The Everything Store: Jeff Bezos and the Age of Amazon

by Brad Stone

He started building an editorial group—writers and editors who would craft a literary voice for the site and give customers a reason to keep coming back. The group’s mission was to make Amazon the most authoritative online source of information about books and replicate the trustworthy atmosphere of a quirky independent bookstore with refined literary tastes.

That summer, the company launched what could be considered its first big innovation: allowing other websites to collect a fee when they sent customers directly to Amazon to buy a book. Amazon gave these approved sites an 8 percent commission for the referral. The Associates program wasn’t exactly the first of its kind, but it was the most prominent and it helped spawn a multibillion-dollar-a-year industry called affiliate marketing. It also allowed Amazon, very early on, to extend its reach across the Web to other sites, entrenching it in advance of the looming competition.

walked into the door and this guy with a boisterous laugh who was just exuding energy comes bounding down the steps,”

It invested $8 million, acquiring a 13 percent stake in the company, and valuing it at $60 million.

Bezos was going to do more than establish an online bookstore; now he was set on building one of the first lasting Internet companies.

“Jeff was always an expansive thinker, but access to capital was an enabler,”

“the cash from Kleiner Perkins hit the place like a dose of entrepreneurial steroids, making Jeff more determined than ever.”12

Employees soon learned of a new motto: Get Big Fast. The bigger the company got, Bezos explained, the lower the prices it could exact from Ingram and Baker and Taylor, the book wholesalers, and the more distribution capacity it could afford.

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.

The assumption was that no one would take even a weekend day off. “Nobody said you couldn’t, but nobody thought you would,”

“There were deadlines and dea...

(Bezos, it seems, has a nostalgic streak; one building is called Fiona, the code name of the original Kindle, and another is Obidos, which is what Shel Kaphan dubbed the company’s original computer infrastructure, after a town in Brazil where the tributaries of the Amazon River converge.)

Parking was scarce and expensive. Nicholas Lovejoy suggested to Bezos that the company subsidize bus passes for employees, but Bezos scoffed at the idea. “He didn’t want employees to leave work to catch the bus,” Lovejoy says. “He wanted them to have their cars there so there was never any pressure to go home.”

that grouped together customers who had similar purchasing histories and then found books that appealed to the people in each group. That feature, called Similarities, immediately yielded a noticeable uptick in sales and allowed Amazon to point customers toward books that they might not otherwise have found.

“Great merchants have never had the opportunity to understand their customers in a truly individualized way,” he said. “E-commerce is going to make that possible.”

As the company and its technologies evolved, one person was having a ridiculously good time: Shel Kaphan.

Kaphan asked Bezos why, now that they had accomplished some of their earliest goals, he was so bent on rapid expansion. “When you are small, someone else that is bigger can always come along and take away what you have,” Bezos told him. “We have to level the playing field in terms of purchasing power with the established booksellers.”

He walked into Bezos’s office that year and wondered aloud, “We’re growing pretty quickly now. Are you going to replace me?” Bezos didn’t waver. “Shel, the job is yours as long as you want it.”

Bezos began filling out the rest of his senior leadership ranks, building a group that would formally become known as the J Team.

Amazon recruited executives from Barnes & Noble and Symantec and two from Microsoft—Joel Spiegel, a vice president of engineering, and David Risher, who would eventually take over as head of retail.

“If we get this right, we might be a $1 billion company by 2000,” Bezos told him. Risher personally informed Microsoft cofounder Bill Gates of his defection to the bookseller across the lake. Gates, who underestimated the Internet’s impact for too long, was stunned. “I think he was honestly flabbe...

Bezos disagreed. He looked right at Schultz and told him, “We are going to take this thing to the moon.”

Bezos’s “get big fast”

Amazon did not urgently require the capital of a public offering—it had yet to begin launching new product categories, and its ninety-three-thousand-square-foot warehouse in South Seattle was serving the company’s needs. But Bezos believed a public offering could be a global branding event that solidified Amazon in customers’ minds.

Another reason Bezos pushed to go public was that competition was looming online in the form of the reigning giant of the bookselling business, Barnes & Noble.

Inexperienced at the time in these kinds of discussions, Bezos called investor and board member Tom Alberg and asked him to accompany him to dinner with the Riggios. Beforehand, they decided on a strategy of caution and flattery.

They told Bezos and Alberg that they were going to launch a website soon and crush Amazon. But they said they admired what Bezos had done and suggested a number of possible collaborations, such as licensing Amazon’s technology or opening a joint website. “They didn’t come right out and offer to buy us. It was not particularly specific,” Alberg says.

“It was a pretty friendly dinner. Other than the threats.”

Afterward, Alberg and Bezos told the Riggios they would think about a partnership. Later Alberg and Bezos spoke on the phone and agreed that such a collaboration was unlikely to work. “Jeff was always a big believer that disruptive small companies could triumph,” Alb...

Barnes & Noble would take many months to back up its threat and spin up its own Web operation, and during that time, Bezos’s team accelerated the pace of innovation and expansion.

Customers paid with their credit cards when their books shipped but Amazon settled its accounts with the book distributors only every few months.

With every sale, Amazon put more cash in the bank, giving it a steady stream of capital to fund its operations and expansion.

In other words, Bezos and Covey argued, a dollar that was plugged into Amazon’s infrastructure could lead to exponentially greater returns than a dollar that went into the infrastructure of any other retailer in the world.

At seemingly every stop, investors asked the pair about possible expansion into other categories. Bezos demurred and said he was focused only on books.

what it cost Amazon to attract a new user and how much loyal customers typically spent on the site.

He wanted capital from an IPO but didn’t want to give his rivals a road map to use to follow in his footsteps. “There was a lot of skepticism on the road show,” says Covey. “A lot of people said, you are going to fail, Barnes and Noble is going to kill you, and who do you think you are not to share this stuff?”

The IPO process was painful in another way: During the seven-week SEC-mandated “quiet period,” Bezos was not permitted to talk to the press. “I can’t believe we have to delay our business by seven years,” he complained, equating weeks to years because he ...

Later that month, the Riggios unveiled their own website, and many seemed ready to see Amazon crushed.

Straining against the regulatory shackles that required him to stay silent, Bezos wanted to send mimes wearing Amazon T-shirts to skulk around the Riggios’ launch event.

“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.”

For the next year, Amazon.com and BarnesandNoble.com competed, each asserting that it had a better selection and lower prices. Barnes & Noble laid claim to a deeper catalog; Amazon ramped up efforts to find rare and out-of-print books, assigning employees to track down books in independent bookshops and at antique-book dealers. In 1998, Barnes & Noble would spin off its dot-com subsidiary with a $200 million investment from German media giant Bertelsmann and later take the company public. Amazon would then outflank the bookseller by rapidly expanding into other product categories like music and DVDs.

The Riggios were reluctant to lose money on a relatively small part of their business and didn’t want to put their most resourceful employees behind an effort that would siphon sales away from the more profitable stores.

The shift from that to mailing small orders to individual customers was long, painful, and full of customer-service errors. For Amazon, that was just daily business.

But the IPO raised $54 million and got widespread attention, propelling the company to a blockbuster year of 900 percent growth in annual revenues. Bezos, his parents, and his brother and sister (who had each bought ten thousand dollars’ worth of stock early on) were now officially multimillionaires.

But even that was peanuts compared to the coming exponential growth in Amazon’s stock.

After returning to civilian life, he eventually went to work in the information-systems division of the most technologically sophisticated retailer in the world: Walmart.

Despite the awkward start, Dalzell left Seattle intrigued with Bezos’s vision and geeky charisma.

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,” says Bruce Jones, a longtime Amazon engineer and Dalzell’s friend. “Rick made sure we got the important stuff done.”

Now, an aspirational project aimed at building a massive mechanical clock designed to measure time for ten thousand years, a way to promote long-term thinking.