Initial Context:

Jeff Bezos, the primary speaker, is in a conversation with a Business Insider host, discussing Amazon’s various ventures. The conversation begins with the host mentioning Bezos’ investment in Business Insider and quickly pivots to Amazon’s failed Fire Phone project.

Personal and Business Relationship:

Before diving into the core discussion, both speakers reminisce about their long-standing relationship, highlighting that the host once made a bold prediction about Amazon’s stock price that was widely criticized but ultimately proven conservative.

Amazon’s Iterative Approach:

When asked about the failure of the Fire Phone, Bezos underscores Amazon’s iterative approach to business. He cites examples of failed ventures like Amazon Auctions and Zshops, which eventually led to the successful Marketplace model. This third-party seller business now represents more than 40% of units sold on Amazon.

Successes in Amazon’s Device Portfolio:

Bezos acknowledges the successes in Amazon’s device portfolio, mentioning the seventh-generation Kindle, Fire TV, and Amazon Echo. He emphasizes that many of these devices were iterations of earlier, less successful ventures.

The Importance of Taking Risks:

Bezos makes a case for the importance of taking “bold bets” and conducting experiments. He asserts that failures are part and parcel of the experimentation process and should be embraced. His perspective is that a few major successes can compensate for multiple failures. He cites Amazon Web Services (AWS), Kindle, and Amazon Prime as examples of such successes.

Financial Reality of Failures:

Bezos is frank about the financial setbacks, stating that he’s made “billions of dollars of failures” at Amazon. Despite these failures, he emphasizes that what really matters is a company’s willingness to experiment and learn from those experiments.

Corporate Longevity:

Bezos ends by cautioning against “bet-the-company bets,” arguing that constant, calculated risk-taking is better than a desperate, last-ditch effort to save a struggling company.

Future of the Fire Phone:

On the subject of the Fire Phone’s future, Bezos remains vague, stating that it will take many iterations and that only time will tell how it evolves.

Profitability and Business Structure:

Jeff Bezos, the primary speaker, addresses the recurring question of Amazon’s profitability. He clarifies that Amazon is profitable, but its profit generation varies across its diverse portfolio of businesses and initiatives. Some are well-established and significantly cash-flow positive, while others are new investments. Bezos likens this to starting with a profitable lemonade stand and then leveraging its success to open new ventures like hamburger and hot dog stands.

Investor Expectations:

Bezos emphasizes the importance of transparency with investors, citing a Warren Buffett quote that distinguishes between holding a rock concert and a ballet. The point is that different kinds of investors have different expectations, and it’s crucial to clearly state the company’s approach and intentions. Bezos notes that Amazon set these expectations early on in their 1997 shareholder letter, declaring a willingness to take big, long-term bets, some of which might fail.

Switching Business Approaches:

In response to a question about how Amazon maintains a high stock price despite fluctuating profitability, Bezos says it’s challenging for publicly traded companies to suddenly switch their approach. If a company has consistently followed a long-term, reinvestment-focused strategy, it’s easier to maintain that course than to suddenly become short-term profit-focused.

Handling Quarterly Earnings:

Bezos is queried about Amazon’s significant losses in a recent quarter, and he responds that while companies might prefer smooth, upward-trending metrics, that’s not the reality. He discourages the practice of micro-managing quarterly results, stating that most decisions affecting a quarter were made years prior. He advises focusing on controllable inputs, like reducing cost structures, which eventually result in desired outputs such as free cash flow and return on invested capital.

Building for the Long Term:

Finally, Bezos states that companies should aim for long-term success rather than obsessing over short-term stock prices. He warns against companies that try to “sell the stock,” arguing that it’s unsustainable. Instead, companies should identify and focus on the inputs that eventually lead to higher stock prices, like free cash flow and return on invested capital.

Controllable Inputs:

Jeff Bezos emphasizes the importance of focusing on ‘controllable inputs’ in a business rather than worrying about driving up the stock price, which he views as an output. He states that increasing efficiency, particularly in picking algorithms in Amazon’s fulfillment centers, and reducing defects are key controllable inputs that can lower the cost structure.

Principles for Success:

Bezos lists key principles that businesses should adhere to: customer obsession, inventiveness, patience, and operational excellence. Specifically, operational excellence involves identifying and fixing defects at the root, which ultimately impacts the cost structure positively.

Time on Investor Relations:

Bezos reveals that he spends only six hours a year on investor relations, an approach he describes as “unusual.” His rationale is based on the view that time is a limited resource, and how you choose to spend it has substantial implications.

Investor Engagement Strategy:

Bezos explains that Amazon’s strategy is to engage with long-term investors rather than traders who turn their portfolio multiple times a year. He asserts that this selective approach in investor engagement is more aligned with the company’s goals and principles. The company aims to explain the business fundamentals, not the stock, to these long-term investors.

Decision on Time Allocation:

Highlighting the importance of time, Bezos considers decisions about where and how to spend one’s time as “incredibly levered ways” to approach life and business. By concentrating efforts on long-term gains and controllable aspects, he believes that the business will naturally yield beneficial outputs like stock price appreciation in the long run.

Stock Price and Employee Morale:

Jeff Bezos addresses the concern about Amazon’s fluctuating stock prices and its impact on employees. He underscores the importance of long-term thinking over short-term stock movements. Employees are frequently reminded not to associate their worth with the stock’s current performance. A major part of Amazon’s compensation is in the form of stock, which Bezos believes fosters a sense of ownership and long-term commitment.

The Ownership Mentality:

Bezos compares the mindset of an owner to that of a renter to illustrate the company’s cultural ethos. Owners think long-term and take better care of what they own. He urges employees to focus on the fundamentals of the business rather than the daily stock price. According to him, the stock price doesn’t contain useful information about the actual state of the business.

Handling Criticism and Doubts:

Despite various criticisms and predictions about Amazon’s downfall, Bezos believes that looking at the company’s stock performance over the long term shows a more stable picture. He emphasizes Amazon’s dual nature as both a large company and a startup, which inherently brings about volatility.

Employee Benefits and Culture:

Responding to the perception that Amazon is frugal when it comes to employee benefits, Bezos argues that the company offers meaningful amenities, just not the same as some other tech companies. For instance, he mentions Amazon’s urban campus, which although expensive to maintain, offers a vibrant work environment. Statistics like 15% of employees living in the same zip code and 20% walking to work are cited to show the benefit’s value.

Unique Amenities:

Bezos describes some unconventional amenities at Amazon, such as openable windows for fresh air and allowing dogs in the office. He argues that while these benefits may not be as flashy as free massages, they add genuine value to the employees’ experience and are aligned with the company’s culture.

Conclusion:

Bezos emphasizes that there’s no one-size-fits-all approach to company culture and benefits. Amazon has its unique set of amenities and focuses on long-term thinking and ownership, which he believes are more crucial than short-term stock fluctuations for the company’s success.

Dependency on Jeff Bezos:

Jeff Bezos asserts that while he can do some tasks at Amazon that may be difficult for others due to his history with the company, his role has evolved significantly. His focus now lies in maintaining the company’s unique culture.

Culture Maintenance:

Bezos describes his role as primarily maintaining a culture that encourages high standards, operational excellence, inventiveness, and a willingness to take risks and experiment. He sees himself as a counterbalance to institutional reluctance, the one who can say “yes” when others might not.

Culture’s Self-Reinforcing Nature:

According to Bezos, Amazon’s distinctive culture is deeply ingrained and self-reinforcing. He believes that even if he wanted to change certain aspects of the culture, he would be unable to do so. This stability in culture is seen as a positive trait.

Amazon’s Unconventional Planning:

Unlike companies that focus on competition during annual planning, Amazon’s planning process doesn’t revolve around identifying and defeating enemies. Instead, it concentrates on inventing and improving customer experiences.

Personal Job Satisfaction:

Bezos shares that he is still enthusiastic about his work, mentioning that he literally “runs into the office,” even after a fulfilling family vacation.

Succession Planning:

Bezos confirms that there is a succession plan in place, not only for him but also for all senior executives at Amazon. This indicates a forward-looking approach to leadership and organizational stability.

Amazon’s Culture:

Jeff Bezos explains that his primary role at Amazon has evolved to maintaining the company culture, which is now deeply ingrained. He emphasizes that this culture is built on high standards, operational excellence, inventiveness, and a willingness to experiment. Bezos also indicates that succession plans are in place for him and other senior executives.

Public Relations & Hachette:

Bezos addresses the famous public disagreement between Amazon and Hachette, stating that such negotiations between retailers and suppliers are common but rarely public. He believes that Amazon has been treated fairly by the media and customers over the years. He views hard negotiations on behalf of customers as an essential part of Amazon’s role.

Future of Reading:

Bezos argues that books are competing against various forms of media for leisure time. Thus, making books more accessible and affordable is crucial for promoting a culture of long-form reading. He talks about the Kindle’s mission of reducing friction for long-form reading and making every book, in every language, available within 60 seconds.

Impact on Authors and Publishers:

Contrary to the notion that Amazon is undermining authors and big publishers, Bezos claims that the book industry is in better shape than ever, thanks to e-books. He argues that making reading more affordable will ultimately benefit authors by widening the reader base.

Broader Perspective:

Bezos stresses the importance of viewing improvements and changes in a broader historical context, arguing that, for the most part, things are getting better. He dismisses the tendency to glamorize the past as often inaccurate, citing that more affordable reading will not hurt authors but instead enrich the culture of reading.

Focus on Key Areas:

Jeff Bezos explains Amazon’s diversified business model by identifying the key areas where he focuses his efforts. Contrary to the common belief of focusing on “just one thing,” Bezos asserts that Amazon’s ventures are unified by a common approach, namely customer obsession and invention.

Customer Obsession and Invention:

According to Bezos, Amazon’s senior executives constantly review programs to assess the level of customer obsession involved. They aim to offer something better than what is already available in the market. This means that any new venture or project undertaken by Amazon starts with these guiding principles.

Long-Term Thinking and Operational Excellence:

Bezos stresses that he focuses on long-term goals, aiming for operational excellence by reducing defects at the root. This culture and these habits are not only followed by Bezos but also by Amazon’s senior leadership team, many of whom have been with the company for over ten years.

Staff Commitment:

The company’s senior team could all retire and live comfortably, given Amazon’s stock performance. However, they choose to stay, motivated by the fun and excitement of building new things. This highly committed senior team is essential to Amazon’s sustained success.

Business Evolution:

Bezos mentions that Amazon started with just books, but customer feedback and needs have led to its expansion into diverse product categories. He distinguishes between expanding based on customer needs and expanding based on Amazon’s existing skill sets.

Regulatory Challenges in Innovation:

Regarding the much-anticipated drone delivery service, Bezos states that technology is not the main hurdle; rather, regulatory issues are the “long pole” in the timeline for this innovation.

Bezos’ approach counters the conventional wisdom of focusing on a single area, demonstrating that a set of core principles can effectively guide a company through diverse business ventures.

Drone Technology:

Jeff Bezos discusses the development of Amazon’s Prime Air drone service, particularly emphasizing the significance of the autopilot and machine vision systems over the physical aspects like the airframe and motors. He notes that the biggest hurdle for the drone service is the regulatory environment.

Regulatory Concerns:

Bezos speculates that the United States might lag behind other countries in adopting drone delivery services due to complicated regulatory issues. He comments that the Prime Air team has a high ratio of lawyers to engineers, indicative of the regulatory challenges they face.

Work-Life Philosophy:

Turning to personal matters, Bezos indicates that reaching the age of 50 hasn’t significantly altered his outlook on life. He still enjoys his work and family life, emphasizing the importance of being present at home and at work. He also mentions that he travels less than 20% of the time to ensure he remains connected with his office and family.

Handling Stress in Leadership:

Bezos shares insights on stress management for senior executives. He believes that stress arises from a lack of control over one’s environment and advises executives to delegate tasks that stress them to capable team members, thereby gaining more control and reducing stress.

Role Models and Parenting:

Bezos acknowledges the positive impact of his parents as role models and expresses a desire to provide the same for his own children. He also shares a humorous anecdote about his eldest son being the last in his class to receive a smartphone, pointing to his parenting style.

Public Perception:

Regarding a book written about him and Amazon, Bezos thinks the first half captures the early culture of Amazon well but feels it gives him too much credit, overlooking other key contributors. He also discusses the challenges of being a public figure, noting that public perception is often far removed from reality.

The segment serves as an in-depth look into both the professional and personal aspects of Jeff Bezos’ life, from the technological advances at Amazon to his perspectives on work-life balance and stress management.

Purchase of Washington Post:

Jeff Bezos reveals that he didn’t initially seek to buy a newspaper but was approached by Don Graham through an intermediary. Intrigued but unsure due to his lack of experience in the newspaper industry, Bezos eventually decided to buy the Washington Post after some consideration.

Decision-making Gates:

Bezos describes two key “gates” or factors in his decision to acquire the paper. The first was whether the Post was an important institution, a question he easily answered in the affirmative. The second was about the institution’s viability: he didn’t want to invest in a losing proposition. Eventually, he grew optimistic about the Post’s future.

Internet’s Impact on Traditional Newspapers:

Bezos acknowledges that the internet has caused “radical disruption” to traditional newspapers, changing their previous financial viability, particularly in single-newspaper towns. While advertisers now have various options to reach people, Bezos believes his experience with the internet and the financial security he can offer make him a suitable owner.

Team Importance:

Bezos emphasizes the value of having a strong team at the Post, including technology and editorial staff. He says a key factor in his decision was whether the Post had a capable team as he didn’t have confidence in his ability to fix a broken team.

Optimism about the Future:

Despite general pessimism about the future of newspapers, Bezos is optimistic, partly due to promising trends in online readership. He also talks about repositioning the Post from a local to a national and global product, which aligns well with its status as the newspaper of the U.S. capital.

Brief Mention of Space Ambitions:

The conversation briefly shifts to Bezos’s interest in space travel, as he’s making rockets. While he shares this interest with other billionaires like Elon Musk and Richard Branson, the discussion doesn’t delve into the specifics of his space endeavors.

Passion for Space:

Jeff Bezos explains that his passion for space was ignited when he was five years old and watched Neil Armstrong land on the moon. He argues that humans are fundamentally explorers, a trait that has evolved as a survival mechanism.

Human Evolution and Exploration:

Bezos elaborates that humans have a natural inclination toward curiosity and exploration. He claims this is likely a survival trait, stating that our ancestors who were curious and explorative likely outlived those who were not.

Importance of New Frontiers:

Bezos asserts that exploration and pioneering are essential to human progress. He mentions that “new worlds have a way of saving old worlds,” emphasizing the importance of a frontier for continued human development.

Vision for the Future:

Bezos’ ultimate vision is to see millions of people living and working in space. He mentions that not only does he find this important for human progress, but he is also personally passionate about it.

Blue Origin’s Role:

Bezos talks about his space company, Blue Origin, which is working on both suborbital and orbital vehicles. He shares that they have won a contract to replace Russian engines in the Atlas V rocket due to geopolitical concerns involving Ukraine.

Technology and Safety:

Discussing Blue Origin’s technological advances, Bezos mentions that their vehicles can fly autonomously, removing the need for test pilots during the development phase. He also emphasizes the importance of a full envelope escape system for the crew capsule, stating that lack of such a system in the Space Shuttle was a mistake.

Company Philosophy:

The motto of Blue Origin is ‘gradatum ferociter,’ which means ‘step by step, ferociously.’ Bezos notes that this is essential in the space business, where rushing and cutting corners can have disastrous consequences.