[part 2] lol

because we have the low cost we have not having retail real estate and because also the efficiencies the the personnel efficiencies are very high of doing business this way we generate for example more than three hundred thousand dollars a year in revenue per operating employee today even though we're still inefficient in honing our techniques compared to physical bookstores that generate about ninety five thousand dollars a year in operating revenue per employee now because of that we can afford to charge lower prices and basically what ends up happening is we offer best seller level discounts but instead of on the 65 New York Times best sellers on four hundred thousand bestsellers we change our website every day and the reason we do that is to encourage people to come back and we're happy always when people come to our website even if they don't buy anything because you know occasionally they will so one of the interesting things about the book space and every business environment is different and every industry is different is that people don't just shop for books for convenience they don't shop for them just because they need them it's actually an incredibly fun thing to do and people many people will spend two hours on a Sunday afternoon in a book store there are other products that aren't like this at all so for example pharmaceuticals you know nobody browses the preparation age counter you go in you go out you're done you want that to be a painless experience so that wasn't meant to be funny but I mean well and but but we do work very hard and we'll never make amazon.com fun and engaging in the same ways the great physical bookstores are you'll never be able to hear the bindings creak and smell the books and have tasty lattes and soft sofas at amazon.com but we can do completely different things we'll blow people away and make the experience an engaging and fun one I'll talk about some of the stuff that we can do in the future a little later one of the things that's that we've done it's been much commented on and I think has been very important is we let regular old customers review books turns out our customers are very smart and the reviews are extremely helpful to other customers in terms of making purchasing decisions and I'm also convinced that there's a little piece in the human brain that can immediately tell by reading somebody else's writing whether the person is smart or crazy within like the first five words so you can actually weed out the the reviews that you don't want to pay attention to really well - it's one of the things that surprises people sometimes upsets publishers and authors is that we let people into negative reviews and they say why do you do this you're you only make money if you sell the books why don't you read out the negative reviews and the reason is because our we're taking a different approach of trying to sell all books we want to make every book available the good the bad and the ugly and when you're doing that you actually have an obligation if you're gonna make the shopping environment one that's actually conducive to shopping so sort of let truth loose and that's what we try to do with the customer reviews so we do actually remove reviews that are off topic or even if they're funny we also we let for example authors review their own work so they can say I'm the author and click here if you're the author and you can review this book and we scan all of these we have a team of people who does this and matches them up and we have to have the email address and we can verify things with the publisher so on but occasionally things slipped through we did have God review the Bible we there were a couple of other amusing things we let's see who was in a Karen burrow it was was very very upset that Jane Austen had gotten to miniseries that was so what is the name of the the write the contemporary of Jane Austen who was her jealous of her all the time it slipped my mind right now yeah that yeah it's Bronte thinking that's my wife speaking of saving me yet once again and the the anyway she was she also reviewed one of her own works and said I just can't believe it that Jane Austen getting to miniseries in a full-length motion picture in one year so but even those funny ones we take away we should probably post them on a special page that would be a fun thing to do finally what people don't see sort of behind the scenes at Amazon accom you can see a lot of things on the website but you can't see the stuff that the software development all the effort that goes into the back end tools amazon.com is very much a technology company in fact I think of us in many ways as sort of a small AI company artificial intelligence is something that's gotten a bad rap there are some good reasons for that and some bad reasons one of the bad reasons is that once the AI guys work really hard and accomplish something it's not AI anymore it's just a parlor trick and what's interesting is there's some very simple but sophisticated techniques that are working well to help people discover things online like collaborative filtering I'll talk a little more about that in a minute but this is all subterranean so we're starting to do things on our site now that aren't very visible like customize the homepage for particular customers using their past activity and their stated preferences to guide us and you don't even notice this unless you sit right next to someone and see that their version of amazon.com is slightly different from yours we've just started doing this this is something we've wanted to do forever and the goal is to make the perfect store for everybody we don't have to have the average store for the mythical average customer we've also worked hard on all the customer service tools the things that process electronic mail if you're doing business in a a mail-order company for example you could there are dozens of off-the-shelf systems you can buy to handle inbound phone calls into a call center and so on we get thousands of email messages from our customers every day and there aren't any great off-the-shelf inbound email Center of software packages yet there will be so we've had to write our own in fact about 85% of all of our software development to date has actually gone into the back-end systems that are completely invisible to customers the logistics systems that handle two and a half million different items and six different availability categories early on we looked at could we buy a software package that would do the logistics for us the problem is that if you look at the available packages that are built for mail or companies they typically have just two availability categories in stock and backordered we actually have six because we have books that are shipped within 24 hours two to three days one to two weeks four to six weeks not yet published shipped when available and when we're out of print shipped within one to three months if we can find it at all so some of this stuff just has to be done done the hard way we've also done one more thing that I think is interesting and enough to mention which is our amazon.com Associates Program the they're actually several other places doing this now but at the time I believe it was new and the idea was let's make it possible let's use the inherent features of the web to make it possible for any website no matter how big or how small to have its own bookstore in association with amazon.com and today we have over 30,000 of these associated Amazon account associates out there on the web ranging in size from on the big side AOL excite Yahoo Netscape AltaVista Geocities to the small so somewhere in the middle dr. Ruth Westheimer sells sex-education books from her website through amazon.com to the very tiny mite one of my favorites actually a website that bills itself as the web's now mind you the webs out the world's the web's oldest and best place to buy meteorites you can indeed find everything on the web if you look hard enough and now they can sell meteorite books along with with this it's interesting because it's a win win win it's a win for the associate because we pay them a share of revenues pay them 15% of revenues for all the books that they sell it's a win for our customer because they now have in many cases a specialized website like the meteorite one or one on yellow Labradors and so on that put these books in an editorial context you know we can't say with editorial authority that this is the Bible of Labrador Retrievers but there's a website out there that can say that and finally it's a it's a win for a camera who I did already it's a win for us yeah it's also a win for us and the reason is that we get new customers this way and these sites help us with branding so what I'd like to do now is sort of go back in time so we have we have over a thousand employees now which startles me to no end because three and a half years ago we had seven and so things and I want to sort of walk you through some of the just really kind of little anecdotes about amazon.com there from the very from the very beginning in 1994 when I came across this fact that the web was growing at 2,300 percent a year I was working on Wall Street very specialized kind of investment bank called a quantitative hedge fund the company called de Shah and I when I decided I was gonna go do this crazy thing I went and told my boss and he said no hmm let's go for a walk so we were on a two-hour walk in Central Park and he actually thought it was a good idea some very smart guys names David Shaw is one of the few people I know who has a fully developed left brain a fluid oaf right brain just a super smart guy and he said this is a great idea but it would be a better idea for somebody who didn't already have a good job and and that was actually a compelling argument to me and so I went away he convinced me to think about it for two more days and it was very hard to make that decision and until I found the right framework in which to make the decision I think because I know there are a lot of people who are interested in entrepreneurial activities out there I think this could be useful is that it's the right framework for me anyway to make the kind of decision was a regret minimization framework so I projected myself into the future and I'm 80 years old and I'm looking back on my life what do I want to have done at that point one of them minimized all the regrets that I have and I knew that when I was 80 there was no chance that I would regret having locked away from my 1994 Wall Street bonus or knew that kind of thing I wouldn't even remember that but I did think there was a chance that I might regret not having participated somehow and this thing that I thought was going to be very exciting called the Internet and and I also knew that if I tried and failed I wouldn't regret that so once I thought about it that way it become became incredibly easy to make that decision it's also easy for me because my wife who's sitting right here so supportive and and also beautiful thankfully she's not geographically tied to particular area so we were able to pick up and move to the best place to do amazon.com which turned out to be to be Seattle but there's actually a story there so when you get bored of these anecdotes let me know and I will stop but the when somebody's growing 2,300 cent a year you have to move fast a sense of urgency becomes your most valuable asset and and so we did do that I I wanted to turn out it was the problem of where to locate amazon.com was highly constrained by three factors it had to be in an area with a large pool of technical talent it had to be in a place a small state because only the residents of the state where you have what they call Nexus have to do you only have to charge those customers sales tax so I wouldn't want to be in California and so on bigger states and and and finally it had to be nearby a major book wholesaler turns out the largest book warehouse in the world is in Roseburg Oregon so I was doing this analysis and I had tons of statistics about cities all over the country even I can tell you to this day that they're about three thousand flights a week out of the Seattle Airport which makes it sort of a medium sized hub so and that was you know these there's like more minor considerations but you but trying to make this decision the problem was I hadn't quite made an arrow down to four cities Portland Oregon Seattle Boulder and Lake Tahoe and the Nevada side of the border and the movers were here and they had packed up our stuff and they wanted to know where to take it so I told him just head west and call us tomorrow and we'll tell you and that's what they did and so and my wife drove it to Seattle and I tapped out the first draft of the business plan in the car on the way there I also called our attorney I called a friend in Seattle and said can you recommend an attorney and retain an attorney by cell phone and had that person set up bank accounts and so on so that those were all ready by the time we got there had him incorporate the company and of course he's got it in software so what should the name of the company be she need for the incorporation night it was very clever I had already thought of this I knew he was going to ask her that question and so without even missing a beat I said Cadabra Cadabra Inc like abracadabra well I instantly knew that was an incredibly dumb name because he came back to me right away with cadaver no no not cadaver Cadabra and he's like cadaver Ivano so anyway the company was incorporated as Cadabra Inc right there and three months later was changed to amazon.com a name that actually the entire a section of the dictionary was perused turns out that things are always listed online in the order and almost always an alphabetical order so kind of like the yellow pages where you get the triple-a auto repair phenomenon you start to see that in fact we do have a competitor or a small competitor online called like triple A one books or something like that so it was that's