Amazon Unbound: Jeff Bezos and the Invention of a Global Empire

by Brad Stone

He thought the Amazon brand could be malleable, like Richard Branson’s Virgin, so he dove headlong into new product categories and started selling CDs, DVDs, toys, and electronics. “We are going to take this thing to the moon,” he told then fellow Seattle CEO Howard Schultz of Starbucks.

What followed was one of the most remarkable turnarounds in business history. After failing to match eBay’s success with online auctions, Bezos opened the site to third-party sellers and allowed them to list their wares alongside Amazon’s own products and let customers decide who to buy from. Then he had an epiphany, recognizing the flywheel, or virtuous cycle, that was powering his business. By adding outside vendors and additional selection to Amazon.com, the company drew in new shoppers and earned commissions on those sales, which it could use to lower prices or subsidize faster delivery. That in turn drew in more shoppers and attracted more sellers—and the process repeated itself. Invest in any part of the loop, Bezos reasoned, and this cycle would accelerate.

Bezos was prepared to fight to protect a significant price advantage over offline rivals, and even backed a California ballot initiative to undo a new state law that would force online retailers to collect sales tax. But in the middle of the fight, he changed course; sales tax avoidance had tied the company in knots, requiring it to limit where it opened facilities and even where employees could travel. By agreeing to collect sales tax, Bezos surrendered his prized advantage. Instead, he took the longer view, making it possible for Amazon to open up offices and fulfillment centers in more populous states, much closer to its customers, laying the groundwork for one of the largest expansions in business history.

Amazon’s principal #10, “frugality”: Accomplish more with less. Constraints breed resourcefulness, self-sufficiency, and invention. There are no extra points for growing headcount, budget size, or fixed expense.

principal #8, “think big”: Thinking small is a self-fulfilling prophecy. Leaders create and communicate a bold direction that inspires results. They think differently and look around corners for ways to serve customers.

That the resurgent Apple had the same idea of a voice-activated personal assistant was both validating for Hart and his employees and discouraging, since Siri was first to market and with initial mixed reviews. The Amazon team tried to reassure themselves that their product was unique, since it would be independent from smartphones. Perhaps a more significant differentiator though was that Siri unfortunately could no longer have Jobs’s active support, while Alexa would have Bezos’s sponsorship and almost maniacal attention inside Amazon.

To develop this voice and ensure it had no trace of a regional accent, the team in Poland worked with an Atlanta area–based voice-over studio, GM Voices, the same outfit that had helped turn recordings from a voice actress named Susan Bennett into Apple’s agent, Siri. To create synthetic personalities, GM Voices gave female voice actors hundreds of hours of text to read, from entire books to random articles, a mind-numbing process that could stretch on for months.

Characteristically secretive, Amazon has never revealed the name of the voice artist behind Alexa. I learned her identity after canvasing the professional voice-over community: Boulder-based singer and voice actress Nina Rolle. Her professional website contained links to old radio ads for products such as Mott’s Apple Juice and the Volkswagen Passat—and the warm timbre of Alexa’s voice was unmistakable. Rolle said she wasn’t allowed to talk to me when I reached her on the phone in February of 2021. And when I asked Amazon to speak with her, they declined.

Over the ensuing months, that amicable consensus devolved into a long-standing tug-of-war between Hart and his engineers, who saw playing music as a practical and marketable feature, and Bezos, who was thinking more grandly. Bezos started to talk about the “Star Trek computer,” an artificial intelligence that could handle any question and serve as a personal assistant. The fifty-cent word “plenipotentiary” was used inside the team to describe what he wanted: an assistant invested with full powers to take action on behalf of users, like call for a cab or place a grocery order. With his science fiction obsession, Bezos was forcing his team to think bigger and to push the boundaries of established technology. But Hart, facing pressure to actually ship the product, advocated for a feature set he dubbed “the magical and the mundane” and pushed to highlight basic, reliable features like allowing users to ask for weather reports as well as setting timers and alarms. The debate manifested itself in endless drafts of the “PR FAQ”—the six-page narrative Amazonians craft in the form of a press release at the start of a new initiative to envision the product’s market impact. The paper, a hallowed part of Amazon’s rituals around innovation, forces them to begin any conversation about a new product in terms of the benefit it creates for customers.

Later, Alexa execs would say that Bezos’s close involvement made their lives more difficult but also produced immeasurable results. Jeff “gave us the license and permission to do some of the things we needed to do to go faster and to go bigger,” Toni Reid said. “You can regulate yourself quite easily or think about what you’re going to do with your existing resources…. Sometimes, you don’t know what the boundaries are. Jeff just wanted us to be unbounded.”

“Jeff was very particular that he didn’t want to just build any store. He wanted the store to be disruptive—something that no one had attempted before, something that would change the way brick-and-mortar retail had been done for hundreds of years,” said Bali Raghavan, who joined as one of the first engineering directors.

The PR FAQs from the time—with Bezos’s handwriting scrawled in the margin, according to people who saw drafts—coined a trademark for a system that didn’t yet exist: “Just Walk Out technology.” Having envisioned the outcome, they would now try to invent a system that would allow shoppers to select items from shelves and get automatically charged without ever queueing up to pay.

Bezos didn’t want them to take an easy path; he wanted them to innovate in the field of computer vision, which he saw as important to Amazon’s future. So they settled on the idea of cameras in the ceiling and algorithms behind the scenes that would try to spot when customers selected products and charge them for it. Scales hidden inside the shelves would provide another reliable sensor to determine when products were being removed and corroborate who was buying what.

Toward the end of 2013, they decided to focus on groceries. Americans on average shopped for clothes and electronics just a few times a year. They shopped for food an average 1.7 times a week in 2013, according to the Food Marketing Institute, magnifying the inconvenience of waiting in line.

Shoppers themselves also tended to get confused by the novel format. “We noticed lots of customers hesitating at the exit, asking the entry associate if they really could leave,” Puerini said later. “In tests, we put up a big poster that said, ‘No, really, you can just walk out!’ ” A version of the sign is still there in the original store.

“Jeff is master of ‘this isn’t working today, but could work tomorrow.’

And in 2020, Amazon started opening large Amazon Fresh grocery stores, without Go technology but with the long-gestating Amazon Dash Carts, which allowed shoppers to scan items as they walked the aisles and skip the checkout line.

Ballmer and other Amazon skeptics, like the hedge fund investor David Einhorn, who added Amazon to his “bubble basket of stocks” that fall, were looking at Amazon’s reported losses and significant investments in new initiatives. They were also underestimating the true performance of its older business units, which the company shrouded in secrecy. Amazon was profitable, particularly mature retail categories like books and electronics in the U.S. and UK. But rather than accumulating record amounts of cash and reporting it on its income statement, as companies like Microsoft and Apple were doing at the time, Bezos invested Amazon’s winnings like a crazed gambler at the craps table in Las Vegas.

But in 2015, an earlier wager finally started to pay off. In its April earnings report, Amazon revealed for the first time the financial health of its ten-year-old cloud business, Amazon Web Services, and shocked Wall Street with its underlying sales growth and profitability.

It turned out that Steve Ballmer’s broadside against Amazon was a perfect contrarian indicator; it would mark almost precisely the start of one of the most dramatic increases in corporate value and personal wealth in the entire history of capitalism.

AWS’s revenues and profits were a closely guarded secret. The division generated $4.6 billion in sales in 2014 and was growing at a 50 percent annual clip. But Amazon disguised those numbers, along with nascent advertising revenues, in a sundry “other” category on its income statement, so that potential competitors like Microsoft and Google would not recognize how attractive a business cloud computing actually was. Observers and analysts could only guess at the financial dimensions of a unique enterprise computing business, anomalously tucked inside an online retailer.

Bezos contended that the media business enhanced the appeal and “stickiness” of Amazon Prime, which in turn motivated people to spend more on Amazon. “When we win a Golden Globe, it helps us sell more shoes,” he said on stage at a technology conference in 2016. At least some of his Hollywood employees were dubious of that characterization. They did not consider themselves to be shoe salespeople, although everyone appreciated having the backing of a profitable e-commerce company subsidizing their creative risks. They tracked each show and analyzed how many people watched and then converted from free Prime trial periods or extended their current membership. But there was little evidence of a connection between viewing and purchasing behavior—especially one that justified the enormous outlay on video. Any correlation was also obfuscated by the fact that Prime was growing rapidly on its own. The truth was this: Bezos wanted Amazon to make TV shows and films. He could see that the decades-old way that TV shows and movies were produced and distributed was changing and sought a principal role for Amazon in that future. As in the early days of Alexa, the Go store, and Amazon India, the economic justification might be flimsy today, but opportunities for making money would always present themselves tomorrow.

In 2015, Amazon’s domestic retail sales were growing at a respectable 25 percent clip; by 2017, they were increasing at an even faster rate of 33 percent.

Amazon executives explained this as a triumph of their flywheel, the virtuous cycle that guided their business. Once again, it worked like this: Amazon’s low prices and the loyalty of its Prime members led to more customer visits, which in turn motivated more third-party sellers to list their wares on its marketplace. More products attracted more customers. And the commissions that marketplace sellers paid to Amazon allowed the company to further lower prices and invest in speedier delivery for a greater percentage of items, making Prime even more attractive. Thus the fabled flywheel fed on itself and spun ever faster.

Operating leverage is a little like trimming the sails of a sailboat as it picks up speed. Bezos and his lieutenants on the S-team asked the same questions of the executives in their older, more mature business units: How could they reduce costs in their operations while maintaining sales growth? How could they maximize the productivity of every hour they were getting from their employees? Where could automation and algorithms stem the growth in headcount or replace employees altogether? Each year the company would try to get more efficient and improve leverage by even the smallest margin. The resulting changes could make employees’ jobs more difficult.

“Jeff was the one who challenged everyone to lower fees and not focus on income, but instead to put our attention to adding sellers and growing selection. He knew that was how we could get the business to scale and become profitable. Jeff always said that when you focus on the business inputs, then the outputs such as revenue and income will take care of themselves.”

The executives on the trip were amazed by what they saw. The group on the fashion leg visited an apparel factory that was making $9 sport coats for the retailer Abercrombie & Fitch, which then sold them at retail for $500. The same factory was also selling the coats with a different button pattern directly online for $90—and still making a fat profit.

Execs on the electronics leg of the trip saw similar things. Factories across China were going straight to shoppers online, bypassing traditional stores, and providing great value for consumers. In other words, massive disruption was coming to retail, despite the problems of fraud, counterfeits, and low-quality items.

“We realized that people charging ten to fifty times what products actually cost to make, based on a brand name, wasn’t going to last and consumers would be the winners.”

What execs still didn’t like to admit, particularly at a politically sensitive time in bilateral trade relations, was that 49 percent of the top ten thousand largest sellers on Amazon were based in China, according to Marketplace Pulse, a research firm that monitors the site. In April 2020, the Office of the U.S. Trade Representative listed Amazon sites in five countries as “notorious markets” with dangerous levels of counterfeit and pirated products. Amazon called the report a “purely political act” and part of a vendetta by the administration of Donald Trump.

Despite all these tribulations, the selection machine had met Jeff Bezos’s lofty goals and positioned Amazon at the forefront of a rapidly globalizing retail landscape. The higher-margin proceeds from the third-party marketplace, which were at least double the profits from Amazon’s own retail efforts, would go on to nourish other parts of his business empire, such as Prime Video and the construction of new fulfillment centers, just as Bezos had always hoped.

One problem was that Whole Foods was no longer unique: Walmart, Costco, and Kroger were expanding the number of aisles devoted to organic and natural products. Another was that the company had grown over the years by acquiring regional chains, which led to an unwieldy patchwork of back-end technology systems. Without a frequent shopper program, which Mackey refused to implement, it knew next to nothing about even its most loyal customers. A decentralized operating structure limited the company’s dexterity at precisely the time when it needed to evolve quickly to meet changing tastes, as well as to introduce home delivery and new digital payment methods.

Jeff Bezos placed prospective business opportunities into one of two buckets. There were land rushes, when the moment was ripe, rivals were circling, and Amazon had to move quickly or else it would lose out. Then there was everything else, when the company could bide its time and patiently experiment.

But for years he took a more passive approach to home delivery of food—that is, until he saw formidable competition emerge and abruptly changed his mind. The resulting shift in strategy would have significant consequences for the massive grocery market and the way customers, competitors, and regulators viewed the e-commerce juggernaut forever after.

Internet historians would view Webvan as the ultimate symbol of Silicon Valley’s arrogant rush to create a future that people didn’t want. According to Herrington, a Princeton University and Harvard Business School alumnus who ran product development and marketing at Webvan, the real story was more complex. CEO Louis Borders—cofounder of the eponymous book chain—and his team erred by building a network of warehouses that were so costly to operate that the company lost money on every order. Before they could rectify that mistake or even open for business in many cities where they had set up operations, Wall Street stopped funding unprofitable startups during the early 2000s recession. The company’s sales and customer base were growing, but it couldn’t withdraw from its financial commitments fast enough and declared bankruptcy.

Amazon Fresh launched in August 2007. In Bellevue, east of Seattle, Herrington’s team leased an old Safeway distribution center,

Unlike other Amazon services, which instantly had national or even global reach, Fresh’s potential was bounded by the zip codes where its fleet of drivers could make deliveries. The Fresh team also had to solve a nest of thorny problems, like what to do with expired food, how to manage the complex banana ripening process, and how to respond when customers complained they had found something unseemly in their dinner. Still, over the course of six years, they made slow but steady progress that crept toward profitability.

Herrington regularly pitched plans to the S-team to replicate Fresh in other cities. But Amazon was smaller back then, and the land-rush opportunities, such as the doomed expansion in China and the Fire Phone, took precedence. Consumer adoption of home grocery delivery, Bezos believed, was going to be a more gradual process.

Then in April 2012, Bezos convened the S-team at Willows Lodge in Woodinville, Washington, about a half hour northeast of Seattle, for their annual off-site retreat. Each executive was asked to bring a one- to two-page memo that contemplated a significant new opportunity for Amazon. Herrington had joined the vaunted leadership council a year before, and his blunt memo woul...

Herrington was talking largely about the inexpensive, bulky items stocked by supermarkets, such as bottled water, Diet Coke, or even a bag of apples.

“All of them anchor their customer relationship in groceries,” he wrote. If Amazon’s retail business was going to grow to $400 billion in gross merchandise sales, it needed to transform a model based on infrequent shopping for relatively high-priced goods to more regular shopping for low-priced essentials.

He concluded the memo by subtly needling his colleagues, including Bezos, who considered himself implacably bold. “We should be less timid in investing in this future,” Herrington wrote. “We have the capacity to put a much more significant bet on the table, if we have the will.” Bezos typically responded well to this type of critical introspection, especially when it was coupled with a proposal for aggressive expansion.

Then, as so often happened in Amazon’s history, the arrival of competitors onto a shifting landscape injected some resolve into the calculations of Bezos and the S-team.

Two rivals introduced same-day delivery services, using similar business models. The San Francisco startup Instacart was founded by Apoorva Mehta, a former Level 5 senior engineer in Amazon’s logistics division (in other words, a relatively low-level worker on a hierarchy that stretched from Level 1 warehouse recruits to Bezos at Level 12).

The second challenger seemed even more dangerous at the time. Amazon’s archrival, Google, introduced a service called Google Shopping Express—later Google Express—offering customers unlimited same-day delivery from retailers like Costco, Target, and Smart & Final for a $95-a-year annual subscription. In 2014, the service expanded to Chicago, Boston, Washington, D.C., and soon after would land in Bezos’s backyard in Seattle.

With Bezos spending his time on newer initiatives like Alexa, he was leaving the daily maneuverings in Amazon’s consumer business to his retail chief.

In her new job, Landry’s first task was writing the PR FAQ, the preliminary press release that conjured the kind of service that Wilke wanted. The paper and its subsequent revisions described a smartphone app-based service that Landry first dubbed Amazon Magic, and then Amazon ASAP. She proposed forming three separate teams, each with a magic-themed name, which would all take different approaches toward the same goal of ultra-fast delivery. One group would develop a retail service, code-named Houdini, which would store and sell a limited selection of the most popular products on Amazon from strategically located urban warehouses.

Another group would take a third-party marketplace approach, dubbed Copperfield. That team would seek to form partnerships with retail and grocery stores and list the products they had on their shelves on a new Amazon smartphone app, just like Google Express and Instacart.

Finally, a third group was formed to pursue an idea called Presto. It called for assembling an even smaller selection of top-selling products and driving them around in a truck or van to deliver items in less than ten minutes to surrounding neighborhoods. This approach proved complex and risked overlapping with the others, causing confusion, so it was quickly shelved.

in a November 2014 meeting, he scrapped the Amazon ASAP name and rechristened the service Prime Now, to tie it more closely to Amazon’s expanding subscription club.