Friday, October 11, 2019

Jeff Bezos’s Master Plan

Where in the pantheon of American commercial titans does Jeffrey Bezos belong? Andrew Carnegie’s hearths forged the steel that became the skeleton of the railroad and the city. John D. Rockefeller refined 90 percent of American oil, which supplied the pre-electric nation with light. Bill Gates created a program that was considered a prerequisite for turning on a computer.

At 55, Bezos has never dominated a major market as thoroughly as any of these forebears, and while he is presently the richest man on the planet, he has less wealth than Gates did at his zenith. Yet Rockefeller largely contented himself with oil wells, pump stations, and railcars; Gates’s fortune depended on an operating system. The scope of the empire the founder and CEO of Amazon has built is wider. Indeed, it is without precedent in the long history of American capitalism.

Today, Bezos controls nearly 40 percent of all e-commerce in the United States. More product searches are conducted on Amazon than on Google, which has allowed Bezos to build an advertising business as valuable as the entirety of IBM. One estimate has Amazon Web Services controlling almost half of the cloud-computing industry—institutions as varied as General Electric, Unilever, and even the CIA rely on its servers. Forty-two percent of paper book sales and a third of the market for streaming video are controlled by the company; Twitch, its video platform popular among gamers, attracts 15 million users a day. Add The Washington Post to this portfolio and Bezos is, at a minimum, a rival to the likes of Disney’s Bob Iger or the suits at AT&T, and arguably the most powerful man in American culture.

I first grew concerned about Amazon’s power five years ago. I felt anxious about how the company bullied the book business, extracting ever more favorable terms from the publishers that had come to depend on it. When the conglomerate Hachette, with which I’d once published a book, refused to accede to Amazon’s demands, it was punished. Amazon delayed shipments of Hachette books; when consumers searched for some Hachette titles, it redirected them to similar books from other publishers. In 2014, I wrote a cover story for The New Republic with a pugilistic title: “Amazon Must Be Stopped.” Citing my article, the company subsequently terminated an advertising campaign for its political comedy, Alpha House, that had been running in the magazine.

Since that time, Bezos’s reach has only grown. To the U.S. president, he is a nemesis. To many Americans, he is a beneficent wizard of convenience and abundance. Over the course of just this past year, Amazon has announced the following endeavors: It will match potential home buyers with real-estate agents and integrate their new homes with Amazon devices; it will enable its voice assistant, Alexa, to access health-care data, such as the status of a prescription or a blood-sugar reading; it will build a 3-million-square-foot cargo airport outside Cincinnati; it will make next-day delivery standard for members of its Prime service; it will start a new chain of grocery stores, in addition to Whole Foods, which it already owns; it will stream Major League Baseball games; it will launch more than 3,000 satellites into orbit to supply the world with high-speed internet.

Bezos’s ventures are by now so large and varied that it is difficult to truly comprehend the nature of his empire, much less the end point of his ambitions. What exactly does Jeff Bezos want? Or, to put it slightly differently, what does he believe? Given his power over the world, these are not small questions. Yet he largely keeps his intentions to himself; many longtime colleagues can’t recall him ever expressing a political opinion. To replay a loop of his interviews from Amazon’s quarter century of existence is to listen to him retell the same unrevealing anecdotes over and over.

To better understand him, I spent five months speaking with current and former Amazon executives, as well as people at the company’s rivals and scholarly observers. Bezos himself declined to participate in this story, and current employees would speak to me only off the record. Even former staffers largely preferred to remain anonymous, assuming that they might eventually wish to work for a business somehow entwined with Bezos’s sprawling concerns.

In the course of these conversations, my view of Bezos began to shift. Many of my assumptions about the man melted away; admiration jostled with continued unease. And I was left with a new sense of his endgame.

Bezos loves the word relentless—it appears again and again in his closely read annual letters to shareholders—and I had always assumed that his aim was domination for its own sake. In an era that celebrates corporate gigantism, he seemed determined to be the biggest of them all. But to say that Bezos’s ultimate goal is dominion over the planet is to misunderstand him. His ambitions are not bound by the gravitational pull of the Earth. (...)

In a way, Bezos has already created a prototype of a cylindrical tube inhabited by millions, and it’s called Amazon.com. His creation is less a company than an encompassing system. If it were merely a store that sold practically all salable goods—and delivered them within 48 hours—it would still be the most awe-inspiring creation in the history of American business. But Amazon is both that tangible company and an abstraction far more powerful.

Bezos’s enterprise upends long-held precepts about the fundamental nature of capitalism—especially an idea enshrined by the great Austrian economist Friedrich Hayek. As World War II drew to its close, Hayek wrote the essay “The Use of Knowledge in Society,” a seminal indictment of centralized planning. Hayek argued that no bureaucracy could ever match the miracle of markets, which spontaneously and efficiently aggregate the knowledge of a society. When markets collectively set a price, that price reflects the discrete bits of knowledge scattered among executives, workers, and consumers. Any governmental attempt to replace this organic apparatus—to set prices unilaterally, or even to understand the disparate workings of an economy—is pure hubris.

Amazon, however, has acquired the God’s-eye view of the economy that Hayek never imagined any single entity could hope to achieve. At any moment, its website has more than 600 million items for sale and more than 3 million vendors selling them. With its history of past purchases, it has collected the world’s most comprehensive catalog of consumer desire, which allows it to anticipate both individual and collective needs. With its logistics business—and its growing network of trucks and planes—it has an understanding of the flow of goods around the world. In other words, if Marxist revolutionaries ever seized power in the United States, they could nationalize Amazon and call it a day.

What makes Amazon so fearsome to its critics isn’t purely its size but its trajectory. Amazon’s cache of knowledge gives it the capacity to build its own winning version of an astonishing array of businesses. In the face of its growth, long-dormant fears of monopoly have begun to surface—and Amazon has reportedly found itself under review by the Federal Trade Commission and the Department of Justice. But unlike Facebook, another object of government scrutiny, Bezos’s company remains deeply trusted by the public. A 2018 poll sponsored by Georgetown University and the Knight Foundation found that Amazon engendered greater confidence than virtually any other American institution. Despite Donald Trump’s jabs at Bezos, this widespread faith in the company makes for a source of bipartisan consensus, although the Democrats surveyed were a touch more enthusiastic than the Republicans were: They rated Amazon even more trustworthy than the U.S. military. In contrast to the dysfunction and cynicism that define the times, Amazon is the embodiment of competence, the rare institution that routinely works. (...)

In its current form, Amazon harkens back to Big Business as it emerged in the postwar years. When Charles E. Wilson, the president of General Motors, was nominated to be secretary of defense in 1953, he famously told a Senate confirmation panel, “I thought what was good for our country was good for General Motors, and vice versa.” For the most part, this was an aphorism earnestly accepted as a statement of good faith. To avert class warfare, the Goliaths of the day recognized unions; they bestowed health care and pensions upon employees. Liberal eminences such as John K. Galbraith hailed the corporation as the basis for a benign social order. Galbraith extolled the social utility of the corporation because he believed that it could be domesticated and harnessed to serve interests other than its own bottom line. He believed businesses behave beneficently when their self-serving impulses are checked by “countervailing power” in the form of organized labor and government.

Of course, those powers have receded. Unions, whose organizing efforts Amazon has routinely squashed, are an unassuming nub of their former selves; the regulatory state is badly out of practice. So while Amazon is trusted, no countervailing force has the inclination or capacity to restrain it. And while power could amass in a more villainous character than Jeff Bezos, that doesn’t alleviate the anxiety that accompanies such concentration. Amazon might be a vast corporation, with more than 600,000 employees, but it is also the extension of one brilliant, willful man with an incredible knack for bending the world to his values.

by Franklin Foer, The Atlantic |  Read more:
Image: Bloomberg/Landov via