Loophole
Long drive, a lot to think about, and a long ago hack. Also, 7 other things worth your time.
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An origin story and a lesson today. It’s about Amazon. I was thinking about it while my wife, daughter and I did the five-hour drive back from New England, after a fantastic four-day Thanksgiving celebration with family.
Maybe you know this story? I don’t think most people do. It’s about how Amazon overcame a supposedly insurmountable problem in its very earliest days, by exploiting a loophole other people just didn’t think of.
Amazon is now worth $1.78 trillion (as of Friday), but we’re talking here about the very early version of the company, when it was just one of many fledgling Internet bookstores, and it was funded basically with a friends-and-family round that included a big portion of Bezos’s parents’ retirement savings.
Let’s set the stage with a very short passage from a contemporaneous (1996) article that ran in Fortune magazine, explaining their business model back then:
Orders in hand, Amazon requests books from a distributor or publisher, which delivers them to the company's Seattle warehouse.
The order is then packed and shipped. On average, customers get books five days after ordering. Pay extra, and they speed the process by a day or two.
The trick here was threefold.
First, they claimed to have more titles than any other bookstore on the planet.
Second, they were taking orders (and payment) from customers before they even ordered the books from wholesalers.
Finally, Amazon was offering 10 to 30 percent off list prices.
Their problem was that this big discount was only possible if they could get the most preferential terms possible from wholesalers, but they weren’t ordering enough books at first to qualify. Crazy as it seems now, the order minimum was 10 books at a time—but at the start, Amazon wasn't consistently getting 10 orders a day.
So, here was the solution Bezos explained in a 1999 interview with Wired magazine:
[W]e found a loophole. Their systems were programmed in such a way that you didn't have to receive 10 books, you only had to order 10 books. So we found an obscure book about lichens that they had in their system but was out of stock.
We began ordering the one book we wanted and nine copies of the lichen book.
They would ship out the book we needed and a note that said, "Sorry, but we're out of the lichen book." One of these days we're going to get all those lichen books dumped onto our front lawn.
I don’t know how long this little “loophole” went on. Regardless of whether it was just a few weeks or longer, however, I’ve always found it devilishly inspiring.
(For what it’s worth, Bezos later claimed nobody had any hard feelings: “I've since talked and joked at length with the people at these companies about this. They actually think it's very funny.”)
Why does this matter today? Well, it's probably one of many tiny things that could have meant the difference between Amazon's early success and failure.
But it also stands out as the kind of simple, unorthodox thing that I think every creative person has to be willing to do, especially in the very early days.
It's like the co-founders of Airbnb realizing that their early listings weren't getting tenants because the photos in the ads were low-quality, and offering free professional photos to fix the problem.
Or the early days of PayPal, when the company emailed people and told them that they had created accounts for them with $10, $20, or $50—and they only had to open the account to get the money.
I'm a bit of a history geek, so I'll also point to Lyndon Johnson, who as a freshman congressman lived in a dormitory with other representatives, and would shave in the communal bathrooms several times each morning, so that he could "just happen" to run into colleagues and network with them.
These are the unglamorous, analog, unscalable things people do in the beginning to survive, and thrive. I know you can probably think of other examples quickly.
The question is, within the bounds of ethics, and knowing that you have to live with yourself (and also that future stakeholders will judge your choices), how hard are you willing to look to find the loophole, or the trick, or the unorthodox hack that makes success possible?
Bonus points if it also makes for a good story later.
OK, call for comments: I can only imagine some of the “it wasn’t going to work so I hacked a way for it to work” stories that this group has, from business, from life—maybe from back in school or some earlier stage. Please feel free to share them in the comments. If anyone wants to stay anonymous(ish), reply to this email with a story and I’ll post your account as “from a reader.”
7 other things worth your time
How the omicron variant of Covid-19 rattled the world in a single week. (Link 1, Link 2) Seriously, last Wednesday, I don’t think I’d heard of this; today it’s all anyone is talking about. Caveat: I have no idea personally what it will mean in the long run. (WSJ, $. Both links go to the same site, but I’m curious if people hit a paywall on either or both of them. Can you let me know?)
South African scientists warned the world of the omicron variant, but now they say they simply identified it first, not that it necessarily originated in their country. With their country facing travel bans from the U.S., Canada, the U.K., and other nations, some health officials say it’s creating a disincentive to share warnings the next time. (NPR)
This is so predictable and stupid: “Criminals are cashing in on bitcoin ATMs around the country, using the convenient, largely anonymous transactions for drug trafficking, money laundering and a variety of fraud.” (CNBC)
I had to read this three times before I was confident enough to share it here, but it’s shocking: Research shows the #1 leading cause of death of pregnant women in the U.S. is murder, mostly involving guns. This from a new study in the journal Obstetrics & Gynecology. “Homicide far exceeds obstetric causes of death during pregnancy, such as hemorrhage, hypertension, or infection.” (Buzzfeed News)
Actor Matthew McConaughey, who was leading in early polls to become the next Texas governor, says he won’t run for office. (Twitter)
Alabama’s capital city renamed its “Jeff Davis Avenue” to “Fred D. Gray Avenue” (Gray was the lawyer for Rosa Parks, and grew up on the street). Now, the city is being fined $25,000 by the state for violating a law that protects “Confederate monuments and other longstanding memorials.” (AP)
I love this Twitter account that just reprints interesting headlines from old newspapers, like this one from 1901: “THE FIRST MAN WITH AN UMBRELLA: Where was he? Who was he? What happened to him?”
Thanks for reading. Photo credit: Pixabay. I wrote about some of this in a different version for Inc.com. Want to see all my mistakes? Click here
Hi Bill.
Late 1940's early 1950's, my Greek immigrant father's restaurant was the 2nd one from the movie theater. When the 7 PM feature ended, the moviegoers went out for coffee and dessert. They always filled up "Lumar's" restaurant first before they would go to our restaurant. Dad rounded up a group of "down and out" men and gave them each a nickel to get coffee at Lumars at 8:45. When the movie ended at 9 PM, Lumar;s was full of coffee drinkers and Dad sold lots of dessert. This went on for quite a while. Lumar;s closed and Dad was a success for many years.
I'm actually going to college for my BS in Computer Science/Software Engineering. But I plan to get into Affiliate & Email Marketing. I also have 120 products to sell online.