I recently watched “Amazon Empire – The rise and Reign of Jeff Bezos”, a documentary by PBS Frontline.
It is a thought-provoking piece of work, and I decided to share some of the most interesting, and perhaps less known, ideas and anecdotes that caught my attention.
These are the twelve thoughts that I could distill out of the 2-hour documentary.
1. Working hard matters
Jeff Bezos admires Thomas Edison, credited as the inventor of the lightbulb.
Edison allegedly said: “Genius is 1% inspiration, 99% perspiration”.
Jeff made this statement his own and used it with his early employees and team members as a reminder that ideas are the easy bit but execution is what truly counts.
2. Obsess with customers
Most of us are familiar with Jeff Bezos’ obsession with customer experience and serving his clients.
Perhaps less known is the fact that during the early years of Amazon, in meeting rooms people used to keep an empty chair at the table to represent the customer.
Immense focus on customer experience was there from the start.
3. Reach over profit
A significant accomplishment of Jeff Bezos was that of convincing Wall Street and his investors that for many, many years Amazon was not going to be very profitable. At the same time, critics were accusing Jeff of pushing small businesses out of existence.
Jeff’s strategy, in a nutshell, was to attempt a monopolization of the market by initially forgoing profit in an effort to increase market share. Small businesses wouldn’t be able to afford to play against this and, over the medium term, would disappear. Amazon was also able to leverage a fiscal advantage too: as an online retailer, the site wasn’t required to charge sales tax like bricks and mortar stores.
The net effect was that people would browse books in real shops and buy on Amazon.
4. Go after the weak
Amazon started to go after publishers in what was internally known as the Gazelle Project.
Similarly to the cheetah that, when hungry, goes after the weakest gazelle (because that’s the easiest one to kill), Amazon went after the smallest publishers (the easiest ones to give up autonomy). Amazon was adopting aggressive tactics to force publishers to drop their price and profit margins. Amazon would, quite explicitly, demand a “kickback” from the publishers for allowing them to sell on the website. If a publisher didn’t agree to it, Amazon would link its books to competitors’ pages or would make the BUY button disappear.
Publishers would find themselves in a dilemma: undoubtedly, simply being on Amazon was increasing their sales significantly, however these (unfair) practices were affecting their profit margins.
The attitude towards Amazon became a “Render unto Caesar that which is Caesar’s”. Reality was hitting the smaller publishers hard. They, however, were not comfortable to openly speak about it: margins are finite, someone had to give and, most of the time, the one to give wasn’t Amazon.
5. Seize real estate opportunities
In 2005, Jeff Bezos introduced Amazon Prime (a 2-day free shipping service at the time) that would be destined to become the most successful membership program in history. It was a risky bet that paid off, so much more as it was taken when Amazon could only count on 10 warehouses nationally.
After the Global Financial Crisis, Jeff Bezos went on a building spree across America to create Fulfillment Centers. Having an increasing number of fulfillment centers in more and more areas of the country was going to be fundamental to be able to keep up with the promises of Amazon Prime.
6. amazon.love
As the company expanded, Amazon was attracting more and more criticism for its ruthless practices towards sellers and workers. Jeff Bezos understood that his organization was at a decisive moment and he needed to shift this perception dramatically. He wanted Amazon to become a big company that was loved by the people.
In 2010-2011, he wrote a memo of twenty-four bullet points that he circulated amongst his top leadership.
He titled it “amazon.love”:
7. Pick your fights carefully
At some point, Amazon was selling 40% of all books in the USA, and 2/3 of all electronic books. For most critics, Amazon should have become an antitrust target, given the advantage they were taking thanks to their size and positioning.
At that point, Hachette decided to push back on some of Amazon’s predatory terms and conditions. In response, Amazon announced they would stop selling all of Hachette’s books on their platform: consequences on authors were devastating.
The sales of Hachette-published authors plummeted by 50-90%. The move literally ruined entire careers for starting authors. A few writers decided to raise this problem with the Obama administration. The then President of the United States of America denied any intervention on the premise that Amazon was a very popular company, that was giving million of jobs to Americans.
Eventually, Hachette and Amazon settled their dispute. Amazon allowed Hachette to set their own prices for e-books, while offering incentives to keep them low.
8. Mind your language
Amazon became the modern equivalent of last century railroads, the infrastructure that controls the flow of Commerce across the country.
Some high profile sellers did try to use other avenues to sell but the testimony from Jason Boyce, a former seller on Amazon, is emblematic: “All other platforms combined delivered 10% of Amazon sales. This is a testament to just how good Amazon is [at driving sales].”
Amazon employees were getting trained on what terminology to use. It was forbidden for them to mention the word “monopoly”. The expression “market share” was going to be substituted by “market segment share”.
The message is clear: Amazon is not going going to openly say how big they are.
9. It’s about who you know
As Amazon was becoming larger and more influential, Jeff Bezos deliberately decided to get closer to politics and politicians.
He bought a house in Washington DC.
Jeff Bezos being Jeff Bezos, he bought The Washington Post too.
He started active lobbying campaigns with the Obama administration.
Nobody shifts their focus towards Washington so rapidly, simply because they want to enjoy Washington’s free museums…
In those years, Jeff Bezos was building Amazon Web Services, a cloud infrastructure that powered Amazon, part of which he could rent to businesses and, of course, the government.
Jeff scored a large contract with the CIA: a game-changing win because it cleared all doubts around the security of the service.
10. Collecting data from the inside
AWS helped Amazon to move from the company that sells everything to the company that does everything.
In fact, Amazon came up with the Echo device, an interactive tool that would manage many aspects of people’s everyday life through voice control (many of us are familiar with Alexa).
Jeff Bezos is a huge fan of Star Trek and he openly admitted that the Echo device should one day turn into the Star Trek computer. Delivering the Echo into homes, like a modern trojan horse, would help Amazon collect even more data around its consumers. As Alexa gets embedded into everybody’s life, the AI race amongst all Big Techs sees Amazon at an advantage.
11. Shopping mode
Amazon started acquiring small and big organizations and partnering with established brands across a variety of areas: they bought Ring (a security cameras company) and Wholefoods, they partnered with Berkshire Hathaway and JP Morgan to enter the Health Insurance business, they attempted to penetrate the Pharmacy industry by acquiring PillPack in 2018 and launching Amazon Pharmacy.
Simply the announcement of any Amazon move would make competitors’ stock price drop, no matter the industry.
Another example was when Amazon decided to enter the movie production business with Amazon Studios, to compete with Netflix, as part of the Prime offering.
In the words of Jeff Bezos: “Every time I win a Golden Globe, this helps me selling more shoes. People who subscribed to Prime then explore how they can get more value out of the program”
12. Brave handling of private life
When Amazon announced its intention to build a second headquarter in the US, all over America dozens of cities and states started a race to offer the best proposal to Jeff Bezos.
These cities’ value proposition was to offer larger space and making Amazon pay less taxes so that the metropolitan area of choice could benefit from the 50,000 new jobs that Amazon would bring. At about the same time, The National Enquirer (now a bankrupt brand, then owned by David Pecker) started to cover the story of Jeff Bezos cheating on his wife. Pecker was said to be linked to two people that disliked how Bezos’ Washington Post was covering them: Donald Trump and Saudi Crown Prince Mohammed bin Salman.
Allegedly, Pecker had asked for money to Bezos to refrain from publishing private photos of Jeff and his new lover. But Bezos rejected any attempt.
He, bravely, publicly admitted his personal life’s mistakes and exposed Pecker’s blackmailing practices.
Conclusive thoughts
The documentary is a great piece of investigative journalism and I can definitely recommend it to people interested in finding out some of the less known stories about Amazon and his founder. It contains nuggets of wisdom if you are a business nerd or simply a curious person.
There’s no doubt that Jeff Bezos managed to build a phenomenal organization, one that truly impacts the lives of billions of people on the planet. I am a huge fan.
Some questionable practices have been employed along the way though.
Shel Kaphan, who in the early days of Amazon helped it becoming the giant it currently is, now candidly admits that, on one hand, he’s proud of what Amazon achieved but, on the other hand, the scale this “huge and unstoppable force” reached scares him.