America's No. 1 financial conglomerate

Chapter 422 Goldman Sachs Analysis

The meeting lasted a full day, but no substantial consensus was reached. In the end, the disputes were temporarily left to be discussed later.

That evening, Henry Paulson, far away on Wall Street, learned the final outcome of the meeting from his office.

In Goldman Sachs' office, Paulson was intently working on documents when the office door was gently pushed open, and his secretary walked in, carrying the coffee that his assistant had wanted to bring in earlier.

Paulson heard the coffee being placed on the table, but when he realized there were no footsteps, he looked up in confusion.

She looked up from the documents and asked, "Meghan, is something the matter?"

Megan nodded slightly, her hands hanging naturally in front of her, her expression somewhat serious. "Mark just called and reported on the situation at Amazon today."

Megan then recounted in its entirety what Mark had said on the phone: "Mark mentioned on the phone that after today's meeting, a representative from Kleiner Perkins Caufield & Byers approached him privately outside the meeting room."

"The other party stated that if Amazon's expansion plan ultimately fails, leading to significant operational risks or a decline in performance, they hope that Goldman Sachs can support them in replacing the current management team."

After listening to Megan's report, Paulson did not show any obvious surprise. He slowly extended his right hand, picked up the still steaming cup of coffee on the table, and took a small sip.

After he finished his coffee and put the cup back on the table, he turned his gaze back to Megan and said in a calm tone, "Not surprising. These impatient guys are quick to shirk responsibility by changing management as soon as they see potential risks, ignoring the strategic value of the company's long-term development."

Changing management is not a simple administrative or personnel adjustment; it involves complex considerations of interests and market signals.

When investment institutions jointly request a change in the management team of a startup, it often means that the company's credibility among Wall Street institutional investors is declining, and subsequent resource allocation will decrease.

For Amazon, it would be great if the new management team could handle things well. However, if the new management team couldn't handle things well, couldn't quickly familiarize themselves with the business, and couldn't formulate better operating strategies, then Amazon would completely lose the trust of Wall Street.

At that point, Wall Street will package Amazon as a delicious cake, using methods such as embellishing some financial data and amplifying short-term market highlights to find players to take over. Wall Street will never give Amazon a third chance to try and fail.

"So, you also choose to believe Bezos?" Megan's face showed obvious surprise after hearing Paulson's words.

Kleiner Perkins Caufield & Byers' concerns are not without merit. Amazon's expansion plans do indeed have many uncertainties. However, judging from Paulson's words, he seems to have high hopes for Bezos and Amazon.

Seeing that Paulson did not answer immediately, Megan tentatively offered her opinion: "Actually, I share the same view as Kleiner Perkins. I feel that Bezos has been too aggressive this time, involving too much capital and too many new product categories. If the market reaction is not as expected, it could very well drag down Amazon's existing operating system."

"It would be more prudent to proceed steadily and expand gradually, adjusting the pace of development in a timely manner based on market feedback."

Paulson glanced at him, then chuckled, picked up his coffee cup again, took a big gulp, and said, "You're right, Bezos's approach is indeed very aggressive, and has exceeded the reasonable range of risk."

"Then you..." Megan's expression of surprise deepened upon hearing this.

Paulson's tone just now clearly showed his approval of Bezos, but now he seems to agree with his own radical assessment of Bezos.

"But it is precisely this radicalism that is the biggest reason why I am optimistic about him."

Megan was a little confused. She looked at Paulson with a puzzled expression on her face and a questioning look in her eyes.

Aggressiveness means high risk, and investment seeks a balance between risk and return. As a seasoned investment decision-maker, Paulson could not possibly be unaware of this principle.

Paulson didn't mince words and explained, "His proposed expansion decision may seem overly aggressive and even risky on the surface, but his judgment is very accurate."

"In 1995, he gave up a stable, promising, and high-paying job on Wall Street that many people envied, and chose to resign and found Amazon."

"At the time, no one was optimistic about the Internet retail sector. Almost everyone thought his choice was wrong, believing that Internet retail lacked a realistic foundation and was difficult to form a scalable business model."

"But now, Amazon has become one of the benchmark companies in the global internet industry, which fully proves how forward-thinking Bezos's judgment was at the time."

"His current aggressive expansion is not because he wants to, but because he knows that if he cannot seize market share at this critical juncture, Amazon will lose its first-mover advantage in these product categories and may even lose access to these markets altogether."

"Whether it's Walmart, Best Buy, Home Depot, or other major retailers in their respective niche markets, Amazon is far superior in terms of capital reserves, product variety, and warehousing and logistics coverage."

"Once they complete the construction and operation of their online shopping websites, Amazon will face enormous obstacles if it wants to enter these markets."

"That's why Bezos is so eager to expand Amazon's product categories. He wants to leverage Amazon's existing user base to further retain existing consumers and use word-of-mouth marketing to attract more new users to the Amazon platform, thereby quickly capturing more market share."

"Establishing warehousing centers shortens transportation distances, increases mail delivery speed, and improves the user's shopping experience."

"For the average consumer, the difference between two-day and three-day delivery may not be noticeable, but the difference between two-day and seven-day delivery will definitely be stark. This huge difference in time will directly affect the consumer's shopping choices."

"But as you just said, Amazon's funding is a big problem." Megan still hadn't changed her concerns about Amazon's expansion plans. "Even if Amazon manages to seize some market share from those traditional retail giants, so what? Whether it's the variety and quantity of goods, or the prices it gets from manufacturers, Amazon can't compete."

After listening to Megan's concerns, Paulson nodded slightly, a look of approval on his face. "But you've overlooked a crucial issue."

"What's wrong?" Megan asked immediately, wanting to know what she had overlooked.

"That means Amazon can afford to lose money, while those brick-and-mortar retail giants can't."

In short, it directly points out the fundamental difference in business models between e-commerce and traditional retail giants.

"Amazon is willing to forgo profits and even accept losses in order to seize market share. As long as it can achieve rapid growth in market share and continuous expansion of user base, it has the potential for long-term profitability."

"But can traditional brick-and-mortar retail giants like Walmart and Best Buy do this?"

Megan gave a negative answer almost instantly, stating firmly, "Absolutely not!"

Traditional retail giants like Walmart employ hundreds of thousands of people and bear huge daily costs for labor, store rent, and supply chain operations.

If they lose money trying to compete in the online market, and offline sales are affected by online competition, no matter how promising the future of e-commerce is, the company's shareholders will not accept such a result.

This will inevitably put enormous pressure on management, forcing them to abandon the loss-making online business and return to the traditional offline retail model.

"No wonder Ernst dared to so openly attend the retail industry conference and publicly discuss his plans to enter e-commerce." Megan suddenly remembered a question from before, and a look of sudden realization appeared on her face.

"He wasn't afraid at all that his idea of ​​entering e-commerce would be leaked, nor was he afraid that retail giants would follow suit because of him. He had long understood that in the end, the remaining companies in this e-commerce battlefield would be internet companies, not traditional retail giants."

Paulson smiled with satisfaction. "Tell Mark to ignore the other shareholders. We fully support Bezos's decision. If the others don't want financing, we can buy all these shares."

"Okay, I'll contact Mark and convey your instructions to him accurately," Megan replied quickly, turning to leave the office.

"Wait a minute." Just as Megan was about to reach the office door, Paulson suddenly called out to her, "Any new developments regarding Ernst's situation?"

As a key target of Goldman Sachs, Ernst has always been at the highest level of Goldman Sachs' intelligence monitoring system.

First, this guy is too wicked and too good at making money; he can make a fortune in any industry he enters.

As hyenas of Wall Street, who wouldn't want to know Ernst's plans and join him in the feast?

Another point is the current relationship between Goldman Sachs and the other party. While not exactly hostile, there is a conflict of interest between them.

Goldman Sachs dares not be careless in the face of such an opponent.

Megan shook her head. "He's been in Redwood City lately, and hasn't left since attending the wedding of Carl Weller, the head of Bell Labs."

"Haven't you figured out why he wanted to acquire Bell Labs yet?" Paulson asked, frowning.

Paulson could understand entering the e-commerce field.

After all, there is a huge conflict of interest between the two parties regarding the bill.

Online finance needs customers, and e-commerce is undoubtedly the best match.

Once PayPal defeats Amazon and dominates the e-commerce sector, it will naturally kick Bill aside.

But what about acquiring Bell Labs? Is it really just a matter of prioritizing technology, as some outside observers claim?

Paulson had a feeling that things were definitely not that simple, and that there must be some unknown secrets involved.

No, not a single word.

Paulson was clearly not satisfied with the answer, and his brow furrowed even more.