ON FEBRUARY 2ND Amazon, America’s third-most valuable public company, announced its best-ever quarter. Propelled by the covid-19 pandemic, which has confined consumers to their homes, the firm reported that quarterly sales had risen 44% year on year, and exceeded $100bn for the first time. It was a barnstorming performance. But it was not the main story. On the same day the firm announced that Jeff Bezos, its boss and founder, will step down as chief executive this summer after nearly three decades in charge.
Mr Bezos will not depart the company. He plans to boot himself upstairs to become executive chairman. That role, he said, will allow him to remain “engaged in important Amazon initiatives”, but also give him more time to focus on other interests, notably space travel, fighting climate change and the Washington Post, a newspaper he bought in 2013. His replacement as CEO will be Andy Jassy, a long-serving Amazon employee who built and runs Amazon Web Services (AWS), the firm’s highly profitable cloud-computing division.
The news prompted gushing tributes to a man who began selling books online in 1994 with a recycled wooden door for a desk. Bernstein, a broker, described Mr Bezos as the “greatest of all time”. Mr Bezos has certainly made a mark. In 2019 Amazon delivered 3.5bn parcels, one for every other human being on the planet—and that was before the pandemic turbocharged online shopping. His rigorous, tight-fisted insistence that Amazon’s employees treat every day as if it were “day one” at a hard-pressed startup has helped the firm move into new lines of business, from smart speakers and video-streaming to advertising and cloud-computing. Its valuation has risen 3,000-fold since its market debut in 1997.
Mr Jassy, in other words, will take control of a firm in an enviable position. Amazon is not without problems—it has struggled in some overseas markets, and faces attention from trustbusters in America and elsewhere. But few companies are in better nick to face those challenges down.
Founders often find it hard to let go. One immediate question is therefore how much control Mr Bezos will actually cede. “I think it’s inevitable that there will be at least a bit of back-seat driving for the first few years,” says Nick McQuire of CCS Insight, a research firm. But Mr Bezos may not need day-to-day involvement to see his company carry on in his image. “Amazon has the most codified culture of any big tech firm,” says Aaron Levie, the boss of Box, a cloud-computing company. “It is built to outlast its founder.”
Mr Jassy is in any case more of a continuity candidate than a revolutionary. Brian Olsavsky, Amazon’s finance chief, reassured analysts on the earnings call that “he’s been here almost as long as Jeff”. Mr Jassy joined in the year Amazon went public and has been close to Mr Bezos since. He comes across as detail-oriented and more than a little nerdy—much like Mr Bezos in his first couple of decades in charge.
That does not mean that nothing will change. Bernstein expects Amazon’s combined revenues from AWS and online advertising to surpass those from its retail division in 2023. By 2024 digital adverts may be the company’s biggest source of profits, and retail may actually add to the bottom line (see chart). Last year Jeff Wilke, who ran the mammoth retail arm, said he would leave the company, depriving Mr Jassy of an able lieutenant.
Customers in America are beginning to grumble that Amazon is becoming a flea market, with ever more shoddy products juiced with faked reviews. This has yet to stop them shopping there, as the latest results attest. But it could turn into a problem. Abroad, where sales grew briskly last year, the incoming boss will have to decide whether to pursue expansion in places like South America and India, where Amazon faces stiff local competition.
At least one investor worries that Mr Jassy’s background in cloud computing may leave him struggling to direct the firm’s retail arm. Meanwhile, those who would prefer to see the money-spinning AWS hived off into a separate company may wonder if the man who created it has any more appetite for such a radical move than Mr Bezos did.
Those aren’t the only dilemmas in Mr Jassy’s in-tray. Amazon’s demands on workers in its warehouses and at times intrusive surveillance have come under scrutiny. The firm has spent heavily on improved working conditions and pays a $15 minimum wage in America. But it continues to attract criticism, especially as it resists unionisation among logistics workers. Many of AWS’s well-paid programmers empathise with their colleagues on the warehouse floor. In May Tim Bray, an AWS executive, quit in disgust over what he described as Amazon’s “chicken-shit” sacking of workers who had complained about poor safety during the pandemic.
Amid a general souring on the Utopian promises of big tech, Amazon’s success has also attracted attention from American trustbusters. They worry it may be using sales data from the third-party sellers on its platform to inform the development of in-house products which then drive those sellers out of business. A congressional report in 2020 cited claims that Amazon used the juicy profits from AWS to subsidise its unlucrative retail operations—but said that the firm had not provided the data necessary to decide one way or another. Some politicians have talked of barring Amazon from competing with its third-party sellers, or even of splitting it up. Amazon denies doing anything wrong.
Some speculate that such looming political awkwardness may have influenced the timing of Mr Bezos’s decision to stand back. Perhaps. Mr Bezos, for his part, gives every indication of being a man with a higher calling. When Bill Gates stepped down as the boss of Microsoft in 2000, he threw himself wholeheartedly into the Gates Foundation, which, as the world’s biggest private charity, funds everything from malaria-prevention to AIDS research.
Mr Bezos, whose near-$200bn fortune is even larger than Mr Gates’s, may be planning a similar change of focus. He is sympathetic to at least some environmental concerns: he has said before that growing resource consumption is not compatible with a finite planet. Of his many other businesses, Blue Origin, his rocketry firm, is widely reckoned to be his favourite. Like Elon Musk, who this year overtook him as the world’s richest man, Mr Bezos is a fully paid-up space cadet. Blue Origin is already involved in America’s plans to return astronauts to the moon.
In 2019 Mr Bezos sketched out a vision of the future in which a trillion humans live in gigantic, artificial space-going habitats, relieving the pressure on a crowded planet. It is an apocalyptic idea—and, to put it mildly, a bold one. To Mr Bezos it may seem more fun than running an online department store with a sideline in server farms and virtual billboards—even one as era-defining as Amazon.
Source: Business - economist.com
