Marginal, Average and Amazon Inc.

I mentioned on my social that Amazon Inc. up here in Canada makes $1 billion for their 20 Canadian employees. The case I want to show comes straight from Warren Buffet’s prudence about technology and what I fear might be the hype that’s caught some analysts. And for comparison I had used the auto manufacturing process.

Productivity helps Canadians stay competitive. But unlike the number of cars a person can assemble, when a technology company makes $1 billion per 20 people it runs the risk of skewing our perception. Unlike the American market Canada is very small, historically oil and natural resources is its primary industries, and now that they are in a doldrums, it wouldn’t be prudent to deny reality just because of a few exceptional anomalies like Amazon Inc.

Productivity is made up of marginal and average measurements of profitability. To continue using cars as a metaphor, marginally things rise like the RRPM and averagely things rise like the Speed. Depending on how you drive, the RRPM rises as you pick up speed until another gear kicks in, then the RRPM drops back down. Sometimes you can redline the RRPM. When the other gear kicks in, the car moves forward at greater speed and less friction. And if you were to do something to those needles by altering the RRPM gauge, your driving will be out of whack..even dangerous. Again, unlike a car, the economy is so big you can only rely on these gauges not sight. Which is when a lot of people go off the road.

Though the news might be bad, taking precaution is better than crashing. Unfortunately it seems that the majority of Canadians might have poorly timed the economy. Oil prices have stayed low longer and only now has the U.S. President agreed to green-light a major pipeline project – that might have started several years from today. And it doesn’t mean it will be built overnight nor that oil will start flowing any time soon (there are other business bubbles at risk of bursting).

So it is imperative, for the general public, though not someone like Warren Buffet who writes his own analysis, to be given the facts come what may. One final tip about viewing the economy is that it is grounded in ‘the physical’; practical that things like being overworked, too much over time, floods and being pregnant all impact the economy – the other thing called finance is a secondary feature of the economy (placing bets on or against groups of people).