricing, everybody else has to follow suit.

 

Yes...public cloud is not a high margin business (as of now).

[Liberty]

Liberty you say you want to see them succeed at a "good" business, I have two counterpoints:

-Succeeding at retail is really hard! Shouldn't this be a compliment of management team, versus succeeding at something where they own the patent and have no competition?

-Most businesses aren't good businesses. Most are commoditized in one way or another. Being the low-cost operator in a commoditized business is the best position to be in.

 

I'd want that to be interested. I'm looking for good businesses. Yes, most businesses are bad. But I don't have to own them. Maybe others want to, and that's fine. Different strokes.

 

But that doesn't take anything away from management -- they deserve all the credit in the world for building this business that I use frequently and that I would be sad to ever see disappear. For all I know, it's harder to be the CEO of US Steel than of Mastercard, so that deserves credit on that front too. But that doesn't change which business I'd like to own if I had to choose between those two (that's before taking valuation into account -- maybe the good business is too expensive and that's a showstopper, but personally, I'm not interested in bad businesses anymore, even if they're cheap, and Amazon isn't exactly cheap either).