AWS Goes AWOL: Are we Too Dependent on the Cloud?

0:05WTH at AWS, we need to talk about computing in the cloud, fools. You're listening to Motley Fool Money.

0:20Welcome, fools. I'm your host, Tim Byers. With me are longtime fools, David Byer, Tom King. It's great to have you both here. So guys, just a few hours ago, recording Monday morning, Amazon Web Services suffered a pretty catastrophic outage in one of the eastern U.S. regions. And businesses that offer essential digital services have taken a hit here. This isn't the first time we've seen AWS go down. And it's not going to be the last, especially with the scale of the AI buildout of which AWS plays a pretty big part. So quick reactions here first. And Tom, I'll start with you. Are you at all surprised by this news?

1:05Why or why not? I'm not. You know, this is a complicated system and in a complicated system, little things can compound. So it's almost inevitable that something like this would happen. It's very similar to what happened with CrowdStrike last year. Remember when CrowdStrike caused that big outage? You know, it recovered from that. It got on. It was, it is a cost of, it is how things are these days. Yeah. I mean, that's a fair point. I mean, these, these things are made up of like those, you know, we've seen these commercials before Dave, where you have the dominoes all lined up and you hit one of those dominoes and they all start falling.

1:43Like what's your reaction to this? To be frank, I'm surprised it's not happening more. Really, really think about this. Like this was an outage, you know, something bad happened. It was an outage for a few hours. It's slowly got everything's getting back online. Everything's back up and running. This is a massive system. The fact that it has the reliability that it does is an engineering marvel. So yeah, I get it. It's disappointing. Thank goodness it happened at 3 a.m. Eastern time. I don't know exactly how much traffic is flowing through there. I remember in my backyard in Northern Virginia, 35 % of the world's internet traffic used to flow through my backyard at peak times.

2:30So I'm not surprised, but quite frankly, I'm impressed how they, how quickly they recovered it. And I'm not, I'm surprised it doesn't happen more. Maybe it does. And we just don't feel it. I don't know if there is a Jeff Bezos shakes head approvingly meme, but I think you'd be getting that right now, Dave. I mean, it's, it is interesting. So let's talk about this AWS going dark again. This has happened many times. Here's what we know. AWS, like you said, Dave, went offline around 3 a.m. Eastern time for what appears to have been a couple of hours. The rolling effects could continue. And we are recording this on a platform called Riverside.

3:10And as soon as I logged in, we got a nice little notice from Riverside saying, hey, AWS went down and services may be affected. I'm paraphrasing there. So lots of companies have been affected here. At issue were some errors in the company's DynamoDB database. So let me just briefly explain what this is. Amazon's primary database is DynamoDB. It's a transactional database. And it's most famous for being the homegrown Amazon database that they use really to process transactions. So, this is meant to be a highly resilient, highly replicated database throughout the Amazon and the Amazon Web Services ecosystem.

3:57This is what they've built their business on. And what it was subject to, we don't know if it was an attack or just an error, it was subject to an outage in the DNS system, the domain name server system. When that happens, when the DNS goes out, and you probably have heard of this, like a distributed denial of service attack. That's meant to attack the DNS. And if you do that, if you take down the DNS, it's like you having your phone and suddenly all your contacts, like you can't press to call anybody because your contacts are frozen. Like the phone book in your phone just no longer works. You can't call anybody.

4:43When the DNS is down, that's what happens. The DNS determines when you say google.com, there's an underlying IP address that's a series of numbers and it translates google.com to those numbers. And when that's down, you can't do that, which means the internet just stops functioning. So this appears to be what happened here. I'm kind of curious because the affected companies include Coinbase, Robinhood, Roblox, Punch of Others. Two questions from me. I'll start with you this time, Dave. You said effectively, you're surprised this isn't happening more, but I'd like to gauge your concerns. Are you at all concerned with how much influence AWS has over modern compute?

5:39And are we creating any kind of single point of failure here? So the answer is yes, there is concern. I don't know how much I should be concerned though, because this is the direction that everything is going. Many years ago, I was talking with some folks and I'm like, when the internet came up, we are always going to be going more digital, not more analog. Okay. And you know, AWS, Azure, Google computing platform, you know, GCP, right. They all sprung up and they all provide this, these types of services. So I don't think we're going to a single point of failure, right? There's not going to be one company that always does everything for everyone.

6:26But we don't have nearly as many companies doing this as when the internet was first being created. There aren't as many IP companies, things like that. So, I don't know. Like I said, it's one of those things where it's the cost of doing business. If you're not going to own your own hardware and manage your own hardware, you're essentially paying for the risk of someone else having an issue and your business being affected. Yeah. I mean, Tom, I'm curious how you think about this because this is an issue, right? Digital businesses need to have that digital infrastructure to do business and that infrastructure is now largely outsourced.

7:13So how do you think about this? It is one of the downsides that we must live with. We gained many advantages from the cloud providers, and this is one of the downsides. If one of them breaks, they have a large impact on a lot of people. I'm sure you guys remember, you've been around long enough to remember the days when you would have cold rooms in your office building that were stacked with computing equipment to deliver your website and the things that you sold over the internet, we don't have those anymore. We outsource that to Google or Microsoft or Amazon. And we don't have to worry about keeping it working or keeping the equipment cold.

8:03Yes, it's one of the disadvantages of our current system, but we've gained many other advantages, I think, is the way to think about it. I love that you called server rooms cold rooms. like as i i've i've been in many i i grew up when i lived in africa you would go into the server room to cool down because of one of the cold one of the only cold rooms in the in the office building nice okay i love that you called it that because like you go into a server room and yes it's intending to be cold get too close to a server you stop being cold real fast like they they run They run really hot, but I love that you called them that.

8:47Let's talk about risk here, though, Tom, because I think you're both right. Let's call this the cost of doing business, but how would you assess risk? Because AI is here. The AI buildout is going to continue, and it's going to largely depend on these cloud infrastructure companies quite a lot of them. They are going to be the ones that are going to do the most, let's call it GPU hoarding. They're going to do the most GPU hoarding. They are going to provide the infrastructure. And when the digital assistance you need is housed someplace else that we can't see and is controlled by somebody else, how should we think about companies like Coinbase, Robinhood, and Roblox?

9:35do they need to be valued with a higher risk premium because of their dependence on something like AWS? Tom, I'll go to you first on this. I don't think so. I think that companies will take the option that costs them the least, both in terms of money and time and headaches and so on. So if you really care about resiliency, of always having your services available over the internet, you would invest the money and the time and everything else to have your own servers. The reason they choose to go with one of the cloud providers is because they gain many different advantages. It's probably cheaper for them.

10:19It's less work for them. It expands to fool the needs. There is no limit to how much demand their service can supply so that there's no limit on the hardware. Amazon handles that problem or Google or Microsoft. So I think companies are always going to make a decision that is best for them in their own unique circumstances. So, no, I don't think that any kind of additional risk needs to be considered here. Dave, what do you think? I agree with what Tom was saying. I don't think there's any additional risk premium that's needed. And part of the reason is there's actually a market that's determining where people will spend their money.

11:10We don't have a single point of failure. This isn't a monopoly.

11:18If these incidences grew in frequency, what would happen? People would switch. There's actually a massive incentive for these companies to make sure that the systems are reliable. Again, it happened early in the morning. There was an immediate response. It actually got back online pretty quickly. if it was that serious, they responded quickly, and I'm sure that they've learned, and we'll see what happens going forward. But I actually think the market is what controls the risk. I realize it would be a pain to switch, but there are options available for substitution. And there are companies that are switching.

12:09Alright, up next, we're going to talk about some fakers and some breakers. It's the faker-breaker game. You're listening to Motley Fool Money. Amazon bietet allen frischgebackenen Eltern in den Logistikzentren extra Familienboni. So wie Anton, der gerade seine neugeborene Tochter im Arm hält. Ihr Glucksen ist für ihn das schönste Geräusch der Welt. That means, maybe that sound is the best of all.

13:05period of time. They look good enough. They look enough like breakers to small f-fool some investors. So, Tom, coming to you first here, faker or breaker Coinbase? I would probably say faker because, you know, it's heavily dependent on the level of speculative activity in the markets, which goes up and goes down. And when it goes down, it really, really hurts the people that are involved. So, I would say Faker. Okay. I mean, this is an interesting one because the crypto markets are getting more and more real, more and more interesting. There is more real dollars flowing in particular into Bitcoin.

13:49However, this is probably one of the most rampant areas for fraud. And with that, I'm going to give you number two here, Dave, because it's a related company, Robinhood, which has made a lot of money on orchestrating crypto. So, faker or breaker, Robinhood? So, Robinhood is not for me as an investor. Okay. All right. I like that you're qualifying already, but keep going. Well, we work for The Motley Fool. We tend to think about things differently, right? Robinhood is a type of competitor. I will say that this is still a breaker. The reason is, is because you do have founders who had their vision.

14:32They knew what they wanted to do and they were executing on it. The other thing is they're serving a big market and one that's growing. And the other thing that they're in order to serve those markets, they continue to bring new products and services. So they have some sort of ability that they seem to be turning into an advantage to know, hey, this is what our consumers want. More people are coming, more people are staying engaged. And yes, whether it was free trades or now it's crypto or now it's prediction markets, again, not for me, but that's OK. There's a lot of companies out there that don't serve me.

15:14But I see this company as having a lot of the traits of a rule breaker. Okay. I'm going to bring up the third one, and I'm going to ask you both for a super quick take on this, because I think it's a company, some of it, maybe two of us, I know I'm going to be using this company later this week in order to go to Fool Fest in D.C., and that is Lyft. So, faker or breaker, Tom, Lyft, the not Uber, Uber lookalike. Yeah. So, Lyft is pretty much concentrated in the United States. Uber took the global expansion option. I think that Uber's size gives it certain advantages over Lyft. I know from being a regular, or at least until a few years ago, a regular user of both, that Uber was always cheaper and always quicker to get to you.

16:05They also probably lose more money than Lyft or were back then at the time. I mean, I think it's hard to say, but I mean, there has to be a Lyft because Uber can't have this in market entirely to itself. then we'd really be in trouble. This is what you're saying. It passes the cola test. It is the Pepsi to Uber. It does. It is, yes. Does that make it a breaker for you, or is it still not enough? It's still not enough, but I think it's an important company. It has to exist to compete with Uber. All right. Last word, Dave. Faker or breaker? Faker is hard, but I have to push in that direction. It's interesting, if I remember my history correctly, Lyft started before Uber.

16:51I don't know. But I think that's correct. I think it was called Zimcar, and then it morphed, and then Lyft was created out of Zimcar. But it got usurped by Uber. Uber just went on a, we're going to gobble up the world, we're going to take this market share strategy. And Uber has done a good job of rebounding, but I don't see it as something that can really take serious market share going forward. It'll still grow. It still provides an excellent service. It's the one I go to. I don't go to Uber. But no, I don't think I can call it a rule breaker. But Faker is tough. Faker is harsh, in my opinion.

17:35It's just a game, Dave. You've got to make a call. I'm going with Faker. No, I'm going with Faker. But I'm giving you the little caveat. All right. Fair enough. Up next, we preview tomorrow. There's some interesting stuff happening. Speaking of prediction markets, there's your hint. You're listening to Motley Fool Money. The Civil War and Reconstruction was a pivotal era in American history. When a war was fought to save the Union and to free the slaves. And when the work to rebuild the nation after that war was over turned into a struggle to guarantee liberty and justice for all Americans. I'm Tracy.

18:12And I'm Rich. And we want to invite you to join us as we take an in-depth look at this pivotal era in American history. Look for the Civil War and Reconstruction wherever you find your podcasts. All right, back with a preview for tomorrow. You will have Emily Flipp and Sanmiteo and Jason Hall talking about prediction markets. What are they? How are they approved with regulators? How much money is flowing through them now? And how can you invest in them? So if prediction markets are a legitimate market opportunity, are they based on skill? Is it just another form of gambling? This is everything you're going to hear from Emily Sandmead and Jason tomorrow.

18:51But for today, I think we've concluded here, guys, that AWS, massive, down today for a little period of time, probably going to be down again in the future. doesn't mean that this is one that we should get too overhyped about, but a little bit annoying. But that's it for today. Thanks to David Meyer and Tom King for joining me today, guys. As always, people on the program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers.

19:36Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. That's it for Motley Fool Money today. Again, please be sure you tune in for Emily Sandmeat and Jason Tomorrow, for Dave Meyer and Tom King, for our engineer, Dan Boyd, and our producer, Anna Chuck Ballew. I'm Tim Byers. You've been listening to Motley Fool Money. Thanks. See you soon, fools. Fool on.