Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're Inside The ICE House, our podcast from Intercontinental Exchange on markets, leadership and vision and global business. The dream drivers that have made the NYSE and indispensable institution of global growth for over 225 years each week, we feature stories of those who hatch plans, create jobs and harness the engine of capitalism. Right here, right now at the NYSE and at ICE's exchanges and clearing houses around the world. And now welcome Inside The ICE House. Here's your host, Josh King of Intercontinental Exchange.
Josh King:
Let me let you in on a little secret. All around my house in upstate New York, I've installed a variety of Amazon Echo devices. Dot speakers in the bedrooms in my home office and Echo Flex in the basement and where most of the human traffic is, an Echo Show in our kitchen. Since I bought my first one, there's been so many variations on the line of smart speakers that I really can't keep track. I gave an Echo Show to my 85 year old mom and my 90 year old dad and they don't really know how to use it, how to ask it to play their favorite Sinatra tune, order a few more boxes of dishwasher pods, or play the final season of Marvelous Mrs. Maisel.
Josh King:
In truth, they don't really have to know how to use it. They just have to be on the receiving end when I utter the command, "Alexa, drop into Howard and Phyllis King." And voila, the kitchen comes to life, their son and daughter-in-law and grandchildren crowded around the camera on our device, like the American nuclear you that once gathered around the old Wards Airline Radio to hear FDR's fireside chats. There we were in all of our glory, served up to my aging parents to cavell at how quickly the kids are growing, how clear the picture is, how crisp the sound is. Rarely does a virtual visit go by without mom reminding me that her Echo Show was the best gift I've ever bestowed on her.
Josh King:
Jeff Bezos, if you or your minions are listening, as some say, you sometimes are, you have done well, sir. But here's what I do when I'm alone with my Echo devices, they're all connected to wifi enabled smart plugs that control every lamp and light in the rooms where I primarily inhabit. When I issue the command, "Alexa, please turn on Josh's office lights." Adding a measure of politeness to my voice of authority, I imagine I'm captain Picard on the bridge of the USS Enterprise. I've even taught Alexa to sound general quarters if I want to imagine, like in The Hunt For Red October, an attack is imminent. And in fact, in a sense that was the inspiration for the products design.
Josh King:
This is all from a company that 24 or so years ago, I bought a few hundred shares of for low double digits per share after its 1997 IPO. And before you think I'm wealthy beyond measure, you should know also that I sold the stake once I banked a short term capital gain sufficient to buy a new sectional sofa from Crate & Barrel. Alas, that is the story of my investing wisdom over the decades.
Josh King:
Where Amazon and Jeff Bezos have gone since those early days is the subject of two of Brad Stone's four books. The Everything Store, for which I interviewed Brad in my old podcast, Polioptics back in 2013, and now Amazon Unbound, Jeff Bezos and The Invention of A Global Empire, out this month from Simon and Schuster. As the title suggests, unbound, as in to the moon. As we'll see from our conversation with Brad, the sprawling story of Amazon has become far more complex than buying a Tom Clancy novel and having it delivered tomorrow, or even more complex than dropping into my mother's kitchen unannounced. Our conversation with Brad Stone on technology, shopping, storytelling, and a dash of scandal in the 21st century is coming up right after this.
Speaker 2:
We started with a vision to transform energy markets using technology to boost transparency and level the playing field. That vision and customer focus continues to drive how we look at opportunities and challenges in our industry. Today, we connect participants around the world so they can trade, hedge, invest and raise capital. We establish prices across asset classes and create opportunity to solve complex global problems. We provide pricing that markets rely on, transform the way business is done, help company needs grow to fuel innovation and provide data to advance economies and society while we invest in our communities. 20 years ago we saw an opportunity to create a market driven by customer needs. Today our markets create endless opportunity for participants around the world, and our team is focused more than ever before to ensure the markets continue to function properly. On behalf of my colleagues around the globe, thank you from Intercontinental Exchange.
Josh King:
As I mentioned before, the break, I first interviewed Brad Stone back on episode 123 of my old show, Polioptics, back on October 18th, 2013, when had just published The Everything Store, Jeff Bezos and The Age of Amazon. Back then a share of Amazon would cost you about $364. Today that share will set you back nearly 10 times that. Its price as of yesterday, 3,270 bucks. Company's market cap, 1.66 trillion. Brad is also the author of The Upstarts and Gearheads, and he's the senior executive editor for global technology at Bloomberg News, where he oversees a team of 65 reporters and editors that covers high tech companies, startups, cyber security and internet trends around the world. Among the firms Brad writes about regularly and in his two books are Twitter, that's NYSE ticker symbol, TWTR, and Uber, ticker symbol UBER. And we're going to get into those as well, along with the technology names not yet part of our everyday vernacular that may someday soon celebrate their IPO at the New York stock exchange.
Josh King:
Brad Stone, welcome inside the ICE House.
Brad Stone:
Hey, Josh, great to talk to you again.
Josh King:
We're going to get a lot into your book and the technology space in general, but let's start with that device that I waxed on about in the intro, addressing a joint session of Congress, May 25th, 1961, John F. Kennedy said, "I believe this nation should commit itself to achieving the goal before the decade is out of landing a man in the moon and returning him safely to the earth." Now in an email to Greg Hart, Ian Freed and Steve Kessel on January 4th, 2011, in a similarly active and terse rhetoric, Jeff Bezos wrote, "We should build a $20 device with its brains in the cloud that's completely controlled by your voice." Brad, we note how the engineers at NASA jumped through hoops between '61 and '69 to make Kennedy's challenge a reality. What did the engineers at Amazon do in response to Jeff's email?
Brad Stone:
Yeah, Josh, I love the historic allegory the there. Well at first they really didn't do much, they bandied about and brainstormed over email with Bezos. And no one was really sure whether this was just one of Jeff's million and two ideas that he discusses every day or something realer. And then you mentioned Greg Hart, he was Bezos as assistant at the time. When he and Bezos we're talking about what Hart would do next to the company, Bezos implored upon him to go make this device a reality. And they drew a sketch on the whiteboard, I have that in my book. And then basically he went and built a team over the next couple years.
Brad Stone:
Now, the difference between JFK and the moon mission and Bezos and the Alexa mission is that Bezos micromanaged the thing very closely, met with them a couple times a week, got deep into the technical details of voice recognition and far field recognition. I don't think that JFK back then was immersed in the fundamentals of rocketry. And Bezos authorized the investment, he walked out of a meeting when he thought that the team wasn't thinking grandly enough and basically inspired them to go bring the Echo device out into the world, into skies to get enough testing from contract workers, who they brought through dummy houses and apartments to test this thing. And he made it a reality, he really used his CEO magic to usher Alexa into existence.
Josh King:
You're referencing the Amped project. And I get a sense that maybe sometimes Bezos would look at executives like Hart somewhat cross eyed and wonder if they really had their heart in it. And then Hart tells him how much he's spending on it, and Jeff's eyes bright up and says, "Now I know you're serious about it. What are we going to do next?"
Brad Stone:
It's a great example of CEO leadership and a combination of inspiration and intimidation. Because prior to that meeting that you just described, Bezos was kind of quizzing his executives on how much training data they had. And he felt like it wasn't enough, the quote is something along the lines of you're telling me it's going to take 20 years to catch up with Google instead of 40. And he stands up and walks out of the room and the Amped project, which I described this kind of subterfuge testing was the result of that. So it's all of the aspects of Bezos's famous leadership style on display. Tough, exacting, relentless, somewhat inspirational, a combination of inspirational and intimidating, I think.
Josh King:
There's a new tech IPO at the New York Stock Exchange every week of the year with ideas and inventions that are worth writing about, Brad. And you only have so much time and patience to churn out another book, the process is hard. Why go back to the Amazon well?
Brad Stone:
Right. Well, my last book was called The Upstarts and it was about Uber and Airbnb. And of course those were really big business success stories, maybe colored by a little bit of cultural wrangling of the sort that Silicon Valley was going through in 2017 and 2018, when it came, came to trampling laws and creating cultures, particularly in Uber's case that weren't really tailored to all of their employees. And then I hit the reset button as we do in this business, and I thought, well, what's next? And I had written The Everything Store in 2012, but it really was about the first 15 years of Amazon history. And it was just a different company, and Bezos before our eyes had become a different kind of leader, a different kind of CEO, a different kind of business figure on the public stage, in good ways and in some strange ways.
Brad Stone:
I started the book before HQ2, but that was obviously really defining in terms of Amazon's image, and then of course the battle with the National Enquirer. So I just felt like there was more story to tell, that the Amazon story is one of the biggest and most important of our time. It is warping our economic reality, it is creating new challenges for lawmakers and regulators and Bezos is an epic figure. And so I thought, do you know what? I'm going to, I'm going to write a sequel. I'm going to do my Empire Strikes Back to compliment the Star Wars.
Josh King:
Talking about managing Amazon's image, I talked to you about your first book about eight years ago. I'm curious, what was the difference about the process this time? What's changed about him and his staff in terms of granting access? The guy who was the White House press secretary, a friend of mine, Jake Carney, when you wrote your first book is now Bezos's media gatekeeper.
Brad Stone:
Right, in some ways the company is a little more amenable or at least they try to be. I think they realize that they can't be the enigma hiding in Seattle anymore. And so they allowed me to talk to maybe almost two dozen senior executives, but the foundation was still the interviews with the former employees, the current employees speaking on background, the partners and customers and sellers and lawmakers who have had interesting perches. One difference though, is that the surface area this time around was so much bigger. Amazon, the first 15 years has kind of a linear story. A group of people in a garage with an idea, through the dot com boom, survived the dot com bust, reinventing themselves in the first decade of the 21st century.
Brad Stone:
And now this story sprawls in every direction, marketplace, groceries, prime video, Bezos's ownership of the Washington Post and fight with the Trump administration, Blue Origin, the space company, the National Enquirer saga. So part of it was just talking to enough people, covering the surface area and then weaving it together in a narrative that charts the 80 billion company becoming the 1.6 trillion company. It took longer, this one took three years. I think The Everything Store at most took two.
Josh King:
In your acknowledgements, you give a nod to Stephanie Frerich of Simon and Schuster as a graceful editor who never shied away from asking difficult questions, rearranging clunky prose and keeping the larger narrative from veering off course. Brad, book publishing has changed a lot since you put out Gearheads, The Turbulent Rise of Robotic Sports, back in 2003. From the challenges of getting a book out by Mike Pence and Kellyanne Conway to the success of publishing a cookbook by Snoop Dogg, where are we in terms of the industry as Amazon Unbound makes its debut?
Brad Stone:
It's a great question, Josh. I think that maybe some of the earthquakes and upheaval that folks were predicting a decade ago with the arrival of the Kindle, the setting of uniform digital price of 9.99, the extinction of Borders, that some of the worst prophecies haven't come to pass. I think maybe a bigger factor was the pandemic in terms of the pressure and onslaught on independent bookstores. But by and large, I think the numbers of stores, at least before the pandemic was holding steady. Barnes and Noble is constantly in search of reinvention, and Amazon publishing its own books exclusively for the Kindle and its bookstores hasn't really imploded the industry in the way that has been feared.
Brad Stone:
Now look, there's still plenty of challenges. The book publishers are consolidating. You can't even keep track of it. It's like what we're seeing this week with Hollywood studios, they're all in orbit around Amazon. Which Amazon now, it at one point felt like book publishing was live or die for Amazon. And now you get the sense that they spend far more time contemplating things like movies and TV shows. I have one anecdote in my book where someone's presenting to Bezos a proposal to increase the public relations staff for the book business. And he was like, "Why would we do that? We already basically control it." So his mind now is elsewhere and yet the book publishers are still in orbit around this big, frustrating, unresponsive, but very demanding company.
Josh King:
Now that your book is done and out, you're taking to Twitter to make the case to @RateMySkypeRoom that you deserve props for transforming your garage for 30 plus hours of interviews and events to promote the book. I should note that the video of us talking isn't going to go anywhere, but has Claude Taylor of Room Raider weighed in yet, and what does it take to sell a book these days?
Brad Stone:
Well, he did. He did. I think that is who that is. The Rate My Skype Room guy.
Josh King:
Yeah.
Brad Stone:
He gave me a nine out of 10, but it's frankly probably generous. Yeah, folks can't see us but I did convert my into an office during the pandemic. The lighting is terrible, I look like a ghost, but I've got the ring lights and everything. And look, there are greater catastrophes in the world than having to promote a book from your home right now. Right? So I'm not going to complain even though, of course, as an author, I sort of will anyway, but you have to do everything virtual, people are tired of Zoom. You're trying to get attention in a busy news environment that includes war in the Middle East and upheaval in Washington.
Josh King:
Yeah.
Brad Stone:
But I think I'm fortunate in that the Amazon story is a historic one. People want to learn from this company, they want to understand it to better regulate it. They want to understand the trade offs they're making in terms of local community retailers and taxes. And I think that the company and the guy who's now the wealthiest person in the world sort of are their own black hole for attention. And so in that respect, maybe I need to wave my arms a little less to get people to pay attention.
Josh King:
So we're going to come back to the story of Amazon Unbound in a couple minutes, but I'd be remiss if I had the predigious Mr. Stone on our New York stock exchange podcast and didn't spend a little time wandering around the current diaspora of Silicon Valley and some of the stories that are in the headlines, even as we speak. Brad, Bezos and Amazon and the Washington Post have had their fraught relationship with Donald Trump, and we're going to get to that. But in recent weeks, Trump's Twitter ban has been reaffirmed by Jack Dorsey and Facebook's oversight board has also upheld the company's ban on the former president from its platform. How's this going to play out as we head to 2022 and 2024?
Brad Stone:
Boy, I think it will continue to be just a source of controversy and a can't win decision scenario for the big social networks. On the one hand, Trump earned his penalty by ceding the revolt at the capital building in January of this year. And Facebook and Twitter were really reluctant to push him out, right? He had committed so many perceived sins toward common decency while he was president, and fomenting an insurrection was finally a bridge too far. They pushed him out, but the fact the uncomfortable facts remain, which is that Trump's still commands an enormous loyalty in parts of the Republican party. And he has a big audience and these social networks are terrified as being seen as partisan forces. We see that every time they testify in Washington, and the Republicans bring it up. They don't want to just be the blue social networks and they need to cater to both parties and all of their customers. So in some ways it's a no win decision.
Brad Stone:
Now, Trump makes it easy for them because he can be so outrageous and tramp on so many norms. But I think as we head towards the midterms and then the next presidential election, if he continues to be a force and his allies continue to be forces, Facebook's going to face a difficult decision, right? Do you really want to be the arbiter of truth for politicians when those really aren't the principles our country is founded upon? We allow free expression when it stands within the balance of decency. So I don't think this is going away for those companies and the job will just get harder.
Josh King:
Is Dorsey also seeing it as hitting his business in terms of traffic? You don't have that guy with 85 million followers creating all sorts of views on promoted ads and business flow.
Brad Stone:
My understanding of Twitters last quarterly numbers is that they came through it in better shape than a lot of analysts and observers thought. They figured that the demise of Trump on the Twitter platform would hit the company where it hurt. But my understanding, recollection of the numbers was it wasn't that bad, that they came through it with the ad model intact and user growth hitting some of the benchmarks at least. And so look, Dorsey seems to take a harder line than Zuckerberg on this stuff. And if he feels like he can navigate around this, he has for whatever reason, a little bit more backbone. And finally of course, was pushed there when it comes to really just expelling Trump. Zuckerberg sort of outsourced the decision to this oversight board, which then kicked it back to him. But Dorsey basically has banned Trump for the foreseeable future, at least. So I don't see Dorsey backing down on that one.
Josh King:
And just this week, Goldman Sachs, NYSE ticker symbol GS, they poached Peeyush Nahar from Uber to run its Marcus Digital Banking Unit. At Uber, Nahar had overseen the software team for payments, insurance and FinTech, and he's an Amazon alum as well. Where does that leave Uber? And what does it mean for Silicon Valley as it marches further down Wall Street?
Brad Stone:
I do think Uber is moving into maybe a little bit of a challenging stage in terms of executive retention and recruitment. This is now a public company, the upside of the startup years is behind it. It did navigate the pandemic probably more elegantly than I thought with this hard right pivot to Uber Eats as the transportation business kind of collapsed understandably. And now, hopefully I'll speak optimistically Josh, as the pandemic wanes, maybe Uber's looking to revive some of the transportation goals it had. It's still a really challenging competitive environment with a rival, Lyft that competes on prices and for drivers. And then you've got a regulatory framework that keeps changing and Uber might be forced to hire drivers as employees. So it's not surprising that the top executives go seek brighter pasts elsewhere, and that'll probably remain one of Dara's biggest challenges at Uber.
Josh King:
Another company, Pro Core Technologies, it's going to be NYSE ticker symbol PCOR is going to have its IPO at the New York Stock Exchange this week. The company was founded 18 years ago in 2003. And it focuses on cloud-based project management tools for contractors. It's somewhat similar, somewhat competitive, somewhat complimentary to Autodesk. Now, Amazon went public just three years after it was founded in 1997, leaving so much upside on the table for investors. What's the state of the chatter in Menlo Park, Palo Alto, Sandhill Road, on companies accelerating their path to the public markets? Whether through these traditional IPOs, specs, or direct listings?
Brad Stone:
Right. I think we're entering into an era of, well, we're already in the era of wild experimentation and maybe reckless experimentation when it comes to going public. And the SPAC boom is just a great illustration of companies that are still really in their gestational R and D stage, that are years away from revenue, and yet are nevertheless now public. There was maybe a feeling in Silicon Valley during the pandemic that the old rules didn't apply, that there was an opportunity you needed to take advantage of, that the capital markets were looking for these kinds of investment opportunities. I think there's going to be a reckoning, right? When you have these companies that are public now, but really aren't mature and doing and have public company leadership and are nowhere near revenues, yeah I think that there's going to be some brutal years ahead.
Brad Stone:
And who knows, maybe that means the pendulum will swing back, it always goes back and forth. It always has since I've been covering Silicon Valley, and pretty soon we'll be back to go to old school IPOs with really intense scrutiny during the road shows and run up to the offering. So at this point, I believe we're in the tail end of the experimentation phase and we'll see how it plays out. And whether we become a little bit more traditional in the years ahead.
Josh King:
One guy who's never done an IPO is your boss, Mike Bloomberg. He's got a net worth of 59 billion, done a lot for journalism. So has Jeff Bezos with his 2013 purchase of the Washington Post for 250 million. Mark Benioff bought time, 2018 for 190. But Warren buffet, Berkshire Hathaway, that's ticker symbol BRKA, gave up on 31 newspapers last year, selling them for 140 million to Lee Enterprises. Now Brad, you graduated from Columbia in 1993, had stops at Newsweek, the New York Times, and for the past 15 years at Bloomberg. But from your perspective, what's been the impact of vast private wealth on journalism and what's its future?
Brad Stone:
It certainly has been checkered, right? And you name a number of great examples and of course, yeah, at Bloomberg now I'm the benefactor of one of them, but Bloomberg News is very tightly integrated into Bloomberg LP. And it's all one company. And what we do at Bloomberg News is primarily to nourish Bloomberg terminal subscribers. And then you have Bezos over at the Washington Post, who bought it privately. It has nothing to do with Amazon. And he did it almost as an, I'm not going to say it was an outright act of philanthropy, but he saw a major national media institution withering in the digital age and thought he could help, and has made a tremendous impact.
Brad Stone:
And then there are vanity purchases, the purchases of smaller newspapers by wealthy people or hedge funds to ring profit out of an old media model has been disastrous, right? Really, really ripped apart a lot of local media institutions with really dire ramifications for politics and informed local communities. And that is really unfortunate. So you do hope that some of these billionaires who have done so well in nurturing and rescuing big media companies and have gotten the glow, the refractive glow of being a media savior can recognize that some of these smaller publications in communities, there might not be the reputational benefit or even the economic benefit of turning them around. But they're what is holding together our democracy, the fact that we have informed communities.
Brad Stone:
And so you're looking for someone who, Josh you'll know this, was it Carnegie who built the libraries? Yeah, someone who wants to leave a legacy like Carnegie left with building public libraries, but do it in local communities rescuing newspapers and putting them on solid financial footing.
Josh King:
Talking about billionaires, Brad, the 2011 passing of Steve Jobs, the splitting up of the Bezos and Gates marriages in 2019 and a few weeks ago, respectively have created a formidable force of independent focused female billionaires in Laurene Powell Jobs, Mackenzie Scott and now Melinda French Gates. We know what Powell Jobs is doing with Emerson Collective, how might the future be transformed further with these three women able to put so much capital to work on their own instincts and analysis of what the world needs?
Brad Stone:
Yeah, now that's going to be tremendously fun and interesting to watch. Mackenzie Bezos, the speed at which she has deployed her new personal fortune almost suggests that she finds the Amazon winnings to be somewhat distasteful. That's my speculation, not any kind of [crosstalk 00:27:13].
Josh King:
What's she done with it?
Brad Stone:
Well, she's just been giving it away at an incredible pace. And she hasn't built a foundation. She's essentially, her and her advisors are tapping Climate philanthropy, social justice philanthropies, minority colleges, community organizations. And these charitable organizations are picking up the phone to hear a representative of Mackenzie Bezos offering a 20 million or 50 million dollar check and their lives are changing. And not to say she's not being careful, they're picking very interesting targets, but she's making a very rapid difference. And Melinda Gates, obviously I'm not that I'm not an expert there, but the way in which she has carved out a role at the Gates Foundation for women oriented issues and equality and social justice causes around the world as Bill Gates remains very laser focused on immunization and climate change, speaks to a real impact that she's already had and can continue to go on having as an independent giver. And then of course, is continuing to be this major force at the Gates Foundation.
Josh King:
All right. So after that tantalizing little tour through the current Silicon Valley technology landscape, when we come back after the break, Bloomberg's Brad Stone and I dive deep into his book, Amazon Unbound, Jeff Bezos and The Invention of A Global Empire. That's all coming up right after this.
Speaker 1:
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Josh King:
Welcome back. Before the break, Brad Stone, author most recently of Amazon Unbound, Jeff Bezos and the Invention of a Global Empire. We're doing a quick tour through the big tech names like Twitter, Uber, Facebook, Airbnb, and some of the financial services like Goldman Sachs that are embracing technology like never before. And now we're going to turn our attention to an in-depth look at the subject at hand, Amazon and the empire that Mr. Bezos has built. About that empire Brad, Jeff Bezos said at a 2019 event in Washington, DC, that, "My life is based on a large series of mistakes." And those mistakes could range from launching the Fire Phone to taking a go slow approach with Blue Origin to plunking down perhaps 10 billion this week for MGM studios, which has been reported. But no innovation is a guaranteed hit, is it?
Brad Stone:
Well no. And he would probably say that it is the the many bets, the experimentation that yields even a small, even a low batting average that will lead to hits like Alexa. Now, part of that is Bezos leading with his chin, trying to be humble. And I don't know that he's really sincere that his life is a series of mistakes, his life is a series of unmistakable triumphs and he probably knows that better than anyone. But it is his public posture, particularly recently, as he and Amazon have come under all sorts of criticism.
Josh King:
Thomas Edison has a very special place at the New York Stock Exchange. The holder of 1093 patents to his name, one of the most illustrious is the universal stock printer which improved on Edward Callahan's original invention. You quote Graham Moore's novel The Last Days of Night at the beginning of book saying dozens of researchers and engineers and developmental tinkerers labored beneath Edison in a carefully constructed hierarchical organization that he founded and oversaw. What does that say about Bezos's management and organizational philosophy?
Brad Stone:
First of all, I haven't even told my editor about this, but I'll give credit to a former Amazon board member named Bing Gordon, who suggested that I read that book and who actually saw parallels between how Graham Moore describes Thomas Edison, and Bezos and how he runs Amazon. And the idea is that they're both illustrious inventors, but really what they've created is a system of invention. A set of processes and rituals and proteges, and even this bizarre custom inside Amazon of writing and reading six page documents, all of this is key to the inventive process at Amazon.
Brad Stone:
And the idea is that Edison was so product because he had people around him and he created a system of creativity. And that is what Bezos has strived to do. And it's been really successful at Amazon and The Post. I kind of argue in the book that it's not that successful at Blue Origin and that one of the prevailing questions about the future of Amazon is if you take Bezos out of the system can it still be as effective? Because Andy Jassy is a tremendous operator, this is the new CEO of Amazon, but he doesn't have the inventiveness of Bezos to be able to send that email we were talking about that creates Alexa. And so it's unclear whether the system can operate in the same way without the creator.
Josh King:
Talk about some ideas that never went anywhere, Haven Healthcare, that joint venture with JP Morgan Chase NYSE ticker symbol JPM and Berkshire Hathaway. It was an idea that really never got off the ground. You don't write about it much in the book other than to quote the JPM CEO, Jamie Diamond, who told you that, and I'm going to quote here, "Jeff was like a kid in a candy store. It was all new to him, he was focused. He was so focused on Amazon for a long time and then he gradually became a citizen of the world." Did healthcare turn out not to be the kind of candy that Bezos wanted to eat?
Brad Stone:
Well, no. Actually there are a lot of healthcare initiatives inside Amazon, like Pill Pack and the online pharmacy. The slightly grotesque metaphor that I'll use is, Josh, you remember when you were young and you shared an apartment with like two other guys and nobody cleaned the bathroom, because if you cleaned the bathroom, you were the guy that cleaned the bathroom. And that is what, Haven Healthcare was the bathroom, right? When you have these joint ventures that might seem like a great idea when Jamie, Warren and Jeff are drinking around the campfire. But then they create this thing with equal percentages and holdings and higher a CEO. And really nobody takes responsibility, nobody wants to clean the bathroom. And of course, they all have their own ambitions, to continue the metaphor, to own their own apartments, I guess, or homes.
Brad Stone:
And so Amazon's developing really ambitiously, lots of healthcare things. Not just the online pharmacy, but walk-in clinics and the telehealth service, Alexa devices that will allow customers to monitor their vital signs. Probably a lot of stuff we haven't even seen yet, but the idea of a three part joint venture was probably flawed to begin with.
Josh King:
I've been so fascinated for so long by this six page narrative process that I first read about I don't even know when. As a writer, I'd love to be in the room where executives ruminate over drafting that carefully written memo before speaking, a room where ultimately PowerPoint is verboten. What's your take on it from your perspective as a writer and take us inside that room as you've best been able to recreate it when the memo is passed around and there's quiet, and then people start to talk?
Brad Stone:
Right, yeah, just to remind people, decision making at Amazon is an editorial process. People write these documents, they labor over them day and night and weekends, they have appendices full of data to support their arguments. They get passed up and down the chain, God forbid, you make a typo. And then if you're presenting to the leadership team everyone sits around in meditational silence, reading it, and probably furtively glancing at Bezos and other ST members to see if their eyes [crosstalk 00:35:35].
Josh King:
Do they get any advanced look at it before they start, or they can't see it before they start those meetings?
Brad Stone:
Well, my understanding is that with most of these things, the papers are passed out and they read it there. Now, at the Washington Post where Bezos brought that custom, he usually does read the papers beforehand. So maybe it varies a little bit. And then everyone reads in silence, then there's the discussion. And Bezos usually speaks last. It'll be interesting to see if Andy Jassy eventually speaks last. And of course, everyone's sort of reading his mood, reading the wind, feeling the tension, and God forbid he finds a mathematical error or disagrees on something or asks for a redo. They're pressure packed meetings. They're really remarkable sessions, but the idea is that friendly agreement gets you nowhere and by design they're meant to be kind of combative and pugnacious and in the end that they think that you get to the right decisions that way.
Brad Stone:
So a unique custom in corporate America, one that Amazon executives I think are trying to bring elsewhere and not clear whether that can sort of survive in soil other than Amazon. Bezos, it's how he thinks. And he is the one that came up with the process and really sponsors it inside Amazon.
Josh King:
We talked about Alexa in the first part of the show, but I want to focus for a bit on some of Amazon's less volume innovations. A few days ago, I wanted two guitar stands so that my guitar and banjo were displayed and weren't gathering dust in their bags. So I searched Amazon, the first thing that came up was this relatively inexpensive item, the brand Amazon Basics. How does the Amazon use data to know that cheap guitar stands, will sell on their platform and then go about making their own and putting them on top of the search function?
Brad Stone:
Right. Oh, you've identified a critical question and avenue of antitrust exploration. The charge against Amazon is that the private label manager, some poor soul who's the Amazon Basics, hard lines division is looking to see what sells, maybe peeking at the seller data from a third party guitar brand seller. And is going, "Okay, we need to do a guitar stand." And then they're finding a factory in China. Maybe they're finding the factory of the seller who was established, the guitar brand, and then they're shipping it to their FC's. Now, the critical point is that Amazon probably doesn't need to look under the hood. Now, it did, I write in the book about how it was a kind of free for all in the early years of the private label business and managers did dip into the cookie jar of data.
Brad Stone:
But probably, it's not a lot of wizardry to find out that guitar stands do well. That that's a consistent business and that Amazon Basics should be there. I think people get uncomfortable though, with this idea of Amazon Basics appearing high in search results, a taxonomy that Amazon controls, qualifying for Prime, having positioning in the fulfillment network, being dropped off in two days. It's the whole Amazon playing field being tilted toward Amazon. And that I think triggers people's alarm bells. That's something that with this complex company is easy to understand, and it feels like Amazon privileging itself against some of these sellers that might be depending on it for sustenance.
Josh King:
I am part of the Amazon marketplace community. As a hobby really, my buddy and I developed a line of seltzer that we call Dr. Priestley's American Small Batch Fizzy Water, named after the inventor of carbonation Joseph Priestley. We wanted to tell our potential distributors that we've sold it in all 50 states, so we turn to fulfillment by Amazon. Now, as you write about or allude to, a case of 24 cans filled with water isn't efficient to be sold by delivery, but Amazon will do it for us for a price. They'll pick it up from our co-packers, ship it to their fulfillment centers, sell it to consumers, ship it out and take it back if it's damaged in route. Why are they selling what they would call CRAP, or can't realize a profit?
Brad Stone:
Right. Well that actually goes back to arguments inside the company back in probably 2011, 2012, where executives were arguing a lot of these kinds of consumable and food products like seltzer water is key to the biggest retailers in the world. It goes back to what I was saying before, people shop for these kinds of things multiple times a week. And Amazon had a great business with customers buying one or two times a month, but it kind of left their flank exposed. And if Walmart was ever able to pivot, or Kroger, from consumables and grocery into hard and soft lines, then Amazon could be exposed. Bezos didn't really believe it right away. He thought of it as like an opportunity that was going to be out there. And it was only when Instacart came to the fore and Google launched Google express that I think he realized that the grocery business online was turning into a little bit of a land grab and he had to be there. He authorized some more investments and then ultimately acquired Whole Foods when it was having trouble.
Brad Stone:
And now they're launching Amazon Fresh Supermarkets in competition with Whole Foods, which is a very Amazon like thing, and stomping those out around the country. So he wants to be in the seltzer business too, Josh, and who knows, you might have some Amazon Basics competition before too long.
Josh King:
So Brad I've now finished the second season of For All Mankind on Apple Plus. It would've seemed to be a perfect show for Prime Video, to build synergies for intergalactic travel on a rocket from Blue Origin. But beyond a few hits like Marvelous Mrs. Maisel and Jack Ryan, the business has underperformed somewhat. Love what you wrote about in the book, The Annual Campfire Retreat, particularly the one that Roy Price was involved in. And the original vision for studios and what the new chief, Jen Salty, is going to do with the business now that potentially she has the full MGM library to build on.
Brad Stone:
Right, right. That might be happening this week or at least very soon. But I just want to say one thing and to encourage folks to think about this in a little bit of a different way. Netflix is obviously the leader in streaming and Disney Plus and HBO Max, and other companies, NBC with Peacock, have made some inroads. And Amazon feels like maybe it's languishing with Amazon Studios. But Amazon alone has the [inaudible 00:42:19] box, the Fire TV, and is right there with Roku as an entryway into this larger universe. You can sign up for HBO Max or Disney Plus on the Amazon service. Disney plus and other streaming services, and Netflix use AWS, right? So Amazon alone is competing up and down the stack in this battle. And even when they lose, they win, which is just an epitome of maybe the Amazon story and my book. It's like they place bets on every square on the roulette board. I might have mixed and for there, but you know what I mean. And it is all accruing to Amazon's advantage.
Brad Stone:
And they started Amazon Studios with niche programming, but I would say they've probably had some modest success. The Boys is a TV show that has been successful. They've made this massive investment on the Lord of the Rings, which I feel like they must be a little nervous about just because of the size of the commitment and the fatigue that maybe people have after watching 90 hours of the Lord of the Rings movies. And, but now potentially James Bond and the Pink Panther and survivor, with MGM. So that's one where, and we could talk more about their model.
Josh King:
And Shark Tank.
Brad Stone:
Yeah.
Josh King:
What's amazing is that Shark Tank is part of that property as well. And the idea of the whole essence of Shark Tank is built for Amazon and synergies.
Brad Stone:
Maybe Bezos will join the panel of judges on Shark Tank, but I think they've had success there even when it hasn't been perhaps as visible as say Netflix's.
Josh King:
My old friend Clayton Maury is formally of Arian Space. He's been part of the Blue Origin management team for a while. They're now taking bids for the first tourist seats on The New Shepherd Spacecraft, which plans to take its first astronauts into just near space on July 20th. In many ways, Bezos finds himself second fiddle now to Elon Musk and SpaceX. How does that position feel for him and what he expect will be the future for that business given that challengers like Richard Branson are finding with Virgin Galactic, the SPAC that was launched at the NYSE?
Brad Stone:
I, of course can't speak for Bezos or peer into his mind, but I do think it probably bugs him. Not just the attention that Musk has gotten or the fact that he is somehow able to turn his followers into fanboys, despite whatever undisciplined, crazy things he's tweeting. But the idea that the government has really financed SpaceX's rise, underwrote his ambitions. This is on a flood of contracts to orbit, satellite contracts, missions to the space station. Now plans to the moon, SpaceX won that over Blue Origin. And Bezos had a set of assumptions at the beginning that he would keep Blue Origin small, that he would pay for it himself, that he would constrain the investment. And that Blue Origin would be the tortoise and not the hare. And the hare came around, it wasn't just a fairytale.
Brad Stone:
And maybe your friend might disagree here with my conclusions, but I feel like Bezos changed gears because he saw the success SpaceX was having. Started to do more things at once, started to grow the company, hire traditional aerospace executives. And that has seeded a little bit of dysfunction. And they are going to have a major display with the launch of New Shepherd, but the orbital rocket, New Glen, is years delayed. They've lost the moon contract, they're they're lagging. And Bezos is a competitive guy. And I don't think he wants to be second. So it will be interesting to see, particularly as a little bit more time after he resigns as Amazon CEO, how he addresses it and whether he applies more of his time and attention to Blue Origin.
Josh King:
Part three of the Brad Stone trilogy, you think?
Brad Stone:
I hope not, I don't know. I feel like maybe I've spent a little too much time focusing on one guy, but who knows, if there's a great story to tell, maybe.
Josh King:
Beyond the final frontier, Amazon is perhaps belatedly working to change how it does things here on earth. Jeff has said that Amazon will eventually power all of its operations with renewable energy and it's buying a hundred thousand electric vehicles from Rivian automotive, which is a startup in Plymouth, Michigan as part of a its two billion dollar climate pledge fund. Rivian is said to be weighing an IPO later this year, is Jeff trying to assuage the global warming warriors and cash in like Musk at the same time?
Brad Stone:
Well, I think he has addressed the criticism and they were late. There were activists and employees trying to get Amazon to release its carbon impact report. And instead of just doing that, Bezos decided he wanted to put a spin on it and be perceived as a leader. And they created this thing called the Climate Pledge and got other companies to sign it. And the investment in Rivian, look, I want to be optimistic about that. I've got Amazon vans crawling my neighborhood right now, and Amazon unlike the other big tech companies is because of that transportation fleet really is a net polluter on a grand scale. And to the extent that they can take a chunk of our delivery infrastructure in this country and with one fell swoop, an investment and some innovation turn it into an electric fleet, that'll be good for our skies and for, for the climate.
Brad Stone:
So that they succeed on the backend via their investment is, it's another way in which the big tech companies have so advantages. And we see it again and again, Amazon did this with the airlines that it invested in and rebranded as Prime Air. It invested in them, it made the announcement and then it benefited on the back end. And it's one of the ways in which their advantages tend to be self perpetuating.
Josh King:
It's clear that Jeff Bezos didn't talk to you for Amazon Unbound, but Jake Carney made sure that others did. You talked about the 15 executives that you did talk to. The Everything Store had to be seen as a sort of recruiting vehicle for the best and brightest to join the firm like the [inaudible 00:48:22] space program. There has to be a significant unattributed value of having an independent voice like Brad Stone declare that the company's potential is limitless. Despite the fact that you raise a lot of the uncomfortable topics for senior management in your writing. And I've heard you talk as well about the thought of seeing this book actually sold on various Amazon platforms. You're writing a independent, critical look at the company, but it is also, while Jeff Bezos may not even give it the time of day or pretend he's not, it's doing great service to the business. What do you think?
Brad Stone:
Oh boy, I don't know. I hope they see it that, well, do I hope they see it that way? Obviously that's not my journalistic goal, right? My goal is to hold the company to account, to illustrate the ways in which it can do much better in its relationship with its employees and impact on the planet and effect on the competitive environment. But at the same time, not be such a critic that I'm not acknowledging the way in which the company has benefited our lives. And look, I'm an Amazon customer and I see that firsthand particularly during the pandemic. So I guess maybe my answer is I don't worry, even though that's a little disingenuous, because of course I want to know, did Bezos read the book? What did he think? But I will profess that I don't really care how they view it. I just want to stick to the facts and tell a good business story that people, that critics and fans of the company alike can learn from.
Josh King:
Well, it's not a six page memo, Brad, but it is a 480 page memo. And it will be very much taken to heart at warehouses, on delivery planes, in that boardroom and everywhere else where people do work with Amazon, like me and Dr. Priestly. So thanks so much for spending a little time with us and really peeling back the skin of the book.
Brad Stone:
Thank you, Josh. Thanks for the great questions.
Josh King:
And that's our conversation for this week. Our guest was Brad Stone, author of Amazon Unbound, Jeff Bezos and the Invention of a Global Empire out now from Simon and Schuster. If you like what you heard, please rate us on iTunes so other folks know where to find us. And if you've got a comment or a question you'd like one of our experts to tackle on a future show, email us at [email protected] or tweet at us @ICEHousePodcast. Our show is produced by Pete Ash and Ian Wolf. I'm Josh King, your host, signing off in the library of the New York Stock Exchange. Thanks for listening, we'll talk to you next week.
Speaker 3:
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