by Brad Stone
Over the years, unions like the Teamsters and the United Food and Commercial Workers tried to organize associates in Amazon’s U.S. FCs, passing out flyers in the parking lots and in some cases knocking on the doors of workers’ homes. Amazon’s logistics executives quickly met these campaigns by engaging with employees and listening to complaints while making it clear that unionizing efforts would not be tolerated. The sheer size of Amazon’s workforce and the fact that turnover is so high in the fulfillment centers make it extremely difficult for anyone to organize workers. Most recently, in 2013, workers at two Amazon FCs in Germany went on strike for four days, demanding better pay and benefits. The company refused to negotiate with the union.
The unions themselves say there’s another hurdle involved—employees’ fear of retribution. In January 2001, the company closed a Seattle customer-service call center, as part of a larger round of cost-cutting measures. Amazon said closing the facility was unrelated to recent union activity there, but the union involved was not so sure. “The number one thing standing in the way of Amazon unionization is fear,” says Rennie Sawade, a spokesman for the Washington Alliance of Technology Workers. Employees are “afraid they’ll fire you—even though it’s technically not legal. You’re the one who has to fight to get your job back if they do.”
Amazon often had to contend with something even more unpredictable than stealing, unionization, or truancy in its FCs: the weather. Company managers learned quickly that they had no choice but to install air-conditioning in their first fulfillment centers in Phoenix, where the summers were brutal, but they skimped on what they viewed as an unnecessary expense in colder climates. Instead, fulfillment-center managers developed protocols to deal with heat waves. If temperatures spiked above 100 degrees, which they often did over the summer in the Midwest, five minutes were added to morning and afternoon breaks, which were normally fifteen minutes long, and the company installed fans and handed out free Gatorade.
These moves sound almost comically insufficient, and they were. In 2011, the Morning Call, an Allentown newspaper, published an exposé about poor working conditions in Amazon’s two Lehigh Valley fulfillment centers during that summer’s brutal heat wave. Fifteen workers suffered heat-related symptoms and were taken to a local hospital. An emergency room doctor called federal regulators to report an unsafe working environment. In a detail that struck many readers and Amazon customers as downright cruel, the newspaper noted that Amazon paid a private ambulance company to have paramedics stationed outside the FCs during the heat wave—ready to deal with employees as they dropped.
Jeff Wilke argues that Amazon’s overall safety record, as reflected in the low number of incidents reported to the Occupational Safety and Health Administration, or OSHA, demonstrates that it is safer to work in the company’s warehouses than in department stores. (The low number of recorded complaints to OSHA regarding Amazon facilities backs up this contention.3) In terms of public perception, though, it didn’t matter. The report sent shock waves through the media, and the following year, battered by the negative publicity, Amazon announced it was paying $52 million to install air-conditioning in more of its fulfillment centers.4
Bezos and Wilke could battle chaos, they could try to out-engineer it, but they could never eradicate it completely. The capricious and unpredictable quirks of human nature always managed to emerge in unexpected ways, like in December of 2010, when a disgruntled employee set a fire in a supply room in Fernley. Employees were evacuated and had to stand out in the cold shivering for two hours before being sent home, according to two employees who were there. That same year in Fernley, a worker preparing to quit hoisted himself onto a conveyor belt and took a long joyride through the facility. He was subsequently escorted out the door.
Perhaps the best story stems from the busy holiday season of 2006. A temporary employee in the Coffeyville, Kansas, fulfillment center showed up at the start of his shift and left at the end of it, but strangely, he was not logging any actual work in the hours in between. Amazon’s time clocks were not yet linked to the system that tracked productivity, so the discrepancy went unnoticed for at least a week.
Finally someone uncovered the scheme. The worker had surreptitiously tunneled out a cavern inside an eight-foot-tall pile of empty wooden pallets in a far corner of the fulfillment center. Inside, completely blocked from view, he had created a cozy den and furnished it with items purloined from Amazon’s plentiful shelves. There was food, a comfortable bed, pictures ripped from books adorning the walls—and several pornographic calendars. Brian Calvin, the general manager of the Coffeyville FC, busted the worker in his hovel and marched him out the door. The man left without argument and walked to a nearby bus stop; sheepish, one might imagine, but perhaps also just a little bit triumphant.
CHAPTER 7
A Technology Company, Not a Retailer
On July 30, 2005, Amazon celebrated its tenth anniversary at a gala at Seattle’s Benaroya Hall. Authors James Patterson and Jim Collins and screenwriter Lawrence Kasdan spoke to employees and their guests, and Bob Dylan and Norah Jones performed and sang a rare duet, Dylan’s “I Shall Be Released.” The comedian Bill Maher acted as master of ceremonies. Marketing vice president Kathy Savitt had persuaded Bezos to splurge on the historic moment, and, characteristically, they organized everything in such a way that it had a benefit for customers: the concert was streamed live on Amazon.com and watched by a million people.
Despite how far Amazon.com had come, it was still often a media afterthought. It was now officially the age of Google, the search-engine star from Silicon Valley. Google cofounders Larry Page and Sergey Brin were rewriting the story of the Internet. Their high-profile ascent, which included an IPO in 2004, was universally watched. Suddenly, clever online business models and experienced CEOs from traditional companies were passé in Silicon Valley, replaced by executives with deep technical competence.
This, it seemed, was to be the era of Stanford computer science PhDs, not Harvard MBAs or hedge-fund whiz kids from Wall Street, and the outside world did not believe Amazon would fare well in this profound shift. In the year leading up to its birthday celebration, Amazon’s stock fell 12 percent as Wall Street focused on its slender margins and the superior business models of other Internet companies. Eighteen of the twenty-three financial analysts who covered the company at the time of the anniversary event expressed their skepticism by putting either a hold or a sell rating on Amazon’s stock. The market capitalization of eBay, still viewed as a perfect venue for commerce, was three times larger than Amazon’s. Google’s valuation was more than four times Amazon’s, and it had been public for less than a year. Fixed-price online retail was simply out of vogue.
Ever since the late 1990s, Bezos had been claiming that Amazon was a technology company pioneering e-commerce, not a retailer. But that sounded like wishful thinking. Amazon still collected a vast majority of its revenues by selling stuff to customers. Despite Bezos’s protestations, Amazon looked, smelled, walked, and quacked like a retailer—and not a very profitable one at that.
A week after the tenth-anniversary show, the New York Times published a lengthy article on the front page of its Sunday business section that suggested Bezos was no longer the right man for the job.1 “It’s time for Mr. Bezos to do as the founders of so many other technology companies have done before him: find a professionally trained chief executive with a deep background in operations to take the reins,” said an analyst quoted prominently in the piece.
The rise of Google did more than shift the mind-set of Wall Street and the media. It posed a new set of challenges to Amazon. Rather than just hopping on Amazon.com and looking for products, Internet users were starting their shopping trips on Google, putting an unwelcome intermediary between Jeff Bezos and his customers. Google had its own e-commerce ambitions and early on opened a comparative shopping engine, dubbed Froogle. Even worse, both Amazon and eBay had to compete with each other to advertise alongside Google results for pop
ular keywords like flat-screen TV and Apple iPod. They were essentially paying a tax to Google on sales that began with a search. To make this new kind of advertising more efficient, Amazon devised one of the Web’s first automated search-ad-buying systems, naming it Urubamba, after a river in Peru, a tributary of the Amazon. But Bezos was wary of helping Google develop tools that it might then extend to Amazon’s rivals. “Treat Google like a mountain. You can climb the mountain, but you can’t move it,” he told Blake Scholl, the young developer in charge of Urubamba. “Use them, but don’t make them smarter.”
Google competed with Amazon for both customers and talented engineers. After its IPO, the search giant opened an office in Kirkland, a twenty-minute drive from downtown Seattle. Google offered its employees lavish perks, like free food, office gyms, and day care for their children, not to mention valuable stock options. For its part, Amazon offered a sickly stock price and a combative internal culture, and employees still had to pay for their own parking and meals. Not surprisingly, Google began to suck engineers out of Amazon en masse.
During this time, Bezos relentlessly advocated for taking risks outside of Amazon’s core business. Between 2003 and 2005, Amazon started its own search engine and devised a way to allow customers to search for phrases inside books on the site. Bezos also helped to pioneer the modern crowd-sourcing movement with a service called Mechanical Turk and laid the groundwork for Amazon Web Services—a seminal initiative that ushered in the age of cloud computing.
Bezos battled a reaction that he dubbed the institutional no, by which he meant any and all signs of internal resistance to these unorthodox moves. Even strong companies, he said, tended to reflexively push back against moves in unusual directions. At quarterly board meetings, he asked each director to share an example of the institutional no from his or her own past. Bezos was preparing his overseers to approve what would be a series of improbable, expensive, and risky bets. He simply refused to accept Amazon’s fate as an unexciting and marginally profitable online retailer. “There’s only one way out of this predicament,” he said repeatedly to employees during this time, “and that is to invent our way out.”
Bezos was certain that Amazon needed to define itself as a technology company instead of a retailer, so he started hiring technologists and giving them obscure job titles. In 2001, he lured Apple veteran and renowned user-interface expert Larry Tesler to Amazon and called him vice president of shopping experience. The next year, he hired a Stanford-educated machine-learning professor named Andreas Weigend and dubbed him chief scientist. Neither did particularly well under Bezos’s demanding tutelage and both quickly grew tired of Seattle. Weigend lasted only sixteen months at Amazon, Tesler a little over three years. Then Bezos found a technologist who thought just as grandly as he did about ways Amazon could branch out in new directions.
Udi Manber was born in Kiryat Haim, a small town in northern Israel, and he earned a PhD in computer science at the University of Washington. In 1989, as a computer science professor at the University of Arizona, he wrote an authoritative book about the problem-solving wonders of complex mathematical formulas called Introduction to Algorithms: A Creative Approach that captured the attention of the Silicon Valley cognoscenti. Manber worked at Yahoo during its glory years but quit in disappointment in 2002 after former Warner Brothers CEO Terry Semel took over as CEO and reoriented the Web portal toward becoming a media company.
Rick Dalzell had heard of Manber’s book and started courting him while Manber was preparing to leave Yahoo. Dalzell introduced Manber to Bezos, and by all accounts, an intoxicating geek bromance was born. One of the first questions Bezos asked Manber was “Why don’t you describe a new algorithm that you invented?” Manber did and then marveled at Bezos’s comprehension. “He not only fully understood it, but did it faster than most people. I did not expect that from a CEO. It would have taken me a month to explain it to most senior Yahoo people,” he says.
Manber had serious reservations about moving to Seattle. His wife was a professor at Stanford and they had two young daughters in school. But Bezos agreed to let him split his time between Seattle and Silicon Valley. Manber joined Amazon that fall, and Bezos gave him a typically obscure job title: chief algorithms officer. A few months later, he joined the S Team. “Udi and Jeff had instant chemistry,” says Dalzell.
Manber’s mission was a broad one: use technology to improve Amazon’s operations and invent new features. He would see Bezos once a week—an exception to the CEO’s aversion to one-on-one meetings—to review ongoing projects and brainstorm new ideas. Manber always had Bezos’s full attention, even on a day when they met just a few hours before Amazon’s quarterly earnings announcement.
One of Manber’s first projects at Amazon captured the interest of both the media and the New York publishing establishment for the sheer scope of its ambition. Before Manber joined the company, Amazon had introduced a tool called Look Inside the Book, an effort to match the experience of a physical bookstore by allowing customers to browse through the first few pages of any title. Manber took that idea much further. He proposed a service called Search Inside the Book that would let customers look for specific words or phrases from any book they had purchased. Bezos loved the idea and raised the stakes: he wanted customers to be able to search any book on the site, and he gave Manber a goal of getting one hundred thousand books into the new digital catalog.2
“We had a very simple argument” for book publishers, Manber says. “Think of two bookstores, one where all the books are shrink-wrapped and one where you can sit as long as you want and read any book you want. Which one do you think will sell more books?”
Publishers were concerned that Search Inside the Book might open up the floodgates of online piracy. Most, however, agreed to try it out and gave Amazon physical copies of their titles, which were shipped to a contractor in the Philippines to be scanned. Then Manber’s team ran optical character-recognition software over the book files to convert the scanned images into text that Amazon’s search algorithms could navigate and index. To reduce the chance that customers would read the books for free, Amazon served up only snippets of content—one or two pages before and after the search term, for example, and only to customers who had credit cards on file. It also dropped a small piece of code, called a cookie, in each customer’s computer to ensure he didn’t keep coming back to read additional pages without paying.
It was a computationally intensive process, and Amazon did not provide Manber and his team with much in the way of computer resources. Manber almost had to resort to running his software on employee computers at night and on weekends, but one of his employees found a batch of idle PCs that had been set aside for emergencies. He was allowed to commandeer those machines, although with the understanding that they could be taken back at any time.
Amazon introduced Search Inside the Book on October 2003—and for the first time in three and a half years, there was a feature story on the company in Wired magazine, celebrating its significant innovation. The article revived Bezos’s vision of the Alexandria Project, that 1990s-era fever dream of a bookstore that stocked every book ever written. Perhaps such a universal library could be digital and thus infinitely more practical? Bezos cautiously told Wired that Search Inside the Book could indeed be such a beginning. “You have to start somewhere,” he said. “You climb the top of the first tiny hill and from there you see the next hill.”3
As Amazon was adding product categories throughout the 1990s, its executives came to an inevitable conclusion: the company had to become good at product search. Early in its history, Amazon had licensed a now-defunct search engine called Alta Vista, a spinoff of computer maker Digital Equipment Corp., but it had quickly proved insufficient. In the late 1990s, Amazon engineers Dwayne Bowman and Ruben Ortega led the development of an internal product-search tool called Botega (a mash-up of their surnames) that capitalized on Amazon’s vast trove of customer data, information the website had been collecting from the
moment it officially opened for business. The system identified the top products customers clicked on for a given search term and then positioned those products higher in ensuing searches. That worked, for a time. But as Amazon’s catalog grew ever more complicated and Google got exceedingly good at indexing and organizing the Web, Amazon had to confront the awkward truth that one of its chief rivals could search Amazon’s site better than its own search engine could.
At that point, several factors led Amazon directly into the broader Web search arena—and into its first head-to-head confrontation with Google. Amazon was having a difficult time luring technical talent to Seattle, and its divisions often found themselves competing for the same engineers. So in late 2003, Jeff Holden, Udi Manber, and several colleagues travelled to Palo Alto to interview potential hires. The trip was so fruitful and the Seattle labor market had grown so challenging that the company decided to open its first North American office outside Seattle.
Bezos and Dalzell came to call these satellite locations remote development centers. The idea was to place the offices in regions with rich pools of technical talent and set teams to work on specific, isolated projects, harnessing the energy and agility of a startup while minimizing the need for communication with the mother ship in Seattle. Amazon’s lawyers, concerned that this might require the company to collect state sales tax, signed off on the strategy but only if the offices were set up as independent subsidiaries and stayed away from transactions with customers.