Tom Friedman isn’t the worst pundit at the New York Times. On the contrary, in that group he may be above average. Still, Friedman must be one of the most overrated people in the world.
At Ricochet, Rob Long resurrects a 1999 column in which Friedman predicted the demise of Amazon.com:
…if you really want to be ”concerned” about the levels of some of these profitless Internet stocks, such as Amazon.com, you should pay less attention to Mr. Greenspan and more attention to what’s going on in a small house in Cedar Falls, Iowa.
There, a single Iowa family, headed by Lyle Bowlin, is re-creating Amazon.com in a spare bedroom. I tell you this not because they’re an immediate threat to Amazon.com, but to underscore just how easy it is to compete against Amazon.com, and why therefore I’m dubious that Amazon and many other Internet retailers will ever generate the huge profits that their stock prices suggest.
As Rob notes, Friedman is a “lifelong journalist with no business experience,” but that didn’t deter him from pontificating on Amazon’s future:
Here’s the deal: Amazon.com offers ”The Testament,” by John Grisham, for 30 percent off retail ($19.57), plus $3.95 shipping and handling. Mr. Bowlin sells it for 35 percent off ($18.17) and $2.75 shipping and handling — $2.60 less. How? Like Amazon, Mr. Bowlin buys ”The Testament” from the wholesaler for 44 percent off retail, but since he has no overhead or advertising budget he can sell it for 35 percent off. …
So the next time your broker tells you that this or that Internet retailing stock is actually worth some crazy multiples, just think for a moment about how many Lyle Bowlins there already are out there, and how many more there will be, to eat away at the profit margins of whatever Internet retailer you can imagine. It only costs them $150 a month and they can do it as a hobby!
Or think about it like this: For about the cost of one share of Amazon.com, you can be Amazon.com.
Rob Long draws a sound conclusion:
Look, the point isn’t that Friedman made a stupid prediction. We all make stupid predictions. The point is that we have a pundit class that’s uniquely unqualified to pronounce on business, and business opportunities, and yet arrogantly and pompously does so anyway. There’s something monumentally irritating about Friedman’s flatulently confident assertions, backed up as they are without a shred of experience, knowledge, or skin in the game. It’s worth remembering — especially these days, when business and economic predictions keep erupting from the noisy, nasty, uninformed bowels of the pundit class.
All true. But I would add one more observation. Friedman’s claim that an ordinary citizen can replicate Amazon in his living room was laughably wrong, but there is a delicious irony in the fact that there is indeed one industry with respect to which Friedman’s dire prediction came true: Friedman’s own industry, journalism. It turns out that amateurs, many of whom have far more expertise with respect to business, politics, the arts–you name it–than Tom Friedman and other pundits with newspaper columns can, almost for free, turn out exactly the same product that Friedman does. Only better.
In 1999, Amazon wasn’t doomed, but the New York Times was. This chart shows the price of Amazon stock from 1998 to the present. It is currently around three times as valuable as it was when Friedman wrote his column; click to enlarge:
Compare and contrast: this is a similar chart for stock in the New York Times Company, which is now worth less than one-third as much as when Friedman predicted Amazon’s demise:
The Times has declined for a number of reasons, but one of the important ones is that citizen journalism turned out to be not just a viable alternative, but a superior alternative, to the myopia that Friedman and his colleagues represent. Friedman was perceptive enough to diagnose the problem that micro-competition could cause for Amazon (albeit incorrectly) but not perceptive enough to apply the same reasoning to his own industry. That fact speaks volumes about how much trust we should put in the pundit class, especially when it opines about business matters.