The Everything Store

In 1994, Jeff Bezos had an enviable job in New York at an investment firm called D.E. Shaw. That's where he ran into a statistic that changed everything: the internet was growing at a pace of thousands of percent a year. For someone used to calculating risk and return all day long, that number screamed opportunity.

He made a list of products that could be sold online: books, records, clothing. Books won because there are millions of titles published in the world, more than any physical bookstore can stock. Bezos quit and told his boss about the plan, and the boss tried to talk him into staying. It didn't work.

The scene that became famous: Bezos and MacKenzie, his wife at the time, drove from New York to Seattle, and in the passenger seat he typed up the business plan on a laptop while she drove much of the way. Seattle was chosen because it was near a book distributor and had tech talent available, thanks to Microsoft. The company was born in a rented garage, literally.

The name Amazon came after earlier attempts, including an idea called Cadabra, which sounded too much like cadaver over the phone. Amazon won because it evokes the world's largest river, suggests a gigantic catalog, and starts with A, which helped it show up first in alphabetical lists.

Books were the perfect product to test the model: cheap to package, easy to ship by mail, with a huge catalog that no physical store could stock in full. Bezos bought from the big distributors and shipped from his own garage in the first months, packing order after order.

Growth was so fast that the company was constantly running out of stock and overloading its systems. Before long, the online bookstore became an ever bigger storefront: records, movies, toys, electronics. The idea of becoming the store that sells everything was in the plan from the start, and books were just the front door.

Bezos had a thesis that was unusual for the time: growing fast mattered more than turning a profit soon. While competitors worried about getting their books into the black, Amazon reinvested everything in warehouses, technology and low prices, even while operating in the red year after year.

Wall Street bought the idea for a while. Amazon's stock soared at its 1997 IPO and kept rising even without profit, because investors bet that whoever claimed space on the internet first would dominate the market later. Bezos defended that logic in his letters to shareholders.

The problem is that this bet depended on cheap money being available forever, and that didn't last. The company kept buying stakes in other dot-coms, opening category after category. The size of the bet only became clear when the wind changed direction.