What should Amazon be doing on Day One of Web3?
An expansion on Not Boring’s Crypto Bezos
The question Packy asks in his thought-provoking piece is a great one - What Would Bezos build if he were starting out today? He looks at four interviews from the earlier days of Amazon (circa 1999) to make a compelling argument. I loved the idea, and Packy’s willingness to take a stab at answering WWBB (What Would Bezos Build?):
Crypto Bezos, on the other hand, would build products, from Day One, that are better for the regular customer than anything they have access to today. He’d pick a small wedge -- something for which crypto is most uniquely well-suited -- and patiently expand outward over time, as the underlying tech makes crypto better at more and more things.
The first category that comes to mind would be NFTs, which are the easiest comp to Original Amazon. Original Bezos sold physical products online, Crypto Bezos might sell digital ones. There’s no other way to sell portable, ownable digital items besides crypto; NFTs check that major box. Maybe the answer is simple: Crypto Bezos would launch the Metaverse Everything Store.
I think that’s too on the nose, though. Certainly, Crypto Bezos would incorporate NFTs where practical, but I think he’d be more drawn to an area in which crypto is uniquely well-suited to make the biggest difference in the everyday customer’s life: personal finance.
Crypto Bezos could find ways to abstract away all of the complexity beneath the surface to build a wallet or finance app that makes people more money, automatically gives them ownership in the companies and protocols behind the things they buy, rewards them for their attention, and closes the wealth gap. Instead of one-click purchase, Crypto Bezos might offer 0-click yield maximization/risk minimization. (There’s actually one company I’m really excited about here but I can’t talk about it yet. Soon.)
The wallet or app would be a direct wedge from which Crypto Bezos could expand into any number of categories, bringing a large base of newly-onboarded customers along. In a decade or two, Crypto Bezos’ empire might be as sprawling as Original Bezos’ is today, selling the crypto equivalent of everything from books to cloud services to Prime Video, direct or via marketplace.
The thing is though, I have no idea what Crypto Bezos will build. No one writing about the internet in 1994 predicted what Amazon would become. Even five years in, the media all but dismissed it as a nerdy fad run by a nerdy lad. Books were a non-obvious choice. The fun thing about innovation is that it’s impossible to predict because the next big idea is going to come from the unique experiences and insights of one of the 7.9 billion people on earth.
Web3 Bezos might be building in crypto already, might be a really smart person at a hedge fund, web2 company, or outside of tech, or might even be a community of people building and collaborating together, aided by web3’s unique coordination capabilities.
He’s humble about this conclusion, adding that “Chances are, many of the 76,625 of you will have better ideas on the subject than I do.”
I may not have a better idea, but I think I have a better question. Or at least a more ambitious question, in the true crazy spirit of Web3. Here goes:
What if we ignored the individual and focused on the institution itself? Looked at Amazon instead of Bezos?
If instead of Bezos, we looked at Amazon, their long-term strategy is one that has been executed remarkably recently. For example, the brilliant strategy behind Amazon’s acquisition of Whole Foods (brilliantly articulated in Ben Thompson’s analysis) was in 2017. So, we don’t have to imagine Bezos was 30 today; we could actually just look at Amazon right now.
I found this an online study guide about Amazon’s mission.
“The overarching goal of Amazon company aim is to constantly improve the customer experience by leveraging the internet and technology to assist customers in finding, discovering, and purchasing anything they want.”
Watch the first six seconds. “It doesn’t matter to me whether we’re a pure internet play. What matters to me is do we provide the best customer service. Internet Shminternet.” These words are as applicable to Web3 today as they are to the physical vs. digital debate of 1999. Jeff Bezos has said that he wants Amazon to be the most obsessed customer-experience company, irrespective of how they reach customers. So if that’s Amazon’s mission, then a more interesting question emerges - What would Amazon build if they were starting in Web3 today?
Actually, we can go one step further. Jeff Bezos has said himself that for Amazon, every day is Day One. In fact, it’s part of Amazon’s culture, embedded even in those early interviews from Jeff Bezos himself. Taking this into account, an even better question emerges:
Given it’s Day One in Web3, what should Amazon build in Web3 today?
I’m going to take a stab at answering that question as a complete idiot who has the following credentials:
Not an engineer or developer
Never worked at Amazon
Has made every investing mistake in crypto
So, take those credentials into account when weighing my arguments. But, here’s what I would do if I were to answer that question today for Amazon.
Step 1 - I would create a new Web3 venture arm for Amazon. Let’s call it Day One VC.
Follow the playbook set by Tiger Global (outlined perfectly in this piece called Playing Different Games by Everett Randle):
Be (very) aggressive in pre-empting good tech businesses
Move (very) quickly through diligence & term sheet issuance
Pay (very) high prices relative to historical norms and/or competitors
Take a (very) lightweight approach to company involvement post-investment
Above all, deploy capital, deploy capital, deploy capital
Tiger Global has $65b AUM, giving them incredible ability to execute this strategy. With a market cap of $2T, Amazon could easily create a fund of similar size and scope. You might be thinking - why a VC fund and not scale up their acquisition arm? To answer that, look no further than David Phelps and Annika Lewis' description of Lightspeed VC's attempt to invest in Sushiswap in their piece Collectivizing Finance:
There is, however, a catch—a familiar one by now. The VC must be beholden to the project and its community rather than the project and community being beholden to the VC, as they would have been in the past. That means the VC must give up power to extract concessions and become a team player, accepting the same terms as the rest of the community.
Retail investors banding together to curtail the extractive power of a VC? It all sounds a bit like Wallstreetbets applied to private markets, Doge mania with a conscience. But it’s already begun. As we’ve seen, when Lightspeed proposed a massive investment in Sushiswap at discounted terms a few weeks ago, a standard operating procedure for VCs, the community of 60,000 token holders erupted in anger that the investors with the most money were getting the cheapest deals.
It is to Lightspeed VC Amy Wu’s great credit that she openly engaged the community on calls with a sharp understanding that alienating the community of a decentralized, tokenized project could destroy the investment entirely.
The section concludes with, “The Sushi community is now debating a number of proposals, but…Lightspeed will not be getting a discount; the power of the VC wanes.”
Web3 enthusiasts will likely take a similarly combative stance to the idea of corporate invaders. How do you make yourself a minority supporter instead? Treat these customers like the owners they are in Web3.
Take minority stakes at high valuations, demonstrating philosophical support of decentralized governance and rewards to early adopters and participants.
Provide value-add in bridging the gap between the physical and digital, e.g.imagine Hirst’s Currency project was managed and fulfilled by Amazon instead of Palm.
Step 2 - I would make the following investments:
Invest in a layer 1 protocol, likely Solana. Solana’s emphasis on speed, low fees, and a hospitable developer ecosystem makes it the most philosophically aligned with a customer-obsessed company like Amazon. Buy up to 5% of the outstanding coin supply, offering to overpay relative to current prices and to outline the partnership (how you plan to support developers and products built on the protocol). Total Cost - $2b.
Invest in the best Web3 commerce tool, likely OpenSea. OpenSea has the highest transaction volume and is the runaway leader in the space, building great network effects (though I’ll be honest - I’m still not clear on how much that matters in Web3). Given their latest valuation and Amazon’s need to overpay a la Tiger Global, Amazon’s probably looking at another $0.5b for 5% of the equity of OpenSea.
Invest in excellent Web2 to Web3 onboarding. Just say you’re committing $1b over ten years to projects as early and educational as Station or Buildspace or as late and commercial as Dapper Labs, as long as they share an obsession with how customers get onboarded to Web3. And again, making those commitments in the form of investments that stay within typical Web3 VC parameters.
Of course, there would still be pushback. Plenty of crypto enthusiasts would find this corporate swashbuckling loathsome, but those are probably the same people that hate A16Z’s rapid expansion in the space. Yet, A16Z has demonstrated that within the world of crypto, there’s plenty of interest in a well-funded, high-prestige alternative to pure crowdfunds.
This would be a very different look for Amazon. It would be relinquishing the control that Amazon has thrived on in terms of moving vertically to own all the elements of the supply chain. But in actuality, I’m still arguing for Amazon making moves all along the Web3 supply chain. I’m just suggesting the only way the strategy can succeed is if they relinquish ownership and control to do so. Amazon has always taken an extremely long-term view and created amazing experiences for consumers along the way.
Remember that video at the top? Here’s another quote from Jeff Bezos 45 seconds in:
Long term, I believe that it’s very easy to predict that there are going to be lots of successful companies born of the Internet. They’re going to have very large market caps and so on. I also believe that today, where we sit, it’s very hard to predict who those companies are going to be...and I think Amazon…if we’re not one of those important lasting companies born of the Internet, we will have nobody to blame but ourselves and we will be extremely disappointed in ourselves.
Today’s definition of Internet must expand to include Web3 and the tidal wave of changes it is likely to unleash. If what Bezos said above still reflects Amazon’s question, I think executives at Amazon have to be asking themselves the following question.
Wouldn’t it be awesome if…Amazon built the Tiger Global of Web3?