From Online Bookseller to the Everything Store
Amazon. No company has impacted the internet — and all of modern life — more than this one. We’ve waited seven years to do this episode, and are so, so excited to finally dive into every nook and cranny of this legendary company. And of course because we’re Acquired and this is Amazon, we couldn’t contain it all to just one episode… even a 4+ hour one! So today we focus on Amazon.com the retail business, and we’ll have another full episode on AWS coming soon. And because all great series are trilogies, to fully understand Amazon we highly recommend starting first with our previous episode on Walmart, which truly is the giant’s shoulder that Jeff Bezos stood upon. Let’s go!!
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More on the episode
Playbooks
1. When you witness a once-in-a-decade (or century!) anomaly, run toward it
In 1994, Jeff realized that traffic on the internet grew at 2300x the previous year(!)
We can’t think of ANYTHING that’s growing that fast today. He realized the rarity of that tailwind, quit his job, and didn’t waste any time before starting Amazon
2. Do what you’ll regret the least when you’re 80
Even though Jeff was the heir-apparent at D. E. Shaw, the decision to quit was “easy” compared to the opportunity cost of not starting Amazon
Using his now-famous “regret-minimization framework,” Jeff knew that the bigger risk for him was STAYING in his great job
3. Have a big vision, but start focused
But where to focus?
Jeff selected books analytically: they are easy to ship, you can get most from just a couple distributors, but there was also meaningful long-tail demand that bookstores (even large ones) didn’t keep in stock. The internet had infinite shelf space!
Which leads us to…
4. Leverage new paradigms only to do the previously impossible
Most new tech platforms are actually WORSE at doing the old thing. But they unlock totally new use-cases… like a store that could have 3M+ books! Barnes & Noble stocked just ~100k.
5. Think in decades & invest in customer experience
Amazon famously showed no profits for 20 years. Jeff knew that investing in growth and customer experience today could lead to profitability (and a huge moat) decades down the road
One of my favorite Bezos quotes is “Long term, there was never any misalignment between customer interest and shareholder interest”
6. Make bold bets - failures teach
From the failed zShops & Auctions to the Fire Phone, Amazon hit a lot of deadends
But Amazon is a learning machine. From Jeff’s 1997 letter:
“We will make bold rather than timid investments decisions where we see sufficient probability of gaining market leadership advantages. Some of these investments will pay off. Others will not, and we will have learned a valuable lesson in either case”
7. Cash Rules Everything Around Me
If you have cash sitting around, you can invest much more aggressively than your competitors
Since Amazon’s customers paid up-front and Amazon didn’t have to pay suppliers for month(s), they could invest the cash in the meantime. They leaned into this HARD, building more fulfillment centers to grow and improve customer experience
Which… would have been a problem if they ever stopped growing. But more customers kept flocking, basically forever. Turns out the internet became a pretty big place :)
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