In this week’s newsletter, we talk about how Amazon has been trying to get insider information about its rivals such as Flipkart and Walmart, how cloud seeding can impact economics and more.
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Did Amazon spy on Flipkart and others?
Amazon might have landed in hot soup.
Last week, the Wall Street Journal published an investigative report which claims that the e-commerce behemoth was spying on its rivals.
How, you ask?
Well, let us tell you how ‘spying’ works in the corporate world.
Say you’re running a brand selling sneakers in India. You’ve studied shoe design and manufacturing. And to get a pulse of the market, you often conduct surveys to understand what customers are looking for.
But occasionally, you’ll also assess how your prospective rivals are doing. You’ll browse through their website and see the listings and prices. You’ll pop into the stores to evaluate the customer buying experience. If they launch a new pair of sneakers that are flying off the shelves you’ll buy it too and maybe tear it apart to figure out what the secret sauce is.
If you grow to a large size, you might have set up a team dedicated to doing this. You might call it the ‘Benchmarking’ team.
It’s all part of market research. Or what the industry would call competitive intelligence.
And there’s nothing wrong with it. You could call it spying but you’re simply using public data to stay one step ahead of your competitors. It’s not illegal.
But you know when that becomes a problem?
When you see a rival put up a post saying they’re hiring senior personnel and you recruit someone to work as your spy. Yup, you’ll ask them to apply for the role and cross your fingers in the hope they’ll get selected. If all goes to plan, you then have a mole in the rival company who can get access to documents detailing secret projects and internal strategies. And then feed you this information on the sly.
That’s spying. That’s corporate espionage. And that’s illegal.
So, what did Amazon do?
Okay, in 2015, Amazon was tweaking its business model. It was focusing more on getting third-party sellers to sell their wares on the platform. It was doubling down on its own logistics and delivery fleet. And it had an internal ‘Benchmarking’ team that was tasked to get a sense of what its rivals were up to and help Amazon sort of copy tactics.
But, rather than simply talk to people or comb through earnings reports, the team had another idea. They wanted to set up a company called Big River Services International. Think of it as a seller that would sell a bunch of eclectic stuff — shoes, beach chairs, and Marvel t-shirts. And Big River would list as a seller on rival e-commerce marketplaces such as Flipkart. On Flipkart, it sold wooden home decor stuff under the brand Crimson Knot. And this would give them an insider’s view to figure out pricing algorithms, how shipping and logistics worked, and even payment methods.
The Big River team would then pass on the information to Amazon’s Benchmarking team who could then tell leadership how to better Amazon’s own services.
On the face of it, that doesn’t seem too bad. And Amazon believes its rivals do the same thing too. But the problem as per some lawyers is that if you misrepresent who you are just to get trade secrets, you can be taken to court.
Did Amazon do that?
Well, as per the WSJ, “Team members attended their rivals’ seller conferences and met with competitors identifying themselves only as employees of Big River Services, instead of disclosing that they worked for Amazon.” One of those rivals was eBay which apparently held a conference to give sellers on its platform some ‘exclusive information’.
Now what WSJ doesn’t specify is if those ‘teams’ were directly from Amazon posing at Big River. Or whether they actually worked at Big River. If it’s the former, it’s a misrepresentation. If it’s the latter, a lawyer would argue it’s not a problem.
But wait…Amazon apparently did assign two email addresses to a lot of folks working at Big River. One which was a non-Amazon one for external communication. And one linked to Amazon so that they could email folks internally without a problem.
That seems a little suspect. And it makes it sound like Amazon was using moles, no?
And guess what?
When the Blue River folks created reports that they wanted top Amazon executives to see, they didn’t email them. Rather, they printed it out and handed it over.
And you know that quite often when people try circumventing the regular digital trail, they’re up to something dubious.
Maybe what makes the whole thing worse is that Amazon even seems to have had a ready reckoner on how to react in case the news of Big River even became public. It was a crisis management tool that was ready to use.
Why would you need a preplanned response if you didn’t think you were operating in a legal grey area?
And this isn’t the first time Amazon’s corporate espionage tactics have been questioned this year.
A couple of weeks ago, WSJ published a separate story adapted from a book that will be published today (23rd April). And it talks about the time from a few years ago when Amazon wanted to launch its own food brand.
So it hired an employee from a really popular department store called Trader Joe’s. And it didn’t tell her what her project at Amazon would be. It was only when she got to Amazon that she figured that they wanted her to spill the Trader Joe’s’ trade secrets — Amazon wanted to know which food items sold well and even the margins on the products.
Now Amazon did fire the folks involved in resorting to these tactics so that’s a good thing.
But it just goes to show that this probably won’t be the last time we’re hearing the words ‘corporate espionage’ and ‘Amazon’ in the same breath.
The economics of modifying the weather
It rained cats and dogs in the UAE (United Arab Emirates) last week. Parts of the country received more rainfall in a day than it receives on average in an entire year. It flooded the glitzy city of Dubai and shuttered its busy airport too.
And this suddenly sparked rumours that cloud seeding was the culprit!
But experts don’t agree with this theory. They blame it on climate change and the erratic weather patterns it creates.
Now we’re not going to debate the cause and we hope that the UAE recovers soon, but we thought we could talk about this trending term ― cloud seeding.
In 1946, Irving Langmuir, a Nobel Prize winner and research scientist at New York’s General Electric Labs was studying the buildup of ice on airplane wings. One thing led to another, and he soon wanted to figure out why the mist at the nearby Mount Washington never converted into snow, despite the temperature being well below 0°C (water’s freezing point).
To help with that, he hired Vincent Schaefer, a research assistant, who ran his experiments on a freezer.
Schaefer kept playing with the freezer conditions and exhaling into it to see if the moisture in his breath would convert into ice or not. It never did. And one summer day and many failures later, he observed that the freezer was struggling to keep cold. So, he decided to throw in a block of dry ice or solid carbon dioxide to help it. And that was enough to convert the supercooled water inside, back into ice. The trick was that the dry ice was much, much colder.
This discovery got Langmuir thinking “Clouds are basically bags of supercooled water. And rain is actually ice crystals falling from the sky, which melt on their way down. So what if I shoot dry ice pellets into these rain heavy clouds to induce snow?” Langmuir and Schaefer flew a plane into the sky and did exactly that. They made the clouds shed snow which melted into rain on their way to the ground.
And that folks, is how humans learnt to modify the weather or what you call cloud seeding.
Sidebar: Bernard Vonnegut, an atmospheric scientist and Langmuir’s colleague, later dug through chemistry books to find out that any material that has a chemical structure similar to ice can have the same effect as dry ice. And since silver iodide particles fit the bill, they can also be used to induce the formation of ice crystals or artificial snow.
And this business has become a huge industry, working a lot of economic wonders for many countries across the globe.
To begin with, cloud seeding has long been used to address water scarcity.
And to understand this, you could look at China, which has the world’s largest cloud seeding system. Its ‘weather modification office’ employs over 50,000 people whose job profile is to actually shoot silver iodide into clouds to make them rain.
But apart from creating jobs, China has also been trying to fight the economic losses from the water scarcity its northern region has been experiencing for nearly half a century.
You see, the Yangtze River, China’s longest river and the Yellow River, its second largest, have been its biggest sources of freshwater. This water actually comes from melting ice glaciers off the Tibetan plateau. But climate change-driven rising global temperatures meant that there wasn’t much snowcap left to create more fresh usable water. And that simply set off China’s northern provinces to a water crisis.
To solve that, China had a brainwave. Decades ago, it invested about $80 billion in something called the South-to-North Water Diversion Project. The aim was to transfer water from the Yangtze, which wasn’t as gravely affected by the water crisis to its northern regions. Lengthy tunnels would send water to the riverbed of the Yellow River in the north. And just so this water stayed in the northern regions, it also engaged cloud seeding systems to make it artificially rain in the area.
At the beginning of the water crisis, this water shortage actually cost China about $35 billion annually or 2.5 times the average annual losses caused by floods. And since cloud seeding can increase rainfall or snow by 5-15%, it may have helped China a little bit.
The only problem though?
China’s southern water sources may be drying up too. And if there isn’t enough water to form rain clouds, you can’t really induce artificial rain.
But China’s cloud seeding efforts aren’t just limited to making it rain so that people have water to drink and water their fields. In 2008, it also used the technique to keep rain away from the Beijing Olympics.
Yes! You read that right. It simply emptied the clouds beforehand by triggering downpours ahead of the opening ceremony. That’s how it ensured that the ceremony not just witnessed the bluest of skies but also gave China a bang for its buck. At least that’s what they say happened.
And all of this has actually encouraged the country to expand its weather modification systems to make it artificially rain or snow over 5.5 million square kilometres by 2025.
But there’s another problem.
Hannele Korhonen, a Finnish scientist who worked on a cloud-seeding project in the UAE had a genuine doubt “There is X amount of water in the world. If you make the clouds rain in one place, is the water missed somewhere else?”
Confused?
Okay, so cloud seeding can actually make clouds rain before they move on to another region. So it could actually be used as a war weapon.
And this isn’t a bizarre theory we came up with. In fact, during the Vietnam War in the 1970s, the US was accused of modifying the weather so that it could prolong the monsoons, soften the roads and cause landslides along roadways in enemy held territory.
So yeah, making it rain isn’t just an economic boon but can actually raise questions about which country owns what part of the sky. And we can’t really answer that unless international policies address it.
PS: The actual statistical results for cloud seeding does seem to be mixed however, and not all scientists think this works.
Finshots Recommends
This week’s recommendation is Money, Explained.
An insightful docuseries that pulls back the curtain on the world of finance, simplifying and demystifying subjects like credit, casinos, student debt, and fraud, in an attractive and understandable manner.
Watch it on: Netflix
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