The Big Idea
The rise of Amazon is chronicled from lowly start-up selling books to internet behemoth is written with such insider detail that it seems like the author was in the room for many critical conversations
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.
10/10 – although now a bit dated (published in 2014), this is a comprehensive, behind the scenes look at the rise of Amazon with many insights along the way
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.
Bezos has proved quite indifferent to the opinions of others. He is an avid problem solver, a man who has a chess grand master’s view of the competitive landscape, and he applies the focus of an obsessive-compulsive to pleasing customers and providing services like free shipping. He has vast ambitions—not only for Amazon, but to push the boundaries of science and remake the media. In addition to funding his own rocket company, Blue Origin, Bezos acquired the ailing Washington Post newspaper company in August 2013 for $250 million in a deal that stunned the media industry.
Bezos is an excruciatingly prudent communicator for his own company. He is sphinxlike with details of his plans, keeping thoughts and intentions private, and he’s an enigma in the Seattle business community and in the broader technology industry.
He is engaged and full of twitchy, passionate energy (if you catch him in the hallway, he will not hesitate to inform you that he never takes the office elevator, always the stairs).
“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. 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.
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.
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. He already exhibited the same boyish excitement and conversation-stopping laugh that the world would later come to know.
Jeff Holden, who worked for Bezos first at D. E. Shaw & Co. and later at Amazon, says he was “the most introspective guy I ever met. He was very methodical about everything in his life.”
The firm also combed through the ranks of Fulbright scholars and dean’s-list students at the best colleges and sent hundreds of unsolicited letters to them introducing the firm and proclaiming, “We approach our recruiting in unapologetically elitist fashion.”
strong no hire; inclined not to hire; inclined to hire; or strong hire. One holdout could sink an applicant.
“When you are in the thick of things, you can get confused by small stuff,” Bezos said a few years later. “I knew when I was eighty that I would never, for example, think about why I walked away from my 1994 Wall Street bonus right in the middle of the year at the worst possible time. 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.
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.
“It’s easier to invent the future than to predict it.” —Alan Kay
Amazon was getting one of the first glimpses of the “long tail”—the large number of esoteric items that appeal to relatively few people.
Against that meager start, Bezos would tell investors he projected $74 million in sales by 2000 if things went moderately well, and $114 million in sales if they went much better than expected. (Actual net sales in 2000: $1.64 billion.)
Little by little, the CEO with the piercing laugh, thinning hair, and twitchy demeanor revealed his true self to his employees. 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.
“the cash from Kleiner Perkins hit the place like a dose of entrepreneurial steroids, making Jeff more determined than ever.”
Bezos preached urgency: the company that got the lead now would likely keep it, and it could then use that lead to build a superior service for customers.
looking for someone with the same low regard for the usual way of doing things that Bezos himself had.
“Look, you should wake up worried, terrified every morning,” he told his employees. “But don’t be worried about our competitors because they`re never going to send us any money anyway. Let’s be worried about our customers and stay heads-down focused.”
He was a seasoned manager, adept at hiring quickly and getting large groups to set and meet ambitious objectives. Dalzell regularly sat next to Bezos in meetings and was in charge of putting manpower behind the founder’s best ideas. “It was real easy for Jeff to spout off big ideas faster than anyone could practically do anything with them,”
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.
Bezos used that word a lot: bold. In the company’s first letter to its public shareholders, written collaboratively by Bezos and Joy Covey and typed up by treasurer Russ Grandinetti in early 1998, the word bold was used repeatedly.
Jeff Bezos embodied the qualities Sam Walton wrote about. He was constitutionally unwilling to watch Amazon succumb to any kind of institutional torpor, and he generated a nonstop flood of ideas on how to improve the experience of the website, make it more compelling for customers, and keep it one step ahead of rivals.
network effects—products or services become increasingly valuable as more people use them.
He was looking for versatile managers—he called them “athletes”—who could move fast and get big things done.
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.
“I have never seen anyone so calm in the eye of a storm. Ice water runs through his veins,” Britto says.
“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.
Kim Rachmeler shared a favorite quote she heard from a colleague around that time. “If you’re not good, Jeff will chew you up and spit you out. And if you’re good, he will jump on your back and ride you into the ground.”
My grandfather looked at me, and after a bit of silence, he gently and calmly said, “Jeff, one day you’ll understand that it’s harder to be kind than clever.”
“He was excruciatingly focused,” says Weinstein, who lived around the corner and became one of Bezos’s best friends (the two are still close). “Not like mad-scientist focused, but he was capable of really focusing, in a crazy way, on certain things. He was extremely disciplined, which is how he is able to do all these things.”
Bezos’s high-school friends say he was ridiculously competitive. He collected awards for best science student at his school for three years and best math student for two, and he won a statewide science fair for an entry concerning the effects of a zero-gravity environment on the housefly.
At some point, he announced to his classmates his intention to become the valedictorian of his 680-student class, and he crammed his schedule with honors courses to bolster his rank. “The race [for the rest of the students] then became to be number two,” says Josh Weinstein. “Jeff decided he wanted it and he worked harder than anybody else.”
Bezos wrote out his valedictory speech longhand. His mother typed it up, pausing just long enough to realize that for a high-school senior, Jeff had some wildly outlandish ambitions. She still has a copy, which includes the classic Star Trek opening, “Space, the final frontier,” and discusses his dream of saving humanity by creating permanent human colonies in orbiting space stations while turning the planet into an enormous nature preserve
“He absolutely thinks he’s going to space,” Hanauer says. “It’s always been one of his goals. It’s why he started working out every morning. He’s been ridiculously disciplined about it.”
He gave Blue Origin a coat of arms and a Latin motto, Gradatim Ferociter, which translates to “Step by Step, Ferociously.” The phrase accurately captures Amazon’s guiding philosophy as well. 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.”
He wrote down a list of the ten smartest people he knew and hired them all, including Russell Allgor, a supply-chain engineer at Bayer AG. Wilke had attended Princeton with Allgor and had cribbed from his engineering problem sets.
“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.
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.
So he framed the kind of employees he wanted in simple terms. All new hires had to directly improve the outcome of the company. He wanted doers—engineers, developers, perhaps merchandise buyers, but not managers.
In early 2002, as part of a new personal ritual, he took time after the holidays to think and read. (In this respect, Microsoft’s Bill Gates, who also took such annual think weeks, served as a positive example.)
As part of his ongoing quest for a better allocation of his own time, he decreed that he would no longer have one-on-one meetings with his subordinates. These meetings tended to be filled with trivial updates and political distractions, rather than problem solving and brainstorming. Even today, Bezos rarely meets alone with an individual colleague.
“It is fantastically easy to hide between bullet points. You are never forced to express your thoughts completely.”
“I don’t want this place to become a country club,” he was fond of saying as he pushed employees harder. “What we do is hard. This is not where people go to retire.”
Jeff Bezos fit comfortably into this mold. His manic drive and boldness trumped other conventional leadership ideals, such as building consensus and promoting civility.
Retail markup was significant; stores doubled the wholesale cost (a practice known as keystone pricing) or even tripled it (known as triple-keystone pricing). Jewelry manufacturers and retailers clung tightly to that custom, which didn’t fit well with Bezos’s newly adamant resolve to offer the lowest prices anywhere. The
He asked Ravindran and Jeff Holden to put together a SWAT team of a dozen of their best people and told them he wanted the program ready by the next earnings announcement, in February—just weeks away.
Bezos battled a reaction that he dubbed the institutional no, by which he meant any and all signs of internal resistance to these unorthodox moves. Even strong companies, he said, tended to reflexively push back against moves in unusual directions. At quarterly board “There’s only one way out of this predicament,” he said repeatedly to employees during this time, “and that is to invent our way out.”
Amazon wanted to stimulate creativity among its developers, it shouldn’t try to guess what kind of services they might want; such guesses would be based on patterns of the past. Instead, it should be creating primitives—the building blocks of computing—and then getting out of the way.
Jassy would define the shadow role as a quasi chief of staff, and today the position of Bezos’s shadow, now formally known as technical adviser, is highly coveted and has broad visibility within the company. For Bezos, having an accomplished assistant on hand to discuss important matters with and ensure that people follow up on certain tasks is another way to extend his reach.
It was considered a Jeff project, which meant that the product manager met with Bezos every few weeks and received a constant stream of e-mail from the CEO, usually containing extraordinarily detailed recommendations and frequently arriving late at night.
The comment reflected his distinctive business philosophy. 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.
Bezos didn’t just love books—he fully imbibed them, methodically processing each detail. Stewart Brand, the author of How Buildings Learn, among other works, recalls being startled when Bezos showed him his personal copy of the 1995 book. Each page was filled with Bezos’s carefully scribbled notes.
“We were told to do one great thing with maniacal focus,” says Tom Ryan, a software engineer from Palm whom Zehr brought over that fall. “The aspiration was to be Apple.”
One of the primary conclusions from their research was that a good book disappears in the reader’s hands. Bezos later called this the top design objective. “Kindle also had to get out of the way and disappear so that you could enter the author’s world,” he said.
Within the books group, the resulting program was dubbed the Gazelle Project because Bezos suggested to Blake in a meeting that Amazon should approach these small publishers the way a cheetah would pursue a sickly gazelle.
At the meeting, Donahoe paid his respects to the e-commerce pioneer. “I am always going to be less cool than you,” he told Bezos. “I have huge admiration for what you’ve done.” Bezos said that he did not view Amazon and eBay as fighting a winner-take-all battle. “Our job is to grow the e-commerce pie and if we do that there is going to be room for five Amazons and five eBays,” Bezos said. “I’ve never said a negative thing about eBay and I never will. I don’t want anyone to view this as a zero-sum game.”
“Jeff does a couple of things better than anyone I’ve ever worked for,” Dalzell says. “He embraces the truth. A lot of people talk about the truth, but they don’t engage their decision-making around the best truth at the time.
“The second thing is that he is not tethered by conventional thinking. What is amazing to me is that he is bound only by the laws of physics. He can’t change those. Everything else he views as open to discussion.”
Hsieh felt strongly that everyone, even senior executives, should take below-market compensation to work there because of the great internal culture the company offered.
“How much money do you want to spend on this?” asked chief financial officer Tom Szkutak in the board meeting. “How much do you have?” asked Bezos.
“I don’t know if you guys don’t have high standards or if you just don’t know what you’re doing,” he said, sighing heavily.
Bezos often said that Amazon had a “willingness to be misunderstood,” which was an impressive piece of rhetorical jujitsu—the implication being that its opponents just didn’t understand the company.
“We’re not actually benefiting from any services that those states provide locally, so it’s not fair that we should be obligated to be their tax collection agent since we’re not getting any of the services,”
On an attached spreadsheet, Bezos listed seventeen attributes, including polite, reliable, risk taking, and thinks big, and he ranked a dozen companies on each particular characteristic.
Bezos’s silence on the topic of his long-lost biological father is unsurprising: he is far more consumed with pressing forward than looking back.
Have Backbone; Disagree and Commit
He personally runs the biannual operating review periods for the entire company, dubbed OP1 (done over the summer) and OP2 (done after the holiday season).
Teams work intensely for months preparing for these sessions, drawing up six-page documents that spell out their plans for the year ahead. A few years ago, the company refined this process further to make the narratives more easily digestible for Bezos and other S Team members, who cycle through many topics during these reviews.
Once a week, usually on Tuesday, various departments at Amazon meet with their managers to review long spreadsheets of the data important to their business.
The metrics meetings culminate with the weekly business review every Wednesday, one of the most important rituals at Amazon, run by Wilke.
Sixty managers in the retail business gather in one room to review their departments, share data about defects and inventory turns, and talk about forecasts and the complex interactions among different parts of the company.
“The symbol is important for a couple of reasons. If [humans] think long term, we can accomplish things that we wouldn’t otherwise accomplish,”
The other thing I would point out is that we humans are getting awfully sophisticated in technological ways and have a lot of potential to be very dangerous to ourselves. It seems to me that we, as a species, have to start thinking longer term. So this is a symbol. I think symbols can be very powerful.”
“The rest of us try to muddle around with complicated contradictory goals and it makes it harder for people to help us,” says his friend Danny Hillis. “Jeff is very clear and simple about his goals, and the way he articulates them makes it easy for others, because it’s consistent.
it’s because Jeff approached it from the very beginning with that long-term vision,” Hillis continues. “It was a multidecade project. The notion that he can accomplish a huge amount with a larger time frame, if he is steady about it, is fundamentally his philosophy.”
Bezos and MacKenzie seem to share the skill of efficiently dispersing their time across many personal responsibilities and multiple projects. For Bezos, in addition to his family and Amazon, there’s Blue Origin, where he typically spends each Wednesday, and Bezos Expeditions, his personal venture-capital firm, which holds stakes in companies such as Twitter, the taxi service Uber, the news site Business Insider, and the robot firm Rethink Robotics. Since August of 2013, Bezos has owned the Washington Post newspaper and has said he wants to apply his passion for invention and experimentation to reviving the storied newspaper.
Bezos coordinates closely with the creators of the Clock of the Long Now and oversees its quarterly review sessions, which the clock engineers call Ticks.
“Joy was substance over optics,” he said. “Joy was a long-term thinker. Joy was bold.” Bezos continued, choking up: “Joy and I talked often about a day in the future when we would sit down together with our grandkids and tell the Amazon story. I still want that to happen.”
I found myself thinking about what it takes to accomplish things as big as they both did, when a lot of what you are doing is unconventional. It may very well be that the absolute intensity of drive and focus is essential and incompatible with all of the nice management thought about consensus and gentle demeanor.
Jeff’s clarity, intensity of focus, and ability to prioritize, which has no doubt become ingrained in his key team, is unusual and behind his ability to keep leaping forward versus protecting existing ground.
“The Internet is disrupting every media industry, Charlie,” he said. “You know, people can complain about that, but complaining is not a strategy.”