Amazon's 'Everything War' with Dana Mattioli

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This week on the podcast, I have another extra special guest. Dana Mannioli is the Amazon reporter for The Wall Street Journal. In addition to covering Amazon, she is an award winning reporter who has deep roots in both M and A and retail. Her new book is really quite fascinating, The Everything Wore, Amazon's ruthless quest to own the world and remake corporate power, just came out a few months ago.

Like I thought I.

Knew Amazon, and it turns out I really didn't know Amazon. Fascinating book and I'm really fascinating conversation that I think you'll enjoy. With no further to do. My discussion with the Wall Street Journals. Dana Maddioli, Welcome to Bloomberg.

Thanks for having me.

So we've been trying to get the schedule for quite some time. We've been ships in the night, and I'm glad we finally did this. Before we get into the book, I just have to go over your background, which is really fascinating. You started the journal in two thousand and six. Tell us a little bit about how you got there.

Oh, I'd say I snuck through the back door. I started a week after graduating from college, Amazing as a journal as a major in an English major. I had some freelance clips while I was in college. I would go and take my articles that I wrote for class and sell them to the local newspapers in Washington, DC. Sometimes just give them away to get a byline. And that's sort of how I got hired at the Journal and just really learned as a grunt at that point and rose up the ranks.

It's kind of fascinating that you're the Amazon reporter now because you began covering retail companies like j C. Pennies. I don't know if it call Kodak retail. They had a tail arm. Tell us a little bit about some of the companies you covered and some of the front page scoops you got.

Yeah. So for a while I was the retail reporter at the Wall Street Journal. I loved that job. I basically covered thirty different publicly traded retailers, from Gap to Macy's to Nordstrom and got to know a lot of those CEOs very well, people like Mickey Drexler over at

Right. You started six at that point, Amazon is what a decade old just about Yeah, and had already begun to damage traditional retailers. You go from retail to doing large M and A deals. You covered the Pfizer Alergen deal and a bunch of other M and A tell us how you went from retail to mergers and eye acquisitions.

Yeah, there was a stop before that. Actually, I covered Quodak, like you said, that was my first corporate gig, and then retail, and then I was the M and A reporter with another reporter named Dana Simluca who's a good friend of mine, and our whole job was to break what companies were buying other companies, and it was a really exciting job. You'd get these giant tips one hundred billion dollar deals and you put the headlines down. You'd see the stock prices just go through the roof, right.

Huh. And just to wrap up the M and A, you win another Lobe award in twenty sixteen covering the Dow DuPont merger. That was a giant merger. Tell us a little bit about that story.

Yeah, that was you know that this was a time when there were a lot of there's a lot of industrial m and A, A lot of these corporate giants that you know, had been esteemed companies were hitting a rough patch and we started to see a lot of deals in the chemicals space and the industrial space. I broke that with my colleagues Danis and Luca and Dave Banoit, and that was one of the biggest years for em Anda that I was on the beat.

So retail m and A, how do you end up not just back in their online retail space with Amazon, but making that your sole beat? How did you become Amazon only as a reporter?

So after six years on the M and A beat, you know, writing probably hundreds of articles. It's very competitive, beat Bloomberg pretty fiercely. It was time for me to take a step back from that type of reporting. You get fairly burn.

It's a grind, it is.

It's a grind, you know. I was reporting stories out from my friend's weddings, from christenings, from family birthday parties, ever off. So I wanted to take a step back and do a bigger, like investigatory beat. And the only thing that really excited me at the time was Amazon. I'd seen them be this major player on the retail beat, on the M and A beat, I saw stupid M and A happening because of Amazon. I remember I broke this deal when CVS was buying Etna. This is a

What ye was that?

That was twenty nineteen, all right.

So by then I'm trying to remember how big Amazon had become. I mean, they obviously blew up after the pandemic, but I want to say Scott Galloway's book The Four had already come out, Brad Stone's book The Everything Store. I don't know if that had come out yet.

That did that came out? I want to say maybe twenty fifteen, And.

Both of those books sold very well and drew a lot of attention Amazon. It doesn't sound like it was a tough argument to get the editors of woll Street General to say, Hey, these guys are a behemoth. We need a dedicated person covering justice one company.

Yeah, And they were excited that I've raised my hand. I had, you know, a history of being very scoopy getting inside companies.

Again war winning, right, and and you.

Know Amazon's such a big company. You know, they're two trillion dollars today, and they're kind of like a giant. They're not kind of they're giant conglomerate. They're like fifteen different publicly traded companies in one company. Yeah, so I had I wanted to do this in a way that I my spots. If you just cover Amazon news day and day out, you could just write wire stories all day. Right, there's a million stories about them. I wanted to be deliberate and investigate them.

So let's talk a little bit about that delibered investigation. The book covers Amazon's quest to own the world and remake corporate power. What does that mean?

Well, Amazon, you know they started as this against all odds, grudge startup, right, But what we've seen in more recent years is that they've become the number one or two player by size in about eight different industries. You know, from retail, which we are already know forty percent of everything bought online in the US is Amazon to cloud computing, where they are the biggest cloud computing in the world exactly in the US. They deliver more parcels than UPS

Say that again, they deliver more parcels than UPS or FedEx.

Yes, they are the number one parcels.

That's astonishing.

And guess what it's they're only their own product. They're not delivery it really for other people. That's just Amazon goods.

Wow.

They've taken over industry after industry, and that's forced bankruptcies, it's forced lack of innovation. And beyond that, you know, my book gets into how they have this pattern of lying, cheating, copying their way to the top, and using their leverage in all these different industries to crush competition.

So we're going to get into the details of that for sure. I just want to go through the eight areas where they're number one or two. So online retail, cloud, computing, package delivery. What are the other four or five where they're dominant?

Yeah, voice assistant devices.

Yeah, nobody comes close to that.

Right. In online advertising, the number three actually a whole charged which.

By the way, the online advertising is has become so ubiquitous throughout the site. So it's Google, Facebook, Amazon, exactly amazing. Give us the other two or three ebook ebooks, and that's before we get to other gadgets. Yeah, I mean the Kindle. Just Barnes and Nobles still make the Nook or is it do?

And it's it's kind of a paltry experience. And I'll tell you ninety percent of my ebooks for this book have been sold in Amazon, which just tells you, right, how much of a dominant.

I'll tell you something fascinating that when you Google search your book, the first link that comes up is Amazon. And that's true on so much stuff. I mean on Google, I don't mean on the Amazon site. Yeah, but on eight verticals, most of which they are either number one or number two.

And they're keeping you know, they're going to keep growing. They they're getting into space with this project Kuiper.

They are, now that's separate from Bezos's Blue Origins company. You're talking about a wholy different pursuit coming from Amazon proper within their own company, and what do they want to do in space.

They're going to go head to head with Elon Musks Starlink with this these satellites, these orbital satellites, and that should launch in the next year. So they're ever growing and they have a lot of bandwidth to do that in ways that other publicly traded companies really don't.

Why on earth does Amazon want to be in the satellite business out of curiosity? Is this related at all to Blue Origins and what Bezos is doing with that?

Well, it's a question for Bezos, I would say. You know, Starlink, which is Elon Musk's venture, is considered one of his crown jewels. Okay, so there's like definitely an appeal there. The way that Elon has its structured it does fit into his space exploration company SpaceX. So some people pose it that this should this be part of Blue Origin rather than Amazon. Sure, but as of right now it is part of Amazon is.

I guess the thinking must be, Hey, if we have more people with access to the Internet, we're shopping more people will shop online and we'll capture forty percent of it or whatever.

They're right, they'll boost those two hundred million pribes ribers could grow exponentially.

Right. How do you define Amazon Prime as a vertical? Is it just part of their delivery process? It comes with a lot of other things. Where do you put Amazon Prime into this?

I mean, it's one of the biggest membership programs there is at any company.

It's amazing, right, pay for the privilege.

To shop with this company.

Well, you theoretically pay for two day delivery, although if you've been an Amazon user for any length of time, that turns out to be bs because they do everything they can to dissuade you from next day or two day or same day delivery. Hey, ship on Wednesdays with even fewer boxes, create less ecological waste. Ship next Thursday. Here's a ninety nine percent digital coupon. Ooh, that's great. I rent ahead of Beatle. I'll save ninety nine cents.

I hear that from a lot of shopping right.

I mean, So, I've been an Amazon member since I got a gift certificate from my college roommate. I want to say it was ninety eight, ninety eight, So this is early member and I out of college long before that. But but early member, like I used to just search and click whatever came up first, and it was always the right thing. I ordered lithium batteries with a like for a keyfob on your car. It's a very specific model number, wouldn't that exact model number come up first?

Well, there's a large part of my book gets into this toxic culture at Amazon. Uh huh, where employees are in this hunger games like scenario where they're competing with their other employees to keep their jobs.

Talking about the six percent, Yeah, they get cut at the end of the year, ranking that whole like everything they said they weren't doing.

The Actually time, I have all the documents.

GE used to cut the bottom ten percent six percent? And then where did the force ranking come from?

Jeff like that Intel did this right, That's what he said to his leadership team, like, let's do this because we have to get rid of the bottom performers. But that has unintended consequences. It means that everyone at Amazon, on the white collar side, is driven to work in a way that just benefits their numbers, benefits their bottom lines, even if it's not good for you as the customer, even if it means it's unsafe for the customer, as

Unsafe for the customer. How is it on?

Yes, So I have anecdotes in the book where there are well meaning people on the Child's Marketplace team that are that where there's they're selling clothes for children, right, and there's a mandate from Bezos to expand selection and get more sellers into Amazon dot Com because the more sellers you have, the more sales you get, the more sales sellers come on exactly, And they make changes to the sign up process for sellers to on board to

So in other words, Chinese junk with that's not fireproof, that's not exactly.

So then the Chinese junk comes in within a day and some of these parents on the team are horrified. There are children's pajamas that smell.

Like gas, aldehyde and gas.

There are hoodies that have strings around the acuatch are a strangulation hazard that are banned from being sold in the US because if it's strangled tall there there are all these.

Listen, if kids have to die in order for our profit margin to expand, that's just a little collateral damage. Who can complain as long as our profits are gone. I mean, you know it's a tough world. That tough enough.

So they flagged this to the Actually they take upon themselves to add some of the friction back into the process. Design it okay, and their boss yells at them, it's just take that off, and they said, well, we're trying to protect the consumer. We ostensibly we are a customer obsessed organization, which is what they say, right, And he said, well, if that's what you know Bezos wants, there's other people that will handle that. So they reluctantly do that, and

Well, you know, that's extra if you want it to actually work. Yeah, that's a different that's that's carbon monoxide prime. You know, you can't just order early, you know. In the two thousands and twenty tens, it felt like the reason people were terrified of Amazon is huge selection, fairly high quality product, and the prices were almost always the cheapest.

From Well, there's a reason for that. You know, Amazon has been sued for being an illegal monopoly.

Uh huh.

And the idea here is that, you know, when when a company is building monopoly, they have to have the best experience because they have to steal market share from their competitors. So when Amazon was coming up, when you like the experience, it was fast shipping, the quality was much better, The prices were low because they were using predatory pricing to undercut their rivals, to steal market share, get people to sign up for prime, and put companies

Right, circuit city.

It goes on. And I spoke to all those CEOs for this book, and they lived at first hand. Amazon is undercutting them on price to steal their customers and put them out of business. What happens to monopoly once they become a monopoly is that there's less competition. Where are you going to go? So they could raise prices, they could flood the feed with advertisements that are annoying to you. They could do all these things to make

I haven't canceled my Prime account, but I will tell you that I have dramatically reduced the products I buy on Amazon, and very often in the old days it's like,

That's why also part of this building. The monopoly situation is that Amazon's third party sellers. Sixty percent of what's sold on Amazon is these third party sellers. They are so reliant on Amazon because forty percent of everything's sold online is there. They have to be there, and it's this weird love hate relationship.

We're going to go into the details on some of the really dubious things that they did just across the board. We'll talk about. I mean, the book is kind of horrifying, as I don't know if that was your intention, but as you're walking working through it, it's like, oh, this company has some ethical compromises and some just culture that seems to be really toxic, not just for the customers,

Book, it does.

Let's talk a little bit about how Amazon's culture got to where it is today, going back to its origin story. Bezos works at Hedge Funds, Qunshop d Shaw, and he is given the task, along with three other employees, of investigating this new fangled Internet thingy and what the possible areas for growth and disruption might come out of it. Three or four different analysts were given different sections. Bezos's was tasked with looking into the impact of the Internet

And he liked what he saw. At the time, the idea that this would take off was really far fetched. Nine four ninety three and three percent of Americans had ever been on the World Wide Web. So think of it, and you know, and and David Shaw was the nerdy programmer type of person who could see the potential for it. So he thinks, let's have my you know, my star associates and vps look into the commercial uses for the Internet.

Why didn't David Shaw invest in Bezos and Amazon when when he left for Seattle.

Well, so, then Bezos likes what he sees all on d Shaw's dime. He does his research report, sees that there's likes for this, thinks that books could be the first area of selling online. And he goes on this walk with David the in Central Park and says, Hey, I think I'm going to quit and start an online book shop. And David said, you know, I think that's you already have a really good job. I think that's a good idea for someone else. And by the way,

Kind of surprised that Shaw went that way instead of saying, you know, sort of let us seed you us, let us participate in this, like it was a little adversarial as opposed to cooperative.

Yeah, And actually Bezos had a really hard time fundraising this idea because it was so wild. You know, it took him a really long time to get his first million dollars. Most of his investments trickled in in fifty thousand dollars.

Increments literally friends and family. Oh, yeah, big time until eventually, right, who was the first VC to put money into.

Believe it was Kleiner. They're on the board and oh that's right.

John Door was on the board for forever. That's ocky, so really kind of interesting that he missed it. But the whole thing, just the way I learned about it, it's kind of shady.

Isn't I mean it's copycat mentality that continues to this date. Amazon. Oh that's a good idea. Be a shame if someone took it.

So Amazon is not only Custer obsessed, as Bezos once said, but it's also competitor obsessed. Where does that come from? And how does it manifest itself?

Oh, they're the most competitor obsessed company I've ever covered, and I've covered companies for eighteen years. Part of it is the culture, because they have to be performing at all times to justify their existence, to not get cut.

Literally walk through the store, and they have to walk.

Through the store and people love to do it. It's like a really delightful experience, right. So the head of the team goes about hiring the senior executive from Trader Joe's. She doesn't really know what her job's going to be, moves out to Seattle, and her first week in Seattle, stumbles across this really secretive room conference room. It has

Clearly like and the collect correct answer is I have no documents that they made me turn everything in as per my prior employment agreement.

Or if I do, I cannot give them over to because that's actually illegal. Okay, So she says no. The boss keeps hounding her, hounding her, and it becomes this really tense experience. Then she emails him the top selling items from Trader Joe's from one whole week in the US, ranked by products that were sold, and they start to disseminate that within the team. They have their blueprint to copy the top two hundred items at Trader Joe's. And

I want to stay with the idea of some of the earlier advantages that Amazon had and how it resulted in their growth. We'll get to diapers dot com, We'll get to some of the other headlers. Let's talk about the state tax advantage, So talk about arbitrage. Bezos specifically picks Washington state because there's so few shoppers in the state that by locating there and shipping to the rest of the country, he doesn't believe he has to collect state sales tax because of an old Supreme Court case.

Was it was a catalog, It wasn't Seiers.

That said, hey, you only collect interstate commerce is not taxable. Therefore you don't have to collect it its own unless you have a nexus to that state. So immediately they're at a six seven eight percent advantage over everybody else in most states. Tell us how they push the envelope with state sales tax.

This is simultaneously brilliant but horrifying for the rest of retail. He comes up with this idea that his warehouses don't count as physical locations for Amazon.

Which is kind of bizarre because of course it is right. I mean, if you locate a warehouse in New York, you now have in nexus with New York.

But they tried to carve that out as a separate entity. And up until twenty seventeen, Amazon was not collecting sales tax.

In something, so they had a twenty year head start.

Exactly, and up to ten percent in some of these states. And that just had ripple effects because people once the advent of online shopping came about, people became really price conscious, you know, people would do comparison shopping. And I spoke to you one of the presidents of Sears who had to deal with this head on, and he said, you know, Amazon and him would be selling the same Sony television.

So with the benefit of hindsight, you look at they have this advantage for twenty years, which is a long time. I'm kind of shocked that states didn't stand up and say, not only are we losing jobs in our states, but we're losing tens of millions or hundreds of million in tax revenue. Why did the various states tolerate this for as long as they did.

That's a really good question. I spoke to someone in Amazon's public policy office that worked on this, and he said, like, this was our secret sauce, and Amazon fought tooth and nail to preserve it, to not get rid of this advantage they had, and so they know they'd go to court, they would go for Congress and make their case and some states did come knocking.

Wherever there is a state income tax, there's usually a state sales tax potend. Right, So if you open a warehouse there and the state is losing a lot of revenue, why wouldn't they just sue Amazon and say, hey, we figured out you sold this money goods in our state and uo of sales tax here because you have an.

Ex Well, what part of what I found is that many of these legislators in the states were very short sighted. They wanted to put up press releases that oh, we got an Amazon warehouse at all of these temporary jobs. And there's this horrible scene in the book where Jerry Storch, who's the CEO of Toys r US at the time, which is one of New Jersey's.

Largest employee r speaks to Chris Christie.

He speaks to Chris Christie. He says, you guys are killing me. Why are you not making Amazon collect sales tax in New Jersey. You're putting Toys r Us out of business. You're gonna put Main Street on business. And Chris Christie sort of the aaas him. And then a year later they announced this big Amazon warehouse in Robbinsville, New Jersey. They give Amazon all these tax credits for it. Christy gets to put out the press release that they're

It's amazing how effective they were manipulating so many self interested politicians who were so short sighted. But we saw that time and time again. It was fascinating that the Amazon two HQ was slated for New York, and a lot of people in New York said, this is a money losing deal. This isn't a wealthy company. Why do we have to give them tax breaks? They have to compete with everybody else, and they said, screw you.

Going to New York was one of the rare cities to really call them out on that. Just think about the frenzy around hundreds of different cities lobbied and put in these very intensive applications for the pleasure of having these warehouse jobs and the second headquarters there, and that just shows how politicians really just want the jobs.

Right, That's right, And so it was kind of interesting that when you ran the numbers as people in New York did, it wasn't a good deal and they ended up sort of splitting it. It's kind of part in Virginia. And where where did the rest of the Amazon headquarters end up going.

Oh, it's in Virginia. But they haven't broken ground on a lot of it really.

Yeah, so that was years ago. I mean, after all those crazy contests and RFPs and submissions, they got like two hundred cities applying for this, they still haven't broken gup. That's amazing.

They have one building up for sure, but the whole plan has not come to fruition.

Ironically, if you take the Long Island Expressway out past Jericho, sayas It, you'll see this immense warehouse that they built that used to just be like an empty parking lot. I don't know what was there if for years it was rumored that something was coming, and what a perfect location right off the highway. Why do you need to give you know, that gives them access to forty million people or fifty million people on the aisle, and why would you have to give them a tax break for that.

I mean they have something like six point five billion dollars in subsidies on taxes from different jurisdisdictions around the US. It's pretty staggering.

Yeah, that's really amazing. The other thing that was so disruptive was how Amazon changed how Wall Street itself viewed retailers, both in terms of profit versus growth and startups versus established retailers. Talk a little bit about the impact Amazon had on how Wall Street thought about other companies.

Yeah, this is huge. There probably wouldn't be an Amazon today if Jeff did not convince Wall Street that we don't have to make profits.

Right His initial shareholder letter was, hey, don't expect profits for the next ten or twenty years exactly.

And that just was not the norm back then. It is today, but that was definitely not the norm. This just gave him a tremendous roadway to reinvest in his business and grow and steal share and cut on prices to get customers and.

Not pay federal taxes because if you're not profitable, no tax it's a.

Great point tax rate, and that really destroyed his competitors because they couldn't catch up with him on online shopping. I spoke to a lot of these CEOs who went head to head with Amazon in the nineteen nineties and two thousands. One of them was the CEO of Linens and Things, and I said, you know, why were you all so late to online shopping? Did you not believe in it? And he said, Dana, we believed in it.

There's a little bit of short termism there because and again we have the benefit of hindsight, but he obviously saw what was coming. Why can't you stay to the board? Look, here's the trade off. Either we spend one hundred million dollars now and be able to compete with them, or we and and lose some stock price for a couple of quarters or years, or we're dead. Those are your choices. You want, you want a little bit of a pullback now or you just want to go bankrupt.

Retail's a notoriously hard business. It could be a low margin and they have to manage to Wall Street quarter after quarter, quarter to quarter, and they couldn't. You know, the CEO told me, we couldn't miss one quarter of earnings, let alone years of them like Bezos did. I'd be out of a job. I would be fired. The company

Go through the list Toys, r US, Linens and things Target. Why on earth would Target, which is a giant company, outsource its e commerce to Amazon.

Well, Jerry Storch, who was the see of Toys r US, first Target on dot com, and he told me a story that he got yelled at by senior leaders for spending ten thousand dollars on buying the domain name Target stores dot com.

That's an amazing story in the book, which is like ten thousand dollars for a domat like that is around.

It to be so careful with their money because it's a hard business, right, and so yeah, Target Borders Toys r US and they they had to outsource it, which meant Amazon kept their customer data. They paid Amazon a fee for shipping it, they paid Amazon a fee for listing it. They paid Amazon all these fees, and Amazon had all the upside and.

They figured out, you write in the book, they figured out that if they were losing sixty five seventy million dollars a year on their site, hey we could charge them fifty million and it's a cost saving for them.

Yeah, they just can The lowshold just astonishing.

So let's stay with books for a minute. I'm fascinated that Barnes and Noble tries to respond very aggressively to Amazon, and they figure, we're going to take over wholesaleer Ingram in order to get a little more bulk, be able to stands Amazon, which at that point had become a substantial market share of the book selling world. And Amazon gets the takeover stopped on anti trust grounds. How ironic? Explain what happened there.

Yeah, so Barnes and Noble, in order to stay competitive, tries to buy Ingram, this book distributor that Amazon also used, and Amazon cried foul and said the should be an antitrust violation. And basically, Amazon even today sometimes has this mentality that they are the David going up against Goliath, even though that has not been true for a very very long time, including in that anecdote, Amazon by market value was way bigger than Barnes and Noble at that time.

So we were talking earlier about Amazon's lack of profitability for the first couple of years. It's kind of interesting how Bezos's initial share hold your letter, I want to say ninety six something like that, seventy seven, the same year as the IPO warrant investors not to expect profits for years to come. We're going to spend a billion dollars building out our website. Not only did this not have a negative impact, Wall Street applauded the profitless growth.

I mean, he trained his shareholders essentially to not expect anything, and he was very clear communicating that. But it also just gave them roadway to take all their money and say, you know, books are not the bi all end all. We're going to use this as a test case. We're going to make some money, and then we're going to take all that money and put it into expanding our verticals. Let's open this up to toys, Let's open this up

To say the very least, let's talk about Amazon Web Services. I love the part of the book where you describe how this became a thing every time they would stand up a new vertical or open a new division, and people forget what it was like in the nineties and early two thousands before there was an AWS. You ought to go out and buy a couple of hundred servers and a lot of software engineers to put this together

Yeah. So Andy Jasse, who's the CEO today, started at Amazon a few like a little bit before the IPO, so he's been there from the early days. Amazon's retail business was expanding so rapidly, and they had so much data and they needed so much computing power that they were continuously adding that to their own business, and they got good at it. Jeff and and and a few other people started figuring out like, hey, yeah, we're a retail company, but we're also good at this technology stuff.

Own right, and one of the biggest sources of profits for Amazon.

As well, an enormous source of profits.

So they start out with storage, they start out, they had computes, They had a number of different services that just allow anybody, you don't have to go buy a bunch of servers, and that really led to an enormous adoption cycle by a lot of tech startups, a lot of small companies that hey, you don't need one hundred million dollars worth of junkets, two guys on a laptop, you can launch a business exactly.

And also a lot of their competitors, a lot of their fiercest competitors, Netflix, Apple use as the CIA uses aws, right, So this is a really entrenched business product for them, and it's very sticky. Once you're on it, you don't really leave.

So it's kind of interesting what happens in other areas of Amazon, where there's supposed to be a Chinese wall between you as a customer of their corporate services and the rest of their business. But you described time and time again in the book how that Chinese wall really doesn't exist. Anybody has access to everything throughout the company. Let's talk a little bit about marketplace, all right. So originally Amazon, Chase, Deebay launched an auction site. It actually failed,

It's more than sixty percent of their real Wow.

That's amazing. So that becomes wildly successful. But all of these small businesses that sell in marketplace, they haven't been very happy with how marketplace works. Tell us what's going on.

Yeah, they have this uncomfortable situation of selling on marketplace, relying on it for their income, but then also seeing a lot of their products that they've gone to great lengths to use RND to create showing up in very similar versions on Amazon's private label side of the business called Amazon Basics or Amazon Essentials. And for years they've alleged that Amazon stole my idea, and Amazon has always very vocally refuted that notion. They say, you know this

So let's put a little flesh on that. So Amazon is both the platform to these third party sellers as well as a original competitor, not merely selling other people's products but creating their own. Anything that's a hot seller on Amazon, they are aware of through their own data, and they look at it. They look at the margin, and they figure out how cheaply can we make this and how much do we want to go after this. They've been pretty aggressive about that, haven't they They have.

I mean, the documents that I was given shows how they reverse engineer these best selling products, and they have everything from the number of items sold to the cost to sell them, to the number of returns to the margins. There's twenty five different fields that the employees on the private label side of the company who have been told

Really, yes, under oath, and yet it's pretty obvious they've been doing that and doing it for a long time. Let's talk a little bit about Alexa and how they sent up a venture funds that was very different than the typical venture funds. Tell us a little bit about what's going on with Voice and Alexa inside of Amazon.

Yeah, Amazon was one of the pioneers of this voice technology and you know these voice assisted robots, and as such, they set up this vcarm called the Alexa Fund. And

Later you talk about the firewalls and the vcs, and one entrepreneur is in a meeting with a bunch of people, Hey, who are those guys? I know you are? And who are who are these guys? And it turns out they're the product heads that are going to be making the competing, competing product. It's really the the I like the VC quote Amazon is a wolf in wolf's clothing, Like there's a very really not even a big attempt to hide it.

Oh my god, this was galling to me as a deal geek who covered M and A. I asked some of these founders I spoke to for the book to send me all the documents that Amazon gave them prior to these meetings, and I read them very thoroughly and found something called a residual's clause buried in the legal ease, and it basically said that anything retained in the memories of Amazon executives at these meetings where proprietary stuff is being disclosed could be used by Amazon in their own

So essentially, and I keep coming back to this from the original d Shaw issue the culture at Amazon. They hired senior lawyers from some of the best firms. It seems like ethics is completely irrelevant. It seems like this is a group of rogue capitalists who are just rapacious in their greed regardless of ethics and business standards. They're just opera reading in a gray zone of legality, but in a very black and white zone of ethics. These are bad people doing bad things.

The interesting thing is so many of my sources for this book are the people doing the bad things, because once they take a step back from Amazon and they realized how this company pushed them to their breaking point, that it made them do things that they would not have done at a company that was not so cutthroat.

They feel bad, Well they should. They have a guilty conscious because they did really bad things for the money. They could feel bad about it after the fact. But let's be blunts. They had big stock options and reasonable pay packages. And if you're coming over from a top twenty law firm where you're giving up a seven figure job, you're doing it because you have the chance to make ten figures in your stock options. So I feel bad

I would agree with you. And you know, that's the one thing I wanted to depict in this book is the human toll of that. I mean, when I was reporting out that chapter, you're just describing the founders that would cry to me on the phone about what happened to their companies, how Amazon just decimated them. It was really hard reporting, just as a journalist to like internalize

Let's talk a little bit about diapers dot com and what was the parent company, Quizzy Quizzy Quizzy, So this is kind of interesting. Amazon can't figure out how to ship diapers quickly, right, And moms are a giant demographic in retail. I think the book says they make eighty four percent of the consumer spending the controls in the household. Like, there, you win the moms, you win retail. And these guys have figured out how to have diapers arrived next day, like,

Yeah, it's the definition of predatory pricing. It's twenty ten. Jeff Bezos becomes laser focused on Quidzy, which is started by these two entrepreneurs that are like the first people in their in their families to even go to college, right, these are homegrown talent, Mark Lori and Vinie Berra, Right. And he puts together a team to essentially spy on them and figure out how they do it, and Amazon starts to really cut the prices of their own diapers

That's two point two billion a year on diapers.

Along because they were so threatened by this little startup in New Jersey. Okay, and Amazon eventually makes a buyout offer to this firm, but they don't want to do it because they're doing so well they think they could ipo one day, so they turn them down. So then Amazon ratchets up the heat, cuts price of diapers more, creates this loyalty program to incentivize moms to shop with Amazon not Quidzy, and it becomes to the point where it's untenable for the quizy people. They start missing their

Like one hundred million dollars more than the five and change exactly five point fifty Amazon head offers it's a.

Higher offer and it's not the company that's destroyed them. So they go in the hallway, they discuss it, and they say, let's take this Walmart offer. They go back into the room with the Amazon executives. They say, hey, just want to let you know we got this offer. It's better for a shareholders. We're going to go in this direction. And they're told by a senior Amazon executive, Okay, you go ahead and do that, and we'll go to cut the price of our diapers to zero.

That seems legal, right, We're going to give our diapers a way to put you out of business and prevent you from selling to our competitor Walmart.

Right. And the people in that room knew that if Walmart had decided to acquire Quidzy and Amazon put them out of you know, created this pricing war that they were selling diapers for either zero or.

Like a dollar material change exactly. In fact, elements that would lead to the deal falling apart.

Walmart could back away from the deal scot free, so they were forced to sell to their main competitor who put them in this position. And this created, you know, generational wealth for those two men who didn't even go to for a drink to celebrate because they were so upset.

Now, what what did they end up doing in the future post that that purchase?

Oh, they shut it down. They shut down quids They.

Just took all the clients. They took the few years and then eventually was folded in. The two guys who created Quidcy. Did they do anything else in the field?

Now, Mark Lori went on to start a company called jet dot.

Com, he said, Which gets why.

Walmt by it for a very significant sum, a couple of billion. Body now owns if you live in New York, there's a place called Wonder, this restaurant company that is I actually really like Wonder. So he's doing that now, So I mean this, He's gone on to do really big things.

So the fascinating thing is, after being forced to sell the diapers dot Com company to Amazon, Jet dot Com became essentially the back end of all of Walmart online retailing. So I want to say he got a little bit of payback. Whether whether or not he, you know, put as much pain to Amazon as Amazon put to him is arguable. But it was pretty obvious, and you make it clear in the book he was imagine getting bought for five hundred and fifty million dollars and leaving dejected.

It is, it really is. I mean, I just I think it speaks to like the pain and suffering they went through with this M and A battle.

What are the things that kind of shocked me. You mentioned what a difficult a place to work Amazon is. They even backload their stock options. Your stock options are like if you work at Google or somewhere else, you get stock options and they'll vest in three years and you could start selling. At least that's what it used to be. I don't know what it is these days, but they backloaded. It's five fifteen. Year three is forty percent of your stock options. Year four is forty percent.

Yeah, And that creates this pernicious cycle. The average white collar employee at Amazon lasts a year and a half. That's a major so most of them leave their stock options on the table. But if you want to get your full payout, you have to survive. You have to not be part of that bottom six percent. And that creates that pressure cooker of an environment that I talk about.

So let's ask the question about the big question. Is Amazon a monopoly? Have they remade corporate power in their own image? And what sort of antitrust enforcement might we expect in the future.

Well around the world, including our government, have said it is a monopoly. The Federal Trade Commission filed a lawsuit last year saying it's an illegal monopoly, and the lawsuit says it could be broken up.

What about Europe, they've been pretty strict about Amazon as well.

The ear was way ahead of us on policing our own giants. Marguerite Bestare was looking into Amazon, Facebook, Google, and Apple years ago and people thought she was crazy.

Right, So we're recording this a week before the election. We don't know what the outcome is going to be, but it appears that no matter who wins, Amazon's going to stay in the FTC's crosshairs. Because Lena Kahan works for the Biden Harris administration, the assumption is if Harris wins, she continues, and Trump really dislikes Bezos because of his ownership with The Washington Post and has said Amazon should

It's really fascinating. I don't know which administration they would want to win. They you know, they had a really painful four years under Trump where he was just berating them online every day, alleging that Jeff Bezos was using the Washington Post as a political tool to.

Attack him to the Amazon Washington Post.

Amazon Washington Post, that should be a lobbyist, according to him. So that was like super painful. But then the Biden administration came in where they had good connections, and that was even more painful in some ways. You know, Biden chooses Lena Khan to be the head of the FTC. She brings forward the lawsuit against Amazon for being a monopoly. So either way, it's not like a really great outcome for that company.

You know. The interesting thing about the anti trust enforcement against Microsoft in the nineties was just having that enforcement hanging over their head was enough to allow all these small companies to get out from under you know, every startup had to deal with the question every software startup, Hey, what's going to prevent Microsoft from just building these features to office or into Windows? And it was really challenging.

You know, the big question is will this FTC suit have a chilling effect on the way Amazon behaves? I would say they have more competition these days, Timu and Shean are you know, these low cost Chinese marketplaces. But I don't see any changes to the way Amazon is operating. You know, Andy Jasse there's a scoop in the book. He's telling his deputies, you know, at around the same time that they have this historic lawsuit against them for being too big, that they should be so much bigger.

Putting it, supersizing it. And since we're talking about antitrust enforcement, it's kind of fascinating that the entire we've had forty years of lacks anti trust enforcement, dating back to the Reagan administration and Judge Bork, who was one of the big advocates of moving away from historical anti trust enforcement. You describe in the book. Lena Khan is a twenty seven year old law student at Yale. She writes a

Yeah, she was this law school student at Yale, where actually Bork had been a professor, and she writes this seminal law review article saying that the antitrust laws the way that they're being interpreted, partially because of Bork, are failingstomers and consumers in the US, and that Amazon's the prime example of this. That Amazon is a monopoly and it's allowed to be monopoly because we're not enforcing her anti trust laws the way that they were first derived.

Point that the way Amazon has become a monopoly and abuses its platform power is very reminiscent of what we saw under standard Oil and Rockefeller tell us a little bit about some of the abusive uses of their power that manifest in their growth.

Yeah. So, she points to predatory pricing that Amazon was undercutting the market in those early days in order to steal share from rivals and put them out of business. She also says they're like a utility, that this isn't a company that you might want to work with. You sort of have to work with them if you want to reach shoppers, and that has power over the sellers on their website, where they could you know, Jack up fees.

And share a lot of data a lot of their rather not as well as by advertising from them.

Advertising is another area.

In the book. You talk about how when Amazon enters into the marketplace with a competitive product, they shut off their competitors' ability to advertise that.

Product they do, and that's you know, advertisings become so core to being successful as a seller on Amazon dot Com because there's millions of other sellers that flywheel that if you don't buy advertising, you're not showing up in search. And what did Amazon do Roku, which makes a competing device for them for streaming TV, all of a sudden they can't buy ads anymore. You know, this happened across the device's space.

And so the anti trust law is, Hey, if you want to be a platform, you could be a platform. If you want to be a retailer, you could be a retailer, but you can't tie your platform advertising into reducing the competitiveness of your products versus other people.

Well, that's where the Congress was alleging that if you can't own the world's biggest online platform and also compete on it, that it has to be one or the.

Other spin out that separate business and.

Do FTC lawsuits a little bit different. She alleges that actually, in this current form, Amazon's become the monopoly. They don't have to do predatory pricing anymore. They could actually exert their power on their sellers. You know, a decade ago, the average seller in Amazon gave nineteen cents on the dollar back to Amazon and fees. Today that's forty five cents on the dollar. That's unbelievable, and that means those sellers have had to raise the price of their goods to cover Amazon's margin.

Or reduce their own margin or their own margin.

And the FTC lawsuit says, because Amazon's so big and they require those sellers to also have the lowest price in Amazon, that they have to raise the price on Target dot Com and Walmart dot Com and on and on and on, and it's created higher prices for all of us.

Huh, So are you an Amazon Prime member? Do you use Amazon?

We have a Prime account because my husband watches football and they have Thursday Night Football. We don't really shop on it though.

You don't very rarely. Huh, that's really interesting. All right, Let's jump to our favorite questions. We ask all of our guests starting with, so what are you streaming these days? What are you either listening to on Audible? What are you watching on Amazon Prime or Netflix or Apple Plus? What was keeping you entertained besides Thursday Night Football?

I watch Nobody Wants This. That was very good, charming, really really good. I listened to my favorite murder. It's a true crime podcast. I'm a Murder, you know they call it.

Tell us about your early mentors who helped shape your career.

Oh gosh, I have so many of them. Joanne Lublin, who was this dynamo at the Wall Street Journal, Danis Simaluka, my former boss at the Wall Street Journal on M and A Jamie Heller who's now the CEO of Business Insider, Dennis Berman, who is an amazing m and a reporter at the Journal. And Drew Dowell, I would say, who he's now overseas for us.

Let's talk about books. What are your favorites? What are you reading right now?

So some of my favorites are The Moonstone by Wilkie Collins it's like one of the first Victorian detective mysteries. I love the Bronts and Jane Austin. I know that's like pretty trite. I'm reading some just fun Halloween type of books right now, this book called Lucy Fowley called The Midnight Feast. That's been really fun. And I love Sally Rooney. I have her new book ready to read after this one.

All right, our final two questions. What sort of advice would you give to a recent college grad interested in a career in either journalism, m and a retail what's your advice journalism?

It's I mean, you have to hustle. I would say it's to get as many bylines as you can, even if it's not at one of the prestige newspapers. At first, I fully believe the way I got hired at the was freelancing my college papers. My college you know, articles to other places to get a byline in places in tiny newspapers that probably don't exist anymore. And you just have to be reporting around you all the time, making

And what do you know about the world of journalism today. You wish you knew twenty years or so ago when you were first starting out.

Oh my gosh. When I first started out, dot com was like not even that much of a thing, right, you know. The WSJ dot Com was this like bastard step child, right, And that's that's what I was put on. Actually, I think I wish I knew that you just have to be so resilient in this profession that if you're doing your job well, it means a lot of rejection. That you're gonna cold call people and they're gonna hang up on you, and that's fine, cold call the next one.

Really really interesting. Thank you, Dana for being so generous with your time. We have been speaking with Dana Mattioli. She covers Amazon for The Wall Street Journal and is the author of the book The Everything War, Amazon's ruthless quest to own the world and remake corporate power. If you enjoy this conversation, well be sure and check out any of the five hundred or so previous discussions we've