This Week in Startups - Emergency Pod! Jeff Bezos steps down as Amazon CEO: Reasons, reactions & more | E1170

Episode Date: February 4, 2021

FOLLOW Jason: https://linktr.ee/calacanis Referenced in this Episode: GeekWire - Amazon Web Services posts record $13.5B in *profits* for 2020 in Andy Jassy’s AWS swan song https://rb.gy/k9m3ep CNBC - Amazon reports first $100 billion quarter following holiday and pandemic shopping surge https://rb.gy/v24lfb Amazon Q4 2020 Earnings https://rb.gy/653jmd

It's an emergency podcast. Jeff Bezos, the greatest CEO of the past 20 years, is stepping down. I repeat, Jeff Bezos is stepping down as CEO of Amazon. That's right, the head of Amazon Web Services, and Jeff Bezos's longtime right-hand man, Andy Jassy, J-A-S-S-Y, is taking over Amazon.com. What does it mean for Amazon's future? What is Bezos going to do with all this time? And $200 billion or so in equity? and is Andy the right man for the job? All that and more when we get back on this emergency pod. Do you ever wish you invested early in some of the best performing IPOs of 2019 and 2020? I bet you did. Well, our crowd investors invested early in many of those awesome IPOs.

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in the fourth quarter of 2019. You can do, you can see from those numbers, that's a big increase. We're talking about almost $40 billion additional dollars, $38 billion. dollars in addition added which is just an incredible percentage growth and this is amazon's first time breaking having a hundred billion dollar uh revenue quarter which is just extraordinary if you look at the 2020 earnings revenue increased 38 percent which is actually just what i said about the fourth quarter to 386 billion dollars compared with 280 billion in 2019 that's a hundred billion dollars in additional growth which if the average package signs was 10 or 20 bucks you can

imagine just how many packages that was, that additional packages they sent or servers, but just if it was packages, that would be a billion more packages at $100 each. So just to do back of the envelope and try to conceptualize how big this company is. It is huge. It is not large, it is not humongous. It is huge on a scale that we've never seen in the history of humanity. Just think about this for a second. The current employee account, 1.3 million people work at Amazon.

That is unbelievable. And they're adding more and more people. They've got over 150 million worldwide Amazon Prime subscribers. Amazon Prime is $12.99 a month in the United States, $119 a year. So you start thinking about that. People are paying them all $10 a month if they pay yearly for the privilege of shopping at Amazon. That is unbelievable. $10 a month.

Now, obviously worldwide. that might be different prices. But if we just took 100 million or 50 million as a U.S. number, 50 million as a U.S. number would be 500 million a month, just in Amazon Prime fees. So if it is, and I think it's probably north of 50 million in America, if it was just 50 million in America,

$10 a month, very easy math, $6 billion in Amazon Prime fees a year. This is a huge company and it's only getting bigger. So here are the key quotes from Jeff Bezos's letter to employees. This is February 2nd. I'm excited to announce,

that in Q3, I'll transition to executive chair of the Amazon board, and Andy Jassy will become CEO. In the exec chair role, I intend to focus my energies and attention on new products and early initiatives. Andy is well-known inside the company and has been at Amazon almost as long as I have. He will be an outstanding leader, and he has my full confidence. Now, let's break that down. This is happening in Q3. Okay. There's a little bit of transition time, but it's not two years. It's not a year. It's Q3. It's going to come up pretty quick. And In the executive role, he intends to focus his energies and attentions. Okay.

What is he going to do? New products and early initiatives. So new products, I wonder what those might be. And early initiatives. Wonder what that might be. So does it sound like moonshots like Google? Or is it something like, do they want to continue making hardware? You know, people make fun of their phones and their tablets, but their tablets have done

relatively well. Alex has done relatively well. The fire stick has done extraordinarily well. So maybe more hardware coming. Maybe they'll take another shot at the phones. Obviously, there's a lot. I mean, you have so much cash and such a huge user base, they could try to try and That's an interesting thing that he didn't say. He didn't say I was going to try to build new businesses through acquisition, but maybe, and Whole Foods was quite an acquisition for them, as was Twitch. Just think about those two acquisitions. I mean, we're talking about how big Amazon is. How big is Whole Foods and Twitch now? I mean, these things have really grown. He continues. As exec chair, I will stay engaged in important Amazon initiatives, but also have the time and energy I need to focus on the day one fund, the Bezos Earth Fund. That is the fund, I think, where he's giving $10 billion to global warming initiatives. And he just made his first. donations there, Blue Origin, obviously his space X competitor co-existor, The Washington Post, and my other passions. I've never had more energy, and this isn't about retiring. I'm super

passionate about the impact I think these organizations can have. So this is super interesting. Day 1 fund supports underprivileged families 100 million plus in 2020, Bezos Earthfront, as I said, $20 billion in Climate Focus Fund, and Blue Origin is Bezos's essential SpaceX, although he's pretty far behind. I think where Elon is out right now. Maybe he wants to spend more time on that. He continues, and this is where it gets a little bit in terms of him giving some prescriptive advice.

Amazon is what it is because of invention. And he's right. He is completely right about this. They are bold. They take big swings and they try new things and they innovate. The fact that Amazon came out with Amazon Web Services instead of Google, IBM, you know, HP, pick a person who makes computers and hardware.

They didn't come up with this. Amazon came up with the leading cloud computing company. That is just bizarre and amazing. We pioneered customer reviews one-click, personalized recommendations, primes insanely fast shipping, just walk out shopping, the climate pledge, Kindle, Alexa, marketplaces, infrastructure, cloud computing, career choice, and much more, said Jeff Bezos, Amazon founder and CEO. If you do it right, a few years after a surprising invention, the new thing has become normal. People yawn. That yawn is the greatest compliment an inventor can receive. when you look at our financial results, what you're actually seeing are the long run cumulative

results of invention. Right now I see Amazon at its most inventive ever making it an optimal time for this transition. I think what he's saying there is don't stop innovating. Don't rest on your laurels. Have a sense of urgency. He does not want to leave and have them just milk the existing categories, which let's be honest, that's kind of what Tim Cook has done at Apple. He's taking the existing products on the existing roadmap and he's just milling. milk them and milk them and milk them for profit and profit. And it's working. So you can't necessarily criticize Tim Cook for making a money printing machine print even more money. But people are buying less iPhones and maybe the company is less innovative. We haven't seen so many great

products. I think some of the products, I mean, the only good product really since Steve Jobs passed in my mind is the AirPods. And I don't think that that's like some amazing product. I think it's great, but if that's your best product after the iPhone and the iMac and a lot of other products, I'm a little concerned about Apple. I'll be totally honest. We'll see if their AR glasses actually come to fruition. So who is Andy Jassy? Well, he's running Amazon Web Services. He's been CEO of that since April of 2016. He joined Amazon in 1997 with several other Harvard MBA colleagues. His early roles included marketing manager. In 2003, he founded Amazon Web Service internally with a team of 57 people. He's responsible for the most profitable portion of Amazon, from what I understand, which is Amazon Web Services.

They had $45 billion in revenue in 2020, and their Q4 2020 revenue is at $12.7 billion, which is 10% of Amazon's total revenue. So he's already responsible for 10% of it. And when you look a year ago, it was just at $9.9 billion. So it's growing and it's highly profitable. Amazon Web Services is the largest profit center with $13.5 billion in 2020 profits. Think about that. As cheap as Amazon Web Services is, it throws off $13.5 billion in profits, which is 60% of Amazon's total operating profit in 2020. That's from Geekwire. What's interesting about that statistic is they're making all this money. They're generating all this revenue from

selling stuff. Bananas at Whole Foods and Amazon basics cables, but where does the profit come from? It's coming from their server farms and renting compute space. That's incredible when you think about it. And it's also an opportunity. That means if they did, products on Amazon a little bit more profitable, maybe they would make even more money. Or maybe their secret plan is to just keep building AWS and everything else is a front for that. Since Andy became CEO of AWS, its quarterly growth rate has decreased slightly as AWS reached major enterprise scale. Fancy way of saying it's kind of hard to grow at 80%, 70%, 60% a year on such a big number, but growing 20, 30%, anything over 20% is incredible. So let's speculate. Why did Bay,

Bezos leave. I've heard a lot of different reasons. Being the richest man in the world kind of puts a target on your back in terms of being hated. It certainly did that to Bill Gates and then he went on to do philanthropy. Also, you get dragged into all these Senate hearings and breakup hearings. And we saw Larry and Sergei kind of disappeared and Sundar started going to all of these. Maybe he's pulling a Larry. Maybe he's pulling a Sergei. Maybe he just wants to have his own Sundar run the company and not have to deal with getting dragged to Washington and he wanted just, I mean, when's the last time anybody saw Larry and Sergey do a public speaking gig or, you know, be anywhere in the public eye. I haven't seen those guys in years on CNBC or at a conference. I mean, the last time I saw

at a conference was the D conference with a RICO conference a couple of years ago. Some people maybe think he's going out on top like Jordan. Maybe he thinks this is as good a time as any. Markets out of top. It's out of high. We did all this revenue and we got to two-day shipping. Maybe he's just not very excited about it anymore, even though he's saying he's excited. Or maybe he just wants to give all this money away and see what it would be like to be a philanthropist for the last 20 years or 30 years, however long he lives. Maybe he's got 20 good years. He's 57, I believe, now. He's worth 185 billion. Let's just round that number up to 200 billion. Let me break this down for you. If Bezos were to make 5% on $200 billion a year, that's $10 billion, if you had $10 billion a year to give away

and you divide it by 365 days a year, that equals $27 million a day. Last time I checked, there's 24 hours in a day, which means he can give away a million dollars an hour for the next 20 years and not touch the principle, which means I'm not perfect that math. He could probably double that and eventually wind down or triple it and wind down the entire $200 billion. Long story short, imagine giving away $27 million a day for the next 20 years. This is like Brewster's millions.

It's an impossible task. He can do things now that only Bill Gates has been able to do. And now this is why we should appreciate capitalism. We now have, once again, the richest person in the world has now dedicated himself to giving his money away. This is a big deal. This is a very big deal. We've now seen it happen twice. It's my prediction. This will keep happening. People get to extraordinary wealth. They've accomplished everything they want to do. And then they decide, I want to do great work in the world. want to be remembered for solving some huge problem humanity has. So congratulations, Bezos. Additionally, maybe the being hated thing is making him nervous. He was a target of MBS hacking his

phone, according to reports stealing nudes from his phone. This can't be fun to be in that kind of crosshairs. Maybe that was a little exhausting for him. Or maybe people putting guillotine outside of his house. I thought that was really low and really a very, very, very dangerous and dark thing to do to threaten violence towards somebody, no matter who they are, whether it's Trump on one side or, you know, AOC or Bezos, you should not threaten any kind of violence or even, you know, initiate it in a modest, playful way. When you say we should bring out the guillotine, all you need is one sick person to take it literally, or somebody who's literally schizophrenic or suffering from bipolar to have a bad day to fall off their meds and they go do something

really regrettable. And, you know, I'll leave it at that. It's very dangerous to incite violence. We saw that on January 6th. We saw how close it came to people actually hurting Pence or AOC or Nancy Pelosi. You just don't want to do that, right? And we wouldn't want to see it on either side of the aisle. And I think there was a famous moment where Bill Gates got hit by an absurdist French guy with a whipped cream pie. And I remember when that happened, I just thought to myself, That is giving the green light to every crazy person who might want to do worse than hit somebody in the face with their pie. Because now you've shown the person is accessible, right? You can get to the person.

And that is really dangerous for society. Please don't do this kind of stuff, folks. I know it's sometimes funny to think, like, oh, we're going to bring out the guillotine. It's just pick another metaphor, right? Like, we're not happy with this person for whatever reason. And I think the Washington Post was something that made Bezos just really a target, right? And that is, you know, it could be scary for a person. I think also maybe he wants to live his life and have some fun and not have to run the day to day.

That's a potential thing going on here. Somebody was saying on Twitter, I saw this undercurrent, maybe there's some sort of scandal that's going to happen. I don't think that's the case. It would have come out by now already. So I don't think that that's the case. I'll be totally honest. I've met Jeff a couple times. It seems like a real stand-up guy.

And so I wish him well. This is going to be amazing for him to go out and to see what he does with all this additional free time that he'll have, do we think that this is going to hurt Amazon? Do we think Amazon's going to do better without him? Hmm, I don't think Amazon's going to do better without him. I'll say that. Do I think Amazon's trajectory can be changed now when it has this much momentum? I don't think that either. But I think he might, if he is truly engaged as he's saying as the chairman of the board, the exec chair, if he can do, if he can free himself up to do massive acquisitions, forget about starting businesses, The massive acquisition game is where Amazon can really, really accelerate their business.

So is there a YouTube? Is there an Instagram? Is there another Whole Foods? Is there a Tesla-like company? It's too late for Tesla. But, you know, an Uber or an Airbnb that he could figure out a way to buy. If Amazon owned Airbnb and Uber, my goodness, would that be the everything store? That's what I think should be on their list.

They should just go down the list and look at all the companies. under $250 billion and think if they owned Airbnb, if they owned Uber or Lyft or Postmates or DoorDash, what would that look like? And that's really where I think Bezos could do incredible work. Because you can't rebuild those products. They have too much of a network effect. It would take five, ten years to rebuild them if you were even able to do it. Just like Amazon had a hard time with groceries. They did groceries. Amazon did phones. They had a hard time with those two categories because doing groceries is hard, and it's a network of all of these local perishable foods. It was hard for them. They didn't get it done. But when they got whole foods, they got it done.

They did have some travel stuff they tried. They also tried to do a phone. It didn't work. They were up against Google Fi and Samsung and Apple. But maybe they go, can buy something in this space. Who knows what's out there? But I do think massive acquisitions would be the thing that would get Bezos. to keep the innovation going. Hopefully they keep innovating at the company. Hopefully they keep acquiring. That's one of the best things about Amazon is I think they're savvy acquirers.

Maybe not on the level of Facebook or Google, but they could add that to their skill set and be as good as Google or Facebook. In buying stuff, we wish them well. And we'll see you all next time on This Week in Startups. This Week in Startups is brought to you by Our Crowd Helps You Invest Early in Pre-IPO companies alongside professional VCs.

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