#180 Jeff Bezos Invention of a Global Empire

In this episode, the host delves into Brad Stone's "Amazon Unbound: Jeff Bezos and the Invention of a Global Empire," exploring the evolution of Amazon and Jeff Bezos' approach to business. The discussion highlights Bezos' philosophy of growth through experimentation and failure, akin to the methods of Thomas Edison. Bezos' counterintuitive and relentless strategies are examined, particularly his development of a self-service, high-margin business model that reinvests profits into new ventures. The episode also touches on Bezos' responses to criticism and his decision-making process, such as the expansion of Amazon's advertising platform despite potential drawbacks. Furthermore, the host reflects on the challenges of Bezos' CEO role and his shift in focus towards other interests, including Blue Origin, following his departure from Amazon's leadership.

• Thomas Edison's genius lay in creating a system for invention rather than being an inventor himself.
• Edison led a hierarchical organization with researchers, engineers, and tinkerers.
• The system facilitated numerous inventions under Edison's guidance.

"Number one, his genius was not in inventing. Rather, it was in inventing a system of invention. Dozens of researchers and engineers and tinkerers labored beneath Edison in a carefully constructed hierarchical organization that he founded and oversaw."

The quote highlights Edison's innovative approach to invention by establishing a structured environment that enabled his team to create and innovate effectively.

• The paradox of traits admired in men (kindness, generosity, openness, honesty, understanding, and feeling) versus traits associated with success (sharpness, greed, meanness, egotism, and self-interest).
• The dichotomy between qualities that are respected and those that yield tangible success.

"It has always seemed strange to me the things that we admire in men, kindness and generosity, openness, honesty, understanding, and feeling, are the complements of failure in our system. And those traits that we detest, sharpness, greed, meanness, egotism, and self-interest, are the traits of success."

This quote reflects on the societal contradiction where the traits that are morally valued often do not align with the characteristics that are rewarded in the context of achieving success.

• Jeff Bezos's approach to business is rooted in experimentation, learning from failures, and applying lessons consistently across various business lines.
• Bezos believes in taking risks and learning from mistakes to foster growth and innovation.
• The methodology of experimenting and scaling successful experiments is central to Amazon's expansion.

"Every interesting thing I've ever done, every important thing I've ever done, every beneficial thing I've ever done, has been through a cascade of experiments and mistakes and failures. I'm covered in scar tissue as a result of this."

Bezos emphasizes the importance of experimentation and learning from failures as a pathway to achieving significant accomplishments, mirroring Thomas Edison's philosophy.

• Jeff Bezos set his own metric for success, focusing on long-term value over short-term financial returns.
• Bezos's first letter to shareholders outlined his operating philosophy, emphasizing market share and cash flow.
• The same principles applied to Amazon were also used in Bezos's other ventures, like Blue Origin.

"Bezos wanted to set his own metric for success without interference from impatient outsiders. So he encoded his operating philosophy in his first letter to shareholders."

The quote encapsulates Bezos's desire to define success on his own terms, prioritizing long-term growth and market dominance over immediate financial gains.

• Jeff Bezos values traits such as customer satisfaction and ambition in the people he promotes.
• Jeff Wilk, a senior executive at Amazon, exemplified these qualities.
• The development of the Kindle highlighted Amazon's willingness to venture into challenging territories for growth.

"Wilk was a lot like Bezos, precocious, ambitious, and focused on satisfying customers over just about everything else, including the feelings of his employees."

This quote describes Jeff Wilk as embodying the same customer-centric and ambitious traits that Jeff Bezos himself values, indicating the qualities Bezos seeks in his leadership team.

• Jeff Bezos stresses the importance of a shared knowledge base and continuous improvement.
• Bezos led discussions on influential books like "The Innovator's Dilemma" by Clayton Christensen.
• Amazon's shift from a retailer to a technology company is considered one of the great turnaround stories.

"Jeff was a ravenous reader, leading senior executives in discussion on books like Clayton Christensen's The Innovator's Dilemma."

The quote demonstrates Bezos's commitment to fostering a culture of learning and innovation within Amazon's leadership, using external thought leadership to inspire internal strategies.

• Jeff Bezos keeps negative articles and reminders of past challenges to stay motivated.
• The practice is similar to Warren Buffett's habit of keeping newspaper clippings from the Great Depression.
• Bezos uses these reminders to ensure that Amazon does not become complacent.

"While he had triumphed against enormous odds, Jeff preferred those negative articles like the old Amazon bomb cover story to be posted on his office walls so that he and his colleagues would remain frightened and motivated."

The quote reveals Bezos's use of past criticisms and challenges as a tool to maintain a sense of urgency and motivation within Amazon, preventing complacency.

• "Think big" is a core leadership principle at Amazon, encouraging bold and innovative thinking.
• Leaders are expected to inspire results and explore new ways to serve customers.
• Bezos pushes for ambitious thinking and is critical of conservative approaches within Amazon.

"Thinking small is a self-fulfilling prophecy. Leaders create and communicate a bold direction that inspires results."

This quote from Amazon's leadership principles underscores the company's ethos of aiming for audacious goals and fostering a culture that encourages expansive thinking and innovation.

• Bezos applies a consistent strategy for developing new businesses, focusing on experimentation and scaling successes.
• He challenges teams to envision a "magical product" and then work backward to achieve it.
• Bezos promotes a culture of learning and growth, even in unfamiliar domains.

"You're going about this the wrong way. He said, first tell me what would be a magical product, then tell me how to get there."

Bezos criticizes a team's approach for lacking ambition, urging them to start with an ideal customer experience and work backward to make it a reality, exemplifying his forward-thinking approach.

• A conversation about a new product should start with the benefits it creates for customers.
• Richard Branson's definition of a business as something that improves someone's life aligns with Bezos's customer-centric approach.
• Entrepreneurship is viewed as a practice, with the early stages of product development being iterative and experimental.

"Begin any conversation about a new product in terms of the benefit it creates for customers."

The quote reflects Bezos's philosophy that the starting point for any new product discussion should be the value it adds to the customer, emphasizing a customer-first mindset in product development.

• Amazon needed to expand the Alexa beta program without revealing it to the public.
• They implemented Project Amped, renting apartments and houses across the country.
• Temp agencies were hired to have people read scripts off iPads in these locations, filled with various listening devices.
• Some devices resembled the future Echo, while others were decoys.
• The project faced challenges, including suspicions of illicit activities due to the high traffic of people.
• Despite skepticism from beta testers, Amazon succeeded in training the voice computer, and Bezos was pleased with the outcome.
• By 2014, Amazon had increased its speech data store by a factor of 10,000.

"limited and they would need to massively expand the Alexa beta program while somehow still keeping it a secret from the outside world." This quote emphasizes the challenge Amazon faced in expanding the Alexa beta program while maintaining secrecy.

• Bezos encourages thinking big and coming up with unconventional solutions.
• Hart, the former shadow running the project, did not seek approval for Amped but informed Bezos of the multimillion-dollar cost.
• Bezos' response indicated his willingness to invest heavily in promising experiments.
• The launch of the Echo was successful, selling 100,000 units in the first week.
• Bezos' strategy involves scaling up successful projects rapidly and maintaining a competitive edge.
• Bezos' philosophy: "Pour gasoline on your winners" and have professional pride in leading product categories.

"And Jeff is extremely happy." This quote illustrates Bezos' satisfaction with the innovative approach and successful outcome of the Amped project.

• The Echo's success led to rapid expansion, with the team growing from a few hundred to 10,000 employees in five years.
• Bezos constantly fueled growth and innovation within Amazon.
• Ideas for improvement often come from customer feedback.
• Bezos has a public email address and takes customer suggestions seriously.
• An example of this is a Swedish customer's email leading to the expansion of Alexa to 80 new countries within a day.
• Bezos empowers teams to think without constraints and pursue ambitious goals.

"Bezos got that email at 02:00 a.m. And by the following morning, there were a half a dozen independent groups working to sell Alexa in 80 new countries." This quote showcases Bezos' swift action in response to customer feedback, leading to rapid international expansion.

• Bezos demonstrates patience for those engaged in the invention process at Amazon.
• He prioritizes direction over immediate profitability or cost concerns.
• Amazon Go's development reflects Bezos' focus on simplifying the customer experience by eliminating checkout lines.
• Bezos values conflict over agreement, believing it leads to better results.
• He encourages internal competition to accelerate project development.

"You guys are going to fail." This quote from Bezos during a meeting about Amazon's expansion into India highlights his directness and focus on winning strategies.

• Amazon kept AWS's financial success secret to avoid attracting competition.
• Bezos invested in high-margin businesses that could scale and provide leverage.
• AWS's profitability was revealed after ten years, surprising Wall Street and significantly increasing Amazon's stock value.
• Bezos' strategy involved hiding AWS and advertising revenues to prevent competitors from recognizing the potential of cloud computing.

"Amazon disguised their numbers along with their nascent advertising revenues in the other category on its income statement." This quote explains how Amazon strategically concealed AWS's financial success to maintain a competitive advantage.

• Jeff Bezos embodies the culture of Amazon Web Services (AWS), which is tough, unrelenting, and focused on high standards.

• AWS's culture is a reflection of Amazon's overall culture, emphasizing toughness and relentless pursuit of high standards.

  Jeff is AWS incarnate. So it says, AWS's culture was a microcosm of Amazon tough, unrelenting, and focused on meeting impossibly high standards.

  This quote emphasizes the intense and demanding culture at Amazon and AWS, which Jeff Bezos personifies in his leadership style.

• Founders, including Jeff Bezos, are known for adopting successful ideas from others.

• Jeff Bezos took inspiration from Alibaba's Singles Day to create Amazon's Prime Day.

  All the greatest founders in history stole great ideas. [...] So Jeff proposed that Amazon might fashion its own such shopping holiday.

  This quote highlights the practice of learning from and implementing successful strategies from other businesses, which led to the creation of Amazon's Prime Day.

• Jeff Bezos adopted stack ranking from other influential leaders and aimed to constantly improve employee performance.

• Stack ranking involves rating employees and eliminating lower performers to increase overall quality.

  Bezos also advocated for the practice of stack ranking, where employees were rated by their managers on the basis of job performance and the lower performers were pushed out the door.

  This quote describes the stack ranking system that Bezos implemented at Amazon, inspired by practices at General Electric, to maintain a high-performance workforce.

• Bezos applied his business philosophies to the Washington Post, emphasizing technology and experimentation.

• He turned the Washington Post from a loss-making entity to a profitable business.

  You've suffered all the pain of the Internet, but you haven't yet fully enjoyed its gifts, Bezos told his new employees.

  This quote reflects Bezos' approach to transforming the Washington Post by leveraging the benefits of the Internet to turn the newspaper around financially.

• Jeff Bezos values control and individuality, as shown by his decision to keep the Washington Post out of Apple News Plus.

• He believes in building his own distribution instead of joining others.

  Jeff's not a fan of bundles. [...] He wants control, right?

  This quote explains Bezos' preference for maintaining control over distribution channels, which influenced the decision to not join Apple News Plus with the Washington Post.

• Bezos' willingness to make significant investments in entertainment, as seen with the show "The Grand Tour."

• Amazon's agility in securing deals reflects the company's ambitious nature.

  This is how Jeff spends $250,000,000 in 15 seconds for a show about cars.

  The quote illustrates Bezos' rapid decision-making and investment in high-value entertainment content, showcasing Amazon's strategic moves in the industry.

• Bezos focuses on lowering cost structures and inventing to reduce costs.

• His philosophies align with those of historical figures like Henry Ford, emphasizing efficiency and fair wages.

  We do not charge more because we can't figure out how to make it cost less. We invent to make it cost less.

  This quote captures Bezos' philosophy of innovation to reduce costs rather than increasing prices, drawing parallels to Henry Ford's approach to business.

• Bezos asks challenging questions to drive ambition, such as how to attract a million sellers to Amazon's marketplace.

• He emphasizes the importance of self-service platforms for scalability and revenue growth.

  How would you get a million sellers into this marketplace?

  This quote demonstrates Bezos' focus on scalability and self-service in Amazon's marketplace, driving the company's growth and efficiency.

• Bezos is committed to constant improvement, exemplified by the evolution of Amazon Prime's delivery times.

• He encourages competition within the company to foster innovation.

  Somebody's going to make your product obsolete. Make sure it's you.

  This quote, referencing Edwin Land, highlights the philosophy of self-disruption and continuous improvement that Bezos instills in Amazon's culture.

• Bezos allows acquired companies to operate autonomously to learn from their experiences and extract business lessons.

• This approach is similar to Warren Buffett's management style.

  Bezos often allowed acquired companies and their eccentric CEOs to operate autonomously.

  The quote shows Bezos' strategy of allowing acquired companies to remain independent, which aligns with his learning-oriented leadership style.

• Bezos' strategy for Amazon's logistics involves leasing aircraft and benefiting from investment returns.

• Amazon invests in companies to secure air routes and gain financial returns without owning planes.

  Amazon had simultaneously achieved its goal of securing exclusive access to air routes and earned nearly a half a billion dollars on its investments.

  This quote explains Amazon's strategic approach to logistics and investment, which allows the company to expand its delivery capabilities while also earning significant returns.

• Bezos' approach to business starts with asking the right questions and avoiding complacency.

• Amazon's advertising revenue has seen significant growth, showcasing the success of Bezos' strategies.

  Amazon made around $20 billion from ads in 2020.

  The quote highlights the impressive growth of Amazon's advertising business, which is a testament to Bezos' focus on asking the right questions and driving the company's performance.

• Jeff Bezos scrutinized the unit profitability of Amazon's retail business without advertising revenue.
• He identified that the growth of advertising was masking stagnation in the core retail business.
• Bezos insisted on scaling back hiring and investments to focus on core profitability without the "safety blanket" of advertising.
• Amazon's advertising became a multi-billion-dollar business, which Bezos decided to expand despite a short-term decline in customer purchases.
• The decision to move ads to the top of search pages significantly increased the profitability of sponsored products.

"I wonder what unit profitability was in 2017 without advertising."

This quote shows Bezos questioning the genuine profitability of the retail business without the contribution from advertising.

"He argued that the growth of advertising was concealing stagnation in online retail."

Bezos recognized that the advertising revenue was hiding the fact that the retail business was not growing as it should.

"He insisted that they radically scale back their hiring plans and other investments and commit to returning to the underlying profitability that had achieved years before without the safety blanket of advertising."

Bezos demanded a return to the core profitability of the retail business, emphasizing sustainability over short-term gains from advertising.

"Yes, Amazon should continue to expand the percentage of search results that included sponsored listings."

Bezos approved the expansion of advertising, understanding its profitability and its alignment with his business preferences.

• Jeff Bezos attempted to recruit SpaceX's Gwynne Shotwell as CEO for Blue Origin, but she declined.
• Bezos wrote an 800-word "welcome letter" to Blue Origin employees, emphasizing a methodical approach and sustainable spending.
• Blue Origin's hiring strategy contrasted with SpaceX, recruiting from legacy aerospace companies.
• Bezos's commitment to Blue Origin was questioned in light of his lifestyle post-Amazon CEO, with speculation on whether he would focus more on the space venture.

"Bezos tried making her the CEO of Blue Origin. She said no."

Bezos sought to bring in top talent from the industry but faced rejection, indicating the competitive nature of the space sector.

"We are a small team committed to seeding an enduring human presence in space."

This quote from Bezos's welcome letter outlines the long-term vision and patient approach of Blue Origin.

"Blue's headcount soared past 1000 people in 2017 and then doubled in 2018."

Blue Origin's rapid expansion indicated increasing ambitions in the space industry, contrasting with the company's original cautious spending approach.

• Amazon executives and board members read "The Great A&P and the Struggle for Small Business in America" to understand historical parallels with their situation.
• The book's insights prompted Amazon to adopt an active stance against criticism and to use it as valuable intelligence for change.
• Bezos emphasized learning from criticism to make improvements, such as raising Amazon's minimum wage in response to public pressure.

"The S team and Amazon's board of directors read the great A&P and the struggle for small business in America."

Amazon's leadership used historical case studies to inform their strategies in dealing with criticism and regulatory challenges.

"Jeff becomes the richest person in the world and people start like, well, why are you making so much money and not paying your employees."

Public criticism targeted Bezos's wealth in contrast to Amazon employee wages, prompting internal reflection and action.

"When you're criticized, first look in the mirror and decide, are your critics right? And if they're right, change, don't resist."

Bezos's approach to criticism was to assess its validity and to make changes where necessary, leading to a proactive and responsive corporate strategy.

• Bezos's decision to step down as CEO was influenced by the changing nature and scale of Amazon, along with the challenges and scrutiny it faced.
• His tenure saw the transformation of Amazon from a book-selling website to a trillion-dollar empire.
• The book suggests that running Amazon became less enjoyable for Bezos over time, leading to his resignation.

"The move heralded a formal changing of the guard at Amazon and the end of one of the most epic runs in modern business history."

This quote reflects on the significance of Bezos's departure from the CEO role and his impact on the business world.

"Bezos had another reason to elevate himself out of the top role being Amazon's CEO was a lot less fun."

Bezos's departure was partly due to the reduced enjoyment of the role, highlighting the personal factors influencing such decisions.

• The speaker provides a recommended reading order for books about Jeff Bezos and Amazon.
• The list starts with "The Everything Store" and includes "Invent and Wander" and "Working Backward."
• The speaker suggests using these books to build a shared base of knowledge with colleagues or friends.

"First, start with the everything store. If you haven't read it already, it's probably the most insightful book that I've ever read."

This recommendation places "The Everything Store" as the foundational book for understanding Bezos and Amazon.

"Then from there I would read, invent and wander, because that's every single Bezos shareholder letter, plus edited transcripts of some of his best talks."

"Invent and Wander" is recommended for its collection of Bezos's own writings and speeches, providing direct insight into his thinking.

"The third book I would read is working backward because that's all about the ideas, the application of Bezos'ideas, within Amazon."

"Working Backward" is suggested for understanding the practical application of Bezos's ideas in Amazon's operations.