Founders - #71 Jeff Bezos' Shareholder Letters

Episode Date: May 12, 2019

"To read Bezos’ shareholder letters is to get a crash course in running a high-growth internet business from someone who mastered it before any of the playbooks were written."  ----Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work.  Get access to Founders Notes here. ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast

Bezos broke all the rules when he built Amazon. In doing so, he carved out a unique way of looking at the world, at companies, and at tech in general. And nowhere is Bezos' philosophy of business, technology, and leadership better articulated than in his annual shareholder letters, which he has written every year since the company's IPO in 1997. To read Bezos' shareholder letters is to get a crash course in running a high-growth internet business from someone who mastered it before any of the playbooks were written. Okay, so that is an excerpt from the CB Insights newsletter. And this week, so if you're a regular listener to this podcast, you know every week I'd normally read a biography or an autobiography of an entrepreneur and then I pull out ideas that you can use in your life and work from there this week's gonna be different at the same time I was reading the book the Dow of Capital which I covered on last week's podcast I was also reading this this CB Insights newsletter so I spent last week reading every single shareholder letter. I'm just going to jump

right into the shareholder letters. I read them just like I read the books. And I'm just going to share the highlights of each one. I'll tell you which year I'm in. I'm going to go through all of them. I think there's like 21 of them. And I'll tell you all the notes and the highlights that I left. Okay, so let's start with 1997. This is a really important Amazon shareholder letter because every single year from 1998 on, Jeff attaches this shareholder letter to the bottom of the other one. And he wants to remind the people that are thinking

about investing in Amazon what they can actually expect. That he knows that, hey, I may have a different way of looking at things, but I'm going to be honest with you how I'm looking at them. And this is why I'm doing this. So don't jump in here unless you're agreeing with my philosophy. And he repeats over and over again. He's like, listen, there's plenty of other ways to run a successful business. This just happens to be the strategy we choose. All right. So it starts right at the beginning. Amazon passed many milestones in 1997. By year end, we had served more than 1.5 million customers, yielding an 800% revenue growth to $147 what i the reason i started off there is because now they have hundreds of millions of customers i know there's over 100 million people in the prime

program subscribing to program uh subscribing to the prime program and their their revenue was i think 282 billion last year actually 241 billion um okay so first shareholder letter when they public, they have 147 million, and now they're doing 241 billion. Okay, and then let's go back to Jeff. He says, this is day one for the internet, and if we execute well, excuse me, this is day one for the internet, and if we execute well for Amazon.

Today, online commerce saves customers money and precious time. Tomorrow though, personalization, online commerce will accelerate the very process of discovery. Amazon uses the internet to create real value for its customers and by doing so hopes to create an enduring franchise even in established and large markets and Jeff continues he says our goal is to move quickly to solidify and extend our current position while we begin to pursue the online commerce opportunities in other areas we see substantial opportunity in the large markets we are targeting. This strategy is not without risk. It requires serious investment and crisp execution against established franchise leaders.

Then he has the first subheading, which he's going to, he probably says this term long-term. I don't know, maybe a hundred times throughout the letters. And he says, it's all about the long-term. He says, we believe that a fundamental measure of our success will be the shareholder value we create over the long term. Because of our emphasis on the long term, we may make decisions and weigh trade-offs differently than some companies. Accordingly, we want to share with you our fundamental management and decision making

approach okay so now we're going to jump into some of the highlights there and the first one he says we will continue to focus relentlessly on our customers okay so no doubt with myself that word relentless is important i don't know if uh how many of you know this i think i included in the podcast i did on the Everything Store But Jeff wanted to name Amazon He wanted to name his company Relentless So much so, if you go to Relentless.com today It forwards to Amazon

And that's a good one If you can only describe Jeff Bezos one way That word Relentless might be the best term you could use So he says, we will continue to focus relentlessly on our customers we will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations are short-term wall street reactions we will make bold use the word bold constantly too 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 will have learned another valuable lesson in each case. He talks a lot about it has to be fundamental to your company DNA to take risk, to constantly be experimenting. And then doing so when there's basically a limitless upside because that's how you pay for a bunch of ideas you have that are inevitably going to be failures. Let's see. Okay, so it says, we will work hard to spend wisely and maintain our lean culture, we understand the importance of continually reinforcing a cost-conscious culture, particularly in a business incurring net losses. In other words, you have to maintain your frugality. At this stage, we choose to prioritize growth because we believe that scale is central

to achieving the potential of our business model. We know our successes will be largely affected by our ability to attract and retain a motivated employee base, each of whom must think like and therefore must actually be an owner. Another common theme of his. You need to think like an owner. I'll reference that theme through some of the future letters he writes as well because he says it in different ways. It's really interesting. Another heading. Obs obsess over customers from the very beginning our focus has

been offering our customers compelling value we maintained a dogged focus on improving the shopping experience remember at this time i think they're only selling books they might have moved into dvds and music but there's not that many categories they're in. And he says, we dramatically lowered prices, further increasing customer value. So what's best for the customer is kind of the North Star of how they're making their decisions. But he's going to be honest. He's just referencing, hey, this is going to be a pain in the ass to do, right? And the only way we're going to be able to do this is if we have a motivated employee

base that are thinking like owners. But he lays it out honestly and transparently. is if we have like a motivated employee base that are thinking like owners, but he lays it out honestly and transparently. He's like, listen, it is not easy to work here. We are working to build something important, something that matters to our customers, something that we can all tell our grandchildren about. Such things are not meant to be easy and then he continues looking

forward we are still in the early stages of learning how to bring new value to our customers through internet do internet commerce and merchandising how crazy is it that he's writing these words in 1998 okay and then this is the my final highlight from the 1997 shareholder letter. And to me, this summarizes a good one-sentence summary of what I'm about to read is one of the most famous, maybe it's not the most famous, but one of my favorite quotes that Jeff Bezos says all the time.

He says, step by step, ferociously. So he's willing to be patient. He's willing to put in the work for the long term, but that doesn't mean you go slow. You're still doing it ferociously. It's the way he wants you to be patient. He's willing to put in the work for the long term. But that doesn't mean you go slow. You're still doing it ferociously. It's the way he wants you to think about it. So he says, we now know vastly more about online commerce than when Amazon was founded. Well, we still have so much to learn.

We just learned a lot in those two years. Though we are optimistic, we must remain vigilant and maintain a sense of urgency. The challenges and hurdles we will face to make our long-term vision for Amazon a reality are several. Aggressive, capable, well-funded competition, considerable growth challenges, and an execution risk. The risks of product and geographic expansion, and the need for large continuing investments to meet an expanding market

opportunity. So before I move on to the 1998 shareholder letter, while I was working on taking notes and organizing all the information I'm going to share with you today, I saw this tweet that was really interesting. And it says, it's kind of interesting that while Apple, Google, and Facebook have totally changed their core concerns in the last decade, Amazon is basically still running a strategy from before some of today's founders were even born. People tend to imagine there's a secret to Amazon's success. And now he's going to quote some of the like what people guess that their secret. It's all a con. They'll raise prices. AWS is paying for it all nope it's worse than that they found an extremely efficient way to build a certain kind of retailer and just kept

cranking the handle and the reason i brought that up now is uh because all a lot of what he's talking about in 1997 and i don't even understand how he's he was able to think about the principles of what would make a successful business. And that he basically adheres to these principles for the next 20. He'll add stuff to it, but he doesn't go back on anything he says. So that tweet about, hey, he's running the same playbook for 20 something years well like that gives him a massive massive advantage because it makes the decisions that amazon because they have such a clear set of principles on how to run their business it makes their the decisions they have to make way easier than somebody that has to switch up and and change their product or change their their entire

strategy like they said facebook google and others all right so let's move on to 1998. a summary of this next note is it it will be hard and be hard and we will survive only by taking bold risks. So he says, it may be difficult to conceive, but we think the opportunities and risks ahead of us are even greater than those behind us. We will have to make many conscious and deliberate choices, some of which will be bold and unconventional. Hopefully, some will turn out to be winners. Clearly, some will turn out to be mistakes. So he's right on both accounts if you analyze what Amazon has done since this point. And he goes back to his focus,

which is really probably the best focus you could have for any company. We intend to build the world's most customer-centric company. And then I'm going to skip a couple paragraphs. And he says, there is no rest for the weary. So this is so important. And the note I left myself is Jeff understands human nature. I constantly remind our employees to be afraid, to wake up every morning terrified,

not of our competition, but of our customers. Our customers have made our business what it is. They are the ones with whom we have a relationship, and they are the ones to whom we owe a great obligation. And we consider them to be loyal to us right up until the second that someone else offers them a better service. So that's what I mean about him understanding humans. Like, yeah, people are going to love you right now, but their love for you is fleeting. It's not unconditional.

And if you don't maintain this focus on being the world's most customer-centric company and somebody else does, they'll just take your customers. He says, we're proud of the differentiation we've built through constant innovation and relentless, there's that word again, focus on customer experience. During our hiring meetings, we ask people to consider three questions before making a decision. This is interesting. I'm just going to read you. He explains every one.

I'm just going to read the three questions he asks. Will you admire this person? Will this person raise the average level of effectiveness of the group they're entering? And number three, along what dimension might this person be a superstar? Now skipping ahead several paragraphs later, the most important thing I could say in this letter was said in last year's letter, which detailed our long-term investment approach. Because we have so many new shareholders, we've appended last year's letter immediately after this letter. So they went from having about 13,000 investors to 200,000 at this time.

I invite you to please read the section entitled, It's All About the Long Term. And then this is what he says, and I love this. You might want to read it twice to make sure we're the kind of company you want to be invested in. As it says there, we don't claim it's the right philosophy. We just claim it's ours. Okay, so now we're going to move on to 1999. He starts out a lot of letters, like basic updates. A lot of it's like numbers percentage of growth stuff like that so i'm going to skip over most of that because it's you know it's one's not that important uh 20 something years later but it's also um very confusing when just spitting a bunch

of numbers and percentages at you it's easier for me at least to read numbers than it is to hear numbers um but i do want to make uh there is one highlight i did on this letter that i think is extremely interesting and he says consider this most important point. The current online shopping experience is the worst it will ever be. So he's saying it's the worst it's ever going to be, but look how it's still good enough, right? It's good enough today to attract 17 million customers, but it will get so much better. He's taking the roundabout approach. Increased bandwidth will result in faster page views and richer content. Further improvements will lead to always-on access, which I expect will be a strong boost to online shopping at home

as opposed to the office. Isn't that crazy? Didn't even know that the smartphone was coming 10 years later. And we'll see significant growth. Oh, I guess, I mean, he kind of did see it, actually. Look at the next sentence I just tripped over. And we'll see significant growth in non-PC devices and wireless access. Moreover, it's great to be participating in what is a multi-trillion dollar global market, in which we are so very, very, very tiny.

We are doubly blessed. We have a market-sized, unconstrained opportunity in an area where the underlying foundational technology we employ improves every day. That is not normal. And I think that word not, I think he underlined it. That may be the only time he underlines anything in all 20-something letters that I read. So again, we have a market size, unconstrained opportunity in an area where the underlying foundational technology we employ improves every day. That is not normal. And I just love that idea. It's like, listen, a lot of people say, we have 17 million customers. That's successful business. But what we can be compared to where we are now, we could be so much better in the future

if we have the patience and we're able to survive then. Let's just hold on. And he always talks about this idea of being heads down focused. And if we'll get there, we'll have much greater opportunities. He also talks about, listen, there's just some opportunities

that only larger companies can employ. But a lot of them don't, a lot of large companies don't even like take advantage of those opportunities because they're scared like they have risk averse which he'll talk about later later letters it's very fascinating okay so now we're getting to the 2000 shareholder letter which is written you know the year after so this is after the the the dot-com bubble. And it says, this is how he starts the letter. Ouch. It's been a brutal year for many in the capital markets and certainly for Amazon

shareholders. As of this writing, our shares are down more than 80% from when I wrote you last year. Nevertheless, by almost any measure, Amazon, the company, is in a stronger position now than any time in the past. I wrote to myself, is this an example of manic optimism? If you listen to my podcast I did on Charles Goodyear, they talked about this guy struggled for 30 years to solve all... He basically birthed the modern rubber industry right but there was a rubber industry that existed before he patented his invention but it was rubber it would rot away it would start to smell it basically was like a temporary material as opposed to now you can you know you can have a pair of rubber shoes for 20 years whatever the case is and to get through 30 years of trials and tribulations they talk about this dude's like he's crazy.

People called it manic optimism. Jeff has a little bit in his writing because I think he really believed he wasn't like, you know, he didn't think it was like a slam dunk. He didn't think it was going to happen by accident, but he really believed if they did everything as best they could, he could have one of the most valuable companies. He could have a shot at a basically unlimited market, which he wound up being true, wound up being correct about rather. All right, so he says, so if the company is better positioned today than it was a year ago, why is the stock price so much lower than it was a year ago? As the famed investor Benjamin Graham said, in the short term, the stock market is a voting machine. In the long term, it's a weighing machine. Clearly, there was a lot of voting going on in the boom year of 99,

and much less weighing. We're a company that wants to be weighed, and over time, we will be. Over the long term, all companies are. In the meantime, we will have our heads down working to build a heavier and heavier company many of you have heard me talk about the bold bets that we as a company have made and will continue to make again he's writing this in 2000 2001 he still talks about

this in 2017 2018 this is something that he he is fundamental to the way he runs his companies so he says uh we uh we have made and will continue to make, including – so he talks about, listen, we made a lot of – we made some investments. We lost some money here, guys. He said, including Living.com and Pets.com, both of which shut down in operations in 2000. We were significant shareholders in both and lost a significant amount of money. All right, moving on. So he says, let's move on to the future. Why should you be optimistic about the future of e-commerce

and the future of Amazon.com? He says, price performance of processing power is doubling every 18 months. He's referencing Moore's Law here. Price performance improvements in disk space and processing power will allow us to, for example, do ever more and better real-time personalization of our website. He talks about this is an advantage he's going to have over physical retailers that will only compound over time because he can do things that they cannot.

In the physical world, retailers will continue to use technology to reduce costs, but not to transform the customer experience. We too will use technology to reduce costs, but not to transform the customer experience. We too will use technology to reduce costs, but the bigger effect will be using technology to drive adoption and revenue, so doing things other people can't. And we will do so by keeping the customer first. And the note I left myself is he knows that reputation is persuasive um that this is just helpful in human relations in general like our memories are flawed as human beings i think last week i talked about it it's more uh more the metaphor is more similar to like think of your memories taking a photograph as opposed to

recording a video with a with a, like you have a picture of what happened but you lose a lot of context especially with time as opposed if you had the whole video and you know what's going on. So he's saying he's gonna tell you exactly over and over and over again and he also says hey I don't know if if the same people are reading these letters all the time so he's got to kind of lay out his philosophies over and over again in case you might be a new shareholder maybe this is the first year that you're actually reading these letters. And here's another example of repetition. Like 2000, this year will be a year of focus and execution. As I usually do, I've

appended our 1997 letter. It gets more interesting every year that goes by in part because so little has changed. I especially draw your attention to the section entitled, It is all about the long term. Okay, moving ahead by another year. Let's see, what's the note? This might be, so one of the most famous things Amazon is known for is the Amazon Flywheel. In case you don't know what that's about,

you can go back and listen to my podcast I did on the Everything Store or or you can just Google Amazon Flywheel, you'll see a picture of it. This may be the first mention of it. It takes a few years for him to use the term Flywheel, though. He says, focus on cost improvement makes it possible for us to afford to lower prices, which drives growth. Okay, so lower prices drives growth. Growth then, in turn, spreads fixed costs across more sales, which reduces our cost per unit, which then makes possible for more price reductions.

That's why they call it a flywheel. Customers like this, and it's good for shareholders. Please expect us to repeat this loop. So he's calling it a loop. Eventually he's going to use the term flywheel. Another highlight, a few paragraphs down we stayed relentlessly focused on the customer and then another subheading obsess over customers our commitment continues and then he says we've this is interesting he's got a bunch of these I've never even heard of a company doing this before.

But I would consider this like a customer first feature. Because, again, you can't obsess over customers if you're not putting them first. It says, we improved convenience with features like instant order update, which warns you if you're about to buy the same item twice. And so people are like, well, why would – first of all, you're taking revenue away from your company. But he doesn't care because he feels it's best and best for the long-term relationship

he wants with his customers. And the only way to protect the long-term relationship with your customers is by doing what's best for them. But he also says, hey, people are busy. They forget what they already have bought. Okay, so skipping ahead, I'll just point out that one of the most important things we've done to improve convenience

and experience for customers also happens to be a huge driver of variable cost productivity eliminating mistakes and errors at their roots every year that's gone by since amazon's founding we've done a better and better job of limiting errors and limiting the root causes of errors saves us money and saves customer time which which only gets more important as you grow. All right, it says, in the 1997 letter, we wrote, when forced to choose between optimizing the appearance of our gap accounting and maximizing the present value of future cash flows, we'll take the cash flows. Now he's going to tell why. Why do we focus on cash flows? 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. And this is important because he's saying, since we expect to keep our fixed costs largely fixed, even at significantly higher unit volumes,

we believe Amazon is poised over the coming years to generate meaningful, sustained, free cash flow. And then the last thing he has in a sentence in here, I'm just going to bring your attention again, relentless commitment to long-term shareholder value. All right. So now we're jumping to this is the 2002 letter. And I love it because every single letter is different.

Like you just, it really is. If you print these out or I guess if you, I'm working off the PDFs and put them together, it is kind of like a short book on running a high-growth internet business so in many ways amazon.com is not a normal store we have a deep selection that is unconstrained by self shelf space we turn our inventory 19 times a year we personalize the store for each and every customer we trade real estate for technology and which in this technology's case, which gets cheaper and more capable every year. We display customer reviews critical of our products.

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, which is our product detail pages, with third parties. And if they offer better value, we let them. So I don't think he explicitly states it there, but if you're reading that, every single thing that he's highlighting benefits the customer. This is one of our most exciting peculiarities is poorly understood. People see that we're determined to offer both world-leading customer experience and the lowest possible price.

But to some, this dual goal seems paradoxical, if not downright quixotic. Traditional stores face a time-tested trade-off between offering high-touch customer experiences on one hand and the lowest possible prices on the other. How can Amazon be trying to do both and this is such an important point you can't do both unless you change the customer experience the answer is that we transform much of the customer experience with customer experience costs largely fixed which is which he makes the point is more like a

publishing model than a retailing model our costs as a percentage of sales can shrink rapidly as we grow our business we believe our ability to lower prices this is the summary we believe our ability to lower prices and simultaneously drive customer experience is a big deal and i just want to read one more thing from this letter because this surprised me and usually if something's surprising i try to include it on the podcast um so think about what's happening here this is 2002 shareholder letter they're still competing heavily in books and um he wants to make sure he just he started the letter saying hey like not only do we want to have the best customer experience but we also want to lowest possible prices this is crazy what they did to make sure they as a test to make sure have the lowest possible prices they went to bookstores in new york city and seattle which says we priced then he took the first thing he does he starts

working on the 100 bestseller list of 2002 he says we priced all 100 titles by visiting their super stores in both seattle and new york. It took us six hours in four of their different super stores to find all 100 books on their list. When we added up everything we spent, we discovered that at their stores, these 100 best-selling books cost $1,561. At Amazon, the same books cost $1,195 for a total savings of $366 or 23%. For 72 of the 100 books, our price was cheaper.

On 25 of the books, our price was the same. On 3 of the 100, their prices were better. We subsequently reduced our prices on these books. On three of the hundred, their prices were better. We subsequently reduced our prices on these books. So this kind of, first of all, I just think it's amazing because there's this real famous essay that I recommend everybody reading. I would read it. It's by Paul Graham. It's called Do Things That Don't Scale.

Well, going and buying, physically buying 100 bestseller lists, something that don't scale. But it's a wonderful way to tell how you're actually doing. It reminds me, if you listen to the podcast I did on The Invisible Billionaire, at the time, Daniel Ludwig, he's got a net worth of something like $3 or $6 billion in the 70s. He's probably 50 or 60 years old at this time. He's thinking about investing. He made a lot of money in shipping, oil, real estate, other things like that. But he's thinking about investing.

I think it was like Panama or somewhere in either Central or South, Northern, South, in South America, but like the Northern part. And he had invested a lot of money in the Bahamas one time. And he relied on like scientists and people saying, hey, like you can build this huge ship because like you're able to dredge and to make like to make the channels you need so the ship can get through to winds up they were wrong. So what this guy does, he hops on a flight from New York City down, I think it was Panama. I'm going to say Panama. I'm just going to go with it to Panama. to panama he's dressed in like you know just jeans and like dirty clothes he takes a goes down

uh goes to a hardware shop gets like a string that he measures out to like six feet nine feet at different lengths and like a weight like a like a i'm not a fisherman so i don't know what they're called but like the weights they put on the end of fishing lines then rents a boat and then goes out and physically by himself by hand checks to make sure that the debt the the information he was given about like the depth and how like like this specific geolocation is this deep and etc like what he needs to make sure he can get his ships in there is accurate then that same day he flies back to new york like that is an insane level of dedication. And he only did that because it's practical. It's like, Hey, how else am I going

to find out that these in the past I've relied on other people's judgment and it didn't work out. So this time, I'm not going to, I'm not going to make the same mistake, start twice. This is like almost like a, I know it's not Jeff going out. Imagine in 2002, you run into, I guess we wouldn't know who Jeff, but not many people would know who he was at the time. But like, you know, this is still very interesting that amazon said you know what this we're going to take the time we're going to spend six hours we're going to like and we're going to actually check like we're promising we're saying hey not only we have unlimited shelf space but the pricing is better and they went out and checked i don't know i think that that that idea

can be applied to so many different things and i think it's important for entrepreneurs and other people sometimes like oh entrepreneurs and other people. Sometimes it's like, oh, I have other people that might do it. Or like just even if you have other people do it, like check on what they're doing and do things that don't scale but you know are valuable. Okay. I love that idea a lot. All right.

So now we're going to 2003. Okay. It says, long-term thinking, there's that word again, is both a requirement and an outcome of true ownership. Owners are different from tenants. I know a couple who rented out their house and the family who moved in nailed their Christmas tree to the hardwired floors instead of using a tree stand. Expedient, I suppose, but no owner would do something so short-sighted. Similarly, many investors are effectively short-term tenants, turning their portfolio so quickly they're really just renting the stocks that they temporarily own. It's an

interesting concept. We emphasize our long-term views in the 1997 letter to shareholders. Our first is a public company. Because that approach really does drive making many concrete, non-abstract decisions, I would like to discuss a few of these non-abstract decisions in the context of customer experience. And here's an example. It says, for instance, shortly after launching Amazon in 1995, we empowered customers to review products. While now a routine Amazon practice, at the time we received complaints from a few vendors, basically wondering if we understood our business. And here's something you hear, some examples of things he heard.

You make money when you sell things. Why would you allow negative reviews on your website? Speaking as a focus group of one, I know I've sometimes changed my mind before making purchases on Amazon as a result of negative or lukewarm customer reviews. Though negative reviews cost us some sales in the short term, helping customers make better purchase decisions ultimately pays off for the company. And in this next section, this is where he's going to actually spell out a real world example of long-term thinking. And more importantly, why, which is huge when you're communicating with other humans. You can't just broadcast to them. You have to explain why you think the way you do or why you arrived at the decision or why you're, it's important. It's going to enable you to work with other people better if you guys are on the same page, if they understand why you're doing what you're doing.

Among the most expensive customer experience improvements we're focused on are our everyday free shipping offers and our ongoing product price reductions. Eliminating defects, improving productivity, and passing the resulting cost savings back to the customers in the form of lower prices is a long-term decision. Increased volumes take time to materialize,

and price reductions almost always hurt current results. So he's got two things that are in conflict, but he doesn't really think they're in conflict, right? He's saying in the long term, however, relentlessly driving the price cost structure loop, which I guess is what we're going to call the flywheel until he calls it the flywheel, will leave us with a stronger, more valuable business. Since many of our costs, such as software engineering, are relatively fixed, and many of our variable costs can also be better managed at a larger scale, driving more volume through our cost structure reduces those costs as a percentage of sales.

And I would argue this further gives him an advantage over his competitors. That advantage is going to compound with time and with size. Our pricing strategy does not attempt to maximize margin percentages, but instead seeks to drive maximum value for customers and thereby create a much larger bottom line in the long term and I love the way he ends the last sentence of his letter here's to not being a tenant I'm gonna skip over 2004 just because there's like a lot of numbers. He talks about, he lays out like if you're interested in what I'm talking about, I'd go back and read 2004. He goes back into like why are they choosing to optimize for free cash flow,

but it's like graphs and earning statements, which is just no way for me to read this to you without it being really confusing. All right, so let's go to 2005. And this is how he started. I love the way he starts his letters, this one. Many of the important decisions we make at Amazon can be made with data. There is a right answer or a wrong answer, a better answer or a worse answer, and math tells us which is which. These are our favorite kinds of decisions. Quantitative analysis improves customer experience and cost structure. So everybody's going to agree with what he's saying. But then he's going to talk about that data cannot always lead the way,

and you must rely on your judgment. You have to. And so he's going to get to that now. As you would expect, however however not all of our important decisions can be made in this enviable math-based way sometimes we have little or no historical data to guide us and proactive experimentation is impossible impracticable impractical are tantamount to a decision to proceed though data analysis and math play a role, the prime ingredient in these decisions is judgment. As our shareholders know, we have made a decision to continuously and

significantly lower prices for customers year after year as our efficiency and scale make it possible. This is an example of a very important decision that cannot be made in a math-based way. In fact, and he was getting a lot of criticism around this time for doing so. In fact, when we lower prices, we go against the math that we can do, which always says that the smart move is to raise prices. But our judgment is that relentlessly returning efficiency improvements and scale economies to customers in the form of lower prices creates a virtuous cycle that leads over the long term to much larger dollar amount of free cash flow. Remember, he always wants to optimize for that.

And thereby is much more valuable to Amazon. Do you see how all of his principles are kind of interlocking and they work within one another? That's what I mean is like why he can execute a plan for 20 something, the same, essentially the same plan, different domains for 20 something years. And that's a huge advantage. Now he's got this great footnote here. And this is a problem we all face. And that is how do you make decisions in a complex adaptive system? And the world is a complex adaptive system and starting a company is a complex adaptive system. So he talks about this, he read this paper, it was written in 1976. It's called The Structure of Unstructured Decision Processes. And this is his main takeaway from the paper. And it's interesting that he leaves this in

the footnote. He says, talking about the paper. And it's interesting that he leaves this in the footnote. He says, talking about the paper now, they look at how institutions make strategic, unstructured decisions as opposed to more quantifiable operating decisions. Among other gems you will find in the paper is this. And this is a quote from there. Excessive attention by management scientists to operating decisions may well cause organizations to pursue inappropriate courses of action more efficiently. Think about that. What do you just said? You have these so-called

management scientists, which is really no such thing. That's silly. That's a silly term. But they're talking about if you dedicate excessive attention to them, right? Or they're dedicating excessive attention to operating systems, can cause organizations to pursue inappropriate courses of action. Other words, doing the wrong thing, but doing the wrong thing more efficiently.

Nobody wants to do that. That's hilarious. They are not debating. So now this is Jeff talking. They are not debating the importance of rigorous and quantitative analysis, but only noting that it gets a lopsided amount of study and attention. And this is such a, I love this guy's mind. Probably because of the very fact that it is more quantifiable.

I'm going to read that whole thing again because I think it's really important what he's saying here. They look at how institutions make strategic unstructured decisions as opposed to more quantifiable operating decisions. Among other gems you will find in the paper is this. Excessive attention by management scientists to operating decisions may well cause organizations to pursue inappropriate courses of action more efficiently. They are not debating the importance of rigorous and quantitative analysis, but only noting that it gets a lopsided amount of study and attention, probably because of the very fact that it's more quantifiable.

So think of all the people that a lot of entrepreneurs look up to in modern era, and think of somebody, like why when Elon Musk, I talk about like one of the genesis of me starting this podcast was this other podcast I saw with Elon Musk where he's like well when you're starting a company like who did you look to like for advice like how did you like how did you try to learn about it and his Elon's response he's like first of all of all, I looked for things in a historical context, and he meant books, basically. And it's interesting what he follows after this. He says, I didn't read business books. I read biographies and autobiographies because I thought they were helpful.

Because Elon understands this whole idea that the world and then the microcosm of the world of starting a new company where the outcome changes. It's a complex adaptive system. It doesn't change. It doesn't behave as you would expect it to. And therefore, studying one idea that may have worked for somebody is not the best idea. If you look at the totality, and he referenced the life of Benjamin Franklin. But if you look at the totality as much as you can from biography of other people's lives,

you understand, okay, why they make that decision. And then you can gather information from their experience. Not to say there's 10 rules of making a successful business. If you ever see an article like that, you know it's bullshit.

It doesn't exist. Elon was going through and reading voraciously and collecting examples of how other people in history reacted to certain things not thinking that oh this book is going to teach me how to build a rocket company uh in you know in 2002 in America that book is unwritten it's impossible this book is going to teach me how to make an electric car company like it it didn't exist he had to look for broader larger themes and i just love

this idea where people get caught up and it's like oh just please just tell me how to do it like there is no such thing there's no such thing and another way of looking at this is um somebody well i don't remember who said the quote but they're like what's the what one benefit of being well read is that you just are able to spot bullshit easier because you have a lot more, like a larger frame of reference. You've seen other experiences. You've heard about other things. You've learned other things. And so therefore, you might not be able to gauge whether something is accurate in the positive,

but you can definitely see if things are inaccurate in the negative. Okay, so let me move ahead. I just love that footnote so much. All right, so moving ahead on the letter. As another example, in 2000, we invited third parties to compete directly against us on our own prime retail real estate, which is repeated before, our product detail pages. Launching a single detail page for both Amazon retail and third-party items seemed risky, well-meaning people internally and externally worried it would cannibalize Amazon's retail business. single detail page for both Amazon retail and third-party items seem risky. Well, meaning people

internally and externally worried it would cannibalize Amazon's retail business. And as is often the case with consumer-focused innovations, there was no way to prove in advance that it would work. That is so important. I guess what I was just trying to say there, it's like, you don't know. It's a complex adaptive system. You cannot predict. It's impossible. Stop trying. So he's saying, listen, and so in Jeff's case,

he's like, listen, just be bold. Limit your downside and leave the upside unlimited, which we'll talk about more in a little bit. So he says, as is often the case with consumer-focused innovations, there was no way to prove in advance that it would work. Let me, there's a line that I tweeted out the other day

that actually comes from one of these shareholder letters, but it kind of, I'm going to jump ahead because I think it applies here. So he says, this is Jeff Bezos, Jeff Bezos from one of his later shareholder letters, and it's just like why they didn't use market research before making the echo and keep in mind they've sold 100 million plus of echo enabled devices or Alexa enabled devices and again he just he just told us in 2005 as is often the case with consumer focused innovations there's no way to prove in advance

it would work and now this is him in, I think, 2017 writing these words. He says, market research doesn't help. If you had gone back to a customer in 2013 and said, would you like a black always-on cylinder in your kitchen about the size of a Pringles can that you could talk to and ask questions that also turns on your lights and plays music? I guarantee you they would have looked at you strangely and said, no, thank you. He is extremely – what I'm learning about Jeff Bezosos and maybe what i've learned about jeff bezos is

he's extremely comfortable in complex um environments that have unpredictable outcomes he actually most people are scared of that right where human nature i think is reflexive or reflective i don't know reflex? Maybe that's not the right word. We naturally want to be scared of the unknown, right? Why are little kids scared of the dark or other people, things like that. But what Jeff did is he actually makes that part of his business model, which is genius. He's like, no, no, no.

Instead of being afraid of the downside to the unknown, I'm going to use that as a way to basically farm these giant businesses. And towards the end, he talks about the three different ways they do this. I don't want to trip over something I'm going to tell you in the future, but I think when I read it, it was like you have Amazon retail, marketplace, whatever you call it, AWS, and then Prime prime all of which were huge massive risks but wind up being massive multi-billion dollar businesses by themselves okay um i really must like 2005 shareholder because i've spent a lot of time in here all right we're almost done

with this letter uh let's see this is where's my note here okay so this is uh he says math math based decisions command wide agreement okay whereas judgment based decisions are rightly debated and often controversial so the idea what he just said using the echo example um you know the math might not have agreed with it i'm sure people like why are we investing so much money in these things? Especially this was taking place around the time that they did the Fire Phone, which he references. They're basically two sides of the same coin. You can't predict.

They both said, okay, we're going to try these two. We're going to spend, and he spends billions and billions and billions of dollars on some of these businesses that fail. But then I left myself on that one sentence. This is another reason it's difficult. Like judgment-based decisions are rightly debated, and they're controversial. All right, so it says, you can count on us to combine a strong,

quantitative, and analytical culture with a willingness to make bold decisions. There's that word bold again. As we do so, we'll start with the customer and work backwards. In our judgment, that is the best way to create shareholder value. Okay, so now we're going to move on to 2006. Oh man, a lot of highlights on this one too. Oh buddy. All right, here we go. Planting seeds that will grow into meaningful new businesses takes some discipline, a bit of patience, and a nurturing culture. He's going to continue that tree metaphor here. And this is another way to think about this paragraph is this is what Jeff

looks at, looks for before starting a new business, which I think is valuable for all of us. Okay. It says 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. Before we invest our shareholders' money in a new business, we must convince ourselves that the new opportunity can generate the returns on capital our investors expected when they invested in Amazon.

And we must convince ourselves that the new business can grow to a scale where it can be significant in the context of our overall company. We must believe that the opportunity is currently underserved, one characteristic, and we have the capabilities needed to bring strong customer-facing differentiation to the marketplace. That's the second one. I often get asked, when are you going to open physical stores? And he's going to talk about, so he just gave us his mini rubric for businesses, right?

And now he's going to give us an example of one business opportunity that they could pursue that fails this mini rubric and the second one that hits all of them. Therefore, he knows he can move forward. He says, I often get asked, when are you going to open physical stores? That's an expansion opportunity we've resisted. It fails all but one of the tests outlined above. The potential size of a network of physical stores is exciting. However, we don't know how to do it with low capital and high returns. Physical world retailing is a cagey and ancient business that's already been well served. What an interesting use of words there. Cagey and

ancient, already well served. And we don't have any ideas for how to build a physical store experience that's meaningfully differentiated for customers. Interesting. 2006, they didn't. But I don't know if you've heard of Amazon Go. I think they're in Seattle. I think they're in New York City. I don't remember where the other one, if there is more than that. But it turns out they didn't know how to do it in 2006.

Peers, they know how to do it now. Okay, so this is an example of the business that passes all the tests. And probably the most, it'd be interesting if this winds up being more valuable than any other Amazon business, including the retail part. I'm sorry, this is, nope. I thought I was going to talk about AWS.

AWS is the next one. So there's two of them. AWS is what I was talking about, but this is Fulfillment by Amazon. Fulfillment by Amazon is a set of web services APIs that turns our 12 million square foot fulfillment center network into a gigantic and sophisticated computer peripheral.

If you pay us 45 cents a month per cubic foot of fulfillment space, you can stow your products in our network. You make web service calls to alert us to expect inventory to arrive, to tell us to pick up and pack one or more items, and to tell us where to ship those items. You never have to talk to us. It's differentiated, can be large, and passes our returns bar. Amazon Web Services is another example. With AWS, we're building a new business focused on a new customer set, software developers. And then this is all of his attributes of a successful business, which he feels AWS has,

and he winds up being proved right in time again. 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 12 years. We're well positioned to do it. It's highly differentiated

and it can be a significant financially attractive business over time and then he feels that doing this hard work is actually a competitive advantage he says in some large companies it may be difficult to grow new businesses from tiny seeds because of the patience and nurturing required. In my view, Amazon's culture is unusually supportive of small businesses with big potential, and I believe that's a source of competitive advantage. Like any company, we have a corporate culture formed not only by our intentions, but also a result of our history.

For Amazon, it includes several examples of tiny seeds growing into big trees. We have many people at our company who have watched multiple $10 million seeds turn into billion-dollar businesses. The firsthand experience and the culture that has grown up around those successes, in my opinion, is a big part of why we can start businesses from scratch. The culture demands that these new businesses be high potential, that they be innovative and differentiated, but it does not demand that they be large on the day they are born. Okay, so moving forward to 2007, this is interesting. This is how he thought about, how Amazon thought about designing the Kindle. We started by setting ourselves the admittedly audacious goal of improving upon the physical book. We did not choose that goal lightly.

Anything that has persisted in roughly the same form and resisted change for 500 years is unlikely to be improved easily. It's kind of a variation of one of my favorite ideas I've learned over the past few years, which is the Lindy effect. We knew Kindle would have to get out of the way, just like a physical book. So readers could become engrossed in the words and forget they're reading on a device it's also smart we also knew that we shouldn't try to copy every last feature of a book we could never out book the book we have to add new capabilities ones that could never be possible with a traditional book the list of useful things that can be done only in the new medium is a long one.

And then he goes on to a larger, almost philosophical idea here. He makes an interesting point on how our tools, seeing as where the species that are the tool builders, can actually change us. It's really interesting. We humans co-evolve with our tools. We change our tools, and then the tools change us. It's really interesting. We humans co-evolve with our tools. We change our tools, and then the 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. 500 years ago, Gutenberg's invention

led to a significant step in the cost of books. Physical books ushered in a new way of collaborating and learning. Lately, network tools such as desktop computers, cell phones, et cetera, have changed us too. And this is so interesting. So this is how he sees it's changed us. They've shifted us more toward information snacking. And I would argue toward shorter attention spans. He's writing this in 2007. What do you think if you asked him about this today?

It's undoubtedly done that. I was watching this documentary. It's like a mini documentary on YouTube the other day about this guy goes around to bookstores all over the world. And he also interviews people that happen to wind up making the time to read more than average people. And one of the people he interviewed said something that I thought was very, very interesting.

So much so since I've learned it, I've been repeating it constantly. And she said that reading is forced meditation, that in a world where we're constantly scrolling and tapping and looking at like bite size, what Jeff Bezos here has called information smacking. The opposite of that is reading a book where you're forced to focus on a subject. I always think of it like I'm having a one-sided conversation

about something. Like think about the Dow of Capital, the one I did last week. That guy has been working on that idea for 30 years. And what I got in 10 to 15 hours reading the book is a one-sided conversation about him synthesizing an idea that he's thought about for 30 years. And I think that's extremely valuable.

And the idea of thinking about reading books is forced meditation. I also think podcasts and audio books fit into this as well. Because I mean, think about, like I listen to some podcasts anywhere from 30 minutes, if you think of like hardcore history, five hours whatever the case is like you are meditating on a subject for much longer than you know looking at a picture on Instagram for a second or looking at a tweet or whatever the case is I think that it's interesting if you I've seen surveys and stuff

we talk about like apps that make you anxious and apps that give you a pleasurable feeling when you're done using them. And what I love is the podcast player app. It always scores really high on – it was beneficial. It wasn't wasted time as opposed to a lot of the social apps. A lot of people, they may be addicted, but they largely are a waste of time. And then he – okay, let me move on. Oh, he says something really interesting here because I always talk about it's like I'm an evangelist

for reading and for podcasts, right? Which you kind of pick up on if you've listened to this podcast for any length of time. But maybe I'm using the wrong word. Maybe the better word is missionary. And we're going to learn about that right here with Jeff. He says, we hope Kindle and its successors may gradually and incrementally move us over the years into a world with longer

spans of attention. It's interesting to make a product that he's trying to combat what he feels is a negative effect on humanity, right? So he says, we want to move us into a world with longer spans of attention. Is that really surprising considering how Jeff thinks long-term? Providing a counterbalance to the recent proliferation of info snacking tools. Remember, he's writing this in 2007. I realize my tone here tends towards the missionary, and I can assure you it's heartfelt. It is also not unique to me, but it is shared by a large group of folks here. I'm glad about that because missionaries build better products. I love that.

OK, so let's go. Now we're in 2008. So we've already seen his response to the initial dot com crash. Now this is his response to the financial crisis of 2007-2008. And I noted off myself before I read this, this is brilliant. And this is not just the thinking that's brilliant,

even though the idea is good, but acting on that thinking, I think is brilliant. It says, in this turbulent global economy, our fundamental approach remains the same. Stay heads down focused on the long-term and obsess over customers. 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 places, spaces, sorry.

Seek instant gratification or the elusive promise of it. And chances are you'll find a crowd there ahead of you. Okay. So do you see why I'm combining this week's podcast with last week's? Listen to what he just said. If you seek instant gratification or the elusive promise of it, chances are you'll find a crowd ahead of you. What is the paragraph that I read you earlier? The entrepreneur who foresees a profit opportunity in the distant future and who patiently reinvests earnings into his business year after year in anticipation has a much greater opportunity than entrepreneurs who are engaged in short-term projects.

That's what Jeff is saying here, just saying it in different words. So he says, let me go back to where I lost my place. Hold on. Okay, so you'll find a crowd there ahead of you. Why? Because it's easier. And anything that's easier, that's what humans are going to gravitate towards. Long-term orientation interacts well with customer obsession.

If we can identify a customer need and if we can further develop conviction that the need is meaningful and durable, our approach permits us to work for multiple years uh permits us to work patiently for multiple years to deliver a solution it's important that that need is durable meaning it's going to basically never change and he always talks about like you should invest in your business invest in things long term so for him it's like customers are not going to wake up tomorrow like oh i wish i was paying more for what i was getting oh i wish the delivery took took uh took longer that's just not going to happen. So if you invest in lower prices and faster delivery, you can reap benefits in 2008 and you can reap benefits in

2028. Okay. So he talks about meaningful durable. Okay. Working backwards, something he talks about a lot, from customer needs can be contrasted with a skills forward approach. This is such an interesting idea, man. With 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 backwards from customer needs often demands that we acquire new competencies and

exercise new muscles, never mind how uncomfortable and awkward feeling those first steps might be. All right. So now he's going to talk about, he has a subheading called customer experience pillars. He says, in our retail business, we have strong conviction that customers value low prices, fast selection, and fast, convenient delivery, and that these needs will remain stable over time. So I was just kind of talking about that. It is difficult for us to imagine that 10 years from now, customers will want higher prices, less selection, or slower delivery.

Our belief in the durability of these pillars is what gives us confidence, gives us the confidence required to invest in strengthening them. We know that the energy we put in now will continue to pay dividends for the future and so he's going to talk about some of the stuff that that's necessary to do this and one of them is prudent prudent spending um and the note i left myself is be frugal motherfucker the customer this is what he's telling us, the customer experience path we've chosen requires us to have an efficient cost structure. What does that mean? That's a fancy way of saying we watch what we spend our money on. The good news for shareholders is that we, actually he calls them share owners, that's interesting.

The good news for share owners is that we see much opportunity for improvement in that regard. Everywhere we look, and we all look, we find what experienced Japanese manufacturers would call muda. I guess it translates to waste. And this is his response to finding muda. It's hilarious. I find this incredibly energizing. I see it as a potential. Years and years. This is so interesting. I see this as potential. So you're seeing waste now as potential in the future, right?

Years and years of variable and fixed productivity gains and more efficient higher velocity. More flexible capital expenditures. What an interesting perspective. And then I left a note to myself. It says, read the footnote, future David. All right, so let's go to the bottom here. Glad I passed David left that so I didn't forget.

Oh, this is great. So this will be the end of 2008 letter. He says, at a fulfillment center recently, one of our, I have no idea how to pronounce this word, capital K, Kaizen. And hold on, I don't know how to pronounce it, but I grabbed the definition for us. It says Kaizen is a Japanese business philosophy of continuous improvement of working practices and personal efficiency. All right, cool. So at a Fulfillment Center recently, one of our Kaizen experts asked me, quote, if I'm in favor of a clean fulfillment center.

Oh, I'm sorry. So he asked me, I'm in favor of a clean fulfillment center. But why are you cleaning? Why don't you eliminate the source of the dirt? And the very last sentence that Jeff, I love this, the very last sentence in this shareholder letter. He says, I felt like Kar like karate kid what a great thought most of us so it's dirty let me just get it cleaned up again this guy took it one step further he's like why don't you eliminate the source of the dirt you save all the future time cleaning it all right so that can be obviously applied to so many

different things um and this is just a reminder because because, you know, like, there's some people that, like, if you listen to podcasts over enough, you realize that most humans, like, we don't all, we have a very limited amount of ideas, and, like, you're going to hear that again, and vocabulary, you're going to hear us repeat over and over again, and some people poke fun at this, I think it's such a weird thing, like, I put this in here here because now we're in 2009, Jeff Bezos, we're what, 12 letters into this or whatever it is. And he repeats himself. Jeff Bezos repeats himself. Don't be afraid to repeat yourself. Like it's okay. All right. So it's the financial results for 2009 reflect a cumulative effect of 15 years of customer experience improvements. And what are those improvements? He says them over and over again.

Increasing selection, speedy delivery, reducing cost structure. He just referenced them as pillars, right, that don't change. The work has been done by a large number of smart, relentless, customer-devoted people all across the areas of the company. Again, not afraid to repeat himself. We all know that we can still be much better, and we're dedicated to improving further. Senior leaders that are new to Amazon are often surprised by how little time we spend discussing actual financial results or debating projected financial outputs and now he's going to say why because what do they believe we believe that focusing our energy on the controllable inputs to our business is the most effective way to maximize financial outputs over time. And the summary here, Jeff has just some straightforward advice for us.

Start with the customer and work backwards. Listen to customers, but don't just listen to customers. Also invent on their behalf. There's another thing he repeats a lot. It's our. Also invent on their behalf. There's another thing he repeats a lot. It's our job to invent on their behalf. It's not the customer's job to tell you what you should build. It's your job. Figure it out.

All right, 2010. Many of the problems we face have no textbook solutions. We just had this discussion about the benefit of reading biographies and looking at the whole when you're dealing with a complex adaptive system. Many of the problems we face have no textbook solutions, and so we happily invent new approaches. Our technologies are almost exclusively implemented as services, and he describes services as bits of logic that encapsulate the data they operate on and provide hardened interfaces as the only way to access their functionality this approach reduces side effects and allows services to evolve at their own pace without

impacting the other components of the overall system and now he's talking this is really interesting what he's getting to now he's saying, this idea that you should have, like, that companies have a research and development on R&D department is ridiculous. Because he's like, in a company, R&D is the responsibility of every department. So he says, all of the effort we put into technology might not matter that much if we kept technology off in the side in some sort of R&D department. But we don't take that approach. Technology infuses all of our teams, all of our processes, all of our decision making, and our approach to innovation in each of our businesses. It is deeply integrated into everything we do. I'm just going to give

an example of this, which now is very common, but at the time is kind of hard to do, right? This is one example is WhisperSync. Our Kindle service designed to ensure that everywhere you go, no matter what device you have with you, you can access your reading library and all of your highlights, notes, and bookmarks all in sync across your Kindle devices and mobile apps. The technical challenge in making this a reality

for millions of Kindle owners with hundreds of millions of books and hundreds of device types living in over 100 countries around the world, all at 24 hours a day, seven days a week reliability. As a Kindle customer, of course, we hide all this technology from you. So when you open your Kindle, it's in sync and on the right page. To paraphrase Arthur C. Clarke,

like any sufficiently advanced technology, it is indistinguishable from magic. And the result of that is because they're willing to invent. They're not just willing to say, okay, this is a textbook way you're supposed to do this. They're willing to just figure it out, go on to the frontier. Invention is in our DNA and technology is the fundamental tool we wield to evolve and improve every aspect of the experience we provide our customers. Okay, moving on to 2011. This entire letter is about the power of invention. So they talk about, they give examples from customers using things they've invented like Amazon Web Services,

fulfillment by Amazon, and Kindle Direct Publishing. So I'm going to skip over that part, but there are some interesting sentences in here. He says, invention comes in many forms and at many scales. The most radical and transformative of inventions are often those that empower others to unleash their creativity, to pursue their dreams. And he continues that. He says, 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. So he's telling you to build things that are not zero-sum. And then one of my favorite parts of reading the everything store is he's obsessed with eliminating gatekeepers. And it's not just eliminating gatekeepers for the sake of eliminating gatekeepers. He's telling us why here. He says, I'm emphasizing the self-service nature of these platforms because it's important for a reason I'm emphasizing the self-service nature of these platforms

because it's important for a reason I think is somewhat non-obvious. Even well-meaning gatekeepers slow innovation. It's an important sentence there. When a platform is self-service, even the improbable ideas can get tried because there's no expert gatekeeper ready to say that will never work. And guess what? Many of those improbable ideas do, and society is the beneficiary of that diversity. All right, 2012. So this is interesting. Before I read this, this is the note. I was like, in other words, we would still take this approach even if it didn't maximize success, but we are pretty sure it does.

And this is why I wrote this because Jeff writes here, our energy at Amazon comes from the desire to impress customers rather than the zeal to best competitors. We don't take a view on which of these approaches is more likely to maximize business success. There are pros and cons to both and many examples of highly successful competitor-focused companies. We do work to pay attention to competitors and to be inspired by them, but it is a fact that the customer-centric way is, at this point, a defining element of our culture. One advantage, perhaps a subtle one, of a customer-driven focus is that it aids a certain type of proactivity. When we are at our best, we don't wait for

external pressures. We are internally driven to improve our services, adding benefits and features before we have to. We lower prices and increase value for customers because we have to be... excuse me... we lower prices and increase value for customers before we have to. We invent before we have to. These investments are motivated by customer focus rather than by reacting to competition. That's really interesting. So if you keep in mind what is best for the customer as opposed to what the hell your competitor is doing, you'll probably arrive at true innovations while they're just over copying the other people they're competing with.

That's fascinating. And as always, he reiterates what is best for the customer is best for the shareholder. Our heavy investments in Prime, AWS, Kindle, digital media, and customer experience in general strikes some as too generous, shareholder indifferent, or even at odds with being a for-profit company. Amazon, as far as I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers, writes one outside observer. But I don't think so. To me, trying to dole out improvements in a just-in-time fashion would be too clever by half. It would be risky in a world as fast moving

as one we all live in. More fundamentally, I think long-term thinking squares the circle. Proactively delighting customers earns trust, which earns more business from those customers, even in new business arenas. Take a long-term view, and the interests of customers and shareholders align.

All right, 2013. Wow, this one's, OK, here we go. So the takeaway I took from this section is when you succeed at something others doubted would work, you gain confidence to try new things in the future. It says, customers love Prime. More than one million customers joined Prime in the third week of December alone. And there are now tens of millions, that's insane. And now there are tens of millions of Prime members worldwide. It's easy for us to forget that Prime was a new, unproven,

some even said foolhardy concept when we launched it nine years ago. Let me scroll down a little bit to the next highlight. And this is when he repeats this a lot. I think it's super important because it goes against our human nature which we talked a lot about last week it says experiments and more experiments we have our own internal experiment experimentation platform called web lab that we use to evaluate improvements to our websites and products i keep in mind that this time he's got like you know three to about three giant businesses depending on on where you classify Kindle in, right?

So they do a lot of experiments to get there, though. He said, in 2013, we ran 1,976 experiments, up from 1,092 in 2012 and 546 in 2011. So the opposite of what normally happens at large companies, they slow down their innovation. As he grew, as Amazon grows, they speed it up. And it says, he's still talking about experimenting, you have to, it's just got to be something you have to do. Do not be afraid of it. It says, failure comes part and parcel with invention. It is not optional. We understand that and we believe

in failing early and iterating until we get it right. When this process works, it means our failures are relatively small in size because most experiments can start small." He's really just talking about the fact that experimenting is a core organizational tenant here. And then he says, and when we hit on something that is really working for customers, we double down on it with hopes to turn it into an even bigger success. However, it's not always as clean as that. Inventing is messy. And over time, it is certain that we'll fail at some big bets too. I'm going to start reading more shareholder letters. I'm just very curious to see how other founders

and public companies talk this way. Okay, so 2014. This is Jeff telling us what a great business looks like to him. A dreamy business offering has at least four characteristics. Customers love it. It can grow to a very large size. It has strong returns on capital, and it is durable in time,

with the potential to endure for decades. When you find one of these, don't swipe right. Get married. Well, I'm pleased to report that Amazon hasn't been monogamous in this regard. After two decades of risk-taking and teamwork, and with generous helpings of good fortune along the way, we are now happily wed to what I believe are three such life partners. Marketplace, Prime, and AWS. Each of these offerings was a bold bet at first, and sensible people worried that they would not work. But at this point, it's becoming pretty clear how special they are and how lucky we are to have them. It's also clear that there are no sinecures in business.

We know it's our job to always nourish and fortify them. He says, we'll approach this job with our usual tools, customer obsession rather than competitive focus, heartfelt passion for invention, commitment to operational excellence and a willingness to think long term and then this is maybe the first time in these letters where Jeff actually uses the word fly well we're all the way up in 2014 and it's a great example of what it means here in case you're not sure. He says, the success of this hybrid model accelerated the Amazon flywheel. Customers were initially drawn by our fast-growing selection of Amazon-sold products at great prices with great customer experience. By then allowing third parties to offer products side by side, we became more attractive to customers, which drew even more sellers. This also added to our economies of scale, which we passed along by lowering prices and

eliminating shipping fees for qualifying orders. Having introduced these programs in the US, we rolled them out as quickly as we could to other geographies. The result was a marketplace that became seamlessly integrated with all of our global websites. So another way to think about, he continues a few paragraphs later, which I love. This is probably the simplest way to think about, to understand the flywheel, and that's feeding energy from one thing into another. So it says, maintaining a firm grasp of the obvious is more difficult than one would think

it should be. But it's useful to try. If you ask what do sellers want, the correct and obvious answer is they want more sales. So what happens when sellers join Fulfillment by Amazon and their items become Prime eligible? They get more sales. Notice also what happens from a Prime member's point of view. So the other side, right? Every time a seller joins Fulfillment by Amazon,

Prime members get more Prime eligible selection, meaning the value of the membership goes up. This is very powerful for our flywheel. Fulfillment by Amazon completes the circle. Marketplace pumps energy into Prime, and Prime pumps energy into Marketplace. So that was the best description I've heard so far. Okay, so it says,

so now he's going to talk about AWS. Large enterprises have been coming on board as well, and they're choosing to use AWS for the same primary reason that startups did, speed and agility. This is so, so, so important because he really understands, he understands what his customers want, and he's telling you to understand

what your customer wants. Okay, so he says, now you have these large companies coming on AWS. Startups started first, but now the large ones are, and they're doing it for the same reasons, which is odd, just being agility. So he says, having lower IT costs is attractive, and sometimes the absolute cost savings can be enormous. But cost savings alone could never overcome deficiencies in performance of functionality.

Enterprises are dependent on IT. It is mission critical. So the proposition, the sales pitch, in other words, I can save you a significant amount on your annual IT bill and my service is almost as good as what you have now, will not get too many customers. What customers really want in this arena is better and faster. And if better and faster can come along with a side dish of cost savings than terrific, but the cost savings is the gravy, not the steak. IT is so high leverage. You don't want to imagine a competitor whose IT department is more nimble than yours. Every company has a list of technology projects that the business would like to see implemented as soon as possible. The painful reality is that tough triage decisions are always

made and many projects never get done. Even those that get resourced are often delivered late or with incomplete functionality. If an IT department can figure out how to deliver a large number of business enabling technology projects faster, they'll be creating significant and real value for their organization. These are the main reasons AWS is growing so quickly. IT departments are recognizing that when they adopt AWS, they get more done. So it's interesting, that's the real value add, not that it's going to be cheaper. And then this is Jeff later on telling us explicitly how he thinks of his businesses,

which I think is one of the most valuable takeaways from these letters, is hearing from him how he's thinking about what he's doing. I believe AWS is one of those dreamy business offerings that can be serving customers and earning financial returns for many years into the future. Why am I optimistic? For one thing, the size of the opportunity is big, ultimately encompassing global spend on servers, networking, data centers, infrastructure software, databases, data warehouses, and more. Similar to the way I think about Amazon retail, for all practical purposes, I believe AWS is market-sized unconstrained. I've also heard other people say it's basically a tax on the Internet.

So think about the size of the opportunity, right? All right, so we're going to 2015. This is where Jeff is actually analyzing the similarities between his AWS business and his retail business. This year, or the beginning of the retail business, says this year Amazon became the fastest company ever to reach $100 billion in annual sales. Also this year, AWS is reaching $10 billion in annual sales, and AWS is doing so at a pace

even faster than Amazon achieved that milestone. What is going on here? Both were planted as tiny seeds. See? He sticks to his script. Both were planted as tiny seeds and both have grown organically without significant acquisitions into meaningful large businesses quickly superficially the two could hardly be more different one serves consumers and the other serves enterprises one is famous for brown boxes and the others for api's is it only a coincidence that coincidence that two such dissimilar offerings grew so quickly under one roof under the, the two are not so different at all. They share a distinctive organizational culture that cares deeply about

and acts with conviction on a small number of principles. I'm talking about customer obsession rather than competitor obsession. Eagerness to invent and pioneer, willingness to fail, the patience to think long-term, and the taking of professional pride in operational excellence. A word about our corporate, a word about corporate cultures rather, not just theirs. For better or worse, they are enduring, stable, and hard to change. They can be a source of advantage or disadvantage. You can write down your corporate culture, but when you do so, you're discovering it, uncovering it, not creating it. It is created slowly over time by the people and by the events, by the stories of past success and failure that become a deep part of company lore.

If it's a distinctive culture, it will fit certain people like a custom-made glove. The reason cultures are so stable in time is because people will self-select. Someone energized by a competitive zeal may select and be happy in one culture, while someone who loves to pioneer and invent may choose another. The world, thankfully, is full of many high-performing, highly distinct corporate cultures. We never claim our approach is the right one. We just claim that it's ours. And this is actually one of my, I'm going to get to one of my favorite Jeff Bezos quotes ever. It's actually saved. I always talk to you, I have these screenshots that I save my phone under a folder.

Things that I want to remember, ideas I want to remember. Every so often, I open up the folder and just scroll through and it's like flashcards for ideas. It's really interesting, actually. All right, to invent,

you have to experiment. I'll tell you which, when I get to the quote. To invent, you have to experiment and if you know in advance that it's going to work, it's not an experiment. Most large organizations embrace the idea of invention but are not willing to suffer

the string of failed experiments necessary to get there. Outsized returns often come from betting against conventional wisdom. And conventional wisdom is usually right. Given a 10% chance of a 100 times payoff, you should take that bet every time. But you're still going to be wrong nine times out of 10. We all know that if you swing for the fences, you're going to strike out a lot, but you're also going to hit some home runs.

Now, this is the start of the quote I love. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score 1,000 runs. This long-tailed distribution of returns is why it's important to be bold big winners pay for so many experiments and then scrolling down a little bit this is actually a longer one of his

longer letters they wrote and this is the difference between Amazon and most technology companies many companies describe themselves as customer focused, but few walk the walk. Most big technology companies are competitor focused. They see what others are doing and then work to fast follow. And then Jeff talks to this idea about an invention machine and he's going to, this is also him telling us how he makes decisions. Wow, I've been talking for a while. My voice is going. All right. We want to be a large company that's also an invention machine. We want to combine the extraordinary customer service capabilities that are enabled by size with the speed of movement, nimbleness, and risk acceptance mentality normally associated with entrepreneurial startups.

Can we do it? I'm optimistic. We have a good start on it, and I think our culture puts us in a position to achieve the goal, but I don't think it'll be easy. There are some subtle traps that even high-performing large organizations can fall into as a matter of course, and we'll have to learn as an institution how to guard against them. One common pitfall for large organizations, one that hurts speed and inventiveness, is a one size fits all decision making. This is a really important point. Some decisions are consequential and irreversible,

or nearly irreversible, one way doors. And these decisions must be made methodically, carefully, slowly, and with great doors, and these decisions must be made methodically, carefully, slowly, and with great deliberation and consultation. If you walk through and don't like what you see on the other side, you can't go back to where you were before. We call these type one decisions, but most decisions aren't like that. They're changeable and reversible. They're two-way doors. If you've made a suboptimal type two decision, you don't have to live with the consequences for that long.

You can reopen the door and go back through. Type two decisions can and should be made quickly by high judgment individuals or small groups. But this is the difference between Amazon and other companies, right? As organizations get larger, there seems to be a tendency to use heavyweight type one decision-making process, and he put that into italics, the word process,

on most decisions, including type two decisions. The end result of this slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention. We'll have to figure out how to fight that tendency. Okay, so now we're going to 2016. And I love how he starts this letter. He says, Jeff, what does day two look like? That's a question I just got

at our most recent all-hands meeting. I've been reminding people that it's day one for a couple of decades. I work in an Amazon building named Day One, and when I moved buildings, I took the name with me. I spend time thinking about this topic, and so this is his answer. Day two is stasis, followed by irrelevance,

followed by excruciating painful decline, followed by death. And that is why it's always day one. To be sure, this kind of decline would happen in extreme slow motion. An established company might harvest day two for decades, but the final result will still come. I'm interested in the question, how do you fend off day two? What are the techniques and tactics? How do you keep the vitality of day one even inside a large organization? Such a question can't have a simple answer. There will be many elements, multiple paths, and many traps.

I don't know the whole answer, but I know bits of it. Here's a starter pack of essential day one defense. Customer obsession, a skeptical view of proxies, which we'll elaborate more on in a minute, the eager adoption of external trends. Wow. I mean, how many people, how many businesses you know do that? Eager adoption of external trends and high velocity decision making. Okay. There are many, so it says, there are many ways to center a business.

You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and can be product-focused, you can be technology-focused, you can be business model-focused, and there are more. But in my view, obsessive customer focus is far more protective of day one vitality. Staying in day one requires you to experiment patiently, accept failures, plant seeds, protect saplings, and double down when you see customer delight. A customer-obsessed culture creates the conditions where all of that can happen. So now he's going to elaborate on what he meant by resist proxies.

So he says, as companies get larger and more complex, there's a tendency to manage proxies. So I didn't understand what he meant until he explains in the next paragraph. This comes in many shapes and sizes, and it's dangerous, subtle, and very day two. So he says, a common example is process as a proxy. This is something Steve Jobs talked about too. He says, good process serves you so you can serve customers. But if you're not watchful, the process can become the thing. This can happen very easily in large organizations. The process becomes the proxy for the result you want. You stop looking at outcomes, and you just make sure you're doing the process right.

Gulp. It's not that rare to hear a junior leader defend a bad outcome with something like, well, we followed the process. A more experienced leader would use it as an opportunity to investigate and improve the process. The process is not the thing. Another example, market research and customer surveys can become proxies for customers, something that's especially dangerous when you're inventing and designing products. He's going to give an example here.

Fifty-five percent of beta testers report being satisfied with this feature. That is up 47% in the first survey. That's hard to interpret and could unintentionally mislead. Good inventors and designers deeply understand their customer. They spend tremendous energy developing that intuition. They study and understand many anecdotes rather than only the averages you'll find on surveys. They live with the design.

A remarkable customer experience starts with heart, intuition, curiosity, play, guts, taste. You won't find any of that in a survey. So he's going to talk about what he calls high velocity decision making. Day two companies make high quality decisions, but they make high quality decisions slowly. To keep the energy and dynamism of day one, you have to somehow make high quality, high velocity decisions. easy for startups and very challenging for large organizations speed matters in business and I love to

say now we're I'm gonna skip ahead a little bit to this other idea he has that's called disagree and commit this is how you how you make sure that you're optimizing for speed and business he just said it's important if you're the boss you should do this too. I disagree and commit all the time. We recently greenlit a particular Amazon Studios original. I told my team my view. This is his view.

Debatable whether it would be interesting enough, complicated to produce, the business terms aren't that good, and we have lots of other opportunities. They had a completely different opinion and wanted to go ahead. I wrote back right away with, I disagree and commit and hope it becomes the most watched thing we've ever made. Consider how much slower this decision cycle would have been

if the team had actually had to convince me rather than simply get my commitment. Recognize true misalignment. This is an interesting point too about the difference between how deadly misalignment is in organizations. So he says, recognize true misalignment issues early and escalate them immediately. Sometimes teams have different objectives and fundamentally different views. They are not aligned. No amount of discussion, no number of meetings will resolve

this deep misalignment. Without escalation, the default dispute resolution mechanism for this scenario is exhaustion. Whoever has more stamina carries the decision. I've seen many examples of sincere misalignment at Amazon over the years. When we decided to invite third-party sellers to compete directly against us on our own product detail pages, that was a big one. Many smart, well-intentioned Amazonians were simply not at all aligned with the direction. The big decision set up hundreds of smaller decisions, many of which needed to be escalated to the senior team. You've worn me down is an awful decision-making progress. It is slow and de-energizing. Go for quick escalation instead. It is better.

Alright, so let's go to 2007. Oh, this is very interesting. One thing I love about customers is that they are divinely discontent. Their expectations are never static. They go up. It's human nature. We didn't ascend from our hunter-gatherer days by being satisfied. People have a voracious appetite for a better way, and yesterday's wow quickly becomes today's ordinary. I see that cycle of improvement happening at a faster rate than

ever before. You cannot rest on your laurels in this world. Customers won't have it. So how do you stay ahead of ever-rising customer expectation? There's no single way to do it. It's a combination of many things, but high standards are certainly a big part of it. I'd like to share with you the essentials of what we learned so far about high standards inside an organization. First, he's asking the question, is this intrinsic or teachable? He says, first, there's a foundational question. Are high standards intrinsic or teachable?

Do we first and foremost need to select for high standards people? If so, this letter would need to be mostly about hiring practices, but I don't think so. I believe high standards are teachable. In fact, people are pretty good at learning high standards simply through exposure. High standards are contagious. Bring a new person onto a high standards team and they'll quickly adapt. The opposite is also true. If low standards prevail, those too will quickly spread. This is really interesting. I use podcasts and books for what he's about to explain. Another important question is whether high standards are universal or domain-specific.

In other words, if you have high standards in one area, do you automatically have high standards elsewhere? I believe high standards are domain specific, and you have to learn high standards separately in every area of interest. But when I started Amazon, I had high standards on venting, on customer care, and on hiring. But I didn't have high standards on operational process,

how to keep fixed problems fixed, how to eliminate defects at the root, and how to inspect processes and much more i had to learn and develop high standards on all of that understanding this point is important because it keeps you humble you can consider yourself a person of high standards in general and still have debilitating blind spots there can be whole arenas of endeavor where you may not even know that your standards are low or non-existent and certainly not world class. It is critical to be open to that likelihood. So what I mean by at the beginning of this as I use podcasts and books for this,

I've said this repeatedly that we're really, really lucky to be born in the age of the internet and specifically with the growth in podcasts that we've been seeing. And the reason being is because analyze your daily interaction. Think about every single person you've interacted with today. Think about the person you talked to yesterday. Think about the person you talked to last week. And over and over and over again,

you're going to realize that for the vast majority of people, for the vast majority of people, for the vast majority of people that they interact with, there's very few of us that get to interact with truly brilliant, high standard people in our day-to-day lives because these people are rare. But the beautiful thing about books and podcasts is you get to access them. You can sit in on a

discussion of two people that have thought about a subject and studied a subject for 30 something years or whatever the case is. You can let their standards become yours. You can expand the scope of your ambition. Like I'm sitting here reading all these books all day about people, you know, something like think of Kirk Kerkorian who we covered a few weeks ago, like eighth grade education, didn't stop him. He just took, he just went from one opportunity to another, to another, to another. Like you realize, oh wow, so much of life and everything around us is nonlinear. And by exposing yourself to this is, to this is doing exactly what Jeff Bezos is saying. He's like, listen, you could have debilitating blind spots.

You could think that maybe you're in good health or good shape, and then you either read a book or listen to a podcast about somebody that dedicates their life to that. You could think you're a really good entrepreneur, and then you realize, oh, I didn't even think about this idea or this approach. There's just a limitless number of things that we can improve on constantly and none of us are ever going to get to this.

There's no such thing as perfection. But that doesn't mean we shouldn't try throughout our entire lives to keep growing and to keep adding new skills and to keep doing things as best as we can. So I think reading, especially biographies, listening to podcasts where you have people that are sharing ideas that are useful to your life, like that's one way to just slowly, even if you're increasing your standards by 1% every year, 2% a year, 5% a year, over many decades,

that's a vast improvement over the person next to you that's not doing those things, that's not reading those books, that's not listening to those podcasts, that's a vast improvement over the person next to you that's not doing those things that's not reading those books that's not listening to those podcasts it's not having those experiences that's not experimenting that's not inventing it's extremely important okay so I mean just think about like if you read his shareholder letters and read his book like that's one person and you can learn so much because Jeff is willing to share it go on YouTube and I'm doing this a lot I'll eventually put the notes on my personal website and i'll let you know what i do but uh i've been going through and um not only on podcasts i take notes but on uh like these talks and they're all over youtube my man there's just so much information i want to learn here like i want to remember and so i have

like the kindle highlight version of it i would it's the way i think about it like you know things i want to go back and like have flash cards almost to remember and i was like you know what if it's value to me it's probably valued to other people. So when I'm done with that, I'll let you know. All right. And this is very weird. He's going to bring up the idea of doing a perfect handstand. So a close friend of mine recently decided to learn to do a perfect freestanding handstand,

not leaning against the wall, not just for a few seconds. Instagram good. She decided to start her journey by taking a handstand workshop at her yoga studio she then practiced for a while i promise you this the story is really worth hearing just bear with me she then practiced for a while but wasn't getting the results she wanted so she hired a handstand coach yes i know what you're thinking but evidently this is an actual thing that exists in the very first lesson the coach gave her some wonderful advice. Most people, he said, think that if they work hard, they should be able to master a handstand in about two weeks. The reality is that it takes about six months of daily practice.

If you think you should be able to do it in two weeks, you're just going to end up quitting. Unrealistic beliefs on scope, often hidden and undiscussed, kill high standards. To achieve high standards yourself or as part of a team, you need to form and proactively communicate realistic beliefs about how hard something is going to be, something this coach understood well. He says, building a culture of higher standards is well worth the effort, and there are many benefits. Naturally and most obviously, you're going to build better products and services for customers. This would be reason enough. Perhaps a little less obvious, people are drawn

to high standards. They help with recruiting and retention. More subtle, a culture of high standards is proactive of all the invisible but crucial work that goes on in every company. I'm talking about the work that no one sees, the work that gets done when no one is watching. In a high standard culture, doing that work well is its own reward and it's part of what it means to be a professional this is Jeff beating his drum he's telling us why companies must experiment invent from very on from very early on in Amazon's life we knew we wanted to create a culture of builders people who are curious explorers they like to invent

they see the way we do things as just the way we do things now. A builder's mentality helps us approach big, hard to solve opportunities with a humble conviction that success can come through iteration, invent, launch, reinvent, relaunch, start over, rinse, repeat again and again. They know the path to success in anything. They know the path to success is anything but straight. Wandering, this is such an interesting use of the word wandering. I love how he says this. Wandering in business is not efficient, but it is also not random. It's guided by hunch, gut, intuition, curiosity, and powered by a deep conviction that the prize for customers is big enough and it's worth being a little messy and tangential to find our way there.

Wandering is an essential counterbalance to efficiency. You need both. The outsized discoveries, the nonlinear ones, are highly likely to require wandering. And if you think about that, it makes sense. If you didn't have to wander, if there was these huge nonlinear opportunities, somebody would have done them. You have to go off paths that other people aren't doing. You have to wander. The biggest needle movers will be things that customers don't know to ask for. We must invent on their behalf. We have to tap into our own inner imagination about what's possible. AWS itself as a whole is an example. No one asked for AWS, no one. Turns out the world was in fact ready and hungry

for an offering like AWS but didn't know it. We had a hunch, followed our curiosity, took the necessary financial risks, and began building, reworking, experimenting, and iterating countless times as we proceeded. And customers are responding to our customer-centric wandering and listening. AWS is now a 30 billion annual run rate business and is growing fast. And here he talks about something I don't think I've heard anybody else say.

He talks about failure needs to scale too. And this is the last of the highlights. You also hear a quote in here that I read to you earlier. He says, as a company grows, everything needs to scale, including And this is the last of the highlights. And you also hear a quote in here that I read to you earlier. He says, as a company grows, everything needs to scale, including the size of your failed experiments. If the size of your failures isn't growing, you're not going to be inventing at a scale that can actually

move the needle. Amazon will be experimenting at the right scale for a company of our size if we occasionally have multi-billion dollar failures. Development of the Fire Phone and Echo was started around the same time. While the Fire Phone was a failure, we were able to take our learnings and accelerate our efforts into building Echo and Alexa. No customer was asking for it. This was definitely us wandering and market research doesn't help. If you'd gone to

a customer in 2013 and said, would you like a black, always-on cylinder in your kitchen about the size of a Pringles can that you can talk to and ask questions, that also turns on your lights and plays music, I guarantee you they would have looked at you strangely and said no thank you.

Customers have purchased more than 100 million Alexa-enabled devices. All right, we made it. 20-plus years of synthesized knowledge of Jeff Bezos building one of the largest and most successful technology companies of our time. If you enjoyed this podcast, do me a favor. Can you spread this? I think it's an interesting idea. I think a lot of people would be interested in it.

Send it to friends, share it on social media, do whatever you can. And in general, just encourage your friends to, if you're enjoying and learning from my podcast, please encourage your friends to sign up. And if you want to support it, please sign up. It takes 15 to 20 seconds. There's a link. You could become a misfit. Half my podcasts are free. Half podcasts I do are just for misfits. So if you're not already a misfit, you're missing out. There's a ton of knowledge and experience and good ideas that I'm uncovering and reading all these books. And it'd be a shame if you missed out on half of them. It's unbelievably affordable. And not only that, but it supports my work. And it's the only thing that'll keep this project going over a long period of time. So literally 10 to 15 seconds, you're listening to a bunch of podcasts

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