Amazon and China Belt and Road delay profits and building logistics

Amazon has posted just a handful of profitable quarters in its two-decade history and now has a $550 billion valuation.

“Bezos’ ability to paint an extraordinary vision (i.e., ‘Earth’s Biggest Store’) and register steady progress against that vision is rewarded with the cheapest capital in the history of business,” says Galloway. “And… Cheap. Capital. Is. Awesome.”

That steady flow of cheap capital allows Amazon to do a bunch of extraordinary things that would doom most companies. It started a cloud-computing business, a movie studio and a consumer electronics business. It started an ocean shipping company and an airline. It’s even now making mundane stuff like batteries and skinny jeans.

Bezos recently told shareholders that the goal is to “experiment patiently, accept failures, plant seeds, protect saplings, and double down when you see customer delight.”

Amazon is on track to have a trillion dollar valuation by 2022.

Part of Amazon’s plan is to dominate logistics (shipping, trucking and robotic warehouses and self driving systems).

Tesla, Uber and other companies are copying the approach of delaying profits to grow bigger and faster.

China’s Belt and Road multi-trillion infrastructure project is following the same model. Both Amazon and China are looking to strengthen and dominate logistics.

Over the past five years, Chinese companies are now running no less than 77 sea terminals in dozens of countries, building high-speed rail corridors across Southeast Asia and potentially even Europe and Russia, funding the construction of highways in Pakistan, bridges in Bangladesh, power plants in too many countries to list here, erecting new cities and/or special economic zones in Sri Lanka, Oman, Myanmar, Malaysia and Abu Dhabi, dug a vast array of oil and gas pipelines stretching across Central Asia, Russia and Southeast Asia, and established a 35-line network of direct freight trains connecting the manufacturing centers of central and western China with cities in Europe.

In developing this infrastructure, China has shown that they can vastly outcompete other companies and governments to get contracts. Their strategy is simple: they overpay. China is will to overpay and delay profits til 10, 20, 50 years from now. China is investing in a future world where all roads, shipping lanes etc run through Beijing and will delay profits to achieve that goal.

Developing physical infrastructure internationally is a way for China to establish and cement the long-term political relationships with other countries.

AidData’s research offers a picture of a rising financial giant that is challenging even the biggest donor nations. China provided $354.4 billion in official funding around the world between 2000 and 2014 — not far off the amount spent by the United States in the same period, $394.6 billion.

Earlier this year, China bears had a field day reporting about how the Beijing’s foreign reserves were falling, with some pointing out that upwards of $1 trillion were lost. But this appears to have been little more than a minor hiccup, as over the past six months in a row China’s reserves have been on the rise and are now above their customary $3 trillion. Or, we can put it like this: China makes around $40-$60 billion per month from the imbalance between imports and exports alone, and even seemingly extravagant spending on the BRI doesn’t yet seem to have much of an impact on Beijing’s bottom line.

Belt and Road will be

* super accurate GPS
* high speed rail everywhere
* bigger ports and airports
* powerplants, solar and wind power
* multi-continent spanning power grids