Jeff Bezos, Amazon and the final frontier

Amazon founder and CEO Jeff Bezos

Jeff Bezos has a plan much bolder than bringing Amazon to Australia in 2018. It’s to live long enough to see people in space and know that he played a part in putting them there.

Entrepreneur, investor, computer scientist, philanthropist, space nut and briefly the world’s richest person, Jeff Bezos is arguably best known as the founder and chief executive of tech giant Amazon

A kid from Albuquerque who built a business on books, Bezos has changed the way the world shops, and he continues to have countless ideas for making the world a better place, including frustration-free packaging, artificially intelligent delivery drones and populating a new world … in space. 

Here he speaks to the president and chief executive of the Internet Association, Michael Beckerman, about all he has done and all he still dreams of doing.

Michael Beckerman: At what point did you realise the scale of the success you’ve had with Amazon, from the initial foray into books to where you are now as a company?

Jeff Bezos: Did I anticipate what would happen over the last 22 years at Amazon? The answer is: God no. Amazon started as a very small company – it was me and a few other people. I was driving all the packages to the post office myself, and when I raised money for Amazon I had to raise a million dollars from 22 different investors at US$50K each. They got 20 per cent of the company for the million dollars. Forty people told me no. 

[It took] 60 meetings to get 20 yeses. The first question was always, “What’s the internet?”. I had to walk through that, and this was 1994, early 1995. Did I anticipate [what Amazon is] today and the current version of it? No. 

It has been one foot in front of the other and I think that is true for most businesses – you kind of proceed actively, step by step, and figure it out. You have a success and then you kind of double down on that success and you figure out what else you can do and what customers want. Everything we’ve done, all the success we have, is at its root primarily due to the fact that we have put customers first.

Jeff Bezos Beckerman: People have a very different idea of what Amazon is. Some people see you as an e-commerce company or a retailer. Others see you as an innovative tech company. You have Amazon Web Services and you have original content. You have Alexa [Amazon’s voice-controlled virtual assistant] and many other things. How should we be thinking about Amazon?

Bezos: We do such a diverse array of things, from producing original content at Amazon Studios to Amazon Web Services where we sell start-ups and enterprises computer infrastructure, to our consumer [where] we deliver things in little brown boxes. The common thread is in [our] approach. 

We have a very distinct approach that we have been honing and refining and thinking about for 22 years. It’s really just a few principles that we use. At the very top of the list is customer obsession, instead of competitor obsession or business-model obsession or product obsession or technology obsession. There are many ways to centre a business and many of them can work. I know and have friends who lead very competitor-obsessed companies and those companies can be successful. Personally, I like the customer obsession model. 

The second one is that we are willing – eager, even – to invent and pioneer, and that marries really well with customer obsession. Customers are always dissatisfied. Even when they don’t know it, even when they think they are happy, they want a better way and they just don’t know yet what that should be. Customer obsession is not just listening to customers; it is also investing on their behalf, because it’s not their job to invent for themselves. 

Finally, there is real long-term orientation. I ask everybody to not think in two- or three-year time frames but to think in five- to seven-year time frames. When somebody congratulates Amazon on a good quarter what I’m thinking to myself is those quarterly results were actually pretty much fully baked about three years ago. Today, I’m working on a quarter that is going to happen in 2020, not in the next three months. 

Next quarter, for all practical purposes, is done already and it’s probably been done for a couple of years. If you start to think that way it changes how you spend your time, how you plan and where you put your energy. Your ability to look around corners gets better, and so many things improve if you can take a long-term view. 

That’s Amazon. It’s a collection of principles and an approach that we deploy, and it’s fine. I dance into work.

Amazon founder Jeff Bezos visits Amazon's Bangalore, India office in 2014. Beckerman: Clearly you don’t take the success of Amazon lightly and you’re very involved in the company, so what does keep you up at night when you think about the continued success of Amazon?

Bezos: I’m gifted with sleeping really well. I know what you mean though. For me, the thing I worry about the most is that we lose our way, that we lose our obsessive focus on customers or we somehow become short-term oriented or start to become overly cautious – kind of failure averse – and therefore unable to invent and pioneer. You cannot invent and pioneer if you cannot accept failure. To invent you need to experiment. If you know in advance that it is going to work it is not an experiment. 

It’s embarrassing to fail, but you have to say no, that’s not how this works. It encourages you to experiment more. It’s the right business decision to experiment more, it’s also better for your customers – customers like successful experiments.

There is a giant misconception in a lot of young, inexperienced entrepreneurs. What’s fashionable right now is to talk about how disruptive a business plan is going to be, but invention is not disruptive, it is customer adoption that is disruptive. At Amazon we have invented a lot of things that customers did not care about at all. Believe me, they were not disruptive to anyone. It’s only when customers like the new way that anything becomes disruptive.

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Beckerman: Is there something that you think people get wrong about Amazon that surprises you when you read about it in the media?

Bezos: I don’t know about wrong. On balance, we’ve been treated very fairly by the media, but there is a piece of our business which is probably not fully appreciated – it’s the scale and energy that surrounds the third-party seller part of our business. 

Today, roughly half of the company really is third-party sales. It’s small businesses. There are 100,000 businesses on Amazon who make US$100,000 or more a year, and it’s turned into a gigantic service for them. We even let them stow their products in our fulfilment centres, so their products become Prime eligible [Amazon Prime is a paid service that offers free one- or two-day shipping and other perks], which increases their sales and a lot of people make their living on that. 

We’ve extended that into other areas, too. We have a platform called Kindle Direct Publishing on which authors can write books and then publish them directly, and that’s become very successful. It’s the same thing with Amazon Web Services (AWS). We create a set of tools so that software developers and companies that employ software developers can figure out surprising and amazing things to build with them. Empowering these third parties is probably the biggest thing that most consumers don’t appreciate about Amazon. Good investors understand it very well.

"Everything we have done, all the success we have, is at its root primarily due to the fact we have to put customers first."

Beckerman: Amazon has changed so much. Ten years ago you were barely in cloud computing. Can you preview or predict what Amazon is going to look like in a decade?

Bezos: That’s a very good question. I think, on the outside, Amazon could change quite a bit. As you said, 10 years ago you wouldn’t think that AWS would be such a significant contributor to the business, and there could be more things in a 10-year time frame that we don’t know about. 

The one thing I hope will not change, of course, is the approach I outlined at the beginning: the customer obsession, the willingness to invent, the patience, letting things develop, and accepting failure as a path to success. 

One thing I should point out about failure is that there is a different kind of failure, which is not what you want. That’s where you don’t know what you are doing and you just screw it up. That’s not a good failure, that’s just bad execution.  

The right kind of failure should be an invention. It should be something that you know is an experiment. You don’t know if it is going to work and you know up front that you don’t know if it is going to work. That shouldn’t be opening a new fulfilment centre [for example]. 

I would advise any entrepreneur or large business to identify their big ideas; there should only be two or three of them and the good news is they are usually incredibly easy to identify. 

For Amazon – the consumer business – the three big ideas are low prices, fast delivery and vast selection. The big ideas should be obvious. It’s very hard to maintain a firm grasp of the obvious at all times so you have to back up and say, “These are the three big ideas. How do we always deliver things a little faster? How do we always reduce our cost structure so that we can have prices that are a little lower?” And the good thing about these big ideas is they will be stable in time. 

It may be a digital success but Amazon still needs humans to pack its orders. Its fulfilment centres are huge. This one in England is the size of six soccer pitches.Ten years from now, customers will still like low prices no matter what happens with technology. No matter what happens, people are going to like faster delivery. I know that customers like low prices and they like availability. They like data security.

It’s not hard to figure out what the big ideas are and then you can keep putting energy into those things and they will still be paying you dividends 10 years from now. 

Beckerman: With big ideas in mind, what is Amazon’s approach to artificial intelligence (AI)?

Bezos: It is a golden age. We are now solving problems with machine learning and artificial intelligence that were in the realm of science fiction for the last several decades. Natural language understanding and machine vision problems – it is an amazing renaissance. 

Machine learning and AI is a horizontal enabling layer. It will empower and improve every business, every government organisation. Basically, there is no institution in the world that cannot be improved with machine learning. 

At Amazon, some of the things we are doing are kind of superficially obvious and they’re interesting and they’re cool. I’m thinking about things like Alexa and Echo [Amazon’s hands-free voice-controlled speaker that connects to the Alexa voice service], and our autonomous Prime Air delivery drones. Those things use a tremendous amount of machine learning, machine vision systems, natural language understanding and a bunch of other techniques. 

These are kind of the showy ones though, and I would say a lot of the value that we are getting from machine learning is happening beneath the surface, with things like improved search results, improved product recommendations for customers, improved forecasting for inventory management, and literally hundreds of other things.

“Your ability to look around corners gets better, and so many things improve if you can take a long-term view.”

I think the most exciting thing we are working on in machine learning is that through Amazon Web Services – where customers are corporations and software developers – we are determined to make these advanced techniques accessible to every organisation, even if they don’t have the current class of expertise that is required. 

Deploying these techniques is difficult. It takes a lot of expertise so you have to compete for the very best PhDs in machine learning and it’s difficult for a lot of organisations to win those competitions. Because of the success of Amazon Web Services, we are in a great position to be able to put energy into making those techniques easy and accessible. 

Beckerman: You mentioned at a shareholders’ meeting last year, or the year before, that Amazon is going to use its scale for sustainability and the environment. Is there anything you want to preview or update on that?

Bezos: We have done a couple of things that I think everybody inside the organisation is very proud of. We have a program called Frustration Free Packaging. We’ve been working on it for roughly 10 years and while it is a simple idea, it is incredibly hard to execute. 

We go to manufacturers and we say, “Look, you are producing this thing in a four-colour printed package with a cellophane window and lots of twisty wired ties,” or, worst case, the clamshell packaging where they seal it in indestructible plastic. That packaging is expensive. It’s hard to recycle. It has a bunch of flaws but it shows off the product. At Amazon that doesn’t matter, since we’re going to show you great pictures and videos and customer reviews of the product and then it can be sealed in a tiny cardboard box that’s easy to open. 

The program teaches people to make internet packaging that is very efficient, easy to recycle and easy to open, and in the past year we have saved something like 55 thousand tonnes of waste as a result of it. 

Amazon has installed solar panels on 15 of its fulfilment centres.We have started putting solar cells on the roofs of all of our fulfilment centres, too – 15 this year. These are big fulfilment centres. They are about a million square feet [92,000sq m]each and we are covering them with solar cells that will cover about 80 per cent of each centre’s energy budget on an annual basis. 

We are the largest corporate purchaser in the world of renewable energy – something like 3.6 million megawatt hours per year. We’ve built solar farms and solar wind farms and we keep just rolling this out. We have a goal, long term, of being completely renewable, so it will take a long time.

The good news is these programs are not only great for the environment, they are good business decisions, too. The technologies have improved, so you can actually do it and feel like you are making a sensible business decision. 

Beckerman: I have one final question; it’s about a shared passion of ours. I went to space camp as a child and you have a rocket company, Blue Origin. How do you see that company evolving in the future?

Bezos: I love space. I have been a space lover since I was a five-year-old. I feel like I won the lottery with Amazon – [in fact] I know I won the lottery – and now I’m investing [this money] in Blue Origin, which is a space company. We are building a suborbital tourism vehicle and we will start taking people up, hopefully, in 2018. We’ve been working on it for more than 10 years. 

We are also building an orbital vehicle called New Glenn, named after John Glenn, the first American to orbit the earth. These are both fully reusable boosters – that’s the key to lowering the cost. 

Our vision for Blue Origin is [to see] millions of people living and working in space. 

My personal hope is that I live long enough to see the kind of dynamism in space … I want to see a whole economy, entrepreneurs in space [in the way] that I’ve witnessed the [development] of the internet over the last 20 years.

The problem with being an entrepreneur in the space arena is that the price for admission is so high. To do interesting things in space, the entry level is a few hundred million dollars. 

On the internet, because the price for admission is so low, you can get these amazing experiments where one kid in a dorm room does something and it turns into Facebook. 

In Amazon’s case, I started this thing with an incredibly small amount of capital and it was able to grow – we didn’t need a lot to begin with. The heavy lifting was in place for Amazon. I didn’t need to build a transportation network [because] it existed already, it was UPS and the Royal Mail and the US Postal service and Deutsche Post. I didn’t have to build a telecommunications backbone to connect with my customers. It was there, it was called the internet. 

“To invent you need to experiment. If you know in advance that it is going to work it is not an experiment.”

The point is that Amazon didn’t have to build a payment system because it already existed; it’s called the credit card. Computers were already on every desk thanks to Microsoft, IBM and Apple. All that heavy lifting was in place. 

It would be such a good feeling to be an 80-year-old guy and to lie there thinking about my life and say, “Look there is now a bunch of entrepreneurs in space because I took my Amazon lottery winnings and built the heavy-lifting infrastructure that does take billions of dollars in capex to lower the cost of access to space”. That’s how you get millions of people living and working in space. 

We are going to have to decide: do we want a society of pioneering, invention, expansion and growth, or do we want a society of stasis? Personally, I don’t think that stasis is even compatible with freedom. For me, that is a big problem.

Secondly, stasis is going to be very dull. You don’t want to live in the stasis world … and of course we are going to continue to get more efficient, too – we have been for hundreds of years. 

Also, I don’t want to stabilise population. I would love for there to be a trillion humans in the solar system. With a trillion humans we would have a thousand Einsteins and a thousand Mozarts. It would be incredible. Don’t you want that dynamism? 

This is for your great, great, great grandchildren, but what kind of world do you want them to live in? I want them to live in that expansive world, learning more about the universe and moving out throughout the solar system, which is why we have to do it.

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