I really enjoyed Brad Stone's The Everything Store: Jeff Bezos and the Age of Amazon. Anyone who wants to better understand the dynamics of disruption or just gain a better understanding of the website we've come to love, must read this book.
Here are ten things I found interesting.
1. Why Books
Bezos choose books as the first category for Amazon because:
They were pure commodities; a copy of a book in one store was identical to the same book carried in another, so buyers always knew what they were getting. There were two primary distributors of books at that time, Ingram and Baker and Taylor, so a new retailer wouldn't have to approach each of the thousands of book publishers individually. And, most important, there were three million books in print worldwide, far more than a Barnes & Nobel or a Borders superstore could ever stock.
2. Bezos's Regret Minimization Framework
When deciding to make the leap from a stable job to a start up, Bezos came up with what he calls “the regret-minimization framework.”
When you are in the thick of things you can get confused by small stuff,” Bezos said a few years later. “I knew when I was eighty that I would never, for example, think about why I walked away from my 1994 Wall Street bonus right in the middle of the year at the worst possible time. That kind of think just ins't something you worry about when you're eighty years old. At the same time, 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.”
3. Things Can Be Better
A lot of Bezos's, and by extension Amazon's, success comes from a low regard for the way things are currently done.
4. Starbucks tried to get an Ownership Stake in Amazon
Starbucks had “proposed putting a rack of merchandise from Amazon next to its cash registers in exchange for an ownership stake in the startup.”
… Bezos visited Starbucks CEO Howard Schultz in his SoDo headquarters and Schultz told the pair that Amazon had a big problem and that Starbucks could solve it. “You have no physical presence,” the lanky Starbucks founder said as he brewed coffee for his guests. “That is going to hold you back.”
Bezos disagreed. He looked right at Schultz and told him, “We are going to take this thing to the moon.” They decided to work on a deal, but it fell apart a few weeks later when Schultz's executives asked for a 10 percent ownership stake in Amazon and a seat on its board.
5. Focus on Customers Not Competitors
Speaking at an all-hands meeting called to address the assault of Barnes & Noble:
“Look, you should wake up worried, terrified every morning,” (Bezos) told his employees. “But don't be worried about our competitors because they're never going to send us any money anyway. Let's be worried about our customers and stay heads-down focused.”
6. Why a lot of incumbents fail
They are reluctant to lose money.
The Reggios (the people in charge of Barnes & Noble) were reluctant to lose money on a relatively small part of their business and didn't want to put their most resourceful employees behind an effort that would siphon sales away from the more profitable stores. On top of that, their company's distribution operation was well entrenched and geared toward servicing physical stores by sending out large shipments of books to a set number of locations. The first from that to mailing small orders to individual customers was long, painful, and full of customer-service errors. For Amazon, that was just daily business.
When Bezos entered the ebook market he made a crucial decision. Bezos appointed someone to lead up the ebook effort and asked him to kill Amazon's physical book business. There would be no ‘best of both' worlds in this Darwinian contest.
7. How Amazon Thinks About Leadership
Whether you are an individual contributor or the manager of a large team, you are an Amazon leader. Here are a few of Amazon's leadership principles. Every Amazonian is guided by these principles.
Have Backbone; Disagree and Commit
Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.
Vocally Self Critical
Leaders do not believe their or their team’s body odor smells of perfume. Leaders come forward with problems or information, even when doing so is awkward or embarrassing. Leaders benchmark themselves and their teams against the best.
Thinking small is a self-fulfilling prophecy. Leaders create and communicate a bold direction that inspires results. They think differently and look around corners for ways to serve customers.
Bias for Action
Speed matters in business. Many decisions and actions are reversible and do not need extensive study. We value calculated risk taking.
8. It's Harder to be Kind than Clever
Bezos's grandparents taught him a lesson in compassion … On a road trip, when Bezos was ten and passing time in the back seat of the car, he took some mortality statistics he had heard on an antismoking public service announcement and calculated that his grandmother's smoking habit would take nine years off her life. When he poked his head into the front seat to matter-of-factly inform her of this, she burst into tears, and Pop Gise pulled over and stopped the car.
Bezos described what happened next in his commencement speech at Princeton:
He got out of the car and came around and opened my door and waited for me to follow. Was I in trouble? My grandfather was a highly intelligent, quiet man. He had never said a harsh world to me, and maybe this was to be the first time? Or maybe he would ask that I get back in the car and apologize to my grandmother. I had no experience in this realm with my grandparents and no way to gauge what the consequences might be. We stopped beside the trailer. My grandfather looked at me, and after a bit of silence, he gently and calmly said, “Jeff, one day you'll understand that it's harder to be kind than clever.”
9. Communication can be a Sign of Dysfunction
At a management offsite in the late 1990s, a team of well-intentioned junior executives stood up before the company's top brass and gave a presentation on a problem indigenous to all large organizations: the difficulty of coordinating far-flung divisions. The junior executives recommended a variety of different techniques to foster cross-group dialogue and afterward seemed proud of their own ingenuity. Then Jeff Bezos, his face red and the blood vessel in his forehead pulsing, spoke up.
“I understand what you're saying, but you are completely wrong,” he said. “Communication is a sign of dysfunction. It means people aren't working together in a close, organic way. We should be trying to figure out a way for teams to communicate less with each other, not more.”
10. The Narrative Fallacy
When Brad Stone met with Jeff Bezos to solicit his cooperation for the book, Stone wasn't prepared for one of Bezos's questions: “How do you plan to handle the narrative fallacy?”
The narrative fallacy, Bezos explained, was a term coined by Nassim Taleb in his 2007 book The Black Swan to describe how humans are biologically inclined to turn complex realities into soothing but oversimplified stories. Taleb argues 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. These stories, Taleb wrote, shield humanity from the true randomness of the world, the chaos, of human experience, and, to some extent, the unnerving element of luck that plays into all successes and failures.
In Taleb's book — which, incidentally, all Amazon senior executives had to read — the author stated that the way to avoid the narrative fallacy was to favor experimentation and clinical knowledge over storytelling and memory.