#27. Jeff Bezos: Day One

21:37They captured the customer's credit card, their shipping address, and their trust. And the get big fast mentality didn't just save them from Barnes & Noble.

21:45Jeff Bezos:It created the infrastructure for everything that came later. Because they were forced to build massive servers to handle the traffic, they learned distributed computing. The war with Barnes & Noble forged Amazon's DNA. It taught them that speed is the only defense. It taught them that in the digital world, if you aren't the predator, you're the prey. And it taught Jeff that if you're willing to be misunderstood, if you're willing to lose money while everyone calls you crazy, you can win the long game. But the war wasn't over. In fact, the biggest threat wasn't a competitor. The biggest threat was coming from the market itself.

22:17Because three years later, the bubble would burst and Amazon would face its near-death experience.

22:30Okay, inflation point number three now. And we're going to fast forward three years. It's now the year 2000.

22:36Jeff Bezos:The world has changed completely. If 1997 was the wild west, then 1999 was the gold rush. The dot-com bubble has inflated to insane proportions. Any company with a dot-com at the end of its name is suddenly worth billions of dollars. People are quitting their jobs as doctors and lawyers to day trade tech stocks. Taxi drivers are giving you stock tips. It's a mania. And Jeff Bezos is the king of this mania. In December, 99 time magazine names him person of the year. He's on the cover. He looks like a young and nerdy emperor. The headline calls him the king of the e-commerce revolution. Amazon stock hits an all-time high of$113 a share.

23:18Jeff Bezos:Bezos is a multi-billionaire on paper. He's the richest man under 40 in America. The company has expanded beyond books. They're selling music, DVDs, electronics, toys. the vision of the everything store is happening. But underneath the surface, there's a rot. The company is burning cash at a terrifying rate. They built millions of square feet of warehouse space that they aren't using. They've hired thousands of people. They've spent millions on advertising. And then the music stops. In March 2000, the dotcom bubble bursts. It's not a slow leak. It's an explosion. The NASDAQ collapses. Investors realize that most Most of these internet companies have no revenue, no profits and no business model and panic sets in one by one.

24:05The darlings of the internet start to die. Pets.com goes bankrupt. Webvan goes bankrupt. E toys goes bankrupt. Billions of dollars evaporates in weeks. So Jeff's desire shifts instantly. He's no longer trying to get big fast. He's simply trying to survive. He realizes that the capital markets, the investors who've been funding his losses for five years are closing the tap and he needs to stop the bleeding.

24:31Jeff Bezos:But the world isn't just ignoring Amazon, it's attacking Amazon. The narrative shifts overnight. The same media that called him a genius in 99 is now calling him a fraud in 2000. They say Amazon is just another bubble company that's going to zero. And then the hammer drops. On June 23rd, 2000, a bond analyst at Lehman Brothers named Ravi Surya releases a report. Now, usually analyst reports are boring. They're full of jargon and hedging. Nobody reads them except other analysts. But this report is different. It's a 28-page assassination. Ravi Surya doesn't look at the vanity metrics like revenue growth or customer count.

25:13Jeff Bezos:He looks at the balance sheet. He looks at the convertible bonds Amazon sold to raise money and he looks at the cash burn. and he concludes that Amazon has extremely weak and deteriorating credit. And he writes in his own words, current assets will be less than current liabilities by the third quarter and the company will run out of cash within four quarters. He basically says Amazon is insolvent. It's a Ponzi scheme and it's going to die. He rates the bond as a void and predicts bankruptcy. The report goes viral on Wall Street. It's the first time a major analyst has called the emperor naked.

25:51And the market reacts instantly. Amazon stock price goes into freefall. It drops from$113 to$100 to$50 to$20 and it keeps going. And eventually it bottoms out at$6 a share. I want you to imagine that. You lose 95 % of your company's value in less than 12 months.

26:13Jeff Bezos:If you'd invested a hundred grand in Amazon stock, it's now worth five grand. Now imagine the atmosphere inside the company. Amazon pays its employees very low cash salaries. The whole compensation model is built on stock options. The employees were working 80 hour weeks because they thought they were going to be rich. They were counting on that stock for their mortgages, for their kids' college funds, for their retirement, and they're watching it evaporate. The break rooms are quiet. People are crying in the bathrooms. Every computer screen in the office has a stock ticker in the corner. People are checking the price every five minutes.

26:49Jeff Bezos:Down another dollar. Down another 50 cents. The press is also relentless. They call in a new nickname for the company. They call it Amazon.com. Jay Leno is even making jokes about Amazon going out of business in his monologue on The Tonight Show. Jeff is receiving hate mail. He's being sued by shareholders. His board members are getting calls from furious investors demanding that they fire him. This is the moment. I mean, this is the moment where the company should have died, but it's also the moment that separates the good CEOs from the great ones. Most CEOs in this situation would panic. They would try to pump the stock.

27:25Jeff Bezos:They'd go on CNBC and promise huge profits to calm the market. It amounts a massive stock buyback to prop up the price, and they'd probably pivot the business model to do something safer. But Jeff does the opposite. it. He realizes that Ravi Surya is technically right about the cash ban, but wrong about the business. He knows that the underlying physics of the business are working, even if the balance sheet looks ugly. So he goes on the offensive internally. He calls an all hands meeting at the company headquarters. The mood is grim. It's like a funeral. He walks onto the stage. He's wearing his signature blue dress shirt and khakis.

28:01He grabs a marker. He writes one sentence on the whiteboard in big, bold letters. I am not the stock price. He turns to the room and he says something that's become legendary.

28:13Jeff Bezos:When the stock is up 30 % in a month, don't feel 30 % smarter because you aren't. And when the stock is down 30 % in a month, don't feel 30 % dumber because you aren't. He tells them the stock market is a voting machine in the short term, but it's a weighing machine in the long term. Right now, the market is voting against us, but the weighing machine, the actual business is getting heavier every day. He issues a new rule, no checking the stock price. He tells managers, if you catch your team checking the stock price, tell them they are wasting their time. Tell them to spend that time improving the customer experience.

28:51Jeff Bezos:Then he shifts the entire financial focus of the company. Before this moment, Amazon talked about revenue and gross merchandise value. That's what growth companies talk about. But now Jeff becomes obsessed with a new metric, free cash flow per share. It's the purest sense of underlying value in a company. He realizes that earnings, accounting profits, is a vanity metric that can be manipulated. But cash flow is the truth. Cash flow is oxygen. And as long as you have cash, you can't die. He gets disciplined, brutally disciplined. He shuts down underperforming distribution centers. He cancels projects.

29:32And then he does the hardest thing of all. He lays off 15 % of the workforce, 1 ,300 people. It's the first layoff in company history.

29:41Jeff Bezos:It's painful. It breaks the family culture of the early days. People are crying as they pack their boxes. Jeff hates it, but he knows it's necessary to save the ship. he focuses the entire company on operational excellence he tells the team get the crap out of our processes they start measuring everything how many seconds does it take to pack a box how much tape we're using how many steps is a picker taking the warehouse they turn the chaotic mess of get big fast into a finely tuned machine they adopt six sigma and lean manufacturing techniques they become obsessed with efficiency and the result of all this is that jeff was right While the stock was sitting at$6 and the world was laughing, the internal metrics were skyrocketing.

30:26Jeff Bezos:Customer satisfaction scores were higher than ever. Units sold were up. Cost per order was down drastically. Invent returns were speeding up. The business was actually getting healthier every day, even though the stock chart looked like death. Jeff ignored the scoreboard and focused on the game. Amazon didn't run out of cash. They turned the corner. In fact, in the fourth quarter of 2001, Amazon posted its first ever quarterly profit. It was tiny,$5 million or one cent per share, but it was a profit. It proved the model worked and it proved Ravi Surya wrong. And here's the most important part of this story.

31:04Because the crash killed everyone, Amazon was left alone. E-Toys was gone. Circuit City was dying.

31:11Jeff Bezos:Borders was struggling. The crash cleared the field. It wiped out all the pretenders who were just burning cash without a real business model. When the dust settled, Amazon was the last man standing in the rubble. They had the entire e-commerce market to themselves for the next decade. If the bubble hadn't burst, Amazon might have based stiff competition from well-funded rivals, but the crash starved the competition of capital, while Amazon had just enough to survive. This inflection point taught Jeff the most important lesson of his career. decouple your self-worth from external validation. He learned that the market knows nothing.

31:48The press knows nothing. The only thing that knows the truth is the data. If he'd listened to the market in 2000, he would have quit. He would have sold the company. He would have pivoted, but he didn't. He looked at the whiteboard. He looked at the customer and he kept building.

32:04Jeff Bezos:And that is why today Amazon is worth trillions of dollars and Lehman Brothers, the bank that issued the report saying Amazon would die is bankrupt and gone. Talk about irony.

32:22Jeff Bezos:Okay, inflection point number four now, and it's 2004. The Amazon.com era is over. The company has survived the crash. They're profitable. They've proven the skeptics wrong. They're selling books, music, DVDs, electronics, toys, kitchenware. They're a legitimate, successful retailer. The stock has recovered from$6 to about$40. And Jeff is a billionaire again. But inside Amazon, the mood isn't celebratory. It's anxious. Jeff is restless. He's looking at the landscape and he sees storm clouds. Google is growing like a weed. Their search engine is becoming the starting point for every internet session.

32:59Jeff Bezos:Jeff worries that Google will become the front door to the internet and Amazon will just be a room inside Google's house. eBay is massive. Walmart is finally waking up to e-commerce. So Jeff realizes that Amazon is still just a transactional business. People shop on Amazon when they need a specific book or a specific DVD, but they don't love Amazon. They don't have a habit of using Amazon. If Walmart offers the same book for 50 cents less, the customer will leave. There's no loyalty. There's no moat. So Jeff wants to create an unbreakable bond with the customer. He wants to change the fundamental nature of the relationship.

33:34Jeff Bezos:He wants to transform Amazon from a store you visit into a utility you subscribe to. So much so that he wants to make it irresponsible for a customer to shop anywhere else. It's worth repeating that. Again, he wants to make it irresponsible for a customer to shop anywhere else. But there's a massive barrier standing in the way. It's friction, specifically the friction of shipping costs. In 2004, buying online is still annoying. You go to Amazon, you find a book you want for$15, you add it to your cart, you go to checkout and then you see it. Shipping and handling,$3.99. That$3.99 feels like a tax.

34:11It feels like a penalty. It makes you hesitate. It makes you think, maybe we'll just drive to the bookstore and pick it up.

34:18Jeff Bezos:Jeff hates this friction. He knows that shipping costs are the number one reason for cart abandonment. He'd already tried Super Saver Shipping, where if you spend$25, you get free shipping. It worked, but it was slow. It took five to seven days and it didn't feel magical. Instead, Jeff wants fast free shipping. He wants it to feel like teleportation. One day, an engineer named Charlie Ward drops an idea into the digital suggestion box on the internal intranet. Now, Charlie Ward is not a logistics expert. He's a software engineer. He's just a guy who writes code. His idea is simple. What if we created a shipping club?

34:55Jeff Bezos:What if customers paid a flat fee upfront, like a subscription, and in exchange, they got free two-day shipping on everything for a year? Jeff sees this idea. And unlike most CEOs who would ignore a suggestion from a random engineer, Jeff becomes obsessed with it. He falls in love with the concept immediately, and he calls it Prime. He convenes a SWOT team to build it, but immediately he runs into a wall, his own finance team. The finance team, led by CFO Tom Skutak, hates the idea. They absolutely despise it. They run the numbers, they build the models, and they come to Jeff with a stack of spreadsheets that all say the same thing.

35:32Jeff, this is financial suicide. Let's look at the math that they were looking at. Expedited shipping, two-day air, is expensive.

35:40Jeff Bezos:It costs Amazon about$8 a package to ship something in two days via UPS or FedEx. Bezos wants to charge$79 a year for the membership. So do the math. If a customer signs up for$79 and shipping costs$8 per package, Amazon breaks even after just 10 orders. But who is going to sign up for Prime? The power users. The people who buy a lot of stuff. The people who order 20, 30, 50 times a year. The finance team argues, Jeff, you're creating a self-selection problem. The only people who will buy this are the people who are going to abuse it. If a guy buys a$15 book and we pay$8 to ship it, we lose money instantly.

36:17Jeff Bezos:If he buys$50 a year, we lose hundreds of dollars on him. They tell him, we're going to bleed cash on every single package. We're going to bankrupt the company. It defies all retail logic. You're subsidizing your most expensive, most demanding customers. You're accelerating your losses. The board of directors are skeptical. The logic is irrefutable. The math says no. So Jeff listens to the math. He looks at the spreadsheets. He understands the logic perfectly. And then he ignores it. He says, I don't care about the math. I care about the psychology. He understands something that the accountants don't.

36:52Jeff Bezos:He understands that humans are not rational calculators. He understands that shipping costs are a psychological barrier, not just a financial one. He knows that if he can flip a switch in the customer's brain, if he can change their mindset from should I pay for shipping on this item? So I might as well buy this because the shipping is free. He changes everything. He tells the team, I want to draw a moat around our best customers. I want to change their behavior. I want them to stop looking at the price of the item and just look at the convenience. He picks the price point,$79. To Jeff,$79 felt right.

37:26Jeff Bezos:It felt like a real commitment, but low enough that people would impulse buy it. It was a pure gut call. He tells the team, launch it. He gives them a seemingly impossible deadline. He wants it launched, not months, but in weeks. So the engineering team has to scramble to rewrite the checkout code. Amazon launches Prime in February 2005. At first, the finance team looks like they were dead right. It's a bloodbath. Shipping costs explode. The company's margins compress and the stock takes a hit. Wall Street hates it. They say Amazon is giving away the store. They're desperate. But then the flywheel starts spinning and it starts spinning faster than anyone, even Jeff could have imagined.

38:08Jeff Bezos:Once a customer pays that$79, a switch flips in their brain. They want to get their money's worth. They stop shopping at Target. They stop driving to Walmart. They stop looking at Google Shopping to compare prices. They start buying everything on Amazon. I need batteries. Amazon. I need a toaster. Amazon. I need socks. Amazon. I need a single tube of toothpaste. Amazon. And the data starts coming in. Before Prime, the average customer spent about$400 a year on Amazon. After joining Prime, that same customer spent$1 ,500 a year. Their purchase frequency went from five times a year to 50 times a year.

38:45Jeff Bezos:Yes, Amazon was losing money on the shipping, but they were making it up on the volume. And more importantly, they were making it up because they didn't have to spend any money on marketing to acquire that customer again. The customer was locked in. They were off the market. Prime transformed Amazon from a store you visit into a utility you subscribe to. It became like electricity or water. You just use it. Today, there are over 200 million Prime members worldwide. It generates over$35 billion a year in subscription fees alone before you even count the products they buy. It's the most successful membership program in the history of capitalism.

39:22Jeff Bezos:It's the reason Amazon is impossible to disrupt. When Walmart finally tried to launch a competitor Walmart Plus, it was 15 years too late. The moat was already filled with alligators. This inflection point teaches us a critical lesson about innovation. Sometimes you have to break the math, to build the psychology. If Jeff had listened to the spreadsheet, Prime never would have happened. He had to trust his intuition about human behavior over the hard data of the finance team. He realized that if you give customers a superpower, the ability to get anything they want in two days for free, they'll reward you with their loyalty forever.

40:00Jeff Bezos:Prime was just the second most important invention of the 2000s because while Prime was securing the retail business, a small team of engineers was working on something in the background, Something weird. Something that had nothing to do with selling books. Something that would eventually become more value than the entire retail empire combined.

40:24Jeff Bezos:Okay, final inflection point now. It's the early 2000s. While the world is focused on Amazon the retailer, the company that sells books and diapers and runs warehouses, there's a completely different drama unfolding inside the engineering department. Amazon is growing fast. but its own internal technology is a disaster. It's what engineers call a hairball, a tangled mess of spaghetti code. Meanwhile, Jeff wants speed. He wants Amazon to be able to launch new features, new categories, and new websites instantly. He wants to be able to launch Amazon Japan or Amazon Jewelry in a week, not a year.

40:59Jeff Bezos:But the infrastructure is broken. Every time a team wants to build a new feature, let's say a recommendation engine for shoes, they have to rebuild the entire infrastructure from scratch. They have to provision their own servers, set up their own databases, configure their own storage, write their own network protocols, and it takes months just to get to the starting line. So Jeff is frustrated. He looks at his brilliant engineers, some of the smartest computer scientists in the world, and he realizes that they're spending 70 % of their time on plumbing and only 30 % of their time on the actual product.

41:30Jeff Bezos:He calls this undifferentiated heavy lifting. He compared it to a factory in the year 1900. Back then, if you wanted to build a brewery, you also had to build your own power plant. You had to have a steam engine. You had to hire an electrician. It was expensive. It was hard, and it didn't make your beer taste any better. Jeff says, we're doing the same thing. We're building our own power plant for every single project. The breaking point comes when Amazon tries to launch a service called Merchant.com. The idea was to license Amazon's e-commerce technology to other retailers like Target and Marks & Spencers.

42:03Jeff Bezos:But when they tried to separate the code to give it to Target, they realized they can't. It's so deeply intertwined that they can't untangle it. The project is a nightmare. So Jeff does something radical. He doesn't just ask the engineers to fix it. He issues a mandate, a decree. Sometime around 2002, he sends an email to the entire engineering organization. It has become legendary in Silicon Valley. It's known as the API mandate. The email basically says this. First, all teams will henceforth expose their data and functionality through service interfaces, APIs. Second, teams must communicate with each other only through these interfaces.

42:43Jeff Bezos:No direct linking, no backdoors, no reading another team's database. Third, there will be no other form of inter-process communication allowed. Fourth, all service interfaces, without exception, must be designed from the ground up to be externalizable. That is to say, the team must plan and design to be able to expose the interface to developers in the outside world. No exceptions. And fifth, anyone who doesn't do this will be fired. And then he signs it. Have a nice day. This is the nuclear option. It forces the entire company to rebuild itself from the inside out. It forces them to adopt a service-oriented architecture.

43:22Jeff Bezos:It's painful. It takes years. Engineers hate it. It slows everything down in the short term, but it works. It turns Amazon's messy code into a set of clean modular building blocks. Then the second penny drops. In the summer of 2003, Jeff hosts an executive retreat at his house on Lake Washington. Andy Jassy, who was Jeff's shadow, his chief of staff at the time, is there. They do an exercise. What is Amazon actually good at? They list the obvious things. We're good at retail. We're good at logistics. But then they realize something else. We're really, really good at running infrastructure. We're good at managing data centers.

44:01Jeff Bezos:We're good at scaling databases. We're good at undifferentiated heavy lifting. So Jeff has a light bulb moment. He says, we have developed this expertise to run our own business. Why don't we turn this into a product? Why don't we sell these infrastructure primitives, you know, storage, compute, database to other developers? He says, we're going to build the electric grid for the internet. it. He asked Andy Jassy to leave his role as a shadow and go build this business. It's a crazy idea. Amazon is a bookstore. It's a retailer. It has no business selling server space. So they launched Amazon Web Services AWS in 2006.

44:37Jeff Bezos:They launched with two simple products, S3, Simple Storage Service, which is a plan to store files. And the second is EC2, Elastic Compute Cloud, a place to rent virtual servers. The reaction from the business world is silence. Wall Street is confused. They say, what is this? Why is the bookstore renting out servers? This is a distraction. They should be focused on selling more books. Their margins are already razor thin. Businessweek runs a cover story wondering if Amazon has lost its way. But in Silicon Valley, the reaction is very different. It spreads like wildfire. Suddenly, two guys in a garage don't need to raise$5 million to buy servers and hire a sales admin.

45:16Jeff Bezos:They can just put a credit card into AWS and pay 10 cents an hour for a server. It democratizes innovation. It unleashes the startup boom of the 2010s. Startups like Airbnb, Pinterest, Uber, Netflix, and Lyft build their entire businesses on top of AWS. They don't build their own data centers. They just plug into Amazon's grid. And the incumbents, you know, Google, Microsoft, IBM, they ignore it. They look at AWS and say, that's a toy. It's a hobbyist. No serious enterprise will ever put their data on Amazon servers. In fact, Jeff famously said, we faced no like-minded competition for seven years.

45:54Jeff Bezos:It's unbelievable. Usually when you invent something good, you get copied in two years. We got seven years. Because Amazon was a bookstore, Google didn't see them as a threat. They let Amazon run the table. By the time Google and Microsoft woke up and launched their own clouds, you know, as you're in Google cloud, AWS was already the standard. They had a seven year headstart today. AWS is a monster. It generates a hundred billion dollars in revenue a year. It generates the vast majority of Amazon's operating profit. It powers the internet. If AWS goes down, half the web goes dark. Talk about the irony, the undifferentiated heavy lifting, the boring plumbing that was slowing them down became their most valuable asset.

46:37Jeff Bezos:Jeff took a cost center, IT, and turned it into a profit center. And this is the ultimate example of day one thinking. A day two company would have said, we're a retailer. Let's stick to retail. A day one company says, we have this capability. Let's invent something new. Without AWS, Amazon would just be a low margin retailer fighting with Walmart. With AWS, it's the most powerful technology company in the world. And it all started because Jeff Bezos got tired of his engineers spending too much time configuring servers.

47:16Jeff Bezos:So we've just walked through five incredible inflection points. When you take a step back and look at these moments together, when you look at the mosaic of Jeff Bezos' career, you know, what do you see? What are the patterns? What's the operating system running inside his brain? For me, I see three distinct powerful threads that tie all of this together. These are the common threads that make Jeff different from almost any other CEO in history. The first one is the willingness to be understood for long periods of time. This is, without a doubt, the single most defining trait of Jeff Bezos. It's his superpower.

47:50Jeff Bezos:Most human beings crave validation. It's hardwired into our biology. We want our parents to be proud of us. We want our peers to respect us. We want the stock market to applaud us. We want the media to call us geniuses. When the people criticize us, our instinct is to defend ourselves, to explain and to conform. But Jeff has seemingly surgically removed this part of his brain. He doesn't just tolerate being misunderstood. He expects it. He believes that it's a necessary precondition for invention. Here's a famous quote. You know, if you want to invent, you have to be willing to be misunderstood for long periods of time.

48:25Jeff Bezos:Think about the evidence that we just went through. When he quit D.E. Shaw, his own boss told him he was crazy. He was misunderstood. When he launched Get Big Fast and lost money on purpose, Wall Street called him reckless. Again, he was misunderstood. When the stock crashed in 2000, the media called him Amazon.com. Again, misunderstood. When he launched Prime, his own CFO told him it was financial suicide. Again, misunderstood. When he launched AWS, Businessweek asked him if he'd lost his mind. Again, misunderstood. Again. And the list goes on. When he launched the Kindle, people mocked it. You know, why would I read an ugly gray screen when I can read a paper book?

49:00Jeff Bezos:When he launched Amazon Marketplace and invited third-party sellers on the platform, people said, you're inviting your competitors into your store. You're crazy. In every single one of these cases, the conventional wisdom was X and Bezos did Y. And in every single case, he had to endure years, sometimes a decade of criticism before the world caught up to him. Jeff has a supernatural ability to internalize his own scorecard. He doesn't look at the external scorecard, you know, the stock price and the press. He looks at the internal scoreboard, the inputs, the customer data, and the thesis. If you're a founder or a creator or a leader, that is the hardest lesson to learn.

49:39Jeff Bezos:You have to build a callus around your ego. You have to be okay with looking like a fool in the short term to look like a genius in the long term. The second common thread is obsession with customers, not competitors. This sounds like a cliche. Every company says customer first. It's on every corporate poster in every break room in America. But Jeff actually means it and he practices it with a religious fanaticism. Most companies are competitor focused. Pepsi is focused on Coke. Ford is focused on GM. Microsoft is focused on Google. They watch what the competitor does and then they try to do it slightly better or slightly cheaper.

50:17Jeff Bezos:They're reactive. They're looking sideways. but Jeff realizes very early on that if you focus on competitors you can only be good as they are you are limited by their imagination but if you focus on customers you're limitless and the reason is because customers are never satisfied Jeff famously said this customers are always beautifully wonderfully dissatisfied even when they report being happy and business is great even when they don't know it yet, they want something better. He realizes that the customer is the ultimate forcing function for innovation. Do customers ask for Prime? No. Nobody sent him an email saying, I'd like to pay you$79 a year for free shipping.

50:58Jeff Bezos:But he knew that customers always want things faster and cheaper. Do customers ask for AWS? No. But he knew that developers always want to move faster and pay less for infrastructure. Jeff works backwards from the customer's permanent, invariant needs. He says, I very frequently get the question, what's going to change in the next 10 years? That's a very interesting question. I almost never get the question, what's not going to change in the next 10 years? And I submit to you that the second question is actually the more important of the two. He knows that 10 years from now, customers will not want higher prices.

51:34Jeff Bezos:Customers will not want slower delivery. Customers will not want less selection. Because those things are immutable, he can invest billions of dollars into them with zero risk. By anchoring his strategy to the customer, he liberates himself from the rat race of watching the competition. While Barnes & Noble was watching Amazon, Amazon was watching the customer, and that's why Amazon won. The third common thread is be stubborn on vision, but flexible on details. This is the essence of the day one mentality. Jeff is incredibly rigid about where he's going, but he's incredibly fluid about how to get there.

52:10Jeff Bezos:As an example, let's look at the everything store vision. He had that idea in 1994. He wanted to sell everything to everyone. That was the North Star. He never wavered from that for 30 years. But the details of how to get there, he failed constantly and he was always willing to kill a bad idea and try a new one. Think about this. You know, think about auctions. Remember when Amazon tried to compete with eBay? They launched Amazon auctions. It failed miserably and nobody used it. So he pivoted. He launched Z Shops, which was a way for small businesses to set up their own little storefronts on Amazon.

52:43Jeff Bezos:That failed too. It was a ghost town. So he pivoted again. He launched Amazon Marketplace, where third-party products are listed right next to Amazon's product on the same page. That worked. Today, it's 60 % of their sales. If he'd been stubborn on the details, he would have stuck with auctions and ridden it into the ground. If he'd been flexible on the vision, he would have quit after auctions failed and said, I guess we're just a bookstore. but he combined the two. He kept the vision, the everything store, but changed the path. Auctions, Z shops, marketplace. We see this pattern everywhere. Think about the Fire Phone.

53:17Jeff Bezos:That was a massive failure. That was$170 million write-off, but the technology, you know, voice recognition became Alexa. The vision, owning the interface remained, but the detail, you know, phone versus the speaker, that changed. Think about Amazon Wallet. That failed, but Amazon pay is huge. Like so many other entrepreneurs that we've profiled on Inflection Moments, Jeff treats failure as data. He doesn't take it personally. He sees it as an experiment that doesn't work, which gets him one step closer to the experiment that will work. Most people are the opposite. They're stubborn on the details.

53:51Jeff Bezos:I have to do it my way, but they're flexible on the vision. As soon as it gets hard, they lower their ambition. Jeff teaches us to hold the vision tight but hold the plan loose. So when you combine these three threads, be willing to be misunderstood, obsess over customers, not competitors, be stubborn on vision, flexible on details, you get a machine that can survive a 90 % stock crash, ignore the skeptics, break the laws of finance, and invent entirely new industries from scratch. You get day one.

54:28Jeff Bezos:So here's what keeps coming back to me about Jeff Bezos' story. It's the concept of day one. Every single year for over two decades, Jeff ended his annual letter to shareholders with the exact same sentence. He would attach a copy of his original 1997 letter, the one where he laid out his philosophy, and he would write, It remains day one. For a long time, it's easy to think of this as just some catchy slogan, a bit of corporate cheerleading. But the more you study Jeff, you realize it's a philosophy of survival. Jeff has a very specific definition of day two. He once wrote, day two is stasis, followed by irrelevance, followed by excruciating, painful decline, followed by death.

55:10And that is why it is always day one. Think about that. stasis, irrelevance, decline, death. That is the natural entropy of the universe.

55:20Jeff Bezos:Every organization, every empire, every person eventually moves to day two. We get comfortable, we get risk averse, we start protecting what we have instead of inventing what's next. We stop looking for the regret minimization moments because we have too much to lose. Jeff spent 30 years fighting a war against gravity. He managed to keep a massive bureaucratic organization acting like a hungry underdog in a garage. He managed to keep a company with one and a half million employees terrified of stasis. That is his true legacy. Not the money, not the rockets, but the proof that you can choose to stay in day one forever if you have the discipline to be misunderstood.

56:00Jeff Bezos:If Jeff had waited for the math to work, he would still be sitting in a hedge fund office in New York City. He'd be a very rich, very successful, anonymous retired banker. And we We wouldn't have Amazon, we wouldn't have AWS, we wouldn't have the world we live in today. But Jeff didn't wait for the math. He drove the car to Seattle and he made the math work.

56:27Jeff Bezos:If you enjoyed this deep dive into the mind of Jeff Bezos, please subscribe and share with a friend. And to bring this full circle, think of the person that you would want in the passenger seat of your Chevy Blazer while you drive across the country to start something crazy. send it to them. Thanks for listening. We'll talk soon.

57:10Jeff Bezos:If you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up for our newsletter. The link is in the show notes. Until next time, keep building and talk soon.