“The Everything Store” Here are some parts that I have marked in my copy of the book“ The Everything Store” by Brad Stone. 1.“To be Amazoned means “to watch helplessly as the online upstart from Seattle vacuums up the customers and profits of your traditional brick-and-mortar business.” 2.”Despite the recent rise of its stock price to vertiginous heights, Amazon remains a unique and uniquely puzzling company. The bottom line on its balance sheet is notoriously anemic, and in the midst of its frenetic expansion into new markets and product categories, it actually lost money in 2012. But Wall Street hardly seems to care. With his consistent proclamations that he is building his company for the long term, Jeff Bezos has earned so much faith from his shareholders that investors are willing to patiently wait for the day when he decides to slow his expansion and cultivate healthy profits.” Jeff Bezos 3.“Bezos has proved quite indifferent to the opinions of others. He is an avid problem solver, a man who has a chess grand master’s view of the competitive landscape, and he applies the focus of an obsessive-compulsive to pleasing customers and providing services like free www.capitalideasonline.com Page - 1 “The Everything Store” shipping. He has vast ambitions – not only for Amazon, but to push the boundaries of science and remake the media. In addition to funding his own rocket company, Blue Origin, Bezos acquired the ailing Washington Post newspaper company in August 2013 for $250 million in a deal that stunned the media industry.” 4.“Bezos likes to say that the markets Amazon competes in are vast, with room for many winners.” 5.“Bezos takes a red pen to press releases, product descriptions, speeches, and shareholder letters, crossing out anything that does not speak simply and positively to customers.” 6.“Toward the end of the hour we spent discussing this book, Bezos leaned forward on his elbows and asked, “How do you plan to handle the narrative fallacy?” 7.“The narrative fallacy, Bezos explained, was a term coined by Nassim Nicholas Taleb in his 2007 bookThe Black Swan to describe how humans are biologically inclined to turn complex realities into soothing but oversimplified stories. Taleb 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. www.capitalideasonline.com Page - 2 “The Everything Store” 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.” 8.“Bezos was suggesting that Amazon’s rise might be that sort of impossibly complex story. There was no easy explanation for how certain products were invented, such as Amazon Web Services, its pioneering cloud business that so many other Internet companies now use to run their operations. “When a company comes up with an idea, it’s a messy process. There’s no aha moment,” Bezos said. Reading Amazon’s history to a simple narrative, he worried, could give the impression of clarity rather than the real thing.” 9.“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.” 10.“Institutional reluctance at companies to challenge the status quo.” Alan Kay www.capitalideasonline.com Page - 3 “The Everything Store” 11.“Bezos also revered pioneering computer scientist Alan Kay and often quoted his observation that “point of view is worth 80 IQ points” – a reminder that looking at things in new ways can enhance one’s understanding.” 12.“Bezos would later say he found a kind of workplace soul mate in David Shaw – “one of the few people I know who has a fully developed left brain and a fully developed right brain.” 13.“At DESCO, Bezos displayed many of the idiosyncratic qualities his employees would later observe at Amazon. He was disciplined and precise, constantly recording ideas in a notebook he carried with him, as if they might float out of his mind if he didn’t jot them down. He quickly abandoned old notions and embraced new ones when better options presented themselves. He already exhibited the same boyish excitement and conversation – stopping laugh that the world would later come to know.” 14.“Jeff Holden, who worked for Bezos first at D. E. Shaw & Co. and later at Amazon, says he was “the most introspective guy I ever met. He was very methodical about everything in his life.” 15.“Bezos felt that hiring only the best and brightest was key to Amazon’s success.” 16.“For years Bezos interviewed all potential hires himself and asked them for their SAT scores. “Every time we hire someone, he or she should raise the bar for the next hire, so that the overall talent pool is always improving”, he said, a recurring Jeffism.” www.capitalideasonline.com Page - 4 “The Everything Store” 17.“For the next year, Amazon.com and Barnes and Noble.com competed, each asserting that it had a better selection and lower prices. Barnes and Noble laid claim to a deeper catalog; Amazon ramped up efforts to find rare and out-of-print books, assigning employees to track down books in independent bookshops and at antique-book dealers. In 1998, Barnes & Noble would spin off its dot-com subsidiary with a $200 million investment from German media giant Bertelsmann and later take the company public. Amazon would then outflank the bookseller by rapidly expanding into other product categories like music and DVDs. Bezos had predicted that the chain retailer would have trouble seriously competing online, and, in the end, he was right. The Riggios 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 shift 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.” 18.“In early 1997, Jeff Bezos flew to Boston to give a presentation at the Harvard Business School. He spoke to a class taking a course called Managing the Marketspace, and afterward the graduate students pretended he wasn’t there while they dissected the online retailer’s prospects. At the end of the hour, they reached a consensus: Amazon was unlikely to survive the wave of established retailers moving online. “You seem like a really nice guy, so don’t take this the wrong way, but you really need to sell to Barnes and Noble and get out now,” one student bluntly informed Bezos. Brian Birtwistle, a student in the class, recalls that Bezos was humble and circumspect. “You may be right,” Amazon’s founder told the students. “But I think you might be underestimating the degree to which established brick-and-mortar business, or any company that might be used to doing things a certain way, will find it hard to be nimble or to focus www.capitalideasonline.com Page - 5 “The Everything Store” attention on a new channel. I guess we’ll see.” 19.“During those misadventures, Bezos seemed unperturbed. If anything, the setbacks made him push the company even harder into new territory. He said to Rick Dalzell, the former Army Ranger who’d joined Amazon from Walmart, “Physically, I’m a chicken. Mentally, I’m bold.” 20.“Bezos used that word a lot: bold. In the company’s first letter to its public shareholders, written collaboratively by Bezos and Joy Covey and typed up by treasurer Russ Grandinetti in early 1998, the word bold was used repeatedly. “We will make bold rather than timid investment decisions where we see a sufficient probability of gaining market leadership advantages,” they wrote. “Some of these investments will payoff, others will not, and we will have learned another valuable lesson in either case.” The letter also stated that the company would make decisions based on long-term prospects of boosting free cash flow and growing market share rather than on short-term profitability, and one section in particular served as a guidepost for the unorthodox way the company planned to approach Wall Street. We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital. Our decisions have consistently reflected this focus. We first measure ourselves in terms of the metrics most indicative of our market leadership: customer and revenue growth, the degree to which our customers continue to purchase from us on a repeat basis, and the strength of our brand. We have invested and will continue to invest aggressively to expand www.capitalideasonline.com Page - 6 “The Everything Store” and leverage our customer base, brand, and infrastructure as we move to establish an enduring franchise. Inside Amazon, the shareholder letter became the equivalent of holy scripture. Bezos rereleases the letter each year with the company’s annual report, and the company has hewed remarkably close to the promises and philosophies laid out in it.” 21.“Amazon started its dot-corn-era sprint with what it called its megadeals.