/ BOOKNOTES

The Everything Store by Brad Stone

The Everything Store is a book about the founding of Amazon which is the world’s biggest online store founded by Jeff Bezos who is now also the world’s richest man with a net worth of over 200 billion dollars.

I did not really know much about Amazon and Jeff Bezos before reading this book. I knew that Jeff Bezos was crazy rich and assumed that he was like Bill Gates and Mark Zuckerberg by starting a company in his early 20s and became this huge business magnate.

However, Jeff Bezos worked in a corporate job after graduating from Princeton University with a 4.2 GPA, then he decided to quit his position as a Senior Vice-President at D. E. Shaw to work on his new company Amazon.

Here are the main lessons that I learnt about this book.

  1. The Regret Minimization Framework
  2. Focus on Customers, Not Competitors
  3. The Narrative Fallacy
  4. Think Long Term

The Regret Minimization Framework

When you are eighty years old, and in a moment of reflection narrating for only yourself the most personal version of your life story, the telling that will be most compact and meaningful will be the series of choices you have made. In the end, we are our choices. —Jeff Bezos

Bezos used this “Regret Minimization Framework” to decide the next steps he should take in his career.

“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 thing just isn’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.”

Jeff Bezos could have easily got on with life by continuing to climb the corporate ladder. However, after he saw a statistic that the internet annual growth rate was 2300%, he decided to be more adventurous and start his own internet business.

This is something that I found really insightful as we tend to think that the stuff that happens in our life is going to make everything worse and the world will end. However, that is not the case, although you might be scared that you did something really embarrassing and foolish today, decades down the line, this will be a joke for you about the ignorance of your youth.

This has helped me to take action instead of thinking “If I did this I might regret this”. Because in the long run its the things that we don’t do that tend to haunt us and regret.

Focus on Customers / Missionary vs Mercenary

Amazon’s main advantage according to the team was that they are customer obsessive. Instead of focusing on their competitors and trying to one up them all the time. Amazon decided to play the long game and focus on making Amazon better for the customer through a simple website, cheaper prices, faster delivery etc. This allowed it to build a fanbase of loyal customers who associate online shopping with Amazon immediately and recommend the products to their friends.

The Narrative Fallacy

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.

I have written about this more deeper in this article here

Jeffisms

Jeff had a bunch of values that were important to the growth of the company. These were known as Jeffisms. These were the values, concepts and mantras that Jeff Bezos operated his life by and that were vital for the growth of Amazon.

One of the earliest mantras at Amazon was “Get Big Fast”. This was the mantra that Jeff Bezos liked to repeat in Amazon’s early years. The plan was simple, “get big fast”. This was done by adding new products to Amazon.com, improving the delivery process, employing more people

Highlights

When you are eighty years old, and in a quiet moment of reflection narrating for only yourself the most personal version of your life story, the telling that will be most compact and meaningful will be the series of choices you have made. In the end, we are our choices. - Jeff Bezos

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.

Bezos moved to the financial firm Bankers Trust in 1988, but by then, frustrated by what he viewed as institutional reluctance at companies to challenge the status quo, he was already looking for an opportunity to start his own business. Between 1989 and 1990 he spent several months working in his spare time on a startup with a young Merrill Lynch employee named Halsey Minor, who would later go on to start the online news network CNET.

(Bezos also liked to say in speeches during Amazon’s early years that it was the Web’s “2,300 percent” annual growth rate that jolted him out of complacency. Which makes for an interesting historical footnote: Amazon began with a math error.)

One set of numbers in particular in the February 1994 edition of the newsletter was startling. For the first time, Quarterman broke down the growth of the year-old World Wide Web and pointed out that its simple, friendly interface appealed to a far broader audience than other Internet technologies. In one chart, he showed that the number of bytes—a set of binary digits—transmitted over the Web had increased by a factor of 2,057 between January 1993 and January 1994. Another graphic showed the number of packets—a single unit of data—sent over the Web had jumped by 2,560 in the same span.8 Bezos interpolated from this that Web activity overall had gone up that year by a factor of roughly 2,300—a 230,000 percent increase. “Things just don’t grow that fast,” Bezos later said. “It’s highly unusual, and that started me thinking, What kind of business plan might make sense in the context of that growth?”9 (Bezos also liked to say in speeches during Amazon’s early years that it was the Web’s “2,300 percent” annual growth rate that jolted him out of complacency. Which makes for an interesting historical footnote: Amazon began with a math error.)

So looking back on life’s important junctures was on Bezos’s mind when he came up with what he calls “the regret-minimization framework” to decide the next step to take at this juncture in his career. “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 thing just isn’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.

“It’s easier to invent the future than to predict it.” - Alan Kay

customer obsession, frugality, bias for action, ownership, and high bar for talent. Later Amazon would add a sixth value, innovation.

The turmoil in Amazon’s management during the company’s frenzied years of expansion was only the start of a much longer test of faith. In 2000 and 2001, the years commonly thought of as the dot-com bust, investors, the general public, and many of his employees fell out of love with Bezos.

Instead of Get Big Fast, the company adopted a new operating mantra: Get Our House in Order. The watchwords were discipline, efficiency, and eliminating waste.

He quoted Benjamin Graham, the British-born investor who inspired Warren Buffett: “In the short term, the stock market is a voting machine. In the long run, it’s a weighing machine” that measures a company’s true value. If Amazon stayed focused on the customer, Bezos declared, the company would be fine.

“My approach has always been that value trumps everything,” Sinegal continued. “The reason people are prepared to come to our strange places to shop is that we have value. We deliver on that value constantly. There are no annuities in this business.”

Kim Rachmeler shared a favorite quote she heard from a colleague around that time. “If you’re not good, Jeff will chew you up and spit you out. And if you’re good, he will jump on your back and ride you into the ground.”

Bezos described what happened next in his 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 word 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.”

“We would trust Jeff to take them to movies,” Jackie Bezos says, “but the two of them would come back embarrassed, saying, ‘Jeff laughs too loud.’ It would be some Disney movie, and his laughter was drowning out everything.”

Bezos’s colleagues and friends often attribute Amazon’s tardiness in digital music to Bezos’s lack of interest in music of any kind. In high school, Bezos forced himself to memorize the call letters of local Miami radio stations in an effort to fake musical fluency in conversations with his peers.8 Colleagues remember that on the solemn road trip from Target’s offices in Minneapolis after 9/11, Bezos indiscriminately grabbed stacks of CDs from the bargain rack of a convenience store, as if they were all interchangeable. Steve Jobs, on the other hand, lived and breathed music. He was a notoriously devoted fan of Bob Dylan and the Beatles and had once dated singer Joan Baez. Jobs’s personal interests guided Apple’s strategy. Bezos’s particular passions would have the same defining impact at Amazon. Bezos didn’t just love books—he fully imbibed them, methodically processing each detail. Stewart Brand, the author of How Buildings Learn, among other works, recalls being startled when Bezos showed him his personal copy of the 1995 book. Each page was filled with Bezos’s carefully scribbled notes. In 2004, Apple’s dominance in digital music spawned fresh soul-searching at Amazon. The sales of books, music, and movies accounted for 74 percent of Amazon’s annual revenues that year. If those formats were inevitably transitioning to digital, as Apple’s accomplishment seemed to demonstrate, then Amazon had to move quickly to protect itself. “We were freaking out over what the iPod had done to Amazon’s music business,” says director John Doerr. “We feared that there would be another kind of device from Apple or someone else that would go after the core business: books.”

On his desk, Zehr had a copy of Neal Stephenson’s The Diamond Age, a futuristic novel about an engineer who steals a rare interactive textbook to give to his daughter, Fiona.

“Jeff does a couple of things better than anyone I’ve ever worked for,” Dalzell says. “He embraces the truth. A lot of people talk about the truth, but they don’t engage their decision-making around the best truth at the time. “The second thing is that he is not tethered by conventional thinking. What is amazing to me is that he is bound only by the laws of physics. He can’t change those. Everything else he views as open to discussion.”

Says one observer who had a seat close to the battle, “They have an absolute willingness to torch the landscape around them to emerge the winner.”

“In a world where consumers had limited choice, you needed to compete for locations,” says Ross, who went on to cofound eCommera, a British e-commerce advisory firm. “But in a world where consumers have unlimited choice, you need to compete for attention. And this requires something more than selling other people’s products.”

But Bezos was dissatisfied with that simplistic conclusion and applied his usual analytical sensibility to parse out why some companies were loved and others feared. Rudeness is not cool. Defeating tiny guys is not cool. Close-following is not cool. Young is cool. Risk taking is cool. Winning is cool. Polite is cool. Defeating bigger, unsympathetic guys is cool. Inventing is cool. Explorers are cool. Conquerors are not cool. Obsessing over competitors is not cool. Empowering others is cool. Capturing all the value only for the company is not cool. Leadership is cool. Conviction is cool. Straightforwardness is cool. Pandering to the crowd is not cool. Hypocrisy is not cool. Authenticity is cool. Thinking big is cool. The unexpected is cool. Missionaries are cool. Mercenaries are not cool.

Frugality. We try not to spend money on things that don’t matter to customers. Frugality breeds resourcefulness, self-sufficiency and invention. There are no extra points for headcount, budget size or fixed expense.