Bezonomics

It’s a very readable book. It’s, perhaps, suitable for those who haven’t read much about tech industry. It’s a very good starting point to learn about tech behemoth. A lot in the book I have heard/read before so it took very little time to finish the book. The author seems to have favourable views of Amazon and vigorously defends its practices in several occasions.

Bezonomics, a potent cocktail of customer obsession, crazy innovation, and long-term thinking driven by a relentless AI, is the business model of the twenty-first century. It’s profoundly changing the way we work and live. Amazon is becoming an operating system for your life.

Anti-competitive practices

When the company sees that a certain product is popular, it finds a manufacturer to produce it under its own brand. The classic example is AmazonBasics batteries, which compete directly with Eveready and Duracell and often underprice those premium brands. Selling on amazon is like dancing with the devil. Platforms may one day decided to compete with third-party sellers using infinite amount of data they accumulated on the platform to their advantage. 

Amazon lends to third-party sellers. They can stop extending credit with no explanation and no right to appeal. All the decisions are made by AI. Of course, they can tweak their AI to accidentally starve their competitors of cash.

When Amazon competed with diapers.com, it dropped its diaper prices dramatically to undercut diapers.com. At one point, it was found that Amazon was on track to lose $100 million on diapers over a three-month period. It stops at nothing to drive competitor out of business.

At one point the author wrote; 

“those calling for the breakup of Amazon on anticompetitive grounds also lack compelling evidence that Amazon is hurting small businesses more than it’s helping them.”

I feel that the author was a bit bias here. Evidence is clear on anti-competitive behavior as outlined above.

Another section that the author tried to defend Amazon. 

The question here is about the data, EU antitrust commissioner says. “Do you then also use this data to do your own calculations, as to what is the new big thing, what is it that people want, what kind of offers do they like to receive, what makes them buy things?” Well, that’s exactly what Amazon seems to do—although the company denies it, in all likelihood to avoid antitrust scrutiny. The question is: Does the data give Amazon an unfair competitive advantage over the retailers selling on its platform? There’s no doubt that Amazon has sharp elbows and that it’s a fierce competitor with the third-party merchants who sell on its site. The story of seller of travel bags who woke up one day and found that Amazon had become a direct competitor, anecdotally makes that case. Yet, the evidence doesn’t support the argument that Amazon is an invincible retailer.

To me, the question is not if Amazon’s an invincible retailer, it’s about whether Amazon behaves anti-competitively. The evidence is clear that it does.

A couple more points from the book that I find interesting.

Blacbox phenomenon.

When machines make a decision, who will challenge the machine when it makes a mistake? Often those who have invented the software have no way of knowing how a machine decided what it did and why. This could have serious implications as AI infiltrates more of society’s crucial decisions, such as diagnosing a patient, granting a mortgage, or deciding who gets into college.

Narrative fallacy

A term popularized by Nassim Nicholas Taleb in his 2007 book, The Black Swan, a work that Bezos requires his top executives to read. Taleb argues that humans are biologically wired to turn complex situations into oversimplified stories.

Ask someone to alleviate world hunger or solve peace in the Middle East, and most will throw up their arms in dismay. Ask them to solve those issues in one hundred years, and suddenly the problem becomes more addressable.

Businesses that may have a chance against Amazon.

I find that this section of the book is probably the most useful as it discussed real businesses that employ strategies to fight off Amazon in niche that they can’t compete efficiently.

Businesses of the future fighting amazon will focus their efforts in four major areas: creating an amazing in-store experience that digitally merges with an amazing online one; offering a highly curated selection of exclusive products; investing heavily in technology, including mastering social media; and doubling down on a social mission in a way that makes customers feel good about buying from the stores.

Small businesses that have an edge—whether it’s knowledgeable service or a craft product like farm-made cheese that can’t be easily sold at scale on Amazon—should do just fine.

Personalisation: A more differentiated level of service, a more personalized experience that Amazon cannot replicate at scale. Stitch Fix, an online clothing store, has store’s stylists used data they collect from customers’ profiles to find clothes most likely to please. It charges a $20 fee for each box it sent out to customers, which goes toward any purchases made. Clients pay for the clothing they keep and can easily return what they don’t want. The box arrived at a regular interval as determined by the customers. It provides customers with a personal shopper armed with smart data analytics, no matter their budget—something that would be impossible to do economically in a brick-and-mortar store and tough to do online, especially at the scale and the low-price points where Amazon operates.

Conscience: Warby Parker’s social missions and its enthusiastic salespeople sell glasses cheaply by cutting off optometrist middle man. Buyers feel good as buy ones pair of glasses is also giving ones to the poor.