The Ethics of Amazon Revisited

Over the four years or so that I’ve been keeping this blog, my most-viewed post remains the one on the Ethics of Amazon, which still accounts for a almost 10% of all of the traffic I get. It probably helps that it’s one of the early hits if you try a Google search that includes “Amazon” and “ethics” in the keywords, but it does seem to keep catching imaginations, considering that there was a comment on this post just last week. Mostly what people ask me about this post is why Amazon (or any other successful company, for that matter) should care about what becomes of its competition. After all, in a capitalist system, aren’t we trying to destroy the competition and take their market share? It made me think we should take a closer look…

First off, no one is saying that Amazon shouldn’t make a lot of money. But expanding your sales and revenue is more than just a zero-sum game (e.g. one where every dollar of sales you make is one more that someone else doesn’t make). In particular, every Internet retailer whom Amazon puts out of business represents a certain number of people who will lose their jobs and therefore not be able to buy anything from Amazon, or anyone else. It’s also possible that the investors who put up capital to start those e-commerce sites will be wiped out, too, which would not only eliminate more customers, but lower the overall supply of capital available in America, raising interest rates and creating new barriers to entry for anyone trying to start a new company. But that’s just the beginning…

If this effect cascades into the companies that used to supply those sites, they may be unable to continue in business as well, knocking more customers out of the workforce and potentially limiting the products that Amazon can obtain for sale. Even worse, the communities in which those suppliers are based will be negatively impacted, resulting in all of the services, utilities, transportation companies, energy companies and government agencies in those communities being driven out of work, as well. Commerce has always been an interconnected whole, and this is more true now in the Internet Age than it has ever been before. If Amazon’s dominance is sufficiently complete, they could end up being the only surviving retailer, Internet or real-world, left in America – and then go bankrupt since there will be no one left to do business with them…

In business school we call this the “Stakeholder” concept, and it’s a key idea in strategic management. The success or failure of your company doesn’t just impact your investors and stockholders; it also affects your employees, your competitors, the people who will be impacted by the environmental and economic results of your operation, your competition, and even the government. The fact is that while most people think the ideal condition for any company is to corner the market and have a complete monopoly over the goods and/or services they sell, the historical record indicates that such companies are bad for business – and not only other people’s business, but ultimately their own. And the wider the reach of their operations becomes, the more problematic their domination of the marketplace is going to become…

I’m still not saying that Amazon shouldn’t make absurd amounts of money, or even that there is anything wrong with their domination of some aspects of Internet commerce. I am however suggesting that their long-term strategy may not be quite as solid as it looks – and that, once again, this is harder than it looks…