Jeff Bezos and I have a long history, dating from my days on Wall Street. Today, he’s an investor in Business Insider, and I remain an Amazon shareholder. I tried not to let any of that be a factor when I interviewed him recently at our annual conference in New York City. Jeff rarely gives in-depth interviews, so I didn’t hold back on asking about issues both pressing and personal. (Even Amazon’s biggest investors, I learned, get only six hours of his time per year!) What follows, in text and video, are edited excerpts from my discussion with the man the Harvard Business Review called “The Best-Performing CEO in the World.”

Henry Blodget: Let’s jump right in. What the hell happened with the Fire phone?

Jeff Bezos: First of all, it’s really early. We’ve had a lot of things we’ve had to iterate on at Amazon. You may remember something called Auctions that didn’t work out very well. Z Shops morphed out of that. Then we launched Marketplace, which became our third-party seller business, which now represents 40% of units sold on Amazon. That’s a great business.

If you look at our device portfolio broadly, our hardware team is doing a great job. The Kindle is now on its seventh generation. The Kindle Voyage, the new premium product, is just completely killer. Fire TV, Fire TV Stick — we’re having trouble building enough. Amazon Echo, which we just launched. So there’s a lot of activity going on in our device business. With the phone, I just ask you to stay tuned.

HB: What was the mistake with the phone? Or are you saying there is no mistake?

Jeff: I think it takes more time to analyse something like that. Again, one of my jobs is to encourage people to be bold. It’s incredibly hard.  Experiments are, by their very nature, prone to failure. A few big successes compensate for dozens and dozens of things that didn’t work. Bold bets — Amazon Web Services, Kindle, Amazon Prime, our third-party seller business — all of those things are examples of bold bets that did work, and they pay for a lot of experiments.

I’ve made billions of dollars of failures at Amazon.com. Literally billions of dollars of failures. You might remember Pets.com or Kosmo.com. It was like getting a root canal with no anesthesia. None of those things are fun. But they also don’t matter.

What really matters is, companies that don’t continue to experiment, companies that don’t embrace failure, they eventually get in a desperate position where the only thing they can do is a Hail Mary bet at the very end of their corporate existence. Whereas companies that are making bets all along, even big bets, but not bet-the-company bets, prevail. I don’t believe in bet-the-company bets. That’s when you’re desperate. That’s the last thing you can do.

HB: We should stay tuned for an evolution of the phone. For how long?

JB: Who knows? Ask me in some number of years.

Here’s what happened next, when I asked Bezos, “Let’s just establish this once and for all: Can Amazon make money?”

 

 

HB: You talked about what a lot of CEOs do in terms of trying to drive that stock price, selling the stock. You told me something when we we’re outside that is extraordinary, which is that you spend six hours a year on investor relations.

JB: Yes. We do a lot of unusual things there. We don’t meet with our biggest investors. We meet with investors who have low portfolio turnover. Many investment funds have very high portfolio turnover. They’re not really investors — they’re traders. There’s nothing wrong with that: It’s just a different thing. Where you are going to spend your time and your energy is one of the most important decisions you get to make in life. We all have a limited amount of time, and where you spend it and how you spend it is just an incredibly levered way to think about the world. If you’re going to spend time explaining the company, you should do it with people who are long-term investors, rather than traders. That’s our point of view.

HB: How dependent is Amazon on you these days? You famously had a terrifying experience in a helicopter. And last year you had a terrifying experience in the Galapagos.

JB: The kidney stone was just painful —  I don’t recommend that. Stay hydrated … Anyway, my opinion is that I can do some things at Amazon that would be hard for other people to do, only because of my history with the company. As the company has grown, of course my job has changed very much.

My main job today: I work hard at helping to maintain the culture. A culture of high standards of operational excellence, of inventiveness, of willingness to fail, willingness to make bold experiments. I’m the counterbalance to the institutional “no” who can say “yes.” I’m not going to be here forever. Many of the traits that make Amazon unusual are now deeply ingrained in the culture. In fact, if I wanted to change them, I couldn’t. The cultures are self-reinforcing, and that’s a good thing. We sometimes have people come to the company and they find Amazon very boring, because we don’t have enough competitive zeal. With annual planning processes, some companies literally start with, “Who are our three biggest enemies? Here’s how we’re going to hold them at bay or defeat them.” We don’t have such a list at Amazon. It’s not how our annual planning process works.

On the other hand, if you’re the person who gets up in the morning and says, in the shower, “What can we invent for customers? What can we do differently? How can we improve that experience?” And so on and so on. Then that is going to be a playground.

I still run into work, by the way. I took my family on a vacation to France. My wife’s whole family — there are about 20 of us. We had an unbelievably good time. Great food, everything. We were there for a week. I got back to Seattle, and I ran into the office. I’m having so much fun.

HB: Is there a succession plan?

JB: Yeah, there is a succession plan for me, and for all of our senior executives.

HB: There is somebody who would take over?

JB: Yes, absolutely.

HB: Who?

JB: Secret.

HB: Let’s turn to Hachette. You just had a very famously public bitter fight with them over the price at which you were allowed to sell their books. First of all, were you surprised with the amount of animosity that was directed at Amazon?  

JB: My view is that in this incident and actually in our entire history, I think we have been treated extraordinarily well by the press and the media — certainly by customers. I have no complaints. I think we have been treated way above average over time and and I’m grateful for that. Retailers negotiating and fighting with suppliers is not a new phenomenon. Rarely does it break through into a public fight and mostly it’s not. It’s an essential job of any retailer to negotiate hard on behalf of customers. It’s what we do.

HB: If there was no negotiation, and you could dictate to everybody exactly what the terms were going to be, what would the future be for authors?

JB: The most important thing to observe is that books don’t just compete against books. Books compete against people reading blogs and news articles and playing video games and watching TV and going to see movies.

Books are the competitive set for leisure time. It takes many hours to read a book. It’s a big commitment. If you narrow your field of view and only think about books competing against books, you make really bad decisions. What we really have to do, if we want a healthy culture of long-form reading, is to make books more accessible.

It takes many hours to read a book. It’s a big commitment. If you only think about books competing against books, you make really bad decisions. You’re competing against Candy Crush and everything else. If we want a healthy culture of long-form reading, you have to make books more accessible. Thirty dollars for a book is too expensive.

Part of that is making them less expensive. Books, in my view, are too expensive. Thirty dollars for a book is too expensive. If I’m only competing against other $US30 books, then you don’t get there. If you realise that you’re really competing against Candy Crush and everything else, then you start to say, “Gosh, maybe we should really work on reducing friction on long-form reading.” That’s what Kindle has been about from the very beginning.

In the internet era, almost all of the tools for reading have been reducing the friction of short-form reading. The internet is perfect for delivering three paragraphs to your smartphone. The Kindle is trying to reduce friction for reading a whole book. It’s working.

The vision for Kindle is every book, every imprint, in any language, all available in 60 seconds. That’s a multi-decade vision. We’ve been working on it for a decade now, and we’ve made huge progress. We’re making books easier to get, more affordable, more accessible. It’s a fantastic mission. The Kindle team is very dedicated to it, and they’re doing a great job. You are getting more reading.

HB: Which sounds great. Until it comes to the author who wants to write a book but can’t quit their job unless they have the nice advance from the big, rich publisher who you are quietly demolishing.

JB: No, but the facts are wrong. Publishers are having unparalleled profitability, and the book industry is in better shape than it ever has been, and it’s because of e-books. The Kindle team deserves a significant amount of credit for that, because they were early, they got ahead of it. There’s been very little piracy in e-books, unlike other digital media. This is a good-news story for publishers and for authors. It’s very difficult for incumbents who have a sweet thing to accept change. It’s just very difficult. It’s very easy, but almost always incorrect, to glamorize the past.

It’s easy to do. We all have these fake memories of how great things used to be. Right, before penicillin things were awesome. There are exceptions. But mostly things have gotten better, and we live in a world where I hope things continue to get better. Surely making reading more affordable is not going to make authors less money. Making reading more affordable is going to make authors more money.

HB: You turned 50 recently.

JB: Yes.

HB: Any changed outlook on life?

JB: No, not really. I’m still dancing into the office. I love my life. I have four kids. My wife still claims to still like me. I don’t question her aggressively on that. I do the dishes every night, and I can see that actually makes her like me. It’s a very odd thing.

HB: I do that, too.

JB: I’m pretty convinced. It’s like the sexiest thing I do. [Laughter]

HB: There was a book written about you recently, on Amazon. ["The Everything Store" by Brad Stone.] Have you read it?

JB: Yes, I read it.

HB: And?

Jeff: I’m not going to say many things, but I’ll say the first half of the book does an extraordinarily good job of capturing the culture of Amazon in the early days. Very, very good. I would also say that I get way too much credit in the book. There are a lot of people who have played huge roles in Amazon’s history, and they’re almost completely left out, or just barely mentioned. Maybe someday I’ll write that book and make sure that those people get their credit.

HB: Your wife reacted to the book with a long defence on Amazon as a comment — incredibly well written — and in it she said, “This is not my husband.” Who is right? It sucks to have stuff written about you.

JB: You don’t think I’m going to sit up here on stage and tell you my wife is wrong.

HB: Here we go.

JB: Henry, that’s … I don’t even know where you’re going.

HB: What was she objecting to?

JB: She was there in the early days. You’ve been a public figure, and you still are, but you had more public figureness in your earlier stock-analyst days. I’ve been a public figure. You get used to everything being wrong about you. Anytime you think you know a public figure from their media … You really don’t. I’ve gotten to know several public figures. You can’t tell that Bill Gates is an amazing dad. I know that. It’s very hard. Other people, like my wife, she doesn’t have so much experience with this. I’m like, “It doesn’t matter.”

HB: Fair enough. What are you like as a dad?

JB: Me? Let’s see … 

HB: Boring? Work all the time?

JB: No. I have three boys and a girl. The oldest is 14. He was the last person in his class to get a smartphone. He reminded me of this frequently. When the second-to-last person got a smartphone, he sent an email message to all of his classmates that said, “Then there was one.”

All of my kids are very, very different. It’s pretty amazing. We spend a lot of time travelling, though I don’t travel very much for work. One of the reasons I do so little of what I’m doing here today, on stage, is that I like to be at home. I like to be in the office. I feel disconnected from the office if I’m travelling a lot. I travel less than 20% of the time, maybe less than 10% of the time.

I organise my life that way, because it’s a personal preference. I told our most senior executives at Amazon: “Because you’re a senior executive, you have more control over your environment, and you should have less stress.” If senior executives are stressed out, I tell them, “Look, you shouldn’t be stressed out. Figure out what’s causing it. Bring someone on your team who is good at that or who likes doing it, and have them shore you up in that regard.”

I am very, very lucky. I’m lucky in so many ways. I won a lot of lotteries in life. I’m not just talking about Amazon, a certain financial lottery, for sure. I have won so many lotteries. My parents are both amazing role models. My grandfather. My mum had me when she was 17, and she says, “Don’t do that.” It’s not her “reco.” [Laughter]

Her dad had to fight to keep her in high school. Having a pregnant mother in high school in the 1960s in Albuquerque, New Mexico, that’s a difficult situation. My dad was hardworking. He worked for Exxon for 33 years. In life, we get a lot of rolls of the dice. One of the big rolls of the dice is who are your early role models, so I try to do that for my kids.

HB: Drones. You had this amazing “commercial” on “60 Minutes” last year, about this fantastic future when drones are going to fly out and bring me my package, and it’s going to be right there. Immediately, everybody in the country, and probably around the world, was saying, “Great — when?”

JB: That’s a difficult question to answer. Technology is not going to be the long pole. The long pole is going to be regulatory. I just went and met with the primary team and saw the 10th- or 11th-generation drone flying around in the cage. It’s truly remarkable. It’s not just the physical airframe and electric motors and so on. The most interesting part of this is the autopilot and the guidance and control and the machine vision systems that make it all work. As for when, though, that is very difficult to predict. I’d bet you the ratio of lawyers to engineers on the primary team is probably the highest at Amazon.

HB: Is this a situation where everyone else in the world except Americans is going to get drone deliveries?

JB: I think it is sad but possible that the US could be late. It’s highly likely that other countries will do it first. I may be too sceptical. I hope I’m wrong.

HB: In addition to everything else we’ve talked about, you make rockets. You want to go into space. This is a proclivity that you share with fellow billionaires such as Elon Musk and Richard Branson. First of all, what is it about space that captivates you? Second, what are you doing that’s different? Third, just talk about how hard it is when you saw Richard have an accident that has set everybody back a long time. Talk about space. What’s the vision there?

JB: First of all, and most fundamentally, you don’t get to choose your passions. Your passions choose you. For whatever reason, when I was 5 years old, Neil Armstrong stepped onto the moon. I was imprinted with this passion for space and for exploration. I think it’s important. I could come up with lots of rational reasons why it’s important, and I really do believe them.

I think it’s probably a survival skill that we’re curious and like to explore. Our ancestors, who were incurious and failed to explore, probably didn’t live as long as the ones who were looking over the next mountain range to see if there were more sources of food and better climates and so on and so on.

We are really evolved to be pioneers. For good reason. New worlds have a way of — you can’t predict how or why or when — but new worlds have a way of saving old worlds. That’s how it should be. We need the frontier. We need the people moving out into space.

My vision is, I want to see millions of people living and working in space. I think it’s important. I also just love it. I love change. I love technology. I love the engineers we have. They’re brilliant. We have about 350 people there. We’re building a vertical takeoff, vertical landing vehicle. It takes off like a regular rocket, and it lands on its tail like a Buck Rogers rocket.

The initial mission is space tourism. We’re also designing an orbital vehicle. We just won a contract to provide the new engines for the new version of the Atlas 5, which is the most successful launch vehicle in history. That’s a Boeing-Lockheed joint venture. That vehicle uses Russian engines, and because of all the things that are happening in Ukraine and so on, that supply of engines has become less certain, so they want to switch away from a Russian-made engine and they chose [us] to provide that engine. It’s a very exciting endeavour. Great team. They’re just doing a wonderful job, and it’s fun.

HB: When are you going?

JB: I don’t know. When we’re ready. I like our architecture. The vehicle can fly autonomously. Throughout the entire test program, it flies all by itself and comes and lands all by itself, so we don’t need test pilots, which is good during the development phase. The crew capsule uses a full-envelope escape architecture. If you go back in time, all rockets had escape systems, Apollo and Soyuz.

The space shuttle was really the first human-rated vehicle not to have an escape system. That was a mistake. It needed an escape system. Our vehicle has a full-envelope escape system. I like the architecture we’re building. I’m excited about it, but this is not a business where you can rush things or cut corners. Our motto is, “Gradatim Ferociter.” It stands for step-by-step ferociously. One step a time.

HB: Thanks, Jeff. It’s a privilege and a pleasure to talk to you. 

NOW WATCH THE FULL INTERVIEW: It includes additional discussion on the criteria Amazon uses to expand into new businesses, the pay and perks of employees, and why Jeff Bezos bought The Washington Post:

 

 

 

Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.

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