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Strategies & Market Trends : Buffettology -- Ignore unavailable to you. Want to Upgrade?

To: Chuzzlewit who wrote (862)	12/29/1998 6:02:00 PM
From: Robert Douglas	Read Replies (1) \| Respond to of 4691

Chuzz, Thanks for the link. I certainly am in no disagreement that the Internet will be one of the great changing forces of the next decade. I'm glad I am not a retailer or an airline reservation agent or even an auto-dealer because the changes will be profound. I know an auto dealer who acknowledges that the manufacturer has in so many words told them that they are not the future of auto retailing. My opinion for some time has been that the Internet will make businesses of all stripes more efficient and competition more keen. The end result is likely to be thinner profit margins for many and extinction for some. As investors, we are going have to be very wary that those barriers to entry we have taken for granted will fall as easily as did the Berlin Wall. Whether or not "Buffettologists" recognize this more or less than any other group, I cannot say. -Robert

To: Chuzzlewit who wrote (862)	12/29/1998 6:17:00 PM
From: Michael Burry	Respond to of 4691

<Off topic?> What's even more concerning is that Amazon.com doesn't have to be making money in order to force others out of business. The independents point to Amazon.com, but it is this rabid bull that is the culprit. I work in Palo Alto (the city in the story in your link), and certainly many of us here do buy books online. But for only one reason - it's typically 30% cheaper or more. That's obviously below Amazon.com's profit margin. Scale? Well, Amazon.com loses more money the more it sells. And given its model, you have to wonder where the efficiencies will come in to change this situation, since it is already so efficent that it doesn't have to carry inventory. So you have a business that can print capital by issuing stock to insane investors to support its horrid bottom line, and it is putting out of business perfectly good businesses operating on the funny theory that you have to cover your costs with your revenues. Of course, Amazon's game cannot be kept up indefinitely. Something has to give. Even the analyst that gave it a $400 price target said that it takes a lot of faith to believe that Amazon.com will be profitable in the next 5 years , if ever. Those are his words I emboldened. CW, it's an interesting topic, so I started a thread for it -- Subject 24530 Good investing, Mike

To: Chuzzlewit who wrote (862)	12/29/1998 11:11:00 PM
From: Shane M	Read Replies (1) \| Respond to of 4691

Chuzzlewit, The primay problem I have with e-commerce right now, is that it's still to darn hard to find what you want to buy on the net. It's slow too. I think business to business opportunities will be greater, and there's alot of efficiency to be gained, but I don't think internet retailing model will translate well into many consumer areas - at least until bandwidth improves substantially (my 28.8 connection isn't even close) to equate browsing on the internet to flipping through a mail order catalog. The point is a good one to ask, however, becuase it forces us to address the nature of competitive advantage in the age of the internet, and how this will impact franchise value. One case in point: Right now we are seeing the internet commoditize equity trading and information - eroding the franchise value of many brokerage houses. Another industry about to be impacted IMO is banking. Banks that don't embrace the internet are risking alot now in my opinion. Insurance companies (and I work for one) also have alot to fear as comparitive pricing through the net will become much much easier in the years to come - it's already happening for life insurance (quotesmith), and Property and Casualty insurance is seeing test markets for multiple quotes for auto/home insurance.. Shane