2005 Entrepreneurship Conference - Taking on the Challenge: Jeffrey Bezos, Amazon

0:00 I want to talk a little bit about how we think about Innovation at amazon.com and give you a couple of examples from the world this is the whiffle ball and the guy his name is David Nelson malany and in 1953 he took a a Cody perfume package and out of frustration because his son had broken a window with a regular baseball and created the whiffle ball his son named it

0:30 this woman is named Betty Nesmith Graham and she is you will know of her accomplishment in just a moment if you don't recognize her name but she was an executive assistant in the time when typewriters transitioned to film cartridges from Ink ribbons and and she was very annoyed she wasn't an espe she was a great executive assistant but she was a rather poor typist and she

1:02 was annoyed by her inability to erase her mistakes with the film cartridges so she invented Liquid Paper which after let's see by n she did this in 1956 and in 1975 she sold Liquid Paper to the Gillette Corporation for $ 47.5 million so she did pretty well with her Innovation and by the way it was just White paint so

1:35 it's there was no very very clever person because there was no you know special chemistry involved here this this was not a high-tech solution and but extraordinary observation of a problem and a solution now so sometimes people see the problem and the problem is really annoying them and then they invent a solution sometimes you can work this

2:07 from the backwards Direction and and in fact in high-tech I think a lot of the Innovation sometimes comes from this direction you see a new technology or there's something out there some new understanding in the world and you work backwards from a solution to find the appropriate problem carbon dating is a little bit like this so you know they'd always wanted this solution to be able to date things but until they really understood radioactive decay that wasn't possible to come up with

2:35 that solution so some new understanding some New Concept enters the world and that there are a lot of things like that in high-tech another critical ingredient for anybody who would be Innovative is persistence and there are many examples of people being persistent in the world in order to make something work this is this is one of my favorites WD40 was this a small team a small company of three people got a government

3:07 contract to develop a u some kind of coding that they could put on the skin of Atlas missiles while they sat in their silos to keep them from rusting and they they worked on this for a long time to find this right compound that would do this job and and finally did it now it turned out that the Atlas missile Market was a fairly small one so the the company wasn't

3:41 really able to make much progress now what is WD40 stand for it's it stands for water displacement 40th attempt and that that's the name right out of the lab book when they did all this work to invent WD40 so when they properly recognized the size of the Atlas missile Market they started to think about a different business plan and the company was called the Rocket Chemical Corporation and it was their only

4:12 chemical and it was their only product and so about 10 years later they renamed the company the WD40 company and you know the rest is is history one of the most pernicious obstacles to invention is learned helplessness so people get the problems that you encounter if you encounter them for a long enough duration humans and actually biology in general but humans in particular are so remarkably adaptive

4:43 that we pretty soon see right through the problems we don't even notice them and so great inventors and people who they're very good at you know ordinary things bother them you know they wake up every morning and take a shower and they think this shower is terrible you know and then and but if you but it's very difficult to do that to kind of push through this learned helplessness you get used to something here's an example this woman is named

5:09 Mary Anderson and Mary invented the windshield wiper let me get Mary's paper out here oh well I know the story well enough but Mary was this was around 1913 and cars didn't have windshield wipers in fact when it rained people would pull off to the side of the road and they would take a rag and clean the windshield off and they'd drive another Mile and and repeat this process and

5:41 they thought nothing of this and Mary you know looked at this and she said that it's ridiculous and that there must be a better solution than stopping every so often and cleaning off your windshield with a rag and so she invented the windshield wiper and she was roundly criticized that this was a ridiculous thing and people had all sorts of reasons why it wouldn't work primarily that it would be a huge distraction for drivers to have this

6:06 thing going back and forth in front of them and but she persisted and of and and this happened very quickly within 10 years of her invention of the windshield wiper they were standard equipment on all cars so it was one of these things that you know it actually even though people poo pooed it once they tried it they're like you know stopping not having to stop every Mile with a rag is actually a pretty good idea and so Mary definitely got the

6:33 last laugh and this is one of my favorite inventions and a fantastic example of learned helplessness do you know toilet paper was invented and people see the Year this in the mid 1800s guy named Joseph GTI 1857 invented toilet paper this is the first toilet paper it's hard to read but it says many people have wooed their own destruction physical and mental by neglecting to pay attention to ordinary

7:08 matters rarely in an advertisement does one find such a profound statement and so but this is one of those things people didn't know they needed toilet paper until Joseph gedi invented it and then very shortly thereafter they began to realize they it didn't know how they lived without it and it's certainly difficult to consider going back now let me talk about let me

7:41 make one very important disclaimer right up front that amazon.com does not claim any inventions nearly as important as toilet paper this is this is clear but we have been working hard on Innovation and we've done a bunch of different stuff and I want to I want to and we have been for the whole nine and a half years of our of our history and I want to talk a little bit about that so first of all it's sometimes

8:05 useful to take a little time travel trip and move backwards this is what amazon.com looked like in July of 1995 I think this is actually a screenshot from August and and it you know it's changed a lot since then this is by the way I wrote all of this HTML myself no really please hold your applause there's no need you're you're embarrassing me and th this notice some of the

8:38 very obvious problems that this has for example there's no search box on this page there the search box is a click away you have to click on I think you you know one million titles will take you there or search amazon.com's million tile catalog so this is what the website looks like today and we invest about $250 million in the last year about $2 million a year for several years now 250

9:09 million the last year on technology and content development and so the website should be better these are significant sums of money the company has generated over the last three years $950 million in free cash flow in the context of of investing $650 million and technology in that same period of time so we've we've we've you know we've gotten smarter about a few things the search box is now you don't have to click it's not one click away it's right

9:40 there and there there a bunch of other things going on here but but the point is that the the you lose track in the moment of how much Innovation there is over a nine-year period one of the things that is very important at Amazon that we're constantly trying to do is reject this either or thinking that really is at the heart one of the big impediments to Innovation let me give you a simple example which is in customer

10:12 service what the what we want to do is make the service better so that we can have the acsi rating that you're talking about of 88 which we are very very proud of and because that's a very they they have a panel of like 60,000 customers that they pull so it's a very statistically significant kind of result and something that we we do you know it's it's a metric that people have worked very hard not specifically

10:40 on that metric but on the things that lead to it so it's a great for us it's something that we you know are very proud of this we get a lot of customer contacts and one of the things that we would like to do is minimize customer contacts and in order to save money so we can offer people lower prices but still offer great customer service and so how do you solve that problem well you do it a couple ways one is you

11:07 eliminate defects and eliminate root causes of defects because if customers are contacting you they probably didn't want to I think actually the number four reason we get contacted is to say thank you and so that's kind of nice we don't need to eliminate those contacts but most of the contacts that we get are not to say thank you they you know sometimes come in all capital letters they you know and so if you can eliminate the defects you're

11:37 going to save money because you're not going to have to handle the customer contact at all and you're going to improve the customer experience so there's no tradeoff in reducing defects and the more the closer you reduce defects to the root to the root cause the the more that's going to be true you're going to both improve the experience and save money no tradeoff but the second thing that we did is build customer self-service and this is our you know

12:04 this is the page where you go to to do customer self-service and we let people cancel their own orders we let people U you consolidate orders and do all sorts of things and change their shipping address and so on and so on and check on the status and and when is my thing going to arrive etc etc and that has really empowered customers and what you find is when other in other Industries like the hotel industry

12:31 Embassy Suites often wins the best customer service award in in hotels when they pull heavy Hotel users and of course they the the secret to Embassy Suites winning that is that they don't actually have any service it's all self-service and so people when they're serving themselves think the service is terrific and so you have the buffet out and if the buffet is out and the food is free so you just take the food and you leave there's just not much

13:01 that can go wrong and and and that that really helps so that's something that that we've worked hard on and it's an example of rejecting either or thinking and we have been able to reduce contacts over the last seven or eight years by 85% which is a huge reduction and that that level of that driving down contacts per unit continues the other thing you have to do if you're going to innovate and that we try try to do at amazon.com is

13:30 maximize the rate of experimentation so and if you're going to do that you have to make sure that your cost of doing experiments is low if your cost of doing experiments is high then you're only going to get to do that the company is only going to do a few experiments per year and if you're doing a few experiments per year the the you're going to have to do some kind of global prioritization to see which kind of experiments you can do

13:59 and that's going to have a couple of downsides one is you're not going to do much experimentation but the second is that the best most inventive people in your organization are going to become frustrated because they're going to have to get ultimately if we if Amazon could only do three experiments a year then if you wanted to do an experiment you'd have to get my permission to do it and I'm not scalable so so that is going to

14:23 put a huge impediment in the way of invention and if you want on the other hand if you want to make experimentation that everybody can do it and it doesn't take you know sort of you know the the institutional apparatus doesn't have to approve every experiment then you need to make the cost of experimentation low if you're still going to make it a reasonable thing to do and and and not irresponsible you can't just let if the

14:48 cost of experimentation is high you can't just say yeah this is going to cost hundred million doll to do this experiment but go for it so getting that cost low is is key and one one of the things that we've done over the years is put a lot of effort into making sure that our infrastructure and the framework that operates our website and other parts of our business really make it easy for people to do experiments in

15:10 a self-service way without coordination with the institutional apparatus one of the great things about operating on the web is that you have U you have so much the ability to collect data and all many things that in the physical world because the cost of experiment would be high you have to use judgment to decide those things you have to use intuition to judge those things because you can't do the experiment at realistic cost so you end up having to

15:37 argue over it and on the web you can often just know the answer so you know a simple example this was a control this page and you'll see the difference here a new line is going to pop up want it delivered tomorrow May 5th order in the next two hours and 53 minutes and choose one day shipping at checkout so this is an experiment we did about a year ago and 50% of the customers saw this way

15:59 and 50% of the customers saw it this way and you can just literally measure the impact that this has on all sorts of important metrics you know first and foremost sales so you can see just telling people that they should order in the next two hours and 53 minutes increase sales or decrease sales and and and and and and by how much and is this worth doing and is it worth pushing harder on and so on and so on so being

16:26 able to do that kind of experiment and not having it be a big deal is is really wonderful here's another example an even simpler example this is you know customers who bought this also bought something that we're well known for and this has been improved over the years dramatically here's a small example this was tested too Al it's not the one I'm showing here is we added series to it so that you're you know you're here's an actual individual DVD

16:53 but here's series from different things that was a successful experiment so it stayed one the experiments that we ran with this customers who bought this also bought was it it seemed very intuitive that if this works well then adding images might make it work even better so we added images turned out that it didn't make it work better it made it work worse and even though that's a little counterintuitive I mean to to me I can see it both ways but

17:21 that's the that's kind of the whole point here you know you you have your a prior guesses but then you actually validate them with real data here's another try at images since the this the when this one didn't work people say maybe it's too clunky maybe it's pushing things down below the fold so this one oops this one was tried but it also didn't work as well so we stuck with this one the other thing we try to do at

17:52 amazon.com is have a customer Centric Obsession instead of a competitor obsessed point of view and there are by the way it's not clear in all companies at all times that this is the right strategy competitor focus and in fact close following strategies can be very effective in certain business environments and there's certainly nothing wrong with with the with with with that but in our industry and and given the DNA that we have inside the company the kind of

18:22 people that we've attracted over time are people who like to invent people who like to Pioneer so you know we'd have we have the wrong culture to be close followers so there's part of this that you know we are what we are and we and and and and and we kind of have to stick with that and make the best of that I I actually think in our space this is also very handy because the rate

18:44 of change in the online world is so rapid that close following doesn't work as well as it might in a more stable industry that that changes more slowly over time but one of the things about these Fast Change in Industries is I I often get asked by by audiences if I q& period U you know what's going to change in five to 10 years one of the questions that I rarely get asked and I think is at least as important of a

19:15 question and maybe in some ways an even more important question is what is not going to change over the next five to 10 years and that's another reason why customer Centric strategies can be so powerful because comp competitor focused strategies have to change a lot the competitive set changes so rapidly over the last 10 years our competitive set has changed and the technologies have changed so many things change but the basic drivers of our business the core

19:42 things that customers want do not change you know we know that what customers want are selection low prices and convenience and I guarantee you that 10 years from now they're still going to want selection low prices and convenience we are not going to wake up 10 years from now and have customers say this is all well and good I love this thing amazon.com but could you make it a little less convenient it's just not going to happen and so so when

20:12 you work on low prices you have to figure out inventive ways to do that and there are inventions at different at different granularities there are the a lot of the most important invention happens with the finest granularities so incremental improvements in unit productivity are critical so can you can you in in in our fulfillment centers you know which are about seven we have about seven million square feet of fulfillment centers each you know the each one is

20:38 about 700,000 square feet these are huge buildings you know kind of corner to corner they're half a mile on a side and so how do you pick you can order any two items we have a million more than a million items in stock which to put that in context you know a Barnes & Noble Superstore has about 125,000 items a Costco or Sam's Club has about 4,000 items u a big big box electronics store has about 7,000 items so over a

21:08 million inst stock items is a lot of items and you can order any two of those items and before 6:30 p.m. eastern time if you if you can if you order them before 6:30 p.m. eastern time we will ship them that same night so and those two items might be on opposite sides of this big fulfillment center so we have have to there's a tremendous amount of work and very sophisticated computer algorithms that go into optimizing the

21:35 pick paths so that we can pick those items and get them into the same box at low cost it's easy to do that if you're not worried about optimizing cost it's very difficult to do that if you are concerned about optimizing cost so those kinds of incremental improvements taking those pick path algorithms and making them modestly better and doing that every day and and the key to doing that kind of invention is to make sure that

21:59 you have small separate empowered teams that aren't subject to a bunch of dependencies in the rest of the organization they know what they're trying to achieve and they go about making those incremental improvements day in day out month in month out they have to be able to answer the question which it's amazing you'll find that this is very common in in in the business world that people often cannot answer the question how do you know whether

22:24 you're getting better or not at this particular thing and the picking the granularity of where you ask that question is the trick I mean it's very easy you know on the distant outputs if you look at you know something like free cash flow or revenues those kinds of things people know whether they're getting better but those things are not directly actionable you can't you know assign some team and say look go drive a free cash flow it's just too easy

22:49 I mean it's it's too it's easy to command them to do it but they won't be able to do it I mean it's a useless kind of thing to ask for and then on bigger granularities so one of the things that we also observe is that used products can have much more value proposition for customers so we invite thirdparty sellers to compete against us on our Prime real estate which is our detail Pages that's an invention that

23:15 also not only adds a lower price but selection too so you go through all these things selection one of the things that we've done recently to increase breett the selection at Amazon is again invite these third party sellers in this works in all the categories where we operate and in some of the newer categories like apparel it's a huge part of the strategy convenience the most recent thing that we've done to increase convenience is for our heavy customers

23:44 which is something called Amazon Prime and Amazon Prime is a we only launched this a week ago and it is a $79 flat fee membership you pay $79 9 a year and you get two day shipping for free and that is a u the idea here is to take what might be an Indulgence for people getting Next Day Air shipment or second

24:14 day air Next Day Air Next Day Air is just $3.99 an item once you're remember and take some they might perceive as an Indulgence transform it into a fixed cost and then once people can view as a fixed cost well why not have two-day shipping on my items and so for a certain segment of customers this is a very attractive proposition and it's for it's specifically for that segment of customers where convenience is most valued so you know there's another

24:46 segment of customers who are who are completely happy to wait you know eight business days for the products they'll use our super saers shipping offer which is free all they have to do is meet a $25 order hurdle so they're perfectly willing to save a few things in their shopping cart until they can meet that order hurdle they sort of manage that it creates a little bit of mental overhead for them but they're they're okay with

25:11 that and so that becomes a great value proposition for them and there's another set of customers who think about this completely differently they hate the fact that there's this $25 order hurdle they want to be able to buy you know one thing when they see it get it done have it come they want it to come fast they don't want to have to think about it they don't want to have to try and optimize shipping costs and in fact one

25:33 of the things that happens for that kind of customer too is they create there's a kind of cognitive dissonance or guilt that gets set up in their head you know it they kind of they since they can get the shipping for free they feel like they should be getting the shipping for free and so even though you know maybe for them that's not actually a rational economic consideration this is another convenience oriented feature that's been on the

26:03 website for a couple of years now it's instant order update and this reminds you that you've already bought something and we get feedback from customers all the time this is something that we measured tested very very carefully and it reduces sales there's just no question about it that in the short term it's statistically significant way reduces sales and we so we overruled that with judgment and said even though we can't do long duration longitudinal tests in time like like a drug company

26:33 would do to test for toxicity and that kind of thing where they do like a 10year test that those tests are just so expensive to do we're g to make a we're g to make a intuitive bet that having this thing that reminds you that you already bought something will will actually will be so beloved by customers that they'll it'll be one of the reasons they like amazon.com and so and and in fact in fact we do get tremendous

26:59 anecdotal response back from customers saying they love this feature little you know thank you notes saying I was about to buy the same music CD that I bought a year ago and this is very real I don't know you know some people are more organized and have better memories than others I definitely fall prey to this in fact just yesterday I was reading a Blog that mentioned a a Walt Disney DVD on the back in I the late 50s or early 60s

27:26 I can't remember where Walt Disney was very interested in space and he hired wner Von braa and did a whole series of television specials about the exploration of space starring Warner Von Bron and these things have been collected on a DVD and I read about this on this blog and I thought my God this is so cool I have to buy this and so I went to amazon.com actually they were an associate and so they had a link handy

27:53 for me and I clicked right through to the detail page and there was my instant order update I had bought a year ago and I've never watched it I bought it and I must have like you know put it somewhere and so now I'm going to go search for it this is a real one too Drew who's sitting down here told me that he almost bought these earrings for his wife a second time and is that a true

28:22 story and so I think in that case we that was really a valuable service another convenience oriented feature is giving people highquality product information right on the detail page and one of the great things about this is an exam this is a piece of the detail page for the segue and it explains in great detail how the segue works and one of the great things about the online model that

28:55 that we use is that a lot of of our best customer experience is a fixed cost so if you have enough scale if you have you know in in so in the last 12 months we have these U you know 47 million customers who have purchased from amazon.com and if you have 47 million customers you get to advertise that the cost of all this content across that very large customer base and so there's a sense in which you can have your cake

29:26 and eat it too if you look in the physical IAL world at physical world retail stores the kind of high touch customer experience stores cannot have the lowest costs and the reason for that is that those stores the things that generate hight touch customer experience in the physical world are variable cost things so when you double your sales you double those costs our model when you look at this kind of content or any of the software features that we provide at

29:56 instant order update it's you know somebody has to develop that and maintain it and make it work but it would cost us the same to do that development if we had a million customers as it does if we have 47 million customers so that that that that that aspect of our model that we get to transform customer experience into a fixed cost instead of a variable cost is really a key it's underappreciated aspect of of what we do

30:24 now this is also for any company that wants to be Innovative absolutely critical thing to do which is to not be distracted when people tell you that this is stupid and isn't going to work and people are well-meaning and entrepreneurs and and and and I've used that term the most Broadway you know people who are building people who are inventing H have to have this combination of stubbornness and flexibility and the trick of course

30:55 is knowing which to use when but but what you cannot do is be distracted by the outside world you have to stay heads down focused on customers and not let external events distract you and Amazon is a very good case of this this is December of 1998 but and actually this is a phrase that and I think Rob is in the audience but this is not you rob you didn't write this

31:29 but this is this is a case of 1997 Forester research coined this term and and Barnes & Noble had just launched their online store and I thought that Forester had a very good point they were saying you know Amazon is this two-year-old company they've had this nice two-year run but you know s now the the big the big gorilla has come to town and at the time

32:02 we had annual revenues of $60 million a year we had 125 employees and Barnes & Noble had you know 30,000 employees and at that time I don't know3 billion dollar a year in sales and so it didn't seem like an even fight and and they coined this term amazon. toast and and it was widely picked up and you know the and it did bother the the there's one one feedback loop here that has to be managed which

32:30 is you have to make sure that the that you have some All Hands meetings and that you communicate to employees what they you know should they be worried about this or shouldn't they be worried about this and in our case I thought this was a very simple situation because the I didn't think there was anything we could do about what our competitors were going to do and so you know we did have the All Hands meeting and I asked

32:51 all of our 125 employees to be terrified and to wake up with their sheets drenched in sweat every morning and I did I carefully specified sweat and and but that they should be afraid not of our competitors but they should be afraid of our customers because our customers are the only ones who are going to ever give us money and so that helps it actually helps have that kind of customer focus if you're because

33:21 it helps you stay heads down you don't get worried about your comp your competitors are going to do what your competitors are going to do you can watch you can learn from them but you can't let them set your strategy you have to do what you're going to do and you also can't let the media set your strategy and and and and but you do see that happen you can't let Wall Street set your strategy either this is a year after amazon.to

33:46 this is 19 May of 1999 and this I I've always been amused by this but I'm I'm comt being misunderstood but this I have to tell you my mom really hated this this really bothered her she she was so pissed off about this this just that just didn't like that caricature it really bothered her so but anyway you just have to ignore

34:19 those outside influences you can listen and kind of try to see if there's any any any kernels of truth that you can take and adapt there's no reason to have a Siege mentality but that's those are the kind of reactions you see you either see that people enter this sort of Siege mentality with respect to external factors or they or they're too responsive to these external factors and the reality is you have to take it with a grain of salt and you

34:47 know reexamine your strategy make sure you really believe in it it's the right one and stick to it that's the only way you can invent because invention always leads you down past s that people are going to think are weird it's sort of obvious this is the this is this is that acsi score and it's actually four years running that we've had this highest score so one of the things I mentioned is with the carbon dating and what

35:18 happens in the online is you in the well in Tech in general is you get you get so much change and you have to sometimes look at the change and see what you can invent so one of these things is mors law which is remarkable and its variance for bandwidth and and and in in storage but if you look at disc space costs as as an example disc space is 30 times cheaper today than it was 5 years ago and so you know that's

35:46 just what happens when things get twice as cheap every year for five years and humans aren't good at thinking in those kind of you know exponential terms but this is really a big deal and if if you if you were to picture a physical store it creates that when things change that rapidly and actually creates a problem you have to figure out what are we going to do with all that disc space because it's not you know you can't just

36:10 pocket the cost savings you don't get enough value out of that you have to say well if we can use 30 terabytes of dis and that's a reasonable thing to to to spend money on now what could you do that would actually benefit customers that use this 30 terabytes of disk and the one of the things that we did was search inside the book which uses about 30 terabytes of disk because we keep the full images of all the pages

36:36 and we now have over 200,000 different books that are completely searchable and you can view the actual images of the books and and and that it kind of the good news about that is it's very beneficial to customers and it soaks up a lot of this now almost free dis space that you can buy out in the world another example example is A9 let me just go here which just

37:07 launched again about a week ago the an9 and Yellow Pages we do a search on optical oh this regular mouse works too and it's a lot easier to use and one of the Innovative things that the A9 team did for their Yellow Pages is take 20 million photos of over a million different businesses in 10 different cities and they did that in a very cool way I mean this in some you

37:39 know here if you go down the list here this is Optical in Seattle but you know the map changes the Little Numbers highlight as you go over which I think is a nice user interface touch but if I go down to optical illusions Inc click on that takes you to a detail page for optical illusion Inc and you can kind of stroll along the street

38:12 here so here is you know and you can zoom in on this picture and actually this is kind of a cool picture because this is you can see in the reflection of this window that's the vehicle that we took the picture from and I also I like the way this guy is in motion it's just kind of a and then you can't barely see her but there's a woman behind him you can just sort of see her see her

38:45 shoes we have's only been up a week and but you know but if you take 20 million 20 million photographs of a million different businesses we've already gotten lots of contacts from people people you know who are who found themselves in these pictures and if they request to be removed we remove them but but this is a a this is a pretty cool use of technology and again it's looking at what's changed in the world because one

39:16 of the most interesting things about this is is how they did it you can keep going by the way I can click here and it'll take me you know down the next street I can just keep walking down this street okay so how did they do this should I go to the back to the PowerPoint all right here's the truck there there there more than one of these that is a a

39:49 camera a digital camera mounted on the top of the truck and when they first started doing it their first tests were done with with not with SUVs but with regular cars and and the the camera was not in any kind of enclosure but they attracted too much attention and people would like smile for the camera or or do more profane things for the camera so they solved that problem by getting a taller vehicle

40:21 and you know putting the camera in an enclosure so it just sort of looks like some luggage on the roof and people don't notice it and the the so let's see here's one of the you guys if you've been a Time Square you may have seen this guy he's out there all the time I think he's called the Naked Cowboy he's been doing this for years and years and years he was there he's been there at least for eight years that maybe

40:45 longer I don't know and I think tji Fridays has hired him now as a sort of mascot but anyway they captured the Naked Cowboy and Time Square let me is this when I go to the video all right let me see we going to do this the hard way because it's not working the easy way all right watch this I should actually let me pause this for a sec

41:18 this let me give you a little setup so this is some some of the actual footage from this camera this is a just to give you the the this is a a camera that is connected to a laptop that has a GPS in it and so the Jeep the car just drives around and the driver doesn't have to do anything except make sure all the equipment is running properly and it just takes you know a bunch of frames

41:45 per second and and and and and and the car knows where it is at all times so this now we we one of the cities that we did we did over 10 cities but one of them was Washington DC and and and the driver whose name is Josh in this case had a fairly interesting experience because the camera broke and needed some adjustments it just got jiggled or something and needed to be fixed and remounted so which happens

42:18 occasionally so he didn't think anything of it he stopped the car he got out and he started to fix the camera but unfortunately for Josh he happened to stop right in front of the state department and and unfortunately just to make matters a little more complicated it was the day before the election and so Washington was at its highest state of alert and fortunately this entire incident was

42:50 captured on video and it's kind of fun to watch so there's Josh he's getting out of the car gonna work on the camera a little but he sees somebody's coming he's reaching for his cell phone now trying to call amazon.com legal now now there are two of them they're very curious why Josh is photographing the state department here's the third one

43:29 here's here's the here's the fourth one and if you can catch glimpses of Josh's face you can see that he is a little stressed by the way to at at a certain point here you can see the woman in the red hair who I think is the one sort of in charge she's trying to calm Josh down and she says something to him like it's not like we're accusing you of having a bomb or anything which didn't

43:53 really work oh yeah here's the the great they take a picture of Josh and the and they they actually were were they they actually were very friendly to Josh and he explained the whole thing and they made some phone calls and confirmed his strange but true story about what was going on and all the whole incident only took like 45

44:24 minutes and and and and Josh was sent on his way to photograph the rest of Washington DC let's go back okay but all of those things oh okay all those things are if you look at what all the problems that had to be solved to do something like get that you know the GPS

44:54 integrated with the digital camera and get the those in trucks and then solve all these little Point problems that people were noticing the camera and so on that's what innovating is all about it really is those kinds of problems and the great thing about this is at amazon.com is I do very little of this so you know we have a culture where people in small teams can go off and do these relatively lowcost experiments and try to build neat things if you want

45:23 to have an Innovative company the single most important thing even ahead of minimizing the cost of experimentation is to make sure that you're selecting the people correctly on the way in and so you need to hire people who like to build who like to invent and you need to make sure that they like to do that at all granularities you know sometimes you come across these people who are only interested in inventing at the at the grandest sort of whiteboard

45:50 level and they actually can't make progress in the real world you know they're unwilling to figure out how to mount the camera on top of the truck and mounting the camera on top of the truck turns out to be incredibly important this is I've mostly included this slide to demonstrate my true pedigree as a geek this is me in fourth grade and all most of you in this room are far too young to recognize that device that I'm sitting

46:19 in front of but I was I'm I'm one of the only people I know who had access to a my age who had access to a computer computer in fourth grade I went the school that I went to in in Houston got this a company donated this teletype and also donated some excess Mainframe time sharing time that they had and so we got this thing one day and none of the teachers knew how to use it

46:44 and nobody knew how to use it but had manuals and that that phone receiver it's called an acoustic modem and you actually put the it's a 300 bod modem and and the all the programs were stored on paper tape which you punch holes in and we me and about three other kids started staying after school and and learned how to program this this Mainframe computer and store our programs and our very primitive programs

47:16 on paper tape and that went on for several months until we discovered that the Mainframe was pre-programmed to play Star Trek and pretty much that's all we did with the computer after that we would stay after school the teachers were like boy these kids just love computers it was this really cool Star Trek game where you know it's all done on this this teletype on paper and it would print a little I think

47:48 it was a 9 by9 grid and somewhere in that N9 by9 grid like you know an asterisk would be a star and a plus sign would be a klling on ship and you had to do it was a simulation game and you had to like you know you had limited resources like you had only so much power and you had to decide how to allocate that power between Shields and engines and phasers and it was actually unbelievably fun and

48:12 so but you've gota this is you got to find people who are passionate about building this is our first employment ad at amazon.com we posted this on uset and and we asked for exactly what we wanted and and you know the the technology computer science people and and business people who are interested in technology have always been most important so you must have experience designing and building large and complex yet maintainable systems and

48:43 you should be able to do so in about onethird of the time that most competent people think possible and by the way as a total aside you'll see that the name of the company at the time was Kadabra that was the first name of the company and Kadabra was a terrible name because while driving across the country as my wife driving I called an attorney in Seattle and asked the attorney to if he could incorporate the company so it

49:14 would already be ready by the time we arrived and he said sure this is no problem by the way this attorney was my friend's divorce attorney so it wasn't this wasn't like Wilson sonini or anything you know this was and and so he said sure you know what do you want the name of the company to be and I you know was all proud of myself for having anticipated that question and I said Kadabra and he said

49:45 kadav and I I thought I knew right then that my name Choice was not going to survive for long I was like no no no no Kadabra like Abracadabra he was like oh okay so he about three months later we changed the name to amazon.com H and that was chosen because it started with the letter a and at that time all of the lists online were alphabetized and it was also the domain

50:17 name was available and it was it worked internationally and it was short and easy to spell so there were a whole bunch of good features of that