Helping customers make better purchase decisions
Jeff Bezos letter to shareholders 2002
Key message 7/22
Jeff Bezos has been writing a letter to shareholders since 1997 and looking at all if them gives an insight to the organisation and a masterclass in leadership. This is a series of short blogs that gives you a snap shot / key takes outs of each letter, along with links to them all.
“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.’”
If you want to build a successful company for the long term, build a company of owners.
With the mentality of a service provider, you will seek short-term gains and sacrifice future growth.
With the mentality of an owner, you will always act in the best interests of your customers and your team. In the end, the work you do acting as an owner will coincide with the interests of your shareholders.
It can be difficult to take a long-term view when Wall Street and other stakeholders tend to look for fast results. Doing the best thing for the long-term needs of your company doesn’t always coincide with the most expedient or profitable thing in the short term.
That’s because “many investors are effectively short-term tenants,” Bezos writes. Many investors are not looking for long-term success — they want dividends tomorrow.
But it’s not just a problem for investors: the short-term focus also tends to infect the people who run companies.
Thinking long term and building a successful growth company means getting out of that short-term investor mindset and thinking like an owner.
Taking a long-term view often requires deep consideration of your business model, and it doesn’t always make everyone happy.
When Amazon first started allowing customers to review their products, they got angry feedback from some vendors who asked why they allowed negative reviews on a site where profit came from sales.
For Bezos and the rest of Amazon, customer reviews were built with a long term goal in mind: that customers would trust Amazon to provide them with quality products and transparent information. Though negative reviews cost sales in the short term,” he writes, “helping customers make better purchase decisions ultimately pays off for the company.”
The same goes for Amazon’s pricing: “Our pricing strategy does not attempt to maximize margin percentages,” he writes, “but instead seeks to drive maximum value for customers and thereby create a much larger bottom line.”
Every decision that gets made at Amazon gets made through “the context of the customer experience.” They design it with long-term owners in mind. And in the end, they trust — and ask that their shareholders trust — that it will ultimately pay off.
link to all letters to shareholders
- 1997: Bring on shareholders who align with your values
- 1998: Stay terrified of your customers
- 1999: Build on top of infrastructure that’s improving on its own
- 2000: In lean times, build a cash moat
- 2001: Measure your company by your free cash flow
- 2002: Build your business on your fixed costs
- 2003: Long-term thinking is rooted in ownership
- 2004: Free cash flow enables more innovation
- 2005: Don’t get fixated on short-term numbers
- 2006: Nurture your seedlings to build big lines of business
- 2007: Missionaries build better products
- 2008: Work backwards from customer needs to know what to build next
- 2009: Focus on inputs — the outputs will take care of themselves
- 2010: R&D should pervade every department
- 2011: Self-service platforms unlock innovation
- 2012: Surprise and delight your customers to build long-term trust
- 2013: Decentralize decision-making to generate innovation
- 2014: Bet on ideas that have unlimited upside
- 2015: Don’t deliberate over easily reversible decisions
- 2016: Move fast and focus on outcomes
- 2017: Build high standards into company culture
- 2018: Wandering is an essential counterbalance to efficiency