SIMON BROWN: I’m chatting now with Craig Antonie. He’s the CIO at AnBro Capital. We’ve chatted with Craig a few times. They’ve got their Unicorn Fund – among other things a unit trust and an ETN on the JSE. Craig, I appreciate your time.
The reason we are chatting, in particular, is Amazon, where Jeff Bezos’s last day at work was effectively on Sunday, exactly 27 years after he formed the company. I know one criterion for your Unicorn Fund – maybe not a criterion, but something you look for – is companies that are owned, managed, and run by founders. How much is it a concern with Jeff Bezos, who is, with respect, a legend in the business world and the richest man, stepping down?
CRAIG ANTONIE: Hi there, Simon, thanks again for having me. Very happy to be here. Yes, it’s an interesting journey in Amazon’s business cycle, if you like. The important thing to consider, I guess, is who the CEO is, who the new guy is, and where he’s come from. His name is Andy Jassy. He joined Amazon in 1997 before the IPO, so he’s been in there a very long time. He’s had various leadership roles in the business and was once head of the business-to-business segment, as well as their business-to-consumer segment. You hear things like B2B and B2C deals in those companies.
Then he was largely responsible for founding Amazon Web Services in 2006. As of last year, although accounting for just 12% of Amazon’s revenue, the Web Services business was about 59% of the operating income.
When you put all of these things together, we see a couple of things that we like as a Unicorn investor or as the CEO of the fund that invests in companies that are predominantly run by founders. First of all, you have a guy that was there really from almost the beginning. He has a very close connection and relationship with Jeff Bezos by virtue of that, and by virtue of the fact that he’s held several key leadership roles en route to actually becoming the founder of the biggest profit puppy in that business – and ultimately the CEO of the overall business.
I think when we look at those kinds of things, we say there’s probably a very similar DNA in him to that in someone like Jeff Bezos; they have been there together from when it was a company with a handful of employees to the global giant that it is today.
So the focus on innovation and competition and customer service and that kind of thing is unlikely to change or to shift very much now that he’s taking over.
SIMON BROWN: I take your point. There have been no CEOs there forever. If nothing else, it’s about simple mortality, and Apple’s the big example. Steve Jobs got fired by the board and then he came back – and owing to ill health he left. There was a lot of concern, and frankly, Tim Cook, if anything, made Apple better. There as well, Jobs and Cook had really worked incredibly closely together. They probably, you almost got a sense, finished each other’s sentences. And I get the sense with Andy Jassy that he’s not Bezos, but he’s probably the next best thing. It’s not always the worst thing when you get a bit of new blood coming in because it’s going to happen.
CRAIG ANTONIE: Yes, for sure. I think this is a sort of guy who knows the business inside out, arguably just as well as, or perhaps even better than Bezos, because he’s been on the ground fighting in the trenches, whereas Bezos has always had that sort of overarching view and vision for the company. The fact is that Bezos is not actually going very far. He’s still going to be on the chairman’s seat there, and he’s still going to have his influence. That relationship, I guess, will still be one that they can leverage off on a day-to-day basis.
But it will be interesting to see the new ideas that come from the new CEO. I think the next question a lot of people will probably ask is, well, with Amazon where it is today – and it’s a $1.8 trillion-odd business – is it still going to be a good investment now that there is a big shift in leadership? Where’s the business going from here? Sometimes it pays a little to just dig in a bit.
One or two stats I can throw at you and the listeners, Simon, which you might find quite interesting, is that if one looks at the middle of 2020, only 7.5% of retail purchases in the US happened online last year. If one compares that to China, China’s were almost 16%, the UK’s almost 15%. Those are the three big e-commerce markets if you like, and the US is the one which has still got the least penetration of the three.
Also, they have a very big exposure and presence in countries like Japan, Canada, France, and Germany – those kinds of things. Online retail penetration in those countries is still sub-6% on average. So just that portion of the business, I think, is still a very long way from seeing growth saturation. Also, the logistics business, which everyone talks a lot about now, is on track to deliver more packages this year than both FedEx and UPS combined – which is interesting.
And then of course there are new businesses that are bubbling under the surface, which some people may not know a lot about. One is a company called Twitch, which is something we are quite interested in. That’s a platform which allows people to watch video gamers play games. And if one looks at things like Esports and how that’s progressing, that could potentially be a big thing. And then they have another one, which is a fascinating business called Zoox.
What Zoox does is mobility as a service platform; the easiest way to describe that is to imagine a robotic version of Uber – where you have totally electronic robotic cars driving people up and down and all the rest of it. Much like Google, I suppose, has their ‘Other Bets’ business, companies like Amazon are so innovative and have a lot of other levers they are looking to pull to continue growing.
All in all, we are still very excited about Amazon as an investment, despite its size. If anything, its size gives it a massive competitive advantage in terms of its scale and reach, and that often is a very good place to be when you’re looking to grow your business.
SIMON BROWN: Yes. And they’ve got so many other [things]. As I was writing a list, it just got longer and longer. They’ve got Kindle, they’ve got Audible, they’ve got Amazon Ecko, there’s Prime. All of these have a huge amount of scope left and a huge amount where they can still grow.
That was going to be my next question: Is Amazon still in Unicorn? But I think you’ve made that case.
We’ll leave it there. We’ve been talking about Amazon’s new CEO. Is it in Unicorn? Craig Antonie, AnBro Capital CIO, I appreciate your time.