Amazon (Photo credit: edgeplot)

I want to talk today about Amazon and how it exercises its self-interest.

There’s been a lot of ranting discussion about Amazon lately. Various news articles and blog posts more or less accuse them of being evil for, among other things:

• Donating $1 million to small presses and non-profit literary organizations.
• Raising the promotional fees charged to large publishers for promoting their books.
• Giving their workers top pay and benefits and expecting hard work in return.
• Not paying taxes they’re not required to pay, even though they have supported changing the laws to make them fairer.
• Allowing anyone to publish books, without policing them.
• “Refusing” to sell books from a publisher that pulled them.
• Being the puppet master behind the lawsuits against Apple and the Big 6 publishers.
• Generally being a meanie and eating everyone’s lunch by being too competitive (and somehow stifling competition by being competitive).

There have been many well-reasoned rebuttals of the various accusations, including several by David Gaughran on his Let’s Get Digital blog:

• The Anti-Amazon Campaign Jumps The Shark
• Amazon Is Creating Competition, Not Killing It
• Scott Turow: Wrong About Everything

There have also been allegations of a coordinated smear campaign against Amazon (who doesn’t love a good conspiracy theory?). You may have noticed that a lot of the material comes from the Seattle Times. But I don’t really want to get into that.

In fact, I had no intentions of wading into these pro-/anti-Amazon debates at all. But one post by J W Manus got me thinking: Why Amazon Doesn’t Scare Me. I put my thoughts in a comment on that article. Then I realized I should put those thoughts in a post…

Amazon and Enlightened Self-Interest

As I see it, Amazon is practicing what libertarians call Enlightened Self-Interest. They are only working for their own self-interest, which is to make as much money as possible. In fact, they have a fiduciary responsibility to their shareholders to do so. We should not expect anything else from a corporation.

The difference with Amazon is they do it in an enlightened way: they treat their customers well and trust that they will be fairly rewarded for doing so. This is as opposed to the unenlightened way pursued by many large companies, which is to lie, cheat, steal, and anything else that will increase profits in the short term.

Part of treating their customers well is supplying as many of the products their customers want as possible. Supporting self-publishing does this, by increasing the number and variety of books available, while setting up mechanisms (customer reviews, and their recommendation algorithms) to allow the best to float to the top, so customers don’t have to wade through a lot of trash. Also, their disintermediation allows the books to be sold at a lower cost while increasing the benefits to the suppliers—the real suppliers, the authors, not the middle men, the publishers and distributors.

Customers show enlightened self-interest by looking for the best price they can get for a book, but buying it rather than pirating it.

Authors show enlightened self-interest by writing the best books they are able to and selling them at a fair price, with a free market providing the most efficient mechanism for determining what a fair price is. As opposed to the unenlightened “authors” who try to rip off customers with unauthorized copies of other people’s work or other scams. But again, Amazon helps filter that stuff out.

Even though each party is acting in self-interest, by doing it in an enlightened way, they benefit each other. This is the magic of free markets. But it only works when there are mechanisms to weed out the scumbags and allow the markets to operate efficiently. Amazon has been doing a good job of providing such mechanisms.

Such a market will also support middle men, but only when they add value and act in an enlightened way, rather than trying to artificially restrict supply and drive up prices.

So while Amazon of necessity operates purely out of self-interest, it benefits its suppliers, customers and employees by doing so in an enlightened way. This is not evil.

That’s my opinion. Please tell me what you think.