Thursday, June 21, 2012

The Amazon Effect

I've been catching up on some reading from a few weeks ago, so I apologize if this isn't very timely. But here's a good long piece by the Nation's Steve Wasserman on Amazon. It focuses a lot on the cutthroat business practices of Jeff Bezos.

Jeff Bezos got what he wanted: Amazon got big fast and is getting bigger, dwarfing all rivals. To fully appreciate the fear that is sucking the oxygen out of publishers’ suites, it is important to understand what a steamroller Amazon has become. Last year it had $48 billion in revenue, more than all six of the major American publishing conglomerates combined, with a cash reserve of $5 billion. The company is valued at nearly $100 billion and employs more than 65,000 workers (all nonunion); Bezos, according to Forbes, is the thirtieth wealthiest man in America. Amazon may be identified in the public mind with books, but the reality is that book sales account for a diminishing share of its overall business; the company is no longer principally a bookseller. Amazon is now an online Walmart, and while 50 percent of its revenues are derived from music, TV shows, movies and, yes, books, another 50 percent comes from a diverse array of products and services. In the late 1990s Bezos bought, the authoritative movie website. In 2009 he went gunning for bigger game, spending nearly $900 million to acquire, a shoe retailer. He also owns, a baby products website. Now he seeks to colonize high-end fashion as well. “Bezos may well be the premier technologist in America,” said Wired, “a figure who casts as big a shadow as legends like Bill Gates and the late Steve Jobs.”

But I think overall it highlights many of the issues I and many others wrestle with in our new economy. On one hand, we purchase many non-perishable goods online from places like Amazon. We enjoy the convenience of having a box show up on our front step a few days later, while paying discounted prices and often even getting free shipping. But on the other hand, are the effects of these long term trends good for the economy and the country?

Here was the most disturbing anecdote in the story:
 Amazon has sixty-nine data and fulfillment centers, seventeen of which were built in the past year alone, with more to come. For the thousands of often older migratory baby boomers living out of RVs, who work furiously at the centers filling customer orders at almost literally a breakneck pace, it is, by all accounts, a high-stress job. These workers are the Morlocks who make possible Amazon’s vaunted customer service. Last fall, the Morning Call investigated their plight in one of Amazon’s main fulfillment warehouses in Allentown, Pennsylvania. It found that some employees risked stroke and heat exhaustion while running themselves ragged trying to fulfill quotas that resemble the onerous conditions so indelibly satirized by Charlie Chaplin in Modern Times. Ambulances were routinely stationed in the facility’s giant parking lot to rush stricken workers to nearby hospitals. Amazon, for its part, says such problems are exceptional, and indeed by OSHA’s standards incidents of this kind are not the norm....

Obviously, since the start of wide-scale commerce and currency hundreds of years ago, businesses have re-organized around the goal of becoming middle men between consumers and products or services. The Internet era has changed that relationship by shrinking the chain of middle men (and often outsourcing the manual labor to other countries). The plus is lower costs for consumers. The downsides are often less profit for the creators/distributors of the products/services, elimination of jobs in the chain, and stronger monopolies or duopolies. This is typical for the way industries evolve over time, but in the last 15 years, things have evolved much faster than ever before, contributing to the poor economic conditions we've had for over 10 years now. A big job vacuum has been created and no adequate solutions have been proposed thus far.

I don't have any grand solutions, but a few ideas would improve this situation:

1. Companies like Amazon definitely need to pay state sales taxes (based on the city of the purchaser) to support the infrastructure that allows them to do business. There are roads and bridges and such needed to distribute their products. There are local police and fire departments who are employed to protect their assets. Somebody has to help pay for that. Not to mention, investing in local communities' schools ensures there will be more people who will actually be willing and able to buy an E-Reader and some E-Books down the line. That's a bedrock "pay it forward" principle of our system of taxation.

2. And yes those costs need to be passed on to the consumer. I can't speak for everyone, but I would be willing to pay an extra $1 or so per shipment if it goes to supporting health benefits for their workers or the higher wages that unionized workers can demand.  

3. For those who create the content that is sold, why not some extra fractions of a dollar of every purchase of a CD or a book go to the artist/label, author/publisher? If it no longer becomes worth artists/authors time to spend years making something that essentially creates millionaire middle men, but only earns them roughly enough money to eat, quite a few may stop doing it altogether. And the less artists creating, means less quality products for Amazon to sell.

The article concludes:

...Peter Mayer of Overlook Press: “All sides of this argument need to think deeply—not just about their businesses, but also about their world. I grew up in a world in which many parts together formed a community adversarial in a microcosmic way but communal in a larger sense: authors, editors, agents, publishers, wholesalers, retailers and readers. I hope, worried as I am about the current trajectory [of publishing], that we do not look back one day, sitting on a stump as the boy does in Shel Silverstein’s The Giving Tree, and only see what has become a largely denuded wasteland.”

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