It would be difficult to deny that Amazon.com (NASDAQ:AMZN) has been one of the most revolutionary companies of the current century. The enterprise has grown from an online bookseller into one of the world’s largest retailers. At the same time, it has helped revolutionize the cloud computing industry, the advertising industry and the retail industry in general.
Before Amazon introduced its streamlined online ordering system and two-day (and later one-day) delivery service, e-commerce was still a clunky experience. Other retailers have yet to catch up with Amazon in this regard.
Much of the company’s success can be attributed to the drive of its CEO and founder Jeff Bezos.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Advice from the founder ” data-reactid=”21″>Advice from the founder
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="In my opinion, Bezos is one of the best company managers of all time, up there with Warren Buffett (Trades, Portfolio), Jack Welch, Bill Gates (Trades, Portfolio) and Henry Singleton. His approach to capital allocation, dynamic management and product development is almost unrivaled.” data-reactid=”22″>In my opinion, Bezos is one of the best company managers of all time, up there with Warren Buffett (Trades, Portfolio), Jack Welch, Bill Gates (Trades, Portfolio) and Henry Singleton. His approach to capital allocation, dynamic management and product development is almost unrivaled.
It was clear that Bezos was committed to creating value for his investors through innovation and reinvestment from the very beginning. As the founder explained in his first-ever letter to shareholders of the newly public Amazon Corporation in 1997:
“We believe that a fundamental measure of our success will be the shareholder value we create over the long-term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model.”
“Because of our emphasis on the long-term, we may make decisions and weigh tradeoffs differently than some companies… We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions…We aren’t so bold as to claim that the above is the ‘right’ investment philosophy, but it’s ours, and we would be remiss if we weren’t clear in the approach we have taken and will continue to take.”
In an interview with Business Insider’s Henry Blodget in 2014, Bezos re-iterated this stance:
“One of my jobs is to encourage people to be bold. It’s incredibly hard. Experiments are, by their very nature, prone to failure. A few big successes compensate for dozens and dozens of things that didn’t work. Bold bets — Amazon Web Services, Kindle, Amazon Prime, our third-party seller business — all of those things are examples of bold bets that did work, and they pay for a lot of experiments.”
Bezos went on to say that while he’s “made billions of dollars of failures,” in the long-run, none of these failures really matter. What matters the most is innovation, and you’re never going to have a 100% success rate with innovative projects:
“What really matters is, companies that don’t continue to experiment, companies that don’t embrace failure, they eventually get in a desperate position where the only thing they can do is a Hail Mary bet at the very end of their corporate existence. Whereas companies that are making bets all along, even big bets, but not bet-the-company bets, prevail. I don’t believe in bet-the-company bets. That’s when you’re desperate. That’s the last thing you can do.”
This attitude continues to prevail at Amazon to this day. That’s why the company has been so successful over the past few decades. As long as managers continue to pursue this course, it is reasonable to believe that the company’s growth will continue for the foreseeable future.
Investors can take a lot away from these comments. Companies that continually innovate and reinvest earnings back into their operations yield some of the best investment performances over the long run.
Disclosure: The author owns no share mentioned.
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