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13 Mar

We highly suggest that Central Bankers Globally read the book  The Everything Store Jeff Bezos and the Age of Amazon. The book chronicles the various stages of the life of Amazon and was highly instructive as to how a technology company reinvents not only itself but other highly divergent businesses as well. What struck us however was the degree to which Amazon could access capital, both in the debt and equity markets, in order to pursue a highly scattershot strategy. Thanks to the Fed in the late 90’s and the mid 2000’s the cost of capital to Amazon was essentially zero, and as such they were able to fund highly questionable acquisitions as well as projects which inevitably made no economic sense. My intent is not to criticize Amazon, we think they are almost unmatched in terms of distribution, customer service and logistics. What is most interesting in the telling of the Amazon story is that this unfettered access to capital allowed them to go after the lowest margin businesses, and in the process trashing the already low margins that existed. Thus when Central Bankers lament deflation and dis-inflation, they should look long and hard as to how their own actions have led to costless capital, which have in turn have led to the “Amazoning ” of a number of industries.

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