by Jason Aten @JasonAten
Given what we know now, the trajectory of Jeff Bezos seems almost inevitable. The founder and CEO of Amazon has been relentless in his pursuit of building the most dominant, customer-focused enterprise in modern history. It’s fitting, considering he first thought to name his company Relentless.com.
Looking backward, however, it can be easy to forget that relentless did not mean inevitable, at least not in the early years. But as Amazon’s execution began to match Bezos’s vision, an extraordinary company emerged–one that changed our lives. Bezos leaves his CEO role as one of the most important business leaders of his generation, having taken his company from zero to nearly $1.7 trillion, the market value of Amazon today. Along the way, the man behind “The Everything Store” gave us some of the most important lessons on entrepreneurship, innovation, and customer experience. Here are 11 principles every entrepreneur can learn from Jeff Bezos.
1. Use the regret minimization framework.
When Bezos first entertained the idea of moving across the country to start an online bookstore, he used a mental exercise he calls a “regret minimization framework.” The idea was to think about turning 80 and looking back on his life. “I want to have minimized the number of regrets I have,” Bezos has explained. “I knew that when I was 80, I was not going to regret having tried this. I was not going to regret trying to participate in this thing called the internet that I thought was going to be a really big deal.”
2. Find the right opportunity.
Bezos decided to build an internet business first, not a book business. He had been working in New York City for D.E. Shaw, the investment firm, when he heard that internet use was growing at an annual rate of 2,300 percent. His math, in fact, was grossly incorrect. The internet was growing by a factor of 2,300, meaning it was actually growing at a rate of 230,000 percent. That math worked too.
Bezos was not especially fond of books, but books seemed like the best bet to take advantage of the internet’s explosive growth. In 1994, the year Amazon launched, the catalog of available books in print was effectively infinite, with more than three million titles–a long-tail business well suited to e-tailing. Shipping books was also relatively easy and not terribly expensive. As a place to start, the idea just made sense.
3. Be customer-obsessed.
Many companies preach the gospel of customer focus. Bezos lived it. “The secret sauce of Amazon–there are several principles at Amazon–but the number one thing that has made us successful, by far, is obsessive, compulsive focus on the customer,” Bezos told David Rubenstein in a 2018 interview at the Economic Club of Washington, D.C.
He wasn’t talking about feel-good service. It was more about creating a company people couldn’t live without. “From the beginning, our focus has been on offering our customers compelling value,” he wrote in Amazon’s 1997 letter to shareholders.
“Compelling” also meant clear. One often-cited example was Bezos’s insistence that for every new product, the team write a six-page memo and include a sample press release. “We don’t do PowerPoint (or any other slide-oriented) presentations at Amazon,” Bezos once wrote. “Instead, we write narratively structured six-page memos. We silently read one at the beginning of each meeting in a kind of ‘study hall.’ ”
Bezos believes that the narrative style of the format clarifies the strategy, and that by writing the press release at the outset, the team was forced to think about whatever they were doing through the lens of the customer’s first encounter with the product.
4. Make your value exceed all the costs.
In the early days of e-tailing, ordering anything online was a terrible experience for both sellers and buyers. Only about one-third of households had computers, and they were slow. Even fewer of those households had internet access. The websites that existed were just bad.
If you were going to persuade someone to get on a computer, dial up an internet connection, and buy, you had better offer something they couldn’t get anywhere else. The experience had to create enough value–by offering low prices, limitless selection, and flawless fulfillment–that it would overcome the early barriers of buying online.
Even as the web became easier to access, the question remained: Does your site make your customers’ lives easier or better in some tangible way? If so, they’ll probably buy just about anything from you. In Amazon’s case, that’s almost exactly what happened.
5. Fear customers, not competitors.
Don’t be afraid of our competitors, because they’re never going to send us money, Bezos once told his team. “Be afraid of our customers, because those are the folks who have the money.” In other words, focus your worry where it really matters.
6 Focus on the long term.
In 1997, Amazon was still a relatively small company. It served some 1.5 million customers. Bezos’s shareholder letter that year sent a signal to Wall Street that he didn’t care about quarterly earnings, a trait the company would willingly demonstrate for years.
“We believe that a fundamental measure of our success will be the shareholder value we create over the long term,” Bezos wrote. “This value will be a direct result of our ability to extend and solidify our current market leadership position.”
Prime is a great example. When launched in 2005, it cost $79 a year and offered free, two-day shipping. Bezos would later write: “We want Prime to be such a good value that you’d be irresponsible not to be a member.”
Acquiring all of those members at that relatively modest price was expensive. Those willing to pay that much money were likely to be repeat customers who bought a lot of stuff, meaning shipping costs could quickly exceed the price of the membership. That was the point. The leaps in sales, even if it meant losing money in the short term, would feed the bigger plan. And they did. For a long time, Amazon reinvested almost everything back into the business, favoring growth over profits. Wall Street complained. Bezos didn’t care.
7. Feed the flywheel.
Books were always going to be just the beginning. To attract more customers, Bezos planned on having a large selection of products, at low prices and with great customer service. Increasing the number of customers would attract third-party sellers to the platform, which would increase the selection of products, which would attract even more customers, and so on. The more products Amazon sold, the more efficient its processes and systems became. The higher the sales volume, the better the prices it could get from suppliers, and the better it could devote those lower costs to growth. Amazon didn’t invent the flywheel–Walmart has also used it as an operating principle–but Bezos & Co. certainly made it spin faster.
8. Hire for intensity.
Do you want missionaries or mercenaries? That’s the question. “How do you hire great people and keep them from leaving?” Bezos asks. “By giving them, first of all, a great mission–something that has real purpose, that has meaning.”
9. Protect your culture.
Amazon’s cutthroat corporate culture is no secret. There are stories of endless hours, brutal working conditions, and an environment that pushes people beyond their limits. “Nearly everyone I worked with I saw cry at their desk,” a former employee told The New York Times for a 2015 exposé. At the same time, Amazon continues to attract talented people who have built products and services that have had an enormous impact on the world. “We never claim that our approach is the right one–just that it’s ours–and over the last two decades, we’ve collected a large group of like-minded people,” Bezos wrote to investors in 2016.
For any criticism you might make about Amazon’s intense culture, Bezos is right when he says that culture is “created slowly over time by the people and by events–by the stories of past success and failure that become a deep part of the company lore.” The important thing is to recognize that history, and to guard it carefully.
10. Know what kind of decision you’re making.
Amazon breaks down the decisions it needs to make into two types. “There are decisions that are irreversible and highly consequential; we call them one-way doors, or Type 2 decisions,” Bezos explains in Invent & Wander, a collection of his writings.
Bezos has described his role as the “chief slowdown officer,” and in Type 2 cases, he always looks for more information, since the decision is very important and once it’s made, there’s no going back. Most decisions, Bezos says, are two-way doors, or Type 1 decisions. These are less consequential. Make the wrong choice and you can go back. The problem, he says, is confusing the two, and taking too long to make Type 1 decisions.
“Is it a one-way door or a two-way door?” Bezos asks. “If it’s a two-way door, make the decision with a small team or even one high-judgment individual. Make the decision.” Confusing the two types of decisions is something every entrepreneur should avoid.
11. Listen to your critics–but not too much.
People who are on a mission expect criticism. “If you can’t afford to be misunderstood, don’t do anything new or innovative,” Bezos says. He also offers some insight on handling criticism. “First, look in a mirror and decide if your critics are right,” Bezos says. “If they’re right, change.”
Sometimes Amazon does. Vilified over pay rates in warehouses, it set a $15/hour minimum wage in 2018. A smaller example: In 2009, Amazon had illegally distributed copies of George Orwell’s 1984. When notified about the issue, the company remotely deleted copies from users’ Kindles. Amazon eventually made it right by offering customers a new copy of the book, or $30, along with a mea culpa. “This is an apology for the way we previously handled illegally sold copies of 1984 and other novels on Kindle,” Bezos told customers. “Our ‘solution’ to the problem was stupid, thoughtless, and painfully out of line with our principles. It is wholly self-inflicted, and we deserve the criticism we’ve received.”