Welcome to the weekend, and welcome to December. We're heading into the holidays — and the third calendar year of this pandemic (ugh). We're sorry that the virus, and all of its mutations, is still dominating your newsfeed. |
Thanks for writing in to share your favorite Daily episodes of 2021. We'll be featuring some of your responses in our last newsletter of the year. And if you still have a favorite to share, you can let us know here. |
Today in the newsletter, we're looking closer at Wednesday's episode and asking: What are the biggest threats to Amazon's business model? Then, we have listening recommendations to get you up to speed on Omicron. |
The Big Idea: The Threats to Amazon |
The Daily strives to reveal a new idea in every episode. Below, we go deeper on one of those from our show this week. |
 | | An Amazon warehouse in Kent, Wash., last year.Ruth Fremson/The New York Times |
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In the circus that is the American economy, Amazon is a magician — making inane objects appear suddenly, bewilderingly. A dog frisbee. Command hooks. Another screwdriver, because somehow you still don't have the right one. |
Like any good magician, Amazon has mastered hiding the trick: Its thousands of employees, fulfillment centers and rapidly moving conveyor belts remain out of sight. As you heard on Wednesday's show, maintaining this illusion requires a small army of employees: Amazon hired roughly half a million people in the last year, pushing its work force to more than 1.2 million globally, up more than 50 percent from a year ago. But high turnover rates along with a nationwide labor shortage have caused headaches for the company in recent months. |
We ended the episode with a question: Does the current labor shortage reveal challenges for Amazon's business model in the long term? Here's what experts have to say. |
A big problem that's a "short-term concern" |
"We have a substantial issue of tight labor markets in the United States right now that is manifesting itself from psychotherapists to gardeners and from investment analysts to fast food workers," said Lawrence Summers, former U.S. secretary of the Treasury. He attributed the labor shortage to ongoing pandemic health concerns, an aging labor force and workplace changes that had caused workers to reimagine their lifestyle. |
"I think it is a source of wage inflation pressure and unless the Fed takes very substantial action, it is likely to be with us for quite some time," Mr. Summers added, noting that it could be a "few years" before the labor market rebalanced. |
Still, some experts say the current labor shortage is likely to be only a short-term challenge for Amazon. "We have to ask the question: Are they so big that they're exhausting the labor pool?" said Marshall Van Alstyne, a business professor at Boston University and co-author of the book "Platform Networks." "They're not." |
Mr. Van Alstyne argues that there are still untapped sources of labor that Amazon could continue to attract with competitive wages. A 2019 report from the Brookings Institution found that low-wage workers made up 44 percent of the American labor force (at the time, roughly 53 million people). Their median hourly wage was $10.22. In the short term, he argues, Amazon will continue to attract these workers from other industries with its starting wages of $15 an hour, even as competition for workers inflates wages across the country. |
But the labor pool isn't infinite. With Amazon's high employee turnover rate, it would take the company three decades to exhaust the current low-wage labor pool in the United States (presuming all of those people are willing to work for the company in the first place). So in the medium term, the company will most likely look to another solution to address labor instability: automation. |
"If they can succeed in automating more low-level labor tasks, they will be less dependent on human labor," Mr. Van Alstyne said. Robots are used throughout Amazon already, and the company is racing to expand their use in an effort to meet the punishing demands of Prime delivery logistics. But Amazon's efforts to automate could open the company up to additional liabilities. |
The looming threats to Amazon |
For Amazon robots to be able to stock, select, pack and ship goods, all of those products need to be inside the company's fulfillment centers, allowing Amazon to control the entire delivery process instead of outsourcing shipment to partners. Amazon is rapidly building warehouses to bring even more products in-house — a decision that could strengthen the legal case that they are liable for the safety of those products. |
Lawmakers are increasingly agitating to reform Section 230, the provision of the Communications Decency Act that shields platform companies from liability for harmful content on their platforms. While the provision is most often considered in regard to hate speech and misinformation on social media platforms, reforms to Section 230 could also open Amazon up to liability for harmful or defective products sold on its platform. With more and more products stored in-house, it will be increasingly difficult for Amazon to legally argue that it is simply a third-party platform and not the seller. |
Complicating these third-party claims are Amazon's ambitions as a retailer — ambitions that Matthew Hytinen, 41, a former vendor manager at Amazon who left the country in 2015, argues are monopolistic. |
"How much should the owner of the marketplace be able to leverage and control all our data?" Mr. Hytinen asked, adding that complete visibility into customer purchasing habits allows Amazon to identify its most in-demand products and then manufacture, advertise and sell its own version, often outselling its competitors. |
"The problem is that it's unfair entry," Mr. Van Alstyne said. "I do anticipate that will be addressed in subsequent legislation." |
Data privacy regulations, most actively being pursued in the European Union, could complicate a critical pillar of the company's business. Amazon is one of the largest cloud computing companies in the world and is responsible for over a third of the country's data storage market. Revenue from Amazon Web Services has grown almost 39 percent from a year ago, up to $16.11 billion in the last quarter — and any regulation that creates red tape on the storage and use of data could affect revenue for the company in this vertical. |
But, ultimately, Mr. Summers thinks the biggest threats to Amazon remain unknown. |
"Usually it's the threats you don't see that get you, not the threats you do see. IBM was brought down by the personal computer. Microsoft was brought down by the internet," he said. "My guess is the biggest threats to Amazon come less from changes to public policy than changes in the technology environments that we don't foresee right now." |
 | | And just for fun, here's Clementine, our host Sabrina Tavernise's dog, with the frisbee from Amazon Prime that you heard about in Wednesday's episode. Sabrina Tavernise |
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What you need to know about Omicron |
 | | A technician working in a laboratory at the Nelson R. Mandela School of Medicine in Durban, South Africa.Joao Silva/The New York Times |
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On Tuesday, we had the Times reporter Apoorva Mandavilli on the show to talk about the knowns and unknowns of Omicron, the latest — and seemingly hardest to pronounce — variant of the coronavirus. News moves fast, and the last week has been filled with reports of new discoveries of the variant across the world and what it means for the efficacy of the available vaccines. Our Well desk even published an expert guide on how to deal with the uncertainty that the variant has caused. As we await more news on what this latest development means, here are some recent articles recorded by the narrated articles team about the coronavirus. |
What the Future May Hold for the Coronavirus and Us: Even for a virus, evolution is a long game, and our relationship with Covid-19 is still in its infancy. We are extremely unlikely to eradicate the virus, scientists say, and what the next few years — and decades — hold is difficult to predict. But the legacy of past epidemics, as well as some basic biological principles, provides clues to where we could be headed. |
Did Covid Change How We Dream?: As the novel coronavirus spread and much of the world moved toward isolation, dream researchers began rushing to design studies and set up surveys. The first thing almost everyone noticed was that for many people, their dream worlds seemed suddenly larger and more intense. |
Inside the C.D.C.'s Pandemic 'Weather Service': The Centers for Disease Control and Prevention created an ambitious, multimillion-dollar center to predict future outbreaks. However, as election polls, weather apps and fantasy-football enthusiasts routinely demonstrate, the most mathematically rigorous forecasts can still be wrong, just as the sloppiest guesswork can, by pure chance, be right. |
Friday: We chart the life, career and legacy of Stephen Sondheim, the Broadway songwriting titan who died last week. |
That's it for the Daily newsletter. See you next week. |
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| By Lauren Jackson and Desiree Ibekwe. |
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