Which Will It Be – Curtain #1 or Curtain #2? January 13, 1999February 12, 2017 From Andrew Frisch: “I’ve been following your Amazon tales and the ensuing sidebars for some time now. Since you promoted booksamillion.com today, I figured I’d let you know about another on-line bookseller and some interesting things it offers: www.books.com – I’ve actually been using them since 1992, when they were a telnet-based business, before the web thing caught on. They offer two features I appreciate. The first is ‘bookmarks,’ which are earned with purchases, and are accrued towards free books. It works out to about 5 percent if you use them efficiently. In college and grad school, I used them for most of my textbooks, which proved to be significantly cheaper than the school store, and helped build up those bookmarks rather quickly. “The second feature borders on trivial but is kind of nifty. They supply you with a button to press to compare prices to both Amazon.com and BarnesandNoble.com. If either price is lower, which it rarely is, they automatically lower theirs to beat it. Typically it saves you a penny or two, but sometimes it’s a few bucks. Definitely worth the click.” A.T.: Well, I tried this, naturally enough searching on, well, me. And it came up with only two weird selections for Andrew Tobias, I think because a middle initial – P. – has somehow crept into the world’s databases for me and I can’t get rid of it. (Never mind that it is my middle initial – I don’t use it.) But when I searched on “Only Investment Guide,” sure enough, I got my book, offered at $10.35. Which sure beats the $13 retail price. And then I clicked on Price Compare and – to my surprise – found that while it was $10.40 at Amazon.com, it was $7.80 at barnesandnoble.com, so suddenly Books.com had switched its price from $10.35 to $7.62. That sure beats trudging from store to store and haggling the old-fashioned way! One might think this sort of thing bodes ill for the fat profits Amazon will eventually make, not just on books but on videos and clothing and everything else it will eventually help you buy – the Internet is likely to make retailer profits razor thin on just about everything – but even with the stock up more than four-fold in the last eight weeks (and about 24-fold in the last year or so), AMZN enthusiasts are not hard to find. To wit, this from Motley Mike: “I think the power of Amazon is not just their book selling, but their music, movies, and their potential to sell more things. Have you checked out their video store – it is great. All kinds of search capabilities, reviews, etc. Anyway, just wanted to tell you that it’s too bad about your misguided shorts, but I’m glad you did short the stock because it’s guys like you that help Amazon-longs like me! Have a great day. Mike.” A.T.: And here’s the thing. Amazon is terrific, and I have long assumed they’d be selling lots – indeed, everything – besides books. It’s not a tulip or a scam. Good people and good execution deserve success. But it is not the only good company in the world. Basically, the stock market today is giving people a choice, like that game show with the hidden prizes behind the three curtains. Here’s today’s choice (just two curtains): Curtain #1: You could own all – ALL! – of Amazon.com. It would be 100% yours. All its assets, all its debts (I don’t think it has debts), its technology, its cash, its inventory, its brand recognition and goodwill and future profits – all yours! Curtain #2: You could own all – ALL! – of Federal Express and United Airlines and the New York Times Company and Barnes & Noble. They would be 100% yours. All their assets – the planes and trucks and printing presses and retail stores and Web sites and technology and worldwide brand names and cash and profits – and all their debts (though if one went bankrupt, it wouldn’t affect your holdings in the others). Plus, just to make it as appealing as possible, you’d get a check made out to you personally for $1 billion. Truly, all this would be yours. OK, this is a rare moment. WHICH CURTAIN WOULD YOU CHOOSE? Music, please. Close-up on sweat on contestant’s brow. Mike chooses … Curtain #1! And the crowd roars in agreement. Because of course as of this writing, that’s just how the crowd is valuing the two prizes. Amazon is valued at a little more than $28 billion (down 10% from its high, no less). And the other four companies, combined, are valued at just under $25 billion. So even with that extra billion in cash I threw in to make it interesting – even these days $1 billion buys a lot – Wall Street would tell you Curtain #1 is more valuable than Curtain #2. And maybe, given Amazon’s bright prospects, this is true. But it’s not as though FedEx’s prospects are so dim. Or that the New York Times doesn’t have a worldwide franchise whose value could grow. Or that even the bright people at Barnes & Noble and United Airlines won’t be able to find ways to grow their businesses. And it’s not as though that measly billion in cash I threw in would have to be buried in a mattress, either. So what Mike is saying is that Amazon’s future is not just very bright, as I think it is, but that to pay $30 billion or so for the whole thing is what he’d do if he had $30 billion. Personally, I’d spend $1 billion launching a competitor to Amazon ($35 to register the new Web site, $999,999,965 to hire Pixar or somebody to program it and make it fun) and use the $29 billion left over for a really great party. Tomorrow: An Even Better Source for Free Books HOUSEKEEPING NOTE: Currently, an alternative route to this column is www.andrewtobias.com. As of February 1, that will be the ONLY way to reach it. To keep reading, please adjust your bookmark. Also, please note my new e-address: atobias@andrewtobias.com.