Brad Stone: 'Amazon Unbound'

‘Amazon Unbound: Jeff Bezos and the Invention of a Global Empire’ is author Brad Stone’s follow up to his 2013 book, ‘The Everything Store: Jeff Bezos and the Age of Amazon’. If the first book was Amazon’s origin story, this second is a recounting of the wide array of bets the company placed over the last decade; where its ambitions put it into conflict with its ideals; where its size has brought it uncomfortably into the public eye; and Bezos’ own personal journey from outsider to collosus. This is a great book if you want to learn about the history of products and services which have come to define Amazon like Alexa, Prime Video and Amazon Go; as well as the company’s ongoing efforts in eCommerce and logistics; and its hopes to dominate in emerging markets like India, Brazil and Mexico.

‘Amazon Unbound’ is a more complex book than its predecessor though because Amazon - and Bezos - have themselves become more complex. I think one of the main questions Stone wrestles with is the degree to which Bezos’ and Amazon’s stories need to be told separately, particularly as Bezos stretched Amazon’s ambitions and then outgrew them - think The Washington Post, Blue Origin, Bezos’ own growing celebrity, and even his divorce and new relationship. This was particularly pertinent for me as one of my main goals reading the book was to better understand what Amazon might be like once Bezos resigns as CEO on July 5 this year (and joins Blue Origin’s first human flight on July 20).

In so many respects, Bezos - “the CEO who thought of himself as a swashbuckling inventor” - will be irreplaceable. As Stone recounts, he played a seminal role in the conception and development of most of the company’s great ideas. We know he conceived the original blueprint for an online ‘everything store’ in the early days of the internet; Stone’s book shares how he also had the imagination to sketch the initial concept for the Alexa smart speaker (see below); the perception to formulate a twelve step guide for making iconic television; and even the obsession to pursue the design and manufacture of a burger made from the meat of a single cow (yes, that’s right - see here and here).

Bezos could jog through ideas using two simple criteria: if they work, will they grow to become big businesses? And if Amazon didn’t pursue them aggressively now, would it miss an opportunity? When an idea fit the bill, Bezos could lend his full authority to the project, bringing Amazon’s massive resources to bear and providing cover for the team responsible to take risks and fail. This is what he said to the executives building Amazon India, for example:

During a quieter moment of his trip, Bezos talked to his local executives at a nearby hotel. He reiterated that he wanted them to think like cowboys, with India as the Wild West frontier of e-commerce. “There are two ways of building a business. Many times, you aim, aim, aim, and then shoot,” he said, according to three executives who were there. “Or, you shoot, shoot, shoot, and then aim a little bit. That is what you want to do here. Don’t spend a lot of time on analysis and precision. Keep trying stuff.”

It’s hard to imagine someone other than a founder being willing to take these bets and size them so big. Or to risk failure so publicly. But this was the rational approach, as Bezos explained to a class of MBA students in the late 1990s:

We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score 1,000 runs. This long-tailed distribution of returns is why it’s important to be bold.

What reassures me therefore as Bezos prepares to formally step back from day to day operations to focus on the Chairman’s role is how consistently he has emphasised systems and process. Stone repeats this over and over: “Bezos liked to say that “good intentions don’t work, but mechanisms do.””; or “Bezos, on the other hand, dove into the tedious details of HR and tried to formulate mechanisms that would substitute for good intentions.”; and “[Bezos] endeavored to put systems and values at the center… instead of the heavily regulated resources of his own time and reputation.”

It’s as if the inventor invented an invention machine to both amplify and outlast himself.

This is best embodied in Amazon’s Leadership Principles (shared below), which start with the famous edict on customer obsession. These principles are a north star for decision-making, with ‘Amazon Unbound’ full of conversations like this:

“You are going about this the wrong way,” Bezos said after reading about the delay. “First tell me what would be a magical product, then tell me how to get there.”

The principles also make the invention machine into a perpetual motion machine, as described by former Amazon Treasurer Kurt Zumwalt:

“This is not a typical corporate conglomerate like Berkshire Hathaway or General Electric. Almost every aspect of Amazon is built around subtly increasing its connection to customers. The power of the business model is the combination of the sum of its self-reinforcing businesses and services, enabled by world-class technology, operational excellence, and a rigorous review and measurement process.”

Andy Jassy, Bezos’ successor as CEO, may well be the inventor’s finest addition to - and greatest test of - his machine. He was Bezos’ first ever Technical Advisor, a junior executive handpicked to shadow Bezos for two years to imbibe the Amazon’s founder’s way of doing things. Some of the best chapters in ‘Amazon Unbound’ introduce us to Jassy and other senior executives in Bezos’ inner circle. Like Dave Clark, now CEO of Amazon Worldwide Consumer, their skill is to “take Bezos’s ambitious visions, convert them into something approximating reality, and then grow them into systems that [don’t] blow apart at Amazon’s tremendous size.”

Elsewhere, I was grateful that ‘Amazon Unbound’ did not shy from controversies and hard questions. One of these is Bezos’ paranoia that relentless ‘Day One’ at Amazon will become complacent, entitled and bureaucratic ‘Day Two’. According to Stone, Bezos “solemnly declared that one of the biggest threats to the company was a disgruntled and entrenched hourly workforce - like the unionized workers that impaired U.S. automakers with strikes and onerous contract negotiations”. Perhaps anticipating efforts to unionise, Bezos’ 2020 shareholder letter put worker relations front and centre; Amazon is also already making changes to its HR policies and workspaces, both financially and non-financially.

To keep Amazon’s white collar workforce on its toes, Stone tells how Bezos “could be a remorseless boss capable of terrifying employees when they failed to meet his exacting standards”. He could zero in with laser focus on inefficiency, like he did to challenge the core US eCommerce business to stop using advertising revenues to cushion worsening economics. More persistently, Stone describes “an informal cruelty present in the corporate culture” as employees were stack ranked and left scrambling in various corporate restructurings. Can a professional CEO like Jassy maintain this pressure? I think he’ll have to.

Perhaps the most troubling controversy raised in the book is where the ideal of customer obsession diverges from reality. Nothing symbolises this more than Advertising, which may now be Amazon’s largest profit driver. Despite knowing from tests that placing paid search results above organic ones would diminish the customer experience, Bezos gave the green light because advertising profits could fund investments elsewhere.

For similar reasons, Amazon has allowed its Marketplace to become a sprawling flea market, which Stone alleges is now dominated by Chinese merchants who compete with low costs and a willingness to game the review system. While Alibaba has long taken an active and aggressive stance to root out such bad behaviour, Amazon has so far kept a laissez-faire attitude (although it did remove some Shenzhen-based merchants days before Stone’s book was released).

Another thing which becomes uncomfortably clear in the book is that while Amazon likes to celebrate its swift reaction to failure - most famously with the Fire Phone - in reality, there are many projects stuck in an ambiguous doldrum. For example, after a decade, none of Amazon’s multiple and overlapping efforts in physical retail seem to have reached escape velocity. Prime Video has occupied an enormous amount of Bezos’ time and Amazon’s resources but as Stone asks, it’s not clear whether it really is driving more Prime Memberships and more retail sales.

The book’s title is a pithy summary of how Amazon appears in 2021, “totally unbound from the laws of corporate gravity”. However, Stone does not neglect another force tugging at Amazon: the rules and mores of global society. Here, unfortunately, Stone can verge towards the sensational, whether it be the activists at fulfilment centres or the small merchants who are no longer competitive on Marketplace.

The chapter on Amazon’s role - and Bezos’ comeback - during COVID is one of redemption and a nice place to end. But Stone could have found more balance by reminding us of the many humdrum ways in which Amazon has made all of our lives better, most of which are so good they’ve become unremarkable. AWS, for example, turned compute from a fixed to a variable cost, radically transforming the economics of a startup and facilitating an age of unprecedented innovation.

From Stone’s first book to his second, Amazon stock returned 952%, equal to a 36% p.a. compound return. And while ‘Amazon Unbound’ can sometimes feel like distant history, it’s worth remembering that the company’s story is far from over. Bezos will remain Chairman and the company’s single largest shareholder. Jassy is a proven lieutenant who has been with the company since its beginnings. And they are supported by a strong bench of talent, glued together by ambition and a common culture.

So I prefer this other definition of ‘unbounded’ offered earlier in the book, when we see Bezos the inventor at his finest:

Later, Alexa execs would say that Bezos’s close involvement made their lives more difficult but also produced immeasurable results. Jeff “gave us the license and permission to do some of the things we needed to do to go faster and to go bigger,” Toni Reid said. “You can regulate yourself quite easily or think about what you’re going to do with your existing resources…. Sometimes, you don’t know what the boundaries are. Jeff just wanted us to be unbounded.”

Customer Obsession

Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.

Ownership

Leaders are owners. They think long term and don’t sacrifice long-term value for short-term results. They act on behalf of the entire company, beyond just their own team. They never say “that’s not my job."

Invent and Simplify

Leaders expect and require innovation and invention from their teams and always find ways to simplify. They are externally aware, look for new ideas from everywhere, and are not limited by “not invented here." As we do new things, we accept that we may be misunderstood for long periods of time.

Are Right, A Lot

Leaders are right a lot. They have strong judgment and good instincts. They seek diverse perspectives and work to disconfirm their beliefs.

Learn and Be Curious

Leaders are never done learning and always seek to improve themselves. They are curious about new possibilities and act to explore them.

Hire and Develop the Best

Leaders raise the performance bar with every hire and promotion. They recognize exceptional talent, and willingly move them throughout the organization. Leaders develop leaders and take seriously their role in coaching others. We work on behalf of our people to invent mechanisms for development like Career Choice.

Insist on the Highest Standards

Leaders have relentlessly high standards — many people may think these standards are unreasonably high. Leaders are continually raising the bar and drive their teams to deliver high quality products, services, and processes. Leaders ensure that defects do not get sent down the line and that problems are fixed so they stay fixed.

Think Big

Thinking small is a self-fulfilling prophecy. Leaders create and communicate a bold direction that inspires results. They think differently and look around corners for ways to serve customers.

Bias for Action

Speed matters in business. Many decisions and actions are reversible and do not need extensive study. We value calculated risk taking.

Frugality

Accomplish more with less. Constraints breed resourcefulness, self-sufficiency, and invention. There are no extra points for growing headcount, budget size, or fixed expense.

Earn Trust

Leaders listen attentively, speak candidly, and treat others respectfully. They are vocally self-critical, even when doing so is awkward or embarrassing. Leaders do not believe their or their team’s body odor smells of perfume. They benchmark themselves and their teams against the best.

Dive Deep

Leaders operate at all levels, stay connected to the details, audit frequently, and are skeptical when metrics and anecdote differ. No task is beneath them.

Have Backbone; Disagree and Commit

Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.

Deliver Results

Leaders focus on the key inputs for their business and deliver them with the right quality and in a timely fashion. Despite setbacks, they rise to the occasion and never settle.

CompaniesGraham Rhodes28 June 2021Amazon, Entrepreneurs, Hypergrowth