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Conglomerates Didn’t Die, They Look Like Amazon
- danvoell 9y agoI get that this is groundbreaking and different this time, but isn't this just buying a vertical?
- adventured 9y agoYes, there's actually absolutely nothing special about what Amazon is doing. It's GM buying Hughes or Perot. Or Berkshire buying company xyz. Or GE buying its hundredth company. Or Walmart getting into xyz category. Or Google buying Nest & Boston. The sensationalism is courtesy of Bezos nearing the richest person on earth status combined with Amazon's increasing pervasiveness in the US economy. It's the hot new new story of the moment to write sensationalism around, spin up some fear, whatever, gotta drive those clicks. It has so many angles to play on, it has even got Trump courtesy of the Trump/Bezos feud, what more could they ask for.
- smilbandit 9y agohttps://en.wikipedia.org/wiki/Megacorporation https://en.wikipedia.org/wiki/Megacorporation
- arvidkahl 9y agoAmazon has found their way to cornering the one property that is not influenced by fashions and whims: scarcity. Both in a logistical and economical sense, they have been pushing the envelop on all corporate levels, from AWS to fresh produce. To me, most of the "new and more agile" companies are cargo-culting the optimization paradigm, focussing on time-saving and convenience as if the more basic needs were already met. In that case, they are fighting for customer attention because the customer has attention to spare. Amazon however moved so deeply into the consciousness of the household (and, on HN, our work environments) that people are perfectly fine with Amazon being a conglomerate - since they literally deliver. Heh.
- deleted 9y ago[deleted]
- TheSpiceIsLife 9y ago> that people are perfectly fine with Amazon being a conglomerate What is this supposed to mean? Is there supposed to be something inherently not-fine with a conglomerate? If conglomerates survive because they're better able to deliver goods and services more efficiently then great. As another comment pointed out[1], we are surrounded by conglomerates.[2] Other conglomerates that have delivered things people love include, but limited to, Toyota; Yamaha; Mitsubishi; Wesfarmers; 3M; Alhpabet; Honeywell; Berkshire Hathaway. The list is expansive. 1. https://news.ycombinator.com/item?id=14592612 https://news.ycombinator.com/item?id=14592612 2. https://en.wikipedia.org/wiki/List_of_conglomerates https://en.wikipedia.org/wiki/List_of_conglomerates
- michaelt 9y agoIs there supposed to be something inherently not-fine with a conglomerate? Some people think they have a tendency to be inefficient, as high-performing areas of the business waste money subsidising low-performing areas of the business. And low-performing areas are insulated from free market feedback, like going bankrupt or investors leaving. Of course, some of this stuff is only obvious with hindsight. It was probably inefficient that Google Ads wasted money subsidising Plus and Wave; but probably efficient that Google Ads subsidises Gmail.
- sharemywin 9y agoWould the economy be better off if the money from google ads was paid back as dividends?
- mcguire 9y agoThe portion that paid for Wave?
- dragonwriter 9y ago
- stirlo 9y agoBen Thompson has a great take on this... https://stratechery.com/2017/amazons-new-customer/ https://stratechery.com/2017/amazons-new-customer/ Essentially amazon develops services and buys the best customer for said services to ensure they get used.
- nitemice 9y agoThis is a really amazing and clever idea on Amazon's part: Taking a system or technology that you've already built and are maintaining, and make it accessible to others as a platform. Then continue using that platform as if you were a/the best customer. They did it with AWS, they've done it with their retail business, and now they're probably going to do it with AmazonFresh/WholeFoods. It makes a lot of sense, and it offers them a lot more flexibility to use the platforms they build in other ways too.
- amelius 9y agoBut by allowing others on their network they are more vulnerable to security breaches.
- jacquesm 9y agoI'd wager they are much less vulnerable to security breaches because of that. It forces them to treat all their tenants as potentially hostile whereas otherwise they might fall in to the usual trap of thinking that behind the corporate firewall life is good and everybody can be trusted.
- amelius 9y agoI don't think this applies because they probably don't compartmentalize their infrastructure on a per-user basis. PS: If Amazon was a nuclear reactor, letting others on their network as an additional business model, then everybody would probably be opposing this.
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- noobermin 9y agoWhile prices are low, another aim of governments should be to keep wages high enough to maintain a standard of living. I think the fear around Amazon isn't that it is going to all of a sudden raise the price of goods from Whole Foods, but that they will reverse the employee friendly aspects of the company. When prices are low but wages aren't high enough to guarantee that people can take advantage of those lower prices, inequality is exacerbated.
- bottled_poe 9y ago> another aim of governments should be to keep wages high enough to maintain a standard of living Disagree. The aim of government should be to enable the elimination of every single job while also enforcing a fair distribution of wealth. Wage regulation is a traditional capitalist approach to solving this problem. There are other approaches which might need to be tried in the coming decades..
- fennecfoxen 9y agoWage regulation is capitalist? Sounds pretty central-planning to me.
- amagumori 9y agoi agree! in fact, you know what would be a really efficient form of capitalism? what if we just eliminated wage regulation, and the marginal costs of workers to our business entirely, by making them slaves!
- adventured 9y ago> what if we just eliminated wage regulation, and the marginal costs of workers to our business entirely, by making them slaves! Your premise is incorrect and historically ignorant. Slaves are net more costly and drastically less efficient than free employees. George Washington, among numerous other slave owners of the time, for example wrote about that fact indepth. The net cost of workers skyrockets and their productivity implodes, in the case of slavery. Washington made the economic point that with slaves, he became entirely responsible for the cost of their existence, in all regards (shelter, food, health, etc), and their work output was at best on par with or below that of free labor (which is exactly what one would expect). As a system, slavery was a failure morally and economically.
- tpeo 9y ago>The conglomerate was supposed to be dead, a relic of a bygone of era of corporate America. That's not even close to being true. How does someone get a job on a supposedly reputable newspaper writing such daft shit? https://en.wikipedia.org/wiki/List_of_conglomerates https://en.wikipedia.org/wiki/List_of_conglomerates
- TheSpiceIsLife 9y agoThe first paragraph of the article states: Investors, we have been repeatedly told, want smaller, nimbler, more focused companies." Who's we? If, by investors, they mean a fairly specific subset of investors, namely Venture Capitalists* and Angel Investors, then yes. But otherwise, no. People aren't bailing out of established conglomerates. Not that I'm aware of.
- Mathnerd314 9y agoThis guy and his friends, obviously: https://www.youtube.com/watch?v=4QiQKALBymE https://www.youtube.com/watch?v=4QiQKALBymE Seems like a mix of investors, reporters, and CEOs.
- scatters 9y agoThe conglomerate discount is real - about 10% on average in developed countries. This applies to public companies, so is a revealed preference of institutional and retail investors, not VCs and angels.
- TheSpiceIsLife 9y agoOkay, well then, thanks for pointing that out. I retract my previous statement and substitute it with something more like: The discount investors apply to conglomerates is linked to perceived lower risk. So while it might not be accurate to say investors want smaller, nimbler, more focused companies without specifying which investors, it can be accurate to say something like investors looking for a higher rate of return (which implies greater risk) want smaller, nimbler, more focused companies.
- appleiigs 9y agoI don't know what the fetish is with Amazon. The article is ridiculous in suggesting Amazon putting Walmart out of business when it only started making real money in 2016. Amazon made $2B in 2016 and $0.6B in 2015, lost $0.2B in 2014. Walmart made $13B last year... but the article says Amazon is the one with the better mouse trap and "impervious to the natural life cycle of a conglomerate"? huh? With the toxic culture, Amazon is going to go Uber someday. The Whole Foods acquisition is probably the start of Amazon taking a step too far.
- deleted 9y ago[deleted]
- icebraining 9y agoAmazon has made real money for years, they just have reinvested it. Comparing Amazon to Uber is silly, they're an established business and leader in multiple markets.
- appleiigs 9y agoReinvesting income doesn't give you negative income. Having the highest marketshare doesn't mean they make money from it. Bezo is considered the worlds worst boss and there have been many articles about its corporate culture... that will catch up to Amazon.
- icebraining 9y agoReinvesting income doesn't give you negative income. When you're running multiple new mostly-empty datacenters or fulfillment warehouses that you built for future growth, the short term efficiency (and hence income) will be pretty shitty, no? I'm not talking about the cost of building them, but the cost of running them far from capacity.
- keithlfrost 9y agoAmazon certainly has its share of problems and failures, but a lack of strategic financial thinking is not one of them. Take a look at the graph [1] of Amazon revenue and profit over time. Those curves are not generated by people who aren't paying attention. [1] http://www.businessinsider.com/amazon-revenue-vs-profit-2016-1 http://www.businessinsider.com/amazon-revenue-vs-profit-2016...
- Mathnerd314 9y ago(from the Yale note) > switching costs are high > Amazon’s platform lock-in > users said they would be taking their business from Amazon and returning to Diapers.com—which, other users pointed out, was no longer possible I have a hard time taking this seriously. "Lock-in" is just a sunk cost, it's more about the psychology of switching than an actual problem. If they went through all the pain of figuring out AWS's XML formats then they shouldn't have any trouble with another cloud service...
- dredmorbius 9y agoI'm increasingly wary of the "sunk cost fallacy" argument. For reasons which are difficult to articulate clearly, but the upshot is that I don't think SCF gives full weight to the issues involved, at least in some instances. One aspect of this is risk. Whatever your present course is, you've greately reduced your uncertainty regarding it. A new course of action may involve a great deal of unrealised and unrecognised risks. That is, your costs are understated, and your benefits are overstated. Particularly with complex situations.
- Mathnerd314 9y agoPresent courses often have a great deal of unrecognized uncertainty and risk too: https://blog.codecentric.de/en/2013/12/never-change-running-system-wrong/ https://blog.codecentric.de/en/2013/12/never-change-running-... Decision theory generally proceeds as follows: map out all possible outcomes, all possible courses of action, estimate probabilities of each action leading to each outcome, and choose the action with best outcome distribution. So far I haven't seen anybody argue against it directly... the problem instead is availability, most people aren't aware of it and can't or don't use it on a daily basis.
- cakedoggie 9y agoThey also look like Samsung. And Sony. And LG.
- baybal2 9y ago>Conglomerates Didn’t Die, They Look Like Amazon (nytimes.com) More like all Japanese conglomerates look these days (Marubeni, Mizuho, Mitsui etc) Except, the topmost structure is not likely to be publicly traded.
- seoseokho 9y agoAnd Tata, Softbank, etc., etc. I never thought conglomerates were dead.
- starstorm312 9y agoInterestingly, the article suggested that Amazon, in being both the distributor and the cloud provider, may be able to increase their advantage by exploiting information they hold on competitors.
- frogfuzion 9y agoCertainly just the simple ability to see which accounts are scaling up or down and spending metrics can provide a huge business edge right?
- dokument 9y agoMaybe. Still wouldn't be as much as google knows. Via android phone locations, apps installed, what people are saying in email/gchat/gvoice conversations, google home histories, youtube, etc. Not mentioning their other services like google cloud. It would be very easy to use that data to know when and with who to invest.
- creepydata 9y agoThey already know all the detailed information about their third party sellers and they also directly compete with them as well.
- cylinder 9y agoWhat are some other acquisitions Amazon might make to buy a customer? Would they buy a large automotive dealership group? Or is that not analagous?
- wott 9y agoWell, when a company has various activities, the direction/management decides that a company must focus on a single activity ("focus on a single trade and be expert in it, delegate the rest" is then their motto). Then when a company has a single activity and is an expert in it, the direction/management decides that a company must have diverse activities, be it vertical integration to decrease the costs, or horizontal integration to reduce competition, or just invest/acquire in totally unrelated sectors to eliminate risk. And then back to step one, and so on. The only constant goals in all this seem to be: 1. to justify firing employees and lowering working conditions; 2. to generate artificial activity for all the direction/business/finance sector, so that they always feel both useful and powerful.
- ImaginaryIP 9y agoIt's exciting to be an engineer at Amazon because of the broad range of business problems it tackles and how easy it is to move among teams. If you want to pivot into video streaming, cloud computing, data science, etc., you can easily find a mentor. It makes me feel like personal ambition is my only limit (which is both daunting and exciting).
- cmurf 9y agoShip avocados green and they survive, but aren't ripe the day of delivery, or until 2-3 days later. Ship them almost ripe so that they arrive ripe, and they will be bruised and nasty, unless they pack them in an avocado sleeve that keeps them from rolling around. Done right, it has the potential to be a better avocado experience, because so many morons molest avocados, digging their grubby fingers into them and bruising the poor thing. And it's the next person who can't see this who buys the bruised avocado. All those brown spots in an avocado? Those are finger squeezes. Stop avocado rape! There's a lot of problems with shipping produce direct to customer, sight unseen, and maybe a few benefits. But I gotta say even 10 years ago Fresh Direct in NYC was doing a genius job of it.