This is a good starting book to get an insight on how Amazon was built by its founding team.
And just when it had established itself as the Internet’s top retailer and a leading platform on which other sellers could hawk their wares, Amazon redefined itself yet again as a versatile technology firm that sold the cloud computing infrastructure known as Amazon Web Services
Patient investors for profits
it actually lost money in 2012. But Wall Street hardly seems to care. With his consistent proclamations that he is building his company for the long term, Jeff Bezos has earned so much faith from his shareholders that investors are willing to patiently wait for the day when he decides to slow his expansion and cultivate healthy profits.
Bezos is a micromanager with a limitless spring of new ideas, and he reacts harshly to efforts that don’t meet his rigorous standards.
Conflicting wants from customers
But at a certain point, these companies get so big that a contradiction in the public’s collective psyche reveals itself. We want things cheap, but we don’t really want anyone undercutting the mom-and-pop store down the street or the locally owned bookstore, whose business has been under assault for decades,
Bezos focus and away from media
He rarely speaks at conferences and gives media interviews infrequently. Even those who admire him and closely follow the Amazon story are apt to mispronounce his surname
No slides for presentations
Amazon’s internal customs are deeply idiosyncratic. PowerPoint decks or slide presentations are never used in meetings. Instead, employees are required to write six-page narratives laying out their points in prose, because Bezos believes doing so fosters critical thinking. For each new product, they craft their documents in the style of a press release. The goal is to frame a proposed initiative in the way a customer might hear about it for the first time.
He devotes his full attention to the conversation, and, unlike many other CEOs, he never gives you the sense that he is hurried or distracted — but he is highly circumspect about deviating from well-established, very abstract talking points.
3 focus: customer, long term and innovation
“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.
Acknowledge that it is complex and not that simple
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. Taleb argued that the limitations of the human brain resulted in our species’ tendency to squeeze unrelated facts and events into cause-and-effect equations and then convert them into easily understandable narratives. These stories, Taleb wrote, shield humanity from the true randomness of the world, the chaos of human experience, and, to some extent, the unnerving element of luck that plays into all successes and failures.
Avoid Narrative Fallacy
In Taleb’s book—which, incidentally, all Amazon senior executives had to read—the author stated that the way to avoid the narrative fallacy was to favor experimentation and clinical knowledge over storytelling and memory. Perhaps a more practical solution, at least for the aspiring author, is to acknowledge its potential influence and then plunge ahead anyway.
Hiring from all background
By design, D. E. Shaw would be a different kind of Wall Street firm. Shaw recruited not financiers but scientists and mathematicians—big brains with unusual backgrounds, lofty academic credentials, and more than a touch of social cluelessness. Bob Gelfond, who joined DESCO after the firm moved to a loft on Park Avenue South, says that “David wanted to see the power of technology and computers applied to finance in a scientific way” and that he “looked up to Goldman Sachs and wanted to build an iconic Wall Street firm.”
Studying other businessmen
Between 1989 and 1990 he spent several months working in his spare time on a startup with a young Merrill Lynch employee named Halsey Minor, who would later go on to start the online news network CNET. Their fledgling venture, aimed at sending a customized newsletter to people over their fax machines, collapsed when Merrill Lynch withdrew the promised funding. But Bezos nevertheless made an impression. Minor remembers that Bezos had closely studied several wealthy businessmen and that he particularly admired a man named Frank Meeks, a Virginia entrepreneur who had made a fortune owning Domino’s Pizza franchises. Bezos also revered pioneering computer scientist Alan Kay and often quoted his observation that “point of view is worth 80 IQ points”—a reminder that looking at things in new ways can enhance one’s understanding.
At DESCO, Bezos displayed many of the idiosyncratic qualities his employees would later observe at Amazon. He was disciplined and precise, constantly recording ideas in a notebook he carried with him, as if they might float out of his mind if he didn’t jot them down. He quickly abandoned old notions and embraced new ones when better options presented themselves.
Bezos thought analytically about everything, including social situations.
Members of the firm delighted in asking these recruits random questions, such as “How many fax machines are in the United States?” The intent was to see how candidates tried to solve difficult problems. After the interviews, everyone who had participated in the hiring process gathered and expressed one of four opinions about each individual: strong no hire; inclined not to hire; inclined to hire; or strong hire. One holdout could sink an applicant.
Working in a company which was using the latest tools
D. E. Shaw was ideally situated to take advantage of the Internet. Most Shaw employees had, instead of proprietary trading terminals, Sun workstations with Internet access, and they utilized early Internet tools like Gopher, Usenet, e-mail, and Mosaic, one of the first Web browsers. To write documents, they used an academic formatting tool called LaTeX, though Bezos refused to touch the program, claiming it was unnecessarily complicated. D. E. Shaw was also among the very first Wall Street firms to register its URL. Internet records show that Deshaw.com was claimed in 1992.
Bezos interpolated from this that Web activity overall had gone up that year by a factor of roughly 2,300—a 230,000 percent increase. “Things just don’t grow that fast,” Bezos later said. “It’s highly unusual, and that started me thinking, What kind of business plan might make sense in the context of that growth?”
Compulsion for business with growth
(Bezos also liked to say in speeches during Amazon’s early years that it was the Web’s “2,300 percent” annual growth rate that jolted him out of complacency. Which makes for an interesting historical footnote: Amazon began with a math error.) Bezos concluded that a true everything store would be impractical—at least at the beginning. He made a list of twenty possible product categories, including computer software, office supplies, apparel, and music. The category that eventually jumped out at him as the best option was books.
Making the jump
Bezos knew it would never really be his company if he pursued the venture inside D. E. Shaw. Indeed, the firm initially owned all of Juno and FarSight, and Shaw acted as chairman of both. If Bezos wanted to be a true owner and entrepreneur, with significant equity in his creation and the potential to achieve the same kind of financial rewards that businessmen like pizza magnate Frank Meeks did, he had to leave his lucrative and comfortable home on Wall Street.
Not having a regret in the future
That kind of thing just isn’t something you worry about when you’re eighty years old. At the same time, I knew that I might sincerely regret not having participated in this thing called the Internet that I thought was going to be a revolutionizing event. When I thought about it that way… it was incredibly easy to make the decision.”
Leaving a cushy job
Then they drove northwest, Bezos sitting in the passenger seat, typing revenue projections into an Excel spreadsheet—numbers that would later prove to be radically inaccurate. They tried to check into a Motel 6 in Shamrock, Texas, but it was booked, so they settled for a road motel called the Rambler. 12 When MacKenzie saw the room, she declined to take off her shoes that night. A day later, they stopped at the Grand Canyon and watched the sunrise. He was thirty, she was twenty-four, and together they were writing an entrepreneurial origin story that would be imprinted on the collective imagination of millions of Internet users and hopeful startup founders.
They were now calling it Amazon.com. The site was primitive, mostly text and somewhat unimpressive.
It was all done on a threadbare budget. At first Bezos backed the company himself with $10,000 in cash, and over the next sixteen months, he would finance the startup with an additional $84,000 in interest-free loans, according to public documents.
Releasing the beta site
In the spring of 1995, Bezos and Kaphan sent links to the beta website to a few dozen friends, family members, and former colleagues. The site was bare, crammed with text and tuned to the rudimentary browsers and slowpoke Internet connections of the time. “One million titles, consistently low prices,” that first home page announced in blue underlined text.
Kaphan invited a former coworker, John Wainwright, to try the service, and Wainwright is credited with making the very first purchase: Fluid Concepts and Creative Analogies, a science book by Douglas Hofstadter. His Amazon account history records the date of that inaugural order as April 3, 1995.
Ring the bell with a purchase!
Each order during those early months brought a thrill to Amazon’s employees. When someone made a purchase, a bell would ring on Amazon’s computers, and everyone in the office would gather around to see if anyone knew the customer.
Dog fooding initially
Bezos decided to watch reviews closely for offensive material rather than read everything before it was published. The early employees and their friends wrote many of the initial reviews themselves. Kaphan himself took a book off the shelf that was meant for a customer, a Chinese memoir called Bitter Winds: A Memoir of My Years in China’s Gulag. He read it cover to cover and wrote one of the first reviews.
Getting a negative feedback form a customer and taking in the feedback
Bezos later recalled getting an angry letter from an executive at a book publisher implying that Bezos didn’t understand that his business was to sell books, not trash them. “We saw it very differently,” Bezos said. “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.”
Physical vs online..
Tom Alberg, a former executive at McCaw Cellular, met Bezos and was dubious because he loved browsing in bookstores. Then a few days later he failed to find a business book for his son at a local shop, and he changed his mind and decided to invest.
Hiring smart people
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.
He was unusually confident, more stubborn than they had originally thought, and he strangely and presumptuously assumed that they would all work tirelessly and perform constant heroics. He seemed to keep his ambitions and plans very close to the vest, not revealing much even to Kaphan.
Analytics and stats
Bezos was also proving himself to be something of a spoilsport. That year the engineers rigged a database command, rwerich, to track the number of daily purchases as well as orders throughout the lifetime of the company. They obsessively watched those numbers grow—it was one of their pleasures amid the typically frenetic days. Bezos eventually told them to stop doing it, in part because it was putting too much strain on the servers.
Not celebrating minor wins
its first five-thousand-dollar-order day and Lovejoy wanted to throw a party, Bezos rejected the idea. “There are a lot of milestones coming and that’s not the way I want to run things,” he said.
Working long, hard and smart
In the old Bellevue house, Bezos had said to Kaphan and Davis, “You can work long, hard, and smart, but at Amazon.com you can pick only two out of three.” Now the young CEO liked to recite, “You can work long, you can work hard, you can work smart, but at Amazon you can’t choose two out of three.”
Energy and enthusiasm
“I walked into the door and this guy with a boisterous laugh who was just exuding energy comes bounding down the steps,” says Doerr, who had backed such winners as Netscape and Intuit. “In that moment, I wanted to be in business with Jeff.”
Better financial terms
Unlike brick-and-mortar retailers, whose inventories were spread out across hundreds or thousands of stores around the country, Amazon had one website and, at that time, a single warehouse and inventory. Amazon’s ratio of fixed costs to revenue was considerably more favorable than that of its offline competitors.
But Bezos, characteristically secretive, divulged only the legal minimum and withheld some data, like what it cost Amazon to attract a new user and how much loyal customers typically spent on the site. He wanted capital from an IPO but didn’t want to give his rivals a road map to use to follow in his footsteps.
Using Internet to enhance features
This was a key part of Amazon’s early strategy: maximizing the Internet’s ability to provide a superior selection of products as compared to those available at traditional retail stores.
Amazon brand expansion
Bezos now felt expansion into new categories was urgent. In customers’ minds, the Amazon brand meant books only. He wanted it to be more malleable, like Richard Branson’s Virgin, which stood for everything from music to airlines to liquor.
Under valued company?
During that time, no one placed bigger, bolder bets on the Internet than Jeff Bezos. Bezos believed more than anyone that the Web would change the landscape for companies and customers, so he sprinted ahead without the least hesitation. “I think our company is undervalued” became another oft-repeated Jeffism. “The world just doesn’t understand what Amazon is going to be.”
Hiring from a complementary industry
As the company grew, Bezos offered another sign that his ambitions were larger than anyone had suspected. He started hiring more Walmart executives. In early 1998, Amazon pursued one of Rick Dalzell’s former colleagues, a retired Walmart vice president of distribution named Jimmy Wright.
Wright asked Bezos what products they would be shipping. “He said, ‘I don’t know. Just design something that will handle anything,’ ” Wright recalls. “I’m going, You’re kidding me, right? And he said, ‘No, that is the mission.’ I had to have a solution to handle everything but an aircraft carrier.” Wright had never experienced a challenge of that magnitude.
Filling a patent for 1-Click ?!?!
Critics charged that the idea behind 1-Click was rudimentary and that its approval by the U.S. patent office was a symptom of lazy bureaucracy and a broken patent process. Bezos didn’t altogether disagree—intellectually, he was an advocate for patent reform—but he was determined to exploit the status quo for any possible advantage.
Not taking failure personally
Bezos didn’t take the defeat personally. He later cast the mistake as the first step in a series of important experiments to bring third-party sellers onto Amazon.
‘This is the most critical project in Amazon’s history’ is pretty close to a direct quote.” Ultimately, the project faded amid other, more pressing priorities. It is more evident in the way Amazon operates now that Bezos became absorbed with the challenge of delivering products immediately after customers placed their orders.
Bezos and very early Google
On a Saturday morning, Shriram picked up Bezos and his wife at a local hotel, the Inn at Saratoga, and drove them to his home. Page and Brin met them there for breakfast and demonstrated their modest search engine. Years later, Bezos told journalist Steven Levy that he was impressed by the Google guys’ “healthy stubbornness” as they explained why they would never put advertisements on their home page.
Doesn’t matter if you didn’t know, you willing to learn
In other words, Miller knew nothing about toy retailing, but in a pattern that would recur over and over, Bezos didn’t care. He was looking for versatile managers—he called them “athletes”—who could move fast and get big things done.
With door-desks and minimal subsidies for employee parking, he was constantly reinforcing the value of frugality. A coffee stand on the first floor of the Pac Med building handed out loyalty cards so a customer could get a free drink after his or her tenth purchase. Bezos, by now a multimillionaire, often made a deliberate show of getting his card punched or handing his free-drink credit to a colleague waiting in line next to him.
quarterly earnings reports came out, analysts were usually so upbeat and congratulatory that Amazon executives had to prevent themselves from sounding overly arrogant. On the tops of their earnings scripts, they wrote in giant letters Humble, humble, humble. A few times they also added Remember, Meg is listening, a reference to the eBay CEO and a reminder to remain guarded with company information.
An idea generator
“Most companies have priority lists of forty-five good ideas and triage is easy,” Galli says. “At Amazon there were a hundred and fifty good ideas all the time and Jeff was capable of developing a new one every day.”
Leaning out and organising things after a big growth
At the same time, rising investor skepticism and the pleadings of nervous senior executives finally convinced Bezos to shift gears. Instead of Get Big Fast, the company adopted a new operating mantra: Get Our House in Order. The watchwords were discipline, efficiency, and eliminating waste. The company had exploded from 1,500 employees in 1998 to 7,600 at the beginning of 2000, and now, even Bezos agreed, it needed to take a breath. The rollout of new product categories slowed, and Amazon shifted its infrastructure to technology based on the free operating system Linux. It also began a concerted effort to improve efficiency in its far-flung distribution centers. “The company got creative because it had to,” says Warren Jenson.
“The most anxiety-inducing thing about it was that the risk was a function of the perception and not the reality,” says Russ Grandinetti, Amazon’s treasurer at the time. Which is why Amazon’s damage-control response was unusually
To Bezos, Suria represented a strain of illogical thinking that had infected the broader market: the notion that the Internet revolution and all of the brash reinvention that accompanied it would just go away. According to colleagues from the time, Bezos frequently invoked Suria’s analyses in meetings. An executive in the finance group used Suria’s name to coin a term for a significant mathematical error of a million dollars or more; Bezos loved it and started using it himself. The word was milliravi.
Optimism despite stock price!
In the span of three weeks in June, it dropped from $57 to $33, shedding almost half its value. Employees started to get nervous. Bezos scrawled I am not my stock price on the whiteboard in his office and instructed everyone to ignore the mounting pessimism. “You don’t feel thirty percent smarter when the stock goes up by thirty percent, so when the stock goes down you shouldn’t feel thirty percent dumber,” he said at an all-hands meeting.
Perfection in feedback and customer service
Bezos didn’t care about that simple calculus. He hated when customers called at all, seeing it as a defect in the system, and he believed that customers should be able to solve their problems themselves with the aid of self-help tools.
Selling it cheaper… figure out the core of the business
“There are two kinds of retailers: there are those folks who work to figure how to charge more, and there are companies that work to figure how to charge less, and we are going to be the second, full-stop,” he said in that month’s quarterly conference call with analysts, coining a new Jeffism to be repeated over and over ad nauseam for years.
Why lower prices?
“You’ve got to decide what you’re great at,” he told the Amazon executives. Drawing on Collins’s concept of a flywheel, or self-reinforcing loop, Bezos and his lieutenants sketched their own virtuous cycle, which they believed powered their business. It went something like this: Lower prices led to more customer visits. More customers increased the volume of sales and attracted more commission-paying third-party sellers to the site.
Jeff, the marketing manager?
“There can be only one head of marketing at Amazon, and his name is Jeff,” says Diane Lye, a British senior manager who led Amazon’s data-mining department and helped run the advertising tests. Bezos felt that word of mouth could deliver customers to Amazon. He wanted to funnel the saved marketing dollars into improving the customer experience and accelerating the flywheel.
Shopping cost hurdles
During the 2000 and 2001 holidays, Amazon offered free shipping to customers who placed orders of a hundred dollars or more. The promotion was expensive but clearly boosted sales. Customer surveys showed that shipping costs were one of the biggest hurdles to ordering online.
Learning from another industry!
Then one of his deputies, a finance vice president named Greg Greeley, mentioned how airlines had segmented their customers into two groups—business people and recreational travelers—by reducing ticket prices for those customers who were willing to stay at their destination through a Saturday night. Greeley suggested doing the equivalent at Amazon. They would make the free-shipping offer permanent, but only for customers who were willing to wait a few extra days for their order. Just like the airlines, Amazon would, in effect, divide its customers into two groups: those whose needs were time sensitive, and everyone else.
Over the next year, Amazon executives quit in droves. They left because their stock had been vested or because they no longer believed in the mission or because their comparatively low salaries and the depressed stock price guaranteed that they were not getting wealthy anytime soon. Some were tired and just wanted a change. Others felt Bezos didn’t listen to them and that he wasn’t about to start. Almost all figured that Amazon’s best days were behind it.
Not taking it personally
Bezos never despaired over the mass exodus. One of his gifts, his colleagues said, was being able to drive and motivate his employees without getting overly attached to them personally. But he did usually make time in his calendar for a private meeting with exiting executives.
When computer generated reviews surpassed human editors
An algorithm called Amabot brought about the downfall of editorial. Amabot replaced the personable, handcrafted sections of the site with automatically generated recommendations in a standardized layout. The system handily won a series of tests and demonstrated it could sell as many products as the human editors.
Bezos, an adopted child
Bezos grew up in a tight-knit family, with two deeply involved and caring parents, Jackie and Mike, and two close younger siblings, Christina and Mark. Seemingly, there was nothing unusual about it. Yet for a brief period early in his life, before this ordinary childhood, Bezos lived alone with his mother and grandparents. And before that, he lived with his mother and his biological father, a man named Ted Jorgensen. Bezos himself told Wired magazine that he remembered when Jackie and Mike, who is technically his adoptive father, explained this situation to him when he was ten. He learned Mike wasn’t his biological father around the same time he learned that he needed glasses. “That made me cry,” he said.