# Amazon Unbound  ## Metadata - Author: [[Brad Stone]] - Full Title: Amazon Unbound - Category: #books ## Highlights - “Every interesting thing I’ve ever done, every important thing I’ve ever done, every beneficial thing I’ve ever done, has been through a cascade of experiments and mistakes and failures,” Bezos continued. “I’m covered in scar tissues as a result of this.” ([Location 71](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=71)) - Tags: [[blue]] - in 1996, Silicon Valley venture capitalists got ahold of the startup, and the abundance of money flipped a switch in the brain of the budding CEO, sparking a bullish fervor of wild ambitions and fever dreams of domination. ([Location 129](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=129)) - Tags: [[blue]] - Bezos wanted to set his own metrics for success, without interference from impatient outsiders, so he encoded his operating philosophy in his first letter to shareholders, vowing a focus not on immediate financial returns or on satisfying the myopic demands of Wall Street, but on increasing cash flow and growing market share to generate value over the long term for loyal shareholders. “This is Day 1 for the Internet and, if we execute well, for Amazon.com,” he wrote, coining the sacred phrase “Day 1” that inside Amazon would come to represent the need for constant invention, fast decision-making, and the eager embrace of broader technology trends. ([Location 135](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=135)) - Tags: [[blue]] - Amazon’s stock sank into the single digits, ruining dreams of quick fortune. The thirty-seven-year-old Bezos scrawled “I am not my stock price!” on a whiteboard in his office and doubled down on giveaways to customers, like rapid delivery of the latest Harry Potter novel on the day of publication. ([Location 152](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=152)) - Tags: [[blue]] - 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. ([Location 163](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=163)) - Tags: [[blue]] - It turned out that there was more depth than anyone had suspected to the increasingly fit CEO with the now clean-shaven head. He was a ravenous reader, leading senior executives in discussion of books like Clayton Christensen’s The Innovator’s Dilemma, and he had an utter aversion to doing anything conventionally. Employees were instructed to model his fourteen leadership principles, such as customer obsession, high bar for talent, and frugality, and they were trained to consider them daily when making decisions about things like new hires, promotions, and even trivial changes to products. ([Location 190](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=190)) - Tags: [[blue]] - This unusual and decentralized corporate culture hammered into employees that there was no trade-off between speed and accuracy. They were supposed to move fast and never break things. ([Location 200](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=200)) - Tags: [[blue]] - The performance of each team was evaluated by Bezos’s hallowed leadership council of like-minded math whizzes: the S-team (for senior team). Sitting atop it all was Bezos himself, who would home in on promising new projects, or on fixing teams whose results were disappointing, with the same focus and exacting standards that he had brought to Amazon’s earliest days. ([Location 203](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=203)) - Tags: [[blue]] - “It’s still Day 1!” he dutifully reminded his employees and investors in the shareholder letter published that spring. After all, there was so much more to do to augment the nearly endless selection of physical and digital goods on the virtual shelves of “the everything store.” ([Location 223](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=223)) - Tags: [[blue]] - In 2015, the total value of the products sold on the marketplace surpassed the value of the units that Amazon sold itself on its own site. ([Location 248](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=248)) - Tags: [[blue]] - The CEO, for example, went to great lengths to illustrate Amazon’s principle #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. His wife, MacKenzie, drove him to work most days in their Honda minivan, and when he flew with colleagues on his private Dassault Falcon 900EX jet, he often mentioned that he personally, not Amazon, had paid for the flight. ([Location 336](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=336)) - Tags: [[blue]] - If Bezos took one leadership principle most to heart—which would also come to define the next half decade at Amazon—it was principle #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. ([Location 340](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=340)) - Designers convinced Bezos to lose the microphone in subsequent versions of the Kindle, but he clung to his belief in the inevitability of conversational computing and the potential of artificial intelligence to make it practical. It was a trope in all his favorite science fiction, from TV’s Star Trek (“computer, open a channel”) to authors like Arthur C. Clarke, Isaac Asimov, and Robert A. Heinlein, whose books lined the library of hundreds of volumes in his lakefront Seattle-area home. While others read these classics and only dreamed of alternate realities, Bezos seemed to consider the books blueprints for an exciting future. ([Location 357](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=357)) - Note: Reading great sci-fi as a blueprint seems very useful. Elon did the same. What great sci-fi can you read to become more creative? - “They basically told me, ‘We don’t care. Hire more people. Take as long as it takes. Solve the problem,’ ” recalled Adams. “They were unflappable.” ([Location 431](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=431)) - With his science fiction obsession, Bezos was forcing his team to think bigger and to push the boundaries of established technology. ([Location 473](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=473)) - Meanwhile Bezos grew impatient. “How will we even know when this product is good?” he kept asking in early 2013. Hart, Prasad, and their team created graphs that projected how Alexa would improve as data collection progressed. The math suggested they would need to roughly double the scale of their data collection efforts to achieve each successive 3 percent increase in Alexa’s accuracy. ([Location 574](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=574)) - Note: Need to determine a success metric and track it. Set a goal to hit - “You are going about this the wrong way,” Bezos said after reading about the delay. “First tell me what would be a magical product, then tell me how to get there.” ([Location 579](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=579)) - Note: Start from a point of optimism. What does the ideal product that you’d love to make look like? Then work backwards to plan out the steps on how to get there - Typically, Jeff Bezos was not about to cede a critical strategic position in the unfolding digital terrain to other companies, especially when he believed the ground was still fertile for innovative approaches. ([Location 592](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=592)) - he proposed a phone with an advanced 3D display, responsive to gestures in the air, instead of only taps on a touchscreen. It would be like nothing else in stores. Bezos clung to that idea, which would become the seed of the Fire Phone project. ([Location 595](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=595)) - while he was inordinately focused on customer feedback in other parts of Amazon’s business, Bezos did not believe that listening to them could result in dramatic product inventions, evangelizing instead for creative “wandering,” which he believed was the path to dramatic breakthroughs. “The biggest needle movers will be things that customers don’t know to ask for,” he would write years later in a letter to shareholders. “We must invent on their behalf. We have to tap into our own inner imagination about what’s possible.” ([Location 602](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=602)) - Note: When building something truly new, you have to just build. The winding path will take you somewhere interesting - The group started and then canceled another phone project, a basic low-cost handset to be made by HTC and code-named Otus, which would also use the Amazon flavor of the Android operating system that ran on Amazon’s new Fire tablets, which were showing promise as an economical alternative to Apple’s iPad. ([Location 615](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=615)) - Note: Here Bezos miscalculated. He is trying to release an Amazon phone as a premium product above the iPhone, while simultaneously positioning his already-released tablets as budget items. The mixed signaling would make it harder to build the brand image necessary to command good margins on a true best in class product - Amazon brand, which is great value.” Freed said that Bezos told him afterward, “You can’t, for one minute, feel bad about the Fire Phone. Promise me you won’t lose a minute of sleep.” ([Location 633](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=633)) - Note: Don’t punish people for taking big bets that don’t pay off. This is how you encourage innovation - Bezos didn’t penalize Ian Freed and other Fire Phone managers, sending a strong message inside Amazon that taking risks was rewarded—especially if the entire debacle was primarily his own fault. ([Location 641](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=641)) - At Amazon, Jeff Wilke had popularized the idea of calling it “minimum lovable product,” or MLP, asking, “What would we be proud to take to the market?” ([Location 728](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=728)) - Each team was run by a so-called “single-threaded leader” who had ultimate control and absolute accountability over their success or failure. (The phrase comes from computer science terminology; a single-threaded program executes one command at a time.) Alexa, like Amazon itself, became a land of countless CEOs, each operating autonomously. To yoke them all together, George oversaw the creation of a “north star” document, to crystalize the strategy of a global, voice-enabled computing platform. ([Location 749](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=749)) - 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.” ([Location 771](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=771)) - The decentralized and chaotic approach of countless two-pizza teams run by single-threaded leaders was manifested in aspects of the product that had become overly complex. ([Location 777](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=777)) - Because Bezos thought traditional retailers played their appointed roles well, the group had to meet a high bar before they could proceed. “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,” ([Location 838](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=838)) - He told them that while they all had done a fine job, the experience was too complicated. Customers would have to wait in line for meat, seafood, and fruit to be weighed and added to their bill, which contrasted with the store’s major selling point: the absence of time-wasting queues. He felt the magic was walking out without waiting—the physical equivalent of Amazon’s famous one-click ordering—and wanted to focus the effort on that, with a smaller and simpler experience. ([Location 900](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=900)) - Note: Focus on the core of the experience. Don’t lose sight of what differentiates you - Kumar inhabited a few aspects of the Amazonian leadership template forged by Bezos in his younger, more tempestuous years as CEO: hard-driving, maniacal about the customer, IQ over EQ, raw force of will over innate leadership ability. ([Location 919](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=919)) - “If I have to choose between agreement and conflict, I’ll take conflict every time,” Bezos often said. “It always yields a better result.” ([Location 924](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=924)) - “If you were a venture capitalist, this just did not make sense anymore,” said another executive privy to the decision-making. But Bezos wanted to forge ahead. “Jeff is master of ‘this isn’t working today, but could work tomorrow.’ If customers like it, he’s got the cash flow to fund it,” this exec said. ([Location 1001](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1001)) - We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score 1,000 runs. This long-tailed distribution of returns is why it’s important to be bold. ([Location 1025](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1025)) - Bezos had missed an earlier opportunity to invest in India. In 2004, Amazon opened one of its first overseas software development centers in Bangalore, in a small office above an auto dealership. Employees working on its floundering search engine, A9, and its nascent cloud business, Amazon Web Services, repeatedly pitched plans to start a local online store. But as Amazon recovered from the dot-com bust and concentrated its energies on launching in China, India was practically an afterthought. As a result, some of Amazon’s early employees in India quit to start their own firms. ([Location 1045](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1045)) - Note: A mistake by Bezos. By starting Amazon in India but not prioritizing it, he brought together intelligent and motivated people in the field of online retailers (creating potential competitors who knew India better than him) without actually scaling his own business. Worst of both worlds - Amazon’s China employees were dependent on technical support and other kinds of help from Seattle, and thus were slow to respond to these and other obvious market signals. ([Location 1072](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1072)) - Note: This is why innovation in a big company is hard (just like ProMap). Small group with few resources, but have to deal with the bureaucracy of a large organization. Worst of both worlds - Amazon failed to adapt to the idiosyncrasies of the China internet—Chinese sellers were accustomed to paying about 2 to 5 percent of their sales to Alibaba, in addition to ads to make their listings more prominent. Amazon execs were skeptical of the advertising model so instead charged 10 to 15 percent of sales, which seemed unusually high to sellers. As a result, Alibaba raced further ahead. ([Location 1076](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1076)) - “You guys are going to fail,” he bluntly told the Indian crew. “I don’t need computer scientists in India. I need cowboys. “Don’t come to me with a plan that assumes I will only make a certain level of investment,” Bezos continued, according to the recollection of two executives who were there. “Tell me how to win. Then tell me how much it costs.” Another Indian executive at the meeting, Amit Deshpande, says the message was: “Go big and take risks. Make it happen. We have your backs.” ([Location 1129](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1129)) - To move more nimbly, all departments reported into Agarwal, instead of to their peers in Seattle. “At a fundamental level, we questioned everything and asked, ‘Is this the right thing for India?’ ” said an Amazon India executive. ([Location 1145](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1145)) - Note: To innovate in a large organization, the team must have a large amount of autonomy from the parent company and license for creative freedom - “We have a reliance to varying degrees on Google in all of our established countries. I always want to ask the question, ‘Is the advertising that we do worth it?’ ” ([Location 1232](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1232)) - Amazon was profitable, particularly in 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. ([Location 1408](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1408)) - Note: Amazon had a very high ROIC, so naturally Bezos pushed for more growth to increase future cash flows - AWS’s portfolio of cloud-based databases, on top of the classics like S3 and EC2, drew companies big and small toward cloud computing and further into Amazon’s embrace. Once they moved their data onto Amazon’s servers, companies had little reason to endure the inconvenience of transferring it back out. They were also more likely to be attracted to the other profitable applications that AWS introduced. ([Location 1473](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1473)) - Note: AWS had high switching costs and strong up sell opportunities for customers. As a result, giving companies upfront discounts or free services assistance makes sense to ensure they move to AWS and get locked in - Bezos liked to say that “good intentions don’t work, but mechanisms do.” ([Location 1499](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1499)) - On one side of the room was a multicolored roulette wheel, with different web services, like EC2, Redshift, and Aurora, listed around the perimeter. Each week the wheel was spun (until 2014 when there were too many services and software mimicked the function of the wheel), with the goal being, Jassy said, to make sure managers were “on top of the key metrics of their service all week long, because they know there’s a chance they may have to speak to it in detail.” ([Location 1511](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1511)) - Note: This is straight out of High Output Management by Andy Grove. By giving each group metrics to track, it allows the group to assess its own performance and respond to leading indicators of underperformance. In addition, by making the presentation random, it ensures that all managers keep on top of their metrics without forcing executives to analyze every single group every single week - “You’ve built this lovely castle, and now all the barbarians are going to come riding on horses to attack the castle,” Bezos said, according to a former AWS exec who reports hearing the comment. “You need a moat; what is the moat around the castle?” ([Location 1528](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1528)) - Wulff reflected on that wistfully and considered it an illustration of the Amazon leadership principle that stipulates leaders must be “vocally self-critical.” “That’s when I learned a lesson that regardless of whether you just delivered the biggest revenue day in Amazon’s history, your first sentence is, ‘We fucked up.’ ” ([Location 1597](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1597)) - Bezos suspected that managers couldn’t be counted on to voluntarily embrace the hassle of additional hiring and feared that a tolerance for mediocre performers would spread through the company and erode the “Day 1 mentality.” Stack ranking would force managers to upgrade the talent on their teams. “People thought it was a mean-spirited process and to a certain extent it was,” Niekerk said. “But in the big picture, it kept Amazon fresh and innovative.” ([Location 1662](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1662)) - Baron said that Bezos “didn’t try to reinvent the paper; he tried to capture what made it special.” ([Location 1880](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1880)) - It was a Bezos-style repeatable process, or forcing function, designed to push his team to think creatively and innovate. Post execs said that Bezos read every memo beforehand save for once, when he apologized for not getting to it and took the time to read it quietly at the start of the meeting. ([Location 1885](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1885)) - “The most important thing Jeff has brought is a culture of experimentation,” Prakash said. “None of us feel that if we spend money and screw up some big project that we’re going to have to face an auditing committee. We are not afraid to fail.” ([Location 1926](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=1926)) - “Every time we do something, we don’t want to do me-too,” he said. “We’d like to do some wrinkle on it, some improvement, something that customers have a chance of responding to. ([Location 2126](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2126)) - Bezos, a film lover, was now excited by the idea of creating original content. It was evolving into another significant long-term bet, alongside Alexa, the Amazon Go stores, the expansions in India and Mexico, and Amazon Web Services. ([Location 2128](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2128)) - 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. ([Location 2390](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2390)) - Another way to understand Amazon’s fervid growth as a large company was by its successful pursuit of operating leverage, or growing revenues at a faster rate than expenses. 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. ([Location 2394](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2394)) - Tags: [[blue]] - Building such systems required a significant up-front investment and added to Amazon’s fixed costs. But over the ensuing years, those expenses paid off as they replaced what would have been even larger, variable costs. It was the ultimate in leverage: turning Amazon’s retail business into a largely self-service technology platform that could generate cash with minimum human intervention. ([Location 2415](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2415)) - Tags: [[blue]] - Note: So Amazon accepted higher upfront fixed costs in order to reduce compensation payouts in the future and improve inventory management, thereby creating higher future cash flows. This also serves to feed the flywheel, because by reducing costs in compensation and inventory management, Amazon could lower costs and attract more customers and business - Bezos believed that FBA had a chance both to succeed and to have an outsized impact on the company. “I need you to deliver so that we can fund the portfolio of other businesses” that also have enormous potential, he said, according to Tom Taylor, instructing the FBA team that they should be moving three times faster than normal Amazon teams. ([Location 2445](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2445)) - Tags: [[blue]] - Note: He was clearly thinking in the way outlined in Value - Amazon is a portfolio of businesses, and he wanted to use high cash flow/mature businesses to fund the high growth/new businesses. In this way, Amazon e-commerce (and eventually FBA and 3rd party sellers) served to fund the company’s moonshots, like Alexa - “Averages are bad measures. I want to see actuals, highs, lows and why—not an average. An average is just lazy.” ([Location 2454](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2454)) - Tags: [[blue]] - Note: Same sentiment expressed in Value and by Nassim Taleb - expected values hide the ACTUAL scenarios that can occur. Scenario planning gives a realistic picture of cases that might happen - Jeff always said that when you focus on the business inputs, then the outputs such as revenue and income will take care of themselves.” ([Location 2460](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2460)) - Tags: [[blue]] - Faricy understood that there was only one answer to Bezos’s interview question—you couldn’t possibly reach out to sellers and recruit a million of them one by one. You would have to build a machine that would have to be self-service, and sellers would have to come to Amazon instead of the other way around. Over the next few years, Faricy and his team rebuilt Seller Central, the website for third-party merchants, giving merchants the ability to easily list their products on Amazon.com, set prices, and run promotions—all with a minimum of oversight by Amazon employees. ([Location 2470](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2470)) - Tags: [[blue]] - The perennial debate inside Amazon was pitting the quality of products versus the quantity. The fights often had to be arbitrated by Faricy’s boss, senior vice president Sebastian Gunningham, or by Bezos himself. Both leaned heavily toward expanding the breadth of selection as fast as possible. “Jeff and Sebastian’s view was that all selection is good selection,” said Adrian Agostini, a longtime marketplace executive. “They wanted rules in place: don’t offend, don’t kill, don’t poison. Other than that, you take what you get and let customers decide.” ([Location 2486](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2486)) - Tags: [[blue]] - By now Amazon was hurriedly adapting to a changing e-commerce landscape. The flood of Chinese sellers onto the internet represented a potential Cambrian explosion of new, low-priced selections. Such generically branded goods might not appeal to everyone, but they could draw younger or lower-income buyers to online shopping, and they later might graduate to more expensive products and even sign up for Amazon Prime. ([Location 2526](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2526)) - Tags: [[blue]] - Execs didn’t have to guess which customers preferred: their choice was clear in numerous trials and experiments. Amazon’s German website, for example, allowed third-party merchants to list and sell a wide variety of branded and generic shoes, while Amazon’s UK site featured a curated shoe store with only more expensive, brand-name footwear. The German site performed markedly better, because of the greater selection and cheaper options. This finding was significant, because Amazon’s corporate compass only pointed one way: toward what customers wanted. And it turned out that plenty of people will buy dirt cheap sneakers on the internet, even if they suspect the shoes are not destined to last that long. ([Location 2567](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2567)) - Tags: [[blue]] - Bezos never wanted to compromise on quality—there were no trade-offs allowed at Amazon, after all. He wanted quality and quantity, and he expected that Amazon’s engineers would create new tools to block dangerous products and counterfeits. ([Location 2598](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2598)) - Tags: [[blue]] - 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. “It was unbelievable what we saw,” Faricy said. “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.” ([Location 2627](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2627)) - Tags: [[blue]] - 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. ([Location 2692](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2692)) - Tags: [[blue]] - 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. ([Location 2714](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2714)) - Tags: [[blue]] - 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. ([Location 2741](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2741)) - Tags: [[blue]] - Herrington’s memo pointed out that Walmart, Carrefour, Tesco, Metro AG, and Kroger were the world’s five largest retailers at the time. “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. In other words, if the company was going to join the ranks of the biggest retailers, the S-team had to figure out a way to profitably sell supermarket items. If they didn’t, Amazon was going to be vulnerable to rivals who already enjoyed the shopping frequency and cost advantages of the grocery model. ([Location 2787](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2787)) - Tags: [[blue]] - in-store brands made up around 20 percent of all retail in the U.S. and above 40 percent in European countries like the UK, Germany, Spain, and Switzerland. By working directly with manufacturers, retailers lowered prices, increased their profit margins, and cultivated loyalty among shoppers with exclusive products. ([Location 2921](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=2921)) - Tags: [[blue]] - The project once again represented a different style of innovation within Amazon. Employees didn’t “work backwards” from their idealized customers, who had never asked for such a creation. They worked backwards from Bezos’s intuition and were catering to his sometimes eclectic tastes (literally). Bezos was right a lot, particularly when it came to cutting-edge technology. But in the end, the single cow burger and other culinary innovations introduced within Amazon Fresh generated little buzz or increased business. ([Location 3057](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3057)) - Tags: [[blue]] - Bezos didn’t want another empathetic business philosopher to replace Onetto as the head of Amazon’s operations; he sought an uncompromising operator who could gain operating leverage by slowing down the growth of costs in the FCs relative to Amazon’s skyrocketing sales. ([Location 3251](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3251)) - Tags: [[blue]] - The deal to acquire Kiva Systems was Dave Clark’s baby—he implicitly understood its potential to remake the FCs and turn Amazon’s surging variable labor costs into a more predictable fixed investment in robotics and software. ([Location 3272](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3272)) - Tags: [[blue]] - it introduced the machines into its newer FCs, with profound results. As Clark had hoped, they magnified worker productivity and decreased the rate of growth of Amazon’s seasonal labor needs relative to its sales. They also allowed Amazon to build denser fulfillment centers, with the shelf-toting robots swarming over the ground floor as well as a series of reinforced mezzanines. In a 2014 TV interview, Clark estimated that Amazon was able to get 50 percent more products per square foot into new fulfillment centers than the previous generation. ([Location 3286](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3286)) - Tags: [[blue]] - He possessed a crucial skill at Amazon that was about to prove exceedingly useful: he could take Bezos’s ambitious visions, convert them into something approximating reality, and then grow them into systems that didn’t blow apart at Amazon’s tremendous size. ([Location 3309](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3309)) - Tags: [[blue]] - Note: Operators like this are crucial. Analytical and able to construct concrete plans of action from vague directions - All of these tensions culminated after UPS failed so prominently over the 2013 holiday season. Amazon executives had had enough. If they couldn’t reliably count on the shipping companies to support their growth, the company would have to build an in-house logistics network—controlling merchandise from the warehouses of its suppliers to its fulfillment centers, and all the way to customers’ doorsteps. ([Location 3330](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3330)) - Tags: [[blue]] - the sort centers and Sunday delivery were only the first step toward the goal of an in-house logistics network. Amazon was never entirely comfortable relying on the USPS, just as it was distrustful of UPS and FedEx. The post office was subject to unpredictable political forces and the lingering public perception that it provided a less reliable service. So Clark and his colleagues began pitching their most ambitious move yet: a so-called “last mile” network to customers’ homes. ([Location 3344](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3344)) - Tags: [[blue]] - Clark and his colleagues assuaged themselves by considering the nonunion workforces of FedEx Ground, DHL, and pretty much every other ground delivery firm that competed with UPS and its unionized delivery workforce. Amazon would use the exact same model in creating Amazon Logistics, its new transportation division. It wouldn’t directly hire anyone but instead create relationships with independent delivery companies—DSPs (delivery service partners)—that employed nonunion drivers. That would allow it to pay lower labor rates than UPS and to avoid the prospective nightmare of drivers bargaining collectively for higher wages, which could destroy the already fragile economics of home delivery. ([Location 3351](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3351)) - Tags: [[blue]] - Bezos using the former name in his infamous 60 Minutes interview in 2013 to announce that the company was working on aerial drones to ferry individual packages to people’s backyards. Several operations executives told me they were embarrassed by that stunt (which seven years later, had progressed no further than private tests). They used an old internal Microsoft term to describe it: “cookie licking,” or the act of claiming to do something before you actually do it, in order to capture notoriety and prevent others from following. ([Location 3424](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3424)) - Tags: [[blue]] - Issues with the app cascaded, O’Dell said. Routing was poor, and drivers found it difficult to progress from one delivery to another. Fraud was prevalent, with drivers finding loopholes to get paid for work they didn’t do. One problem was that dueling two-pizza teams in Seattle and Austin worked concurrently on versions of Rabbit for iOS and Android, magnifying the confusion among delivery firms. ([Location 3517](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3517)) - Tags: [[blue]] - Note: The downside of the agile “two pizza team” setup. Also talked about in the Acquired podcast regarding AWS. Small teams help you move fast, but they also can make it hard to set cohesive product strategy - Clark’s decade-long retrofit of Amazon’s fulfillment centers and its last-mile delivery network had inexorably changed Amazon’s retail business. It allowed the company to place its merchandise closer to dense population areas and to lower its transportation costs, since Amazon no longer had to pay the inflated retail rates of the big carriers. It also aligned Amazon’s delivery expenses with its growth; the more customers signed up for Amazon Prime and Amazon’s grocery delivery services, Prime Now and Amazon Fresh, the more efficient and cost-effective it became to send drivers into those neighborhoods. ([Location 3550](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3550)) - Tags: [[blue]] - “I’m a simplifier,” Clark said, when I asked about the set of skills that had enabled him to progress from the Campbellsville FC, all the way to the upper echelons of the S-team. “I can take complicated stuff and figure out how to boil it down into what you need to do to actually make it big.” ([Location 3574](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3574)) - Tags: [[blue]] - Bezos had tugged on a string, and the entire quilt started to unravel. Now he kept pulling. In the multi-hour discussion that followed, he argued that the growth of advertising was concealing stagnation in online retail. Bezos was constitutionally tolerant of losing money over the first decade of a promising new business; but retail was well past that point. He wanted to go as far back as possible to find when this troubling trend had started. Then he insisted that Wilke and his team throw out months of careful planning that had gone into their OP1 document and present a revised version to him. ([Location 3629](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3629)) - Tags: [[blue]] - For more than two decades, Bezos had emphasized the tactical advantages of low margins and low prices, in order to win points of market share as if they were continents on a Risk board. But now his thinking had shifted; he was frustrated that retail wasn’t more profitable and that two of his most trusted deputies, Jeff Wilke and Doug Herrington, weren’t getting more leverage out of their operation. The numbers suggested executives might be backsliding in their mandate to relentlessly improve operating performance, and that Amazon was inheriting some of the attributes of what Bezos ominously called “Day 2” companies. “Day two is stasis, followed by irrelevance, followed by excruciating, painful decline, followed by death,” he had said earlier that year on stage at an all-hands meeting. “And that is why it is always Day one.” ([Location 3639](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3639)) - Tags: [[blue]] - Bezos was a proponent of bringing ads onto Amazon and using them to support low prices. He talked about two hypothetical e-commerce websites: one with ads that subsidized low prices and another that was ad-free but had higher prices. Customers, he said, would always flock to the website with better deals. “We are stupid if we don’t do it” was his usual conclusion, according to several S-team members. ([Location 3665](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3665)) - Tags: [[blue]] - The stubbornness spoke to Amazon’s ambivalence about display advertising and a religious refusal to violate the trust of customers in any way—a philosophical departure from the approach of its Silicon Valley peers, such as Facebook. For Bezos, during the first part of Amazon’s journey into advertising, the sanctity of the customer experience took absolute precedence over any business relationship or incremental boost to the balance sheet. ([Location 3710](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3710)) - Tags: [[blue]] - Search ads had all of the business characteristics that Bezos loved. Customers weren’t transported off Amazon when they clicked but sent to individual product pages, where they made purchases and fed the flywheel. Few expense account–wielding mad men were needed to administer it; the system was largely self-service. And once the technology was in place, search ads would produce tremendous leverage—and a huge windfall that Bezos could use to finance new inventions. ([Location 3775](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3775)) - Tags: [[blue]] - At the same time as he issued the directive, he also ordered S-team members to watch a nineteen-minute video on YouTube, produced by Bain & Company, called “Founder’s Mentality.” It was all about eliminating bureaucracy, maintaining the voice of customers in everyday decision-making, and preserving the mindset and motivation of an insurgent startup. “One of the paradoxes of growth is that growth creates complexity and complexity is the silent killer of growth,” said Bain director James Allen in the video. ([Location 3851](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3851)) - Tags: [[blue]] - Bezos felt that working with such existing components would allow Blue Origin to keep its engineering teams small and move fast—principles laid out in the Welcome Letter. He believed that constraints drove innovation, and he wanted to develop space vehicles with the cadence of a software project, incorporating new ideas into frequent iterations, using as many standard technologies as possible. The method worked well at internet companies like Amazon, where bugs could be easily fixed. But at an aerospace firm perpetually stretched for resources, it was a recipe for errors to sneak into systems that needed to be strenuously tested and mission hardened. ([Location 3962](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3962)) - Tags: [[blue]] - As a result of these divergent approaches, SpaceX quickly grew much larger and faster. By the time Blue hired its 250th employee in 2013, SpaceX had 2,750 workers and was already sending unmanned spacecraft to the International Space Station. Blue was consumed with New Shepard, but SpaceX had entirely skipped the intermediate stage of building suborbital rockets to take tourists to space, which Bezos felt was necessary, in part to acclimate people to the idea of space travel, to achieve his ultimate goal of creating a future where millions of humans are living and working in space. ([Location 3982](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3982)) - Tags: [[blue]] - While Bezos and Musk seemed like-minded in their respective space ambitions, they had philosophical differences driving their companies. Musk’s oft-stated goal was to colonize Mars and make humans a “multi-planetary species” as an insurance policy against calamity on Earth. Bezos believed “that of all the planets in the solar system, Earth is by far the best one,” and that lowering the cost of access to space was the path to putting large, vibrant populations onto space stations, where they could harvest solar energy and mine the abundant metals and other resources from the surface of the moon. Bezos hypothesized that at the current rate of population growth and energy use, humanity would have to start rationing resources within several generations, leading to a society of stasis. “We go to space to save the Earth,” he declared on Twitter. ([Location 3986](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=3986)) - Note: Interesting difference in perspective. Musk is concerned with tail risks (ie. Annihilation of earth) where as Bezos is concerned with stagnation in economic and population growth. Bezos only wants to leave earth as a means to acquire more resources for it - he wouldn’t leave if he didn’t have to. For Musk, leaving Earth, and getting far far away, is a feature, not a bug - Bezos was studying SpaceX and the reasons for its mounting success. Musk’s company was funding its rapid growth by selling its launch services; perhaps Blue could do something similar, while remaining focused on its “step by step” path to getting to space. ([Location 4000](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=4000)) - Note: SpaceX ends up selling a high volume of relatively cheap launches to fund its growth and investments in more moonshot projects. This is literally Amazon applied to space travel. How did Jeff miss this and go for the high ticket, low usage tourist angle? - he preferred to manage many of the details of daily operations invisibly, via email with Rob Meyerson. This style of oversight put the company’s president in a difficult position. Meyerson was acting as a conduit for Bezos but had none of his imposing authority; ([Location 4059](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=4059)) - Note: Trying to micromanage from afar is a recipe for disaster. Either set up the system to run semi-autonomously or go full hands on - His generation’s destiny, he explained, was to lower the cost of access to space and unleash the same forces of creativity that had unlocked the golden age of innovation on the internet. The goal was a trillion humans one day living and working throughout the solar system on space stations that operated on the plentiful power of the sun. ([Location 4140](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=4140)) - Musk and Bezos were a lot alike—relentless, competitive, and absorbed with their self-images. But Musk eagerly sought the spotlight and cultivated a kind of cultlike adoration at his companies and among his fans, preening on stage at Tesla events and extemporaneously (and often recklessly) riffing on Twitter. He also seemed entirely comfortable sharing the salacious details of his personal life, like his relationship with the musician Grimes. Bezos, on the other hand, was more guarded. He always followed a meticulous and well-rehearsed script in public and endeavored to put systems and values at the center of Blue Origin, instead of the heavily regulated resources of his own time and reputation. And he was far more circumspect than Musk with the details of his private life. ([Location 4162](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=4162)) - He observed when Elon Musk magically dubbed Tesla’s planned lithium-ion battery plant a “Gigafactory,” then pitted seven states against one another before selecting a site east of Reno, Nevada, and receiving a tax relief package worth $1.3 billion. Musk was personally involved in the search, deploying his singular charisma in meetings with governors and tours of prospective sites. By the end of the process, Nevada had offered Tesla the biggest tax relief package in the state’s history and allowed it to operate there practically tax-free for a decade. ([Location 4274](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=4274)) - Note: Tax concessions are HUGE for increasing cash flows. Musks’a charisma and cult of personality helped Tesla in a number of ways, and this is one of the biggest. But overall it managed to: 1. Attract top talent despite below-industry leader pay and long work hours 2. Access cheap capital 3. Increase stock price (making acquisitions easier) 4. Get massive tax breaks (increasing cash flow for future investments) 5. Huge media coverage (amounting to millions of dollars in free advertising) - now Bezos concluded that Amazon, with its high-paying jobs and reputation as an innovator, should also be able to secure a large incentive package from a similarly business-friendly region. ([Location 4279](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=4279)) - Amazon’s economic development team was assigned an S-team goal that year to amass $1 billion in annual tax incentives. ([Location 4285](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=4285)) - he produced a very Bezosian idea—novel in its complete inversion of the traditional ways that corporations courted localities. Instead of developing numerous offices in multiple cities, or negotiating privately with one location for a satellite office, Amazon would announce its intention to create a second headquarters—an equal to its home in Seattle. It would then open the site selection process to all cities in North America and allow them to compete for a prize of some fifty thousand jobs and $5 billion in capital investments over a span of fifteen years. Such a process, Bezos argued, could highlight what communities coveted from the company instead of what its critics feared about it. ([Location 4289](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=4289)) - Note: Competition would drive up the offers for tax breaks, and making it a massive office would increase the size of the tax breaks as well - In the days before the finalists were announced, the HQ2 team divided the list of more than two hundred cities that hadn’t made the cut and placed phone calls to local officials, alerting them to the bad news. Most asked why, while expressing disappointment with the amount of time and resources they had put into the failed effort. Amazon employees responded with blasts of data. “Your metro area only has 375,000 people and of those only 10 percent have advanced degrees,” went a typical explanation. “Sorry, that’s not enough of a labor pipeline.” City officials mostly agreed that Amazon’s outreach was conscientious, and that Holly Sullivan in particular spent more time than she needed answering questions and preserving relationships that might be helpful to the company in the future. ([Location 4358](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=4358)) - Note: Think through your reason for everything and have thoughtful answers ready. Also preserve relationships, even in the wake of bad news - Amazon was caught flat-footed. The company had opted for secrecy instead of on-the-ground preparation and for autonomy over hiring experienced public affairs and lobbying firms to counter any negative reaction. Newcomers to New York’s bare-knuckle style of politics, Amazon executives had incorrectly calculated that support from Cuomo, de Blasio, and other allies would carry the day. “New York was lost from the moment they announced it,” ([Location 4537](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=4537)) - Note: Need to understand how power is exerted in a democratic system - Bezos was a master compartmentalizer; his ability to keep the intricate threads of his personal and professional lives separate was unrivaled. ([Location 4643](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=4643)) - Over the course of two and a half decades, Bezos had taken an idea to sell books on a new medium called the Web, and through invention, the unencumbered embrace of technology, and the ruthless pursuit of leverage, spun it into a global empire worth more than one and a half trillion dollars. ([Location 5942](https://readwise.io/to_kindle?action=open&asin=B08TB1TP7H&location=5942))