Network Effect

The Fine Line Between Profits and Theft

Amen brother. Amen.

States Starting to Realize 'Amazon Tax' Won't Save Them

@rrtzmd - i actually agree with you - less government, and less taxes is the answer over the long run. as I stated, I wasn't making a statement regarding whether I thought the Amazon tax was the solution to the problem. I was simply making a statement that I think that we have a major problem on our hands caused by the massive consolidation that the Internet is creating. In theory, I like your idea - cut government budgets and taxes for local businesses - make it possible for a lot of companies to be profitable owning or renting a local storefront that employs locals by cutting their costs relative to their Internet counterparts. I don't pretend to understand what it costs to keep our roads paved, and bridges from collapsing, and all the other things that states need money for. But, in theory, I agree with you. However, it cannot be something that applies to all businesses, just local ones. you cannot do the same thing for Internet retailers because it will not have the desired impact of allowing local businesses to succeed. I just think that something needs to be done to change the current status quo because currently, consolidation is occuring at an unhealthy pace. it's my opinion that we are headed for deep trouble if nothing is done.

States Starting to Realize 'Amazon Tax' Won't Save Them

Or it's a way to save local businesses who pay state income taxes, and provide jobs for local people who pay state income taxes. In my opinion, the Amazon tax has nothing to do with tax revenues generated from Amazon or any other out of state retailer who currently sells their goods and services to in-state residents. It has to do with the unemployment level. Walk down any street and how many 70% off signs or empty stores or Retail Space Available signs do you see? Ask any manufacturer if they have limitations on how many retailers they will allow within a certain geography. The answer is 1, although the geographical dimensions may vary from manufacturer to manufacturer. Would a manufacturer allow for two stores in the same mall? No, because one would lose - both would engage in a price war until one died. The Internet has made the world one big mall, so everyone has been in a massive price war over the last 3-5 years and margins are being contracted and killing companies off one by one. It's an environment where very few companies within a particular industry can succeed. It provides perfect information to the consumer. In the short term, it's great for the consumer because it means that consumers get things at the lowest possible price. However, this is very bad for most businesses because too many companies can't make any money. The winners can, and that is great; I'm simply saying that it is creating too few winners. I am not saying that the Amazon tax is necessarily the solution, but the Darwinistic nature of the Internet is currently hurting our economy. It's putting too many companies out of business through margin contraction caused by price wars.

The Internet has, over the last couple years, gone from a technology that is having a net increase of jobs and unique revenue streams on our economy to one that is having a net decrease. It is creating massive consolidation across all industries and all geographies, all at the same time. However, the world has never seen this pace and breadth of consolidation all occuring at the same time, and it is starting to have a devastating effect on our economy and the world economy. I'm a big believer in the Internet and its ability to help our society. Over the long run, and up until this point, it has and will continue to make the world a much better place. But, we have crossed over - right now, we are in a period where it is hurting rather than helping. So whether the Amazon tax is the right solution or not, I don't have an opinion. But I agree with what they are trying to do. They are trying to save jobs by creating a solution where more businesses can succeed, and that in my opinion, is what the world, and America needs right now - we all need more businesses that can succeed so we can all have jobs. And it's not just the local retailer itself or its employees that are being killed. It's the commercial real estate company, the insurance company, the cleaning company, the hardware store, the sign company ... etc, etc, etc. There are a whole ecosystem of industries that are being affected by the fact that much fewer consumers are actually going to stores to purchase items.

I understand the counterargument about evolution and progress, and the "this philisophy would have prevented us from developing the automobile because it put horse and buggy companies out of business". I am simply suggesting that the pace and breadth of consolidation created by the Internet is too large at the moment for our society and the economy to handle. You can apply the same philosophy that the government uses to block two large companies from merging. Too much consolidation of power is bad for the economy, society, and eventually the consumer in the long run, even if it is obtained through legal and fair practices. There is a balance, and at the moment, we are out of balance in my opinion. Like I said, just walk down the street and look around. Are you truly happy with this new equilibrium?

How the Internet Is Wreaking Havoc on Media Companies

@rrtzmd - I agree with you in theory, but not in practice (and I definitely don't think most of us will survive unscathed if it is left unregulated - we will survive but not unscathed). The difference between this evolution and prior ones is that this evolution is creating consolidation in all industries, and all geographies, all at the same time. Very few business models are not impacted by the Internet at this point. So, consolidation is occuring at a pace and breadth that has never been seen before - on a global macroeconomic level. The short term impact was growth of jobs and unique revenue streams which is what occurred this past decade. However, we have crossed the inflection point at which the number of jobs and unique revenue streams that it is creating are less than the ones that it is destroying and that trend will continue to get worse unless regulation comes into play. Think about why the government doesn't let two big companies merge - because it would be bad for the consumer in the long run because there would be too much consolidation and power. This is what the Internet is doing in most industries and geographies - it is creating massive consolidation. You need competition in a capitalist economy. Consolidation kills competition. And that's why I think the Internet will be regulated so that this trend doesn't continue and things won't end badly for the consumer in the long run.

How the Internet Is Wreaking Havoc on Media Companies

The Internet is wreaking havoc on just about everything. Jobs are being lost to productivity increases caused by the Internet. This doesn't end well for a lot of companies if you play it out long enough. Left unbridled, the Internet will cut out all middle men, and it will create perfect information for the consumer. Both are very bad for many businesses, and therefore bad for the consumer in the long run because consumers need to be employed. The Internet needed to be "protected" this past decade. The next decade it will be regulated and taxed so that many businesses can make a profit, not just a few, and so that people start going into malls again (for example) and therefore there is a reason to have malls with paying jobs, real estate to be rented, construction to be done ... etc etc etc. I hate to say it because I'm an Internet guy, but the Internet has increased our productivity too much and it is now hurting our economy rather than helping it because it is killing and consolidating more revenue streams and jobs than it is creating new ones.

Palm: The Miss of 2009

All you have to do is look at the volume in the first part of the chart, add in the blog posts by main streeters who are saying that there is absolutely no reason for Palm shares to be going up, and you have the reason why Palm's stock price is still going up.

Apple, Amazon on to Something Big

Apple has the moat, Amazon does not. It takes a customer base inside your ecosystem to build a moat. Amazon doesn't have one in their ecosystem (I realize that there are manipulators out there predicting Amazon's Kindle sales, but it will be clear in the next year or so that Amazon's Kindle isn't selling). Amazon will lose the hardware game quickly for the eBook industry. You can't be a one product consumer electronics company. Apple will win the hardware side of the eBooks game because they have the biggest ecosystem. Amazon may have the ability to carve out a short term win (3-5 years) on the software side, but eventually they will be squeezed out of that as well because content providers will be connected directly to the customer through the ecosystem (Apple's App Store). Google and Microsoft will also go after this space but eventually, there can only be one middle man - all other middle men get squeezed out. And that middle man is the one who owns the ecosystem - and that is Apple.

Amazon has the ability to win the logistics game. They should focus on being a service provider to the ecommerce industry and start going after companies like FedEx and other logistics players. Retail, in the long run, will only be a loss leader for them, but they can have a great business as a service provider to other retailers. But this will take quite a long time.

Google, I'm afraid, is on the downside of the mountain. They don't control any relationship between the buyer and the seller. They just help them find each other, which is not a business model that has a moat around it. A lead generation business model will always lose to a transaction processing one. If Google's business model required from the beginning that you become a Google customer to use its services, then they might be able to win quite a few games over the long run (eBay, Paypal, etc). But, unfortunately for them, they didn't. Their business model is not a walled garden, so there is no moat around it.

A Second Opinion on Palm Pre's App Numbers

You may be right, for the small customer base that the Pre has, they may be downloading a lot. Who cares in my opinion. The reality is that Apple does have the largest mobile ecosystem and it is now growing itself. The self-perpetuating cycle between buyers and sellers is now in place with the iPhone/Pod/Touch/App Store and it cannot be beaten by anyone except Apple itself. The only thing that will tear this down is poor execution on Apple's part ... and we all know where Apple stands on execution. Unfortunately for a lot of companies and industries, this snowball is going to continue to roll down hill and no one can stop it. Even if Palm or RIMM or anyone for that matter comes out with better technology, it wont matter. The value lies in the ecosystem, and you can't build one when there is already a dominant player in the market. Someone might be able to carve out a niche in a vertical market if they beat Apple to the punch. This is the strategy all these other phones should be going after - build out a mini-ecosystem in as many small vertical segments as they can before Apple gets there.

Palm Pre Shoots to Rival the iPhone Launch

All of this ranting and raving about Kindle, Pre, anything non-Apple is because Wall Street (and everyone else) is scared that Apple is crushing the competition and there won't be anything left. If the waters aren't murky, how can they manipulate stocks?

Palm Pre Shoots to Rival the iPhone Launch

The Palm Pre is selling so well, they fired the CEO a couple days after launch.

E-Readers: The Fun Is Just Starting

This industry is application based, not hardware based. Therefore, a large manufacturer (aka Apple) with a large ecosystem around their devices will win the hardware end of game. I agree, eBooks is going mainstream, just not as a standalone device. It is going mainstream as an application that will be a part of a larger ecosystem. As for the application side, my instincts tell me content providers will eventually go direct through the ecosystem because there will be too many mouths to feed. But they may win this game for a little while and may in fact be the software provider who wins this game. But there are some big names (aka Google) going after this space as well so we will see.

Is Apple Poised to Move into the Living Room?

Xmas 06 - iPhone
Xmas 07 - iPhone 3G
Xmas 08 - iPhone as gaming platform via App Store
Xmas 09 - App Store as media delivery platform for AppleTV, Kindle-type device (books, movies, tv, newspapers, magazines, blogs, social networking, etc)

Etc etc etc. App Store is a revolutionary platform and ecosystem. Watch for this latest app (the local restaurant ordering application) to take off. And many, many, many more. Industry after industry after industry ...

Why I Remain Short Amazon

$60+ - going to $90!

Why I Remain Short Amazon

Why would you base your trading decisions on fundamentals or P/E? It's all about the charts, and Amazon is going through the roof as shorts get squeezed.

Amazon Is Looking Like Starbucks of Yore: Too Expensive

Amen brother, but Amazon is yet another example of why wall street is a con man's game. The pros are long so they don't talk about this, they choose to talk about the positive side of the story. Once they've made their money and are out, they will then talk about all these negatives. The key to making money in the stock market has nothing to do with fundamental analysis. It has to do with figuring out how big money is trading, and nothing else. they will focus on whatever they decide they want to focus on, and for the past couple years, it appears that they are more and more focusing on whatever main street is not focusing on. It takes two to trade, and the story is clear as day the last couple years - wall street trades the opposite of whatever main street trades, regardless of the story. They just focus through the media on the part of the story that backs their trade. Hence the con.