Big Technology Podcast - Amazon's Identity Crisis — With Todd Bishop

Episode Date: January 18, 2023

Todd Bishop is the co-founder of Geekwire, a tech news site based in Seattle. Bishop joins Big Technology Podcast to discuss how Amazon will navigate its new dedication to efficiency without losing its inventive spirit. Can 'The Everything Store' become 'The Some Things Store?' That's the crucial question to ask about a tech behemoth that's lost 40% of its value over the past year and is struggling to find its footing under CEO Andy Jassy. Stay tuned for the second half where we touch on labor, Microsoft's relationship with OpenAI, and more.

LinkedIn Presents Book on a big technology podcast, a show for cool-headed, nuanced conversation, of the tech world and beyond. Amazon became Amazon by doing it all. It's a bookstore, first-party marketplace, their party marketplace, does web services, hardware, voice computing. It's a grocer. It's a movie studio.

you get the picture. But look, as the good times rolled, Amazon's focus just loosened a bit. And then all of a sudden a company known for its frugality was starting to spend out of control and spread its resources just a bit too thin. The company is now engaged in the largest layoff for any tech company over the past year and the largest in its history. And along with that comes a push toward focus. For Amazon right now, the big question really is, what does it focus on? And what is it really? It's a bit of an identity crisis. And it's accompanied by this one major question. How can the company keep inventing in leaner times? If it can figure that it'll probably be okay. If it can't, who knows what will happen to this company. Todd Bishop is the co-founder

of Geekwire. It's a fantastic tech news site that I've read a ton as I've gotten to know Amazon better. And he's here to discuss this and more. So stay tuned as we go deep into Amazon's era of self-reflection and self-identification. I think you're going to love hearing from Todd. Here is our conversation. Hey, Todd. Welcome to the show. Hi, Alex. Thank you. It's a pleasure to be here. Great to have you. I have to say I'm a big fan of your work and geekwire. I've been reading it for years. You're the ultimate Seattle tech website and your coverage on Amazon and Microsoft is like really so insightful. And I think being there on location is super important because you can feel these cultures. And you guys really do that.

So it's great to have you on. Thank you. Appreciate that. It's been fun. We've been doing it for 20 years or so in various incarnations. So it's been fascinating to see sort of the fading of Microsoft and the resurgence of Microsoft and then the rise of Amazon right in our backyard here. That's right. So let's talk about Amazon.

I mean, 18,000 layoffs that are ongoing right now. Where are those layoffs happening? They're in a variety of places. but primarily we're seeing it in areas like their people and experiences team, their devices team. And by the way, people and experiences is the Amazon euphemism for human resources. So we're seeing it in a few different places, but consumer devices and human resources are the main areas where we're seeing those cuts. When you say consumer means retail. Yes, exactly.

Stores. So I read a lot of coverage about this, yours and also Bradstone's coverage of what's going on and where Amazon's cutting because I think we can really see where they're going when we look at where they're going to focus. And one of the things that Brad mentioned is that Amazon is losing a shocking amount of money in retail. Is that something that you see in your reporting? And if that's true, why is that happening and how does that change Amazon? Yeah, it's a really important point. I mean, for many years, e-commerce has been the core of the. this company. And increasingly we're seeing the percentage of Amazon's overall revenue that

comes from e-commerce decline as a proportion of its total business. And it's been a rocky couple of years. Of course, they saw the surge in the pandemic in overall sales, but they really overbuilt. And the capacity that they created not only in their data centers, but also just in general in their business to fulfill the demand that they saw in the pandemic was not needed clearly. And they've seen that go away now that we've emerged into whatever our new reality is. And I think it is a real question of what this company is. And to the point of the struggles in the core e-commerce business, I think there are lots of questions about where this company is headed. And to your point and to Brad's point in his reporting, I think you can see in things

like different areas of the business that are still being invested in, where the company is headed. So where is it headed? Good question. I think clearly you're still seeing Amazon focus on areas like robotics. I think it's interesting that even with all the discussion of the devices and service cutbacks, you're still seeing them push forward with some of their home. robots. You're also in some ways seeing the company double down on Amazon Web Services, on advertising. So those are just some of the areas that we're seeing them still continue to invest in. So let's talk a little bit about the character of what Amazon actually is,

because there are these like memes out there that the Amazon retail business is sort of a break-even business and the company really makes money on ads and on web services. Is that really true? Well, it's certainly true as it relates to Amazon Web Services. I mean, Amazon Web Services is a juggernaut in its own right. And some of the people I've talked to have wondered, John Rossman as a former Amazon executive who put this forward, wondered if it's time to spin off Amazon Web Services and make it a unit, it's a business in its own right. And obviously, that's a perennial question at Amazon. But I think now, now is an interesting time to ask it. Would they create more value for shareholders if they

were able to do that for shareholders of essentially two companies? And I think the answer would be yes. I think that gets into, oh, yeah, absolutely. But the meme is that web services help subsidize retail. We just talked about how retail is losing money. So do you, is that true and do you lose your ability to deliver in retail if you separate those two entities? Yes. So if you took the state of each business today, you're right. We do a chart occasionally that's looking at Amazon without AWS and what it would be like. And for many years in the prior decade, Amazon Web Services was subsidizing the retail. And then during the pandemic,

you saw the retail part of the business come into its own and become profitable. And in recent quarters, you've seen the old trend emerge, where Amazon Web Services is essentially subsidizing a portion of the Amazon business. This gets to the day one mentality in my mind. And in looking at this... Yeah. Go ahead. Yeah, you call it a book. And I've got some observations on how Amazon uses the phrase day one and how it's twisted inside the company. But maybe we can get into that in a second. that. Yeah. But I think if you re-energized this company by saying to all the people on the store's side, on the e-commerce side, hey, it's do or die. You have to become profitable. I think it would be a very interesting dynamic. And it gets to a little bit of what Andy Jassy was saying in his recent memo about focusing and making sure that the bets that they're making,

are contributing not only to the long-term growth of the company, but to the at least near-term profitability or strength of the business. And I think that's where Amazon is right now. Now, I don't think they're actually going to spin off AWS. I think that's a sacred cow in many ways for Andy Jassy, especially having led that business for many years himself. But I think it speaks to the need for Amazon to really take a step back and ask it sell first. What is it? It's funny. If you look at it, the description of Amazon at the bottom of its press release, Amazon describes not what it does, but what it is. It's Earth's most customer-centric company. Okay, what do you do? For many years, they sold books, and then they sold Kindles and

devices and for a long time they did everything you know up until a you know a few months ago and i think this moment in the company's history is the time when they needed to step back and ask themselves what they actually do not only what they are but what what what they do as a result so i see what you're getting at with with day one there so yeah let's talk about that in a moment but i just want one more question before we do yeah so you're saying that amazon's retail business is unprofitable even with advertising well No, that is not true. And you know what, Alex, I actually would need to go back and look at the specific spreadsheets.

And I can call it up as we're talking here. And actually, as I was saying that, I want to make sure that I'm accurate and what I'm saying. I don't know the answer to that question without looking at the numbers, which, you know, I typically do in my prep for earnings, which is a couple weeks away. Okay. All right. Because I think with that advertising, that changes stuff. But I think your question of what does Amazon do, what is it, is a really good question, right? And the day one mentality, let's just talk about that.

So I wrote, obviously, for those familiar, I have a book, it's called Always Day One. It's about all the tech giants, but really focuses a lot on Amazon. And my perspective is that the company's day one mentality is to build what the market needs without any regard for its legacy product. So if the market needs a third-party marketplace, and that might cannibalize its first-party marketplace, it builds it. If the market needs voice computing and it's not really what it does, then it finds a way to build it. Same thing with Amazon Web Service. It's never really too beholden to its legacy business. But that I think we're starting to get to is getting complicated because now that legacy business is not as strong as it used to be.

So I guess the question is, does it actually need to be as strong? Like, does Amazon need to have retail at the core? And if it doesn't have retail, why don't you try to answer the question for them? What is Amazon? Yeah, I think that's a great question. To me, if you look at the company's history, I think it's really instructive to think long-term here, as Amazon would say. They are an e-commerce company at their core. And I think, not that I'm in any position to give advice on this, but if I were looking at the business and thinking about it, that's where I would start.

I would go back to that and ask whether things like Project Kuiper or, Project Kuiper is Amazon's satellite internet venture that's going to attempt to rival SpaceX Starlink. So essentially they're taking on Elon Musk. And it's kind of a weird fit inside the company, especially given that you've got Blue Origin, Jeff Bezos's actual space venture, headquartered just about 20 miles south of us here. And I think that to me is one of the prime examples of what is this company? Why are you doing that? And I think the answer is if you're doing it in service of internet connections to get people to buy more stuff, then great. I think that makes a lot of sense as a company.

But I think you start to have to ask, is that something that Amazon should be doing on its own? Interesting. But I would say the success, this is the argument to keep doing it, right? Think about the day one thing. The success of Amazon has always been to build outside of that core focus. If they'd stopped at where they were in the beginning, they would just be a bookstore or potentially this first party marketplace. Their determination to go out and build voice computing. with the Echo Hardware with the Kindle, Amazon Web Services.

That's what's made Amazon into the powerhouse that it is today, not its prowess in retail. In fact, it's cutting in retail. So doesn't that show you that outside of doubling down on, what good does doubling down on retail do for them? It seems to me it's almost like they should do the opposite. You know, this is why they're making the millions and the billions, and I'm covering what they're doing. Absolutely. I can see that argument. I think the most important thing for them to do is to step back and look at who they are and what they should do as a result. And the past five, six years under the latter half of Jeff Bezos's tenure as CEO, and then under the first couple years as Andy Jassie's, with Andy Jassie as CEO, I think they were just doing everything. It wasn't just the everything store. It was the everything company. It was the everything company. company. And this, I think, is the moment when they need to redefine who they are and what they're doing. And I think you are seeing them go through that process, although not perhaps

to the level that might be justified. And then why do you think they're cutting in retail in that case? I mean, it seems to me like the retail was about as core to the bare bones as it possibly could be. Maybe the spending. Yes. And to be clear, I think it's important to recognize that cutting in retail is not necessarily abandoning retail. It's simply saying that they hired too many people. And I think this gets back to the issue of all of the growth that they saw in the pandemic and the fact that they anticipated that growth continuing and becoming the new reality, as many tech companies did. By the way, I did call up the chart. And yes, indeed, now this is Amazon without AWS, and I can share this with you afterward, Alex. But they're down losing, if not for

AWS in the third calendar quarter of 2022, just as an example, they would have lost about $2.8 billion in operating income. Yeah. So that speaks to the fact that the core retail business is not profitable at that point. Yeah. Okay. So there you go. So that's the issue. And of course they're going to blame the pandemic. And of course, the needs. to scale up during the pandemic was there. In fact, a lot of people would say without Amazon, we've had a really rough, even more rough pandemic because it did feel that need that all the brick and mortar stores

couldn't serve for a large part of it. But I question whether that's actually the case here. And we're going to start getting into some of Amazon's culture. I love talking about Amazon's culture. And one of the core values of the company has always been frugality. And here's again from Bradstone's story. And then we're going to start getting into yours. But he says over the last few years, especially the final years of Bezos's tenure as the chief executive officer, frugality seemed to go out the window.

Amazon spent big on everything from new offices in Seattle and Arlington, Virginia to Hollywood productions, a $1 billion tab for that new Lord of the Rings and acquisitions $8.5 billion for MGM that no one thought was worth that much. The company also went on a wild spree of hiring employees and constructing warehouses, both to satisfy pandemic demand, but also to support a new one-day delivery promise to prime members. I mean, going from two to one was that really necessary. So obviously, it's the pandemic, but it's the spending. And Amazon, of course, has been known for this frugality issue. They had door desks, right, which were desks built out of old doors. What happened to frugality there?

And is that something that Andy Jassy is going to have to really work to? pull back because ultimately the costs, right, or what Wall Street's looking at if you're losing money, your stock is down in Amazon stock was down like 50% last year. I think there's ways to look at the leadership principles and read them selectively and justify different things based on which things you emphasize. And I think in some ways, the day one mentality has been at odds at times in the past with other elements of their leadership principles, including invent and simplify, the simplify portion of invent and simplify, and also frugality, as you say, because when you're looking at everything with fresh eyes and seeing the opportunities anew every day, you're going

to spend some money making bets. And we can get into the whole one-way door, two-way door conversation about how they approach different opportunities. But I really think that. I really think that you're seeing now Andy Jassy say, whoa, let's take a step back and let's figure out what we actually want to invest in. We can't just throw everything against the wall and hope that something sticks. That's right. I'm curious what you think about Jassy's ability to do this, to do the cost-cutting necessary. And I've been saying that he doesn't really have the ability. He obviously hasn't shown the ability yet because the company is still seeing these losses, right? Every time we see an earnings preview, it's worse and worse in terms of where it's

going to net out with profit. And my theory is he can't do it because he's coming, of course he started in retail, but he's coming from Amazon Web Services. When you're in a part of the business that prints money, it's going to be really difficult to do the cost cutting that you would do a second nature if you're from the retail business. So does Jassy as a character, as a person, have what's necessary to do what a retail boss would do? I think he does. Yes. I'm hearing a little bit of a butt in your voice there. Well, I think the way that he's set up inside the company is working against him.

I agree with you, number one, it may not be his first inclination. It may run against his experience and his character, given his experience in Amazon Web Services. That said, I think that he himself has the stomach for it. I think you don't put somebody in that position as CEO. as a board, if they can't go through and make difficult decisions. And he's certainly been making difficult decisions. And I'm not just talking about layoffs. It could just be like finding places. If you're in the retail business, you're really good at finding any fat to cut, but you don't have to do in Amazon Web Services. But continue. Yes, exactly. The single threaded leader approach

that Amazon uses, where they give one executive autonomy over a certain area and let them run with it, that was great for Amazon's heyday, for the boom of this company. And it's one of the reasons why they grew so quickly not only in terms of employees, but in terms of their overall business. I think that works against somebody like Andy Jassy, against this executive team, the S team, as they call it, when they're trying to make tough decisions and make the kinds of cuts and strategic choices that we're talking about,

And frankly, we saw it in the way these layoffs were rolled out. It was leaked first to the New York Times. And in my conversations after that initial New York Times story with Amazon people, they were clear that the 10,000 number that came out was not a target. And in fact, I got steered away from that. The point was, hey, if you run with that, it's probably not going to be right. because Amazon did not know at that point how many people they were going to lay off. And that was because they have such a system of distributed autonomy where these leaders

are going out and looking at their business, their individual businesses within the larger company, and deciding what's right for them. And I'm sure there's mandates to some extent in terms of the overall cost structure that they need to hit within their own profit and loss statements inside the business. But that autonomy makes it very difficult when you're trying to do something from a centralized place in terms of guiding this company. And I think Andy Jesse's in a tough spot in that way. How do you think he's going to handle that? So, by the way, I want you to answer that question, but before you do, just to give us a little bit of a deeper explanation of this single-threaded

leader thing because in most companies, you're going to have someone that's in charge of a division or whatever it is. They make the decisions. So are they like not accountable to a CEO? How is that different? And then how can a CEO in that case then wrangle the other leaders under him to cut in the way that he needs? Yeah. So as I understand it, Amazon takes that divisional structure a step further and divides those divisions and those products and efforts and teams up even more with single autonomous leaders over very specific areas with a mandate to build successful businesses, to grow successful businesses and ultimately long-term contribute to the company's profitability. So that while it did fuel their growth is coming back in some ways to haunt them, I think, here. Much easier to run that when you never have to cut. Yes.

Exactly. And to answer your question, I think it's just Amazon taking that deeper than many companies do and creating more autonomy within the organization for better or worse than a lot of other companies do. Do you think Amazon, this is a hypothetical, but let's roll with it, would have been better putting Jeff Wilkie, who is the CEO of worldwide consumer and came from that retail side of the business. It was all about automation, putting him in charge of the company instead of Jassy. And Jesse, of course, trusted Bezos lieutenant, worked under him as his technical advisor, the first one, you know, and then built this amazingly successful business, AWS. But the second he was named CEO, or right beforehand, Wilkie left the company.

And maybe the type of person that the company needs right now is someone like a Jeff Wilkie. I love that question. I have not thought about that in a while. It's been a while since Jeff Wilkie was there. I've talked with Jeff Wilkie about his new pursuits in. trying to reinvent American manufacturing, but he's always very gracefully declined my efforts to get him to armchair quarterback Amazon, of course. Here's what I think.

I think it would have been interesting to see some sort of power sharing arrangement between Wilkie and Jassy, if that could have been possible. Rather than going either or, I would have taken both. Because in Jassie, you have somebody with experience in media, experience in obviously the cloud, and in Wilkie, you have a real operations and manufacturing expert. And of course, I think the implication from the outside, at least, is that because Jassy was in line and perhaps chosen, and I can't remember the exact timing of all the departures and appointments. but clearly Wilkie would have wanted that CEO job at Amazon. No doubt. We're all CEO and who knows if you never know.

Of course, there are other reasons that things can happen, but I think the assumption is that he left because he didn't get it. And I think Dave Clark butted heads with Jassy from what I understand and from what we've all read. And I think... Who was running retail, Dave Clark, who was running retail, who is now at the Coceo of flexport. Exactly. So Clark effectively succeeded Jeff Wilkie in the consumer role. And he was then reporting to Jassy. And I don't know. I just, I wonder if things would be a little bit different at that company right now if somehow Wilkie and Jassy were doing it together. The argument for

Wilkie would be that the core error that they've made. You talked about the losses. You read them out a couple minutes ago, the errors that they've made have been on the operations and the infrastructure and the retail side. Well, no. Yes. That's the thing that's put them in this bind. Right. And would it have happened under Wilkie. Well, they would have had the pandemic to deal with, and you'd have to scale up for that. But likely not if that area was not in a state of flux the way that it is today. Yeah, but and not being someone who's built out billions of dollars of infrastructure. I don't know the realities of the timing of that, but I can only imagine that given some of the lead times on things like distribution facilities, fulfillment centers,

that to some extent you end up getting stuck with a decision that you made six, nine months earlier. So it can be difficult. To your point, would Wilkie have seen that sooner, perhaps, given his experience in operations and fulfillment? Maybe. Maybe. Do you think Bezos will come back? I mean, that's kind of a fun prediction that people are talking about. That would be fascinating. You think he's done? I mean, how much is his net worth cut in this bit of calling?

Now, that would be, I would love it as a story to cover. I think the chances are slim. I think Jeff Bezos has moved on. And frankly, this is my guess, but I have a hunch. the fact that he has that he doesn't have to deal with this day to day, that he's not writing the memo, retroactively telling employees who already know that 18% or 18,000 of them are being cut, that they're doing layoffs. I think, I think Jeff Bezos probably is grateful that he's not in that day to day. He seems like he's having fun on his Instagram, so. And in other places.

Yeah. I want to ask you a question again about, um, about Amazon Web Services and then get into a little bit about the, we're going to circle back a little bit more to what Amazon is after this. Yeah. AWS, in my understanding is a division part of the company that needs certainty, right? Because its customers are buying cloud. Of course, the cool thing about cloud is it's flexible. But as you figure out how much to budget for cloud,

you really need to understand where you are as a business, where you're going. we're in this like really uncertain moment the vix which is the indicator for volatility is it's actually come down a little bit recently but it's been going haywire and it's really tough to say okay next quarter we need this much storage or this much compute from awes and so it probably has executive spending less just because they don't know we don't know exactly what the feds plan is we don't know exactly we're in this like very weird place in the economy. How bad do you think the lack of certainty is hurting AWS's ability to function and thrive, if at all? Yeah, I think it's, and we'll see how it shook out in the fourth quarter here

in a couple weeks, but I do think that it's causing them to take short-term losses. And when I say losses, I don't mean actual red ink. They're obviously very still, they're still very profitable. But I think it's causing them to make short-term decisions to cut the costs of their customers and cut into their own profitability in the interest of the long-term relationship. They're saying, okay, to a lot of these companies, and Brian Olsowski, the Amazon CFO has acknowledged this, that right now, AWS's game is to bend on a lot of these contract negotiations and acknowledge the financial uncertainty that many of AWS's customers are facing right now and say, no problem, we got you, we're going to make sure that we optimize your cloud spend,

that what you are spending is actually worth it to your business and hope that in the long run, as a result, that customer will stay loyal to AWS. Fascinating. So it could be a short-term hit on that profitability, which they're using to subsidize the other businesses. Wow. Yes. So that is an issue.

That's going to be worth watching in the quarterly report. Yeah. Okay. Let's talk a little bit, you know, it's kind of unfair in the beginning. I was like, tell me exactly where Amazon's going. Of course, it's hard for us to update it. But you do in your story about the layoffs, talk about this principle of invent and simplify. And I feel like it's worth sitting on this idea for a moment and talking about whether it will persist inside Amazon and how it will.

So let me first give my understanding of what I think invent and simplify is. And then because I think it's really central to the whole day one premise, right, which is to build whatever the market needs. And from my perspective, the way that Amazon works is everything, every process, everything that can be automated is simplified in there. So the money and the people power needed to operate that company are maximized in a way that's efficient and not going to supporting existing activities. Then there is the invent. I almost think they have it backwards. To me, it would be simplify first and then invent. And that's where you get this day one mentality of building where the market needs.

Now, Jesse actually, and you seized upon this in your story, Jesse actually said that they have to rethink. the way that the company is doing it. I'll just read it from, this is a quote from your story of Jassy. He says, we sometimes overlook the importance of the critical invention, problem solving, and simplification that go into figuring out what matters most to customers in business, adjusting where we spend our resources and time, and finding a way to do more for customers at a lower cost, passing the savings to customers in the process. So it's kind of interesting because it's like JASCy positioning, Invent, and Simplify as effectively cut your costs. So talk a little bit about how that might be shifting after these layoffs.

And does that mean that the invent part becomes less important? Great question. And just to frame that a little bit more before I try to answer that, I think invent and simplify is interpreted as Jassy acknowledged in his memo inside the company as relating to products and services. They want to go out and invent new things for customers and simplify them, make them easier for customers. And what he's saying now is they need to simplify this company. That's the shift. And he's saying it's always been important and he's always been thinking along those lines. But I don't think people in the company thought about it that way until this point. Maybe they did and then just got away from it because the company

you had doubled in size over the past four years. I remember being in Seattle in 2017, 2018, and that simplified part as they were going through automation programs like hands off the wheel was front and center. But it's very easy maybe when you double your company size in a matter of a couple years to completely lose side of what that simplified part of it means. Because you can't really invent unless you simplify

because it just takes all the resources that you would use for inventing otherwise. Yeah. To your question, I think if it's simply cutting and pruning without this new sense of what Amazon is and what it does, then I think the invention is hard. But if it's first focusing on the areas where they think they can have the greatest impact and where they can really double down and create new innovation and then deciding, okay, what's left? Let's get rid of that. then I think it works. And then I think you have an environment, a culture that is still focused on invention.

And I think pruning the tree is a good example. Look first at the branch that's the strongest and get rid of the suckers all around it. Yeah. But the question is, if Amazon does this and focuses too much on the simplify it, not the invent, which is the potential risk with the way that Jassy is focusing folks, it can lose that inventive side. And that's kind of where I started, you know, in our conversation talking about how part of the DNA that's made Amazon, what it is today, is that invent side. Do you think there's a risk that now, especially the market is demanding it? And Amazon really has never been one to listen to the market in terms of these things.

But the market is demanding it. And they're listening, clearly. So do you think there's a risk of them over-indexing on the Simplify and forgetting to invent? Potentially. Yes. Yes. And I guess this is just where I think Jassy has to drill that message home. It's both. They need to do both. There certainly is a risk. Yes. And I think that is, again, something that they need to just define. They need to really lay out their priorities internally. And I'm sure that's happening. I don't mean to imply that it's not. But I think there is a way to do both. And I think it happens by first focusing on the invention and then deciding from there what you can let go. So what's your prediction for how this goes? Because the company is in such an interesting space. I mean, it really feels like yesterday that Amazon was the most dominant company in the world.

You had to break it up. One year, it stock drops 50%. There's obviously chaos in terms of the overextension that it's done in the retail area. How does the company get through this point in time? Well, how do they get through it? I think they, well, let me say this, from a journalist's perspective, this was not only the most interesting company to cover over the past decade, but here in their hometown, this was the most fun company to cover. And I, and I don't mean they were easy to cover or that they were easy to crack. But I would say every month, every two months, maybe sometimes every other week, they would do something. And you'd just be like, what in the hell? What is that? The treasure truck, the Amazon treasure truck. Yes, say what that is. Yes, this was a daily deals vehicle, literally, that started here in Seattle.

They drove it around. I've still got one of my, I don't know, $25 fire HD tablets that I got off the treasure truck down at the corner of market in 24th here in Ballard. in Seattle. And it was just this whole idea of, you know, just anything. Just yesterday, we've, my colleague Kurt Schlosser broke the news that the Amazon Fresh pickup, the grocery pickup site that they opened here several years ago as an experiment right before they acquired Whole Foods, you know, that's being shut down. I mean, Amazon books.

started right out here at the University Village Shopping Center in Seattle. So I bring it up more because we got to see just how much stuff this company was throwing against the wall. And I think it is going to be tougher for them in this new environment because rather than laying out their chips, if I could use another metaphor across the table, they're going to have to stack them on various specific places because they aren't applying the resources across the, the breadth of the table like they were before. And I think there's a risk there. Obviously, they are going to have to make those decisions wisely and strategically. And there's a chance that maybe they aren't going to find that fourth pillar of their business in the things that they bet on. Yeah, what is the mood of the Amazon employees that you speak with and the people you hang out in Seattle? By the way, you're making me miss Seattle. I spent a number of, well, one awesome summer

there and then a couple of trips up in the next couple summers it's a great town when it's warm out so beautiful oh my gosh shout out to west seattle i mean holy cow nice that place was awesome uh alky beach in august oh man it doesn't get any better than that i was once i know this is sort of a bit of a tangent but i was once on a run and it was like fleet week or whatever what's it called the fleet week in seattle seafar seafar i come around the bend on west by the way for folks listening west seattle is sort of across the the wall from Seattle proper and you can look and see the skyline with the space needle and all that. And I come around the bend and out comes this view of Seattle skyline and then boosh like five

F-16s or whatever it is fly right across. And I was just like, all right, here we are. It's such a beautiful place. And the food's great too. The top pot donuts. It's a beautiful place. Ty Tom's in the U district. You know what I'm talking about? You've been there? Oh, sure, absolutely. It's a beautiful place in the summer. It's a beautiful place in the summer. I've done maybe once in the way. I'm not talking about the winner. But anyway, sorry. Continue. Go ahead. Yeah. What's the mood? You lost to be there. Oh, the mood. Yeah. A little bit, it depends on the level. Among managers and leaders I've talked to, it's a little bit harried. Just like there's a lot going on right now. And I think the communications issues that we've talked about, If you're able to talk to some of the Amazon folks privately, that's been rough. The fact that these employees knew that cuts were coming but didn't know who was being laid off, which areas of the business were going to be the biggest focus. Now, Jassy alluded to it a little bit previously in an earlier memo, but there's been a big axe hanging over the heads of these people.

And it's rough. It's not to work like that. Yeah. Yes. So I do want to get across, especially because of the theme of your book, I think there's been a perversion of day one inside Amazon. I'm glad you're saying this. Yeah. Go ahead. Yes. So in my mind, and if you listen to the way Jeff Bezos presented it originally and continued to talk about it, in simple terms, day one is about starting every day with a beginner. mind, looking at things as if you were starting out and you had a green field in front of you. And it's in that way an inspiring message. Increasingly, almost subconsciously,

Amazon leaders that I've talked to, product leaders, use it as an excuse instead. They use it they use it to say, this is an MVP. This is a minimum viable product. We're just getting started. I've literally had two or three of them over the past year say, it's just day one. The implication being, please forgive the flaws in this product. We've still got a ways to go. And that is not in my mind what Jeff Bezos meant. I don't think that's what day one is about. And I think it's interesting in its own right. But beyond that, I think it's interesting because I think it means that the company's leadership principles are finding their limit in terms of their ability to accurately shape this culture in the vision of its founder. And I think that's a risk. I think it's something that

Andy Jassy needs to, in an ongoing way, address. And again, I'm sure he is. I don't mean to discount everything that they're doing. But the use of day one is an excuse to me is a giant red flag about this culture. Todd Bishop is with us. He's the co-founder of Geekwire, great news website about the tech scene in Seattle covers Amazon. Microsoft. We'll get to a little bit of Microsoft's relationship with Open AI after the break. And I'm also going to ask him a little bit about what's going on in the warehouses. And maybe we can talk a tiny bit more about the leadership principles in case your curiosity is piqued because they are one of the most interesting parts of the amazon culture we'll be back right after this on big technology podcast hey everyone let me tell you

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We would be thrilled if you would do that on your podcast app of choice, but no pressure. Really appreciate you being here. We're already, what, 40-something minutes in and you're sticking with us? Appreciate that. That's awesome. Okay, so let's just do a quick wrap on the Amazon part. And then, of course, since you're out there in Seattle, I definitely want to ask you a little bit about Microsoft and Open AI. First things first, the leadership principles.

It's very interesting to hear you talk about how maybe they're sort of reaching the end of the air utility. When I was out in Seattle, I found that Amazon employees. So these leadership principles are basically the Ten Commandments or whatever. I found that people follow them more closely than their religion. If they're in a marriage with another Amazon employee, they use the leadership principles to structure their marriage. They teach them to their kids. When you're hanging out with Amazon employees off the clock, they will look at the way that people order on a menu and they'll be like, okay, that was good bias to action, which is one of those leadership principles or if they don't really like what the table's ordering, they'll do. like disagree and commit and then just say, okay, I don't want to eat this, but I'm going to love it.

These type of things. It's really weird. It's cult-like in some ways, but very effective. And it does seem kind of comforting to actually have these principles that sort of structure the way that you operate as a company. I'm curious if that's the right way to describe them and how you think they've faded in some way. Yes. And I want to be clear. I don't think the leadership principles are going to go away in terms of their influence inside Amazon. But I think, what you're saying is exactly right. I think that's my impression as well. I think at the beginning, we would hear Amazon executives talk about the leadership principles. And honestly, I would do a little bit of the metaphorical journalistic eye roll. Well, they sound so silly. But they're actually pretty

effective. Right. And the fact that they're simple, for the most part, the last couple that they added, more verbose than any of the others and a little bit harder to follow about. Earth's most customers, no, no, I'm sorry. Earth's, oh boy, you caught me off the cup. They're related to the environment and employees, basically making sure that they're Earth's best employer and also that they're good stewards of the environment. I'll have to call them up here as we're talking.

See, clearly I have not been inculcated in the leadership principles as much as I should. Strive to be Earth's best employer is one, and success and scale bring broad responsibility. Oh, that's right, broad responsibility. which obviously includes climate, but clearly speaks to impact on customers and antitrust. I think that's their sort of antitrust antidote that they put into the principles. Yeah, that was before the stock got cut in half.

Yeah, but go ahead. Exactly. No, these things are genuine. I mean, the people at the company, for the most part, believe in these things and adhere to them. I just think as a tool to perpetuate. the culture, I think Amazon is seeing that there's limits to that. And I think the way that the day one approach and the interpretation of what day one means, the way that's changed in the eyes of some leaders, I think is one example or piece of evidence to that end. Let me ask you one question,

maybe a couple of questions about the fulfillment centers before we moved to Microsoft. Last year, there was, or 21, it's hard to remember exactly when. There were, was a push inside Amazon fulfillment centers for the workers to unionize. And they obviously did a pretty good job in my neck of the woods getting one east coast fulfillment center unionized, but then it completely sputtered. So how would you say Amazon is treating its frontline workers? And where does the union push stand today? Yeah.

So, and in fact, that Staten Island union push is still playing out. We're still seeing different decisions come out. on that. To some extent, I think that's still the test of how much unionization we're going to see inside Amazon. The independent Amazon labor union that pushed forward with that, I think, did a remarkable job in many ways against long odds. And clearly, the company was, to say that they did not embrace the union would be an overstatement or would be an understatement. I mean, This company clearly does not want unions in its midst, and they're obviously trying to do whatever they can within the bounds of the law and potentially otherwise to keep unions from happening. And I think a lot of this will depend on how things play out at the NLRB in the courts and whether employees at other fulfillment centers see a relatively

not easy, but at least straightforward path to unionizing themselves. So can you break that out in a little bit more detail? So the Staten Island Fulfillment Center voted to unionize. And is that what's the state of that right now? And why haven't? I mean, I imagine that that would be just the beginning, but it seems like everything fizzled. Right.

So this is still before the NLRB, the National Labor Relations Board. In fact, there was just the decision that came out earlier this week. where, I'm looking at a New York Times story on it right now, in fact, where a federal labor official turned down Amazon's attempt to overturn the union victory. So this is, though, still just one obstacle that the union face. They've overcome it now. And now they're essentially going to have to proceed with contract negotiations with the company. So it was a victory for the union. And I think that's progress for them. And it's also interesting. thing. You've got, frankly, another Seattle corporate titan that is facing something similar

in Starbucks in terms of the Starbucks push. And what's interesting there is I think you've seen those employees get a little bit more of a ground swell across the nation than you've seen the Amazon unions do. I will just mention one other obstacle that unions face, and that is Amazon drivers. People might not know this, but even though they're driving around making deliveries in Amazon vans and Amazon uniforms, they're returning every, they don't work for Amazon. They work for thousands now of independent delivery service partner companies. And boy, that is, talk about a structure that makes it difficult to unionize. I mean, it could be possible, but I think it's highly unlikely. And of course, that's beyond Amazon's employee base, but it's key to its infrastructure

and to its operations. And I just think it makes it really hard. By the way, Microsoft did just allow a union. Microsoft, right, speaking of Seattle corporate titans or Seattle area corporate Titans, Microsoft allowed a union in one of its gaming subsidiaries and seems to be much more open. You're smiling. Is this a public related? Tell us the real story behind that. Well, that's That's, I mean, the key, the key audience for that whole push is the FTC, and obviously that didn't work. So, Microsoft is attempting to require. Oh. Oh, well, not all.

I mean, largely. It's, I think Activision is a major motivator. Right, right. Oh, sure. Absolutely. Because that acquisition, they're trying to do this acquisition, it's sort of stuck in the mud right now, and the FTC is trying to block it. That is very interesting. So you think that this is just sort of like a, hey, look, we're, we're, we're, we're

good company. It's, it's not just that. I think that's a major part of it. Right. And I've talked with Brad Smith, the Microsoft president about this, and he acknowledges that that is a component. Really? That one reason Microsoft is focusing on this issue, they've made a broad pledge to, if not embrace unions, then at least just allow them to proceed without, you know, undue opposition. Very different approach from Amazon. Oh, and that's another interesting dynamic. Yeah. Microsoft, and I don't know that they would acknowledge this, but I think it's clear. Many times, Microsoft will do things on the policy level that are specifically a poke in the eye at Amazon. And so in this union push, and less so to Starbucks, Satya Nadella, Microsoft CEO is on the Starbucks board.

But in this union pledge that Microsoft made, I think there was a clear undertone, undercurrent of making it clear that Microsoft, Microsoft was on the good side, it's on the light side of this issue, whereas Amazon, in their view, might not have been. Well, they have to be on the light side now that they're going to have this superpower AI underneath their umbrella. So why don't we end with this? Nice transition. Microsoft is trying to acquire a large stake, 49% of Open AI. I'm curious how you think that that will impact their products. A lot of people are focused on search.

We've talked a lot about search. Feel free to address that if you want. The thing that really strikes me is the weird. places that they're trying to put it now i think it's weird maybe it's pretty important and smart but from your story about this you write that microsoft reportedly looks to integrate open ai technologies into more of its products including Microsoft word PowerPoint and the outlook like what's going to happen i'm doing a PowerPoint and then some you know ultra supercharged clipie tells me hey this actually is terrible why don't i get my friend dolly to draw something for you that is

actually presentable what is this going to actually look like That would be cool, potentially, and I should acknowledge there's been some great reporting on this recently from the information from Bloomberg. I've talked with Mary Joe Foley, who's now at the research firm directions on Microsoft about this. So I'm in part sort of conveying things that I've read and heard from them. You're seeing some AI and PowerPoint already. I mean, in a basic level, it's a PowerPoint designer. When you throw a bunch of images into a slide and say, hey, make this look. pretty. So you're seeing that to some extent. To me, I think the key is to remember that open AI

is not just chat GPT. In other words, open AI has a variety of technologies. Yes, its main strength is in natural language processing. And so there we see chat GPT really taking off. And I think you do have some potential for that. But to your point, Dali and other types of visual technologies, I think you could see being incorporated. I do think there's a risk, though, of technology for technology's sake in some of these integrations. And granted, we have not seen them, not seen all of them that are on the drawing boards. But if you look at what Open AIs technology was able to do in GitHub with the GitHub co-pilot program, developers love that thing. I mean, it is able to essentially be a second pair of eyes,

a pair of AIs on your code saying, did you really mean to do that? No, I think you should do this. I mean, I'd love that in my job writing a story. I could probably have used that on this podcast, somebody chirping into my ear saying, no, Todd, AWS profits were this, you know. Right. Like, you could see in different scenarios and in different industry verticals where it could be, something beneficial. Interesting. Ron John Roy and I do a weekly Friday show, and that's Friday. We talked about how Satya might be the goat CEO for keeping open AI so close, especially

as Google has been a little lukewarm to release some of its products like Lambda, which we haven't seen yet. You agree with that assessment? I think that, let me just say this, when Satya Nadella was named Microsoft CEO, I was skeptical. Really? I, now, yes, I, so I had talked with Satya in his prior roles as the head of Bing and server and tools.

And he was always on message about whatever they were announcing from, from those divisions at the time, very focused, very focused. And I had not at that point seen what I think we could accurately call someone with vision. Right. He certainly has a vision and an ability to. communicate the growth mindset, which is kind of Microsoft's adaptation of day one. Of day one. Well, that's the thing that I was saying, and I'm always day one.

Just a bit of a side note. Every company has this. Microsoft has growth mindset. Amazon has day one. Facebook has where 1% done, et cetera, et cetera. This is a thing. But I think that looking now in hindsight, with the benefit of hindsight, you got in Satya Nadella, somebody who's able to have the institutional knowledge, the internal

credibility, and the sense for what this company is, but also the open mind to these kinds of partnerships. Right. And I wonder, I wonder if Steve Ballmer would have done the open AI deal. Well, given his track record, I would say likely not. Or if he did, it would find some way to explode. I don't know. He might have tried to just acquire them outright given his track record back.

If he had any money left after all that he spent on Nokia. Sorry, Balmer, I'm giving you a hard time again. It's one of the themes on this podcast, but yeah. Well, you know, I think he is, I think looking back on his tenure, there are a lot of things that went right that people don't give him credit for. So I will say that. Elevating Satya as the head of server and tools was probably the best move that Balmer made the whole time. Sorry, go ahead.

No, Azure, Microsoft Azure. Heck, if Balmer wasn't there, you wouldn't have Bing for Microsoft to incorporate GPT into, you know? So there you go. You've got to judge these people with the benefit of history. So it does seem like, yes, that was a good decision. So I'll give Balmer that. He should have spent at least half of that billion, though, on dancing lessons. That's my, I won't stand. I won't back down on that. spend that money on dancing lessons. So, yeah, it's interesting stuff. It'll be interesting to see.

I know in Google, they did a code red about this. That's what the Times was reporting. And I'm sure there's this picture. I think you guys had it of Sott Inadella and Sam Altman, the CEO of Open AI standing next to each other with these big smiles on their faces, looking kind of jacked. And I'm sure that, like, inside Google right now, Sundarpa Chai has that on a dartboard. And he's just fling a darts and being like, why? I said AI was electricity and fire. And look what they're doing.

Maybe. I don't know. I know even less about Sundar's mentality. He's not really a dart thrower. But it's fun to imagine. Yeah. Todd, so great to have you on. I know that people can go to GeekWire to read your stories.

Understand there's a geekwire podcast, which you can find on your podcast app of choice, anywhere else that people can find your work. those are the best places geekwire.com and the geekwire podcast. I appreciate the plug. We have a lot of fun. And chat GPT was the discussion last week with Mary Jo Foley. So that's a little bit more on that topic. Awesome. Well, thanks again for joining. Thank you, Alex. And that'll do it for us here on big technology podcast. Thank you so much, Todd Bishop, for joining. It was a really thought-provoking conversation. And it may very well inspire some stories on big technologies, the newsletter. So stay tuned for that. and just again on Friday for a conversation about the news. Again, we do these flagship interviews on Wednesday and then the news breakdown shorter episodes on Friday. So two episodes a week now on Big Technology podcast. It's been super fun. We're right in the thick of it. We've already got two in the books and we continue to charge on in January. Thank you, Nate Gwattany for handling the audio as always. Thank you to LinkedIn for having me as part of your podcast network.

Thanks to all of you. The listeners, really appreciate you coming back week after week. It's great to have you here and hope we can do it again sometime soon. Hope you have a great rest of the week and we will see you next time on Big Technology Podcast.