Craig Mod On Amazon: ‘The World’s Most Complicated Iceberg’

Depth Charge

I think the difficult piece with Amazon is that everyone underestimates what they’ve built.

Craig Mod does not underestimate it:

If Gutenberg’s printing press was the equivalent of Amazon, you would look at the printing press and you’d go, “Oh, I can probably replicate that, it’s just a couple of dowels and a press – and take an old wine press, a grape press – and we’ll put it together and we’ll make this printing press.” But the fact of the matter is that what we see on the surface of Amazon, the printing press…goes underground 400 stories and occupies 4,000 football fields underneath.

 

Mod recorded his conversation with the Copyright Clearance Center’s Chris Kenneally, and the exchange is available both in audio and in transcript. Mod had given a keynote address to the Yale (Book) Publishing Course in New Haven before diving back into work on a collection of essays he has coming out in Japan in October.

On the tape, you hear Kenneally and Mod talk at length about what Mod terms “four years to live with a variety of formidable e-reading devices.”

This is enough time, he says, for us to now decide, each of us, “Well, what am I doing now and why am I doing that? How am I reading now and why am I reading the ways that I’m reading?”

At nine minutes into the exchange, Kenneally gets into the Amazon question by engaging one of the hallmarks of Mod’s thinking — a high view. This is no pun on the guy’s legendary air travel. He lives both in the States and in Japan. (Fellow frequent flyers might enjoy his recent, smart essay at Medium, Let’s Fly.) But he can be thoughtfully grounding when the time comes for him to offer a stabilizing perspective.

And he does that here with Amazon.

“Oh, Amazon Is Killing Publishing”

Kenneally gets into it this way:

Where does book publishing stand with regard to Amazon, in your view? Do you think that they have found some kind of comfort in that relationship or are they still focused on beating Amazon or – and if they are doing any of those things – what should they be doing, in your view?

Mod knows to start by moving the emotion to one side, “getting away from [whether] Amazon is good or bad for publishing,” as he puts it.

Just purely looking at it objectively and rationally as a technical company – the amount of tech that they’ve produced around the reading process and around the distribution process – you look at what they’ve done, and they’ve spent the last 10 years optimizing for this.

If you’ve seen much coverage of the US Open in the last two weeks on American television, you could be forgiven for thinking that IBM Cloud is the only player in that airy sounding game – their commercials have been lobbed at us as frequently as drop shots. But, says Mod:

Everyone also forgets Amazon runs most of the Internet. The Amazon cloud computing services [AWS] – an article just came out a few days ago saying that it’s one of the fastest growing businesses in history. And nobody associates Amazon with that. So when you talk about Amazon, you have to realize…they have a 10-year lead on anyone who’s starting today who’s thinking about building synch services, who’s thinking about building distribution services, who’s thinking about building payment platforms around books – selling books, distributing books.

As soon as the industry! the industry! forgets that Amazon is so much more than a publishing-facing entity, Mod says, “It makes it tough to tease out the emotional response, which is, ‘Oh, Amazon is killing publishing’ — or the perspective of the Big Five because they have this monopoly stronghold on, effectively, the printing press.”

If you’re looking to be afraid, Mod says, be sure to look in the right places:

What makes Amazon so powerful and also dangerous as a monopoly is that it’s not just that they have some cultural power over saying, “Oh, we’re going to distribute these books and we’re not going to distribute those books” — because Amazon doesn’t have total distribution power. I mean we can still buy books at Powell’s. We can still buy books at Barnes & Noble online. But it’s that Amazon has invested in what the future of reading looks like in such a way that it’s almost impossible for anyone to catch up to them. And the result of that monopoly – the monopoly on tech – is that we’re seeing less innovation in ebooks than we would if they had real competitors, which I don’t think they do.

Kenneally makes the connection: “So the book industry’s view of Amazon is rather like the sailor’s view of the iceberg.”

Mod: “Yes, exactly. Yeah. It’s the tip of the world’s most complicated iceberg. You go under the ocean and there’s a whole universe. It’s almost incomprehensible how complex the iceberg is.”

And where this takes the exchange, as it happens, sails near to a bit of “kill Amazon” palaver that played out in the news just this week.

“Soft Skin Between The Scales”

The $100 billion question is who runs out of money and patience first: Amazon, or everyone else.

That’s Kevin Roose, writing at New York Magazine about 6 Ways Competitors Are Trying To Kill Amazon. And, as the wisest folks are saying in response to that article, the very fact that one corporation is seen as something “everyone else” is trying to “kill” is a testament to its power.

The wannabe avengers are “like knights circling a dragon,” Roose writes, “looking for patches of soft skin between the scales…scanning Amazon’s business model for weak points.”

Roose discusses various dynamics, areas of operation that might look like the dragon’s soft skin.  He gives us six of these:

• Discovery — is it possible to create more impulse buys, more non sequitur sales, than Seattle’s algorithms support?
• Delivery — “a wave of same-day delivery start-ups” is in action, as Roose writes, an area in which Amazon “doesn’t have a sizable head start.”
• Alliances — on the ground, among brick-and-mortar retailers.
• Mobile alliances — although Roose classes these simply under mobile, his main interest seems to be teamwork (he mentions Uber with Starbucks and United Airlines, PayPal with Home Depot and Foot Locker).
• “Extremities” — in terms of outlying areas of Amazonian activity, Roose talks Web services (to compete with AWS) and streaming media.
• “A big, unforeseen problem” — not much of a business strategy, perhaps, Roose includes a wait-and-see option for would-be Amazon killers in which they “let the beast flail and be patient.”

Well, sure. But, as Roose writes:

Jeff Bezos’ e-commerce empire is a muscled behemoth, with $75 billion in annual sales, Genghis Khan–size ambitions, and the leverage to wrangle extreme concessions from its suppliers. What Amazon does, it does very well, and that includes steamrolling companies that get too close to its turf.

“You’ve Already Underestimated The Iceberg”

Hiroshi Mikitani is the founding CEO of Rakuten which, in early 2012, closed its deal to buy the Canadian-based Kobo. Known for some strong, independent thinking, Mikitani notably broke with other business interests after the Fukushima catastrophe, arguing against nuclear energy as a reliable resource.

Mod readily gives Mikitani his due:

I think Mikitani-san does a lot of interesting, innovative stuff. And he likes to be abrasive – certainly in the media. And obviously he’s…an incredible CEO, building up Rakuten the way he’s built it up. But I think, when Mikitani-san says something like “Beat Amazon,” it’s a letdown for all of us who want more folks like Allen [Lau of Wattpad], who are thinking about delighting readers above beating Amazon.

Amazon, Mod says, “doesn’t do social well and it doesn’t do human well.”

By comparison, he says, Allen Lau of Wattpad “has been focused on how do we make a nourishing, positive community for people to come to and…do whatever kind of writing they want to do. And they can do it serially. They can write the whole book on their laptop and then upload it later or in pieces. They can write it live in the Wattpad interface…First and foremost is that connection between reader and writer.”

Clearly, Wattpad and Amazon are two sharply different entities. Amazon, at least for at least a great many of those fathoms below the surface, is about retail. Wattpad, what we can see of that one, is about, as Mod says, creative writing and sharing it. Ashleigh Gardner of Wattpad always stresses that it’s not a publishing platform but a social medium.

What Mod is talking about is Wattpad’s writers’ “intimate conversations with readers” and its “engagement numbers,” which he calls “off the charts — just absolutely bananas.”

By comparison, he explains that Rakuten is “the Amazon of Japan…They’ve been around forever, and you can buy anything on it.” And “after buying Kobo,” he recalls, Rakuten’s Mikitani delivered a shirt to the CEO of Kodansha, the largest Japanese publisher.

And the shirt said, “Beat Amazon.”…And, to me, that is the worst thing – it’s the laziest thing you can possibly say, because it’s a meaningless platitude. It’s dogmatic. A conversation can’t start from that. It’s so one-sided – it’s so short-sighted as well – even to think you’re going to beat Amazon…If that’s where you’re starting from, then you’ve already lost, because you’ve already underestimated the iceberg.

 

Instead of saying “Beat Amazon,” what I think would have been inspiring is if Mikitani-san brought a shirt to the Kodansha CEO that said “Delight readers.”

 “The Print Industry Does Not Need To Go Away”

In a telling coda to the conversation, Kenneally has Mod reveal some intriguing dissonance in his own adamant fondness for Japan.

Print “definitely still dominates in Japan,” he says, “and one of the reasons I love living in Japan is the print culture there is so strong. And the books and magazines that are produced there are still some of the most beautiful in the world. It’s inspiring every time you walk into a bookstore.”

And yet, Japan’s adoption of digital reading, he says, has been seriously set back, “because they were so reluctant to embrace the Kindle or iBooks or the iPad.”

Amazon, he tells Kenneally, “struggled for years to get Kindle contracts and to get publishers to accept the Kindle,” which finally was launched in Japan “six or seven years after it launched in the States.”

The result?

Japan has a six-year lag on Kindle usage and adoption….And so that’s another reason why Mikitani-san saying “Beat Amazon” was depressing: Japan actually has pushed back the technology to such a degree that, in a way, Japan is where America was four years ago in terms of tech adoption.

His new book of essays, written for Japan, Mod says, addresses just this, as a gift of hard experience Stateside.

I’m presenting it to Japanese publishers and readers and writers and technologists and start-ups over there to say, “Hey, here’s a crib sheet of the last four years of what’s happened in the American publishing industry. And Amazon has…won out in this tech monopoly. Here are a few steps to try to mitigate that.”

Japan is in an optimistic place, Mod says.

“The print industry does not need to go away,” as many there have feared.

“And they can build start-ups that can go around and do things [well] that Amazon does poorly.”