Following is the unofficial transcript of a CNBC exclusive interview with Amazon.com, Inc. (NASDAQ:AMZN) CEO Andy Jassy on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) airing today, Thursday, April 14th. Following are links to video on CNBC.com:
Amazon CEO Andy Jassy: This Has Been A Time Of Extraordinary Growth
Amazon CEO Andy Jassy: Employees Are Better Off Not Joining A Union
ANDREW ROSS SORKIN: Welcome back to “Squawk Box.” We are live in Seattle at Amazon’s headquarters this morning where Amazon CEO Andy Jassy just published his first shareholder letter since taking the helm of the company last summer. Andy Jassy joins me right now in an exclusive interview right here in a room by the way we were talking about this earlier. This has posters of basically with signatures of every frankly new product that’s been developed at the company over the many years.
Q1 2022 hedge fund letters, conferences and more
ANDY JASSY: A lot of them. Thanks for having me.
SORKIN: It’s very nice to have you here on what’s turned out to be a very jam packed news day and I want to talk about your letter in just a moment because it is a major piece of the news in the morning. But the other big piece of the news that we’ve been talking about all morning is Elon Musk who does sort of loom large here in certain ways given that you’re now competing with him when it comes to space or at least Jeff is on that front and Kuiper with the satellites and also know Zoox with with your vehicles. What do you make of this this Twitter bit?
JASSY: I don’t know. I woke up just sort of I don’t know how you wake up at this hour every day but, and just heard the news and it’s interesting we all use Twitter obviously to some degree and it’s it’s a very interesting service and capability. It’ll be interesting to see how it evolves.
SORKIN: Do you, would you ever think Amazon should own a Twitter? I ask because I think of Walmart at one point wanted to get involved with TikTok and social medias, the next thing.
JASSY: It sounds like somebody else is gonna own Twitter.
SORKIN: You think Elon Musk is gonna ultimately be the buyer?
JASSY: I don’t know. That’s, that’s the rumor. That’s what you guys are all talking about that.
SORKIN: That’s what we’re talking about. Let me talk about your letter and let me talk and let’s talk about what’s going on right now because one of the things that’s so fascinating in this letter this morning is just what’s happened during this company, to this company during your new time here. I mean, you’ve been here for a very, very long time, but in this new role, and we’re all now talking about supply chain issues, the pandemic seemed to be over and now we have issues in China and what that’s going to mean, big inflationary pressures. How do you, how do you just see things as they are right now?
JASSY: Well, it’s quite an interesting time and and, you know, we we grew three times faster than we expected in 15 months. We had a fulfillment center network that we built in, it’s a pretty big network that we built over 25 years that we had to double in 24 months. So it’s really been a time of extraordinary growth. And at the same time when you grow that fast and with some of the things happening in a world, there are also challenges. You know, we had, we had to double our fulfillment center network. We hired about 300,000 people last year alone which was a lot of people but at the same time, even though we hired a lot of people, we couldn’t hire all the people we needed in all the places that we needed and so that created all sorts of challenges in placing inventory close to our customers as we typically do and when you have to place it a little bit further away, it means you have longer transportation costs to get there. All the rate of Transportation has gone up over the last number of months. And, you know, then you see what’s happened with the war in Ukraine where it’s created a bunch of inflationary pressure. If you look at the cost of fuel, look at the cost of metal and building just very different and, you know, then you look at some of the supply chains as you mentioned, you know, it’s, there are, there are certain items that are very difficult to get, you know, we all are have a lot more demand for chips than there is supply right now. And, you know, because we design our own chips and we buy a lot of chips for the things we do in AWS and our devices, even in our vehicles, we get a fair share of those but still it’s not fast enough and it’s not enough and I think some of the issues happening right now in China where, you know, as there are variants and as they’re being very conservative and locking down production creates some issues and getting products as fast as we need and it’s still more expensive and more time consuming to get products into the country so there’s still supply chain challenges.
SORKIN: So, when you have to plan out how are you even planning at this point, in terms of just how transitory or not these inflationary pressures are. I know you just added a 5% surcharge for third party sellers to deal with the fuel cost. Do you think that that is a long-term situation? Do you think that that shifts back?
JASSY: I hope not. You know, it’s the last thing we ever want to do is have to raise costs for our sellers and sellers for us are so important and so critical to the business and in the early part of the pandemic with all the costs I talked about earlier, right or wrong, we just absorbed all those costs for sellers, but in part because we thought some of those would attenuate as we got to the beginning of this year and some of the impacts on COVID change, but with the war in Ukraine and then all the inflationary pieces that happened there after, at a certain point you can’t keep absorbing all those costs and run a business that’s economic and so I think that, you know, we’re very aware that we them, that sellers have costs as well. They’re very important customers for us and partners and we’ll keep looking at how costs evolve and revisit.
SORKIN: You talked about chips being a major issue. What do you think we should be doing here in the United States about manufacturing those chips and does Amazon have a role in that long-term you think?
JASSY: Well, I think it’s, it’s, it should concern people that so much of the chip production is concentrated in one place, and there’s, you know, there are a lot of geopolitical things that could happen. And so I think it’s quite wise for the US to be thinking about creating more production here and, you know, I’m very happy about the CHIPS act that we’ve been working on in the country. It’s a lot of money, it’s $35, $40 billion and yet, it’s probably not enough. I think we probably are going to need even more than that to have the ability to withstand some kind of shock to production in a particular part of the world. But I think it’s very important. I, you know, we design our own chips and we’re big buyers of chips and we’re big customers of some of the big chip companies as well as producers ourselves so there could be a role for us to play. We certainly want to help and we certainly want to partner.
SORKIN: Do we believe that the companies in America and I know Intel is trying to do this, but do we have enough know how in this in the country to actually do the manufacturing piece of this do you think?
JASSY: I think it’s a good question. I think we have a start. I mean, Intel obviously has been doing this for a long time. And you know, Pat Gelsinger has been a partner, you know, first on the VMware side now with Intel for a long time and I have confidence in their ability to produce and but they have work to do as they know and and we’re going to need additional providers I think to be where we ultimately want to be.
SORKIN: And what are you seeing in terms of wages at this point, in terms of wages going up?
JASSY: Yeah. Well, they certainly have gone up over the last two years. And, you know, some of which we did ourselves. You know, we championed the $15 minimum wage which is more than double the federal minimum wage, which it’s high time that that change too by the way, but—
SORKIN: What do you think it should become?
JASSY: I don’t know the exact number but below $7.50 to me feels very wrong. You know, I think it should be closer to to the $15 minimum wage that that, you know, we started a few years ago—
SORKIN: And now about 18.
JASSY: Yeah, our average starting salary now is over $18. And so, wages have continued to go up. You know, when you run a retail business like we do, it’s true for all retailers, they’re relatively low operating margin businesses. So there’s really only so far you can go and have an economic business that makes sense, but we’ve continued to see wages go up. There’s been a very significant acceleration the last two years and I, you know, it’s hard to tell how much more they’ll go up. I don’t think we’ll go backwards though.
SORKIN: In that context, how do you see the union movement that’s taking place, frankly, around the country, but clearly aimed in certain places and I’m thinking about New York, where I’m from at Amazon?
JASSY: Well, I mean, I’d say a few things. You know, first of all, of course, it’s its employees’ choice whether or not they want to join a union. We happen to think they’re better off not doing so for a couple of reasons at least. You know, first, at a place like Amazon that empowers employees, if they see something they can do better for customers or for themselves, they can go meet in a room, decide how change it and change it. That type of empowerment doesn’t happen when you have unions. It’s much more bureaucratic, it’s much slower. I also think people are better off having direct connections with their managers. You know, you think about work differently. You have relationships that are different. We get to hear from a lot of people as opposed to it all being filtered through one voice. If you want to keep the construct that we’ve had for for this long, you have to have, you know, competitive and compelling benefits though for for employees and it’s why we champion the $15 minimum wage a few years ago and we’re up over $18 now. It’s why we have full insurance, why 401k, 20 weeks of paid leave and our Career Choice Program where in our fulfillment center for our employees who want to get a college education, we’ll pay for their full tuition, so those things really matter. The one thing regardless of how it all evolves is we just won’t compromise on the customer experience. That for us, you know, is paramount and—
SORKIN: What did you think when you heard President Biden effectively say, and this is regard to the unions around Amazon, here we come?
JASSY: Well, everyone’s entitled to their own opinion and you know, we we have a lot of things that we I think have supported the administration on and agree with them on, you know, some of the way that we’ve tried to help with COVID and with immigration and, you know, the chips piece that we’re talking about, the Infrastructure bill. We won’t agree on everything, though.
SORKIN: When you look at one of the issues that the unions have raised as you know so well are safety issues, and you’ve addressed this to some degree in this morning’s letter. But I’m hoping you can speak to it because there was some data out just about two days ago that seemed to suggest and this was data put together by I think some of the Union advocates that there were more, even double the number of injuries at Amazon facilities relative to their peers.
JASSY: Well look, there’s a lot of ways you can spin the safety data and some special interests folks like you’re talking about with this case, will do it for their own interests. That that data is not really accurate. You know what I would say is a few things. You know, first of all, for anybody that had hired a lot of people during the pandemic like we did, and there are plenty of others who did as well, their incident rates, their recordable incidents which what OSHA asked everyone to report on, went up in 2021 versus 2020 because he had a lot of new people. In our case, we hired about 300,000 people just in 2021, most of whom had never worked in this type of manual and industrial space, and who had to be trained and all the data we have says that the incidence of injury in the first six months is always much higher than thereafter. So we have a lot of new people, you’ll have more incidents. But that said, if you if you look at the the injury data and safety data, you know, for us, we we have a few macro areas in which we do work. We have what OSHA calls warehousing. We have what OSHA calls messengers and couriers, messengers and couriers, and then we have grocery and if you look at the industry average versus our numbers, we’re a little bit higher than average in warehousing, we’re a little bit lower than average in both messenger and couriers and grocery. So we’re about average, which, frankly, I take no solace in. We don’t aspire to be average. You know, we’re trying to be the best in the industry and it’s why we’re spending, you know, we have we spent about $300 million on safety last year alone. We have about 8,000 people who just work with safety and we’re trying all sorts of things and work in all sorts of all sorts of things. We have a rotational program we built where we’ve built sophisticated algorithms to try to predict when somebody’s doing something too, too frequently and rotate their jobs and rotate what they’re working on. We have wearables that we’re investing in that send haptic signals when we believe you’re making a dangerous movement. We have, you know, new shoes that we’ve had everybody wear that, you know, protect your toes and avoid slips. We do training on body mechanics and wellness. So we’re working on a lot of those things, but the reality is that we will not be happy until we’re the best in the industry and and even then, I won’t be happy because I’m gonna know there are things that we could be doing better. This is important to me, it’s important to—
SORKIN: How do you think about this? So one of the things that Jeff said in his letter last year was that one of the missions of Amazon now is to be Earth’s best employer and Earth’s safest place to work. How do you think about that relative to the priority of serving the customer?
JASSY: I don’t think they have to be at odds. And in fact, I think they’re very complimentary. When you take care of employees and employees are safe and they love working where they work, they stay longer. They tend to be happier, they tend to be more productive. And all those things improve the customer experience. So I see them as very complimentary.
SORKIN: Want to also talk to you about – I mentioned third party sellers and the fuel surcharge, but also want to talk to you about third party sellers because there are investigations going on as you know and other concerns about Amazon doing what might be described as white label products that compete with third party sellers. How do you think about that relationship? And also, how do you think about either being able to use or not use data that you have, about what selling in one place or how a product is working or not working and then making a similar competitive product?
JASSY: Well, I think you’re really talking about private brands or private labels. And as you know, we didn’t invent private label. That’s a many decades long practice that all the big retailers have participated in for a long period of time. And I think when you decide to build private label in particular areas, for us, it’s almost always driven by customers who say, “I like this particular product, but I want an alternative that’s more cost effective.” And so we have, for us, it’s a part of our business. It’s a smaller part of our business than it is for most retailers. But what we always are going to show customers is what we think they most want. So if a customer is used to buying a particular brand in a particular area, that’s what we tend to show them as long as it’s in stock, and we can get it to them quickly and customer reviews are good. But we’re always going to optimize to show customers what we think would be best for them to buy.
SORKIN: But how should a third party seller think about that? Because – and I ask because some of them will build a product and then think to themselves, “Well, if Amazon decides that they’re going to also make the same product, that’s going to be a problem for me.”
JASSY: Well, it’s, you know, third party sellers and their products are the majority of units that we sell in the store today. And so if you build a great product, with a great price and high quality, you’re going to perform well. Like everybody else, you have to find ways to get awareness. But if you have that product, there’s only so many things that any company is going to manufacture. We tend to focus in areas that tend to be the, you know, kind of the everyday household pieces that people want and need. But if you build a great product, you’re going to have a business over time. And that’s what we see borne out in the numbers, which is, you know, sellers continue to do very well in our store. They’re the majority of our units.
SORKIN: Talking about products – and we’re going to talk about a couple of the sort of component parts of Amazon. But in the retail piece, I have a Prime question for you, which is what do you think the elasticity is long term on the Prime price? We talked about this on the air actually when you raised the price on it last year. In terms of if you’re a family of four, it might be able to go very high. If you’re a family of one, maybe it can’t. I don’t know.
JASSY: It’s a good question. And I don’t know if anybody knows the answer to it. I think that the value of Prime today when you think about what’s in it, the you know, the all you can eat two day shipping, that you know, increasingly we’re moving more and more shipments to one day shipping. What you get in Prime video with, you know, our originals and all the products that you know we have a channels program where third party entertainment companies are selling subscriptions and channels to people. We got the whole catalog in music. You know, what we’ve got on the gaming side with all the gaming benefits. The grocery benefits – it’s a, you know, and then you layer in some of the things that we keep adding really every month. I mean, just look at what we have coming the rest of the year in Prime video with you know, a new Jack Ryan season. A new The Boys season. The new Lord of the Rings, which you know is over Labor Day. And football. I mean you know, and so we keep adding value to Prime. I think it’s you know, I think it is a great value today. And we don’t plan on stopping adding value in Prime.
SORKIN: What, by the way, is the aspiration in media? I ask in large part we’ve been talking all week about WarnerMedia just merged with Discovery+. Everybody’s trying to understand what the streaming wars ultimately look like. When you think about it as an economic matter, and this is interesting because I think people want to understand, is this a component part of Prime or is the economics of it independent of Prime? And I ask that because, you know, do these other businesses ultimately subsidize the streaming business? There’s a lot of people in Hollywood who are trying to understand what it’s all going to look like.
JASSY: Well I think it’s still pretty early days for us in entertainment and we’ve invested–
SORKIN: You just merged with MGM.
JASSY: We, yes, we just acquired MGM and it’s very early days for us in entertainment. We’ve invested a lot of money there and a lot of resources and I think you should expect will continue to do so. We’re very optimistic about what’s possible. And you know today, what we find is, so many people are starting Prime because they see some show that they love in Prime Video. And then they oftentimes once they start Prime, they use the shipping benefit and buy retail products. So they, you know, and vice versa. So I think that today, it really connects that Prime value proposition and I think people get a lot of value from those collected pieces. As we keep adding more and more content as you see what we’re doing with sports and we’re pretty early in what we’ll add. It’s possible we’ll explore other models as well but today it’s part of that Prime –
SORKIN: It’s part of Prime. Not something you want to spin off just yet.
SORKIN: By the way, talking about spin offs. Obviously you’ve heard speculation for years now about whether certain parts of Amazon should get broken up and spun off, either for regulatory reasons or even economic reasons. How do you think about that?
JASSY: Well, did Jon Fortt put you up to this?
SORKIN: He did not. He did not.
JASSY: Jon asks me this every time I see him. But you know, I think that you always have to decide, you know, when you’re going to choose to spin something – why you’d want to spin something off. Typically it’s when you know when companies need more money to be able to invest in a particular business and or if they want to get something off their balance sheets and their financial statements. We just don’t find that to be the case. You know, our consumer businesses have a lot of connectivity between them. We were just talking about an example of that with Prime Video and in our retail business, and, you know, in the case of AWS, we haven’t had any issues with respect to being able to fund that business the way it’s needed to be funded to grow. So we just haven’t found a compelling reason to do so.
SORKIN: You recently announced the 20-for-1 stock split. What was the rationale from your prospective to do that?
JASSY: Well, you know, there’s obviously no substantive, quantitative reason to do it. And so, it wasn’t for any of those types of reasons. It was really because of that, it meant you could keep it the way you were running it or you can change it. And we just kind of looked at it and thought it might provide more flexibility for our employees. And there’s a bunch of small but meaningful examples including, you know, when your stock price is over $3,000, If you have an employee who wants to sell for whatever reason they need to sell but they don’t need to dispose of $3,000 they have to sell a whole share as opposed to when your stock price is more like $150 and you need to sell share because you need something that’s $500 or $1,000, you know, it’s more flexible, more convenient for them. So we just at the end of the day felt like it would provide a little bit more flexibility for our employees.
SORKIN: One of the things we bat around on this show virtually every day – it’s hard to get through an interview without mentioning the word crypto. As a payment platform and you actually have a huge payment platform unto itself. How do you think about crypto today?
JASSY: Well, I think it’s an emerging area obviously. And there’s a lot of – it’s very interesting and there’s a lot of discussion about it. And yeah, I think NFTs have really started to take off and you know –
SORKIN: Do you own any?
JASSY: I don’t own any NFTs myself.
SORKIN: Any Bitcoin?
JASSY: I don’t have Bitcoin myself. So, you know, I think I expect that NFTs will continue to grow very significantly. We’re not probably close to adding crypto as a payment mechanism in our retail business. But I do believe over time that you’ll see crypto become bigger and it’s possible.
SORKIN: Could you see yourself selling NFTs?
JASSY: Yeah, I think it’s possible down the road.
SORKIN: On the platform. Before we let you go, it’s been 10 months now in this new role. And I’m curious what the relationship is like with Jeff, how much time you guys spend together, what does he think of all of this? We were actually mentioning we thought your letter was a little Bezosian in some respects. What’s it been like?
JASSY: Well, I have a great relationship with Jeff and, you know, I’ve known him for a long time and I have an unbelievable amount of respect for him. And we talk regularly, we talk weekly and it’s great to have a sounding board and he’s got so much wisdom. And you know, I think both of us share a lot of excitement and optimism for the future. We’re so early in all of our businesses. I mean, even in our retail business, which people think as kind of our most mature business. You know, we’re about 1% of the worldwide retail market segment and 85% of retail still lives offline. So we’re so early in all of these areas. You know, AWS is a $70 billion revenue run rate business growing, you know, about 37% year over year in 2021. And still 95% of the world’s IT spend is on premises and not in the cloud. So, all of these areas you go through it with Alexa has the chance to be kind of, you know, the best personal assistant which changes your life. And entertainment as we just talked about. Our advertising business is early. Kuiper, you know, we’re building a low Earth orbit satellite. And Robotaxi business in Zoox. I mean, we’re so early in these areas that I think we both share a lot of optimism that there’s an opportunity to change a lot of customer experiences over a long period of time.
SORKIN: It’s still day one. Are you going to space? Will you go on –
JASSY: I’m not going anytime soon.
SORKIN: You don’t want to go up with him?
JASSY: I didn’t say I didn’t want to go up. I’m just saying I’m not going anytime soon.
SORKIN: Andy Jassy, thank you so much.
JASSY: Thanks for having me. I appreciate it.
SORKIN: On a very newsy day. Congratulations on the letter. And we hope to do this more often. Thank you again. Guys, I’m going to send it back to you in the studio.