Highlights: The Everything Store: Jeff Bezos and the Age of Amazon, by Brad Stone
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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. When I thought about it that way… it was incredibly easy to make the decision.”11 Bezos’s parents,
The two-pizza-team concept took root first in engineering, where it was backed by Rick Dalzell, and over the course of several years, it was somewhat inconsistently applied through the rest of the company. There was just no reason to organize some departments, such as legal and finance, in this way.
The idea of fitness functions in particular appeared to clash with some fundamental aspects of human nature—it’s uncomfortable to have to set the framework for your own evaluation when you might be judged harshly by the end result. Asking groups to define their own fitness functions was a little like asking a condemned man to decide how he’d like to be executed. Teams ended up spending too much time worrying over their formulas and making them ever more complex and abstract. “Being a two-pizza team was not exactly liberating,” says Kim Rachmeler. “It was actually kind of a pain in the ass. It did not help you get your job done and consequently the vast majority of engineers and teams flipped the bit on
The other change was also peculiar and perhaps unique in corporate history. Up until that time, Amazon employees had been using Microsoft’s PowerPoint and Excel spreadsheet software to present their ideas in meetings. Bezos believed that method concealed lazy thinking. “PowerPoint is a very imprecise communication mechanism,” says Jeff Holden, Bezos’s former D. E. Shaw colleague, who by that point had joined the S Team. “It is fantastically easy to hide between bullet points. You are never forced to express your thoughts completely.”
time to express their thoughts cogently. “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.” There was a period of grumbling adjustment.
Not everyone embraced the new format. Many employees felt the system was rigged to reward good writers but not necessarily efficient operators or innovative thinkers. Engineers in particular were unhappy to suddenly find themselves crafting essays as if they had been hurled back through time into ninth-grade English. “Putting everything into a narrative ended up sort of being like describing a spreadsheet,” says Lyn Blake, a vice president in charge of the company’s relationships with manufacturers at the time. Blake herself suspected the whole thing was a phase. (It wasn’t.) Bezos
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.
away. He was capable of both hyperbole and cruelty in these moments, and over the years he delivered some devastating rebukes to employees. Among his greatest hits, collected and relayed by Amazon veterans:
“If that’s our plan, I don’t like our plan.” “I’m sorry, did I take my stupid pills today?” “Do I need to go down and get the certificate that says I’m CEO of the company to get you to stop challenging me on this?” “Are you trying to take credit for something you had nothing to do with?” “Are you lazy or just incompetent?” “I trust you to run world-class operations and this is another example of how you are letting me down.” “If I hear that idea again, I’m gonna have to kill myself.” “Does it surprise you that you don’t know the answer to that question?” “Why are you ruining my life?” [After someone presented a proposal.] “We need to apply some human intelligence to this problem.” [After reviewing the annual plan from the supply-chain team.] “I guess supply chain isn’t doing anything interesting next year.” [After reading a narrative.] “This document was clearly written by the B team. Can someone get me the A team document? I don’t want to waste my time with the B team document.”
But they also acknowledge that Bezos is primarily consumed with improving the company’s performance and customer service, and that personnel issues are secondary. “This is not somebody who takes pleasure at tearing someone a new asshole. He is not that kind of person,” says Kim Rachmeler. “Jeff doesn’t tolerate stupidity, even accidental stupidity.”
Raman spoke fast and had a thick accent, and his malapropisms, dubbed Kalisms, were legendary. “You all must be smoking cracks!” he yelled. Or “Can I have some of what you’re drinking so I can feel good about your business too?” He lasted at Amazon less than two years, but people at the company still talk about him.
Holden had been at Amazon longer than anyone else on the management team and had the closest personal relationship with Bezos. If members of the S Team were planets revolving around the sun, then Holden
Now Manber had to inform Bezos, right in the midst of so many other defections to Google. He delivered the news over the phone. Amazon employees would describe what happened next as one of Bezos’s all-time biggest nutters. Manber anticipated that Bezos would be disappointed and perhaps try to persuade him again to stay. “That’s what I had expected Jeff to do, but that’s not what he did,” Manber says. “He was clearly angry and he was dumping on me. I don’t recall now his exact words, but it was something like ‘No! No! No! You can’t do that!’ He was blaming me almost like I was a kid who did something very wrong.”
new set of APIs to let developers plug into the Amazon website. Soon other websites would be able to publish selections from the Amazon catalog, including prices and detailed product descriptions, and use its payment system and shopping cart. Bezos himself bought into the Web’s new orthodoxy of openness, preaching inside Amazon over the next few months that they should make these new tools available to developers and “let them surprise us.” The company held its first developer conference that spring and invited all the outsiders who were trying to hack Amazon’s systems. Now developers became another constituency at Amazon, joining customers and third-party sellers. And the new group, run by Colin Bryar and Rob Frederick, was given a formal name: Amazon Web Services. It was the trailhead of an extremely serendipitous path.
The rise of Amazon Web Services brings up a few obvious questions. How did an online retailer spawn such a completely unrelated business? How did the creature that was originally called Amazon Web Services—the group working on the commerce APIs—evolve into something so radically different, a seller of high-tech infrastructure? Early observers suggested that Amazon’s retail business was so seasonal—booming during the holiday months—that Bezos had decided to rent his spare computer capacity during the quieter periods. But that explanation is widely debunked by Amazon insiders, in part because it would require Amazon to kick developers off its servers every fall.
At the same time, Bezos became enamored with a book called Creation, by Steve Grand, the developer of a 1990s video game called Creatures that allowed players to guide and nurture a seemingly intelligent organism on their computer screens. Grand wrote that his approach to creating intelligent life was to focus on designing simple computational building blocks, called primitives, and then sit back and watch surprising behaviors emerge. Just as electronics are built from basic components like resistors and capacitors, and as living beings spring from genetic building blocks, Grand wrote that sophisticated AI can emerge from cybernetic primitives, and then it’s up to the “ratchet of evolution to change the design.”
Bezos directed groups of engineers in brainstorming possible primitives. Storage, bandwidth, messaging, payments, and processing all made the list. In an informal way—as if the company didn’t quite know the insight around primitives was an extraordinary one—Amazon then started building teams to develop the services described on that list.
For the launch of Simple Storage Service, Atlas had commemorative T-shirts made up for his colleagues; he used the design of Superman’s costume but with an S3 rather than an S on the chest. Naturally, he had to pay for the shirts himself.
Jassy, Bezos, and Dalzell presented the plan for the new AWS to the Amazon board, and the institutional no came close to rearing its ugly head. John Doerr, expressing what he would later call a “healthy skepticism,” asked the obvious question: At a time when Amazon was having difficulty hiring engineers and needed to accelerate its international expansion, “Why would we go into this business?”
As the company prepared to introduce Mechanical Turk to the public, Amazon’s PR team and a few employees complained they were uncomfortable with the system’s reference to the Turkish people. Bezos liked the name for its historical association but agreed to let the communications staff and Mechanical Turk team brainstorm alternatives. They seriously considered Cadabra, an allusion to magic and the original corporate name of Amazon. But in the end, Bezos shrugged off the concerns and said that he personally would bear the responsibility for any backlash.
magnet for competition. 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. (He was partly right about the iPhone; its sizable profits did indeed attract a deluge of competition, starting with smartphones running Google’s Android operating system. But the pioneering smartphone is also a fantastically lucrative product for Apple and its shareholders in a way that AWS has not been, at least so far.)
It is not hyperbole to say that AWS, particularly the original services like S3 and EC2, helped lift the entire technology industry out of a prolonged post-dot-com malaise. Amazon also completely outflanked the great hardware makers of the time, like Sun Microsystems and Hewlett-Packard, and defined the next wave of corporate computing.
Amazon’s own image. AWS enlarged the scope of what it meant to be the everything store and stocked Amazon’s shelves with incongruous products like spot instances and storage terabytes. It made Amazon a confusing target for Walmart and other rival retailers and gave the company fresh appeal to the legions of engineers looking to solve the world’s most interesting problems. Finally, after years of setbacks and internal rancor, Amazon was unquestionably a technology company, what Bezos had always imagined it to be.
Eberhard had founded a computer-networking company in the 1980s and had been around the Silicon Valley block a few times. (Later he would cofound the electric-car company Tesla.) So he knew that he needed deep-pocketed investors as well as powerful allies to pave his way in the complex and cosseted world of the book-publishing business. Eberhard believed that he needed Jeff Bezos and Amazon.com.
It later became fashionable to say that the Rocketbook and contemporaneous competitors like the SoftBook were ahead of their time and that the world was not yet ready to read digitally. But that is not quite the entire story. NuvoMedia sold twenty thousand units in its first year and was on track to double that in its second. It negotiated pioneering e-book contracts with all the major book publishers (the Authors Guild condemned the contracts as being unfavorable to authors1), and in 1999, Cisco invested in NuvoMedia, giving the company more credibility and another strategic ally.
Bezos’s colleagues and friends often attribute Amazon’s tardiness in digital music to Bezos’s lack of interest in music of any kind. In high school, Bezos forced himself to memorize the call letters of local Miami radio stations in an effort to fake musical fluency in conversations with his peers.8 Colleagues remember that on the solemn road trip from Target’s offices in Minneapolis after 9⁄11, Bezos indiscriminately grabbed stacks of CDs from the bargain rack of a convenience store, as if they were all interchangeable.
Within Amazon there is a term used to describe the top executives who get to implement Jeff Bezos’s best ideas: Jeff Bots. The playfully derisive phrase that undoubtedly hides a little jealousy connotes slavish devotion but also loyalty and effectiveness. Jeff Bots draw fuel from their CEO’s ample idea tank and then go out into the world and dutifully execute the best notions. They have completely absorbed Bezos’s business philosophy and molded their own worldviews around it, and they recite rote Jeffisms—how they start from the customer and work backward, et cetera—as if these were their prime directives. To interview a Jeff Bot as a journalist is to witness his or her remarkable ability to say absolutely nothing of substance while going on about Amazon’s inventiveness and its unmatched, gee-whiz enthusiasm for the customer. Jeff Bots would surely rather chomp down on their cyanide-capsule-implanted molars than address topics that Amazon has programmed them to never publicly discuss—subjects such as the competition and any possible problems with products.
Sears, for example, failed to move from department stores to discount retailing; IBM couldn’t shift from mainframe to minicomputers. The companies that solved the innovator’s dilemma, Christensen wrote, succeeded when they “set up autonomous organizations charged with building new and independent businesses around the disruptive technology.”9
Drawing lessons directly from the book, Bezos unshackled Kessel from Amazon’s traditional media organization. “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.” Bezos underscored the urgency of the effort. He believed that if Amazon didn’t lead the world into the age of digital reading, then Apple or Google would. When Kessel asked Bezos what his deadline was on developing the company’s first piece of hardware, an electronic reading device, Bezos told him, “You are basically already late.”
Amazon’s founder wanted his new e-reading device to be so easy to use that a grandmother could operate it, and he argued that configuring devices to work with WiFi networks was too complicated for non-tech-savvy users. He didn’t want to force customers to connect the device to a PC, so the only alternative was to build cellular access right into the hardware, the equivalent of embedding a wireless phone in each unit. Nothing like that had been tried before. Bezos insisted that customers should never have to know the wireless connection was there or even pay for access. “I thought it was insane, I really did,” Parekh says.
Amazon had an easy way to demonstrate its market power. When a publisher did not capitulate and the company shut off the recommendation algorithms for its books, the publisher’s sales usually fell by as much as 40 percent. “Typically it was about thirty days before they’d come back and say, Ouch, how do we make this work?” says Christopher Smith, a senior book buyer at the
they risked losing control of their own business to the well-capitalized Internet companies on the West Coast, who seemed to approach the cerebral pursuit of bookselling with all the literary nuance one might find in an algorithm.
This is not to pick on a particular Amazon executive, but to illustrate a point. Inside the company at the time, the culture was self-perpetuating, and those who couldn’t channel Bezos’s fervor on behalf of Amazon and its customers didn’t stay with the company. Those who could do it stayed and advanced.
Amazon had grown from a beleaguered dot-com survivor battered by the vicissitudes in the stock market into a diversified company whose products and principles had an impact on local communities, national economies, and the marketplace of ideas. Like all powerful companies, it would now be subject to ongoing scrutiny of its corporate character, a perpetual test of not only how well it served its customers but also how well it treated all of the parties drafted into its whirling ecosystem, including employees, partners, and governments. The development of Fiona set the stage for this new phase in Amazon’s history and revealed the company as relentlessly innovative and disruptive, as well as calculating and ruthless. Amazon’s behavior was a manifestation of Bezos’s own competitive personality and boundless intellect, writ large on the business landscape.
That meant nothing, of course. Despite the teeming abundance of merchandise at Phoenix 3, Bezos still saw broad gaps in Amazon’s product lineup. “In order to be a two-hundred-billion-dollar company, we’ve got to learn how to sell clothes and food,” Bezos said frequently to colleagues during this time. That figure was not randomly selected; it referred to the magnitude of Walmart’s sales in the middle years of the decade. To lead the new foray into consumable goods, Bezos hired Doug Herrington, a former executive at Webvan, the failed grocery-delivery business from the dot-com boom. After two years of work, Herrington’s group started testing Amazon Fresh, a grocery-delivery service in Amazon’s hometown of Seattle.
telling them they were stupid and saying they should “come back in a week when you figure out what you’re doing.” Then he walked a few steps, froze in midstride as if something had suddenly occurred to him, wheeled around, and added, “But great work, everyone.”
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.
During these skirmishes, Bezos advocated for a federal bill that simplified the sales tax code and imposed it over the entire e-commerce industry. (This had the advantage of being a highly unlikely scenario, considering the political deadlock gripping Washington, DC, at the time.)
There is a clandestine group inside Amazon with a name seemingly drawn from a James Bond film: Competitive Intelligence. The group, which since 2007 has operated within the finance department under longtime executives Tim Stone and Jason Warnick, buys large volumes of products from competitors and measures the quality and speed of their services. Its mandate is to investigate whether any rival is doing a better job than Amazon and then present the data to a committee that usually includes Bezos, Jeff Wilke, and Diego Piacentini, who ensure that the company addresses any emerging threat and catches up quickly.
diapers category alone. Inside Amazon, Bezos had rationalized these moves as being in the company’s long-term interest of delighting its customers and building its consumables business. He told business-development vice president Peter Krawiec not to spend over a certain amount to buy Quidsi but to make sure that Amazon did not, under any circumstances, lose the deal to Walmart. As a result of Bezos’s meeting with Lore
Bezos had won again, neutralizing an incipient competitor and filling another set of shelves in his everything store. Like Zappos, Quidsi was permitted to operate independently within Amazon (from New Jersey), and soon it expanded into pet supplies with Wag.com and toys with Yoyo.com. Walmart had missed the chance to acquire a talented team of entrepreneurs who had gone toe to toe with Amazon in a key product category. And insiders were once again left with their mouths agape, marveling at how Bezos had ruthlessly engineered another acquisition by driving his target off a cliff. Says one observer who had a seat close to the battle, “They have an absolute willingness to torch the landscape around them to emerge the winner.”
Amazon executives view MAPs and similar techniques as the last vestiges of an old way of doing business, gimmicks that inefficient companies use to protect their bloated margins. Amazon has come up with countless workarounds, including a technique called hide the price. In some cases, when Amazon breaks MAP, it doesn’t list the price on its product page. A customer can see the low price only when he places the item in his shopping cart.
Amazon’s own employees have compared third-party selling on the site to heroin addiction—sellers get a sudden euphoric rush and a lingering high as sales explode, then progress to addiction and self-destruction when Amazon starts gutting the sellers’ margins and undercutting them on price. Sellers “know they should not be taking the heroin, but they cannot stop taking the heroin,” says Kerry Morris, the former Amazon buyer. “They push and bitch and complain and threaten until they finally see they have to cut themselves off.”
It was more Bezos-style expedient conviction—the arguments had the advantage of being completely rational while also serving Amazon’s own strategic interests.
random customer anecdotes, the opposite of cold, hard data, also carry tremendous weight and can change Amazon policy. If one customer has a bad experience, Bezos often assumes it reflects a larger problem and escalates the resolution of the matter inside his company with a question mark.
Despite the scars and occasional bouts of post-traumatic stress disorder, former Amazon employees often consider their time at the company the most productive of their careers. Their colleagues were smart, the work was challenging, and frequent lateral movement between departments offered constant opportunities for learning. “Everybody knows how hard it is and chooses to be there,” says Faisal Masud, who spent five years in the retail business. “You are learning constantly and the pace of innovation is thrilling. I filed patents; I innovated. There is a fierce competitiveness in everything you do.” But some also
The people who do well at Amazon are often those who thrive in an adversarial atmosphere with almost constant friction. Bezos abhors what he calls “social cohesion,” the natural impulse to seek consensus. He’d rather his minions battled it out in arguments backed by numbers and passion, and he has codified this approach in one of Amazon’s fourteen leadership principles—the company’s highly prized values that are often discussed and inculcated into new hires.2
Have Backbone; Disagree and Commit Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.
But other escapees call Amazon’s internal environment a “gladiator culture” and wouldn’t think of returning. There are many who last less than two years. “It’s a weird mix of a startup that is trying to be super corporate and a corporation that is trying hard to still be a startup,” says Jenny Dibble, who spent five months there as a marketing manager in 2011, trying,
Managers in departments of fifty people or more are required to “top-grade” their subordinates along a curve and must dismiss the least effective performers. As a result of this ongoing examination, many Amazon employees live in perpetual fear. A common experience among Amazon workers is a feeling of genuine surprise when one receives a good performance review. Managers are so parsimonious with compliments that underlings tend to spend their days anticipating their termination.
Frugality 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.
The notion that he can accomplish a huge amount with a larger time frame, if he is steady about it, is fundamentally his philosophy.”
Amazon may be the most beguiling company that ever existed, and it is just getting started. It is both missionary and mercenary, and throughout the history of business and other human affairs, that has always been a potent combination. “We don’t have a single big advantage,” he once told an old adversary, publisher Tim O’Reilly, back when they were arguing over Amazon protecting its patented 1-Click ordering method from rivals like Barnes & Noble. “So we have to weave a rope of many small advantages.”