Jeff Bezos' 1997 shareholder letter is still relevant - Axios
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Jeff Bezos' 1997 shareholder letter is still relevant


Ted S. Warren / AP

Making quick decisions and obsessing on customer outcomes are keys to keeping companies in a psychic start-up mode, CNBC's Anita Balakrishnan says in her writeup of Amazon CEO Jeff Bezos' annual shareholder letter:

Bezos compares "Day 1" companies — companies that are at the beginning of their potential — with "Day 2" companies. "Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1."

And to hammer his point about Day 1, Bezos attached a copy of his original, 1997 shareholder letter, which Business Insider founder Henry Blodget calls "still a playbook for building a great company."

"Jeff, what does Day 2 look like?"

That's a question I just got at our most recent all-hands meeting. I've been reminding people that it's Day 1 for a couple of decades. I work in an Amazon building named Day 1, and when I moved buildings, I took the name with me. I spend time thinking about this topic.

"Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1."

To be sure, this kind of decline would happen in extreme slow motion. An established company might harvest Day 2 for decades, but the final result would still come.

I'm interested in the question, how do you fend off Day 2? What are the techniques and tactics? How do you keep the vitality of Day 1, even inside a large organization?

Such a question can't have a simple answer. There will be many elements, multiple paths, and many traps. I don't know the whole answer, but I may know bits of it. Here's a starter pack of essentials for Day 1 defense: customer obsession, a skeptical view of proxies, the eager adoption of external trends, and high-velocity decision-making.

True Customer Obsession

There are many ways to center a business. You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality.

Why? There are many advantages to a customer-centric approach, but here's the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don't yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf. No customer ever asked Amazon to create the Prime membership program, but it sure turns out they wanted it, and I could give you many such examples.

Staying in Day 1 requires you to experiment patiently, accept failures, plant seeds, protect saplings, and double down when you see customer delight. A customer-obsessed culture best creates the conditions where all of that can happen.

Resist Proxies

As companies get larger and more complex, there's a tendency to manage to proxies. This comes in many shapes and sizes, and it's dangerous, subtle, and very Day 2.

A common example is process as proxy. Good process serves you so you can serve customers. But if you're not watchful, the process can become the thing.

This can happen very easily in large organizations. The process becomes the proxy for the result you want. You stop looking at outcomes and just make sure you're doing the process right. Gulp. It's not that rare to hear a junior leader defend a bad outcome with something like, "Well, we followed the process." A more experienced leader will use it as an opportunity to investigate and improve the process. The process is not the thing. It's always worth asking, do we own the process or does the process own us? In a Day 2 company, you might find it's the second.

Another example: market research and customer surveys can become proxies for customers — something that's especially dangerous when you're inventing and designing products. "Fifty-five percent of beta testers report being satisfied with this feature. That is up from 47% in the first survey." That's hard to interpret and could unintentionally mislead.

Good inventors and designers deeply understand their customer. They spend tremendous energy developing that intuition. They study and understand many anecdotes rather than only the averages you'll find on surveys. They live with the design.

I'm not against beta testing or surveys. But you, the product or service owner, must understand the customer, have a vision, and love the offering. Then, beta testing and research can help you find your blind spots. A remarkable customer experience starts with heart, intuition, curiosity, play, guts, taste. You won't find any of it in a survey.

Embrace External Trends

The outside world can push you into Day 2 if you won't or can't embrace powerful trends quickly. If you fight them, you're probably fighting the future. Embrace them and you have a tailwind.

These big trends are not that hard to spot (they get talked and written about a lot), but they can be strangely hard for large organizations to embrace. We're in the middle of an obvious one right now: machine learning and artificial intelligence.

Over the past decades, computers have broadly automated tasks that programmers could describe with clear rules and algorithms. Modern machine learning techniques now allow us to do the same for tasks where describing the precise rules is much harder.

At Amazon, we've been engaged in the practical application of machine learning for many years now. Some of this work is highly visible: our autonomous Prime Air delivery drones; the Amazon Go convenience store that uses machine vision to eliminate checkout lines; and Alexa, our cloud-based AI assistant. (We still struggle to keep Echo in stock, despite our best efforts. A high-quality problem, but a problem. We're working on it.)

But much of what we do with machine learning happens beneath the surface. Machine learning drives our algorithms for demand forecasting, product search ranking, product and deals recommendations, merchandising placements, fraud detection, translations, and much more. Though less visible, much of the impact of machine learning will be of this type — quietly but meaningfully improving core operations.

Inside AWS, we're excited to lower the costs and barriers to machine learning and AI so organizations of all sizes can take advantage of these advanced techniques.

Using our pre-packaged versions of popular deep learning frameworks running on P2 compute instances (optimized for this workload), customers are already developing powerful systems ranging everywhere from early disease detection to increasing crop yields. And we've also made Amazon's higher level services available in a convenient form. Amazon Lex (what's inside Alexa), Amazon Polly, and Amazon Rekognition remove the heavy lifting from natural language understanding, speech generation, and image analysis. They can be accessed with simple API calls — no machine learning expertise required. Watch this space. Much more to come.

High-Velocity Decision-Making

Day 2 companies make high-quality decisions, but they make high-quality decisions slowly. To keep the energy and dynamism of Day 1, you have to somehow make high-quality, high-velocity decisions. Easy for start-ups and very challenging for large organizations. The senior team at Amazon is determined to keep our decision-making velocity high. Speed matters in business — plus a high-velocity decision-making environment is more fun too. We don't know all the answers, but here are some thoughts.

First, never use a one-size-fits-all decision-making process. Many decisions are reversible, two-way doors. Those decisions can use a light-weight process. For those, so what if you're wrong? I wrote about this in more detail in last year's letter.

Second, most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you're probably being slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you're good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure.

Third, use the phrase "disagree and commit." This phrase will save a lot of time. If you have conviction on a particular direction even though there's no consensus, it's helpful to say, "Look, I know we disagree on this but will you gamble with me on it? Disagree and commit?" By the time you're at this point, no one can know the answer for sure, and you'll probably get a quick yes.

This isn't one way. If you're the boss, you should do this too. I disagree and commit all the time. We recently greenlit a particular Amazon Studios original. I told the team my view: debatable whether it would be interesting enough, complicated to produce, the business terms aren't that good, and we have lots of other opportunities. They had a completely different opinion and wanted to go ahead. I wrote back right away with "I disagree and commit and hope it becomes the most watched thing we've ever made." Consider how much slower this decision cycle would have been if the team had actually had to convince me rather than simply get my commitment.

Note what this example is not: It's not me thinking to myself "well, these guys are wrong and missing the point, but this isn't worth me chasing." It's a genuine disagreement of opinion, a candid expression of my view, a chance for the team to weigh my view, and a quick, sincere commitment to go their way.

And given that this team has already brought home 11 Emmys, 6 Golden Globes, and 3 Oscars, I'm just glad they let me in the room at all!

Fourth, recognize true misalignment issues early and escalate them immediately.

Sometimes teams have different objectives and fundamentally different views. They are not aligned. No amount of discussion, no number of meetings will resolve that deep misalignment. Without escalation, the default dispute resolution mechanism for this scenario is exhaustion. Whoever has more stamina carries the decision.

I've seen many examples of sincere misalignment at Amazon over the years. When we decided to invite third party sellers to compete directly against us on our own product detail pages — that was a big one. Many smart, well-intentioned Amazonians were simply not at all aligned with the direction. The big decision set up hundreds of smaller decisions, many of which needed to be escalated to the senior team.

"You've worn me down" is an awful decision-making process. It's slow and de-energizing. Go for quick escalation instead — it's better.

So, have you settled only for decision quality, or are you mindful of decision velocity too? Are the world's trends tailwinds for you? Are you falling prey to proxies, or do they serve you? And most important of all, are you delighting customers? We can have the scope and capabilities of a large company and the spirit and heart of a small one. But we have to choose it.

A huge thank you to each and every customer for allowing us to serve you, to our shareowners for your support, and to Amazonians everywhere for your hard work, your ingenuity, and your passion.

As always, I attach a copy of our original 1997 letter. It remains Day 1.

Sincerely,

Jeff

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Singapore has gone "beyond" UN to pressure North Korea

Trump with Singaporean PM Lee. Photo: Evan Vucci / AP

Prime Minister Lee Hsien Loong of Singapore said Monday "pressure" as well as "dialogue" between the U.S. and China are critical in handling the North Korean nuclear threat. President Trump commended Singapore for partnering with the U.S. to combat the threat, and Lee said his country has gone "beyond" the UN Security Council's resolutions to do so.

Trump also said Singapore Airlines signed a $13.8 billion deal with Boeing which will create 70,000 jobs in the U.S.

  • On North Korea: U.S. and Singapore share "an unwavering commitment" to combating the threat, Trump said.
  • On Lee's father, the former PM: Singapore made "rapid development from a poor island nation to an economic powerhouse under [Lee's] great father."
  • On U.S.-Singapore relations: The relationship is at its "highest point and it will continue," Trump said. Lee underscored that Singapore is the second-biggest Asian investor in the U.S.
Worth noting: The president did not take questions after the joint conference, though reporters asked about the Niger ambush and Trump's tweet about gold star widow Myeshia Johnson.
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Megyn Kelly refutes Bill O'Reilly's harassment denials

Megyn Kelly poses on the set of her new show "Megyn Kelly Today." Photo: Charles Sykes / Invision / AP

Megyn Kelly spoke out against her former Fox News colleague Bill O'Reilly on NBC News' Megyn Kelly Today this morning, stating, "O'Reilly's suggestion that no one ever complained about his behavior is false. I know because I complained."

The background: Kelly's assertion comes on the heels of O'Reilly's repeated denials of sexual misconduct during his time at Fox News. A NYT report was published over the weekend detailing his $32 million settlement agreement with a former Fox News analyst over a harassment claim.

More from Kelly: She also shared an email that she wrote to the co-presidents of Fox News in November 2016 after O'Reilly said in a CBS interview that "wasn't interested" in her discussion of Fox News' toxic professional climate in her memoir: "Perhaps he didn't realize the kind of message his criticism sends to young women across this country about how men continue to view the issue of speaking out about sexual harassment."

How O'Reilly responded to the latest report: Emily Steel and Michael S. Schmidt, the New York Times reporters who broke the story about O'Reilly's massive settlement agreement, shared some of their on-the-record interview tapes with O'Reilly with the NYT's The Daily podcast.

In O'Reilly's own words:

  • "We have physical proof that this is bullshit. Bullshit. Okay? So it's on you if you want to destroy my children further."
  • "This is crap. And you know it. It's politically and financially motivated. And we can prove it with shocking information."
  • "Leaks are not facts. Leaks are designed to hurt people, and surely you both know that."
  • "I've never had one complaint filed against me by a co-worker in any Human Resources department."

O'Reilly also went on the record with his former Fox News colleague Glenn Beck this morning and repeated a similar defense while arguing that there is a larger conspiracy meant to end his career, per Media Matters for America:

  • "The end game is, 'Let's link Bill O'Reilly with Harvey Weinstein.'"
  • "[T]hey don't care because this was a hit job to get me out of the market place. And then you'll have the left go, oh, he's paranoid, oh, yeah, yeah. OK. I could back that up 50 different ways. Media Matters is involved. CNN is involved. And it's beyond any doubt."

O'Reilly posted a statement on his website with a sworn affidavit from his accuser that he claims refutes the reports. He has promised to address the allegations further tonight on No Spin News, his nightly podcast.

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Lack of affordable housing killing jobs in Bay Area

A view of the San Francisco skyline from Alamo Square. Photo: Marcio Jose Sanchez / AP

The Bay Area saw its worst month for local employment since February 2010, losing 4,700 jobs in September, per Mercury News.

The backdrop: Employers in the Bay Area are finding it hard to fill positions due to limited housing and sky-high prices. Workers who can't find or afford housing close to their offices are pushed out of the area, and many of them don't want to bother with long commutes. "Housing is the chain on the dog that is chasing a squirrel," economist Christopher Thornberg told Mercury News. "Once that chain runs out, it yanks the dog back."

Go deeper: The national jobs picture for September

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Norway's electric car boom

Data: U.S. Energy Information Administration; Chart: Lazaro Gamio / Axios

Norway has, far and away, the largest percentage of cars that are electric compared to other nations, according to a new report released Monday by the U.S. Energy Information Administration.

The reason: The Norwegian government offers the largest monetary incentives for plug-in electric cars, per the report: "These incentives reduce the purchase price and the operational costs associated with PEV ownership and include an exemption from an acquisition tax ($11,600 savings) for both battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs)."

Why it matters: The trend toward electric cars is picking up speed all over the world, including in the biggest economies like China. Norway, whose wealthy government and economy has been built on oil production, offers an example of what factors drive adoption of electric cars.

Go deeper: The report, titled "Plug-in electric vehicles: future market conditions and adoption rates" is worth a read, or at least a scan.

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Trump meets with Singapore's Prime Minister at the White House

President Donald Trump greets Singapore's Prime Minister Lee Hsien Loong as he arrives at the White House. Photo: Andrew Harnik / AP

President Trump met with Lee Hsien Loong, the Prime Minister of Singapore, at the White House Monday where they spoke of the strength of U.S.-Singapore relations.

What's next: The leaders will participate in a bilateral working luncheon with Cabinet Secretaries and key White House officials later this afternoon, before making a joint statement in the Rose Garden.

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EPA pulls scientists' climate change talks

Seals rest on rocks in Narragansett Bay off the coast of North Kingstown, R.I. Rhode Island. Photo: Steven Senne / AP

The Environmental Protection Agency has canceled three of its scientists' speaking engagements at the State of the Narragansett Bay and Watershed conference today in Providence, R.I., per the New York Times' Lisa Friedman. The conference coincides with the release of a 400-page report on the health of Narragansett Bay, which features "significant" discussion of how climate change has affected the bay. The agency helps fund the Narragansett Bay Estuary Program and the agency's scientists were involved in the report.

Why it matters: "The move highlights widespread concern that the EPA will silence government scientists from speaking publicly or conducting work on climate change," writes Friedman. Trump-appointed EPA administrator Scott Pruitt has maintained humans are not the main driver of global warming, and has removed most mentions of climate change from the EPA website.

What they're saying:

  • "It's definitely a blatant example of the scientific censorship we all suspected was going to start being enforced at EPA," John King, who works on the program, told the. "They don't believe in climate change, so I think what they're trying to do is stifle discussions of the impacts of climate change."
  • "EPA scientists are attending, they simply are not presenting, it is not an EPA conference," EPA spokesman John Konkus told the Washington Post in an email.
Featured

Amazon gets hundreds of city proposals to host HQ2

Amazon chief executive Jeff Bezos at a meeting with Donald Trump in 2016. Photo: Evan Vucci / AP

Amazon has been flooded with pitches from cities and regions that want to host its second headquarters, the company said Monday. The company received 238 proposals from "54 states, provinces, districts and territories across North America."

Why it matters: There's lots of competition for what Amazon is calling HQ2. While the new headquarters could bring 50,000 jobs that pay an average salary of $100,000 to the winning city, there are also potential downsides to hosting, including the possible cost of billions of dollars via tax breaks.

Go deeper: The New York Times recently covered the tactics cities are employing to court the project.

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Tillerson says Taliban could join Afghan gov. if they renounce violence

Secretary of State Rex Tillerson speaks with Gen. John Nicholson, left, commander of Resolute Support, and Amb. Hugo Llorens. Photo: Alex Brandon / AP

Secretary of State Rex Tillerson said Monday on a previously unnannounced visit to Afghanistan that he thinks moderate elements of the Taliban could participate in the Afghan government under certain conditions, per the AP. He said the Taliban should prepare to negotiate with the government since they'll "never win a military victory."

"There's a place for them in the government if they are ready to come, renouncing terrorism, renouncing violence and being committed to a stable prosperous Afghanistan... we are looking to engage with those voices and have them engage in a reconciliation process leading to a peace process and their full involvement and participation in the government," he said.
Why it matters: The strategy Trump laid out for Afghanistan focused primarily on military efforts, but this is a window into what Tillerson believes a diplomatic solution could look like.
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Foxconn backs Bitcoin startup Abra

Rebecca Zisser / Axios

Abra, a Silicon Valley bitcoin startup primary focused on foreign exchange, has raised $16 million in new funding led by China's Foxconn.

Why it matters: This deal could help lead to a revolution in how people pay for consumer electronics and other household goods. Foxconn's investment does not have a strategic partnership attached, but Abra CEO Bill Barhydt believes that the inclusion of IoT chips in such things as flat-screen TVs – Foxconn now owns Sharp – could eventually be leveraged to enable pay-as-you go leasing programs transacted via Bitcoin.

Other investors in the Series B round: Silver8 Capital, Ignia, Arbor Ventures, American Express, Jungle Ventures, Lerer Hippeau Ventures and RRE Ventures.

Bottom line: Does Barhydt's vision seem far-fetched? Sure. Well, until you realize that a version of this has been underway for several years with M-Pesa and solar home-lighting systems in Kenya.

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E-commerce warehouse jobs breathe life into the rust belt

Bethlehem, Pennsylvania is well acquainted with the struggles brought on by deindustrialization. The city was once home to America's second-largest steel producer, but its citizens struggled for decades with declining steel employment, before Bethlehem Steel went bankrupt altogether in the early 1990s.

But as the New York Times reports, the city as become a poster child in recent years for the new, e-commerce economy. Its proximity to New York and Philadelphia and its large pool of less expensive labor have made it an appealing place for online retailers to locate their warehouses and fulfillment centers.

Why it matters: Some economists argue that when you account for fulfillment center jobs, the retail industry is actually adding jobs, and that these positions pay better than those in brick-and-mortar stores.