Posted on Leave a comment

Jeff Bezos and the History of Amazon

Nowadays, Amazon is nearly everywhere. If you haven’t ordered a product through their services, you certainly have heard of them. The corporation is steadily in the top three of corporations with the highest market capitalisation since 2018, and since 2017 its owner, Jeff Bezos, is the richest man in the world. Bezos established Amazon in 1995 and initially operated the e-commerce store from his garage. So it’s not just quite an interesting company to look at and see how it managed to take over the United States and is undoubtedly expanding internationally, slowly taking over the world. But who is the man behind Amazon, Jeff Bezos, and what drives him?

How did Amazon start?

Jeff Bezos was born as Jeffrey Preston Jorgensen on the 12th of January 1964 to a 17-year-old mom and a father that abandoned the mother and child soon after Jeff’s birth. There barely is anything known about Jeff’s biological father. When Jeff was four years old, his mother married Mike Bezos, a refugee from Cuba that managed to obtain a scholarship to go to college in Albuquerque. After he met Jeff’s mother, he got a job as an engineer at Exxon and officially adopted young Jeff, whose name changed to Bezos. During his childhood, Jeff was exceptionally gifted, fascinated if not obsessed with space travel and technology which led to him winning multiple science prizes during highschool. In 1986 he graduated summa cum laude from Princeton University with a bachelor in electrical engineering and computer science. He then worked a variety of jobs at fintech companies and the banking industry, only to eventually become senior vice-president of D.E. Shaw & co, a multinational investment management firm at the age of 30. 

During the early ‘90s, Jeff Bezos still worked as a hedge fund manager. But during that time Bezos already saw the potential of the internet and figured he’d regret it if he didn’t jump in. After reading a report that predicted the buying and selling of products online would increase drastically, he listed 20 products he thought were promising for the internet market. After some deliberation, he shortened the list to five: CDs, hardware, software, videos and books. Eventually, he decided just to sell books: there was much demand for them, they were relatively cheap to stock up, and there are a plethora of titles available. Bezos figured it’s the ideal product for the internet. In July 1995 he started the website, which he ran from the garage of his home.

The name Amazon wasn’t the first name Bezos decided upon by the way. Initially, Bezos named the company Cadabra, but after his lawyer mistook it for the word cadaver, Bezos changed it to Relentless. But Relentless too had some negative associations. Bezos said that he used a dictionary to eventually decide on Amazon because it had an exotic and different ring to it. And it refers to the largest river in the world, something that’s fitting for the now-largest company. According to the General Manager of Amazon’s Amazonsmile program, Ian McAllister, the first product ever ordered on Amazon was Douglas Hofstadter’s book “Fluid Concepts and Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought.” At that time nobody expected that this order was the first of many billions. 

It didn’t take long for Amazon to become a booming internet business. Bezos’s garage rapidly filled up with buzzing servers to keep everything running smoothly. During the first months, Amazon sold books in 50 US states and 45 countries worldwide, with around 20.000 USD revenue weekly. It adopted the slogan ‘Earth’s biggest bookstore’ and went public on the NASDAQ on May 15 1997. Three million stocks were listed at 18 dollars each, with Amazon reaching a revenue of 32 million dollars the year before. According to the Investopedia, if you invested 10.000 USD in 1997, that same amount of shares would  be worth more than 12 million dollars as of May this year.

As the late ‘90s arrived, Amazon continuously expanded its inventory. Besides books, it started selling films, games, electronics, software, toys and much more in its online store. The dotcom bubble crashed in the early 200s. Although Amazon continued to enjoy the confidence of its investors, a lot of its competition was killed off. If anything, the dotcom bubble helped Amazon gain a larger market monopoly. 

Over the years, Amazon started to focus itself more on technology. Nowadays, Amazon is often listed among other large tech-companies, that just happens to be in retail as well. There’s a clear reason why it started to focus more on technology. As the webshop kept improving over the years, it realised the digital infrastructure the shop was developing and using was a goldmine. Nowadays an overabundance of webshops exist and the digital infrastructure of these webshops generally is sound. But many e-commerce comforts we nowadays take for granted were created by Amazon. Because of its specialisation and pioneering in many digital aspects, in order to keep a platform its size running smoothly, it could sell systems for data analysis, storage and networks to other companies. Others were very eager to buy these systems because it would save them a lot of money if they didn’t have to invest in developing them themselves. This is how Amazon became the market leader in so-called cloud computing, selling computer systems through the internet. 

And there are pretty big names that run on Amazon-technology. Even its competitors use it: Netflix uses it even though Amazon competes with the platform through Prime Video. Many online e-commerce stores use it as well. Its cloud computing share in 2019 was about 35 billion dollars. In total, Amazon’s revenue in 2019 was near 1000 billion dollars, a tenfold increase from the 100 billion dollars of 2015. By June 2017 Amazon stocks reached a 1000 dollar value, with the entire company valued at 480 billion dollars. As of April 2020, Amazon is worth 1.14 trillion dollars.

Even though they provide cloud computing to their competitors, they have certain ways of dealing with competition. One such example is Whole Foods, an American supermarket chain that Bezos acquired in 2017 for a record sum of around 13.7 billion dollars. Amazon is large to the extent that in some markets disruption occurs: the market cannot handle its presence and bleeds out all other stores in that sector. The Kindle and e-books are out-competing small bookstores, for example. Amazon has threatened, at one time or another, nearly every niche in the small retail sector. 

Those stories are a sign on the wall that it isn’t a story that’s just over roses. At times, Amazon bit off more than it could chew, or perhaps more than its consumers could chew. Because there were misses as well, pretty big ones at that. In 2014 Amazon tried to release the fire phone, a competitor of android- and iPhones. Yet the phone didn’t sell at all and was pulled from sales within one year. Amazon suffered 170 million dollars in losses. The grocery service Amazon Fresh wasn’t a success either and has thrown in the towel in most areas it operated in. 

CEO Bezos

Because of the unprecedented growth of Amazon, Jeff Bezos managed to become the richest man in the world on July 27 2017. A record he didn’t even manage to hold for a day because he lost it again when the stock price of Amazon dropped a little, and Bill Gates, Microsoft’s CEO, overtook him. Three months later on the October 27, Bezos once again overtook Gates and this time for a long while. At least, as of today he still holds the number one spot. 

As an employer, Bezos is notorious for his inflammable character and sarcastic response when he doesn’t like something. Apparently, he hired a leadership coach that tries to keep him in check and make him a better employer. Brad Stone, a tech journalist that wrote the book ‘The Secrets of Bezos’ writes about an anecdote where Bezos reprimanded some employees, telling them they were stupid and to ‘not return until they knew what they were doing’. As he was marching out, angrily, he suddenly stopped in his tracks, seemed to realise what he did, turned around and said ‘but good work, everybody’. 

In addition, the working conditions of Amazon have been under scrutiny for a long time. The news often features items about it because of specific issues with its workforce. US distribution centres are notorious for poor working conditions where the pace of work is constantly monitored and even toilet breaks are timed. Following the BBC documentary ‘The Truth Behind a Click,’ it became evident that in the UK employees had to work 60 hour weeks and sleep in tents because Amazon did everything they could to maximise profits. But the distribution centre of Amazon in Germany had an even weirder scandal when it turned out guards keeping an eye on the workers turned out to be criminal neo-Nazis. 

At any rate, Amazon is notorious for its aversion to trade unions. Some other curious facts that have surfaced is that Amazon has patents on a wristband that tracks the movement of its employee’s hands when packing boxes and a so-called worker’s cage. This supposedly was designed to protect the workers in warehouses They scrapped the worker’s cage after public outcry against the idea. In 2018 the average wage Amazon employees received wasn’t enough to reach the most basic standard of living. Because of it, Bernie Sanders proposed the Stop Bad Employers By Zeroing Out Subsidies Act. Abbreviated, this spelt Stop Bezos and was a law proposal to try and force companies such as Amazon to pay their employees better wages. The fact, so many of its employees, are on food stamps is rather criminal, especially in a country such as the United States. In 2018 Amazon announced it would pay all its employees a 15$/hour minimum wage. So to their credit, they did recognise the criticism, 15$ is more than double the federal minimum wage. It is also lobbying Washington to increase the federal minimum wage. 

Other Ventures

Bezos doesn’t just stick to Amazon as a businessman. He owns different companies, as well. Among them is Blue Origin. This company focuses on commercial space travel and is a direct competitor to Elon Musk’s SpaceX. Basically, both companies are competing about who can establish the first commercial space travel, a bit like the United States and the Soviet Union had their space race during the Cold War. In late 2015 Bezos managed to be the first to send a reusable rocket into space and return it to earth in one piece. Because the rocket was reusable, the possibility of space travel came closer: it would have been too expensive to build a rocket for each trip. Although Blue Origin initially said the first passengers would travel into outer space in 2019, no such commercial flight has yet happened. In May 2019 Bezos announced that Blue Origin was planning on the launch of a moon lander named Blue Moon, which should be ready by 2024. 

Besides space travel, Bezos also dabbled in media. He bought the Washington Post in 2013. The paper was in financial trouble and Bezos managed to acquire it for 250 million dollars. Ever since there have been accusations that he tries to steer the content of the newspaper a particular direction, although the editor in chief and Bezos himself strongly deny that. Because Bezos introduced software that gave more options to receive payment for articles, the paper finally became profitable again. Amazon also owns Alexa Internet and the Internet Movie Database. I’ve already touched upon the acquisition of Whole Foods Market. With its 460 stores throughout the US, Canada and the UK it had annual revenue of 16 billion dollars in 2016. Following Amazon’s acquisition, the prices of some of the best selling products were lowered. In 2018 Amazon acquired the online pharmacy PillPack for 753 million dollars.

All in all, taking into account the shady side of Amazon, there is no denying that Bezos managed to establish an incredible global company from, quite literally, his garage. And only time will tell how that will translate to the future, with its wealth in overdrive.

Leave a Reply