Amazon CEO Jeff Bezos shares thoughts on corporate culture, decision-making and failure

It may not be Warren Buffett’s eagerly anticipated letter to shareholders, but Amazon.com Chief Executive Jeff Bezos’ annual investor missive has become known for offering its own yearly insights into how he runs the online retail giant.

Two years ago, for instance, Bezos shared in his letter that Amazon had adopted an approach from Zappos, offering fulfillment center employees between $2,000 and $5,000 to leave if they didn’t want to work there anymore. As part of each year’s letter, he republishes the one he wrote in 1997, in which he set out his belief in “long-term market leadership considerations rather than short-term profitability considerations.”

This year, Bezos shared his thoughts on decision-making, failure and Amazon’s corporate culture, which came under tough scrutiny last August in an investigation by the New York Times that received lots of attention.

“A word about corporate cultures: For better or for worse, they are enduring, stable, hard to change,” he wrote near the top of the letter. “They can be a source of advantage or disadvantage. You can write down your corporate culture, but when you do so, you’re discovering it, uncovering it — not creating it. It is created slowly over time by the people and by events — by the stories of past success and failure that become a deep part of the company lore.”

Though he did not directly mention the New York Times story, Bezos said that a distinct corporate culture fits some people but not others. “The reason cultures are so stable in time is because people self-select,” he wrote. “Someone energized by competitive zeal may select and be happy in one culture, while someone who loves to pioneer and invent may choose another.”

He wrote that “we never claim that our approach is the right one — just that it’s ours — and over the last two decades, we’ve collected a large group of like-minded people.”

Bezos went on to describe the importance of experimentation at Amazon, using words that are rare for a typical CEO to use in a letter to investors.

“One area where I think we are especially distinctive is failure,” he wrote. “I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment.”

He cited the three “bold bets” at Amazon that have worked: Amazon Web Services, the company’s cloud computing business; Marketplace, its business for third-party sellers; and Prime, its rapid delivery subscription service. Marketplace, he wrote, began after two efforts that missed (Auctions and zShops), while Amazon Web Services, which has reached $10 billion in annual sales, was initially greeted with skepticism.

Bezos seems conscious, however, of the difficulties that large companies have in remaining “an invention machine,” as he put it, writing that a common trap is “one-size-fits-all” decision-making. “Type 1 decisions,” he wrote, are those that are “consequential and irreversible or nearly irreversible — one-way doors — and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation.” Meanwhile, “type 2 decisions,” which can be reversed if they aren’t made well, should be made much faster.

The problem with many big companies, he wrote, is that they apply the methodical process they use for bigger calls to less weighty decisions too often: “The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention. We’ll have to figure out how to fight that tendency.”

Jena McGregor writes a column analyzing leadership in the news for the Washington Post’s On Leadership section. Bezos owns the Washington Post.

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