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To: Lee who wrote (145194)	10/19/1999 11:14:00 PM
From: Ian@SI	Respond to of 176387

Lee, Re Philips Curve. Only time it's a curve is if the plot is restricted to the 70s. If the 80s and 90s are included, it's a scatter diagram. i.e. - there is no correlation. FWIW, Ian.

To: Lee who wrote (145194)	10/23/1999 5:37:00 PM
From: Mick Mørmøny	Read Replies (3) \| Respond to of 176387

Is this a story we will read sometime in the next year? NEW YORK (NYT) -- The Dow Jones industrial average dropped 1,266 points today after Amazon.com announced that it had inadvertently made a profit. After years of having persuaded investors that its business model called for it to consistently lose money until it had built up its market share, Amazon stunned Wall Street by announcing earnings of 1 cent per share this quarter on sales of $1.1 trillion, or 10 percent of U.S. G.D.P. The reason these earnings rattled Wall Street was that investors began to realize that no matter how big Amazon's market share became its profit margins were going to remain razor thin because it is now competing with everyone -- not just booksellers. And therefore its market capitalization -- the company is valued at more than Fort Knox -- was simply not sustainable. "Pie in the sky is always great as long as the pie remains in the sky," said one Wall Street broker, "but when the pie actually comes down to earth and you get to see what a real slice looks like -- well, you have a problem. Amazon's whole strategy was to keep the pie in the sky. But now they've blown it by accidentally making a profit." The Seattle-based Internet retailer issued a statement following its quarterly earnings report, saying: "The Amazon board wants to apologize to shareholders for completely missing its quarterly loss target and inadvertently making a profit. The board has been assured by management that this problem will be rectified in the coming quarter. Amazon intends to increase both its advertising budget and the number of books it will sell at a loss to insure that it returns to unprofitability by the next quarter. Our shareholders can rest assured that our primary goal remains market share and our business motto remains: 'Amazon.com: We took the 'E' out of P/E.' " Said one Wall Street Internet analyst: "Look, I believe the Internet changes everything. I've taken the Kool-Aid. But I think the question of whether Jeff Bezos [Amazon's founder] will ever make the massive profits that his stock price implies is really uncertain." It will depend on at least three things, the analyst said. The first is, Are Amazon's competitors dead or are they just behind? Has Mr. Bezos killed Wal-Mart, Barnes & Noble, Best Buy, Borders, Toys "R" Us and Circuit City -- all of which he is now competing against? Or, has he just showed them the power of the Internet as a retailing tool and all these brick-and-mortar companies will now become clicks and bricks? "If that is the case," the analyst said, "all Amazon will have done is to build market share for the day when its rivals catch up. If it hasn't made money up to now, with its huge head start on the Internet, how is it going to make big money when the others catch up? The cost of switching from Amazon to another retailer is zero on the Internet. It's just one click. Wal-Mart hasn't even come into cyberspace in any serious way yet -- and those guys are meaner than junk-yard dogs. You think they're going to let Amazon just put them out of business? No way." The second thing Amazon's future depends on, said this analyst, is what inning we are in. If we are still in the first inning as far as Internet retailing is concerned, maybe Amazon, or another Amazon soon to be born, will come up with yet another innovation for using the Internet to sell things at a profit. But if we are already in, say, the fifth inning, if the basic Internet revolution in retailing is now in place and the rest is just execution, then the Wal-Marts will eventually learn to execute. Amazon might still be a winner -- it is a phenomenal marketer -- but not a winner-take-all. The third unknown, the analyst said, is whether Amazon can use its high stock price to buy one or more already profitable brick-and-mortar retailer in order to go head to head with Wal-Mart. At first people thought all business was moving to the Net; now they see that the Net is moving into business. The next big merger wave will be between virtual companies and real ones. "I swear, I thought Bezos' actual plan was to skip making a profit and go directly from being an I.P.O. to being an N.G.O. for distributing books cheaply," said another analyst. "I don't know what Amazon's future is as a company -- but as a charity, wow! What a write-off machine! It could have been called 'Unicef.com.' Really, who's given away more kids' books at cost than Amazon? Bezos had a chance to be Andrew Carnegie -- without ever making a dime. Now he's blown it by making a profit and forcing everyone to look at Amazon like, well, a real company. I mean, who needs that?" FOREIGN AFFAIRS / By THOMAS L. FRIEDMAN Reality Bytes, NYT 10/17/99 ************************ Amazon vs. Everybody Forget Amazon vs. Barnes & Noble, Amazon vs. eBay, even Amazon vs. Wal-Mart. This company has bigger plans. But when will it make money? pathfinder.com ---------- Dr. Lee: You're such a good sport. I was just kidding when I asked you for a new definition of "wealth effect" and "Phillips Curve." Thanks for the materials from your extensive library. They were mostly instructive. Your time and trouble were not wasted. Allow me to return the favor with a little humor on a baseball Saturday when the two best teams are set for a rematch. Cheers, Mick $$$