The Everything Store: Jeff Bezos and the Age of Amazon (29 page)

Amazon appealed the settlement but lost and was required to pay $51 million to its former partner. The dispute with Toys “R” Us would become exhibit A in the argument that Amazon was so fixated on catering to its customers and on the mechanics of its own business that the corporation was often hostile to the large companies it partnered with. (At the same time as the Toys “R” Us suit, another partnership, with travel site Expedia, also dissolved in litigation. That matter was settled out of court.)

With the toy business now in transition after the dissolution of the agreement with Toys “R” Us, the hard-lines retail division was cast into further disarray. Part of the problem was that categories like electronics and jewelry were not yet profitable but were growing faster than the older media businesses, which dragged down the company’s finances. Bezos felt he needed to give the issue specific attention, and so in late 2004, he hired Kal Raman, the former Drugstore.com executive who had played a supporting role in the employee poaching that had led to the Walmart lawsuit in 1998. Overnight, Bezos cleaved in two the domain of Diego Piacentini, then the senior vice president for worldwide retail, and he handed hard lines over to Raman. Bezos announced the move on a Tuesday in an internal e-mail to the company. Almost everyone from that time says the message was a shock not only to them but also to Piacentini (though Piacentini insists that he knew about the change before the e-mail went out).

Raman was a native of a small village in southern India. His father had died when he was fifteen, plunging his family into poverty. He bootstrapped his way to a degree in electrical engineering, then to a
job at Tata Consulting Engineers in Mumbai, and then to a consultant gig at Walmart in Texas, where he climbed the ranks of its IT department and met Rick Dalzell.
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Raman was whip-smart, a tireless worker, and he had a reputation as an exceedingly demanding manager. He also had some memorable habits, including chewing an Indian betel leaf called pan during meetings and spitting into the garbage pails. Diane Lye, who ran Amazon’s data warehouse at the time and reported to Raman, sums it up this way: “Kal was a screamer.”

Applying his experience from Walmart, Raman pushed to build systems that finally realized Bezos’s vision of Amazon as a company with data at its heart. His groups created automated tools that allowed buyers to order merchandise based on dozens of variables such as seasonal trends, past purchasing behaviors, and how many customers were searching for a particular product at certain times. Raman’s teams also improved the software for pricing bots, which were automated programs that crawled the Web, spied on competitors’ prices, and then adjusted Amazon’s prices accordingly, ensuring that Bezos’s adamant demand that the company always match the lowest price anywhere, offline or online, would be met.

Buyers were held strictly accountable for keeping their products in stock and their prices competitive. If they somehow failed to deliver—if their shelves were suddenly empty or if Amazon’s prices were higher than a rival’s—then “Kal was going to personally hunt you down and kill you,” says Diane Lye, who worked for Raman for eighteen months. “There was so much fighting and yelling at each other. The technology was broken all the time and because the technology was broken, the data was often wrong. We would bring it to Jeff Bezos and it was all contradictory and he would be yelling and screaming at us. Oh, it was horrible.”

Raman spoke fast and had a thick accent, and his malapropisms, dubbed Kalisms, were legendary. “You all must be smoking cracks!” he yelled. Or “Can I have some of what you’re drinking so I can feel good about your business too?” He lasted at Amazon less than two years, but people at the company still talk about him.

“Kal was brutal,” says Jason Goldberger, a retail manager who
worked for Raman. “He’s like out of a movie. The year after Katrina, I took over the home-improvement business, and he could not understand why generator business had fallen [compared to the increase that had accompanied the storm]. He’s such a driven personality.”

The turbulence caused by all these changes added to the overall dysfunction gripping Amazon at the time. The S Team was beset by a variety of internecine rivalries, perhaps typical for a large company. Raman and Piacentini, uncomfortably splitting ownership of the retail business, did not get along. Raman also battled with Jeff Wilke. At one point, Wilke heard that Raman had spoken negatively about the fulfillment team and he confronted him in a large meeting. “I heard there’s something you want to say to me,” Wilke said. “Do you want to say it in front of all these people?” Onlookers thought they might come to blows. In addition, Kathy Savitt, the vice president of communications, didn’t get along with Piacentini, and Jason Kilar, who had fully imbibed Bezos’s principles and mannerisms, had committed to run the video site Hulu but stuck around while he gave Amazon months to find his replacement.

Bezos handled it all poorly; it was as if the personal dramas were happening on a different dimensional plane that he couldn’t or didn’t want to access. As a result, the S Team, according to several of its members, became a highly combustible forum, a group in which everyone felt the need to be outspoken and curry favor with the boss and where political disputes were allowed to fester.

One of the biggest of those disputes was between Udi Manber and another technical leader of the company, Jeff Holden—Bezos’s former colleague at D. E. Shaw, the onetime teenage hacker who had dubbed himself the Nova.

Holden had been at Amazon longer than anyone else on the management team and had the closest personal relationship with Bezos. If members of the S Team were planets revolving around the sun, then Holden was Mercury, occupying a privileged orbit and drawing a fair amount of criticism, partly based on jealousy. Now in his midthirties, Holden remained a fast talker and a prodigious
diet soda and Frappuccino drinker who always paced intensely during product meetings. Like Bezos, he was an aggressive manager who wanted to see results fast.

As senior vice president of worldwide discovery, Holden oversaw more than five hundred employees in Personalization, Automated Merchandising, Associates, E-Mail Marketing—and the department in charge of the search engine. It had been partly his idea to have Manber return to Palo Alto and run A9. But after a while, Holden began to feel that Manber’s group was too absorbed with the abstract challenges of general search and wasn’t focused enough on the practicalities of running the search for the Amazon website and solving nagging problems, such as latency, or the amount of time it took for searches on Amazon.com to generate results. The problem was that Holden retained ownership of the search experience on the website while Manber held responsibility for the search technology; they were basically dependent on each other.

Eventually, after growing increasingly frustrated, Holden concluded the situation was unworkable and, with an engineer named Darren Vengroff, started his own secretive effort in Seattle to rebuild Amazon’s search engine using the open-source tools Lucene and Solr. After a few months, Holden demonstrated the prototype to Bezos, who agreed to let them test it. Holden told Bezos he wanted to develop the Solr-based engine further and, if things went well, move search back to Seattle. Bezos said he’d think about it and later ran the proposal by Manber, who felt it was a sneak attack on his turf.

Now everyone was in a difficult spot. Bezos came back and told Holden and Manber to form a joint team to evaluate the new approach. There are various versions of what happened next, but the bottom line is that Manber and Holden didn’t like each other and couldn’t work well together. After the evaluation period ended, Bezos decided that search should remain the purview of A9. Holden was crestfallen. He argued that his organization had spearheaded the project and was doing the hard work to fix the persistent search
problems on the site. Bezos pointed out that those were emotional concerns, not logical ones.

Feeling that Bezos had chosen Manber over him, Holden planned his departure from Amazon. With Vengroff, he would start a mobile search company called Pelago (which Groupon later acquired). Though this was a difficult time in their relationship, Holden and Bezos remained friends, and Bezos invested in Pelago. But when Holden left, Bezos lost one of his oldest friends at the company and one of Amazon’s most versatile innovators. Fortunately, he still had Udi Manber.

And then Manber decided to leave.

Manber said he didn’t like running a remote office and felt isolated from the decision-making in Seattle. Privately, he was annoyed that Bezos had allowed Holden’s rival search effort to take root in Seattle. He told Bezos and Rick Dalzell that he was considering going back to academia to do research in the science of memory. Bezos pleaded with Manber to stay on as what he called an Amazon Fellow. Manber said he would consider it.

Meanwhile, Urs Hölzle, one of Google’s first employees and its vice president of engineering, wanted to relinquish his oversight of search to focus on Google’s infrastructure. Hölzle invited Udi Manber to have dinner with him and surprised the Israeli scientist by asking if he was interested in replacing him as Google’s head of search engineering. Manber demurred at first, saying he was planning on getting out of the field. Then a few weeks later he changed his mind and decided that he might as well hear Google’s offer. Hölzle arranged a dinner that January with Larry Page in a private room of Il Fornaio, a restaurant in downtown Palo Alto. Page and Manber made sure to enter the restaurant separately. In the middle of dinner, Sergey Brin joined them. Google CEO Eric Schmidt showed up for dessert. It was an impressive full-court press.

By February, Manber had received an extraordinarily lucrative offer to run the search team at Google, and he decided to take it. Money aside, for any search engineer at the time, going to Google
meant stepping onto the biggest playing field in the world and joining a championship-caliber team. For its part, Google had snagged one of the brightest minds in search and simultaneously decapitated the efforts of a competitor with one swift stroke.

Now Manber had to inform Bezos, right in the midst of so many other defections to Google. He delivered the news over the phone. Amazon employees would describe what happened next as one of Bezos’s all-time biggest nutters. Manber anticipated that Bezos would be disappointed and perhaps try to persuade him again to stay. “That’s what I had expected Jeff to do, but that’s not what he did,” Manber says. “He was clearly angry and he was dumping on me. I don’t recall now his exact words, but it was something like ‘No! No! No! You can’t do that!’ He was blaming me almost like I was a kid who did something very wrong.”

In that moment, Manber felt like he had lost a friend. He pleaded with Bezos that an engineer with his background and interests could not possibly decline the opportunity to run search at Google. Bezos viewed it as a personal betrayal. This time, he couldn’t brush away an employee’s departure easily. “He was not mincing words, and I felt horrible. He was always very good to me, the closest to a mentor that I ever had, and I was letting him down,” Manber says. “I don’t know if he ever forgave me, probably not, but I didn’t really have a rational choice. I [had] already decided to leave Amazon, so it was between moving to the top of my field or starting from scratch in a new field.”

A few days later Bezos calmed down and tried to get Manber to change his mind, but it was too late. Bezos had now lost his two closest colleagues and technical leaders, and just at the time that Amazon’s attempt to break out of retail and embrace an identity as a technology company was faltering. The general search engine at A9.com was a failure and was shut down a year after Manber left. Block View would be overtaken by Google’s Street View. Search Inside the Book was interesting but hardly a game changer, and the world’s best engineers were fleeing a poisonous Amazon culture
and flocking to Google and other hot Internet companies in Silicon Valley. If Bezos was going to prove to the world that Amazon was indeed the technology company that he so desperately claimed it to be, he needed a dramatic breakthrough.

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In early 2002, Web evangelist and computer book publisher Tim O’Reilly flew to Seattle to bend Jeff Bezos’s ear. O’Reilly, who would go on to help create a popular series of Web 2.0 technology conferences and the traveling festival for hardware hobbyists called the Maker Faire, thought that Amazon was acting too much like an isolated Web destination. He wanted the company to make available its sales data that could, for example, allow him and other book publishers to track various trends and help them decide what to publish next.
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Bezos hadn’t considered providing a broad range of such services to the outside world and initially replied that he didn’t see how that would benefit Amazon.

Over the years, O’Reilly and Bezos would have a friendly but sometimes adversarial relationship. In February of 2000, O’Reilly had organized an online protest against Amazon when it refused to allow other Internet retailers to use its patented 1-Click system. (Bezos cleverly blunted the campaign by joining in O’Reilly’s criticism of the patent system and supporting his idea for an independent company called BountyQuest, which, until it folded, allowed companies to post rewards for documents that undermined patents.
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) O’Reilly also wrote a blog post urging fans of local bookstores to make their purchases there even if prices were cheaper online, arguing that those merchants would otherwise go away. That missive was taped to the cash registers of more than a few independent bookstores around the country.

But on this particular visit to Bezos in 2002, O’Reilly had a cogent case to make, and Bezos listened. The publisher showed Bezos Amarank, a sophisticated tool his company had created that visited the Amazon website every few hours and copied the rankings of
O’Reilly Media books and the books of its competitors. It was a clunky process that relied on a primitive technique called screen scraping, and O’Reilly suggested that Amazon should develop a series of online tools called application programming interfaces, or APIs, that allowed third parties to easily harvest data about its prices, products, and sales rankings. O’Reilly spoke ambitiously about parceling out entire sectors of the Amazon store and allowing other websites to build on top of them. “Companies need to think not just what they can get for themselves from new technologies but how they can enable others,” he said.
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