Amazon's "headquarters" defaults to where Jeff Bezos, the company's founder and CEO, happens to be, currently Day 1 Tower. Its name comes from a perpetual Bezos maxim: that, relatively, we're still at "day one" of the internet—and, by extension, that Amazon is just getting started.
That's getting harder to say with a straight face, with sales, profits and the stock price all soaring, the latter up 270% over three years and 103% in the past 12 months. Amazon is closing in on Apple to become the world's most valuable company, and Bezos, whose personal net worth approaches $160 billion, has in the process become the planet's richest person, by far.
Nevertheless, Bezos talks about Amazon like it's a giddy startup that just closed its Series A. "For all practical purposes, the market size is unconstrained," says Bezos, his rolled-up sleeves showing off Popeye-like forearms, the product of midlife weight training that has produced buzzed-about results for the 54-year-old. His growth rationale comes from a "super-lucky" confluence: The retail market, Amazon's original quarry, is "many trillions," as is, he says, the cloud market that Amazon Web Services (AWS) pioneered. "There are different businesses where the market is limited," adds the man whose company should hit $210 billion in revenue this year. "But we just don't have that issue."
If Jeff Bezos is already the world's most feared businessperson, the prospect of him "unconstrained" should sober every corporate leader. Yes, he's ruthless and a master of the long game, but Bezos' greatest strength, borne out over the past few years, has been his ability to shape-shift Amazon into adjacent businesses—some of which were adjacent only in retrospect—on a massive scale. It's quantifiable: Forbes has been ranking innovative companies for eight years, and we recently worked with a trio of management professors to try to determine the country's most innovative business leaders. The four-prong methodology—incorporating public reputation and influence, value creation and the premium that investors assign to the chief executive—places Bezos squarely at the top.
"What Jeff Bezos has done and is likely to do is perhaps the most remarkable achievement I've seen," Warren Buffett told me last year, after I asked him, open-ended, to name the most impressive business mind in his almost eight decades of market-watching. "Because he's taken two very major industries, and simultaneously, and sort of under the nose of competitors, he's become in effect the leader and is redefining them and succeeding at really big businesses."
Though Bezos and Buffett were referring to retail and the cloud, Bezos is actually unconstrained in far more ways. First, thanks to AWS, the company famous for emphasizing growth over profitability is finally spitting out billions—and Bezos has the market credibility to reinvest it in pretty much any way he wants. Second, the scale that Amazon needs for growth practically demands aggressiveness. And, finally, by dominating retail and digital business services, both of which touch almost every other industry, he's now positioned to move adjacently into just about any business where he finds added value. He's playing in the multibillions in at least four markets—healthcare, entertainment, consumer electronics and advertising—that constitute many of the companies not already terrified of Amazon. It's no coincidence that each of those four either hits or approaches the "trillions" potential Bezos alluded to.
While his pioneering peers of the first dot-com era embraced and popularized the "open kimono," Bezos has always viewed stealthiness as an asset, masking new initiatives inside larger expenditures and feigning disinterest in burgeoning favorites. As Bezos' public profile has expanded, public utterances and interviews (despite his ownership of the Washington Post) have become increasingly rare. Bezos refuses to discuss Donald Trump, who has taken to beating up on him and the Post on Twitter, but he clearly understands he has a target on his back. When asked, as the head of an ascendant advertising company, whether he took any lessons from Facebook's travails last year, his answer was succinct, political and inconceivable. "No," says this advocate for corporate learning, pausing for a few seconds to underscore that he wasn't going there. Ditto questions about becoming a data company. "I've never really thought of Amazon in that way," says the man who runs as data-driven a company as any, before reverting to his stump speech. When it's suggested that it's at least a tool, Bezos quickly interjects: "One of many tools."
Nevertheless, during the morning he spent with Forbes outlining how he channels innovation and chooses where to expand, a road map for Amazon's future emerged. Given Amazon's size, it moves both vertically and horizontally, each direction portending a lot more disruption. Even five years ago, Bezos seemed content merely to try to sell everything to everybody, becoming the bane mostly of retailers and wholesalers. But this master innovation artist now has the ultimate palette: any industry he chooses.
For this unconstrained era, the most important word at Amazon is yes. Bezos explains, correctly, the traditional corporate hierarchy: "Let's say a junior executive comes up with a new idea that they want to try. They have to convince their boss, their boss's boss, their boss's boss's boss and so on—any 'no' in that chain can kill the whole idea." That's why nimble startups so easily slaughter hidebound dinosaurs: Even if 19 venture capitalists say no, it just takes a 20th to say yes to get a disruptive idea into business.
Accordingly, Bezos has structured Amazon around what he calls "multiple paths to yes," particularly regarding "two-way doors": decisions that are often based on incremental improvements and can be reversed if they prove unwise. Hundreds of executives can green-light an idea, which employees can shop around internally. "He knows and we know that you can't invent or experiment without some failure," says Jeff Wilke, the longtime Bezos lieutenant who runs Amazon's consumer and retail operations. "Those we sort of celebrate. In fact, we want them to occur all over the place. Jeff doesn't need to review those. I don't need to review those."
But regarding the larger ideas and verticals—a.k.a. "one-way doors"—that change the direction of the company, Bezos prides himself on playing "chief slowdown officer." He's looking for three things. First, originality. "We have to have a differentiated idea. It can't be a 'me too' offering," he says. Second, scale. "We're gifted with some very large businesses we've built over time, and we can't afford to put our energies into something that if it works, it's still going to be small." And, finally, a Silicon Valley-worthy ROI. "Even at substantial scale, it has to have good returns on capital."
Ultimately, the ideas that hit that troika, Bezos says, emanate from one of two models. Either by looking backward at customer needs—as in we've noticed people act a certain way, so let's try to serve them with a product. Or peering forward—we know how to do something valuable, so let's find customers.
The Amazon juggernaut ultimately stems from the latter. Originally a niche player, Bezos could have easily focused just on becoming the world's digital bookstore, the way crafts belong to Etsy and shoes to Zappos (now owned by Amazon, naturally). But in mastering selling books, Bezos saw that he could use those tools—from inventory management to recommendationengines—to move adjacently: first into music and DVDs, then toys and electronics, then pretty much anything that can be sold at retail. And he again leveraged that knowledge audaciously (and successfully) in opening up Amazon as a platform for independent sellers, who were formerly competitors—cementing his legacy as a transformative retailer, in the pantheon with the likes of Sam Walton, Aaron Montgomery Ward and Sears Roebuck's Julius Rosenwald.
This is where the story should have ended. But as the Western world's dominant online retailer, Amazon was also solving huge technological and logistical problems, and rather than view those skills merely as accretive to the core business, Bezos saw them as businesses unto themselves. An internal need for part-time developers led to Mechanical Turk, one of the world's first crowdsourcing gig marketplaces. Building a staggeringly efficient delivery infrastructure led to the Fulfillment by Amazon service, and mastering how to take money for each purchase led to Amazon Pay. Most important, as Amazon began building enormous capabilities to store its data in the cloud, Bezos figured out that other businesses might want to store their data there as well. In 2017, AWS had $17.5 billion in revenue.
Even those customer-driven concepts create skills-based dividends. Take the Kindle reader, Amazon's first foray into hardware, back in 2007. Wilke, who came from AlliedSignal, remembers protesting to the board. "I spoke up and said, 'I don't agree. I think we're likely to miss our planned delivery date. Our yields are gonna be too low. We're gonna underproduce. We're gonna frustrate customers. Hardware's hard. We're a software company.'
"Jeff said, 'Well, I'm willing to concede that all those things will happen, and I still think that the right vision for our company is to be really good at building hardware, so we need to get started learning." And so they did. Kindle is a romanticized product at Amazon, both because of the hardware breakthrough and because it harks back to the company's roots in books. It didn't transform the company, though, and other hardware failures, like the disastrous Fire smartphone, followed. But Bezos' decision also eventually led to the Amazon Echosmart speaker, a true game-changer.
"We have a lot of hardware experience today, but back then we didn't have those skills," says Bezos, laughing. "You have to be patient. It's not going to be just time to learn a skill. It might take time for the thing to really flower." In other words, if you study the skills Amazon is currently learning, you'll have a fair idea of what it will soon be selling.
And right now Bezos is learning about healthcare. It's America's biggest industry—18% of GDP—and one of its most inefficient. Last year, Bezos, along with Buffett and JPMorgan Chase CEO Jamie Dimon, announced that their three companies would pool their efforts, hiring high-profile CEO Atul Gawande to lead a nonprofit initiative to deliver better care at a lower cost for their own employees, with the idea of creating a scalable, clonable model. It's no small thing: Those three companies employ 1.2 million. Add in their dependents, and it's like running a pilot project for everyone in Oregon or Connecticut.
Bezos is adamant about Amazon's intentions here. "This is a nonprofit initiative, as you guys know. It's very different," he interjects, before even a full question can be asked about it. Buffett, for his part, concurs, having explained to me a few months ago: "We were deluged by people after the announcement who said, 'We want to join in.' And we said, 'You don't have to join in. Steal everything we get, if we get anything.' " The "if we get anything" is key. "Like Columbus leaving, we don't know where the hell we're going exactly," Buffett added. "But we hope there's another continent out there and we don't go off a shelf at some point."
But even if they do sail off the Earth, Bezos wins, as Amazon burnishes its skills accounting for around one fifth of the domestic economy. While any breakthroughs developed with Buffett and Dimon "would still be inside that nonprofit entity," Bezos says, "each of the companies can pursue their own initiatives." Bezos has already started. In June, Amazon agreed to pay almost $1 billion for PillPack, a startup that delivers pre-packaged daily prescription envelopes. It's everything that Amazon is good at: fulfillment, customization and dependability. And it's another toe in the healthcare pool.
Bezos is also going to school in advertising. Amazon's most recent quarterly performance revealed a startling number: Amazon is on pace to exceed $8 billion in advertising revenue this year—roughly double last year's total. And why not? Google might know what you're interested in buying, Facebook might be able to deduce what you'd be inclined to buy, but Amazon knows what you've actually bought, or even whether you showed intent to buy.
That raises all sorts of issues. Bezos talks exuberantly about his consumer obsession, but there are few customers who want to be targeted with more ads. Bezos says the trust that Amazon has built with its customers will ensure the company doesn't cross a line—and that customers, in turn, will give him the benefit of the doubt. "It's very valuable, and so you would never do anything to jeopardize it," he says. "It's what allows you to expand the business." If Bezos can walk that line, it's easy to envision the Facebook-Google advertising "duopoly" gaining a third major entrant.
When you walk among the Seattle high-rises, the most interesting building in Amazon's neighborhood—with apologies to a stunning new biosphere designed to serve as something of a company commons—is a food store that pokes out from the bottom of Day 1 Tower. Amazon's $13 billion Whole Foods purchase last year is only the second-most-interesting grocery initiative at Amazon; the first is Amazon Go, an 1,800-square-foot experiment in frictionless brick-and-mortar purchases that opened in January.
Go, a food store, might be the most Amazonian thing at Amazon. Bezos has always stressed frugality, and here are his employees (and a few Seattle residents and tourists) shopping for their lunches, buying them from Amazon and in doing so also providing the company reams of data to hone its skills. More important, Go demonstrates what's possible when different aspects of Amazon's myriad operations come together. Go encompasses knowledge gained from purchases at Whole Foods; from Amazon's increasingly sophisticated algorithmic and hardware capabilities, in the form of AI, camera and sensor technologies, which combine to figure out what's taken off the shelf (and put back) and who did the taking; and from Amazon Pay, which seamlessly handles the transaction once the company's app registers the inputs. Grabbing a chocolate milk here on the way out feels like shoplifting—no checkout lines, no scanning, no swiping. If healthcare and advertising represent huge expansion verticals on Amazon's de facto vertical campus, Go brings together what's possible horizontally when Amazon puts all the pieces together.
The most important aspect of it all is Prime. At its core, it's a marketing tool, a way to encourage buying—and generate recurring subscription revenue (an estimated $10 billion in 2017)—in a similar vein to warehouse clubs like Costco and BJ's Wholesale. But as it grows, it's surged into a way to shower its 100 million-plus subscribers with perks and privileges. And those perks create endless new adjacencies and business lines. Prime explains why Amazon has started to encroach on Netflix and is expected to spend $5 billion on programming this year, including the highly touted Marvelous Mrs. Maisel. In just three years, "Prime Day"—an annual 36 hours of special deals just for members, with participants spending billions on more than 100 million products this July—has become a shopping holiday with a mania surpassed only by Black Friday and Cyber Monday. Access to Prime is how Amazon gets its outside retailers to pay more for Fulfillment by Amazon.
Prime also underpins Amazon's brick-and-mortar strategy. Prime's same-day deliveries and pickups require more physical beachheads, which in turn help underwrite expansion into all sorts of fields Amazon could never have justified, such as food, the kind of perishable product that doesn't fit into the classic Amazon model. After years as a bookstore killer, the company now has 16 permanent Amazon Books locations across 11 states. And Amazon recently opened a second Go in Seattle. "They have to have something that's special and new," Bezos says. "And that's what you're seeing if you're paying attention to our physical-stores strategy."
Prime, in short, has become Amazon's central nervous system, connecting everything in the company—and giving Amazon a path to expand into new markets while also juicing its core retail business—without really being its own thing. "It can't be a stand-alone business because it's completely tied in to our consumer offering," Bezos says.
Similarly, as seen with Go, artificial intelligence will increasingly connect what previously seemed like disparate product lines, from cloud to retail. Take the wildly successful Echo, which has made Jeff Wilke's existential question about Amazon—is it a hardware or a software company?—moot. It's an effective piece of hardware empowered by AI-driven software, which drives Amazon's retail sales, leverages Amazon's content and so on. "The most interesting thing about machine learning as opposed to a lot of other technologies is just how horizontal it's going to be," Bezos says. "There's not a single category of business or government or anything, really, that can't improve itself."
Even the much ballyhooed "HQ2" second headquarters bake-off, which Amazon insiders continue to say will be finalized by year's end, speaks to Amazon's horizontal outlook. (Forbes is betting on Washington, D.C., where Bezos already has a base and which has the talent, logistics and access to influencers; by shortlisting both the Virginia and the Maryland suburbs, as well as the District of Columbia, Bezos can also play three governments within one metropolitan area against each other for the best sweetheart deal.) Increasingly, Bezos says, geography at Amazon is becoming irrelevant. When separate teams need to work together, "what you want is those two groups to have infrequent meetings and set a road map of the future." He adds: "If you organize correctly, people do not have to be in the same building or the same city or even the same time zone, because you can work off a road map."
And make no mistake, that road map is "pretty much all" that Bezos works on, delegating the day-to-day business operations. Long-term thinking has been Amazon's hallmark, and the cash spigot from AWS empowers Bezos to keep running the retail juggernaut with near-zero margins and unassailable efficiencies, as well as invest in far-flung areas. "I very rarely get pulled into the today," Bezos says. "I get to work two or three years into the future, and most of my leadership team has the same setup."
"Friends congratulate me after a quarterly-earnings announcement and say, 'Good job, great quarter,' and I'll say, 'Thank you, but that quarter was baked three years ago.' I'm working on a quarter that'll happen in 2021 right now."
It's that mindset that has companies in dozens of industries running scared. "I come up with ideas. We could sit here with an idea, and I could fill this whiteboard in an hour with 100 ideas," Bezos says. "If I have a week with no brainstorming meetings, I complain to my office, like 'Come on, guys, help me here.' " Corporate America, take note—either innovate or Jeff Bezos will do it for you.