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So, in the wake of that crash of the F thirty five jet in South Carolina, with a lot of questions remaining about what the hell actually happened there, we've got a new report that outlines some not great details about this very very expensive thing. Put this up on the screen. So they say that the F thirty five fighter jets can only fly fifty five percent of the time, so about half of the time. This is according to a US watchdog. Let me read you a little bit
from this article. They say that maintenance issues keep the aircraft on the ground often despite the growing reliance on this plane by the US and its allies. The fleet's mission capable rate, or the percentage of time a plane can perform one of its assigned missions was fifty five percent. That is far below the Pentagon's goal of eighty five percent to ninety percent. The F thirty five share of the US's overall tactical aviation fleet is expected to keep growing.
Basically every branch the military is increasingly relying on the F thirty five and moving in this direction in spite of the fact that it is incredibly costly and apparently down from maintenance roughly half the time. This is the world's costliest defense procurement project. Let me give you the numbers here. The Pentagon plans to buy roughly two thousand more of these things by the mid twenty forties, costing one point seven trillion dollars over the program's life cycle,
including one point three trillion for maintaining the aircraft. Music to the ears of manufacturer Lockheed.
Martin, absolutely and not only that, Crystal, it actually costs forty two thousand dollars per flight hour for F thirty five, forty two thousand dollars an hour to fly this thing. I've always been obsessed with the flight hour costs for a lot of these things. A lot of Americans don't even understand. It's not just about buying the plane. Costs of running these planes is outrageous and it reminds me of there was I think it was a B two bomber. So the B two bomber flight costs per hour, let's
go ahead look it up live. Yeah, okay, so B two costs one hundred and sixty three thousand dollars per hour. And at one point we had these guys who flew from like Louisiana all the way to Libya to bomb Isis with a B two drop the bombs, which that's what another million, million and a half and so the cost of the bomb and then fly back it was like a thirty six hour mission. The collective mission costs
like ten million dollars for a single bombing run. And it's just one of those we just ride it off. And you know, this was a huge fight in the military. I know aviation geeks are going to get mad at me for screwing up some of the details, but there was this fight around a ten Warthog, which was like it's a very cheap plane. It's much cheaper in order to fly, and it has like the sound that people
are familiar with with the machine guns. It was used as a terrorist killer a lot in the Global War on Terror, and especially because a lot of these guys don't have anti aircraft stuff, it was much easier in order to fly and to use. But the air Force was trying to get rid of it because they're much more in favor of these costly gadgets like fifth generation fighters at thirty fives, B two s all these other very very expensive aircraft. I think we're gonna have a
reckoning whenever we have another war. We're going to find out that a lot of these costly toy projects, you know, fifty games and all that stuff, that war has not changed that much. It's all about what flies, what actually works, and can you produce a ton of them in a major war of attrition. Just look at Ukraine. You know this is very nerdy, But there was entire ideas in the nineteen nineties called there was a new generation of warfare as in war changed for all time and whateveryone
would point to. Was the US campaign against the Iraqi military because the Iraqi Republican Guard and the military was one of the largest militaries in the world. We steamroll them in thirty days. The Highway of Death and they're like, oh my god, like wars forever change, it's all about computers and all that stuff. What are we learning from Ukraine? You would be better off learning the tactics of World War One than you would anything afterwards about the fighting.
Well, and also what was like the most critical thing. It's just ammo.
Ammo artillery, same fight nineteen twelve. So look, I'm not going to sit here and claim that all of war is exactly the same, but I think war is a lot more analogous in rhymes with some of the major conflicts we've had, as opposed to some video game that a lot of these idiots have been pushing us into for a long time. This is all like, you can nerd out on this stuff forever, and I know people who do. About China and the US and fifth generation aircraft.
Here's the deal.
We ever got into a war w Taiwan. You know what's gonna matter? Anti shit missiles. You know, a bunch of mines in the middle of the sea. We've been doing that since what since time immemorial. So it's like we can talk about this forever. But the F thirty five is the symbol I think of this new bet that war is just easily outsourced to computers and drones and all this. And I'm not saying those things don't matter, but you know, the very nitty gritty about what can
be produced, what can go on time, what actually works? Yeah, what's really employable on the battlefield. We'll find it all out very soon. And most of the time people are totally wrong in terms of the before a major war break.
It also just shows there's just literally no cost control. Yeah, you know how much this is the Financial Times. This is not even a US media outlet that's reporting on this, you know, I mean, this GAO report got very little pickup and think of on you know. On the other hand, like any sort of civilian program that was going to like feed the nity or was abused by quote unquote world ar queens or whatever, there would be endless media coverage of that type of waste, waste, fraud, an abuse.
But this, I mean this again, most costly defense procurement project in the entire world, and we have so little scrutiny,
so little expectations. We're just happy to give literally trillions of dollars to Lockheed Martin for a product that is not standing up to the standards that the Defense Department themselves have set for these jets, so you know, and it also does just raise more questions about what the hell happened in that other incident, because if you're having a lot of problems with these with these jets, did
that play into this crash? And the fact that you know they were unable to find the debris for a while, so good, pretty extraordinary. The total lack of oversight and how the Pentagon just gets a pass like trillions to the tune of trillions of dollars to waste money and have no accountability whatsoever. True.
All right, we'll see you guys later. You will very rarely see me recommend CNN. But one of the only people who works there who I really like is Harry Enton. He used to work over at five thirty eight. He's kind of their polling guru, and he did a fantastic breakdown which we also on our focus group about the demise of Fox News amongst Republican voters and how their power is waning, how they really need Trump a lot more than Trump needs them. Let's take a listen.
Seventy four percent say not Fox News. Now the plurality leader is Fox News a twenty six percent, But the fact is most Republicans are in fact not tuning to Fox News as its main news source. Other follow ups social media twelve percent, broadcast networks at eleven percent. But I think that this is a key number to keep in mind going forward. Seventy four percent of Republican likely voters say the news erance they turn to most is not Fox News. But I guess the other question to
flip that is does Fox News need Donald Trump? Yes, this is what I would say is absolutely Fox News needs Donald Trump more than Donald Trump needs Fox News.
Why is that?
I actually love that clip because they were using the New York Times data to illustrate a point that we keep hammering home. And of course, look, CNN has an incentive to bash Fox. They're just as bad. Ask them how much they need other politicians and Democrats. Okay, so let's put that aside. But the meta point is correct.
As we saw in our focus group, we had eight likely viewers or likely voters in the New Hampshire primary GOP primary, only one said Fox is the prime amazing ten years ago, every single person twenty years ago, O'Reilly or earlier? They would have been like a Riley fan club, you know, and that's dead gone. Only one person said Fox and Tucker Carlson. Every other person said some version of Internet.
Right, But the Tucker Carlson person was like, I watch him on X exactly.
She doesn't even watch.
Our great focus group leader there. James like like, oh, you're watching him on X. She's like, yeah, yeah, what it needs to be Twitter. So yeah, I mean, it's just it's a very different era for them. And what's interesting is they also went into like of their viewers. They are having an impact on their viewers somewhat because Trump gets forty three percent of the Fox News viewer vote, which is still like pretty high, but of the Newsmax
viewer vote, he's getting seventy six percent. So there's clearly an impact here in terms of their coverage and trying to pump up Rondo, Santis and whatever. So among the people who are still watching them, they have an impact. It's just that they don't have that lock on all
of the GOP base. There are other options, and you know, I'm not going to say that that landscape has like really made things better because I'm not sure Newsmacs one American News Network and some of these other you know, like Steedman.
Or war Room or whatever.
I'm not sure they're providing better information or that it's improving the stag of democracy. It just shows the fractured media landscape has made it so that, you know, Rupert Murdoch who now has stepped down from the top position. But they're no longer the kingmakers that they once were. They no longer have the control that they once did, and that is an astonishing change in American political media.
Yep, absolutely, it's now Here's the thing. I'm not going to sit here and defend all these alternatives, but those alternatives are what make our show possible. So I'm going to just defend the ecosystem. People have options for the first time in a long time. Lack of centralized control in general is a net benefit. Will see who emerges whatever real competition news.
It creates first possibility exactly, it creates possibility. And even as listen, there's challenges in independent media as well that we've talked about here too, and challenges in the incentive structure for independent media, you know, especially with the amount that tech oligarchs drive the algorithms and create who are the winners and who are the losers in that new ecosystem. So there's a little bit of an illusion of independence. It's not as independent as you would want it to be.
But the best thing you can say for is it does create space and optionality and possibility, and that, you know, that is an exciting landscape to be able to look at, you know, in terms of Fox News, ultimately, I think that Harryeton is right that Trump has more power and relationship than they do at this point. And so as much as they wanted to turn the page on Trump or whatever, they're not going to be able to. They're going to fall right back into the extent that they
ever low. They've always had hosts there who are sort of like slavishly committed to Trump, but they're going to all be one hundred percent towing the line is not going to be a question because they need his audience.
In the words of a great character, chaos isn't a pit, Chaos is a ladder.
We'll see you guys later.
Hi.
I'm Matt Stoler, author of monopoly focused newsletter Big and an anti trust policy analyst. I have a really good segment for you today on this big breakdown because this week the Federal Trade Commission in seventeen States filed an antitrust suit against Amazon, which is, of course, as you know, one of the biggest companies in the world, and the
suit was about monopolization and unfair methods of competition. So this segment is about what the case means, the government's claims, and whether the legal arguments that the government is using are strong. Now, for a lot of you, this explanation is going to sound sort of familiar because I laid out what would become the basis for this lawsuit in a video about a year ago. Okay, let's dive in. For almost twenty years, Amazon's business has existed on a
very strange premise that almost no one questions extensively. The retail firm is the lowest price option in the market, and it offers quote unquote free shipping to over one hundred million Amazon Prime customers, for which it charges one
hundred and thirty nine dollars a year membership fee. The revenue from Prime does not come close to covering its logistics arm, which cost about eighty five billion dollars in twenty twenty two, and one analyst says that the value of Amazon Prime, if you unbundle it is about one thousand dollars per user. So how can Amazon do all of this? How can it be the lowest cost retailer and give free shipping all while making money or at
least not losing a ton of it. The answer, as it turns out, is that, as we all know, there is no such thing as a free lunch. Consumers pay for the free shipping. You and I pay for free shipping. It's just we do it through a hidden tax baked into the price of what you buy by an extraordinarily clever scheme orchestrated by Amazon. And that's what the Federal Trade Commission and the seventeen States are suing over. This
hidden tax is well known in the industry. Here's Mike Beckham, the CEO of Simple Modern, which is a very successful retailer, and he made that point in August, essentially knowing that the suit was going to come out in some form or fashion. So he says that Amazon should not have normalized the idea of free shipping. They would have won the market without it. Now they are forced to lean
heavily on a hidden tax that drives up prices. Aka advertising, because their unit economics don't work without it.
What does that mean? All right?
Most people think of Amazon as a retailer who sell to retail customers. That is what people think their businesses. But retail end users, you and me aren't really Amazon's customer. In fact, we are really Amazon's product Amazon does you know. Yeah, they sell to us, but they are more of their business is that they operate as a middleman who sells access to us. The actual customers of Amazon, the customers who provide Amazon's retail profit, are third party businesses who
rely on Amazon's infrastructure to get their wares to the public. Now, you can see in this picture that sixty percent of Amazon's products are not actually sold by Amazon, but are
sold through Amazon by what are called third party sellers. Now, in twenty twenty two, Amazon CEO Andy Jasse, who took over from Jeff Bezos, he said this explicitly, quote unquote, small and medium sized sellers use Amazon not because of the e commerce software Amazon provides, but quote because they get access to a few one hundred million customers end quote. There are extremely high switching costs if you are a third party seller who sells whatever it is sneakers, widgets,
cups to move from one online superstore to another. So Amazon and being an online retailler with a deep and rich selection is a business with really significant barriers to entry, and there are only a few players. One result is that Amazon has an overwhelming share of online shoppers. It's monopoly, which means that third party sellers must either pay Amazon what it demands or they lose access to the market. As one seller put it, quote, we have nowhere else
to go, and Amazon knows it end quote. Now, as a third party seller, you pay a lot of fees. You pay a fee for listing on Amazon, you pay a fee for using Amazon's warehouse services known as Fulfillment by Amazon. You also have to pay for advertising. What happens if you don't pay, well, if you don't pay, you don't get put in a place on the site where consumers click. So this is one of the things
the FTC noted. Advertised products on Amazon are quote forty six times more likely to be clicked on when compared with products that are not advertised end quote. So this actually makes the experience for consumers a lot worse. You've probably noticed in the last few years Amazon when you search for something, it's so full of pay to play ads that actually consumers are complaining that they can't really
find organic results. They can't find the best product. They find the product that Amazon put in front of them, which is often higher cost and worse quality. It's a steering problem. As the FTC noted, one senior Amazon executive quote reportedly compared Amazon's advertising and search divisions to the parable of the scorpion and the frog. It was in the advertising division's nature, as the proverbial scorpion, to poison
organic search results end quote. And this actually went all the way up to Jeff Bezos, and he said, yes, we want to distort our organic search results and make the extra many billions that will bring in. Now, at this point, the price Amazon charges third party sellers, who again are the real customers, has grown to nearly fifty percent of their revenue.
That's what they call the take rate.
It's one out of every two dollars if you sell on Amazon, that's what you're giving to Amazon. And it is this money, which one group estimates at one hundred and twenty three billion dollars in total revenue for Amazon last year, that pays for the free shipping as well as Amazon Prime Video, It's music service, Twitch and everything
else that comes bundled with Prime. Now what do these third party sellers do Well, They, in turn, and this is where the hidden task comes in, they raise their prices to consumers aka you and me, and then they send that money back to Amazon in the form of fees. It's basically a giant money laundering scheme. Okay, So this leaves one reasonable question that a lot of people can have once you think through this scheme, which is all right, So it's so expensive to go use Amazon, you have
to raise your prices. Why can't you just go off Amazon and offer lower price. Why can't you go to Walmart's marketplace, or why can't you go to targets or ebays or why can't you set up your own website and do it? Well, this is a good question, and that's where the scheme gets clever. Originally, Amazon imposed contracts, as the FTC noted, barring all sellers from offering their goods for lower prices anywhere else. So this was an
anti discounting measure. They said, you have to through Amazon at your lowest price, and you can't offer it anywhere for lower They originally they did this through contract, They just put it in contracts, but this seems really sketchy, and Europeans as well as Senator Richard Blumenthal complained about what are called price parity agreements. So Amazon dropped it's explicit contractual requirements in twenty nineteen. However, the change was a farce. The firm simple did through code what it
couldn't do through contract. Amazon claims the FTC has implemented an algorithm for the express purpose of deterring other online stores from offering lower prices, But just weeks after dropping this requirement, Amazon wrote in an internal memo it would not change its policies, and today Amazon tells sellers that if it detects a lower price on any other online store for their products this, according to the FTC, they will be punished, which is to say, their ability to
get their products onto a place on the Amazon website where customers click will go away. And the net effect inaggregate on Amazon is that and this is from Amazon's internal documents themselves. Quote prices will go up now they won't just go up on Amazon, they will go up across and have gone up across the Internet, because remember, it's not it's not just that they have to raise prices on Amazon, they're not allowed to discount those those prices,
and this was in the complaint as well. Indeed, Amazon actually tells third party sellers to raise prices. The Amazon VP of Price of Pricing once told a seller's account manager who complained the seller. The seller was complaining that we can't afford to take our prices down on Amazon to match our own website because of all the fees and the Amazon VP of Price he had said, said to his account manager, he said, you know, go tell
the seller. You may want to ask him to check if his sales on other sites directly or through distributors is putting him and us at a relative competitive disadvantages. He might get the hint smile emoji. The overall point is that Amazon is degrading the shopping experience, raising prices, and yet somehow still gaining market share. It's able to block third party sellers from going elsewhere, and therefore able to stop potential rivals from entering the market or from
expanding in the market or investing in the market. It's a pretty strong complaint, and while anti trust cases are always random, and they depend on the judge. Bill Beher, the former Assistant Attorney General for anti trust under the Obama administration, said it's a good it's good argument quote if the FTC and States can prove even some of the factual allegations in this one hundred and seventy two page complaint, he said, Amazon is in a world of hurt.
Now.
I want to note something else that I think matters. One of the more disturbing trends in anti trust in law in general is how secretive courts have become about corporations, allowing corporations to hide their dirty laundry under the guys that it's competitively sensitive, whether it is or not. For instance, in the current Google antitrust trial, which is over the two trillion dollars search firms monopoly power, the secrecy ordered by the judge on what should be a public record is,
according to New York Times quote unprecedented. Similarly, the Amazon complaint is heavily redacted, large because at this point courts are highly deferential to what corporations claim is our trade secrets. Was very different than the way it was in the nineteen nineties when Microsoft was brought to trial, and there's a ton of stuff that was released.
Now.
Judges are very scared that anything that might embarrass a company might harm the market.
This is a problem.
So here are two elements in the Amazon complaint that are partly redacted that I think are important and hopefully we'll learn more in a few weeks or in a few months when the case, you know, some of this stuff might come out.
The first is that Amazon.
Like Google, has been destroying documents and internal conversations relating to the case, or seems to have so. Amazon executives systematically and intentionally redacted redacted, redacted of the signal messaging app redacted, redacted, redacted, despite the plaintiff instructing Amazon not to do so. The extent of the bad behavior is not clear, since the paragraph alleging wrongdoing is well redacted, but that seems pretty bad. The second secretive thing.
That we don't know.
We don't know what it is is something that the FTC calls notes is an Amazon internal project called Project NeSSI. It's an algorithmic pricing system so egregious that the FTC determined that it deserved its own legal charge as an unfair method of competition.
So what is project NeSSI.
We don't know, since nearly all of the information about it is redacted, but it looks bad.
Now. A lot is.
Gonna come out in this Amazon trial, and Amazon is gonna fight tooth and nail. You know, we're gonna who knows how it will resolve itself. It's going to take a while. But here's the thing. Because of this case, because of the Google case, because of a whole bunch of cases that are now slimming into the court system. I don't think it's fair to say that our interest
and our pressure in politics doesn't matter. I think it actually shows that what we do, what we care about, what we pay attention to, what we advocate for, does matter, and that we do get responses from our politics.
It's slow, but it's real.
So here's an Axios reporter, Ashley Gold, making the point that things actually can change in politics for the positive. So she tweeted, if you would have told me in say twenty eighteen, that's just five years ago, that I would barely have time to cover all of the tech anti trust cases actually coming to fruition because the whole beat being so busy, I would have laughed, What a time indeed, what a time. Thanks for watching this big
breakdown on the Breaking Points channel. If you'd like to know more about big business and how our economy really works, you can sign up by going to the link in the description below for my market power focused newsletter.
Big Thanks and have a
Good one, Critt