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Shel Kaphan

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Shel Kaphan

Former Chief Technology Officer, Amazon

Shel Kaphan was hired by Jeff Bezos in 1994 as Amazon’s first employee and later served as chief technology officer. He left Amazon in 1999 and is currently president of the Kaphan Foundation.

Following are excerpts of an interview with Shel Kaphan conducted by James Jacoby on January 21, 2020.

This interview appears in:

Amazon Empire

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Amazon’s Early Vision

What was the vision for Amazon in those really early days?What was Jeff’s vision?What were you building?

Well, I don’t think anybody, probably including Jeff, really had the full scope of the opportunity in mind at that point.And as far as anything anybody talked about, we hadn’t really talked about anything beyond books.And, you know, there started to be a few follow-on categories like video and audio back when people used to sell those things physically.You know, that already seemed like a stretch.And then there started to be an international expansion.The company acquired two online booksellers in Europe, and so we started expanding internationally.So by the time some new management came into the software side of the company, there was really—that’s when they really started to expand into different product categories and different—and to more fully internationalize the site and even start to work on other, different modes of selling things like auctions, for example, which no longer exist there as far as I know.But that became—that morphed into the third-party Marketplace.

… What do you think about, when you look back at those days, what do you think is sort of more myth and legend than is reality about the early founding, the founding of Amazon?

Okay, well I would say the idea that we knew what we were doing.

That's mythology?

I mean, in the sense that we knew where we were going in particular.Well, I can really only speak authoritatively about myself, but what the company is now was nowhere in my wildest imagination.Nowhere.So I could see that it was going to grow beyond what I could see at the time, but the fact that it could have the kind of position in the world that it has now, I had no clue.

When did it become clear, though, to you that Amazon would be more than books?

Well, relatively early on, like I said, we started selling video and audio products, and we started expanding internationally.And then they started hiring some people from other companies that had other retail experience, and, you know, they were starting to sell other kinds of really unrelated products, like jewelry and things like that.And that was, all came as a bit of a surprise to me.

What do you mean “surprise”?Why a surprise?

Well, because there wasn’t really, like, an internal dialogue in the company about “And now we are going to expand into this category, and then we’re going to expand into that category.”It all just sort of, at least to me, it just sort of came down as a fait accompli.

Amazon’s Power in the Marketplace

… I know you’re not a legal scholar, but are you basically concerned that Amazon is a monopoly?

I’m concerned that it has that type of power.I think whether you technically can call it a monopoly or not, I don’t know.It’s certainly an oligopoly, or it participates in one, and also the other side, monopsony and oligopsony, which is on the supplier side.So yes, it does concern me, and I feel like the main way that society collectively can organize to get a handle on limiting the power of these platform companies—not just Amazon, but these platform companies that have network effects and for which there is a natural monopoly—is through, you know, something like antitrust enforcement, where, in particular with Amazon, I feel like their retail business should not be able to get any more information about customers than a third-party seller has, that there should at least be what’s called a Chinese wall between the retail business and the platform business.

There are proposals out there to break up Amazon.Is that something that you think would be a logical—is that something you’d promote, the idea of breaking them up?

Well, if that’s what it would take for them to be on a level playing field with third-party sellers on top of their platform, I think that they’re now at the scale where that could potentially make sense.

I mean, that’s a big deal, to go in and to—here’s a business that they built; they came up with the brilliant idea of having both the platform and being a retailer on that platform.But you think a bold measure like that may be necessary?

I think so.And furthermore, I think that all of the pieces of that would independently be very successful.And if you look, for example, at when the Standard Oil was broken up, or the Bell Telephone Network, all of the pieces became very successful in and of themselves, possibly even more so than the original company.So the main thing I am concerned about is just preserving the ability for small companies to innovate and to do so without fear of having their business taken away by somebody that has channel information that is really—should be private to them, or it should be protected by the channel against other retailers being able to compete with them.

I mean, it’s a rather remarkable statement coming from the first employee at Amazon, to basically be saying that, at this point, you think that the company should undergo some sort of federal intervention, whether it be breaking them up or—

Well, I think they could intervene with themselves and convince—and take actions to convince people that they’re not going to take advantage of their platform position to take over the businesses of suppliers that use them as a channel.

Is Amazon a Force for Good?

... We’ve talked about the early days, and you came to Amazon and built something with Jeff that you felt had a—that was in some ways a force for good, as you’ve described it, in some ways.Do you think that Amazon is a force for something good these days?

I think that’s still a part of them, but I think that they are now so big that they have to learn how to manage their own impact, unintended or not.

I think that the characterization of Amazon as being a ruthless competitor is true and that they are content to be somewhat monomaniacal on that.And, you know, under the flag of customer obsession, they can do a lot of things, which might not be good for people who aren’t their customers, you know, immediately.And that is definitely some of how they get their edge in the world, is by being kind of focused in a way that’s not well rounded in that way.

And so they kind of get away with some things that maybe, you know, larger society would like it better if they didn’t.

... Isn’t this just capitalism?Isn’t this just a company doing what a company does?

Yes. Yes, it is.And that’s one of the reasons why, I mean, actually I think it’s like a pure manifestation of what capitalism in the way that it’s implemented in America is about.And that means that—I kind of don’t even think it’s their fault.I think they’re doing what the business schools teach people to do, and they’re doing it, you know, aggressively and skillfully and with great intelligence.

Whether that’s what we want our businesses to be is another question, and that’s a question for, you know, the rest of society to figure out.And businesses that are taking—that are taking full advantage of the system that we have, like Amazon is, they will continue to do that unless they’re constrained by other forces in society.

And that worries you?

Sure.

Why?

Well, because I care what the world is going to look like going forward.

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