I wouldn't touch NFLX with your money, but what Hastings is saying (albeit somewhat promotionally) is that shareholders should be rooting for negative FCF... the more negative the better... if the model is working as intended, because they're at the investment stage of a major growth initiative.

If you trust the mgmt that's a valid statement... and surely Netflix mgmt has earned some credibility on the original programming front. I do not get the valuation on the stock at all, but you have to admit that Reed Hastings is killing it, and should be given carte blanche to invest capital until proven otherwise. This is not the area to focus fiscal discipline.

Proper financial analysis doesn't focus on a single magic number; nobody's seriously talking about negative FCF as an actual metric for operational success like you'd use to figure out an employee performance bonus ("Look, we piled a 60-foot pyramid of benjamins in the parking lot, doused it with kerosene, and lit on fire! High fives all around"). Actual financial analysts will instead be largely focusing on the balance sheet impact... corporate finance... and Hasting's comment about "debt-to-market cap ratio" is right on target. He's saying they can borrow money cheap whenever they want, and clean it up with secondary stock offerings whenever pricing is attractive (such as, say, right about now). I'd look for a steady program of stock issuance to fund this risky initiative.

EBITDA is commonly used as a proxy for operating profit in the VC community.

Depreciation & amortization aren't going to be hugely relevant for Uber (unlike the companies Buffett tends to invest in), and in the context of startups where capital expenditures relate to growth not replacement, and are going to be sourced from further investment rather than retained earnings, these noncash expenses just clutter the laser focus on operating profits, which are the overriding interest... the first thing you want to know is "when are they going to stop burning cash", not "how long will it take them to recoup the investment on their IT infrastructure"

Interest expense gets taken out because it reflects corporate finance decisions, not operating results. The business isn't doing better or worse because a company relied more or less on debt financing vs. equity, or had to pay a higher or lower interest rate. It's not like anybody's ignoring the debt, it's just that people whose business is to change the capital structure prefer to value the entire enterprise in a capital structure agnostic manner, then deduct the full value of debt to get what's left over for equity... a balance sheet approach, rather than GAAP's approach of anointing net earnings on the income statement as the One True Number that we need to slap a multiple on.

EBITDA is not a finishing point in evaluating & valuing companies, it's just the point along the way that's of the keenest interest.

Sure. The connection is the profits of the business, and the division thereof. Ignoring taxes... if Dan raises his salary by $1, he keeps 100% of that. On the other hand, if he foregoes that $1 and lets it drop to the bottom line as profit, he has to give 30% of it to Lucas. Dan is heavily incentivized to maximise his comp vs. business profits. This is easily accomplished by hiring compensation consultants, who are widely known as utter whores for management (i.e. Dan). The compensation consultant uses a blatantly distorted metric for an industry comparison (gross revenues are wholly inappropriate for the economic realities of this type of business, just as they are for Groupon) and jacks Dan's salary into the stratosphere, thus guaranteeing a return engagement. A big circle jerk, with Lucas footing the bill. Lucas gets pissed. Dan says, "arm's length 3rd party; sue me". Lucas eventually does so.

So now Dan's pissed. He knows his compensation is outrageous, probably unsustainable under legal scrutiny, and DEFINITELY unsustainable around the family table at Christmas (not to mention local newspapers)...but instead of acceding to Lucas and giving him his fair share, he gets all passive-aggressive and decides instead to gift that share to other employees... "If I can't have it, you can't either". This kind of toxic sibling BS is doubtless admixed with nobler motives... after all, Dan is forfeiting 70% of the money gifted to his fellow employees. This latter angle gets all the play, and I'm sure there's truth in it... but let's get real here.

Yes, this.

AMZN's game plan is to transform retail by exploiting network effects, economies of scale, lower cost structure, and the ability to shunt costs off to others. They're investing heavily to create a dominating position that will be unassailable by new etrants - see Warren Buffett's comments about economic moats.

They are deliberately running their operations close to break-even from an accrual accounting point of view... their $126M loss sounds large, but it's not very material given their $20B of revenue over the same period. These losses (from low prices) are a crucial part of killing competition and transforming the retail ecosystem permanently. Instead they're focused on keeping enough positive cash flow that they generate enough internal funding to fuel their strategy without continuing to raise significant funding from sales of equity or debt. You need to focus on AMZN's statements of cash flow

2014q2 operating cash flow was $862M - seven times the "swelling losses" making headlines. This didn't quite fund their purchases of property/plant/equipment which were $1,290M... but these kinds of cash sources & uses can be quite lumpy over the course of a single quarter; they maintain a very healthy warchest in corporate treasury as a shock absorber.

That's the game plan. Bezos is very good at it. The investors are on board... foregoing the bird in the hand to reap many more birds from the bush in the feature is what investing is all about.

I have no interest in owning the stock, but that's what those who do are looking at.

quodlibet

Clearly you don't do any real cooking. If nothing else, doing liquid volume/weight conversions based on 1g = 1ml is a game changer. And remind me how many tablespoons are in a quarter cup, again?

All quite true. It's important to understand the the most important modality of Wall Street greed is *individual* greed. Generally speaking, each employee has massive incentive to game the system in order to get a huge bonus at the end of the year. If his gaming of the system subsequently blows up his employer, or the US financial system, the worst that happens is that he gets fired - but he gets to keep bonuses reaped to date. This asymmetry explains much Wall Street behavior... make hay while the sun shines, burn the house down, move on to the next casino. If the people responsible for reigning in this behavior allow them, there will be truly shocking amounts of systemic cheating in order to maximize current (not long-term) profits. That's exactly what happened with S the users of their ratings, if they had half a brain, knew there was something wrong here... they just didn't care.

In fact, you are describing the business model of Egan Jones. Never heard of them, have you? See, the problem with that business model is that there's no incentive to widely disseminate the ratings; those who pay for the ratings have an incentive to hoard them for themselves in order to get some advantage over other buyers.

Here is a list of all the ratings agencies. You'll notice that no investment banks are on the list.

1. I'll reiterate the advice not to cook the stuffing inside the cooking. Whatever cooking method you use, just make a turkey stock, use that to make the stuffing, and cook it on the side. This is the way to go. 2. Sous vide is a really good way to cook a turkey... it's basically infra-poaching, and the results are excellent. If you want to be geeky, you'll want a PID controller and an immersion circulator... these are getting easier to obtain (non-contaminated from labs), and home appliances such as the Sous Vide Supreme are now readily available & affordable. Personally, I use a FoodSaver vacuum sealer and a Sous Vide Magic controller in combination with a large old-school asian rice cooker (simple on/off switch), and it works great. You can also just get down ghetto-style, using zip-lock bags and a digital thermometer: http://www.youtube.com/watch?v=PM3O1xRJ4XU Here's a basic procedure: Skin the turkey; reserve. Butcher the turkey, reserving giblets, legs, wings, boneless breast. Chop carcass with a meat cleaver, roast, make turkey stock in pressure cooker. Stretch turkey skin & press flat; salt & dehydrate. On Thanksgiving day, vacuum-seal legs & breasts separately. Make dressing of choice using turkey stock; bag separately from turkey. Cook legs at 150degF for 3hours, then reduce heat to 140degF, leave legs in, add breasts and stuffing, cook for another 2 hours. Meanwhile, deep fry the turkey wings. Crisp up the skin in the oven & serve right out of the oven, sliced into chips, alongside the meat. 3. He may be the devil, but Nathan Myrhvold is not to be denied his due here. Seriously, how is that nobody's posted any Modernist Cuisine Thanksgiving links here?? http://modernistcuisine.com/2012/11/thanksgiving-the-modernist-cuisine-at-home-way/ 4. Oven cooking: Whoever said to brine the turkey before cooking it sous vide... don't do this. Brining turkey works really well for oven cooking, but it's unnecessary (and can be counterproductive) for sous vide cooking. America's Test Kitchen has published a whole list of tips for roasting a turkey. One year my brothers & I started drinking heavily at 10AM, and wound up doing pretty much all of them. We brined the turkey, then loosened the skin & rubbed garlic herb butter all over between skin & flesh, as well as outside the skin. Then we prepared ice packs & applied them to the turkey breast for a good 45 minutes before it hit the oven, so that the temp differential would give the legs a head start on the cooking. We started the turkey out supine at lower temp (I think it was 325degF), with a tinfoil heat shield over the breast. Then 1/3 of the way through the cooking time, we flipped the turkey into prone position and increased the temp to 375degF. Then 2/3 of the way through the cooking time, we flipped the turkey onto its back again to brown the skin of the breast. Then we let it rest a good while before carving... and yeah, stuffing was cooked on the side. This was a good turkey. It was a lot of fuck-with factor, but we were drunk and in a mood to fool around; it was fun. 5. Carving turkey: Remove the wishbone in situ, through in incision at the front of the breast by the neck. Then make a midsagittal incision along the sternum, and take each side of the breast off the carcass entire. Slice the breast along the bird's length, from head to tail, against the grain. When you take the legs off, make sure to dig for the pocket of dark meat called the "oyster" just behind the leg joint, back of the kidneys - best meat on the whole bird. Happy Thanksgiving everyone.

Keying by good vendors is indeed a worthwhile strategy - so you'll get plenty of recommendations for Macs and Thinkpads, which are solid picks in my book. A lot depends on just how & for what you want to use your laptop. Personally, I've become a huge fan of the semi-rugged versions of the Panasonic Toughbook, some of which are in your budget - best laptops I have ever owned. Even the "business" versions (as opposed to MILSPEC models) have all-titanium frame, shock-mounted hard-drive in a quick-release cage, waterproof keyboard, large batteries with high-powered AC adapter, a heavy-duty built-in briefcase-type handle (on many models) and all sorts of other nice features. I specifically recommend the Toughbook 52. They're heavy as bricks, so you won't look cool in a coffeeshop... but these survive getting flopped onto X-ray conveyor belts, jumped up & down on by toddlers, falling off the desk, spilling coffee on the keyboard, etc.... whereas I've killed a couple IBM Thinkpads through the same pattern of abuse. Awesome business laptops.