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
