Jeff Bezos, CEO of Amazon, and one of the nation’s most eligible relocation seekers, visited Dallas Friday evening to shed light on his business success, but not where he plans to build his coveted second headquarters.
The George W. Bush Presidential Center and Southern Methodist University co-hosted Bezos’ interview, which lasted 51 minutes inside of SMU’s Moody Coliseum.
“Jeff, welcome to Dallas. I’m excited that you can see what a city that really wants you here looks like. Right, guys?” said Kenneth Hersh, Bush Center CEO, eliciting roaring applause from a packed coliseum. “I left 30 seconds here, just in case there was a little real estate announcement you wanted to make.”
Bezos laughed it off, and never circled back to the topic.
What he did emphasize, however, was a need for entrepreneurs to be daring, fight through discomfort, relish in naysayers’ lack of vision and move away from present paradigms.
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Weathering early struggles
Bezos started Amazon in 1995. Back then, he’d often drive packages to the post office himself.
“I knew the UPS guy so well that he would even let me in five minutes after closing,” Bezos said. “I hoped one day we’d be able to afford a forklift. We were so inefficient with our operations and logistics that … we were packing on the floor, on our hands and knees.
“I said to one of the software engineers, who was packing alongside me, ‘You know what we should do? We should get knee pads.’ He looked at me like I was the dumbest guy he’d ever seen in his life and said, ‘Jeff, we should get packing tables.’ The next day I bought packing tables, and it doubled productivity.”
Bezos peppered the conversation with similar vignettes of early struggles to underline a point of challenging conventional thinking.
He took Amazon public in 1997, issuing stock at $1.50 per share. In 1998, revenue was $600 million, and he lost $125 million, but stock had jumped to $55 a share.
He doubled down. Sales went up three-fold. He lost hundreds of millions more, but stock went up to $76 by December 1999.
The market indicated Amazon — and every other dot.com enterprise — was doing great, even though it was in the red, taking on roughly $2 billion in debt from 1999 to 2001. Despite the debt, Amazon kept doubling sales. During the interview, Bezos indicated that his even-keeled perspective on his company’s success positioned Amazon to survive where other dot.com startups failed.
“I liked our business, and I liked the fundamentals of our business, but I also knew that the stock price was disconnected from what we were doing on a day-to-day basis,” he said. “I told the staff, when the stock is up 30 percent in a month, don’t feel 30 percent smarter. Because when it’s down 30 percent in a month, you’re going to have to feel 30 percent dumber, and it’s not going to feel as good.”
Laying that mental ground work was helpful, because by 2000 Amazon’s stock went down to $6 per share. On a split-adjusted basis, it was below $1 per share.
He wasn’t disheartened. Bezos said he kept close tabs on Amazon’s internal metrics, such as the number of customers, the company’s fixed costs and positive contribution margin.
“I just knew it was a fixed-cost business, and as soon as we reached a sufficient scale, we would have a good business,” Bezos said.
Tenants of success
It’s well documented that he was right. Amazon’s stock on Friday closed at $1,527.49 per share, and this year Bezos’ net worth is around $119 billion.
During his sit-down interview on stage, he dovetailed Amazon’s triumph-over-adversity talking points with his own tenants for business success.
- Find someone in your life to support your cause, which he dubbed “winning the life lottery.” He learned how to be resourceful from his grandfather, who was a Texas farmer with a ranch between San Antonio and Houston.
- Keep business simple. Stick to one thing. Amazon’s business has changed, but the cultural thread still revolves around having a customer obsession, an eagerness to invent, long-term thinking and operational excellence.
- Maintain a small company spirit. He still receives emails from customers, though he no longer answers as many of them personally. He has a ‘two-pizza team’ rule, meaning that teams should be no larger than can be fed by two pizzas. Also, no PowerPoints are allowed in Amazon, to which the Dallas crowd started cheering.
- Shun the critics.“When we are criticized, we first look in the mirror and ask, were we wrong? If so, then we change. If the critic is wrong, then we don’t change, no matter how hard the pressure is.”