Amazon's 14 Leadership Principles via Jeff Bezos

What I hope is Amazon's legacy is the most customer-centric company in the world. What we've always wanted to do is raise the bar of what it means to be customer-centric to such an extent that other organizations, whether they're other companies or hospitals. or government agencies, whatever the organization, they should look at Amazon as a role model and say how can we be as customer-centric as Amazon, even the competitors, I imagine so, I hope the competitors too, but if we could let them know, uh uh, if that could be our legacy, that we put forward the general idea of ​​what it means to be customer-centric, that would be a great achievement, it would be achieving a mission that is much bigger than ourselves, um, Harvard Business Review recently called him the most successful CEO alive, Steve.

Obviously JN is also on the list, what does that mean to you when considering your own

leadership

style? Well, I think if you look at the Big Ideas on Amazon, what we really focus 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 you can invent on behalf of customers unless you're willing to think long term because a lot of inventions don't work. If you are going to invent it means that you are going to experiment and if you are going to experiment it means that you are going to fail and if you are going to fail you have to think long term so these three ideas, client centrality, long term thinking and passion for invention, go from the hand and in our that's kind of an Amazonian cocktail, that's how we do it and um uh and we and by the way we have a lot of fun doing it that way um because one One of our

leadership

principles

is that good leaders have many times right and, um, it sounds great, but is there a way I can practice being right a lot and you're not going to be right all the time?

But I think With practice you can be right more often and I have observed people who write a lot and noticed a few things about them. The first is that people who write a lot listen a lot and people who write a lot change. their minds a lot and uh, people who write a lot seek to refute their deepest convictions, which is very unnatural for humans, which is why humans, for the most part, as we go through life, we are very selective in evidence that we let it seep into us and We like to look at evidence that confirms our pre-existing beliefs and people who write a lot work very hard to do that unnatural thing of trying to disconfirm your beliefs and by the way, changing your mind a lot is so important that you should never let anyone catch you with something you've said in the past because that's just you know life is complicated, the world is complicated and sometimes you get new data and when you get new data, by the way, sometimes you have to change your mind. you don't get new data and you just re-analyze the situation and realize it's more complicated than you initially thought and change your mind, this is something you know, it's frustrating to watch and I won't get into politics here tonight. but it's frustrating to watch politicians because they are hardly allowed to change their mind, as soon as they change their mind they are accused of being flip-flops when the reality is that anyone who doesn't change their mind much is dramatically underestimating the complexity.

Of the world we live in, yes, two pizza teams is something we've been preaching at Amazon almost since the beginning and it's a simple idea: no team should be so large that it can't be powered by just two pizzas. And obviously, to do big things you need big teams, but you need to subdivide them and the reason it's so useful is because it's natural that we humans grew up around campfires and telling each other stories, and you're sitting in the woods. tables tonight. They have about 10 people at each table, 10 people, maybe 12 people is the perfect size to have natural human coordination without a lot of structure and if you want to have a large group of 100 or 500 people organized, you have to have a lot of structure. for that to work and so if you can organize big things with a multitude of small teams, that takes a lot of effort to organize it that way, but if you can figure that out, communication in those small teams will be very natural and easy and then six page L memos of PowerPoints, many, many years ago, now we ban PowerPoint presentations, which Amazon was probably the smartest we've ever done, what do you do as the leader of a major online company?

You're probably in contact with people like a 19-year-old kid in his room with a computer changing so profoundly that all the record companies want to see it. Please stay in touch with that kind of experimentation and that kind of energy. Hire smart people and how do you do it if you don't hire? Because you know that one person can't keep in touch with the huge amount of new things happening, so what you have to do is implement a recruiting system. process that attracts and retains smart, talented, hard-working people who want to be part of your mission, whatever it may be, but then when you talk to them, when you bring in the CEO to talk to these people, what the mission statement is, you tell them. says first The most customer-centric company in the world and we have one and I explain what we mean by that because we have a very precise definition of Customer Centric: it means listening, inventing and personalizing, so you have to listen to customers first , companies that do not listen to customers.

Secondly you have to invent for customers because companies that only listen to customers fail, it's not the customer's job to invent for themselves, it's our job at

amazon

.com to invent things like click and other things like sales rank that goes from one to 18. million of those kinds of things that customers really like, it's our job, not theirs, to think about that and thirdly, personalize, take each individual customer and put them in the center of its own universe and then when we talk about the most customer-centric company on Earth, we mean that. In a very broad sense, this is bigger than

amazon

.com, what we want to do is raise global standards of customer service and customer centricity, so it's kind of like Sony.

Sony was born right after World War II and is a company that If you go and look at their initial mission statement, it wasn't to be known for quality, it was to make Japan known for quality, not for Sony Japan, and that's what we want to do, we want to do something bigger than amazon.com. To do what I would define for me would be that we set a new example of customer service and customer centricity that other companies admire and want to emulate and that is a mission that people can get excited about. Amazon recently came under fire for having a harsh work culture, and I'm wondering if you guys came out and defended yourself and explained it.

I have a two part question, one is whether the question is whether you considered it fair or not, whether it made you rethink anything about your work culture, yes, no, that's a very good question, company and the second question is a bit of a setup. which I need to tell everyone because I know you have an employee program that you wanted to talk about, yeah I do, but do the first one first, so yeah, no, not really. I'm very proud of the culture that we have at Amazon and you know it's a uh, it's a, I consider it a gold standard culture for innovation and pioneering work, and the people that I work with, these people, who are missionaries for what they do, they know if they are providing a great customer. experiment, um, the only way to do it is with happy people, you can't do it with a bunch of miserable people, um, you know, looking at the clock all day, that includes work-life balance and all that stuff , yes, but I would use I teach three leadership classes a year on Amazon.

I'm a part of that, they're bigger classes, but I come in and do a session and I always talk about work-life balance, except I like to use the phrase work-life harmony. than balance because for me balance implies a strict job while I find that when I am happy at work I come home with more energy I am a better husband a better father and when I am happy at home I go in and I am a better boss and a better colleague and so that um isn't, you could be out of a job and have a terrible work-life balance, you know, even though you have all the time in the world, you could feel like, oh my gosh, you know I'm miserable and you would. be draining energy and then you have to find that Harmony is a much better word and I think for most people it is about meaning, people want to know that they are doing something interesting and useful and for us you know that because of the challenges that have. chosen by ourselves, we can work in the future and it's a lot of fun to work in the future for the right type of person, there are people, I mean, who, you know, ours is an environment that accepts many of the changes that we have had .

Because the internet is changing, the technologies that we use are changing, we operate at the intersection of technology and retail, which are highly competitive industries, but it's really a um for someone who hated change. I imagine high tech would be a pretty bad career, it would be very difficult, you know, and there are much more stable industries, so they should probably choose one of those more stable industries with less change and they would probably be happier there. I would be that industry. be hard 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 hard one being like I don't know how to adjust insurance claims or something like that you know where I am I had the same job everyone days and did not change frequently.

That would be difficult. I would do it, but I would do it, and I would do it to a high level of quality, but I wouldn't like it and a lot of them. I have iPads now, okay, still just saying there's a little change there, okay, okay, pretty student, they'll have machine learning again too. My job, one of my jobs as an Amazon leader, is to encourage people to be bold and people love it. focus on the things that aren't working yet, and that's good, it's human nature, that kind of divine discontent can be very useful, but you really know that it's incredibly difficult to get people to make bold bets and you need to encourage that, and If you are going to make bold bets, they will be experiments and, if they are experiments, you don't know in advance if they will work.

Experiments are, by their very nature, prone to failure, but great successes, few. big hits make up for dozens and dozens of things that didn't work, so you know, bold bets AWS Kindle Amazon Prime our third-party seller business, all of those things are examples of bold bets that did work and pay off big time I've run experiments for thousands of millions of dollars in failures on amazon.com, literally billions of dollars in failures and, uh, you know, you might remember dogs.com or Cosmo, or you know, getting a root canal without anesthesia very easily, uh, none of those. things are fun but they also don't matter what really matters are companies that don't continue experimenting companies that don't accept failure eventually reach a desperate position where the only thing they can do is make a sort of Hail Mary bet. at the end of your corporate existence, while the companies that are, you know how to make bets from the beginning, even you know the big bets, but you don't bet on the company's bets.

I don't believe in betting, the company bets. That's when you're desperate, that's the last thing you can do, at what point can the best customer experience provider in the world start raising prices? We're not going to raise prices, so if you're waiting for us to raise prices, give up now, but we will. We're going to lower prices, but let me chime in on that because I think it's an important point, not in part because of the questions everyone is asking about cash flow and profitability, but because it seems like buying online is not price sensitive, In other words, all of this.

Reports I read about people being forced to raise their prices to generate more cash and finding that customers continue to shop online, so price sensitivity doesn't seem to be a critical factor just because prices can be raised. It doesn't mean you have to, so we have huge economic advantages over brick-and-mortar 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 lowers prices to unreasonable levels. I know, but that's how it is. Our prices are sustainable and as we become more efficient and have more scale and as we buy Cooperative not for 20 million customers but for 40 million customers, we will be able to lower prices even further and that is.

It's a good idea, but I'm just asking if, in fact, if you could sell your products at a higher price and customers were willing topaying a higher price, it wouldn't, it would generate more cash, not necessarily, so think about it. What benefits us the most, so there's an equation here: when you lower prices, you also increase the number of customers you have, you increase the level of income, you have one of the things that people get wrong is what they think. that you're trying to optimize for percentage margins you know they think you're trying which you're which isn't what you're trying to do is actually trying to maximize dollar margins and if you're trying to maximize dollar margins, a lot of times that makes you want to. a lower price, not a higher price.

Another point I would like to highlight is that unlike physical retail, which is a variable cost business, so if you double your sales, you double your costs. Online retail is a fixed-cost business, and much more so, when you double your sales, you don't get to double your costs, as a result, one of the wrong intuitions about the physical world that we all know. In the physical world, any place that has the best service may not 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 time. for a long time incredibly happy he wrote it in the bubble he wrote it until the end hanging during those seven years of scarcity and suddenly it takes off like a rocket very much a believer in the long term the investment cycle the big bets all those things Even in the last quarter I swallowed a little bit when I saw the fact that you were no longer just breaking even, you were losing a lot of money and in fact a lot more than you said you were going to lose, which I thought was a bag of sand, oh They just said they were going to lose and they were going to make a profit and the stock was going to skyrocket.

It was worse than you said, so when do you start saying it's okay? It has to rain a little. Where is this part where you are very nice to me because I am an investor and the company is the next one? What I want, what I'm asking is a shareholder, look, we would all love for all of our numbers to be aligned and smooth. to the right and uh, that would be great, but that's not how it works, you know, you know, those numbers are measures of production and 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 we put into any particular quarter happened years ago, so it's not like you know there are only so many knobs you can turn during a quarter, I mean, you can, but they're very, like eating your seed corn, if you turn those knobs, you don't want to do that, so, it's a uh, you know people, I think if you focus on the controllable inputs of your business instead of the long-term results, get better results, so the Benjamin Graham quote here is that in the short term the stock market is a voting machine, in the long term it is a weighing machine and I think people are right to build a company that wants to be weighed and not voted. and that means having a good return on invested capital and having, you know, a lot of free cash flow, but if you told me here's a job, I would turn it down if someone came up to me and said Jeff, I want your job to be Driving up Amazon's stock price and managing it directly now may seem ridiculous to some of you, but a lot of companies actually do this, they go out and try to sell the stock, which is kind of the bottom line and it's much better to say. : "Okay, let's not do that." That's not going to be sustainable.

It's a bit of a silly approach. What are the inputs to a higher stock price? Okay, so let's continue working backwards, what are the inputs to free cash flow? And let's keep working backwards until we get to something that's controllable and a controllable input to free cash flow would be something like a lower cost structure and we work backwards from there and you say okay, you know if we can improve our efficiency of selection in our logistics centers and reduce defects, defects are very, very expensive, it is professional, you know that reducing defects from the root is one of the best ways to reduce the cost structure, so if then that starts to be a job you would take, you would say, if you knew a reasonable person, you would say: I have no idea how to make the stock price go up.

I can't handle that directly. It's not a controllable input, but I can. make your selection algorithms more efficient and that will reduce the cost structure and then you will know to follow that chain along the way, that's what you do in all these businesses, you, you want, you know, customer obsession, He wants to invent his way out of the boxes. You want to invent your path to the future, you want to be patient and have operational excellence, to find defects from the root and solve them.