Jeff Bezos Exits Stage Right

Jeff Bezos Exits Stage Right

On Tuesday, February 2, 2021, Amazon announced that its founder and CEO Jeff Bezos would resign that second position and assume the role of executive chair sometime during the third quarter of this year. Andy Jassy, currently the head of Amazon Web Services, will take over as CEO at that time.

In a letter to Amazon employees (also released to the public), Bezos explained his decision and its timing. (Don’t worry, I won’t quote it all.)

In the Exec Chair role, I intend to focus my energies and attention on new products and early initiatives. Andy is well known inside the company and has been at Amazon almost as long as I have. He will be an outstanding leader, and he has my full confidence. This journey began some 27 years ago. Amazon was only an idea, and it had no name. The question I was asked most frequently at that time was, “What’s the internet?” Blessedly, I haven’t had to explain that in a long while.
As much as I still tap dance into the office, I’m excited about this transition. Millions of customers depend on us for our services, and more than a million employees depend on us for their livelihoods. Being the CEO of Amazon is a deep responsibility, and it’s consuming. When you have a responsibility like that, it’s hard to put attention on anything else. As Exec Chair I will stay engaged in important Amazon initiatives but also have the time and energy I need to focus on the Day 1 Fund, the Bezos Earth Fund, Blue Origin, The Washington Post, and my other passions. I’ve never had more energy, and this isn’t about retiring. I’m super passionate about the impact I think these organizations can have. Amazon couldn’t be better positioned for the future. We are firing on all cylinders, just as the world needs us to. We have things in the pipeline that will continue to astonish. We serve individuals and enterprises, and we’ve pioneered two complete industries and a whole new class of devices. We are leaders in areas as varied as machine learning and logistics, and if an Amazonian’s idea requires yet another new institutional skill, we’re flexible enough and patient enough to learn it. Keep inventing, and don’t despair when at first the idea looks crazy. Remember to wander. Let curiosity be your compass. It remains Day 1.

This was a surprise. No reporter or news organization seems to have had the story ahead of time. It was folded into a pretty standard (albeit extremely successful) Q4 earnings report and a now quite quaint announcement about a change of design at Amazon’s HQ2 facility in Virginia.

If anything, the worry for years was that Amazon did not seem to have a succession plan in place if something should happen to Bezos where he would have to unexpectedly step down. That succession order became clearer last year, when Jeff Wilke, head of Amazon’s consumer business, announced he would retire in 2021. That left Jassy as not the only candidate but clearly the most likely Amazon executive to succeed Bezos. And it seemed to resolve the open question: was Amazon’s future primarily as the world’s largest retailer (digital or otherwise), or as the world’s leading provider of internet infrastructure? AWS and all of the ways it can be expanded and extended are now pretty clearly at the center of Amazon’s future plans.

Now I have to confess something. I have no knowledge of exactly what Amazon is going to do. But it appears that nobody except possibly Bezos, Jassy, and a few others in the inner circle have quasi-certain knowledge about what happens next. So I will make a prediction: Amazon will continue to be a dominant retail powerhouse. It will sell books and electronics and lawn furniture and t-shirts and everything else, along with digital media, cloud storage, and advanced AI. It will not abandon the hard work of physical infrastructure for the sweet, high-margin lure of the cloud.

There are a few reasons for this. The first one is that it is impossible to do digital retail (and increasingly, brick-and-mortar retail) at Amazon’s scale without having the technological capacity a company like Amazon has. If you spun off or sidelined the retail business, you’d be either kneecapping it or forcing it to buy back the services that the retail side of the business already gets in house. Amazon has a huge advantage in both digital and physical logistics; that’s better than a moat, it’s two moats. It’s a moat surrounded by a ring of fire with a dragon inside. You don’t let that go because a consultant or activist shareholder points out that technically your profit margins could be higher if you only did one or the other. Amazon has never run its business that way under Bezos and it would be incredibly foolish for the company to start doing so now, especially when he’s still in a position to influence precisely those sorts of decisions.

The other reason not to split off physical goods from digital ones, or even retail from infrastructure (which is a separate question) is that it fractures your storefront. Amazon is the retailer of first resort. You go to the same site or app to buy underwear that you do to rent a movie. Digital goods are not special and different and holier or less holy than physical ones. Everything about Amazon’s history teaches that lesson again and again. What is special and different and holy is Amazon’s relationship to its customers and increasingly its partners.

When Netflix thought about spinning off its DVD business to focus on streaming video, the idea quickly foundered at the realization that the same service customers already enjoyed would force them to maintain two accounts on two websites with no easy way to link them. Amazon wouldn’t necessarily have to do that: the company already offers its logins to access many different services on the web, including ones it doesn’t own. But it would still subdivide the customer experience, and Amazon has invested too much in that to start messing with it now. And no shareholder has the muscle to squeeze a company this big like Carl Icahn did to Blockbuster back in the day. This is still Bezos’s show; the company will continue to be organized in the fashion that Bezos helped to design it.

At the same time, however, AWS really is the company’s flagship product now. Maybe the most interesting question, and one I haven’t really seen asked or answered yet, is who will replace Jassy as the new head of AWS, because that will be an incredibly important job.

Now, let’s say something about Jeff Bezos. My friend Christina Warren, who works as a Cloud Advocate at Microsoft but once upon a time was a humble tech reporter, wrote the following on Twitter:

It’s hard to think of another CEO who has founded and grown a company the way Jeff Bezos has over the last 26 years. It’s almost unprecedented levels of success under one CEO. I’m literally struggling to come up with a solid corollary for Bezos’s tenure as CEO at Amazon with anyone else in business. Maybe Watson Sr. at IBM. That’s the only person that comes to mind right now who had such a successful sustained leadership of a megacorp.

My suggestion (which Warren accepted, with the caveat that it was a modern example) was Microsoft’s Bill Gates. And if you look at it, the timing is about right. Gates co-founded Microsoft with Paul Allen in 1975 and led it until 2000, about 25 years to Bezos’s 26. Like Bezos, Gates stayed on as executive chairman, with an added title of chief software architect, transitioning to a part-time role in 2006 to focus on his foundation work and finally exiting as chair in 2014. He only left his board position at Microsoft in 2020 — not even a year ago. So if we follow Gates’s model, Amazon can expect another 20 years of Bezos playing some role at the company, even if it’s increasingly an advisory one to his successor’s successor.

People like Bezos and Gates continue to exert a huge influence over the companies they’ve founded, and their unprecedented wealth permits them to continue to exert a huge influence over the rest of the world. Bezos owns a spaceflight company, a major newspaper, and most of Amazon. He is not going to go away to start an apple butter farm or retire away to Xanadu like Charles Foster Kane. That’s not how this works.

At the same time, it is significant that Bezos is relinquishing control of the day-to-day operations of Amazon, a company with which his name will forever be linked. I pulled my copy of Brad Stone’s book The Everything Store: Jeff Bezos and the Age of Amazon off my bookshelf (really it’s a dresser with Amazon boxes for bookends, but same deal), and the book (after a few quick flips) fell open to page 38 and this story of the company’s early days:

The site went live on July 16, 1995 and became visible to all web users. And as word spread, the small Amazon teams are almost immediately that they had open a strange window onto human behavior. The internet’s early adopters ordered computer manuals, Dilbert comic collections, books on repairing antique musical instruments — and sex guides. (The bestseller on from that first year: How To Set Up And Maintain A World Wide Web Site: The Guide For Information Providers, by Lincoln D. Stein. There were orders from US troops overseas and from an individual in Ohio who wrote to say he lived 50 miles away from the nearest bookstore and that was a godsend. Someone from the European Southern Observatory in Chile ordered a Carl Sagan book, apparently as a test, and after the order was successful, the customer placed a second order for 7000 copies of the same book. Amazon was getting one of the first glimpses of the "long tail" — the large number of esoteric items that appeal to relatively few. Paul Davis once surveyed the assortment of books squirreled away on the shelves in the basement and with a sigh called it "the smallest and most eclectic bookstore in the world.” No one had been hired yet to pack books, so when volumes rose and the company fell behind on shipping, Bezos, Kaphan, and the others would descend to the basement at night to assemble customer orders. The next day, Bezos, MacKenzie, or an employee would drive the boxes to UPS or the post office. The packing work was arduous and often lasted well into the night. Employees assembled orders on the floor, wrapping books in a cohesive cardboard that stuck to itself but not anything else. That summer, Nicholas Lovejoy, a former D.E. Shaw employee who had left the hedge fund to teach high school math in Seattle, joined the company part-time and made the obvious suggestion of adding packing tables to the warehouse. That tidy anecdote quickly made catalog of Jeffisms and was still being repeated 20 years later. “I thought that it was the most brilliant idea I've ever heard in my life,” Bezos said in a speech, finding the story so freshly amusing that he accompanied it with a honking laugh.

That’s the image we have of startup founders: the people who pack the boxes and drive them to the post office themselves. The ones whose spouses front the money that makes the whole enterprise possible (and take their turn driving the boxes too). The people who assemble unlikely casts of characters, one of whom can change the entire direction of the company with an idea as groundbreaking as “we really don’t have to do this on the floor.”

I wonder if Bezos thought of that story when writing (or reading: Bezos likely has people who can at least get a rough draft down for him by now) his letter to employees, with its invocation of machine learning and logistics, spaceflight and plans to fight global warming. If he thought of his now ex-wife MacKenzie, and all of the other people from the company’s beginnings who’ve now moved on to start the next chapters in their lives.

What strikes me most about the story is less the homespun, DIY-ness of the boxes and trucks and more the fact that from its beginnings, as soon as the site encountered customers, Amazon became something strange and unexpected to the people charged with making it. Everything from the customers to the cardboard did not behave as expected. A table was not a revolutionary idea because no one had ever conceived of it before; it was a revolutionary idea because it solved a problem for people consumed with understanding and continuing to feed and grow this bizarre creature that would eventually grow to become something not one of us, from Jeff Bezos to any of his billions of customers, fully understands.

Amazon will continue to grow and evolve in unpredictable ways. Nothing ends; it simply changes. Today, as Bezos writes year after year, is always Day 1. That will continue to be true whether that remains a tradition continued by his successor or a privilege reserved for the founder.