Warren Buffett once let enthusiasm trump rational analysis, bought an airline stock, and got burned. Ever since he has been unremittingly critical of the industry, suggesting that if you’d bought airlines starting a Kitty Hawk you still wouldn’t have made any money. By contrast, if you’d bought Berkshire the first time you heard Buffett’s name, you could afford to fly on Netjets.
Similarly, if I’d bought Jeff Bezos the first time I bought a book at Amazon, I could probably own the river of the same name by now. If Bezos hasn’t already annexed it. Amazon is one of the most amazing stories of our time, yet is seems to be hiding in plain sight. That’s probably because Amazon is so homely on the surface – a place you can buy books, videos, shampoo, sporting goods, electronic gadgets, hearing aid batteries.
In the era of conglomerates, Gulf+Western was known as Engulf and Devour for gobbling up companies. But the sum turned out to be worth less than its parts. Amazon might be called Disrupt and Conquer. It gives competitors the willies by underselling in huge volume. Bezos has said, “Your profit margin is my opportunity.”
From a little online bookseller, it now dominates bookselling. It can make and break titles, sells you a device to read eBooks with, and even offers authors a chance to self-publish. Many are vanity projects, but a few titles that began life on Kindle have become big sellers, including “The Martian,” which became the Matt Damon movie. Look out, Random House, Barnes and Noble and other olde timey merchants.
Kindle opened the door to digital gadgets and Amazon now offers several, including a way to stream video from various providers, chief among them Amazon. It produces its own movies and TV series including “The Man in the High Castle,” “Transparent,” and “Mozart in the Jungle,” which just won the Golden Globe for 2015’s Best Comedy. Look out, NBC, FX, MGM, et al. The Amazon Network/Studio is about to eat your lunch.
Bezos has made headlines by suggesting he might soon deliver to your door via drones. Obviously delivery is a large expense for Amazon, so the Bezos solution to not to pay for it but to profit from it. Pending drones, it was recently been announced that the company is buying a fleet of cargo planes. Look out UPS, FedEx and friends.
Figures for the sales of the Christmas just past are now in. Dollars spent in stores were down. Dollars spent online were up yet again. I don’t believe I bought a single Christmas gift anywhere but Amazon. I am not alone. Together the following retailers accounted for 25% of online Christmas sales – Best Buy, Apple, Nordstrom, iTunes, Wal-Mart, Macy’s, Target, Kohl’s, Groupon, Etsy. They ranked 2 through 11 in online Christmas sales. But number one was Amazon with 43% of sales, almost twice the total of the next ten combined. Look out everybody.
One reason Amazon is beloved by customers is price, but another is ease of use. The slickness of their service makes it easy to shop online with no hassle, to browse, order, pay and await fast delivery in seconds. And the expertise behind that performance also generates revenue. Amazon sells its fulfillment services to others etailers who can hitchhike on the big dog. It sells web and cloud hosting and other digital business services, thus its server farms and robot warehouses aren’t business expenses but profit making sidelines.
Booksellers are generally pictured as people like Meg Ryan in “You’ve Got Mail” or Hugh Grant in “Notting Hill,” but that hapless, weedy, unworldly, stereotype isn’t Bezos. He’s a Princeton Phi Beta Kappa with degrees in electrical engineering and computer science. He is another nerd Attila like Gates, Jobs and Zuckerberg bent on conquest and leaving a wake of scorched earth behind.
And when he isn’t making everyone on earth a vassal of the Amazon Empire, Bezos invests through his family foundation and Bezos Expeditions in new worlds to conquer — neural research, cancer screening tests, clean energy, space exploration, and, perhaps as others out of nostalgia might buy old coins or disco fashions or cast iron toys, he owns The Washington Post. The only question remaining about Amazon is how long until it owns everything, employs everyone, and delivers whatever you covet to your door before you consciously realize you desire it. Big Bezos is watching you.