Focus on what makes your beer taste better. – Jeff Bezos

Disclaimer: This blog post was written by someone whose company is hosted entirely on AWS

Beer and Startups

In 2008, Bezos told the YC batch a story of European Breweries in the 20th Century and electricity consumption. Breweries found that they were significantly more effective at producing beer provided they had access to electricity. Given the time period, these breweries had to build their own power generators that were incredibly complex and expensive.

As time went on, utility companies were created and could provide power cheaply to breweries. Breweries which got electricity from utility companies were able to outperform the breweries with in house electricity. Breweries with in house electricity were spending all of their time and money on fixing and running generators instead of making their beer taste better.

Bezos ends the parable with a lesson to the YC batch: “Focus on what makes your beer taste better“. This was right after the launch of AWS, and the true meaning behind the lesson was clear. Host your application on AWS, we’ll take care of the electricity and you make your beer taste better.

I love this advice. It’s something that I think every PM and Startup founder needs to have on loop. David Sacks said that his most common word at Paypal was “NO”. Startups can’t magically outperform incumbents on every aspect, they can outperform on a single spike that they devote all of their energy to.

Cheap Beer Tastes Better

Bezos is one of the best entrepreneurs of the internet age. Amazon has changed the way the world shops, it caused the death of malls and built a logistics network that can put a book in your hand within two hours with the press of a button.

What’s strange is that Bezos doesn’t follow his own advice.AWS has enabled an incredible number of startups by building infrastructure and a support system for every company on the internet. AWS is the utility provider of the internet age. Why share a story of the importance of separating businesses and utility providers while investing so much time, effort, and money to combine a business and utility provider.

This discrepancy is why I wanted to write this post. In my ideal future, every time someone on Linkedin shares the beer quote, there should be a mandatory disclaimer that Bezos didn’t follow his own advice. The reason is simply because Bezos understands that cheap beer tastes better.

Thanks to AWS’s ridiculously high profit margins, Amazon can afford to charge lower costs for it’s goods and services. This means Amazon can produce cheaper beers than it’s competitors while getting electricity at cost.

Selling Electricity

A true equivalence for Bezos story above is if one of the breweries started to sell their electricity to the nearby towns and using the profits to make cheaper beer driving the rest of the breweries either out of business or reliant on electricity.

Selling Electricity is a strategy that I think a lot more organizations should pursue. At it’s core, even the simplest startup has created something novel that is required for their success. See if you can resell these capabilities to a new set of customers. Try to identify markets that you can serve not by your product, but by the components required to create your product. Who knows, you might even decide to only become a utility business.