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Amazon Unbound: Blueprint to Hunt for the Next Big Thing? (Part One of Four)
Author Brad Stone offers a thoroughly researched and fascinating look into Amazon’s success
Reading Amazon Unbound was a surreal experience. One moment, I felt like I was inside the giddy head of Jeff Bezos as he celebrated the release of Manchester by the Sea – Amazon Studio’s first film pushing for Oscar glory – with Hollywood legends like Diane Keaton and Faye Dunaway at his house.
Another moment, I could almost feel the palpable anger of Marc Onetto (former head of Amazon operations) against Bezos. As soon as national scandal broke after workers passed out from heat at an Amazon warehouse in Lehigh Valley, Bezos blamed Onetto for failing to anticipate the crisis. When pointed out by Onetto that it was Bezos who had rejected his earlier proposal to install air-conditioning units in Amazon facilities, Onetto was again blamed – this time for his unconvincing and ambiguous writing to senior management.
The level of detail in Amazon Unbound is unlike the other books I have read about Amazon. The most recent two, Working Backwards and Think Like Amazon – both written by former employees – do not quite get into the soul of Bezos the way that Amazon Unbound does. You could almost feel the intensity of a man who created one of the most successful companies in the 21st century.
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Companies run by Imperial CEOs
On a recent podcast episode of Invest Like the Best, Aswath Damodaran – a Professor of Finance at NYU – was asked about defining characteristics of the most successful business leaders. He cited Jeff Bezos for having built a formidable team at Amazon, but decried Elon Musk for running Tesla like an imperial CEO. He further stated he would stay away from companies run by Caesar-like figures as an investor.
Musk has been CEO and co-founder of Tesla since 2008, barely into the second decade of his tenure. Bezos founded Amazon in 1994 and remained as CEO for 27 years. By all accounts, Bezos was nothing less than the most demanding emperor at Amazon. For example, when he asked for a single cow burger to be created in 2016, the SVP of North American e-commerce thought Bezos was joking. Except that he was not, and a project team was mobilized to create it. Amazon employees often found themselves working backwards based solely on Bezos’s intuition and sometimes bizarre directions.
Bezos and Musk could not be more similar in the ways they wielded powers at their respective companies during comparable stages of their leaderships. Perhaps having an imperial CEO is the very essence needed to create pioneering innovations that carve out entire markets from scratch. Amazon Web Services, Kindle, Roadster, Model 3, and Alexa have delivered extraordinary returns for Amazon and Tesla shareholders, because Bezos and Musk pushed for their outrageous visions to be realized. Neither relied on the vote of assembly, but ruled by fiat.
Amazon – Anatomy of a Multiplier
Though Amazon is still in active growth, investors are already looking for the next big thing. The natural temptation is to look for another founder-CEO in the exact same mold as Jeff Bezos, but that can be perilous. Elizabeth Holmes of Theranos modelled herself after Steve Jobs, down to wearing black turtlenecks, to evoke the same aura. After reading Amazon Unbound, I wonder how I can distill Amazon’s anatomy to identify the next generation of era-defining corporations:
What leadership traits are essential to creating next-generation corporations that are going to be as impactful as Amazon in the next 10 years?
Many founder-CEOs are justifying growth at all costs with the same long-term shareholder value rhetoric as Amazon. Yet, many will fail. Peloton is an example of how a founder-CEO mismanaged expansion before ceding control to a more seasoned professional. What are some helpful smoke signals that might alert investors before substantial value is destroyed?
Which emerging public companies have the makings to become the next Amazon-equivalent?
In contemplating question (1) above, the parallels between Elon Musk and Jeff Bezos continue to be striking. Besides having extraordinary visions of what their companies could become – from their respective origins as a niche EV maker and an online bookseller – both possess profound technical capabilities to turn them into realities. Musk is a product architect at heart with a multi-disciplinary intellect that has empowered him to do almost anything, from software coding at Zip2 to rocket science at SpaceX. Bezos is no slouch himself, with a technical background in electrical engineering and computer science. His drive for operational efficiencies and innovations were in full display when Bezos purchased The Washington Post in 2013, and turned the hemorrhaging newspaper around by 2016.
It may be useful to think about smoke signals based on leaders who have had recent public downfalls. Peloton’s John Foley is a cautionary tale for investors who might have mistaken him for the Elon Musk of connected fitness. Referring to the 16 Leadership Principles at Amazon, lack of frugality at Peloton may the most obvious red flag.
Pre-Covid, advertising budgets at Peloton were said to be overly generous, with agencies instructed to just spend without much consideration for ROI. When Covid hit, it became a demand boon, but huge drains on Peloton’s finances happened instead. Mishandled logistics, haphazard production plans, and excessive inventories were key culprits. In 2021, despite a discombobulated internal organization from overexpansion, Foley doubled down on its apparel strategy (with his wife as the vice president) and announced plans for an additional facility in Ohio. Financial health deteriorated so drastically that in late 2021, Peloton had to raise equity of $1 billion to plug liquidity gaps. A shocking move, despite having sold more bikes during lockdown than ever before.
In early 2022, Foley was replaced by Barry McCarthy, the former chief financial officer of Spotify and Netflix. Peloton just raised $750 million in debt to further shore up its balance sheet, a move that further confirmed how the pandemic was a wasted opportunity mismanaged by former leadership.
In summary, an absence of discipline at the top – especially fiscal – may be the smoke signal to look out for.
Emerging Public Companies: Next Amazons
This section is jointly contributed by John A. Nardi, host & founder of the Talkin’ Money Podcast. We discussed Amazon Unbound on his show on June 17th, and subsequently came up with three distinct ideas, which will be revealed in the coming weeks on this blog.
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