9 ms·

Amazon and the Unwisdom of the Populist Crowd

63 points by raleighm 9y ago

awat 9y ago
I’m not an economist so someone with more insight can weigh-in if I’m speaking out of turn. My personal concern with Amazon is a similar one I had with Wal-Mart in that there seems to be a relationship between stagnant wages acceptance based on access to lower and lower cost goods. This seems to me to be an unsustainable race to the bottom that benefits large vertically integrated multinationals no matter how many economic arms they figuratively break in the process. That being said I’m not sure if that is a problem that Amazon is actually creating or just a consequence of wage supression being easier to accept when technology makes goods cheaper.
- actsasbuffoon 9y ago
  It's a bit of a trade. I'd say it comes down to market efficiency. We all understand why efficient markets are good. It allows large numbers of people to affordably access a variety of goods and services. That said, people rarely discuss the downsides of extremely efficient markets. In an inefficient market, there are lots of opportunities for someone to step in and find a way to make money. For instance if shipping and storing goods is expensive to do in small quantities, and your area doesn't have enough access to tools, you could exploit that inefficiency and make some money by opening a hardware store. You would take on the cost of storing, transporting, and insuring a large quantity of goods, and you'd take advantage of economies of scale in a way that regular consumers can't. You make money, and your community is better off, because now they have a place to buy hammers, paint, and other hardware. In a highly efficient market, people have already found most of the obvious opportunities to make money. If shipping is cheap enough and online ordering is convenient and secure enough, it could make sense for one entity to become so large and efficient that they dominate all of retail. It's a lot harder to run a successful hardware store in 2018 than it was in 1978. You need retail space, employees, etc. Meanwhile your competition can exploit economies of scale in a way that was impossible a few decades ago. Is this a bad thing? It's hard to say. It gives lots of people cheap access to goods. It also makes it hard for small players to break into the scene, and local economies are probably not going to be able to adapt very quickly.
  - awat 9y ago
    I agree with a lot of this thanks for the response. What are your feelings on some kind of regulation around local protections? I know regulations are generally percieved quite harshly on HN. But in a highly efficient market it seems like you may at some point no longer have local access to goods. Which seems like a dangerous recipe if so&so location becomes no longer worth the cost of shipping goods there but the local stores have already perished.
    - actsasbuffoon 9y ago
      I'm in favor of good regulations, but I'm also not a libertarian. I'm a fan of the Scandinavian approach; well regulated free markets. That said, I'm relatively new to investment. I've been reading a lot on the subject for the last few months, but there are people here who know way more on the subject than I do. It's certainly been highly educational, but it hasn't done anything to shake my core belief that markets should exist to serve people, not the other way around.
      - awat 9y ago
        Seems logical I definitely agree with the sentiment about markets existing to serve people. I’m in a similar place with my research I know enough to know there is a problem but then again thats the easy part fixing it is the tough bit.
- jonknee 9y ago
  Amazon seems to have displaced other large low-paying companies than it has mom and pops (who were already gutted by Wal-Mart and the like). In fact Amazon props up tons of really tiny businesses that sell through its platform.
awakeasleep 9y ago
Seems like an effort to dismiss the new antitrust movement's goal of helping people realize the problem presented by these enormous companies is a political problem that needs to be analyzed across the many ways society is affected. The author doesn't make a very spirited defense of his main point, because he distorts the neo-Brandeisian analysis of the effects of Amazon on business and employment into a question of whether the means Amazon used to achieve those effects are legal. Modern Anti-trust is looking to see whether new standards should be applied to anti-competitive behavior, based on how the most powerful companies are affecting society. They're not trying to litigate whether our current megacorporations broke any rules to get where they are. But even conceding that point, let's return to the introductory paragraph, What does it mean for a company to be Too Big? There are obvious answers, like how a company that is "too big to fail" holds the government and citizens as collateral when it gambles. But what about something that applies to the tech monopolies more directly? Too Big to Manage. It's an absentee landlord type situation. Facebook allowing people to sell oxycontin and meddle with the US election comes to mind, but what about: 1) Good faith usage of Amazon can get you put on restricted traveler lists. https://lifehacker.com/your-amazon-order-might-lock-you-out-of-trusted-travele-1821964978 https://lifehacker.com/your-amazon-order-might-lock-you-out-... 2) Amazon facilitates the sale of counterfeit goods, including pet food. https://news.ycombinator.com/item?id=16448001 https://news.ycombinator.com/item?id=16448001 3) It seems to be facilitating money laundering. http://fortune.com/2018/02/22/money-laundering-books-amazon/ http://fortune.com/2018/02/22/money-laundering-books-amazon/ 4) And we've all seen the rest of the articles, about illegal drugs on amazon, about fake review scams, and more Those are the points the author should address to counter anti-trust's uneasiness about amazon
- sharemywin 9y ago
  Too me it's all about bundling. You need to take a lot of crap offerings because they've bundled it together with the one or two things they're really good at. To the point where it's take it or leave it proposition. I don't propose to have an answer. But, bundling products, services and contract clauses into "take it or leave it" propositions make competition difficult.
- toomuchcredit 9y ago
didibus 9y ago
I think this is all true. The problem lies somewhere else. Companies like Amazon is what we want. Convenient, re-investing all profit to improve its services and lower its prices. They deliver beneficial goods and services to our society. That's great. The problem is in redistribution of wealth throughout our society. As we optimize production and delivery. The inequality of wealth distribution widens, because less and less crums fall behind for the poor to pick up. The pie gets bigger, but the portions most people are getting of it keeps getting smaller. If it grew faster then the portions shrank, all would be good, but I believe we're starting to see cases where it doesn't, and some people reaching a point where they get none of the pie. And this is not an Amazon's problem, or an economic one. This is a societal problem we'll have to address. What if not everyone is needed? What if society can sustain itself with only a fraction of the population? Who gets chosen to remain, and who gets cut out? Think of a dinner party. 10 people are invited. They form the party. How many of them are needed to cook? Not all 10, thats too many cook. It would actually be less efficient to have them all in the kitchen. So what if two of them cook? Do they only get to eat? Do they get more of the food? Maybe all 10 guests would have been able to cook, so who's lucky enough to be the chef and eat? This is now happening at the scale of our society. But we don't treat each other like friends at a party. So when we get to cook, we don't share. We should.
- eigen-vector 9y ago
  Good argument for socialism. The question that follows any argument that advocates some form of wealth sharing is "what do I get in return?". I think, as a society, we should be valuing the non-materialistic impact we can all have on each other. I am a software developer. I can build things and make money off that, great. I create some value and am compensated in return for that. I can now go seek things I cannot do myself like writing a song, or playing a sport in a manner worthy of my audience and go support the artist or the sportsperson. There now is a working model for wealth sharing. Once we come out of the basic shell of "socialism will breed a generation of welfare seekers", and look at a pivot of capitalism with wealth distribution in mind, it could see some success.
  - pmiller2 9y ago
plantain 9y ago
Search for "Chromecast" on Amazon. How exactly, is that not anticompetitive?
- jonknee 9y ago
  Because they are far from the only store and it's easy to get a Chromecast wherever you are? You can't buy one at the Apple Store either, but that's fine.
makmanalp 9y ago
> But, just as in 1993 with Walmart, and now with Amazon, the basic fact remains that consumer preferences shift. Tragedy of the commons and undesirable local optima are still a thing. Yes, we might want cheaper and more convenient shopping and continue to buy stuff from Amazon, and also still might not want the long term negative effects of Amazon slowly crushing all competition. The rest of the article is about whether what Amazon is doing fits an existing definition of anti-competitive. That's all fine and good, but a larger question is whether that definition of anti-competitive is the only thing we should be worrying about. e.g. yes, Amazon forces market conditions to improve for customers in the short term, but I have zero doubt that once they crush competitors they'll happily jack up prices. There's also perhaps an argument that the level of automation and technological prowess that amazon brings is different from what Walmart had back in the 90s. There the argument was that walmart is walmart, but local shops still at least have a premium niche to fill (which, while true, did do disasters to many local economies which didn't have the clientele for niche stores). Now perhaps Amazon is good enough that it might even destroy that gap too.
haZard_OS 9y ago
I think this is a good time to introduce Richard Wolff, my favorite economist. Here, Wolff makes a few general remarks about Amazon in comparison to outsourcing to China: https://www.rdwolff.com/is_amazon_the_1_threat_to_jobs https://www.rdwolff.com/is_amazon_the_1_threat_to_jobs
acd 9y ago
Sherman antitrust act has been used in the past to break up companies which has been to large for example AT&T and Standard oil. https://en.wikipedia.org/wiki/Sherman_Antitrust_Act https://en.wikipedia.org/wiki/Sherman_Antitrust_Act
zeth___ 9y ago
And here we see capitalist apologists trying to jettison capitalism and move over into feudalism. By definition the only time a market can function is when no firm is large enough to have an impact on prices. Amazon can. Amazon is too big and needs to be reduced into smaller chunks. The best solution is a revenue tax for companies. Just how people pay an income tax and a consumption tax so too should corporations. That the largest will splinter into thousands of small ones is a feature that will kick start competition and get us out of the 'too big to fail' economic funk we have been in for 20 years.
- killbrad 9y ago
  Whose definition says that?

63 points by raleighm 9y ago

awat 9y ago

I’m not an economist so someone with more insight can weigh-in if I’m speaking out of turn. My personal concern with Amazon is a similar one I had with Wal-Mart in that there seems to be a relationship between stagnant wages acceptance based on access to lower and lower cost goods. This seems to me to be an unsustainable race to the bottom that benefits large vertically integrated multinationals no matter how many economic arms they figuratively break in the process. That being said I’m not sure if that is a problem that Amazon is actually creating or just a consequence of wage supression being easier to accept when technology makes goods cheaper.

actsasbuffoon 9y ago
It's a bit of a trade. I'd say it comes down to market efficiency. We all understand why efficient markets are good. It allows large numbers of people to affordably access a variety of goods and services. That said, people rarely discuss the downsides of extremely efficient markets. In an inefficient market, there are lots of opportunities for someone to step in and find a way to make money. For instance if shipping and storing goods is expensive to do in small quantities, and your area doesn't have enough access to tools, you could exploit that inefficiency and make some money by opening a hardware store. You would take on the cost of storing, transporting, and insuring a large quantity of goods, and you'd take advantage of economies of scale in a way that regular consumers can't. You make money, and your community is better off, because now they have a place to buy hammers, paint, and other hardware. In a highly efficient market, people have already found most of the obvious opportunities to make money. If shipping is cheap enough and online ordering is convenient and secure enough, it could make sense for one entity to become so large and efficient that they dominate all of retail. It's a lot harder to run a successful hardware store in 2018 than it was in 1978. You need retail space, employees, etc. Meanwhile your competition can exploit economies of scale in a way that was impossible a few decades ago. Is this a bad thing? It's hard to say. It gives lots of people cheap access to goods. It also makes it hard for small players to break into the scene, and local economies are probably not going to be able to adapt very quickly.
- awat 9y ago
  I agree with a lot of this thanks for the response. What are your feelings on some kind of regulation around local protections? I know regulations are generally percieved quite harshly on HN. But in a highly efficient market it seems like you may at some point no longer have local access to goods. Which seems like a dangerous recipe if so&so location becomes no longer worth the cost of shipping goods there but the local stores have already perished.
  - actsasbuffoon 9y ago
    I'm in favor of good regulations, but I'm also not a libertarian. I'm a fan of the Scandinavian approach; well regulated free markets. That said, I'm relatively new to investment. I've been reading a lot on the subject for the last few months, but there are people here who know way more on the subject than I do. It's certainly been highly educational, but it hasn't done anything to shake my core belief that markets should exist to serve people, not the other way around.
    - awat 9y ago
      Seems logical I definitely agree with the sentiment about markets existing to serve people. I’m in a similar place with my research I know enough to know there is a problem but then again thats the easy part fixing it is the tough bit.
jonknee 9y ago
Amazon seems to have displaced other large low-paying companies than it has mom and pops (who were already gutted by Wal-Mart and the like). In fact Amazon props up tons of really tiny businesses that sell through its platform.

awakeasleep 9y ago

Seems like an effort to dismiss the new antitrust movement's goal of helping people realize the problem presented by these enormous companies is a political problem that needs to be analyzed across the many ways society is affected. The author doesn't make a very spirited defense of his main point, because he distorts the neo-Brandeisian analysis of the effects of Amazon on business and employment into a question of whether the means Amazon used to achieve those effects are legal. Modern Anti-trust is looking to see whether new standards should be applied to anti-competitive behavior, based on how the most powerful companies are affecting society. They're not trying to litigate whether our current megacorporations broke any rules to get where they are. But even conceding that point, let's return to the introductory paragraph, What does it mean for a company to be Too Big? There are obvious answers, like how a company that is "too big to fail" holds the government and citizens as collateral when it gambles. But what about something that applies to the tech monopolies more directly? Too Big to Manage. It's an absentee landlord type situation. Facebook allowing people to sell oxycontin and meddle with the US election comes to mind, but what about: 1) Good faith usage of Amazon can get you put on restricted traveler lists. https://lifehacker.com/your-amazon-order-might-lock-you-out-of-trusted-travele-1821964978 https://lifehacker.com/your-amazon-order-might-lock-you-out-... 2) Amazon facilitates the sale of counterfeit goods, including pet food. https://news.ycombinator.com/item?id=16448001 https://news.ycombinator.com/item?id=16448001 3) It seems to be facilitating money laundering. http://fortune.com/2018/02/22/money-laundering-books-amazon/ http://fortune.com/2018/02/22/money-laundering-books-amazon/ 4) And we've all seen the rest of the articles, about illegal drugs on amazon, about fake review scams, and more Those are the points the author should address to counter anti-trust's uneasiness about amazon

sharemywin 9y ago
Too me it's all about bundling. You need to take a lot of crap offerings because they've bundled it together with the one or two things they're really good at. To the point where it's take it or leave it proposition. I don't propose to have an answer. But, bundling products, services and contract clauses into "take it or leave it" propositions make competition difficult.
toomuchcredit 9y ago

didibus 9y ago

I think this is all true. The problem lies somewhere else. Companies like Amazon is what we want. Convenient, re-investing all profit to improve its services and lower its prices. They deliver beneficial goods and services to our society. That's great. The problem is in redistribution of wealth throughout our society. As we optimize production and delivery. The inequality of wealth distribution widens, because less and less crums fall behind for the poor to pick up. The pie gets bigger, but the portions most people are getting of it keeps getting smaller. If it grew faster then the portions shrank, all would be good, but I believe we're starting to see cases where it doesn't, and some people reaching a point where they get none of the pie. And this is not an Amazon's problem, or an economic one. This is a societal problem we'll have to address. What if not everyone is needed? What if society can sustain itself with only a fraction of the population? Who gets chosen to remain, and who gets cut out? Think of a dinner party. 10 people are invited. They form the party. How many of them are needed to cook? Not all 10, thats too many cook. It would actually be less efficient to have them all in the kitchen. So what if two of them cook? Do they only get to eat? Do they get more of the food? Maybe all 10 guests would have been able to cook, so who's lucky enough to be the chef and eat? This is now happening at the scale of our society. But we don't treat each other like friends at a party. So when we get to cook, we don't share. We should.

eigen-vector 9y ago
Good argument for socialism. The question that follows any argument that advocates some form of wealth sharing is "what do I get in return?". I think, as a society, we should be valuing the non-materialistic impact we can all have on each other. I am a software developer. I can build things and make money off that, great. I create some value and am compensated in return for that. I can now go seek things I cannot do myself like writing a song, or playing a sport in a manner worthy of my audience and go support the artist or the sportsperson. There now is a working model for wealth sharing. Once we come out of the basic shell of "socialism will breed a generation of welfare seekers", and look at a pivot of capitalism with wealth distribution in mind, it could see some success.
- pmiller2 9y ago

plantain 9y ago

Search for "Chromecast" on Amazon. How exactly, is that not anticompetitive?

jonknee 9y ago
Because they are far from the only store and it's easy to get a Chromecast wherever you are? You can't buy one at the Apple Store either, but that's fine.

makmanalp 9y ago

> But, just as in 1993 with Walmart, and now with Amazon, the basic fact remains that consumer preferences shift. Tragedy of the commons and undesirable local optima are still a thing. Yes, we might want cheaper and more convenient shopping and continue to buy stuff from Amazon, and also still might not want the long term negative effects of Amazon slowly crushing all competition. The rest of the article is about whether what Amazon is doing fits an existing definition of anti-competitive. That's all fine and good, but a larger question is whether that definition of anti-competitive is the only thing we should be worrying about. e.g. yes, Amazon forces market conditions to improve for customers in the short term, but I have zero doubt that once they crush competitors they'll happily jack up prices. There's also perhaps an argument that the level of automation and technological prowess that amazon brings is different from what Walmart had back in the 90s. There the argument was that walmart is walmart, but local shops still at least have a premium niche to fill (which, while true, did do disasters to many local economies which didn't have the clientele for niche stores). Now perhaps Amazon is good enough that it might even destroy that gap too.

haZard_OS 9y ago

I think this is a good time to introduce Richard Wolff, my favorite economist. Here, Wolff makes a few general remarks about Amazon in comparison to outsourcing to China: https://www.rdwolff.com/is_amazon_the_1_threat_to_jobs https://www.rdwolff.com/is_amazon_the_1_threat_to_jobs

acd 9y ago

Sherman antitrust act has been used in the past to break up companies which has been to large for example AT&T and Standard oil. https://en.wikipedia.org/wiki/Sherman_Antitrust_Act https://en.wikipedia.org/wiki/Sherman_Antitrust_Act

zeth___ 9y ago

And here we see capitalist apologists trying to jettison capitalism and move over into feudalism. By definition the only time a market can function is when no firm is large enough to have an impact on prices. Amazon can. Amazon is too big and needs to be reduced into smaller chunks. The best solution is a revenue tax for companies. Just how people pay an income tax and a consumption tax so too should corporations. That the largest will splinter into thousands of small ones is a feature that will kick start competition and get us out of the 'too big to fail' economic funk we have been in for 20 years.

killbrad 9y ago
Whose definition says that?