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The Everything Store

By Brad Stone

*A Book Review*

by Michael C. Gray

© 2014 by Michael C. Gray

This is the story of Jeff Bezos, including how he built Amazon into a powerhouse portal of the internet. Brad Stone analogizes Bezos to be as brilliant and visionary as Steve Jobs. He is also portrayed to be as ruthless as the historic robber barons.

Bezos was raised by his mother and step-father in a middle-class family. He spent a lot of time on his grandfather's ranch in Texas. After graduating from Princeton University, he worked at a hedge fund company called D.E. Shaw & Co. The firm pioneered the use of computers and mathematical formulas to exploit disparities in prices in the global financial markets. Some of his coworkers later joined him as key employees at Amazon.

Unlike many of the other "dot com" companies in the early days of the internet, Amazon focused on building a war chest and spent it frugally. Although his ambition was to eventually offer a broad range of products, Bezos initially focused on books. In the early years, the company generated significant losses in order to build its customer base. Today it is profitable.

The headquarters for Amazon was located in Seattle, Washington because the state has a relatively small population and the company wanted to exploit the "nexus" rules, which exempt a corporation with no physical presence in a state from collecting sales taxes. This automatically gave the company a 5% to 10% price advantage in most states. More recently, states including California and New York have exerted pressure to have Amazon collect sales taxes. In exchange, the company has negotiated other tax and financial breaks for warehouses in some of those states.

Bezos admires Sam Walton of WalMart fame. He has adopted the "low cost leader" philosophy, and predatory decisions are rationalized as being for the benefit of customers. He also raided some of WalMart's key executives.

Employees are expected to sacrifice their lives and families for the benefit of the customers/company and receive modest compensation compared to other tech companies. Employees also receive few fringe benefits. The company almost had an internal rebellion when an executive announced that complementary Aleve would no longer be provided. The cafeteria is not subsidized and the company has pay vending machines. The company doesn't provide parking for employees. There are no corporate jets and executives are expected to travel economy class.

While focusing on selling books, the company developed exemplary systems for the customer's experience on its web site and for managing its warehouses to deliver orders promptly and in good condition. It then established a "toll booth" position by inviting other companies to sell their products on its website and store products in its warehouses for delivery to their customers.

When Amazon sets its sights on an acquisition, it will undercut the prices of the target and threaten to give preferential views on its website to competitors.

It's worthwhile to study Jeff Bezos - especially if you ever want to do business with him. He is a brilliant and fierce competitor. He isn't an individual that I would choose for a role model.

Buy it on Amazon: The Everything Store: Jeff Bezos and the Age of Amazon.

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There are a few books of basic wisdom that endure for generations. George S. Clason's book, The Richest Man In Babylon, is one of them.

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Michael Gray, CPA
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