Jeff Bezos (Insights, Stories, and Secrets)

What I learned from Working Backwards: Insights, Stories, and Secrets from Inside Amazon by Colin Bryar and Bill Carr. ---- [3:58] What is best for the customer? Do that: "Amazon believes that long-term growth is best produced by putting the customer first. If you held this conviction, what kind of company would you build?" [7:05] Jeff skips the conferences and dinners: "95 percent of the time I spent with Jeff was focused on internal work issues rather than external events like conferences, public speeches, and sports matches." [25:08] Don't encourage communication—eliminate it: "Jeff said many times that if we wanted Amazon to be a place where builders can build, we needed to eliminate communication, not encourage it. When you view effective communication across groups as a "defect," the solutions to your problems start to look quite different from traditional ones." (There is nothing conventional about Jeff) [27:29] Why companies must run experiments: "Time and time again, we learned that consumers would behave in ways we hadn't imagined especially for brand-new features or products." [30:16] Jeff on the importance of making decisions quickly: "Most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you're probably being slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you're good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure." [30:48] Great anything is rare: "Great Two-Pizza team leaders proved to be rarities. Although we did identify a few such brilliant managers, they turned out to be notoriously difficult to find in sufficient numbers, even at Amazon." [34:30] A simple tip from Jeff on how to produce unique insights: "Jeff has an uncanny ability to read a narrative and consistently arrive at insights that no one else did, even though we were all reading the same narrative. After one meeting, I asked him how he was able to do that. He responded with a simple and useful tip that I have not forgotten: he assumes each sentence he reads is wrong until he can prove otherwise. He's challenging the content of the sentence, not the motive of the writer.” [35:12] Why Amazon works backwards: "Working Backwards is a systematic way to vet ideas and create new products. Its key tenet is to start by defining the customer experience, then iteratively work backwards from that point until the team achieves clarity of thought around what to build." [40:00] Working backwards on Kindle: "We were working forward, trying to invent a product that would be good for Amazon, the company, not the customer. When we wrote a Kindle press release and started working backwards, everything changed. We focused instead on what would be great for customers. An excellent screen for a great reading experience. An ordering process that would make buying and downloading books easy. A huge selection of titles. Low prices. We would never have had the breakthroughs necessary to achieve that customer experience were it not for the press release process, which forced the team to invent multiple solutions to customer problems." [43:58] Patience. Then bet big: Our approach permits us to work patiently for multiple years to deliver a solution. Once we had a clear vision for how these products could become businesses that would delight customers, we invested big. Patience and carefully managed investment over many years can pay off greatly. [46:03] Have Steve Jobs level of belief in your products: "Jobs calmly and confidently told us that even though it was Apple's first attempt to build for Windows, he thought it was the best Windows application anyone had ever built." [54:48] Amazon's Kindle strategy was influenced by Apple: "In digital, that meant focusing on applications and devices consumers used to read, watch, or listen to content, as Apple had already done with iTunes and the iPod. We all took note of what Apple had achieved in digital music in a short period of time and sought to apply those learnings to our long-term product vision." [56:48] Good ideas are rare. When you find one bet heavily: "At some point in the debate, someone asked Jeff point blank: "How much more money are you willing to invest in Kindle?" Jeff calmly turned to our CFO, Tom Szkutak, smiled, shrugged his shoulders, and asked the rhetorical question, "How much money do we have?" ---- Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work. Get access to Founders Notes here. ---- “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast

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• 0:00David Senra?

  An insider's guide to the principles and practices that drove Amazon's meteoric rise. Colin Bryar and Bill Carr joined Amazon in the late 1990s, at a time when it was making the transition from a small company that used doors for desks to one of the fastest-growing and most respected companies in the world. In Working Backwards, these two long-serving Amazon executives reveal and codify the principles and practices that drive the successes of one of the most extraordinary companies the world has ever known. With 27 years of Amazon experience between them, much of it in the early 2000s, a period of unmatched innovation that brought products and services, including Kindle, Amazon Prime, Amazon Studios, and Amazon Web Services to life,

• 0:45David Senra?

  Breyer and Carr offer the first insider's account of the practices that set Amazon apart. With lessons and techniques for applying Amazon's 14 leadership principles to your company or career, the authors illuminate how the principles inform decision-making at all levels and reveal how the company's culture has been defined by four characteristics: customer obsession, long-term thinking, eagerness to invent, and operational excellence. Breyer and Carr explain the set of ground-level practices that ensure these characteristics are translated into action and flow through all aspects of the business. Working Backwards is a practical guidebook and a corporate narrative, filled with the authors' in-the-room recollections of what being Amazonian is like

• 1:30David Senra?

  and how it affected their personal and professional lives. They demonstrate that success on Amazon's scale is achieved through commitment to its set of well-defined, rigorously executed principles and practices, shared here for the very first time. And that is an excerpt from the front cover of the book that I want to talk to you about today, which is Working Backwards: Insights, Stories, and Secrets from Inside Amazon, written by Colin Bryar and Bill Carr. And I want to do this bonus-- this book is a bonus episode-- because there's a sequel to what may be the most insightful biography I've ever read. That's The Everything Store, written by Brad Stone. Not only do you get a good--

• 2:10David Senra?

  Idea of the early life of Jeff Bezos, what he was like as a young person, why he made the decision to quit his job at the age of 30 and start Amazon. But you also get a lot of his, he probably has the most unique ideas out of any entrepreneur that I've covered. And so that author is releasing in the next few weeks, a book called Amazon Unbound. And I think a good way to prepare for that book is by reading this one. So let me go ahead and jump into a couple, there's a couple of interesting parts I found in the introduction that I want to bring to your attention. So it starts off at saying, why is Amazon worthy of study? And it says, to say that Amazon is an unconventional company is an understatement. Its most significant initiatives have often been criticized and even derided as folly.

• 2:55David Senra?

  And when I read those two sentences, I thought, I was like, well, that's actually a good thing. I remember in the book, Confessions of an Advertising Man, David Ogilvie said that talent and good ideas is more likely to be found among nonconformists, dissenters, and rebels. And so those kind of people are going to be criticized by everybody else, and it's largely due to everybody else not understanding their ideas. So that may be an indicator that you actually have some good ideas if people disagree with them. So they continue talking about what this book is about. And then I'm going to really, when you think about the title, Working Backwards, I'm going to refer to that as It Could All Be So Simple, and that'll make sense in one second. So it says, this book is primarily about showing you some of the unique principles and processes at Amazon with enough detail that you will be able to implement them if you choose to.

• 3:40David Senra?

  So it's separated into two parts. The first part is going over the philosophies, the ideas, and the principles behind Amazon. And then the second part has to do with how they apply those philosophies to the building of many products. So it talks about the Kindle, Amazon Prime, Prime Video, and then AWS. And so let's go back to this idea that it could all be so simple. And it has to do with a fundamental core belief of Amazon. It says, Amazon believes that long-term growth is best produced by putting the customer first. If you held this conviction, what kind of company would you build? So, working backwards is the idea that you don't start building a product. You start with the ideal customer experience in mind, usually in the form of a press release

• 4:21David Senra?

  and an accompanying FAQ, which I'll talk to you more about in detail later. And then you work backwards from that ideal customer experience. And the reason I say it could all be so simple is because think about the products and services and the companies that you patronize. Sometimes you do so voluntarily, sometimes it's involuntary. But this is not rocket science, and yet it's a very simple idea that almost nobody uses in practice. The best thing for the company is the best thing for the customer. And yet, there's a lot of experiences, some small, some major, where when you have an unpleasant experience with a company, you're just like, you could tell, okay, you're thinking about it from your perspective instead of from the customer's. That's the most common, I would say, method of operating businesses.

• 5:02David Senra?

  And I think what, again, what makes Amazon unique is that they take a simple idea and they apply it relentlessly. So, I'll talk some more about that. If you held this conviction, what kind of company would you build? Jeff described Amazon in this way, direct quote from Jeff. "Our culture is four things: customer obsession," right, which is just another way of saying putting the customer first, "instead of competitor obsession; willingness to think long-term with a longer investment horizon than most of our peers; eagerness to invent," which of course goes hand in hand with failure; and then the fourth one, "taking professional pride in operational excellence." And so, we're going to come back to that idea that it could all be so simple multiple times throughout the book. I want to talk about what I think makes this book really, really unique is the fact that

• 5:45David Senra?

  one of the authors, this guy named Colin, he was actually Jeff's shadow for a very long time. And so, we're going to get unique insights. I just can't imagine, like, once people know that, okay, this guy was Jeff's shadow for two years, it happened in the early 2000s, think about the fundamental changes that Amazon was forced to go through during those periods, how many people would want to meet with this guy, pick his brain, to use the common expression? It's just like, well, you don't have to pick his brain, just pick up the book that he wrote, and then you can download all of his experiences into your mind, right? So, he says, "Jeff asked me," this is summer 2003, "Jeff asked me to become his technical advisor, a role that is known as Jeff's shadow." So, he's with him 24/7. I mean, obviously, not when he's at home, but at work, right? And this role is similar to a chief of staff role at other companies.

• 6:30David Senra?

  That position had been formalized 18 months earlier when Andy Jassy So it says, "Now the CEO of Amazon Web Services," that's when the book was published. He's now the CEO of Amazon, "became Jeff's first full-time technical advisor." And so when I read that, I got extremely interested, not that I was obviously going to finish reading the book anyways, but this is right in the introduction. I was like, okay, this is going to be serious because this guy is spending every day with Jeff, almost every hour with Jeff, for two years at a very integral part of the company-building process of Amazon, way before they're the Amazon that we know today. So he's going to have a lot of interesting insights. The very first one was fascinating. He talks about how Jeff spends his time, which I love.

• 7:12David Senra?

  And so he's talking about, hey, they went to this charity tennis event, but this is the important part. This story is atypical. 95% of the time I spent with Jeff was focused on internal work issues rather than external events like conferences, public speeches, and sports matches. When I read that, I immediately thought of this quote I always think about. It's in the book Becoming Steve Jobs. I think that was Founder's number 19, somewhere back in there. But Tim Cook talks about, and the reason I'm bringing this to your attention is because I find it fascinating that Jeff and Steve, Jeff Bezos and Steve Jobs arrived at the similar conclusion about the best use of your time. And so Tim Cook said, "If you look closely at how Steve spent his time, you'll see that he hardly ever traveled and did none of the conferences and get-togethers that so many CEOs attended. He wanted to be

• 7:57David Senra?

  home for dinner." They focused nine, that's a crazy stat, 95% of his time on internal work issues. The more I learn, the more I really just start thinking about the external world as just an external distraction. So more on the unique perspective that Colin's able to get from Jeff. He was able to ask, "Why?" That's hugely important to understanding, like, why did, how did Jeff arrive at these decisions, this philosophy he built over time, and then why? So he says, "When I write about what led Jeff, what led to Jeff making key decisions in this book, I can do so because I often directly asked him for his specific thinking behind his insights, as the reasoning behind them was often more illuminating than the insights themselves."

• 8:43David Senra?

  And this is also why I think Charlie Munger talks about, hey, the reason you need, the reason he's read hundreds of biographies, the reason he recommends people to spend time reading biographies. And he uses the term, you're becoming friends with the eminent dead. And he's like, listen, you can learn the ideas, but if you get a sense of the person, and you get a sense of this person by reading his life story, his or her life story, then you have an idea of why they arrived at these decisions. Because the decisions we make are a byproduct of the experiences we have and the personality and how we view the world. And I think his point is that they just stick. You have a better understanding of them. You're more likely to remember them and then to utilize them in your own life. I think that's a very astute observation by Munger. All right, so let's go back to the end of the introduction here and then we'll get into some of these ideas. And I love this part.

• 9:28David Senra?

  Really, it's a reminder that there's just, there's always more than one way to solve a problem. So he says, you know, this is, they use the term, this is being Amazonian. This is, you know, the way Amazon, largely guided by Jeff's philosophy, chose to build the business, but it's not the only way. So he says, "The world, thankfully, is full of..." Now, this is Jeff writing, by the way. I wasn't clear. "The world, thankfully, is full of many high-performing, high-distinctive corporate cultures. We never claim that our approach is the right one, just that it is ours." And again, that's something you see in biographies over and over again. They tell the philosophy behind the methods used to build their companies. And usually, they explicitly say stuff like that. The ones I've just happened to be top of mind because we're reviewing some highlights. James Dyson talks about, "This is just my way of doing things."

• 10:13David Senra?

  Yvon Chouinard talks about that in his book, Building of Patagonia. David Ogilvie talks about that in Building Ogilvie and Mather. "This is my way of doing things. I take influences from the past, experiences that I had, and then I remix it with my own ideas and I try to create something new, something unique and new." So let's talk a little bit about Jeff at the very beginning of Amazon. These are my favorite parts of company history. "In the very early days of the company, when it consisted of only a handful of employees..." Now, they have, what, over a million? Last I read, something like 1.3 million, some crazy number like that. "In the very early days of the company, when it consisted of a handful of people working out of just three small rooms, there was no formal leadership principles because Jeff was the leadership principles. He wrote the job descriptions, and he interviewed the candidates. He packed and shipped boxes

• 10:57David Senra?

  and read every email that went out to customers." Taking part in every aspect of the business allowed him to communicate the Amazon philosophy informally to the relatively small group of employees. So they're obviously going to get to the point that your company's not going to stay that small forever. Eventually, you're going to have to find a way to communicate these leadership principles when you can't communicate them one-on-one. Let's go back to more of Jeff at the beginning. The first Amazon distribution center was a room that measured 400 square feet and that had last served as the practice space for a local band whose name was still spray painted on the door. And yet, even at this time, Jeff was still focused on, it has to be the best. We have to be committed to operational excellence. Jeff had one simple rule.

• 11:42David Senra?

  It has to be perfect. He reminded his team that one bad customer experience would undo the goodwill of hundreds of perfect ones. So it also talks about, and we see this from his very, I've read this before on past podcasts, but I love it. It's a constant reminder. You can go back and find this online, but it's a very early job ads were written by Jeff. And this is what it said. The job description he wrote for his very first employees said, "You must have experience designing and building large and complex, yet maintainable, systems. And you should be able to do so in about one-third the time that most competent people think possible." So even from the very beginning, we see he's a very extreme character. The words relentlessly and unreasonably high are distinctly Jeff.

• 12:27David Senra?

  And I always say, type into your web browser relentless.com and see where it boards to. Jeff owns that domain. It's hilarious. So they talk about there's actually written, not in stone, I wouldn't say, but written and communicated at length are Amazon's leadership principles. You can find them online. They're obviously in the book. I'm just going to pull out some quotes from the leadership principles. And so we get a good idea of the philosophy and the culture at Amazon. Leaders start with the customer and work backwards. That's the very first one. As we do things, we accept that we may be misunderstood for long periods of time. They opened the book with that, right? We work to disconfirm our beliefs.

• 13:08David Senra?

  So he talks about the philosophy, excuse me, the leadership principles are describing what a leader is at Amazon. So it says, you know, leaders start with this, leaders do this, leaders expect this. So it said, one of this is leaders are working, work to disconfirm their beliefs. Leaders are never done learning. Leaders have relentlessly high standards. Many people may think these standards are unreasonably high. Thinking small is a self fulfilling prophecy. Speed matters in business. These are not coming from the same one. These are just highlights from all 14, okay? Constraints breed resourcefulness, self sufficiency, and invention.

• 13:53David Senra?

  There are no extra points for growing headcount, budget sized, or fixed expenses. Leaders benchmark themselves and their teams against the best. And leaders are obligated to challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders do not compromise for the sake of social cohesion. Okay, so now they start talking about, okay, well, that's nice that you have leadership principles. You write them down, you communicate them. But how do you make sure that they are actually applied? So they use the term mechanisms. This is the way they reinforce the leadership principles. The book goes in great detail about this.

• 14:34David Senra?

  Really, my favorite part of this is, and it's going to tie to two other things that Jeff has said and Sam Walton said in his autobiography, which Jeff read. Underlined, he gave his gifts, he made Amazon executives read. It had a large impact on the way he ran his business. But it says, "Amazon realized early on that if you don't change the underlying condition that created a problem, you should expect the problem to recur." So I think it was on Founders 155. I read Invent and Wonder, the collected writings of Jeff Bezos. It's every single Jeff Bezos shareholder letter, plus a bunch of his most famous talks. They were transcribed and lightly edited. And he said something, in that book, it was fascinating. He's talking about this idea that he hired somebody that was a kaizen.

• 15:19David Senra?

  Expert, that's a Japanese term that means continuous improvement. So it talks about something that was happening at its fulfillment center. I'm just going to read this from that book. At a fulfillment center, this is Jeff writing, "At a fulfillment center recently, one of our kaizen experts asked me, 'I'm in favor of a clean fulfillment center, but why are you cleaning? Why don't you eliminate the source of the dirt?'" And then Jeff's response to this was hilarious. He says, "I felt like the Karate Kid." And that ties into what they're talking about in the book. Like, okay, that's nice that you're fixing the problem, but you need to make sure that you change the underlying condition so the problem doesn't continue to recur. So in his autobiography, Sam Walton talks about this, and he uses the example of test scanners. And I'm going to get to that. He talks about really what's the most common result of a problem in a company, what Sam

• 16:03David Senra?

  Walton's talking about is that you just add another layer of bureaucracy on it. He's like, "But that's not solving the problem." So he says, "If you don't zero," this is Sam Walton talking now, "if you don't zero in on the bureaucracy every so often, you will naturally build in layers. You never set out to add bureaucracy. You just get it, period, without even knowing it. So you always have to be looking to eliminate it. A lot of this goes back to what Deming told the Japanese a long time ago. Do it right the first time. The natural tendency when you've got a problem in a company is to come up with a solution to fix it. So that's exactly what they're talking about in the book, right? But Walton ran into this 30, 40 years earlier. Too often, that solution is nothing more than adding another layer. What you should be doing is going to the source of the problem to fix it, and sometimes

• 16:47David Senra?

  that requires shooting the culprit." So now we have another person in the book talking about an example in Walmart's history. "I'll give you an example that drove Sam crazy until we started doing something about it. Merchandise would come into the back of the store. It was supposed to be marked at the right price or marked correctly on the spot." Right? So that's the idea, they're describing the ideal, what should have happened. That's not what happened. "But because it often wasn't getting done properly the first time," I'm adding the first time, "we created positions called test scanners. People who go around the store with handheld scanners, making sure everything is priced correctly. There's another layer right there. And Sam didn't ever visit a store without asking if we ever really needed these folks." So now they talk about the solution.

• 17:32David Senra?

  Really, it's a simple philosophy. What you have to do is just draw a line in the dirt and force the bureaucracy back behind the line. And then know for sure that a year will go by and it will be back across that line. And you have to do the same thing again. Okay, so skipping ahead, I love this. They talk about, okay, it's nice that you have principles, it's nice you have mechanisms, but really incentives rules everything around you. No matter how clear your leadership principles and yearly plan may be, they speak softly in comparison to financial incentives. The bulk of your compensation at Amazon and potentially enormous upside is the long-term value of the company. So it talks about what they're trying to avoid by doing this. The wrong kind of compensation practice can cause misalignment of incentives in two ways. Number one, by rewarding short-term goals at the expense of long-term value creation.

• 18:16David Senra?

  And number two, by rewarding the achievement of localized department milestones, whether or not they benefit the company as a whole. Both of these incentives, that is, can powerfully drive behaviors that are antithetical to the company's ultimate goals. So this is something we've learned over and over again. I've done, what, three books on Charlie Munger. He talks about incentives over and over again. In Warren Buffett's shareholder letters, he talks about the reason that they... So at the very structure of Berkshire, they know the power of incentives. That's why they keep... They just dictate where the money of the company is going to be invested, at headquarters, that being Warren and Munger and the people that help them.

• 18:59David Senra?

  And then, two, they set the compensation for the people running the businesses. And they're largely decentralized after that. It's very interesting. So let me read this quote, two quotes from Munger about the same thing. "Never, ever think about something else when you should be thinking about the power of incentives." Another quote. "I have been, I think I've been in the top 5% of my age cohort all of my life in understanding the power of incentives. And all of my life, I've underestimated it." Okay, so now there's a chapter called, it's about organizing the company. And they have this idea in here that's really, I think, powerful. And it's separable, they call it separable, single-threaded leadership. And you'll see the need for this in this meeting. It's with Jeff and a bunch of other executives.

• 19:44David Senra?

  And so this guy, one executive starts talking. He says, "The project, this project has many moving parts. We've identified five unresolved issues so far that are slowing us down." They are, and then Jeff interrupts. He said, "Before we get to those issues, would someone please tell me who's the most senior, the most senior, single-threaded leader for this initiative?" Then there's an uncomfortable, long pause. And then one guy guesses, he's like, "I guess I am." So he says, "I am." Then Jeff says, "But you're in charge of the whole business unit." Remember, he said, "single-threaded leader for this initiative." Right? So he says, "I am, but you're in charge of the whole business unit. That includes a lot more than this one initiative." Then another vice president, "That would be me, then." So now Jeff turns his attention to him.

• 20:26David Senra?

  "So, this is all that you and your team work on every day." And that one sentence describes the idea behind single-thread, separable, single-threaded leadership. Okay? "Okay, so it's you. So this is all that you and your team work on every day." "Well, no. The only person working on it full-time is one of our product managers." And now Jeff starts to get really impatient. "Does a product manager have all the skills, authority, and people on their team to get this done?" Back to the vice president. "No, not really, no. Which is why we plan to hire a director to head it up." Jeff goes, Jeff continues. "How many interviews have you conducted so far for this new director?" "Well, it's not an open position yet, so the answer is zero."

• 21:10David Senra?

  And so Jeff's going to end the meeting right here. "Okay, we're kidding ourselves. The initiative won't go green, meaning we can do it, until there's a new leader in place. That is the real roadblock." Remember, the meeting started off saying, "Hey, we've identified five issues of the roadblock." Jeff's like, "No, you didn't. This is a real roadblock." That is the real roadblock this initiative is facing. Let's remove that one first. So now this is the author's interpreting for us what like what's going on here. "Speed," or more accurately, "velocity," which measures both speed and direction, "matters in business. With all other things being equal, the organization that moves faster will innovate more, simply because it will be able to conduct a higher number of experiments per unit of time. Yet many companies find themselves struggling against their own bureaucratic drag,

• 21:51David Senra?

  which appears in the form of layer upon layer of permission, ownership, and accountability, all working against fast, decisive, forward progress." Go back to the example of Sam Walton. It's not that he wanted to remove layers just for the sake of removing layers, but he knew that it slows it down and it increases his cost structure. Going more, continuing this train of thought on the very next page. The answer, so they're talking about like, well, how do we, how do we speed things up? "The answer lies in an Amazon innovation called 'single-threaded leadership,' in which a single person, unencumbered by competing responsibilities, meaning that is the only thing they work on, owns a single major initiative,

• 22:31David Senra?

  and heads up a separate, largely autonomous team to deliver its goals." So that reminded me, one of my favorite ideas that I've ever come across. I don't understand why more companies don't use this. It's when Peter Thiel was the CEO of PayPal, he came up with this idea that he had an extreme, they call it an extreme philosophy on manager focus. Let me read this to you. So it says, "Thiel developed an unorthodox, extreme philosophy on manager focus and prioritization. Instead of focusing on five things, or three things, the magic number is one. You only focus on one singular thing." As PayPal executive at the time, Keith Raboy recalls, "Peter would refuse to discuss virtually anything else with you

• 23:14David Senra?

  except what was currently assigned as your number one initiative." That is very similar to what we're seeing Jeff Bezos do in this meeting, right? "Every employee, for instance, had to identify the single, not the top two, not the top five, the single most valuable contribution to the company." So this is extreme manager focus work because Thiel gave it teeth. "With distractions cleared away, Thiel empowered every person in the company to pursue their only priority with extreme dispatch and vigor." What a great term there, huh? Giving each individual in the organization a singular focus drives people to work on only those goals that will help it achieve true success. So that's, in this case, they're calling it, you know, his unorthodox stream philosophy on manager focus.

• 23:58David Senra?

  And in Amazon, they're saying, hey, who's the single-threaded leadership? And this is something that's really important. They talk about this idea over and over again in different contexts in the book. Now, we've got to another one of Jeff's, very unorthodox, but one of my favorite ideas of his. And I'm going to try to reduce it into a maxim, and that is, communication is a sign of dysfunction. I'm going to read this entire section to you. It's a quick few paragraphs. It's under the heading, "Better Coordination Was The Wrong Answer." Resolving a dependency usually requires coordination and communication. And so, right there, that gives you a hint, in case you haven't heard this idea before. Jeff doesn't want to resolve dependencies.

• 24:42David Senra?

  He wants to eliminate them, right? And when your dependencies keep growing, requiring more and more coordination, it's only natural to try speeding things up by improving your communication. So you have Amazon, they realize it's a problem, let's solve the problem. Jeff's like, no, you're solving the wrong problem. There are countless approaches to managing cross-team coordination, ranging from formalized practices to hiring dedicated coordinators, and it seemed as though we looked at them all. At last, we realized that all this cross-team communication didn't really need refinement. It needed elimination. It wasn't that we had the wrong solution in mind, rather, we've been trying to solve the wrong problem altogether. We didn't yet have the new solution, but we finally grasped the true identity of our

• 25:24David Senra?

  problem: the ever-expanding cost of coordination among teams. This change in our thinking was, of course, nudged along by Jeff. In my tenure at Amazon, I heard him say many times that if we wanted Amazon to be a place where builders can build, we needed to eliminate communication, not encourage it.

• 25:44David Senra?

  So he takes the standard idea in business. Oh, you know, we have a problem. Let's get, you know, put our heads together. Let's have a meeting. Oh, we're not communicating well. Let's, you know, let's get Slack. Let's get a different way to communicate. Let's send emails, et cetera. And Jeff's like, no, stop communicating. And this is why. When you view effective communication across groups as a defect, the solution to your problem starts to look quite different from traditional ones. I need to read. I underlined that sentence twice. When you view effective communication across groups as a defect, not something to be encouraged, something to be eliminated. That's what he's saying, right? The solutions to your problems start to look quite different from traditional ones. Or read that another way. The solution looks quite different from what other companies are wasting time doing. He suggested that each software team should build and clearly document a set of APIs, so application programming interfaces,

• 26:29David Senra?

  for all their systems and services. An API is a set of routines, protocols, and tools for building software applications and defining how software components should interact. In other words, Jeff's vision was that we needed to focus on loosely coupled interaction via machines through well-defined APIs rather than via humans through emails and meetings. This, why? Why? Why is he doing this? This would free each team to act autonomously and move faster. That's another idea that he uses in different contexts. And I've heard him in other speeches and other writing. We're talking about, listen, if you, if you're moving, if your decision-making process is moving slow, the best people are going to leave because the best people want to build new things. They want to build better products.

• 27:12David Senra?

  And they can't do that if they're waiting around for permission. So make it permissionless. Again, another way to explain the same concept and same idea. Now, they talk about the importance of speed because the more experiments you run, excuse me, the faster you go, the more experiments you run, the more experiments you run, the more you innovate, the faster you move. Okay, it's all tied. Let me go back to this idea. I'm not going back. I'm continuing the idea. And really, the new life of myself is this is why every company must run experiments. Time and time again, we learned that consumers would behave in ways we hadn't imagined, especially for brand-new features or products. So the first solution to this less communication is building these autonomous units, these little, small teams within Amazon.

• 27:56David Senra?

  And they're called two pizza teams. This was the first proposed solution. This evolves. But it says Jeff proposed that instead of finding new and better ways to manage our dependencies, we needed to figure out how to remove them. "We could do this," he said, "by reorganizing software engineers into smaller teams that would be essentially autonomous, connected to other teams only loosely," and what a great sentence right here, "and only when unavoidable. These largely independent teams could do their work in parallel. Instead of coordinating better, they could coordinate less and build more." So then there's this document that talks about what a two pizza team is. I'm going to pull out some ideas, or excuse me, pull out some highlights. "No more than 10 people. They should have no need to coordinate with other teams to get their work done."

• 28:40David Senra?

  Remember, he's emphasizing speed here, still. "They should be evaluated by a well-defined fitness function." This is actually, what I love about them, about this book, is they talk about the documents they use, and then they wind up going back and saying, hey, that actually didn't work. So this well-defined fitness function, they, they wind up dropping this because it was a series of weighted metrics. And they're like, why are we, the way we're weighting these metrics seems to be arbitrary. Why don't we just identify, like, instead of taking an average of metrics, just use the actual metrics. Identify the metrics that are important to the team's success, and then use those. I'm going to skip over that. He says, "They must be monitored in real time. A team's real-time score on its metrics would be displayed on a dashboard next to all other two pizza team scores."

• 29:24David Senra?

  The team will own the business results. This eliminates the all-too-easily-heard excuses such as, "We built what the business folks asked us to," or "They just asked for the wrong product." So now, they drop this idea of, or I don't even know if dropping it. It morphs into, the two pizza team idea morphs into the single-threaded leadership idea. And in this book, they do a postmortem on the original two pizza, two pizza team idea. And the summary is, they just called it a clever idea that didn't work. So this is Jeff writing in his shareholder letter. He's talking about two pizza teams, but really he's talking about the importance of decision-making speed.

• 30:06David Senra?

  So he says, "A well-instrumented two-pizza team had another powerful benefit. They were better at course correcting, detecting and fixing mistakes as they arose. In his 2016 shareholder letter, even though he wasn't explicitly talking about two-pizza teams, Jeff suggested that most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you're probably being slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you're good at course correcting, being wrong may be less costly than you think. Whereas being slow is going to be expensive for sure."

• 30:48David Senra?

  So I mentioned earlier that two-pizza teams morphs into single-threaded leaders. And really, this is, why did they have to do that? Because great anything is rare. The limiting factor was great leadership. So it says, "Great two-pizza team leaders proved to be rarities. Although we did identify a few such brilliant managers, they turned out to be notoriously difficult to find in sufficient numbers, even at Amazon. This greatly limited the number of two-pizza teams we could effectively deploy. The two-pizza team clearly needed a new name. We chose the computer science term 'single-threaded,' meaning you only work on one thing at a time."

• 31:30David Senra?

  Just one sentence I want to pull out here that I love. Another phrase you'll hear at Amazon. "Be stubborn on the vision, but flexible on the details." Stubborn on the vision, flexible on how to get there. So now they talk about the communication internal, the unique internal communication structure that Amazon uses, and it's these six-page narratives. So it says, "If you were asked recently hired Amazon employees about what has surprised them the most in their time at the company so far, one response would top the list: the eerie silence in the first 20 minutes of meetings. The reason for that silence? A six-page document that everyone must read before discussion begins. Amazon relies far more on the written word to develop and communicate ideas than most

• 32:15David Senra?

  companies, and this difference makes for a huge competitive advantage."

• 32:21David Senra?

  And so before they implemented it, they just had a feeling that PowerPoint was not, that they were wasting a lot of time doing PowerPoints in meetings. And so they wind up reading an essay. Jeff reads it, and so does Colin. And it's an essay by this guy named Edward Tough. And it really identifies, it's called "The Cognitive Style of PowerPoint: Pitching Out Corrupts Within." And so it says, "Tough identified in one sentence the problem we'd been experiencing. As analysis becomes more causal, multivariate, comparative, evidence-based, and resolution-intense," he writes, "the more damaging the bullet point list becomes." And so this is where they find the beginning of their solution. "Tough proposed a solution. For serious presentations, it will be useful to replace PowerPoint slides with paper handouts

• 33:05David Senra?

  showing words, numbers, data graphs, images, and images together. High-resolution handouts allows viewers to contextualize, compare, narrate, and recast evidence. In contrast, data-thin, forgetful displays tend to make audiences ignorant and passive, and also to diminish the credibility of the presenter. Tough offered wise advice on how to get started. Making this transition in large organizations requires a straightforward executive order. From now on, your presentation software is Microsoft Word, not PowerPoint. Get used to it." That is essentially what we did. And so Jeff's going to write, it says, "Jeff offered a short explanation of the reason behind the change.

• 33:47David Senra?

  The reason writing a good four-page memo is harder than writing a 20-page PowerPoint is because the narrative structure of a good memo forces better thought, and better understanding of what's more important, and how things are related. PowerPoint-style presentations somehow give permission to gloss over ideas, flatten out any sense of relative importance, and ignore the interconnectedness of ideas." So they talk about the new meeting format, and I'm going to read this to you, and then I'll tell you what my note was. "Even though you cannot hear it, with a well-written narrative, there is a massive amount of useful information that is being transmitted in those 20 minutes, otherwise known as why books have lasted for 5,000 years." A massive amount of useful information is being transmitted.

• 34:32David Senra?

  This is a simple tip from Jeff on how to produce unique insights. Jeff has an uncanny ability to read a narrative and consistently arrive at insights that no one else did, even though we were all reading the same thing. After one meeting, I asked him how he was able to do that. He responded with a simple and useful tip that I had not forgotten. He assumes each sentence he reads is wrong until he can prove otherwise. He's challenging the content of the sentence, not the motive of the writer. Jeff, by the way, was usually among the last to finish reading. So they have an entire chapter on working backwards, which is obviously the name of the book. It says, "Working backwards start with the desired customer experience." This is another example. It could all be so simple. "Working backwards is so central to the company's success that we used it as the title for our book.

• 35:17David Senra?

  Working backwards is a systematic way to vet ideas and create new products. Its key tenet is to start by defining the customer experience, then iteratively work backwards from that point until the team achieves clarity of thought around what to build. Its principal tool is a second form of written narrative called the PR/FAQ, short for press release/frequently asked questions." And then on the next page, this is a great sentence that made me laugh. "Working as Jeff's shadow was a bit like drinking from a fire hose." So now they go into how this idea came about. They didn't use it yet because it didn't exist. This is early 2004. They're going to launch Amazon Digital.

• 36:01David Senra?

  They're realizing, okay, like all of our, I think 70% of Amazon's sales were in physical media, you know, books, CDs, stuff like that. And they're like, okay, clearly this is going to change. And really, this is about seeing your idea. So make a demo, which is, I covered on the book, creative selection. It's a bonus episode on Apple's product-making process. So really, make a demo or make a mock-up. It's really what's happening here. "Our team developed plans using the tried and true MBA-style methods of the time." We had several meetings with Jeff to present our ideas. He never seemed satisfied or convinced. He found our proposals light on the details as to how the service would work for the customers. Remember, this is before they realized, let's work backwards. Finally, inevitably, he would ask, where are the mockups?

• 36:45David Senra?

  Jeff was referring to the visual representations that would show exactly how the new service would look on the Amazon website. To create a meaningful mockup, you have to think through what the experience will be for the customer. We didn't have any mockups. A few weeks later, we were back with rough mockups in hand. Jeff listened carefully and then began asking detailed questions. There's so many examples in this book where meetings just go awry with Jeff, and it goes back to his dedication for operational excellence. He's asking questions. We had answered as we had before. We hadn't figured all that out, all that stuff out yet. That answer did not go over well, at all. Jeff wanted to know exactly what we were going to build and how it would be better for customers.

• 37:24David Senra?

  To Jeff, a half-baked mockup was evidence of half-baked thinking. And he was quick to say so, often using strong language to make his point inescapably clear. And the note left myself in that margin was, that should hurt your professional pride, man. You really want to, like, not only, maybe you're running a company, maybe you have coworkers, maybe there's other people on the team, but like, I don't want to be embarrassed. I don't want people to think I'm half-assing my job. I think that's even worse than Jeff having to use strong language to make his point clear. He's telling you, like, this half-baked mockup is evidence of half-baked thinking. Like, where's your professional pride? Jeff suggested a different approach for the next meeting.

• 38:09David Senra?

  Forget the spreadsheets and slides, he said. Instead, each team member would write a narrative document. In it, they would describe their best idea for a device or service for the digital media business. So Jeff does, this is going to blow your mind right here. Moving on to the next meeting, obviously. One proposed an ebook reader. This is 2004. This is going to blow your mind. One proposed an ebook reader that would use the new e Ink screen technology. Other words, the Kindle, before the Kindle. Another described a new take on an MP3 player. Jeff wrote his own narrative about a device he called, this is crazy. Jeff wrote his own narrative about a device he called the Amazon Puck.

• 38:50David Senra?

  It would sit on your countertop and could respond to voice commands like, "Puck, please order a gallon of milk." Puck would then place the order with Amazon. That's 2004, he's describing the Echo. What, Echo came out, what, a decade later, something like that? That's wild. Writing up our ideas was hard work. It required us to be thorough and precise. We had to describe features, pricing, how the service would work, why consumers would want it. This is really, I'm gonna read that again. That's the fit, I mean, that's a great description of why you need to work backwards. This is before they realized they needed to work backwards. Writing up our ideas was hard work. It required us to be thorough and precise. We had to describe features, pricing, how the service would work, why consumers would want it. Half-baked thinking was harder to disguise on the written page than in PowerPoint slides.

• 39:36David Senra?

  After a lot of trial and error, Jeff then pushed the idea further. What if we thought of the product concept narrative as a press release? In a conventional organization, a press Remember, he doesn't, there's nothing conventional about Jeff. In a conventional organization, a press release is written at the end of the product development process. So Jeff's like, well, we're gonna do it at the beginning. So it talks about implementing this on the development of Kindle halfway through, or not even halfway, but partially. They were trying to develop some kind of product before working backwards. So it says, "We were working forward, trying to invent a product that would be good for Amazon, the company, not the customer." I remember at the very beginning, I said, "I really think this is how most businesses are, it could all be so simple." Most businesses, instead of focusing what's best for the customer, they think what's best for the company.

• 40:21David Senra?

  It doesn't make any sense. When we wrote a Kindle, when we wrote a Kindle press release and started working backwards, everything changed. We focused instead on what would be great for customers. An excellent screen for a great reading experience. An ordering process that would make buying and downloading books easy. Which, interesting, is they used the fault of the iPod at the time, where you had to, you could download music, but you had to like connect the iPod to your computer? Where they're like, "Oh, I don't want you to have to connect the Kindle, so we need to find a way to download books." So they use Whisper, WhisperNet, WhisperSync? I can't remember the actual product name. And I thought that was, because I bought the first Kindle. It was 300 bucks, it was giant, and I loved it. But I thought that was a great idea. So he says, "We focus," again, because it's better for the customer, right? Not easier for your engineering team.

• 41:06David Senra?

  "We focus this down on what would be great for customers. An excellent screen for great reading experience, an ordering process that would make buying and downloading books easy, a huge selection of titles, low prices. We would never have had that breakthrough necessary to achieve the customer experience were it not for the press release process, which forced the team to invent multiple solutions to customer problems." That's a really important insight, too. It forces you to invent what you need to deliver the best customer experience. It's really smart. "Over time, we refined and normalized the specifications for the PR/FAQ. The press release portion is a few paragraphs, always less than one page. FAQ should be five pages or less. There's no words for extra pages or more words." Then it talks about the benefit of restricting length.

• 41:49David Senra?

  Restricting the length of the document is, to use the term that came up when describing the narratives, a forcing function. "We have seen that it develops better thinkers and communicators." I'm going to, that sentence made me think of two quotes, one from Jeff Bezos, one from Sam Walton, really saying the same thing. First quote from Jeff Bezos, "I think frugality drives innovation, just like other constraints do. One of the only ways to get out of a tight box is to invent your way out." So then Sam Walton, from his autobiography, really the summary of this paragraph, "As constraints are your friends." "Many of our best opportunities were created out of necessity. The things that we were forced to learn and do because we started out under-financed and under-capitalized in these remote, small communities contributed mightily to the way we've grown as a company.

• 42:33David Senra?

  Had we been capitalized, or had we been the offshoot of a large corporation, we might not have ever tried the Harrisons, or the Rogers, or the Springdales." He's talking about all these little small towns, "and all those other little towns that we went into, into the early days. It turned out that the first big lesson we learned was that there was much, much more business out there in small-town America than anybody, including me, had ever dreamed of." So now we get into more of the application of these ideas. So more quotes from Jeff's shareholder letters are in this book I'm going to read to you. This is 2015. "We want to be a large company that's also an invention machine. We want to combine the extraordinary customer service capabilities that are enabled by size with the speed of movement, nimbleness, and risk acceptance mentality normally associated

• 43:17David Senra?

  with entrepreneurial startups," Jeff wrote. He also wrote, "I believe that we are the best place in the world to fail. We have plenty of practice, and failure and invention are inseparable twins." That's something Thomas Edison would tell you, Edmund Lamb, James Dyson, Henry Royce, Enzo Ferrari, the list goes on and on. Failure and invention are inseparable. To invent, you have to experiment, and if you know in advance that it's going to work, it's not an experiment. Most large organizations embrace the idea of invention but are not willing to suffer the string of failed experiments necessary to get there. He continues, "Long-term thinking levers our existing abilities and lets us do things we couldn't otherwise contemplate. Long-term orientation interacts well with customer obsession.

• 44:02David Senra?

  If we can identify a customer need and if we can further develop conviction that that need is meaningful and durable, our approach permits us to work patiently for multiple years to deliver a solution." Now, this is one of the author's writing. "Key word: patiently. Most companies will give up on an initiative if it does not produce the kind of returns they are looking for within a handful of years. Amazon will stick with it." So saying many companies, and I would extrapolate that out, to most people give up if an initiative does not produce the kind of returns. And they certainly don't give it a few years before they give up either. So again, long-term thinking is just a huge advantage because it's so difficult to do. The other key is regality. You can't afford to pursue inventions for very long if you spend your money on things that don't lead to a better customer experience.

• 44:48David Senra?

  Now, this, this is a really interesting idea. And it can be distilled down to invention works well where differentiation matters. It talks about the very beginning of Amazon, like, why aren't they making their own data center hardware? As opposed to why they chose to make the hardware for Kindle. So it says, the reason, invention works well where differentiation matters. In the company's early days, the hardware that powered Amazon's data centers was not a point of differentiation with the customers. And now, obviously, that's changed with the AWS, but they're talking about the early days of Amazon, okay? So it was not the point of differentiation with the customer. Creating a compelling book-buying online experience was. Whereas with the Kindle, others were selling eBooks.

• 45:31David Senra?

  So there was a real value in owning and controlling the creation of an outstanding device for our customers to read them on. Differentiation with customers is often one of the key reasons to invent. So let's summarize that again. Invention works well where differentiation matters. So let's go to this meeting. They're still talking about the Kindle, and there's a meeting that happens between Jeff Bezos and Steve Jobs in 2003, right during the switch, the beginning of the switch from Amazon, realizing, hey, we got to switch to digital, right? And this is fantastic. So in fall 2003, we traveled to Apple campus to meet with Steve Jobs. Jobs, so they're eating sushi, and this is just hilarious. I loved Steve Jobs so much. Jobs segued into the real purpose of the meeting and announced what Apple had just

• 46:16David Senra?

  finished. Apple had just finished building their first Windows application. He calmly and confidently told us that even though it was Apple's first attempt to build for Windows, he thought it was the best Windows application anyone had ever built. He then pers- I've only built one, but it's the best ever. I love this guy. He then personally gave us a demo on the soon-to-be-launched iTunes for Windows. During the demo, Jobs talked about how this would transform the music industry. Up until that point, if you wanted to buy digital music from Apple, you needed a Mac, which comprised of less than 10% of the home computer market. Apple's first foray into building software on the competing Windows platform showed how serious they were about the digital music market. Now, anyone with a computer would be able to purchase digital music from Apple.

• 47:00David Senra?

  Jobs said that CDs would go the way of other outdated music formats like the cassette tape, and their importance and portion of overall music sales would drop quickly. His next comment could reasonably be construed as either a matter-of-fact statement, an attempt to elicit an angry retort, or an attempt to go Jeff into making a bad business decision by acting impulsively. That's really interesting. He said, "Amazon has a decent chance of being the last place to buy CDs. The business will be high-margin but small. You'll be able to charge a premium for CDs since they'll be hard to find." Jeff did not take the bait. But we all knew that being the exclusive seller of antique CDs did not sound like an appealing business model.

• 47:43David Senra?

  While it is tempting to suggest that the meeting impacted Jeff's thinking, only Jeff can speak to that. This is what I love, to talk about his actions, to really tell you what's important. Actions express priority. I love that maxim, "Actions express priority." All right, so it says, "Only Jeff can speak to that." What we can say is what Jeff did and did not do afterward. What he didn't do, and what many companies would have done, is to kick off an all-hands-on-deck project to combat this competitive threat, issue a press release claiming how Amazon's new service would win the day, and race to build a copycat digital music service. They don't have the advantage of music. You're not going to beat the maker of the iPod. You have the advantage of books. This is why they go the Kindle route instead of the MP3 player route.

• 48:25David Senra?

  Instead, Jeff took time to process what he learned from the meeting and formed a plan. A few months later, he appointed a single-threaded leader, this guy named Steve Kessel, to run digital, who would report directly to him, to Jeff, so that they could work together to formulate a vision and plan for digital media. In other words, his first action, this is why I'm reading this whole section to you, other than I love Steve Jobs' story as much as the next person. In other words, his first action was not a "what" decision. It was a "who" and "how" decision. This is an incredibly important difference. Jeff did not jump straight to focusing on what product to build, which seemed like the straightest line from A to B.

• 49:06David Senra?

  Instead, the choices he made suggest he believed that the scale of the opportunity was larger and that the scope of the work required to achieve success was equally large and complex. He was focused first on how to organize the team and who was the right leader to achieve the right result. At the time, Amazon did not have billions of dollars to spend on digital media or anything else. So we would need to lean heavily on the frugality principle to stay in the game with the bigger players. Jeff was a student of history, every best, every, the greatest founders all are. Jeff was a student of history and regularly reminded us that if a company didn't or couldn't

• 49:47David Senra?

  catch and adapt to, to meet shifting consumer needs, it was doomed. And that's exactly what's happening, right? Their business is built off of physical media. Right now, there's a phenomenon, remember going back to the Bill Gates, the Bill Gates memo from a few weeks ago, or whenever that was, where he's like, you know, you can't fight against it, you gotta go with it. There's a huge phenomenon happening with the shift from physical to digital media. So he says, "You don't want to become Kodak," Jeff would say, referring to the once mighty photography giant that had missed the term from film to digital. Not only did they miss that, but they missed when, you know, all the books I've read on Edwin Land on instant photography. "We weren't going to sit back and wait for this to happen at Amazon." And we're going to go more into his decision, he has a choice here, right?

• 50:32David Senra?

  Everybody's jumping in the game and they list, there's like 15 different companies all copying Steve Jobs and, and building MP3 players. And so he, he, he comes to the conclusion, he's like, "Well, you can invent or copy. I choose to invent." We had many meetings with Jeff. I would present our ideas for our music product or a company we might acquire. Each time we had these meetings, Jeff would reject what he saw as copycat thinking, emphasizing again and again that whatever music product we built, it had to offer a truly unique value proposition for the customer. He would frequently describe the two fundamental approaches that each company must choose between when developing new products or services. We could be a fast follower, that is, make a close copy of successful products that other companies have built, or we could invent a new product on behalf of our customers.

• 51:17David Senra?

  He wanted Amazon to be a company that invents. Jeff made clear that people like the exec who baited him at the digital music conference wouldn't drive our process. So this owner of, what they're talking about is one of these music label executives were talking about how great iTunes was. And he basically wanted more companies to come up with ideas like iTunes so it could generate more money for him, his record label. Okay. So he says he recognized that building copycat versions of products like the iPod and iTunes Store was a non-starter. He chose the path of invention by looking beyond the music category where every other large company is focused because Apple and iTunes is getting so much press and attention, right? So what do we do? They just try to copy.

• 52:02David Senra?

  He's like, no, we're not going to do that. We're going to look beyond that category, which led him to begin Amazon's foray into digital by focusing on eBooks and an e-reader device. In doing so, Jeff demonstrated his belief that true invention leads to greater long-term value for customers and shareholders. So this is where he makes the decision, we're going to make our own hardware. And people are like, what the hell? Amazon's going to make hardware? What is happening here? So we're going to get into the why behind hardware, which is fairly fascinating. And again, I think the main part, you've got to pick up this book and read it because it's the condensed and distilled thinking of Jeff Bezos. It's worth way more than what, I think I paid 29 bucks for the book. It's ridiculous what kind of a bargain this is. Jeff zeroed in on the fundamental difference between the digital media retail business

• 52:47David Senra?

  and our existing physical media retail business. Our competitive, he's just so smart. And again, it's clear thinking. He just thinks extremely clear. It's amazing. Our competitive advantage in physical media was based on having the broadest selection of items available on a single website. This is physical 70% of Amazon's sales at the time. That's their advantage. That's why they're winning. But this could not be a competitive advantage in digital media, where the barrier to entry was so low. Any company could match our offering. While it took time and effort, any company could build an eBook store where they offered the same breadth and depth of books and songs as any other digital venue. He realized it's not just iTunes, it's iTunes with a combination of iPod.

• 53:32David Senra?

  They had to be willing to undertake the tedious work of aggregating all the digital files. Into a single online catalog. So it's tedious, but it's pretty straightforward, pretty easy. So we knew we couldn't meet Jeff's requirement that our digital business had a distinct and differentiated offering just on selection and aggregation, which is what they're different. That's their value, what makes them different in the physical retail business. So it's not like what they're saying there is like, I can't just take what my advantage in the physical retail business and map it on digital and kind of shoehorn it in there like, oh, we're done. No, you have to rethink this. To win in digital, we needed to identify other parts of the value chain where we could differentiate and serve customers well.

• 54:16David Senra?

  Jeff told Steve, not Steve Jobs, it's Steve, the guy that's running digital, that this meant moving out of the middle and venturing to each, either side of the value chain. So in the book, there's some drawings and it talks about like Amazon's aggregating in physical retail, that's their value, right? But on either side of the aggregation, you have content creation or content consumption. And he's like, we have to move to one of these sides. We can't stay in the middle and get value just aggregating in digital media. It's not going to work. So he says, "In digital, that meant focusing on application and devices consumers use to read, watch, or listen to content, as Apple had done with the iPod and iTunes." So what's the book version of that? Kindle.

• 55:01David Senra?

  "We all took note of what Apple had achieved in digital music in a short period of time and sought to apply those learnings to our long-term product visions." It's really interesting to me. I listened to a couple of interviews with Jimmy Iovine and he said this even before he sold Beats by Dre to Apple. I think he sold the company for like $3 billion, something like that. But he was, obviously ran record labels in a previous life. And he talked about a long time ago, pre iPod, he tried to do a music streaming service and he couldn't get anybody to cooperate. And then he says he winds up meeting with Steve Jobs, like, oh, this guy's going to get it done because he matched the hardware with the actual streaming. And actually, I call it a streaming service. I'm pretty sure he was selling it just a digital way to buy albums and songs, though.

• 55:44David Senra?

  So I don't think it was like the streaming service that we think of today. Going, continuing this idea, the other reason for starting with books was that the ebook business as a whole was tiny. There was no good way to read ebooks on a device other than the PC, and reading on a PC was definitely not a good experience. We believed that customers would want the book equivalent of the iTunes iPod experience. So, again, I have hundreds of books on my Kindle. I never made this connection up until now, that really the Kindle and what Amazon did is the book equivalent to iTunes and iPod. Very fascinating. So it says, "We need the book equivalent of the iTunes iPod experience, which is an app paired with a mobile device that offered consumers any book ever written. The content available at a low price that they could buy, download, and start reading in seconds.

• 56:28David Senra?

  But we would need to invent the device ourselves." Remember, this whole section started with Jeff saying, "We can invent or copy. I choose Amazon to invent." The idea that Amazon, a pure e-commerce distributor of retail products made by others, would become a hardware company and make, and sell its own reader device, was controversial. And we go into how controversial it was at the time. This is hilarious. There was heated discussion about the surprising ramp up in expenses across many areas, particularly with Kindle. At some point in the debate, someone asked Jeff point blank, "How much more money are you willing to invest in Kindle?" Jeff calmly turned to our CFO, smiled, shrugged his shoulders, and asked, "How much money do we have?" That was his way of signaling the strategic importance of Kindle.

• 57:13David Senra?

  So, moving ahead, obviously, I'm skipping over large chunks of the book. You gotta read it to get the full story, like every other book, but there's a section in Prime that made me laugh, and it's really like, you can summarize Jeff as being uncomfortable with mediocrity. They're talking about all the different decisions. They realize, like, there's just a huge driver with, even at this stage, and I think it's probably still true to this day, we don't like to pay for shipping, for some reason. And they even talk about, listen, if you increase the price of a product to cover, and let's say the product is $10 and $5 shipping, you could just price the product at $15, say, free shipping, and more people would buy. So for whatever reason, they just realized a huge bottleneck that Amazon was experiencing

• 57:57David Senra?

  is, like, we have to solve the solution. That's why they came up with Prime and all this other stuff. But I want to read the section two because I thought it was great. Now that customers had gotten a taste of free shipping, they no longer wanted to be forced to choose between slow and free and fast and expensive. Jeff exhibits discomfort when presented with an either/or proposition in which both results are mediocre. You picture him at his meeting, he's skin crawling. Viewed through the customer obsession and insist on the highest standard leadership principle, the only answer to the question, which would you rather have, slow and free or fast and expensive, is fast and free. So the catch was that fast and free was where Amazon needed to go next. But our fulfillment capabilities were not up to the task.

• 58:38David Senra?

  So it's another example of working backwards from the greatest experience for a customer and then visualizing in your mind and on paper what that experience is, working backwards from that and realizing all the things that you have to invent to deliver that customer experience. This is a great, simple guiding principle. This is Jeff talking about Prime. We want Prime to be such a good value, you'd be irresponsible to not be a member. And I think they have, what, over 200 million members at this point? So I think he got there.

• 59:10David Senra?

  Just a few more ideas for you. This is get it to be Howard Hughes quality. Jeff watched the movie Aviator, which is one of my favorite movies as well. It says, "Not long after..." So they had this idea of Amazon Unbox, which is like a failed project where you could watch movies on your computer. Anyway, so it says, "Not long after Unbox's launch, my boss Steve Kessel took me aside. He told me that he had an interesting meeting with Jeff, who made it very clear that setting and insisting on high standards for the digital media organization was an essential part of Steve's job. To make his point, Jeff asked Steve if he ever seen the movie The Aviator, the story of Howard Hughes, the business tycoon, aviator, and film director. Jeff described a scene in which Hughes, played by Leonardo DiCaprio, visits one of his aircraft manufacturing facilities

• 59:54David Senra?

  to check on the progress of his latest project, which is the Hughes H1 racer. A sleek, single-passenger plane designed to set new speed records. Hughes examines the plane closely, running his fingers along the source of the fuselage. His team watches anxiously. Hughes is not satisfied. "Not enough," he says. "Not enough. These rivets have to be completely flush. I want no air resistance on the fuselage. She's got to be cleaner. Cleaner. Do you understand?" The team leader nods, back to the drawing board. Jeff had told Steve that it was his job to be like Howard Hughes.

• 1:00:36David Senra?

  From then on, Steve had to run his fingers over each new Amazon product, checking for anything that might reduce the quality, insisting that his team maintain the highest standards. That is a fantastic metaphor, so let's remember that it's get it to be Howard Hughes quality. And I like the idea, the visualization of running, metaphorically running your fingers over the product, checking to see for anything that might reduce the quality. This is also fascinating. This is a story about Amazon's first developer conference, so they have the basic idea for AWS, right? And so they're going to develop their first product aimed at developers, not consumers. And so they have the first Amazon developer conference attracted eight people. Eight.

• 1:01:21David Senra?

  And Jeff Bezos still showed up, and the people were surprised, like, what the hell is Jeff doing here for eight people? But in his, I love what the authors did here because they described, they talked about his thinking, right? And so in his 2006 shareholder letter, Jeff made his reasons clear. Now, this is Jeff writing, "Like any company, we have a corporate culture formed not only by our intentions, but also as a result of our history. For Amazon, that history is fairly fresh, and fortunately, it includes several examples of tiny seeds growing into big trees. We have many people at our company who have watched multiple $10 million seeds turn into billion-dollar businesses. That firsthand experience and the culture that has grown up around those successes is, in my opinion, a big part of why we can start businesses from scratch.

• 1:02:04David Senra?

  The culture demands that these new businesses be high potential, that they be innovative and differentiated, but it does not demand that they be large on the day they're born. I remember how excited we were in 1996 as we crossed 10 million in book sales. It wasn't hard to be excited. We had grown from 10 million to 10 million from zero. Today, when a new business inside Amazon grows to 10 million, the overall company is growing from 10 billion to 10.01 billion. It would be easy for the senior executives who run our established billion-dollar businesses to scoff, but they don't. They watch the growth rates of the emerging businesses and send emails of congratulations. That's pretty cool, and we're proud of it."

• 1:02:49David Senra?

  And I'll close on this real quick. And really, the thing about working backwards is the note I left myself is this is on slowing down now to go faster later. Based on my experience of going through the working backwards process with Jeff for well over a dozen different product teams, I can say confidently that the extra time we spent slowing down to uncover the necessary truths was ultimately a faster path to a large and successful business. And that is where I'll leave it. To get the full story and support the podcast at the same time, buy the book using the link that's in the show notes on your podcast player or by going to founderspodcast.com. And I'll talk to you again soon.