Amazon Unbound Read online

  The confluence of those three initiatives—in the fulfillment centers, and with AWS and the Kindle—vaulted Amazon back into the graces of Wall Street. In 2008, Amazon surpassed eBay in market capitalization and was beginning to be mentioned in the same breath as Google, Apple, and a new Silicon Valley upstart, Facebook. Bezos then used every bit of leverage at his disposal to outduel Walmart and acquire two emerging online rivals: the shoe-retailer Zappos and a seller of consumable goods called Quidsi, which owned the popular website Diapers.com. Antitrust authorities approved those deals quickly—decisions that would later be regarded skeptically in light of Amazon’s growing dominance.

  It turned out that there was more depth than anyone had suspected to the increasingly fit CEO with the now clean-shaven head. He was a ravenous reader, leading senior executives in discussion of books like Clayton Christensen’s The Innovator’s Dilemma, and he had an utter aversion to doing anything conventionally. Employees were instructed to model his fourteen leadership principles, such as customer obsession, high bar for talent, and frugality, and they were trained to consider them daily when making decisions about things like new hires, promotions, and even trivial changes to products.

  PowerPoint presentations, with their litany of bullet points and incomplete thoughts, were banned inside the company despite being popular in the rest of corporate America. Instead, all meetings started with almost meditative readings of data-rich, six-page documents, called “narratives.” The act of business building at Amazon was an editorial process, with papers subject to numerous revisions, debate over the meaning of individual words, and meticulous consideration by company leaders, most of all from Bezos himself. Meanwhile, working groups inside Amazon were broken into small versatile units, called two-pizza teams (because they were small enough to be fed with two pizzas), and were ordered to move quickly, often in competition with one another.

  This unusual and decentralized corporate culture hammered into employees that there was no trade-off between speed and accuracy. They were supposed to move fast and never break things. Goals, accountability, and deadlines were pushed down into the organization, while metrics were fed upward, via weekly and quarterly business reports and biannual companywide reviews, called OP1 (for operating plan, in the late summer) and OP2 (after the holidays). The performance of each team was evaluated by Bezos’s hallowed leadership council of like-minded math whizzes: the S-team (for senior team). Sitting atop it all was Bezos himself, who would home in on promising new projects, or on fixing teams whose results were disappointing, with the same focus and exacting standards that he had brought to Amazon’s earliest days. He took nothing for granted, including Amazon’s increasing success.

  His blasts of annoyance, directed at employees who failed to meet those standards, were legendary inside the company. “Why are you wasting my life?” he’d ask, scoffing at disappointing underlings. Or he leveled them with “I’m sorry, did I take my stupid pills today?” While the brutal leadership style and distinct culture was enervating to many employees, it was also proving unmistakably effective. In the spring of 2011, Amazon was valued at $80 billion. Buoyed by the rise of his stock holdings, the forty-seven-year-old Bezos was the thirtieth richest person in the world, with an $18.1 billion net worth.

  That outsized success started to draw attention. State legislatures recognized that the growing flood of tax-free sales over the internet was depleting their coffers, and they passed legislation requiring online retailers to pay sales taxes, closing a loophole that had been created before the internet age for mail-order companies. Bezos was prepared to fight to protect a significant price advantage over offline rivals, and even backed a California ballot initiative to undo a new state law that would force online retailers to collect sales tax. But in the middle of the fight, he changed course; sales tax avoidance had tied the company in knots, requiring it to limit where it opened facilities and even where employees could travel. By agreeing to collect sales tax, Bezos surrendered his prized advantage. Instead, he took the longer view, making it possible for Amazon to open up offices and fulfillment centers in more populous states, much closer to its customers, laying the groundwork for one of the largest expansions in business history.

  Amazon was sprawling out in every direction, both online and back home. It moved from a scattered collection of offices around Seattle to nearly a dozen buildings in a developing office district by the freshwater Lake Union, north of downtown. In early 2012, anonymous fliers taped around South Lake Union found a derogatory name for the growing cadre of employees spreading out over the area with their identifiable badges: “Am-holes.” It presaged a growing unease between the company and its left-leaning, blue-collar hometown.

  While he had triumphed against enormous odds, Jeff Bezos preferred those negative articles, like the old “Amazon.bomb” cover story in Barron’s, to be posted on his office walls, so that he and his colleagues would remain frightened and motivated. “It’s still Day 1!” he dutifully reminded his employees and investors in the shareholder letter published that spring. After all, there was so much more to do to augment the nearly endless selection of physical and digital goods on the virtual shelves of the everything store.

  * * *

  I published a book by that title in October 2013, right into the grip of the world’s growing fascination with Amazon. It was an attempt to explain a classic modern business story—how the impresario of online books had fought off near ruin and upended not only retail but digital media and enterprise computing.

  There were generally positive reviews and a few infamous negative ones. “I wanted to like this book,” wrote MacKenzie Bezos in a one-star brickbat posted to Amazon.com. She alleged factual inaccuracies, a “lopsided and misleading portrait of the people and culture at Amazon,” and criticized my characterization of Bezos’s disciples, who channeled his maxims and leadership style, as “Jeff Bots.” Later, I also learned that Bezos was upset with how I had handled tracking down his biological father, the now-deceased Ted Jorgensen, a man who had left his family when Bezos was a toddler and did not know what had become of his son until I visited him forty-five years later.

  At the time I thought I had written the comprehensive book on Amazon’s rise. But then a strange thing happened. In 2014, Amazon released the first Echo, a voice-activated speaker running the virtual assistant Alexa. The product was a hit, and over the next five years the company sold more than a hundred million devices, initiating a new wave of voice-connected computing and eliminating the odor of Amazon’s previous failure in consumer gadgets, the Fire Phone. Amazon was moving from its customers’ doorsteps to their living rooms, with access to their broad range of requests and questions, and potentially their most intimate conversations.

  At around the same time, Amazon’s AWS division expanded its line of database services to lure large enterprises and government agencies into that ethereal future of enterprise computing known as “the cloud.” Amazon reported AWS’s financial results for the first time in the spring of 2015, shocking investors with its profitability and growth, only to generate another round of feverish enthusiasm for Amazon’s stock.

  A few years later, Amazon opened its first prototype Amazon Go physical retail store in Seattle, using artificial intelligence and computer vision so customers could walk out of the store and be automatically charged rather than checking out with a human cashier. The company also expanded geographically, pushing into India, Mexico, and other countries, at massive expense and in direct competition with the largest company in the world by sales: Walmart. Meanwhile, its investments in Hollywood, via Amazon Studios, yielded critical hits like Transparent, The Marvelous Mrs. Maisel, and Jack Ryan, along with a few notorious bombs, like Woody Allen’s Crisis in Six Scenes. It put Amazon right behind Netflix in the race to redefine home entertainment for a new age.

  While all this was unfolding, Amazon was also reinvigorating its older businesses. Amazon Marketplace, where independent sellers hawked their wares
on Amazon.com, exploded with a surge of low-priced products (including counterfeits and knockoffs) manufactured in China. In 2015, the total value of the products sold on the marketplace surpassed the value of the units that Amazon sold itself on its own site. Amazon acquired the organic supermarket chain Whole Foods Market in 2017, saving the iconic American grocer from an unwelcome incursion by activist investors, and boosting its own ineffectual efforts to crack the food business.

  Amazon also remade its delivery operations, lessening its reliance on partners like UPS with its own network of sortation centers, drivers, and cargo aircraft branded with the Amazon Prime logo. And it revived its advertising business, embedding ads in its search results just as Google had pioneered a decade before to Amazon’s annoyance, generating a profitable new revenue line for the company.

  The Amazon that I had written about was worth nearly $120 billion at the end of 2012. The company’s market capitalization touched a trillion dollars for the first time in the fall of 2018—eight times more valuable in less than six years—and returned to surpass that threshold, apparently for good, in early 2020. My Amazon had under 150,000 employees. By the end of 2020, it had an astounding 1.3 million employees. I was writing about the Kindle company, but this was now the Alexa company. Also, the cloud company. And a Hollywood studio. And a video game maker, robotics manufacturer, grocery store owner—and on and on.

  While Amazon seduced investors and customers, it also moved to the center of an acrimonious political struggle that had the potential to redefine free market capitalism. Its vocal critics believed that such brazen accumulation of wealth and power had a significant cost, exacerbating income inequality and stacking the odds against workers and locally owned businesses.

  “Today’s big tech companies have too much power—too much power over our economy, our society, and our democracy,” wrote Senator Elizabeth Warren at the debut of her unsuccessful bid for the White House in 2019. “Amazon crushes small companies by copying the goods they sell on the Amazon Marketplace and then selling its own branded version.” She urged that Jeff Bezos’s meticulous creation be forced to spin off Zappos and Whole Foods Market and be stamped into smaller parts.

  * * *

  As Amazon changed, so too did Bezos undergo his own startling transformation.

  In the company’s early years, he usually sported pleated khakis and navy-blue button-down shirts and rode his two-wheel Segway scooter around the office, his laugh ricocheting off the walls. He lived with his wife and four children in the opulent waterfront suburb of Medina, Washington, outside Seattle, and fiercely guarded their privacy. Despite his budding wealth, he appeared to have little interest in collecting assets like vintage sports cars or expensive paintings won at exclusive auctions. He was not, by any means, an aficionado of luxury yachts. Only his private jet seemed to kindle his overt enthusiasm, because avoiding public air travel saved him a resource that money couldn’t buy: time.

  But by the late 2010s, Bezos as the unfashionable, single-minded geek was largely obsolete. Even the half-reformed nerd from the Fire Phone launch in 2014, who delighted in reciting the technical specifications of the fated smartphone, had bowed from the stage.

  Shedding this image as an awkward though self-assured geek, Bezos emerged as a business kingpin who, at first, seemed to have an almost mystical aura of invincibility. Over the summer of 2017, Bezos became the wealthiest person in the world, a mathematical eventuality produced by Amazon’s rising stock price and the relatively slower growing fortune of Microsoft cofounder Bill Gates, who was giving his money away in philanthropy, a process Bezos had yet to start in any meaningful way. As Bezos rose to the top of the world’s wealthiest chart, a widely circulated photo from the prestigious Allen & Company’s conference in Sun Valley showed him wearing a pair of stylish Garrett Leight folding sunglasses and a short-sleeved polo shirt and down vest that exposed enormous biceps. The photo went viral. Jeff Bezos was the action hero of the business world.

  At first it was difficult for insiders to discern how much Bezos had truly changed. Colleagues said he remained absorbed in the mechanics of new businesses at Amazon, like Alexa. But other demands required his time, including his fledgling philanthropic efforts, his newly ambitious space company, Blue Origin, and the Washington Post, the prestigious newspaper he bought in 2013 that was a frequent target of the impetuous U.S. president, Donald J. Trump.

  JPMorgan CEO Jamie Dimon, a longtime friend, said that the “Jeff I know is the same old Jeff.” But as Dimon worked with Bezos in forums like the Business Council, a D.C. organization that meets several times a year to discuss policy, and Haven Healthcare, the failed joint initiative between Amazon, JPMorgan, and Berkshire Hathaway to lower employee healthcare costs, he observed his friend’s eyes gradually opening. “Jeff was like a kid in a candy store. It was all new to him. He was so focused on Amazon for a long time. Then he gradually became a citizen of the world.”

  To others, Bezos’s metamorphosis indicated the presence of something else: the hubris that comes with unimaginable success. In the fall of 2017, he directed Amazon to stage a contest called HQ2, a bakeoff among cities in North America to land a new Amazon headquarters outside of Seattle. The unprecedented public competition created a seventeen-month frenzy, with 238 regions contorting themselves to attract the tech giant. New York City and Northern Virginia were dubbed the winners, but by then political sentiment had turned sharply against Amazon for (among other things) seeking out rich local tax incentives. Progressive legislators in Queens, like popular congresswoman Alexandria Ocasio-Cortez, and their allies in organized labor were able to make enough noise that Amazon ignominiously rescinded its offer to open the office in Long Island City, New York.

  From there things took an even stranger turn. In January 2019, Bezos tweeted the surprising news of his divorce from MacKenzie, his wife of twenty-five years, stunning even those who believed they knew the couple well. The next day, the National Enquirer, the infamous supermarket tabloid, published a eleven-page spread divulging Bezos’s extramarital relationship with TV personality Lauren Sanchez that included salacious private text messages between the pair. Bezos ordered an investigation into how the paper obtained his texts and intimate photographs; over the next year, that tawdry drama grew to involve charges of global espionage and hints of a conspiracy that involved Mohammed bin Salman, the crown prince of Saudi Arabia. How does one of the most disciplined men in the world get himself into a situation like that? more than one Amazon executive wondered privately at the time.

  Amazon’s founder was now so many things in the public eye, all at once: an inventor, arguably the most accomplished CEO in the world, a space entrepreneur, a newspaper savior and swashbuckling proponent for a free press—as well as a menacing monopolist, the foe of small business, an exploiter of warehouse workers, and the subject of prurient tabloid fascination. Such a disparate range of responses was also on display in the varied reaction to his February 2021 announcement that he would devote himself more fully to new products and projects at Amazon, as well as to his other interests, by giving the CEO job to longtime deputy Andy Jassy and becoming executive chairman.

  Despite his optimism about solutions to global warming at the Climate Pledge press conference, this was clearly not the same old Jeff. So I resolved to write this sequel, and to investigate how Amazon had grown to such tremendous size in such a little amount of time. I would once again pose the critical question of whether Amazon and Jeff Bezos were good for business competition, for modern society, and even for our planet.

  The task was completed with help from Amazon, the Washington Post, and Blue Origin, which facilitated interviews with many senior executives. Amazon did not, in the end, make Bezos himself available, despite repeated requests and personal entreaties. I also interviewed several hundred current and former employees, partners, competitors, and many others caught up in the whirling cyclone of Bezos and his multiple enterprises and personal dramas.

  The resul
t is this book. It’s the story of a hard-driving CEO who created such a fertile corporate culture that even at massive size it repeatedly shucked its own bureaucracy to invent exhilarating new products. It’s also the story of how a leading technology company became so omnipotent over the course of a single decade that many started to worry that it might definitively tilt the proverbial playing field against smaller companies. And it shows how one of the world’s most famous businesspeople appeared to lose his way, and then tried to find it again—right in the midst of a terrifying global pandemic that further augmented his power and profit.

  It’s a tale that describes a period in business history when the old laws no longer seemed to apply to the world’s most dominant companies. And it explores what happened when one man and his vast empire were about to become totally unbound.

  PART I INVENTION

  Amazon, December 31, 2010

  Annual net sales:

  $34.20 billion

  Full- and part-time employees:

  33,700

  End-of-year market capitalization:

  $80.46 billion

  * * *

  Jeff Bezos end-of-year net worth:

  $15.86 billion

  CHAPTER 1 The Über Product Manager

  There was nothing particularly distinctive about the dozen or so low-rise buildings in Seattle’s burgeoning South Lake Union district that Amazon moved into over the course of 2010. They were architecturally ordinary and, on the insistence of its CEO, bore no obvious signage indicating the presence of an iconic internet company with almost $35 billion in annual sales. Jeff Bezos had instructed colleagues that nothing good could come from that kind of obvious self-aggrandizement, noting that people who had business with the company would already know where it was located.