Bezonomics — Brian Dumaine
Bezonomics is an excellent revelatory and unbiased look at Amazon’s most indomitable business model. It has become a formidable force in shaping the life of consumers all over the world. Amazon and its imitators are significantly affecting and shaping how we live and do business. Bezonomics has lead to societal disruption, shaken retail to its foundation, rapidly dominating cloud computing and is looking out for more new ventures in the coming future.
Jeff Bezos, the founder of Amazon is a son of a poor unicyclist father and a teenager mom. Jeff spent his holidays mostly with his grandfather in the farms. His grandfather was an instrumental factor in shaping his thoughts while he was growing up. Jeff believes in the values instilled by his grandfather till date and says those have always been a crucial contribution to the success of the company. As Jeff did not spend much time with his own father after his parents separated, he never shared a cordial bond with him. As Jeff grew in his career, interestingly his father had no idea about the success of his son. He continued to earn his living by doing the repair works. Jeff recalls he wished to meet his father after long gap of years, but due to some unprecedented situations, did not get a chance to meet him.
With all the great values imbibed into him from his grandfather, Jeff stands today an astute businessman, a great visionary who can think above and beyond ones imagination, a true quality every entrepreneur should have. He embodies three characteristics that distinguishes him from other entrepreneurs.
1. Resourcefulness is the greatest virtue
2. He faces the truth (cold, hard facts) no matter where it leads him
3. Visionary who looks way and beyond in the future — decades and centuries beyond
Jeff believes in the narrative fallacy, a term mentioned in his most recommended book to all the CEOs — Black Swan which refers that humans are biologically wired towards translating complex situations into oversimplified stories. With that, Bezos is not bothered with the contradictions in his life. The narrative fallacy of Bezos life is that he is a hard driving brilliant executive who cares to please his customers to the core. He will drive his employees to madness until they come up with ground breaking products like Kindle, Echo, Alexa etc. to make his customers happy. With this fact driven and relentlessly focused mind, he earns a reputation as a plutocrat. Few years back, when Jeff was addressing the all hands meeting in Seattle, he named it to be Day 1. He wants every employee in his company to work as if its their first day there, with full focus, dedication and drive to make customers happy. He says there is no Day 2. If there is a Day 2, then it will be excruciating pain, sense of failure. Bezos office in Seattle downtown is name Day 1 as well. Amazon is a place which is driven by intensity and drive, and where complacency is a taboo.
Jeff Bezos started his career by working in a Wall Street hedge fund in 1994. Jeff was constantly bewildered with the idea of internet economy and its potential to capture the entire world in the future. With that idea conflated with his entrepreneurship skills, he left his job to start a online bookstore in Seattle. He developed a website called “Amazon” in his garage by a few employees. 1995 marked the year when a book was sold for the first time. Slowly as Amazon proliferated, it overtook competition from larger book retailers such as Barnes and Noble. With the online bookstore being a hit, Bezos diversified into online sale of music and video. By the end of the year, he had expanded the company’s products to include a variety of other consumer goods.
As Bezos puts it, Amazon’s goal is to deliver cheaper products to the customers in less time. To achieve this goal, Amazon manifests an intense culture deeply in the company which is its extreme customer obsession along with constant innovation and management strategies. Employees working in the warehouse, especially loading the trucks with the A to Z smile boxes, sending out for delivery have a hard time during their work hours. Employees are not allowed to take break at their convenience. There was one employee who had complained that he had to urinate in a coca cola bottle as he was not allowed to take a restroom break. A place where a person is expected to work like a machine sounds inhuman, but implementing such stringent and focused practices took Amazon to the place where it is today. Given this deeply instilled Amazon culture in their employees, Bezos believes that Amazon could still be a failure tomorrow. This is one of the quality of an entrepreneur that one should learn from. Inspite being the ruler of the world, an entrepreneur's thirst should not quell by just looking at today’s success achieved, but should constantly be driven to achieve the dreams that a visionary leader does — which is to think above and beyond in the future. In a recent interview with Bezos, he was asked what future he foresees in the next 10 years. His response to that was even after 10 years, the fundamentals wont change. Customers would still want to have choice in product selection, to get products at cheaper prices and instant delivery which Amazon is already excelling at. This is how a visionary leader thinks, above and beyond predicated off the fundamentals which is essentially the genesis of his company.
As Amazon started capturing the retail industry, other retailers like Walmart, E-Bay, Target and many more observed a drastic decline in their product sales. By providing customer convenience by placing an order with just a click of a button and guaranteed delivering within the estimated time resulted in Amazon leading the retail business. There were numerous retailers that went bankrupt as Amazon sold wide ranged products from baby diapers, toys, clothing, home appliances and decors etc. all in one place. This attracted customers as it saved their time and effort to visit multiple stores to buy them. Amazon became the one stop solution, a consolidated place for purchasing goods and services. Amazon, the online monstrous dragon guzzled many stores in US like Sears, JC Penny, ToysRus, BabyRus etc. by selling those products coming from different third party vendors at cheaper price. Amazon now also has introduced its own brand into many products like clothing, food and gift items etc. which gives customers even more wide range of products to choose from with a reasonable price.
One of the big factors contributing to Amazon’s major source of income comes from its prime membership. A customer can subscribe to prime membership, which is a paid service $150/year, and get additional benefits like free shipping, immediate delivery of products in a day or two time. Prime members can enjoy latest streaming of movies, web series, music along with it. Bezos pays close attention and passionately cares for prime members and the services offered to them. He has been ensuring that no prime customers should be unhappy with the services they provide incessantly.
Dumaine introduced Bezos philosophy at work.. For every new product / idea that the teams are trying to come up, Jeff encourages to put that idea down in a six pager memo. Jeff reads the memo along with the prerogatives in a conference room. Once the memo is thoroughly read by everyone in the room, there is brainstorming and discussion leading to further refinement in the product ideas. Jeff believes this six pager memo idea works the best and this lead to the birth of their outstanding products — Alexa, Echo, FireTV, Firephone etc.
Bezos calls the Amazon culture as a flywheel. It is a high-tech perpetual-motion machine for growth. Though hard to set in motion, the more energy you pour into making it spin faster, the more the flywheel roars under its own power. Bezos says he wants to power his flywheel with artificial intelligence, big data, and machine learning in the coming future. With this immense power of flywheel, Amazon can soar even higher in the sky. Amazon is investing highly in AI and new technologies to come up with innovative products like Amazon Glow and Astro robot. AI is now embedded into Alexa which helps in better understanding the customer needs/interests for relevant recommendations. Amazon is also highly invested in each of their domains to perform their best and to be the leaders. With the launch of their drones for delivering goods to customers was another brilliant idea which saved time, energy, resources for Amazon delivery tremendously. Their high investments in job automation is also something to be noticed. Amazon Web Service has already captured the cloud computing world.
Today, Amazon has spread its tentacles so far and wide across the globe that its impossible for any other industry to grow beyond it. Amazon has inserted itself into more of your life than you may have guessed. Even if you do not shop on Amazon.com, chances are good that the web service you use to catch up on shows, stream your music, or conduct financial transactions is powered by Amazon Web Services. Dumaine talks out an excerpt in the book to give us an perspective how Amazon is part of our life and how much have we all started to depend on its services/products. Dumaine runs over an perspective of a young girl (millennials who are born in the Amazon world cant think a life without it) who asks Alexa to brew her coffee, check the weather and order groceries from Whole Foods to be delivered to her apartment that evening. She has bought all her college books from Amazon.com. She is subscribed to Amazon Prime since she was 18 years old, but her excitement has no bounds when she receives a Amazon delivery in the smiley box taped with Amazon packing. While going to work, she listens to Amazon music, at work she has her important files backed up on Amazon Web services, gathers her team to discuss her next start-ups milestone by launching a new product on Amazon site for increased sales. In the evening, on the way back to her home, she stops at a cashier-less Amazon Go store to pick up a snack, the sensors and cameras automatically charge her Amazon account for what she carries out. She returns home, where she asks Alexa to read her a recipe for dinner. After eating, she relaxes by asking Alexa to play the Amazon Prime Video hit The Marvelous Mrs. Maisel on her TV, and then falls to sleep reading her Kindle.
Besides analyzing the company’s success, the author speculates about what areas Bezos will disrupt in the future. Bezos was a part of health care too in collaboration with Berkshire Hathway and Atul Gawande. Health care seems to be the next possible target that Amazon will be hitting, with them offering prescription drugs, home health care products, and remote monitoring by medical practitioners using a conflation of Alexa and Echo. Advertisements is another area where Amazon can capture a big market share. Banking is another big domain where Amazon would become “a digital financial business offering checking accounts, loans, and mortgages.” Bezos has put his foot in the space already with the launch of Blue Origin with the vision of enabling a future where millions of people are living and working in space for the benefit of Earth. In order to preserve Earth, Blue Origin believes that humanity will need to expand, explore, find new energy and material resources, and move industries that stress Earth into space. Few years back,
Amazon acquired Whole Foods at $13.7B, one of the largest acquisitions till date. Its recent acquisition of MGM studios for $8.5b expanded its entertainment pool by multitudes. Amazon has so far outreached the world that they can literally rule the world in various domain with a great conglomeration of their products, services and new upcoming technologies. As Dumaine says, the list of new ventures that Amazon can grab is endless.
But with companies like Amazon, Facebook and Google which are an ecosystem for surveillance capitalism is proving destructive for our society. Capitalism by itself is proven to be a destructive creation where all these big tech giants privatize the captured user data to maximize their profits. Capitalistic economy are notoriously seeking ways to minimize labor costs in order to maximize their profits. Amazon fell into this pit as well where it payed their laborers’ exiguously. Recently, with the minimum wage of $15/hour in Seattle act passed and after Bernie Sanders constant pestered Jeff about increasing the minimum wage for the laborer , he finally acceded Bernie’s demand to increased the minimum wage of his laborers’ to $15/hour.
Its true that Amazon is leading the charge in job automation and it would steal more jobs than innovation will replace. We have already started to see this trend which is leading to social inequality and income disparity among the society. It can only vanish with implementing universal basic income for everyone which will help alleviate this problem.
Bezos’ model, says Dumaine, “is going to change the world in a way that’s more profound than most of us can imagine”. Having read this book, it’s hard to disagree.