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Smart people are a dime a dozen and often don’t amount to much. What counts is being creative and imaginative.
“I have no special talent,” Einstein once said. “I am only passionately curious.” That’s not fully true (he certainly did have special talent), but he was right when he said, “Curiosity is more important than knowledge.”
A second key trait is to love and to connect the arts and sciences. Whenever Steve Jobs launched a new product such as the iPod or iPhone, his presentation ended with street signs that showed an intersection of Liberal Arts Street and Technology Street. “It’s in Apple’s DNA that technology alone is not enough,” he said at one of these presentations. “We believe that it’s technology married with the humanities that yields us the result that makes our heart sing.”
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People who love all fields of knowledge are the ones who can best spot the patterns that exist across nature.
Another characteristic of truly innovative and creative people is that they have a reality-distortion field, a phrase that was used about Steve Jobs and comes from a Star Trek episode in which aliens create an entire new world through sheer mental force. When his colleagues protested that one of Jobs’s ideas or proposals would be impossible to implement, he would use a trick he learned from a guru in India: he would stare at them without blinking and say, “Don’t be afraid. You can do it.”
More than half of US households are members of Amazon Prime, and Amazon delivered ten billion packages in 2018, which is two billion more than the number of people on this planet.
To make the decision, Bezos used a mental exercise that would become a famous part of his risk-calculation process. He called it a “regret minimization framework.” He would imagine what he would feel when he turned eighty and thought back to the decision. “I want to have minimized the number of regrets I have,”
“You know the business plan won’t survive its first encounters with reality,” he says. “But the discipline of writing the plan forces you to think through some of the issues and to get sort of mentally comfortable in the space. Then you start to understand, if you push on this knob, this will move over here and so on. So, that’s the first step.”
“The core of the company is customer obsession as opposed to competitor obsession,” he said. “The advantage of being customer focused is that customers are always dissatisfied. They always want more, and so they pull you along. Whereas if you’re competitor obsessed, if you’re a leader, you can look around and you see everybody running behind you, maybe you slow down a little.”
“We don’t do PowerPoint (or any other slide-oriented) presentations at Amazon,” he wrote in a recent shareholder letter. “Instead, we write narratively structured six-page memos. We silently read one at the beginning of each meeting in a kind of study hall.”
There are three criteria he instructs managers to consider when they are hiring: Will you admire this person? Will this person raise the average level of effectiveness of the group he or she is entering? Along what dimension might this person be a superstar?
Our cash and investment balances, following our May 1998 high yield debt offering and early 1999 convertible debt offering, now stand at well over $1.5 billion (on a pro forma basis), affording us substantial financial strength and strategic flexibility.
axiomatic
W
Operational excellence: 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.
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. If you could know for certain just two things—a company’s future cash flows and its future number of shares outstanding—you would have an excellent idea of the fair value of a share of that company’s stock today.
Ultimately, your determination of cash flow per share will be a strong indicator of the price you might be willing to pay for a share of ownership in any company.
You can make a purchase with a few seconds and one click. We put used products next to new ones so you can choose. We share our prime real estate—our product detail pages—with third parties, and, if they can offer better value, we let them.
quixotic.
W
LONG-TERM THINKING IS both a requirement and an outcome of true ownership.
Why not focus first and foremost, as many do, on earnings, earnings per share or earnings growth? The simple answer is that earnings don’t directly translate into cash flows, and shares are worth only the present value of their future cash flows, not the present value of their future earnings. Future earnings are a component—but not the only important component—of future cash flow per share. Working capital and capital expenditures are also important, as is future share dilution.
Free Super Saver Shipping and Amazon Prime, both of which are expensive in the short term and—we believe—important and valuable in the long term.
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.
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 will continue to measure our programs and the effectiveness of our investments analytically, to jettison those that do not provide acceptable returns, and to step up our investment in those that work best. We will continue to learn from both our successes and our failures.
We will make bold rather than timid investment decisions where we see a sufficient probability of gaining market leadership advantages. Some of these investments will pay off, others will not, and we wi...
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we’ll start with the customer and work backward. In our judgment, that is the best way to create shareholder value. *
Our established businesses are well-rooted young trees. They are growing, enjoy high returns on capital, and operate in very large market segments. These characteristics set a high bar for any new business we would start.
Furthermore, we must believe that the opportunity is currently underserved and that we have the capabilities needed to bring strong customer-facing differentiation to the marketplace. Without that, it’s unlikely we’d get to scale in that new business.
With AWS, we’re building a new business focused on a new customer set: software developers. We currently offer ten different web services and have built a community of over 240,000 registered developers. We’re targeting broad needs universally faced by developers, such as storage and compute capacity—areas in which developers have asked for help, and in which we have deep expertise from scaling Amazon.com over the last twelve years. We’re well positioned to do it, it’s highly differentiated, and it can be a significant, financially attractive business over time.
Anything that has persisted in roughly the same form and resisted change for five hundred 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.
We humans coevolve with our tools. We change our tools, and then our tools change us. Writing, invented thousands of years ago, is a grand whopper of a tool, and I have no doubt that it changed us dramatically.
sinecure
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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.
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.
“Working backward” 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. Eventually the existing skills will become outmoded. Working backward from customer needs often demands that we acquire new competencies and exercise new muscles, never mind how
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We’ve received thousands of feedback emails from customers about Kindle, and—remarkably—26 percent of them contain the word “love.”
A review of our current goals reveals some interesting statistics: 360 of the 452 goals will have a direct impact on customer experience. The word revenue is used eight times and free cash flow is used only four times. In the 452 goals, the terms net income, gross profit or margin, and operating profit are not used once.
Arthur C. Clarke, like any sufficiently advanced technology, it’s indistinguishable from magic.
Q
With AWS, FBA, and KDP, we are creating powerful self-service platforms that allow thousands of people to boldly experiment and accomplish things that would otherwise be impossible or impractical. These innovative, large-scale platforms are not zero-sum—they create win-win situations and create significant value for developers, entrepreneurs, customers, authors, and readers.
our policy could be to require the customer to contact us and ask for the refund. Doing it proactively is more expensive for us, but it also surprises, delights, and earns trust.
arrears.
W
Our business approach is to sell premium hardware at roughly breakeven prices. We want to make money when people use our devices—not when people buy our devices.
All of this progress comes in the context of AWS being the widely recognized leader in its area—a situation where you might worry that external motivation could fail. On the other hand, internal motivation—the drive to get the customer to say “Wow”—keeps the pace of innovation fast.
indelible
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The reason cultures are so stable in time is because people self-select.
Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right.
Given a ten percent chance of a one hundred times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten.
no matter how good an entrepreneur you are, you’re not going to build an all-composite 787 in your garage start-up—not one you’d want to fly in anyway. Used well, our scale enables us to build services for customers that we could otherwise never even contemplate.
AWS is made up of many small teams with single-threaded owners, enabling rapid innovation. The team rolls out new functionality almost daily across seventy services, and that new functionality just “shows up” for customers—there’s no upgrading.
