I remember telling my son: “Are you kidding? I’m not going to invest in a company that hasn’t shown a profit in SIX years!” . So he decided to buy a big chunk of Amazon stock and I didn’t. Just wait until they inevitably crash… that’ll show him.
I don't know, Nick. I am no kind of an economist, economics being the dismal science and me being a pretty happy guy. But I suspect that the real money isn't in the business itself, but in the flow of money through the business.
Look at Twitter. It never made any money. It doesn't actually produce anything. It's advertising is of minimal impact. And yet, the muskrat spent what, $44 billion for it? You can bet that that 44 billion went into a lot of peoples pockets. The people that owned it were laughing all the way to the bank.
Here's another example: I take a lot of trips. Although occasionally I do buy a ticket, I rarely pay very much, if anything, for airfare. I can get a United Airlines credit card and pay $100 for the membership fee. That hundred dollars on the credit card will give me 60,000 United Airlines points, enough for a round trip to Europe. Depending on the time of year, that ticket could cost me anywhere from $700-$2000, but I spent only $100.
How does United Airlines make any money from this, because I am certain that it costs them more than $100 to transport me. My guess is, they make money from the credit card fees and charges, which the banks pay to them. Both the bank and the airline make money from the flow of money through the bank. Millions and billions of transactions every single day, and they skim a little bit off the top, which they can then invest in higher yield places.
There is a very old adage from the 19 century about business. Own nothing, but control everything. That's where the money is.
I see someone has already suggested submission to the CHRONICLE. I was going to up the "ante" by proposing that you submit to the NYT (which I read) or the the WSJ (which I don't)
Thanks. It's nice to know I'm not alone in saying WTF often and at great volume. But I never went beyond Econ 101 (or whatever it was called back then).
BTW, how is your body treating you? Are you fully recovered from the doctors' abuses?
Many years ago I took a class in entrepreneurship and small business management where we had to write a business plan and show finances for 5 years out, one year out, quarterly and monthly. It took a lot of number crunching on accounting paper (before computers this is what was done). I tuned in my business plan and the instructor said he could have sent us to Bof A and they would do it for us but he wanted us to go through the exercise because you needed to do that to take out a loan to start and keep the business running.
I couldn't agree more. I am not a business man, but common sense says either you are profitable or you will close. Pouring billions into losing companies boggles my investing mind!
That freight train is Oakland...we're broke full of potholes, crime out of wack...but let's increase our Mayor's salary by $75,000+++...does this sound like a dot com business? let's just keep losing it seems to be everywhere, SAD...always love your insight, thanks again
This is so odd. My husband and I own an organic farm - about 2000 acres, so not a “farmers market” farm. My husband went to Duke law school, became an attorney, and about 40 years ago found his true love was farming? Fortunately I was a college prof so I could support him. At that time, organic wasn’t that popular so we kept plugging away. Our employees have been with us forever, followed by their grown children. It’s been hard work but we have been and are profitable. I want to imagine going into a bank, “hey, I want to borrow 3 or 4 billion, don’t worry, I’m not planning to pay it back!” Really?? How do companies do this??
I remember telling my son: “Are you kidding? I’m not going to invest in a company that hasn’t shown a profit in SIX years!” . So he decided to buy a big chunk of Amazon stock and I didn’t. Just wait until they inevitably crash… that’ll show him.
I don't know, Nick. I am no kind of an economist, economics being the dismal science and me being a pretty happy guy. But I suspect that the real money isn't in the business itself, but in the flow of money through the business.
Look at Twitter. It never made any money. It doesn't actually produce anything. It's advertising is of minimal impact. And yet, the muskrat spent what, $44 billion for it? You can bet that that 44 billion went into a lot of peoples pockets. The people that owned it were laughing all the way to the bank.
Here's another example: I take a lot of trips. Although occasionally I do buy a ticket, I rarely pay very much, if anything, for airfare. I can get a United Airlines credit card and pay $100 for the membership fee. That hundred dollars on the credit card will give me 60,000 United Airlines points, enough for a round trip to Europe. Depending on the time of year, that ticket could cost me anywhere from $700-$2000, but I spent only $100.
How does United Airlines make any money from this, because I am certain that it costs them more than $100 to transport me. My guess is, they make money from the credit card fees and charges, which the banks pay to them. Both the bank and the airline make money from the flow of money through the bank. Millions and billions of transactions every single day, and they skim a little bit off the top, which they can then invest in higher yield places.
There is a very old adage from the 19 century about business. Own nothing, but control everything. That's where the money is.
FYI: the United Card is backed by Chase. I know this.
I knew it, too. It's sitting right in front of me.😜
Love this column.
I see someone has already suggested submission to the CHRONICLE. I was going to up the "ante" by proposing that you submit to the NYT (which I read) or the the WSJ (which I don't)
Spot on, Nick, as usual.
Thanks. It's nice to know I'm not alone in saying WTF often and at great volume. But I never went beyond Econ 101 (or whatever it was called back then).
BTW, how is your body treating you? Are you fully recovered from the doctors' abuses?
This is truly a bizarro world.
Many years ago I took a class in entrepreneurship and small business management where we had to write a business plan and show finances for 5 years out, one year out, quarterly and monthly. It took a lot of number crunching on accounting paper (before computers this is what was done). I tuned in my business plan and the instructor said he could have sent us to Bof A and they would do it for us but he wanted us to go through the exercise because you needed to do that to take out a loan to start and keep the business running.
I couldn't agree more. I am not a business man, but common sense says either you are profitable or you will close. Pouring billions into losing companies boggles my investing mind!
Oh my. Good to know. Yikes.
That freight train is Oakland...we're broke full of potholes, crime out of wack...but let's increase our Mayor's salary by $75,000+++...does this sound like a dot com business? let's just keep losing it seems to be everywhere, SAD...always love your insight, thanks again
This is so odd. My husband and I own an organic farm - about 2000 acres, so not a “farmers market” farm. My husband went to Duke law school, became an attorney, and about 40 years ago found his true love was farming? Fortunately I was a college prof so I could support him. At that time, organic wasn’t that popular so we kept plugging away. Our employees have been with us forever, followed by their grown children. It’s been hard work but we have been and are profitable. I want to imagine going into a bank, “hey, I want to borrow 3 or 4 billion, don’t worry, I’m not planning to pay it back!” Really?? How do companies do this??
Excellent!
And it's a Chem train,loaded with toxic chemicals barreling down a rickety poorly maintained AmTrac line!
Great story Nick!!! “Go big, or go home!” Just like my golf game!😃
Reminds me of the musical the Producers, where they schemed ot make a lot of money by running a money losing show!