The Everything Store: Jeff Bezos and the Age of Amazon

Points:

Let’s play a game what if you had 1000$ to invest in any of the prestigious FAANG companies (Meta, Amazon, Apple, Netflix, Google) companies during its IPO (Initial Public Offering), which company do you think would give you the most ridiculous earnings back? Did you answer Tesla, the poster boy of overvalued stocks (remember at it’s peak was worth the rest of the car industry combined). Tesla would have certainly been a great decision, your thousand dollars would be worth 400k$ at its peak, yet it would still be half of your return on Amazon which would be worth 800k$ now and almost worth 1.6 million at it’s peak. The more incredible part is that there isn’t any huge argument that Amazon is massively overvalued, maybe it’s worth 10% more or 10% lower but everyone thinks Amazon deserves its place. The contrast is far more stark when compared with rest of the tech industry. You would do more than twice as better as Netflix (313k)(which is just 1/10th the market cap of Amazon, not a fair comparison), 20 times better than Google (41k), 200 times better than Meta (4.5k), only Apple would have turned out to be a better bet (1.3 mill) which Amazon at its peak beat Apple at its peak. Apple also is boring because its been studied to death, Hollywood has made 2 biopics to Steve Jobs, Jobs commencement address at Stanford was viewed 41 million times, and we’ve reached a point where the most cliche isms of the prevailing zeitgeist are falsely attributed to jobs

“Your true inner happiness does not come from the material things of this world. Whether you’re flying first class, or economy class — if the plane crashes, you crash with it.” (This is a fake Steve Jobs quote).

Jeff Bezos of course has instead been made into an evil villain in the media , especially since Bezos is not fortunate enough to contract out the sweatshop work to Asia unlike Apple. Bezos also proceeded to tackle this problem in the most Bezos way imaginable, organizing a book reading session with his executive team at his lakeside home to analyze and dissect what needs to change in the company to stop being portrayed as an evil empire, to arguable success (Do you know Jeff and Andy added being the world’s best employer to Amazon’s leadership principles, lol.

So let’s dive in to the story of Amazon and it’s meteoric rise in American History.

Thinking big in Silicon Valley is pretty much the default option. Startups are looking to disrupt and upend an existing industry , else are they even a startup. Yet somehow, Amazon is the one company that employees join not prepared to think as big as Bezos or Amazon. In some cases the employee can be faulted, if an employee joined Amazon thinking it was a book selling company they should have extrapolated that it would become an “everything store”. Yet in many cases, it’s actually the opposite. Employees join thinking e-commerce is their main business and they are joining a subsidiary only to be overwhelmed by the scale at which Amazon is willing to invest into the new business. AWS a particularly early example, is a company that requires large capital expenditures and has now gotten bigger than IBM (also is Amazon’s most profitable business by far.) The best example comes from employees (now senior VP) Rohit Prasad. When Mr. Prasad was hired out of Raytheon to work on speech recognition and question answering in Alexa; he thought he was here to build a voice assistant that would play a small but integral role in a giant retail company. This of course led to an infamous Bezos “nutter” as the employees used to call it where Bezos abruptly left the meeting, disappointed by the lack of resources employees were using to solve the problem. Rohit then had to recalibrate. He realized what he needed to do was to rent homes in ten cities like Boston, Seattle etc over six months and hire actors to talk as if they were talking to an assistant. This was followed by bugging the homes with multiple Alexas all over to collect data from a variety of different alexa placements, hire hundreds of annotators for thousands of hours of speech data and then training a deep learning algorithm for speech recognition. This was a few orders of magnitude of scale beyond what the alexa team was doing, which was giving Alexa’s to engineers to test at home and collect data. Only when employees started thinking this big about Alexa, did Bezos perk up and say “Now you guys are serious about building this”. A similar story played out with Amazon studios. Roy Price could be forgiven for thinking that getting a few golden globe nominations for Amazon Studios shows would be enough, especially considering Amazon just entered the business in 2010. Jeff of course was deeply unsatisfied. He kept demanding Roy (and later his successors) to bring Amazon his own Game of Thrones , which now it’s clear seems to have been the 1 billion dollar Lord of The Rings show to arguable success. To set a scale for Amazon’s ambitions, Amazon is trying to launch satellites (Kuiper), create checkout less stores (Amazon Go stores), Build a self driving car (Zoox), Create a healthcare subscription service (RxnPass) and this is ignoring some of the less successful businesses like Last Mile delivery (Amazon Scout) and Drone Delivery (Prime Air), Phones (Fire phone) and also ignoring the incredible behind the scenes that Amazon has successfully done like their own Air Logistics Service (Amazon Air), Dark Warehouse (Kiva Robotics Acquisition) and so on. This is not normal in Silicon Valley. This is in fact highly abnormal. Amazon has consistently ranked number 1 in R and D investment, almost double of the second highest Google in 2020 with 42 billion spent. One big indicator of a lack of innovation or more favourably ambition is when a company spends huge amounts of money buying back it’s own stock. It’s basically saying they don’t know what to do with this money, investors take it back and be happy. Apple is the poster-boy of stock buybacks, it has spent more than 80 billion buying back its own stock. The top 20 companies buying back their own stocks include Apple, Alphabet (Google), Meta, Microsoft, Walmart. Amazon is not in the list. Amazon meanwhile in number 4 in the total amount of cash in hand. Amazon knows what to do with it’s money, Amazons going to spend it trying to disrupt healthcare or launching fucking satellies (Head by an ex-vice president from SpaceX) cause why not. The more books I’ve read about Amazon (5+) the more I’ve come to appreciate how rare it is to find such a company, once in a generation or less.

Final Draft:

Silicon Valley represents a lot of things in the modern world. One formulation is that Silicon Valley is the valley of invention. It is the place where idealists, hackers and hippies come together and invent new technologies, augment human capabilities, create new industries from scratch and usher in the new era of human civilization. The poster boy for this silicon valley is the eccentric lone hacker, the kind of guy who studied cryptographic trust schemes in 2002 and decided to dedicate his life to creating a secure distributed ledger (or the guy who decided deep learning was the way in 2010). Such a person has no need to be from a prestigious college, though he often is, it is more to the college's credit for recognizing his talent than any specific thing he did to get admitted. Similarly he is rarely, if ever chasing high prestige jobs like an lawyers, bankers etc, it could be very likely that his field of study never pans out and he languishes for life in obscurity and that would be completely fine by him.

There is however a resoundingly different view of silicon valley that has emerged in recent years. In this view, Silicon Valley is the valley of disruption. It is the place where smart and hungry people discontent with the status quo come together and then proceed to light a fire that devours anyone in its path, crushing small enemies with sheer scale and dethroning incumbents with superior execution and technology. The poster boy for this silicon valley is the disgruntled financier. He is someone who has at every point in life succeeded or at least worked very hard for it. He is very likely to be from a prestigious Ivy League or equivalent university, very likely to join a prestigious career right after college. His thinking goes like this, he has worked hard and used all his smarts to reach where he is, yet there are people in this industry who are dumber and lazier than me who are doing completely fine. What's up with that? In these cases silicon valley serves less as a vehicle of technical invention and more as a vehicle of simple disruption. A case where an able and power hungry aristocracy sees vast amounts of land under control of a kakistocracy. This view came to the forefront with the new generation of Silicon Valley Startups like Uber and Airbnb. Before Uber, a taxi driver was an actual career. You worked x years, then you got your medallion, then you owned a few taxis and then you possibly started your own taxicab. Now you’re relegated to the gig economy, there is no career growth beyond putting more hours a day, it is essentially a career dead end. Uber is undoubtedly better for consumers but its disruption has caused people to ask, at what cost? Amazon however did everything Uber did, if Uber lit a candle, Amazon periodically light forest fires and started ten years earlier and continues doing it to the present day, etching disruption into the company ethos. Amazon is in my view, the poster boy of silicon valley disruption, at once marveling onlookers with the rapid achievement of scale, injecting fear into incumbents who have seen it eat away other industries, hated by all competitors and yet loved by consumers.