By James Pethokoukis and Brad Stone

Few institutions held up better
during the COVID pandemic than Amazon. Its supply chains successfully
accommodated a massive surge in demand and continued to provide products to
hundreds of millions of customers. No wonder its stock price has almost doubled
since March 2020. And yet, Amazon faces an uncertain future. Jeff Bezos is
stepping down as CEO, and policymakers have grown increasingly vocal about
their desire to break up Big Tech companies like Amazon. So what’s next for
this retail giant? I recently discussed that question, and much more, with Brad
Stone.

Brad is the senior executive editor for global technology at Bloomberg News, as well as a writer for Bloomberg Businessweek. He is also the author of four books, the most recent of which is Amazon Unbound: Jeff Bezos and the Invention of a Global Empire, released last May.

What follows is a lightly edited transcript of our conversation. You can download the episode here, and don’t forget to subscribe to my podcast on iTunes or Stitcher. Tell your friends, leave a review.

Pethokoukis: I remember when Mark Zuckerberg testified before
Congress, and one thing that really struck me is that the people questioning
him really did not understand how Facebook made money. And to me, it seems
Facebook is a much simpler company than Amazon.

So as you’ve been doing interviews about the book, do you
sense that people understand how Amazon works?

That’s
a really good question. They certainly understand how the oldest — and maybe
still the largest — part of Amazon works, primarily because they’re customers.
When you go to any city (but particularly Washington DC) and talk to regulators
and legislators, they understand Amazon in part because they interact with it
every single day, probably like the rest of us. And so when you talk about the
retail business, the third-party marketplace, maybe Alexa, and definitely the
movies and TV shows, I think there’s an understanding. Maybe there’s not a full
appreciation for the complexity as it pertains to things like Amazon Web
Services and how it all fits together. But I think because Amazon is known as a
store, there is an understanding of a large part of what it does.

Sometimes I get the sense, talking to people — even
regulators and staffers — that they believe Amazon would love to be able to own
and sell everything. It seems like they believe Amazon is looking to destroy
all those small businesses and take data from them. Are they right? And if not,
what is the strategy of the bulk of Amazon’s business?

Maybe
you’re right, in that there are now critics on both sides of the aisle. There’s
this rare bipartisan consensus against the Big Tech companies — in particular
Amazon. And I think they may often attribute the very worst motives to the
company.

So let’s just take the specific issue of Amazon’s private-label business and how it gleans data from its third-party sellers to figure out what to sell and what to put under the Amazon Basics mantle. To a certain extent, maybe I’m not so sure that they don’t understand it — you know, there’s a political argument being made here. But the fact is that most retailers have very large private label businesses, and of course they look at what’s selling to figure out what they should sell. And Amazon does it too. They’ve been caught with their hand in the cookie jar because they’ve proclaimed to have an internal policy against letting employees look at the data from third-party sellers. And as I recount in my book (and others have recounted as well), clearly employees have vaulted over the wall.

But
when it comes to actual policy that might prohibit Amazon from rolling out
private label products, it’s unrealistic because then you have to consider
Costco, Walmart, Walgreens, and everyone else who does it. So I don’t know . .
. we’re in the realm of the political argument, and there’s not a lot of room
for nuance about how retail operates in general.

One of my favorite writings on Amazon is from the tech analyst Benedict Evans, who had a great blog post, maybe a couple of years ago, called “Amazon is a Boring Retailer.” And let me just read what he wrote about Amazon and get your thoughts:

I sometimes think that if you could look in the safe behind Jeff Bezos’s desk, instead of the sports almanac from Back to the Future, you’d find an Encyclopedia of Retail, written in maybe 1985. There would be Post-It notes on every page, and every one of those notes has been turned into a team or maybe a product.

Amazon is so new, and so dramatic in its speed and scale and aggression, that we can easily forget how many of the things it’s doing are actually very old. And, we can forget how many of the slightly dusty incumbent retailers we all grew up with were also once radical, daring, piratical new businesses that made people angry with their new ideas.

What I’m getting at is that people just don’t have a good
sense of the history of business. They may understand regulation and law, but
they don’t understand the history of business and how what Amazon is doing is
very old. They’re just doing it way faster and way bigger.

Yes and no. In my first book about Amazon, The Everything Store, I do talk about how Bezos and his executives read the Sam Walton autobiography and took certain pieces from it. And clearly, they do utilize best practices from retail. But there’s so much about Amazon that is unique. The shelves are endless. The variety is potentially endless.

There
are also all these pieces at Amazon where the connections are very opaque, but
they clearly reinforce each other. So there’s the way in which retail operates
on Amazon Web Services, and ostensibly gets a pretty hefty discount for
Amazon’s cloud infrastructure, which then turns around and sells to other
competitors at a markup. Or there’s the way in which Amazon’s Alexa devices sit
in people’s homes with a backend on AWS and integrate other thriving pieces of
the tech ecosystem, like music streaming, surveillance, cameras, and other
things.

Amazon
is a collection of self-reinforcing parts — all adhering to the same business
principles, but with these very opaque and fuzzy connections between them, and
then throwing off tremendous amounts of cash and allowing Amazon to invest in
new things. So I think yes, the manual’s there, but Amazon’s really pioneering
new territory as well.

You mentioned the previous book, The Everything Store, and
I would recommend to listeners that it makes a fantastic companion to Amazon
Unbound. Can they buy that in a beautiful box set or something? Have you
produced that?

No,
unfortunately not. Maybe one day, Jim, but you’re right. I really felt like it
was a little bit like The Godfather and The Godfather: Part II. They’re two
pieces of the same epic story.

I’ve talked to a lot of authors, and you get the sense
that when they’ve written about something, they may be forced to talk about it
because they’re promoting it, but they don’t want to go back to it. They are
just done with it. But you apparently were not Amazon-ed out. You were not
Bezos-ed out. You returned to it. What did you find so compelling about this story
that you wanted to devote a whole lot of time to talking and writing more about
it?

Mostly,
I was very proud of The Everything Store, and I was talking about Amazon a lot
and came to realize that it was all outdated. The company that I had written
about in 2013 was a giant and was interesting, but it had a $100 billion market
cap with maybe 40,000 or 50,000 employees. Bezos was interesting, but certainly
wasn’t the most famous guy in business.

And
that all shifted. The market cap zoomed to $1.5 trillion, and Bezos became the
richest person in the world and changed before our very eyes — physically, his
personal life, the things that he was interested in. And when I started Amazon
Unbound, I certainly didn’t know that he was going to retire as CEO, get
divorced, or further commit to his private space company, Blue Origin. So the
landscape was changing, and I needed to update my history. And then really, as
I started to work on it, I was just surprised by how good the story was.

I’ve written quite a few blog posts about The Everything
Store. I just think it’s such an amazing story. Jeff Bezos could have had a
fantastic career on Wall Street, but he sees an opportunity and ends up in the
basement of some other store in Seattle, packing books by hand. It’s a great
entrepreneurial story. And when people used to think about Jeff Bezos back
then, they thought of the guffawing laugh — he was really a charming character.

Now he’s depicted as Lex Luther. How did that happen?

I
don’t know that I’m depicting him as Lex Luther, but it’s funny because I have
gotten that question: Is Bezos an evil villain?

Maybe
we have to disassociate our generalized distaste for extraordinary wealth at a
time of huge and worrying income inequality with the particulars of Bezos. He
obviously gets criticized — and duly so — in my book and elsewhere for Amazon’s
relationship with its employees, the corporate culture, and some of the
pressures that it’s exerting on small businesses.

But
I still feel like his intentions are good. He’s investing in opening space with
his private space company, Blue Origin, because he feels like this is something
that humanity will need generations from now. And he wants to start it, same as
Elon Musk. And for all of Amazon’s faults, I don’t think I would have written
two books if I didn’t generally believe that, in the end, it’s brought a lot of
conveniences to our lives. It’s got a lot of things it needs to fix, but it’s
also managed to innovate at scale and obviously was a complete lifeline during
the pandemic. So I don’t really think that it’s fair to call him a Lex Luther
type.

I
will say, he can do a fairly poor job of evangelizing for his own interests —
like at the recent space launch, when he inadvertently thanked Amazon employees
for paying for the whole thing. He’s unlike Elon Musk, who manages to use his
charisma to spin his followers into fans. Bezos just has a much harder time
doing that. And as a result, I think he’s easier to caricature.

And it seems like that caricature — which is obviously a
function of the size of the company, Bezos’s wealth, and broader concerns about
inequality — has caused a revisionist reframing. I remember that, for a long
time, there were questions about whether Amazon was really a buyable business,
because they weren’t recording profits. People didn’t understand that strategy.

Now we look back at that strategy and say, “Oh this
is a predatory company that was not making money because it was undermining
other companies and underpricing its product.” And that’s part of why I
think people just always have been befuddled by the business strategy of this
company. They thought it didn’t make sense, and then they thought it made too
much sense and represented this intentionally predatory approach to business.

Yeah,
that’s interesting. In my book, I have this chapter that looks at how Amazon
developed the ad business. And one of the interesting anecdotes there is how
Bezos really pushed back on his retail business using advertising money to
subsidize their unprofitability. He wanted the retail business to stand on its
own. And this, in a way, runs counter to that narrative.

As
for the fact that Amazon has lost money in some years and probably could be
even more profitable than it is currently, I think that speaks more to Bezos’s —
and now Andy Jassy’s — interest in just funding new things. For example, Amazon
is going to spend $12 billion this year on Prime Video through licensing TV
shows and movies, as well as making their own. So Amazon’s profits go to this
expansionist zeal — new industries, new inventions, things like Alexa, whatever
the new thing is that they’re going to launch. It’s not really from
undercutting prices or pricing below competitors. Bezos wants those older
Amazon businesses to stand on their own and be profitable. It’s a little bit
more complex than “Amazon hides the ball to undercut competitors.”

Did Jeff Bezos think — and does current management think —
that they have a PR problem? Certainly a lot of what you read about Amazon used
to focus on pay issues. And now it’s about life inside the warehouses, drivers
not getting bathroom breaks, all that stuff. But then you’ll look at customers’
brand ratings, and Amazon scores very, very high.

So does Amazon management think they have a problem? Or do
they just think business reporters, the media, and politicians like to attack
the company, but actual customers and regular people think Amazon’s great?

That’s
a good question. You know, I would point to the last Bezos shareholder letter
and some of the things that Andy Jassy has said recently. They’ve added a
couple of principles to their 14 sacrosanct leadership values that they all
study religiously. They talk about being more employee-centric and
employee-focused, and also about looking at some of the possible ramifications of
their actions for society. To me, that suggests a receptiveness to the
criticism.

So
I don’t think they’re fully in their shells of denial, even if it’s sometimes
their public posture to say “Okay sure, people are going to criticize us.
They just don’t understand.” I think that these recent changes and some of
the recent rhetoric suggests that while the halo might still be over their
heads given these brand surveys, some of the criticism is going to accumulate
and make people question whether they want to continue to support the company
and click on the “buy now” button. So I do think that maybe some of
the attempts to be a friendlier Amazon are in response to a criticism that they
do see as a bit of an existential problem.

You mentioned Elon Musk earlier. He and Bezos are two
very, very wealthy individuals, but with very different personalities. And the
same goes for their space ambitions. You have Musk talking about being on Mars
and being a multi-planetary civilization. Blue Origin’s mission statement is
very different. It’s all about Earth, creating a space economy, and lowering
our environmental footprint. It just seems far more rooted — maybe more
customer-centric, if you assume the customer is humanity. Any thoughts on that?

It’s
really funny because in the short term, the companies are direct competitors.
Putting aside all the space tourism and suborbital flights we’ve seen over the
past couple of weeks, Blue Origin is competing and trying to catch up with
SpaceX for contracts to send orbital rockets into space, carry commercial and
government satellites, and take astronauts to the space station and then ultimately
to the moon. And Blue Origin keeps losing those contracts and then protesting.
That’s because New Glenn, their rocket, is years away from fruition, and SpaceX
has a complete collection of functioning rockets.

But
the long-term goal is different. It’s like we have these different visions
attributed to the two CEOs. Musk thinks that to ensure humanity’s survival, we
need to be a multi-planetary species. So he wants to go to Mars and set up a
colony there. And Bezos simply thinks you might as well go to the North Pole,
because it’s going to be much more pleasant than Mars — you can actually
breathe the air! So instead, his long-term goal is to have huge space stations
orbiting the earth, comprised of material from the moon and harvesting the
energy of the sun, and that’s humanity’s future. It’s like we have these two
science fiction geeks who read different books and have different visions.

Is Bezos in this for the long run? He may be behind now,
but is he going to keep putting resources towards Blue Origin and do what we
can, because this is his legacy?

We’re
talking during a week in which Bezos wrote an open letter to the NASA
administrator, basically pledging $2 billion of his own money to cover the
development of a moon lander, because NASA only had the funding to go and award
SpaceX the contract. So this guy is in it for the long term.

The question, I think, for people who are watching is, “Should that money be deployed to more terrestrial, philanthropic goals with a larger impact?” But for Bezos, this is his dream. He gave his high school valedictorian speech about opening up the economy in space. This is what he’s going to do. So yes, in his remaining time on this planet, I expect him to be fully into Blue Origin and funding this goal. And look, he basically just put his own life on the line to take the maiden crew voyage of the suborbital rocket, New Shepherd. So I think he’s fully in it.

Is he as fully committed to The Washington Post?

I
have no reason to think that he’s not. Right now, he has put The Washington
Post on firm footing. They’ve got a new editor. My understanding is it’s
profitable, a great subscription business. My only question is, “Would he
ever consider that his work is ‘done’ there and move on?” But I have no
reason to believe it. I think that this has been successful for him, and to
some extent has probably burnished his image. He appears to really love living
in Washington DC. He’s got a home there. So yeah, I think he’s probably in that
for the long term as well.

The book is called “Amazon Unbound.” But
certainly here in Washington, people see that as a problem — they believe it
needs to be “bound.” Do you think the company perceives a real
regulatory risk?

I
mean, definitely a risk. They’re realistic. They understand that the darts are
aimed at them and that they will be coming from all sides — from Europe, from
the FTC, from the state AGs, and from Congress. But I think they’re ready for a
fight.

And
look, breaking up a company — or even trying to reform a company — is a
multi-year effort. You also have a conservative judiciary that just bounced
back the FTC’s lawsuit against Facebook. And I think it’s really going to be
difficult for regulators to make a case that Amazon has any kind of a monopoly,
considering that it competes in these really large, diverse markets, from
retail to enterprise computing. And so I think in some ways they’re ready for
battle, and they realize it’s going to be a challenge. But they’re probably
confident that, despite the public rhetoric, they’ve got some advantages in the
fight.

Will the new CEO, Andy Jassy, be someone that people know?
Will Jassy be like a Tim Cook-type of CEO, where a lot of people know who he is?

I
think so. I think the difference is that Cook could emerge from the shadow of
Steve Jobs, because unfortunately Jobs passed away. Whereas Bezos will be very
much with us. And I expect stories about Amazon will still feature at least
some Bezos smiling photos or laughing photos.

They’re
going to try to bring Jassy out. He presents such a humbler target because he’s
not the wealthiest guy in the world. He’s very down to earth, and he’s quite an
eloquent speaker. And he’s got an inspirational story, starting at Amazon
almost at the very beginning. So I do think they’ll try to introduce him to the
world. And the question will be whether the media really focuses on Jassy if
Bezos is still giving space press conferences and dipping in to launch Amazon
products.

Do you think there’s going to be a third volume, to finish
out an Amazon trilogy? What do you think might be the themes in that trilogy?

Well,
I’m in recovery now from barely getting through volume two. I suppose in 10
years, if the story is as good as it’s been, Bezos has carved a whole new
chapter, the story of the regulatory pushback against Amazon and the other tech
companies comes to some satisfying conclusion . . . yeah, I would never rule it
out. I’m not smart enough to have foreseen what Amazon became after I published
The Everything Store, so it’s hard to imagine where the story goes from here.
But I’ll be watching it closely, just like everybody else.

All right. So pencil it in: July 2031, back on this
podcast.

Thank
you, Jim.

Brad, thanks a lot.

James Pethokoukis is the Dewitt Wallace Fellow at the American Enterprise Institute, where he writes and edits the AEIdeas blog and hosts a weekly podcast, “Political Economy with James Pethokoukis.” Brad Stone is the senior executive editor for global technology at Bloomberg News, as well as a writer for Bloomberg Businessweek.

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