MSP31: Amazon's Age of Empire

Amazon Age.jpeg

MSP31: Amazon's Age of Empire

While politicians around the world play sport over the rights to publicly grill Mark Zuckerberg and Facebook’s executives, one company seems to be Teflon coated in this age of data scandals. Are we heading for Amazon’s Age of Empire, wonders Kulturpop’s Matt Armitage. Yes, It’s time to Mattsplain.

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EPISODE TRANSCRIPT

Why the sudden interest in Amazon?

·      A few weeks ago we a story on geeks squawk that I called bezos bingo, because as listeners know I’m incredibly cheesy.

·      The story was about Amazon’s search for Its second US headquarters.

·      And tech journalists had taken to checking the flight records of Bezos personal plane to check which cities he’d been flying to see if that would give them an edge over where the headquarters was likely to be situated.

·      It’s not much of a story, it’s very lighthearted, there’s not really any substance to it.

·      It just seemed to be another one of the endless stream of seemingly inconsequential Amazon stories. When you do a search on any of the big news sites, you quickly see the Amazon stories come up pretty much every day.

·      But they’re rarely the big ticket item, they’re there, ticking away in the background.

 

Which made you think that there’s something sinister in the background?

·      Not at all. It’s into reminded me that most people think of Amazon as being an online retailer.

·      That’s where most people have their interaction with the company.

·      When you’re in the tech world, and it’s probably stretching the definition to say that I’m in the tech world, 

·      but when you’re looking at in The world of tomorrow and potential cultural impacts, which is essentially what we do on this show, and you are more aware of these things but the same time you take them for granted.

·      I know the Amazon is much more than a Retailer. Story today about Amazon supplying facial recognition software to law enforcement agencies, that couple to the bidy cams a lot of police now wear.

·      I’m sure most of our listeners are aware that amazon is more than its dot com, but, lke the facial recognition product, that doesn’t mean that they’re aware of the sheer scale of what Amazon is involved in.

 

Isn’t it more important to focus our attention on the companies that are making the headlines? Facebook and Google and companies that have been caught up in the privacy and data overreach?

·      That’s precisely why I think we should be talking about Amazon right now.

·      And looking at the sheer scale of what Amazon is and where it’s headed.

·      As regular listeners will know, my biggest issue with a lot of the technology companies is the way that we pay for their services.

·      One of the reasons that we have these issues with privacy and data overreach is because we are making the services do weird contortions in order to find a business model. 

·      Our relationship with Amazon is much more straightforward. It’s a transactional one.

·      Amazon provides services and we pay for them.

·      Even services that they do provide free, such as websites like IMDb and good reads which many people not be aware the Amazon owns, point us back towards products that Amazon sells, namely, films and books and TV streaming services.

·      That’s really clever. 

·      It’s so clever that a lot of people May not even realise how much data of the company is able to gather about them, and how it is able to nudge them towards spending money on the site.

 

In Malaysia, at least, Amazon doesn’t have such a big presence, though it does have dedicated stores in Singapore, India and Australia now. 

·      No, that’s true.

·      And that’s another reason for talking about the company.

·      We don’t see its presence yet we’re all a part of it ecosystem in some ways.

 

Let’s go back a few steps. What is Amazon?

·      Amazon is best known as an online retailer, amazon.com and its numerous offspring around the world, .co.uk etc etc.

·      Amazon was founded in 1994, which makes it one of the older Internet companies.

·      Jeff Bezos left a Wall Street firm eager to get in on the burgeoning online scene, which one we’re talking about the mid 1990s, meant the information super dust track, because if you compare it to the Net we have today, it was kind of like Electric supercar versus the donkey and cart.

·      The donkey and cart will get you there eventually, but my gosh, it smells bad and it stops a lot of times along the way. 

·      Working on his gameplan, Bezos came up with the idea of an online bookstore.

·      He asked a bunch of his friends and relatives to support him and invest at least $50,000 in his new company in exchange for around 1% of the company.

·      Approximately 20 of them did, including his parents who stumped up around US$300,000.

·      Those 20 odd individuals should be extremely wealthy today, assuming they held onto their stakes.

·      That 1% would be worth around US$7 billion today.

 

What’s Amazon’s net worth?

·      It’s somewhere in the region of between $750 and $800 billion.

·      Amazon is in a flat race with Apple to become the first trillion dollar valued company.

·      The company turned over nearly $100 billion last year.

·      While we’ve seen Apple struggling over the past few years to maintain that innovation cycle, there’s a feeling that Amazon is really only just getting started.

·      While most tech companies have that period of exponential growth that slows, amazon saturates and then simply finds other areas to expand into.

·      It’s a bit like The Blob if you want a sci fi analogy.

·      The currently accounts for Half of all online transactions in the US, so that’s one out of every $2 spent.

·      The Company is involved in almost every aspect of economic activity in the US.

·      Manufacture, retail, distribution and logistics, financial services, entertainment, healthcare, IT and cloud services. 

·      When you look at Amazon versus Google or Facebook or apple, you’re already having a very different conversation.

·      Most of those companies are looking at ways to diversify and retain marketshare.

·      Amazon is simply expanding around a core business, and that expansion get wider and broader.

·      The company is probably one of the very few that is exponentially expanding vertically and horizontally.

·      And it’s one of the very few that charges us directly at every level of our interaction with it.

 

Can you buy absolutely anything on Amazon?

·      It’s not like the darknet. I think sometimes it gets overstated what’s lurking in their catalogue.

·      For interest’s sake, I did check to see if I could buy a flamethrower on the site.

·      A multi-purpose tool. It’s good for toast, party tricks and road rage.

·      The US has a rather different attitude to what constitutes a dangerous device then now most other countries.

·      And guess what? You can!

·      It’s not a military grade flamethrower, one of the marketplace third parties sells a natural gas powered flame machine that is designed for Birmingham weeds.

·      So, yeah, that counts.

 

Why do you think that Amazon is in such a strong position compared to a lot of other technology companies?

·      Scale is an obvious answer.

·      It’s not boxed into any particular corner.

·      Even direct competitors like China’s Alibaba seem to get more coverage. Amazon manages to be both aggressive and low key in a lot of ways.

·      I was speaking at a conference last year and when a member of the audience asked which technology companies did I think would be the dominant companies in say 10 or 20 years, I think a lot of people were surprised that I said Amazon rather than Snapchat.

·      When you look around you can see a lot of the data based Technology companies wondering how they going to make the jump into the next era of technology.

·      How’d they are going to retained their relevance? For example, how are companies like Google and Facebook going to fare in the world of screenless technology?

 

Isn’t Google the leader in that pack?

·      Google is certainly streets ahead of most Of the competitors when it comes to artificial intelligence, neural networks and this new era of computering,

o  I’m pushing this as a word by the way, to distinguish the making of computers from the actual computing they do. 

·      So you have Google along with heavy duty computing companies like IBM.

·      We’re seeing companies like Facebook and Apple playing catch up and trying to get into this game. 

·      And it’s an uphill task – it requires a lot of acquisition money because this isn’t an area where you just start from scratch. 

·      IBM has been doing this for decades – you don’t wake up one morning and decide to be a market leader in neural networks unless you’ve got a few billion bulging in your pockets.

·      And That’s not to say that that it’s a hopeless task: 

·      As usual I dictated my notes for this show using Apple’s natural language processor which is built into the operating system of my computer and found some other devices and is also part of its Siri offering.

 

When we talk about this kind of natural language processing, Amazon isn’t the obvious leader.

·      No. And that gives you an idea of how the company operates. 

·      When Amazon innovates it’s in a very different way to other technology companies.

·      It’s more of a reverse engineering approach. They didn’t come approach it like Google and come up with a machine intelligence system and try and figure out ways to make money from it.

·      They realise that they wanted a device in peoples homes, so they would have to develop class leading microphone technology so the people’s requests could be received with no mistakes from across a room and a neural network the good understanding process those requests.

·      As a result, Amazon is leading is in integration and hardware.

·      By contrast, we’re only starting to see the first machine intelligence hardware devices from companies like Google and Apple reaching the market, with those natural language operating system services inside.

·      Those companies are still very much wedded to devices with screens.

·      Amazon isn’t and it’s approach is really different.

·      Amazon practically gives its entry-level hardware away.

·      The tablets start at around US$80 V good serviceable items.

·      They may not be as versatile as an iPad or an android tablet, and they are very tightly tied into Amazons ecosystem, for a lot of users that’s what they want.

·      A Machine let’s than surf the web watch movies and answer the occasional email.

·      And that is cheap enough that if you drop it and break screen you’re not going to spend the night sobbing.

·      In fact, and for a lot of Amazon products, you can simply replace it with a new one for less money than it would cost to have equivalent product from Apple repaired.

·      And that’s really important in the cost conscious world.

 

When we come back. More on Amazon and its natural language system Alexa. Blah Blah.

 

BREAK

 

Welcome back to Mattsplained. We’re halfway through the show and Matt hasn’t said anything remotely scary so far. I can only assume he’s saving the Armageddon for the final minutes.

 

Alexa. For those people who don’t know, who or what is Alexa?

·      Well let’s start with something scary.

·      Alexa is Amazon’s version of Siri. A Voice assistant built into a lot of their hardware devices that enables you to access information and services online.

·      Obviously, that’s not the scary part.

·      There was the story a few months ago that Alexa equipped devices would start to emit a strange and witchy laugh for no apparent reason. And apparently scared some users.

·      And this goes back to what I was saying about the stories on Amazon often being quite light.

·      I honestly can’t remember if anyone got to the bottom of the story, but the chances are it was some random little prank by a coder or coders.

·      Have a quick laugh and move on.

 

So, Amazon is pioneering screenless operating technology?

·      Very much so. It’s not that the technology is is superior to anything that any of the competitors is offering.

·      Just a lot more accessible.

·      For example apples fire TV stick which is priced at around US$40, comes with an Alexa enabled remote-control.

·      So their TV service is, in effect, an interactive voice based computer. For $40.

·      And that kind of hardware, a simple TV streamer, allows the company to sell its ecosystem to people who aren’t interested in things like smart home controllers, tablets, kindles etc.

·      Their echo dot voice controlled speaker is making its way into tens of thousands of homes because it’s priced at an incredible US$50. In fact on Amazons your cycle the moment this special offer where you can buy two dots for $80.

·      By contrast Apples homepod speaker is priced at $350.

·      You might argue that Apple and Amazon are going for two very different markets. Amazon’s market is very straightforward – people who want to buy stuff from Amazon.

 

Are we more likely to buy into walled garden systems in a screenless world?

·      Absolutely, I think that’s a very real risk.

·      When you’re looking at a screen, you’re more aware of the world you are navigating. You know for example that you can only get your apps from one source.

·      That you have exit points from that walled garden for example your Internet browser.

·      That’s why we see so much jockeying for position between Apple and Facebook and Google. Because none of them really wants you to exit their garden and enter the others world.

·      I think screenless technology makes you care a little bit less.

·      Because you’re not really aware of where you are in the ecosystem. You’re simply asking for something and a computer serves it up to you.

·      If you ask an AI a question, who knows where it’s actually going to get that information?

·      Well, the person who owns the AI and knows where it’s going to get the information, that I may not be obvious to a user.

 

Do you think the average user really cares whether they’re walled in or not?

·      Absolutely not. Not because I look at users in a patronizing way the Because most people aren’t going to notice.

·      If you ask a question and you get served the information, in most instances that’s going to be good enough.

·      Which is why Amazon has really got a jump on the competition.

·      It has this really tightly integrated ecosystem that revolves around selling you products. 

·      It will do all the shiny happy stuff like tell you what the time is, Will give you the latest scores in whatever meaningless sport you follow.

·      And that’s really at the core of what it does. It listens to you and gives you what you want.

·      That’s a really attractive proposition. Especially for $50.

·      And it’s not a proposition that Apple or Google can currently compete with.

·      It’s all about washing powder.

·      Apple can sell you an app or some music to do your laundry to. Google can direct you to any number of businesses, online or offline, that will sell you some detergent.

·      Depending on where you live, Amazon will deliver that detergent to you in a couple of hours.

 

People trust Amazon?

·      I think they do. We haven’t seen that erosion of trusts in the company that we’ve seen with a lot of other technology companies.

·      That’s not to say that the company doesn’t have its Darkside.

·      Donald Trump hates Amazon.

·      There are plenty of stories about Amazon’s attitude to paying sales and income taxes.

·      Regulators in some countries have their eye on Amazon for potential Monopoly on anti-trust violations.

·      It certainly doesn’t have the best reputation amongst the technology companies for creating a fun working environment. 

·      On the other hand, unlike a lot of tech companies, it actually employs a lot of people, and not just highly skilled programmers. Currently it employs around half a million people.

 

Those are all negatives, How does the company generate that feeling of trust?

·      By being very customer oriented.

·      If you go to Amazon’s retail sites, you generally find that their prices are amongst the cheapest for pretty much everything.

·      Their sites are easy to navigate. They have a lot of one clicking buying options so you don’t spend ages going through various e-commerce layers, adding in shipping addresses etc.

·      Their delivery systems are robust and efficient. 

·      It’s really convenient.

·      And yes occasionally a package goes astray. You contact their customer service and replacement wings its way to you.

·      Those are the kind of small touches the keep you coming back and buying more.

 

How can traditional retailers compete?

·      In a sense they can’t, hence the murmurs about anti-trust investigations.

·      It’s partly about deciding what kind of society you want to live in. 

·      I think when it comes to independent retailers people have already made their decisions. 

·      A growing number of people are willing to pay slightly higher prices in order to support businesses in the local community.

 

It must be more than Amazon versus the independents? Is the company threatening traditional retail chains?

·      That’s where it becomes a bit blurry. And a lot more cutthroat.

·      Is Amazon any better or worse than Marks & Spencer, Walmart, Target, Tesco’s?

·      That’s one of the reasons that I think we don’t have an overly negative view of Amazon. That’s why we trust them. We see them as a shark eating the other sharks.

·      Big box retailers have long had independent storeowners under siege. We don’t really feel any sympathy for them. If Amazon gobbles them up, the attitude seem to be: good riddance, plus ca change.

·      Especially when Amazon is increasingly expanding into bricks and mortar spaces as well, with its takeover of the whole foods supermarket chain in the US and its emergence into the fresh food delivery market leveraging on that colossal logistics chain and distribution network.

 

Can we steer clear of Amazon?

·      This is where I get to be the voice of doom and Armageddon.

·      In short, no. 

·      Because, as I said Amazon is far more than a retail site.

·      The company That everyone laughed in the early 2000s that sold DVDs and books and CDs and couldn’t turn a profit no matter how much expanded, now has a hand in everyone else’s business.

·      Amazon Web services AWS, its cloud computing division, accounts for around 45% of the world’s cloud computing business.

·      Every day you are using services and websites that rely on Amazon.

·      Not just commercial companies. The CIA uses AWS. You could be part of the Amazon supply chain simply because they have you under investigation.

·      Even its competitors use Amazon. According to the Guardian report I read, the Tesco supermarket chain uses AWS despite Amazon being a direct competitor.

·      Netflix relies on AWS servers even though Prime video is probably its closest competitor.

·      There are rumours that Amazon is going to seek a banking license in the relatively near future.

·      Which makes sense. It’s one of the leaders in online payment gateway technology. It already offers Micro loans to small businesses using its marketplace service.

 

How are governments and regulators responding to this growth?

·      I think legislators getting increasingly concerned.

·      For example, Amazons marketplace, where it allows third-party retailers to sell using its site and gives them the option of using its fulfilment centres – its warehousing and delivery network accounts for about 20% of its revenue and up to half the goods sold through the site.

·      When you factor expansion into so many other sectors, including the announcement this year that comes it would be looking into healthcare, there have been concerns that Amazon could become a tax on trade.

·      That it has its fingerprints on so many parts of the world economy that it becomes in effect like a privately owned global sales tax.

 

Should we be alarmed?

·      Probably. Monopolies don’t tend to improve the situation for people.

·      Prices tend to be low until they don’t have to be low any more, the bigger a company is, the more muscle it has to distort markets and put up barriers to competition.

·      And suddenly you can avoid giving your money directly to the company, the chances are you will still be giving it to companies that are also contracting Amazon.

·      In this instance, I think our most realistic recourse is to put pressure on our governments and representatives to deal with Amazon.

 

Are you alarmed?

·      I’m never alarmed. At worst I think I show a mild concern.

·      There are certain parts of Amazon’s behaviour that trouble me, as I’ve mentioned

·      I guess a romantic part of me can see Amazon becoming the Star Trek replicator of companies.

·      Saying, Alexa I’d like a cup of tea ,a portion of chips and a new pair of Socks please.

·      All of which materializes in front of me.

·      And we have this tendency to think about our social life in terms of malls and shops, especially here in Southeast Asia.

·      And I sounds very hippyish of me, as much as I don’t want to lose all those independent retailers, part does wonder if we actually need all of those retailers.

·      And do we want a society that is geared around retailers and consumerism?

·      Couldn’t we be doing something better with our time than visiting stores?

 

I think that’s a tall order (or similar comment)

·      I know.

·      It does strike me that we would have a lot more free time if we were freed from having to do all the mundane things like grocery shopping.

·      When I’ve just been to the third store in a row to try and find food that my very fussy cat will eat, I do wonder at the futility of it all.

·      Isn’t there something better we can do with our communal spaces than turn them over to shops?

·      Don’t get me wrong, I’m not saying that Amazon is in this business because it has some utopian social vision of our future, 

·      of all the technology companies I think Amazon is probably the most hard-nosed when it comes to numbers and profit.

·      And as I’ve said before, I would rather have our tech luminaries stay in tech and not play around with politics and social engineering.

·      I think it would be interesting not to mention a little ironic if the ultimate consumer company freed us from the trappings of a consumer society.

·      Anyway, I guess that’s nothing more than a daydream. 

·      See, I’ve managed to get through a whole show without casting anyone into the fiery pits of hell. 

 

Matt Armitage