international analysis and commentary

A tale of two companies: Apple and Amazon in the evolving globalization

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Apple and Amazon are indisputably two of the world’s greatest technological giants, and yet their strategies are completely different. While Apple has chosen a globalist model, aimed at a privileged elite, Amazon is focusing on the masses – especially those that feel that the benefits of globalization have passed them by. When the geopolitical recession hits, Jeff Bezos’ model looks more likely to come out on top.

Steve Jobs and Jeff Bezos

 

Geotechnology as a field has emerged because of a change in the relationship between geopolitics and technology over the last decade. Specifically, the most powerful technology companies’ business models have had unintended—but nonetheless direct—geopolitical effects, going from empowering individuals and civil society and undermining authoritarianism (the communications revolution) to eroding civil society, polarizing democracies and strengthening authoritarian regimes (the data revolution). A critical question is what the implications for these shifts mean for these technology companies themselves.

 

GLOBAL TECHNO-UTOPIA. To answer this question, I’ve been thinking a lot about Apple versus Amazon, two companies with strategic business models based on completely different worldviews. Apple is about economics; Amazon is about geopolitics. They’re both fascinating looks at where the two companies expect the world is heading.

Apple aims to be the high-end global consumer technology solution. The world’s best design and a focus on privacy with personal user data in a secure cloud; the anti-Facebook, a company that won’t sell your data to partners, with price points out of reach for most of the world’s consumers. Essentially, Cupertino is selling a non-dystopian response to a dystopian world—while everyone else is giving away your privacy, Apple users won’t have to.

There’s an undeniable logic to it—with the rising speed of human displacement coming from artificial intelligence and climate change, a world with far more inequality isn’t a world where it makes sense to bet on the middle class. Those who will have enough money will demand a product set that allows them to escape the growing governance challenges that result from a failing public sector. Techno-utopianism, at least for Apple users.

But Apple assumes the world’s 1% will continue to act as global consumers. The problem is that none of this works for China. A huge part of Apple’s global market, the Chinese have no interest in a long-term model that allows part of their citizens to avoid surveillance and, accordingly, the government-led nudges of their behavior that promote political stability. As China moves to break its dependence on the US in key technologies like semiconductors and smartphone operating systems over the coming 5 years—probably the single most impactful geopolitical decision taken by a government in decades—Apple becomes one of the most vulnerable technology targets for Beijing.

This will particularly prove the case if the US is successful in choking off the supply of essential hardware and software to Huawei. The world’s No. 2 smartphone maker is already rolling out an alternative operating system after its access to Google’s Android operating system and related app ecosystem was cut off by the Trump administration. If the US campaign succeeds, and Huawei is forced to retreat and fall back on the Chinese domestic market to survive, Apple’s position—as the high-end US prestige smartphone brand in China—will become increasingly vulnerable, whether that is due to its official Chinese retaliation or to an unofficial, nationalist uprising against Apple as a US brand.

Even if that doesn’t come to pass, the fracas around the NBA in China (to cite just one example) suggests that Apple could also eventually find itself in an impossible position, struggling to justify its privacy-centric brand rhetoric in the West with its continued presence in China. Already the company has come under fire in the West for removing an app from its store that Hong Kong protesters were using to crowdsource intelligence about police movements. And what’s a problem for China in the coming decade will also be a problem for the countries where China has technological dominance: those countries align their economies with Chinese technology and data standards.

 

BETTING ON THE MASSES. Amazon’s worldview couldn’t be more different. Jeff Bezos and company are working to dominate the data and logistics required for low-cost retail in the West. Goods on demand faster and cheaper than anyone else can provide them, and an unmatched data ecosystem that grows along with it. Compared to Apple, it’s a bet on the other side of growing global inequality—mass consumption of inexpensive goods. But Amazon is also working to become the technology company most aligned with the US government—the Lockheed of the twenty-first century. Potentially, Amazon could come to be the monopoly tech provider of a subsidized American underclass.

It may be easy to write off Bezos’s decisions to buy The Washington Post, to acquire the most significant residence in the city, and to move Amazon’s new headquarters (HQ2) to Crystal City as a trifle. But it’s harder to see those choices as coincidence given Amazon’s strategy. Amazon has been looking to ensure they have a leg up on a wide assortment of key US government contracts. This has not proved an entirely smooth process: after all, Amazon lost out to Microsoft on the biggest government IT contract in decades, a $10 billion deal to build a secure cloud for the Pentagon. But Amazon is already the cloud provider to the CIA and is appealing the decision on the Department of Defense contract.

In any case, it’s the most government-friendly of the big four consumer-facing US tech giants: Facebook doesn’t compete in cloud and Google was forced to back away from a small collaboration on facial recognition with the Defense Department after some employees threatened to quit if there were any possibility that the company would be working with the government on military projects. Recent speed bumps aside, Amazon’s business model has leaned towards becoming the indispensable data provider and partner to the US government.

With the move from the World Wide Web to the Internet of Things, the technology fight essentially moves from monopoly verticals towards consolidation; in other words, what matters is whose business is integrated with the most consumption. For the growing ranks of formerly comfortable middle-class Americans whose prospects are dimmed by rising inequality and automation, the US government is likely to have more say over that than anybody else in the Western world. To be clear, that won’t be as true with Apple’s higher-end clientele, for whom the effect of government regulation will be more removed. But for those left behind, it’s another story entirely.

If there’s a major structural trend inside the United States today, it’s the growing number of people who feel the social contract isn’t working for them. Flat wages and systemic underinvestment in infrastructure will need to be resolved. Add to that the post-industrial revolution (i.e. automation displacing and reshaping much of the current labor force), and you have a permanent underclass of citizens that require more intervention from the public sector.

 

IDENTIFYING THE TECHNOLOGY PROVIDER OF CHOICE. Who is going to be the technology provider of choice for that underclass, subsidized by the US government? Who will be the tech company responsible for public housing? Public schools? Prisons? Who’s going to build all this smart infrastructure? When people aren’t willing to pay more for privacy (indeed, the exact opposite is true), the US government will need a partner that can ensure that costs are kept manageable. And it’s not a huge leap to imagine that the company at the forefront of providing cloud services to big government agencies – and who also happens to operate one of the world’s most finely-honed mass-market logistics machines – could one day be tapped to power this new social contract: consumption for the underclass, brought to you by Uncle Sam and Amazon Basics.

Further, Amazon’s strategy doesn’t rely on the Chinese market (where a few Chinese companies will own the space in monopoly tech verticals). Rather, it relies on the notion that, as China becomes more dominant in a large part of the world, the United States learns from China rather than the other way around. Parts of the US population becoming permanently disenfranchised requires a strategic fix from the US government; if you can’t integrate the people, you need to change their governance model. This isn’t new—the United States has always been a representative democracy… but not for everyone.

As more people get disenfranchised, Apple’s globalist model looks to provide for the privileged few, while Amazon’s nationalist model provides for the dependent many. In our coming geopolitical recession, Amazon—not Apple—looks like the winning business model to me.