From: acquiredfm
After graduating from college in 1986, Jeff Bezos did not immediately enter finance [00:00:06]. Instead, he began his career working for a startup called Phytel [00:00:08].
Work at Phytel
Phytel was founded by computer science professors from Columbia University [00:00:14] and specialized in developing early network technology for high-speed trading applications [00:00:23]. This technology was a precursor to today’s co-located data centers used by exchanges like NASDAQ and the New York Stock Exchange [00:00:31]. Jeff Bezos worked at Phytel for two years [00:00:38].
His experience at Phytel, being exposed to early networked computing, proved highly beneficial [00:01:04]. It provided him with not just a basic understanding of how these systems worked, but also insights into the practical implications of data flow (bits and bytes, packet counts) and hardware bandwidth, allowing him to conceptualize future applications that could be built on such infrastructure [00:01:11].
Move to Investment Banking
In 1988, Jeff Bezos recognized that the quantitative trading and finance firms, who were Phytel’s customers, were making significantly more money [00:00:55]. This realization prompted his decision to leave Phytel and transition into banking [00:02:36]. Given his computer science background and prior work in network operations for early quant finance, it is presumed he entered the field of quantitative trading and finance [00:02:48]. He joined the investment bank Bankers Trust [00:02:59], which later became part of Deutsche Bank through a series of mergers [00:03:02].
Entrepreneurial Ventures and Connections
While at Bankers Trust, Jeff Bezos maintained his entrepreneurial inclinations [00:03:15]. He befriended Halsey Minor [00:03:19], who later went on to found CNET [00:03:39]. Jeff Bezos and Minor almost started a financial newsletter together [00:03:31]. CNET’s model of distributing written content over the budding World Wide Web resonated with Amazon’s future business of distributing books, albeit physically printed [00:03:51]. Both individuals ultimately started businesses that rode the same technological wave [00:04:05]. Jeff Bezos often chuckled about the irony of starting a business leveraging new technology (the internet) for content distribution, but choosing a physical product (books) rather than hypertext directly in a browser [00:04:16]. Even today, full book content remains largely unsearchable by digital native methods [00:04:38].
Transition to DE Shaw
In 1990, while still at Bankers Trust and considering starting his own venture [00:05:07], Jeff Bezos received a fateful call from a headhunter [00:05:05]. This led him to interview at DE Shaw, a financial firm founded just a couple of years prior [00:05:15]. Jeff Bezos unexpectedly “falls in love” with the firm and its founder, David E. Shaw [00:05:30]. This marked a significant turning point in his career, leading directly to the events that would culminate in the founding of Amazon.
David E. Shaw, a Stanford computer science PhD from the 1980s, became a computer science professor at Columbia University before joining Morgan Stanley in 1986 and founding DE Shaw in 1988 [00:05:42]. His background, combining academia with an interest in finance (influenced by his step-father, a UCLA finance professor) [00:06:16], provided the unique intellectual environment that appealed to Jeff Bezos. The firm was modeled after Jim Simons’ Renaissance Technologies [00:06:39], which achieved exceptional returns, though DE Shaw distinguished itself by viewing itself as more than just a quant hedge fund, but as a group of creative individuals who invested in and started businesses [00:08:03]. This philosophy greatly appealed to Jeff Bezos [00:08:31].
Jeff Bezos quickly ascended at DE Shaw, becoming the fourth senior vice president [00:08:36]. He was the youngest at that level, seen as a rising star and the future of the firm [00:08:47]. He and David Shaw developed a very close relationship, with Shaw likely serving as a mentor [00:08:54]. Jeff Bezos was deeply involved in recruiting brilliant individuals from various disciplines, adhering to the firm’s philosophy of hiring the smartest people regardless of their business or finance knowledge [00:09:11]. Many future key early Amazon employees, such as Jeff Holden and Nicholas Lovejoy, were recruited during this time [00:09:34]. Importantly, he also met MacKenzie Scott at DE Shaw, a Princeton graduate who would become his wife and, arguably, the first employee of Amazon [00:10:01].
Within DE Shaw, Jeff Bezos led projects beyond quantitative trading. His first major project was building the “third market business,” an initiative to create a separate market where retail investors could trade without paying high commissions [00:11:01]. This concept bears resemblance to modern dark pools and payment for order flow [00:11:21].
Given their backgrounds and connections to the internet’s early developers (including David Shaw’s Stanford PhD and Jeff Bezos’s college experience with command-prompt based internet) [00:11:56], David Shaw reassigned Jeff Bezos to explore internet opportunities within the firm [00:12:28]. Together, they developed business plans for internet ventures [00:12:33]. One of their initial ideas was an online retail brokerage for financial trading, similar to E-Trade [00:12:48], possibly an evolution of the third market business Jeff Bezos had been working on [00:12:55]. These early explorations within DE Shaw directly laid the groundwork for his eventual decision to leave and start Amazon.