THE PE INVESTOR

There’s certain people that you do not want to try to beat at their own game, and certainly Jeff Bezos would be number 1. (…)  Jeff has just shown amazing talent in figuring out how to please customers.

Warren Buffett, Chairman of Berkshire Hathaway

Amazon was founded in 1994 by Jeff Bezos, a former senior VP at hedge fund DE Shaw, initially as an online book store. About 30 years later, the company generates net sales of $575 billion and an operating income of $37 billion (FY2023), employs 1.5 million people, and Jeff Bezos is the world’s #2 richest man with a net worth of $234 billion (Forbes, January 2025). Amazon has managed to become a global leader in two seemingly unrelated lines of business: (1) the original consumer business (net sales of $484 billion, operating income of $12 billion), whose online stores and offline stores sell a very wide assortment of merchandise and offer related goods and services (third-party seller services, advertising services, subscription services, consumer devices); and (2) the more recent Amazon Web Services (net sales of $91 billion, operating income of $25 billion), started in 2006, which provides on-demand, pay-as-you-go, cloud computing, storage, database, machine learning and other services to startups, enterprises and government agencies.

Below are the most salient aspects of Amazon’s management system, compiled from various sources.

Disclaimer: Blind imitation of the principles and practices below should obviously not be viewed as a surefire recipe for success, but it is interesting to note that Bezos and his team also drew inspiration from other successful founders, managers, companies, and thinkers before them – e.g., Sam Walton (Walmart), Warren Buffett (Berkshire Hathaway), Alan Greenberg (Bear Stearns), Jim Collins, Clayton Christensen, GE, Microsoft, Toyota, etc. – combining their best ideas in an original and relentless manner.

Think about the business in a long-term, holistic way – like an owner, not a renter

• Owners are different from tenants:
  • Long-term thinking is a requirement and an outcome of true ownership.
  • Tenants tend to be more short-sighted.
• The long-term interests of shareholders are tightly linked to the interests of customers:
  • If you do your job right, today’s customers will buy more, you’ll add more customers, and it will add up to more cash flow and more long-term value.
  • The fundamental measure of success is long term shareholder value creation. Online selling is a scale business characterized by high fixed costs and relatively low variable costs. Market leadership drives higher revenues, higher profitability, greater capital velocity, stronger ROIC, and shareholder value.
• Focus relentlessly on customers.
• Measure indicators of market leadership first: customer and revenue growth, repeat purchases, brand strength.
• Invest in light of long-term market leadership rather than short-term profitability considerations or stock market reactions.
• Measure effectiveness, step up investment in what works best, jettison investments or programs that do not provide acceptable returns.
• Learn from sucesses and failures.
• Make bold investment decisions when the odds are favorable.
• Maximize future cash flows rather than GAAP earnings.
• Spend wisely and maintain a lean, cost-conscious culture.
• Balance the focus on growth with long-term profitabilty and capital management.
• Hire and retain versatile, talented, and motivated employees who must think like, and be, owners.

Obsess over customers (rather than competitors)

• The customer franchise is the most valuable asset:
  • Nourish it with innovation and hard work.
  • Focus on offering customers compelling value, along durable customer experience pillars.
    • E.g., in retail, such pillars include: (1) vast selection, (2) fast, convenient delivery, and (3) low prices.
  • This will create repeat purchases and word of mouth.
• Work hard to grow:
  • The number of customers.
  • The number of products they purchase.
  • The frequency with which they shop: the more frequently they visit, the less time, energy and marketing investment is required (“in sight, in mind”).
  • The level of satisfaction they have.
• View customers as perceptive and smart, and work hard to earn and keep their trust: 
  • Brand image follows reality, not the other way around. 
  • Wake up every morning terrified of customers: they are loyal, until some else offers them a better service.
  • The pricing objective is to earn customer trust, not to optimize short-term profit dollars.
  • Your brand is what other people say about you when you’re not in the room.
  • A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well.
• A competitor-obsessed leader will see everybody running around behind and slow down.
• A customer-obsessed company will be pulled along by customers, who are always dissatisfied and always want more.
• If you can keep your competitors focused on you while you stay focused on the customer, ultimately you’ll turn out all right.
• Pay attention to competitors and economics, but obsess over customers.

Invent on their behalf

• Listen to customers, but also invent on their behalf.
• Improve, experiment, and innovate in every initiative.
• Look for new ideas everywhere.
• Start with customers and work backwards.
  • Identify a customer need.
  • Develop conviction that the need is meaningful and durable.
  • Work patiently to deliver a solution, acquiring new competences in the process.
  • If you only used a “skills-based” approach (i.e., “We master this skill, what else can we do with it?”) it will not drive you to develop new skills, and your existing skils will become outmoded.
• Use the PR-FAQ framework.
  • Start by writing a press release (“PR”), specifying the features, cost, customer experience, and price of the product or service. If the PR does not describe a product or service that is meaningfuly better (faster, easier, cheaper) than what is already out there or results in a stepwise change in customer experience, then it is not worth building.
  • Add a “frequently asked questions” (“FAQ”) with answers, to share the salient details from a consumer point of view and assess how expensive and challenging it will be to create it from an internal point of view (operations, technical, product, marketing, legal, business development, financial).

Commit to operational excellence, which also includes customer experience

• Operational excellence covers both customer experience and more traditional operational concepts (productivity, margins, efficiency, asset velocity):
  • Continous improvement in customer experience.
  • Driving productivity, margin, efficiency, and asset velocity.
• The best way to drive one of these is to deliver the other:
  • Focus on cost enables lower prices, which drives growth. Growth spreads fixed costs across more sales, reduces unit cost, and enables price reductions (“price-cost structure loop”).
  • More efficient distribution yields faster delivery, which lowers customer service costs, improves customer experience, and decreases customer acquisition and retention costs.
• Be cost-conscious and spend wisely:
  • Maintain a lean, frugal culture.
  • Accomplish more with less.
• Apply Toyota’s approach to quality control and continuous improvement: 
  • Identify and eliminate waste:
    • Everywhere you look, you can find waste.
  • Identify the most effective sequence of actions (“standard work”) and track all abnormalities.
  • Empower employees to stop the production or sale of goods when they notice a quality problem (“Andon Cord”):
    • This enables serious issues to surface as soon as they are noticed.
  • Identify the root cause of defects using the “Five Whys” method:
    • Eliminating mistakes and defects at their root improves customer experience and costs: e.g., allowing negative customer reviews, “instant order update”, “look inside”,  ability to cancel or modify an order
    • Instead of cleaning, eliminate the source of dirt.
  • Assign continuous improvement (“kaizen”) teams to eliminate them.
    • Ideal teams combine frontline workers, engineers, and executives.
    • Each kaizen is a very simple thing, but the accumulation of kaizens makes an enormous difference.

Keep a “forever day 1” culture

• Fend off “Day 2”: stasis, followed by irrelevance, decline, and death.
• The starter pack of essentials for Day 1 defense includes:
  • Customer obsession:
    • Customers are always dissatisfied.
    • Your desire to delight them will drive you to invent on their behalf.
    • This requires patient experimenting, accepting failures, planting seeds, protecting saplings, and doulbing down when you see customer delight.
  • A skeptical view of proxies:
    • If you’re not watchful, the process becomes the proxy for the result you want.
    • Market research and customer surveys can become proxies for customers.
  • The eager adoption of external trends:
    • e.g., machine learning and artificial intelligence.
  • A high-velocity decision making:
    • Use a different process for type 1 and type 2 decisions
      • Type 1 decisions are consequential and irreversible (one way doors) and require a methodical, slow, careful, deliberative and consultative process.
      • Type 2 decisions are reversible (two-way doors) and can use a light-weight process.
    • Don’t wait to have 100% of the information you need
      • Make decisions with 70% of the information you wish you had.
      • If you’re waiting for 90%, you’re probably being slow.
    • Be good at quickly recognizing and correcting bad decisions.
    • When there is no consensus, “disagree and commit”
    • Recognize and escalate deep misalignment issues immediately.

To compete effectively, be robust, nimble, and innovative

• Robustness (the ability to take a punch) stems from scale. As you get bigger, you grow more robust (e.g., the US Army).
• Nimbleness (the ability to dodge a punch) stems from decision-making speed, and from the willingness to be experimental, take risks, and fail.
• Innovation avoids having to compete on an even playing field.

To get outsized returns, swing for the fences, but be prepared to strike out a lot

• Outsized returns often come from betting against conventional wisdom, but conventional wisdom is usually right.
• If you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs.
• The difference between baseball and business, however, is that baseball has a truncated outcome distribution while business has a long-tailed distribution of returns.
  • When you swing, no matter how well you connect with the ball, the most runs you can get is four.
  • In business, every once in a while, when you step up to the plate, you can score one thousand runs.

Plant high-potential seeds, so that big winners pay for many failed experiments

• Look for customer problems that need solving.
• Look at technology and how it may change the customer experience
• Set a bold direction that inspires results.
• Before investing shareholders’ money in a new business, ask the following questions:
  • Returns: Can the new opportunity generate the returns on capital investors expect?
  • Potential size: Can the business grow to a scale where it can be significant in the context of the company?
  • Differentiation that customers care about: Is the opportunity currently underserved? Do you have the capabilities to bring strong customer-facing differentiation?
• Having a culture supportive of small businesses with big potential is a source of competitive advantage.
  • In many large companies, it might be difficult to grow new businesses from tiny seeds because of the patience and nurturing required.

Allow experimental failures, not operational failures

• There are two different kinds of failure.
  • There’s experimental failure, e.g., when you are developing a new product or service or experimenting in some other way. If it doesn’t work, that’s okay.
  • And there’s operational failure, e.g., when you’ve done something many times, know how to do it, but it ends up being a disaster. That’s just bad execution.
• Failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment.
• Most large organizations embrace the idea of invention but are not willing to suffer the string of failed experiments necessary to get there.

Think hard about “one-way door” decisions, but act fast for “two-way door” decisions

• There are two types of decisions:
  • Type 1 decisions are irreversible and highly consequential decisions (“one-way doors”): if you don’t like what you see on the other side, you can’t get back to where you were before.
  • Type 2 decisions are reversible decisions (“two-way doors): if you’ve made a suboptimal Type 2 decision, you can reopen the door and go back through.
  • Most decisions are two-way doors. If they turn out to have been wrong, you can back up.
• When a decision needs to be made, assess if it is a one-way door or a two-way door:
  • If it’s a two-way door, make the decision with a small team or even one high-judgment individual. If it’s wrong, it’s wrong. You’ll change it. There is no need for extensive study. Speed matters.
  • If it’s a one-way door, make the decision methodically, carefully, slowly, analyze it five different ways, get consensus or at least drive a lot of thought and debate.
• In large organizations, all decisions end up using the heavyweight process that is really intended only for irreversible, highly consequential decisions. And that’s a disaster.
• [Personal note: In some fast-growth, entrepreneurial companies, the opposite tends to happen: all decisions end up using the quick process, including irreversible, highly consequential ones, which can lead to disasters too.]
• For big decisions, act as the Chief Slowdown Officer: Says Bezos: “I often find myself at Amazon acting as the chief slowdown officer: “Whoa, I want to see that decision analyzed seventeen more ways because it’s highly consequential and irreversible.”

Have backbone, “disagree and commit”

• Challenge decisions when you disagree.
• Do not compromise for the sake of social cohesion.
• Commit wholly once a decision is made.
• When two subordinates disagree, hear the various points of view, decide the way forward, and ask them to disagree and commit: “Look, none of us knows what the right decision is here, but I want you to gamble with me. I want you to disagree and commit. We’re going to do it this way. But I really want you to disagree and commit.”
• When a subordinate disagrees with you, you should sometimes overrule them, but often disagree and commit:  “You know what? I really disagree with this, but you have more ground truth than I do. We’re going to do it your way. And I promise I will never tell you I told you so.”

Make major initiatives someone and his (small) team’s full-time job

• Appoint a single person, unencumbered by competing responsibilities, to own a single major initiative (“single threaded leadership”).
• He should head up a separable, autonomous team to deliver its goals, with the tools and authority to complete the job.
  • The team should be small enough to be fed by two pizzas. [Note: this rule has since been replaced by the “single-threaded leadership” concept].
  • The team should have clear, unambiguous ownership of specific features or functionality and be able to drive innovations with a minimum of reliance or impact upon others (too much dependency slows down the pace of innovation and creates a dispiriting disempowerment).

Align their plans with the company’s goals with a thorough annual planning process

• The annual planning process seeks to align independent teams:
  • The company relies on autonomous, single-threaded teams, which keep it nimble.
  • Their autonomy must be paired with precise goal-setting to align their independent plans with the company’s overarching goals.
• The senior leadership team (“S-Team”) sets high level objectives for the company in the summer, e.g.:
  • Revenue growth targets by geography and business segments.
  • Operating leverage targets.
  • Improving productivity and giving back savings to customers via lower prices.
  • Free cash flow generation targets.
• Operating plans (OP1, OP2):
  • Each group prepares a more granular, bottom-up operating plan, with finance and HR:
    • Assessment of past performance, including goals achieved, goals missed, and lessons learned.
    • Key initiatives for the following year.
    • Detailed income statement.
    • Requests and justifications for resources (new hires, marketing spend, equipment and other fixed assets).
  • The plan is presented to a panel in the fall, via a 6-page narrative memo, reworked until Q4, and updated in January.
    • The panel reconciles any gaps between the bottom-up proposal and the top-down goals.
    • The team may be asked to rework its plan until the top-down goals and bottom-up proposals reconcile.
    • The process (“OP1”) is completed by December.
    • In January, OP1 is updated to reflect Q4 results and to update the trajectory of the business. This shorter process (“OP2”) generates the plan of record for the year, including targets for revenue, cost, and performance.
  • The plan of record (OP2) makes it clear:
    • What each group has committed to do (owners, deliverables, and targeted completion dates).
    • How they intend to achieve those goals.
    • What resources they need to get the work done.
  • Goals may be added, removed, and modified along the way, but any change to OP2 requires formal S-Team approval.
• S-Team goals:
  • The S-Team then selects the most important OP1 initiatives and goals within each group.
  • For instance, 6 out of the 23 Amazon music team goals might be included as S-Team goals.
  • The music team would work to achieve all 23, but would make sure to prioritize the 6 S-Team goals via resource allocation decisions.
• The goals are unusally numerous, detailed, aggressive, and customer oriented for the most part.
  • There were 452 S-Team goals in 2010, of which 360 will have a direct impact on customer experience. The word revenue was used 8 times, and free cash flow only 4 times. The terms net income, gross profit, and operating profit were not used once.
  • Examples could include “Add 500 new products in the musical instruments category (100 in Q1, 200 in Q2, etc.)”, or “Ensure 99.99% of calls to software service XYZ are responded to within 10 milliseconds”.

Follow up on performance on a weekly and quarterly basis

• Weekly Business Review (“WBR”) process:
  • Weekly cadence:
    
    • The review is held on a weekly (or bi-weekly) basis.
    • This accelerated feedback and adjustment loop, enables to identify issues, and make mid-course adjustments much faster and with much more agility than competitors.
  • Focus on issues (variances against expectations) and what is being done about them:
    • Instead of focusing on historical performance, the review focuses more on how to solve particular customer problems and how to design and implement experimentations to improve, innovate, and invent.
    • Business owners are expected to provide crisp explanation for variances against expectations.
    • Things which operate normally should not be delved on.
    • The meetings should be planned ahead and run efficiently.
  • Begin each meeting with the distribution of a data package:
    • Weekly snapshot of graphs, tables, and explanatory notes for all the metrics.
    • Customer feedback should be collected and summarized (“voice of the customer”).
    • Formatting should be consistent to speed interpretation.
  • Focus on controllable inputs (leading indicators) rather than outputs (lagging indicators):
    • Controllable inputs include areas such as selection, price, and convenience.
    • Output metrics include areas such as customers, orders, revenue, profit, and share price.
  • Refine, improve, and independently validate metrics:
    • The selection metric evolved from “number of detail pages” to “number of detail page views” to “% of detail page views where the products were in stock” to “% of detail page views where the products were in stock and immediately ready for two-day shipping” (Fast Track In Stock).
    • The “in stock” metric is measured so as to align with customer experience (i.e., instead of taking a snapshot every night, the information is collected every time a product page is displayed).
    • If the metric is important, do a separate measurement or gather customer anecdotes to see if the information trues up.
  • Certify metrics by the finance team to avoid biases:
    • The finance team’s goal should be to “call it like they see it”.
  • Acknowledge mistakes a chance to take ownership, understand the root cause, and learn.
• S-Team goal tracking:
  • Track the status of S-Team goals throughout the year by the finance team:
    • “Green”: on track
    • “Yellow”: risk of missing the goal
    • “Red”: unlikely to hit the goal unless something meaningful changes) .
  • Review goals every quarter:
    • Thoroughly prepared multi-hour meetings, held on a rolling basis throughout the quarter rather than all at once.
    • The contents of a quarterly business review memo would include: Introduction, Tenets, Accomplishments, Misses, Proposals for next period, Headcount, P&L, FAQ, Appendices (spreadsheets, tables, charts, mockups).
    • “Yellow” or “red” status draws the team’s attention where it is needed most, and calls for a frank discussion about what’s wrong and how it will be addressed.

When acquiring a business or hiring an employee, look for missionaries, not mercenaries

• When meeting the founder or CEO of a company you are thinking of buying, assess whether he is in it merely to make money or because of a true passion for serving customers:
  • The mercenaries are trying to flip their stock.
  • The missionaries love their product or their service and love their customers and are trying to build a great service.
  • The great paradox is that it’s usually the missionaries who make more money.
• Likewise, before hiring an employee, assess whether they are in it for the money or because they believe in the mission:
  • Mercenaries are in it to make a fast buck for themselves, don’t have the firm’s best interests at heart, and don’t have the resolve to stick with the company in challenging times.
  • Missionaries believe in the mission, and stick around for 5+ years.

Look for builders, with true ownership and mental toughness

• Builders are curious, explorers, like to invent, and understand success comes through iteration.
• Ownership: Leaders are owners, who think long-term, don’t sacrifice long-term value for short-term results, act on behalf of the entire company, beyond just their own team, and never say, “that’s not my job.”
• Mental toughness: Don’t give up after failure, worry about pleasing others, fear change or taking calculated risks, make the same mistakes repeatedly, resent others’ success, expect immediate results.

Use a rigorous, consistent process to hire high-level talent

• It is better to let the perfect person go than to hire the wrong person and to deal with the ramifications.
• Before making a hiring decision, consider three questions:
  • Will you admire this person?
  • Will this person raise the average level of effectiveness of the team? In five years, everyone should say “The standards are so high, I’m glad I got in when I did”
  • Along what dimension might this person be a superstar?
• Use the “Bar Raiser” process: A formal process aimed at minimizing personal bias and raising the bar with each hire
  • Job Description: the hiring manager should draft a well-written, specific, and focused job description (JD), which clearly articulates the job responsibilities and required skills. If the JD is for a new position, members of the interview loop begin by reviewing the description and ask clarifying questions, thus revealing aspects of the job previously not identified.
    • The JD for a sales manager, for example, might specify the type of sales (inside or outside), whether the sales are enterprise-related or more transactional (i.e., long lead time, high dollar value vs. one-call close, lower dollar value), and the level of the role (e.g., senior manager, director, or VP).
    • For a software development engineer, the JD might specify that the candidate must have the ability to design and write computer code for highly available, scalable systems that are easy to maintain.
    • For other roles, the JD may specify the ability to negotiate with vendors or manage cross-functional teams.
  • Résumé Review: The recruiter and hiring manager search for candidates by networking, using LinkedIn, and job posts. The recruiter selects the most worthy candidates based on how their résumés fulfill the JD requirements.
    • If the candidates the recruiter selects meet the hiring manager’s expectations, that’s a sign that the JD is clearly written and specific.
    • If the selected candidates are off target, the JD probably needs work.
  • Phone Screen: The hiring manager conducts a one-hour phone interview with each selected candidate:
    • 45 minutes: the hiring manager describes the position, their background and why they chose to join the company (to establish some rapport), questions the candidate and follows up where necessary.
    • 15 minutes: reserved for the candidate to ask questions.
    • The questions are formulated in advance, designed to solicit examples of the candidate’s past behavior (“Tell me about a time when you . . .”) and focus on a subset of leadership principles.
    • A candidate should not be brought in for a time-consuming and expensive interview loop unless the hiring manager is inclined to hire them after the phone interview. The volume and rate of candidates passing through the entire funnel should be tracked and used to coach/train recruiters and hiring managers, and make process changes.
  • In-House Interview: This consists of 5-7 carefully planned interviews of 1 hour each:
    • The hiring manager constructs the interview loop, deciding:
      • How many interviewers should be on the loop.
      • The mixture of roles and disciplines, job levels, and types of expertise that should be represented.
    • In addition to the hiring manager and recruiter, the loop must include a “bar raiser”: Trained to become interviewing experts, they
      • Conduct one of the interviews.
      • Set a good example.
      • Coach others on interviewing techniques.
      • Ensure the process is followed and bad decisions are avoided.
      • Ask probing questions in the debrief.
      • Make sure personal biases do not affect the hiring decision.
      • Determine whether the candidate meets or exceeds the hiring bar set by the company.
    • Loop participants must:
      • Be trained in the company’s interviewing process.
      • Not be more than one level below the candidate.
      • Not become a direct report of the candidate.
    • Assess job-specific functional skills: e.g., asking a software engineer to write software code, solve a design question, develop an algorithm, or demonstrate knowledge of a relevant subject area.
    • Assess personal contribution: Ask the candidate to provide detailed examples of what they personally contributed to solving hard problems or how they performed in work situations like the ones they will experience.
    • Assess cultural fit: Assess how the candidate accomplished their goals and whether their methods align with the company’s leadership principles. Assign each interviewer one or several principles.
    • Avoid general, open-ended questions such as “Tell me about your career” or “Walk me through your résumé”, which are usually a waste of time.
    • Map questions to your assigned principle: e.g., to test high standards, ask “Can you give me an example of a time when your team proposed to launch a new product or initiative and you pushed back on their plan because you didn’t think it was good enough?”
    • Probe the candidate’s actual role using the STAR method:
      • Situation: “What was the situation?”
      • Task: “What were you tasked with?”
      • Action: “What actions did you take?”
      • Result: “What was the result?”
    • Maintain control of the interview: When the candidate goes on a long detour, politely cut him short and move on to the next question.
    • Develop a rapport.
    • Remember that every candidate—whether qualified for the job or not—is a potential customer and source of leads.
  • Written Feedback
    • Take detailed notes—as close to a verbatim record as possible.
    • Written feedback should be specific, detailed, and filled with examples from the interview to address the leadership principles assigned to the interviewer.
    • Block 15 minutes after the interview to complete the feedback, so nothing of value is forgotten.
    • Include your vote on the candidate:
      • Strongly inclined to hire.
      • Inclined to hire.
      • Not inclined to hire.
      • Strongly not inclined to hire.
    • Do not see or discuss other members’ votes, comments, or feedback until your own feedback has been submitted.
  • Debrief/Hiring Meeting
    • Once the in-house interviews are complete and the written feedback and votes have been collected, the interviewers get together in person or via video conference to debrief and make the hiring decision.
    • The meeting should be held as soon as possible, usually no more than a few days after the interviews have been completed.
    • The meeting begins with everyone reading all the interview feedback.
    • Afterward, the Bar Raiser kicks off the meeting:
      • One method is to ask the group if anyone would like to change their vote now that they have had a chance to read all the feedback.
      • Another is to create a two-column list on a whiteboard of the leadership principles where the candidate meets the bar in one column and falls short in the other.
    • The Bar Raiser uses the Socratic method: asking questions that jump-start the critical thinking process, to lead and guide the dialogue with the goal that everyone, or at least the majority, will arrive at the same conclusion about the candidate.
    • The meeting is concluded with a decision from the hiring manager (validated by the Bar Raiser) to hire or not.
      • If either feel they don’t have enough information to make a decision, then there was a failure in the upstream process.
      • It is extremely rare for a Bar Raiser to exercise their veto power.
      • The debrief meeting is an opportunity for each interviewer to learn from others and to develop their ability to assess talent.
      • If the Bar Raiser observes something amiss with the process, they are expected to give real-time coaching and feedback and help get things back on track. A good Bar Raiser sometimes spends more time coaching and teaching in a debrief meeting than assessing the candidate.
  • Reference Check
    • When the interview panel decides that the candidate is a hire, he is asked to supply 4-5 references:
      • Ideally including former managers, peers, subordinates and others.
      • Who have worked directly with the candidate.
      • Possibly for many years.
    • The hiring manager, not the recruiter, calls the references
    • The goal is to further explore and confirm the candidate’s:
      • Skills.
      • Past performance.
    • Two questions often get a telling response
      • “If given the chance, would you hire this person again?”
      • “Of the people you have managed or worked with, in what percentile would you place this candidate?”
  • Offer Through Onboarding
    • The hiring manager should personally make the offer and sell the candidate on the role and company.
      • You may have chosen the candidate, but that doesn’t mean the candidate has chosen you.
      • You must assume that good employees are being actively pursued by other companies, including their current employer.
      • There is always the risk that you could lose the candidate. Nothing is certain until the day they report to the office.
      • It’s important to keep the candidate excited, not only about the company but also about the team members they’ll be working with.
    • After the offer is made, a team member should check in with the candidate at least once a week until he or she makes a final decision.
      • Make a sincere and personal gesture:
        • Email saying how excited you are about the candidate joining the team.
        • Coffee or lunch.
        • Books you think they’d like.
      • Get to know the candidate better.
      • Figure out what key factors will affect their decision.
        • Sometimes you’ll be surprised by what you learn.
        • The candidate may be sold on the role and compensation, but their spouse or partner may have reservations about some aspects of the job.
        • If you’re hiring a recent college grad, their parents may have a voice in the decision.
      • Seek to uncover, address and resolve any issues standing between them and accepting the offer.
      • Enlist other people to help close the deal, e.g. a current employee:
        • Who came over from the same company.
        • Who attended the same school.
        • Who knows someone who overcame similar reservations, or had the same questions.
• You can work long, hard, or smart, but you can’t choose two out of three.
• Recognize and develop talent.
• Help them grow to their full potential.

Weight their compensation to equity rather than cash

• Significantly lower base salaries than in most companies:
  • In 2021, the salaries of the top executives were $160,000 to $175,000.
  • By 2023, they had increased to $365,000.
• No annual cash bonus (whether individual or team-based).
• Periodic grants of restricted stock units subject to long-term back-ended vesting (4-10 years) that assume a fixed annual increase in the stock price.
  • In 2021, the Group CEO, CEO of Worldwide Consumer and CEO of AWS received awards with a quarterly vesting period of 10, 4, and 5 years respectively (CEO: Yr 2: <1% / Yr 3: 4%/ Yr 4: 7% / Yr 5: 10% / Yrs 6-10: 16% each ; Consumer: Yrs 1-4: 25% each ; AWS: Yr 1: 27% / Yr 2: 23% / Yr 3: 19% / Yr 4: 15% / Yr 5: 9%).
  • Other eligible employees typically have the following 4-year vesting period: Yr 1: 5% / Yr 2: 15% / Yr 2.5: 20% / Yr 3: 20% / Yr 3.5: 20% / Yr 4: 20%.
  • When planning compensation, the company assumes its share price will increase by 15% per annum.

Reinforce culture with awards

• Door desk award: This award originates from the early days when Bezos and his team used doors purchased from Home Depot as makeshift desks to save money. The award recognizes employees who come up with creative, cost-saving ideas.
• Just do it award: This award is given twice a year to recognize employees who take notable initiatives to solve a problem, typically outside their primary job responsibilities. Recipients receive a Nike shoe.
• Amazon Stars: This award (established in 2020) is given to c40 employees who contribute at work and in their local communities.

As a senior executive, focus on the big decisions

• As a senior executive, you get paid to make a small number of high-quality decisions.
• Your job is not to make thousands of decisions every day.

Insist on the highest standards

• Model what good looks like, raise the bar.
• Deliver high quality products, services and processes.
• Fix problems.

Use 6-page well written narrative memos rather than live presentations

• Benefits of written memos:
  • Ideas matter most, not presenters. A switch to narratives places the team’s ideas and reasoning center stage, leveling the playing field by removing the natural variance in speaking skills and graphic design expertise that today plays too great a role in the success of presentations.
  • Writing a memo forces to think and synthesize more deeply.
  • The time, energy and stress devoted to rehearsing and delivering presentations can be saved.
  • Narratives deliver much more information in a much shorter time:
    • 3,000-4,000 characters per page for the typical Word document.
    • 400-500 characters per page for the typical Powerpoint.
• Optional, but frequnetly used contents of the memo:
  • Key tenets that lead you to make the recommendation.
  • FAQ, to anticipate counterarguments or misinterpretations.
  • Appendices containing data or documentation.
• Structure of the meeting:
  • Distribute the memo at the start of each meeting.
  • Have each participant read it in silence by for 20 minutes.
  • Ask the audience for feedback, questions and clarifications, offer insights, and suggest refinements or alternatives.

Earn your team’s trust

• Listen attentively
• Speak candidly
• Treat others respectfully
• Be self-critical
• Benchmark against the best

Be right, a lot

• Sift through the noise
• Seek diverse perspectives
• Speak last
• Work to disconfirm beliefs
• Get to the best possible answer for customers

Learn and be curious

• Seek to improve and learn every day.
• Be curious about new possibilities and explore them.

Dive deep into the details

• Stay connected to details.
• Audit frequently.
• Be skeptical when metrics and anecdotes differ.
• No task is beneath a leader.

Deliver results

• Focus on the key inputs.
• Deliver them timely and with the right quality.
• Never settle despite setbacks.

Strive to be the best employer

• Create a safer, more productive, diverse, and just environment.
• Lead with empathy, and make it easy for people to have fun at work.
• Ask if your employees are growing, empowered, and ready for what’s next.
• Commit to your employees’ personal success.

Responsibility

• Create more than you consume.
• Leave things better than how you found them.

Sources

• Invent & Wander, The collective writings of Jeff Bezos
• Working Backwards, Insights, Stories and Secrets from Inside, by Colin Bryar and Bill Carr
• The Amazon Management System, by Ram Charan and Julia Yang
• The Everything Store, by Brad Stone
• Think Like Amazon, by John Rossman
• Amazon Leadership Principles
• Amazon SEC filings