The Everything Store by Brad Stone

(New York: Little, Brown, 2013-10-15), 384

Continuing to make my way through the Hopper reading list, this was a neat inside look at Amazon and a fusion of a lot I learned in Working Backwards and Sam Walton. It's interesting to learn about some of the inside history of Amazon, for example the development of the Kindle or AWS.

Notes


Contents


Prologue

  • "Amazon's corporate mission is to raise the bar across industries, and around the world, for what it means to be customer focused." (8)
  • Bezos asked Stone how he planned to handle the Narrative Fallacy in writing the book. The Narrative Fallacy describes how we are inclined to turn complex realities into oversimplified stories which shield us from the randomness of the world, and Taleb says to avoid this by favoring experimentation and clinical knowledge over storytelling and memory (12, cf. The Black Swan bib)

Part I: Faith

Chapter 1: The House of Quants

Summary: Bezos brainstormed new business ideas with Shaw, including an "everything store." He used his regret-minimization framework to decide to leave Shaw and start Amazon.

  • Resume: Princeton 1986, Fitel (computer trading network), Bankers Trust, D. E. Shaw (DESCO)
  • Learning: "He went to school on everybody. I don't think there was nobody Jeff knew that he didn't walk away from with whatever lessons he could." (20, Halsey Minor)
  • Notetaking: "He was disciplined and precise, constantly recording ideas in a notebook he harried with him, as if they might float out of his mind if he didn't jot them down...He was very methodical about everything in his life." (20)
  • His idea for an "everything store" came out of investigating new business ideas with Shaw. Books are pure commodities and he aimed to start with unlimited selection in at least one category.
  • Bezos used his Regret-Minimization Framework to decide to leave Shaw and start Amazon: when you're 80 you won't care about walking away from a bonus, but you might care about missing an opportunity to participate in something big (27)
  • He told the moving van to drive west and he could call them on the road with a specific destination (!!, 29)

Chapter 2: The Book of Bezos

Summary: The crazy early days of Amazon.com which included insanely hard work and culminated in the IPO on May 15, 1997.

  • Iconic job posting: "You should be able to do so in about one-third the time that most competent people think possible." (30)
  • "It's easier to invent the future than to predict it." (30, Alan Kay)
  • Bezos chose Seattle because it's a tech hub and because Washington has a small population to minimize sales tax collection (31)
  • Allowing negative reviews on products: "We don't make money when we sell things. WE make money when we help customers make purchase decisions." (38)
  • Employee Laurel Canan gave up coffee: "You can't do a job like that on caffeine. You have to do it on carbs." (39)
  • Bar raiser hiring, and Bezos would not hire if they asked about work/life balance (44)
  • Jeffisms: "You can work long, hard, and smart, but at Amazon you can't choose two out of three." (46)
  • John Doerr invested in Amazon and joined the board. The motto was "Get Big Fast" (48)
  • "Great merchants have never had the opportunity to understand their customers in a truly individualized way. E-commerce is going to make that possible." (52)
  • Negative operating cycle helped Amazon grow: cash in when orders ship, but settle accounts with book distributors every few months (57)

Chapter 3: Fever Dreams

Summary: "Go really big or go home."

  • "I brought him very bad news about our business, and for some reason, he got excited." (67, Mark Breier)
  • Taking a page out of Walmart's book: strict frugality and hiring Walmart executives
  • "Bezos had imbibed Walton's book thoroughly and wove the Walmart founder's credo about frugality and a bias for action into the cultural fabric of Amazon." (75, cf 2023-07-04-Sam Walton-Made in America bib)
  • Selection: "We want to be the place for someone to find and discover anything they want to buy." (81)
  • Generalism: "In other words, Miller knew nothing about toy retailing, but in a pattern that would recur over and over, Bezos didn't care. He was looking for versatile managers—he called them 'athletes'—who could move fast and get big things done." (84)
  • Acquisitions motivated the first articulation of the Amazon leadership principles: customer obsession, frugality, bias for action, ownership, and high bar for talent (88)
  • Hiring bar raisers could veto a candidate who did not meet the goal of raising the company's overall hiring bar (89)
  • Bezos drove them hard, including and executive book club on Saturday mornings, but the environment was not friendly toward families (89)
  • Bezos insisted the company needed to master anything that touched he customer experience (90)
  • Brannon and Covey showed Bezos a common-size income statement (each line item normalized by revenue), which was a catalyst for moving toward profitability (91) ^3e672c
  • Category leaders became General Managers, with P&L ownership (93)

Chapter 4: Milliravi

Summary: "Get Big Fast" becomes "Get Our House in Order." The downturn was a stunning fall from grace, but Amazon survived through conviction, improvisation, and luck. Much of Amazon of today was forced in the dot-com crash.

  • Amazon got lucky by raising cash right before the downturn (101)
  • "I have never seen anyone so calm in the eye of a storm. Ice water runs through his veins." (102, Mark Britto)
  • Ravi Suria wrote disparaging analyst reports about Amazon which were wrong, earning the nickname of a milliravi for a significant mathematical error of a million dollars or more (107)
  • Platforms: "The ambition of every technology company is to be worth more than the sum of its parts." (107)
    • In this is the origin of AWS by making parts of Amazon a platform for others...
    • Amazon has the most authoritative product catalogue → Marketplace (115)
  • Bezos: "That either-or mentality, that if you are doing something good for customers it must be bad for shareholders, is very amateurish." (111)
  • "If somebody else can sell it cheaper than us, we should let them and figure out how they are able to do it." (115)
  • Amazon courted Walmart to run their website and Walmart was interested in an acquisition, but nothing happened. But Bezos learned from Walton and Walmart about everyday low prices. Lee Scott, Walmart CEO: "We view advertising and pricing as two ends of the same spectrum...Most of our marketing dollars we pour into reducing prices. Our marketing strategy is our pricing strategy, which is everyday low pricing." (118)
  • STO Pitfalls: "People at various levels were making decentralized decisions to move quickly and the process wasn't strong." (121, Piacentini)
  • Bezos met Costco founder Jim Sinegal: "The reason people are prepared to come to our strange places to shop is that we have value. We deliver on that value constantly. There are no annuities in this business." (125)
    • Jeffism: "There are two kinds of retailers: there are those folks who work to figure how to charge more, and there are companies that work to figure how to charge less, and w are going to be the second, full-stop." (125-126)
  • Jim Collins presented findings from Good to Great before it was published: "You've got to decide what you're great at." → Amazon flywheel (126)
  • Bezos "demanded more than they could possibly deliver and was extremely stingy with praise." (131)
  • First profitable quarter in Jan 2002

Part II: Literary Influences

Chapter 5: Rocket Boy

Summary: Blue Origin's origin.

  • Tells the story of his childhood: "Jeff and his siblings grew up observing their father's tireless work ethic" (145), and spent every summer with his grandparents on their ranch in TX where he did manual labor and read science fiction books
    • "Jeff, one day you'll understand that it's harder to be kind than clever." (149)
  • Bezos wants money for Space: would be great if Dune was nonfiction, and read Robert Zubrin's The Case for Mars (154)

Chapter 6: Chaos Theory

Summary: Amazon focuses on fulfillment and launches Prime.

  • Jeff Wilke came in to fix distribution growing pains; Amazon needed someone who was smart enough to go toe to toe with Bezos (163)
    • He wrote down a list of the ten smartest people he knew and hired them all
  • Communication is a sign of dysfunction: coordination among employees wastes time and people closest to the problem are usually in the best position to solve it (167, cf The Mythical Man-Month bib)
  • Bezos took time after the holidays to think and read → led to STO (168)
  • They focused on fulfillment as a core competency (rather than a commodity) and took inspiration from The Goal to focus on maximizing the efficiency of the biggest bottlenecks (172)
  • Jeff stopped having 1-1 meetings in his "ongoing quest for a better allocation of his own time", and banned PowerPoint while introducing 6-page narratives (175)
  • ★ Jeff's Nutters (177), including:
    • "Are you lazy or just incompetent?"
    • "If I hear that idea again, I'm gonna have to kill myself."
    • "Does it surprise you that you don't know the answer to that question?"
    • "Why are you ruining my life?"
    • "I don't know if you guys don't have high standards or if you just don't know what you're doing" (278)
  • "Bezos's behavior was often easier to accept because he was so frequently on target with his criticisms...He had this unbelievable ability to be incredibly intelligent about things he had nothing to do with, and he was totally ruthless about communicating it." (178)
  • Amazon turned off UPS for a short time to increase leverage with them in negotiations (181)
  • Prime paid huge strategic dividends, Bezos made the decision to move forward even though every financial analysis said not to (186)

Chapter 7: A Technology Company, Not a Retailer

Summary: The rise of AWS, with its interesting strategy of pricing with low margins to attract customers and deter competition so as to build a head start.

  • Raman: "Can I have some of what you're drinking so I can feel good about your business too?" (204)
  • Bezos was obsessed with a book Creation by Steve Grand bib, which got him thinking about primitives or building blocks, leading to some ideas for AWS (213)
  • EC2 was built by a team in South Africa with a slow internet connection: "the solitude was beneficial as it afforded a comfortable distance from Amazon's intrusive CEO" (214)
  • S3 developer: "I literally thought I'd get fired after every one of those meetings." (214)
  • Andy Jassy was Jeff's first official shadow
  • Bezos: price new technology low, as high margins justify rivals' investments in R&D and attract more competition, while low margins attract more customers (221)

Chapter 8: Fiona

Summary: Development of the Kindle.

  • "Bezos didn't just love books—he fully imbibed them." (231)
  • "It is far better to cannibalize yourself than have someone else do it. "(230, Diego Piacentini)
  • The Innovator's Dilemma bib: great companies fail not because they want to avoid disruptive change but because they are reluctant to embrace promising new markets that might undermine their traditional businesses and that do not appear to satisfy their short-term growth requirements. The companies that solved the innovator's dilemma succeeded when they set up autonomous organizations charged with building new and independent businesses around the disruptive technology. (234)
    • "I want you to proceed as if your goal is to put everyone selling physical books out of a job."
  • "Those who couldn't channel Bezos's fervor on behalf of Amazon and its customer didn't stay with the company...But he also found it increasingly hard to reconcile the company's approach toward its partners with his own Christian values." (249)

Part III: Missionary or Mercenary?

Chapter 9: Liftoff!

Summary: Amazon came out of the great recession stronger than ever.

  • "Amazon battled and mastered chaos" (264)
  • Bezos "embraces the truth. A lot of people talk about the truth, but they don't engage their decision-making around the best truth at the time. He is not tethered by conventional thinking. What is amazing to me is that he is bound only by the laws of physics. He can't change those. Everything else he views as open to discussion." (267)
  • Bezos prefers to build: "Bezos had absorbed the lessons of the business Bible Good to Great bib, whose author, Jim Collins, counseled companies to acquire other firms only when they had fully mastered their virtuous cycles, and then as an accelerator of flywheel momentum, not a creator of it." (268)
  • Amazon acquires Zappos
  • The 2007/8 financial crisis hid some of the emerging strength of Amazon from competitors (274)
  • Agency model shift for e-book publishers (and the anti-trust suit against Apple)

Chapter 10: Expedient Convictions

Summary: Amazon is relentless and negotiates every point and makes life terrible to competitors and is completely rational.

  • "Missionary" (righteous goals, trying to make the world a better place) vs "Mercenaries" (out for money and power and run over anyone who gets in the way) from The Monk and the Riddle (287)
  • Amazon fights (and loses) the issue of collecting state sales taxes
  • Amazon acquires Diapers.com: "They have an absolute willingness to torch the landscape around them to emerge the winner." (300)
  • Launch of Amazon publishing

Chapter 11: The Kingdom of the Question Mark

Summary: The power of customer anecdotes, and some other aspects of Amazon culture (tenets, principles, reviews, etc.)

  • Question-mark emails from Bezos to his team are called "escalations" (325)
  • Amazon's confrontational culture: "Bezos believes that truth springs forth when ideas and perspectives are banged against each other, sometimes violently." (326)
  • Random customer anecdotes can overrule data: "It's an audit that is done for us by our customers. We treat them as precious sources of information." (327)
  • People who do well at Amazon are those who thrive in an adversarial atmosphere, while others live in perpetual fear of termination
  • Frugality breeds resourcefulness
  • Tenets: principles for each group that guid the hard decisions and allow them all to move fast without constant supervision (331)
  • Bezos philosophy: you can accomplish a huge amount with a long enough time frame (336)

Epilogue

Topic: Management, Amazon

Source

Bibliography

file:(2023-07-27-The Everything Store)

New Words

  • salubrious: Favorable to health (263)
  • imbroglio: An intricate, complicated plot (280)

Created: 2023-06-11-Sun
Updated: 2023-09-19-Tue