Time Loves a Hero

Well they say time loves a hero
But only time will tell
If he's real, he's a legend from heaven
If he ain't he was sent here from hell
-- Barrere, Payne, Gradney (from "Time Loves A Hero", Little Feat)

Yesterday was a bit different, schedule wise, in that this is deemed to be a Windy Weekend here in West Redneck, CT. Thus my morning was devoted to moving mucho leaves from their temporary pile on the lawn to permanent recumbence elsewhere. To gird my loins, I made a quick look at r-bloggers, and found that Rob Hyndman had, unusually, posted a job advert. It is from Amazon, and provided me with great mirth as I set about to haul leaves.

His post is mostly a quote from the (unnamed) email he received from Amazon:

... we have found that applied economists compare quite favorably with the machine learning specialists and statisticians that are sometimes recruited for such roles.

The job posting itself is on the AEA site. And provides added humor.

Amazon economists will apply the frontier of economic thinking to market design, pricing, forecasting, program evaluation, online advertising and other areas. You will build econometric models, using our world class data systems, and apply economic theory to solve business problems in a fast moving environment.

Sounds a whole like the description of what those benighted knuckleheads from Wall Street were doing, doesn't it??

All well and good, you say; but where's the laugh out loud part? Well, as I set out to haul leaves I noted that Amazon had provided a job (or, at least, career track) email. Oh goody!! I penned a snarky, but lighthearted, rebuke. But why, you may wonder?

Consider that, among quants, the economists are the most incompetent. While a grad student, most of my profs were the initial wave of New Quant Economists who represented what has been wrong with econ quant for some decades since: they were all flunked out math and science Ph.D. drudges, who found that they could find repentance in the econ department. Thus, we get econ quants who still think in terms of God's Inviolate Laws running the show, rather than the reality that it's Political Economics run by social Darwinists making up the rules as they go along. The rules change without regard to data. The data changes in response to rule changes, which are blithely ignored by said quants. They all believed that a well known ratio (median house price / median income), could go straight up forever. Yeah, sure. They apply the wrong context to a field of which they've not even had 101 training. They consider it just another series of algebra exercises. Political economics ain't algebra.

So I hauled leaves, which meant that I'd missed my mid-morning stroll to get my dead trees NYT. And, if it's Friday, it must be Krugman. I sorely would miss my dose of Krugman, but I really didn't want to re-gather all them leaves. Remember, this is after I'd sent my snarky email (no, they haven't replied). Having done with hauling, I didn't expect there'd be any left, but I got the last copy. Oh joy. He, once again, rubs the mainstream and right wing cabal's collective noses in the Japanese experience.

For now, here's what you should know: Japan used to be a cautionary tale, but the rest of us have messed up so badly that it almost looks like a role model instead.

What, you must be wondering, does Amazon's love affair with econ quants got to do with Krugman and Japan? Glad you asked. It dawned on me that Amazon and econ quants were a perfect match, the totally dysfunctional marriage. Amazon's only hope to be consistently profitable is to gain monopoly status in retailing, since:

The net result of nearly two decades in business is that Amazon's trailing 12-month price-to-earnings ratio stands at an alarmingly high 550. Compare that to consistent profit earners with significant online retail operations such as Google (p/e 29), Wal-Mart Stores (2) or eBay (25), and it's easy to be confused by investors' hunger for Amazon.

Amazon, Bezos in particular, hasn't yet figured out that moving widgets by the tonne on trains is way cheaper, per widget, than by each in aeroplanes. He seems to be getting a clue, what with all these so called distribution centers he's building. They're really just brick and mortar stores, by a different name. In order to compete on price, Amazon has to eat the inflated distribution cost by setting the widget price low enough that, when delivery is added in, the total isn't way out of whack. Some folks may have been stupid enough not to do the arithmetic, but not now. The total price of that widget from Amazon has to compete with the price, ignoring the total cost of driving, at Target or WalMart or Sears.

The only way Amazon gets justifiable profit is when it gets monopoly power to pass on the inflated delivery costs. There is no other option, save bankruptcy. The numbers can only add up one way. Well, unless you're an accountant who can bend or change the rules. Clueless CEO and clueless quants seeking to be "the king of the world!" Jack, and his boat, sank.