Hacker News Reader

Comment by tdy721 | Hacker News Reader

Amazon was never a profit machine. I do think that's part of the core business, re-invest everything and more... and they turned into a giant comparable to Walmart.

View on HN

And so it is for Tesla. And SpaceX.

Those companies are means to an end, not profit-generating machines.

It's not really the same thing. Amazon don't turn a profit because they intentionally re-invest they money they would make into areas that they think will make them money in future. (Once or twice they've screwed this up and accidentally ended up making a profit.) Tesla don't turn a profit because they're making and selling cars at prices below their total costs.

Care to provide a source to back up that claim?

They have basically a single source of revenue AFAIK which is selling cars. They sell X amount of cars per year making $Y. They don't turn a profit. Last year they lost close to $1B mostly because of their R&D costs. They need to either sell more cars (assuming that they can make money per additional unit like they say they can) or charge more for the ones they do sell, or both. Fortunately they are expected by investors to follow the Amazon model so they can get away with it for the foreseeable future.

Spending on R&D is exactly the same as Amazon intentionally reinvesting in areas that will make them more money. How does this not make them like Amazon?

The only real difference is that they have higher bootstrapping costs due to the type of product they make. i.e a physical object with a complex production pipeline. The only way to ever get profitable is to heavily and intentionally reinvest in R&D. Musk is doing the only thing that a startup in this space can do and expect to succeed outside of getting acquired which would be pretty much directly counter to the stated goals of the company.

>Mostly Because of their R&D costs

How is this not investing in their future?

Reply on news.ycombinator.com