Thomas Friedman, Genius, Circa 1999: Amazon.Com Is Doomed

Always remember that the professional media class who pontificates us has no expertise, or even training, and often not even any basic familiarity with the wide world of subjects they lecture you about.

I do that, too. But I admit it all the time.

Rob Long writes:

Look, the point isn't that Friedman made a stupid prediction. We all make stupid predictions. The point is that we have a pundit class that's uniquely unqualified to pronounce on business, and business opportunities, and yet arrogantly and pompously does so anyway. There's something monumentally irritating about Friedman's flatulently confident assertions, backed up as they are without a shred of experience, knowledge, or skin in the game. It's worth remembering -- especially these days, when business and economic predictions keep erupting from the noisy, nasty, uninformed bowels of the pundit class.

They've done nothing but comment on stuff other (better) people are doing but they're pretty sure they should be ordering the doers to hop to and follow plans of their devising.

A point made a while ago -- forget who -- is that Amazon.com's real value is that it is a trusted medium of exchange on the internet. Entering credit card information is still a wiggy thing for most people (myself included) when going to an unknown, or even known, vendor; Amazon's great value comes from the fact that they've been around so long they've substantially overcome that.

Amazon has a lot of third-party vendors selling through it. Amazon actually does the money collecting, then passes it on to the third party, after taking a nice cut for their trouble. Works out for everyone -- these rinky-dink vendors who no one would otherwise trust get to make their sales, and Amazon gets their slice, and everyone's happy.

So what Amazon is really selling at this point is convenience and trust in their credit-card billing system. People who control stuff like this -- the metastructure of commerce -- that basically have a license to print money. Just take a little slice out of millions of transactions and pretty soon you're talking serious money.

Early on, skeptics said of Amazon, "Well, their profit margins are razor thin; they're basically selling you four quarters for a dollar. There is no money in it and never will be."

Bezos said that wasn't true -- of course we're making a profit, duh, he countered -- but even if he had been operating at break-even or a loss he was piling up what would ultimately be Amazon's power. Just market-share and trust.

Now Amazon can sell you a lot of stuff at prices that either aren't at any kind of attractive discount or even might be a little over-priced but, what the hell, it's easy, let me just push these three buttons and order this thing even if it costs me a few extra bucks.

Anyway, I don't suppose Friedman could have foreseen that in 1999, but then, it's not like he foresaw most of it and just missed that neat twist. He missed it all.

And will continue missing it all. Because he doesn't know anything. Almost none of them do.

Powerline (the first link) gets in a further dig at Friedman by comparing Amazon stock's prices with the New York Times stock's.

Kind of predictable, though Friedman failed to predict it: A company that offers a useful product will prosper and a company that offers dreck will suffer.

posted by Ace at 05:48 PM

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