The Everything Store: Jeff Bezos and the Age of Amazon

by Brad Stone

A few years later, as a direct result of that weekend, Bezos would become the biggest financial backer of the 10,000-Year Clock and agree to install it on property he owned in Texas.

He calls Bezos’s decision to remove him from active participation in Amazon “a betrayal of a sacred trust” between people who had started a business together and says that the way he was treated “was one of the biggest disappointments of my entire life.”

With his convincing gospel, Bezos had persuaded them all to have faith, and they were richly rewarded as a result. Then the steely-eyed founder replaced them with a new and more experienced group of believers.

Watching the company move on without them gave these employees a gnawing sensation, as if their child had left home and moved in with another family. But in the end, as Bezos made abundantly clear to Shel Kaphan, Amazon had only one true parent.

“You seem like a really nice guy, so don’t take this the wrong way, but you really need to sell to Barnes and Noble and get out now,” one student bluntly informed Bezos.

Brian Birtwistle, a student in the class, recalls that Bezos was humble and circumspect. “You may be right,” Amazon’s founder told the students. “But I think you might be underestimating the degree to which established brick-and-mortar business, or any company that might be used to doing things a certain way, will find it hard to be nimble or to focus attention on a new channel. I guess we’ll see.”

“I’m a student of history,” he said. “If I’m able to join a company like yours at this early stage, I’d feel like I get to participate in something historic.” Bezos almost started yelling. “That is exactly how we think at Amazon.com! You watch. There will be a proliferation of companies in this space and most will die. There will be only a few enduring brands, and we will be one of them.”

findings from a survey that showed a significant majority of consumers did not use Amazon.com and were unlikely to start simply because they bought very few books.

He told Breier to organize the new Harvard Business School graduates into a “SWAT team” to research categories of products that had high SKUs (the number of potentially stockable items), were underrepresented in physical stores, and could easily be sent through the mail. This was a key part of Amazon’s early strategy: maximizing the Internet’s ability to provide a superior selection of products as compared to those available at traditional retail stores. “I brought him very bad news about our business, and for some reason, he got excited,” Breier says.

Bezos now felt expansion into new categories was urgent.

In customers’ minds, the Amazon brand meant books only. He wanted it to be more malleable, like Richard Branson’s Virgin, which stood for everything from music to airlines to liquor. Bezos also needed Amazon to generate the kind of returns that would allow him to invest in technology and stay ahead of rivals. “By that time, Jeff had done the math on a legal pad and knew this had to happen. It was go really big...

from the beginning, Bezos planned to expand beyond books, but he was looking for the right moment to do it. “He always had a large appetite,” she says. “It was just a question ...

Amazon executives chose music as the first expansion target, and DVDs as the second.

To open new categories and build more warehouses, Amazon needed more than a plan: it needed additional capital. So that May, the company raised $326 million in a junk-bond offering, and the following February, another $1.25 billion in what was at the time the largest convertible debt offering in history. With a 4.75 percent interest rate for the latter offering, it was exceedingly cheap capital for the time.

During that time, no one placed bigger, bolder bets on the Internet than Jeff Bezos. Bezos believed more than anyone that the Web would change the landscape for companies and customers, so he sprinted ahead without the least hesitation.

“I think our company is undervalued” became another oft-repeated Jeffism. “The world just doesn’t understand what Amazon is going to be.” In those highly carbonated years, from 1998 to early 2000, Amazon raised a breath-taking $2.2 billion in three separate bond offerings. It spent much of that on acquisitions, but even just a few years later, it was difficult to show that any of those deals helped its primary business.

During those misadventures, Bezos seemed unperturbed. If anything, the setbacks made him push the company even harder into new territory.

“Physically, I’m a chicken. Mentally, I’m bold.”

Bezos used that word a lot: bold.

“We will make bold rather than timid investment decisions where we see a sufficient probability of gaining market leadership advantages,”

“Some of these investments will pay off, others will not, and we will have learned another valuable lesson in either case.”

The letter also stated that the company would make decisions based on long-term prospects of boosting free cash flow and growing market share rather than on short-term profitability, and one section in particular served as a guidepost for...

We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital. Our decisions have consistently reflected this focus. We first measure ourselves in terms of the metrics most indicative of our market leadership: customer and revenue growth, the degree to which our customers continue to purchase from us on a repeat basis, and the streng...

The portals were accustomed to receiving equity stakes for these kinds of deals, but Bezos refused to give that—he was as stingy about handing out stock as he was about allowing employees to fly business-class. Instead, he paid cash and convinced each portal to throw in a freebie: links to Amazon books within search results. For example, if someone searched AOL.com for ski vacations, he would see a link to books about skiing on Amazon.

The acquisitions brought in experienced executives, but Amazon was moving too quickly, and was too chaotic internally, to properly integrate the companies and their technology. Most of the executives left after a year or two, repulsed by the frenetic pace, the dreary Seattle weather, or both.

Amazon owned a third of the company. The venture got off to a promising start, so for the next two years, Tinsley and Bezos invested tens of millions of Amazon’s cash in a variety of dot-com hopefuls, including Pets.com, Gear.com, Wineshopper.com, Greenlight.com, Homegrocer.com, and the urban delivery service Kozmo.com. In exchange for its cash, Amazon took a minority ownership position and a seat on the board for each, and the company believed it was well positioned for the future if those product categories succeeded on the Internet.

Almost all of them went down in flames, though, during the collapse of the dot-com bubble in 2000, and by then, Bezos had his own problems and possessed neither the temperament nor the time to try to save them. The company lost hundreds of millions on these investments. “Amazon had to be focused on its own business,” says Tinsley. “Our biggest mistake was thinking we had the bandwidth to work with all these companies.”

wild expansion for a few months,

“What we are doing here is building a giant rocket ship, and we’re going to light the fuse. Then it’s either going to go to the moon or leave a giant smoking crater in the ground. Either way I want to be here when it happens.”

As the company grew, Bezos offered another sign that his ambitions were larger than anyone had suspected. He starte...

But Dalzell knew that if anyone could accomplish Bezos’s ambitious vision of a rapid build-out of distribution capacity, it was Jimmy Wright. “I’m not sure anyone else in America could have done it,” Dalzell says.

Bezos said he wanted a distribution system that was ten times larger than it currently was, and not just in the United States but in Amazon’s new markets in the United Kingdom and Germany. Wright asked Bezos what products they would be shipping. “He said, ‘I don’t know. Just design something that will handle anything,’ ” Wright recalls. “I’m going, You’re kidding me, right? And he said, ‘No, that is the mission.’ I had to have a solution to handle everything but an aircraft carrier.”

And there was no predictability, because Amazon sales were growing by 300 percent a year.

Joy Covey realized that the gap between the number of orders being placed on the website and the number of packages being shipped to customers was widening, and she raised an alarm.

These facilities, Wright decreed, would be called not warehouses but distribution centers, as they were in Walmart’s internal lexicon.

“Walmart did not even have Internet in the building back then,” says Kerry Morris, a product buyer who moved from Walmart to Amazon. “We weren’t online. We weren’t e-mailing. None of us even knew what he meant by online retail.”

That year, more than a dozen Walmart employees moved to Amazon.

Bezos had imbibed Walton’s book thoroughly and wove the Walmart founder’s credo about frugality and a “bias for action” into the cultural fabric of Amazon. In the copy he brought to Kathryn Dalzell, he had underlined one particular passage in which Walton described borrowing the best ideas of his competitors. Bezos’s point was that every company in retail stands on the shoulders of the giants that came before it.

He was constitutionally unwilling to watch Amazon succumb to any kind of institutional torpor, and he generated a nonstop flood of ideas on how to improve the experience of the website, make it more compelling for customers, and keep it one step ahead of rivals.

In early 1998, Bezos was closely involved with a department called Personalization and Community, which was geared toward helping customers discover books, music, and movies they might find interesting. That May, he surveyed what was then Amazon’s Hot 100 bestseller list and had an epiphany—why not rank everything on the site, not just the top sellers? “I thought, ‘Hey, why do we stop at a hundred? This is the Internet! Not some newspaper bestseller list. We can have a list that goes on and on,’ ” he told the Washington Post.

Amazon filed for a patent on what it called its 1-Click ordering process.

declared that he wanted to make it as easy as possible for customers to buy things on the site.

devised a system that preloaded a customer’s credit card information and preferred shipping address and then offered the opportunity to execute a purchase with a single press of a button when he or she ordered a product.

By reducing the friction of online buying even marginally, Amazon could reap additional millions in revenue while simultaneously digging a protective moat around its business and hobbling its rivals. The company’s nineteen-page patent application for the system, entitled “Method and System for Placing a Purchase Order Via a Communications Network,” was approved in the fall of 1999. Amazon trademarked t...

He sued Barnes & Noble for infringing on the patent in late 1999 and won a preliminary ruling that forced the bookseller to add an extra step to its checkout process. Amazon licensed the patent to Apple in 2000 for an undisclosed sum and tried to use it, ineffectively, to gain some leverage over a rising and worrisome rival that first showed up on Amazon’s radar in mid-1998: eBay.

Blackburn realized that it was growing rapidly, and, even more unsettling—and unlike Amazon—it was profitable.

The company had the perfect business model: it took a commission on each sale but had none of the costs of storing inventory and mailing packages. Sellers posted their own products on the site, auctioned them off to the highest bidder, and handled shipping to the customers themselves.

The venture capitalists backing eBay asked around and heard that one did not work with Jeff Bezos; one worked for him.

Though Bezos often claimed that Amazon considered itself “a customer-focused company, not a competitor-focused company,”4 eBay anxiety spread.

But the effort went nowhere. Customers could reach Amazon Auctions only by clicking on a separate tab on the Amazon home page, and it looked like a dingy leftovers bin to people who were accustomed to using Amazon to shop in the traditional way, with predictable prices for each item.