This article is part of the On Tech newsletter. This is the collection of past column.
I keep writing about the dollars that Big Tech companies are making in revenue and profits. But what’s even more astonishing is what the tech giants are spending to keep their businesses running and thriving long into the future.
I have observed that the five biggest American tech superstars – Apple, Microsoft, Google, Amazon, and Facebook – have splurged on massive investments in their businesses. That includes specialized equipment for assembling iPhones, undersea internet cable and computer centers that compress YouTube videos into your phone, and warehouses for Amazon employees to assemble and ship orders.
What companies spend on physical assets lasts for years – the cost of capital is, for you, one of the best overviews of how Big Tech leverages success for even greater success.
According to the financial statements, the combined profits of these five companies have increased by more than 25% in the most recent year. The tech giants have the cash and permission from their investors to spend virtually whatever it takes to stay on top. That is an advantage that few companies can match.
An example: According to the company’s financial statements, in the last year, UPS spent about 5 cents of every dollar of its revenue on additional aircraft, trucks, delivery depots, package handling equipment and software to manage it all. My calculations from Amazon disclosures show that the same kind of company spending works out to 13 cents for every dollar of revenue.
UPS and Amazon don’t do exactly the same thing. Amazon’s major investments include technology hubs for its cloud computing business. UPS ships to many businesses, while Amazon primarily handles packages for themselves.
Both companies have been wildly successful during the online shopping pandemic. But UPS is shrinking what it spends on long-term assets while Amazon spends more each year.
The good news is that this is exactly what we want rich and successful companies to do: Invest a large portion of their wealth to improve their business – for their benefit and ours. . As Microsoft spends large sums of money upgrading its computer centers, it will benefit all businesses that use the online versions of Excel and Outlook. As Amazon equips its warehouses with new assembly lines, orders can be delivered to our homes more efficiently.
We might be impressed and still wonder if anyone can keep up with Big Tech’s investment.
How does a driverless car startup compete with what Google and Apple can spend on sensors, computer chips, prototype labs, and the best minds to figure it all out? (Answer: No. A lot of driverless car startups have given up or sold to larger companies.)
General Motors recently said it would spend about $10 billion a year on major assets to transform itself into a technology and electric vehicle company. That includes overhauling factories and investing in new projects like developing electric batteries.
That’s only about half of what Facebook spends, both in raw money and as a percentage of each company’s total annual revenue, on computer centers and other long-term investments. In short, Facebook’s investments in shooting Instagram posts around the world are more than GM’s spent in recreating a 113-year-old American industry icon.
The question I keep coming back to in this newsletter – and I don’t know the answer – is whether Big Tech can be invincible. History shows that Dominant companies don’t stay that long. What seems different now, however, is the existence of a handful of companies overwhelmingly dominant in a dynamic sector of the economy with the ability to spend anything to stay afloat. head.
Before we go…
Follow the neighborhoods for delivery couriers: In New York, restaurant delivery people organize nightly patrols on bridges and roads to prevent robberies. Several couriers told my colleague Coral Murphy Marcos that they believed the police were not doing enough to protect them from the spike in e-bikes by commuters. New York Magazine wrote last month about patrols and courier organization.
Do you hate food or something else? Axios writes about cases of “review bombing” in Washington or people leaving negative reviews on a restaurant’s Yelp page protesting the restaurant’s policies on masks or vaccinations. Yelp has elaborate systems in place to try to weed out people who don’t like a restaurant they’ve never been to.
Behind China’s video game crackdown: An anthropologist writes in Sixth Tone about the Chinese government’s recent restrictions on children playing video games. “The basis of the Internet addiction panic in China are deeper social problems related to the social transformations of the past 40 years,” said Rao Yichen. (My colleagues wrote last month about China’s gaming restrictions.)
Here are glorious portraits of cows, including a herd on a white sandy beach (?!?!). The Atlantic recently recirculated this collection of 2019 moo images.