Plus gutting the DOE, and it’s time to take a stand
Every single company that dominates our digital life these days — oh hell, let’s just call it what it really is, shall we? Every company that dominates most of ourlife these days — Facebook, Amazon, Google, Microsoft, Apple — these companies all were born as upstarts — challengers who fought against the status quo, founder-driven scrappers who discovered new paths, paths which led to their ultimate ascendance.
But now they’re dominant, they’re incumbents. And that means they care as much — perhaps more — about maintaining their power as they do about maintaining the level playing field which allowed them all to prosper in the first place.
And: Ethics in business follow ethics in government, Valerian follow up…
For a short item in a daily newsletter, my post on Google and Amazon’s feed-driven ambitions brought some outsized email responses my way. Suffice to say, people in the industry are paying close attention to the topic, and that got me thinking a bit more about where this all might lead. Given it’s Monday, and the news is a bit slow, indulge me in a bit of speculation.
Here’s the headline: I predict Walmart will attempt to either partner with Instagram, or to invest in (and partner with) Pinterest. Or both.
Antitrust fights in the tech industry have always been problematic. Software is a “non-rival” good — additional copies cost nothing to produce, and one person possessing it doesn’t exclude another — so monopolies don’t feel like such a big problem, and the industry changes so quickly that monopolies tend to be fleeting. The last big antitrust battle in tech, the 1990s-era case against Microsoft, created a lot of sound and fury but mostly succeeded in distracting, rather than dismantling, its target.
Many companies enter the fray for possession of the coveted default seller position on Amazon pages — the seller you end up choosing when you click the big orange “buy” button — but only one can win. Since an estimated 85 to 90 percent of the sales for a given product page go to the winner, it’s a consequential choice. In Buzzfeed, Leticia Miranda lays out how this struggle has evolved, and what criteria Amazon uses to resolve it.
The answers are to some extent opaque: Amazon won’t detail its formula for fear it will get gamed, but says companies can win by “keeping prices low, updating their inventory, and offering multiple shipping methods and fast, reliable service.” Also, it helps if they are Amazon Marketplace veterans and if they ship from Amazon warehouses.
Sometimes the day-two and week-two takes on big stories are more valuable to read than the breaking coverage. Here’s a couple of examples.
For Investors, Travis Kalanick Was Great, Until He Wasn’t
Before he became the icon of toxic management and bad-boss behavior that he is today, Travis Kalanick was, in the eyes of the venture capitalists who funded his company, the perfect startup CEO. He had the vision. He had the hard-charging spirit, the “won’t take no for an answer” stance, the “I’ll do anything to win” determination. As long as VCs value “manic, headstrong sociopaths,” we’ll be stuck with more Kalanicks, writes Adrianne Jeffries in The Outline.
If you fear Amazon is about to swallow up the entire retail industry in its hungry online maw, this morning’s news that the company is buying Whole Foods will not reassure you. Amazon intends to pay $13+ billion to buy the high-end organic and luxury supermarket chain that customers love/hatingly refer to as “Whole Paycheck” thanks to its high prices (Bloomberg).
John Mackey, the Whole Foods CEO, would remain in charge of the business. In Texas Monthly profile published this week, Mackey vowed to stick to Whole Foods’ “conscious capitalism” mission despite pressure from equity investors to boost profits or sell the company.
Amazon is the first destination for most US consumers searching for products online. For venture-backed startups building direct-to-consumer brands, Amazon is often an afterthought. They fear ceding any level of control over the brand narrative and customer relationship, the core drivers of brand value. However, it’s becoming increasingly perilous to ignore Amazon.
Most consumer-facing companies strive for price transparency. Understandably, consumers want to know how much a good or service will cost before they make a purchase — but what about pricing transparency?
Not transparency over the final price, but transparency over the pricing process?
It’s important to separate the two, because companies can exhibit one or the other, or both, or neither. Companies can change their approach over time as well. Let’s take a look at some quick examples.
Conventional wisdom used to be that the Internet would destroy middlemen. Middlemen, the thinking goes, don’t create any real value, only feeding off of the time or knowledge constraints of others. Once people had access to the wealth of knowledge and timesaving that the Internet provides, middlemen would cease to be valuable.
Marina Krakovsky argues in a compelling new book that conventional wisdom was wrong. The Middleman Economy argues that, while transaction costs have decreased for everyone, they have decreased at an even faster rate for professional middlemen, leading to have an even larger role in today’s economy. The book’s subtitle, “How Brokers, Agents, Dealers, and Everyday Matchmakers Create Value and Profit” suggests that middlemen are both more ubiquitous and necessary than even most professionals realize.
Questioning Amazon’s algorithms. Amazon famously puts customers first. But a new report by ProPublica suggests that the company’s code pushes its own merchandise, even when other listings on the site offer better deals. The algorithm that chooses which seller to feature in the rectangular orange “buy box” seems to favor Amazon itself, or the “Fulfilled by Amazon” partners who pay the company to handle inventory and shipping. Read closely, though, and ProPublica’s argument turns out to be almost entirely about shipping costs. For Amazon’s favored Prime customers (who pay $100 a year for free shipping and other perks), and for anyone whose order tops $50, the shipping costs nothing, and the deal Amazon highlights really is the cheapest one. That’s still arguably a problem, but hardly the capital offense the story implies. Watchdogging algorithms is the investigative journalism of the future, and ProPublica does great work. But in its eagerness to tar Amazon it has obscured the real lessons here: Platform owners are always going to give themselves an edge. Amazon deserves credit for running an open platform that lets alert consumers find good deals and gives outside merchants access to its vast market. It has also earned a rap on the knuckles for tilting its listings to goose Prime signups. Instructive, for sure. Scandalous? Probably not.
Nuggets of gold in piles of user comments. Of course you care about user feedback and customer reviews! But who has time to read them all? Now there’s a machine-learning-style data analytics tool that will read them for you and tell you what to do (Buzzfeed). This service is called Metis, and for the moment its eyes are trained on the products of luxury merchants. For instance, it told a high-end hotelier that its guests really, really cared about customizing their breakfasts. We can assume this sort of analysis will quickly move down market as well, where the volume of feedback is even more overwhelming, and the potential payoff for small incremental improvements is that much higher. Anything that helps businesses listen better is valuable — as long as the process still allows individual human voices to make themselves heard.