Amazon Full Time Employees: 154,100
Walmart Full Time Employees: 2,200,000
(Based on Yahoo Finance Company Profile Stats)
There is a growing need for Human's to work Lesser Hours going forward rather than more Hours.
This is misleading. All valuations are based on the discounted value of future cash flows. There are three variables at work here: today's cash flows, the growth rate of these cash flows and the discount rate. The market is simply saying that Amazon's growth prospects outweigh it relatively smaller size.
Edit:
The only point I'm trying to make is that an investor, when they exchange money for a stock, is placing a bet on a single outcome: future cash flows. Of course there are plenty of ways to get those cash flows, but I find that most people get caught up in details like employee headcount and fail to grasp the single most important factor: compound growth.
What I was criticizing was just using the ratio of present market cap and present headcount as a meaningful metric, when comparing companies with very different growth expectations. That effectively becomes a restatement of the different growth expectations: Amazon has the same market cap as Wal-Mart but its present size is smaller in almost any way you could count present size (sales, headcount, etc.).
Perhaps you meant 'emotional' or 'irrational' rather than 'speculative'.
What I meant was that much investment is speculative, and that speculative investing is not solely, or even mostly, based on a purely rational model e.g. one that is based on a prediction of future cash flows.
It is usually based on betting on the the future price of the asset, independent of fundamentals. Some of these approaches are more justifiable than others: market momentum, qualatiative prediction of the company's valuation trajectory, trendy but questionable financial metrics, sophist technical analysis etc.
This only holds under the assumption of rational expectations.
Under the more reasonable assumption of heterogeneous expectations, it becomes necessary to think about what the market on average expects (or, possibly, other functionals of the agent population if the assumption of competitive markets is violated); the more so the shorter your investment horizon.
See for example
[1] F. Allen, S. Morris, and H. S. Shin. Beauty contests and iterated expectations in asset markets. Review of Financial Studies, 19(3):161–177, 2006.
which shows the failure of the law of iterated expectations (which is used to establish your original assertion) for the average expectations operator.
You then have
[2] P. Bacchetta and E. Van Wincoop. Higher order expectations in asset pricing. Journal of Money, Credit and Banking, 40(5):837–866, 2008.
who derive a gap between price and fundamental value (understood as the NPV formula that would prevail without the interference of higher-order beliefs) in the presence of heterogeneous expectations.
And last but not least,
[3] M. Kurz and M. Motolese. Diverse beliefs and time variability of risk premia. Economic Theory, 47(2-3):293–335, 2011.
who generalize this from the asymmetric information frameworks used above, where expectations are coordinated by the public signal, to a symmetric information setting where it is the correlation of beliefs that coordinates expectations.
In the end, this is all building on Keynes's original intuition that if agents hold diverse beliefs about the future "the energies and skill of the professional investor and speculator are […] concerned, not with what an investment is really worth to a man who buys it ‘for keeps’, but with what the market will value it at."
So no, it is not necessarily the best strategy to only focus on NPV of cash flows. The shorter your time horizon, the more you depend on what "other people" expect too, whether you think them foolish or not.
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PS: Of course, if you believe that you have no predictive power w.r.t. what "Mr. Market" thinks (to borrow from Ben Graham's exasperated simile), then by all means your optimal strategy becomes to lengthen your horizon as far out as possible and concentrate only on NPV of cash flows, just as you said, in the spirit of value investing. I'm only pointing out that the optimality of this strategy hinges on both your investment horizon and your belief about your relative predictive powers w.r.t. "Mr. Market" and the fundamentals (leaving aside positive feedback loops or what Soros called "reflexivity" between price and fundamentals for now).
Individual agents are free to be irrational, biased, and heterogeneous. In fact, heterogeneity is required in nearly any model, otherwise no trades will occur.
Good point, although I didn't say they did. One can indeed view RE as a special case of heterogeneous expectations, and in fact that is essentially what I argue in a paper I am working on: That efficient markets are a region in the parameter space of more general market models, and that by traversing that parameter space one can generate different market outcomes. By way of illustration, take the public signal out of the above cited paper [1]. Without the coordination provided by the public signal the law of iterated expectations works again for the average expectations operator!
Regarding the source of heterogeneity, I don't agree with your citation of irrationality or biases. I am not an expert on behavioral economics but from what I understand, behavioral models seem very fragile to the insertion or presence of even a few rational agents, hence the need to erect "limits of arbitrage" by adding frictions, constraints, etc. It is possible to motivate heterogeneous expectations in a more robust way, see my reference [3] above and further references therein, for example. The basic idea is to generalize the economic system from ergodicity or even stationarity, so that heterogeneity is motivated epistemologically, rather than psychologically.
A rational investor knows how others value something and acts accordingly. What you described is one way to value something. If it was just you and me buying stocks, I would know how you act and get in front of your behavior to profit from it.
In finance you don't have to be the smartest person in the room to succeed, you just need to know the most about what everyone else is thinking.
For equity market cap value that the article and previous person are talking about? No.
Amazon: 670k Walmart: 220k
Assuming the ratio stays the same, when Amazon gets to Walmart level sales, it will need about 700k employees which is still 1/3 of Walmart's current employee count.
Self-driving vehicles will probably replace the need for most of these employees, however.
What am I missing?
Although I suspect a compressed air tank with enough capacity would be way too heavy for a drone to carry.
The power to weight ratio is the key issue. Also -- noise could be an issue too -- want to have quiet deliveries.
I'm thinking parcel cannon + small airbag bumpers and maybe a little parachute to slow decent at exactly the right time :)
Shit, with retarded patent system in US someone is already patenting this as you read my post.
I agree that the last-mile driver will stick around for a bit longer, but their number is relatively small.
For example: UPS owns 100k vehicles, worldwide[1].
In comparison, over 3 million people are employed by the transportation industry in the US alone[2].
[1] http://www.ups.com/content/us/en/about/facts/worldwide.html
It'll still be a lot less than Walmart since they don't have brick and mortar stores on a large scale and Amazon is very bullish on robotics.
Thus from a business perspective you get rewarded by keeping workers off your payroll, but I don't think it means people aren't working for you. The poster child for this is the 'sharing/gig/slaving' economy type places.
Because of that I am not convinced there is actually less human capital in moving the goods through Amazon or Walmart, but I do agree its accounted for differently. And that means I really can't agree with it as evidence to support the claim that humans should work fewer hours.
It would make for a great paper, maybe even a nice book, on comparing how many hours of labor are invested and how many people in getting a product from manufacturing to your hands using the two different product flows (and doing that for a representative sample of all products offered).
When I was a contract programmer at Apple In 1990 I was told that it hired so many contractors so it could inflate the ratio of revenue to employees, which would inflate the stock price. While Apple still had to report our pay it was some other kind of business expense, like office furniture.
But dont you have air conditioning my mother asked.
The federal regulations specify the temperature in which AC is permitted he replied. Washington DC is the coolest place that permits air conditioning.
That seems to be the new entry point for a lot of service/retail work. Get past the trial period and there may or may not be opportunities to move to forty
By Marketcap: Facebook > Amazon > Walmart By FTE: Walmart(2.2 million) > Amazon (150K) > FB (10K)
I realize FB is not in the same business, but I wonder what view those picketing Walmart for unfair and unjust labor practices have of the 'new economy businesses' that are being valued higher yet employ fewer Americans. Do you protest the jobs that were never created ?
Yeah...
If you considered the entire globe, then yes, there are growing middle classes in certain Asian and Latin American countries.
To say that we shouldn't care about the growing wealth gap because the world has smart phones is disingenuous.
See http://www.pewresearch.org/fact-tank/2014/10/09/for-most-wor... , and this quote: "In fact, in real terms the average wage peaked more than 40 years ago: The $4.03-an-hour rate recorded in January 1973 has the same purchasing power as $22.41 would today."
No, it isn't "demonstrably false". It's true by almost every metric.
>For the average middle class worker in the US, however"
Well, if the US middle class were somehow more important than workers elsewhere around the world, this would matter. They aren't, so it doesn't.
So please, name them.
Real hourly compensation has risen: https://research.stlouisfed.org/fred2/series/COMPRNFB
Anyone pushing wage numbers is playing a game of hide the salami, and ignoring the trend towards a larger portion of income being given in forms other than money.
More importantly, though, the Fed graph you show is an average (the real hourly compensation one). With growing inequality, using the average hides the fact the improvement for the median worker is much lower.
If you feel consumers are overconsuming medicine and driving up the price, there are lots of great ways to fix that. The most effective is high deductibles (currently illegal).
I know you are aware that life expectancy is minimally related to health care consumption, so why do you bring it up?
If you have data showing that median real compensation per hour is lower, show it.
And again, since household income has not moved much (according to figures I cited), you still need to provide an explanation for why we don't seem to consume less. (Hint: the basket of goods in CPI changes and $1 of chained-CPI adjusted wages today buys more than $1 of chained CPI adjusted wages 30 years ago. I.e., CPI != inflation in the long run.)
it's also easy to argue that the typical metrics used in this comparison are misleading.
A "typical middle class worker" in the early 1970s lived in a house that was built in the 1950s or earlier, around 1200 square feet, 1 bathroom, 2-3 bedrooms, without air conditioning or a washer/dryer, and had one vehicle available to the household [0]. Nowadays, we consider that "the projects", undesirable housing for poor people, while the "middle class" live in considerably larger dwellings with more amenities.
The reason I mention this is that real wage / purchasing power comparisons almost universally use "average housing costs" as a significant part of the metric, and "average housing costs" are in no way measuring the same thing. ( It so happens that I live in my childhood home, which my parents purchased in 1975 for $32,500 -- about 3.1 times the national median household income. I purchased it from them in 2012 for $135,000, a mere 2.7 times the median income.)
If you actually compare the goods a median-wage worker can purchase today to the goods a median-wage worker could purchase in the 1970s, there are definitely some things we have a harder time affording (like routine health care), but with the majority of material goods, you can get much bigger/better/faster/higher quality stuff for the same portion of the budget [1]. A modern middle class income gets you much better than 40-years-ago middle class living conditions.
[0] dig through the reports at http://www.census.gov/programs-surveys/ahs/data.All.html for details
[1] http://nonprofitupdate.info/2011/07/27/i-can%E2%80%99t-think...
As for real human needs , like healthcare - it seems to be that with technology ,at some point in time, they will be fully solved, so no need for further growth.
a house cost $22,000 (ie, 5.3x an annual income)
a loaf of bread cost $0.18 (ie, 0.004% of annual income)
Today, a median household income is $51,939 and
a median house costs $188,900 (ie, 3.63x an annual income)
a loaf of bread costs $2.26 (ie, 0.004% of annual income)
Current median income and house prices from Google, loaf of bread cost from http://www.numbeo.com/cost-of-living/country_result.jsp?coun....
All dollars nominal.
EDIT: Here's a fancy chart I just found, thought it might be useful to make the point:
http://www.bls.gov/opub/ted/2000/feb/wk3/art03.htm
Also I'm not sure if it's a typo, but your comparison between "average income" in 1955 and "median household income" today seems to hurt, not help your point.
2. Since 1950, food prices seem to have grown at the overall rate of inflation, so food is cheaper relative to the median income. (https://research.stlouisfed.org/fred2/series/CPIUFDSL/)
3. Healthcare is usually considered essential, and its cost has increased as a fraction of median income, but I would bet 1950's medicine would be dirt cheap today if it weren't illegal to practice it: no MRIs, no patented medicines, no chemotherapy, etc. What we get in exchange for the higher cost is a decade of life expectancy.
4. Here is an interesting article I found on this topic: http://www.theatlantic.com/business/archive/2012/04/how-amer...
It's not quite clear that the extra decade of life expectancy comes from the more expensive medicine.
(I agree with the rest of your arguments for what it's worth.)
WalMart sells over 5x as much: if Amazon were to scale proportionally it would have 835,000 employees.
(And if we looked only at the non-AWS portion of Amazon I'd imagine the difference would be even smaller)
We should compare by total product sales.
https://news.ycombinator.com/item?id=9945053
has Walmart revenues about 5x Amazon revenues, and your numbers have Walmart employees about 10x Amazon employees.
So a very naive linear extrapolation implies Amazon would have about half the employees of Walmart if their revenues were equal.
Or fewer humans working more hours?
Post-Seattle construction: 224,100
Amazon is building office space for 70,000 workers in downtown Seattle.