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Why Google is a better company than Amazon and the Future of Work-Life Integration

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Ever since the NY Times article came out last week regarding the dictatorial high turn-over corporate working environment at Amazon, I have noticed an influx in blog entries by prominent people defending the Amazon corporate model and asserting that working long, arduous hours at the sacrifice of personal life is the only way to succeed and that the new technocratic class of Gen Yers who demand more of a work/life balance do not understand the ethics of work.

Let's look at the facts.

First of all, despite the hype of Amazon and the rise of eCommerce startups and companies in general; overall, Amazon has not been a profitable entity in the way Google or Netflix have. In fact, Amazon has not reported a meaningful profit in the last 20 years. Although they posted a $92 million net income in their latest quarterly report, primarily they have been vacilliating between net losses (eg, -$126 million (Q2 2014) -$437 million (Q3 2014) $214 million (Q4 2014) -$57 million (Q1 2015) and $92 (Q2 2015) etc). 

Currently, Amazon has between 1%-1.5% of the US retail market by value and utilising its cash flow for capital expenditures, in its bet to capture a larger segment of the global retail market.

This strategy is parallel to Uber Technologies and other US startups such as Snapchat, in which the primary focus is on growth and not net income. In essence, these companies are betting on the assumption that they will be able to capture the larger global market and gain tremendous growth in the process, while all of their free cash flow (FCF) is spent on capital expenditures (capex).

Obviously this strategy becomes problematic because a lot of the burn is directly financed by investors who are often told that their return will be astronomical on the assumption that these companies will be eventually able to capture a large segment of the global market.

However, in practice, what often happens is that a significant portion of companies fail because they expand too quickly into global regions, whilst their capex rapidly increases with a negative FCF, and many clone companies crop up in which competition becomes too fierce. This is something that happened with Groupon, and all of its clone companies; expansion at a rapid rate with skyrocketing capex, whilst its FCF turned negative. Amazon has not reported a positive FCF throughout the last 5 quarterly reports. (source: Google finance)

Google is a company that has a history of strong net income and also was able to expand into many global regions through a variety of methodolgies in addition to having a positive FCF while also spending around 25-50% of their FCF into capex.

However, that might be the difference between the leadership styles of Eric Schmidt and Jeff Bezos.

As Google was in its early expansion phases in the late 90s and early 2000s, then CEO (and now chairman) Eric Schmidt, along with the Google founders created a corporate culture that went directly against the traditional corporate culture that Amazon exemplifies. Instead of treating employees as an infinite series of shifting bodies with a high turnover, the trio (Schmidt, Brin, Page) instead began a culture of what we know today as that work-life integration, when work automatically merges with personal life, where there is high level of flexibility in the working environment and the end goal is project driven, and not micromanaged by how many hours one puts into the office.

"The culture of working enormously long hours is ingrained in many workplaces. But for men in particular, it also has a lot to do with comparing themselves to peers. When men don’t work as much as colleagues and friends, they report being unhappy and shift their work schedule to match or better them."

I think this delineates a very important distinction between thinkers who abide by post-Industrial 80s corporate America and the new technocratic generation of thinkers who see productivity as more important than "conspicious work" or what I call "busywork".

As a personal anecdote, many friends from Samsung have related similar experiences to me, in which simply the appearance of being at the office and sitting at one's desk doing nothing is perceived as being a good employee as opposed to accomplishing goals set by the company. As one current female Samsung employee told me:

"Samsung does not like outliers, they don't like people who are high achievers, they prefer people who are good at taking orders and able to put in late hours at the office and on the weekends." -Female Samsung employee

This lack of innovation policy might be one of the reasons why Samsung is unable to create any new products on their own- rather, what they are best at doing is copying other company products sold at a cheaper price. Another current Samsung employee told me that although they technically have a gym that employees are able to use at any time, it is frowned upon that anyone uses the gym until after working hours. The company is also so paranoid that their own employees will leak information to other companies that they also have in place a policy in which one has to cover up their camera phones with stickers when they enter the building, so that no employee can take photos of what they might be working on.

These kinds of practices are indicative of a bygone era: post-Communist Russia and China, and post-Industrial 80's America when workers were seen as exchangable entities and not valued contributors to the company.

Although currently Amazon has been idolised in the media again due to their skyrocking equity shares even at the lack of significant profitability, one really does have to wonder, at what price are people willing to idolise that particular Amazon model, in which a significant portion of their employees despise their own corporate culture, when the model proven by Google, Netflix and others move towards a future when "work" isn't about putting in long hours at the office in the evenings and on the weekends but working smart?

"Working smart" is a more significant gauge of productivity than "working hard and long," and are contraindicative of each other and Google understands this concept, but Amazon does not.

"I would hearken back to the quote that we have in the book from Marissa Mayer, where she said that resentment comes from being told what to do and when to do it. I think you really want to give people the flexibility to manage their own time relative to their own work deadlines and strike their own dynamic in terms of how to be spending their time." - Jonathan Rosenberg, Google Executive

After all, what might take one person 10 hours to do something, might take another person one hour to accomplish. I have seen many people, who supposedly are experts in IT in the US, simply struggling with getting the basics of their printer to work from their laptop week after week, whilst bragging about all the hours they put into the office whilst pushing employees to skip lunch. Others I've seen just sit in front of their computer whilst reading non-essential emails all day, pretending to be busy. Work isn't really quantifiable by hours, but by a personal methodology around a supportive environment that embraces flexibility.

I, however, do admire colleagues such as one of my Co-Founders, who sits as a Non-Executive Director for one of my startups, juggles many projects at once, and also is a Managing Partner at McKinsey & Co and formerly a Managing Director and Partner at Accenture. He is someone who works hard, but also works smart, never misses a meeting without advance notice, travels a great deal, but understands the work-life balance, and also spends a lot of time with his family planning incredible holidays around the world. He understands the meaning of work without sacrificing the humanity behind work. I think there is a misconception that success comes at the price of renouncing time with your family. When flexibility becomes an integral part of the workspace, then an inherent work-life balance becomes more evident in which work naturally blends with one's life.

For women though, that decision most likely revolves around planning a family. One of my cousins, who has her own medical practice in New York City and is a professor at NYU, didn't start a family until she was in her 40s. It wasn't until she had the flexibility of starting her own practice that she made the decision to have a child. She still works just as hard, and just as smart, but inevitably one of the key aspects of being the head of your own business is deciding when and where to work. Also, Kathleen Kennedy, whom I consider a world class Hollywood producer, and one of the first people I had met when I lived in Los Angeles, also followed a similar kind of career trajectory. She also delayed having children until after she started her own production company, the Kennedy/Marshall Company with her husband after working with such directors as Steven Spielberg. I remember one of the best advice she gave me was, "You have to follow your instinct, and don't do what other people think you should do."

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Kathleen Kennedy with her husband and two young daughters at the opening of Benjamin Button

In fact, a key aspect of starting one's own business is the inherent flexibility involved. If all organisations were to adopt the Google, Netflix model of corporate structure, there would be less capital wasted on a high turnover of employees. Perhaps in this new era, with many services becoming automated, and the advent of AI, we will be reinventing the corporate model before the Industrial Era, when job security was guaranteed, and employees had a job for life instead of the current era of perpetual wanderlust and dissatisfaction with their work environment.