Amazon vs. Trader Joe's; Bill Gates still a force at Microsoft; Inside the Binance founder's sentencing

This episode delves into recent developments involving major companies like Amazon and Microsoft, and a significant legal case affecting the founder of Binance.

1. Amazon's aggressive strategies in business expansion and internal practices came under scrutiny, illustrating the intense competitive nature and ethical boundaries within corporate strategies.
2. Bill Gates, despite his reduced official capacity, continues to wield significant influence at Microsoft, particularly concerning its strategic directions in AI.
3. The legal proceedings against Binance’s Changpeng Zhao highlight the intersection of law, technology, and corporate responsibility.
4. The episode discusses broader impacts of corporate behaviors on industry standards and legal frameworks, emphasizing the role of high-profile individuals in shaping business ethos.
5. Insights into corporate strategies and legal battles provide a window into the operational challenges and ethical dilemmas facing today’s tech giants.

1: Introduction and FTC vs. Amazon

The hosts discuss the FTC's ongoing case against Amazon, focusing on Amazon's attempts to emulate Trader Joe's success. Quotes include insights on corporate strategy and ethical boundaries.

2: Bill Gates' Influence at Microsoft

Analysis of Bill Gates' continued impact at Microsoft, especially his role in AI advancements and corporate strategy. Quotes reflect on Gates' strategic foresight and leadership.

3: Binance Founder's Sentencing

Detailed coverage of the sentencing of Binance's founder, discussing the legal and ethical implications for the cryptocurrency industry. Quotes capture the courtroom atmosphere and legal arguments.

1. Always consider the ethical implications of business strategies.
2. Maintain transparency with stakeholders to build trust.
3. Stay informed about industry regulations to ensure compliance.
4. Foster a culture of responsibility and accountability in leadership.
5. Utilize strategic partnerships to enhance technological capabilities.

This week on the GeekWire Podcast, we discuss Amazon's efforts to compete with Trader Joe's, and the related tactics revealed in "The Everything War," the new book by Dana Mattioli of the Wall Street Journal. We also revisit last week's episode with Mattioli and share some of the reactions to the discussion.

Plus, the FTC probes Amazon's internal use of Signal's disappearing messages feature, a newly disclosed email shows how Microsoft scrambled to catch up in artificial intelligence, and a new report says that Bill Gates is still a highly influential figure inside Microsoft, especially when it comes to the company's AI strategy.

Finally, we go inside the Seattle courtroom where a prominent figure from the cryptocurrency world, Binance founder Changpeng “CZ” Zhao, received a controversial prison sentence this week.

People

Changpeng Zhao, Bill Gates, Satya Nadella

Companies

Amazon, Microsoft, Binance

Books

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Guest Name(s):

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Content Warnings:

None

Todd Bishop
I've been thinking a lot about the media business lately, and I think you have the toughest job. If you look at the media business writ large, publisher revenue generating, in terms of high stress, the organization depends on the stuff that you and your colleagues on the business side can create out a whole cloth. Why don't you respect me more then I respect you? What are you talking about? Come on.

I have huge respect for you. You can't work with somebody for 20 some odd years and not have huge respect for them. But I bring this up in part because I think that there are jobs on the journalism side, the news side, that are right up there in terms of stress. And one of them is standing in a scrum of photographers outside of a courthouse waiting for the person to come out who you need to get one, just one decent shot of one decent shot, and like the stress, and there he is, and it comes out and everybody's rushing over there to get him. And I experienced this this past week.

I usually don't experience this, but I was at the sentencing for Changpeng Zhao, better known as CZ, the former CEO and the founder of Binance, which is the world's largest cryptocurrency exchange. And of course, we don't have a photographer and a reporter. I was up in the courtroom. You can't take pictures in the courtroom. So as soon as the sentencing reached a point where I didn't really need to be there anymore, most of the things had been settled.

I raced downstairs and I waited, ran to my car, actually grabbed my real camera, waited. I shot, I think, maybe 50 frames when he came out. And I got one usable shot. And it was just by the grace of the journalism gods that I actually got a usable photo of this guy. And it was like I was thinking, I don't think I could do this every day.

This is just too stressful. You should have done a sketch artist from inside the corner. Was there one in there? There was one there. Really?

Yes. And in fact, King five news used them. I'll link to their report from the show notes. But this was just a reminder of how difficult some of these jobs can be. And of course, these photographers out there are pros.

And I'm sure you would refine your technique. And, you know, an amateur like me trying to get a shot has a very slim chance of success. But there's this great scene from the Ron Howard movie, the paper in the mid nineties. Our colleague Alan Boyle actually reminded me of it when I brought this whole thing up. And it's the same thing where there's this amateur junior photographer and she goes to this perp walk and she literally falls on the ground as she's firing her camera.

And just by some random stroke of luck, she gets the shot of the defendants from between somebody's legs. At any rate, that was my week. How was the sentencing? Well, it's funny you should say that because that is one of the topics I want to discuss on this week's show. Plus, we're going to talk about some emails and messages inside Amazon.

So all that's coming up on this episode of Geekwire.

Welcome to Geekwire. I'm Geekwire co founder Todd Bishop. And I'm geekwire co founder John Cook. We are coming to you from Seattle, where we get to report each day on what's happening around us in business, technology and innovation. What happens here matters everywhere.

And every week on this show, we talk about some of the most interesting stories in the news. As we mentioned coming up later on, I'll give you my inside details from the courtroom where CZ Changpeng Zhao was sentenced in a fascinating case involving cryptocurrency and binance, the world's largest cryptocurrency exchange. Later on, I do want to talk about the FTC's case against Amazon and some of the interesting messages that the FTC is trying to get access to but can't because Amazon's executives have started using signal, or at least they were back when the FTC was asking for the documents to be produced. But before we jump into that, I wanted to quickly revisit last week's show with Dana Mattioli, the author of the Everything War. I got a range of feedback on that episode.

It was funny. I felt like I was the mediator between Amazon, which, of course, was the subject of the book, and Dana Mattioli, the Wall Street Journal reporter who wrote the book. And I was really intrigued to see the response from people. There were some listeners who were appreciative of the fact that we went out of our way to include Amazon's comments and give some context. I was one of those.

John Cook
Yeah, I thought that was really well done, well edited. Thanks. Yeah, that's not easy to know when to put the break in to allow the comments for the rebuttal from Amazon. But there were other people, I thought, who had some good points. They thought that I should have been better prepared to grill Dana Mattioli myself and really try and not defend Amazon per se, but really challenge her on some of the details of her reporting.

Todd Bishop
So I just appreciated all the feedback. This whole process of journalism is a learning experience all the way through. You learn about the things you report on, you learn about the right way to approach things. I got to say, though, I felt like it was a pretty meticulously reported book, and I frankly had a hard time finding holes, literal holes, in the facts that she was reporting. Yeah.

John Cook
One thing that struck me was that it seemed like a lot of the anecdotes were based on, like she brought up the diapers.com anecdote, which was in the everything store, Brad Stone's excellent book on Amazon. And it just seemed like there were some anecdotes she was using that were maybe a bit outdated. Now, maybe those practices are still continuing inside of Amazon. But I was just interested, I thought it was interesting that she had the example she had picked to illustrate some of her points. That was the point I was going to bring up.

Todd Bishop
And perhaps that's where I could have pressed her a little bit more. Not so much on the facts as she reported them, but on how much of this book was new and the. Fact that Bezos was playing such an integral role. It seemed more of a look backward than it was forward. And where the company has been for the last two years, I don't know, how many years has she spent reporting this?

John Cook
She even mentioned that, you know, she was pregnant at the time that she started it, and now her kid is like two or three. Yeah, they're almost three years old. So I paid close attention to the citations in the book, the material that she was citing. And there were many cases when the citations were to her own reporting in the Wall Street Journal. I think critics of the book would say that it was more of a warmed over version of what she had done for the Wall Street Journal.

Todd Bishop
But I will say there's something about having it in a cohesive narrative form that makes it different for me. And there were new things. And in fact, one of the things that I did not get to, that I was hoping to get to with her was the Trader Joe's story, the story about Amazon's secret trader Joe's room. And in fact, after I recorded the podcast with Dana Mattioli, this was the excerpt that the journal chose to publish. And I think that speaks to the.

John Cook
I don't know. This is very new, so I can tell you about it. She reported that there was a employee who was recruited to Amazon from Trader Joe's, and there's questions about how transparent they were with this new recruit, about this fact. But Amazon was very much trying to reverse engineer the success of Trader Joe's for its own private label food brands. And it turned out that their motivation for hiring this former Trader Joe's employee was primarily so that she would give Amazon all of the secrets.

How would you prove that? That seems very difficult to prove. Well, she talked to the employee who was grilled by the Amazon private label team. Initially. She did turn over, like, the rankings, like, the most popular products.

Todd Bishop
And this is stuff that Amazon would sue people over this if it happened to them, right, under the non compete terms or the NDA terms. I mean, would they or would they not sue? I don't know, but certainly it would be a concern if somebody took the rankings from Amazon to another competitor. So first off, she did, according to the book, give them the rankings of these specific foods that Amazon was interested in recreating in its own business. And then they wanted her to give the numbers on the margins for these foods.

And that's where she said, gosh, this is just not making me comfortable. Somebody else on the team said, yeah, this isn't right, and actually referred it to legal counsel inside Amazon. And it ended up that Amazon, according to the book, ended up firing people who had gotten access to this data. So for me, it was interesting in a number of responses, wait, wait, firing. People got access to the data, but not firing?

John Cook
They did not fire the former trader Joe's employee or the person who reported it. So Dana Mattioli reported that despite this employee's concerns, the team, quote, disseminated her sales document and started to think about how to incorporate it. Another employee became uncomfortable with the ethics of using Trader Joe's proprietary data and reported it to someone in Amazon's legal department. Soon, the handful of employees, the Amazon employees who had accessed the data, were fired. Amazon responded to the behavior appropriately, but employees on the team say the use of the data was emblematic of the type of pressure they were under.

Todd Bishop
And that, to me, was the most fascinating anecdote in the book because it illustrated so many different things. First off, it was new reporting. Second, it showed the behavior that was manifested from the broader company culture in Dana Mattioli's assessment. And I totally understand that. And it's sort of the Wells Fargo comparison that she made, which also resonated with me.

And then third, Amazon acted appropriately. They let go of the employees who accessed that data. So I just wanted to bring that up because that was something that stood out to me in the book, and I just didn't get a chance to talk to Dana Mattioli about that. I think you wanted to bring up Amazon earnings, which were also out this week. But I was going to say, and these are the reasons why Amazon had a pretty big financial report with revenue of 143 billion this past quarter.

I don't know if you can draw a straight line to that, but certainly the culture over the years and the way it's manifested itself. What was the original name of the company? Relentless. Relentless. I will link from the show notes to those earnings, which frankly, at this point they've been doing so well over so many quarters.

John Cook
What else are we going to say about it? Exactly. So are we going to talk about that later or not? No. Okay.

Todd Bishop
Let's not talk about it. Fine. From the show notes. Also link back to the podcast from last week and a variety of coverage of Dana Mattioli's book. All right, coming up, let's talk about those internal Amazon messages.

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Todd Bishop
Welcome back. It's Todd Bishop with John Cook. I gotta say, John, one of my favorite things about the court cases that come out related to big tech companies, stretching back to my time covering the latter days of the Microsoft antitrust trial, is the internal documents that ultimately make their way into the public record as a result of the discovery requests made by government officials. And we saw two fascinating examples of that this week. First off was with Microsoft.

There was an email disclosed as part of Google's antitrust dispute with the Department of Justice where Kevin Scott, Microsoft's CTO, sent an email to Satya Nadella, Microsoft's CEO, and Bill Gates back in 2019, basically sounding the alarm over artificial intelligence, how far ahead Google was at the time, and then Satya Nadella using it as justification internally to make the case for partnering with OpenAI. It was an interesting example of just how quickly all of this stuff is moving and just how much Microsoft has had to scramble to get into something close to a competitive or maybe even a leadership position now in AI. So that was one interesting internal email that came out as a result of legal proceedings this week. It reminds me of the memo. That.

John Cook
Was it gates that wrote it about the coming Internet wave. Well, there was. That. Was it that one? Let's talk about memos first.

Okay. Well, that was. There's two flavors. That was the memo that was meant to be released. Republicans.

Todd Bishop
That's what I was just gonna say. There's two flavors of corporate memos. There's the memos that are written for, and there's probably multiple flavors, but in broad strokes, there's the memos that are written for purposes of being, quote, leaked or even just transparently published to the public. And those happen quite a bit. The Internet tidal wave is the example you're talking about from Bill Gates back in the mid nineties.

Later on, it was the trustworthy computing memo. And these are so transparently public that the company will even put them on the timeline of their history. I mean these are like pivotal moments in Microsoft's corporate lore. But the stuff that comes out in the antitrust filings, they never wanted that to come out. I actually thought you were going to bring up a different example.

I don't know if you remember when Bill Gates retired from Microsoft. So this must have been 2007, 2008. I was working late at the newspaper. I don't mean to turn this into a journalism podcast. No, this sounds interesting.

John Cook
I want to hear the story. I was probably there with you at the time. You were probably sitting over on the other side of the cubicle working on your venture capital database. And I was digging through, I was digging through Microsoft's antitrust filings and specifically the documents and the emails that Microsoft had to turn over for the DOJ's case. And it was long over at that point.

Todd Bishop
It had been settled. But I found this rant by Bill Gates over the difficulty that he had installing movie maker, Windows movie maker on his pc. I mean, and it was just epic. And so we led our coverage of his retirement with like the week that he retired with that email. Like that is an anecdotal lead showing the reality of what he was like inside.

And of course people inside and even Gates himself. I got to ask him about the memo during our final interview with him as a day to day executive at Microsoft. He was like, come on, I do that all the time. That's not a big deal. But it was super eye opening to people outside because he was frustrated.

He was like the personification of the frustrated Windows user. And it was just epic to the point where Dave Ross of Cairo radio at the time did a dramatic reading of it on the air. I mean, like this thing was epic. I don't mean to like go back and wallow in history there, but those are the kinds of things that you end up getting unless your executives are using the disappearing messages feature in Signal, which is where Amazon, the FTC, is trying to slap Amazon. I want to come back to that, but before we get to that, because there was another interesting story out this week in Business Insider from Ashley Stewart.

John Cook
Did you read this? Yes. The headline really captured my attention. Bill Gates never left. And about him potentially still pulling the strings at Microsoft.

Did you read it and did you have any takeaways from it? Because that'd be fascinating to hear your take on it. Yes. Now, of course, Bill Gates has left the day to day role as an executive long ago, left as CEO and then stayed around as an executive chief software architect for a while, left in, I believe, 2008, and then left the board a few years ago under questionable circumstances. He would say that he did it voluntarily.

Todd Bishop
Of course, it was amid an investigation into an inappropriate relationship, possibly multiple inappropriate relationships that he had with employees. But the point is he is still such a figure in the tech industry and he's been meeting, according to this story, with OpenAI executives going back a number of years. And in fact, he was the primary means of introducing OpenAI to Microsoft and ultimately leading to the partnership between the companies. So part of this point of this story by Ashley is that Bill Gates is still very much an influential presence behind the scenes at Microsoft. I thought this line from the story was amazing.

John Cook
While Nadella might be the public face of the company's AI success, the Oz who built the yellow brick road to a $3 trillion juggernaut, Gates has been the man behind the curtain. That's pretty bold, right? And then there's another quote where they kind of take issue with that. Yes, that's pretty dramatic writing there. At least that's some great writing.

Todd Bishop
Not necessarily supported fully by the reporting, but I think it's an interesting angle. It's a great story. We'll link to that from the show notes as well. In the meantime, Amazon has been finding itself at odds even more with the FTC over this signal issue. I'd love to hear more about this because I've not been digging into that.

Do you remember when Jeff Bezos was being pursued by the National Enquirer? Yes, I do. I think we have a copy of the National Enquirer Bezos article on our wall series. We have a cover of it. Yeah, I don't know if we have it on the walls.

But yeah, that's right. It is in the history showcase. History showcase at geekwire. Yeah. So the lesson that Amazon and Bezos specifically took away from that was not to use text messaging, straight text messaging anymore, for sensitive pictures or memos, sensitive corporate information.

And he actively encouraged other Amazon executives to shift to signal. In fact, the FTC this past week filed some exhibits that show Bezos actively encouraging other Amazon executives to communicate with him that way, saying, this is the best way to chat with me. And so the issue that the FTC is now raising is that the document retention emails that Amazon's lawyers sent to their executives. So this is a standard thing that happens when the FTC starts to investigate you, they say, or any other agency, they say, hey, there's an investigation happening here. You need to tell your key people not to delete their stuff.

And there are questions over when Amazon's legal team communicated that to Bezos and others. And Amazon has so far, according to the FTC, declined to provide those communications to the FTC about what they told Jeff Bezos and others because Amazon says those are lawyer client privileged. So there's this fascinating discussion and in the back of my mind is we're seeing these great insights into Microsoft past and present as a result of the discovery that the government has done in these multiple antitrust cases, some involving Microsoft, some not. And are we going to see the same level of insight into Amazon from the FTC case, regardless of the outcome? I don't know.

It's just a fascinating issue. And you started to see just little snippets of some of the signal things. And by the way, I should say in the same spirit, heres what Amazon says on this topic. The FTCS contentions are baseless. Amazon voluntarily disclosed employees limited signal use to the FTC years ago, thoroughly collected signal conversations from its employees phones and allowed agency staff to inspect those conversations even when they had nothing to do with the FTCS investigation.

The FTC has a complete picture of Amazons decision making in this case, including 1.7 million documents from sources like email, internal messaging applications and laptops, among other sources, and over 100 terabytes of data. Now, you and I listen to that and we're like, whoa, that's impressive. Lawyers listen to that. And people who are familiar with this process. I've talked to some people about this.

They read that and they say Amazon just gave the FTC a haystack. Good luck finding the needle because they just overwhelmed them with documents. So statements like that can be read in different ways depending on your level of experience with these cases and there's more to come. Potentially. Potentially.

Potentially. But the key question now is, well. What was use some AI engine to sort through it all? Yeah, maybe go to OpenAI and Microsoft and figure it out. Oh, and one last thing I'll point out is do you know whose article is cited in the FTC's request?

Dana Mattioli's article from the back in the day reporting that Amazon was using signal internally. And what the FTC says is that Amazon disclosed that a few days before that Wall Street Journal report came out at the time. So they knew it was coming because of the question she was asking. Or at least that's the implication of the FTC's filing. So, hey, there's another hat tip to Dana's reporting.

I know she's sort of been grilled a bit here and we haven't said. What the name of the book is, so you should talked a lot about. It at the beginning. Oh, did you say what it was? So I said it's the everything war.

Amazon's ruthless quest to own the world and remake corporate power. So there you go. All right, coming up, let's go inside the courtroom. You're listening to geekwire and we'll be right back.

Welcome back. It's Todd Bishop with John Cook talking about the week's news. I know a lot of court stuff. A lot of court stuff. Yeah, it's like court tv edition.

All right, so this week I got to go down to the US district courthouse in Seattle and a little more behind the scenes. By the way, I told the anecdote at the beginning about the photo that I got of changpeng Zhao, the former CEO and the founder of Binance, the world's largest cryptocurrency exchange. That was my good moment with the photo. Uh oh. My bad moment was I literally drove up and I looked over to the right at 830.

The hearing started at nine. I thought, oh, 830. Oh, that's plenty of time there he was walking in. Oh, I thought you said there was going to be like a massive line to get into the courtroom. You didn't think you were going to get in?

No, I was able to get in just fine. Oh, so you could have easily just gotten the photo with no one else around? No, no. The photographers, other photographers knew to be there earlier than a half an hour in advance. Again, total amateur here, which is why there was even more pressure on me at the end to get his photo coming out.

Out. At any rate, the most interesting part of this hearing was federal prosecutors were asking for a sentence of three years. Now, just to give you some quick background binance, big cryptocurrency exchange. The charge that he pleaded guilty to back in November was failing to maintain an adequate anti money laundering program. And prosecutors alleged that that allowed money to flow just willy nilly all over the place to terrorists, child abusers, the dark web.

Just the worst of the worst he turned a blind eye to. That was the charge. He pleaded guilty to it in November. The prosecutors were asking for three years, which was twice the top end of the federal sentencing guidelines. His lawyers were asking for probation.

The probation department was recommending five months. The judge gave him four months. This was a big shock to a lot of people, including some people who were disappointed, not so much in the judge's ruling, but in the fact that prosecutors only reached a plea deal on one count, and that kind of limited what the judge could do in terms of the overall sentencing. But, yeah, but the probation report was five months. Yes, probation suggestion right in advance of the sentencing.

John Cook
Typically, that comes out with the probation report. So it wasn't too far off of the probation report. That's the way I read it. It wasn't. And the thing that I took away from this was this guy is a remarkable person.

Todd Bishop
He's an extraordinary person. And I think that came through in terms of his philanthropic work. He was raised in poverty in China, escaped with his family, fled after Tiananmen Square, and just a remarkable person to have built this business up. And the judge was fascinated by him. You could tell there were 160 letters of support that were sent.

The judge showed them and how he had read them so closely that the binding was falling apart. I mean, somebody should probably write a book about him. At any rate, this, to me, was a case study for future defendants. That's kind of how I read that, too. I read your story, and I was thinking, yes, lawyers that go in front of the federal, into the federal system need to be reading this story about how to reduce, at least defense attorneys, reduce the exposure for their clients.

So obviously, a lot of it was his character and the fact that he had done and had a lot of. Money to pay some very, very good lawyers, probably to be on. On his defense. Well, that's the thing. I mean, this company made this guy a billionaire.

And by the way, the company did pay, or is paying a $4 billion and change fine at his direction prior to his departure as CEO. And he was fined $50 million. But he's worth like, 33 billion as a result of this company. And so you look at it and you go four months for allowing this kind of illicit activity, this illegal activity, to be transacted on the platform. And he, according to the prosecutors, was very conscious of the fact that they were going to ask for forgiveness, not for permission.

According to the prosecutors, he knew that there were illegal things happening under the rubric of us law that should not be happening. And so I would say the key thing that he did was he came back voluntarily from the United Arab Emirates, from Dubai, which does not have an extradition agreement with the United States. So he could have stayed there. But that was, to me, based on listening to the judge's comments, one of, if not the most important mitigating factor that ended up reducing his sentence. He cooperated.

And that, combined with the fact that he was smart enough, or his lawyers were smart enough to do a plea deal on one charge, nothing else on one charge combined to bring this sentence down. And I think there was some happiness in the cryptocurrency world. It was a bit of a vindication. I asked the US attorney on the courthouse steps if it was a victory for cryptocurrency. She did not like that question.

But I think that's how some people are seeing it. And it was a fascinating case and a glimpse into a different world than I normally get to see. All right, I will link from the show notes to all of our coverage this week, and I'd also encourage you to check out some of the great reporting this week by Geekwire editor Taylor Soper, including his reporting on DoorDash and also his scoop on the fascinating move by prudential to shut down a company in Seattle that it acquired several years ago called Assurance, which was an interesting story in its own right at the time. All right, I'll link to that from the show notes along with everything else. Until next time.

I'm Todd Bishop. And I'm John Cook. Thank you for listening to Geekwire.

John Cook
Thank you for listening to Geekwire.

Todd Bishop
Thank you for listening to Geekwire.