Is the artisan trend a precursor to a Big Tech backlash?

In the Economist’s 1843 magazine, Ryan Avent writes about the resurgence of the “artisan” culture in Crafting a life:

Before the Industrial Revolution, the craft economy was simply the economy. Clothing, processed food, furniture, wood and iron tools were all made by hand, using simple equipment, one unique batch at a time. Artisans learned their trade through years of observing experts, within the family or in a structured apprenticeship. The quality of both the instruction and the finished products was highly variable. There was virtually no opportunity for mass education in trades, nor a chance for better producers to capture increased market share by scaling up production.

The Atlantic ran a similar piece recently Craft Beer Is the Strangest, Happiest Economic Story in America.

At the same time, the number of public companies has decreased and the “Big 4” tech companies make up 24% of the market cap of $SPY. Some amazing numbers, per Scott Galloway in Esquire:

Over the past decade, Amazon, Apple, Facebook, and Google—or, as I call them, “the Four”—have aggregated more economic value and influence than nearly any other commercial entity in history. Together, they have a market capitalization of $2.8 trillion (the GDP of France), a staggering 24 percent share of the S&P 500 Top 50, close to the value of every stock traded on the Nasdaq in 2001.

How big are they? Consider that Amazon, with a market cap of $591 billion, is worth more to the stock market than Walmart, Costco, T. J. Maxx, Target, Ross, Best Buy, Ulta, Kohl’s, Nordstrom, Macy’s, Bed Bath & Beyond, Saks/Lord & Taylor, Dillard’s, JCPenney, and Sears combined.

Meanwhile, Facebook and Google (now known as Alphabet) are together worth $1.3 trillion. You could merge the world’s top five advertising agencies (WPP, Omnicom, Publicis, IPG, and Dentsu) with five major media companies (Disney, Time Warner, 21st Century Fox, CBS, and Viacom) and still need to add five major communications companies (AT&T, Verizon, Comcast, Charter, and Dish) to get only 90 percent of what Google and Facebook are worth together.

And what of Apple? With a market cap of nearly $900 billion, Apple is the most valuable public company. Even more remarkable is that the company registers profit margins of 32 percent, closer to luxury brands Hermès (35 percent) and Ferrari (29 percent) than peers in electronics. In 2016, Apple brought in $46 billion in profits, a haul larger than that of any other American company, including JPMorgan Chase, Johnson & Johnson, and Wells Fargo. What’s more, Apple’s profits were greater than the revenues of either Coca- Cola or Facebook. This quarter, it will clock nearly twice the profits that Amazon has produced in its history.

Will the trend of the big getting bigger continue? Or is there enough of a Big Tech backlash to make things start regressing to more normalized levels?

We’re certainly not making a call and will continue to look for further evidence.

 

How Amazon continues to grow

There’s no doubt that Amazon continues to grow their power in the world of ecommerce. Here’s an interesting look at how they continue to grow their role with each additional transaction.

As crowds build on either side of the platform, the middleman becomes ever more indispensable. Oh, sure, a new platform can enter the market—but until it gets access to the 480 million items Amazon sells (often at deep discounts), why should the median consumer defect to it? If I want garbage bags, do I really want to go over to Target.com to re-enter all my credit card details, create a new log-in, read the small print about shipping, and hope that this retailer can negotiate a better deal with Glad? Or do I, ala Sunstein, want a predictive shopping purveyor that intimately knows my past purchase habits, with satisfaction just a click away?

Similarly, the more online buyers and sellers are relying on Amazon to do their bidding or settle their disputes, the less power they have relative to Amazon itself. They are less like arms-length transactors with the company, than they are like subjects of a despot, whose many roles include consumer and anti-fraud protection.

While this may be an argument against the practice, there doesn’t appear to be any change coming. Until there is, there’s no reason to believe Amazon won’t continue to grow.

See the full post From territorial to functional sovereignty: the case of Amazon at openDemocracy.

Disclosure: Long AMZN

Using crypto to pay viewers & other new business models

Jeremy Epstein looks at how Amazon is integrating advertising into their streaming video service, and how it could be applied to crypto-enabled business models of the future:

Let’s leave aside the legitimate fear that now Amazon has even MORE information about you, locked away in proprietary databases, and can manipulate you at will since who cares about that anyway, right?

What Amazon is now doing, better than anyone in the history of TV has ever done, is tie content viewing directly to revenue.

For every show you watch, intro you skip over, episode you quit halfway through…every single click, you are going to earn some sort of crypto-token for it.

That’s right, you will get paid to watch TV. (That’s all we need, right? At least my kids can become revenue generators now.)

Vendors will run AI algorithms on all of the data that you (and others) generate and serve even more relevant ads based on your viewing habits.

You’ll get your content for free and you will get paid to watch it.  Then, you’ll use those crypto-tokens to buy the products that advertisers put in front of you (which is paid for in the same crypto-tokens), all part of the circular economy.

It likely won’t be Amazon that will find a way to pay you, as they’ve shown they are happy to keep your data in exchange for finding ways to sell more, but there are new business models, made possible by crypto and blockchain.

via Amazon Shows How You Will Get Paid in Cryptocurrency to Watch TV at Never Stop Marketing…

Amazon Go and the Future

The economics of Amazon Go define the tech industry; the strategy, though, is uniquely Amazon’s. Most of all, the implications of Amazon Go explain both the challenges and opportunities faced by society broadly by the rise of tech.

via Amazon Go and the Future at Stratechery by Ben Thompson

More…

Keep in mind, most businesses start out in the red: it usually takes financing, often in the form of a loan, to buy everything necessary to even open the business in the first place; a company is not truly profitable until that financing is retired. Of course once everything is paid off a business is not entirely in the clear: physical objects like shelves or refrigeration units or lights break and wear out, and need to be replaced; until that happens, though, money can be made by utilizing what has already been paid for.

This, though, is why the activity that is accounted for in R&D is so important to tech company profitability: while digital infrastructure obviously needs to be maintained, by-and-large the investment reaps dividends far longer than the purchase of any physical good. Amazon Go is a perfect example: the massive expense that went into developing the underlying system powering cashier-less purchasing does not need to be spent again; moreover, unlike shelving or refrigerators, the output of that expense can be duplicated infinitely without incurring any additional cost.

As always from Stratechery, a great analysis of what Amazon Go means for the future.

 

Tough to Please

From A Bull Market Should Make Investors Happy:

Generally, this far into a bull market, euphoria kicks in. In 1929, shoeshine boys were doling out stock tips. In 1999, people were quitting their jobs to trade technology stocks from their living rooms.

These days, each successive stock market record seems to spur more hand-wringing than cheerleading. There is anxiety about overhyped shares, about the possibility of central banks withdrawing their support for global economies, even about markets simply being worryingly quiescent, as evidenced by the historically low readings of the volatility index known as the VIX.

This is from Landon Thomas Jr. in the New York Times. He includes the following numbers, which really puts the relative small size of crypto in perspective:

Since early 2009, the market capitalizations of Amazon and Apple, have soared from $26 billion and $74 billion to $532 billion and $872 billion.

By definition, it seems there are a number of people happily putting more into the market.

Mr. Bernstein argued that investors should care the economic and corporate fundamentals — not the remote chance that a calamity will strike.

“You cannot invest successfully,” he said, “when you are crouched under your desk in a fetal position.”

Amazon’s growing competitor list may be a problem

From Michael Coren at Quartz on the history of competing with so many companies, as Amazon does:

Perhaps no other company in history has sold so many different products (354 million) while competing against so many other companies (hundreds). In the past, that power hasn’t lasted. Amazon is betting it will be different.

On how it’s worked in the past:

General Electric (GE) fell into this trap after World War II. As GE brought hundreds of industries under its roof, the company’s stock began to track US booms and busts. Today, analysts compare GE’s portfolio of business from jet engines to oil-field safety valves to an actively managed mutual fund—and one that doesn’t beat the market. Since the mid-1940s, the $181 billion conglomerate has barely outperformed the S&P 500. Almost all of its standout performance came during the 20-year tenure of CEO Jack Welch in the 1980s and 1990s–a management feat that hasn’t been repeated.

Amazon has a nearly unprecedented advantage and that may be damaging in the long-term:

Modern antitrust theory, rooted in the ideas of “consumer harm” from monopolists’ high prices, misses the threat posed by Amazon, Khan argues. The structural advantages Amazon wields over competitors gives its the ability to price products below cost and restrict access to customers. Over time, Amazon’s stranglehold on the market may degrade product quality, variety, and innovation, and enable exploitive pricing after competitors are eliminated.

While they don’t fit the classic definition of a monopoly, Amazon is aware trouble may lie ahead and is prepared:

The company’s lobbying budget ballooned to $11.4 million in 2016, a six-fold increase over 2011, reports the Washington Business Journal. Amazon now retains at least 77 lobbyists, two of them former heads of the Department of Justice Antitrust Division during the Obama and George W. Bush Administrations, brought on to help ensure the Whole Foods acquisition.

Maybe it’s different this time, or perhaps Amazon will someday be unseated by the likes of OpenBazaar or another blockchain enabled marketplace.

 

Has the Bitcoin bubble already burst?

JC at AllStarCharts asks whether the Bitcoin bubble has already burst and that it’s now performing similar to other assets after a crash. He even makes the case that Bitcoin is underperforming the likes of Nvidia and Amazon.

I think a lot of people are asking the wrong question. To me, it’s not whether or not Bitcoin is in a bubble? It’s whether or not the bubble in Bitcoin already popped?

What we care about when it comes to supply and demand dynamics is how the asset has performed since the bubble popped. In the case of Bitcoin, to me it’s crystal clear that a bubble popped in 2013. Again, it’s not that I’m suggesting it was “the” bubble, but an 86% crash from high to low? Yes, that is the definition of a bubble popping. The bitcoin enthusiasts argue that there were plenty of crashes prior to that, which is fine. Moving forward, from any sort of structural perspective, this 2013-2015 crash is our point of reference. Crashes prior to that led to that run up we saw into 2013.

It certainly seems reasonable to believe after reading this post.