Amazon Upends the Grocery Industry

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From cool global headquarters, this is Motley Fool Money. It's the Motley Fool Money Radio Show. I'm Chris Hill and joining me in studio this week from Million Dollar Portfolio, Jason Mozart and Matt Arguesinger and from Total Income, Ron Gross. Good to see you as always gentlemen.

We got the latest headlines from Wall Street. Best selling author Brad Stone will analyze the state of Uber. And as always, we'll give you an inside look at the stocks on our radar. But we begin with the blockbuster deal from Friday morning Amazon is buying Whole Foods Market for $13.7 billion.

This is an all cash deal and that is a 27% premium for Whole Foods shares. CEO John Mackie is on our Board of Directors here at the Motley Fool. He will remain the CEO of Whole Foods and Ron Gross. I'll just start with you.

This was a stunner. You know, as an Amazon and Whole Foods shareholder, I'm pleased on both ends here. But I'm a little bit surprised that I didn't see this coming at all really. It seems kind of silly in hindsight.

It makes sense. There were some tests that the two had done together. We know Amazon for the longest time has been really pushing into that grocery business. We know Whole Foods has been struggling for a variety of competitive reasons.

So I like the deal. I think it makes sense. Shame on me for not seeing it earlier. Jason, for anyone who was wondering how serious Amazon is about bricks and mortar, they're serious.

Yeah, let's read it right here. Shame on you Ron. We also, no, it's fine. We're all writing it all right.

We're all writing it all right. Our phones are all lighting up. Twitter is crazy. It's just, wow, I mean, first things first.

I would much rather see this deal than something like the rumors we were seeing with Amazon. Potentially taking some interest in Slack. I just couldn't see how those two really worked together and it seemed like the valuation for Slack was out of control. There's a lot on pack here with this deal.

But I think, like Ron said, it is a good deal for both companies. Whole Foods for a long time and we owned it in MVP for a while. And our big concern was groceries are just becoming a hyper-competitive market. We're really the primary form of competition as price.

It's become abundantly clear that people don't care as much about the experiences they care about the price. And that put Whole Foods in a really tough spot. And they, I don't think, had an easy way out from there. And Kroger's results, I think, just sort of reinforce that.

So I think this deal gives Whole Foods the opportunity to continue competing on price and growing that business without being held to the scrutiny of your public companies. And for Amazon, this is right in their wheelhouse, I think, as far as making leverage their expertise and shipping and logistics with the physical footprint that Whole Foods has today to really grow out. What I think is becoming a very robust market online grocery. It should be, should just do nothing but continue to grow here for the coming years.

It's certainly a shocker to me. I mean, I had no doubt that Amazon was going to invest big and go big into groceries. If you think about it, outside of rent and your mortgage payment, it's pretty much the most consistent month for the company. It's pretty much the most consistent month expense that anyone has.

And it's non-cyclical. So it's a big market. I'm not surprised Amazon was going after it. I am surprised that they decided to do their biggest acquisition deal ever since Twitch in 2014 for a billion.

To go after Whole Foods, to Jason's point, it's definitely a distribution deal. I thought Bloomberg had an interesting heat map of it and showing how the both companies had significant correlation on the coast. But if you look at Whole Foods, they have a lot more stores in the Midwest and Southeast. Amazon really doesn't have any kind of footprint.

So there's a lot to gain if you're Amazon. I just think if you're going to make a big move into the groceries, I think you could have done something different than going Whole Foods. I think there's a cultural difference there between the two companies. I think JetPays was an Amazon, more of a kind of hardcore, let's cut the expenses, let's focus on distribution where Whole Foods is more about store-friendlyness customer experience.

Well, let's get to the price tag for a second here since this has already been referenced. This is not just the biggest acquisition Amazon has ever made. This is exponentially the biggest acquisition they've ever made. I mean, you mentioned Twitch.

You look at Zappos. Those are both in the neighborhood of a billion dollars. This is $13.7 billion. And Jason, we've talked before about Facebook and the amount of money that they paid for WhatsApp, $19 billion.

And analysts asking questions over time like, okay, how's that going? And I think that one of the things Amazon has bought themselves here, fairly or unfairly, is ongoing questions from it. I think it's completely fair. And I say, this is an Amazon shareholder to start to ask Amazon on a quarterly basis.

Okay, you just wrote the biggest check you've ever written. How is that going so far? Yeah, I mean, that's a very good point. It's something that I don't think the market is just looking at this and saying, okay, it's Amazon.

It's Bezos. Great deal. Now, let's move forward. I mean, we are all going to want to see some results and how this affects the company's bottom line.

I think that, I mean, when you look at something like WhatsApp and compare it to something like Whole Foods, I mean, the glaring difference there is that Whole Foods obviously is obviously a big deal. And I think that what this does, it gives Amazon some credibility and probably what's the biggest hurdle to clear in the online grocery space. And that's figuring out a way to deliver quality fresh produce, fruits, meats, things like that. I think that's probably one of the hang-ups a lot of consumers have with ordering groceries online.

They've done really well with Prime Pantry with the shelf stable stuff. This is going to give them the opportunity, but it's just that. It's an opportunity. They still have to execute.

And we are going to learn very quickly how they plan to execute. But again, with that Prime membership, with all the leverage they can pull within that Prime membership, I just think the opportunities here are so vast. And Jeff Bezos is such a good long-term thinker. And really, it's very clear that John Mackie cares deeply about this company.

And I think that's important to remember here, because it's going to give him a chance to really get back to doing what he wants to do without everybody holding up to the fire core in a core route. Well, I think we are today, we're closer than ever to that future, where I'm at home. I'm getting ready to go to work or go to the house and I speak my grocery list into Alexa. And by the time I get home, I got groceries delivered to me.

And I think that's a future a lot of people are probably excited about. And to Jason's point, the hang-up there has always been fresh food on a daily basis. Now, Amazon has that capability. To your point, Chris, I don't think Bezos really sweatses those quarterly conference calls as much as some CEOs do.

They feel the need to explain away every quarter what's going on with same-term sales or price points. I think he's just fine offering the information. He's going to offer and let investors do what they will. I think the only disconnect I see with this, Madam mentioned the culture.

I think price point, whole food is typically a very premium price product. Whole paycheck is the big joke there, where Amazon, you think more of a discount, lower priced items. So it will be interesting to see now that Whole Foods has less scrutiny on the quarterly basis. Are they going to keep prices where they were?

Are they going to lower prices and really try to take a chunk out of the competition? As we know, groceries are a thin margin business. Whole Foods is probably a 3% profit margin business. There's not much leeway there, but if Bezos wants to, he can take this down to a 2.1.5% business and just try to take huge market share.

Yeah, like he said, your margin is my opportunity. I think that comes into play here. But let's also remember, a lot of times we see these kinds of deals. The acquirer shares of the acquirer will go down on this news, while the company being acquired might go up.

In this case, the market is bidding both stocks up, so it seems on the surface at least that the market might be able to deal with this deal as well. Well, you mentioned the margins run. Yes, this is traditionally a low margin business, but let's go back in time. It's six to 12 months whenever Amazon unveiled that video of the store that they were testing out in Seattle.

Which had very few employees. So yes, it's a low margin business. Unless you significantly reduce the number of people who work there and then all of a sudden the margins start to get better. They've said for now that they won't be laying off Whole Foods employees specifically cashiers because people are wondering, does technology all of a sudden start replacing the cashier?

And let's face it, eventually, I think that happens more and more and more for the time being no. But if that Amazon go worked in that one test market, which I think it did, it would be awfully exciting to push that out to other stores. Well, I think we should talk about what this means probably for the competition. Yeah, I was just going to say, Jason mentioned Kroger before.

I think it's worth pointing out that earlier this week Kroger came out and lowered their revenue guidance for the full fiscal year and the stock fell almost 20%. And then this happened and Kroger shares falling on Friday, another 10-12% on top of that. Right. And I saw Friday, you saw Costco down, you saw Walmart down.

I mean, this is the business that these companies have gone after tremendously for the past few decades, at least. And now Amazon, of course, is making a big play. Earlier when I was saying earlier, the old surprise was me. I actually thought from a cultural standpoint that Amazon buying Costco actually made a lot more sense.

I mean, of course, that's a big deal. You probably have to pay 80 or 90 billion for Costco. Still not a humongous deal compared to Amazon's $460 billion market cap. I just don't think they would have gotten that deal past regulators.

But that to me would have made more sense. If Amazon was going to really, as Jason says, go in and grab market share in a big way and do it in a business that's a lot more similar, has a lot more distribution of fulfillment capabilities. Membership business made a lot more sense. Yeah.

What about this notion that's going around that Amazon got a really good price, even though they're writing the biggest check they've ever written? And there was one firm, and I don't remember which one it was, but one firm, the bio price was $42 a share. One firm came out and actually put a price target on Whole Foods at $45 a share saying we think they're going to be other bidders coming into this. Who else?

I was trying to wrap my head around who this makes sense for. So there are two concepts that at least could come into play here. Kroger is one, just because if you think about it. Kroger's out in bad, well, they are having a bad week.

But let's not forget, it's not just Kroger, they own Harris teeter. So they do have some familiarity with that upper end space. And don't neglect private player publics. Max favorite goes early.

I think, right? I mean, we all love the publics here now. And then we don't get enough exposure to publics up here. Wonderful sort of down south.

They are private, as we said, and that would be an opportunity, of course, for Whole Foods to be able to get out of the limelight as well there. I like, you know, you're thinking they're with Costco. I mean, two companies with very loyal fan-dacism, subscribers, they have great renewal rates. But at the end of the day, I think this is going to be something that ends up making a lot of sense.

And honestly, I don't want to call Whole Foods a desperate seller, but I will say this was a business that was clearly facing monumental challenges here in the coming years. And I don't know there was really any easy way out for them. I think this is ultimately the best case scenario for them. And shareholders ought to feel pretty good about the steel.

Yeah, speaking to the competition, even without the online piece here, there's just too much competition in this business for such a thin margin business. And there's too much price competition. And you see it hitting, hitting all these folks. Now we have the Europeans coming in with all the Unledo, I probably pronounced both of those wrong.

I apologize. So now we even see more competition than you layering the fact that online is only 2%, online groceries, only 2% of all online sales, a major competitive force about to come in. I think we could start to see more and more consolidation in this industry. And few years from now, there'll be bigger players, but less.

I think a lot of people may not realize how robust the online grocery space is. In 2016, it was about $42 billion in sales. It grew more than 150% from the year before. And that has just projected to take up more and more share of the overall grocery market as time goes on.

So clearly Amazon placing a bet on the direction this market has headed. And I think they're on a something. Coming up, a reminder that when federal investigators knock on the front door of your business, it's not so they can give you candy and flowers. Stay right here.

This is Monica Belmont. Welcome back to Monica Belmont, the full money crescendo here in studio, Jason Moser, Matt Arguessinger, and Ron Gross. Booz Allen Hamilton, a holding company best known for its consulting services, announced late Thursday that the US Justice Department is investigating its accounting practices and shares a Booz Allen film more than 18% on Friday, Ron. Not good.

I don't know if there's fire, but there sure seems to be a lot of smoke. Federal, civil, and criminal probe, as you said, companies cost accounting and indirect cost charging practices with the US government. They do almost all of their business with the US government. It's almost like an arm of the US government at this point.

They claim that their internal and external audit processes have not identified any material weakness, but typically is what people say right up until you identify the material weakness. Who knows where this will go, but the street, the investors out there want no part of it. And they're selling this stock off, bruskely. Am I the only one who thought of Arthur Anderson?

Yeah, we'll see where this goes. A changing of the guard, a general electric, longtime CEO Jeff Imelt announced he is retiring before the end of the year. He has led GE through some tough times, Jason, but if you're grading him on the performance of the stock, I think it's fair to say that shareholders are looking forward to new leadership. Yeah, he probably walks out of there with like a D minus.

And I think my bet is that John Flannery has what is going to be perceived at least to be a pretty easy act to follow. But I think a lot of that is also going to be thanks to some things that Imelt did here recently, at least in sort of streamlining the business and helping get it sort of back in a direction where they could focus on points of strength. And I mean, it's worth remembering to me, Imelt had to lead this company through two, at least two extremely pivotal crises, I mean, in 9-11, the financial crisis. I mean, those are things where we can't discount that.

I mean, we have to remember he did take this company through those periods of time. Obviously Warren Buffett felt like there was a reason to invest in the company at some point. I think it's a good reminder that Buffett can often make investments that we simply can't make. I think he got 3 billion in preferred shares with a nice 10% yield.

That's nice. And options to buy some warrants there. And Plaid something's finally working out for you. Yeah, sure.

It certainly shows you that investing, there are a lot of different ways to win. Again, I think this is a business that I think is set up to succeed here for the coming years because they are focusing back on points of strength. We were talking with Taylor Muckerman this week about their focus on energy. I think those are all good steps in the right direction.

I think you're a GE shareholder. You're probably happy to see a changing of the garb, but you also have to feel pretty good about what's to come. Nike is revamping its operations and cutting 2% of the workforce in the process. It shares of Nike down 6% in the wake of Mark Parker's announcement.

I know, Matty, this feels like one of those situations where it's going to get a little bit worse before it gets better. I think so. I think we talked before. I think the retail problems, the retail channel problems are still a bit challenged from Nike under-earmure and really the whole space.

They're calling this consumer direct offense. There's really two sides of the story. It's consolidation on one side and product adaptability on the other. The consolidation is probably needed.

I think that's responsible for the 2% workforce cuts that we're talking about. For example, they're going down to four business regions. I don't know why Nike had both a Western European and a Central Eastern European segment. They're just combining that into a European at least.

So things like that make sense. I think what's really important is they're really consolidating the website, the direct consumer business, and the products, the digital products visit into one business, they're calling Nike direct. Seems like that should all been together before, but now they're bringing it all together and I think that's the major force of the company. That's what I mean by spending a lot of capital.

That's obviously the growth engine for Nike and a lot of these businesses going forward. I like the move and being more adapted to the consumer is going to be important part of that. Well, and Parker has done such a good job running Nike for so long that you sort of look at this and think, yeah, he's not taking this line down. No, no, no, he's going to figure this out.

And I think it's about making Nike more of a stylish apparel company as opposed to just a purely sports apparel company. I think that's the right move. Since 2009, sales of breakfast cereal in the United States have fallen nearly 20%, but Kellogg has come up with a plan to win back millennials. The company has unveiled a line of Fruit Loops branded merchandise.

It is starting with limited edition sunglasses and a social media campaign that includes the hashtag, whatever fruits your loops. Wow. That is awesomely terrible. Not terribly awesome.

I don't know. Is this going to work, Ron? I just don't see the connection between, yeah, this is what's going to be difficult eating cereal. I don't even think the people that developed it think it would.

Let's go to our man behind the glass Steve Broido. Steve, if I offered you merchandise branded with any cereal, not just for loops, any cereal, what do you don't miss? C3POs. The old school C3PO cereal.

That was a kid. That's the one, man. I'm not going to say all about it if they bring it back. Ron Gross.

I know you're familiar with the pet rock. Yes. How about the fruity pebble? Nice.

Nice. What about you, Jason? Someone hooked me with a cat and shaped cat and crunch coffee mug. I would not be scared to use it.

Okay. I'm going full nerd on this. It's not packed home, pop shirt, but you know, you actually, the teacher crackles. Like you were having this crackling a little time.

What's going on? It's a person. That's a box tee shirt technology right there. I'm going with Jason, although I want a cat and crunch sword.

It's not a thing. Alright guys, we'll see a little bit later in the show. Up next, the most valuable startup in Silicon Valley is falling apart. We will find out how bad it's getting for Uber as we check in with Brad Stone.

That's next. This is Motley Full Mone. Alright, before we get to the conversation with Brad Stone, I've got to say thanks to our friends at Rocket Mortgage by Quicken Loans. Chances are you're confident when it comes to your work or your hobbies or your life in general, well, Rocket Mortgage gives you that same level of confidence when it comes to buying a home or refinancing your existing home loan.

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Equal housing lender licensed in all 50 states, nmlsconsumeraccess.org 30-30. Welcome back to Motley Full Mone. I'm Chris Hill. The company in the spot like this week is Uber.

So to weigh in on that and more of the news out of Silicon Valley, we turn to Brad Stone. He is a senior executive editor for Technology at Bloomberg and a best selling author who's the latest book is The Up Starts, How Uber, Airbnb and the Killer Companies of the New Silicon Valley are changing the world. Brad, good to talk to you again. Thanks, Chris.

Uber may be changing the world, but lately it is undergoing some changes of its own for those who haven't been following the story. Uber's board voted to adopt all of the recommendations of an independent investigation led by the former Attorney General Eric Holder. And the first recommendation, review and reallocate the responsibilities of Travis Kalenik, the CEO. Kalenik has taken a temporary leave of absence.

Does this guy have a future at Uber? Yeah, I think he does. To be sure, he is getting on extraordinary thin ice. This is a company that has been at the center of a storm.

It's really the only way to say it. It's simply January, early February. For a number of different reasons that we might all shoehorn into under the umbrella of this company where he jammed the accelerator down and the engine overheated in a number of egregious ways. They grew too quickly, too fast.

They had poor internal controls. They skirted close to or over the line of legality in a couple of their different avenues of expansion and created a workplace culture without the guardrails of a professional human resources organization which created all sorts of allegations of mistreatment, of sexism, of working of really a terrible internal atmosphere. Travis is really the founder, CEO who is technically a co-founder, but he is sort of in that role. He has gotten Uber to where it is today, a company that was valued in the last funding round at $70 billion.

Probably come down since then, but nevertheless, an extraordinary success by almost every standard, except for the one that we have been using over the past few months. He also has a lot of voting control and analytics of the company and some loyalty from people. I do think he stays around. We should also add Chris.

Part of the reason that he is stepping away for this indefinite amount of time is he suffered a horrendous personal tragedy in an accident that his parents got into and his mom passed away. I'm not so sure that he would be taking this time off if it wasn't for those unfortunate circumstances, but this is a company that needs a quick turnaround, needs a reputational overhaul. I don't know that anyone has the authority within Uber right now to do it. He also has a huge recruiting opportunity or challenge ahead of him in terms of hiring this long-promised COO, his partner, he's got opening from CFO to the senior vice president of engineering that he now has to fill.

I was going to say that the latest issue of Time Magazine features the headline, Uber fail. Upheaval at the world's most valuable startup is a wake-up call for Silicon Valley. We'll get to the wake-up call part in a second, but in terms of upheaval, as you said, the CEO is on a temporary leave of absence. The head of finance has gone, the head of business has gone.

Who is in charge right now? Technically, there's now a committee of several executives, a longtime executive who run the different business units who are running the company. If you look at Travis' letter to employees, saying that he would take some time off, he kind of couched it. In my sense, it's that he is still involved, that he is working on the filling these spots, he's recruiting issues, while he's trying to take some time off degree.

Look, I know what the optics were, and he thinks it's going to take some time off. I really do think this is still, for now, for better or for worse, Travis' company. I think my sense is probably inside Uber. Even though they've had to fall on their swords and they've embraced the findings of these reports, this is the company that was built on stubbornness on opposite.

It doesn't surprise me, really, that the Travis is still involved in a stilled company. Travis Kalenick's personal tragedy aside, you've studied this company closely. It's obviously a very big part of your latest book. Is any of what has happened at Uber over the past few weeks been surprised to you?

Of course. I mean, who really could have predicted any of this? I mean, I think it's a unique situation in business. Now, let me be more specific.

Maybe some of the allegations of internal, you know, affected them or overlooking some of these harassment claims. This was all started off by a blog post by a former engineer named Susan Fowler, who says that she raised a sexual harassment allegation. That unfortunately happened to companies. What was surprising is that the human resources at organization at Uber ignored it.

There were some people that were talking about these kinds of problems beforehand. Some of this other stuff, just the particulars of it, you know, yeah, I mean, it has been surprising. The fact that Anthony Levin-Dousie, the founder of an automated trucking company called Auto, left his previous job at Alphabet and downloaded tens of thousands of files and is now being accused of intellectual property theft. That was a surprising one.

The allegation that the head of the business in India obtained improperly and looked at the police report of a woman that horrifically was raped by an Uber driver in India. And then might have shared that with other executives at Uber. That was surprising. So, yeah, I mean, it's whiplash almost.

If you follow this company, if you try to tell its story, the extent to which, you know, the scandal hasn't engulfed them, has been quite shocking. So the people that you talk to outside of Uber, when they see all of this playing out, do you get a sense that what is happening here in plain view of the business world, and I might add the VC investing world, do you think we're moving towards a world where this is where less likely to see companies in Silicon Valley who are, for lack of a better term, tolerating CEOs or founders who are brilliant jerks, or is there always going to be a high level of tolerance if you're brilliant enough or the idea that you're building your business around is good enough? Yeah, I think, well, first of all, I think that there's enough of a belief in this community that Uber is unique, that Travis is a unique case, that they went to places that nobody else would have gone, you know, that it doesn't, you know, there's a belief from maybe a defense mechanism in the valley that Uber's situation really doesn't say anything about the larger business community. I think it does, I mean, I don't believe that, but you know, when you have that belief, that defense mechanism, you know, it's just kind of clear as the pathway for other founders, the other CEOs to do the same thing.

And look, I mean, to a certain extent, some of this behavior is pattern matching from the companies and the founder executives who came before, you know, Steve Jobs, a brilliant jerk, Jeff Bezos, arguably, could be a brilliant jerk. Those companies are tremendous successes, and look, we'll see where Uber ends up, you know, it's still the most highly valued private technology company, probably in history. The last chapter's not yet been written, right? You know, we don't know if they raised more money, if there is an IPO at some point, if they can turn it around, you know, I think it's sort of to say that there's a little bit of, you know, that they're struggling right now, you know, and you know, but if they can get out of this media storm and write the ship, the economics of the business still look fairly good, and you know, not just the ride-sharing component, but some of these other services that they've laid on top of it, like Uber Eats, you know, it's a tremendous, from what I can observe anecdotally and other people I've talked to, you know, some parts of the business are growing quite well.

So when the last chapter is written, we'll see what kind of larger impact it has in Silicon Valley. All right, let's move over to Apple, which recently introduced the HomePod, their smart speaker, for the home that appears to be geared around music, and I'm curious what your reaction was when they unveiled this at the World Wide Developer Conference, the whole presentation struck me as Apple wants to own music, and they talked about, well, we had the iPod, what we've done for mobile music we want to do in your home, and then at the end, they just sort of threw in this last slide that was like, oh, and by the way, this device will also do what the Amazon Echo and the Google Home Assistant will do as well. So what was your reaction, and what is the reaction in general of people that you've spoken with? Yeah, you know, it was curiously positioned, right, then it probably said something about Apple.

I mean, clearly they've thought long and hard about how to position this thing. You know, they've gone back to kind of the basics of the company, right? You know, Apple offers a premium experience with PCs and with smartphones, and so the HomePod is $349. The treat with Amazon Alexa device is $50 or $60, so that's dramatic.

It's a music device. So again, Apple going back to the basics, they've really been a dominant player in the music business for now over 10 years. And also maybe finding a portion of the market that might not be very well served. Maybe it was an acknowledgement to some extent that Amazon had gotten into the living room first with Alexa, and Apple had to be strategic about establishing a stronghold.

So perhaps it's smart. I thought it was expensive. I thought December 2017, you know, misses half the holiday season, so it feels a little late. You know, Google and Amazon are out there already.

I thought the design, you know, looks a little bit like an Ottoman, something you might throw your feet on top of. None of these devices are particularly attractive. You know, but I actually didn't get to hear it, but I heard it sounds great. You know, and I use my echo right now for music.

And so maybe, again, maybe they have found a little opening here. And this is the beginning. It's the first inning of the new product category, so we'll see where they take it. But yeah, you know, Apple was first with Siri in terms of these voice-activated assistants.

They added it to the iPhone now several years ago, and yet somehow they sort of missed this key turn in this market. So you mentioned the echo. I know you're a big fan of it. And certainly from conversations you and I have had your family as a big fan of the echo.

Do you think there's room for both? Do you envision Apple's thinking to themselves, well, you know what, we're not trying to be the Google Home Assistant just yet. So for now, we're content to try and say, oh, no, have your Google Home Assistant, have your Amazon Echo. But we also think you should have this for your music.

Yeah, I mean, I think this is a new product category, and they're going to be room for different players. So with emphasizing music is maybe even less going after Google Home and the Amazon Echo. And also taking on Sonos, another high-end speakers, positioning up as a replacement for that. So it's a new market, and there's going to be room for different strategies.

And while I, it's true I will confess to being a little bit of an echo fan, I have to say, we enjoy it a little bit of the novelty. And I'm not sure how much utility we get from it. Amazon plays out the idea that this is a commerce engine, right? And we can order things.

Well, sometimes we do, but it's not that hard to go to your computer or your phone and type in something and buy it on Amazon. So who knows? Maybe it is a music application that is really offered a new kind of utility in the living room or the dining room. And perhaps Apple figured something out.

It seems expensive to me to begin with, but that's the start, and they drive the price of these things down over time. I knew that housing was expensive in Silicon Valley, but that was really driven home to me this week when I saw a Wall Street Journal story about Google buying hundreds of modular apartment units to use as short-term housing for employees. That's how expensive it is to live in Silicon Valley. Facebook is reportedly planning to design 1,500 units in Menlo Park and a percentage of those are going to be classified as affordable housing.

These seem like band-aid measures. I don't see how this is sustainable for more than a short amount of time. Yeah, we're going to end up at Japanese-style capsule hotels pretty soon. Yeah, I mean, the San Francisco Bay Area has a housing crisis.

There's really very little high-density housing. The real estate prices are the highest in the country. And Google and Apple and Facebook and even Amazon and with its presence here and all the startups are, these are still good times and they're expanding. And so, yeah, I agree.

It's a band-aid, but they're applying the kind of tech mentality that drives the price down to adapt to the conditions that they find themselves in. So, we'll see, just because they're modular and maybe a little less expensive doesn't mean they won't be nice and they're probably temporary accommodations. That's that. I'm not going to volunteer to move into what I've come soon.

Last question and then I'll let you go. Your first book, The Everything Store is about Amazon. You've said that in some ways every entrepreneur in Silicon Valley styles themselves after Jeff Bezos. Is there a company today that reminds you of Amazon in its early stages 20 years ago?

A bunch of companies that spring to mind. But I'll go with maybe Airbnb in one respect. Airbnb is one of the most successful marketplace businesses in Silicon Valley history really. But more recently they've decided that they can't just be in a accommodations marketplace.

They want to be more. And they've moved into doing things like offering experiences, different things for people to do on their trips. And Brian Chucky, the CEO, has drawn the Amazon comparisons and tried to compare it to those times where Amazon either moved into different categories or different lines of business altogether. So I think it's another example of a small company modeling itself after Amazon taking making a pretty bold bet and investing for the long term.

You can read more from Brad Stone at Bloomberg. You can follow him on Twitter. If you want to know what's going on in Silicon Valley, you should be following him on Twitter. Brad Stone, thank you so much for being here.

Thanks, Chris. Coming up next we'll give you an inside look at the stocks on our radar. This is Motley Fool Money. As always people on the program may have interest in the stocks and they talk about it in the Motley Fool may have formal recommendations for or against.

So don't buy ourselves stock based solely on what you're here. Welcome back to Motley Fool Money, Chris Hill here in the studio. Once again, Jason Moser, Matt Argersinger and Ron Gross, forget the stocks on our radar. Got a couple of people hanging out with our man Steve Roto behind the class.

John Daggle, local to the Alligator area and Ben Carter, also from the DC area. Ben is the host of an awesome financial podcast called Manage Your Damn Money. Nice. And I don't know about you guys, but I mean, saintly jealous that he got a great name for his podcast.

I think Manage Your Damn Money is better than the name we've gotten. I think it's not even a thing about that. It's a no brainer. So you know what, when you don't listen to Motley Fool Money, check out Ben's podcast.

All right, let's get to the stocks on our radar this week and we'll start with our man Ron Gross. What do you got? You got a question from David Minerals, CMP, leading producer of salt for highway deicing, also a growing agricultural fertilizer business. They have a unique asset, which is the largest salt mine in the world.

In Canada, they also have the largest dedicated rock salt mine in the UK, 4.2% dividend yield has increased that yield every year since going public since 2003. Salty? Steve Roto, question about companies minerals. What's your favorite mineral, Rock?

What's rock? Well, potash, obviously. Jason Moser, what are you looking at? Yeah, check out United Natural Food Sticker as a UNFI.

They are a national distributor of natural and organic groceries. We've talked about all these companies that are sort of getting sold off thanks to this Amazon Whole Foods deal in United Natural Foods. It's no exception, but they have a very diverse supplier base. For example, Haynes Silesh will account for 5% of their total purchases in 2016.

The interesting thing is that Whole Foods market accounted for about 35% of their net sales in 2016. So I'm trying to determine how this deal is actually going to affect them because I could see it being a catalyst in the long one, helping them out if Amazon is going to grow out that consumer base with this Whole Foods acquisition. So I'm going to dig a little bit more into this one. Steve, question about United Natural Foods?

Do you personally pay a premium for organics at this store? I personally do not. No, I don't really care if it's organic. I'm just going to cook it and if it's good, I'm fine with that.

What about you Steve? Do you pay up for organics? Not usually, but sometimes. Not Arkansas.

What are you looking at this? I'm going negative this week. The next industry to be disrupted in my opinion is going to be the auto parts retailers. And so I'm looking at advanced auto parts, ticker AAP and O'Reilly automotive ticker O-R-L-Y.

If you think about it, you got mobility disruption, which is going to take a lot of private vehicles off the road. And then you've got the rise of electric vehicles which have vastly lower moving parts in each vehicle. And I think that's bad news for the do-it-yourself auto parts guy or manufacturer or mechanic, sorry. Or Dow.

And so that business looks really suspecting me right now. And these two stocks are trading pretty high valuations. Steve, question about either O'Reilly or advanced auto parts? It's a broader question.

Gas powered cars go away altogether. We move to electric cars. How long is it going to take for that transition to happen? Faster in other countries, but probably by 20 years to the US.

They're off the road. Compass minerals, United Natural Foods auto parts. You got a stock you want to add to your watch list, Steve? These all sound a little weird, but I might go with Ron's federal company.

It was the potash that one year over, wasn't it? It was the potash. Alright, Ron goes. Jason, Mozart, and Matt, August, and your guys.

Thanks so much for being here. Thanks, Riz. And I'm Rob Motley for Money. Our engineer is Steve Brido.

Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.