Jeff Bezos is accustomed to praise. A never-ending stream of news stories, magazine features, books, and TV profiles celebrate the Amazon founder and CEO as one of the brightest minds in tech. But at Business Insider’s annual Ignition conference on Tuesday, Bezos found himself in the hot seat, as Business Insider CEO Henry Blodget grilled him about Amazon’s year to date.
“Henry, you’re exhausting me,” Bezos joked on stage, and with good reason. Though Bezos is an investor in Business Insider, a popular news website, Blodget pulled no punches, and it’s been a rather rocky year for Amazon.
Just recently, Amazon reported major losses for the third quarter of its financial year, a tough blow, even for an operation that has traditionally chosen reinvestment in new ideas over turning a profit. Then there’s the Fire Phone, Amazon’s first entry into the smartphone market, which has been largely considered a flop, and is now being sold for 99 cents on a two-year contract, after debuting at $199 each.
‘Henry, you’re exhausting me,’ Bezos joked, and with good reason.
Meanwhile, the company has spent much of this year waging war with Hachette over e-book pricing, which has turned some long-time Amazon customers against the company, believing that Amazon undervalues the very people who built the company in the first place: authors. And oh yeah, what about that whole drone delivery thing, which the press chastised as little more than a publicity stunt?
Bezos had lots of explaining to do, and he did so primarily by emphasizing that Amazon is a company that has always embraced failure—sometimes lots of it—in order to achieve major success. “I’ve made billions of dollars of failures at Amazon.com. Literally,” he said.
“None of those things are fun, but also they don’t matter. What matters is companies that don’t continue to experiment or embrace failure eventually get in the position where the only thing they can do is make a Hail Mary bet at the end of their corporate existence. I don’t believe in bet-the-company bets.”
‘It’s a Volatile Stock’
Bezos dismissed Amazon’s dismal third quarter earnings as a blip on the radar, saying he believes Amazon’s future will be so long that even what many investors consider to be a substantial fluctuation is tiny in the long run. He added that managing a company explicitly to meet quarterly expectations “would be a mistake.”
“If you look at our stock price over a year, five years, ten years, it all looks pretty great,” he said. “It’s a volatile stock. It always has been. It probably will be. We’re a large company, but in many ways because of all our emerging businesses, we’re still a startup, and there’s a lot of volatility with startups.”
The Fire Phone? ‘Stay Tuned’
That was also his argument as to why Amazon is still unprofitable, despite having what Bezos says are “very significant, very profitable” lines of business. “It’s like we built this lemonade stand 20 years ago,” he explained. “It’s become very profitable, but we decided to use our skills for a hamburger stand and a hotdog stand and so on.”
And those bets, Bezos said, take longer than a few months to succeed or fail. Case in point: the Fire Phone. Bezos stopped short of admitting that Amazon’s smartphone has been a complete failure, but he didn’t blindly herald it as a success either. “I think it takes more time to analyze something like that,” he said, urging the audience to “stay tuned.”
‘Books Are Overpriced’
Bezos was much less ambivalent about the recent dispute with Hachette, however, which ended recently with the publisher winning the right to set its own prices. Despite the resolution, Bezos maintained his argument that books are overpriced, and that authors and publishers would all be better off if they cost less.
“If we want a healthy culture of reading book-length things, we’ve got to make books more accessible and part of that is making them less expensive,” Bezos said. “If you make it more affordable, it’s not going to make authors less money. It’s going to make authors more money.”
Drones, Drones, and More Drones
The conversation also drifted toward Amazon’s interest in drone deliveries, which Bezos announced last winter. Bezos said the so-called Prime Air team is still hard at work on a new iteration of its drone, even though he predicted that the United States will likely fall behind other countries in its adoption of commercial drone technology.
Bezos explained that he feels justified in pursuing these wacky ideas because that is what he set out to do all along. “You have to be super clear about what kind of company you’re trying to build,” he said. “We said we were going to take big bets. We said we were going to fail.”
He seems to believe that because Amazon is still trying new things, and sometimes failing, it’s as alive and vibrant as ever. But trusting that instinct may be Bezos’s riskiest bet yet. He admitted, however, that one big reason Amazon is able to take this approach is because he is still its CEO.
“I can do some things at Amazon that would be hard for other people to do, only because of my history with the company,” Bezos explained. That said, he also confessed that he does have a successor picked out should he have to hand over the reigns someday. Who has he chosen? It’s a “secret.”