The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google

by Scott Galloway

The internet is the fastest-growing channel in the largest economy in the world, and Amazon is capturing the majority of that growth.

With retail growth essentially flat across the American economy, Amazon’s growth must be coming from somewhere.

Who’s losing?

Ever...

Too many stores, flat wages, changing tastes, and Amazon have created the perfect storm for retail.

The equity markets now believe that what’s good for Amazon is bad for retail, and vice versa.

It’s a situation almost unique in business history. And it has become a self-fulfilling prophecy,

as Amazon’s cost of capital declines while every other re...

There’s no checkout.

Whom does this latest Amazon maneuver put at risk? The 3.4 million Americans (2.6 percent of the U.S. workforce) employed as cashiers.

That’s a lot of workers—close to the number of primary and secondary school teachers in the United States.

Amazon’s customers trust it so much that they’re allowing the company to listen in on their conversations and harvest their consumption data.

This will give Amazon deeper penetration into the private lives and desires of consumers than any other company.

Leveraging big data and unrivaled knowledge of consumer purchasing patterns, Amazon will soon meet your need for stuff, without the friction of deciding or ordering.

Amazon made a move in the direction of zero-click ordering when it launched its Wardrobe service in June 2017, allowing customers to choose clothes and accessories to try on at home before deciding which to keep.

We are witnessing the great reckoning in retail.

Amazon’s unwavering focus on making consumer purchases increasingly frictionless, its facility with investor relations, and its decision to invest in B2B (platform services for competitors) place it in the pole position for the race to a trillion.

Amazon already knows a great deal about you and me.

Pretty soon it will know more about our shopping preferences than we know ourselves.

And we’re cool with that—we will have voluntarily handed over a...

The retentless focus of removing friction is what makes Amazon stand apart

Amazon has had more access to cheaper capital for a longer period than any firm in modern times.

Most successful VC-backed tech companies in the nineties raised less than $50 million before showing a return to investors.

By comparison, Amazon raised $2.1 billion in investors’ money before the compa...

invest tens, maybe hundreds, of millions of dollars on development and marketing, have it fail within the first thirty days, and then treat the whole disaster as a speed bump.

Now that is patient capital.

as shareholders screamed, the CEO of another company would blink and pull in its horns.

Not Amazon. Why?

This cuts to Amazon’s core competence: storytelling.

Through storytelling, outlining a huge vision, Amazon has reshaped the relationship between company and shareholder.

Amazon has exploded this tradition, replacing profits with vision and growth, via storytelling.

Thanks to a rate of growth that reflects a steady march toward this vision, the market bids Amazon stock higher and provides the firm with exceptionally cheap capital.

In addition, Amazon has trained the Street to hold them to a different standard—to expect higher growth but lower profits.

That enables the company to take the (substantial) incremental gross margin dollars it earns each year and plow more capital back into the business—and avoid that whole tax thing.

And that in turn funds the digging of deeper and deeper moats ...

Amazon business thinking: If we can borrow money at historically low rates, why don’t we invest that money in extraordinarily expensive control delivery systems?

That way we secure an impregnable position in retail and asphyxiate our competitors. Then we can get really big, fast.

What is remarkable to me is less Amazon's strategy but rather how exceptional it is compared to everyone else - they are so risk averse, they are intentionally underinvesting in their businesses in favor of accounting gimmicks such as share buybacks to artifically boost metrics and performance bonuses.

Through earnings call after earnings call, Amazon reinforces its vision of growth, downplays profits, and reminds its shareholders that it doesn’t ever pay dividends.

have more adoption and buzz than any consumer hardware product since the iPad.

The overlooked lesson here, other than having a shit-ton of capital, is the willingness to perform infanticide on initiatives or products that aren’t working, thus freeing up capital (in Amazon’s case, human capital) to start new crazy initiatives.

My experience in traditional firms is that anything new is seen as innovative, and the people assigned to it, like any parent, become irrationally passionate about the idea and refuse to acknowledge just how stupid and ugly your little project has become.

As a result, traditional companies not only have less capital to invest but fe...

Amazon demonstrates real discipline around not ramping up investment until they k...

Bezos’s perpetual message is that it’s Amazon’s nature to swing for the fences on a regular basis.

the home runs of Amazon Prime and AWS produced several thousand runs

“Given a 10 percent chance of a hundred times payout, you should take that bet every time.”

Needless to say, most CEOs don’t think this way.

Most won’t even take risks that have less than a 50 percent chance of success—no

no matter how big the potent...

This is a big reason why old-economy firms are leaking value t...

Today’s successful companies may have the assets, cash flow, and brand equity, but they approach risk differently than many te...