Nov 5, 2018

Axios Future

By Bryan Walsh
Bryan Walsh

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1 big thing: Amazon, a breakup threat, and HQ2

Illustration: Sarah Grillo/Axios

As Amazon narrows the finalists to host its much-sought second headquarters and its tens of thousands of new, high-paying jobs, a little-remarked-upon factor may be playing a large role in its thinking — the company's vulnerability to antitrust action by an activist White House.

  • In a new development, Amazon has decided to split HQ2 between two cities, scoops the WSJ's Laura Stevens.
  • Axios' Erica Pandey reports: Whether there are one or two new headquarters, the antitrust threat could favor the D.C. area, since a big local jobs creator may be less likely to be charged by the Justice Department.
  • The same thinking could lead CEO Jeff Bezos to rule out the only finalist on foreign soil — Toronto.

Driving the news: In an interview with Axios that aired on HBO last night, President Trump said his administration is "very seriously" considering antitrust action against Amazon, along with Google and Facebook.

Amazon declined to comment. But Bezos has publicly welcomed scrutiny, saying that "all big institutions of any kind ... should be inspected."

Why it matters: Amazon has faced intensifying critical attention — expanding into industry upon industry, accounting for half the money spent on U.S. online shopping, and at one point this year having a $1 trillion market cap.

  • Trump has accused the company of profiting on the back of cheap U.S. Postal Service rates.
  • He has singled out the Washington Post for special derision, routinely calling it the "Amazon Washington Post." Bezos personally owns the paper.

This war of words has come as Amazon conducts its high-profile search for the site of what it calls its "second headquarters," in addition to Seattle. In January, it disclosed 20 finalists, culled from a list of 238 cities that applied to host HQ2.

In recent days, a series of scoops has roiled the search:

  • In a story on Saturday, the Post reported that Amazon is in advanced talks with Crystal City, a northern Virginia neighborhood 4 miles from the White House.
  • The WSJ followed with its own scoop today, reporting that Amazon is in advanced talks with Crystal City, but also New York City and Dallas.
  • Then, this afternoon, came the added WSJ report that Amazon had decided to build two new headquarters.

In terms of why D.C., a number of analysts tell Axios that it's — not surprisingly — politics.

  • "I assume moving to D.C. is partly based on Amazon’s need to lobby the government. It’s much easier to lobby when you have an office near D.C.," says Keith Hylton, a professor of antitrust law at Boston University.
  • Scott Galloway, an Amazon critic and professor at New York University, said a D.C.-area headquarters would be "a prophylactic against regulation. ... No one's going to regulate the local boy."

For the same reason, Bezos may decide to avoid Trump's ire by striking Toronto off the list. Trump has conducted a long Twitter war against companies that, in his view, send American jobs overseas.

Citi's Mark May is even arguing that Amazon break itself up preemptively: "By separating the retail and [Amazon Cloud] businesses, Amazon could minimize or avoid the risk of increased regulatory pressure," he wrote in a note to clients today.

The bottom line: Even if setting up shop close to D.C. and keeping jobs in the U.S. don't end the antitrust debate, they will undoubtedly present advantages, experts say.

  • "At a minimum, [a DC headquarters provides] a window and a mindset for potential regulatory or law enforcement action relevant to its future," Tim Wu, a law professor at Columbia University and author of the forthcoming "The Curse of Bigness," tells Axios.
  • "A corporate mailing address in the D.C. area isn't going to save Amazon from any blatant violation of antitrust. But proximity to elected officials could buy it more time or maybe even help alter the rhetoric around any controversial business tactics," says Cooper Smith, an analyst at Gartner.
2. An e-commerce shipping war

An Amazon warehouse. Photo: Grant Hindsley/AFP/Getty

Amazon has kicked off the holiday shopping season with an aggressive shot over the bow of its competitors — free shipping, including for non-Prime members.

Erica writes: After capturing half of all U.S. online holiday sales last year, Amazon is now plotting how it can lure even more customers in what's expected to be a $720 billion shopping bonanza this holiday season, per the National Retail Federation.

  • This is "yet another example of the steps retail heavyweights such as Amazon, Walmart, Target, etc. will take to continue to expand market share, and they will use every weapon in their arsenal to accomplish this," Moody's analyst Charlie O'Shea said in a note.
  • O'Shea tells Axios: "Amazon's primary advantage continues to be a profit-agnostic shareholder base, which allows it to invest in virtually any area, at almost any cost, with no negative impact on its share price. This is an advantage that no other retailer enjoys."

Details: Amazon will waive the $25 minimum purchase that its non-Prime members must meet for free shipping. The deal lasts through the busy season.

  • The move is an easy way to get new people to try Amazon as Prime membership growth slows, says James Thomson, a former Amazon executive who now consults for retailers that sell on its platform.

Go deeper: The decline of Black Friday

3. Fire view from space

Wildfires in Northern California, beneath the International Space Station. Photo: NASA

Artificial intelligence will allow satellites to quickly detect new fires from space, skirting the need to send high-definition imagery down to Earth before finding signs of fire.

Axios' Kaveh Waddell writes: The economic burden of U.S. wildfires is estimated between $71 billion and $348 billion every year. As climate change lengthens and intensifies wildfire season, earlier detection could save lives, money and property.

Background: Two NASA satellites currently orbiting the Earth scan nearly the entire planet once a day with special instruments useful for fire detection.

  • They beam down the data to a NASA facility outside Washington, D.C., where a program detects fires based on an understanding of what they look like from space, a process that takes about 3 hours.
  • NASA first tried to use AI for this about 20 years ago, but the computers of the day weren’t powerful enough, said James MacKinnon, the NASA engineer who runs the new AI project.

Now MacKinnon’s system allows satellites themselves to flag the fires, using artificial intelligence.

  • NASA trained a neural network — a powerful AI technique used for finding hidden patterns — to predict whether an image includes a wildfire.
  • The new AI-based system can process images in a matter of minutes.

On its own, a 3-hour speedup may not seem valuable. But MacKinnon envisions a new constellation of many small satellites that can fly frequently over the Earth, quickly process the images they take onboard, and send down only information about the fires they detect.

  • With such a fleet, fire detection would occur nearly instantaneously, many times a day at every point in the world.

What’s next: "Space-qualified computers are extremely limited, so getting these modern algorithms working on them really opens up a ton of opportunities for doing cool science," MacKinnon says.

  • One upcoming project would allow satellites to predict solar flares — sudden bursts of radiation with numerous effects on the Earth — from images of the sun’s corona, right on board the spacecraft.
4. Worthy of your time
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Data: SurveyMonkey online poll. Poll methodology; Chart: Andrew Witherspoon/Axios 

Only half of Americans have faith in democracy (Kim Hart — Axios)

AI will devastate the developing world (Kai-Fu Lee — Bloomberg) (video)

Is Oumuamua actually a UFO? (Matt Williams — Universe Today)

When developing nations contract planned-city-itis (Monte Reel — Bloomberg BusinessWeek)

Sears near bankruptcy financing deal (Mike Spector — Reuters)

5. 1 fast-food thing: A search for older workers

Photo: Jeffrey Greenberg/UIG/Getty

A number of fast-food and casual-dining restaurants around the country, like McDonald’s and Bob Evans, are seeking out senior citizens, who employers say are more sociable and punctual than teenagers, reports Bloomberg's Leslie Patton.

“Hiring seniors is a good deal for fast-food chains. They get years of experience for the same wages — an industry median of $9.81 an hour last year, according to the BLS — they would pay someone decades younger.”
Bloomberg's Leslie Patton

Axios' Khorri Atkinson writes: At 3.7% unemployment, the labor market is tight. Citing the Bureau of Labor Statistics, Bloomberg reports that the number of working Americans between the ages of 65 and 74 is expected to grow 4.5% by 2024. Meanwhile, the number of workers aged 16–24 will plunge by 1.4%.

Bryan Walsh