#75: Grow Your Business Like Amazon with Steven Anderson

[00:00:00] Hala Taha: Hey, young and profiters! It's Hala as our avid listeners know my favorite way to kick off the show is to read the reviews we're getting on apple podcasts, Castbox YouTube, and any platform that enables you to leave a review this week. I wanna share a five star review from Karen O'Connor. I've listened to a lot of podcasts over the last two years.
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On today's show, we're chatting with Steve Anderson author of the Bezos Letters, 14 principles to grow your business like Amazon, Steve has spent 35 plus years helping the insurance industry understand, integrate and leverage current and emerging technologies. He's also the president of the Anderson network and a top 10 global InsureTech influencer.
To top it off, Steve has over 340,000 followers on LinkedIn and is known as one of the top technology consultants and speakers in the U S in this episode, we'll discuss the rise of Amazon and why you should act like every day is day one. When growing a company, how Jeff Bezos sees his risks strategically to grow Amazon and why Amazon focuses on their customers instead of their competition.
Hey, Steve. Welcome to young and profiting podcast. It's so great to have you

[00:03:00] on today.
Steven Anderson: Oh, Hala. Thank you for having me. This is a real pleasure to talk with you.
Hala Taha: Yeah, I'm very excited to talk about all the things that you have to offer to our listeners. You are the author of the Bezos Letters, which are 14 principles to grow your business, just like Amazon.
And the book is extremely well-written it's well-researched you got so many great reviews out there on this book and in it, you distill 14 principles or business insights that we can use to grow our business. To give some context to my listeners as to why these letters are so important and what these letters are.
Each year, Jeff Bezos writes an open letter to Amazon shareholders and these letters started back in 1997. And over the last two decades, these letters have been really a source of insight to the world, to how Jeff Bezos, who is, the richest man in the world, how he thinks about efficiency, how he thinks about the customer experience, retention, managing through crises and much more.
So I have a ton of questions related to your next to

[00:04:00] your latest book, but first I wanna understand how did you end up writing this book? Because from my understanding you're really from the insurance field. So how does that relate to what you wrote in the book and why did you decide and get the idea to write this book?
Steven Anderson: Sure. As you said, I've been in the insurance industry, my entire career, the last 20 years, I've been a consultant about technology to the industry and in that role, Obviously follow technology and all the changes going on and came to a realization a few years ago that the biggest risk, I think, businesses in general face is actually not taking enough risk, which coming from, the risk management industry is just a weird way of thinking.
And so I was looking at companies that had done things well. And some that had not, certainly the Blackberry and the blockbusters and Kodaks and Sears and a lot of them and was trying to understand the difference. And that's when I came across Amazon

[00:05:00] and. Through that research really discovered the shareholder letters.
And I had heard about them usually when they come out, there's some articles about whatever Bezos is writing about in that particular letter. But I ended up actually reading them through in order. And at the time there were 20 and was astounded at how much really information, I would say tips that Bezos talked about in the letters about how we think about
growing Amazon and realized that those are tips that any business I think can use.
Hala Taha: Yeah, that's really cool because I know that there's lots of books that analyze Warren Buffett's letters to Berkshire Hathaway shareholders. But I think are you the only book that distills Bezos letters.
Steven Anderson: Yes, so far. I suspect there might be some other ones coming out, but yeah, I was surprised to actually win.
I was again, continued my research and again, there have

[00:06:00] been articles about individual letters, but not a deep analysis of kind of the flow of how he talked and how he changed actually through the years, too, in terms of his thought process. So I just became really fascinated and frankly, I, My first kind of iteration was I did a executive summary one-page summary of each of the letters and was gonna give it away as a lead gen.
Here's some tips from Amazon. If you're curious about how they do things. And fortunately, my wife actually is in the book publishing business and I showed it to her and she said, oh no, this is a book. This is not a lead gen. And so that kind of started that process of putting it together into what was published last fall in the book. So
Hala Taha: Very cool. Aren't you lucky that you have a wife who's in the book publishing industry.
Steven Anderson: And so I had a little bit of an inside track on getting the book published, but even more importantly, she is

[00:07:00] a coauthor. She's an excellent editor and writer. And so your comment early about the book being readable and that's due to her.
And so I give her the credit for that.
Hala Taha: That's sweet. That's fantastic. So it's been about a year since you put out the book, has anybody from Amazon reached out to you or have you gotten a chance to talk to Bezos himself about it?
Steven Anderson: I get that question and I have not talked to Bezos. I've had a handful of people, either mentioned the book and, Facebook posts or some things like that.
But nothing directly that I've been able to talk to. And frankly I, people ask why didn't you try and interview Bezos? And I actually felt like being an outsider gave me a different perspective in terms of looking at the letters, as opposed to interviewing there's some already some really good books out there that, the history of Amazon or a deeper dive into, some of the inner workings.
But I felt this coming just from the shareholder

[00:08:00] letters was a good position for me to be in.
Hala Taha: Yeah. And people who read the book, nobody complained that you had no interviews from Bezos. Everybody said it was really well-researched that you had a lot of valid points and people found value from it.
So as long as people are liking and enjoying the content and find value in it, it doesn't really matter. How you got to that outcome. So really cool stuff. So Amazon, as most of my listeners know, it's one of the fastest companies who have reached a hundred billion dollars in sales since 1997, Amazon stock price has risen from $5 per share to now it hovers around $3,000 per share.
When I checked yesterday, it was right under 3000. And after studying Amazon and Jeff Bezos, you came up with 14 principles, which you outline in the book. So can you share with us some of these key principles at a high level and why you think Amazon was able to achieve so much massive growth so quickly?
Steven Anderson: So the 14 principles are categorized into four. What I call cycles? So Test, Build,

[00:09:00] Accelerate and Scale. And as a business grows right from startup. At startup, they're gonna be testing a lot of different things and then they wanna build on that, accelerate that growth. And then actually then scale.
And so, that's the structure that I came up with the 14 principles. So in the test cycle, the first, the actually principle number one seems to resonate with a lot of people, which is encourage successful failure. And that actually came that phrase. And I think. Resonates with people is that those words are not typically put together success and failure.
In the same phrase, it actually came from the Ron Howard movie, Apollo 13. So Apollo 11, the alarm strong landed on the moon. 12 went back 13 was just going back again as our third. Place on the moon. And if you remember that movie oxygen tank exploded, blew out the side of the service module, at that

[00:10:00] point, the mission became a failure.
At the very end of that movie, Tom Hanks playing Jim Lovell, the commander of that mission is stepping off the helicopter onto the deck of the IWA Jima. After coming back, getting all three astronauts back alive, and he said, Our mission Apollo 13 became known as masses most successful failure. And that just always caught my attention in terms of, okay.
What does that actually mean? Again, one of the themes throughout the shareholder letters is this idea that Bezos has that failure is necessary for success. And he talks about it in, in several different ways. At one point he says, I think Amazon is the best place in the world for an employee to fail. Because we understand that's part of the process.
And experimentation absolutely has to lead to failure because if it's, if you know the experiment's gonna work, it's not an experiment, right?

[00:11:00] The whole nature is testing out an idea, finding out if it works or not. And so that idea is just woven throughout what he talks about. And I think is a real key to, again, how they've grown.
And also they are unique in terms of the number of different businesses they've been able to create. So you have the e-commerce business, you have AWS, you have Amazon marketplace, all the third party sellers. Each one of those they've been able to start small and grow. And here's where I think the current terminology gets it backwards.
You have to start with an experiment. In order to invent and only then can you innovate, but everybody's talking about needing to innovate, but they're not talking about the work necessary to experiment and invent and most companies in essence, punish employees for failure. So you've got a, yeah.
We want

[00:12:00] you to innovate and do all these things, but you better be right. And I'm convinced employees. Aren't actually afraid of failure. We all understand that's part of learning, but they're afraid of the consequences of that failure, especially in a business environment. And I think that's where Amazon stands out as something unique.
Hala Taha: Yeah, very cool. Let's stick on failure for a second. So from my understanding, Amazon really builds on their failure to enable success. So for example, they had the fire phone and based on that failure, they use that those insights to then create the Amazon echo. Can you shed some color and maybe provide some other examples in which Amazon failed and then use their insight from that failure to build something different that did succeed.
Steven Anderson: Let me talk to him about the phone cause that you could argue that's their biggest failure. So that was a Bezos pet project and announced in 2014, I phoned specifically designed really to shop on Amazon. Now, if you think about it, Who needed another phone? We already had

[00:13:00] Android phones. We already had iOS that was announced in 2007.
And frankly, nobody needed it. In fact, at one point, Amazon tried to sell it for 99 cents and they couldn't give it away. And so they wrote off $178 million in inventory loss and in development loss at the end of 2014. But as you mentioned, four months after the announcement of the fire phone, that Hardware team and actually comes out of lab 1 26, that hardware team gave Bezos his first demonstration of what we would come to know as the echo and Alexa.
So echo was the hardware, all the voice processing, by the way, that's astounding technology. If you can stand across the room and say, Alexa, and it recognizes as your voice, that's a huge technological. Problem that they were able to solve. And then marrying that with the machine learning platform, Alexa, to be

[00:14:00] able to understand the question, look up the answer and give it voice going back.
It's an amazing product. And I think we can say this pretty successful today.
Hala Taha: Yeah. It's in like almost every household. I have another example. I recently had Jim McKelvey on the show. He's the co-founder of square. And in 2012 square put out a card reader, it was doing really well. It was like a fast growing startup.
Then in 2014, Amazon put out a similar card reader. And they undercut the price. And so square thought it was their demise they're over, but, they had this really strong innovation stack, which is what Jim McKelvey calls like, laring innovation upon innovation, whether it's processes or hardware or software, they had all these different innovations that enabled them to actually beat and compete with Amazon.
And a funny end to the story is that Amazon ended up, shutting down their card reader service, and then shipping all of their customers square card readers as like a classy way of saying goodbye. So I thought that was such a

[00:15:00] great story.
Steven Anderson: It is a great story. In fact, I just finished his book. It's the innovation stack and was fascinated with his description.
Exactly. Like you said again, I think for Amazon, they saw that as a possibility. And why would they think of that? That goes to another of the principles, which is obsess over customers. So everything at Amazon starts with a focus on the customer. In fact, one of the favorite phrases Bezos uses is we invent on behalf of the customer.
And I think that's a really interesting example because they were trying to make it better for the customer. They didn't understand the complexities of the payment. And again, I think, he describes very well. They really didn't disrupt the payment industry. They actually just discovered a market that no one else was serving.
So again, focusing on the customer, but at Amazon, no one asked for prime. But again, if we're inventing on behalf of the customer, what is one of

[00:16:00] the friction points of shopping online? Back early on, it was having to pay for shipping. I can remember shopping and then going to the checkout cart.
And then finding how much shipping would be. And then is it worth it? Now I'll just go to the store and I can get, but prime took that friction point away. And it was a crazy idea. Nobody at Amazon, except Bezos thought it was a good idea, but he said, if it's better for the customer, it will be better for Amazon and better for our shareholders.
Hala Taha: Yeah, I really love how Amazon has such like a customer first mentality. I wanted to share a quote in his 1998 letter. He says, I constantly remind our employees to be afraid to wake up every morning, terrified not of our competition, but of our customers. Our customers have made our business what it is.
They're the ones with whom we have a relationship and they're the ones with whom we owe a great obligation and we consider them to be loyal to us

[00:17:00] right up to the second that someone else offers them a better service. Yeah, it's so powerful. It's not about your competition. It's about your customers.
Steven Anderson: And that, that concept of, be afraid of your customers is their focus. In fact, he goes on in a couple other places to talk about their focus being on the customers, not on the competition. So they don't wake up in the morning thinking about how do we beat our competitors. They think about how do we delight our customers.
And in an interview Bezos said, Disruption. So right. Amazons, everybody says they're gonna disrupt this industry or that industry for Bezos. His mindset is. Invention comes first disruption as a consequence of other companies not inventing. So again, it's a bit of a twist and a different way of thinking, but absolutely customer first is very much their mindset.
Hala Taha: Can you give any other illustrative examples of

[00:18:00] how Amazon has put their customers first?
Steven Anderson: Immediately comes to mind is Amazon marketplace. So again, early 2000s. And this again, we'll get the failure in here too. Amazon went through two iterations before they actually landed on marketplace. So the first iteration is they actually opened an auction site to compete against eBay.
The problem is they didn't come. People don't come to Amazon. To get auctions. They go to eBay, eBay just had it. So that was a failure. And then they tried what was called Z shops and it was a separate website with a separate login where third-party sellers could access Amazon's customers. Nobody wanted to log in another place.
And the third iteration was marketplace. And again, crazy idea. Why in the world would we let other third parties be on our same pages where we're selling product and they may have the

[00:19:00] same product, but the customer focus is Bezos saying if a third party has a better price or has inventory. And we don't that benefits the customer.
And if it benefits the customer, it will ultimately benefit Amazon. And of course, by the way, those third-party sellers pay Amazon a fee. To be on the site to have access to the marketplace, have access to the fulfillment network that Amazon spent billions of dollars creating over the years, but that's a different way of thinking.
And when you're customer focused, not competitor focus. That allows you to think differently about how you do things.
Hala Taha: Yeah. Again, it's customers before competition. Another great example of that. Let's dive into the topic of risk. You have said that Bezos is a master of risk and he uses risk to strategically grow.
What are some prime examples of this?
Steven Anderson: Every time they start a new product it's top of

[00:20:00] mind right now. Cause I just wrote an article on my LinkedIn newsletter about this, but Amazon scout. So scout is a six wheel kind of a small cooler size that is autonomous that goes down sidewalks to deliver packages, to, to people's homes.
Residential. Started experimenting with scout. In 2017, they actually announced their first test. It was in a suburb of in Washington state in 2019. And they just announced this last week. That they are coming to my town where I live in Franklin, Tennessee, outside Nashville. And so I wrote this article and, it's just such a great illustration of experimenting, iterating.
So they have a whole team now that works on the autonomous software that works on the device itself. How big it can be, how fast it can go.

[00:21:00] And then now slowly working into other areas to again, test the concept, but what's the risk? Failure, right? It doesn't work out well. One of the tools.
Amazon uses to reduce their risk is when they're coming up with these crazy ideas, they use a process called a six page narrative or a six page memo. And I can talk a lot about that, but what happens is Bezos in 2004, banned PowerPoint. It's never used anywhere at Amazon and he requires. A written narrative, a story, a maximum of six pages, the start, every meeting that's exploring this idea, so I absolutely know there was a memo written about Amazon scout, probably in

[00:22:00] 2016 ish.
And that memo is handed out at the meeting, not beforehand. And the first 10, 15 or 20 minutes have spent everybody reading the memo. Now, it really interesting process. But to me, that is one of the ways they use to mitigate or reduce the risk because Bezos is convinced that writing out those thoughts on paper helps you think deeper and see problems quicker.
That they can then work on mitigating. So that's just one of the tools they use and, again, he just thinks very differently. And I guess the thing is he's not afraid of taking risk, knowing it may not work. And again, he says in a number of different places, we've got to try. Thanks. And here's this great, another quote.
I think it's out of the 2018 letter if I remember correctly,

[00:23:00] but it's basically. The size of our wrists. Need to grow as the size of our organization grows. If we're not taking billion dollar risks and making billion dollar failures, we're not gonna move the needle enough to have a impact on our business.
Who thinks that way?
Hala Taha: Yeah, such a different way.
Steven Anderson: Yes, such a different way.
Hala Taha: So I, I do wanna dig deeper on the memo piece. I think that this is really interesting. Why is Bezos so against PowerPoint and why does he prefer that memo structure? And what is the structure of that memo? What is the expectation in terms of the format that he gives to his employees?
Steven Anderson: First, when we talk about PowerPoint, he believes. Using bullet points or a PowerPoint presentation is lazy because you can hide behind those bullet points without having to really dig deep before you do that presentation. He also believes in fact, at Amazon, if

[00:24:00] you go to their job site, there's a section there that explains you may be asked in a, as part of your interview to write out something because.
The written word at Amazon is really important. And I do believe that to be the case who, when you have to write out, it makes you think deeper and differently. A lot of times for me writing actually helps me think about what I think, because having to put it into sentences and thoughts and words and paragraphs make you think differently.
So what's the stucture. It varies. I'll say that. So there's not just one way to do it, but basically this structure is the first thing is a future press release. So the Amazon scout, they actually right back in 2016, 17, when they were first thinking about this idea, they wrote a press release

[00:25:00] that could be released in 2019.
So future, so looking forward, right? What is it that the customer's gonna get out of this. What are the benefits? What are the right? All of those kinds of things. And actually, if you go to investor relations at Amazon and look at press releases, you can get an idea of how they structure those press releases.
I can almost guarantee that most of those were written years before the actual product announcement. So that's the first thing. Then they create an FAQ frequently asked questions and they, who are the people? So customer questions, what are the questions customers are gonna ask about this product service or platform?
What about. The other vendors that might be involved with it. So in terms of scout again, I'm speculating. I don't, I haven't read it, but the customer's

[00:26:00] asking could this injure my pet, who's gonna watch it as it goes, what kind of packages can be delivered? And so they come up with these questions and then they answer the questions.
Literally two, there are two answers to the questions. One is just a short. Here's the answer and the other is a discussion answer. So delving deeper into kind of the reasoning behind the answer, to the question, et cetera. So I will tell you. I actually use this process, a six page memo process for a project I'm working on that I was explaining a new service I'm putting together to a group of potential investors.
And it was absolutely a fascinating process to actually not just research and talk about, but actually to use. The media, and I did. I made, I didn't hand it out beforehand. I handed out at the meeting, physical written right document, took the first 15 minutes quietly.

[00:27:00] Wow. How uncomfortable for me was that, you're expecting people to read it, but then the magic started because the discussion wasn't about explain this.
I had already done all of that. The discussion was about questions. What didn't I cover enough ? what more questions did they have that I didn't anticipate the discussion was much full because literally everybody was on the same page.
Hala Taha: Yeah. I love that. See, I think that's so cool because at work they call me the PowerPoint princess, because I'm so good at creating these like elaborate PowerPoints and like they're designed so pretty and you can get away with not having that much information and putting on a great presentation like if you have
a well-spoken speaker, it's like a song and dance that you do at a business meeting. And, people are wow, and they don't have many questions and everybody just like moves along. But when it's just a paper that you have to read, it's like the information is what's important.
And everybody's just really focused

[00:28:00] on the idea itself instead of the pretty colors or the speaker or, the song and dancer.
Steven Anderson: Or even interrupting the presenter. With a question. But that question is gonna be answered three slides down. So everybody reading it, now gets the whole picture and then the discussion can be richer in terms of what's other questions do we have, et cetera.
Hala Taha: Yeah. And I love the idea of having the press release in the beginning. Again, it's like that customer first. What value are you presenting to the world? To the marketplace? That's what the press release portion is probably about, and then the FAQ is like poking holes in it. What are the different issues and how are you mitigating it?
Or what's the answer to it. Really cool stuff.
Steven Anderson: And I will say Bezos talks about this in the letters. And he says one, you can tell a difference between a good memo and a not as good memo. And he basically says a good memo takes probably at least a week to write because you write it, you edit it,

[00:29:00] you share it with others on the team, get their input, you set it aside for a couple of days and then come back to it.
So it's a longer process. And some people have said that slow things down. And actually, no, I think it's the idea of slowing down to speed up because then you can speed up now that we know all of this. What are the problems we have to solve? What are the new things we have to invent?
Now we can go after that and speed up the process.
Hala Taha: Yeah, that's really interesting. And also because they can quickly assess what's a good idea. What's not a good idea. And not waste time on bad ideas, just because, somebody had a great presentation and convinced, one or two people to move forward.
Steven Anderson: To move forward. Yep, exactly.
Hala Taha: Yeah. Great. Cool. So going back to risk for a few minutes, everybody knows what ROI is. Return on investment. That's a very common phrase, but Amazon uses another term ROR return on risk. Can you help define that for our listeners and help us understand how we can measure

[00:30:00] and track our ROR?
Steven Anderson: Yeah. So this idea, again, as you said, return on investment, right?
We track a lot. If marketing wise, if I'm gonna spend X amount of dollars on ads somewhere, how many more sales am I gonna get? And we're really good at looking at those kinds of relationships, but when it comes to risk-taking, it, it is more nebulous. It's not quite as hard and fast. And so adding in that equation of what's your return on risk.
And again, going back to Amazon, they took a great risk on Amazon prime, but what's their return been? They took a great risk on Amazon marketplace, but what's the return been? No, both of those Bezos identifies as one of their big bets. So it is harder to measure but to me, it's a mindset of how do we invest in experimenting?
How do we gauge, again, success and failure in that process? How do

[00:31:00] we know to move forward with invention? And it really is more of a mindset. And frankly, I'm still working on a formula to try and put some more weight around that idea. But the concept in the book and as at the Amazon is very much a mindset of, we know we have to risk things if we're gonna be able to move forward.
Hala Taha: Yeah. So I know that there's a risk of doing something and then there's also a risk of not doing something. Could you provide more color of break that down for us?
Steven Anderson: Yeah, that was a curve thought process as the book was starting to come together because when it comes to technology, and I think we can all agree.
Technology continues to develop rapidly and one of my core thoughts was businesses don't have the time today that they used to. 10 years or 15 years ago to take a year or two and figure out this new platform, or what's the internet gonna do, or right. You have a much

[00:32:00] shorter time period today.
And so making a decision to not move forward or not embrace the technology or not experiment is perhaps a bigger risk, but most business owners, managers, whoever. Consider the risks being, if I do this, if I experiment on this new platform, this new process, this new service, that could be the bigger risk when in fact it could be the opposite.
So absolutely there's a risk of not doing something. And I would say back to some of those kinds of, I would say well-known examples, but that was Blackberry. Nobody's gonna ever wanna type on a glass keyboard. They're always gonna want a physical keyboard. No, people's attitudes change.
You can't do that. Blockbuster people are always gonna wanna go and rent from a video store. No Netflix showed that was not the process. And again, people's viewing habits changed. They still wanted to watch

[00:33:00] movies, but how they watched them change. So not an and by the way, blockbuster had an opportunity to buy Netflix.
And they said, no, so again, not seeing the future. And again, that's one of the things that Bezos talks about is the way he describes it is having a mindset of eagerly adopting new trends. So not being afraid of those new trends. And again, that's part of that risk taking mindset.
Hala Taha: Yeah. All of this is so fascinating to me.
I think Jeff Bezos and Amazon is it's just such a well-run company and they're the biggest company in the world right now. I feel like they're crushing it, especially during COVID-19 it's we are like, our lives depend on Amazon right now. So it's just so interesting.
Steven Anderson: Yeah. So they're right up there in terms of just market capitalization.
They're right up there with Microsoft and Google and Amazon. And so again, I think their reasons they're there. And that's

[00:34:00] what the principals try. That's why I broke it down that way and try and highlight some of it. Cause it's not just one, they're 14 for a reason. They all are stand on each alone.
Then but they all interact with each other too. So that's part of, what's difficult about trying to look at Amazon and bring those things into your own businesses. You've got to think not just, oh, I got to do customer obsession, but there are several things that you can work together to enhance your own business.
Hala Taha: Yeah, very cool. So I wanna spend the rest of the interview really focusing on the letters themselves. One of the principles in your book is this phrase that Jeff Bezos used in his first letter in 1997, it's always day one, or he refers back to it in all his letters that it's always day one. Tell us about what that means and how can our listeners incorporate this idea in their daily lives.

[00:35:00] Steven Anderson: Yeah. So for Bezos day one, as you say, he's, he uses it from the very first letter in, and it's in the context at that point of the internet is so new that nobody knows, we don't really know what is gonna happen. And so he says, it's day one for the internet and day one for Amazon. And it really has developed over the years to a mindset of.
Amazon, even as big as it is. Thinks like a startup. And that's really hard to do, right? Because the problem is most companies that get successful, like Amazon success actually is their biggest risk because we get successful and we start protecting what got us there instead of. Actually killing, right?
What God is there and looking at what's new, different, or

[00:36:00] what else we can do. And so, he reinforces this idea of day one. And he ends virtually every letter with something, as you said, along the lines of, it's still day one. And by the way, that first 97, 19 97 letter, he has attached every single year to the, every new letter.
So he actually ends the phrase with as is my habit. I attach our 1997 letter. It's still day one. And in fact, in the 2019 letter, he ends with that, but changes just a little bit. He says, even in these times, right talking about COVID and all the things going on, even in these times, it's still day one. So to the point for Bezos is that, the office building in Seattle, where he has his office has a plaque in the lobby.
It's called the day one building. And the plaque identifies his mindset

[00:37:00] around this. But I think one of the best ways to describe the mindset is actually. A question. He got an a at a all hands meeting and the question was Jeff, what is day two look like? And actually there's a great YouTube video where he answers the question it's probably worth looking up, but here's how we answers it.
And I'm quoting from the 2016 letter day two is stasis followed by irrelevance, followed by excruciating painful decline, followed by death. And that is why it's always day one. So that decline, and he says, that could take years and has for many businesses, that are not doing as well today, or have gone out at, Sears is the one that pops into my mind, but I think what's really interesting in the letter.
He goes on to say, I'm interested in how you fend off day two. How do you stay day one? And he says there are four

[00:38:00] things that he's identified at least right now that are day one. Defense. One is customer obsession. Talked about that. Two is a skeptical view of proxies. So in Bezos use of that word, a proxy is any process or procedure that isn't thoughtfully
used meaning how many times have you heard a customer service person say, oh, that's not our procedure. If the procedure's not serving the customer, then let's not make the procedure the end all and be all. Let's make sure the procedures still correct today. So that's what he means about a skeptical view of proxies.
And I mentioned this one before an eager adoption of external trends, keeping that future focused out there. And then fourth, finally, high velocity decision banking. So he identifies those four as day one

[00:39:00] defense activities to keep a business, even as they grow and scale. In that startup mindset.
Hala Taha: Yeah. That's really powerful stuff. I would encourage everyone to look up day one mindset and like embrace that because I think it's really interesting and I think it can really help people be innovative, always stay scrappy, resourceful, have a customer first mentality. I think that is really powerful stuff.
Back when Bezos wrote this 1997 letter, Amazon actually. It was already bay, it was already successful, but it was unprofitable at the time. I think profitability was something he was trying to argue against in terms of how people should value Amazon. Why do you think that people shouldn't judge a company like Amazon, at least at the time based on their profitability?
Steven Anderson: Part of what he says in that 97 letter is with the internet and the early days of the internet, we believe that it's a land rush right now.

[00:40:00] So the idea is we need to invest and get out in front and become the platform. So our focus will be on the longterm, not on short-term quarterly profits. And he got hammered, Amazon and Bezos got hammered by wall street.
And you have to remember. He actually came out of wall street. He worked for an investment firm in New York before he started Amazon. And so he understood that mindset that needing to hit quarterly profits all the time. But also, he said, we're not gonna do that. And he talks about it at the end of that letter that, if your investment strategy is, to get short-term profits to come in and out, we're probably not a good stock for you to hold, buy and hold.
But if you think of the long-term, we are a good place for you to be, and he says, I wanna be clear. And again,

[00:41:00] I think we're seeing a theme here. He thinks differently. Most people would be, yeah, buy my stock. He's going, no, here's our philosophy. We're gonna build for the long term. You will see results, but not in the short term.
And they weren't profitable. And I can't remember, I'd have to look up the exact year, but it was 10 years, at least before they showed their first profit, because they reinvested everything right into fulfillment centers and infrastructure and all of those things that now we're paying off huge dividends.
Hala Taha: Exactly, and anybody who invested in Amazon back then has has 30 X their investment at least.
Steven Anderson: Actually I just read somewhere that in that early years, 97, 98, a hundred dollars in Amazon stock would be worth over $11,000 today. Just a hundred dollars. Yeah.
Hala Taha: Wow.
Steven Anderson: Yeah.
Hala Taha: I only bought stock like three years ago, so it was still profiting, but not that much.
So speaking of him, like thinking

[00:42:00] radically different in his 2001 letter. He talked about measuring Amazon by free cash flow. Can you explain why Bezos believed that free cashflow was the best metric for understanding the financial success of his business?
Steven Anderson: I can attempt to. This was actually, and I said this in the book free cash flow was so important
to Bezos as the correct measure, but I am not an accountant. I'm not the financial analyst there, but as I understand it and others out there can explain it better than I can, but having the cash available to invest is a better indicator of success for a company. And in fact, They do the legal right gap accounting in their 10 K, but they also add these whole sections around free cash flow and where they are and what the numbers look like because Bezos feels very strongly, that's a better measure

[00:43:00] of potential and the success of the company.
So you're absolutely right. Again. Going against the grain of what most businesses do.
Hala Taha: Yeah. And then now a lot of companies, I think report that way and report on free cashflow. He likes set the trend there.
Steven Anderson: Yeah, think he set the trend. I think there are more companies today that do that than back then, because of, I won't say necessarily just because of him, but that thought processes made its way into a whole lot of other companies.
Hala Taha: Yeah. So let's fast forward to 2019. Was his 2019 letter that talked about COVID-19 incorporated in your book? Or did that come later after the book?
Steven Anderson: It came later, actually that letter was released. So the letters are released the April after the year. So for 2019, it was released in April of 2020. So that was not incorporated, was not available when we publish the book.
And it's an interesting letter. It's a weird letter. I just say it

[00:44:00] that way. I still haven't gotten my head completely around it. And for the first time, I'm not sure he was the primary author of that letter. Now all the other letters, there's a flow and a cadence and how a words are used and I'm convinced he had help.
I'm sure writing them, but I'm convinced he had that final edit before the letter was published. The 2019 was, is just different in a couple of ways. One is obviously the COVID-19 stuff and talking a lot about their response and what they're doing and how they're protecting employees. I actually wrote a, an article.
I'm trying to think of the timeline right now and unusually for the first time that I know of. He released a public letter to employees talking about their response to COVID 19 and what they were gonna do and how they were gonna protect employees and those kinds of things. And actually I wrote an article in around, how Bezos is leading in crisis and communicating and some of

[00:45:00] those things.
And then some of that's reiterated here in the 2019 shareholder letter. And then the second half, it just shifts. Second half goes into sustainability and and frankly, Amazon is doing great things in sustainability and those kinds of things. And when I find interesting is people seem to think this is a new thing for Bezos and it's not.
Bezos was sustainability and climate change and helping the earth. And his, he was valedictorian of his high school class in Miami, Florida. His valedictorian speech talked about how. Manufacturing needed to be moved to outer space or red earth orbit, and that the earth should become designated as a national park and people come there on vacations, so this is not an idea that is brand new for him and the whole reasoning

[00:46:00] behind blue origin.
This face company that he started is to create the infrastructure. To actually make that vision possible. Meaning getting into space cheap enough that literally, and these are his words. A college kid in a dorm room could create a space company. And so I think he's misunderstood a bit in, in that arena cause I've seen some stuff written of, oh, now he's coming thinking about it.
No, he's been thinking about it since high school or earlier,
Hala Taha: That's so interesting. Yeah. I never knew that he was really a big sustainability proponent. I definitely wanna dig deep into that at some point and try to understand, I don't know much about his space company or anything like that, really interesting guy. Great job on the book. Great job on the research. The last question that we ask every guest on the show is what is your secret to profiting in life?
Steven Anderson: Two things come immediately to mind. One is generosity. I'm pretty convinced that the more

[00:47:00] generous you are, the more that comes back to you as a individual and as a business there.
And I would say the second things that comes to mind is I practice a pretty. I guess structured would be the right way of saying it, but goal setting process. And so I have annual goals. I have, I take those annual goals into quarterly goals, into monthly goals, into weekly goals. And literally I have, what are the three things I need to do today that will move me forward on one of those goals.
Hala Taha: Oh, very cool. And how often do you do that goal setting?
Steven Anderson: So I review, I have a weekly review so I actually review the week and what did I do? What didn't I do well, and I update things monthly and then quarterly. And then a full annual, like a day long process of what goals do I want to accomplish.
And they're not all just business, some of them are

[00:48:00] personal hobbies, things like that. Cause again, I believe there's more to business than just business.
Hala Taha: Oh, totally. Yeah. I interviewed David Allen. He is the inventor of the GTD getting things done system. And I think that. That reminded me of his process a lot.
Steven Anderson: Absolutely. Yeah, now, his book had a big impact on me early on.
Hala Taha: Very cool. So where can our listeners go to learn more about you and everything that you do?
Steven Anderson: So the best place for the book is theBezosletters.com. And if you'd like, there some additional material workbooks to help you, as you read through and work through the book and apply it to your own business.
I've also created an assessment there that helps you. Understand one, your risk tolerance and where in the four cycles and 14 principles might you and your business have most effective use of right now. So no, no cost to that, but you can access both of those on theBezosletters.com.
Hala Taha: Great. Thank you

[00:49:00] so much, Steve. It was such a pleasure to have you on.
Steven Anderson: Hala, thank you! Enjoyed the conversation
Hala Taha: Thanks for listening to young and profiting podcast. If you enjoyed this episode, please consider leaving a review on apple podcasts or comment on YouTube SoundCloud or your favorite platform. Reviews make all the hard work worth it.
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