Amazon is Amazing

Nothing warms the cockles of this economist’s heart like seeing a market do its bit beautifully. As we say in the trade (pun intended), markets work and incentives matter. That sums up very neatly two of the fundamental insights of economics.

Consider this fact (from a Dec 2013 Quartz article): “Amazon changes its prices more than 2.5 million times a day. By comparison, Walmart and Best Buy changed their prices roughly 50,000 times each in the entire month of November.”

Those numbers for Amazon must have gone up since then. Perhaps Amazon changes its prices 4 million times a day now.

When I am in no hurry to buy something I am interested in, I tag it on camelcamelcamel.com, the Amazon price-tracking site. Recently I was interested in a microphone. The image on the left (click to embiggen) shows how the price moved. I ordered it and as it happened, it did not suit my needs. I returned it. It was as easy as going to a Kohl’s store and dropping it off at a counter that handles Amazon return.

Everything about Amazon is amazing. Quite frequently, their deliveries arrive much sooner than they promise. (That evil Jeff Bezos.) How they manage to do that blows my mind. Business Insider reports that:

They have 1.5 billion items listed for sale and 200 million users. Amazon has one billion gigabytes of data on their items and users. If you put all that data on 500-gigabyte hard drives and stacked them up, the pile of hard drives would be over eight times as tall as Mount Everest. Now that’s some big data.

With all this data, Amazon analyzes customers’ shopping patterns, competitors’ prices, profit margins, inventory, and a dizzying array of other factors every 10 minutes to choose new prices for its products. This way they can ensure their prices are always competitive and squeeze out ever more profit. 

Amazon has a patented “Anticipatory Shipping Model” that predicts what you are likely to buy and ships that item to a warehouse near you before you even buy it, thus reducing shipping costs and time if you buy it.

The private sector works much, much better than the public sector. By the private sector I mean consumers like us, and privately owned firms (from tiny mom and pop operations to giants like Google and Amazon) that we buy from. We consumers like to get the most for our bucks, and the firms compete with other firms to get our bucks. It’s a firm-eat-firm world out there, and we the consumers win in that struggle for survival. Markets are about prices, profit and loss, and people. Prices convey information to all participants in the market; profits provide the motivation to firms to satisfy us; losses weed out firms that don’t create value. Markets are for the people, by the people and of the people — just like democracy but much less harmful.

Why doesn’t the public sector (enterprises run by the government) work as well? Because most of the time public sector firms are not subject to the discipline of the market. Public sector firms use taxpayer money which is not theirs. Losses are paid for by taxpayers and it’s no skin off of the backs of those running public sector firms.

Let’s note that India has a huge public sector. The government runs Indian Railways, Air India, the postal services, hotels, hospitals, universities, schools, mines, and all sorts of things that the private sector could do better.

It’s all karma, neh!

Fun Facts:

Why did Bezos pick Amazon for the name of his firm? Grunge says:

The name “Amazon” came from two places. First off, it was already the name of the biggest river in the world, making it both familiar and evocative of grandeur. Secondly, way back in 1995, a lot of websites were still listed alphabetically, meaning that a site with an “A” name had a leg up on the competition. If that sounds strange, keep in mind that it’s an age old business technique harkening back to the first phone book listings. That’s why so many back-in-the-day businesses had monikers like Acme and Ajax.

The image at the head of this post is of the Amazon river and the rain forest from this site. Here are some facts about the Amazon rain forest:

  • There are two different types of rainforests, temperate and tropical. Temperate rainforests are cool and mild while tropical ones are hot and humid. The world’s largest tropical rainforest, the Amazon covers even more land than the second and third largest rainforest combined. 2,100,000 square miles of the amazon basin are covered in the dense tropical rainforest.
  • The Amazon rainforest is so large that it actually makes up more than half of the remaining rainforest land in the entire world. It’s so big that it is almost the size of the continental United States.
  • When a Spanish explorer and soldier Francisco de Orellana battled native tribes for their rainforest land in 1542. He was surprised to see women fighting alongside the men. He called the rainforest the Amazon. The Amazon rainforest is also called Amazonia.
  • There are many tribes of indigenous people who still live in the Amazon rainforest today. Almost all of the tribes have their own culture language rules and territory. Several of the tribes have no contact with the outside world and no experience with the modern technology.
  • The Amazon rainforests unique climate creates incredible unique biodiversity so the areas human residents have some pretty interesting neighbors. One-tenth of all known plant and animals’ species on the entire planet live in the Amazon rainforest. It’s the single largest collection of diverse species on earth. In fact the collection is still growing as scientists discover even more new species every year.
  • The Amazon region is actually home to more than 30 million people. Most of the land is divided into separate territories belonging to 9 different countries, Brazil, Colombia, Peru, Venezuela, Ecuador, Bolivia, Guiana, Suriname and French Guiana.

 



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