Speaker 1: Business journalism proves the old adage that truth is stranger
Speaker 1: than fiction. You literally cannot make these stories up. The
Speaker 1: Unrun story was a complete game changer in my career
Speaker 1: because n Run became this cultural moment in American history.
Speaker 1: This major American company, with these executives who were supposed
Speaker 1: to be the smartest guys in the room, could collapse
Speaker 1: into bankruptcy in the space of about six months. But
Speaker 1: a lot of people who become investigative journalists set out
Speaker 1: to be that they want to go shed light on
Speaker 1: wrongdoing in corporate America. I didn't necessarily set out to
Speaker 1: do that, and I still don't. I'm primarily driven by curiosity.
Speaker 1: I want to explain things. I'm Bethany McClain. This is
Speaker 1: making a killing. If you type relentless dot com into
Speaker 1: your browser, you'll be redirected to Amazon dot com. Relentless
Speaker 1: was the original name that Jeff Bezos wanted for Amazon,
Speaker 1: and now more than ever, we can understand why the
Speaker 1: company that started out selling books is in so many
Speaker 1: ways today the Everything store. In nineteen ninety six, Amazon
Speaker 1: had one hundred and fifty one employees and five point
Speaker 1: one million dollars in revenue. Last year, Amazon had six
Speaker 1: hundred and forty seven thousand, five hundred employees and total
Speaker 1: revenue across all its business segments, which obviously includes a
Speaker 1: lot more than books these days, of two hundred and
Speaker 1: thirty two point eight nine billion. Its net income, though,
Speaker 1: was only ten billion dollars. Amazon has long been criticized
Speaker 1: for its risky strategy of inefficiency, burning capital without delivering
Speaker 1: consistent profits, but this strategy helped it dominate several key
Speaker 1: markets online retail, ebooks, audio books, cloud computing, to name
Speaker 1: just a very few, and it keeps on coming. There's
Speaker 1: Amazon grocery, Amazon restaurants, Amazon healthcare. There's so much to
Speaker 1: understand about Amazon, and given its rate of growth and
Speaker 1: change lately, it can feel a little dizzying. But my
Speaker 1: main interest is not in whatever the latest daily headlines
Speaker 1: are about the company. I'm interested in what all those
Speaker 1: headlines add up to, taken as a whole, what Amazon
Speaker 1: has become, what industries it has disrupted and forever changed,
Speaker 1: and ultimately what that means for all of us because okay,
Speaker 1: not quite all of us, but most of us are
Speaker 1: Amazon's customers. I'll confess to getting boxes on a frighteningly
Speaker 1: regular basis. That means, in a sense, where Amazon's enablers
Speaker 1: as it decimate its other businesses, from our neighborhood bookstores
Speaker 1: to now our grocery stores to maybe our pharmacies. If
Speaker 1: ultimately it's Amazon's world and we just live in it,
Speaker 1: is that a good thing? Can Amazon be trusted to
Speaker 1: wield its ever growing power benevolently or are we all
Speaker 1: going to come to regret the monster we've created? Is
Speaker 1: Amazon a modern day Frankenstein? My guest now is Seth Godin,
Speaker 1: who hardly needs an introduction. Seth and I share a
Speaker 1: publishing on the Mater portfolio, the business imprint of Penguin
Speaker 1: Random House, and one of my memories from long ago
Speaker 1: as of my publisher handing me sus remarkable book, Purple Cow.
Speaker 1: But it's hard to believe this is the first time
Speaker 1: we're actually meeting live. He's exactly who I wanted to
Speaker 1: talk to in order to dive into questions of Amazon
Speaker 1: and publishing, but also retail in marketing and trust Sas
Speaker 1: latest book, This Is Marketing, is a New York Times bestseller.
Speaker 1: I know it's supposedly terrible podcasting to talk about something
Speaker 1: only we can see, so let me just what we're
Speaker 1: looking at. There are these two pictures of Jeff Bezos
Speaker 1: side by side. On the left is this nineteen ninety
Speaker 1: eight Jeff looking very gentle and sweet and a frumpy
Speaker 1: brown sweater like a New York City book editor. This
Speaker 1: Jeff's caption is I sell books. Over on the right
Speaker 1: is Jeff from twenty seventeen with a shaved head, aviator, glasses,
Speaker 1: black vest, muscles, bulging, very badass, looking like he should
Speaker 1: be the lead in the next Fast and Furious movie.
Speaker 1: This Jeff's caption is I saw whatever the fuck I want.
Speaker 1: I love this because it's just the perfect metaphor for
Speaker 1: Amazon's evolution, the change from selling books to selling everything
Speaker 1: but more as this attitude of relentlessness is relentless. The
Speaker 1: right word seth well. Relentless was Jeff's word. The original
Speaker 1: name for Amazon was relentless dot com. I think it's
Speaker 1: important to differentiate between the media's perception of Amazon as
Speaker 1: the work of someone who has a plan about what
Speaker 1: he's going to sell on how he's going to sell it.
Speaker 1: It's more are about the system and if we can
Speaker 1: understand the systems analysis of what is it like to
Speaker 1: work there what is it like to sell there, what
Speaker 1: is it like to be an investor? Each of the
Speaker 1: elements of the system add up into the Amazon as
Speaker 1: we experience it. I don't think Jeff could change the
Speaker 1: system by himself, even if he wanted to. He's responsible
Speaker 1: for the system. We are all impacted by the system.
Speaker 1: But what we're going to need to understand is systems
Speaker 1: that end up changing our culture at some level are
Speaker 1: on us because we are the culture, and we as
Speaker 1: a people have the privilege and the possibility of changing
Speaker 1: systems if it's important enough to us. We just can't
Speaker 1: wait till it's too late, because if we do, then
Speaker 1: we don't get to change the system. It's interesting because
Speaker 1: I mentioned this analogy of Amazon as being like Frankenstein,
Speaker 1: and it's an interesting comparison because when you talk about
Speaker 1: even Jeff bez As being unable to control the monster
Speaker 1: he's created, right, it's taken on a life of its own.
Speaker 1: What are the key ingredients in that system that make
Speaker 1: it so powerful or make it so disruptive. Well, so
Speaker 1: let's talk about the Amazon we see, not Amazon Web
Speaker 1: services or the other things that contribute most of their profit. Yeah,
Speaker 1: but the Amazon that we see is a company that
Speaker 1: sells everything. They don't sell anything, and that's a really
Speaker 1: big distinction. Most of the retail that we've ever seen
Speaker 1: in our whole lives is run by merchants, and merchants
Speaker 1: are driven by the idea that they have a limited
Speaker 1: amount of shelf space. So there's a skill and a
Speaker 1: talent and a gift involved in being a good merchant.
Speaker 1: Selectivity and curation, and not just curation, but owning the
Speaker 1: outcome of what you just did. So when Nieman Marcus
Speaker 1: pushes a certain kind of look, or when an item
Speaker 1: is sold in a chain of car stores and a
Speaker 1: different item isn't these have impacts on us. Amazon began
Speaker 1: with the insight that there's infinite shelf space, and therefore
Speaker 1: the entire organization is built around we sell everything, and
Speaker 1: no one here has the power to sell a thing.
Speaker 1: So the entire system is run by an algorithm, and
Speaker 1: the algorithm says this click, this moment, this bit on
Speaker 1: the screen, what's its maximum value today? And the problem
Speaker 1: with day trading today is you don't know where that
Speaker 1: cycle keeps pushing you. There's no long arc. There's just
Speaker 1: the oh if I use this word instead of that word,
Speaker 1: today's sales go up. And the problem with that is
Speaker 1: it usually leads to a race to the bottom, a
Speaker 1: race to the bottom in what respect in terms of
Speaker 1: the cheapest merchandise wins rather than the quality merchandise. So
Speaker 1: that's a great question. So race to the bottom could
Speaker 1: be make it cheaper so you can sell it cheaper.
Speaker 1: Race to the bottom could be make it more urgent,
Speaker 1: or pander to the people that you're trying to sell
Speaker 1: to make it more vivid. It said that if you
Speaker 1: ab test a website enough, sooner or later it will
Speaker 1: become a porn site because it's really depressing. It is depressing,
Speaker 1: but sooner or later, this picture will get more clicks
Speaker 1: than that picture this claim will get. So if you
Speaker 1: look at the horrible news and the buzzfeedification of the web,
Speaker 1: it didn't happen because Walter Conkite's airs wanted it to happen.
Speaker 1: It happened because the algorithm said, make the headline one
Speaker 1: that people click on. And the same thing's true with
Speaker 1: solar lanterns, and the same things true with paper clips.
Speaker 1: Expand that solar lantern piece of it. You and I
Speaker 1: had discussed that, but expand, expand tell us what happened
Speaker 1: with solar lanterns in the old days. If someone came
Speaker 1: up with an idea for a solar lantern, there wouldn't
Speaker 1: be very many factories that could make one. You would
Speaker 1: take a risk, craft it, bring it to the merchant
Speaker 1: at Walmarter Kmarter Target and say here, I made this.
Speaker 1: The merchant would have to allocate you scarce shelf space.
Speaker 1: You'd have to stand behind it. There might be one
Speaker 1: or two to choose from, and if it was good,
Speaker 1: you would change the culture because you could get a
Speaker 1: piece of the market. In the modern age of infinite
Speaker 1: shelf space with dozens or maybe fifty companies, many of
Speaker 1: them in China, but around the world. Using cheap labor
Speaker 1: and cheap systems, anyone can commission a solar lantern. You
Speaker 1: don't have to have a known brand name. You'll still
Speaker 1: get shelf space. You need reviews, you can buy reviews.
Speaker 1: You can buy reviews for a nickel, And so all
Speaker 1: of a sudden, the consumer who types in solar lantern
Speaker 1: because the search box wins every time you type it in,
Speaker 1: because it's convenient solar lantern, and you end up at
Speaker 1: Amazon's right. But then Amazon search box shows you fifty
Speaker 1: solar lanterns, twenty solar lanterns. Anyone can sell a solar lantern.
Speaker 1: They're sorted by review, but the reviews are fake. And
Speaker 1: which one are you going to buy? They're all the same,
Speaker 1: Buy the cheap one, the algorithm keeps saying, by the
Speaker 1: cheap one. Okay. There's nothing that sounds appealing about this.
Speaker 1: Is there a good side to it? Is there any
Speaker 1: benefit apart from cheaper merchandise. It's all going to work
Speaker 1: itself out in the following way. More access, more choice
Speaker 1: will enable more consumers to make better decisions, and that
Speaker 1: over time, the fake reviews will work themselves out. That
Speaker 1: Amazon will always give you a refund if you say
Speaker 1: my solar lantern is lousy. Amazon's brand is the most
Speaker 1: respected brand in America. You're not going to switch. You
Speaker 1: don't have a lot of choices. This is hypercapitalism. It's
Speaker 1: infinite choice, with nobody being the nanny state, nobody saying
Speaker 1: I'm the merchant, I'm in charge. Instead pick So let's
Speaker 1: go back to this, to the retail part of Amazon,
Speaker 1: this obvious retail part, because I want to push a
Speaker 1: little bit on what the cost of this has been
Speaker 1: and there's this common perception right that it's Amazon that's
Speaker 1: putting retailers out of business Jim Boree Toys r US.
Speaker 1: But this has been happening for a long time. We
Speaker 1: had superstars years ago putting the little guy out of business.
Speaker 1: I remember watching the nineteen ninety eight Tom Hanks make
Speaker 1: Ryan movie You've Got Mail, or the Big Fox Box
Speaker 1: Barnes and Noble look alike as putting cute little shop
Speaker 1: around the corner out of business. Now the bad guy
Speaker 1: is Amazon. So has anything really changed or is this
Speaker 1: just evolution. Well, there's a very long history of retailers
Speaker 1: going out of business, and if Amazon wasn't putting them
Speaker 1: out of business, somebody else would retailers go out of
Speaker 1: business because landlords never go out of business. The question
Speaker 1: for me is what will we do to our culture
Speaker 1: when there is no main Street. I'm not saying that
Speaker 1: our culture can't survive without main Street. I'm saying that
Speaker 1: there's going to be a significant cost to that dislocation.
Speaker 1: Because what main Street does for us, in addition to
Speaker 1: giving us a convenient place to pick up a kind bar,
Speaker 1: is oh there's a bathroom, Oh there's lights, Oh there's
Speaker 1: another human being. Maybe I could have a conversation without
Speaker 1: human being exactly. If you watch enough Old Star Trek,
Speaker 1: you'll come to see there are no stores. No one
Speaker 1: goes shopping in science fiction. You know, I had never
Speaker 1: noticed that, but you're absolutely right. The real question is
Speaker 1: this improvement that's going on making things cheaper. Improvement in quotes, right,
Speaker 1: This improvement in quotes, this change things are cheaper. I
Speaker 1: shop at Amazon all the time because it's more convenient,
Speaker 1: more reliable, cheaper. I like that brand as something that
Speaker 1: makes it easier for me to do my life. Most
Speaker 1: of the cash benefit accrues to the middleman in this
Speaker 1: case Amazon, but it is all being sucked out of somewhere.
Speaker 1: And the question is when that somewhere is gone, what
Speaker 1: will we replace it with? And will we be able
Speaker 1: to fashion another culture, a better culture, one that we're
Speaker 1: proud of when we take away the thing that has
Speaker 1: fueled it. And So, when I think about the book
Speaker 1: industry and the people that I cherish that I've worked
Speaker 1: with for all those years, there isn't going to be
Speaker 1: a New York City book industry in twenty years. It's
Speaker 1: impossible to imagine that it will exist because they don't
Speaker 1: have any friction. If there is no friction, where are
Speaker 1: they going to generate the heat they need to pay
Speaker 1: the bills? They won't be able to. So what will
Speaker 1: those people do? How will we create cycles a forward
Speaker 1: motion that enable people who create, or merchants or people
Speaker 1: who sell, or people who own a factory to thrive
Speaker 1: in a world where there is no friction. It's a
Speaker 1: great irony, isn't it that it is all of us
Speaker 1: Amazon's customers who are enabling something that in the end
Speaker 1: may be very antithetical to our interests. It may not
Speaker 1: be what we want. Is there something or welly in
Speaker 1: about the Amazon that it's going to become? Well? So,
Speaker 1: then the question is, once you build the systems and
Speaker 1: the algorithm, and you are doing it to please the
Speaker 1: public markets, where do we see that the public markets
Speaker 1: have ever been right in their long term perspective about
Speaker 1: what it is to please them? Because the companies that
Speaker 1: we are the most proud of, the ones that we
Speaker 1: point to, aren't the ones that Wall Street is happy
Speaker 1: within the long run. That what it means to be
Speaker 1: to make Wall Street happy in the long run is
Speaker 1: that you are predictably and reliably beating estimates on your
Speaker 1: quarterly earnings per share, yep, not that you're leaving behind
Speaker 1: something better than you found it. So let's pause on
Speaker 1: that point. Because Amazons somehow manage to play the game differently,
Speaker 1: at least for a number of years, in the sense
Speaker 1: that Amazon didn't produce consistent profits, and yet the company
Speaker 1: has had unlimited access to capital raising and a soaring
Speaker 1: stock price. Why were the rules different from Amazon? Why
Speaker 1: was Jeff bez Us able to play by a different
Speaker 1: set of rules, at least in the short term. Well,
Speaker 1: to bring in a overused phrase, Jeff is almost always
Speaker 1: the smartest guy in the room and real, for real,
Speaker 1: no sarcasm in that right. And he understood that something
Speaker 1: was shifting in the stock market because something was shifting
Speaker 1: in the way the Internet worked, and that there are
Speaker 1: stocks that are traded because their numbers make sense, and
Speaker 1: there are stocks that are traded because their story makes sense.
Speaker 1: And if you can have the best story stock and
Speaker 1: there's a limited supply of it, people who want the
Speaker 1: best story stock will buy it. So Jeff said, here's
Speaker 1: what I want you to measure me on, and he
Speaker 1: has regularly exceeded the thing he said to be measured
Speaker 1: on Other companies say you want to be measure us
Speaker 1: on profit, go ahead, measure us on profit. So Jeff's
Speaker 1: consistency in that approach was key. He's vulnerable now for
Speaker 1: the following reason. Lots and lots of the key people
Speaker 1: who he works with need the stock price to keep
Speaker 1: going up. When it was just him, it was okay
Speaker 1: if the story hit a speedboat. But when it's lots
Speaker 1: of people who are all have their hands on the algorithm.
Speaker 1: The challenge you have, and I live through this when
Speaker 1: a Well was my biggest customer, and I live through
Speaker 1: this when I worked at Yahoo, is that these people
Speaker 1: have their hands on the dials and there are decisions
Speaker 1: that they will make based on what Wall Street is
Speaker 1: telling them, because at some point Wall Street always says,
Speaker 1: we heard the story, now we want to go back
Speaker 1: to the thing we like to measure. Jeff business has
Speaker 1: also been able to do something else that I think
Speaker 1: is really interesting, which is that he's created sort of
Speaker 1: this with Amazon Web Services, the cloud computing business. It
Speaker 1: essentially gives him leverage in the retail business that other
Speaker 1: retailers don't have because he's got this money making appendage
Speaker 1: kind of stuck on this mammoth retail business. And so
Speaker 1: I think the AWS accounts for what like one hundred
Speaker 1: and fifty percent of Amazon's operating business, And so how
Speaker 1: does that give Amazon advantages that other retailers don't have? Okay,
Speaker 1: just a little bit of background here. Twenty five years ago,
Speaker 1: the typical newspaper made one hundred and ten percent of
Speaker 1: its profit from classified ads. But people didn't think of
Speaker 1: the newspaper as the classifies with some bonuses. Right well,
Speaker 1: AWS is the invisible cloud in the sky that runs many,
Speaker 1: many websites. And the brilliance that Jeff brought to the
Speaker 1: table was this. He said, I'm going to need something
Speaker 1: like this. If I'm going to need something like this,
Speaker 1: I bet my competitors are going to need something like this.
Speaker 1: And if I'm willing to lose money building it to scale,
Speaker 1: I can erect a moat, so my competitors will need
Speaker 1: to use mine because it's so much cheaper. I want
Speaker 1: to jump in and blow your mind. We all think
Speaker 1: of Amazon as the boxes that show up at our doorstops,
Speaker 1: but that's just the Amazon. We can see the Amazon
Speaker 1: that sells more batteries than drursa more diapers than Pampers.
Speaker 1: CNN famously said Amazon is building an army of brands,
Speaker 1: and their private label sales reach seven point billion last year.
Speaker 1: There are more than one hundred million Americans paying more
Speaker 1: than one hundred dollars a year for the service of
Speaker 1: Amazon Prime, and Amazon commands half of the US e
Speaker 1: commerce market. But the rest of it, the Amazon you
Speaker 1: don't see, is even more staggering. There's Amazon Web Services
Speaker 1: or AWS, which accounted for fifty percent of the company's
Speaker 1: operating and come last year. There's Amazon Video, Amazon Studios,
Speaker 1: Amazon Go, Amazon Fresh, Amazon restaurants, They own whole Foods,
Speaker 1: They acquired an online pharmacy. They are leaders in AI
Speaker 1: and deep learning. Their revenue across all business segments total
Speaker 1: two hundred and thirty two point eight nine billion, that's
Speaker 1: billion with a B last year, up thirty one percent
Speaker 1: from the year before, and there are no signs of
Speaker 1: a slowdown in twenty nineteen. I understand the concept of
Speaker 1: Amazon selling everything and and not selling anything in particular,
Speaker 1: but the question for me is when can they changed
Speaker 1: that dial. And if you look a little bit closer
Speaker 1: into the publishing world, right, Amazon just originally sold books,
Speaker 1: and they didn't sell a particular book. They sold books
Speaker 1: and everybody loved it. But now Amazon is also the publisher,
Speaker 1: the creator, publishing its own books within its own system.
Speaker 1: And so I was struck by this Wall Street Journal
Speaker 1: story that begins with its great anecdote about a guy
Speaker 1: named Mark Sullivan in his book Beneath a Scarlet Sky.
Speaker 1: Amazon published it and effectively used Amazon's tools to make
Speaker 1: it into a best seller. And so what happens if
Speaker 1: Amazon starts working that dial? Okay, so I can talk
Speaker 1: about the book thing from personal experience, because it was
Speaker 1: my idea. I met with Jeff in nineteen ninety five
Speaker 1: and I said, you're already doing the hard part. You
Speaker 1: should do the part about publishing. And he laughed and said,
Speaker 1: not too soon. Five years later I went back. Five
Speaker 1: years later, I went back and about I don't know,
Speaker 1: eight years ago, they called me up and they said, okay,
Speaker 1: we're ready. Now it's time. Now it's time. Now what
Speaker 1: do I mean by the hard part? The hard part
Speaker 1: is they know who the readers are, and they know
Speaker 1: what the readers want. No one in New York has
Speaker 1: ever done that. Random House doesn't know who the readers are.
Speaker 1: Penguin doesn't know what the readers want. There's this disconnect, right.
Speaker 1: Amazon's created a knowledge in exactly. So they ought to
Speaker 1: be able to go to the author and say, based
Speaker 1: on what we know, we can find books for our
Speaker 1: readers instead of you trying to find readers for the books.
Speaker 1: That's a game changer. That's magnificent. They can upend the
Speaker 1: entire system exactly. And this is where that everything and
Speaker 1: anything thing kicks in because guess what Amazon has done.
Speaker 1: Many many books like Sullivan's book, But they're pointing to
Speaker 1: the Sullivan book because it turns out they didn't pick
Speaker 1: his book to be a bestseller. They're playing a portfolio theory.
Speaker 1: Lots of books went through the system and Amazon has
Speaker 1: failed to act as a merchant and say we pick
Speaker 1: this book that in fact, it's a super level playing field.
Speaker 1: They don't promote their books that much more than other
Speaker 1: people's the way a real merchant would do it. They
Speaker 1: don't make other people's books harder to find, the way
Speaker 1: a real merchant would. It's still back to this idea
Speaker 1: of everything. So the egalitarian and me says terrific. Now
Speaker 1: you don't have to look or sound like an author
Speaker 1: to get new York to pick you. You can go
Speaker 1: straight to the Kindle and get twenty of your friends
Speaker 1: to buy your book, and a twenty of your friends
Speaker 1: buy your book on the Kindle and it's amazing, and
Speaker 1: now four million of your friends have bought the book
Speaker 1: and you're a best selling author. But what happens if
Speaker 1: Amazon becomes not just the everything store but the only store?
Speaker 1: Then can't they start to work that lever? Why wouldn't
Speaker 1: they work those levers eventually? Well, everything in their algorithm,
Speaker 1: in their DNA, in their setup is don't work that lever.
Speaker 1: That the entire mindset is the system will figure out
Speaker 1: what's going to be sold. They don't think like direct
Speaker 1: marketers or as marketers. They think like algorithm marketers. Put
Speaker 1: it in tag it properly, see what happens because it
Speaker 1: doesn't cost them anything. Because they know something's going to work,
Speaker 1: doesn't matter to them which one works. That's brand new thinking.
Speaker 1: I am not anti Amazon. I am anti letting an
Speaker 1: algorithm run wild forever. At some point I want human
Speaker 1: beings to stand up and say, we understand the algorithm.
Speaker 1: We're proud of the algorithm. We change the algorithm, and
Speaker 1: this is the problem. We have with Facebook and Google,
Speaker 1: you'd vote for man not machine. Google famously says it's
Speaker 1: not up to us. The algorithm decided to put this
Speaker 1: as the first match. This is nonsense. There are more
Speaker 1: than three thousand people at Google who do nothing but
Speaker 1: tweak the algorithm, but they don't want to accept responsibility
Speaker 1: for the fact that they do that. There are thousands
Speaker 1: of people at Amazon who are working on their search algorithm.
Speaker 1: There are thousands of people Amazon who are figuring out
Speaker 1: what clues and signals you can put next to something
Speaker 1: to move it up or move it down. There are
Speaker 1: lots of things that are built by hand that become
Speaker 1: the rules in the algorithm that shift how entire industries operate.
Speaker 1: Because the algorithm is in just a bunch of code,
Speaker 1: it's a series of principles. Well, then, let me push
Speaker 1: back on your point that there's something non merchant like
Speaker 1: about Amazon, because aren't all those people in effect being
Speaker 1: merchants in that sense that they are influencing the decisions
Speaker 1: we're going to make about how we pick things and
Speaker 1: how we make our selection. Aren't they embedding a humanity
Speaker 1: or a friction into the system, perhaps in a slightly
Speaker 1: different way than a traditional retailer would have. Let me
Speaker 1: try to differentiate what I mean by merchant. In the
Speaker 1: traditional model, a merchant owns twenty square feet of the
Speaker 1: shelf and has a name. The challenge I have here
Speaker 1: are that people who are better at coding than being
Speaker 1: in a community are anonymously making decisions that have ramifications
Speaker 1: far outside their twenty square feet right, and when we
Speaker 1: see the bad outcomes of that, we don't even know
Speaker 1: who to ask. Not only that, but we can't determine
Speaker 1: whether it's an innocent side effect or the point you
Speaker 1: seem perhaps a little more optimistic than I would expect
Speaker 1: you to be, or a little more optimistic than I
Speaker 1: might be given that pressure from Wall Street that at
Speaker 1: some point Wall Street is going to say, turn up
Speaker 1: the dial, do this, make the extra twelve cents on this,
Speaker 1: use your power to make a best seller, to pick
Speaker 1: a book that's going to be a best seller, use
Speaker 1: your power to pick one product over the other, and,
Speaker 1: by the way, make the person making the product pay
Speaker 1: for that in some way. I mean, it's not benign
Speaker 1: the way you're describing it, but doesn't have the potential
Speaker 1: to become something very not benign. So when I think
Speaker 1: about monopolies that have failed us and what has happened
Speaker 1: when they have tried to extract more money. We see
Speaker 1: all the way back to the first example of Standard oil.
Speaker 1: Standard Oil basically acted like gangsters and eliminated their competition.
Speaker 1: If we think about the company everyone hates the most,
Speaker 1: their cable company, they have done things like limit choice
Speaker 1: and given us a horrible customer service, lied to us,
Speaker 1: and tricked us because we don't have any choices. When
Speaker 1: I think about how Amazon will make more money, those
Speaker 1: aren't the side effects that I see. I think they
Speaker 1: will make more money by incrementally increasing the cost of
Speaker 1: using AWS, which will be paid for by all of us,
Speaker 1: but not very much. And then I think they will
Speaker 1: make more money by pushing the retail division to actually
Speaker 1: make a profit, which means that each of us will
Speaker 1: pay an extra five twenty dollars a month, and we'll
Speaker 1: pay it because by that point we won't have any choice, right,
Speaker 1: We can't go back to the store down the street
Speaker 1: to buy our book or our toilet paper or our
Speaker 1: whatever instead, because that start down the street won't exist anymore.
Speaker 1: This is true, but it's still going to be cheaper
Speaker 1: than the stores solder to us, we still come out
Speaker 1: ahead on the money side. On the money side, cheaper
Speaker 1: is an interesting word because it depends on what costs
Speaker 1: you're trying to measure exact for your point. So my
Speaker 1: whole articulation here is not about the fact that Amazon
Speaker 1: is going to be a net drag on the gross
Speaker 1: national product of the United States or our efficiency to
Speaker 1: acquire stuff. It's impossible for me to imagine that that
Speaker 1: will occur. What I believe is a change is being
Speaker 1: made to our culture, starting with some of the things
Speaker 1: we care the most about, books and television, and we're
Speaker 1: not prepared to talk about it, and we're not aware
Speaker 1: of how the change is happening, and that if the
Speaker 1: change becomes algorithmic, I worry about that because as bad
Speaker 1: as the people in Hollywood have behaved over the years,
Speaker 1: we knew who the people in Hollywood were, and the
Speaker 1: people in Hollywood were in our communion accountability versus anonymity.
Speaker 1: Maybe that's a way to sum it up. I think
Speaker 1: I get it. Going back to the publishing example, It's
Speaker 1: not so much that somebody at Amazon is saying, let's
Speaker 1: make this book a best seller. It's more that an
Speaker 1: algorithm is making the book a best seller, and nobody's
Speaker 1: controlling it, but something is controlling it, and so the
Speaker 1: choices where we get are going to be dictated by
Speaker 1: something we can't see, and we'll be buying a book
Speaker 1: that wasn't hand selected for us by a someone who
Speaker 1: loves books, but rather as the result of an algorithm.
Speaker 1: So here's the JK. Rowling story. When I was a
Speaker 1: book packager, I did one hundred and twenty books in
Speaker 1: ten years. I did almanacs, I did how two books,
Speaker 1: and I also did young adult fiction. And I did
Speaker 1: a series for Scholastic based on Nintendo games because boys
Speaker 1: weren't reading enough books. So I got the rights to
Speaker 1: Nintendo games and turn them into novels. And Scholastic made
Speaker 1: me take out all vampires, all casual death because they said,
Speaker 1: we're not no casual death none. That's what Nintendo games
Speaker 1: are filled with, right right, we are not ready to
Speaker 1: have nine and ten year old boys read this. Two
Speaker 1: years later, after the series it sold pretty well, they
Speaker 1: came out with this book that no one had ever
Speaker 1: heard of, called Harry Potter. And I don't need to
Speaker 1: tell you there's a lot of casual death in Harry Potter,
Speaker 1: and then bookstores took this book and hand sold it,
Speaker 1: which is a longstanding, treasured tradition in book publishing, which
Speaker 1: is the actual owner, the actual clerk saw the nerdy
Speaker 1: ten year old walk in and handed the book to
Speaker 1: the kid and said, you need to read this. And
Speaker 1: Harry Potter went on to make JK. Rerewlling the most
Speaker 1: successful author in history, first billionaire as an author. It
Speaker 1: is inconceivable that if Amazon had existed, then that Harry
Speaker 1: Potter would have worked. That's an incredibly frightening thought. Change
Speaker 1: that comes down from tastemakers is different from change that
Speaker 1: comes up from the grass. And I think we need both.
Speaker 1: We've always had both, But the algorithm takes one of
Speaker 1: those away. Yeah, it's not even change coming from tastemakers,
Speaker 1: it's changed coming from an algorithm. Right, And how does
Speaker 1: that play out? We're talking about books which are of
Speaker 1: critical interest to you and to me and to all
Speaker 1: of us who care about the culture. But what about
Speaker 1: when it comes the same sort of power being applied
Speaker 1: to other aspects of our life, from what food we
Speaker 1: eat to what medicines we have available. As Amazon becomes
Speaker 1: Amazon Restaurants and Amazon Healthcare, so The healthcare thing is
Speaker 1: interesting because Walmart is quietly planning on healthcare being the
Speaker 1: next pillar that they're going to embrace. If we can
Speaker 1: figure out how to apply the efficiency of the algorithm
Speaker 1: to the price of an antibiotic, if we can figure
Speaker 1: out how to use rules based thinking to make sure
Speaker 1: people don't waste their lives and their money on placebos
Speaker 1: when they're not effective, you know, then we're going to
Speaker 1: come out ahead. But again, what's a challenge here is
Speaker 1: that the science of direct marketing is different than the
Speaker 1: magic of a human who sees us, who understands us,
Speaker 1: who speaks to us a certain way. And what we
Speaker 1: know about medicine is that a third of the time
Speaker 1: we get better because we believe we're going to get better,
Speaker 1: not because we took the right pill on the right day.
Speaker 1: I worry about the lack of choice. That what all
Speaker 1: the people who are trying to play this game are
Speaker 1: trying to do is lock people in, because in an
Speaker 1: open system with unlimited choice and efficiency, nobody makes any money.
Speaker 1: So the race is always to create some version of monopoly,
Speaker 1: because monopoly creates the ultimate form of scarcity, so that
Speaker 1: you can get your money back and That's why people
Speaker 1: are arguing that a nonprofit in the center of the
Speaker 1: system that is truly motivated to keep turning the algorithm
Speaker 1: toward efficient is a worthwhile thing to have. And if
Speaker 1: you're a capitalist, I think it's important to acknowledge that
Speaker 1: monopoly is almost the opposite of capitalism. It is not
Speaker 1: a useful product of capitalism. So when I look at healthcare,
Speaker 1: the book industry is tinker toys compared to the complexity
Speaker 1: of healthcare. Who's paying, who's the customer, what do they want?
Speaker 1: What if you get it wrong? Right? My mom used
Speaker 1: to run the bookstore that she founded in Buffalo where
Speaker 1: it was in the all By Knox Art Museum, So
Speaker 1: she had certain art books that no one else had.
Speaker 1: And I still remember the day Charlie, before she died,
Speaker 1: she got a call from Amazon and they said, do
Speaker 1: you have this book? A human called her and she
Speaker 1: said yes. They say, we'll pay full price and we'll
Speaker 1: pay you to have you fedexit to our customer because
Speaker 1: they were willing to lose money to be able to
Speaker 1: keep the promise. We have every book, and they found
Speaker 1: a copy of the book for well, if someone needs
Speaker 1: chemo medicine, it's different than if they need a book
Speaker 1: about Magreet and you're going to have to figure out
Speaker 1: where in the supply chain you live, what are the shortcuts?
Speaker 1: What are the shortcuts you can't take? Will you let
Speaker 1: everyone play? When Orn Hatch says, I want you to
Speaker 1: be able to sell bees wax vitamins and call them
Speaker 1: a drug, these are all very different decisions, then please
Speaker 1: carry my kindle book called The Martian. In some ways, though,
Speaker 1: I guess the silver lining to that analysis is that
Speaker 1: this isn't going to be easy for Amazon. In other words,
Speaker 1: we're on a path at being Amazon's world and we're
Speaker 1: just going to live in it, but we're not getting
Speaker 1: going to get there quite as quickly if they're not
Speaker 1: going to be able to take over our healthcare business
Speaker 1: as well. There's stuff we need and there's stuff we want,
Speaker 1: And the thing about stuff you want is that once
Speaker 1: you have it, you want something else. So last year
Speaker 1: we spent as much on self storage as we spend
Speaker 1: on going to the movies. That we have more stuff
Speaker 1: than we have room for. That's really depressing. True. So this,
Speaker 1: once you've created the actual everything store and everyone is
Speaker 1: a click away from everything, that's not enough. Now I
Speaker 1: want to buy something from Shopify that nobody else has now,
Speaker 1: I want to buy an experience that no one else
Speaker 1: has experienced. We're watching already a whole generation now that
Speaker 1: would rather have a smartphone than a car. Why is
Speaker 1: that right? Because the potemic value of a car has
Speaker 1: gone down, whereas the value of being connected has gone up.
Speaker 1: So the culture and the economy are going to keep shifting.
Speaker 1: And it's not clear that it's Amazon's world when it
Speaker 1: comes to this thing that they do the same way.
Speaker 1: It's not UPS's world, even though they deliver everything. UPS
Speaker 1: is sort of invisible. And has UPS's ubiquity changed our culture?
Speaker 1: Of course it has, but I don't want to call
Speaker 1: it UPS world, even though UPS comes to my house
Speaker 1: every day. So is there any chance that consumers start
Speaker 1: to say, no, no, no, this actually isn't what we want,
Speaker 1: or that businesses that are being decimated, are producers are
Speaker 1: that are having their margins shrunk by Amazon start to
Speaker 1: put pressure on the system. Is there a way to
Speaker 1: stop the algorithm in process? I think there is zero
Speaker 1: chance that individual consumers and individual providers will have any
Speaker 1: impact whatsoever on the algorithm. Zero zero. That's pretty strong
Speaker 1: It's like saying I'm tired of the telephone. I'm not
Speaker 1: going to have telephone calls anymore. I'm going to walk
Speaker 1: to people's houses and talk to them face to face.
Speaker 1: At and T did not worry about that problem in
Speaker 1: nineteen sixty not going to be a problem. The problem
Speaker 1: for monopolists is when the culture says to the government,
Speaker 1: we care very much about antitrust and it comes in waves.
Speaker 1: There was no antitrust thinking before standard oil, and then
Speaker 1: there was a ton of anti trust thinking and Teddy
Speaker 1: Roosevelt was it the heart of it, and then it
Speaker 1: faded over time. So it comes and it goes, and
Speaker 1: it's been gone a long time. But I think when
Speaker 1: we saw when we see the high jinks at the
Speaker 1: FCC and everything else, it's due to come back. And
Speaker 1: when it comes back, and it's already come back in Europe,
Speaker 1: that is something that these giant algorithmic companies have to
Speaker 1: figure out how to deal with because they can't make
Speaker 1: it go away. Do you think that's on Bezos's radar screen? Oh,
Speaker 1: I think that they spend a lot of time thinking
Speaker 1: about that. I mean from all the way from the
Speaker 1: early days of sales tax, they could have fought the
Speaker 1: sales tax being harder. Instead, one day they took a
Speaker 1: deep breath and they said, fine, we're going to collect
Speaker 1: sales tax. Is there any chance, if Amazon is around
Speaker 1: in a hundred years that we have both this or
Speaker 1: an Amazon like thing is around in a hundred years,
Speaker 1: that we can also still have independent stores on Main Street?
Speaker 1: Or does one automatically at some point come at the
Speaker 1: expense of the other. So what we know is that
Speaker 1: there's a really big desire. We don't know if it's
Speaker 1: primordial or recent for human beings to go to a
Speaker 1: store on Main Street that I was in a fancy
Speaker 1: mall last week, the busiest business by far with Starbucks,
Speaker 1: because everyone was window shopping at everything else and drinking
Speaker 1: the one thing that they could afford in the store
Speaker 1: in the mall. Right, So merchants and retailers are clever.
Speaker 1: They like being merchants and retailers. They will show up
Speaker 1: with new things to do in those spaces that human
Speaker 1: beings will pay a little to engage with. I think
Speaker 1: the big shift is going to be landlords have to
Speaker 1: understand that the thing that they were charging a huge
Speaker 1: tax on has gone away, and you can't charge the
Speaker 1: pottery barn tax anymore. You can't charge the proud attacks anymore.
Speaker 1: And we're going to see landlords to take a big hit.
Speaker 1: Or what we're seeing in New York is dozens and
Speaker 1: dozens and dozens of empty storefronts. And one of the
Speaker 1: things I proposed on my blog, which was really interesting
Speaker 1: feedback I got, was I think a vacancy tax is
Speaker 1: a great idea. I think if your store is vacant
Speaker 1: for more than three months, you should have to pay
Speaker 1: a tax on it, because it should pay for the
Speaker 1: cops and the lights and everything else we have to
Speaker 1: do to make up for the fact that you're not
Speaker 1: doing it. I think that's a fantastic idea. It makes
Speaker 1: perfect sense. And I got four angry notes, all four
Speaker 1: from landlords, so that's not surprising, all right. If you
Speaker 1: could change one thing about the business world, or if
Speaker 1: you could have maybe a bit stick with Amazon, if
Speaker 1: you could have Amazon do one thing differently, what would
Speaker 1: it be. I think we need to do two things
Speaker 1: to be our best selves as humans in a commercial economy,
Speaker 1: and they are to solve interesting problems and to lead.
Speaker 1: And what it means to lead is to see other people,
Speaker 1: to truly see them, to figure out where you can
Speaker 1: help them, where you can take them, and what you'll
Speaker 1: take responsibility for. That is an interesting problem. There are
Speaker 1: lots of interesting problems when I think about the least
Speaker 1: thing a human can do in the commercial world is
Speaker 1: to say, will this be on the test? What does
Speaker 1: my boss want me to do? And worst of all,
Speaker 1: I'm just doing my job. And so I guess what
Speaker 1: I would hope for in a relentless company that's driven
Speaker 1: by a series of algorithms is how many people they
Speaker 1: are are charged with never saying I'm just doing my
Speaker 1: job and instead are saying, here, I made this, and
Speaker 1: I'm proud of it. You want the algorithm to have accountability.
Speaker 1: I do, indeed. So I loved my conversation with Seth
Speaker 1: in large part because what comes out of his mouth
Speaker 1: is not what you think is going to come out
Speaker 1: of his mouth, and those are always the best conversations.
Speaker 1: So I'm both more optimistic and more pessimistic after my conversation.
Speaker 1: I'm disheartened because I really do see the dangers of
Speaker 1: the algorithm. As Seth calls it. We want accountability, we
Speaker 1: want humanity, we want that great independent bookstore on the
Speaker 1: corner of our main street, or at least we're going
Speaker 1: to want them when they disappear. But I'm less concerned
Speaker 1: about Amazon taking over the world than I was. Healthcare
Speaker 1: is going to be interesting, even for Jeff Bezos. We
Speaker 1: also spent a lot of time talking about not just
Speaker 1: the Amazon you can see as a consumer, but the
Speaker 1: Amazon you can't see, the algorithm, and I think I'm
Speaker 1: a little bit reassured on that front. While the Frankenstein
Speaker 1: Bezos has built may not be controllable if Seth is right,
Speaker 1: it's also not going to be able to act with
Speaker 1: outright malice. Does that pass for optimism? Making a Killing
Speaker 1: is a co production of Pushkin Industries and Chalk and Blade.
Speaker 1: It's produced by Ruth Barnes. My executive producers are Alison
Speaker 1: McClean no relation and Megan Casey. The executive producer at
Speaker 1: Pushkin is Nea Loebell. Engineering by Jason Gambrel. Our music
Speaker 1: is by Jed Flood. Special thanks to Jacob Weisberg at
Speaker 1: Pushkin and everyone on the show. I'm Bethany mcclein, Thanks
Speaker 1: so much for listening. Find me on Twitter at Bethany
Speaker 1: mac twelve