- The following is an excerpt from the new book, “Invent and Wander: The Collected Writings of Jeff Bezos,” a collection of writings and public statements by Jeff Bezos, with an introduction by journalist and biographer Walter Isaacson.
- Bezos shares how a customer-first mentality allowed Amazon to flourish and bounce back from financial failures.
- From the early beginnings of Prime to failed initiatives, Bezos explains why differentiating between experimental and operational failures lifted his ecommerce site to new heights of innovation and change.
- “If we build a new fulfillment center and it’s a disaster, that’s just bad execution. That’s not good failure,” Bezos said. “But when we are developing a new product or service or experimenting in some way, and it doesn’t work, that’s okay. That’s great failure.”
- The excerpt is based on Jeff Bezos’ 2017 conversation with his brother Mark, a 2018 interview with billionaire David Rubenstein, and a 2019 interview with Ronald Reagan Presidential Institute director Roger Zakheim.
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When you are focused on moving things forward, you run into problems, failures, things that don’t work. Each one of those times you have a setback, you get back up and try again. You’re trying to invent your way out of a box. We have so many examples at Amazon where we’ve had to do this. We’ve failed so many times — I think of this as a great place to fail. We’re good at it. We’ve had so much practice.
Many years ago we decided to develop a third-party selling business to add selection to the store. We started Amazon Auctions. Nobody came. Then we opened zShops, which was fixed-price auctions. Again nobody came. Each one of these failures was like a year or a year and a half long. We finally came across this idea of putting the third-party selection on the same product-detail pages as our own retail inventory. We called this Marketplace, and it started working right away. That resourcefulness of trying new things to figure out what customers really want? It pays off and it is core to everything we do…
I treat every problem that I hear about from a customer as an opportunity to improve. My email address, [email protected], is well known. I keep that address and read my emails, though I don’t see every single one anymore because I get too many. But I see a lot of them, and I use my curiosity to pick out certain emails.
For example, I’ll get one from a customer about a defect. We’ve done something wrong. That’s usually why people are writing us — because we’ve screwed up their order somehow. Whenever something may seem a little odd about the problem, I’ll ask the Amazon team to do a case study and find the real root cause or causes — and then do real root fixes. So then, when you fix it, you’re not just 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 if I have a failed order or a bad customer experience, I treat it just like that.
This customer-first mentality underscored the decision to forge ahead in the face of financial disaster with Prime…
Most of the inventing we do at Amazon goes like this: somebody has an idea, other people improve the idea, other people come up with objections for why it can never work, and then we solve those objections. It’s a very fun process. We were always wondering what a loyalty program could be, and then a junior software engineer came up with the idea that we could offer people a kind of all-you-can-eat buffet of fast, free shipping.
When the finance team modeled that idea, the results were horrifying. Shipping is expensive, but customers love free shipping. You have to use heart and intuition. There has to be risk taking. You have to have instinct. All the good decisions have to be 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. We’ve made mistakes, doozies like the Fire Phone. I haven’t enough space to list all of our failed experiments, but the big winners pay for thousands of failures.
So we tried Prime, and yes 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 so that is what happened, but we could see the trend lines. We could see all kinds of customers were coming, and they appreciated that service, so that’s what led to the success of Prime.
Keeping the Faith
Failure is simply a matter of perspective:
At the pinnacle of the internet bubble our stock peaked somewhere around $113, and then after the internet bubble burst, in less than a year our stock went down to $6. My annual shareholder letter for 2000 starts with a one-word sentence: “Ouch.” That 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, defects — everything you can imagine. 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 we didn’t need to go back to the capital markets. We already had the money we needed, so we just needed to continue to progress.
During that era I found myself on television, alongside half a dozen internet entrepreneurs, being interviewed by Tom Brokaw. Tom is now one of my good friends, but at the time he turned to me and said, “Mr. Bezos, can you even spell profit?” And I said, “Sure, P-R-O-P-H-E-T.” He burst out laughing.
Tolerance for failure has its limits:
I always point out that there are two different kinds of failure. There’s experimental failure — that’s the kind of failure you should be happy with. And there’s operational failure. We’ve built hundreds of fulfillment centers at Amazon over the years, and we know how to do that. If we build a new fulfillment center and it’s a disaster, that’s just bad execution. That’s not good failure. But when we are developing a new product or service or experimenting in some way, and it doesn’t work, that’s okay. That’s great failure. And you need to distinguish between those two types of failure and really be seeking invention and innovation.
Reprinted by permission of Harvard Business Review Press. Excerpted from “Invent and Wander: The Collected Writings of Jeff Bezos.” “Invent and Wander” is co-published by PublicAffairs, an imprint of Perseus Books, and Harvard Business Review Press. Copyright 2021 Jeffrey P. Bezos. All rights reserved.
Disclaimer: This book is a collection of his writings and public statements. Bezos didn’t drive the creation of the book and he won’t profit. His royalties go to charity.
Excerpt is based on Jeff Bezos’ conversation with his brother Mark Bezos at Summit LA17 on November 4, 2017, an interview with David Rubenstein at the Economic Club of Washington on September 13, 2018, and an interview with Roger Zakheim at the 2019 Reagan National Defense Initiative (RNDF) conference on December 7, 2019.
Invent and Wander is a collection of writings and public statements by Jeff Bezos, founder and CEO of Amazon. Bezos is also the founder of aerospace company Blue Origin, which is working to lower the cost and increase the safety of spaceflight, and he is owner of the Washington Post. In 2018, he founded the Bezos Day One Fund, which focuses on funding nonprofits that help homeless families, and on creating a network of tier-one preschools in low-income communities. Bezos graduated summa cum laude, Phi Beta Kappa in electrical engineering and computer science from Princeton University in 1986, and was named TIME Magazine’s Person of the Year in 1999.