tv Bush Center Leadership Forum - Jeff Bezos Conversation CSPAN May 29, 2018 1:06pm-1:30pm EDT
on friday, jimmy carter, betsy and keisha meadows, lance bottoms. on c-span this week, on c-span.org and the c-span radio app. jeff jesus talked about founding amazon, the future of the company and its purchase of "the washington post" and artificial intelligence and space travel. the forum was hosted by george w. bush center leadership format southern methodist university in dallas. this is an hour. >> jeff, welcome to dallas. i am excited for you to see a city that really wants you here, right guys? [cheers and applause]
sorry, that was too tempting. i have left 30 seconds in case there is a real estate deal. [laughter] jeff: it is nice to be here. host: i want to thank our sponsors, highland capital management. this is a multifaceted event. we are here for the engage event and they culminating conversation. we are here with smu, our great partner heard we are sponsored by howard capital. this has been a great couple of days with bono, priscilla chan, ben bernanke, hank paulson, condoleezza rice, president and mrs. bush talking about leadership. i want to talk about leadership. i want to take you back to the beginning. in 1995 you started. you went public in 1997, and i
will adjust for stock splits that you issued shares at $1.50 a share. in 1988 your revenue is $600 million and you lost $125 million but your stock went up to $55 a share. so you double the down. sales went up threefold. you lost another $400 million but your stock went up to $76. $27 million of market capital. take us to that time when the market is telling you that you are doing great, that you have -- but you have red ink in the company. you took on $2 billion in debt from 1999 to 2001. what were you thinking back then? [laughter] jeff: it is kind of fun to go back and think about those days. in those days, when i started the company, it was just one person.
and then there were 10 people. today, there are almost 600,000 people, so there is a lot of change. but back in that time, we were still a pretty small company by most standards. but we were growing fast and it was very exciting. i was driving all the packages to the post office myself. i knew the ups guy so well that he would let me in, even like five minutes after closing. i hoped one day we would be able to afford a forklift. it was that kind of operation. we were so inefficient with our operations and logistics in those early days when there were just 10 of us, that i did not have packing tables. we were packing on the floor on our hands and knees, and i said
to one of the software engineers who was packing alongside me, do you know what we should do? we should get kneepads. and he looked at me like i was the dumbest guy he had seen in my life. and he said jeff, we should get packing tables. the next day, i got packing tables and it doubled our productivity. [laughter] in the era you are talking about, we had gone public and you are right, on a split-adjusted basis it is $1.50 a share in today's terms. and the market became very quickly, kind of an internet bubble kind of market. stock prices went up very, very high. when i raised the initial funding for amazon, i had to talk to 60 prospective investors to raise $1 million. i raised $1 million from 22 different investors, $50,000 at a time. and they got 20% of the company for $1 million.
that was in 1995. but just two or three years later, a stanford mba with no business experience could raise $25 million in a single phone call if they had an internet business plan. so the whole thing, in just two or three years, the excitement, as we would certainly see when the bubble burst in 2000, the hyperbolic excitement about the internet had infected everybody. and i knew, i liked our business and i like the fundamentals of our business but the stock price was disconnected what we did on a day-to-day basis. so i was always preaching, we would have all hands meetings, and there was a small number of employees at that time, i think in 1997 we would have had a few hundred employees, and we would
have all hands meetings and i would say, i remember the great quote from benjamin graham that in the short run the stock market is a voting machine. in the long run, it is a weighing machine. all the employees at stock options and i did not want them counting their success that way. and i said, when the stock is up 30% in one month, don't feel 30% smarter. because when it is down 30% in one month, you are going to have to feel 30% dumber, and it is not going to feel is good. and it was good that i laid the groundwork, because sure enough in the year 2000, the whole thing came tumbling down. host: went down to six dollars. jeff: it went out to six dollars and i'm not sure if that was on a split-adjusted basis. on a split-adjusted basis, it was probably down to one dollar.
host: did you ever doubt the business model at that point? jeff: no. and because i had the internal metrics on how many customers we had and how it was going, people thought we were losing money because we were selling dollar bills for $.90. it was very clear we were not. we had high fixed costs but we had a positive contribution margin and i knew that it was just a fixed cost business. and, as soon as we reached a sufficient scale, we would have a very good business. so it was that understanding of the fixed nature of our expenses relative to physical world retail is what led us to the get big fast strategy. we knew the economics would be improved if we had a sufficient scale. we worked hard on that. host: so you are preaching the benefits of e-commerce and fast-forward to today, now we have content, physical amazon stores, amazon cashier-less
stores, which we used to call shoplifting. [laughter] jeff: shoplifting without the jail time. host: that's right. and then buying whole foods. how do you manage these businesses, with different cost structures? jeff: finishing up on the prior point before i answer that question, with the memory of barbara bush in all of our minds. a lot of people in this room are entrepreneurs, have done various things, taken risks of various kinds, and i think the, one of the precursors, one of the foundational things to being able to take risk is to have had some kind of support from somebody. you have to have some mentors, you have to have somebody who loves you, these of the things the buildup and allow you to
jump off into uncharted terrain and do something new, because you know you have a support system of one kind or another. and i certainly did. i just want to point out i feel very strongly that, i have one a -- i have won a lot of lotteries. amazon is one of the lotteries that i have won. but i had a big laterally with -- but i hit a big lottery with my parents. my father was an immigrant. he came here when he was 16 years old. he didn't speak any english. [applause] he's a great guy. my mother had me which was 17 years old. she was a pregnant 16 euros in -- 16-year-old in albuquerque, new mexico, and high school, which was not cool.
and she made it work. and her parents helped her with that whole thing and made that all work. if you don't get that support somehow, it doesn't have to be your parents, sometimes you can get lucky and have it be a grandparent or friend or a teacher, it can be somebody, but you need that. some but he has to step in to your life. and that is a lottery that i suspect a lot of people in this room have also one, just like me. host: amazon go. jeff: we do so many different things. and the traditional advice would be to stay focused and keep the business simple. and the way i think about this is, we actually do stick to one thing, it is just not described, the business itself, we do web services, buying compute services from us, we have a retail business, amazon studios which is making original content, amazon go, the things you listed. but the cultural thread that runs through all these things is the same. we only have a few principles at amazon, core values that we go
back to again and again. and if you would each of the each off you looked at the things that we do, you would see those run straight to everything. the first one is by far the most important one is customer obsession. we talk about it as customer obsession, as opposed to competitor obsession. i have seen companies talk over and over about the customer focus, but when i pay close attention to them, i believe they are competitor focused. by the way, competitor focus can work but it don't think it works -- but i don't think it works in the long run as well as customer focus. for one thing, once you are the leader, if your whole culture is competitor obsessed, it is hard to stay energized and motivated if you are out in front. whereas, customers are always unsatisfied, there are always discontent, they always want more.
so no matter how far out there you get in front of your competitors, you are still behind your customers. so they are always pull you -- pulling you along. so customer obsession is what we do. another when his eagerness to invent. we left to pioneer. -- we love to pioneer. whenever we have tried to do something in a me too fashion, we have failed that it. we need to do something that is differentiated, unique, that works for us. and another one is long-term thinking. we are willing to take some time and be patient with our business and initiatives. -- business initiatives. and that runs through everything. a lot of our competitors might have three-year time frames and we might have a five year to seven year time frame. and in the last one, operational excellence.
literally, how do you have high standards around identifying defects, fixing defects at the root, all those things that lead to, what can be stated in a simpler way is professionalism, you want to do things right for the sake of doing them right. host: now the you have 600,000 employees, i calculate you are adding about 250 people per day. you mention you are fending off day two, and you say day to is stasis, followed by irrelevance, -- you say that day 2 is stasis, followed by irrelevance, followed by decline, followed by death. that's why it is always day 1. how does that work? jeff: day one is a phrase we use at amazon all the time. i have been using it since my first annual shareholder letter from 20 years ago. we say it is always day one. and it needs to be day one for the reason you just mentioned.
the real question for me is, how do you go about maintaining a day numeral and culture? it is great to have the scale of amazon. we have financial resources, lots of brilliant people, we can accomplish great things, we have global scope, we have operations all over the world. the downside of that is that you can lose your nimbleness, you can lose your entrepreneurial spirit, you can lose that kind of heart that small companies often have. so if you could have the best of both worlds, if you could have that entrepreneurial spirit and heart, while at the same time having all the advantages that come with scale and scope, think of the things that you could do. the question is how do you achieve that? the scale is good because it makes you robust. a big boxer can take a punch to the head.
the question is, you also want to. those pledges. -- you want to dodge those punches. so you want to be nimble. he want to be big and nimble. and i find things that are protective of the day one mentality, and one of them is customer obsession. i think that is the most important thing. it gets harder when you're bigger. let's say you are a a 10-person startup company, every person in the company is focused on the customer. when you get to be a bigger company, you have middle managers and you have all these layers, and those people are not on the front lines. they are not interacting with customers every day. customers, and they start to not -- they are insulated from customers, and they start to not manage the customer happiness directly, but they start to manage through proxies like metrics and processes and some of those things become bureaucratic. so it is very challenging. but one of the things that happens is that the decision-making velocity slows down.
one of the reasons that happens is that people, the junior executives inside the big company, start to model all decisions as if they are heavyweight, irreversible, highly-consequential decisions. if you make a decision, and you have a two way door, you can backup back through the door and try again. even reversible decisions a start to be made with heavyweight processes. so you can teach people these pitfalls and traps and then teach them to avoid those traps. that is what we are trying to do at amazon so that we can maintain our inventiveness and our heart, and our small company spirit, even as we have the scale and scope of a larger company. host: 600,000 people is a small company. that is a trick. we focus on leadership and i know you are a voracious reader, and you are fond of a book called "the black swan."
and it is about the human tendency to do reduce things -- to reduce things to anecdotal stories. jeff: we can create a narrative around anything. to connect any sequence of facts we can create any narrative. host: how do you focus that throughout the organization when you have that many layers? jeff: it is a little bit different than the way "the black swan" talks about anecdotes. i am a big fan of anecdotes in business. not necessarily building and anecdotal structure around them. i still have it emailer dress that customers can write to, i
see most of those emails, i don't answer very many of them anymore but i see them, and i forward them, some of them, the ones that catch my curiosity, i forward them to the executives in charge of that area with a question mark. and that question mark is shorthand for, can you look into this, why is this happening, what is going on? and we have tons of metrics. we have weekly business reviews with these metrics, and we know so many things about customers and whether we are delivering on time, whether the packages have too much air in them and wasteful packaging, so we have so many metrics that we monitor. and the thing i have noticed is that when the anecdotes and the data disagree, the anecdotes are usually right. there is something wrong with the way you are measuring it. and that's why it is so important, if you are shipping
billions of packages a year, you need good data and the metrics. are you delivering on time to certain apartment complexes? you delivering on time to certain countries? you do need the data. you need to check that data with your instincts. and you need to teach that to all the senior executives and engineering segments. host: if you are not answering your emails, can you give us your cell phone? [laughter] do you still have the two pizza rule, and no powerpoint? jeff: the two pizza team, we try to create teams that are no larger than can be fed with two pizzas. that's the two pizza team rule. no powerpoint are used inside of amazon. when we hire a new executive from the outside -- [applause]
it is the weirdest meeting culture you will ever encounter. new executives have a little bit of culture shock in their first amazon meeting, because what we do is, somebody for the meeting has prepared a six-page memo, a narratively-structured memo that has real senses, topic sentences, verbs and nouns, not just bullet points. it is supposed to create the context for what will then be a good discussion. and then we read those memos silently in the meeting, so it is like a study hall. and everybody said thread the around they sits table and when we read silently, for usually about half an hour or however long it takes us to read the document, and then we discuss it. and it is so much better than the typical powerpoint presentation for so many reasons.
host: but nobody is eating the pizza at that point? jeff: there is no pizza at that point. host: one author says that takes you back to river oaks school, where they start you with a reading exercise. jeff: i never make that connection, but you never know where things come from. i did have a great experience there. definitely recommend the memo over the powerpoint. and the reason we read them in the room, by the way, is, just like high school kids, executives will left their way through the meeting as if they had read the memo. [laughter] because we are busy, and you actually have to carve out the time to get the memo read. that is what the first half hour of the meeting is for. and then everybody has actually read the memo, they are not just pretending. host: that sounds effective. [laughter] how has your leadership style changed over the years? jeff: it has changed a lot,
mostly because it has had to. the company has changed so much. companies of 10 people or 100 people, i can be involved in every decision, not just the objectives, like what are we going to do, but even the methods, how are we going to do it? and as a company gets bigger, the ceo or founder or whoever it is that is leading the company cannot be involved in all of those decisions. they certainly cannot be involved in the methods of how things are going to get done, so you do have to change your leadership approach as the company scales, but the principles of the company have not changed. i probably spend more my time now on culture and trying to set high standards for things like customer obsession and inventiveness and things like that.
for me, i am kind of a teacher now, so it has changed quite a bit. and i have this great luxury, i love my job. i tap dance in to work. i just got back from an amazing vacation in norway. i got to go dogsledding and go to a wolf preserve, and all of this. you but i couldn't wait to get back to work, because it is so fun. and one reason that it is fun for me is that i get to work in the future. i have a very limited, day-to-day, operational needs. i have constructed my job so that i don't have to be pulled into the present. i can stay to her three years in -- stay two or three years in the future. and i tell my team to organize themselves in the same way. we are big enough now that they need to look around corners.