Many myths surround a successful entrepreneur. One of the biggest is that you’ll find success with your endeavour. However, the fact is about 20% of new businesses fail within the first year. That number climbs to 50% by the fifth year. Other myths include the traits of entrepreneurs: that they’re ‘genius’, they have “created a need, then fill the need” or that they’re hardscrabble people who built something in a dingy basement or a garage.
Jeff Bezos, the founder of Amazon and the world’s richest man, is none of those things. He is, in fact, one of those rare “once in a lifetime” entrepreneurs. A Princeton University graduate who worked on Wall Street before deciding to start Amazon. It could be argued that he was the right person at the right time.
Luck also plays a role in the success of an entrepreneur.
Amazon.com opened its cyber doors in 1994 as strictly an online retailer of books. It’s grown since then and now along with Google, Facebook and Apple it’s considered one of the “big four” tech companies. The company also has an incredible market capitalization approaching one trillion dollars. Today, almost every type of product and service, aside from public insurance or medicine, is offered through Amazon or one of its many subsidiaries. Unless you live off the grid, Amazon is touching your life whether you’re aware of it or not.
But does Amazon have a strategy for an endgame? Surely their double-digit corporate growth and expansion can’t go on forever. Maybe they’re hedging their bets to see how big they can get before the United States Department of Justice steps in with antitrust law violations?
In short, antitrust laws exist for the benefit of consumers. The laws serve to keep companies from playing dirty. While price rigging, market allocation, and price-fixing all violate antitrust laws, it’s monopolies that are most associated with antitrust laws. One of the most recent well-known antitrust cases involved Microsoft’s anti-competitive practice by forcing its browsers on computers that had the Windows operating system.
Amazon’s reach, with almost 700,000 employees around the world the companies reach is far and wide. It’s largest and fastest-growing division, Amazon Web Services (AWS) cloud hosting, has captured about 37% of that market but still isn’t considered a monopoly. If you stream shows from Netflix, they are AWS’s number one client spending around 19 million dollars a year. Other users in the top tier of AWS clients include Facebook, LinkedIn, and the BBC.
But they’re not only servicing companies like Netflix, ESPN, and the BBC, but they’re also in competition with them through their streaming service Amazon Prime Video and their production division, Amazon Studios. Their shows have won Emmy Awards, Golden Globe Awards and their 2017 Kenneth Lonergan film Manchester by the Sea was nominated for six Academy Awards including Best Picture, the first for a streaming service.
Have you watched a movie or show on Netflix and then looked up one of the actors on imdb.com? Well, that’s also owned by Amazon. Shopped at a Whole Foods? They’re owned by Amazon. Through Amazon Maritime, they own a Federal Maritime Commission license to monitor their shipments from China. The company is also in the process of building out its logistics division to directly compete with Federal Express and the United States Postal Service.
It’s hard to imagine that Bezos’s goal was the extinction of small businesses but it was most certainly to re-shape the way people shop. Unfortunately, both have taken place. In the world of retail, Amazon has had a crippling impact on many businesses, both small and large. Their flagship product, books, decimated the locally owned bookstore. They also levelled what was once a competitive national bookstore landscape in America that included Borders Books, B. Dalton, and Barnes and Noble, etc. Of those big-box retailers, only Barnes and Noble and a handful of discount bookstores that remain.
The Amazon impact on local economies is equally as dire. Since the advent of the indoor mall, local stores have struggled but with Amazon, they were run out of town. However, Amazon has said that it helps small businesses. In a press release from 2018, Amazon claims that small and medium-sized companies that sell on Amazon have created more than 900,000 jobs worldwide. Additionally, “more than 20,000 small and medium-sized companies surpassed $1 million in sales in 2017.”
As Amazon continued to grow and succeed, it became evident that Bezos wasn’t just going to stay within the confines of the internet. In 2013, Jeff Bezos paid $250 million to purchase, and save, The Washington Post newspaper. Even though many have claimed traditional media like newspapers were dying, even at the time, this was viewed as a smart investment.
Traditional media in America has a history of being liberal and The Washington Post was no different. Its long history includes breaking the Watergate story in the 1970s that led to the resignation of President Richard Nixon.
Hoping to get a piece of the lucrative government contracting business, in 2014, the U.S. Central Intelligence Agency (CIA) awarded a $600 million contract to Amazon Web Services. Awarding the service to an outside contractor was considered a “radical departure” for the traditionally guarded and conservative intelligence community.
When Bezos purchased The Washington Post, he promised to maintain a distance and not have any influence over editorial decisions. But in 2013 no one could have predicted that Donald Trump would be elected President of the United States. By all accounts, Bezos has been very hands-off with the newspaper but given the current political climate, it’s no surprise that The Washington Post, like many others around the world, has been critical of President Trump. Accordingly, the newspaper, Amazon, and Bezos has caught the ire of President Trump.
Five years after landing the CIA contract, Amazon and other tech companies were bidding for a $10 billion Pentagon cloud computing contract. During the summer, President Trump began publicly questioning whether this contract was being competitively bid among companies like Amazon, Microsoft, Oracle, and IBM. An upcoming book “Holding The Line: Inside Trump’s Pentagon with Secretary Mattis” even claims that President Trump told then-Secretary of Defense James Mattis to “screw amazon.”
Already having a foothold in the business, Amazon was considered the top contender for the contract. However, after an intense lobbying effort by other tech companies, the $10 billion Pentagon cloud computing contract was awarded to Microsoft, shocking many.
Amazon responded to losing the Pentagon contract by filing a lawsuit claiming “the procurement process was compromised and negatively affected by the bias [against Amazon] expressed publicly by the president and commander in chief, Donald Trump.”
The many businesses of Amazon would encompass a Venn diagram that incorporates almost every aspect of modern life. With that said, the antitrust law definition of monopoly, “dominance of an industry or sector by one company or firm while cutting out the competition” is probably the very thing that has allowed Amazon to continue to thrive. By that definition, Amazon doesn’t qualify as a monopoly. For example, Amazon doesn’t prohibit a small business from selling its products on Amazon, they encourage it…and they will even distribute it.
Furthermore, Amazon came to prominence in a new environment, the internet. And to be a monopoly it must be proven that Amazon didn’t become the behemoth it is through anything other than business acumen and innovation.
In 2018, Forbes Magazine published an article stating that Amazon was not a monopoly because “a monopoly occurs when complete control of the entire supply of goods or a service in a certain area or market rests with a single entity.”
Alarm bells don’t ring at the US Department of Justice until “a market share of greater than 50%” has been reached (and at 37% of the market, Amazon Web Services is coming close).
At a cursory look, Amazon looks like it would be a monopoly. However, they currently account for about 5% of retail sales in the US (and 1% globally) and even though that number is expected to double to 10% by 2020, they would still fall below the 50% needed to qualify as a monopoly.
The endgame for Amazon and Bezos looks to be rather simple – world domination. That may sound hyperbolic, but the company has a foothold in almost every imaginable business, currently operates in 17 countries and for the quarter ended 30 September 2019 had a 24% increase in revenue compared to the previous year. The company continues to grow and continues to diversify.
All things considered, maybe world domination isn’t Amazon’s endgame. With Bezos’ space travel company Blue Origin, he’s got his eyes set on space too.