Jeff Bezos Revealed: Building Amazon One Box at a Time

Get big fast. The mantra of Amazon dot com and its boisterous founder Jeff Bezos. From the moment I got there the feeling was that you just pressed on the accelerator harder and harder. The audacious entrepreneur rewrote the rules of retail. There really was this sense of urgency around this Internet land grab that was taking place. How do we establish the Amazon brand. His strategy didn't always pay off. Even after Amazon went public people looked at the financials and said this company is not going to make it. Amazon dot com was actually profitable in December 1995. It must have been for oh about one hour with a series of sly moves. Jeff Bezos built and rebuilt Amazon dot com. If you ask a question that Jeff doesn't feel like is something they want to go into. The answer you get is going to be the laugh. And he's laughing all the way to the back. You can buy anything at Amazon dot com from books music shoes and clothing to a battle tank or a tiki hut. Amazon is the most successful online retailer in the world and still run by the man who created it back in 1994. Jeff Bezos. Jeff seemed to realize that being the singular place where a consumer can find and buy virtually anything that's available in the retail market was a critical part of the company's growth strategy. The public image of Jeff Bezos is a superhero entrepreneur. And he is that if you look at his life from the very beginning he's taken risks and he solved problems and he's created billions of dollars. Well Bezos is more guarded than his outgoing public persona and declined to participate in this program. Jeffrey Preston Bezos was born in Albuquerque New Mexico on January 12th 1964 to Jackie guys a 17 year old high school student guys divorced his biological father and married Miguel Bezos a Cuban immigrant and petroleum engineer for Exxon. Miguel adopted four year old Bezos in 1968. Bezos described his early computer experience in a 2001 interview with the Academy of Achievement. There was a company in Houston that had loaned excess mainframe computer time to this little elementary school. None of the teachers knew how to operate this computer. Nobody did. But there was a stack of manuals and me and a couple of other kids stayed after class and learned how to program this thing. As a teen Bezos embarked on his first serious entrepreneurial effort a summer camp based out of his house with an emphasis on science and literature. Five students signed up at one hundred and fifty dollars a pop. In 1986 he graduated from Princeton University summa cum laude with degrees in electrical engineering and computer science. Nicholas Carlson is deputy editor at Business Insider dot com and has covered Amazon for six years. Jeff Bezos actually recruited into a hedge fund named D.E. Shaw and he didn't want to work in finance. He actually wanted to work in computer programming. But D.E. Shaw is a computer programmer and the hedge fund is sort of built around algorithms and the type of technology that Bezos is interested in. It wasn't the only thing he found interesting. He came upon a statistic that just astounded him. He saw that the Internet was growing at two thousand three hundred percent per year and he just became obsessed with this number. Studying the top 20 mail order businesses Bezos saw an opportunity online. Chris Anderson is editor in chief for Wired magazine. He could see that there was this technological tsunami that was arriving that was going to disintermediate was going to create new distribution channels reset economics change the way we bought and sold. And the question was which domain shall we apply it to. The answer was books a commodity for which no comprehensive catalog existed. In July 1994 he quit his secure Wall Street job to pursue his dream to create one of the world's first online bookstores. His first investors his parents who he talked about with the Academy of Achievement. My dad's first question was what's the Internet. So this he wasn't making a bet on this company or this concept. He was making a bet on his son. In the summer of 1994 Jeff Bezos and his wife Mackenzie headed to Washington state armed with three hundred thousand dollars from his parents. Entrepreneur and technology expert Esther Dyson is chairman of the investment firm Adventure Holdings. You now have a lot of people leaving Wall Street to go try and do startups. But Jeff was different. He had a really solid business slash Wall Street background. And then he created something amazing. Bezos and his wife settled in Bellevue Washington and hired two programmers to write the code. Bezos related the story in a speech at Lake Forest College in 1998 found a house that could serve as the first business and it had a garage and seemed the right thing to do. There's a history of startups and garages. This wasn't fully legitimate because it was a converted enclosed garage. But I considered it somewhat legitimate because it wasn't insulated. Those were not impressive offices. He dubbed the company Amazon after the seemingly endless South American River with its countless tributaries. On July 16th 1995 Amazon dot com opened its virtual doors to the public. James Marcus was employee number 55. Marcus was hired to write book reviews for the site. That was nothing more than a list of titles. When I checked out their site to see if this was a place where I might want to work. I discovered it was quite rudimentary actually. There was a front page with an eclectic mixture of books. But the most notable thing was that there was a huge catalog of probably several hundred thousand books at the time. But there was no content in that catalog. The fledgling Amazon dot com had no advertising budget. Initial sales were generated solely by word of mouth. Heath Terry is managing director of Internet Research at Conocord Genuity. And there was a lot different about Amazon really from the beginning. You know they weren't in Silicon Valley. They were in Seattle. They weren't really into the whole hype of the bubble. They weren't putting out press releases every single day. The site caught on. Within a month books had been sold to customers in all 50 states and 45 other countries. What was different about Amazon was that Jeff ran it right. He was organized. He understood distribution. He understood how to motivate people to buy. He just he did things with great attention to detail. Bezos goal for growing the company could be summed up in a simple line. Get big fast was both a mantra and very much a strategic decision on Jeff's part. Everything had to be on steroids. All growth had to be on steroids. Eric Best was manager of business development at Amazon from 1999 to 2001. There really was this sense of urgency around capturing e-commerce market share. This Internet land grab that was taking place. How do we establish the Amazon brand and grow the overall business at the expense of competitors and within a very time bound window. The strategy paid off big time. By the end of 1996 the company reached 15 point seven million dollars in sales. The gains were boosted by Amazon's ability to offer tax free shopping to most online consumers. What makes us different is vast selection convenience. We deliver right to the desktop and also the fact that we're the broadest discounters in the world. We discount over 300000 titles basically the best selling titles. That's twice as many titles as the largest physical bookstore even offers. But early investors were frustrated. The surge in sales came without profits while Amazon spent millions developing software and expanding its business. You know there was a lot of a risk that was taken on by the company during those early days. And I think there was a lot of speculation around whether or not that was the right thing to do. It's easy now to look back and say of course Amazon needed that capital and they needed to invest at the rate that they did in order to achieve the scale that they now have. That was not always clear from day one. What was clear was that Bezos was unstoppable. He kept up the pace and powered ahead for Amazon's IPO. The idea was that you could not rest on your laurels for one moment and that you just had to keep innovating all the time and staying ahead of the competition all the time and never have even a millisecond of complacency. On May 15th 1997 the stock began trading on the NASDAQ stock market at twenty nine dollars and twenty five cents a share nearly twelve dollars higher than its offering price. The day of the actual IPO was a very big deal. There were you know parties all over the company and Jeff addressed us over the speaker phone from New York. I mean Jeff was telling us on the phone you know we've made history today. You have all made history today. It was pretty damn exciting. But despite the well-received IPO tech analysts still offered a dour assessment of the company. Tim O'Reilly is founder and CEO of O'Reilly Media. Most people remember the business stories that Amazon was going to be toast. People were scrutinizing their financials. They were saying this company will never be profitable. There were a lot of naysayers. The company's engineers were hard at work updating the site introducing features like one click shopping. By the end of 1997 the value of Amazon stock nearly tripled. Jeff would say to us do not pay attention to the stock price. He was very confident that in the long run it would go up and up and up but felt it was very dangerous to look at it in the short run. Amazon continued their frantic expansion hiring more than 7000 employees and beefing up their product line. You know we just heard talk about virtually everything and anything. We could sell groceries health care cell phone plans and cell phones magazines and then eventually you know hardware and garden hoses and toys. The expanded product line and high volume sales paid off for both Amazon dot com and Bezos. On December 20th 1999 he was anointed Time magazine's person of the year. Made my mom cry and you know parents are always proud and that feels great. Was that the ultimate legitimization of his sort of starry eyed dream of conquering the world through e-commerce. Like you flip to the inside of the magazine. There's Jeff dressed as Indiana Jones swinging on a vine. It was kind of making him into an American folk hero in a way. It's like you suddenly like Paul Bunyan was in the office down the hall from you. Bezos was at the top of his game but an industry wide disaster was right around the corner. By the late 90s Amazon dot com was an online juggernaut. But in 2000 the dot com bubble burst. Stock prices slumped and Jeff Bezos was forced to take drastic measures. There were at least two waves of layoffs. And as is usually the case with these things you don't know who's going to go. You kind of cower in your office and wait for the HR person to you know summon you with a finger. And it feels bad to see your colleagues go in the context of the slowing economy and the the deep slowing in consumer confidence. This was the only prudent decision that we could make. By September 2001 the company's stock hit an all time low and bottomed out at five dollars and ninety seven cents a share from poster child to whipping boy and nanoseconds. It's not the kind of stock that you can own and sleep well if you're a small investor. And I think by the way that's true of all Internet stocks. The advantage that Amazon had was they had built this war chest so to speak on their their balance sheet of cash to fund them through all this. Jeff Bezos made a lot of large bets and not all of them paid off. The company didn't profit for many years in the beginning. The reason Jeff Bezos got away with that and benefited long term is because he was always very direct with employees and stakeholders in the company. At long last by January 2002 those bets began to pay off. Amazon stock price rebounded and Bezos company did something it hadn't done in seven years posted a profit. The best thing I can say about him is that he was unwavering in his confidence. He could see the bigger picture and he knew that the skeptics were short termers. They were not seeing the big picture and he stuck to the vision. Once the bubble burst the investors patience for companies saying we're going to make big investments in building out a dot com side to our business was very very thin. And so Amazon took advantage of that and started partnering with Target and Toys R Us and the gap and other traditional retailers. The dot com retail giant joined forces with more than 400 companies. But not all retailers were willing partners. I do know of a number of cases in which he has acquired companies in order to take out competitors potential future competitors rather than because he actually wants that business to continue with his company back on track. Bezos switched gears and increased his focus on a much different passion. On March 6th 2003 he charted a helicopter to scout property in a remote region of southwest Texas. He was looking to buy up ranches for a venture he had started in 2000 called Blue Origin. Blue Origin is a technology company whose purpose was to develop vertical takeoff and vertical landing rockets for human space travel. The trip was nearly a disaster. Shortly after takeoff the helicopter flipped and landed in a riverbed. In 2003 Jeff Bezos almost died in a helicopter crash. It's sort of a pattern where he can go through something difficult like a dot com crash. Be philosophical about it. Laughing off with his big famous laugh. Unlike space exploration ventures bankrolled by private backers including Elon Musk Richard Branson and John Carmack. Bezos is obsessive about keeping his efforts at Blue Origin secret for a variety of reasons. It's pretty secretive. And I think actually from the point of view of the space industry that's sort of a pity. What makes a good market is when you have a bunch of competitors openly competing and they try and position themselves against one another. And the market's visible. They compete for money they compete for people and so forth. After six years of working behind closed doors and locked gates Blue Origins odd looking test rocket blasted off. Bezos was also set to launch on another revolutionary effort. This one closer to home. This is an opportunity to hugely expand the book industry expand pricing expand the definition of what a book could be. But it required someone with sufficient clout to do that end to end hardware software web integration. And only Amazon was in a position to do that. On November 19th 2007 Jeff Bezos took to the Charlie Rose show to announce the release of a groundbreaking new product here in my hands is what we're talking about. It is called the Kendall. Tell me when you first had the idea that this might be possible. What we realized at the time was that there were a few technologies that were sort of converging that we could combine together at the right recipe and make something that would be what we hoped would be transformative in the world of electronic reading. The Kindle was an instant hit. Amazon put this device out there that takes away so many of the aesthetic pleasures that people take in books. You know you can't smell the pages anymore. Dog ear the books. But it turns out book lovers who are all these people that feared and load this thing. Now they love the Kindle. The three hundred ninety nine dollar e-reader sold out nationwide in just five and a half hours. The number of Kindle sold however remains a closely guarded secret. A company spokesman said that they choose not to disclose the number. Jane Friedman is former CEO of Harper Collins and co-founder of Open Road Integrated Media. No one today knows how many Kindles there really are out there. It's a guessing game. We know that there are millions but how many millions. But it's strategic for Amazon obviously because that's what they do. They keep a lot of information close to the vest. But publishers saw the Kindle as an industry killer. There will be a real blood on the tracks of publishing in the next few years because publishers did not wake up soon enough to the fact that Amazon was a competitor. While the Kindle was making serious waves in the e-book marketplace Amazon was preparing to make its largest corporate acquisition to date. Tony Shea is CEO of Zappos dot com America's leading online shoe retailer. When I first met Jeff Bezos in 2004 he had contacted us and said they were interested in possibly acquiring Zappos. At the time we said we weren't interested because Zappos would kind of lose its identity. Shea was hesitant to sell to Amazon. They contacted us again and said they were willing to consider a different scenario where we could remain independent. And we started realizing while they might actually be really great partners. Amazon purchased the hot online shoe retailer in the summer of 2009. Zappos investors received 10 million Amazon shares worth about one point two billion dollars at the time the deal closed. They got stock which at this point is better than cash. And what this kind of shows is that Jeff Bezos and Amazon is someone who yes he can steamroll the competition when he needs to. But he's also willing to play ball and negotiate and get what he wants but make everybody wealthier in the process. The shoe fit. But January 27th 2010 Apple launched the iPad also designed for use as an electronic reading device. Bezos responded aggressively by cutting costs and adding new features to his e-reader. One thing that Bezos has always been comfortable doing running Amazon is playing with very tight margins. So when you see the Kindle lowering in price what you're seeing is Bezos recognizing what the real long term gain here for Amazon is to be the place where everyone buys all of their e-books and the Kindle is just how they get them. The phenomenal growth of the e-book market devastated bricks and mortar stores. Amazon came on the scene and became a competitor to the bricks and mortar retailers. And they were the tailor. Everybody was coexisting. In fact borders and it may have been their downfall but borders did all of their digital their digital selling through Amazon had borders established its own presence. It might have been a very different situation today. According to the Authors Guild Amazon had been buying books from publishers at 12 to 13 dollars wholesale and selling them as Kindle books for nine ninety nine taking a loss each time. Best selling author John Grisham railed against Amazon's pricing model. We're going to get to a point if a book is worth ten dollars. OK whether it's a discount hardback at Amazon or an e-book sold by Amazon for the Kindle if we're at ten dollars OK then suddenly the whole industry is going to change. You're going to lose publishers you're going to lose bookstores. Others saw opportunity. You look at all of the authors that have been empowered by Kindle to develop a direct consumer relationship that they never had before. And I think that's where Amazon is able to come out a winner. And all of this by building this bridge between authors and their readers that in the past has never really existed. Borders books filed for bankruptcy and Barnes and Noble the world's largest bookshop chain is looking for a buyer. In 2011 Amazon dot com stepped beyond the retail sales market and into the video streaming ring going head to head with Netflix. Andrew Wallenstein is a TV editor for Variety magazine. I think if you're Netflix you're looking at Amazon and really sizing them up as a competitor. Amazon has a lot of traction online. They've got deep pockets to buy just as much content. They're at the very beginning of this kind of effort. But in time Amazon could grow to be just as big as Netflix. The e-commerce retail giant is also fending off growing efforts to put an end to its untaxed online sales. New laws may force Amazon to charge local sales tax. But Bezos remains cool under fire and unfazed. He continues to forge ahead. Jeff Bezos has his fingers in everybody's pie. He's got video streaming which competes with Netflix. He's doing music now which competes with Apple and iTunes. He's even selling Android apps in an Amazon dot com app store that goes right after Google's marketplace. If he sees something where Amazon can make a little piece of money and help its margins which are so thin he'll go for it. Going forward has gotten him this far. His space project is going even farther. In April 2011 NASA awarded Blue Origin $22 million to continue developing its space vehicle design. He was listed by Forbes as the 30th richest person in the world estimating his net worth at 18 point one billion dollars. Amazon dot com remains the world's largest online retailer. He's not just a visionary with visions. He's an architect with blueprints and some notion of how to make things work. He thinks very carefully about design and structure and operations. And that's what turns a visionary into somebody who actually accomplishes something. He could have sold Amazon to Barnes and Noble or probably to some other booksellers and walked away with many millions of dollars like in his early 30s. Since then he just keeps on coming up with really good ideas. He's not the hard charging going to take no prisoners type CEO. He's somebody that has his vision for how he wants to build this company and is able to surround himself by people that buy into that. I think ultimately that's one of the reasons that he's been as successful as he has.