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“Make sure that you are focused on something you are passionate about.”
These words summarize Jeff Bezos’s answer to a girl asking what advice he would give “to an internet startup company now.” He added it was the same advice he would give to any entrepreneur.
This was after a talk he gave at a summit in 2001 in which he shared a few stories from the early stages of Amazon. His stories had valuable lessons for every entrepreneur and offered crucial insights into different aspects of entrepreneurship like coming up with ideas, making important decisions, and dealing with risks. But what hit me the most was how so many aspiring entrepreneurs misinterpret the idea behind following one’s passion.
The Amazon Idea
In 1994, Bezos learned that internet usage was growing at an incredible rate of 2300 percent a year. That means every year, the number of people using the internet swelled to 24 times what it was just a year ago. And that unusual growth rate was on top of the fact that there was already a sizeable population using the internet. He says —
“And so something with a non-trivial baseline growing at 2300 percent a year is clearly going to be everywhere tomorrow. And so the question was — what kind of a business plan would make sense in the context of that growth?”
So in this data, where most could see nothing but numbers, Jeff Bezos saw an amazing opportunity to seize the moment and benefit from the rise of a technology that looked set to dominate the future. He understood that people would continue to buy things, but the way they did that would change. And that gave him his business idea that is now worth over a trillion dollars.
Lesson — Great ideas come from an acute awareness of the world around you. They come from a deep understanding of what would remain the same and what would change with time. So follow credible sources of information and spend time learning and thinking about anything unusual that pops up.
Bezos also talked about why he decided to sell books to start with. He explained how he put together a list of twenty different products looking for the best option. And that list was not created based on things that popped up in his head. It was a list of products with the highest mail-order sales volume.
Several factors made books the best choice for the first product, but the most significant of them was, as he says,
“books are very unusual in one respect. And that is that there are more of them than there are products of any other category. So there are literally millions of books in print at any given time. And computers are good at organizing such large selections of products and you could build something online that literally couldn’t be built any other way.”
So, he chose books because they allowed him to gain maximum leverage from the technology available to him. And by doing that, he made sure he had little or no competition. Almost all other book stores were offline, and they just couldn’t compete with his algorithms and online database and catalog.
Lesson — For your business to be successful (or sometimes even to survive), it needs to have unfair advantages. Use every major decision as an opportunity to find and create your own moat.
Dealing With Risks
Jeff Bezos had a stable and well-paying job that he loved when he had the idea of starting his online business. No matter how it looks in hindsight, it was not an easy decision then.
So how did he make that decision?
He used what he calls the “regret minimization framework”. That is a fancy way to say he tried to make decisions in a way that would minimize the number of regrets for his future 80-year-old self. But for that, he had to have a solid understanding of the nature of the opportunity and the risks involved. And his talk testifies to the fact that he had exactly that.
He was convinced the internet would be everywhere, so the whole world was a potential market. He knew the probability of a startup becoming successful (<10 percent) but was also very confident, so he gave himself a 30 percent chance.
And what were the risks? In case of a failure, he would lose a few years of his time and effort and the money of the early investors (which included his parents).
So there were costs associated with failure, but they were trivial compared to the rewards of success even at 30 percent probability. The opportunity was far too great to be missed. Given this clarity, no wonder he did what he did.
But Bezos also said something else in response to a question on the role of risks that’s worth keeping in mind.
He said, “risk is a necessary component of progress.” And then added that the job of an entrepreneur in the early stages of their company is to use the “precious startup dollars” to “systematically eliminate risks one after the other.”
Lesson — It’s important and unavoidable to take risks. The trick is to identify the opportunities worth the risks. And when you have made your move, one of your first tasks is to eliminate or minimize the risks involved.
The Role of Passion
In his entire 10-minute speech (that preceded a 6-minute Q&A session), not once did Bezos talk about anything he loved doing. The stories that he shared with great humor were all about having and paying attention to the right data, critical thinking, decision-making, being responsible to the stakeholders, and, of course, working hard.
I was during the Q&A that he mentioned his love for exploration.
“I’d really like to be a physical explorer…I would have loved to be, you know, Sir Richard Francis Burton or something like that. How much fun would that be to go, you know, search for the source of the Nile and you know, have people throw spears at you and stuff?”
But obviously, he didn’t go after that passion. Yet, when asked for it, his advice for entrepreneurs was to be focused on something they are passionate about. So how do we interpret that? Was there a deeper meaning to what he said?
Well, here’s how I see it. The problem lies in how our culture has started to view passion. Today passion is about an activity. It’s about doing what you love. The passion Bezos is talking about is very different.
He is talking about a conviction and belief in your idea, your vision. The kind of belief that excites you and makes doing the hardest things easy. He is talking about the passion that can make you love what you do.
For him, it was his belief in how the internet could be used to change the world and to make a fortune in the process. A belief that had its roots in sound logic and hard facts. And it was for this vision that he was willing to risk precious years of his life and his reputation. And to work till dawn packing and shipping orders after doing all the other work during the day.
Lesson — As an entrepreneur, you will need to juggle several different activities and responsibilities. You’ll likely hate a good part of it. So what you need is a vision that you believe is worth all the pain and struggle.
While there was, undoubtedly, an element of luck or what he calls “planetary alignment” involved, Jeff Bezos’s success wasn’t a coincidence. There was a lot of intent, analysis, strategies, hard work, and sacrifices involved in making it happen.
That’s what it takes to build a successful company. But that’s also what made Jeff Bezos worth over 200 billion dollars today.