Brad Stone, "The Everything Store: Jeff Bezos and the Age of Amazon"

The Everything Store: Jeff Bezos and the Age of AmazonThe Everything Store: Jeff Bezos and the Age of Amazon
Brad Stone


A well-written book about the enormous online retailer Amazon and its founder, Jeff Bezos. This book won the Financial Times and Goldman Sachs Business Book of the Year Award 2013, and soon after its japanese translation appeared. (Citation page below refers to the location number of the Kindle edition of this book.)

As seen from many reviews of this book, especially customer's review on Amazon.com, there are many disputes whether the author tells the truth on facts. Surely, I felt the author tends to describe Amazon and Bezos one-sidedly, to say the least, caricaturelly. But maybe that's a journalistic way. This book does not analyze academic facts. And from this point of view, the author succeed in impressionally illustrating Amazon and Bezos.

This book starts from charaterization of Bezos, and ends with it. At the very beginning, the author picks up a privately distributed book to show that Bezos's ability was obvious and there is no surprise to see today's his fame(loc.33; 2165, 2257). This brilliant sixth-grader was "ridiculously competitive"(loc.2257) at high-school, and later graduated from Princeton University, and with some job hopping, got a job at a quantitative hedge fund, DESCO. At this fund, Bezos realized profound commercial potential of the Internet. Besides this, one point should be remebered of DESCO in comparison with Amazon: DESCO "wasn't really a hedge fund but a versatile techonology laboratory full of innovators and engineers"(loc.302). Namely, it is only accidentally a hedge fund, which applied its techonology as its first domain. This character reminds me of Amazon Web Services. One easily regards Amazon as an online shopping site, but it is not what Bezos imagines to be(loc.3362). It is designed to be a technology company (thus I cannot agree to describe Amazon as this book's title the everything store).

One of strong impressions obtained from this book is Bezos's character. Typically described like this:
Bezos is extremely difficult to work for. Despite his famously hearty laugh and cheerful public persona, he is capable of the same kind of acerbic outbursts as Apple's late founder, Steve Jobs, who could terrify any employee who stepped into an elevator with him. Bezos is a micromanager with a limitless spring of new ideas, and he reacts harshly to efforts that don't meet his rigorous standards.(loc.103)

This raucous laugh as his trademark occurs so sudden that it is "a mystery that has never been solved"(loc.152). As written in quotation, this kind of harsh character is not only with Bezos. The author guesses this behavior relates with the fast-paced techonology business, and lists other intense busters - Bill Gates, Steve Bullmar and Andy Grove(loc.2633).

Another strong impression from this book on Bezos's character is his entrepreneurship. His collegues acknowledged that he had a gift to "drive and motivate his employees without getting overly attached to them personally"(loc.1979). And also, he can always consider matter on its foundation. He is not tethered by conventional thinking. According to Rick Dalzell, his longtime right-hand man, Bezos "is bound only by the law of physics. He can't change those. Everything else he views as open to discussion."(loc.3977). For my favorite example of this fundamental thinking, "communication is a sign of dysfunction"(loc.2491). The needs people feel to communicate show that something goes wrong at that time. What must be done is not to improve their coordination (it's waste of time), but to provide methods for solving problems to the people closed to them. "Autonomous working unites are good. Things to manage working unites are bad"(loc.2510). This exceeding creativity was nurtured by his deeply involved and caring parents(loc.2060, 2269). As well known, Bezos is adopted. His biological father was a circus performer. One may remember two other famous entrepreneurs in technology industry, Steve Jobs and Larry Ellison are also adopted, but it is of course unknowable whether their unusual circumstance of birth helped to create fecund entrepreneurship(loc.2070).

Speaking of Amazon, it is a unique and uniquely puzzling company(loc.95). That's because the entire company is scaffolding built around Bezos's brain(loc.4937). Amazon's behavoir is a manifestation of Bezos's own competitive personality and boundless intellect(loc.3874). Amazon is built from the very beginning with Bezos's long-term vision(loc.5021), so it is rather missionary than mercenary(loc.4272, 5098). This means that every company's behavoir must be based on its long-term vision. Every strategy must be rejected if it does not match with vision of the everything store, however lucrative(loc.1982, 4873). Around this long-term vision, Amazon's six core values (orginally five, excluding the last one) are settled: Customer obsession, Frugality, Bias for action, Ownership, High bar for talent and Innovation(loc.1312).

Customer obsession is surely at the core of Amazon. Obsession is a precise description, as it is one of the major reasons that make target of Bezos's brunt of temper(loc.1678). From the early stage of Amazon, Bezos recognized that Amazon's profit comes not merely by selling things, but helping customers make purchase decisions(loc. 532). Similarities, the early automatic recommendation system of books is a typical example of this helping method. Bezos believed that this is one of the insurmountable advantage over its brick-and-mortar bookstore(loc.740-747). A more impressive anecdote of this customer obesseion is a scene at the first meeting of partnership between Amazon and ToysRUs.
When both teams met for the first time, Bezos made a big show of keeping one chair open at the conference-room table, "for the customer", he explained.(loc.1633)

Frugality and Bias for action are tightly connected with the giant retailer, Walmart. These two values were woven into the cultural fabric of Amazon from Walton's book(loc.1104). The author also points out influence from Bezos's grandfather on a straight distaste for inefficiency(loc.2190). Anyway, Walmart gave massive impact on Amazon. In its early days, Amazon had learned much about logistics from Walmart. Many people went to Amazon at Seattle from Bentonvile and provided necessary knowledge about inventory control and logistics. This transplantation was so intense that Walmart sued Amazon alleging that Amazon was trying to steal its trade secrets(loc.1099). Of course, Walmart's style of logistics is not omnipotent. It cannot handle small orders. Walmart's logistics was designed for sending products in bulk from logistics center to stores. So it works great for sending out five thousand rolls of toilet paper, but not for Amazon's small and various orders - for example, one book and one DVD and some tools with gift-wrapped. To treat these orders, Russell Allgor, a formerly supply-chain engineer at Bayer AG, created new algorithm to answer where and when to stock particular products(loc.2040-2434). Amazon's shipping facilities are no longer called as warehouses nor distribution center, but fulfillment center. It is quite interesting that Amazon studied Goldratt's Theory of Constraints to reinvest in the business of distribution(loc.2567-2678), and also studied Toyota way (whose consultants failed to impress Amazon employee so that called insultants)(loc.2839).

On High bar for talent, "Bezos felt that hiring only the best and brightest was key to Amazon's success"(loc.622). For this, he tries to hire suitable people at suitable time. On the contrary, Shel Kaplan, an engineer who created very early IT framework of Amazon, walked away from Amazon with bitter resentment. The same happend to many early Amazon employees(loc.911-931). Also, permant scars on Amazon by hiring Joe Galli Jr. as COO and many troubles with him are to be noted(loc.1359-1488)

Innovation is surely at the center of Amazon. What is most interesting in this book is on the birth of Kindle. Bezos was always thinking that transition to digital media is inevitable, but fixing the fulfillment center and improving Amazon's technology infrastructure were more urgent to invest(loc.3451). What finally kicked Amazon was success of iPod and iTunes Store, and downfall of CD shops. "We didn't want to be Kodak"(loc.3484). To succeed in books as Apple had in music, Amazon executives raptly discussed the book Innovator's Dilemma by Clayton Christensen. Bezos said to Kessel, who was appointed to manage Kindle project from traditional media organization: "Your job is to kill your own business"(loc.3528).

The basic strategy of today's Amazon is seen in the development of Kindle. In my opinion, this "Steve Jobs's mistake" must be widely discussed (though the below quotation refers to AWS, not Kindle):
Bezos predicted they would be good over the long term but said that he didn't want to repeat "Steve Jobs's mistake" of pricing the iPhone in a way that was so fantastically profitable that the smartphone market became a magnet for competition.
The comment reflected his distinctive business philosophy. Bezos believed that high margins justified rivals' investments in research and development and attracted more competition, while low margins attracted customers and were more defensible. (He was partly right about the iPhone; its sizable profits did indeed attract a deluge of competition, starting with smartphones running Google's Android operating system. But the pioneering smartphone is also a fantastically lucrative product for Apple and its shareholders in a way that AWS has not been, at least so far.)(loc.3332)

The latter half of this book discusses repeatedly Amazon's harsh strategy, for example cheetah-and-gazelle program(loc.3673). For publishers who were reluctant to make the e-book edition of their books, Amazon told them that they faced losing their prominence in Amazon's search results and in its recommendations to customers. Also, Amazon's request to slash book price was so intense, that many sues filed by booksellers and publishers against Amazon. At last, in the fall of 2009, Apple appeared as a white knight(loc.4190). Beside book industry, another notorious price strategy of Amazon is to sell products below cost to beat rivals. To force to accept the acquision by Amazon, it took this strategy with Zappos for apparel, with Diapers.com for diapers(loc.4449). On this matter, the role of Amazon Marketplace is remarkable. This works as laboratory with no risk for Amazon. Marketplace play a crucial role for the ideal of everything store, but at the same time, Amazon can learn how to sell unfamiliar products by the third-party in detail, moreover, with commision fee. Apparel, jewelry categories are developed by Amazon itself in this way(loc.2727). For stores in Marketplace, selling on the site is like heroin addiction(loc.4551). A impressively well established business model.
Some of the retailers who sell via the Amazon Marketplace seem to have a schizophrenic relationship with the company, particularly if they have no unique and sustainable selling point, such as an exclusive on a particular product. Amazon closely monitors what they sell, notices any briskly selling items, and often starts selling those products itself. By paying Amazon commissions and helping it source hot products, retailers on the Amazon Marketplace are in effect aiding their most ferocious competitor.(loc.4534)

To say last words, I have a complaint. This book does not handle the history of Amazon Web Service. The author praises importance of this service as it "helped lift the entire technology industry out of a prolonged post-dot-com malaise"(loc.3356). But almost nothing is written how AWS was developed within Amazon. As I wrote before, this service shows that Amazon is not everything store, but a techonology company. No one has ever expected that a bookstore provides cloud computing service. Maybe it is too technologically difficult for the author to handle. It's pity.