The Everything Store: Jeff Bezos and the Age of Amazon

by Brad Stone

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.” Bezos announced that employees could no longer use such corporate crutches and would have to write their presentations in prose, in what he called narratives. The S Team debated with him over the wisdom of scrapping PowerPoint but Bezos insisted. He wanted people thinking deeply and taking the 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. Meetings no longer started with someone standing up and commanding the floor as they had previously at Amazon and everywhere else throughout the corporate land. Instead, the narratives were passed out and everyone sat quietly reading the document for fifteen minutes—or longer. At the beginning, there was no page limit, an omission that Diego Piacentini recalled as “painful” and that led to several weeks of e...

Google competed with Amazon for both customers and talented engineers. After its IPO, the search giant opened an office in Kirkland, a twenty-minute drive from downtown Seattle. Google offered its employees lavish perks, like free food, office gyms, and day care for their children, not to mention valuable stock options. For its part, Amazon offered a sickly stock price and a combative internal culture, and employees still had to pay for their own parking and meals. Not surprisingly, Google began to suck engineers out of Amazon en masse.

Part of AWS’s immediate attraction to startups was its business model. Bezos viewed Web services as similar to an electric utility that allowed customers to pay for only what they used and to increase or decrease their consumption at any time. “The best analogy that I know is the electric grid,” Bezos said. “You go back in time a hundred years, if you wanted to have electricity, you had to build your own little electric power plant, and a lot of factories did this. As soon as the electric power grid came online, they dumped their electric power generator, and they started buying power off the grid. It just makes more sense. And that’s what is starting to happen with infrastructure computing.”14

Bezos predicted they would be good over the long term but said that he didn’t want to repeat “Steve Jobs’s mistake” of pricing the iPhone in a way that was so fantastically profitable that the smartphone market became a magnet for competition.

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’s belief was borne out, and AWS’s deliberately low rates had their intended effect; Google chairman Eric Schmidt said it was at least two years before he noticed that the founders of seemingly every startup he visited told him they were building their systems atop Amazon’s servers. “All of the sudden, it was all Amazon,” Schmidt says. “It’s a significant benefit when every interesting fast-growing company starts on your platform.”

But the emergence of Amazon Web Services was transformational in a number of ways. Amazon’s inexpensive and easily accessible Web services facilitated the creation of thousands of Internet startups, some of which would not have been possible without it, and it provided larger companies with the ability to rent a supercomputer in the cloud, ushering in a new era of innovation in areas like finance, oil and gas, health, and science. 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.

After three weeks of intense negotiations, the companies hit a major roadblock. Bezos told Eberhard he was concerned that by backing NuvoMedia and helping it succeed, he might be creating an opportunity for Barnes & Noble to swoop in and buy the startup later. So he demanded exclusivity provisions in any contract between the companies and wanted veto power over future investors. “If we made a bet on the future of reading, we’d want to help it succeed by introducing it to our customers in a big way,” says David Risher, Amazon’s former senior vice president of U.S. retail, who participated in the negotiations. “But the only way that’d have made sense is if it had been exclusive to us. Otherwise, we’d have been funneling our customers to a potential rival.”

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.”

For titles published prior to the late 1990s, it was sometimes unclear who actually owned the digital rights, and publishers were often loath to revisit the issue with authors and their agents, as they might view it as an opportunity to renegotiate their entire deal.

By law, manufacturers are not allowed to set retail prices, but they can decide whom they want to carry their products, and they make those decisions judiciously. Shoe brands like Nike and Merrell viewed Amazon as a dangerous discounter, a company that would very likely consign their new in-season products to the bargain bin in an effort to garner new customers and gain market share. As a result, the top brands were reluctant to supply Amazon with merchandise, and the website’s shoe selection was sparse.

The site finally launched in December as Endless.com. On its first day, Endless offered free overnight shipping and free returns. The deal ensured Amazon would lose money on each sale. But it would clearly apply pressure to a certain company in Las Vegas. The Zappos board members considered Amazon’s opening maneuver, gritted their teeth, and a week later matched it with free overnight shipping. The difference was that the new Endless.com, unlike its rival, enjoyed almost no traffic or sales volume and so lost little with its overnight-shipping offer; Zappos’ profit margins took a direct hit. Over the next year, Endless made little progress as an independent retail destination. The site attracted brands like Kenneth Cole and Nine West and developed features such as a more flexible search engine and product photos that expanded when customers hovered over them with their cursors. But Amazon was walking an almost impossible precarious tightrope, trying to assuage the fears of brand-name companies with industry-standard pricing while also using Endless as a way to undercut Zappos on price. In early 2007, with apparel brands watching closely for any signs of discounting, Amazon added a five-dollar bonus to its free overnight shipping. In other words, a customer was given five dollars just to buy something on the site. It was a clever but transparent ploy, an effort to inflict further pain on Zappos. Employees who worked on Endless say that, naturally, this was Jeff Bezos’s idea...

Amazon’s booming marketplace is a primary source of tension between Amazon and other companies. Over the holiday months in 2012, 39 percent of products sold on Amazon were brokered over its third-party marketplace, up from 36 percent the year before. The company said that over two million third-party sellers worldwide used Amazon Marketplace and that they sold 40 percent more products in 2012 than in 2011.11 The Marketplace business is a profitable one for the company, since it takes a flat 6 to 15 percent commission on each sale and does not bear the expense of buying and holding the inventory.

Amazon’s founder repeatedly suggested he had little reverence for the old “gatekeepers” of the media, whose business models were forged during the analogue age and whose function it was to review content and then subjectively decide what the public got to consume. This was to be a new age of creative surplus, where it was easy for anyone to create something, find an audience, and allow the market to determine the proper economic reward. “Even well meaning gatekeepers slow innovation,” Bezos wrote in his 2011 letter to shareholders. “When a platform is self-service, even the improbable ideas can get tried, because there’s no expert gatekeeper ready to say ‘that will never work!’ And guess what—many of those improbable ideas do work, and society is the beneficiary of that diversity.”

“Some big companies develop ardent fan bases, are widely loved by their customers, and are even perceived as cool,” he wrote. “For different reasons, in different ways and to different degrees, companies like Apple, Nike, Disney, Google, Whole Foods, Costco and even UPS strike me as examples of large companies that are well-liked by their customers.” On the other end of spectrum, he added, companies like Walmart, Microsoft, Goldman Sachs, and ExxonMobil tended to be feared. Bezos postulated that this second set of companies was viewed, perhaps unfairly, as engaging in exploitative behavior. He wondered why Microsoft’s large base of users had never come out in any significant way to defend the company against its critics and speculated that perhaps customers were simply not satisfied with its products. He theorized that UPS, though not particularly inventive, was blessed by having the unsympathetic U.S. Postal Service as a competitor; Walmart had to deal with a “plethora of sympathetic competitors” in the small downtown stores that competed with it.

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