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<ul class="summary-list"><li>A <a href="https://cup.columbia.edu/book/flywheels/9780231199544">new book</a> reveals the rules <keyword id="11893181" type="UNKNOWN" weightage="60" keywordseo="amazon" source="Orion">Amazon</keyword> founder <keyword id="11908741" type="UNKNOWN" weightage="60" keywordseo="jeff-bezos" source="Orion">Jeff Bezos</keyword> used to make the company a success.</li><li><keyword id="12525656" type="UNKNOWN" weightage="60" keywordseo="tom-alberg" source="Orion">Tom Alberg</keyword>, an ex-Amazon board member, wrote the book, which detailed Bezos' <a href="https://www.businessinsider.com/jeff-bezos-says-always-day-1-amazon-philosophy-2019-12">"Day 1" philosophy</a>.</li></ul><p><a href="https://www.businessinsider.com/jeff-bezos-net-worth-life-spending-2018-8?r=US&amp;IR=T">Jeff Bezos</a> led Amazon to mammoth success by using a particular set of principles when he needed to make important decisions for the company. The principles were discussed in a new book, <a href="https://cup.columbia.edu/book/flywheels/9780231199544">"Flywheels: How Cities Are Creating Their Own Futures,"</a> by <a href="https://www.businessinsider.com/jeff-bezos-tom-alberg-amazon-2019-11?r=US&amp;IR=T">Tom Alberg</a>, a former board member at Amazon.  </p><p>Alberg – now a managing director of Madrona Venture Group, a Seattle-based venture firm he founded – was an early investor in Amazon.</p><p>Back in 2019, Alberg said no one wanted to invest in the company's first funding round because they expected what was then a fledgling online books startup to be "murdered" by Barnes &amp; Noble, <a href="https://www.businessinsider.com/jeff-bezos-tom-alberg-amazon-2019-11?r=US&amp;IR=T">Insider's Ashley Stewart reported</a>.</p><p>Bezos ultimately convinced Alberg to invest because he had a thorough, focused business plan and strong initial results, Alberg wrote in the book. </p><p>Now that it's a trillion-dollar company, Alberg said he's often asked: "Why is Amazon so successful?"</p><p>Drawing on his experience of watching the <keyword id="6358815" type="UNKNOWN" weightage="60" keywordseo="tech" source="Orion">tech</keyword> mogul make decisions, Alberg set out to explain the principles Bezos stuck to at work. </p><p>"The most important is customer obsession," Alberg wrote in the book. He added that, according to Bezos, too many companies focus on their competitors as opposed to their customers.</p><p>As Bezos explained to a Congressional Committee, "customers are always beautifully, wonderfully dissatisfied. A constant desire to delight customers drives us to constantly invent on their behalf," Alberg wrote. Bezos sometimes made decisions that could harm Amazon's bottom line but benefit the customer, he added.</p><p>The second principle is "constant invention and innovation." Per Alberg, invention is closely related to customer satisfaction. "Customer satisfaction and innovation are powerful touchstones when making decisions," he wrote.</p><p>Making decisions is much easier when you ask "what is the best decision for the customer?" and "is there a way to invent our way to a solution?" Alberg wrote. </p><p>The third principle championed by Bezos is operational excellence, according to Alberg. Some examples include "two-pizza teams," one-click shopping, single-threaded leaders, and working backward. </p><p>The "two-pizza rule" is one of Bezos' more creative strategies, which is aimed at not losing an entire day to unnecessary meetings. It's potentially a key to the founder's success, <a href="https://www.businessinsider.com/amazon-jeff-bezos-two-pizza-rule-productive-meetings-2017-7?r=US&amp;IR=T">Insider's Áine Cain and Shana Lebowitz reported</a>.</p><p>So, how does it work? The more people you pack into the meeting, the less productive the meeting will likely be. The idea is that most people will end up agreeing with each other rather than voicing their own opinions and ideas. The solution? Never have a meeting where two pizzas couldn't feed the entire group.</p><p>Thinking long-term underscores the fourth principle for Bezos' decision-making process at Amazon, according to Alberg. That can range from launching a new business or investing in new technologies. One example Alberg notes is Bezos' early adoption of AI. </p><p>"When businesses were just beginning to recognize the possibilities of machine learning and <a href="https://www.businessinsider.com/amazon-delivery-driver-camera-ai-bezos-2021-3?r=US&amp;IR=T">AI</a>, Jeff told the board that he intended to use AI in every part of the business," he wrote. Bezos then began to hire AI experts and train his existing engineers to use it. </p><p>Amazon subsequently created and <a href="https://www.businessinsider.com/amazon-microsoft-and-google-cloud-artificial-intelligence-compared-2021-9?r=US&amp;IR=T">made AI tools available to customers on Amazon Web Services </a>— one of the company's subsidiaries — that they could use in their business to even compete against Amazon, according to Alberg.</p><p>The fifth principle, and perhaps the overriding one, is his "abiding optimism of the future and how we are only in Day 1," Alberg wrote. Bezos' <a href="https://www.businessinsider.com/jeff-bezos-says-always-day-1-amazon-philosophy-2019-12?r=US&amp;IR=T">"Day 1" philosophy</a> is based on the broader idea that although the internet and Amazon may seem mature and in successive phases to many, Bezos believes, we are still at the beginning. </p><p>"It is his ultimate expression of optimism about what the future will bring," Alberg wrote. </p><p>These principles are "no secret," Alberg added. "But you have to live by them all of the time, and most businesses are unwilling or unable to do so."</p>

Jeff Bezos made decisions at Amazon based on 5 key principles, according to a former board member

<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Reuters</span></p><p class="caption">Amazon CEO Jeff Bezos</p></div><p></p></div></div></p><ul class="summary-list"><li>Jeff Bezos had trouble raising the first $1 million for Amazon because everyone expected it would be "murdered" by Barnes and Noble, says early investor and longtime board member Tom Alberg.</li><li>Alberg, who retired from Amazon's board in May after more than two decades with the company, took a chance.</li><li>Bezos wasn't "the smartest guy" he'd every met, nor was it a sure thing Amazon would be "wildly successful."</li><li>But Bezos had a thorough, focused business plan and strong initial results. </li><li><a href="https://www.businessinsider.com/prime">Click here to read more stories on BI Prime</a></li></ul><p>No one wanted to invest in Amazon's first funding round because they expected the fledging online books startup to be "murdered" by Barnes &amp; Noble, early investor and longtime board member Tom Alberg said.</p><p>It took Bezos nearly all of 1995 to raise his first $1 million, right when he launched the company out of a garage in the Seattle suburb of Bellevue.</p><p>Alberg - now a managing director of Madrona Venture Group, the Seattle-based venture firm he founded around that time - took a chance on Bezos anyway.</p><p>"He was obviously smart but, you know, I have to honestly say - you meet a lot of smart people doing what we do. And I didn't come out of the meeting and say, 'Well this is the smartest guy I ever met. It's obviously going to be wildly successful.'"</p><p>Bezos ultimately convinced Alberg to invest because "he had really investigated very thoroughly," Alberg said. "He had a very focused kind of plan, and including breaking even a couple of years."</p><p>Bezos had invested some of his own money and money from his parents into the startup and had trouble convincing investors to join in. It took Bezos from January to December 1995 to raise $1 million, Alberg said. At the time, the internet was still a largely unproven market, even in the immediate aftermath of the IPO of early web-browsing pioneer Netscape.</p><p>Barnes &amp; Noble at that time was known as the big retail chain driving independent book stores out of business. Investors were still warming up to the internet and they were skeptical of Bezos' decision to build Amazon as a bookstore. </p><p>"The real feedback he was getting was, 'You're going to be murdered by Barnes and Noble once they enter the internet," he said.</p><p>Alberg said he was a big believer in the internet, but that it still took him three or four months before deciding to invest - and he did so only when Bezos said he was close to raising the full round.</p><p>During that time, <a href="https://www.businessinsider.com/amazon-history-in-photos-2015-10">Bezos launched Amazon's website and immediately started selling books all over the country</a> - showing Alberg that Amazon had an immense reach that allowed it to play on a completely different scale than brick-and-mortar stores like Barnes &amp; Noble.</p><p>"It showed you didn't have to have 10 percent of the Seattle market, you had to have one-one hundredth of the United States and that would be the equivalent so you could actually grow quickly and generate revenue," he said.</p><p>The risk paid off. By the time Alberg retired from Amazon's board this May, his stake was worth an estimated $28.9 million.</p><p>Amazon ultimately raised just $8 million more through a Series A round with Kleiner Perkins ahead of the company's May 1997 IPO, a modest offering in which the company raised just $54 million at a market value of $438 million. The company is worth more than $864 billion at the time of this writing.</p><p>Barnes &amp; Noble, meanwhile, was <a href="https://markets.businessinsider.com/news/stocks/barnes-and-noble-stock-price-elliott-management-acquiring-bookseller-2019-6-1028263629">acquired earlier this year by hedge fund Elliott Management for $683 million</a>, including debt.</p><p class="tagline"><a href="https://www.businessinsider.com/intelligence/40-big-tech-predictions-for-2019?IR=T&amp;itm_source=businessinsider&amp;itm_medium=ctgr_bii&amp;itm_term=ctgr_leadgen&amp;itm_content=amazon&amp;itm_campaign=40-big-tech-predictions-for-2019-2"></a></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="https://www.businessinsider.com/safest-walk-ice-penguin-2017-2">The safest way to walk on ice is to impersonate a penguin</a></h3>        <div>                    </div>    </div>

Here's why early investor Tom Alberg took a chance on Amazon even though Jeff Bezos wasn't 'the smartest guy I'd ever met' and everybody thought it'd be 'murdered' by Barnes & Noble

<ul class="summary-list"><li>While best known as the headquarters of Amazon and Microsoft, experts believe <a href="https://www.geekwire.com/2019/analysis-seattle-startup-ecosystem-poised-unprecedented-acceleration-company-creation/">the Seattle area is on the precipice of a major startup boom</a> because of a confluence of factors including a critical mass of talent, and the increasing availability of venture capital and angel investments.</li><li>Business Insider compiled a list of the Seattle area's top enterprise startups based on nominations from industry leaders and venture capitalists.</li><li>Eighteen enterprise startups - meaning private companies that haven't sold a majority stakes - made the cut.</li><li><a href="https://www.businessinsider.com/prime">Click here to read more stories from BI Prime</a></li></ul><p>The Seattle area is known for Amazon and Microsoft - except when the companies are mistakenly referred to as "Silicon Valley giants" - but the region also punches above its weight when it comes to enterprise startups.</p><p>While the Bay Area is unlikely to be knocked off its perch as the top tech hub in the world, early Amazon investor and cofounder of Seattle's most prolific venture firm Madrona Venture Group Tom Alberg said, Seattle is a clear No. 2.</p><p>"You've got Amazon and Microsoft - two of the five most valuable companies in the world," Alberg said. "The other three are in the valley. There are none in New York - I love this - none in Chicago, none in L.A., none in Austin."</p><p>The other three - Apple, Google, Facebook - have huge offices in the Seattle area. Facebook's largest engineering outpost is here, and <a href="https://www.businessinsider.com/facebook-expands-seattle-largest-engineering-outpost-2019-11">the company is quietly laying the foundation for its own HQ2-style expansion</a> by leasing enough office space for 20,000 employees in the region.</p><p>Since Amazon went public in 1994, 31 startups founded in Seattle have reached valuations in excess of $1 billion, according to <a href="http://thedl.danielxli.com/issues/the-dl-an-inside-view-into-pacific-northwest-tech-190797">an analysis</a> from a Madrona Venture Group venture capitalist. </p><p>The Seattle area is on the precipice of a major startup boom because of a confluence of factors including a critical mass of talent, increasing availability of venture capital and angel investments, and STEM education through the University of Washington, as <a href="https://www.geekwire.com/2019/analysis-seattle-startup-ecosystem-poised-unprecedented-acceleration-company-creation/">two artificial intelligence experts wrote in a recent guest post for Seattle-based tech news site GeekWire</a>.</p><p>Business Insider compiled the following list of the Seattle area's top enterprise startups based on nominations from industry leaders and venture capitalists. Here are the startups to watch in 2020:</p><p class="tagline"><a href="https://www.businessinsider.com/intelligence/40-big-tech-predictions-for-2019?IR=T&amp;itm_source=businessinsider&amp;itm_medium=ctgr_bii&amp;itm_term=ctgr_leadgen&amp;itm_content=amazon&amp;itm_campaign=40-big-tech-predictions-for-2019-2"></a></p>

Investors say these are the 18 hottest enterprise startups from Seattle's booming tech scene to watch in 2020

<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>AP</span></p><p class="caption">This May 13, 2014 file photo shows a row of Google self-driving Lexus cars at a Google event outside the Computer History Museum in Mountain View, Calif.</p></div><p></p></div></div></p><p>Two tech veterans in Seattle have a bold plan to take over a 150 mile stretch of Interstate 5 between Seattle and Vancouver with self-driving cars. </p><p>According to a <a href="http://www.bloomberg.com/news/articles/2016-09-19/seattle-tech-vets-to-propose-driverless-stretch-of-interstate-5" target="_blank">Bloomberg report</a>, Tom Alberg, who is the co-founder of Madrona Venture Group and an Amazon board member, and Craig Mundie, a former Microsoft executive, plan to reveal exact details about their plan at a conference in Vancouver on Monday. </p><p>Alberg and Mundie told Bloomberg that they envision the interstate transformation happening in phases and that it would take about ten years to move completely to driverless cars. </p><p>The tech vets propose that self-driving cars and trucks should first be integrated into the carpool lanes. Eventually, though, they envision driverless cars taking over the interstate during peak hours, with human drivers only being allowed to operate vehicles between 8:00 pm to 4:00 am on weekdays and weekends. </p><p>While Alberg's and Mundie's plan may sound far-fetched, it's actually more feasible than introducing self-driving cars on city streets first. This is because driving conditions on the highway are easier for autonomous systems to process than driving conditions on city streets.</p><p>Simply put, there are less obstacles to avoid on the highway than there are on city streets. This is the same reason why semi-autonomous systems, like Tesla's Autopilot, are only meant for use while driving on highways. </p><p>It's worth noting, though, that Alberg's and Mundie's plan is nowhere being put in place. Vancouver and Seattle authorities would have to get on board first and form a team to hammer out all of the legal details. However, it wouldn't be surprising if Seattle did make moves to get into the self-driving car race soon.</p><p>A number of US cities and states are working to win over tech and auto companies working on driverless cars. </p><p>Beverly Hills, for example, is already working to develop the <a href="http://www.techinsider.io/beverly-hills-to-get-driverless-car-fleet-2016-4" target="_blank">infrastructure to support self-driving cars</a> and is also working with companies developing the tech to figure out the best way to roll out a fleet of autonomous vehicles into the city's public <keyword id="34991" type="ORGANIZATION" weightage="60" keywordseo="transportation">transportation</keyword> system. </p><p>Michigan state is even considering legislation that would <a href="http://www.businessinsider.com/michigan-bill-autonomous-cars-2016-8" target="_blank">allow driverless cars on the road with no human operator</a>. This is significant because most self-driving test cars on the road today must have a human in the driver's seat, even though the car is doing the driving. </p><p>For example, a human operator is still required to sit in the front seat of Google's autonomous cars while it's operating on public roads. But if the Michigan bill passes, these vehicles could operate in the state without a human present at all, making these cars truly driverless. </p><p>Considering automakers and car makers are investing a lot of money into developing autonomous vehicles, it makes sense they would want to work in cities and states with progressive regulations in place. </p><p><a href="http://www.bloomberg.com/news/articles/2016-09-19/seattle-tech-vets-to-propose-driverless-stretch-of-interstate-5" target="_blank">Alberg told Bloomberg</a> that his plan could help put Seattle on the map for driverless cars and help attract investments from large automakers and tech giants alike. </p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/uber-self-driving-taxis-test-drive-2016-9">We got a ride in a self-driving Uber - here's what it was like</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="l4bjh2NTE6wNgV21PA-L2La3Bl-jWw39" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

Two Seattle tech vets have a bold plan to block off 150 miles of interstate for self-driving cars

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span>Mike Segar/Reuters</span></p><p class="caption">Amazon Founder and CEO Jeff Bezos</p></div><p></p></div></div>Amazon founder Jeff Bezos has made a lot of money for people who bet on his company over the years.</p><p>But Bezos told an amazing story in San Francisco on Friday about the first brave souls who invested in Amazon two decades ago.</p><p>According to Bezos, the first 20 or so outside investors in Amazon put in around $50,000 apiece for a stake of a little less than 1% of the company at the time. If those early investors had held on to their entire stakes, and those stakes had never been diluted by later investors, they would be $3.5 billion today - a return of 70,000x.</p><p>Bezos also said that previous to that, his parents both chipped in a significant portion of their life savings, which worked out very well for them. "It couldn't happen to two nicer people," he said on stage at the Vanity Fair New Establishment Summit.</p><p>He explained that the venture capital scene was very different in 1994 when he first started raising money for Amazon.com, which at the time was positioned as a mere online bookstore.</p><p>About 20 to 22 investors put in small checks of about $50,000 apiece, he said, for a total seed stage investment of around $1 million. In exchange, those combined investors got about 20% of the company. Most of those investments happened through 1995 and 1996.</p><p>Richard Brandt's book about Amazon, "<a href="https://www.amazon.com/One-Click-Jeff-Bezos-Amazon-com/dp/1591845858">One Click</a>," offers a few more details:</p><p style="padding-left: 30px;">"A Seattle-based stock broker named Eric Dillon was interested in investing, but thought the valuation Bezos had put on the company - $6 million - was pulled out of thin air, until Bezos sat down with him to show how much other Internet companies were trying to raise. Dillon talked Bezos down to a $5 million valuation and put in some money. A Seattle businessman named Tom Alberg was impressed with Bezos's projection that Amazon could turn over the equivalent of an average bookstore's inventory 20 times a year, compared with 2.7 times for most bookstores - with details to back up the claim.</p><p style="padding-left: 30px;">"In the end [Nick] Hanauer managed to get some commitments by making the first investment himself. Others followed, and by the end of the year another twenty investors kicked in money, most of them around $30,000 apiece. Bezos raised $981,000."</p><p>Later, in June 1996, Amazon raised an $8 million Series A from Kleiner Perkins, and that was its only VC investment before going public.</p><p>When Amazon went public in May 1997, the only one of those three early investors whose name was on the S1 was Tom Alberg, who is still director of the company, as well as managing director of VC firm Madrona Ventures. He owned 195,000 shares at the time. Amazon has split its shares three times, all in 1999, so those shares today would be worth about $1.9 billion. </p><p class="tagline">Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/lisa-brennan-jobs-steve-jobs-daughter-2016-10">The story of Lisa Brennan-Jobs, the daughter Steve Jobs claimed wasn't his</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="RiZXk1eDosEkg3ZHQRbxeoPFcLvmNNoy" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

Jeff Bezos told what may be the best startup investment story ever

<p><div class="KonaFilter image-container display-table"><div><div class="image"></div></div></div></p><ul class="summary-list"><li>Calls to break up Big Tech have renewed speculation Amazon will spin off its multibillion-dollar cloud business Amazon Web Services into a separate company.</li><li>That idea has come up every so often for at least the last six years, but Amazon Web Services CEO Andy Jassy has repeatedly dismissed such a move as unnecessary.</li><li>The business case for a spinout largely hinges on the notion that some customers are reluctant to sign on with Amazon's cloud, given that they compete with the company in markets like retail. </li><li>AWS already runs largely independently, and has its own CEO and chief financial officer.</li><li>But a spinout would introduce new logistical and operational headaches as it had to staff up in fields like accounting and hire a new board of directors. That's not to mention that Amazon.com itself is hosted on Amazon Web Services, making the two difficult to separate. </li><li>Most experts say that the headaches aren't worth the upside, and that despite the rhetoric of antitrust crusaders like Sen. Elizabeth Warren (D-MA), Amazon and CEO Jeff Bezos aren't likely to give into political pressure.</li><li>NYU Professor Scott Galloway, who correctly predicted that Amazon would buy Whole Foods, takes the stance that a spinout is coming: "I predict by 2025, the most valuable company in the world will be AWS."</li><li>Amazon is slated to report earnings on Thursday after the bell. Wall Street is expecting the company to post revenues of $68.8 billion on earnings per share of $4.6, which would be a nearly 22 percent increase over the same period of 2018. </li><li><a href="https://www.businessinsider.com/prime?module=article&amp;area=summary">Click here for more BI Prime stories</a></li></ul><p>For years, Amazon has been asked the same question - will the retail giant spin off Amazon Web Services, its market-dominating cloud computing subsidiary, into a separate business?</p><p>First, the calls came from Wall Street, as many analysts and investors believed the growing cloud computing business would be worth more on its own than it is as a smaller piece of the Amazon empire.</p><p>Now, as Amazon faces heightened antitrust scrutiny and calls to break up Big Tech, the question has been raised again - and could be an issue this week, as Amazon reports earnings.</p><p>The company is slated to report quarterly earnings on Thursday after the bell. Wall Street is expecting Amazon to post earnings per share of $4.60 on revenues of $68.8 billion, which would be a nearly 22 percent increase over the same period of 2018.</p><p>AWS is typically a big profit driver for Amazon, but analysts at Bank of America say that Amazon Web Services revenue will likely see some kind of slowdown, in a note to clients cited by MarketWatch.</p><p>Most recently, a writer for The Atlantic who recently profiled Amazon CEO Jeff Bezos <a href="https://www.cnbc.com/2019/10/15/bezos-could-break-up-amazon-before-regulators-atlantic-writer-says.html">said last week he believes the forward-looking executive will spin off AWS</a> to preempt the rising tide of antitrust rhetoric coming from Washington, DC, and especially from Senator Elizabeth Warren (D-MA) amid her bid for the Democratic presidential nomination.</p><p>"Bezos, who is seeing around corners, is going to break up his own company," Franklin Foer told CNBC's Squawk Box. "AWS exists as its own fantastically profitable business. There's no reason that it needs to be connected to Amazon the e-retailer."</p><p>Scott Galloway, the NYU professor who predicted Amazon would buy Whole Foods, in December said he expects Amazon will make AWS a separate business to <a href="https://www.businessinsider.com/scott-galloway-amazon-will-spin-off-amazon-web-services-ignition-2018-12">placate regulators and achieve hundreds of millions of dollars more in market value</a>.</p><p>AWS is important for Amazon. Research firm Morningstar recently estimated AWS is worth more than $550 billion on its own - more than half of Amazon's $873 billion market cap, at the time of writing. AWS is also the most profitable part of Amazon's business. </p><p>At the same time, however, those expecting a spinoff shouldn't hold their breath. While Amazon Web Services is better poised than most other Amazon subsidiaries to stand on its own, both financially and operationally, most experts say that the company may just not have enough incentive to make such a dramatic move. Indeed, AWS CEO Andy Jassy has repeatedly said over the years that he doesn't see any advantages to splitting off from the Amazon mothership.</p><p>Amazon Web Services declined to comment for this story.</p><h2>Antitrust scrutiny</h2><p>The antitrust scrutiny of Amazon to date mainly revolves around the company's e-commerce business, where it is both a seller and a marketplace. The big question is whether Amazon unfairly uses data it collects from third-party sellers as a marketplace to gain an advantage as a seller that then competes with those sellers.</p><p>Spinning off AWS wouldn't directly address that concern, but it may help to relieve concerns about Amazon's size.</p><p>Senator Warren has promised that, if elected president, she would break up big technology companies including Amazon - but hasn't specifically singled AWS out as a target. Warren's campaign has not responded to a request about whether any of her plans include AWS. </p><p>Warren in March revealed a plan which would require Amazon to spin out its private label brand from the rest of the company. She also pledged to appoint regulators to reverse mergers, including Amazon's Whole Foods buy, Facebook's acquisition of Instagram and the sale of Waze to Google.</p><p>The potential use of AWS data in other parts of Amazon's business is the subject of scrutiny. The House Judiciary committee <a href="https://judiciary.house.gov/sites/democrats.judiciary.house.gov/files/documents/Amazon%20RFI%20-%20Signed.pdf">on Sept. 13 sent Amazon a letter</a> requesting information including on the use of AWS data by non-AWS teams or divisions, and whether Amazon has or plans any policies about how those teams and divisions can use AWS data.</p><p>Still, Amazon doesn't typically make business decisions based on political pressure, said Matt McIlwain, managing director at Madrona Venture Group, the Seattle-based venture firm founded by early Amazon investor and longtime board member Tom Alberg. McIlwain has worked closely with AWS over the years and meets regularly with the division's CEO Andy Jassy.</p><p>"Jeff has said for many years they are comfortable being misunderstood," McIlwain said. "My sense of the culture is that's not how Amazon makes decisions."</p><h2>How a spin-off would work</h2><p>Amazon Web Services already practically runs on its own. It's answerable to Amazon execs like CEO Jeff Bezos and CFO Brian Olsavsky, to be sure - but AWS has its own CEO, in the form of Jassy, and its own CFO, Sean Boyle.</p><p>That eliminates some, but not nearly all, of the operational hurdles that would come with creating an independent AWS. This hypothetical company would have to hire its own board of directors, not to mention that it would likely have to staff up in fields like accounting and legal, where it could previously lean on Amazon. </p><p>It's also unclear how many of Amazon's 650,000 employees (as of the end of 2018) work specifically for AWS, and how much office space the subsidiary takes up on its own. For a ballpark figure, over 45,000 LinkedIn users list AWS as their current employer, though those profiles aren't always accurate. </p><p>In America, AWS has dedicated offices in Seattle, San Francisco, New York and the Washington, DC area, according to the company's website, but it has workers elsewhere and in other Amazon offices, too. </p><p>The biggest challenge in such a split could be creating an operating agreement for Amazon to continue using AWS services, Morningstar analyst R.J. Hottovy said. The two sides of the business are more intertwined than people think because Amazon.com is actually hosted on AWS, he said, and making AWS an Amazon vendor would be tricky.</p><p>A spin-off is an unlikely event, Hottovy said, but "incrementally slightly more likely to happen now" as more people in government call for breaking up Amazon.</p><h2>The business case for a spin-off</h2><p>Spinning off AWS would be difficult, but not unheard of, Galloway - the NYU professor and marketing expert who famously predicted Amazon's Whole Foods acquisition - said. PayPal used to be the main payments provider for eBay and the companies figured out how to make it work when they split in 2015, he said. </p><p>"No doubt it would be a complex undertaking, but when the upside is tens or hundreds of millions of dollars, the incentive is present," Galloway said. "I predict by 2025, the most valuable company in the world will be AWS." </p><p>A major business case for such a spinout would be the elimination of perceived conflicts of interest between AWS and its customers, both current and future. A common refrain in the tech industry is that retailers, and anybody else who competes with Amazon, are reticent to sign on with AWS, given that the two are otherwise rivals. </p><p>Those concerns have proved a boon to competitors: Walmart in 2018, for example, signed a major cloud deal with Microsoft after reportedly telling technology vendors not to use AWS services if they want to partner with Walmart.  Microsoft CEO Satya Nadella at the time of the tie-up said the companies' rivalry with Amazon was <a href="https://www.wsj.com/articles/amazon-foes-walmart-and-microsoft-deepen-tech-partnership-1531800060">"absolutely core to" their partnership</a>.</p><h2>Time is a flat circle</h2><p>The idea of spinning off AWS has come up often throughout the years. Oppenheimer analyst Jason Helfstein may have been among the first when, in 2013, he said <a href="https://www.forbes.com/sites/ericsavitz/2013/02/12/will-amazon-spin-off-aws/#5b9266a58235">an AWS spin-off was "inevitable"</a> because potential AWS customers might compete with Amazon and not want to use the company's cloud service.</p><p>Helfstein has a different view now. </p><p>Back then, he said he felt AWS was more valuable than the market was giving it credit for, but Amazon has since helped solve that by changing the way it reports earnings. He also thought the potential customer conflicts would become too significant, but said, as of now, that doesn't seem to be the case.</p><p>Given the subsidiary's success, Helfstein said it's hard to say whether things would be any different if AWS spun out years ago, but that doing so would have put pressure on Amazon's balance sheet to find new funding sources for other parts of its business.</p><p>While AWS has struggled to pick up retailer clients because a lot of clients feel they're giving enough information to Amazon as it is, Hottovy, the Morningstar analyst, said, that dynamic is unlikely to change just because AWS officially splits from the retail side. He expects retailers would still be reluctant to work with AWS, even though a name change would be likely.</p><p>"Culturally, it would run against the core principles Amazon has," McIlwain, the Seattle-based VC, said. "They are much more focused on trying to do three things: consistently delivering great products at a good price in a convenient way. It's going to be really hard to make the case they are harming the consumer."</p><p class="tagline"><a href="https://www.businessinsider.com/intelligence/40-big-tech-predictions-for-2019?IR=T&amp;itm_source=businessinsider&amp;itm_medium=ctgr_bii&amp;itm_term=ctgr_leadgen&amp;itm_content=amazon&amp;itm_campaign=40-big-tech-predictions-for-2019-3"></a></p>

The idea that Amazon should spin out its massively profitable cloud business keeps coming up. Here's how that might work - and why it's very unlikely

<p><div class="KonaFilter image-container display-table float_right click-to-enlarge"><div><div class="image on-image"><a title_source="Getty / David Ryder" title_caption="Amazon CEO Jeff Bezos " class="zoomin" href="https://static-ssl.businessinsider.com/image/5416e545ecad04e13f3a4129-960/jeff-bezos-mad-1.jpg"><span class="sprites click-to-enlarge-icon" title="Click to enlarge"></span></a><p class="source"><span>Getty / David Ryder</span></p><p class="caption">Amazon CEO Jeff Bezos </p></div><p></p></div></div>As the <a href="http://www.businessinsider.com/amazon-hachette-ebook-pricing-2014-7" target="_blank">war over e-book prices continues</a> between Amazon and "Big Five" book publisher Hachette, a group of authors is sending a letter to Amazon's board of directors, warning them that their reputations - as well as the company's - are at risk. </p>
<p>"Efforts to impede or block the sale of books have a long and ugly history," the letter says, <a href="http://www.nytimes.com/2014/09/15/technology/in-latest-volley-against-amazon-hachettes-writers-target-its-board.html" target="_blank">according to the New York Times.</a> "Do you, personally, want to be associated with this?"</p>
<p>The group, called Authors United, includes major Hachette writers like Stephen King and John Grisham (as well as non-Hachette authors) who protest Amazon's negotiating tactics.</p>
<p>In its efforts to convince Hachette to price all its e-books at $9.99, Amazon has refused pre-orders and stalled delivery of Hachette books. As a result, Hachette authors report their sales on Amazon have sunk by at least 50% - and in some cases as much as 90%.</p>
<p>"Since its founding, Amazon has been a highly regarded and progressive brand," the letter to Amazon's board continues. "But if this is how Amazon continues to treat the literary community, how long will the company's fine reputation last?"</p>
<p>Amazon CEO Jeff Bezos is the chairman of the board. <a href="http://phx.corporate-ir.net/phoenix.zhtml?c=97664&amp;p=irol-govmanage" target="_blank">Other members include</a> Tom Alberg, from Madrona Venture Group; John Seely Brown, former director of Xerox's research center; William Gordon, from Kleiner Perkins; Jamie Gorelick, deputy attorney general during the Clinton administration; Judith McGrath, former MTV chairwoman; Alain Monie, from Ingram; Jonathan Rubinstein, former CEO of Palm; Thomas Ryder, former CEO of Reader's Digest; and Patricia Stonesifer, CEO of nonprofit Martha's Table. </p>
<p>Here's <a href="http://www.authorsunited.net/amazonboardletterprivate/" target="_blank">the full letter</a>, which authors have until Wednesday to sign:</p>
<blockquote class="blockquote">
<p>Dear [name],</p>
<p>We are writing to you in your capacity as a director of Amazon.com, Inc. As we all know, Amazon is involved in contract negotiations with several media and publishing companies, including Hachette. About six months ago, to enhance its bargaining position, Amazon began sanctioning Hachette authors' books. These sanctions included refusing preorders, delaying shipping, reducing discounting, and using pop-up windows to cover authors' pages and redirect buyers to non-Hachette books.</p>
<p>These sanctions have driven down Hachette authors' sales at Amazon.com by at least 50 percent and in some cases as much as 90 percent. These sales drops are occurring across the board: in hardcovers, paperbacks, and e-books. Because of Amazon's immense market share and its proprietary Kindle platform, other retailers have not made up the difference. Several thousand Hachette authors have watched their readership decline, or, in the case of new authors, have seen their books sink out of sight without finding an adequate readership. These men and women are deeply concerned about what this means for their future careers.<span style="font-size: 15px; line-height: 1.5em;"> </span></p>
<p>We urge you to review our names at the bottom of this letter. No group of authors as diverse or prominent as this has ever come together before in support of a single cause. We are literary novelists and Pulitzer Prize-winning journalists; thriller writers and debut and midlist authors. We are science fiction and travel writers; historians and newspaper reporters; textbook authors and biographers and mystery writers. We have written many of your children's favorite stories. Collectively, we have sold billions of books. Amazon's tactics have caused us profound anguish and outrage.<span style="font-size: 15px; line-height: 1.5em;"> </span></p>
<p>Russell Grandinetti of Amazon has stated that the company was "forced to take this step because Hachette refused to come to the table." He has also claimed that "authors are the only leverage we have." As one of the world's largest corporations, Amazon was not "forced" to do anything. This is an obvious fact. We all have choices. Amazon chose to involve 2,500 Hachette authors and their books. It could end these sanctions tomorrow while continuing to negotiate. Amazon is undermining the ability of authors to support their families, pay their mortgages, and provide for their kids' college educations. We'd like to emphasize that most of us are not Hachette authors, and our concern is founded on principle, rather than self-interest.</p>
<p>We find it hard to believe that all members of the Amazon board approve of these actions. We would like to ask you a question: Do you as an Amazon director approve of this policy of sanctioning books?<span style="font-size: 15px; line-height: 1.5em;"> </span></p>
<p>Efforts to impede or block the sale of books have a long and ugly history. Would you, personally, want to be associated with this? We feel strongly that such actions have no place in a common commercial dispute. Amazon has other negotiating tools at its disposal; it does not need to inflict harm on the very authors who helped it become one of the largest retailers in the world.<span style="font-size: 15px; line-height: 1.5em;"> </span></p>
<p>Our position has been consistent. We have made a great effort not to take sides. We are not against Amazon. We appreciate that Amazon sells half the books in the United States. But Amazon has repeatedly tried to dismiss us as "rich" bestselling authors who are advocating higher ebook prices-a false and unfair characterization, as most of us are in fact midlist authors struggling to make a living. And we have not made any statements whatsoever on book pricing. Our point is simple: we believe it is unacceptable for Amazon to impede or block the sale of books as a negotiating tactic.</p>
<p>Amazon has every right to refuse to sell consumer goods in response to a pricing disagreement with a wholesaler. We all appreciate discounted razor blades and cheaper shoes. But books are not consumer goods. Books cannot be written more cheaply, nor can authors be outsourced to China. Books are not toasters or televisions. Each book is the unique, quirky creation of a lonely, intense, and often expensive struggle on the part of a single individual, a person whose living depends on that book finding readers. This is the process Amazon is obstructing.</p>
<p>There has been much talk on the Internet about how traditional publishers like Hachette are "dinosaurs" defending a moribund business model. There have been claims that Amazon is leading the way to a new publishing paradigm, one that that pays authors higher royalties, allows anyone to publish, and cuts out the elitist gatekeepers. We agree that Amazon has spurred important innovations in publishing, including a wonderful self-publishing model that has given many new writers a voice.</p>
<p>But what these commentators and Amazon itself may not realize is that traditional publishing houses perform a vital role in our society. Publishers provide venture capital for ideas. They advance money to authors, giving them the time and freedom to write their books. This system is especially important for nonfiction writers, who must quit their jobs to travel, research and write. Without an advance, for example, many aspiring writers would never be able to leave their jobs to write their first books. Thousands of times every year, publishers take a chance on unknown authors and advance them money solely on the basis of an idea. By assuming the risk, publishers expect-and receive-a financial return. What will Amazon replace this process with? How, in the Amazon model, will a young author get funding to pursue a promising idea? And what about the role of editors and copy editors, who ensure that what ultimately ends up on the shelf is both worthy and accurate?</p>
<p>We are certain that you, as an Amazon board member, prize books and freedom of expression as much as we do. Since its founding, Amazon has been a highly regarded and progressive brand. But if this is how Amazon continues to treat the literary community, how long will the company's fine reputation last? We appeal to you, with hope and goodwill, to exercise your governance and put an end to the sanctioning of books, which are the very foundation of our culture and democracy.</p>
</blockquote><p class="tagline">Disclosure: Jeff Bezos is an investor in Business Insider through his
personal investment company Bezos Expeditions.</p>

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