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Amazon, the Company that Ate the World

The Kindle Fire (internal code name: Otter) is designed to ensure that even more of those purchases go to Amazon. The company has built a tablet-optimized shopping application, with simplified and streamlined pages but none of the clutter of the main website. The app is pre-installed and sits at the bottom of the Fire’s main screen (users can get rid of it if they want). The device also comes with the enticement of a 30-day free trial of Amazon Prime, the company’s $79-a-year two-day delivery program that tends to convert members into Amazon addicts who triple or even quadruple the amount they spend on the site. Since March, Amazon has also administered its own app store for Android devices, culling Google’s more comprehensive selection and removing everything that’s offensive and unreliable. Kindle Fire owners will have access to apps from Pandora (P), Twitter, Facebook, and Netflix (NFLX). Other competitors such as Barnes & Noble (BKS) can submit their apps, but it will be much easier for Kindle Fire owners to find Amazon’s own content.

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Although the decision to design and build its own hardware is a high-stakes bet, it’s equally true that Bezos had no choice but to enter the tablet business. About 40 percent of Amazon’s revenues comes from media—books, music, and movies—and those formats are rapidly going digital. Amazon was late to understand the speed of that transition; Apple, which launched the iPod in 2001 and iTunes two years later, wasn’t. The iPad has only strengthened Apple’s hold over digital media. There’s a Kindle app for the iPad, but Apple takes a 30 percent slice of all content that app makers sell on the tablet and has restricted Amazon from directing iPad users to its website in order to avoid giving Apple its cut. Doing business on the iPad threatens Amazon’s already thin profit margins.

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Losing the tax advantage may not be such a bad thing. If and when Amazon starts collecting sales tax, it will be free to set up distribution centers right outside major cities, which would enable even faster deliveries than it offers now. As part of Amazon’s deal with California, for example, the company has pledged to spend $500 million on new warehouses and hire 10,000 full-time workers and 25,000 seasonal employees. Customers in California could soon end up getting same-day deliveries of products and even produce. Amazon’s experimental “Fresh” grocery program is now active in Seattle, where the company already collects sales tax.

Nancy Koehn of Harvard Business School thinks Amazon may be getting big enough for people to finally start considering the ramifications—for towns, shopping centers, and jobs—of a world dominated by online buying. She recently discussed Amazon on Wisconsin Public Radio—not the most neutral forum—but was surprised when almost all of the phone calls from listeners were critical of the company. “Americans get very nervous about centralized power that affects their communities,” she says. “We get a little bit nervous about bigness, yet we want the convenience and the pricing and the material plenty that bigness allows.”

[business week]

California and Bust

A compelling book called Cal­ifornia Crackup describes this problem more generally. It was written by a pair of journalists and nonpartisan think-tank scholars, Joe Mathews and Mark Paul, and they explain, among other things, why Arnold Schwarze­neg­ger’s experience as governor was going to be unlike any other experience in his career: he was never going to win. California had organized itself, not accidentally, into highly partisan legislative districts. It elected highly partisan people to office and then required these people to reach a two-thirds majority to enact any new tax or meddle with big spending decisions. On the off chance that they found some common ground, it could be pulled out from under them by voters through the initiative process. Throw in term limits—no elected official now serves in California government long enough to fully understand it—and you have a recipe for generating maximum contempt for elected officials. Politicians are elected to get things done and are prevented by the system from doing it, leading the people to grow even more disgusted with them. “The vicious cycle of contempt,” as Mark Paul calls it. California state government was designed mainly to maximize the likelihood that voters will continue to despise the people they elect.

[Vanity Fair]