In Good Company with Nicolai Tangen - CEO of Amazon Web Services: Cloud, GenAI, two pizza rule and customer obsession.

Episode Date: December 6, 2023

Adam Selipsky the CEO of AWS is leading the world's largest cloud provider. He shares his vision for the future of AWS, how he plans to foster a culture of innovation and customer obsession. He also reveals how he applies the famous "two pizza rule" and the unique meeting culture in Amazon. The production team on this episode were PLAN-B's Nikolai Ovenberg and Niklas Figenschau Johansen. Background research was done by Sigurd Brekke with input from portfolio manager Doug Shell and Regina Jarstein and Håkon Brynildsen.  Links:Watch the episode on YouTube: Norges Bank Investment Management - YouTubeWant to learn more about the fund? The fund | Norges Bank Investment Management (nbim.no)Follow Nicolai Tangen on LinkedIn: Nicolai Tangen | LinkedInFollow NBIM on LinkedIn: Norges Bank Investment Management: Administrator for bedriftsside | LinkedInFollow NBIM on Instagram: Explore Norges Bank Investment Management on Instagram Hosted on Acast. See acast.com/privacy for more information.

Hi, everyone, and welcome to our podcast, In Good Company. I'm Nicolaj Tangen, the CEO of the Norwegian So & Well Fund. In this podcast, I talk to the leaders of some of the largest companies we are invested in so that you can learn what we own and meet these impressive leaders. Today, I'm speaking to Adam Selipski, CEO of Amazon Web Services, the largest cloud provider in the world. We own over 1% of Amazon. This translates to 80 billion Norwegian kroner

or over 8.1 billion US dollars. This means that each Norwegian owns 15,000 kroner in this company. Most of the internet is run on cloud-based services. But how does the cloud work? How do they protect it? And how is AWS competing with Microsoft and Google? Tune in. Now, the cloud is the backbone of everything digital, and you control a third of this market. Now, you've got customers such as Netflix, Apple, NASA, CIA, Tesla, Spotify, and so on. So just to kick off with the basics here, what is the cloud? The cloud is essentially the ability for companies of all sizes, all types, to run all their infrastructure in a way that feels infinite and like it has no specific place. That's why you have the metaphor of the cloud.

Companies used to have data centers. They would buy or rent the data centers. They'd buy servers. They'd hook up networking. They'd worry about keeping those servers up and running. And when AWS launched in 2006 and pioneered the cloud, all of a sudden there was this illusion of infinite capacity. Like you could just tap into compute capacity. You could tap into storage capacity.

And it didn't matter to you where it was or how it worked. You just had to concentrate on serving your customers, building your applications, instead of worrying about IT infrastructure. So how much of the total IT in the world is now in the cloud? You know, it's hard to know exactly, but I'd estimate probably somewhere in the realm of 10% of IT has moved to the cloud. And people think it's a lot higher than that, because there have been a lot of dollars that have moved to the cloud. But they forget that there are a lot of IT dollars spent in the world. There's maybe several trillion dollars of IT spend per year. And so, even though a lot of dollars

have moved, we're probably still only in the 10%, 15% range. And that means there's a huge amount of workloads that are still going to be moving to the cloud for years to come. So actually, we're very early in this cloud migration. Stupid question. But how do you actually move the data to the cloud? I assume you don't transfer it through Wi-Fi. Well, it's not a stupid question at all. It's a very important question. And data moves a lot of different ways. It depends on how much data you have and where you are. Sometimes people just transfer data across the internet, just from the servers that they have right across the internet. But often when we have big

organizations with a lot of data, it requires higher throughput to get the data up into the cloud. And also, you really want to be careful about security and privacy. So, many of our customers set up dedicated connections, essentially a direct connect over a private connection to AWS. And that can be, again, just like all other aspects of the cloud, that can be scaled up or scaled down to whatever size it needs to be. aspects of the cloud that can be scaled up or scaled down to whatever size it needs to be. And we'll be securely transferring data over those private encrypted direct connections to us. Now, you've been very important in the startup world because you enable companies to kick off with a business without making huge investments in IT structure. So what are some of the ventures that you have backed? You're right. When AWS started, it was really with a vision of enabling anybody, even a kid in a college dorm room, to have access to the same powerful compute infrastructure

that even the largest companies, the largest enterprises in the world had. What that really meant was developers, and it really meant a lot of startups. And to this day, startups are still kind of deep in the DNA of who we think we are. So in the early days, there were companies like Netflix, Airbnb, Pinterest. Of course, they're no longer considered startups. Those are all enterprises now, but they were all startups. And then later on came companies like Stripe and CrowdStrike. Again, big companies now who used to be startups. And we're still at it. So if you look at unicorns, the startups who are worth over a billion dollars, over 80% of the world's unicorns run on AWS.

And it's a great, great privilege to work with all of those innovators. Wow, well done. Now, if we take these data centers, they are immense, right? Tell us about one of the bigger ones. I mean, how large are they? Well, AWS is built from an infrastructure perspective on this concept of regions, which is really, really important. So we have 32 independent infrastructure regions around the world, many in the US and Canada, UK, many in the EU, Australia, India, China, Japan, Korea, et cetera, et cetera.

So 32 full-fledged regions around the world. And each of those regions has multiple what we call availability zones. Each one has at least three availability zones per region. And that's a really, really important set of concepts because it provides incredible resilience for customers. So each region is built to operate independently. If you have any kind of problem in one region, it's not going to affect you in another region.

And even inside of a region, if you architect so that your resources run inside of multiple availability zones inside of a region, they're also built to be available separately, not to fail for the same reasons. And so, our customers can build very, very highly resilient applications with very high uptime. And each availability zone could be just one data center. It's usually a pretty large data center. Or an availability zone could actually be a conglomeration of a number of big data centers all put together.

It all depends on how much customer demand we have in the region for those workloads. But we have a very large, very scaled worldwide infrastructure. So let's say you and I would jump in a car and we'll go and visit a big one. How big is it? You're going to see a whole series of data centers. They're going to be hard to find, by the way. We don't advertise them and put our names on them. Security is more important than marketing.

But we can have data centers with many, many, many thousands of servers in them. So we open the door. You and I, we go into the center. What do we see? What's in there? Well, to start with, by the way, we'll have trouble getting in. So my badge, my employee badge won't work at the data centers because I don't need to go inside of them every day. I would have to get special permission. Our very security-conscious customers want to know that there are extremely

effective security controls, both physical as well as virtual controls. But assuming we get permission and we actually go inside, we'll have to get past physical barriers to get inside. We'll have to get past significant security to go inside. We wouldn't be allowed in to any sensitive area, but if we just pretend for a moment that we are, we'd see many, many banks of servers and really just a small number of human beings who are absolutely essential for keeping those servers running, for replacing any servers or disk drives, for example, or power supplies with issues. And it would look hopefully very clean and very orderly. Hopefully it would look very boring, because when everything's operating very smoothly, there's actually nothing to see, which is the best state of affairs. Yeah. Now, I assume that when CIA trusts you with the data,

it's probably pretty secure. How much does the data demand change during the year or during the week? I mean, something like Black Friday, when there's huge retail demand, what kind of fluctuations are you seeing overall? Overall, AWS has actually very smooth demand patterns. And that's an effect of the scale at which we operate. And that's one of the huge advantages we offer our customers. So if you're a retailer, as you alluded to, in the December holiday season or Black Friday leading up to it, you're going to have a huge spike.

If you're a tax company in the US, you're going to have a huge spike in April when taxes are due. If you're a news organization, you probably have a big spike first thing in the morning, maybe at lunchtime, etc., etc. And basically, with the scale at which AWS operates, we're over a $90 billion a year revenue organization. Again, with those 32 full infrastructure regions around the world, Again, with those 32 full infrastructure regions around the world, we essentially aggregate all of that demand. So, when one company has high demand, another has low, and then they flip.

And so, that makes our infrastructure very efficient and lowers our cost structure because we're making high utilization of all of the infrastructure resources. And that in turn allows us to charge really low prices for customers and to keep dropping prices to customers. We've lowered prices over 120 times in the past 17 years since we launched. But really, our ability to manage all those peaks and valleys for customers throughout the course of their day, their week, their month, their year is one of the benefits that we provide to them. And so just for the listener, we have all of our operations in the cloud with you guys. We pay roughly 70 million Norwegian kroner per year for that service. Now, you were one of the pioneers in the cloud services, but now you have competitors such as

Microsoft, Google, and they have been gaining ground and actually are growing slightly faster than you. So how are you competing with them? How do you win or lose business? Well, we've had robust competition for a long time, as we should, by the way. And I like to say, if you look to your left and you look to your right and you don't see anybody next to you, you may have dramatically overestimated the attractiveness of your market segment. And it is a fast-growing and attractive segment. And so, customers appropriately have a lot of choices, which we think is good for customers. And by the way, I think at the end of the day, it's good for us. It keeps us sharper and makes sure that we keep our focus on really what we need to do to delight customers.

So I think that AWS, as you alluded to, was the pioneer of the cloud. We launched in 2006, and lots of folks scratched their heads and said, what does this have to do with selling books? I can't tell you how many times I got asked that question. And of course, the answer is it has nothing to do with selling books. But the technology that we built to sell books has everything to do with our exposing that same technology for many, many other organizations to use. But because it came from Amazon that some people said, oh, they're just a bookseller and nobody will use this. And then startups began using it. And they said, well, no enterprise will ever use it. And then

enterprises started using it. And they said, well, nobody will ever run mission-critical applications on it. And then we started doing things like powering Netflix and controlling NASA's Mars rover, you know, SUV-sized vehicles on the surface of Mars. And people started to get the idea that mission-critical workloads were indeed running in the cloud. And so I think we just proved ourselves over a number of years. We also moved very, very fast on product innovation. And it was probably five to seven years before other companies really started to come out with even vaguely competitive offerings. And our founder, Jeff Bezos, has actually publicly called that five to seven-year head start the largest gift in business history.

Now, I have no idea if that's true or not, but it's just an interesting concept. What does he mean by that? Well, he means that we had five to seven years to build a large array of really powerful, really important services to gain traction, to get a customer base, most importantly, to gain knowledge, to gain experience about what it took to operate really, really well in this new business. But why were the other people so slow? I think because we were so threatening to their business model. They didn't want to believe it.

If you look at the old guard of technology companies, particularly software companies, in some cases, hardware companies, for 30 or 40 years, they overcharged customers. They intentionally locked them in, so they made it hard to leave. We really offered a completely new model of not having to commit, being able to elastically use as much or as little as you want, to see your prices go down continuously, not going up continuously, all while being highly available, highly secure, and highly reliable. And so it was really threatening to those high prices and high margins by these other technology companies. And so it was easier to find excuses to dismiss us as not knowing what we were doing, rather than to see

the enormous customer value that was being created. Now, at some point, it became obvious and inevitable to see how customers were voting. Of course, we had other customers get into this market segment. Over time, you give it enough years and you're a competent technology company. There are absolutely other offerings out there. And we try not to be naive and to understand what competitors are doing, but we still to this day focus the vast, vast majority of our time, our effort, our mental energy on being customer obsessed and figuring out what customers need us to do as opposed to having a competitively driven strategy.

How does artificial intelligence change the landscape? Are all the language models now trained in the cloud? I think AI is, well, to start with, AI is enabled by the cloud. I mean, really in the long run, if you look at the amount of compute resources, which are required both to train these models, as well as to run inference or run these models in production, models, as well as to run inference or run these models in production, the capacity requirements and therefore the potential costs can be really enormous. Those will happen in the cloud because the economics and the capacity availability will

be much, much higher in the cloud than elsewhere. So, I really view generative AI and AI in general as the next big, big thing that is happening in the cloud. Now, it's not just one thing. I mean, generative AI is going to fundamentally change many, many technologies, will fundamentally impact probably every application that you and I interact with, both in our professional and our personal lives. So it's fundamental, but it's not a different thing. It is the next huge thing that will happen in the cloud. And it's very much tied to your data strategy.

So we have all of these companies who have built data platforms on AWS and have vast amounts of data in the cloud. And that data is what helps them differentiate with generative AI. There are these models there, but what you've got to do is bring your data to the models, whether it's your customer service data, your investor data, your medical research data, whatever it is, and use that data to your advantage using these new powerful large language models. And helping companies to really marry together their data and their generative AI strategies, we think is what's going to unlock the real power, the real value. And is that why you now invest billions in Anthropic, which is competing with OpenAI?

Yeah, Anthropic used AWS from the very beginning when they were founded a few years ago. And as our relationship with them has deepened, I think that we provided a really great opportunity for them to get access to massive amounts of compute capacity, which they need to train their Claude models. They're now in Claude 2,

which is a really leading-edge model. It's as good as anything in the world. And at the same time, they're really smart people, and we saw that there was an opportunity to collaborate with them and have them help us to optimize and improve the hardware, the custom-designed chips that AWS designs. And we decided to deepen that partnership together. And as one element of it, we also did invest into Anthropic. So it's a tight partnership.

It's a special partnership. Anthropic now uses AWS as its primary cloud provider. And I think we'll be partnering together for a long time to come. You've got competitors in the US and China, but no European competitor. Why is Europe so slow here? I think it's true that if you just look globally, the largest public cloud providers have been US-based companies. And as you said, especially inside of China, especially inside of China, Chinese-based companies. But there are smaller European-based competitors as well. And I think it's a very dynamic and quickly moving space.

And I think there are opportunities for companies from all countries if they've got a great value proposition to gain market segment shares. So for now, this is the way it's played out. But, you know, I think we all need to stay very alert. Well, you're very diplomatic, Adam. But when we look at many different industries, Europe is a bit behind in innovation, in technology and so on. Now, why do you think it is? Because when I look into some of your business principles, you have words like big, fast, and so on. And these are not very European slogans. Well, we partner with a great number

of European companies, whether it's systems integrators like Capgemini, whether it's software companies like Sage in the UK that I just spoke with last week. And I see a lot of innovation happening in Europe. I think, you know, a lot's been written and said about how venture capital works and how much funding happens with companies in the US. And I think a lot of the VCs are looking more internationally these days. So I think there's a good chance that the innovation continues to grow and flourish in a lot of different countries around the world. You know, India is another place where people are really looking at for innovation to come out of.

So again, I think it's very dynamic. And I think there have been great conditions for technical innovation in the US, for sure. But I think you'll see it in other countries over time as well. Now, these data centers are very energy intensive. How do you plan for a more sustainable future? Well, that is incredibly important. It is one of the most important topics that we could touch on.

So Amazon has taken a very public pledge to be net zero carbon across all of Amazon, retail, AWS, everything by 2040, which is 10 years ahead of the Paris Accords and is a very big, bold public commitment. We did it publicly instead of privately because we wanted to both put a forcing function on ourselves, frankly, because it's difficult,

as well as to really catalyze and help inspire other organizations, other companies to join us in helping to fight climate change. We have over 400 other organizations, including many large companies, who have signed on to the Climate Pledge. So we're really gratified by that.

Now, we can't just wait till 2040. And we have a lot of interim goals along the way, one of which is to be 100% renewable energy powered by 2025. Now, obviously, that is just around the corner. And the good news is we are already over 90% renewable energy powered across all of Amazon. But a huge part of that, of course, comes from AWS data centers. So we're already at 90% on our way to 100%. US data centers. So we're already at 90%, on our way to 100%. And one of the big ways we do that is by being the largest corporate purchaser of renewable

energy on Earth over the past three years. And we've done long-term funding for wind farms, for solar projects around the world, including the first offshore wind in Japan project, and many others like it. It's also really important that we innovate to just use less energy, period. And I mentioned custom-designed chips a little while ago. So the first AWS, we certainly buy a lot of chips for our servers from a lot of really great partners. But in addition, for a number of

years now, AWS has actually designed its own chips, which customers can use in different servers, virtual servers. And that general purpose chip is called Graviton. Our Graviton-based chip actually consumes 60% less power than equivalent chips that our customers use. So simply by moving into the cloud and then moving onto our Graviton-based capacity, customers can reduce their energy consumption by up to 60%. If you look at the chips that you buy, how much do you now develop yourself? And how much are you still dependent on the likes of NVIDIA? I think it's a big mix. We have in the kind of classical x86-based chip architecture,

we're great partners with Intel, with AMD. In the GPU space, we're great partners with NVIDIA and have a very tight relationship with NVIDIA. So we continue to buy and use enormous quantities of chips from all of those companies. And I don't foresee any change in that in the foreseeable future. How could quantum computing change your business? I think quantum computing is potentially very disruptive, very exciting. It's also, I think, a lot of unknowns, and it's years away. So we're investing in quantum now, both internally inside of Amazon,

as well as we've funded a lot of research at places like Harvard University, Cal Poly, Caltech, and we'll continue to do so. I think that it's a proposition which, you know, in a number of years from now, could really be disruptive to how computing is done. But it's very, very early. There are a lot of unsolved questions which need to be solved

before it becomes a viable technology at scale. But when it is a viable technology, how is that world going to be different? What's going to be the main change? The main change would be the ability to do vastly larger, more powerful computing jobs at much faster and at much lower cost. I mean, that is the dream. And I think there's a good chance that the world gets there. But there's supposed to be a lot of scientific research as well as applied computer science to make that happen. And we're investing in it.

I know a lot of other companies are as well. And I think it's an area of great potential for the world. But at the same time, as we keep that eye towards the future, we're keeping the other eye on the technologies we need today to improve price performance for our customers. And in your opinion, how do we stack up against China, both on the AI side, but also on quantum computing? Well, on quantum, I'd say it's too early to really answer that question. I think it's hard to know actually who's proceeding at what pace. It's still very early. On AI, I mean, again, to the best of my knowledge, I'll say, I think that the U.S. and the Western world is proceeding really well.

I think that there are great, great leaders in the AI space. And what I really like is that some of them are big companies like Amazon, and some of them are very, very young startups like Anthropic or Cohere or Stability AI or AI21, all of whom are great AWS startup partners, or Hugging Face is another one. And I think that mix is really important for innovation, having the resources of big companies along with the fresh thinking of very young, smaller companies. And so I think that the US and the Western world is very well positioned. I think we have a lot of questions around not only where the technology will go, but how you think about responsible AI and ethical AI and making sure that these capabilities are used in the right way.

And we're busy at work, as you can imagine, in all of those areas, you know, technical, out there in the market with customers, as well as very intently with regulators and policymakers. Do you think the tech companies are able to self-regulate AI? I think tech companies, it's very important that tech companies participate very vocally in the discussion. I don't think it will only be tech companies self-regulating. I think that it will be partially up to governments and potentially multinational organizations to provide guidance and to provide regulatory frameworks.

And I think countries should have a voice in saying, here's how we want AI to proceed inside of our country. And I think that tech companies have a lot of experience. We're the ones with the technology and with the customers. So we have really important voices in that conversation. And we're helping very actively to shape those conversations. I was at the White House this summer when President Biden announced his voluntary commitments around AI, which about seven companies signed up for. Later this week, I will be in the UK at the AI Safety Summit that the UK government is putting on, which I have a lot of world leaders at. And we're devoting the time and the resources to participating in those forums, participating in those discussions. And I think that industry needs to come together along with academia,

as well as policymakers and regulators to figure out with this powerful set of new technologies how we can ensure safe, responsible use with a lot of visibility into it, where at the same time, and this is essential, not squashing innovation. We've got to let companies keep on innovating, particularly as some of the countries you mentioned

are probably not going to worry so much, are going to keep on innovating. And so we have to make sure that our countries and our companies keep on innovating unfettered as well. Talking about innovation, you are also launching a satellite network to provide broadband, akin to what Starlink is doing. So what is it? You launched a few satellites, you're looking at several thousands of them eventually. So what is it? What is this going to do? Well, it is very exciting. You're referring to Project Kuiper with a K. And it's a whole satellite capability being launched actually by a sister division to AWS. It's being spearheaded by another part of Amazon, although AWS partners very closely with them.

several years, have several thousand LEO, or low-Earth orbit satellites, up around Earth. Just a few weeks ago, we launched our first two test satellites, which was a very exciting milestone. Those tests have gone really well, really as well or better than what one could have hoped. And so, those teams are going to keep pressing forward really urgently and relentlessly and as fast as possible, getting the first production satellites up next year and then moving into commercial availability for customers after that. And the first and primary mission of Project Kuiper was to provide internet access to unserved and underserved people around the world. And there are billions of those people who are either unserved and underserved people around the world. And there are billions of those people

who are either unserved or underserved. And I'm really excited for that mission. I think over the next several years, it's going to be really exciting. We're obviously still early in that journey, but Amazon takes a very long-term view of most things. And we think it'll be an amazing set of offerings for customers for many years to come.

So that's a great place to pivot to your corporate culture because you are one of the longest term thinking companies I know. What kind of time frame do you operate within when you plan? Yeah, I do think that's one of the most distinguishing things about Amazon is we do tend to take very long term views in our planning horizons. And it's such a tool for us. It's so powerful because instead of looking at things on a 90-day cycle, as a quarterly basis, we're thinking about what can we do 3, 5, 10 years from now to serve customers really well and to create great businesses for ourselves

and to make decisions based on those criteria. And a lot of companies choose not to have that long-term viewpoint. I think it's very limiting. But what is it that makes people think short-term? I think there's a lot of investor sentiment around quarterly earnings in the US, for example. And there's tremendous pressure. And I think that if you have a culture where, you know, you care a lot about the optics, short-term optics, and you just don't focus yourself as much on creating long, long-term value for customers, then you kind of end up in that trap. Now, I'm not saying short-term results don't matter. They do. And having targets and hitting them matters. But really building a business for the long-term is what matters the most. And I think we've done a good job over time about trying to run a good

business in the short-term while really building enormous value for the long-term. Well, Sam Altman from OpenAI said that long-term thinking is a competitive advantage because so few people do it. What are some of the longest-term investments you've made at Amazon? Well, we've talked about Kuiper, and that probably started, call it, five years ago. And we're just at this exciting stage of starting to launch satellites, and it'll be another couple of years before that full constellation is up. So that is very capital intensive for sure and long-term proposition.

I think we've been talking for the past 30 or 40 minutes about a really good example, which is AWS. If you go back in time, Amazon was mainly a retailer, had a few retail categories, and then there was this crazy idea about turning Amazon inside out, offering up the guts of Amazon for other companies to use. A lot of people didn't understand it. Other people thought it was crazy. It was definitely a long-term proposition because it requires not only building all of the software services that we offer customers today around compute and storage and database and machine learning and AI and call center operations and everything in between, but also spending all of the capital required for the data centers and the servers and all

that infrastructure that we've already discussed. And we knew it would take years for it to become a big business and a profitable business. But at the same time, we believed and still believe that in time, in the fullness of time, it could be the biggest business that Amazon has. It's probably the majority of the value of your company now, isn't it? If you look at the whole Amazon? Hard to say. I think that all of the pieces of Amazon work very well together. I leave it to the investment community to try and sort out which pieces are worth what. But we see many, many companies now who want to do business with all of the different areas of Amazon. So automotive companies who want to do business with AWS and integrate our devices and entertainment systems into the vehicles and supply Amazon with electric delivery vehicles.

And that's just the automotive industry. So I think all the pieces of Amazon work very, very well together. But also Amazon retail business, which is where the whole thing started, was running for ages on negative and very thin margins, right? Well, certainly in the early days, Jeff became very, I think, well-known for the mantra of get big fast. That was really a term here at Amazon. And that preceded my time here at the company, by the way. But I think that was a really big thing. And the company really believed that achieving that scale in retail was going to be really, really important. And it would help price, it would help customer selection, and it would help convenience and delivery speeds if they could get big fast.

And they did. And, again, that took a very long-term perspective instead of just, you know, worrying about the very, very short term. And as a result, you know, the retail business has been great. It is a retail business, and obviously retail businesses, you have to be appropriately cost-conscious. Those folks have always done a great job of really investing for the future

while also being really, really efficient. And it's been great to partner with them and see the results that they've achieved. A lot of companies say they are customer-focused. Now, you really are customer-focused. How can we see that? So it's a great question because you're right. Everybody does say they're customer-focused.

And I think that a lot of people think that customer-focused is somehow an emotional attribute. And on this emotional scale, you'll go from, you know, maybe disliking your customers. We could all point to a few companies who don't seem to like their customers very much, to maybe liking your customers. And then the highest on that scale would be, you know, loving your customers. And I think, in my opinion, that is not what customer obsession is really about. Although I think loving your customers is a good thing. But at Amazon, and I think the reason why we actually are so customer obsessed, I think that what it means is two things. One, understanding customers at an incredibly

deep level, a level that is hard to achieve, a level that takes effort continuously. And most companies simply don't go through all of the energy, don't expend the energy and go through the effort required to understand on each one of their services, each use case, what do customers really need from you? What real problems do they have? And then as hard as that is, that actually turns out to be the easier of the two things. The second is to ensure that every important decision you make is taken from that customer perspective. I've seen a lot of companies outside of here who, they actually understand a fair amount about the customers, but then when they decide to price

something, it's just about profit maximization. Or if they decide whether to build something, it's about, well, can we afford to build it? And they kind of drop the customer perspective outside the door for some weird reason. And I think you have to have the discipline to say, we not only have all this knowledge about what customers really need, we are going to bring it into the room and make sure that we're basing our decision around that. And you see that embody itself in a lot of different ways at Amazon. It's not just talk. It's not just a philosophy.

One example is we have this fairly well-known mechanism called a press release slash FAQ process, PRFAQ. What that means is that before we build anything of substance, a new service, a new AWS feature, we'll actually write a full press release along with a full FAQ. It doesn't matter whether we ever actually issue that press release or not. And the idea being that you need to be able to describe in detail why what you're building matters, how it's going to delight customers, or why would you bother to waste your engineer's time on it? And we call that our working backwards process. And it's a process

that we've actually got a number of customers who have seen, loved, and adopted. And we actually go in and do workshops with a number of our customers to teach that technique. It's very powerful. And a lot of our customers have really grasped it. It's interesting. I spoke to some of the people who were in charge of the selection of AWS as a partner. And as you can imagine, we are a government entity entirely. So these processes are really thorough and can take a long time. As they should be.

But one of the really differentiating factors was that it was very, very clear to us that you really cared about us as a client. And that spirit has endured after we signed the contract. And you guys have really delivered. So well done. Yeah, it just seems so basic. It's so important for AWS. I tell my teams all the time that your job is to go form long-term trusted relationships. And the business part will take care of itself if you do that. I think so much

springs from that. And people get really caught up in their own short-term concerns that it's easy to forget that. And we try here to make sure that we don't. You have some really cool leadership principles which are publicly known. What is the most important one for you? This is like choosing between your children. It's just not fair. like choosing between your children. It's just not fair. We have 16 leadership principles. They're not just in some manual. They're alive and well. I sometimes call them the operating system of Amazon or the central nervous system. Customer obsession is vital for sure. I think another one which is absolutely core is invent and simplify. That's really about innovating and also embodies the principle that innovating doesn't mean just making things more complicated.

It means making them more powerful but also more simple. We've always tried to move very fast as a company. And in fact, one of the reasons why AWS was founded was because Amazon wanted to move faster and they wanted to create the shared layer of infrastructure services so all the other teams at Amazon could worry about their customers and not about infrastructure. And so, I think we've built in many, many mechanisms to move fast. We hire people who like to build, who are innovative. We organize for speed. A lot of people think speed is preordained.

We think speed is a choice. And so we organize ourselves, both culturally as well as just our teams themselves, to be able to innovate and to be able to do it really, really quickly. And so I think that invent and simplify is incredibly important for customers. And it's actually been a huge advantage for Amazon in the market segments we're in as well. You have something called a two pizza team. What is that? So two pizza team.

So the concept of that is wherever possible, you should have a team no larger than can be fed with two pizzas. And we've had a lot of teams at Amazon over the years who actually are two-pizza teams. And even when, you know, with our scale, you obviously have teams that grow larger than that. And we very often try and refactor or slice those teams up to create even smaller, more nimble teams.

But even where we don't actually do that, it's the concept that's alive and well. And the concept is, you know, stay small, stay nimble, and very, very importantly, you know, control your destiny. You know, don't take dependencies where you don't have to on many other teams. You know, figure out how to be able to own your own progress, overcome your own obstacles,

and make rapid progress for customers. What's special about the meeting culture in Amazon? Well, we do do something which is unusual, which is we pretty much never use PowerPoint to run an internal meeting. So for most internal meetings, somebody writes a narrative, a document. And it could be short or it could be up to six pages, no longer than six pages. And when we come into a meeting, the first thing we do is say hello, and then we all sit down and read.

So, we might spend the first 15 to 30 minutes of a meeting simply reading. And when everybody's finished reading the document, there's no presentation. Somebody just says, okay, what questions do we have? It's an incredibly powerful mechanism. To me, it is one of the most powerful ways to move the business forward because it creates real understanding. With PowerPoint bullets, it's so easy to be on the surface. It's so easy also to not get through the material because you just interrupt the presenter. With the narrative,

you are forced. It is very obvious if you have not thought through a problem deeply with a four-page or a six-page narrative. So, you have to have depth of thought. You have to have been able to lay out all the issues to have a good conversation. And in addition, it's very egalitarian. By the end of reading the document, everybody has the same information. Nobody has special knowledge. And then anybody in the room, regardless of who they are, can ask questions, and it's all from the same fact base. And so, it's been one of the most, to me personally, one of the most amazing mechanisms that I've seen at Amazon to really help create deep understanding,

to make decisions and to move our businesses forward. Moving on to leadership, what is the most challenging part of being the CEO of AWS? I would say, well, I sometimes joke that I have, I fear that I'll wake up in the morning and somebody will tell me that I work at a big company. Now, I guess I do happen to work at a big company, but I never want it to feel that way.

I never want our customers to feel that way. And there's this concept of insurgents versus incumbents. And insurgents don't mind disrupting. Insurgents just want to create new things and want to create value. And incumbents want to preserve value and worry about what they already have instead of worrying about what they can build for customers. And I think it's very easy as you grow larger and you have revenue streams and you have businesses to slip into that incumbent mentality. And I think one of the most important jobs I have as a leader is to try and remind everybody at AWS that it is still day one.

It is very, very early in the cloud journey that there's way more work to do than we have already done. way more work to do than we have already done, and that our customers demand and expect us to be innovating on their behalf. It's our job to do that and figure out how to create a good business for ourselves along the way, not to figure out how to create a good business and bring customers along with us. I think you've got to have a lot of leadership, a lot of cultural mechanisms to continuously remind everybody across what is now a pretty scaled and pretty sizable team about how we believe we want to operate and how we want our world to work. You spent a few years outside Amazon as the CEO of Tableau. When you came back, how has your leadership changed? And also, how does your

leadership change with age and experience? I think that over time, partially, as you say, from age and experience and partially from just being able to step away and operating in a different environment and getting a new look on the world, I think one thing I've really tried to focus on over the past few years is leading with empathy. is leading with empathy. And some people confuse, by the way, empathy with sympathy. Very different.

To me, empathy means understanding. Understanding. So, understanding where people come from, understanding why they're saying what they're saying, instead of just focusing on the words coming out of somebody's mouth, trying to go back a step and understand, you know, are they saying this because they're worried what they're saying, instead of just focusing on the words coming out of somebody's mouth, trying to go back a step and understand, are they saying this because they're worried about a program? Are they saying this?

What's going on? Or what's going on with the person, the human being? Where are they coming from? And in order to do that, I've tried to really, really focus. As obvious as it may sound, I've tried really, really hard to focus on listening more over the past few years. Can empathy be learned? Is it an acquired skill? Absolutely. I think it starts with your listening skills. So I've figured out over the past few years that I don't learn that much when I talk. And then I learn a lot more when I listen. So I think they're very tactical things, very tangible things, I should say,

like listening. And would your wife agree to this? On some days. On my better day. Maybe not on all days, but good question. So I think absolutely it can be learned. I like to think that I've gotten better, not perfect, but better and better at this over the years. And I think if you have empathy and really start and really listen and understand where people are coming from, that allows you to be really open and honest and in return. And my personal leadership style, I try to really be open and honest and transparent and let people understand what I'm thinking and why I'm thinking it.

And I think that really resonates with most people if they feel that you've brought them along the discussion, that you've brought them along the decision process. They've had a voice. They've been heard. There's been thoughtful discussion. I've had many examples where I've had to make a decision which a lot of people disagree with. And I found that in the vast majority of cases, they don't like the fact that we've decided something that they wouldn't have decided, but they're okay with it. They're

okay with it because of the process. They're okay because they feel respected, because they feel listened to, and they trust that their leaders are, even if not always in complete agreement with them, that they have the best intentions and that they're going through a thoughtful, appropriate process. How do you deal with stress? Stress? What stress? No, we're in a very—I'm very privileged.

We're in an incredible business. I have an incredible position. I'm very, very lucky. But it is fast paced. Of course, there's stress. I think in a couple ways, one of which is at work, having a really, really good team and knowing that I can talk to the people on my team. People used to tell me, oh, the CEO job is very lonely. I've never found it lonely. I think that's a choice. And I don't find it lonely because my senior leaders

know what's going on. I don't keep things inside my own head. I share with them. They help me. They make my ideas better. They bring new ideas, which are usually better than mine. And we really operate as a team. And I think that reduces my personal stress at work. And then I think it's really important to set boundaries and to have time for whatever it is that's important to you. For me, my family is really important. Spending time with the family is important. There's also some sporting things I love to do.

I love to water ski in the summer. I love to play tennis year-round. And you've got to carve out time for those things to stay whole and to stay healthy. Do you read? I don't read nearly as much as I would like to. carve out time for those things to stay whole and to stay healthy. Do you read? I don't read nearly as much as I would like to. I do read, but unfortunately, at this particular stage, it's a little more episodic. But I do love to read, and I've been a lifelong reader since I was a little kid.

We have tens of thousands of young people listening to this. What is your advice to them? I think advice to young people. Well, I wish there was probably a lot of advice I should have been given when I was young. So what to choose? I would say maybe two things. One is try and remember that you have a long life, hopefully, and a long career. And I think people early in their career are measuring themselves against their peers that they went to university with or that they started a job with. And, you know, whether you do something 12 months earlier or later than I do, you know,

it really doesn't matter. What matters is the experience you gain. So just gain experience, build skills, you know, do things which you can see could be valuable to you, you know, down the line. And I promise that, you know, if you gain those skills, it really won't matter that 20 years from now that I had some promotion six months before you did. So just take that long-term view about skill building. And the second thing I'd say, and I really wish that I had learned this earlier in my career, is this concept of being vocally self-critical. is this concept of being vocally self-critical.

And most people are able to, you know, very quickly critique somebody's shirt, whether they like the coffee they're drinking that day. But when the camera turns on themselves, they lose that objectivity because it's painful and it makes you insecure. And I think if you can understand what you're really good at, what you're not so good at, what you really want to work on, if you have that clarity of understanding, it's the old adage, you can't manage what you can't measure. And if you can't sort of understand yourself, how can you really hope to know what to work on? And I think if you can just be objective with yourself about what the things you want to work on are, no matter how good you actually are

at other things, that is an incredibly powerful skill. Well, it's been really great talking to you. We've been investing in Amazon for more than 20 years, and we are just so grateful for all the value that you have created. And also, thank you for running our operations up in the cloud. Well, it's a privilege. We love working with you. We love working with all of our customers. We have got an incredibly passionate team, and we're just getting started, so we'll keep going. Fantastic. Thank you so much.