How to run your company like Amazon and Why Google and Microsoft are laying off people

Dude, do you know how Amazon runs their company?

No.

Okay.

So there's— I know how they run their meetings.

Yeah, okay, but this is part of it. There's a book. Did I tell you about this book? I think I told you about this book, Working Backwards.

No.

So this book is called Working Backwards. And this guy that was the chief of staff for Jeff Bezos for 2 years, imagine that you're just following Jeff Bezos, shadowing him everywhere. That's one guy that wrote the book. The other guy that wrote the book, he worked at Amazon for 15 years and he helped start Amazon Prime. I think he started, he helped with the launch of Kindle, all these things, right? Like a lot, the media division for Amazon as they're trying to get out a book. there for 15 years. And there are a couple things. First, let's talk about the meetings because you brought up the meetings. First thing is they— for the longest time, everyone was doing PowerPoints, right? And then at a certain point, they're just like, dude, like, no more PowerPoints. Because PowerPoints are easier for the— for you, the creator, but it's harder for the audience to understand, right? So they mandated this thing where you have to write narratives and memos where like if you came up with an idea, Neil, you'd have to write out like, hey, This is what I'm thinking right now. This is what it's going to look like. Here's the resources required. And then FAQ, like, this is how much is it going to cost. Here's how much we might get from it. And so it forces clear thinking because the problem as a company gets bigger is everyone has an idea, right?

Yeah.

Everyone's like, oh, I have this idea. I have this idea. But this stops the laziness. It's like, oh, you have an idea? You're going to write a narrative, okay? And some of these narratives will take like a week, 2 weeks to write because they're like 6, 7 pages or so. And they're really refined, right? If they're not refined, then people just leave the meeting. And so that's a good place. That's a good starting point because we started that at our company and it's so much easier now. I'm just like, oh, okay, you really like— okay, do a memo, right? And then I'm leading by example. I'm writing memos all the time. Is it a pain in the ass? Yes. But at the same time, it's really— it feels a lot clearer in terms of where we're going.

So what's an example of a memo that you wrote recently?

So there's a concept. So, you know, I went to that retreat recently, right?

Yeah.

And one of the key takeaways was like the entire group was like, dude, you guys are so good at top of the funnel marketing. You guys are order takers, but you don't fulfill the middle 60%. And then our mutual friend Yaniv and I were like, oh shit, yeah, that's true, right?

You're talking about for sales specifically? Yeah.

So like, just let me back up a second. Let's— the reason I call it the missing 60% is let's say 100 people come into my funnel, 20 people will never buy, 20 people are hand raisers, they're ready to buy. And then 60%, the middle 60%, are— they need to be nurtured, right? And so I wrote an entire memo. It probably took me about 2 hours or so and it ended up being like 6, 7 pages. But through that, that sparked a lot of side conversations and ideas. And now we have a list of things and we're just tackling those things now. So, but there's no like, there's a lot less questions and confusion.

And you're actually seeing people take action in turn.

Yeah, yeah. People are like, and then I'll have, I'll like have people talk about like, hey, how helpful has this been? It's like, dude, it's like amazingly helpful because now it's, we're not just throwing ideas all over the place. We're like forcing clear thinking.

And I'm assuming everyone reads the memo before they attend the meeting.

They can read it before, but you have them read it during because you just never know. Like you, like if we go into meet, like, are you going to actually read it before? Like probably not, right? Well, 6 pages is hard to read during a meeting. Here's how it works. So, for Amazon, the way they do it is if it's a 6-page narrative, you allocate 60 minutes for it, right? The first 20 minutes, so a third of the meeting, is for reading. The other 40 minutes is for deciding and debating. If it's a 3-page memo, then it's 30 minutes and it's 10 minutes of reading. So, people give or take will probably take about, I don't know, 2 to 3 minutes per page to read. And so, the whole thing is like it forces accountability with the entire group because nobody can say, oh, I didn't have time to read it.

Yeah.

Because people are at varying levels too. But that's just like one thing that they do, right? There's a bunch of other things that they do where it's like, oh, okay, here's the entire playbook on how to run Amazon.

What else does Amazon do that you found interesting from the book?

So, let me see. I mean, that one's the first one that comes to mind. I'm struggling to think of a couple other ones. Maybe as we go through this episode, I'll try to pull up a couple other ones. But that's the main one so far. Yeah, let me think about it as we go through this episode.

Yeah, I know they have really good operators. You know, if you look at their hiring history, because I used to live in Seattle. When I lived there, there were— and I haven't read the book, but one thing that they did that was really interesting is they didn't just look for people who came from good colleges. They looked for people who are really good at systems and processes. And they would find them from any parts of the world. And I remember I met this family, the guy was from India or the whole family was from India. He did so well at Amazon. This was before they were in India, right?

Mm-hmm.

But they were still hiring from India for Amazon US. But this was before they entered the Indian market for marketing within India. And this person did really well. So what Amazon did was They took a picture of their apartment, every single thing in there and how it was laid out. Crew came in, put it on a boat, and then they moved them to the United States. Once the stuff came, the apartment was ready just the way they had it in India. Like, they would go above and beyond to get really good people. They didn't care where they were from.

Yeah.

It wasn't about the cost, because if you're moving someone from India to the United States, you're paying US wages, especially in Seattle, which isn't an affordable city. But the one thing I did notice when I was living in Seattle is they would look everywhere for just amazing talent and operators who are really good, not just book smart, because a lot of book smart people everywhere, but really good at systems and processes.

Dude, I got, I got more for you now because you sparked a— you sparked the memory again. And I'm also looking at the sheet over here. I think I talked to you about this, but in the book, the book came out in 2022 maybe, or maybe 2020. So it's a pretty recent book. And I remember one of the chapters said that Amazon, to this day, this is what the authors believe, they don't pay over $160,000. Most of it is in stock, right? And they believe that that helps align people for the long term. Now, not everybody can do that, but like, I thought that was interesting.

Wait, we talked about this.

We did talk about this. It's literally in the book.

Yeah, but that point on how they're saying $160,000, it's a bunch of bull. The real reason they only pay $160,000 is that $160,000 goes against their P&L. When they compensate people with stock grants, that doesn't go against their earnings. For a publicly listed company.

Well, it's the employees spinning the narrative, right? But it's like, it still is what it is. Like, I get what you're saying from like a business standpoint.

But yeah, it's just their way to save money. There's no difference compensating someone in stock or cash. They compensate them in stock because it helps their earnings. That's really it.

They have another thing where— so this I definitely didn't talk to you about, but when they hire people, they remove the reference checks because they found that reference checks are useless, right? So like, they might do backdoor reference checks, but like, Let's say I'm hiring you, Neil. If whoever you're going to give me is going to put their best foot forward and it's like you never make a negative decision off of like people's references, so you end up wasting a bunch of time. I was like, and I thought about it for a second. I was like, yeah, those references have never helped me. The backdoor references have helped, never going direct. And so I'm like, oh, that's going to save a lot of time.

So we're much smaller than Amazon in headcount, but we still have a lot of employees. We follow up on people's reference checks.

With their references or the backdoor references? Yeah, their references. Yeah, we've been doing it. So we were hardcore about it. We do this thing called extreme reference checking where like, Neil, let's say if we're You're a senior, like a VP or something. We want 2 people that were your managers, 2 people that are your direct reports, and then 2 people that were your peers, right? And then we're just going through all of it and we had it all documented and like, how would you rate this person, everything. And even the person that was— the people that were stellar across the board, they ended up being like— some people were like a nightmare and some people that were like okay, they ended up being superstars.

So, so we don't look at reference checks from that perspective. Uh, funny enough, when people are giving us reference checks, There's a lot of people who are going to say amazing things. That's the majority of them, right? We don't really care too much about those. Funny enough, a few times we've had people actually give them terrible references. They're like, I don't even know why they added me as a reference.

Which is bad judgment. Yes.

So then that has helped us not necessarily hire some people because their reference checks did not pan out. But the way we look at it is if you're going to— someone's going to give you reference checks, almost everyone's going to say positive things. You can pretty much ignore those. And the ones that are negative, if you get those, It is quite a bit telling and it saved you potentially making a bad decision.

Let me give you, let me give you one or two more. I will say when we did the backdoor reference checks, so I might go to you and say, hey, Neil, we're also going to do backdoor reference checks too. Is there anybody you'd like us not to talk to? So not your current employer. Is there anybody else we shouldn't talk to? I remember we went to some backdoor reference checks. Oh my God. One, one person turned out to be like a sexual offender. And it's like, we've never figured out, like we talked to them and they're like running the other direction. Right. But then my, the HR team really loved this person. I was like, sorry. We're just not going to do it. You just never know. By the way, Neil and I have an agency owners group called the Agency Owners Association. All you have to do, just go to marketingschool.io/agency. Once again, it's marketingschool.io/agency to learn more. And now back to the show. They have a program called the Bar Raiser Program, right? So it's like Amazon wants to hire bar raisers. So like you want to— the idea is to continually hire people that are smarter than you. And so they have a bar raiser Like, I can appoint you as a bar raiser in the company if I think you're like top tier. And your job is to— you'll come into the interview process, you're not a hiring manager, you have no— this role doesn't affect you basically. You'll come and say like, do I think this person's a bar raiser or not? So you're going to oversee the process.

Wait, is this for a new hire?

For a new hire.

Okay. Yeah.

So imagine a new hire, like you're kind of overseeing, you're checking in to make sure that like the people, the hiring people, managers are following the process. Also, They have a hiring manager just to make sure they don't repeat the— sorry, the people that are involved with the hiring process are— they have— they're assigned to a certain value, right? And they have like 14 values actually, right? And so you go through the entire list, but it's like, that's to make sure people don't repeat the same thing. And they're asking them historical experience-related questions as it relates to each value, and then they make a decision at the end, right? So it's very thorough.

Yeah.

And I'm like, I've heard of the bar raiser thing in the past. Like, okay, yeah, just hire people smarter than you. But like the way they do it, it's all outlined in this book. And that's why I recommend everyone buy the book. No affiliate commission needed.

Yeah. Look, Amazon's run an amazing company. If you read the book, I haven't read it.

What works for them—

I have an extra copy.

I'll bring one to you.

But what works for them won't really necessarily work for you.

No, you just take what you like and, you know, it's like most things. Yeah.

Because Amazon got in early on the internet. They were smart, amazing execution. They did really well on the cloud side with AWS. But funny enough, you know Microsoft Cloud is growing way faster than Amazon Cloud, right?

How much faster?

I don't have the exact stats, but CNBC—

Azure versus AWS.

Azure versus AWS growth. Let's see if I can come— all right. Revenue at Azure increased 30% in the quarter compared to 13% year-over-year growth at AWS.

Oh, wow. But, but, but AWS has bigger numbers.

Uh, yes. Analysts estimate Azure, which is about half the size of AWS 5 years ago, is now 3/4 of its size.

Okay. Yeah, good growth, but AWS is still a little bigger. Not a little bigger, significantly bigger.

Yeah, but if they— if they're 3/4 of the size, you're 75% there. If you're growing at 30%, someone's growing at 13%.

Oh, I thought you said 1/3 the size for a reason. Some reason.

No, uh, 3/4 the size.

That's different. Yeah.

Azure will catch up really fast.

Yep.

At that growth number.

So why do you think Google and Microsoft are laying people off right now? There's a video with, with, um, what's— who's the CEO of Google? Uh, Sundar. Yes, Sundar. So he made a video on why Google and Microsoft are laying people off, and then his whole thing is we're investing in the future. So what do you think that means?

I think they're just cutting costs to increase stock price and profitability because they got really bloated during COVID Yeah, I mean, you look at Facebook, look at all the costs they cut, right?

And that's why they ripped. What did they go up by? 20, 21% in a day? 25%?

It was something ridiculous.

Did Coinbase go up more on that one day this week?

Uh, I don't know if— I know Coinbase is at $180-something as of the recording of this podcast.

Yep.

But dude, you know, it literally went from $394 to $474. That's what the graph is looking like on, uh, Google Stock. I don't know what Google— or Google Finance.

So how does this apply to you all? What it means is, hey, keep investing in valuable skills because then people will always find value. And the same thing with your business, keep doing useful things for people and then you will get paid. That's all. That's all.

It really is, dude. If you make a company more money, you'll make more money. It really is that simple. If not, go leave to somewhere else, a place that actually values you.

Yep. All right, so that is it for today. Please don't forget to rate, rate, and subscribe. Go to marketingschool.io/agency to register Or apply for our Agency Owners Association. We're actually going to be doing that event May 8th to the 10th, and it's only going to be limited to a certain amount of people. So go apply and we'll see you later. Thank you.