How Amazon’s Jeff Bezos created an online giant

Jeff Bezos’ focus on consumers above shareholders has at times vexed Wall Street. But smart investors have stayed with his company. In 16 years as CEO of Amazon, the online retail giant he created, Bezos has delivered industry-adjusted shareholder returns of 12,266%, and the value of the company has grown by $111 billion.

Bezos took time to speak with HBR on November 26 – Cyber Monday, which set an all-time record for online sales, a category Amazon practically invented. Edited excerpts from the interview follow.

HBR: When Amazon went public, in 1997, you wrote a letter to shareholders that said, “It’s all about the long term.” Did you feel you were challenging orthodoxy?

Bezos: We were trying to make sure we were correctly advertising the event. Warren Buffett once said, “You can hold a rock concert or you can hold a ballet. Just don’t hold a rock concert and advertise it as a ballet.” A public company has to be clear about whether it’s holding a rock concert or a ballet, and then investors can decide if they want to opt in.

HBR: What does it mean from the perspective of a CEO to think long-term?

Bezos: If you’re long-term oriented, customer interests and shareholder interests are aligned. In the short term, that’s not always the case. We have other stakeholders, too – our employees, our vendors. We take it as an article of faith that if we put customers first, other stakeholders will also benefit, as long as they’re willing to take the long-term view. And a long-term approach is essential for invention, because you’re going to have a lot of failures along the way.

HBR: You’ve said that you like to plant seeds that may take seven years to bear fruit. Doesn’t that mean you’ll lose some battles to companies that have a more conventional, two- or three-year outlook?

Bezos: Maybe so, but if we had always needed to see significant financial results in two or three years, then some of the most meaningful things we’ve done would never have been started – like Kindle, Amazon Web Services, Amazon Prime.

HBR: How much do you care about your share price?

Bezos: I care very much about our shareowners, so I care very much about our long-term share price. I do not follow the stock on a daily basis, because I don’t think there’s any information in it. The economist Benjamin Graham once said, “In the short term, the stock market is a voting machine. In the long term, it’s a weighing machine.” We try to build a company that wants to be weighed, not voted on.

HBR: Does it make sense for Amazon to stay in the hardware business, which is a low-margin, low-profit area for you?

Bezos: Our approach is to sell our hardware – our Kindle devices – at near breakeven. Then we have an ongoing relationship with customers who buy content from us: digital books, music, movies, TV shows, games, apps. We aren’t trying to make $100 every time we sell a Kindle Fire, so we don’t have to get you on the upgrade treadmill.

HBR: You have said that you would be interested, if you had the right concept and approach, in creating a physical Amazon retail experience. Why even consider that?

Bezos: We like to build innovative things, but only if we can put our own unique twist on them. If we could find something differentiated that we thought customers would like, it would be superfun.

HBR: Would developing a phone fall into that innovative category?

Bezos: Yeah, absolutely.

HBR: Who do you fear is your biggest challenger?

Bezos: We don’t get up every morning wondering, “Who are the top three companies that are going to try to kill us?” I know of companies that do that in their annual planning processes, and the competitive zeal motivates them. We do pay attention, but it’s not where we get our energy from.

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