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April 08, 2013

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Joe Curwen

While I'd never presume to question Smith's comprehension of the situation, I'd like to humbly suggest that it is a bit of a false parallel he draws, though the point is well taken. In brief, I see China's investment as a more canny strategy than Amazon's gamble. China's strategy appears to be the polar opposite of the U.S. policy move in the face of our new great depression. We have bailed out the top and let the base crumble. China is spending from the top to invigorate the base, for long term growth. Amazon's profligate spending program was designed to capture the hearts and minds of the market, and it succeeded. Lucent Technologies tried the same thing and failed ten years ago. They overspent hoping to crowd out the competition, but ended up weakening their returns. Amazon's bid was not only a gamble; it was also a play for intangibles that nevertheless had a very real market effect, whereas China's spending policy is more the equivalent of buying more raw material that one's business was sure to need sooner or later, at a cost that will look cheap in the future when one looks back and assesses the gains it enabled one to realize.

Joe Curwen

While I'd never presume to question Smith's comprehension of the situation, I'd like to humbly suggest that it is a bit of a false parallel he draws, though the point is well taken. In brief, I see China's investment as a more canny strategy than Amazon's gamble. China's strategy appears to be the polar opposite of the U.S. policy move in the face of our new great depression. We have bailed out the top and let the base crumble. China is spending from the top to invigorate the base, for long term growth. Amazon's profligate spending program was designed to capture the hearts and minds of the market, and it succeeded. Lucent Technologies tried the same thing and failed ten years ago. They overspent hoping to crowd out the competition, but ended up weakening their returns. Amazon's bid was not only a gamble; it was also a play for intangibles that nevertheless had a very real market effect, whereas China's spending policy is more the equivalent of buying more raw material that one's business was sure to need sooner or later, at a cost that will look cheap in the future when one looks back and assesses the gains it enabled one to realize.

Joe Curwen

The comment feed gave an error message telling me to try again, hence the double post.

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