Chapter 138 - Working Backwards: Insights, Stories, and Secrets from Inside Amazon
Today’s Chapter is based on the book “Working Backwards: Insights, Stories, and Secrets from Inside Amazon**”** by Colin Bryar and Bill Carr.
Colin Bryar and Bill Carr were two Amazon executives who worked closely with Jeff Bezos during his tenure at Amazon. In this book, they reveal the principles and practices that have driven the success of Amazon.
Previously on Jeff Bezos:
Here’s what I learned:
Customer Obsession
“There is only one boss. The customer―and he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”
— Sam Walton
Jeff Bezos’ leadership at Amazon is a perfect example of how companies should think about their relationship with customers, placing an unshakeable focus on customer needs above all else. This obsession isn’t just a slogan at Amazon, it is a foundational principle that permeates every decision, from product development to operational excellence. Bezos believed that long-term shareholder value is intrinsically linked to customer satisfaction, a view that drove Amazon’s growth from an online bookstore to a global powerhouse.
By focusing on customers over competitors, Amazon cultivated a culture where innovation stems from solving real customer problems, leading to breakthroughs like one-click shopping and Prime delivery. This approach encourages leaders to think deeply about customer experiences, ensuring that every initiative aligns with what customers truly want, rather than what the company assumes they need. In the long run, Bezos believes that by focusing on the customers, shareholders would be rewarded. As he once said, “We have an unshakeable conviction that the long-term interests of shareowners are perfectly aligned with the interests of customers.“
As such, Bezos emphasized on exceeding customers’ expectations to build trust and loyalty, a tactic that allowed Amazon to turn one-time buyers into lifelong advocates. Bryar and Carr explains that “Another of Jeff’s frequent exhortations to his small staff was that Amazon should always underpromise and overdeliver, to ensure that customer expectations were exceeded. One example of this principle was that the website clearly described standard shipping as U.S. Postal Service First-Class Mail. In actuality, all these shipments were sent by Priority Mail—a far more expensive option that guaranteed delivery within two to three business days anywhere in the United States. This was called out as a complimentary upgrade in the shipment-confirmation email.“
“Our culture is four things: customer obsession instead of competitor obsession; willingness to think long term, with a longer investment horizon than most of our peers; eagerness to invent, which of course goes hand in hand with failure; and then, finally, taking professional pride in operational excellence.”
— Jeff Bezos
This concept of customer obsession is a perfect example of the power of inversion. In fact, one of Amazon’s leadership principle mentions that leaders should start with the customer and work backwards, meaning that they need to work vigorously to earn and keep customer trust. Bryar and Carr mentions that “Although leaders pay attention to competitors, they obsess over customers.” This principle is the “why” behind the famous “Working Backwards” process itself. Instead of starting with a company’s internal capabilities and asking “what can we build?”, Amazon starts by imagining the perfect customer experience and then works backward to invent the technology, processes, and products required to make it a reality. This outside-in perspective ensures that every invention is tethered to a real customer need, preventing the common corporate trap of building a solution in search of a problem.
For example, under Bezos, this obsession manifested in mechanisms like the Andon Cord for customer service, empowering agents to halt sales on faulty products to prevent dissatisfaction. Such tools ensured that customer issues were addressed swiftly, turning potential negatives into opportunities for improvement. Bezos’ tenure teaches us that true success comes from an unwavering commitment to customers, fostering loyalty that drives sustainable growth. By embedding this into every layer of the organization, companies can create a virtuous cycle where customer happiness fuels innovation and profitability.
This reminds me of Jacobi’s principle of “Invert, always invert” that is oftenly used by Charlie Munger. In fact, Munger is well-known for promoting the concept of keeping things simple. Munger once said that “If something is too hard, we move on to something else. What could be simpler than that?” In fact, when it comes to investing, Munger explains that at Berkshire Hathaway, they have three baskets(in, out and too tough) in which they classify new investment ideas. And most often then not, ideas tend to go into the too tough pile. As Buffett once said, “I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.”
As a matter of fact, I believe that this concept of Munger of keeping things simple comes from the power of inversion that was inspired by the famous mathematician Jacobi, who often solved complex issues by inverting the problem. Similarly, Munger came up with the concept that one can succeed in life by avoiding stupidity by using the power of inversion. Munger gives the example of a professional tightrope walker for 20 years. He is successful in his art because he knows what he cannot do, because he knows that if he gets it wrong, he won’t survive.
Similarly, Munger understands that to succeed in life, one must avoid taking stupid paths. For one, Charlie Munger mentions that “three things ruin people: drugs, liquor and leverage.”
“We all know talented people who have ruined their lives abusing either alcohol or drugs—and often both.”
— Charlie Munger
Think Long-Term
“If you really look closely, most overnight successes took a long time.”
— Steve Jobs
In a world obsessed with short-term gains and quarterly results, Amazon’s commitment to long-term thinking was one of its most radical and defining trait. Jeff Bezos operated on a different time horizon, one measured in years and decades, not financial quarters. This patience allowed Amazon to plant seeds, many of which would take years to grow and involve. In fact, this long-term mindset was the bedrock that made monumental bets like Kindle, AWS, and Prime possible. Each required immense capital, years of development, and a willingness to be misunderstood by outsiders who could not see the vision.
This long-term orientation thinking was truly in opposition to the common tendency within large organizations to reject bold, risky ideas in favor of safe, incremental improvements that offer short-term certainty at the price of long-term stagnation. Bryar and Carr mentions that “The institutional no refers to the tendency for well-meaning people within large organizations to say no to new ideas. The errors caused by the institutional no are typically errors of omission, that is, something a company doesn’t do versus something it does. Staying the current course offers managers comfort and certainty—even if the price of that short-term certainty is instability and value destruction later on.”
Knowing the danger of this, Bezos fought this inertia at Amazon by creating a culture that not only tolerated experimentation and failure, but saw it as an essential cost of invention. He often believed that failure was not a disaster to be avoided, but as an inevitable and necessary tuition paid for innovation.
“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.”
— Jeff Bezos
As we have previously learned, Bezos was not timid in making investment decisions where he had an opportunity in gaining market leadership advantages even when he knew that some of his investments would not pay off. As he once said, “We like to invent and do new things, and I know for sure that long-term orientation is essential for invention because you’re going to have a lot of failures along the way.”
As a pioneer in the technology industry, it is in the company’s DNA to be committed to constant improvement, experimentation and innovation. This can be done by investing into new businesses. However, Bezos mentions that it is also his responsibility to make sure that any opportunities they invest in must generate the same return on capital that investors expected when they invested in Amazon. This can only be done by taking a long-term and true ownership approach.
Furthermore, Bezos also understood that as Amazon grows in size, everything needs to be scaled and this includes the size of their failed experiments. In fact, if the size of failures of Amazon didn’t grow, then they would not be inventing at a size that would actually move the needle. Obviously, not all experiments will pan out,, but the good thing is that , in the long-run, the big winners should cover all the losses.
“Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a one hundred times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten. We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score one thousand runs. This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments.”
— Jeff Bezos
Finally, This philosophy was backed by a compensation structure designed to incentivize long-term value creation. Unlike many companies where executive pay is heavily weighted toward cash, Amazon increasingly skewed compensation toward long-term equity as people were promoted. This directly ensured that leaders acted like true owners, thinking in terms of years, not just the next bonus cycle. Bryar and Carr explains that “Amazon’s compensation is, by contrast, simple and oriented toward the long term. As one is promoted at Amazon, the ratio of cash to equity compensation becomes more and more skewed toward long-term equity.”
The Bar Raiser Process
“If each of us hires people who are smaller than we are, we shall become a company of dwarfs. But if each of us hires people who are bigger than we are, we shall become a company of giants.”
— David Ogilvy
We learned previously that Bezos pushed this idea of hiring the right people. In fact, “Hire the right people” became one of Amazon’s core pillars for success. And the first thing Bezos does when he sees someone, whether it’s to hire him or her or to purchase a new business from him or her, is to assess if he or she is in it merely to make money or because of a true passion for serving customers.
“I’m always trying to figure out one thing first and foremost: Is that person a missionary or a mercenary?”
— Jeff Bezos
As such, before making any hiring decision, Bezos insists his managers to go through the following three criteria:
Will you admire this person?
Will this person raise the average level of effectiveness of the group he or she is entering?
Along what dimension might this person be a superstar?
Here’s how Bezos explains the importance of these questions:
“During our hiring meetings, we ask people to consider three questions before making a decision: Will you admire this person? If you think about the people you’ve admired in your life, they are probably people you’ve been able to learn from or take an example from. For myself, I’ve always tried hard to work only with people I admire, and I encourage folks here to be just as demanding. Life is definitely too short to do otherwise. Will this person raise the average level of effectiveness of the group they’re entering? We want to fight entropy. The bar has to continuously go up. I ask people to visualize the company five years from now. At that point, each of us should look around and say, “The standards are so high now—boy, I’m glad I got in when I did!” Along what dimension might this person be a superstar? Many people have unique skills, interests, and perspectives that enrich the work environment for all of us. It’s often something that’s not even related to their jobs. One person here is a National Spelling Bee champion (1978, I believe). I suspect it doesn’t help her in her everyday work, but it does make working here more fun if you can occasionally snag her in the hall with a quick challenge: “onomatopoeia!””
— Jeff Bezos
Similarly, in “Working Backwards: Insights, Stories, and Secrets from Inside Amazon”, Colin Bryar and Bill Carr mentions the concept of “Bar Raiser” process when hiring people that was developed by Amazon, a rigorous, bias-minimizing system that ensures every hire raises the team’s overall standard. This process counters common pitfalls like confirmation bias and personal preferences, focusing instead on data-driven decisions tied to Leadership Principles.
Bryar and Carr mentions that “The Amazon Bar Raiser program has the goal of creating a scalable, repeatable, formal process for consistently making appropriate and successful hiring decisions. Like all good processes, it’s simple to understand, can be easily taught to new people, does not depend on scarce resources (such as a single individual), and has a feedback loop to ensure continual improvement. The Bar Raiser hiring process became one of the earliest and most successful components of the being Amazonian toolkit.“
In summary, the Amazon Bar Raiser program had the intention of ensuring that by raising the bar with each new hire, the team would get progressively stronger and produce increasingly powerful results. This reminds me of this quote from Steve Jobs: “So I’ve built a lot of my success on finding these truly gifted people, and not settling for “B” and “C” players, but really going for the “A” players. And I found something… I found that when you get enough “A” players together, when you go through the incredible work to find these “A” players, they really like working with each other. Because most have never had the chance to do that before. And they don’t work with “B” and “C” players, so it’s self-policing. They only want to hire “A” players. So you build these pockets of “A” players and it just propagates.”
“The name was intended to signal to everyone involved in the hiring process that every new hire should “raise the bar,” that is, be better in one important way (or more) than the other members of the team they join. The theory held that by raising the bar with each new hire, the team would get progressively stronger and produce increasingly powerful results. “
— Colin Bryar and Bill Carr
This also reminds me of Danny Meyer’s hiring process. The founder of Shake Shacks mentions a final but critical test when evaluating potential hiring candidates. He requests that all of his managers ask themselves one final question before hiring someone: “Do they believe the candidate has the capacity to become one of the top three performers on our team in his or her job category? If people cannot ever develop into one of our top three cooks, servers, managers, or maître d’s, why would we hire them? How will they help us improve and become champions?” This is incredibly important as it helps to weed out mediocrity as it is extremely dangerous for a company to hire a “whelming” candidate as it can cause an organisation a long-lasting harm.
“Overwhelmers earn you raves. Underwhelmers either leave on their own or are terminated. Whelmers, sadly, are like a stubborn stain you can’t get out of the carpet. They infuse an organization and its staff with mediocrity; they’re comfortable, and so they never leave; and, frustratingly, they never do anything that rises to the level of getting them promoted or sinks to the level of getting them fired. And because you either can’t or don’t fire them, you and they conspire to send a dangerous message to your staff and guests that “average” is acceptable.”
— Danny Meyer
Beyond the Book
Read "Inversion and The Power of Avoiding Stupidity" by Farnam Street
Read "Avoiding Stupidity is Easier than Seeking Brilliance" by Farnam Street
Read "The Importance of Working With “A” Players" by Farnam Street
Listen to "#321 Working with Jeff Bezos" by Founders Podcast
If you enjoy reading my newsletter, please consider becoming a paid subscriber. You’ll be able to keep this newsletter going! Here’s what you get when you upgrade:
Voting on polls: you’ll get to vote on who I should write about next.
Requesting biographies: you can request a biography for me to read and write about next.
Supporting my next book purchase: all payments received will be used to purchase a new biography.