Bold (19 page)

Thus the question: Why hasn't Branson's balloon burst?

Branson is a fun junkie. He has set world records in balloons. He has set world records in speedboats. He has set world records in outlandishness. Exhibit A: When Virgin Atlantic archrival British Airways decided to back the erection of a 440-foot Ferris wheel in the heart of London and had construction delays, Branson wasted no time in flying an airship over the site trailing a giant banner that read: “BA can't get it up.”
¹⁷

But what's often lost in this discussion is that fun-junkie-dom has helped Branson in two critical ways. For starters: he's immensely passionate about everything he does. When he first told Virgin Music CEOs of his idea to use one-third of last year's profits to start Virgin Atlantic, his justification was that the risk was worth it because it was “fun.” “They weren't happy with the word
fun
,” Branson recounted in his appropriately titled quasi-business/biography/philosophy book,
Screw It, Let's Do It
.
¹⁸
“To them, business was serious. It is. But to me, having fun matters more.”

Fun matters more because Branson employs it as strategy for thinking at scale—both as a fuel (i.e., a way of harnessing his passion)
and as a first principle, assuming that if something is fun for him—like an airline that makes you say “Wow!”—then it'll also be fun for everyone else. And just to make sure he's right (also because it's fun), Branson always conducts the experiment.

This is the key point. Branson's balloon hasn't burst because his fiery devotion to fun translates directly to his dedicated clientele and fervent fans. It's become a business strategy based on experimental customer-centrism. If Branson thinks a particular service might be beneficial to his customers (i.e., fun), he tries it out. This is why Virgin Atlantic was the first airline to offer free seat-back TVs, onboard massages, an onboard cocktail lounge, a glass-bottomed plane, and most recently, stand-up comedians (for now, on domestic British flights). “Unless you're customer-centric,” explains Branson, “you might be able to create something wonderful, but you're not going to survive. It's about getting every little detail right. It is running your airline like you would an upscale restaurant—the kind where the owner is there every day. Virgin Atlantic started out with one plane against British Airways's hundred planes. On paper, we should not have survived. But because we were customer-centric, people went out of their way to fly us. We have survived for thirty years, during which almost every single airline that we were competing against—Pan Am, TWA, Air Florida, People's Express, Laker Airways, British Caledonian, and about twenty others—went bust.”

This methodology has allowed Branson to scale. By putting his customer's needs first, Branson can triangulate vast distances, find industries that are stuck or broken, and apply his brand and experimentalism to take his shot.

But Branson, like Larry Page and Jeff Bezos, also runs his empire like a competitive ecosystem—letting some companies live, letting others die, and always, ceaselessly, experimenting. He is quick to rapidly iterate his ideas, and quicker to shut down a failure. In total, while Branson is known to have started some five hundred companies, he has also shut down the two hundred of them that didn't work.

He also gets that risk mitigation is critical.
“Superficially,” he says, “I think it looks like entrepreneurs have a high tolerance for risk. But, having said that, one of the most important phrases in my life is ‘protect the downside.' It should be one of the most important phrases in any businessperson's life. So okay, we made a big, bold move going into the airline business. But the most important negotiation with Boeing was that we had the right to give the plane back after twelve months. That meant I could put my toe in the water, I could see whether people liked the airline. But if it didn't work out, it wasn't going to bring everything else crashing down. I'd be able to look my record company bosses in the eye and we'd still be friends because they'd still have jobs. Protecting the downside is critical. Make bold moves but make sure to have a way out if things go wrong.”

You have probably noticed by now that Branson and Musk employ different risk management strategies. In fact, all four men in this chapter have different strategies. So far we have seen Musk argue that if the idea is important enough, enormous risks are always justified. Branson also bets big, but because he's risking his entire brand (Virgin) versus a singular company (Tesla), he manages to do this is a way that doesn't jeopardize the empire.

Virgin Galactic is a fantastic example. In October 2004, when Burt Rutan demonstrated the success of the three-passenger SpaceShipOne vehicle, winning the Ansari XPRIZE, Branson and his team came in with a multi-hundred-million-dollar commitment to scale that design up to an eight-passenger vehicle able to make multiple flights per day and carry thousands into space per year. But, as is Branson's style, in 2009, he was brilliantly able to offset that risk by bringing in Aabar, the Mideast investment fund, to purchase 32 percent of Virgin Galactic for $280 million.
¹⁹
Then, two years later, Aabar increased their stake by 6 percent, committing an additional $110 million to fund small satellite launch capability.
²⁰
So, sure, Branson bet a huge amount on Virgin Galactic, but he then protected that investment and brought in an extra $390 million in working capital to ensure its success. Branson, it seems, isn't just bold in his risk taking, he's also bold about his risk mitigation. The end result, though, is the same.

A few years back Google's April Fool's joke was the announcement of a new company called Virgle, a fake Google/Virgin collaboration to establish a permanent human settlement on Mars.
²¹
There were corresponding videos on YouTube, with Branson, Brin, and Page talking about where to fill out a colonist application and how they were currently searching for experts in physics, engineering, and—most critically—Guitar Hero III. But the really funny part is that a lot of people didn't realize it was a joke. A lot of others still aren't sure. Which is to say, Branson's appetite for bold is so big and his track record at scale so stellar that, for a great many, it's difficult to
not
believe Branson is going to Mars.

Jeff Bezos is a busy man. About five years ago, when I emailed him to set up a breakfast meeting, his response came back: “Peter, I'm so busy I'm trying to optimize my toothbrushing time.” And there's a reason he's so harried—the same reason Eric Schmidt listed Amazon (alongside Google, Apple, and Facebook) as one of the four horsemen of technology. Bezos isn't interested in small shifts or polite progress. He wants to effect change on a massive scale, with customer-centric thinking and long-term thinking being the primary drivers behind this revolution.

Jeff Bezos was born on January 12, 1964, in Albuquerque, New Mexico.
²²
Like Musk, he too showed an early interest in how things work. As a toddler, he disassembled his crib with a screwdriver. Later he rigged up a series of elaborate electric alarms to keep his siblings out of his room. His childhood in Houston was a wash of science projects, science fairs, and
Star Trek
episodes. His high school years were spent in Miami, which is also where his love of computers arose. As his brother, Mark Bezos, once told reporters:
²³
“He would certainly have been classified as ‘the nerd.' ”

Defending that title, Bezos went to college at Princeton, where he
finished summa cum laude in 1986 with a degree in computer science and electrical engineering. After graduation, Bezos pursued investment banking, becoming the youngest vice president at the Wall Street firm of D. E. Shaw. But he was not destined for a career in finance. A short four years later, Bezos had an epiphany that caused him to quit his lucrative job, move to Seattle, and attempt to change the world—one e-commerce transaction at a time.

“The wake-up call that led to
Amazon.com
was finding that web usage in the spring of 1994 was growing at 2300 percent a year,” said Bezos during a speech given in 2001 at the Academy of Achievement in Washington, DC.
²⁴
“And things just do not grow that fast. . . . You could tell anecdotally, even though there wasn't good research on this at the time, that the baseline of web usage wasn't trivial . . . so the question was, What kind of business plan would make sense in the context of that growth? And I went through a whole bunch of different things. I made a list of twenty different products, looking for the first product to sell online. I came up with books for a bunch of reasons, but primarily because books were very unusual in one respect . . . there are more of them than there are products of any other category. So there are literally millions of different books in print . . . and computers are good at organizing such large selections of products. And you could build something online that literally couldn't be built in any other way. You couldn't have a physical world bookstore or a paper catalog with millions of different books.”

In the early days, Amazon's success was by no means a given, but Bezos has always been a fantastic evangelist. Also an honest evangelist. When his parents decided to invest a good portion of their life savings in the company, Jeff—in a great example of probabilistic thinking—told them they had a “70 percent chance of losing their money.” He also admitted to hedging his bet. “I was giving myself triple the normal odds, because, if you look at the odds of a start-up succeeding at all, it's only about 10 percent. Here I was giving myself a 30 percent chance.”

Bezos used his parents' money to set up shop in the proverbial garage of his Seattle home, soon expanding into a nearby two-bedroom
house. It was from there, on July 16, 1995, that
Amazon.com
opened for business. Bezos and his small team designed a small launch. They invited a couple of hundred friends and family to visit the site, and were so excited about potential business, they hooked up an electronic bell to ring every time a transaction occurred. “There was a time when we were examining every order that came in,” says Bezos, “and it was always a family member placing the order. [But] the first order we got from a stranger—I remember there were probably ten of us in the company, all gathered around after the bell rang, looking at the order. We were like: ‘Is that your mom?' ‘That's not my mom!' And thus it began.”

And did it ever.

The bell was soon ringing continuously (they had to disconnect it). Within one month, Amazon had customers in forty-five countries and all fifty U.S. states. Within two months, sales had reached $20,000 a week. Then, in May of 1997, they went public with a $500 million valuation. Six months after that, the number climbed to $1.2 billion, then rose to $23 billion over the next two years. Bezos, now thirty-five years old, had gone from “I have a neat idea” to “I run a multibillion-dollar company” in just over five years.
²⁵

Bezos's success sits atop two critical strategies: long-term thinking and customer-centric thinking. We'll take them one at a time.

Bezos has never been interested in quick profits or short-term rewards. From the start, Amazon has been playing the long game. In his now-famous 1997 letter to his shareholders,
²⁶
Bezos put it this way: “We believe that a fundamental measure of our success will be the shareholder value we create over the
long term
. . . . Because of our emphasis on the long term, we may make decisions and weigh tradeoffs differently than some companies.”

The letter went on to explain his thinking strategy with a number of now-famous points:

• We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.

• We will make bold rather than timid investment decisions where we see a sufficient probability of gaining market leadership advantages. Some of these investments will pay off, others will not, and we will have learned another valuable lesson in either case.

• We will share our strategic thought processes with you when we make bold choices (to the extent competitive pressures allow), so that you may evaluate for yourselves whether we are making rational long-term leadership investments.

• We will balance our focus on growth with emphasis on long-term profitability and capital management. At this stage, we choose to prioritize growth because we believe that scale is central to achieving the potential of our business model.

This letter is often held up as the encapsulation of Bezos's view on the subject, but personally, I think an answer he gave to an Amazon Web Services Live audience in 2012
²⁷
was far more revealing:

“What's going to change in the next ten years?” And that is a very interesting question; it's a very common one. I almost never get the question: “What's not going to change in the next ten years?” And I submit to you that that second question is actually the more important of the two—because you can build a business strategy around the things that are stable in time. . . . In our retail business, we know that customers want low prices, and I know that's going to be true ten years from now. They want fast delivery; they want vast selection. It's impossible to imagine a future ten years from now where a customer comes up and says, “Jeff, I love Amazon; I just wish the prices were a little higher” [or] “I love Amazon; I just wish you'd deliver a little more slowly.” Impossible. And so the effort we put into those things, spinning those things up, we know the energy we put into it today will still be paying off dividends for our customers ten years from now. When you have something that you know is true, even over the long term, you can afford to put a lot of energy
into it.