Jeff Bezos thinks of himself as a great man, and why shouldn’t he? ‘Our vision is to have every book ever printed, in any language, available in under 60 seconds.’ He wrote that ten years ago; now it’s almost true. When he graduated from high school, first in his class, he gave a speech to his classmates on how the fragility of the Earth required them to explore outer space and work towards rehousing humanity in orbiting space stations. He has used some of his fortune to turn 290,000 acres in West Texas into a giant laboratory for new spacecraft, which he claims will be so efficient and inexpensive to service that everyone will eventually be able to leave the planet. In his annual letter to the shareholders of Amazon, he acknowledges that some of his decisions may seem inexplicable, but ‘it’s all about the long-term.’ To that end, he has donated $42 million to the construction of the Clock of the Long Now, which is supposed to tick for 10,000 years. His temporarily is not our temporarily.Bezos was born in 1964 in New Mexico. His mother was 16; his father, not much older, was a unicyclist in a circus. Bezos never knew him, and he was adopted by his mother’s second husband, a Cuban petroleum engineer who fled Castro as a teenager and told Brad Stone that he takes credit for passing on a ‘libertarian aversion to government intrusion into the private lives and enterprises of citizens’. To taxes, for example. Jeff did well at school, particularly in maths and science; he went to Princeton; and by the age of 28 he was one of the vice presidents of a New York investment firm. In 1994, when the World Wide Web was a year old, he made a list of things that he might be able to sell in great quantities over the internet. In a supposed triumph for mail order and catalogue companies, the US Supreme Court had decided that businesses weren’t required to collect sales tax on behalf of any state in which they lacked a ‘physical presence’. Anything sold online was going to be cheaper than almost anything sold in a shop. Someone was going to make a fortune. Bezos created a ‘regret minimisation framework’:
I knew when I was eighty that I would never, for example, think about why I walked away from my 1994 Wall Street bonus … At the same time, I knew that I might sincerely regret not having participated in this thing called the internet that I thought was going to be a revolutionising event. When I thought about it that way … it was incredibly easy to make the decision.Bezos’s list included clothes, computer software and office supplies. What he liked about books was that they were ‘pure commodities’: copies of the latest Stephen King sold online would be no better or worse than those sold in shops. But no actual shop was big enough to offer all the three million-plus books in print. Two distributors, Ingram and Baker & Taylor, handled distribution for most American publishers: Bezos wouldn’t have to make separate deals with each publishing house. Books also came assigned with International Standard Book Numbers and were catalogued on CD-ROM: that would save time, and Bezos was in a hurry.
The company’s motto was ‘Get Big Fast’. The Amazon isn’t just the largest river in the world: it’s larger than the next seven largest rivers combined. Bezos preferred the name Relentless.com, but friends persuaded him that it sounded sinister. (Type Relentless into an address bar and you still get directed to Amazon.) He also considered Bookmall.com (but he knew that soon enough he wouldn’t only be selling books) and Cadabra.com (sounded too much like ‘cadaver’). Naturally he couldn’t set up the business in New York – too many potential customers lived there, and he didn’t want to charge them all sales tax – but somewhere isolated would make it difficult to hire engineers. The compromise was Seattle: at least Microsoft was nearby. Washington is also one of the few American states that doesn’t charge any personal income tax. (In 2010, Bezos donated $100,000 to a campaign that successfully defeated Initiative 1098, supported by Bill Gates, which would have started taxing those who earn more than $200,000 a year.) Bezos took a four-day bookselling course through the American Booksellers Association. He used his savings and took out loans to hire a small staff, and his parents put up money from their retirement fund. They didn’t know anything about the internet, but they trusted him.
At first only web geeks shopped from Amazon, and for a year its bestselling book was How to Set Up and Maintain a World Wide Web Site: The Guide for Information Providers. To make the site livelier Bezos hired an editorial team to review books, but sacked them when he realised that customers preferred doing it themselves. (My first book review was a freebie for Amazon: five stars for Jane Eyre.) Distributors made Amazon order ten books at a time, but Bezos got round the system:
You didn’t have to receive ten books, you only had to order ten books. So we found an obscure book about lichens that they had in their system but was out of stock. We began ordering the one book we wanted and nine copies of the lichen book. They would ship out the book we needed and a note that said: ‘Sorry, but we’re out of the lichen book.’
Amazon advertised itself as the world’s largest bookstore, but didn’t actually hold any stock: a customer would order a book from Amazon, Amazon would order it from a distributor and pass it on. It was the kind of transaction that ordinary bookshops do all the time: the difference was that Amazon – run from Bezos’s garage, later from crummy offices in the cheapest part of town – could afford to take 30 or 40 per cent off bestsellers, 10 per cent off everything else. Any business meetings were held in a café inside a branch of Barnes and Noble.
According to Stone’s The Everything Store, which charts Amazon’s growth from bookseller to all-around mercantile hegemon, one of Bezos’s favourite books is Sam Walton’s autobiography, Made in America, about the creation of Wal-Mart. Bezos made his top employees read it, then realised that it was simplest just to replace or augment them with executives from Wal-Mart – so many of them that Wal-Mart sued, alleging that Amazon was stealing trade secrets. Walton’s creed, as Bezos understood it, was to have lower prices than your competitors, even if doing so cut into your profits or meant you had to treat your employees like garbage. With lower prices you’ll get more customers; with more customers you can push suppliers to lower their prices, which will let you lower your prices even further, thereby attracting more customers; repeat until your competitors are dust. Mega-bookstores – Borders and Barnes and Noble – were slow to take to the web, but Bezos prepared for them by patenting ‘1-Click’ checkout, which just meant that customers’ shipping and billing details were saved and stored: no need to type them out next time. The patent was written so broadly that when Barnes and Noble did start selling books online, Amazon was able to prevent their ‘Express Lane’ checkout, even though it required two clicks. Every American webstore was forced to be clunkier than Amazon unless, like Apple, it paid Amazon huge licensing fees. This lasted until 2006, when a New Zealand actor with a side interest in intellectual property law finally produced evidence that another e-commerce company had actually patented one-click shopping first, under a different name. But by then most of Amazon’s would-be competitors were defunct.
by Deborah Friedell, LRB | Read more:
Image: TNW
