The Everything Store: Jeff Bezos and the Age of Amazon

by Brad Stone

Amazon’s executives remember this significant failure as painful but strangely uplifting. “Those days in the nineties were the most intense, fun time I ever had at the company,” Blackburn says. “We had an insanely talented group of people trying to figure out how to launch a superior auctions site. In the end the network effect mattered. You could say we were naïve, but we built a great product.” Bezos didn’t take the defeat personally.

He later cast the mistake as the first step in a series of important experiments to bring third-party sellers onto Amazon.

Bezos claimed he was impervious to the hype, but as the dot-com frenzy intensified, he used the unique climate to hasten Amazon’s growth. If there was to be a great Internet landgrab, he reasoned, Amazon

“We don’t view ourselves as a bookstore or a music store,” he said that year. “We want to be the place for someone to find and discover anything they want to buy.”

There were two ways to accomplish this: either slowly, category by category, or all at once. Bezos tried both paths, and some of his ideas were so outlandish...

The idea was to obtain two copies of every book ever printed and store them in the new distribution center in Lexington, Kentucky. That was expensive and inefficient; most books would just sit gathering dust and taking up space, but Bezos wanted customers to be able to find any title on Amazon and get it quickly.

Bezos wanted to obtain one of every product ever manufactured and store it in a distribution center. “The overarching goal was to make Amazon the first place people looked to buy anything,” says Kim Rachmeler, a longtime Amazon executive. “If you had a rodeo costume in stock, what wouldn’t you have?”

“didn’t have a lot of support among the rank and file, to put it mildly. It kept getting pushed down the stack and Jeff kept reviving it. I vividly remember a large meeting where Jeff was trying to convince people that Fargo needed to be done. ‘This is the most critical project in Amazon’s history’ is pretty close to a direct quote.” Ultimately, the project faded amid other, more pressing priorities.

“for many years we were on a journey to figure out if we could get to same-day delivery.” The quest sparked a $60 million investment in Kozmo.com, which delivered everything, from snacks to video games, to a New York City customer’s doorstep. (It went bust in 2001.) Bezos even wondered aloud whether Amazon could hire college students on every block in Manhattan and get them to store popular products in their apartments and deliver them on bicycles. Employees were dumbstruck. “We were like, Aren’t we already worried about theft from our distribution center in Atlanta?” says Bruce Jones, an engineer who worked on DC software.

By any measure, the acquisition of Junglee was a failure.

Unbeknownst to the founders of Junglee at the time, Ram Shriram was quietly advising two PhD students at Stanford—Larry Page and Sergey Brin—who were trying to reimagine search on the Internet.

In February 1998, Shriram had become one of the first four investors who backed the hopeful little company, Google, with $250,000 each.

Years later, Bezos told journalist Steven Levy that he was impressed by the Google guys’ “healthy stubbornness” as they explained why they would never put advertisements on their home page.6

He later went back to the Google founders and argued that Bezos’s insight and budding celebrity could help the fledgling firm, and they agreed. Brin and Page flew to Seattle and spent an hour with Bezos at Amazon’s offices talking about technical issues like computer infrastructure. “Jeff was very helpful in some of those early meetings,” Larry Page says.

Thus did Jeff Bezos become one of the original investors in Google, his company’s future rival, and four years after starting Amazon, he minted an entirely separate fortune that today might be worth well over a billion dollars.

“He’s so prescient. It’s like he can peer into the future,”

“He’s also extremely shrewd and self-aware and knows just how far he can push something.”

The expansion into selling music and DVDs in 1998 had gone well, with Amazon quickly surpassing the early leaders in each market,

At the beginning of 1999, an emboldened Bezos selected toys and electronics as two of the company’s primary new targets.

In other words, Miller knew nothing about toy retailing, but in a pattern that would recur over and over, Bezos didn’t care. He was looking for versatile managers—he called them “athletes”—who could move fast and get big things done.

They walked the convention floor that week introducing themselves to wary toy companies that weren’t sure if Amazon and e-commerce in general represented an opportunity or a threat.

The toy company execs demanded to know how much product the two wanted to buy. The young Amazon executives had no earthly idea.

Toys were fundamentally different than books, music, or movies. This time, there were no third-party distributors to provide any item and take back unsold inventory. The big toy makers carefully weighed how much product they would allocate to each retailer. And the retailers had to predict nearly a year in advance what the next holiday season’s most popular items ...

If the retailers’ forecasts were wrong, they were in deep trouble, because after the holidays, unsold toys were nonreturnable and...

“Toys are so fad driven, it’s a little like betting on Oscar winners only by loo...

Bezos wanted Miller to plow $120 million into stocking every possible toy, from Barbie dolls to rare German-made wooden trains to cheap plastic beach pails, so that kids and parents would never be disappointed when they searched for an item on Amazon. But a prescient Miller, sensing disaster ahead, pushed to lower his own buy.

“No! No! A hundred and twenty million!” Bezos yelled. “I want it all. If I have to, I will drive it to the landfill myself!”

“The store was great for customers and we made our revenue goals, which were big, but other than that everything that could go wrong did. In the aftermath we were sitting on fifty million dollars of toy inventory. I had guys going down the back stairs with ‘Vinnie’ in New York, selling Digimons off to Mexico at twenty cents on the dollar. You just had to get rid of them, fast.”

It would take Amazon years to generate enough sales to sway the big Asian brands. For now, the electronics store was sparely furnished. Bezos had asked to see $100 million in electronics sales for the 1999 holiday season; Payne and his crew got about two-thirds of the way there.

Someone had the idea that the tables in the conference room at the Sheraton should have piles of merchandise representing all the new categories, to reinforce the idea of broad selection. Bezos loved it, but when he walked into the room the night before the event, he threw a tantrum: he didn’t think the piles were large enough. “Do you want to hand this business to our competitors?” he barked into his cell phone at his underlings. “This is pathetic!”

The piles of products were eventually large enough to satisfy Bezos, but the episode was an early warning. To satisfy customers and their own demanding boss during the upcoming holiday, Amazon executives were going to have to substitute artifice and improvisation for truly comprehensive selection.

With door-desks and minimal subsidies for employee parking, he was constantly reinforcing the value of frugality.

They agreed on five core values and wrote them down on a whiteboard in a conference room: customer obsession, frugality, bias for action, ownership, and high bar for talent. Later Amazon would add a sixth value, innovation.

Bezos began thinking about ways to inculcate those values in the company beyond hanging the lists on the walls of offices and distribution centers.

At least one anointed bar raiser would participate in every interview process and would have the power to veto a candidate who did not meet the goal of raising the company’s overall hiring bar.

“Many companies as they grow begin to compromise their standards in order to fill their resource needs,” says Dalzell. “We wanted to make sure that did not happen at Amazon.”

As Amazon’s growth accelerated, Bezos drove employees even harder, calling meetings over the weekends, starting an executive book club that gathered on Saturday mornings, and often repeating his quote about working smart, hard, and long.

“Jeff didn’t believe in work-life balance,” says Kim Rachmeler. “He believed in work-life harmony. I guess the idea is you might be able to do everything all at once.”

“The reason we are here is to get stuff done, that is the top priority,” he answered bluntly. “That is the DNA of Amazon. If you can’t excel and put everything into it, this might not be the place for you.”

They tried to rationalize the numbers and forecast the future, but none of it added up to anything other than massive losses as far as they could see.

Bezos insisted the company needed to master anything that touched the hallowed customer experience, and he resisted any efforts to project profitability. “If you are planning for more than twenty minutes ahead in this kind of environment, you are wasting your time,” he said in meetings.

Barron’s published a seminal article entitled “Amazon.bomb” that declared, “Investors are beginning to realize that this storybook stock has problems.”7 The article overreached, suggesting Walmart and Barnes & Noble would crush the upstart.

Kelyn Brannon, Amazon’s chief accounting officer at the time, says that she and Joy Covey pulled Bezos into a meeting to show him a form of financial analysis called common-sizing the income statement; it expressed each part of the balance sheet as a percentage of value to sales. The calculations showed that at its current rate, Amazon wouldn’t become profitable for decades. “It was an aha moment,” Brannon says. Bezos agreed to lift his foot from the accelerator and begin to move the company toward profitability. To mark the occasion, he took a photo of the group with his everpresent point-and-shoot digital camera and later taped the picture to the door of his office.

He believed the company should stockpile as many experienced managers as possible, and he was beginning to contemplate spending more of his time in the pursuit of his other personal passions.

The J Team was renamed the S Team (the S stood for “Senior”). Bezos was free to focus his attention on new products, public relations, his outside interests, and his family.

“Jeff was really thinking that he would focus on his philanthropic and other interests, which were diverse, and that he would turn Amazon over more,” Galli says. “That was exciting to me.” Galli, the son of an Italian American scrapyard owner from Pittsburgh, fashioned himself a cost-cutter and turnaround artist, and he was eager to make an impact on what was then one of the biggest business stages in the world.

Galli was not technical, a significant drawback at a firm whose employees somewhat defensively viewed their workplace as a software-development company, not a retailer. He read his e-mail only after his secretary printed it out for him, and he wanted to change the Amazon culture to favor phone calls instead of e-mail.

“At Amazon there were a hundred and fifty good ideas all the time and Jeff was capable of developing a new one every day.”

There were now five distribution centers spread across the United States and two in Europe.

The rapid growth once again required the company to initiate the Save Santa operation. Employees said good-bye to their families and headed off on two-week shifts to staff the customer-service phone lines or work in distribution centers across the country. Frugal to the bone, Amazon packed them two to a hotel room.