by Brad Stone
In the midst of this realignment, Bezos found another way to reduce fixed costs, flatten his organizational chart, and avoid a specter that he dreaded: that Amazon might become a stodgy “Day 2 company.” He issued a company-wide mandate (“He’s doing that all the time, of course, and people scramble like ants being pounded with a rubber mallet whenever it happens,” wrote former Amazon engineer Steve Yegge in a 2011 blog post). From henceforth, all Amazon managers—whose direct reports consisted primarily of other managers—would have to have a minimum of six employees reporting to them.
Though it sounded innocuous, the directive, dubbed “span of control,” set off the equivalent of a neutron bomb inside the company. Senior managers with only three, four, or five direct reports had to reach into their organizations and appropriate employees from a subordinate to get to six direct reports, leaving the underling without the necessary number. These actions had a cascading effect, and executives who had steadily climbed Amazon’s ranks in pursuit of management responsibility now found the path upward was sealed off.
To many Amazon employees, the organizational rearrangement revived the feeling that an informal cruelty was present in the corporate culture, reminiscent from the days of stack ranking. While some divisions, like AWS, got a reprieve from the directive, others were hit hard. Executives in retail say that 10 to 20 percent of their colleagues (stripped of their direct reports and roles as managers) departed amid these shake-ups, moving either to high-growth divisions like AWS and Alexa or leaving Amazon altogether.
“From the standpoint of organizational morale, they couldn’t possibly have handled it more poorly,” said Stan Friedlander, a former chief merchant in Amazon’s shoe and apparel category who otherwise enjoyed his ten years at the company. “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. And it accomplished it under the mantle of attacking organizational complexity and hewing to Bezos’s goal of fighting “Day 2” stasis. It was a typical Bezos move—brilliant, and rather cruel. At the same time as he issued the directive, he also ordered S-team members to watch a nineteen-minute video on YouTube, produced by Bain & Company, called “Founder’s Mentality.” It was all about eliminating bureaucracy, maintaining the voice of customers in everyday decision-making, and preserving the mindset and motivation of an insurgent startup. “One of the paradoxes of growth is that growth creates complexity and complexity is the silent killer of growth,” said Bain director James Allen in the video.
Many executives figured there must be something more to the disruptive moves and tried to get inside Bezos’s head. Some speculated that he liked being the sole risk-taker at the company and felt that his deputies were investing too much in random areas. One longtime executive, who left after the shake-up, said that his “best thesis” was that Bezos simply “wants to be the king of L.A.” and that the march toward profitability was an attempt to finance the expanding bet on Amazon Studios and original TV shows and films. Others opined that Bezos might have been concerned about the impact of a stagnating share price on Amazon’s stock-heavy compensation plans and understood that generating a profit would wow Wall Street.
If that was the gambit, it worked magnificently. After the contentious OP1 reviews and the “span of control” directive over the fall of 2017, headcount growth slowed and Amazon’s retail margins expanded, just as Prime’s global membership rolls surpassed 100 million and AWS continued its fervid expansion. As a result, Amazon’s net income—its annual profit—jumped from $3 billion in 2017 to $10 billion in 2018, sending investors into a defibrillated frenzy. Amazon’s stock price levitated. Its market capitalization soared past $550 billion by the end of 2017, to $730 billion at the end of 2018.
And that, of course, had profound repercussions. Veteran employees who had enjoyed years of accumulated stock grants saw their net worth skyrocket. Long-term Amazon investors were richly rewarded for their fealty. And in the fall of 2017, Jeff Bezos finally overcame Bill Gates in the race for the title of world’s wealthiest person. Adjusting for inflation, he would soon be richer than Gates at the height of the Microsoft Windows monopoly and richer than Sam Walton during the period of Walmart’s iron grip over U.S. retail.
Even for Bezos, who had been in the public eye for two decades, the designation brought an entirely new level of admiration from peers and scrutiny from the media. “The day that Jeff was declared the richest person in the world was the day that the phrase entered the first paragraph of any story about Amazon, no matter the subject,” said Jay Carney. Added Josh Weinstein, the high school friend who had accompanied Bezos to his childhood home in Miami, “The business of being the richest person in the world changed the way other people look at him. It became a different world for him.”
Bezos himself was the architect of that shift. By discovering the gold mine of search advertising, then insisting his company avoid turning ads into a crutch while battling to contain the growth of his own bureaucracy, he unlocked perhaps the most fertile period of growth in Amazon’s history. In the terrestrial world of business, at least, he had established absolute dominance over most of his peers in retail and technology.
CHAPTER 11 Gradatim Ferociter
A year before Jeff Bezos went to war against the bureaucracy at Amazon, an unusual set of meetings transpired on the sixth floor of newly opened Day 1 tower. Over the course of several weeks in the fall of 2016, executives from Bezos’s other company, Blue Origin, which he owned and operated independently of Amazon, took turns hailing Ubers from their offices in Kent, Washington, for the half-hour midday drive to downtown Seattle. The occasion? A rare one-on-one lunch with their founder to discuss what ailed the sixteen-year-old space startup.
Amid the resplendent success of Amazon and the striking revival of the Washington Post, Blue Origin was the straggler in Bezos’s expanding empire of accomplishment. A program to fly tourists to suborbital space on a reusable rocket called New Shepard had suffered numerous delays and lost two unmanned vehicles to fiery explosions—or “rapid unscheduled disassemblies,” in the macabre lexicon of the rocket scientists. An even more ambitious project to take tourists and cargo into orbit on a much bulkier rocket, New Glenn, was years away from completion.
Meanwhile, SpaceX, the private space company that Tesla cofounder Elon Musk founded two years after Blue Origin, was making significant headway as well as history. Its steadfast Falcon 9 rocket was regularly sending commercial and military satellites into orbit and had just been designated to resupply the International Space Station. That April 2016, the firm landed a Falcon 9 booster on a drone platform floating in the Atlantic Ocean. It was an extraordinary technical achievement, one that offered a sharp contrast between the two space firms and their billionaire backers.
Now Bezos was spending part of his Amazon workday trying to understand the problems at Blue Origin. Over the course of a series of lunches, some which lasted as long as two hours, Blue executives tried to enlighten their owner. They complained about poor internal communication, time-consuming meetings, and inexplicable spending decisions. One engineer described the company as a Potemkin village—its dysfunctional culture concealed beneath an industrious façade. Another executive threatened to quit if problems weren’t promptly addressed.
Many of the Blue employees who lunched with Bezos were circumspect when it came to the root of these problems. They danced around the way Bezos constrained the company’s headcount while expanding its ambitions. Figuring Bezos might share their accounts, they were also reticent to discuss the person who ran the firm on his behalf: president Rob Meyerson, a thirteen-year Blue veteran.
Nevertheless, Bezos listened carefully, took notes, and seeme
d to get the message. After the lunches, he informed Meyerson that he wanted to begin to look for something Blue Origin had never had in its history: a CEO. Susan Harker, Amazon’s vice president of recruiting, led the search for Bezos. The process included an entreaty to Gwynne Shotwell, SpaceX’s dynamic chief operating officer and president, who quickly rebuffed it, saying that it “wouldn’t look right,” according to a person privy to the discussion.
Blue Origin’s CEO search stretched on for over a year. Meyerson helped to interview candidates and his colleagues wondered if he might be proceeding slowly to protect his job, or whether Bezos was having trouble making up his mind. Finally, talks intensified with Bob Smith, president of the mechanical systems and components division of Honeywell Aerospace and a former executive director at United Space Alliance, a company that supported NASA’s retired space shuttle program.
Smith, like Bezos, was “an Apollo kid” who had spent part of his childhood in Texas watching American astronauts walk on the moon. He interviewed with Blue Origin executives more than two dozen times over the course of a twelve-month courtship and later recalled asking in jest, “Do you want my dental records too?”
Just as Bezos was surpassing Bill Gates as the wealthiest person in the world, and a year after his meetings with Blue staff at the Day 1 tower, Smith finally got the job in August 2017. There was no formal announcement and little fanfare in the press. But Bezos’s mandate to Smith was clear: turn an underachieving research and development organization into a mature business that justified the backing and bravado of the world’s richest person. Blue Origin “had really hit a severe inflection point” is how Bob Smith later put it in an interview. It was time “to step through some much bigger doors.”
* * *
Jeff Bezos’s passion for space travel was etched into the public’s earliest understanding of his illustrious biography. As a child, his parents sent him every summer to the South Texas ranch of his retired grandfather, Lawrence Preston Gise, who had worked on space technology and missile defense systems in the fifties and sixties for the Atomic Energy Commission. Gise passed on a passion for space to his grandson. Bezos spent his summer vacations watching the Apollo launches, devouring the extensive science fiction collection at the local library, and dreaming of humanity’s manifest destiny in space. He often said that his grandfather, whom everyone called “Pop,” taught him the value of self-reliance. Together they fixed windmills, rebuilt an old bulldozer, and vaccinated cattle. In his valedictorian speech at Miami Palmetto Senior High School, Bezos ruminated on solving the problems of overpopulation and pollution by putting millions of people into orbiting space stations.
In 2000, Bezos deployed the bounteous resources from his success at Amazon to pursue those dreams. He founded Blue Origin—the name refers to humanity’s birthplace, Earth—with a hypothesis that quickly proved incorrect: that significant advancements in space would require alternatives to liquid-fueled rockets. For the first few years, Blue resembled “a club more than a company,” as journalist Steven Levy later wrote in Wired, a think tank that included a dozen aficionados, like novelist Neal Stephenson and science historian George Dyson, who brainstormed radical and unproven ways to travel into space.
By 2003, Bezos had changed course, acknowledging the unrivaled efficiency of conventional liquid propulsion. Instead of trying to reinvent rockets, the firm would focus on lowering the cost of building them, by making them reusable. That year, he hired Meyerson, a NASA veteran coming off six years at the failed space startup Kistler Aerospace. An introverted engineer with a plaintive demeanor and no executive-level management experience, Meyerson started as a senior systems engineer on New Shepard. But Bezos, who already had an all-consuming day job, couldn’t approve every decision and wanted Blue to move faster. Soon after he hired him, he made Meyerson the program manager and president of the small firm.
While Bezos couldn’t supervise every detail at Blue Origin, he could devise the mechanisms—a system of invention—to guide how employees set priorities and conducted their work. In June 2004, he wrote an eight-hundred-word memo, informally dubbed “The Welcome Letter,” which to this day is given to new Blue employees as part of their hiring packet and has never before been publicly revealed.
“We are a small team committed to seeding an enduring human presence in space,” Bezos began, reflecting his original desire to keep the company under seventy employees. “Blue will pursue this long-term objective patiently, step by step.” He described releasing new versions of its rockets at six-month intervals with “metronome-like regularity,” and predicted the company would eventually shift its focus to a crewed orbital vehicle program that “will stretch Blue’s organization and capabilities.” He drew a distinction between those plans and more hypothetical longer-term scenarios, like building a spacecraft to visit the moon, and cautioned employees to focus on the task at hand and work methodically.
“We’ve been dropped off on an unexplored mountain without maps and the visibility is poor,” he wrote. “You don’t start and stop. Keep climbing at a steady pace. Be the tortoise and not the hare. Keep expenditures at sustainable levels. Assume spending will be flat to monotonically increasing.” He reassured employees that he understood that funding Blue personally would be expensive. “I accept that Blue Origin will not meet a reasonable investor’s expectation for return on investment over a typical investing horizon,” he wrote. “It’s important to the peace of mind to those at Blue to know I won’t be surprised or disappointed when this prediction proves true.”
The document, signed by Bezos, took on the same sacred inviolability inside Blue as Amazon’s inaugural letter to shareholders, with employees returning to it each year at all-hands meetings. He condensed its central idea into the company’s Latin motto, Gradatim Ferociter, or “Step by Step, Ferociously.” He also devised an elaborate coat of arms that depicted two tortoises standing on the Earth and appealing to the stars, over an hourglass with wings, a symbol of fleeting time.
The Welcome Letter and its subsequent representations served as a sort of beacon in the dark, quietly speaking to other enthusiasts at the company who dreamed of opening the space frontier, while Bezos kept Blue Origin enveloped in secrecy. New employees were all required to read the memo and reflect on it; prospective job candidates were even asked to write essays reflecting on the depth of their passion for the Blue mission, and were turned down if their yearnings were seen as not devotional enough.
In the mid-2000s, Bezos’s interests in space attracted the attention of another prominent devotee: Elon Musk, who founded SpaceX in 2002 with the same goal of making more economical, reusable rockets and opening the space frontier. Bezos and Musk met privately twice to discuss their mutual obsession, once in San Francisco and soon afterward in Seattle with their spouses at the time, MacKenzie and Justine Musk. The couples had dinner at a restaurant downtown, and then Jeff and MacKenzie gave Musk and his wife a tour of Blue’s original warehouse office, which a colleague recalled he had curiously cleared ahead of time of employees and any revealing indications of their work.
In many ways, SpaceX back then was the antithesis of Blue Origin. Financed with seed investments by Musk and an array of venture capitalists, it desperately pursued profitability from the outset by bidding against established aerospace giants for government contracts to launch commercial satellites and military hardware into orbit. With Blue, Bezos was thinking more long-term. He intended to finance the firm himself and wanted to develop technologies with New Shepard that could later be integrated into more ambitious missions into orbit and beyond. “Don’t just build a space vehicle, build a company that builds space vehicles,” Bezos had written in the Welcome Letter.
Musk later told me that he “thought it was cool that Jeff created Blue Origin and that there was someone else with similar philanthropic goals with regard to space, and a lot of resources.” He recalled their early meetings as friendly and remembered getting into a technical debate with Bezos ove
r the merits of Blue Origin’s planned fuel mix, which used peroxide, a compound known to decompose rapidly when exposed to sunlight. “Peroxide is great until you come back one weekend and your vehicle is gone and your test site is gone,” Musk said. But Bezos was operating on the advice of his chief propulsion officer at the time, William Kruse, a former engineer for the aerospace corporation TRW. Kruse favored peroxide’s non-cryogenic properties and the fact that it could be used with an existing turbo pump, which required little extra engineering effort.
Bezos felt that working with such existing components would allow Blue Origin to keep its engineering teams small and move fast—principles laid out in the Welcome Letter. He believed that constraints drove innovation, and he wanted to develop space vehicles with the cadence of a software project, incorporating new ideas into frequent iterations, using as many standard technologies as possible. The method worked well at internet companies like Amazon, where bugs could be easily fixed. But at an aerospace firm perpetually stretched for resources, it was a recipe for errors to sneak into systems that needed to be strenuously tested and mission hardened.
In 2011, Blue Origin was launching a test vehicle on Bezos’s three-hundred-thousand-acre ranch in West Texas. That August, a simple software error drew the rocket off course, forcing an onboard safety system to terminate the flight at forty-five thousand feet. Residents of the town of Van Horn, thirty miles away, saw a “rapid unscheduled disassembly.” The company ensured that no video was made public and only acknowledged the incident when the media started to investigate. “Not the outcome any of us wanted, but we’re signed up for this to be hard,” Bezos wrote in a blog post on the Blue Origin website.
By then Blue was already redeveloping New Shepard, acceding to Musk’s advice on the volatility of peroxide by shifting to a higher-performance rocket fuel mixture of liquid oxygen and liquid hydrogen. The company also started to tentatively apply for government contracts, receiving $25 million in awards for the initial two phases of CCDev, an Obama-era program to solicit proposals from private companies to ferry astronauts to the International Space Station. But the more stringent requirements of Phase 3, conducted over the winter of 2012, called for participating companies to build a complete orbital spacecraft in three years.
