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Amazon 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

Amazon 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 ago
  Is 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 ago
    Would the economy be better off if the money from google ads was paid back as dividends?
    - mcguire 9y ago
      The portion that paid for Wave?
  - dragonwriter 9y ago
    It's not about individual cases, but that having the businesses combined prevents investors from allocating capital between them, which is viewed as, in aggregate, less efficient as the allocation is a step removed from the market.
    - TheSpiceIsLife 9y ago
      This assumes that investors are efficient at allocating capital, or that individual investors are more efficient than institutional investors. As an obvious counterpoint: Birkshire Hathaway A more local example, as an Australian, is Wesfarmers who have persistently maintained strong brands in hugely diverse fields. As a welder by trade I'm willing to bet that the people managing these two conglomerates are more efficient at allocating capital than I, at least.
      - dragonwriter 9y ago
        > This assumes that investors are efficient at allocating capital Yes, in aggregate, it does. Phrased another way, it assumes that the market is more efficient when different investments are unbundled and can be selected independently than when they are bundled. Note that I am not necessarily endorsing this charge against conglomerates, just clarifying what I see to be its basis.
  - TheSpiceIsLife 9y ago
    I see your point, however: > And low-performing areas are insulated from free market feedback, like going bankrupt or investors leaving. This could be a net good for society as not all things societies like can necessarily be delivered by high-performing businesses.
- arvidkahl 9y ago
  In my view, people have a strong tendency to question conglomerates, as they do with most large aggregations of wealth and power. On your list, I find many names that have been criticised for their acquisition strategies (and general corporate behavior). I meant to stress the familiarity that regular people have with small businesses in comparison to large megacorps.
- CuriouslyC 9y ago
  From the perspective of the voting/idealistic shareholder, conglomerates make it very difficult to influence the activity of a company, since any individual activity is a small portion of their makeup. Another problem with conglomerates is that big players compete in nonproductive ways. Large companies tend to actively lobby and influence regulations. The goal is generally to protect their business model (by limiting innovation), and it has been shown to have a very high return on investment. Having a broad base also gives conglomerates a lot of leveraging points in negotiations as well. Conglomerates also concentrate your failure points in the economy. Infrequent major failures are more painful than frequent minor failures. Besides, companies should not be "too big to fail." On the other hand, when conglomeration increases efficiency, it can be a good thing. As a result, if a market is stable and further innovation unlikely, conglomerates can be better for society than independent competitors, assuming sufficient competition to limit profit.
bogomipz 9y ago
>"Amazon has found their way to cornering the one property that is not influenced by fashions and whims: scarcity." What do you mean by this? What exactly is scarce?
- sqeaky 9y ago
  Anything that Amazon can move from an area of lesser scarcity.
  - bogomipz 9y ago
    Sorry, I'm still not understanding. Could you give a concrete example of this with Amazon?
    - sqeaky 9y ago
      Amazon is a logistics company. They aren't (just) a store, they aren't (just) a web host. They have positioned themselves where they do a lot of unglamorous stuff that makes business work. The are a meta store, anyone can set up a store and do the hard work of marketing and fulfilling orders and Amazon gets a slice. Then Amazon started hanging on to other people's inventory too, now you just need to buy the stuff and Amazon will hold it while you go out and do the hard work of marketing and selling and Amazon gets a slice. Their know there is scarcity of products and try to connect sellers with buyers. With AWS they know new businesses will use their infrastructure but they don't want to take the risk with how it will be used. Any startup with any idea can take a real existential risk on their business idea and Amazon will take a slice. They know that for all its ephemerality information in the correct place is scarce, but they don't know how to solve all the problems with information. They made good tools and lease them to those the tackle information scarcity. Where it doesn't make sense to have other people do it, they try to reduce costs by literally moving things from a to b. Their drones are the their most vivid example but there are countless mundane Amazon warehouses strategically placed. If Amazon doesn't know if the risk/reward is good enough they will contract it out and let the other assume the risk. They are automating or distributing the ways of reducing scarcity and leaving themselves with minimal risk. As their risk and cost gets lower it makes sense for them to tackle ever smaller amounts of scarcity. They are so efficient at dealing with scarcity that it makes sense for them, a multi-billion dollar company, to give you a button with the sole purpose of ordering you more laundry detergent by pushing that single purpose button. They are leveraging the scarcity of one empty self in one tiny room of your home. If that isn't the story of a company with a deep relationship with scarcity then I don't know what else it might be.

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 ago
Is 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 ago
  Would the economy be better off if the money from google ads was paid back as dividends?
  - mcguire 9y ago
    The portion that paid for Wave?
- dragonwriter 9y ago
  It's not about individual cases, but that having the businesses combined prevents investors from allocating capital between them, which is viewed as, in aggregate, less efficient as the allocation is a step removed from the market.
  - TheSpiceIsLife 9y ago
    This assumes that investors are efficient at allocating capital, or that individual investors are more efficient than institutional investors. As an obvious counterpoint: Birkshire Hathaway A more local example, as an Australian, is Wesfarmers who have persistently maintained strong brands in hugely diverse fields. As a welder by trade I'm willing to bet that the people managing these two conglomerates are more efficient at allocating capital than I, at least.
    - dragonwriter 9y ago
      > This assumes that investors are efficient at allocating capital Yes, in aggregate, it does. Phrased another way, it assumes that the market is more efficient when different investments are unbundled and can be selected independently than when they are bundled. Note that I am not necessarily endorsing this charge against conglomerates, just clarifying what I see to be its basis.
- TheSpiceIsLife 9y ago
  I see your point, however: > And low-performing areas are insulated from free market feedback, like going bankrupt or investors leaving. This could be a net good for society as not all things societies like can necessarily be delivered by high-performing businesses.
arvidkahl 9y ago
In my view, people have a strong tendency to question conglomerates, as they do with most large aggregations of wealth and power. On your list, I find many names that have been criticised for their acquisition strategies (and general corporate behavior). I meant to stress the familiarity that regular people have with small businesses in comparison to large megacorps.
CuriouslyC 9y ago
From the perspective of the voting/idealistic shareholder, conglomerates make it very difficult to influence the activity of a company, since any individual activity is a small portion of their makeup. Another problem with conglomerates is that big players compete in nonproductive ways. Large companies tend to actively lobby and influence regulations. The goal is generally to protect their business model (by limiting innovation), and it has been shown to have a very high return on investment. Having a broad base also gives conglomerates a lot of leveraging points in negotiations as well. Conglomerates also concentrate your failure points in the economy. Infrequent major failures are more painful than frequent minor failures. Besides, companies should not be "too big to fail." On the other hand, when conglomeration increases efficiency, it can be a good thing. As a result, if a market is stable and further innovation unlikely, conglomerates can be better for society than independent competitors, assuming sufficient competition to limit profit.

bogomipz 9y ago

>"Amazon has found their way to cornering the one property that is not influenced by fashions and whims: scarcity." What do you mean by this? What exactly is scarce?

sqeaky 9y ago
Anything that Amazon can move from an area of lesser scarcity.
- bogomipz 9y ago
  Sorry, I'm still not understanding. Could you give a concrete example of this with Amazon?
  - sqeaky 9y ago
    Amazon is a logistics company. They aren't (just) a store, they aren't (just) a web host. They have positioned themselves where they do a lot of unglamorous stuff that makes business work. The are a meta store, anyone can set up a store and do the hard work of marketing and fulfilling orders and Amazon gets a slice. Then Amazon started hanging on to other people's inventory too, now you just need to buy the stuff and Amazon will hold it while you go out and do the hard work of marketing and selling and Amazon gets a slice. Their know there is scarcity of products and try to connect sellers with buyers. With AWS they know new businesses will use their infrastructure but they don't want to take the risk with how it will be used. Any startup with any idea can take a real existential risk on their business idea and Amazon will take a slice. They know that for all its ephemerality information in the correct place is scarce, but they don't know how to solve all the problems with information. They made good tools and lease them to those the tackle information scarcity. Where it doesn't make sense to have other people do it, they try to reduce costs by literally moving things from a to b. Their drones are the their most vivid example but there are countless mundane Amazon warehouses strategically placed. If Amazon doesn't know if the risk/reward is good enough they will contract it out and let the other assume the risk. They are automating or distributing the ways of reducing scarcity and leaving themselves with minimal risk. As their risk and cost gets lower it makes sense for them to tackle ever smaller amounts of scarcity. They are so efficient at dealing with scarcity that it makes sense for them, a multi-billion dollar company, to give you a button with the sole purpose of ordering you more laundry detergent by pushing that single purpose button. They are leveraging the scarcity of one empty self in one tiny room of your home. If that isn't the story of a company with a deep relationship with scarcity then I don't know what else it might be.