Amazon: Part One. The Unfulfillment Company.

1997, Special Libraries Conference, Seattle, WA. Jeff Bezos interviewed by Richard Wiggins.

RW: Hi there. Who are you?

JB: I’m Jeff Bezos. (laughing)

RW: And what is your claim to fame?

JB: (Laughing) I’m the founder of Amazon.com

RW: Where did you get an idea for Amazon.com?

JB: Well, three years ago, I was in New York City working for a quantitative hedge fund, when I came across a startling statistic that web usage was growing at 2,300% a year, so I decided I would try and find a business plan that made sense in the context of that growth, and I picked books as the first best product to sell online after making a list of like 20 different products that you might be able to sell.

And books were great as the first best, because books are incredibly unusual in one respect. And that is that there are more items in the book category than there are items in any other category by far. Music is number two. There are about 200,000 active music CDs at any given time, but in the book space, there are more than three million different books worldwide, active and in print, at any given time across all languages.

More than one and a half million in English alone. So when you have that many items, (you) can literally build a store online that couldn’t exist any other way. And that’s important right now, because the web is still an infant technology. Basically, if you can do things using a more traditional method, you probably should do them using the more traditional method.

I thought I had a fairly decent grasp of Amazon before putting this together. It wasn’t until I assembled the pieces for this essay that I only started to discern the magnitude of Amazon’s influence over us. Actually, I’m not even sure that it’s fair to call it a company anymore.

As we move through the episode, one thing to keep in mind is Amazon is just getting warmed up. It will more than likely surpass Walmart as the world’s number one company in terms of revenue, if not this year, then next year. There is literally nothing standing in its way. Regulators, consumers, competitors. Nothing, and no one, will slow them down. The best we can hope for is to contain it, but that relies on one thing:

Whether we want to or not.

There are more profitable companies. Energy companies in China, Apple, Microsoft, Google, JP Morgan Chase—these companies all boast stronger profit margins, but that too won’t last forever. It’s difficult to imagine a scenario over the next five to ten years where Amazon doesn’t become the single largest, most profitable and influential company on planet Earth.

So why do this? Just another essay to prove how fucked we are? Another example of a company that embodies the full perversion of the capitalist neoliberal economic model? Well, partly. I do feel as though it’s important for us to prove our ongoing thesis by specifically pointing to an obvious symptom of this disease. But I also think it’s important to fully comprehend the scope and depth of Amazon’s influence because I’m not entirely sure that it’s widely understood.

But, believe me, I’ve also heard the call that we need to do more than just explain things wherever possible and offer solutions, should practical solutions exist. And, on this, I do think there’s a little daylight. Although, I want to temper any potential enthusiasm here. Amazon has been around for nearly 28 years at this point. It’s not an overnight sensation. There’s no one policy measure, piece of legislation, social action or even competitor on the horizon that is going to suddenly unwind the juggernaut that is Amazon.

So framing is important. As it always is. It’s one thing to be offended by the sheer size of Amazon. To view its founder as an evil billionaire who evades taxes, gives back paltry sums to charity and indulges fantasies of space travel in phallic rockets. We can detest the abusive working conditions at their plants. Decry their anti-competitive and monopolistic practices. All of it. But we should always be asking why. What’s the end game? Who’s really getting fucked? How much is the changing nature of business and innovation versus how much is manipulation, greed and harm?

Are we mad because there’s something really, really foul at play here, or because they’re winning?

So let’s do it. Let’s unf*ck Amazon together for the next little while and try to figure out what’s at stake. Because what really set me on my heels after putting together the pieces, is that Amazon isn’t ordinary. People talk about Elon Musk, oh he’s a genius. Smartest man on the planet. Let Elon run everything. Elon Musk is a fucking turd compared to Jeff Bezos. I mean it. Bezos may have handed over the day-to-day operations and moved into the executive chair capacity, but make no mistake. He’s in charge. And he’s in charge of way more than you might think.

There are clips from articles, news reports and a PBS documentary in today’s episode. And I pulled a lot of great stuff from a book titled Fulfillment: Winning and Losing in One-Click America, by Alec MacGillis. A few chapters in the book originally appeared in The New Yorker, but MacGillis finished compiling the book for release in 2021. Amazon is a pretty popular subject, so there were endless options for book love, but I really fell in love with this one because MacGillis skillfully weaves a very human narrative in describing one of the most inhumane companies ever conceived. Each chapter begins with a personal narrative and human face that paints a picture of the real American Amazon.

I liked his approach because there are so many characters to talk about when examining Amazon’s journey to one of the most powerful companies in history. There’s the story of Seattle, a central character in the rise of Amazon. The more than 1.1 million people in the United States that work directly for Amazon and 1.6 million globally. The cities and states across the country that bend over backwards to their own detriment to attract Amazon’s attention. Then, there’s society and culture, and what the online retail phenomenon has done to our relationships with goods and services and with one another.

And, of course, there’s the planet. The massive impact that our obsession with consumer goods and expediency is having on our home planet. There’s little wonder why Bezos is looking to get the fuck outta here at some point.

So let’s start with one of the central characters that most of us don’t see. And that’s the city Amazon calls home.

Chapter One

Seattle Not-So Super Sonic

A young Jeff Bezos had done his turn on Wall Street and set out with $100,000 from his parents and an idea to start an online bookstore. That part of the origin story is pretty well documented. His adopted city was Seattle, near corporate giant Microsoft, ostensibly because it placed him near some top notch developer talent on the west coast. Partially true. Another explanation is that one of his early investors was Nick Hanauer, an entrepreneur from Seattle. Pitchf*ckers will recognize Nick’s name as the host of Pitchfork Economics and founder of Civic Ventures. We’ll talk more about Nick later.

MacGillis explains that the real reason for selecting Seattle over California, which was already teeming with coding talent, was because, “If Bezos set up his company in California, he would have to assess sales tax on all his customers in the biggest state in the country.”

This first decision remains crucial to Amazon’s success. Because sales tax is a state issue, and the laws weren’t clear on how to collect sales tax on the internet, all products technically originated in Washington and were therefore exclusive of sales tax no matter where the customer was based. It’s the first example of tax avoidance that would define Amazon’s posture toward taxation generally and its relationship with government entities.

For the first few years, Amazon grew steadily. It made it through the dot com bubble and became an outlier in its ability to attract both money and talent. From day one, though it was established as an online bookseller, Amazon’s founder made it clear that he intended to sell everything under the sun. The ultimate one stop shopping experience for consumers around the globe.

But first, it had to dominate the publishing space. With ferocious intensity, Bezos set out to do just that. To say he succeeded would be a colossal understatement.

Amazon’s success in taking over the publishing industry was swift and complete. Having already gone public three years after its founding, it quickly became a Wall Street darling and had access to almost unlimited capital. With this unending supply of cash, Bezos would invest heavily into a technology infrastructure unrivaled in history. Technically, the company turned a profit in 2001, but that had more to do with a one-time quarterly settlement of debt in Euros. But, by the early 2000s, it did begin turning out a bottom line. Enough to satisfy investors as top line revenue continued to creep.

Expanding its product line meant hiring and building. The bigger the company got, the more human and physical resources it required to feed the machine. By the 2010s, Amazon truly entered the flywheel phase of its growth and revenue, and profits began to compound.

By this time, Amazon was beginning to dominate the Seattle landscape. The greater the competition for talent, the higher the wages. The higher the wages, the tighter the housing market and higher the prices. From 2010 to 2020, Seattle’s population grew by a staggering 21%. And with it, so did its troubles. But when Seattle’s public officials looked to its number one tenant for support, it was pretty much crickets.

As MacGillis writes:

“For years, Amazon had been strikingly unengaged in politics and civic affairs in Seattle, an absence that grew all the stranger the more it expanded. This was a reflection of the libertarian politics of its founder: government was not only a hindrance, it was irrelevant. Mike McGinn, the mayor from 2010 to 2013, had not met Bezos once while leading the city.”

The population boom, rising costs and the city’s inability to craft a comprehensive plan that involved corporate stakeholders turned into a full blown homelessness crisis. By the end of the decade, Seattle would earn the dubious ranking of the third highest homeless population in the country. In a city bursting with more than four million residents, most of whom barely scraping by, 11,000 fell through the cracks. The city council, having been ignored by its most notable tenant for more than a decade, voted to approve what was dubbed a “head tax” on the number of employees a company employed within the city. The funds would be used to support programs and housing for the most at risk population in the city.

Finally. After years of silence, the giant awoke from its slumber.

MacGillis expertly reviews how Amazon was able to lobby local council members and generate fear among residents that it would consider scaling back expansion plans in Seattle due to a proposal that would tax corporations on the number of employees in the city in order to fund programs to combat the growing issue of homelessness.

At the time of the proposal in 2018, Seattle had the unenviable distinction of the third highest homeless population in the country. Median home prices had risen to a shocking $800,000. And Amazon’s revenue hit a new high of $230 billion. It also reported that its profits exceeded $1 billion for the second consecutive quarter. A first for the company.

All in, the proposed tax, which was spread among all businesses, would net about $75 million per year. Amazon threw everything against the wall to help kill the measure and succeeded first by getting the council to reduce the tax. After the proposal was scaled back, it was estimated that Amazon’s share of the new tax would cost them about $12 million per year to help fight homelessness in the city it called home. The $230 billion corporation with multi-billion dollar profit margins would have to pay in the neighborhood of $12 million a year.

Amazon was pissed.

And so the measure passed. Until it didn’t.

Only two days after it passed, Amazon back-channeled a referendum to repeal it, spending more than $500,000 in one month with conservative lobbying firms to generate a groundswell of support against the tax. Then, just 60 days after the tax passed the council, the same members voted to repeal it. The corporate tax to help combat homelessness in Seattle was officially dead.

Chapter Two

Customer Centric

Anyone who has researched Amazon or heard Bezos speak will be familiar with Bezos’s obsession with the customer. This is everything. Building solutions for the customer almost to the exclusion of all else is what Bezos and his executive team have preached since the beginning.

It’s a winning strategy, or at least it has been for Amazon. The dark side of his particular brand of obsessiveness is an antipathy toward the workforce. Not the executives and developers. They’re sacrosanct in tech. But those bottom feeding trolls that do the work they haven’t figured out how to automate.

Not every success story is built this way. Take, for example, my personal favorite mogul Danny Meyer. Years ago, I lived in Manhattan right across the street from where the first Shake Shack would open up. I moved out literally months before this happened, and Meyer completely transformed Madison Square Park by involving local suppliers, giving back to the community surrounding his restaurants through beautification programs and other initiatives. My loss. But living down the block from his famed Union Square Cafe put him on my mental radar early.

So when his seminal business book Setting the Table came out, I purchased dozens of copies and gave them out to my staff. Because Danny Meyer saw the world differently. In a business known for “the customer is always right,” Meyer flipped the script. Here’s a passage from the book that explains his philosophy:

“The interests of our own employees must be placed directly ahead of those of our guests because the only way we can consistently earn raves, win repeat business, and develop bonds of loyalty with our guests is first to ensure that our own team members feel jazzed about coming to work. I place the interest of our investors fifth (behind guests, community and suppliers), but not because I don’t want to earn a lot of money. On the contrary, I staunchly believe that standing conventional business priorities on their head ultimately leads to even greater, more enduring financial success.”

Needless to say, Jeff Bezos has a different world view. I’m not suggesting there’s a one-size-fits-all approach to business. Valuing the customer is important in business, but valuing one’s employees isn’t mutually exclusive. Yet, Bezos has operated with a palpable disdain for the million plus workers that exist outside of Amazon’s ivory tower. Much of the innovation they’ve brought to bear has been in an effort to supplant the worker. Automate and improve efficiency. As The New York Times reported in a special investigation last year:

“Even before the pandemic, previously unreported data shows Amazon lost about 3 percent of its hourly associates each week, meaning the turnover among its work force was roughly 150 percent a year. That rate, almost double that of the retail and logistics industries, has made some executives worry about running out of workers across America.”

This isn’t normal. That’s how fucking bad the conditions are. But warehouse workers are expendable, and in Amazon’s estimation, human labor is merely a temporary bridge solution to full automation. Or, as close as they can get. As MacGillis notes:

“As seamless as it all looked, the company was still searching for ways to eliminate slack. For one thing, it had secured two patents for a wristband that could track workers’ every move, and even alert them via a vibration if it detected that they were going off task.”

He continues, explaining the company put in place “an automated system to track performance—productivity, time off task—and the system would flag you for termination if you lagged. That is, you could be fired by an algorithm.”

By the mid to late 2010s, word of discontent among Amazon employees was beginning to permeate the media landscape.

In 2018, The Intercept co-authored a report with The New Food Economy based upon data they obtained that showed Amazon’s employees were one of the top recipients of SNAP benefits, formerly known as food stamps. This report came out around the same time the government announced a pilot program where benefit holders could redeem coupons on Amazon.

The company built on disdain for the government was operating warehouses subsidized by state governments and filled with employees that required supplemental food benefits to survive and who could now redeem them on Amazon.

MacGillis calls Amazon’s philosophy “zero-sum sorting.” It’s the crux of his exposé about Amazon’s view. The world at your doorstep. At any cost. But now, the company employs more than a million people in the United States. That’s about one out of every 160 people working, if you count just direct employees. When you factor in the supporting economy, the Amazon ecosystem gets exponentially larger.

And, because their business relies on pounding margins and making everything cheap and accessible, they’re extracting a toll in more places than just their suppliers. More for them, less for you, all to make goods cheaper and cheaper. And the more the consumer falls behind, the more the government is required to step in and fill the gaps. Maybe more debt. Another job. Maybe, you can sign on to deliver packages at night so you can afford to order more packages during the day.

Chapter Three

Gaming the System

Bezos is currently feuding with Biden. He feuded with Trump. Clapped back at criticisms from Bernie and Elizabeth Warren. Ignored the politicians that ran his home city of Seattle. Fought taxation on their goods. Hid profits for years by funneling them through Luxembourg. Bezos has done everything in his power to reflect the libertarian image of the self made man behind the nearly half a trillion dollar company that employs a million people. He doesn’t need anyone’s help.

This is the same company, as MacGillis points out that:

“In 2017 alone, Amazon would collect well over $100 million in subsidies to open fulfillment centers around the country, for a total of more than $1 billion over the previous decade. The company had a whole department tasked with securing subsidies—it called this its office of ‘economic development.’”

By the late 2010s, Amazon had become a political powerhouse, bending states and the federal government to its will every step of the way. Honestly, it’s a masterclass.

It might not seem like a big deal to own a newspaper these days. But there are still a handful of newspapers that matter. Papers of record. The Wall Street Journal. The New York Times. Financial Times.

And The Washington Post. Again, MacGillis:

“In 2013, the Graham family, overwhelmed by upheaval in the news business, was looking to offload The Washington Post, which had been in its hands for 80 years. Don Graham met with Bezos to discuss the matter at the annual Sun Valley, Idaho, conference held by investment bank Allen & Co. Four weeks later, they announced the sale of the paper for $250 million, which at the time was less than 1% of Bezos’s estimated net worth.”

In 2015, Amazon hired former White House Press Secretary Jay Carney.

By the end of the 2010s, it maintained the largest lobbying presence in Washington D.C. among its tech peers, with almost 30 full-time lobbyists in one office and more than 100 contractors spread out across D.C.

“It lobbied on the sales tax, which it still didn’t assess on most of the third-party sales that now made up more than half of its U.S. retail business. It lobbied against regulations for drones, which it hoped to use to deliver packages. It lobbied to maintain the discounted delivery rates it enjoyed with the postal service. It lobbied on government procurement, seeking to become the one-stop shop for all federal purchasing. It lobbied against any effort to bring antitrust scrutiny to the company.”

Even more devious, Amazon tapped a former Obama administration official named Anne Rung to establish an online procurement department within the company. Her first target was a school district in Northern Virginia, answering what might seem like a simple “request for proposal” (RFP) to purchase school supplies. But this district was far from ordinary. The district was the lead bidder in a cooperative purchasing agreement for a network of, “55,000 school districts, police departments, and other local government entities operated by a for-profit company called U.S. Communities,” writes MacGillis.

Rung was successful because she worked backchannels to have this and many subsequent RFPs designed to specifically include language for a portal. This is important. It was less about the bulk cost of procuring goods and more about how they would be purchased. Amazon operated ostensibly the only full scale platform, thereby making each RFP effectively sole sourced. Rung’s plot worked and the little school district RFP resulted in a contract worth $5.5 billion dollars.

Impressive. But Rung was just getting started.

As The Guardian reported, Rung would shift her sights to a bigger target: The Federal government itself:

“Emails seen by the Guardian show that the Amazon executive Anne Rung communicated with a top official at the General Services Administration (GSA) about the approach the government would take to create the new portal, even before the legislation that created it—known to its critics as the ‘Amazon amendment’—was signed into law.”

This amendment was useful in the same manner in that Amazon’s platform would be utilized as a central clearinghouse for purchasing. That way, Amazon didn’t even need to own the goods that were sold. Every transaction, regardless of who the seller was, would benefit Amazon’s bottom line. MacGillis explains the process succinctly:

“Amazon took a roughly 15% cut from any sales local suppliers made on the Marketplace. ‘With this strategy,’ explained a report by the Institute For Local Self-Reliance, a research and advocacy organization that defends communities from corporate control, ‘Amazon is following an approach that it’s already used with consumer goods: Positioning itself to be not just the retailer selling goods to public agencies, but the platform through which its competitors have to go to reach their buyers. This enables Amazon, through the fees that it charges sellers, to collect a private tax on their sales.’”

Remember when we talked about the Enron Loophole that allowed companies like Enron to engage in speculative behavior in the energy markets? How it was snuck into a larger bill to avoid scrutiny? Same thing here. The so-called Amazon amendment was slipped into the 2017 National Defense Authorization Act (NDAA) and allowed the DoD to make purchases of up to $50 billion in the Amazon marketplace.

The government playing footsie with big business is hardly novel. But the local relationship is disturbing on a more visceral level. Especially when they give themselves over and pay fealty to Amazon’s corporate power through tax breaks and subsidies. One anecdote in Fulfillment is how an EMS team wasn’t bothered by the regular calls to assist workers in distress at an Amazon packing facility. That was their job. What bothered them is that they knew they were doing it for free.

Local municipalities don’t even realize the double dip damage they’re doing to their own communities by accepting these warehouses and fulfillment centers. By giving them subsidies and incentives, they’re robbing local coffers right off the bat. When these centers come into town, Amazon can immediately jump in to offer prime service to the community. This, in turn, chips away at the local community businesses and storefronts that can’t compete with the service, and they go out of business, thereby further depriving the community of badly needed property and sales tax income. And so it goes.

More to come, Unf*ckers. But, for all practical purposes, here endeth Part One of Amazon: The Unfulfillment Company.