Jeff Bezos is widely known as the CEO of Amazon, currently the richest man in the world, and it’s clear that his success didn’t just come from nowhere. He left the security of a high-level position at a Wall Street investment firm to start Amazon, which at the time was of its inception, just an online bookstore. Bezos understood the risks of starting over and attempting to build a company from the ground up. He even warned his earliest investors, his parents, that there was a 70 percent chance Amazon would fail.
It took 60 meetings to raise Amazon’s first funding round, eventually resulting in 25 investors participating with cheque sizes of about $50,000 each. In a famous 60 Minute interview, Bezos confides: “The riskiest moment for Amazon, Charlie, was at the very, very beginning. I needed to raise $1 million at a certain point, and I ended up giving away 20 percent of the company for a million dollars... And it was nip and tuck whether I was going to be able to raise that money. So, the whole thing could have ended before the whole thing started. That was 1995, and the first question every investor asked me was: ‘What’s the Internet?’”
Throughout his career and personal life, Bezos has based his risks on what he calls a “regret minimization framework.” Instead of assessing how much risk a decision has, he instead questions if he’ll regret a decision in the future. Before starting Amazon, he asked himself if he would regret not being a part of the internet boom that was happening at the time, and he found that the answer was yes. That simple but elegant mindset drew Bezos towards the continued risk-taking that has defined Amazon’s success.
Bezos has driven a significant amount of innovation throughout Amazon’s existence. Just consider how far the business has come from simply selling books online, now selling a wider variety of products than any physical store. The company is always striving to further diversify their offerings, which include Amazon Web Services and Amazon Prime among their most successful endeavors. Bezos founded one of the largest companies in the world on a monumental risk, and he continues to innovate and take risks to this day.
Elon Musk also dismissed safety and comfort in his career to push forward and innovate. After Paypal was bought out by eBay in 2002, he took his money to create SpaceX in hopes of commercializing spaceflight and eventually attempting colonization of other planets. His other companies grew to include Tesla, The Boring Company, SolarCity, and more.
Musk’s biggest struggle came in 2008, as SpaceX faced repeated failures in its tests and Tesla was losing money fast. Musk was broke, and his companies were close to bankruptcy. But finally, SpaceX managed its first successful launch and subsequently earned a $1.6 billion contract from NASA. Meanwhile, Tesla investors decided to increase their investments, saving the company. Instead of seeing the end of the line and giving up, Musk chose to fight for his vision until the last second, and was rewarded for his perseverance and determination.
The stories of Bezos and Musk indicate that risk-taking can pay off excellently -- but only for worthwhile risks. Despite the high chances of failure, they didn’t enter their endeavors recklessly, but instead with intense vision for the future and a plan to carry it out.
This sort of major risk-taking is something that’s often avoided in businesses today. According to Scott Galloway, clinical professor of marketing at NYU’s Stern School of Business, most CEOs now won’t take a risk that has anything less than a 50 percent chance of success. Bezos has opposed this view, and was quoted early in his career as saying, “Given a 10 percent chance of a hundred times payout, you should take that bet every time."
An entrepreneur can take a single risk and have it pay off, but if they spend the rest of their career playing it safe, they’ll never capitalize on or multiply the success found previously. Both Bezos and Musk are constantly trying new things -- Bezos and Amazon are always developing new ways to involve themselves in various industries, while Musk’s lineup of companies show that he is not afraid to continually take risks and pursue new ideas.
Type 1 vs Type 2 Decision Making
According to Bezos, there are two types of decisions that any business will make: Type 1 and Type 2. Type 1 decisions are irreversible, and should therefore be made with caution. Type 2 decisions are ones that are easily reversible. If a Type 2 decision is not working out, a business can simply revert back to its former state. Amazon makes a lot of Type 2 decisions, constantly trying out new services or products and quickly cutting them if they aren’t working out. The best example of this was the Amazon Fire Phone, which failed to have any immediate impact and was swiftly taken off the market.
But this sort of Type 2 decision-making has also led to the development of Amazon Web Services and Amazon Prime, two of the company’s biggest services. In addition, the payoff from previous successful risks allows the business to take more risks in the future with less consequence. If one of Amazon’s projects fails, the company’s losses are minimal. But a smaller company making a comparable investment would likely fail altogether if their project doesn’t work out. This is why in retrospect, Amazon’s Fire Phone seems like only a minor failure. Continually taking risks creates success, which eventually builds to the point of mitigating the effects of potential failures going ahead.
While innovators and businesses should lean heavily toward Type 2 decisions, there are many factors to consider before deciding to follow through on an idea. All risk must be measured, and one must question what the impact of an idea will be. In this sense, business is alchemy -- every idea and decision must lead you to ask: how far off are you from transmuting lead to gold? Answering this question thoroughly with data and careful planning is what bolsters innovators and their ideas.
Bezos and Musk may be exemplary individuals, but innovation is impossible without a team to build on an innovators’ ideas and keep them in check. Risk-taking is a team effort, and it requires surrounding oneself with people who provide value and insight into the pursuit of innovation. My team at Shopin is constantly questioning ideas, considering the ramifications and always thinking about how an idea can thrive. Having a reliable team is another way to strengthen the power of innovation and to mitigate the risks involved. Innovators don’t have to carry their burdens alone.
Of course, Musk’s recent run-ins with the SEC show a different, darker side of risk-taking that innovators often face. After tweeting a drug-related joke while espousing plans to take Tesla private, the SEC sued Musk for securities fraud, claiming that the tweet was false and misleading, which caused unnecessary volatility in Tesla’s stock. He has been criticized for his behavior, but Musk has defended himself by asserting his freedom of speech. While Musk and Tesla reached a settlement with the SEC, Musk maintains his disdain for the situation, even going so far as to say that he does not respect the SEC.
Putting aside the controversy, Musk’s insistence on maintaining his position and not backing down offers a meaningful lesson in risk-taking. When opposition bears down on all sides, innovators face a choice: back down and allow one’s vision to dissipate, or charge forward and learn from the experience. Musk, for better or for worse, believes so strongly in his vision and his business methodology that he willingly stood against one of the most prominent government agencies. Bezos too, faced opposition from his peers and from the public when he started Amazon, but both leaders understand deeply that sometimes, to be innovative is to be uncompromising.
One of the most intimate and inspirational videos I’ve seen is a clip from a 60 Minutes interview with Elon Musk after he is told that his heroes, like Apollo astronauts Neil Armstrong and Eugene Cernan, don’t believe in SpaceX’s mission. Musk becomes emotional, admitting his disappointment, and verges on the edge of tears. Nonetheless, he quickly recovers, and reveals that in spite of the doubts cast by his heroes, he has never considered giving up his vision. If business is alchemy, then innovators are the alchemists, the ones trying to transmute existing elements and create something better. When someone tells them it cannot be done, they are not dissuaded from their goal.
Today, Bezos and Musk are lauded as two of the most successful and influential people in the modern world, and they are inspirational examples of what it means to take risks and be a true innovator. Despite the criticism they receive at times, it’s hard to argue with their results. Perhaps one of the reasons they so often court controversy is because they challenge the status quo, constantly looking for ways we can make our lives better. Whether you agree with them or not, this is how true innovators operate and succeed: on their own terms.
Before I embarked on the journey of Shopin, I had the decision to pursue another blockchain-related opportunity that would have made me wildly financially wealthy. I looked at what Shopin’s predecessor was trying to achieve and realized how rare an opportunity we had in front of us to shift the status quo for so many people, and have since pursued the evolution of that vision relentlessly. During times of struggle, many told me to walk away from the opportunity, but I could not let go of the mission and vision.
I remember when one of my closest friends and advisors told me: “I have no idea how you do it: When everyone else is running out of a burning building, you’re the only one running in.” I spent thousands of hours and went down to my last dollars to save the company and cover the employees’ salaries.
There were days where I had to negotiate with investors, employees, vendors and retailers all on the same day… and the only thing I had to sell was a vision and a belief that we could execute to bring it to life. The stress was overwhelming. Most nights I worked till 3AM or was on calls with mentors in Europe till the morning light creeped through the window panes, reminding me a new day had dawned.
Now, Shopin has remarkable opportunities in its future, leading the charge in improving the retail experience while making a positive impact on data rights and security. The feeling of overcoming risk to innovate and succeed is incomparable. Make no mistake: Every day is a psychological, emotional, mental and creative challenge… each one faced with a boat-load of gratitude and grit.
To court innovation is often to glimpse into the void of insanity. If you don’t get used to teetering at the edge, you will never know what’s on the other side.