#282 Jeff Bezos Shareholder Letters

1513 snips

Dec 19, 2022

Explore the art of long-term thinking and customer obsession through insights from Jeff Bezos' shareholder letters. Learn how proactive service builds trust and prioritizes customer satisfaction. Discover the boldness needed for innovation and the importance of embracing risks in business growth. Delve into the transformative power of continuous learning and the necessity of individuality in a conformist world. This is a journey through the principles that set Amazon apart in the competitive landscape.

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ADVICE

Customer Focus and Bold Bets

Focus relentlessly on customers.
Make bold investment decisions where market leadership advantages are probable.

INSIGHT

Bezos' Masterclass

Bezos' shareholder letters offer a crash course in growing internet businesses.
He mastered the art before any established playbooks existed.

ADVICE

Repetition and Urgency

Repetition is key; repeat important principles.
Maintain a sense of urgency due to inherent risks and opportunities.

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My life and work

Ford, Henry, Crowther, Samuel

E. Kalita

Mrs Henry Ford

Henry Ford

Samuel Crowther

Ford Henry 1863-1947

Henry Henry Ford

In this autobiography, Henry Ford recounts his early life on a farm in Michigan, his fascination with mechanics, and his journey to becoming a successful businessman. The book covers his innovative approaches to industry and mass production, his views on business, wages, and social concerns, and how he applied his principles to various sectors beyond the automotive industry. Ford also shares his stringent and sometimes controversial views on life, business, and society[1][3][4].

Made in Japan : Akio Morita and Sony

Akio Morita

Mitsuko Shimomura

Edwin M. Reingold

This book narrates the story of Akio Morita's early life, the formation and success of Sony Corporation in the aftermath of Japan's defeat in World War II, and Morita's insights on business management, international trade, and cultural differences. It covers the development of iconic Sony products like the transistor radio and the Walkman, as well as Morita's perspectives on Japanese and American business practices and global economics. The book provides a unique blend of history, philosophy, and business management, offering valuable lessons for entrepreneurs and those interested in the Japanese way of doing business.

Sam Walton

Made in America

John Huey

Sam Walton

In 'Sam Walton: Made in America,' Sam Walton shares his personal and professional journey, from his early life in Kingfisher, Oklahoma, to the founding and expansion of Walmart. The book is a first-person account supplemented by quotes from friends, family, and colleagues. It highlights Walton's core values, such as the importance of hard work, customer satisfaction, and competitive pricing. The autobiography also provides insights into Walton's leadership style, his approach to business, and the lessons he learned throughout his career. The book was published posthumously in 1993 and offers a compelling and inspiring look at the life of one of America's most successful entrepreneurs.

Creative Selection

Inside Apple's Design Process During the Golden Age of Steve Jobs

Ken Kocienda

In 'Creative Selection,' Ken Kocienda offers a detailed look at Apple's software development process during his 15-year tenure at the company. The book focuses on the 'creative selection' process, a method of iterative development through continuous demos and feedback. Kocienda shares stories of his work on key products like the iPhone, iPad, and Safari web browser, and discusses the essential elements of innovation at Apple, including inspiration, collaboration, craft, diligence, decisiveness, taste, and empathy. The book provides insights into the working culture and decision-making processes under Steve Jobs' leadership.

Invent and Wander

The Collected Writings of Jeff Bezos

Jeff Bezos

Walter Isaacson

This book provides a rare glimpse into how Jeff Bezos thinks about the world and where the future might take us. It spans topics across business and public policy, from innovation and customer obsession to climate change and outer space. Written in a direct, down-to-earth style, it offers readers a master class in business values, strategy, and execution, covering principles such as the importance of a Day 1 mindset, long-term thinking, customer obsession, and the role of culture and failure in innovation.

Zero to One

Notes on Startups, or How to Build the Future

Peter Thiel

In 'Zero to One,' Peter Thiel argues that true innovation comes from creating something entirely new, going from 'zero to one,' rather than incrementally improving existing ideas. He emphasizes the importance of vertical progress through technology and the benefits of monopoly in driving innovation. Thiel also discusses the need for long-term planning, the importance of finding the right co-founders, and the power law in startup success. The book challenges conventional wisdom and encourages readers to think critically and aim big to build the future[2][3][5].

The Everything Store

Jeff Bezos and the Age of Amazon

Brad Stone

The Everything Store is a revealing and definitive biography of Amazon.com and its driven founder, Jeff Bezos. The book chronicles Amazon's journey from its humble beginnings as a mail-order book seller to its transformation into a global retail and technology giant. Brad Stone enjoyed unprecedented access to current and former Amazon employees and Bezos family members, providing a detailed, fly-on-the-wall account of life at Amazon. The book highlights Bezos's relentless pursuit of new markets, his innovative ventures such as the Kindle and cloud computing, and how he transformed retail in a manner comparable to Henry Ford's impact on manufacturing.

Inside Steve's Brain

Leander Kahney

Inside Steve's Brain delves into the intellectual processes and leadership strategies of Steve Jobs, highlighting his focus on innovation, perfectionism, and control. The book provides insights into Apple's product development and Jobs' approach to business, including his emphasis on hiring top talent and creating seamless user experiences. It also explores Jobs' personal struggles and the impact on Apple's future.

What I learned from rereading Jeff Bezos' Shareholder Letters (for the 3rd time!)

Read Jeff's letters in book form: Invent and Wander: The Collected Writings of Jeff Bezos or for free online: Amazon Investor Relations

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[2:30] Amazon hopes to create an enduring franchise

[3:00] Because of our emphasis on the long term, we may make decisions and weigh trade-offs differently than some companies.

[4:00] We will continue to focus relentlessly on our customers.

[4:00] We will work hard to spend wisely and maintain our lean culture. We understand the importance of continually reinforcing a cost-conscious culture.

[4:00] We set out to offer customers something they simply could not get any other way.

[5:00] Word of mouth remains the most powerful customer acquisition tool that we have.

[5:00] We are working to build something important, something that matters to our customers, something that we can all tell our grandchildren about. Such things aren't meant to be easy.

[6:00] "To read Bezos’ shareholder letters is to get a crash course in running a high-growth internet business from someone who mastered it before any of the playbooks were written." — From CB Insights

[7:00] Common themes repeated in Jeff’s letters:

More innovation is ahead of us.

It is still early. The opportunity —if we execute well — is enormous.

We will move quickly.

We will endure. Amazon will be a durable, long-lasting company.

We will focus on cash flow.

Once in a lifetime opportunities will be risky. Jeff gave himself a 30% chance of success— at best.

Customer obsession is our North Star. It is what we will bet the company on.

We will be BOLD.

We will have a frugal, lean culture that Sam Walton would approve of.

This will be hard. All valuable things are.

We will have to learn along the way.

[8:00] Sam Walton: Made In America by Sam Walton. (Founders #234)

[11:00] I would love to ask Jeff the question, “If you could only have one word to describe you on your tombstone, what would it be?” My guess is he would pick “relentless.”

[16:00] We believe we have reached a "tipping point," where this platform allows us to launch new ecommerce businesses faster, with a higher quality of customer experience, a lower incremental cost, a higher chance of success, and a faster path to scale and profitability than any other company. (A company that builds companies)

[17:00] Made in Japan: Akio Morita and Sony by Akio Morita. (Founders #102)

[19:00] We will continue to invest heavily in introductions to new customers. Though it's sometimes hard to imagine with all that has happened in the last five years, this remains Day 1 for ecommerce, and these are the early days of category formation where many customers are forming relationships for the first time. We must work hard to grow the number of customers who shop with us. (He was right about this — what is the lifetime value of an Amazon customer over 17 years?)

[21:00] To us, operational excellence implies two things: delivering continuous improvement in customer experience and driving productivity, margin, efficiency, and asset velocity across all our businesses.

Often, the best way to drive one of these is to deliver the other.

For instance, more efficient distribution yields faster delivery times, which in turn lowers contacts per order and customer service costs. These, in turn, improve customer experience and build brand, which in turn decreases customer acquisition and retention costs.

[22:00] Creative Selection: Inside Apple's Design Process During the Golden Age of Steve Jobs by Ken Kocienda (Founders #281)

[24:00] Jeff Bezos on The Electricity Metaphor for the Web's Future

[27:00] Repeat this loop: Focus on cost improvement makes it possible for us to afford to lower prices, which drives growth. Growth spreads fixed costs across more sales, reducing cost per unit, which makes possible more price reductions. Customers like this, and it's good for shareholders. Please expect us to repeat this loop.

[29:00] The Everything Store: Jeff Bezos and the Age of Amazon by Brad Stone. (Founders #179)

[35:00] My Life and Work by Henry Ford. (Founders #266)

[40:00] Jeff Bezos is unapologetically extreme. He is already the best and still wants to be better.

[41:00] This part is incredible— on the need for good judgement and why data may lead you to make the wrong decision:

Our quantitative understanding of elasticity is short-term. We can estimate what a price reduction will do this week and this quarter. But we cannot numerically estimate the effect that consistently lowering prices will have on our business over five years or ten years or more. Our judgment is that relentlessly returning efficiency improvements and scale economies to customers in the form of lower prices creates a virtuous cycle that leads over the long term to a much larger dollar amount of free cash flow, and thereby to a much more valuable Amazon.

[43:00] Don’t build an undifferentiated commodity business. — Zero to One: Notes on Startups, or How to Build the Future by Peter Thiel. (Founders #278)

[44:00] Differentiation is survival.

[49:00] Missionaries build better products.

[50:00] Long-term thinking levers our existing abilities and lets us do new things we couldn't otherwise contemplate. It supports the failure and iteration required for invention, and it frees us to pioneer in unexplored spaces. Seek instant gratification-or the elusive promise of it-and chances are you'll find a crowd there ahead of you. Long-term orientation interacts well with customer obsession. If we can identify a customer need and if we can further develop conviction that that need is meaningful and durable, our approach permits us to work patiently for multiple years to deliver a solution.

[52:00] Problems are just opportunities in work clothes.

[53:00] Similar idea said two different ways:

Jeff Bezos: The financial results for 2009 reflect the cumulative efforts of 15 years of customer experience improvements.

Peter Thiel: If you focus on near-term growth above all else, you miss the most important question you should be asking: will this business still be around a decade from now?

[55:00] The most radical and transformative of inventions are often those that empower others to unleash their creativity—to pursue their dreams.

[57:00] A dreamy business offering has at least four characteristics.

—Customers love it

—It can grow to very large size

—It has strong returns on capital

—It's durable in time-with the potential to endure for decades.

When you find one of these get married.

[1:03:00] Be a yardstick of quality. Some people aren't used to an environment where excellence is expected. — Inside Steve’s Brain by Leander Kahney. (Founders #204)

[1:03:00] I believe high standards are teachable. High standards are contagious. —Jeff Bezos

[1:04:00] Leaders have relentlessly high standards. Many people may think these standards are unreasonably high.

[1:07:00] The key point here is that you can improve results through the simple act of teaching scope-that a great memo probably should take a week or more.

[1:10:00] Differentiation is Survival and the Universe Wants You to be Typical

In what ways does the world pull at you in an attempt to make you normal?

How much work does it take to maintain your distinctiveness?

To keep alive the thing or things that make you special?

We all know that distinctiveness – originality – is valuable.

What I’m asking you to do is to embrace how much energy it takes to maintain that distinctiveness.

The world wants you to be typical – in a thousand ways, it pulls at you.

Don’t let it happen.

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