It’s all about the long-term

I have just binge read 20 years of Amazon Shareholder letters.  I am reminded that great companies don’t just happen.  Great companies are designed great from the beginning.  Perhaps my greatest takeaway is a phrase Jeff Bezos uses often in his annual reports, “It’s all about the long-term.”

In the 1997 Amazon Shareholder letter, the Company’s first since going public, Jeff Bezos outlines the company’s long-term investment approach.  He includes a copy of this 1997 letter in each subsequent annual report.  Despite the changing times, Amazon’s business philosophy has remained the same.  To Amazon, it’s always Day 1 and hence the constant reference to that 1997 letter.

Everything Amazon does is about the customer.

Lower prices.  Bigger inventory.  Free shipping.  Faster delivery.  Allowing third-parties (who might undercut Amazon’s prices) to sell on the platform.  Enabling customers to post bad reviews even if it hurts sales.  Adding new features to Prime without charging customers more money.  Refunding customers just because they’ve had a bad experience.

At first glance, some of these decisions may seem wrong.  However, as Bezos says, “what’s good for the customer is good for shareholders.”  When looked at through this lens, business decisions are easier.  As I build The Mozaic, and think about the investments I am now contemplating, it’s important that I too have a lens that enables me to make the right decisions.

Amazon also reminds me of a lesson I learned recently at Harvard Business School.  “You must create value before you capture value.”  By always doing what’s best for the customer, Amazon ensures customer growth (value creation).  It then leverages customer growth into revenue growth (value capture).  It’s a simple formula, followed religiously despite evolving technology and market condition.

Start with the customer.  Work backwards.

Doing this is hard.  Few companies walk the walk.  It can cause a tremendous amount of short-term pain.  But when you’re building for the long-term, it’s not only the right thing to do, it’s the only thing to do.  And as Amazon rightly points out, it should always be Day 1.

If you’re interested in a good binge read, I include links to all of the past Amazon Shareholders letters:

1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016 and 2017.



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