Backblaze is doing to S3 what I dream about doing to Amazon Retail after several years working for them. The amazon philosophy is quite a bit like the underpan

Backblaze is doing to S3 what I dream about doing to Amazon Retail after several years working for them. The amazon philosophy is quite a bit like the underpants gnomes: 1) grow, 2) ..., 3) profit. Where there are natural monopolies with obvious economies of scale, this is an incredible strategy. But outside of that (retail, for example), it just doesn't work. Economies of scale come coupled with diseconomies of scale, and #2 needs to be an intentional and deliberate approach to managing those diseconomies of scale. If you look at their financials, it is obvious that Amazon retail has had a miserable time managing this...over the last 15 years they have steadily lower inventory turns, steadily increasing logistics costs, availability inconsistency, etc. Anybody who works there now or worked there in the past can see how inefficiently they run things and how efficiency improvements one day are ameliorated by political and speculative decisions the next day. Combine this with their typical acquisition strategy, as exemplified by the Quidsi approach. Lowball, and when they don't accept, spend money subsidizing your own product to undercut their market and make them more desperate to sell. The Backblaze approach is genius for taking on Amazon because it inverts the priorities to 1) meticulously manage costs, and then 2) directly engage amazon by competing on price. Backblaze can compete on price because their cost structure is lower than Amazon. Amazon can always subsidize their product, but by doing so Amazon is in the weaker position in the endurance race. Backblaze can ride out the attempts at undercutting them because they have a lower cost structure and prices need to drop a lot before they affect their cash flow safety. It's also a resilient strategy; Amazon can know that's exactly what they're doing and they can't do anything to stop it apart from beating them at their own game of cost management. It's a slow and steady road, but it can work. Now, if only they would start running more than an S3 competitor :)