This is a story about the earliest days of Amazon, and a simple, important “loophole,” as Jeff Bezos put it, that the earliest employees leveraged. If you like this, you’ll also enjoy my free ebooks: Jeff Bezos Regrets Nothing and 12 Simple Tricks That Will Probably Make Your Life a Little Better.
Amazon is now a $1.7 trillion company, but it faced difficult challenges at the very start–back when its website sold only books, and the company was hustling to get its first customers.
I like the solution we’ll discuss below, and that Bezos and the other early Amazonians devised, for three reasons: first because it’s a good story, second because it’s unexpected–and finally, most importantly, because it might inspire you to do whatever it takes to make your business a success.
Let’s set the scene. Actually, here’s a nearly contemporaneous source, from 1996, that explains how Amazon’s bookstore-only store worked in those days:
Orders in hand, Amazon requests books from a distributor or publisher, which delivers them to the company’s Seattle warehouse. The order is then packed and shipped. On average, customers get books five days after ordering. Pay extra, and they speed the process by a day or two.
The key point is that for many books, Amazon was taking orders (and payment) before they had even ordered them from the wholesalers. It’s a great financial model, but in the very early days, it presented a seemingly insurmountable problem.
This was because Amazon wanted to promise customers two things:
- more listed titles than any other bookstore on the planet, and
- discounts of 10 to 30 percent off list prices.
Have a shot at those early goals meant that the brand new, baby version of Amazon.com had to get the best possible terms from its wholesale distributors. The problem was that the wholesalers had a 10-book order minimum, and although it might seem hard to believe now, back then Amazon wasn’t consistently getting 10 orders a day.
So, instead of waiting until they had enough order volume, which would have delayed shipping even more, Bezos explained the solution they came up with in a 1999 interview with Wired magazine:
[W]e found a loophole. Their systems were programmed in such a way that you didn’t have to receive 10 books, you only had to order 10 books. So we found an obscure book about lichens that they had in their system but was out of stock.
We began ordering the one book we wanted and nine copies of the lichen book.
They would ship out the book we needed and a note that said, “Sorry, but we’re out of the lichen book.” One of these days we’re going to get all those lichen books dumped onto our front lawn.
Bezos seems to have been speaking colloquially in the interview, so I can’t say how long this little hack went on. It’s interesting to reflect that by 1999, when he sat down with Wired, Amazon had already gone public, and Bezos was already a multi-billionaire.
Regardless of whether this “loophole” was exploited for a few weeks or longer, however, I find it devilishly inspiring. As Bezos told the tale two full decades ago, Amazon wasn’t doing anything illegal or outside wholesalers’ terms of service, but it was exploiting a flaw in order to build its business.
(“I’ve since talked and joked at length with the people at these companies about this,” Bezos said in a speech around the same time. “They actually think it’s very funny.”
Why does this matter today? Well, it’s probably one of many tiny things that could have meant the difference between Amazon’s early success and failure.
But it also stands out as the kind of simple, unorthodox thing that I think every successful business, and frankly every creative person, has to be willing to do–especially in the very early days.
- It’s like the co-founders of Airbnb realizing that their early listings weren’t getting tenants because the photos in the ads were low-quality, and offering free professional photos to fix the problem.
- Or the early days of PayPal, when the company emailed people and told them that they were giving them free cash, if they’d open an account.
- I’m a bit of a history geek, so I’ll also point to President Lyndon Johnson, who, when he first came to Washington as a member of Congress and stayed in a dormitory with other representatives, would shave several times each morning in the communal bathrooms, so that he could “just happen” to run into colleagues and network with them.
These are the unglamorous, analog, not scalable things that businesses have to do in the beginning to survive, and thrive. I know you can probably think of other examples quickly.
The question is, within the bounds of ethics, and knowing both that you have to live with yourself and that future stakeholders will judge your choices, how hard are you willing to find the loophole, or the trick, or the unorthodox hack that makes success possible?
Bonus points if it also makes for a good story, later.
(Don’t forget the free ebooks: Jeff Bezos Regrets Nothing and 12 Simple Tricks That Will Probably Make Your Life a Little Better.)