The Market Ticker
Commentary on The Capital Markets- Category [Musings]
2015-08-18 22:21 by Karl Denninger
in Musings , 290 references


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The talk of the day is about this hitpiece done by the NY Times on Amazon's work practices for employees -- and not just the blue-collar ones you heard about before either.

Not much of this is really very new in the annals of corporate business, save perhaps in one area -- the accumulation of data on employee performance at a level that is breathtaking in both depth and scope.

I'm not going to pass judgement on the company in regard to these practices because fundamentally this is about a negotiation that takes place between greed and balance.

Amazon rewards people at the levels where it matters -- and where they can push people like this -- with stock options that, if they survive the experience, will make them very wealthy.

But there is no free lunch; working 80+ hours a week on a continual basis pretty-much precludes doing anything else other than sleep.

The NY Times piece tries to lace this through and through with the taint of slave-like conditions, but that's only true for the blue-collar side of the fence, where the pay is relatively fixed and while there is the potential for advancement it's relatively limited.  When you have someone in a position that either comes with or might come down the road with an option grant worth millions if you remain long enough for it to vest the "slave" argument disappears into a puff of smoke.

At the end of the day the story here is not really about what the NY Times would like it to be.

Rather, it's about us and, at a significant level, about you.

Amazon appeals to people's greed in the way that it operates when it comes to the white-collar worker, and those who sign up know damn well what they're getting into.  Given the opportunity to take a crack at the many-million-dollar payoff, many will go for it.  A material number will obtain it too; while nowhere near all do, enough manage to meet the bar of performance for long enough to keep the queue filled at the HR office.

No, the real problem in this article is that it ignores math.  You see in order for Amazon to continue to offer those sort of stock option rewards the stock price has to keep going up even as the dilution factor grows!  If it doesn't then those options may well vest but not be worth much -- or anything -- more than their grant price.

Bezos knows this and so does Wall Street.  The problem is that the stock's appreciation over time has had exactly nothing to do with the profitability of the business, which has consistently failed to materialize over the firm's entire time in operation!

Rather it's about the promise of "Get bigger, be dominant, kill everyone who is lesser (including employees) and eventually the profits will come."

Uh huh.  Sure they will.

I come back to the question I've asked since Amazon was a simple book-seller: When?

The bottom line is quite simple: If the Street -- or you -- start to ask "when" and mean it the "ethos" of the 90 hour workweek and Amahole attitude will suddenly be impossible to reward.

In the end the only means Amazon has to get people to destroy themselves chasing that pot of gold is as "solid" as the rainbow made visible by a daytime rain shower -- a rainbow that you, along with the pump-monkeys in the media, make appear and keep visible.

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2015-08-06 09:55 by Karl Denninger
in Musings , 536 references

... of uncertain weather.....

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2015-08-05 21:55 by Karl Denninger
in Musings , 638 references

Why is it, exactly, that most of you think things will be ok? That you can afford to sit back and let the political and financial world unfold?

Do you think you'll die before it all goes to Hell, and thus for you at least it will be ok? How about your kids?

No kids? Legacy doesn't matter, right?

Time is short folks... exactly how much sand remains in the hourglass is unknowable, but odds are it's not a lot.

Choose wisely...

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