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The Key to a Great Con
It’s pretty clear where Amazon is headed: 1) Take over the retail and media
sectors, globally; and 2) Replace the delivery of all these products (goodbye
UPS, FedEx, and DHL) with its own planes, drones, and autonomous
vehicles. Sure, they’ll continue to hit speed bumps. However, their culture of
innovation and access to infinite capital will roll right over them. Does
anyone believe that any country (except perhaps China, protecting its own
online retailer Alibaba) can resist?
As Paul Newman explained in
The Sting
, the key to a great con is that the
victim never realizes he was conned—indeed, he believes he is about to be a
big winner right up until the last moment. Newspapers still feel that the future
happened
to
them versus what really happened: they were Googled, hard.
And where Google didn’t molest them, their own stupidity—not buying eBay
when it was offered to them on a silver platter, not snapping up Craigslist
when it was still a start-up, and keeping their top talent on the print side
instead of moving them to the web—doomed them. Had they made the right
decision on just half of the opportunities presented to them by cyberspace,
most would still be around.
The rest of the Four have similarly pulled the wool over the eyes of their
victims. Brands eagerly pumped money into building Facebook communities
before realizing they weren’t their own. Sellers are quick to join Amazon,
believing the platform provides them access to a new swath of customers, but
then find themselves in competition with Amazon itself. Even Xerox thought
it was getting a lucrative piece (100,000 shares) of Apple, one of the world’s
hottest tech companies, for simply letting Steve Jobs look behind “its
kimono.”
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You could say these wounds were self-inflicted.
Aspirational horsemen always show a willingness to go to market in ways
unavailable to their old-guard competition. Uber, for example, operates in
blatant contravention of the law in many, perhaps just about all, of its
markets. It has been banned in Germany; Uber drivers are fined in France
(but Uber pays the fines);
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and various U.S. jurisdictions have ordered Uber
to cease operations.
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And yet, investors—including governments—are lining
up to hand the company billions. Why? Because they sense that, in the end,
the law will give way before Uber does; Uber is inevitable. And they are
probably right. There are laws, and there are innovators. Good money is on
the innovators.
Uber not only evades the regulations traditionally applicable to car-for-hire
services; it also evades labor law by posing as an app that links independent
drivers—a posture that nobody seriously believes. Yet despite all of this,
Uber continues to sign up drivers and riders at a furious pace—myself
included—because its basic service and simple app are vastly superior to the
coddled, protected taxi model. Uber has recognized that if an industry is
broken enough, consumers will conspire to violate the law in favor of a far
preferable service. And, in the long run, do you really think Congress is
going to fight both Wall Street and millions of consumers?
Amazon has also effectively conspired with half a billion consumers to use
algorithms to starch the margin brands used to garner and deliver those
savings to their ally, consumers. A retailer leveraging its power to grow a
higher-margin private label is not new. We’ve just never seen anybody this
good at it. Just as U.S. allies were “shocked” we were listening in on world
leaders’ phone calls, they all knew we spied on each other. What pissed them
off is how much better we, the United States, are at it. This alliance between
Amazon, consumer, and algorithms gives consumers enormous value, and
Amazon’s resultant (blistering) growth garners hundreds of billions in
shareholder value for employees and investors. As consumers we benefit
enormously from a relationship with the most powerful allies you could ever
have on your side. As citizens, wage earners, and competitors, we know we
are being abused but just can’t break up with the hot girl.
There is a justice system, but it isn’t blind. It’s good to be as rich as one of
the Four when caught red-handed. Facebook assured EU regulators seeking
approval of the acquisition of WhatsApp that it would be impossible for the
two entities to share data in the short term. This promise assuaged regulators’
concerns over privacy, and the acquisition was approved. Spoiler alert:
Facebook figured out how data could jump silos … pretty fast. So, feeling
lied to, the EU fined Facebook 110 million euros. This is tantamount to
getting a $10 parking ticket for not feeding a meter that costs $100 every
fifteen minutes. The smart choice: break the law.
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