Amazon's 14 Leadership Principles via Jeff Bezos

what I would hope amazon's legacy would be is earth's most customer centric company what we have always wanted to do is raise the standard for what it means to be customer centric to such a degree that other organizations whether they be other companies or whether they be hospitals or government agencies whatever the organization is they should look at Amazon as a role model and say how can we be as customer centric as Amazon even three-headed ER as I imagine right hopefully competitors as well but if we could make you know if that could be our legacy that we kind of raised the general idea of what it means to be customer centric that would be a huge accomplishment it would be accomplishing a mission that's much bigger than ourselves Harvard Business Review called you recently the most successful living CEO Steve Jobs obviously was listed as well what does that mean to you as you consider your own leadership style well I think and if you look at the Big Ideas at Amazon what we're really focused on is thinking long term putting the customer at the center of our universe and inventing those are the three big ideas and they work well together it's you I don't think that you can invent on behalf of customers unless you're willing to think long term because a lot of invention doesn't work if you're going to invent it means you're going to experiment and if you're going to experiment it means you're going to fail if you're going to fail you have to think long term so these three ideas customer centricity long term thinking and a passion for invention those go together in in our that's kind of the amazon cocktail that's that's how we do it and eat and we're and by the way we have a lot of fun doing it that way because one of our leadership principles is the good leader to write a lot and it sounds kind of like well how great but is there some way that I could practice being right a lot and elected read all the time but I didn't think you would practice you could be right often and I've observed people who are write a lot and I notice a few things about them the first is the people who are write a lot they list a lot and people who are write a lot change their mind a lot and people who are write a lot they seek to disconfirm there must profoundly held convictions which is very unnatural computers so humans mostly as we go about life we're very selective with the evidence that we left seep into us and we like to observe the evidence that confirms our pre-existing beliefs and people who have write a lot work very hard to do that unnatural thing of trying to disconfirm their beliefs by the way of changing your mind a lot is so important you should never let anybody tap you with anything you've said in the past because that is just a you know it life is complicated the world is complicated and sometimes you get new data and when you get new data you should change your mind by the way sometimes you don't get new data and just reanalyze the situation and you realize it's more complicated than you initially thought it was and you change your mind this is something you have it's frustrating to watch and I will not get into politics here tonight but it's frustrating to watch politicians because they're almost not a lot to change their minds as soon as they change their mind they get accused of being flip-floppers with reality is anybody who doesn't change their mind a lot is dramatically under estimating the complexity of the world that we live in yeah well competes in teams is something that we've been preaching at Amazon almost from the very beginning and it's a simple idea which is no team should be so large that it cannot be said with just two pizzas and and so obviously to do great things you need big teams but you need to subdivide them and the reason that it's so helpful is because there's a natural we humans grew up around campfires of telling each other stories and you're sitting at table tonight I've got ten people in each table ten people maybe twelve people is the perfect size to have a natural human coordination without a lot of structure and if you want to have a big group of a hundred people or 500 people organize does have a lot of structure to make that work and so if you can arrange to do big things with a multitude of small teams and that takes a lot of effort to organize that way but if you can figure that out the communication of those small teams will be very natural and easy and the six page memos included powerpoints as many many years ago now we outlawed PowerPoint presentations of Amazon what do you do though as a leader of a major online company to make sure that you are in touch with people like some 19 year old in his bedroom with a computer changing profoundly so much that all the record companies want to see him how do you stay in touch with that kind of experimentation and that kind of energy hire smart people and how do you go back if you don't hire because because no single individual cannot keep in touch with the plethora of yoga of new things happening so what you have to do is you have to put in place a recruiting process that attracts and retains smart talented hard-working people who want to be a part of your mission what but then when you talk to them when they bring out the CEO to talk to these people what's the mission statement you tell them first it's earth's most customer centric company and we have a very and I explain what we mean by that because we have a very precise definition for customer centric it means listen invent and personalize so first you have to listen to customers companies that don't listen to customers fail second you have to invent for customers because companies that only listen to customers fail it's not the customers job to invent for themselves it's our job at amazon.com to invent things like one-click and other things like like sales rank going from 1 to 18 million those kinds of things that customers really like that's our job not theirs to think of that and third is personalized take every individual customer and put them at the center of their own universe and then when we talk about Earth's most customer centric company we mean that in a very broad way this is bigger than Amazon a call what we want to do is sort of uplift the worldwide standards for customer service and customer centricity so this is sort of like sony sony - born right after world war ii is a company that's set out if you go and look at their early mission statement it was not to be known for quality it was to make Japan known for quality not Sony Japan and that's sort of what we want to do we want to do something bigger than amazon.com to make what would define it one it would be that the that we set a new example for customer service and customer centricity that other companies look at admire and want to emulate and that is a mission that people can get excited about so a little while back you are Amazon was criticized for having a harsh work culture and I'm just wondering if and and you you guys came out and defended yourselves and explained it I have kind of a two-part question one is whether it is whether it's you considered it fair at all or not whether it made you rethink anything about your work culture ya know it's very good by company and the second question is a little bit of a setup I need to tell all of you because I know you have an employee program that you wanted to talk club yeah I want to but do the first ok so ya know it really has not I I'm very proud of the culture that we have at Amazon and you know it's a it's a I think of it as a gold standard culture for innovation and pioneering work and the you know in the people I work with these people who they're missionaries for what they do they are you know you if you're giving great customer experience there's the only way to do that is with happy people you can't do it with a set of miserable people you know watching the clock all day so does that include work-life balance and all those things yes but I would I use I teach three leadership classes a year at Amazon I'm a part of it they're bigger classes when I come in and teach a session and I always talk about work-life balance except I like to use the phrase work life harmony rather than balance because to me balance implies a strict trade whereas I find that when I am happy at work I come home more energized I'm a better husband better dad and when I'm happy at home I come in and better boss and better colleague and so that that it's not you could be out of work and we have terrible work-life balance you know even though you've got all the time in the world right you could just feel like oh my god you know I'm miserable and you would be draining energy and so you have to find that harmony it's a much better word and I think for most people it's about meaning people want to know that they're doing something interesting and useful and for us you know because of the challenges that we have chosen for ourselves we get to work in the future and it's super fun to work in the future for the right kind of person there are people I mean who you know we ours is an environment it embraces a lot of change we have to because the Internet is changing the technologies that we use are changing we operate the intersection of Technology and retail both of which are highly competitive industries and but it's really for somebody who hated change you know I imagine high tech would be a pretty bad career it would be it would be very tough you know and there are much more stable industries and so they should probably choose one of those more stable industries with less change and they'd probably be happier there I'd be that industry would be tough for me so we're not all the same and for me a job that I don't know like for me the job that would be the RV like I know insurance claims adjuster something you know where I had the same job every day and it didn't change frequently I'd be heart I'd do it but it would and I'd do it at a high quality level but I wouldn't like it and a lot of them have iPads now okay even so I'm just saying there's a little time to say okay and pretty soon they'll have machine learning too again my job one of my jobs as the leader of Amazon is to encourage people to be bold and people love to focus on things that aren't yet working and that's good it's human nature that kind of divine discontent can be very helpful but you really you know it's incredibly hard to get people to take bold bets and you need to encourage that and if you're going to take bold bets they're going to be experiments and if they're experiments you don't know ahead of time though they're going to work experiments are by their very nature prone to failure but big success is a few big successes compensate for dozens and dozens of things that didn't work so you know bold bets AWS Kindle Amazon Prime our 3rd party seller business all of those things are examples of bold bets that that did work and they pay for a lot of experiments I've made billions of dollars of failures at amazon.com literally billions of dollars of failures and you know you might remember pet's calm or Cosmo or you know give myself a root canal with no anesthesia very easily none of those things are fun but but they also they don't matter what really matters is companies that don't continue to experiment companies that don't embrace failure they eventually get in the desperate position where they only thing they can do is make a kind of Hail Mary bet at the very end of their corporate existence whereas companies that are you know making bets all along even you know big bets but not bet the company bets I don't I don't believe in bet the company bets that's when you're desperate that's that's the last thing you can do at what point can the Earth's best customer experience delivers they're raising prices we're not going to raise prices so if you're waiting for us to raise prices give up now but we're going to lower prices but so let me jump in on that because I think that's an important point not partly because of questions everybody raises about cash flow and profitability but because it looks like shopping online is not price sensitive in other words all this reports that I read about people who are forced to raise their prices in order to generate more cash they're finding that customers are continuing to buy online so price point sensitivity doesn't seem to be a critical just as you could raise prices doesn't mean you should so we have huge economic advantages over physical stores in terms of a centralized distribution model in terms of not having expensive retail real estate we have never been one of those companies that lowered prices to unreasonable levels I know that and so we're our pricing is sustainable and as we get more efficient and as we get more scale and as we're buying cooperative not for 20 million customers but for 40 million customers we're going to be able to lower prices even further and that's a good idea but I'm just asking if in fact if in fact you could sell your products at a higher price and customers be willing to pay a higher price you wouldn't do know generate more cash not necessarily so think about the what the thing that benefits us most so there's there's an equation here when you lower prices you also increase the number of customers you have you increase the level of revenues you have one of the things that people make a mistake on is they think that you're trying to optimize for percentage margins you know they think you're trying what's your new cheese not why not where you're trying to you're actually trying to maximize dollar margins and those if you if you try to maximize dollar margins often times that causes you to want a lower price not increase price another point I would make is that unlike physical world retailing which is a variable cost business so if you double your sales you double your costs right online retailing is a fixed cost business much more so so when you double your sales you don't come anywhere near doubling your costs as a result one of the intuitions that's wrong about the physical world we all know in the physical world that whatever place has the best service can't have the lowest prices online I think that's wrong I think online you can have the best service and the lowest prices if you have enough scale so I've been a shareholder for a long long time incredibly happy wrote it up in the bubble wrote all the way down hung out for those seven lean years and then suddenly it takes off like a rocket ship very much believer in the long term the investment cycle the big bets all that stuff even I last quarter had a little bit of a gulp when I saw the fact that you are not just breaking even anymore but losing a boatload of money and in fact way more than you even said you were going to lose which I thought was sandbagging oh they just said they're going to lose and they're going to come in with a profit that stocks going to soar it was worse than you said so when do you begin to say okay that's it go rein it in a little bit where is this part we were extra nice to me because I'm an investor haha and the company is that comic I know I'm asking either shareholder look and we would all love all of our numbers to be smooth lines up and to the right and that would be terrific but that's not how it works you know you know the those numbers are our output measures and you I mean I guess you could try to manage your quarterly earnings very precisely but I think personally that would be a mistake you know most of the work that we put into any particular quarter happened years ago so it's not you know there's there aren't that many knobs you can turn during a quarter I mean you can but they're very low like eating your seed corn if you turn those knobs you don't want to do that and so it's it's a I you know people I think if you focus on the controllable inputs to your business instead of the outputs in the long term you get better results so the the Benjamin Graham quote here is that in the short term the stock market is a voting machine in the long term it's a weighing machine and I think people are well advised to build a company that wants to be weighed and not voted upon and that means having good return on invested capital and having you know lots of free cash flow but if you said to me if I said here's a job I would reject if somebody came to me and said Jeff I want your job to be to drive up the Amazon stock price and just manage that directly now this might sound ridiculous to some of you but many companies actually do this they have they actually go out and they try to sell the stock that's kind of the final output and it's much better to say okay let's not do that that's not going to be sustainable it's kind of a silly approach what are the inputs to a higher stock price yes okay well free cash flow and return on invested capital inputs to a higher stock rest okay so let's let's keep working backwards what are the inputs to free cash flow and you keep working backwards until you get to something it's controllable and a controllable input for free cash flow would be something like lower cost structure and they back up from there and you say okay well you know if we can improve our pick efficiency in our fulfillment centers and reduce defects defects are very very costly it's probably know reducing defects that the root is one of the best ways to lower cost structure and so if you then that starts to be a job you would accept you would if you're you know a reasonable person you would say I have no idea how to drive up the stock price I can't manage that directly it's not a controllable input but I can make your picking algorithms more efficient and that will reduce cost structure and then you know follow that chain all along the way that's what you do in all of these businesses you want you know customer obsession you want to invent your way out of boxes you want to invent your way to the future you want to be patient you want to have operational excellence so that you're finding defects at the root and fixing them you

Channel: Dan Croitor

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Keywords: amazon, 14 Leadeship Rules, leadership, hr, amazon culture, leadership principles, core values

Id: B-xdfQv3I1k

Length: 20min 20sec (1220 seconds)

Published: Tue May 23 2017