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Comment by dsr_ | Hacker News Reader

Amazon isn't the whole problem, it's just that Amazon was the winner.

It used to be that most towns had a bookstore, and larger towns or cities had several. Eventually they were displaced by chains: Waldenbooks and B. Dalton, Borders and Barnes & Noble. First the chains chased out the independent bookstores by being able to cut costs and order more efficiently; then the chains ate each other at the same time that Amazon was cutting costs even further. Now there's one limping chain, B&N, and some specialized chains -- mostly religious, secondhand or otherwise discount -- and Amazon.

Efficiency is best served by a single distribution system with maximum economies of scale. That isn't actually a desirable outcome for customers or producers, though.

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I think the key thing is that efficiency isn't the same as a free market, but people tend to equate the two things. It's a rectangle/square problem: free markets drive efficiency, but efficiency doesn't drive free markets.

When an efficient competitor "wins" and drives the competition out of business, everyone loses, as that competitor eventually turns into an entrenched toll-taker. As a consumer, you want your vendors fighting each other all of the time. The situation in books, where Amazon tolerates the existence of B&N, and doesn't give a hoot about Jesus books isn't good for anyone.

I don't think its fair to say that "it isn't good for anyone." I remember buying books before Borders, the big Barnes & Nobles and Amazon. It sucked. The selection was poor, it was impossible to order, because it was very hard to know what was available.

I even used order books by mail order. (In particular Dover published a catalog which had a lot of their math and science reprints. You'd fill in an order form and send it with a check through the mail; 4-6 weeks later your books would arrive.)

The current situation for the consumer is much better.

Agreed. Too sweeping of a statement.

I should have said "in the long run, it isn't good for anyone". I used to camp alot in the Adirondacks in upstate NY. There was one grocery store that was basically the only store in a 50 mile radius. Guess what? The store hours sucked, and milk was $4/half gallon.

Even now, it's difficult to resolve situations with Amazon -- good luck figuring out how to contact a human to resolve a complex problem.

Agreed, book publishers need to work on their marketing and sales. If they were able to target their audience more directly and efficiently, they wouldn't need to rely on Amazon. No Starch Press (nostarchpress.com) did a fine job selling "Learn You Some Erlang for Great Good!" (and their other programming titles) without Amazon.com

> Now there's one limping chain, B&N, and some specialized chains -- mostly religious, secondhand or otherwise discount -- and Amazon.

That's not true, there are many online book sellers out there, and I'm guessing not all of them are in danger of going out of business. Amazon is the biggest player, but what has played out is that book selling is too low-margin to be viable as a meat-space transaction.

Why is this not a desirable outcome for customers?

Because you end up with a monopoly.

Monopoly is just a description of a market situation. You're using it as a pejorative term without actually explaining why, in this particular case, it's a bad thing.

Monopolies are bad only because the winner in a monopoly nearly always uses their market position to increase the barrier to entry to upstarts, often by lobbying for increased regulations (costs) in the market that didn't exist when they started. If monopolies (at least some - Amazon works as an example) operated in the same way they did on their way up - looking for ways to disrupt and improve on the status quo rather than looking for ways to ensure the status quo does not change, they wouldn't be nearly the negative force that they generally are.

I assume because monopolists can demand economic rents.

But I imagine that Amazon is continuously under competitive pressure -- consider the disruption e-books caused. Had that caught Amazon flat-footed, it could have decimated their book business.

Because once a company obtains a monopoly, their interests and those of the customer diverge, and there's no longer any control imposed by the market, because there is no market - just one initially efficient supplier with no incentive to remain efficient and every incentive to boost their margins at the expense of producers and customers.

This is why we have a regulated market, and rules about monopolies.

That assumes that a company can maintain the monopoly while gradually making its service worse and worse. Other companies can spring up which take advantage of its margins (as Jeff Bezos may have said, "my margin is your opportunity").

What Amazon would have to do to maintain a monopoly is to continuously locate and destroy startups which try to compete with it, by using its scale. You're saying that, while it's doing this, it may make things worse for the consumer. Perhaps, but that's REALLY tough to do (until someone writes software to do it).

One thing is for sure though - regardless of how good the service is to consumers, the demand for human labor will erode further and the comparative advantage of local economies will erode all over the world - not just for books but tons of products and services. As a result, we will need an ever greater welfare state so that many out-of-work people can be paid to be consumers and send price signals back into the economy, even if they are unable to make much money themselves (because presumably robots would be employed instead).

This reminds me of one of Russell's essays, "In Praise of Idleness". Despite the fact that collectively, we would be extremely comfortable working very little if we all worked the same amount, in reality some of us work extremely hard while others work not at all. So an innovation that makes work less necessary is seen as an evil (reduces the number of jobs), where it could instead reduce work for everyone uniformly in principle (assuming massive job training and education opportunities). I think it's an interesting argument.

http://www.zpub.com/notes/idle.html

Yeah. I think most people in HN don't view automation as a bad force. But we do have to note there's no guarantee that jobs will come back for EVERYONE and that over time the demand for human labor won't decrease. Most people already don't concern themselves with growing/hunting food, obtaining water, warming/cooling themselves, etc. We've moved on to other things, freed up by advances in technology. Perhaps the current "busywork" of blogging, accountants, lawyers etc. is the future. But ultimately, outside the engineers that build and take care of the technology, there are tons of people whose jobs are being disrupted. There should be a way to make sure these people remain consumers and don't starve.

I think it's a natural outgrowth of specialization. Right now the largest bottleneck our society has is the fact that knowledge is painfully difficult to transfer. You can send a kid to school for four years and he still more economically useful than a plumber's apprentice. If you take work away from the busy people and give it to the less busy people, the net result is an overall lowering of quality.

This problem does not seem to be surmountable with the level of social infrastructure we have. I doubt even more societies with a greater level of public organization, like Norway, could do this. Knowledge and experience are just best when hoarded.

It's desirable on the way there, as costs get pushed down as disruptions happen. The problem is that once one company controls most of the market, their incentives change. It starts to make the most economic sense for them to lobby for anti-competitive policies (often under the guise of regulations) that increase the costs to upstarts (as they can't stay as lean with increased compliance). It's here that the benefits of a free market start to disappear, not because of the free market system, but because the winner in the freer market has a strong incentive to make the market less free, and has the money to lobby for it.

Because a monopoly leads to zero competitive pressure - no matter how much we believe in Bezos' ethos.

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