Best columns: Business
Amazon’s threat to big brands
The New York Times
Local retailers have long worried about Amazon putting them out of business, said Farhad Manjoo. Now it’s time for major global brands to feel anxious, too. I recently received a small internet-connected camera, the kind you might use to keep tabs on your dog at home, with a “groundbreaking feature that no rival can match”: a $20 price tag. Sold by Seattle-based startup Wyze Labs, the high-quality camera demonstrates how Amazon is helping newer companies sell “better products for ludicrously low prices.” Wyze’s founders used to work at Amazon, and they were inspired by the e-retailer’s “high-volume, low-margin approach to sales.” Wyze uses quality components sourced from China and its own software, but the firm still only breaks even. Its founders’ strategy for long-term success is to build a brand so they can sell other gadgets in the future. And that’s “the second place Amazon comes in.” Wyze relies on its Amazon storefront to “establish an instant presence next to the big guys,” knowing that Amazon reviews “have become just about the most important factor in how consumers buy electronics products.” Helping newer manufacturers get a leg up on bigger rivals may not be what Amazon set out to do, but that’s what’s happening: Half of the e-retailer’s products now come from small businesses, which are rewarded by the nature of Amazon’s platform for selling high-quality, low-priced merchandise. This shift is “unquestionably good for consumers.” Not so much for “the Nests and Netgears of the world.”
Finance’s computing revolution
“Self-driving finance” has quietly come to dominate our markets, said Gillian Tett, and if we aren’t careful, it “could turn into a runaway train.” Today, just 10 percent of U.S. stock-market trading is conducted by human brokers; the rest is driven by automatic systems, such as computerized high-speed trading programs. “Humans write this code, and sometimes oversee trades,” but machines are increasingly taking on even those roles. Regulators estimate that computers are now generating 50 to 70 percent of trading in equity markets and 60 percent of futures, with artificial intelligence and machine learning being applied to huge amounts of data to produce investment advice. This shift to self-driving investments has taken place with minimal public debate. Imagine if we gave driverless cars as little scrutiny; an outcry would rightly ensue. Yet this trading technology is moving “faster than politicians and voters understand” and overtaking “legal and regulatory frameworks.” If a “self-learning financial program goes haywire,” who exactly will be left holding the bag? Regulators can’t keep up, and they are finding it difficult to even assess how a computer-driven flash crash might spread throughout markets. Digital devotees will no doubt argue that the benefits of innovation “more than offset the risks.” But we need to have “a public debate about the computing revolution in finance” before it’s too late.