Postcards from the Edge of the World (Vol. 6)You likely used this company a lot in December... will you ever look at them the same way?
Welcome to the many new readers who have joined us here at Postcards…
This letter is a different kind of financial newsletter. I’ve said in our Welcome Letter that many people feel something is off about the economy… I’ve repeatedly said that the U.S. economy has changed drastically. And I have argued that we’ve shifted from a place that really builds things… to instead just reaching into one another’s pockets… (a paraphrase of Frank Sabotka in Season 2 of The Wire). This commentary is not an indictment. It’s an exploration of finance, incentives, and the shift to a more extractive, “fee-based” economy rather than a “value-enhanced” one. I hope you see the world a little differently from the Edge of the World… and feel empowered to protect your wealth, health, and yourself... Now then…
To Whom It May Concern (You): In late November 2025, Amazon (AMZN) sent bills to thousands of software developers who had built their businesses around its e-commerce platform. Starting January 31, 2026, these developers must now pay $1,400 per year… just to keep their apps working. For 16 years, Amazon’s developer tools were free. “Come build with us,” Amazon said. “Help sellers grow. Let’s build an ecosystem together.” Thousands of companies took that deal. Developers built inventory management tools and coded pricing software. They created analytics dashboards and integrated order processing systems. These became entire businesses, serving Amazon sellers that could not compete without them. Well… now Amazon wants rent. Not because the infrastructure suddenly got more expensive, nor because developers will receive new services or benefits. It’s just because Amazon can demand it. Amazon became these developers’ single point of failure. The developers can’t leave because their customers depend on Amazon. So, write on the back of a napkin… That was many years of code… thousands of users… and centralized revenue streams built on platform integration. And now, it’s “Pay up or shut down.”
This saga embodies what many like me call “Digital Feudalism.” You don’t rob people on a highway like bandits. You build the infrastructure (the highway) they need, wait until they’re trapped on it, and then monetize their dependency. French lords in 900 AD would recognize the model well. The Ways They TakeI’m not making allegations of illegality or bad faith… I’m just starting an economic analysis of incentives and outcomes… Let’s start with the new fee structure. Amazon’s new API fees start at $1,400 per year just for basic API access. Then they charge for usage. The “Basic” tier includes 2.5 million API calls per month. That sounds generous until you realize that some software businesses can burn through that quickly. After that? It’ll cost 40 cents per thousand calls. That’s pure margin on existing infrastructure. But Amazon isn’t calling this extraction. They’re calling it something like partnership investment and aligning fees with service costs, according to various press releases and re-releases. The same infrastructure that was free yesterday now costs thousands per year. Nothing really changed except Amazon’s decision to charge for it. Many developers probably earn between $50,000 and $200,000 per year. The new fees could eat into a solid portion of their profit margins. Some will likely shut down, leading to consolidation and, over time, only a few major players dominating various niches. Others will pass costs to customers who are already getting squeezed by Amazon’s seller fees. The fee tiers tell the story of where this goes… Basic, Pro, Plus, Enterprise… all pay the $1,400. Then there are additional monthly charges that scale up to $10,000. You can contact them for Enterprise pricing, which usually means “whatever we think you can pay.” That’s not cost recovery. It’s rent seeking at scale. The sellers can’t escape this either.
They’ve built their entire businesses around selling on Amazon, all while waiting months for payment as Amazon enjoys interest-free loans through its invoicing practices (more on that here and in a bit). Again… I’m not calling Amazon useless, evil, or malicious. Amazon has created real value. It lowered consumer prices, expanded market access for millions of small sellers, and built logistics and cloud infrastructure that never existed at this scale. Over 60% of items sold on Amazon now come from third-party sellers, many of whom would never have reached national or global customers without the platform. My point is how we got here… And how we got here is that extraction works best after value creation. Which is why I’m calling the Feudal. This Concept Is Not NewThis five-step Feudal pattern has worked through history because… It’s simple.
Every era with dominant infrastructure owners eventually produces the same behavior. Here are clear examples… Standard Oil JD Rockefeller didn’t crush competitors by drilling better wells. Standard Oil controlled refining and transportation, offered favorable rates to partners early on, and then raised prices once rivals and customers had no alternative routes to market. The value wasn’t oil… it was ownership of the bottleneck. Railroad Barons In the late 19th century, the barons ran an early version of “platform feudalism.” I don’t refer to it as capitalism because capitalism requires choice and competition. Railroad Barons offered discounted shipping to favored businesses, encouraged towns and industries to orient themselves around rail access, and then raised rates once farms, factories, and cities were fully dependent. The rails were the product… but the tolls were the profit. AT&T The “phone” company perfected infrastructure capture in the 20th century. It provided cheap or free hardware and services to lock customers into its network, then charged monopoly rents on long-distance calls and equipment leasing because no alternative network existed. Switching wasn’t expensive… it was impossible. Feudal Europe Yes… Go back over 1,000 years. Lords didn’t extract through violence. They controlled mills, roads, bridges, and grain storage, often allowing free or cheap use initially to encourage settlement. Once peasants depended on that infrastructure to survive, tolls, tithes, and “customary fees” became permanent sources of rent. That’s why “feudalism” isn’t an insult. It’s a structural description. Microsoft Bill Gates ran a softer version in the 1990s. Developers were encouraged to build on Windows with deep system access, proprietary APIs, and free tools. Once Windows became unavoidable, Microsoft used control of those interfaces to favor its own applications and tax competitors. Microsoft’s antitrust case wasn’t about software… It’s always about the chokepoints. Bill Gates didn’t just make his fortune on software. He made it on rent. Some wonder why Warren Buffett and Berkshire bought a ton of Alphabet stock last year. Well, Buffett has famously invested in monopolies and duopolies… The software giant followed the same arc with search and advertising. They had free traffic that built entire media businesses. Then the algorithm changed, and ad placement converted that dependency into a pay-to-play system. Publishers didn’t lose audiences. They lost leverage… and now they pay fees… Which brings us to Amazon. Hey… remember when they were just an online bookstore?
Amazon’s Ten (of ?) Choke PointsAmazon feels different than any example above… And it’s because Amazon doesn’t control just one layer. It controls many at once. This includes marketplace, logistics, payments, cloud, data, and developer access. In past eras, power was fragmented. Today, it’s vertically integrated. Amazon owns many chokepoints and charges for passage… has cost-of-capital advantages that no small businesses or competitors outside of Walmart have, capital access that many U.S. banks don’t even have, and structural and human resource advantages that enable them to compete against Venture Capital firms and that might otherwise have funded their looming startup competition. Here’s a tighter version of just 10 of the chokepoints that they own:
Each of these can be defended in isolation. Together, they form a closed loop. Amazon positions itself so that everyone eventually has to pay. That’s the model. This isn’t competitive capitalism at work. This is infrastructure ownership turning optional services into mandatory toll roads. It’s Digital Feudalism. And once the precedent holds, it spreads… forever.
Your Sovereign MovesYou can’t beat infrastructure capture, but you can reduce your exposure to it. If you’re interested in reducing your exposure to the company’s practices, consider the following: 1. If you sell, own your customer. Build direct channels and avoid letting Amazon exceed roughly 30% of revenue. Use the marketplace for discovery, then convert to relationships they can’t reprice. 2. If you build software, build portable versions of it. Go with open APIs, open standards, and code that migrates. The proprietary shortcut today becomes a switching cost tomorrow. 3. If You Must… Cancel Prime. This might upset people. But again, Prime members spend roughly $1,400 per year. Non-members spend closer to $600. This behavioral platform drives incredible user consumption. Go look at your Prime spending… I’ll bet you’ll be surprised by the shopping patterns. Your other option is to only shop on a specific day and double-check your cart twice. Don’t spend impulsively. 4. Buy direct from brands. You’re buying the same products, often at the same price (Amazon won’t let any seller sell for less than its platform price). The brand keeps the 15% to 45% that Amazon would have otherwise taken. 5. Reduce Amazon Web Services if you can. Use Google Cloud, Azure, or self-hosted. But at a minimum, architect your business for portability, so you can leave without incurring big switching costs or leaving part of your business behind. 6. Support local alternatives. Competition requires competitors. Keep them alive. 7. Build skills that can’t be intermediated. People must build trades, professional services, and other activities that require physical presence. This is a must always… and it will always be a Sovereign move for everyone, everywhere. 8. Don’t rely on antitrust intervention. It may come, but it always comes late. There really isn’t any real motivation to breakup Amazon. And even if they do, it will likely be more linked to Amazon Web Services than the e-commerce platform. Now we get into the investing elements…9. Own the toll booth directly. When Michael Lewis wrote Liar’s Poker, he said the book was a warning about greed and debauchery on Wall Street. But many readers inferred it as a ringing endorsement of why they should go and start a career in finance. He has joked about this at various conferences that I’ve attended. No doubt… Postcards are built to warn and reflect on these business practices and the system in which we operate... And I must admit… I’m not just writing a warning… I’m also writing a “How-To” Manual on investing in the age of extraction. In essence, it can be read of a “defense of businesses” that have incredibly high moats, monopolies, regulatory capture, and practices that create constant cash flow through sheer scale. Warren Buffett has invested in these types of businesses for decades… yet so many people always saw him as a kind-hearted value investor. Well, I always saw him (positively) as a ruthless investor fighting for cash flow and sanity, but always taking what the market gave him as he exploited chokepoints, scale, monopolies, moats, and regulatory capture. What do you think his investments in the Top 3 credit card companies are really about? The version of Buffett you’ve seen for decadesat Berkshire conferences was the Adam West version of Batman, while my version of Buffett is The Dark Knight.
So… with that… gulp… Buy Amazon (AMZN) stock for the long haul? Every fee increase flows to shareholders… so… yes, it’s logical to own the biggest extraction machine that isn’t a taxing government with a money printer... Yes, Amazon will get beaten up a bit during downturns in liquidity cycles… but that’s okay… This is about owning the long-term chokepoints in the economy. It doesn’t even need an investor presentation to cite… Buy it when there are major cracks in the repo market and panic. When the Fed steps back in… Amazon will do great because of the structure of the financial system. The company aligns with the Every Buyer Strategy I outlined in November. Of course… There is another way… And that brings us to a Choose Your Own Road… for investing around this story… 10. Own the physical layer. This is the big one…. The future doesn’t belong to the people who build the best tools. It belongs to the people who own the rails and decide when tolls begin. So, why don’t you? Let’s get to two ideas here…... Continue reading this post for free in the Substack app
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