Chapter 20

Market Analysts Morphing

At the end of this chapter, we present the Annual Shareholder Letter that Jeffrey P. Bezos, CEO of Amazon, sent to investors. It starts with “Random forests, naïve Bayesian estimators, RESTful services, gossip protocols, eventual consistency, data sharding, anti-entropy, Byzantine quorum, erasure coding, vector clocks …”

Huh? This is from a retailer?

Amazon has good reason to talk technology and related math and science. It is the largest online retailer.1 Its Kindle, eBook sales, and Amazon Web Services revenues make up 10 percent of its revenues and are some of the fastest growing products in its store. Nonetheless, stop and ask: How many Wall Street analysts can relate to the language that Bezos used?

The Geeks on Wall Street

Wall Street spends plenty on technology. Much has been written about the “quants,” especially during the market meltdown of 2008. Scott Patterson of the Wall Street Journal, who wrote a book on the topic, says about them:

By the early 2000s, such tech-savvy investors had come to dominate Wall Street, helped by theoretical breakthroughs in the application of mathematics to financial markets, advances that had earned their discoverers several shelves of Nobel Prizes.2

Yet, even as Wall Street is investing massively in its own technologies, its analysis of technology of industries it follows has not been keeping pace.

Early in 2011, Amazon stock took a hammering even as the company announced robust growth—net income grew ...

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