About Dana: 

Transcript

Dana: What's fascinating to me too is that this has become a bit of like a bipartisan issue. In a very fractured political environment, Republicans and Democrats agree that this company has too much power.

Corey: Welcome to Screaming in the Cloud, I'm Corey Quinn. People sometimes tell me that I should write a book. So I've talked to people who have written books and it turns out that no one wants to write a book so much as they want to have written a book. My guest today has done exactly that. Dana Mattioli recently wrote and released The Everything War, Amazon's ruthless quest to own the world and remake corporate power.

Thank you for joining me.

Dana: Thanks for having me, and that sentiment is true. Having written the book is much better than the writing part. It is an all consuming

Corey: thing.

Dana: Completely. It takes up lots of hours of your life. I'm happy it's now released into the world. Thanks for having me.

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No unnecessary forms, no fuss, because honestly, who has time for that? Visit Prowler. com to get your first security scan in minutes. There was a time that I would have pushed back on the subtitle of that. Amazon's ruthless quest to own the world and remake corporate power. In the early days that I was doing what I'm doing, I had the luxury and privilege of only being able to focus on their cloud computing division.

And then one thing led to another, like slowly turning up the temperature on boiling a frog. to the point where they're in almost every aspect of modern strategy. They're in every part of society. Their corporate strategy is clearly a memo that's got a post it note that just says yes on it. And they recently bought my doctor's office, of all things.

It's, there is no arena in which Amazon is not Losing sleep at night, terrified that someone who is not them may be transacting business and they don't get a taste of it has been my takeaway from it. And what was great about reading your book is that, Oh good, I'm not the only person who feels this way.

I was starting to feel like a bit of a lunatic.

Dana: Yeah. I mean, they've become truly this giant behemoth of a corporation. That's this tentacles that have expanded further and further in industries far afield from where they started. To your point, they bought my doctor's office too. I'm guessing you're talking about one medical.

And when I spoke to sources for this book, Amazon, they almost describe Amazon as a utility, both from like a consumer standpoint, it's hard to avoid, but also from a competitive standpoint. What's remarkable about their onslaught of all these sectors is oftentimes their competitors are forced to work with not just one or two tentacles of the octopus, but three or many.

Because of their far reaching power.

Corey: Half of my consulting work is negotiating long term contracts with AWS on behalf of my customers. And increasingly, there are always shadows of corporate development that work their way into it. Because in some other arena, that Amazon is doing some deal with the company.

And we see it with their competitors as well. Google and Microsoft are both broadening into other interesting swaths of society. But it's starting to be that you can't just do a pure cloud deal with any of these companies, Amazon in particular, because, well, we sell products and then we have to get things onto their store.

So we also want to negotiate a marketing deal. And, and it turns into this, this tangled mess of things that are not obvious from the outside.

Dana: Yeah, it creates a really uncomfortable scenario for lots of their partners, lots of their competitors, and there's like this co op petition that goes on, right?

There's a scene in the book that I think speaks to that, when Amazon is in negotiations with AT& T on HBO Max, which is launching, and Warner Media, which is the parent company of HBO Max, doesn't want HBO Max to be on a prime video channel. And there's all these negotiations back and forth where, um, Amazon says, well, you have to be there.

And they decide not to have HBO Max on Amazon's properties at all. And when they start negotiating to come to the table, the idea of throwing in a lucrative cloud contract comes into play for Amazon. So they basically say, If you want to be on, um, Fire TV distribution, which is another one of Amazon's products for distributing streaming.

If you want to just be on Fire TV and not Prime Video, then maybe you have to spend hundreds of millions of dollars more on your cloud bill at AWS. And that's just like a really unique lens into the type of leverage they have in these negotiations and how they could eke out different sorts of sweetheart deals or, or tie their businesses together in order to.

Corey: I wrote an article a few years ago with a little bit of an over the top title, The Amazonian Evil Infecting AWS, and I was talking about specifically the pernicious, uh, creep of advertising that seems to on some level become a toxic element to all big tech and the fullness of time, where there effectively becomes no boundary anymore between, uh, sponsored content and editorial.

And since then, over the past year, I've watched it unfold, where sure enough, there are now sponsored results in the AWS Marketplace that are showing up, which no one uses for product discovery in the first place, but I'm sure it's tied to some other corporate development thing on the back end.

Everything that a company says in public has to start to be viewed from this lens. Whenever they have, they're talking about another company doing something with their cloud or what they're collaborating on, you just wonder, okay, in which direction did the money change hands? Because of course, nothing happens at this scale without that happening.

It's just, it's turned me cynical.

Dana: That's really fascinating on the ad exchange. on AWS. I hadn't heard of that before, but I could tell you, I mean, in researching the company, which is purposefully Byzantine, they're a very secretive black box of a company, which is what drew me to covering them in the first place.

Wanted to get inside there and their, um, their earnings reports are really just fascinating and what they do disclose and what they don't. And I was able to get an unvarnished look at their advertising profits, which they don't report. And it is through the roof profitable. Some cases, 90 percent operating margins, billions and billions and billions of dollars.

So I guess it doesn't surprise me that they would try to extend their reach beyond Amazon. com's shopping site to the AWS marketplace and try to, to Leverage as much, you know, incremental revenue as they could.

Corey: One of the questions I've had since the beginning, and I still don't have an answer even after reading your book, assume for the sake of argument that I take everything that you reported and heard from sources at absolute face value, which is never the case.

Not that you've done anything that you should not have done, but it feels like when it comes down to a he said, she said story, there are three versions. What he said, what she said, and the truth of what actually happened that no one ever gets to really uncover. But what I've wondered for a very long time is how much of what Amazon has become today was an intentional thing that Bezos saw 30 years ago versus an emergent property from, okay, now we go from A to B.

Now we're at B. Where do we go here? Well, C looks good and so on and so forth. And then suddenly there, there really are the everything store and they wind up then having to compete with everyone along almost every axis.

Dana: Yeah, it's a great question. I think it's like a bit of both. There was, I spoke with Amazon's, one of the earliest CFOs for this book.

And what he had to tell me was just so fascinating. This is back pre 2002. The company is obviously pretty small by today's standards and it's mostly a retailer. No, it is just a retailer. It doesn't have AWS, doesn't have any other businesses yet. And he says, even back then they spoke about Amazon's total addressable market.

Or the potential for its revenues to be anyone else's revenues. So that they weren't just limiting themselves to other booksellers or other retailers, that anyone who made money, that's our addressable market. So I think there was always some sort of vision here. And then, you know, early on, Jeff also told his team that he wanted this company to become a daily habit.

He didn't want the customer to just go to amazon. com once a month and buy a book or batteries or paper towels. He really wanted to get embedded into the lifestyle. And that's what you saw happening, um, right at the very time that Corporate America. Was saying that conglomerates don't work, that GE shouldn't be an air turbine company and a movie studio or a TV studio and shouldn't make curling irons and medical devices because it doesn't make any sense and the activist investors force these companies to break up.

Because there was a conglomerate discount, Jeff spun up this massive conglomerate with lots of disparate pieces. And it did become the daily habit. It, you know, all the companies that rely on it for AWS is one area, but it's a giant logistics company. You know, we reported a few months ago that Amazon secretly Unseeded UPS, uh, you know, a hundred year old logistics company in the space of a few years to become the top parcel carrier in the U.

S. It is becoming, you know, um, it not becoming, it is a Hollywood studio. It's a podcast maker. It's a grocery store. It's a digital advertiser. So it truly is this daily habit. And I, you know, I went back to some of Amazon's earliest employees to just understand what they think about that because, you know, when they joined, it was a mission based company.

They wanted to democratize breeding. They weren't in it for the profits. And some of them said that they could saw, they could see some version of this coming that Jeff's. Ambitions were really just limitless. Um, and more telling to me is that a lot of them have canceled their Prime accounts. They've tried to avoid Amazon being a daily habit in their own household because they, they harbor some regrets about what they helped create.

They think it's gone off the rails a bit.

Corey: It has. I read everything, uh, in through eBooks, uh, my Kindle. So it's not lost on me the, the irony of having bought your book and read it on the Kindle. Which in turn means that every, exactly how long I spend per page, every page turn, every highlight, every time I go back to make sure I'm catching the beginning of a paragraph or take a picture for the Twitter thread I did, the review of the first third of the book with a read along approach, they retain that data indefinitely.

I can see that on books that I wound up reading in 2013, and they claim it's for whisper sync, but I'm pretty sure you don't need to know that level of granular detail and keep it in perpetuity. Which of course then follows to, if you're going to track me to that level of degree, because I am a reader, that is where I, that is where I am happiest, you still don't seem to understand people better than you do.

Because I wonder how much differently, I wonder how differently Amazon would come across if they understood people better than they do. That seems to be the big Achilles heel, is that they, they're surprised. By the results of their own decisions, uh, when they did their ridiculous HQ2 beauty pageant, they were surprised, didn't play well in the press.

Back when, in the early days, er, back when, I'm trying to remember what the actual anecdote was here, where There was a, when Dave Clark made a series of tweets, he was that of the S team, attacking Bernie Sanders, I thought that he just basically had, you know, got into the old granddad and wound up firing off from his Twitter account, but there were multiple hours of meetings with Bezos and the rest to workshop that, and it's like, hang on, that's the best you could do?

It just struck me as bizarre.

Dana: Yeah, that was one of the interesting parts of reporting out this book, is was getting into like the S team's mindset to understand why decisions were made. And what I found was that, is that Bezos and lots of members of the S team almost had this victim mentality. that they felt that the press and government and everyone was unfairly maligning them and that they were misunderstood and people were losing, losing sight of all the good that they do for society and for small businesses and whatnot.

And that was pretty fascinating to me. Like one ST member told me that Amazon has gotten more abuse than any company in corporate American history, with maybe the exception of big tobacco executives. And that was just funny to me that, you know, there's These snap reactions and judgements are to fight the narrative and deny, deny, deny, deflect, deflect, deflect, but not fix the underlying cause of why the narrative exists.

And you see that play out time and time again in the book. Amazon.

Corey: Speaks in the language of monopolists, as do a number of other large tech companies. And that's always comes across as we are unfairly being criticized. We are, it is always a fight for survival. We need to make sure that the company exists next year.

That's why we're doing the thing. Any random upstart, any random startup could wind up disrupting everything that we're doing, and we have to be vigilant about that. Usually people mean that in the sense that that's why we have to keep innovating, but in practice, that's why we make sure that we always have inside information when every startup is doing.

It's, it is off putting, to put it mildly.

Dana: Yeah, those are some of the more gripping or painful parts of the book to report is how Amazon's M& A team and, you know, venture capital team, the Alexa fund, was meeting with so many entrepreneurs. They had access to the most innovative companies in the world, really, because they're the 800 pound gorilla in the room in many industries.

And you know this from being in the space is that, you know, when you're a startup and you're looking for funding or an acquisition, You often will meet with venture capitalists up and down Sand Hill Road, but you don't typically have to worry about sharing information with them because they're not going to go and compete

Corey: with

Dana: you.

Corey: When it does, it makes headlines because, wait a minute, what, what did the, where did the VC send my pitch deck? And it becomes a miniature scandal because that, that violates accepted norms of VC behavior.

Dana: Right. Um, but because Amazon is the biggest player in not just retail, but cloud computing and it's giant and logistics and advertising and all these spaces, Founders are putting into the uncomfortable scenario of often pitching them for either an investment or an acquisition, knowing that Amazon is also their biggest competitor.

And in reporting those parts of the book out and speaking to companies that felt like Amazon stole their ideas through the M& A process, through the venture capital fund process, that was just like really crushing for these guys. It's the only time in the book where sources cried to me on the phone, telling me their stories, where they felt like, you know, um, they went in in good faith.

They opened the kimono, they shared all of their most proprietary data, their product roadmaps, their patents, their engineering reports, their customer readouts, and you know, the same pattern just kept playing out. Amazon would bring all the top leaders to these meetings, the top leaders at Amazon that would eventually compete with those companies.

They'd learn so much information, they'd take a look under the hood, and then The founder would get ghosted. And then months later, a year later, Amazon would announce pretty much the same product. And in some scenarios in the book, those companies no longer exist. Like that, that was, you know, it was winner take all like their, their clients immediately jumped ship.

And Some of them tried to pivot. Um, one of the most fascinating parts of that for someone who's like a deal geek like me, I covered M& A for a long time at the Wall Street Journal, is that Amazon had protections in place that really helped it in this scenario. It made these founders sign something called a residuals clause.

And that it basically said, almost exactly said, that anything retained in the memory. of Amazon executives in these meetings could be used without legal consequence. And one of my Amazon lawyer sources called that a get out of jail free card.

Corey: Yeah, because it proved you didn't actually remember that and took notes and use the documentation there.

Some people have trick memories. It's a. Yeah, and there's stories like this that come out. A trend that I noticed in the narrative you laid out is something I've been subtly picking up on, I think, for a while, which is in the early days, we talk about how when Amazon was just founded, it was Bezos and his trusted lieutenants making all these decisions and calling the shots at a very high level.

Increasingly, what we've seen in the decades since has been all the decisions are being made significantly far downstream by individual product owners, which famously run very small teams. So whenever something goes too far off the rails, like there was a recently acclaimed in an employment suit that is currently being fought by a former employee in their AI group that they were told, instructed to do unethical things about taking other folks data with everyone else is doing this and we're behind.

When it came to light, this is what happened. That manager was fired. But that's an awfully good defense deniability story among anything else, because without that, you're not going to retain your job anyway. So it's a culture from the top, that comes from the top, but is also given autonomy to a surprising degree to various folks.

People think it's about innovative, by being innovative and giving access to people, small teams to change the world, but it feels like it's a defense mechanism to the cynical.

Dana: Yeah, I'm glad you brought that up because that case is really interesting and I think it's emblematic of a larger issue at Amazon where, you know, the company when presented with situations like that will often say, oh, it's just a bad apple.

But when I researched this book and spoke to, you know, 600 people in and around Amazon, 17 S Team members, board members, I had hundreds of pages of internal documents. And it painted a picture of a toxic culture that often led to pressure cooker of environment that caused employees to do things that they knew ethically they shouldn't do, to do anti competitive things.

And it wasn't just a few bad apples. This was systemic.

Corey: Whenever we hear stories about people being treated differently because they go on bereavement leave or they go out to have a child and suddenly they face uphill battles and discrimination, people tell me that there's no policy on that and I believe them.

Obviously there's no we are going to discriminate against people policy, but I've talked to an awful lot of current and former AWS employees who have stories that all rhyme with that. These people don't know each other. I mean, half my job is introducing Amazonians to one another, it seems. And the fact that they're all coming up with the same general thrust of things tells me that it's very real.

It's not just a few bad apples or people annoyed to push back against it. And there's something inherently rotten in the culture that allows and empowers this.

Dana: Yeah. So I've covered companies in some shape or form for 18 years at the Wall Street Journal. We're one of the last newspapers that covers companies in that way.

And I would say that this is the most aggressive. Cutthroat culture I've ever encountered. So there's definitely something different in the water at Amazon. And when I speak to some of the early employees to kind of pinpoint, like, what happened? Why did it change? Because it wasn't always like that. They point at one thing in particular, but this is not the extent of it.

Jeff became enamored with what Intel at the time was doing in the 90s on stack ranking. Something that was popularized by GE, um, and Jack Welch, where you cut the bottom 10 percent of employees every year. And he thought this was brilliant, because he thought that his managers were too busy to cut anyone from their teams, because even if the people weren't carrying their weight, they were still doing stuff.

And he thought that that was leading to less great employees sliding by. So he They adopt stack ranking, um, and people at Amazon before the stack ranking and then after it describe a scenario where it became a much less forgiving culture, the elbows got sharper, it became less collaborative, and then to your point, You were only as good as your last home run and people got paranoid about losing their jobs.

You didn't want to be in the bottom 6%. You know, you could have a death in your family and take your eye off the ball because you're grieving and be on the chopping block, right? And when I, when I speak to employees at Amazon, um, current and former, they often point out how nervous they are about letting their foot off the gas.

And, you know, if you're in that sort of pressure cooker in the environment, and by the way, you have access to arguably more data than any other company in the world that you're not supposed to look at. It could be tempted to looking to look at that and get an edge over your competitors. Or, sorry, it could be tempting to look at that to get an edge over your other colleagues.

Corey: Oh, absolutely. The competition is at least as strong internally as it is externally. Uh, there was a big thing where, oh, we don't look at customer data on AWS to inform our own product decisions. But I've heard stories of them pulling metadata from the account, like the billing records. Well, that doesn't sound like much of a big deal, but you can show me your AWS bill from last month, and I can disturbingly accurately Talk to you about what your architecture looks like based upon nothing other than that.

It, it gives more information than people would otherwise believe from that somewhat blasé description of metadata. I, I'm sure they have policies and procedures in place that have been strengthening all the time. You will not convince me at this point that there's an open policy of looking at data that customers are storing inside of the cloud, because the day a story like that comes to light through some whistleblower or whatnot, it's It's game over for their entire cloud division.

Almost no one will stand for that. But it's, but the idea of getting as close to the line as humanly possible, oh yeah, and then a little bit further.

Dana: And it's telling to me that you think about AWS's client base. I mean, Netflix is an AWS customer. They compete ferociously with Amazon Prime Video and Amazon Studios, right?

Apple is their, one of their biggest, uh, AWS clients. And there's a scoop in the book. Apple spends 2 billion a year on their AWS cloud bill. I mean, that's enormous. And they compete with Amazon on the devices side. It's just telling that all across Amazon's different tentacles, there are competitors that compete fiercely with them that are also beholden to them.

Corey: It feels like the only organizations that can use cloud. And not worry about Amazon being a competitive threat is folks who are working in philanthropy. Because everything else, their strategy becomes, yes, I would, it's strange to think of it this way, but you talk about various S team meetings, and I'm starting to wonder if there's, there are specific procedures and policies for those meetings, because if we look at it from a market cap perspective, they are effectively forming what becomes parliament for a, for a nation state.

They are, they're, they're larger than a significant number of countries GDP wise. It is, at this point, too big to ignore. So much of your book talks about the political shifting winds, uh, during the Trump, uh, administration and dealing with, uh, with having to, uh, Talk to people and give VIPs tours of Seattle.

Bezos opted out of one at one point, and of course, Amazon PR rushed to dispute that story despite you having multiple people corroborating it. It's, that's Amazon PR doing what Amazon PR is going to do, I suppose. But it's a, but it's, it's been a wild story just to see how all of that works and the growing realization that they absolutely need to make friends in government.

Dana: Yeah, so what's been fascinating to me is that Amazon was super late. To government relations for a company of its size, Jeff was notoriously averse to spending any time with politicians. He once tells Paul Meisner, who was the head of government relations, you know, Hey, if I wanted to do any of this, I wouldn't have hired you.

Like, just let me keep to my business. You do yours. And he didn't want to, like, glad hand. Um, so the board has to convince him finally that, you know, you need to start taking this seriously. We're now in the headlines a lot. People are upset about the way we treat warehouse workers. The booksellers are crying foul.

People are saying that we're crushing Main Street. Like there was a narrative forming. So they finally start spending some time and money on DC and they bring in a heavy hitter. Jay Carney from the Obama White House. He was Obama's spokesperson to come in and head up PR and government relations. Um, but just given the culture at the company and some, frankly, bad own goals, it doesn't go well and it hasn't gone well.

Corey: No, the, the, so often they are so surprised by the public reaction to something. Like the, the whole peeing in bottles scandal happens, and then it comes out that, yeah, no, this is happening quite a lot. Then a month later at reInvent, they give water bottles to everyone as a, as a, a swag. It's just, It's a little tone deaf, uh, sorry, I'm not sure if you're aware of this or not, because in your book you refer several times to, um, Amazon's Cloud Confab in Las Vegas, and I just, part of me wonders how many times Amazon PR reached out to say, It is called reInvent, please use the proper branding.

Little r, big I, colon in the middle. Like that, that seems a thing they would care about more than the substance of what you say, because it feels like they miss the forest for the trees on that.

Dana: Yeah, it's interesting. We do detail a pretty combative stance that forms both in the government relations side, but also the PR side.

So Jay comes in and Their immediate approach is to where they would have ignored stories and government in the past was to like sort of over corrupt and try to stop the narrative forming. And you know, they famously get, you know, nuclear with the New York Times and the New York Times writes that scathing investigation into Amazon's culture.

These are two Pulitzer finalists, I think, that wrote the report, um, really credible reporters at the New York Times. And Amazon, you know, decides to write a nasty Medium post about them and their reporting methods and try to attack them publicly. And you see that playing out also, you know, on the Hill. I spoke to people involved, aides on the congressional investigation into Big Tech, which happened a few years ago.

Congress started investigating whether Amazon was a monopoly, but also Apple and Facebook and Google. And Amazon's stance there was just so different than their peers. The other companies tried to be helpful. They, you know, took on typical lobbying techniques with Congress. What everyone in Congress told me and their aides told me was that Amazon was super combative.

One source told me that Amazon had the biggest middle finger to Congress approach he'd ever seen in his life. Right? So, and a lot of this is driven by, by Jeff, like the scene in the book where he and his lieutenants are on zoom calls or chime calls as they call it. Crafting up nasty tweets at senators is like indicative to more broadly how they behave in these circles.

Corey: Massively so. It's, uh, there's a certain arrogance to it that is surprising, to put it. I say it's surprising, but I guess it really isn't. It's, on some level, when you have enough power to get almost anything that you want, and it's not just money, it is power. In, in this day and age, those are easily conflated.

But, uh, At some point, they believe that when they don't like something, they can change it by sheer force of will. And they always seem flabbergasted when that is not true. They've been on a massive kick lately, talking about how great they are at generative AI, despite being the worst at it out of the big three providers.

Dana: Can I actually share another anecdote that's sort of indicative of this? You know, they like to try to change the narrative or beat it down rather than like maybe addressing the underlying causes for the narrative. So there's a scene in the book that I've heard from a lot of people about now, um, it's stuck with readers where there's an engineer in Seattle who's hired and he's kind of working around the clock for Amazon, but he's enjoying the work.

He's getting good feedback from his, his boss. And then all of a sudden he is put on a performance improvement plan, which is like dreaded at Amazon. It's a precursor to being in that bottom

Corey: 6%. The pip factory is how they're often referred to by relatively junior employees fresh out of school. They're not wrong.

Dana: So he's put on the pip, and it just takes a mental toll on him. To the point where he starts thinking about suicide and then he decides he's going to do it. And he goes to the office in Amazon, uh, the Apollo building, and types out this really just brutal suicide note and says that he's going to kill himself.

Because of what's been done to him at Amazon, and he wants this to be a cautionary tale to everyone else. And, you know, one of the last sentences is, now look out your window and watch me fall. He sends it company wide, he copies Jeff Bezos, the S team, the management team, and then he jumps off the building.

He, luckily he survives. Um, but he had a brutal fall and, you know, I have the 911 call and I could hear him screaming in the background. I could hear his panicked colleagues trying to help him, trying to get ambulances there. And Amazon's response was to immediately delete the email from everyone's inboxes and not address it.

And, um, I just think that's telling about how they, they dealt with that. It's an inconvenient narrative for them. Um, they didn't really want it out there. But they haven't changed their employment practices or their retention practices. And, you know, people are still worried about it being a pit factory.

It still affects people's mental health, and this was years ago.

Corey: You can get away on some level at small company scale with panic reactions like that, but you're not going to convince me that at a company of Amazon scale that there isn't a crisis response team who's, who plans out, okay, what do we do if, and then they basically do tabletop exercises all day to figure out what the crisis response is.

I know this because I've hired crisis comms consultants myself to solve some of those things at a much different scale. And There had to have been a playbook for what happens in the event of something like this going on and apparently control the narrative is the number one thing they do rather than how do we avoid getting into this situation in the first place.

The company pathologically lacks empathy for other companies, for customers in many respects despite their protestations to the contrary, and most galling to me the very fine people that build up the company and make the whole thing go. I don't want to see them mistreated. Tired of big black boxes when it comes to cloud security?

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com When Andy Jassy took over from Jeff Bezos as CEO, he added two new, uh, leadership principles. One is, uh, strive to be the Earth's best employer, which I guess that means the only employer that's left, because I sure don't see a lot of that. That, that feels like it's empty words on a page. And the other was that with success and scale come broad responsibility, which they seem very interested in shirking at every opportunity that they get.

Now, I'm sure there are worse things. That are happening internally that don't see the light of day. And to be fair, there are tremendously ethical people who work there. It came out as some sort of scandal years ago that Amazon experimented with using AI as part of their recruiting process, found that it was inherently biased toward basically people that look an awful lot like me, the cishet white dude hanging out here.

And Then just realizing, oh, this is bad, and then declining to deploy it. And people reported on this like it was some sort of scandal, but no, we ran an experiment, didn't make decisions, found out that it had that bias. We couldn't easily correct it, so we shut it down. That's exactly what you want to see from companies.

I don't like shaming them when they do things like that. That's, that's the right answer. It's when this other stuff comes out, and then we made how many untold billions of dollars in the next year from that unethical thing, and it's only discovered years later because of a whistleblower? No, you, you've lost the benefit of the doubt at that point.

Dana: There's a good example of that in the book actually. And in the FTC lawsuit, Amazon was using, um, a secret algorithm called Project Nessie, like in the lochness monster. That was very hush hush. People didn't email about it much. It was very neat to know. And basically what it would do is raise prices on Amazon's goods and test out price elasticity on the higher margins.

to get incremental revenue. Um, it would also get them out of pricing battles when there was like a sale across the internet at Walmart or, or Target, you know, cut the prices of their Barbies 20%. It would get them out of the down spiral, but they used it a lot to test the higher limits of pricing and with the intent that other retailers would follow them up.

So it would raise prices elsewhere as well. And what was staggering to me was that the secret project made Amazon billions of dollars. And they were just able to deploy that with the flip of a switch and they shut it down. But the, in Discovery, the FTC suit, um, Doug Harrington, who's now the head of Amazon's consumer business, discusses like, you know, let's bring back our old friend Nessie.

He writes an email because of inflation that they were trying to raise their prices again. And, you know, so the consumer customer obsession, Talking point that they like to pull out. I mean, that to me, it flies in the face of customer obsession. If you're trying to arbitrarily raise prices on that.

Corey: I will say, I don't know about you, hopefully not.

But given that you are somewhat of a public figure, I suspect I already know the answer to this one. I have had people obsessed with me in the past. It is not a positive descriptor when someone has an obsession around you. It's like, we are customer obsessed, that's why we're installing listening devices in their home style stuff.

It is, people misunderstand that very often, even internally, as meaning we want to advocate for the customer and do what's right for them. is not what the word obsession means. It means a massive over focus on them. Okay, that you can do a lot with that and it gives people an awful lot of leeway.

Dana: I never thought about it that way, but that's a, that's an interesting way to look at it.

But I would also argue that they are 1000 percent competition obsessed too, to a degree that I've, I've never often not come across in corporate America.

Corey: It's, there have been notable examples in the cloud space where they are extremely focused on finding out what other people are doing and then jumping in on it.

One thing that I wish the FTC would spend more time on in, uh, in this aspect is that it's challenging to explain to people not deep in the cloud space, but various Amazon's cloud regions are subdivided into what are known as availability zones. Traffic between them generally costs two cents per gigabyte.

Great. Now if you want to run a database service that you run yourself or some third party's offering between availability zones, you're paying two cents per gigabyte. Amazon's first party services are advantaged to the point where all that replication traffic between them is free. And are they the best service?

Absolutely not. But are customers using them in some cases solely because they can't afford not to? Also, yes, that's the sort of thing that, well, no one's going to really understand this. So we're going to go and down that path instead. And when we get called out on it, we'll claim that it's because of we're pricing it into our own dynamics of the service.

Sure, I don't know enough to dispute whether they are or not, but that's not what it looks like to the outside world. And it really rubs people the wrong way.

Dana: That's really fascinating. They almost have their own versions of the moats we see elsewhere on Amazon within AWS and that. Sort of scenario.

Corey: Oh, absolutely.

My, my running gag has been to call whenever they launch a service like that DocumentDB with MongoDB compatibility in parentheses next to it is the formal name of the service. So I just call it Amazon Basics MongoDB. It's, it's the crappy knockoff version that they're going to advantage themselves internally.

And that's a pretty big hit when I wind up making those references to my particular audience. And it's, I guess the value of your book across the board on this is. I felt a little bit like I have gone slowly mad over the last years because I see these things and I wonder am I just at this point reading tea leaves and driving myself nuts in some sort of diagnosable way where I have the cork board covered with string and I've no one has talked to me from the outside world for a decade and I'm seeing shadows of that in a lot of the stories you're identifying which tells me we're gonna probably need a lot more cork boards if it turns out that I'm nuts.

But at least I'm in good company.

Dana: You're definitely not nuts. I would say the reporting in the book is backed up by lots of sources that were in the room when these decisions were made. Lots of internal documents and some of the bigger investigations in the book that Amazon had tried to deny at the time were later confirmed by regulatory agencies, Congress, the FTC, agencies with subpoena power.

So you're definitely not losing your mind.

Corey: One thing that I've seen, at least on the cloud side, is where Companies like to ask me when they're debating making large spending commitments of, well, what if Amazon decides to become our competitor? To which the response is, what if? What do you mean if? It's a, it's a foregone conclusion.

It's possible they already are. People don't have that fear in the same way about Google, for example. The response there is, oh, what if they launch a, uh, half baked service around the thing that we do and then lose interest in 18 months and discontinue it? We should be so lucky. How can we convince them to do that?

People are scared of Amazon in a way that I have not seen. for other, from other companies. And those narratives are very clearly spelled out in the stories you're taking from sources in your book.

Dana: Yeah, that was really interesting to me. It was just how, it's what attracted me to covering this company to be a myth.

I was the journals mergers and acquisitions reporter for six years. And during that period, I just saw a change happening in, in boardrooms across the country. It started with the retailers being fearful of Amazon, but then it spreads to these other companies, and it seemed like there wasn't a public company in the U.

S. that wasn't talking about Amazon in their boardroom quite a bit. In 2017, Amazon was invoked on more conference calls than President Trump, which gives you, which is telling about like their power and also the fear factor here. So I wanted to get inside. Why Amazon was so feared across corporate America and how they seem to just seamlessly enter and dominate so many industries that they, that they spread their tentacles to.

And what's fascinating to me too, is that this has become a bit of like a bipartisan issue. In a very fractured political environment, Republicans and Democrats agree that this company has too much power. Joe Biden's team thinks this, so does Donald Trump's team. And there's a scene in the book that I was just like, kind of floored by, where this White paper winds up on the desk of President Trump's aides, and it's called, um, The Cost of Amazon's Dominance.

And in it, it basically says that the government needs to intervene or there will be no more competition left because Amazon will have decimated competition. And, um, person who wrote that was the team at Tryon Management, which is this giant hedge fund run by Nelson Peltz, this conservative billionaire.

Trump backer. Uh, this isn't, you know, a left leaning person. This is someone who's a pure capitalist and he has, you know, a really unique perch in corporate America where he has been on corporate boards of places like Disney and Heinz and he's, he understands how corporate America works because he's been on so many boards and he was seeing that this, that Amazon was Just decimating competition.

So he gets in Trump's ear as to his other billionaire CEO friends. And that to me was just like really fascinating that there's bipartisan agreement on this. There was even a congressional bipartisan investigation into Amazon's power and the other tech companies where they ruled that all these companies had monopoly power.

And. The fear factor can just not be overstated.

Corey: And I don't think that they're wrong. You had a quote from Dave Clark in your book. Uh, if we stay consumer focused, that's going to address most of this. Most of antitrust is about the protection of the consumer, and if we stay focused on that, we'll be fine.

Uh, it's a shame that, you know, Didn't stay focused on that.

Dana: Well, Amazon has benefited. So has Big Tech. They benefited in the 1970s and 80s. There was a reinterpretation of antitrust. You know, the antitrust laws were first derived in the Gilded Age during the time of like Standard Oil, the Sugar Trust, the Railroad Trust, when Americans were wary of how much power these big companies had.

So the antitrust laws are written and they're, and they're enforced in the methods of the trust busters, um, where they protect competition and competitors and small businesses. But in the seventies and eighties, there was a change in thinking led by the Chicago school. And there was this conservative judge named Robert Bork who wrote this seminal book called the antitrust paradox, where he basically says, The way that we've been enforcing antitrust is all wrong and we are inhibiting competition, not protecting it.

And he says, let's stop focusing on David versus Goliath. Let's focus on prices for customers. Let's focus on doing the right thing for customers. And that translated into low prices and efficiencies. So as long as you're providing a service at a low cost and you had efficiencies of scale, you weren't deemed anti competitive.

And that really just benefited it. All of big tech. Think about Google and Facebook. You don't pay as a consumer to get on their websites or their platforms. If you think about Amazon in those early years, it was the low cost retailer. It was undercutting everyone. So they were able to skate by and grow unfettered.

And so Dave Clark's quote there was largely right. Like they just said, if as long as we keep prices low and we're innovating on behalf of the consumer, we don't have an antitrust problem here. But what's interesting is Lena Kahn, who's the chairwoman now.

Corey: Lina Khan's paper was seminal in disputing that.

Dana: She wrote her own retort to Robert Bork, called Amazon's Antitrust Paradox, where she says, Hey Bork, who's now dead, but this hasn't worked out. These laws cannot regulate Amazon or the digital companies and we're creating gilded age digital monopolies. And they've grown to such size and power that we cannot regulate them under the parameters that you helped popularize.

And she's been on a warpath to reverse back antitrust interpretation to 40 years ago, and um, which has been really fascinating. She's saying you can't just skate by on low prices. What she ultimately brought forward was A lawsuit against Amazon about them raising prices. So it was a consumer welfare lawsuit, which was pretty fascinating to me.

Um, I think it's probably driven by a number of losses the FTC has had trying to, to enforce in the other way. But yeah, Amazon has really held on tight to their, their narrative that, you know, we are customer obsessed. As long as we innovate for the customers, we cannot be castigated.

Corey: Yeah. Must be nice if you can pull that off and make it stick.

But there's always a question around that. The, uh, the last question I have for you is in 2013, uh, Brad Stone wrote a book, uh, The Everything Store, and there was a review, still on Amazon as of today, I'll throw a link to that in the show notes, uh, one star verified purchase from someone named Andy Jassy, and it effectively, he writes very well, and just winds up, uh, tearing the book a whole, and its premise, uh, basically a whole bunch of holes, uh, you could, you could Choose your own opinion as far as how, how accurate that you agree or disagree with it.

My question for you is, do you think you're going to have, uh, some bright up and coming Amazon exec do the same thing to yours once the dust settles from this?

Dana: That's a great question. I didn't, I thought you were going to mention the Mackenzie Bezos review. That's funny. I didn't realize Andy did that as well.

You know, I wouldn't be surprised. It's also, you know, a strange feeling to be an author of a book that's really a critical look inside the and sell it on the world's. biggest platform for books that is the topic of the book, right? You know, you said that you read it on your Kindle. Well, 82 percent of all eBooks are sold on Amazon.

So they even hold a lot of power as it relates to distributing my book.

Corey: I really want to thank you for taking the time to speak with me today. If people want to learn more, and I don't know, buy the book, which I do heartily recommend. Where can they find you?

Dana: I am on Twitter at Dana Mattioli. On LinkedIn, same name.

And the book is sold wherever books are sold. We would really appreciate if you help your local bookseller. I've spoke to so many of them for this book. They are some of the nicest people in the world. Some of them don't even take pay because they're so passion based. They want to be pillars of their community.

So if you have a great local bookstore near you and you want to buy it there, like give these people some business. Bookshop is a good way to help local.

Corey: And we will of course put links to that in the show notes. Thank you so much for taking the time to speak with me. I appreciate it. Dana Matteoli, reporter at the Wall Street Journal.

I'm cloud economist, Corey Quinn, and this is Screaming in the Cloud. If you enjoyed this podcast, please leave a five star review on your podcast platform of choice. Whereas if you hated this podcast episode, please leave a five star review on your podcast platform of choice, along with an angry comment talking about how terrible it was.

I look forward to reading it, Andy.