The network with German characteristics
Axel Springer is the largest European media group in the field of written information. Great, not only for the size of its business but above all for how it has been able to face the great turbulence caused by the transition from the age of the mass media to that of the new media. Today the majority of Axel Springer's turnover and profits (which have never waned) are realized on new media thanks to a shrewd and brilliant transition led by his athletic and photogenic boss, Mathias Döfner, 55 years old. We are not in the Silicon Valley between San Francisco and San José or even in the Meat District or in the Silicon Alley of New York, we are in the free and Hanseatic city of Hamburg located in the nation most distant from the culture and philosophy of Silicon, Germany.
Mathias Döfner is one of the most influential people in Europe: highly listened to by the German government, he is a formidable lobbyist in Brussels to such an extent that a large part of European legislation on new media bears his imprinting. His vision of the new economy, anything but technophobic, could be defined, abusing a very popular formula, "The network with German characteristics".
The strange couple
The first concern of the Hamburg manager is to protect his sector from the disruptive action of the large Internet groups, above all from those who practice the deadly content-data-advertising triangulation, above all when the contents offered are the result of algorithms of aggregation. In fact, Döfner's campaign against Google has something epic, which is now finding support in the initiatives of the Danish commissioner Margrethe Vestager, who breathes the same Hanseatic air as Döfner.
It therefore sounds rather peculiar that the annual Axel Springer award went to one of the deadliest traditional business destroyers like Jeff Bezos. Let me be clear, Amazon's business does not conflict with that of Axel Springer, indeed the Seattle giant employs half a million people worldwide and is a formidable barrier to the expansion of the Chinese outside their borders. Furthermore, Jeff Bezos respects journalism and information in its historical configuration, as demonstrated by his action at the Washington Post which has returned to what it was. The contents are purchased on Amazon and are not given away for a handful of personal information. Döfner-Bezos still remain an odd couple, even if the two have a business in common.
We are talking about Business Insider, an online economic-financial newspaper, owned by Bezos and in 2015 and acquired by Springer who now controls 97%. The remaining 3% is owned by Bezos' financial vehicle.
The two men openly confronted each other for over an hour in Berlin at the 2008 Axel Springer award ceremony. On this occasion Döfner, in perfect English, interviewed Bezos on many topics, including those relating to the man's private life richest in the world. We are pleased to reproduce some passages of this interview in Italian translation. Is Döfner-Bezos the right couple to take us into the future?
Risk, resourcefulness and change
Döfner: Jeff, you worked in New York as an investment banker which is really the exact opposite of an entrepreneur. The banker does not take risks directly, he exploits the risks that others take. How did you come to become an entrepreneur and start a business?
Bezos: I think the beauty of being human, in general, is to always want to improve things. If entrepreneurs and inventors go where their curiosity takes them and follow their passions, they always discover something and wonder how to make it happen. And they are never satisfied. It is a great energy. I believe that this energy should be directed primarily towards customers rather than pouring it into competitors. Sometimes I see companies — even young, small start-ups — starting the business paying more attention to the competition than to the customers. I think in large mature industries this may be the wrong approach. Thus the pioneers are left to be others, descending into irrelevance. There are many things a young, creative company tries out that doesn't work. And those mistakes, mistakes and failures, cost real money. There are no mature industries anymore, because change is happening everywhere. Just look at what's happening in the auto industry.
Döfner: Speaking of risk, resourcefulness, and change, tell us how you told your wife, MacKenzie, that you wanted to change jobs, start Amazon, and move across the country.
Bezos: I went to my wife, MacKenzie, who was recently married to a man with a steady job on Wall Street, to tell her I wanted to quit my job, move across the country, and start an Internet bookstore. MacKenzie's first question, like that of everyone else I'd told about my project, was, "What is the Internet?" Because no one knew what it was, it was 1994. But even before she asked me “What is the Internet?”, she said “Great, let's go”. Because she wanted to support me and she knew I had a thing for innovation and initiative. When there are warm and supportive people in your life, like MacKenzie, my parents, my grandfather, my grandmother (Cuban immigrants who lived in a refugee camp), you end up in a position to take risks.
Döfner: Did MacKenzie, as a writer, direct you to books?
Bezos: No. It is true that she loves books and I love reading, but I chose books for another reason. I chose books because there were more items in the books category than in any other product category. It was thus possible to build a very broad offer. There were 3 million titles in 1994, 3 million items available on the market right away. The largest physical bookstores only had 150.000 titles in stock. It was therefore possible to build an online library with a truly universal selection. Every printed book, even out-of-print ones, was what Amazon wanted to offer customers. That's why the books.
Döfner: When did you realize that books could be a success?
Bezos: Well, I was prepared that with books it would take a long time. And I knew that the chance of success would be seen in the first 30 days. I was shocked at how many books we sold. We were ill-prepared. At that time we only had 10 people in the company, most of whom were developers. So everyone, including me and the developers, got down to shipping packages. We didn't even have packing tables. We were kneeling on a concrete floor filling boxes. One day, at XNUMX or XNUMX in the morning, I said to one of my fellow developers “You know, Paul, this is killing me, we need to get some knee pads”. Paul looked at me and said, “Jeff, we need to get the packing tables.” And I'm like, "Oh my God, that's a good idea!" We bought the packing tables the next day and it doubled our productivity, and probably saved our shoulders and knees too.
Crises, competitors and critics
Döpfner: But Amazon has had serious crises. You nearly went bankrupt. What went wrong?
Bezos: We've had so many… there have been so many crises. Knocking wood, I haven't had any existential crises, but we've had a lot of dramatic events. I remember we had only 125 employees in the beginning when Barnes & Noble, the largest bookstore chain in the United States, opened an e-commerce site to compete with us, barnesandnoble.com. We had a two year head start. We opened in 1995; they opened in 1997. All the media were betting against us, the funniest being an article describing how we were about to be destroyed by this much larger company. The most memorable title was “Amazon, toast”. We had 125 employees and 60 million in turnover. Barnes & Noble at the time had 30.000 employees and approximately $3 billion in revenue. So they were giants; we were dwarfs. We had limited resources and the press was very negative about Amazon's future. So I called a meeting of all employees, which was not difficult to hold since we were only 125 people. We all entered a room, so terrified by the idea of having such a formidable competitor that friends and relatives called us to say: "Are you okay?". So I said, “Look, it's okay to be afraid, but we don't have to be afraid of our competitors, because they will never send us money. Instead, we must be afraid of our customers. Let's stay focused on them, instead of obsessing over this big competitor and we'll do well in the end." And so it was. I really believe it: if you stay focused you can face any dramatic situation. Whatever the situation, your answer should be to double down on customers. Satisfy them. And not just satisfy them, delight them, amaze them.
Döpfner: Amazon employs 566.000 people. You are probably the biggest job creator in recent times. At the same time, you are harshly criticized by unions and the media for low wages and inappropriate working conditions. How do you deal with these criticisms? Are they right?
Bezos: Towards any criticism my approach is this and also what I recommend within Amazon. When you are criticized, look in the mirror and ask yourself: "Is the criticism fair?". If they are, switch, don't resist. As for working conditions, I'm proud of what you find at Amazon and I'm proud of the wages we pay. In Germany alone we employ 16 people and our salaries are the highest for the type of work we offer.
Döpfner: There is a union fight, because the unions want Amazon employees to be unionized. What is the real substance of the conflict?
Bezos: That's a good question. There are two kinds of criticisms. There are well-intentioned criticisms that aim to improve the service. These could be — to give you an example — customer reviews. When we introduced customer reviews 20 years ago, some book publishers weren't happy because some were negative, but we've been steadfast in our decision to admit them. There is a second type of criticism, which is self-interested criticism, which comes in all shapes and sizes. When you're doing something in a new way and customers like it, the incumbents who are doing it the old way will start criticizing. And they will be interested critics. And so you need, while looking in the mirror, to figure out if the criticism is constructive or interested. From our point of view, we have workers' councils and we have very good communication with our employees. So we don't believe we need a union to go between us and our employees, but, of course, at the end of the day, it's always the employees who have the choice. And that's how it should be. But surely we would be very naive to believe that we will not be criticized. You have to accept it. One thing I always tell people is that if you're going to do something new or innovative, you have to be willing to be misunderstood. If you can't afford to be misunderstood, then for heaven's sake, don't do anything new or innovative.
Society and large Internet companies
Döpfner: The general sentiment towards large innovative technology companies has changed. Facebook, Google, Amazon, Apple were seen as the good guys in T-shirts and blue jeans who were saving the world. Now they are sometimes held up as the evil of the world. And the Big 4 or Big 5 debate is heating up: professors like Scott Galloway and think-tanks like The Economist are proposing a breakup, other influential figures like George Soros were very critical of Davos and the European Commission is taking a very tough stance. Do you think the wind has changed? How should big tech companies behave, how should Amazon behave?
Bezos: I think it's a natural instinct. I think we humans, especially in the Western world and especially in democracies, are wired to be skeptical and circumspect about large institutions of any kind. In the United States we are always on the alert about government and public administration at the central and local level. I assume it is the same in Germany. That's a healthy attitude, because they're big, powerful institutions, the police or the military or whatever it is. It doesn't mean that they are not trusted or that they are bad or evil or anything like that. It's just that they wield great power and control over our lives and so we want them to be continually scrutinized. Now, if you look at the big tech companies, they've gotten so big that they need to be audited. And in this regard, and it's not personal, I think even the founder of a large technology company or institution could go astray. And if he goes astray, he might start taking it personally. Like “Why are they inspecting me?”, when he would like people to just say “Yeah, that's fine”.
Döpfner: Attitudes towards data protection and privacy have always been different between Europe and the US, but in the context of events like Cambridge Analytica, it's also changing in the US. Is this criticism hysterical or is it appropriate? And what are the consequences for a company like Amazon?
Bezos: I think this is one of the great questions of our age. I think of the Internet as a great, powerful new technology. It is horizontal. It affects every industry. And, in my view, the internet is already pretty old at this point; it's been around for a long time already; but if you look closely it's only about 10 or 15 years. As a community we haven't had time to figure out how to operate, we're still evaluating all of this. But we're finding that these powerful tools also allow for some not-so-good things, like letting authoritarian governments interfere in free, democratic elections around the world. This is an incredibly scary thing. As for Amazon's role, I think, first and foremost, we have a duty to work with regulators, give them our point of view honestly, without any stonewalling or skepticism. But the ultimate decision is not ours, so we will work with whichever set of regulators we are assigned. Then we will follow whatever rules are made regardless of the impact it will have on our business. We will find different ways to make our customers happy. What I don't want to happen is for innovation and invention to be blocked. One of the unintended consequences of regulation is that it ends up favoring the established business, the incumbents. From this point of view Amazon is an incumbent and therefore I should be happy with this consequence. But I'm not because I see the consequences on society that wants to go forward. We want to make sure that regulation stimulates innovation and does not block it, and at the same time we want it to safeguard people from terrorists and criminal acts when it comes to data security, privacy and encryption. This is a very complex challenge to which we cannot yet give a definitive answer.
Döpfner: Data security should become a competitive advantage for those companies that treat data with respect and responsibility.
Bezos: I agree 100%. Earning consumer trust is one of the biggest assets in business. And if you misuse their data, they will notice. Consumers are very intelligent and should never be underestimated. The reason consumers have been responsive to a large proportion of our initiatives is that we have worked hard to earn their trust.
Blue Origin
Döpfner: You are not flying planes, but you are sending satellites into orbit. Could you share with us your vision of Blue Origin and the idea of space tourism with reusable spacecraft?
Bezos: Yes. This is super important to me because I think in terms of a very long term, 200 years let's say. I believe and am increasingly convinced that Blue Origin, my space company, is the most important job I'm doing. There is a completed project for Blue Origin.
Döpfner: Really, are you saying that e-commerce, cloud, publishing are all less important than project space?
Bezos: Yes and I'll tell you why. First of all I'm interested in the cosmos, I have a passion for it. I've been studying and thinking about it since I was five years old. But that's not why I'm engaging in the project. I'm doing this because I'm afraid we will end up as a static civilization and I don't want my grandchildren and my grandchildren's grandchildren to live in a static civilization. It has always benefited from a civilization of growth and change. Let's think about what drives it forward. It's the energy. Let me give you some numbers. We take our body, we are animals. They eat for our metabolism. We burn about 100 watts. Our body is like a 100 watt light bulb. Our brain consumes 60. We are incredibly efficient. But if we extrapolate the developed countries where a lot of energy is used, we notice that the consumption rate of our metabolic civilization is 11 watts per capita. In the state of nature, like animals, we use 100 watts, but in developed civilizations we need 11 thousand. And the matter is growing. Now if you take the basic energy consumption of the world and increase it by a few percentage points a year for just a few hundred years, what happens is that you have to cover the entire earth's surface with solar cells to get energy. There is a real energy crisis. And it's coming fast. What can we do? We must work on energy efficiency on which we have always worked. It's not that we've wasted energy, it's that the need for energy continues to grow. So the stasis will be very bad. Now let's consider the scenario of moving through the solar system. When we are a trillion human beings we will have thousands of Einsteins and thousands of Mozarts and a need for unlimited energy resources for all our practical purposes. This is the world I want my grandchildren to live in. In any case, I think that in this time frame we will transfer all heavy industries into space and Earth will become a residential area where only light industry will operate. It will be a beautiful planet.
Döpfner: Last week we had a guest with Bill Gates and he told us, ironically, that he has such a ridiculous amount of money that it's impossible to find proper ways to spend that money sensibly and do good. What does money mean to you, as you are the first person in history to have a 12-figure net worth.
Bezos: The only way I see to share this great wealth is to convert it into space travel. Blue Origin is expensive enough to need that fortune. I'm liquidating about 1 billion a year of Amazon stock to fund Blue Origin. And I intend to continue doing that for a long time. I'm very lucky to hear about Blue Origin's mission which I think is incredibly important to civilization in the long run. And I'm going to use my Amazon finance lottery winnings to fund it.
Safe travels Jeff Bezos!
