Monday, November 11, 2013

The Everything Store: Jeff Bezos and the Age of Amazon by Brad Stone

Brad Stone’s treatment, The Everything Store: Jeff Bezos and the Age of Amazon, is the talk of the business press this week. Jeff Bezos’ wife, MacKenzie Bezos, posted a ‘one-star review’ of the book on the Amazon site. In it, she expresses concerns about the book’s ‘factual inaccuracies’ and ‘narrative tricks.’ While she certainly had a better view of the recounted events than did Stone, her objections seem quibbling. This is a thoughtful and well researched book, with a surprisingly balanced tone: Stone neither praises Jeff Bezos nor does he bury Bezos.

Stone’s book is both a CEO biography and a corporate history. Bezos is the exception that proves the rule; he is the visionary founder who wasn’t pushed aside for a professional ('adult') manager. And given Bezos’ continuity at the helm of Amazon, one can fairly charge much of Amazon’s success -- and its bullying behavior -- to Bezos.

Stone’s book is a prosecutor’s dream -- it is a catalog of unfair business offenses (were such behavior disciplined today). There is a zone of indeterminacy involved in most bargaining: between the terms a party would accept and the better terms a party might exact (before driving the other party away). Bezos is shown to consistently drive for the very best outcome in Amazon’s dealings -- where the greater part of the joint benefit falls to Amazon and a bare minimum is left for the ‘cooperating’ counterpart. Perhaps this is to be admired; we’d all like to be ‘tough bargainers.’ But Bezos (as depicted by Stone) doesn’t pull punches. He is capable of ‘refusing to deal.’ He applies price pressure against smaller firms. He levers Amazon’s immense power against competitors and partners.

The justification for his appalling behavior (and this is more than just a legal argument) relies on the enormous benefit Amazon showers on the consumer. For this is the mystery of Amazon: Amazon is a company that is not profitable (Bezos’ personal wealth results from the market value of his Amazon shares). And Amazon delivers to its customer. Amazing service and amazing value (yes, I am a fan; I’m even a somewhat foolish ‘Amazon Prime member’). There is a flow through that immunizes Amazon -- and Jeff Bezos -- from public scorn.

How far does consumer complicity shield Amazon? A simple element of Amazon’s business had been (again from the start) the avoidance of sales tax. Stone tells us this is why Amazon was established in Seattle, and not California. And Amazon had fairly good authority for its position that it was not required to collect sales taxes for deliveries into those states where it had no ‘presence’ (which included all states with significant populations). In theory, these sales tax avoiding-customers were obliged to declare their Amazon purchases and pay the counterpart ‘use taxes,’ but of course no one (and I mean no one) did so. Amazon fought the efforts of states to force it to collect sales taxes for many years; only recently has it capitulated. But during its build-out, the missing sales tax generated an insurmountable price advantage in Amazon’s competition with the corner book store.

Bezos is enigmatic. He doesn’t appear to have invented anything new -- the Amazon business category (online bookseller) already existed when Bezos started the company. Bezos and Amazon excelled in the execution of the business. Though Amazon was built on books, it had been conceived to become the omnibus online retailer -- the Everything Store. And in a strange way, to sell everything is to sell nothing. Kindles aside, there are few Amazon products. The quintessential Amazon purchase involves a fungible product that is on offer at many outlets (including other online outlets): Amazon bundles best price and fast delivery. And like the laboratory animal, we hit the pleasure button over and over again.

Hidden away from the ordinary consumer is a whole other Amazon: Amazon Web Services, which supplies a host of web infrastructure and affiliated services to many businesses. Web Services were not part of the original business plan -- and in the end this part of the Amazon empire may outlast the Everything Store built on top of it.

It frightens me how well Jeff Bezos knows me (I have told friends that Amazon knows me better than does Google, the company that ‘reads’ all my email). But after reading Stone’s book, I’m not sure I know Jeff Bezos (and I’ll grant that MacKenzie Bezos likely does know Jeff Bezos). Stone relates the sad story of Bezos’ biological father (who had no idea Bezos was his son until Stone informs him). It’s poignant, no doubt, but it doesn’t give the reader much insight; Bezos has no doubts who his parents are (Jackie and Mike Bezos, early backers of Amazon).

The Everything Store: Jeff Bezos and the Age of Amazon is shortlisted for the 2013 Financial Times and Goldman Sachs Business Book of the Year Award.
See my reviews of these other shortlisted books for the 2013 FT/Goldman Sachs Award:

Neil Irwin, The Alchemists
Iain Martin, Making It Happen: Fred Goodwin, RBS and the Men Who Blew Up the British Economy
Viktor Mayer-Schönberger and Kenneth Cukier, Big Data
Anita Raghavan, The Billionaire’s Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund 
Sheryl Sandberg, Lean In: Women, Work, and the Will to Lead

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