Introduction Daniel Shvartsman:Cyber Monday is over, and I guess, it’s time to conclude our mini-series ​ on Amazon. To do so, we invited Priya Anand, the Amazon reporter for The Information to join Behind The Idea. One thing that came up in our conversation was the build out of Amazon’s physical footprint. She called out some of the limits to the experimentation process when talking about Amazon’s 5-star concept. Priya Anand: To be honest, I walked into the one SoHo and was like – this reminds me of ​ like a RadioShack, plus the front of a Barnes & Noble, which maybe is not what they were going for, I imagine. DS: At the same time, she acknowledged that there is a real cache to these new stores like ​ Amazon Go. PA: Every time I go into one of the Amazon Go stores in Seattle and was there a few months ​ back and went to a store, I’ve been to the one in San Francisco, there are always people taking selfies in there, and you never see that in a normal store of course. DS: What will Amazon look like five years from now? Does the break-up Amazon ​ movement have any momentum? We have one last discussion to see if we can put the pieces altogether. This podcast was recorded on November 9, pre-HQ2/3 and neither Priya nor I have any positions in any stocks mentioned. But we’re here to see what else Amazon will take over in the years to come. So, let’s open the book one last time. Welcome to Behind The Idea. The podcast that looks at what makes great investment analysis work. We’re starting Part 4 of our mini-series on Amazon, the retail giant. We’re excited to welcome Priya Anand, the Amazon reporter for The Information, a leading tech news website on to the podcast. We’re going to be talking more about Amazon’s competitive positioning, regulatory risk, whatever else seems to fit as Amazon can plan to be about everything. So, Priya, welcome on to Behind The Idea. PA: Thanks for having me. ​ DS: So, I wanted to start – we’re recording this just after the mid-term elections and also you ​ had a recent article you published about how Amazon deals with President Trump and sort of their policies around that and obviously President Trump also just spoke up again about Amazon. I’m curious how much has actually changed for Amazon over the last couple of years? How much is the regulatory climate or the story for them changed as they continue to grow? PA: So, one thing that’s unique about this period of time for them is that no one has really ​ had the kind of problem that they have right now with President Trump who is routinely disparaging them over Twitter in ways that may not always be actually that accurate. So, it’s a unique issue that we are dealing with here, but despite the fact that it’s, you know it’s very easy to dismiss these attacks from Trump. It’s, you know, they could be called misinformed in some cases, the company tells him or its employees to say that he’s misinformed about the deals, the Post Office, and Tax Policy etcetera, but at the same time we are seeing more criticism from right and left of Amazon or at least more attention if not direct criticism. Right. A few weeks back, we saw Bernie Sanders coming out upset about how Amazon treats its warehouse workers. Amazon lifting its minimum wage up to $15 an hour for its warehouse workers in response and got some praise from Bernie afterward as a result of that, but there are other people in congress too, members of congress like Ro Khanna, who represents part of Silicon Valley who are saying, we need to at least scrutinize Amazon and see how they are effecting the competition and how their pricing shakes out once their competitors are no longer as powerful in the field because of Amazon’s strengths. And so, there are more people putting attention on this issue, the FTC also brought on Lina Khan, who, I’m sure many people are listening to this and you are familiar with her Amazon's Antitrust Paradox piece in the Yale Law Journal. I think it was last year at this point. And she is on board too in there doing these hearings to assess how they should view competition, consumer projection. So, there’s more chatter at least in Washington about Amazon and whether or not she looked up more closely, does that translate into actual movement to regulate them? D.C. is a pretty slow pace. The EU has been much faster on these things and they are looking at how Amazon is a marketplace and a competitor to the merchants on its platform selling its own stuff and whether it benefits from having that insight into third party sales, but we haven’t seen that kind of swift movement in the U.S. What we have seen though is Trump was calling her review, the Post Office to review their business deals and their practices and whether or not Trump is involved, you know the Post Office has been suffering for years and in some cases not directly related to companies like Amazon and people just don’t send much snail mail anymore. There are lots of other problems the Post Office has. They did and deciding, this is proposal the Post Office has to raise rates, essentially across the board for next year. It’s not affecting only amazon, it affects basically everyone who jumps in the post office and isn’t going to be that significant of a thing for Amazon, who knows, but D.C. is a slow place. It’s a short answer. I guess. DS: Right. So, I want to come back to that, but I want to sort of look at Amazon itself for a ​ second or two and how they are kind of part of their power, their business power eventually it has to in theory flow towards profit and you had written about how Amazon’s retail business in the U.S. is producing profit, and I’m just curious if you, how you see, is there – one thing we’ve been wondering about is whether Amazon truly can achieve profit like whether they will really get to the point where there is sort of the idea that they will just stop investing and then they make the money, but they also kind of, the way they grow, the kind of have to keep investing, I don’t know, how do you see – do you see that their business bends towards profit over the long haul, is the retail – is what’s happening in retail something that we should expect to happen with the rest of their business lines over time or how do you sort of see that playing out? PA: Well, I think, you know their last earnings cycle was pretty interesting. So, I had written ​ a few weeks back about how, people forget, people call Amazon a money loser. They are a retail business, it is not necessarily AWS, but it’s still producing in the billions of dollars operating income each year and has been for several years now. In the last earnings cycle, these things are usually sort of dry for them, but that quarter, they really paired down their international retail losses too. So, Amazon is so famous for reinvesting its profits. I think it is sort of a mis rumor that people call it a money-losing company at this point, and reinvesting is part of what ends up making them strong in the long haul. I don't see them stopping that right. They have so many initiatives that they’re working on that on the newer side. Like Alexa is fairly new, so has not become – outside of the device sales has not become a meaningful driver of sales, very few people use their devices to order shop and voice shop, but they are looking at tons of other applications for Alexa. They have talked about implications on health and in medicine for Alexa, obviously they’ve got these deals with homebuilders to put Alexa and from the ground up sort and have explored ways of doing that beyond just putting devices in certain rooms, where they will be commonly featured. So, people can use Alexa to order more Amazon room service and things like that. The experimentations is certainly not going away and I think despite that they get into the point where they are still on the retail side proving to have significant profits. DS: You had mentioned pairing down the international losses and one thing I was curious ​ about is, is there a disconnect between what they’ve done in the U.S. and international or do you just from your vantage point is it just a matter that we’re earlier on in the international store and that they’ll get to the U.S. level eventually? PA: Well, I think there is a lot to impact there. So, China, they did not do well, right. As a ​ result, Amazon does not want to lose out on India too, which is expected to be a huge market once it becomes more mature, and more people go online and more people are comfortable shopping online.