I am Charles Schwartz Show - Scale Like Jeff Bezos

Starting point is 00:00:00 Welcome to the I Am Charles Schwartz Show. In this episode, we're diving deep into the DNA of business success with Steve Anderson, the Wall Street Journal bestselling author who's cracked the code on Amazon's unprecedented growth. With years of research and a keen eye for corporate strategy, Steve has distilled Jeff Bezos' shareholder letters into a blueprint for unstoppable business expansion. From his background in the insurance industry to becoming a leading voice in business innovation, Steve's journey is a testament to the power of long-term thinking and customer obsession. He's dissected the strategies that transformed Amazon from an online bookstore to a global tech giant, all while maintaining a day one mentality.

Starting point is 00:00:40 In this conversation, Steve unveils the four cycles of business growth that have propelled Amazon to the top. He reveals why customer obsession isn't just a buzzword, it's the cornerstone of building an empire that stands the test of time. So if you're ready to transform your business thinking and embrace the principles that build trillion-dollar companies, grab your notepad and get ready to ignite your entrepreneurial fire. The show starts now. Welcome to the I Am Charles Schwartz Show, where we don't just discuss success, we show you how to create it. On every episode, we uncover the strategies and tactics that turn everyday entrepreneurs into unstoppable powerhouses in their businesses and their lives. Whether your goal is to transform your life or

Starting point is 00:01:19 hit that elusive seven, eight, or nine figure mark, we've got the blueprint to get you there. The show starts now. We're with someone who's also a Wall Street Journal bestseller. I'm crazy excited to have him on the podcast today. Thank you for being part of this, Steve. Charles, thanks for having me. I look forward to our conversation. There's so many things.

Starting point is 00:01:38 And at the end of this, we're going to talk about how, I know you've written a book. I know you're a Wall Street Journal bestseller. We're going to go over that. But there's this one thing at the end that we were talking about off camera before we started recording that just completely changed how I just understand things. So we'll get to that in a second. But before we do that, let's get the audience updated. Who are you? What have you done? Tell me more about it. I'd be happy to. So my career has been in the insurance industry in insurance agencies. So selling insurance to individuals and businesses.

Starting point is 00:02:06 Started that a long time ago, worked in an agency in the Washington DC area, one in the Dallas Fort Worth area. And kind of during that time, got a real interest in technology. So this was literally late 80s, 90s, 2000. So lots of things were happening. And I started my own consulting business in 1999

Starting point is 00:02:27 helping agencies with all of that right and so certainly database systems and tracking policies and clients the social platforms just starting to come websites right all of those kinds of things. Fast forward to probably now five, six, seven, eight years ago, I really started asking the question, because technology continues to develop so rapidly, and even more so today, I think, is the biggest risk insurance agents face actually not taking enough risk? Which is, again, very counterintuitive for the industry, right? Because we're all about reducing risk, mitigating risk, transferring risk to an insurance policy. What is this taking more risk thing? So that started a research looking at companies that were once very successful and are gone. Why? What happened? And also looking at companies that have been

Starting point is 00:03:27 successful and continue to be successful. And again, why? What's the difference? Came across the Amazon letters to shareholders that Jeff Bezos wrote starting in 1997 when they went public. And at the time, I think there were probably 15 18 letters and i've read one or two but i got all those letters and literally read them in a row as a book and i realized that there were strings going through those letters thoughts ideas thoughts, ideas. And that really intrigued me because it felt like a class on how Bezos thinks and how he grew Amazon. And I realized that these things, these threads could apply to any company. And so that led to, honestly, my first iteration of the book was a PDF lead gen giveaway, one page executive summary of each of the letters. And fortunately, my wife is in the book publishing business.

Starting point is 00:04:36 And so I showed it to her. She showed it to the founder of the book publishing company that she was working for. They both immediately came back and said, this is a book. And I went, oh, shit. publishing company that she was working for they both immediately came back and said this is a book and i went oh shit because i'd written my entire career but there's a big difference between a thousand or fifteen hundred word article and what ended up being a 65 000 word book and so that was a 18 month plus process getting the book ready and then the publishing from there. The fact that you wrote a book, I'm a little jealous of it because not only do I have the book here because you gave me a copy, but you're also USA Today bestseller and I'm just WSJ. So I'm a little jealous that you got it.

Starting point is 00:05:19 The other thing that I'm jealous about in the book is you did such a good job dividing up kind of these, there's these 14 principles you talk about and you divide it up in four sections, which makes my life easier as a guy to understand these things. So I, you know, the audience, if you haven't read the book, um, let's go through there. I know there's four specific sections you've done. Yep. So if you could walk me through those four sections and then maybe some key things, some key takeaways, because again, everyone wants to scale like Bezos. You were talking about at the time Bezos was doing 2,300% growth. That's what the internet was doing at the time, which is wild. You broke it down in a digestible way where reading the letters by themselves, it doesn't give enough insight.

Starting point is 00:05:59 Your book, which does such an amazing job. And again, what we're about to talk about at the end just surpasses all of it. I was like, what? It's such a concept that didn't even make sense. Can you walk us through what the four divides are? Yeah, I'd be happy to. So as we were, you know, 14 is a lot, right? It's a lot to digest. So we're trying to figure out, okay, how can we simplify this and make it easier to understand? And you certainly alluded to that. So we created these four cycles is what we call them. And the four are test, build, accelerate, and scale.

Starting point is 00:06:38 And I believe every business from the startup to the 50-year-old company are going through these cycles, either as a company, as a division, as a region, they could all be at different places. So test. When you start, you're testing. You're testing ideas, product, service, platform, whatever it is. What is your great idea that you are inventing on behalf of the customer and so to do that according to bezos and again if you look at amazon in their history you can see this over and over again the first principle there is called encourage successful failure because what amazon says and what bezos in um built into the culture there is that we need to experiment in order to find that next thing

Starting point is 00:07:36 that's going to delight our customers and by its very nature an experiment means you're going to fail because if you're not going to fail it's not an experiment right there's things you don't know no matter how much prep work you do there's things you don't know and we've all experienced that right great ideas execution whatever the reason and and i'm i quote a friend of mine who said this in the book, employees aren't afraid of failure. They're afraid of the consequences of failure. Correct. And so that's part of that culture.

Starting point is 00:08:13 And I also want to make sure I always say at this point, Amazon has an intolerance for incompetence. So this is not an excuse for lazy, shoddy work. This is, this is the, and Amazon built some tools around making sure that every experiment had the best chance of success as possible. So that's test. So with the tools that you were talking about, that Amazon's created to build in these tolerances, what are some of the tools? Because you've spent a lot more time in this than I have. I agree wholeheartedly that the only way to succeed is to fail. You can't succeed your way to success. You can only fail your way to success. And we talk about this all the time that

Starting point is 00:09:01 one massive success will make up for a lot of failures and to the quote you gave which was you know they fear the consequences of failing i fear the consequences of not risking enough that you go because i've done that i've wasted so much time in my life where we're trying to do things and i'm like oh i don't want to fail those consequences are much worse normally than failing. This obviously doesn't count if you're jumping out of an airplane without a parachute, completely type of failure, but you'll know the result really quickly at the end of it. What are some of the tools that Amazon's implemented that, you know, you talk about the tools that they've gone through to make sure that

Starting point is 00:09:37 their employees are failing on a high level and that they have these fault tolerances built in. The primary tool, and it started in 2004, when Bezos sent a letter out to his senior leadership team, so the top executives, and said, we will no longer allow slide-oriented presentations in our meetings. No PowerPoint, no keynote. I don't even think there were google slides back then so but but no none of that instead the person who is called the meeting and is looking for a decision or pitching an idea must write a physical narrative about what they want and what it was dubbed the six page memo.

Starting point is 00:10:31 So it was a maximum of six page. So constrained. Um, and then a lot of development as they continued working through that process, but that memo started with a future press release. So the person had the press release that would go out when the product platform service was launched to customers. The benefits, why they need it, you know, whatever. And then an FAQ,

Starting point is 00:11:00 frequently asked questions. They would go in and try anticipate what are all the questions that the other people in the meeting might ask or want to know, and then they answer those questions. That is not sent out before the meeting. It is handed out at the meeting, and literally the first 15 minutes for a smaller decision, maybe 30 minutes for a larger decision is spent in study hall. Every executive is reading the memo because what Bezos said was executives say they will read it or have read it and they haven't because

Starting point is 00:11:40 they're busy. Right? So we carve out time. So everybody literally is on the same page. And then you open it up for discussion. And the discussion is so much richer because you're not getting interrupted with a question. Oh, that's in, you know, two slides down or whatever, all of that back and forth forth and what bezos says is when you have to write your ideas down they are more well formed absolutely you have to think through at a deeper level people hide behind powerpoint bullets it's one of the powers of journaling and why we make people journal because you have to write things down and process through it well and and literally

Starting point is 00:12:25 for me often the comment i don't know what i think until i write it out i mean it's that same idea and so it's developed over the years um the sixth page came in when people were writing you know 25 pages so they constrained it bezo said a good memo probably takes two weeks, maybe more, to write. And it's passed around the team, you know, lots of input. Another interesting thing is the memo itself is from the team, not from an author. So it's a team function. I mean, there's a leader who's leading the charge. But think about that now.

Starting point is 00:13:06 We're thought through, hear all the things, questions come in, they refine it. That becomes the document now for implementation. And if it fails, you now have something to go back to and say, what didn't we understand? What didn't we get right? So now you're learning because people don't remember what happened in the meeting, right? But now we have the document that we can go back to and adjust into the future. You will more commonly hear it described as the working backward document. So that working backward idea is we work backward from the customer to invent on their behalf.

Starting point is 00:13:50 So as we go through this and people start finding these copies, and obviously we're going to give them a copy of your book and have access to that, which is amazing, which I can't believe you offered that and I stole your thunder. But in this, that's just the first section. And what I loved about your book is it's all of these practical implementation things, which is what all of this is about. What can I use immediately? What are the things that I can implement to start scaling, to start leveling up immediately? And there's so many books that are fluff, but you know, Steve, as much as I've had time with you, there's never been any fluff. We get directly to it. Here's practical things that you can implement immediately. So once we get out of test, our next section that we go into, if we've tested it, we now need to build it, right? That's the next phase. That's the next part of the system. As we go through the

Starting point is 00:14:38 process, talk to me about building and what are some of the things in there, the tools that, you know, people right now are already going to punch you down to get down this list and these examples, everything's already going to happen. So expect it. What are the things that we have with building, which is the next phase? Yeah, building. And there are three in build. I'll just mention them, talk one or two a little more depth, but obsess over customers, apply long-term thinking and understand your flywheel. And I have a hard time on all three because all three are important, but I think the first one I'll mention is obsess over customers. And this is really interesting to me. It really is one of the first things that caught my attention.

Starting point is 00:15:17 Bezos wrote about obsessing over customers in his first 1997 letter. And one of the things that's really interesting to me is that first letter set the foundation for Amazon. And every subsequent letter, he attached that very first 1997 letter to remind people. He had a whole section on, we will obsess over customers. And what's interesting to me is every business knows they need to take care of customers. You don's interesting to me is every business knows they need to take care of customers. You don't have customers, you don't have a business.

Starting point is 00:15:49 But we think of it in terms of customer service, customer journey, customer focus. Obsess has a whole different connotation to it, and in some cases, negative. You're too obsessed. But my question is, can you be too obsessed over your customer and and the way that works itself out of amazon is a fanatical focus on making the customer experience at amazon as frictionless as humanly possible and they spent what 26 years now working on that i mean think about when i ask people when i'm speaking i'm going to hear about something on amazon most hands go on everybody why it's easy you know i i know in our household it's often the the question is is it worth going to the store or should I

Starting point is 00:16:45 just go ahead and get it? Because I know Amazon has it. So it's a decent price and I can have it in a day or two. So obsess over customers. Long-term thinking, just quick comments. Long-term thinking is another one of those foundational 1997 sections. And what he said was, is we make decisions based on long-term benefit, not short-term quarterly profits. So he went totally against Wall Street quarterly profit expectations and said, no, the internet's growing. It's kind of like the wild land rush in the wild West. We need to get our presence out there we will reinvest everything into doing that and they did they didn't make profits for a number of years and they bucked that trend now early on in the 2000s they had all kinds of pushback so apply long-term

Starting point is 00:17:37 honda civic yeah for years there's a there's a famous interview where he's driving he's a multi-bazillionaire and he's's driving his little Honda Civic to work. And we talk about what makes people loyal. This obsession over customers is why I shop at Amazon, because the return policy is so frictionless. I'm like, okay, I go click, and I'm done. I've never had any issues with any returns ever. And it's why I shop at Amazon. And yeah, I'll wait a day or two for something i could go

Starting point is 00:18:06 over to tarjay or well and the thing about going you don't know if they have it right and so then are you wasting it was on i i and one of the thing amazon continues to work on is really not just self-service uh customer service but automated customer service so i had i ordered a product first time in a long time missed the delivery date got a notice missed the delivery date and they said we think your package is lost click here to cancel and reorder and and they proactively reached out and said, here's the process. That's different than most businesses. It's not proactive. And that proactivity creates loyalty. For example, my cell phone service,

Starting point is 00:19:01 they changed their plan about six months ago and it's a cheaper plan. And I just happened to stumble upon it six months later. And I was like, Hey, why didn't you tell me that? Oh, well, we don't tell people. We don't do that. Right. Your Amazon on the other hand has by in default, just turned into an Amazon commercial Amazon by default. If your price changes in 30 days, you literally can go in and request the difference and they won't even challenge you on it. They're like, okay, okay. So they have these proactive ways. And when I go again, it's for me, it's a return policy because now that there's ads in Amazon prime video, I'm getting mad at it, but I'm like, no, I'm not charging me.

Starting point is 00:19:38 But in this environment where people come in, you have just, you click and you're done. The return policy is so easy and you can get out and pick up at your door. You can drop it off. It's just, it's part of my shopping experience because I shop at whole paycheck. I mean, whole foods and it's a whole paycheck at this point. It's getting a little better, I think, but. Oh God, it's still, oh God, it's rough. So, you know, Jeff, if you're listening to this, fix it, dude, come on, stop it. You're killing us. Like, Hey, it's orange shoes're listening to this, fix it, dude. Come on, stop it. You're killing us.

Starting point is 00:20:07 Like, hey, it's orange juice for $400. I'm like, dude. So, but going into that environment, I just, we just, it's part of our shopping experience. We're going to bring our packages and drop them off. And that process is even easy as well. Like they don't even talk to you anymore. You show them the QB and then, and you're done. So it's amazing. Really, really good.

Starting point is 00:20:22 So we've gotten to the point of testing. We're assessing over clients in the build process as we're getting to the next one, which we've got skip, which I know it's accelerating. We do accelerating next. I always want to go to accelerate. Yep. Yeah. And actually I'll, I'll talk about one that relates to our, just our conversation and accelerate it to make complexity simple. And that's exactly what we've just been talking about. And that actually, that principle came when I was listening in my car to NPR interview when Amazon had just purchased a pharmacy called PillPack. And there was a, I don't remember, one of the other big pharmacy chains, CEO was like, well, we're not worried about Amazon getting in the pharmacy business.

Starting point is 00:21:10 It's more complicated than they realize. And I literally remember saying out loud, yeah, but that's what Amazon does. They make complexity simple. But the one I want to accelerate that I think is where businesses start, I almost say failing, but start slowing down. And the principle is generate high velocity decisions. So as a business grows, there's a natural tendency to add layers. Supervisors, managers, division heads, whatever it might look like. And Bezos hated that. He wanted bureaucracy as small as humanly possible. So when he talks about high-velocity decision-making, he breaks decisions into two different types.

Starting point is 00:22:06 He called them type one, type two, or one-way doors and two-way doors. One-way doors are decisions that are big, kind of bet-the-company type big decisions. And he said those decisions should be made at the highest level possible with as much data and information as you can gather and probably ends up being a gut decision. He says, what the problem is, is those are very few and far between. But as a business grows, the two-way door decisions, type two, are easily reversible. So we make a decision to go and do a product. And you see this at Amazon all the time.

Starting point is 00:22:50 You hear like, oh, they shut this down, or they shut that down, or they closed these stores, or they did. Those are two-way door decisions. We thought we were going to go this way. It didn't work out the way we planned. It's not generating what we need to continue to move forward. So we pivot. You either pivot to something else or you literally turn around and go back, slow stuff down, take what you learned and then do something else. So, you know,

Starting point is 00:23:21 we can talk about grocery, we can talk about health care we can talk about even alexa and all of that i mean there are all kinds of different areas where amazon tests this is back to that experimentation try things out now some you know smaller businesses are going to say i don't have their money no you don't but you do have whatever budget you have and should be setting aside for these experiments and these tests and and figuring out and a couple of tools there are again and and this is an example of where the principles stand on their own and they interact with one another so the working backward documents, six-page memo is another key here. He also said two-way doors, decision-making.

Starting point is 00:24:15 You make a decision when at most you have 70% of the data or information you wish you had. And you wish you had, I think is a really important phrase that I think gets skipped over. So you make those decisions quickly and by a small team, what became dubbed as two pizza teams. So teams at Amazon should be no bigger than what two large pizzas can feed. Really simple tactics. Yeah, it makes

Starting point is 00:24:45 sense. And the people on that team are there because they are high quality people. You have hired high quality. So that leads, we won't go into it quite yet, but a principle in the scale area, which is focus on high standards. So you don't hire people to fill a position. You hire people that have the skills, knowledge, and ability either you need or you want. And if you hire them and they're the top people, let them make the decision. And again, if you build a culture that failure isn't punished, all of that starts working together. And that's why the cycles, I like the cycle idea of them. They're all working together to generate what the company needs, which is profitable growth.

Starting point is 00:25:34 One of the things that, you know, when you talk about the principles, you divided them up, there's in the first two, there's three principles. And then the second two, there's four principles. And when we're talking about this, you know, a lot of people are trying to accelerate and we'll get into scaling, but the four principles that are, that are in accelerate are important. And I want to make sure that we're telling the audience, Hey, we're only picking one, but when it comes to accelerate, what are the, what are the four principles that as you've broken them down? So generate high-velocity decisions, make complexity simple, accelerate time with technology, and then promote ownership.

Starting point is 00:26:16 And I will focus two sentences maybe on promote ownership. Bezos said again in that very first 97 letters, so we've already talked about long-term thinking, we've talked about customer obsession, employees was another big section. And he said, employees are going to make Amazon what it is, and we need to focus on hiring the best. And employees need to be owners, need to think like owners. And to think like owners, they actually need to be owners. So Amazon's pay scale package from the very beginning certainly was money, but weighted more to stock options. Because Bezos said there's a different mindset when you actually own a piece of the company.

Starting point is 00:27:04 And even early on, it's changed somewhat because times change, but even early on, fulfillment center workers participated in those stock options. And so it was an important piece of building that culture that allowed Amazon to be able to continue to grow. So as we go through this cycle, we've done a great job of testing. We've built, we've accelerated. Now we're in my favorite section, which is scaling, which I know, surprise. I love scaling more than anything else.

Starting point is 00:27:39 And I've got my experience scaling, but seeing it through the eyes of Bezos is totally different. Seeing it through the letters, how you digested it. There are four sections inside scaling. And I know we read this other thing we're going to talk about that popped my brain cells. But for scaling, I want to take some time. What are the four parts of scaling and which one stands out with the tools as well? million employees worldwide about 550 000 in the u.s how do you keep all of this from the early stage and help keep incorporating that into that large so that so but that's focused on culture

Starting point is 00:28:36 one quick story and it kind of leads to your comment earlier about Bezos driving around in the Honda he was very focused on frugality to only spend money on what improved the customer not what improved you know like flying coach and those kinds of things early on in the garage where he started, they were packing books to be driven to the post office and they were on the floor and he was had somebody else helping him. And he's in Bezos looked over and said, we need to get knee pads. My knees are killing me. And the guy said, no, we need packing tables. And he looked at him and said, that's brilliant.

Starting point is 00:29:23 Went out box store lumber place realized he could get solid core doors and four by fours some brackets and create packing tables that became known as the door desk Bezos had a door desk in his office he may still I don't know know that but for years a symbol visible of culture and and there are again there are other examples of of though that so building culture the second focus on high standard i mentioned that in terms of hiring when you're scaling there is a you need people if you're if you're accelerating your growth and you're scaling you need people the tendency is to hire a body. If you're accelerating your growth and you're scaling, you need people. The tendency is to hire a body. But if you're going to scale long term, you need to focus on quality and those high standards you have.

Starting point is 00:30:16 And I will tell you, it's hard to get a job at Amazon even today. Yes. And it's interesting because I see all kinds of different kind of tips on how to interview and what to expect and all of those kinds of things. And there's no question. People often ask, I hear Amazon's a hard place to work. It is. They have high standards and they expect you to keep up to those high standards. But when you think of that and you hire a players, a players want to work with a players, not B or C players. And if you bring B or C players in, they bring a players down.

Starting point is 00:31:00 So it's, it's, I mean, and I don't know how many open positions Amazon has right now. It's still a lot always is, but they're very intentional. And one of the ways they do that, again, a quick story, is they have a position called a bar raiser. There is usually that person in interviews when they're interviewing a potential candidate. That bar raiser has ultimate veto authority over hiring that person. Above any manager, above any VP, if they say they don't think this person would be a good fit,

Starting point is 00:31:35 they are not hired. They've been given extra training. They have demonstrated a capacity for understanding culture, et cetera. But that's a tool to help scale, which is a really interesting concept. Third in the scale is measure what matters. And the subtitle is question what's measured and trust your gut. So Amazon's hugely data-driven.

Starting point is 00:32:01 They know everything. And it's not just the reports so Beza has published his email address in I don't remember what year letter and he said this is my email write me you have a problem I want to know and people did he said I used to look at him he doesn't anymore obviously as a team but people send i had a problem i had this and then he did originally his team might do now or his team might bring it to bezos well he's not there anymore so i think andy's were jesse's doing this still but he literally just forward that email with a question mark to the person responsible for that part of the organization. Nobody ever wanted to get a question mark email from Bezos because it meant there was a problem. And so my point here is hugely data-driven, but he said anecdotal data often brings more insight than hard numbered data and we're either that's why i

Starting point is 00:33:11 say measure what matters and question what's measured we might be measuring the wrong thing getting results we think are telling us it's good when in actuality there's some other nuance there that we haven't understood. So that's key. I think it goes back to what you were talking about before about hiring people. Don't just fill the void. Don't just put a body there. That's not an ideal solution for you. Hire someone that you know you're going to get on a higher thing.

Starting point is 00:33:38 To hire just the higher is not measuring what matters. You're doing this and it costs, there's so many situations where people hire people and it costs you a fortune because it didn't work out. I'd rather hire four or five people, figure it out, put them through the testing process and purge out when I'm dealing with businesses. If they have an open position, I always say, hire three people. You're going to probably fire four. And they're like, wait, what? I'm like, you're probably not only going to not hire these people, but there's someone else on your staff that you're going to realize through this process isn't your person. Because to the pizza box example you gave, it doesn't take a whole lot of people to scale.

Starting point is 00:34:08 It really doesn't. Some of the people I know who are making solid eight figures have four or five people who work for them. You don't need this big bloated staff for most people. You need operations and systems and doing these things in order to scale effectively. So those were two of them. We've got two more well those three so maintain your culture standard and data the last one measure matters and the last one yeah i believe it's always david so i'm smiling because i like this i speak on it a lot so uh and the again very first 97 letter so much goes back to that letter. It still intrigues me. He said in that letter, it's day one for the internet.

Starting point is 00:34:50 Now remember, in 1997, nobody knew what the internet was. It really was day one. It hadn't been built. Nobody knew what it was going to be. Like today, people said, oh, this is a fad. This is never going to do anything. Got it. And he said, it's day one for the internet and for amazon.com if we execute well and then every letter subsequent every other letter he

Starting point is 00:35:17 wrote always ended with some form of it's still day, it's always day one. Even in the 2019 letter, which I call the pandemic letter, he said, even with the troubles we faced, it's still day one. So what is day one? It's a mindset. What were you thinking the first day you walked into your new business or you started or you got online or whatever it was for you, that excitement, that realization, I have an idea. We're going to see if this works. How do you maintain that excitement in scaling? And so, so here, here's what he said.

Starting point is 00:36:05 He was in front of an all-hands meeting in Seattle, regular occurrence, update on the company, a couple thousand employees there. And at the end, he did Q&A. And he had people write down questions, so he got cards. And he looked at the next card, and he kind of chuckled. And he said, I think I know the answer to this question. And the question was, Jeff, what does day two look like?

Starting point is 00:36:28 Well, the crowd started laughing. And he said, I think I know the answer to this. Day two is stasis, followed by irrelevance, followed by excruciating painful decline, followed by death. And that's why it's always day one. So I won't name them all, but you know companies. In fact, I have an article in my head. I haven't written it down yet because I write to know what I think. But HP, I don't know if you've seen their printers, had this subscription service and they would lock out your printer if you didn't renew. That just happened to my wife. And the article title right now is, is HP printers a day two company?

Starting point is 00:37:17 Oh, absolutely. Yeah. And your previous day two companies, Kmart, Sears, things of that nature. Blackberry. Oh God. Kodak ibm oh yeah and also in a way microsoft right now i would say microsoft and that's really an example it's really hard to turn a company around when you start that process microsoft is one of the exceptions one of the few i think exceptions of a company that was down going down really fast and was able new ceo able to reverse that trend but but let me if i may yeah they're

Starting point is 00:37:54 trending differently but i don't know if they're going to get out of it so i say that again i don't know if they're going to get out of it at this point because the culture and this this is why culture is so important the culture that app that apple has made that is built is so solid it's an identity and people don't violate identities because in our core that means death the culture that microsoft built was based on features right that was like we have these features is what we do this is our tech look at us shiny shiny new toy apple was no this is an entire ecosystem this is who you are as a person that's exceptionally hard to defeat the reason i bring that up is i'm a microsoft certified trainer i own it companies i was i trained mcfcs i'm i'm this guy i just bought a

Starting point is 00:38:37 macbook which is unbelievable for me to go because the devices that are the, in the, the Apple world can do things that the PC world just regrettably can't. And I wouldn't have gotten there if I didn't have my iPad that I fell in love with and my iPhone that I fell in love with because it's cohesive. And if you're not focusing on your culture, you're going to lose, you're going to become a day two company. Unbelievably. Yeah.

Starting point is 00:39:01 Yeah. So he went on to say in the 2016 letter, told that story, and he went on to say, I'm more interested in how you fend off day two. So he said, I don't know all the answers, but I have a few. So here are four. Before he mentioned to fend off a day two mindset, our customer obsession, we talked about a skeptical view of proxies. Now, that one's a little harder to delve into. But for Bezos, a proxy is a process or procedure that no longer serves the customer. And so, again, so a skeptical view, you know, and again, back to how many times have you heard a customer service agent say, well, that's not company policy versus, right? I mean, that's the idea behind it.

Starting point is 00:39:54 Or even a procedure internally that causes friction for the customer. So skeptical view of proxies. And they change. And they need to change. And you need to have processes and procedures no question third is eager adoption of external trends and again 2016 and he says one of those trends now and he and he said they're actually pretty easy to figure out because they're talked a lot about. He said, one of those trend now is machine learning, which is the foundation of where we are with generative AI and all that kind of stuff.

Starting point is 00:40:36 But eager adoption of those trends, not being afraid of them, not being willing to experiment. Right. So we go back. And then fourth high velocity decision making again which we've talked about so four defenses for a day two mindset and that's to me that's kind of the ultimate cap off of scaling well i know that's the ultimate cap off what we were talking about beforehand which is i want to lead you into how to avoid day two. It's completely counterintuitive. And I know this is what you're speaking about now. And I know that there's a new iteration of the book coming out, but this concept that you just gave to me, I initially had pushback when we were talking. I was like, what are we talking about here? And very quickly I was like oh, crap, he's right. So I'd love to share this with people. We've been leading into this. Let's talk about it. I know you're speaking about it more than anything else.

Starting point is 00:41:31 I don't want to give it away. I already saw your thunder with the book. What is this thing that broke my mind? So I've realized over the last few years that it really is understanding more and more of the principles, the cycles, how businesses work. Everywhere I look in the business press, be it Harvard Business Review, be it Fast Company, be it Inc., be it Bloomberg, you pick them. I don't care which. It's all about innovation. Companies have to innovate.

Starting point is 00:42:04 All this new stuff coming, they have to innovate. I think that's backwards. Okay, let's get into it because I still have resistance to this. If they're not innovating, what should they be doing? Innovation is improving on what already exists. What companies need to be doing is inventing on behalf of the customer. So again, back to experimentation. So in my framework I'm building, experimentation leads to invention, which allows innovation. So Amazon's innovative. I mean, the Kindle keeps

Starting point is 00:42:44 getting different and better. Thele keeps getting different and better the echo keeps getting different and better their services keep getting different and better aws keeps adding new things at the core they also invent new ways to do things and so if you're focused on innovation i believe that is actually the doorway to day two and i and i kind of go back it's an old book yeah to play christiansen's the innovators dilemma because they get to a point where they're continuing to innovate and somebody else out there has created something brand new and now all of a sudden they're doing Hail Mary, that kinds of things that mostly don't work to catch up and they can't.

Starting point is 00:43:33 So if you're in a business and you're like, okay, I get it. I'm going to get surpassed, even though I have the greatest, most amazing typewriter in the world. Someone over here has invented a laptop. I'm going to lose no matter what, no matter how great my typewriter is, no matter how well I innovate in that environment, where innovation needs to be fed by invention. If you're a business owner and you're trying to scale, and I know you're talking about this all the time, what are the things that you can do as a business owner to kind of scale and level up and the practical tools, because you're great at giving tools. What are the things that people can do to start really leaning more into invention versus innovation? I'm going to go back to customers because Bezos did all the time.

Starting point is 00:44:18 And kind of that working backward I talked about earlier is at amazon they spend an inordinate amount of time deeply understanding customers wants needs and desires more so than any company i can think of or i can identify i mean they go out they interview they they visit places they they spend the effort to deeply understand and the basil said the whole purpose is so we can find out what they will want if they knew it was available so that's the invention part for example i could do kindle i could do echo who needed a device that sits on the table that you can talk to in a response to you? Nobody's asking for it. That's a fallacy of focus groups.

Starting point is 00:45:15 If they don't know what's available or what's possible, how can they tell you what they like? like now you might want but focus groups you're better off getting customers and giving them prototypes and and maybe doing some things like that but what are there and and here's where i will i got too many things in my head going too many businesses don't understand their own processes. They haven't gone through them. And so secret shoppers, send somebody that doesn't know your business, ask them to buy. Ask them to go through the sales funnel,

Starting point is 00:46:01 the process, the whatever. And ask them to tell you honestly and forthrightly where the problems are, where the friction is. And I will tell you just a simple example of that. Doctors, doctor visits used to be hugely painful. Had to fill out the forms all the time, same information all the time blah blah blah some of the more advanced ones now just did this for an appointment i had coming up online portal fill all the information out check double check change all done when i walk in

Starting point is 00:46:42 no clipboard and maybe if i have to sign something, they have everything. And I can communicate with the physician through the portal. That's an example of huge friction getting better. Where in your business do you have that situation? And then how can you invent new ways to fix it? So, yeah, I mean, when we first started this off camera, I was like, I don't think I agree. But now that we've talked about it, the idea that innovate, you've got to invent. If not, you're going to have the best typewriter on the planet.

Starting point is 00:47:17 Right. You're going to get crushed by laptops. Steve, I adore it. Thank you so much for being on. If people want to track you down, if people want to have more access to you and learn more about this, if they want to learn more about the book and to learn more about the Secret Center, because remember guys, this is less than an hour. We could do this for days. There's so much value in there. And I love how you deliver

Starting point is 00:47:38 it because it's tactical. It's one of the things that I adore more than anything else. I don't want to know what the name of your dog was. I want to know how to implement now. I don't care about where you grew up. I want to know this now. How do people track you down? How do people get ahold of you? How can people see you speak? What are the things that they can do? Yeah. So one comment is for everybody listening at the end of every chapter, we've got questions. So I was really focused and thank you for identifying that really focused on how do we make this practical that somebody reading can start thinking about how it can apply to their business. So that is my goal. And you've kind of alluded to, we have a gift for your listeners.

Starting point is 00:48:19 In the show notes, there will be a link to a place where you can download a digital copy of the book. So you can get access to the book. My request there, Charles, is for everybody to leave an honest review on Amazon. There's nothing better that could help me. If you liked it, if you didn't like it, honest review. I don't want fluff. So that's there. so people can get me the book website is thebezosletters.com um i'm on linkedin uh a pretty big presence there so you could search steve

Starting point is 00:48:58 anderson bezos or steve anderson insurance and you'll likely find me. Let me know if you want to connect. Let me know you heard me on the podcast. I'll be happy to. And that's where I post most of my stuff. And so we can certainly stay in touch that way. So if someone wants to work directly with you and really track you down, is LinkedIn the best option for that to send you a message from there? Actually, steve at thebezosletters.com. We'll skip the LinkedIn back and forth stuff, but certainly LinkedIn, you can reach out there and I'll just get, I can give you that email address also. Gotcha. But I will say that if you get a response from Steve, that's just a question mark, you might be in trouble. You might be on day two. So just have to worry about it. Steve,

Starting point is 00:49:43 I appreciate it. Thank you so very much for coming on. Charles, it's been fun. Really enjoyed it. Thank you. And that wraps up another enlightening episode of our show. We sincerely hope you found tremendous value in our deep dive with Steve Anderson, the business strategy virtuoso who's unlocked the secrets behind Amazon's meteoric rise. A heartfelt thanks to Steve for sharing his time and profound insights with us

Starting point is 00:50:05 today. Your meticulous analysis of Amazon's growth principles and your ability to translate them into actionable strategies for businesses of all sizes is truly remarkable. To our listeners, your commitment to elevating your business acumen and embracing innovation is what drives us to continue bringing you top-tier content. Your pursuit of excellence in your own ventures is nothing short of inspiring. If you're eager to fully absorb and implement the strategies we've discussed, be sure to check out our comprehensive companion guide. It provides an in-depth breakdown of everything we covered, offering you step-by-step guidance on how to apply Amazon's four growth cycles, cultivate a day one mentality, and master the art of customer

Starting point is 00:50:46 obsession in your own business. Visit podcast.imcharlesschwartz.com to secure your copy now. Remember, long-term thinking and relentless invention are the cornerstones of lasting success. Until our next episode, keep pushing boundaries and reinventing the future of your business.

I am Charles Schwartz Show - Scale Like Jeff Bezos

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