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Sep 25, 2023Liked by Gad Allon

Hello sir,

I’m enjoying your newsletter. It’s interesting to me how large corporations often focus on scaling while sacrificing quality. I’m seeing that in my field of business, Applied Behavior Analysis clinic, where PE firms are dumping millions into buying up small clinics, then trying to apply to “Amazon” model. However, the ABA business is heavily dependent on quality to truly provide a service to the clients. They effectively turn clinics into body shops. Is this the future of healthcare? Not in our clinic. My strategy is to grow slowly and steadily with quality taking central focus. I may not grow a unicorn, but we are known for quality. Does qualify matter in this day and age? Thanks

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Professor Allon,

It seems you have identified a serious problem for Amazon. I agree with you that increasing warehouse automation fails to provide a viable alternative because of the robots’ low accuracy. As you detailed, hiring so many seasonal workers is not sustainable either, much less feasible. Aside from increasing wages and automation, do you think Amazon should change course in favor of hiring more year-round employees?

Aside from simply benefitting the workforce by adding more jobs, this track will improve efficiency for which you point out Amazon greatly loses as it scales. Decreasing the ~150% turnover rate (and the associated $8 billion cost) will create better trained workers which in turn will reduce the number of employees needed. Amazon also will be able to minimize the higher salaries and signing bonuses during hiring frenzies in Q4. It seems counterintuitive, but could Amazon actually save money with more long-term workers? And perhaps more year-round workers will better prepare Amazon for the end of the year? This approach may fulfill another of the so-called “six levers” of preventing the company's labor crisis: appeasing unions with stabler jobs. As you suggested, the “Amazon Way” could soon be a thing of the past. It seems we may be in agreement, but I’d love to hear your take.

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