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The Everything Store: Jeff Bezos and the Age of Amazon

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The Everything Store: Jeff Bezos and the Age of Amazon

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When you are eighty years old, and in a quiet moment of reflection narrating for only yourself the most personal version of your life story, the telling that will be most compact and meaningful will be the series of choices you have made. In the end, we are our choices. —Jeff Bezos, commencement speech at Princeton University, May 30, 2010

There is so much stuff that has yet to be invented. There’s so much new that’s going to happen. People don’t have any idea yet how impactful the Internet is going to be and that this is still Day 1 in such a big way. Jeff Bezos

“We are genuinely customer-centric, we are genuinely long-term oriented and we genuinely like to invent. Most companies are not those things. They are focused on the competitor, rather than the customer. They want to work on things that will pay dividends in two or three years, and if they don’t work in two or three years they will move on to something else. And they prefer to be close-followers rather than inventors, because it’s safer. So if you want to capture the truth about Amazon, that is why we are different. Very few companies have all of those three elements.”

The narrative fallacy, Bezos explained, was a term coined by Nassim Nicholas Taleb in his 2007 book The Black Swan to describe how humans are biologically inclined to turn complex realities into soothing but oversimplified stories.

Usenet bulletin-board posting, August 21, 1994: Well-capitalized start-up seeks extremely talented C/C++/Unix developers to help pioneer commerce on the Internet. You must have experience designing and building large and complex (yet maintainable) systems, and you should be able to do so in about one-third the time that most competent people think possible. You should have a BS, MS, or PhD in Computer Science or the equivalent. Top-notch communication skills are essential. Familiarity with web servers and HTML would be helpful but is not necessary. Expect talented, motivated, intense, and interesting co-workers. Must be willing to relocate to the Seattle area (we will help cover moving costs). Your compensation will include meaningful equity ownership. Send resume and cover letter to Jeff Bezos.

“It’s easier to invent the future than to predict it.” —Alan Kay

“When I read that letter, I thought, we don’t make money when we sell things. We make money when we help customers make purchase decisions.”

The first week after the official launch, they took 846 worth of books, according to Eric Dillon, one of Amazon’s original investors. The next week they took 7,000 worth of books. So they were behind from the get-go and scrambling to catch up.

Bezos felt that hiring only the best and brightest was key to Amazon’s success. For years he interviewed all potential hires himself and asked them for their SAT scores. “Every time we hire someone, he or she should raise the bar for the next hire, so that the overall talent pool is always improving,” he said, a recurring Jeffism.

No one had any idea how to deal with that kind of growth, so they all made it up as they went along.

Eric Benson took about two weeks to construct a preliminary version that grouped together customers who had similar purchasing histories and then found books that appealed to the people in each group. That feature, called Similarities, immediately yielded a noticeable uptick in sales and allowed Amazon to point customers toward books that they might not otherwise have found.

“When you are small, someone else that is bigger can always come along and take away what you have,” Bezos told him. “We have to level the playing field in terms of purchasing power with the established booksellers.”

Bezos enforced strict frugality in Amazon’s daily operations; he made employees pay for parking and required all executives to fly coach.

“What we are doing here is building a giant rocket ship, and we’re going to light the fuse. Then it’s either going to go to the moon or leave a giant smoking crater in the ground. Either way I want to be here when it happens.”

Could a Wal-Mart-type story still occur in this day and age? My answer is of course it could happen again. Somewhere out there right now there’s someone—probably hundreds of thousands of someones—with good enough ideas to go all the way. It will be done again, over and over, providing that someone wants it badly enough to do what it takes to get there. It’s all a matter of attitude and the capacity to constantly study and question the management of the business.

They agreed on five core values and wrote them down on a whiteboard in a conference room: customer obsession, frugality, bias for action, ownership, and high bar for talent. Later Amazon would add a sixth value, innovation.

The rapid growth once again required the company to initiate the Save Santa operation. Employees said good-bye to their families and headed off on two-week shifts to staff the customer-service phone lines or work in distribution centers across the country.

“The goal was to get Christmas out the door and uphold our brand promise. We believed in it.”

Steady progress toward seemingly impossible goals will win the day. Setbacks are temporary. Naysayers are best ignored.

An interviewer once asked Bezos why he was motivated to accomplish so much, considering that he had already amassed an exceedingly large fortune. “I have realized about myself that I’m very motivated by people counting on me,” he answered. “I like to be counted on.”

Employees remember that when the home and kitchen category was introduced in the fall of 1999, kitchen knives would fly down the conveyor chutes, free of protective packaging. Amazon’s internal logistics software didn’t properly account for new categories, so the computers would ask workers whether a new toy entering the warehouse was a hardcover or a paperback book.

“Communication is a sign of dysfunction. It means people aren’t working together in a close, organic way. We should be trying to figure out a way for teams to communicate less with each other, not more.”

Bezos’s counterintuitive point was that coordination among employees wasted time, and that the people closest to problems were usually in the best position to solve them.

In the seminal high-tech book The Mythical Man-Month, IBM veteran and computer science professor Frederick Brooks argued that adding manpower to complex software projects actually delayed progress. One reason was that the time and money spent on communication increased in proportion to the number of people on a project.

“Autonomous working units are good. Things to manage working units are bad.”

The entire company, he said, would restructure itself around what he called “two-pizza teams.” Employees would be organized into autonomous groups of fewer than ten people—small enough that, when working late, the team members could be fed with two pizza pies. These teams would be independently set loose on Amazon’s biggest problems. They would likely compete with one another for resources and sometimes duplicate their efforts, replicating the Darwinian realities of surviving in nature. Freed from the constraints of intracompany communication, Bezos hoped, these loosely coupled teams could move faster and get features to customers quicker.

Bezos refined the formula even further. Every time a new feature or product was proposed, he decreed that the narrative should take the shape of a mock press release. The goal was to get employees to distill a pitch into its purest essence, to start from something the customer might see—the public announcement—and work backward. Bezos didn’t believe anyone could make a good decision about a feature or a product without knowing precisely how it would be communicated to the world—and what the hallowed customer would make of it.

The pressure during the holidays could get so intense that Wilke instituted a new ritual as a form of therapeutic release: primal screams. When a logistics executive or his team accomplished something significant, Wilke would allow the person or even the entire group to lean back, close their eyes, and yell into the phone at the tops of their lungs. “It was clearly a great release but the first time it almost blew my phone speaker,” Wilke says.

Being an unstore meant, in Bezos’s view, that Amazon was not bound by the traditional rules of retail. It had limitless shelf space and personalized itself for every customer. It allowed negative reviews in addition to positive ones, and it placed used products directly next to new ones so that customers could make informed choices. In Bezos’s eyes, Amazon offered both everyday low prices and great customer service. It was Walmart and Nordstrom’s.

In the engineering department, employees were constantly trying to fix a technical infrastructure that was now an aging, sprawling mess. The company had outgrown the original framework devised by Shel Kaphan in the 1990s, the monolithic code base dubbed Obidos that for years was held together by what Amazon executive Werner Vogels later called “duct tape and WD40 engineering.”4 And when Amazon cloned its clunky code base to run the websites of Target and Borders, those deals were lucrative but they magnified the company’s infrastructure problems. Instead of fighting flames emanating from a single building, engineers often had to deal with a neighborhoodwide inferno. Like a lot of other technology companies at the time, Amazon got an education in the wisdom of moving to a simpler and more flexible technology infrastructure, called service-oriented architecture. In this kind of framework, every feature and service is treated as an independent piece and each can easily be updated or replaced without breaking the whole.

Part of AWS’s immediate attraction to startups was its business model. Bezos viewed Web services as similar to an electric utility that allowed customers to pay for only what they used and to increase or decrease their consumption at any time. “The best analogy that I know is the electric grid,” Bezos said. “You go back in time a hundred years, if you wanted to have electricity, you had to build your own little electric power plant, and a lot of factories did this. As soon as the electric power grid came online, they dumped their electric power generator, and they started buying power off the grid. It just makes more sense. And that’s what is starting to happen with infrastructure computing.”

Bezos believed that high margins justified rivals’ investments in research and development and attracted more competition, while low margins attracted customers and were more defensible.

“Let’s give them credit,” Schmidt says. “The book guys got computer science, they figured out the analytics, and they built something significant.”

“It is far better to cannibalize yourself than have someone else do it,”

The Innovator’s Dilemma, by Harvard professor Clayton Christensen. Christensen wrote that great companies fail not because they want to avoid disruptive change but because they are reluctant to embrace promising new markets that might undermine their traditional businesses and that do not appear to satisfy their short-term growth requirements.

“Your job is to kill your own business,” he told him. “I want you to proceed as if your goal is to put everyone selling physical books out of a job.”

  • y asi nació el kindle

Missionaries have righteous goals and are trying to make the world a better place. Mercenaries are out for money and power and will run over anyone who gets in the way.

Rudeness is not cool. Defeating tiny guys is not cool. Close-following is not cool. Young is cool. Risk taking is cool. Winning is cool. Polite is cool. Defeating bigger, unsympathetic guys is cool. Inventing is cool. Explorers are cool. Conquerors are not cool. Obsessing over competitors is not cool. Empowering others is cool. Capturing all the value only for the company is not cool. Leadership is cool. Conviction is cool. Straightforwardness is cool. Pandering to the crowd is not cool. Hypocrisy is not cool. Authenticity is cool. Thinking big is cool. The unexpected is cool. Missionaries are cool. Mercenaries are not cool.

We try not to spend money on things that don’t matter to customers. Frugality breeds resourcefulness, self-sufficiency and invention. There are no extra points for headcount, budget size or fixed expense.

intimidating. “This is what, for employees, is so absolutely scary and impressive about the executive team. They force you to look at the numbers and answer every single question about why specific things happened,”

Think Big Thinking small is a self-fulfilling prophecy. Leaders create and communicate a bold direction that inspires results. They think differently and look around corners for ways to serve customers.

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