One of my favorite Bezo-isms is “Disagree and Commit.” I’ve seen it in articles a handful of times recently as the adulation around Amazon and Bezos’ management reaches a fever pitch.
Notwithstanding the disappointing forecast for Q418, Amazon’s recent operating performance has been spectacular. But, more interesting is that it has been “spectacular at scale” and across a very large and complex business.
While Revenue Growth YOY has been strong,
the real story has been YOY growth in Operating Income.
Those are beautiful numbers. It’s clear that in the past few years the company has turned on the profit machine.
For many years, Amazon (and Bezos) trumpeted their focus on revenue growth. The mantra was “we are reinvesting all of our profits in growth.” This is the same thing most startups say (and most VCs push for) as growth compounds rapidly if you can keep the growth percentage (yup – it’s simple math.) This has been particularly true for B2B SaaS companies, not withstanding the notion of the Rule of 40 for a Healthy SaaS Company.
While growth in revenue is still important, Amazon’s ability to generate this kind of growth on its operating income is a reminder that turning on the profit switch at some point does matter, if only to show how much leverage your operating model has (me thinks Tesla did that in Q318 for the same reason). The AWS numbers are remarkable to me – their YOY growth is 46% and their operating income is about 30%. That’s well above the rule of 40.
I would have loved to be in the meetings during the shift from “grow at all costs” to “keep growing fast, but flip the operating income switch.” There were many moments in time over the past 15+ years where I’m sure this came up. But clearly the focus on this changed in the last few years, and the results are now front and center.
I don’t hold any Amazon stock directly, nor do I play the stock market, but the financials in public companies have a myriad of lessons buried in them for private companies that are scaling. That said, the management lessons buried underneath the numbers are even more important. “Disagree and commit” seems to be working well these days for Amazon.
As the weekend approaches, I sense the need in the universe for some people to find a new TV show to binge watch.
If you fit in this category and haven’t yet watched The Expanse, give it a try. If you are a BSG fan and haven’t seen it yet, start tonight. If you like sci-fi, drama, space opera, global political intrigue, underdogs, detective noir, the risk of mass extinction, and believable human history a few hundred years in the future, this one is for you.
There’s a ton of setup, so you need to hang in there for the first five or so episodes. As the friend who referred me to it stated, it’s “Boring boring PROTOMOLECULE…” You get there quickly enough.
There are three seasons, and Amazon just picked up the fourth, so there is a lot to catch up on along with a future. And, after reflecting on it compared to our current geopolitical situation, it’s easy to assert that “nothing ever changes.”
Glowforge recently launched their 3D laser printers to the public, making their product line available within 10-day delivery. As an early investor (and a huge fan) this was an incredibly gratifying moment, as Glowforge is now shipping – in volume – the product from one of the most popular pre-order campaigns in history.
We’ve been a part of Glowforge’s journey to production since even before their record-setting crowdfunding campaign. But the campaign was the moment we knew that we’d found something special: the elusive product-market fit. People really, really wanted the product. Now that it has made its way into thousands of households, we’re seeing something even better. People really, really love their Glowforge.
Of course, all the numbers in the world can’t convey just how awesome their product is until you see it in action. I’ve used mine to make everything from luggage tags to wallets. It’s an incredible shortcut on the journey from idea to having something tangible you can hold in your hands – no matter your skill level. Trust me, I’ve tested the low end of the skill level personally (e.g. me …)
I’m not the only one excited about it, either. Everyone I’ve ever demoed it for is astonished at what it can do – even my partner Moody’s thirteen-year-old son can’t get enough of it and, admittedly, uses it much more effectively than I do.
Glowforge is taking another big step toward making their printers more accessible by launching their Glowforge Plus model with the Amazon Exclusives program. I waited several years to get mine and have no regrets, but now the next generation of Glowforge owners will be eligible to get their printers delivered to their doorstep in just two days with free Prime shipping.
The move makes sense from a product standpoint, but it also falls right in line with their underlying philosophy: with the right tool, anyone can be a creator. Today, it’s as easy to purchase as it is to use.
Ian Hathaway, my co-author for my next book – Startup Communities 2: The Next Generation – has a great blog post up titled The Amazon Bounce Back.
Colorado, specifically Denver, is in the final 20 cities bidding on Amazon’s HQ2. This open bid process is an absolutely brilliant move by Amazon for a variety of reasons.
- Enormous branding: Everyone, everywhere, is talking about Amazon. Amazon Amazon Amazon. We love Amazon.
- Absurd market information: The amount of data about each city that Amazon is getting out of this is incredible.
- Visibility into what cities are willing to offer: Amazon knows where its future leverage points are when negotiating with individual cities.
While I’m glad Denver approached it the way they did, focusing on strength and resources of the community rather than by throwing dollars at Amazon, our state government still provided plenty of financial incentives.
Amazon HQ2 could qualify for huge Colorado tax incentives. From the article:
“Colorado’s main tax incentive used to lure “Amazon HQ2” could add up to at least $458.9 million rebated back to the Seattle-based retail giant over several years and could top $860 million if the company’s HQ2 campus were to grow fast enough. The figures are based on the pay scale Amazon predicts at HQ2 and the formula for Colorado’s “Job Growth Incentive Tax Credit” program.”
Since I think the chance of Amazon actually choosing Denver is 0.0001%, I have a suggestion for the Colorado state government for when Amazon chooses someplace else.
Give 100% of the benefit (economic and otherwise) you are offering to the Denver-based business community, with special focus on high growth scaleup companies.
Steve Case has a brilliant Memo to the Cities Amazon Passed Over. Julie Lenzer explains how everyone can have a trophy, or how to make the most of NOT getting Amazon HQ2.
In the context of be careful of what you wish for some economists are now weighing in: Amazon HQ2 finalists should refuse tax breaks, say nearly 100 economists, professors. There is only going to be one city that ends up with Amazon’s HQ2. For everyone else, especially Denver, use what you were willing to do to drive real long-term economic growth and health for your city, rather than retreat in defeat.
Amy and I love to read. For a number of years, I’ve recorded everything I read on Goodreads. When I write a blog post reviewing a book, I usually (but not consistently …) repost it on Goodreads and occasionally remember to post it on Amazon. Regardless, the definitive log of what I’ve read is on my Goodreads Bookshelf.
Last year Goodreads started doing a fun compilation of all that a user read in the past year with their Year in Books summary.
I’ve always been a high rater of books. Instead of 1 to 5, I almost always rate in the 3 to 5 range. I do this because if I don’t like a book while I’m reading it, I stop, and don’t log it.
Not surprisingly my three top genre’s are non-fiction, fiction, and biography. In the fiction category is a lot of science fiction. I’m not sure where the categories came from but in 2018 I’ll do a better job of shelving my books by actual category.
22,201 pages is a lot of pages to read. For perspective, that’s about 60 pages a day of reading. My reading between Kindle and physical book is probably 75% Kindle / 25% physical. When I reflect on Amazon’s impact on my reading (which includes Goodreads), it’s pretty remarkable.
My goal in 2018 will again be 100 books.
For starters, let’s look at some Golden Retriever puppies instead.
I watched most of the Apple announcement last week (I was on vacation and hanging out waiting for Amy, so I just plopped down on the floor and watched Special Events on the Apple TV channel.) I fell asleep for a few minutes part way through it. I turned it off about halfway through the iPhone X announcement.
I’ve been an Apple user for many years now. Every few years, I switch to an Android phone for a month (whatever the newest model is) but always end up going back to my iPhone. Whenever each new iPhone model has come out (for at least the past five years) there’s been a mad rush among my partners to make sure all of us have a new phone the day they ship. I even sported a rose gold one during one upgrade cycle just because I could.
When Amy and I went to lunch after the iPhone 8 and X announcement, she asked me if I was going to get a new iPhone. I said no. I realized I was profoundly uninspired – both by the new phone and the way the Apple team presented it. I’d go so far as to say I was bored, which as a lifetime nerd, is unusual when Amy lets me hang out and do anything related to computers (including watching TV about computers.)
Amy then said, “I didn’t mean the 8, I meant the X.”
For some reason, I’m completely uninterested right now in the iPhone X. I don’t know why. It might be the presentation. It might be that’s it’s not available for another few months. It might be that I just spend too much money and time fixing my iPhone 7+ screen (twice) after dropping it. Why twice? Because the first time I stupidly sent it over to one of the non-Apple “we can fix your iPhone for you for less money” stores who replaced the glass but totally screwed up a bunch of other things (the home button, the touch dynamics, and the edge feel of things.) That resulted in me buying a new iPhone 7+. Dumb Brad – just to go the Apple store even if it’s five miles further away and you have to drive instead of walk.
On the other hand, iOS 11 just installed on my phone while I was writing this post. A cursory glance shows that it’s working fine but other than different fonts, new icon styling, shading on an iMessage reply, and a different control center, it looks the same so far. At least I can play with fun new apps like Occipital’s TapMeasure to see how ARKit works.
I’m perplexed by the current Apple release cycle dynamics. I know they’ll mint money with the new phones, but my feeling of disappointment lingers as a user. Suddenly, I’m more inspired by Amazon’s new hardware.
Early this morning I saw an email from Dave that pointed me at a giant bundle of happiness.
So – let’s go through all the parts of awesomeness of this.
First, Philip K. Dick is one of my favorite sci-fi writers. One summer, about five or so years ago, I bought every PKD book I could find in paperback (almost all of them.) I started reading them from first to last. I’ve gotten through about half of them and have sporadically read others. He gets some things so totally right and others so completely wrong. It’s delicious.
Next, as a die-hard BSG fan, I can’t resist anything by Ronald D. Moore. Enough said on that one.
Then, we’ve got Brian Cranston. I’ve never been able to get Amy into Breaking Bad so I’m afraid that’s going to be a guilty pleasure that I end up doing solo. But I know – from many friends – the depth of Brian Cranston. So, now I’ll have a way to loop Amy into watching him, which might get her interested in Breaking Bad again.
And finally – Amazon. Dear Amazon – the content you are doing is dynamite! Good job.
Recently, Amazon’s Alexa team and Techstars launched The Alexa Accelerator, powered by Techstars, Last week, a bunch of fun skills have been integrated into Alexa. I thought I’d give some a try. Cooper, my intrepid two year old super alpha golden retriever shows up around a minute into the video when I do my favorite Alexa skill, the Woof Woof.
If you have an Alexa, give these a try.
What is the Alexa Accelerator?
What is a start-up accelerator?/What is a startup incubator?
How do I / can I apply to the Alexa Accelerator?
Who should apply to the Alexa Accelerator?/Should I apply to the Alexa Accelerator?
What is the Alexa fund?
Where will the Alexa Accelerator take place?
When are applications due for the Alexa Accelerator?/By when should I apply…
What is Techstars?/Who is Techstars?
Amy and I watched the Amazon series Goliath last month. It was deeply awesome. Deeply deeply awesome. We also watched The Night Manager which we loved almost as much. And, at the end of each, I said to Amy, “They should end this now and not do a Season 2.”
Goliath captured my attention more.It had amazing character development. Bill Bob Thornton, who I’ve always liked, was at his best, William Hurt was excruciatingly delicious, Nina Arianda made me root for her every time she said something, and Molly Parker had mastery over the role of ruthless, hateful, and utterly self-centered, manipulative lawyer. The filming, while against the standard LA backdrop, was rich and unique. There were many tense moments that just kind of hung on for an extra few beats, which I loved. Each of the eight episodes had at least one unexpected twist and turn. The backstory was complex and finally all came together in the last episode, which was magnificent.
I thought the climactic moments were breathtaking. In the back of our minds we knew we were watching the last episode. And then the screen went black and it was over.
I expect it’s easy for Hollywood to crank out a Season 2. Take the complex characters, subtract a few, add a few new ones, put in a new current story, continue to unfold pieces of the backstory, and keep going. Hollywood knows how to do this.
But wouldn’t it be special if this was it? Just one season. An eight hour movie, instead of an annual TV show.
I have no idea what the economics of the movie business is, especially with all the new Amazon, Netflix, Showtime, AMC, SyFy, and HBO series. But I am intrigued with what feels like a new type of show – the six to eight hour movie. It’s a little too long to watch in one setting but you can watch it over a three to five day period. It becomes immersive without taking over everything. It doesn’t drag you out week by week with mildly unsatisfying endpoints. And it doesn’t end up being a 13 hour bingfest, which can be done (ala House of Cards) but doesn’t stay with you (or at least stay with me) as much.
I let this idea sit for a few weeks (I wrote the headline for this post three weeks ago after we finished Goliath.) When I saw it this morning, it still felt right to me. I wonder if, as the tech to deliver content continues to evolve, we will start seeing the one season / 6-8 hour show that ends at a peak moment, rather than is cancelled because it sucks.
I love Alexa. Of all the various tech things I’ve bought in 2016, Amazon’s Alexa has become the most consistently used new thing in my world. I’ve even had a breakthrough on the home front as Amy now regularly says “Alexa, play …” We’ve got them everywhere and the Echo Dot that showed up in October is centrally located on my office desk at Foundry Group.
On Wednesday, Techstars and Amazon announced the Alexa Accelerator, powered by Techstars. Applications will open in January and the first program will start in July 2017.
Amazon, through their Alexa Fund, has been investing in companies that are using Alexa Voice Service, Alexa Skills Kit, or companies working on the science behind voice technology, including text to speech, natural language understanding, automatic speech recognition, artificial intelligence and hardware component design. Several companies we’ve invested in, including TrackR, Rachio, and Dragon Innovation now count the Alexa Fund as investors.
It’s exciting to me to see Amazon and Alexa take it to the next level with their partnership with Techstars. I expect that will add another reason for me to spend even more time in Seattle.