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Feb 11, 2022

Veni, Vidi, Vici

By:Josh Fabian

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A Change in Demand

Barnes and Noble was the Starbucks of bookstores. Circuit City was the biggest Best Buy competitor. Walmart was the only game in town for lower priced everything-you-could-possibly-need. Enter Jeff Bezos and Amazon.

The last three decades have been truly revolutionary in any number of ways. Tell anyone under thirty you have a landline and don’t be surprised when they ask if you fought in Vietnam. Tell them mobile phones were originally “car phones” and they’ll ask, “so you had to go to your car whenever you wanted to make a call?” Explain there was a time when thick catalogs were sent out by places like Service Merchandise or Sears where you had to flip through hundreds of pages to see what products they had. If you wanted to buy one, you would call a phone number and give the product number to an actual person on the other end. If you wanted to have it shipped, it would take 6-8 weeks.

Today, there is next to nothing you can’t get from Amazon as soon as today and no later than a few days. If they don’t offer something now, it’s just a matter of time until they do. Their most recent and most profitable moves have been into services. Their cloud computing service, AWS, runs much of the backbone upon which the internet relies. Just this past week, they announced a foray into telehealth. The question becomes, what’s next?

Will Amazon Offer Financial Services?

The one market Amazon hasn’t attempted to enter is financial services. But if you ask us, they will. It’s a no-brainer. Given the wealth of information they already have on hand, disrupting financial services wouldn’t be a stretch. Using Amazon for telehealth and as your pharmacy (yes, they already have that)? Why not buy your life insurance through them, too? If you’re buying life insurance, how about an annuity? Ordering, The Unlucky Investor’s Guide to Options Trading? Why not just trade through Amazon as well?

The biggest obstacle to Amazon entering financial services is the market is regulated. But that won’t stand in their way. Healthcare is a regulated space as well. The margins in financial services are big and worth the compliance headaches. With their AWS and broad access to personal data, Amazon would be an immediate threat to competitors.

The Most Powerful Monopolies

While the last thirty years have seen remarkable technological innovation, they have also created monopolies. Google, Facebook and Amazon are all virtually unchallenged in their respective spaces. The most aggressive of these conquistadors is arguably Amazon. No market seems impenetrable given their resources. Julis Caesar may have thought he came, saw and conquered. But even Caesar would be displaced by Amazon.

Written by Dylan Ratigan and Josh Fabian

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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