Amazon CEO Andy Jassy: AI Is Going To Transform Every Experience We Know | Interview 4/11/2024

Well, we see our consumers are spending, but they're just being really careful about what they spend on and how much they spend. So wherever they can, they're trading down in average selling price. You see consumers wherever they can find a deal, they take the deal. We see it's going to take a lot for people not to buy detergent or shampoo or things like that. You can see that in the growth of our everyday essentials business, which last Q4 of 2023 was over 20% year-over-year. Some of that is because people are going to buy all the time, but some of that is just because of the speed that we have and we're getting to people, so they consider us for more. But people are still buying, they're just being careful about what they shop for. And then you're seeing a trade down. We see people trading down on ASP wherever they can. And then I'd say on the enterprise side, the last couple years companies have tried to save money however they could, and we saw it a lot in our AWS business and the cost optimization we saw. But I think a lot of that cost optimization has attenuated, and we've seen a lot of the deals that people were talking about with us for a long time that were sitting on the back burner have started to move. Migrations have picked up again. The pipeline is really full, and I think people have moved from largely trying to save cost to figuring out how to modernize their infrastructure again, move from on-premises to the cloud, and then think about how they can use generative AI to change their business.

Again, we see consumers are spending, they're just trading down. You know, a place where we see real impact is in discretionary items, things like TVs or computers or electronics. We're growing our market segment share at a faster rate there than others, but still at a lower rate than what we see in a healthy economy.

Yeah, we've been saying it for a while, and I do think that AI is going to transform every customer experience that we know. And I think a lot of the discussion has been around applications, starting really with ChatGPT, which really caught people's attention. But we think there are three big macro areas of the generative AI stack, each of which are gigantic and each of which we're investing deeply in. I think of it as at the lowest layer are for people that are building their own large language models. The two things that really matter there is the compute to train the model and to run the predictions or the inferences, and what matters in that is the chip, and then the services that you have to actually build models. We've got very significant investments there. Most of the early AI models have been built by Nvidia, but supply is more scarce and people are concerned about cost, so we've built our own custom silicon for AI. We've built a training chip called Trainium and an inference chip called Inferentia that are meaningfully more price-performant than what you can find out there. So a lot of the training and a lot of the predictions are going to be done on those chips. And then I would say at that middle layer of the stack are for people that are going to actually leverage somebody else's model, customize it with their own data, and then use our features to make it easy as a service. We built the service called Bedrock, and a lot of the generative AI applications are being built on top of Bedrock. It's the easiest way to build a high-quality generative AI application. Then there's the applications, of which we're building a lot of them ourselves, but the vast majority of those will be built by third parties, and we're optimistic a lot of them would be built on Bedrock.

I think the one thing that we've seen pretty consistently in this relatively early stage of generative AI is that customers want choice. They're learning how to build models. They want different model types for different types of applications and use cases. They want different model sizes because it changes the latency and the cost structure. So part of the attraction for so many people of Bedrock, I was just mentioning, is just it has the largest selection of models available. It's got not only models that we build but also Anthropic and Meta with Llama 2 and Mistral and Cohere and Stability AI. So you have a lot of choices, and then Bedrock makes it really simple to move between models and move between model sizes so that you can actually experiment and get the right quality and latency. For us, and we see it with our own, we're building dozens of generative AI applications right now, some of which are launched, others are in development. We find with our own model builders and our own application builders that sometimes they want to use our own models, sometimes they want to use third-party models, and we give people choice so they can make those decisions.

Well, first of all, what I would tell you is that this is going to transform virtually every experience we know, and it's a gigantic space, and there are going to be a lot of very successful players in it. If you go talk to enterprises or companies that are using generative AI, they are very excited about what we're building, and more and more customers are moving to our services. We're going to have partnerships. We have a very deep partnership with Anthropic. Claude 3, which they released just a few weeks ago, is the best model on the planet right now with the best performance, and it runs best on top of AWS. So our customers are very excited about that. But at the same time, we have a lot of experience building models at the company. We've been doing it for a long time, and we've been building our own models, these Titan models we have. We're going to keep building those, and we give people choice.

I don't know. I mean, I think we got to be careful right now in Western countries and the way that we're handling regulation. I think a really good example of that is what happened with iRobot, if you follow that. So I think it's a really kind of a sad story. It's a great entrepreneurship story where you had this American company that invented this product, invented the category, and built a business that was almost a billion dollars in revenue. And whenever you build a good business, you end up with competition. They attracted these two very large Chinese companies as competitors, and they needed scale because scale let you buy components at the right price and invest in R&D. So they merge with Amazon, and the European Commission blocks it because they worry that we're going to feature our vacuum cleaner, their Roomba, versus others, which of course is not our model because we make at least as much money selling third-party items as our own. But they block it, and then immediately after they block it, the FTC comes out and says, 'Oh, we would have blocked it if they hadn't.' And so what happens? We abdicate the acquisition. iRobot lays off a third of its staff. The stock completely tanks, and now it's a real question whether they're going to be a going concern. Turns out with these in-house vacuum cleaners, they have to map the inside of your house, that's the way they don't run into a table or a chair. So really, what Western regulators were saying was that they trust these two large Chinese companies with maps of the inside of US consumer homes more than they do Amazon, even though we've been an amazing steward of customer data in our retail business and for AWS, where customers of both those businesses will tell you that that can't be what we were going for. So I think people don't know what they can do right now, and I just think we got to try and find a way to be reasonable in what we're doing.

Yeah, I mean, there are some acquisitions happening, but we're consuming a lot of time and taxpayers' money with what we're doing right now, and I think a lot of it is outside the bounds of the law right now.

I think that some of these organizations are making decisions that are outside the bounds of the law.

Well, I think you got to start with facts. If you look at Amazon, over 60% of the units we sell are sold by third-party sellers. It's not hard to actually create software to put up an e-commerce website or storefront. It's much harder to get distribution and access to customers, which is what Amazon gives sellers. Our sellers on average sell about $230,000 in our marketplace. We have thousands of sellers who sell over a million dollars a year in our marketplace. So sellers are making a lot more money selling on Amazon than they could on their own. Then if you look at things like Fulfillment by Amazon, which is our service that allows you to store your products with Amazon, we'll pick, pack, and ship it for you, and it also is available for Prime shipping, that saves sellers over 70% from having to do it themselves. So it costs money, so we charge a fee for it, but it's much more cost-effective for sellers. And while there's always things we can be doing better for sellers, and we work really hard at it, we have a great relationship with sellers.

It's a very good question. They're both really interesting businesses. One of the main reasons that we have first-party business is that it allows us to make sure for the items that customers care a lot about that otherwise wouldn't happen, that you can keep the prices as low as possible for customers and keep the in-stock levels the way you want. But wherever we have third-party sellers who are selling, it's always a great value proposition, and they sell the majority of units for us now.

Well, we'll see. I mean, it's hard not to be impressed with what Adam Silver and the NBA has done. It's just an incredible product, and it's an international product. We have a lot of respect for them, and we'll see what happens.

John asked you to ask me that? No, I'm genuinely curious. No, I don't foresee us spinning it off because it's so tightly integrated into our Prime offering. But I do think that sports, if you look at the ratings of shows every year, sports occupies 90-plus percent of the top ratings. We've seen with Thursday Night Football just how many customers love that offer and how many people come to it and how many Prime subscriptions it drives. Thursday Night Football has been a huge success for us. We've got NASCAR coming. We're going to have six races right in the middle of the year. We have soccer through UEFA and Champions League. I don't know if you watched the women's final four this past weekend, which was just unbelievable. We're the exclusive streaming partner on the WNBA, so we'll get to see Caitlin Clark on Prime Video as well. Sports are very attractive for our customers, and you can expect us to do more.

I think we're pretty comfortable with the offering we have right now, and we're continuing to produce really great exclusive content. I don't know if you've seen Fallout yet or not, but it's got great reviews. I'm really pleased with the content we have, and we're just starting.