فیونا

CHAPTER 8

Fiona

Back in the Paleozoic era of the Internet, around the year 1997, an entrepreneur named Martin Eberhard was sitting in a Palo Alto coffee shop with his friend Marc Tarpenning, sipping a latte and pondering the inevitably bright future of mobile computing. The PalmPilot, the pioneering personal digital assistant, had just been introduced, and cell phones were evolving quickly into sleek devices that slid easily into a jacket pocket. Eberhard and Tarpenning worked for a disk-drive manufacturer and had just returned from a conference called DiskCon. In other words, they were bored out of their skulls and looking for something more interesting to do. They both happened to be voracious readers.

Over coffee that day, the friends postulated that it might finally be possible to invent a computer for reading digital books. People had been talking about this for years, ever since Project Gutenberg, a nonprofit founded in the early 1970s in Champaign, Illinois, with a mission to digitize the world’s books and make them available on personal computers. Eberhard and Tarpenning had a different idea. They wanted something mobile, so people could take whole libraries of e-books with them in dedicated electronic-reading devices. That spring they started NuvoMedia and developed one of the world’s first portable e-readers, which they called the Rocket e-Book, or Rocketbook.

Eberhard had founded a computer-networking company in the 1980s and had been around the Silicon Valley block a few times. (Later he would cofound the electric-car company Tesla.) So he knew that he needed deep-pocketed investors as well as powerful allies to pave his way in the complex and cosseted world of the book-publishing business. Eberhard believed that he needed Jeff Bezos and Amazon.com.

In late 1997, the NuvoMedia founders and their lawyer took a Rocketbook prototype to Seattle and spent three weeks in negotiations with Bezos and his top executives. They stayed at a cheap hotel downtown and made regular trips to the old Columbia Building on Second Avenue to discuss the possibility of an Amazon investment in NuvoMedia. Bezos “was really intrigued by our device,” Eberhard says. “He understood that the display technology was finally good enough.”

The prototype itself was crude, with a painted surface and rudimentary software. But it worked, displaying such books as Alice in Wonderland and A Tale of Two Cities on its glowing transflective LCD screen. The device weighed a little over a pound, heavy by today’s standards, but it could be held with one hand, like a paperback book, and its battery lasted twenty hours with the backlight on, which compares favorably to today’s mobile devices.

Bezos seemed impressed but had some reservations. To download books, a customer needed to plug the e-reader into his computer. “We talked about wireless but it was crazily expensive at the time,” says Eberhard. “It would add an extra four hundred dollars to each unit and the data plans were insane.” The Rocketbook’s display wasn’t as easy on the eyes as modern e-readers, but Eberhard had checked out low-powered, low-glare alternatives, like E Ink, being developed in the MIT Media Lab, and e-paper, from Xerox, and found the technology was still unreliable and expensive.

After three weeks of intense negotiations, the companies hit a major roadblock. Bezos told Eberhard he was concerned that by backing NuvoMedia and helping it succeed, he might be creating an opportunity for Barnes & Noble to swoop in and buy the startup later. So he demanded exclusivity provisions in any contract between the companies and wanted veto power over future investors. “If we made a bet on the future of reading, we’d want to help it succeed by introducing it to our customers in a big way,” says David Risher, Amazon’s former senior vice president of U.S. retail, who participated in the negotiations. “But the only way that’d have made sense is if it had been exclusive to us. Otherwise, we’d have been funneling our customers to a potential rival.”

Eberhard couldn’t bring himself to agree to limit his future fund-raising opportunities, so Bezos’s concerns became a self-fulfilling prophecy. Once it was evident that the companies were at an impasse, Eberhard and Tarpenning got on a plane and flew to New York to meet with Len and Stephen Riggio of Barnes & Noble. They shook hands on a deal within the week. The bookseller and the publishing giant Bertelsmann agreed to invest two million dollars each, and together they owned nearly half of NuvoMedia.

It later became fashionable to say that the Rocketbook and contemporaneous competitors like the SoftBook were ahead of their time and that the world was not yet ready to read digitally. But that is not quite the entire story. NuvoMedia sold twenty thousand units in its first year and was on track to double that in its second. It negotiated pioneering e-book contracts with all the major book publishers (the Authors Guild condemned the contracts as being unfavorable to authors1), and in 1999, Cisco invested in NuvoMedia, giving the company more credibility and another strategic ally. The reviews of the device were generally favorable. Oprah Winfrey included the Rocketbook among her Ten Favorite Things in the inaugural issue of O magazine, and Wired wrote of the device, “It’s like an object that has tumbled out of the future.”2

NuvoMedia had an aggressive road map for rapid development. Eberhard planned to exploit economies of scale and advances in technology to improve the Rocketbook’s screen quality and battery life while driving down its price. (Over the 1999 holiday season, the basic model cost $169.) “Within five years,” he told Newsweek’s Steven Levy that December, “We’ll have front-surface technology that doesn’t require you to read behind glass.”3 But NuvoMedia still needed fresh capital, and Eberhard was growing nervous about the unsustainable dot-com bubble and the deteriorating fund-raising climate. In February 2000, he sold NuvoMedia to a Burbank-based interactive TV-guide firm called Gemstar in a stock transaction worth about $187 million. Gemstar also snapped up SoftBook.

It was a terrible move. Gemstar’s main corporate objective, it turned out, was exploiting its patent portfolio through litigation. A few months after the sale, Eberhard and Tarpenning exited the firm in disappointment. Gemstar released successors to both Rocketbook and SoftBook, but after slow sales and given its own internal lack of enthusiasm, it pulled them from the market in 2003. Gemstar CEO Henry Yuen, who orchestrated the company’s e-book acquisitions, later fled to China amid accusations of accounting fraud.4

The Gemstar debacle did more than just demolish the future prospects of the Rocketbook and SoftBook. It seemingly dampened all interest in the very idea of digital reading. BarnesandNoble.com stopped selling e-books altogether after the Rocketbook disappeared, and Palm sold its e-book business at around the same time.5 E-books seemed like a technological dead-end and a hopeless medium—to almost everyone.

Bezos and Eberhard remained friendly during those years, and Bezos watched the rise and fall of the Rocketbook with more than passing interest. “I firmly believe that at some point the vast majority of books will be in electronic form,” he said in the late 1990s. “I also believe that is a long way in the future, many more than ten years in the future.”6

Bezos was underestimating the potential, perhaps intentionally. In 2004, seeking a digital strategy for Amazon amid the gathering power of a revived Apple Computer, he started a secretive Silicon Valley skunkworks with the mysterious name Lab126. The hardware hackers at Lab126 were given a difficult job: they were to disrupt Amazon’s own successful bookselling business with an e-book device while also meeting the impossibly high standards of Amazon’s designer in chief, Bezos himself. In order for Amazon to furnish its new digital library, the company’s liaisons to the book world were ordered to push publishers to embrace a seemingly dormant format. It was a nearly impossible mission, and it had to be executed on Amazon’s typical shoestring budget. Many mistakes were made, some of which continue to resonate today.

But in 2007, a few weeks after Amazon unveiled the result of all this effort, the first Kindle, Bezos called up Martin Eberhard at his home in Silicon Valley to ask him whether he thought Amazon had finally gotten it right.

Over his years at the helm of Apple, Steve Jobs usually reviled those former colleagues who had defected from his company and abandoned its righteous mission. Though Diego Piacentini left Apple for a startup that Jobs had incredulously dismissed as just a retailer, the two remained unusually cordial, perhaps because Piacentini had given Apple six months to find his replacement as head of European operations. Jobs would occasionally contact Piacentini when he needed something from Amazon, and in early 2003, Piacentini e-mailed his former boss with a request of his own. Amazon wanted to make Apple a proposal.

Piacentini brought Neil Roseman and H. B. Siegel, the technologist who’d started the company’s fledgling digital-media group, to the meeting that spring on Apple’s campus in Cupertino. The Amazon executives did not expect to meet with Jobs himself and were surprised when Apple’s cofounder greeted them personally and spent several hours with them that day.

At the time, Apple did not sell music; its iTunes software allowed users to organize and play their music collections on their PCs and transfer songs onto their iPods. Jobs wanted to get iTunes onto as many PCs as possible, and he floated the idea of Amazon distributing CDs to its customers that carried iTunes software. Piacentini and his colleagues had another plan: they suggested creating a joint music store that would allow iPod owners to buy digital-music files from the Amazon website.

Neither proposal went anywhere. Jobs stood up to illustrate on the conference-room whiteboard his vision of how Apple itself would sell albums and single-tracks directly from iTunes. The Amazon executives countered that surely such a music store should exist on the Web, not inside a piece of clunky desktop software that needed to be regularly updated. But Jobs wanted a consistent, easy-to-use experience that stretched from the music store all the way to the portable media player and was so simple that even unsophisticated users could operate it. “It was clear that Jobs had disdain for selling on the Web and he didn’t think anyone cared about books,” Neil Roseman says. “He had this vision for a client-application version of the iTunes store and he let us know why it had to be an end-to-end experience.”

Jobs confidently predicted that Apple would quickly overtake Amazon in music sales, and he was right. In April 2003 Apple introduced the iTunes music store, and in just a few years Apple leapfrogged over, in quick succession, Amazon, Best Buy, and Walmart to become the top music retailer in the United States.

At the time of that humbling lesson, Amazon investors “needed a microscope to find the sales” from all of the company’s various digital initiatives, as Bezos later put it.7 The company sold downloadable e-books in Microsoft’s and Adobe’s proprietary formats for reading on a PC screen, but the e-book store was well hidden on the Amazon website and yielded few sales. Look Inside the Book and Search Inside the Book were arguably digital-reading efforts, but their purpose was to improve the shopping experience and increase the sales of physical books. As the negotiations with NuvoMedia showed, Bezos was thinking early about the inevitable transition to digital media. But more pressing matters, like fixing the fulfillment centers and improving Amazon’s technology infrastructure, always seemed to take precedence.

Over the next few years Apple dominated the music business and helped send chains like Tower Records and Virgin Megastores into the retail dustbin (with a significant assist from Internet piracy). At first Bezos dismissed iTunes, noting that selling single-tracks for ninety-nine cents each wasn’t profitable and that Apple’s goal was only to increase sales of the iPod. This was true, but as the iPod became ubiquitous, Apple began to exploit iTunes to get into adjacent media such as video, and Amazon took a deeper look. “We talked a lot about what made the iPod successful in music when nothing else had been,” says Neil Roseman.

Amazon executives spent months considering various digital-music strategies and at one point explored the possibility of preloading iPods sold on Amazon with the music from CDs that customers had bought on the site. When it proved impossible to get the music labels to agree to that, Amazon settled on launching a digital-music service, similar to Rhapsody, which gave monthly subscribers unlimited access to a vast catalog of music. Amazon came close to launching that effort in 2005. It was going to use music encoded with Microsoft’s proprietary DRM (digital rights management) anticopying software Janus. But then several members of the team rebelled at what they viewed as a flawed approach, in part because the Janus-encoded music wouldn’t play on the iPod, which so many Amazon customers already owned. “I realized I’d rather die than launch that store,” says Erich Ringewald, a product manager who worked on the initiative. Bezos agreed to scrap the effort and start over. Meanwhile, Apple increased its lead in digital media. Amazon finally introduced the MP3 Store in 2007, featuring songs without DRM that users could freely copy. But Apple quickly negotiated the same agreements and Amazon remained a perennial straggler in music.

Bezos’s colleagues and friends often attribute Amazon’s tardiness in digital music to Bezos’s lack of interest in music of any kind. In high school, Bezos forced himself to memorize the call letters of local Miami radio stations in an effort to fake musical fluency in conversations with his peers.8 Colleagues remember that on the solemn road trip from Target’s offices in Minneapolis after 9/11, Bezos indiscriminately grabbed stacks of CDs from the bargain rack of a convenience store, as if they were all interchangeable.

Steve Jobs, on the other hand, lived and breathed music. He was a notoriously devoted fan of Bob Dylan and the Beatles and had once dated singer Joan Baez. Jobs’s personal interests guided Apple’s strategy. Bezos’s particular passions would have the same defining impact at Amazon. Bezos didn’t just love books—he fully imbibed them, methodically processing each detail. Stewart Brand, the author of How Buildings Learn, among other works, recalls being startled when Bezos showed him his personal copy of the 1995 book. Each page was filled with Bezos’s carefully scribbled notes.

In 2004, Apple’s dominance in digital music spawned fresh soul-searching at Amazon. The sales of books, music, and movies accounted for 74 percent of Amazon’s annual revenues that year. If those formats were inevitably transitioning to digital, as Apple’s accomplishment seemed to demonstrate, then Amazon had to move quickly to protect itself. “We were freaking out over what the iPod had done to Amazon’s music business,” says director John Doerr. “We feared that there would be another kind of device from Apple or someone else that would go after the core business: books.”

Investor Bill Miller from Legg Mason often discussed the digital transition with Bezos when the two got together. “I think the thing that blindsided Jeff and helped with the Kindle was the iPod, which overturned the music business faster than he thought,” says Miller. “He had always understood this stuff was going digital, but he didn’t expect to have his CD business eviscerated like that.”

Bezos ultimately concluded that if Amazon was to continue to thrive as a bookseller in a new digital age, it must own the e-book business in the same way that Apple controlled the music business. “It is far better to cannibalize yourself than have someone else do it,” said Diego Piacentini in a speech at Stanford’s Graduate School of Business a few years later. “We didn’t want to be Kodak.” The reference was to the century-old photography giant whose engineers had invented digital cameras in the 1970s but whose profit margins were so healthy that its executives couldn’t bear to risk it all on an unproven venture in a less profitable frontier.

Bezos was apparently contemplating a dedicated electronic reader as early as 2003—around the time Gemstar pulled the Rocketbook from shelves. Andreas Weigend, Amazon’s short-lived chief scientist, remembers Bezos speaking to his technical team about such a device and saying, “It’s for one-handed reading.” Upon imagining what the other hand might be doing, Weigend started to laugh out loud, and then everyone else in the small conference room did as well. “Jeff, the good kid that he is, had no idea what one-handed reading could refer to,” Weigend says.

In 2004, Amazon executives were considering shutting down their own fledgling e-bookstore, which featured books in Adobe and Microsoft formats. The store was everything Bezos hated: its selection was small, its prices were high, and the customer experience of downloading titles and reading them on the screen of a PC or PDA was terrible. But Bezos, according to Piacentini, seemed determined. Despite these early flaws, e-books were clearly the future of bookselling.

A few weeks into these discussions, in an S Team meeting, Bezos announced that Amazon would develop its own dedicated electronic reading device for long-form reading. It was a stunning edict. Creating hardware was expensive and complicated. It was also well outside of Amazon’s core competency—its litany of obvious skills. There was a chorus of vehement objections. Jeff Wilke in particular had the background in manufacturing to know what challenges lay ahead for the company if it tried to make and sell its own devices. “I thought it would be difficult and disruptive and I was skeptical that it was the right use of our resources,” he says. “It turned out that most of the things I predicted would happen actually happened, and we still powered through it because Jeff is not deterred by short-term setbacks.”

Diego Piacentini also protested. He had watched firsthand as Apple struggled through the 1990s with disastrous surpluses of products and massive inventory write-offs. “It was seen by me and all the small thinkers as a very risky investment,” he says.

Bezos dismissed those objections and insisted that to succeed in books as Apple had in music, Amazon needed to control the entire customer experience, combining sleek hardware with an easy-to-use digital bookstore. “We are going to hire our way to having the talent,” he told his executives in that meeting. “I absolutely know it’s very hard. We’ll learn how to do it.”

Within Amazon there is a term used to describe the top executives who get to implement Jeff Bezos’s best ideas: Jeff Bots. The playfully derisive phrase that undoubtedly hides a little jealousy connotes slavish devotion but also loyalty and effectiveness. Jeff Bots draw fuel from their CEO’s ample idea tank and then go out into the world and dutifully execute the best notions. They have completely absorbed Bezos’s business philosophy and molded their own worldviews around it, and they recite rote Jeffisms—how they start from the customer and work backward, et cetera—as if these were their prime directives. To interview a Jeff Bot as a journalist is to witness his or her remarkable ability to say absolutely nothing of substance while going on about Amazon’s inventiveness and its unmatched, gee-whiz enthusiasm for the customer. Jeff Bots would surely rather chomp down on their cyanide-capsule-implanted molars than address topics that Amazon has programmed them to never publicly discuss—subjects such as the competition and any possible problems with products.

Throughout Amazon history, there was perhaps no more faithful or enterprising Jeff Bot than Steve Kessel, a Boston-born graduate of Dartmouth College and the Stanford University Graduate School of Business. Kessel joined Amazon in the heat of the 1999 expansion after a job consulting for browser pioneer Netscape. In his first few years at the company, he ran the book category at a time when Amazon was cultivating direct relationships with publishers and trying to assuage their fears about third-party merchants selling used books on the site. During this grinding period of Amazon’s greatest challenges, Bezos grew to trust him immensely.

One day in 2004, Bezos called Kessel into his office and abruptly took away his impressive job, with all of its responsibilities and subordinates. He said he wanted Kessel to take over Amazon’s fledgling digital efforts. Kessel was skeptical. “My first reaction was that I already had the best job in the world,” he says. “Ultimately Jeff talked about building brand-new things, and I got excited by the challenge.” Bezos was adamant that Kessel could not run both the physical and digital-media businesses at the same time. “If you are running both businesses you will never go after the digital opportunity with tenacity,” he said.

By that time, Bezos and his executives had devoured and raptly discussed another book that would significantly affect the company’s strategy: The Innovator’s Dilemma, by Harvard professor Clayton Christensen. Christensen wrote that great companies fail not because they want to avoid disruptive change but because they are reluctant to embrace promising new markets that might undermine their traditional businesses and that do not appear to satisfy their short-term growth requirements. Sears, for example, failed to move from department stores to discount retailing; IBM couldn’t shift from mainframe to minicomputers. The companies that solved the innovator’s dilemma, Christensen wrote, succeeded when they “set up autonomous organizations charged with building new and independent businesses around the disruptive technology.”9

Drawing lessons directly from the book, Bezos unshackled Kessel from Amazon’s traditional media organization. “Your job is to kill your own business,” he told him. “I want you to proceed as if your goal is to put everyone selling physical books out of a job.” Bezos underscored the urgency of the effort. He believed that if Amazon didn’t lead the world into the age of digital reading, then Apple or Google would. When Kessel asked Bezos what his deadline was on developing the company’s first piece of hardware, an electronic reading device, Bezos told him, “You are basically already late.”

With no personal knowledge of the hardware business and no internal resources at the company to draw on, Kessel went on a fact-finding mission to Silicon Valley, meeting with hardware experts from Apple and Palm and with executives from the famed industrial design firm Ideo. He learned that Amazon would need not just designers but electrical engineers, mechanical engineers, wireless engineers—the list was endless.

Following Christensen’s dictates as if they were instructions in a recipe, Kessel set up another subsidiary in Palo Alto in addition to A9. To take the helm of the new division, he hired Gregg Zehr, an easygoing former vice president of engineering at Palm Computing who kept a jazz guitar in his office. Jateen Parekh, a former engineer at set-top-box maker ReplayTV (an early TiVo rival), became the first employee, and a few others were hired as well. There was no office to report to, so they set up shop in an empty room in the headquarters of A9. Zehr and his colleagues set about furnishing the new division with a name alluring enough to attract the best and brightest engineers from Silicon Valley. They eventually settled on Lab126. The 1 stands for a, the 26 for z; it’s a subtle indication of Bezos’s dream to allow customers to buy any book ever published, from a to z.

They didn’t get their marching orders right away, so Zehr and his team spent the first few weeks investigating the possibility of building an Internet-connected set-top box and even an MP3 player. Finally Amazon’s new hardware geeks were given their mission: they were to build an electronic reading device. “We were told to do one great thing with maniacal focus,” says Tom Ryan, a software engineer from Palm whom Zehr brought over that fall. “The aspiration was to be Apple.”

The group piggybacked on A9’s infrastructure for the next year. When the search division moved to the former offices of a law firm on Lytton and Alma in downtown Palo Alto, Lab126 moved with them and took up residence in the old law library. They researched existing e-readers of the time, such as the Sony Libre, which required triple-A batteries and sold poorly. They concluded the market was wide open. “It was the one thing that wasn’t being done well by anyone else out there,” says Parekh.

Lab126 was soon given extensive resources but it also had to contend with the unfettered imagination of Bezos. Amazon’s founder wanted his new e-reading device to be so easy to use that a grandmother could operate it, and he argued that configuring devices to work with WiFi networks was too complicated for non-tech-savvy users. He didn’t want to force customers to connect the device to a PC, so the only alternative was to build cellular access right into the hardware, the equivalent of embedding a wireless phone in each unit. Nothing like that had been tried before. Bezos insisted that customers should never have to know the wireless connection was there or even pay for access. “I thought it was insane, I really did,” Parekh says.

In those early months, much of the early direction for the Kindle was set. Zehr and Parekh made the decision to explore the low-powered black-and-white display technology called E Ink that, years before, Martin Eberhard had found too primitive and expensive. It used millions of tiny microcapsules, each about the diameter of a human hair and containing positively charged white particles and negatively charged black particles suspended in a clear fluid. When a positive electric field is applied, positively charged particles move to the top of the microcapsule, making that spot appear white; when a negative electric field is applied, negative particles migrate up, and the spot appears black.

Unlike LCD systems, the technology worked well under direct sunlight, used very little battery power, and was exceedingly easy on the eyes. In a sense, Amazon got lucky. A technology perfectly suited for long-form reading on a device (and terrible for everything else) just happened to be maturing after a decade of development.

In those waning months of 2004, the early Lab126 engineers selected a code name for their new project. On his desk, Zehr had a copy of Neal Stephenson’s The Diamond Age, a futuristic novel about an engineer who steals a rare interactive textbook to give to his daughter, Fiona. The early Lab126 engineers thought of the fictitious textbook in the novel as a template for what they were creating. Michael Cronan, the San Francisco–based graphic designer and marketing executive who baptized the TiVo, was later hired to officially brand the new dedicated reading device, and he came up with Kindle, which played off the notion of starting a conflagration and worked as both a noun and a verb. But by then Kessel’s team was devoted to the name Fiona and the group tried, unsuccessfully, to convince Bezos to keep it. In a sense, the knowledge-starved Fiona of Stephenson’s fictional world became Amazon’s patron saint in its risky journey into the digital frontier.

While Zehr and his crew at Lab126 worked on software and developed relationships with Asian manufacturers, the early industrial design work on Amazon’s new e-reader was contracted out to the San Francisco office of global design firm Pentagram. Zehr had worked with a partner there, Robert Brunner, at Apple in the 1990s, and he introduced Brunner to Steve Kessel with the suggestion that Pentagram could offer a nimbler and perhaps more discrete style of collaboration than larger firms like Ideo. Brunner assigned two of his employees, Tom Hobbs and Symon Whitehorn, to the job.

The Pentagram designers, both British born, began by studying the actual physics of reading—the physical aspects of the pastime, such as how readers turn pages and hold books in their hands. They forced themselves to read on existing e-readers, like the Sony Libre and the old Rocketbook, and on PDAs like the iPaq from Compaq and Palm’s Treo. They brought in focus groups, conducted phone interviews, and even went up to Seattle to talk to Bezos himself, trying to deconstruct a process that for many hundreds of years people had taken for granted. “We were pushing for the subconscious qualities that made it feel like you are reading a book,” says Hobbs. One of the primary conclusions from their research was that a good book disappears in the reader’s hands. Bezos later called this the top design objective. “Kindle also had to get out of the way and disappear so that you could enter the author’s world,” he said.10

The Pentagram designers worked on the Kindle for nearly two years. They met with Steve Kessel, Greg Zehr, and Charlie Tritschler—another Palm veteran who’d joined Lab126—every Tuesday morning at A9 in Palo Alto and later at the new Lab126 offices in Mountain View. They periodically traveled to Seattle to update Bezos on their progress, and they had to present to the CEO in the customary Amazon way, with six-page narratives.

The meetings could get tense. Hobbs, Whitehorn, and Brunner wanted to strip out complexity and make the device as streamlined and inconspicuous as possible. Bezos also wanted a simple, iconic design but insisted on adding a keyboard so users could easily search for book titles and make annotations. (He envisioned sitting in a taxi with Wall Street Journal columnist Walt Mossberg and keying in and downloading an e-book right there in the cab.) Bezos toted around a BlackBerry messaging device at the time and told the designers, “I want you to join my BlackBerry and my book.”

In one trip to Seattle, the designers stubbornly brought models that left out the keyboard. Bezos gave them a withering look. “Look, we already talked about this,” he said. “I might be wrong but at the same time I’ve got a bit more to stand on than you have.”

“I remember being very silent for the rest of that meeting,” Hobbs says. They complied and designed oblong buttons, based on the style of the BlackBerry, while trying to accommodate the angles that reader’s fingers might take moving across the device.

There were similar disputes about wireless connectivity. The Pentagram designers couldn’t understand how the economics of the wireless connection could work and assumed Amazon would be asking the user to pay a wireless charge every time he or she bought a book. At one point, they pitched Bezos on a process similar to the iTunes model, which required making the bookstore accessible on a PC. Bezos pushed back. “Here’s my scenario, I’m going to the airport. I need a book to read. I want to enter it into the device and download it right there from my car.”

“But you can’t do that,” Hobbs replied.

“I’ll decide what I can do,” Bezos said. “I’ll figure this out and it is not going to be a business model you understand. You are the designers, I want you to design this and I’ll think about the business model.”

Pentagram worked on Fiona through the middle of 2006, and then Lab126, which by then had hired its own designers, reclaimed the project. The Pentagram designers would feel ambivalent about the device when they finally saw it at the same time as the rest of the world. It was too cluttered with buttons, the design too confusing. After the project, Symon Whitehorn left Pentagram to go work at, of all places, Kodak. He hired Tom Hobbs as a contractor and together they created a unique digital camera that allowed picture-takers to impose on their photos the historical look of classic Kodachrome film. It presaged mobile-phone applications like Instagram, and, naturally, Kodak killed the project before it ever hit the market.

Meanwhile, after Pentagram left the Kindle project, the device seemed nearly ready and close to launching. But a litany of delays followed. E Ink sent displays from Asia, and owing to variable temperatures and humidity, batches would have low contrast or get dimmer with frequent use. Intel sold the family of XScale microprocessor chips that Kindle used to another chip company, Marvell. Qualcomm and Broadcom, two wireless-technology companies that manufactured cellular components to be used in the Kindle, sued each other in 2007, and at one point it seemed like a judge would prevent certain key Kindle parts from entering the United States. Bezos himself brought about repeated delays, finding one fault or another with the device and constantly asking for changes.

The top-secret Kindle effort dragged on for so long that it became the subject of persistent rumors inside Amazon, even though no one was supposed to know of the project’s existence. At an all-hands meeting at the Moore Theater in the fall of 2006, someone stood up and asked, “Can you tell us what Lab126 is?”

Bezos responded brusquely. “It’s a development center in Northern California. Next question.”

To give the Kindle even a remote chance of succeeding, Amazon needed e-books—lots of them. Bezos had watched the Rocketbook and later saw the Sony Reader hobbled by pitifully limited catalogs. There was simply nothing for owners of the early e-book devices to read. His goal was to have one hundred thousand digital titles, including 90 percent of the New York Times’ bestsellers, available for download when the device went on sale. At the time, publishers had digitized only their front lists, or about twenty thousand books total. The Kindle store finally offered Bezos another chance to fulfill part of his dream of the everything store, a comprehensively stocked library that was exceedingly convenient for customers, but to get there, Amazon would have to pressure, cajole, and even threaten some of its oldest partners, a group of companies that had come to view Amazon as something other than a faithful friend.

Back in its earliest days, Amazon’s relationship with book publishers was uncomplicated and largely symbiotic. The company acquired most of its books from Ingram, Baker and Taylor, and other distributors, and on the rare occasions when the distributors didn’t have a title in stock, they bought directly from publishers. There were occasional but insignificant skirmishes during these years. Bezos often said publicly that publishers originally hated the notion of customer reviews, fearing that harsh and often anonymous online critiques could hurt sales. Publishers and the Authors Guild also complained about the appearance of third-party sellers hawking used books on the site.11

For its part, a young Amazon constantly harangued publishers for more “metadata,” the books’ supplementary information, like author biographies, comprehensive descriptions of the subject matter, and digital images of jacket covers. Still, many publishers viewed Amazon as a savior, a desperately needed counterbalance to Barnes & Noble, Borders, and Waterstones in the United Kingdom, all of which were churning out new superstores and using their size and growth to press for steeper discounts on wholesale prices.

Living in Seattle, a continent away from New York City, Bezos made few friendships in the world of book publishing. One of his rare personal connections was with Larry Kirshbaum, the CEO of the Time Warner Book Group and the high-profile minder of James Patterson and other authors. Kirshbaum believed so deeply in the Amazon mission that he had bought shares in its May 1997 initial public offering. A few months later, on a night of pounding rain in midtown Manhattan, Bezos and Kirshbaum walked six blocks from the Time-Life Building to attend a party that Rupert Murdoch was throwing for Jane Friedman, then the incoming chief executive officer of News Corporation’s HarperCollins book division. The luminaries of the publishing business, such as Random House’s then CEO Alberto Vitale and literary agent Lynn Nesbit, crowded into the Monkey Bar on Fifty-Fourth Street, with its red-leather booths and murals of gamboling chimps. For a rare night, Bezos socialized amiably with the titans of an industry that Amazon was about to irrevocably change. “It was one of those moments in your life where you remember everything,” says Kirshbaum, who would join Amazon as the head of its New York publishing division in 2011. “In fact, I think Bezos still owes me an umbrella.”

When Amazon began its all-consuming pursuit of profitability after the turn of the century, its attitude toward the rest of the book world began to change. By 2004, Amazon sold a large percentage of all books in the United States. So it aggressively sought more favorable financial terms in its deals with publishers and tried to reap some of the benefits of its growing size and significance in the industry. During these pivotal years, the steward of Amazon’s relationship with publishers, Lyn Blake, was herself a veteran of the industry, a former executive of the computer-book division of Macmillan.

Blake joined Amazon in 1999. Her first job was to establish stronger direct relationships with publishers and create standards for how they shipped packages of books to Amazon’s fulfillment centers (no Styrofoam packing peanuts, for example). Blake brought more discipline and analytics to Amazon’s book-supply chain, overseeing the creation of automated systems that purchased from whichever source—distributor or publisher—had books in stock and offered the best price. She developed Amazon’s first co-op programs in the book category, selling prominent placement on the site to publishers who were willing to pay promotional fees. These were customary tactics for any large retailer, and Blake had seen them employed by other retail chains, to profitable effect, from her perch at Macmillan.

Blake was an anomaly at Amazon. She refused to carry a BlackBerry and left the office every day promptly at five to greet her young daughter at home. She could be a tough negotiator, and she knew her way around the Robinson-Patman Act, the 1936 antitrust law that prohibited manufacturers from selling goods to large retailers at a lower price than they sold to their smaller competitors. Having been on the other side of the negotiating table, she was sensitive to the needs of book publishers and was often their advocate inside Amazon. “My relationship with the largest publishers was very positive,” Blake says. “Of course I pushed them to do better and work harder, but when they had issues with us, I was willing to address those issues.”

Blake’s balancing act soon became difficult. In Bezos’s perennial quest to subsidize low prices for customers and finance programs like Super Saver Shipping and Prime, he pushed Blake and her team to establish more favorable financial relationships with book publishers and expand profit margins wherever they could. Bezos believed Amazon should be well compensated for the special benefits it brought to the book industry. The site carried millions of titles, not just the one hundred and fifty thousand or so that appeared on the shelves of a Barnes & Noble superstore. Unlike traditional retailers, Amazon returned few unsold books, often less than 5 percent. The big book chains regularly returned 40 percent of all the books they acquired from publishers, for full refunds, an arrangement that is nearly unique in retail.

By 2004, Amazon’s normally placid book-buying department found itself preparing for battle. Buyers received negotiating training and an education on the limits and flexibility of Robinson-Patman. Blake dutifully pushed publishers for compromises while constantly reminding her boss that if publishers rebelled, Amazon could be hurt. “There was a period of time where inside Amazon, we were scared of how the publishing industry would take all this,” says Erick Goss, a senior manager of the books group. “Lyn was our ambassador. I credit her for maintaining these relationships.”

Amazon approached large publishers aggressively. It demanded accommodations like steeper discounts on bulk purchases, longer periods to pay its bills, and shipping arrangements that leveraged Amazon’s discounts with UPS. To publishers that didn’t comply, Amazon threatened to pull their books out of its automated personalization and recommendation systems, meaning that they would no longer be suggested to customers. “Publishers didn’t really understand Amazon. They were very naïve about what was going on with their back catalog,” says Goss. “Most didn’t know their sales were up because their backlist was getting such visibility.”

Amazon had an easy way to demonstrate its market power. When a publisher did not capitulate and the company shut off the recommendation algorithms for its books, the publisher’s sales usually fell by as much as 40 percent. “Typically it was about thirty days before they’d come back and say, Ouch, how do we make this work?” says Christopher Smith, a senior book buyer at the time.

Bezos kept pushing for more. He asked Blake to exact better terms from the smallest publishers, who would go out of business if it weren’t for the steady sales of their back catalogs on Amazon. Within the books group, the resulting program was dubbed the Gazelle Project because Bezos suggested to Blake in a meeting that Amazon should approach these small publishers the way a cheetah would pursue a sickly gazelle.

As part of the Gazelle Project, Blake’s group categorized publishers in terms of their dependency on Amazon and then opened negotiations with the most vulnerable companies. Three book buyers at the time recall this effort. Blake herself said that Bezos meant the cheetah-and-gazelle analogy as a joke and that it was carried too far. Yet the program clearly represented something real—an emerging realpolitik approach toward book publishers, an attitude whose ruthlessness startled even some Amazon employees. Soon after the Gazelle Project began, Amazon’s lawyers heard about the name and insisted it be changed to the less incendiary Small Publisher Negotiation Program.

Publishers were horrified by this. The company they had once viewed as a welcome counterbalance to the book chains was now constantly presenting new demands. The demands were introduced quite persuasively in the form of benefits to be passed on to Amazon’s customers, but even that could sound ominous. When Amazon passed on savings to customers in the form of shipping deals or lower prices, it had the effect of increasing the pressure on physical bookstores, including independent bookshops, and adding to Amazon’s growing market power.

Around this time, Amazon representatives made the rounds asking publishers to submit titles for its Search Inside the Book program. Meanwhile, Google had begun scanning library books without the permission of copyright owners, part of a massive effort to make the world’s literary output available online as a research tool. In 2005, the Authors Guild and the Association of American Publishers filed dual lawsuits against Google in federal court. This was a separate drama with its own convoluted legal backstory, but it amplified some book publishers’ growing anxiety: they risked losing control of their own business to the well-capitalized Internet companies on the West Coast, who seemed to approach the cerebral pursuit of bookselling with all the literary nuance one might find in an algorithm.

Lyn Blake left Amazon in early 2005. She had achieved unexpected financial success and wanted to devote more time to her family. She admits that she also saw an approaching rupture in Amazon’s relationships with book publishers. “Maybe I was feeling like it was going to go that way,” she says. “I like to do business where both parties feel like they are going to get something valuable out of it, which means future negotiations can take place in a civilized way.”

Her successors would not channel the same advocacy for publishers inside Amazon or have the same deft political touch. Before she left, Blake promoted Randy Miller, one of the founders of Amazon’s jewelry store, to take over vendor relations in Europe. By his own admission, Miller took an almost sadistic delight in pressuring book publishers to give Amazon more favorable financial terms. He ranked all of the European publishers by their sales and by Amazon’s profit margins on their books. Then he and his colleagues persuaded the lagging publishers to alter their deals and give Amazon better terms, once again with the threat of decreased promotion on the site. Miller says he and his colleagues called the program Pay to Play. Once again, Amazon’s lawyers caught wind of this and renamed the program Vendor Realignment.

Over the next year, Miller tangled with the European divisions of Random House, Hachette, and Bloomsbury, the publisher of the Harry Potter series. “I did everything I could to screw with their performance,” he says. He took selections of their catalog to full price and yanked their books from Amazon’s recommendation engine; with some titles, like travel books, he promoted comparable books from competitors. Miller’s constant search for new points of leverage exploited the anxieties of neurotic authors who obsessively tracked sales rank—the number on Amazon.com that showed an author how well his or her book was doing compared to other products on the site. “We would constantly meet with authors, so we’d know who would be watching their rankings.” Miller says. “I knew these people would be on their phones the second they saw their sales numbers drop.”

These tactics were not unique to Amazon. The company had finally learned the tricks of the century-old trade that is modern retail. Profit margin is finite. Better financial terms with suppliers translate directly into a healthier bottom line—and create the foundation on which everyday low prices become possible.

Walmart in particular had mastered this perpetual coercion of suppliers, and it did it with missionary zeal and the belief that it led to the low prices that made products like diapers affordable to lower- and middle-class Americans. Walmart is notorious for demanding that suppliers open offices in Bentonville, Arkansas, and integrate certain technologies, like RFID chips, into their products. The company is also known for specifying just how much it will pay for products and for demanding severe concessions if it believes a supplier’s profit margin is too high.

In Amazon’s early years, when the likes of Sony and Disney refused to sell directly to the company, Bezos had been on the short end of this Darwinian dynamic. He had learned the game firsthand. Now the balance of power was shifting. Now suppliers needed Amazon more than Amazon needed them.

In the midst of this changing landscape, Amazon started to pitch publishers on the Kindle.

The first two Kindle emissaries to the New York–based publishers presented an unlikely picture. Dan Rose, a longtime Amazon business development executive, led the early effort to bring publishers on board. Rose was of medium height, sported dot-com casual clothes like khakis and royal blue oxford shirts, and spoke easily about the coming opportunities of the digital age. He visited publishers with a former Microsoft product manager named Jeff Steele, an openly homosexual six-foot-four bodybuilder who wore dark suits and ties and cut a menacing figure—but who in reality had an exceedingly gentle temperament.

Their goal, set in the first half of 2006, was to convince jittery publishers to place yet another bet on e-books, despite the many previous failures and false starts in digital publishing. They were handicapped in their mission: Bezos didn’t actually permit them to acknowledge the existence of the Kindle, which remained top secret.

So Rose and Steele were forced to approach the topic circuitously, talking up Search Inside the Book and an e-book standard created by the French company Mobipocket, which Amazon acquired in 2005 to jump-start its e-book initiative. Owning Mobi technology allowed Amazon e-books to appear on a variety of different devices, like cell phones and PDAs.

Without any hint of why the prospects for e-books might soon brighten, publishers were reluctant to act. They already encoded their most popular titles in the standards supported by Sony, Adobe, Microsoft, and Palm, yet e-books remained an infinitesimally small part of their business. Digitizing backlist books also presented enormous legal challenges. For titles published prior to the late 1990s, it was sometimes unclear who actually owned the digital rights, and publishers were often loath to revisit the issue with authors and their agents, as they might view it as an opportunity to renegotiate their entire deal.

Rose and Steele’s progress was slow. Adding to the pressure, Bezos wanted biweekly reports on their march toward the goal of one hundred thousand e-books. “I described my job as dragging publishers kicking and screaming into the twenty-first century,” says Jeff Steele. “We found they really weren’t willing to do something interesting.” That summer, the duo finally convinced Bezos they couldn’t hide the ball any longer: they had to tell publishers about the Kindle. “Once they see it, they will get excited about it,” Steele argued. Bezos reluctantly agreed to allow them to show publishers a Kindle prototype, as long as it was within the confines of a strict nondisclosure agreement.

In the fall of 2006, Amazon began showing the device to publishers. At the time, Fiona was unimpressive; it looked like the cream-colored bastard child of a BlackBerry and a calculator, and it froze up as often as it worked. Publishers thought Amazon might be hawking the e-book equivalent of Betamax, the failed Sony home-video format of the 1970s. They saw mostly what wasn’t there: no color, no video, no backlight. The early prototypes did not have working wireless access either, though Amazon executives described what the experience might be like while they feebly demonstrated the device by loading SD cards with sample e-books.

During these unproductive months, Amazon developers conceived of a potential shortcut to their goal, which they dubbed Topaz. Topaz was a program to take the scanned digital files from Search Inside the Book and repurpose them in a format suitable for the Kindle. Amazon offered this as an option to publishers, arguing that it would help them decrease the costs of digitizing their catalogs, although the digital file would remain exclusive to the Kindle. Large publishers like Simon and Schuster did not want to create a new dependency on Amazon, but some smaller publishers jumped at the option.

By early 2007, Amazon could demonstrate the Kindle’s wireless access, and, finally, some publishers understood its potential. John Sargent, the CEO of Macmillan, and some other executives became converts when they recognized for the first time that giving customers instant gratification—the immediate download of any e-book at any time—might allow Amazon to succeed where Sony and others had failed. Of course, as Bezos had feared, it leaked. Engadget, the technology blog, had the first details about Amazon’s new e-reading device, and soon after, Victoria Barnsley, the CEO of HarperCollins UK, confirmed at an industry event that she had seen the device and was “rather impressed.”12

The Kindle was supposed to go on sale for the 2006 holidays. But it was delayed another year as Bezos relentlessly pressured Steve Kessel and his team for fixes, new features, and a larger catalog of e-books. By that time, Dan Rose had departed Amazon to join the budding social network Facebook, and Jeff Steele and his group reported directly to Kessel. Steele also worked alongside the merchandising director from the physical books group, Laura Porco.

Porco, a graduate of Ohio State University and one of Lyn Blake’s hires, was a blunt and tenacious advocate for Amazon’s cause. She channeled the intensity of Bezos, ruthlessly aiming to exact profit margins from Amazon’s relationships with its suppliers wherever she could. Prior to joining the Kindle group, she battled with the movie studios, pulling Disney out of Amazon’s recommendations in the midst of one negotiation (a tactic that didn’t work) and clashing so fiercely with executives at Warner Home Video that the studio famously banned her from its buildings, according to several of Porco’s colleagues. One Random House executive called her Amazon’s “battering ram.” Even her colleagues were in awe of her Hyde-like transformation when conducting the company’s business. “Laura can be one of the kindest people, but when it comes to Amazon she wants to drink blood,” says Christopher Smith.

A few years after the original Kindle negotiations, a publishing-industry executive visited Amazon to discuss a job opening at the company. He was interviewed by a series of Amazon book executives, including Porco, who asked only one question: “What is your negotiation strategy?” The executive replied that he believed a successful negotiation must make both sides happy. Porco’s passionate view, according to this executive (who did not get the job), was that this was an “un-Amazon” response and that one party must always win.

This is not to pick on a particular Amazon executive, but to illustrate a point. Inside the company at the time, the culture was self-perpetuating, and those who couldn’t channel Bezos’s fervor on behalf of Amazon and its customers didn’t stay with the company. Those who could do it stayed and advanced.

Erick Goss, a veteran of the book group, could no longer abide the Jeff Bots, and he moved to Nashville in 2006 to care for his ailing mother. He took a job at a competitor, Magazines.com, and Amazon threatened to sue him for violating his noncompete clause. (The matter was settled privately.) Goss admitted to mixed emotions about Amazon. He was proud of the difficult things he and his colleagues had accomplished. But he also found it increasingly hard to reconcile the company’s approach toward its partners with his own Christian values and says that for a year after leaving Amazon, he had post-traumatic stress disorder.

Jeff Steele, the gentle giant who spearheaded Amazon’s outreach to the publishers, also grew to dislike Amazon’s creeping aggressiveness. “I didn’t like to bully people. Every reasonable business-development deal should involve some sort of compromise, some give-and-take,” he says. “I just got uncomfortable.” In what became the final straw, Steele quarreled with Kessel over the terms of Amazon’s contract with Oxford University Press, which supplied the digital dictionary that was embedded in the Kindle. Kessel wanted to renegotiate the already completed contract to exact more favorable terms from the publisher. Steele bluntly told him that the deal had already been negotiated and that it was unethical to revisit the contract. Soon after, Steele got into a shouting match with Laura Porco and was asked by Kessel to collect his things and leave the company. Porco then took over the Kindle effort.

The next few months were tense. Amazon’s inducements to publishers were followed by threats. Publishers that didn’t digitize enough of their catalogs, or didn’t do it fast enough, were told they faced losing their prominence in Amazon’s search results and in its recommendations to customers. Years earlier, the music labels had scampered into the arms of Apple despite their reservations, since they were facing the even more ominous threat of rampant music piracy. But books were not as easily pirated and shared online, and book publishers feared no similar bogeyman. So Bezos finally had to turn Amazon into one.

What had started out as Amazon’s soliciting publishers for help had evolved into the equivalent of a parent threatening a child. After realizing they did not yet have the Oprah Winfrey book club pick, One Hundred Years of Solitude by Gabriel García Márquez, Porco sent an e-mail to Random House’s head of sales demanding to know why there was no e-book version available. The note, which came during the middle of the night New York time, was so contemptuous and incendiary that it made the rounds within the publishing company. (Knopf, the Random House imprint that published the book, wouldn’t have the digital rights for another year.)

Publishers felt caught up in a schizophrenic assault by Amazon that combined supplication and threats and alternated urgency with delay. Porco and her team presented list after list of books that publishers needed to digitize, then screamed when e-books weren’t produced fast enough. Amazon also appealed directly to agents and authors, alienating publishers, who were uncomfortable seeing one of the world’s largest retailers speaking with their most prominent authors. “It seems clear to me that the insanity being directed at us was coming directly from Jeff Bezos, who had some mania about a magic number that needed to be hit about the number of titles available on the Kindle on the word go,” says one publishing executive.

Amazon and its publishing partners now occupied entirely different worlds. The e-book business didn’t exist in any meaningful way, so publishers couldn’t understand why they were being berated and punished for not embracing it. Amazon executives saw themselves as racing toward the future and fulfilling Bezos’s vision of making every book ever printed available for instant digital delivery, but at the same time they were trying desperately to beat Apple and Google to the next vital phase in the evolution of digital media.

And there was one other ingredient in this piquant stew. Bezos decided that the digital versions of the most popular books and new releases would have a flat price of $9.99. There was no research behind that number—it was Bezos’s gut call, fashioned after Apple’s successful ninety-nine-cent price tag for a digital single in iTunes and based on the assumption that consumers would expect to pay less for an e-book than they did for a traditional book, as an e-book had none of the costs associated with printing and storage. Since Amazon bought e-books from publishers at the same wholesale price as it bought physical books, typically paying around fifteen dollars for a book that would retail at thirty, that meant it would lose money on many of its sales. Bezos was fine with that—he believed publishers would eventually be forced to lower their wholesale prices on e-books to reflect the lower costs of publication. In the meantime, it was just the kind of investment in Amazon’s future that he loved. “Customers are smart, and we felt like they would expect and deserve digital books to be lower priced than physical books,” says Steve Kessel.

Amazon knew quite well that publishers would absolutely hate the $9.99 price. The $9.99 e-books were considerably more appealing to some customers than the more expensive hardcovers, the industry’s most profitable format, and the pricing pulled the rug out from under traditional retailers, particularly independent booksellers, who would suddenly find their shelves stocked with what some book buyers might soon view as overly expensive relics. Everyone had watched this precise dynamic play out in music, with disastrous consequences for physical retailers.

So Amazon decided not to let publishers know about the planned $9.99 price, lest they object. This was easily rationalized; retailers have no obligation to tell their suppliers how they plan to price products, and doing so could theoretically raise the specter of vertical price fixing and attract the attention of antitrust authorities. Still, Amazon had approached publishers as a partner, and now it was deliberately withholding a key piece of information. “We were instructed not to talk about pricing strategy,” Jeff Steele says. “We knew that if we priced e-books too low, they would fear it would devalue their product. So we just said pricing had not yet been decided.”

Oblivious to the pricing plans, publishers slowly came aboard, digitizing larger parts of their catalog. By the fall of 2007, Amazon had ninety thousand books in the Kindle library, tantalizingly close to Bezos’s goal. Kindle owners would have the equivalent of a Barnes & Noble bookstore at their fingertips.

When Bezos finally stopped delaying and set the launch of the first Kindle, executives from all the major book publishers flocked to the press conference. They had been bruised and battered by Amazon over the past few years but they came together as an industry to take a cautious step toward what promised to be the inevitable future of the written word—a future with a major surprise waiting for them.

On November 19, 2007, Jeff Bezos stepped onto a stage at the W Hotel in lower Manhattan to introduce the Kindle. He spoke to an audience of a hundred or so journalists and publishing executives, a relatively small crowd compared to the reverential throngs who gathered for the product rollouts of Apple. Wearing a blue sport coat and khakis, Bezos stated that Amazon’s new device was the successor to the five-hundred-and-fifty-year-old invention of blacksmith Johannes Gutenberg, the movable-type printing press. “Why are books the last bastion of analog?” Bezos asked that day. “The question is, can you improve upon something as highly evolved and as well suited to its task as the book, and if so, how?”

The original Kindle, priced at $399, was clearly the product of all the compromises and anxieties that had gone into its labored three-year development. It was meant to disappear in the reader’s hands, yet it sported a wedge-shaped body with a jumble of angular buttons, an attempt to make a bold design statement while allowing for the easy entry of text. Bezos wanted a device that did one thing extremely well. But the former Palm engineers at Lab126 had watched the PalmPilot get overtaken by more versatile gadgets, so at the last moment they packed the Kindle with other features, like a Web browser and an MP3 player, which were quarantined in an unusual “experimental” section of the device.

In retrospect, the first Kindle provided an exultant answer to Bezos’s question. In many respects, it was superior to its analog predecessor, the physical book. It weighed ten ounces and could carry two hundred titles. The E Ink screen was easy on the eyes. Whispernet, the name Amazon gave to the Kindle’s free 3G cellular network, allowed readers to painlessly download books in a flash. “I think the reason Kindle succeeded while others failed is that we were obsessive, not about trying to build the sexiest gadget in the world, but rather [about building] something that actually fulfilled what people wanted,” says Russ Grandinetti, a faithful Jeff Bot who later joined the Kindle team.

Competitors were caught flat-footed by the success of the Kindle. A few weeks before the W Hotel event, I wrote about the forthcoming launch for the New York Times and spoke to Stephen Riggio, then the CEO of Barnes & Noble. Riggio and his brother were still bruised from their early foray into e-reading with the Rocketbook and felt that customers had flatly rejected the idea of e-books. “The physical value of the book is something that cannot be replicated in digital form,” Riggio told me. “People love to collect books and to have them in their home and on their shelves. I would say it could never be identically replicated because of the value of books as physical objects in consumers’ minds.”13

Riggio had heard the rumors about the forthcoming Kindle but doubted Amazon’s prospects. “Certainly there’s an opportunity to get back into the business but we think it’s small at this moment and probably will be small for the next couple of years,” he said. “When the market is there, we’ll be there.”

It was an enormous tactical blunder. Barnes & Noble would have to scamper to meet Amazon’s challenge in the e-book market. It would follow a very similar blueprint, setting up a development office in Northern California as Amazon had done with Lab126. Ironically, to design the device, the retailer hired Robert Brunner, the former Apple designer who had left Pentagram to start his own agency, Ammunition. Brunner and his employees had battled with Bezos over putting a keyboard on the Kindle, so, perhaps not surprisingly, the new B&N device—dubbed the Nook—would leave out the keyboard in favor of a separate touch-based control pad, and its advertising would sport the tagline “Books don’t have buttons.”

The Kindle wasn’t an overnight success, of course, but an avalanche of publicity and its prominent placement at the top of the Amazon website ensured that the company would quickly run through its stock of devices. Steve Kessel had studied the introductions of similar consumer electronics like the iPod and placed a conservative first order of twenty-five thousand units. The original batch sold out in hours. Amazon then discovered that the development of the Kindle had gone on for so long, one of its Taiwanese suppliers had discontinued a key component in the wireless module. The company spent months getting a replacement. When a new batch of Kindles arrived the following fall, Bezos appeared on Oprah Winfrey’s talk show, and that blew out the supply once again. “When we originally made the first manufacturing capacity for the Kindle one, we thought we were being very optimistic,” Bezos said. “It was just bad planning.”14

The shortage led to some internal friction. Even after the device sold out, Bezos wanted to promote it heavily on the Amazon home page to continue educating customers and building the brand. Jeff Wilke, now head of North American retail, thought it was irresponsible to feature a product that wasn’t available, and also a waste of Amazon’s most precious real estate. Angry e-mails over the issue one day turned into a heated conversation in Bezos’s office. “We were both passionate and within five minutes we were both mad,” says Wilke, who later conceded that Bezos was right and the short-term pain had been worth it to build the Kindle franchise. Bezos won the argument, of course, but Wilke convinced him to at least make it clearer on the site that Amazon did not actually have any Kindles on hand.

Just as Clayton Christensen had predicted in The Innovator’s Dilemma, technological innovation caused wrenching pain to the company and the broader industry. No one was feeling it more than the book publishers. Amazon had spent much of the last two years cajoling and threatening them to embrace its new digital format. But in all those conversations, the company had clearly withheld a crucial detail that Bezos divulged seventeen minutes into the forty-minute launch speech. “New York Times bestsellers and new releases are only nine dollars and ninety-nine cents,” Bezos said almost halfway through his presentation at the W Hotel.

Among the gathered publishing execs at the Kindle press conference, there was confusion. Was the $9.99 price a promotional discount for the launch? Was it only for bestsellers? Even after the event, Amazon executives told their publishing counterparts they didn’t know or couldn’t say. Soon it was clear to the bookselling industry that the flat price was not transitory at all—Amazon was pushing it as a new standard. Bezos went on a media tour after the Kindle event, appearing on programs like The Charlie Rose Show, trumpeting the $9.99 price for new releases and bestsellers and making a persuasive case for change in the book business. “It is not written anywhere that books shall forever be printed on dead trees,” he told Rose.

Finally the grim reality sank in, and publishing executives kicked themselves for their own gullibility. “It left an incredibly bad taste in our mouths, that they would slip that one by us after hammering us for months and months with their goddamn lists,” says one executive of a major publishing house. “I don’t think they were doing the wrong thing, but I think the way they handled it was wrong. It was just one more nail in the coffin that no one realized was being closed over [us], even while we were engaged every single day in a conversation about it.”

“I think we were absolutely naïve in agreeing to supply those files without any caveats around them,” says another executive at a big-six publisher, one of the six trade houses with the largest market shares. “If I could rewrite history I would have said, ‘Thanks so much, I love the idea of the Kindle, but let’s have an agreement that says you will not sell below the cost.’ I feel like I was asleep at the tiller.”

The new low price for top-selling e-books changed everything. It tilted the playing field in the direction of digital, putting additional pressure on physical retailers, threatening independent bookstores, and giving Amazon even more market power. The publishers had seen over many years what Amazon did with this kind of additional leverage. It exacted more concessions and passed the savings on to customers in the form of lower prices and shipping discounts, which helped it amass even greater market share—and more negotiating leverage. All this would take a few years to sink in, but it became widely understood when the Kindle started gaining real momentum with the introduction of the Kindle 2 in early 2009. The gazelles were wounded, the cheetah was on the loose, and the subsequent high-profile business and legal dramas would shake the book industry to its foundation.

Amazon had grown from a beleaguered dot-com survivor battered by the vicissitudes in the stock market into a diversified company whose products and principles had an impact on local communities, national economies, and the marketplace of ideas. Like all powerful companies, it would now be subject to ongoing scrutiny of its corporate character, a perpetual test of not only how well it served its customers but also how well it treated all of the parties drafted into its whirling ecosystem, including employees, partners, and governments. The development of Fiona set the stage for this new phase in Amazon’s history and revealed the company as relentlessly innovative and disruptive, as well as calculating and ruthless. Amazon’s behavior was a manifestation of Bezos’s own competitive personality and boundless intellect, writ large on the business landscape.