[eldavido]

Capital structure is _not_ external. You seem sophisticated to know this, but for everyone else, it's all about CASHFLOW. How much the business has coming in the door, how much is going out, etc.

Warren Buffet goes on periodic rants about these accounting gimmicks in Berkshire's annual letters. Metrics like EBITDA pretend things like massive capital investment don't exist. Guess what, if you own datacenters, or railroads, or anything else, you absolutely have to factor the costs of acquisition and holding those assets into your business model, metrics, and financing needs.

Amazon seems to have this figured out. Look at their financial statements, they always put the statement of cashflows first, right at the top, #1. Everything else is secondary. I'm not surprised their founder is worth 12 figures.

[tim333]

For what it's worth Buffett doesn't go on about cashflow much either, he focuses on profits in the traditional sense of the owners getting richer.

[eldavido]

Says or does?

He might talk about profits a lot, but Berkshire is very much a cashflow-optimized machine. The entire thesis of the company was a hack, noticing that insurance collects cash upfront (premium payments) in trade for future liabilities, giving smart insurers a huge amount of cheap, investable cash.

Within Berkshire, they have operating businesses (Marmon, Fruit of the Loom, Dairy Queen) that throw off operating profits, which then get plowed into high-return but illiquid assets like BNSF (the railroad) which are great long-term investments, but require deploying mountainous, almost government-sized piles of cash.

This isn't my own thinking either; it's a bit of an infection of American businesses that we're so margin-obsessed. This is the thinking that got IBM out of PC manufacturing. "You can't take a profit margin to the bank", as they say. And given the current rate climate, we're anything but capital constrained.

Cashflow is everything.