Speaker 2
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,
Speaker 1
Jerry Storch, who was the CEO of Toys R Us, first worked at Target on.com, and he told me a story that he got yelled at by senior leaders for spending $10,000 on buying the domain name TargetStores.com. That's an amazing
Speaker 2
story in the book, which is like $10,000 for
Speaker 1
a domain like that is a rounding error. But so careful with their money because it's a hard business, right? And so, yeah, Target, Borders, Toys R Us. Toys R Us. And 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
Speaker 2
they figured out, you write in the book, they figured out that if they were losing $65, $70 million a year on their site, hey, we could charge them $50 million and it's a cost saving for them. Yeah, they just came up with an arbitrary number below that threshold. Just astonishing. So let's stay with books for a minute. I'm fascinated that Barnes& Noble tries to respond very aggressively to Amazon and they figure we're going to take over wholesaler Ingram in order to get a little more bulk, be able to withstand Amazon, which at that point had become a substantial market share of the book selling world. And Amazon gets the takeover stopped on antitrust grounds. How ironic. Explain what happened there.
Speaker 1
Yeah. So Barnes& Noble, in order to stay competitive, tries to buy Ingram, this book distributor that Amazon also used. And Amazon cried foul and said this 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& Noble at that time. And Len Riggio, the CEO of Barnes& Noble at the time, calls them out on it. He says, you're crying foul and pretending like this is going to hurt this little player, but you are the behemoth here. You know, the regulators do turn it down. They say that the fifth industrial revolution is about human centricity, about building
Speaker 3
technology to enhance our abilities and productivity. But previous revolutions haven't exactly been kind to ordinary workers. Can this one really be any different? Can we build a more utopian view of the future while respecting the forces of industry? I'm Hannah Fry, host of The Exponential Era, and I got to sit down with an expert at Nokia Bell Labs to ask these questions. Find out their answers at bloomberg.com forward slash Nokia. From the Delta Sky Club. Welcome back, Delta Airlines relies on 5G solutions from T-Mobile for Business to power operations and serve customers faster. Together, we're putting 5G into the hands of ground staff so they can better assist on-the travelers with real-time information throughout the airport. This is elevating customer experience. This is Delta Airlines with T-Mobile for Business. bloomberg Business.
Speaker 2
Take your business further at T-Mobile slash now. 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 shareholder letter, I want to say 96, something like that? 97, the same year as the IPO, warned 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. Tell us a little bit about what an advantage and how prescient that shareholder letter from Bezos was.
Speaker 1
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 be 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 electronics. It allowed them to build the everything store. And then it allowed them to put this money toward other areas of growth beyond retail and really create this Amazon octopus. To
Speaker 2
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's like in the 90s and early 2000s before there was an AWS. You had to go out and buy a couple of hundred servers and a lot of software engineers to put this together and to manage it. And then you had to build, like you were reinventing the wheel every time there was a new startup. Tell us about how Andy Jassy kind of looked at this and said, hey, why don't we just do this once and scale it for ourselves? And maybe someone else will want to buy the excess from us.
Speaker 1
Yeah. So Andy Jassy, who's the CEO today, started at Amazon 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 Andy 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. If we need this, other companies probably also need this as they explore expanding online. So they productized it. They created a company called Amazon Web Services. It was very iffy as to whether this would take off. They didn't dedicate a ton of resources to it at the beginning. Andy remembers sheepishly asking for like a few dozen employees to work on it with him and thought that was like a big deal. Standalone, if this were to be split off from Amazon, would be one of the biggest tech companies in the world on its own. And one
Speaker 2
of the biggest sources of profits for Amazon as
Speaker 1
well. An enormous source of profits.