Amazon: missionary or mercenary?
I’ve just finished reading The Everything Store by financial journalist Brad Stone. It’s a very interesting book on the rise and rise of Amazon and its founder, Jeff Bezos.
Amazon’s mission can basically be summed up as follows: offering consumers the widest selection of goods and services imaginable at the lowest possible prices.
But in its quest to make the whole world fall in love with it, Amazon is skirting laws, bullying suppliers and mistreating employees.
Even if Amazon only has its customers’ best interests at heart, does the end always justify the means?
No clean hands
There’s no question Amazon has significantly improved consumer life. You can purchase pretty much anything from its website nowadays, all from the comfort of your own home.
I’ll admit that I did all my holiday shopping on Amazon last year. I didn’t have to leave the house, the gifts arrived on time and I didn’t pay more than I would anywhere else.
The company is cheap, reliable, and convenient. I don’t think many people have trouble believing Amazon is on the side of the consumer.
But the company’s dominant market position is breeding concern, and not just with competitors who see more and more business taken away from them.
BBC business reporter Natalie Sherman wonders if companies like Amazon and Google aren’t getting too big.
With a few giant tech companies dominating the market, competition might be stifled. And the amount of data that these tech companies possess gives rise to privacy concerns.
It’s a new page in an ongoing discussion of media pundits who are trying to establish whether the company is intrinsically good or bad.
Amazon is now a company worth over $460bn, wielding a lot of influence. By 2021 it could account for 50% of all online sales in the US.
In building its empire, it’s quite evident from Stone’s book that Amazon’s hands aren’t clean.
It has blackmailed governments, threatening them with job losses if they passed unfavourable legislation.
It doesn’t appear to value its employees as much as its customers, with some troubling stories about its treatment of workers in call centres and warehouses.
And, like many other multinationals, it has done everything in its power to avoid paying taxes.
The European Commission is currently investigating Amazon’s ‘sweetheart deal’ with Luxembourg to see if it has given the company an unfair advantage over rivals.
“In its pursuit of bigness, Amazon has left a trail of destruction – competitors undercut, suppliers squeezed – some of it necessary, and some of it highly worrisome,” Franklin Foer wrote for New Republic.
Foer goes on to argue that Amazon is on its way to become a monopoly in just about everything and calls on regulators to act.
“In effect, we’ve been thrust back 100 years to a time when the law was not up to the task of protecting the threats to democracy posed by monopoly; a time when the new nature of the corporation demanded a significant revision of government.”
Millions of people benefit
That’s not how everyone sees it, though.
For every critic, Amazon has a supporter who sees the business as a white knight fighting the good fight for consumers.
“Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers,” writes Matthew Yglesias in Slate.
“The shareholders put up the equity, and instead of owning a claim on a steady stream of fat profits, they get a claim on a mighty engine of consumer surplus.”
This view is corroborated by Annie Lowrey in New York Magazine:
“Amazon relentlessly drives down prices for goods and services and delivers them fast and cheap. It plows its profits into price cuts and innovation rather than putting them in the hands of its investors. That benefits millions of families – full stop.”
These are valid points and it’s certainly tempting to only look at the benefits Amazon brings and close our eyes to the rest.
You could even reasonably argue that Amazon wouldn’t have made it in a cut-throat business world if it hadn’t acted like a shark from time to time.
But ignoring the company’s wrongdoings just because the consumer reaps the benefits is a slippery slope.
Pressuring governments and evading taxes in my mind can never be justified under any circumstances. Even if you don’t mind Amazon doing it because it passes these savings on to consumers, it’ll give other companies a free pass to use the same techniques and exploit the same loopholes.
Amazon’s market dominance should also be closely watched by regulators.
Jeff Bezos may be happy to put consumers first, but who says the company’s next CEO thinks the same way? In the long run monopolies have rarely proved favourable to society.
In The Everything Store a distinction is made between companies that are ‘missionary’ and ones that are ‘mercenary’.
Missionaries try to do good and make the world better. Mercenaries are after power and money and will crush whoever crosses their path.
In the debate of whether Amazon is missionary or mercenary, Bezos has always confidently stated that his company is the former. But after reading The Everything Store, the author’s conclusion is probably the most accurate:
“Amazon may be the most beguiling company that ever existed, and it is just getting started.
“It is both missionary and mercenary, and throughout the history of business and other human affairs, that has always been a potent combination.”
Regardless of what you might think of Amazon, the company looks destined for even bigger things.
At about $1,000 a share, Wall Street firms still have it as a buy, which should tell you enough about their expectations.