by Brad Stone
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 kin
d 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 aggressiv
e 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!’ ”