Sunday, August 18, 2013

Beating up Bezos, For All the Wrong Reasons

Jeff Bezos, founder of Amazon – a company that has improved the lives of millions of its customers – is acquiring the Washington Post.  Needless to say, this has raised questions from many quarters.  For some, the question is “why would he buy an asset in a dying sector?”  For others, the question is “what are his politics, and how will his politics affect the editorial policy of the Post?”

This second question is important to Allan Sloan.  It is so important that he has decided to plead for an answer.  His column is entitled “A plea to learn about Bezos’s personal politics.”  Mr. Sloan is Fortune magazine’s senior editor at large, and is a retiree of and owns stock in The Washington Post Co.  His column is a nice example of why the industry he represents is dying.

When I first heard that Jeff Bezos, the founder of, was a libertarian, I laughed out loud, because I thought it was a joke. Bezos’s company, after all, is based on the Internet, which was created during the Cold War by a military research-and-development arm of the federal government, the Advanced Research Projects Agency. No Arpanet, no Internet. No Internet, no Amazon, no $25 billion personal fortune for Jeff Bezos.

I have no idea if Bezos is a libertarian.  I also have no idea where the first seedling of the internet was planted, nor do I know by whom.  However, two things are painfully clear: 1) what is known today as the internet – and this has been true for at least the entire time Amazon has existed – is the product of private sector entrepreneurship, and 2) to suggest that a libertarian must preclude himself from benefiting from any and all government-sponsored activities is childish and immature.

For twenty years and more, thousands of companies have sprung up out of the minds of hundreds of thousands of entrepreneurs, programmers, visionaries, venture capitalists, and the like.  That they may or may not have gained some benefit from some germ of a government-sponsored activity is immaterial.  Even if the military-research story was the first seedling, is it possible that a four-star general has given us Yahoo, Cisco, Apple, Google, Facebook, eBay, and Amazon?

In most jurisdictions of the world, the government has needlessly monopolized countless functions: water, roads and sidewalks, parks and related services, defense and security.  If one uses any of these services – which cannot be avoided in daily life – is one not libertarian?

Lew Rockwell dot com is one of the most popular sites on the internet – is Mr. Rockwell not libertarian?

For me, the philosophical line is easy to draw – do not advocate for government benefit; do not utilize government services that would not otherwise be provided in a free market.  Yes, often the devil is in the details, but the philosophical line seems clear to me personally.  The internet is fair game for a libertarian under these conditions.

Mr. Sloan insists that Mr. Bezos comes clean about his politics: “if you’re going to own a high-class journalistic enterprise like The Post, whose job is to call powerful forces to account, you should expect to be called to account yourself.”

When Peter Elkind, a colleague of mine at Fortune magazine who spent months working on a must-read cover story called “Amazon’s (Not So Secret) War on Taxes” (June 2013 issue), tried to talk to Bezos about his business and personal philosophies, he was stonewalled.

If you check the numerous articles about Bezos — including Fortune’s 2012 businessperson-of-the-year story and the interviews that he’s done — you see that he ducks and weaves when he’s asked about libertarianism.

I guess Sloan can ask Bezos, and I guess Bezos can answer or not, as he likes.  There are easier ways to answer the question, which I will do later.  In the meantime, Sloan isn’t done demonstrating why his kind is a dying breed, and that he should perhaps simply consider thanking Mr. Bezos for raising the stock price of his Washington Post shares – and sell while he can. 

…consider this anecdote, courtesy of Sheldon Kaphan, formerly Amazon’s chief technology officer, and Bezos’s first hire at the firm.  Kaphan says he once heard Bezos say, “If the government hadn’t invented the Internet, private enterprise would have done it.” Yeah, right, and defeated the Soviet Union, too.

Private enterprise has invented virtually every convenience known to man.  Private enterprise has invented virtually every communication tool known to man.  Again, I don’t know – and I don’t care – if some four-star general first asked about secure network-to-network communication.  What is clear is that markets work, and have worked for all of man’s recorded history in any division-of-labor economy.

As to the Soviet Union, like virtually all of the mass evil on this earth, it actually was invented by government, and not just the government of Lenin. Perhaps Sloan can examine this if he wants to provide meaningful commentary in the future.

The title of my posts suggests that there may be reasons to beat up Bezos, but not for Sloan’s reasons.  Amazon supports various federal measures to require online retailers to collect sales tax.  Certainly no libertarian worthy of the name would make any such statement in support of a new or increased tax of any kind, yet Bezos, through Amazon, does.

The reason Amazon does is obvious, and is most clearly stated by NPR, of all places:

Collecting state and local sales tax all around the country would require a fair bit of effort on the part of online retailers, because sales tax rules vary from state to state. That's not a huge deal for a giant company like Amazon, but it would be more of a burden for smaller online retailers. From Amazon's point of view, that's a good thing — it makes life harder for Amazon's smaller competitors.

That's why big businesses, despite what they may say, often like regulations. They make life harder for small, would-be competitors.

 Amazon has reached efficiency and price points where it no longer requires the lack of sales tax to provide competitive advantage.  Amazon has established warehouses in so many jurisdictions that it must collect sales tax in many districts anyway.

Amazon has also learned what all big businesses learn – regulation is a friend, because the small shop cannot keep up.  Amazon can afford to comply with the sales tax regimes of all of the states in the US with the different sales tax requirements.  How is a small online retailer supposed to do that?

Bezos has a fiduciary duty to his shareholders, and this duty calls him to support federal regulation that benefits Amazon at the expense of its competitors.  But a libertarian would draw the line on such action: government coercion as a means to an end is never justifiable.

Bezos has provided incalculable benefit to mankind in the form of providing quality product at competitive prices.  He may or may not label himself as libertarian.  To the extent one looks for clues to this, it seems one need look no further than Amazon’s support of federally mandated sales tax collection.

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