The Everything Store: Jeff Bezos and the Age of Amazon (Brad Stone 2013)

This book tells the story of Amazon's first 20 years from 1994 to 2014. It is a long book, but I found it very engaging. In comparison, I had not that much enjoyed the GooglePlex book from Steven Levy (an author I adore). 

A caveat though... In 2014, MacKenzie Scott (then Bezos), a writer herself, had given the book a 1-star Amazon review due to inaccuracies, crossing the line of nonfiction to fiction in terms of character development, and failing to provide a balanced narrative.

Well, as usual, here are some of my highlights from the book. 

D. E. Shaw

Bezos was in his midtwenties at the time, five foot eight inches tall, already balding and with the pasty, rumpled appearance of a committed workaholic. He had spent five years on Wall Street and impressed seemingly everyone he encountered with his keen intellect and boundless determination. Upon graduating from Princeton in 1986, Bezos worked for a pair of Columbia professors at a company called Fitel that was developing a private transatlantic computer network for stock traders. Graciela Chichilnisky, one of the cofounders and Bezos’s boss, remembers him as a capable and upbeat employee who worked tirelessly and at different times managed the firm’s operations in London and Tokyo. “He was not concerned about what other people were thinking,” Chichilnisky says. “When you gave him a good solid intellectual issue, he would just chew on it and get it done.”

Bezos would later say he found a kind of workplace soul mate in David Shaw—“one of the few people I know who has a fully developed left brain and a fully developed right brain.”

MacKenzie Tuttle, who graduated from Princeton in 1992 with a degree in English and who studied with author Toni Morrison, joined the hedge fund as an administrative assistant and later went to work directly for Bezos. Lovejoy remembers Bezos hiring a limousine one night and taking several colleagues to a nightclub. “He was treating the whole group but he was clearly focused on MacKenzie,” he says. MacKenzie later said it was she who targeted Bezos, not the other way around. “My office was next door to his, and all day long I listened to that fabulous laugh,” she told Vogue in 2012. “How could you not fall in love with that laugh?” She began her campaign to win him over by suggesting lunch. The couple got engaged three months after they started dating; they were married three months after that.

D. E. Shaw was ideally situated to take advantage of the Internet. Most Shaw employees had, instead of proprietary trading terminals, Sun workstations with Internet access, and they utilized early Internet tools like Gopher, Usenet, e-mail, and Mosaic, one of the first Web browsers. To write documents, they used an academic formatting tool called LaTeX, though Bezos refused to touch the program, claiming it was unnecessarily complicated.                

In early 1994, several prescient business plans emerged from the discussions between Bezos and Shaw and others at D. E. Shaw. One was the concept of a free, advertising-supported e-mail service for consumers—the idea behind Gmail and Yahoo Mail. DESCO would develop that idea into a company called Juno, which went public in 1999 and soon after merged with NetZero, a rival. Another idea was to create a new kind of financial service that allowed Internet users to trade stocks and bonds online. In 1995 Shaw turned that into a subsidiary called FarSight Financial Services, a precursor to companies like E-Trade. He later sold it to Merrill Lynch. Shaw and Bezos discussed another idea as well. They called it “the everything store.”

Bezos concluded that a true everything store would be impractical—at least at the beginning. He made a list of twenty possible product categories, including computer software, office supplies, apparel, and music. The category that eventually jumped out at him as the best option was books. They were pure commodities; a copy of a book in one store was identical to the same book carried in another, so buyers always knew what they were getting.

Bezos knew it would never really be his company if he pursued the venture inside D. E. Shaw.

At the time, Bezos was newly married, with a comfortable apartment on the Upper West Side and a well-paying job. While MacKenzie said she would be supportive if he decided to strike out on his own, the decision was not an easy one. Bezos would later describe his thinking process in unusually geeky terms. He says he came up with what he called a “regret-minimization framework” to decide the next step to take at this juncture of his career.

Bezos later learned of a 1992 Supreme Court decision that upheld a previous ruling that merchants did not have to collect sales tax in states where they did not have physical operations. As a result, mail-order businesses typically avoided locating in populous states like California and New York, and so would Bezos.  

Seattle 

Later that month, Bezos and MacKenzie packed up the contents of their home and told the movers to just start driving their belongings across the country—they said they would call them on the road the next day with a specific destination. First they flew to Fort Worth, Texas, and borrowed a 1988 Chevy Blazer from Bezos’s father. Then they drove northwest, Bezos sitting in the passenger seat, typing revenue projections into an Excel spreadsheet—numbers that would later prove to be radically inaccurate. 

That fall, Shel Kaphan drove a U-Haul full of his belongings up from Santa Cruz and officially joined Bezos and his wife as a founding employee of Amazon and as its primary technical steward.

At first Bezos backed the company himself with \$10,000 in cash, and over the next sixteen months, he would finance the startup with an additional \$84,000 in interest-free loans, according to public documents.

In early 1995, Bezos’s parents, Jackie and Mike Bezos, invested \$100,000 in Amazon.

Amazon was a family affair in another way. MacKenzie, an aspiring novelist, became the company’s first official accountant, handling the finances, writing the checks, and helping with hiring.

Later that fall, they hired Paul Davis, a British-born programmer who had been on staff at the University of Washington’s computer science and engineering department.

“One million titles, consistently low prices,” that first home page announced in blue underlined text. Next to that was the amateurishly illustrated logo: a giant A set against a marbled blue background with the image of a river snaking through the letter.

While the site wasn’t much to look at, Kaphan and Davis had accomplished a lot on it in just a few months. There was a virtual shopping basket, a safe way to enter credit card numbers into a Web browser, and a rudimentary search engine that scoured a catalog drawn from the Books in Print CD-ROMs, a reference source published by R. R. Bowker, the provider of the standard identifying ISBN numbers for books in the United States.

There was little science to Amazon’s earliest distribution methods. The company held no inventory itself at first. When a customer bought a book, Amazon ordered it, the book would arrive within a few days, and Amazon would store it in the basement and then ship it off to the customer.

Naturally, some of the reviews were negative. In speeches, Bezos later recalled getting an angry letter from an executive at a book publisher implying that Bezos didn’t understand that his business was to sell books, not trash them. “We saw it very differently,” Bezos said. “When I read that letter, I thought, we don’t make money when we sell things. We make money when we help customers make purchase decisions.”

Amazon was getting one of the first glimpses of the “long tail”—the large number of esoteric items that appeal to relatively few people.

No one had been hired yet to pack books, so when volumes rose and the company fell behind on shipping, Bezos, Kaphan, and the others would descend to the basement at night to assemble customer orders. The next day, Bezos, MacKenzie, or an employee would drive the boxes to UPS or the post office.

On August 9, 1995, Netscape Communications, the corporate descendant of the pioneering Mosaic Web browser, went public.

At the time, it had about \$139,000 in assets, \$69,000 of which was in cash. The company had lost \$52,000 in 1994 and was on track to lose another \$300,000 that year. Against that meager start, Bezos would tell investors he projected \$74 million in sales by 2000 if things went moderately well, and \$114 million in sales if they went much better than expected. (Actual net sales in 2000: \$1.64 billion.)

He wanted to value the fledgling firm at $6 million—an aggressive valuation that he had seemingly picked out of thin air. And he told investors the same thing he told his parents: the company had a 70 percent chance of failing.

“Every time we hire someone, he or she should raise the bar for the next hire, so that the overall talent pool is always improving,”

That summer, the company launched what could be considered its first big innovation: allowing other websites to collect a fee when they sent customers directly to Amazon to buy a book. Amazon gave these approved sites an 8 percent commission for the referral.

It invested \$8 million, acquiring a 13 percent stake in the company, and valuing it at \$60 million. Kleiner wanted to put a junior member of the firm on Amazon’s board of directors but, as a condition of the deal, Bezos insisted that Doerr himself take the position.

Amazon was now nearing a hundred and fifty full-time employees, less than a third of whom were in the warehouse.

Building up

With the D. E. Shaw noncompete clause finally expiring, he called Jeff Holden and told him to pack his bags. Holden convinced a few other DESCO employees to come with him,

Another new arrival was Joy Covey as chief financial officer. Driven and often intimidating to underlings, Covey became an intellectual foil to Bezos and a key architect of Amazon’s early expansion.

Amazon had a measly \$16 million in sales in 1996; Barnes & Noble notched \$2 billion in sales that same year.

Barnes & Noble would take many months to back up its threat and spin up its own Web operation, and during that time, Bezos’s team accelerated the pace of innovation and expansion.

“Look, you should wake up worried, terrified every morning,” he told his employees. “But don’t be worried about our competitors because they`re never going to send us any money anyway. Let’s be worried about our customers and stay heads-down focused.”

the IPO raised \$54 million and got widespread attention, propelling the company to a blockbuster year of 900 percent growth in annual revenues. Bezos, his parents, and his brother and sister (who had each bought ten thousand dollars’ worth of stock early on) were now officially multimillionaires.

“You seem like a really nice guy, so don’t take this the wrong way, but you really need to sell to Barnes and Noble and get out now,” one [Harvard Business School] student bluntly informed Bezos.

Bezos was humble and circumspect. “You may be right,” Amazon’s founder told the students. “But I think you might be underestimating the degree to which established brick-and-mortar business, or any company that might be used to doing things a certain way, will find it hard to be nimble or to focus attention on a new channel. I guess we’ll see.”

In those highly carbonated years, from 1998 to early 2000, Amazon raised a breathtaking \$2.2 billion in three separate bond offerings. It spent much of that on acquisitions, but even just a few years later, it was difficult to show that any of those deals helped its primary business. It opened five new state-of-the-art distribution centers in the United States and later had to close two of them and lay off hundreds of workers amid the inevitable retrenchment.

During those misadventures, Bezos seemed unperturbed. If anything, the setbacks made him push the company even harder into new territory.

Bezos used that word a lot: bold. In the company’s first letter to its public shareholders, written collaboratively by Bezos and Joy Covey and typed up by treasurer Russ Grandinetti in early 1998, the word bold was used repeatedly. “We will make bold rather than timid investment decisions where we see a sufficient probability of gaining market leadership advantages,” they wrote. “Some of these investments will pay off, others will not, and we will have learned another valuable lesson in either case.”

“Amazon had to be focused on its own business,” says Tinsley. “Our biggest mistake was thinking we had the bandwidth to work with all these companies.”

Distribution centers

He started hiring more Walmart executives.

Bezos courted Wright for months and that summer got him to tour the Dawson Street warehouse. Bezos said he wanted a distribution system that was ten times larger than it currently was, and not just in the United States but in Amazon’s new markets in the United Kingdom and Germany.

Wright asked who he needed to show the plans to and what kind of return on investment he would have to demonstrate. “Don’t worry about that,” Bezos said. “Just get it built.” “Don’t I have to get approval to do this?” Wright asked. “You just did,” Bezos said. Over the next year, Wright went on a wild \$300 million spending spree. He not only built the warehouse in Fernley but purchased and retrofitted existing warehouses, one near Atlanta, two in Kentucky, and one in Kansas.

“Walmart did not even have Internet in the building back then,” says Kerry Morris, a product buyer who moved from Walmart to Amazon.

One notoriously caustic émigré from Walmart, Tom Sharpe, took over as vice president of merchandising and lasted a little more than a year.

“Bezos knew sales rank would be like a drug to authors,” says Greg Linden, an early Amazon engineer. “He insisted that it change whenever a new order came in.” That was not a trivial challenge. Amazon’s overloaded servers were already stretched to the limit, and its Oracle database software was not designed to handle the increasing loads generated by the swelling audience of the Web.

Around that same time, Amazon filed for a patent on what it called its 1-Click ordering process.

In the auctions category, eBay already had an insurmountable advantage. Amazon’s executives remember this significant failure as painful but strangely uplifting.

In other words, Miller knew nothing about toy retailing, but in a pattern that would recur over and over, Bezos didn’t care. He was looking for versatile managers—he called them “athletes”—who could move fast and get big things done.

“No! No! A hundred and twenty million!” Bezos yelled. “I want it all. If I have to, I will drive it to the landfill myself!” “Jeff, you drive a Honda Accord,” Joy Covey pointed out. “That’s going to be a lot of trips.” Bezos prevailed. And the company would make a sizable contribution to Toys for Tots after the holidays that year. “That first holiday season was the best of times and the worst of times,” Miller says. “The store was great for customers and we made our revenue goals, which were big, but other than that everything that could go wrong did. In the aftermath we were sitting on fifty million dollars of toy inventory.

The electronics effort faced even greater challenges.

Around that time, he also started traveling via a private plane, which he subleased from a local businessman. But whenever he flew with colleagues, he invariably declared, “The company isn’t paying for this, I am.”

They agreed on five core values and wrote them down on a whiteboard in a conference room: customer obsession, frugality, bias for action, ownership, and high bar for talent. Later Amazon would add a sixth value, innovation.

At least one anointed bar raiser would participate in every interview process and would have the power to veto a candidate who did not meet the goal of raising the company’s overall hiring bar. Even the hiring manager was unable to override a bar raiser’s veto. “Many companies as they grow begin to compromise their standards in order to fill their resource needs,” says Dalzell. “We wanted to make sure that did not happen at Amazon.”

Looking for a way to reinforce Walton’s notion of a bias for action, Bezos instituted the Just Do It award—an acknowledgment of an employee who did something notable on his own initiative, typically outside his primary job responsibilities. Even if the action turned out to be an egregious mistake, an employee could still earn the prize as long as he or she had taken risks and shown resourcefulness in the process.

“Jeff didn’t believe in work-life balance,” says Kim Rachmeler. “He believed in work-life harmony. I guess the idea is you might be able to do everything all at once.”

Early 2000s

MacKenzie was pregnant with their first child, and earlier that year, the couple had moved out of their apartment in Seattle and into a ten-million-dollar mansion in Medina, on the eastern shores of Lake Washington.

Bezos took some time off after the birth of his first child, Preston, and then returned to find the company in an uproar over Galli’s abrasive style. Amazon and its board of directors now had a leadership crisis.

Now Amazon’s board had to deal with the leadership crisis. There were complaints about Galli, who was clearly agitating to be CEO, and Bezos, who many employees felt was not taking the time to cultivate other leaders, listen to their issues, or invest in their personal growth.

To adjudicate the matter, he turned to a Silicon Valley legend, a former Columbia University football coach named Bill Campbell.

Campbell himself revealingly described his role at Amazon this way in an interview with Forbes magazine in 2011: “Jeff Bezos at Amazon—I visited them early on to see if they needed a CEO and I was like, ‘Why would you ever replace him?’ He’s out of his mind, so brilliant about what he does.”

The Galli experiment and all of the misadventures from that year would leave permanent scars on Amazon. As of this writing, the company has not given another executive the formal title of president or chief operating officer. Amazon wouldn’t make another significant acquisition for years, and when it did, Bezos carefully considered the lessons from his reckless binge.

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.

Amazon stock, which since its IPO had moved primarily in one direction—up—topped out at \$107 and would head steadily down over the next twenty-one months. It was a stunning fall from grace.

While other dot-coms merged or perished, Amazon survived through a combination of conviction, improvisation, and luck.

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.

Bezos agreed, it needed to take a breath. The rollout of new product categories slowed, and Amazon shifted its infrastructure to technology based on the free operating system Linux. It also began a concerted effort to improve efficiency in its far-flung distribution centers.

Bezos announced in an internal memo that Amazon was “putting a stake in the ground” and would be profitable by the fourth quarter of 2001.

For the next eight months, Ravi Suria continued to pummel Amazon with negative reports.

In the summer of 2000, with Ravi Suria continuing to press his case in public, the slide in Amazon’s stock price started to accelerate. In the span of three weeks in June, it dropped from \$57 to \$33, shedding almost half its value.

In July, author J. K. Rowling published the fourth book in the series, Harry Potter and the Goblet of Fire. Amazon offered a 40 percent discount on the book and express delivery so customers would get it on Saturday, July 8—the day the book was released—for the cost of regular delivery. Amazon lost a few dollars on each of about 255,000 orders, just the kind of money-losing gambit that frustrated Wall Street. But Bezos refused to see it as anything other than a move to build customer loyalty.

Amazon was mentioned in some seven hundred stories about the new Harry Potter novel in June and July that year.

Sinegal explained the Costco model to Bezos: it was all about customer loyalty.

That July, as a result of the Sinegal meeting, Amazon announced it was cutting prices of books, music, and videos by 20 to 30 percent.

Drawing on Collins’s concept of a flywheel, or self-reinforcing loop, Bezos and his lieutenants sketched their own virtuous cycle, which they believed powered their business. It went something like this: Lower prices led to more customer visits. More customers increased the volume of sales and attracted more commission-paying third-party sellers to the site. That allowed Amazon to get more out of fixed costs like the fulfillment centers and the servers needed to run the website. This greater efficiency then enabled it to lower prices further. Feed any part of this flywheel, they reasoned, and it should accelerate the loop. Amazon executives were elated; according to several members of the S Team at the time, they felt that, after five years, they finally understood their own business.

The exclamation point on the accomplishment was that Amazon had turned a profit by both controversial pro forma accounting standards and conventional methods. Amazon had finally shown the world that it wasn’t just another doomed dot-com. The stock price immediately jumped 25 percent in after-hours trading, clawing its way out of the single digits.

Jeff Wilke

And to quell the turmoil in the distribution centers, he started to rely on a young executive named Jeff Wilke, whose cerebral and occasionally impatient management style mirrored his own.

Mark Mastandrea, an MIT classmate who would follow him to Amazon, says that Wilke “was one of the smartest people I had ever come across. He got to the answers faster than anyone else.”

So in one of his first moves, Wilke renamed Amazon’s shipping facilities to more accurately represent what was happening there. They were no longer to be called warehouses (the original name) or distribution centers (Jimmy Wright’s name); forever after, they would be known as fulfillment centers, or FCs.

Wilke elevated the visibility of his FC managers within Amazon. He brought them to Seattle as often as possible and highlighted the urgency of their technical issues.

Wilke wore a flannel shirt every day as a gesture of solidarity with his blue-collar comrades in the field.

Wilke was promoted to senior vice president a little over a year after joining Amazon. Jeff Bezos had found his chief ally in the war against chaos.

“I understand what you’re saying, but you are completely wrong,” he said. “Communication is a sign of dysfunction. It means people aren’t working together in a close, organic way. We should be trying to figure out a way for teams to communicate less with each other, not more.”

At that meeting and in public speeches afterward, Bezos vowed to run Amazon with an emphasis on decentralization and independent decision-making. “A hierarchy isn’t responsive enough to change,” he said. 

Bezos’s counterintuitive point was that coordination among employees wasted time, and that the people closest to problems were usually in the best position to solve them.

The drive to cut costs also forced Bezos to eliminate any emerging layers of middle management from his company.

“We didn’t want to be a monolithic army of program managers, à la Microsoft. We wanted independent teams to be entrepreneurial,” says Neil Roseman. Or, as Roseman also put it: “Autonomous working units are good. Things to manage working units are bad.”

In early 2002, as part of a new personal ritual, he took time after the holidays to think and read.

The entire company, he said, would restructure itself around what he called “two-pizza teams.” Employees would be organized into autonomous groups of fewer than ten people—small enough that, when working late, the team members could be fed with two pizza pies. These teams would be independently set loose on Amazon’s biggest problems. They would likely compete with one another for resources and sometimes duplicate their efforts, replicating the Darwinian realities of surviving in nature. Freed from the constraints of intracompany communication, Bezos hoped, these loosely coupled teams could move faster and get features to customers quicker.

Bezos announced that employees could no longer use such corporate crutches and would have to write their presentations in prose, in what he called narratives. The S Team debated with him over the wisdom of scrapping PowerPoint but Bezos insisted.

Not everyone embraced the new format. Many employees felt the system was rigged to reward good writers but not necessarily efficient operators or innovative thinkers. Engineers in particular were unhappy to suddenly find themselves crafting essays.

“Was distribution a commodity or was it a core competency? If it’s a commodity, why invest in it? And when we grow, do we continue to do it on our own or do we outsource it?”

At the end of the day, Bezos, Wilke, and their colleagues reached a conclusion: the equipment and software from third-party vendors simply wasn’t designed for the task at hand. To escape from batches and move toward a continuous and predictable flow of orders through the facility, Amazon would have to rewrite all the software code. Instead of exiting the business of distribution, they had to reinvest in it.

“The principles and math were on our side, and I realized early on that this was a company where you can carry the day when you have the principles and math on your side, and you are patient and tenacious.”

If an employee did not have the right answers, or tried to bluff the right answer, or took credit for someone else’s work, or exhibited a whiff of internal politics, or showed any kind of uncertainty or frailty in the heat of battle, the vessel in Bezos’s forehead popped out and his filter fell away. He was capable of both hyperbole and cruelty in these moments, and over the years he delivered some devastating rebukes to employees. 

“This is not somebody who takes pleasure at tearing someone a new asshole. He is not that kind of person,” says Kim Rachmeler. “Jeff doesn’t tolerate stupidity, even accidental stupidity.”

Right or wrong, Bezos’s behavior was often easier to accept because he was so frequently on target with his criticisms, to the amazement and often irritation of employees.

Amazon Prime

Bezos was adamant about the February launch date. When the Prime team reported that they needed more time, Bezos delayed the earnings announcement by a week. The team members finished mapping out the details for the service at three o’clock in the morning on the day of the deadline. It was a complex undertaking, but it was achievable because so many of the elements of the program already existed.

In many ways, the introduction of Amazon Prime was an act of faith. The company had little concrete idea how the program would affect orders or customers’ likelihood to shop in other categories beyond media. If each expedited shipment cost the company \$8, and if a shipping-club member placed twenty orders a year, it would cost the company \$160 in shipping, far above the \$79 fee. The service was expensive to run, and there was no clear way to break even. “We made this decision even though every single financial analysis said we were completely crazy to give two-day shipping for free,”

Prime would eventually justify its existence. The service turned customers into Amazon addicts who gorged on the almost instant gratification of having purchases reliably appear two days after they ordered them. Signing up for Amazon Prime, Jason Kilar said at the time, “was like going from a dial-up to a broadband Internet connection.”

gradually Wilke’s organization got better at combining multiple items from a customer’s order into a single box, which saved money and helped drive down Amazon’s transportation costs by double-digit percentages each year.

Prime opened up new doors, and the next year Amazon introduced a service called Fulfillment by Amazon, or FBA. The program allowed other merchants to have their products stored and shipped from Amazon’s fulfillment centers. As an added benefit, their products qualified for two-day shipping for Prime members, exposing the sellers to Amazon’s most active customers. For Wilke’s logistics group, it was a proud moment. “That is when it really hit home,” says Bert Wegner. “We had built such a good service that people were willing to pay us to use it.”

A technology company?

Despite Bezos’s protestations, Amazon looked, smelled, walked, and quacked like a retailer—and not a very profitable one at that.

Google competed with Amazon for both customers and talented engineers. After its IPO, the search giant opened an office in Kirkland, a twenty-minute drive from downtown Seattle. Google offered its employees lavish perks, like free food, office gyms, and day care for their children, not to mention valuable stock options. For its part, Amazon offered a sickly stock price and a combative internal culture, and employees still had to pay for their own parking and meals. Not surprisingly, Google began to suck engineers out of Amazon en masse.

During this time, Bezos relentlessly advocated for taking risks outside of Amazon’s core business. Between 2003 and 2005, Amazon started its own search engine and devised a way to allow customers to search for phrases inside books on the site. Bezos also helped to pioneer the modern crowd-sourcing movement with a service called Mechanical Turk and laid the groundwork for Amazon Web Services—a seminal initiative that ushered in the age of cloud computing.

“There’s only one way out of this predicament,” he said repeatedly to employees during this time, “and that is to invent our way out.”

Manber joined Amazon that fall, and Bezos gave him a typically obscure job title: chief algorithms officer. A few months later, he joined the S Team. “Udi and Jeff had instant chemistry,” says Dalzell.

Manber’s mission was a broad one: use technology to improve Amazon’s operations and invent new features. He would see Bezos once a week—an exception to the CEO’s aversion to one-on-one meetings—to review ongoing projects and brainstorm new ideas.

Manber had a dozen engineers working on Web search, while Google had several hundred.

Like a lot of other technology companies at the time, Amazon got an education in the wisdom of moving to a simpler and more flexible technology infrastructure, called service-oriented architecture.

Led by Amazon’s chief technology officer at the time, an avid pilot named Al Vermeulen, whom colleagues fondly called Al V., the company rebuilt its technology infrastructure as a series of these independent but interconnected parts.

Holden began to feel that Manber’s group was too absorbed with the abstract challenges of general search and wasn’t focused enough on the practicalities of running the search for the Amazon website and solving nagging problems, such as latency,

By February, Manber had received an extraordinarily lucrative offer to run the search team at Google, and he decided to take it.

Bezos viewed it as a personal betrayal.

The general search engine at A9.com was a failure and was shut down a year after Manber left. Block View would be overtaken by Google’s Street View. Search Inside the Book was interesting but hardly a game changer, and the world’s best engineers were fleeing a poisonous Amazon culture and flocking to Google and other hot Internet companies in Silicon Valley. If Bezos was going to prove to the world that Amazon was indeed the technology company that he so desperately claimed it to be, he needed a dramatic breakthrough.

AWS

O’Reilly suggested that Amazon should develop a series of online tools called application programming interfaces, or APIs, that allowed third parties to easily harvest data about its prices, products, and sales rankings.

Now developers became another constituency at Amazon, joining customers and third-party sellers. And the new group, run by Colin Bryar and Rob Frederick, was given a formal name: Amazon Web Services. It was the trailhead of an extremely serendipitous path.

Dalzell suggested to Pinkham that instead of leaving Amazon, he open an office in Cape Town. They brainstormed possible projects and finally settled on trying to build a service that would allow a developer to run any application, regardless of its type, on Amazon’s servers. Pinkham and a few colleagues studied the problem and came up with a plan to use a new open-source tool called Xen, a layer of software that made it easier to run numerous applications on a single physical server in a data center.

Their efforts would become the Elastic Compute Cloud, or EC2—the service that is at the heart of AWS and that became the engine of the Web 2.0 boom.

Bezos was deeply interested in the evolution of Web services and often dived into the minutiae of S3, asking for details about how the services would keep up with demand and repeatedly sending engineers back to the drawing board to simplify the S3 architecture. “It would always start out fun and happy, with Jeff’s laugh rebounding against the walls,” Atlas says. “Then something would happen and the meeting would go south and you would fear for your life. I literally thought I’d get fired after every one of those meetings.”

“He had this vision of literally tens of thousands of cheap, two-hundred-dollar machines piling up in racks, exploding. And it had to be able to expand forever,” Atlas says. Bezos told him, “This has to scale to infinity with no planned downtime. Infinity!”

So Jassy was given a unique opportunity. Bezos asked him to become his first official shadow—a new role that would entail Jassy’s following around the CEO and sitting with him in every meeting.

As Jassy’s tenure as shadow ended, he became a natural candidate to step in as the new head of AWS. One of his first jobs was to write a vision statement; he had to tinker with the margins to get it under six pages.

A college student in a dorm room who would have at his or her disposal the same infrastructure as the largest companies in the world,” Jassy says. “We thought it was a great playing-field leveler for startups and smaller companies to have the same cost structure as big companies.”

John Doerr, expressing what he would later call a “healthy skepticism,” asked the obvious question: At a time when Amazon was having difficulty hiring engineers and needed to accelerate its international expansion, “Why would we go into this business?” “Because we need it as well,” Bezos replied, suggesting that Amazon’s demand for such a service reflected the broader market need. Jassy remembers Doerr telling him after the meeting that he was lucky to work at a company that would invest in something so daring.

S3 remained alone and somewhat overlooked, like a section of a fence that had not yet been finished. A month after the launch, Alan Atlas recalled, it crashed for nine hours, and hardly anyone in the outside world noticed. Then a few months later, the Elastic Compute Cloud went to public beta, allowing developers to actually run their own programs on Amazon’s computers.

Bezos wanted AWS to be a utility with discount rates, even if that meant losing money in the short term.

... pricing EC2 instances at fifteen cents an hour, a rate that he believed would allow the company to break even on the service. In an S Team meeting before EC2 launched, Bezos unilaterally revised that to ten cents. “You realize you could lose money on that for a long time,” van Biljon told him. “Great,” Bezos said.

... 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.

Bezos’s belief was borne out, and AWS’s deliberately low rates had their intended effect; Google chairman Eric Schmidt said it was at least two years before he noticed that the founders of seemingly every startup he visited told him they were building their systems atop Amazon’s servers. “All of the sudden, it was all Amazon,” Schmidt says. “It’s a significant benefit when every interesting fast-growing company starts on your platform.” Microsoft announced a similar cloud initiative called Azure in 2010. In 2012, Google announced its own Compute Engine.

It is not hyperbole to say that AWS, particularly the original services like S3 and EC2, helped lift the entire technology industry out of a prolonged post-dot-com malaise.

Finally, after years of setbacks and internal rancor, Amazon was unquestionably a technology company, what Bezos had always imagined it to be.

Kindle 

The hardware hackers at Lab126 were given a difficult job: they were to disrupt Amazon’s own successful bookselling business with an e-book device while also meeting the impossibly high standards of Amazon’s designer in chief, Bezos himself.

Bezos decided that the digital versions of the most popular books and new releases would have a flat price of \$9.99.

Oblivious to the pricing plans, publishers slowly came aboard, digitizing larger parts of their catalog. By the fall of 2007, Amazon had ninety thousand books in the Kindle library.

“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.”

The great recession that started in December 2007 and lasted until July 2009 was in some ways a gift to Amazon. The crisis not only drove Zappos into Amazon’s arms but also significantly damaged the sales of the world’s largest offline retail chains, sending executives scurrying into survival mode.

With the Nook and the iPad yet to be introduced, Amazon had a commanding 90 percent of the digital reading market in the United States.

Jobs’s patronizing statement was potentially incriminating. If publishers had engaged in a joint effort to make customers pay “a little more,” that was the foundation on which modern antitrust cases were built. The Justice Department sued Apple and the five publishers on April 11, 2012, accusing them of illegally conspiring to raise e-book prices. All the publishers eventually settled without admitting liability while Apple alone held out, claiming that it had done nothing wrong

Bezos often said that Amazon had a “willingness to be misunderstood,” which was an impressive piece of rhetorical jujitsu—the implication being that its opponents just didn’t understand the company.

Bezos also deflected attacks by claiming that Amazon was a missionary company, not a mercenary one.

Amazon's Mission

Bezos likes to say that when he’s angry, “just wait five minutes,” and the mood will pass like a tropical squall. When it comes to issues of bungled customer service, though, that is rarely true.

There was an animated argument. Amazon’s culture is notoriously confrontational, and it begins with Bezos, who believes that truth springs forth when ideas and perspectives are banged against each other, sometimes violently.

Eventually, they compromised. E-mail marketing for certain categories such as health and personal care was terminated altogether.

Amazon styles itself as highly decentralized and promises that new employees can make decisions independently. But Bezos is capable of stopping any process dead in its tracks if it creates a problem for even a single customer.

I think about how effective and quick Jeff was and how important it was that he didn’t slow down too much or modify his ideas to make others feel comfortable.

Jeff’s style always read as completely pure—never a self-interest or political dimension, all purely focused on the best outcomes for Amazon and our customers.