China’s Economic Reckoning
The Price of Failed Reforms
Jeff Bezos has always been a tinkerer. As a toddler, he tried to dismantle his crib, and in high school, he started his first business—an educational summer camp for middle schoolers. After graduating summa cum laude from Princeton in 1986 with a degree in electrical engineering and computer science, he went to work on Wall Street, but he quit finance in 1994 to try his hand as an entrepreneur. Amazon.com started as an online bookseller, selling its first copies in July 1995. In the years since, it has grown into a diversified retail giant, as well as a producer of consumer electronics, such as the Kindle, and a major provider of cloud-computing services. Bezos spoke to Foreign Affairs editor Gideon Rose in November.
What are the crucial qualities that make for a successful entrepreneur? There are a few qualities that entrepreneurs benefit from. One is that view of divine discontent: How can you make something better? I think entrepreneurship and invention are pretty closely coupled. And inventors are always walking around the world thinking, “I’m kind of inured to this, but just because I’m used to it doesn’t mean it can’t be improved.” That ability to look at things with a fresh mind, a beginner’s mind, is very useful for entrepreneurs.
Entrepreneurs also benefit greatly from being willing to fail, willing to experiment. Good entrepreneurs tend to be stubborn on the vision but flexible on the details. They’re persistent on what they’re trying to accomplish, but they are willing to rewrite the details as needed as they learn and as things fail.
Another quality I would mention is passion for the mission, whatever it is. The very best products and services are always built by missionaries. They’re people who are genuinely passionate about the arena and happy to be in it. Such people wake up in the morning thinking about that idea, thinking about that particular set of customer experiences or that service or product. They’re doing that when they’re in the shower, and they’re doing that as they close their eyes at night. That’s pretty different from the mentality of somebody just trying to get in on the Internet gold rush.
Most entrepreneurs and most start-ups fail; only a few become truly giant successes. Are there predictable things you can see in advance that separate the winners from the losers, or is success just a matter of luck and timing? Certainly, good luck and good timing are huge components of outsized success in entrepreneurial endeavors. Lots of things have to go right, and the planets have to align; that certainly happened in Amazon’s case. Our timing turned out to be very good. And so you can’t sit down to write a business plan and say you’re going to build a multibillion-dollar corporation; that’s unrealistic. A good entrepreneur has a business idea that they believe they can make work at a much more reasonable scale and then proceeds adaptively from there, depending on what happens.
When did you realize that Amazon would become the behemoth it is today? One step at a time. There were early indications that we were onto something, even from the very beginning. The original business plan contemplated only books, and it contemplated growing a relatively small company. But shortly after launching, we had already sold books in all 50 states and 45 different countries. We were way ahead of our business plan.
And then, a couple of years after that, when we were still a very small company, we sent an e-mail message to about a thousand randomly selected customers and asked, “Besides the things we sell today, what would you like to see us sell?” The answers came back to that so long-tailed—people said, “Windshield wiper blades for my car,” and so on and so on. It was very surprising. It was at that point—this is probably 1998—that we started to realize that perhaps we could sell a very wide selection of things using the methods that we had pioneered.
Is entrepreneurship a source of innovation and dynamism that benefits not just the entrepreneurs themselves but the economy and society more generally? Yes, I think so. New inventions and things that customers like are usually good for society. They can be tough on incumbents, and so people who have built a business doing it the old way think it would be better if things could be more stable for longer periods of time. But you have to remember, new inventions are not inherently disruptive. Invention is only disruptive if customers say, “Hey, I like this better than the old way.”
That kind of improvement for customers is often very good for society, even if it’s difficult for people who are invested in the traditional methods.
So by that logic, is all creative disruption by definition a net plus? Because if it wasn’t, then it wouldn’t be going forward? I’m always a little worried about words like “all” and “always” and “never.” I’m sure there are exceptions. But I would say that, on balance, most successful innovations in the economy do tend to be good for society.
You’ve managed not only to create Amazon but also to periodically reinvent it. What are the keys to running a large business enterprise in an entrepreneurial way? Corporate culture and the selection of people—and those are related. For a company at Amazon’s scale to continue to invent and change, to build new things, it needs to have a culture that supports a willingness to experiment, a willingness to fail. I think it is very helpful to have a customer-obsessed culture.
There are other business strategies that work. You can be competitor-obsessed, and that leads to business strategies like close following. Close-following strategies can be good for businesses because you don’t have to go down as many blind alleys and you get to let your competitors do the pioneering—and then, when something works, you can jump on it. But it doesn’t lead to as much entrepreneurialism.
A pioneering culture, one that actually enjoys and is excited by experimentation, a culture that rewards experimentation even as it embraces the fact that it is going to lead to failure—that is very important for larger companies in order to be entrepreneurial. And a long-term orientation is a key part of that. If everything has to work this quarter, then you’re by definition not going to be doing very much experimentation.
You started out 20 years ago as the little guy. Twenty years later, you’re the big guy, dominating everything. Does the world look different from that perspective? I don’t know exactly how to answer that. I can tell you one thing, though: I am having so much fun. I run into the office every morning. I love every part of my job.
Does the state have any role to play in fostering entrepreneurialism, or is it simply a matter of the private sector being allowed to do what it needs to do? Governments can foster and hinder experimentation. I’m not an expert in that arena, but I’m sure that’s the case. I also think the culture in certain countries is a big factor. If you talk to entrepreneurs in the U.S., they’re willing to take risks. If somebody does a start-up and it doesn’t work out, they’ll do another. There’s no stigma associated with failure. That’s not true all over the world. An acceptance that experimentation is associated with failure is a part of U.S. culture. It’s not unique; other places have it as well. But it’s strong in the U.S. and something that we should be incredibly happy about.
Increasingly, you see entrepreneurship taking off in other countries. Is this a zero-sum game Americans should be worried about, or is it good for the world that others are now starting to display the kind of technological entrepreneurship that used to be an American specialty? It’s great for the world, because we all benefit from each other’s inventions. If somebody in Asia invents a new cure for some type of cancer, we’re all going to benefit from that. The more innovation we can have in the world, the better off society is going to be.
So does Alibaba help Amazon or compete with it? We have a long-standing practice of staying focused on our customers rather than our competitors. We try to be inspired by the things we see out in the world and wonder how they will enable us to improve the lives of our customers.
Do you worry about what some have called “the death of innovation” or “the great stagnation,” or do you think that technology and innovation are moving forward to ever-greater heights down the road? We live in a dynamic time, where the rate of change and the rate of innovation are very high. It’s not equal in all segments or sectors of the economy, but we are seeing a lot of innovation in certain sectors, and I expect that to continue. The great thing about ideas is that every new idea leads to two more new ones. It’s the opposite of a gold rush, where the more people who show up in 1849 to get that gold in California, the faster the gold runs out. Ideas are not like that; ideas breed.
Some people have argued that Amazon does well by its customers, but not so well for small businesses. Do you think that argument has any validity? Do you lose sleep over the consequences for other businesses trying to compete with you? I think we are very empowering to certain small businesses. Probably some of the most impactful inventions that we’ve done are those that empower other companies. For example, our third-party-seller business: we have millions of small sellers who get access to our prime retail real estate and get to compete against us and sell right alongside us. That technology has been a facilitator for millions of small businesses.
Kindle—we call it KPD, Kindle Direct Publishing—is another self-service platform that has been incredibly empowering to a whole set of creators: authors who have never been able to get distribution before. And AWS [Amazon Web Services, the company’s cloud-computing division], because it transforms capital expense and fixed expense into a variable cost, has been a tremendous enabler of hundreds of thousands of small businesses that use it to lower their data center costs and increase their nimbleness. AWS sells services to software developers, software engineers, and companies that employ them. It has grown into a very significant, and very exciting, business for us over time and is a very important piece of infrastructure for the Internet and for many enterprises and many government agencies.
All of these things are very good for small business, and we’re very proud of that. There are competitors out there, and I’m sure in some cases, they wish we didn’t do what we do. I know how to make our competitors happy: raise prices, slow delivery speeds, and reduce selection. But that’s not what our customers want us to do.
You started out selling books. Now you’re the subject of them. Do you read the books written about you, and if so, what do you think of them? Amazon has been so well treated, on balance, by the media that, for myself and for all the people I work with, we try to keep an even keel, and a deep keel, on matters like that. When the PR is good, don’t believe it; and when it’s the opposite way, don’t believe that either.
Note: This interview has been edited and condensed.
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