[codex]

Bezos has found and hacked a feature of public markets: you can get away with no profits as long as you're growing. Therefore, you can construct a profitless business scheme that reinvests all profits (or doesn't generate any) as long as your sales forever climb. It's the business equivalent of the Ponzi scheme--and if you look at Amazon's revenue, it is a classic exponential curve.

If sales ever plateau and investors force you to generate profits, the plane stalls and the whole thing spirals down, because it's the profit reinvestment which actually drives sales growth, and actual profits attract competitors who have been unable to pull off the profitless-hyper-growth trick. So far that hasn't happened.

Amazon's value is in the entire business and not the sum of its parts, which means that at some point, investors expect to own a profit making enterprise and not a bunch of warehouses. However, that won't happen until sales plateau or Bezos dies. Ironically, at that point the business loses a lot of value, both because growth has stopped and because competitors are about to enter the space, emboldened by Amazon's newly discovered profits. The whole thing is a bit of a sham. Any growth industry (Internet retail) can support only one "no profit rocket," and eventually it comes back to earth when that industry matures and ends the hypergrowth phase.

[vasilipupkin]

Right. It is not a Ponzi scheme. Investors price stocks based on the expected future cashflows. And those expected cashflows by the very definition reflect the non-zero probability of failure. Now, investors as a whole may overvalue or undervalue those cashflows - but this has nothing to do with a Ponzi scheme

[codex]

It is like a Ponzi scheme in that it requires continuous expansion to maintain. Switching metaphors, it's also like a Catch-22: Amazon is successful precisely because it makes no profit. How, then, do you value future cash flows? Any profit it does make will hamper future flows. Furthermore, Bezos is far too into empire building to stop and take profits. His ego and fame is bound up into the size of his company, not how profitable it is, so the expectation of profit should be near zero.