VINEGAR VS. HONEY

Jeff Bezos could teach Donald Trump a thing or two about politics

Obsession
"America First"
Obsession
"America First"

Donald Trump picked a fight with Jeff Bezos today with a highly erroneous tweet apparently intended to strike back at the Bezos-owned Washington Post’s coverage of his administration. The digital nastygram suggested Bezos’ company Amazon owns the Post (it does not) and that Amazon does not pay internet taxes (which do not exist).

The attack comes two days after a White House summit that Bezos called “very productive,” though after a previous twitter assault Bezos has mused about launching Trump into space. Picking a fight with Bezos may not be a good strategy for the POTUS because in recent years Bezos has showed himself to be a sophisticated political operator, unlike Trump during his first months in office.

For instance, Trump’s attempts to push his party’s troubling health care bill across the line have fallen flat. The president held a meeting at the White House yesterday with lawmakers struggling to coalesce around a workable proposal. He told them that “if we don’t get it done, it’s just going to be something that we’re not going to like, and that’s OK.” After the meeting, senators told reporters that it didn’t seem as if Trump understood the details of the law.

Bezos in contrast has been quietly winning points in Washington.

Internet taxes

Let’s take the issue of this so-called “internet tax.” Amazon, Bezos’ online retail giant, at one time did not charge sales taxes on purchases in states where it had no physical presence, reducing revenue for state governments that depend on sales taxes to fund public services. Those states were losing five to ten cents every time a consumer dollar went to Amazon instead of a brick-and-mortar retailer.

Amazon at first took a very Trumpy approach to the problem: It refused to pay sales tax anywhere it didn’t have a distribution facility, and even moved operations from states that passed laws intended to tax the internet retailer directly.

But the company’s executives soon realized that public opinion was turning against it—and that the company’s burgeoning physical distribution network made exiting state markets untenable in the long term. The company gave up its state-by-state fight. Instead its lobbyists backed a 2013 bill that imposed a national standard for online companies to pay sales taxes. Amazon now collects the levy in all 45 states (plus the District of Columbia) with a sales tax on the books.

As a bonus for Bezos, the tax imposes an extra burden on upstart competitors seeking to beat the retail giant at its own game; they, too, will need to collect the tax, a wrinkle Amazon didn’t worry about during its rise.

The lesson? Recognize when it’s time to stop bluffing and find a compromise, and be willing to work with your apparent opponents—in this case, revenue-hungry state governments—to turn a problem into an advantage.

Rocket politics

This week, another Bezos firm demonstrated its savvy in Washington. Blue Origin is a firm that aims to compete with Elon Musk’s SpaceX in the reusable rocket business. Despite recent strides in private space funding—with a good chunk of it coming from Bezos’ own pockets—governments are still the biggest source of revenue for rocket builders, thanks to NASA’s science expeditions and the national security state’s capacious budget for maintaining expensive communications and observation satellites.

To break into that market, Blue Origin is developing an engine to be used in a new vehicle developed by United Launch Alliance (ULA), a joint venture of Lockheed Martin and Boeing that is the main provider of rockets to the government. Blue Origin also wants to use the engine in its own next generation orbital rocket, which will someday compete with ULA. Although it will be cooperating with a future competitor, the deal with ULA will allow Blue Origin access to the knowledge of an experienced aerospace firm, while ULA gets access to the latest technology to booster its chances against SpaceX.

In addition, Blue Origin is competing against a traditional aerospace contractor, Aerojet Rocketdyne, to build ULA’s engine. Aerojet built the engines for the Space Shuttle, but it appears likely to come in second in this race, per an update delivered to Congress by NASA experts.

To blunt Aerojet’s potential advantage, Blue Origin this week announced a $200 million investment in a new factory in Huntsville, Alabama, the traditional home of US rocket-building and where Aerojet planned to construct its engines. Alabama’s senior senator Richard Shelby is famously protective of his state’s aerospace industry, so the decision is likely to make it easier for ULA to finalize its deal with Bezos’ firm. (Last year, a ULA executive was fired for suggesting the decision was already made.)

Just as Amazon resolved its tax problems, Blue Origin found that to win over a key resource—the confidence if its biggest customer in its market—it had to cooperate with a rival for short-term gain, and share the wealth to win over a skeptical decision maker.

Trump’s pugnacious position, on the other hand, has missed the opportunity to win over reluctant Republicans. His political team needed to be talked out of running attack ads against a vital lawmaker, Nevada senator Dean Heller.

Twitter attacks have to some extent taken Trump all the way to the White House. But a more sophisticated strategy, available at the Everything Store, might be better suited to accomplishing his goals now that he’s there.

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