AMAZON SETS ITS SIGHTS ON HEALTH CARE FIELD
E-commerce behemoth makes waves whenever entering new industry.
When Amazon sets its sights on a new industry, corporate America shudders.
The latest example came this past week, when the online retailing giant said it is working with Berkshire Hathaway and JPMorgan Chase to create a company to offer affordable health care to their employees. Stocks of health insurers tumbled, erasing billions of dollars in shareholder value.
It has happened before. Supermarket stocks slumped when Amazon unexpectedly bought Whole Foods last year. And when Amazon said it would sell Kenmore washing machines last summer, it rattled the shares of other appliance sellers.
Why is Amazon feared? Because it can grow businesses fast and take market share quickly, says Erik Gordon, a professor at the University of Michigan’s Ross School of Business.
“Amazon is a serial innovator,” Gordon says. “They’re very smart. Amazon scans the horizon and says, ‘Why are they doing it that way?’”
Below, a look at Amazon’s history of disruption:
It started with books
Before it sold toilet paper, TVs and just about anything else, Amazon.com launched in 1995 as a site that mostly sold books. At the time, it pushed other booksellers to beef up their online presence.
But Amazon shook up the industry again in 2007, when it launched its Kindle e-book reader. Soon, more people traded paper books for digital versions. Barnes & Noble followed with the Nook e-reader two years later. But Borders, another bookstore chain, was slow to react and went out of business in 2011.
Now Amazon is moving into physical bookstores. It has opened more than a dozen locations of Amazon Books, which also sell some toys, electronics and Amazon gadgets.
Retail reckoning
But don’t blame just Amazon for the failure of other retailers, says Neil Saunders, an analyst at GlobalData Retail. Blame competitors for not evolving, he says.
“Amazon isn’t a killer,” he says. “It’s just a disrupter.”
Big retailers, such as Target and Walmart, have spent billions to catch up with Amazon, and it seems to be paying off.
Amazon
States such as New Jersey, Arizona, Kentucky and Alaska have adopted these tools. Defendants who receive low scores are recommended for release under court supervision.
Among other things, such algorithms aim to reduce biased rulings that could be influenced by a defendant’s race, gender or clothing — or maybe just how cranky a judge might be feeling after missing breakfast.
The AI system used in New Jersey, developed by the Houston-based Laura and John Arnold Foundation, uses nine risk factors to evaluate a defendant, including age and past criminal convictions. But it excludes race, gender, employment history and where a person lives.
It also excludes a history of arrests, which can stack up against people more likely to encounter police — even if they’re not found to have done anything wrong.
Other efforts to automate judicial decisions have come under fire — in particular, a proprietary commercial system called Compas that’s been used to help determine prison sentences for convicted criminals. An investigative report by ProPublica found that Compas was falsely flagging black defendants as likely future criminals almost twice as frequently as white defendants.
Other experts have questioned those findings, and the U.S. Supreme Court last year declined to take up a case of a Wisconsin man who argued the use of gender as a factor in the Compas assessment violated his rights.
Arnold notes that its algorithm is straightforward and open to inspection by anyone — although the underlying data it relies on is not.
Advocates of the AI approach argue that the people in robes are still in charge. “This is not something where you put in a ticket, push a button and it tells you what bail to give somebody,” said Judge Ronald Adrine, who presides over the Cleveland Municipal Court. The algorithmic score is just one of several factors for judges to consider, he says.
But others worry the algorithms will make judging more rote over time. Research has shown that people tend to follow specific advisory guidelines in lieu of their own judgment, said Bernard Harcourt, a law and political science professor at Columbia.
“It’s naive to think people are simply going to not rely on them,” he said.
Those issues played out before Judge Jimmy Jackson Jr. in that Cleveland courtroom last summer. Before his arrest Aug. 29, Hercules Shepherd had no criminal record.
College coaches were pursuing the star high school basketball player; recruitment would mean a big scholarship that could help Shepherd realize his dreams of
Such algorithms aim to reduce biased rulings that could be influenced by a defendant’s race, gender or clothing — or just a cranky judge.
becoming an engineer. But by sitting in jail, Shepherd was missing two days of classes. Missing two more could get him kicked out of school.
The judge looked down at a computer-generated score on the 18-year-old’s case file. Two out of six for likelihood of committing another crime. One out of six for likelihood of skipping court. The scores marked Shepherd as a prime candidate for pretrial release with low bail.
“Mr. Shepherd? I’m giving you personal bond,” Jackson said. “Your opportunity to turn that around starts right now.” ( Jackson subsequently lost an election in November and is no longer a judge; his winning opponent, however, also supports use of the pretrial algorithm.)
Smiling, Shepherd walked out of the courtroom. That night, he was led out of the Cuyahoga County Jail; the next day, he was in class. Shepherd says he wouldn’t have been able to afford bail. If he isn’t arrested again within a year, his record will be wiped clean.