Amazon founder determined to succeed


By DAVID STREITFELD and CHRISTINE HAUGHNEY

New York Times News Service

Early employees of Amazon still remember the day the company took away their aspirin.

It was late 1999. After years of heady excess, the Internet boom was beginning to falter. Amazon, among the most celebrated of the dot-coms, was burdened with debt and spiraling losses. Jeff Bezos, its founder and chief impresario, had to impress Wall Street that he was serious about cutting costs.

But how? Amazon had never indulged employees with Silicon Valley perks like massages or sushi chefs. Just about the only thing that workers received free was aspirin. So the aspirin went.

The removal created a lot of muttering, but the cost-cutting — including layoffs — and promises of future profit helped Amazon escape the jaws of doom. Now, 14 years later, Bezos, 49, has become so rich and successful that he can surprise the world by buying The Washington Post for the equivalent of pocket change, which in his case is $250 million.

No one, apparently including Bezos himself, seems to know what he intends to do with that fabled newspaper.

The aspirin take-away and similar incidents over the course of Bezos’ career show a determination to do whatever is necessary to succeed and a fanatic attention to detail, even at the expense of appearing ridiculous. Also, he does not care about your headache.

“Jeff may be outwardly goofy, with that trademark laugh, but he’s a very tough guy,” said James Marcus, who was Amazon employee No. 55. “If he goes even halfway through with his much-vaunted reinvention of journalism, there is no way he’s not going to break some eggs.”

Bezos is the sole founder, the public face, the largest shareholder and the visionary of Amazon.

“For many of us, creating Earth’s biggest bookstore would have been enough,” said Kerry Fried, employee No. 251. “Jeff’s goal was a touch grander: to conquer the world.”

He has more than his share of detractors — just ask your neighborhood bookseller, if you can find one.

Amazon.com Inc., which is as much a reflection of Bezos’ personality as a corporation worth $125 billion can be, is by far the fastest-growing major retailer, although that simple label long ago ceased to suffice. It is also a movie studio, an art gallery and a publisher. It is an empire that spans much of the globe and even has its own currency, Amazon Coins. What it does not have much of, and never did, are old-fashioned profits.

The company has all sorts of regulatory and competitive concerns, making for a minefield of possible conflicts of interest for the owner of The Post. Amazon has opposed states’ efforts to have e-commerce companies collect sales tax. It was the main beneficiary of the Justice Department’s successful pursuit of five publishers and Apple on antitrust grounds. It is locking horns with major companies like Wal-Mart and IBM. And as it expands into same-day delivery of its products, it will come up against grocery chains and drugstores.

Through its thriving data storage division, Amazon is becoming an important contractor to the government bureaucracy that is a mainstay of The Post’s reporting. If persistent rumors are true and the company produces an Amazon phone, yet another set of antagonists will arise.

Other newspaper publishers have similar, if fewer, conflicts. The Washington Post Co. owns Kaplan, the for-profit education business that came under congressional scrutiny, and the company fought efforts to impose regulations. But the newspaper nonetheless maintained its commitment to investigative journalism. Some argue that it would to take more than a change of ownership to transform that culture.

“Newsrooms are very conservative,” said Bill Buzenberg, executive director for the Center for Public Integrity. “They have difficulty changing and certainly they have difficulty selling out their core principles.”

Perhaps. But then, few newsrooms have ever been confronted with a new owner whose zeal for disruption is matched by his obsession with tinkering until he gets it right. As Steve Yegge, a former employee, once put it, “He just makes ordinary control freaks look like stoned hippies.” A relevant fact: Bezos originally thought of naming Amazon “Relentless.”

Marcus, now the executive editor of Harper’s Magazine, said it all made sense, kind of: “Bezos is fascinated by broken business models. And whatever else you think of newspapers, the business model is broken.”

Although indisputably one of the great marvels of the age, Amazon is a curious beast that offers few obvious lessons for how a newspaper like The Post might become profitable. Financial writers have noted that Apple makes more than twice as much money in a quarter than Amazon earned during the last decade. Last quarter, Amazon had a net loss of $7 million.

Amazon tends to give its profits directly to its customers. It sells to them at a discount, will often ship free and, if a customer wants to return an item, will refund the money before even receiving the return.

That’s a sure way to win friends and lose money. But Wall Street believes that the company will someday monetize tens of millions of customers — in other words, make a real profit each time it sells them something. Maybe next year.

People who have worked closely with Bezos say he refuses to waste time on anything that isn’t directly about the customer. “That’s where his ego is,” one former colleague said.

One other competency that Bezos has: money, and lots of it.

“There’s not a person in this world that can save the newspaper industry,” said Craig Huber, an independent research analyst. “He’s going to be dealing with operating losses as far as the eye can see. I think The Washington Post sold to him because he’s going to be more willing to absorb those losses.”

A core role for any newspaper is to cover the local government. For The Post, that includes the federal government. In recent years, however, Amazon has become a government contractor — in effect, the government’s digital filing cabinet.

Amazon Web Services, Bezos’ cloud computing operation, is a leading service for third-party rental of computing and data storage. Besides hundreds of thousands of individuals and businesses, more than 2,000 research institutions and 500 government institutions worldwide use AWS. Amazon runs several large data centers, each containing hundreds of thousands of servers, along with 42 smaller facilities around the world.

The operations of these data centers, like most other details about AWS, are a closely held secret.

AWS also operates a separate data center, called GovCloud, for the U.S. government. GovCloud is compliant with the government’s International Traffic in Arms Regulations, or ITAR, controls. Only U.S. citizens can use these computers.

In one important recent development, AWS was awarded a contract valued at $600 million to provide computing services to the Central Intelligence Agency. James Staten, an analyst with Forrester Research, said the CIA contract was a breakthrough for Amazon. “Every other national intelligence service will want the same kind of computing, if they can get it,” he said.

Every other cloud services company, meanwhile, wants a piece of the action. IBM formally protested the award on undisclosed grounds. The Government Accountability Office, while finding generally for Amazon, said the CIA should re-examine the deal.

Although Bezos, not Amazon, bought The Post, his role as Amazon’s chief executive and biggest shareholder makes for awkward relationships. Kate Martin, director of the Center for National Security Studies, said, “It’s a serious potential conflict of interest for a major newspaper like The Washington Post to have a contractual relationship with the government and the most secret part of the government.”

Two controversies seem to prefigure the sort of conflicts Bezos’ will have as The Post’s new owner.

WikiLeaks briefly used Amazon Web Services in late 2010 to host its purloined classified documents, but then Amazon pulled the plug. The company said that contrary to news reports, it was not acting at the government’s request. Instead, it said it took WikiLeaks offline for violating Amazon’s rules against posting material you do not own.

A more recent complaint involves the opposite of the WikiLeaks situation. Ask.fm, a website for anonymous teenagers, is being pilloried in the British media for allowing cyberbullying that was blamed in the suicides of four youths. Amazon, which reportedly hosts Ask.fm, has been asked to take it down for violating its rules against hate speech. An Amazon spokeswoman declined to comment or even confirm that the company hosts Ask.fm.

Bezos has already commanded a large editorial team.

In the early days of Amazon, he set up a department to review books. It offered Amazon instant credibility. Bezos never suggested that the reviews be positive, and he gave the department his full support.

Until he did not. People at Amazon at the time describe a struggle between high-minded reviewers and data-driven MBA’s, otherwise known as the Vulcans, in a tribute to Bezos’ favorite television show. The Vulcans pointed out that relatively few customers actually read the reviews, so maybe Amazon shouldn’t spend so much to produce them.

“It was a culture war and the Vulcans won,” said Tim Appelo, who worked in the editorial department.

The professional reviews yielded to the innovation of customer reviews — sometimes an impartial evaluation, sometimes a love song by the author’s mother disguised as an impartial evaluation.

Appelo was not bitter. In fact, he went back to Amazon for a second stint, introducing its digital video store in 2006. (He is now at The Hollywood Reporter.)

“Bezos knows that there is a difference between the marketplace and the marketplace of ideas,” Appelo said. “He is relentlessly and ruthlessly inventive but I don’t think he’ll indulge his Vulcan side too much.”

Put like that, it sounds somewhere between a gut feeling and a heartfelt wish. In these troubled times for newspapers, that might be the most The Washington Post can expect.


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