|Home > Magazine > October 2002|
Polls & Surveys
Chief Risk Officer
The Amazon chairman on what the Web would have been like without Amazon, how important partners are, and why to keep focused on the long term.
BY MERIDITH LEVINSON
Levinson: I know there were very practical reasons for your deciding to sell books over the Internet, but I'm wondering if there's some part of you that's at all a bibliophile and if that influenced your starting Amazon as an online book-seller?
Bezos: I happen to be a big reader, but that's not why books were chosen as the first product category for Amazon.com. They were chosen because that's where we thought we could create the most value for customers because of the broad selection of items for that product category. There are more items in the book category than there are in any other category by far. One of the things you can do online is have very large sections because you don't have shelf space constraints. The other thing that was very important is I'm really a technology person and this is really a technology company. It's a nice coincidence for me that I like books, but that is not the key thing. What really got me excited was the Internet and the ability to use technology. In the last five years, we've invested $800 million in technology and we continue to spend $200 million a year. That's a big deal for us and for our partners.
Not only do we do e-commerce for ourselves, but we do it for other companies as well. In fact, last year we reorganized our whole business around that concept, and now have big companies like Toys "R" Us, Target, Borders and Virgin. Basically, we do their e-commerce for them. We have 30 such partnerships. They like it because we eat our own cooking: We build the technology to the quality level where we are happy to use it for ourselves and then we share it with our partners. We're very selective about who our partners are. We always look for best-of-breed partners and it's worked very well. We really are a technology company, and books were just the first product to sell online, in our opinion.
What would the Web have been like if you'd never founded Amazon?
I suspect it wouldn't have made very much difference. The big forces at work on something like this are much larger than any individuals.
So you think the Internet would have just matured as it had even without Amazon?
It might not be quite as customer centric. I think if there's a particular flavor that we've added to the mix it is that we were obsessed over the customer experience, and we take that into everything we do, including our partner relationships. The technology that we've built is very customer-centric technology. Everything that we've done has been around being obsessed over customers rather than, for example, competitors. Even though that can be a very successful business strategy, it just hasn't been our approach. That's kind of a unique flavor that you didn't see a lot of in the Internet, especially during the hyper-growth phase.
Over the last two years, we have the highest customer satisfaction score ever recorded in a service industry that's measured by the American Customer Satisfaction Index, which is a big study that gets followed every year. It's a score of 84 and there's never been a score that high. We have a culture of customer focus and the earth's most customer centric company. It's a phrase we use inside the company that means three things: listen, invent and personalize. You listen to the customer. Then you invent on their behalf because it's not their job to invent for themselves. And then you put them at the center of their own universe and personalize the experience around them. All the technology that we've built to be able to do that personalization, we will share with our partners.
It sounds like you're saying that Amazon didn't have that big an impact on the evolution of the Web, and I find that hard to believe. I must be missing something.
We've certainly had an impact on e-commerce, which is only a piece of the Web, of the Internet. It's like saying we wouldn't have electricity today if Westinghouse hadn't been around. Of course we would have electricity today. We would be doing pretty much everything that we are doing with electricity today with or without Westinghouse ever having been around. That's how really big things work.
Were there any positive consequences that came out of Amazon that you hadn't anticipated?
I think what's very unusual about what we've done is that we have worked so hard to be a good partner to companies like Target and Borders and Toys "R" Us, companies that in a more superficial way, you might consider to be competitors rather than partners. We have so much knowledge about e-commerce and the retail market is so large, that it makes sense for us to share that knowledge with them in these contractual partnerships.
What's it like to be the founder and CEO of a company that's had such ups and downs?
The ups and downs have been mostly external perception. The actual internal facts have been pretty much "steady as she goes." If you look at 1999, we had 14 million customer accounts. In 2000, we had 20 million customer accounts. In 2001, we had 26 million customer accounts, even though during that period our stock went from $100 a share to $15 a share. We just stayed heads down, focused on building a great experience for our customers and kind of let the external world take care of itself over time.
I guess another way of asking the question is how does it feel being the target of so much attention, especially negative attention?
I feel like we've always been incredibly well treated by the press. Even our harshest critics have always been our best customers because they were criticizing things that really were Internet-sector things. Even as our harshest critics were lumping us together with other dotcom bust companies, they were also curiously buying from us. I think we were internally pretty cognizant of that. I think we've been treated very, very fairly.
Even throughout the slump and the dotcom correction? Even when people were expressing all sorts of doubts about the viability of your business model?
It was always very mixed. There have always been people who were skeptical. That started right away in 1994 when I wrote the first business plan. And there have always been people who've been supportive. That happens for every company that's ever been built. There have been supporters and there have been skeptics. And, by the way, skepticism is healthy. I would claim that the abnormal thing was 1999 when all the skepticism got really quiet. Skepticism is the traditional role of investors, it's the traditional role of media.
For a lot of people, skepticism, and especially criticism, can be very difficult. How did you survive it, what kept you going?
I liked the fundamentals of our business and we had a long-term vision and have never concerned ourselves about the short term. Also, our customer experience was never criticized. When I would meet one of our harsher critics at a conference or some venue, [he'd] say, "I don't know how you guys are going to ever make money" I got that part"I don't know how you're every going to make money, but I love your service and I shop with you all the time." Well, thank you for that.
Even when you look at the stock market picture in May of 1997, when we went public, we went public at the price of $1.50 a share. We've gone from a $1.50 to $15 in a factor of five years and at the same time, the NASDAQ market has actually gone down. It's at its five-year low right now. We've gone a factor of 10 in a five-year period, which is great performance over the long term. The only problem is that it went from $1.50 to $15 via $100. But that was true for the whole sector.
Was it this long-term vision that helped you maintain your optimism?
Oh, absolutely. The long-term orientation and a powerful vision which was shared by everybody here at the company. That's what allows you to stay heads-down focused and not get distracted by some of these external factors that you're talking about. That's a very good question actually. But there were a lot of companies that did get distracted by it. And they didn't do well.
Who are some of your favorite authors or what are some of your favorite books?
My favorite book is The Remains of the Day. I think it's the perfect novel. I'm a big science fiction reader. My favorite movie is Dr. Strangelove. My favorite product in the kitchen store is the OXO Salad Spinner. Read the customer reviews of that and I guarantee you, even if you don't like salads, you'll buy the OXO salad spinner.
Mom's got one. Great item.
I would also highly recommend the Canon Image Stabilization Binoculars.
What was the first book you bought from Amazon.com?
You know, that's a very good question. I don't know that. The very first book we sold was Douglas Hofstadter's Fluid Concepts.
Wow, I can't believe you can't remember the first book you bought from your own store.
We did so much testing. For me, it was a little bit anti-climactic. I bought so many books during the beta test period, by the time we actually flipped the switch and turned it on, I was actually much more interested in what other people were going to buy. But I could log in right now and look in my account and it would have it
What feeds you, what keeps you going?
What motivates me is other people counting on me. Here we've got thousands of employees and we're all counting on each other. There are thousands of investors counting on us and there are millions of customers counting on us, and when you have so many people counting on you, it's very, very easy to stay motivated. And it's fun.
Who's influenced you in your life and your career, and why?
The two that come fastest to mind are my grandfather and my dad. My grandfather on my mother's side. I spent all my summers on his ranch from age 4 to 16. That was a huge influence. He was an incredibly self-reliant fellow, as most people who live in rural areas are. It was a little town of 3,000 people, and a cattle ranch. They'd build their own windmills, lay their own pipelines, do their own veterinary work. That was a big influence because one of the things I learned was if you put your mind to it, you can do most things, even the things you don't know how to do.
The second person is my dad because he still, to this day, is the hardest working person that I know. Growing up, we always knew that each family vacation was subject to being canceled at the last second and it never occurred to us to complain about it. It just seemed totally normal.
Have some comments of your own on motivation, optimism or Amazon.com? Post them here.