As technology stocks go, Amazon has always seemed a little weird. Stock market pundits have complained time and again that there was no sense in continuing to reward a company that couldn’t turn a profit. If I had a dime for every tea-leaf reader who advised investors to short Amazon stock because sooner or later they’d be right, the company couldn’t keep up this kind of unrealistic growth forever, I’d probably be able to afford to be well-invested in Amazon stock myself.

But after Amazon turned a profit for the second quarter in a row this year, making Jeff Bezos the third-richest person in the USA and fifth-richest on the planet, and since the stock has literally doubled in value over the course of 2015 (pity all the poor people who took that advice to short it) there doesn’t seem to be any more doubt that the company is doing something right. But what?

Dana Blankenhorn at Seeking Alpha places the credit largely on Amazon Web Services (AWS), the hosting and colocation company that now accounts for a significant fraction of the busiest web sites on the Internet.

For those who don’t understand why the value of Amazon stock has doubled, maybe this discussion of open source politics can demonstrate the point. Amazon’s aggressive $1 billion/quarter CapEx spend, and regular price cuts, succeeded in giving its cloud a dominant position against companies that other pieces of Amazon – the store and the media operation – also compete against. It is becoming increasingly clear to technologists that resistance to this trend is futile, that even the largest tech companies must find a way to live in an Amazon world, rather than fight it.

But Farhad Manjoo at the New York Times doesn’t think that’s the whole story, because Amazon’s retail business is doing really well, too. Manjoo thinks that the secret lies in Jeff Bezos’s tendency to plan years ahead and work toward the fruition of those plans. Like a kid with a huge LEGO collection and a knack for architecture, Bezos has built out Amazon’s infrastructure year by year, and Amazon is finally starting to reach the point where that investment can pay off.

Why is Amazon so far ahead? It is difficult to resist marveling at the way Mr. Bezos has built his indomitable shopping machine, and the very real advantages in price and convenience that he has brought to America’s national pastime of buying stuff. What has been key to this rise, and missing from many of his competitors’ efforts, is patience. In a very old-fashioned manner, one that is far out of step with a corporate world in which milestones are measured every three months, Amazon has been willing to build its empire methodically and at great cost over almost two decades, despite skepticism from many sectors of the business world.

Now those investments are beginning to bear fruit. It’s happening in fulfillment, which is the business term for filling and shipping orders. Amazon has built more than 100 warehouses from which to package and ship goods, and it hasn’t really slowed its pace in establishing more. Because the warehouses speed up Amazon’s shipping, encouraging more shopping, the costs of these centers is becoming an ever-smaller fraction of Amazon’s operations.

Another secret is the “Prime effect,” in which subscribers to Amazon Prime have been found to buy more things from Amazon because they already had their shipping costs paid for. One analyst suggests that by 2020, 50% of American households could have joined Amazon Prime, at a “very conservative” estimate.

Manjoo recounts to talking to Silicon Valley venture capitalists who were no longer making huge investments in the e-commerce field because of Amazon, and to stock analysts who suggested competitors simply couldn’t compete with Amazon’s “really insurmountable infrastructure.”

Small wonder that publishers are finding it so hard to deal with Amazon. In some ways, anyone who isn’t Amazon is finding it hard to deal with Amazon—even as many of them give Amazon Web Services their business.

I wonder just how far back Jeff Bezos planned all this. When he thought it would be a good idea to sell books over the Internet, did he gaze twenty years into the future and realize that if he played his cards right, he could effectively be in charge of online retail (outside of China, anyway)? It would certainly make a great story.

I do hope other businesses can figure out how to compete with Amazon. It isn’t good to have so many eggs in one basket, no matter how big that basket is. Even if Jeff Bezos thinks the key to running a successful business is making its customers as happy as he can, what happens when he steps down and someone else takes the reins? But at the same time, I can’t help but find the retail juggernaut amazing and a little humbling, just as I would the Statue of Liberty, the Gateway Arch, Hoover Dam, or any other immense undertaking that was somehow completed successfully.


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