Jeff Bezos on the beauty of low margins and building a reusable space craft

Amazon CTO Werner Vogels and CEO Jeff Bezos on stage at AWS: Reinvent

Amazon CEO Jeff Bezos may come out for the big Kindle launches but he doesn’t usually talk much too about the Amazon Web Services side of his business. That changed Thursday when he took center stage at the  AWS: Reinvent show to chat with Amazon CTO Werner Vogels about the company’s public cloud — and other topics. Here are my 5 takeaways.

1: Amazon Web Services are not just for startups anymore.

Vogels asked whether AWS can go after enterprises and startups at the same time — a meme that has pervaded this show of 5,000 AWS partners, customers, and would-be customers. Bezos was unequivocal: “Yes. I know we can because it’s working. We have existence proof,” he said. “The customer needs of those two [groups] are not that different. Everyone wants low cost, everyone wants reliability, and everyone wants fast-evolving APIs and services.”

2: Web services as platform for all

Just as Microsoft offers a platform for third-parties while it also often competes with them, Amazon has to tread a fine line. Amazon runs its own video streaming service on AWS while Netflix, the big streaming video vendor also runs on AWS. Sure, Amazon Prime instant video competes with Netflix but “we bust our butts every day for Netflix,” Bezos said. Improvements made to standardize the AWS web platform will benefit Amazon retail and other retailers, he said. (Indeed, some might say that Netflix, which has done a lot to troubleshoot and improve upon AWS, has busted its butt for Amazon as well.)

Amazon CTO Werner Vogels and CEO Jeff Bezos chat on stage at AWS: Reinvent

3: AWS benefits space travel

Blue Origin, the Bezos-backed company that’s developing reusable spacecraft to “democratize” space travel, uses a ton of AWS. “There are two problems with space travel today. It’s too expensive and it’s too dangerous. Other than that, it’s fine,” Bezos said.

Blue Origin is able to spin up multithousand node clusters in minutes on AWS that used to take a weekend to set up. “It’s safe to say they’re heavy-duty compute users and basically wet themselves they are so happy,” he said.

4: Startups: Be fearless and follow your bliss

For entrepreneurs who want to start new companies or to start a new endeavor within an existing enterprise, Bezos, who launched 18 years ago with $1 million in capital from 22 investors, had some words of advice. “Never chase the hot thing whatever it is — it’s like trying to catch a wave. Pick something you’re passionate about and evangelize it.  I’d take a missionary over a mercenary every day.”

And, entrepreneurs have to be willing to fail and to be misunderstood. That’s the price of doing something truly new.

5: Stress aside, running a low-margin business ain’t half bad

Bezos admitted to having “waking dreams” that he might one day operate a high-margin business. Then he gets over it. “It’s impossible to operate efficiently in a high margin business,” he said.

Margins were a recurring theme at the show this week, with AWS senior vice president Andy Jassy referencing the 60 to 80 percent margins enjoyed by “old guard” IT providers. “That’s a great model,” he said. “It’s just not our model.”

But then again, no one really knows what AWS margins are. The conventional wisdom is that Amazon makes no money on AWS, although that’s far from clear. Over the past 12 months, Amazon logged nearly $2.2 billion in sales of “other” — the category that includes AWS. It unclear how profitable those sales are.

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