Amazon, the Destroyer of Companies

Posted in Reading

Amazon is a scary company.

At least, that’s the story told by The Everything Store, a recounting of the Amazon founding and growth story leading up to its present-day conglomeration of e-commerce, mobile devices, and cloud platforms. The book tries to be fair and report both the good and the bad, and it’s a bit refreshing to see journalism, as incomplete as it must be to wind through years of hearsay and mythical founding history, shred light on the messiness of starting and running any business, much more so one of Amazon’s breadth and ambition.

One aspect that stood out was the sheer ferociousness the company employed to a problem, and the resulting hardball tactics and strategy that flowed. When something appeared to threaten Amazon, it wouldn’t even flinch in sawing off its own fingers just so the other guy would lose a hand. The company is famous for producing a sky-high valuation while turning in little to no profit, and it appears to use whatever it has in cash to ensure that no one else can get ahead on price, selection, or delivery speed.

Although it’s a little counter-intuitive at first, there has been some writing and thought into Amazon’s business model and strategy, which amounts to a scorched earth war on prices at most/all times. On some level, this is a huge plus: who wants to enter a low-margin business against an established giant with enough money to win any battle of attrition? Why would potential competitors bother with something as hard as inventory and shipping and fulfillment logistics?

It makes surprised that there are not more companies trying to follow the Amazon playbook. If more businesses ran with Amazon’s mindset, they’d be substantially more defensible from the start, and as a bonus we as the end-users would get cheaper services with better customer support. They’d still be rewarded in the markets for growth and providing real lasting value in an era of first-world-problem solutions, but I suppose CEOs of Jeff Bezos’ mold are hard to come by.

So my main takeaway is: like the Eye of Sauron, be scared if Amazon’s gaze ever lingers in your direction.