The Amazon Effect
When President Trump declared war against Amazon, he was echoing his predecessor Barack Obama, who also thought it was within his job description to ‘pick winners and losers’. In this case, Trump apparently decided to turn a winner into a loser. Since his war with Amazon began, Amazon has lost nearly 10% of its value, representing billions of dollars. His declared rationale is that because of Amazon, many small ‘mom and pop’ stores are going out of business, that jobs are being lost, and that the villain in this story is the extraordinary power that Amazon has in the economy and the challenge that it provides to the little guy.
We have seen this movie before. Back in the early nineteen eighties, the computer revolution was in its heyday. It was changing the way we worked, the way we communicated, the way we lived. The min-computer – something between a desktop and a mainframe computer that has now almost disappeared – ruled the business world, giving even small companies the ability to automate their operations in a way that had never been possible before.
The changes were significant, and the nay-sayers warned that the advent of the computer would result in millions of lost jobs, as workers in factories and offices alike, with no computer skills or experience, would quickly be replaced by what they called the ‘automated office’. The consultants called it ‘disruptive change’, and so it was. But it was not the calamity that they predicted. It was, in fact, a doorway to new industries, new jobs, new training programs, and an expanding economy.
As the micro-computer began to make huge strides into the market, people learned to use them, rather than fear them. At first, the computers were small, with limited computing power and monitors that were only capable of displaying monochrome text in a single, mono-space typewriter font. Their output depended on glorified, computerized typewriters. But within only a few years, the expanding capability of the Internet burst into the market, supported by new computers with full color monitors and a dazzling graphics capabilities, and printers that could produce elaborate documents in full color. As the popularity of computers went up, the price of computers went down, until there was barely a household in the Western world that didn’t have at least one. Children learned about computers in their homes and schools, and chose careers in the new technologies that grew into massive industries. Rather than destroying jobs, computers created jobs.
Today’s disruptive technologies have created new opportunities in fields that link computerized systems with automation in manufacturing, sales, distribution, and oversight. When Amazon opens one of its huge, fully automated fulfillment centers, it also hires more than 2,000 new workers. It also provides work to delivery companies like UPS and Fedex, as well as providing opportunity for the already-floundering US Post Office. Trump has singled out the Post Office as an example of an Amazon victim, but the USPO was in trouble long before Amazon came along. By providing massive distribution work for the delivery companies, Amazon helps keeps their trucks running as Americans buy from Amazon on-line. In fact, Amazon’s contribution to the American economy includes providing over 542,000 jobs around the country for people at all skill levels.
One of the side effects of the technology revolution is time compression. The time it takes to do a task, the time it takes to buy a product on-line, and the time it takes to deliver it from the seller to the buyer, all have been speeded up in ways never thought possible. One can buy a product on-line in California and have it delivered the next day (or sooner!) in New York.
Business has also benefitted from the technology revolution in countless other ways. Teleconferencing has replaced previously essential cross-country travel for meetings, with a huge gain of productive time and energy. The ability to research, write, and deliver critical reports has accelerated dramatically. And research of every kind has been enhanced and accelerated in previously unimagined ways. Here again, the magic of disruptive change has created millions of new jobs.
A caveat is also inherent in the new realities of the Amazon economy. Millions of Americans, many in small mom and pop businesses, depend on Amazon to provide them with a national, even global, market that they could never access before. Millions use Amazon as their on-line department store, to buy and ship their purchases, either for convenience or necessity, if they are homebound. Large and small vendors, even mom-and-pop merchandisers, depend on Amazon to reach larger markets than they could on their own. Millions of others depend on their investment in shares of Amazon stock to help fund their retirements. But in the month of March of this year, as a direct result of the President’s negative reamarks, Amazon lost over $200 in share value, nearly 10% of its worth, and tanked the stock market, not just the Amazon shares. For a small investor whose 401K depends on a healthy stock market, this could be shattering.
So here, Mr. President, is my forecast, that I hope will give you some reassurance, and a plea for reconsideration:
My forecast: The Amazon effect will prove to be a boon, not a threat, to the American economy. It has created a brand new dynamic in the supply and demand cycles of America’s economic engine that will revolutionize new industries (such robotics, inventory control, and supply chain dynamics). It will create new opportunities for millions of Americans as the Amazon effect is adopted by other companies, and new jobs at every level from manufacturing to management. Where old companies have and will continue to fail (as they always have), new companies, based on the new realities of the Amazon era, will spring up all around America.
So please, Mr. President, let Amazon help you make America great again, by being a leader in a new and exciting technology revolution in America, with a strong, resilient economy based on the disruptive change that will provide opportunity for all Americans.