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- [00:10]
A
Hello and welcome to the Blackmail episode of Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon of Axios. I'm here with Emily Peck.
- [00:23]
B
Hello.
- [00:24]
A
I'm here with Stacey Marie Ishmael.
- [00:26]
C
Hello.
- [00:28]
A
And most excitingly, I'm here with Brad Stone of Bloomberg. Welcome, Brad.
- [00:34]
D
Hi, guys. Thanks for having me.
- [00:35]
A
Introduce yourself. Why are you here on this here show?
- [00:38]
D
Well, I wrote a book, actually, another book about Jeff Bezos.
- [00:43]
A
One book about Jeff Bezos is not enough.
- [00:45]
D
It wasn't enough. The book is Amazon, Jeff Bezos and the Invention of a Global Empire. For sale now at your friendly local neighborhood bookstore. In addition to the site we all know so well, Amazon and other online.
- [00:59]
A
Stores, we are going to talk to you about all manner of things Amazon, which is this bottomless well of things to talk about. We're going to talk about its labor practices. We're going to talk about how it reflects Jeff Bezos personality. We're going to talk about his midlife crisis. We're going to talk about him being blackmailed by the National Enquirer. We're also going to talk about the Colonial Pipeline, which was blackmailed by a group called Darkseid, which might now be closing down. According to the Wall Street Journal, they've been painting themselves as ethical hackers. But maybe they're just going to disband and come back as something less ethical. It's a great conversation. I'm super excited about this one. And if you're a Slate plus member, you get to hear Stacey Marie's tale of woe about simple, the Neobank that used to be fabulous and no longer exists. It's all coming up on Slate Money. The Colonial Pipeline, the biggest pipeline in America was hit by one of the biggest, fastest growing industries in the world, which is ransomware as a service, which I love. The idea that this has become professionalized and we have like SaaS based criminals these days and they shut down the pipeline and they demanded a ransom and it turns out that they paid the ransom even though they didn't need the ransomware hackers to restore their data because that would have taken forever. They restored it from backup. As far as I can make out, the reason, the main reason they paid the ransom was to stop the ransomware hackers from putting their confidential data on the dark Web. Emily, was this the right move? Is it always a good idea if you are being ransomed to pay the ransom?
- [02:48]
B
It can be the right thing to do to pay the ransom. I think there are parallels here to kidnappings that we see people paying ransoms in the developing world. So sometimes, a lot of times, companies are paying the ransom because of this secondary threat. Not only has the ransomware operators, the professionals, not only have they shut down your systems, but they've also said, if you don't pay the ransom, we're going to put all this stuff online, we're going to make your private data public. And that's a big threat. So you understand why they would pay ransom. There's a whole. There are professionals who will help you negotiate your ransom. So they might ask for 25 million, but you can haggle them down and it might be worth the costs. Sometimes people don't pay the ransom. The city of Baltimore a few years ago was hacked and refused to pay up and then wound up spending like $18 million to upgrade its systems instead. And sometimes that is the right thing to do. And I think maybe if there was more public policy support, more sophistication within these companies, that paying the ransom would become an increasingly worse idea over time.
- [04:00]
A
It's a classic example of the prisoner's dilemma and the collective action problem in that I think in any given case, it always makes sense, nearly always makes sense to pay the ransom, depending on where they've priced it. And normally they price it relatively intelligently because they want the money. Once they've done the hack, it is clearly better if no one pays the ransom ever. And if you were talking about kidnapping, and the United States famously has a policy that never pays kidnappers, rather than, say, like France, which pays them all the time. And the idea is that this is going to cause kidnappers to be less likely to kidnap Americans, which doesn't seem to work very well. But, yeah, it's definitely a collective action problem because the one thing that these things really have in common is that you have insurance. In both cases, it doesn't cost you any money once you've paid the insurance premiums, to just allow the insurer to pay the ransom and get your data back. Like, why wouldn't you do that?
- [04:55]
D
Exactly. The thing that is perverting this whole prisoner's dilemma outlook here in the United States in particular, is that companies have cyber insurance. They pay a premium. So when they're attacked, and as we reported at Bloomberg, almost immediately Colonial paid. Right. There wasn't even a question. Right.
- [05:15]
A
They.
- [05:15]
D
I don't even know if you know, at the time when they immediately paid, they figured that they could restore the flow of oil. I think it was just an immediate calculation, free of kind of political concerns. Or what the collective good might be or what the Biden administration might want them to do. They simply paid. The insurer will cover it. And the danger here is that it's another way stop on this slippery path to just seeing more of these kinds of attacks.
- [05:41]
B
One thing to think about, Tim o' Brien at Bloomberg actually made this point, sort of what you're saying already, the insurance encourages the hacking. It's like it creates a market for it. It's what Tim said is it's like flood insurance that is used in these areas that are prone to flooding. So people's houses get knocked down, but they have insurance, they rebuild in the same place. It's like the cyber insurance is doing the same thing. It's like encouraging this to just go on forever.
- [06:06]
A
This is all aspects of the insurance industry. All insurance is a form of moral hazard, right? That once you are insured against something, you, you worry about it less because you know that you're insured against it and so you behave a little bit more recklessly. So, Stacey, does this mean we should just abolish insurance?
- [06:25]
C
I think one of the things that hopefully if we believe in market based economies, that will start to happen is like premiums will adjust and it'll become like a more expensive calculation for this. But I think the other thing that I've been thinking about is with respect to like those kinds of municipalities that you mentioned earlier, Emily. Right. The most sophisticated players are playing a different game. They have the insurance, they have the backups, they have their own in house teams, they have red teams and blue teams and they're doing pen testing and they're always trying to see where their own vulnerabilities are. The courthouses and the police departments and the school districts who have neither the budgets nor frankly the internal aptitude or awareness of any of those things are at increasing risk. Because, Felix, to what you said earlier, the there is a degree of professionalization here, but there is also the fact that it's easier and easier to do these kinds of things as more and more people move stuff online. So you both have, in this case, the apparent regret of the ransomware folks involved with Colonial where they're like, oh no, that got slightly more attention than we were hoping for. But also the fact that the kinds of tools and the techniques that they're using are even more accessible to people with fewer scruples and the ability to wreak different kinds of havoc, even if gas supply chains might not be influenced.
- [07:43]
A
I love that these were like ethical hackers and they have this terms of service in the ransomware as a service thing where they're like, do not be attacking hospitals. We do not approve of that. It's awesome. But one of the interesting dynamics here is that as you were saying, Stacy, a lot of the smaller, less technologically sophisticated police departments, schools, hospitals, or even just small companies are increasingly online and making themselves increasingly vulnerable. And the stated solution to this or one of the stated solutions to this is rather than just running software on their computers that is easily hacked, what they should do is just move everything to AWS, because that is much more robust and Amazon has all of the teams that prevent this kind of thing. Brad, is this true? Should everyone be moving to AWS to prevent being hacked?
- [08:40]
D
I think it's a dangerous world where Amazon controls everything, number one. Number two, I don't know. I mean, I think there's always going to be probably elements of the network that are local and proprietary and thus remain vulnerable. I don't know where in the metaphorical pipeline of Colonial's computer infrastructure they were attacked. They may use aws. I actually don't know.
- [09:01]
B
Can we just, also, just before we move on to Amazon, which I really want to talk about, should we mention that one of the reasons the use of ransomware is increasing exponentially is because of Bitcoin has made it super easy and fun to blackmail companies in the US and totally get away with it. And I think maybe for the future we should talk more about efforts to regulate bitcoin a little bit. This shouldn't be. It shouldn't be this easy to get away with large scale theft.
- [09:33]
A
Ransomware basically barely existed before Bitcoin made it incredibly profitable. And there are these things called bitcoin mixes. Bitcoin of course is very traceable. You can see what happens. But criminals have worked this one out and they've created these little apps called bitcoin mixes where you throw, you know, a million bitcoins in and you get out 995,000 bitcoins. And those bitcoins you get out are unrelated to the ones you put in and you've basically effectively laundered your bitcoin.
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C
Yeah, I was going to say this is just like Swiss bank accounts, Antiguan based shell companies and a spot of money laundering.
- [10:08]
A
So innovative blockchain, in terms of actual real world use applications for cryptocurrency, this has to be way up there, right? What else is it? I mean it's used obviously for like speculation and investing in some kind of store of value thing. But in terms of using Bitcoin to run your business. The only people who are doing that. Like ransomware.
- [10:30]
C
Yes, it's.
- [10:31]
B
So it is a currency in this, in the criminal world. So congratulations to bitcoin. Amazon does not own any bitcoin.
- [10:39]
A
What does it, Brad?
- [10:40]
D
No, and actually it was interesting this week. Elon seemed to flip the bit a little bit on bitcoin and Tesla started selling. And he was pointing to the environmental impact of mining bitcoin, which was curious because why, however, many months ago, when they started buying bitcoin, the situation was the same. I don't know why he had an epiphany about that.
- [10:58]
A
Yeah, the situation hasn't changed. To be clear, Tesla did not start selling. In fact, he announced that they would stop selling. They have been selling. They made a couple of hundred million dollars from selling in the last quarter, which was very good for their pnl. And now he said he's not going to sell anymore because there's a carbon footprint attached with selling. So now he is a full on hoddling straight, hodling. He's just going to hodl his bitcoins for the foreseeable future. And apparently Elon turning into a Hodler was very bad for bitcoin and caused all of the prices to fall, which is about as logical as anything else in the bitcoin world.
- [11:28]
D
I cannot follow the number of his pivots and changes of mind on cryptocurrency.
- [11:33]
A
This is why you write about sensible billionaires like Jeff Bezos instead of like completely insane meme lords like Elon Musk.
- [11:41]
C
Is there such a thing as a sensible billionaire?
- [11:44]
A
Okay, so that's the next one. We need to segue smoothly from ransomware as a service done by like, shady Russian hackers to what was going on? Extortion, Blackmail? What exactly was like Jeff Bezos, girlfriend's brother, up to?
- [11:58]
D
Well, okay, so let me, Felix, let me. I'll back up and say, you know, my book is the story of Amazon over the last 10 years. And when I started, I did not anticipate that this would be a piece of the story. But of course, Jeff Bezos himself sort of led us all down this path with his very public dalliances with Lauren Sanchez in late 2018. And so I devote a piece of the book to kind of exploring what exactly happened. And when we reflect on it, there's sort of a fog of obfuscation, like ambiguity. Was it the Saudis? Was it the Trump administration? How did the National Enquirer get the text messages that they printed and the photographs that they claimed to have of Bezos and his girlfriend. And what was reported at the time, and what I later discovered was basically the definitive bottom line truth, was that Felix, you're right, it was Lauren Sanchez's brother, who in his own mind may have been trying to cushion the blow of the public revelation, who sold these things though, for 200,000 plus dollars to the National Enquirer. And then afterwards, and this is going to take a little bit of explaining. So ami, which owns the National Enquirer, had a non prosecution agreement with the Southern District of New York, right. They had to play nice in the wake of Catch and Kill and the Michael Cohen Trump saga. And when Bezos and his representatives started to claim that the National Enquirer story might be politically motivated, that was kryptonite to the Inquirer because it suggested they were up to their old shenanigans. So they asked the Bezos camp to stop making these insinuations in the Washington Post, which of course Jeff Bezos owns and elsewhere. And there was a negotiation about could the Bezos camp stop from proclaiming that this was politically motivated. And in doing that, Dylan Howard, the editor of the National Enquirer, presented a litany of what the paper had, including some semi explicit photographs. And suggesting he had one explicit photograph, we could get to that.
- [13:54]
A
This was the point at which blackmail comes in, right?
- [13:56]
D
The minute he.
- [13:57]
A
Well, extortion, extortion. The minute that he presents this list of this is material that we have and haven't published, then there's an implicit extortion attempt there threat saying unless you shut up about this being politically motivated, we will publish these things. Was that certainly Jeff Bezos managed to very elegantly use that in the kind of jujitsu move to really bring down ami and Dylan Howard. But was that what he was trying to do? Was he actually trying to extort Jeff Bezos?
- [14:28]
D
Well, I think they got dangerously close to it, right? They were trying. They had a vulnerability, you know, and their vulnerability was that the FBI and federal prosecutors would reopen the examination into ami. So they wanted Bezos and his representatives to stop making these allegations. You know, I had private transcripts between Dylan Howard and Marty Singer, who was the attorney involved in this on Bezos side. And he was actually saying this is not an extortion attempt. And yet when you look at the email that Bezos ultimately published on medium, you can see how it might be interpreted that way. But the jujitsu move was sort of brilliant. Bezos to go back to colonial. He does not have, you know, Colonial has cybersecurity insurance. He does not have embarrassment insurance. Right. He is basically just putting it out there, publishing the emails, conceding that the sexting was happening, and taking the risk that some of these things, you know, are made public, and then wrapping himself up in the mantle of the Washington Post, sort of obfuscating a little bit by saying, this is the work he does that he's the most proudest of. And it's a complexifier for him because it creates political enemies, even though that really has nothing to do. Well, maybe a little bit. It does have something to do with it because the Inquirer started investigating Bezos because the Post was so aggressive in investigating AMI's catch and kill allegations. And implausibly, Michael Sanchez, the brother, is playing a sort of unhinged conservative on Twitter, and perhaps he is. So there were some reasons for the Bezos camp to believe that perhaps this was all tied in to a political conspiracy, when, in fact, he was one of the most famous business people in the world conducting a dalliance within public view. And there is a natural reason why a tabloid newspaper might be interested in that.
- [16:13]
B
Yeah. So then he goes and publishes this medium post with the. I think the wonderful title, no, thank you, Mr. Pecker, about, you know, the prospect that his. An obscene photo of himself could be published in the National Enquirer. And he manages to distract everyone's attention from the fact that, like, bottom line, he's cheating on his wife of two decades with this other woman and traveling on helicopters, which he previously said he did not like helicopters, and make everyone think that he's, like, this big champion of free speech and journalism. It's like this brilliant PR move that kind of pays off. This is why I bought the Washington Post, so I can wrap myself in the mantle of democracy. And I think in the book, that was when I realized that Jeff Bezos is the one that coined Democracy Dies in Darkness for the Washington Post. Like, it's just this brilliant PR move. It's like Bill Gates did the Gates foundation and tried to, like, cure diseases. And Jeff Bezos just bought the Washington Post and said he was now, like, a champion of, you know, the First Amendment. And free speech is kind of very, if you look at it in the most cynical way, very similar.
- [17:19]
D
You know, I sort of struggled with that. How cynical of an interpretation should I make? And I don't know if it really was purely disingenuous. I mean, as I said, in surveying the landscape, they might have had reasons to believe, you know, that it was political. Like AMI was in cahoots with the Trump administration. And the Saudis did hate Jeff Bezos. Like those Twitter bot armies that were tweeting anti Semitic things at him even though he's not Jewish and trying to institute a boycott of Amazon in the Middle East. That was all real. Right? The Saudi government was incensed at Bezos and the Washington Post for their dogged pursuit of the Khashoggi murder. And yet we don't really notice whether his phone was really hacked. There's some doubts about that and there's certainly no evidence. And it would contradict a lot of the evidence in the public record to suggest that the Saudis tipped off the National Enquirer. And in fact, I concluded that the FBI had looked at that and eventually discarded it.
- [18:12]
B
It was just this brother in law. Unbelievable. Playing both sides the whole time.
- [18:16]
D
A character from a Coen brothers movie. Basically. You can't make it up.
- [18:20]
A
Before we go into Amazon though, I just want to sort of close the loop on the whole Jeff Bezos midlife crisis thing because please do. It is fascinating. My favorite Jeff Bezos Bezos article came out a couple of years ago in the New York Times and just. He didn't speak to you for this book. He didn't speak to the New York Times for the profile day ran. But he did pose for a New York Times photographer to come to the office and take a photograph of him wearing an incredibly tight fitting white shirt showing his bulging pecs like in sloping sunlight and looking very manly.
- [18:53]
D
I remember that he's looking out a window or at least like on a ledge. Exactly.
- [18:57]
A
And you're like, hey, there's obviously a very considered PR calculation there. Right. The minute that you don't talk to the reporter. But you do pose for that kind of a photograph. You're doing something. And tell me what he was doing. Tell me what he is doing. Tell me about all of this. Half billion dollar mega yachts and buying up a whole bunch of properties.
- [19:18]
C
It's very important.
- [19:18]
A
Yeah, support yachts for your big yacht. And he has gone from being like this guy in Washington who just happens to be very rich to a cash splashing midlife crisis billionaire. What do you make of that? You know this guy as well as anyone. Pretty much.
- [19:34]
D
This is the story that I'm telling in the book. The evolution of this geeky sort of spindly tech nerd who is completely focused on the Amazon business. He had the crazy laugh. He had press conferences where he gave everyone his favorite children's book and went Deep into the details of the technical specifications and lost everybody in the audience. That was the fire ph to. Yeah, to this guy that I sort of barely recognize and I think. Which has surprised a lot of the senior executives at Amazon now a lot. Hasn't changed the focus and the domineering kind of leadership style. Maybe a little bit of the lack of empathy when it comes to workers in his fulfillment centers and in Amazon's offices. But, you know, clearly he started to enjoy the luxury, the extravagant luxuries of his wealth and his fame. And that was like a step by step process that was going to Hollywood and throwing the parties and having attention gravitate to him and throwing these private events called Campfire where he would invite the elite to Santa Barbara and being the owner of the Washington Post and getting all the attention from that. And like, he's human, right? He's human. He has a partner now who moves easily in that world in a way that MacKenzie Scott never did, and she enjoys the extravagant lifestyle. So he's popping up on David Geffen's yacht and on Barry Diller's yacht. And I was really proud that I did. I know I sleuthed out the Bezos yacht, you know, that is now under construction in Amsterdam. And, you know, he's human. And before, he was so obsessively focused. And I think, you know, Jamie. I quote Jamie Dimon in the book, you know, and they are friends and work together in a couple of different capacities. And, you know, he describes Jeff's eyes opening up to a larger world. So it's kind of the nerd coming out of his shell.
- [21:17]
A
Does this explain the Amazon prime move into Hollywood? And. And as Jeff Bezos steps back from Amazon, he steps down as CEO as he doesn't have an operating role there anymore. Should Hollywood be worried that the Amazon taps are gonna get turned off, given that he doesn't necessarily have the same ability to just, say, spend billions on no particular purpose?
- [21:38]
D
Well, I mean, first of all, he probably does, right? He's not going anywhere. He's executive chairman. But no, it's tempting to think of the move into Hollywood as sort of like a rich person's extravagance, but it's actually really logical. And I'll go really quickly. You know, Amazon's the Everything Store. DVDs 15 years ago were a big shelf on the everything store. That business goes away. It goes to Video on Demand, so they get into that. Netflix disrupts that with subscription, so they get into that, but the selection isn't great. So they wrap it up into prime and then you have a period of years where Netflix and Amazon are dueling to buy catalogs from the studios and the networks. And as HBO and Showtime discovered decades ago, that's just a losing game. You're just enriching the studios to buy content. And they both reached the conclusion that the better way to do that is to make your own movies and TV shows. Then we have Amazon Studios and you know, the funny thing there is you've got the tech geeks from Seattle trying to make TV shows and it's sort of comically sort of inept for a couple years and arguably they've sort of figured it out. Maybe not completely, certainly not on the scale of Netflix and now Disney and some of the other players. But the very Amazon like thing is that they're at every other layer of the ecosystem. Netflix and Disney use aws. Fire TV is there with Roku, you know, bringing in tens of millions of homes into the world of streaming. So Amazon always finds a way to succeed at every level of the ecosystem.
- [23:05]
A
The question I have though is it's very obvious when Netflix is succeeding, they can see whether the money they make from subscriptions is bigger than the amount of money they're spending on new shows and whether they're profitable and that kind of stuff. How does Amazon judge the sort of ROI of its investment in Hollywood?
- [23:23]
D
They do have a number of different metrics. The number of subscribers that sign up to prime, you know, after sampling a TV show or a movie, resubscriptions, time spent. But here's I think, Felix, the key thing when you think about prime, it started as a two day shipping program. And right now, and this was at a time when Amazon had a dozen fulfillment centers. And today there is a fulfillment center, you know, less than an hour from my house, probably less than an hour from your house and Emily's house. And two days would probably be happening if you're a member of prime or not. And so, you know, you think about Prime Video as really sort of now the main course in the meal of prime membership. And probably the reason why, you know, if members were to rationalize it, which probably a lot of them don't, that's sort of the insidious magic of a membership club. You just sort of sign up and it keeps charging you. But if they're going to rationalize it, it's probably the free video and TV shows that are the most meaningful because the shipping is going to happen whether they pay or not.
- [24:23]
A
I love that answer. Stacey, you are the product manager here. You understand what this weird term product. We've talked to Paul Ford about this on this show before. What the hell is product? But Amazon prime is my favorite example of a huge product worth probably hundreds of billions of dollars, which no one can really define what it is. How do you think about Amazon prime and do you think it really is sort of centered these days on video?
- [24:51]
C
I want to go back to an anecdote that Brad shared in the book where he talked about at one point in the Alexa life cycle they brought in execs just to figure out all the ways in which Alexa had become too annoying for consumers and too hard to set up. And there were too many different things to do. And from a product perspective, I feel very similarly about prime. Right? I have been in the Amazon ecosystem for a long, long time, less and less for labor related issues, but for a long time I have a Twitch prime subscription because I play video games and because they acquired a series of things that I'm interested in. And yet as a user I'm constantly confronted with these kind of competing experiences. Whereas, okay, I'm trying to watch this video, but I don't know if I have access to it even though I am a Prime customer because maybe I have to rent it still. I'm not sure if this is an Amazon prime original or what this thing is. I don't necessarily have access to it on all of my devices because there was certainly a period in which the various device entertainment providers were not getting along and so you would try to watch a streaming thing on a particular kind of platform and you couldn't. And I am not sure if Amazon has ever been the kind of place that has really thought in the way that an Apple or even a Google think about the primacy of the user experience over the service and the fact that in the book, Brad, you say two kind of conflicting things from the Amazon perspective. One is that innovation springs fully formed from Bezos brain and the other is that managers and execs walk around saying over and over again it's all about the customer. We care about customer needs. Those things are fundamentally in conflict. And I really feel with prime as a set of services that you see that tension, you see the tension between these are things we think will be useful to customers, these are things we think are innovative and that are going to shore up the moat, as it were, against various kinds of incumbents. And the tension of the marketing is how to convince everybody that they're related to each other.
- [26:51]
B
One example that comes to Mind, Stacey, from what you just said, from Brad's book, is the cow burger that Jeff Bezos became like the single cow, really obsessed with the idea. Yes. Of making a hamburger from just one single cow as opposed to multiple cows. Something no one's ever thought about until. Well, I mean, people had been thinking, but no consumer had been worried about it until he decided to be worried about it and then he said it was like, good.
- [27:19]
D
Yes.
- [27:19]
A
Fred, what was the logic there, explain why people might want their burger to come from only one cow?
- [27:24]
D
Well, I don't know that they do, but. So the logic was, you know, Bezos wants to put a little twist or some unique aspect to everything. He's sort of obsessed with that. And they are launching at the time, 2016 or so Amazon fresh in the new markets, prime now. And you know, they realize that their left flank is exposed on groceries, that the biggest retailers in the world have this multiple times a week relationship with their customers. They Amazon doesn't at the time and they're going to need to get into groceries. So what can they do? Different and private label brands, consumables and food is one thing. Now, at the time, Bezos reads an article in the Washington Post that says a typical burger is made from the meat of 100 cows or more. Somewhat unappetizing, kind of gross. Kind of gross. And it also says, and this is like the sentence in the article, making a burger from the meat of just one cow would be difficult and expensive. And those words are catnip, those catnip, catnip.
- [28:23]
A
He's like, difficult and expensive.
- [28:25]
D
We do difficult and expensive. So he asks for a single cow burger. His executives are like, well, ha, good joke, very funny. He's like, no, no, I'm serious. How hard can it be? Which you never want to hear Jeff Bezos say. And the whole thing. And I had to spend months looking for who was the poor soul who had to do this. And I found her. She had left Amazon. It trickles down into her lap and you know, go source a single cow burger. And by the way, Jeff is really interested in this. So she travels the country, finds a ranch, gets the cow burger, sends it to Bezos. She's, you know, she's a manager in a company of hundreds of thousands of employees. And he taste tests it at home and comes back and says too fatty and the packaging is terrible and then he has to redo it. But Stacey, it really goes to what you're saying, which I think is a central core tension at Amazon that I try to illustrate in the book, which is, yes, the company is trying to follow customers and satisfy customers, but at the same time the whole thing is built around the brains and the peculiar tastes of this one guy who as he gets richer and changes and starts to move in elite society and enjoy elite society, his tastes are leaving the planet earth and going into some bizarre orbit. Yes. Where you have single cow burgers. And the other funny, really quick illustration of like how Amazon works is they launch the single cow burger and suddenly it's being promoted on the apps. You can suddenly ask Alexa, what is a single cow burger? And it responds, it knows. And it's because Jeff has taken the time to go to all the different corners of his vast to make them, put them all on the same page about the single cow burger. And ultimately I don't think it's really a game changer. So there's a lot of farce in what he does. In addition to the big successes, maybe.
- [30:11]
B
We'Ve all worked for like a capricious eccentric millionaire or billionaire like this. And it is interesting that Bezos has these proclivities but ultimately has this extremely, obviously very successful company, like some of his obsessions turn out to be really. Or they have been really on the nose like Alexa, she is his baby completely. So not everything is like this like eccentric, ridiculous. Oh God, the boss wants to do this dumb thing move like one out of three times. It's like a multi billion dollar obsession.
- [30:42]
A
And we all know from the economics of Silicon Valley that if you score a home run one out of three times you can become worth $100 billion. The question I have about this is when, when Amazon buys Whole Foods, all of the supermarket stocks fall overnight, like knee jerk. When Amazon buys pill pack, all of the pharmacy stocks fall overnight. Knee jerk. Amazon is a competitive threat, obviously. And there is the one thing that everyone thinks about and knows about, which is book selling, where Amazon came in and really genuinely disrupted the industry. But then I look at everything else that Amazon has got into, whether it's supermarkets or pharmacies or anything else, or even selling shoes, and I don't see a lot of disruption. I don't see a lot of incumbents really being hurt. So Brad, can you answer that sort of fundamental question for me? Like, is Amazon ex book selling a disruptive force?
- [31:41]
D
I think if we were to go back and look at that market reaction after Amazon bought Whole Foods, we'd see that like despite that initial and highly publicized decrease in the stock prices of the supermarkets, they recovered. You know, it's almost like a meme stock reaction after a big news event. And I would suspect, but I haven't checked, the same is true with pharmacies. And so Amazon is a disruption, but I think we've seen over and over it's a long term disruptor. It serves so many constituencies, it's so big, it's so sprawling, its focus is so dissipated over so many things that it's not a serious threat in the immediate term in these really big markets. The supermarkets is a great example. Like Whole Foods has not really revived under Amazon. It hasn't added stores. And Amazon itself, while it's taken the category really seriously, is only just now beginning to open up these large scale supermarkets with its own brand name, Amazon Fresh, doing a very peculiar and Amazonian thing which is trying to use technology to create a new experience. So we talked about Bezos wanting to do everything differently in these big supermarkets. You either have the go store technology that's in the ceilings and the shelves where it automatically charges you and you don't have to wait in line with the cashier or these dash carts where when you drop an item into the grocery cart it'll automatically charge you. And it's funny because their big idea is to take away the amount of time we wait in the checkout line, which I don't know about you guys, but like, I don't really mind, you know, I'll check my email for the three minutes that I'm going to wait to check out a product. And you know, so they approach these things as type A disruptors. And look, it's an amazing successful company. But you know, Felix, I just think you're right. Like sometimes the immediate estimation from the market is that, oh, big bad Amazon is coming to town and everyone's going to be crushed. And that's simply not the long term reality.
- [33:30]
A
Certainly one of the things that strikes me over and over again is the incredibly low value that people generally place on their own time. If you look at how long people are willing to stand in line for, you know, a free ice cream or something like on no level of like how much do I value my time? Does that make sense. But people will still do it. And the idea that you can create a whole new industry based on the idea that people value their time so much that they really will want to avoid spending three minutes at the checkout seems counterintuitive to me, but obviously intuitive to someone like Jeff Bezos who is a management consultant who thinks in that kind of way.
- [34:06]
C
That reminds me of the Anecdote in the book about when they were looking at the fire phone and Bezos asked somebody like, do people even use the calendars on the phone? And I think the line, Brad, that you wrote was, you know, like, yes, we do use calendars of the person who doesn't have three executive assistants. And you know, so I think the discrepancy between what, quote unquote, normal people care about and what somebody with two yachts and a space program care about and how they value different kinds of things is just ever widening.
- [34:35]
B
Yeah, well, what I was going to say is, to Felix's point, has Amazon disrupted any markets besides books, really? And I think maybe if you look outside, like what products and companies have been disrupted, perhaps Amazon has disrupted labor and work. You know, we see, you know, how many people are working in the warehouses right now and how hard they're being worked. I think that's had enormous ripple implications for labor across the country and not just direct employees of Amazon. But there was a story on Friday in the information about long haul truckers now driving for Amazon and getting into lots and lots of accidents because they're being pushed, you know, because of the way Amazon is so ruthless about time. And you know, this follows similar stories about delivery drivers. And so Amazon might not have changed like the places where we buy stuff. I mean, they did, but haven't disrupted shoes or groceries or whatever, but they've disrupted the way people work in a very big way that I feel like we don't maybe even understand yet all of that.
- [35:37]
D
I think that's absolutely true. And another aspect to it is how those drivers and those long haul truckers aren't Amazon employees, they're contractors. And that's obviously an employment trend that has been taking place over the decades. FedEx being the kind of most explicit example. And they had to defend that model through numerous legal challenges. But Amazon is now doing it on a scale that is really unlike anything we've ever seen and sort of accelerating this idea of a fissured workplace that is exacerbating income inequality and having all sorts of negative effects that we probably don't even understand. Yeah, absolutely. Disruptment in labor markets. But look, I mean, let's not also underestimate. Yeah, just the disruption in retail, the way in which the Amazon marketplace is globalized and sellers from countries with lower tax obligations and cost basis like China have come in and displaced sellers in the US and in Europe and yeah, the impacts. It's not disruption in the way we think, you know, Amazon comes into supermarkets and crushes the competitors. But the impact is broadly felt.
- [36:40]
A
I think you said something really fascinating in an interview with Ben Thompson of Gathechary where you said that you went back and talked to basically everyone that Amazon had wheeled out as the face of Amazon Markets Marketplace as like, we love Amazon Marketplace. It's awesome. It's a whole business for me and I'm making lots of money. And you know this in the context of a world where literally multibillion dollar companies are being built up on Amazon Marketplace as a platform. These companies exist only to sell on Amazon Marketplace and this is a huge $100 billion business. And you went back to everyone who's like making a living off Amazon Marketplace, at least in the United States. And they are all hate it now, right? I mean they're super unhappy with it.
- [37:26]
C
It's like the yoga rat people.
- [37:28]
D
Pretty embittered. Yeah. The idea was because I knew I couldn't take a kind of super poll of every marketplace seller. And I feel like in the media we sometimes have a tendency to go to the loud voices who are the most disgruntled. So how can I get any kind of a fair read on the marketplace sentiment? And the answer is you probably couldn't. But it could be interesting if I went to every seller who had been mentioned in the Bezos investor letters and then a couple who had lobbied prominently on AM behalf and yeah, they had all turned and it was part of the story I was telling, which was in a nutshell, Amazon has this marketplace. They look at Alibaba moving to the West. They look at this little startup called Wish, which is doing some retail arbitrage, taking manufacturers in China and allowing them to sell into the United States. They realize that this is a trend, that the retail environment is globalizing and they make a conscious decision that even though it's probably going to hose all of their sellers in the United States, they're going to create a self service platform in China and other countries to allow sellers to come in and reach buyers in the United States, wrap it up into fulfillment by Amazon and Prime, create discounts and shipping programs to get it from overseas into the United States. And there is actually testimony in some of the House Antitrust subcommittee hearings that shows Amazon executives saying our sellers in the US Are really going to hate this. We're going to market it in China, but we're going to slow walk it in the US and they were a little disingenuous about it. And the impact is that all those sellers who are singing Amazon's Praises in Bezos's investor letters are now, you know, feeling like carnage on the side of the road.
- [39:07]
C
Brad, there's something you say in the book a couple of times that, you know, Bezos gets weak need around entrepreneurs. And I found again, like all of these tensions, it's like these folks are entrepreneurs. These are people, whether they're based in the US Or China and India, who are trying to make a living and trying to build businesses. Like what explains the sort of the ruthlessness towards certain. Is it only people who are engineers that they want to acquire that he has that attitude to?
- [39:34]
D
Well, you know, it was funny because I sort of play with that theme a little bit in the book and what I was sort of getting at is how Bezos in certain situations can be a really poor judge of character or it's almost like a philosophy that he has where if you're going to be distrustful of everyone, then it's just going to slow you down and the better thing to do is to trust people and then sort of figure it out later. And you know, I tell a couple stories in the book when he meets one of the founders of Flipkart, but the one I really love is when he meets and nobody's actually asked me about this. And it's kind of a horrible story in the book.
- [40:09]
C
Garcia.
- [40:10]
D
Yeah, he meets an executive who he essentially greenlights to hire as the CEO of Amazon Mexico. And this guy launches Amazon in Mexico and then, you know, turns out is committing a domestic abuse and eventually has his ex wife killed by assassins and then disappears and has never been heard from again. And then, you know, Bezos saying he gets weak kneed around entrepreneurs. I feel like there are a couple of illustrations in the history and the arc of the story where he's made some snap judgments about people. Maybe Michael Sanchez, the brother of his paramour, would be another example of where he was sort of blindsided by someone. And it's just this interesting contradiction for one of the smartest people in the world to have made some of these really high profile mistakes.
- [40:53]
B
He's not a people person. It doesn't seem to me like Amazon isn't exactly known for treating people well. You talked in the book about Jodi Kantor's New York Times piece on, you know, the Amazon white collar workers like crying at their desks and being overworked and all that. And I guess that changed things for a minute at the company, but then it seems to have reverted back to the norm. You had a great example in the book about two Guys who work there, executives who are like best friends. When the one decides to leave the company, he's like dead to the other guy.
- [41:23]
D
They sue him, they sue him.
- [41:25]
B
They sue him for going to Target. And he had like gone to his wedding, been in his wedding, in the wedding party.
- [41:31]
D
He was best man, right? And we're talking about Dave Clark now the CEO of the consumer business. But I just think it's maybe broadly true about a lot of these tech magnates that we cover, that they're operating on a different wavelength, maybe a different part of the quote, unquote spectrum. And while that creates a lot of brilliance and a lot of drive and obviously a lot of success and wealth creation and has changed our world, there are some elements missing. Or maybe it's that little empathy gene that would slow us down in our drive to create a big company, but that doesn't slow them down at all. And there are lots of consequences and there's a personal impact to that. And yet in the brutal capitalist universe, it's effective.
- [42:17]
C
There's a lot of explicit cruelty in the book. I want to go back to the Juan Carlos Garcia example who was the ill fated CEO of Amazon Mexico, because one, it's tonally very different from all of the other chapters in the book. But it's also the only time that there is this explicit correlation between this is a person who had a temper and look at this horrifying thing that happened, whereas all the other times it's people just being like assholes freely. And that seems to be completely chill. Right. And so even within, and I see this in business coverage, I see this as somebody who's worked for a large tech company where execs screaming at you is just a normal Tuesday. There's a tolerance for that behavior up to a certain point, but as long as the results are there. And I think one of the other disruptions to Emily's earlier point about labor is the sense of ruthlessness and cruelty, whether kind of explicit in terms of you have people describing PTSD after certain kinds of meetings or the casualness of, well, whatever labor conditions, or we're going to cut the Washington Post pensions. Just this sense of people are only useful in a transactional sense insofar as they deliver value, weddings be damned. And that there were just all of these anecdotes about, I hope you don't think you're going to go to your grandmother's house for the holiday, or I hope you don't think you can be skiing and not on call, or I hope you don't think it's just why? Right. I'm truly. I've thought about this for a really long time. Are we enabling this? Are we normalizing this? And then giving rise to another generation of people who were raised in the Amazon way or the Apple way or the Google way? Who then are the people that venture capitalists will bet on because they have this background and none of them know how to manage people other than being, like, terrifying and mercenary and ruthless. Like, what is the counterfactual? Like, did you actually find people at Amazon who operated with some degree of empathy and humanity, who were also successful?
- [44:16]
D
Well, let me go to a story in the book. I found the manager who developed and ran the First Prime Day. And, you know, she had, you know, taken this idea. One of the few women, right? One of the few women, yeah. She had taken this idea and developed it. And of course, Bezos and then his deputy, Jeff Wilkie, had micromanaged it, and it was going to be a big Amazon event and public spectacle in 2015. And she traveled the world and did it very quickly, you know, and then she stayed at Amazon a couple years, and then she went home to visit her mother, and they got into a fight, and her mother wheeled around and said, stop using Amazon's leadership principles in our relationship. And, like, the blinds opened from her eyes, and she realized that Amazon had made her kind of mean and that maybe it had taken more from her than she had wanted, and that why was she laboring on behalf of Bezos when maybe, you know, because of his public scandal at the time, he didn't deserve it? And why wasn't there more representation on the senior leadership team? And it's this remarkable story where she cancels her prime membership, she recycles her echoes, and she becomes a disgruntled Amazon employee. And, you know, it's one of the reasons why I think the reporting about Amazon has gotten so good lately is because that is a growing group of employees who have stories to tell, who feel like there's a sort of informal cruelty at work in that culture. Now, I'm always tempted to give the Amazon answer because I know their shtick so well. And what they would say, and I think what a lot of tech companies would say is people have a choice to work here and they volunteer into it. And we're all builders, and we're here to create an enduring company. And people aren't, you know, they're not in prison here. And it's. And, you know, I think that has been effective for the company that they draw those kinds of type A overachievers and they work them to the bone and then those people get to move on and have Amazon on their resume and go do other glorious things. So yeah, I think it's interesting and hopefully, you know, in the book and as people read more about Amazon and understand it, there's a more of an appreciation for what you're supporting when you hit the, the buy now button.
- [46:17]
B
I think that's true to a point because the cruelty and the culture trickles down to those warehouse workers that everyone writes about. And I recently spoke to this woman who worked in an Amazon warehouse and was pregnant and they didn't make it easy for her. You know, if she had to go to the bathroom, she had to find her manager who might be like 15 minute walk away. She had to ask him to go, which is, you know, for a pregnant woman it's kind of a nightmare. And there were other problems and I asked her like, well, why didn't you just quit? And she was like, well, Amazon pays $15 an hour. No one else does. If I left and got another job, it would be fast food. I'd make half as much. So Amazon just has so much outside influence as an employer and the pay is relatively decent that people are forced into these situations. So when you say, oh, they can just walk away, it's like, well, no, not everyone can. I mean the executives, sure, they could walk away, but for like, what is it now, like a half a million other people, they can't really just walk away. You're kind of like, like have the golden handcuffs of $16 an hour. So it becomes then that trickle down effect of the culture I think is something to worry about.
- [47:19]
D
Right, but and that's also indicative not just of how Amazon's relationship with its employees, but the labor landscape and a lot of places where it operates.
- [47:27]
B
Exactly.
- [47:28]
C
And the lobbying. Right. So like the chapter about the New York headquarters for example, and like what the helipads. But I think the fact is a lot of these tech companies are building company towns all over the place. Right. Like right now I live in Austin. There is sort of an increasing number and a desire to attract more and more of these kinds of campuses where you have Google setting up, Amazon setting up like separate from Bezos Ranch, like Musk's, one of his gigafactories, et cetera. And what that does is it affects the labor market fairly substantially and then it affects the prices of all of the other things for all the other people who are not Part of the company town. It starts to affect rents, it starts to affect the expensive coffee shops that replace the less expensive coffee shops that were there before. And so it is always useful for these tech companies to be able to say, well, people have choices. What in fact your individual choice as a warehouse worker compared with a company with an army of lobbyists that are ensuring that they're going to get favourable tax breaks to be able to come in as one of the biggest, if not the only employers in that part of town offering those kinds of wages. That is an actual complicated story.
- [48:33]
A
I think that's a good place to wrap up the Amazon discussion because we have a numbers round to get to people. Stacey, do you have a number?
- [48:42]
C
I do and My number is 5 million, which is a double barreled number because it is both the amount of ransom that the Colonial pipeline paid and also the amount of money that Ohio is willing to spend on giving massive vaccine awards in this lottery where they're like, we'll give up to five people a million dollars each.
- [49:04]
A
We'll give exactly five people one a week.
- [49:06]
D
And I'm just like five weeks.
- [49:07]
C
I got vaccinated in the wrong part of the US to not be eligible for a potential million dollar windfall.
- [49:16]
A
I'm all into the Ohio lottery windfall. I think this is a great way of spending 5 million. Emily Jevenube.
- [49:23]
B
Yeah, I had like a million numbers that I wrote down, but I'm going with a very personal number today. Felix.
- [49:29]
A
Okay. Okay.
- [49:30]
B
It is $22.587 billion. How is that personal to me?
- [49:35]
C
Is that your bank account?
- [49:36]
B
I'll tell you, that is the total. Yes, it is. That is the total amount of money according to Wikipedia that Marvel Cinematic Universe films have made all 23 of them.
- [49:47]
A
And as a person, have you watched all 23?
- [49:49]
B
I've watched 22 of 23. As a personal family pandemic project, what.
- [49:54]
D
Was the one you didn't.
- [49:56]
B
We didn't watch the Incredible Hulk with Ed Norton because we couldn't get it on Disney and we then read it was terrible. So I hope that was the right call.
- [50:05]
C
Stacey says maybe it's not terrible. There were a series of choices.
- [50:10]
A
So, Emily, after investing, what is this, like 40 hours or more in the movie.
- [50:16]
B
Let's not total that. Let's not figure that out. It was a great time for the family.
- [50:20]
A
It was fun. Yeah. Oh yeah. I'm glad to hear that.
- [50:22]
B
I'm obsessed and now waiting for more releases. Releases to come. I'm fully on board. Yes, Loki. I'M fully on board with this. I used to not understand it, but these movies cost a lot of money. And, like, if you have a lot of money, you can streamline entertainment like Amazon can do it. They have that list that's in Brad's book that you should all go find where they say, like, these are the bullet points, secret to success, of how you make entertaining stuff. And I feel like Marvel has kind of figured that out.
- [50:49]
A
Well, yeah. And I can recommend, if you're interested in this. About a year ago, we had Ben Fritz on from the Wall Street Journal who wrote a whole book about the way that Hollywood has gone from the town where famously nobody knows anything to the town which has actually cracked the code, you know, has worked out what the formula is to make movies that people love.
- [51:07]
B
Yes, they cracked it.
- [51:08]
A
My number, I think this could be one of the largest numbers that we've ever had on Slate money. My number is 50,6935-5207-8053-7778. Stacey, do you have a clue what that one is?
- [51:27]
C
Is it the national debt? Like, I'm kidding.
- [51:33]
A
That is the number of shibs that Vitalik Buterin, the founder of Ethereum, donated to the India Covid crypto relief fund. These guys invented a new cryptocurrency called the Shiba Inu cryptocurrency, because obviously meme something something. And in order to help that cryptocurrency take off, they just airdropped basically 50 trillion shibs to Vitalik, who's like the meme God of Cryptoland, in an attempt to make it seem more respectable, which succeeded to the point at which these 50 trillion shibs, which were just like an invention of a computer a few weeks earlier, were suddenly worse, worth $1.5 billion. And he was like, fine, I'm now a Shiba Inu billionaire. I am going to give $1.5 billion in sheeps to the India Crypto Covid Relief fund, which he did, which is awesome. And he gave a bunch of, like, ether to give. Well, he did a big giveaway, but that was like the way that wealth was just created. A billion dollars of wealth was just created and then given to charity. I kind of love that story.
- [52:40]
C
Incredible.
- [52:41]
A
But, Brad, you get to go last in the numbers round.
- [52:43]
D
Well, I just want to say that I need to start paying more attention to crypto because, Felix, I didn't understand anything. I need to go look at that story, send you some clips. Clearly, yes, I'm falling behind. Okay. At the risk of moving this back to Amazon, My number is 18.5 billion and that is this 40 year 8 part debt security that they just issued. And what was remarkable to me about that is what the future looks like for Amazon. And this low cost of capital that they can access, it means more fulfillment centers, more data centers, more countries, more product expansion. And that even as Jeff Bezos now steps aside, you know, the clockwork, the mechanical machine that he has built at Amazon shows no sign of slowing down. They also another number 75,000 new employees that they just hired, 15,000 in the UK. You know, this is a boulder that is running downhill and I don't think that we really can fathom what the impact of that is going to be on our economic reality and on our society.
- [53:43]
A
So Brad, correct me if I'm wrong, but Amazon has never paid a dividend. Right?
- [53:47]
D
Right. That is sort of unique.
- [53:48]
A
And if I'm right about this, it is now making actual real money. It is extremely profitable company. So explain to me, if it's got all of these profits that it's throwing off in the form of profits and it's not paying any of those profits out in dividends, why is it borrowing $40 billion? Why can't it just use the, the profits that it's making?
- [54:06]
D
Because it's cheap capital. And because that money, the debt income and the bond raise goes to building more Amazon. Amazon doesn't want to give money back to shareholders. Although it did. I believe it did. We'll have to check this, Felix. That I do think it maybe announced a modest stock buyback which is very unique for Amazon. They normally don't do it, but Amazon's profits go to buy more Amazon, more data centers, more fulfillment centers, you know, and they're still, it's still a work in progress of, you know, moving this company close, closer to its customers, building out the transportation network. You know, they're adding UPSs, you know, almost every year, FedExes to this company and who knows, maybe one day they externalize that and actually start to ship packages for E commerce companies or other big customers. And yeah, it's just this sort of self perpetuating machinery that Bezos has ingeniously created.
- [54:59]
A
Okay, well I think that's it for Slate money this week. Thank you Brad for coming on. This was a fantastic conversation. Thank you everyone for listening. I'm glad you were here. I do hope you're Slate plus members so that you get to listen to Stacey talk about what the hell happened to her bank account. This week, in response to popular demand, we will be talking about simple, the first ever neobank and its sad demise. Thank you very much to just Molly for hosting me here at Seaplane Amadou in Brooklyn and for producing this air show. And we will be with you again next week on Sleep Money.