Plus a quick roundup of the week's Amazon news
Andy Jassy's first annual letter as Amazon CEO appeared last week, along with a related interview he did on CNBC's Squawk Box. I was sad to see this exchange (there's a little more but this is the core of it) turn into a fleet of breathless stories about Amazon maybe selling NFTs:
SORKIN: Could you see yourself selling NFTs?
JASSY: Yeah, I think it’s possible down the road.
All he did was not rule it out! There's a lot more that's interesting in this letter and interview than that!
For example, I may be an infrastructure and logistics dork, but I also love a good compare-and-contrast with meaty, meaty facts. And this meditation on how Amazon's fulfillment center (like the rest of Amazon) is always iterating is a good one:
For perspective, in 2004, we had seven fulfillment centers in the U.S. and four in other parts of the world, and we hadn’t yet added delivery stations, which connect our fulfillment and sortation centers to the last-mile delivery vans you see driving around your neighborhood. Fast forward to the end of 2021, we had 253 fulfillment centers, 110 sortation centers, and 467 delivery stations in North America, with an additional 157 fulfillment centers, 58 sortation centers, and 588 delivery stations across the globe. Our delivery network grew to more than 260,000 drivers worldwide, and our Amazon Air cargo fleet has more than 100 aircraft. This has represented a capital investment of over $100 billion and countless iterations and small process improvements by over a million Amazonians in the last decade and a half.
The point of the argument is that Amazon has built an unusually resilient structure in all its divisions that makes it particularly resistant to being washed away by the COVID-19 pandemic or whatever comes next. A lot of big companies that may have had a "good pandemic" in 2020 or even 2021 are not prepared for what comes next in our weird post-vaccination three-legged race of ebbing and flowing waves, reluctant openings and emergency closures. They're not prepared for 2024 or every year after. Amazon, I think, is not exactly prepared for what's to come, but their structures will adapt to it better than just about anybody else's.
What Amazon is not especially ready for is a new labor movement coming out of its warehouses and delivery centers that will likely change how its logistics operations work, and maybe every part of the company too. Jassy is trying to get ahead of perceptions that it's an unusually antagonistic or dangerous employer by touting Amazon's effort to improve worker pay and safety, arguing that Amazon's workplace injury rate is near average while its benefits lead the field.
The trouble with that account is that it doesn't account for Amazon's sheer size, and how that distorts thinks like averages. Katherine Long at Business Insider published a fact-check showing that Amazon's worker injury rate is even higher than Jassy admits is unacceptable, noting that Jassy is using 2020 numbers (Amazon's 2021 injury figures are 15% worse), excludes its last-mile delivery drivers from its pool of workers surveyed, and that (Jupiter-like), Amazon's sheer number of workers and injuries drive the whole field's averages up. Jassy is correct that worker injuries are a problem Amazon hasn't yet solved, but muddies the waters to try to make his company's efforts under his leadership look better than they've really been.
Some of the other notable facts from Jassy's letter are less significant, but still interesting. For example, one of the Amazon strategies he outlines for good problem-solving iteration is a "minimum lovable product":
Define a Minimum Loveable Product (MLP), and Be Willing to Iterate Fast
At Amazon, this concept used to be called a Minimum Remarkable Product, and was defined in more strict opposition to a minimum viable product: an MRP wasn't just an MVP plus the fact that people love it:
There's the concept of the MVP or Minimum Viable Product. It's a bad word at Amazon. If anyone says "We have an MVP we want to show you," it's frowned upon. We can't ship something that's just viable anymore because the landscape is so competitive.
We say MRP or "Minimum Remarkable Product." It has to be memorable. It has to be lovable. Making it easy is good, but those are the table stakes now. Now it's about making this memorable.
So "lovable" was already part of the language, but at some point it outright replaced "remarkable." I don't think either concept was invented at Amazon ("minimum lovable product" as a counter-concept to MVP goes back a few years before Amazon started using it).
(I also feel like I have a vague memory of reading about when this switch happened and even the product that drove that decision? But Google is no help to me now. If you know, please let me know, because it's been driving me crazy.)
Anyways, MLP is a powerful idea, Amazon uses it, and Amazon changed their language to make even its acronym for lovable products more lovable. All this is significant; it all trickles down to other companies and smaller startups, and helps define a set of practices across the industry and across industries. It is delightful to watch language in action.
If there's a big idea in action in the shareholder letter, I think it's this:
Speed is disproportionally important to every business at every stage of its evolution. Those that move slower than their competitive peers fall away over time.
This is a very Amazon idea, and more generally a very tech startup idea, but it's also a very Jassy-at-Amazon idea, and the rest of the letter fleshes it out. It's all about how you optimize for speed, how you build a company that prioritizes for it, and what the consequences of that decision have to be.
One of the ironies is that faster companies have to think more long-term than slower ones, and have to hold onto big ideas (heck, even Amazon's phone was a big idea) longer than companies with a slower initial speed do:
We’re sometimes criticized at Amazon for not shutting much down. It’s true that we have a longer tolerance for our investments than most companies. But, we know that transformational invention takes multiple years, and if you’re making big bets that you believe could substantially change customer experience (and your company), you have to be in it for the long-haul or you’ll give up too quickly.
So it's not upending the whole company every quarter because something doesn't work. It's not (or shouldn't be) "breaking things." It's moving to the market fast and repeatedly iterating on something that customers will love. I think this is actually a remarkably rich and balanced strategy for product and services development, and it's good to see it spelled out in a document this prominent.
More Amazon News
- A judge ruled (in a case led by the NLRB) that Gerald Bryson, a worker at Amazon's JFK8 warehouse in Staten Island, NY, was unlawfully fired for protesting that the warehouse should be shut down in the early days of COVID-19 (April 2020).
- Amazon announces its Q1 2022 earnings next week (April 28); the Motley Fool argues that Amazon could be prepping for a big loss (in which case, Jassy's letter would be setting the stage for a preemptive apologia).
- Amazon is reportedly working on a new AR/VR product that is referred to as "magical," "useful," and "new-to-world." Some of the job listings for the project also suggest it is related to Amazon's other smart home work. Vague, but intriguing!
That's all we have for today. Please come back and read more again next time, and spread the word! (Please remember we're now at Revue, not Substack. I'm still getting new subscribers at Substack, and it's a pain to keep importing everyone over here. There are worse problems to have, I'm sure.)