There is no real fix here. The article is wrong. The effective tax erasure when you do that is not really significant. When you resell the depreciated asset, you make a profit which “erases” the depreciation and will have to pay taxes on that. You have actually just deferred your taxes. That can be advantageous cash flow wise but that’s pretty much it.
No, I fundamentally disagree with the idea that the clock is starting anew when you sell the asset. The buyer can start depreciating but the seller just paid taxes on the benefits it received from the sale which is an equivalent cash flow. You can in fine only depreciate once per asset. The whole reselling thing is bogus.
There is no real tax shielding coming from depreciation. If you just invest to replace existing depreciated asset, you just reach a steady state where you indefinetly write off real loss of value in infrastructure and pay taxes on real income which is things working as they should.
The real tax shielding actually comes from debts and means you can finance your investment in new infrastructure advantageously by using the tax write off. The interplay of debts and depreciation is not involved: that would remain true without any depreciation.
Anyway, the point of Malone through EBIDTA wasn't about cash flows anyway. It was to show that if you ignored how new investments were financed, the company was actually earning money and was profitable and these profits would materialise as soon as the company would stop expending which is indeed exactly what Amazon did again years later.
To get back to the article, I don't really understand what follows the part about Malone. If the point was that raising money through debts would be preferable to raising through capital, I would obviously have agreed but that's kind of obvious and startups wouldn't use VC money if they had access to debt anyway. Instead, he is somewhat talking about WCR without mentioning WCR which is weird before coming back to his initial argument about VC without having really at any point discussed the subject. What a mess.
