The everything store by Brad Stone
Jeff Bezos and the age of Amazon
[Book is sort of biography of Amazon.com and Bezos is pronounced as ‘Bay-zose’ - a Cuban name]
Near the elevators, there is a black plague with white lettering that informs visitors they have entered the realm of the philosopher-CEO. It reads:
“There is so much stuff that has yet to be invented
There’s so much new that’s going to happen
People don’t have any idea yet how impactful the internet is going to be and that this is still Day 1 in such a big way --------- Jeff Bezos.
Amazon’s internal customs are deeply idiosyncratic. PowerPoint decks or slide presentations are never used in meetings. Instead employees are required to write six-page narratives laying out their points in prose, because Bezos believes doing so fosters critical thinking. For each new product, they craft their documents in the style of press release,
The narrative fallacy, Bezos explained, was a term coined by Nassim Nicholas Taleb in his 2007 book The Black Swan to describe how humans are biologically inclined to turn complex realities into soothing but oversimplified stories. Yalib argued that the limitations of the human brain resulted in our species’ tendency to squeeze unrelated facts and events into cause-and-effect equations and then convert them into easily understandable narratives.
The idea for Amazon was conceived in 1994 on the 14th floor of a midtown NYC skyscraper. Nearly twenty years later, the resulting company employed more than 90,000 people and had become one of the best known corp. on the planet, frequently delighting its customers with its wide selection, low prices, and excellent customer service while also remaking industries and unnerving the stewards of some of the most storied brands in the world.
Bezos earned a BSE in electrical engineering and computer science from Princeton in 1986 and worked in David Shaw’s D E Shaw firm. David Shaw took his PhD in computer science from Stanford and before jumping into entrepreneurship, he was teaching at Columbia University. David Shaw was a pioneer in using computers and algorithms for stock and bond trading and was very successful. His company had its own domain name in 1992 much before Goldman Sachs and Morgan Stanley have theirs domain names. David Shaw wanted to take advantage of the internet and deputed Bezos to explore the opportunity. While they discussed many ideas, they liked the idea of setting up web portal for online trading and they called it ‘the everything store’.
While exploring internet for different opportunity, Bezos was surprised to see the huge growth (2,560 percent web growth in one year).
“I knew that I might sincerely regret not having participated in this thing called the Internet that I thought was going to be a revolutionizing event. When I thought about it that way.... it was incredibly easy to make the decision’.
During his time at D E Shaw, Bezos met MacKenzie who took her undergraduate from Princeton in English literature and working near to his office. The relationship was fruitful and within three months they got married.
D E Shaw liked Bezos idea of establishing an online bookstore and he wants to be part of the new idea. However, Bezos wanted to run by himself and D E Shaw warned him that he will be direct competition with new company as David Shaw is also planning to do the same.
In early 1995, Bezos parents Jackie and Mike Bezos, invested $100,000 in Amazon from their hard earned savings. “We saw the business plan, but all of that went over our heads to a large extent”, but we were betting on Jeff”, says Mike Bezos. Bezos told his parents that there was a 70% chance they could lose it all. “I want you to know the risks, because I still want to come home for Thanksgiving if it doesn't work:.
There is an interesting cross-bid between Amazon and yahoo for a company called Junglee, founded by three graduates from Stanford's computer science PhD program. Ram Sriram, the chief operating officer of Junglee before he became business development manager at Amazon (after the take over by Amazon)call it a ‘total tissue rejection. Part of the reason it did not succeed was that the team didn’t buy into it”.
By any measure, the acquisition of Junglee was a failure. All of the Junglee’s founders and most of its employees left Amazon by the end of 1999 to return to the Bay area (Amazon head office is located in Seattle to take advantage of tax). But the deal nevertheless produced an extraordinary bounteous outcome for Bezos. Unbeknownst to the founders of Junglee at the time, Ram Sriram was quietly advising two Phd students at Stanford - Larry page and Sergey Brin - who were trying to reimagine search on the internet. In Feb 1998, Shriram had become one of the first four investors who backed the hopeful little company, Google, with $250,000 each.
Six month after the investment, over the summer of 1998 Bezos and MacKenzie were in Bay area for a camping trip with friends and Bezos told Shriram that he wanted to meet the Google guys. On a Saturday morning, Shriram picked up Bezos and his wife at a local hotel, the Inn at Saratoga and drive them to his home. Page and Brin met them there for a breakfast and demonstrated their modest search engine. Years later , Bezos told journalist Steven Levy that he was impressed by the Google guys’s healthy stubbornness as they explained why they would never put advertisement on their homepage.
Brin and Page left Shriram’s house after breakfast. Revealing once again his utter faith in passionate entrepreneurs’ power to harness internet, Bezos immediately told Shriram that he wanted to personally invest in Google. Shriram told him that the financing round had closed months ago, but Bezos insisted and said he wanted the same deal terms as other early investors. Shriram said he would try to get it done. He later went back to Gogle founders and argued that Bezos’s insight and budding celebrity could help the fledgling firm and they agreed. Brin and page flew to Seattle and spent an hour with Bezos at Amazon’s offices talking about technological issues like computer infrastructure. “Jeff was very helpful in some of those early meetings” Larry page says.
In June of 2000, with Amazon’s stock price headed downward along with the rest of the NASDAQ, Bezos first heard the name of Ravi Suria. A native of Madras, India, and son of a school teacher, Suria came to US to attend the university of Toledo and earned MBA from the school of business at Tulane university. At the start of 2000, he was a new and unknown twenty eight-year old convertible-bond analyst at the investment bank Lehman Brothers, working in a small office on the 14th floor of the World Financial center. By the end of that year, he was one of the most frequently mentioned analysts on Wall Street and the unlikely nemesis of Jeff Bezos and Amazon.
Working from Amazon’s latest quarterly earnings release, Suraia analyzed the heavy losses of the previous holiday season and concluded that the company was in trouble and in a widely disseminated research report, he predicted doom. And Amazon’s stock fell another 20 percent.
Suriya's analysis was, in the narrowest sense and with the benefits of hindsight , incorrect. with the additional capital from the bond raise in Europe, Amazon has nearly a billion dollar in case and securities enough to cover all its negative working capital model would continue to generate cash from in the process of cutting costs.
The next eight months, Ravi Suria continued to pummel Amazon with negative reports. His research became a litmus test for people’s view of the dawning new internet age. To Bezos, Suria represented a strain of illogical thinking that had infected the broader market: the notion that the Internet revolution and all of the brash reinvention that accompanied it would just go away. According to colleagues from the time, Bezos frequently invoked Suria’s analyses in meetings. An executive in the finance group used Suria’s name to coin a term for a significant mathematical error of a million dollar or more; Bezos loved it and started using it himself. The word was milliravi.
Suria, later got smoked out from Lehman for his erroneous reports and Amazon used milliravi in their annual reports.
Book continues with different collaboration and partnership that went against those who partnered with Amazon (Circuit City, Toys R US, Target, Wüsthof , etc) and there were attempts to but Amazon by Barnes and Noble, Wal-Mart etc.
In order to expand Amazon distribution centers, Amazon started to pull Wal-Mart executives who were excelled in distribution network and its management.
In order to make advantages of tax benefits, Amazon built fulfillment stores in major states who were fighting with Amazon on tax related issues. With fulfillment centers, Amazon investing in the state (more jobs) and got tax concessions.
Mike Bezos who migrated from Cuba during the Cuban missile period was not Jeff’s biological father. Ted Jorgensen is Jeff’s biological father who was a uno-cycle circus man and Bezos's mother, Jackie, had him when she was a teenager and was married to his father for just two years. Author of the book traced Jorgensen and explained to him about his billionaire son and Amazon.com and he never heard his son or his company before this intro. He is currently running a small bike repair shop in Glendale Arizona. With the help of his son from his second marriage, he tried communicating many times and asking forgiveness on what he did to him. Jeff replied back to him that he had no ill-feeling about the past.
Here are a dozen books widely read by executives and employees that are integral to understanding the company.
The Remains of the Day by Kazuo Ishiguro
Sam Walton: Made in America, by Sam Walton with John Huey
Memos from the Chairman, by Alan Greenberg
The mythical man-month by Frederick P. Brooks Jr
Built to last: Successful Habits of Visionary Companies by Jim Collins and Jerry I. Porras
Good to Great: Why some companies make the leap.. .and others don’t by Jim Collins
Creation” life and how to make it by Steve Grand
The innovator’s Dilemma: The Revolutionary Book that will change the way you do business by Clayton M. Christensen
The goal: A process of ongoing improvement by Eliyahu M Goldratt and Jeff Cox
Lean thinking: Banish waste and create wealth in your corporation by James P. Womack and Daniel T. Jones
Data Driven Marketing: The 15 metrics everyone in marketing should know by Mark Jeffery
The black swan: The impact of highly improbable by Bassim Nicholas Taleb
Book review from NYtimes - http://www.nytimes.com/2013/11/03/books/review/brad-stones-everything-store.html