Bloomberg Studio 1.0 - Amazon CEO Andy Jassy

Bloomberg Studio 1.0 - Amazon CEO Andy Jassy

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Thank you Andy so much for coming down. It's really wonderful to have you here in person. It's my pleasure to be here. Thanks. I just found out we actually lived in the same dorm in college just a few years apart. So it's been almost a year since you took over from Jeff as CEO of Amazon. And it's been a year of firsts. The first stock splits since the dot com boom the first vote to unionize an Amazon warehouse. Your first Bloomberg Technology conference. Thank you. I want to start with a quick report card.

In February 2021 Jeff Bezos shocked the world by announcing plans to step down as Amazon CEO. A few months later he passed the reins to Andy Jassi his longtime top lieutenant the architect of one of the company's biggest profit engines. Amazon Web Services. Bezos has stayed on as executive chair leaving Jassi to navigate a critical inflection point in Amazon's history. How does the company manage market turmoil rising inflation and regulatory scrutiny and a push by some warehouse workers to unionize all while keeping customers coming back. Joining me on this edition of Bloomberg Studio 1.0 Amazon second

CEO Andy Jassi. He joined us from our flagship Bloomberg Technology Summit in San Francisco. I'd like you to grade your view of Amazon's performance and we've got time later to really dig in but quickly how would you grade Amazon's performance over the last year with customers. Well I think we you know I'm not sure I'm the right person to grade myself during the year or not but I I'll give you my take. You know I think with respect customers I think we've done a lot of good. And I think if you look at during the pandemic which really has extended till the early part of this year you know so much as the PPE and food and essential items and people equipping their home offices were bought from Amazon. And you know to scale the way we needed to remember in 2000 20 we grew 39 percent year over year on a two hundred forty five billion dollar revenue run rate. I mean it's very it's unprecedented. It's never happened before but it was really hard to do that.

And we had to take the really big footprint of fulfillment center footprint. We built the first 25 years on Amazon and double it in 24 months. We built out that transportation network. And just a couple of years you know we nearly doubled the size of our workforce during that time. And I think you saw it in other businesses. It was a really big part of helping

companies and governments have business continuity during the pandemic. And so many companies and organizations in the last year made the strategic decision that they were gonna stop running their own infrastructure technology and disproportionately chose eight of us to help them move to the cloud. And we spent a lot of time helping to make that transformation. So what about investors. I mean the stock is down significantly from a peak last year. Obviously there's broader market turmoil. Yeah I think you know for investors financially I'd say it's mixed. You know I think we have some businesses are growing really strongly. If you look at E.W. s you know in 2021 grew 37 percent year over year. It's on a 74

billion dollar revenue run rate. Business is pretty unusual growth. And we grew 58 percent year over year. And our advertising business you know it's a 32 billion dollar revenue run rate business. So some business is growing really strongly. And you know we've continued to grow in our retail business despite pretty crazy comparables during 2020. But I think the real challenge for us there is on the cost side and there have been several things that have happened some of which are more control than others. You know I think the part that's less control is really around inflation. And I think we thought that inflation would start to attenuate in 2022. And with the war in Ukraine it just went the other way. It has significantly

accelerated. So the cost of trucking and line haul and ocean and air and fuel is just substantially gone up. And I think that will attenuate at some point. No one knows how long that will take. I think the more control areas for us are really around fulfillment center capacity and productivity. It was taking about 24 months to build new film and centers during the pandemic. And so we had to make decisions you know in mid 2020 and early 2021 on how much demand we're going to plant for. And

so you know we we end up with more capacity we need right now. And there's a number of things that we're working on. And we've stopped building on properties where we don't need it yet. And we've let a number of leases lapse and not a small number of both those things. We've had a lot of occasions in our history where we've worked on productivity made improvements and with a lot of clearly defined initiatives. And I'm confident we'll get back to the right level of profitability. You are going to

sublease 30 million square feet of space. Is there a mistake in the execution there because of the over again because you have to make these decisions two years in advance. And again if you put yourself back in 2020 where we were growing 39 percent year over year on a two hundred forty five billion dollar revenue run rate it's very hard to know what's the right amount to build. And you have to make a decision. And we made the decision to air on the side of our consumers and sellers. Now how would you grade Amazon's performance with employees your colleagues. There has been some high profile. Yeah I think that

when I started in this gig we had just create a new leadership principle to strive to be Earth's best employer. And I think we're you know we spent a lot of time trying to think through what that really means is broad. And I think we've made a fair bit of progress. But it's still early in my opinion. But I still think there are many areas that we can keep improving you know and I think you know the first one I'd I'd mentioned is safety. You know I

think that you know in our fulfillment centers that is the top priority. And you know when you get into the details the numbers and outside of all the spin of it all we're about average there but we're not trying to be average. You know we want to be the best in the industry and the best in the world at it. And that's a high priority and an area that I'm passionate about the team is passionate about. And I think we have a lot of work we can do to make our employees everyday lives easier. We have we've identified kind of a top hundred list of of areas that we can be better at. We are just metro nominally stepping through and so we met a lot of progress but we've a lot of work to still Elon

Musk just came out saying he has a super bad feeling about the economy. Tesla laying off 10 percent of his staff. Jamie Diamond says he's preparing for an economic hurricane. The World Bank just slashed its forecast for global growth. How do you feel about the economic climate. I wasn't planning on giving any guidance please. But see how bad or supersized bad. I think there's some things as it relates to Amazon that are useful to remember. You know I think the first piece is remember that 85 percent of the worldwide retail market segment share is offline. And if you believe that that equation is going to flip

at some point which we do I think it will we will flip over a long period of time. If you look at different downturns you know should we have one at some point. We've been through a few obviously in the 25 years that I've been at Amazon. Customers change their habits. And so you know I also think there's you know those two reasons those two factors give me some optimism that even if we have a downturn that we have the potential to still grow. We have a roadmap that's probably three to five years long. We're going to continue to advance. We're going to continue to be insurgent. And we have a lot of work to do to get to where we think we ultimately can get for customers. Now when it comes to the stock as I mentioned it has fallen

significantly. Do you think investors are missing something or has tech just been overvalued. And this also of course matters to employees who are significantly paid in stock. Well you know look I haven't been at Amazon for 25 years. I arrived at the company three weeks before I went public. I have never tried to predict what the stock's going to do. And any time I've tried to a little bit I've been wrong. So yeah I think it's I think it's pretty hard

pretty hard to predict what's going to be in any short period time. I do really believe that Benjamin that Benjamin Graham maxim that in the short term the stock market tends to be a voting machine. In the long term it tends to be weighing machine. And I think if you know we've been through a lot of points in 25 years. I've been at Amazon where the macro factors

are off and stocks are down. Our stock is down. But you can't really control that. We have a concept we talk about a lot at Amazon inputs and outputs and the ultimate output for a company a share price you know and then other big outputs a free cash flow or profit or revenue. You can't really manage the outputs. You have to manage it the input level. And that's where we spend all our time. And so if you do the right things for the business long term things tend to work out. I think we've had very good returns for investors and I expect that to be true again. Do you see Amazon strategy as fundamentally different from Netflix and Disney. And if so how.

What are the moon shots at Amazon that are capturing most of your time and attention. What is going to define the next era of Amazon. I mean is it is it Astro the home robot or is it something else. Well you know we have a unique way that we look at big new investments. And I'm not sure it's right or wrong. It just

happens to be our way. And we ask ourselves when we're considering something for questions we we ask if it's successful can it be big and move the needle in Amazon. Is it being well served today. Do we have a differentiated approach and do we have competence there. If not can we acquire quickly. If we like the answer to those questions we'll go pursue it with a single thread team that isn't distracted by the rest of business. And sometimes

that leads to innovation investments that seem pretty obvious. Like you know when I got to the company was a books only retailer and then we expanded to music and video electronics and toys. This seems obvious to people other times. That process does not lead to investments that seem obvious to people. I mean eight of us was something that people externally and internally

thought was a little bit nutty at the time. But just imagine what Amazon would be today without eight of us. And I think that you see the same thing here. You know that there are so many significant investments I'm making that I'm excited about. I'm going to have to constrain myself to a few. But you know I I'm really excited about what we're doing in the prime video space.

I think we're clearly on the right track there and building a significant business. That's interesting because Netflix also just announced some layoffs for subscriber loss in a decade. Disney cutting back on costs. Do you see Amazon's strategy as fundamentally different from Netflix and Disney. And if so how. Well you know we're very bullish on it. And remember we all the all the models are a little bit different. But for prime video we have 200 million plus prime subscribers who you know get that entertainment for free by being part of prime. And so we have a little bit different pricing model and some of the others. But I I'm incredibly encouraged by what we have coming. If you if you look at me we launched this show Reach earlier in the year was a

huge hit. We know the new measles season. We we just launched New Boy Season which is a big boys fan. I am a big as I thought. It's very good. Of course we have the rings coming up in September. There's no football so I'm very bullish about it. We also hear we're excited about what we've done with MGM. You know I think some of the assets there will go very well with the rest of what we're doing entertainment wise. And so if you look at Warner Brothers Discovery and Paramount Stars and Global they're building really significant subscription businesses. So I'm very bullish about that business. I'm optimistic that we have a chance to build a significant grocery business which is you know early stages for us. I am excited about Kapor which is our low

earth orbit satellite that we're building. Got to remember there are 300 to 400 million people in the world who have limited to no Internet connectivity. I mean just think about how different the world is when you don't have that type of connectivity. And so I think that's a really significant opportunity that has some of U.S. characteristics to it. I continue to be very optimistic about Alexa. You're building the world's best personal assistant. We have you know 200 million endpoints already that are using Alexa. We're clearly onto something there. And then you are autonomous driving ride hailing service and zoos that

we're building here in the Bay Area. I just think with the way auto consumption is evolving I think that also is a chance to be really significant business. Now I don't know if I don't know if all of them are going to be successful but if any one of them becomes the fourth pillar for us on top of Marketplace and Prime and eight of us we're a completely different company just like we were when eight of us became successful. So I think they're very worthwhile investments and bets. And I'm optimistic about. I didn't mention Astro obviously though powered by DAX. Yeah but I mean our home robots going to be. They don't yet. Where is it. Yeah it's not really widely available for sale. What's the status. I hope you get one. Okay. Thank you. Everyone's very

curious about Jeff's role these days. What kind of executive chair. He really is. He said when he left that he'd focus his attention and energies on initiatives that he really cares about as at Amazon. But from the outside it looks like he's really focusing on philanthropy. He's focusing on space. What kind of an executive chairman is he. Well you know Jeff is always going to be involved and he has. You know I I'm I feel very lucky to have been on Amazon for 25

years. I feel very lucky to have worked directly for Jeff for 20 of them. And we have a really close relationship and have for a long time. And I think we share a lot of the same values about customers and how important is optimized for customers and how high standards they need to be you know given how easy it is for people to switch and the importance of invention and speed. And so you know I just feel very lucky to have had the chance to work so

closely with him. So is your relation I mean he was your only boss for twenty five years right. Relationship fundamentally different than it was when you were the head of. Yeah. If you were ever in every single job you have the relationships different. You know remember Mike the first couple years I worked for Jeff I worked is what we call his shadow. Then it's really like a chief of staff. And that was different than when I was starting eight of us which was different from when we got 80 of us going. And it was you know a business that was starting to do well. And it's different when I'm in the CEO role. But you know the constant has always been that we have a great relationship and we collaborate really well. Amazon is poised to

become the biggest private sector employer in the world second only. Right now Wal-Mart is in that spot but Amazon will probably soon surpass it. First vote to unionize at an Amazon warehouse. I know you've been spending a lot of time at warehouses. When you look at someone like Chris Smalls who I think some people look at as

this modern day hero who got fired pulled off this union vote. What's your message to someone like him. Your message to the folks who think maybe we should join a union. Well I think that the first thing to be clear about is that employees get to make that choice whether they want to have a union or not. They always have had that choice. And it continues to be their

choice. And you know we happen to think they're better off without a union for a number of reasons including the fact that you know it's much harder when you have a union to have a direct relationship with your manager and to get things done quickly. So if you see something on the line that you think could be better for you or your team or you or your customers you can't just go to your manager and say let's change this. You know there's a whole process in bureaucracy that you have to go

through to be able to do that. You know and and we get you know when there's a union we're going to get the feedback filtered by what the union decides is worth bringing up. And we'd much rather hear from every employee whatever is on their mind. And so you know I think if you want to continue to have the structure that we've had for all this time you have to have really competitive benefits. And then I think if you look at Amazon's they're very unusual in this space. We champion the 15 dollar minimum wage several years ago. The starting salary is now over 18 dollars an hour which is more than double the

federal minimum wage. You get full health insurance and for a one K and 20 weeks up to 20 weeks of parental leave. And if you want to get a college education you haven't had one. We have a career choice program that gets our fulfillment center associates be able to do so. That is a very unusual and compelling set of benefits. And those were all accomplished

without a union. So yeah I think that we realize that we we have to continue to work on the relationship with our employees and we need to continue to provide the right benefits. And you know we need to continue to work on safety. And that's our intention. You made a huge mark on Amazon with NWS obviously. What is the mark that you want to make. Still. The FTSE has revamped its antitrust inquiry into Amazon and by some accounts is accelerating it. Are you preparing for an antitrust lawsuit from the FTC. If you are a large company it's growing as to a significant extent. Like we have you have to be

prepared to be scrutinized. And we have known this for some time many years and we have tried to run the company with that in mind and knowing that if somebody got there we would stand up to that scrutiny. And you know I think that's what we've tried to do in running the business. We can't control what you know whether organizations spring different suits against us. But I

think if you look at our business if you actually look at the fact if you take out of you know take out of the equation that there there may not be the most objective you know leadership when it comes to Amazon in that organization. If you look at the facts you know in our retail business we're about 1 percent of the worldwide retail market segment share. And remember 85 percent of us still offline. And if you look in our eight of U.S. business we know about how you measure it. Ninety five

percent of the worldwide global I.T. spend is on premises. And then we have a cloud business and then we have a portion of we the leading market segment share in the cloud part of this. But we operate you know we compete with native U.S. is really on premises I.T. in addition to the cloud. So you know these are relatively small percentages of the entire pie and you can kind of step through all the businesses. And I think simply because you've been successful in a few different businesses doesn't somehow mean that you have a natural market power. It just means you've been successful in a couple of different customer experiences. But we still have a relatively small amount of market segment share in those areas. What about the FCC are

being sued by them over third party data and how you've used it. Do you think in the past Amazon made mistakes with letting employees internally see how those third party Sally Sellers were dealing with pretty good control. I mean you know we of course disagree with the premise of that. But I would say that we have very good controls with respect to the data that the different police sets are able to see. And by the way I think that we can be better for sellers. You know I think that we can have better tools from the get started. We gave better

tools from the manage what they're doing across the different Amazon units. I think we can communicate. There's a whole bunch of things we can do better. And we agonize over every single email or communication we get from sellers. And we do very regularly robust serving. And a lot more sellers are happy with Amazon than unhappy with Amazon. And I think if you look at what what they're able to do is you know as a business buy virtual selling on Amazon versus not completely changes with possible sellers don't really long for e-commerce software that exists in lots of places. And it's not very expensive. What they love about selling on Amazon is that they get access to our hundreds of millions of customers and that completely changes what their prospects can be in terms of the businesses they're building. So we have a lot of work to do there like we do in a lot of other places. But I think we have a very strong partnership with sellers. What's the view of the supply chain right now and how

much pain there is going to continue to be and for how long. Well you know I think that. There's a lot of challenges in the supply chain still. I mean it's it's gotten better than it was. But there are all sorts of challenges. You know non-perishable goods electronics chips is still a really significant issue for all sorts of businesses. We have worked really hard to open a lot more points of presence in ports and to increase our capacity and getting products in. But I think it's going to be something that companies battle with for some time. You made a huge mark on Amazon with NWS obviously. What is the mark that you want to make still on Amazon. I mean

in this new role what's going to define the Andy Jassi era. Well I don't I don't really think of it that way Emily. I mean I don't think it's really about an anti Jazeera or any one person you know. And and by way of U.S. was not about any one person that you know if you spent a time honored to be less that is an unbelievable team not just incredible leadership team which it is but just top to bottom. The number of inventors and people care about customers and operate you know something where it has to work almost like a doubt and it's always teams. And so I look at every single one of our businesses and you know take our

retail business or our consumer business which is the oldest for businesses 85 percent of it still gives off light. I think we have a lot of upside and a lot of growth. And I think as much invention as we've seen the last 25 years you know the time I've been there I think that it's going to look small compared to the next 25 years. There is a lot for us to invent on behalf of customers. And so I'm excited to be part of the team that makes it happen. You know we are continuing to you know to increase

the amount that we give back to the communities in which we have big presence. And that really matters to me. I think we have a responsibility to do that. And so you know it's it's a long journey that we're working on but I'm excited be part of it. And you know I hope for a long time. Well thank you for joining us and telling us about the way the journey is going so far. Thank you. Jihye Lee Rishaad Salamat.

2022-06-16 15:37

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