Amazon as a Vector

“Platforms act as both springboards for alterity and the means for monopolisation. They increase exit amongst the platform owners in some senses, and amongst the users in others”[1]. They are hubs for communication and vectors for different forms of socio-economic organisation. If we view history as a series of Kondratiev waves (50-60 year developments of techno-social evolution) or epochal sequences (as defined by Mumford as the period of technics), our current period can be described as the “Age of Informations and Telecommunication”[2] or the intertechnic period[3] respectively. Much as the neotechnic phase of production that Mumford identified sat between the eotechnic and paleotechnic forms, in the intertechnic the power of e-commerce, internet communicatory networks and social media sit between monopolistic tendencies and decentralist modes, with Amazon as a particular vector of this intertechnic phase. This phase is not some cliff-edge, but rather a representation of the ambiguity of internet structures (platforms, marketplaces, multimedia, etc.) that both have decentralising means and tendencies and have individual organisations in this ecology that attempt to control the flows and methods of these tendencies. Thus questions of antitrust, economic organisation and what our institutions should do and will be come to be primary.

The primary question of data is also central, as data is the nexus from which profit is developed and honed by platforms. The primary mechanism of platforms is to control and use the individual and collective data within its jurisdictional/market capacity. Platforms dominance in regards to the control of data situates them in a position between being a controller of the flow of information (i.e. governmental) and monetising that data for profit (i.e. a company). This contradictory nature presents problems related to definitions. Are platforms there to provide services to users and other producers, or are they themselves competitive companies in the same marketplaces as their users? One may ask why does this matter. So long as “rational economic actors working within the confines of the market seek to maximize profits by combining inputs in the most efficient manner”[4] what difference does it make that platforms control both the flow of goods and information as well as providing those same goods, so long as prices are fair for consumers and actors are efficient in their use of resources.

However from a structural perspective the development of quasi-governmental power amongst platforms introduces problematic dynamics. “A market dominated by a very small number of large companies is likely to be less competitive than a market populated with many small- and medium-sized companies. This is because: (1) monopolistic and oligopolistic market structures enable dominant actors to coordinate with greater ease and subtlety, facilitating conduct like price-fixing, market division, and tacit collusion; (2) monopolistic and oligopolistic firms can use their existing dominance to block new entrants; and (3) monopolistic and oligopolistic firms have greater bar-gaining power against consumers, suppliers, and workers, which enables them to hike prices and degrade service and quality while maintaining profits”[5]. Further the development of governmental power means a situation where payment is made for services rendered, like protection or the provision of infrastructure. Voice in this instance is limited if not eliminated altogether as the ability to debate or question the means of these provisions is curtailed. Effectively you either pay or go without, as platforms control both the flow of goods as well as being a producer in those markets. You participate on unequal or unfavourable terms, thereby ceding the autonomy that entrepreneurial activity and access to resources provide.

The development of platforms into governmental entities also increases the costs of complexity that come with being both a means of governance and a competitive company. The creation of forums whereby data can be unleashed by users means multiple dynamics can go beyond the platform’s control. Users can share information, hide their or others identities, provision illegal or semi-legal goods and generally subvert legal, moral or political norms. The closed Facebook group is one example. As are darknets and black markets linked through social media. So too are private messengers that obscure information and anonymise participants. Fake news also presents an information quagmire, as filtered junk clogs the media feeds of users and gatekeepers, making it difficult to differentiate between what is and isn’t true. Platforms then act as vectors, not just by subverting established governmental practice through the provision of services and control of information, but by letting those subversive means swell inside their own platforms. As the complexity of governance increases due to the transparency of data ownership and the cryptographic means of obscuring one’s activities, platforms-as-governance become unwieldy institutions that require more control right at the points where they begin to lose it.

The intertechnic period then has this as its central issue. As Mumford described the neotechnic period as holding the potential for new forms of technical and social governance to develop through the ubiquity of electric supply and the ability to produce goods in smaller settings, replacing the institutional behemoths of previous technics with local/regional markets, worker-led production and the decentralisation of technical productive knowledge, so too does the intertechnic period hold multiple means to develop alternatives. Platforms hold levels of potential that means either new forms of domineering control over the ability to interact with each other, exchange goods and services and produce information. Or within its interstices there is the possibility for new methods of socio-economic organisation and exchange to emerge and scale.

Our intertechnic period presents a varied number of challenges that are affecting both the way societies are governed and the way goods and information flow and trade. Slumps in business investment and productivity have produced short-term strategies for maintaining company growth and providing value. This has seen a turn away from shareholder value developed through pension funds and long-term interests to investment funds who reward on the basis of short-term financial gains[6]. With the increasing liquidity and speed of trade and logistical flows in the international economy that define this current Kondratiev wave, this short-termism can potentially increase as opportunities for capital funds and investment are difficult to come by as traditional institutions (banks, stock markets, governments) are more interested in propping up existing financial structures or increasing profit margins through speculative investments.

Platforms have been interesting in bucking this trend as they focus on loss-leading in established markets. For example “the premise of Amazon’s business model was to establish scale. To achieve scale, the company prioritized growth. Under this approach, aggressive investing would be key, even if that involved slashing prices or spending billions on expanding capacity”[7]. The scale produced has meant extension into multiple business lines with the purpose of cornering and dominating those markets. Combining this with its segmented business structure involving the separation of its organisation between function, managerial hierarchy and geographic division[8] means a structural system that favours market domination for the purpose of maintaining share value, as well as an ability to shift funds across the multiple lines of business, making Amazon into an investment vehicle as well as a competitive market entity and a provider of infrastructure.

However such a strategy presents its own risks. While platforms like Amazon have cornered markets through long-term investment strategies and developing itself as a utility[9], a central cog in the systems of e-commerce and retail, this doesn’t beget issues of public trust and the increasing complexity from running these multiple lines. This complexity isn’t just internal, but external as regulatory authorities and antitrust legislation question and change Amazon’s structure and corporate purpose. Amazon currently holds the ability to price discriminatorily amongst its consumers, depending on their shopping habits and activities. This both has the ability to change the way we view commerce, further segmenting and individualising markets, as well as entrenching a loss of trust as consumers become unaware of whether they’re getting a good deal. This also entrenches a lack of trust amongst its various stakeholders, as they too cannot guarantee a fair price for the goods they sell and market through the platform.

Its reliance on shareholder capital is another risk borne from the inability to integrate stakeholders into its organisational structure. Companies in general are “incorporated bodies which bring together a range of stakeholders – owners and suppliers of capital, labour, suppliers and customers – for the purpose of enterprise”[10]. The inability to integrate the needs or concerns of these stakeholders produces risks brought through rigidity as Amazon cannot respond to slumps in growth or investment. Also, the risk of not diversifying the stakeholder base of one’s company means losing market share to companies who do aggregate the various knowledge flows these diverse actors have. “A disadvantage of [Amazon’s] organizational structure is that it has limited flexibility and responsiveness. The dominance of the global function-based groups and global hierarchy characteristics reduces the capacity of Amazon to rapidly respond to new issues and problems encountered in the e-commerce business”[11].

To some extent this has been seen in the way book publishers have pushed back against Amazon’s pricing system, or the drops in inventory and operating margin as bespoke websites and newer e-commerce outlets begin to compete with Amazon’s retail operations[12]. The way Amazon scaled back operations of its Amazon Mom program with the buyout of Quidsi[13] also shows these risks, as this led to customer backlash and a move to other e-commerce outlets. In exploiting its stakeholders as it has done, Amazon risks increasing its costs and the complexity of its operations as regulatory and competitive burdens are placed on it to limit loss-leading prices or prevent imposing one-sided service agreements between Amazon and the sellers in its marketplace.

Competitive junctures open up as developments in e-commerce and other business lines move forward, exploiting the bottlenecks and issues present in Amazon’s organisational structure and market strategy. The segmentation of markets into niche elements and high-speed logistical flows create subversive conditions through which certain lines of Amazon’s business model can be outcompeted or outmoded. On the retail front, the increasing speed of delivery and the investment in experiences and individualisation of the shopping experience leads to a focus on 1. social care through the retailer i.e. direct provisioning, tailored services and round-the-clock customer care 2. Extreme just-in-time production runs. The concept of “retail as the third space”[14] shows the prevalence of these dynamics as retailers adapt business models to move away from being pure sellers toward focusing on things like experiences and making themselves blend in with the background of their location. With regards to JIT production lines, this becomes even more relevant as customer care and personalised experience go as much into the product as into the service, particularly when mixing online (where the product may be ordered and customised) and offline (where the product may be returned or further modified) worlds.

To significant degrees Amazon has already begun to tackle these issues through integrating high-speed delivery and logistics (through drones and autonomous vehicles) into its delivery services, as well as increasing the number of its regional distribution centres. Its investment in peopleless supermarkets is also indicative of recognising the risks these competitive junctures present, making the shopping experience seamless as bespoke product lines are combined with JIT logistics systems to make new third spaces through analysing people’s shopping habits and thus tailoring product lines and shop design to popular desires. This also makes retail spaces modular, as they are able to quickly cycle and recycle through various products lines based on varied consumer and stakeholder demands. Amazon is placing itself further into these markets as utilities, providing tools for experimentation and market segmentation.

However with these developments come the need to adapt due to climate change. ““When customers want to receive a product in one or two days, the carbon emissions increase substantially,” he said. “If you are willing to wait a week, it’s like killing just 20 trees instead of 100 trees.” Amazon didn’t say whether it would be buying carbon offsets outright, and absent that, the most likely way for it to reach its emissions goals would be to fine-tune its delivery process. The “last mile” of delivery—from a warehouse to a customer’s home, for example—is often one of the largest costs for e-retailers”[15]. The increased costs of offsetting carbon emissions presents the possibility that changes to Amazon’s delivery and logistics systems may be necessary, either increasing delivery costs for consumers or limiting product availability.

Things like blockchains[16] present another competitive hurdle, as the increasing desire for personalisation and curation brought forth through big data analytics and search result tailoring means that not only will people shop for price, but also for social or cultural purposes as with “emotional branding and prestige buying”[17]. This brings into question the production history of the product, from sourcing to authentication that blockchain can provide to some degree through unique identifiers and tailored delivery procedures that are recorded and tracked. Again, short run production runs and constant adaptability to market change suggest competitive fronts that large companies (with their huge knowledge-distributional issues) like Amazon may not cope with. The dynamics Amazon set forth can overtake it.

These developments then raise the fundamental question, why use Amazon as a platform provider at all, as the JIT services will become more readily available due to energy conservation needs/climactic shifts that change transportation and logistical patterns (particularly if competition law is pushed onto Amazon’s corporate structure or the structure of growth over profit falls flat due to retail slumps and the increasing need for adaptation due to worker’s rights issues and climactic shifts) and platforms such as Facebook and eBay become more ubiquitous, as well as micro-services based on regional economic patterns. Amazon’s drop in retail share[18] suggest such a dynamic already as its main profitable area is still its web services division. Competitors are thus beginning to eat at its market share, and even in the fields of logistics and infrastructure provision, it has competitors such as AliBaba and Mercado Libre in other global regions. And on the regulation front, even if national regulation does not quell the monopolistic tendencies, municipal regulation has already shown with Uber and Lyft that platform companies are vulnerable to concerted efforts to either regulate or ban at the city or regional level, producing the space for alternatives in the process.

These internal and external dynamics present significant challenges that established platforms like Amazon will struggle with. However, as Amazon’s monopolistic tendencies face greater recognition, regulation through common carrier provisions or fiduciary responsibilities increases the complexity of its operations that move from market operations to wider service provision. We see a transformation from Amazon-as-company to Amazon-as-governance as Amazon’s web services hubs and infrastructural and logistical services underpin market operations for other actors. By providing it fiduciary or common carrier responsibilities, there becomes “a decentralisation of juridical authority away from state legislation, akin to the feudal patchwork of different corporate forms that rivalled kingdoms and empires for political control. Thus in regulating platforms as distinct units, you increase the possibility for regulatory autonomy and the removal from direct control”[19]. Amazon-as-governance sits between states and markets as an independent regulatory authority for e-commerce and the provision of services to online marketplaces and retail outlets.

This regulatory independence brought through external fiduciary-legal responsibilities and inter-platform competition creates juridical possibilities alongside the new market and logistical possibilities that Amazon has instantiated in the fields where it exists as Amazon-as-company. Amazon, like other platform companies, is a vector for new socio-economic changes and possibilities. “Many categories in which decentralized marketplaces could outshine centralized providers aren’t actually here yet. We are, for instance, only now beginning to understand the value of our personal data, that we can own it, and that we might be able to earn from it. And we are only now beginning to explore the possibilities of non-human sales transactions by the means of IoT. Decentralized marketplaces will present the perfect environment for such product, buyer, and vendor categories to nestle into. Right now, we probably aren’t able to grasp the real potential of decentralized marketplaces. It’s nothing we can read about on the internet, because it hasn’t happened yet.

Applications that propose alternatives to existing options will always be compared to those existing options. Ideally, we would let go of our habit of thinking in extremes; it’s not the time to lock up a decentralized marketplace and an Amazon or an eBay in a cage and let them fight it out. It’s not “either or”, and there is no need for absolutes. Just like you can enjoy both vegan bacon and “bacon bacon” (unless that contradicts your ideology), you might find that you can use both centralized and decentralized marketplaces (unless that contradicts your ideology).

In the end, the market is going to decide who stays and who leaves. If decentralized marketplaces are able understand their users’ needs and continue to adapt and evolve, chances are that they will overcome what currently puts them behind centralized providers and provide the powerful benefits of decentralization to a growing range of consumer types”. With platforms developing into quasi-independent juridical authorities “I think a very realistic [scenario] would be [that] some sort of decentralized marketplace or market paradigm takes effect, and by the time Amazon or Lazada or whoever it is realises that this has happened, it’s too late for them to own it — but then they can still be a part of it”[20]. Amazon-as-governance would fit into this paradigm, acting as lender, guarantor and juridical arbitrator for the various marketplaces and companies within these spaces. It would provide arbitration (much like eBay), support to producers, fair price and services agreements and hospitality/care services.

“The solution for most companies building high-speed bespoke supply chains is not to develop distribution on their own. Instead they could either piggyback onto the efficient in-country infrastructure already built by e-commerce leaders like Amazon, Alibaba, and, increasingly, Google, or outsource to in-country local delivery services. Other options may emerge: For example, Amazon plans to launch an Uber-like app that would, among other things, connect individual truck drivers to shippers that need goods moved”[21]. As Amazon-as-company is outcompeted by smaller, leaner firms better able to exploit bottlenecks and innovate around pre-existing risks, Amazon-as-governance must take on the complexity of infrastructural and logistical provision that comes with regulating and structuring marketplaces. Regarding the technology at play (3D printers, drones, modular frameworks of design), the ephemeral nature of these suggests that competition (involving the downward push of costs as distribution is brought in board or diversified across variable platforms) will only increase, further increasing the complexity of Amazon’s platform governance strategies.

Amazon presents a platform that begets its own autonomy i.e. by allowing for sale at below market price, dynamics are presented that allow for direct-to-consumer production and consumption, as independent traders/producers can sell directly to consumers at pre-agreed fair prices set through services agreements. One can see this development in the way publishers are bullied into selling their books at set prices, and in the small pushbacks this has produced. Book prices could go up, but this then encourages intra-platform production and general cheapening through inter-platform competition as people reject raised prices caused by big producer demands.

I think inevitably Amazon will along with other platforms move into governance type relations, either through overt state regulation or through various opt-in mechanisms. The real question becomes whether Amazon can cope with the incredible social complexity this will bring, and whether the further segregation and fragmentation of its corporate units to cope with the knowledge/goods flows will mean Amazon will secede into its constituent parts in an autonomised mode of anti-trust separation patterns. And even assuming it does manage this social complexity through some form of structural transformation, the various market and governmental competitors as well as the regulatory holds of data law and competition policy mean that Amazon-as-governance presents a variety of exit rights/opportunities that state-based mechanisms currently don’t provide. With the thickening of governance relations amongst many fragments and tangents, the various international, municipal and local competitors that platforms like Amazon will face mean that the brittleness traditional brick-and-mortar retailers have shown in the face of e-commerce dominance will begin to chip away at those platform’s governance/market positions, eroding the bases and requiring constant adaptation and manoeuvre as platforms develop their own brittleness. In particular data laws pose a systemic risk that is increasingly fragile, particularly as GDPR pushes back at data institutions and further debates over the ownership of data question where the platform’s jurisdictional authority actually lies. The mechanisms of exit here are increasing, requiring an anti-fragility that Amazon and others may not have.

“The real barrier of capitalist production is capital itself. It is that capital and its self-expansion appear as the starting and the closing point, the motive and the purpose of production; that production is only production for capital and not vice versa, the means of production are not mere means for a constant expansion of the living process of the society of producers. The limits within which the preservation and self-expansion of the value of capital resting on the expropriation and pauperisation of the great mass of producers can alone move — these limits come continually into conflict with the methods of production employed by capital for its purposes, which drive towards unlimited extension of production, towards production as an end in itself, towards unconditional development of the social productivity of labour. The means — unconditional development of the productive forces of society — comes continually into conflict with the limited purpose, the self-expansion of the existing capital. The capitalist mode of production is, for this reason, a historical means of developing the material forces of production and creating an appropriate world-market and is, at the same time, a continual conflict between this its historical task and its own corresponding relations of social production”[22].

Amazon-as-company transforming into Amazon-as-governance entails the subsumption of profit to other socio-economic actions, as concepts like fair and equal pricing, stakeholder integration and services agreements that incorporate multiple demands and desires push the envelope of pure market competition. Going back to Lina Khan’s analysis of economic structuralism, we see that the formation and development of the firm are fundamentally important in how markets and governance are structured. It is not just a matter economic efficiency when it comes to understanding why firms are important, but also includes concepts like “the preservation of open markets, the protection of producers and consumers from monopoly abuse, and the dispersion of political and economic control”[23]. It means the maintenance of the industrial commons where power “should be distributed away from centralised powers, from tournaments where you are a mindless participant”[24]. Production melts into social governance as the increase in productive use of labour expands against its limits, leading to production for social purpose as value is destroyed. Regulatory limits, such as limits on the hours of labour, further this process of decomposition.

Platforms in taking on the levels of political-social complexity must deal with these multiplicitous sets of demands, as economic concerns move into the wider matrices of cultural and political discourses. Platforms in moving toward alternative arrangements as they’re given increasing levels of juridical and fiduciary control are akin to phyles, “transnational distributed networks… who collectively have firms or [a] group of firms”[25], as they hold collective control over many business lines and provide services and infrastructure for those lines. Developing corporate mission statements like connecting the world or being the everything store fit the mould of a phyle, as their economic methods are subsumed to political or social ends. The increasing prevalence of data control makes this point more acute, as platforms begin to recognise their role as beyond the simple division of profit toward their shareholders, developing regulatory strategies that tackle issues of public trust, transparency and ownership. New systems of value form within these networks, converging around multiple social and economic identities and structures.

Increasingly this direction becomes the line of travel for platform companies as they take on board governmental power. Amazon acting as an infrastructural utility that becomes a backbone within e-commerce and retail, providing data-based information and service agreements that integrate consumer and stakeholder demands. A meta-Twitter that maps the conversational nexus of socio-political discourse. Facebook as a gatekeeper for media information. Blockchains becoming channels for vast networks of micropayments, contractual obligations and identificatory passports[26]. The growth of e-democracy or e-government as citizenship and national loyalty become fluid and ephemeral, open to increasing change as political identities grow more tribal and archipelagian, and politics separates from geography. As states and traditional government institutions disaggregate and struggle to take on board the various crises and issues present in the modern intertechnic period such as paramilitarism, political populism, financial crises, globalisation and climate change[27], platforms present one vector through which governmental strategies can be theorised and experimented with. Amazon then is both a vector for changes from old institutional models into its own structural organisation, as well as a vector for changes that supersede and modify it, making it redundant in some areas and integral in others. Whether it could cope with such social complexity is to be seen. Either the platform monopoly becomes governmental, or it splits into the various phyles and markets that increasingly constitute it.

[1] https://thelibertarianideal.wordpress.com/2019/02/22/social-media-and-governance-the-disequilibrium-of-communication-and-commodification/

[2] https://deterritorialinvestigations.wordpress.com/2017/05/01/charting-k-waves/

[3] https://thelibertarianideal.wordpress.com/2019/03/26/patchwork-as-real-world-vectors/

[4] https://www.yalelawjournal.org/note/amazons-antitrust-paradox

[5] https://www.yalelawjournal.org/note/amazons-antitrust-paradox

[6] https://www.ippr.org/files/2017-07/cej-cgr-dp-17-07-14.pdf

[7] https://www.yalelawjournal.org/note/amazons-antitrust-paradox

[8] http://panmore.com/amazon-com-inc-organizational-structure-characteristics-analysis

[9] https://www.yalelawjournal.org/note/amazons-antitrust-paradox

[10] https://www.ippr.org/files/2017-07/cej-cgr-dp-17-07-14.pdf

[11] http://panmore.com/amazon-com-inc-organizational-structure-characteristics-analysis

[12] https://purelytheoreticalresearch.com/upload/Death-of-retail.pdf