Jet

The episode opens by acknowledging demand rather than news value: Walmart's acquisition of Jet.com generated more listener requests than any previous topic, by Ben Gilbert's count north of ten across email, Slack, Twitter and in-person conversations. David Rosenthal then sets the frame that the rest of the episode will complicate — over $3 billion for a company that was two years old and had been live for one — and immediately rewinds, because the deal only makes sense as the second act of a longer relationship.

That relationship begins with Quidsi, founded by Marc Lore in 2005, whose main operating business was Diapers.com. Rosenthal traces Lore one step further back: his first company sold to Topps, the trading card company, which brought him to Seattle to run a new division, where he was already thinking about e-commerce. The Seattle detail that matters is social rather than professional — Lore's daughter attended a private school that Jeff Bezos's children also attended, and the two met at a school picnic and talked about e-commerce. Gilbert's reaction is the correct one: this was 2001, Amazon was already six or seven years into the business, and the two men were not co-imagining a category.

The Diapers.com history is compressed to its punch line: a protracted negotiation in which Amazon tried to clone the business and then undercut it across Diapers.com, Soap.com and other properties, ending in an acquisition in 2010 for $545 million. Gilbert asks the obvious question — why did the price war not simply finish the company off, given Amazon's resources — and Rosenthal supplies the answer that recurs later in the episode: Walmart was also interested and had already bid.

The most consequential detail is Bezos's instruction to his corporate development team, as reported by Brad Stone: do not, under any circumstances, allow Walmart to buy this company. Rosenthal characterizes the acquisition as defensive, and the structure of the claim is worth noting — the price war and the purchase were not separate moves but parts of a single objective, which was denying a rival a position in the category.

After the acquisition, Amazon did what it had done with Zappos: Diapers continued as an independently operating, wholly owned business, and Lore ran it for a couple of years before leaving in 2013. Gilbert asks whether the departure was amicable; Rosenthal's answer is that it was not, and he grounds it in the negotiation rather than in speculation about the retention package. Lore was not a fan of Amazon, particularly after working there, and left with something to prove.

The evidence for that reading is a quotation Lore gave the New York Times as he was starting Jet, which Rosenthal reads in full: at Amazon, he said, "I saw that it didn’t matter how you treated people. You just paid them enough so you didn’t care if you burn them out, and then you got new people and burn them out. It was an environment of very short-term thinking." Gilbert notes the tension with the show's habitual praise of Amazon's long-term orientation; Rosenthal concedes the disagreement and defers it, which is the right move — the quote is evidence about Lore's motivation, not about Amazon's actual planning horizon.

Jet launches in the summer of 2014 on an explicit claim about Amazon's customer base: Amazon is very good at what it does, but its core customer is not the average American — it is wealthier, upper-middle-class, and cares about convenience and selection as much as price. Lore's target is the segment that cares about price first, and his model for serving it is Costco, itself another Seattle company, a coincidence Rosenthal notes with some pleasure.

The thesis is stated in Lore's own words: "There’s this huge middle class of people that are going to be spending more and more dollars online and for them, it’s going to be all about price. They’ll be willing to trade off convenience in selection versus price." The claim is not that everyone will trade convenience for price; it is that a large, growing segment will, and that Amazon's structure makes it poorly positioned to serve them.