This conversation appears in Newsweek's "Interview" issue. To read more of the magazine's interviews with the year's biggest newsmakers, go to Newsweek.com.
No one has been more surprised by the success of the Kindle than Amazon CEO Jeff Bezos. The electronic book reader has become the online retailer's best-selling product. Bezos spoke to Newsweek's Daniel Lyons about the device, how the Apple tablet might affect it, and the next phase of digital distribution. Here are excerpts from their talk:
Lyons:Amazon had an amazing year despite the bad economy. How did you do it?
Bezos: It is the basics. It is focusing on selection, low prices, and reliable, convenient, fast delivery. It's the cumulative effect of having this approach for 14 years. I always tell people, if we have a good quarter it's because of the work we did three, four, and five years ago. It's not because we did a good job this quarter.
Lyons:Amazon started off as a retailer. Now you're also selling computing services, and you're in the consumer-electronics business with the Kindle. How do you define what Amazon is today?
Bezos: We start with the customer and we work backward. We learn whatever skills we need to service the customer. We build whatever technology we need to service the customer. The second thing is, we are inventors, so you won't see us focusing on "me too" areas. We like to go down unexplored alleys and see what's at the end. Sometimes they're dead ends. Sometimes they open up into broad avenues and we find something really exciting. And then the third thing is, we're willing to be long-term-oriented, which I think is one of the rarest characteristics. If you look at the corporate world, a genuine focus on the long term is not that common. But a lot of the most important things we've done have taken a long time.
Lyons:You've talked about Kindle being this example of working backward from the customer. Can you explain that?
Bezos: There are two ways that companies can extend what they're doing. One is they can take an inventory of their skills and competencies, and then they can say, "OK, with this set of skills and competencies, what else can we do?" And that's a very useful technique that all companies should use. But there's a second method, which takes a longer-term orientation. It is to say, rather than ask what are we good at and what else can we do with that skill, you ask, who are our customers? What do they need? And then you say we're going to give that to them regardless of whether we currently have the skills to do so, and we will learn those skills no matter how long it takes. Kindle is a great example of that. It's been on the market for two years, but we worked on it for three years in earnest before that. We talked about it for a year before that. We had to go hire people to build a hardware-engineering team to build the device. We had to acquire new skills. There's a tendency, I think, for executives to think that the right course of action is to stick to the knitting—stick with what you're good at. That may be a generally good rule, but the problem is the world changes out from under you if you're not constantly adding to your skill set.
Lyons:Have you been surprised by the Kindle's success?
Bezos: Astonished. Two years ago, none of us expected what has happened so far. It is [our] No. 1 bestselling product. It's the No. 1 most-wished-for product as measured by people putting it on their wish list. It's the No. 1 most-gifted item on Amazon. And I'm not just talking in electronics—that's true across all product categories. We've spent years working on our physical books business, and today, for titles that have a Kindle edition, Kindle book sales are 48 percent of the physical sales. That's up from 35 percent in May. The business is growing very quickly. This is not just a business for us. There is missionary zeal. We feel like Kindle is bigger than we are.
Lyons:Steve Jobs once predicted Kindle would fail because "people don't read anymore."
Bezos: Well, I believe that reading deserves a dedicated device. For people who are readers, reading is important to them. And you don't want to read for three hours on a backlit LCD screen. It's great for short form. This is a really important point—that we humans co-evolve with our tools. We change the tools, and the tools change us, and that cycle repeats. For the last 20 years network-connected tools like smart phones, BlackBerrys, and desktop PCs connected to the Internet have been shifting us as a civilization toward short-form reading. I love my BlackBerry. It's great for reading e-mails. Same thing with my desktop computer. I'm very happy to read short articles, blog posts. But I don't want to read a 300-page book on my computer. And so what Kindle is doing is it's bringing the convenience of wireless connectivity to long form. I believe that we learn different things from long form than we learn from short form. Both are important. If you read The Remains of the Day, which is one of my favorite books, you can't help but come away and think, I just spent 10 hours living an alternate life and I learned something about life and about regret. You can't do that in a blog post.