In any conversation discussing the most magnificent capital allocators of all time, Warren Buffett (Trades, Portfolio) often comes out on top, for obvious reasons. But often overlooked is Jeff Bezos, even though he has arguably built a much more massive and successful empire than Buffett. He has also built up his Amazon.com Inc. (AMZN, Financial) empire from scratch.
As a result, I want to highlight a selection of quotes from one of the most comprehensive interviews Bezos (who is relatively media shy) has ever given. The interview was first published in Business Insider. It is a lengthy and frank talk about Amazon's successes and failures over the years.Â
Bezos' rare interview
Interestingly, the interview starts with a discussion of Bezos' most significant failures at Amazon and why, despite billions in wasted capital spending, these mistakes no longer matter:
"Experiments are, by their very nature, prone to failure. A few big successes compensate for dozens and dozens of things that didn’t work. Bold bets — Amazon Web Services, Kindle, Amazon Prime, our third-party seller business — all of those things are examples of bold bets that did work, and they pay for a lot of experiments.
I’ve made billions of dollars of failures at Amazon.com. Literally billions of dollars of failures. You might remember Pets.com or Kosmo.com. It was like getting a root canal with no anesthesia. None of those things are fun. But they also don’t matter."
Bezos goes on to say that it's not the failures that matter, but the willingness to try, to experiment with new businesses to stay ahead of the competition and remain relevant in an ever-changing world. It is critical, he goes on to say, that managers avoid making any "bet-the-company" last-ditch attempts to save businesses, as this won't work.
Only long-term investors matter
It is this drive to always be innovating that seems to be to blame for Bezos' lack of available time to spend with investors.
In the interview, he goes on to say that he spends less than six hours a year talking with investors and "selling the stock." Much like Buffett, who only wants committed long-term investors to hold Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial) stock, Bezos says he wants to meet his biggest investors, but only those with a "low portfolio turnover."
"Where you are going to spend your time and your energy is one of the most important decisions you get to make in life. If you’re going to spend time explaining the company, you should do it with people who are long-term investors, rather than traders."
Explaining how Amazon works is not a simple process. The business' DNA is built into its culture. According to Bezos, it is a culture of "high standards of operational excellence, of inventiveness, of willingness to fail, willingness to make bold experiments."
Unlike other companies, the CEO goes on to explain, Amazon does not have a set planning process for growth.
"We sometimes have people come to the company and they find Amazon very boring because we don’t have enough competitive zeal," he said. But that does not mean Amazon isn't looking to win. The company approaches its markets differently. Rather than focusing on one driving factor, managers consider how various markets impact each other and then develop systems to benefit from this weakness.
"It takes many hours to read a book. It’s a big commitment. If you only think about books competing against books, you make really bad decisions. You're competing against Candy Crush and everything else. If we want a healthy culture of long-form reading, you have to make books more accessible. Thirty dollars for a book is too expensive. In the internet era, almost all of the tools for reading have been reducing the friction of short-form reading. The internet is perfect for delivering three paragraphs to your smartphone. The Kindle is trying to reduce friction for reading a whole book. It’s working."
The Kindle is just one part of the Amazon ethos to put customers first; the philosophy that has been the driving force behind the business ever since it first opened its doors.
Sure, Amazon might not be everyone's favorite, and some of its business practices have attracted criticism, but you have to admire Bezos' drive to succeed, be better than the competition and continuously innovate. I highly recommend that you check out the full interview on Business Insider.
Disclosure: The author owns shares of Berkshire Hathaway.
