Jeff Bezos Talks Business Vision, Leadership & Entrepreneurship
The first thing to really talk about is to I want to take you back to, to. The beginning and, in. 1995. You started yep, you, went public in 97. And I'll. Adjust for, stock splits but you raised stock you rate you issued shares at a dollar fifty a share in. 1988. Your revenue was six hundred million dollars and you lost 125. Million but. Your stock had gone to $55. A share so. You doubled, down sales, went up threefold, you lost another 400 million but, your stock went up to $76. 27 billion dollars of market cap your, personal net worth of nine billion. Take. Us back to that time where the market is telling you you're doing great but. You have red ink in the company you took on two billion dollars of debt from, 99201. While. You tripled while you doubled sales yet again what, were you thinking, back then, well. That's. A great, great. Question and, it is kind of fun to go back and think. About those days. You. Know in those days when we had I. Don't. Know when I started the company and it, was just one person and then there were ten people and. Today. There are almost. 600,000. People so, there's a lot of change. But. Back in that time. We. Were still pretty small company. By. Most standards, then. The error you're talking, about we. Had we'd gone public and you're right on a split adjusted basis it's a dollar fiftieth share in, today's terms and the. Market became. Very quickly a. Kind. Of an internet. Bubble. Kind, of market, and the stock prices, went up very very high when, I raise the initial. Funding. For Amazon I had to talk to 60. Prospective. Investors, to, raise a million dollars and I raised a million dollars from 22, different investors. $50,000. At a time and they, got 20%. Of the company for. A million dollars and that. Was in 95 but, just, three. Years two or three years later. You know Stanford. MBA, with no business experience could. Raise 25, million dollars with a single phone call if. They had a internet. Business plan so the whole thing in just two or three years the. Excitement. Really. As we could would shortly see when the bubble burst in the year 2000. The hyperbolic, excitement. About, the internet had infected everybody, and. I. I. Was I knew that there was that we had a funder I liked our business, and, I liked the fundamentals, of our business, but. I also knew that the stock price was disconnected, from. What we were doing on a day to day basis, and so I was always preaching, we would have All Hands meetings, and there was a small, number of employees at that time but you, know probably let's. See in, 97. I think we would have had a few hundred employees, we. Have All Hands. Meetings, and I, would said look you. Know we got to remember the great quote, from Benjamin. Graham that. In the short, run the stock market is a voting machine in the long run it's a weighing machine so. Don't think about the daily stock price because it was going up every day the stock prices going up and I. Didn't, want because all the employees had stock options, and I didn't want them counting their success. That way and so, I was said look when the stock is up 30% in, a month don't. Feel 30%. Smarter, because, when it's down 30%. In a month then you're gonna have to feel 30%, dumber and it's not gonna feel as good and. It was good, that I kind, of laid that groundwork because. You know sure enough in the year 2000. The, whole thing came, tumbling down I think Amazon went, back about $6, went down just six, dollars and that I don't even know if that's on a smoother justed, basis I think that's probably. That. Was below I was on a split adjusted basis probably below it all about so and you know ever doubt the business model at that point no so, I you, know it's very interesting to me because I had all the internal, metrics.
On You know how many customers we had what was going on I could see people, thought we were losing money because we were selling dollar bills for 90 cents even. Though we were very clear that we were we, were we had high fixed costs, and but we had contribution. Margin positive, contribution, margin and I. Just knew that it was a fixed cost business, and as soon as we reached the sufficient, scale we would have a very, good business and so that was that. Understanding. Of the fixed nature. Of our expenses, relative. To physical, world retail is what, led us to have the get big fast strategy, we, knew that it would be that. Our economics, would be very much improved if we could have, a sufficient, scale so we worked hard and so so at that time you're you're preaching, the benefits, of e-commerce and and really yeah, disintermediating. The business so, fast-forward to today now we have content, we, have physical Amazon, stores we have Amazon, cashier, 'less stores yeah we used to call shoplifting, and and, then now you shoplifting. Without the jail time that's right and then and then and then buying whole foods here for a Texas company so how does that how, does that fit together your, vision and then how do you manage these disparate, businesses, with different cost structures now yeah well. Maybe. Just, finishing. Up a little Oh in that prior point before I answer that question I and and, also with either. The memory of Barbara. Bush in. All of our minds, I I. Think, part of if you're a lot of people in this room or entrepreneurs, start, their own businesses, done various things taking, risks of various kinds, and I think, the. One. Of the precursors, one of the foundational, things in being able to take risk is to have had. Some. Kind of support from somebody you have to have some mentors you. Have to have somebody who loves you these, are the kind of things that build up and allow you to. Kind, of you know jump, off into uncharted, terrain and do something new because you know you have a support. System of one kind or another how. Can you do so many different things, why. Don't you stick to the knitting the kind of traditional. Advice would be to stay focused, and keep the business simple, and. The. Way I think about, this is, we. Actually do, stick to one thing it's just not. Described. It sunk the businesses so if we do web, services, which is you know big Enterprise is buying compute, services, from us and we, have our retail business and we have Amazon Studios which, is making original content, Amazon go the things you listed. So. But. The, cultural. Thread, that runs through all these things is the same we only have a few. Principles. Of the Amazon kind, of core values that we go back to over, and over again and if you looked at each of the things that we do you. Would see those run straight. Through everything. So the, first, one and by far the most important, one is customer, obsession, and we. Talk about it as customer, obsession, as opposed. To. Competitor. Obsession. And, I have seen over and over again companies, talk about. That. Their customer, focused, but, really, when I pay, close attention to them I believe, they are competitor, focused, and that's, just a completely different mentality by, the way competitor, focus, can work but. I don't think it works in the long run as well, as customer. Focus for one thing once you're the leader if, your whole culture, is competitor. Obsessed, it's, kind of hard to stay energized and, motivated if, you're out in front, whereas. Customers, are always, unsatisfied. They're always discontent. They always, want more and so, no matter how far you. Get out there in front of your competitors, you're still behind your customers, so, they're always pulling, you along so customer. Obsession, is a, deep principle. That underlies everything we do another one is. Eagerness. To invent, so, we love to pioneer, and when, we have done by the way whenever we have tried to do something in a kind of me2 fashion, we have failed at it we. Need to have something, that is, differentiated. Unique. Something. That customers are going to like that we're kind, of leading with so.
That's Another element, that. Works for us and then, another. One is long-term. Thinking. We are willing to. To. Take some time and be patient with our business initiative, and that runs through everything so, a lot of our competitors might, have. Two, to three year kind of timeframes and we might have more of a five to seven year sort. Of timeframe and then the last one, operational. Excellence so. Literally. You know how, do you have high standards around you, know identifying. Defects, fixing, defects, at the root all, of those kinds of things that, lead to what. I think also can be in a simpler way just stated as professionalism. That you want to do things right just for the records sake of doing them right so let's talk about that with. A with another I guess this is a corollary, now, that you have about six hundred thousand employees I calculated, you're adding about 250, people a day you've. Mentioned that you're trying to fend off day two yeah and you've said that day two is stasis, followed. By irrelevance, followed. By excruciating. Ly painful, decline followed, by death yeah, that's why it is always day one yeah yeah. How's that work well. So, day one and this. Is a phrase that we use at Amazon all the time I've been using it's in my first annual, shareholder, letter from 20, years ago. And. We stay it's always day one and it needs to be day one for the reason that you just mentioned. And. How do you so the real question for me is how do you go about maintaining, a day one culture, you. Know it's great to have the. Scale. Of Amazon, we have financial. Resources we. Have lots of brilliant people we. Can accomplish great things we have global. Scope we have operations all over the world but. The downside of that is, that you can lose your nimbleness, you can lose your entrepreneurial, spirit, you can lose your, that. Kind of heart that the. That. Small companies often have and, so. If you could have the best of both worlds if you, can have, that. Entrepreneurial. Spirit and heart while. At the same time having all the advantages, that come with scale and scope I think. Think. Of the things that you could do and and so how, the question is how do you achieve that, the. Scale. Is good because it makes you robust, you know, a big, boxer can take a punch to the head the. Question, is you also want to dodge those punches so you'd like to be nimble you, want to be big and nimble, and I, find there are a lot of things that are protective, of the day one mentality, I already spent some time on one of them which is customer.
Obsession, I think, that's the most important, thing if you can and it gets harder as you get bigger when you're a little tiny company so you're a 10 person startup company every, single person the company is focused on the customer when. You get to be a bigger company you've, got all the milk you've got middle managers, and you've got all these layers and the. Those people aren't on the front lines they're not interacting with customers every day they're, insulated. From customers, and they, start to manage, not the customer, happiness. Directly. But they start to manage through proxies. Like metrics. And processes. And some of those things can become bureaucratic. So it's, very challenging. But. One, of the things that happens, is the decision-making. Velocity. Slows down, and I think the reason one of the reasons that that happens, is that, people, oh. It's a junior executive is, inside the big company, start. To, model. All decisions. As if they are heavyweight, irreversible. Highly. Consequential, decisions. And so even. Two-way. Doors you. Could make you make a decision it's the wrong decision you can just back up back through the door and try again, even, those reversible. Decisions, start to be made with heavyweight processes. And so, you. Can teach people that, these. Pitfalls, and, and and, traps and then teach, them to avoid those traps and that's what we're trying to do at Amazon so that we can maintain our. Inventiveness. And our, hearts. And our kind. Of small companies spirit, even, as we have the scale and scope of a larger company so six hundred thousand people small company which that's, a that's a trick so I know the, bush Center we focus on leadership and I, know that you're also a voracious, reader and. You're fond of a book by now seem to leave called the Black Swan yes sure and it's it's, about humans tendencies, to reduce thing to anecdote reduce things to anecdotal, stories and. To, shield us from sort of the of. The way things actually have building, narratives, and and how can we human they'll create a narrative around anything to connect any sequence, of facts we can create a narrative so how do you infect, that, throughout. The whole organization when, you have that many that. Many layers well. I. I. Think you, know what I would say about that it's really a little different from the way that that. Black Swan talks about anecdotes, the way you're talking about but I'm actually a big fan of anecdotes, in business. Not building a narrative structure, around them necessarily, but I still. Have. An. Email address that customers. Can write to I see most, of those emails, and I, don't answer very, many of them anymore but but, I see them and I, and, I forward, them some. Of them the ones that catch my curiosity. I forward. Them to the. Executives, in charge that area, but, with a question, mark and that. Question mark is just a shorthand for can. You look into this why is this happening, what does what's, going on and. What. I find, is free energy because we have tons of metrics, we, have you, know weekly business reviews with these metric. Decks and we look at our we know so. Many things about customers. And they're there, you know whether we're delivering, on time. What. You know whether, the, packages. Have too much air in them and you know wasteful, of packaging, and so we have so many metrics, that. We monitor, and. The. Thing I have noticed is that when the anecdotes, and the, data, disagree. The. Anecdotes, are usually right there's.
Something, Wrong with the way you're measuring, it and that's, why it's so important, to to. Keep your you, need to to run it something that you were you're doing you know shipping. Billions of packages, a year for sure you need good data, and metrics and are you delivering on time you deliver on time in every city are, you delivering on time to apartment, complexes, are you delivering on time in certain countries you. Do need the data but, then you need to check that data with, your intuition, and your instincts, and you need to teach that to the, all the senior executives, and. And junior executives, just still have the to pizza rule and no powerpoints oh yeah. The two pizza team we try to we. Try to. Create. Teams, that, are no larger, than can. Be fed with two pizzas we. Call that the two pizza team rule, no. Power points, are used inside, of Amazon, so. Every meeting we, have that when we hire a new executive from the outside. This. Is the weirdest. Meeting. Culture, you will ever encounter, and. New executives, have a little bit of you. Know culture. Shock in their, first Amazon, meeting because what we do is somebody. For, the meeting, has prepared a six page memo. A narrative lis structured, memo that is got, you know real sentences. And topic sentences, and verbs, and now it's not just bullet points and it. Lays out and, supposed, to create the context, for what will then be a good discussion so, and then we read those memos. Silently. In the meeting. So. It's, like a study hall and we. Do that everybody, sits around the table and we read silently from usually about half an hour however, long it takes us to read the document. And then. We discuss it and it's. So much better than. The. Typical, PowerPoint. Presentation. For so many reasons you were quoted as saying I believe you have to be willing to be misunderstood. If you're going to innovate so, how are you misunderstood, you're gonna do if, you're gonna do anything. New. Or innovative. You. Have to be willing to be misunderstood. And, if you can't tolerate that then, for God's sake don't do anything new or innovative. Every. Important. Thing we've done has been misunderstood. Often. By well-meaning, sincere.
Critics, Sometimes. Of course by, self-interested. Insincere. Critics, but. But. You know I'll give you an example a. Thousand. Years ago, we. Started, this thing called customer, reviews and we, let customers review. Books we only sold books at that time and. Customers. Could come in and rate, a book between. One and five stars, and they could write a text-based. Review, you guys are very familiar with this it's a now a very normal thing but. Back. Then this. Was crazy. And. The. The. Publishers. The book publishers, did. Not like this because. Of course not, all the reviews are positive and. The. I. Got, a letter from one publisher, that. Said I have a good idea for you why, don't you just publish, the. Positive, customer reviews and. I. Thought about this and because, and he is argument is making to me is that our sales would go up if we. Just published the positive, customer reviews I thought. About this I thought I don't know I don't actually believe that because. I don't, think we make money. When. We, sell. Something, we make money when, we help someone make a purchase, decision and. It's. Just a slightly different way of looking at it because people are the, part of what they're paying us for is, helping them make a purchase, decision and, if. You think about it that way then, you want the negative reviews too and of. Course it has been extremely. Helpful for people to have negative customer views and by, the way it's come full circle now where. The product manufacturers. Use. The customer reviews to improve, the next generation, of the product, so. It's actually helping, the whole ecosystem, but. And now nobody, criticizes. Customer, reviews in fact if you were in, the you, know here in the year 2018. If some ecommerce company, were to say we're only going to publish the positive, customer reviews that, would be the crazy thing, that would get criticized. So, the. And innovative. Quickly. Becomes. They. Do normal and then. It's you, know it's, it's it's the new incumbent, idea and then it doesn't get criticized. Went, by the way more generally, and what I preached at Amazon, to all of our employees is when we are criticized there, is a simple. Process. That you need to go through which, is first. You, look, yourself in the mirror and decide, is your critical right, do. You agree, are. We doing something wrong if, you. Are, change. And. By. The way if. You look yourself in the mirror and you decide that your critic as wrong as we did with the customer, reviews then. Do. Not change, no matter how much pressure is brought to bear do, the right thing in that case as well, have. A deep Kehl you, have to have a deep teal the thing I worry about the most is, that we would lose, our way. In one of those things that we would lose our our. Obsessive. Focus on customers, or would somehow become short-term oriented or would. You. Know and start, to become overly. Cautious you, know kind of failure, averse, and therefore unable to invent, and pioneer, you cannot, invent, and pioneer, if you. Cannot, accept failure, its, you to invent. You need to experiment, and if. It's if you know in advance that, it's going to work it. Is not an experiment, and so. That's a very important. Thing you you know it's these they're inseparable, twins, failure, and invention, it's so you, have to be willing to do that it's, embarrassing, to fail. You. Know it's always embarrassing to, fail but you have to say no that's, not how this works if I said to you you. Have a 10%, chance of a. With a particular, decision a 10%, chance of a 100x. Return. You. Should take that bet every time but, you're still going to be wrong nine out of ten times and it's gonna feel bad 910. Times and in, in in with technology, the. Outcomes, the results, can be very long tailed they it's very at the payoff is can be very asymmetric. Which, is why you should do so much experimentation. You know everybody, knows that if you swing for the fences you hit more home runs but you also strike out more but. With the baseball, that analogy doesn't go far enough because with baseball, no, matter how well you connect, with the ball you can only get four runs the. Success, is capped at four. Runs. But. In business every once in a while you step up to the plate you hit the ball so hard you get a thousand. Runs and. So. When that when you have that kind of asymmetric. Payoff and you, know one at one at back and get you a thousand, runs it. Encourages. You to experiment. More it's the right business, decision to experiment, more it's also better for your customers, customers, like the. Successful. Experiments, by the way this is a giant. Misconception. In a. Lot. Of young entrepreneurs inexperienced doctors that they mean one, of the things that is very fashionable, right now is to talk about how disruptive their business plan is going to be and.
The. But invention. Is not disruptive. Only. Customer, adoption, is disruptive. And Amazon, we've invented a lot of things the, customers did, not care, about at all and believe. Me they, were not disruptive. To, anyone. So. It's only when customers, like the new way that anything. Becomes, disruptive. And. So really it's just saying, that you wanted you know if somebody comes to you with a business plan that they claim is disruptive, you should ask them to explain it to you in simpler language and. The simpler language is why are customers going to adopt this, why. Are they going to like it why is it better than. The, traditional way by. The way one thing I should point out about failure, and this is a fine point internally, we take it we, know it and we don't need to talk about it much but there's a different kind of failure which is not, what you want that's where you have operating. History and you do know what you're doing and you just screw it up so. That's, not a good fair that's not an experiment that's just bad operations. Operational. Excellence, and so, like if we've, opened 134. Elmen centers were on, generation. 8 of our fulfillment center technology, if we open, a new fulfillment, center and, just woof it you, know we have to do some internal examination that's not an experiment. That's just bad execution so. There's different kinds of failure and you need to make sure you're making the right kind of failure the right kind of failure should be an invention it, should be something that you know it's an experiment, you don't know if it's gonna work and you know up front that you don't know if it's gonna work you need to identify. Your. Big, ideas, and there should only be two or three of them and then. If a senior, leader the. The main job of a senior, leader is to identify two or three important ideas and then, to enforce, great execution, against, those big ideas and. The, good news is that the big ideas, are usually, incredibly. Easy to identify you. Shouldn't need to think about them very much you already know what they are let me give you an example, for. Amazon, the consumer, business. The. Three big ideas are low, prices. Fast. Delivery, and. Vast. Selection. You. Don't need you, know it's, not the kind you know in the way the, way you know that they're the big ideas because they're so obvious the big ideas should, be obvious, and, by the way it's very hard to maintain a firm grasp of the obvious at all times so. Little, things can distract you from the obvious but. You have to back up and, say these are the three big ideas how, do we always deliver things a little faster how, do we always reduce our cost structure so that we can have prices, that are a little lower and the, good thing about these big ideas is they will be stable, in time so. I know for a fact that ten, years from now customers. Are still gonna like low prices, no. Matter what, happens, with technology. And everything, else, no matter what happens, people are gonna like faster, delivery it is impossible. For me to imagine a, scenario where, ten, years from now a customer, comes to me and says Jeff I love. Amazon, I just wish you delivered, a little more slowly. This, is so. Inconceivable. That, you have you can have great conviction as a leader to, continue to put energy into. Driving. Speed, of delivery and whatever. You're you know an AWS, I know that, customers, they like low prices, they, like availability, they don't want the services to be down they like data security, it's not very hard to figure out what, the big ideas, are and then you can keep putting, energy, into, those things and you spin up those five wheels and they'll still be paying you dividends, ten years from now.