Break up Amazon before it does any more damage to America
"Author, entrepreneur and NYU business professor Scott Galloway has emerged as one of Amazon’s fiercest critics. At last month’s Recode Code Commerce, Galloway gave a 45-minute talk on the future of retail that savaged Amazon and warned of the threats the company poses not just economically but philosophically and morally.
“I believe our society is effectively going through this very uncomfortable transition that is bad for our youth, bad for America and bad for the planet where we no longer worship at the altar of character and kindness,” he said. “We worship at the altar of innovators and billionaires.”
Galloway calls this “a perversion” that has occurred without our true realization. And Amazon, he says, is more responsible than any other tech giant.
In his best-selling book “The Four: The Hidden DNA of Amazon, Apple, Facebook and Google,” Galloway cites some arresting statistics: Far fewer U.S. households have a gun than Amazon Prime, by 30 to 64 percent. More Americans have Prime than voted in 2016 (55 percent), or earn $50,000 or more a year (55 percent), or go to church (51 percent). He calls Amazon’s ability to woo Prime subscribers at a $119 yearly cost the equivalent of “entering into a monogamous relationship” with its consumers, who as of 2016 spent, on average, $193 per month. (Non-Prime members average $138 per month.)
From 2006 to 2016 Amazon’s stock price growth surged by 1,910 percent, destroying Sears, J.C. Penney, Kmart, Best Buy, Macy’s, Nordstrom, Target and Walmart.
Perhaps most importantly: Since the Great Recession, Amazon has paid just $1.4 billion in corporate taxes compared to Walmart’s $64 billion."
Mon Dieu!?! Quelle Horreur! Let's unpack a little bit of the stupid on this, shall we?
Retail is a dynamic space which should be driven by the consumers wants and desires but which today due to government regulation, lazy business practices, and sheeple like consumers has not changed since Sears moved from mail order to brick and mortar. Retail is an industry screaming for innovation and change. Amazon brings innovation and change and customers flock to Amazon. This is all pretty mundane. But our intemperate professor (and the author) is a dolt who believes that change is bad, and, presumably, that we should always live in the early 20th century past. Piss off, poseur (if you are Canadian, hoser)!
Change is difficult but necessary, and it will affect our children, ourselves, our businesses and pretty much everything we hold dear. Businesses like Amazon are the kindest businesses. They offer lower prices, better service, and higher quality products to more people. The author and our intemperate professor believe that business should not focus on the customer but others like employees and taxpayers. While the business has responsibilities towards employees, employees are not forced to work for Amazon; they can leave at will. With unemployment, at 3.8% there are ample jobs awaiting, yet they stay with Amazon, perhaps that tells us something? If it does, it eludes the author and professor think(less)tank.
Comparing gun ownership, voter turnout, having an income of more than $50,000 per year, and church attendance with Amazon Prime membership is tangentially interesting but notice how he never tells us why these comparisons matter. It is almost as if people who do not own guns, who do not vote, who do not attend church, and who earn less than $50,000 per year should not want to have the benefits of saving money, a convenient shopping experience, or better service, but they do. Gee, I wonder why?
These pro-brick-and-mortar business types are anti-classical liberals and anti-liberty. They want to tell the consumers of America and the world that they cannot buy from a business which has the highest customer service ratings, which sells a nearly infinite number of products, conveniently, for low prices and with the added benefit of shop-from-home cost and time savings. Amazon has done more over the past few years to make shopping more affordable than any other business in the world. No longer do shoppers have to pay to drive to the grocery, the haberdasher, the suitmaker, the propeller builder. Now those things and more are available online with the click of a button, for competitive prices with myriad side-by-side products to compare with two-day shipping, next day for an additional fee, and sometimes same day delivery!
The complaint that Amazon does not pay loads of money in taxes should be considered a boon. These savings are going to consumers, and not government wastrels who will send the money to their friends in business who are willing to engage them in corrupt tit for tat crony socialism practices.
Corporations should never pay income taxes. This is just a way for progressives to hide how much money you pay each year in taxes. Non-humans do not and cannot pay taxes. Taxes may only be paid by humans, and taxes levied on corporations are then extracted from the human customers of the products purchased. This is nothing but a hidden tax you pay but do not realize.
The government should be required to tax in a plain, obvious way, so we know exactly how much we are paying. Taxes should fall fairly, and consistently upon all taxpayers. Corporate taxes are designed to be a covert tax on individuals. This is unfair and inappropriate.
"'We have institutionalized a regressive corporate tax structure at the hands of our idolatry of innovators and Amazon,” Galloway says. In 2017, Amazon paid nothing in federal tax.
The company is now on pace to become the largest clothing retailer in the country by 2021 and has become the most valuable company on the planet without ever posting substantial profit."
So what? Customers are the metric by which we should judge businesses. If people believe they are getting a good product for a fair price with acceptable levels of customer service why should Galloway be allowed to interfere with that relationship? He thinks he knows more than you, he is smarter than you, and so will adjust your ability to enter into this business relationship, meaning eliminate that ability. The man is an insidious, progressive authoritarian who wants to tell the tens of millions of people who buy from Amazon and who are members of Amazon Prime, sorry, you cannot buy from Amazon anymore. One of Galloway's problems is the tax payments. Galloway likes the idea of individuals being defrauded by the government to pay more in taxes than they would otherwise be willing to pay. This is what progressives are all about.
Another of Galloway's problems is that Amazon's focus in on providing low prices to all customers, not just wealthy customers, but all.
"And Amazon has made itself such an indispensable part of the supply chain that it sets the price points of just about everything. If you are someone who makes something or sells something, from books to fire pits to flat- screen TVs, Amazon tells you what the market — its market — will bear. Its limitless supply of cash means it can undercut any other retailer in any space it wants to dominate."
This language is absurd. The complaint is that Amazon negotiates prices effectively and businesses supplying products must compete hard on price. Gee, this is news? I thought this was always the model, but I was wrong. The 20th-century model was crappy products and unsupportably high wages. But the unions which forced those high prices through high wages have come a cropper now that the consumers have bolted the stable and decided to buy products of reasonable quality for far lower prices.
What Galloway wants is to protect incompetent producers of inferior products from consumers who want a better deal and a better product.
The ugly truth is Galloway is about protecting crony businesses who engage in corrupt practices with government. Galloway is about protecting the progressive crony socialism system at the expense of consumers.
The author falls into hysterics about here:
"In a world where so much is now controlled by so few — there are five big book publishers left, five Hollywood studios, five large health insurers, four phone providers and four cable companies — and this summer AT&T bought Time Warner — Amazon’s reach is terrifying."
Did you soil your armor? Prat! Amazon buys from the big five book publishers but also allows and promotes individuals competing against them directly, and successfully. But you will not hear that from the author. Amazon is one of the most amazing liberal companies ever. By liberal I mean liberty liberal, not the fascist progressivism which stole the liberal label in the early 20th century once it fouled the moniker progressive with authoritarian fascistic policies like eugenics, racism, etc.
Amazon, along with Netflix, is also busting Hollywood/Cable/Satellite, and broadcast TV by offering independent production of high quality short and feature-length programming.
Amazon is also set up to bust big healthcare.
To listen to Galloway and the author one would presume these are all horrible as if Americans want to be faced with another 25 crappy superhero movies over the next year as opposed to a large variety of high-quality programming.
"Its ostensible search for the next city to house its second headquarters has become “the Olympics on steroids,” Galloway says, with state and local governments promising tax breaks that would starve funding for schools, police and fire departments. We have a new national holiday, Amazon Prime Day. Alexa and Echo, Amazon’s cloud-based voice-operated systems, sit in an estimated 40 million homes and spy on us, reporting our moods, tastes, wants, needs and fears back to HQ.
Yet we don’t fear Alexa.
Bezos has even greater ambitions. His acquisition of Whole Foods, which plunged competitor Kroger’s stock from $31 to $22 per share, is but one step in dominating what and how we eat. Amazon is spending $5 billion on original programming this year and is on pace to outspend Netflix by 2022.
Think about that, Galloway says: A retailer in Seattle as content king. And after announcing a vague health care initiative back in January, stock prices for major health care insurers plummeted — such is Amazon’s power that the mere hint of market entry damages long-standing competitors."
If local government is smart, it will let the next guy pay Amazon to locate its headquarters, just as it would be smart for local government not to pay to build sports stadiums for pro teams, or do many other incompetent and economically wasteful things. But Galloway and the author are on the side of wasteful government not on the side of businesses which are cutting waste and costs and passing those costs on to consumers and shareholders. Amazon is playing these idiot politicians in local government, but that is not Amazon's fault, that is the fault of the local voters for electing dolts and fools. Caveat emptor applies to politics even more than to customers.
If you fear Alexa, turn her off, or don't buy her, but whingeing about her and demanding regulation for people who are happy with her is authoritarian nonsense. People know what they are doing, they are adults, they have agency and just because the author and Galloway disagree with what people do does not give them the right to tell everyone what to do.
Of course, Kroger stock has fallen now that Amazon has purchased Whole Foods. While grocery is competitive, it has been a very long time since grocery was innovative. I worked in a Safeway store in the mid-1970s. I occasionally traveled to another local Safeway to help them out. Usually, that meant spending a night cleaning out tub freezers. The store I traveled to shut down a year or so ago. It was identical to the store back when I cleaned the tub freezers (The tub freezers had been replaced with standup units, and checkstands use automated scanners, but those are about the only real changes made over the past 40 years. Any other changes were cosmetic.
Grocery is a business screaming for change and innovation. We may hate change when it disrupts our way of life but the innovation it brings we often find highly valuable. Automated UPC checkstands made the checkout faster, more accurate and allowed lower prices since the checkers did not need years of training and an encyclopedic memory of product prices. Yes, the old lady checkers of the 1970s memorized all of the product prices and could ring them up with or without a pricing tag on the product. They were a marvel but a costly marvel.
The stock prices of non-innovative companies always fall once the industry is breached by an innovative company. This is because of the AT&T Effect. Read about that here: Tariffs always hurt the people!
The essential problem is experts are expert in a field subject to a specific economic model until the model shifts then the experts are no longer expert. Their expertise is in the old model not the new, so they know less than nothing, they know the wrong things. Investors intuitively understand this problem which is why old-line companies like AT&T and Sears once the model changes the investors leave in droves. They know these companies are likely to fail if they do not get new blood right at the beginning.
By changing the business dynamic and bringing innovation to long moribund industries companies like Amazon do a real service to customers, investors, and everyone else. As a result, product quality goes up, prices go down, and customer service improves. Galloway and the author both want the opposite. Should you listen to them? This is not a difficult choice for me, no!
Galloway's Steve Jobs theory is not blasphemous it is stupid. The simpler explanation is that people like good products for low prices, with good customer service which are easy to obtain. What Galloway and his type miss is that it used to be difficult to find many products. As an example, I recently bought a mirror extender for my motorcycle, but there was a problem two of the Allen set screws were too long. In the past to find replacements one needed to live near a city where a distributor of screws and bolts could help you find this very specific product. But today, with Amazon, in about 20 seconds, I found replacement bolts of exactly the correct thread, length, and size.
I do not buy from Amazon because I mistakenly believed Steve Jobs was Jesus, I do so because Amazon simplified my life and allowed me to compare myriad products for price and quality each with reviews by dozens or hundreds of individuals pointing out problems and benefits to the specific product. I can do all of this quickly from my home and have the product usually delivered for "free" within two days, Jesus Christ not included.
"We have become equally complacent while technology mauls our economy, he says. “We seem to be comfortable, at least in tech, with the 8,000 people who work at headquarters splitting $80 billion in revenue,” while lower-wage workers struggle to get by. Business Insider reported that as of this year, Amazon was among the top companies whose employees relied on food stamps. And that $15 minimum wage? In exchange, the company quietly cut monthly bonuses and stock options.
Meanwhile, Amazon is shedding the need for human workers at a rapid clip. In 2012, the company paid $775 million for robotics firm Kiva Systems and as of June had over 100,000 robots fulfilling online orders. A higher minimum wage for human workers doesn’t make Amazon suddenly moral. It just makes it smart."
Galloway is a business professor who knows nothing about economics or business it appears. Like all businesses, Amazon pays people what they are worth. Within corporations, the Pareto Distribution applies, and only a tiny few product one half of all of the productive output. The truth of this is that the bottom 50% of workers either are barely productive enough to be worth hiring or are not productive enough to be worth hiring. Essentially, companies work because a few workers are massively productive while the mass of workers are not.
Here is how brutal the Pareto Distribution is: Amazon has about 350,000 employees. Take the square root of 350,000, and you get 592 this is the number of people who produce one half of all of the productive output at Amazon. They should receive at least half of all the salary and wages paid, but they do not they receive less. This means that 349,408 people are slacking. But the numbers are even worse because if you take 592 and take the square root, you find that 24 people produce 25% of all of Amazon's productive output. And on the other end, if we take 349,408, we find that 591 people produce one half of all of the remaining output (this group produced 50% of Amazon's productive output, so 591 people produce half of the half or 25 % of the total.) This means that the bottom 348,817 people only produce 25% of Amazon's productive output while 1183 people produce 75% of the productive output. This is why the people at the bottom are paid so little; they are not even worth what they are being paid.
We can also use the Pareto Distribution to understand why employers want to replace workers with robots, not just in the US but China and everywhere else. The bottom 90% of the workforce is barely worth paying for the tiny amount of productive work they do.
The story is hilarious. First come complaints about how Amazon is a terrible employer, then about how it doesn't employ enough people. This reminds me of the progressives who constantly rail that universities are rape factories but that not enough women go to college. Progressives are good at holding competing contradictory ideas in mind at the same time.
Galloway wants to break up big tech because it is paving the way for individuals to bolt from controlling, omnipresent anti-liberal government.
He makes noises like he is on the side of the little guy, but his desires are the opposite.
Change is coming whether Galloway or the author want it or not. Don't let them use government to stop the change we want but they do not.