20 Years of Wisdom From Amazon's Jeff Bezos
When it comes to shareholder letters, none are more popular than the annual missive from Berkshire Hathaway's Warren Buffett. And rightfully so: Buffett is arguably the world's greatest investor, and his pithy wisdom is easy for everyone to digest.
But there's another Founder/CEO giving Buffett a run for his money: Over the last 20 years, Amazon's (NASDAQ: AMZN) Jeff Bezos has been putting pen to paper and churning out the same type of actionable wisdom we should all be reading.
Here's the most important nugget from each one of those 20 letters.
1997: We're focused on the long term
From the outset, Bezos made it clear that he would ignore Wall Street's modus operandi and focus on the uber-long-term:
1998: Here's how you hire right
This year's snippet is somewhat out of context from the rest, but it still offers insight into how the company hired some of the brightest minds available in the late 1990s:
- Will you admire this person? ...
- Will this person raise the average level of effectiveness of the group they're entering? ...
- Along what dimensions might this person be a superstar?
1999: E-shopping is as bad as it'll ever be
It might seem obvious now, but Bezos very clearly foresaw how e-commerce would change over time.
The real Jedi mind trick is accepting this: Bezos would probably say the online shopping experience right now is much worse than it will be moving forward.
2000: We're learning from our mistakes
Like all dot-coms, Amazon suffered when the tech bubble burst. Bezos admits that he, too, got carried away:
2001: Here's why we've started cutting prices
Starting in 2001, the company started lowering prices on goods. The "loop" he mentions below will be covered in MBA classes for decades:
2002: We can have our cake and eat it, too (low prices and customer service)
If a brick-and-mortar wants outstanding service, it needs to spend more money on hiring and bells and whistles. Not so with e-commerce:
2003: Let's revisit what long-term thinking looks like
Bezos comes back to long-term thinking a lot. Here, he explains the difference between "owners" of Amazon stock and "tenants."
2004: Free cash flow is more important than earnings
While the example he uses is a bit far-fetched, Bezos provides an example of a business that can generate outstanding profits on paper and be a cash-losing business when it comes to money in the bank.
2005: Data is good, but long-term judgement is better
Another long-term differentiator of Bezos is that he balances when to use data to make decisions, and when to ignore it and focus on what data can't measure:
2006: How to decide to go after a new opportunity
Optionality -- i.e., being able to pursue multiple lines of business moving forward -- is a key characteristic of Amazon. Bezos looks for three things in such lines of business.
2007: Can we really replace a 500-year old invention (the book)?
To get an idea for the kind of outside-the-box thinking that happens in Amazon's C-Suite, look at how Bezos described the mindset used when designing the Kindle.
2008: Should we focus on our unique skills or our customers? Customers -- always customers!
Lots of companies like to focus on their strengths. There's nothing wrong with that. As Bezos describes, though, there's a better long-term way.
2009: How to set goals
Amazon sets a lot of goals. Almost none of them have to do with financial outcomes. Instead, they focus on what they can control: the process.
2010: We're using AI, and it's making a difference
This is the biggest sleeper (for non-IT folks) of these letters. Bezos gets into the nitty-gritty of how Amazon constructs its technology to make the business better. The most important takeaway: its forging into unexplored territory.
2011: Eliminating gate-keepers helps the world...and us
Some believe Amazon is a monopoly that needs to be disbanded. But detractors must acknowledge that Amazon Web Services (AWS), Kindle Direct, and Fulfillment by Amazon (FBA) have eliminated gate-keepers and allowed smaller businesses and authors to flourish for a relatively small fee:
2012: Be customer-focused, not competition-focused
Amazon worries more about fulfilling its mission than about what the competition is up to.
2013: How we invent at Amazon
The embrace of failure at Amazon is legendary, leading to lots of small failures...and a few huge wins.
2014: Amazon is now married to these three businesses
Starting in 2014, Bezos made it clear that three lines of business were driving most of Amazon's results: the online market place, Prime, and AWS.
2015: Two-way doors vs. one-way doors
Bezos realizes that most decisions are reversible. You can use his advice below in almost every facet of your life.
2016: How to make high-velocity, high-quality decisions
Continuing last year's two-way door theme, Bezos makes it clear that he intends to continue pushing very hard to make such decisions as fast as possible.
2017: Got standards?
Finally, Bezos reflects on high standards. While most people can identify what those standards look like, there's a missing piece.
The great thing about such wisdom is that it's valuable not only to business owners, but also to investors. Focus your time and attention on companies that emulate many of the values Bezos preaches, and you're likely to find winning investments that help you achieve your own financial independence.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Brian Stoffel owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
