Bushes Buff Up Big Oil, While Amazon.com Oozes

We are pleased to report that we watched not one TV second of the Republican Convention. Not that we aren’t politically responsible: We duly read the transcripts, or as much of them as could be stomached, but four days of audio-visual lies and self-congratulation in the (pressed) flesh is more than we’re up to. In this man’s view, the Bushes, père et (both) fils , were put on earth for one purpose only, to add a front of Yankee probity to the schemes of oil-patch adventurers (granite goes down better than snake oil when you’re working the “mullets” back East), and I remain uncertain as to whether this is what we need in a President, notwithstanding that it is usually what we get.

When one of my colleagues proudly informs me, “I’m a political junkie!”-as one did last week on the way to Penn Station-it makes me wonder, since in the world where I grew up and was educated, addiction, even if officially licensed (the classic WASP world is an island set in a silver sea of gin), is hardly encouraging to clear thinking.

Thus I find it interesting that it is considered a sign of the fitness of Richard Cheney for high office that he fixed things so adroitly for Halliburton when he was its chief executive. I know a bit about that company. My father was a director for almost four decades, from the time it was spun out to the public. My cousin Bill Owsley was the chief of engineering. I was present and remember vividly July 4, 1954, in Duncan, Okla., when company founder Erle P. Halliburton-a man who, if he’d lived long enough, would have never met a Bush he didn’t like (as “Ol’ Erle P.” often put it)-gave his annual address to the company picnic, a tirade similar in tone and view of social democracy to the philosophy that had been expressed from the pulpit a couple of decades earlier at Nuremberg. Halliburton would later acquire Brown & Root, the company so closely identified with the rise of Lyndon Baines Johnson (see Robert Caro’s biography passim ). Politically, Ol’ Erle P. was the precursor of Garry Trudeau’s Uncle Duke: a compassionate fascist. It was a workable philosophy in 1954-but much has changed since.

Its founder’s politics notwithstanding, Halliburton was one of the great companies in America until it moved it from Duncan to Dallas and shifted its focus from the oil fields to the lobbyist’s suite. It was a source of pride to have driven one of those red-and-gray trucks, to have worked for men like “Preach” Meaders and Logan Campbell and my immediate supervisor, Jimmy Johnson (men who would have been lost on M Street), and the tool-pushers and roughnecks we worked with out in the field. Never since that summer have I done such honest and satisfactory work (I put a lot of that experience into Hanover Place ). An oil well that needs to be perforated or logged, or demands its dose of mud or cement, suffers neither fools nor bullshit artists. All were in evidence, I judge, in Philadelphia.

So while my colleagues were off practicing “convention journalism”-which as Dave Barry observes, appears to consist mainly if not solely of scheming to get into lobbyists’ parties subsidized by your and my tax dollars and designed to promote tax cuts for the other guy- your correspondent stayed at home and worried about the real world.

Among other things, I reviewed my clippings collection on Amazon.com: “Suddenly, Amazon’s Books Look Better” ( Business Week , Feb. 21, 2000) with picture of contented-looking Jeff Bezos captioned “CEO Bezos could see black ink by 2002”; followed by “Can Amazon Make It?” ( Business Week , July 10, 2000), with caricature of Bezos sinking in quicksand captioned “Bezos: Some analysts say the cash may run out in four to six quarters.” I admired Bezos’ Man of the Year cover from Time and once again reflected on the pitfalls that attend an editorial philosophy predicated on trendiness and ass-kissing.

Readers will recall that AMZN has suffered severe recent market travails, that Mr. Bezos’ noble craft is somewhat adrift, in consequence of the stout hawser of analytical bullishness that moored it to the sturdy dock of Wall Street’s good opinion having been worn to the parting point by the scrabbling claws of analytical rats leaving the ship. The pell-mell flight of these intellectually and ethically wee beasties was precipitated on June 22 by Ravi Suria, a Lehman Brothers bond analyst who made the point that in business, as in Republican politics, concepts need cash flow to make them work. “Suria’s report,” writes Business Week (July 10), “had the audacity to evaluate this icon of the New Economy as a traditional retailer.”

While I admire Mr. Suria’s audacity, and the ability of his analytical colleagues to see the truth of his observation and change their minds about a stock the Meekers and Blodgets had previously hailed as the second coming of whatever, I feel that a measure of pain and discomfiture might have been avoided by reading what I wrote in this space on Nov. 23, 1998:

“And what of Amazon.com Inc.? The biggest of the ‘dot com’ booksellers must rank right up there with B&N in the Bertelsmann and Ingram accounts receivable. Amazon is a wonderful place to shop, but I have my doubts of its investment merits. This is a company which seemingly cannot make money on a billion of sales! It keeps going because this stock market has overpriced real profits and is reduced to throwing investors’ money at earnings that are purely conceptual. But Amazon is not Boeing North American Inc., with enormous sunk costs, which have to be recovered on the first 100 747’s, say, after which the gravy really starts to flow. This is a retail business, where orders have ultimately to be processed by human beings, at X per hour, and books physically taken off shelves by human hands, at Y per hour, to be shipped.

“The magic of Amazon for book buyers isn’t the pricing, it’s the convenience. An agent of my acquaintance put it well when she observed, ‘Amazon has overdiscounted the convenience factor,’ which is to say: it’s not the price, stupid, it’s the service! In particular, the variety of titles available, the ease and efficiency of browsing and the speed of fulfillment.

“Predatory pricing more often than not ends in the predator consuming itself. Price-driven retailing leads to creditors’ meetings. Amazon will be forced to raise prices soon, because if it can’t make money at $1 billion of volume at present pricing, it probably never can.”

Closer to the moment, on Nov. 8, 1999, I wrote: “… [with regard] to Jeff Bezos’ thudding announcement of Amazon’s third-quarter earnings: I love his business, I’m a loyal and regular customer, but I wouldn’t want to have a nickel in it at this point.” And on May 8, 2000: “The papers are full of Amazon.com’s operating results … I don’t think the figures mean what they’re being celebrated as meaning, but this is a time when a rainproof parade of naked emperors has trampled underfoot everyone who tried to stand in its path.” Seven weeks later, Mr. Suria checked in.

The 80’s were the 60’s all over again, with two more zeros tacked onto the sums in which deals were conjugated. What you feared was that most inexorable of forces: compound interest. The 90’s are turning out to be something different. Forget the sums. There are some new, troubling forces out there, most notably Uncle Sam’s decision to make common cause with the private-sector “strike suit” bar, in going after everyone from Philip Morris to Sotheby’s. It’s an alliance that could prove more threatening to market democracy than anything in the mind of Marx, because it allies a politics of envy with a legalism based on greed.

This has been a heady decade, and periods of intoxication are notably tough times during which to try to keep one’s wits about one. One gets careless, one doesn’t see that the rules are changing, that the game is no longer what it used to be about. The other night, on “Hardcore Baseball,” one of the participants in a roundtable on umpiring got it right (I quote from my hastily scribbled notes): “We don’t care how the game’s played as long as there’s a gentlemen’s agreement, but the second someone brings up a rule infraction, that’s it!”

The game of finance and business is changing. We must needs be wary. It is no longer sufficient merely to obey the golden rule, drink plenty of water, look both ways before crossing, and never see a movie with a Baldwin brother in it. Given the politicians we have been given, and the journalists who attempt to explain them to us, it will be necessary to think-which won’t be easy, given how much time, money and effort has gone into making thinking unfashionable, if not impossible. Bushes Buff Up Big Oil, While Amazon.com Oozes