Schlagwort-Archive: amazon

Jeff Bezos’s vision comes true, here’s how you’ll shop in 2020: The vast bulk of store-bought goods – food staples, paper products, cleaning supplies, and the like – you will order electronically. Some physical storefronts will survive, but they’ll have to offer at least one of two things: entertainment value or immediate convenience.

If Jeff Bezos’s vision comes true, here’s how you’ll shop in 2020:

The vast bulk of store-bought goods – food staples, paper products, cleaning supplies, and the like – you will order electronically. Some physical storefronts will survive, but they’ll have to offer at least one of two things: entertainment value or immediate convenience.

 

Source: https://www.wired.com/1999/03/bezos-3/

 

The Inner Bezos

Amazon.com’s founder figured out how to sell books on the Web, and now he wants to sell you everything else. Simple, right? So why is he so far ahead of the pack?

The counter clerks at Amelia Island’s Flash Foods convenience store never saw it coming. Around Christmas 1997, a rented white Chevrolet Suburban pulled into the parking lot and disgorged three members of a commando squad on a mission. The team was disguised in the tourist garb common to the Florida resort island, and the only hint that it might be a military operation was the way the squad members whispered code words like „Whiskey, Bravo, Tango“ into their Motorola walkie-talkies. While the driver sat in the car and timed the exercise, a second soldier stood guard at the door. Another quickly grabbed a spot in line for the cashier. The fourth rushed toward the dairy case in quest of the squad’s ultimate goal: a quart of milk.

Within two minutes, the purchase was completed and the car was roaring back onto the streets.

One of these odd customers bore the code name Ffej Sozeb. If the clerks had heard this nom de guerre, they still might not have figured out that they’d been hit by a pioneering Internet entrepreneur who one year later would be worth north of $9 billion. The slightly built, 5′ 8″, brown-eyed faux Navy SEAL with thinning hair was, in reality, Jeff Bezos, founder, chair, and CEO of Amazon.com. His comrades on this mission of breakfast necessity were members of his immediate family: father Mike, brother Mark. Behind the wheel: his mother Jackie.

That Jeff Bezos is almost innately programmed to turn something as mundane as a milk run into a fantasy game should serve him well during the next few years, as he attempts to drive Amazon.com beyond its phenomenal, if so far unprofitable, early success as a book, music, and video seller. The 35-year-old Bezos must make Amazon.com, to this point little more than a convenient place to shop for a limited range of goods, the kind of environment that lures men, women, and children in from vast distances, then seduces them into acts of acquisition. As Internet commerce matures from the exotic to the everyday, as it becomes less about exploiting a position on the frontiers of technology and more about mastering the art of sales and merchandising, the challenges Bezos faces have become exactly those that confronted the great retailers who invented the mass market for consumer goods in the United States a century ago.

To reach historical heights – to become as important to 21st-century culture as Richard W. Sears, Macy’s Isidor Straus, and John Wanamaker were to the culture of the late 19th and early 20th centuries, when they fundamentally changed not only the experience of shopping but also the essential nature of American life – Bezos will need to deliver on the second promise in the oft-repeated goal he sets for his staff: „to build a valuable and lasting company.“

„It’s a question,“ says Stanley Marcus, chair emeritus of Neiman Marcus, with the simplicity of an expert in long distance seduction, „of how you get the merchandise you’re infatuated with into the hands of the people you like.“

The goal is within reach. Bezos’s vision has always been about taking advantage of a new platform and new tools to change shopping itself. Long before he launched the company, he had dreams of making Amazon.com „broader than books and music“ – a point reinforced this past Christmas season by his move into gift sales and by his December move to offer Amazon.com customers goods from other retailers. Analysts who had projected $190 million in revenue for the company during the fourth-quarter holiday period were flabbergasted when Amazon.com registered sales of approximately $250 million, news that helped send the company’s stock as high as $350 per share by early January (shortly before a three-for-one stock split) – just shy of the $400 per share CIBC Oppenheimer foresees by 2002.

If Jeff Bezos’s vision comes true, here’s how you’ll shop in 2020:

The vast bulk of store-bought goods – food staples, paper products, cleaning supplies, and the like – you will order electronically. Some physical storefronts will survive, but they’ll have to offer at least one of two things: entertainment value or immediate convenience.

Successful „shoptainers“ will be like the Gap, with its environment of music and youth culture, or Nordstrom, with its tinkling pianist and distinctive face-to-face service. They may be even more amplified, with personal service and showmanship turning every shopping trip into a Super Bowl-style destination event. „That experience is what you get when you go to movie theaters, and why you don’t always rent movies, right?“ Bezos notes.

As Internet commerce matures, Bezos faces the same challenges that confronted the great retailers who invented the mass market for consumer goods a century ago.

Convenience specialists will also have contemporary antecedents – the 7-Eleven chain, say, or Walgreen’s, where you can get a quart of milk or NyQuil geltabs at 10 p.m. – but these, too, will evolve: open 24/7, for example, so that you can take care of the last mile of delivery yourself at any time. The consultants at the Global Business Network even sketch out a scenario where, within a generation or two, vans carrying inventories of more popular necessities, such as toilet paper or diapers, may be constantly circling neighborhoods, ready to drop off an order within moments of receiving it.

The United States – whose culture has been defined by consumption since at least the 1840s, when the British consul in Boston was appalled to see servant girls „strongly infected with the national bad taste for being overdressed“ – will be utterly transformed, Bezos believes, by this bifurcation of shopping and consumer desire into shoptainment and just-in-time components. The urban downtowns, which just a few years ago planners and politicians gave up for dead, will continue to renew and thrive, thanks to the inherent entertainment value in the great retail districts like Times Square or Pine Street in Seattle. Yet within a generation’s time the kitschy and cluttered landscape of today’s suburbia will disappear, because the new retail environment won’t support „the sort of bad stores that people go to because they don’t have any alternative.“

„Strip malls,“ Bezos predicts, „are history.“

Bezos reserves an evangelical passion for the changes he expects in the most manipulative aspects of today’s consumer culture.

„What consumerism really is, at its worst,“ he adds, „is getting people to buy things that don’t actually improve their lives. The one thing that offends me the most is when I walk by a bank and see ads trying to convince people to take out second mortgages on their home so they can go on vacation. That’s approaching evil.“

When Bezos describes his primary goals for the Amazon.com interface, he becomes a whistle-stop campaigner for a new politics of consumerism. „We want to turn visitors into customers, and we want to make the experience as welcoming as possible,“ he says. He insists that the lures and aids Amazon.com provides for its online shoppers – the one-click ordering system that stores credit card and shipping information; the variety of helpful suggestions and information that seem configured to exploit a customer’s most impulsive tendencies – are far removed from the world’s entrenched consumerist come-ons.

The new merchant, he suggests, volubly and unstoppably, is a community builder, a facilitator, a networker. He cites Amazon.com’s willingness to post negative book reviews as an example of harnessing the antimanipulative truths the Internet allows consumers to root out. The Net’s famously decentralized, open flow of information, he goes on, inevitably deflates the most extravagant hype of traditional retailing. And that shifts the balance of power – which since the origins of department stores and mass merchandising has favored the merchant – back into the hands of consumers. Amazon.com’s scheme is, in effect, to form a strategic alliance with all that newly unleashed power.

„This doesn’t mean that you can’t build a valuable, lasting enterprise in the online environment,“ Bezos says, „but it does mean you better recognize the environment you’re in, and not try to build an airplane to fly underwater. Ah-ha-ha-ha-ha-ha!“ The laugh, which frequently interrupts conversation, comes out as a long, extended bray, startling the uninitiated. The laugh has become famous, too, yet it only underscores Bezos’s ardor. Almost since the beginning of Amazon.com’s remarkable rise, Bezos has been characterized as yet another fuzzy-cheeked geek who lucked into an IPO, an uninspired financial technician with a good but not very original idea about distributing goods over the Internet, who would soon be, in the ill-fated phrase of Forrester Research president George Colony, „Amazon.toast.“ It’s a characterization Bezos’s competitors have found costly. They may also have missed that, in focusing on the consumer in a way few Web entrepreneurs can match, he is actually trying to transform the world.

„Jeff always wanted to make a lot of money,“ says his high school girlfriend, Ursula „Uschi“ Werner. She herself was an overachiever – valedictorian of the Miami Palmetto Senior High School class a year ahead of Bezos, winner of a full scholarship to Duke University, and a Rhodes Scholar – but she remains awed by Bezos’s commitment. „It wasn’t about money itself. It was about what he was going to do with the money, about changing the future.“

Family is important. The Bezos family is extremely close; they actually enjoy spending the holidays together. Reflecting on the source of Jeff Bezos’s drive, his closest friends turn inevitably to the legion of family stories, all of which seem to revolve around the theme of hard work and equally hard play.

But within the well-known Bezos family story lies a remarkable story of collective strength.

Mike Bezos is not Jeff’s biological father. „I’ve never met him,“ Jeff says of the man who is. „But the reality, as far as I’m concerned, is that my Dad is my natural father. The only time I ever think about it, genuinely, is when a doctor asks me to fill out a form.“ While it’s easy enough to theorize that the circumstance of Bezos’s birth has had profound psychological repercussions, he responds to questions about it with complete equanimity – if some surprise; his family rarely discusses the matter and even close friends don’t know the truth. „It’s a fine truth to have out there,“ he says. „I’m not embarrassed by it.“

He recalls that his parents sat him down and told him when he was 10. Whatever their concerns about the possible consequences, they needn’t have worried. Jeff describes the moment as not nearly as important or memorable as learning, at around the same time, that he would need to wear glasses. „That made me cry,“ he says.

Mike Bezos (pronounced BAY-zoes) had arrived in the United States, alone, in 1962, at the age of 15. He came under the auspices of Operation Pedro Pan, an education/rescue program crafted by a south Florida Catholic priest that spirited thousands of teenagers out of Castro’s régime during the early ’60s. After learning English and graduating from high school in Delaware, where he lived in a Catholic mission with 15 other refugees, Mike Bezos moved to New Mexico to attend what was then the University of Albuquerque.

There, he met Jackie Gise, in a local bank where the two worked. In his freshman year of college – he was 18, she was 17 – they married.

Jeff was born soon after, in January 1964, and Mike Bezos legally adopted him.

With a young family – Jeff’s sister Christina and brother Mark are five and six years younger than him, respectively – Mike Bezos still managed to finish his education, then joined Exxon as a petroleum engineer. The family moved several times during Jeff’s childhood, from Albuquerque to Houston, then briefly to Pensacola, Florida.

Bezos remembers he always had the youngest parents around. But his friend Joshua Weinstein says that even during their high school years, when she was in her early 30s, Jackie Bezos commanded as much if not more authority and respect than any other mother. She says her values came from her own father, who offered another strong role model for Jeff.

Jeff spent summers working at his maternal grandfather’s ranch in Cotulla, Texas, fixing windmills, castrating cattle, laying pipes, and repairing pumps. Lawrence Preston „Pop“ Gise had held jobs that a young boy couldn’t help but find cool. Gise worked on space technology and missile defense systems at Darpa in the late 1950s; in 1964, Congress appointed him manager of the Atomic Energy Commission’s Albuquerque operations office, where he supervised 26,000 employees in the AEC’s western region, including the Sandia, Los Alamos, and Lawrence Livermore laboratories. He retired to his southwest Texas spread in 1968, and he doted on Jeff from the time his grandson was an infant. „Mr. Gise was a towering figure in Jeff’s life,“ says Weinstein.

His grandfather sparked and indulged Jeff’s fascination with educational games and toys, assisting him with the Heathkits and the other paraphernalia he constantly hauled home to the family garage. (Picture the scattered components of a robot; an open umbrella spine clad in aluminum foil for a solar cooking experiment; an ancient Hoover vacuum cleaner being transformed into a primitive hovercraft.)

Jackie Bezos’s challenge as a parent was to stay a step ahead of, or at least next to, her prodigy. „I think single-handedly we kept many Radio Shacks in business,“ she jokes. During his late grade school years, Jeff became fixated on a device called an Infinity Cube, which uses a set of motorized mirrors to allow one to stare into „infinity.“ But at $20 it was too expensive to buy, she told him. Jeff figured out that the pieces of the cube could be bought cheaply, so he did – and built it himself. „The way the world is, you know, someone could tell you to press the Button,“ he said at the time. „You have to be able to think … for yourself.“

The story of Bezos and the Infinity Cube is documented in Turning on Bright Minds: A Parent Looks at Gifted Education in Texas. Written by Julie Ray and published locally in the Houston area in 1977 – and, incidentally, not available via Amazon.com – the book follows 12-year-old Jeff (renamed Tim) through a typical day in the Vanguard program at Houston’s River Oaks Elementary School, a magnet school that was part of a voluntary integration effort in the city’s public school system. Jeff endured a 40-mile round-trip commute each day to attend. The author describes him as „friendly but serious,“ even „courtly,“ and possessed of „general intellectual excellence,“ though, according to teachers, „not particularly gifted in leadership.“

He used his brain to compensate. Jackie and Mike, concerned that Jeff wasn’t always comfortable with kids his own age, enrolled him in the high-pressure world of Texas youth football. „He barely made the weight limit, and I thought he was going to get creamed out there,“ Jackie recalls, laughing. Within two weeks, however, the coach had named him defensive captain, because Jeff was one of the few kids on the team who could remember all the plays – not only where he was supposed to be but also the assignments for the other 10 players on his squad.

He completed his personal immersion in the shared world of every American geek growing up in the ’70s and early ’80s by diving into the deep end of the sci-fi and fantasy pool. When the River Oaks school gained access to a mainframe computer in downtown Houston via a timeshare system, he and his friends spent hours on it playing a primitive Star Trek game, searching for cloaked Klingon ships in a three-by-three matrix.

By the time he reached high school in Dade County, Jeff had focused on space travel as his future. It wasn’t just that he wanted to be an astronaut, like thousands of other kids; as he told friends and acquaintances, he intended to be a space entrepreneur. „Oh, he had ideas about space promotion!“ says Bill McCreary, a Miami Palmetto science teacher. Some were drawn from real-life experiences in a high school space initiative he attended at NASA’s Huntsville, Alabama, center. But behind the young Bezos’s space-station plans was serious intent. „He said the future of mankind is not on this planet, because we might be struck by something, and we better have a spaceship out there,“ recalls Rudolf Werner, the father of Jeff’s high school girlfriend. Uschi Werner still jokes that Bezos’s real goal for Amazon.com is to amass enough of a personal fortune to build his own space station. Reminded of those concerns today, Bezos laughs but quickly turns serious. „I wouldn’t mind helping in some way,“ he says. „I do think we have all our eggs in one basket.“

Achieving his astronaut goals meant succeeding at school, and Bezos would show as a teenager that behind the easygoing façade and booming laugh was a relentless, even intimidating, work ethic, one that has become his hallmark at Amazon.com. „He was always a formidable presence,“ says Joshua Weinstein. When Bezos made clear his intention to become class valedictorian, for example, Weinstein says everyone else understood they were working for second place. Besides securing the valedictorian’s title, Bezos was also one of three members of his graduating class awarded a Silver Knight Award, a prestigious academic honor in south Florida high schools, sponsored by Knight Ridder’s Miami Herald. (Pilgrimage note: One of the few remaining talismans of Jeff Bezos’s presence at Miami Palmetto is an oak board, in a glass display case cluttered with sports memorabilia just inside the school’s front door, that holds the names of Silver Knight winners.)

Bezos got his first taste for retail during this time, spending one summer as a fry cook at McDonald’s, studying the company’s automation improvements even while he responded to the Pavlovian cues of the many and often simultaneously sounding buzzers that told him when to scramble his eggs, flip his burgers, and pull his fries out of the boiling vat. „Now, actually, the french fries raise themselves up out of the oil,“ he says, „which let me tell you is a major technological innovation! Ah-ha-ha-ha-ha-ha!“

In an attempt to avoid a second summer in the grease pit, Bezos, with Uschi Werner, embarked on his first serious entrepreneurial effort: a summer-education camp for fourth-, fifth-, and sixth-graders that the two labeled the DREAM Institute. (DREAM stood for Directed REAsoning Methods.) Six students signed up for the $600 camp; two of them were Jeff’s own brother and sister.

The program, prophetically, emphasized a mix of science and literature, the future and the past. Required reading included The Once and Future King, Stranger in a Strange Land, The Lord of the Rings, Dune, Watership Down, Black Beauty, Gulliver’s Travels, Treasure Island, and David Copperfield, along with the plays Our Town and The Matchmaker. The science curriculum ranged from fossil fuels and fission to space colonies and interstellar travel – with a dollop of television and advertising study thrown in for good measure. „Our program,“ the budding entrepreneurs wrote in a „Dear parent“ flyer generated on Jeff’s Apple II and a dot-matrix printer, „emphasizes the use of new ways of thinking in old areas.“

„When I’m 80,“ he asked himself, „am I going to regret leaving Wall Street? No. Will I regret missing the beginning of the Internet? Yes.“

Jeff and Uschi’s long distance relationship didn’t survive his matriculation at Princeton, but their entrepreneurial exploits nonetheless helped Bezos overcome his first serious intellectual disappointment. Intent on becoming a theoretical physicist and following the likes of Einstein and Hawking, he discovered that although he was one of the top 25 students in his honors physics program, he wasn’t smart enough to compete with the handful of real geniuses around him. „I looked around the room,“ Bezos recalls, „and it was clear to me that there were three people in the class who were much, much better at it than I was, and it was much, much easier for them. It was really sort of a startling insight, that there were these people whose brains were wired differently.“ The pragmatic Bezos switched his major to computer science and committed himself to starting and running his own business.

In his senior year, Bezos turned down job offers from Intel, Bell Labs, and Andersen Consulting to join a start-up called Fitel, which had run a full-page ad in The Daily Princetonian soliciting the school’s „best computer science graduates.“ The company, launched by two Columbia professors in the days when VANs and EDI were hot topics, was attempting to build an ambitious worldwide telecommunications network for trading firms that would help them clear and settle cross-border equity transactions – piggybacking atop General Electric Information Service’s network alongside GEnie, GE’s early consumer online service.

Bezos was employee number 11. His success at debugging spaghetti code earned him rapid promotion to head of development and director of customer service, which entailed a weekly commute between New York and London, where his divisions were located, aboard discount airline People’s Express. „This is not,“ he says, „the right way to organize a start-up company, just for the record. Ah-ha-ha-ha-ha-ha!“

After nearly two years of failed attempts to grow Fitel, Bezos bailed out for a more stable job as a product manager at Bankers Trust. There, he sold software tools to the company’s pension-fund clients, but he also explored outside projects. At one point, he collaborated briefly with a Merrill Lynch consultant named Halsey Minor (who would later become well known as the founder of CNET) on an abortive plan to start a company that would use then-fledgling software agents to create a personalized news fax for financial professionals. By 1990, however, after only two years at Bankers Trust, Bezos was circulating his résumé to headhunters with the express goal of escaping financial services for a technology company, where he could pursue what he had decided was his „real passion,“ using computers and so-called second-wave automation to revolutionize business.

Then a headhunter called, telling Bezos, „I know you said you would kill me if I even proposed the finance thing, but there’s this special opportunity that’s actually a very unusual financial company.“ It was the two-and-a-half-year-old hedge fund firm D. E. Shaw.

David Shaw, like Bezos, was a computer scientist. His specialty was devising new trading strategies for particular financial instruments. The two clicked immediately, with Bezos finding Shaw „one of those people who has a completely developed left brain and a completely developed right brain. He’s artistic, articulate, and analytical. It’s just a pleasure to talk to someone like that.“ Shaw, in turn, thought his 26-year-old hire „fantastic,“ a „pleasurable person to talk to“ who was „also very entrepreneurial.“

Four years later, Bezos had worked his way up to senior vice president, one of four at the firm. He’d also devised a plan for his personal life.

„At a certain point I was sort of a professional dater,“ he explains about his years in New York. His systematic approach to the quest for a permanent relationship was to develop what he labeled „women flow,“ a play on the „deal flow“ Wall Streeters try to generate to locate worthwhile investments. In managing their deal flow, bankers will set limits like „I won’t look at anything under a $10 million equity investment.“ The limitation Bezos set for friends producing candidates for his „women flow“ was more esoteric. „The number-one criterion was that I wanted a woman who could get me out of a Third World prison,“ he says.

„What I really wanted was someone resourceful. But nobody knows what you mean when you say, ‚I’m looking for a resourceful woman.‘ If I tell somebody I’m looking for a woman who can get me out of a Third World prison, they start thinking Ross Perot – Ah-ha-ha-ha-ha-ha! – they have something they can hang their hat on! Life’s too short to hang out with people who aren’t resourceful.“

His self-deprecatory explanation for asking friends to set him up on blind dates is that „I’m not the kind of person where women say, ‚Oh, look how great he is,‘ a half hour after meeting me. I’m kind of goofy, and I’m not – Ah-ha-ha-ha-ha-ha! – it’s not the kind of thing where people are going to say about me, ‚Oh my God, this is what I’ve been looking for!'“

As it happened, women flow did not produce the desired result. Instead, he fell in love with a member of his own staff. The future MacKenzie Bezos was a research associate who had been an assistant to novelist Toni Morrison while studying at Princeton. MacKenzie – whose first novel will be published by Random House later this year – and Jeff were married in 1993. A year later, Shaw put Bezos in charge of exploring new business opportunities in the burgeoning world of the Internet.

It was while brainstorming ideas in the then-unfamiliar area of electronic commerce that Bezos came to his deceptively simple conclusion: The most logical thing to sell over the Internet was books, largely because two of the country’s largest book distributors already had exhaustive electronic lists.

As Amazon.com has long since established, no single bookstore, even a superstore, can carry a comprehensive inventory of the books in print. The distributors, carrying thousands of titles, in effect act as the warehouse for most stores, particularly smaller independent booksellers. When customers ask a store for a book it doesn’t have, the first place many of them will turn to fill the customer’s order is Ingram or Baker & Taylor, the two largest distributors. These companies‘ inventory lists, once regularly circulated to bookstores on packs of microfiche, went digital in the late 1980s along with others in the book trade – an unheralded benchmark that would enable Bezos to offer books online through the virtual retailer he envisioned creating.

But David Shaw and others at the firm weren’t ready to make books a priority. After consulting initially with another partner, Bezos approached Shaw to tell him he had been bitten by the entrepreneurial bug and wanted to leave. Bezos says he kept staring at the Net’s 2,300 percent annual growth figure and placing his thoughts within what he calls a „regret-minimization framework.“ „When I’m 80,“ he asked himself, „am I going to regret leaving Wall Street? No. Will I regret missing a chance to be there at the beginning of the Internet? Yes.“

„Let’s take a walk,“ he recalls Shaw saying, and the two of them set off for Central Park. Shaw, while acknowledging that he himself had left an established business to pursue entrepreneurial dreams, tried to impress on Bezos what he would be giving up by leaving; not just financial security but a pivotal role at D. E. Shaw. „I did tell him that we might be competing with him, too,“ Shaw says. Bezos was willing to accept that risk.

When MacKenzie and Jeff Bezos made their now semifamous cross-country road trip to the Seattle area, Jeff tapping out a business plan on his computer along the way, he had already spent months laying the groundwork for Amazon.com, beginning with his Internet investigations at D. E. Shaw. Bezos had also made at least one recruiting trip to California to meet with three programmers he’d learned about through a D. E. Shaw partner. Over blueberry pancakes at the Sash Mill Cafe in Santa Cruz, Bezos managed to convince one of them, Shel Kaphan, to become employee number one.

Kaphan has a reputation among the engineering staff at Amazon.com as the prototypical pessimist, a geek convinced that the company’s systems are always on the verge of implosion. He came by his doomsaying honestly – he had worked for at least a dozen companies before Amazon.com, including failed start-ups and bureaucratically inept monsters. Shortly before he and Bezos met he had left Kaleida Labs, an ill-fated Apple spin-off, which makes it all the more remarkable that he almost immediately found Bezos trustworthy – so trustworthy, in fact, that Kaphan agreed in short order to relocate to Seattle.

Bezos returned in principle to the setting of his childhood experiments, building the prototype for Amazon.com with Kaphan and a contractor named Paul Barton-Davis in the cramped, poorly insulated converted garage of a rented home in the Seattle suburb of Bellevue. A potbellied stove commanded the middle of the room, and extension cords ran everywhere because there weren’t enough electrical outlets to power the trio’s Sun SPARCstations. Eventually the stove was ejected in a space-saving flurry and replaced by a set of ceramic space heaters, which further taxed the overburdened power supply.

Bezos has profited directly from his Amazon.com stock only once, selling 180,000 shares last November for $23 million.

In their quest to revolutionize retailing, the threesome made ample use of the unsuspecting competition’s physical resources. One can never tire of the delicious irony that Kaphan and Bezos would frequently repair to the Barnes & Noble store in downtown Bellevue to drink coffee and toss around ideas in the relative calm of the in-house Starbucks café. The superstore also served as a venue for business meetings with outsiders. MacKenzie Bezos even negotiated the company’s first freight contracts there.

The first million dollars of seed capital came from a group of 15 angel investors Bezos had persuaded to help him, including Wall Street chums, friends of his parents, buddies from Princeton, and a small group of local investors. Tom Alberg, onetime president of Lin Broadcasting, a subsidiary of McCaw Cellular, was part of the group and became Amazon.com’s first board member.

At one point, a single venture capital firm in the Seattle area wanted to take the whole million-dollar round but demanded a 50 percent discount on the valuation Bezos had offered. He refused and the VCs passed, in part because they believed Barnes & Noble would crush Amazon.com as soon as it turned its attention in Bezos’s direction. Watching that decision, Alberg says, taught him that „you need to do due diligence in this world, but at some point you need to make a judgment about the people.“

Bezos and Kaphan rigged the SPARCstations to sound a bell’s ring every time the servers recorded a sale. Amazon.com launched in July 1995, and the bell started ringing – so often that within a few weeks the noise had become unbearable and they disabled it. „Every week, the revenues went up,“ says Alberg. „By the second or third week, there was $6,000 or $10,000, and by the end of early September there was $20,000 a week. It was clear there was a trend here.“ It also helped that even in the earliest days sales were coming from around the country. „He could say, ‚I had a sale in New Hampshire,‘ and we were all impressed,“ Alberg recalls.

It wasn’t that Bezos was first out of the box with an idea for shopping, or that he had discovered some magic elixir unknown to other merchants. But he had made a series of small, smart choices that added up.

It starts with the realization that in fact not everything should be virtual – that Amazon.com should own its own warehouses, so that it can maintain quality control over the packaging and shipping of orders, which Bezos sees as an essential opportunity to enhance the Amazon.com customer experience. This allows the company to combine orders for books from multiple publishers – or orders that include a book, a CD, and a video – into single packages. It also gives Amazon.com employees who pack orders a chance to check for defective goods. In its music department, for example, the company will replace cracked or broken CD jewel cases. Locating in Seattle, therefore, wasn’t about being near a technology hub as much as it was about being near one of Ingram’s distribution facilities, which allowed for quicker turnaround on deliveries from that key supplier. And Washington had a relatively small population, which limited the pool of potential customers from whom Amazon.com would be forced to collect sales tax. (It’s no accident that the company’s second warehouse is in Delaware, which not only has no sales tax but is also an ideal base for serving East Coast customers; its third and latest warehouse is near Reno, Nevada – which lets Amazon.com originate deliveries close to the huge California population, but just outside that state’s tax-collection borders.)

Bezos combined those pragmatic choices with a relentless focus on the customer experience: tweaking the interface to make it ever easier to understand, streamlining the ordering process at every turn, responding immediately to every customer query. „We want people to feel like they’re visiting a place,“ he says, „rather than a software application.“

He also turned hiring staff into a Socratic test. „Jeff was very, very picky,“ says Nicholas Lovejoy, who joined Amazon.com as its fifth employee in June 1995. In endless hiring meetings, Bezos, after interviewing the candidate himself, would grill every other interviewer, occasionally constructing elaborate charts on a whiteboard detailing the job seeker’s qualifications. If he ferreted out the slightest doubt, rejection usually followed. „One of his mottos was that every time we hired someone, he or she should raise the bar for the next hire, so that the overall talent pool was always improving,“ Lovejoy says.

With its potential $250 million in revenues in the fourth quarter of 1998, Amazon.com is on track for at least $1 billion in annual sales this year. The company has moved its headquarters three times since starting in the Bellevue garage, and its staff is spread out in four buildings in downtown Seattle, in addition to its Northwest warehouse location, in an industrial area near the port facilities that stretch along the harbor south of downtown. This summer, the company will consolidate all but the warehouse operation in the old Pacific Medical Center building, which sits on a bluff near the intersection of I-5 and I-90 southeast of central Seattle.

But nothing about the company’s physical or revenue growth can compare to the astonishing rise in its stock price in recent months – on January 19 Amazon.com’s $22.1 billion market value exceeded that of Kmart and JCPenney combined – and the concurrent growth in Bezos’s personal net worth, over $9 billion by mid-January 1999. (A few other billionaires, including his parents, and dozens of multimillionaires have been created during the two short years of Amazon.com’s public existence.)

Bezos is thus far facing down stratospheric wealth with a modesty that outsiders to tech culture often find odd (and maybe even unnatural) but which is surprisingly common in the industry, where twentysomethings worth millions routinely rent along the freeway. When Joshua Weinstein teased Bezos about being listed on the Forbes 400 roster of the richest Americans, for example, „Jeff said the only real difference was that he doesn’t have to look at the prices on a menu anymore.“

„One thing to keep in mind,“ Bezos says, about not only his own gains but those of any Amazon.com employee who holds unvested options or hasn’t sold their stock, „is for many of these people the wealth that they have is paper wealth, and it will exist at that level only for as long as we continue to serve our customers well.“ Securities and Exchange Commission records show that Bezos himself has profited directly from his Amazon.com stock only once, when, last November, he sold 180,000 shares (of the more than 19 million he held at the time) for approximately $23 million.

Like a lot of other newly minted tech barons, Bezos’s splurges tend to involve having a good time with friends. In August, to celebrate Shel Kaphan’s fourth anniversary at Amazon.com, Bezos organized „the Shelebration,“ a four-day surprise weekend excursion to Maui. He chartered a jet to carry himself and MacKenzie, Kaphan, and members of the Amazon.com engineering staff and their spouses from Seattle to Hawaii. When the group arrived at the house Bezos had rented, Kaphan discovered a second surprise: An even larger group of Shel’s old friends from the San Francisco Bay Area had arrived there first, aboard a second plane Bezos had chartered for them from San Jose.

MacKenzie and Jeff, who’ve lived till now in a one-bedroom rental in downtown Seattle, also recently went shopping for a house, spending a reported $10 million for a rustic mansion alongside Lake Washington in a neighborhood littered with Microsoft millionaires.

It’s often forgotten how recently the mass American consumer market has evolved, how profoundly it has changed the way people shop, and how dramatically it has altered the very structure of society. Little more than 100 years ago, most Americans bought their goods – including clothes, food, furniture, even at times books – directly from the people who created them. But as the Industrial Revolution penetrated industry after industry, a gap began to open between producers and consumers until the one had little or no direct contact with the other. A new breed of middlemen arose to act as brokers between them (creating legendary opportunities for what sociologist Thorstein Veblen, in his Theory of the Leisure Class, derided as „conspicuous consumption“). In turn, routine, public display of manufactured, store-bought wares enabled the development of virtual societies (or „consumption communities,“ as historian Daniel Boorstin labeled them) in which membership and status were based not on an inborn class hierarchy but on the ownership of specific types of goods.

The most successful of the new retailing middlemen were the salesmen and magnates who understood that Americans, particularly in the rapidly urbanizing society of the late 19th and early 20th centuries, wanted their status anxieties satisfied by the shopping experience, and who built the modern department store for this express purpose. Among the most flamboyant was John Wanamaker, who sounds like a latter-day Internet entrepreneur with his boast 89 years ago that he had „revolutionized the retail business in America.“ Among the innovations Wanamaker could claim credit for developing or popularizing were escalators, the glass display cabinet, the street-level store entrance, the revolving door, free delivery anywhere in the world, and charge accounts. Wanamaker’s landmark Philadelphia store still operates at the corner of Broad and Market streets, and his New York store at Broadway and Astor Place was that city’s premier shopping destination from the 1890s until the 1920s, when it was finally surpassed by Macy’s, „The World’s Largest Store.“

But perhaps the most significant innovation by Wanamaker and his peers – who included Marshall Field, Boston’s Filene family, and Isidor Straus, who ran Macy’s – was their decision to display their mass-produced goods artfully behind plate glass, which new technologies had made easier to produce in ever larger sheets.

Before 1885, most merchants, if they chose to display anything, simply piled goods haphazardly in their front windows. It took an impresario named L. Frank Baum – who later indulged another kind of American fairy tale when he wrote The Wizard of Oz – to change that. In 1897 Baum began publishing a trade journal called The Show Window and a year later founded the National Association of Window Trimmers.

„You know, the potential exists in a broadband world for every author to have a five-minute video snippet explaining the intended audience.“

The goal of any good store-display designer, according to Baum, was to „arouse in the observer the cupidity and longing to possess the goods.“ Under his example, department store merchants began to use glass, light, and color to create street-corner crowds and stimulate their audiences in ways previously unknown. „What a stinging, quivering zest they display,“ novelist Theodore Dreiser said in 1902 about the newfangled „show windows“ he had encountered, „stirring up in onlookers a desire to secure but a part of what they see, the taste of a vibrating presence, and the pictures that it makes.“

A century later, the „show window“ is alive and well, now transferred to the modern video display, whether it’s connected to the Internet or receiving a television signal. Bezos and crew have focused as intently on trimming their video windows as Baum and Wanamaker concentrated on theirs.

Certainly, his backers insist, Amazon.com’s founder has the necessary talents. Board member Patty Stonesifer, a former Microsoft executive, points to last year’s annual meeting of Amazon.com shareholders, at the Seattle Art Museum, where Bezos held the audience spellbound in a way that reminded her of the best Hollywood executives she has met. „I don’t think he’s a showman,“ says Stonesifer, „but people are drawn to him because he seems unbelievably like a winner. And they want to help him win.“

Translating that ability from the annual meeting to the screen is, of course, another matter. Up to this point, the focus has been on minimizing flash in favor of speed, and on accepting the limitations of what it’s possible to do within the 640 x 480 pixels available inside a browser window on a computer screen. „Every business has to deal with some scarcity, and in our case it’s screen real estate,“ Bezos observes.

But even amid the tiny graphics and fast-loading pages, the entertainment value built intentionally into Amazon.com shows through. Rankings, for example – updated in real time for the company’s best-sellers – tell shoppers exactly how well each book is selling. (It’s not unheard-of for authors to purchase copies of their own books just so they can see the ticker bump up.) And dedicated collectors of rarities – the most notoriously exacting crowd around, with significant cultural trickle-down – can readily appreciate Amazon.com’s attention to detail. Using the music keyword-search function, for example, you can pull up a listing of the six CDs offered by Amazon.com that feature the oud, the traditional Middle Eastern stringed instrument. (Oud by George Mgrdichian was number 14 on Amazon.com’s Middle East music chart in early January.)

As bandwidth and speed increase, making it ever easier for consumers to browse through goods online, Bezos expects e-catalogs to finally drive their paper counterparts into extinction. The bulletin-board discussions and review areas on Amazon.com will also grow more sophisticated, he promises. „You know, the potential exists in a broadband world for every author to have a five-minute video snippet explaining who the intended audience is, why they should buy that book, or that music CD, or that video, and you’ll be able to show the trailers from the videos.“ (Asked, however, to name the one missing technology that, if it existed, would dramatically improve Amazon.com’s business prospects, he says simply, „Windows instant on“ – meaning a personal computer that boots up as quickly as a TV or a PalmPilot. „At home it’s a real pain,“ he says, „because in the 90 seconds or two minutes that it takes, I’ve forgotten what I was going to do!“)

Bezos spends hours at a time thinking about the future: trawling for ideas, exploring his own site, sometimes just surfing the Web, particularly on Mondays and Thursdays, which he tries to keep unscheduled. „I catch up on email, I wander around and talk to people, or I set up my own meetings – ones that are not part of the regular calendar.“ His surfing isn’t always confined to retail: Let the record note that on a Thursday in January he spent five hours on the Web using MacKenzie’s MSN account, plumbing the depths of his space fascination and learning more about „roton“ rockets.

He also gathers new ideas from other wanderers in the company. Amazon.com’s purchase last August of Junglee, then a Silicon Valley-based company that produces product comparison software for Web shoppers, came about when Amazon.com treasurer Randy Tinsley approached Bezos sometime in late April 1998 and lobbied for the acquisition. After a half-hour debate during which Tinsley allowed that Junglee might resist a sale, Bezos’s final word was, „We have a million other things to do – drop it.“ Two hours later, Tinsley called Bezos back to say he had called Junglee anyway and the management there was actually interested. „It shows you how much people listen to me!“ Bezos jokes.

Like an investor checking his portfolio, every three months Bezos sits down with his assistant Kim Christenson to examine and analyze his calendar for the quarter just past. He wants to know, among other things, how much time he has devoted to each of the dozen or so categories to which Christenson has assigned every meeting, phone call, or trip. (The categories include standards like recruiting, as well as onetime items like the launch plans for Amazon.com’s UK and German sites.)

Although he won’t disclose all the projects currently occupying those 12 categories, one that surely colors all of them is the need to fend off the renewed challenge by Barnes & Noble to Amazon.com’s book business – in particular, the potential threat to his supply chain in Barnes & Noble’s recent purchase of Ingram, the book distributor that has been an essential source of Amazon.com inventory. Asked whether B&N’s bid for Ingram took him by surprise, Bezos implies that he knew Ingram was for sale and passed on it, adding, „We don’t talk about what we might have looked at and not done.“ Given that getting items into customers‘ hands as quickly as possible is a key part of the Amazon.com experience, he admits that distributors are also key, at least currently. But he insists they aren’t a necessity long term. „There are so many ways to solve that problem,“ he says, one of which appears to lie in Amazon.com initiatives to build direct relationships with publishers. As for Barnes & Noble, „I bet you a year from now they will not consider us direct competitors,“ Bezos predicts. „Clearly they do today, but we’re on different paths … we’re trying to invent the future of ecommerce, and they’re just defending their turf.“

Jeff Bezos is shopping in meatspace. „I want to get a pair of cargo pants,“ he says, „although my wife says she hates them.“

We’re striding up Pine Street toward the new Nordstrom store in Seattle’s downtown shopping district, next door to the Pacific Place mall and only a couple of blocks from Amazon.com headquarters. Bezos wants cargo pants, he says, because he has too much stuff to carry in his pockets. Today he’s packing a gizmo he calls his World Trade Center Escape Kit, a combination flashlight, penknife, and key chain that he began to carry after the New York landmark was bombed. (For Christmas, he bought every member of his family their own survival kit, an off-the-shelf postmodern version of the Swiss Army knife, from Brookstone, called the Tool Logic Tool Lite Deluxe. Bezos, who has given the matter a good deal of thought, insists that the people trapped for hours in the smoky darkness of the World Trade Center’s fire escapes would have reached safety faster if they had had these simple tools.) Toy shopping, online and off, captivates him. Jeff and MacKenzie’s Christmas gift to everyone a year ago was laser-tag guns and vests, which, combined with the walkie-talkies his parents offered up, served as weapons in a nighttime game of laser-enhanced Capture the Flag on Amelia Island. The entire Bezos clan raced around in the dark zapping each other. „I never realized my mom was such a good shot!“ he says. But Jeff, as his mother recounts with a hint of disapproval, used a secret weapon to stack the deck in his favor: a pair of night-vision goggles MacKenzie had given him. „It’s not clear,“ Bezos counters, „that you’re supposed to have a level playing field when you’re marching into battle. Ah-ha-ha-ha-ha-ha!“

In Nordstrom we pick up lattes and stand in the middle of the main floor. Bezos comments idly on the down escalator: „Look, you turn immediately and go down, instead of walking from one end to the other and circulating through the merchandise.“ He pauses to consider whether the utility in facilitating quick passage from the main floor to the basement would outweigh the retail imperative.

For the kind of shopper Bezos represents, utility is, of course, a mantra. His wardrobe consists of white or blue dress shirts and a pair of khaki pants. Back in the late ’80s in New York, when he had to wear a suit every day to the office, he gained a preference for shirts with hidden snaps under the collar points for easy tie removal. He has trouble locating this style in the Pacific Northwest, so now he buys a pack of standard snapless shirts and has the snaps sewn on. When he discovers a pair of shoes he likes, he’ll buy four pairs at once and wear them in regular rotation for years.

Bezos has a full-steam-ahead, leaning-into-the-wind style of walking when he’s in a hurry, and in the Pacific Place mall he is continually veering off on some new quest for knowledge. He marches into an upscale pen shop and asks the first salesperson we encounter to show us the most expensive model in stock, which turns out to be a $975 Mont Blanc fountain pen. „That was a very good salesman,“ he announces when we leave, pleased with the young man’s knowledge of nib and ink arcana. As we pass Victoria’s Secret he says slyly, „You know, they charge you for the catalog in the stores,“ and whisks me through racks of bras and panties to a cash register in the back, where he asks the clerk to show him the goods. It turns out two catalogs are for sale, one for $5 and another for $3. „It’s the rare store that gets to charge for the catalog,“ he notes admiringly.

We bomb out of the mall and across the street to Old Navy. („You know, they treat jaywalking as seriously here as they do in Los Angeles,“ Bezos says before leaping bravely into mid-block traffic.) Once inside, he tries on a pair of light khaki cargos, size 33R. He deliberates. He decides to buy the pants. „I’m only going to buy one pair,“ he says, „because my wife hasn’t seen them yet.“

Back out in the street, the shopping throng envelopes us. Bezos waves an arm across the scene. „You see, none of this is going away,“ he says. „The Net can’t replace this experience.“

Not that it matters. Back in his office, he’s once again enumerating Amazon.com’s unlimited upside and its not insignificant advantages over the places we’ve just been – small, centralized inventory, low-cost warehouse space, one-to-one knowledge of consumer preferences. „There’s no comparison between the two models,“ he says gleefully, leaning forward and clasping his hands. „Online is so much cheaper.“

It remains to be seen what the long-term costs for Amazon.com will be. In business, of course, the conventional wisdom is that being an innovator costs a lot more than being an imitator, a fact Bezos acknowledges. But the pioneering quality of his business model is as much an aspect of his personality as the personality of Amazon.com. „You cannot,“ he says, „make a business case that you should be who you’re not.

„One of the things that I hope will distinguish Amazon.com is that we continue to be a company that defies easy analogy,“ he goes on. „This requires a lot of innovation, and innovation requires a lot of random walk“ – that is, spontaneous, open-ended search.

„There’s a strong case to be made for being a copier. It’s just not as satisfying, or as fun!“ Rule number one on how to succeed in business, from the new master of the game.

PLUS

Count the Change: All $22.1 Billion of It*

Mall of America 2010

Alexa do you work for the NSA ;-)

Tens of millions of people use smart speakers and their voice software to play games, find music or trawl for trivia. Millions more are reluctant to invite the devices and their powerful microphones into their homes out of concern that someone might be listening.

Sometimes, someone is.

Amazon.com Inc. employs thousands of people around the world to help improve the Alexa digital assistant powering its line of Echo speakers. The team listens to voice recordings captured in Echo owners’ homes and offices. The recordings are transcribed, annotated and then fed back into the software as part of an effort to eliminate gaps in Alexa’s understanding of human speech and help it better respond to commands.

The Alexa voice review process, described by seven people who have worked on the program, highlights the often-overlooked human role in training software algorithms. In marketing materials Amazon says Alexa “lives in the cloud and is always getting smarter.” But like many software tools built to learn from experience, humans are doing some of the teaching.

The team comprises a mix of contractors and full-time Amazon employees who work in outposts from Boston to Costa Rica, India and Romania, according to the people, who signed nondisclosure agreements barring them from speaking publicly about the program. They work nine hours a day, with each reviewer parsing as many as 1,000 audio clips per shift, according to two workers based at Amazon’s Bucharest office, which takes up the top three floors of the Globalworth building in the Romanian capital’s up-and-coming Pipera district. The modern facility stands out amid the crumbling infrastructure and bears no exterior sign advertising Amazon’s presence.

The work is mostly mundane. One worker in Boston said he mined accumulated voice data for specific utterances such as “Taylor Swift” and annotated them to indicate the searcher meant the musical artist. Occasionally the listeners pick up things Echo owners likely would rather stay private: a woman singing badly off key in the shower, say, or a child screaming for help. The teams use internal chat rooms to share files when they need help parsing a muddled word—or come across an amusing recording.

 Amazon in Bucharest
Amazon has offices in this Bucharest building.
Photographer: Irina Vilcu/Bloomberg

Sometimes they hear recordings they find upsetting, or possibly criminal. Two of the workers said they picked up what they believe was a sexual assault. When something like that happens, they may share the experience in the internal chat room as a way of relieving stress. Amazon says it has procedures in place for workers to follow when they hear something distressing, but two Romania-based employees said that, after requesting guidance for such cases, they were told it wasn’t Amazon’s job to interfere.

“We take the security and privacy of our customers’ personal information seriously,” an Amazon spokesman said in an emailed statement. “We only annotate an extremely small sample of Alexa voice recordings in order [to] improve the customer experience. For example, this information helps us train our speech recognition and natural language understanding systems, so Alexa can better understand your requests, and ensure the service works well for everyone.

“We have strict technical and operational safeguards, and have a zero tolerance policy for the abuse of our system. Employees do not have direct access to information that can identify the person or account as part of this workflow. All information is treated with high confidentiality and we use multi-factor authentication to restrict access, service encryption and audits of our control environment to protect it.”

Amazon, in its marketing and privacy policy materials, doesn’t explicitly say humans are listening to recordings of some conversations picked up by Alexa. “We use your requests to Alexa to train our speech recognition and natural language understanding systems,” the company says in a list of frequently asked questions.

In Alexa’s privacy settings, Amazon gives users the option of disabling the use of their voice recordings for the development of new features. The company says people who opt out of that program might still have their recordings analyzed by hand over the regular course of the review process. A screenshot reviewed by Bloomberg shows that the recordings sent to the Alexa reviewers don’t provide a user’s full name and address but are associated with an account number, as well as the user’s first name and the device’s serial number.

The Intercept reported earlier this year that employees of Amazon-owned Ring manually identify vehicles and people in videos captured by the company’s doorbell cameras, an effort to better train the software to do that work itself.

“You don’t necessarily think of another human listening to what you’re telling your smart speaker in the intimacy of your home,” said Florian Schaub, a professor at the University of Michigan who has researched privacy issues related to smart speakers. “I think we’ve been conditioned to the [assumption] that these machines are just doing magic machine learning. But the fact is there is still manual processing involved.”

“Whether that’s a privacy concern or not depends on how cautious Amazon and other companies are in what type of information they have manually annotated, and how they present that information to someone,” he added.

When the Echo debuted in 2014, Amazon’s cylindrical smart speaker quickly popularized the use of voice software in the home. Before long, Alphabet Inc. launched its own version, called Google Home, followed by Apple Inc.’s HomePod. Various companies also sell their own devices in China. Globally, consumers bought 78 million smart speakers last year, according to researcher Canalys. Millions more use voice software to interact with digital assistants on their smartphones.

Alexa software is designed to continuously record snatches of audio, listening for a wake word. That’s “Alexa” by default, but people can change it to “Echo” or “computer.” When the wake word is detected, the light ring at the top of the Echo turns blue, indicating the device is recording and beaming a command to Amazon servers.

 Inside An Amazon 4-Star Store
An Echo smart speaker inside an Amazon 4-star store in Berkeley, California.
Photographer: Cayce Clifford/Bloomberg

Most modern speech-recognition systems rely on neural networks patterned on the human brain. The software learns as it goes, by spotting patterns amid vast amounts of data. The algorithms powering the Echo and other smart speakers use models of probability to make educated guesses. If someone asks Alexa if there’s a Greek place nearby, the algorithms know the user is probably looking for a restaurant, not a church or community center.

But sometimes Alexa gets it wrong—especially when grappling with new slang, regional colloquialisms or languages other than English. In French, avec sa, “with his” or “with her,” can confuse the software into thinking someone is using the Alexa wake word. Hecho, Spanish for a fact or deed, is sometimes misinterpreted as Echo. And so on. That’s why Amazon recruited human helpers to fill in the gaps missed by the algorithms.

Apple’s Siri also has human helpers, who work to gauge whether the digital assistant’s interpretation of requests lines up with what the person said. The recordings they review lack personally identifiable information and are stored for six months tied to a random identifier, according to an Apple security white paper. After that, the data is stripped of its random identification information but may be stored for longer periods to improve Siri’s voice recognition.

At Google, some reviewers can access some audio snippets from its Assistant to help train and improve the product, but it’s not associated with any personally identifiable information and the audio is distorted, the company says.

A recent Amazon job posting, seeking a quality assurance manager for Alexa Data Services in Bucharest, describes the role humans play: “Every day she [Alexa] listens to thousands of people talking to her about different topics and different languages, and she needs our help to make sense of it all.” The want ad continues: “This is big data handling like you’ve never seen it. We’re creating, labeling, curating and analyzing vast quantities of speech on a daily basis.”

Amazon’s review process for speech data begins when Alexa pulls a random, small sampling of customer voice recordings and sends the audio files to the far-flung employees and contractors, according to a person familiar with the program’s design.

 Amazon.com Inc. Holds Product Reveal Launch
The Echo Spot
Photographer: Daniel Berman/Bloomberg

Some Alexa reviewers are tasked with transcribing users’ commands, comparing the recordings to Alexa’s automated transcript, say, or annotating the interaction between user and machine. What did the person ask? Did Alexa provide an effective response?

Others note everything the speaker picks up, including background conversations—even when children are speaking. Sometimes listeners hear users discussing private details such as names or bank details; in such cases, they’re supposed to tick a dialog box denoting “critical data.” They then move on to the next audio file.

According to Amazon’s website, no audio is stored unless Echo detects the wake word or is activated by pressing a button. But sometimes Alexa appears to begin recording without any prompt at all, and the audio files start with a blaring television or unintelligible noise. Whether or not the activation is mistaken, the reviewers are required to transcribe it. One of the people said the auditors each transcribe as many as 100 recordings a day when Alexa receives no wake command or is triggered by accident.

In homes around the world, Echo owners frequently speculate about who might be listening, according to two of the reviewers. “Do you work for the NSA?” they ask. “Alexa, is someone else listening to us?”

— With assistance by Gerrit De Vynck, Mark Gurman, and Irina Vilcu

Source: https://www.bloomberg.com/news/articles/2019-04-10/is-anyone-listening-to-you-on-alexa-a-global-team-reviews-audio

Microsoft wants regulation of facial recognition technology to limit ‚abuse‘

Facial recognition put to the test
Facial recognition put to the test

Microsoft has helped innovate facial recognition software. Now it’s urging the US government to enact regulation to control the use of the technology.

In a blog post, Microsoft (MSFT)President Brad Smith said new laws are necessary given the technology’s „broad societal ramifications and potential for abuse.“

He urged lawmakers to form „a government initiative to regulate the proper use of facial recognition technology, informed first by a bipartisan and expert commission.“

Facial recognition — a computer’s ability to identify or verify people’s faces from a photo or through a camera — has been developing rapidly. Apple (AAPL), Google (GOOG), Amazon and Microsoft are among the big tech companies developing and selling such systems. The technology is being used across a range of industries, from private businesses like hotels and casinos, to social media and law enforcement.

Supporters say facial recognition software improves safety for companies and customers and can help police track police down criminals or find missing children. Civil rights groups warn it can infringe on privacy and allow for illegal surveillance and monitoring. There is also room for error, they argue, since the still-emerging technology can result in false identifications.

The accuracy of facial recognition technologies varies, with women and people of color being identified with less accuracy, according to MIT research.

„Facial recognition raises a critical question: what role do we want this type of technology to play in everyday society?“ Smith wrote on Friday.

Smith’s call for a regulatory framework to control the technology comes as tech companies face criticism over how they’ve handled and shared customer data, as well as their cooperation with government agencies.

Last month, Microsoft was scrutinized for its working relationship with US Immigration and Customs Enforcement. ICE had been enforcing the Trump administration’s „zero tolerance“ immigration policy that separated children from their parents when they crossed the US border illegally. The administration has since abandoned the policy.

Microsoft urges Trump administration to change its policy separating families at border

Microsoft wrote a blog post in January about ICE’s use of its cloud technology Azure, saying it could help it „accelerate facial recognition and identification.“

After questions arose about whether Microsoft’s technology had been used by ICE agents to carry out the controversial border separations, the company released a statement calling the policy „cruel“ and „abusive.“

In his post, Smith reiterated Microsoft’s opposition to the policy and said he had confirmed its contract with ICE does not include facial recognition technology.

Amazon(AMZN) has also come under fire from its own shareholders and civil rights groups over local police forces using its face identifying software Rekognition, which can identify up to 100 people in a single photo.

Some Amazon shareholders coauthored a letter pressuring Amazon to stop selling the technology to the government, saying it was aiding in mass surveillance and posed a threat to privacy rights.

Amazon asked to stop selling facial recognition technology to police

And Facebook (FB) is embroiled in a class-action lawsuit that alleges the social media giant used facial recognition on photos without user permission. Its facial recognition tool scans your photos and suggests you tag friends.

Neither Amazon nor Facebook immediately responded to a request for comment about Smith’s call for new regulations on face ID technology.

Smith said companies have a responsibility to police their own innovations, control how they are deployed and ensure that they are used in a „a manner consistent with broadly held societal values.“

„It may seem unusual for a company to ask for government regulation of its products, but there are many markets where thoughtful regulation contributes to a healthier dynamic for consumers and producers alike,“ he said.

https://money.cnn.com/2018/07/14/technology/microsoft-facial-recognition-letter-government/index.html

June 2018 Tech News & Trends to Watch

1. Companies Worldwide Strive for GDPR Compliance

By now, everyone with an email address has seen a slew of emails announcing privacy policy updates. You have Europe’s GDPR legislation to thank for your overcrowded inbox. GDPR creates rules around how much data companies are allowed to collect, how they’re able to use that data, and how clear they have to be with consumers about it all.

Companies around the world are scrambling to get their business and its practices into compliance – a significant task for many of them. While technically, the deadline to get everything in order passed on May 25, for many companies the process will continue well into June and possibly beyond. Some companies are even shutting down in Europe for good, or for as long as it takes them to get in compliance.

Even with the deadline behind us, the GDPR continues to be a top story for the tech world and may remain so for some time to come.

 

2. Amazon Provides Facial Recognition Tech to Law Enforcement

Amazon can’t seem to go a whole month without showing up in a tech news roundup. This month it’s for a controversial story: selling use of Rekognition, their facial recognition software, to law enforcement agencies on the cheap.

Civil rights groups have called for the company to stop allowing law enforcement access to the tech out of concerns that increased government surveillance can pose a threat to vulnerable communities in the country. In spite of the public criticism, Amazon hasn’t backed off on providing the tech to authorities, at least as of this time.

 

3. Apple Looks Into Self-Driving Employee Shuttles

Of the many problems facing our world, the frustrating work commute is one that many of the brightest minds in tech deal with just like the rest of us. Which makes it a problem the biggest tech companies have a strong incentive to try to solve.

Apple is one of many companies that’s invested in developing self-driving cars as a possible solution, but while that goal is still (probably) years away, they’ve narrowed their focus to teaming up with VW to create self-driving shuttles just for their employees.  Even that project is moving slower than the company had hoped, but they’re aiming to have some shuttles ready by the end of the year.

 

4. Court Weighs in on President’s Tendency to Block Critics on Twitter

Three years ago no one would have imagined that Twitter would be a president’s go-to source for making announcements, but today it’s used to that effect more frequently than official press conferences or briefings.

In a court battle that may sound surreal to many of us, a judge just found that the president can no longer legally block other users on Twitter.  The court asserted that blocking users on a public forum like Twitter amounts to a violation of their First Amendment rights. The judgment does still allow for the president and other public officials to mute users they don’t agree with, though.

 

5. YouTube Launches Music Streaming Service

YouTube joined the ranks of Spotify, Pandora, and Amazon this past month with their own streaming music service. Consumers can use a free version of the service that includes ads, or can pay $9.99 for the ad-free version.

youtube music service

With so many similar services already on the market, people weren’t exactly clamoring for another music streaming option. But since YouTube is likely to remain the reigning source for videos, it doesn’t necessarily need to unseat Spotify to still be okay. And with access to Google’s extensive user data, it may be able to provide more useful recommendations than its main competitors in the space, which is one way the service could differentiate itself.

 

6. Facebook Institutes Political Ad Rules

Facebook hasn’t yet left behind the controversies of the last election. The company is still working to proactively respond to criticism of its role in the spread of political propaganda many believe influenced election results. One of the solutions they’re trying is a new set of rules for any political ads run on the platform.

Any campaign that intends to run Facebook ads is now required to verify their identity with a card Facebook mails to their address that has a verification code. While Facebook has been promoting these new rules for a few weeks to politicians active on the platform, some felt blindsided when they realized, right before their primaries no less, that they could no longer place ads without waiting 12 to 15 days for a verification code to come in the mail. Politicians in this position blame the company for making a change that could affect their chances in the upcoming election.

Even in their efforts to avoid swaying elections, Facebook has found themselves criticized for doing just that. They’re probably feeling at this point like they just can’t win.

 

7. Another Big Month for Tech IPOs

This year has seen one tech IPO after another and this month is no different. Chinese smartphone company Xiaomi has a particularly large IPO in the works. The company seeks to join the Hong Kong stock exchange on June 7 with an initial public offering that experts anticipate could reach $10 billion.

The online lending platform Greensky started trading on the New York Stock Exchange on May 23 and sold 38 million shares in its first day, 4 million more than expected. This month continues 2018’s trend of tech companies going public, largely to great success.

 

8. StumbleUpon Shuts Down

In the internet’s ongoing evolution, there will always be tech companies that win and those that fall by the wayside. StumbleUpon, a content discovery platform that had its heyday in the early aughts, is officially shutting down on June 30.

Since its 2002 launch, the service has helped over 40 million users “stumble upon” 60 billion new websites and pieces of content. The company behind StumbleUpon plans to create a new platform that serves a similar purpose that may be more useful to former StumbleUpon users called Mix.

 

9. Uber and Lyft Invest in Driver Benefits

In spite of their ongoing success, the popular ridesharing platforms Uber and Lyft have faced their share of criticism since they came onto the scene. One of the common complaints critics have made is that the companies don’t provide proper benefits to their drivers. And in fact, the companies have fought to keep drivers classified legally as contractors so they’re off the hook for covering the cost of employee taxes and benefits.

Recently both companies have taken steps to make driving for them a little more attractive. Uber has begun offering Partner Protection to its drivers in Europe, which includes health insurance, sick pay, and parental leave ­ ­– so far nothing similar in the U.S. though. For its part, Lyft is investing $100 million in building driver support centers where their drivers can stop to get discounted car maintenance, tax help, and customer support help in person from Lyft staff. It’s not the same as getting full employee benefits (in the U.S. at least), but it’s something.

Source: https://www.hostgator.com/blog/june-tech-trends-to-watch/

Alibaba and Amazon hit India

Source: https://www.economist.com/news/special-report/21730539-e-commerce-giants-are-trying-export-their-success-alibaba-and-amazon-look-go-global

IN SEPTEMBER 2014 Jeff Bezos announced his first big investment in India, hopping aboard a colourful bus in Bangalore. It was the start of a rapid $5bn investment in India, part of Mr Bezos’s plans to take Amazon global. Two months later Alibaba’s Jack Ma appeared in Delhi. “We will invest more in India,” he declared. The following year Alibaba put $500m into Paytm, an Indian digital-payments company. This year it led a fundraising round for Paytm’s e-commerce arm. The two giants seem set for an epic clash in India.

But in their home markets they have so far stayed out of each other’s way. Amazon has only a tiny business in China. Alibaba’s strategy in the United States has been to help American businesses sell in China and vice versa. “People always ask me, when will you go to the US?” says Alibaba’s CEO, Mr Zhang. “And I say, why the US? Amazon did a fantastic job.” The two firms have mostly invested in different foreign markets: Alibaba across South-East Asia and Amazon across Europe. But much of the rest of the world is still up for grabs.

The biggest tussles will probably be over growing economies and cross-border commerce. Alibaba aspires to serve 2bn customers around the world within 20 years—a benevolent empire that supports businesses. In some cases it has begun with digital payments, as in India with Paytm. In others it has invested in e-commerce sites, as with Lazada, in South-East Asia. But it intends to build a broad range of services within each market, including payments, e-commerce and travel services, and then link local platforms with Alibaba’s in China.

Mr Ma wants to enable small firms to operate just as nimbly as big ones on the global stage. Alibaba helps Chinese companies sell in places such as Brazil and Russia, and assists foreign firms with marketing, logistics and customs in China. Eventually it hopes to use its technology to link logistics networks around the world so that any product can reach any buyer anywhere within 72 hours. That is still a long way off, but it gives a glimpse of the company’s staggering ambition.

Amazon already earns more than one-third of its revenue from e-commerce outside North America. Germany is its second-biggest market, followed by Japan and Britain. This year it bought Souq, an e-commerce firm in the Middle East. Its criteria for expansion elsewhere include the size of the population and the economy and the density of internet use, says Russ Grandinetti, head of Amazon’s international business. India has been one of its main testing grounds.

Amazon, like Alibaba, also wants to help suppliers in any country to sell their products abroad. An Amazon shopper in Mexico, for instance, can buy goods from America. Mr Grandinetti sees such cross-border sales as an increasingly important component of Amazon’s value to consumers and sellers alike.

Yet both companies run the risk that strategies which did well in their home countries may not succeed elsewhere. In China, for instance, the popularity of e-commerce relied on a number of special factors. China’s manufacturers often found themselves with excess supplies of clothes and shoes; Alibaba provided a place to sell them. Alipay thrived because few consumers had credit cards. China has also benefited from having cheap labour and lots of big cities—more than 100 of them with over 1m people—creating a density of demand that made it worthwhile for logistics firms to build distribution networks.

As they expand, however, Amazon’s and Alibaba’s business models may shift and, in some markets, start to converge. So far the companies have differed in important ways. Amazon owns inventory and warehouses; Alibaba does not. But Alibaba has a broader reach than Amazon, particularly with Ant Financial’s giant payments business. As Amazon grows, it may become more like Alibaba. In India, for instance, regulations prevent it from owning inventory directly. And Amazon recently won a licence from the Reserve Bank of India for a digital wallet. Alibaba, for its part, may become more like Amazon. As the Chinese firm set its sights on South-East Asia, it invested in SingPost, Singapore’s state postal system. In September it became the majority owner in Cainiao, a Chinese logistics network, and said it plans to spend $15bn on logistics in the next five years.

Their advances may be slowed by other rivals. Smaller firms can flourish in niches. Flipkart, whose backers include Naspers and SoftBank, is competing fiercely with Amazon in India; the two companies routinely bicker over which has the bigger market share. Yoox Net-a-Porter, an online luxury-goods seller, is also expanding around the world.

Among the questions facing the two giants are whether other technology firms will pour more money into e-commerce, and what partnerships might emerge. Tencent’s WeChat Pay is already challenging Alipay in China. About one-third of WeChat’s users in China shop on that platform. Tencent is trying to recruit shops to accept its payment app in other countries, too, and recently took a stake in Flipkart. In deploying its services abroad, Tencent might get a helping hand from Naspers. The South African company owns about one-third of Tencent and has backed e-commerce firms around the world. Facebook is now muscling in on this business by making it easier for its users to buy goods through its messaging service as well as its other platforms, WhatsApp and Instagram.

The A-list still stands

For now, however, Amazon and Alibaba remain each other’s most formidable international rivals. Success in e-commerce requires scale, which needs lots of capital. Local e-commerce firms in India have come under pressure from investors to boost profitability. Amazon has no problems on that score. As Amit Agarwal, head of Amazon India, puts it: “We will invest whatever it takes to make sure we provide a great customer experience.”

Big firms also have a natural advantage as they expand, because technologies developed for one market can be introduced across many. “It’s like a Lego set,” says Lazada’s chief executive, Maximilian Bittner. He can use pieces of Alibaba’s model, such as algorithms for product recommendations, to improve Lazada’s operations. Amazon’s investments in machine learning have myriad applications anywhere in the world.

That does not mean that Amazon and Alibaba will dominate every country around the world, nor that they will crush every competitor. Bob Van Dijk, chief executive of Naspers, maintains there is room for many operators: “I don’t believe in absolute hegemony.” But given the two giants’ ambitions and the benefits of scale, they are bound to become more powerful and compete directly in more places. That has implications for all sorts of industries, but particularly the retail sector.

Amazon will continue to invest heavily in India

Amazon.com     Inc.     will     continue      investing  heavily  in  India,  the  chief   of its local operations said, dispelling  concerns of slower spending by the  US  e-commerce  company  after  its   chief financial officer Brian Olsavsky  said that while the India investments  were  starting  to  show  results,  they   had   hit   margins,   contributing   to    lower-than-expected  results  in  the   third quarter. “Not   at   all,”   Amazon’s   India   chief    Amit  Agarwal  said  in  an  interview   on   Monday   when   asked   whether    Amazon       would       slow       down        investments     in     India.     Amazon,      which  initially  said  it  would  invest   $2  billion  in  India,  had  said  in  June   that it would invest an additional $3  billion in the country. That investment is on track, Agarwal  said,  adding  that  the  company  is   “excited  about  the  momentum  that   we see in India”. “India is very early in its e-commerce  trajectory. Amazon is very early in its  e-commerce  trajectory  in  India.  To   transform how India buys is going  to take a long time; it will take a lot  of investment and… for many years.  This is just the beginning.” Amazon is betting big on its Prime  service in India and expects the  loyalty programme to dominate  sales in the coming months. “Prime continued to be the top seller  in all of October, not just for wave  one (of the Great Indian Festival).  Prime membership continues to  be a top seller and it is going to be  so going forward every month. My  belief is that Prime membership will  be the top seller every month based  on the trends that we are seeing,”  said Agarwal. On Monday, Amazon also said that  it witnessed record numbers during  its month-long Diwali sale event,  the Great Indian Festival, with sales  jumping 2.7 times from last year. This year’s Diwali sale has proven  to be the biggest showdown in the  history of Indian e-commerce, with  Amazon India and rival Flipkart  going all out to woo shoppers. While Flipkart claimed to outsell  Amazon India during the first leg of  the sale season, Amazon claims it  came back strongly during the latter  half of the sale season, with bigger  discounts in key categories such as  smartphones and large appliances. “October this year for us was 2.7  times of last year’s October—which  is incredible because last year was  4 times the October before,” said  Agarwal, adding that this growth  came even as “conversations”  suggested growth in India’s  e-commerce business was going to  be flat. Agarwal said that October could be  an inflection point for e-commerce  in India. “We had categories from  phones to Amazon Fashion to  appliances growing three to 11  times; even newer categories such  as luxury and beauty grew 46 times;  grocery and everyday consumables,  7.1 times; furniture, 11.8 times; gold  jewellery, eight times—so a lot of  these categories are showing robust  growth.” Agarwal said that 70% of the  company’s new customers in  October came from tier-II and tier-III  cities, adding that it was confident  of carrying the momentum from its  Diwali sale well into November and  December. Mint couldn’t independently verify  the numbers, but, in general,  all e-commerce marketplaces  (including Snapdeal, Amazon and  Flipkart’s smaller rival) did well in  October, carrying forward their  momentum from their annual sales. “When I look at the gaps between  the waves, our growth rates in those  gaps continued to the same extent.  We’re growing at 150% year-over- year. At peacetime, the growth rate  is still what I’m telling you. And as  we exit out of wave three (the third  sale event in October), we don’t see  a slowdown,” Agarwal said. “The broader e-commerce story is  not just a Flipkart-Amazon battle. Of  course, both Flipkart and Amazon  are trying to get a fair share of the pie  in key categories such as electronics,  fashion and large appliances. And  despite drags on margins, nobody is  going to reduce investments in India.  What you will see, however, is that  they will focus on innovation. For  example, during the festive season,  smartphone sales shot up and a lot  of the sales jumped due to things  like product exchanges. Another  new innovation was something like  Amazon Prime. So, you’ll see a lot of  that going forward,” said Sreedhar  Prasad, partner-e-commerce at  KPMG

Amazon has a secret plan to replace FedEx and UPS called ‚Consume the City‘

Amazon has been quietlybeefing up its own shipping logistics network lately.

Amazon CEO Jeff BezosAmazon CEO Jeff Bezos

Although Amazon publicly says it’s meant to complement existing delivery partners like FedEx and UPS, a new report by The Wall Street Journal’s Greg Bensinger and Laura Stevens says Amazon has broader ambitions.

Eventually, Amazon aims to build a full-scale shipping and logistics network that will not only ship products ordered from Amazon, but also will ship products for other retailers and consumers.

In other words, Amazon is looking to compete against delivery services like FedEx and UPS, the report says. Internally, some Amazon execs call the plan „Consume the City.“

Here are other new details around Amazon’s logistics plan, according to the report:

  • Amazon recently hired former Uber VP Tim Collins as VP of global logistics.
  • It recruited dozens of UPS and FedEx executives and hundreds of UPS employees in recent years.
  • Test trials for last-mile deliveries are running in big cities like Los Angeles, Chicago, and Miami.
  • The company also experimented with a program called „I Have Space“ to store Amazon’s inventory in warehouses owned by other companies.

On top of that, InternetRetailer.com recently reported that Amazon has hired Ed Feitzinger, the former CEO of UTi Worldwide, one of the largest supply chain management companies, as VP of global logistics. Add that to the fact that Amazon has now built facilities within 20 miles of 44% of the US population, and Amazon is starting to look like a real threat to existing logistics networks.

According to Baird Equity Research, Amazon is looking at a $400 billion market opportunity by launching all these initiatives. They could also help Amazon reduce some of its shipping costs, which have been increasing every year.

People in the industry are starting to take notice, too, according to Zvi Schreiber, the CEO of Freightos, an online marketplace for international freight.

„After dominating e-commerce and warehousing, Amazon is moving farther up the supply chain and eyeing the logistics sector from all angles, particularly looking to leverage technology, capital, and manpower to make logistics more efficient,“ Schreiber told Business Insider.

„Given their track record of disrupting industries — from retail to warehousing and e-commerce fulfillment to cloud computing — the trillion-dollar freight industry is certainly tracking Amazon nervously.“

http://www.businessinsider.de/amazon-secret-plan-replace-fedex-ups-called-consume-the-city-2016-9

Facebook Is Not a Technology Company

At the close of trading this Monday, the top five global companies by market capitalization were all U.S. tech companies: Apple, Alphabet (formerly Google), Microsoft, Amazon, and Facebook.

Bloomberg, which reported on the apparent milestone, insisted that this “tech sweep” is unprecedented, even during the dot-com boom. Back in 2011, for example, Exxon and Shell held two of the top spots, and Apple was the only tech company in the top five. In 2006, Microsoft held the only slot—the others were in energy, banking, and manufacture. But things have changed. “Your new tech overlords,” Bloomberg christened the five.

But what makes a company a technology company, anyway? In their discussion of overlords, Bloomberg’s Shira Ovide and Rani Molla explain that “Non-tech titans like Exxon and GE have slipped a bit” in top valuations. Think about that claim for a minute, and reflect on its absurdity: Exxon uses enormous machinery to extract the remains of living creatures from geological antiquity from deep beneath the earth. Then it uses other enormous machinery to refine and distribute that material globally. For its part, GE makes almost everything—from light bulbs to medical imaging devices to wind turbines to locomotives to jet engines.

Isn’t it strange to call Facebook, a company that makes websites and mobile apps a “technology” company, but to deny that moniker to firms that make diesel trains, oil-drilling platforms, and airplane engines?

Part of the problem has to do with the private language of finance. Markets segment companies by industry, and analysts track specific sectors and subsectors. Exxon is an energy industry stock, while GE straddles energy, transportation, public utility, healthcare, and finance. The “technology” in the technology sector is really synecdoche for “computer technology.” Companies in that sector deal in software, semiconductors, hardware manufacturing, peripherals, data processing services, digital advertising, and so forth.

“Technology” has become so overused … that the term has lost all meaning.

For the NASDAQ exchange, where most so-called technology companies are traded, those industries are based on the Industry Classification Benchmark (ICB), a classification system developed by the London Stock Exchange’s FTSE Group. The ICB breaks the market down into 10 industries, each of which is broken down further into supersectors, sectors, and subsectors. The ICB technology industry counts “Internet” as a subsector of “Software & Computer Services,” for example. Companies are assigned to sectors and subsectors based on the (largest) source of their revenue (thus, GE is considered an energy company).

A company like Microsoft fits squarely into Technology, Software & Computer Services, because that’s where the majority of its revenue derives. Likewise, Apple is a traditional ICB “technology” company, in the sense that it makes most of its money from selling computer hardware. But the other companies in Bloomberg’s Monday top five are technology companies in a mostly vestigial way.

Almost all of Google’s and Facebook’s revenue, for example, comes from advertising; by that measure, there’s an argument that those firms are really Media industry companies, with a focus on Broadcasting and Entertainment. Of course, Alphabet is a lot like GE, or at least it aspires to be, with its investments in automotive (Self-Driving Car Project), health care (Calico), consumer goods (Nest), utilities (Fiber). But the vast majority of its revenue comes from Google’s ad business.

Amazon generates a lot of revenue from its Amazon Web Services (AWS) business—perhaps as much as $10 billion this year. It also derives revenue from manufacturing and selling computer hardware, like the Fire and Kindle. But thevast majority of Amazon’s revenue comes from international sales of consumer goods. Amazon is sort of a tech company, but really it’s a retailer.

A day later, at the close of the markets Tuesday, August 2, the tech sweep was already history. Exxon Mobil had pushed Facebook out of position five, topping the, uh, online broadcast media company’s $352 billion market cap by $8 billion, or 2 percent. Warren Buffett’s conglomerate Berkshire Hathaway also closed Tuesday at $354 billion in total value. Among Berkshire Hathaway’s top revenue drivers are insurance, manufacturing, and the obscure but ubiquitous McClane Company, which provides supply-chain management and logistics services for the grocery industry. It brought in $28 billion in revenue last year, or about $10 billion more than Facebook. Johnson & Johnson, which sells consumer and industrial health products from Actifed to Zyrtec, wasn’t far behind, with a $345 billion market capitalization at the close of business Tuesday.

Every industry uses computers, software, and internet services. If that’s what “technology” means, then every company is in the technology business—a useless distinction. But it’s more likely that “technology” has become so overused, and so carelessly associated with Silicon Valley-style computer software and hardware startups, that the term has lost all meaning. Perhaps finance has exacerbated the problem by insisting on the generic industrial term “technology” as a synonym for computing.

There are companies that are firmly planted in the computing sector. Microsoft and Apple are two. Intel is another—it makes computer parts for other computer makers. But it’s also time to recognize that some companies—Alphabet, Amazon, and Facebook among them—aren’t primarily in the computing business anyway. And that’s no slight, either. The most interesting thing about companies like Alphabet, Amazon, and Facebook is that they are not (computing) technology companies. Instead, they are using computing infrastructure to build new—and enormous—businesses in other sectors. If anything, that’s a fair take on what “technology” might mean as a generic term: manipulating one set of basic materials to realize goals that exceed those materials.

http://www.theatlantic.com/technology/archive/2016/08/facebook-is-not-a-technology-company/494183

lower-cost gadgetry that lasts a lot longer could be a dire omen for high-margin hardware companies like Apple

This week, Intel CEO Brian Krzanich announced that people are keeping their PCs a lot longer before upgrading: The average has increased from four years to as many as six.

The tablet-refresh cycle isn’t much shorter than that, to Apple’s eternal chagrin. Even iPhone sales have started to taper off, partly because people are keeping their phones longer or choosing cheaper Android phones.

What’s happening is pretty simple. The hardware and the software running on any device itself have become way less interesting than the web apps and services, like the ones that Google and Amazon have made the core of their business.

Why buy a $700 iPhone when a $200 Android phone can access the same YouTube or Amazon Music as everyone else? All you need to do to get new Facebook features is refresh your browser or update your app. You don’t need a high-performance device to participate in the 21st century.

It’s a stark contrast with the traditional model for consumer electronics, where you’re expected to upgrade the hardware to keep pace with the new features they release.

And it could be a dire omen for high-margin hardware companies like Apple.

Meanwhile, web-first companies like Amazon and Google are more than happy to exploit this, even as our notions of what a computer actually is continue to shift. Just look at devices like Google Chromecast and the Amazon Echo.

Chromecast, Echo, case in point

Since 2013, Google has sold 25 million Chromecast devices — the completely amazing $35 dongles that turn any TV into a smart TV. That’s right, $35.

The real brilliance of the Chromecast lies in what it isn’t, rather than what it is. It doesn’t have an interface of its own. You just push a button on your phone and have whatever YouTube video you’re watching or Spotify album you’re listening to appear on your TV screen.

A nice side effect: It’s relatively simple to take an existing smartphone app and add Chromecast streaming capabilities, and literally tens of thousands of apps have done that integration.

You don’t have to think about it or learn a new interface; you just click and go.Mike George Amazon VP of EchoGettyAmazon VP of Echo Mike George.

It means that every single day, I get more return on the initial $35 investment in the Chromecast I bought in 2014. But since all of the good stuff is happening in the apps, not the Chromecast itself, it’s extremely unlikely that I will ever have to replace this Chromecast, barring a hardware malfunction.

You could probably say the same thing about the Amazon Echo home voice assistant. Developers have released almost 1,000 „skills“ for the Amazon Echo’s Alexa platform, including the ability to call an Uber, play Spotify music, or order a Domino’s pizza.

These gadgets are getting better, not worse, the longer they stay on shelves. And while there may be periodic minor hardware improvements, they’re way more minor than the gap between an iPhone 5 and an iPhone 6, and far less necessary to keep getting maximum value from the device.

The pressure is on

This move is going to keep putting pressure on hardware-first manufacturers — especially those who rely on high margins, like Apple.

The Chromecast and the Echo are relatively cheap gadgets — because all the important, useful stuff about them lives in the cloud, they’re optimized to be small, efficient, and unobtrusive.

Tesla autopilotTeslaTesla’s autopilot mode scanning the road.

Amazon doesn’t need to make money on the Echo itself, as long as it drives more commerce to its retail business. Same with Google: as long as the Chromecast gets more people to watch YouTube videos and download more stuff from Google Play, they don’t have to make money from the gadget itself.

And you’re seeing more of this all over, like when Tesla made thousands of its electric cars partially self-driving with an overnight software update. The gadget Tesla drivers already owned — in this case a car — suddenly got way more useful.

This trend isn’t going to kill off the smartphone, or the PC, or the tablet. But it means lower-cost gadgetry that lasts a lot longer. We’re only seeing the early stages of this shift now, but it has a lot of potential to shake up how we think about and how we buy our devices.

www.businessinsider.de/apple-iphone-vs-web-services-2016-6

Amazon is already after its next $400 billion opportunity

During Amazon’s most recent earnings call, Baird Equity Research analyst Colin Sebastian asked two questions to Amazon CFO Brian Olsavky: one about Amazon Web Services‘ margins, and another about the chances of Amazon expanding its own shipping logistics services to other companies.

The first one got answered promptly, though Olsavsky had to stop mid-sentence because the operator accidentally jumped in early. Still, Olsavsky made it a point to get back and finish his answer.

The second question never got answered.

„If he wanted to talk about it, he would have remembered to answer,“ Sebastian told Business Insider. „Either way, I think the answer is that Amazon doesn’t talk about potential or future services.“

Amazon’s notoriously secretive about its future plans, so it’s not too surprising that Olsavsky skipped Sebastian’s question.

But when you’re going after something as big as the logistics and shipping market, it’s hard to keep your plans under wraps — and a growing amount of evidence suggests Amazon may indeed be going after the delivery and logistics market, which Sebastian pegs as a $400 billion market opportunity.

Next $400 billion opportunity

Over the past few months, we’ve seen a series of reports speculating Amazon’s plan to establish a bigger in-house logistics service that will allow it to potentially bypass its current delivery partners, like UPS and FedEx.

That includes:

Serbastian believes this all points to Amazon building up its in-house logistics delivery network. He envisions Amazon first starting out with its own deliveries, but eventually opening up the service to other companies, putting it in direct competition with the likes of UPS and FedEx.

„Among other opportunities, Amazon has ‚powerhouse potential‘ in the large transportation and logistics market, dominated by global enterprises such as DHL and UPS,“ Sebastian wrote in a recent note.

„Amazon’s cloud technology expertise and increasingly complex fulfillment, logistics and delivery network seem to be obvious foundation to offer third-party services, with an incremental $400-450 billion market opportunity.“

A worker gathers items for delivery from the warehouse floor at Amazon's distribution center in Phoenix, Arizona November 22, 2013.  REUTERS/Ralph D. Freso   Thomson ReutersWorker gathers items for delivery at Amazon’s distribution center in Phoenix

Project Dragon Boat

Perhaps the strongest indication of a bigger Amazon logistics ambition was disclosed last week in a report by Bloomberg’s Spencer Soper.

The report, citing a 2013 Amazon document, revealed an internal project called Dragon Boat, which is intended to become a service that controls everything from picking up the product at the factory in China to delivering it to the end customer in the US.

It said the document described Project Dragon Boat as a „revolutionary system that will automate the entire international supply chain and eliminate much of the legacy waste associated with document handling and freight booking.“

„Sellers will no longer book with DHL, UPS, or FedEx but will book directly with Amazon,“ the report said.

When Amazon’s Olsavsky was asked about its logistics plan again by another analyst during earnings call, he simply shrugged it off as a complementary service, saying it’s intended to supplement, not replace, existing delivery companies.

„What we found in order to properly serve our customers at peak, we’ve needed to add more of our own logistics to supplement our existing partners. That’s not meant to replace them,“ Olsavsky said.

Next AWS

Werner Vogels, Amazon.com chief technology officer, speaks at the AWS Re:Invent conference at the Sands Expo in Las Vegas, Nevada November 29, 2012. REUTERS/Richard Brian Thomson ReutersVogels, Amazon.com chief technology officer, speaks at the AWS Re:Invent conference at the Sands Expo in Las Vegas

But don’t expect Amazon’s logistics business to expand overnight.

If anything, it’s going to take a few years to fully ramp up and establish itself to become a viable delivery option for other companies, according to Sebastian.

„They will start small, mostly to add capacity for their own business, but then, over time, as they gain more expertise, they will offer extra capacity to other companies,“ Sebastian told us.

In that sense, it could follow the path of Amazon Web Services, its cloud computing service that’s now generating almost $8 billion in annual revenue.

Amazon built AWS out of the infrastructure it had created to support its own operations, but it’s now become one of the most widely used cloud computing platforms, used by everything from small startups to big companies like Netflix and GE.

„I think it’s like AWS,“ Sebastian said. „But it took 10 years for AWS to get as large as it is.“

http://www.businessinsider.de/signs-of-amazon-getting-into-logistics-2016-2