There are few things in the world that are more ridiculous than Jeff Bezos’ astronomical hecto-billionaire wealth.
One of them might be Amazon’s 2018 federal corporate income tax exposure, which was a hefty $0 on $11 billion dollars of pre-tax profit. In fact, that year, Amazon actually received a $129 million federal tax refund. This year, for the first time since 2016, the super-monopoly will finally pay federal taxes to the show-stopping tune of around 1% of the standard 21% tax rate – thanks to a variety of credits and deductions.
Bezos himself just cashed out around $3.5 billion in Amazon shares in the first week of February 2020, bringing his personal wealth to more than double Mark Zuckerberg’s. It makes sense considering Amazon’s over-trillion-dollar capitalization and 11% stock price surge in just the past year.
Will this dominance and perpetual growth go on forever? Or will Amazon reach a limit – albeit a stratospheric limit, but a limit nonetheless?
Amazon’s earnings this holiday season were dizzying, skyrocketing as millions more joined the Prime platform, bringing the total number of members to 150 million – essentially the population of Russia. This vertigo-inducing growth was in large part thanks to the one-day shipping flywheel pushed by Bezos, which gained momentum as it rolled over the competition and collected loyal customers with alarming speed in 2019.
Of course, Bezos isn’t done yet. The question is really how high Amazon’s stock can climb.
As far as stock prices go, Amazon isn’t at the top – that spot belongs to Warren Buffet’s conglomerate, Berkshire Hathaway, Inc. At $340,185 per share, it’s pretty unlikely that Amazon will compete with this platinum pick, but Bezos sure is trying. As of February 12, 2020, Amazon’s share price stands at just over $2,100, which is over 26% higher than it was just four months prior.
Cracks Starting to Show in the Smile
Amazon manages to seemingly endlessly expand because the monolithic online retailer keeps its labor costs extremely low. Of course, the taxpayer makes up the difference, with social subsidies like Medicaid and the Supplemental Nutrition Assistance Program. It has been reported that in the state of Arizona, home to Amazon’s largest fulfillment center, one in three Amazon employees is reportedly dependent on food stamps.
The company cajoles and convinces major cities with low-earning populations to promise massive tax write-offs in exchange for jobs. But not very good jobs. In fact, Amazon warehouse workers get paid less on average than workers in other facilities. So Amazon gets bigger, Bezos gets richer, and everybody else just keeps paying.
Apart from squeezing your average American, Amazon is also squeezing businesses into non-existence.
One example of this is the company's ruthless destruction of Birkenstock. As reported in the New Yorker, when Birkenstock objected to counterfeit sandals being sold in the high traffic Amazon “Buy Box” section and massive quantities of their shoes being bought up and sold off at rock bottom prices, Amazon simply thumbed their nose at the German retailer and went on their merry way.
This colonizing expansionism is the key to Amazon’s success, and it’s likely what will push the company’s share price even higher as they bulldoze honest, hardworking companies into submission and dominate ecommerce around the world.
Other verticals that Amazon is eyeing will also contribute to a steady increase in share price, with the company’s signature flywheel spinning with ever-increasing intensity.
What’s Next for the Ecommerce Giant
In 2020, Amazon turns 25, and to celebrate it looks like Bezos is going towards broadband. Project Kuiper, employs 3,236 satellites in low Earth orbit to deliver low-latency, high-speed internet connections. When this capability is combined with Amazon Web Services and other products reliant on broadband (like the always-eavesdropping Alexa, for example), this will likely skyrocket the company’s value and further solidify its already overly dominant position.
Amazon will also likely launch its own online pharmacy this year, following the 2018 acquisition of PillPack. Prescription drugs are big, big business in America. When Big Tech meets Big Pharma, it will push Amazon’s share price higher and higher. The company is already negotiating with insurers, so it’s likely that we’ll see Alexa pushing pills later this year.
Other projects in Bezos’ perpetually growing portfolio are self-driving cars, which will obviate the need for delivery personnel and cement the same-day shipping paradigm for the Cult of Prime, and a huge boost to advertising. Already a $14 billion revenue driver in 2019 and up almost 40% from 2018, advertising will continue to be a boost for Amazon.
Of course, it’s also possible that not everything will be coming up smiles for Bezos if President Trump has his way. Aside from tax-dodging, exploitative employment practices, predatory expansion, and what’s looking very much like the definition of a monopoly, Amazon has raised the ire of the President over supporting counterfeiting and IP infringement. As a recent investigation by the Wall Street Journal exposed, Amazon carries thousands upon thousands of dangerous, misleading, mislabeled, and pirated products.
The Trump administration is committed to combating this piracy, especially given that it’s enabled by Chinese manufacturing, and the president’s determination could finally curb the out of control practices that Amazon is perpetuating. The campaign to curtail Amazon’s complacency, which is worth many billions of dollars, could force a plateau, and maybe even a drop, in the company’s share price.
To date, when someone is harmed by a bogus product purchased on Amazon – and there are plenty – only the seller is held liable. But if this changes, then Amazon will be held responsible for all of the exploding hoverboards and vape products, all of the corrosive fake lipstick, and all of the lead-infused baby toys sold on its platform.
This could amount to many billions in settlements, leading to loss of market trust – which could spell the end of the Age of Amazon, or at least a significant share price dive.
The End of an Era?
“If we start to focus on ourselves, instead of focusing on our customers, that will be the beginning of the end,” Bezos famously told his employees back in late 2018. “I predict one day Amazon will fail. Amazon will go bankrupt. If you look at large companies, their lifespans tend to be 30-plus years, not a hundred-plus years.”
If Amazon’s reputation starts sustaining major blows, which is starting to feel like an inevitability, we’ll surely start to see more scrutiny, more regulation and definitely more taxation. In this case, the company will suddenly become mortal.
The time to stop pouring the money of the American public into Jeff Bezos’s pockets may have arrived. If the tax shelters, loopholes, exploitation and lack of accountability are halted, this may be the end of Amazon’s grotesquely meteoric market status.