Amazon has a serious problem with counterfeit goods and fake reviews. One might think that with the rise of AI/ML catching fake reviews and counterfeits will be much easier but Amazon doesn't seem to be doing any thing. In which case, allowing them to handle money seems like a recipe for disaster.
As for the Ant Financial comparison, I find it hard to believe that Amazon is not utilizing the reserves it gathers by selling gift cards on its platform. Those too are excess reserves to be paid to suppliers once customers utilizes and buys something from a supplier.
I would have thought that on Hackernews of all places people would recognize the scale that is involved with a site like Amazon and recognize that fixing this problem is far from trivial.
I'm sure Amazon is taking it very seriously - when have they ever shown anything but "obsession" about positive customer experiences. But it is hard, and it will take time to do it effectively without completely blocking all 3rd party sellers on the site.
> Amazon has a serious problem with counterfeit goods ans fake reviews.
I flat out won't buy from Amazon unless I'm already in the market to get something that I know is cheap and may or may not work- which turns out is not very often. Because of this I very much doubt the reality of the retail apocalypse in the long term.
> Amazon has a serious problem with counterfeit goods
Or you could say that Amazon is highlighting the comparative lack of quality of branded goods. A Lacoste shirt is so easy to replicate at a fraction of the cost, that Amazon, by its very nature undermines the entire rationale for buying Lacoste.
This comes up every time Amazon is a topic on HN, and yet, from the article:
"Amazon is rich with the most important resource in asset management: trust. The firm earned the highest reputation ranking in the U.S. in a 2017 Harris Poll. It was ranked as both the most influential and most trusted company in a 2016 survey by SurveyMonkey. It was the only company to land in the top 5 for both categories."
If the above is true, then counterfeit goods are probably not ultimately a significant problem for them.
It's important to seperate Amazon the market place and Amazon the merchant here. Amazon is a market place where you can find all types of merchants. In this role, it's not so much Amazons issue what these merchants sell.
It's similar to how there are all types of websites running on AWS. Amazon is not responsible for their content.
Amazon is also a merchant on their own market place. I would expect Amazon and other big name merchants to usually sell you genuine products.
I don't really use the reviews on Amazon any more for making decisions. Typically if I'm buying something on Amazon it's a book, and I already know I want it because someone I trust recommended it, or it's some random thing I want like speakers or a bike tool or something and I just research what to buy online before I go to Amazon.
Amazon sells gift cards. You can even specify one-day shipping on gift card. Amazon does a wholesale business in Amazon credits that have the effect of lowering transaction prices. For example, Coinstar machines don't charge a fee if you take an Amazon credit in return for your coins.
If Robinhood, a start up with very few resources, can offer commission free trading, I'd bet Amazon could offer approximately 0 cost S&P500 funds.
If the partnership with JP Morgan works, people could direct deposit money into their Amazon account, auto-invest into Amazon funds, and then spend on Amazon ecommerce. In this model, Amazon immediately saves ~2% on credit card transaction fees, a small portion of which could be used to subsidize cheap or 0 cost investments.
Essentially Amazon could vertically integrate the money that will be spent on their products in the future...
I am amazed, how much people underestimate the whole complexity of setting up a successful fintech. Basically, you don't have to work for the clients - you need to work for regulators, and also for risk and compliance, and also for duty of care, and much much more, on the thinnest possible margin, if you want to be competitive. Setting up AI to help people make investment decisions is a nightmare due to the number of dimensions you need to take into account while validating data.
I really hope Amazon doesn't start the investment service in the way described in the article.
I don't think this would be a good idea for Amazon. I don't trust it right now to provide me things that aren't counterfit unless its sold by the actual supplier. Allowing funds to be on its platform without proper vetting seems strange. If Amazon actually wanted to go into the Asset Management space I would actually see it buying something like Robinhood. The problem in Asset management is all of the people who would regularly be retail investors are too smart to be peddled a bunch of random mutual funds and instead try to use index funds. The margins for those are already cut to the bone. I don't see how they could compete with something like Schwab intelligent portfolio either.
> I don't trust it right now to provide me things that aren't counterfit
That might be true for a small percent of HackerNews readers that are also Daringfireball readers - but the world at large still trusts Amazon; that's the whole point of the article, really.
As anecdotal evidence, an Amazon Investment might be the only way to convince me to become a Prime member (if that'd be a required precondition). I'd almost certainly use it, if allowed.
In addition to ETFs, why not go 1 step further? Offer hedge funds too. Amazon has a ton of data on which consumer brands are overperforming every quarter. Use that data to make investment decisions.
Why does it have to be Amazon? Look, Amazon's strategy isn't complicated.
Find a market where margins are large ("your margin is my opportunity"). Bring a simple, easy competitor to the market and aim for zero profit. Grow wildly. Build related products that either your customers want (and go elsewhere for) or else you are currently spending money on. Repeat until billionaire.
Anyone with some capital, industry-specific knowledge and a bit of courage can try this strategy. It won't always succeed. But the point is that waiting for Bezos or Musk or some other behemoth to solve all the world's problems rather than doing it ourselves is a very poor way to live.
If a VC or an angel investor would just give me $10,000 a year as salary, I would work on any idea full time for them, 90 hours a week, fighting fires, everything.
The issue is that the labor demand in this country (VCs, corporations, angels, basically anyone with money) would much rather prefer to spend $120,000 on one "really good" programmer than say $30,000 total on a team of 3 young and hungry programmers.
Something something, "adding programmers = adding delays and complexity to a project". And maybe it's true.
But the result is that the one amazing programmer lives lavishly, and the other 3 starve.
And what is worse, there's no guarantee the project will succeed, no matter who you hire.
Isn't the virtual distribution shelf for investment funds already a pretty established thing? When I log into my online bank there is an online market place for funds, allowing you to place money in funds with maximum trust and minimum effort. How would Amazon improve on this?
(That said, I like the idea of always selecting the top 1% of fund customers and allowing them to offer their own funds)
Because that existing "online market place for funds" is gibberish to most retail customers.
You go to Amazon, you type in "best AA batteries", and what you get back is not a raw list of battery serial numbers or technical specifications about battery performance (which is basically what you get in the existing brokerage experience, describing funds and their performance). What you get on Amazon is plain-english descriptions, reviews and ratings, and a sorted order of relevance or price or whatever. All these things smooth out the buying experience, reducing any possible source of friction for your purchase decision (hell, you can subscribe-and-save for new batteries every 6 months, thereby precluding ever having to make a purchase decision ever again); they want to make it as easy and natural and automatic as possible, for you to click Buy. But for investments, customers face a huge upfront barrier in terms of lack of knowledge and uncertainty, before they can make a purchasing decision; sure, all the raw information is there, but only highly motivated customers (relatively speaking) are going to dig through it or overcome it before transacting.
Now, I'm not saying that Amazon should add customer reviews of ETFs or funds or whatever ("5 stars: I bought VTSAX and made $43.26, and you can too!"), but it can certainly do a whole heck of a lot to reduce the friction of making a transaction. The point is, the customer shouldn't have to do any work (or as little as humanly possible), before clicking the Buy/Sell button.
And sure, the existing financial institutions can work on this same problem, but this is a actually not their biggest problem. Their biggest problem, is convincing customers to even think about them and take a look at their offerings, in the first place. 70+% of American households have Prime; how many have brokerage accounts? Some Googling around puts this at ~14% ([1] DOL 2015 report says 17 million households had brokerage accounts in 2013, DOWN from 19 million in 2001; total there's roughly 120 million total households in America). Also remember, this 14% of households is split amongst all the competing brokerage firms, while the 70% of households is ALL Amazon's.
All the brokerage ads I see, are targeted towards traders or people who want to become traders; this makes sense for those firms, because why would someone who has no interest in trading, ever use their brokerage? But this is narrow-minded and ultimately self-limiting thinking, and this is not at all how Amazon thinks. EVERYONE is an Amazon customer (or potential customer); once you're on the platform, figuring out exactly what to sell and how to sell it to you is easy. Prime is a huge economic engine/pool of consumers, at which Amazon could throw just about any product at, at any time. Some will stick, some will fail, but even those that fail can be recycled and improved and retried.
Everyone else is fighting over their shares of gold, while Amazon is working to create/feed the golden goose instead. Strategy over tactics.
Don't financial firms have to isolate their business models? Banks traditionally couldn't offer brokerage services for instance. I can't imagine the government granting Amazon a license to operate a retail trading desk, particularly if anyone can offer products on it.
Great thought piece. Read this carefully and certainly written by someone knowledgeable about the industry (I would hope so if he's running a hedge fund!)
I see some comments view this as a far-fetched idea. Maybe that's why its a good one....
RobinHood, the stock trading app, didn't exist 5 years ago. Now you trade for free - challenging a dozen well-known incumbent platforms like Schwab, Fidelity, etc... Luckily, these big guys offer more than just stock-trading. Imagine, zero fee trading with a fund-management platform as described by OP - I think it would crush the competition.
So here is a pitch you could make for the tech companies to get into finance. Simply replace <x> with either Amazon or Google
1. <x> Advisor: Retail investors are moving rapidly to passive tracking instruments such as ETFs, <x> can help educate investors on how to allocate their funds to this asset class based on individual risk/reward profiles. <x> can make better sense of all the data available and become the 'ultimate' robo-advisor.
2. <x> One View: <x> is in position to own account aggregation and build up an incredible view into the spending/saving habits of the general population in the developed world. Initiatives such as PSD2 in Europe will help fuel the growth in aggregation in the next few years. Going forward beyond simple read-only aggregation,combined with <x> Advisor and write-APIs to to financial institutions, <x> can allocate my funds to the best products across multiple different institutions in real-time.
3.<x> Bank: With my investments taken care of through <x> Advisor and One View whats left is a utilitarian bank account to manage my free cash flow on a daily basis. Something practical and highly functional without the fuss that offers features such as peer-to-peer FX swapping at mid rates when I go on holiday. This is where <x> could create the challenger bank people have been anticipating.
Maybe they should offer an Amazon weighted fund, that invests based in your personal consumption, ie if you buy a lot of Gillette razers then buy some Gillette shares.
> Jeff Bezos’ disdain for Wall Street is well known
Is it? Bezos got his business education on Wall Street at D.E. Shaw. What is known about his having "disdain" for that industry? Is this just a botched reference to his strategy of ploughing profits back into company growth?
Lots of FicTech in my city. From friends who work for these companies. They are a mess. Amazon needs to come in revolutionize the market place. But if they did, they would get broken up.
Short term question is whether Walmart will survive, I hope they do much as I despise the company. Amazon needs competitors. Longer term is will it be Alibaba vs Amazon worldwide? Interesting times...
> Amazon is rich with the most important resource in asset management: trust.
I'm sorry, but what? I don't even trust Amazon to deliver eclipse glasses that aren't counterfeit, and I know most of my friends/family feel the same way at this point.
The only thing I trust them to deliver is streaming video at this point.
If Amazon wanted to move into Asset Management, I think they'd have to show financial experience/competence first for the trust to be there. Wouldn't it make more sense for them to open a bank first?
How long before we see Amazon break themselves up as Google did into Alphabet? This seems like a solid approach to prevent government anti-monopoly action.
The fact that an article like this about Amazon (or any of the tech "giants") is in some way credibe (I think it is) is curious. IE, a company that does retail, sells media & tech infratructure could also go into financial products...
I think it's several things are going on.
First, this new breed of companies is highly eutrepreneurial and competant. Maybe it's youth. Maybe it's the fact that they emerged recently as winners from a high competition dynamic... If Google or Amazon declare they will now be running schools, I'd be a lot more interested than if Unilever or Shell did the same. I know we're concerned about their power, size, monopoly power & vested intertest in the anti-privacy camp, but credit is still due... I think.
Second is the power of ....power. The modern economy is top heavy. Most markets are structurally hard to break into. "Normal people" can't just start company doing banking, insuring, medicines, transport, tobacco, energy, gambling. There are upstart-hostile rules, locking out new and/or small players or structural reasons preventing small players.
"Can't" is strong. Uber started a transport company. But, there are structural and regulatory reasons that make most large markets much more closed than search engines and online shopping. There is no chance for a thousand entrants, with winners emerging from a wide field. This leaves the field open almost exclusively to large companies running lower risk gambles.
Third.. third is financing. Financing has changed in ways that I don't understand well enought to express concisely. There is a lot of financing available these days, via "back-channels." The less formal sectors like VC and (much bigger) corporate lending.
Think of what california's VC & angel complex does. It is, in many ways, the heart of the startup ecosystem. Promising founders get to take big chances without liability. This makes it possible to start a Google or an Uber.
How would SV look if founders had personal liability, like regular small business people? How would it look if they were limited to bootstrapping? Startup financing is an exception, and a relatively small one. Elsewhere on earth, finance is a much more closed shop. You have to be an insider of some sort.
Financing is (to quote Buffet) *resource allocation.
Take for example, "leveraged buyouts" and similar arrangements. Leveraged buyout means that I get a loan from you to buy company X, which then owes you repayment. Some form of this is how Russia's oligarch system came to be. It's how a lot (most) private sales of comapnies happen. It's how infrastructure companies happen. Mining.
I don't quite understand it. The big risks are go to the financer, but the profits don't. Regardless, the structure exists and being big is a prerequisite.
[+] [-] thisisit|8 years ago|reply
As for the Ant Financial comparison, I find it hard to believe that Amazon is not utilizing the reserves it gathers by selling gift cards on its platform. Those too are excess reserves to be paid to suppliers once customers utilizes and buys something from a supplier.
[+] [-] deanCommie|8 years ago|reply
I would have thought that on Hackernews of all places people would recognize the scale that is involved with a site like Amazon and recognize that fixing this problem is far from trivial.
I'm sure Amazon is taking it very seriously - when have they ever shown anything but "obsession" about positive customer experiences. But it is hard, and it will take time to do it effectively without completely blocking all 3rd party sellers on the site.
[+] [-] tjr225|8 years ago|reply
I flat out won't buy from Amazon unless I'm already in the market to get something that I know is cheap and may or may not work- which turns out is not very often. Because of this I very much doubt the reality of the retail apocalypse in the long term.
[+] [-] cm2187|8 years ago|reply
[+] [-] fergie|8 years ago|reply
Or you could say that Amazon is highlighting the comparative lack of quality of branded goods. A Lacoste shirt is so easy to replicate at a fraction of the cost, that Amazon, by its very nature undermines the entire rationale for buying Lacoste.
[+] [-] bootlooped|8 years ago|reply
"Amazon is rich with the most important resource in asset management: trust. The firm earned the highest reputation ranking in the U.S. in a 2017 Harris Poll. It was ranked as both the most influential and most trusted company in a 2016 survey by SurveyMonkey. It was the only company to land in the top 5 for both categories."
If the above is true, then counterfeit goods are probably not ultimately a significant problem for them.
[+] [-] TekMol|8 years ago|reply
It's similar to how there are all types of websites running on AWS. Amazon is not responsible for their content.
Amazon is also a merchant on their own market place. I would expect Amazon and other big name merchants to usually sell you genuine products.
[+] [-] jeffreyrogers|8 years ago|reply
[+] [-] gaius|8 years ago|reply
Why would one think that?
[+] [-] Zigurd|8 years ago|reply
[+] [-] obblekk|8 years ago|reply
If the partnership with JP Morgan works, people could direct deposit money into their Amazon account, auto-invest into Amazon funds, and then spend on Amazon ecommerce. In this model, Amazon immediately saves ~2% on credit card transaction fees, a small portion of which could be used to subsidize cheap or 0 cost investments.
Essentially Amazon could vertically integrate the money that will be spent on their products in the future...
[+] [-] compsciphd|8 years ago|reply
you're talking .03% in fees. On a $1Mil investment that's $300 a year.
[+] [-] arsenico|8 years ago|reply
I really hope Amazon doesn't start the investment service in the way described in the article.
[+] [-] zitterbewegung|8 years ago|reply
[+] [-] virgilp|8 years ago|reply
That might be true for a small percent of HackerNews readers that are also Daringfireball readers - but the world at large still trusts Amazon; that's the whole point of the article, really.
As anecdotal evidence, an Amazon Investment might be the only way to convince me to become a Prime member (if that'd be a required precondition). I'd almost certainly use it, if allowed.
[+] [-] WingH|8 years ago|reply
[+] [-] noway421|8 years ago|reply
[+] [-] mabbo|8 years ago|reply
Find a market where margins are large ("your margin is my opportunity"). Bring a simple, easy competitor to the market and aim for zero profit. Grow wildly. Build related products that either your customers want (and go elsewhere for) or else you are currently spending money on. Repeat until billionaire.
Anyone with some capital, industry-specific knowledge and a bit of courage can try this strategy. It won't always succeed. But the point is that waiting for Bezos or Musk or some other behemoth to solve all the world's problems rather than doing it ourselves is a very poor way to live.
[+] [-] anoncoward111|8 years ago|reply
The issue is that the labor demand in this country (VCs, corporations, angels, basically anyone with money) would much rather prefer to spend $120,000 on one "really good" programmer than say $30,000 total on a team of 3 young and hungry programmers.
Something something, "adding programmers = adding delays and complexity to a project". And maybe it's true.
But the result is that the one amazing programmer lives lavishly, and the other 3 starve.
And what is worse, there's no guarantee the project will succeed, no matter who you hire.
[+] [-] fergie|8 years ago|reply
(That said, I like the idea of always selecting the top 1% of fund customers and allowing them to offer their own funds)
[+] [-] strgcmc|8 years ago|reply
You go to Amazon, you type in "best AA batteries", and what you get back is not a raw list of battery serial numbers or technical specifications about battery performance (which is basically what you get in the existing brokerage experience, describing funds and their performance). What you get on Amazon is plain-english descriptions, reviews and ratings, and a sorted order of relevance or price or whatever. All these things smooth out the buying experience, reducing any possible source of friction for your purchase decision (hell, you can subscribe-and-save for new batteries every 6 months, thereby precluding ever having to make a purchase decision ever again); they want to make it as easy and natural and automatic as possible, for you to click Buy. But for investments, customers face a huge upfront barrier in terms of lack of knowledge and uncertainty, before they can make a purchasing decision; sure, all the raw information is there, but only highly motivated customers (relatively speaking) are going to dig through it or overcome it before transacting.
Now, I'm not saying that Amazon should add customer reviews of ETFs or funds or whatever ("5 stars: I bought VTSAX and made $43.26, and you can too!"), but it can certainly do a whole heck of a lot to reduce the friction of making a transaction. The point is, the customer shouldn't have to do any work (or as little as humanly possible), before clicking the Buy/Sell button.
And sure, the existing financial institutions can work on this same problem, but this is a actually not their biggest problem. Their biggest problem, is convincing customers to even think about them and take a look at their offerings, in the first place. 70+% of American households have Prime; how many have brokerage accounts? Some Googling around puts this at ~14% ([1] DOL 2015 report says 17 million households had brokerage accounts in 2013, DOWN from 19 million in 2001; total there's roughly 120 million total households in America). Also remember, this 14% of households is split amongst all the competing brokerage firms, while the 70% of households is ALL Amazon's.
All the brokerage ads I see, are targeted towards traders or people who want to become traders; this makes sense for those firms, because why would someone who has no interest in trading, ever use their brokerage? But this is narrow-minded and ultimately self-limiting thinking, and this is not at all how Amazon thinks. EVERYONE is an Amazon customer (or potential customer); once you're on the platform, figuring out exactly what to sell and how to sell it to you is easy. Prime is a huge economic engine/pool of consumers, at which Amazon could throw just about any product at, at any time. Some will stick, some will fail, but even those that fail can be recycled and improved and retried.
Everyone else is fighting over their shares of gold, while Amazon is working to create/feed the golden goose instead. Strategy over tactics.
---
[1] https://www.dol.gov/sites/default/files/ebsa/researchers/ana...
[+] [-] vinceguidry|8 years ago|reply
[+] [-] anonu|8 years ago|reply
I see some comments view this as a far-fetched idea. Maybe that's why its a good one....
RobinHood, the stock trading app, didn't exist 5 years ago. Now you trade for free - challenging a dozen well-known incumbent platforms like Schwab, Fidelity, etc... Luckily, these big guys offer more than just stock-trading. Imagine, zero fee trading with a fund-management platform as described by OP - I think it would crush the competition.
[+] [-] monkeydust|8 years ago|reply
1. <x> Advisor: Retail investors are moving rapidly to passive tracking instruments such as ETFs, <x> can help educate investors on how to allocate their funds to this asset class based on individual risk/reward profiles. <x> can make better sense of all the data available and become the 'ultimate' robo-advisor.
2. <x> One View: <x> is in position to own account aggregation and build up an incredible view into the spending/saving habits of the general population in the developed world. Initiatives such as PSD2 in Europe will help fuel the growth in aggregation in the next few years. Going forward beyond simple read-only aggregation,combined with <x> Advisor and write-APIs to to financial institutions, <x> can allocate my funds to the best products across multiple different institutions in real-time.
3.<x> Bank: With my investments taken care of through <x> Advisor and One View whats left is a utilitarian bank account to manage my free cash flow on a daily basis. Something practical and highly functional without the fuss that offers features such as peer-to-peer FX swapping at mid rates when I go on holiday. This is where <x> could create the challenger bank people have been anticipating.
[+] [-] cavisne|8 years ago|reply
[+] [-] bvm|8 years ago|reply
[+] [-] thinkling|8 years ago|reply
> Jeff Bezos’ disdain for Wall Street is well known
Is it? Bezos got his business education on Wall Street at D.E. Shaw. What is known about his having "disdain" for that industry? Is this just a botched reference to his strategy of ploughing profits back into company growth?
[+] [-] BatFastard|8 years ago|reply
Short term question is whether Walmart will survive, I hope they do much as I despise the company. Amazon needs competitors. Longer term is will it be Alibaba vs Amazon worldwide? Interesting times...
[+] [-] daxorid|8 years ago|reply
Why do you think they wouldn't survive? $15B in free cash flow versus $46B in debt makes bankruptcy a virtual impossibility.
[+] [-] 908087|8 years ago|reply
I'm sorry, but what? I don't even trust Amazon to deliver eclipse glasses that aren't counterfeit, and I know most of my friends/family feel the same way at this point.
The only thing I trust them to deliver is streaming video at this point.
[+] [-] hodgesrm|8 years ago|reply
[+] [-] inthewoods|8 years ago|reply
[+] [-] avoutthere|8 years ago|reply
[+] [-] jeffreyrogers|8 years ago|reply
[+] [-] sroussey|8 years ago|reply
[+] [-] dalbasal|8 years ago|reply
I think it's several things are going on. First, this new breed of companies is highly eutrepreneurial and competant. Maybe it's youth. Maybe it's the fact that they emerged recently as winners from a high competition dynamic... If Google or Amazon declare they will now be running schools, I'd be a lot more interested than if Unilever or Shell did the same. I know we're concerned about their power, size, monopoly power & vested intertest in the anti-privacy camp, but credit is still due... I think.
Second is the power of ....power. The modern economy is top heavy. Most markets are structurally hard to break into. "Normal people" can't just start company doing banking, insuring, medicines, transport, tobacco, energy, gambling. There are upstart-hostile rules, locking out new and/or small players or structural reasons preventing small players.
"Can't" is strong. Uber started a transport company. But, there are structural and regulatory reasons that make most large markets much more closed than search engines and online shopping. There is no chance for a thousand entrants, with winners emerging from a wide field. This leaves the field open almost exclusively to large companies running lower risk gambles.
Third.. third is financing. Financing has changed in ways that I don't understand well enought to express concisely. There is a lot of financing available these days, via "back-channels." The less formal sectors like VC and (much bigger) corporate lending.
Think of what california's VC & angel complex does. It is, in many ways, the heart of the startup ecosystem. Promising founders get to take big chances without liability. This makes it possible to start a Google or an Uber.
How would SV look if founders had personal liability, like regular small business people? How would it look if they were limited to bootstrapping? Startup financing is an exception, and a relatively small one. Elsewhere on earth, finance is a much more closed shop. You have to be an insider of some sort.
Financing is (to quote Buffet) *resource allocation.
Take for example, "leveraged buyouts" and similar arrangements. Leveraged buyout means that I get a loan from you to buy company X, which then owes you repayment. Some form of this is how Russia's oligarch system came to be. It's how a lot (most) private sales of comapnies happen. It's how infrastructure companies happen. Mining.
I don't quite understand it. The big risks are go to the financer, but the profits don't. Regardless, the structure exists and being big is a prerequisite.