There are a handful of singular changes, all of them could be called advances that have fundamentally changed life in rural America during my adult life. By rural America, of course, I mean my rural America, which I help others to understand as 22 miles to the nearest McDonalds.
One would be satellite TV, or country cable. Removing the restriction to a few – as in three – local channels delivered over considerable distance to unreliable antennas was jaw-dropping. Similarly, cell phones, especially smart phones immediately and irrevocably changed our ways of connecting to others. And suddenly “others” could mean just about anybody anywhere.
But perhaps the most life-altering development for farm families and particularly our small communities has been the nearly total reshaping of retailing. Two institutions epitomize this change: Walmart and Amazon. Walmart’s sophisticated algorithms and explosive growth soon shuttered local grocery, hardware, and clothing stores. Walmart not only deliver the same goods cheaper than the competition it was willing to absorb several years of low profits or even losses to achieve that dominant position.
The recent announcement that Amazon had replaced Walmart as the largest retailer in the U.S. shows a striking strategy similarity: patience. Here is a chart of Amazon net income since 1994.
Two things to notice about this chart. First the astonishingly long time it took for Amazon to grow revenue and how much slower the net income – profits increased. Partly this is due to the chart scale. Revenue is now close to $300B. If we zoom in on profits, you get a better idea.
In the last two years it has generated over $20B in profits, and remember that revenue is still growing rapidly, so this profit increase could just be beginning. Indeed, the pandemic may have been a breakthrough event for Amazon‘s growth.
It’s easy to understand why our town squares and main streets are no longer and will never be retail centers although some services like hairdressing and insurance seem to survive. But the lesson I took away from these graphs was modern business requires more patience than most farmers have or can afford. I’ll talk about that more in the future.
