Amazon’s founding story is fairly well known by this point. In 1994, 30-year-old Jeff Bezos left D.E. Shaw to start a risky online business, citing two things: the first, a February 1994 newsletter, Matrix News, that reported the number of bytes transmitted over the Web increasing by about 230,000% over the previous year. He later recalled, in 2001, that ‘things just don’t grow that fast.’
This is a companion discussion topic for the original entry at https://commoncog.com/c/cases/amazon-from-books-to-everything
Connecting the Ford case insourcing of cost to the Amazon case. Just as Ford insourced cost to lower car prices, Amazon has made investments (recently they have scaled this back) into developing their own logistics capability to lower the shipping cost it pays to UPS, FedEx, and USPS.
I think one interesting addition to this case might be https://forum.commoncog.com/t/tricky-things-about-running-trial-error-experiments-in-business/1695?u=cedric — specifically Colin’s comment that they used the existential threat of the Prime program’s costs to drive the cost structure down.
From afar we can say “oh, scale economies are inevitably the result of scale” but I’ve always found that there’s a surprising amount of work, ingenuity and invention when you zoom in on how a scale economy moat actually gets built!
Almost stoking fear - its a great point!
After reflecting further, I think this should be added and here is how I think about what you wrote:
Judging scale by the end result ignores a lot of nuance and the path to get there. Scale economies can arise out of invention, pressure, and constraints and the path to get there is anything but straightforward.
Not specific to this case, but this, the Ford Case, and the TI case all show that lowering price and increasing costs / pressure drive invention to achieve Scale economies.
This is a great point. Sigh, we need to modify the caselib software to let members write their own commentaries — I really like the way you phrase things.