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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Master's in

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Speaker 1: Business with Barry rid Holts on Bloomberg Radio.

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Speaker 2: This week on the podcast, I have another extra special guest.

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Speaker 2: Dana Mannioli is the Amazon reporter for The Wall Street Journal.

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Speaker 2: In addition to covering Amazon, she is an award winning

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Speaker 2: reporter who has deep roots in both M and A

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Speaker 2: and retail. Her new book is really quite fascinating, The

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Speaker 2: Everything Wore, Amazon's ruthless quest to own the world and

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Speaker 2: remake corporate power, just came out a few months ago.

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Speaker 2: I thought this was a really interesting book. I read

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Speaker 2: a lot of stuff for interviews, and this is a

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Speaker 2: book that I would have just plowed through regardless. It

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Speaker 2: was really fascinating. And you know a lot of the

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Speaker 2: things you spect about on Amazon, you think about, you know,

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Speaker 2: how they flex their corporate muscles. You have like a

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Speaker 2: loose idea, Hey, they really seem to be the eight

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Speaker 2: hundred pound gorilla. I had no idea. You know, as

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Speaker 2: I'm reading the book, I'm just genuinely shocked, and by

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Speaker 2: the way, it's deeply investigating. In research, she did hundreds

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Speaker 2: of interviews with former employees and executives and partners and

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Speaker 2: like just everybody who was affiliated with this and these

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Speaker 2: are not nice people. These are ethically compromised executives who

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Speaker 2: are just hell bent on increasing profits by any means necessary.

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Speaker 2: And she paints a not very pretty picture of the company,

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Speaker 2: It's culture, its tactics.

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Speaker 1: Like I thought I.

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Speaker 2: Knew Amazon, and it turns out I really didn't know Amazon.

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Speaker 2: Fascinating book and I'm really fascinating conversation that I think

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Speaker 2: you'll enjoy. With no further to do. My discussion with

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Speaker 2: the Wall Street Journals. Dana Maddioli, Welcome to Bloomberg.

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Speaker 1: Thanks for having me.

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Speaker 2: So we've been trying to get the schedule for quite

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Speaker 2: some time. We've been ships in the night, and I'm

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Speaker 2: glad we finally did this. Before we get into the book,

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Speaker 2: I just have to go over your background, which is

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Speaker 2: really fascinating. You started the journal in two thousand and six.

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Speaker 2: Tell us a little bit about how you got there.

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Speaker 1: Oh, I'd say I snuck through the back door. I

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Speaker 1: started a week after graduating from college, Amazing as a

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Speaker 1: journal as a major in an English major. I had

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Speaker 1: some freelance clips while I was in college. I would

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Speaker 1: go and take my articles that I wrote for class

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Speaker 1: and sell them to the local newspapers in Washington, DC.

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Speaker 1: Sometimes just give them away to get a byline. And

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Speaker 1: that's sort of how I got hired at the Journal

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Speaker 1: and just really learned as a grunt at that point

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Speaker 1: and rose up the ranks.

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Speaker 2: It's kind of fascinating that you're the Amazon reporter now

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Speaker 2: because you began covering retail companies like j C. Pennies.

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Speaker 2: I don't know if it call Kodak retail. They had

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Speaker 2: a tail arm. Tell us a little bit about some

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Speaker 2: of the companies you covered and some of the front

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Speaker 2: page scoops you got.

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Speaker 1: Yeah. So for a while I was the retail reporter

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Speaker 1: at the Wall Street Journal. I loved that job. I

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Speaker 1: basically covered thirty different publicly traded retailers, from Gap to

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Speaker 1: Macy's to Nordstrom and got to know a lot of

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Speaker 1: those CEOs very well, people like Mickey Drexler over at

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Speaker 1: shake Crew right like legends. And that was a really

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Speaker 1: good education for me actually in writing this book, because

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Speaker 1: I saw firsthand through their lens of how they had

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Speaker 1: to react to a young Jeff Bezos and how that

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Speaker 1: was decimating their businesses.

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Speaker 2: Right. You started six at that point, Amazon is what

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Speaker 2: a decade old just about Yeah, and had already begun

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Speaker 2: to damage traditional retailers. You go from retail to doing

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Speaker 2: large M and A deals. You covered the Pfizer Alergen

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Speaker 2: deal and a bunch of other M and A tell

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Speaker 2: us how you went from retail to mergers and eye acquisitions.

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Speaker 1: Yeah, there was a stop before that. Actually, I covered Quodak,

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Speaker 1: like you said, that was my first corporate gig, and

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Speaker 1: then retail, and then I was the M and A

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Speaker 1: reporter with another reporter named Dana Simluca who's a good

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Speaker 1: friend of mine, and our whole job was to break

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Speaker 1: what companies were buying other companies, and it was a

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Speaker 1: really exciting job. You'd get these giant tips one hundred

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Speaker 1: billion dollar deals and you put the headlines down. You'd

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Speaker 1: see the stock prices just go through the roof, right.

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Speaker 1: It was like this kind of adrenaline rush of a beat.

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Speaker 1: So I did that for six years, which is a

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Speaker 1: very long time to cover that beat because it's fairly

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Speaker 1: all on. You know, you work every Sunday because deals

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Speaker 1: get announced on Monday. But also a through line on

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Speaker 1: that beat was the beginning of that beat. When I

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Speaker 1: started in twenty thirteen, the retail companies, the consumer companies

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Speaker 1: were worried about Amazon. By the time I left that

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Speaker 1: beat in twenty nineteen, every single corporate boardroom I spoke

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Speaker 1: to every CEO, every banker, in industrials, healthcare, every industry

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Speaker 1: was worried about Amazon.

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Speaker 2: Huh. And just to wrap up the M and A,

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Speaker 2: you win another Lobe award in twenty sixteen covering the

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Speaker 2: Dow DuPont merger. That was a giant merger. Tell us

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Speaker 2: a little bit about that story.

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Speaker 1: Yeah, that was you know that this was a time

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Speaker 1: when there were a lot of there's a lot of

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Speaker 1: industrial m and A, A lot of these corporate giants

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Speaker 1: that you know, had been esteemed companies were hitting a

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Speaker 1: rough patch and we started to see a lot of

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Speaker 1: deals in the chemicals space and the industrial space. I

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Speaker 1: broke that with my colleagues Danis and Luca and Dave Banoit,

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Speaker 1: and that was one of the biggest years for em

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Speaker 1: Anda that I was on the beat.

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Speaker 2: So retail m and A, how do you end up

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Speaker 2: not just back in their online retail space with Amazon,

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Speaker 2: but making that your sole beat? How did you become

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Speaker 2: Amazon only as a reporter?

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Speaker 1: So after six years on the M and A beat,

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Speaker 1: you know, writing probably hundreds of articles. It's very competitive,

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Speaker 1: beat Bloomberg pretty fiercely. It was time for me to

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Speaker 1: take a step back from that type of reporting. You

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Speaker 1: get fairly burn.

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Speaker 2: It's a grind, it is.

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Speaker 1: It's a grind, you know. I was reporting stories out

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Speaker 1: from my friend's weddings, from christenings, from family birthday parties,

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Speaker 1: ever off. So I wanted to take a step back

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Speaker 1: and do a bigger, like investigatory beat. And the only

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Speaker 1: thing that really excited me at the time was Amazon.

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Speaker 1: I'd seen them be this major player on the retail beat,

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Speaker 1: on the M and A beat, I saw stupid M

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Speaker 1: and A happening because of Amazon. I remember I broke

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Speaker 1: this deal when CVS was buying Etna. This is a

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Speaker 1: bet the farm sort of eminem deal. Sixty nine billion

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Speaker 1: dollars were the CVS, this pharmacy was buying an insurance company.

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Speaker 1: And I learned that the CEO of CVS was terrified

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Speaker 1: of Amazon. Every board meeting he had with his board,

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Speaker 1: they had Amazon proofing plans put in place. And I

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Speaker 1: started seeing that in other boardrooms too, that these dumb

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Speaker 1: deals were happening because people were trying to Amazon proof

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Speaker 1: their businesses, and I started to think about how how

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Speaker 1: little people knew about how Amazon always seemed to win,

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Speaker 1: how they seemed to have their finger on the scale

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Speaker 1: in a lot of ways. So I pitched this investigatory

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Speaker 1: Amazon beat to my bosses at the Wall Street Journal,

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Speaker 1: and they were into it. They said, if you think

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Speaker 1: you could get inside this black box, the do it?

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Speaker 2: What ye was that?

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Speaker 1: That was twenty nineteen, all right.

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Speaker 2: So by then I'm trying to remember how big Amazon

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Speaker 2: had become. I mean, they obviously blew up after the pandemic,

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Speaker 2: but I want to say Scott Galloway's book The Four

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Speaker 2: had already come out, Brad Stone's book The Everything Store.

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Speaker 2: I don't know if that had come out yet.

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Speaker 1: That did that came out? I want to say maybe

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Speaker 1: twenty fifteen, And.

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Speaker 2: Both of those books sold very well and drew a

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Speaker 2: lot of attention Amazon. It doesn't sound like it was

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Speaker 2: a tough argument to get the editors of woll Street

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Speaker 2: General to say, Hey, these guys are a behemoth. We

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Speaker 2: need a dedicated person covering justice one company.

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Speaker 1: Yeah, And they were excited that I've raised my hand.

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Speaker 1: I had, you know, a history of being very scoopy

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Speaker 1: getting inside companies.

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Speaker 2: Again war winning, right, and and you.

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Speaker 1: Know Amazon's such a big company. You know, they're two

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Speaker 1: trillion dollars today, and they're kind of like a giant.

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Speaker 1: They're not kind of they're giant conglomerate. They're like fifteen

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Speaker 1: different publicly traded companies in one company. Yeah, so I

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Speaker 1: had I wanted to do this in a way that

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Speaker 1: I my spots. If you just cover Amazon news day

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Speaker 1: and day out, you could just write wire stories all day. Right,

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Speaker 1: there's a million stories about them. I wanted to be

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Speaker 1: deliberate and investigate them.

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Speaker 2: So let's talk a little bit about that delibered investigation.

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Speaker 2: The book covers Amazon's quest to own the world and

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Speaker 2: remake corporate power. What does that mean?

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Speaker 1: Well, Amazon, you know they started as this against all odds,

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Speaker 1: grudge startup, right, But what we've seen in more recent

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Speaker 1: years is that they've become the number one or two

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Speaker 1: player by size in about eight different industries. You know,

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Speaker 1: from retail, which we are already know forty percent of

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Speaker 1: everything bought online in the US is Amazon to cloud computing,

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Speaker 1: where they are the biggest cloud computing in the world

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Speaker 1: exactly in the US. They deliver more parcels than UPS

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Speaker 1: or FedEx. And it goes on and on and on.

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Speaker 2: Say that again, they deliver more parcels than UPS or FedEx.

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Speaker 1: Yes, they are the number one parcels.

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Speaker 2: That's astonishing.

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Speaker 1: And guess what it's they're only their own product. They're

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Speaker 1: not delivery it really for other people. That's just Amazon goods.

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Speaker 2: Wow.

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Speaker 1: They've taken over industry after industry, and that's forced bankruptcies,

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Speaker 1: it's forced lack of innovation. And beyond that, you know,

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Speaker 1: my book gets into how they have this pattern of lying, cheating,

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Speaker 1: copying their way to the top, and using their leverage

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Speaker 1: in all these different industries to crush competition.

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Speaker 2: So we're going to get into the details of that

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Speaker 2: for sure. I just want to go through the eight

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Speaker 2: areas where they're number one or two. So online retail, cloud, computing,

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Speaker 2: package delivery. What are the other four or five where

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Speaker 2: they're dominant?

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Speaker 1: Yeah, voice assistant devices.

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Speaker 2: Yeah, nobody comes close to that.

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Speaker 1: Right. In online advertising, the number three actually a whole

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Speaker 1: charged which.

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Speaker 2: By the way, the online advertising is has become so

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Speaker 2: ubiquitous throughout the site. So it's Google, Facebook, Amazon, exactly amazing.

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Speaker 2: Give us the other two or three ebook ebooks, and

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Speaker 2: that's before we get to other gadgets. Yeah, I mean

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Speaker 2: the Kindle. Just Barnes and Nobles still make the Nook

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Speaker 2: or is it do?

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Speaker 1: And it's it's kind of a paltry experience. And I'll

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Speaker 1: tell you ninety percent of my ebooks for this book

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Speaker 1: have been sold in Amazon, which just tells you, right,

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Speaker 1: how much of a dominant.

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Speaker 2: I'll tell you something fascinating that when you Google search

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Speaker 2: your book, the first link that comes up is Amazon.

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Speaker 2: And that's true on so much stuff. I mean on Google,

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Speaker 2: I don't mean on the Amazon site. Yeah, but on

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Speaker 2: eight verticals, most of which they are either number one

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Speaker 2: or number two.

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Speaker 1: And they're keeping you know, they're going to keep growing.

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Speaker 1: They they're getting into space with this project Kuiper.

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Speaker 2: They are, now that's separate from Bezos's Blue Origins company.

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Speaker 2: You're talking about a wholy different pursuit coming from Amazon

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Speaker 2: proper within their own company, and what do they want

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Speaker 2: to do in space.

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Speaker 1: They're going to go head to head with Elon Musks

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Speaker 1: Starlink with this these satellites, these orbital satellites, and that

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Speaker 1: should launch in the next year. So they're ever growing

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Speaker 1: and they have a lot of bandwidth to do that

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Speaker 1: in ways that other publicly traded companies really don't.

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Speaker 2: Why on earth does Amazon want to be in the

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Speaker 2: satellite business out of curiosity? Is this related at all

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Speaker 2: to Blue Origins and what Bezos is doing with that?

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Speaker 1: Well, it's a question for Bezos, I would say. You know, Starlink,

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Speaker 1: which is Elon Musk's venture, is considered one of his

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Speaker 1: crown jewels. Okay, so there's like definitely an appeal there.

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Speaker 1: The way that Elon has its structured it does fit

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Speaker 1: into his space exploration company SpaceX. So some people pose

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Speaker 1: it that this should this be part of Blue Origin

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Speaker 1: rather than Amazon. Sure, but as of right now it

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Speaker 1: is part of Amazon is.

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Speaker 2: I guess the thinking must be, Hey, if we have

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Speaker 2: more people with access to the Internet, we're shopping more

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Speaker 2: people will shop online and we'll capture forty percent of

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Speaker 2: it or whatever.

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Speaker 1: They're right, they'll boost those two hundred million pribes ribers

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Speaker 1: could grow exponentially.

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Speaker 2: Right. How do you define Amazon Prime as a vertical?

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Speaker 2: Is it just part of their delivery process? It comes

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Speaker 2: with a lot of other things. Where do you put

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Speaker 2: Amazon Prime into this?

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Speaker 1: I mean, it's one of the biggest membership programs there

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Speaker 1: is at any company.

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Speaker 2: It's amazing, right, pay for the privilege.

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Speaker 1: To shop with this company.

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Speaker 2: Well, you theoretically pay for two day delivery, although if

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Speaker 2: you've been an Amazon user for any length of time,

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Speaker 2: that turns out to be bs because they do everything

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Speaker 2: they can to dissuade you from next day or two

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Speaker 2: day or same day delivery. Hey, ship on Wednesdays with

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Speaker 2: even fewer boxes, create less ecological waste. Ship next Thursday.

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Speaker 2: Here's a ninety nine percent digital coupon. Ooh, that's great.

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Speaker 2: I rent ahead of Beatle. I'll save ninety nine cents.

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Speaker 2: But obviously it works because the more they can spread

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Speaker 2: out their shipping. My experience has been the shipping timeliness

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Speaker 2: has decreased dramatically.

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Speaker 1: I hear that from a lot of shopping right.

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Speaker 2: I mean, So, I've been an Amazon member since I

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Speaker 2: got a gift certificate from my college roommate. I want

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Speaker 2: to say it was ninety eight, ninety eight, So this

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Speaker 2: is early member and I out of college long before that.

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Speaker 2: But but early member, like I used to just search

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Speaker 2: and click whatever came up first, and it was always

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Speaker 2: the right thing. I ordered lithium batteries with a like

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Speaker 2: for a keyfob on your car. It's a very specific

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Speaker 2: model number, wouldn't that exact model number come up first?

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Speaker 2: So I was, and I went back and I redid

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Speaker 2: it and figured out, oh, that's a sponsored link that

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Speaker 2: has nothing to do with what I requested other than

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Speaker 2: it's roughly a lithium ion battery. So I went to

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Speaker 2: return it, and every now and then Amazon will say, yeah,

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Speaker 2: I don't bother, just just keep it right and we'll

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Speaker 2: credit you because it's more expensive to send it back

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Speaker 2: then the product is worth. So the search has been terrible,

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Speaker 2: The pages are just festooned with advertising. The whole experience

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Speaker 2: is much worse. And then there's the other two issues.

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Speaker 2: The prices are no longer the lowest, and the interesting

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Speaker 2: thing about the pandemic is when they were frequently out

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Speaker 2: of things, it sent you searching. So I think everybody

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Speaker 2: has a Target account, a Walmart account, which may not

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Speaker 2: have been true in twenty nineteen pre pandemic. So the

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Speaker 2: whole experience is much less delightful than it was. I

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Speaker 2: kind of think since Bezos left, the people who are

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Speaker 2: there are just focused on how do we max out

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Speaker 2: profitability and the hell with the user experience, which wasn't

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Speaker 2: what it felt like under Bezos or am I wildly

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Speaker 2: overstating that.

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Speaker 1: Well, there's a large part of my book gets into

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Speaker 1: this toxic culture at Amazon. Uh huh, where employees are

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Speaker 1: in this hunger games like scenario where they're competing with

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Speaker 1: their other employees to keep their jobs.

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Speaker 2: Talking about the six percent, Yeah, they get cut at

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Speaker 2: the end of the year, ranking that whole like everything

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Speaker 2: they said they weren't doing.

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Speaker 1: The Actually time, I have all the documents.

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Speaker 2: GE used to cut the bottom ten percent six percent?

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Speaker 2: And then where did the force ranking come from?

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Speaker 1: Jeff like that Intel did this right, That's what he

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Speaker 1: said to his leadership team, like, let's do this because

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Speaker 1: we have to get rid of the bottom performers. But

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Speaker 1: that has unintended consequences. It means that everyone at Amazon,

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Speaker 1: on the white collar side, is driven to work in

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Speaker 1: a way that just benefits their numbers, benefits their bottom lines,

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Speaker 1: even if it's not good for you as the customer,

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Speaker 1: even if it means it's unsafe for the customer, as

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Speaker 1: long as it's expanding selection and increasing profits. That often

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Speaker 1: is the name of the game.

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Speaker 2: Unsafe for the customer. How is it on?

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Speaker 1: Yes, So I have anecdotes in the book where there

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Speaker 1: are well meaning people on the Child's Marketplace team that

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Speaker 1: are that where there's they're selling clothes for children, right,

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Speaker 1: and there's a mandate from Bezos to expand selection and

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Speaker 1: get more sellers into Amazon dot Com because the more

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Speaker 1: sellers you have, the more sales you get, the more

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Speaker 1: sales sellers come on exactly, And they make changes to

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Speaker 1: the sign up process for sellers to on board to

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Speaker 1: Amazon dot Com. They want to make it easy as

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Speaker 1: possible sign up and you could be selling within a day, okay, right,

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Speaker 1: so not really betting these sellers.

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Speaker 2: So in other words, Chinese junk with that's not fireproof,

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Speaker 2: that's not exactly.

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Speaker 1: So then the Chinese junk comes in within a day

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Speaker 1: and some of these parents on the team are horrified.

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Speaker 1: There are children's pajamas that smell.

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Speaker 2: Like gas, aldehyde and gas.

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Speaker 1: There are hoodies that have strings around the acuatch are

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Speaker 1: a strangulation hazard that are banned from being sold in

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Speaker 1: the US because if it's strangled tall there there are

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Speaker 1: all these.

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Speaker 2: Listen, if kids have to die in order for our

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Speaker 2: profit margin to expand, that's just a little collateral damage.

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Speaker 2: Who can complain as long as our profits are gone.

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Speaker 2: I mean, you know it's a tough world. That tough enough.

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Speaker 1: So they flagged this to the Actually they take upon

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Speaker 1: themselves to add some of the friction back into the process.

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Speaker 1: Design it okay, and their boss yells at them, it's

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Speaker 1: just take that off, and they said, well, we're trying

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Speaker 1: to protect the consumer. We ostensibly we are a customer

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Speaker 1: obsessed organization, which is what they say, right, And he said, well,

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Speaker 1: if that's what you know Bezos wants, there's other people

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Speaker 1: that will handle that. So they reluctantly do that, and

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Speaker 1: all the goods fled back in right. And ironically, their

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Speaker 1: boss who told them not to do that, is now

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Speaker 1: the VP of Customer Safety and Trust. But my book

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Speaker 1: found other examples. Amazon was selling carbon monoxide detectors that

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Speaker 1: don't detect carbon monoxide.

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Speaker 2: Well, you know, that's extra if you want it to

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Speaker 2: actually work. Yeah, that's a different that's that's carbon monoxide prime.

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Speaker 2: You know, you can't just order early, you know. In

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Speaker 2: the two thousands and twenty tens, it felt like the

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Speaker 2: reason people were terrified of Amazon is huge selection, fairly

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Speaker 2: high quality product, and the prices were almost always the cheapest.

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Speaker 2: I don't find any of those things now. The selection

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Speaker 2: is sort of a it's paradoxically, there's so much garbage

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Speaker 2: on it, like when this when they first started marketplace,

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Speaker 2: my immediate reaction was, Hey, if I wanted products from

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Speaker 2: a garage sale, I know where eBay is. I can

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Speaker 2: click over there. Why are you making this worse? But

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Speaker 2: I guess you know it's worked out.

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Speaker 1: From Well, there's a reason for that. You know, Amazon

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Speaker 1: has been sued for being an illegal monopoly.

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Speaker 2: Uh huh.

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Speaker 1: And the idea here is that, you know, when when

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Speaker 1: a company is building monopoly, they have to have the

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Speaker 1: best experience because they have to steal market share from

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Speaker 1: their competitors. So when Amazon was coming up, when you

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Speaker 1: like the experience, it was fast shipping, the quality was

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Speaker 1: much better, The prices were low because they were using

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Speaker 1: predatory pricing to undercut their rivals, to steal market share,

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Speaker 1: get people to sign up for prime, and put companies

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Speaker 1: out of business. You know, Lens, the last time you

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Speaker 1: saw a circuit city.

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Speaker 2: Right, circuit city.

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Speaker 1: It goes on. And I spoke to all those CEOs

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Speaker 1: for this book, and they lived at first hand. Amazon

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Speaker 1: is undercutting them on price to steal their customers and

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Speaker 1: put them out of business. What happens to monopoly once

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Speaker 1: they become a monopoly is that there's less competition. Where

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Speaker 1: are you going to go? So they could raise prices,

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Speaker 1: they could flood the feed with advertisements that are annoying

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Speaker 1: to you. They could do all these things to make

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Speaker 1: it a lesser experience. But have you canceled your Prime account? Probably?

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Speaker 2: I haven't canceled my Prime account, but I will tell

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Speaker 2: you that I have dramatically reduced the products I buy

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Speaker 2: on Amazon, and very often in the old days it's like,

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Speaker 2: oh it's on Amazon. Remember one click buying. There is

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Speaker 2: no more one click buying because when you see something,

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Speaker 2: especially if it's something you're not familiar with the price,

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Speaker 2: you have to quickly Google Walmart, Target, and Google shopping

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Speaker 2: to see because every now and then a third party

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Speaker 2: seller will have a product that's double or you know,

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Speaker 2: fifty percent more than what it should be. I just

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Speaker 2: bought something from Target the other day that was twenty

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Speaker 2: two dollars. It was thirty four dollars on Amazon, and

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Speaker 2: it wasn't being sold by Amazon, but it was by

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Speaker 2: a marketplace.

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Speaker 1: That's why also part of this building. The monopoly situation

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Speaker 1: is that Amazon's third party sellers. Sixty percent of what's

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Speaker 1: sold on Amazon is these third party sellers. They are

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Speaker 1: so reliant on Amazon because forty percent of everything's sold

402
00:20:14,760 --> 00:20:17,160
Speaker 1: online is there. They have to be there, and it's

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Speaker 1: this weird love hate relationship.

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Speaker 2: We're going to go into the details on some of

405
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Speaker 2: the really dubious things that they did just across the board.

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Speaker 2: We'll talk about. I mean, the book is kind of horrifying,

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Speaker 2: as I don't know if that was your intention, but

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Speaker 2: as you're walking working through it, it's like, oh, this

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Speaker 2: company has some ethical compromises and some just culture that

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Speaker 2: seems to be really toxic, not just for the customers,

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Speaker 2: but the employees as well and the partners. It seems

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Speaker 2: across the board it's when it all costs, and you

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Speaker 2: don't often stop and think what that means, but it

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Speaker 2: means a lot of really bad things. According to your.

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Speaker 1: Book, it does.

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Speaker 2: Let's talk a little bit about how Amazon's culture got

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Speaker 2: to where it is today, going back to its origin story.

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Speaker 2: Bezos works at Hedge Funds, Qunshop d Shaw, and he

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Speaker 2: is given the task, along with three other employees, of

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Speaker 2: investigating this new fangled Internet thingy and what the possible

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Speaker 2: areas for growth and disruption might come out of it.

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Speaker 2: Three or four different analysts were given different sections. Bezos's

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Speaker 2: was tasked with looking into the impact of the Internet

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Speaker 2: on retail, directly by David Shaw. Tell us a little

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Speaker 2: bit about that project. How long on d Shaw's dime

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Speaker 2: was Bezos researching the Internet months?

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Speaker 1: And he liked what he saw. At the time, the

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Speaker 1: idea that this would take off was really far fetched.

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Speaker 1: Nine four ninety three and three percent of Americans had

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Speaker 1: ever been on the World Wide Web. So think of it,

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Speaker 1: and you know, and and David Shaw was the nerdy

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Speaker 1: programmer type of person who could see the potential for it.

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Speaker 1: So he thinks, let's have my you know, my star

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Speaker 1: associates and vps look into the commercial uses for the Internet.

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Speaker 1: One looks into banking, and Jeff looks into retail. And

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Speaker 1: the idea is, if they think it's worth worthwhile, that

437
00:22:20,200 --> 00:22:22,320
Speaker 1: d Shaw will open up these verticals and they do

438
00:22:22,400 --> 00:22:25,000
Speaker 1: it with the other areas that the people that research

439
00:22:25,040 --> 00:22:28,960
Speaker 1: the other areas for for David start businesses for him

440
00:22:28,960 --> 00:22:29,679
Speaker 1: that make money.

441
00:22:29,880 --> 00:22:34,640
Speaker 2: Why didn't David Shaw invest in Bezos and Amazon when

442
00:22:34,680 --> 00:22:36,400
Speaker 2: when he left for Seattle.

443
00:22:36,720 --> 00:22:39,560
Speaker 1: Well, so, then Bezos likes what he sees all on

444
00:22:39,720 --> 00:22:42,600
Speaker 1: d Shaw's dime. He does his research report, sees that

445
00:22:42,640 --> 00:22:44,480
Speaker 1: there's likes for this, thinks that books could be the

446
00:22:44,520 --> 00:22:47,439
Speaker 1: first area of selling online. And he goes on this

447
00:22:47,520 --> 00:22:49,920
Speaker 1: walk with David the in Central Park and says, Hey,

448
00:22:50,680 --> 00:22:52,639
Speaker 1: I think I'm going to quit and start an online

449
00:22:52,640 --> 00:22:55,440
Speaker 1: book shop. And David said, you know, I think that's

450
00:22:55,600 --> 00:22:57,239
Speaker 1: you already have a really good job. I think that's

451
00:22:57,280 --> 00:22:59,360
Speaker 1: a good idea for someone else. And by the way,

452
00:22:59,440 --> 00:23:02,000
Speaker 1: you know, that was my idea. We might go head

453
00:23:02,000 --> 00:23:03,560
Speaker 1: to head with you and compete with you on this.

454
00:23:03,680 --> 00:23:06,600
Speaker 1: And Bezos basically says I'll take the risk and moves

455
00:23:06,640 --> 00:23:07,360
Speaker 1: out to Seattle.

456
00:23:07,520 --> 00:23:11,200
Speaker 2: Kind of surprised that Shaw went that way instead of saying,

457
00:23:11,880 --> 00:23:14,480
Speaker 2: you know, sort of let us seed you us, let

458
00:23:14,520 --> 00:23:19,280
Speaker 2: us participate in this, like it was a little adversarial

459
00:23:19,320 --> 00:23:20,920
Speaker 2: as opposed to cooperative.

460
00:23:21,160 --> 00:23:24,440
Speaker 1: Yeah, And actually Bezos had a really hard time fundraising

461
00:23:24,440 --> 00:23:28,000
Speaker 1: this idea because it was so wild. You know, it

462
00:23:28,000 --> 00:23:29,680
Speaker 1: took him a really long time to get his first

463
00:23:29,720 --> 00:23:32,879
Speaker 1: million dollars. Most of his investments trickled in in fifty

464
00:23:32,960 --> 00:23:33,720
Speaker 1: thousand dollars.

465
00:23:33,480 --> 00:23:38,240
Speaker 2: Increments literally friends and family. Oh, yeah, big time until eventually, right,

466
00:23:38,320 --> 00:23:40,720
Speaker 2: who was the first VC to put money into.

467
00:23:40,560 --> 00:23:44,480
Speaker 1: Believe it was Kleiner. They're on the board and oh

468
00:23:44,480 --> 00:23:44,800
Speaker 1: that's right.

469
00:23:44,880 --> 00:23:47,280
Speaker 2: John Door was on the board for forever. That's ocky,

470
00:23:47,520 --> 00:23:50,400
Speaker 2: so really kind of interesting that he missed it. But

471
00:23:50,520 --> 00:23:55,240
Speaker 2: the whole thing, just the way I learned about it,

472
00:23:55,240 --> 00:23:56,560
Speaker 2: it's kind of shady.

473
00:23:56,280 --> 00:24:00,400
Speaker 1: Isn't I mean it's copycat mentality that continues to this date. Amazon.

474
00:24:00,440 --> 00:24:02,280
Speaker 1: Oh that's a good idea. Be a shame if someone

475
00:24:02,280 --> 00:24:02,600
Speaker 1: took it.

476
00:24:04,200 --> 00:24:08,920
Speaker 2: So Amazon is not only Custer obsessed, as Bezos once said,

477
00:24:09,240 --> 00:24:13,399
Speaker 2: but it's also competitor obsessed. Where does that come from?

478
00:24:13,800 --> 00:24:15,480
Speaker 2: And how does it manifest itself?

479
00:24:15,760 --> 00:24:18,480
Speaker 1: Oh, they're the most competitor obsessed company I've ever covered,

480
00:24:18,480 --> 00:24:21,239
Speaker 1: and I've covered companies for eighteen years. Part of it

481
00:24:21,320 --> 00:24:24,280
Speaker 1: is the culture, because they have to be performing at

482
00:24:24,280 --> 00:24:26,800
Speaker 1: all times to justify their existence, to not get cut.

483
00:24:27,200 --> 00:24:29,760
Speaker 1: It's this pressure cooker of an environment that people that

484
00:24:29,800 --> 00:24:32,359
Speaker 1: I've spoken to that might have worked at other companies

485
00:24:32,359 --> 00:24:34,800
Speaker 1: wouldn't be tempted to do illegal things on ethical things,

486
00:24:34,840 --> 00:24:37,440
Speaker 1: anti competitive things are sort of forced to their breaking

487
00:24:37,480 --> 00:24:39,280
Speaker 1: point at Amazon, and I could give you an example

488
00:24:39,280 --> 00:24:42,199
Speaker 1: if you like. There's a scene in the book that

489
00:24:42,240 --> 00:24:45,119
Speaker 1: has resonated with a lot of people where Amazon, at

490
00:24:45,160 --> 00:24:48,480
Speaker 1: Jeff's behest wanted to create like a Trader Joe's like

491
00:24:49,280 --> 00:24:51,680
Speaker 1: product line of food. He liked that Trader Joe's was

492
00:24:51,720 --> 00:24:56,600
Speaker 1: quirky and cool. So the team at Amazon writes the

493
00:24:56,680 --> 00:24:59,560
Speaker 1: sixth pager that's how they come up with ideas, and

494
00:24:59,600 --> 00:25:02,600
Speaker 1: it says, we want to copy the top two hundred

495
00:25:02,600 --> 00:25:05,280
Speaker 1: best selling items at Trader Joe's. And they get the

496
00:25:05,280 --> 00:25:07,320
Speaker 1: green light for management to do that. But Trader Joe's

497
00:25:07,359 --> 00:25:09,760
Speaker 1: is a really secretive company. They don't do online shopping.

498
00:25:10,200 --> 00:25:11,879
Speaker 1: It's hard to figure out what the best sellers are.

499
00:25:12,000 --> 00:25:13,960
Speaker 2: Literally walk through the store, and they have to walk.

500
00:25:13,840 --> 00:25:15,760
Speaker 1: Through the store and people love to do it. It's

501
00:25:15,760 --> 00:25:19,240
Speaker 1: like a really delightful experience, right. So the head of

502
00:25:19,240 --> 00:25:22,879
Speaker 1: the team goes about hiring the senior executive from Trader Joe's.

503
00:25:23,080 --> 00:25:24,840
Speaker 1: She doesn't really know what her job's going to be,

504
00:25:25,880 --> 00:25:29,320
Speaker 1: moves out to Seattle, and her first week in Seattle,

505
00:25:29,440 --> 00:25:34,680
Speaker 1: stumbles across this really secretive room conference room. It has

506
00:25:34,840 --> 00:25:37,800
Speaker 1: paper over the doors and the walls, brown paper. Suit

507
00:25:37,840 --> 00:25:40,120
Speaker 1: can't see inside, and she goes inside and it's filled

508
00:25:40,240 --> 00:25:43,119
Speaker 1: with Trader Joe's boxes of foods, and she has this

509
00:25:43,200 --> 00:25:46,040
Speaker 1: light bulb moment like, oh, crap, I've been hired to

510
00:25:46,080 --> 00:25:50,440
Speaker 1: replicate my former employer. From there, her boss starts hounding her, saying,

511
00:25:50,520 --> 00:25:53,280
Speaker 1: give me any documents you retained from your time at

512
00:25:53,280 --> 00:25:55,040
Speaker 1: Trader Joe's, which is.

513
00:25:55,080 --> 00:25:57,520
Speaker 2: Clearly like and the collect correct answer is I have

514
00:25:57,560 --> 00:26:00,560
Speaker 2: no documents that they made me turn everything in as

515
00:26:00,640 --> 00:26:03,320
Speaker 2: per my prior employment agreement.

516
00:26:03,119 --> 00:26:05,159
Speaker 1: Or if I do, I cannot give them over to

517
00:26:05,200 --> 00:26:08,639
Speaker 1: because that's actually illegal. Okay, So she says no. The

518
00:26:08,680 --> 00:26:12,040
Speaker 1: boss keeps hounding her, hounding her, and it becomes this

519
00:26:12,160 --> 00:26:15,879
Speaker 1: really tense experience. Then she emails him the top selling

520
00:26:15,880 --> 00:26:18,240
Speaker 1: items from Trader Joe's from one whole week in the US,

521
00:26:18,960 --> 00:26:22,480
Speaker 1: ranked by products that were sold, and they start to

522
00:26:22,480 --> 00:26:24,560
Speaker 1: disseminate that within the team. They have their blueprint to

523
00:26:24,600 --> 00:26:26,840
Speaker 1: copy the top two hundred items at Trader Joe's. And

524
00:26:26,880 --> 00:26:28,440
Speaker 1: then he doesn't stop there. He says, no, send me

525
00:26:28,480 --> 00:26:31,600
Speaker 1: all the margins, really, and she says, no, I'm not

526
00:26:31,640 --> 00:26:33,400
Speaker 1: doing that, and he screams at her in the middle

527
00:26:33,440 --> 00:26:36,399
Speaker 1: of the Seattle office starts crying and someone reports to

528
00:26:36,560 --> 00:26:38,640
Speaker 1: HR because it was just like such a clear violation,

529
00:26:38,720 --> 00:26:40,840
Speaker 1: and Amazon actually fired those people because it went up

530
00:26:40,880 --> 00:26:44,240
Speaker 1: to HR. But that sort of scenario plays out at

531
00:26:44,240 --> 00:26:45,879
Speaker 1: Amazon every single team.

532
00:26:46,280 --> 00:26:49,639
Speaker 2: I want to stay with the idea of some of

533
00:26:49,680 --> 00:26:55,040
Speaker 2: the earlier advantages that Amazon had and how it resulted

534
00:26:55,080 --> 00:26:58,439
Speaker 2: in their growth. We'll get to diapers dot com, We'll

535
00:26:58,440 --> 00:27:02,000
Speaker 2: get to some of the other headlers. Let's talk about

536
00:27:02,320 --> 00:27:08,560
Speaker 2: the state tax advantage, So talk about arbitrage. Bezos specifically

537
00:27:08,880 --> 00:27:15,080
Speaker 2: picks Washington state because there's so few shoppers in the

538
00:27:15,160 --> 00:27:19,040
Speaker 2: state that by locating there and shipping to the rest

539
00:27:19,080 --> 00:27:22,240
Speaker 2: of the country, he doesn't believe he has to collect

540
00:27:22,480 --> 00:27:26,760
Speaker 2: state sales tax because of an old Supreme Court case.

541
00:27:27,040 --> 00:27:29,359
Speaker 2: Maybe it even involved a catalog. It wasn't Sears.

542
00:27:29,480 --> 00:27:31,359
Speaker 1: Was it was a catalog, It wasn't Seiers.

543
00:27:31,920 --> 00:27:36,400
Speaker 2: That said, hey, you only collect interstate commerce is not taxable.

544
00:27:36,520 --> 00:27:39,280
Speaker 2: Therefore you don't have to collect it its own unless

545
00:27:39,320 --> 00:27:44,760
Speaker 2: you have a nexus to that state. So immediately they're

546
00:27:44,800 --> 00:27:48,920
Speaker 2: at a six seven eight percent advantage over everybody else

547
00:27:49,000 --> 00:27:52,280
Speaker 2: in most states. Tell us how they push the envelope

548
00:27:52,320 --> 00:27:53,760
Speaker 2: with state sales tax.

549
00:27:54,080 --> 00:27:58,720
Speaker 1: This is simultaneously brilliant but horrifying for the rest of retail.

550
00:27:59,200 --> 00:28:01,680
Speaker 1: He comes up with this idea that his warehouses don't

551
00:28:01,720 --> 00:28:04,000
Speaker 1: count as physical locations for Amazon.

552
00:28:03,960 --> 00:28:07,320
Speaker 2: Which is kind of bizarre because of course it is right.

553
00:28:07,960 --> 00:28:10,600
Speaker 2: I mean, if you locate a warehouse in New York,

554
00:28:10,720 --> 00:28:12,359
Speaker 2: you now have in nexus with New York.

555
00:28:12,520 --> 00:28:15,240
Speaker 1: But they tried to carve that out as a separate entity.

556
00:28:15,400 --> 00:28:19,760
Speaker 1: And up until twenty seventeen, Amazon was not collecting sales tax.

557
00:28:19,520 --> 00:28:21,879
Speaker 2: In something, so they had a twenty year head start.

558
00:28:21,760 --> 00:28:23,960
Speaker 1: Exactly, and up to ten percent in some of these states.

559
00:28:23,960 --> 00:28:26,680
Speaker 1: And that just had ripple effects because people once the

560
00:28:26,720 --> 00:28:29,880
Speaker 1: advent of online shopping came about, people became really price conscious,

561
00:28:30,080 --> 00:28:33,040
Speaker 1: you know, people would do comparison shopping. And I spoke

562
00:28:33,080 --> 00:28:35,960
Speaker 1: to you one of the presidents of Sears who had

563
00:28:36,000 --> 00:28:38,880
Speaker 1: to deal with this head on, and he said, you know,

564
00:28:38,960 --> 00:28:41,840
Speaker 1: Amazon and him would be selling the same Sony television.

565
00:28:41,880 --> 00:28:45,800
Speaker 1: Let's say it's five hundred dollars market the price. Amazon

566
00:28:45,840 --> 00:28:48,120
Speaker 1: for many states could sell that for five hundred dollars flat.

567
00:28:49,080 --> 00:28:51,360
Speaker 1: Sears would have to charge eight percent sales tax in

568
00:28:51,400 --> 00:28:54,240
Speaker 1: New York. So what would Sears do? They would cut

569
00:28:54,280 --> 00:28:58,360
Speaker 1: the price of their TV by eight percent in order

570
00:28:58,440 --> 00:29:01,040
Speaker 1: to go head to head with Amazon, and they would

571
00:29:01,080 --> 00:29:04,480
Speaker 1: just completely destroy their margins. And it created this race

572
00:29:04,520 --> 00:29:07,560
Speaker 1: to the bottom on electronics prices because they had to

573
00:29:07,600 --> 00:29:10,440
Speaker 1: try to compete but at a loss. And this happened

574
00:29:10,520 --> 00:29:13,840
Speaker 1: in so many companies where they either couldn't compete and

575
00:29:13,880 --> 00:29:16,760
Speaker 1: they lost the sale to Amazon, or they cut their

576
00:29:16,760 --> 00:29:19,040
Speaker 1: prices and they destroyed their margins. And that's like a

577
00:29:19,200 --> 00:29:21,400
Speaker 1: very easy way to go bankruptcy.

578
00:29:21,280 --> 00:29:24,880
Speaker 2: So with the benefit of hindsight, you look at they

579
00:29:24,880 --> 00:29:28,240
Speaker 2: have this advantage for twenty years, which is a long time.

580
00:29:28,840 --> 00:29:33,000
Speaker 2: I'm kind of shocked that states didn't stand up and say,

581
00:29:33,440 --> 00:29:36,080
Speaker 2: not only are we losing jobs in our states, but

582
00:29:36,120 --> 00:29:39,680
Speaker 2: we're losing tens of millions or hundreds of million in

583
00:29:39,800 --> 00:29:44,040
Speaker 2: tax revenue. Why did the various states tolerate this for

584
00:29:44,080 --> 00:29:44,960
Speaker 2: as long as they did.

585
00:29:45,440 --> 00:29:47,640
Speaker 1: That's a really good question. I spoke to someone in

586
00:29:47,680 --> 00:29:50,480
Speaker 1: Amazon's public policy office that worked on this, and he said, like,

587
00:29:50,560 --> 00:29:53,320
Speaker 1: this was our secret sauce, and Amazon fought tooth and

588
00:29:53,400 --> 00:29:55,440
Speaker 1: nail to preserve it, to not get rid of this

589
00:29:55,480 --> 00:29:58,000
Speaker 1: advantage they had, and so they know they'd go to court,

590
00:29:58,160 --> 00:30:00,880
Speaker 1: they would go for Congress and make their case and

591
00:30:00,920 --> 00:30:02,240
Speaker 1: some states did come knocking.

592
00:30:02,640 --> 00:30:05,960
Speaker 2: Wherever there is a state income tax, there's usually a

593
00:30:05,960 --> 00:30:10,040
Speaker 2: state sales tax potend. Right, So if you open a

594
00:30:10,080 --> 00:30:13,360
Speaker 2: warehouse there and the state is losing a lot of revenue,

595
00:30:13,520 --> 00:30:16,920
Speaker 2: why wouldn't they just sue Amazon and say, hey, we

596
00:30:16,960 --> 00:30:19,840
Speaker 2: figured out you sold this money goods in our state

597
00:30:20,120 --> 00:30:21,920
Speaker 2: and uo of sales tax here because you have an.

598
00:30:21,840 --> 00:30:23,520
Speaker 1: Ex Well, what part of what I found is that

599
00:30:23,520 --> 00:30:26,480
Speaker 1: many of these legislators in the states were very short sighted.

600
00:30:26,560 --> 00:30:29,320
Speaker 1: They wanted to put up press releases that oh, we

601
00:30:29,440 --> 00:30:32,320
Speaker 1: got an Amazon warehouse at all of these temporary jobs.

602
00:30:32,920 --> 00:30:35,520
Speaker 1: And there's this horrible scene in the book where Jerry Storch,

603
00:30:35,520 --> 00:30:37,120
Speaker 1: who's the CEO of Toys r US at the time,

604
00:30:37,120 --> 00:30:39,000
Speaker 1: which is one of New Jersey's.

605
00:30:38,720 --> 00:30:40,880
Speaker 2: Largest employee r speaks to Chris Christie.

606
00:30:40,920 --> 00:30:42,720
Speaker 1: He speaks to Chris Christie. He says, you guys are

607
00:30:42,800 --> 00:30:45,680
Speaker 1: killing me. Why are you not making Amazon collect sales

608
00:30:45,720 --> 00:30:47,720
Speaker 1: tax in New Jersey. You're putting Toys r Us out

609
00:30:47,720 --> 00:30:49,720
Speaker 1: of business. You're gonna put Main Street on business. And

610
00:30:49,800 --> 00:30:52,320
Speaker 1: Chris Christie sort of the aaas him. And then a

611
00:30:52,400 --> 00:30:56,240
Speaker 1: year later they announced this big Amazon warehouse in Robbinsville,

612
00:30:56,280 --> 00:30:59,480
Speaker 1: New Jersey. They give Amazon all these tax credits for it.

613
00:31:00,200 --> 00:31:01,880
Speaker 1: Christy gets to put out the press release that they're

614
00:31:01,920 --> 00:31:04,800
Speaker 1: bringing hundreds of jobs to New Jersey. But Jerry's whole

615
00:31:04,800 --> 00:31:07,520
Speaker 1: point was, Okay, you're getting hundreds of jobs there, You're

616
00:31:07,520 --> 00:31:09,960
Speaker 1: gonna lose thousands of jobs just from my one company, right,

617
00:31:10,080 --> 00:31:12,360
Speaker 1: So that's really short sighted. And that's what happened out

618
00:31:12,440 --> 00:31:14,400
Speaker 1: you know, toys or restaponant of business.

619
00:31:14,440 --> 00:31:19,640
Speaker 2: It's amazing how effective they were manipulating so many self

620
00:31:19,680 --> 00:31:22,640
Speaker 2: interested politicians who were so short sighted. But we saw

621
00:31:22,680 --> 00:31:25,560
Speaker 2: that time and time again. It was fascinating that the

622
00:31:25,600 --> 00:31:30,040
Speaker 2: Amazon two HQ was slated for New York, and a

623
00:31:30,040 --> 00:31:32,200
Speaker 2: lot of people in New York said, this is a

624
00:31:32,360 --> 00:31:35,400
Speaker 2: money losing deal. This isn't a wealthy company. Why do

625
00:31:35,440 --> 00:31:37,400
Speaker 2: we have to give them tax breaks? They have to

626
00:31:37,400 --> 00:31:39,560
Speaker 2: compete with everybody else, and they said, screw you.

627
00:31:39,680 --> 00:31:42,440
Speaker 1: Going to New York was one of the rare cities

628
00:31:42,960 --> 00:31:44,920
Speaker 1: to really call them out on that. Just think about

629
00:31:44,960 --> 00:31:49,800
Speaker 1: the frenzy around hundreds of different cities lobbied and put

630
00:31:49,800 --> 00:31:52,920
Speaker 1: in these very intensive applications for the pleasure of having

631
00:31:52,920 --> 00:31:56,160
Speaker 1: these warehouse jobs and the second headquarters there, and that

632
00:31:56,280 --> 00:31:59,640
Speaker 1: just shows how politicians really just want the jobs.

633
00:31:59,600 --> 00:32:02,600
Speaker 2: Right, That's right, And so it was kind of interesting

634
00:32:02,720 --> 00:32:05,719
Speaker 2: that when you ran the numbers as people in New

635
00:32:05,800 --> 00:32:09,000
Speaker 2: York did, it wasn't a good deal and they ended

636
00:32:09,040 --> 00:32:12,320
Speaker 2: up sort of splitting it. It's kind of part in Virginia.

637
00:32:12,880 --> 00:32:15,960
Speaker 2: And where where did the rest of the Amazon headquarters

638
00:32:16,040 --> 00:32:16,560
Speaker 2: end up going.

639
00:32:16,600 --> 00:32:19,080
Speaker 1: Oh, it's in Virginia. But they haven't broken ground on

640
00:32:19,120 --> 00:32:20,440
Speaker 1: a lot of it really.

641
00:32:20,560 --> 00:32:23,720
Speaker 2: Yeah, so that was years ago. I mean, after all

642
00:32:23,800 --> 00:32:28,280
Speaker 2: those crazy contests and RFPs and submissions, they got like

643
00:32:28,360 --> 00:32:32,240
Speaker 2: two hundred cities applying for this, they still haven't broken gup.

644
00:32:32,440 --> 00:32:32,920
Speaker 2: That's amazing.

645
00:32:32,960 --> 00:32:34,920
Speaker 1: They have one building up for sure, but the whole

646
00:32:34,920 --> 00:32:36,400
Speaker 1: plan has not come to fruition.

647
00:32:36,600 --> 00:32:41,320
Speaker 2: Ironically, if you take the Long Island Expressway out past Jericho,

648
00:32:41,400 --> 00:32:45,760
Speaker 2: sayas It, you'll see this immense warehouse that they built

649
00:32:45,760 --> 00:32:48,200
Speaker 2: that used to just be like an empty parking lot.

650
00:32:48,560 --> 00:32:51,000
Speaker 2: I don't know what was there if for years it

651
00:32:51,120 --> 00:32:54,720
Speaker 2: was rumored that something was coming, and what a perfect

652
00:32:54,800 --> 00:32:57,640
Speaker 2: location right off the highway. Why do you need to

653
00:32:57,680 --> 00:33:02,120
Speaker 2: give you know, that gives them access to forty million

654
00:33:02,120 --> 00:33:04,520
Speaker 2: people or fifty million people on the aisle, and why

655
00:33:04,560 --> 00:33:07,360
Speaker 2: would you have to give them a tax break for that.

656
00:33:07,360 --> 00:33:10,440
Speaker 2: That's where the customers are. Shouldn't their business model be

657
00:33:10,480 --> 00:33:12,720
Speaker 2: able to accommodate building warehouse?

658
00:33:12,800 --> 00:33:15,200
Speaker 1: I mean they have something like six point five billion

659
00:33:15,280 --> 00:33:19,480
Speaker 1: dollars in subsidies on taxes from different jurisdisdictions around the US.

660
00:33:19,520 --> 00:33:20,440
Speaker 1: It's pretty staggering.

661
00:33:20,560 --> 00:33:23,520
Speaker 2: Yeah, that's really amazing. The other thing that was so

662
00:33:23,680 --> 00:33:31,120
Speaker 2: disruptive was how Amazon changed how Wall Street itself viewed retailers,

663
00:33:31,160 --> 00:33:35,040
Speaker 2: both in terms of profit versus growth and startups versus

664
00:33:35,120 --> 00:33:39,240
Speaker 2: established retailers. Talk a little bit about the impact Amazon

665
00:33:39,320 --> 00:33:42,560
Speaker 2: had on how Wall Street thought about other companies.

666
00:33:42,640 --> 00:33:45,360
Speaker 1: Yeah, this is huge. There probably wouldn't be an Amazon

667
00:33:45,400 --> 00:33:47,760
Speaker 1: today if Jeff did not convince Wall Street that we

668
00:33:47,800 --> 00:33:48,880
Speaker 1: don't have to make profits.

669
00:33:49,040 --> 00:33:52,800
Speaker 2: Right His initial shareholder letter was, hey, don't expect profits

670
00:33:52,840 --> 00:33:54,840
Speaker 2: for the next ten or twenty years exactly.

671
00:33:54,920 --> 00:33:57,719
Speaker 1: And that just was not the norm back then. It

672
00:33:57,760 --> 00:34:00,080
Speaker 1: is today, but that was definitely not the norm. This

673
00:34:00,200 --> 00:34:03,120
Speaker 1: just gave him a tremendous roadway to reinvest in his

674
00:34:03,200 --> 00:34:06,000
Speaker 1: business and grow and steal share and cut on prices

675
00:34:06,040 --> 00:34:07,880
Speaker 1: to get customers and.

676
00:34:07,760 --> 00:34:10,759
Speaker 2: Not pay federal taxes because if you're not profitable, no

677
00:34:10,880 --> 00:34:11,319
Speaker 2: tax it's a.

678
00:34:11,320 --> 00:34:16,360
Speaker 1: Great point tax rate, and that really destroyed his competitors

679
00:34:16,400 --> 00:34:19,080
Speaker 1: because they couldn't catch up with him on online shopping.

680
00:34:19,160 --> 00:34:20,879
Speaker 1: I spoke to a lot of these CEOs who went

681
00:34:20,960 --> 00:34:23,160
Speaker 1: head to head with Amazon in the nineteen nineties and

682
00:34:23,160 --> 00:34:25,040
Speaker 1: two thousands. One of them was the CEO of Linens

683
00:34:25,080 --> 00:34:26,920
Speaker 1: and Things, and I said, you know, why were you

684
00:34:26,960 --> 00:34:30,080
Speaker 1: all so late to online shopping? Did you not believe

685
00:34:30,120 --> 00:34:32,200
Speaker 1: in it? And he said, Dana, we believed in it.

686
00:34:32,239 --> 00:34:35,239
Speaker 1: But my boardroom, my board of directors, laughed me out

687
00:34:35,280 --> 00:34:36,840
Speaker 1: of the room when I asked for one hundred million

688
00:34:36,880 --> 00:34:40,640
Speaker 1: dollars to get our e commerce and logistics up and running,

689
00:34:40,680 --> 00:34:43,040
Speaker 1: because that would have tanked our earnings, that would have

690
00:34:43,120 --> 00:34:44,320
Speaker 1: tanked our share price.

691
00:34:44,520 --> 00:34:48,160
Speaker 2: There's a little bit of short termism there because and

692
00:34:48,200 --> 00:34:51,719
Speaker 2: again we have the benefit of hindsight, but he obviously

693
00:34:51,760 --> 00:34:55,560
Speaker 2: saw what was coming. Why can't you stay to the board? Look,

694
00:34:55,560 --> 00:34:58,040
Speaker 2: here's the trade off. Either we spend one hundred million

695
00:34:58,080 --> 00:35:01,040
Speaker 2: dollars now and be able to compete with them, or

696
00:35:01,080 --> 00:35:05,319
Speaker 2: we and and lose some stock price for a couple

697
00:35:05,360 --> 00:35:09,239
Speaker 2: of quarters or years, or we're dead. Those are your choices.

698
00:35:09,440 --> 00:35:12,000
Speaker 2: You want, you want a little bit of a pullback

699
00:35:12,040 --> 00:35:15,200
Speaker 2: now or you just want to go bankrupt.

700
00:35:15,440 --> 00:35:17,799
Speaker 1: Retail's a notoriously hard business. It could be a low

701
00:35:17,880 --> 00:35:20,919
Speaker 1: margin and they have to manage to Wall Street quarter

702
00:35:20,920 --> 00:35:23,600
Speaker 1: after quarter, quarter to quarter, and they couldn't. You know,

703
00:35:23,840 --> 00:35:26,520
Speaker 1: the CEO told me, we couldn't miss one quarter of earnings,

704
00:35:26,600 --> 00:35:29,040
Speaker 1: let alone years of them like Bezos did. I'd be

705
00:35:29,040 --> 00:35:30,840
Speaker 1: out of a job. I would be fired. The company

706
00:35:30,840 --> 00:35:33,600
Speaker 1: could go bankrupt. And that was exactly what was going

707
00:35:33,600 --> 00:35:35,480
Speaker 1: on in every company that was trying to compete with them,

708
00:35:35,600 --> 00:35:37,120
Speaker 1: to the point where so many of them had to

709
00:35:37,120 --> 00:35:40,400
Speaker 1: outsource their logistics to Amazon, which is their main competitor.

710
00:35:40,680 --> 00:35:44,560
Speaker 2: Go through the list Toys, r US, Linens and things Target.

711
00:35:44,680 --> 00:35:48,040
Speaker 2: Why on earth would Target, which is a giant company,

712
00:35:48,239 --> 00:35:50,800
Speaker 2: outsource its e commerce to Amazon.

713
00:35:50,880 --> 00:35:53,080
Speaker 1: Well, Jerry Storch, who was the see of Toys r US,

714
00:35:53,120 --> 00:35:55,799
Speaker 1: first Target on dot com, and he told me a

715
00:35:55,840 --> 00:35:58,640
Speaker 1: story that he got yelled at by senior leaders for

716
00:35:58,719 --> 00:36:02,240
Speaker 1: spending ten thousand dollars on buying the domain name Target

717
00:36:02,239 --> 00:36:02,920
Speaker 1: stores dot com.

718
00:36:02,920 --> 00:36:05,480
Speaker 2: That's an amazing story in the book, which is like

719
00:36:05,840 --> 00:36:08,759
Speaker 2: ten thousand dollars for a domat like that is around.

720
00:36:08,520 --> 00:36:10,520
Speaker 1: It to be so careful with their money because it's

721
00:36:10,520 --> 00:36:15,080
Speaker 1: a hard business, right, and so yeah, Target Borders Toys

722
00:36:15,160 --> 00:36:18,279
Speaker 1: r US and they they had to outsource it, which

723
00:36:18,280 --> 00:36:21,239
Speaker 1: meant Amazon kept their customer data. They paid Amazon a

724
00:36:21,239 --> 00:36:23,880
Speaker 1: fee for shipping it, they paid Amazon a fee for

725
00:36:24,040 --> 00:36:27,880
Speaker 1: listing it. They paid Amazon all these fees, and Amazon

726
00:36:27,920 --> 00:36:29,120
Speaker 1: had all the upside and.

727
00:36:29,080 --> 00:36:31,040
Speaker 2: They figured out, you write in the book, they figured

728
00:36:31,040 --> 00:36:33,800
Speaker 2: out that if they were losing sixty five seventy million

729
00:36:33,880 --> 00:36:36,919
Speaker 2: dollars a year on their site, hey we could charge

730
00:36:36,960 --> 00:36:39,160
Speaker 2: them fifty million and it's a cost saving for them.

731
00:36:39,239 --> 00:36:44,120
Speaker 1: Yeah, they just can The lowshold just astonishing.

732
00:36:44,560 --> 00:36:48,080
Speaker 2: So let's stay with books for a minute. I'm fascinated

733
00:36:48,120 --> 00:36:52,719
Speaker 2: that Barnes and Noble tries to respond very aggressively to Amazon,

734
00:36:52,920 --> 00:36:56,560
Speaker 2: and they figure, we're going to take over wholesaleer Ingram

735
00:36:56,800 --> 00:36:59,759
Speaker 2: in order to get a little more bulk, be able

736
00:36:59,800 --> 00:37:03,680
Speaker 2: to stands Amazon, which at that point had become a

737
00:37:03,719 --> 00:37:08,759
Speaker 2: substantial market share of the book selling world. And Amazon

738
00:37:08,840 --> 00:37:12,280
Speaker 2: gets the takeover stopped on anti trust grounds. How ironic?

739
00:37:12,640 --> 00:37:13,759
Speaker 2: Explain what happened there.

740
00:37:13,880 --> 00:37:16,400
Speaker 1: Yeah, so Barnes and Noble, in order to stay competitive,

741
00:37:16,440 --> 00:37:19,520
Speaker 1: tries to buy Ingram, this book distributor that Amazon also used,

742
00:37:20,040 --> 00:37:22,279
Speaker 1: and Amazon cried foul and said the should be an

743
00:37:22,280 --> 00:37:27,080
Speaker 1: antitrust violation. And basically, Amazon even today sometimes has this

744
00:37:27,120 --> 00:37:29,760
Speaker 1: mentality that they are the David going up against Goliath,

745
00:37:29,800 --> 00:37:31,480
Speaker 1: even though that has not been true for a very

746
00:37:31,560 --> 00:37:34,319
Speaker 1: very long time, including in that anecdote, Amazon by market

747
00:37:34,400 --> 00:37:36,719
Speaker 1: value was way bigger than Barnes and Noble at that time.

748
00:37:36,760 --> 00:37:38,960
Speaker 1: And Len Reggio, the CEO of Barnes and Noble at

749
00:37:38,960 --> 00:37:42,080
Speaker 1: the time, calls them out on it. He says, you're

750
00:37:42,120 --> 00:37:44,040
Speaker 1: crying fall and pretending like this is going to hurt

751
00:37:44,239 --> 00:37:47,719
Speaker 1: this little player, but you are the behemoth here. You

752
00:37:47,719 --> 00:37:49,359
Speaker 1: know that the regulators do turn it down.

753
00:37:49,719 --> 00:37:54,080
Speaker 2: So we were talking earlier about Amazon's lack of profitability

754
00:37:54,080 --> 00:37:57,640
Speaker 2: for the first couple of years. It's kind of interesting

755
00:37:57,680 --> 00:38:01,719
Speaker 2: how Bezos's initial share hold your letter, I want to

756
00:38:01,760 --> 00:38:05,279
Speaker 2: say ninety six something like that, seventy seven, the same

757
00:38:05,360 --> 00:38:09,719
Speaker 2: year as the IPO warrant investors not to expect profits

758
00:38:09,760 --> 00:38:12,600
Speaker 2: for years to come. We're going to spend a billion

759
00:38:12,680 --> 00:38:17,839
Speaker 2: dollars building out our website. Not only did this not

760
00:38:17,920 --> 00:38:21,960
Speaker 2: have a negative impact, Wall Street applauded the profitless growth.

761
00:38:22,000 --> 00:38:25,320
Speaker 2: Tell us a little bit about what an advantage and

762
00:38:25,719 --> 00:38:29,440
Speaker 2: how prescient that shareholder letter from Bezos was.

763
00:38:29,920 --> 00:38:33,440
Speaker 1: I mean, he trained his shareholders essentially to not expect anything,

764
00:38:33,480 --> 00:38:35,840
Speaker 1: and he was very clear communicating that. But it also

765
00:38:35,920 --> 00:38:39,440
Speaker 1: just gave them roadway to take all their money and say,

766
00:38:39,480 --> 00:38:41,239
Speaker 1: you know, books are not the bi all end all.

767
00:38:41,280 --> 00:38:43,000
Speaker 1: We're going to use this as a test case. We're

768
00:38:43,000 --> 00:38:44,200
Speaker 1: going to make some money, and then we're going to

769
00:38:44,239 --> 00:38:46,520
Speaker 1: take all that money and put it into expanding our verticals.

770
00:38:46,840 --> 00:38:48,680
Speaker 1: Let's open this up to toys, Let's open this up

771
00:38:48,719 --> 00:38:51,320
Speaker 1: to electronics. It allowed them to build the Everything store,

772
00:38:51,760 --> 00:38:53,600
Speaker 1: and then it allowed them to put this money toward

773
00:38:53,840 --> 00:38:57,360
Speaker 1: other areas of growth beyond retail and really create this

774
00:38:57,440 --> 00:38:58,640
Speaker 1: Amazon octopus.

775
00:38:59,680 --> 00:39:03,960
Speaker 2: To say the very least, let's talk about Amazon Web Services.

776
00:39:04,400 --> 00:39:06,680
Speaker 2: I love the part of the book where you describe

777
00:39:06,719 --> 00:39:10,719
Speaker 2: how this became a thing every time they would stand

778
00:39:10,800 --> 00:39:13,640
Speaker 2: up a new vertical or open a new division, and

779
00:39:13,800 --> 00:39:15,680
Speaker 2: people forget what it was like in the nineties and

780
00:39:15,719 --> 00:39:19,640
Speaker 2: early two thousands before there was an AWS. You ought

781
00:39:19,680 --> 00:39:22,200
Speaker 2: to go out and buy a couple of hundred servers

782
00:39:22,280 --> 00:39:25,600
Speaker 2: and a lot of software engineers to put this together

783
00:39:25,640 --> 00:39:27,280
Speaker 2: and to manage it. And then you had to build

784
00:39:27,520 --> 00:39:30,600
Speaker 2: like you were reinventing the wheel every time there was

785
00:39:30,640 --> 00:39:34,799
Speaker 2: a new startup. Tell us about how Andy Jassey kind

786
00:39:34,880 --> 00:39:37,000
Speaker 2: of looked at this and said, hey, why don't we

787
00:39:37,080 --> 00:39:39,680
Speaker 2: just do this once and scale it for ourselves and

788
00:39:40,080 --> 00:39:42,319
Speaker 2: maybe someone else will want to buy the access from us.

789
00:39:42,400 --> 00:39:44,960
Speaker 1: Yeah. So Andy Jasse, who's the CEO today, started at

790
00:39:44,960 --> 00:39:47,080
Speaker 1: Amazon a few like a little bit before the IPO,

791
00:39:47,280 --> 00:39:49,960
Speaker 1: so he's been there from the early days. Amazon's retail

792
00:39:49,960 --> 00:39:52,600
Speaker 1: business was expanding so rapidly, and they had so much

793
00:39:52,680 --> 00:39:55,440
Speaker 1: data and they needed so much computing power that they

794
00:39:55,480 --> 00:39:58,319
Speaker 1: were continuously adding that to their own business, and they

795
00:39:58,360 --> 00:40:00,440
Speaker 1: got good at it. Jeff and and and a few

796
00:40:00,440 --> 00:40:02,640
Speaker 1: other people started figuring out like, hey, yeah, we're a

797
00:40:02,680 --> 00:40:05,000
Speaker 1: retail company, but we're also good at this technology stuff.

798
00:40:05,080 --> 00:40:08,080
Speaker 1: If we need this, other companies probably also need this

799
00:40:08,120 --> 00:40:11,759
Speaker 1: as they explore expanding online. So they productized it. They

800
00:40:11,800 --> 00:40:15,040
Speaker 1: created a company called Amazon Web Services. It was very

801
00:40:15,120 --> 00:40:17,120
Speaker 1: iffy as to whether this would take off. They didn't

802
00:40:17,120 --> 00:40:19,240
Speaker 1: dedicate a ton of resources to it at the beginning.

803
00:40:19,920 --> 00:40:23,280
Speaker 1: Andy remembers sheepishly asking for like a few dozen employees

804
00:40:23,320 --> 00:40:24,640
Speaker 1: to work on it with him and thought that was

805
00:40:24,640 --> 00:40:27,120
Speaker 1: like a big deal standalone. If this were to be

806
00:40:27,160 --> 00:40:28,800
Speaker 1: split off from Amazon, would be one of the biggest

807
00:40:28,800 --> 00:40:30,720
Speaker 1: tech companies in the world on its.

808
00:40:30,640 --> 00:40:34,160
Speaker 2: Own right, and one of the biggest sources of profits

809
00:40:34,160 --> 00:40:35,240
Speaker 2: for Amazon.

810
00:40:34,840 --> 00:40:36,800
Speaker 1: As well, an enormous source of profits.

811
00:40:36,960 --> 00:40:39,880
Speaker 2: So they start out with storage, they start out, they

812
00:40:39,960 --> 00:40:43,680
Speaker 2: had computes, They had a number of different services that

813
00:40:43,960 --> 00:40:47,080
Speaker 2: just allow anybody, you don't have to go buy a

814
00:40:47,080 --> 00:40:51,279
Speaker 2: bunch of servers, and that really led to an enormous

815
00:40:51,760 --> 00:40:55,000
Speaker 2: adoption cycle by a lot of tech startups, a lot

816
00:40:55,000 --> 00:40:57,399
Speaker 2: of small companies that hey, you don't need one hundred

817
00:40:57,440 --> 00:40:59,840
Speaker 2: million dollars worth of junkets, two guys on a laptop,

818
00:41:00,040 --> 00:41:01,360
Speaker 2: you can launch a business exactly.

819
00:41:01,440 --> 00:41:03,000
Speaker 1: And also a lot of their competitors, a lot of

820
00:41:03,000 --> 00:41:08,200
Speaker 1: their fiercest competitors, Netflix, Apple use as the CIA uses aws, right,

821
00:41:08,239 --> 00:41:11,319
Speaker 1: So this is a really entrenched business product for them,

822
00:41:11,680 --> 00:41:13,399
Speaker 1: and it's very sticky. Once you're on it, you don't

823
00:41:13,400 --> 00:41:13,879
Speaker 1: really leave.

824
00:41:14,160 --> 00:41:17,960
Speaker 2: So it's kind of interesting what happens in other areas

825
00:41:18,080 --> 00:41:21,560
Speaker 2: of Amazon, where there's supposed to be a Chinese wall

826
00:41:21,680 --> 00:41:25,920
Speaker 2: between you as a customer of their corporate services and

827
00:41:25,960 --> 00:41:28,279
Speaker 2: the rest of their business. But you described time and

828
00:41:28,320 --> 00:41:31,479
Speaker 2: time again in the book how that Chinese wall really

829
00:41:31,480 --> 00:41:35,480
Speaker 2: doesn't exist. Anybody has access to everything throughout the company.

830
00:41:35,719 --> 00:41:38,279
Speaker 2: Let's talk a little bit about marketplace, all right. So

831
00:41:38,320 --> 00:41:43,200
Speaker 2: originally Amazon, Chase, Deebay launched an auction site. It actually failed,

832
00:41:43,680 --> 00:41:46,600
Speaker 2: and the pivot was to marketplace. Hey, let's bring in

833
00:41:46,680 --> 00:41:50,480
Speaker 2: third party sellers of stuff rather than auctions, just selling

834
00:41:50,520 --> 00:41:53,759
Speaker 2: it at standard prices. That's now more than half of

835
00:41:53,880 --> 00:41:54,800
Speaker 2: the business.

836
00:41:54,960 --> 00:41:56,880
Speaker 1: It's more than sixty percent of their real Wow.

837
00:41:57,160 --> 00:42:02,680
Speaker 2: That's amazing. So that becomes wildly successful. But all of

838
00:42:02,719 --> 00:42:07,279
Speaker 2: these small businesses that sell in marketplace, they haven't been

839
00:42:07,400 --> 00:42:10,640
Speaker 2: very happy with how marketplace works. Tell us what's going on.

840
00:42:10,840 --> 00:42:13,880
Speaker 1: Yeah, they have this uncomfortable situation of selling on marketplace,

841
00:42:13,920 --> 00:42:17,800
Speaker 1: relying on it for their income, but then also seeing

842
00:42:17,880 --> 00:42:20,560
Speaker 1: a lot of their products that they've gone to great

843
00:42:20,640 --> 00:42:24,200
Speaker 1: lengths to use RND to create showing up in very

844
00:42:24,440 --> 00:42:27,120
Speaker 1: similar versions on Amazon's private label side of the business

845
00:42:27,160 --> 00:42:30,359
Speaker 1: called Amazon Basics or Amazon Essentials. And for years they've

846
00:42:30,360 --> 00:42:33,800
Speaker 1: alleged that Amazon stole my idea, and Amazon has always

847
00:42:34,160 --> 00:42:37,640
Speaker 1: very vocally refuted that notion. They say, you know this

848
00:42:37,760 --> 00:42:40,760
Speaker 1: is there's firewalls. We would never copy our own sellers,

849
00:42:41,400 --> 00:42:43,880
Speaker 1: and they've they've disputed that, and I was able to

850
00:42:44,200 --> 00:42:46,960
Speaker 1: get documentation and find the receipts that they've been doing

851
00:42:47,000 --> 00:42:48,160
Speaker 1: this for a very long time.

852
00:42:48,239 --> 00:42:51,000
Speaker 2: So let's put a little flesh on that. So Amazon

853
00:42:51,080 --> 00:42:54,839
Speaker 2: is both the platform to these third party sellers as

854
00:42:54,880 --> 00:42:59,040
Speaker 2: well as a original competitor, not merely selling other people's

855
00:42:59,080 --> 00:43:02,760
Speaker 2: products but creating their own. Anything that's a hot seller

856
00:43:02,880 --> 00:43:06,680
Speaker 2: on Amazon, they are aware of through their own data,

857
00:43:06,800 --> 00:43:08,640
Speaker 2: and they look at it. They look at the margin,

858
00:43:08,680 --> 00:43:10,520
Speaker 2: and they figure out how cheaply can we make this

859
00:43:11,000 --> 00:43:13,359
Speaker 2: and how much do we want to go after this.

860
00:43:13,840 --> 00:43:16,359
Speaker 2: They've been pretty aggressive about that, haven't they They have.

861
00:43:16,480 --> 00:43:19,400
Speaker 1: I mean, the documents that I was given shows how

862
00:43:19,440 --> 00:43:22,400
Speaker 1: they reverse engineer these best selling products, and they have

863
00:43:22,480 --> 00:43:26,240
Speaker 1: everything from the number of items sold to the cost

864
00:43:26,640 --> 00:43:29,480
Speaker 1: to sell them, to the number of returns to the margins.

865
00:43:29,520 --> 00:43:31,960
Speaker 1: There's twenty five different fields that the employees on the

866
00:43:31,960 --> 00:43:34,880
Speaker 1: private label side of the company who have been told

867
00:43:35,040 --> 00:43:37,480
Speaker 1: you probably shouldn't be doing this. There's policies in place

868
00:43:37,480 --> 00:43:40,520
Speaker 1: at Amazon that are essentially not enforced, and because they're

869
00:43:40,560 --> 00:43:42,600
Speaker 1: afraid of losing their jobs and not hitting their numbers,

870
00:43:42,600 --> 00:43:45,600
Speaker 1: they've often resorted to looking over the fence and taking

871
00:43:45,640 --> 00:43:49,160
Speaker 1: this type of data to reverse engineer best selling hits

872
00:43:49,160 --> 00:43:51,360
Speaker 1: because it makes them look good and it keeps their jobs.

873
00:43:51,719 --> 00:43:55,279
Speaker 1: And Amazon, even under oath, told Congress that they were

874
00:43:55,320 --> 00:43:56,000
Speaker 1: not doing this.

875
00:43:56,520 --> 00:43:59,600
Speaker 2: Really, yes, under oath, and yet it's pretty obvious they've

876
00:43:59,600 --> 00:44:01,760
Speaker 2: been doing that and doing it for a long time.

877
00:44:02,080 --> 00:44:06,359
Speaker 2: Let's talk a little bit about Alexa and how they

878
00:44:06,400 --> 00:44:09,160
Speaker 2: sent up a venture funds that was very different than

879
00:44:09,160 --> 00:44:11,640
Speaker 2: the typical venture funds. Tell us a little bit about

880
00:44:11,640 --> 00:44:15,600
Speaker 2: what's going on with Voice and Alexa inside of Amazon.

881
00:44:15,719 --> 00:44:18,280
Speaker 1: Yeah, Amazon was one of the pioneers of this voice

882
00:44:18,320 --> 00:44:21,959
Speaker 1: technology and you know these voice assisted robots, and as such,

883
00:44:21,960 --> 00:44:24,799
Speaker 1: they set up this vcarm called the Alexa Fund. And

884
00:44:24,840 --> 00:44:27,640
Speaker 1: what I learned was that a pattern played out. They'd

885
00:44:27,640 --> 00:44:30,000
Speaker 1: have all of these CEOs and founders pitch them on

886
00:44:30,040 --> 00:44:33,439
Speaker 1: getting money and seed investments for their companies, and under

887
00:44:33,440 --> 00:44:36,680
Speaker 1: the auspices of either getting an investment or being bought

888
00:44:36,680 --> 00:44:39,000
Speaker 1: by Amazon's M and A arm, they'd share all of

889
00:44:39,040 --> 00:44:43,760
Speaker 1: their proprietary data things like, you know, their patents, their technologies,

890
00:44:44,280 --> 00:44:46,000
Speaker 1: all the stuff that companies go to great lengths to

891
00:44:46,040 --> 00:44:48,120
Speaker 1: keep secret because they think they're getting an investment. And

892
00:44:48,200 --> 00:44:51,879
Speaker 1: time and time again, Amazon would take that information, bring

893
00:44:51,920 --> 00:44:54,160
Speaker 1: the heads of different Amazon businesses to these meetings to

894
00:44:54,239 --> 00:44:57,719
Speaker 1: learn from it, and then ghost them and introduce the

895
00:44:57,719 --> 00:44:59,600
Speaker 1: same exact product from an Amazon brand.

896
00:45:00,280 --> 00:45:04,239
Speaker 2: Later you talk about the firewalls and the vcs, and

897
00:45:04,800 --> 00:45:09,680
Speaker 2: one entrepreneur is in a meeting with a bunch of people, Hey,

898
00:45:09,719 --> 00:45:11,799
Speaker 2: who are those guys? I know you are? And who

899
00:45:11,800 --> 00:45:14,800
Speaker 2: are who are these guys? And it turns out they're

900
00:45:14,840 --> 00:45:18,240
Speaker 2: the product heads that are going to be making the competing,

901
00:45:18,320 --> 00:45:22,600
Speaker 2: competing product. It's really the the I like the VC

902
00:45:22,840 --> 00:45:26,600
Speaker 2: quote Amazon is a wolf in wolf's clothing, Like there's

903
00:45:26,640 --> 00:45:31,480
Speaker 2: a very really not even a big attempt to hide it.

904
00:45:32,160 --> 00:45:35,919
Speaker 2: A different part of the book describes an entrepreneur where

905
00:45:35,960 --> 00:45:38,400
Speaker 2: there are people in the room with their arms closed,

906
00:45:38,440 --> 00:45:44,080
Speaker 2: looking bored and like not usual venture capital behavior if

907
00:45:44,080 --> 00:45:47,759
Speaker 2: you're really interested in this technology. They eventually figure out

908
00:45:48,040 --> 00:45:53,600
Speaker 2: this is just a Yeah, that was fishing is too kind?

909
00:45:54,200 --> 00:45:58,960
Speaker 2: You call it specifically VC espionage. Talk a little bit

910
00:45:58,960 --> 00:46:02,960
Speaker 2: about how misleading even the NDA's were. The non disclosure.

911
00:46:03,000 --> 00:46:04,640
Speaker 1: Oh my god, this was galling to me as a

912
00:46:04,680 --> 00:46:06,920
Speaker 1: deal geek who covered M and A. I asked some

913
00:46:07,000 --> 00:46:08,799
Speaker 1: of these founders I spoke to for the book to

914
00:46:08,840 --> 00:46:11,400
Speaker 1: send me all the documents that Amazon gave them prior

915
00:46:11,440 --> 00:46:13,560
Speaker 1: to these meetings, and I read them very thoroughly and

916
00:46:13,600 --> 00:46:16,879
Speaker 1: found something called a residual's clause buried in the legal ease,

917
00:46:17,360 --> 00:46:21,320
Speaker 1: and it basically said that anything retained in the memories

918
00:46:21,640 --> 00:46:25,160
Speaker 1: of Amazon executives at these meetings where proprietary stuff is

919
00:46:25,160 --> 00:46:28,399
Speaker 1: being disclosed could be used by Amazon in their own

920
00:46:28,440 --> 00:46:32,319
Speaker 1: business without any legal repercussion. So it's a license to steal.

921
00:46:32,840 --> 00:46:35,680
Speaker 2: So essentially, and I keep coming back to this from

922
00:46:35,680 --> 00:46:40,200
Speaker 2: the original d Shaw issue the culture at Amazon. They

923
00:46:40,320 --> 00:46:43,680
Speaker 2: hired senior lawyers from some of the best firms. It

924
00:46:43,800 --> 00:46:47,960
Speaker 2: seems like ethics is completely irrelevant. It seems like this

925
00:46:48,000 --> 00:46:52,480
Speaker 2: is a group of rogue capitalists who are just rapacious

926
00:46:52,760 --> 00:46:59,399
Speaker 2: in their greed regardless of ethics and business standards. They're

927
00:46:59,480 --> 00:47:03,600
Speaker 2: just opera reading in a gray zone of legality, but

928
00:47:03,760 --> 00:47:06,359
Speaker 2: in a very black and white zone of ethics. These

929
00:47:06,400 --> 00:47:08,160
Speaker 2: are bad people doing bad things.

930
00:47:08,560 --> 00:47:10,920
Speaker 1: The interesting thing is so many of my sources for

931
00:47:10,960 --> 00:47:14,120
Speaker 1: this book are the people doing the bad things, because

932
00:47:14,160 --> 00:47:16,600
Speaker 1: once they take a step back from Amazon and they

933
00:47:16,640 --> 00:47:19,680
Speaker 1: realized how this company pushed them to their breaking point,

934
00:47:20,120 --> 00:47:21,640
Speaker 1: that it made them do things that they would not

935
00:47:21,719 --> 00:47:24,120
Speaker 1: have done at a company that was not so cutthroat.

936
00:47:24,440 --> 00:47:26,760
Speaker 2: They feel bad, Well they should. They have a guilty

937
00:47:26,800 --> 00:47:29,800
Speaker 2: conscious because they did really bad things for the money.

938
00:47:29,840 --> 00:47:32,040
Speaker 2: They could feel bad about it after the fact. But

939
00:47:32,160 --> 00:47:35,840
Speaker 2: let's be blunts. They had big stock options and reasonable

940
00:47:35,880 --> 00:47:39,040
Speaker 2: pay packages. And if you're coming over from a top

941
00:47:39,080 --> 00:47:42,280
Speaker 2: twenty law firm where you're giving up a seven figure job,

942
00:47:42,719 --> 00:47:44,680
Speaker 2: you're doing it because you have the chance to make

943
00:47:44,719 --> 00:47:48,600
Speaker 2: ten figures in your stock options. So I feel bad

944
00:47:48,800 --> 00:47:53,440
Speaker 2: that they feel bad. Not really, they did bad things

945
00:47:53,520 --> 00:47:55,920
Speaker 2: because they were in for the money and they realized

946
00:47:56,360 --> 00:47:58,480
Speaker 2: the trade off wasn't worth it. Sell your soul for

947
00:47:58,480 --> 00:48:00,920
Speaker 2: a few bucks, you still made to deal with the devil.

948
00:48:01,360 --> 00:48:03,200
Speaker 1: I would agree with you. And you know, that's the

949
00:48:03,239 --> 00:48:04,960
Speaker 1: one thing I wanted to depict in this book is

950
00:48:04,960 --> 00:48:06,600
Speaker 1: the human toll of that. I mean, when I was

951
00:48:06,640 --> 00:48:09,680
Speaker 1: reporting out that chapter, you're just describing the founders that

952
00:48:09,719 --> 00:48:11,880
Speaker 1: would cry to me on the phone about what happened

953
00:48:11,920 --> 00:48:14,880
Speaker 1: to their companies, how Amazon just decimated them. It was

954
00:48:15,040 --> 00:48:17,680
Speaker 1: really hard reporting, just as a journalist to like internalize

955
00:48:17,719 --> 00:48:20,040
Speaker 1: a lot of that. This company that didn't need to

956
00:48:20,080 --> 00:48:22,840
Speaker 1: do these things to win chose to rit and it

957
00:48:22,920 --> 00:48:27,200
Speaker 1: cost people their jobs, their livelihoods, their technologies at what costs.

958
00:48:27,440 --> 00:48:29,520
Speaker 2: Let's talk a little bit about diapers dot com and

959
00:48:29,600 --> 00:48:32,880
Speaker 2: what was the parent company, Quizzy Quizzy Quizzy, So this

960
00:48:32,960 --> 00:48:36,239
Speaker 2: is kind of interesting. Amazon can't figure out how to

961
00:48:36,239 --> 00:48:41,799
Speaker 2: ship diapers quickly, right, And moms are a giant demographic

962
00:48:41,840 --> 00:48:44,120
Speaker 2: in retail. I think the book says they make eighty

963
00:48:44,120 --> 00:48:48,560
Speaker 2: four percent of the consumer spending the controls in the household. Like, there,

964
00:48:48,600 --> 00:48:51,640
Speaker 2: you win the moms, you win retail. And these guys

965
00:48:51,680 --> 00:48:54,880
Speaker 2: have figured out how to have diapers arrived next day, like,

966
00:48:55,320 --> 00:48:59,600
Speaker 2: they figured out how to reach moms. And Amazon decides

967
00:48:59,640 --> 00:49:03,480
Speaker 2: to go out after them, and they start predatory pricing,

968
00:49:03,640 --> 00:49:09,200
Speaker 2: selling diapers twenty percent below cost, which one would think

969
00:49:10,160 --> 00:49:11,560
Speaker 2: is illegal, isn't that.

970
00:49:11,960 --> 00:49:14,480
Speaker 1: Yeah, it's the definition of predatory pricing. It's twenty ten.

971
00:49:14,640 --> 00:49:17,760
Speaker 1: Jeff Bezos becomes laser focused on Quidzy, which is started

972
00:49:17,760 --> 00:49:20,840
Speaker 1: by these two entrepreneurs that are like the first people

973
00:49:20,880 --> 00:49:22,920
Speaker 1: in their in their families to even go to college, right,

974
00:49:22,960 --> 00:49:26,160
Speaker 1: these are homegrown talent, Mark Lori and Vinie Berra, Right.

975
00:49:26,719 --> 00:49:30,040
Speaker 1: And he puts together a team to essentially spy on

976
00:49:30,120 --> 00:49:32,680
Speaker 1: them and figure out how they do it, and Amazon

977
00:49:32,719 --> 00:49:35,520
Speaker 1: starts to really cut the prices of their own diapers

978
00:49:35,560 --> 00:49:38,160
Speaker 1: thirty percent. They cut the price of their diapers so

979
00:49:38,320 --> 00:49:40,920
Speaker 1: much that they start losing two hundred million dollars a

980
00:49:40,960 --> 00:49:44,680
Speaker 1: month just on diapers. According to internal documents.

981
00:49:43,400 --> 00:49:46,920
Speaker 2: That's two point two billion a year on diapers.

982
00:49:46,480 --> 00:49:48,640
Speaker 1: Along because they were so threatened by this little startup

983
00:49:48,640 --> 00:49:53,040
Speaker 1: in New Jersey. Okay, and Amazon eventually makes a buyout

984
00:49:53,040 --> 00:49:54,680
Speaker 1: offer to this firm, but they don't want to do

985
00:49:54,719 --> 00:49:56,520
Speaker 1: it because they're doing so well they think they could

986
00:49:56,520 --> 00:49:58,879
Speaker 1: ipo one day, so they turn them down. So then

987
00:49:58,920 --> 00:50:02,879
Speaker 1: Amazon ratchets up the heat, cuts price of diapers more,

988
00:50:03,160 --> 00:50:06,000
Speaker 1: creates this loyalty program to incentivize moms to shop with

989
00:50:06,040 --> 00:50:09,520
Speaker 1: Amazon not Quidzy, and it becomes to the point where

990
00:50:09,520 --> 00:50:11,920
Speaker 1: it's untenable for the quizy people. They start missing their

991
00:50:11,920 --> 00:50:14,640
Speaker 1: internal numbers. They have to start considering a sale. Unfortunately,

992
00:50:14,640 --> 00:50:17,920
Speaker 1: they're really crestfallen about that Amazon's one of the biggest

993
00:50:17,920 --> 00:50:19,840
Speaker 1: players in the space. They even have to consider an

994
00:50:19,880 --> 00:50:22,560
Speaker 1: offer from the person that did this to them. Okay,

995
00:50:23,080 --> 00:50:26,040
Speaker 1: So they're at this private dinner with Amazon executives discussing

996
00:50:26,080 --> 00:50:29,080
Speaker 1: this offer. They don't want to sell to Amazon. And

997
00:50:29,600 --> 00:50:32,799
Speaker 1: Mark Lori's BlackBerry at the time gets an email pop

998
00:50:32,880 --> 00:50:35,640
Speaker 1: up and it's an offer from Walmart, and they're excited

999
00:50:35,680 --> 00:50:36,399
Speaker 1: to for.

1000
00:50:36,400 --> 00:50:38,480
Speaker 2: Like one hundred million dollars more than the five and

1001
00:50:38,600 --> 00:50:41,400
Speaker 2: change exactly five point fifty Amazon head offers it's a.

1002
00:50:41,440 --> 00:50:44,319
Speaker 1: Higher offer and it's not the company that's destroyed them.

1003
00:50:44,320 --> 00:50:46,160
Speaker 1: So they go in the hallway, they discuss it, and

1004
00:50:46,160 --> 00:50:48,680
Speaker 1: they say, let's take this Walmart offer. They go back

1005
00:50:48,719 --> 00:50:50,799
Speaker 1: into the room with the Amazon executives. They say, hey,

1006
00:50:50,880 --> 00:50:52,359
Speaker 1: just want to let you know we got this offer.

1007
00:50:52,400 --> 00:50:54,719
Speaker 1: It's better for a shareholders. We're going to go in

1008
00:50:54,760 --> 00:50:58,280
Speaker 1: this direction. And they're told by a senior Amazon executive, Okay,

1009
00:50:58,920 --> 00:51:00,319
Speaker 1: you go ahead and do that, and we'll go to

1010
00:51:00,360 --> 00:51:01,960
Speaker 1: cut the price of our diapers to zero.

1011
00:51:02,200 --> 00:51:04,720
Speaker 2: That seems legal, right, We're going to give our diapers

1012
00:51:04,760 --> 00:51:06,440
Speaker 2: a way to put you out of business and prevent

1013
00:51:06,480 --> 00:51:08,720
Speaker 2: you from selling to our competitor Walmart.

1014
00:51:08,760 --> 00:51:11,359
Speaker 1: Right. And the people in that room knew that if

1015
00:51:11,400 --> 00:51:15,560
Speaker 1: Walmart had decided to acquire Quidzy and Amazon put them

1016
00:51:15,560 --> 00:51:17,839
Speaker 1: out of you know, created this pricing war that they

1017
00:51:17,840 --> 00:51:19,520
Speaker 1: were selling diapers for either zero or.

1018
00:51:19,480 --> 00:51:23,520
Speaker 2: Like a dollar material change exactly. In fact, elements that

1019
00:51:23,640 --> 00:51:25,280
Speaker 2: would lead to the deal falling apart.

1020
00:51:25,400 --> 00:51:28,120
Speaker 1: Walmart could back away from the deal scot free, so

1021
00:51:28,160 --> 00:51:30,600
Speaker 1: they were forced to sell to their main competitor who

1022
00:51:30,600 --> 00:51:32,520
Speaker 1: put them in this position. And this created, you know,

1023
00:51:32,600 --> 00:51:35,319
Speaker 1: generational wealth for those two men who didn't even go

1024
00:51:35,360 --> 00:51:37,600
Speaker 1: to for a drink to celebrate because they were so upset.

1025
00:51:38,160 --> 00:51:40,400
Speaker 2: Now, what what did they end up doing in the

1026
00:51:40,400 --> 00:51:42,840
Speaker 2: future post that that purchase?

1027
00:51:42,880 --> 00:51:46,600
Speaker 1: Oh, they shut it down. They shut down quids They.

1028
00:51:46,480 --> 00:51:49,720
Speaker 2: Just took all the clients. They took the few years

1029
00:51:49,960 --> 00:51:52,560
Speaker 2: and then eventually was folded in. The two guys who

1030
00:51:52,640 --> 00:51:54,640
Speaker 2: created Quidcy. Did they do anything else in the field?

1031
00:51:54,719 --> 00:51:57,160
Speaker 1: Now, Mark Lori went on to start a company called

1032
00:51:57,239 --> 00:51:57,800
Speaker 1: jet dot.

1033
00:51:57,680 --> 00:52:00,120
Speaker 2: Com, he said, Which gets why.

1034
00:51:59,680 --> 00:52:02,759
Speaker 1: Walmt by it for a very significant sum, a couple

1035
00:52:02,800 --> 00:52:04,440
Speaker 1: of billion. Body now owns if you live in New York,

1036
00:52:04,440 --> 00:52:07,120
Speaker 1: there's a place called Wonder, this restaurant company that is

1037
00:52:07,400 --> 00:52:10,040
Speaker 1: I actually really like Wonder. So he's doing that now,

1038
00:52:10,080 --> 00:52:12,200
Speaker 1: So I mean this, He's gone on to do really

1039
00:52:12,239 --> 00:52:12,640
Speaker 1: big things.

1040
00:52:12,680 --> 00:52:16,080
Speaker 2: So the fascinating thing is, after being forced to sell

1041
00:52:16,160 --> 00:52:21,000
Speaker 2: the diapers dot Com company to Amazon, Jet dot Com

1042
00:52:21,040 --> 00:52:25,680
Speaker 2: became essentially the back end of all of Walmart online retailing.

1043
00:52:26,160 --> 00:52:29,680
Speaker 2: So I want to say he got a little bit

1044
00:52:29,719 --> 00:52:35,120
Speaker 2: of payback. Whether whether or not he, you know, put

1045
00:52:35,120 --> 00:52:37,520
Speaker 2: as much pain to Amazon as Amazon put to him

1046
00:52:37,600 --> 00:52:41,040
Speaker 2: is arguable. But it was pretty obvious, and you make

1047
00:52:41,080 --> 00:52:44,240
Speaker 2: it clear in the book he was imagine getting bought

1048
00:52:44,239 --> 00:52:47,919
Speaker 2: for five hundred and fifty million dollars and leaving dejected.

1049
00:52:48,200 --> 00:52:49,880
Speaker 2: I know, it's kind of amazing.

1050
00:52:50,040 --> 00:52:51,600
Speaker 1: It is, it really is. I mean, I just I

1051
00:52:51,640 --> 00:52:53,640
Speaker 1: think it speaks to like the pain and suffering they

1052
00:52:53,680 --> 00:52:55,600
Speaker 1: went through with this M and A battle.

1053
00:52:55,960 --> 00:52:57,600
Speaker 2: What are the things that kind of shocked me. You

1054
00:52:57,680 --> 00:53:03,359
Speaker 2: mentioned what a difficult a place to work Amazon is.

1055
00:53:03,960 --> 00:53:08,480
Speaker 2: They even backload their stock options. Your stock options are

1056
00:53:08,560 --> 00:53:10,840
Speaker 2: like if you work at Google or somewhere else, you

1057
00:53:10,880 --> 00:53:13,680
Speaker 2: get stock options and they'll vest in three years and

1058
00:53:13,760 --> 00:53:15,880
Speaker 2: you could start selling. At least that's what it used

1059
00:53:15,920 --> 00:53:17,240
Speaker 2: to be. I don't know what it is these days,

1060
00:53:17,520 --> 00:53:21,840
Speaker 2: but they backloaded. It's five fifteen. Year three is forty

1061
00:53:21,840 --> 00:53:25,000
Speaker 2: percent of your stock options. Year four is forty percent.

1062
00:53:25,360 --> 00:53:27,480
Speaker 2: You really have to stick it out, don't you.

1063
00:53:27,880 --> 00:53:31,000
Speaker 1: Yeah, And that creates this pernicious cycle. The average white

1064
00:53:31,040 --> 00:53:33,200
Speaker 1: collar employee at Amazon lasts a year and a half.

1065
00:53:33,280 --> 00:53:35,560
Speaker 1: That's a major so most of them leave their stock

1066
00:53:35,600 --> 00:53:37,480
Speaker 1: options on the table. But if you want to get

1067
00:53:37,480 --> 00:53:39,759
Speaker 1: your full payout, you have to survive. You have to

1068
00:53:39,800 --> 00:53:42,279
Speaker 1: not be part of that bottom six percent. And that

1069
00:53:42,320 --> 00:53:45,080
Speaker 1: creates that pressure cooker of an environment that I talk about.

1070
00:53:45,440 --> 00:53:49,840
Speaker 2: So let's ask the question about the big question. Is

1071
00:53:50,000 --> 00:53:53,359
Speaker 2: Amazon a monopoly? Have they remade corporate power in their

1072
00:53:53,400 --> 00:53:57,960
Speaker 2: own image? And what sort of antitrust enforcement might we

1073
00:53:58,040 --> 00:53:59,040
Speaker 2: expect in the future.

1074
00:53:59,239 --> 00:54:02,120
Speaker 1: Well around the world, including our government, have said it

1075
00:54:02,160 --> 00:54:05,040
Speaker 1: is a monopoly. The Federal Trade Commission filed a lawsuit

1076
00:54:05,080 --> 00:54:08,520
Speaker 1: last year saying it's an illegal monopoly, and the lawsuit

1077
00:54:08,560 --> 00:54:09,799
Speaker 1: says it could be broken up.

1078
00:54:10,440 --> 00:54:13,480
Speaker 2: What about Europe, they've been pretty strict about Amazon as well.

1079
00:54:13,760 --> 00:54:15,840
Speaker 1: The ear was way ahead of us on policing our

1080
00:54:15,880 --> 00:54:20,680
Speaker 1: own giants. Marguerite Bestare was looking into Amazon, Facebook, Google,

1081
00:54:20,840 --> 00:54:23,080
Speaker 1: and Apple years ago and people thought she was crazy.

1082
00:54:23,560 --> 00:54:26,240
Speaker 2: Right, So we're recording this a week before the election.

1083
00:54:26,360 --> 00:54:27,960
Speaker 2: We don't know what the outcome is going to be,

1084
00:54:28,480 --> 00:54:33,319
Speaker 2: but it appears that no matter who wins, Amazon's going

1085
00:54:33,400 --> 00:54:38,920
Speaker 2: to stay in the FTC's crosshairs. Because Lena Kahan works

1086
00:54:39,000 --> 00:54:44,320
Speaker 2: for the Biden Harris administration, the assumption is if Harris wins,

1087
00:54:44,360 --> 00:54:49,239
Speaker 2: she continues, and Trump really dislikes Bezos because of his

1088
00:54:49,239 --> 00:54:52,680
Speaker 2: ownership with The Washington Post and has said Amazon should

1089
00:54:52,719 --> 00:54:57,439
Speaker 2: be broken up. What's it like inside the lobbying arm

1090
00:54:57,520 --> 00:54:59,520
Speaker 2: of Amazon heading into this election.

1091
00:55:00,000 --> 00:55:03,360
Speaker 1: It's really fascinating. I don't know which administration they would

1092
00:55:03,360 --> 00:55:05,560
Speaker 1: want to win. They you know, they had a really

1093
00:55:05,600 --> 00:55:08,480
Speaker 1: painful four years under Trump where he was just berating

1094
00:55:08,520 --> 00:55:11,640
Speaker 1: them online every day, alleging that Jeff Bezos was using

1095
00:55:11,640 --> 00:55:14,080
Speaker 1: the Washington Post as a political tool to.

1096
00:55:14,080 --> 00:55:16,240
Speaker 2: Attack him to the Amazon Washington Post.

1097
00:55:16,040 --> 00:55:20,400
Speaker 1: Amazon Washington Post, that should be a lobbyist, according to him.

1098
00:55:20,760 --> 00:55:22,520
Speaker 1: So that was like super painful. But then the Biden

1099
00:55:22,560 --> 00:55:25,719
Speaker 1: administration came in where they had good connections, and that

1100
00:55:25,840 --> 00:55:27,800
Speaker 1: was even more painful in some ways. You know, Biden

1101
00:55:27,880 --> 00:55:30,200
Speaker 1: chooses Lena Khan to be the head of the FTC.

1102
00:55:30,760 --> 00:55:33,719
Speaker 1: She brings forward the lawsuit against Amazon for being a monopoly.

1103
00:55:34,360 --> 00:55:37,320
Speaker 1: So either way, it's not like a really great outcome

1104
00:55:37,400 --> 00:55:38,240
Speaker 1: for that company.

1105
00:55:38,560 --> 00:55:41,240
Speaker 2: You know. The interesting thing about the anti trust enforcement

1106
00:55:41,280 --> 00:55:46,000
Speaker 2: against Microsoft in the nineties was just having that enforcement

1107
00:55:46,040 --> 00:55:48,919
Speaker 2: hanging over their head was enough to allow all these

1108
00:55:48,960 --> 00:55:53,080
Speaker 2: small companies to get out from under you know, every

1109
00:55:53,160 --> 00:55:57,000
Speaker 2: startup had to deal with the question every software startup, Hey,

1110
00:55:57,040 --> 00:55:59,840
Speaker 2: what's going to prevent Microsoft from just building these features

1111
00:56:00,120 --> 00:56:05,719
Speaker 2: to office or into Windows? And it was really challenging.

1112
00:56:05,760 --> 00:56:09,680
Speaker 2: The anti trust enforcements seem to have forced them to

1113
00:56:09,880 --> 00:56:12,320
Speaker 2: behave better and that, you know, that was the Cambrian

1114
00:56:12,360 --> 00:56:17,000
Speaker 2: explosion of dot COM's Might we see something similar with Amazon?

1115
00:56:17,120 --> 00:56:22,040
Speaker 2: Might online retail expand from the forty percent market share

1116
00:56:22,080 --> 00:56:25,880
Speaker 2: Amazon has elsewhere if this anti trustwork is enforced.

1117
00:56:26,400 --> 00:56:28,959
Speaker 1: You know, the big question is will this FTC suit

1118
00:56:29,000 --> 00:56:32,440
Speaker 1: have a chilling effect on the way Amazon behaves? I

1119
00:56:32,480 --> 00:56:35,239
Speaker 1: would say they have more competition these days, Timu and

1120
00:56:35,280 --> 00:56:39,400
Speaker 1: Shean are you know, these low cost Chinese marketplaces. But

1121
00:56:39,560 --> 00:56:42,200
Speaker 1: I don't see any changes to the way Amazon is operating.

1122
00:56:42,320 --> 00:56:44,160
Speaker 1: You know, Andy Jasse there's a scoop in the book.

1123
00:56:44,320 --> 00:56:47,799
Speaker 1: He's telling his deputies, you know, at around the same

1124
00:56:47,800 --> 00:56:49,759
Speaker 1: time that they have this historic lawsuit against them for

1125
00:56:49,800 --> 00:56:52,120
Speaker 1: being too big, that they should be so much bigger.

1126
00:56:52,160 --> 00:56:55,200
Speaker 1: He tells them, we should be a ten trillion dollar company. Okay,

1127
00:56:55,280 --> 00:56:57,799
Speaker 1: so how do you get to ten trillion dollars when

1128
00:56:57,840 --> 00:57:00,560
Speaker 1: you're two trillion dollars. It's competing the way you're you've

1129
00:57:00,560 --> 00:57:01,600
Speaker 1: been competing.

1130
00:57:01,800 --> 00:57:06,160
Speaker 2: Putting it, supersizing it. And since we're talking about antitrust enforcement,

1131
00:57:06,600 --> 00:57:10,760
Speaker 2: it's kind of fascinating that the entire we've had forty

1132
00:57:10,880 --> 00:57:15,920
Speaker 2: years of lacks anti trust enforcement, dating back to the

1133
00:57:15,920 --> 00:57:19,320
Speaker 2: Reagan administration and Judge Bork, who was one of the

1134
00:57:19,360 --> 00:57:25,360
Speaker 2: big advocates of moving away from historical anti trust enforcement.

1135
00:57:25,560 --> 00:57:29,160
Speaker 2: You describe in the book. Lena Khan is a twenty

1136
00:57:29,240 --> 00:57:33,680
Speaker 2: seven year old law student at Yale. She writes a

1137
00:57:33,800 --> 00:57:39,600
Speaker 2: law review paper on how much Amazon is monopoly? And

1138
00:57:39,720 --> 00:57:42,480
Speaker 2: when was the last time a law review paper when

1139
00:57:42,600 --> 00:57:45,920
Speaker 2: viral like this? This completely upended what was going on.

1140
00:57:46,000 --> 00:57:47,439
Speaker 2: Tell us a little bit about Lena Khan.

1141
00:57:47,640 --> 00:57:50,160
Speaker 1: Yeah, she was this law school student at Yale, where

1142
00:57:50,200 --> 00:57:53,120
Speaker 1: actually Bork had been a professor, and she writes this

1143
00:57:53,360 --> 00:57:56,360
Speaker 1: seminal law review article saying that the antitrust laws the

1144
00:57:56,360 --> 00:57:59,160
Speaker 1: way that they're being interpreted, partially because of Bork, are

1145
00:57:59,200 --> 00:58:02,680
Speaker 1: failingstomers and consumers in the US, and that Amazon's the

1146
00:58:02,680 --> 00:58:06,640
Speaker 1: prime example of this. That Amazon is a monopoly and

1147
00:58:06,680 --> 00:58:08,840
Speaker 1: it's allowed to be monopoly because we're not enforcing her

1148
00:58:08,840 --> 00:58:11,320
Speaker 1: anti trust laws the way that they were first derived.

1149
00:58:11,600 --> 00:58:13,840
Speaker 1: And this might be the only time that a law

1150
00:58:13,880 --> 00:58:16,320
Speaker 1: review article goes viral. Millions of people read this thing,

1151
00:58:16,400 --> 00:58:21,000
Speaker 1: including legislators, CEOs. It gets picked up by the New

1152
00:58:21,120 --> 00:58:24,000
Speaker 1: York Times, right, it becomes this like zeitgeist type of movement.

1153
00:58:24,000 --> 00:58:27,040
Speaker 1: It's the first time that people start equating this company

1154
00:58:27,080 --> 00:58:29,880
Speaker 1: with the smile on the box, with potentially being a monopoly.

1155
00:58:30,600 --> 00:58:34,720
Speaker 1: And she starts to with this other band of trustbusters

1156
00:58:34,800 --> 00:58:38,360
Speaker 1: start to reshape this moment in time about whether anti

1157
00:58:38,360 --> 00:58:40,840
Speaker 1: trust laws are failing Americans. She makes the.

1158
00:58:40,800 --> 00:58:44,720
Speaker 2: Point that the way Amazon has become a monopoly and

1159
00:58:44,840 --> 00:58:48,800
Speaker 2: abuses its platform power is very reminiscent of what we

1160
00:58:48,840 --> 00:58:52,200
Speaker 2: saw under standard Oil and Rockefeller tell us a little

1161
00:58:52,200 --> 00:58:56,600
Speaker 2: bit about some of the abusive uses of their power

1162
00:58:56,840 --> 00:58:58,800
Speaker 2: that manifest in their growth.

1163
00:58:59,000 --> 00:59:02,320
Speaker 1: Yeah. So, she points to predatory pricing that Amazon was

1164
00:59:02,400 --> 00:59:05,000
Speaker 1: undercutting the market in those early days in order to

1165
00:59:05,000 --> 00:59:07,120
Speaker 1: steal share from rivals and put them out of business.

1166
00:59:07,400 --> 00:59:09,960
Speaker 1: She also says they're like a utility, that this isn't

1167
00:59:09,960 --> 00:59:12,080
Speaker 1: a company that you might want to work with. You

1168
00:59:12,160 --> 00:59:13,720
Speaker 1: sort of have to work with them if you want

1169
00:59:13,760 --> 00:59:16,600
Speaker 1: to reach shoppers, and that has power over the sellers

1170
00:59:16,600 --> 00:59:19,160
Speaker 1: on their website, where they could you know, Jack up fees.

1171
00:59:19,640 --> 00:59:22,840
Speaker 1: It has power over lots of different competitors that feel

1172
00:59:22,880 --> 00:59:25,440
Speaker 1: like they're forced to work with their main rival in

1173
00:59:25,520 --> 00:59:26,960
Speaker 1: order to access markets.

1174
00:59:26,680 --> 00:59:28,000
Speaker 2: And share a lot of data a lot of their

1175
00:59:29,000 --> 00:59:32,000
Speaker 2: rather not as well as by advertising from them.

1176
00:59:32,040 --> 00:59:33,960
Speaker 1: Advertising is another area.

1177
00:59:33,520 --> 00:59:36,480
Speaker 2: In the book. You talk about how when Amazon enters

1178
00:59:36,520 --> 00:59:41,080
Speaker 2: into the marketplace with a competitive product, they shut off

1179
00:59:41,120 --> 00:59:43,440
Speaker 2: their competitors' ability to advertise that.

1180
00:59:43,400 --> 00:59:46,400
Speaker 1: Product they do, and that's you know, advertisings become so

1181
00:59:46,720 --> 00:59:49,200
Speaker 1: core to being successful as a seller on Amazon dot

1182
00:59:49,240 --> 00:59:52,360
Speaker 1: Com because there's millions of other sellers that flywheel that

1183
00:59:52,400 --> 00:59:54,840
Speaker 1: if you don't buy advertising, you're not showing up in search.

1184
00:59:55,080 --> 00:59:57,840
Speaker 1: And what did Amazon do Roku, which makes a competing

1185
00:59:58,040 --> 01:00:00,520
Speaker 1: device for them for streaming TV, all of a sudden

1186
01:00:00,560 --> 01:00:02,880
Speaker 1: they can't buy ads anymore. You know, this happened across

1187
01:00:02,880 --> 01:00:03,960
Speaker 1: the device's space.

1188
01:00:04,320 --> 01:00:06,120
Speaker 2: And so the anti trust law is, Hey, if you

1189
01:00:06,120 --> 01:00:07,920
Speaker 2: want to be a platform, you could be a platform.

1190
01:00:07,920 --> 01:00:10,000
Speaker 2: If you want to be a retailer, you could be

1191
01:00:10,040 --> 01:00:15,120
Speaker 2: a retailer, but you can't tie your platform advertising into

1192
01:00:15,280 --> 01:00:18,720
Speaker 2: reducing the competitiveness of your products versus other people.

1193
01:00:18,800 --> 01:00:20,640
Speaker 1: Well, that's where the Congress was alleging that if you

1194
01:00:20,680 --> 01:00:23,760
Speaker 1: can't own the world's biggest online platform and also compete

1195
01:00:23,800 --> 01:00:25,200
Speaker 1: on it, that it has to be one or the.

1196
01:00:25,200 --> 01:00:28,120
Speaker 2: Other spin out that separate business and.

1197
01:00:28,960 --> 01:00:32,120
Speaker 1: Do FTC lawsuits a little bit different. She alleges that actually,

1198
01:00:32,160 --> 01:00:35,240
Speaker 1: in this current form, Amazon's become the monopoly. They don't

1199
01:00:35,240 --> 01:00:37,680
Speaker 1: have to do predatory pricing anymore. They could actually exert

1200
01:00:37,720 --> 01:00:40,080
Speaker 1: their power on their sellers. You know, a decade ago,

1201
01:00:40,240 --> 01:00:43,400
Speaker 1: the average seller in Amazon gave nineteen cents on the

1202
01:00:43,440 --> 01:00:46,080
Speaker 1: dollar back to Amazon and fees. Today that's forty five

1203
01:00:46,120 --> 01:00:49,040
Speaker 1: cents on the dollar. That's unbelievable, and that means those

1204
01:00:49,080 --> 01:00:51,240
Speaker 1: sellers have had to raise the price of their goods

1205
01:00:51,320 --> 01:00:52,800
Speaker 1: to cover Amazon's margin.

1206
01:00:52,760 --> 01:00:55,120
Speaker 2: Or reduce their own margin or their own margin.

1207
01:00:55,280 --> 01:00:58,840
Speaker 1: And the FTC lawsuit says, because Amazon's so big and

1208
01:00:58,880 --> 01:01:01,640
Speaker 1: they require those sellers to also have the lowest price

1209
01:01:01,680 --> 01:01:03,760
Speaker 1: in Amazon, that they have to raise the price on

1210
01:01:03,800 --> 01:01:05,560
Speaker 1: Target dot Com and Walmart dot Com and on and

1211
01:01:05,600 --> 01:01:08,040
Speaker 1: on and on, and it's created higher prices for all

1212
01:01:08,080 --> 01:01:08,400
Speaker 1: of us.

1213
01:01:08,640 --> 01:01:11,280
Speaker 2: Huh, So are you an Amazon Prime member? Do you

1214
01:01:11,360 --> 01:01:12,040
Speaker 2: use Amazon?

1215
01:01:12,640 --> 01:01:15,800
Speaker 1: We have a Prime account because my husband watches football

1216
01:01:15,840 --> 01:01:18,000
Speaker 1: and they have Thursday Night Football. We don't really shop

1217
01:01:18,040 --> 01:01:18,760
Speaker 1: on it though.

1218
01:01:18,640 --> 01:01:22,160
Speaker 2: You don't very rarely. Huh, that's really interesting. All right,

1219
01:01:22,240 --> 01:01:24,920
Speaker 2: Let's jump to our favorite questions. We ask all of

1220
01:01:24,920 --> 01:01:28,480
Speaker 2: our guests starting with, so what are you streaming these days?

1221
01:01:28,600 --> 01:01:30,880
Speaker 2: What are you either listening to on Audible? What are

1222
01:01:30,920 --> 01:01:34,360
Speaker 2: you watching on Amazon Prime or Netflix or Apple Plus?

1223
01:01:34,400 --> 01:01:37,040
Speaker 2: What was keeping you entertained besides Thursday Night Football?

1224
01:01:37,480 --> 01:01:40,520
Speaker 1: I watch Nobody Wants This. That was very good, charming,

1225
01:01:40,880 --> 01:01:43,360
Speaker 1: really really good. I listened to my favorite murder. It's

1226
01:01:43,400 --> 01:01:45,840
Speaker 1: a true crime podcast. I'm a Murder, you know they

1227
01:01:45,840 --> 01:01:46,120
Speaker 1: call it.

1228
01:01:46,560 --> 01:01:50,240
Speaker 2: Tell us about your early mentors who helped shape your career.

1229
01:01:50,360 --> 01:01:52,320
Speaker 1: Oh gosh, I have so many of them. Joanne Lublin,

1230
01:01:52,480 --> 01:01:56,680
Speaker 1: who was this dynamo at the Wall Street Journal, Danis Simaluka,

1231
01:01:56,720 --> 01:01:58,440
Speaker 1: my former boss at the Wall Street Journal on M

1232
01:01:58,440 --> 01:02:01,800
Speaker 1: and A Jamie Heller who's now the CEO of Business Insider,

1233
01:02:02,320 --> 01:02:05,680
Speaker 1: Dennis Berman, who is an amazing m and a reporter

1234
01:02:05,720 --> 01:02:07,600
Speaker 1: at the Journal. And Drew Dowell, I would say, who

1235
01:02:08,120 --> 01:02:09,360
Speaker 1: he's now overseas for us.

1236
01:02:09,640 --> 01:02:12,160
Speaker 2: Let's talk about books. What are your favorites? What are

1237
01:02:12,160 --> 01:02:13,120
Speaker 2: you reading right now?

1238
01:02:13,200 --> 01:02:15,680
Speaker 1: So some of my favorites are The Moonstone by Wilkie

1239
01:02:15,720 --> 01:02:19,600
Speaker 1: Collins it's like one of the first Victorian detective mysteries.

1240
01:02:19,760 --> 01:02:21,919
Speaker 1: I love the Bronts and Jane Austin. I know that's

1241
01:02:21,960 --> 01:02:26,400
Speaker 1: like pretty trite. I'm reading some just fun Halloween type

1242
01:02:26,400 --> 01:02:29,080
Speaker 1: of books right now, this book called Lucy Fowley called

1243
01:02:29,160 --> 01:02:31,840
Speaker 1: The Midnight Feast. That's been really fun. And I love

1244
01:02:31,880 --> 01:02:35,760
Speaker 1: Sally Rooney. I have her new book ready to read

1245
01:02:35,800 --> 01:02:36,439
Speaker 1: after this one.

1246
01:02:36,600 --> 01:02:39,280
Speaker 2: All right, our final two questions. What sort of advice

1247
01:02:39,280 --> 01:02:42,600
Speaker 2: would you give to a recent college grad interested in

1248
01:02:42,640 --> 01:02:47,200
Speaker 2: a career in either journalism, m and a retail what's

1249
01:02:47,200 --> 01:02:49,320
Speaker 2: your advice journalism?

1250
01:02:49,360 --> 01:02:52,120
Speaker 1: It's I mean, you have to hustle. I would say

1251
01:02:52,640 --> 01:02:55,120
Speaker 1: it's to get as many bylines as you can, even

1252
01:02:55,120 --> 01:02:57,800
Speaker 1: if it's not at one of the prestige newspapers. At first,

1253
01:02:58,280 --> 01:02:59,800
Speaker 1: I fully believe the way I got hired at the

1254
01:03:00,440 --> 01:03:04,640
Speaker 1: was freelancing my college papers. My college you know, articles

1255
01:03:04,680 --> 01:03:06,880
Speaker 1: to other places to get a byline in places in

1256
01:03:07,080 --> 01:03:09,960
Speaker 1: tiny newspapers that probably don't exist anymore. And you just

1257
01:03:10,040 --> 01:03:12,400
Speaker 1: have to be reporting around you all the time, making

1258
01:03:12,440 --> 01:03:15,960
Speaker 1: sources wherever you are, keeping a great rolodex. So I

1259
01:03:15,960 --> 01:03:17,840
Speaker 1: think that's the most important thing you could do.

1260
01:03:18,480 --> 01:03:21,800
Speaker 2: And what do you know about the world of journalism today.

1261
01:03:22,360 --> 01:03:24,680
Speaker 2: You wish you knew twenty years or so ago when

1262
01:03:24,680 --> 01:03:26,720
Speaker 2: you were first starting out.

1263
01:03:27,440 --> 01:03:30,520
Speaker 1: Oh my gosh. When I first started out, dot com

1264
01:03:30,640 --> 01:03:33,400
Speaker 1: was like not even that much of a thing, right,

1265
01:03:33,560 --> 01:03:36,240
Speaker 1: you know. The WSJ dot Com was this like bastard

1266
01:03:36,280 --> 01:03:39,560
Speaker 1: step child, right, And that's that's what I was put on. Actually,

1267
01:03:41,960 --> 01:03:44,040
Speaker 1: I think I wish I knew that you just have

1268
01:03:44,120 --> 01:03:49,080
Speaker 1: to be so resilient in this profession that if you're

1269
01:03:49,080 --> 01:03:50,880
Speaker 1: doing your job well, it means a lot of rejection.

1270
01:03:51,080 --> 01:03:52,840
Speaker 1: That you're gonna cold call people and they're gonna hang

1271
01:03:52,920 --> 01:03:55,480
Speaker 1: up on you, and that's fine, cold call the next one.

1272
01:03:55,480 --> 01:03:57,120
Speaker 1: You just get up again and get up again, because

1273
01:03:57,320 --> 01:03:59,040
Speaker 1: so much of journalism is a numbers game.

1274
01:04:00,080 --> 01:04:03,480
Speaker 2: Really really interesting. Thank you, Dana for being so generous

1275
01:04:03,520 --> 01:04:07,200
Speaker 2: with your time. We have been speaking with Dana Mattioli.

1276
01:04:07,400 --> 01:04:10,840
Speaker 2: She covers Amazon for The Wall Street Journal and is

1277
01:04:10,880 --> 01:04:14,640
Speaker 2: the author of the book The Everything War, Amazon's ruthless

1278
01:04:14,720 --> 01:04:18,440
Speaker 2: quest to own the world and remake corporate power. If

1279
01:04:18,480 --> 01:04:21,080
Speaker 2: you enjoy this conversation, well be sure and check out

1280
01:04:21,120 --> 01:04:23,720
Speaker 2: any of the five hundred or so previous discussions we've

1281
01:04:23,720 --> 01:04:26,959
Speaker 2: had over the past ten years. You can find those

1282
01:04:27,000 --> 01:04:32,240
Speaker 2: at iTunes, Spotify, YouTube, Bloomberg, wherever you find your favorite podcast,

1283
01:04:32,560 --> 01:04:34,919
Speaker 2: and be sure and check out my new short forum

1284
01:04:35,040 --> 01:04:40,200
Speaker 2: podcast At the Money, Short conversations with experts about single

1285
01:04:40,280 --> 01:04:44,320
Speaker 2: topics that affect your money, earning it, spending it, and

1286
01:04:44,400 --> 01:04:47,960
Speaker 2: most importantly investing it At the Money, in the Master's

1287
01:04:48,040 --> 01:04:51,600
Speaker 2: and Business feed, or wherever you find your favorite podcast,

1288
01:04:52,200 --> 01:04:53,880
Speaker 2: I would be remiss if I do not thank the

1289
01:04:53,880 --> 01:04:57,040
Speaker 2: correct team that helps us put these conversations together each week.

1290
01:04:57,360 --> 01:05:00,960
Speaker 2: Sarah Livesey is my audio engineer. Jone Russo is my

1291
01:05:01,120 --> 01:05:05,280
Speaker 2: head of research. Anna Luke is my producer. Sage Bauman

1292
01:05:05,360 --> 01:05:08,840
Speaker 2: is the head of podcasts at Bloomberg. I'm Barry Bertolts.

1293
01:05:09,120 --> 01:05:12,840
Speaker 2: You've been listening to Masters in Business on Bloomberg Radio.