Amazon is a huge and complex organization. How should we think about it as a whole?
Amazon is an opportunistic corporation. It invests in businesses where we think we have a competitive advantage. In general, Amazon thinks of itself as a technology company. So we put the technology first, whatever the product is that we’re selling. And we believe that because we have so much talent and so much capital, we should be able to use our technology advantage to dominate any market that we decide to enter.
What were its origins? Why did Amazon start off as a company that sold books on the internet?
In the mid-1990s, the internet was widely seen as a replacement for the library—the library 2.0—so figuring out how to buy books on the internet felt like a natural next step. A little later on, you could see some of that same spirit living at Google through the Google Books project, which was an enormous undertaking. They put a hugely disproportionate amount of resources into it. Amazon’s ultimate goal was similar to that of Google Books: to digitize all of the information in the world’s books and make it available universally, because that was the promise of the internet.
Jeff Bezos studies other “great men” in history and imagines himself to be a kind of Alexander the Great. There's even a building on the Amazon campus called Alexandria, which was the name of one of the company’s early projects to get every single book that had ever been published to be listed on Amazon.
But there was also a more practical reason. Books are ideal because you can stuff them in a box. They’re relatively cheap to ship. Also, they’re easy to protect when shipping. It’s difficult to damage books.
From the beginning, Amazon sold physical things. That meant its business evolved very differently than that of Google or Facebook, which make their money by tracking people around the internet and using that information to sell ads.
Right, Amazon is not primarily an ad-driven platform. Although it does have a subsidiary, A9, that’s in the online advertising business. But A9 is not a top moneymaker. The top money makers for Amazon by revenue are the retail side, and AWS.
Why did Amazon get into the cloud computing business in the first place? What was the original impetus?
Amazon wanted to explore the possibility of selling web services because they realized most other firms weren't doing a terribly good job of it. From the start, startups flocked to AWS because we saved them a lot of time and effort. Once AWS had the startups hooked, it was easy to start selling to large businesses—the “enterprise” market—because they envied how well the more technically sophisticated startups were doing.
That was good for us, because big companies are more lucrative. But they also have stricter security requirements. They tend to be in mature industries that are more heavily regulated, and regulators care about how they’re securing their data.
And that’s where you come in.
For a long time, security hadn’t been a big focus at Amazon because the data being collected—what books people were ordering—wasn’t that sensitive. It's not information most people were concerned about anybody having. We had to have a way to secure credit card information to make online transactions possible. But we outsourced that.
After AWS got started in 2006, security became a much bigger concern. Amazon realized how important it was to its most lucrative customers. These days, the company takes security extremely seriously. I think you'd be hard-pressed to find many nation states that have as sophisticated a security approach as Amazon does.
Security is mostly about making yourself a difficult target. It’s like that joke where you go hiking with your friends and a bear attacks you. You don’t need to be faster than the bear; you just need to be faster than your slowest friend.
Big companies have traditionally operated their own data centers. Was it hard to make the case to them that they should move to the cloud? They might feel more secure if they’re doing everything themselves.
They might, but ultimately the security standards of their data centers are always going to be lower than those of a cloud provider like AWS. A cloud provider has many tenants and they can have economies of scale that let them have more sophisticated security systems than someone fully managing their systems in-house.
Also, if you're a company that's operating your own data center, you're responsible for 100 percent of your security—infrastructure security, transit security, perimeter security, everything. If you move to the cloud, Amazon is responsible for at least some of that.
So when you use AWS, part of what you’re paying for is security.
Right; it’s part of what we sell. Let’s say a prospective customer comes to AWS. They say, “I like pay-as-you-go pricing. Tell me more about that.” We say, “Okay, here's how much you can use at peak capacity. Here are the savings we can see in your case.”
Then the company says, “How do I know that I'm secure on AWS?” And this is where the heat turns up. This is where we get them. We say, “Well, let's take a look at what you're doing right now and see if we can offer a comparable level of security.” So they tell us about the setup of their data centers.
We say, “Oh my! It seems like we have level five security and your data center has level three security. Are you really comfortable staying where you are?” The customer figures, not only am I going to save money by going with AWS, I also just became aware that I’m not nearly as secure as I thought.
Plus, we make it easy to migrate and difficult to leave. If you have a ton of data in your data center and you want to move it to AWS but you don't want to send it over the internet, we’ll send an eighteen-wheeler to you filled with hard drives, plug it into your data center with a fiber optic cable, and then drive it across the country to us after loading it up with your data.
What? How do you do that?
We have a product called Snowmobile. It’s a gas-guzzling truck. There are no public pictures of the inside, but it’s pretty cool. It's like a modular datacenter on wheels. And customers rightly expect that if they load a truck with all their data, they want security for that truck. So there's an armed guard in it at all times.
It’s a pretty easy sell. If a customer looks at that option, they say, yeah, of course I want the giant truck and the guy with a gun to move my data, not some crappy system that I develop on my own.
There are also specific security services that AWS sells, such as Amazon Inspector. Amazon Inspector is a tool that will audit all of your configurations for AWS, and will provide recommendations about how to change those configurations.
When you make a connection to a server, that connection is made over a specific port. And there are some ports that nefarious people might sniff to see if they’ve been left open because they’re frequently used for the management of that server. And so Amazon Inspector might say to you, “We have scanned your server and detected that this port has been left open and you're not using it. Do you want to close this port to prevent people from trying to connect to it?” Or it might say, “These two servers that you have are communicating to each other in a format that is easily eavesdroppable. We recommend that you use at least version X of the connection software that will plug some security holes.”
If you're a competent system administrator, you should have done all that when you configured your system. But not every system administrator is competent. If you’re the sysadmin for some, you know, insurance agency, what do you give a shit? You live in Sioux Falls. Why would you care about cloud security? You don't have to bust your ass because you live in a small-town market where you know everybody and you’re never going to be out of a job. A lot of companies that are headquartered in remote areas don't have particularly sophisticated IT teams. So they’ll pay Amazon to do security for them.
You mentioned that the most lucrative customers for AWS are large companies in mature industries, which tend to be more heavily regulated. How does AWS help those kinds of companies meet their compliance obligations?
Certain institutions and industries are regulated more than others. Take the healthcare industry. Hospitals and health insurance providers are bound by the Health Insurance Portability and Accountability Act (HIPAA). There are a lot of regulations about how data can be stored, how long it can be stored, and what types of consent are required. It can be very difficult to implement a system that is fully compliant with HIPAA, but AWS has products that can help with that.
Same thing with the General Data Protection Regulation (GDPR), the European privacy law. It requires organizations to handle personal data in very specific ways. One of the new rights that it creates is the “right to be forgotten.” So if you’re a company that does business in Europe, you’re going to need a way to fulfill requests from customers who want their data deleted. AWS can produce a report that says, “Yes, that data was deleted; we can no longer access it.”
So compliance can create lucrative business opportunities for AWS. Presumably those opportunities will grow, with new privacy regulations like the California Consumer Privacy Act, and more regulations expected from the European Union around data and AI.
AWS is a money machine, basically. Today, retail is something like 70 percent of Amazon's revenue. But AWS is 70 percent of the company’s operating profits.
One of the reasons why the antitrust people are looking at Amazon is because Amazon is using highly profitable businesses where it has a really durable advantage in order to subsidize losses in other divisions that it uses to capture market share. Without an organ similar to AWS, a competitor like Walmart has to lower prices below the level of profitability to remain competitive. And they can only sustain those losses for so long.
What’s an example of a division that AWS subsidizes particularly heavily?
Prime Video, for one. Jeff loves Prime Video because it gives him access to the social scene in LA and New York. He’s newly divorced and the richest man in the world. Prime Video is a loss leader for Jeff’s sex life.
A Really Big Deal
We’re now many months into the COVID-19 pandemic. How has work changed for you?
The first thing everybody noticed was conferences getting canceled, and everybody was like, “Wow, I guess COVID is a really big deal!” Then we emptied out all the buildings. There was a bifurcation of the people who work in corporate and the people who work in the fulfillment centers. The white-collar folks are fine because we can just work from home. But there was a huge internal drive to make fulfillment centers safe.
What was the outcome of those conversations? I know there have been a number of collective actions among Amazon warehouse workers around the issue of safety during the pandemic.
At the beginning of the pandemic, management brought in some consultants and scientists to analyze how disease is spread. We had one week to figure out what we were going to do and then three weeks to execute. Now there are temperature reading cameras. You can't go into Amazon buildings if your temperature is elevated. They figured out how to reduce touch as much as possible. They implemented ways to scan badges at a distance and ways to use barcodes instead of near-field communication readers. They also created a testing regimen.
There was initially no way to get tests but because of our industrial might and muscle, we were able to identify a vendor, so we worked with them to do tests for warehouse workers. I'm not sure how often those tests occur. And it’s not like we test for a whole slate of things. A lot of the warehouse workers are older people who are out of the traditional workforce and find it hard to get back in because they can't retrain or they don't want to, or the job they used to do doesn't really exist anymore. A lot of them don't work enough hours to get health insurance. So if you have cancer and you might die from your cancer, we won't help you get treatment. But if you have this infectious respiratory disease, we want to know.
I actually don’t know if the steps that have been taken around COVID have made things worse, or whether they have improved the warehouses. Internally, people say, “Oh, we’re probably better than our competitions, or other warehousing and logistics companies.” But I don’t know if that’s the case.
There were other challenges at the beginning of the pandemic too, right—with supply chains for instance?
Supply chains all across Amazon were definitely impacted. It was difficult to get hand sanitizer. It was difficult to get cardboard boxes.
We got lucky in the sense that the beginning of the pandemic overlapped with the Chinese New Year. So we had already accounted for some slowdown, because we expected the Chinese New Year to impact timetables anyway.
Overall, though, it seems like the pandemic compounded all of Amazon's advantages and significantly reduced the impact of all of Amazon's weaknesses.
The crisis advantaged large purchasers. The more scale you have, the more buying power you have, right? If you're a factory, the way that your distribution of customers is set up is that you have one or two customers that make up 80 percent of your business and then a ton of customers who make up 20 percent of your business. So if your production is down 30 or 40 percent, you say, “Okay, I’m going to have to cut out all of the small vendors and only focus on the big partners.” That’s what happened. Amazon was able to get preferential distribution of shipments when smaller companies were totally sold out.
And there’s been so much e-commerce growth in general during the pandemic.
The question on everybody's minds in retail is: can Walmart and Target use their local distribution infrastructure to get packages to people's doors faster than Amazon can? Walmart and Target’s only advantage is their physical stores. When the stores are closed, they can be used as distribution hubs. You can pick things up close to where people's homes are and deliver them. Buying Whole Foods gave Amazon the opportunity to reach, you know, 80 percent of the 1 percent. But vast swaths of America aren't reachable by Whole Foods.
The rumors that I hear, both internal and external, are that we're very seriously interested in acquiring post office real estate. The reason why the post office is valuable to privatize is because of their real estate holdings. They have great real estate in every downtown of every city in the United States. Amazon may be interested in buying all of the post office locations, and we have the cash to do it. So why not?
The other week we announced we're hiring one hundred thousand more workers again. We're expanding dramatically across the board, in part-time and full-time, at corporate and retail and fulfillment and logistics and devices and distribution and all the various pies we have our fingers in.
How about AWS? Are you growing the same way?
Some of our customers obviously saw a dramatic decline in their income. Some large customers in the hospitality industry and the retail industry negotiated substantially discounted rates or got large one-time credits.
But in general, COVID did convince a lot of companies to accelerate their cloud migration, because if you're an organization that has your own data center, chances are that you now have to implement a bunch of safety guidelines and restrictions. Amazon just operates at such a scale that we can do it better and more efficiently.
For instance, a lot of security companies throughout the industry were impacted because suddenly their secure facility had entry rules. Only one person could be in there at a time. But in the security technology industry there are a lot of processes that need two or more people to be physically present. So that made it impossible to use a lot of the secure facilities because the guidelines were in conflict. It was kind of a Freaky Friday moment where everybody realized that, in the context of a pandemic or a natural disaster, these procedures they created to make sure that their facilities were safe were actually preventing them from following security best practices.
Customers who were experimenting with a small presence in AWS, who had maybe kept their own data center for security purposes, freaked out. They were like, “Wow, we really need to move to the cloud quickly because they can do all these things for us that we can't do on premises now.”
Besides the challenges of dealing with social distancing, are you seeing new cybersecurity threats in the COVID era?
The security threats that are emerging now are the same as ever. They're just more intense. 80 percent of security problems are petty cybercrime. And that’s what’s going up.
Increasingly, large tech firms use people in developing countries as a disposable white-collar workforce. Smaller shops do too. A lot of startups will have one CTO in the Bay Area, and then they'll have their whole development shop be in Ukraine or Romania or something.
But when funding dries up for startups and companies have to shutter, then all of their digital operation overseas is cut loose. And the people who lose their jobs go into cybercrime. They think, “There's no other options for me. So sure. Let's do it. Lock and load.”
A cybercriminal can also get paid by a competitor to expose data, or to change the configuration so the data is exposed publicly to make that company look bad. The Capital One breach in 2019 involved a former Amazon employee, actually. Capital One suffered a huge embarrassment in the press. But unfortunately, as with the Experian data breach in 2015, the Capital One incident showed that the markets are very forgiving of data breaches, because the people who are most victimized by them are poor people who have no idea how to control their data anyway, and didn't even know what it means to have their data breached.
Companies don't like to have their whole ass be shown that way. It's a lot of egg to get on your face. But in the end, the market is learning that massive data exposures are not that bad of a problem unless Congress comes calling.
Unlocking the Last Foot
So you work in cybersecurity and that’s clearly a major focus for AWS. But as we talk about this, there’s another sense of the word “security” in the back of my mind—home security. This is an area Amazon is now getting into with Ring, the internet-connected doorbell.
I wasn't involved with that acquisition. But what I've heard is that our investment in Ring was initially about wanting to combat package theft.
The retail side of Amazon is basically a logistics company. We have a distribution infrastructure that we chop up into different segments. “First mile” is from manufacturing to distribution. “Middle mile” is from the first distribution center—a warehouse—to the second—the place where a package will get delivered from, like a postal depot. “Last mile” is from that second distribution center to people's front door. And one of the major problems with the last mile is package theft.
But that wasn’t the only motivation with Ring. More broadly, Amazon’s smart home projects are also aimed at unlocking the “last foot”—not just how you get the package to the customer’s door but into their house. At one point we tried to make an electronic lock with an electronic key that Amazon deliveries could use. But then someone else made Ring, and we realized we could use that instead.
Amazon has aggressively marketed Ring to police, partnering with hundreds of law enforcement agencies across the country and in some cases even giving the devices away for free. Cops are given access to a portal they can use to request Ring footage from individual houses. Has Ring brought Amazon into much closer relationships with law enforcement?
Relationships with law enforcement take a very long time to build, so it would really surprise me if any of those relationships were the result of the Ring acquisition. The groundwork was already being laid. I think Ring just helped accelerate things.
In general, the nice thing about working with law enforcement is that they know what they want. Regulators don’t.
But honestly, I think Amazon also kind of backed into that situation. We only realized after the fact that we had all this data about who was coming to people’s front doors. And then there was a lot of gleeful Mr. Burns–style finger touching, when we thought about what we could do with that data. Ring has a Neighbors app, where you could take your Ring data and share it with the app, and your neighbors could see who was in the neighborhood. So law enforcement was a natural next step. And law enforcement dovetailed nicely with our interest in pursuing the home security angle through our other smart home products.
Like the Alexa-enabled smart speakers.
Right. Ring dovetails nicely with Alexa on the home security front. And Alexa could also help the retail effort to unlock the “last foot” and get packages inside the home.
You said that Amazon was already building relationships with law enforcement long before the Ring acquisition. Why?
AWS works extensively with US government agencies. At the federal level, AWS runs a special cloud for a number of intelligence agencies, and we’re still trying to get the contract for JEDI, the Pentagon’s big cloud project.
The other factor that presumably contributes to Amazon’s coziness with intelligence agencies and law enforcement is the fact that many people from those fields go work for Amazon. Why is that?
Amazon pays a better salary and you get to work on more exciting stuff, and there’s just less hassle.
Do the cultures mesh well?
In general, the military is pretty top-down, command-and-control. That’s not Amazon. We mostly want people to be as autonomous as possible. At Amazon it's easy to shoot up the hierarchy and talk to senior executives if there's a problem.
Does Amazon make a concerted effort to hire from law enforcement and the military?
For the rank and file, yes. There is a concerted effort to recruit former law enforcement and military. In fact, Amazon thinks of military personnel as a diversity category and does targeted hiring. We have an internal affinity group called Warriors@Amazon for ex-military personnel, and it is by far our most successful diversity hiring group.
At the higher levels, there’s a revolving door. If you’re a chief procurement officer at the Pentagon, the guy who orders whatever they’re buying for the military, you do that for awhile and then you go to the General Accountability Office to be a watchdog. And then after you've been a watchdog for awhile, you go to work for Amazon, where you can make half a million dollars a year selling Amazon services back to the Pentagon. And you can get it past the watchdog because you used to be the watchdog.
Amazon’s not the only company that does this, obviously. Everybody does. It’s the same twenty thousand people in the United States who have had jobs in the military, regulatory, and industry, all selling these things to each other back and forth.
In September 2020, Amazon appointed Keith Alexander, the former NSA chief, to be on your board of directors. How did you and your coworkers see that?
At the most obvious level, it’s a move to get influence over the Defense Department and win more US government contracts. Because Keith Alexander has relationships with all of the right people in the Pentagon, he can help move the needle in terms of not only managing relationships with current officials, but also helping us strategize about what's important to the decision makers going forward.
But it was also highly controversial. Even within Warriors@Amazon, they’re of two minds about it. Some of the Warriors love the US government. On the other hand, bringing on someone like Keith Alexander also poses serious risks to Amazon's business.
Our European partners are screaming about the message that hiring Keith Alexander sends with regards to the privacy of their data. It also comes at a particularly bad time. AWS needs the European market. But there have been a couple of recent legal decisions in Europe that have made our lives harder, like the courts striking down the Privacy Shield agreement in the summer of 2020. [Eds.: Privacy Shield was a compliance framework that certified the data security of US-based companies, and allowed them to receive EU user data in a manner deemed compliant with GDPR.] AWS has been working really hard with customers to make sure that we can comply with whatever new privacy standards the European Union develops.
So within this context, bringing Keith Alexander onto the board is definitely going to raise a lot of eyebrows on the other side of the pond. Our European partners are going to say, “Well, excuse me. Our concern is that you're taking data from our citizens and bringing it back to the States. And now you're hiring the architect of the program that’s been spying on the entire world?!” It sends mixed signals at best. But the fact that there’s a business case against it has also helped the people inside the company who are opposed to it for philosophical or ideological reasons.
Are there many of them?
A lot of my coworkers are concerned about Keith Alexander’s presence.
I would say a quarter of the people at Amazon would identify with digital freedoms organizations like the Electronic Frontier Foundation, and they are pissed off. I think there are a lot of AWS employees who would rather quit than turn data over to the NSA. Those people are all up in arms and they’re some of the smartest and most innovative people at the company. I don’t think Amazon counted on so much internal opposition and resistance.
White-collar workers at Amazon have organized internal campaigns against the sale of facial recognition software to law enforcement agencies, and the sale of cloud services to companies that enable ICE. Has Amazon’s relatively large contingent of former law enforcement and military personnel made the organizing environment for these campaigns more challenging?
My experience with ex-military people is that they love America but they don't care for the government. So they're like, “Yeah, I worked for Uncle Sam, but I could give a shit.” So I don’t think the presence of those people necessarily makes organizing harder. I just think the collapse of the Left in general over the past several decades has made workers everywhere believe that resistance is futile. Maybe we're doing right in the world, maybe we're doing wrong—but if we’re doing wrong, there's really very little we can do about it except some things around the margins.
It seems that most of the organizing energy at Amazon among white-collar workers has been around climate issues. There is an ongoing campaign to push the company to dramatically reduce its carbon emissions that have involved open letters to Bezos. And in April 2020, the company fired two white-collar workers who had helped lead the climate organizing, and who had also criticized the company’s treatment of warehouse workers during the pandemic. What’s your perspective?
I didn't sign any of those letters, because I'm not sure what good they accomplish either internally at Amazon or externally in the world.
In general, campaigns at Amazon fall into three groups. The first is mainstream causes that are palatable to everyone, like donating winter coats and protecting animal rights. The second is environmentalism. It's easy to find people at Amazon who care about global warming. So there is some support for people who recognize the severity of the problem and are willing to organize internally at Amazon around it. But that organizing effort is still pretty small. It has an outsized voice in the media, because everybody’s fascinated by Amazon. But there aren’t a ton of people who are paying attention to it internally.
The third category of campaigns is social justice activism, like the #TechWontBuildIt campaigns against working with ICE or law enforcement. There’s a spirited debate on a couple of internal mailing lists about that kind of activism. But again, it's a small number of Amazon employees.
Why do you think there aren’t a lot of people participating in this conversation internally?
Historically, Amazon has probably had some of the worst internal communications tools of any large company. It's very difficult to discover active conversations happening in the company. There is no central clearinghouse. There is no internal social media. We recently got Slack, but it hasn’t made much of a difference for employees interested in organizing.
Do you think the lack of internal communications tools is intentional?
I think this is one of those cases where you should not presume malice. Amazon doesn’t actively not want employees to talk to each other. They just don’t see how employees talking to each other benefits productivity, morale, or the bottom line. If it did, and that impact could be quantified in some way, we'd have it tomorrow. But as it is, Amazon gives employees the tools that it thinks will help them get the job done. And they don't see employee fraternization as relevant to the job.
Google, by contrast, has very robust internal communication infrastructure. And that infrastructure played an important role in facilitating organizing at Google. (Although more recently, management has been limiting the kinds of conversations that can happen on internal platforms.) Do you think the absence of similar tools helps explain why Amazon has seen comparatively less organizing?
Well, if you look at Google, you'll notice they're headquartered in Mountain View, in the heart of Silicon Valley. And if you're an employee at Google and you're good at your job and you want to leave your job tomorrow, there are fifty-three employers out there that are going to be ready to hire you.
If you're working in Seattle for Amazon and you're good at your job and you want to leave your job tomorrow, you have far fewer opportunities. Where are you going to go, Microsoft? There's not nearly as much mobility. So I think a big part of the reason we have less organizing is that people are more afraid to jeopardize their jobs. If you want to stay in the Northwest, you keep your head down.
Statistically it is also more likely that an Amazon employee will have a family than a Google employee. So that’s another factor that makes people more risk-averse. Why should they do something that would potentially jeopardize their job? Particularly when it has a low chance of success?
As you pointed out, one of the reasons that the organizing efforts within Amazon have received so much media attention is because the media is fascinated by Amazon. There have been a spate of stories looking critically at Amazon’s market power, partnerships with law enforcement, labor conditions in its warehouses, and so on. Amazon also has prominent critics in national politics like Bernie Sanders.
How are these kinds of criticisms perceived from the inside? How do people respond to that sort of thing?
I think your question kind of misses the forest for the trees. For most people at Amazon, glancing at the Apple News feed on their iPhone is about as much of the discourse as they consume. They don’t care about the news. It doesn't contribute anything to their life. There are colleagues I'm friends with who don't really know who ran for president. They figure it's all going to be the same anyway, so why bother.
But by the same token, if they hear someone criticize Amazon, they’re not inclined to be super defensive. There aren’t a lot of intense loyalists. People at Amazon are mercenaries. The company doesn't have great benefits. Office life kind of sucks and it’s not that fun of a place to work. It’s a grind. People work there because it pays a little bit better than the competition and it looks good on a resume. They can go in, do their job, go home, spend time with their kids, watch sports. That’s the good life.
Amazon has around a million employees worldwide. The majority work in shipping and logistics and delivery. There are maybe eighty thousand corporate employees. And I would estimate that fewer than two thousand of them have participated in discussions around organizing.
Do you see any cause for hope?
In general, the people who are going to organize are the people who need to organize because they are fighting for their lives and their subsistence. Those are the people on the logistics side of Amazon who work at the distribution centers. Those are the members of the industrial proletariat in China who are manufacturing the things that are shipped out on the retail side. Those are the humans in developing countries doing piecework on Mechanical Turk.
If there is going to be change, that’s where it will come from. I think that if you’re looking at corporate employees within Amazon as a source of hope, that’s ludicrous. The notion that these companies are going to repair the damage they’re causing by having white-collar workers organize internally to me is crazy. But maybe that's cynical and nihilistic. Maybe I’m a bad man.