Founders - Jeff Bezos (Insights, Stories, and Secrets)

Starting point is 00:00:00 An insider's guide to the principles and practices that drove Amazon's meteoric rise. Colin Breyer and Bill Carr joined Amazon in the late 1990s, at a time when it was making the transition from a small company that used doors for desks to one of the fastest growing and most respected companies in the world. In working backwards, these two long-serving Amazon executives reveal and codify the principles and practices that drive the successes of one of the most extraordinary companies the world has ever known. With 27 years of Amazon experience between them, much of it in the early 2000s, a period of unmatched innovation that brought products and services including Kindle, Amazon Prime, Amazon Studios, and Amazon Web Services to Life, Breyer and Carr offer the first insider's account of the practices that set Amazon apart.

Starting point is 00:00:56 With lessons and techniques for applying Amazon's 14 leadership principles to your company or career, the authors illuminate how the principles inform decision-making at all levels and reveal how the company's culture has been defined by four characteristics. Customer obsession, long-term thinking, eagerness to invent, and operational excellence. Breyer and Carr explain the set of ground-level practices that ensure these characteristics are translated into action and flow through all aspects of the business. Working backwards is a practical guidebook and a corporate narrative filled with the author's in-the-room recollections of what being Amazonian is like and how it affected their personal and professional lives. They demonstrate that success on Amazon's scale is achieved through commitment to its set of well-defined, rigorously executed principles

Starting point is 00:01:43 and practices shared here for the very first time. And that is an excerpt from the front cover of the book that I want to talk to you about today, which is Working Backwards, Insight Stories and Secrets from Inside Amazon, written by Colin Breyer and Bill Carr. And I want to do this bonus, this book is a bonus episode, because there's a sequel to what may be the most insightful biography I've ever read. That's The Everything Story written by Brad Stone. Not only do you get a good idea of the early life of Jeff Bezos, what he was like as a young person,

Starting point is 00:02:16 why he made the decision to quit his job at the age of 30 and start Amazon, but you also get a lot of his, he probably has the most unique ideas out of any entrepreneur that I've covered. And so that author is releasing in the next few weeks, a book called Amazon Unbound. And I think a good way to prepare for that book is by reading this one. So let me go ahead and jump into a couple. There's a couple of interesting parts I found in the introduction that I want to bring to your attention. So it starts off saying, why is Amazon worthy of study? And it says to say that Amazon is an unconventional company is an understatement. Its most significant initiatives have often been

Starting point is 00:02:52 criticized and even derided as folly. And when I read those two sentences, I thought, I was like, well, that's actually a good thing. I remember in the book, Confessions of an Advertising Man, David Ogilvie said that talent and good ideas is more likely to be found among nonconformist dissenters and rebels. And so those kind of people are going to be criticized by everybody else. And it's largely due to everybody else not understanding their ideas. So that may be an indicator that you actually have some good ideas if people disagree with them. So they continue talking about what this book is about. And then I'm going to really, when you think about the title Working. And then I'm going to really,

Starting point is 00:03:29 when you think about the title, Working Backwards, I'm going to refer to that as it could all be so simple. And that'll make sense in one second. So it says this book is primarily about showing you some of the unique principles and processes at Amazon with enough detail that you will be able to implement them if you choose to. So it's separated into two parts. The first part is going over the philosophies, the ideas, and the principles behind Amazon. And then the second part has to do with how they apply those philosophies to the building of many products. So it talks about the Kindle, Amazon Prime, Prime Video, and then AWS. And so let's go back to this idea that it could all be so simple. And it has to do with a fundamental core belief of Amazon. It says, Amazon believes that long-term growth is best produced by putting the customer first. If you held this conviction, what kind of company would you build?

Starting point is 00:04:13 So working backwards is the idea that you don't start building a product. You start with the ideal customer experience in mind, usually in the form of a press release and an accompanying FAQ, which I'll talk to you more about in detail later. And then you work backwards from that ideal customer experience. And the reason I say it could all be so simple is because think about the products and services and the companies that you patronize. Sometimes you do so voluntarily, sometimes it's involuntary. But this is not rocket science. And yet it's a very simple idea that almost nobody uses in practice. The best thing for the company is the best thing for the customer. And yet it's a very simple idea that almost nobody uses in practice. The best thing for the company is the best thing for the customer. And yet there's a lot of experiences, some small, some major, where when you have an unpleasant experience with a company, you're just like you could tell, OK, you're thinking about it from your perspective instead of from the customers.

Starting point is 00:05:02 That's the most common, I would say, method of operating businesses. And I think what again, what makes Amazon unique is that they take a simple idea and they apply it relentlessly. So it talks more about that. If you held this conviction, what kind of company would you build? Jeff described Amazon in this way, direct quote from Jeff, our culture is four things, customer obsession, right? Which is just another way of saying putting the customer first instead of competitor obsession, willingness to think long-term with a longer investment horizon than most of our peers, eagerness to invent, which of course goes hand in hand with failure. And then the fourth one, taking professional pride in operational excellence. And so we're going to come back to that idea that it could all be so simple

Starting point is 00:05:39 multiple times throughout the book. I want to talk about what makes this, what I think is, makes this book really, really unique is the fact that one of the authors, this guy named Colin, he was actually Jeff's shadow for a very long time. And so we're going to get unique insights. I just can't imagine like once people know that, okay, this guy was Jeff shadows for two years, it happened in the early 2000s. Think about the fundamental changes that Amazon was forced to go through during those periods. How many people would be, would want to meet with this guy, pick his brain, to use a common expression? It's just like, well, you don't have to pick his brain. Just pick up the book that he wrote, and then you can download all of his experiences into your mind, right?

Starting point is 00:06:14 So he says, Jeff asked me, this is summer 2003, Jeff asked me to become his technical advisor, a role that is known as Jeff's shadow. So he's with him 24-7. I mean, obviously not when he's at home, but at work, right. And this role is similar to a chief of staff role at other companies. That position had been formalized 18 months earlier when Andy Jassy. So it says now the CEO of Amazon Web Services. That's when the book was published. He's now the CEO of Amazon became Jeff's first full time technical advisor.

Starting point is 00:06:47 And so when I read that, I got extremely interested. Not that I was obviously going to finish reading the book anyways, but this is right in the introduction. I was like, okay, this is going to be serious because this guy is spending every day with Jeff, almost every hour with Jeff for two years at a very integral part of the company building process of Amazon, way before they were the Amazon that we know today. So he's going to have a lot of interesting insights. The very first one was fascinating. He talks about how Jeff spends his time, which I love. So he's talking about, hey, they went to this charity tennis event. But this is the important part. This story is atypical. 95%

Starting point is 00:07:20 of the time I spent with Jeff was focused on internal work issues rather than external events like conferences, public speeches, and sports matches. When I read that, I immediately thought of this quote I always think about. It's in the book Becoming Steve Jobs. I think that was Founders number 19, somewhere back in there. But Tim Cook talks about, and the reason I'm bringing this to your attention is because I find it fascinating that Jeff Bezos and Steve Jobs arrived at the similar conclusion about the best use of your time. And so Tim Cook said, if you look closely at how Steve spent his time, you'll see that he hardly ever traveled and did none of the conferences and get-togethers that so many CEOs attended. He wanted to be home for dinner.

Starting point is 00:07:59 They focused 95% of his time on internal work issues. The more I learn, the more I really just start thinking about the external world as just an external distraction. So more on the unique perspective that Colin's able to get from Jeff. He was able to ask why. That's hugely important to understanding. How did Jeff arrive at these decisions, this philosophy he built over time and then why so he says when i write about what led jeff uh what led to jeff making key decisions in this book i can do so because i often directly asked him for his specific thinking behind his insights as the reasoning behind them was often more illuminating than the insights themselves

Starting point is 00:08:42 and this is also why i think charlie munger talks about hey the reason you need the reason he's read hundreds of biographies the reason he he recommends people to spend time reading biographies and he uses the term you're becoming friends with the eminent dead and he's like listen you can learn the ideas but if you get a sense of the person and you get a sense of this person by reading his life story his or her life story then you have an idea of why they arrived at these decisions, because the decisions we make are a byproduct of the experiences we have and the personality and how we view the world. And I think his point is that they just stick. You have a better

Starting point is 00:09:15 understanding of them. You're more likely to remember them and then utilize them in your own life. I think that's a very astute observation by Munger. All right, so let's go back to the end of the introduction here, and then we'll get into some of these ideas. And I love this part. Really, it's a reminder that there's always more than one way to solve a problem. So he says, you know, this is, they use the term, this is being Amazonian. This is, you know, the way Amazon, largely guided by Jeff's philosophy, chose to build the business, but it's not the only way. So he says the world, thankfully, is full of, now this is Jeff writing, by the way, I wasn't clear. The world, thankfully, is full of many high performing, high distinctive corporate cultures. We never claim that our approach is the right one, just that it is ours. And again, that's

Starting point is 00:09:59 something you see in biographies over and over again. They tell the philosophy behind the methods used to build their companies. And usually they explicitly say stuff like that. The ones I've just happened to be top of mind because we're reading some highlights. James Dyson talks about this is just my way of doing things. Yvonne Chouinard talks about that in his building of Patagonia. David Ogilvie talks about then building Ogilvie and Mather. This is my way of doing things. I take influences from the past experiences that I had, and then I remix it with my own ideas and I try to create something new, something unique and new. So let's talk a little bit about Jeff at the very beginning of Amazon. These are my favorite parts of company history.

Starting point is 00:10:34 In the very early days of the company, when it consisted of only a handful of employees, now they have what, over a million? Last I read, something like 1.3 million, some crazy number like that. In the very early days of the company, when it consisted of a handful of people working out of just three small rooms, there was no formal leadership principles because Jeff was the leadership principles. He wrote the job descriptions and he interviewed the candidates. He packed and shipped boxes and read every email that went out to customers. Taking part in every aspect of the business allowed him to communicate the Amazon philosophy informally to the relatively small group of employees. So they're obviously going to get to the point that your company is not going to stay that small forever.

Starting point is 00:11:13 Eventually, you're going to have to find a way to communicate these leadership principles when you can't communicate them one on one. Let's go back to more of Jeff at the beginning. beginning, the first Amazon distribution center was a room that measured 400 square feet and that had last served as the practice space for a local band whose name was still spray painted on the door. And yet even at this time, Jeff was still focused on it has to be the best. We have to we have to be committed to operational excellence. Jeff had one simple rule. It has to be perfect. He reminded his team that one bad customer experience would undo the goodwill of hundreds of perfect ones. So it also talks about, and we see this from his very, I've read this before on past podcasts,

Starting point is 00:11:55 but I love it. It's a constant reminder. You can go back and find this online, but it's a very early job ads were written by Jeff. And this is what it said. The job description he wrote for his very first employees said, you must have experience designing and building large and complex yet maintainable systems. And you should be able to do so in about one third the time that most competent people think possible. So even from the very beginning, we see he's a very extreme character. The words relentlessly and unreasonably high are distinctively Jeff. And I always say, type into your web browser, relentless.com and see where it forwards to. Jeff owns that domain. It's hilarious. So they talk about there's actually written, not in stone, I wouldn't say, but written and communicated at length are Amazon's leadership

Starting point is 00:12:42 principles. You can find them online. They're obviously in the book. I'm just going to pull out some quotes from the leadership principles. And so we get a good idea of the philosophy and the culture at Amazon. Leaders start with the customer and work backwards. That's the very first one. As we do things, we accept that we may be misunderstood for long periods of time. They opened the book with that, right? We work to disconfirm our beliefs. So he talks about the philosophy, excuse me, the leadership principles are describing what a leader is at Amazon. So it says, you know, leaders start with this, leaders do this,

Starting point is 00:13:19 leaders expect this. So it says one of this is leaders are working, work to disconfirm their beliefs. Leaders are never done learning. Leaders have relentlessly high standards. Many people may think these standards are unreasonably high. Thinking small is a self-fulfilling prophecy. Speed matters in business. These are not coming from the same one.

Starting point is 00:13:44 I'm just these are just highlights from all 14, okay? Constraints breed resourcefulness, self-sufficiency, and invention. There are no extra points for growing headcount, budget-sized, or fixed expenses. Leaders benchmark themselves and their teams against the best. And leaders are obligated to challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders do not compromise for the sake of social cohesion. Okay, so now they start talking about, okay, well, that's nice that you have leadership principles, you write them down, you communicate them, but how do you make sure that they are actually applied? So they use the term mechanisms.

Starting point is 00:14:31 This is the way they reinforce the leadership principles. The book goes in great detail about this. Really, my favorite part of this is, and it's going to tie to two other things that Jeff has said and Sam Walton said in his autobiography, which Jeff read, underlined, gave his gifts. He made Amazon executives read. It had a large impact on the way he ran his business. But it says Amazon realized early on that if you don't change the underlying condition that created a problem, you should expect the problem to recur. So I think it was on Founders 155. I read Invent and Wonder, the collected writings of Jeff Bezos. It's every single Jeff Bezos shareholder letter,

Starting point is 00:15:07 plus a bunch of his most famous talks. They were transcribed and like lately edited. And he said something in that book. It was fascinating. He's talking about this idea that he hired somebody that was a Kaizen expert. That's a Japanese term that means continuous improvement.

Starting point is 00:15:22 So it talks about something that was happening at his fulfillment center. I'm just going to read this from that book. At a fulfillment center, this is Jeff writing, 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 the dirt? And then Jeff's response to this was hilarious.

Starting point is 00:15:41 He says, I felt like the karate kid. And that ties into what they're talking about in the book. Like, okay, that's nice that you're fixing the problem, but you need to make sure that you change the underlying conditions so the problem doesn't continue to recur. So in his autobiography, Sam Walton talks about this and he uses the example of test scanners. And I'm going to get to that. He talks about really what's the most common result of a problem in a company, what Sam Walton's talking about, is that you just add another layer of bureaucracy on it. He's like, but that's not solving the problem. So he says, if you don't zero, this is Sam Walton talking now, if you don't zero in on

Starting point is 00:16:12 the bureaucracy every so often, you will naturally build in layers. You never set out to add bureaucracy. You just get it, period, without even knowing it. So you always have to look to be, you always have to be looking to eliminate it. A lot of this goes back to what Deming told the Japanese a long time ago, do it right the first time. The natural tendency when you've got a problem in a company is to come up with a solution to fix it. So that's exactly what they're talking about in the book, right? But Walton ran into this 30, 40 years earlier. Too often, that solution is nothing more than adding another layer. What you should be doing is going to the source of the problem to fix it. And sometimes that requires shooting the

Starting point is 00:16:49 culprit. So now we have another person in the book talking about an example in Walmart's history. I'll give you an example that drove Sam crazy until we started doing something about it. Merchandise would come into the back of the store. It was supposed to be marked at the right price or marked correctly on the spot, right? So that's the idea. They was supposed to be marked at the right price or marked correctly on the spot, right? So that's the idea. They're describing the ideal, what should have happened. That's not what happened. But because it often wasn't getting done properly the first time, I'm adding the first time, we created positions called test scanners. People who go around the store with handheld scanners, making sure everything is priced correctly. There's another layer right there.

Starting point is 00:17:30 And Sam didn't ever visit a store without asking if we ever really needed these folks. So now they talk about the solution. Really, it's a simple philosophy. What you have to do is just draw a line in the dirt and force the bureaucracy back behind the line. And then know for sure that a year will go by and it will be back across that line. And you have to do the same thing again. Okay, so skipping ahead, I love this. They talk about, okay, it's nice that you have principles, nice you have mechanisms, but really incentives rules everything around you. No matter how clear your leadership principles and yearly plan may be, they speak softly in comparison to financial incentives.

Starting point is 00:17:57 The bulk of your compensation at Amazon and potentially enormous upside is the long-term value of the company. So it talks about what they're trying to avoid by doing this. The wrong kind of compensation practice can cause misalignment of incentives in two ways. Number one, by rewarding short-term goals at the expense of long-term value creation. And number two, by rewarding the achievement of localized department milestones, whether or not they benefit the company as a whole. Both of these incentives, that is, can powerfully drive behaviors that are antithetical to the company's ultimate goals.

Starting point is 00:18:34 So this is something we've learned over and over again. I've done, what, three books on Charlie Munger. He talks about incentives over and over again. In Warren Buffett's shareholder letters, he talks about the reason that they, so at the very structure of Berkshire, they know the power of incentives. That's why they keep, they just dictate where the money of the company is going to be invested at headquarters, they're being warned and Munger and the people to help them. And then two, they set the compensation for the people running the businesses. And they're largely decentralized after that. It's very interesting. So let me read this quote, two quotes from Munger

Starting point is 00:19:07 about the same thing. Never, ever think about something else when you should be thinking about the power of incentives. Another quote, I've been, I think I've been in the top 5% of my age cohort all of my life in understanding the power of incentives and all of my life I've underestimated it. Okay, so now there's a chapter called, it's about organizing the company and they have this idea in here that's really, I think, powerful and it's separable. They call it separable single-threaded leadership. And you'll see the need for this in this meeting. It's with Jeff and a bunch of other executives. And so this guy, one executive starts talking. He says, this project has many moving parts.

Starting point is 00:19:48 We've identified five unresolved issues so far that are slowing us down. They are, and then Jeff interrupts. He said, before we get to those issues, would someone please tell me who's the most senior single-threaded leader for this initiative? Then there's an uncomfortable long pause. And then one guy guesses. He's like, I guess I am. So he says, I am. Then Jeff says,

Starting point is 00:20:11 but you're in charge of the whole business unit. Remember, he said single-threaded leader for this initiative, right? So he says, I am, but you're in charge of the whole business unit. That includes a lot more than this one initiative. Then another vice president. That would be me then. So now Jeff turns his attention to him.

Starting point is 00:20:26 So this is all that you and your team work on every day. And that one sentence describes the idea behind separable single-threaded leadership. Okay. Okay. So it's you. So this is all that you and your team work on every day. Well, no, the only person working on it full time is one of our product managers. And now Jeff starts to get really impatient. Does a product manager have all the skills, authority and people on their team to get this done? Back to the vice president. No, not really. No. Which is why we plan to hire a director to head it up. Jeff goes, Jeff continues. How many interviews have you conducted so far for this new director? Well, it's not an open position yet, so the answer is zero. And so Jeff's going to

Starting point is 00:21:11 end the meeting right here. Okay, we're kidding ourselves. The initiative won't go green, meaning we can do it until there's a new leader in place. That is the real roadblock. Remember that the meeting started off saying, hey, we've identified five issues of the roadblock. Jeff's like, no, you didn't. This is a real roadblock. That is the real roadblock this initiative is facing. Let's remove that one first. So now this is the authors interpreting for us what's going on here. Speed, or more accurately, velocity, which measures both speed and direction, matters in business. With all other things being equal, the organization that moves faster will innovate more, simply because it will be able to conduct a higher number of experiments per unit of time.

Starting point is 00:21:47 Yet many companies find themselves struggling against their own bureaucratic drag, which appears in the form of layer upon layer of permission, ownership, and accountability, all working against fast, decisive forward progress. Go back to the example of Sam Walton. It's not that he wanted to remove layers just for the sake of removing layers, but he knew that it slows it down and it increases his cost structure. Continuing this train of thought on the very next page, the answer, so they're talking about like, well, how do we speed things up? The answer lies in an Amazon innovation called single-threaded leadership in which a single person, unencumbered by competing responsibilities,

Starting point is 00:22:25 meaning that is the only thing they work on, owns a single major initiative and heads up a separate, largely autonomous team to deliver its goals. So that reminded me of one of my favorite ideas that I've ever come across. I don't understand why more companies don't use this. When Peter Thiel was the CEO of PayPal. He came up with this idea that he had an extreme, they call it an extreme philosophy on manager focus. Let me read this to you. So it says Thiel developed an unorthodox extreme philosophy on manager focus and prioritization. Instead of focusing on five things or three things, the magic number is one.

Starting point is 00:23:04 You only focus on one singular thing. As PayPal executive at the time, Keith Raboy, recalls, Peter would refuse to discuss virtually anything else with you except what was currently assigned as your number one initiative. That is very similar to what we're seeing Jeff Bezos do in this meeting, right? Every employee, for instance, had to identify the single, not the top two, not the top five, the single most valuable contribution to the company. So this is extreme manager focus work because Thiel gave it teeth. With distractions cleared away, Thiel empowered every person in the company to pursue their only priority with extreme dispatch and vigor. What a

Starting point is 00:23:42 great term there, huh? Giving each individual in the organization a singular focus drives people to work on only those goals that will help it achieve true success. So that's, in this case, they're calling it, you know, his unorthodox stream philosophy on manager focus. And in Amazon, they're saying, hey, who's the single threaded leadership? And this is something that's really important. They talk about this idea over and over again in different contexts in the book. Now we've got to another one of Jeff's very unorthodox, but one of my favorite ideas of his. And I'm going to try to reduce it into a maxim

Starting point is 00:24:20 and that is communication is a sign of dysfunction. I'm going to read this entire section to you. It's a quick few paragraphs. It's under the heading better coordination was the wrong answer. Resolving a dependency usually requires coordination and communication. And so right there, that gives you a hint in case you haven't heard this idea before. Jeff doesn't want to resolve dependencies. He wants to eliminate them, right? And when your dependencies keep growing, requiring more and more coordination, it's only natural to try speeding things up by improving your communication. So you have Amazon. They realize it's a problem. Let's solve the problem.

Starting point is 00:24:56 Jeff's like, no, you're solving the wrong problem. There are countless approaches to managing cross-team coordination, ranging from formalized practices to hiring dedicated coordinators. and it seemed as though we looked at them all. At last, we realized that all this cross-team communication didn't really need refinement. It needed elimination. It wasn't that we had the wrong solution in mind. Rather, we've been trying to solve the wrong problem altogether. We didn't yet have the new solution, but we finally grasped the true identity of our problem, the ever-expanding cost of coordination among teams. This change in our thinking was, of course, nudged along by Jeff. In my tenure at Amazon, I heard him say many times that if we wanted Amazon to be a place where builders can build, we needed to eliminate

Starting point is 00:25:40 communication, not encourage it. So he takes the standard idea in business. Oh, you know, we have a problem. Let's get, you know, put our heads together. Let's have a meeting. Oh, we're not communicating well. Let's, you know, let's get slack. Let's get a different way to communicate. Let's send emails, et cetera.

Starting point is 00:25:55 And Jeff's like, no, stop communicating. And this is why. When you view effective communication across groups as a defect, the solution to your problem starts to look quite different from traditional ones. I need to read, I underline that sentence twice. When you view effective communication across groups as a defect, not something to be encouraged, something to be eliminated, is what he's saying, right? The solutions to your problem start to look quite different from traditional ones, or read that another way. The solution looks quite different from what other companies are wasting time doing. He suggested that each software team should build and clearly document a set of APIs, so application programming interfaces, for all

Starting point is 00:26:30 their systems and services. An API is a set of routines, protocols, and tools for building software applications and defining how software components should interact. In other words, Jeff's vision was that we needed to focus on loosely coupled interaction via machines through well-defined APIs rather than via humans through emails and meetings. Why? Why? Why is he doing this? This would free each team to act autonomously and move faster. That's another idea that he uses in different contexts. And I've heard him in other speeches and other writing. We talk about, listen, if you if you're moving, if your decision-making process is moving slow,

Starting point is 00:27:06 the best people are going to leave because the best people want to build new things. They want to build better products. And they can't do that if they're waiting around for permission. So make it permissionless. Again, another way to explain

Starting point is 00:27:18 the same concept and same idea. Now, they talk about the importance of speed because the more experience you run, the faster you go, the more experience you run, the more experience you run, the more you innovate, the faster you move. Okay, it's all tied. Let me go back to this idea. I'm going back. I'm continuing the idea.

Starting point is 00:27:37 And really, this is why every company must run experiments. Time and time again, we learned that consumers would behave in ways we hadn't imagined, especially for brand new features or products. So the first solution to this less communication is building these autonomous units, these little small teams within Amazon. And they're called two pizza teams. This was the first proposed solution. This evolves. But it says Jeff proposed that instead of finding new and better ways to manage our dependencies, we needed to figure out how to remove them. We could do this, he said, by reorganizing software engineers into smaller teams that would be essentially autonomous, connected to other teams only loosely. And what a great sentence right here. And only when unavoidable. These largely independent teams could do their work in parallel. Instead of coordinating better, they could coordinate less and build more.

Starting point is 00:28:29 So then there's this document that talks about what a two-piece team is. I'm going to pull out some ideas, or excuse me, pull out some highlights. No more than 10 people. They should have no need to coordinate with other teams to get their work done. Remember, he's emphasizing speed here, still. They should be evaluated by a well-defined fitness function. This is actually what I love about them, about this book, is they talk about the documents they use and then they wind up going back and saying, hey, that actually didn't work.

Starting point is 00:28:55 So this well-defined fitness function, they wind up dropping this because it was a series of weighted metrics. And they're like, why are we, the way we're weighting these metrics seems to be arbitrary. Why don't we just identify, like instead of taking an average of metrics just use the actual metrics identify the metrics that are important to the team's success and then use those i'm going to skip over that he says they must be monitored in real time a team's real-time score on its uh metrics would be displayed on a dashboard next to all other two pizza team scores. The team will own the business results. This eliminates the all too often heard excuses such as, we built what the business folks will ask us to, or they just asked for the wrong product. So now they drop this idea of, or I

Starting point is 00:29:40 don't even know if dropping it, it morphs into the two pizza team idea morphs into the single threaded leadership idea. And in this book, they do a postmortem on the original two pizza, two pizza team idea. And the summary is it's a they just called it a clever idea that didn't work. So this is Jeff writing in his shareholder letter. He's talking about two pizza teams, but really he's talking about the importance of decision-making speed. So he says, a well-instrumented two-pizza team had another powerful benefit. They were better at course-correcting, detecting and fixing mistakes as they arose. In his 2016 shareholder letter, even though he wasn't explicitly talking about two-pizza teams,

Starting point is 00:30:19 Jeff suggested that most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you're probably being slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you're good at course correcting, being wrong may be less costly than you think. Whereas being slow is going to be expensive for sure. So I mentioned earlier that two pizza teams morphs into single-threaded leaders. And really, this is why did they have to do that? Because great anything is rare. The limiting factor was great leadership. So it says, great two pizza team leaders proved to be rarities. Although we did identify a few such brilliant managers, they turned out to be notoriously difficult to find in sufficient numbers, even at Amazon.

Starting point is 00:31:15 This greatly limited the number of two pizza teams we could effectively deploy. The two pizza team clearly needed a new name. We chose the computer science term single-threaded, meaning you only work on one thing at a time. Just one sentence I want to pull out here that I love. Another phrase you'll hear at Amazon, be stubborn on the vision, but flexible on the details. Stubborn on the vision, flexible on how to get there. So now they talk about the unique internal communication structure that Amazon uses. And it's the six page narratives.

Starting point is 00:31:50 So it says if you were asked recently hired Amazon employees about what is what is surprising the most in their time at the company so far, one response would top the list. The eerie silence in the first 20 minutes of meetings. The reason for that silence, A six-page document that everyone must read before discussion begins. Amazon relies far more on the written word to develop and communicate ideas than most companies. And this difference makes for a huge competitive advantage. And so before they implemented it, they just had a feeling that PowerPoint was not, that they were wasting a lot of time doing PowerPoints in meetings. And so they wind up

Starting point is 00:32:29 reading an essay. Jeff reads it. And so does Colin. And it's an essay by this guy named Edward Tuff. And it really identifies, it's called The Cognitive Style of PowerPoint, Pitching Out Corrupts Within. And so it says, Tuff identified in one sentence the problem we'd been experiencing. As analysis becomes more causal, multivariate, comparative, evidence-based, and resolution intense, he writes, the more damaging the bullet point list becomes. And so this is where they find the beginning of their solution. Tuff proposed a solution. For serious presentations, it will be useful to replace PowerPoint slides with paper handouts showing words, numbers, data graphs, images, and images together. High resolution handouts allows viewers to contextualize, compare, narrate, and recast

Starting point is 00:33:15 evidence. In contrast, data thin, forgetful displays tend to make audiences ignorant and passive and also to diminish the credibility of the presenter. Tuff offered wise advice on how to get started. Making this transition in large organizations requires a straightforward executive order. From now on, your presentation software is Microsoft Word, not PowerPoint. Get used to it. That is essentially what we did. And so Jeff's going to write.

Starting point is 00:33:44 He says, Jeff offered a short explanation of the reason behind the change. The reason writing a good four-page memo is harder than writing a 20-page PowerPoint is because the narrative structure of a good memo forces better thought and better understanding of what's more important and how things are related. PowerPoint-style presentations somehow give permission to gloss over ideas, flatten out any sense of relative importance, and ignore the interconnectedness of ideas. So they talk about the new meeting format, and I'm going to read this to you, and then I'll tell you what my note was. Even though you cannot

Starting point is 00:34:15 hear it, with a well-written narrative, there is a massive amount of useful information that is being transmitted in those 20 minutes, otherwise known as why books have lasted for 5,000 years. A massive amount of useful information is being transmitted. This is a simple tip from Jeff on how to produce unique insights. Jeff has an uncanny ability to read a narrative and consistently arrive at insights that no one else did, even though we were all reading the same thing. After one meeting, I asked him how he was able to do that. He responded with a simple and useful tip that I had not forgotten. He assumes each sentence he reads is wrong until he can prove otherwise.

Starting point is 00:34:53 He's challenging the content of the sentence, not the motive of the writer. Jeff, by the way, was usually among the last to finish reading. So they have an entire chapter on working backwards, which is obviously the name of the book says working backwards, start with the desired customer experience. This is another example. It just, it could all be so simple. Working backwards is so central to the company success that we used it as a title for our book. Working backwards is a systematic way to vet ideas and create new products. Its key tenant is to start by defining the customer experience, then iteratively work backwards from that point until the team achieves clarity of thought

Starting point is 00:35:31 around what to build. Its principal tool is a second form of written narrative called the PR slash FAQ, short for press release slash frequently asked questions. And then on the next page, this is a great sentence. It made me laugh. Working as Jeff's shadow was a bit like drinking from a fire hose. So now they go into how they use this, how this idea came about. They didn't use it yet because it didn't exist. This is early 2004.

Starting point is 00:36:01 They're going to launch Amazon Digital. They're realizing, OK, like all of our I think 70 percent of Amazon's sales were in physical media, you know, books, CDs, stuff like that. And they're like, okay, clearly this is going to change. And really, this is about seeing your idea. So make a demo, which is I covered on the book, Creative Selection. It's a bonus episode on Apple's product making process. So really make a demo or make a mock-up is really what's happening here. Our team developed plans using the tried and true MBA style methods at the time. We had several meetings with Jeff to present our ideas. He never seemed satisfied or convinced. He found our proposals light on the details as to how the service would work for the customers.

Starting point is 00:36:40 Remember, this is before they realized let's work backwards. Finally, inevitably, he would ask, where are the mock-ups? Jeff was referring to the visual representations that would show exactly how the new service would look on the Amazon website. To create a meaningful mock-up, you have to think through what the experience will be for the customer. We didn't have any mock-ups. A few weeks later, we were back with rough mock-ups in hand. Jeff listened carefully and then began asking detailed questions. There's so many examples in this book where meetings just go awry with Jeff. And it goes back to his dedication for operational excellence. He's asking questions we had answered as we had before.

Starting point is 00:37:14 We hadn't figured all that stuff out yet. That answer did not go over well at all. Jeff wanted to know exactly what we were going to build and how it would be better for customers. To Jeff, a half-baked mock-up was evidence of half-baked thinking. And he was quick to say so, often using strong language to make his point inescapably clear. And I left myself in that margin was, that should hurt your professional pride, man. You really want to, like, maybe you're running the company, maybe you have coworkers, maybe there's other people on the team. But, like, I don't want to be embarrassed. I don't want people to think I'm half-assing my job.

Starting point is 00:37:53 I think that's even worse than Jeff having to use strong language to make his point clear. He's telling you, like, this half-baked mock-up is evidence of half-baked thinking. Like where's your professional pride? Jeff suggested a different approach for the next meeting. Forget the spreadsheets and slides, he said. Instead, each team member would write a narrative document. In it, they would describe their best idea for a device or service for the digital media business. So what Jeff does, this is going to blow your mind right here.

Starting point is 00:38:24 Moving on to the next meeting, obviously, one proposed an e-book reader. This is 2004. This is going to blow your mind. One proposed an e-book reader that would use the new e-ink screen technology. Other words, the Kindle before the Kindle. Another described a new take on an MP3 player. Jeff wrote his own narrative about a device he called. This is crazy. Jeff wrote his own narrative about a device he called this is crazy jeff wrote his own narrative about a device he called the amazon puck it would sit on your countertop and could respond to voice commands like puck please order a gallon of milk puck would then place the order with amazon that's 2004 he's describing the echo. What? Echo came out what? A decade later

Starting point is 00:39:05 or something like that? That's wild. Writing up our ideas was hard work. It required us to be thorough and precise. We had to describe features, pricing, how the service would work, why consumers would want it. This is really, I'm going to read that again. That's a great description of why you need to work backwards. This is before they realized they needed to work backwards. Writing up our ideas was hard work. It required us to be thorough and precise. We had to describe features, pricing, how the service would work, why consumers would want it. Half-baked thinking was harder to disguise on the written page than in PowerPoint slides. After a lot of trial and error, Jeff then pushed the idea further. What if we thought of the product concept narrative as a press release in a conventional organization a

Starting point is 00:39:46 remember he doesn't there's nothing conventional about jeff in a conventional organization a press release was written at the end of the product development process so jeff's like well we're gonna do it at the beginning so it talks about implementing this on the development of kindle halfway through or not even halfway but partially They were trying to develop some kind of product before working backwards. So it says, we were working forward, trying to invent a product that would be good for Amazon, the company, not the customer.

Starting point is 00:40:12 I remember at the very beginning, I said, I really think this is how most businesses are, it could all be so simple. Most businesses, instead of focusing what's best for the customer, they think what's best for the company. It doesn't make any sense. When we wrote a Kindle,

Starting point is 00:40:24 when we wrote a Kindle press release and started working backwards everything changed we focused instead on what would be great for customers an excellent screen for a great reading experience an ordering process that would make buying and downloading books easy which interesting is they use the the fault of the ipod at the time where you had to, you could download music, but you had to like connect the iPod to your computer where they're like, oh, I don't want you to have to connect to Kindle. So we need to find a way to download books. So they use WhisperNet, WhisperSync. I can't remember the actual product name. And I thought that was because I bought the first Kindle. It was 300 bucks. It was giant and I loved it. But I thought that was a great idea. So he says we focus,

Starting point is 00:41:03 again, because it's better for the customer, right? Not easier for your engineering team. We focused this out on what would be great for customers. An excellent screen for great reading experience, an ordering process that would make buying and downloading books easy, a huge selection of titles, low prices. We would never have had that breakthrough necessary to achieve the customer experience were it not for the press release process, which forced the team to invent multiple solutions to customer problems. That's a really important insight, too. It forces you to invent what you need to deliver the best customer experience. That's really smart. Over time, we refined and normalized the specifications for the PR slash FAQ. The press release portion is a few paragraphs, always less than one page.

Starting point is 00:41:40 FAQ should be five pages or less. There's no awards for extra pages or more awards. Then it talks about the benefit of restricting length. Restricting the length of the document is, to use a term that came up when describing the narratives, a forcing function. We have seen that it develops better thinkers and communicators. That sentence made me think of two quotes, one from Jeff Bezos, one from Sam Walton, really saying the same thing. First quote from Jeff Bezos. I think frugality drives innovation, just like other constraints do. One of the only ways to get out of a tight box is to invent your way out. So then Sam Walton from his autobiography, really the summary of this paragraph is constraints are your friend. Many of our best opportunities were created out of necessity. The things that

Starting point is 00:42:23 we were forced to learn and do because we started out underfinanced and undercapitalized in these remote small communities contributed mightily to the way we've grown as a company. Had we been capitalized or had we been the offshoot of a large corporation, we might not have ever tried the Harrisons or the Rogers or the Springdales. He's talking about all these little small towns and all those other little towns that we went into into the early days. It turned out that the first big lesson we learned was that there was much, much more business out there in small town America than anybody, including me, had ever dreamed of. So now we get into more of the

Starting point is 00:42:58 application of these ideas. There's more quotes from Jeff's shareholder letters are in this book I'm going to read to you. This is 2015. We want to be a large company that's also an invention machine. We want to combine the extraordinary customer service capabilities that are enabled by size with the speed of movement, nimbleness and risk acceptance, risk acceptance mentality normally associated with entrepreneurial startups. Jeff's wrote. He also wrote, I believe that we are the best place in the world to fail. We have plenty of practice. And failure and invention are inseparable twins. That's something Thomas Edison would tell you, Edwin Land, James Dyson, Henry Royce, Enzo Ferrari.

Starting point is 00:43:35 The list goes on and on. Failure and invention are inseparable. To invent, you have to experiment. And if you know in advance that it's going to work, it's not an experiment. Most large organizations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there. He continues, long-term thinking levers our existing abilities and lets us do things we couldn't otherwise contemplate. 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, our approach permits us to work patiently

Starting point is 00:44:09 for multiple years to deliver a solution. Now this is one of the authors writing, keyword patiently. Most companies will give up on an initiative if it does not produce the kind of returns they are looking for within a handful of years. Amazon will stick with it. So saying many companies, and I would extrapolate that out to most people, give up

Starting point is 00:44:30 if an initiative does not produce the kind of returns. And they certainly don't give it a few years before they give up either. So again, long-term thinking is just a huge advantage because it's so difficult to do. The other key is frugality. You can't afford to pursue inventions for very long if you spend your money on things that don't lead to a better customer experience. Now, this is a really interesting idea. It can be distilled down to invention works well where differentiation matters.

Starting point is 00:44:56 It talks about the very beginning of Amazon, like why aren't they making their own data center hardware as opposed to why they chose to make the hardware for Kindle. So it says the reason invention works well, where differentiation matters in the company's early days, the hardware that powered Amazon's data centers was not a point of differentiation with the customers. And now obviously that's changed with AWS, but they're talking about the early days of Amazon. Okay.

Starting point is 00:45:21 So it's not, it was not the point of differentiation, differentiation with the customer creating a compelling book buying online experience was whereas with the Kindle, others were selling eBooks. So there was a real value in owning and controlling the creation of an outstanding device for our customers to read them on differentiation with customers is often one of the key reasons to invent. So let's summarize that again. Invention works well where differentiation matters. So let's go to this meeting. They're still talking about the Kindle. And there's a meeting that happens between Jeff Bezos and Steve Jobs in 2003,

Starting point is 00:45:57 right during the switch, the beginning of the switch from Amazon, realizing, hey, we got to switch to digital, right? And this is fantastic. So in fall of 2003, we traveled to Apple campus to meet with Steve Jobs. Jobs, so they're eating sushi. And this is just hilarious. I love Steve Jobs so much. Jobs segued into the real purpose of the meeting and announced what Apple had just finished. Apple had just finished building their first Windows application. He calmly and confidently told us that even though it was Apple's first attempt to build for Windows, he thought it was the best Windows application anyone had ever built. He then personally gave us a demo on the soon-to-be-launched iTunes for Windows. During the demo, Jobs talked about how this would transform the music industry.

Starting point is 00:46:43 Up until that point, if you wanted to buy digital music from Apple, you needed a Mac, which comprised of less than 10% of the home computer market. Apple's first foray into building software on the competing Windows platform showed how serious they were about the digital music market. Now, anyone with a computer would be able to purchase digital music from Apple. Jobs said that CDs would go the way of other outdated music formats like the cassette tape and their importance and portion of overall music sales would drop quickly. His next comment could reasonably be construed as either a matter of fact statement, an attempt to elicit an angry retort, or an attempt to go Jeff into making a bad business decision by acting impulsively.

Starting point is 00:47:26 That's really interesting. He said, Amazon has a decent chance of being the last place to buy CDs. The business will be high margin, but small. You'll be able to charge a premium for CDs since they'll be hard to find. Jeff did not take the bait, but we all knew that being the exclusive seller of antique CDs did not sound like an appealing business model. While it is tempting to suggest that the meeting impacted Jeff's thinking, only Jeff can speak to that. This is what I love. Talk about his actions to really tell you what's important. Actions express priority.

Starting point is 00:47:54 I love that, Maxim. Actions express priority. All right. So it says only Jeff can speak to that. What we can say is what Jeff did and did not do afterward. What he didn't do is, and what many companies would have done, is to kick off an all-hands-on-deck project to combat this competitive threat, issue a press release claiming how Amazon's new service would win the day, and race to build a copycat digital

Starting point is 00:48:15 music service. They don't have the advantage of music. You're not going to beat the maker of the iPod. You have the advantage of books. This is why they go the Kindle route instead of the MP3 player route. Instead, Jeff took time to process what he learned from the meeting and formed a plan. A few months later, he appointed a single-threaded leader, this guy named Steve Kessel, to run digital, who would report directly to him, to Jeff, so that they could work together to formulate a vision and plan for digital media. In other words, his first action, this is why I'm reading this whole section to you, other than I love Steve Jobs' story as much as the next person. In other words, his first action was not a what decision, it was a who and how decision. This is an incredibly important difference. Jeff did not jump straight to focusing on what product to build, which seemed like the straightest line from A to B. Instead, the choices he made suggest he believed that the scale of the opportunity was larger and that the scope of the work required to achieve success was equally large and complex. He was

Starting point is 00:49:18 focused first on how to organize the team and who was the right leader to achieve the right result. At the time, Amazon did not have billions of dollars to spend on digital media or anything else, so we would need to lean heavily on the frugality principle to stay in the game with the bigger players. Jeff was a student of of history and regularly reminded us that if a company didn't or couldn't catch and adapt to to meet shifting consumer needs, it was doomed. And that's exactly what's happening. Right. Their business is built off physical media. Right now, there's a phenomenon. Remember going back to the Bill Gates, the Bill Gates memo from a few weeks ago or whenever that was, where he's like, you know, you can't fight against it. You got to go with it. There's a huge phenomenon happening with the shift from physical to digital media. So he says, you don't want to become Kodak, Jeff would say, referring

Starting point is 00:50:16 to the once mighty photography giant that had missed the term from film to digital. Not only did they miss that, but they missed when, you know, all the books I've read on Edwin Land on instant photography. We weren't going to sit back and wait for this to happen at Amazon. And we're going to go more into his decision. He has a choice here, right? Everybody's jumping in the game and they list. There's like 15 different companies all copying Steve Jobs and building MP3 players.

Starting point is 00:50:42 And so he comes to the conclusion. He's like, well, you can invent or copy. I choose to invent. We had many meetings with Jeff. I would present our ideas for a music product or a company we might acquire. Each time we had these meetings, Jeff would reject what he saw as copycat thinking, emphasizing again and again that whatever music product we built, it had to offer a truly unique value proposition for the customer.

Starting point is 00:51:08 He would frequently describe the two fundamental approaches that each company must choose between when developing new products or services. We could be a fast follower, that is, make a close copy of successful products that other companies have built, or we could invent a new product on behalf of our customers. He wanted Amazon to be a company that invents. Jeff made clear that people like the exec who baited him at the digital music conference wouldn't drive our process so this this uh owner of uh what they're talking about is a one of these uh uh music label executives were talking about how great itunes was and he basically wanted more companies to to come up with ideas like itunes so it could generate more money for him his his record label okay so? So he says he recognized that building copycat versions of products like the iPod and iTunes store was a

Starting point is 00:51:50 non-starter. He chose the path of invention by looking beyond the music category where every other large company is focused because Apple and iTunes is getting so much press and attention, right? So what do we do? They just try to copy. He's like, no, we're not going to do that. We're going to look beyond that category, which led him to begin Amazon's foray into digital by focusing on eBooks and an e-reader device. In doing so, Jeff demonstrated his belief that true invention leads to greater long-term value for customers and shareholders. So this is where he makes the decision. We're going to make our own hardware. And people are like, what the hell? Amazon's going to make hardware? What is happening here?

Starting point is 00:52:25 So we're going to get into the why behind hardware, which is really fascinating. And again, I think the main part, you got to pick up this book and read it because it's the condensed and distilled thinking of Jeff Bezos. Like it's worth way more than what, I think I paid 29 bucks for the book.

Starting point is 00:52:41 Like it's ridiculous what kind of a bargain this is. Jeff zeroed in on the fundamental difference between the digital media retail business and our existing physical media retail business. Our competitor, this is, he's just so smart. Our competitor, and again, it's clear thinking. He just thinks extremely clear. It's amazing. Our competitive advantage in physical media was based on having the broadest selection of items available on a single website. Right? This is physical 70% of Amazon sales at the time. That's their advantage.

Starting point is 00:53:10 That's why they're winning, right? But this could not be a competitive advantage in digital media where the barrier to entry was so low. Any company could match our offering. Well, it took time and effort. Any company could build an e-book store where they offered the same breadth and depth of books and songs as any other digital venue. Right. It's that he realizes not just iTunes, it's iTunes with a combination of iPod. They had to be willing to undertake the tedious work of aggregating all the all the digital files into a single online catalog. So it's like it's tedious, but it's, you know's pretty straightforward, pretty easy. So we knew we couldn't meet Jeff's requirement that our digital business had a distinct and differentiated offering just on selection and aggregation, which is what they're – that's their value, what makes them different in the physical retail business. So it's not like what they're saying there is like I can't just take what my advantage in the physical retail business and map it on digital and kind of shoehorn it in there like, oh, we're done. No, you have to rethink this.

Starting point is 00:54:10 To win in digital, we needed to identify other parts of the value chain where we could differentiate and serve customers well. Jeff told Steve, not Steve Jobs, this is Steve, the guy that's running digital, that this meant moving out of the middle and venturing to each either side of the value chain so in the book there's some there's uh some drawings and it talks about like amazon's aggregating uh in physical retail that's that's their uh that's their their value right but on either side of the aggregation you have content creation or content consumption he's like we have to move to one or one of these sides we can't stay in the middle and get value just aggregating in digital media. It's not going to work. So he says, in digital, that meant focusing on application and devices consumers use to read, watch, or listen to content, as Apple had done with the iPod and iTunes. So what's the book version of that? Kindle. We all took note of what Apple had achieved in digital music in a short period of

Starting point is 00:55:04 time and sought to apply those learnings to our long-term product vision it's really interesting to me i've listened to a couple interviews with jimmy ivine and uh in he said this even before he sold beats by dre to to apple i think they he sold the company for like three billion dollars something like that but he was a obviously ran record labels uh in a previous life and he talked about a long time ago pre-ipod he tried to do a music stream service and he couldn't get anybody to cooperate and then he says he winds up meeting with steve jobs like oh this guy's gonna get it done because he matched the hardware with the actual streaming uh and i actually i called a streaming service i'm pretty sure he was selling it just a digital way to buy albums and songs

Starting point is 00:55:44 though so i don't think it was like the streaming service that we think of today. Going continuing this idea, though, the other reason for starting with books was that the e-book business as a whole was tiny. There was no good way to read e-books on a device other than the PC. And reading on a PC was definitely not a good experience. We believe that customers would want the book equivalent of the iTunes iPod experience. So, again, I have hundreds of books on my Kindle. I never even made this connection up until now, that really the Kindle and what Amazon is,

Starting point is 00:56:12 is the book equivalent to iTunes and iPod. Very fascinating. So it says, we need the book equivalent of the iTunes iPod experience, which is an app paired with a mobile device that offered consumers any book ever written. The content available at a low price that they could buy, download, and start reading in seconds. But we would need to invent the device ourselves. Remember, this whole section started with Jeff saying we can invent or copy.

Starting point is 00:56:35 I choose Amazon to invent. The idea that Amazon, a pure e-commerce distributor of retail products made by others, would become a hardware company and sell its own reader device was controversial. And we go into how controversial it was at the time. This is hilarious. There was heated discussion about the surprising ramp up in expenses across many areas, particularly with Kindle. At some point in the debate, someone asked Jeff point blank, how much more money are you willing to invest in Kindle? Jeff calmly turned to our CFO, smiled, shrugged his shoulders,

Starting point is 00:57:06 and asked, how much money do we have? That was his way of signaling the strategic importance of Kindle. So moving ahead, obviously I'm skipping over large chunks of the book. You got to read it to get the full story like every other book, but there's a section in Prime that made me laugh. And it's really like, you can summarize jeff as being uncomfortable with mediocrity they're talking about all the different decisions they realize like there's just a huge driver with even at this stage and i think it's probably still true to this day we don't like to pay for shipping for some reason and they even talk about listen if you increase the price of a product uh to cover and let's say the product is $10 and $5 shipping, you could just price the product at $15 to say free shipping and more people buy.

Starting point is 00:57:53 So for whatever reason, they just realized a huge bottleneck that Amazon was experiencing. It's like we have to solve the solution. That's where they came up with Prime and all this other stuff. But I want to read the section too because I thought it was great. Now that customers have gotten a taste of free shipping, they no longer wanted to be forced to choose between slow and free and fast and expensive. Jeff exhibits discomfort

Starting point is 00:58:11 when presented with an either or proposition in which both results are mediocre. You can picture him in this meeting as skin crawling. Viewed through the customer obsession and insist on the highest standard leadership principle, the only answer to the question, which would you rather have, slow and free or fast and expensive, is fast and free. So the catch was that fast and free was where Amazon needed to go next, but our fulfillment capabilities were not up to the task.

Starting point is 00:58:38 So that's another example of working backwards from the greatest experience for the customer and then visualizing in your mind and on paper what that experience is, working backwards from that and realizing all the things that you have to invent to deliver that customer experience. This is a great, simple, guiding principle. This is Jeff talking about Prime. We want Prime to be such a good value, you'd be irresponsible to not be a member. And I think they have, what, over 200 million members at this point? So I think he got there. To be such a good value, you'd be irresponsible to not be a member.

Starting point is 00:59:07 And I think they have, what, over 200 million members at this point? So I think he got there. Just a few more ideas for you. This is Get It To Be Howard Hughes Quality. Jeff watched the movie Aviator, which is one of my favorite movies as well. So they had this idea of Amazon Unbox, which is like a failed project where you could watch movies on your computer. Anyway, so it says not long after Unbox launch, my boss, Steve Kessel, took me aside. He told me that he had an interesting meeting with Jeff, who made it clear, very clear that setting and insisting on high standards for the digital media organization was an essential part of Steve's job. To make his point, Jeff asked Steve if he ever seen the movie The Aviator, the story of Howard Hughes, the business tycoon, aviator, and film director.

Starting point is 00:59:48 Jeff described a scene in which Hughes, played by Leonardo DiCaprio, visits one of his aircraft manufacturing facilities to check on the progress of his latest project, which is the Hughes H-1 Racer. A sleek, single-passenger plane designed to set new speed records. Hughes examines the plane closely, running his fingers along the source of the fuselage. His team watches anxiously. Hughes is not satisfied. Not enough, he says. Not enough. These rivets have to be completely flush. I want no air resistance on the fuselage. She's got to be cleaner. Cleaner? Do you understand? The team leader nods, back to the drawing board. Jeff had told Steve that it was his job to be like Howard Hughes. From then on, Steve had to run his fingers over each new Amazon product,

Starting point is 01:00:41 checking for anything that might reduce the quality, insisting that his team maintain the highest standards. That is a fantastic metaphor. So let's remember that as get it to be Howard Hughes quality. I like the idea, the visualization of running, metaphorically running your fingers over the product, checking to see for anything that might reduce the quality. This is also fascinating. This is a story about Amazon's first developer conference. So they have the basic idea for AWS, right? And so they're going to develop their first product aimed at developers, not consumers.

Starting point is 01:01:14 And so they have the first Amazon developer conference attracted eight people. Eight. And Jeff Bezos still showed up. And the people were surprised. Like, what the hell is Jeff doing here for eight people? But in his I love what the authors did here because they described they talk about his thinking. Right. And so in his 2006 shareholder letter, Jeff made his reasons clear.

Starting point is 01:01:35 Now, this is Jeff writing like any like any company. We have a corporate culture formed not only by our intentions, but also as a result of our history. For him, for Amazon, that history is fairly fresh. And fortunately, it includes several examples of tiny seeds growing into big trees. We have many people at our company who have watched multiple $10 million seeds turn into billion dollar businesses. That firsthand experience and the culture that has grown up around those successes is, in my opinion, a big part of why we can start businesses from scratch. The culture demands that these new businesses be high potential, that they be innovative and differentiated, but it does not demand that they be large on the day they're born.

Starting point is 01:02:15 I remember how excited we were in 1996 as we crossed $10 million in book sales. It wasn't hard to be excited. We had grown to $10 million from zero. Today, when a new business inside Amazon grows to $10 million, the overall company is growing from $10 billion to $10.01 billion. It would be easy for the senior executives who run our established billion-dollar businesses to scoff, but they don't. They watch the growth rates of the emerging businesses and send emails of congratulations. That's pretty cool, and we're proud of it.

Starting point is 01:02:49 And I'll close on this real quick. And really the thing about working backwards is, the note I left myself is, this is on slowing down now to go faster later. Based on my experience of going through the working backwards process with Jeff for well over a dozen different product teams, I can say confidently that the extra time we spent slowing down to uncover the necessary truths was ultimately a faster path to a large and successful business. And that is where I'll leave it to get the full story and support the podcast at the same time by the book using the link that's in the show notes on your podcast player

Starting point is 01:03:24 or by going to founderspodcast.com. And I'll talk to you again soon.

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Founders - Jeff Bezos (Insights, Stories, and Secrets)

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