Jeff Bezos, CEO and Founder, Amazon

[Music] Oh Jeff thank you very much for coming thank you David it's great to be here so let's start by asking you this we announced that you were coming here in May since that time your stock is up by about 250 billion dollars do you attribute some of that increase to the knowledge that people think if you're so smart as to come here you must be really good at running your company it's clearly completely causal I mean there's that's I would recommend that to any CEO now your stock is actually up 70 percent this year is there one thing that you think is responsible for that of several things because 70 percent is pretty good now I am it's a you know I I have been lecturing they have All Hands meetings at Amazon and for 20 years ever since we've been about 21 years now in 1997 every at almost every All Hands meeting I said look when the stock is up 30% in a month don't feel 30% smarter because when the stock is down 30% in a month it's not going to feel so good to be feel 30% dumber and that's what happens you know the great quote that Warren Buffett brings up all the time but Benjamin Graham said which is you know in the in the in the short run the stock market is a voting machine in the long run it's a weighing machine and what you need to do is operate your company in such a way knowing that it will be waved one day and just let it be weighed and never spend any time thinking about the daily stock price I don't okay so as a result of going up seventy percent this year you have become the wealthiest man in the world it is that a title that you really want it or not I is it I can assure you I have never sought that title and it was fine being the second wealthiest person in the world that actually worked fine it's not it isn't a it I I would say it's something people naturally are curious about you know it's a kind of an interesting curiosity but it's not the thing I would much rather if they said like you know inventor Jeff Bezos or entrepreneur Jeff Bezos or you know father Jeff Bezos those kinds of things are much more meaningful to me and the you know the it's an output measure that if you look at the financial success of Amazon and the the stock I own 16 percent of Amazon and Amazon is worth roughly a trillion dollars that means that what we have built over 20 years we have built eight hundred and forty billion dollars of wealth for other people and that's really what we've that's what from a financial point of view that's what we've done we've built eight hundred and forty billion dollars of wealth for other people and that's great that's how it should be you know there I believe so powerfully in the ability of entrepreneurial capitalism and free markets to solve so many of the world's problems all of them but so many of them so you live in Washington State and they're in Seattle we're outside of Seattle now the man who was the richest man for about twenty years his name Bill Gates yeah and what is the likelihood that the two richest men in the world live not only in the same country not only the same state not only the same city but in the same neighborhood I mean is there something in that neighborhood that we should know about and are there any are there any more houses for sale there act right after I saw bill not not too long ago I you know we were joking about the world's richest man thing and I basically said thank you no I said you're welcome and he immediately turned to me and said thank you but no Medina is a great little it's a suburb of Seattle and you know I don't think there's anything special in the water there and you know I did locate Amazon in Seattle because of Microsoft I thought that that big pool of technical talent would provide a good place to recruit talented people from and that did turn out to be true so it's not a complete coincidence there is some correlation there but when you are the richest man in the world you go into a store when you want to buy something do you have to put a credit card down you just say I'm Jeff Bezos and they send you this the how do you about that and you have to care you carry cash around you you can yeah I do carry cash and I have I have credit cards yeah and if your credit I have to show my driver's license and you know but have you ever had a credit card I'd know that I I have I've had my credit card denied so what do you say when they you say don't you know if I give them another credit card I'd say here try this one so earlier today you made an announcement that is the most significant philanthropic gift you've made in the pipe it was a about about a year ago you said you were wanted to look for some good philanthropic ideas and you got I think 47,000 of them and you reviewed them and how did you decide where to put this two billion dollars and would you describe exactly what you're gonna well that process was very helpful so I I solicited ideas a kind of crowd-sourced and I got literally as you said something like 47,000 maybe even a little more some of them came to my inbox most of them came on social media and I read through thousands and thousands of them my office kind of correlated them all and put them into buckets and there were some themes that emerged but the other thing that's fascinating about the kind of exercises you see just how long tailed it is people are interested in trying to help the world in so many different ways and you it's all the things you would expect you know it's but but but also some more unusual things but it's you know some people are greatest in the arts and opera and they think that's underfunded and a lot of people are interested in medicine and particular diseases and think that those deserve more R&D dollars all these things are correct a lot of people are very interested in homelessness including me a lot of people are very interested in education and of all kinds all kinds of interesting to both kind of college scholarship type education but also apprenticeship program so you name it and people are interested in education I'm very interested in early education and I made them you know the apple doesn't fall far from the tree my mother has become in running the Bezos Family Foundation she has become an expert in in early education I'm a student of Montessori schools I started at Montessori when I was 2 years old and the teacher complained to my mother the Montessori School teacher complain to my mother that I was too task-focused and that she couldn't get me to switch tasks so she would have to just pick up my chair and move me and by the way I think that's if you ask the people who work with me that's still probably true teacher ever call you since and say that she was responsible for your success no I'm in touch with several of my high school elementary school teachers though but I don't know any of my Montessori School teachers ok so the gift that you're giving essentially that you're gonna have some for preschool for children who need preschool for treet we're yeah well full tuition preschool Montessori inspired I'm very excited about that because I'm gonna operate that that's gonna be an operating nonprofit I'm gonna hire an executive team there's gonna be a leadership team we're gonna operate these schools and we're gonna put them in low-income neighborhoods it's just there's no doubt we know for a fact that if a kid falls behind it's really really hard to catch up and if you can give somebody a leg up when there are two three or four years old by the time they get to kindergarten or first grade they're much less likely to fall behind you can still happen but you've really improved their odds and a lot of in you know and you know most probably most people in this room have been very mindful about making sure that their kids got very good preschool education and you know got that kind of headstart that Head Start compounds fantastically if you can get that you know starting at age 2 3 4 that's there's a powerful compounding effect there so it's highly levered that's all that really means you know that you can the money spent there is going to pay gigantic dividends for decades so and the other part of your gift will be to give awards out to yes and that's going to be more traditional grant-making philanthropy so there I'm gonna identify with the help of a team I'm gonna identify that we're gonna hire full-time team identify and fund that and fund family homeless shelters and that will be you said you would give an initial two billion dollars I expect to add to that yeah it's day one everything I've ever done has started small Amazon started with a couple of people and Blue Origin started with five people and the budget at Blue Origin was very very small now the budgeted origin has approaches a billion dollars a year a next year will be more than a billion dollars so in Amazon who literally was ten people today it's half a million people but you you it's hard to remember for you guys but for me it's like yesterday I was driving the packages to the post office myself and hoping one day we could afford a forklift and so but so for me I've seen small things get big and it's part of this day one mentality I like treating things as if if they're small you know Amazon even though it is a large company I wanted to have the heart and spirit of a small one and then so anyway that the day one foundation is going to be like that will will will will wander a little bit too so I we have some very specific ideas of what we want to do but I believe in the power of wandering all of my best decisions in business and in life have been made with heart intuition guts you know not not an analysis when you can make a decision with analysis you should do so but it turns out in life that your most important decisions are always made with instinct intuition taste heart and that's what we'll do with this day one foundation - it's part of that day one mentality as we go about you know building out this network of of nonprofit schools we will will learn new things and we'll figure out how to make it better so one of the decisions that you are doing by the customer is going to be the child this is this is so important because that is it the secret sauce of Amazon where there several principles at Amazon but the number one thing that has made us successful by far is obsessive-compulsive focus on the customer as opposed to obsession over the competitor and I talked so often to other CEOs and some other CEOs and also founders and entrepreneurs and I can tell that even though they're talking about customers they're really focusing on competitors and it is a huge advantage to any company if you can stay focused on your customer instead of your competitors so then you have to identify who is your customer so at the Washington Post for example is the customer the people who buy advertisements from us know the customer is the reader full-stop with the customer is the reader and then by the way where do advertisers want to be advertisers want to be where there are readers so it's really not that complicated you know it sort of it comes around really well and in the school who are the customers is it the parents is that the teachers no it is the child and that's what we're going to do we're gonna be obsessively compulsively focused on the child we're going to be scientifically we can be and we're gonna use heart and intuition when we when we want to when you use your intuition make decisions where is the intuition leading you now on your second headquarters [Laughter] all right can can we just take a moment to acknowledge that that may be the best segue in the history of interviewing seriously David so that is that is alright that's amazing answer is the answer is very simple we we will announce the decision before the end of this year so we've made tremendous progress the team is working their butts off on it and we will get there no no hey be nice come on but you know you already have something in one Washington and what about another Washington area you got yeah no that's right we in in Seattle we call this the other Washington okay this is so speaking of Washington you've bought a few years ago as you mentioned the Washington Post why did you buy the Washington Post you had no background in that area what what convinced you to do that okay first of all I was not looking for a newspaper I had no intention of buying a newspaper I had never thought about the idea had never occurred to me it was never something wasn't like a childhood dream no nothing and my friend Don Graham who at that time I had known 15 years I know him 20 years now he approached me through an intermediary and wanted to know if I would be interested in buying the Washington Post and I sent back word that I would not because I didn't really know anything about newspapers and Dawn over a series of conversations convinced me that I that was unimportant because we had inside the Washington Post we have so much talent that understands newspapers that wasn't what the problem was but they needed was somebody who had an understanding of the Internet and so so that was the first thing that's kind of how it got started and then I so I did some soul-searching and again my decision-making process something this would definitely be intuition and not analysis the the the financial situation of the Washington Post at that time this is 2013 was very upside-down and is a fixed cost business and they had lost a lot of revenue over the previous five or six years not through any fault of the people working there or of the leadership team all of the paper had been managed very very well the problem was a secular one the internet was just a roading all of the traditional advantages that local newspapers had all of them I mean it was just taking away every gift that the the local newspaper had was kind of systematically removed by the internet and so that's why you see this it's a it's a it's a it's a profound problem across local newspapers all around the country and in fact the world and so so I had to do some soul-searching and I said you know is this something I want to get involved in if I'm gonna do it I'm gonna put some heart into it and some work into it and I decided I would only do that if I really believed it was an important institution and I said to myself if this were a financially upside-down salty snack food company the answer would be no and but but it was very soon as I started thinking about that way I was like this is this is an important institution it's really it is the newspaper in the capital city of the most important country in the world the Washington Post has an incredibly important role to play in this democracy there's just no doubt in my mind about that and and so as soon as I had passed through that gate I only had one more gate that I had to go through before telling dawn yes and that was I wanted to look myself you know be really open with myself and look in a mirror and sort of think about the company and be sure that I was optimistic that it could work because you know if it were hopeless that would also be and not something I would get involved in and I looked at that and I was super optimistic and it needed to be transitioned to a national and a global publication there's one gift that the internet brings in newspapers it destroys almost everything but it brings one gift and that is free global distribution in the old days of paper newspapers you would have to build printing plants everywhere and your logistics operations to have a truly global newspaper or even a really international news paper super expensive heavy capex investments that's why so few papers actually became national or global no not really no global ones to speak of depending on how are you what you count and so but today with the internet you get that gift of free distribution so we had to take advantage of that gift and that's the that was the basic strategy we had to switch from a business model where we made a lot of money per reader with a relatively small number of readers to a little bit tiny bit of money per reader on a very large number of readers and that's the transition that we did last night the I'm pleased to report to you that the post is profitable today the newsroom is growing it's been growing every year since I've been there Marty Baron who leads the newsroom is killing it I think he's the best editor in the newspaper business we have Fred Ryan who is the publisher Fred Hiatt at the editorial page they're killing it shy lash our head of Technology is a superstar so we are you know that it's working and I'm so proud of that team and I know for a fact when I'm 80 or let's say I always project myself forward to age 80 but as I get older I'm starting to do 90 so I know that when I'm 90 it's gonna be one of the things I'm most proud of is that I took on the Washington Post and helped them very rough transition so when you and you agreed to buy it I think the asking price was 250 million dollars you didn't ago she ate you know hip done I asked him how much he wanted he said 250 I said fine I didn't negotiate with him and I did no due diligence and he I wouldn't need to it done he tried like to sell I I had you know Don told me every warts and pimple and he told me all the things that were great and every single thing he told me on both sides of that ledger turned out to be true okay so now that you own the Washington Post sometimes there are some people who criticize some things that The Washington Post says and you've been remarkably quiet I have no idea what you're talking about well you've been remarkably quiet in not defending yourself well I do defend the post and so I don't I don't I don't feel the need to defend Amazon but but I do I will say this it is a mistake for any elected official in my opinion I don't think this is a very out-there opinion to attack media and journalists I believe that it is an essential component of our democracy there has never been I was gonna say never been an elected official who liked their headlines I think there's probably a no no public figure who has ever liked their headlines it's okay it's part of the process you know it's it's if you're the president the United States or a governor of a state or whatever you you don't take that job thinking you're not going to get scrutinized you're going to get scrutinized and it's it's it's healthy and somebody very you know what what what what the president should say is this is right this is good I'm glad I'm being scrutinized and that would be so secure and confident but it's really dangerous to demonize the media it's dangerous to call the media lowlifes it's dangerous to say that they're the enemy of the people we live in a society where it's not just the laws of the land that protect us we do have freedom of press it's in the Constitution we but what we but it's also that social norms that protect us those we we it works because we believe those words on that piece of paper and every time you attack that you're eroding it a little bit around the edges now look I don't want to be dramatic here we are so robust in this country the media is going to be fine we're going to push through this and by the way Marty Baron would tell you this is a super important point he will always say he'd meet when he meets with the newsroom I've heard him say many times I say it myself when I meet with journalists at the Washington Post we Marty says we are the administration may be at war with us we are not at war with the administration just do the work just do the work that's Marty's friend so you have I didn't mention the president but you mentioned the president so since you mentioned the president have you met the president he was a lawyer wasn't it right so you've met the President on a couple occasions and yeah talk to him very much as he call you in for lunch or dinner and not that much well I'll keep my conversations with the president to myself but yes I've had a couple of conversations with him and this doesn't make you think you want the job yourself though right it's not a job you would ever aspire to are you asking me if I would run for president yes I'll be your VP you run you run well no I think you'd be a better candidate but yeah let's talk about how you came to the situation where you are today so you grew up in Texas initially yes I was born in Albuquerque all right as a but I left when I was three or four and I moved to Texas he moved to Texas and from early age were you a pretty smart student and your teachers tell you this you know you were good or I have always been academically smart and that you know by the way the older I get I realized how many kinds of smart there are there are a lot of kinds of smart they're a lot of kinds of stupid too but but there are you know I see people all the time who I know they wouldn't have gotten a pluses on you know their calculus exams but they're but they're incredibly smart but yes I was a very good student right so you ultimately moved into high school in Miami yes and then you were valedictorian of your class yes and then you gave a speech as the valedictorian saying you thought we should colonize space or something like that I did it was 1982 I graduated from high school in 1982 big public rights of Miami Palmetto Senior High go Panthers and there were 750 kids in my graduating class and I loved high school I had so much fun we had I lost my library privileges because I laughed too loudly in the library and what about that laughs where did you get that laughter I'm you know it is distinctive I've had that laugh all my life there was a short not that sort there was a multi-year period where my brother and sister would not see a movie with me because they thought it was too embarrassing and my but I don't know why I have this laugh it's just it's just and I laugh easily and often the people who know me you know yes my mom or anybody who knows we will and they'll say if Jeff's unhappy wait five minutes and I can't maintain unhappiness I guess I have you know good serious levels or something so you you graduated as value Tori and you decide to go to Princeton how come you decide to go to Princeton because I wanted to be a theoretical physicist and I so I went to Princeton and I was a really good student as I pointed out already I got eight pluses on almost everything I I had was in the honors honors physics track which starts out with you know a hundred students and by the time you get to quantum mechanics it's like thirty so I'm in quantum mechanics I think this is like junior year and I've also been taking a bunch of computer science classes and electrical engineering classes which I'm also enjoying and I I can't solve this partial differential equation it's really really hard and I've been studying with my roommate Jo who also was really good at math and and the two of us worked on this one homework problem for three hours and got nowhere and we finally said we looked up at each other over the table at the same moment we said yo Santa because yo Santa was the smartest guy at Princeton and we went to you asanas room and he was Sri Lankan and in the face book which was an actual paper book at that time there were his name was three lines long because I guess in Sri Lanka when you do something good for the King they give you an extra syllable on your name and so we had a super long last name the most humble wonderful guy and we show him this problem and he looks at it he stares at it for a while and he says cosine and I'm like what do you mean he's like that's the answer and I'm like that's the answer and he's like yeah let me show you so he brings us into his room he sits us down he writes out three pages of detailed algebra everything crosses out and the answer is cosine and I said listen yo Santa did you just do that in your head and you said no that would be impossible three years ago I solved a very similar problem and I was able to map this problem on to that problem and then it was immediately obvious that the answer was cosine and I that was an important moment for me because that was the very moment when I realized I was never going to be a great theoretical physicist and so I started doing some soul-searching I was like that you know that is a magic trick it's the people who you know theoretical physics in most occupations if you're in the 90th percentile or above you're gonna contribute in theoretical physics you've got to be like one of the top 50 people in the world or you're really just not helping out much you know you're again and so I was very clear that I like I saw the writing on the wall and I changed my major very quickly to electrical engineering a graduated summa laude I graduated summa laude Phi Beta Kappa Phi Beta Kappa and then you went into the highest calling of mankind finance yes I went I went to New York City and I ended up working at a quantitative hedge fund run by a brilliant man named David Shaw de Shah & Co and I started there when there were only 30 people when I left there were about 300 and David is still one of the most brilliant people I've ever met I learned so much from him I used a lot of his ideas and principles on things like HR and recruiting and what kind of people to hire when I start a very very good well-known hedge fund and you're a star there as I understand what propelled you to say I'm quitting this I'm gonna start a company selling books over the internet and I'm gonna do it from Seattle where did that idea come from I came across the fact so this is 1994 nobody has heard of the Internet very very few people was used at that time mostly by scientists and physicists and things like that we used it a little bit of deshawn for some things but not much and and and I came across the fact that the web world wide web was growing at something like twenty-three hundred percent a year this is an i-94 and anything growing that fast is even if it's baseline usage today is tiny it's growing so fast it's got to be big and so I looked at that and I was like there's got to be I should come up with a business idea and get you know on the internet and then let the internet go around this and we can keep working on it and so I made a list of products that I might saw my and I started forced ranking them and I picked books because books is super unusual in one respect which is that there are more book items in the book category than there are items in the other category the three million different books active and in print around the world in a given time so my my the founding idea of Amazon was to build Universal selection of books the biggest bookstores only had 150,000 titles and so that's what I did and I you know I hired a small team and we built we built the software I moved to Seattle why do I did you pick Seattle because of Microsoft yeah it was two things the largest book warehouse in the world at that time was in nearby in a town called Roseburg Oregon and then also the recruiting pool that was available from Microsoft I mean you told your parents you're gonna equip de sha where you're successful making presumably a fair amount of money yeah and you told your wife McKenzie that you're gonna move across the country what did they all say they were immediately and reflexively supportive right after they asked the question what's the internet and so know that but this is right you know you know you with your loved ones you you you bet on them you're not betting on the idea you're you're you you are betting on the person I told my but I told my boss David Shaw that I was gonna do this thing he went on a long walk with him in Central Park and he said finally you know after a lot of listen II said you know what Jeff this is a really good idea I think you're onto a good idea here but this would be a better idea for somebody who didn't already have a good job and that actually made so much sense to me and that he convinced me to think about it for two days before making a final decision and that was that is one of those decisions I made with my heart and not my head and I basically said I don't want to regret I don't when I'm 80 now 90 I have I want to have minimized the number of regrets that I have in my life and most of our regrets are acts of omission they're things we didn't try it's the path untraveled those are the things that haunt us well and so anyway I have one of those it relates to this you know when you we're trying to get the bibliography of books in print to sell you went to a company that my firm owned Baker and Taylor acre and Taylor which had started in 1839 never made a profit since 1839 it was always breakeven and as I understand it the salesman was told by you that you would give them a small piece of the company you were starting to have a lot of cash our salesmen said no we don't want a piece of a company we want some cash yeah so you gave some cash and later when I heard about this I flew out to see you yeah in your ramshackle little office building and I said you know I think that it's like 1997 right this was a long time ago the first time we met and so I said that deal wasn't so good we'd like the piece of the company whatever you were thinking of giving us and you were actually very gracious you didn't say get out of here I don't need you anymore you said look I don't really need you frankly but you were helpful in the beginning so we'll cut up the deal and I'll give you a little piece of the stock yeah and you did and that's thought today is worth about five billion dollars unfortunately we sold it right at the IPO yeah so but it's a testament to your character that that doesn't bother you though it does bother me I I mentioned it every actually I think about every day but I do remember when I went out there and you had your desks were labeled you had like doors where yeah we still do and you were telling me that you had to go deliver the books yeah for the post office yourself I still I don't still delivered suppose but I was doing that for years and I said I was packing boxes I might not know in my hands and knees them in the first month I was packing boxes on my hands and knees on the hard cement floors and with somebody else didn't standing next to me kneeling next to me we're packing and and I said you know what we need knee pads this is for killing my knees and this guy packing alongside me said we need packing tables and I was like that's the most brilliant idea I've ever heard and the next day I went and bought packing tables and it like doubled our productivity so where did the name Amazon come from Earth's biggest river Earth's biggest selection okay that seems simple was that an easy choice or were there other candidates well the first name I named it Cadabra I was I had these it's hard for you it's really hard to impress upon you how small this beginning was but when I was driving to Seattle I wanted to hit the ground running I wanted to have a company incorporated and I wanted to have bank accounts set up and so I called a friend and and he recommended his lawyer to me turned out this guy was actually his divorce attorney but his but this guy incorporated the company for me and set up bank accounts and said I need to know what name you want the company to be for the incorporation papers and I said cuz over the phone I said Cadabra like abracadabra but it's a suit Cadabra and he said cadaver and I was like okay that's not gonna work and but I like go ahead with Cadabra for now and I'll change it and so like three months later I changed it to Amy so what propelled you to sell things more than books and obviously if you're only selling books today you wouldn't be the richest man in the world presumably it's the idea that you're selling other things when did you first get the idea to sell other things we after books we started selling music and then we started selling videos and then I got smart and I I emailed a thousand randomly selected customers and asked them besides the things we felt today what would you like to see a cell and that answer came back incredibly long-tailed people said basically the way they answered the question was with whatever they were looking for at that moment so like I remember one of the answers was I wish you've sold windshield wiper blades because I really need windshield wiper blades and I thought to myself we can sell anything this way and and then so then we launched electronics and toys and many other categories over time and the vision became because you read the original business plan it's just books well 1997 you went public yeah and the value of a company was under a billion dollars and maybe 600 million or something 3 3 3 something I think write better IPO so and then went underwater for a while right your stock at one point I think went to $100 but then it went down to six or something like that at the peak of the internet bubble our stock peaked some around a hundred and thirteen dollars and then after the internet bubble you know busted open our stock went down to six and went from a hundred and thirteen to six in less than a year my annual shareholder that year starts with a one word sentence and that one word sentence is the word ouch so most of those internet companies of the dot-com era are out of business yeah you survived what was it that made you to survive and virtually the rest of them are gone well I it's very the whole period is very interesting because the stock is not the company and the company is not the stock and so as I watched the stock fall from 113 to 6 I was also watching all of our internal business metrics number of customers profit per unit you know everything you can imagine defects etc every single thing about the business was getting better and fast and so as the stock price was going the wrong way everything inside the company was going the right way and I you know so I wasn't we didn't need to go back to the capital markets we didn't need more money the only reason you know a financial bust like the internet bubble bursting is you know makes it really hard to raise money but you know we already had the money we needed so we just needed to continue to progress Wall Street kept saying well Amazon's not making any money they're just getting customers where the profits where the profits and Wall Street kept beating you up on that and your response was I don't really care what you think well I was on television with Tom Brokaw he pulled together half-a-dozen internet entrepreneurs from that era this is you know in turn I think it's been right before the bubble burst maybe were right after I camera but in that area and he was interviewing all of us and he finally turned to me and he said mr. Bezos can you even spell profit and Tom by the way Tom Brokaw is now one of my good friends and but he's like can even spell profit and I said it sure PR OPH et and he he burst out laughing and and but look I Amazon was you know people always accuse us of selling dollar bills for ninety cents and said look anybody can do that and grow revenues that's not what we're doing we always had positive gross margins it's a fixed cost business and so what I could see is that from the internal metrics is that what at a certain volume level that we would cover our fixed costs and the company would be profitable so who came up with the idea of prime prime seems to be a great way to get money in advance of people actually getting the services yeah who's like actually it's very so like many inventions inside of a team and I love team inventing is my favorite thing so I tap-dance into the office I love Amazon I have so much fun there I love Blue Origin I love the Washington Post but Amazon is my full-time job and I get to invent I get to live 2 to 3 years in the future and most of the invention we do there is you know if somebody has an idea and then other people improve the idea and other people come up with objections why I can never work and then we solved those objections and it's a very it's a very fun process prime there were a couple of things one one of our board members being Gordon always wanted us to have a loyalty program and he ever he would bring this up every board meeting and he you know and the loyalty programs that we would think about were things like frequent flyer miles which don't really work in a business like Amazon in my opinion there are a lot of reasons that they work for Airlines but that's different and there's structural differences and the but so we kept to think but we're always wondering what could a loyalty program be and then actually a kind of a junior software engineer came up with this idea not as a loyalty program but this idea that we could offer people kind of an all-you-can-eat buffet of fast free shipping and when we modelled that so then you know the finance team went and modeled that idea and that the results were horrifying that we would offer unlimited shipping shipping is expensive and that we would and customers loved free shipping so at this point we already had something called free Super Saver Shipping where we would for in exchange for letting the product go very slow to you and in exchange for having a certain minimum order threshold size then you could get free shipping but this was gonna be no order threshold so you could buy you know a single $20 item or a single $10 item and free two-day shipping and when we modeled this it didn't look pretty but we could see I mean again back to that you have to use heart and intuition there has to be risk-taking you have to have instinct all the good decisions have to made that way you do it with a group you do it with great humility because by the way getting it wrong isn't that bad that's the other thing when when we make mistakes and we've made Dizzy's like the fire phone and many other things that just didn't work out I can I could look we don't have enough time for me to list all of our failed experiments but the big winners pay for thousands of failed experiments so you try something like prime and it was very expensive at the beginning it cost us a lot of money because what happens when you offer a free all-you-can-eat buffet who shows up to the buffet first the heavy eaters it's scary it's like oh my god did I really say as many prawns as you can eat and and so that is what happened but but surely we could see the trend lines we could see that you know the different all kinds of customers were coming and they appreciated that service so that's what by the way when you have your team by the way they're a feeder my answers are too long you're sensing this audience cut me off so I'm not used to cutting off the richest man in the world so so let me ask you this are killing me David when when you said that you sit around with your team and so forth but you didn't like meetings before 10:00 a.m. no you'd like to get 8 hours of sleep yes don't like powerpoints explain all that why is that ok many so I I like to putter in or I get a pearl I go to bed early I get up early I like to putter in the mornings I like to read the newspaper I like to have coffee I like to have good practice with my kids before they go to school so I have my kind of puttering time it's very important to me and so that's why I set my first meeting for 10 o'clock I like to do my high IQ meetings before lunch like anything that's going to be really mentally challenging that's the ten o'clock meeting and because by 5:00 p.m. I'm like I can't think about that today let's try this again tomorrow at 10:00 a.m. and and so then on sleep I get 8 hours of sleep I prioritize it unless I'm traveling in different time zones sometimes it's impossible but I am very focused on it and and therefore me I need a dollar sleep I think better I have more energy my mood is better all these things and think about it as a senior executive what do you really get paid to do as a senior executive you get paid to make a small number of high quality decisions your your job is not to make thousands of decisions every day so let's say that I slept 6 hours a day well let's go really crazy and say I slept 4 hours a day so now I just got 4 so-called productive hours back so if I was going to you know have say 12 hours of productive time during any waking day now all of a sudden I have 12 plus 4 I have sixteen productive hours so I have 33% more time to make decisions so if I was gonna make you know a hundred decisions now I can make 133 decisions but if I did that arithmetic wrong I'm sorry and and so your make a hundred and thirty three decisions is that really worth it if the quality of those decisions might be lower because you're tired or grouchy or any number of things now it's different if it's a startup company I mean you know you're really you know when Amazon was a hundred people I was a different story but but Amazon's not a start-up company and all of our senior executives operate the same way I do they work in the future they live in the future none of the people who report to me should really be focused on the current quarter I always tell people sometimes I get you know we'll have a good quarterly conference call or something and and Wall Street will like our quarterly results and I'll go people will stop me and say congratulations on your quarter and I say thank you but what I'm really thinking is that quarter was baked three years ago i right now I'm working on a quarter that's going to reveal itself in 2021 sometime and that's what you need to be doing you need to be out sort of you know two or three years in advance and if you are and then why do I need to make a hundred decisions today if I make like three good decisions a day that enough and they should just be as high-quality as I can make them Warren Buffett says he's good if he makes three good decisions a year and so you know and I really believe that so I care what your question was like a triple compound question right so you've got at least time I really let me ask you this okay who have revolutionized retail and people buy so many things over the internet people are obsessed with buying things or even by the way when you buy over the Internet Amazon do you ever get the wrong orders anything ever wrong what do you do if you call up and complain or you don't have any problems no I I I'm customer of Amazon hopefully like all of you in this no one person whole Tyner service isn't even this room who's not an Amazon customer see me right afterwards and I'll walk you through it it's m'm and i and i treat them like the same way i treat a problem that i would get from customer my email address is famous and i keep it and then I read it it's Jeff at amazon.com I don't see every email that I get anymore because I get too many but I see a lot of them and I and I use my curiosity to pick out certain emails I'll get one from a customer and there's a defect you know we've done something wrong that's the usually people are writing us not always but usually the writing is because we've screwed up their order somehow and I am so I look at this and for some reason it's something seems a little odd about that one and so I asked the team to do a case study and and find real root cause or causes it's usually causes real root causes and then real root fixes so that when you fix it you're not fixing it for that one customer you're fixing it for every customer and that process is a gigantic part of what we do so I would treat my if I have a failed order or some bad customer experience I would treat it just like that oh you've revolutionized retail as I say but now you were in the bricks and mortar business you bought whole foods that was the theory behind buying something that doesn't sell things over the internet well there we're very interested in physical stores and we have it I've been asked for years we ever open physical stores literally 20 years haven't asked that question and I always say yes but only when we have a differentiated differentiated offering something's not me too because that space physical stores is so well served if we offer a me-too product offering it's not gonna work we're and it's also just we're not very good at that most of the whenever we've tried dabbling in something that's a me-too service we tend to get beaten it doesn't work we're our culture is much better at pioneering and inventing and so we have to have something that's different and that's what Amazon Go is it's completely different the Amazon bookstore completely different and we have ideas about how to merge Prime and Whole Foods to make that those are still rolling out you haven't seen them yet but to make to use Amazon Prime to make Whole Foods a very differentiated experience and continue to add technology to that and what you know and so basically Whole Foods I love whenever I'm talking to Amazon buys a lot of companies usually there's much smaller than Whole Foods but we buy a bunch of companies every year and I'm always trying to assess what I meet with the entrepreneur who founded the company I'm always trying to figure out one thing first and foremost is that person a missionary or a mercenary and the mercenaries are trying to flip their stock the missionaries love their product or their service and love their customer and trying to build a great service by the way the great paradox here is that that's usually the missionaries who make more money and you can you can tell really quickly just by talking to people and when I met John Mackay who's the founder of Whole Foods just it's a missionary company he's a missionary guy and so what we're gonna be able to do is take some of our resources some of our technical technological know-how and and expand the Whole Foods mission they have a great mission which is to bring nourishing food to everybody organic nourishing food to everybody and but you know we have a lot to bring to that table in terms of resources but also in terms of operational excellence and in terms of technology know-how now one of the other companies you started with in your company which is technologically superior company is Amazon Web Services where that you come from AWS has been we started it I don't know a long time ago now 15 years ago and and worked on it behind the scenes for a long time and then finally launched it it has become a very large company and it at AWS we completely reinvented the way that companies by computation so traditionally if you're a company and you needed computation you would build a data center and you'd fill that data center with servers you'd have to upgrade the operating systems of those servers and keep everything running and so on so on none of that added any value to what the business was doing it was kind of price of admission you know undifferentiated heavy lifting and what we saw at Amazon is we were doing that we were building data centers for ourself just like that what we saw is there was tremendous waste of effort between our applications engineers and our networking engineers the ones who run the data centers and they were they were having to have lots of meetings and planning fleet sizes and all these like non-value-added tasks and we said look what we can do is develop a set of hardened api's that allow these two groups the applications engineers and the networking engineers to have roadmap meetings instead of these fine-grained meetings and then we'll expose those api's to the applications engineers and they can just take as much compute resources they want well and as soon as we hatched that plan it became immediately obvious to us we were just gonna do that for ourselves and as soon as we did that it was immediately obvious that every company in the world was gonna want this and then something then a business miracle happened this never happens this is like the greatest piece of business luck in the history of business so far as I know we faced no like-minded competition for seven years it's unbelievable and we like I'll give you it like when I launched amazon.com in 1995 Barnes & Noble launched Barnes and noble.com in 1997 two years that's very Clack that's very typical if you invent something new we launched Kindle Barnes and Noble launched No two years later we launched Eko Google launched Google home two years later when you pioneer if you're lucky you get a two year head start nobody gets a seven year head start and so that was incredible because and I think it was a whole confluence of things I think that the big established enterprise software companies did not see Amazon as a credible enterprise software company and so we had this long runway to build this incredible little feature-rich and it's just so far ahead of all the other products and services available to do this work today and the team doesn't let up there this team led by Andy Jesse and Teresa's here so we're we're you Teresa Teresa's everybody here in Washington knows Teresa but this team is just they're killers I mean they're they're just innovating on the product side so rapidly and they're running everything so well I'm incredibly proud of them Amazon itself has virtually no competition in its online sales so who is number two to you on online sales there's virtually nobody our competition is where cut we where we elbow for customers is in in the physical world so in other words our that when people are choosing between us there were about 40 percent of so of online sales but we're like I don't know one low single-digit percentage of retail sales so you know 97 98 percent of sales eighty-five percent of sales is two or more is still in the physical world so that's where we face competition but do you worry that the u.s. government might come along or where the European governments say you're so big you're so powerful that even though you haven't done anything that is traditionally monopolistic you're just too powerful and some regulatory thing could come and impair your business well not here's here's where I think about that I have I have a couple I get asked this question frequently and I thought it was an original question now sorry you do do that sometimes but that's not one of them and my view on this is very simple all big institutions of any kind are going to be and should be examined scrutinized inspected governments should be inspected government institutions big educational institutions big nonprofits big companies they're gonna get scrutiny it's not personal it's kind of what we as a society want to have happen so that's that's one thing and I remind people internally when when you know that if they don't take this personally that will lead you and a lot of wasted energy this is just normal it's actually healthy it's good we want to live in a society where people are worried about big institutions so that's okay and then the second thing I think is we are so inventive that whatever regulations are promulgated or however it works that will not stop us from serving customers so to really you know I mean under all kind of regulatory frameworks that I can imagine customers are still going to want low prices they're still going to want fast delivery they're still going to want big selection and so these things are so fundamental those are the things that we do so I would say that I will say one more thing as long as we're talking about big companies is it's really important that that politicians and others not they need to understand the value that big companies bring and not demonize or vilify business in general or especially I'm visiting well they shouldn't vilify big companies and they certain to vilify business in general for sure and the reason is simple um there are certain things only big companies can do you know I've seen this the whole way I know what Amazon could do when we were 10 people and I know what we could do was we were a thousand people and I know we could do or ten thousand I know we can do today we're half a million and you know give you a more vivid example of this I love you know garage entrepreneurs I invest in a lot of their company I know many of them but nobody in their garage is gonna build an all carbon-fiber fuel-efficient Boeing 787 it's not gonna happen you need Boeing to do that if you like your iPhone you need Apple to do that you need Samsung to do that these are things that you know that a well-functioning they're the entrepreneurial capitalism does those kinds of things very well and then there are market failures where nobody takes care of the you know this is you know then you look towards philanthropy and towards government so you need different models for different things but you definitely this world would be really bad without Boeing and without Apple and without Samsung and so on so one of your passions is not just Amazon but its outer space and space travel yeah lu origin so you've started Blue Origin a little bit in secret then you've made it public you're putting a billion dollars or more of your own personal capital and every year next year it'll be more for the first time all right and what you're going to get out of it are we going to have people going into space what is the yes this is this this is the most important work I'm doing and I have great conviction about that it is it's a simple argument this is the best planet we have now sent robotic probes to every planet in this solar system believe me this is the good one my friends who say they want to move to Mars I say look do me a favor move to the top of Mount Everest for a year first because that's a garden paradise compared to Mars and so this gem of a planet we're finally as a species big enough to really impact it and so you know for for thousands and thousands of years Earth was really big and humanity was really small that's not true anymore and so we faced a choice as we move forward we're gonna have to decide whether we want a civilization of stasis which we could do that's a real that's a legitimate choice what does it mean it means we will have to cap population we will have to cap energy usage per capita so people don't think about how much energy they use your metabolic rate as an animal you use about a hundred watts of power so use about the same amount of power as a 100 watt light bulb but your civilizational metabolic rate as a human living in the developed world so now this is a developed world figure is more than ten thousand watts of power that's so much you're using when you know just going about your life all these lights and driving your cars and your vehicles and flying across the country and whatever you're doing that uses energy you're using on average about 10,000 watts and the in the under the less developed world by the way they want to be where we are so there's gonna be a lot of energy used energy usage for a long long time has been growing at you know a few percent a year even as efficiency has grown very fast so we get we're always getting more efficient and even though we're getting more efficient we keep using more energy and that's a big part of the reason energy is so fundamental that's a big part of the reason that we have the you know we have the lifestyle we have as the modern civilization it's it's it takes a lot of energy and so do you want that to continue for your grandchildren or your grandchildren's grandchildren in other words I want my grandchildren's grandchildren to be using way more energy per capita than I am and I would like to see not have a population cap I wish there were a trillion humans in the solar system then there would be a thousand Einsteins in a thousand Mozart's but we don't have that long if you take current baseline global energy usage and compounded it just a few percent a year for just a few hundred years the such is the power of compounding you have to cover the entire surface of the earth and solar cells that is not going to happen so as a result that we can be sure of that's not going to happen so what will that lead to it'll lead to stasis I don't even think stasis is compatible with liberty so there's all sorts of problems that we are about to face because for the first time in our civilizational history going back thousands of years we're now big compared to the size of the planet we can fix that problem but we can fix it in exactly one way by having by moving out into the solar system and you know and so my part my role in that is I want to build reusable space vehicles that's the heavy lifting Amazon was able to get started with only a million dollars in capital and in and because I got to ride on the back of the credit card system I got to ride on the back of the pre-existing transportation network that could deliver packages the pre-existing telecommunications network that could allow people to connect to our servers all of that all that would have been hundreds of billions there was in capex but the heavy lifting was already in place and that's what allowed Facebook if you think about it to kids in a dorm room made this half trillion dollar market cap company and you know in an incredibly less than two decades that's unbelievable and so but that can't happen in space there's no way to kids in a dorm room can start a space company of any significance because the price of admission is so high and so I want to build space infrastructure so that the next generations of people can use that infrastructure the same way I use UPS and FedEx and so on to build Amazon and that and and and so that's what Blue Origin is all about so do you ultimately want that to be your legacy or Amazon and what would you like to be have as your legacy world's oldest man that's a that's a famous line I like but but but the real thing is I you know it'll be whatever it's gonna be I'm gonna be proud of the things I want to I I live my life in such a way that when I in a quiet moment of reflection and I'm thinking back on my life that I have a few regrets as possible and I don't you know what what will my legacy be I have no idea and and I don't even want to spend a lot of time thank you intend to give away the bulk of your fortune at some point your life I tend to give away I don't know how much of it I'm going to give away I'm also going to invest a lot of it in Blue Origin so for me I start with mission and I think and there are we have so far figured out three ways if you have a mission you can do it with government you can do it with nonprofit and you can do with for-profit if you can figure out how to do it with for-profit that has a lot of advantages for many reasons one it's self-sustaining so you know we don't need you know here's my iPhone the last thing we need is a company a non-profit company making phones it turns out there's a healthy competitive ecosystem that likes to build these things there's no market failure here if you like the Gates Foundation you look at you know room-temperature vaccines there's no market for room-temperature vaccines anybody who can afford a vaccine you can also afford a refrigerator and so you have to start solving problems like that that have no market solution and then you get to other things like the court system and the military and so on you can't even figure out a non-profit model so the real answer your question is I'm going to give away a lot of money in a non-profit model but I'm also going to invest a lot of money in something that any rational investor would say is a really bad investment which is Blue Origin but I think it's super important and if I can't make Blue Origin a for-profit thing maybe I'll convert it to nonprofits um at some distant point in the future but that would be I would be I wouldn't want that I want I want it to be a thriving ecosystem is being healthy how do you stay in shape I exercise which I enjoy so for me that's not a not a problem and how do you deal with the wealth with respect to your children I mean how do you shield them from the effects of this enormous wealth I don't really shield them they're very very mature they'd you know kids are smart they know what's going on my oldest son when he was twelve I asked him you know do your classmates ever talk about sure so what do you tell them I said I told them my life is normal to me and I thought wow that's so profound because everybody's life is normal to them we all have that we all share that and when you took your oldest son to college this year you carried his books up the steps like everybody other yeah I cared I'd helped to move in to his dorm and with my wife and it was bittersweet but son it was also sad I didn't get sad till the day before well let's just close with your wife we haven't mentioned her yeah she's a Princeton graduate she's a novelist and she's been supportive of everything you're doing right and you would like to say anything else about her I was waiting for the question okay we've been married 25 years she also is a summa laude graduate from Princeton we didn't meet there we met in New York City at de Xiang Co where we worked we got engaged after we got we dated for three months we were engaged for three months and then got married so we our whole kind of dating engagement period was only six months long its I also I would like to take a moment to talk about my parents if that's okay you didn't ask me but I well I would like to they're there here in the audience and my parents are I thank you guys you know you get different gifts in life and one of the great gifts I got is my mom and dad he it's amazing my highest admiration is withheld for those people we all know some of them I know several them who had terrible parents maybe they were abusive whatever it is and some of those people who who so admirably break that cycle and pull out and and make that all work I did not have that situation I was always loved my parents loved me unconditionally and and by the way it was pretty tough for them you know she doesn't talk about it that much but my mom had me when she was 17 years old she was a high school student in Albuquerque New Mexico you could ask her but I'm pretty sure that wasn't cool in 1964 to be a pregnant mom in high school in Albuquerque New Mexico and in fact my grandfather who is another incredibly important figure in my walk in my life went to bat for her and because the high school wanted to kick her out you weren't allowed to be pregnant in high school there and and my grandfather said you can't kick her out it's a public school she gets to go to school and they negotiated for a while and the principal finally said okay she can stay and finish high school but she can't do any extracurricular activities and she can't have a locker and I know and then and my grandfather being a very wise man he was like done we'll take that deal and so she finished high school she had me and then she married my my dad my dad is my real dad not my biological dad his name is Mike he's a Cuban immigrant he came here as part of Operation Pedro Pan and in fact was put up by a Catholic Commission not too far from here in Wilmington Delaware and then got a scholarship to to college and Albuquerque which is where he met my mom so I have a kind of a fairy tale story and my grandfather possibly because I mean I'm pretty sure because my parents were so young starting at age four he would take me every summer on his ranch and it was the most spectacular from age 4 to 16 I basically spent every summer working alongside him on the ranch he was the most resourceful man he would he did all his own veterinary work he would even make his own needles he would pound the wire with a oxy acetylene torch and and drill a little hole in it and sharpen it and make a suture like make a needle that he could suture up the cattle with some of the cattle even survived and he was a remarkable man and a huge part of all of our lives but it is you don't realize you know you just look back and you know if you if you don't have these parents you know it's so important so it's just a really big deal and my grandfather to use like a second set of parents for me well Jeff I want to thank you for a very interesting conversation and I want to offer you the first honorary membership of the Economic Club of Washington I hope you'll join our club when you decide ultimately to spend more time here as we hope you will I'd be delighted to accept they have a few gifts for you this is a copy of the original map of the district Columbia as designed by Pierre L'Enfant we hope you'll take this as a gift we also have a year a leather-bound copy of the first book ever sold on Amazon oh wow fluid concepts in creative analogies yeah the douglas hofstadter book you got it right well I'm glad of that and look at that that's really cool and courtesy of Ted Leonsis one of the owners of perhaps the Capitol signed by the Stanley Cup team nice so thank you for a great evening a great conversation thank you he is a super interviewer thank you

Channel: The Economic Club of Washington, D.C.

Views: 882,548

Rating: 4.7414036 out of 5

Keywords: Jeff Bezos, David M. Rubenstein

Id: zN1PyNwjHpc

Length: 70min 37sec (4237 seconds)

Published: Thu Sep 20 2018

Reddit Comments

[u/DevonMG]

That was a good story. I think this is the first time I've heard this guy talk.

[u/Mrbubbles07]

I wish I had bought some Amazon stock 😢