The Flywheel of Jeff Bezos
The rise and rise of Jeff Bezos and Amazon over the past two decades has spawned multiple books, apart from a steady stream of articles. You cannot build a business that touches hundreds of millions of lives and thousands of companies and become the richest man on earth without attracting attention.
Two earlier books — One Click: Jeff Bezos and the Rise of Amazon.com by Richard L Brandt and The Everything Store: Jeff Bezos and the Age of Amazon by Brad Stone had looked in detail at the building of the Amazon retail juggernaut. Now Bezonomics by Brian
Dumaine, a contributing editor to Fortune magazine, tries to find the secret sauce that keeps Amazon going— find new markets, create new businesses and, remain as lean and hungry as it was as a start-up despite its great size and sprawl of operations.
Mr Dumaine has done excellent research — he spent over two years talking to current and former employees, partners, competitors and, others around the Amazon ecosystem. The result is a book that looks not just at Amazon’s retail store, which anyway gets a lot of attention, but also its money-spinning Amazon Web Services (AWS), the new thrusts into Amazon Prime Videos (which is competing with Netflix and movie theatres) and Amazon Prime Music, the increasing ubiquity of Alexa and Echo, the effort to get into health care, as well as Mr Bezos’ current obsession —space exploration and possibly colonisation
The author tries to explain the strategy that has allowed Mr Bezos to build one business after another, finding opportunities that others have missed. He uses the Flywheel Concept, first articulated by Jim Collins, author of Good To Great, to explain the Amazon journey. The Flywheel Concept of business postulates that it takes an enormous effort and energy to get a giant flywheel into motion because of its inertia. But once it catches speed, a constant supply of relatively little energy will keep it spinning faster and faster, creating more force and power. Most successful companies that last for decades have found their flywheels, according to Jim Collins (and Mr Dumaine too).
The author tries too hard to bring the flywheel concept each time he examines a new business or to explain why certain strategies were adopted by Mr Bezos. This becomes a bit irritating in an otherwise well-written book that explores many issues, including some of the negatives of the Amazon juggernaut.
Mr Dumaine is clearly in awe of
Mr Bezos and Amazon but the book is not a hagiography and explores what Amazon does not do right as well. The author looks at how Walmart is more than holding its own despite the rise of Amazon. (Walmart is still much bigger in terms of revenues, though the market does not value it as highly as Amazon.
Also, Walmart is making a huge push into online even as Amazon is getting into physical retail).
The author also explores the negative influence of
Amazon. This includes the abysmal working conditions in Amazon warehouses, Mr Bezos’ ruthlessness with competitors, especially small start-ups that he has crushed, and Amazon’s penchant for giving a raw deal to small entrepreneurs on its platform. He also looks at Amazon’s (and Mr Bezos’) conflicts with governments in many places in which it operates. Several lawmakers around the world feel that Amazon has become too powerful and need to be broken up or more tightly regulated.
Mr Dumaine also looks at the big question — if Amazon (and the other Silicon Valley giants) increasingly use robotics, artificial intelligence, machine learning etc, to reduce manpower, what happens to employment? Will new jobs be created by the new technologies to compensate for the jobs lost? Or should governments worldwide go for universal basic income (UBI) as many technology titans have suggested. Unfortunately, the author stops short of discussing all the issues. For example, he does not look at the fact that for UBI to be implemented, the government would need to garner more taxes —something that Amazon, Apple,
Google and their ilk manage to keep at a bare minimum by smart tax planning and overseas corporations. Equally, if the company is making so much profit, why isn’t it paying its workers more? (To be fair, Amazon increased its minimum pay for warehouse workers to $15 an hour when the minimum mandated wage was $11).
The book excels in its detailed look at Amazon operations and its understanding of American business history. It falls short of getting under the skin of Mr Bezos himself — possibly because Mr Dumaine got little time with the man himself. The other issue — and it is not the author’s fault — is that a book of this nature becomes somewhat outdated as soon as it comes out. This book was written before the coronavirus pandemic roiled the globe and hence misses on what Amazon did right and where it faltered during the lockdown in various countries. Still, I would say it is an excellent addition to any business books library.