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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Conservative leaders ready to defend Dina Powell

Molly Riley, Evan Vucci, Nati Harnik / AP

As Steve Bannon plans his outside war against his "globalist" enemies in the administration, some high-profile conservative movement leaders are signaling they'll vouch for one of his targets — deputy national security adviser Dina Powell.

  • The influential social conservative leader Ralph Reed tweeted on Friday: "Sloppy reporting falsely claims Dina Powell is a moderate or liberal in the WH. Wrong. She is a a solid conservative & a woman of faith."
  • Ken Mehlman, co-chair of the American Enterprise Institute followed: ".@ralphreed is right. Have known Dina Powell for 22 yrs. Reagan conservative from the beginning & pushing peace through strength on NSC..."

Why this matters: Bannon tells friends that Powell belongs to a group of "globalists" or "West Wing Democrats" that have taken over the West Wing and threaten President Trump's agenda. Breitbart is sure to continue its war against Powell — in fact, it's only going to ramp up — but she's spent years in Republican politics and will have high-profile defenders across the conservative movement.

Other conservative leaders and Trump allies who've previously supported Powell:

  • Former House Speaker Newt Gingrich: "Worked with Dina Powell on the Contract with America and @Scaramucci is right." (Referring to a similarly supportive tweet from Anthony Scaramucci
  • Senior Trump campaign official David Urban: "I have known/worked with Dina for 20 years - she is a Patriot! on the Hill, at RNC, or in the WH, America is lucky she is willing to serve!"
  • Hawkish Republican Sen. Tom Cotton: "Dina Powell is an outstanding choice for deputy national security adviser. She has years of experience working both in the business world and at many different levels of government, including Congress, the White House, and the State Department. In that time, she has earned the deep respect of her colleagues..."
  • Texas Sen. Ted Cruz: "Congrats to my friend Dina Powell on being appointed Deputy National Security Advisor. Experienced, very smart, and very talented."
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Bannon: "The Trump presidency that we fought for, and won, is over"

Andrew Harnik / AP

After confirming his White House departure, Bannon told The Weekly Standard on Friday, "The Trump presidency that we fought for, and won, is over," noting that now that he is gone, it will be "that much harder" for Trump to achieve wins, like the border wall.

"We still have a huge movement, and we will make something of this Trump presidency. But that presidency is over. It'll be something else. And there'll be all kinds of fights, and there'll be good days and bad days, but that presidency is over."

Bannon predicts that moves coming from the White House are about to get much more "conventional" due to what he predicts will be a flood of moderates on the Hill. "They're not populists, they're not nationalists, they had no interest in his program."

Be smart: Axios' Jonathan Swan says Bannon's comments will enrage Trump, who already thinks Bannon took too much credit for his victory and the movement that propelled it.

More highlights...

Zinger: "I'd always planned on spending one year...I want to get back to Breitbart."

Bannon's thoughts on Trump's true nature: "I think you saw it this week on Charlottesville – his actual default position is the position of his base"

Closing quote: "I feel jacked up...Now I'm free. I've got my hands back on my weapons. Someone said, 'it's Bannon the Barbarian.' I am definitely going to crush the opposition. There's no doubt. I built a f***ing machine at Breitbart. And now I'm about to go back, knowing what I know, and we're about to rev that machine up. And rev it up we will do."

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Carl Icahn is done advising Trump

Henny Ray Abrams / AP

Carl Icahn announced over Twitter that he will no longer advise Trump on regulatory issues:

Icahn wrote in his letter to Trump after telling the President he didn't want "partisan bickering" to call into question his role. He reiterated that he "had no duties whatsoever" and didn't profit from his unofficial advisory role. (His second tweet linked to the letter.) That comes after a deluge of critiques from Democrats about conflicts of interest.

Exit recap: This exit comes the same week as Trump's remarks about "both sides" being responsible for violence in Charlottesville, which led to the mass exodus of CEOs from Trump's special councils, Trump's move to shut down the manufacturing and strategy and policy forum, along with the infrastructure council. Plus today the arts and humanities committee resigned over Trump's Charlottesville response.

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Judge shuts down key Uber argument in Waymo lawsuit

AP

A federal judge has denied Uber's attempt to use a key argument to explain why a former employee downloaded files prior to leaving his job at Waymo, Alphabet's self-driving car unit.

What's next: Uber still has to show that it didn't know about Levandowski's alleged downloading of Waymo files (at least until this meeting in March), and that it was not as part of a plan to steal Waymo's technology. The case is set to go to jury trial in October.

"We had hoped that the jury and the public could hear the reasons Levandowski gave for his downloading files, which had nothing to do with Uber," Uber said in a statement. "The fact remains, and will be demonstrated at trial, that none of those files came to Uber."

The details: Recently, Uber's lawyers told the court that the former employee, Anthony Levandowski, told its then-CEO and in-house counsel in March that he downloaded the files as insurance that Waymo pay him a $120 million bonus. However, Uber also attempted to argue that while this particular meeting shouldn't be confidential (and could therefore use this defense), others that took place that same evening are confidential because lawyers were present to give advice. The judge ruled Friday that Uber can't separate the meetings out.

"Anthony Levandowski's supposed excuse for downloading more than 14,000 confidential Waymo files was self-serving and more than just suspicious – it was entirely made-up," said Waymo in a statement. "The extreme measures he took to try to erase the digital fingerprints of his actions completely belie any benign motive."

The story has been updated with statements from the companies.

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Trump elevates Cyber Command

Andrew Harnik / AP

Trump approved an Obama-era plan Friday to elevate Cyber Command, currently housed at the National Security Agency (NSA), to be a Unified Combatant Command.

Why it matters: This shows the U.S. is getting serious about dealing with cyber warfare. The move will also help the U.S. bolster its cyber weapons so it can match Russia's capabilities, three U.S. officials told Reuters, and improve America's ability to interfere in foreign adversaries' military programs when necessary.

Effect: This moves shakes Cyber Command up a bit and gives it some operational independence, although it's not entirely separate from the NSA — yet. Trump's announcement raised the possibility that it could eventually be entirely split off, which would grant it new powers as a standalone unit reporting directly to Defense Secretary James Mattis.
Then it would be the 10th unified command in the U.S. military. Commands are organized by region (for example, Pacific Command) and by responsibility (for example, Transportation Command) and report directly to the defense secretary, per Military.com.

What's next: Cyber Command now needs a nomination for a new leader, which will likely be recommended by Mattis.

Go deeper with Axios' breakdown of the top cyber powers in the world and see where the U.S. stands.

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Trump signs FDA funding bill into law

AP

President Trump has signed into law a bill reauthorizing the user fees that help fund the Food and Drug Administration.

  • It was one of the last bills the Senate passed before leaving for the August recess, and it could have easily turned into a battle, since the Trump administration wanted to restructure the medical product user fees to make the industry pay the full cost of product reviews.
  • But congressional Republicans and Democrats ignored the request, and the administration didn't push the issue.
  • Notable: It's one of the rare health care bills that's significant and yet passed easily, with bipartisan support and without a fight — and it could be one of the last for a while.
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Dell Tech CEO sends Charlottesville email denouncing violence

AP Photo/John Locher

Despite initially deciding to stay on President Trump's American Manufacturing Council (though it was ultimately disbanded), Dell Technologies founder and CEO Michael Dell has now sent an email to employees, denouncing the events last weekend in Charlottesville.

About face: Dell's email is notable because he was one of the few members on the council not to resign following Trump's press conference on Tuesday where he addressed the weekend's events in Charlottesville, saying there was violence on "both sides." This email comes after Trump abruptly dissolved the council on Thursday (and another decided to disband).

Read the whole email:

At the most basic level human emotion can be divided into into love or hate. Hate is evil and we've seen far too much hate lately whether in Charlottesville, Barcelona or elsewhere.
Our company is a place where everyone is welcome. Our team members come from all backgrounds, religions, nationalities, genders and races. This is one of our greatest strengths and we thrive in this culture. Hatred, violence, racism and terrorism like the kind we have seen last weekend in Virginia and more recently in Barcelona are driven only by evil and seek to divide us. These actions and any who support them have no place in our global society.
Our culture code (dell.com/learn/ly/en/ly…) is at the heart of our commitment and it details the expectations we have for our team members and our company. These recent events only strengthen our resolve to make an even greater positive difference in the world.
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What you missed while following Charlottesville

AP

All eyes were on Charlottesville this week as far-right hate groups clashed with counter protesters over the weekend and President Trump gave a shocking press conference dividing blame between white supremacists and the "alt-left."

But the other defining stories of Trump's presidency — the Russia probe, the North Korean threat and the opioid crisis — haven't slowed down. Here's what you might have missed:

Mueller's investigation

  • A top FBI investigator left Special Counsel Robert Mueller's investigation team, per ABC's sources. "The recent departure of FBI veteran Peter Strzok is the first known hitch in a secretive probe that by all public accounts is charging full-steam ahead," Mike Levine of ABC reports.
  • Strzok, who was part of the team that investigated Hillary Clinton's private email servers, is now working for the FBI's human resources division. His reason for leaving the Russia probe is unclear.

The opioid emergency

  • "The opioid crisis is an emergency, and I'm saying officially, right now, it is an emergency ... It's a national emergency. We're going to spend a lot of time, a lot of effort and a lot of money on the opioid crisis," Trump said last week. But, in the week following his announcement, the president has not taken the legal steps necessary to implement national emergency protocol.
  • The steps: Trump first needs to give official notice to Congress that he is declaring a national emergency. Then the declaration is published in the Federal Register.
  • The unknowns: Without an official declaration, it is unclear how the Trump administration plans to respond to the opioid crisis. It could be a mobilization of medical resources or a mobilization of law enforcement — two very different things, Rachel Sachs, a law professor at the Washington University in St. Louis, told Axios.

The North Korean threat

  • North Korea backed off of Guam on Monday after threatening to launch missiles at the U.S. territory.
  • Trump's "fire and fury" comment may have helped, Rand political analyst Andrew Scobell told CNBC. "I think the rhetoric from the president does register in Pyongyang, and it has been noted in Beijing," Scobell says.
  • Trump tweeted: "Kim Jong Un of North Korea made a very wise and well reasoned decision. The alternative would have been both catastrophic and unacceptable!"

NAFTA renegotiations

  • The U.S. perspective: In the renegotiation of the 23-year-old trade deal, the United States' goals are to reform "problems perceived by Trump, such as trade deficits, rules of origin, currency manipulation and market-distorting practices," CNBC reports. "I want to be clear, [the president] is not interested in a mere tweaking of a few provisions," U.S. Trade Representative Robert Lighthizer said.
  • The Mexican perspective: "While Mexican government negotiators fought tooth and nail to save the North American Free Trade Agreement during talks in Washington, thousands of Mexican farmers and workers took to the streets on Wednesday demanding the deal be scrapped," per Reuters.
  • The Canadian perspective: One White House goal is "scrapping NAFTA's dispute-resolution panels, which have sometimes ruled in Canada's favor on softwood lumber and other trade issues," according to Canada's Globe and Mail. Canadian officials will inevitably challenge this, as they have done in the past.
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Civil rights commission condemns ban on transgender troops

Jacquelyn Martin / AP

The U.S. Commission of Civil Rights voted to condemn the ban on transgender troops, which President Trump announced on Twitter last month. The commission has urged Trump to reverse his position. There has not been any formal implementation of the ban since the president's announcement.

Key quote: "The President's mere announcement of a ban on transgender military service harms all Americans by sending a message that fosters and encourages prejudice, inconsistent with our core national values. If implemented, the ban would further harm Americans, and weaken our defense, by enshrining unequal treatment of Americans based on rank stereotype."

One more thing: The commission noted that Trump's ban announcement came 69 years, to the day, after President Truman desegregated the military.

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Bannon's billionaire meeting to plot a path forward

Evan Vucci / AP

Bob Mercer and Steve Bannon had a five hour meeting Wednesday to plot out next steps, said a source with knowledge of the meeting.

They plotted strategy going forward — both political and media strategy. The meeting was at Mercer's estate on Long Island. Mercer had dinner the next night at Bedminster with President Trump and a small group of donors. The source said Mercer and Bannon "remain strong supporters of President Trump's and his agenda."