Founders - #155 Jeff Bezos (Shareholder Letters and Speeches)

Episode Date: November 23, 2020

What I learned from reading Invent and Wander: The Collected Writings of Jeff Bezos, With an Introduction by Walter Isaacson.----Get access to the World’s Most Valuable Notebook for Founders by investing in a subscription to Founders Notes----[2:38]  The whole point of moving things forward is that you run into problems, failures, things that don't work. You need to back up and try again. Each one of those times when you have a setback, you get back up and you try again. You're using resourcefulness; you're using self-reliance; you're trying to invent your way out of a box. We have tons of examples at Amazon where we’ve had to do this. [4:08] I would much rather have a kid with nine fingers than a resourceless kid. [5:51]  I am often asked who, of the people living today, I would consider to be in the same league as those I have written about as a biographer: Leonardo da Vinci (#15), Benjamin Franklin (#115), Ada Lovelace, Steve Jobs (#5), and Albert Einstein. All were very smart. But that’s not what made them special. Smart people are a dime a dozen and often don’t amount to much. What counts is being creative and imaginative. That’s what makes someone a true innovator. And that’s why my answer to the question is Jeff Bezos. [8:26] One final trait shared by all my subjects is that they retained a childlike sense of wonder. At a certain point in life, most of us quit puzzling over everyday phenomena.  Our teachers and parents, becoming impatient, tell us to stop asking so many silly questions. We might savor the beauty of a blue sky, but we no longer bother to wonder why it is that color. Leonardo did. So did Einstein, who wrote to another friend, “You and I never cease to stand like curious children before the great mystery into which we were born.” We should be careful to never outgrow our wonder years—or to let our children do so. [11:50] Jeff’s childhood business heroes were Thomas Edison and Walt Disney. “I’ve always been interested in inventors and invention,” he says. Even though Edison was the more prolific inventor, Bezos came to admire Disney more because of the audacity of his vision. “It seemed to me that he had this incredible capability to create a vision that he could get a large number of people to share.” [17:49] Keeping his focus on the customer, he emailed one thousand of them to see what else they would like to buy. The answers helped him understand better the concept of “the long tail,” which means being able to offer items that are not everyday best sellers and don’t command shelf space at retailers. “The way they answered the question was with whatever they were looking for at the moment. And I thought to myself we can sell anything this way.”[19:26] Every time a seismic shift takes place in our economy, there are people who feel the vibrations long before the rest of us do, vibrations so strong they demand action—action that can seem rash, even stupid. [22:00] “No customer was asking for Echo,” Bezos says. “Market research doesn’t help. If you had gone to a customer in 2013 and said, ‘Would you like a black, always-on cylinder in your kitchen about the size of a Pringles can that you can talk to and ask questions, that also turns on your lights and plays music?’ I guarantee they’d have looked at you strangely and said, ‘No, thank you’”[24:14] We will continue to focus relentlessly on our customers.  [24:58] We are working to build something important, something that matters to our customers, something that we can all tell our grandchildren about. Such things aren’t meant to be easy. [26:22] We are doubly blessed. We have a market-size unconstrained opportunity in an area where the underlying foundational technology we employ improves every day. That is not normal. [29:14] Start with the customer and work backward. That is the best way to create value. [32:19] Amazon’s culture is unusually supportive of small businesses with big potential, and I believe that’s a source of competitive advantage. [35:47] Seek instant gratification —or the promise of it—and chances are you’ll find a crowd there ahead of you.[37:51] At a fulfillment center recently, one of our Kaizen experts asked me, “I’m in favor of a clean fulfillment center, but why are you cleaning? Why don’t you eliminate the source of dirt?” I felt like the Karate Kid.  [39:21] When we are at our best, we don’t wait for external pressures. We are internally driven to improve our services, adding benefits and features, before we have to. We lower prices and increase value for customers before we have to. We invent before we have to. These investments are motivated by customer focus rather than by reaction to competition. [42:48] Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a one hundred times payoff, you should take that bet every time. But you are still going to be wrong nine times out of ten. 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 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 awhile, when you step up to the plate, you can score one thousand runs. This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments.  ----Get access to the World’s Most Valuable Notebook for Founders by investing in a subscription to Founders Notes----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast ----Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work.  Get access to Founders Notes here. ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast

You learn different things from your grandparents than you do from your parents. It's just a very different relationship. I spent all my summers from age 4 to 16 on my grandfather's ranch. He was incredibly self-reliant. If you're in the middle of nowhere, you don't pick up the phone and call somebody when something breaks. You fix it yourself. As a kid, I got to see him solve all these problems himself. He was a careful, conservative, quiet, and introverted sort of person, not prone to crazy acts.

One day, he was all by himself at the main gate of the ranch, and he forgot to put the car in park. When he got to the gate, he noticed the car was slowly rolling down to the gate. He thought, this is fantastic. I have just enough time to unlatch the gate, throw the gate open, and the car is going to drive right through, and it'll be wonderful. He almost got the gate unlatched when the car hit the gate and caught his thumb between the gate and the fence post, stripping all of the flesh off his thumb. It was just hanging there by a tiny little thread. He was so angry at himself that he ripped that piece of flesh off his thumb. It was just hanging there by a tiny little thread. He was so angry at himself that he ripped that piece of flesh off and threw it in the brush, got back in the car,

and drove himself to the emergency room 16 miles away. And when he got there, they said, this is great. We can reattach the thumb. Where is it? He said, oh, I threw it in the brush. They drove back with the nurses and everybody, and they looked for hours for the thumb, and they never found that piece of flesh. Something had probably eaten it. They took him back to the emergency room and said, look, you're going to have to get a skin graft for that. We can sew your thumb to your stomach and leave it there for six weeks. That's the best way to do it. Or we can just cut a skin graft from your butt, and it won't ever be as good,

but the advantage is your thumb won't be sewn to your stomach for six weeks. And he said, I'll take option number two, just do the skin graft from my butt. That's what they did. It was very successful and his thumb worked fine. But the funniest thing about this story is that I have incredibly vivid memories of him. And definitely his mornings were completely ritualized. He would wake up, eat breakfast, read the newspaper, and shave with an electric razor for a really long time,

for like 15 minutes. And when he was done shaving his face with that razor, he would take two quick passes over his thumb because his thumb grew butt hair, which, by the way, did not bother him at all. The whole point of moving things forward is that you run into problems, failures, things that don't work. You need to back up and try again. Each one of those times when you have a setback, you get back up and you try again. You're using resourcefulness.

You're using self-reliance. You're trying to invent your way out of a box. We have tons of examples at Amazon when we had to do this. We failed so many times. I think of this as a great place to fail. We're good at it. We've had so much practice. To give you one example, many years ago, we wanted a third-party selling business because we knew we could add selection to the store. We started Amazon auctions. Nobody came. Then we opened this thing called Zshops, which was fixed price auctions. And again, nobody came. Each of these failures was like a year or a year and a half long. We finally came across this idea of putting the third party selection on the same product detail pages as our own retail inventory. We called this marketplace and it started working

right away. That resourcefulness of trying new things, figuring things out, what do customers really want, pays off in everything. It pays off even in your daily life. How do you help your children? What's the right thing? Even when our kids were four, we would let them use sharp knives. And when they were seven or eight, we would let them use certain power tools. My wife has this great saying, I would much rather have a kid with nine fingers than a resourceless kid, which is a great attitude about life. That was an excerpt titled,

Resourcefulness from the book that I'm going to talk to you about today, which is Invent and Wander, the Collected Writings of Jeff Bezos with an Introduction by Walter Isaacson. So there's three main components of the book. The first is a rather long introduction written by Walter Isaacson. That's about 30 pages long. Walter Isaacson is a biographer. If you've listened to a lot of Founders episodes, you already know who he is. I've done episodes on a bunch of the books, the biographies he's written, Steve Jobs. There's an episode on the book Isaac's Tendent on Steve Jobs, Benjamin Franklin,

Leonardo da Vinci. I think that's the only three. So he wrote a really long introduction. Then the rest of the book, when you read this, you're speaking directly, or I guess you're listening directly to Jeff Bezos himself. The first section, part one, is all the shareholder letters that he's ever written. If you'll remember, I actually read every single one of his shareholders' letters. Go back to Founders number 71 if you haven't already listened to that. So it's Jeff Bezos, shareholder letters, all of them. So this is going to be some review for the people that have already heard that podcast. And then the second part was really actually interesting. They took a lot of the speeches that Jeff Bezos has given in public talks and essentially transcribed them and edited them down, which is very fascinating. So I got a lot of highlights from all three sections. I don't

want to waste any more time. Let's go ahead and jump right into it. I'm going to start with the introduction, and I'll tell you when we obviously switch over to the shareholder letters. So this is Isaacson writing. First, he says, I'm often asked who of the people living today I would consider to be in the same league as those I have written about as a biographer. Leonardo da Vinci, Benjamin Franklin, Ada Lovelace. I somehow missed his biography on Ada Lovelace. I just ordered it, so that'll be a future episode. Leonardo da Vinci, Benjamin Franklin, Ada Lovelace, Steve Jobs, and Albert Einstein. All were very smart, but that's not what made them special. Smart people are a dime a dozen, and often they don't amount to much. What counts is being creative and imaginative. That's what makes

someone a true innovator. And that is why my answer to that question is Jeff Bezos. And from here, Isaacson is going to give us like a brief overview of Bezos's life up until now. But what I found more interesting is he continues to compare and contrast what Bezos has in common with all these great historical figures, which I found the most interesting. So it says, it helps to be excited by all disciplines. Leonardo da Vinci and Benjamin Franklin wanted to know everything you could possibly know about everything that was knowable. They studied anatomy and botany and music and art and weaponry and water and engineering and everything in between. People who love all fields of knowledge are the, this is such an important sentence, people who love all fields

of knowledge are the ones who can best spot the patterns that exist across nature. Both Franklin and Leonardo were fascinated by whirlwinds and swirling water. That helped Franklin figure out how to store how storms move up the coast and to chart the Gulf Stream. It helped Leonardo understand how the heart valve works, as well as to paint both the water rippling by the ankles of Jesus in the baptism of Christ and the curls of the Mona Lisa. Another characteristic of truly innovative and creative people is that they have a reality distortion field, a phrase that was used about Steve Jobs

that comes from a Star Trek episode in which aliens create an entire new world through sheer mental force. When his colleagues protested that one of Jobs' ideas or proposals would be impossible to implement, he would use a trick he learned from a guru in India. He would stare at them without blinking and say, don't be afraid, you can do it. It usually worked. He drove people mad,

he drove them to distraction, but he also drove them to do things they couldn't believe they could do. One final trait shared by all my subjects is that they retained a childlike sense of wonder. At a certain point in life, most of us quit puzzling over everyday phenomena. Our teachers and parents, becoming impatient, tell us to stop asking so many silly questions. We might savor the beauty of a blue sky, but we no longer bother to wonder why it is that color. Leonardo did. So did Einstein, who wrote to another friend. This is a direct quote from Einstein. You and I never cease to stand like curious children before the great mystery into which we were born. We should be

careful to never outgrow our wonder years or to let our children do so. And now Isaacson shifts back to Bezos. Despite his fame and influence, he has remained somewhat of an enigma. But through his life, but through his life tale and writings, it is possible to get a sense of what drives him. When Jeff Bezos was a young kid, he spent his summers on the sprawling South Texas ranch of his grandfather, Lawrence Guise, an upright but loving naval commander who had helped develop the hydrogen bomb as an assistant director of the Atomic Energy Commission. There, Jeff learned self-reliance. When a bulldozer broke, he and his grandfather built a crane to lift out the gears and fix them. Together, they castrated the cattle, built windmills, laid pipe, and had long conversations about the frontiers of science,

technology, and space travel. Jeff was a voracious reader with an adventurous mind. His grandfather would take him to the library, which had this huge collection of science fiction books. Over the summers, Jeff worked his way through the shelves, reading hundreds of them. And later in life, he would not only quote them, but also occasionally invoke their rules, lessons, and lingo. His self-reliance and adventurous spirit were also instilled by Jeff's mother, Jackie, who was just as tenacious and sharp as her father and son. She became pregnant with Jeff when she was only 17. Jeff's biological father ran a bicycle store and performed in a circus unicycle troupe. He and Jackie were married only briefly. When Jeff

was four, his mother remarried. Her second husband was a better match, a person who also taught Jeff the value of grit and determination, Miguel Bezos. He too was a self-reliant and adventurous person. He had come to the United States at age 16 as a refugee from Fidel Castro's Cuba, traveling on his own and wearing a jacket his mother had sewed for him out of household rags. After he married Jackie, he adopted her lively son, who took his last name and forever and forever after considered him his real father. And now we see a personality trait in like a young, like a child, Jeff Bezos, that he has that he keeps his entire life.

It says that his Montessori preschool, Bezos was already fanatically focused. The teacher complained, this is now Bezos talking, the teacher complained to my mother that I was too task focused and that she couldn't get me to switch tasks. So she would just, she would just have to pick up my chair and move me, he recalls. And by the way, if you ask people who work with me, that's probably still true today. This is really interesting. It goes into who he looked up to when he was a kid. His childhood business heroes were Thomas Edison and Walt Disney. I've always been interested in inventors and invention, he says.

Even though Edison was the more prolific inventor, Bezos came to admire Disney more because of the audacity of his vision. It seemed to me that he had this incredible capability to create a vision that he could get a large number of people to share, Bezos says. And now we get to the part where he graduates high school, college, gets a job, and then gets the idea for Amazon. After graduation, Bezos went to New York to apply his computer skills to the financial industry. He ended up at a hedge fund run by David E. Shaw. This is actually a really important person. I looked for a biography on him. He's still alive. I couldn't find anything that's written about him. So if you find anything, please send it to me. Because Bezos says over and over again in his letters and his talks that David's one of the most brilliant people that he's ever known and that he took a lot of his ideas and philosophies

and applied them in the early days of Amazon. So he says he winds up at a hedge fund run by David E. Shaw, which used computer algorithms to discover pricing disparities in the financial markets. Bezos took to the work with a disciplined zeal. While working at a hedge fund in 1994, Bezos came across the statistic that the web had been growing by more than 2,00% each year.

He decided that he wanted to get aboard that rocket, and he came up with the idea of opening a retail store online. When he told David Shaw he wanted to leave the hedge fund to pursue this idea, Shaw took him on a two-hour walk through Central Park. You know what, Jeff? This is a really good idea. I think you're onto a good idea here, but this would be a better idea for somebody who didn't already have a job. He convinced Bezos to think about it for a good idea here, but this would be a better idea for somebody who didn't already have a job. He convinced Bezos to think about it for a couple days before making a decision. So I'm going to get to this part right here. Two things I think I should tell you.

So if you read this book, and I would highly recommend buying the book, I think the description in Founders No. 71, which is where I read Jeff Bezos' shareholder letters, came from this newsletter I subscribe to. It's called CB Insights, and it's actually the one that gave me the idea to read his letters. And it says, to read Bezos' shareholder letters is to get a crash course in running a high-growth internet business from someone who mastered it before any of the playbooks were written. That's a fantastic sentence. I wish I came up with that on my own, but I did not. It came from that newsletter. So anyways, I think, you know, the book was $17, $18. It's just an absolute no-brainer. If you read this book from beginning to end in order, like I did, you're going to see

him repeat a lot of the things. And I think that's important, one, because somebody repeats something, it's clear that's important to them. And two, repetition is persuasive, right? But what I think the better way to do to read this book is, let me give you an example that I always say. Like, I think Charlie Munger is one of the most important thinkers I've ever come across. I think you have to study him and listen to his talks and read his books. But I would say I would always recommend starting with the Tao of Charlie Munger, even though the book The Poor Charlie's Almanac is way more comprehensive. You know, I'd read both. But I would start with The Tao of Charlie Munger because it's very similar to the book I have in my hand

where you can pick it up. If you want to go to the table of contents, just pick a subject you're interested in, read a few pages, put it back down. It's going to spur thoughts and ideas in your mind, but also over time makes you, it's an easy way to understand how they think, right? How Munger thinks you can figure out

from the tale of charlie munger how bezos thinks you could figure out from this book but the reason i bring that up is because i have a lot of highlights that are going to sound very similar but he's he's describing them in different contexts in different situations and usually pulls what i found most interesting about bezos is his efficiency of communication you can read two pages and be like wow there's a ton of thinking composed or embedded in those two pages. And then what I like about him is he pulls out many different ideas and lessons from the same story. So I just want to bring that up in case you hear me repeating myself. All right. So the reason I wanted to talk about that before this section is because I've learned a ton of really good ideas from Bezos.

He's got a ton of them. I think this is his most important idea. This regret minimization framework is fantastic. And it's essentially the framework he comes up with on how to make the decision to jump from a high paying hedge fund job in New York to starting an internet bookstore in the early 90s. All right. To make this decision, Bezos used a mental exercise that would become a famous part of his risk calculation process. He called it a regret minimization framework. He would imagine what he would feel when he turned 80 and thought back to this decision. I want to have minimized the number of regrets I have, he explains. 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. I knew that if I failed, I wouldn't regret that. But I knew the one thing I might regret is not ever having tried. I knew that would haunt me every day. And I think about that idea all the time I think I learned it first when I read the everything store Brad Stone's biography on um Jeff Bezos I think it's founder founders number 16 somewhere back there if you haven't listened to the podcast or read the book yet um and since then I have I can't I've lost count on how many people I've told that almost every conversation if I talk to somebody enough times, I'm going to bring up this idea because I think it's fantastic. It's a really way. It's a really great way to clarify what's important in life.

And I just think it's simple to to be able to apply. OK, so it says Bezos goal soon came soon became to create an everything store. So it's talking about the early days of Amazon. Obviously, he starts out books. He's going to go expand that, right? His next steps were to branch out into music and videos, keeping his focus on the customer. I don't have the Kindle version of this book, but if I did, I believe if you search for that phrase, focus on the customer, it's probably the most repeated phrase in this entire book. He emailed 1,000 of them, meaning his customers. This is a really smart idea, too. He emailed 1,000 of his customers to see what else they would like to be able to buy.

These answers helped him understand better the concept of the long tail. This is also something he talks about over and over again, which means being able to offer items that are not everyday bestseller items and thus don't command shelf space at most retailers. So he's looking for a wedge and an advantage that he's going to have over other retailers, right? Something that's only possible in the everything store online that would not be possible with a physical competitor. The way they answered the question, this is a direct quote from Bezos now, the way they answered the question was with whatever they were looking for at that moment I remember one of the answers was I wish you sold

windshield wiper blades because I really need windshield wiper blades and I thought to myself we can sell anything this way and then we launched electronics and toys and many other categories over time so now this was very interesting there's also an excerpt from this book that comes from time magazine a time magazine writer because they have the decision to make Bezos, I think, person of the year in 1999. So listen to how this writer, this insight from this writer, remember 1999 when he's writing this, that really does put Bezos in historical perspective. And I don't think this was at all obvious at the time, but it's probably more true today, which is very fascinating. Every time a seismic shift takes place in our economy, there are people who feel the vibrations long before the rest of us do. That's a fantastic thought. Fantastic sentence, right?

Vibrations so strong they demand action. Action that can seem rash, even stupid. So Bezos talks about a lot of the ideas in his show-holder letters, that people are like, this is the dumbest thing ever, Amazon Prime being one of them, AWS being another example, developing the Echo and Alexa is another example he uses. People are just, this is the dumbest thing ever. There's just gigantic businesses now. Ferry owner Cornelius Vanderbilt jumped ship when he saw the railroads coming. Thomas Watson Jr. overwhelmed by his sense that computers would be everywhere even when they were nowhere, bet his father's office machine company on it, IBM.

Jeff Bezos had that same experience when he first peered into the maze of connected computers called the World Wide Web. Remember, this isn't how they describe it in 99. And realized that the future of retailing was glowing back at him. And I love the fact that they chose to put him in a historical context, something I've talked to you about all the time that you see reading these books over and over again is they have a lot of the same ideas. They're expressed in different ways, but the themes are very similar across multiple hundred years in vastly different industries. So I really appreciate that they tied that together here. Now, what I thought was very interesting too, is they're going to quote what he's,

some of the stuff he says, Isaacson's about to quote something he says in the shareholder letters. And this is Bezos' thinking that is completely different from everybody else at the time, right? And this is during the dotcom bust. Everyone else was focused on stock prices. And Jeff somehow maintained his focus on the actual underlining business performance. This is what he focused on instead. And I think it had to be really, really difficult considering that he was in the minority of thought at this point. He says, as I watch the stock, the stock, the Amazon stock price fall

from $113 down to $6, I was also watching all of our internal business metrics, numbers of customers, profits per unit, et cetera, et cetera. Every single thing about the business was getting better and fast. It's a fixed cost business. And so what I could see from that,

from these internal metrics, is that at a certain volume level, we would cover our fixed costs and the company would be profitable. So then he continues to talk about how focusing on that as opposed to what everybody else was focused on was actually really helpful and kept him moving forward. He then extends that same idea to the idea that you can't let other people do your thinking for you. And he's going to specifically use the example of market research. And he says market research doesn't help. So he says, market research doesn't help. If you had gone to a customer in 2013 and said, would you like a black, always-on cylinder in your kitchen that's about the size of a Pringles can that you can talk to and ask questions, that also turns on your lights and plays music, I guarantee you they would have looked at you strangely and said no thank you.

And now Isaacson's going to give us his top five most important lessons that he learned from studying Jeff Bezos. I'm just going to list them for you because we'll go into more detail as we see the writing of Jeff himself. So it says, through this book you can learn many of the lessons and secrets revealed in Bezos' interviews, writings, and the annual shareholder letters he has personally composed since 1997. Here are the five that I think are the most important. Number one, focus on the long term. It is all about the long term. Number two, focus relentlessly and passionately on the customer. Jeff loves that word relentless. I've said this over and over again, but even to this day, he was thinking for a brief moment, he flirted with calling Amazon relentless. If you go

to relentless.com to this day, it forwards to Amazon. He owns that domain. Number two, focus relentlessly and passionately on the customer. Obsess over customers. Number three, avoid PowerPoint and slide presentations. Talking about internal communication, internal company communication. Number four, focus on the big decisions. There's actually, he has a really interesting, Bezos, which I'll tell you about later, has some really interesting ideas about how to optimize and how to make, you should be making a handful of small, a small number of high quality decisions and how he goes about doing that.

Number five, hire the right people. Okay. So this is the first shareholder letter setting the tone. And the summary is we're going to focus on the long-term and we're going to focus on optimizing for cashflow. Okay. So it says it's all about the long-term. We believe that a fundamental measure of our success will be the shareholder value we create over the long-term because of our emphasis on the long term, we may make decisions and weigh trade-offs differently than some other companies. We want to share with you our fundamental management

and decision-making approach. We will continue to focus relentlessly on our customers. We will make bold rather than timid investment decisions where we see a sufficient probability of gaining market leadership advantages. And some of these investments will pay off, others will not. But we will have learned another valuable lesson in either case. When forced to choose between the appearance of our gap accounting and maximizing the present value of future cash flows, we're going to take the cash flows. We will work hard to spend wisely and

maintain our lean culture. We understand the importance of continually reinforcing a cost conscious culture. And at the end of the letter, he again sets the tone. This is not going to be easy. We are not expecting it to be easy. We're doing it because it is hard. We are working to build something important, something that matters to our customers, something that we can tell our grandchildren about. Such things are not meant to be easy. The 98 shareholder letter is all about obsessions. This is the part I found most interesting.

We intend to build the world's most customer-centric company. That's a phrase he's still using up until last year's shareholder letter. But there is no rest for the weary. I constantly remind our employees to be afraid, to wake up every morning terrified, not of our competitors, but of our customers. So he says, listen, I'm going to obsess relentlessly over customers because I understand that their loyalty to my company is temporary. It's temporary right up until the point another company can offer them something better. So he says, we consider them to be loyal to us right up until the second that someone else offers them a better service. In 99, he does really quickly, he describes why he feels the opportunity that's in front of him,

the one that's in his grasp, is not normal. I particularly enjoyed this. He says, consider the most important point. The current online shopping experience that Amazon's offering is the worst it will ever be. It's good enough today to attract 17 million customers, but it will get so much better. We are doubly blessed. We have a market-sized, unconstrained opportunity in an area where the underlying foundational technology we employ improves every day. That is not normal. And then in the year 2000, he talks about

the importance of bold bets and understanding that they can and they will fail sometimes. And then he goes into detail, this thought that he expounds on later, about the Internet allows, what's the right size for a company to be if it's an Internet-based business. So he says, many of you heard me talk about the bold bets that we as a company have made and will continue to make. Our decision to invest in smaller e-commerce companies, including Living.com and Pets.com, both of which shut down operations in 2000, and we lost a significant amount of money on both. We made these investments because we knew we wouldn't ourselves be entering these particular categories anytime soon.

And we believe passionately in the land rush metaphor of the internet. So then he's like, okay, I had this idea. I acted on this idea and I realized the idea was incorrect. So I'm going to learn from that. So he says, you know, we believe passionately in the land rush metaphor of the internet. Indeed, that metaphor was an extraordinary useful decision aid for several years starting in 1994. But we now believe its usefulness largely faded away over the last couple of years. In retrospect, we significantly underestimated how much time would be available to enter these categories. Online selling relative to traditional retailing is a scale business characterized by high fixed cost and relatively low variable cost. This makes it difficult to be a medium-sized e-commerce company, which is what

Pets.com and Living.com were at the time he purchased them. He also expresses this idea in another quote, and he says, on the internet, you can be big or you can be small. It is very hard to be medium. And just two sentences I want to pull out over the next few years. Jeff says this is the single most important thing, and it is probably what he repeats the most. Most important, we stayed relentlessly focused

on the customer. Obsess over customers. And a year or two later, he expresses the same idea in a very different way. And again, the note I left myself is this is simple but not easy. He talks about just being obsessed. It's so interesting if you think about how poorly run most companies are. He says it's a huge competitive advantage if you just obsess over the customer, that companies distract themselves by looking up and looking at what other companies are doing or what's

happening internally. He's like, no, no, look at the customer. Just focus on that. And this is a great, simple way to do that. He says, start with the customer and work backward. That is the best way to create value. So this is what I mean about he's a very clear communicator. He can express really profound ideas in very simple ways. Start with the customer and work backward. That is the best way to create value. Now we're up to 2006. This is Bezos' answer.

So he says, I often get asked, when are you going to open physical stores? This is his answer. The potential size of a network of physical stores is exciting. This is way before he doesn't have Whole Foods yet. He doesn't have any of this yet. He doesn't have Amazon Go. He doesn't have the bookstores he has. None of this. This is very interesting seeing his thinking years before opening that because you realize why he took so long to do so. The potential size of a network of physical stores is exciting. Physical world retailing is a cagey and ancient business. Very interesting. Cagey and ancient business that is already well

served. And we don't have any ideas for how to build a physical world store experience that's meaningfully differentiated for customers. I love the fact that he still had that frame of mind. I always think about like I did, you know what, I read five, six books on Edwin Land, one of the most important entrepreneurs to ever live in my opinion. What I found fascinating is, you know, he's focused on, he has a bunch of like aphorisms that I always think of, you know, he's like, don't do anything anybody else can do. And so he invented instant photography and he had patents on this and he essentially had no competitors because nobody could do he invented a new category right and

while inside the research and development of polaroid they started developing they spent years like a decade trying to develop uh like photocopying right and then xerox comes out which was developing the same idea in parallel and xerox comes out and they get to market uh suit uh they get to market before polaroid does and land shuts down the entire division and he's like there's no meaningful differentiation so i'm not going to do it that take i mean think about that you worked on it for years and years how much did you invest time employees money he's like i'm not going to do something somebody else can do. And we see Jeff expressing that same idea. I think Edwin Lane was expressing this idea in like, what, the 1940s, 1950s? Jeff saying the same thing in 2006 is not changing, right? So we have no ideas. That's

meaningful, differentiated for customers. Now, fast forward to the present day we live in, and Amazon Go is completely different than any other store. There's no checkout lights. You walk in, take what you want, and walk out, and you're automatically charged. That is a meaningful differentiation. That was very interesting. He's like, well, I like this idea.

Yeah, I want to tackle in the future. I don't know how to yet. And Jeff's like, I'm just going to be patient, be long-term, and we'll figure out a way. We'll invent new technologies and new ways to attack an ancient industry. That's fantastic. All right, let's go back. This is the same shareholder letter. This is where he talks about patience can be a competitive advantage. In some large companies,

it might be difficult to grow new businesses from tiny seeds because of the patience and nurturing required. Amazon's culture is unusually supportive of small businesses with big potential, and I believe that's a source of competitive advantage. We have so many people at our company who have watched multiple $10 million seeds turn into billion-dollar businesses. That first-hand experience and the culture that has grown up around those successes is a big part of why we can start businesses from scratch. The culture demands that these new businesses be high potential and that they be innovative and differentiated, but it does not demand that they be large on the day that they are born.

So in 2007, he focuses on the importance of being a missionary compared to a mercenary. He also applies that when he buys people's businesses. He asks himself, is this entrepreneur a missionary or a mercenary, right? He also applies that when he buys people's businesses. He asks himself, like, is this entrepreneur a missionary or mercenary? So he talks about, this is really fascinating, because, you know, it starts off, he's had a love of reading. It started off as a bookstore. Now they've just invented the Kindle.

And he talks about, like, you know, we talked about how to develop a parallel reading experience, because he says in The Shareholders, you can't outbook a book. It's very hard to improve on something that's been really successful in its current form for hundreds and hundreds of years like a book has and so i really love what he's saying here though is books the note of myself is books as the antidote to shorter attention spans and how he thought about that while developing the idea for the kindle product we humans co-evolve with our tools we change our tools,

and then our tools change us. Writing, invented thousands of years ago, is a grand whopper of a tool, and I have no doubt that it changed us dramatically. 500 years ago, Gutenberg's invention led to a significant step change in the cost of books. Physical books ushered in a new way of collaborating and learning. Lately, network tools such as desktop computers, laptops, and cell phones have changed us too. They shifted us more towards information snacking, and I would argue, toward shorter attention spans. If our tools make information snacking easier, we will shift more towards information snacking and away from longer form reading. So he's saying that's a bad shift for ourselves and our species as a whole. And the Kindle is a way to get away from that. I'm not going to build something that you're just going to snack on information.

There's a great movie on youtube it's like 20 or 30 minutes long it's like a documentary it's by this guy named max joseph it's just called bookstores i've watched it over and over again well first of all he tours all some of the most beautiful bookstores throughout the world but he also talks to people where reading is fundamental in their life and there's this one person i think she's a professor uh i can't remember what somewhere she might she might be like a dean of a college I can't remember something like that right

and she said something I never thought I never forgot where it talks about why reading is so important in life and she says because reading

is forced meditation so again thinking of books as the antidote to shorter attention spans I like that now we're back to 2008 the financial crisis

and I love the summary of this section is if you seek instant gratification, you're going to find a crowd. In this turbulent global economy, our fundamental approach remains the same. We're going to stay heads down, focused on the long term and obsessed over customers. Long term thinking levers our existing abilities and lets us do new things we couldn't otherwise contemplate. It supports the failure and iteration required for invention, and it frees us to pioneer in unexplored spaces. Seek instant gratification or the elusive promise of it, and chances are you're going to find a crowd there ahead of you. Long-term orientation interacts well with customer obsession. If we can identify a customer need, and if we can further develop conviction that that need is meaningful and durable, what a great word, our approach permits

us to work patiently for multiple years to deliver a solution. Something that he talks about learning and learning the importance of from reading the autobiography of Sam Walton is frugality. And so he's talking about prudence, calling it prudent spending here. But really, he's telling us the benefits of eliminating waste, they compound. Another way to express this idea comes from Henry Clay Frick, which is a partner of Andrew Carnegie. I did multiple podcasts on them. And the sentence I always think about, Henry Clay Frick, when they're talking to their business partners and the people they're working for, he said, gentlemen, watch your costs. That Carnegie and Frick, they focused on costs because costs are permanent. Your revenue is

going to fluctuate over time. Your costs are going to stay the same. So they focused on that end of the business. It's very interesting. So it says, the customer experience path we've chosen requires us to have an efficient cost structure. The good news for share owners is that we see much opportunity for improvement in that regard. Everywhere we look, we find that experienced Japanese manufacturers would call muda. I'm probably pronouncing that incorrectly. It's M-U-D-A and it translates to waste. I find this incredibly energizing. I see it as potential. Years and years of variable and fixed productivity gains and more efficient, higher velocity, more flexible capital expenditures. I love that. So he's saying benefits of limiting this waste, this muda, is going to compound. The footnote that he leaves on this page is fantastic.

At a fulfillment center recently, one of our Kaizen experts, Kaizen is a Japanese term. It means change for the better or continuous improvement. So let me go back to this. At a fulfillment center recently, one of our Kaizen experts asked me, I'm in favor of a clean fulfillment center, but why are you cleaning? Why don't you eliminate the source of dirt? And Jeff tells us his response to this question. I felt like Karate Kid. Okay, so moving forward to 2011, this is all about the power of invention. This letter is all about the power of invention.

I just have one paragraph to read to you, which I think is fantastic. Jeff is talking about why he's creating all the new products they're creating and they wind up being successful. Eliminate gatekeepers. And he explains why that's so important. I am emphasizing the self-service nature of these platforms because it's important for a reason I think is somewhat non-obvious. Even well-meaning gatekeepers slow innovation. When a platform is self-service, even the improbable ideas can get tried because there's no expert gatekeeper ready to say, that will never work. And guess what?

Many of those improbable ideas do work, and society is the beneficiary of that diversity. Okay, now into 2012. This one is titled Internally Driven. The note I left myself, I don't remember what i was talking about says this is wild it reminds me of charlie munger on costco being against human nature so we're going to figure out what i meant by that one advantage one advantage perhaps a somewhat subtle one of a customer driven focus is that it aids a certain type of proactivity when we're at our, we don't wait for external pressures.

We are internally, and he italicized that word, we are internally driven to improve our services, adding benefits and features before we have to. Before we have to. We lower prices and increase value for our customers before we have to. We invent before we have to. These investments are motivated by customer focus rather than by reaction to competition. Okay, now I remember what I was talking about there with that note. There is a quote Munger said. Let's see. It says, as Charlie Munger said at the 2014 Berkshire Hathaway meeting, Costco is unbelievable. It is against the human nature of many entrepreneurial people to get price down and service up. And the connection there is Costco is doing that because they're internally driven, just like Amazon.

They're doing that before. They're doing that because, rather, they're focused on the customer, not the competitor. And this is the wild part. This is how Jeff applies that idea. We built automated systems that look for occasions when we've provided a customer experience that isn't up to our standards. And those systems then proactively refund customers. One industry observer recently received an automated email from us that said, We noticed that you experienced poor video playback while watching the following rental on Amazon Video On Demand, Casablanca. We're sorry for the inconvenience and have issued you a refund for the following amount, $2.99. We hope to see you again soon.

Surprised by the proactive refund, he ended up writing about the experience. Amazon noticed that I experienced poor video playback, and they decided to give me a refund first because of that. Wow. Talk about putting the customer first. That's only $2.99. I have my own version of that. Wow. Talk about putting the customer first. That's only $2.99. I have my own version of this. So my wife and I just, we've had a son, my son's about seven years old now. So, and we order a lot of the stuff we need, obviously from Amazon and his diapers and formula were put, were accidentally charged on a corporate card instead of a personal card. And so my wife's

dealing with them and she's like, oh, hey, can you just refund the corporate card instead of a personal card. And so my wife's dealing with them, and she's like, oh, hey, can you just refund the corporate card and put it on this personal card instead, please? And it was like $200, substantial. It's not $2.99 like that video on demand example. And they said, you know what, we're just going to refund it, and because you're such a good customer, we're not going to charge you again. What the hell? That's insane. And now just like this person was writing about, wow, this is a,

this is a good experience. I'm telling you, like, that's a, it just, it kind of demonstrates, it's just a good, if you're putting the value, like if you're focused on the customer, you're doing what's best for them. You know, you can't, you know, give away $200 all the time, but they even reference, you know, you, you know, you've been customers for 15 years, whatever the number is, you spend X amount, you know, this is a little token of like appreciation for your customer loyalty. It's just it's just, again, really surprising thing to see, especially for a company as large as Amazon. I expect to get shitty service from large companies. And so far, Amazon has not done that, which is really, really surprising.

Moving forward to 2014, I love this idea. Characteristics of a business that you should keep, according to Jeff Bezos. And again, he's going to communicate rapidly. A dreamy business offering has at least four characteristics. Customers love it. It can grow to a very large size. It has strong returns on capital. And it is durable in time with the potential to endure for decades.

When you find one of these, get married. 2015, the summary they put for this letter is big winners pay for many experiments. And I think this is very important to remember. Outsized returns often come from betting against conventional wisdom. And conventional wisdom is usually right. Given a 10% chance of a 100 times payoff, you should take that bet every time. But you're still going to be wrong 9 times out of 10. 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.

This is one of my favorite quotes of his. 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. Big winners pay for so many experiments.

All right, so for 2016, you know, he talks about it's day one. The building he works in is named day one. He talks about it's day one. I think in every single shareholder letter he talks about in speeches. So 2016 is all about fending off day two. And it was prompted by by a question from one of his employees. Jeff, what is day two look like? That's a question I got at his employees. Jeff, what does day two look like? That's a question I got at our most recent all-hands meeting.

His answer, day two is stasis, followed by irrelevance, followed by excruciating painful decline, followed by death. And that is why it's always day one. To be sure, this kind of decline would happen in extreme slow motion. An established

company might harvest day two for decades, but the final result will still come. I'm interested in the question, how do you fend off day two? What are the techniques and tactics? How do you keep the vitality of day one even inside a large organization? So he's going to share with us his thinking on this. He's like, I think about this question all the time. Here's the answers I've come up with. Such a question can't have a simple answer. There will be many elements, multiple paths, and many traps. I love the fact that he's always pointing out, he's like, there's many ways to be correct.

He's like, I'm describing my philosophy on business. It is not the philosophy on business. It is mine. There are others. I'm just telling you the ones I like. I appreciate that. I don't know the whole answer, but I know many bits of it. Here's the starter pack of essentials for day one defense, customer obsession, a skeptical view of proxies, the eager adoption of external trends,

and high velocity decision making. So there's only, I think I only have notes on two of those. Yeah, I'm going to focus on two of them. I think we've talked about customer obsession. Enough, right? You get the point. So I'm going to talk about resisting proxies, which is really interesting. Resist proxies. As companies get larger and more complex, there's a tendency to manage proxies. This comes in many shapes and sizes, and it's dangerous, subtle, and very day-to.

A common example is process as proxy. So this same exact idea Bezos is going to talk to us about right now is in all over if you study Steve Jobs. He talks about how people confuse the process of creating products with the craftsmanship that is actually required. He's like the process is not the thing. Jeff is going to say the same thing. Common example is process as a proxy. Good processes serve you so you can serve customers. But if you're not watchful, the process can become the thing.

This is obviously very important if you have both Steve Jobs and Jeff Bezos talking about this, right? This can happen very easily in large organizations. The process becomes the proxy for the result you want. You stop looking at outcomes and you just make sure you're doing the process right. Gulp. It's not that rare to hear a junior leader defend a bad outcome with something like, well, we followed the process. A more experienced leader will use it as an opportunity to investigate and improve the process. And this is so important

to underline it twice. The process is not the thing. Now, moving on to the next thing, the high velocity decision making. You have to make good decisions, but you also have to make them good decisions quickly. What is one way to do it? And one of his specific tactics that he says is like, listen, you need to learn how to say disagree and commit. And he gives us an example of that here. Use the phrase disagree and commit. I disagree and commit all the time. We recently greenlit a particular Amazon Studios original. I told my team my view. It's debatable whether it would be interesting enough. It's complicated to produce. The business terms aren't that good. And we have lots of other opportunities. They had a completely different opinion and wanted to go ahead. I wrote back right away with, I disagree and commit and hope it becomes the most watched thing we ever

made. Now, why is he doing this? Consider how much slower this decision cycle would have been if the team had to actually convince me rather than simply get my commitment. That is a really interesting sentence that contains a really interesting thought. Most people say you got to convince. I'm the boss. You got to convince me. It's like, no, no, no. You don't need to convince me. You need to get me to commit because then I can green light this. I don't agree with you. You have not convinced me, but you think it's important. You're closer to it. I'm willing to commit and move on. Again, use the phrase disagree and commit. Now think about, I'm moving on to, where am I at? Am I in 2018? 2018. This one is about intuition,

curiosity, and the power of wandering. So we've talked a lot. Think about what the book is named, Invent and Wander. It talks about, I want to be an inventor, the importance of innovation, the importance of invention, over and over again. We haven't even talked about wandering. This was very interesting, and it only takes a paragraph to describe why it's so important. Sometimes, often actually in business, you do know where you're going, and when you do, you can be efficient. Put in place a plan and execute. In contrast, wandering in business is not efficient, but it's also not random. It is guided by hunch, gut, intuition, curiosity, and powered by a deep conviction that the prize for customers is big enough that it is worth being a little messy and tangential to find our way there. Wandering is an essential counterbalance to efficiency.

You need to employ both and why is that so important he's going to wrap up this section it's a very important sentence the outsized discoveries the non-linear the non-linear ones are highly likely to require wandering interesting he uses the word hunch gut intuition, conviction over and over again. He says the most important decisions in your life are not, cannot, cannot, they absolutely cannot be based on data. They've got to be on this, you know, fuzzy, more obscure idea of hunch, gut, intuition. He says the very idea of him starting Amazon was not smart. It's not something he made with his mind. He did it with his heart by following his intuition. OK, so now I'm on to the last part, the last section of the book where, you know, they've essentially transcribed and I think lightly edited a lot of the talks he gave, which is really, really interesting idea, by the way.

You know, you have access to my notes. I have a bunch of talks by Jeff Bezos, but they're just highlights. They're not fully comprehensive like this is. So the opening of the podcast came from one of his talks he was given. I think it's with him and his brother, and they titled it Resourcefulness, right? So this one is about thinking three years out. And it's very interesting because we just went over the importance of rest and recovery and how people don't prioritize it enough on the Nike co-founder Bowerman podcast, right? So we see Jeff Bezos talking a lot about this and he's really talking on making high quality decisions and prioritizing sleep, right? And this section is called Thinking Three Years Out, which is where his focus is. He's not really focused on day-to-day as much now as what's in the future. And so he's going to talk about that. I like to putter

in the morning. I get up early. I go to bed early. I like to read the newspaper. I like to have coffee. I like to have breakfast with my kids before they go to school. So my puttering time is very important to me. That's why I set my first meeting for 10 o'clock. I like to do my high IQ meetings before lunch. Anything that is going to be really mentally challenging is a 10 o'clock. I like to do my high IQ meetings before lunch. Anything that is going to be really mentally challenging is a 10 o'clock meeting because by 5 p.m. I'm like, I can't think any more about this issue today. This is a really important section because I think some people have, and again, reading biographies will disabuse you of this notion that, you know, they're superhuman. Yes, they're smart, driven. Those are not normal characteristics, but they're

not like, they're not mutants. And just this idea, you know, by five ohuman. Yes, they're smart, driven. Those are not normal characteristics. But they're not like, they're not mutants. And just this idea, you know, by 5 o'clock, I'm working all day. My mind is toast. I feel the same way. I try to record first thing in the morning after some kind of physical activity. I feel I'm just more alive. I can connect thoughts. My brain is more alive.

When I record or try to do anything that requires using my brain at night or later in the day, I just feel dumber. And so I really appreciate that Bezos is essentially saying the same thing. So he says, I like to do my high IQ meetings before lunch. Anything that's going to be really mentally challenging is a 10 o'clock meeting before 5 p.m. Excuse me, because by 5 p.m., I'm like, I can't even think more about this issue today. Let's try again tomorrow at 8 at 10 a.m. Then on to eight hours of sleep. I prior prioritize sleep. I need eight hours. I think better. I have more energy. My mood is better. And think about it as a senior executive. What do you really get paid to do? You get paid to make a small number of high quality decisions. If I make like three good decisions a day, that's enough. And they should just be as high quality as I can make them.

Warren Buffett says he's good if he makes three good decisions a year. And I really believe that. This is on recruiting talent. Do you want mission mercenaries or missionaries? This is something he repeats enough over and over again. I have to read to you at least once. We have not created a kind of country club culture where you get free massages and whatever the perks of the moment are. I've always had a bit of skepticism about those kind of perks

because I also worry that people will stay with a company for the wrong reasons. You want people to stay for the mission. You don't want mercenaries at your company. You want missionaries. Missionaries care about the mission. And Jeff applies that to companies he buys too. He talks about when he met with, I think his name is John Mackey, the founder of Whole Foods. He's like, oh, this guy's clearly a missionary, not just a mercenary looking to flip his company. He talks about the importance of not only getting people in the company, but how do you keep them? Like if you want brilliant people, you've got you can also drive those people away because they have really high standards. You have to adhere to them. And one way to drive brilliant people away is to make decisions really slowly.

You could drive great people away by making the speed of decision making really slow. Why would great people stay in an organization where they can't get things done? They look around after a while and they're like, look, I love the mission, but I can't get my job done because our speed of decision making is too slow. And the importance of speed has been over and over again in these books. I always think of Nolan Bushnell, the founder of both Atari and Chuck E. Cheese. He's got this great book. I think it's called Finding the Next Steve Jobs. I did a podcast on it. It's in the back catalog if you haven't listened to it. But something I've always thought about,

he employed Steve Jobs when he was 19 or something, 18, 19 years old, was working at Atari. And he had all these weird requests. Like he didn't want to wear deodorant. He wanted to be able to work barefoot. He wanted to be able to sleep at the office. And Nolan's like, yeah, I'm going to accommodate because I think this kid's smart and he's really good. But he says, like when I gave Steve an assignment,

I didn't have to go back and check on him, right? He was a born entrepreneur. And he says something I always thought about. He says, listen, Steve Jobs had one speed. Go. OK, so now we're going to go back to this importance of speed. So this is how to speed up decision making. And I love this is something I've also heard Jeff say over and over again. And it's just a good idea that I think we should all keep in our brains. There are ways to increase the speed of decision making, and it is super important. There are two types of decisions. There are decisions that are irreversible and highly consequential, and we call these one way doors. They need to be made slowly and carefully.

I often find myself at Amazon acting as the chief slowdown officer. Whoa, I want to see that decision analyzed 17 more ways because it's highly consequential and irreversible. The problem is that most decisions are not like that. Most decisions are two-way doors. You can make the decision and you step through. If it turns out to have been the wrong decision, you can back up. And what happens in large organizations is that all decisions end up using the heavyweight process that is really intended only for irreversible, highly consequential decisions. And that's a disaster. When there's a decision that needs to be made, you need to ask, is this a one-way door or a two-way door? If it's a two-way door,

make the decision with a small team or even one high judgment individual. Make the decision. If it's wrong, it's wrong. You'll change it. But if it's a one-way door, analyze it five different ways. Be careful because that is where slow is smooth and smooth is fast. You do not want to make one-way door decisions quickly. Now this is from an essay they titled Competition. This is really interesting. This is the example I had in mind when I said that. You know in just like two pages.

Bezos can just communicate. There's just so much thinking embedded in these two pages. And this is on scale. Nimbleness. Robustness. And innovation. Or excuse me. How scale.

I can't even read my own writing. Jeez. How scale. Nimbleness. Robustness. And innovation influence competition. and innovation, or excuse me, how scale, I can't even read my own writing, geez, how scale, nimbleness, robustness, and innovation influence competition. Zero-sum games are unbelievably rare. Sporting events are zero-sum games. Two teams enter an arena, one's going to win and one is going to lose. In business, however, several competitors can do well. That's very normal.

The most important thing for doing well against competition in business is to be both robust and nimble. And it is scale. Scale is a gigantic advantage because it gives you robustness. You can take a punch. But it's also good if you can dodge a punch. And that's nimbleness. As you get bigger, you grow more robust. The most important factor for nimbleness is decision you get bigger, you grow more robust.

The most important factor for nimbleness is decision-making speed, which we talked about over and over again. We just covered that, right? The second most important factor is being willing to be experimental. You have to be willing to take risks. You have to be willing to fail, and people don't like failure. I always point out that there are two different kinds of failure. There's experimental failure. That's the kind of failure you should be happy with.

And there's operational failure. We've built hundreds of fulfillment centers at Amazon over the years, and we know how to do that. If we build a new fulfillment center and it's a disaster, well, that's just bad execution. That's not a good failure. But when we are developing a new product or service or experimenting in some way and it doesn't work out that's okay that's a great failure and you need to distinguish between those two types of failures and really be sinking invention and innovation and the other thing about competition this is such a really interesting idea is you don't want a fair playing field and the other thing about competition is that you don't want to play on a level playing field

this is why you need innovation. When it comes to competition, being one of the best is not good enough. Do you really want to plan for a future in which you might have to fight with somebody? You might have to have a fight with somebody who is just as good as you are? I wouldn't. I already mentioned this, but it's important. I think when you talk about it again, it's in the title of the book. It's about wander. We'll wander a little bit too. We have some very specific ideas about how we want to do, about what we want to do.

But I believe in the power of wandering. All my best decisions in business and in life have been made with heart, intuition, and guts, not analysis. And this is coming from somebody with a gifted analytical mind. What does that tell you? It's extremely important. I'm going to read it again. All my best decisions in business and in life have been made with heart, intuition, and guts, not analysis.

When you can make a decision with analysis, you should do so. But it turns out in life that your most important decisions are always made with instinct, intuition, taste, and heart. And this is another one of his ideas I think about all the time. It's a fantastic idea to orient your, I think, your workaround and your life in general. But put your energy into things that won't change. I get asked a very interesting question from time to time. Jeff, what's going to change over the next 10 years? And I enjoy playing with that answer.

That's a fun dinner conversation. But there's an even more important question I almost never get asked. What's not going to change over the next 10 years? And that question is so important because you can build your plans around those things. So I know for a fact that Amazon customers are going to want low prices 10 years from now. That's not going to change. Customers are going to want fast delivery. They're going to want a big selection. So all the energy we've put into those things will continue to pay dividends. It is impossible to imagine a customer coming to me in 10 years from now and saying, Jeff, I love Amazon. I just wish you delivered a little more slowly. Or I just wish the prices were a little higher.

That's not going to happen. When you can figure out things that are going to remain true under almost all circumstances, then you can put your energy into them. Okay, I have a ton more highlights. I could literally sit here for five hours telling you about this book. I just highly encourage you to buy it. If you buy it using the link that's in your show notes on your podcast player or at founderspodcast.com, you'll be benefiting the podcast at the same time. up front is because I want to close on by reading almost his entire commencement address to the graduating class of Princeton that he that he gave the speech in 2010. And it's called We Are What We Choose. And when I'm done reading it, the podcast is just going to end because I want you to think

about what he said. There's questions he's going to ask and these questions i think we should internalize and and think about um so again that when this podcast ends that's 155 books down 1000 to go okay so here we go this is what are we excuse me we are we are what we choose address to the princeton graduating class of 2010 My grandparents belonged to a caravan club, a group of Airstream trailer owners who traveled together around the United States and Canada. And every few summers, we'd join the caravan. We'd hitch up the Airstream trailer to my grandfather's car,

and we'd go off in a line with 300 other Airstream adventurers. I loved and worshipped my grandparents, and I really looked forward to these trips. On one, when I was about 10 years old, I was rolling around in the big bench seat in the back of the car. My grandfather was driving, and my grandmother had the passenger seat. She smoked throughout these trips, and I hated the smell. At that age, I'd take any excuse to make estimates and do minor arithmetic. I'd calculate our gas mileage or figure out use of statistics on things like grocery spending.

I'd been hearing an ad campaign about smoking. I can't remember the details, but basically, the ad said that every puff of a cigarette takes some number of minutes off your life. I think it might have been two minutes per puff. At any rate, I decided to do the math for my grandmother. I estimated the number of cigarettes per day, the number of puffs per cigarettes, and so on. When I was satisfied that it had come up with a reasonable number, I poked my head into the front of the car, tapped my grandmother on the shoulder, and proudly proclaimed, at two minutes per puff, you've taken nine years off of your life. I have a vivid memory of what happened, and it was not what I anticipated. I expected it to be applauded for my cleverness

and arithmetic skills. Jeff, you're so smart. That's not what happened. Instead, my grandmother burst into tears. I sat in the back seat and did not know what to do. While my grandmother sat crying, my grandfather, who had been driving in silence, pulled over onto the shoulder of the highway. He got out of the car and came around and opened my door and waited for me to follow. Was I in trouble? My grandfather was a highly intelligent, quiet man. He had never said a harsh word to me, and maybe this was to be the first time. Or maybe he would ask that I go back

in the car and apologize to my grandmother. I had no experience in this realm with my grandparents and no way to gauge what the consequences might be. We stopped beside the trailer. My grandfather looked at me, and after a bit of silence, he gently and calmly said, Jeff, one day you'll understand that it's harder to be kind than clever. What I want to talk to you about today is the difference between gifts and choices. Cleverness is a gift. Kindness is a choice. Gifts are easy. They're given after all. Choices can be hard.

You can seduce yourself with your gifts if you're not careful. And if you do, it'll probably be the detriment of your choices. This is a group with many gifts. I'm sure one of your gifts is the gift of a smart and capable brain. Your smarts will come in handy because you will travel in a land of marvels. We humans will astonish ourselves. Jules Verne, Mark Twain, Galileo, Newton, all the curious from the ages would have wanted to be alive most of all right now.

As a civilization, we will have so many gifts, just as you as individuals have so many individual gifts as you sit before me. How will you use these gifts? And will you take pride in your gifts or pride in your choices? I got the idea to start Amazon 16 years ago. I came across the fact that web usage was growing at 2300% per year. I'd never seen or heard of anything that grew that fast, and the idea of building an online bookstore with millions of titles, something that simply couldn't exist in the physical world, was very exciting to me. I had just turned 30 years old, and I'd been married for a year. I told my wife,

Mackenzie, that I wanted to quit my job and go do this crazy thing that probably wouldn't work since most startups don't, and I wasn't sure what would happen after that. Mackenzie told me I should go for it. I'd always wanted to be an inventor, and she wanted me to follow my passion. I was working at a financial firm in New York City with a bunch of very smart people, and I had a brilliant boss who I much admired. I went to my boss and told him I wanted to start a company selling books on the internet. He took me for a long walk in Central Park, listened carefully to me, and finally said, that sounds like a really good idea.

But it would be even a better idea for someone who didn't already have a good job. That logic made some sense to me, and he convinced me to think about it for 48 hours before making a final decision. Seen in that light, it was a really difficult choice, but ultimately I decided I had to give it a shot. I didn't think I'd regret trying and failing, and I suspected I would always be haunted by a decision to not try at all. After much consideration, I took the less safe path to follow my passion, and I'm proud of that choice. Tomorrow, in a very real sense, your life,

the life you author from scratch on your own, begins. How will you use your gifts? What choices will you make? Will inertia be your guide or will you follow your passions? Will you follow dogma or will you be original? Will you choose a life of ease or a life of service and adventure? Will you wilt under criticism or will you follow your convictions? Will you bluff it out when you're wrong or will you apologize? Will you guard your heart against rejection or will you act when you fall in love? Will you play it safe or will you be a little bit swashbuckling? When it's tough, will you give up or will you be a little bit swashbuckling? When it's tough, will you give up

or will you be relentless? Will you be a cynic or will you be a builder? Will you be clever at the expense of others or will you be kind? I will hazard a prediction. When you're 80 years old and in a quiet moment of reflection, narrating for only yourself the most personal version of In the end, we are our choices. Build yourself a great story.