Motley Fool Money - Amazon Upends the Grocery Industry

Episode Date: June 16, 2017

Amazon buys Whole Foods. What does the deal mean for consumers, investors, and competitors? Our analysts tackle those questions and delve into the latest news from General Electric, Nike, and Kellogg. Plus, best-selling author Brad Stone discusses the future of Uber.     Learn more about your ad choices. Visit megaphone.fm/adchoices

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Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. In the Molly Pool Money Radio Show, I'm Chris Hill, and joining me in studio this week from Million Dollar portfolio, Jason Moser and Matt Argusinger, and from Total Income, Ron Gross. Good to see you, as always, gentlemen. Hey, you do. We've got the latest headlines from Wall Street.

Best-selling author, Brad Stone will analyze the state of Uber. And as always, we'll give an inside look at the stocks on our radar. But we begin with the Blockbuster deal from Friday morning. Amazon is buying Whole Foods market for $13.7 billion. This is an all-cash deal. a 27% premium for Whole Food shares. CEO John Mackey is on our board of directors here at The Motley Fool. He will remain the CEO of Whole Foods. And Ron Gross, I'll just start with you. This was a stunner.

You know, as an Amazon and Whole Food shareholder, I'm pleased on both ends here. But I'm a little bit surprised that I didn't see this coming at all, really. And it seems kind of silly in hindsight. It makes sense. There were some tests that the two had done together. We know Amazon for the longest time has been really pushing into that grocery business. We know Whole Foods has been struggling for a variety of competitive reasons. So, I like the deal. I think it makes sense. Shame on me for not seeing it earlier. Yeah. Jason, for anyone who was wondering how serious Amazon is about bricks and mortar, they're serious.

Yeah, let's reiterate here. Shame on you, Ron. We all saw this guy. No, it's funny. We're all riding to work this morning. Our phones are all lighting up. Twitter's crazy. It's just, wow. First things first, I'm really, I would much rather see this deal than something like the rumors we were seeing with Amazon, potentially taking some interest in Slack. I just couldn't see how those two really worked together, and it seemed like the valuation for Slack was out of control. This, there's a lot to unpack here with this deal, but I think, like Ron said, it is a good deal for both companies. I mean, Whole Foods for a long time, and we owned it in MDP for a while.

And our big concern was grocery has just become a hyper-competitive market where really the primary form of competition is price. It's become abundantly clear that people don't care as much about the experiences they care about the price. And that put Whole Foods in a really tough spot. And they, I don't think, had an easy way out from there. And Kroger's recent results, I think, just sort of reinforce that. So I think this deal gives Whole Foods the opportunity to continue competing on price and

growing that business without being held to the scrutiny of your public companies. And for Amazon, this is right in their wheelhouse, I think, as far as they can leverage their expertise in shipping and logistics with the physical footprint that Whole Foods has today, to really grow up. What I think is it's becoming a very robust market, online grocery. It should be, should just do nothing but continue to grow here for the coming years. It's certainly a shocker to me. I mean, I had no doubt that Amazon, you know, I should Amazon was going to invest big and go big into groceries. If you think about it, outside of rent and your mortgage payment, it's pretty much the most consistent monthly expense that anyone

has. And it's non-cyclical. So it's a big market. I'm not surprised Amazon was going after it. I am surprised that they decided to do their biggest acquisition deal ever since Twitch in 2014 for about a billion. Twitch. To go after Whole Foods, to Jason's point, it's definitely a distribution deal. I thought Bloomberg had an interesting heat map of it and showing how both companies had significant correlation on the coast. But if you look at Whole Foods, they have a lot more stores in the Midwest and Southeast where Amazon really doesn't have any kind of footprint. So there's a lot to gain if you're Amazon. I just think if you're going to make a big move into the groceries,

I think you could have done something different in going Whole Foods. I think there's a cultural difference there between the two companies. I think Jeff Bezos and Amazon, more of a kind of hardcore, let's cut expenses, let's focus on distribution where Whole Foods is more about store-friendlyness, customer experience. Well, let's get to the price tag for a second here, since this has already been referenced. This is not just the biggest acquisition Amazon has ever made. This is exponentially the biggest acquisition they've ever made. I mean, you mentioned Twitch, you look at Zappos. Those are both in the neighborhood of a billion dollars. This is 13.7 billion. And Jason, we've

talked before about Facebook and the amount of money. that they paid for WhatsApp $19 billion, and analysts asking questions over time, like, okay, how's that going? And I think that one of the things Amazon has bought themselves here, fairly or unfairly, is ongoing questions from it. I think it's completely fair. And I say, this is an Amazon shareholder, to start to ask Amazon on a quarterly basis. Okay, you just wrote the biggest check you've ever written. How is that going so far? Yeah, I mean, that's a very good point. It's something that I don't think the market is just looking at this and saying, okay, it's Amazon, it's Bezos. Great deal. Now, let's move forward.

I mean, we are all going to want to see some results on how this affects the company's bottom line. I think that, I mean, when you look at something like WhatsApp and compare it to something like Whole Foods, I mean, the glaring difference there is that Whole Foods obviously makes money and WhatsApp does not. And I think that what this does, it gives Amazon some credibility and probably what's the biggest hurdle to clear in the online grocery space. and that's figuring out a way to deliver quality, fresh produce, fruits, meats, things like that. I think that's probably one of the hangups a lot of consumers have with ordering groceries online. They've done really well with Prime Pantry, with the shelf-stable stuff. This is going to give them the opportunity, but it's just that.

It's an opportunity. They still have to execute, and we are going to learn very quickly how they plan to execute. But again, with that Prime membership, with all of the levers they can pull within that Prime membership, I just think the opportunities here are so vast, and Jeff Bezos is such a good long-term thinker. And really, it's very clear that John Mackey cares deeply about this company. And I think that's important to remember here, because it's going to give him a chance to really get back to doing what he wants to do without everybody holding him up to the fire, quarter in and quarter out. Well, I think we are, today, we're closer than ever to that future, where I'm at home,

I'm getting ready to go to work or go out of the house, and I speak my grocery list into Alexa. and by the time I get home, I've got groceries delivered to me. And I think that's a future. A lot of people are probably excited about. And to Jason's point, the hang-up there has always been fresh food on a daily basis. Now, Amazon has that capability. To your point, Chris, I don't think Bezos really sweats those quarterly conference calls as much as some CEOs do where they feel the need to explain away.

Every quarter, what's going on with same-store sales or price points. I think he's just fine offering the information he's going to offer and let investors do what they will. I think the only disconnect I see with this, Maddie mentioned the culture. I think price point. Whole Foods is typically a very premium priced product. Whole Paycheck is the big joke there, where Amazon, you think more of a discount, lower priced items. So it will be interesting to see now that Whole Foods has less scrutiny on the quarterly basis. Are they going to keep prices where they were? Are they going to lower prices and really try to take a chunk out of the competition? As we know, groceries are a thin margin business. Whole Foods is probably

a 3% profit margin business. There's not that much leeway there. But if Bezos wants to, he can take this down to a 2-1.5% business and just try to take huge market share. Yeah, like he says, your margin is my opportunity. I think that comes into play here. But let's also remember, a lot of times we see these kinds of deals, the acquirer, shares of the acquirer will go down on this news while the company being acquired might go up. In this case, the market is bidding both stocks up. So it seems on the surface, at least, that the market might be all right with this deal as well. Well, and you mentioned the margins, Ron.

I mean, yes, this is traditionally a low margin business, but let's go back in time six to 12 months whenever Amazon unveiled that video of the store that they, a concept that they were testing out in Seattle, which had very few employees. So yes, it's a low-mars-go, yeah. So yes, it's a low-margin business unless you significantly reduce the number of people who work there, and then all of a sudden the margins start to get better. They've said for now that they won't be laying off Whole Foods employees, specifically cashiers, because people are wondering, does technology all of a sudden start replacing the

cashier? And let's face it, eventually, I think that happens more and more and more for the time being no. But if that Amazon Go worked in that one test market, which I think it did, it would be awfully exciting to push that out to other stores. Well, I mean, I think we should talk about what this means probably for the competition. Yeah, I was just going to say, I mean, Jason mentioned, I think it's worth pointing out that earlier this week, Kroger came out and lowered their revenue guidance for the full fiscal year, and the stock fell almost 20%. And then this happened, and Kroger shares falling on Friday, another 10, 12 percent on top of

that. Right. I mean, I saw Friday, you saw Costco down, you saw Walmart down. I mean, this is the business that these companies have gone after tremendously for the past few decades, at least. now. Amazon, of course, is making a big play. Earlier when I was saying, you know, the deal was surprising to me, I actually thought, from a cultural standpoint, that Amazon buying Costco actually made a lot more sense. I mean, of course, that's a bigger deal. You'd probably have to pay 80 or 90 billion for Costco. Still not a humongous deal, if you compare it to Amazon's $460 billion market cap. I just don't think they would have gotten that deal past

regulators. But that, to me, would have made more sense. If Amazon was going to really, as Jason says, go in and grab market share in a big way and do it in a business. that's a lot more similar, has a lot more of the distribution of fulfillment capabilities, membership business made a lot more sense. What about this notion that's going around that Amazon got a really good price, even though they're writing the biggest check they've ever written? And there was one firm, and I don't remember which one it was, but one firm, the buyout our price was $42 a share.

One firm came out and actually put a price target on Whole Foods of $45 a share, saying, we think there are going to be other bidders coming in for this. Who else? I was trying to wrap my head around whom this makes sense for. So there are two concepts that at least could come into play here. Kroger is one, just because if you think about it, that is a bad week. Well, they are having a bad week, but let's not forget. It's not just Kroger. They own Harris Teeter. So they do have some familiarity with that upper end space. And don't neglect private player Publix. Mac's favorite grocer really, I think, right, Mac? I mean, we all love a little publics here now and then. We don't get enough exposure to publics up here.

Wonderful store down south. They are private, as we said, and that would be an opportunity, of course, for Whole Foods to be able to get out of the limelight as well there. I like, you're thinking there with Costco. I mean, two companies with very loyal fan bases. I mean, subscribers, they have great renewal rates. But at the end of the day, I think this is going to be something that ends up making a lot of sense. And honestly, I don't want to call Whole Foods a desperate seller, but I will say, I mean, this was a business that was clearly facing monumental challenges here in the coming years. And I don't know. there was really any easy way out for them. I think this is ultimately the best case scenario

for them. And shareholders ought to feel pretty good about this deal. Yeah. Speaking to the competition, even without the online piece here, there's just too much competition in this business for such a thin margin business. And there's too much price competition. And you see it hitting all these folks. Now we have the Europeans coming in with Aldi and Liddle. Probably pronounced both of those wrong. I apologize. So now we even see more competition. Then you layer in the fact that online is only 2 percent online grocery is only 2% of all online sales, a major competitive force about to come in. I think we could start to see more and more consolidation in this industry. And a few years from now,

there'll be less, bigger players, but less. Yeah, I think a lot of people may not realize how robust the online grocery space is. I mean, in 2016, it was about $42 billion in sales, which grew more than 150% from the year before. And it is just projected to take up more and more share of the overall grocery market as time goes on. So, clearly, Amazon placing a bet on sort of the direction this market is headed, and I think they're on to something. Coming up, a reminder that when federal investigators knock on the front door of your business, it's not so they can give you candy and flowers. Stay right here. This is Motley Full Money.

Welcome back to Motley Full Money, Chris Hill here in studio with Jason Moser, Matt Argusinger, and Ron Gross. Booz Allen Hamilton, a holding company best known for its consulting services, announced late Thursday that the U.S. Justice Department is investigating its accounting practices and shares of Booz Allen fell more than 18 percent on Friday. Ron? Not good? I don't know if there's fire, but there sure seems to be a lot of smoke. Federal, civil and criminal probe, as you said, companies cost accounting and indirect cost-charging practices with the U.S. government.

They do almost all of their business with the U.S. government. It's almost like an arm of the U.S. government at this point. They claim that their internal and external audit processes have not identified any material weakness, but that typically is what people say right up until you identify the material weakness. Who knows where this will go, but the street, the investors out there want no part of it and are selling the stock off brusquely. Am I the only one who thought of Arthur Anderson when all of this was going down? We'll see where this goes.

A changing of the guard, a general electric. Longtime CEO, Jeff Immelt, announced he is retired. tiring before the end of the year. He has led GE through some tough times, Jason. But if you're grading him on the performance of the stock, I think it's fair to say that shareholders are looking forward to new leadership. Yeah, he probably walks out of there with like a D-minus. And I think my bet is that John Flannery has what is going to be perceived, at least, to be a pretty easy act to follow. But I think a lot of that is also going to be thanks to some things that ML did here recently, at least in sort of streamlining the business and helping get it

sort of back in a direction where they could focus on points of strength. And, I mean, it's worth remembering to, I mean, ML had to lead this company through two, at least to extremely pivotal crises. I mean, in 9-11, the financial crisis. I mean, those are things where we can't discount that. I mean, we have to remember he did take this company through those periods of time. Obviously, Warren Buffett felt like there was a reason to invest in the company at some point. I think it's a good reminder that Buffett can often make investments that we simply can't make. I think you got $3 billion in preferred shares with a nice 10% yield. Some options to buy some warrants there.

I'm glad something's finally working out for Warren. It certainly shows you that investing there are a lot of different ways to win. Again, I mean, I think this is a business that I think is set up to succeed here for the coming years because they are focusing back on points of strength. We were talking with Taylor Muckerman this week about their focus on energy. I think those were all good steps in the right direction. I think if you're a GE shareholder, you're probably happy to see a changing of the garb, but you also have to feel pretty good about what's to come.

Nike is revamping its operations and cutting 2% of the workforce in the process, shares of Nike down 6% in the wake of CEO Mark Parker's announcement. I don't know, Maddie. This feels like one of those situations where it's going to get a little bit worse before it gets better. I think so. As we've talked before, I think the retail problems, the retail channel problems are still a big challenge for Nike Under Armour and really the whole space. They're calling this consumer direct offense. There's really two sides of this story. It's consolidation on one side and

product adaptability on the other. The consolidation is probably needed. I think that's responsible for the 2% workforce cuts that we're talking about. For example, they're going down to four business regions. I don't know why Nike had both a Western European and a Central and Eastern European segment. They're just combined that into a Europe, Middle East, and Africa segment. So things like that makes sense, I think. But what's really the important thing been doing it's really consolidating the website, the direct consumer business, and the digital products business into one business unit. They're calling Nike Direct. It seems like that should have all been together. But now they're bringing it all together, and

I think that's the major force of the company, and that's really going to be spending a lot of capital. That's obviously the growth engine for Nike in a lot of these businesses going forward. And so I like the move, and being more adapted to the consumer is going to be an important part of that. Well, and Parker has done such a good job running Nike for so long that you sort of look at this and think, yeah, he's not taking this lying down. No, no, no. He's going to figure this out. And I think it's about making Nike more of a, more of a stylish apparel company as opposed to just a purely sports apparel company.

I think that's the right move. Since 2009, sales of breakfast cereal in the United States have fallen nearly 20 percent, but Kellogg has come up with a plan to win back millennials. The company has unveiled a line of Fruit Loops branded merchandise. It is starting with limited edition sunglasses and a social media campaign that includes the hashtag, whatever fruits your loops. Wow. That is awesomely terrible.

I don't like that. Not terribly awesome. I don't know. Is this going to work, Ron? I just don't see the connection between, yeah, this is what's going to get people eating cereal again. I don't even think the people that developed it think it were. Let's go to our man behind the glass, Steve Broido. Steve, if I offered you merchandise branded with any cereal, not just fruit loops, any cereal, what are you going to be?

with. C3PO's. The old school C3PO's cereal. I was a kid. That's the one, man. No longer for sale, but if they bring it back. Ron Gross. I know you're familiar with the Pet Rock?

How about the fruity pebble? Nice. What about you, Jason? If someone hooked me with a cat-in-shaped cat-and-crunch coffee mug, I would not be scared to use it. I'm going full nerd on this. Snap, crack one pop, yeah, well, snap, crackle, sure, but you actually, the t-shirt crackles. Like, you walk up and it's like crackling the whole time.

You're like, what's going on? This person's going to get a wearable technology right there. I'm going with Jason, although I want a Captain Crunch sword. Give me an actual sword. That's not a thing. All right, guys. We'll see you a little bit later in the show.

Up next, the most valuable startup in Silicon Valley is falling apart. We will find out how bad it's getting for Uber as we check in with Bradstone. That's next. This is Motley Full Money. All right. Before we get to the conversation with Bradstone, I've got to say thanks to our friends at Rocket Mortgage by Quicken Loans. These are you're confident when it comes to your work or your hobbies or your life in general.

Well, Rocket Mortgage gives you that same level of confidence when it comes to buying a home or refinancing your existing home loan. Let's face it, this is something you're not going to do all that many times, so you want as much confidence going into that process as you can get. And with Rocket Mortgage, you can apply simply and understand fully so that you can mortgage confidently. To get started, go to RocketMorgage.com slash fool. Equal housing lender, licensed in all 50 States, NMLS Consumer Access.org, number 3030. Welcome back to Motley Full Money. I'm Chris Hill. The company in the spotlight this week is Uber. So to weigh in on that and more of the news out of Silicon Valley, we turn to Brad Stone.

He is a senior executive editor for Technology at Bloomberg and a best-selling author whose latest book is The Upstarts, how Uber, Airbnb, and the killer companies of the new Silicon Valley are changing the world. Brad, good to talk to. you again. Thanks, Chris. Uber may be changing the world, but lately it is undergoing some changes of its own. For those who haven't been following this story, Uber's board voted to adopt all of the recommendations of an independent investigation led by the former Attorney General, Eric Holder.

And the first recommendation, review and reallocate the responsibilities of Travis Kalanick, the CEO. Kalanick has taken a temporary leave of absence. Does this guy have a future at Uber? Yeah, I think he does. To be sure, he is skating on extraordinarily thin ice. This is a company that has been at the center of a storm is really the only way to say it since late January, early February. You know, for a number of different reasons that we might kind of all shoehorn into under the umbrella of, you know, this was a company where he kind of jam the accelerator down and the engine overheated.

in a number of egregious ways. You know, they grew too quickly, too fast. They had poor internal controls. They skirted close to or over the line of legality and a couple of their different avenues of expansion and, you know, created a workplace culture without the guardrails of a professional human resources organization, which, you know, created all sorts of allegations

of mistreatment, of sexism, of overworking, of really a, you know, terrible internal atmosphere. But, you know, Travis is really, you know, the founder's CEO. He's technically a co-founder, but he is sort of in that role. He's gotten Uber to where it is today, a company that was, you know, valued in the last funding round at $70 billion, probably come down since then, but nevertheless, an extraordinary success by almost every standard, except for the one that we've been using over the past few months.

So he also has a lot of voting control and allies at the company and some loyalty from people. So I do think he stays around. also add Chris, you know, part of the reason that he is stepping away, you know, for this indefinite amount of time, is he suffered a horrendous personal tragedy in an accident that his parents got into and his mom passed away. So, you know, there, I'm not so sure that he would be taken this time off if it wasn't for those unfortunate circumstances. But, you know, this is a company that needs a quick turnaround, needs, you know, a reputational overhaul. And I don't know that anyone has the authority within Uber right now to do it. And, you know, he also has a

huge recruiting opportunity or challenge ahead of him in terms of hiring this long-promise CEO-O, his partner. He's got openings from CFO to the senior rights president of engineering that he now has to fill. I was going to say, you know, the latest issue of Time magazine features the headline Uber Fail, upheaval at the world's most valuable startup is a wake-up call for Silicon Valley. We'll get to the wake-up call part in a second, but in terms of upheaval, as you said, the CEO is on a temporary leave of absence. The head of finance is gone. The head of business is gone. I mean, who is in charge right now? Right. Well, technically, there's now a committee of several executives, a long-time executives, who run the different business units who are running the company.

But if you look at Travis's letter to employees, I mean, saying that he's, you know, would take some time off. He, you know, he kind of couched it, you know, and my sense is that he is still involved, that he is, you know, working on these, filling these spots, his recruitment issues, while he's trying to take some time off to grieve. So, you know, look, I mean, I know what the optics were and he's saying he's going to take some time off. I really do think this is still, for now, for better, for worse, Travis's company. And, you know, I think, you know, my sense is probably inside Uber, even though they've had to kind of fall on their swords and they've, you know, embrace the findings of these reports.

You know, this is a company that was built on stubbornness on obstinence, so it doesn't surprise me really that, you know, that Travis is still involved and it's still his company. Travis Kalanick's personal tragedy aside, you've studied this company closely. It's obviously a very big part of your latest book. Has any of what has happened at Uber over the past few weeks been a surprise to you? Of course. I mean, who really could have predicted any of this? I mean, you know, I think it's, you know, a unique situation in business. Now, let me be more specific. Maybe some of the allegations of internal, you know, of sexism or overlooking some of these harassment claims, you know, this was all started off by a blog post by a former engineer named Susan Fowler who says that she raised the sexual harassment. allegation uh... that is you know that you know unfortunately happened to

companies what was surprising is that you know the the human resources that or at organization at uber ignored it uh... you know there there were some people that were talking about these kinds of problems beforehand some of this other stuff just the particulars of it uh... you know yeah i mean it it has been surprising the fact that uh... you know anthony levindowski the the founder of a automated trucking company called auto

uh... you know left his previous job at Alphabet and downloaded, you know, tens of thousands of files and is now being accused of intellectual property theft, that was hard to predict. That's a surprising one. The allegation that the head of the business in India obtained improperly and looked at the police report of a woman that horrifically was raped by an Uber driver in India, and then might have shared that with other executives at Uber. That was, I mean, you know, that was surprising.

So, yeah, I mean, it's whiplash almost. If you follow this company, if you've tried to tell its story, the extent to which the scandal has engulfed them has been quite shocking. So the people that you talk to outside of Uber, when they see all of this playing out, do you get a sense that what is happening here in plain view of the business world and, I might add, the VC investing world, do you think, we're moving towards a world where this is, we're less likely to see companies in Silicon Valley who are, for lack of a better term, tolerating CEOs or founders who are brilliant jerks, or is there always going to be a high level of tolerance if you're brilliant enough or the idea that you're building your business around is good enough? Yeah, I think, well, first of all, I think that there's enough of a belief in this community

that Uber is unique, that, you know, that Travis is a unique case, that they went to places that nobody else would have gone, you know, that it doesn't, you know, there's a belief from maybe a defense mechanism in the valley that that Uber's situation really doesn't say anything about the larger business community. I think it does. I mean, I don't believe that. But, you know, when you have that belief, that defense mechanism, you know, suggests it kind of clears the pathway for other founders or other CEOs to do the same thing.

And look, I mean, to a certain extent, some of this behavior is pattern matching from the companies and the founder executives who came before. You know, Steve Jobs, a brilliant jerk. Jeff Bezos, arguably, could be a brilliant jerk. Those companies are tremendous successes. And look, we'll see where Uber ends up. You know, it's still the most highly valued private technology company, probably in history. The last chapter's not yet been written, right? You know, we don't know if they raise more money, if there is an IPO at some point, if they can turn it around.

You know, I think it's fair to say that there's a little bit of, you know, that they're struggling right now. You know, but if they can get out of this media storm and write the ship, the economics of the business still look fairly good. And, you know, not just the ride-sharing component, but some of these other services that they've laid on top of it, like Uber Eats. You know, it's a tremendous from what I can observe anecdotally and other people I've talked to, you know, some parts of the business are growing quite well. So when the last chapter is written, we'll see what kind of larger impact it has on Silicon Valley. All right. Let's move over to Apple, which recently introduced the HomePod, their smart speaker for the home that appears to be geared around music.

And I'm curious what your reaction was. When they unveiled this at the Worldwide Developer Conference, the whole presentation struck me as Apple wants to own music. And they talked about, well, we had the iPod, what we've done for mobile music. want to do in your home. And then at the end, they just sort of threw in this last slide that was like, oh, and by the way, this device will also do what the Amazon Echo and the Google Home Assistant will do as well. So what was your reaction and what is the reaction in general of people that you've spoken with? Yeah, you know, it was curiously positioned, right? And it probably said something about Apple. I mean, clearly they thought long and hard about how to position this thing. You know, and they've

gone back to kind of the basics of the company, right? It's, you know, they have, you know, Apple offers a premium experience with PCs and with smartphones. And so the HomePod is $349. You know, the cheapest Amazon Alexa device is $50 or $60. So that's dramatic. You know, it's a music device. So, again, Apple going back to the basics. They've really been a dominant player in the music business for, you know, for now over 10 years.

You know, and also maybe, you know, finding a portion of the market that, might not be very well served. Maybe it was an acknowledgement to some extent that Amazon had gotten into the living room first with Alexa, and Apple had to be strategic about establishing a stronghold, so perhaps it's smart. But I thought it was expensive. I thought December 2017, you know, misses half the holiday season, though it feels a little late. You know, Google and Amazon are out there already. I thought the design, you know, it looks a little bit like an Ottoman, that something you might throw your feet on top of. None of these devices are particularly, attractive. You know, but I actually didn't get to hear it, but I heard it sounds great, you know,

and I use my echo right now for music. And so maybe, again, you know, maybe they have found a little opening here. And this is the beginning. It's the first inning of the new product category. So we'll see where they take it. But, yeah, you know, Apple was first with Siri in terms of these voice activated assistance. They added it to the iPhone now several years ago, and yet somehow they've sort of miss this key turn in this market. So you mentioned the Echo. I know you're a big fan of it, and certainly from conversations you and I have had, your family is a big fan of the Echo.

Do you think there's room for both? Do you envision apples thinking to themselves, well, you know what? We're not trying to be the Google Home Assistant just yet. So for now, we're content to try and say, oh, no, have your Google Home Assistant, have your Amazon Echo, but we also think you should have this for your music. Yeah, I mean, I think this is a new product category, and they're going to be room for different players. I think, in Apple, with emphasizing music is, you know, maybe even less going after Google Home and the Amazon Echo, and also, you know, taking on Sonos and other

high-end speakers, you know, positioning it's a replacement for that. So it's a new market, and there's going to be room for different strategies. And, you know, while I, It's true, I will confess to being a little bit of an echo fan. I have to say we enjoy it a little bit as a novelty, you know, and I'm not sure how much utility we get from it. You know, Amazon plays up the idea that this is a commerce engine, right, and we can order things. Well, sometimes we do, but, you know, it's not that hard to go to your computer or your phone

and, you know, and type in something and buy it on Amazon. And so who knows? Maybe it is the music application that really offers a new kind of utility in the living room or the dining room. And perhaps Apple's figured something out. It seems expensive to me to begin with, but that's the start, and they tend to drive the price of these things down over time. I knew that housing was expensive in Silicon Valley,

but that was really driven home to me this week when I saw a Wall Street Journal story about Google buying hundreds of modular apartment units to use as short-term housing for employees. That's how expensive it is to live in Silicon Valley. Facebook is reportedly planning to design 1,500 units in Menlo Park and a percentage of those are going to be classified as affordable housing. These seem like Band-Aid measures. I don't see how this is sustainable for more than a short amount of time.

Yeah, we're going to end up at Japanese-style capsule hotels pretty soon. Yeah, I mean, you know, the San Francisco Bay Area has a housing crisis. There's really very little high-density housing. The real estate prices are the highest in the country. And, you know, Google and Apple and Facebook and even Amazon with its presence here and all the startups are, you know, these are still good times and they're expanding. And so, yeah, I agree. It's a Band-Aid.

But, you know, they're applying that kind of tech mentality that drive the price down, you know, to adapt to the conditions that they find themselves in. So, you know, we'll see just because they're modular. and maybe a little less expensive doesn't mean they won't be nice, and they're probably temporary accommodations. That said, I'm not going to volunteer to move into one anytime soon. Last question, then I'll let you go. Your first book, The Everything Store, is about Amazon.

You've said that in some ways, every entrepreneur in Silicon Valley styles themselves after Jeff Bezos. Is there a company today that reminds you of Amazon in its early stages 20 years ago? I can think of another, a bunch of companies that spring to mind, but I'll go with maybe Airbnb in one respect. And, you know, Airbnb is, you know, one of the most successful marketplace businesses in Silicon Valley history, really. But more recently, they've sort of decided that, you know, they can't just be an accommodations marketplace. They want to be more. And they've, you know, moved into doing things like offering experiences, different things for people to do on their trips.

And Brian Chesky, the CEO, has drawn the Amazon comparisons and said, you know, tried to, tried to compare it to that, you know, those times where, you know, Amazon either moved into different product categories or different lines of business altogether. And so, you know, I think, I think that, you know, it's another example of a small company modeling itself after Amazon, taking, making a pretty bold bet and investing for the long term. You can read more from Brad Stone at Bloomberg. You can follow him on Twitter. If you want to know what's going on in Silicon Valley, you should be following him on Twitter. Brad Stone, thank you so much for being here. Thank you, Chris. Coming up next, we'll give me an inside look at the stocks on our radar.

This is Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. Welcome back to Motley Full Money, Chris Hill, here in the studio, once again with Jason Moser, Matt Argusinger, and Ron Gross. Before we get to the stocks on our radar, we've got a couple of people hanging out with our man Steve Brodo behind the glass. John Daigle, local to the Alexandria area. Ben Carter, also from the D.C. area.

Ben is the host of an awesome financial podcast called Manage Your Damn Money. Nice. And I don't know about you guys, but I'm insanely jealous that he got a great name for his podcast. I think Manager Dam Money is better than the name we've gotten. I don't even think about that. I mean, it's a no-brainer. So, you know what? When you're done listening to Motley Full Money, check out Ben's podcast. All right, let's get to the stocks on our radar this week,

and we'll start with our man, Ron Gross. What do you got? All right, hold on tight here. Compass Minerals, CMP, leading producer of salt for highway de-icing, also a growing agriculture, fertilizer business. They have a unique asset, which is the largest salt mine in the world. In Canada, they also have the largest dedicated rock salt mine. line in the UK. 4.2 percent dividend yield has increased that yield every year since going public

since 2003. Salty. Steve Broido. Question about compass minerals? What's your favorite mineral, rock? Come on. Rock. Well, potash, obviously. Jason Moser, what are you looking at? Yeah, checking out United Natural Foods, ticker is UNFI. They are a national distributor of naturals and organic groceries. We've talked about all of these companies that are sort of getting sold off thanks to this Amazon Whole Foods deal in United Natural Foods is no exception. But they have a very diverse supplier base. For example, Haynes Celestial accounted

for 5% of their total purchases in 2016. The interesting thing is that Whole Foods market accounted for about 35% of their net sales in 2016. So I'm trying to determine how this deal is actually going to affect them, because I could see it being a catalyst in the long run, helping them out if Amazon is going to grow out that consumer base with this Whole Foods acquisition. So I'm going to dig a little more into this one. Steve, question about United Natural Foods? Do you personally pay a premium for organics at the store? I personally do not. No, I don't really care if it's organic. I'm just going to cook it.

And if it's good, I'm fine with that. What about you, Steve? Do you pay up for organics? Not usually, but sometimes. Matt Argusinger. What are you looking at this? I'm going negative this week. Oh, nice. The next industry to be disrupted, in my opinion, is going to be the auto parts of retail. And so I'm looking at advanced auto parts, ticker AAP, and O'Reilly Automotive, ticker ORLY.

If you think about it, you've got mobility disruption, which is going to take a lot of private vehicles off the road. And then you've got the rise of electric vehicles, which have vastly lower moving parts in each vehicle. And I think that's bad news for the do-it-yourself auto parts guy or manufacturer or mechanic, sorry. Or gal. Or gal. And so that business looks really suspect to me right now. And these two stocks in particular are trading pretty high valuations. pretty high valuations. Steve, question about either O'Reilly or advanced auto parts?

It's a broader question. Gas-powered cars go away altogether. We move to electric cars. How long is it going to take for that transition to happen? Faster in other countries, but probably by 20 years here in the U.S., they're all off the roads. Compass Minerals, United Natural Foods, Auto Parts. You've got a stock you want to add to your watch list, Steve? These all sound a little weird, but I might go with Ron's Mineral Company. It was the potash that won you over, wasn't it? Was the potash? All right, Ron Gross, Jason Moser, Matt Arguson, guys. Thanks so much for being here.

Thanks, Chris. That is going to do it for this week's edition of Motley Full Money. Our engineer is Steve Broido. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.