Billionaire Amazon CEO works in his own warehouse.

Posted March 26, 2009

He looks like a leprechaun and laughs like a hyena, but do not ever underestimate Amazon founder and CEO Jeff Bezos. Back in 2006, Amazon accounted for 5.1% of all online sales. Now it accounts for 6% and it's cash flow more than doubled. The company ranks 8th in the Fortune 500 for ten year shareholder returns — and for most of those ten years it was not profitable.

I competed with this guy for a decade and frequently thought he was nuts. I questioned almost everything about Amazon, from their
international expansion, acquisitions, Kindle, customer obsessiveness, 12 million square feet
of DCs, debt load, savage discounting, corporate paranoia, the UI, really high capex, the acronyms programs like AWS, S3, FBA, EC2, and even Prime when it first
launched.

And occasionally Bezos blew it (auctions, A9, Living.com/kozmo.com/Pets.com and a lot more, early tab proliferation, the crazy Walmart executives, the gold treasure box that a brilliant but mad professor talked him in to, Segway, digital music, and many other experiments that turned out to be amusing belly flops). But in many of those years, the market paid him to try stuff — it would be a much bigger criticism to say he had not tested more ideas (see Whitman, Meg).

More often than not, Bezos had ideas that turned out to be game-changing smart. He created a highly experimental culture that learned quickly from its mistakes. Amazon invented associate programs and AB testing, which he used to create the e-commerce operating system. He bet on Prime, the free-shipping program that launched almost three years ago to raspberries from financial analysts. Prime costs Amazon a fortune, but subscribers end up buying more because they do ALL of their online shopping at Amazon. Over time, it has made a huge difference even though, as Bezos warned at the time, "the one thing you do know when you hold an all-you-can-eat buffet, the heavy eaters show up first."

He built one of the world's strongest brands by setting an very high hiring bar and being obsessed about low prices, large selection, and fast delivery. (His saying that "Your brand is what people say about you when you are not in the room" is classic).

Not only that, but Amazon's commitment to cloud computing, which started out as paid storage (S3) and pay as you go computing (EC2), now includes a database (SimpleDB), a content
delivery network (CloudFront), computer-to-computer messaging (SQS), to say nothing of warehouse and fulfillment services (FBA). Amazon is no longer just an e-commerce company — by thinking well outside the box, Bezos had made it into a highly credible infrastructure company as well. When Amazon launched Prime and cloud computing, it still played kid brother to internet icons Yahoo! and eBay. Today it is worth as much as these two tired franchises combined.

Behind that goofy laugh is not only one very smart CEO, but a rare guy who walks the talk. Bezos is spending this week working in the Lexington, Kentucky fulfillment center to understand his company
from the bottom up.

A cynic might say it's because Amazon today announced it was closing
small fulfillment centers in Nevada, Indiana, and Pennsylvania — but I think not. These are normal capacity adjustments and the affected people will be offered transfers. Indeed, Bezos imposes some unusual requirements on his people

every
new Amazon employee has to spend time in Amazon's fulfilment-centers with their
first year. Every two years, everyone does two days of customer
service, and everyone has to be able to work in a call-centre. In the early years, the whole senior management team spent the holiday crush pulling long shifts in the fulfillment centers. This was mainly to help, but also to educate.

Likewise, all desks at Amazon to this day are hardware store doors bolted to 4*4 legs – a reminder of the company's start up days (I've been in Amazon offices in Germany and Beijing and seen some very fancy doors used as desks — but they are door-desks just the same).

Bezos prefers “two-pizza teams”: if a group can't be fed with just two pizzas, the group is too big. I've seen a few three and four person teams at Amazon — but not nearly as many as most companies their size.

Bezos thinks that talent and fact-based analysis matters more than heirarchy, communication, and advertising. Amazon spends almost nothing on advertising, Bezos once declared communication not just unimportant but "terrible", and he is happy to see a fact-based analysis by junior people overturn decisions by senior ones.

He often thinks in terms of efforts that pay off over 5-7 years — much longer term than most public company CEOs.

I learned a lot watching this guy — but probably not enough. We all think that CEOs should spend a week as an hourly employee looking at their company from the bottom. But I have to ask in ten years as the founding CEO of Alibris, how many weeks did I spend packing books in our warehouse or staffing a customer service desk?

None. I always had more important priorities.