Thomas Friedman in 1999: “Amazon.com Is doomed!”

Most experts aren’t very expert.  Most predictions are wrong.  Most pundits are silly gasbags, bloated with self-love and ignorance.

For instance, here’s NYTimes’ seer Thomas Friedman, on the prospects of Amazon.com, in 1999:

…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.

It gets stupider.  Friedman, a lifelong journalist with no business experience, then pronounces on business models:

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. He can deliver the book through the U.S. Postal Service within three days for only $1.63, so he makes $1.12 more on shipping for each sale. Total profit: $3.65 per book. Plus, says Mr. Bowlin, ”when you charge a book, I collect your money within a few days from Visa, but I don’t have to pay my wholesaler for that book for 30 days, so I have a free loan which I earn interest on — just like Amazon.”

Because his profit margins are razor-thin, Mr. Bowlin, like Amazon, needs repeat buyers. Amazon gets them by offering useful information about books. Mr. Bowlin does it by offering any government-certified nonprofit organization a donation of 10 percent of the purchase price of any book that any nonprofit or its members buy through him.

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.

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.