Fantastic article! I used this exact example during an interview I did with two of my Marxist classmates in law school for my podcast. Who deserves wealth if not someone who built a business that up to 93 million people voluntarily choose to transact with every day because it adds value to their lives? If each of those transactions created an average of $1 of consumer surplus value, and Bezos’s efforts earns him a claim on 15% of that surplus value, then $509M of his annual compensation is justified from that perspective alone.
Ignoring the paper gains on his stock, Bezos usually takes $80K a year in a direct salary and $1.6M in perks (security, travel, etc.). That would mean that from a consumer surplus perspective, Bezos only captures 0.3% of the value he creates. There might be a case to be made that he is woefully underpaid as that is much less than the Nordhaus estimate.
I told my classmates in the interview that I’d take their criticisms of Bezos more seriously after they find a way to make tens of millions of people better off every day.
He doesn't create that value. He harvests value created by general society - Internet, communications, road transport.
Under a better system with better competition, he would earn less profit and the items would be cheaper for consumers. If we could determine how much lower the prices would be under perfect competition then we could figure how much Bezos is costing consumers via his monopoly.
Huge profits are a sign of market failure, not success.
I’m a single mom. I think Amazon saves me at least 5 hours a month. My son and I lived alone for the first 3 months of his life (with the exception of two weeks when a friend lived with us). Kiddo and I wouldn’t have survived that time without Amazon, Walmart grocery delivery and Door Dash.
On the other hand.........besides complaining......what have YOU ever contributed to society........or are YOU just perfect !?? No. Nobody is perfect !
Get real......that is pure ENVY on your part....and you know it !!
No it’s not envy, and it has nothing to do with me. Bezos, Musk, Gates, others have all contributed to society. Zuckerberg is a big no. He got lucky, and his products are a net negative for human welfare. Does criticism of any billionaire bother you? Or do you just have a soft spot for Zuckerberg in particular?
I don't object to you writing this article. Your points are good and they certainly apply to certain rich people.
However you are far too generous to Amazon and the error is easy to point on.
You say "Amazon saves each customer 22 hours a year". This is not true. The Internet and online shopping and efficient fullfilment saves the customer 22 hours a year compared to 1980 systems.
This is different to Amazon. Amazon has somehow managed to monopolise the Internet and online shopping and efficient fullfilment to the extent that it generates excessive profit.
If we rewind history and block Amazon you will find the 2nd version of history still has customers saving 22 hours a year, perhaps even 23 or 24 hours, and you will find other suppliers doing this via the Internet and online shopping and efficient fullfilment.
But of course this is not black and white. Amazon might be an evil monopoly or is might be an extremely efficient competitor. The truth is probably somewhere in between.
But following your argument, that second entrepreneur would also have accumulated enormous wealth. Maybe not as much as Bezos, but still a great fortune. And the same argument would apply if there had been 10, 20, or 30 online stores like Amazon.
The fact is that Amazon won because consumers preferred it over its competitors. That has to count for something. It innovated faster than the others, delivered more value than the others, and, as a result, achieved market dominance.
That’s really the key point, isn’t it? The lightning has to strike somewhere—someone has to be the one who gets it done. In this case, that person happened to be Jeff Bezos.
It’s not always the innovator who reaps the greatest rewards, but whoever does reap those rewards has earned at least some of them.
Take the airplane, for example. The Wright brothers invented it, but it took companies like Boeing to turn it into a successful business. Society benefited from Boeing’s success, as well as from the other companies that later entered the market and competed.
I agree that not every billionaire deserves their fortune. Take Mark Zuckerberg, for example. I genuinely wonder how much Facebook has actually added to our lives.
Sure, at first it helped people stay connected with family and friends, share photos, and things like that. But in the long run, it seems to me that Facebook’s core business has created more negative value than positive.
On the other hand, there have been important byproducts of Facebook’s success. Anyone in the tech industry knows that the company has also developed major open-source technologies that are widely used today, such as React for building web applications and Llama for large language models.
Its core business maybe has a net negative social impact. But some of the secondary effects of its success have clearly been beneficial.
This resonated with me because I think the time-saving argument is even stronger in developing countries like India.
In the developed world, Amazon often substitutes for a reasonably efficient trip to the store. In India, it frequently substitutes for traffic congestion, poor road infrastructure, fragmented retail markets, uncertain inventory, inconsistent product quality, and the sheer cognitive load of navigating all of that.
I live in a gated community, and one of the reasons that lifestyle works is because companies like Amazon bring the market to me. They allow me to keep many of the frictions of urban India outside the gates. Instead of spending half a Saturday driving across Mumbai looking for a particular item, I spend a few minutes ordering it and use the saved time with my family, exercising, or reading.
Economists call it consumer surplus, but "time surplus" may be even more intuitive. For hundreds of millions of people, Amazon isn't just selling products. it is selling back small pieces of their lives. Those minutes compound over years into something far more valuable than the headline number attached to Jeff Bezos' net worth.
Agreed. I live 30 miles from large stores, & my locally stores do not carry a large selection. Amazon saves me an immense amount of time. I would be much poorer without its service. I do use other online vendors for specialized items, so Amazon is not an evil monopoly.
Fantastic article! I used this exact example during an interview I did with two of my Marxist classmates in law school for my podcast. Who deserves wealth if not someone who built a business that up to 93 million people voluntarily choose to transact with every day because it adds value to their lives? If each of those transactions created an average of $1 of consumer surplus value, and Bezos’s efforts earns him a claim on 15% of that surplus value, then $509M of his annual compensation is justified from that perspective alone.
Ignoring the paper gains on his stock, Bezos usually takes $80K a year in a direct salary and $1.6M in perks (security, travel, etc.). That would mean that from a consumer surplus perspective, Bezos only captures 0.3% of the value he creates. There might be a case to be made that he is woefully underpaid as that is much less than the Nordhaus estimate.
I told my classmates in the interview that I’d take their criticisms of Bezos more seriously after they find a way to make tens of millions of people better off every day.
He doesn't create that value. He harvests value created by general society - Internet, communications, road transport.
Under a better system with better competition, he would earn less profit and the items would be cheaper for consumers. If we could determine how much lower the prices would be under perfect competition then we could figure how much Bezos is costing consumers via his monopoly.
Huge profits are a sign of market failure, not success.
I’m a single mom. I think Amazon saves me at least 5 hours a month. My son and I lived alone for the first 3 months of his life (with the exception of two weeks when a friend lived with us). Kiddo and I wouldn’t have survived that time without Amazon, Walmart grocery delivery and Door Dash.
Hi Shannen !
How rare and refreshing your comment is ! Gratitude for the service provided !
That is the REAL PAY-OFF.....providing a much needed service and being appreciated for doing so !!!
On the other hand, Mark Zuckerberg. That guy has contributed nothing truly useful to society.
On the other hand.........besides complaining......what have YOU ever contributed to society........or are YOU just perfect !?? No. Nobody is perfect !
Get real......that is pure ENVY on your part....and you know it !!
No it’s not envy, and it has nothing to do with me. Bezos, Musk, Gates, others have all contributed to society. Zuckerberg is a big no. He got lucky, and his products are a net negative for human welfare. Does criticism of any billionaire bother you? Or do you just have a soft spot for Zuckerberg in particular?
You didn't ANSWER THE QUESTION !
What of SIGNIFICANCE have YOU CONTRIBUTED to the world besides complaining ?
Oh ! That's right ! Bitching about Zuckerberg AGAIN ! Well done ! Grow up !!!
Amazon has indeed saved me and everyone in my neighborhood so much time.
Great article. Although AWS did lower the entry barrier for aspiring entrapanures, you still need substantial capital to compete with the bigger fish
https://shfoferet.substack.com/p/the-accidental-revolution-of-jeff?r=8mv37j
I don't object to you writing this article. Your points are good and they certainly apply to certain rich people.
However you are far too generous to Amazon and the error is easy to point on.
You say "Amazon saves each customer 22 hours a year". This is not true. The Internet and online shopping and efficient fullfilment saves the customer 22 hours a year compared to 1980 systems.
This is different to Amazon. Amazon has somehow managed to monopolise the Internet and online shopping and efficient fullfilment to the extent that it generates excessive profit.
If we rewind history and block Amazon you will find the 2nd version of history still has customers saving 22 hours a year, perhaps even 23 or 24 hours, and you will find other suppliers doing this via the Internet and online shopping and efficient fullfilment.
But of course this is not black and white. Amazon might be an evil monopoly or is might be an extremely efficient competitor. The truth is probably somewhere in between.
But following your argument, that second entrepreneur would also have accumulated enormous wealth. Maybe not as much as Bezos, but still a great fortune. And the same argument would apply if there had been 10, 20, or 30 online stores like Amazon.
The fact is that Amazon won because consumers preferred it over its competitors. That has to count for something. It innovated faster than the others, delivered more value than the others, and, as a result, achieved market dominance.
That’s really the key point, isn’t it? The lightning has to strike somewhere—someone has to be the one who gets it done. In this case, that person happened to be Jeff Bezos.
It’s not always the innovator who reaps the greatest rewards, but whoever does reap those rewards has earned at least some of them.
Take the airplane, for example. The Wright brothers invented it, but it took companies like Boeing to turn it into a successful business. Society benefited from Boeing’s success, as well as from the other companies that later entered the market and competed.
I agree that not every billionaire deserves their fortune. Take Mark Zuckerberg, for example. I genuinely wonder how much Facebook has actually added to our lives.
Sure, at first it helped people stay connected with family and friends, share photos, and things like that. But in the long run, it seems to me that Facebook’s core business has created more negative value than positive.
On the other hand, there have been important byproducts of Facebook’s success. Anyone in the tech industry knows that the company has also developed major open-source technologies that are widely used today, such as React for building web applications and Llama for large language models.
Its core business maybe has a net negative social impact. But some of the secondary effects of its success have clearly been beneficial.
This resonated with me because I think the time-saving argument is even stronger in developing countries like India.
In the developed world, Amazon often substitutes for a reasonably efficient trip to the store. In India, it frequently substitutes for traffic congestion, poor road infrastructure, fragmented retail markets, uncertain inventory, inconsistent product quality, and the sheer cognitive load of navigating all of that.
I live in a gated community, and one of the reasons that lifestyle works is because companies like Amazon bring the market to me. They allow me to keep many of the frictions of urban India outside the gates. Instead of spending half a Saturday driving across Mumbai looking for a particular item, I spend a few minutes ordering it and use the saved time with my family, exercising, or reading.
Economists call it consumer surplus, but "time surplus" may be even more intuitive. For hundreds of millions of people, Amazon isn't just selling products. it is selling back small pieces of their lives. Those minutes compound over years into something far more valuable than the headline number attached to Jeff Bezos' net worth.
Agreed. I live 30 miles from large stores, & my locally stores do not carry a large selection. Amazon saves me an immense amount of time. I would be much poorer without its service. I do use other online vendors for specialized items, so Amazon is not an evil monopoly.