Levy: Let’s talk about web services. Amazon Web Services is dominant in hosting—one observer says that you are the Coke of the field, and there’s no Pepsi. How did an ecommerce site wind up in the position where it’s hosting web powerhouses like Foursquare, NASA, Netflix, and The New York Times? … Young startups all tell me that even if Google offers them free hosting, they still want to use Amazon.

Why do you think that is?


Jeff Bezos: We were determined to build the best services but to price them at a level that customers couldn’t match, even if they were willing to use inferior products. Tech companies always have high margins, except for Amazon. We’re the only tech company with low margins.


Levy: How did you do it?


Jeff Bezos: We really obsess over small defects. That’s what drives up costs. Because the most expensive thing you can do is make a mistake. We can afford to focus on smaller and smaller defects and eliminate them at their root. That reduces cost, because things just work.

December 2011