کتاب بزوس

CHAPTER 2 The Book of Bezos

Usenet bulletin-board posting, August 21, 1994:

Well-capitalized start-up seeks extremely talented C/C++/Unix developers to help pioneer commerce on the Internet. You must have experience designing and building large and complex (yet maintainable) systems, and you should be able to do so in about one-third the time that most competent people think possible. You should have a BS, MS, or PhD in Computer Science or the equivalent. Top-notch communication skills are essential. Familiarity with web servers and HTML would be helpful but is not necessary.

Expect talented, motivated, intense, and interesting co-workers. Must be willing to relocate to the Seattle area (we will help cover moving costs).

Your compensation will include meaningful equity ownership.

Send resume and cover letter to Jeff Bezos. US mail: Cadabra, Inc. 10704 N.E. 28th St., Bellevue, WA 98004

We are an equal opportunity employer.

“It’s easier to invent the future than to predict it.”

—Alan Kay

In the beginning, they knew they needed a better name. The magical allusions of Cadabra Inc., as Todd Tarbert, Bezos’s first lawyer, pointed out after they registered that name with Washington State in July of 1994, were too obscure, and over the phone, people tended to hear the name as Cadaver. So later that summer, after renting a three-bedroom ranch house in the East Seattle suburb of Bellevue, Bezos and MacKenzie started brainstorming. Internet records show that during that time, they registered the Web domains Awake.com, Browse.com, and Bookmall.com. Bezos also briefly considered Aard.com, from a Dutch word, as a way to stake a claim at the top of most listings of websites, which at the time were arranged alphabetically.

Bezos and his wife grew fond of another possibility: Relentless.com. Friends suggested that it sounded a bit sinister. But something about it must have captivated Bezos: he registered the URL in September 1994, and he kept it. Type Relentless.com into the Web today and it takes you to Amazon.

Bezos chose to start his company in Seattle because of the city’s reputation as a technology hub and because the state of Washington had a relatively small population (compared to California, New York, and Texas), which meant that Amazon would have to collect state sales tax from only a minor percentage of customers. While the area was still a remote urban outpost known more for its grunge rock than its business community, Microsoft was hitting its stride in nearby Redmond, and the University of Washington produced a steady stream of computer science graduates. Seattle was also close to one of the two big book distributors: Ingram had a warehouse a six-hour drive away, in Roseburg, Oregon. And local businessman Nick Hanauer, whom Bezos had recently met through a friend, lived there and urged Bezos to give Seattle a try. He would later be pivotal in introducing Bezos to potential investors.

That fall, Shel Kaphan drove a U-Haul full of his belongings up from Santa Cruz and officially joined Bezos and his wife as a founding employee of Amazon and as its primary technical steward. Kaphan had grown up in the San Francisco Bay Area and as a teenage computer enthusiast explored the ARPANET, the U.S. Defense Department–developed predecessor to the Internet. In high school, Kaphan met Stewart Brand, the writer and counterculture organizer, and the summer after he graduated, Kaphan took a job at the Whole Earth Catalog, Brand’s seminal guide to the tools and books of the enlightened new information age. Sporting long hippie-ish hair and a bushy beard, Kaphan worked at Brand’s Whole Earth Truck Store in Menlo Park, a mobile lending library and roving education service. He tended the cash register, filled subscriptions, and packed books and catalogs for shipment to customers.

After earning a bachelor’s degree in mathematics in an on-again, off-again decade at the University of California at Santa Cruz, Kaphan logged time at a number of Bay Area companies, including the ill-fated Apple-IBM joint venture called Kaleida Labs, which developed media-player software for personal computers. He tended to display the disappointment of those experiences in what his friends considered a gloomy countenance. When he got to Seattle, Kaphan, characteristically, had severe doubts that the young startup was going to succeed. He immediately began worrying about the company’s name. “I was once part of a little consultancy called the Symmetry Group, and people always thought we were the Cemetery Group,” says Kaphan. “When I heard about Cadaver Inc., I thought, Oh God, not this again.” But Kaphan (by now shorn of his long locks and beard, balding, and in his early forties) was inspired by what he saw as Amazon’s potential to use the Web to fulfill the vision of the Whole Earth Catalog and make information and tools available around the world.

At first, Kaphan figured he’d write some code and return to Santa Cruz to work remotely, so he left half his belongings at home and stayed with Bezos and MacKenzie in Bellevue for a few days while looking for a place to rent. They set up shop in the converted garage of Bezos’s house, an enclosed space without insulation and with a large, black potbellied stove at its center. Bezos built the first two desks out of sixty-dollar blond-wood doors from Home Depot, an endeavor that later carried almost biblical significance at Amazon, like Noah building the ark. In late September, Bezos drove down to Portland, Oregon, to take a four-day course on bookselling sponsored by the American Booksellers Association, a trade organization for independent bookstores. The seminar covered such topics as “Selecting Opening Inventory” and “Inventory Management.”1 At the same time, Kaphan started looking for computers and databases and learning how to code a website—in those days, everything on the Internet had to be custom built.

It was all done on a threadbare budget. At first Bezos backed the company himself with $10,000 in cash, and over the next sixteen months, he would finance the startup with an additional $84,000 in interest-free loans, according to public documents. Kaphan’s contract required him to commit to buying $5,000 of stock upon joining the company. He passed on the option to buy an additional $20,000 in shares, since he was already taking a 50 percent pay cut to work at the startup and would, like Bezos, earn only $64,000 a year. “The whole thing seemed pretty iffy at that stage,” says Kaphan, who some consider an Amazon cofounder. “There wasn’t really anything except for a guy with a barking laugh building desks out of doors in his converted garage, just like he’d seen in my Santa Cruz home office. I was taking a big risk by moving and accepting a low salary and so even though I had some savings, I didn’t feel comfortable committing more than I did.”

In early 1995, Bezos’s parents, Jackie and Mike Bezos, invested $100,000 in Amazon. Exxon had covered most of the couple’s living expenses when Mike worked in Norway, Colombia, and Venezuela, so the couple had a considerable nest egg and were willing to spend a good portion of it on their oldest child. “We saw the business plan, but all of that went over our heads to a large extent,” says Mike Bezos. “As corny as it sounds, we were betting on Jeff.” Bezos told his parents there was a 70 percent chance they could lose it all. “I want you to know what the risks are, because I still want to come home for Thanksgiving if this doesn’t work,” he said.

Amazon was a family affair in another way. MacKenzie, an aspiring novelist, became the company’s first official accountant, handling the finances, writing the checks, and helping with hiring. For coffee breaks and meetings, the employees would go to a nearby Barnes & Noble, an irony that Bezos later mentioned often in speeches and interviews.

There was little urgency to their efforts, at least at first. Kaphan recalls showing up at the Bellevue house early one morning in October, only to have Bezos declare that they were all going to take the day off to go hiking. “The weather was changing and the days were getting short,” Kaphan says. “We were all new to the area and hadn’t seen much of it.” Bezos, MacKenzie, and Kaphan drove seventy miles to Mount Rainier and spent the day wandering amid patches of snow on the majestic volcano that, on clear days, dominates the Seattle skyline.

Later that fall, they hired Paul Davis, a British-born programmer who had been on staff at the University of Washington’s computer science and engineering department. Davis’s colleagues were so dubious of his move to an as-yet-unlaunched online bookstore that they passed around a coffee can to collect a few dollars for him in case it didn’t work out. Davis joined Kaphan and Bezos in the garage, working on SPARCstation servers from Sun Microsystems, machines that resembled pizza boxes and drew so much power they repeatedly blew fuses in the home. Eventually they had to run orange extension cords from other rooms to put the computers on different circuits, making it impossible to run a hair dryer or vacuum cleaner in the house.2

“At first it didn’t really have a lot of the energy one stereotypically associates with a startup,” says Davis, who biked to Bellevue each day wearing Gore-Tex socks over the cuffs of his trousers. “We were pre-startup. It was just Shel, myself, and Jeff in an office, sitting around a table with a whiteboard and discussing how to divide the programming work.”

One of their driving goals was to create something superior to the existing online bookstores, including Books.com, the website of the Cleveland-based bookstore Book Stacks Unlimited. “As crazy as it might sound, it did appear that the first challenge was to do something better than these other guys,” Davis says. “There was competition already. It wasn’t as if Jeff was coming up with something completely new.”

During that time, the name Cadabra lived on, serving as a temporary placeholder. But in late October of 1994, Bezos pored through the A section of the dictionary and had an epiphany when he reached the word Amazon. Earth’s largest river; Earth’s largest bookstore.3 He walked into the garage one morning and informed his colleagues of the company’s new name. He gave the impression that he didn’t care to hear anyone’s opinion on it, and he registered the new URL on November 1, 1994. “This is not only the largest river in the world, it’s many times larger than the next biggest river. It blows all other rivers away,” Bezos said.

While the original Bellevue garage would come to symbolize a romantic time in Amazon’s early history—the kind of modest beginnings that legendary companies like Apple and Hewlett-Packard started with—Amazon was located there for only a few months. With Kaphan and Davis nearing completion of a primitive beta website, Bezos began to think about hiring other employees—and that meant finding a more professional place to work. That spring, they moved to a small office above a Color Tile retail store in the industrial SoDo (for “south of the Kingdome”) district, near downtown Seattle. Amazon had its first official warehouse in part of that building’s basement: a two-hundred-square-foot windowless room that was once a band practice studio and still had the words Sonic Jungle spray-painted on a jet-black door. Soon after, Bezos and MacKenzie left the Bellevue house and, attempting to recapture the urban energy of their New York lives, moved into a nine-hundred-square-foot apartment on Vine Street in Seattle’s fashionable Belltown neighborhood.

In the spring of 1995, Bezos and Kaphan sent links to the beta website to a few dozen friends, family members, and former colleagues. The site was bare, crammed with text and tuned to the rudimentary browsers and slowpoke Internet connections of the time. “One million titles, consistently low prices,” that first home page announced in blue underlined text. Next to that was the amateurishly illustrated logo: a giant A set against a marbled blue background with the image of a river snaking through the letter. The site seemed uninviting to literate people who had spent their lives happily browsing the shelves of bookstores and libraries. “I remember thinking that it was very improbable that people would ever want to do this,” says Susan Benson, whose husband, Eric, was a former colleague of Kaphan’s. Both would become early employees at Amazon.

Kaphan invited a former coworker, John Wainwright, to try the service, and Wainwright is credited with making the very first purchase: Fluid Concepts and Creative Analogies, a science book by Douglas Hofstadter. His Amazon account history records the date of that inaugural order as April 3, 1995. Today, a building on Amazon’s Seattle’s campus is named Wainwright.

While the site wasn’t much to look at, Kaphan and Davis had accomplished a lot on it in just a few months. There was a virtual shopping basket, a safe way to enter credit card numbers into a Web browser, and a rudimentary search engine that scoured a catalog drawn from the Books in Print CD-ROMs, a reference source published by R. R. Bowker, the provider of the standard identifying ISBN numbers for books in the United States. Kaphan and Davis also developed a system that allowed users of early online services like Prodigy and AOL to get information on books and place orders via e-mail alone—though that was never rolled out.

These were all state-of-the-art developments during the gritty initial days of the Web, a time when tools were primitive and techniques were constantly evolving. The HTML standard itself, the lingua franca of the Web, was barely half a decade old, and modern languages like JavaScript and AJAX were years away. Amazon’s first engineers coded in a computer language called C and decided to store the website in an off-the-shelf database called Berkeley DB that had never seen the levels of traffic to which it would soon be exposed.

Each order during those early months brought a thrill to Amazon’s employees. When someone made a purchase, a bell would ring on Amazon’s computers, and everyone in the office would gather around to see if anyone knew the customer. (It was only a few weeks before it started ringing so often that they had to turn it off.) Amazon would then order the book from one of the two major book distributors, paying the standard wholesale rate of 50 percent off the list price (the advertised price printed on the book jacket).

There was little science to Amazon’s earliest distribution methods. The company held no inventory itself at first. When a customer bought a book, Amazon ordered it, the book would arrive within a few days, and Amazon would store it in the basement and then ship it off to the customer. It took Amazon a week to deliver most items to customers, and it could take several weeks or more than a month for scarcer titles.

Even back then, Amazon was making only a slender profit on most sales. It offered up to 40 percent off the list price on bestsellers and books that were included in Spotlight, an early feature on the website that highlighted new titles each day. The company offered 10 percent off the list price on other books; it also charged shipping fees starting at $3.95 for single-book orders.

One early challenge was that the book distributors required retailers to order ten books at a time. Amazon didn’t yet have that kind of sales volume, and Bezos later enjoyed telling the story of how he got around it. “We found a loophole,” he said. “Their systems were programmed in such a way that you didn’t have to receive ten books, you only had to order ten books. So we found an obscure book about lichens that they had in their system but was out of stock. We began ordering the one book we wanted and nine copies of the lichen book. They would ship out the book we needed and a note that said, ‘Sorry, but we’re out of the lichen book.’ ”4

In early June, Kaphan added a reviews feature that he’d coded over a single weekend. Bezos believed that if Amazon.com had more user-generated book reviews than any other site, it would give the company a huge advantage; customers would be less inclined to go to other online bookstores. They had discussed whether such unfiltered user-generated content could get the company in trouble. Bezos decided to watch reviews closely for offensive material rather than read everything before it was published.

The early employees and their friends wrote many of the initial reviews themselves. Kaphan himself took a book off the shelf that was meant for a customer, a Chinese memoir called Bitter Winds: A Memoir of My Years in China’s Gulag. He read it cover to cover and wrote one of the first reviews.

Naturally, some of the reviews were negative. In speeches, Bezos later recalled getting an angry letter from an executive at a book publisher implying that Bezos didn’t understand that his business was to sell books, not trash them. “We saw it very differently,” Bezos said. “When I read that letter, I thought, we don’t make money when we sell things. We make money when we help customers make purchase decisions.”5

The site went live on July 16, 1995, and became visible to all Web users. And as word spread, the small Amazon team saw almost immediately that they had opened a strange window onto human behavior. The Internet’s early adopters ordered computer manuals, Dilbert comic collections, books on repairing antique musical instruments—and sex guides. (The bestseller on Amazon.com from that first year: How to Set Up and Maintain a World Wide Web Site: The Guide for Information Providers, by Lincoln D. Stein.)

There were orders from U.S. troops overseas and from an individual in Ohio who wrote to say he lived fifty miles away from the nearest bookstore and that Amazon.com was a godsend. Someone from the European Southern Observatory in Chile ordered a Carl Sagan book—apparently as a test—and after the order was successful, the customer placed a second order for several dozen copies of the same book. Amazon was getting one of the first glimpses of the “long tail”—the large number of esoteric items that appeal to relatively few people. Paul Davis once surveyed the odd assortment of books squirreled away on the shelves in the basement and with a sigh called it “the smallest and most eclectic bookstore in the world.”

No one had been hired yet to pack books, so when volumes rose and the company fell behind on shipping, Bezos, Kaphan, and the others would descend to the basement at night to assemble customer orders. The next day, Bezos, MacKenzie, or an employee would drive the boxes to UPS or the post office.

The packing work was arduous and often lasted well into the night. Employees assembled orders on the floor, wrapping books in a cohesive cardboard that stuck to itself but not anything else. That summer Nicholas Lovejoy, a former D. E. Shaw employee who had left the hedge fund to teach high-school math in Seattle, joined the company part-time and made the obvious suggestion of adding packing tables to the warehouse. That tidy anecdote quickly made the catalog of Jeffisms and was still being repeated twenty years later. “I thought that was the most brilliant idea I had ever heard in my life,” Bezos said in a speech, finding the story so freshly amusing that he accompanied it with a honking laugh.6

Bezos tapped Lovejoy to assist with recruiting and told him to go hire the smartest people he knew—just like David Shaw, Bezos wanted all of his employees to be high-IQ brainiacs. Lovejoy brought in four friends from his alma mater, Reed College, one of whom was Laurel Canan, a twenty-four-year-old carpenter who was planning to return to school to become a Chaucer scholar (it never happened). Canan helped build the much-needed packing tables, and then he formally joined the company and took over operations in the warehouse. (The landlord had finally allowed Amazon to expand out of the Sonic Jungle room and take over the entire basement.) One of the first things Canan did upon being hired was give up coffee. “You can’t do a job like that on caffeine. You have to do it on carbs,” he says.

It was an eclectic team operating under unusual circumstances in a challenging environment, and together they took their first tentative steps into an exotic river called the Internet. To everyone’s surprise, they all got swept up in a swift current. The first week after the official launch, they took $12,000 in orders and shipped $846 worth of books, according to Eric Dillon, one of Amazon’s original investors. The next week they took $14,000 in orders and shipped $7,000 worth of books. So they were behind from the get-go and scrambling to catch up.

A week after the launch, Jerry Yang and David Filo, Stanford graduate students, wrote them an e-mail and asked if they would like to be featured on a site called Yahoo that listed cool things on the Web. At that time, Yahoo was one of the most highly trafficked sites on the Web and the default home page for many of the Internet’s earliest users. Bezos and his employees had of course heard of Yahoo and they sat around eating Chinese food that night and discussing whether they were ready for a wave of new business when they were already drowning in orders. Kaphan thought that it might be like “taking a sip through a fire hose.”7 But they decided to do it, and within the first month of their launch they had sold books to people in all fifty states and in forty-five countries.8

Every day the number of orders increased, and the tendrils of chaos—the company’s constant antagonist over the next several years—began to tighten around the young startup. Bezos insisted that Amazon had to have a customer-friendly thirty-day-return policy, but it had no processes in place to handle returns; it had a line of credit but would regularly max out its account, and MacKenzie would then have to walk down the street to the bank and write a check to reopen it. Tom Schonhoff, who joined that summer after getting a computer science degree at the University of Washington, remembers Bezos bringing a latte to work each morning and sitting down at his disorganized desk. One day, the young CEO grabbed the wrong cup and took a slug of curdled, week-old latte. He spent the rest of the day complaining that he might have to go to the hospital. Everyone was working long days, scrambling to keep up, and not getting enough sleep.

On August 9, 1995, Netscape Communications, the corporate descendant of the pioneering Mosaic Web browser, went public. On the first day, its stock jumped from an initial price of $28 per share to $75, and the eyes of the world opened to the gathering phenomenon that was the World Wide Web.

While he and his employees worked exceedingly long days, Bezos was always thinking about raising money. That summer the Bezos family, using the Gise family trust (Gise was Jackie’s maiden name), invested another $145,000 in Amazon.9 But the company couldn’t continue hiring and growing on the Bezos family savings alone. That summer, Nick Hanauer, a garrulous fixture of the Seattle business community whose father had started a successful pillow manufacturing company, helped to line up pitch meetings for Bezos. He canvassed sixty potential investors, seeking to raise $1 million from individual contributions of $50,000 each.10

In the meetings, Bezos presented what was, at best, an ambiguous picture of Amazon’s future. At the time, it had about $139,000 in assets, $69,000 of which was in cash. The company had lost $52,000 in 1994 and was on track to lose another $300,000 that year.

Against that meager start, Bezos would tell investors he projected $74 million in sales by 2000 if things went moderately well, and $114 million in sales if they went much better than expected. (Actual net sales in 2000: $1.64 billion.) Bezos also predicted the company would be moderately profitable by that time (net loss in 2000: $1.4 billion). He wanted to value the fledgling firm at $6 million—an aggressive valuation that he had seemingly picked out of thin air. And he told investors the same thing he told his parents: the company had a 70 percent chance of failing.

Though they could not have known it, investors were looking at the opportunity of a lifetime. This highly driven, articulate young man talked with conviction about the Internet’s potential to deliver a more convenient shopping experience than crowded big-box stores where the staff routinely ignored customers. He predicted the company’s eventual ability to personalize a version of the website for each shopper based on his or her previous purchases. And he prophesied what must have seemed like a radical future: that everyone would one day use the Internet at high speeds, not over screeching dial-up modems, and that the infinite shelf space of the Web would enable the fulfillment of the merchandiser’s dream of the everything store—a store with infinite selection.

Bezos started his investment tour at the Mercer Island home of Eric Dillon, a tall blond stockbroker and one of Hanauer’s best friends. “He swept me off my feet,” Dillon says. “He was so convinced that what he was doing was basically the work of God and that somehow the money would materialize. The real wild card was, could he really run a business? That wasn’t a gimme. Of course, about two years later I was going, ‘Holy shit, did we back the right horse!’ ”

Bezos also pitched Bob Gelfond, a former D. E. Shaw colleague. Gelfond turned for advice to his skeptical father, a man who had had a long career in book publishing and who had experienced the pain of trying to get his company to embrace personal computers. His father recommended against the investment, but Gelfond had watched Bezos smoothly operate in the hedge-fund world and bet on his friend anyway. “It’s one thing to have a good idea, but it’s another to have confidence in a person to execute it,” he says.

Many others turned Bezos down. Hanauer and his mother invested, but one of Hanauer’s brothers and his father declined. Tom Alberg, a former executive at McCaw Cellular, met Bezos and was dubious because he loved browsing in bookstores. Then a few days later he failed to find a business book for his son at a local shop, and he changed his mind and decided to invest. The attorney who told Alberg about the deal invited Bezos to speak at an investment group that met regularly at Seattle’s tony Rainier Club. He thought the valuation was too high and passed.

Bezos later told the online journal of the Wharton School, “We got the normal comments from well-meaning people who basically didn’t believe the business plan; they just didn’t think it would work.”11 Among the concerns was this prediction: “If you’re successful, you’re going to need a warehouse the size of the Library of Congress,” one investor told him.

Todd Tarbert, Amazon’s first lawyer, sighs heavily when recalling his decision about whether to personally back the company. For the first time in his career, he wanted to invest in a client’s firm, and he secured written permission to do so from the Washington State Bar Association. He also talked to his father about taking out a loan against their jointly owned farmhouse. But then Tarbert’s son was born prematurely, and he took a month off from work and never got around to writing the $50,000 check. By the time Tarbert returned, Bezos had already raised the $1 million at a slightly-lower-than-hoped-for $5 million valuation.

One day in late 1997, after Amazon’s IPO, Tarbert was playing golf with his dad. “You know that company Amazon that just went public?” his father asked. “Was that the company we were talking about? What happened with that?”

“Yeah, Dad. You don’t want to know,” Tarbert replied.

“Well, what would that be worth today?” his father continued.

“At least a few million,” Tarbert said.

At the end of that summer, Nicholas Lovejoy told Bezos he wanted to move from part-time to full-time. To his surprise, his former D. E. Shaw colleague didn’t want to hire him full-time. Lovejoy had been working a modest thirty-five hours a week, playing ultimate Frisbee, kayaking, and hanging out with his girlfriend, and Bezos was imagining a different culture for Amazon, one where employees worked tirelessly for the sake of building a lasting company and increasing the value of their own ownership stakes. Lovejoy pleaded his case, arguing he was ready to sign up for sixty hours a week like everyone else, but he couldn’t change Bezos’s mind. Bezos even asked him to find a full-time employee to replace himself, which seemed particularly cruel. Eventually Lovejoy gave him a stack of résumés, and he put his own at the top. He also appealed to MacKenzie, Kaphan, and Davis and got them to change the boss’s mind. Lovejoy would work a variety of jobs at Amazon over the next few years, writing code and book reviews, ferrying packages to the post office at night, and eventually winding up in finance.

Bezos felt that hiring only the best and brightest was key to Amazon’s success. For years he interviewed all potential hires himself and asked them for their SAT scores. “Every time we hire someone, he or she should raise the bar for the next hire, so that the overall talent pool is always improving,” he said, a recurring Jeffism. That approach caused plenty of friction. As Amazon grew, it badly needed additional manpower, and early employees eagerly recommended their friends, many of whom were as accomplished as they were. Bezos interrogated the applicants, lobbing the kind of improbable questions that were once asked at D. E. Shaw, like “How many gas stations are in the United States?” It was a test to measure the quality of a candidate’s thinking; Bezos wasn’t looking for the correct answer, only for the individual to demonstrate creativity by coming up with a sound way to derive a possible solution. And if the potential employees made the mistake of talking about wanting a harmonious balance between work and home life, Bezos rejected them.

Paul Davis was incredulous. Amazon at the time was offering about sixty thousand a year in salary, stock options of questionable value, a meager health plan with a high deductible, and an increasingly frenetic work pace. “We would look at him and ask, How do you think you’re ever going to attract anyone with that kind of background to a company that has no revenue and that is not projected to have any kind of revenue?” Davis said. “I don’t see what the selling point is here!”

Little by little, the CEO with the piercing laugh, thinning hair, and twitchy demeanor revealed his true self to his employees. He was unusually confident, more stubborn than they had originally thought, and he strangely and presumptuously assumed that they would all work tirelessly and perform constant heroics. He seemed to keep his ambitions and plans very close to the vest, not revealing much even to Kaphan.

When his goals did slip out, they were improbably grandiose. Though the startup’s focus was clearly on books, Davis recalls Bezos saying he wanted to build “the next Sears,” a lasting company that was a major force in retail. Lovejoy, a kayaking enthusiast, remembers Bezos telling him that he envisioned a day when the site would sell not only books about kayaks but kayaks themselves, subscriptions to kayaking magazines, and reservations for kayaking trips—everything related to the sport.

“I thought he was a little bit crazy,” says Lovejoy. “At the time we offered 1.5 million books. Only about 1.2 million of those you could actually order. The database came from Baker and Taylor and we had about forty books in the warehouse.”

Bezos was also proving himself to be something of a spoilsport. That year the engineers rigged a database command, rwerich, to track the number of daily purchases as well as orders throughout the lifetime of the company. They obsessively watched those numbers grow—it was one of their pleasures amid the typically frenetic days. Bezos eventually told them to stop doing it, in part because it was putting too much strain on the servers. And when Amazon had its first five-thousand-dollar-order day and Lovejoy wanted to throw a party, Bezos rejected the idea. “There are a lot of milestones coming and that’s not the way I want to run things,” he said.

By early 1996, the young company was outgrowing its space in the Color Tile building. Employees were jammed into three small rooms, four door-desks in each, and the basement warehouse was overflowing with books. Kaphan, Davis, and Bezos piled into a car and went looking for a larger office in industrial areas around Lake Washington. Bezos emerged from every building to proclaim the space too small, Davis recalls. He wanted to accommodate whatever came for the company down the road.

That March, Amazon finally moved to a larger building with a more spacious warehouse a few blocks away. The new office was next to the Pecos Pit, a popular barbecue stand whose tantalizing aromas would waft into the warehouse each day starting at around ten in the morning.

But one early employee did not move with them. Paul Davis, who later became an advocate for open-source software and a critic of Amazon’s enforcing its 1-Click patent, told Bezos he wanted to spend more time with his newborn daughter. Leaving Amazon so early cost him a literal fortune in unclaimed stock options. A few months later, he would punctuate that misstep by slicing off the tip of his thumb with a band saw while preparing his home for sale. Bezos and Tom Schonhoff went to visit him in the hospital.

Somehow Davis, a native Londoner, was immune to the gospel of Jeff. He looked askance at the work-first zealotry, and he noticed that Bezos had changed a clever motivational phrase about choosing among three ways to work. In the old Bellevue house, Bezos had said to Kaphan and Davis, “You can work long, hard, and smart, but at Amazon.com you can pick only two out of three.” Now the young CEO liked to recite, “You can work long, you can work hard, you can work smart, but at Amazon you can’t choose two out of three.”

Davis had a KILL YOUR TV bumper sticker on his Honda Civic, and so to commemorate Davis’s departure, Bezos laid down a blue tarp in the parking lot and put an old computer terminal and keyboard on it. He handed Davis a sledgehammer and then filmed him smashing the machine. Afterward, Davis kept the Escape key.

By the first weeks of 1996, revenues were growing 30 to 40 percent a month, a frenzied rate that undermined attempts at planning and required such a dizzying pace that employees later found gaps in their memory when they tried to recall this formative time. No one had any idea how to deal with that kind of growth, so they all made it up as they went along.

That spring, at the American Association of Publishers annual convention, the chairman of Random House, Alberto Vitale, told a Wall Street Journal reporter about the new online bookselling sensation from the Pacific Northwest. A few weeks later, Amazon was featured in a front-page WSJ article, “How Wall Street Whiz Found a Niche Selling Books on the Internet,” and Bezos had his first stippled-and-hatched portrait in the country’s largest financial newspaper. The number of orders each day immediately doubled. The world now knew about Amazon.com, and, likely, so did Barnes & Noble and Borders, the nation’s largest book chains.

With the influx of the $1 million in fresh capital, the company upgraded its servers and software, and, more important, it hired. Bezos added waves of new employees to customer service, to the warehouse, and to Kaphan’s technical team. He started building an editorial group—writers and editors who would craft a literary voice for the site and give customers a reason to keep coming back. The group’s mission was to make Amazon the most authoritative online source of information about books and replicate the trustworthy atmosphere of a quirky independent bookstore with refined literary tastes. “We were asking people to put a credit card into the computer, which at the time was a radical concept,” says Susan Benson, whose job title evolved to managing editor. Editorial “was important both in creating a good shopping experience but also in getting people comfortable about the idea that there were people on the other side of the screen that they could trust.”

That summer, the company launched what could be considered its first big innovation: allowing other websites to collect a fee when they sent customers directly to Amazon to buy a book. Amazon gave these approved sites an 8 percent commission for the referral. The Associates program wasn’t exactly the first of its kind, but it was the most prominent and it helped spawn a multibillion-dollar-a-year industry called affiliate marketing. It also allowed Amazon, very early on, to extend its reach across the Web to other sites, entrenching it in advance of the looming competition.

By that spring, the company was burning cash hiring and buying equipment and server space, so Bezos decided to raise venture capital. He started negotiating with the Boston-based General Atlantic, whose partners discussed valuing the company at $10 million, eminently reasonable for a startup on track for $15.7 million in sales and $5.8 million in losses that year. Then John Doerr, a prominent partner at the storied Silicon Valley venture-capital firm Kleiner Perkins Caufield and Byers, heard about the company and flew up to Seattle for a visit.

“I walked into the door and this guy with a boisterous laugh who was just exuding energy comes bounding down the steps,” says Doerr, who had backed such winners as Netscape and Intuit. “In that moment, I wanted to be in business with Jeff.” Bezos introduced him to MacKenzie and Kaphan and took him on a tour of the warehouse, where all the outbound orders were neatly stacked on door-desks. When Doerr asked about the volume of daily transactions, Bezos leaned over a computer and typed a grep command next to a UNIX prompt, instantly pulling up the data—and demonstrating his technical fluency. Doerr swooned.

Kleiner and General Atlantic dueled for the next few weeks over the investment, driving Amazon’s valuation up to an altitude that Bezos had not imagined possible. He chose Kleiner on the strength of its reputation in the technology community. It invested $8 million, acquiring a 13 percent stake in the company, and valuing it at $60 million. Kleiner wanted to put a junior member of the firm on Amazon’s board of directors but, as a condition of the deal, Bezos insisted that Doerr himself take the position. Doerr’s direct involvement was a public vote of confidence for any technology startup.

In the circuitry of Bezos’s brain, something then flipped. Budding optimism about the Internet in Silicon Valley was creating a unique environment for raising money at a historically low price in ownership. Doerr’s optimism about the Web mixed with Bezos’s own bullish fervor and sparked an explosion of ambitions and expansion plans. Bezos was going to do more than establish an online bookstore; now he was set on building one of the first lasting Internet companies. “Jeff was always an expansive thinker, but access to capital was an enabler,” Doerr says. James Marcus, an editorial employee, saw it too, writing in his 2004 memoir Amazonia that “the cash from Kleiner Perkins hit the place like a dose of entrepreneurial steroids, making Jeff more determined than ever.”12

Employees soon learned of a new motto: Get Big Fast. The bigger the company got, Bezos explained, the lower the prices it could exact from Ingram and Baker and Taylor, the book wholesalers, and the more distribution capacity it could afford. And the quicker the company grew, the more territory it could capture in what was becoming the race to establish new brands on the digital frontier. Bezos preached urgency: the company that got the lead now would likely keep it, and it could then use that lead to build a superior service for customers.

Of course, that meant everyone at Amazon would have to work even harder. The assumption was that no one would take even a weekend day off. “Nobody said you couldn’t, but nobody thought you would,” says Susan Benson. Eric Benson adds, “There were deadlines and death marches.”

In the warehouse, an expanding and eclectic group raced to keep up with the surge of customer orders. An Amazon representative even told a temp agency, “Send us your freaks.” The bejeweled, tattooed, hair-dyed crew that responded to the call worked day and night in the warehouse next to the Pecos Pit and took turns selecting the music that played on a boom box. Their ranks included a three-hundred-pound baritone who would skip through the room belting out Russian arias.

Christopher Smith, a twenty-three-year-old warehouse temp with tattoos of Chinese characters on his forearms, began working at Amazon, and he would stay with the company in various roles for fourteen years. He started his typical day at four thirty in the morning, biked to work and let in the deliveryman from Ingram at six thirty, and usually stayed past midnight, packing furiously and answering customer e-mails before drinking a few beers in the warehouse and biking back home. “The dominant image in my mind is just… running. And scads of cardboard and packing material flying,” he says.

Smith worked so tirelessly over one span of eight months that he forgot about his light blue Peugeot station wagon that he’d parked near his apartment in Seattle’s Capitol Hill neighborhood. The fate of the car would later be revealed in the piles of mail that stacked up inside his front door. When he finally opened the mail in that pile, Smith found, in succession, several parking tickets, a notice that the car had been towed, a few warnings from the towing company, and finally a letter informing him that the vehicle had been sold at auction for seven hundred dollars. He still owed eighteen hundred dollars on his car loan, and the incident dinged his credit rating. He doesn’t recall caring much at the time.

“Life just stopped,” Smith says. “You were stuck in amber. But inside that amber was frenetic activity that no one else could see.”

Eric and Susan Benson didn’t come to Amazon alone every day—they brought their dog Rufus, a Welsh corgi. Because the two would be working such long hours, Bezos had promised they could always bring Rufus to the office. That was no problem in the SoDo buildings, but then Amazon moved yet again, late in the summer of 1996, to a building downtown, and the company had to write Rufus into the lease with the new landlord. The dog, an amiable presence who liked to park himself in meetings and occasionally suffered gastric distress from being overfed by employees, became the startup’s mascot. There was a superstitious belief that his paw tap on the keyboard was required to launch a new feature, and even today, though Rufus is long gone, there’s a building named for him on Amazon’s Seattle campus. (Bezos, it seems, has a nostalgic streak; one building is called Fiona, the code name of the original Kindle, and another is Obidos, which is what Shel Kaphan dubbed the company’s original computer infrastructure, after a town in Brazil where the tributaries of the Amazon River converge.)

Amazon was now nearing a hundred and fifty full-time employees, less than a third of whom were in the warehouse. A few months later, the warehouse also moved, to a larger, ninety-three-thousand-square-foot facility on Dawson Street in South Seattle (another current Amazon building: Dawson). The new downtown digs weren’t exactly high-class. Amazon took over the Columbia Building on Second Avenue in a seedy downtown neighborhood full of strip joints that was two blocks from touristy Pike Place Market. On the day the company moved in, a homeless man who’d been sleeping near the front door showed employees how to use their new key cards to gain access to the lobby.

The building itself was across the street from a needle-exchange program and methadone clinic and a wig store that attracted the transvestite trade. Kay Dangaard, a New Zealander who had moved through careers as a reporter and an advertising executive, joined the company as its first publicist, and from her office in the new building, she could stare out the window across the alley and into the apartment of a prostitute who practiced her trade early every evening under a flickering, low-wattage lamp.

Parking was scarce and expensive. Nicholas Lovejoy suggested to Bezos that the company subsidize bus passes for employees, but Bezos scoffed at the idea. “He didn’t want employees to leave work to catch the bus,” Lovejoy says. “He wanted them to have their cars there so there was never any pressure to go home.”

That fall, the company focused on customizing the site for each visitor, just as Bezos had promised his original investors it would. Its first attempt relied on software developed by a firm called Firefly Network, an offshoot of the MIT Media Lab. The feature, which Amazon called Bookmatch, required customers to rate a few dozen books and then generated recommendations based on their tastes. The system was slow and crashed frequently, and Amazon found that customers were reluctant to go through the extra effort of evaluating books.

So Bezos suggested that the personalization team develop a much simpler system, one that made recommendations based on books that customers had already bought. Eric Benson took about two weeks to construct a preliminary version that grouped together customers who had similar purchasing histories and then found books that appealed to the people in each group. That feature, called Similarities, immediately yielded a noticeable uptick in sales and allowed Amazon to point customers toward books that they might not otherwise have found. Greg Linden, an engineer who worked on the project, recalls Bezos coming into his office, getting down on his hands and knees, and joking, “I’m not worthy.”

Similarities eventually displaced Bookmatch and became the seed that would grow into Amazon’s formidable personalization effort. Bezos believed that this would be one of the insurmountable advantages of e-commerce over its brick-and-mortar counterparts. “Great merchants have never had the opportunity to understand their customers in a truly individualized way,” he said. “E-commerce is going to make that possible.”13

As the company and its technologies evolved, one person was having a ridiculously good time: Shel Kaphan. He was forty-three years old and had led the remarkable effort to hack Bezos’s vision into existence, completely buying into the gospel of a bookstore with limitless shelf space that spread knowledge to all corners of the earth. He was the mother hen of the technology systems: during the move to the Pecos Pit building, he put the company’s two servers, dubbed Bert and Ernie, into the back of his Acura Integra and drove them over there himself.

Kaphan had taped a fortune-cookie message to the PC monitor on his desk. It read Let no one cause you to alter your code.

Kaphan and Bezos occasionally took walks around the city to discuss the business and Kaphan’s concerns about technical issues and future plans. On one walk, Kaphan asked Bezos why, now that they had accomplished some of their earliest goals, he was so bent on rapid expansion. “When you are small, someone else that is bigger can always come along and take away what you have,” Bezos told him. “We have to level the playing field in terms of purchasing power with the established booksellers.”

One thing was bothering Kaphan around that time. He had enough experience with technology startups to know that the arrival of venture capitalists usually coincided with an influx of new, high-powered executives. He walked into Bezos’s office that year and wondered aloud, “We’re growing pretty quickly now. Are you going to replace me?”

Bezos didn’t waver. “Shel, the job is yours as long as you want it.”

In early 1997, Mark Breier, a former executive at Cinnabon and one of those new executives Kaphan had anticipated, invited his department to his Bellevue home for a day of meetings. That afternoon, Amazon’s marketing vice president introduced employees to a game called broomball. Breier’s father had been an engineer at IBM in Bethesda and had seen the game played on ice during trips to IBM’s offices in Canada. In Breier’s land-based version, players swatted a kickball on the lawn with brooms and other random implements from his garage.

It seemed like goofy fun, but there was an undercurrent of intense competition. In other words, it perfectly expressed the temperament of Jeff Bezos, who stopped by the meeting and threw himself into the inaugural Amazon broomball contest with gusto. At one point, Andy Jassy, then a new recruit from Harvard, made his first significant impression at the company by inadvertently hitting Bezos in the head with a kayak paddle. Later, Bezos dove after the ball into some hedges and tore his blue oxford shirt.

Breier’s tenure at Amazon was short and rocky. Bezos wanted to reinvent everything about marketing, suggesting, for example, that they conduct annual reviews of advertising agencies to make them constantly compete for Amazon’s business. Breier explained that the advertising industry didn’t work that way. He lasted about a year. Over the first decade at Amazon, marketing VPs were the equivalent of the doomed drummers in the satirical band Spinal Tap; Bezos plowed through them at a rapid clip, looking for someone with the same low regard for the usual way of doing things that Bezos himself had. Breier’s broomball creation, however, became a regular pastime at Amazon employee picnics and offsite meetings, with employees covering their faces in war paint and Bezos himself getting in on the action.

As Shel Kaphan had suspected, Breier’s arrival at Amazon was just the beginning of an influx of experienced business executives. With venture capital in the bank, Bezos fixated on taking the company public with an IPO, and he went on a recruiting spree. With the D. E. Shaw noncompete clause finally expiring, he called Jeff Holden and told him to pack his bags. Holden convinced a few other DESCO employees to come with him, though one, Paul Kotas, put his stuff in Holden’s U-Haul and then changed his mind. (Kotas moved to Washington two years later and did become a longtime Amazon executive, though his hesitation would cost him tens of millions of dollars in stock.)

Bezos began filling out the rest of his senior leadership ranks, building a group that would formally become known as the J Team. Amazon recruited executives from Barnes & Noble and Symantec and two from Microsoft—Joel Spiegel, a vice president of engineering, and David Risher, who would eventually take over as head of retail. Risher was swayed by the Amazon founder’s aggressive vision. “If we get this right, we might be a $1 billion company by 2000,” Bezos told him. Risher personally informed Microsoft cofounder Bill Gates of his defection to the bookseller across the lake. Gates, who underestimated the Internet’s impact for too long, was stunned. “I think he was honestly flabbergasted,” Risher says. “To some extent he was right. It didn’t make any sense.”

One of Risher’s first tasks was taking over negotiations with crosstown coffee giant Starbucks, which had proposed putting a rack of merchandise from Amazon next to its cash registers in exchange for an ownership stake in the startup. Risher and Bezos visited Starbucks’ CEO Howard Schultz in his SoDo headquarters—across from the Pecos Pit—and Schultz told the pair that Amazon had a big problem and that Starbucks could solve it. “You have no physical presence,” the lanky Starbucks founder said as he brewed coffee for his guests. “That is going to hold you back.”

Bezos disagreed. He looked right at Schultz and told him, “We are going to take this thing to the moon.” They decided to work on a deal, but it fell apart a few weeks later when Schultz’s executives asked for a 10 percent ownership stake in Amazon and a seat on its board of directors. Bezos had been thinking along the lines of less than 1 percent. Even today, Amazon continues to evaluate the possibility of some kind of retail presence. “We were always willing to consider that there may be an opportunity there,” says Risher.

Another new arrival was Joy Covey as chief financial officer. Driven and often intimidating to underlings, Covey became an intellectual foil to Bezos and a key architect of Amazon’s early expansion. She had an unconventional background. A hyperintelligent but alienated child from San Mateo, California, she had run away from home when she was a sophomore in high school and worked as a grocery-store clerk in Fresno. She entered Cal State, Fresno, at age seventeen, graduated in two years, and then took the exam to become a certified public accountant at age nineteen, notching the second-highest score in the nation without studying. She later earned a joint business and law degree from Harvard. When Bezos found her, she was the thirty-three-year-old chief financial officer for a Silicon Valley digital-audio company called Digidesign.

Over the next few years, Covey remained so intensely focused on executing Bezos’s “get big fast” imperative that everything else in her life became background noise. One morning she parked her car in the office garage and was so distracted that she inadvertently left it running—all day. That evening, she couldn’t find her car keys, concluded she had lost them, and went home without her car. The security guard in the garage called her a few hours later and told her that she might want to come back to the office to retrieve her still-idling vehicle.

Covey began working on an IPO a month after joining the company. Amazon did not urgently require the capital of a public offering—it had yet to begin launching new product categories, and its ninety-three-thousand-square-foot warehouse in South Seattle was serving the company’s needs. But Bezos believed a public offering could be a global branding event that solidified Amazon in customers’ minds. In these days, Bezos took every opportunity to appear in public and tell the story of Amazon.com. (Always Amazon.com, never Amazon; he was as insistent on that as David Shaw had been on the space between the D. and the E. in his company’s name.) Another reason Bezos pushed to go public was that competition was looming online in the form of the reigning giant of the bookselling business, Barnes & Noble.

The chain store was run by Len Riggio, a tough-as-nails Bronx-born businessman with a taste for expensive suits and for fine art, which he lavishly hung on the walls of his lower Manhattan office. Over two decades, Barnes & Noble had revolutionized bookselling. It introduced discount prices on new releases and, with archrival Borders, spread the concept of the book superstore, driving many mall shops and independents out of business. As a result, between 1991 and 1997, the market share of independent bookstores in the United States dropped from 33 to 17 percent, according to the American Booksellers Association, whose membership dropped from 4,500 to 3,300 stores in that time.

Now Barnes & Noble was faced with what must have seemed like a pipsqueak upstart. Amazon had a measly $16 million in sales in 1996; Barnes & Noble notched $2 billion in sales that same year. Still, after the Wall Street Journal article in 1996, Riggio called Bezos and told him he wanted to come to Seattle with his brother Stephen to talk about a deal. Inexperienced at the time in these kinds of discussions, Bezos called investor and board member Tom Alberg and asked him to accompany him to dinner with the Riggios. Beforehand, they decided on a strategy of caution and flattery.

The foursome had a steak dinner at Seattle’s famous Dahlia Lounge, on Fourth Avenue near the Columbia Building, an iconic Seattle restaurant with a memorable neon sign of a chef holding a strung-up fish. The Riggios wore suits and came on strong. They told Bezos and Alberg that they were going to launch a website soon and crush Amazon. But they said they admired what Bezos had done and suggested a number of possible collaborations, such as licensing Amazon’s technology or opening a joint website. “They didn’t come right out and offer to buy us. It was not particularly specific,” Alberg says. “It was a pretty friendly dinner. Other than the threats.”

Afterward, Alberg and Bezos told the Riggios they would think about a partnership. Later Alberg and Bezos spoke on the phone and agreed that such a collaboration was unlikely to work. “Jeff was always a big believer that disruptive small companies could triumph,” Alberg says. “It wasn’t the end of the world. We knew we had a challenge.”

Rebuffed, the Riggio brothers went home and started work on their own site. According to a person who worked at Barnes & Noble at the time, Len Riggio wanted to call the site the Book Predator but colleagues convinced him that was a bad idea. Barnes & Noble would take many months to back up its threat and spin up its own Web operation, and during that time, Bezos’s team accelerated the pace of innovation and expansion.

Joy Covey considered both Morgan Stanley and Goldman Sachs for the role of lead underwriter on the Amazon IPO, but she settled on Deutsche Bank and the tall, mustached founder of its technology practice, Frank Quattrone. Quattrone’s lead analyst, a future venture capitalist named Bill Gurley, had covered Amazon for a year and presciently identified it as one of the “wave riders” that was exploiting the ascendance of the Internet.

That spring, Bezos and Covey traveled the United States and Europe to pitch Amazon to potential investors. With three years of sales data, they now felt they had a unique story. Unlike traditional retailers, Amazon boasted what was called a negative operating cycle. Customers paid with their credit cards when their books shipped but Amazon settled its accounts with the book distributors only every few months. With every sale, Amazon put more cash in the bank, giving it a steady stream of capital to fund its operations and expansion.14 The company could also lay claim to a uniquely high return on invested capital. Unlike brick-and-mortar retailers, whose inventories were spread out across hundreds or thousands of stores around the country, Amazon had one website and, at that time, a single warehouse and inventory. Amazon’s ratio of fixed costs to revenue was considerably more favorable than that of its offline competitors. In other words, Bezos and Covey argued, a dollar that was plugged into Amazon’s infrastructure could lead to exponentially greater returns than a dollar that went into the infrastructure of any other retailer in the world.

At seemingly every stop, investors asked the pair about possible expansion into other categories. Bezos demurred and said he was focused only on books. To burnish their case, they compared their fundamentals to Dell, the high-flying PC maker at the time. But Bezos, characteristically secretive, divulged only the legal minimum and withheld some data, like what it cost Amazon to attract a new user and how much loyal customers typically spent on the site. He wanted capital from an IPO but didn’t want to give his rivals a road map to use to follow in his footsteps. “There was a lot of skepticism on the road show,” says Covey. “A lot of people said, you are going to fail, Barnes and Noble is going to kill you, and who do you think you are not to share this stuff?”

The IPO process was painful in another way: During the seven-week SEC-mandated “quiet period,” Bezos was not permitted to talk to the press. “I can’t believe we have to delay our business by seven years,” he complained, equating weeks to years because he believed that the Internet was evolving at such an accelerated rate.

Staying out of the press soon became even more difficult. Three days before Amazon’s IPO, Barnes & Noble filed a lawsuit against Amazon in federal court alleging that Amazon was falsely advertising itself to be the Earth’s Largest Bookstore. Riggio was appropriately worried about Amazon, but with the lawsuit he ended up giving his smaller competitor more attention. Later that month, the Riggios unveiled their own website, and many seemed ready to see Amazon crushed. The CEO of Forrester Research, a widely followed technology research firm, issued a report in which he called the company “Amazon.Toast.”

Straining against the regulatory shackles that required him to stay silent, Bezos wanted to send mimes wearing Amazon T-shirts to skulk around the Riggios’ launch event. Quattrone put the kibosh on the plan.

Later Bezos recalled speaking at an all-hands meeting called to address the assault by Barnes & Noble. “Look, you should wake up worried, terrified every morning,” he told his employees. “But don’t be worried about our competitors because they’re never going to send us any money anyway. Let’s be worried about our customers and stay heads-down focused.”15

For the next year, Amazon.com and BarnesandNoble.com competed, each asserting that it had a better selection and lower prices. Barnes & Noble laid claim to a deeper catalog; Amazon ramped up efforts to find rare and out-of-print books, assigning employees to track down books in independent bookshops and at antique-book dealers. In 1998, Barnes & Noble would spin off its dot-com subsidiary with a $200 million investment from German media giant Bertelsmann and later take the company public. Amazon would then outflank the bookseller by rapidly expanding into other product categories like music and DVDs.

Bezos had predicted that the chain retailer would have trouble seriously competing online, and, in the end, he was right. The Riggios were reluctant to lose money on a relatively small part of their business and didn’t want to put their most resourceful employees behind an effort that would siphon sales away from the more profitable stores. On top of that, their company’s distribution operation was well entrenched and geared toward servicing physical stores by sending out large shipments of books to a set number of locations. The shift from that to mailing small orders to individual customers was long, painful, and full of customer-service errors. For Amazon, that was just daily business.

Amazon’s IPO, on May 15, 1997, was a success, though a relatively mild one compared with the debauched dot-com affairs that would come later. Bezos battled his bankers to boost the price of the offering to eighteen dollars a share, and the stock traded underwater—below its IPO price—for more than a month. But the IPO raised $54 million and got widespread attention, propelling the company to a blockbuster year of 900 percent growth in annual revenues. Bezos, his parents, and his brother and sister (who had each bought ten thousand dollars’ worth of stock early on) were now officially multimillionaires. And Amazon’s original backers and Kleiner Perkins all saw a healthy return on their investments. But even that was peanuts compared to the coming exponential growth in Amazon’s stock.

From New York, Bezos called into the Amazon office on the day of the IPO and asked employees not to overcelebrate the moment or obsess over the stock price. Henry Weinhard’s beer, an inexpensive local brew, was passed around the Seattle offices and then everyone went back to work, although they all occasionally stole furtive glances at Amazon’s stock price.

Later that month, everyone who worked on the IPO received a wooden box containing a bottle of tequila. On the bottle was a label with an invitation to a “Fiesta Mexicana,” a weekend at the Palmilla Resort in Los Cabos, Mexico, courtesy of Frank Quattrone and Deutsche Bank technology group.

Bezos, MacKenzie, Joy Covey, Shel Kaphan, and Nicholas Lovejoy attended, as did Jeff Blackburn, the Deutsche Bank associate and former Dartmouth College linebacker who would soon join Amazon and become its chief of business development. The weekend included a day cruise, during which Quattrone taught Bezos the Macarena, and the two men, despite a significant height difference, danced next to each other on the ship’s deck. One night there was an opulent dinner on the beach, and the bankers showed up in pirate regalia. Toward the end of the evening, storm winds started to gust and the ocean grew choppy. An errant wave came onto the shore and washed over electrical cables, shorting out the stereo equipment and sending a dessert tray crashing to the sand. As the partygoers scurried for shelter, a happy Bezos surveyed the scene, his laugh cutting through the Mexican night.

In early 1997, while Amazon was fending off the world’s biggest bookstore chain, Covey and Bezos courted Rick Dalzell, a former U.S. Army Ranger. A native of Georgetown, Kentucky, Dalzell had spent the 1980s as a signal engineer stationed in Fort Gamble and then as a communications officer in West Germany. After returning to civilian life, he eventually went to work in the information-systems division of the most technologically sophisticated retailer in the world: Walmart.

With his cheerful demeanor, southern drawl, and penchant for wearing shorts year-round, Dalzell became one of Amazon’s most loved and respected executives. But at first, he turned Bezos and Covey down—repeatedly. When he visited Seattle that spring, the airline lost his luggage, so Dalzell borrowed a coat and tie from the bellman’s desk at his hotel. Then he showed up early to the Amazon offices, and no one was there; unlike Walmart’s staff, Amazon employees worked late and slept late. When Bezos did get there, he and Dalzell sat down to talk, and the Amazon founder promptly spilled his entire cup of coffee right onto Dalzell’s borrowed jacket.

Despite the awkward start, Dalzell left Seattle intrigued with Bezos’s vision and geeky charisma. But back in Bentonville, Arkansas, Dalzell was easily turned around by Walmart execs. From the front seat of a golf cart that was zooming through a massive distribution center, Lee Scott, the future Walmart CEO who was then running logistics, told Dalzell that Amazon was a novel idea but that it had limited potential. Don Soderquist, Walmart’s chief operating officer, said that because Amazon didn’t store its own inventory—at the time, it just ordered it from distributors and then quickly shipped it back out—the model would hit a wall once it got to $100 million in sales. He also said that Dalzell was one of a dozen guys they were betting on, and he added ominously, “Should you decide to leave, you are no longer a member of the Walmart family.”

Dalzell took that advice to heart. But his infatuation with online retailing wouldn’t go away. At that time, early 1997, Walmart and Sam’s Club were taking their own first steps into the world of e-commerce, but Dalzell could see the effort did not have the company’s full backing.

Bezos didn’t give up on Dalzell or the prospect of getting another seasoned engineering executive. He kept looking elsewhere but had Covey call Dalzell’s wife, Kathryn, every few weeks and deployed John Doerr to try to exert his charm. At one point, Bezos and Covey flew to Bentonville to surprise Dalzell and invite him out for dinner. After that meal, Dalzell agreed to join Amazon—but then changed his mind. “It would take an atomic bomb to get my family out of Arkansas,” he said at the time.16

But Dalzell couldn’t get Amazon out of his head. “My wife will tell you if I’m passionate about something, I don’t stop talking about it,” he says. “One day she turned to me and said, ‘Why are you still at Walmart?’ ” In August, he finally accepted the job, for real this time, and Walmart’s CIO stood in Dalzell’s office as he collected his belongings and then marched him out the door.

In August 1997, Dalzell started his new job as Amazon’s chief information officer and became a key member of the J Team. He was a seasoned manager, adept at hiring quickly and getting large groups to set and meet ambitious objectives. Dalzell regularly sat next to Bezos in meetings and was in charge of putting manpower behind the founder’s best ideas. “It was real easy for Jeff to spout off big ideas faster than anyone could practically do anything with them,” says Bruce Jones, a longtime Amazon engineer and Dalzell’s friend. “Rick made sure we got the important stuff done.”

Dalzell’s arrival that summer had a big ripple effect, and it magnified the growing anxieties of Shel Kaphan. Before the IPO, Bezos had taken his original partner for a walk, told him the company needed deeper technical management, and then asked him to become chief technology officer of Amazon. It sounded like a promotion, but in reality Kaphan would be playing an advisory role with no budget or direct responsibilities. Kaphan thought about it for a few days and then registered an objection, but according to Kaphan, Bezos said, “It’s done,” and wouldn’t talk about it anymore.

Kaphan stayed as CTO for the next few years and remained on the management team, but he was sidelined, since he no longer had any employees reporting to him or any way to influence the distribution of critical resources. And his frustration and feelings of powerlessness grew. He had built Amazon’s original systems under battle conditions, with an emphasis on frugality. Now that Amazon was approaching $60 million in sales a year, the infrastructure was a disaster. Kaphan wanted to take the time to carefully rebuild it. Bezos refused to lift his foot off the pedal and wanted all his engineers working on new features, not rewriting old ones. Then he distressed Kaphan further by approving some of Kaphan’s projects, like rebuilding Amazon’s infrastructure from scratch, but allowing other managers to direct them. Kaphan could only sit and watch.

Bezos no longer entrusted the introverted programmer with any real management responsibility, but he did express an appreciation and a fondness for Kaphan. In the fall of 1998, Bezos told Kaphan to pack his bags and accompany him on a trip to check out a potential acquisition target. Then he surprised Kaphan with what he dubbed the Shelebration, a weekend in Hawaii to celebrate Kaphan’s four-year anniversary at Amazon. Bezos flew in colleagues and Kaphan’s family and friends and put everyone up for three days in private cabins on a Maui beach. Every attendee received an ornamental tile coaster emblazoned with a picture of Kaphan wearing a goofy Cat in the Hat hat.

That weekend spawned a fortuitous relationship for Bezos. One of Kaphan’s friends who came on the trip was Stewart Brand, the founder of the Whole Earth Catalog. Brand and his wife, Ryan, bonded with Bezos and MacKenzie, forging a connection that led to Bezos’s involvement in the Clock of the Long Now, an aspirational project aimed at building a massive mechanical clock designed to measure time for ten thousand years, a way to promote long-term thinking. A few years later, as a direct result of that weekend, Bezos would become the biggest financial backer of the 10,000-Year Clock and agree to install it on property he owned in Texas.

But Kaphan grimaced through the Hawaii weekend. He says he felt like “the guy getting the gold watch who has not retired yet.”

Two promises were in conflict with each other. Bezos had pledged to Kaphan that he could keep his job forever. But Amazon’s founder also promised the company and his investors that he would always raise the hiring bar and that Amazon would live or die based on its ability to recruit great engineers. Rick Dalzell and Joel Spiegel were adept at the political martial arts that occurred inside big companies. Kaphan was an introverted hacker with an idealistic streak and little intuitive leadership ability; in fact, he had been hopelessly behind on hiring and growing his own department. But he had also quietly and competently led the effort to deliver Amazon to the world back when it was only a set of uncertain predictions on Jeff Bezos’s spreadsheets.

Kaphan couldn’t imagine himself walking away, but he found himself counting the weeks to his five-year anniversary at the company, when he was scheduled to get the last portion of his stock. He eventually stopped going into the office altogether. He officially stayed at Amazon until the fall of 1999 and then called Bezos one morning from home to say he was quitting. Kaphan recalls that Bezos said he was sorry Kaphan felt that he needed to make that decision and made little effort to persuade him to stay.

Bezos would describe Kaphan as “the most important person ever in the history of Amazon.com.”17 But Kaphan felt bitter resentment about his five-year odyssey. He calls Bezos’s decision to remove him from active participation in Amazon “a betrayal of a sacred trust” between people who had started a business together and says that the way he was treated “was one of the biggest disappointments of my entire life.”

It was a distilled version of the dissatisfaction felt by many early Amazon employees. With his convincing gospel, Bezos had persuaded them all to have faith, and they were richly rewarded as a result. Then the steely-eyed founder replaced them with a new and more experienced group of believers. Watching the company move on without them gave these employees a gnawing sensation, as if their child had left home and moved in with another family. But in the end, as Bezos made abundantly clear to Shel Kaphan, Amazon had only one true parent.