We Study Billionaires - The Investor’s Podcast Network - TIP362: Amazon Unbound w/ Brad Stone

Starting point is 00:00:00 You're listening to TIP. On today's episode, I sit down with Brad Stone, the senior executive editor for Global Technology at Bloomberg. Brad is also in New York Times and Wall Street Journal bestselling author of titles such as The Everything Store, the Upstarts, as well as his new book, Amazon Unbound. In this episode, we cover why his first book on Amazon deserved a sequel, Amazon's explosive growth in multiple industries, as well as failures like the Firephone. The leadership style of Jeff Bezos, good and bad, and much, much more. With the Amazon success and Jeff Bezos's meteoric rise in wealth over the last year in particular,

Starting point is 00:00:39 I've taken a lot of interest in Brad's work. Learning about the world's richest man is always a fascinating discussion, and today is no exception. So with that, please enjoy this deep dive into Amazon and Jeff Bezos with Brad Stone. You are listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Welcome to The Investors Podcast. I'm your host, Trey Lockerbie, and today I am so excited to have with me, Brad Stone.

Starting point is 00:01:23 Brad, welcome back to the show. Hi, Trey. Well, I got to first of all tell you that I really enjoyed this new book of yours, Amazon Unbound. But just for some background for our audience. You've actually been on the show before. It was a while ago. It was episode 142. We discussed one of your previous books, The Upstarts.

Starting point is 00:01:43 A long time ago, we did a book review of your first book called The Everything Store all the way back on episode 11. So I encourage the audience to go back and check those out, especially if you haven't read the books yet. But back then, on episode 11, Amazon was a $34 billion company, and Jeff Bezos was worth a measly $16 billion or so. It was a pauper. So a lot has changed since then.

Starting point is 00:02:09 But why don't you tell me what led you to write the sequel to the Everything Store? It was after I published the Upstarts and I was thinking about my next project. And as you mentioned, the Everything Store was really the first phase in Amazon's history. It's kind of the Old Testament, the rise in the 90s and the near fall during the dot-com bust and then the revival with Prime and the Kindle and AWS. And I guess, you know, as I was looking at it, I was thought, the $50 billion company I wrote about, that cute little e-commerce company, was now taking over the world. And it wasn't just a geographic expansion, but new product lines like Alexa and the Amazon Go Store, and EWS had become a juggernaut, and Amazon was invading Hollywood.

Starting point is 00:02:54 And at the same time, Bezos had kind of transformed in front of our eyes. And this was, I was deciding about this book in 2017. So it wasn't quite the transformation we see now, but it was the beginning of it. And he was about to be one of the five wealthiest people in the world. So I just thought, you know what, if the Everything Store was the Old Testament, you know, there's a New Testament to be written, a sequel, an Empire Strikes Back, or a Godfather, too. And then I didn't know, you know, how, what an opportunity that was, because as I was working on the book, there was HQ2 and Bezos's entanglement with the tabloids, and then a bunch of antitrust questions and ultimately the pandemic. And so it really was,

Starting point is 00:03:33 even a better story than the one I told in the everything story. You mentioned Bezos's transformation. What was coming to mind for me was his physical transformation. He went from being this sort of bookworm selling books to now this Terminator-esque figure walking around selling anything he wants, right? So beyond maybe the physical transformation, how else have you seen Bezos evolve since your last book? That's an interesting question. It was kind of one of the main questions that I had in the book, right? How and why has this guy changed so much? And I'll give you a couple of pieces of evidence of that change. You know, one, fighting with Donald Trump on Twitter. Two, building a luxury yacht in secret in Amsterdam, a yacht that is going to launch later this

Starting point is 00:04:17 year. Bezos was never, not only was he never a yacht guy, my impression was that he would have frowned upon that kind of extravagance. He loved his private jet in the early days because it saved Tim Time. It was all about using his time most efficiently. His interest in Hollywood and throwing parties at his property in Los Angeles. So all sorts of ways that he had fundamentally changed. And I went into explore that. And one of the people I talked to was Jamie Diamond. And they've been friends and colleagues on some projects. And Diamond basically said, you know, Bezos's eyes just opened up to a larger world. Like he had been early Jeff had been so focused on Amazon and the mechanics of the business. And I'm just trying to survive. And then the Bezos,

Starting point is 00:04:59 that we see that I write about in Amazon Unbound is someone who, you know, bit by bit starts to realize the challenges and joys of the world beyond Amazon. And it happens incrementally. It's buying the Washington Post in 2013, starting to direct Amazon into Hollywood about 2015, not because of any vanity project, but because he needed to replace, he needed to put something else in prime because shipping wasn't going to be the differentiator that it once was. And then the requests upon him to give more back, to do philanthropic initiatives, that starts to open his eyes up to the challenges of climate change, and then an accompanying personal change in his life.

Starting point is 00:05:43 And I get into this a little bit in the book, even though I'd set up to write a business book, I kind of had to do it. But as he's becoming more of a figure on the world stage, it became sort of clear that his former wife, McKenzie, wasn't really that interested in going to the parties and hobnobbing with the celebrities and the elites and the way that Bezos seemed to enjoy. And so, of course, that accompanied another dramatic change in divorce, the relationship with Lauren Sanchez, and now we see him sitting courtside at Wimbledon and meeting the French president, posing in fantastic clothes in front of the Taj Mahal, like clearly a different guy than the early Bezos.

Starting point is 00:06:19 You brought up McKinsey, so I have to ask, McKinsey Scott, formerly of Bezos, left you a one-star review of your prior book. What was that about? And how do you think? think she might rate this new book of yours? That's a fond memory, 2013, looking at the Amazon website and the one-star review for McKenzie Bezos pops up. But you also might remember, Trey, it wasn't the only one. Andy Jassy, who's about to be the new CEO of Amazon, he also left me a one-star review. And the PR guy at the time, the head PR guy left me a one-star review. And so what that was about was a very upset and angry Jeff Bezos, trying to throw an asterisk against the book and object to things in it that he didn't

Starting point is 00:07:05 like. And I sort of understand that, looking back, you know, perversely maybe ended up helping my book a little bit. It certainly drew more attention to it. I don't think they raised anything substantive, all that substantive at the time. And I think in retrospect, like the Everything Store really did become the definitive account of the early days. We don't know what McKenzie, Scott, thinks of this book, and I presume I won't be fortunate enough to get the one-star review this time. If I had to guess, I'd guess that she probably hasn't read it. It really does seem like she's moved on and is now spending her time on other things, including her philanthropy. Fair enough. And the reason I ask is mainly because that asterix, as you mentioned,

Starting point is 00:07:44 could have the potential to tarnish the reputation behind the book saying this guy didn't do his research. But if I read correctly, you did over 300 interviews for this new book. So you do plenty of research and maybe walk us through a little bit about those interviews that that took you to this book. Well, I mean, it's always, look, Amazon's a tough company. It's secretive. It exerts a kind of influence, even on employees who have left. There's some fear there. There's a lot of fear of Bezos himself. And so it's always been a mixture of going to current employees and going to former employees, finding whether people are comfortable talking off the record or on background or for the record. Amazon itself, I feel like, has come out of

Starting point is 00:08:26 its shell a little bit. They did work with me on this book. They allowed me to talk to more than a dozen senior executives and employees, maybe even two dozen. Bezos allowed me to talk to some of his personal friends. He didn't cooperate for this book. Maybe the old wounds haven't quite healed, but I was sort of happy with the cooperation. So it's really like, look, the company is so decentralized and distributed across so many things, that really it's just a function of talking to as many people as you can and trying to put together a mosaic of history. Because not everybody, in fact, maybe nobody has the full picture. It's like a numbers game. It's trying to talk to as many people as you can. Well, Unbound is such a great name for it because not only, as you

Starting point is 00:09:09 mentioned, is Amazon so decentralized in a multitude of different industries, but Jeff himself has diversified a little bit, gone into different industry space, Wall Street Journal, etc. And it's really hard to pin down Jeff Bezos, for me especially. I mean, you read about how he's a technologist and he was an old hedge fund guy. Man, how do you define Jeff Bezos? Probably is the most successful business person of our age or most successful entrepreneur, man, maybe even inventor of our time. I think that's where you have to. start. I do think, like, despite the current skepticism and even sort of bitterness towards him right now and we can get into that, that ultimately he will be remembered as someone who

Starting point is 00:09:55 changed the economic landscape and not just once, but in a couple of ways, it's like a hat trick, right? It was with e-commerce and then cloud computing and now Alexa, and he's, and voice computing. And really all three of those things spring not only, you know, from his mind in terms of the creation, but then managing the details of the business, having the long-term vision, sponsoring the investments, and being really long-term about it. So I think ultimately that's kind of how I think about him as a creator. And I think that's probably how he wants the world to see him as well. But it has become more complicated because there is so much skepticism about Amazon and how it exerts its market power. And I think he's probably seen now a little bit as a monopolist,

Starting point is 00:10:40 right, then maybe a conqueror instead of a creator. And I think he realizes that, and it's a reputation that he's laboring to change, not all that successfully, but ultimately we're going to, we're going to evaluate his legacy based on his philanthropic contribution. And that's still a lot of work that is yet to be done. He's got $200 billion right now of a fortune to give away. Yeah, and you mentioned him sponsoring all of these endeavors over the years. And that's what I'm most blown away by because he's somehow been able to fund this behemoth through a very low margin money losing business for most of the time. I mean, it's at scale now and he can change it in any way he wants, but it's really antithetical to almost every playbook we've probably ever seen in our

Starting point is 00:11:29 lifetime. Well, I would say that, like, it wasn't, they weren't able to invest despite being unprofitable. They looked unprofitable because they were investing. And so even, And then starting in 2005, probably after they really recover from the kind of near catastrophe of the dot-com bus, Amazon was always much more profitable than it looked. But it was building new fulfillment centers and new data centers and ultimately subsidizing shipping in the form of prime. Like it's sort of every step of the way when they could have flashed a larger net income and impressed investors and had a larger short-term bump in the stock price.

Starting point is 00:12:09 Instead, they were investing. And so I have this part in Amazon Unbound where I'm quoting Steve Ballmer. I think it's in late 2014 talking on the Charlie Rose show saying they're not a real company, Charlie. They don't make any money. And a couple of weeks later, Amazon announces its first quarter earnings in 2015. And they reveal the actual financials of AWS. And they show a profit and the stock booms. And it's the beginning of this rise to a trillion dollar market cap.

Starting point is 00:12:38 It didn't just happen. but they started to reveal more about how they were operating the business. So it always was profitable. And Bezos has just always been reinvesting and gambling and trying a lot of new things. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You got long days of daylight, incredible food, floating saunas on the Oslo Fjord.

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Starting point is 00:17:13 And I'm wondering how much of this growth over that period through the pandemic will be sustained, you know, now that the world is opening back up again and maybe people might go back to old habits. Yeah, I mean, look, there could be, I'm not going to, nor can I predict the next quarter. And certainly, I think what we just saw, a prime day that seemed a little bit lackluster. And it may be because people feel like they stocked up on stuff during the pandemic and they're going to power back.

Starting point is 00:17:41 They want to spend on experiences and not more crap for their homes. But look, I actually think that most of the momentum will be preserved because Amazon had this insane advantage during the pandemic. It operated, people got more dependent on much of its competition had to shut its doors. And when Amazon, the revenues rose, the profits rose, and as we just talked about, what do they do with that? Well, they build more Amazon. They build more fulfillment centers closer to customers.

Starting point is 00:18:08 They hire more delivery drivers, contract transportation companies. They bought more planes. They enabled more and faster Amazon. That, say what you will, about the fluctuation of people's habits. But the fact that Amazon is now, because of the pandemic, in a position to offer more selection, faster Amazon Web Services, and faster delivery, they have actually extended or deepened their competitive moat. It's now even harder. And people have forged new habits during the pandemic.

Starting point is 00:18:39 Online grocery ordering, at least in the U.S., hadn't really caught on before the pandemic. And now I would argue it's probably a habit for a lot of household. And Amazon, of course, is in a position to succeed. So I think that actually they come out of it looking stronger than ever, and that a lot of the momentum can be preserved. Let's talk about some of the wins and losses of Amazon. There's two stories especially fascinating in the book. One is the spectacular failure of the fire phone.

Starting point is 00:19:07 And the other was the massive success of Alexa. And we might touch on AWS, as you mentioned, as well. But let's just start with the failure of the fire phone. What went wrong there? Well, I mean, first of all, we can look back and say, was there really that much of a wound for Amazon? Bezos loves to bring it up when he was inducted in the Smithsonian Portrait Gallery. This is where I start the book, his speech there, and he's talking about,

Starting point is 00:19:32 how many of you own the firephone? And nobody does. And he talks about how his life has been built on failures. The funny thing is, as embarrassing as that was in 2014, when they took the write-off, I feel like the firephone has come to represent for Amazon at least something positive, which is it's tolerance for failure, its willingness to try new things. and how embarrassments can be way stations on the road to success. And I think, you know, the firephone, when it failed, a lot of that energy went into Alexa. I mean, if you want to go back to the details of that

Starting point is 00:20:03 project, you know, that was a Bezos idea of like a 3D screen and some augmented reality and a very star trekkey. Yeah. And like, but it turns out that when you're a billionaire, you know, you're not all that in touch with the needs of the common folk, particularly when it comes to everyday items. And he was just wrong about that. And then it failed and they took their lumps and they moved on. Now, he was also the inventor-in-chief with Alexa. And again, like he's a science fiction fan and he had this idea. He sent an email to his colleagues in 2010 and I have it in the book.

Starting point is 00:20:36 We should build a $20 computer whose brains are in the cloud that's completely controllable by your voice. And there was a number of things colliding there. He always has had a conviction that people will compute with their voice. Part of that probably goes back to his Star Trek love and he's a science fiction fan. He just had belief in that. And then seeing things like Google Voice and probably Siri start to get good enough. And then a real confidence that Amazon had the tools like AWS, where you could put the brains of an artificial intelligence in Amazon's data centers and then put a kind of end device in people's homes.

Starting point is 00:21:14 And that device would be constantly upgraded as you improve the computing capacity in Amazon's data centers. Amazon's data centers. And all his engineers told him, you can't do it. We can't recognize people's commands from across a garage or a kitchen. And he said, it doesn't matter. Hire people. We'll figure it out. And they did. So that is an example of where his instincts were right, but not just his instincts, but the ability of a founder to wield that kind of combination of inspiration and intimidation to get people to kind of do heroic things. And these lumps, Jeff Bezos coming out on top is a big theme. I think to take away from this book.

Starting point is 00:21:51 And you kind of just mentioned that the fire phone is no exception. And even Alexa had its lumps. I mean, there was a period there where it was replaying back conversations it was recording and sending it to colleagues at someone's office. I mean, this is like, this is a PR disaster. This should have killed that product probably, right? People don't like knowing that some devices recording them all the time. So how did they recover from that?

Starting point is 00:22:16 Yeah, no, it's a good question. there were other ones like at Bloomberg, where I work, we reported that Amazon had a small army of contract workers who were reviewing customer utterances to Alexa, not for any nefarious reason, but to make the device better. But that was not something that most Alexa users understood, that, you know, you might have, you know, someone in Bangladesh or Mumbai or wherever, listening, you know, and inputting data from your commands. How did they survive it? Look, for whatever reason, we have as a society and as consumers have agreed to carry around smartphones with arrays of microphones and video cameras, to put doorbells with video cameras

Starting point is 00:23:01 outside our homes and all sorts of devices with cameras and screens and microphones inside our homes. You know, it may be that Amazon survived it because people really don't, in the end. We can ring our hands about privacy, but I'm not. I've never been convinced that, least mainstream consumers make buying decisions about that. Privacy seems to be something that we compromise on when a device changes our lives in a positive way. One other element you uncover in the book is the actual person behind the voice of Alexa, and she was unknown to this point. So how did you discover her? What led you to doing that? And what was the reaction of, you know, kind of exposing that so far? Yeah. So, Trey, I'll tell you

Starting point is 00:23:46 what led me to doing that. You remember in the first book in the Everything Store, when I identified Bezos's biological father who he hadn't seen when he was two years old. The guy didn't even know who a son had become. And so in this book, my natural thought was, well, who am I going to identify this time? Presumably, there are no more long-lost relatives. And so I actually put some thought into like, where are the secrets? Where would I be curious as a reader? And I had remembered, yes, Siri, the voice of Siri had been identified many years ago. And she hadn't even known that Apple was using her voice as the basis for Siri. And I thought, you know, that's interesting.

Starting point is 00:24:29 I had assumed it was a synthetic voice. But the Siri revelation learned that, okay, no, these are voice actors or actresses. And the technology companies mix and match their voice to produce the answers. And so, yeah, that was just the goal was, who was the voice of Alexa? and that was scouring the voiceover community and the text to speech world and following the clues. And finally, I found a singer and voiceover actress named Nina Raleigh from Boulder, Colorado. And I went to her website and played some clips from her work. And I could tell right away this was the voice of Alexa.

Starting point is 00:25:04 And I'm presuming that she knows she's the voice of Alexa unlike the Siri artist? Well, I should say that when I reached her to explain my revelation, to her, she wasn't able to talk. But yes, I think that unlike the Siri, and I'm completely blanking on her name right now, the voice of Siri, we can Google it. But that was a very unusual situation where she had recorded something, I think for a company called ScanSoft, and then it was acquired and acquired, and then Siri, when it was a startup, picked it up. But no, my impression for my reporting was that the voice of Alexa is not an employee of Amazon, but as a contractor who spends much of her time, you know, recording new things for the company.

Starting point is 00:25:46 So in talking about the team that was behind Alexa, one of the things you pointed out in your book that stood out to me is this discrepancy or bifurcation of sorts of the Jeff Bezos profile where he is known as almost this tyrannical leader, but he seems to have this soft spot for these technologists who are working on these bigger projects. Well, I think, yeah, in the first book, look, it's really a picture of Bezos, almost a micromanager managing very closely all parts of the business. And of course, now the company is so big that he can't possibly distribute his time in an efficient way if he's going to manage like that. And so when I started to do this research,

Starting point is 00:26:29 I was immediately struck by folks who I talked to in Amazon Web Services or retail, the marketplace, logistics, who said, maybe we talk to Jeff once or twice a year, but he really doesn't, not only does he not have much to do with this business, but he can't possibly even understand the complexity of it. And then there were other businesses, the Amazon Studios folks or Alexa or the Amazon Go folks, or even today, like some of the folks who work on the healthcare initiatives, who are like, yeah, we met with them before launch, we were meeting with them every day, or three times a week. It made me realize kind of how he operates at a very high altitude for the older businesses with the capable deputies that have become really complex, and at a low

Starting point is 00:27:13 altitude, close to the ground, watching over the details on the new thing. And that's actually why, Trey, when he says he's going to become executive chairman but still stay at the company and involved in the new projects, I tend to think, you know, it's interesting. I wonder how much will really change, because that is the way he's sort of been running the company. And I do expect he'll continue to be the kind of loudest voice in the room, at least at the beginning. I do think he'll probably withdraw even further over time. Let's take a quick break and hear from today's sponsors. No, it's not your imagination.

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Starting point is 00:30:56 prospectus at fundrise.com slash income. This is a paid advertisement. All right. Back to the show. Well, let's talk a little bit about that because you're right. He did announce in the last year that he's going to move on to be executive chairman, step away as CEO, and put Andy Jassy in his place there. Is the skeptic in some of the literature we've seen is that Andy Jassy is just a much more, maybe lovable is not the right word, but at least, you know, not as, you know what I'm saying? He's a little bit more. Jeff, I would say, is getting a lot of time in the limelight,

Starting point is 00:31:31 and maybe they're just looking to have someone in the role who is a little less of that. So here's the way I think about it. He presents a humbler target for Amazon's critics. When Bazes-Mos is sitting there talking to Congress, he's talking not just as the CEO of Amazon, but as the wealthiest person in the world, a $200 billion fortune that epitomizes the grotesque,

Starting point is 00:31:54 problem of income inequality, particularly in the U.S. And he just can't escape that. And I think, and also frankly, because he's the architect of some of Amazon's more heartless employment systems, there's a lot of baggage. He's like, he's been this kind of tyrannical builder with a tremendous record of success, but also a little bit of carnage in his way. And JASI, I mean, first of all, AWS has none of the historic baggage, you know, the problems in the fulfillment centers.

Starting point is 00:32:23 and the transportation network, he can come to that with a fresh perspective. But he's a humble guy, right? He doesn't dress up. He's not flashy. He's not, as far as I know, flying around in a private jet, family man. And even though he's extraordinarily wealthy, he's not, you know, as explicitly, conspicuously wealthy as Bezos is. So, yeah, I think actually in some weird way, that might help Amazon, which has become this amazing target right now. It's like the world almost is uniformly piling on and the way that we have in the past on Facebook and a couple of years ago for Uber. And I'm not saying it doesn't deserve it.

Starting point is 00:33:02 There are plenty of reasons to critique Amazon. And both of my books can be read as critiques. But I do think that maybe Bezos stepping away, at least visibly, could end up helping the company. Yeah. In fact, there's actually even a recent article and insider stating that Amazon turns through employees so much that the executives there are starting to worry that they'll be running out of people to hire. And even Bezos has been pretty notorious about not prioritizing

Starting point is 00:33:29 employees paid. I mean, the $15 increase was material, especially outside the U.S. But Jeff has gone as far as to say that if they win a best place to work award, that they fail. Do you think the overall culture will improve under the leadership of Andy Jassy? I think like one of the critiques, I think the reasonable critiques of Bezos was that he was the empathy gene was not pronounced. He's a builder. He's a long-term thinker. He's a creator and inventor. But, you know, he was transactional when it came to the people around him and willing to kind of churn through people, get the best out of them, and then discard them or have them move on and go on to the next. And Bezos, I think, has realized the limits of that philosophy now with a million employees

Starting point is 00:34:14 and has talked in his last shareholder letter about revising it. And I think Jassie will come to it with a little bit of a clean slate. But I just want to say one thing, Trey, which is this worry that the Amazon can run out of employees, I think it's like a really, it's a strange thing to say because Amazon has so many advantages. And one of them, it's just like a ridiculous amount of resources to tap into. And of all the companies that are now struggling to staff up post-pandemic in a very tight labor situation, Amazon, you know, if they're really facing a challenge in some part of the country, they will be the first company to go from $15 to $17 an hour to offer a signing bonus. A lot of the things that I think have characterized Amazon as a challenging employer,

Starting point is 00:35:01 the performance improvement plans, the firing workers for time off tasks, managing by algorithms and firing a driver if they're driving too fast or taking too many left turn. I mean, they can change all that tomorrow, right? And that will be like, I think that it's probably overdue. But I do think, like, of all the companies that might have hiring problems, I would put Amazon at the bottom because they can raise their wage in a way that competitors, including other retailers, cannot, and fast food franchises. And a lot of the things that are wrong with the, I think the company's relationship with employees should be, can and should be fixed. There is another issue that maybe I'm neglecting here, which is the union issue. And I do think that could be a,

Starting point is 00:35:45 that could be a threat to the company's labor model, which is why they fight so hard against them. Talk to us about the S group. This is the senior leadership group at Amazon. And it's interesting to hear your perspective about maybe Jeff is stepping away, but not really. But I'm curious to know if a lot of this top talent that's sitting in the S group right now, they're obviously weighing out other opportunities all the time. And as you just mentioned, Amazon has the ability to retain them.

Starting point is 00:36:13 But with Jeff stepping away, do you think that that that job? change that dynamic at all? Yeah, interesting. Yeah, the leadership team, the S team is like 25 people right now at Amazon. It's a more diverse group than it's ever been. It was a bunch of white guys for a long time, and Amazon got the memo a little later than the most companies. It's an interesting group because I think it's a little less technical than it has been in the past. There are only a few computer scientists in that group right now, and it's very diversified. And I just want to, wonder, you know, do the folks that are on that team representing HR or legal or the fashion group, even the folks in retail and devices, how much can they contribute to the big strategic

Starting point is 00:36:55 decisions on AWS and vice versa, right? The companies become so diversified and complex that maybe the S team in a weird way is less of a useful body than it once was. Like on some big company-wide issues, I'm sure it's important. Navigating the pandemic, I think it was important. But these businesses are so diverse and so complex now that maybe the consistency of the team is less important than it once was. And I don't know, but there's one member of that team, Jeff Blackburn, who basically retired from the company, he was the head biz dev M&A guy, and he just came back to run Prime Video, Amazon's content businesses. So, yeah, I don't know. They've got a loyal bunch there. And sometimes you exist in the rarefied era of Amazon and your body acclimates to it.

Starting point is 00:37:43 even folks who leave, they kind of end up coming back because they found that that way of working was particularly suited to them. Well, I love that you called out the awkwardness of Jeff being as wealthy as he is testifying in front of Congress. But I'm curious, is Jassy replacing Jeff? Would that, in your opinion, prolong maybe the ultimate breakup of Amazon's monopoly that might be inevitable? I'm not sure saying you agree, but maybe you don't agree.

Starting point is 00:38:12 I'm curious, what's your take on that? Yeah, I don't, I mean, I think Jassy will do a better job. First of all, Congress will continue to ask for Bezos, right? And then they'll give them Jassy, and that'll be weird. And the same way that Sundar, you know, showing up is, you know, was always a disappointment that it wasn't Larry Page. But I think Jassy will do probably a better job that Bezos could ever do because of his stature.

Starting point is 00:38:36 But I don't think it affects the timetable much. And from my perspective, and maybe, you know, I reserve the right. to change my mind. But I don't think, I don't see an Amazon breakup as being plausible. I think that it's not a monopoly in the way that we think of traditional monopolies like standard oil or even Microsoft in the 1990s. These are massive industries and breakups are long, complex, legal proceedings that end up in the courts. And there could be a political consensus today, but it doesn't mean, you know, a judge is going to agree with it tomorrow. And, um, I think the case isn't that great.

Starting point is 00:39:15 I mean, there are certain areas of Amazon Konda, the way it displays private label products in its search engine, or the most favored nation clauses that it has with marketplace sellers where they can't set lower prices elsewhere that are problematic. But Amazon could change, again, like the problems with employees, it could change those tomorrow. And I don't know that it necessarily hurts its business all that much, unless Amazon ends up willingly splitting up the company

Starting point is 00:39:41 to unlock some shareholder value around AWS, I don't see an easy line between what David Cicholini and Lena Kahn are saying today and a forceful breakup of Amazon anytime in the near future. At the last Berkshire Hathaway meeting, Buffett's keynote talked a lot about the last 30 years, and he highlights that the top companies of the time 30 years ago have fallen away or gone bankrupt for the most part. And Bezos has actually echoed a similar sentiment to his employees, right, that eventually even Amazon will go bankrupt.

Starting point is 00:40:14 But Amazon is already coming up on the 30-year mark. And in a lot of ways, it seems to just be getting started. It seems to have a very long runway to go. I'm curious how you see Amazon evolving over the next 30 years. The protestations of doom that Bezos makes about being a day two company and the 30-year expiration date, I think, are motivational, right? There's nothing in the near future. If anything, Amazon, the Boulder is rolling faster downhill right now.

Starting point is 00:40:43 And we're going to see Amazon opening grocery stores and getting into health care and doing other things that, if anything, just strengthen the frequency and relationship it has with customers. So I think, you know, he has actually set things up for sustained success. The challenges as you get so big, it's impossible to make to satisfy all your constituencies. And so we've seen brands, for example, in Amazon retail, brands like a Nike, you know, go to other channels because they want to be there amid the chaos of the Amazon marketplace. And for that reason, Shopify, the Canadian company has had extraordinary success catering to this one avenue of sellers, of brands that Amazon isn't really doing that great of a job of taking care of. I think like as Amazon gets larger,

Starting point is 00:41:29 it doesn't necessarily slow down, but it creates opportunities for companies that are focused on specific opportunities. And that's not existential for Amazon. If anything, it might be good for them because if I'm Amazon defending myself in court, I'm pointing to the success of Shopify or Walmart or Target and showing that there's a lot of competition. Yeah, I think in terms of Amazon becoming a Sears or becoming a great A&P or the next retailer to fade, I don't see it anytime soon. I'm glad you brought up the grocery aspect because that's one of the more intriguing projects that they have, especially this dual parallel growth of Whole Foods against Amazon Fresh and Amazon Go stores. What is the strategy? Why have two stores? If we can look back to Amazon acquisitions, some Amazon acquisitions over the last decade, and there's a certain breed that kind of stands out, Amazon buying Quidzie, the company that owned diapers.com, or, you can look back to Amazon acquisitions, or, some Amazon acquisition, some Amazon acquisitions over the last decade, and there's a certain breed that kind of stands out.com, or, or, Zappos and then Whole Foods. And in these cases, well, in the first two cases, it was sort of

Starting point is 00:42:33 buying to snuff out a competitor, but also to learn to understand the mechanics of a different, difficult business. And I think that's what they've done with Whole Foods. But there are some orthodoxies at Whole Foods, which won't stock Diet Coke or Lays potato chips. And Amazon is fine allowing the entrepreneurs to run these businesses, but the corporate compass at Amazon really points in one direction, which is, what do customers want? And even if it's bad for them, if it's unhealthy, we're going to give it to them. So the idea that Amazon would to track it and start bringing out these Amazon fresh grocery stores with lower prices and wide selection seems really characteristic to me. But then the change is they're using technology as kind

Starting point is 00:43:18 of a lever to do something interesting in an area that hasn't really evolved all that much since we've been alive, right? A supermarket's been to supermarket. But Amazon wants to bring in these grocery carts that scan your items when you put them in or the ghost store system with the cameras in the ceiling so you can walk out without checking out. I think that's their main avenue for growth in grocery stores. These Amazon fresh supermarkets, where they can use technology to create a differentiated experience, and they can also set them up in such a way with large, probably spaces in the back, warehouse type spaces, so that they can support order online, pick up at the curb, or source from the shelves of the supermarket, and drive to people's homes.

Starting point is 00:44:03 You got to admire the just disruption from all angles, right? I mean, Amazon comes in, disrupts bookstores, totally, makes them almost obsolete, and then says, oh, by the way, we're going to come back and open up our own bookstores. And then they disrupt grocery by having home delivery. And now they're going out there and saying, hey, you know what? We've actually reinvented the store as well. You just have to admire that. Well, I mean, those are different situations.

Starting point is 00:44:28 And I tell the story of the physical retail unit at Amazon. They hadn't been having much success because they were trying to develop this technology to allow people to skip the checkout line. They just thought, let's just launch a bookstore. We can kind of experiment and we can use it as a showroom for devices. And I don't know, there's probably like 20 Amazon bookstores, and I don't see that as a major avenue for expansion. With the supermarkets, the grocery delivery before the pandemic wasn't really succeeding all that much. And they kind of realized, you know, people want to see the bananas.

Starting point is 00:45:01 A lot of people just aren't going to get grocery delivery. They want to walk into stores. And then there's all sorts of things you can do. You can see what they buy and then send that to them every other week. So I think that's like this Omni Channel approach is the future for grocery delivery. One thing I hadn't realized was that Amazon was almost the white night for Whole Foods at the time of acquisition. Yeah, they were probably days away from getting sucked into like an Albertsons and probably

Starting point is 00:45:29 which would have vanquished the Whole Foods brand. And there were all sorts of activist investors and the activists had a good point. Whole Foods hadn't grown in many years and the financials looked bad and the Stores were a patchwork of technology systems. And John Mackey called up, had somebody call up Amazon, which was at this moment of sort of desperately wanting to learn about the supermarket business. There's a quote in your book where Amazon is starting to infiltrate into the India market. And Bezos tells his team that he doesn't need more computer engineers.

Starting point is 00:46:03 He needs cowboys. What did you take away from that quote? Essentially what he was saying, this was during an. in one of their planning meetings, they call them OP1s, I think in 2014. And they brought him basically a set of very conservative projections for how they might grow and market themselves in India. And he wanted them to not be constrained by conservative estimates, but to be on the frontier, try a lot of new things, spend as much as they wanted, let him figure out where the limits were, you know, there's something about, yeah, being cowboys on the frontier, like the kind of

Starting point is 00:46:41 chaos and problem solving and improvisation. What did I take away from it? You know, I think when you're a CEO at that level, you know, and you manage so much, you need to find really crisp ways to convey your expectations. And Bezos seems to have a talent for that. And he really was able to motivate the set of early employees there, you know, to be innovative, to give it their all, to not be conservative and hamstring themselves, just with that one saying. And they all remembered it. And it became also a kind of company culture touchpoint in India where they would have all hands meetings and dress up as cowboys. They'd be wearing cowboy hats, yeah. Exactly. So Bezos, I think he's very effective in doing that, finding ways to crystallize what he's thinking and to do it

Starting point is 00:47:28 in a way that motivates his people. And that's probably kind of late stage Bezos. Early stage Bezos might have just chewed him out. Good point. You do dig into the personal drama that Jeff Bezos experienced, especially in the last few years. There's an affair, there's a divorce, there's tabloid drama. This is an investing podcast, so I don't want to dig into the tabloid drama. What I'm trying to frame up here is how Bezos ultimately, again, comes out on top. Because I think it just speaks to his strategic mind, maybe, his, you could call it brilliance.

Starting point is 00:48:01 I don't really know, but it's. It's yet again. It's another example. There was also sort of, there's a tolerance for embarrassment there. Most billionaires, when confronted by a tabloid with hard evidence of their extramarital affair, you know, would probably just sort of like curl up in a fetal position and declare defeat, try to move on. And Bezos, you know, he thought, well, he did a couple of things, right?

Starting point is 00:48:24 He turned the tables by writing about, you know, and sharing their emails to him. And it's a really probably a left turn to go into what they were fighting. about at the time. But people can read the chapter in my book if they're interested. But the other thing he did is he was a little disingenuous in how he positioned it. I mean, you can look at it as disingenuous or you can look at it as genius, master's stroke. He suggested that the inquirer's motivations might be tied up with its well-known affiliation with Donald Trump. And in the very clear enmity that the government to Saudi Arabia had for him because of his ownership of the Washington Post. And none of those really had anything to do, or at least not much to do, with the reason why the inquire was

Starting point is 00:49:06 running that story. They were running the story because they had a scoop about the wealthiest guy in the world having an affair. But he managed to kind of manipulate the media in such a way as to really casting sympathies to his own side. And he kind of came out, as you said, he won, he won again. And look, he understands the media very well. And, you know, he's a great strategic mind, and he does tend to think outside the box when it comes to media entanglement. I mean, we were talking about the one-star reviews for the Everything store. I view the one-star reviews and the medium posts as sort of the same tool in his toolkit. When confronted with a critic or a situation, he tends to think outside the box and to do

Starting point is 00:49:48 something that's totally unanticipated. And that's what he did with that medium post. It's fascinating. You know, you've written out two books on Amazon. and learned probably more than most people, you know, through this process about the species that is Amazon, the species that is Jeff Bezos. While I was reading it, I was just, I kept thinking back to the story of when Bill Gates and Warren Buffett met for the first time. And Gates's father apparently asked them, you know, in one word, what would you say most attributes to your success? And both of them answered with the word focus. Bezos has been able to grow multiple billion-dollar empires using this Amazon platform, but also he's running now Blue Origin

Starting point is 00:50:33 and the Wall Street Journal. And he has somehow balanced that kind of innovation and distractions, I guess you would say, with a certain amount of focus. I'm just baffled by it, quite honestly. And I'm just curious, after everything you've studied and researched on Bezos and Amazon, what is your biggest takeaway? What is Jeff's superpower in all of this? I think focus is a great one. I don't know if it's the most important one, but this is a trade that Jassy has too and probably all the top Amazon executives have. The ability to sit in a meeting, in meetings for 10 hours, and every meeting starts with the reading of a six-page document that's chalk full of dense numbers and technical terms and business strategies, and to focus on that

Starting point is 00:51:19 and focus on the discussion, and then to phase shift into the next topic, in the next meeting, which might have nothing to do with the previous one. Imagine the life of Bezos. You might go from a presentation on Alexa to a presentation on grocery stores to a potential acquisition to something on the ad strategy. And then you're interviewing a senior executive and then you're into AWS in the afternoon. It's like, but his ability to focus and do topic shift, I think are, and to go deep and to remain focused. I mean, look, I'm like the rest of folks.

Starting point is 00:51:52 I'm a tension deficit disorder these days times 10 and can't do anything for 30 seconds without checking Twitter. And I've managed to somehow make it work, I guess. But I get the sense that Bezos has ability to blot out distraction and to not just focus, but to do it for long periods of time across a lot of different topics is a superpower. You mentioned earlier in the show that you think that sort of the one of the, one of the biggest things we'll remember about Jeff Bezos is his philanthropic efforts. And they are still very nascent in some ways. I mean, given his wealth and what he's accumulated, what has been your

Starting point is 00:52:31 take on his efforts to date? Where is he focusing those efforts mostly? I'm not going to overstate it. As much as I want to be optimistic, I feel like he still has a lot to prove that his legacy will be evaluated in part by how he conducts this philanthropy. I know that with the Bezos Earth Fund, $10 billion to fight climate change, he spent a lot of time trying to find worthy recipients. So far, you know, has contributed to a lot of well-known climate organizations. My hope is that he applies his inventiveness and, you know, his creativity to the problem of climate change and doesn't just distribute money from afar. But I think, look, most of that energy, at least now, seems to be going to Blue Origin. And to me, I'm as much of a space officiantado as the next guy, but they've got a lot to prove there in terms of a beneficial to humanity, long-term vision, and to make this seem like anything other than a rich guy's hobby. And SpaceX has built a successful orbital business. Amazon's been trying to do it for 10 years and there's nothing to show for it. And in a couple of weeks, Bezos will go to the edge of space. He's spending a lot of money to build what could be at best an unprofitable tourism business. So he's

Starting point is 00:53:43 He still has a lot to approve there, and yet that's where he's spending probably the most of his time and his resources. All right, Brad. Well, if I have to ask, this is the sequel, this is the Empire Strikes Back, is there a return of the Jedi coming? Is there a third book on Amazon in the works? I suppose in 10 years, if I reflect back in the same way that I did at the beginning of this book, and it seemed like there was another chapter.

Starting point is 00:54:09 and it was because Bezos had done extraordinary things in space or with philanthropy, and the Amazon story had remained interesting and dynamic. I guess I could see it. At this point, I'm ready to think about something else, I have to say. And as interesting as the Amazon story is, you know, after two books, it's a lot of time thinking about one company and one guy. But I do feel like this is one of the most, if not the most important story of our age. And it's not just about a company and entrepreneurship, but about,

Starting point is 00:54:39 the contract that we have with blue-collar workers and the geography of our cities and main street and economic opportunities. It wraps up a lot of things that I'm interested in. And so it'll be interesting. I'm going to be watching, obviously. And the best part of my day job at Bloomberg is I get to stay pretty close to it regardless. It'll be interesting to watch, particularly once Bezos steps aside. Well, Brad, I really enjoyed the book. I can't recommend it highly enough. It is a masterclass on so many topics as you just kind of highlighted there. It's fascinating in so many ways. And I really look forward to reading more from you down the road. So thank you again for being so generous with your time and coming back on the show and talking to

Starting point is 00:55:22 us about Jeff Bezos and Amazon. I hope we get to do it again soon. Thank you, Trey. All right, you beautiful people, that is all we had for you today. If you're loving the show, please go ahead and follow us on your favorite podcast app and leave us a review. We're loving the feedback, it helps make the show better. You can also just get in touch with me over Twitter at Trey Lockerby or go to Asktheinvestors.com and ask a question that we'll actually play on the show and for doing so, we'll reward you with a free course on our website. And with that, we'll see you again next time. Thank you for listening to TIP. Make sure to subscribe to Millennial Investing by the Investors Podcast Network and learn how to achieve financial independence.

Starting point is 00:56:05 To access our show notes, transcripts or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision consult a professional, this show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - TIP362: Amazon Unbound w/ Brad Stone

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