I was at Amzn in 2000 when the internet bubble popped. Capital markets dried up & we were burning $1B/yr. Our biggest expense was datacenter -> expensive Sun servers. We spent a year ripping out Sun & replacing with HP/Linux, which formed the foundation for AWS. The backstory:
My first week at Amzn in '99 I saw McNealy in the elevator on his way to Bezos' office. Sun Microsystems was one of the most valuable companies in the world at that time (peak market cap >$300B). In those days, buying Sun was like buying IBM: "nobody ever got fired for it"
Our motto was "get big fast." Site stability was critical - every second of downtime was lost sales - so we spent big $$ to keep the site up. Sun servers were the most reliable so all internet co's used them back then, even though Sun's proprietary stack was expensive & sticky.
In 2000, brand new Sun servers started appearing on eBay for 10 cents on the dollar as VC-backed start-ups went out of business (this was pre-AWS when you had to roll your own datacenter). Amzn could have negotiated a better deal with Sun, but Jeff chose a more radical approach.
Amazon's CTO was Rick Dalzell - ex-Walmart, hard-charging operator. He pivoted the entire eng org to replace Sun with HP/Linux. Linux kernel was released in '94, same year Jeff started Amzn. 6 years later we were betting the company on it, a novel and risky approach at the time.
Product development ground to a halt during the transition, we froze all new features for over a year. We had a huge backlog but nothing could ship until we completed the shift to Linux. I remember an all-hands where one of our eng VPs flashed an image of a snake swallowing a rat
This coincided with - and further contributed to - deceleration in revenue growth as we also had to raise prices to slow burn. It was a viscous cycle, and we were running out of time as we ran out of money. Amzn came within a few quarters of going bankrupt around this time.
But once we started the transition to Linux, there was no going back. All hands on deck refactoring our code base, replacing servers, preparing for the cutover. If it worked, infra costs would go down by 80%+. If it failed, the website would fall over and the company would die.
We finally completed the transition, just in time and without a hitch. It was a huge accomplishment for the entire engineering team. The site chugged on with no disruption. Capex was massively reduced overnight. And we suddenly had an infinitely scalable infrastructure.
Then something even more interesting happened. As a retailer we had always faced huge seasonality, with traffic and revenue surging every Nov/Dec. Jeff started to think - we have all this excess server capacity for 46 weeks/year, why not rent it out to other companies?
Around this same time, Jeff was also interested in decoupling internal dependencies so teams could build without being gated by other teams. The architectural changes required to enable this loosely coupled model became the API primitives for AWS.
These were foundational insights for AWS. I remember Jeff presenting at an all-hands, he framed the idea in the context of the electric grid. In 1900, a business had to build its own generator to open a shop. Why should a business in 2000 have to build its own datacenter?
Cloud infrastructure would have emerged eventually even w/out AWS (like electric vehicles w/out Tesla), but how much later and at what opportunity cost ? After the cost of starting a company was reduced dramatically by AWS, innovation exploded and the modern VC ecosystem was born
Amzn nearly died in 2000-2003. But without this crisis, it's unlikely the company would have made the hard decision to shift to a completely new architecture. And without that shift, AWS may never have happened. Never let a good crisis go to waste!
PS: Amzn recently spent years ripping out Oracle, something few have attempted. It takes muscle to do hard things, and muscle gets built by doing hard things. The best companies look at every challenge as an opportunity and engrave that mindset into their culture.

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More from @DanRose999

24 Jan
I learned an important lesson in business when I launched a new retail category early in my career at Amazon: Fail Fast! I spent 18 months shipping a product that should have taken a few months, delaying the oppty to learn and adjust to our initial failure. Here's what happened:
I was originally hired at Amazon on the business development team. After a year I got recruited to help ship a new computer store and run merchandising. I jumped at the opportunity to launch a new business and learn new skills. Amzn was great at creating these opportunities.
Two weeks after joining the retail team, I was in a meeting presenting our pro forma P&L for our computer store launch. I was forecasting inventory turns and gross margins. It was exciting to be thrown into the deep end. I felt like I was at a start-up inside of a start-up.
Read 14 tweets
13 Dec 20
I had a December tradition at Facebook of delivering a one-hour "end of year talk" to my org. The topics changed each year but the common thread was a reflection on life and work outside of our day-to-day. Here's a high-level summary of some of the themes I shared in those talks:
One of my favorite books is Flow: The Psychology of Optimal Experience. We all have activities where we are in a flow state. For me it's surfing - when I see a wave on the horizon coming towards me and suddenly I'm lifted up - I'm not thinking of anything else in that moment.
When we close our eyes and imagine our flow state activities, most of us picture things we do in our free time - cooking, rock climbing, music, writing, etc. But when we evaluate our waking time, most hours are spent at work. What would it look like to experience flow at work?
Read 16 tweets
21 Nov 20
A few days after I joined as head of biz dev at Facebook in 2006, MySpace announced a partnership w/Google worth $1B. I sent an internal email suggesting we pursue a similar deal and Zuck gave me a hunting license. Here's how I signed the biggest deal of my career with Microsoft:
Microsoft had been left at the alter with MySpace. They bid more than Google for the right to run banner ads, but MySpace was owned by NewsCorp and Rupert liked Google better. Ballmer was reportedly very upset about losing, so my first call was to some folks I knew at Microsoft.
MySpace had 10x more users than Facebook at the time, but we were #2 and growing. I told Microsoft we could be their “rebound date,” but they had to move fast because Google was also pursuing us (which was true). I didn’t mention we were wary of Google’s competitive ambitions.
Read 13 tweets
8 Nov 20
I got my first real job in '99 on the biz dev team at Amazon. Like most first jobs, it was a combination of hustle and luck. I had no idea Amazon (or later Facebook) would become what it is today, but I knew I wanted to work there. Here's how it happened:
In high school I thought I wanted a career in business, but my dad was a doctor, my mom a therapist, aunts/uncles physicians & lawyers. I had no role model in biz except my grandfather who owned a fleet of taxi cabs in NY. And my grandmother who always told me "work for yourself"
Harvard had no business major so I thought I would try economics. But after taking Econ 101 freshman year, I decided it wasn't for me (too theoretical and math heavy). Instead I studied Sociology and went down a path of learning about human behavior.
Read 15 tweets
17 Oct 20
In 2004 I had an offer to join the new Kindle team at Amzn and I jumped at the oppty. I was on our retail team at the time -> Kindle was new/sexy. But a week before I was scheduled to start my new job, I was told to stay put and I learned an important lesson. Here’s the story:
2 years earlier I had been given P&L responsibility for Amzn’s cell phone store. We sold phones + plans (like Car Warehouse and Best Buy). This was Amzn’s highest margin biz, but it was tiny and not growing and I was told it could get shut down. I had 6 mos to turn it around.
The industry model at that time was give phones for free w/ service plan attach. I reinvested the service plan margin to make phones less than free, and rev growth exploded. GM % plummeted, but profit $ went way up. My little biz was our fastest growing segment at Amzn!
Read 10 tweets
3 Oct 20
In 2008 Facebook’s user growth hit a wall at 80M and we were having serious debates about whether any social network could ever reach 100M users. 2 years later we had doubled our user base and not long after that we reached 1B users. Here’s how we did it:
I joined FB in summer ‘06 when we had 7M users and were adding 5k/day. Over the next 18 months, Zuck shipped News Feed, Open Registration, Platform and community-led translation. By end of ‘07 we had 70M users and it seemed like we couldn’t be stopped.
Towards end of ‘07 I helped raise our Series C at $15B valuation. We had <400 employees and only $250M revenue, but we had explosive user growth and powerful network effects. Our entire valuation was based on how fast people were signing up for FB all over the world.
Read 13 tweets

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