Over the last 24 hours, Jeff Bezos has made news for two big things. And they’re related.
Yesterday, the Amazon founder, not a publicly known philanthropist, took to Twitter to say: “I’m thinking I want much of my philanthropic activity to be helping people in the here and now — short term — at the intersection of urgent need and lasting impact.”
Today, Amazon announced that they are acquiring Whole Foods Market for $13.7 billion. Bezos said: “Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy.”
I predict that Jeff Bezos will continue to relentlessly grow and succeed in business (if you don’t believe me, go to relentless.com, which he registered in 1997), and it’s great that he wants to use his immense resources to making the world a better place. Today, eight men — including Jeff Bezos — own half the world’s wealth. And the most urgent need and lasting impact is addressing the outcome.
I see two possible paths:
- Traditional philanthropy, and pitchforks. One path: Jeff Bezos decides to give his vast fortune to an “effective” charity (or charities). But inequality continues to accelerate. Ultimately, we end up with a dystopian future where there a few mega-winners and many, many losers. The outcome: thousands of jobless charity recipients storm Amazon’s Seattle headquarters, the Washington Post and Whole Foods with pitchforks and torches.
- Bring back the small and medium producer. Another path: Jeff Bezos uses his massive platform to empower a new generation of makers, creators, and doers. He becomes the first funder of the farmers supplying to Whole Foods, designers selling on Amazon, authors writing books. And his amazing platform can get these producers better, faster, cheaper market access than if they do it themselves. In this path, he gives $30K (I’ll explain below why that’s the number) to thousands of people with ideas, and uses Amazon’s platform to make it a reality. Amazon of course still succeeds as a platform and trading company for people creating things, but many more of those people succeed. And the pitchforks stay at bay.
How consolidation is killing the American Dream
Jeff Bezos and others have built amazing businesses over the last few decades, but the result of this massive success has been a hollowing out of the American Dream. While it’s never been better to be a big company in America, it has rarely been a worse time to be a regular person trying to compete in the economy. Consider this:
- Small and medium businesses are key to jobs. Over the past 40 years, according to the Kauffman Foundation, 80 per cent of net new jobs were created by new businesses.
- According to the nonpartisan Economic Innovation Group, fewer Americans are starting successful firms than at any point in the last century.
- In 1980, nearly half of American firms were five years old or younger. By 2015, that number had fallen to one-third.
- Although a new business starts every two minutes in this country, another firm closes its doors every eighty seconds — the highest rate of firm death in the past fifty years.
Amazon has been a part of this. At the end of the last century we saw big box stores like Walmart eat up small business in towns like Orange, VA. Now Amazon is taking business away from these new “town centers”, and moving it to the cloud. The Institute of Local and Self-Reliance estimates that Amazon alone is responsible for the death of 150,000 jobs over the last 15 years.
We see hollowing out everywhere. Let’s take advertising, which for centuries supported a vibrant local news. In 2016, virtually all growth in the entire industry went to Google and Facebook, who already make up more than three-quarters of the market. Or the retail shops in places like downtown Orange, Virginia. Look at the headlines: “Amazon’s U.S. Online Sales Growth Last Year Was More Than Everyone Else’s Combined”.
The jobs conversation is obsessed with automation and trade deals. But economist Simca Barcai found that economic concentration has contributed far more to job losses than robots or automation. He estimates that concentration has cost the average worker $14,000 a year in take-home pay over the past thirty years.
Jobs are dying due to Amazon’s success, and communities are too. For instance, local Wal-marts are now a center of crime throughout America, because that’s the closest thing that many American towns have to a public space. Whereas a few decades ago, local police could talk to local store owners about crime, today the controlling forces are bureaucrats in Bentonville, Arkansas. Or twenty years ago, the local hardware store would sponsor the Little League teams and Girl Scout troops. Amazon isn’t sponsoring civic associations across America.
Finally, the lack of successful local businesses is bad news for local leadership. We have fewer local advertisers, less-well-funded local papers, and fewer people to run for office with an independent base and knowledge of the problems of our communities. As Justice Louis Brandeis once warned, we are becoming a nation of clerks.
How Jeff Bezos (and others) can help
Money can’t solve everything, but it can surely help. Jeff Bezos can use both his incredible fortune and the most globally dominant distribution system since the Roman roads to bring back the business owners and leaders in our communities.
Here’s where I’d start: The Kauffman Foundation estimates that it costs $30,000 to start a business. The average African-American family, Latino family, and rural family does not clear that basic buy-in. And small business lending, a traditional source of startup loans, has declined fifty per cent in the last thirty years.
If I were Jeff Bezos, and wanted to make the biggest immediate impact, I’d open a national “producer” competition that gives anyone trying to produce and sell something in the free market a few lifelines:
- The $30,000 start-up cash, as a grant, to grow their business. If they want more money, they could go to Amazon Lending, which has put $1 billion into merchants.
- Amazon’s distribution network to help these producers reach the market. The income of the American family farmer has, incredibly, declined 50% since 2008. Give them space in Whole Foods and marketing dollars on Amazon.
This national stimulus package would re-balance our society in favor of the small and medium, live up to Amazon’s original vision, and correct for our blind spots. A few years ago the World Bank randomly gave several hundred Nigerian entrepreneurs a $50,000 grant. The companies who received the funding were able to employ 23 percent more people and were 37 percent more likely to survive.
Victor Hwang, Vice President of the Kauffman Foundation, often says that “This is the first generation where people have defined themselves by what they consume and wear versus what they produce.” People are losing their jobs their and identity. And Amazon and many other mega-corporations have contributed to this problem. But just as Jeff Bezos has turned around journalism in with the Washington Post, he, more than anyone else in the world, is in a position to fix this.
A nation of producers won’t want to storm anything with pitchforks.
So if you’re reading this, Mr. Bezos — or anyone else who likes this idea! — I have more thoughts on how to operationalize it. I’m [email protected].
Ross Baird is CEO of Village Capital. Learn more on Village Capital’s website and read insights on Medium.
