The Dangers of Free Shipping

Carl Schlachte / December 2nd, 2013

All this happened, more or less.

The Wednesday before Thanksgiving I am sitting in my office when a tall, skinny man wearing glasses comes in delivering my mail. This is unusual because I usually walk out to the front to pick it up. We’re into the lean startup thing which means lots of walking.

“You’ve got mail!” he says, winking at me.

I’m still pondering how he made it past the door that needs an electronic key fob to unlock, but I’m a sucker for trivia and he seems harmless, so I ask: “the AOL kind or Meg Ryan kind?”

“The free shipping kind,” he says and then pauses before adding in a stage whisper, “I never really thought she’d make a good ambassador.”

I looked at him for a full beat, wondering just what was going on. “Meg Ryan? She’s an actress not an ambassador.” And I am startled to realize I’m actually engaging in a conversation with a pasty faced stranger about Meg Ryan and AOL. It’s 10 am, and I feel like I need a drink already.

“Oh right!” he says. “She’s still an actress now. Right…” He continues quickly almost to himself. “Sorry, I’m a bit unstuck.”

I’m a little scared. He’s clearly off his rocker. “Look here, who are you and how did you get into my office?”

Instead of answering, he reaches into his pocket and hands me a card. It reads:

Dr. William Pilgrim
Optometrist

“Ok,” I say. “Dr. Pilgrim, what are you doing here? Can I help you with something?”

“Billy,” he says. “I go by Billy.”

I am stumped by the Billy thing. Who calls their optometrist, Billy? “This still doesn’t tell me where you’re from or what you want with me.”

“I’m from upstate New York, but that doesn’t matter. I want you to help stop something that is going to happen in your future. I’m here to try to get you to see what’s coming.”

“Now, just wait a minute,” I stammer. “You want me to stop something that hasn’t happened yet?”

“Right,” he says. “Just like it says on the card.”

“It says ‘optometrist’ on the card,” I point out.

“Yes!” He exclaims. “Optometrist. I help people see things more clearly. Get it?”

“You mean like a metaphor? Or is it a simile?” I couldn’t remember which was the right one, and I was never very good at the parts of speech. I’m still embarrassed by my SAT score in English.

“It’s a metaphor,” he says.

“So now I’m supposed to believe you’re a metaphor from the future? Ok, that’s it. I’m calling the cops.” I turn around and reach for my desk phone.

“You disconnected that last week,” he says.

He’s right. It’s that lean startup thing again. Landlines are so 2000. I pat my pockets for my cellphone.

“Wait!” He yells. “I can prove it!”

“That you’re a metaphor?” I am still fumbling for a phone. “That makes no sense at all.”

“No! That I’m from the future. I can prove I’m from the future.”

I have my phone out now but my hands are so sweaty, the damn fingerprint sensor won’t unlock the phone.

“It gets really cool on version 7,” he says knowingly. “Retinal.”

“What? But how can…”

“No time!” He says. “Well actually… lots of time… infinite really. But no time in this now. Here! Quick, look!” And he tosses the pile of mail down on my desk.

It looks like regular mail to me, until I look at the postmark. November 29, 2015. Two years from now. “Come on! You expect me to fall for this? Anyone can fake a date on an envelope.”

He smiles. “Look closer.”

I look again and then I see it. I thought it was hand drawn at first. Underneath the cancellation mark there’s an arc of an arrow curving to the right.

“You’re an Amazon Prime member aren’t you?” he asks.

“Sure,” I say. “Free shipping… Great deal.” I’ve been gripping my phone so hard, Siri is asking me if I need help with anything. I still think he’s crazy, but there’s something in his eyes that makes me sit still. “What’s Amazon got to do with my mail?”

“Everything,” he says. “That’s why I’m here. They bought the U.S. Postal Service last year… Sorry. They buy the postal service next year. You have to stop them.”

“Amazon does what?” I exclaim.

“They buy the post office. Bezos is a crazy big thinker. Too big. It’s the first step and he must be stopped now while it’s still possible.”

I know that Jeff Bezos is the CEO of amazon.com, but whatever… Billy the eye doctor is clearly whacko. “Why the hell would he do that? They lose money, they’re almost constitutionally incapable of making a profit. They don’t make a profit because their mission to deliver to anyone anywhere in the U.S. for a flat rate is too big. They…”

He looked at me, arched an eyebrow and asked, “Is that Amazon or the postal service you’re referring to?”

“Oh…” He had me on that one. Clever.

“Right.” He continues to speak as if I hadn’t interrupted. “Bezos was planning this all along. Brilliant… “ His voice trails off. “Bezos saw the same problem the telcos did in the 90’s. He was the one to see the answer was concentrated in one spot, so he grabbed it before anyone else could.”

“Saw what?” Against my better judgement he had my attention.

“The last mile! The U.S. Postal Service has built out distribution to every home in the U.S. They own the physical last mile; be it an apartment in NY or a cold fishing hut in Alaska. They’re beyond huge. They deliver 40% of the world’s mail! 31 thousand buildings that can be used as drop off and pick up points. 80 million packages picked up! 200 thousand vehicles! Even FEDex and UPS use the Post Office for a bunch of their shipping. Bezos saw he could get everything in one spot, so first he worked a deal to keep them open on Sundays to test his idea out before buying the whole operation.”

“I guess it makes sense,” I said, rising to the debate. “The post office needed someone to keep it from losing more money.”

“No!” he shouts. “Bezos needed the U.S. Postal Service more than the Post Office needed him. He played the loss making thing up in the public. Why do you think he bought a newspaper? Come on man, think! A Washington newspaper? He needed it for the public debate he knew he was going to have!”

“You’re telling me he bought a newspaper so he could buy the post office?”

“You’ll see. The Unions, the Senators, even the President himself–Bezos outwitted them all. The newspaper was the beginning, but it was the semi-independent platform he needed to talk about why leasing the U.S. Postal Service was such a good idea for everybody, and it worked.”

“Wait… Leasing? I thought you said ‘bought’.”

“Well, it’s a 99 year lease, but he took over the whole thing and is running it for them. The government got shares in Amazon worth way more than it was costing them to run the place themselves. It was the greatest public to private transaction in history. Mail delivery is seven days a week now and Amazon prime members can mail anywhere in the U.S. for free—they call it “prime class mail” now instead of first class. Bezos even did this thing where you could print out postage from your amazon.com account. It wasn’t until later that people figured out he had raised postal rates by making it a flat subscriber fee.” His voice picked up pace, and he was looking at the ceiling. He seemed feverish. “It was brilliant, he said, just brilliant. Because FedEx and UPS depend so much on the U.S. Postal Service, he was able to use his new leverage to reduce all of Amazon’s shipping costs before he wiped out the big retailers, all with the help and blessing of the U.S. Government.”

“You’re telling me he did all of this just so he could ship consumer goods?”

“Think strategically! He didn’t do it for shipping, he did it for taxes. He took over the postal service, and he got tax exempt status for everyone buying from Amazon in return.”

This was too much. “Give me a break!” I said. “If Amazon lets me ship for free and lets me buy things tax free, it sounds like a great deal. Everyone should be happy except Amazon’s competitors.” I had forgotten for the moment that this was not a rational conversation.

“That’s what the Walton’s argued before they started shutting down all those Walmarts. They sued. Get this: amicus briefs from all fifty-one states on behalf of Amazon. The states got a cut of the deal, and it sailed through anti-trust because Amazon was a quasi-governmental-company-hybrid. Like Fannie Mae, except instead of backing mortgages it was shipping hand soap. The last case got to the Supreme Court in 2018 and the ruling was a doozy. You’re a businessman, you’ll love it… Takes the whole “corporations are people” thing to its logical conclusion. Look, I’ve got to go. You’ve got enough warning. Just stop him before it’s too late.”

“Warning? Too late? Too late for what? Too late to get him to pay taxes?”

He looks at me for a moment as if weighing what to say next. “After Amazon took over all the back end services from the CIA, it was easy to win healthcare.gov and lots of the little stuff. They finally took over the IRS in 2020. Do you see? They know everything, and it all shows up on your Amazon home page. They know you need statins and that you deduct for a home office. I’ll let you guess what they do with all that big data… Let’s just say that at one point Amazon’s ‘recommended for you’ became very, very creepy.”

Billy reaches down and grabs the mail off my desk. “Can’t have any paradoxes, can we? I’ve got to go, Montana’s waiting. Stop him. Now, answer that call and tell her not to worry, you don’t need a new water heater.”

I don’t even get to ask him why he has to go to Montana. My phone rings, and I look down to pick it up. It’s my wife calling to tell me that there is a puddle of water under our water heater in the garage. When I look up, Billy’s gone.

So there it is as best I remember it. I guess we shouldn’t let the free shipping lull us into a false sense of security. Don’t say you weren’t warned.

So it goes.

Carl Schlachte

Carl is a serial entrepreneur, having been Chairman and CEO of multiple public and private companies. He is currently CEO of Ventiva, a private thermal management company, as well as Chairman of Immersion (Nasdaq: IMMR ) and a director at Peregrine Semiconductor (Nasdaq: PSMI). You can follow Carl on Twitter at carlsuqupro.
  • Mayson

    Really enjoyed that: tell Billy to thank the Tramalfadorians for me, next time he visits.

  • stennans

    I’ve never seen a limit to Amazon’s ambitions or Bezos’ cleverness.

    • Rene Stein

      It is a shame that he uses it for the purely banal purposes of satisfying our consumer lusts.

      • FalKirk

        I wouldn’t characterize satisfying my lusts as “banal”.

        • Rene Stein

          To you they’re not. But his purpose of bringing all this technology to bear on merely providing customers with more consumer goods for cheaper and faster is what is banal (unoriginal and boring).

          • Carl Schlachte

            Perfect! From the “one-click purchase” viewpoint our own lusts are interesting and original. Anyone else looking at our buying history sees only science fiction books and document shredders.

        • stennans

          John you’re missing the point. Amazon goes way beyond Microsoft in the 1990s, because Microsoft just took over the software market but Amazon is taking over all markets. They’re creating original TV shows, they’ve arranged Sunday delivery, and they’re going to land in your back yard…

  • qka

    Since Amazon Prime costs $80/year, it’s misleading to call it “free”. It’s a subscription; maybe “free with subscription” might be a better phrase. Sort of like getting online access to a publication to which you subscribe to the paper version.

    And 51 states? Did we finally grant statehood to Puerto Rico? Or did we pacify Afghanistan by annexing them, granting them citizenship, and make them all fat, dumb, and happy by letting them collect welfare and Medicaid?

    • Carl Schlachte

      Yeah but… After that first $80 you kind of forget about it and then with the credit card on file, well it just keeps renewing. It feels free the way WiFi in my house feels. Kind of falls in the cracks between AT&T and Comcast.

      As for state #51 I am only reporting what the good doctor told me!

  • aardman

    As if I wasn’t scared enough of Bezos already. Look, the guy got the DoJ to successfully file suit to reestablish a dominant market position in eBooks that Apple had torn down. I cannot think of any other instance in all of US history where the feds actually helped a company gain back a monopoly that it had lost. Bezos is scary. And Eric Holder is infuriatingly incompetent.

    • Carl Schlachte

      Well put. Hadn’t thought about the ebook case from that view, but you’re correct. The entire case (to me at least) hinged on the “agency model” which theoretically gave more power for pricing to the publishers. It does make one wonder. Thanks for pointing it out!

  • Jonathan Hoyle

    If Billy is from 2015, how does he know what happens in 2018 and 2020?

    • N8nnc

      The letter postmark — err, Primemark* — was from 2015, but Billy was from the future, all the future.

      * — I can’t find the registered trademark symbol on the iPad keyboard!

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