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Monday, April 11, 2022

Review: Amazon Unbound

 Amazon Unbound is Brad Stone's follow-on to The Everything Store. It starts off where the earlier book ended, with a focus on the development of Alexa/Echo, the introduction of AWS and its successful attack on the database market, and of course, Amazon Prime, and various other products. It also provides a deep look at the people who ran the logistics behind Amazon.

What I didn't realize was that Amazon spends way more than Google on R&D:

In 2017, Amazon spent $22.6 billion on R&D, compared to Alphabet ($16.6 billion), Intel ($13.1 billion), and Microsoft ($12.3 billion). The tax-savvy CEO likely understood that these significant R&D expenses for projects like the Go store and Alexa were not only helping to secure Amazon’s future but could generate tax credits or be written off, lowering Amazon’s overall tax bill (kindle loc 974)

This is astonishing, since Google prides itself on being a technology company, and has been able to attract (and retain) engineering talent, while Amazon has never been competitive, especially when you take into account its stingy benefits package and back-loaded stock compensation package.

What's more, the book revealed a major event in which Bezos decreed that managers should have no fewer than 6 direct reports. This resulted in many upper managers stealing groups from lower level managers, causing a cascading scramble down the chain and the departure of many managers who had few direct reports:

 “When most big companies go through this, they usually announce they are going to have layoffs,” he said. “You can stick around or get a severance. But Amazon to this day never announced how many people they were trying to get rid of, so it created a culture of fear, which they probably prefer.” The informal, musical chairs–style reorganization allowed Amazon to avoid the internal and external stigma of announcing layoffs. (Kindle loc 3817)

 Stone doesn't mention that by forcing people to depart voluntarily Amazon also doesn't have to pay severance packages. Even in the case where they famously raised wages to $15/hour, there was an ulterior motive:

Earnings in Amazon fulfillment centers varied by state, but some employees were making as little as $10.00 an hour, which was above the $7.25 federal minimum wage. The S-team weighed a number of proposals from operations chief Dave Clark, including incrementally raising wages to $12 or $13 an hour. Instead, Bezos opted for the most aggressive plan, raising the entry-level U.S. hourly rate across the board to $15. At the same time, he compensated for at least part of the additional expense by discarding supplemental sources of worker income, such as stock grants and collective bonuses that were awarded to employees based on the performance of their facility. The move was tactically brilliant. Amazon had surveyed its warehouse workers over the years and found a large majority were living paycheck to paycheck and would rather have the instant gratification of up-front pay than stock grants. By getting rid of the grants, Bezos not only helped to partially offset the pay increase but eliminated another incentive for unproductive or disgruntled low-level workers to stay at the company for more than a few years. (kindle loc 5164)

The book's at its best when it dives into Amazon's logistical push and stuff that while you know had to happen behind the scenes, isn't widely reported. It's at its worst when it discusses Blue Origin (which is unrelated to Amazon) or Jeff Bezos' affair and divorce (which is subject to a lot of attention). I found it enjoyable and a compelling read, with the boring stuff easily skipped one chapter at a time.

I think there are better books about Amazon (e.g., Working Backwards), but still found this one worth reading.

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