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- [00:00]
Oracle Representative
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- [00:47]
Verizon Representative
Cloud bill in half if you move to OCI. Minimum financial commitment and other terms apply.
- [00:52]
Narrator
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- [01:22]
Jeff Bezos
Power.
- [01:22]
Narrator
Starting price for 25 Mbps Internet plan with savings plus taxes, fees and economic adjustment charge terms apply for J.D. power 2024 award information. Visit JDPower.com awards I'd like to start back in November 2019. We're at a black tie event hosted by the Smithsonian. It's their annual National Portrait Gallery's induction ceremony. This is a historic honor. The images of George Washington, Abraham Lincoln and Frederick Douglass hang in these halls. CBS News anchor Gayle King is the evening's emcee.
- [01:55]
Gayle King
They like to get people at different stages of their careers and in particular capture careers that are still going strong, that are still doing interesting things and still have a lot to do and say. And I think that certainly really describes our final honoree. Last but certainly not least.
- [02:13]
Narrator
So this is an annual ceremony where a handful of incredibly accomplished individuals are celebrated. They get their likeness painted and those portraits are then entered into the gallery. Earlier in the evening, they inducted Vogue editor Anna Wintour Lin Manuel Miranda, the creator of Hamilton and the band Earth, Wind and Fire. Now Gail is about to introduce the wealthiest person in the world.
- [02:37]
Gayle King
He is the founder of Amazon Blue Origin, the Owner of the Washington Post.
- [02:43]
Narrator
So then Jeff Bezos walks out on stage, and his speech isn't about his remarkable success, his exorbitant wealth, or even the honor of being inducted into the Smithsonian.
- [02:54]
Jeff Bezos
My life is based on a large series of mistakes, and I'm kind of famous for it, actually, in the business realm. How many people here have a fire phone?
- [03:05]
Narrator
Remember the fire phone? This was Amazon's attempt at making a smartphone to compete with the iPhone. It sold terribly. They canceled the project after just a few months.
- [03:16]
Jeff Bezos
Every interesting thing I've ever done, every important thing I've ever done, every beneficial thing I've ever done, has been through a cascade of experiments and mistakes and failures. And I'm covered in scar tissue as a result of this. It started in the early days of Amazon.
- [03:35]
Narrator
It's interesting to me that on this night, celebrating his lifetime success, he wanted to focus on scar tissue. In fact, that was the theme of his portrait. He asked the photorealistic artist Robert McCurdy to paint him.
- [03:49]
Jeff Bezos
I wanted someone who would paint me hyper realistically, with every flaw, every imperfection, every piece of scar tissue that I have. And thank you, Robert. You did that. Amazingly, you can see my contact lenses in that painting. And I'm not kidding.
- [04:18]
Narrator
The painting of Jeff Bezos is pretty uncanny. He's depicted against a stark white background. He's wearing a white shirt, a silver tie, like he's coming out of a meeting. And his gaze is severe. It's the look that has flustered, intimidated, and motivated Amazon employees for 25 years. What's striking to me is that in the painting, the light is coming in from an angle, so that half of Bezos is illuminated, the other half is shadowy and dark. On this night, Bezos was in a room full of rich elites. This was a crowd that embraced him. But note how little he actually said. This is also typical Bezos. In public, he stays on script. He tells you only what he wants you to hear, and he just teases at the scar tissue. Back then, Amazon still conjured the promise of next day shipping, the marvel of Alexa, voice recognition, a massive library of streaming TV and movies, and not controversy or intrigue. You're listening to Foundering. I'm your host, Brad Stone. I've written two books chronicling Amazon's the Everything store and Amazon Unbound. I've been reporting on Amazon for over 20 years now. I've devoted much of my career to this. Not only to understanding the man, Jeff Bezos, but also to chronicling how he's totally altered our modern Economic reality. So something that people often ask me is, what's Jeff Bezos really like? I want to speak to that for a second. He's a big geek. He loves science fiction and space. But he can also be kind of scary. He can be kind of brutal. When people don't meet his expectations, when they're not thinking on his level, they can be subjected to his outbursts. Also, people ask me, is Bezos smart? And the answer is yes, absolutely. He's extremely well read. He's a master compartmentalizer, someone who can work on many complicated, totally different things, one after the other. But what's most impressive is probably his ability to dive into the deep technical details of things that he knows very little about, to basically go to school on a topic like artificial intelligence or rocket repulsion. He's extraordinarily disciplined, and he can go toe to toe with the engineers who have basically spent their entire careers in those industries because of his intensity and intelligence. You'll notice that in a lot of our interviews, many former Amazon employees and executives seem to adore Bezos. He's almost got a kind of cultish following. This is a guy who started a company in his garage and evolved it all the way to becoming a trillion dollar company that dominates much of the world. He never took much of a salary, but these days he's worth around 200 billion just on his Amazon ownership stake alone. People who worked for him just marvel at the decisions he made and the instincts that he had about the future of technology. But lately, something strange has happened. Public opinion about Bezos has declined dramatically. People ridicule his dreams of space travel and criticize his philanthropic giving. They love to dunk on his lavish lifestyle, which has recently been on awkward display on social media. I think that the number of people who see Jeff Bezos as a hero is diminishing. He's viewed kind of skeptically as someone with enormous amounts of power and resources, who's a difficult person to work for, who's not treating his workforce all that well, and who hasn't done as many good things with his money and power as he could have. These questions have become even sharper during the pandemic. During the first year of lockdown, Amazon sales soared and Bezos personal wealth jumped from 115 billion to 190 billion. His prosperity felt perverse given how many people were struggling. He was living large just when many people were barely scraping by. This raised more questions. Should billionaires exist at all? Is the world better off with or without Amazon in it? Amazon was never one of those tech companies with idealistic promises to save the world. But suddenly the company found itself getting blamed for the world's problems. Why isn't Amazon doing more to combat climate change, fix inequality, protect smaller companies? People started to contrast Bezos fortune with the plight of his workers.
- [09:12]
Gayle King
Amazon is seen as an essential service through this pandemic. But you have been very slow to install your your workers protections, and it's hurt your reputation. You've been seen as a company that puts profits ahead of people.
- [09:28]
Narrator
Amazon was ranked one of the 12.
- [09:30]
Verizon Representative
Worst companies to work for by the national center for Occupational Safety and Health.
- [09:35]
Gayle King
But many Amazon staffers say the demand for greater speed is the leading factor harming warehouse workers.
- [09:42]
Narrator
Ellen says she processed an average of 600 items an hour on the job here at a broken workstation that injured her back. Protesters march down 34th street intent to.
- [09:53]
Oracle Representative
Vent their anger at Amazon. Outside on the street, who's city I'll.
- [09:57]
Narrator
City who's city I'll see These days, a vocal minority of people go out of their way to buy nothing from Amazon.com which brings me to another question I get can you really avoid Amazon in this day and age? I would say the answer is probably no. If you're a conscientious objector and you're not shopping on the site, well, are are you shopping from Whole Foods? They are owned by Amazon. Even if you're watching Netflix videos or sending images on Snapchat, you may not know that both companies rent server space from Amazon through its cloud division. Or you might be reading the Washington Post, which Jeff Bezos personally owns. You might be buying from alternative websites, and those products might be stored in Amazon warehouses and delivered with Amazon vans. Amazon has simply become so big that its tentacles reach into almost every aspect of business these days. To really understand this company, that's become as essential as it is villainized. It's important to go back to the beginning. Love him or hate him, or depend on him for all your daily shopping needs. The rise of Jeff Bezos and Amazon is one of the most celebrated and contentious business stories of our times. But Bezos didn't just change the business world, he also changed himself, pulling off a personal transformation. And you can see it. He's no longer the balding, pasty tech nerd from Seattle. Now he's buff. He posts regularly to Instagram, showing off his new girlfriend and a new lifestyle that includes private yachts, remote islands, and celebrity parties. He acts like the celebrity he is, someone whose personal life and fashion choices are avidly covered by the tabloids. It's a remarkable act of personal and business reinvention. We'll begin to tell that story when we come back.
- [12:07]
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- [13:01]
Verizon Representative
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- [13:03]
BetterHelp Representative
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Verizon Representative
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- [13:10]
Narrator
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BetterHelp Representative
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Verizon Representative
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- [13:36]
Narrator
We're going to go all the way back to the Paleolithic days of the Internet. Back then, Amazon was just an online bookseller. People were being introduced for the first time to this new thing called the World Wide Web. Hi there. Who are you?
- [13:51]
Jeff Bezos
I'm Jeff Bezos. And what is your claim to fame? I'm the founder of Amazon.com where did.
- [13:58]
Narrator
You get an idea for Amazon.com?
- [14:00]
Jeff Bezos
Well, three years ago I was in New York City working for a quantitative hedge fund when I came across the startling statistic that Web usage was growing at 2,300% a year. So I decided I would try and find a business plan that made sense in the context of that growth. And I picked books as the first, best product to sell online.
- [14:19]
Narrator
That's Jeff Bezos speaking in an interview filmed at the Special libraries conference in 1997. In some ways, Bezos had been preparing to start this company since childhood. As a kid, he was considered precocious highly intelligent. His mother, Jackie, had him when she was still in high school. He didn't know his biological dad for most of his life. When he was 4, his mom remarried a Cuban immigrant, Mike Bezos, and they spent the next several years moving around. He was the valedictorian of his high school in Miami, and he gave a speech about entrepreneurship in space. Friends would later say he started Amazon, and he went after all this money because he dreamed of going into space himself one day. Before he started Amazon, Bezos had been a vice president at a Wall street firm, D.E. shaw and Company. He was researching new business opportunities for the company, and he got an idea for a startup, which meant he had a choice to make. Here he is on 60 Minutes.
- [15:19]
Jeff Bezos
The way I made the decision to leave Wall street and do this was, it'll sound geeky to you, but it was a regret minimization framework. So this is how I actually made the decision.
- [15:28]
Narrator
If I understand it, if I can translate that into English, I can deal with, does that mean I want to live my life so that in a.
- [15:37]
BetterHelp Representative
Few decades from now, I'm not going to regret it?
- [15:39]
Jeff Bezos
That's exactly right. I want to have lived my life in such a way that when I'm 80 years old, I've minimized the number of regrets that that I have for you.
- [15:47]
Narrator
It was not carpe diem. It was not wine, women and song.
- [15:50]
Jeff Bezos
No, no, no, no. I don't go in for carpe diem. I go in for regret minimization framework.
- [15:56]
Narrator
So in 1994, he and his wife Mackenzie, left their Manhattan apartment, flew to Fort Worth, Texas, took his parents Chevy Blazer out of storage, and started driving north to Seattle. He chose Seattle because Microsoft was already there. It was a budding tech hub, but still small compared to California or New York. And Washington State had something else appealing to Bezos. Lower taxes. He had the seed of a business notion that on the Web, there were no limits to what you could sell as long as you could figure out a way to find it and ship it through the mail. You could literally create an everything store.
- [16:35]
Jeff Bezos
So when you have that many items, you can literally build a store online that couldn't exist any other way. And that's important right now because the web is still an infant technology, basically, right now.
- [16:45]
Narrator
Back then, Bezos was bubbling with optimism about the Internet and the massive business opportunities. In retrospect, he was absolutely correct.
- [16:54]
Jeff Bezos
What's really incredible about this is that this is day one. This is the very beginning. This is the Kitty Hawk stage of Electronic commerce. We're moving forward in so many different areas and so lots of different companies are as well. I think a millennia from now, people are going to look back and say, wow, the late 20th century was really a great time to be alive.
- [17:12]
Narrator
Bezos sets up the original Amazon office in the garage of a suburban Seattle home. The first challenge was figuring out what to name the company. Bezos registers it as Cadabra Inc. As in abracadabra. But that sounds too much like cadaver. Then he registers b relentless.com because he wants his young startup to operate relentlessly. And here's a neat trick. Even now, if you type relentless.com into your browser, it'll redirect you to Amazon anyway. In a wise move, he chooses the name Amazon. The earth's largest river can stand for its largest selection of books. Amazon.com went live in July 1995. He encodes a few values into Amazon's DNA. Chief among them, satisfy the customer at all costs. The next few years, Bezos moves his company to a succession of offices around downtown Seattle. Some of those spaces were famously sketchy.
- [18:17]
Dan Rose
Yeah, the Columbia building was amazingly right across the street from the needle exchange in downtown Seattle. So you had heroin addicts that were hanging out right outside the building.
- [18:27]
Narrator
That's Dan Rose, who joined Amazon out of business school in the 90s. Later, he became a top deputy to Mark Zuckerberg at Facebook. I called up Dan and a few other early Amazon employees I had originally interviewed for my books. They were proud of their time at Amazon and happy to talk about it.
- [18:45]
Dan Rose
I remember those interviews. There were no offices available. So we literally, for a couple of the interviews, we went into the stairwell and I did interviews in the stairwell. There was definitely a feeling of chaos.
- [19:00]
Narrator
Bezos prowled these halls and he loved the chaos. He gave the company a mission. Get big fast. Amazon raised money from venture capitalists. They went public in 1997, then raised more money from Wall Street. Bezos became a billionaire when the company was only five years old. You generally hear him before you see him. It's the ear piercing laugh of billionaire Jeff Bezos.
- [19:28]
Jeff Bezos
I was a good student. I always worked really hard. I was nerdy.
- [19:33]
Narrator
You were nerdy.
- [19:34]
Jeff Bezos
I was nerdy. That hasn't changed, by the way.
- [19:38]
Narrator
At the time, Jeff Bezos was famous for his laugh. I interviewed him for the first time at around this period and his laugh was definitely something you couldn't avoid. It was kind of jarring. Bezos goofy optimism wasn't an act. In the late 90s, he took Amazon's riches and went on a spending spree. He acquired random startups like IMDb and online stores in France and the UK. They branched into new product categories like CDs, DVDs, and toys. He even splurged on a set of totally nerdy advertisements that appeared all over network tv. It could be a teddy bear, a bike or smoke alarm, or possibly a new TV or game on CD Rom. You'll never guess what I got you@Amazon.com yes, he paid for a group of guys to wear matching sweaters and sing these little jingles in an attempt to lodge Amazon.com into the public's imagination. Is it red or is it blue? You'll never guess what I got you@Amazon.com here's the thing, though. In those early years, Amazon was kind of a hot mess. It was losing money, lots of it. That was fine. Most startups do this. But it was growing so quickly that its internal systems were a disaster. Some of the earliest employees were starting to worry.
- [21:05]
Gayle King
I would say that the train was heading down the track and there was no track.
- [21:08]
Narrator
That's Kellen Brannan. She was an early vice president of finance.
- [21:12]
Gayle King
There was actually no financial planning or analysis at all. And Jeff would say, you know, if you're thinking about something longer than 20 minutes, you've missed the opportunity.
- [21:22]
Narrator
Meaning, literally, don't stop and deliberate for more than 20 minutes. Keep moving. At the time, Amazon had only two warehouses in Seattle and Delaware. During the holiday season, the the warehouse workers couldn't handle the surgeon orders. So early on, Amazon's executives, including Jeff Bezos, helped out in the warehouse. They were packing boxes, driving forklifts, and gift wrapping.
- [21:47]
Gayle King
I learned so much, right? One, I learned it was fun that I could race Jeff in the stacks because we would time ourselves. We had these library carts and we would be. Because the warehouse management system back then would, you know, it might put like an obscene book next to a children's book. And you're picking them, but they're going to different people, but you're stacking them on these library carts. And so we would check in, get our library card, race up and down the stacks, picking the books that were on the sheet. And then we take it out, right? And I could pick 2.4 books per minute. And Jeff was slower. And that was. And he. You could hear him because he would be chasing us, right? We were all competing together, and his big laugh would be there, booming.
- [22:26]
Narrator
Brannon left Amazon in 2000, but she still looks back fondly. At that time, racing Jeff Bezos in the warehouses. She actually got a valuable glimpse of how Bezos operates. He dove into the details of every aspect of his company and just wanted to win at all costs, even against his own colleagues.
- [22:45]
Gayle King
He's incredibly competitive. He wanted to improve his performance, which made me more competitive. But there was a lot of laughter, right? He loved it. And I have to say, I loved it.
- [22:57]
Narrator
All this chaos was okay to a point. Many of the dot coms of the late 90s were pursuing similar strategies, trying to get big fast. Here's Warren Jensen, the company's chief financial officer at the time.
- [23:09]
BetterHelp Representative
It was a land grab. I think one of the things that I remember during that period, Jeff would frequently say, is he'd make the statement that brands are like quick drying cement. And the Amazon mission was very clear to come, find, discover and buy anything online.
- [23:27]
Narrator
Wall street seemed happy to fund that mission, to bet on its possibility, even though it was unprofitable. Amazon lost $600 million in 1999. And investors didn't seem to bat an eye.
- [23:39]
BetterHelp Representative
At first, the company was incredibly strong. The capital markets in early 99 were wide open to big Internet ideas like.
- [23:49]
Narrator
Amazon.com but gradually, investors started to ask questions. When are you going to get real and start to operate like a professional company?
- [23:58]
BetterHelp Representative
There were real storm clouds forming. The company was burning a lot of cash. And I would argue that by the fall of 1999, the Internet bubble was getting pretty thin. In fact, it was starting to burst. Investors were in awe of the growth, but were also voicing strong objections to the mounting losses.
- [24:22]
Narrator
And in March 2000, the Internet bubble burst. This was the dot com crash, and it was epic. A whole generation of Internet companies like Pets.com were careening into bankruptcy. It's described as nothing short of breathtaking, a points drop never before seen on the US markets. This closing bell might as well have been an alarm. So savage was the selling.
- [24:49]
Express Employment Professional
Bad day?
- [24:50]
Narrator
Bad day for you.
- [24:51]
Gayle King
Another one.
- [24:51]
Oracle Representative
Yeah, I know. Too many in a row.
- [24:53]
Narrator
And spare thought for Bill Gates. The Wall street collapse cost the world's richest man A mere $1.8 billion this week alone. Investors were starting to worry. Was Amazon going to be next in the trash heap? And Amazon feared. What if suppliers got nervous next? This could create a domino effect. Bezos and his colleagues had to move quickly to stave off disaster. So Amazon sends Warren to visit one of their largest suppliers, the book distributor Ingram's, to convince them that the company was on solid footing.
- [25:27]
BetterHelp Representative
And we went in and made a presentation to the Ingram board of Directors, and I think it was Laura Ingram stopped the meeting for a second and she said, warren, you have to remember that if you go bankrupt, we go bankrupt.
- [25:40]
Narrator
Warren was Amazon's CFO at the time. If Amazon went under, it could drag Ingrams down with it. This was a remarkable statement and a portent of things to come. Amazon had only been around for eight years, and it was already dangerously intertwined with the success of some of the largest companies in the world. After Bezos lieutenants went around reassuring suppliers, he made a second change, completely altering the company's operating posture. For five years, Amazon's mantra had been get big fast. And Bezos realized those days had to end.
- [26:16]
Gayle King
Jeff, you've got to be concerned about.
- [26:18]
Verizon Representative
Operating margins overall for the company. They're really extremely low.
- [26:21]
Gayle King
You're, in fact, you're amongst the worst out there.
- [26:23]
Jeff Bezos
So the company is basically at break even at this point. You know, we expect to generate substantial and meaningful free cash flow. So we're very excited about where the company is from a business.
- [26:33]
Narrator
This next era at Amazon was going to be about tightening the belt, and that was looking to be a lot less fun. The change in fortune was stunning.
- [26:42]
Greg Greeley
Another question that's been raised on Wall.
- [26:44]
Narrator
Street is you've had a lot of top executive departures within the last year. I think five.
- [26:49]
Jeff Bezos
No, I'm very happy with the executive team we have, and we are. We're really functioning well as a team. We've got good succession plans in place, great people. We're having fun.
- [27:04]
Dan Rose
A lot of people left. A lot of people left the company during that period. And you can't blame them because, again, it wasn't clear we were going to survive.
- [27:14]
Narrator
Dan Rose was fresh out of business school at the time. He watched as his dreams of instant wealth were dashed.
- [27:20]
Dan Rose
Suddenly, the NASDAQ craters and Amazon stock craters. And by the time I had vested my first year of my stock options at the company, that one year, Cliff, my stock was underwater. It was back down below $60. When I joined, it was like at $40. And over the next few years, it went down to something like 8 or 7 or something like that.
- [27:42]
Narrator
As for Bezos, his fortunes were also reversing, particularly in the court of public opinion.
- [27:48]
Dan Rose
Jeff goes from being the poster child of the Internet to being the poster child of the Internet bubble. And so this precipitous fall from grace.
- [27:57]
Narrator
The people who stuck around said that Bezos was handling it gracefully. But Warren Jensen, who worked closely with him, says that the scrutiny and pressure really got to him, especially when the SEC began investigating his personal stock sales for signs of impropriety.
- [28:13]
BetterHelp Representative
There were a lot of arrows pointed directly at Amazon and at Jeff. That was, you know, a painful period for Jeff. I mean, nobody wants to be questioned that way by the SEC and read about it above the fold in the New York Times.
- [28:29]
Verizon Representative
The other thing we've noticed is that there's been more selling of your stock by yourself. You've done about $80 million worth of.
- [28:36]
Gayle King
Shares that you've sold this year, a lot higher than what you have been doing historically.
- [28:41]
Jeff Bezos
My sales that you're talking about are made subject to a 10B5.1 plan which gets set well in advance. And I do for liquidity and diversification. I don't take a big salary@Amazon.com, i don't take options and my source of income is that stock.
- [28:57]
Narrator
The SEC later dropped the case without bringing any charges. It's hard to imagine it now because Bezos seemed so invincible. But back then he was subject to such doubt, even ridicule. His name was almost synonymous with the bust and hubris of the tech elite inside the company. Employees said that Bezos kept repeating one thing almost as a mantra. The only way out of this is to invent our way out.
- [29:22]
Dan Rose
He is, at his heart, he's an inventor. So here you have a CEO of by that time a successful company that had invented something new. He was saying to the world, I didn't just fall into this business, this is who I am. I'm going to constantly be inventing and trying new things and I'm going to build a culture of invention where everybody who works here is going to embrace this and is going to constantly be pushing themselves to invent new things.
- [29:49]
Narrator
How Amazon invented its way out of this first cycle of cynicism and started to become the giant that many people know and fear today. That's next.
- [30:15]
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- [31:12]
Verizon Representative
To you, but they won't feel that way if they're stuck messaging a clunky chatbot or waiting on hold for a representative.
- [31:20]
Narrator
Estimated wait time is 25 minutes.
- [31:28]
Verizon Representative
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- [32:11]
Narrator
I want to take a moment and interrogate this idea that Jeff Bezos is an inventor. As Dan Rose, the early Amazon employee, said earlier, invention is something Bezos cares deeply about. He wants to be seen as an inventor. It's a little contentious. He didn't exactly invent e commerce, but he defined it in its current form. And Bezos did mastermind the Kindle and Alexa. These are objects that have changed the everyday lives of so many people. But because of his wealth and Amazon status as one of the largest businesses in the world, Bezos ingenuity as an inventor often gets lost. Critics see him as a monopolist and Amazon as a monster that has unfairly tilted the economic playing field. That gulf between the inventor and the monopolist, between how Bezos hopes to be seen and the way he often is perceived, has never been larger. He didn't always have this problem. Back in 2004, Amazon was just in survival mode.
- [33:09]
Dan Rose
Here's Dan it wasn't like the company had turned the corner and everything was going great and we were out of the woods. It was like we had barely skated by. Many people thought we were six months away from bankruptcy. At a moment there, if our suppliers hadn't extended credit to us, we probably would have gone out of business.
- [33:26]
Narrator
So Amazon has survived, but would it ever thrive again? Many analysts are doubtful, but in the next few years, Jeff Bezos would pioneer a series of new inventions that would not only change the course of the company's fate, they change the entire tech industry. One of those inventions is extremely fast free shipping. Another is the Kindle. A third, which we'll get to in the next episode, is Amazon Web services or cloud computing.
- [33:53]
Dan Rose
Here were three incredible inventions that were not obvious, none of them were obvious. And he shipped them to the world and set the stage for what would become one of the greatest runs in the history of business over the next 15 years.
- [34:06]
Narrator
Perhaps the most consequential invention of this era is Amazon Prime. It's late 2004 and Bezos early vision for prime was as a sort of loyalty program. At the time, people weren't buying stuff like dish detergent and food online. And Bezos had this idea that if they could eliminate the shipping costs, then online shopping would be no more expensive than going to the store back then. Amazon has fast tracked shipping and it was the pride of the company, but they were charging customers a lot extra to rush their orders in one or two days. So not that many people were using it. Here's former vice president Greg Greeley.
- [34:45]
Greg Greeley
You know, and Jeff himself had been saying, what can we do to get more people using our best product? The ops team had worked so hard to create this really amazing supply chain that could provide predictable, you know, albeit expensive, but could provide a very predictable next day and two day experience.
- [35:01]
Narrator
So Bezos imagines Prime as a special club. Pay $79 up front and get two day shipping for a year. He likes to call it an all you can eat experience. And from the start he has one name in mind.
- [35:14]
Greg Greeley
In 2004, when we were trying to kind of lock in on the program, Jeff said, I think it should be called Prime. And because we had been pushing on this all you can eat experience, my initial thought was, well, why won't we confuse that with prime rib? That's where my head went. I said there must be a better branding there.
- [35:33]
Narrator
Buy anything you want, like patio furniture and get two day shipping. You can imagine. Financial analysts were skeptical.
- [35:40]
Greg Greeley
I am sure we could both do a Google search and find lots of analysts that said this is absolutely crazy. For a number of years they were questioning how we were affording it because of course you just look at the math that our ship revenue that we were collecting and the cost of our shipping.
- [35:57]
Narrator
But Bezos insists on going ahead with Prime. He believes that it will make customers more loyal, more willing to shop beyond books, music and DVDs which were Amazon's core products at the time. And he was gambling that the expense of unlimited 2 day shipping would go down as Amazon builds more warehouses closer to customers. Both Amazon.com and many of its customers are getting what they want with Amazon's prime service. For Amazon, it's more customers and for customers nearly free shipping the service at.
- [36:27]
Verizon Representative
$79 a year includes free two day delivery on any item Amazon stocks. That includes, according to the Wall street journal, a 1500 pound safe. That's £1,500.
- [36:41]
Narrator
David Prime's impact wouldn't be visible to the outside world for a couple of years. But over time, it seriously changed people's shopping habits. How many things did you used to buy in stores that you now buy online? And prime has created a new expectation that shipping and online orders should be free. This created an impossible bar for Amazon's competitors because now rival retailers like Barnes and Noble and Best Buy also have to offer some version of free shipping. And prime sets another thing in motion. Almost invisibly, tens of thousands of workers join Amazon as warehouse workers and drivers. Soon this balloons to hundreds of thousands of workers. They do the brutal work of fulfilling the promise of two day delivery. Over time, as prime accelerates to next day delivery, same day delivery, the labor issues will intensify. At the same time, as Bezos orders the creation of prime, he branches out in an even more surprising direction. He wants Amazon to be more than an online retailer. He has an idea for a consumer electronics device. In the early 2000s, Apple introduces the iPod in the iTunes Music Store. It drastically changes the music business. Bezos watches the CD sales on Amazon fall.
- [37:58]
Dan Rose
Jeff had this realization that this could also happen to Boox and if it did happen to books, it would be much more existential for us than the CD business because for two reasons. Books was by far our largest business, but also more importantly, it was half of the company's profits.
- [38:16]
Narrator
Dan says that from Bezos point of view, it was only a matter of time before someone invented an ipod for books and it could kill his business.
- [38:25]
Dan Rose
Jeff also realized that if Amazon didn't do it, somebody else would. That it was inevitable that digital books would exist in the world in the same way that it was inevitable that the ipod would exist. He got that at a deep, instinctual level.
- [38:42]
Narrator
Bezos sets up a secret team to produce the Kindle and he closely manages the project. Some would say he micromanages it. He insists on a cellular modem that allows the Kindle owner to download an ebook anywhere, even in the back of a taxi. It will take three years and generate all kinds of tension. One challenge is to get book publishers to digitize more of their catalogs. At the time, only about 20,000 books exist in ebook form. But Bezos wants to see five times that many titles available for the Kindle's launch. Dan Rose is in charge of the effort.
- [39:21]
Dan Rose
I cannot overstate the lack of enthusiasm that my overtures were met with from the book publishers. They immediately explained to us why it was not a good use of their time or resources or money to produce more digital books and that they just frankly were not going to do it.
- [39:41]
Narrator
So Amazon pushes back against the book publishers. It basically threatens to pull the publishers physical books from Amazon.com unless they agree to digitize more of their catalogs. Then Amazon surprises publishers with an announcement that all new ebooks will be sold at a flat rate of $10. I don't know if you've bought a new hardcover lately, but they usually cost closer to $30. Publishers are not amused. They believe they've been deceived by Amazon into undermining the most profitable part of their business. The drive towards ebooks was the first notable instance of Amazon really strong arming its suppliers. This more or less becomes Amazon's signature move in the next decade as the company seals its dominance as an online retailer. It also starts to seed Amazon's reputation as a ruthless monopolist. But to Amazon, it's all worth it. When it introduces the Kindle in November22,007, it changes the way the world views the company. Yesterday, Amazon CEO Jeff Bezos unveiled the.
- [40:47]
Verizon Representative
Much weighted Amazon Kindle, a sort of.
- [40:50]
Narrator
Portable digital library which is always at.
- [40:52]
Verizon Representative
BookExpo, the book industries annual convention held this year in LA. There was a palpable buzz of curiosity about the Kindle on the convention floor. People who had never seen a Kindle were eager to get a look at it. Can I feel it?
- [41:05]
Gayle King
Can I see?
- [41:07]
Narrator
You can put your hands. Amazon is no longer a dot com sensation. Bezos is no longer a goofy, over exuberant CEO with the crazy laugh who barely survives the dot com bust. The Kindle puts Amazon in the same league as Apple. They're two pioneers creating a bold future for digital media. And when the Kindle lands on the COVID of Newsweek magazine, Bezos seen for now at least, the way he always wants to be seen as an inventor. Here's Bezos on stage at the Kindle Paperwhite announcement.
- [41:41]
Jeff Bezos
We love to invent, we love to pioneer. We even like going down alleys that turn out to be blind alleys.
- [41:53]
Dan Rose
And it was a big deal and I do think it changed the perception of Amazon and, and people recognize now that this was more than just an Internet retailer. You're a company that can innovate and build new things that may be orthogonal to the core thing that you do.
- [42:07]
Narrator
These two seminal inventions, Amazon prime and the Kindle not only change the way the world views Amazon, they give Bezos a license to keep trying new things. This means that Amazon can push into new product categories, new countries shake up new industries, and the repercussions of Amazon's relentless march forward become bigger than just the tech industry. It has consequences for society at large. Alexa, introduce yourself I'm Alexa and I.
- [42:45]
Gayle King
Respond when you say my name.
- [42:47]
Verizon Representative
There are lots of things we can do together.
- [42:50]
Narrator
Alexa, are you alive?
- [42:52]
Verizon Representative
I'm not really alive, but I can be lively sometimes.
- [42:57]
Narrator
That's next time on the Amazon Story. Foundering is hosted by me, Brad Stone, Sean Wen is our executive producer. Ray Mondo is our audio engineer. Molly Nugent is our associate producer. Mark Millian, Ann Vanderme, Robin Agello and Molly Schutz are our story editors. Francesca Levy is the head of Bloomberg Podcasts. Be sure to subscribe and if you like our show, leave a review. Most importantly, tell your friends. See you next time.
- [43:38]
Verizon Representative
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- [44:10]
Narrator
Prime membership is required to access Spend Visibility.
- [44:13]
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