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CNN 10

A Closer Look At Amazon

Aired November 1, 2018 - 04:00:00   ET


CARL AZUZ, CNN 10 ANCHOR: Hi. I`m Carl Azuz for CNN 10. Every once in a while we devote a special edition of our show to a single big topic. In

the business world there are fewer big topics than Amazon. It started as a retail website in 1995 selling books. From there, it grew to, well you

know this, it sells most of the things you could buy at a mall and the grocery store. It has online content. It offers cloud computing and it`s

still not only sells books, it helps people publish them. In September, Amazon`s total market value passed $1 trillion. It`s the second company to

do that behind Apple and Amazon did it in just 24 years.

In January, Amazon Jeff Bezos became the richest person on earth. His net worth according to the Forbes Business Media Company is around $160

billion, give or take but there have been bumps in the road. The company`s been criticized for what it pays it`s employees for one thing. Last year,

Amazon said the median pay for them was just over $28,000. That means half the people who work for Amazon worldwide made less than that. Thousands of

retail stores have closed over the past year and retail jobs have been lost because many shoppers have been spending less time browsing in stores and

more time browsing on sites like Amazon.

And privacy advocates say Amazon`s Echo device is always listening raising concerns about who else could hear your conversations besides Alexa. The

company is huge. It now has more than half a million employees worldwide. It`s complicated like some of the challenges it`s faced and creating. It`s

also changing the way the world buys goods.


UNIDENTIFIED MALE: Welcome. Do you want anything here?

UNIDENTIFIED MALE: Amazon does the ultimate grab and go - -


UNIDENTIFIED MALE: - - shopping experience.

UNIDENTIFIED FEMALE: You literally grab it off the shelves and go.

UNIDENTIFIED MALE: You use the app to enter the store. Once you`re in, you can put the phone away and you shop the rest of the store. Just like

you would any other store with one key difference. When you`re done, you could just walk out.

UNIDENTIFIED FEMALE: Nothing is simple about the technology behind this cashier less store. The Amazon Go market uses artificial intelligence to

monitor what you`re reached for on the shelf and to make sure you`re charged for what you walked out with and nothing else.

UNIDENTIFIED MALE: What we have to do unique in this year`s case was build a sensors, the cameras.

UNIDENTIFIED FEMALE: All these cameras and sensors above us.

UNIDENTIFIED MALE: The cameras - - the cameras in the ceiling. We had to build a specific machine learning algorithms. The problem that we have to

solve in Amazon Go is who took what. When I take this item off the shelf, it`s in my virtual cart. When I put it back, the item goes back. It`s an

easy problem to solve when you have a single person in the store but when there`s multiple people. More of the products, if you look around look

very similar to each other.


UNIDENTIFIED MALE: So that`s where the challenge comes in.

UNIDENTIFIED FEMALE: The Amazon Go store is by no means the only place where Amazon uses AI.

UNIDENTIFIED MALE: We`ve got hundreds of teams working on artificial intelligence, programs across Amazon. Artificial intelligence like machine

learning, powers the simplicity that we always want to offer to our customers.

UNIDENTIFIED FEMALE: Whether it`s fulfilling orders or delivering packages, those teams are working constantly to improve the customer`s

experience. Inside Amazon`s warehouse it`s AI is hard at work. These are Amazon robotics drive units. Once a customer actually purchases an item

either on their mobile app or on their computer or laptop, the system identifies the pod where the item is actually located in the field. And

the bot max out the most efficient way through using machine learning to get that pod, which has that item that customer purchased to the associate.

So there`s some people out there that will hear robots, machine learning, AI and think, jobs. They`re going to be gone.

UNIDENTIFIED FEMALE: Well we`ve actually determined when we`ve actually deployed our solutions in their fulfillment networks is that we`re actually

relying a lot more on our associates. We`ve increased their efficiency and it really gives them the ability to work on different tasks. And we`ve

actually grown our associate employments across the globe to date.

UNIDENTIFIED MALE: Alexa, order dog biscuits.

UNIDENTIFIED FEMALE: And of course, the AI tool you`re most familiar with is always learning new tricks.

UNIDENTIFIED MALE: Achieving what Alexa is right now is a super hard challenge. Going from that to the future, I would like Alexa to respond to

the - - the - - your mood, your sentiment, your feelings as expressed in your speech. The one key advantage we have is we now have so much more

data. So is it a big challenge? Yes. Are we up to that challenge? Heck, yes.

UNIDENTIFIED FEMALE: An evolution of Alexa, is it still in it`s infancy? Is it a toddler now or is she a toddler now? An adolescent? Teenager?

Certainly hasn`t graduated from college.

UNIDENTIFIED MALE: No. AI hasn`t graduated from college overall. I - - and I think AI is a field is in it`s infancy. Think of it as a older

toddler. You know, who`s going to grow up to be an adult that just stuns us with her brilliance. Right? Is where we are.

UNIDENTIFIED MALE: Is Amazon a monopoly? Well it`s not really an easy question to answer. First you have to understand what the core tenant of

Jeff Bezos` business philosophy is, patience. Go back to the original letter that Jeff Bezos` wrote investors in 1997. He wrote that investors

to Amazon shouldn`t expect Amazon to operate like most companies. Because Amazon wouldn`t judge itself by short term profits. You know, the thing

that almost every other company cares about, only the long term. And Bezos and Amazon stayed true to that. It`s first few years Amazon barely made a

profit. It invested billions of dollars back into the business and it just kept growing and growing and growing and growing and now that patience has

paid off with incredible profits over the last few years.

We all know in some level what a monopoly is. We`ve played the game. But in the context of anti-trust law, it`s a specific thing. It`s meant to

stop a company from forming that can dominate the market in such a way that competition is impossible. Those who do not think Amazon is a monopoly say

that because Amazon is offering it`s customer`s lower prices, it can`t possibly be an anti-trust case. Those low prices are a benefit to consumer

welfare and it would be impossible to regulate exactly how low is too low for prices.

UNIDENTIFIED MALE: The load star of anti-trust enforcement is how are consumer`s effected. Do consumer`s pay more? Do they have less choice?

Then it`s time for the anti-trust cops to get on the beat. This is David Balto (ph). He worked on anti-trust cases for the Justice Department and

the FTC for years and is skeptical about Amazon being a monopoly.

(DAVID BALTO): When consumers are paying less and have a greater amount of choice, which seems to be the simple message from Amazon`s business model,

there`s not a reason for an intense anti-trust scrutiny.

UNIDENTIFIED MALE: But some say that business model is a direct threat to customers. This is Lena Kahn (ph). She`s a lawyer who has really shape

the debate around Amazon and anti-trust law. To people like her, Amazon`s willingness to sustain massive losses isn`t just a savvy business move.

It`s an example of predatory pricing.

(LENA KAHN): So predatory pricing is when a company prices a good below cost and is doing so basically in order to drive out it`s competitors so

that it is able to, kind of, enjoy dominate placement in the market.

UNIDENTIFIED MALE: All of those things are a really high bar for the government to prove and because of that a successful case on predatory

pricing hasn`t been litigated in decades.

(DAVID BALTO): That`s not for a lack of will. We certainly at the FTC and the Clinton Administration had predatory pricing investigations. But at

the end of the day, you have to convince yourself that consumers would be better off if you stop these practices and that`s like looking for a


UNIDENTIFIED MALE: But to those who do think Amazon right now is acting as a monopoly, the government`s view of predatory pricing is outdated.

UNIDENTIFIED FEMALE: The reality is with tech companies, you have a marketplace where that is winner take all. So if you`re a Facebook or an

Amazon or a Google, your main goal is to try to acquire as many users as possible at the very earliest stages. Because once you have a lot of

users, it`s going to be much more difficult for rivals to divert users away from you. And so in that scenario, predatory pricing actually becomes very


UNIDENTIFIED MALE: It`s important to note that the question of predatory pricing is really only one of the questions surrounding Amazon. They`re

also concerns about just how large Amazon has become as a business.

UNIDENTIFIED FEMALE: So in addition to be an online retailer, it also is a huge content producer. It is a book publisher. It has a huge cloud

computing service. The fact Amazon is involved in all these different lines of business positions it to use it`s dominance in the online space in

order to benefit it`s other lines of businesses. And I think that`s something that`s really problematic.

UNIDENTIFIED MALE: What we want from a consumer`s perspective is for those people who provide services for us, to use the bargaining leverage of

having all those customers. To lower costs as much as possible and that`s fundamentally what Amazon has done.

UNIDENTIFIED MALE: So whether Amazon has an unfair advantage over it`s competitors, whether it`s a monopoly. All those things are an open debate

but what is not a debate is right now Amazon is winning.