WEBVTT - Brad Stone on Big Tech Companies (Podcast) 0:00:00.080 --> 0:00:06.080 M. This is Mesters in Business with Very Renaults on 0:00:06.240 --> 0:00:10.880 Bloomberg Radio. Here this week on the podcast, I have 0:00:10.960 --> 0:00:15.200 a special guest. Brad Stone is the editor at Bloomberg 0:00:15.200 --> 0:00:18.680 News who covers technology and the author of a number 0:00:18.720 --> 0:00:22.240 of books. The one that just came out, Amazon Unbound, 0:00:22.360 --> 0:00:25.680 Jeff Bezos and the Invention of a Global Empire really 0:00:25.840 --> 0:00:30.639 quite fascinating. I had previously read his um his first 0:00:30.680 --> 0:00:33.960 book on Amazon, The Everything Store, and when that had 0:00:33.960 --> 0:00:39.520 come out, I think it was Amazon was still a 0:00:39.560 --> 0:00:46.120 successful company, but not the dominant juggernaut it's become. And 0:00:46.440 --> 0:00:50.600 this book really is, you know, the sequel to that 0:00:50.600 --> 0:00:56.360 that talks about how from the low point in when 0:00:56.480 --> 0:01:00.520 Amazon actually had a pretty substantial negative year in the 0:01:00.520 --> 0:01:05.920 stock market down over all of these new drivers of 0:01:06.040 --> 0:01:11.120 revenue and growth, we're just teeing up. And what ends 0:01:11.200 --> 0:01:15.800 up happening is the company just starts to hit on 0:01:15.840 --> 0:01:19.360 all cylinders. And that's before the pandemic, and then the 0:01:19.400 --> 0:01:24.920 pandemic essentially doubles so many different sectors within Amazon. They 0:01:24.959 --> 0:01:28.480 were a company that was made for a work from 0:01:28.520 --> 0:01:33.680 home lockdown situation, UH, perfectly positioned and took full advantage 0:01:33.680 --> 0:01:37.240 of it. Over the course of those years, Amazon became 0:01:37.280 --> 0:01:42.840 the second largest employer in the country behind Walmart. Bezos 0:01:42.920 --> 0:01:45.760 became the wealthiest man in the world. And Amazon just 0:01:46.600 --> 0:01:50.800 dominates so many areas of our everyday lives, from uh 0:01:51.240 --> 0:01:55.800 supermarkets and and delivery of just about everything to Amazon 0:01:55.920 --> 0:02:00.120 web servers too. You you just go through everything they do, 0:02:00.240 --> 0:02:03.640 Amazon Prime, in Amazon Video, and it's it's just endless. 0:02:03.920 --> 0:02:08.400 They have changed the fabric of our society and our economy, 0:02:08.600 --> 0:02:12.520 and Stone does a fantastic job telling the story of 0:02:12.560 --> 0:02:14.880 how that happened. I really enjoyed the book, and I 0:02:14.919 --> 0:02:19.239 think you'll really enjoy our conversation. So, with no further ado, 0:02:19.919 --> 0:02:27.720 my interview with Amazon Unbound author Brad Stone. This is 0:02:27.919 --> 0:02:34.239 Mesters in Business with Very Results on Bloomberg Radio. My 0:02:34.400 --> 0:02:37.800 special guest this week is Brad Stone. He is the 0:02:38.080 --> 0:02:43.480 senior executive editor for Technology at Bloomberg News. Previously, he 0:02:43.680 --> 0:02:48.200 was the Business Week writer covering tech in Silicon Valley, 0:02:48.280 --> 0:02:51.160 and before that he was the tech correspondent for The 0:02:51.200 --> 0:02:54.840 New York Times and Newsweek. He is the author of 0:02:54.919 --> 0:02:58.960 four books, including The Everything Store, Jeff Bezos, and The 0:02:59.000 --> 0:03:04.279 Age of Amazon From. His most recent book is Amazon Unbound. 0:03:04.800 --> 0:03:09.760 Jeff Bezos and the invention of a global empire. Normally, 0:03:09.800 --> 0:03:13.120 at this point I would say, brad Stone, welcome to Bloomberg. 0:03:13.240 --> 0:03:16.960 But since you worked for Bloomberg, let me just say 0:03:17.320 --> 0:03:21.040 welcome to Masters in Business. Thank you very great to 0:03:21.080 --> 0:03:24.440 be here. So I have to start off with the 0:03:24.960 --> 0:03:27.920 simple question, and I know you define this in the 0:03:28.240 --> 0:03:33.040 earlier book, Bezos or Bezos? How do you pronounce his name? 0:03:34.560 --> 0:03:38.600 It is Bezos, yes, and I have encountered uh and 0:03:38.640 --> 0:03:42.680 I'm sure he has as well, numerous alternative pronunciations, but 0:03:42.800 --> 0:03:47.440 indeed it is Bezos. Interesting. So so let's start out 0:03:47.480 --> 0:03:50.880 a little bit with your background. I mentioned you're the 0:03:51.200 --> 0:03:54.880 senior executive editor at Bloomberg News. You were a writer 0:03:55.000 --> 0:03:58.640 at Business Week for ten years, and before that the 0:03:58.640 --> 0:04:02.560 New York Times and and Newsweek. How did you start 0:04:02.720 --> 0:04:07.560 covering technology? What led you into that space? Yeah, well, Verry, 0:04:07.640 --> 0:04:09.840 I was way back before the New York Times. I 0:04:09.960 --> 0:04:15.080 was had a once proud magazine known as Newsweek, and um, 0:04:15.120 --> 0:04:18.440 I was a junior reporter kind of just looking for 0:04:18.480 --> 0:04:22.080 an avenue, um, something that I could you know, write about, 0:04:22.560 --> 0:04:25.480 where my my articles would appear and what was a 0:04:25.600 --> 0:04:30.039 very competitive magazine at the time. For for journalists. And 0:04:30.080 --> 0:04:33.640 this was the nineties and the Internet was becoming more popular. 0:04:33.839 --> 0:04:36.120 And I had, you know, used the Internet and become 0:04:36.160 --> 0:04:39.680 familiar with it while I was in a college and 0:04:40.000 --> 0:04:41.840 I just started writing about it. And then they moved 0:04:41.839 --> 0:04:46.160 me out to Silicon Valley in good timing, just just 0:04:46.240 --> 0:04:49.720 in time for the crash. So I read, I read 0:04:49.720 --> 0:04:53.279 a bunch of your New York time pieces. Um, but 0:04:53.440 --> 0:04:58.800 they were YouTube and iPads and Google Search. How did 0:04:58.839 --> 0:05:03.279 you ultimately you happened on to Amazon as a subject matter. 0:05:04.360 --> 0:05:08.040 I was covering Amazon at the time. Um, it was 0:05:09.000 --> 0:05:11.440 it was a little bit overlooked. If we go back 0:05:11.440 --> 0:05:13.880 to two thousand and six, two seven, you know, the 0:05:13.960 --> 0:05:16.880 eBay market cap was larger than Amazon's at the time. 0:05:16.960 --> 0:05:20.280 It's really remarkable to remember that the Amazon was stopped 0:05:20.279 --> 0:05:23.320 as maybe haven't picked the wrong business model for the 0:05:23.360 --> 0:05:26.400 Internet age. You know, Google was a much more high 0:05:26.400 --> 0:05:30.320 profile and interesting company, it seemed like. And yeah, I 0:05:30.320 --> 0:05:32.800 remember doing a couple of stories about the introduction of 0:05:33.040 --> 0:05:37.960 prime and fulfillment by Amazon and and and Amazon Web Services. 0:05:38.400 --> 0:05:41.440 And I mean I basically I was I would talk 0:05:41.520 --> 0:05:44.760 to Bezos. Um. When when Amazon got into the fight 0:05:44.880 --> 0:05:48.360 with the book publishers around kindle pricing. He was. He 0:05:48.440 --> 0:05:51.400 was on the phone quite a bit arguing Amazon's case, 0:05:51.680 --> 0:05:53.640 and I was always fascinated by the company. I was 0:05:53.720 --> 0:05:56.560 fascinated by Bezos. And then when I went over to 0:05:56.560 --> 0:05:58.800 Business Week and wrote a couple of stories about Amazon 0:05:58.839 --> 0:06:01.880 there it was it was really just sort of opportunistic 0:06:02.480 --> 0:06:04.919 writing my first book. I felt like nobody had really 0:06:04.960 --> 0:06:08.200 done the great Amazon story, and books had been devoted 0:06:08.320 --> 0:06:10.640 to the other big tech companies. Of course, I had 0:06:10.680 --> 0:06:13.799 no idea what kind of juggernaut it was still to become, 0:06:14.240 --> 0:06:15.600 but it seemed to me that it had been a 0:06:15.640 --> 0:06:19.039 little bit overlooked. And that book really I read it 0:06:19.080 --> 0:06:24.200 on vacation. I think in like it was a good read, 0:06:24.400 --> 0:06:31.080 and you had fairly decent access to Bezos prior to that. 0:06:31.520 --> 0:06:35.960 How cooperative was he for the book Everything Store Right. 0:06:36.400 --> 0:06:38.359 I can't quite remember the timeline, but I went in 0:06:38.400 --> 0:06:41.000 there to meet with him to pitch the book, and 0:06:41.040 --> 0:06:44.000 he was very receptive. You know, Amazon has this weird 0:06:44.560 --> 0:06:48.800 cultural ritual where they start every meeting with a dot 0:06:48.880 --> 0:06:51.400 with by reading a document. So I brought him a 0:06:51.480 --> 0:06:55.080 document to read and spiking the book and yeah, and 0:06:55.080 --> 0:06:57.520 he read it in sort of silence, and then he said, 0:06:57.560 --> 0:06:59.800 you know, it's too early to write the Amazon book. 0:07:00.680 --> 0:07:02.400 I did talk to him a couple of times on 0:07:02.480 --> 0:07:04.599 news things while I was reporting on it, and he 0:07:04.680 --> 0:07:07.560 allowed me to talk to his parents and friends and employees, 0:07:07.760 --> 0:07:10.720 but he was pretty distant. It was limited access for 0:07:10.720 --> 0:07:13.920 the first book. Uh that that's really kind of interesting. 0:07:14.440 --> 0:07:16.880 So tell us a little bit about your research and 0:07:16.960 --> 0:07:21.720 writing process. The new book, Amazon on Bound is very 0:07:21.800 --> 0:07:26.840 much told chronologically. How do you go about putting together 0:07:26.960 --> 0:07:32.760 this monstrous right? Well, let me continue the story. So 0:07:32.800 --> 0:07:35.440 after after the last book, the Everything Store comes out 0:07:35.440 --> 0:07:38.400 in twos and thirteen, and Bezos does not like it 0:07:38.600 --> 0:07:40.240 very I don't know if you recall this, but he 0:07:40.320 --> 0:07:43.480 had his wife at the time, Mackenzie Um and some 0:07:43.640 --> 0:07:47.720 employees like including Andy Jafsey, the new CEO. They all 0:07:47.720 --> 0:07:51.520 wrote one star reviews, and I thought, I thought Amazon 0:07:51.680 --> 0:07:55.960 was wasn't aren't they against people buying reviews that that 0:07:56.040 --> 0:07:59.040 violates their policies? I guess it was on the arm, 0:07:59.120 --> 0:08:02.320 So right they been, and they bought it and read it, 0:08:02.360 --> 0:08:05.880 I guess. Um. So anyway, there was a chill, and 0:08:05.880 --> 0:08:09.040 and a couple of years went by, and and then 0:08:09.040 --> 0:08:11.160 I and then at some point I realized that, you know, 0:08:11.200 --> 0:08:14.120 the books took off and had come to be seen 0:08:14.160 --> 0:08:17.040 as kind of the definitive history of early Amazon. But 0:08:17.240 --> 0:08:20.240 I realized that so much had happened Alexa and the 0:08:20.240 --> 0:08:23.760 global marketplace and Bezos becoming the wealthiest person in the world, 0:08:23.960 --> 0:08:26.560 that there were simply more story to tell. And so 0:08:26.640 --> 0:08:30.560 I went back to Amazon, probably a little cheekily and 0:08:30.640 --> 0:08:32.120 just told them that I was going to do it. 0:08:32.480 --> 0:08:34.880 And this time there was no meeting with Bezos, but 0:08:35.280 --> 0:08:37.400 they did allow they did allow me to talk to 0:08:38.200 --> 0:08:42.160 more more than a dozen senior executives, members of the 0:08:42.240 --> 0:08:45.160 Senior Leadership team, the FES team. Yeah, and and they 0:08:45.360 --> 0:08:47.800 basis a lot of going to talk to friends, and 0:08:47.880 --> 0:08:50.440 so the access wasn't all that different. But the foundation 0:08:50.520 --> 0:08:53.439 of the book of both books really were the employees 0:08:53.480 --> 0:08:58.240 who had been there, had participated in key projects, and 0:08:58.320 --> 0:09:00.439 then who had left or were there. But we're willing 0:09:00.480 --> 0:09:04.440 to sort of talk carefully because obviously Amazon and most 0:09:04.480 --> 0:09:07.440 companies these days they try to lock up former employees 0:09:07.520 --> 0:09:10.840 or current employees and nondisclosure agreements. I'd like to say 0:09:10.880 --> 0:09:13.720 that Amazon has a lot of surface area, right more 0:09:13.960 --> 0:09:16.280 so than a lot of other companies. It does so 0:09:16.320 --> 0:09:19.840 many things, and there's actually very few people with any 0:09:19.920 --> 0:09:22.720 kind of a bird's eye view over it. Maybe really 0:09:22.760 --> 0:09:26.360 just Jeff Bezos, I mean Andy Chassis and Jeff Wilkie, 0:09:26.440 --> 0:09:29.720 the former head of the retail business, you know, certainly, 0:09:29.880 --> 0:09:33.240 but they're extremely disciplined and careful in what they say. 0:09:33.360 --> 0:09:38.240 So it's really just it was almost like aggregating enough interviews, 0:09:38.440 --> 0:09:42.320 enough conversations that I could start to piece together enough 0:09:42.360 --> 0:09:45.240 of a picture of this entire company. And then also, 0:09:45.679 --> 0:09:48.120 and by the way, very not just Amazon, put the 0:09:48.160 --> 0:09:52.199 Washington Post blue Origin Bezos and Space company his basis, 0:09:52.320 --> 0:09:55.120 his personal type of the natural Enquirer, like lots of 0:09:55.120 --> 0:09:57.640 different avenues to go down. So it's really almost just 0:09:57.760 --> 0:10:00.120 a sheer exercise and talking to as many people as 0:10:00.160 --> 0:10:02.800 it could. And so people went on the record, even 0:10:02.840 --> 0:10:05.280 fail the inner circle of people without giving you a 0:10:05.280 --> 0:10:10.000 lot of pushback. Did you find this book was a 0:10:10.000 --> 0:10:15.600 little more challenging because it's such a moving target Compared 0:10:15.640 --> 0:10:18.360 to the first version, the version that you wrote in 0:10:20.440 --> 0:10:23.840 Yes and no, it was easier, and that the Everything 0:10:23.880 --> 0:10:26.920 Store was kind of a calling card so I could 0:10:26.920 --> 0:10:29.880 talk I could reach out to hundreds of people, and 0:10:29.920 --> 0:10:31.680 they instantly knew who I was and what I was 0:10:31.760 --> 0:10:34.640 up to, right and and and in some cases I 0:10:34.640 --> 0:10:36.760 had earned a measure of trust by what they saw 0:10:36.920 --> 0:10:41.160 as a as an accurate retelling of the company's early years. 0:10:41.200 --> 0:10:43.720 But it was more difficult in that it was it 0:10:43.800 --> 0:10:48.760 posted an enormous organizational and structural challenge. So in the 0:10:48.840 --> 0:10:52.360 Everything Store, it was a very linear story. It was 0:10:53.120 --> 0:10:55.240 a group of it was one guy in Wall Street 0:10:55.240 --> 0:10:56.800 and then a group of people in a garage and 0:10:56.880 --> 0:10:59.840 bellevue with an idea to sell books on the Internet 0:11:00.559 --> 0:11:03.680 straight through, you know, through the dot com boom, almost 0:11:03.760 --> 0:11:05.960 cratering in the dot com bust, and then a revival. 0:11:06.120 --> 0:11:09.120 It feels iconic that that story in a way. And 0:11:09.160 --> 0:11:11.600 then this story is a sprawl of things happening at 0:11:11.640 --> 0:11:14.280 the same time. I mean, it's Alexa at the and 0:11:14.360 --> 0:11:18.439 the entry in the India and Prime Video and the marketplace, 0:11:18.480 --> 0:11:22.800 and the grocery business and the logistics operation and adds 0:11:23.360 --> 0:11:25.400 and and all the other stuff I mentioned. So it 0:11:25.480 --> 0:11:28.680 was an organizational challenge. But in some ways this story 0:11:28.800 --> 0:11:31.199 was actually the better story. I mean, when you think 0:11:31.200 --> 0:11:33.640 about it from a pure value creation point of view, 0:11:34.120 --> 0:11:37.280 you know, the Everything Store covers the creation of about 0:11:37.440 --> 0:11:42.640 eighty billion dollars in market capitalization, and this this story 0:11:42.800 --> 0:11:45.640 covers the creation of one point six trillion. So in 0:11:45.640 --> 0:11:50.079 some ways, you know, this was the more dramatic business story. Sure, 0:11:50.240 --> 0:11:52.559 just the numbers are just mind blowing, and we'll talk 0:11:52.600 --> 0:11:55.400 about some of the numbers a little later. Any chapter 0:11:55.559 --> 0:11:59.840 stand out as particularly challenging to write or particularly fun 0:12:00.040 --> 0:12:04.839 to dive into. I started this book in two dozen seventeen, 0:12:05.320 --> 0:12:08.960 so this was before h G two, before um the 0:12:09.000 --> 0:12:13.040 Antitrust Subcommittee report into the big tech companies, before obviously 0:12:13.040 --> 0:12:16.920 before the pandemic. But the funnest and the most unexpected 0:12:16.960 --> 0:12:20.600 story was bezos is tangled with the National Enquirer and 0:12:20.760 --> 0:12:24.080 Medium post about the bodies and the Washot post I 0:12:24.080 --> 0:12:26.880 had never expected. Well, let me step back, because you'll 0:12:26.920 --> 0:12:31.520 appreciate this. Most most companies will draw, you know, we'll 0:12:31.559 --> 0:12:35.600 build a spense around the private lives of their key executives. Right, 0:12:35.600 --> 0:12:39.320 it's seen as maybe a no go area. And Amazon 0:12:39.440 --> 0:12:43.000 was fiercely is fiercely protective of bezos Is privacy, and 0:12:43.080 --> 0:12:47.200 Bezos and is seriously protective of his family's privacy. And 0:12:47.280 --> 0:12:49.720 so for this thing to blow up at the end 0:12:49.760 --> 0:12:51.720 of two thousand, a pen as I'm writing the book, 0:12:52.240 --> 0:12:57.079 you know, and an alleged affair, a trashy tabloid newspaper 0:12:58.000 --> 0:13:02.400 accusations of political interfere inspired the Trump administration, a hall 0:13:02.480 --> 0:13:08.200 of mirrors, of crazy characters and private detectives and you know, 0:13:08.559 --> 0:13:12.840 unethical Hollywood characters and perhaps mbs. I mean, it was 0:13:12.920 --> 0:13:15.840 beyond anything that I had imagined, so in terms of 0:13:15.880 --> 0:13:19.680 like challenge and and maybe entertainment value. And I just 0:13:19.679 --> 0:13:21.880 couldn't sort of couldn't believe that this is where not 0:13:21.960 --> 0:13:23.760 only this is where, you know, something that I had 0:13:23.760 --> 0:13:25.960 pried open, but this is where Bezos had kind of 0:13:26.040 --> 0:13:29.559 led the world and lead his own story. Was astonishing 0:13:29.600 --> 0:13:33.200 to me. Let's talk a little bit about that empire 0:13:33.840 --> 0:13:37.679 and put some some flesh on the bones. In terms 0:13:37.679 --> 0:13:40.760 of numbers, I like the way you broke the book 0:13:40.880 --> 0:13:45.760 up into three sections, and each section starts with four 0:13:46.480 --> 0:13:52.400 data points. Annual revenues, number of employees, the market cap 0:13:52.440 --> 0:13:56.320 of Amazon and and Bezos is net worth, and some 0:13:56.440 --> 0:13:59.679 of the numbers from just over a decade, they were 0:13:59.720 --> 0:14:04.400 doing thirty four billion in sales in and then by 0:14:04.880 --> 0:14:07.160 it's a hundred and thirty six billion, and then by 0:14:07.240 --> 0:14:11.080 last year it's two hundred and thirty three billion. And 0:14:11.160 --> 0:14:14.800 along the way, they went from thirty three thousand employees 0:14:14.840 --> 0:14:18.200 to three hundred fifty two. Now they have about six 0:14:18.280 --> 0:14:23.360 hundred fifty thousand employees. Uh, and Bezos went from a 0:14:23.640 --> 0:14:27.920 mere fifteen billion in net worth today's worth well over 0:14:28.720 --> 0:14:32.920 UM was one five. Now he's coming up on two 0:14:33.040 --> 0:14:36.840 hundred billion. And by the way, very employees, it's over 0:14:36.880 --> 0:14:43.000 a million now over a million. Yeah. Sword So so 0:14:43.200 --> 0:14:45.360 that was the question I was gonna ask, is how 0:14:45.440 --> 0:14:49.560 much of the numbers are pandemic related and how much 0:14:49.560 --> 0:14:52.720 of this is just an acceleration of all these trends 0:14:53.680 --> 0:14:57.160 at Amazon that were in place before last year even 0:14:57.320 --> 0:15:00.440 you know began. I mean, I think it's both the 0:15:01.040 --> 0:15:04.720 pandemic was an accelerant and that growth might have happened, 0:15:05.080 --> 0:15:09.240 and the pandemic just moved everything forward. If if people 0:15:09.240 --> 0:15:12.360 are wondering, doesn't roll back to Amazon, let people go, 0:15:13.040 --> 0:15:15.760 I don't think so. I think what the pandemic did 0:15:15.840 --> 0:15:20.160 is that it made people more familiar with UM, you know, 0:15:20.240 --> 0:15:26.560 next Amazon's next day delivery, UM possibilities, grocery shopping. It 0:15:26.760 --> 0:15:30.760 increased Amazon's profits, and what they always do with that 0:15:30.920 --> 0:15:33.640 is they reinvested in the more Amazon So it created 0:15:33.680 --> 0:15:36.920 profilming centers closer to major cities, closer to our homes, 0:15:37.320 --> 0:15:40.000 more trucks on the highway, more events in our neighborhoods, 0:15:40.040 --> 0:15:42.680 more data centers. And what that means is, you know, 0:15:42.720 --> 0:15:49.120 Amazon spent the pandemic basically capturing more advantages, uh, the 0:15:49.160 --> 0:15:53.400 advantage advantages of performance centers close order to our homes 0:15:53.560 --> 0:15:56.200 and faster delivery. And it's not going to unline that. 0:15:56.320 --> 0:15:59.200 And it just means that shopping offline for food and 0:15:59.280 --> 0:16:01.920 for everything else is going to be more convenient, and 0:16:02.000 --> 0:16:08.440 that is probably frightening for offline competitors supermarkets. The other 0:16:08.440 --> 0:16:11.760 thing Amazon's doing is creating physical retail stores, so that's 0:16:11.800 --> 0:16:16.440 still capturing of all retail people shopping in actual stores, 0:16:16.840 --> 0:16:20.240 and Amazon itself stamping out these Amazon Fresh grocery stores. 0:16:20.360 --> 0:16:23.520 So it had a productive pandemic. You might you might 0:16:23.560 --> 0:16:26.320 say it was sort of perversely lucky because it had 0:16:26.320 --> 0:16:28.600 all the advantages going into it, and now it has 0:16:28.640 --> 0:16:32.160 even more. So we're gonna get to some of the acquisitions. 0:16:32.160 --> 0:16:35.440 We'll talk about Amazon Prime and Whole Foods, but before 0:16:35.440 --> 0:16:38.560 we do that. Early in the book, you talk about 0:16:38.680 --> 0:16:43.920 sort of the tens low point for Amazon, which was October. 0:16:45.800 --> 0:16:48.960 They had kind of stumbled with the Amazon Phone and 0:16:49.960 --> 0:16:53.800 a lot of the big growth engines were just starting 0:16:53.840 --> 0:16:57.800 to ramp up. I have to ask, who is possibly 0:16:57.880 --> 0:17:04.080 worse at assessing padditors then Microsoft, Steve Balmer? Is there 0:17:04.119 --> 0:17:07.760 anybody who is? I mean, if this guy, this guy 0:17:07.880 --> 0:17:13.800 missed everything from the iPhone to the iPod two and 0:17:13.800 --> 0:17:19.040 and he was dissing Amazon in like they don't make 0:17:19.080 --> 0:17:22.760 a profit? Who nobody's interested in those guys? I mean, 0:17:23.280 --> 0:17:26.080 I love your usage of him. What attracted you to 0:17:26.240 --> 0:17:29.320 using him as the uh, the patsy and as I 0:17:29.320 --> 0:17:32.320 think I call him the contrarian indicator. Um, but let 0:17:32.320 --> 0:17:34.320 me give a little bit of the defense of Steve 0:17:34.359 --> 0:17:38.280 Balmer and lay to us in fourteen. Um, he wasn't alone, right, 0:17:38.320 --> 0:17:41.280 There were there were investors like David Einhorn who were 0:17:41.359 --> 0:17:44.440 who were adding Amazon to the to the bubble stock basket. 0:17:45.119 --> 0:17:48.960 Um analyts we were mixed. At the time. There was 0:17:49.040 --> 0:17:52.240 a lot of speculation about the underlying profitability of Amazon 0:17:52.280 --> 0:17:55.600 Web Services, which the company was disguising on its income statement. 0:17:55.640 --> 0:17:58.159 At the R and yet we have to have to 0:17:58.200 --> 0:18:01.800 understand that Amazon is deliberately opaque, and you know, in 0:18:02.080 --> 0:18:04.800 a way that it's sort of surprising the sec You know, 0:18:04.800 --> 0:18:09.520 our other regulatory authorities haven't been more aggressive in getting 0:18:09.520 --> 0:18:12.600 the company to reveal more, but it is. It doesn't 0:18:12.600 --> 0:18:15.520 want the world to know how profitable a business Amazon 0:18:15.600 --> 0:18:19.400 Web Services is, and it's not showing profits. It's disguising 0:18:19.480 --> 0:18:24.720 its profits on its income statement by investing in more 0:18:24.800 --> 0:18:28.560 data centers, more fulfillment centers, expansion. At that point, the 0:18:28.640 --> 0:18:32.639 expansion in the India begins, and it's spending a billion 0:18:32.640 --> 0:18:35.080 dollars a year at that point a prime video. So 0:18:35.200 --> 0:18:38.320 no one has any idea because Bezos is sitting there 0:18:38.359 --> 0:18:41.639 at the craft table making new bets, and you know, 0:18:41.720 --> 0:18:43.560 Balmer just happens to be a bit of a loud 0:18:43.600 --> 0:18:46.920 mouth and expressed it at exactly the wrong time. Because 0:18:47.000 --> 0:18:49.920 you can go back and march the exact moment when 0:18:50.040 --> 0:18:53.679 Amazon has to finally reveal a WS as financials and 0:18:53.720 --> 0:18:57.720 the thing starts to take off. Huh. It's interesting that 0:18:57.800 --> 0:19:02.600 it was such a strategic advantage, uh, to not discuss 0:19:03.760 --> 0:19:07.399 Amazon Web Servers for so long, and they were able 0:19:07.480 --> 0:19:10.960 to to get away with that because of um it 0:19:11.040 --> 0:19:13.240 wasn't more than ten percent of the revenues. Is that 0:19:13.640 --> 0:19:17.800 was that the rationale for hiding that. I think that's right. 0:19:17.920 --> 0:19:22.520 That they could another business. Another CEO is going to 0:19:22.600 --> 0:19:24.720 want to show that off. It's going to want to 0:19:24.760 --> 0:19:27.920 impress investors, particularly because if you look at the stock 0:19:28.000 --> 0:19:31.600 performance in two thousand fourteen, I mean my recollection is 0:19:32.160 --> 0:19:34.960 the stock went down and you know, or at least 0:19:34.960 --> 0:19:38.240 it was embattled, and you know, another CEO is going 0:19:38.320 --> 0:19:41.159 to say, well, it's gonna like cater to their own ego, 0:19:41.800 --> 0:19:44.120 uh and to their recruitment needs of their company into 0:19:44.160 --> 0:19:48.080 the image and want to release that. But Basos, across 0:19:48.119 --> 0:19:51.760 the ten years of this of a WS growth, you know, 0:19:51.800 --> 0:19:54.600 he thinks long term, he thinks competitively. He didn't want 0:19:54.600 --> 0:19:57.119 to tip off competitors to how good of a business 0:19:57.200 --> 0:19:59.359 this was, and he kept it hidden. I mean that 0:19:59.520 --> 0:20:02.240 takes a little bit of a remarkable act of CEO 0:20:02.359 --> 0:20:05.399 patients and bravery to do that. But they felt like 0:20:05.440 --> 0:20:07.480 they had a gold mine there and they wanted to 0:20:07.520 --> 0:20:11.160 mine it for whatever it was worth. Let's see in 0:20:14.119 --> 0:20:16.879 let's see what the stock price looks like. Bear with 0:20:16.960 --> 0:20:21.040 me one second while I pull this up. Oh no, 0:20:21.200 --> 0:20:24.959 this was this was not a good year. They were 0:20:25.000 --> 0:20:29.680 down for the full year, and you're right the bottom 0:20:29.760 --> 0:20:32.440 while there was a low over the summer in in May, 0:20:32.520 --> 0:20:36.800 and then there was another low in October. But yeah, 0:20:36.800 --> 0:20:41.400 that doesn't surprise me that that bomber nailed the bottom. 0:20:41.480 --> 0:20:44.440 But a lot of people were pretty skeptical in an 0:20:44.440 --> 0:20:50.040 otherwise pretty decent year for the market, right right, And 0:20:50.040 --> 0:20:53.400 and when you look back at two thousand fourteen, it's 0:20:53.400 --> 0:20:57.600 so remarkable that that there was such skepticism because that 0:20:58.040 --> 0:21:01.280 that is the year that Amazon introduces Alexa. It is 0:21:01.320 --> 0:21:04.239 the year that they started preparing to to introduce the 0:21:04.240 --> 0:21:08.479 financials of aws UM. I think I think that might 0:21:08.520 --> 0:21:11.280 have been the first year that Amazon Studios originals start 0:21:11.359 --> 0:21:13.879 to come out, So the first batch of TV shows 0:21:13.920 --> 0:21:16.760 that weren't all that good, but I think it marked 0:21:16.760 --> 0:21:20.640 a transformation of Amazon Prime into more of a content service. 0:21:20.720 --> 0:21:23.439 So uh and and then and then the expansion in 0:21:23.480 --> 0:21:26.080 the India really begins in earnest in two thou fourteen, 0:21:26.160 --> 0:21:29.320 and so they're placing a lot of vests there and 0:21:29.359 --> 0:21:32.320 to the public markets and two investors. Everything looks kind 0:21:32.320 --> 0:21:34.879 of dire, but it's really the beginning of probably the 0:21:35.840 --> 0:21:40.000 most impressive wealth creation, maybe even in the history of business. 0:21:40.040 --> 0:21:44.040 I mean, Um, it's just it's such a perhaps perhaps 0:21:44.040 --> 0:21:46.480 alongside Apple, you know, the kind of scale that we 0:21:46.520 --> 0:21:49.160 haven't really seen before. Right, So so let's talk about 0:21:49.200 --> 0:21:53.360 some of the big winners that are driving that growth. Um, 0:21:53.400 --> 0:21:57.800 Amazon Prime. This really turned out to be quite a 0:21:57.920 --> 0:22:04.920 game change or not only making clients stickier, but really 0:22:05.040 --> 0:22:08.800 taking Amazon to a whole new level. It really has evolved. 0:22:08.920 --> 0:22:12.080 So back into thousan five, you know, when they conceived it, 0:22:12.840 --> 0:22:15.600 Um Basis wanted to kind of take shipping charges off 0:22:15.640 --> 0:22:19.080 the table. Like he knew Amazon could compete with selection, 0:22:19.480 --> 0:22:22.399 it could be competitive with prices, but the convenience just 0:22:22.520 --> 0:22:25.080 wasn't there to take many days for people to get 0:22:25.080 --> 0:22:28.080 their packages. And at the time Amazon had maybe a 0:22:28.119 --> 0:22:31.199 dozen fu filment centers in the US. So taking shipping 0:22:31.200 --> 0:22:34.480 off the table, trying to offset it with what was 0:22:34.480 --> 0:22:37.639 the seventy nine dollar a year charge it made It 0:22:37.680 --> 0:22:39.720 made a lot of sense. And then you you wrap 0:22:39.760 --> 0:22:43.879 people up into the Prime ecosystem UM, and they spent more. 0:22:44.400 --> 0:22:48.680 And then you fast forward five seven years and Basis 0:22:48.680 --> 0:22:51.400 sees that maybe shipping isn't going to be that much 0:22:51.400 --> 0:22:54.560 of a differentiator anymore in a world where Amazon has 0:22:54.920 --> 0:22:57.560 hundreds of fulfilment centers around the country where one day 0:22:57.640 --> 0:23:00.480 or two day shipping might be possible even without Prime membership. 0:23:00.920 --> 0:23:03.600 And so we kind of surprises all of his executives 0:23:03.640 --> 0:23:06.879 by saying we're gonna put free TV shows and movies 0:23:06.920 --> 0:23:09.639 into this. And now today I would say that's probably 0:23:09.680 --> 0:23:13.439 more more important to the prime to Prime membership, the 0:23:13.440 --> 0:23:17.399 fact that you get access to prime video, prime music. 0:23:17.480 --> 0:23:21.119 I mean, they've got I think it's Amazon Music, mkindle club. 0:23:21.480 --> 0:23:23.159 People don't even know what it gets to you, and 0:23:23.200 --> 0:23:25.240 maybe that's part of it. They're sort of this hazy, 0:23:25.320 --> 0:23:29.600 ambiguous it's a lot of it. That's a lot of things, 0:23:29.640 --> 0:23:32.159 and people tend to maximize the value. It's want to 0:23:32.200 --> 0:23:35.359 maximize the value of any club they belong to. So 0:23:35.440 --> 0:23:39.000 it's a sort of neat psychological trick and and and 0:23:39.480 --> 0:23:43.800 the center of the Amazon operating model. And and then 0:23:43.880 --> 0:23:47.600 related to the expansion of groceries, but as well as 0:23:47.720 --> 0:23:51.639 coming up with um physical locations near I think it 0:23:51.720 --> 0:23:55.960 was prime members was the purchase of whole foods, which 0:23:56.320 --> 0:23:58.760 you discussed in the book. You know, remind me a 0:23:58.800 --> 0:24:02.440 little bit of the Google YouTube purchase. The increase in 0:24:02.520 --> 0:24:06.280 stock price essentially made the purchase free. To tell us 0:24:06.280 --> 0:24:10.399 about the whole Foods purchase. I so I devote a 0:24:10.400 --> 0:24:15.879 whole chapter to Amazon's adventures slash misadventures in groceries. And 0:24:15.960 --> 0:24:19.080 it's really interesting because this is one area where Bethos 0:24:19.200 --> 0:24:22.480 wasn't as far sighted as some of his executives. He 0:24:22.640 --> 0:24:26.640 had people advocating for an expansion in the grocery delivery 0:24:26.680 --> 0:24:29.359 as far back because two thousand and seven he thought 0:24:29.400 --> 0:24:32.280 that this would be an opportunity that would be there 0:24:32.320 --> 0:24:35.719