Motley Fool Radio Interview With
Jeff Bezos CEO, President,
and Chairman of Amazon.com

(August 28, 1999) -- Fool co-founders David and Tom Gardner recently interviewed Amazon.com (Nasdaq: AMZN) CEO Jeff Bezos on the Motley Fool Radio Show. Mr. Bezos shared his thoughts on Amazon's business, short-term investors, and the dating habits of Amazon employees. You'll find the transcript for the interview below.

Tom: We're joined right now by Jeff Bezos, the CEO of Amazon.com, who's been on the program before with us. Jeff, what is the promise that Amazon.com has made to people using the service and buying products from you over the last couple of years? What is the promise that you have to deliver on to build your brand?

Bezos: Well, I think what we're trying to do is be Earth's most customer-centric company. So it's a whole bunch of little things that add up and some big things. But if you could be a customer company -- and sometimes people ask us are you a book company or a music company or now are you a toy company and we're none of those things. We're trying to be a customer company and you can sort of uniquely do that well on the Internet because of the possibilities for personalization, putting each individual customer at the center of your universe. And if you can do that you'll have something completely new and that sort of customer-centricness, the service, the experience, I guess another way to say it is maybe starting with the customer and working backwards. If we can be known for that, then that allows us to do a lot of things for customers.

David: Now given that, Jeff, I want to ask you a question we asked you actually about a year ago when we last had you on and maybe the answer's changed, but maybe it hasn't. And that is, given that you want to be Earth's most customer-centric company, who do you regard as Amazon's primary competition today, here at the end of August?

Bezos: Well, it's a very interesting question. And in fact, our competitive set changes so fast that the people we have to focus on as competitors seem to change almost daily and I think one of the reasons that I ask everybody at Amazon.com to be obsessed over customers instead of competitors is because of that. The customer needs evolve, but they evolve so much more slowly than the competitive set, the technologies and all of the other things that you can get confused by. So it's a tough question to answer that way. I would say in each category that we do business we have a focused competitor that we pay attention to. And then of course those are the online companies and we can watch those competitors and learn from them, but there are also bigger companies that are the physical companies, that's where the revenues are. Those are the other companies we have to look at as competitors because that's where the customers are today.

David: You know, it's funny because I think of Amazon and I think that you may be one of the most competed against companies on Earth. It's really amazing when we think about how many people would identify Amazon. And you have spread your wings so much as a company offering so much, Jeff, and you have been a feisty competitor. Do you feel any sense of responsibility or any sense of remorse for what happened to Planet Hollywood? Is Amazon.com at all responsible for Planet Hollywood? I want you to admit it.

(All laughing)

Bezos: Well actually we have spent a lot of time deep down worrying about that.

Tom: Now Jeff, a couple of weeks ago we had the CEO of Yahoo!, Tim Koogle, on the show and Tim was talking about, in the case of Yahoo!, their desire right from the beginning to build profitability into their corporate culture and define their business on that commercial mission of turning over value in terms of earnings right away to shareholders. Amazon has obviously taken a different path, continues to be unprofitable while showing incredible revenue growth and growth in customers around the world. At what point does profitability become your primary concern and how do you reassure your employees and investors in the interim until we get there?

Bezos: That's a great question. What we tried to do is first of all be extremely consistent and make sure everybody understands both internally and externally that this is a conscious strategy. At the same time [we want] to build a culture -- a lean culture -- that will support profitability at the right time. Cultures are incredibly hard to change, so if you end up with a culture that doesn't support that, or a high cost structure that makes it impossible at any skill level to be profitable, you're just sunk. Because all companies have to be profitable in the long term where you don't get to keep doing anything for customers. But we believe it will be a huge mistake to try to optimize now for short-term profitability.

This is one of the most unusual business events of all time -- what's happening as a result of the Internet, this big dislocation it's caused -- and there's insurmountable opportunity. And the right way to think about it and the way we think about it internally as to when we should shift more focus towards profitability in the short-term is watching the ratio of our mature businesses to our new opportunities that we are investing in. And right now, I'd say we have one sort of semi-mature business which is our U.S. books business. And then we're investing in Germany and the U.K. We're investing in new product categories like toys and electronics and we're investing in whole new business models like auctions. So with all of these opportunities we just think it would be a mistake, it would be shortsighted, to try and optimize for profitability in the short-term.

Tom: Jeff, there's been a tremendous amount of interest among investors really around the world, a lot of focus here in the U.S., but there are a lot of international investors as well buying into Internet companies as owners, but a lot of paper trading of Internet stocks as well. You've spoken over the past year and the past two years about what you think the future holds for Internet publicly owned businesses for the shareholders in these companies. What do you think is in store? There are dozens of internet.com businesses and how will things shake out for investors in these companies?

Bezos: I think that Internet companies because of their volatility are inappropriate investments for any short-term investor. I don't understand how a short-term investor can make a decision to invest in an Internet company. And then I also think they are volatile enough that, for small shareholders -- you know, they should have only a reasonable small portion of their holdings in pure play Internet companies and I clearly include Amazon.com in that group.... So there's the volatility issue. If you look long-term, clearly there are going to be some companies, some of the largest market cap companies in the world ten plus years from now are going to be born of the Internet. I think that you can predict that very confidently, but I think that trying to predict today which those are going to be is very difficult.

In fact, if you look at the history of pioneers -- and again I'm including Amazon.com in that group -- if you look over the past and see other revolutions like the PC revolution and so on, the history of pioneers isn't always that good. So people have to be cognizant of the fact that there are going to be more winners coming out of the Internet revolution than came out of the PC revolution, for example. These companies are going to do very, very well, but trying to pick the winner is going to be tough and there are some differences between the Internet revolution and the PC revolution. I think the brand does matter more here. I think that some of the increasing returns dynamics are even stronger here than they were in the PC revolution.

David: Can you focus on that for a sec, Jeff, increasing returns dynamics? Can you really underline that and make it clear what you mean by that?

Bezos: Yeah. This is the notion that the more success you have, the more success you have. A very simple example in the case of Amazon.com is our customer reviews. We let customers review any item in our catalog and they do. And we have millions of these reviews and the more customers we have, the more reviews we get. And the more reviews we have, the better our experience is for customers and the more customers we get. So the upwards spiral is what people are talking about when they talk about increasing returns dynamics.

David: Can you give us an example of another Internet or other business today that you see that in?

Bezos: You also see it in almost any business that has a powerful brand or word of mouth. Brands are increasing returns dynamics. Online auctions is another case where you see increasing returns dynamics because the buyers go where the sellers are and the sellers go where the buyers are.

Tom: The payoff question: There's been some controversy this past week about the purchasing circle which allows buyers to see what other groups of individuals are buying.

Bezos: A specialized best sellers list.

Tom: Exactly. Specialized best sellers list by company, by region, by zip code, etc. And I don't even really want to go into the privacy issue because I think there's been a whole lot of media hype about that and this is nothing -- there's no big privacy concern here when you have groups of 200 or greater and the information is being presented. But I do want to raise a concern that I have about something that I'm seeing here in USA Today. I see first of all, on the one hand Suzanne Sommers' diet book currently occupies the number one spot on the Amazon best sellers list. That's kind of the proxy for mainstream America. But now I'm looking in USA Today at the top four books that the Amazon.com employees own and here are some titles for you: HTML 4 for the World Wide Web, Learning the Unix Operating System, and Unix in a Nutshell.

David: So I guess our question for you, Jeff, is are these people getting dates?

Bezos: Yeah. I think they are, but they're probably dating each other.

David: Jeff Bezos, CEO of Amazon.com. Thank you very much for joining us for The Motley Fool Radio Show once again.

Bezos: Thank you.

Related Links:
-- Rule Breaker Portfolio (Amazon.com is a portfolio holding)
-- Motley Fool Radio Show
-- Amazon.com Message Board
-- Amazon.com Dueling Fools - 6/30/99
-- Fools on Amazon.bomb - 6/8/99
-- Fool Interview With Amazon's Jeff Bezos - 1/16/99
-- The Planet Hollywood Story - 6/1/99