Bezos is the Henry Ford of the digital age

The pantheon of American business is filled with countless titans. Figures so celebrated, so powerful, that while the early black and white photos of them in stiff portrait poses have long since faded, their names live on – and affect our lives still.

JP Morgan and Levi Strauss shaped and still shape how we spend and what we wear. Andrew Carnegie taught us how to make money, and then how to give it away. The entertainment empire created by Walt Disney has never been more powerful than it is today.

But when we assess the career of Jeff Bezos at Amazon, two luminaries in particular loom from the mists of the past: John D Rockefeller and Henry Ford.

How did Jeff Bezos get so successful and rich? Looking at Henry Ford can explain that story.
How did Jeff Bezos get so successful and rich? Looking at Henry Ford can explain that story.

Rockefeller, after all, became the richest man in the world by riding the wave of a new economy – oil. His Standard Oil aggressively pursued rapid expansion and control of logistics and distribution at every stage of the process from crude well to gas pump, driving down prices and crushing competition. The story, of course, ended with the company being deemed a monopoly and broken up by the courts.

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The comparisons with Amazon appear almost too obvious to mention – though Amazon, for all that it has seemed the only retailer in town during the pandemic – is still a very long way from Standard’s peak 90 per cent market dominance.

But ultimately the comparison between the two men is superficial. A description of their tactics reveals only how they became successful and rich, not why.

It is Henry Ford who can tell that story. Like Bezos, Ford did not create the new economy, but he exploited it best.

Ford did not even come up with the oil age’s killer app – the car. Karl Benz had thought of that more than a decade before. But what Ford did was to understand that there should be no conflict, no trade-off, between quality and scale. In other words, cars could be built better and they could be built cheaper. In doing so his company would rewrite the contract not only between itself and its customers but between itself and its workers too.

Like Bezos, Ford did not create the new economy, but he exploited it best. Ford did not even come up with the oil age’s killer app – the car.

Like Bezos, Ford understood that as soon as humanity departed the artisanal age, where each and every object had to be individually crafted, capitalism depended on increasing returns to scale. Ford neither invented the car, nor delivered the refined oil cars ran on. He didn’t even come up with the idea of standardised parts, which, as the venture capitalist Nicolas Colin recounts in his book Hedge, underpinned mass manufacturing. Rather, Ford hitched standardisation to the scientific analysis of workflows and labour productivity. Again, so-called “scientific management” wasn’t a Ford innovation – it was championed by the engineer Frederick Taylor.

But Ford put these things together better than the rest, on his celebrated production lines. To the detriment of his workers? Not entirely. Ford hated unions, but he hated leaking workers from his factories and, abruptly, to the horror of his fellow bosses, doubled his workers’ wages – just as Bezos has surprised his critics with substantial increases to workers’ wages at Amazon.

Ford’s move helped keep labour loyal, but it also boosted the consumer base for the product he was making. After all, his first mass production car, the Model N, cost $US3000 in 1903. The Model T, which launched five years later, cost $US825. But that was still almost triple per capita income. So down and down went the cost, without jeopardising quality, boosting loyalty, and delivering secure jobs at the same time. It was the flywheel of early-20th century user engagement.

Harnessing each and every customer

Bezos’s genius was to update this for the digital age. He did this partly through the astonishing networking capability of the internet – harnessing each and every user to provide reviews and data that allowed him both to refine the product and so draw in other users, allowing Amazon to grow even as its costs per unit shrank, further enhancing its appeal.

But while it destroyed bricks and mortar on the high street, Amazon also created a formidable bricks and mortar logistic operation: warehouses and delivery that only entrenched its dominance, making it harder to compete with than any pure digital play.

Of course, customers are no longer naive. We are aware of our contribution to Amazon’s success, just as we know that by using Google products we contribute data that makes Google money. So we expect there to be a quid pro quo for our contribution.

In Google’s case, that exchange is excellent “free” services. But Amazon sells things. It cannot be “free”. So it essentially has to provide a user experience that, relentlessly, is better than elsewhere. And it succeeds. How many times have you heard someone curse Amazon and say they wish they could have ordered something from somewhere else, only to sigh “but they didn’t have it in stock” or “but I needed it today…”

Jeff Bezos thought that everyone, not just the rich, should have access to what they wanted, when they wanted it; just as Henry Ford decided that everyone, not just the rich, should be able to have a car.

You may have your view on whether their success in achieving that vision was a good thing or a bad thing, but you cannot doubt the astonishing brilliance they demonstrated in making it happen.

The Daily Telegraph, London

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