AWS

Founders · Apr 8

Working with Jeff Bezos

It grew from the idea of removing undifferentiated heavy lifting after hearing Flickr's founder say half his day went to scaling infrastructure. Its press release promised a dorm-room student the same infrastructure as any Amazon engineer.

Tips

• Bezos spotted undifferentiated heavy lifting, which led to AWS▶ 55:00The early AWS press release and FAQ said a student in a dorm room should get the same world class computing infrastructure as any Amazon engineer.

Acquired · Sep 5

Amazon Web Services

Grew out of Amazon's API mandate and launched with S3 in March 2006 and EC2 in August 2006. It now holds about 39% market share, operating margin rose from 19% in 2015 to about 30%, and contracted revenue tops $100 billion. Launched alone in March 2006. James Hamilton's first month on S3 cost $3.08 with no RFP or approval, then $0.07 the next month for stored test data. Launched August 2006, built largely in isolation by Chris Pinkham's team in Cape Town, separate from Jassy's vision document. Copied the Oracle-style warehouse and needed much customization, so it stayed second to Snowflake. The name informally means a shift away from Big Red, Oracle.

Tips

• Bezos forced every Amazon team to talk only through externalizable service interfaces▶ 46:35This internal API discipline, described in Steve Yegge's famous rant, is what led from a codebase deadlock to externally sellable infrastructure.
• Jeff Bezos answered scaling pain with less communication, not more coordination▶ 41:47Microsoft's answer was to attach a program manager to every few developers, while Amazon removed the need for the conversations.
• AWS began as an internal fix for Amazon's own engineering gridlock, not leftover servers▶ 19:15Vogels wrote in 2011 that AWS was always seen as a business that could grow as big as the retail operation.
• Andy Jassy launched AWS with storage, compute, databases and a CDN together▶ 1:04:41Jassy's 2003 vision document asked for 57 people, which was unheard of at Amazon at the time.
• AWS launched as unopinionated primitives while Microsoft and Google built platforms of the future▶ 1:30:00Microsoft and Google each lost roughly five years of the market, while Amazon ran largely unopposed from 2006.
• AWS made starting a company a credit card purchase, which incumbents could not copy▶ 1:18:40Hamilton's month-one S3 bill was $3.08, and the following month, with only test data stored, it was $0.07.
• AWS won startups first, then used enterprise doubts as a ladder into big companies▶ 1:22:40Netflix moved to AWS in 2009, and Reed Hastings publicly endorsed it at the first re:Invent in 2012, which reassured retailers wary of competing with Amazon.
• Amazon priced AWS at a fraction of incumbents' margins because the old model could not adapt▶ 1:34:50AWS's operating margin was 19.2 percent when it first reported in 2015 and had reached about 30 percent by the time of this episode.
• Amazon cut AWS prices proactively to win share and justify building ahead of demand▶ 2:23:4051 price reductions across AWS services by 2015.
• AWS databases became its stickiest business and Amazon itself took until 2019 to leave Oracle▶ 1:51:00AWS has a contracted revenue backlog of over 100 billion dollars, and databases are among its most used services after EC2 and S3.
• Amazon's focus on what makes the beer taste better drove standardizing infrastructure▶ 48:50Jassy's 2012 re:Invent slide gave six reasons AWS beats traditional infrastructure for enterprises.
• AWS runs machine learning near the customer's data because data gravity beats model quality▶ 2:00:50Google invented TensorFlow and Kubernetes, yet AWS hosts both for customers who already keep data in its cloud.
• AWS rarely kills products because enterprise trust is worth more than a bad service's cost▶ 2:34:40Amazon kept SimpleDB alive, with Netflix reportedly among its users, even after launching DynamoDB.
• Jeff Bezos argued that long-tail business payoffs justify bold bets that fail nine times in ten▶ 2:31:10AWS reached a roughly 80 billion dollar run rate and about 12 billion dollars in 2016 revenue on the way.
• AWS lacks retail's cash float, so it carries a higher cost of capital▶ 2:25:50Amazon's free cash flow turned very negative over the prior twelve months because of data center investment, versus 27 billion dollars in the twelve months to June 2020.
• Chris Pinkham built EC2 from Cape Town at a distance from Bezos's attention▶ 1:13:00Brad Stone reported that EC2 was born in isolation, and Jassy's own account of the 2003 vision document conflicts with the Cape Town version.
• Snowflake won data warehousing because Amazon fought the last battle against Oracle▶ 2:02:10Snowflake reached about a 50 billion dollar valuation while redshift stayed a fast-growing but second-place product.

David Senra · Feb 15

Jason Fried: Your Only Competition Is Your Costs

Leaving AWS to run its own servers in data centers was the one long project at 37signals. Fried expects the move to save about ten million dollars.

Tips

• Fried keeps blubber in the business: cushy margins so mistakes are survivable▶ 1:29:45Leaving AWS for its own data centers is expected to save about ten million dollars.
• Fried plans only six weeks ahead and makes small decisions like a squirrel▶ 39:5799% of projects at 37signals take six weeks or less; the move off AWS was a rare larger exception.

Founders · May 21

Lessons from Jeff Bezos's Shareholder Letters

AWS targets developers' universal needs, storage and compute, where Amazon had 12 years of scaling expertise. Nobody asked for it, and it passes the test of differentiation, size and returns as a self-service platform.

Tips

• Jeff Bezos set a test for new businesses: differentiated, large, and good returns▶ 50:00FBA let sellers store products in a 12 million square foot fulfillment network for 45 cents per month per cubic foot.
• Jeff Bezos built self-service platforms so improbable ideas could be tried without gatekeepers▶ 1:00:10

Acquired · Sep 6

Nvidia Part III: The Dawn of the AI Era (2022-2023)

As a hyperscaler it buys bare Nvidia chips and builds its own systems. It is also pursuing its own Trainium and Inferentia chips.

Lenny's Podcast · Apr 9

Product lessons from Waymo | Shweta Shrivastava (Waymo, Amazon, Cisco)

Shweta was head of product management for AWS database and analytics services. Honeycode was a first-of-its-kind service in a space that had been mostly infrastructure.

Tips

• Disrupt your own product before an upstart does it▶ 28:15She was the first PM on Amazon's Honeycode, a new no-code service in a space AWS had never entered.