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Amazon and the Unwisdom of the Populist Crowd (truthonthemarket.com)
63 points by raleighm 8 months ago | hide | past | web | favorite | 53 comments

I think this is all true. The problem lies somewhere else.

Companies like Amazon is what we want. Convenient, re-investing all profit to improve its services and lower its prices. They deliver beneficial goods and services to our society.

That's great. The problem is in redistribution of wealth throughout our society.

As we optimize production and delivery. The inequality of wealth distribution widens, because less and less crums fall behind for the poor to pick up.

The pie gets bigger, but the portions most people are getting of it keeps getting smaller.

If it grew faster then the portions shrank, all would be good, but I believe we're starting to see cases where it doesn't, and some people reaching a point where they get none of the pie.

And this is not an Amazon's problem, or an economic one. This is a societal problem we'll have to address.

What if not everyone is needed? What if society can sustain itself with only a fraction of the population? Who gets chosen to remain, and who gets cut out?

Think of a dinner party. 10 people are invited. They form the party. How many of them are needed to cook? Not all 10, thats too many cook. It would actually be less efficient to have them all in the kitchen. So what if two of them cook? Do they only get to eat? Do they get more of the food? Maybe all 10 guests would have been able to cook, so who's lucky enough to be the chef and eat?

This is now happening at the scale of our society. But we don't treat each other like friends at a party. So when we get to cook, we don't share. We should.

I'd like to compare the economy to an OS. A task of an OS is to schedule processes, and to do so in a way that is fair and efficient. It would be efficient to give priority to the process which has been running the longest, because that would minimize context switching. But clearly, it's not fair. So from an average user's perspective the OS would be a failure.

In the economy, "priority" is given to those with the most wealth. Priority leads to more opportunities to increasing wealth. In other words, money agglutinates, and evidently for most participants, the economy is a failure.

In the OS analogy, someone could step in and formulate a rule stating that new processes would get a minimum share of the CPU. This would be equivalent in the economy to giving poor people a minimum income to keep them happy enough to not cause any trouble for the wealthy. But clearly, it's a hack in both cases, and a deeper evaluation of the problem is necessary.

> Think of a dinner party. 10 people are invited. They form the party. How many of them are needed to cook? Not all 10, thats too many cook. It would actually be less efficient to have them all in the kitchen. So what if two of them cook? Do they only get to eat? Do they get more of the food? Maybe all 10 guests would have been able to cook, so who's lucky enough to be the chef and eat?

What if they rotate responsibilities?

Or, to reground the metaphor, maybe we need shorter work weeks?

Are you living in USA? France tried something in that direction: https://en.m.wikipedia.org/wiki/35-hour_workweek but it arguably didn’t work well for them because in Europe a full time employee has -on average- very high costs for the employer, and most importantly they job contract is not “at will” (i.e. getting rid of redundant employees is basically impossible).

(N.B.: I am not saying that the European situation is good or bad, just that it is an obstacle towards shortening the workweek, as France apparently found out).

I think that France did a pretty untimely move with their 35 hours right when international competition was becoming much stronger. But it would work if the same policy was adopted by most of your competitors.

"If everyone just behaved themselves" is a solution to basically every problem humanity has, but it is pretty clear by now that that is not something we can depend upon. The tragedy of the commons is real and ongoing.

Well, we got to the 40-hours week, didn't we?

My point is that the fact that the 35 hours didn't work in France this time doesn't mean they can't work in general.

> The inequality of wealth distribution widens, because less and less crums fall behind for the poor to pick up.

One of the best ways to increase your value in the job market is with education.

Poor people have more and better educational opportunities today than at any point in time. Between libraries, universities, colleges, free online resources, etc. the opportunities are growing faster than ever.

So if you consider access to education "crumbs" then I'd say there is more rather than less.

In a competitive environment you have to compare yourself to others today, not yesterday. Your relative education level and the demand at that level is what counts.

So while your absolute education opportunities may be better than ever, the requirements to get a half-decent job are higher, too. Which means you have to learn for longer to reach a higher absolute level. But even ignoring other resources, the poorest may simply not have as much time to spare as those from a wealthy family.

I would tend to agree but add one condition: They have to pay good living wages to all their employees, not just to the few (relative to total nr. of employees) at the top level, e.g. software engineers.

Yes yes - "the market", surplus of low-skilled labor, etc. Look, as far as I can tell the "economy" and everything we have to guide it is the tool(!) and the humans are the top target, and not the other way around. That means if we find areas where the tool fails to deliver we have to adjust and use a different one. All those arguments based on "theory" place the tool first and make it the goal.

I like this quote a lot (found on twitter, I found it on reddit):

> When you blame a poor person for not getting a better job, you accept that while their job is necessary, whoever does it should be poor. (source: https://twitter.com/existentialcoms/status/85550195728851763...)

And from the reddit comments this one:

> My favorite thing to ever hear come out of a custom's mouth was "get a real job". Standing there, performing a service that they themselves are requesting and spending legal tender on, and they don't see the validity of said job.

I love efficiency. I love people who work hard, and who keep learning, experimenting, failing. I love entrepreneurs. I am independent myself, had a small business and worked as freelancer consultant. I also consider myself "conservative" when it comes to how to deal with "low-performers" who do so for no reason other than laziness.

And yet, I won't accept the "market outcome" of extremely low wages and stressful lives (e.g. long commutes, multiple jobs, bad housing, etc.) for people who actually try, and I'd say that includes everyone who takes one of those warehouse jobs or any other job. The theory and the tool ("the market") are failing us because they could not care less about human fates. There is no reason whatsoever to accept that. It is completely in our power to do something about it. We should use "the market" when it works and look for a different tool when it doesn't. Already society is extremely selective about it (and equally selective in its perception), so nothing I say introduces a new element, not even at scale.

So I see two choices (that I like, obviously other people can come up with other options including "everything is fine as it is"):

- Force businesses like Amazon to pay living wages. This means they will have to have higher prices. Maybe large parts of their business model might not work any more.

- Subsidize the work. Choose this option if you think having Amazon outcompete other businesses in some sectors still is better than not having it.

Of course, anything is going to have a (low-skill labor) "market distorting effect". So what? It's not like there is none right now, the price for it all is being paid even now: The burden is carried by the employees, on shoulders considerably less capable of carrying it compared to other options.

> When you blame a poor person for not getting a better job, you accept that while their job is necessary, whoever does it should be poor.

But is that the case? Maybe there are too many people able to do the job. Maybe they accept lower wages because it is the job they want. Maybe there are too many people who want to do the job. That doesn't mean that anyone doing the job should be poor, but it doesn't make sense to pay more for a worker of the same capacity when you can pay less. So, maybe a worker who can do job X should really work on getting a better (read: higher paying) job. Why does that translate to "anyone doing that job should be poor"?

Also, the worker is not necessarily necessary at the given job strictly speaking.

There are plenty of reasons to not do something, but really there is quite a lot of autonomy afforded to people in the US to improve their job standing... I am not against living wages as you state later in your post but that is somewhat a separate issue.

> > When you blame a poor person for not getting a better job, you accept that while their job is necessary, whoever does it should be poor.

> But is that the case?


> Maybe they accept lower wages because it is the job they want.

Did you read the quote? It is about what other people say to the worker.

I feel like you did not read my comment, because your next sentence is

> Maybe there are too many people who want to do the job.

My whole post addressed that from beginning to end. Sometimes I have no words when I read replies to my comments. It feels... so futile to try to have a reasonable discussion when people completely ignore anything I say (write).


I already accepted that other people may feel differently when I inserted:

> (that I like, obviously other people can come up with other options including "everything is fine as it is)

because one thing is definitely true: This is not a law of nature. You can have a society where every Sunday a baby is thrown into a volcano (reference to somewhat similar recent headline from a finding in Peru, only 550 years or so ago, of children with their hearts cut out). The universe could not care less. It is completely up to what you/we want. You can certainly have a society like the current US of A, the richest country on the planet - in both space as well as time, simultaneously having 3rd world conditions for a sizable part of the population: https://www.theguardian.com/society/2017/dec/15/america-extr...

I disagree with this: "When you blame a poor person for not getting a better job, you accept that while their job is necessary, whoever does it should be poor."

First, the low pay is a hint that too many people are trying to be employed in that type of job. The job really isn't necessary, at least in the amount that people are trying to do it.

Second, we need starter jobs for teens. I suppose you could say my son is poor, ignoring the fact that he is a dependent minor child in a household that is not poor. Adults shouldn't be taking the low-paid starter jobs that teens need as references for college and/or future employers.

> the low pay is a hint that too many people are trying to be employed in that type of job

I got two replies and BOTH completely ignore that my entire comment was about just this. I wonder, why do you reply to a comment whose contents you chose to completely disregard?

About the "teens": Low paying jobs are taken only by teens (I would accept even just "statistically speaking")? Hardly. Bad argument since your premise already doesn't pass a smell test.

Nor does that argument make any sense at all. Pay low wages because of "entry job"? That is completely made up after the fact, in order to somehow make paying low pages sound acceptable.

FWIW, I read through your entire comment a few times and did not understand that it was about having a surplus of workers for entry-level or low-pay, low-skill jobs. I see that you briefly mentioned it at the beginning, but it didn't seem to be a main point of your post. Maybe I'm just an idiot and missed it entirely, and maybe the other two commenters also just missed it completely, but it really seems as though you didn't convey that point clearly. In the future, it might be worth trying to take a less hostile approach when replying to people who missed the point of what you said.

I don't think the comment is "about" having a surplus of workers, but pointing to how that argument is a distraction. Putting the cart before the horse, if you will. It simply isn't a valid justification for paying people poorly.

Interesting analogy you pose.

I’d like to offer some amendments....

Pretend that everyone helps with cooking dinner. Then, when the food is served, the person who owns the house gets most of it, and you have barely enough to keep you from being hungry.

But I think you’re right - it is a societal problem, and probably hard to fix (in practicality if not in theory).

What evidence do you have that portion of the pie is getting smaller for most people? I do not believe this at all. It's especially not true on a global scale, where globalization has improved the lives and wealth of millions in China and India.

Wages for men have fallen since 1973:


The fall is especially sharp if you count health care expenditures, which have risen faster than average inflation, but since that also effects women, you could remove the "men" from the first sentence.

For specific examples of industries that have suffered, consider the decline in the wages for truckers:


Men with college degrees have done better than men without college degrees:


Getting downvoted here, but see the non-partisan IGM economic survey on this.

"The 9% cumulative increase in real US median household income since 1980 substantially understates how much better off people in the median American household are now economically, compared with 35 years ago."

When asked to agree-disagree, 60% of economists (70% when you weight by confidence) agree with this.


It is true in the US. There's been a lot published on the subject and it won't be hard to find. The developing world is another story, but the inequality is arguably even more extreme. With a much higher percentage of people living in poverty. Their middle class is mostly growing though, so the picture is improving.

No, a lot depends on how you look at the data. See these two videos for a good overview:


Good argument for socialism. The question that follows any argument that advocates some form of wealth sharing is "what do I get in return?". I think, as a society, we should be valuing the non-materialistic impact we can all have on each other. I am a software developer. I can build things and make money off that, great. I create some value and am compensated in return for that. I can now go seek things I cannot do myself like writing a song, or playing a sport in a manner worthy of my audience and go support the artist or the sportsperson. There now is a working model for wealth sharing.

Once we come out of the basic shell of "socialism will breed a generation of welfare seekers", and look at a pivot of capitalism with wealth distribution in mind, it could see some success.

Historically, the answer to "what's in it for me" for the elite when it comes to wealth sharing is that it acts as guillotine insurance.

The social democracies in Scandinavia were basically a class compromise. The capital class accepted the welfare state, relatively high taxes, an organised working class and a organised labour market. In return the working class gave up their struggle for socialism and would follow rules of conflict resolution with the capital class to avoid un-necessary strikes.

And for those who are wealthy but not part of the 1%, the answer is that the guillotine doesn't stop at the 1%.

In this context, "what do I get in return?" is a question that is only (seriously) asked by two kinds of people: those who can't stand the thought of having less than the absolute maximum they could get, and those who parrot the words of the former group without thinking.

In my opinion, it's pointless to reason with the former, but if I had to try, my answer would be "You still get to be rich, you know, nobody's saying we'll take everything you have."

It's the latter group that is a lot more important to convince, though.

I think the uber rich—top one percent of the top one percent—have realized that staying rich requires less than 99% of their net worth. This resulted in the 99% pledge aka the giving pledge and similar movements. It's those that are wealthy but not wealthy enough to be a Warren Buffet or Bill Gates that seem to feel like the welfare seekers are coming for them. In my opinion, what would actually convince them are studies and experiments that show that wealth sharing improves the collective health of the society rather than just bringing up the downtrodden. The UBI experiments and higher taxes are small but non-trivial steps towards that.

I pay plenty of taxes. The amount of willingness I have to pay more represented as an integer is a very large negative one until capital gains, corporate profits, etc. are taxed at a rate similar to the money I make.

This all assumes that pumping money into the problem will solve it. In my estimation there will be more ~100k middle management positions and boondoggle infrastructure projects in government (which are really just middle class welfare programs depending on how you think about it) and poor people will be just as poor.

>The amount of willingness I have to pay more represented as an integer is a very large negative one until capital gains, corporate profits, etc. are taxed at a rate similar to the money I make.

I agree. There needs to be reform in multiple dimensions. You also bring up the point about governments being inefficient. That needs fixing. I think it calls into question how much our elected representatives are choosing to look away from the problem.

Adding to your point about how inefficient jobs are just welfare programs, the welfare programs themselves are more inefficient than what it seems. It takes way lesser money to push the people at the bottom 10th percent onto the next tier, say, the 20th or even the 30th percent in terms of income than what it takes to push the middle class to upper middle class. The leap is also more significant for someone who cannot afford 3 meals a day to become someone who'd able to afford that, compared to say a family of 4 that makes median income to be able to afford a vacation. To significantly improve the condition of the middle class, it requires way more resources than compared to those that are required to improve the conditions of the poor. If you channel the latter toward the former, almost all the resources go to waste. The problem seems to be that the middle class is a very broad spectrum. Anyone who isn't going through abject poverty or doesn't consider themselves rich is going to consider themselves middle class. This leads to the government pandering to this broad spectrum as part of their vote bank politics. The result is wasted resources and an illusion of efforts spent to bring up the middle class.

> The question that follows any argument that advocates some form of wealth sharing is "what do I get in return?"

This is a ridiculous question to ask. The basis of society is sharing resources; some of us have just forgotten because it's convenient. What do you get in return? To live in a society where nobody is starving, everyone is educated and free to do whatever makes them happy.

I'm already fed, educated, and free to do whatever I want. It doesn't help me for other people to get the same.

Yes it does. A broadly better-educated citizenry makes for a richer, more robust economy. Reducing or eliminating poverty, the same. "A rising tide lifts all boats," as they say.

If you actively think that's not somehow fundamentally helpful to you, or in your best interests, maybe you don't belong in society. If your notion of "freedom" is predicated on other people starving (which I take people to mean when they say it's an infringement upon their freedom to be "forced" to participate in other people's not starving), then I think it's a pretty terrible one. If anyone, anywhere is starving, or enslaved, and you trumpet your own freedom in the face of that, you are necessarily treating freedom as zero-sum, and washing your hands of the costs the people on the other side of that coin are paying — often with their lives.

When "freedom" is propped up on someone else's lack of it, I don't personally find it worth celebrating, or being all "Welp, I got mine!" over, myself.

EDIT: Phrasing

This is why tax rates, especially at the top, should move together with changing "natural" wealth distributions. If technology and new business models are making more "winner take all" scenarios and favoring a few top earners and highly centralized businesses, we don't need to try and shut them down by inventing market distortions, just make top tax brackets higher. Amazon doesn't need to get broken up and at the same time no one has to starve either because it killed their mom-and-pop shop.

Really, the current state of markets are such that we should have at least ~60% top marginal tax rates and treat capital gains exactly the same as income. Whether there's political will for that, I don't know, but it is the best solution.

Taxes can be part of the solution. But if you raise them too much people and companies find a way around it. They leave or they exploit loopholes. If the Panama papers taught us anything, it's that taxes will never be the whole solution.

> we should have at least ~60% top marginal tax rates and treat capital gains exactly the same as income

I agree on principle with this bit at least, but I'm pessimistic that a change like this could ever happen. It seems right now the cat and mouse game is around what counts as income and what doesn't, and increasingly complex methods of exercising control over some asset without ever "earning" it until it's beneficial to do so, if ever.

I’m not an economist so someone with more insight can weigh-in if I’m speaking out of turn. My personal concern with Amazon is a similar one I had with Wal-Mart in that there seems to be a relationship between stagnant wages acceptance based on access to lower and lower cost goods. This seems to me to be an unsustainable race to the bottom that benefits large vertically integrated multinationals no matter how many economic arms they figuratively break in the process.

That being said I’m not sure if that is a problem that Amazon is actually creating or just a consequence of wage supression being easier to accept when technology makes goods cheaper.

It's a bit of a trade. I'd say it comes down to market efficiency.

We all understand why efficient markets are good. It allows large numbers of people to affordably access a variety of goods and services. That said, people rarely discuss the downsides of extremely efficient markets.

In an inefficient market, there are lots of opportunities for someone to step in and find a way to make money. For instance if shipping and storing goods is expensive to do in small quantities, and your area doesn't have enough access to tools, you could exploit that inefficiency and make some money by opening a hardware store. You would take on the cost of storing, transporting, and insuring a large quantity of goods, and you'd take advantage of economies of scale in a way that regular consumers can't. You make money, and your community is better off, because now they have a place to buy hammers, paint, and other hardware.

In a highly efficient market, people have already found most of the obvious opportunities to make money. If shipping is cheap enough and online ordering is convenient and secure enough, it could make sense for one entity to become so large and efficient that they dominate all of retail.

It's a lot harder to run a successful hardware store in 2018 than it was in 1978. You need retail space, employees, etc. Meanwhile your competition can exploit economies of scale in a way that was impossible a few decades ago.

Is this a bad thing? It's hard to say. It gives lots of people cheap access to goods. It also makes it hard for small players to break into the scene, and local economies are probably not going to be able to adapt very quickly.

I agree with a lot of this thanks for the response. What are your feelings on some kind of regulation around local protections? I know regulations are generally percieved quite harshly on HN. But in a highly efficient market it seems like you may at some point no longer have local access to goods. Which seems like a dangerous recipe if so&so location becomes no longer worth the cost of shipping goods there but the local stores have already perished.

I'm in favor of good regulations, but I'm also not a libertarian. I'm a fan of the Scandinavian approach; well regulated free markets.

That said, I'm relatively new to investment. I've been reading a lot on the subject for the last few months, but there are people here who know way more on the subject than I do. It's certainly been highly educational, but it hasn't done anything to shake my core belief that markets should exist to serve people, not the other way around.

Seems logical I definitely agree with the sentiment about markets existing to serve people.

I’m in a similar place with my research I know enough to know there is a problem but then again thats the easy part fixing it is the tough bit.

Amazon seems to have displaced other large low-paying companies than it has mom and pops (who were already gutted by Wal-Mart and the like). In fact Amazon props up tons of really tiny businesses that sell through its platform.

Seems like an effort to dismiss the new antitrust movement's goal of helping people realize the problem presented by these enormous companies is a political problem that needs to be analyzed across the many ways society is affected.

The author doesn't make a very spirited defense of his main point, because he distorts the neo-Brandeisian analysis of the effects of Amazon on business and employment into a question of whether the means Amazon used to achieve those effects are legal.

Modern Anti-trust is looking to see whether new standards should be applied to anti-competitive behavior, based on how the most powerful companies are affecting society. They're not trying to litigate whether our current megacorporations broke any rules to get where they are.

But even conceding that point, let's return to the introductory paragraph, What does it mean for a company to be Too Big? There are obvious answers, like how a company that is "too big to fail" holds the government and citizens as collateral when it gambles.

But what about something that applies to the tech monopolies more directly? Too Big to Manage. It's an absentee landlord type situation. Facebook allowing people to sell oxycontin and meddle with the US election comes to mind, but what about:

1) Good faith usage of Amazon can get you put on restricted traveler lists. https://lifehacker.com/your-amazon-order-might-lock-you-out-...

2) Amazon facilitates the sale of counterfeit goods, including pet food. https://news.ycombinator.com/item?id=16448001

3) It seems to be facilitating money laundering. http://fortune.com/2018/02/22/money-laundering-books-amazon/

4) And we've all seen the rest of the articles, about illegal drugs on amazon, about fake review scams, and more

Those are the points the author should address to counter anti-trust's uneasiness about amazon

This was the tipping point for me, actually, when I went through this same experience about a year ago:


It sounds like a minor bizarre Kafkaesque corporate nightmare, but the whole experience was so surreal I can't begin to convey it. Amazon demands, out of the blue, with no explanation, copies of sensitive financial documents to immediately be sent to strange unknown numbers over fax, or they will shut your account down. And when you do comply, they assert completely capriciously, that you have not, without explanation. And then they shut your account down. The whole thing seems like some obvious scam, except that Amazon representatives can confirm for you that it is real, even though they themselves cannot actually communicate with anyone involved.

I mention this here because of the sense of impunity involved. It was so absurd that any other corporation wouldn't think about doing something like this because of the obvious consequences that would occur.

I've generally felt positive toward Amazon over my lifetime, but in the last couple of years I've soured on them, and it's directly related to a large list of factors that in aggregate suggest Amazon is too large and is abusing its position.

The article undermines its own arguments by pointing out things like Amazon represents "less than half of all online commerce," that "(44%) takes place on its platform." The author is attempting to argue this is not too much, but to me their argument only proves the point.

I'm not sure what to do about it, but Amazon has become a problem, and they are abusing their monopoly.

Yes, it is about antitrust and monopolies. Many of us want competitive free markets. We need policies to fight the natural monopolies of the recent past, with a recognition that network effects and financial concentration have made monopolies and oligopolies much more dangerous.

Alas, the government has largely been captured by these financial interests. And the consumer is giving up freedom of choice for convenience, and not paying attention to this seemingly abstract problem. Thus the outlook for fighting these interests is gloomy.

Too me it's all about bundling. You need to take a lot of crap offerings because they've bundled it together with the one or two things they're really good at. To the point where it's take it or leave it proposition.

I don't propose to have an answer. But, bundling products, services and contract clauses into "take it or leave it" propositions make competition difficult.

> But, just as in 1993 with Walmart, and now with Amazon, the basic fact remains that consumer preferences shift.

Tragedy of the commons and undesirable local optima are still a thing. Yes, we might want cheaper and more convenient shopping and continue to buy stuff from Amazon, and also still might not want the long term negative effects of Amazon slowly crushing all competition.

The rest of the article is about whether what Amazon is doing fits an existing definition of anti-competitive. That's all fine and good, but a larger question is whether that definition of anti-competitive is the only thing we should be worrying about. e.g. yes, Amazon forces market conditions to improve for customers in the short term, but I have zero doubt that once they crush competitors they'll happily jack up prices.

There's also perhaps an argument that the level of automation and technological prowess that amazon brings is different from what Walmart had back in the 90s. There the argument was that walmart is walmart, but local shops still at least have a premium niche to fill (which, while true, did do disasters to many local economies which didn't have the clientele for niche stores). Now perhaps Amazon is good enough that it might even destroy that gap too.

I think this is a good time to introduce Richard Wolff, my favorite economist. Here, Wolff makes a few general remarks about Amazon in comparison to outsourcing to China:


Search for "Chromecast" on Amazon. How exactly, is that not anticompetitive?

Because they are far from the only store and it's easy to get a Chromecast wherever you are? You can't buy one at the Apple Store either, but that's fine.

Sherman antitrust act has been used in the past to break up companies which has been to large for example AT&T and Standard oil.


And here we see capitalist apologists trying to jettison capitalism and move over into feudalism.

By definition the only time a market can function is when no firm is large enough to have an impact on prices.

Amazon can. Amazon is too big and needs to be reduced into smaller chunks.

The best solution is a revenue tax for companies. Just how people pay an income tax and a consumption tax so too should corporations. That the largest will splinter into thousands of small ones is a feature that will kick start competition and get us out of the 'too big to fail' economic funk we have been in for 20 years.

Whose definition says that?

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