This Makes It Impossible To Compete Against Amazon

Mitch JoelPosted by

It seems like the 800 pound gorillas are only getting bigger (and stronger and smarter).

Amazon will probably be the king of the jungle (and the amazon – see what I did there?) for a long time to come. There are many (maybe too many) articles about just how big, diverse and powerful Amazon is. Still, CNN posted this article yesterday, and it made my jaw drop and skin crawl. I was, literally, dizzy from it. The article’s title seems innocuous enough: Amazon gets an edge with its secret squad of PhD economists. It’s not uncommon for big brands to have a chief economist or an economist on staff. Uber has got them, governments have them too. They perform all kinds of tasks. So, just how many economists does Amazon have?

“In the past few years, Amazon has hired more than 150 PhD economists, making it probably the largest employer in the field behind institutions like the Federal Reserve, which has hundreds of economists on staff. It was the only company with a recruiting booth at the American Economics Association‘s annual conference in January, handing out free pens and logoed stress balls. Unlike economists in academia or government, the work of Amazon’s economists is almost entirely secret, and staff are required to sign non-disclosure agreements to keep it that way. But according to background interviews and Amazon itself, integrating economists has been critical to the company’s phenomenal growth in e-commerce. Amazon’s economists game out real estate decisions, set the lowest prices that will deliver a profit, precisely determine what customers care about and whether advertisements are working — all using machine-learning algorithms that automate decision making on a massive scale. It’s the kind of asset that smaller companies can’t always pay for, allowing Amazon to pull further and further away from the competition.”

What chance do the rest of us have?

This is not about a big company going unchecked. This is not about fair competition. This is not about a monopoly. This is about business smarts. The government (with their hundreds of economists on staff) still don’t have access to the kind of raw data that Amazon does (the government has to go out there, create it, find it and then figure out what to do with it). We (often) forget just how powerful searches for products, intent to buy, the actual purchase and where those people live (and that’s just some of the basic data that Amazon captures) can dictate the health of the economy, and the true wealth of nations. Amazon sits on a unique perch, and has the intellectual power to do something about it. It also has enough power, data and insights (that it keeps private) to truly move markets. Imagine that. They are probably the largest employer of economists next to the Federal Reserve, but it’s private and they have all of that first-party “on the ground” consumer intent and consumption data.

It not just about the economists.

Having smart people thinking, challenging and studying the data is one thing. It’s not everything. But Amazon already has near-mastery over the products, price, promotion, placement, sales and distribution of goods across a swath of our lives, and relevancy/power/dominance in almost every room that we occupy (both in the home and at the office), Stacking on top of that one hundred and fifty economist should give us all pause. How do businesses truly compete? How do businesses attempt to offer something more valuable and relevant to consumers, when that mass amount of consumer data is being sliced and diced and then questioned by economists privately owned by one of the biggest brands in the world. You have to give it to Amazon. They really are looking for new and different angles on how to grow and keep their business thriving. 

If you don’t have 150 economists (and, who does?), this begs the question: what type of different thinking can we bring to the business table?