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21 Amazing Lessons From Amazon And CEO Jeff Bezos

Chief Executive editor-at-large Jeff Cunningham takes a deep dive into Jeff Bezos' annual letters to shareholders, and unearthed some keys to Amazon's unbelievable success.
Jeff Bezos
Jeff Bezos
Credit: Amazon

After five Jeff Bezos articles this year, I could be accused of being a Bezos fanboy. Guilty as charged.

Now, a new piece of research from CB Insights on the palpable wisdom behind Bezos’ annual letters rekindled my enthusiasm. (ouch).  Bezos ended his first letter in 1997 by reminding “Amazon’s shareholders that it was their responsibility to decide whether this was a thesis worth investing in. In the opinions of many analysts of the time, it was not.”

If you look at Amazon stock prices over the past 21 years, the company grew from $5 per share to over $1800. That’s the well known but less interesting fact. What matters more in terms of business longevity is that Amazon increased employment—largely among working class and minority communities—to over 500,000 people, making it America’s second largest employer behind Walmart. To those with a hobby for virtue shaming, aimed at any company that doesn’t provide lattes for small elite workforces in Newport Beach or Sausalito, this is what makes capitalism great again.

Amazon share prices trending upward.

In Bezos’ case, his methods are his madness. Based on his performance, all chief executives would be wise to go a bit insane by taking the message from these letters to heart—and mindset.

Herewith, Bezos’ annual letters over 21 years, spelling out his vision for customers, innovation, products.

2017: Build high standards into the company culture

“How do you stay ahead of ever-rising customer expectations? There’s no single way to do it — it’s a combination of many things. But high standards (widely deployed and at all levels of detail) are certainly a big part of it. We’ve had some successes over the years in our quest to meet the high expectations of customers. We’ve also had billions of dollars’ worth of failures along the way. With those experiences as a backdrop, I’d like to share with you the essentials of what we’ve learned (so far) about high standards inside an organization.”

2016: Move fast and focus on outcomes

“Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”

2015: Don’t deliberate over easily reversible decisions

“Some decisions are consequential and irreversible or nearly irreversible – one-way doors — and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. . . . But most decisions aren’t like that — they are changeable, reversible — they’re two-way doors. . . . [These] decisions can and should be made quickly by high judgment individuals or small groups.”

2014: Bet on ideas that have unlimited upside

“A dreamy business product has at least four characteristics. Customers love it, it can grow to very large size, it has strong returns on capital, and it’s durable in time—with the potential to endure for decades. When you find one of these, don’t just swipe right, get married.”

2013: Decentralize decision-making to generate innovation

“We have the good fortune of a large, inventive team and a patient, pioneering, customer-obsessed culture — great innovations, large and small, are happening everyday on behalf of customers, and at all levels throughout the company. This decentralized distribution of invention throughout the company — not limited to the company’s senior leaders — is the only way to get robust, high-throughput innovation.”

2012: Surprise and delight your customers to build long-term trust

“When we’re at our best, we don’t wait for external pressures. We are internally driven to improve our services, adding benefits and features, before we have to. We lower prices and increase value for customers before we have to. We invent before we have to.”

2011: Self-service platforms unlock innovation

“I am emphasizing the self-service nature of these platforms because it’s important for a reason I think is somewhat non-obvious: even well-meaning gatekeepers slow innovation. When a platform is self-service, even the improbable ideas can get tried.”

2010: R&D should pervade every department

“And while many of our systems are based on the latest in computer science research, this often hasn’t been sufficient: our architects and engineers have had to advance research in directions that no academic had yet taken. Many of the problems we face have no textbook solutions, and so we — happily — invent new approaches.”

2009: Focus on inputs — the outputs will take care of themselves

“Senior leaders that are new to Amazon are often surprised by how little time we spend discussing actual financial results or debating projected financial outputs. To be clear, we take these financial outputs seriously, but we believe that focusing our energy on the controllable inputs to our business is the most effective way to maximize financial outputs over time. . . . Our goal-setting sessions are lengthy, spirited, and detail-oriented. We have a high bar for the experience our customers deserve and a sense of urgency to improve that experience.”

2008: Work backwards from customer needs to know what to build next

“’Working backwards’ from customer needs can be contrasted with a ‘skills-forward’ approach where existing skills and competencies are used to drive business opportunities. The skills-forward approach says, ‘We are really good at X. What else can we do with X?’ That’s a useful and rewarding business approach. However, if used exclusively, the company employing it will never be driven to develop fresh skills.”

2007: Missionaries build better products

“We started by setting ourselves the admittedly audacious goal of improving upon the physical book. We did not choose that goal lightly. Anything that has persisted in roughly the same form and resisted change for 500 years is unlikely to be improved easily. At the beginning of our design process, we identified what we believe is the book’s most important feature. It disappears. When you read a book, you don’t notice the paper and the ink and the glue and the stitching. All of that dissolves, and what remains is the author’s world.”

2006: Nurture your seedlings to build big lines of business

“In some large companies, it might be difficult to grow new businesses from tiny seeds because of the patience and nurturing required. In my view, Amazon’s culture is unusually supportive of small businesses with big potential, and I believe that’s a source of competitive advantage.”

2005: Don’t get fixated on short-term numbers

“Math-based decisions command wide agreement, whereas judgment-based decisions are rightly debated and often controversial, at least until put into practice and demonstrated. Any institution unwilling to endure controversy must limit itself to decisions of the first type. In our view, doing so would not only limit controversy — it would also significantly limit innovation and long-term value creation.”

2004: Free cash flow enables more innovation

“Though some may find it counterintuitive, a company can actually impair shareholder value in certain circumstances by growing earnings. This happens when the capital investments required for growth exceed the present value of the cash flow derived from those investments.”

2003: Long-term thinking is rooted in ownership

“Long-term thinking is both a requirement and an outcome of true ownership. Owners are different from tenants. I know of a couple who rented out their house, and the family who moved in nailed their Christmas tree to the hardwood floors instead of using a tree stand. Expedient, I suppose, and admittedly these were particularly bad tenants, but no owner would be so short-sighted. Similarly, many investors are effectively short-term tenants, turning their portfolios so quickly they are really just renting the stocks that they temporarily ‘own.’”

2002: Build your business on your fixed costs

“One of our most exciting peculiarities is poorly understood. People see that we’re determined to offer both world-leading customer experience and the lowest possible prices, but to some this dual goal seems paradoxical if not downright quixotic. Traditional stores face a time-tested tradeoff between offering high-touch customer experience on the one hand and the lowest possible prices on the other. How can Amazon.com be trying to do both?”

2001: Measure your company by your free cash flow

“Why focus on cash flows? Because a share of stock is a share of a company’s future cash flows, and, as a result, cash flows, more than any other single variable, seem to do the best job of explaining a company’s stock price over the long term.”

2000: In lean times, build a cash moat

“The year 2001 will be an important one in our development. Like 2000, this year will be a year of focus and execution. As a first step, we’ve set the goal of achieving a pro forma operating profit in the fourth quarter. While we have a tremendous amount of work to do and there can be no guarantees, we have a plan to get there, it’s our top priority, and every person in this company is committed to helping with that goal. I look forward to reporting to you our progress in the coming year.”

1999: Build on top of infrastructure that’s improving on its own

“The current online shopping experience is the worst it will ever be. It’s good enough today to attract 17 million customers, but it will get so much better. Increased bandwidth will result in faster page views and richer content. Further improvements will lead to ‘always-on access’ (which I expect will be a strong boost to online shopping at home, as opposed to the office) and we’ll see significant growth in non-PC devices and wireless access. Moreover, it’s great to be participating in what is a multi-trillion dollar global market, in which we are so very, very tiny. We are doubly-blessed. We have a market-size unconstrained opportunity in an area where the underlying foundational technology we employ improves every day. That is not normal.”

1998: Stay terrified of your customers

“I constantly remind our employees to be afraid, to wake up every morning terrified. Not of our competition, but of our customers. Our customers have made our business what it is, they are the ones with whom we have a relationship, and they are the ones to whom we owe a great obligation. And we consider them to be loyal to us — right up until the second that someone else offers them a better service.”

1997: Bring on shareholders who align with your values

“We first measure ourselves in terms of the metrics most indicative of our market leadership: customer and revenue growth, the degree to which our customers continue to purchase from us on a repeat basis, and the strength of our brand. We have invested and will continue to invest aggressively to expand and leverage our customer base, brand, and infrastructure as we move to establish an enduring franchise. Because of our emphasis on the long term, we may make decisions and weigh tradeoffs differently than some companies.”

Links to Jeff Bezos’ Shareholder Letters (1997-2017)

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