After graduation Bezos went to New York to apply his computer skills to the financial industry. He ended up at a hedge fund run by David E. Shaw, which used computer algorithms to discover pricing disparities in the financial markets. Bezos took to the work with a disciplined zeal. Foreshadowing the workplace fanaticism he would later try to instill at Amazon, he kept a sleeping bag in his office in case he wanted to sleep there after a late night of work.

  While working at the hedge fund in 1994, Bezos came across the statistic that the web had been growing by more than 2,300 percent each year. He decided that he wanted to get aboard that rocket, and he came up with the idea of opening a retail store online, sort of a Sears catalogue for the digital age. Realizing that it was prudent to start with one product, he chose books—partly because he liked them and also because they were not perishable, were a commodity, and could be bought from two big wholesale distributors. And there were more than three million titles in print—far more than a bricks-and-mortar store could possibly keep on display.

  When he told David Shaw that he wanted to leave the hedge fund to pursue this idea, Shaw took him on a two-hour walk through Central Park. “You know what, Jeff, this is a really good idea. I think you’re onto a good idea here but this would be a better idea for somebody who didn’t already have a good job.” He convinced Bezos to think about it for a couple of days before making a decision. Bezos then consulted his wife, MacKenzie, whom he had met at the hedge fund and married the year before. “You know you can count me in 100 percent, whatever you want to do,” she said.

  To make the decision, Bezos used a mental exercise that would become a famous part of his risk-calculation process. He called it a “regret minimization framework.” He would imagine what he would feel when he turned eighty and thought back to the decision. “I want to have minimized the number of regrets I have,” he explains. “I knew that when I was eighty, I was not going to regret having tried this. I was not going to regret trying to participate in this thing called the internet that I thought was going to be a really big deal. I knew that if I failed, I wouldn’t regret that, but I knew the one thing I might regret is not ever having tried. I knew that that would haunt me every day.”

  He and MacKenzie flew to Texas, where they borrowed a Chevrolet from Jeff’s father and began a drive that would become legendary in entrepreneurial origin tales. As MacKenzie drove, Jeff typed up a business plan and spreadsheets filled with revenue predictions. “You know the business plan won’t survive its first encounters with reality,” he says. “But the discipline of writing the plan forces you to think through some of the issues and to get sort of mentally comfortable in the space. Then you start to understand, if you push on this knob, this will move over here and so on. So, that’s the first step.”

  Bezos picked Seattle as a location for his new company, partly because it was home to Microsoft and many other tech companies and therefore had a lot of engineers to recruit from. It was also near a book distribution company. Bezos wanted to incorporate right away, so on the drive he called a friend to get a recommendation for a lawyer in Seattle. It turned out to be the friend’s divorce lawyer, but he was able to handle the papers. Bezos told the lawyer he wanted to call the new company Cadabra, as in the magical incantation “abracadabra.” The lawyer responded, “Cadaver?” Bezos unleashed his trademark boom of a laugh and realized he would need to come up with a better name. He eventually decided to name what he hoped would be the Earth’s largest store after the Earth’s longest river.

  When he called his father to tell him what he was doing, Mike Bezos asked, “What’s the Internet?” Or at least that’s Jeff’s romantic narrative. Mike Bezos in fact had been a user of the early online dial-up services and had a pretty good idea of what online retailing could be. Even though he and Jackie thought it was rash to leave a high-paying financial industry job for such a lark, they took much of their life savings—$100,000 at first, then more—and agreed to invest. “The initial start-up capital came primarily from my parents, and they invested a large fraction of their life savings in what became Amazon.com,” Bezos says. “That was a very bold and trusting thing for them to do.”

  Mike Bezos admitted that he never understood either the concept or the business plan. “He was making a bet on his son, as was my mother,” Jeff says. “I told them that I thought there was a 70 percent chance that they would lose their whole investment.… I thought I was giving myself triple the normal odds, because really, if you look at the odds of a start-up company succeeding at all, it’s only about 10 percent. Here I was, giving myself a 30 percent chance.” As his mother, Jackie, later said, “We didn’t invest in Amazon, we invested in Jeff.” They eventually put in more money, ended up owning 6 percent of the company, and used their wealth to become very active and creative philanthropists focused on providing early-childhood learning opportunities for all children.

  Others didn’t quite get the idea either. Craig Stoltz was then a Washington Post reporter running the newspaper’s magazine about consumer technology. Bezos came to pitch his idea. “He was short, with an uncomfortable smile, thinning hair, and a somehow febrile affect,” Stoltz later wrote in a blog post. Totally unimpressed, Stoltz blew him off and declined to write a story about the idea. Years later, long after Stoltz left the paper, Bezos would end up buying it.

  Jeff and MacKenzie initially set up the company in the two-bedroom home they rented near Seattle. “They converted the garage into a work space and brought in three Sun workstations,” Josh Quittner later wrote in Time. “Extension cords snaked from every available outlet in the house to the garage, and a black hole gaped through the ceiling—this was where a potbellied stove had been ripped out to make more room. To save money, Bezos went to Home Depot and bought three wooden doors. Using angle brackets and 2-by-4s, he hammered together three desks, at a cost of $60 each.”

  Amazon.com went live on July 16, 1995. Bezos and his small team rigged up a bell to chime whenever they got a sale, but it very quickly needed to be disabled, as rushes of orders came in. In the first month, with no real marketing or publicity plan other than asking friends to spread the word, Amazon scored sales in all fifty states and in forty-five countries. “Within the first few days, I knew this was going to be huge,” Bezos told Time. “It was obvious that we were onto something much bigger than we ever dared to hope.”

  At first Jeff and MacKenzie and a few early employees handled everything, including packing, wrapping, and driving the boxes off to be shipped. “We had so many orders that we weren’t ready for that we had no real organization in our distribution center at all,” Bezos says. “In fact, we were packing on our hands and knees on a hard concrete floor.” One of the other iconic origin tales of Amazon, told often by Bezos with his raucous laugh, involved how they figured out a way to make the packing easier.

  “This packing is killing me! My back hurts, this is killing my knees on this hard cement floor,” Bezos exclaimed one day. “You know what we need? We need knee pads!”

  An employee looked at Bezos as if he were the stupidest person he’d ever seen. “What we need are packing tables,” he said.

  Bezos looked at the employee as if he were a genius. “I thought that was the smartest idea I had ever heard,” Bezos recalls. “The next day we got packing tables, and I think we doubled our productivity.”

  The fact that Amazon grew so quickly meant that Bezos and his colleagues were unprepared for many of the challenges. But he sees a silver lining in the way they had to hustle. “It formed a culture of customer service in every department of the company,” he says. “Every single person in the company, because we had to work with our hands so close to the customers, making sure those orders went out, really set up a culture that served us well, and that is our goal, to be Earth’s most customer-centric company.”

  Bezos’s goal soon became to create an “everything store.” His next steps were to branch out to music and videos. Keeping his focus on the customer, he emailed one thousand of them to see what else they would like to be able to buy. The answers helped him understand better the concept of “the long tail,” which means being able to offer items that are not everyday bestsellers and, thus, don’t command shelf space at most retailers. “The way they answered the question was with whatever they were looking for at that moment,” he says. “I remember one of the answers was ‘I wish you sold windshield wiper blades because I really need windshield wiper blades.’ And I thought to myself we can sell anything this way, and then we launched electronics and toys and many other categories over time.”

  At the end of 1999 I was the editor of Time, and we made a somewhat offbeat decision to make Bezos our Person of the Year, even though he wasn’t a famous world leader or statesman. I had the theory that the people who affect our lives the most are often the people in business and technology who, at least early in their careers, aren’t often found on the front pages. For example, we had made Andy Grove of Intel the Person of the Year at the end of 1997 because I felt the explosion of the microchip was changing our society more than any prime minister or president or treasury secretary.

  But as the publication date of our Bezos issue neared in December 1999, the air was starting to go out of the dot.com bubble. I was worried—correctly—that internet stocks, such as Amazon, would start to collapse. So I asked the CEO of Time Inc., the very wise Don Logan, whether I was making a mistake by choosing Bezos and would look silly in years to come if the internet economy deflated. No, Don told me. “Stick with your choice. Jeff Bezos is not in the internet business. He’s in the customer-service business. He will be around for decades to come, well after people have forgotten all the dot.coms that are going to go bust.”

  So we went ahead. The great portrait photographer Greg Heisler convinced Bezos to pose with his head facing out from an Amazon box filled with packaging material, and at the house of Margaret Carlson we threw a party featuring only food and drink that had been ordered online. Joshua Cooper Ramo, one of our savviest young editors, wrote the overview story that put Bezos in historical perspective:

  Every time a seismic shift takes place in our economy, there are people who feel the vibrations long before the rest of us do, vibrations so strong they demand action—action that can seem rash, even stupid. Ferry owner Cornelius Vanderbilt jumped ship when he saw the railroads coming. Thomas Watson Jr., overwhelmed by his sense that computers would be everywhere even when they were nowhere, bet his father’s office-machine company on it: IBM. Jeffrey Preston Bezos had that same experience when he first peered into the maze of connected computers called the World Wide Web and realized that the future of retailing was glowing back at him.… Bezos’ vision of the online retailing universe was so complete, his Amazon.com site so elegant and appealing, that it became from Day One the point of reference for anyone who had anything to sell online. And that, it turns out, is everyone.

  Amazon was indeed hit hard by the internet-bubble collapse. Its stock was at $106 a share in December 1999 when our Person of the Year issue came out. A month later it was down 40 percent. Within two years it had fallen to as low as $6 a share. Journalists and stock analysts ridiculed it, dubbing the company “Amazon.toast” and “Amazon.bomb.” In the annual shareholder letter he wrote right after that, Bezos began with a one-word sentence: “Ouch.”

  But Don Logan was right. Amazon and Bezos were able to survive the bust. “As I watched the stock fall from 113 to 6, I was also watching all of our internal business metrics: number of customers, profit per unit,” he says. “Every single thing about the business was getting better and fast. It’s a fixed-cost business. And so, what I could see is that, from the internal metrics, is that at a certain volume level that we would cover our fixed costs and the company would be profitable.”

  Bezos succeeded by keeping his eye on the long game, foregoing profits for growth, and being relentless and sometimes ruthless with competitors and even his own colleagues. At one point during the dot.com meltdown, he and a few other internet entrepreneurs were on an NBC Nightly News special with Tom Brokaw. “Mr. Bezos, can you even spell ‘profit’?” Brokaw asked, highlighting the fact that Amazon was hemorrhaging money as it grew. “Sure,” Bezos replied, “P-R-O-P-H-E-T.” And by 2019 Amazon stock would be at $2,000 a share, and the company would have $233 billion in revenues and 647,000 employees worldwide.

  An example of how Bezos innovates and operates was the launch of Amazon Prime, which transformed the way Americans think about how quickly and cheaply they can be gratified by ordering online. One of his board members had been suggesting that Amazon create a loyalty program, similar to what the airlines have with their frequent-flyer programs. Separately, an Amazon engineer suggested that the company offer free shipping to its most loyal customers. Bezos put the two ideas together and asked his finance team to assess the costs and benefits. “The results were horrifying,” Bezos says with his laugh. But Bezos had a rule, which was to use his heart and his intuition as well as empirical data in making a big decision. “There has to be risk taking. You have to have instinct. All the good decisions have to be made that way,” he says. “You do it with a group. You do it with great humility.”

  He knew that creating Amazon Prime was what he calls a one-way door: it was a decision difficult to reverse. “We’ve made mistakes, doozies like the Fire Phone and many other things that just didn’t work out. I won’t list all of our failed experiments, but the big winners pay for thousands of failed experiments.” He was aware that it would be scary at first because those who signed up for Prime would be the heaviest users of shipping. “What happens when you offer a free all-you-can-eat buffet, who shows up to the buffet first?” he says. “The heavy eaters. It’s scary. It’s, like, oh, my God, did I really say as many prawns as you can eat?” But eventually Amazon Prime led to the combination of a loyalty program and a convenience for customers as well as a huge source of customer data.

  The greatest and most serendipitous innovation Bezos made was the creation of Amazon Web Services. The initial ideas—which included a software layer known as Elastic Compute Cloud and a hosting operation known as Simple Storage Service—bubbled up from inside the company. Eventually a variety of related ideas came together in a memo that proposed the creation of a service that would “enable developers and companies to use Web Services to build sophisticated and scalable applications.”

  Bezos seized on its potential and, sometimes with great passion erupting into bouts of fury, pushed his team to develop it faster and bigger. The result would supercharge internet entrepreneurship like no other platform since the iPhone App Store. It would enable any kid in a dorm room or any business on any Main Street—or any big corporation, for that matter—to experiment with ideas and build new services without having to buy racks of servers and suites of software. Instead, they could share in a globally distributed infrastructure of server farms, on-demand computing power, and applications that were more extensive than those of any company in the world.

  “We completely reinvented the way that companies buy computation,” Bezos says. “Traditionally, if you were a company and needed computation, you would build a data center, and you’d fill that data center with servers, and you’d have to upgrade the operating systems of those servers and keep everything running, and so on. None of that added any value to what the business was doing. It was kind of price-of-admission, undifferentiated heavy lifting.” Bezos realized that this process was also holding back various groups of innovators within Amazon itself. The company’s applications developers had been in a constant struggle with the hardware teams, but Bezos made them develop some standard application programming interfaces (APIs) and access to computing resources. “As soon as we did that, it was immediately obvious that every company in the world was going to want this,” he says.

  For a while a miracle happened: for a few years no other companies got into the space as competitors. Bezos’s vision was far ahead of everyone else’s. “It was the greatest piece of business luck in the history of business, so far as I know,” he says.

  Sometimes a failure and a success go together. That is what happened with the flop of Amazon’s Fire Phone and the success of the Amazon Echo, the company’s smart speaker and home assistant device known as Alexa. “While the Fire Phone was a failure, we were able to take our learnings (as well as the developers’) and accelerate our efforts building Echo and Alexa,” Bezos wrote in his 2017 stockholder letter.

  His enthusiasm for Echo grew out of his love of Star Trek. When playing Star Trek games with his friends as a kid, Bezos liked to play the role of the computer on the starship Enterprise. “The vision for Echo and Alexa was inspired by the Star Trek computer,” he wrote. “The idea also had origins in two other arenas where we’d been building and wandering for years: machine learning and the cloud. From Amazon’s early days, machine learning was an essential part of our product recommendations, and AWS gave us a front-row seat to the capabilities of the cloud. After many years of development, Echo debuted in 2014, powered by Alexa, who lives in the AWS cloud.” The result was a wonderful combination of smart speakers, a Star Trek chatty home computer, and an intelligent personal assistant.

  The genesis of Amazon Echo was, in one way, like Steve Jobs’s development of Apple iPod. It arose out of intuition rather than focus groups, and it was not in response to some obvious customer demand. “No customer was asking for Echo,” Bezos says. “Market research doesn’t help. If you had gone to a customer in 2013 and said, ‘Would you like a black, always-on cylinder in your kitchen about the size of a Pringles can that you can talk to and ask questions, that also turns on your lights and plays music?’ I guarantee you they’d have looked at you strangely and said ‘No, thank you.’” In a sweet irony, Bezos was able to trounce Apple in creating such a home device and then make its components—voice recognition and machine learning—work better than competing devices from both Google and, later, Apple.