A Ruthless Quest to Own the World

Today’s column is an interview with Dana Mattioli, author of “The Everything War”, a meticulous and jaw dropping account of Amazon’s quest to fundamentally reset the limits of corporate power. The book comes after investigating the company for five years at the Wall Street Journal where she is the newspaper’s lead Amazon reporter. Dana is an eighteen year veteran reporter at the Journal across the retail, M & A and technology beats with a heavy focus on investigative pieces.

I’ve been writing columns about Amazon’s thirst for hegemony since 2017 and the book is chock full of page turning stories I was wholly unfamiliar with. I won’t spoil any specifics but the Everything War is more page turning thriller than classic business story. In the same way that The Power Broker perfectly captured the zeitgeist of how one man reshaped America in his image in the mid 20th century, The Everything War tells that story in the internet age…with Bezos making Robert Moses look like a mere amateur. 

You can purchase The Everything War here at Bookshop or if you’d love to bask in the cognitive dissonance, here on Amazon. 

Mallazzo: Let’s start with the early years. So much of Amazon’s dominance is rooted in the fact that they convinced Wall Street to tolerate steep losses on the prospect of future growth……an absurd notion for a retailer at the time. In that regard, early CFO Joy Covey (who was killed in 2013 by a van carrying Amazon delivery packages) seems like the most important employee in Amazon’s history as she primarily sold Wall Street the dream.

Why isn’t she a household name in Silicon Valley and broader American business lore?

Mattioli: Employees from those early years told me that without Joy and Jeff’s salesmanship during the company’s IPO that Amazon would likely not exist today. It might not have even made it a year past its IPO.

They did something that was incredibly unusual at the time – they convinced Wall Street that Amazon should not be valued based on its earnings, but on its growth. That’s common today, but was not by any means back in 1997. And this gave Amazon this incredible lifeline. They could undercut competitors on pricing to steal market share, they could reinvest in growth without having to manage to Wall Street. Their competitors, meanwhile, had to hit their earnings targets every single quarter or risk going bankrupt. This meant that their competitors couldn’t even get enough money from their boards of directors to properly start an ecommerce arm.

There’s a scene in the book that is pretty telling. Gerry Storch, then a senior Target executive, gets yelled at by Target management for spending $10,000 on a web domain address for Target. So Covey and Bezos’s ability to go for years without profits created this strategic advantage over the rest of retail that just created a wider and wider delta between Amazon and everyone else. (This paired with a tax loophole that allowed Amazon not to collect sales tax in many states for as recently as 2017 was deadly for a lot of retailers.)

I think Joy’s involvement in training Wall Street in those early years is really underappreciated. Without that foresight and salesmanship, Amazon would likely not be the company it is today.

Mallazzo: One of my favorite little telling details in the book is how often Amazon PR/comms goes out of their way to object to fairly innocuous depictions of Bezos being “ruthless” or “belligerent” in incidents from decades ago. Amazon didn’t respond to many of the sweeping exposes in the book– any idea why they specifically dug their heels in here?

Mattioli: The book has a number of exclusive anecdotes that show the extent to which one of the world’s richest people can be remarkably petty and thin skinned. This includes Bezos calling up the new CEO of Toys R Us during his first week of work and asking “How’s it feel to work with poor performing people?” to telling a fellow CEO “Your margin is my opportunity.”

In later years as Bezos’s profile rose, he urged his deputies to use a combative stance with politicians and reporters that often backfired and led to some high-profile own goals, like Twitter spats with Joe Biden and members of Congress. Amazon’s team botched government relations in Washington, D.C., with a pugnacious Bezos often sabotaging the company’s efforts because his snap reaction was to fight with those who criticized him or the company. Amazon survived four years of a Trump White House where the president continuously attacked Bezos and Amazon only to be spurned by the Biden administration which deemed Bezos “too toxic to touch.”

I think Amazon’s responses in the book specifically to unflattering anecdotes about Jeff reflects this combativeness that you see throughout the book and this broader personality trait of Bezos being very sensitive to personal criticism, even if some of the things they push back on are dated and less consequential than the truly shocking behavior in the book related to the company’s business practices.

Mallazzo: By the time the FTC’s case against Amazon officially goes to trial, Jeff Bezos will be five years removed as Amazon CEO. That said, the trial could serve as a major referendum on his legacy. How much do you get the sense he’ll be puppet mastering parts of Amazon’s defense vs. stepping aside and letting Andy Jassy and David Zapolsky run the show?

Mattioli: I don’t think he will be a puppet master here, because as the book shows, Bezos was a) horrible at DC interactions and b) didn’t like spending his own time on lobbying and courting politicians.

That being said, while he won’t orchestrate the company’s response, his broader legacy is the culture he created at Amazon. I think that some of the predatory behaviors in my book are driven by the company’s culture. I have covered companies for nearly 18 years at the WSJ and I have never encountered such an aggressive and cutthroat culture as I have at Amazon ( and I used to cover investment banks!) They use stack ranking, they backload stock and there is a real fear of being axed. This is a pressure cooker that causes some employees to do whatever they can to stay ahead and keep their jobs. Even if Jassy wanted to change the culture – and I am not sure he does – it would take years to reverse the ways that Amazon employees are conditioned to behave and to win. And in the meantime, I think that could result in more problematic and anticompetitive behavior.

If you’re auditioning for your job each day against equally brilliant coworkers, it could be hard to resist taking a look at data you’re not supposed to see and copying a product. It could be difficult to “forget” intelligence you learned in deal talks and not use it in your own product. It could be hard to kick sellers off your website selling dangerous goods since they are padding your numbers.

Mallazzo: While cynicism dripped throughout the media industry over Bezos’s ownership of the Washington Post, the paper actually did reasonably well under his ownership (for a time) with minimal signs of overt intervention from the boss.

Was there ever a real Amazon information flywheel play for Bezos in owning the Washington Post or do you still mostly take him at face value that this was an earnest investment in preserving a pillar of the fourth estate?

Mattioli: This is the rare instance of a billionaire buying a newspaper and not trying to exert political influence. From what everyone has told me about Bezos’s ownership of The Post, he does not meddle in the journalism. But, that doesn’t mean that the perception of owning it for the wrong reasons hasn’t hurt him.

Some of the funnier parts of the book related to reporting out the pissing matches between then-president Trump and Bezos. For Trump’s part, he couldn’t imagine a world in which a rich person would buy a newspaper and not use it to attack his enemies. So, he viewed every investigation and negative article from The Washington Post during his time at the White House as a direct assignment from Bezos to the Post’s reporters, which was entirely not the case in reality. So, between being jealous of Bezos’s wealth (a scoop in the book) and the Post’s negative coverage of his White House, Trump attacked Bezos, The Post and Amazon publicly and in tweets for four years.

Anthony Scaramucci even told me recently that in his short tenure at the White House (just ten days) the President called him into the office and asked him: “Can we break up Amazon? I hate this son of a bitch Jeff Bezos and I hate the Washington Post."

Mallazzo: THE MOOCH ENTERS THE CHAT! The Post lost $77M last year so maybe even the most relentless business genius of our age isn’t cut out for the media business 🙂 

Swiching gears, The US Amazon seller community is always something of a mercurial lot but current frustrations with the platform are at a boiling point. Any sense from your reporting whether improving the relationship with American sellers is seen as a core initiative? 

Mattioli: That dynamic with sellers is truly a love-hate relationship. It’s interesting, I think at the senior levels of the company, executives truly don’t understand how hard it is for their own sellers and they view it as a really rosy relationship. What I found while investigating the company for this book is that many sellers feel like they are caught on this hamster wheel where every year the economics for them get worse and the economics for Amazon get better. There are scenes in the book where Amazon’s private brands employees are literally spying on their third-party sellers to copy their products for Amazon Basics because of the pressure cooker culture at Amazon. We also show the human toll for sellers of being beholden to one platform. Forty percent of everything sold online in the U.S. is on Amazon.com. There are 200 million Prime members worldwide. Sellers have to be on Amazon, and Amazon knows that. That means that Amazon has been able to steadily increase its cut of what sellers make on the website. A decade ago, on average, Amazon took 19% of every dollar a seller made. Today, Amazon takes 45%. That’s made things untenable for a lot of sellers while only bolstering Amazon’s bottom line.

There’s an example in the book that really paints this picture. This seller took over his Dad’s Ohio-based business which sells items like industrial-sized buckets. He wants to bring it to the digital age so he puts it on Amazon, and they get orders from all over the country, which seems great. But after all of Amazon’s fees, from advertising to logistics to Amazon’s cut, the $10 million in revenue he makes on Amazon.com dwindles down to just $30,000 in profits. He is floored by how little he actually makes at the end of the day and basically says he can make more as an Uber driver. That dynamic is playing out all over Amazon.com with sellers.

Mallazzo: Much of the challenge for independent American sellers is the exponentially increasing cost of PPC, something that is exacerbated by Amazon’s laissez faire attitude towards grey-hat tactics used by Chinese sellers and occassional direct manipulation of the marketplace to box out rival brands.

You’ve done a ton of excellent reporting on Amazon’s manipulation direct keyword blacklisting of key competitors in particular, a blatant anticompetitive practice.

Why do you think Amazon’s ad manipulation has flown relatively under the radar from an antitrust perspective compared to things like Amazon Basics and buy box suppression?

Mattioli: When the Federal Trade Commission or Department of Justice bring forward a lawsuit, they have to make a cohesive argument, and it can’t be a kitchen sink sort of case where they throw in every anticompetitive or problematic behavior they’ve found. When it comes to the FTC case against Amazon, the agency alleges that Amazon is an illegal monopoly, and they focused on a very narrow set of behaviors related to Amazon’s ecommerce power and how that has resulted in higher prices for customers on Amazon.com but also the rest of the internet.

This case is a pretty classic “consumer welfare” lawsuit, which is how the last 40-something years of antitrust law has been interpreted, even though FTC chair Lina Khan has railed against just judging competition based on prices for consumers. To me it signals that the FTC is being more careful in its lawsuit against Amazon. The agency had some pretty big losses in tech where it relied on more novel antitrust theories. This one relies on a standard of enforcement that the courts have recognized in more recent history.

Mallazzo: And therein lies the dilemma facing Lina Khan— she’s making a consumer welfare case against an institution that is broadly still among the most popular in America. Politically speaking, Amazon has always enjoyed considerable bipartisan support from the more moderate (well, really corporate) politicians on both the left and the right while facing sharp criticism from both parties populist factions.

Who creates more headaches for Amazon internally– AOC type figures on the left or Josh Hawley on the right?

Mattioli: For a very long time Amazon (and Big Tech more broadly) had been welcomed with open arms in D.C. The Obama administration was notoriously chummy with technology companies, and these companies were celebrated for being innovative garage startups that were major employers and bastions of innovation. But more recently, there has been this techlash where politicians and even consumers have grown wary of the effects of these companies.

One of the strangest things about reporting out this book was how in such a fractured political landscape where Democrats and Republicans pretty much agree on nothing, they agree that Amazon is too big. Antitrust is an area with bipartisan support. We saw that with Congress’ bipartisan investigation into Big Tech and we even see that now with the FTC case. There are republicans that call themselves “Khan-servatives” who back Lina Khan. This is an area where Bernie Sanders and Elizabeth Warren actually agree with Matt Gaetz and JD Vance. Where Biden and even Trump have some common ground.

Mallazzo: In 2016, Amazon banked on a Clinton presidency and was highly fearful of Trump’s vitriol against the company. But the political landscape has shifted since then with Trump softening towards big tech and Biden showing some antitrust zeal.

Who do you think Amazon is quietly pulling for in the 2024 election?  

Mattioli: It’s a really good question and I don’t think they have great prospects on either side of this. In 2020, Amazon was really hopeful that a Biden presidency would be more positive for them after four years of Trump publicly bashing Bezos and the company. Amazon had hired Obama press secretary Jay Carney to head up public relations and government relations and he had worked for then-VP Biden and had great relationships. But. the last four years under Biden, have arguably been worse than under Trump. While Trump was mostly rhetoric and vitriol, Biden has taken action. He picked Amazon’s biggest foe, Lina Khan, to head the agency regulating Amazon. Biden has been notoriously pro-union while Amazon has tried to suppress union efforts. Biden’s White House has also shunned Bezos. There are scenes in the book where Carney is pretty much begging his friends in the Biden White House to invite Bezos to events and round tables and they won’t, because as one aide put it: “It’s so much easier to have conversations with someone who’s not out there kicking the shit out of you.”

Then, there’s Trump who has openly called Amazon a monopoly. I spoke to Peter Navarro for the book and in addition to calling Bezos a “sociopath” he said that a second Trump term would have resulted in a break up of Amazon. I don’t think either White House will welcome the company with open arms.

Dispatch From America

My quick take on the most interesting current slice of Americana

The CCP Hires Some Consultants: While I go back and forth on whether the prodigal Scott Galloway is a good pundit, his 2019 theory that SoftBank was a CIA operation to funnel $90B from Riyadh into Western democracies will forever be at the top of my jealousy list as the piece I wish I had written.

Turns out Masayoshi Son has some competition for the Presidential Medal of Freedom. In an unbridled act of national service that has garnered minimal headlines, McKinsey has been quietly advising the Chinese military under the front of an operation called the “Urban China Initiative.” Sensing that the United States military has become overly bureaucratic and vulnerable agianst a more agile foe, the consulting firm heroically stepped up to the plate. Instead of advancing its military capabilities, the People’s Liberation Army will spend the next decade sifting through 2,500 slide Powerpoints trying to figure out what the fuck MECE means.

For years, reasonable people have wondered how the firm could remain under endless investigation with nobody going to jail for its role in getting millions of Ameicans addicted to painkillers. Now we know— the Justice Department swallowed its pride realizing the invaluable role that a bunch of 23 year olds with khakis and Harvard degrees could play in shaping the next century of geopolitics. Who says smart people should build things?

Cocktail of the Week: The Creamsicle Screwdriver

There’s no genre of cocktail making that I find quite as satisfying as introducing people to upscale versions of drinks they think they hate because they’ve only had the $10 plastic handle Vodka version of them. Immediately, the screwdriver comes to mind. When made with just vodka and shitty store bought orange juice, screwdrivers are cut out for little else besides the 8AM sorority tailgate. You’re a grown-ass adult now, you can do better.

However, with a little bit of love and the simple introduction of a rum floater, the drink transforms into the piece de resistance of brunch cocktails. Here’s how it’s done:

• 3 oz. FRESH SQUEEZED Orange Juice

• 1.5 oz. vodka (i’ve been using Luksosowa recently which I think is a really good value at ~$17 for a fifth)

• .5 oz. Diplomatico Rum

• Bar spoon of vanilla extract

• Few dashes on Angostrua bitters

Squeeze your oranges, add vodka and stir like you usually would. Then, mix the rum, vanilla and bitters and carefully float the mixture over the top of the drink. The relative difference in buoyancy here makes this a pretty easy float that doesn’t need much technique. Sip and savor the subtle transition from vanilla to orange.

Thanks as always for reading. And because we live in the greatest country in the world, you can book Anthony Scaramucci on Cameo for $57. I love you all.