When you hear stories about Amazon’s “invention machine” — which led to a company with not just one or two products but several successful diverse lines of business — we often hear about things like: Memos, six pages exactly and no powerpoints at all!; or, the idea of just “work backwards from the press release”; and other such “best practices”… But what’s often lost in hearing about these is the context and the details behind them — the what, the how (as well as their origin stories) — not to mention how they all fit together. Knowing this can give us insight into  how all companies and leaders, not just Amazon and Bezos, can define their cultures and ways especially as they scale. After all, Amazon was once a small startup, too.

So in this a16z Podcast with Sonal Chokshi — the very first podcast for the new book Working Backwards: Insights, Stories, and Secrets from Inside Amazon (out February 9) — authors Colin Bryar and Bill Carr share not only how Amazon did it, but how other companies can do it, too, drawing on their combined 27 years of firsthand observations and experiences from being in “the room” where it happens. Bill was vice president of digital media, founded and led Amazon Music, Amazon Video, Amazon Studios; and Colin started out in the software group, was a technical vice president, and then, notably, was one of Jeff Bezos’ earliest shadows — the shadow before him was in fact Andy Jassy, president and CEO of Amazon Web Services (soon to be CEO of Amazon).

The two share not only the early inside stories behind (ultimately) big business moves like AWS, Kindle, Prime — but more importantly, the leadership principles, decision making practices, AND operational processes that got them there. Because “working backwards” is much, much more than being obsessed with your customers, or having company values like “are right a lot”, “insist on the highest standards”, “think big”, “bias for action”, and more. The discussion also touches on hot-topic debates like to lean-MVP-or-not-to-be; the internal API economy; do you even need a chief product officer; and if you need less, not more, coordination as you grow. Can startups really be like Amazon? Yes: and it comes down to how leaders, organizations, and people at all levels decide, build, invent… using the power of narratives and more.

Show Notes

  • The early days of Amazon and the development of the company’s 14 principles [3:18], including one that says leaders should be “right a lot” [6:53]
  • Amazon’s use of written narratives over PowerPoints [9:05], and how meetings are conducted using narratives [15:55]
  • The tenets that guide Amazon’s decision-making [24:00]
  • Working backwards from a press release [26:28], using AWS as a case study [34:56]
  • Discussion of lean startup principles [37:31], and how Amazon’s core principles balance each other [46:21]
  • Advice for startups, including reducing coordination and centralization [51:16]
  • Lessons learned from shadowing Jeff Bezos [58:50]

Transcript

Sonal: Hi, everyone. Welcome to the a16z Podcast. I’m Sonal, and today I have another one of our special, exclusive first-looks-at-a new-book episode — and it is both a very timely and evergreen topic, because the new book, coming out this week, is titled “Working Backwards: Insights, Stories, and Secrets from Inside Amazon.”

In it, authors Colin Bryar and Bill Carr — who between them have a combined 27 years of experience in the company — where Bill was vice president of Digital Media, founded and led Amazon Music, Amazon Video, Amazon Studios for a decade. And where Colin started out in the software group, was a technical vice president, and then notably, was one of Jeff Bezos’ earliest shadows, a legendary program there. Fun fact: the first shadow before that, I believe, was Andy Jassy, president and CEO of Amazon Web Services (and now to be CEO of all of Amazon). The book actually shares the origin story of AWS, among other businesses there, which we touch on briefly — though, as a reminder, none of the following is investment advice. Be sure to see a16z.com/disclosures for more information.

But in any case, our focus today is really on what is the Amazon way — and can other companies really adopt certain best practices, too? In fact, as fast-growing companies establish and find their way, how do they define and scale their culture, processes, and more? We actually spend most of the episode digging, in detail, into two operational practices in particular — the infamous memos-instead-of-PowerPoints, and working backwards from a press release and FAQs. Given the presence of those two topics in tech folklore, and lots of misunderstandings as well — so I actually probe for the origin stories, the specific details of how they do and don’t work, and other nuances so organizations of all kinds can take what they want or need.

Finally, we also debate within this episode the tradeoffs of lean and minimum vs. maximum viable products (and whether the emphasis is on the wrong letter there); whether product managers have a role in companies organized like this; and more topics throughout.

Amazon’s early days

But we start by very briefly discussing the foundational principles — and actually, the first question I want to start with, especially since I hate the “why’d you write this book” question) — Colin, Bill, honestly, there’s a tendency for folks telling these stories, these kind of narratives, to do a sort of hindsight is 20/20, not accounting for attrition data or the failure cases as well. So, part of me is skeptical that startups can do what Amazon did. And, what’s most notable, too, is that Amazon had not just one or two or three product lines, but literally entirely different yet successful lines of business under one roof. So, what drives that? And can startups really relate to the Amazon story then?

Colin: Well, one thing is that the businesses you mentioned, they are substantially different. They require different expertise, they’re different customer sets — AWS is B2B, there’s streaming video, there’s the e-commerce business — but they all have one thing in common, and that’s what we talk about in the book, and we call it The Invention Machine. Which was the process and principles that Amazon used to develop these businesses. And the ones that we talk about, they started off as ideas on a whiteboard or emails — which many people were skeptical we should even do. Some of them grew into household names, but they all started off very small, and with just one or two people.

Bill: I would first start by going back in time a little bit, and place you sort of where Jeff Bezos was and where all entrepreneurs start out. So, at the beginning, Jeff worked out of a simple office building with a handful of employees, and he would be hands-on for everything. The very first customer support emails, like, Jeff wrote or co-wrote. He could review the work and think about all the policies. He could direct the team, and set the tone and the pace.

Well, that works just fine when you’re an early-stage company and you know there’s fewer than 20 of you, and you can all do a stand-up each morning, and you can be hands-on. But guess what? That completely breaks once you start to grow like a weed, and you found product-market fit, and suddenly you’ve looked around and realize you’ve got a team of 130, 200, 500 — and, you realize that there’s all kinds of decisions and meetings happening around you. You can’t be part of every decision. And so, to me what’s most remarkable and notable, is that Jeff sought to figure out ways to actually inject his lens of thinking into all those meetings — and then sought to create a bunch of processes that would reinforce the way he would think about the work, or do the work itself.

Sonal: It’s this idea of operationalizing ‘the invention machine,’ as you guys are describing it. Some of those principles and processes — at a high level, to quickly summarize, to set context for our listeners — they range from customer obsession, ownership, invent, and simplify, “are right a lot” for leaders, learn and be curious, hire and develop the best, insist on the highest standards, think big, bias for action, frugality, earn trust, dive deep, have backbone, disagree and commit, deliver results — which, I love. And we don’t have to unpack all of those, because I will take, like, all day, and it’s the whole reason your whole book exists.

I do want to ask about one before we go into some of the other practices, which is around leading. And the one that really intrigued me was #4, “are right a lot.” And you basically write that, “Leaders are right a lot. They have strong judgment and good instincts. They seek diverse perspectives and work to disconfirm their beliefs.” And I love this, because I always think to myself, “Yeah, dammit, a leader should be right all the time. Their instinct should be damn good.” Tell me more about that one, because that one made me chuckle a bit.

Bill: Yeah this is — and just to be clear of course, we did not write that. That is Amazon’s words that Jeff and the S-team, being his direct reports, painstakingly reviewed to come up with that exact language to define that principle — as with all 14 others. They sweated over the details of every word, every sentence.

And, this principle, “right a lot” — in some ways, it’s very straightforward, which is that as you move up, an early-stage CEO as they grow and progress, they need to be more in the mode of delegating important work and auditing work, but their most important job frankly is to make decisions. And, many decisions will come to you — whether that’s presented with a spreadsheet, a document, PowerPoint. There’s all kinds of data that will be presented to you with those decisions, but there are very, very few problems where the data gives you the answer. At the end of the day you’re going to have to use your judgment.

What “right a lot” refers to is, number one, when those leaders are confronted with those decisions, that more often than not, they pick the right door, but the second part of the definition refers to, more importantly, how those leaders make decisions. Which is, a lot of people think that leadership is about their very strong opinion, arguing their opinion, and winning that argument. And what great leaders do, actually, is they can stake out a position — but they are willing to update (mean change their mind) on what is the right answer, based on new information.

And you know, even Steve Jobs talked about this at Apple where, some product that they launched, it ended up being a mistake. And it was — one of his reports had been telling him all along, “We shouldn’t do this, we shouldn’t do this, we shouldn’t do this.” And then after it launched and it failed, he came back to that person and said, “Why didn’t you talk me out of this?” And the guy said, “Wait a minute, I tried to talk to you out of it. What are you — what are you talking about?” And he said, “Well, you didn’t do a good enough job, because you didn’t present the evidence to me in a persuasive enough way to make me realize why your point of view was so important.” And so, it’s thinking about it and framing it that way — about bringing forward the right data, and the right information — and then it’s also the job of a leader to solicit that to make the best decision.

Narratives over PowerPoints

Sonal: Well that is a perfect segue to a question I’m dying to ask you guys about — because so many companies, their culture is like the mission statement and the values that you’ve shove in a drawer. And so people spend so much time talking about the words and the precision of what they want those principles or values to be, but not actually how to operationalize it.

So, in that vein, because your book really does outline how to operationalize that through the processes and practices that you guys share. One of the ones that comes up all the time in Silicon Valley folklore is the infamous “no PowerPoints, write a memo.” Let’s tackle this one first, because what you just shared, Bill — about “convince me, share the evidence in a persuasive way” — the point is to be effective and be heard, you have to do that well. So, what is your best advice about how leaders and people in the group can share that information?

Colin: So, Amazon started experimenting with writing narratives in 2004. And it was a result of weekly meetings, four hours every week with the S-team (Jeff’s direct reports), where 2-3 teams would come in and give either updates on their business — it could be a decision that needed to be made, or investigating new areas to go into. And the business was growing fast, and we realized that we were not making the right types of decisions. Some of the meetings would go over, we never really accomplished what we wanted to.

I was Jeff’s TA [technical advisor] at the time. We had been looking at other ways to conduct meetings, and we were big fans of Edward Tufte, who’s professor emeritus at Yale, he came to Amazon to speak a couple of times — and after one particularly painful meeting — it was later on in the week, it was toward the end of the day — Jeff said, “Let’s stop doing PowerPoints at these S-team meetings. It’s the wrong tool for what we’re trying to do, and let’s switch over to narratives.”

Which are really just now a six-page memo. One thing that is a little bit misunderstood is these ideas don’t come out fully formed. They started out as four-page memos — it ended up that six-page was about the right length for an hour meeting. But, we did it because narratives convey about 10 times as much information. You know, the pixel density is about seven to nine times the pixel density. People read faster than people talk, and you can have multi-causal arguments in a narrative much better than a hierarchical PowerPoint. But we realized we just needed a better way to analyze complex situations and make better decisions. So we just experimented with this. And the first ones were not good.

Sonal: Just to quote you guys, because this actually made me literally laugh out loud. You guys, write, “The first few narratives were laughably poor when evaluated by today’s standards. Some teams ignored the length limit…” blah, blah, blah. And I was like, yes, people are not — I mean, we may be wired to be good storytellers, but writing is actually a hard skill. I do worry that it becomes a bit performative. For the best writers, not just the best presenters, because — one of my colleagues when I used to work at Xerox PARC used to call this “pissing on paper.” Which is, like, this idea of, you know, how dogs piss around their territory. There’s also a real-time component, where people are performing in real time, like, leaving comments in the middle of the meeting.

Colin: So, a common misconception is, well, now it’s just the best writers instead of the best presenters that’s gonna win out in narratives. We haven’t found that to be the case. It’s really the best thinkers [who] write the best narratives. And some of the best narratives I’ve ever read are by people whose first language is not English.

Bill: Yeah, in fact, the best narratives, many of them are written by software development engineers who may not have even focused on their writing skills. A good narrative, it’s a very data-based and fact-based document. And, writing good narratives is way harder than making a good PowerPoint. And I think, honestly, a lot of companies don’t do this just because it’s hard. When Colin and I brought this to other companies, what tends to happen mostly is that the author will vomit out about 25 pages of just sort of raw data, at you. Getting that person to then shape it and narrow it down to six pages of well thought out narrative is really hard. And oh, by the way, if you spend 10 hours a day reading detailed narratives, I’ve got to tell you, it can be mentally exhausting.

But when people muse, like, how does Amazon do it? Like, how is it possible that they can effectively manage such diverse businesses? One of my number one arguments is that they use narratives to conduct meetings, not PowerPoint. And actually, a former colleague of mine (Derek Anderson, who is now the Chief Financial Officer at Snap), I think he made the observation once that Amazon has like a “narrative information multiplier.” It’s a strategic advantage that the company has over other companies, because <Sonal: love this> their executives are, like, 7-8 times better informed about what’s happening in their company, and they’re able to give super granular, specific feedback to those teams.

Colin: It allowed the S-team to stay connected at a much deeper level. As Amazon started to move into more and more businesses, the span and control of the S-team didn’t grow by 100X — it’s still a relatively small team, and they are just as involved when it was a small company, as they are now when it’s a large company.

The other thing I’d add about narratives is it does remove a lot of bias from the process, where you can have a charismatic speaker with a so-so or even a bad idea that convinces your company to do something that you should not do. You know, the converse is also true. If you have a shy engineer with a great idea, but it’s a boring presentation. It’s one way in which Amazon removes bias to make better decisions and the idea floats to the top rather than how good of a talker the person is.

Bill: And we could go on about this forever but, the other part is it actually is a great way to get your team more engaged from top to bottom, especially in a COVID time. The way that these meetings work is you share the document — and you know, whether it’s with G-Suite or with Word — then everyone can then use the comment feature, and it doesn’t matter whether the person making the comment is a C-level person or a fresh-out-of-college individual contributor, all those comments get seen and heard.

And then when you get into the discussion phase, all those people actually can then understand, you know, why we’re making the decisions we’re making. When you do a PowerPoint, you have to wait to get to the punchline, and while you’re waiting, you’re not sure, like, well, what are we actually doing in this meeting? With a narrative, you just take all that in, and so then you can have high-quality discussion versus that interruption and disjointed conversation you have with a PowerPoint. And if you missed the meeting, you can just read that document. So, there are so many ways in which the narrative method is superior to PowerPoint; that as you can tell, we can never go back.

How narrative meetings work

Sonal: Okay, so how does one do meetings then, based on these memos? One of the things you guys said is that sometimes it’s shocking, because the first 20 minutes of a meeting would be silent. And that made me chuckle, by the way, because one of the cofounders of Roam, the note-taking app, was sharing that sometimes they have entire meetings that are silent, because they’re just