PDF Summary:Invent and Wander, by Jeff Bezos

In 1994, a young programmer named Jeff Bezos took a chance, quit his job, and founded the first online bookstore. Three decades later, his business—Amazon—is valued at over $1 trillion and has revolutionized the online marketplace. Invent and Wander is a compilation of Bezos’s letters to Amazon shareholders, combined with excerpts from interviews and speeches. Its narrative chronicles Amazon’s rise from a niche retailer to a digital superstore while also illustrating Bezos’s values and insights into innovation and success.

In this guide, we’ll explore the history of Amazon as it grew to a thriving online marketplace that also became an invaluable resource for cloud-based computing. We’ll delve into the principles that Bezos says are central to Amazon’s success and compare Bezos’s management decisions with those of his contemporaries. Since Bezos presents an insider’s view of Amazon, we’ll also hear from outside voices who are critical of Bezos’s leadership style and Amazon’s impact on the market.

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These companies’ business models all rely on having a large number of potential customers, high amounts of revenue in relation to the cost of their services, and efficient use of consumer word-of-mouth to attract new customers. Although rapid online growth can be a winning strategy, as it certainly was for Amazon, Hoffman and Yeh say to watch for warning signs that a company’s growth is outpacing its resources. Those signs include a declining growth rate, decreasing productivity, and increasing administrative costs, all of which Bezos works to avoid at Amazon.

Forging Ahead

The next economic hurdle Amazon faced was the Great Recession of 2008. During this downturn and the decade after, Amazon held its course and continued to grow. Bezos highlights three of Amazon’s business innovations that blossomed into permanent, successful programs that have shaped Amazon’s character in the 21st century—Marketplace, Prime, and Amazon Web Services—while explaining how Amazon faced the Covid crisis and continues to flourish in the shifting online economy.

Business Innovations

Launched in 2000, Amazon Marketplace grew out of attempts to host third-party vendors on Amazon’s platform. In its early years, Amazon partnered with other sellers so customers could access goods that Amazon itself didn’t keep in stock. After trying business models that separated outside vendors’ products from Amazon’s offerings, Amazon Marketplace placed third-party merchandise side-by-side with Amazon’s products. Rather than diminishing Amazon’s profits, Bezos argues that Marketplace is a win for all participants. It encourages healthy competition that results in better deals for customers while allowing Amazon’s partners access to a global distribution network that they never could have built themselves.

(Shortform note: Though Bezos presents Amazon Marketplace as a panacea for customers and third-party sellers, not everyone agrees with his assessment. In 2023, the US Federal Trade Commission (FTC) filed a lawsuit alleging that Amazon has built an illegal monopoly that prevents third-party sellers from offering lower prices, coerces vendors into using Amazon’s fulfillment service, and overcharges businesses who have no choice but to sell through Amazon. Amazon responded that the FTC’s lawsuit mischaracterizes Amazon’s relationship with third-party sellers and that it could result in higher prices and slower deliveries for consumers.)

Another risky venture was Amazon Prime, a customer loyalty program that coupled discounts with free shipping on most items. From its conception in 2005, the initial financial projections for Prime suggested it might be a financial boondoggle, and Bezos admits that Prime was risky because if it failed, it would be hard to roll back without incurring customer resentment. Instead, Prime was a smashing success. It turned out that customers were eager to pay an annual premium for the convenience it offered, as well as its added perks such as rapid delivery and streaming video. For many users, Prime made ordering online preferable to shopping in stores.

(Shortform note: Financial analysts who break down the consumer cost of Amazon Prime agree that it represents a bargain, depending on how you make use of the service. If used primarily for its free shipping aspect, you would have to order enough packages per year to recoup the annual membership fee in saved shipping costs. If used for its digital streaming aspects, its pricing is comparable to that of competitors such as Netflix and Disney. However, Amazon Prime’s critics point out that its selection is limited, its rapid delivery service is harmful to the environment, and its discounts and ease of use may promote irresponsible impulse buying.)

Amazon’s third major innovation is completely separate from its retail identity. Initiated in 2006, Amazon Web Services (AWS) provides on-demand cloud computing tools that businesses can access on a pay-per-use basis. Bezos explains that AWS grew out of Amazon’s attempts to solve its own computing problems. Once the company’s software team designed the digital tools they needed, they realized that other companies would need them as well. The first AWS customers were small business start-ups that couldn’t afford their own IT departments, but soon, even large corporations turned to AWS to save costs. Though AWS started as a sort of side hustle, it now represents a significant pillar of Amazon’s standing as an economic giant.

(Shortform note: Whether knowingly or not, when starting AWS, Bezos followed a practice articulated in 1985 by management expert Peter Drucker. In The Essential Drucker, he explains that when an established company is experimenting with a new type of business venture, it should create the new program as a separate entity and treat it as a startup rather than an expansion of the existing enterprise. If the side venture succeeds, it can then be brought under the company’s larger umbrella, and if it fails, its negative returns won’t impact the success of the parent business.)

Crisis and Competition

In 2020, the Covid pandemic drove home how important Amazon is to its customers. Online retail let people order basic necessities without risking exposure from in-person shopping. However, Bezos says that unlike the normal increase in business that comes with holiday shopping, the surge of online ordering during the Covid lockdown caught Amazon off guard. The company hired almost 200,000 new workers prioritizing delivery of essential goods. Amazon’s Marketplace worked to clamp down on third-party vendors engaged in price gouging, while AWS provided cloud computing to government agencies, medical researchers, and emergency call centers, as well as schools and businesses that had to rapidly switch to online work.

(Shortform note: As people turned to online ordering during the lockdown, Amazon prospered while other retailers struggled. However, because Amazon workers were deemed essential and remained in the workplace with little access to clear health and safety information, the pandemic had an unexpected side-effect—the unionization of Amazon’s workforce. Workers came together online to speak up about workplace safety concerns and organized strikes to demand better working conditions and stronger safety measures. Amazon responded with anti-union pressure, but its workers’ attempts to organize have been upheld by US labor officials.)

While Amazon took the lead in online retail, its success didn’t crush its competition—instead, Amazon changed the nature of retail and created new markets for other businesses to pursue. Major competitors like Walmart have now moved into online retail while offering services that Amazon can’t, such as curbside order pickup. By normalizing at-home delivery, Amazon created an avenue for companies such as Instacart that let grocery stores become online vendors. Bezos insists that he isn’t dismayed by the increasingly crowded online marketplace because he doesn’t believe that the competition detracts from Amazon’s value. Rather, the online retail market is still growing, as is Amazon’s overall share.

(Shortform note: Despite Bezos’s statements welcoming competition, Amazon and its chief rival Walmart are racing neck-and-neck to be the US’s top retail business. In 2023, Walmart outpaced Amazon in revenue ($573 billion to $514 billion), business innovation, and environmental sustainability, while Amazon ranked higher in customer service and digital sales. Though Amazon long ago eclipsed eBay in terms of revenue and volume, eBay still remains competitive as an outlet for third-party sellers to find a customer base. Meanwhile, Amazon’s up-and-coming overseas competitor Alibaba is dominating in some global sectors, specifically the Chinese market, and has more active users worldwide.)

The Cornerstones of Amazon’s Success

When Amazon made over $100 billion in sales in a single year for the first time, Bezos reported that they’d achieved that volume faster than any other business. Instead of taking credit for that himself, Bezos attributes Amazon’s success to its workers and to the company’s culture, which he says was created by Amazon employees through their collaboration with each other, rather than being set from on high. In his writings and interviews, Bezos extols the values of that culture, which include intense customer focus, long-term planning, and a willingness to take risks and innovate.

(Shortform note: As Amazon shows, culture is integral to success—and a healthy group culture needs to be nurtured by management if a business is to flourish. In The Culture Code, Daniel Coyle identifies three cultural ideals that executives should foster to make their businesses thriving workplaces. These include making workers feel valued and interconnected with the group, allowing team members to develop trust by showing vulnerability on the job, and giving the whole organization a purpose so that everyone can work toward the same goal. It’s this third ideal that Bezos articulates the most, as we’ll see in the following section.)

It’s All About the Customers

From the start, Bezos declared his intention that Amazon should be the most customer-friendly business in the world. In practice, that means putting customers first is the guideline for every business decision. Bezos describes his deep respect for Amazon’s customers, how their needs drive the business to constantly improve, and how customer focus dictates Amazon’s expansion into new territories and markets.

Bezos starts from the assumption that customers are intelligent—they know the difference between good and bad service, and they can see through any flimsy marketing campaign that might try to brush away a company’s faults. Therefore, the only way to build a good brand is to always give customers a positive experience. No matter the customer, there are always certain constants—people like having a variety of options, paying less for them, and receiving what they order quickly. These constants demand that Amazon’s team meet high expectations in everything they do and teach those expectations to every new employee.

(Shortform note: Bezos’s chief marketing strategy isn’t focused on selling specific items to customers as much as selling the “Amazon experience.” In Superfans, Pat Flynn describes this strategy in detail, arguing that the quality of your customers’ experience is more important than how many customers you have. Once customers become “superfans” of a service, it becomes part of their identity that’s embedded in their daily routines. These customers become active marketers for your company, provide your business with vital feedback, and can ensure your company’s overall longevity. The steps for turning customers into fans boil down to the essentials of good customer service—establish a connection and provide something of value.)

Always Doing More

Amazon pushes to never stop improving because customer expectations always go up. Bezos argues that striving to keep up with its customers rather than aiming to beat the competition forces Amazon to keep innovating even in markets where it already has a commanding lead. Some companies focus on doing one thing and doing it well, but that can give a business tunnel vision. By placing themselves in their customers’ shoes, Amazon’s teams must constantly learn new areas of expertise, which then branch out into whole new markets and services that customers will enjoy. Expanding into new markets is key to keeping Amazon’s customers happy as well as bringing more into the Amazon fold.

(Shortform note: Bezos’s continual expansion of Amazon’s services and the markets in which it operates is a strategy that many companies employ as a bulwark against financial downturns and organizational stagnation. In The 10X Rule, Grant Cardone cites the examples of companies like Google, Walmart, and Coca-Cola who work to make themselves omnipresent so that virtually no one is unaware of their existence. By constantly expanding—and in a sense, overcommitting their resources—companies are forced to excel and innovate in order to survive and deliver on their promises. The end result is a business that can weather any economic downturn, because staying competitive is baked into its culture.)

Other ways Amazon draws in new customers, as well as building trust with those it has, include some practices that seem counterintuitive—such as letting customers post negative product reviews, displaying third-party products that may be cheaper than its own, and proactively informing customers when they could get a better deal than what they’re currently paying. While each of these practices results in a short-term revenue loss, their cumulative impact is an increase in customer loyalty, positive brand associations, and more future sales.

(Shortform note: While it’s true that companies require short-term revenue to pay their bills and keep the lights on, fixating on short-term profits can blind a business to more important issues. In Zero to One, Peter Thiel argues that entrepreneurs should grow their businesses based on 10- or 20-year projections, even though short-term targets are easier to set and measure. In Drive, Daniel H. Pink points out that emphasizing short-term profits leads to short-term thinking, showing that companies that obsess over quarterly earnings spend less on research and development—boosting their short-term numbers at the expense of long-term viability.)

Taking the Long View

To maintain Amazon’s market leadership, Bezos and the rest of his leadership team focus on the company’s success in the future, not on its current quarterly statements. Bezos explains his insistence on making decisions that pay out in the long run, how this reflects an “ownership” mindset, and why many of his long-term decisions are, by necessity, judgment calls.

As early as Bezos’s first letter to shareholders in 1997, he warned investors that Amazon would often engage in practices that incurred short-term losses. The point was to quickly take a lead in the market, which could only be done by building Amazon’s brand, growing its number of repeat, loyal customers, and encouraging more and more sales through its site. He acknowledged that for purely technical reasons, online shopping in the ’90s was still frustrating, so Amazon made up for that by reducing prices and increasing its selection. Nevertheless, the company had to be careful when cutting prices to minimize its losses as it grew.

(Shortform note: In general, new businesses should expect to lose money for several years before becoming profitable. That doesn’t mean that the company’s founders or investors will lose money during that time. Business owners may pay themselves a salary as part of their company’s regular expenses, and investors may receive fixed interest payments on their investments as the company grows. Even successful companies don’t record profits for two or three years, although Bezos reports that Amazon took over five years to reach that goal.)

Bezos says that Amazon executives spend more time setting customer service goals than they do poring over financial reports, because creating value for customers results in greater business returns over the long haul. Short-term speculators don’t appreciate this mindset, but Bezos believes that good investors think like owners and should therefore be on the same wavelength regarding Amazon’s long-term ambitions.

(Shortform note: Bezos’s attitude toward long-term investors reflects the guiding philosophy of business mogul Warren Buffett. In The Essays of Warren Buffett, he drives home the idea that owning stock means owning a piece of a real-world business, which he advises holding on to and taking responsibility for so long as the business is well-operated and produces a steady rate of return. Buffett famously derides short-term traders who treat investments like gambling chips. Bezos, like Buffett, places value in investors who prioritize long-term business goals over short-term fluctuations in the market.)

Making Long-Term Decisions

The tricky part about planning ahead is that it’s impossible to predict the future, even with all the customer data and financial projections in the world. Therefore, Bezos admits that many long-term decisions boil down to judgment calls. When making a gamble—such as whether to experiment with a new service or build a new distribution center—Bezos uses the customers’ interest as his guiding star, assuming that if something Amazon does results in better deals for customers, it will eventually benefit Amazon too, even if the returns won’t be evident for years. Though some of these bets have been controversial—such as sharing website space with third-party vendors—Bezos’s judgment has paid off more often than not.

(Shortform note: In Blink, Malcolm Gladwell backs up Bezos’s assertion that intuitive judgments can be as strong as slow, deliberate, well-reasoned decisions. Gladwell explains that when using intuition, our minds perceive patterns based on snapshots of data while disregarding extraneous details. Intuition can be influenced by unconscious bias, but Gladwell argues that making good intuitive decisions is a skill you can improve through practice and learning to recognize when gut-based decisions are and aren’t appropriate. For Bezos, running a trillion-dollar business surely provides opportunities for both.)

The Will to Innovate

The biggest gambles requiring the most judgment revolve around some form of innovation. Bezos places innovation at the core of Amazon’s identity and culture. He explains innovation’s crucial role in keeping Amazon fresh and energized, how innovation is driven by both customer needs and industrial trends, and why failure is an acceptable, necessary cost.

Bezos’s central business philosophy is that no matter how established your company is, you should always act as if it’s a startup. The alternative is complacency and stagnation, whereas a startup mentality brings energy and a gung-ho attitude to stay ahead. This doesn’t just apply to the boss, but to every employee, because the next innovative insight could come from anywhere in the organization. For example, Bezos writes that Amazon Prime, which paid for itself by the sheer volume of business it generated, was first suggested by a low-level programmer. For this reason, all employees must be empowered to think for themselves and come up with risky ideas. If not, they may quit and innovate for your competitors instead.

(Shortform note: While Bezos celebrates the fact that innovative ideas can come from anyone, he doesn’t describe the process by which new concepts are brought forward. However, in Creativity, Inc., Ed Catmull details the steps and hurdles to do the same thing at Pixar. Catmull acknowledges that many employees are uncomfortable giving feedback or suggesting ideas, so managers have to send the clear message that innovative ideas that fail are tools for learning and won’t result in negative reprisals. Unproven ideas are often risky, but Catmull says that nurturing them to fruition requires focusing on what makes them exciting and working through the problems as they crop up.)

When innovating, Bezos says that it’s important to keep ahead of sweeping industry trends, such as the development of artificial intelligence, but it’s equally important to be so aware of customers’ needs that you can guess what they want before they know it. This involves a process that Bezos calls “wandering”—inventing new products and services with only a vague notion of whether they’ll be successful. This process of trial and error isn’t as haphazard as it sounds, but it’s driven by Amazon’s employees’ insights about how customers engage with the world and what potential innovations might create opportunities for Amazon and its users.

(Shortform note: A famous practitioner of Bezos’s forward-looking innovation style was Steve Jobs, cofounder of Apple Computers. In Isaacson’s biography of Jobs, he comments that under Jobs’s leadership, Apple rarely did market research, since Jobs was convinced that the market didn’t know yet that it needed the new products he was pushing. This proved true for such game-changing innovations as the iPod music player and the iPhone, though not all of Jobs’s products turned out to be winners, most notably the NeXT academic computer station, which was an unmitigated flop.)

The Value of Failure

Of course, not every innovation will work and failure is to be expected. Bezos differentiates between bad failure, such as poor customer service, and good failure which comes from taking potentially profitable risks. The goal with any experiment is to fail as quickly as possible so you can learn what doesn’t work, correct it, and do better. For instance, Amazon’s successful Marketplace program grew out of two earlier failed attempts to bring third-party partners into Amazon’s platform. When a company grows as large as Amazon has, Bezos insists that it has to fail bigger too, or else it isn’t challenging itself hard enough. With the resources at Amazon’s disposal, Bezos expects it to experiment and fail in new, astonishing, billion-dollar ways.

(Shortform note: Bezos’s principle of “failing as soon as possible” is applicable to any business, especially new ones. In The Lean Startup, Eric Ries presents a systematic way to go about it, based on the premise that a brand-new business doesn’t know what its customers want or how they’ll use it. Therefore, Ries describes business practices like a scientific experiment—start with a hypothesis about how customers will relate to your product (based on the most minimal version of it you can make), test your product’s performance in the market, then learn what you can from what you’ve done so far and make any changes that your data shows are needed.)

Looking to the Future

Amazon’s success has made Bezos one of the richest people on the planet, but his ambitions don’t end there. Bezos wants to use his wealth to be a positive force for change in the world. He discusses his thoughts about the social responsibilities of big business and how he’s using Amazon and his aerospace company Blue Origin to improve climate conditions on Earth while laying the foundation for future space-based endeavors.

Industry giants like Amazon are often disparaged for their success, which Bezos argues isn’t helpful or fair. Because of its scale, Amazon can have a positive impact on the world in ways that individuals and nonprofits simply can’t. One way that Amazon has sought to fulfill its responsibilities to society is by raising its wages above the minimum required and challenging other businesses to follow suit. Beyond that, Amazon offers paid tuition for employees pursuing advanced education, while extending paid leave to employees’ family members whose own jobs may not provide the same. In addition to setting an example for other companies, Bezos writes that such policies are good for the recruitment and retention of dedicated workers.

(Shortform note: What Bezos doesn’t acknowledge in his shareholder letters are the numerous employee complaints leveled against Amazon over the last 10 years. Some of these relate to ergonomic injuries sustained by Amazon warehouse workers, which led to an investigation by the Occupational Safety and Health Administration (OSHA). Other issues involve allegations that Amazon underpays employees and encourages a high turnover rate to avoid issuing raises. Some Amazon workers have even made reports of racially abusive working conditions to the Equal Employment Opportunity commission. In 2021, Bezos defended Amazon’s workplace practices while acknowledging that it had work to do regarding helping its workers succeed.)

Amazon’s industry leadership extends into environmental issues. Bezos prides himself that Amazon was the first business to sign the 2019 Climate Pledge, despite the fact that its reliance on packaging and shipping makes it a carbon-intensive industry. To meet its climate goals, Amazon designed one of the world’s most complex systems to track and reduce its carbon emissions. In addition, Amazon’s internal goal is to be carbon neutral by 2040, investing in renewable energy and a fleet of electric delivery vehicles. If it can achieve this, Amazon can pressure others to meet the same standards and even supply the technology to do so.

(Shortform note: Despite Bezos’s pledge in 2019, Amazon’s carbon footprint grew from 2019-2021, with emissions only dropping in 2022 by less than 1%. In 2023, Amazon dropped its benchmark goal to make half of its deliveries carbon-neutral by 2030. For its environmentally minded customers, Amazon marks sustainably sourced products with a special climate badge on the search results page. Bezos also started the philanthropic Earth Fund with a personal pledge of $10 billion supporting grants for sustainability and conservation projects.)

Bezos’s Future Missions

Beyond saving the planet, Bezos believes that humanity’s survival depends on spreading our civilization into space. To foster this, Bezos founded his aerospace startup Blue Origin to develop reusable spacecraft for ferrying astronauts and cargo into orbit, with constant improvements in energy efficiency and cost savings. Bezos says that to colonize space and thrive there in the future, the groundwork must be laid in the present, which he hopes to accomplish through his companies’ culture of constant innovation. After all, Bezos points out that Amazon itself wouldn’t exist without the online infrastructure built by the digital pioneers who came before.

Still Wandering and Inventing

Bezos’s Blue Origin is one of several competing commercial spaceflight companies, including SpaceX and Virgin Galactic. Blue Origin’s reusable New Shepard rocket was grounded after an unmanned launch failure in 2022, though previous flights had successfully carried passengers into suborbital space. Nevertheless, Blue Origin’s larger New Glenn rocket has been selected by NASA to launch a probe to Mars in 2024 and has been tapped to develop a lunar landing module for future manned missions to the moon.

In 2021, Bezos retired from his role as Amazon CEO, passing the reins to Andy Jassy while remaining in place as the executive chairman of Amazon’s board. He’s made massive stock donations to nonprofits, with plans to divest most of his fortune to philanthropic groups in the future. Meanwhile, Bezos has appointed a new CEO for Blue Origin in the hopes of speeding up its progress in the commercial space race.