Thoughts on the Book
The Everything Store: Jeff Bezos and the Age of Amazon (Purchase Link) by Brad Stone.
It’s a good business book, and the author had excellent access to Amazon leaders and employees. Stone previously interviewed Bezos but didn’t have direct access to him for the book, and thus it doesn’t get inside his psyche as much as Isaacson’s book on Steve Jobs could. One can infer a lot from Bezos/Amazon’s behavior, but lacking direct contact, the book missed something (and highlights how extraordinary Isaacson’s book is).
If you’re interested in Amazon, Bezos, or business in general, you should read the whole thing as it’s insightful and a fun read.
It’s also worth noting that Jeff Bezos and his wife both took exception to the conclusions in this volume. She even went so far as to post this review on Amazon! It’s worth reading and considering her points.
I do think the book probably takes liberties to enhance storytelling, take it with a grain of salt. That said, many of the overarching points comport with my knowledge from study Amazon, their business, and leaders – as well as knowing many Amazon employees personally thanks to the extensive cross pollination between Amazon and Microsoft.
Here are my key takeaways from the book.
Bezos is Still Central to Amazon.
Even as he strives to decentralize decision making, Bezos remains essential because he makes all the crucial, tough, internally conflicted decisions (more examples later). Without him in place these conflicts would be unresolved, or worse might be resolved by committee in ways that customers would feel.
Like Apple and many tech companies, Amazon has a tricky road to navigate at some point in the future. For now Bezos has earned the credibility with Wall Street to defer all profits and keep buying share and investing in infrastructure. At some point that permission will be withdrawn. Without Bezos, that time would come sooner and it would be much tougher to navigate the required balance between profit and customers in a coherent way.
Bezos/Amazon isn’t a retailer.
He’s an entrepreneur/investment banker who wants to build new, winning businesses. He didn’t start out in tech or in retailing, he started out in investment banking and wanted to get into building businesses; book retailing (and retailing) were just the best opportunities he saw at the time. Now he’s got retail as a source of funding for new ventures.
We should expect to see him continue to enter new businesses as long as the cash flow continues and shareholders don’t demand to see more of it.
Amazon is Tough.
They’re ruthless to employees, investors, partners, suppliers and acquisition targets. It’s clear to me that the best relationship to have with Amazon is a customer.
Their philosophy is that in deal making, there’s a winner and a loser and they want to be the winner. Some examples:
- Tough on employees. Lots of people have heard the stories about mistreatment of low level folks, but there’s also a history of cast-aside executives, even among early founders. Employee perks are spartan compared to most tech companies (but still generous by most standards).
- Tough on investors. Bezos has been notably willing to not pass profits along to investors, and shares as little information as he legally can with his owners.
- Tough on partners and suppliers. Stories about mistreatment of book publishers, product manufacturers, etc… are amazing. It goes beyond squeezing them on pricing, he’s hidden key information on deals in the past as well (e.g. Kindle book pricing). I’m torn between admiring and being repelled by him. I thoroughly enjoyed what they did to UPS, though.
- Tough on acquisition targets. The tactics he used with Diapers.com and Lovefilm to threaten to drive them out of business to drive down acquisition prices are amazing.
I don’t think ruthless is bad, necessarily. What is amazing is how well they’ve been able to keep a positive company brand given this history. See below for insights as to how.
I’m just glad I’m a customer and not negotiating with them.
I do want to add a note in the wake of The New York Times’ bruising piece about Amazon’s employees. I know a lot of people who have worked both successfully and unsuccessfully at Amazon, and they present a mixed picture. I suspect you could write an equally negative piece about most companies – I know you could have written one about Microsoft in the 90s. Every company has bad managers, bad policies, and flaws – and you can find bitter ex-employees to rant about them.
That said, for a company of its size and footprint, Amazon has had an immature attitude towards these issues and has left itself open to this story. They haven’t been very philanthropic, they don’t have “symbolic” niceties that Google has always had and that Microsoft started and grew over time. Every company and leader has “blind spots” and I think this has been one at Amazon. This gave the Times authors lots of story hooks and quotes to use against Amazon. Reports are the Bezos was genuinely surprised and stung by the article, and we can see the beginning of efforts to present a better picture and face.
Bezos has smart thoughts about company brand perception.
How can they be so ruthless, yet still be so loved? Bezos believes that a positive company brand is crucial to success, so he spent some time considering why some companies are loved and others are feared. He concluded that it isn’t enough to be focused on the customer or inventive. He pounded out a memo about what companies can do to be loved instead of feared. The key items:
I thought this was an insightful list – built upon lots of past mistakes other companies have made – and they appear to be using it in evaluating possible actions.
Customer centricity – Tactic, or Philosophy?
Bezos and his crew are very vocal about loving customers, doing right by customers, giving value to customers. They have thus far acted that way, siphoning billions of dollars from shareholders, suppliers, employees, and partners and giving that value to customers in low prices and awesome service. That’s very laudable, but is this customer centricity is a philosophy or tactic? Will it last? Giving money and value to customers dovetails with their strategy right now: Buy share by undercutting smaller/more mature competitors.
What happens when Amazon shifts from “winning by giving customers goodies” to “winning by delivering profit to shareholders”?. Right now winning is defined as gaining share; at some point they’ll be expected to earn profits.
Amazon has built a sizable moat by solving problems nobody else has had to.
They remind me of Google in this respect (who have done amazing science to build datacenters and big data mining at an unprecidented level). Walmart did this for rural areas – using technology to solve problems no other company had been forced to, getting better at the logistics of stocking stores in the countryside with products.
Amazon had a different, unique problem: How to build a distribution system that didn’t stock stores, it sold directly to individual customers? At first this was “just” about doing it efficiently, but it’s since become amazing at logistics and has turned this into a bunch of hard-to-emulate features, like Prime shipments that combine products, “add in” products that sit in your account until you hit a critical mass of orders and then ship.
The book cites a litany of analysts who didn’t believe in Amazon in the 90’s and early 00’s – I was with them. I assumed Walmart (etc.) would eventually catch up on ecommerce and crush Amazon, but these are hard problems – it’s hard to imagine anyone catching up with them at this point.
The interactions between Amazon and Apple were interesting and formative.
Bezos realized very early on that the iPod and Steve Jobs were a powerful force, and tried to deal with them. They initially offered to run iTunes for Jobs, but Jobs wanted to own the end to end. They worked tirelessly to try to build alliances with Apple, but ultimately realized they couldn’t co-opt Apple and after losing digital music to iTunes they learned and reacted rapidly. The Kindle/Kindle Fire businesses were the direct result of this.
Internal tensions are plentiful and constant
The book is filled with cases of internal teams fighting over conflicting business interests. Teams that deal with suppliers fight with the marketplace team that puts discounters into product pages, email marketing teams fight with brand execs, ebooks departments arguing with physical book teams. What’s remarkable is that they appear to live successfully with these and the customer isn’t aware of them. Bezos breaks a lot of ties, and does seem to lean towards what’s best for the customer.
AWS Makes sense to me now…
AWS can seem strange given their background, but the book makes it seem natural. The story I’d heard/assumed was that they had spare capacity to rent out, but that appears to not be accurate. Instead it’s part of a tradition of building industry-leading assets and “renting” it out to competitors (Amazon Marketplaces, Fulfillment by Amazon, etc…). AWS is just Amazon getting so good at managing infrastructure that there was a natural opportunity to rent it out.
Bezos works to ensure employees have “ownership”
As companies grow, there is a tendency to have decision making and ownership migrate up into the upper reaches of the company. Amazon is trying to keep some sense of distributed ownership and accountability out in the leaf nodes (unlike Apple or Microsoft, who have embraced central decision making). This has pros and cons, but they appear to be sticking by it. Except, of course, when Jeff really cares about something, in which case he swoops down and takes the reigns. There are lots of stories that exemplify Bezos micromanagement, too.
Amazon avoids PowerPoint, they use Word. The first 15 minutes of meetings are spent reading the Word document, and then they discuss it. For what it’s worth, I’ve found that sometimes I force my team to write Word docs before creating slide decks for exactly the reason Bezos cites; it’s too easy to become distracted by creating great slides and forget to tell a clear, coherent story. It’s harder for that to happen in a document.
Cadence and Balance
There are lots of stories and sound bites about customer centricity, but they have an extremely rigorous business review process that also seems to run things. Departments meet every Tuesday to review data on their part of the business. This then rolls up on Wednesday into the Weekly business review. They then have biannual reviews led by Bezos during the summer (OP1) and after the holiday (OP2).
One of the key mysteries left as a reader is how they balance customer centric anecdote driven decision making and hard core data driven business decisions. The answer appears to be that Bezos sets the balance and when customer interests conflict with business interests he breaks the tie.
The book covers a lot, but I was left wanting to understand more about some key topics:
- Tactical execution. How do they organize teams? How do teams make decisions? Is it all informal, or do they force some process top down?
- Design. They do a pretty good job of interaction design (their products are often not beautiful, but they tend to be usable). Is this good designers, or good feedback loops from usage?
- How do they make strategic investments pay off? They have a very good track record here, but the transition is usually very tough. Teams that are “strategic” often never develop the discipline to build a good business, but over focusing on the business hampers investment and innovation. I suspect the secret here is Bezos, but it’s hard to tell.