The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google

by Scott Galloway

The result is a retailer worth more than Walmart, Target, Macy’s, Kroger, Nordstrom, Tiffany & Co., Coach, Williams-Sonoma, Tesco, Ikea, Carrefour, and The Gap combined.

In Q4 of 2016, Apple registered twice the net profits Amazon has produced, in total, since its founding twenty-three years ago.7,8,9,10Apple’s cash on hand is nearly the GDP of Denmark.

Fundamental to business is the notion that in a capitalist society the consumer reigns supreme, and consumption is the most noble of activities.

Consumption has taken the place of shared sacrifice during times of war and economic malaise. The nation needs you to keep buying more stuff.

E-commerce firms die with a whimper, not a bang, because while brick-and-mortar retail has a face, e-commerce deaths are faceless and not as jarring.

Normal business thinking: If we can borrow money at historically low rates, buy back stock, and see the value of management’s options increase, why invest in growth and the jobs that come with it? That’s risky.

Amazon business thinking: If we can borrow money at historically low rates, why don’t we invest that money in extraordinarily expensive control delivery systems? That way we secure an impregnable position in retail and asphyxiate our competitors. Then we can get really big, fast.

Shrewdly and publicly, Mr. Bezos bifurcates Amazon’s risk taking into two types of investments: Type 1—those you can’t walk back from (“This is the future of the company”); and Type 2—those you can (“This isn’t working, we’re out of here”).

Type 2 investments are cheap, because they likely will be killed before they waste too much money, and they pay big dividends in building Amazon’s image as a leading-edge company.

The overlooked lesson here, other than having a shit-ton of capital, is the willingness to perform infanticide on initiatives or products that aren’t working, thus freeing up capital (in Amazon’s case, human capital) to start new crazy initiatives.

the Seattle firm connected with the ball. As Bezos wrote in Amazon’s first annual letter, in 1997, “Given a 10 percent chance of a hundred times payout, you should take that bet every time.”

History favors the bold. Compensation favors the meek.

Big companies may have more assets to innovate with, but they rarely take big risks or innovate at the cost of cannibalizing a current business.

Most boards ask management: “How can we build the greatest advantage for the least amount of capital/investment?” Amazon reverses the question: “What can we do that gives us an advantage that’s hugely expensive, and that no one else can afford?”

Amazon is going underwater with the world’s largest oxygen tank, forcing other retailers to follow it, match its prices, and deal with changed customer delivery expectations. The difference is other retailers have just the air in their lungs and are drowning. Amazon will surface and have the ocean of retail largely to itself.

Making Type 2, risky investments also desensitizes Amazon’s shareholders to failure.

“Failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment.”55

Most uber-wealthy people have one thing in common: failure.

What’s clear is that we need business leaders who envision, and enact, a future with more jobs—not billionaires who want the government to fund, with taxes they avoid, social programs for people to sit on their couches and watch Netflix all day. Jeff, show some real fucking vision.

They sided with Apple, as the firm embodies their own maverick, antiestablishment, progressive ideals—and conveniently ignored the fact that Steve Jobs gave nothing to charity, almost exclusively hired middle-aged white guys, and was an awful person.

Apple has always found inspiration from others (Latin for stealing ideas).

It’s not stores that are dying, but the middle class, and the stores serving them.

Google and Samsung are both coming for Apple. But they are more likely to produce a better phone than to replicate the romance, connection, and general awesomeness of Apple’s stores.

However, they suffer from the same sickness all of us academics are infected with: the pursuit of prestige over social good.

The first is taking—which often means stealing IP from other companies and repurposing it for profit, only to viciously protect that IP once they’ve amassed a lot of it.

The second is profiting from assets built by someone else in a manner unavailable to the originator.

the so-called first-mover advantage is usually not an advantage. Industry pioneers often end up with arrows in their backs—while the horsemen, arriving later (Facebook after Myspace, Apple after the first PC builders, Google after the early search engines, Amazon after the first online retailers), get to feed off the carcasses of their predecessors by learning from their mistakes, buying their assets, and taking their customers.

1. Product Differentiation

A worthwhile exercise is to map out the value chain of your product or service from the origin of the materials through its manufacture, retail, usage, and disposal . . . and identify where technology can add value, or remove pain, from the process/experience.

I’d argue that the majority of stakeholder value created over the last decade has been a function of removal.

Levi’s went from $7 billion to $4 billion from 1995 to 2005 because it didn’t have control of its distribution. Seeing Levi’s jeans piled up as you walk through JCPenney’s is just not an aspirational experience.

I believe P&G will begin acquiring grocery retail, as they must develop distribution that’s growing, and not depend on Amazon, who is their frenemy . . . minus the friend part.

A company has to be vertical to reach half a trillion dollars in market valuation.

One interesting result of the increasing importance of emotional maturity is that among younger people, this skill favors women.

Anyway, when asked in surveys, men and women agree that women in their twenties tend to “act their age” more than men.

Successful people in the digital age are those who go to work every day, not dreading the next change, but asking, “What if we did it this way?”

Adherence to process, or how we’ve always done it, is the Achilles’ heel of big firms and sepsis for careers.

Be the gal who comes up with practical and bat-shit crazy ideas worth ...

Play offense: for every four things you’re asked to do, offer one deliverable or ide...

Another standout skill is...

Be more obsessed with the details than anybody on your team and what needs to get...

Assume nothing will happen unless you are all over everybody and everythi...

Yes, Zuckerberg, Gates, and Jobs all dropped out of college. However, you, or your son, are not Mark Zuckerberg. And while none of them graduated, their college experiences were still instrumental in their success.

Facebook went viral among college students because it grew out of a real need on campus.

Gates spent three years intensely studying math and programming at Harvard before he started Microsoft, and he met Steve Ballmer there, the man to whom he’d turn over t...

And even Jobs, who passed through Reed College in an adolescent daze, famously had his passio...

So, go to college—you may even learn something. But even if you don’t, a brand-name college on your forehead will be your greatest asset until you have assets, and it will never stop opening doors.

The kids who get into the top twenty schools are fine. They can pay off their student debt. Meanwhile, everybody else incurs the same level of student debt, yet faces nowhere near the same opportunities for an ROI on that debt.

The cost of college has skyrocketed in recent years, at a rate of 197 percent vs. the 1.37 percent inflation rate.

Harvard claims it could have doubled the size of its freshman class last year with no sacrifice to its educational quality.