Amazon’s Bezos: ‘I believe we are the best place in the world to fail’

Originally published April 5, 2016 at 5:45 pm Updated April 5, 2016 at 8:41 pm

Amazon’s Jeff Bezos (Erika Schultz / The Seattle Times)

In his annual letter to shareholders, Amazon CEO Jeff Bezos extolled the virtues of experimentation and failure — and the struggle to keep that mentality as Amazon grows into a giant.

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By 

Ángel González 

Seattle Times business reporter

For creating a company that’s been so successful, Amazon.com CEO Jeff Bezos sure talks a lot about failure.

Or, more precisely, about how being unafraid of repeated failure is key to Amazon’s outsized returns. And how important and challenging it is for Amazon, now that it is a giant, to keep that reckless, swing-for-the-fences mentality.

“One area where I think we are especially distinctive is failure,” said Bezos in his annual letter to shareholders, released Tuesday. “I believe we are the best place in the world to fail (we have plenty of practice!) and failure and invention are inseparable twins.”

Bezos’ comments are akin to a State of the Union address for Amazon investors and staffers. They cap a year in which Amazon’s singular corporate culture has been criticized for what some have called a ruthless approach both to competitors and employees — but also a year in which the company for the first time brought home more than $100 billion in revenue.

That milestone was driven mainly by three home runs scored amid endless rounds of experimentation.

Bezos, 52, calls them “big pillars.”

One is the $99 Prime membership service, which brings in revenue and keeps shoppers within the Amazon ecosystem by offering two-day shipping, video streaming with exclusive series, and other perks.

There’s also the Amazon Marketplace, where the company allows third-party sellers to reach customers through Amazon’s website, taking a cut of the proceeds. Its impact has been big, even beyond Amazon.

According to Bezos, the Marketplace has more than 70,000 third-party vendors with sales exceeding $100,000, and collectively those businesses have created some 600,000 new jobs.

Then there’s Amazon Web Services, the cloud-computing business that drives a big part of Amazon’s profit. Bezos says AWS is reaching $10 billion in sales this year, hitting that milestone even faster than Amazon did.

Bezos wrote that Amazon is still “hard at work on finding a fourth” big pillar.

There have been many failed attempts — some high-profile, such as the Fire Phone, killed last year.

Despite those failures, Amazon’s iterative approach lives on — as evidenced by the way in which it’s testing various methods of getting items to consumers faster and more cheaply, from leasing airplanes to hiring Uber-like contractors to deliver packages.

Bezos says Amazon wants to be “a large company that’s also an invention machine.”

“But I don’t think it’ll be easy,” he added, arguing that many big organizations fall into the trap of pondering too much about small choices. “The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently, diminished invention. We’ll have to figure out how to fight that tendency.”