Inside Amazon’s race to become a $10 trillion giant

Amazon (AMZN) didn’t become the tech and retail giant it is today by sitting back and watching its competitors do business. The Jeff Bezos-founded company has long been seen as ruthless on prices and a relentless innovator, but at the core of those things is the notoriously cutthroat Amazon culture, believed to be a win-at-any-cost mindset. But Amazon’s ways may be catching up to it, with the Federal Trade Commission (FTC) on the attack against the company for its alleged monopolistic behavior. So what’s next for Amazon and its investors?

Yahoo Finance Executive Editor Editor Brian Sozzi talks with Wall Street Journal reporter Dana Mattioli about her explosive new book, "The Everything War: Amazon’s Ruthless Quest to Own the World and Remake Corporate Power." Neuberger Berman senior research analyst Daniel Flax — who has long covered tech stocks such as Amazon — also joins the conversation.

Key video moments:

00:00 - Dana Mattioli and Dan Flax join Opening Bid
01:00 - The Amazon culture driven by Jeff Bezos
09:00 - What does Amazon's fierce competition mean for its employees and shareholders?
12:10 - FTC anti-monopoly lawsuit against Amazon
17:07 - How AWS stands as a separate business

Video transcript

Hey there, my investing, curious friends.

Welcome to opening bid.

I'm Brian Sazi.

Yahoo Finance's executive editor.

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Now let's make some money and get a lot smarter joining us.

Now is Wall Street Journal Reporter Dana Mattioli, who is also the author of the new book, The Everything Amazon's Ruthless Quest to own the world and remake corporate power.

Great, great uh title there.

Uh Here with us as well is Daniel Flax Newberger, Berman, senior analyst who covers tech stocks.

Welcome to you both.

I appreciate it.

Dan.

I'm I'm sure you're, you're glad that this book is done.

You read it, it's done.

It's off your plate and now you go back to reporting for the journal.

That's right how it happened in the world.

So I was, you know, I, I read the book um and I couldn't, I was surprised by a lot of things, but maybe you could take us through some of your surprises.

Someone that covers Amazon for the Wall Street Journal who really dug in here, talked to hundreds of people.

What were some of the surprises when you uh when you came out the other side of this?

I think some of the big surprises was just how this really brutal culture at Amazon driven by Jeff Bezos has resulted in some really shocking behaviors throughout the workforce.

It's a pressure cooker for an environment where employees are really tempted in order to stay ahead and keep their jobs to do some unethical, sometimes illegal things like spying on their own sellers on the website to reverse engineer their products, stealing ideas from entrepreneurs who come in to talk to them about an investment or you know, m and a due diligence and like even pumping new employees for documents from their prior employees to copy them.

So there's this copycat mentality throughout the company that is driven by stack ranking and other hr mechanisms because this is this pressure cooker.

We're going to touch on a lot of those things.

But you got me initially here with Jeff Bezos.

I mean, he's not ceo I mean, how involved is he?

Because the thinking is this is Andy Jassi's ship, he's running the operation.

Uh How big a force is Jeff still inside the company?

So Jeff is executive chairman, but the legacy that he created is this culture.

There's been 30 years of operating in Jeff's way.

And you know, there's a scene early in the book where Jeff goes to this retail gala.

It's 2006.

Amazon's a $19 billion company.

No one really takes them seriously in the apparel space.

And he walks in one of my sources sees him and says, you know, what do you doing here?

And he says, well, your margins, my opportunity.

And I think that tells you everything you need to know about the man.

Uh This was a time when Amazon was really just an ecommerce company, not even a giant yet.

And now they're the world's biggest cloud computing company, the third biggest digital advertiser.

They deliver more parcels than UPS and fedex, right?

And you know, while I was reporting out the book, they bought my doctor's office, one medical.

So their tentacles have just kept spreading.

And Jeff's view of having everyone's margin is his opportunity has really panned out, but also has the culture.

He wanted these people to have a killer mentality.

He says that early on in the book and they do because if you don't, you're gone, do they still let you in one after you wrote this book on the wall, I left it on one medical because it came a little bit uncomfortable.

Fair enough.

So I want to go line by line a lot of things you address in this book because I mean, I think it will surprise a lot of investors.

But Daniel, how is Amazon viewed on Wall Street at this point in its life, it's viewed as a company that's continuing to innovate.

They're much, much bigger.

So clearly, they have to create markets and they need to invest in places, they're going to fail very often in what they do.

But the key with Amazon and really these other big platform companies is the ability to iterate, change, evolve.

Even the cloud business, if you think about it, it came out of their own internal needs.

And so they were able to take that and then bring that to other customers.

And when we talk to customers, they get a lot of value there.

It's not that Amazon is perfect.

None of these organizations uh uh is perfect.

The key though really is is to innovate uh evolve your culture.

They, they are a very, they are a fiercely competitive company.

But if you look at the technology landscape, if you look at the retail landscape, all of these companies are, are fighting tooth and nail as it were and and many are not able to survive.

So as an investor, as a long term shareholder, we look at the company and think they're innovating in the ecommerce business more one day delivery, getting, getting you your toothpaste and paper towel, which I need.

In fact, I have a new toothbrush coming like overnight.

It was like $5 Thank you, Amazon.

I mean it is the cloud.

Think about all the new workloads in areas like generative A I and advertising.

They are big but that can be AAA meaningfully bigger company.

So you pull it together as a long term shareholder and they're not gonna make every single quarter.

But if they can empower the people on their platform, the sellers uh deliver value to the buyers in the cloud business, the developer community that in my view helps to create longer term shareholder value.

But it's a journey.

Do you still view Amazon as a Jeff Bezos lead company?

I think every organization is, is about uh the the in this case, over a million men and women who work there.

It's all the developers in the case of Amazon who build on the platform, I think Jeff Bezos has been a uh an exceptional uh clearly very competitive technology and, and business visionary.

However, I think Andy Jasse, I think all the other men and women who lead this company, those who are coming into it.

They are the ones who are going to continue to push ahead.

I don't think it's just about Jeff Bezos.

I think it's a lot bigger than that.

Dana take us inside Amazon's culture.

Yeah.

So this is a company that was started in 1994 and Jeff surrounded himself by sort of hippie Seattle types, very granola.

These are people that wanted to democratize, reading and in the early days, you know, these people were very different from Jeff and he was sort of using them to prove out his concept.

And there comes a time when he is sort of derisive toward their ambitions, he wants this thing to take off and make money.

And what happens is the company IP OS and it's off to the races.

Jeff and his CFO convinced Wall Street that this should not be valuated by profits.

We should be valuated by growth and that gives them so much bandwidth to steal share from everyone else and undercut prices and all the hippies leave and all the NBA S come in and the culture starts to change.

Jeff starts creating companies in his image and get these went to Whole Foods, right, which is now also owned by Amazon.

But you know, the hippies leave the NBA S come in and Jeff becomes enamored with Intel at the times doing stack ranking sort of like the Jeff Jack Welsh ge thing where they cut the bottom 10% of people every year and that has lasting consequences for Amazon's culture.

You know, it becomes punishing unforgiving people whose parent died, for instance, wind up on the chopping block because they missed they had a bad quarter where they're not really producing as much and cut to today.

It's a culture where people are fearful.

You know, there's a scene in the book where an engineer gets hired by Amazon and he's excited.

He's doing great work.

He's kind of working around the clock, but he loves it and it comes time for Yank and Rank and he's put on a pip performance improvement plan.

And in the, in the book, he goes to work and he sits at his desk and starts typing out a suicide note.

And it, it says this is a cautionary tale for my fellow employees.

And the last line is now look out your window and watch me fall, goes to the roof and jumps off and I have the 911 call, you could hear the other employees trying to save him.

They're calling the ambulance and saying get here.

Can you hear him screaming in the background?

And I think Amazon's reaction to that was really telling um this is during the work day, it's pretty traumatizing.

The employee survives.

But instead of addressing this publicly or with their, their own employees or helping with them with counseling, their whole plan was to delete the email from everyone's inboxes and pretend it didn't happen, go on with the day.

And what I've noticed in writing about this company in reporting out this book, speaking to 600 people including 17 ST members that reported to Jeff five board members that's like the high ranking super swat that reported to him and having hundreds of pages of internal documents is they rather bury a negative anecdote about them or something that's inconvenient.

Then address the root causes of why that's happening to begin with.

You know, the hr systems have not become any less punishing and that has resulted in some possibly illegal behavior and it has resulted in the FTC saying they are a monopoly that they are too big to exist in its current form.

Daniel, when I hear some of these stories, I just, that's shocking stuff but that culture, I think many would argue creates better profits.

It creates a company that just eats the competition for lunch.

How do you grade an Amazon like corporate culture?

I I look at the balance that Amazon is, is trying to strike and there's no question.

It is a a fiercely competitive environment.

Uh the margins in the retail businesses, I think we all appreciate our, our razor thin at best and in many cases, they may lose money as other retailers may lose money on a given product.

The key when I think about Amazon is that can they invest in their employees?

So for example, they give them uh opportunities to, to um uh take more classes.

Uh when you speak to some of the people in fulfillment centers is another example, they appreciate the health care benefits.

Uh they have raised wages.

And so I think it's, it's it's this idea of trying to invest in them, give them opportunities uh clearly it's a competitive environment and they are letting people go who, who aren't meeting their ranks uh excuse me, who aren't meeting their targets?

In some cases, those might not be correct decisions.

Do you want to see, do you wanna see companies make that, do that decision?

Get rid of underperformers and invest in top performers?

Is that how stock prices go up, stock prices go up, driven by the revenue growth and ultimately strong free cash flow generation and growth of that free cash flow generation.

In my view, you then have to layer on the market's perception of where a company is going to be in two or three years or even further.

Meaning is the company likely to be more valuable growing in new areas or shrinking?

I think all organizations including in tech, they are going to hire new people, they are going to let go.

Uh people who either aren't performing or in other cases, what you see is that if a company is pivoting out of a certain business, it may look to shut um that business down or sell it and in doing so, they will likely cut costs.

So I don't look at Amazon's behavior with employees and think they are, they are always perfect.

Uh They've clearly made a lot of mistakes.

What I look for is, is a company able to learn from its mistakes.

Are they able to make changes?

Um Are they able to engage with their stakeholders?

Uh putting uh shareholders aside uh the the employees, the regulatory bodies, all the organizations the sellers that those are really key to the vibrancy of the Amazon ecosystem.

And Amazon is doing a lot and I would say as with all platform companies, there's more to be done.

Absolutely.

All right.

Well, uh it's time for a quick break but don't go anywhere.

We're still rocking our usual 24 minute conversation.

So Dana, we were talking about Amazon's culture.

Has Amazon learned, have they learned from the observations in your book?

Are they still ranking and yanking human beings outside of the company?

They are still doing yanking rank.

Um They've also had this really combative way about them as it relates to press but also government relations.

You know, this is a company that's firmly in the regulatory spotlight.

You know, jurisdictions around the world have said that they might be a monopoly, including the FTC and instead of, you know, doing what typical company would do, which is, you know, make friends of regulators or at least lobby them in a way that's constructive.

They've really botched government relations and been, have been combative, which doesn't make any sense.

It doesn't because, you know, they could be broken up as a result of this lawsuit and, and in the midst of the, you know, the FTC calling them a monopoly, they've deleted all their signal messages for two years related to M and A and Antitrust, right?

So these are not the sorts of things that build bridges and sort of help you make your case when you're in the regulatory spotlight for those not familiar.

Why is the FFTC contending that Amazon is monopoly?

Yeah, it's really fascinating to Dan's point.

The seller base is really important to Amazon.

This is, you know, where 60% of all of their retail sales come from is third party sellers.

And you know, Amazon for years has been where 40% of all online shopping in the US happen.

So sellers need to be there.

And for the last decade, they've, they've known that and they've been able to extract more rent from these sellers.

So for instance, a decade ago, on average, Amazon took 90% of every dollar a seller made in revenue on Amazon today.

That's 45%.

And that means those sellers in order to have any sort of margin, a lot of them have had to raise their prices.

So basically whoever I ordered my toothbrush from is probably losing money.

But I mean, I need the toothbrush, maybe he's charging me more, charging me more.

And the FTC is saying that Amazon has this undue power over sellers on amazon.com.

And because if you're a seller on amazon.com, you have to charge your lowest price on amazon.com, your toothpaste, your toothbrush seller.

If he's charging you $5 on Amazon has to cover all those fees.

He's also charging $5 for that toothpaste on walmart.com and target.com.

Even if he could make more money on those websites is Amazon responsible for inflation.

That's sort of what the FTC law it is saying, not inflation writ large, but in e commerce, they're saying that we're all paying more because of Amazon's power in e commerce.

Daniel, how closely are you watching this FTC case?

Which is what starts in 2026 it will go to trial in 2026.

How big issue is this?

I'm watching it very closely.

Not just with the FTC.

If you think about the regulatory bodies in Europe is another example, Amazon needs to and really all of these platforms, they need to be more transparent in terms of how their platforms operate, how they use data, how privacy security, how all of these critical issues are being handled.

And it's not that Amazon I think will ever have all of the answers.

It's a case of are they, are they iterating?

Are they working?

Are they engaging with the uh for example, the regulators in France and the US and all of the different countries that they operate in Germany, Japan, the United Kingdom.

And so are they able to to basically take what they're doing uh work with the bodies to help shape the issues and and clearly if regulators and governments make it too onerous for some of these corporations, some of these platforms to operate, they may choose not to operate there or they may choose to have a smaller presence.

So as a government or a regulator, it's about striking a balance.

Clearly, all of us want more competition, more choice at the same time.

And you're seeing this more broadly in technology, for example, with semiconductors, governments are appreciating that in order to shift or improve the balance.

For example of where chip production happens, more investment is happening clearly in the United States in parts of Europe.

And so Amazon does need to do more.

I think it's a journey for them.

I think Andy Jasse and the leadership team have an opportunity to improve transparency.

But I still, when I think about what they're doing for a lot of their sellers, the buyers, the developers, uh consumers in general, I think they have been a positive force, not perfect but generally a positive.

Yeah, of course.

So what's, what's fascinating to me too is that they haven't been very transparent with their shareholder base.

I was able to get unvarnished financials from uh from my sources at the company.

It's not what they report to Wall Street, what they report internally and their balance sheet looks way differently than what's out in Wall Street.

For instance, you know, on the advertising part of the business, which is wildly successful for them, it's like a new Aws almost.

I was able to learn, you know, they don't report their profits.

I have their profits.

It's like a 90% operating margin which is mind blowing if you think about it for something that's growing as big as it is the retail side of the business which has this misnomer of not being very profitable.

When you see the unvarnished financials, it's extremely profitable.

There's billions and billions and billions of dollars more in profits that are not reported to Wall Street because they're invested in money losing businesses.

And that to me was like, very, very fascinating.

There's a lot, there's a lot of opacity when it comes to Amazon.

So Dan, I think it's, it's a very good point.

So it's important, I think for listeners to understand the perch from a new Burger Berman perspective, very influential person or our company in the markets.

Of course, how could cer or institutional investors about a breakup of this company?

Are they inclined to sell the stock today in advance of something like that happening or they can care less as long as Amazon is beating quarters, Brian.

I think it's a very interesting um time for Amazon because if you look at, for example, Amazon web services, were they to separate that business?

Uh it would be worth uh a a significant amount some uh e even close to the majority of the share price of Amazon today.

And that business has healthy double digit revenue growth prospects, attractive margins.

They're investing tens of billions annually and maybe I'll double click on that point if you think about what Amazon has been doing in their retail business clearly in their cloud business.

They're investing tens and tens of billions in R and D and capital expenditures every single year through good economic times and through tougher ones.

And that's helped them deliver differentiated solutions.

But to go back to that point, Amazon web services would be worth a significant amount.

There are elements in their retail business where they're losing money.

So for example, many international markets, they're investing, hoping to turn profitable 789 years from now.

And so in my view, they're taking very much a longer term framework or horizon there, the key is that were they to break it up?

I suspect it could be worth more assuming in the retail and the advertising business they could continue to execute.

Well, I would imagine they would look to further cut costs of some under performing units in that scenario because it would need to exist on its own.

And so when you look at Amazon, even some of the other tech platforms, there is an argument to be made that they actually would be worth more broken up.

How serious do you think Amazon is about making its own chips?

And does that enhance the value for a business like that?

Investing in the silicon and and really bringing a level of differentiation to the chips in your environment?

So for example, uh inferential trainum on the Artificial intelligence side, Graviton where they've had a lot of success where you're able to come up with chips that give you the the cost benefit could be lower power performance.

That really makes sense in your environment.

I think it's incredibly important you're seeing others do that.

Google has done that very successfully.

Uh Apple does that.

And so the ability to build from the silicon up uh I think provides a level of differentiation, a level of, of stickiness if you like that's powerful, all of these companies though, they're going to invest internally.

But of course, uh Amazon's gonna rely on partners like NVIDIA Intel A MD.

And so you have to do both, but the silicon differentiation, I think is very, very valuable.

How does Lina Khan um go about breaking up an Amazon?

I mean, she's laid the groundwork, she's laid the groundwork.

What if there is a change in the White House?

I think if there's a change in the White House, this lawsuit stands, I've been speaking to people in the Trump administration.

I spoke to, you know, Peter Navarro from my book in addition to calling Jeff Bezos a sociopath on the record.

He said that if, if Trump would have won a second term in the White House, they would have broken the company up.

Um So there's no love lost between, they don't like each other.

I mean, Bezos took a lot of hits during the Trump administration.

It's partially because of his ownership of the Washington Post.

But Donald Trump's friends told me a big impetus was that Donald Trump was jealous of Jeff bezos' wealth.

So there's that too.

So there, there's like also personal animus there.

So, you know, if, if Trump wins, I don't, I don't think Lena would be the chairwoman of the FTC, but he, you know, he's the one who opened the lawsuit and it was under his terms.

Um, so I think, I think it stands if the company were to be broken up, you know, she hasn't explicitly said that.

But if you read the lawsuit carefully, there's language that basically says a breakup, it wouldn't be a wholesale breakup of the company because the lawsuit's pretty narrow.

I think it would more be logistics versus retail, maybe spin off FB A and logistics and that becomes its own company.

But to Dan's point, you know, there's a lot of parallels in my book between Amazon and Standard Oil and Standard Oil fought a bro, a breakup to the nail.

John Rockefeller did not want to break up standard oil.

The government breaks them up in 1911.

It was the best thing that ever happened to him because all of the disparate pieces quadrupled in stock market value.

Post spin off, he became even wealthier.

And there's an argument that that could happen for Amazon here.

If there were a breakup.

Talk to us, Dina quickly about the unethical behavior.

Uh You discussed in the book about a oh, where do I start?

Um One anecdote really stuck with me because Amazon is one of the biggest companies across industries, you know, beyond retail, a lot of founders have to meet with it for, you know, investment like a series A or, you know, M and A talks and the same pattern played out time and time again.

A company would go to Amazon divulge all of their information, their product, road maps, their financials take hours of meetings.

Amazon would bring all the leaders of its top businesses to these meetings, people that stood to benefit from this information and then the company would get ghosted and Amazon would announce the very same product a year later.

And this just decimated a lot of companies.

And I found in my reporting that it was basically by design, Amazon had a clause in its entities called a residual clause that said, and this was unique to Amazon.

Anything retained in the memory of Amazon's executives during these due diligence, meetings could be used without legal impunity, so we could use anything we learn in these meetings and we can't be sued.

And there's very vivid examples in the book where Amazon does just that.

I mean, the Alexa is an example of this back in the early days where they met with a company called UBI and might have ripped off its technology and learned everything from it.

Wow.

All right.

Uh Daniel, no pressure here in the last 2030.

Yeah, about 30 seconds we have left buy, sell or hold Amazon stock, based on everything that you've learned here today and based on your understanding of the company buy Amazon stock for the growth, the reinvention, rapid failure in instances, but the ability to come out stronger, through empowering others to be successful on the platform.

All right, fair enough.

Uh We'll leave it.

Uh We'll leave it there.

Daniel Flack Newberger, Berman, senior analyst who covers tech stocks and, and of course, Amazon and then, uh Wall Street Journal reporter Dana Mattioli, who is also the author of the new book, The Everything More.

Amazon's ruthless Quest to own the world and remake corporate power.

Thank you both.

I appreciate it.

Thank you.

That's it for the latest opening bid.