What Jeff Bezos Knew Back in 1997 That Made Amazon a Gorilla

http://www.forbes.com/sites/ericjackson/2011/11/16/6-things-jeff-bezos-knew-back-in-1997-that-made-amazon-a-gorilla/

by andrewvalish • 15 years ago

176 33 15 years ago

My favorite: "It’s ok to make mistakes but it’s not ok to be timid." I know in silicon valley that sort of thinking is encouraged, but in most of corporate America it's very rare.

simon• 15 years ago

In Cubicleville thinking outside of the box is frowned upon, operating outside of the box is punished swiftly and even realizing that the box has an outside is dangerous.

wanorris• 15 years ago

If your job is to shepherd, say, Proctor and Gamble forward, then the upside of boldness is radically less than if you're Amazon. And the downside of boldness, profligate spending, is likely to come out of your margins without ever being made up in the long term.

In a relatively mature segment, operational discipline is more important than big ideas and plans. Since the reward system is different, it attracts different people, and a more suitable mentality.

This is heavily related to why it's so often that the best people from a growth company leave as the business matures -- the skills that make you great at growing a company will not make you equally successful at managing an existing business, even aside from the fact that growth-company people usually don't like doing the more mundane tasks of a later-stage business.

InclinedPlane2• 15 years ago

I'd add to this: the most sure fire way to dominate a market is by executing with a combination of skills that do not naturally tend to go together.

Google succeeded by combining high quality software engineering with cutting edge computer science research and beyond state-of-the-art data center operations.

Apple succeeded by combining solid software engineering with equally solid internet services engineering and more than anything exceptional design and aesthetics.

Amazon succeeded by combining solid web development with state of the art inventory management and fulfillment processes.

It's easy to do one thing well, there are literally millions of talented people in the world who can do one thing exceptionally well. But to be a company like Google, Amazon, or Apple you need to have a combination of talents that are typically unusual or difficult to keep together.

There are so many tech companies out there who have a band full of guitarists who all have the same musical tastes and background and they wonder why they haven't conquered the world yet.

CubicleNinjas• 15 years ago

This is another great point. Thank you for sharing this.

erichocean• 15 years ago

Agree this is a great point.

Sadly, companies that are good at two things have a very difficult time getting funded. My own company, Fohr, has made it to the full partner round at one very highly-respected VC firm, but because we're in two industries (tech and film), and innovating in both, we're in a no-mans land for funding. :(

InclinedPlane2• 15 years ago

It's not just about diversity of competencies. It's about complementary but dissimilar skills. Apple is able to make beloved consumer electronics because they mesh aesthetic sensibilities and design with quality hw&sw construction. Google succeeded because better algorithms (page rank) led to higher quality results and good software engineering techniques (map-reduce, sharding) married to novel data center operations (heavily automated consumer hw based servers) allowed them to crank out results faster and cheaper than the competition, making ad revenue all that more potent and enabling lower margin ads (such as adwords).

Without a solid track record of success I can imagine it might be difficult to convince outsiders of the merits of a company that is more unusual than its competitors. I think the solution to that is the same as always, keep efficient and execute well until you acquire the profit or the funding to grow.

FD3SA• 15 years ago

Exactly. Innovation is far more likely to occur at the boundary of multiple disciplines, rather than at the pointy end of one. In this day and age, expertise in one area is required, but to be a visionary CEO, one must also have a breadth of knowledge in many fields. Jobs is an excellent an example of such a person. The age of the polymath is once again upon us.

thesash• 15 years ago

It's an impressive testament to Bezos's vision and integrity that he was able to both articulate these principles early on and stick to them for 15 years.

asr• 15 years ago

Most of these points strike me as contrary to traditional lean startup advice--e.g. it's ok to expend a huge amount of resources without seeing results for 5-7 years, and it's important to be first in a big market.

Obviously, this worked for Amazon, and there are some opportunities you won't be able to take advantage of in any other way, but it's certainly high risk. I mean, Pets.com arguably followed much of this advice.

I suspect what really separates Amazon from the pack is their actual customer experience--but that's only 1 of 6 points here.

Confusion• 15 years ago

The problem with these stories is that they assume that correlation is causation: they pick some subset of all the things that influenced Amazon and present them as the decisive influences, without a evidence to support that suggestion.

I humbly suggest that many people that share this worldview and attempted to execute based on it have failed. This advice is as worthwhile as 'lean startup advice': there are no guarantees, it depends on many factors and most will fail.

jpwagner3• 15 years ago

Some research companies will build things that are 5 years off from being viable and that approach is generally contrary to "lean startup advice".

But Amazon built something that was viable immediately AND fit into a 5-7 year plan.

smokinn• 15 years ago

Amazon was nowhere near immediately viable.

It was founded in 1994. It had its IPO in 1997. It posted its first net profit in 2002.

It lost money for 8 years. Hardly "something that was viable immediately".

On the other hand it didn't take that much investment before IPO. It was seeded with 300K from Bezos and his family followed by 50K in angel money and finally an 8MM round.

http://www.quora.com/Who-were-the-original-investors-in-Amaz...

It rode the cheap cash infusion from the dot com bubble for as long as it could until the bubble collapsed. At that point it had cash but was going to run out eventually which is why I imagine they decided then it was time to try and make the company profitable rather than expand through investment.

wmougayar• 15 years ago

True, but they had an enormous amount of funding early on that allowed them to do that. So the lesson for the lean startup is to know when to get the big investment type of funding that allows you to think big, think long-term and go for the jugular as he said.

hsshah• 15 years ago

I observed these traits from a unique vantage point.

Worked with the "world's biggest auction site" for 8 years since 2002. I remembered the pride the company had about it being profitable from Day 1 and the dismissal of Amazon for not turning any profit for so many years. The company had strict quarterly goals and any decision, no matter how appropriate, if it hurts the quarterly goals was discarded.

Comparing this myopic view with Amazon's patience, stubbornness and customer focus; it's no wonder that Amazon went from half to more than double the market cap of my previous company.

chubot• 15 years ago

Yup, that is why I bought Amazon stock in 2005 (really, from an interview that was very similar to this one). Jeff Bezos talks about long term thinking and also executes on it.

I think it also relates to the point made a few weeks ago about Silicon Valley being ADD in some respects -- chasing the hottest new thing, rather than conscientiously building value over years. I think someone said something about Bezos choosing Seattle for that reason. He wasn't from that area like Bill Gates -- he was in NYC I believe and moved out to Seattle to start the company.

FrojoS• 15 years ago

I agree, though, zero sales tax certainly plaid a role, too.

Zimahl• 15 years ago

Zero sales tax where? WA has a 7.6% state sales tax and individual counties have added on top of that.

WA doesn't have an income tax (if that's what you actually meant).

burgerbrain2• 15 years ago

Retailers do not pay sales tax, consumers do. And in every state I am aware of that has a sales tax, those consumers still have to pay use tax.

I really don't understand why people have a hard time dealing with this. This is an issue settled over a century ago by Sears.

rkalvi• 15 years ago

It was a calculated business decision. He moved to seattle as it housed three of the top publishers that he needed to have on board to do business with at amazon.

jpwagner3• 15 years ago

awesome interview from 2000:

http://www.wired.com/wired/archive/8.07/bezos.html

alecco• 15 years ago

A great article but it lacks reference cases to compare with. We easily fall for survivor bias.

vaksel• 15 years ago

stuff like this is pretty much why my online shopping is almost exclusively done at Amazon.

Even if it's a few bucks more compared to some other site, I just trust them not to screw me over.

ofca• 15 years ago

I would just add that all these things are common knowledge. The most remarkable thing he did is - he followed and delivered on all those things. Just look at number 2:"Think long-term meaning 5 – 7 years, not 5 – 7 months". Almost every sane person knows this. But only few deliver. It takes a lot of guts and integrity to undertake such a journey, and Jeff made it look easy. Great guy.

Macsenour• 15 years ago

Just curious, couldn't we apply all 6 of these to Groupon? I think you'd get a "yes" on all of them.

ahi• 15 years ago

"Infrastructure web services had to happen."

Honest question, why? I'm glad they did it, and Amazon is pretty good at it, but I'm not sure why it was inevitable.

mseebach• 15 years ago

One thing I learned a long time ago about really smart people: study, read, or listen to the things that they think are great. It’s a shortcut to greatness.

No. No. No. No. A million time NO. Granted, at least it's better advice to study the things great people study, rather than study great people themselves.

By obsessing over what successful people do, we forget to study what the vast majority of people who did not become great did. For the six lessons listed, you can trivially find businesses who did that and failed. I sure you can find businesses for whom that is straight forward bad advice. And finally, you can find businesses who did not do it, and who still succeeded.

Those six things was probably the right thing to do for Amazon, at the time Amazon did them. Except abstracted beyond recognition, they are not generally applicable.

What Jeff Bezos Knew Back in 1997 That Made Amazon a Gorilla

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