Part of the reason Amazon has to work so hard to maintain its monopoly position is that its business model relies on network effects that only obtain at a certain scale. Tech companies like Amazon make money by monopolizing and then selling the data generated from the transactions on their sites. The more people who sign up, the more data is generated; and the more data generated, the more useful this data is for those analyzing it. The monetization of this data is what generates most of Amazon’s returns: Amazon Web Services (AWS) is the most profitable part of the business by some distance. Far from representing its social utility, Amazon’s market value — and Bezos’ personal wealth — reflects its market power. And the rising market power of a small number of larger firms has actually reduced productivity. This concentration has also constrained investment and wage growth as these firms simply don’t have to compete for labor, nor are they forced to innovate in order to outcompete their rivals. In fact, they’re much more likely to use their profits to buy back their own shares, or to acquire other firms that will increase their market share and give them access to more data. Amazon’s recent acquisition of grocery store Whole Foods is likely to be the first of many such moves by tech companies. Rather than the Darwinian logic of compete or die, the tech companies face a different imperative: expand or die. States are supporting this logic with exceptionally loose monetary policy. Low interest rates make it very easy for large companies to borrow to fund mergers and acquisitions. And quantitative easing — unleashed on an unprecedented scale to tackle the pandemic — has simply served to raise equity prices, especially for the big tech companies.
Grace Blakeley, 'Why the Superrich Keep Getting Richer', Jacobin
