Ted Audio Collective HBR presents Hello, everyone.
You're listening to After Hours.
I'm Felix. I'm Rowie.
I'm Rebecca. Hey, guys.
So we have an interesting show ahead of us, and we'll talk about work quite a bit.
We heard about Jeff Bezos giving up his job as CEO of Amazon and taking on the role as executive chair of the board.
I would love to talk about Bezos, Amazon, how you think about his career, how you think about what he accomplished as CEO.
So that's my topic.
I think, Rebecca, you brought a topic also?
Yes. I want to talk about the minimum wage.
Biden has advocated moving it up to $15, and I'm totally confused about the minimum wage.
Is raising it a good idea or a bad idea?
How should we think about this?
So I'd love to talk about that.
It was a great topic.
So you both saw the news.
Somewhat surprisingly, this fall, Jeff Bezos will step down as CEO of Amazon.
And of course, moments like these, everybody's thinking, what has this person done?
How should I think about the accomplishments?
What impressed you about the way he went about his job, the way he created one of the most significant companies in the United States?
I missed what Mr. Bezos was on about completely.
Oh, really? I thought he was just selling books.
Yeah. I know about IT, and I completely missed it.
So when you say to me, what is the one word I think about when I think about, I'll write two words, brilliant and complicated.
Brilliant because he understood what online commerce could be way before anyone else.
He understood that the bigger he got, the lower his costs, the more people he would get, the more people he could serve.
And he got that that wasn't just books, that it was toasters and furniture and pharmaceuticals.
And he was also brilliant because he persuaded many, many people to give him money to execute this seemingly insane idea.
I mean, Amazon lost money for 20 years, and people say the capital markets are famously shortsighted that you can't get them to think beyond six months, but there they are shoveling billions of dollars in Jeff's direction.
And how did you do that?
How about you, Ravi?
What do you think is his biggest accomplishment?
Bezos managed to attract a lot of talent who adored working there.
And from what we can tell from the outside, or at least what I can tell from the outside, it wasn't for everybody.
The culture wasn't for everybody.
For some people, it was, I think, a misery.
But for a lot of people, it was energizing and productive and creative.
And if I think about a sort of legacy and accomplishments, the legacy and the set of accomplishments to me that come most to mind are the fact that so many people wanted to work there, and so many people wanted to work with him.
Yeah, that's really quite amazing, including many of our graduates, right?
So if you look at where would our graduates love to work, like Amazon is always among the top names.
Two things that I have always found really impressive about Amazon is how the company has success in a particular arena, and then it does something, I think, which is very counterintuitive to many businesses.
It creates competition for itself.
So you're building a small marketplace for books, and you expand a little bit.
And then the next thing you do is you create Amazon Marketplace, and you start competing on your own platform with all of these other businesses that are doing some things worse and doing some things better than you do.
And I think the same story is true for AWS, the cloud services.
So they have some issues, because Amazon is growing very quickly, they build technology that is clearly superior than what they can buy on the market.
And then, again, counterintuitively, they say, oh, and maybe there's like a million other customers, there's a million other businesses who would like to use this technology also.
Now, can you two help me understand, for what innovations, exactly, ought we be giving Bezos credit?
So there's a lot of talk in his own departing letter to the employees about the innovations of which he and he believes they should be proud.
And I'm having a hard time seeing them as like really sparkling life -improving innovations in a broad sense.
And so what are the innovations, like clicking on a button once to buy something rather than having to click twice?
What am I supposed to be excited to revere here?
But, Raul, you just walked right past, you said, other than selling on the internet, in quantity, at low price, at amazing delivery times.
I mean, no one had thought of doing that.
And the web services, they've made web services so much cheaper, so much more transparent, so much more available.
I mean, can't I have that count as an innovation?
I think so, but you know this quote from Tolstoy's War and Peace?
In historical events, the so -called great men are labels that give the event a name.
But just as with labels are the least connected of all with the event itself.
And so I guess what I'm saying is, is this a thing that was going to happen and we've put Jeff Bezos' name on it?
Or is this a thing he really invented, and if not for Jeff Bezos, then we wouldn't be buying things on the internet now at low price and at this scale.
One measure of his importance is to see who else do you think was in a good position to do what he had done?
And there's a couple of companies.
You could think about the booksellers.
You could think about, oh, Barnes & Noble was in pole position, and they didn't.
And even once he was successful and he did it and you could predict where this would end up, they didn't really respond successfully.
So I think to me, that is one measure of how difficult it was.
Sometimes we think, oh, Amazon gets big and they put Borders and Barnes & Noble out of business.
But actually the first impact of Amazon was on the small bookstores in smaller towns.
What's the one thing that they could never deliver?
And so all of a sudden you didn't live in a big metro area, and the world's books became available in a way that they were not available.
I don't know about you, but I have conversations with students about the business that they would like to build.
And it used to be that they have a really great idea.
Five years later I meet them and they tell me, oh my God, it actually happened.
Or I see the newspaper and I'm super proud that I was there when they first conceived of it.
Now they have an idea and they come back next week and the business is up and running.
All of these traditional fixed costs of starting a business, how have they gone away?
And I think the answer is AWS.
So my sense is the effect is really profound.
And yes, maybe in some alternate version of history someone else might have done it, but not as quickly as he did.
What about some of the other legacies?
So the anti -competitive practices.
Couldn't we say that Bezos and Amazon are sort of a metaphor for our era of capitalism and all of its problems and potential lack of sort of societal sustainability going back to these sort of issues?
It's so interesting that you put it that way, because sometimes people attack Bezos as if he were uniquely evil.
You know, I've spoken to union activists who are just furious about Amazon and the working conditions.
I think these very large companies become poster trials for the tendency of what firms are doing at that moment.
That was true of Walmart in the 80s and 90s.
And it was sort of the biggest and the largest.
It was just pushing the limits of the existing system.
And I think Amazon is like that now.
And in fact, in some ways, I mean, they pay a $15 minimum wage, they have a really significant environmental commitment, but they attract a lot of lightning because they're so tall, I think.
And maybe one other aspect that is both a strength and a weakness is the company is really radically in the customer's corner.
It's always keeping the customer in mind and putting the customer first.
When you look at our cash conversion cycle, it's something like minus 31 days.
The suppliers play bank, fuel the growth, provide capital for Amazon's growth.
And it's coupled with the observation that the marketplace is not very profitable.
As Rebecca pointed out before, that must mean everything goes into lower prices for customers in management techniques also.
So then every Amazon meeting, there's an empty chair and the empty chair symbolizes the customer that is not there.
And so we're thinking about the customer or the fact that when you have an idea for a new service, you start with the press release.
There's no code written, nothing has happened yet.
And you write the press release, what are you going to tell your customers the day that product is launched?
But don't these elements of a capitalist system need to be somehow in balance so that the suppliers aren't miserable and the firms and small individual proprietorships that are selling on the marketplace aren't miserable and the publishers aren't miserable.
And so there's like this singular focus on the customer, but it feels a little bit like it's out of balance systemically, which is, I think, really where my head is with this idea that there's something going on maybe in capitalism globally, but definitely in American capitalism that feels out of balance
in an unsustainable way and Amazon represents that at its sort of maximal effect.
That feels exactly right to me, Rowie.
Walmart now looks back and says, oh, we were really out of balance.
We did, we pushed our suppliers so hard that bad things started happening.
And I read them now as trying to compete on being a better balanced company.
Here we have the CEO campaigning for a raise in the minimum wage and trying to invest in education and talking much more credibly in many ways about the firm's environmental footprint.
And so that raises the question of can capitalism rebalance itself, which is a very, very broad question, but how wild is it that Walmart is in many ways competing with Amazon as being like more socially responsible and in better balance?
One of the questions that I find really interesting is, does this need to happen at the level of the individual company?
Like, say, you're describing Rebecca, or is there something in competition?
And one example I'm thinking of is when Amazon tries to copy Etsy and they create Amazon Handmade.
People are really scared for Etsy.
Basically, people are like, oh, my God, this is the end of Etsy.
They can never, ever survive in competition with Amazon.
And then, of course, as we now know, Etsy is doing extremely well.
And when you ask people who are loyal to Etsy, I think both people who make the products, but also people who buy the products, that distinction between Amazon and Etsy is very important.
If you're in the customer's corner, you shop at Amazon.
If you're in the maker's corner, Etsy is so much better, the range of activities, how they treat the makers.
And maybe there is balancing forces, not so much at the level of an individual company that tries to do everything, but maybe the balance is more at the level of the system where someone like Etsy can comfortably survive, exactly because they're different from Amazon.
I think one of the most interesting elements of the transition is that Jassy is the AWS guy.
He was responsible for building that, and he's been shadowing Bezos for a while, and so he knows the work culture.
He's been around that entire time.
But I think the fact that Bezos' successor comes from AWS reflects a theory about the future, which is less about selling on the marketplace, which they seem to have figured out spectacularly well, and there are the challenges and the anti -competitive questions.
But I think this way of thinking about the future of the company really even more as a technology company seems interesting to watch over the next couple of years.
Yeah. What's your sense, Rebecca?
I'm with Ravi. I think if you think about where the growth opportunities, where the real discontinuities might be, it's in the technology business.
They're in the backbone of the internet with a very large operation, deep expertise in AI, and the field is changing incredibly quickly.
I would guess that they're going to start moving in all kinds of new directions that have nothing to do with retailing.
In a way, that's always been interesting, right?
Because they have this consumer -facing website.
We think of them as a retail business, but really much more realistically, they have been a logistics business for a very long time.
I don't know if it's a prediction where they're going to go, but one of the things that I'm very curious about is what will they do with Whole Foods?
In the beginning when they first bought it, I thought the play is a logistics play in that in the future, every restaurant will buy all of their food from Whole Foods because it has a little bit of B2C like the marketplace, but it's going to be mostly a B2B play.
So far, I haven't really seen that happen, but I think it's really interesting for me to think about what they might do with that asset.
Yeah, that will be really interesting.
That's a great question.
Rebecca, you wanted to talk about minimum wages.
Sure. I want to talk about minimum wage because I need help.
I'm just not sure how to think about this.
On the one hand, we have a federal minimum wage here in the US, which is about $7 .25 an hour, which essentially hasn't moved in the last 60 years in real terms, despite the fact that standards of living have risen dramatically.
It's astonishing, really, 60 years.
It's really, really striking.
And so that's a little odd.
We have pretty high levels of poverty.
We have 10 million people living below the poverty line.
Right now in the pandemic, we have more than a quarter of the children in the country going to bed hungry.
There's a lot of poverty.
So one obvious way to fix it would be like, hey, raise the minimum wage, what's not to like?
And then it gets really complicated.
There's a bunch of cases where people raise the minimum wage and it didn't seem to have any effect.
And there's a bunch of cases where they did raise the minimum wage and it did seem to lower employment.
So we're not sure. But then why is this so partisan?
We've got a whole group of people saying we can't raise the minimum wage, it's going to be sort of the end of the world.
And another group saying, oh, let's raise the minimum wage, it's going to be great.
I'm with you, Rebecca.
It's hard to come to some sort of definitive conclusion.
I happen to know people who work in rural areas or who own companies in rural areas and employ in rural areas in not very rich parts of the country.
So where the cost of living is not what it is in Manhattan or Seattle or San Francisco.
And it is clear that they're very nervous and they're doing their own math and looking at this question of $15 and saying, $15 for us here will put us out of business.
And I think one of the things that I'm trying to puzzle through, and I'd love to know what you both think of it, is a federal minimum wage with such an economically diverse and genuinely huge country, and a lot of the comparisons are to Germany or Denmark.
Germany is a pretty big country, Denmark is a tiny country.
And so the sort of wage dispersion we have across the entire United States is enormous.
And so one of the questions is, how can we have a single reasonable minimum wage for rural Louisiana and Manhattan and have it feel like it makes sense?
It's such an interesting point that you're making because when you look at the recent history of minimum wages, most of the activity actually has been at the level of the city, which is relatively new for the United States.
But I think we now have something like 40 cities that have minimum wages and it goes exactly to the point that you're making.
If you look at which cities, it's the rich cities, it's the one that have very high cost of living.
And so that I think is a really interesting question.
Can we institute these minimum wages in a small area without just making businesses flee next time over that doesn't have the minimum wage?
I was a little pessimistic, but so far, it doesn't seem that businesses are fleeing the moment you have a $15 minimum wage, but that also has to do with the cities that have these minimum wages are all very similar, they're not very different.
So your Louisiana example, I think, is a really great example.
And it really raises the question, do we not see a relationship between move on the minimum wage and effect on employment because one doesn't exist or because that relationship looks really different in different contexts?
So when you raise the minimum wage in a market like San Francisco or Boston or New York, where there's a lot of capacity to pay and labor markets are reasonably tight, what you in effect do is move money from either profits or from people who are higher in the income distribution down the income distribution.
So you're actually transferring income, but you do it in Louisiana and the dynamics are quite different.
Rural Louisiana or, may I say, Western Massachusetts, where everybody's living really close to the line, there's nothing spare, there's no margin.
But Rawi, tell us about the politics.
Are there places that should have the minimum wage, that won't adopt them?
Is that why we're thinking about a federal minimum wage?
It's a great question.
And I think that there are states that have shockingly low minimum wages.
Georgia is $5 .15, yeah.
That doesn't make sense for Atlanta, but it might make sense for Macon, which are completely different places in terms of how the labor markets work, cost of living and all of that.
So even at the level of a single state, it would be complicated to say we can define the right level below which it's just not reasonable to pay people.
So is that a way to go, Rawi?
Is instead of having the minimum wage debate, talk about a living wage debate.
Talk about the fair, local wage.
And we would invent some way to kind of think, like, what does it really take to have a decent life?
And that should be the local wage?
I'm not sure. I think that I would be tempted to vote for a federal minimum wage.
I would probably want it to be lower than $15 to accommodate the diversity.
I would want to support cities to have their own local understanding of what constitutes a decent wage, a good living wage.
And maybe $15 is too high for an entire country.
But I think part of the problem is that the left in the United States is just so fed up waiting for progress, either on the part of firms or on the part of localities to tend to a genuine problem of having people who work really hard, one job, two jobs, to have working poor in one of the richest countries
in the world. Like, it mystifies our friends in Europe.
Like, how can you have so many people who have jobs who are poor?
In the wake of the Great Recession 2008 -2009, you remember how it just took incredibly long to pull enough people back into the labor market, in particular for people with not much education.
They had to wait so long for that recession to be over.
It was over for us and for them.
It persisted for a very long time.
And in fact, if you look at the lowest wages, it was only in the last two or three years before the pandemic that these wages really came up because there was enough demand.
So one of the things that I'm struggling with and that would make me very nervous about the $15, that the $15 I think can work in rich cities.
But that doesn't mean that there isn't a person who suffers from these higher wages.
And who is it? It's exactly the same group of people that got punished by the pandemic in the first place.
So Felix, help me because I hear completely what you're saying and the 2008 numbers are really striking.
But help me with how I should think about the second order effects.
Because if we raise the minimum wage significantly, it will bring many people out of poverty.
That will be much better for them and their children.
They will spend more.
It looks as though there's a risk we'll have a recession and so having more income in the economy and people who make less are much more likely to spend their income than people who are already making a good living.
And could it be one of the engines that brings the economy up faster?
Which in the long run is the best answer to bringing in people at the margins.
So one of the reasons why I'm a little skeptical is we have an alternative policy instrument that no one loves to talk about and that is wage subsidies.
So you look at your paycheck and you remember you see the big number and then there's payroll taxes, which is the unfortunate number.
What if we added a line?
And the line was basically for every hour you work, you get a subsidy that roughly brings you to the $15.
If we really want to lift incomes and we want to expand employment at one and the same time, a wage subsidy is just so much more powerful.
The only reason why we're not talking about it is because it costs the government money.
The beautiful thing about the $15 minimum wage is that on paper it's free.
There's no government outlay.
Can I take an approach similar to Felix's but maybe even a little bit more long term, which is to say I think that what we're going through is a kind of crisis of, quote, unquote, good jobs.
What we're missing is a collection of jobs at relatively low skill levels that are good jobs in the sense that they provide for a living wage.
They provide for opportunities for further advancement in education.
And I think most importantly they confer dignity on the people who have them.
And so I think what we're perhaps missing in this national debate is that there's an underlying crisis of how we educate people, how we provide them with skills.
And I think that would require us to think a lot more carefully, even beyond redistribution, about skills development and training and how high schools look in the United States and all of these ways of approaching creating an ecosystem for the cultivation of good dignified jobs rather than necessarily mandating
at the federal level a single dollar amount per hour.
Oh, Rawi, I am so with you on this.
It feels to me that the minimum wage debate is standing in for a broader debate about how we create these kinds of good jobs.
And then I start wondering if minimum wage is maybe a good lever for that.
If employees are going to say, well, if we're going to be paying more, let's have proper education.
Let's have proper healthcare.
If we're going to go for a high wage economy, then I need a bunch of stuff to be true such that I can compete in that high wage economy.
Well, I think there's also a management problem, which is that if otherwise seemingly mundane jobs can be made dignified and otherwise seemingly high status jobs can be made to be unhappy, that has a lot to do with how corporate cultures work and what leaders and managers do.
And like that is a strong push in the direction of thinking about the agency of this, which is somewhat separate from the money.
And I agree with Rebecca, like there is a level at which it is awfully difficult to say, I feel satisfied with the contribution that I'm making to society at this wage in this particular industry.
I mean, and I hate to say this is the answer, not respect, but unions, which is such an unpopular word.
Let's say employee voice.
Let's say rebalancing the power between employer and employee.
I mean, I think it's a great point, Rebecca.
And there are lots of countries in which unions are not a bad word, in which rates of unionization are much, much higher.
And talking about basically the debate about the federal minimum wage as a metaphor for a collection of other questions about good jobs, about fairness, about dignity, and about the balance between capital and labor, and making sure that the balance between capital and labor is reasonable and sustainable
in some long -term way.
The returns to capital have been going up and returns to labor have been going down, despite labor productivity booming.
So something's going on that's not trickling down to use that horrible metaphor from back in the day, trickling down to the people who are doing the work.
Which then might explain in part why increases in minimum wage don't lead to less employment.
Because essentially what we're seeing in the amount of money that people make in their jobs, in part it's just reflecting market power by the firms.
So may I say that I feel a lot less confused than I was.
I still don't know how to solve poverty in the United States or whether $15 is the right number, but I feel I have a much sort of better sense of the moving parts of the argument.
Of course, we brought picks.
Rebecca, what did you have in mind?
This week, Felix, my pick is a book.
It's a book called All We Can Save.
Truth, courage and solutions for the climate crisis.
As you know, I'm all over solving climate and there are a thousand books in this space, but this one is fabulous.
It's a collection of essays by women fighting for climate reform.
And there are activists and scientists and politicians and poets, and it's just a collection of different voices.
That sounds super interesting.
And I found reading it both very hopeful making and very exciting, the sense that there's a whole group of such exciting women in this case, really working to make a difference.
And it's fun. You can pick it up and put it down because all the essays are sort of different and it moves from poetry to prose.
So it's great. You can read it just at those moments at the end of meals where you want something to do.
But that's my pick for this week.
All We Can Save by Ayanna Johnson and Catherine Wilkinson.
Sounds fabulous. That's really interesting.
I have a book also.
In fact, it's related to our first topic, Amazon and Bezos.
And it's a book that's come out a little while ago, but I still think it's at least to me, it was a fascinating read.
It's by Brad Stone and it's called The Everything Store.
And the one thing that is really special about the book is he's one of the very few people who had direct access to Jeff Bezos.
And you could ask him about the decisions.
And this is maybe what I love most about the book.
It's both a collection of how should you think about these big strategic decisions that they make and how do they compete?
And then it's also a book about all of these little things.
That sounds great. Well, I will tell you both of those.
Yeah. They both sound great.
That's really fun. Mine is a little bit in a different direction.
There's a band called Florence and the Machine.
Oh, yeah. Of which you might have heard.
And Florence has one of the most amazing voices in rock and roll today.
And a thing that I did not know about Florence and the Machine until relatively recently is that they really like to do cover songs.
Oh, I didn't know that either.
And they have a bunch of covers here and there on the internet.
Some of them are on Spotify.
And they are just spectacular and fun.
And so there's a newer band I quite like called Beirut and a song I quite like called Postcards from Italy.
And it's a super funky jangly song.
And Beirut is more or less one person with some other accompanist from here and there playing a bunch of different instruments and improbable instruments too.
I don't know if there's a tuba.
There's a whole lot of brass.
A whole lot of brass.
And Florence and the Machine did a paired down cover of Postcards from Italy with just like a ukulele and Florence singing.
And it's quite spectacular.
So the specific pick is that song.
But I would say go and track down Florence and the Machine's covers because they're pretty awesome.
And you'll recognize many of the songs.
And they really turn them into another different thing that's very special.
That sounds really fantastic.
So this is it for today.
Thank you for listening.
This is After Hours from the HBR Podcast Network.
