>> charlie: welcome to our program. tonight, al hunt and stuart taylor assess a federal judge's ruling on the arizona immigration law which was scheduled to go into effect tomorrow. >> the whole thing is a distraction enormously exaggerated by both sides. this is not nazi germany as critics including the aclu have tried to contend, it isn't going to solve the immigration problem and stem crime that proponents change and it is another distraction from trying to deal in some kind of sensible and comprehensive way with a problem that just gets worse every year. >> and i wouldn't be surprised to see it on a stay application in the supreme court within the next month, if, for example, the ninth circuit court of appeals -- which is the first route for appeal -- affirms what the judge

did, i think the state will take it up to the supreme court so we could have some supreme court theatrics pretty quick. it might be the first thing that elena kagan has to deal with -- the first big thing after she's confirmed which i expect will be next week. >> charlie: and jeff bezos from amazon introduces a new kindle and talks about amazon's future. >> when people come to me and they say, "jeff, you've got to have full motion video color on the kindle, i say why? do you think hemingway is going to pop more in color? we're doing a particular thingment when somebody says to me you need to add the full motion video and all these things that the ipad has, i say, "you don't understand my audience. >> charlie: a program note. kevin kline the actor's new movie called "the extra man" was scheduled to appear on tonight's program. heel be seen later this week. tonight the immigration ruling and a conversation with jeff

bezos about the new kindle and about the future of amazon. next. funding for charlie rose was provided by the following. ♪ >> additional funding provided by these funders. >> and by bloomberg. a provider of multimedia news and information services worldwide. captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> charlie: we begin tonight with a debate over arizona's immigration law. today, a federal judge blocked

its most controversial part requiring police officers to check a person's immigration status while enforcing other laws. the ruling also delayed provisions that forced immigrants to carry their papers at all times. the decision comes amid a clash between the federal government and the state of arizona over immigration policy. president obama has condemned the legislation and the justice department filed a lawsuit against it earlier this month. sevens have been filed against the law so far. the law was signed by governor jan brewer in april and was scheduled to go into effect thursday. joining me stuart taylor of "newsweek" and "the national journal" and al hunt. stuart, you're a lawyer. tell me exactly what the judge said. >> the judge said that five -- depending on how you count them, four provisions of the law were preempted by federal law, by which the judge meant they conflicted with the broad purpose of federal law even though they were intended or

purport to have been intended to work together with federal law. the judge also withheld 13 other provisions but they're the less important provisions. the big ones got preliminarily enjoined, meaning the judge saying "i think these are unconstitutional, i'm not quite sure yet but we're going to stop them from operating while the case is litigated." in addition to the two that you mentioned, the provisions that were enjoined would require detention of any arrested suspect -- any arrested suspect, you, me, someone who looks mexican, whatever -- until the person proves that he's legally here -- he or she is legally here. it would also make it illegal for illegal immigrants to work in the united states. congress made it illegal in 1986 for the employers to employ illegal immigrants but it did not make it illegal for them to seek work, and the judge said, here, the federal -- you know, congress chose to stop short of this, the state has gone and

done it, that's preemptive, that's unconstitutional. >> charlie: so it's a federal-state issue? >> yes. what the judge did not get into directly is the whole question of racial profiling, since the law hasn't been in effect, it's all speculative how much racial profiling would go on but what the judge emphasized was two things in terms of why the law would interfere with federal enforcement. one is that it would subject legal immigrants and even citizens who may look mexican, say, to mistaken arrest, harassment, even if not deliberate harassment. and two, it would divert federal reinforcement resources by requiring the federal government to be answering all sorts of petitions from arizona police. police tell us whether, whether that guy or the other guy is legal or not legal and that's not the way the federal government wants to spend its

time. >> charlie: the governor said they would appeal the ruling. >> i wouldn't be surprised to see it in a stay application in the supreme court within the next month if for example the ninth circuit court of appeals which is the first route for appeal affirms wat judge did, i think the state will take it up to the supreme court so we could have some supreme court theatrics pretty quick -- it might be the first thing that elena kagan has to deal with -- the first big thing after she's confirmed which i expect will be next week. >> charlie: albert, what are the politics of this and how might it play out in the midterm elections? >> charlie, the politics are the exact reverse of the reactions. the reactions from most conservatives who favor the arizona law, this is outrage, this is terrible, in fact, many of them realize that it plays to their political advantage for these midterm elections. it's a federal judge appointed by clinton overturning the desire of the state to crack

down on illegal immigrants. the liberals who will hail this also, i think, realize that the short-term politics is bad. i have no question that those advocates of the arizona law will flourish in this election whether it's in arizona, colorado, nevada or anyplace else. i happen to think that the long-term politics are bad for them but i think thehort-term politics are good for them so i think that this ruling today was a political, not a legal, victory for the pro-arizona law people. >> charlie: so it's a legal -- it's a political victory for them and a short-term victory, a near-term victory in terms of their campaigns and what they hope to accomplish in terms of making immigration a big issue. >> right. if i'm running in colorado, or even north carolina, or anyplace and this issue comes up i'm saying, "the state of arizona simply tried to crack down on illegal immigrants and this federal judge, suppered their

authority to do that. the obama administration hasn't enforced the law." that's a more compelling political argument, i think, than those people who try to say we were either defending federal preemption or it was a racial-profiling problem, i think the former is a better political case again in the short-term, i think it's similar to what happened in california 16 years ago when pete wilson adopted an anti-immigration stance. he was running -- actually behind in the polls at one point. it helped him a great deal, and then it hurt -- it hurt republicans in this case in the decade and a half since then. i suspect that will be the case this time. did the president have any alternative not to speak out and to -- you know, have the -- have the attorney general file suit? >> stuart can address the legal issues much better than i can. politically i think he had no choice but to do that. he's promised some kind of major

immigration overhaul. he hasn't been able to deliver on that. and i think to remain silent in this would have been politically unacceptable to his base. >> i think the logic of his suing is implicit in the nature of the complaint. it's preempted by federal law. it conflicts with federal law. it will inevitably, says the justice department, says the president, cause problems for federal law. if you believe that, it makes sense to try and stop it at the inception. i think they might have a little bit stronger case if they had waited a while and there were some record of abuse by police, there was some record that it wasn't purely hypothetical that legal immigrants would be arrested and so forth, but given the theory that they have it makes legal sense for them to have gone early and for the reasons al gave it also makes political sense. i think in the -- >> charlie: sorry, stuart, go ahead. >> yeah, i can't help thinking

that in the long rup, as al says, i think it's probably bad -- in the long run, as al says, ieng it's probably bad for republicans in the long run, i think it's polarization, that this sort of case drives hispanics into the democratic column and nonhispanics into the republican column the more we get polarized along ethnic grounds which can't be too good. >> i agree totally and i think also the whole thing is a distraction. enormously exaggerated by both sides. this is not nazi germany as some of the critics including the aclu have tried to pretend. it also isn't going to solve the immigration problem, it isn't going to stem crime and do all the other things that some of the proponents claim and it really is just another distraction from trying to deal in some kind of sensible and comprehensive way with a problem that just gets worse every year. >> charlie: on the supreme court question, stuart, would it more likely come as a kind of federalism issue in which they're looking for an opportunity to make an important

pronouncement on this court? on the federalism question? >> well, i think federalism is dancing in the background -- it always is, in preemption cases, when the argument is that the state law is unconstitutional because it interferes with a federal law, which is what the argument is here, but liberals and conservatives on the court tend to take different views depending on the type of preemption. i would say that the conservatives do have a backdrop presumption that the states ought to be able to do what they want to be able to do without too much federal interference and i think the conservatives on the court may be driven to uphold on those grounds, i think for the same reason the obama administration is driven to attack the law may be driven to attack it and as justice kennedy is often the deciding vote,may be the deciding vote but i don't think it will be directly decided as we we must strike a

blow for federalism here, i think it will be articulated more win the kind of arcane preemption immigration department of the law. >> charlie: here is what governor phil bredeson of tennessee said. "the governors are saying we've got to talk about jobs and all of a sudden we have immigration going on. it is such a toxic subject. such an important time for democrats." >> yeah. he's right. the short-term politics are bad. it not only takes away from the jobs issue but as i said a moment ago, it appears to put the democrats -- most democrats, not all, to be sure, in the camp of defending illegal immigrants, of defending -- you know, an activist judiciary, any of the other catch phrases so i don't see any gains politically that democrats get out of this decision at all. if it goes to the supreme -- if the supreme court decides before the november election and it depends on what they do, that

might change the dynamics although i don't think it's going to be a major factor in this particular election. >> charlie: the midterm elections are upon us and clearly we're not going to have climate change and clearly we're not going to have immigration reform. will the question of whether the president will return to those issues depend totally on the results of the midterm elections, al? >> i think that the results of the midterm elections are not going to be encouraging for him in either instance and i think the only issue is whether the particular composition of the next congress is such that maybe they can strike some kind of deals on either one of those, but i don't see really why both climate change and immigration won't be more intractable politically next year than this year. unless there is some kind of change heart on the part of people who are opposing the president on both those issues. >> charlie: finally, on the supreme court, stuart, you mentioned that justice kennedy might become the swing vote on

this issue if this issue comes to the supreme court. are we looking at the kagan expected confirmation at a court that's going to be 4-4 with kennedy being the principal swing justice? >> i think, yes, that's what it has been for the last few years ever since justice o'connor, who sort of filled that swing role shared it when justice kennedy really retired in 2005 -- the roberts court, it's been 4-4 with kennedy swinging back and forth. there is no reason to think that that will change because elena kagan seems likely to vote with the liberals as did the justice she will replace, justice stevens. i think kagan might surprise us now and then but by and large i think it will be in a case like this -- the best bet is four conservatives on one side, four liberals on the other side, square feet kennedy deciding who wins. >> charlie: thank you, stuart

taylor. al hunt, thank you very much. pleasure: >> thank. it was a pleasure. ♪ >> thank you. it was a pleasure. >> charlie: jeff bezos is here. he is the founder and c.e.o. of amazon.com, the country's largest online retailer. the country's electronic retailing device, the kindle has sold in the millions since its debut in 2007. amazon recently announced it is selling more digital books than hardcover books for the first time in its history. although sales of the kindle continue to grow, the device faces increased competition from tablet computers such as the apple ipod. amazon announced second quarter profit rose 45% from the same quarter last year and revenue grew 41%. amazon stock has since fallen because analysts expected even greater earnings performance. i am pleased to have jeff bezos back at this table. here is the deal. this is not a commercial for a kindle. because when there are new products from any manufacturer,

when there are new matters in health and science, when there are new books we are pleased to see them in your interest, my first question to jeff bezos is what have you brought? >> your instincts are very good, charlie. this is a new kindle. >> charlie: yes. >> it is -- we're taking preorders starting right now as this -- >> charlie: this is like an official announcement? >> this is an official announcement. this new kindle is 21% smaller in terms it has the same display size. it is 15% lighter. it weighs only 8.7 ounces so you can hold it and read for long periods with one hand. has a month of battery. and it has 50% better contrast on the screen. electronic ink display, readable in bright sunlight so you can read it in the comfort of your home or poolside. >> charlie: does it cost more or less than existing kindle? >> $189, the same as the

existing kindle, we're keeping the price the same even though it has all the improvements -- >> charlie: storage capacity is less or more? >> storage capacity is double. you can carry 3,500 books wuon this device. >> charlie: 3,500. that's a summer time of reading, isn't it? >> that's half the news. the other one is we have an identical device we're also starting to take preorders for it right now called kindle wyfi identical to this one except it doesn't have go anywhere wireless. >> charlie: that's the cheapest kindle you can buy. >> 139 still the 50% improved electronic ink contrast, readable in bright daylight, even a little lighter, 8.5 ounces. >> in the end. when people say the ipad or some other tablet device that allows you to read is a kindle killer. >> yeah. >> jeff bezos says what?

>> first of all i can say kindle is exceeding. it's a very different product. it's a little bit -- i can give you an example. if i came to you, charlie, and i said, "charlie, i love your show. we've got to sex it up. anytime the charlie rose show" -- "the charlie rose show" we need fast cuts, vicious arguments between your guests, we need to really sex up your show, you would say rightly to me, "jeff, i love you, man, but you d'antoni understand my audience. we have a cerebral -- but you don't understand my audience. we have a cerebral conversation here. it's how we're differentiated." >> charlie: that's our place. >> that's what happens to -- when people come to me and they say, jeff, you've got to have full motion video color on the kindle, i say, why? do you think hemingway is going to pop more in color? we're doing a particular thing. so when somebody says to me, you know, you need to add the full

motion video and all these things that the ipad has, i say, qut know what? you don't understand my audience. i love you, but you don't understand my audience." >> charlie: you don't understand how many kindles i have sold. >> that's true. it's also working. that's the other argument i can use to rebut that. >> charlie: bottom line for you is -- for reading -- >> for reading. >> charlie: people want a designated device. >> they want a purpose-built device where no tradeoffs have been made -- where every single design division as you're walking down the process has been made to optimize for reading. the number one thing that people are doing on their ipad right now if you look at the rankings is playing a game called angry birds where you throw birds at pigs and the pigs blow up. the number one thing that people are doing on their kindle right now is reading steve larson. >> charlie: there is an application for a kindle on an ipad. >> absolutely. also on android. also on the iphone. also on the mac. also on the p.c., also on your blackberry. so our approach is when you buy

a kindle book, we want you -- it's buy once, read everywhere so you buy that kindle book and we have a technology called whisper sync, so we'll synchronize your place and you can read on your blackberry, read on your ipad, if you're going to have a two-hour reading session, get the kindle and get a device that is really optimized for long-form reading. >> charlie: the argument made for the kindle, and you make it as well as anyone else is that it's easier to read, that your eyes will tire because of backlighting from an ipad. >> what's the first thing? when you have to read a long document on a computer, what's the first thing you do? you print it out. >> charlie: sure. yeah. >> because when you're looking into a backlit display which is the traditional l.c.d. kinds of computer displays -- it's what you have on smart phones and tablet computers and so on -- the contrast -- the light -- it's just like reading when someone is shining a flash light in your eyes. the electronic paper display like what you are holding there now is a completely revolutionary kind of display.

it looks nothing like a computer display. and still, most people have never seen an electronic paper display. they think of a computer display. when you see one of these you do a double take because it's so different. >> charlie: when the ipad came along, the price of books made publishers happy on the ipad. books here, 9.95. books on the ipad 13.95, i think. tell me the impact of all of that. >> well, we have 630,000 books that you can read that we sell in the kindle store. that doesn't even include the 1.8 million public domain, out-of-copyright pre-1923 books but of those 630,000 books, 510,000 of them are 9.99 or less. same thing if you look at "the new york times" best seller list, there are 112 titles on the list, in the kindle store 81 of those 112 titles are 9.99 or less so we are pushing --

>> charlie: the lag time between the time of publication date and when you can buy them for the kindle? >> not anymore. a few picklishers experimented with that and readers rebelled like -- >> charlie: like the release of movies? >> yes, that idea of windowing. readers rebelled and publishers aren't doing that anymore. >> charlie: you are counting on the fact that people want to have an extra device for reading and therefore you are opting to make it smaller, easier -- >> exactly. >> charlie: and thinner and dak you got it. and at $139 -- cheaper. at $139, people are going to have -- i think we live in a multidevice world. you're going to have a tablet reader like an ipad or a competitor, you're going to have a laptop -- the tablet computer isn't going to replace the laptop because there are times when you want to write a long memo or email message -- >> charlie: the ipads are for receiving things not sending things. >> exactly. likewise, if you want to sit down and read a 300-page book the kindle is the perfect device to sit back and read a 300-page

book. by the way, at $139, some people spend more than that for their sunglasses, charlie -- it's not an expensive device. >> charlie: having said all of that. >> yeah. >> charlie: the guy who is staring at you is steve jobs, who has a phenomenal track record with the iphone and the ipad. are you worried at all about this? because -- >> here is -- let me give you a broader context if i -- not just my kindle hat on but my amazon hat on, you look at tablet computers, we're very excited about tablet computers, definitely including the ipad because they have great web browsers and they make it easier for people to shop at amazon. every internet-connected device -- that's going to be an incremental tailwind for our business and we're seeing lots of traction with the android smart phones. with the iphone. with the ipad. people are using these devices to shop on amazon. >> charlie: are you here to also

say that it is not all that certain that ipad will dominate that tablet market -- that their competition will be good in the same way that the droid x is starting to make progress because of the operating system? >> before the end of this year there will be many tablet computers and the apple with the ipad is going to continue to do extremely well. and i hope they do. we don't see the -- from where i sit, all the data that i have, the evidence is very clear that kindle is a companion to tablet computers, laptops -- it's not an either/or division. we have this feature called whisper sync where you can read on one device and one of the strong usage pattern that is we see is people will read on their kindles and they read on their smart phones, tablet computers, and so on.

we're seeing that people are moving between these devices and it's one of the reasons that we're so focused on buy once, read everywhere. >> most people use their kindle when they're traveling? or do they use it at home? they use it where? >> yes, i think this new $139 kindle is going to be used by people who travel less. people who want to be at home or at least -- >> charlie: because they have wi-fi at home. >> they have wi-fi at home. cucarry 3,500 books on the thing, you can put a big library on your kindle and you don't need your wireless connection but the 3-g kindle, the $189 kindle works in 100 countries wirelessly, don't have to find a wi-if i hot spot, if you travel a lot i think you're going to prefer the 3-g -- especially if you travel internationally, newspapers waiting for you when you wake up in the morning, they follow you around the world. snow will still have this on

this device, anything you have in any other kindle you've got to here? >> you've got it. >> charlie: the size. wawent into research and development to say this is the right size rather than the size of a blackberry or an iphone? >> we did a lot of work. the kindle has only been in the market 33 months, which is astonishing to me because we've seen a rapid transition now selling more kindle than hardcover books, we've sold millions of these devices but we worked on the kindle three years before we launched it, we have been working on it six years even though it's only been in the market a short time. one of the things we did was look at kind of paperback formats, mass-market paperbacks, trying to find the smallest size that we thought would really be conducive to long-form reading so we have also been trying to make sure -- most of the devices that have been developed by we

humans over the last couple of decades have tilted the world toward short-form reading so internet-connected computers, and smart phones and so on are great for short email messages. they're great for blog posts. they're not great for 300-page books. we were focused -- we wanted to find a display size that we thought would work, whether it's a novel or a long history or a biography, and that's the size -- we also have a bigger kindle which has a 9.7-inch -- >> charlie: tablet size. >> that one is better for highly structured books -- books that might have a lot of diagrams or what have you -- >> charlie: when will you have color? >> well, color -- electronic ink -- you know, the sort of electronic paper -- >> charlie: electronic ink is the thing that made this possible because you wanted to create the sense it was as much like the feel of a book as possible. >> we really want it to have no eyestrain.

that's the key. we're not just trying to imitate the book. there is one feature of the book we definitely wanted to imitate which is the book's incredibly elegant book to get out of the way, to disappear so you could enter the author's world. >> charlie: see the story. >> part of that disappearing act that a book does is it does not cause you eyestrain. the same they that a typical computer monitor does so that's why we chose that electronic-ink display. color, i have seen, but it's still in the laboratory and it's not ready for prime time. >> charlie: how many devices do we want to carry with us? >> i think you're going to have a lot of devices. >> charlie: do you really? >> i do. at least four or five. some have yet to be invented. we're not trying to create an experience. we want the author to create the experience. if you're going to read nabokov or hemingway -- you want us creating the experience for? that's not our job. our job is to provide the convenience so that you can get books in 60 seconds, so that you can carry your whole library with you. so that you don't get hand

strain. so the device doesn't get hot in your hand. so that it doesn't cause eyestrain. so that the battery life lasts a month so that you never get battery anxiety -- >> charlie: battery life of this is what? >> one month. >> charlie: one month. >> all those things -- that's our job. our job is to design a perfect device for reading. people say why don't you add a touch screen? the reason we don't have a touch screen is when we were going down that decision path we say, "ok, a touch screen," and the current technology for touch screens is called capacitive touch. it's a layer that goes on top of that display. it adds glare. the first thing that you do when you add a touch display is you add a little extra layer of glass or plastic and a little bit of glare. so it's very easy from an engineering point of view to add a touch screen but it's not the right thing when you're making no compromises and that's our point of view -- we want to build a device that's uncompromised for reading -- and

guess what. our approach is working. >> charlie: it clearly is. you said millions. but your you so secretive -- you and i have had this discussion before. >> on the number? >> charlie: people have written about our discussion as you know from kindle -- >> >> we are secretive about the number because we think it's competitively useful. there are other people if they're going to start planning their manufacturing lines and their supply canes, it's a helpful data point for them to know how many of these we're selling. when we just say "millions," that's not a good data point for them. >> charlie: it's an increasing part of the overall revenue of amazon. >> yes. it's an increasing part. it's still relatively small. amazon's retail business is a large business and this is -- even though this is a big business in its own right at this point relative to amazon's retail business it's still -- -- >> charlie: is this the entry point for you in terms of the

consumer electronics business? >> we are totally focused on reading, so sometimes i get asked are you guys going to make a tablet computer? >> charlie: exactly. >> and go head on against the ipad instead of this, and the answer is -- or in addition to it, and the answer is no and i'll tell you why. we don't want to do a me-too product. before the end of this year, there will be at least 30 ipad competitors. next year, there may be 75. what, do we want to be number 76? how is that going to help anything? so this -- >> charlie: no, no, no. i would argue that if you could create something better than the ipad, then there is a market for you. >> if you could -- if you could have very differentiated product, yes, but what we don't want to do is build a me-too product. >> charlie: and this -- and this is not a me-too product, it's completely differentiated. it does things that a tablet computer with an l.c.d. display could never do. >> charlie: are you going to be hurt by publishers not wanting

to sell to you? or is your volume so significant that publishers always want to make a deal with you? >> well, one of the reasons that this is working is because we have been able to build such a big catalog of electronic books -- it's by far the largest electronic bookstore in the world and it has the lowest prices. and we're going to keep up with that. when we -- just 33 months ago, we had 90,000 titles available for kindle. and today, we have 630,000. we've gone from 90,000 to 630,000 in 33 months and i predict we're going to make that kind of progress again over the next 33 months if not more -- our vision is every book ever written in print or out of print -- >> charlie: available on the kindle? >> within 60 seconds. one of the other features that we have -- i don't think it's talked about enough but i can tell you that our -- our customers really appreciate it -- is our worry-free archive so you can delete with abandon on

this device. if you see a book that you are not reading right now, you want to delete it off the device, you can just delete it because we keep a personal archival copy for you on our servers and you can redownload it at any time. >> charlie: your goal is to be the largest online, and you are, retailer in the world. beyond that, what's the goal? >> our mission is earth's most customer-centric company. >> charlie: i don't know what that means. >> i'll give you an example. >> right after world war ii the guy who founded sony made the mission japan known for quality. this was a time when japan was known for cheap, copycat products and murray teson didn't say we're going to make sony known for quality, we're going to make japan known for quality,

he chose a mission that was bigger than sony. we have a similar idea in mind. we want other companies to look at amazon and see us as a standard bearer for obsessive focus on the customer as opposed to obsessive focus on the competitor. that's one of the reasons we work on differentiated products. it's one of the reasons we take a long-term viewpoint on things. you can't really do the right thing for customers if you're short-term oriented and if you're going to invent new things you've also got to be able -- this goes along with long-term orientation, you've got to be able to endure a lot of criticism. kindle is a good example. if you're going to put your back into reinventing a 500-year-old industry, some folks are going to get ornery.

>> charlie: it was feared by people that had your stock that once wal-mart got serious of being online they were going on blow you away. why didn't that happen? >> i think it's because we did a good job for our customers. you go back in time and we have been called amazon.toast. >> charlie: i remember. >> amazon.con. amazon.bomb. this is all, like, in the first three years of our existence. >> charlie: yeah. >> that's part of what i'm talking about. the willingness to be misunderstood. if you're going to do things, we lay out what we're doing and we tell people how to think about things. like i'm saying to people the ipad is not a kindle killer. i'm very clear about that. it doesn't keep people from writing that. i'm very clear about why. it's a totally differentiated device. 139. works in bright sunlight. you can read with one hand.

it's so bright and the battery last ia month. for $139, why wouldn't you want a device like that? >> charlie: let me go back to the wal-mart issue. >> yeah. >> charlie: what was it that made you able to sustain a challenge from the world's greatest retailer? >> obsessive customer focus on -- >> charlie: how do you focus on the customer better than they focus on the customer? they're pretty good at focusing on the customer too. >> we're differentiated in how we do it so our approach -- if you think about our retail business, which i think is what you are asking about here, there are three things that we know that are critical -- >> charlie: the soul of your business. >> relative to the wal-mart question, i think that's the key. it's selection. low prices. and fast, convenient, reliable delivery. that's the shipment side. >> charlie: wait, wait. so wal-mart doesn't have low prices? fast, and convenient delivery? >> i would claim that amazon has much broader selection, in many

cases, if -- i don't want to be overly bold in my claim but the online model gives us significant cost structure advantages, lets us have even lower prices than physical stores. >> charlie: selling online. >> well, sometimes they have them -- they do have an umbrella problem sometimes where they don't want to compete against themselves online vs. off line. >> charlie: wal-mart with all of the volume that it buys, its purchasing power, therefore, gives it the ability to offer lower prices. doesn't that give them an advantage they ought to be able to translate? their purchasing power is bigger than your purchasing power, is it not? >> i think in a lot of the product categories that ship sailed a long time ago. >> charlie: meaning what? >> we have the purchasing power -- >> charlie: to compete with anybody -- >> we have the volume relationships with suppliers. that playing field has been leveled. if you asked me that question 10

or 15 years ago i would have agreed with you that -- >> charlie: that there was a challenge you had to overcome. >> even then, our profitability is not our customers' problem. we don't take the point of view that we're going to price products at a particular margin for ourselves. we say, we're going to price products competitively and if that means on that product that we lose money, that's ok because we need to take care of the customer earned trust, if we find we can't ever make money with that product we'll stop selling it but we're not going to make customers pay for any of our inefficiencies. if you see wai'm saying. >> charlie: did you lose money on the -- >> charlie: if you see what i'm saying. >> charlie: did you lose money on the kindle? >> every business weave invested in -- most businesses have either no -- every business we've invested in -- most businesses have no impact our a negative impact on our

financials the first 5-7 years. the company is very healthy financially. we're doing very well. it's an outcome of customer obsession. when we were amazon.toast, that was because barnes & noble had -- we only had 100 and -- when we were declared amazon.toast, i think we had 150 employees, barnes and noble had 30,000 employees and someone wrote an article that said amazon has had a great two-year run but now the big boys have shown up and they're going to steamroll them. we had a -- all-hands meeting, i called all 150 employees together and i said, "look," because every employee has read the amazon.toast article, every mother of every employee has read the amazon.toast article and has called -- >> charlie: father and mother living in new york. >> and said "are you ok?" we had an all-hands meeting and i said, "look, you should wake

up worried, terrified every morning but don't be worried about our competitors because they're never going to send us any money any way. let's be worried about our customers and stay heads-down focused. these are big -- most of these are big markets. ñr another way to answer your question about competitors and wal-mart is to say, "look, they can succeed fabulously and it won't stop us from succeeding. these retail markets are huge. so we can -- it often doesn't make sense for us to think of it as a pitched battle. sometimes, people think about business as kind of like a sporting event. there is a winner and a loser. >> charlie: it's not a zero-sum game. >> it usually isn't. i'm sure there are cases but most often, industries succeed so i can tell you i think ecommerce is succeeding. and the way we think about it,

nobody else has to fail for us to do well. i think ebooks is like that. i think there are going to be many winners. i think ebooks is going to be a huge industry. >> charlie: there are many competitors now. you've got barnes and noble is one of them. sony is another now. apple is another. >> but i have a list of 50 competitors that we could walk through all over the world doing different things. our focus is going to be we're going to pay attention to the competitors but we're not going to obsess over them, we're going to obsess over readers because those are the people using the device." missionaries build better products. >> charlie: what is jeff bezos thinking about today in 2010 that we might not know anything about that he thinks may be a reality in 2013 or 2015? where is the -- >> one of the things is our -- the amazon web services business. >> charlie: this is the amazon.cloud stuff?

>> there is a business that's growing -- it's in the hyper-growth phase. it's already a significant business. that's a business that's probably not going to get as much attention -- >> charlie: are they a dominant player? >> in the infrastructure part of it which is the part we play in, amazon is by far the leader and you know it started mostly through start-up companies, now it's big enterprises adopting -- the best analogy i can give you for this is it's like the electric grid so instead of -- right now, big companies build their own data centers, they buy their own servers, there is cap-ex, if you want to operate a data center you have to do it well but it doesn't differentiate you from your competitors. it's just a price of admission. so what we do at amazon web services is we self--- we sell compute by the hour, like buying electricity off the grid insteading of having your own

power generating plant. >> charlie: are you surprised apple had to react to the iphone question of the reception and the antenna? are you surprised by that? were you surprised that steve jobs could make a mistake like that? >> i honestly don't know anything about it other than -- >> charlie: you do know. come on. that's your normal way of evading questions. what is an iphone? who is this job? you have read about it. you had to. >> all i know is what i read in the press. >> charlie: from what you read in the papers what is your assessment? the iphone issue. yes. >> i find it a little surprising. i find it a little surprising. it seems like, to me, that it could have been found in testing. >> charlie: what do you think? they rushed to market? >> i don't know. >> charlie: does it damage them? >> no. not at all. >> charlie: you admit your mistake, you say we've tried to fix it" and move on? >> charlie, even great companies make mistakes and the key is they've got to fix it.

>> charlie: where are you going that we might not know anything about? >> i'll tell you something that's getting a huge -- that's not apparent but is getting a huge amount of focus inside the company. it is apparel. >> charlie: really? >> we're having a lot of sales growth in apparel, we bought a company called zaposthat had shoes -- we already had a good shoe business before buying zapos. you might think why would anybody buy shoes online, why would anybody buy clothes online? historically, clothes has always been the number one mail-order category even pre-internet and we make it real easy for people to try stuff on. >> charlie: you make it easy to try stuff on. >> i make it easy to return and we try to get people not to feel guilty about it. buy three pairs of jeans and return woof them -- return two of them. it's ok. it's ok with us.

>> charlie: keep the one that fits. >> if you want a preview of what -- of where we're headed with apparel, go look at the denim category. go look at, like, women's jeans on amazon and you will see. that will give you a little insight into our future. >> charlie: part of what you hope will be happening is already happening in a big way is that when people think about making a purchase -- >> yeah. >> charlie: their first instinct is amazon? >> what i want is for people to feel like amazon is the most reliable, most -- that they have earned trust -- trust is hard-earned, easily lost but we want to make hard promises like if you're an amazon prime member we'll get you this tomorrow, or in two days and we'll be very clear about it, you can pay $3.99 to get it tomorrow or you can get it free in two days and that's a hard promise to make. and then we do a good job keeping promises. that's how you earn trust.

make a hard promise. keep it. if we can continue to earn rust trust, that's also what lets us branch out into new product categories, new businesses because customers will give you the benefit of the doubt. they'll say "amazon does a good job for me and so i'll try this kindle." >> charlie: you're a billionaire, they say. what do you think of the giving pledge? >> i think it's very interesting. i recently saw bill gates present on this and i think it's a very interesting idea. >> charlie: the idea is that people make a pledge and -- a moral pledge, not a legal pledge to give away half of their net worth. >> yeah. half or more. yeah. that's right. >> charlie: what do you think the receptivity to that is? >> i don't know. >> charlie: does it interest

you? is it something that would resonate with you to know more about? >> i have a lot of ideas -- >> charlie: about? >> about philanthropy that i'm not ready to share or talk about. but philanthropy today has done -- my parents are really leading the charge there today. they run the bezos family foundation and they focus mostly on early education. the pledge is an interesting idea. i don't know what reception it's getting broadly. for me, the most important thing is to figure out where -- which models work the best so for one thing i'm convinced that in many cases for-profit models improve the world more than philanthropy models if they can be made to work, and this is by the way one of the things that the gates foundation -- i know that foundation quite a bit, patty is still an amazon board member. i think they are geniuses at

figuring out that distinction. let me give you an example of what i mean. they are always looking -- they want to invest philanthropically in places where there are clear market failures. vaccines need to be refrigerated. in the poorest places, there is no refrigeration. there is no electricity for refrigeration. how do you distribute vaccines -- can you invent vaccines that don't need to be refrigerated? can you invent battery-powered vaccine refrigerators? they're exploring a multitude of things along those lines but because there is no money it's not the thing pharmaceutical kuchlsz are going to jump on because the bills are going to get paid in the developed world where they do have refrigeration so there is no up side to developing that kind of vaccine. >> charlie: right. >> kindle would be an example of something where the for-profit

model is driving down the cost, increasing the convenience of reading. one of the great things about the for-profit model is it's self-sustaining and it draws competition. so then you get other people -- >> charlie: you're looking at philanthropy as a way that it can use -- adapt -- you want to look at market failures. you want to look for places where -- a lot of r&d is like this. i'm very interested in the r&d that's being done in poverty. there are a couple of esther duflo -- have you had her on your show? >> charlie: no. >> several people looking into r&d in poverty. they ask hard questions like why do able-bodied, highly intelligent, hard-working people stay in poverty? in fact, they've done active experiments where they will -- controlled experiments where they will take a population of such people, fruit vendors in india, for example, and some of them work their way out of

poverty and some of them don't and they're trying to figure out what's the difference between those two groups. an active experiment they did was is there an element of luck? so they randomly selected half of the people and they gave half of them, i think it was $500 or $1,000, sort of like winning the lottery. they said, "ok. so is that lottery going to be an explanatory variable for which of these people work their way out of poverty?" they found it wasn't that meaningful of a variable. so there is a lot of very interesting unknowns but sometimes i think we try to solve problems before we understand the problem. my parents are very interested in early education and actually funding some r&d into very young kids -- even infants where they put them in these very big, superconducting brain-scanning machines and they can watch their brain -- this is the kind of machine that was used to

demonstrate that baby mozart definitely does not work. but you can learn -- you know, get very quantitative and really learn, like, what does work in early education. sometimes we argue about things as a society -- we argue about things even before we know -- have any data. >> charlie: also goes back to something i believe in a lot. which is you've got to ask the right questions. >> yes, you do. >> charlie: if you ask the right questions you're likely to go in the right direction. >> you have to ask the right flavor of the right question, even. >> charlie: let me come back to one question overhaul that interests me. the impact of social media on consumer choice. not where they buy it but what they choose to buy. >> uh-huh. >> charlie: is that a growing phenomenon? people listening to their friends rather than some ratings service whether it's amazon or somebody else? >> here is what i would say. i don't think it's a growing phenomenon in one sense but in another i do.

i think on the internet, word of mouth is more powerful than it has ever been before and so on the internet, everybody buys ink by the barrel. everybody has an opinion and they share them. so in blogs, on social networking sites, by email you can easily email 10 friends, text messages and so on and so on. so i think this is a very powerful and positive phenomenon for society because i think in the past, if you are making a product, you would put 70 -- the right business strategy, not necessarily the right thing for society but the right business strategy was to put 70% of your attention, energy and dollars in to shouting about the product, marketing the product, and 30% into building a great product. and so you could win with a mediocre product if you were a good enough marketer.

>> charlie: right. right. >> and i think that is getting harder to do. that strategy -- the balance of power is shifting away from companies and toward consumers and in the future, which i think isn't bad for companies as long as they understand -- >> charlie: the individual is empowered. >> the individual is getting empowered and the right way to respond to this if you're a company is to say, "i'm going to put the vast majority of my energy, attention and dollars into building a great product or service and put a smaller amount into shouting about it -- marketing it. because i know if i build a great product or service, my customers will tell each other. you have to mix in some patience with that, you're going to have to take a long-term attitude, but if you do that, i think -- another way to say it is maybe we're moving into a world where the truth is more on the surface and i think that's a very healthy and good thing. it won't be without its bumps,

i'm sure. >> charlie: one last, final question about the kindle -- the new kindle. >> tell me. >> charlie: this one sells for how much? >> $139 for the kindle that as long as you have a wi-fi hot spot -- >> charlie: for the new model -- >> then for the 3-g, go-anywhere one, works in 100 countries -- the wireless works in 100 countries, $189. >> charlie: does this work -- for $189 it will work anywhere in the world. >> yeah. 100 countries. the wireless -- >> charlie: the wireless will work anywhere there is wi-fi. >> if you put 3,500 books on there, it will work anywhere in the world as a reader, i'm just talking about the wireless connectivity. >> charlie: thank you for coming. >> charlie, as always, thank you. ♪ ♪

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