it's all about the long term Jeff bezos's first shareholder letter in 1997 this is day one for the internet and if we execute well for Amazon today online Commerce saves customers money and precious time tomorrow through 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 we have a window of opportunity as larger players Marshall the resources to pursue the online opportunity and as customers new to purchasing online are receptive
to forming new relationships 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 that we are targeting this strategy is not without risk it requires serious
investment and crisp execution against established leaders we believe that a fundamental measure of our success will be the shareholder value we create over the long term the stronger our Market leadership the more powerful our economic model Market leadership can translate directly to higher Revenue
higher profitability greater Capital velocity and correspondingly stronger Returns on invested Capital we have invested and will continue to invest aggressively to expand and leverage our customer base brand and infrastructure as we move to establish an enduring franchise there's that word again where
right in the beginning he's already said used the word enduring twice because of our emphasis on the long term we may make decisions and weigh trade-offs differently than some companies we want to share with you our fundamental management and decision-making approach so that you our shareholders May confirm
that is consistent with your investment philosophy we will continue to focus relentlessly on our customers we will make bold 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 either case when forced to choose between optimizing the appearance of our Gap accounting and maximizing the present value of fure future cash flows we'll take the cash flows we will work hard to spend wisely and maintain our
leaning culture we understand the importance of continually reinforcing a cost conscious culture we will obsess over customers from the beginning our Focus has been on offering our customers compelling value we set out to offer customers something they simply could not get any other way and began serving
them with books we brought them much more selection than was possible in a physical store and presented it in a useful easy to search and easy to browse format in a store that's open 365 days a year 24 hours a day we maintained a dogged focus on improving the shopping experience we dramatically lowered
prices further increasing customer value Word of Mouth Remains the most powerful customer acquisition tool that we have I take great pride in being part of this team setting the bar high in our approach to hiring has been and will continue to be the single most important element of Amazon success it is not easy
to work here we are working to build something important Something That Matters to our customers something that we can tell our grandchildren about such things aren't meant to be easy we are still in the early stages of learning how to bring new value to our customers through internet Commerce we
know vastly more about online Commerce than when Amazon was founded but we still have so much to learn though we are optimistic we must remain Vigilant and maintain a sense of urgency that was an exer from Jeff bezos's very first shareholder letter so this is the third time that I've read
Jeff bezos's shareholder letters I plan on rereading them many times in the future the first time I made a podcast about his shareholder letters was all the way back on episode 71 and if you look at episode 71 the tagline the description for that episode I actually got from a fantastic uh business email
newsletter called CB insights and they had a post about uh Jeff shareholder letters and I think they put it the best way like why would you want to spend so much time reading them and learning from them and they said to read basos s Sher 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 writt and so before I go to the 1998 shareholder letter which is all about obsessions I just want to go over the notes that I had from 1997 just these things that I jotted down for myself because a main theme of the shareholder letters is a
main theme of the history the history of Entrepreneurship that fact that repetition is persuasive almost all of History's Greatest Founders they identified a handful of principles that were important to them as they were building the business and they constantly repeated that decade after
decade and you're going to see that as we go through Jeff's shareholder letters and it was so important that that 1997 shareholder letter was attached to every single the end of every single other shareholder letter it can be thought of as the founding document for Amazon and so some of the notes that I jot jotted
down as I read that shareholder letter you know for the third or fourth time uh more Innovation is ahead of us it is still early the opportunity if we execute well is enormous we will move quickly we will endure right from the very beginning Jeff's goal was Amazon was going to be a durable long lasting
company uh we will focus on cash flow once in a lifetime opportunities which is what he considered building Amazon uh will be risky in fact I've heard him talk in other um interviews that he gave himself at best a a 30% chance of success he thought the likely outcome of Amazon would be complete failure uh
customer obsession is our North Star it is what we will bet the company on we will be bold we we will have a Frugal these are all my notes keep in mind we will have a Frugal lean culture that Sam Walton would approve of just famous for reading and being heavily influenced by
Sam Walton's autobiography he'd have the executives inside Amazon read it he'd hand out copies where he actually go and highlight important parts and give it to people he was working with I've read Sam's book multiple times the last time I did a podcast on it was episode 234 if you haven't listen to that yet you
probably want to listen to it after this uh so we'll have a Frugal lean culture that Sam Walton would approve of this will be hard all valuable things are and we will have to learn along the way and so those are main themes that you're going to see him repeat over and over again the note on on the very first page
of the 1998 shareholder letter that I wrote myself it's repetition is persuasive this is day one we must stay VI Vigilant uh we we will act with a sense of urgency because there's both risk and opportunities ahead and we will have failures so it is let's go right to the the shareholder letter it is truly
day one for the internet and if we execute our business plan well it remains day one for Amazon 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 certainly some will turn out to be mistakes heads down focus on customers helped us make substantial progress in 1998 and so this 1998 shareholder letter is all about what they are going to choose to be obsessed about we intend to build the world's most customer Centric company
but there is no rest for the weary 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're 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 we must be committed to constant Improvement experimentation and innovation in every initiative we love to be Pioneers it's in the DNA of the company and it's a good thing too
because we need that pioneering Spirit To Succeed In fact when he talks about hey we're going to we're going to experiment we're going to be Pioneers we're going to invent if you read his very last shareholder uh letter which I have a handful of highlights from I'll get to later but also you'll see uh in a
bunch of interviews how he describes himself he says I am an inventor I didn't know that the first time I read the shareholder letter so I think knowing how he thinks about himself adds more context to why these things are important to him we love to be pioneers it's in the DNA of the company and it's
a good thing too because we'll need that pioneering Spirit to succeed we're proud of the differentiation we've built through constant Innovation and Relentless focus on customer experience I don't have I don't think I have the Kindle version of this book maybe I do but I would imagine if you search the
word Relentless it's going to pop up a bunch of times in fact if you go to this day if you go to relentless.com Jeff owns that that uh domain name and it points to Amazon I would love to ask him the question if you could only have one word to describe you on your Tombstone what would it be my guess is he would
pick Relentless so then he's going to get into how he thinks like what's the proper way to hire this section is work hard have fun make history it would be impossible to produce results in an environment as dynamic as the internet without extraordinary people working to create a little bit of History isn't
supposed to be easy rep more repetition there right and well we're finding that things are as they're supposed to be so he's saying it's obviously very difficult setting that bar high in our approach to hiring has been and will continue to be the single most important element of Amazon success that is a
sentence it's very similar he has a sentence very similar to that in the very first shareholder letter as well during our hiring meetings we ask people to consider three questions before making a decision number one would will you admire this person for myself I've always tried hard to work with people to
work only with people I admire and I encourage folks here to be just as demanding life is definitely too short to do otherwise number two will this person raise the average level of effectiveness of the group that they're entering that's a great question we want to fight entrophy
the bar has to continuously go up and number three along what dimension might this person be a superstar this was the most like I was very surprised when I read this again um so he's talking about you know many people have some kind of unique skills or interest and perspectives that actually enrich enrich
the work environment for everybody else that they're working with and this just threw me for a loop it's often something that's not even related to their jobs one person at Amazon is a national spelling beat Champion I suspect it doesn't help her in her everyday work but it does make working here more fun
and then he goes back into this idea hey this we have a gigantic unbelievably valuable we found out you know trillions of dollars Val uh uh potential opportunity in front of them and it's supposed to be hard as we look forward we believe that the overall e e-commerce opportunity is enormous although Amazon
has established a strong leadership position it is certain that competition will even further accelerate oper so he's talking about what he wants he wants operational excellence and high efficiency and then another main idea he has is that you should clearly articulate your philosophy so that
you're the the right people can self- select in not only people that are working for you but any shareholders or investors that you may attract so he says 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've have so many new shareholders we've appended last year's letter immediate immediately after this year's I invite you to please read the section titled it is all about the long term you might want to read it twice to make sure that we're the kind of company you want to be invested in as it says there we do
not claim it's the right philosophy we just claim that it's ours so 1999 this one's titled building for the long term and he starts right away stay relentlessly focused on the customer we can be uniquely positioned to serve new customers best and benefit as a result our Relentless focus on customers has
worked so he's just talking about he's recapping the Year this is also something he talks about in his very last shareholder that the reason that customers pay you the reason they pay Amazon the reason they pay any business is because we and you create value for them and so that's why he preaches
that's where your focus should be this is very interesting so it's like uh he's giving a talk at Stanford University and he's asked a question like what do you own if I'm a shareholder of Amazon what do I own at a recent event at Stanford University campus a young woman came to the microphone and asked me a great
question I have 100 shares of Amazon what do I and so he's like oh that's an interesting question here's his answer you own a piece of the leading e-commerce platform we believe that we have reached a Tipping Point where this platform now he's already describing his business as a platform and when I went
over so I had already read I read through all the shareholder letters right and then before I sit down to record and to talk to you again I reread all my highlights right so it hit me on that that that the rereading of this part I'm like oh if this is the know life myself if you stop and think about
it it is a company that builds other companies that is how he viewed Amazon in fact in the last shower he talks about listen all of our he names like the most valuable businesses uh that that they invented along the way in the you know the 20 or something years separating the very first sh letter to
the last one and he's like when we started in 1987 we had invented Prime we didn't invent Marketplace we didn't invent Alexa or AWS there was no way we could have predicted that we're the companies we're going to invent but he set up the company from the very beginning to create more companies as
they go along and learn more because listen to what he says here we believe that we've reached a Tipping Point where this platform Amazon allows us to launch new e-commerce businesses faster with a higher quality of customer experience a lower incremental cost a higher chance of success and a faster path to scale
and profitability than any other company our vision is to use this platform to build Earth's most Centric company so that is an extremely important point and it also relates to why I think you should feel confident investing time listening to Founders podcast because all of History's Greatest entrepreneurs
did exactly what you're doing now they're learning from the great people that came before them this idea this this blew my mind right this idea of hey I'm going to create the worlds the one that he's talking about right here in the share letter I'm our vision is to use this platform to build Earth's most
customer Centric company he learned that idea from the founder of Sony AIA Maria I I covered his autobiography which is absolutely fantastic all the way back on Founders 102 if you haven't listened to it let me pull out another this is something I heard Jeff say in a note I
took on this conversation he had and so um the the not I left myself here is Jeff basis on what he learned from AIA Marita and how it influenced the building of Amazon right after World War II Akia Marita the guy who founded this is Jeff talking right after World War II AK Marita the guy who founded Sony made
the mission for Sony that they were going to make Japan known for quality and you have to remember this was at a time when Japan was known for cheap copycat products and Marita didn't say we're going to make Sony known for Quality he said we're going to make Japan known for Quality this is the
punchline he chose a mission for Sony that was bigger than Sony and when we talk about Earth's most customer Centric company we have a similar idea in mind we want other companies to look at Amazon and see us as a standard Bearer for obsessive focus on the customer as opposed to OB obsessive Focus focus on
the competitor I love how all this stuff ties together so let's go back to this our vision is to use this platform to build Earth's most Customer Center company as it is probably clear this platform affords an unusually large scale opportunity one that should be one that should prove very valuable for both
customers and shareholders if we can make the most of it despite the many risks and complexities we are deeply committed to doing so and so if you read between the lines what he's saying with that again another idea of his building a valuable company will be difficult it is supposed to be difficult and then he
goes into his goals for next year which at this time is would be the year 2000 get big fast is something he repeats over and over again he says when you're on uh when you're on when you're an internet business you can either be really really small or really really large the internet kind of destroys the
middle so he says we will continue to invest heavily in introductions to new customers though it's sometimes hard to imagine with all that has happened in the last 5 years this remains day one for e-commerce and these are the early days of category formation where many custom customers are forming
relationships for the first time he was right about that I go back all the time and look when I um like uh when I buy certain books I was like when's the last time I read it when when I bought it you know once I started ordering books on Amazon he captured a customer for now what 15 17 years however long it's been
so he's like they're forming new relationships for the first time we should attract many as many of these people as possible and then if we just obsess over them and constantly provide value they will be loyal to us what is the lifetime value if somebody's been ordering not only books but almost
everything on Amazon for 17 years he was dead right about this so it says this remains day one for e-commerce and these are the early days of category formation where many customers are forming relationship for the first time we must work hard to grow the number of customers who shop with us on the very
next page no I left myself he sees how everything connects and feeds into his overall plan for Amazon there's this very famous thing you should uh uh very famous image if you Google image search Amazon flywheel I think the visual gives a basic idea this is is not the exact same thing and his the flywheel has
evolved over time but you can see that's how he thinks naturally because this a very early days of the company he's talking about this so he's talks about the importance of very high standards he talks about over and over again to us operational excellence implies two things delivering continuous Improvement
in customer experience and driving productivity margin efficiency and asset velocity across all of our businesses often now this is this is where it all connects this is very interesting often the very the best way to drive one of these right he just said hey we're going
to constantly continue to improve in customer experience right we're going to drive productivity increased margin efficiency and asset velocity across all of our businesses then this is where how he connects all this together for you and I often the very best way to drive one of these is to deliver the other for
instance more efficient distribution yields faster delivery times which in turns lowers uh contacts per order and customer service costs these in turn improve customer experience and build brand which in turn decreases customer acquisition and retention cost that is one of the most important paragraphs I
feel in all of the shareholder letters again you can read them for free if you don't have the book that I'm holding in my hand that is $1999 I will put that entire paragraph in the show notes make sure you you get this uh shareholder letter and read this whole part that is so important our whole company is highly
focused on driving operational excellence in each area of our business in 200000 and then obviously moving forward being worldclass in both customer experience and operations will allow us to grow faster and deliver even higher service levels and even though we're still in the very beginning of the
shareholder letters I think you see Jeff basos is unapologetically Extreme he sets an extremely high bar he uses words over and over again words like world class Excellence highly focused if you listen to the episode on Steve Jobs that I did last week Jeff basos also reminds me of Vince Lombardi
there's an entire section in that book which is absolutely fantastic about why what Vince leardi and Steve Jobs had in common and in that story Vince is meeting Vince leard is meeting with his new players for the very first time and he's giving them the speech and leardi was also unapologetically extreme and he
tells them I'm not remotely interested in being just good so now we get into the Pain part the inevitable Pain part of Entrepreneurship this is when Amazon stock drops by 80% and you're going to see Jeff does something extremely smart here you and I talked about this a couple weeks ago did that book uh what I
learned uh before I sold to Warren Buffett's episode 279 and something that that his dad taught him was that you need to concern yourself only with the controllables they were trying to build a diamond business during uh the depression they went to you know that company I think was like 79 years old by
the time they sold Warren Buffett so they went through multiple different Financial panics and his dad's like listen we can't control the macro environment all we control all we should be focusing on rather is what we can actually control inside the actual business so um I wrote um everyone else
is was focused on the stock uh Jeff was focused on the internal metrics of his business so he's like this is a bizarre experience because yeah the stock dropped by 80% but the actual internal metrics of the company are improving so it says ouch it's been a brutal year for many in the capital markets and
certainly for Amazon shareholders as of this writing the 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 than at any time in the past and he does something smart here where he starts out with all the mistakes he's
like listen I say we're going to be bold we're going to make bold investment decisions we are not going to make timid investment decisions but bold bets can and will fail sometimes that's completely expected uh so they wind up losing a bunch of money on these other dotcom startups many of you have heard
me talk about the Bold bets that we as a company have made and will continue to make our decision to invest in smaller e-commerce companies including living.com and pets.com both of which shut down operations in 2000 we lost a significant amount amount of money on both but we're going to see Jeff is
learning and I'm going to tie this into another he gave a Ted Talk on uh the internet's electricity metaphor I took notes on it many many years ago I'll include it uh the link down below but check this out he realized like oh this isn't the Gold Rush that's the wrong metaphor for building an internet
company in the n in the you know mid to late 90s so he's learning we made these Investments because we knew we wouldn't ourselves be entering these particular categories anytime soon and we believed passionately in the land Rush metaphor the Gold Rush metaphor for the internet indeed that metaphor was an
extraordinary useful decision aid for several years starting in 1994 but we now believe its usefulness largely faded over the last couple of years in retrospect we significantly underestimated how much time would be available to enter these categories and so according to this I first took notes
on Jeff bezos's Ted Talk on the electricity metaphor for the web's future all the way back in 2019 I watched it again before I sat down to talk to you and in this talk he's like oh the analogy between the internet boom and the Gold Rush starts to diverge because in the gold rush like there's a
finite amount of gold that you can take out of the ground but the internet gets bigger every day and he says there's a much better analogy that allows you to be incredibly optimistic so he is still incredibly optimistic when everybody else around him the external world is saying no no all this is this isn't
going to work out you are now valued 80% Less in the last 12 months even though your business is getting better right this uh Jeff this is Jeff talking there's a much better analogy allows you to be incredibly optimistic and that analogy is the electric industry and his comparison between the internet and the
electric industry this is my favorite paragraph they are both thin horizontal enabling layers that go across lots of different Industries it is not a specific thing they both can be used as incredible means of transmitting power they they're both they both are an incredible means of communicating
information flows and then just one final thing that may be more important than everything else in the talk is comparing and contrasting your view on the industry that you're working in with other people's view at this time the external world is telling Jeff the Gold Rush the internet Gold Rush is over and
Jeff's like uh no we haven't even barely begun he says we're in the 1908 hurly washing machine stage of the internet you have to watch the video to understand that it was actually hilarious this is the paragraph that just fires me up if you really because I feel this way about podcasting if you
really do believe it's the very very beginning then you are incredibly optimistic I do think there is more Innovation ahead of us than there is behind us we are very very early and Jeff turned out to be dead right I would spend the 18 minutes to watch the video it's absolutely it's just fantastic you
see a thinking uh it's just the Jeff Bas was of 2003 like he had no idea how correct he was and The Innovation and venting that laid before him for the company that he was building it's absolutely and he looks completely different by the way too all right so let's go back to this online selling
relative to traditional retailing is a scale business so this goes back to his main idea listen if you're on the internet you can be really small or really big obviously he's like we're going to be the biggest onl and this is why online selling relative to to traditional retailing is a scale business characterized by high fixed
cost and relatively low variable cost this makes it difficult to be a medium-sized e-commerce company so I'm moving on to the 2001 shareholder letter we see this idea he feels everything is connected the note is simple to myself repeat this Loop focus on cost Improvement so this is a very old idea
something you and I have learned history of Entrepreneurship is full of people that just keep telling you all the founders keep telling you over and over again watch your cost watch your cost the maximum that I always think of I can't remember if it was uh either Andrew Carnegie or his partner Henry Kay
frck gentlemen watch your costs that is what they preached up and down their organizational structure watch your cost watch your cost watch your cost focus on cost Improvement this is Jeff telling you why is so important he brings up the the importance of frugality and having a
low low cost structure over and over and over again focus on cost Improvement makes it possible for us to afford to lower prices which drives growth growth then spreads fixed costs across more sales reducing cost per unit which makes possible more price reductions customers like this and it's good for shareholders
please expect us to repeat this Loop then he starts to summarize some of the gains and and growth they had going to pull out one sentence because he says this is the single most important thing and it is probably what he repeats the most most most important we stayed relentlessly focused on the customer
then he jumps into the next paragraph obsess over customers he does not he he does not care if you think he repeats himself he does and he does that intentionally he is telling you with the frequency in which he he repeats these ideas what is important to him I love this obsessed over customers uh until
July Amazon had primarily been built on two pillars of customer experience uh selection and convenience we added a third customer experience pillar relentlessly lowering prices so now he's using that word again relentlessly lowering prices he like listen we were able to improve the customer experience
because we have more selection and it's more convenient if we just ship you uh what you want instead of you driving to the store waiting in line everything else now where did he get the idea to relentlessly lower prices if you listen to episode 179 which is when I read Jeff's biography which is called the
everything store I think that was the second or third time I read it you already know the story this came as a result of one of the most important meetings that Jeff had in his entire life it is when Jim Sagal the founder of Costco met with Jeff for coffee if I remember correctly they actually meet
for coffee inside like at a Starbucks inside of a Barnes & Noble which is funny because I was obviously one of Amazon's uh main competitors at the time and so I want to read a bunch of highlights from the everything store this is absolutely fantastic I love the way Jim Sagal thinks I wish so many
people were like why haven't you done an episode on cost go I can't there's no books on no biographies on Jim Syle unfortunately and the day it releases I wish he'd write an autobiography is the day I make the podcast so it says it's just giving some background on the fact that they have a a lot of like uh like
Bezos Sagle have rejected multiple acquisition offers over the years including one from Sam Walton and Syle like to say he didn't have an excess strategy that he was building a company for the long term Bezos listened carefully and once again Drew key lessons from a more experienced retail
veteran what are you and I doing at this exam same moment it is exactly exactly what Bezos did he was obsessed about studying and learning from people that came before him and in this case Jim Sagal is way more successful and way more wealthier obviously that's changed now than Bezos was at the time Bezos
listened carefully and once again Drew key lessons from a more experienced retail veteran and what does Jeff do he doesn't just oh that's that's a nice idea he takes that idea he learns a new idea goes back to the company and relentlessly implements it Syle explain the Costco model to Bezos it was all
about Customer Loyalty there are some 4,000 products in the average Costco warehouse uh there are copious quantities of everything in there and it's all dirt cheap Costco Buys in bulk and marks up everything at a standard across the board 14% even when it could charge more that's an idea that basos
has he's beating them on selection uh convenience and prices when people say Hey you know we're beating on on prices by such a large margin let's increase it a little bit more it's like no Syle goes into the fact that uh their most all their profit comes from annual membership it's going to sound a lot
like what prime turns into right uh Jim told him the membership fee is a onetime p pain but it reinforced it but its value is reinforced every time customers walk in and see a 47in TV that's $200 cheaper than anywhere else and then Jim also realized how it all connects Costco's low prices generated heavy
sales volume and the company then used its significant size to demand the best possible deals from suppliers thus raising its per unit gross profit dollars you have to ask Jim why are you educating a potential competitor and Jim says because I benefited from people that came before me that gave me their ideas
a decade later and finally preparing to retire Syle remembers the conversation well I think Jeff looked at it and thought that was something that he could apply to his business as well he does not regret educating an entrepreneur who would evolve into a ferocious competitor this is what Jim said I've always had
the opinion that we have shamelessly stolen any good ideas and then this is the result Bezos took the lessons he learned during that coffee in 2001 and applied them with a Vengeance the Monday after the meeting with Sagle Bezos opened an s team that's his executive team meeting by saying he
was determined to make a change the company's pricing strategy he said according to several Executives who were there was incoherent Amazon preached low prices but in some cases the prices were higher than competitors like Walmart and Costco Bezos said Amazon should have everyday low prices this is why if
Amazon could stay competitor on price it would win the day on unlimited selection and on the convenience afforded to customers who didn't have to get in the car to go to a store and wait in line that that July as a result of the Sagal meeting Amazon announced it was cutting prices of books music and videos by 20
to 30% and this is when they started identifying the fly will they started identifying the loop that has been mentioned a few times in the shold letters so far lower prices led to more customer visits more customers increased the volume of sales and attracted more commission paying thirdparty sellers to
the site that allowed Amazon to get more out of fixed cost which he just referenced right it's like we are a large fixed cost business online selling is a large is excuse me let me read it let me not butcher's point I'm going to go ah Hadad to let me go back in the uh previous year online selling is a scale
business characterized by by high fixed cost and relatively low variable costs right he goes back this has allowed Amazon to get more out of fixed costs like the Fulfillment centers and the servers needed to run the website this greater efficiency then enabled it to lower prices further feed any part of
this flywheel they reasoned that is Jeff and his executive team right this is their thinking behind this and they were dead right about this feed any part of this flywheel they reasoned and it should accelerate the loop and this is where it gets really crazy if you believe the ideas that Jeff
learned in that meeting with Jim Sagal helped Amazon survive and then grow and you look at the difference between where Amazon was before the meeting and where it is as a result of the fact that it was able to survive for the next 20 years what is the value what is the economic value of those ideas this is
why studying the history of Entrepreneurship is so valuable it is exactly there's a line in poor Charlie Charlie's omac the wit and wisdom of Charlie Munger that summarizes exactly what you and I are learning and in poor Charlie Almanac it says there are ideas worth billions in a $30 history book
that is how you and I know we're on the right track I record this in a recording booth I feel like kicking the door right now this fills me up with so much energy because it's attainable for all of us the collection of these ideas obviously the App application execution is on us in individually but it's crazy how
generous so many these entrepreneurs are with letting us learn from their experience it gets me all right I'm going to I got to calm down all right going to 2002 that I love this so the the at least in the book that I'm reading um they title all these and it says what's good for customers is good
for shareholders I wrote Jeff repeats this over and over again and he says this is really interesting because I um there's only one paragraph here but a lot of what came to let me read the paragraph I think reading the paragraph first and then telling you why I thought of Henry Ford let me just read it to you
uh one of our most exciting peculiarities is poorly understood people see that we are determined to offer both World leading customer experience and the lowest possible prices but to some this dual goal seems paradoxical so this is a year after talking to Sagle he says hey we're going to do lowest prices possible and World
leading customer experience the reason I think that popped to mind is because I just uh I just reread Henry Ford's autobiography that's episode 2 266 and you can look at the uh the show notes of episode 266 I said like you could distill Henry Ford's like his his philosophy on company building or what
was important to him down to five words maximum service at minimum cost and also in that autobiography which is a very similar theme to what Jeff saying that he's trying to do here there's something also very similar to this philosophy within Henry Henry for's autography he's
like listen I don't want to make a lowquality cheap product I want to make a high quality cheap product or maybe a better way to put that is like I don't want to make a lowquality inexpensive product I want to make a high quality inexpensive product and so now Jeff goes into more detail about hey uh I learned
this from Jim we're going to have everyday low prices he goes back to the meeting tells his s team hey we're going to be just like Costco and Walmart because if we can match the prices these we're going to have everyday lad prices if we can match them on price we're going to beat them on convenience and
selection right and so look at the the amount of work they're willing to do to make sure they're actually matching the this goal where basos is saying hey we're going to organize around this principle and we're going to show with our actions that it's important to us our pricing objective is not to Discount
a small number of products for a limited period of time but to offer low prices every day and apply them broadly across our entire product range to illustrate this point we we recently did a price comparison versus a major well-known chain of book Superstores we did not handp a choice uh Choice group of books
against which we wanted to compare right so he says instead we we use their published list of their 100 best sellers for the year 2002 so then they say okay you you put up this this is your bestselling books for the year 100 we're going to go to these stores we're going to buy all these books we're going to
see how much it costs us to buy it at your store and then we're going to do the same thing on Amazon so it says we priced all 100 titles by visiting their stores it took us six hours and four of their different Superstores to find all 100 books on their list so right there it's like wait a minute these are your
bestselling books I had to go to four different bookstores just to get a 100 of them right or you could just sit down in front of your computer and do this way faster uh when we added everything up we spent we discovered that at their stores these 100 uh bestselling books cost
$1,561 at Amazon the same books cost 1,195 for a total Savings of $366 or 23% 2003 is a really short letter it's all about long-term thinking and it really is talking about hey you need to design your customer experience with their long-term benefit the long-term benefit of the customer in mind not the
money that you'll make in the short term and he's saying this is counter two and rare and he gives a perfect example to illustrate why it's so difficult to do that as we design our customer experience we do so with long-term owners in mind we we Empower customers to review products so the the reviews
obviously everybody knows this now this was relatively new at the time you could do a review like you're going to Amazon to buy something and on the own the sales page could be a bad review or you know like a bunch of bad reviews so you don't buy them so it says we received complaints from a few vendors basically
wondering if we understood what business we're in you make money when you sell things why would you allow negative reviews on your website they said speaking as a focused 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 and this is this is so important because it goes against I think human nature though negative reviews cost us some sales in the short term helping customers make better purchase decisions ultimately pays off for the company and that is so important because he feels there is no
misalignment between customer and shareholder interest if you always taking care of the customer then the shareholders will be rewarded over the long term he quotes Ben Graham a bunch in this book as well or not the book in the shareholder letters uh on that time scale the interests of shareholders and
customers are aligned if you do this over a long period of time right uh this year uh the widely followed American customer satisfaction index gave Amazon a score of 88 which is the highest customer satisfaction score ever recorded in any service industry uh a representative of the American customer
satisfaction index was quoted as saying if they go any higher they will get a nose bleed and then Jeff says we are working on that again unapologetically extreme he's got ridiculously high standards he is already the best Amazon already got the highest score out of any company on this index ever and he's like
okay I still want to be better okay so then he's got a shareholder letter this is this part is incredible it's all about making decisions uh really on the need for good judgment and why data may actually lead you to make the wrong decision and this is also why he he talks about the importance of wandering
he says like the best decisions he's ever made in his life were not math driven they were like intuitive uh taste or like gut based decisions he starts out I'm going to skip over the part where he's like you know if if you have data making decisions really easy but usually when you're building a company
and he says this later on he's like listen if you wait for all the data if you wait you get 90% sure like you're just going to move too slow he's like you're going to have to get used to being really good at making decisions uh with maybe 70% of the amount of data that you actually need so he says not
all of our important decisions can be made in a math-based way sometimes we have little or no historical data to guide us and proactive experimentation as it means to get data right and proactive experimentation is impossible impractical or tantamount to a decision to proceed the prime ingredient in these decisions is
Judgment he uses that as an opening to describe like why is he significantly lowering prices we have made a decision to continuously and significantly lower prices for customers year after year this is an example of a very important decision that cannot be made in a math-based way and so he explains with
rare exceptions the volume increase in the short term is never enough to pay for the price decrease however our quantitative understanding of elas elasticity is shortterm we can estimate what a price reduction will do this week and this quarter but we and this is the most important part but we cannot
numerically estimate the effect that consistently lowering prices will have on our business over five five years or 10 years or more our judgment and he italicizes the word judgment 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 a much larger dollar amount of free cash flow and thereby to a much more valuable Amazon and he hints on why so few businesses get this correct math-based decisions command wide agreement judgment-based decisions are rightly
debated and they're often controversial we will start with the customer and work backwards in our judgment there's that word again in our judgment that is the best way to create shareholder value the next shareholder goes into his thinking about hey like how do you decide when to
like build new businesses like how do you decide what to go into and really you could think about he's going to give us the he's asked the question hey basos uh when do you actually going to go into open physical stores right this is in 2006 and this goes back to I would summarize this he's like I have no
interest in building an undifferentiated commodity business which you and I just discussed in length because I just read Peter Teal's book the main theme of zero to one is the fact that undifferentiated commodity businesses don't make any money and he explicitly says in that book don't build one that's episode 278
if you haven't listened to it yet I often get asked when are you going to go open physical stores the potential size of a network of physical stores is exciting right physical world retailing is a ky and ancient business that is already well served and we don't have any ideas for how to build a physical
world store experience that's meaningfully differentiated for customers differentiation is something that Bezos is obsessed with one of the most interesting themes in his last shareholder letter is the fact that he feels differentiation as survival and it's a con it's something you have to
put a constant amount of energy into because the universe wants you to be typical and so Jeff you know 15 years ago said hey I have no interest in building an undifferentiated commodity business I'm not going to jump into this even it's a large Market I can make a lot of money until I figure out a way to
differentiate and 15 years later he's still using the fact that hey differentiation is survival that's such a fantastic Maxum still the importance of uh uh differentiation and how he thinks about building new businesses in some large companies it might be difficult to grow new businesses from
Tiny seeds because of the patience and nurturing required Amazon's culture is unusually supportive of small businesses with big potential and I believe that's a source of our competitive Advantage something else I don't know if he ever explicitly uses this sentence but this is definitely something he would agree
with patience can be a competitive Advantage we have many people at our company who have watched multiple $10 million seeds turn into billion dooll businesses that firsthand experience and the culture that has grown up around those successes is a big part of why we can start businesses from scratch the culture
demands that these new businesses be high potential and that to be Innovative and differentiated there's that word again uh so they have to be high potential Innovative and differentiated but it does not demand that they be large on the day that they are born and then this next section is on a team of
missionaries this one of his main themes he says listen missionaries build just they just build better products they actually care for non-financial reasons I'm reading this because this is also very important to me reading is you know a lifelong passion of mine it's maybe the mo it is the most important hobby
I've ever developed and the longest running hobby that I've had think about reading is forc meditation I think books are the antidote to like shorter attention spans I don't think there's a better use of my time um any form of media besides books and podcasts I think that the combination of both um just the
amount like if you if in my own like life you may have experienced this as well like everything I learn in college is compared to like what I've learned from books and podcasts on my own is less than 1% I just think they're extremely important I love the fact that he says that Amazon you know it started
with books because they were missionaries for reading and then he just has better ideas like when you hear Jeff's talk he's constantly referencing the books that he is learning from I just heard a talk one talk he gave I think it's like the David Ruben scene show or something like that and he's
already the rich at that point he was like the richest person quote unquote in the world and he's referencing books right he has infinite amount of resources could hire anybody to give him one-on-one teaching right or could learn from anybody in the world and yet he can still pick up a book that's $20 and and
that get that he finds valuable in his life there's a reason he talks about this later on that um anything that has persist he's talking about how hard it is to improve the book uh I wasn't going to read this point I just thought thought this was interesting but it just came in mind anything that has persisted
in roughly the same form and resist the change for 500 years is unlikely to be proved easily he's like you could never Out book the book so we humans Co but the larger Point here is really the importance of reading no matter everybody has time whether it's an audiobook whether it's you know Kindle
doesn't matter a physical book they have to be part of your repertoire we humans co-evolve with our tools we change our tools and then our 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 the
printing press led to a significant step change in the cost of books physical books ushered in a new way of collaborating and learning lately Network Tools like computers and cell phones uh have changed us too they shifted us towards information snacking and I would argue towards shorter
attention spans his whole point is like that why they were trying to make the Kindle this you should he's trying to get more people to read right to have a longer attention span the best description of reading I ever heard was from I think she was a librarian I've mentioned this a few times and I can't
remember I should write down her name and go find it again but uh she said reading is forced meditation no one is going to describe spending time on social media as Force meditation if our tools make information snacking easier we're going to shift towards information Shack snacking and away from long-term
reading Kindle is purpose-built for long form reading we hope Kindle May gradually and incrementally move us over years into a world with longer attention spans of ATT or with longer spans of attention he's writing this in 2007 there's no way that I think anybody's going to argue that we have longer
attention spans now you know many years later provided they would the Kel would provide a counterbalance to the recent proliferation of info snacking tools because the infot snacking tools are very addictive and you know very they can be short-term pleasurable but no one's going to after you scroll through
social media for an hour you're not like oh that was so great as opposed to like if you read a really great book and you spend an hour with just an amazing writer an amazing mind you you're energized from that right I realized my tone here like when I got done I know this this is technically not a book even
though I'm reading it in book form these shold letters like I was filled with energy I was like I cannot believe this this is like a gift to the world A Gift To The Future generations of entrepreneurs that Jeff took the time you know how much editing and writing went into and Distilling all these
experiences of 20 plus years of sh letters like it is such it's a miracle and it's not just for the the information the valuable knowledge and wisdom that he transfers to you and I it's the hours put into sitting there and really thinking about what he's saying and not thinking about anything
else it's just absolutely fantastic I realize my tone here tends towards the missionary I guess my tone does too and I can assure you it's heartfelt I'm glad about that because missionaries make our excuse me missionaries build better products moving to the next year this is all about working backwards why he's
talking about why working backwards from the customer needs will actually make you a more skilled operator over time this was very interesting um because I like how he'll introduce a topic introduce an idea he'll repeat it but he repeats in different ways and then he builds on it so you have a deeper
understanding over time this is very very well written and very clear thinking in these letters in this turbulent global economy he's writing this after the great financial crisis in 2008 our fundamental approach Remains the Same we will stay heads down focused on the long-term and obsessed over
customers long-term thinking levers our existing abilities and lets us do new things we couldn't otherwise contemplate it supports the failure in iteration required for invention and it frees us to Pioneer in unexplored spaces seek instant gratification or The elusive promise of it and chances are you will
find a crowd there ahead of you long-term or this is excellent longterm orientation interacts well with customer obsess 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 patiently for
multiple years to avoid or excuse me multiple years to deliver a solution working backward from customer needs can be can be contrasted with a skills forward approach where existing skills and competencies are used to drive business opportunities so I'm going to pause right there why is the note saying
hey if you work backwards from the customer needs this is actually going to force you it will make you a more skilled business operator over time because he's like well if we have to work back we start with what's best for the customer we might not have those skills to build the thing that's
irrelevant we will go out and learn them and he's saying most businesses say they use what he's calling a skills forward approach meaning this is skill set I have now let's see what opportunities I can pursue he's like no let's ass backwards dude uh with a skills forward approach uh where skills and
competencies are used to drive business opportunities the skills forward approach says we're really good at x what else can we do with X if you use that exclusively the the company employing it will never be driven to develop fresh skills eventually the existing skills will become outmoded working backward from customers need
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 working backwards from the C this is me talking now or me writing to myself working backwards from the customer's needs will make you a more
skilled business operate over time this is also fantastic goes back to the importance of frugality the importance of always importance of not allowing waste to permeate throughout your company the importance of having a lowcost structure the customer experience path we've chosen requires us
to have an efficient cost structure the good news for shareholders is that we see much opportunity for improvement in that regard so there's a stor I'm going to interrupt My Own Story another book where it talked about Jeff's crazy because you would tell him uh something bad about his business and he would get
excited and this is why because he sees that problems are just opportunities and workf close so he's like hey we if the customer experience path we have to have an efficient costructure the good news for share for share owners is that we see much opportunity for improvement in
that regard saying hey we know we can we can lower cost we can have a more efficient cost structure everywhere we look we find what experienced Japanese manufacturers would call muda or waste so everywhere we look we find waste I find this incredibly energizing I see it as potential years and years of variable
and fixed productivity gains and more efficient higher velocity and flexible Capital expenditures he's got a footnote here that's absolutely fantastic at a fulfillment center recently one of our cin experts asked me I'm in favor of a clean fulfillment center but why are you cleaning why don't you eliminate the
source of dirt and Jeff says I felt like the Karate Kid and that term in case you didn't know I had to look it up myself it's kin most likely pronouncing incorrectly maybe Kaizen it is a Japanese term meaning change for the better or continuous improve improv one of my favorite sentences from uh 0 to
One the book you and I just talked about on episode 278 a few weeks ago is going to relate to exactly what Jeff is saying here this is uh 2009 shareholder letter he says the financial results for 2009 reflect the cumulative efforts of 15 years of customer experience improvements that's the end of Jeff
sentence this is the beginning of Peter if you focus on near-term growth above all else you miss the most important question you should be asking will this business still be around a decade from skipping ahead by a year or two he's talking about the the fact that Amazon it will be a place of invention
we will build new businesses Innovative businesses that no one else has done before he calls it the power of invention really I just when I there's only a few sentences I pulled up from this entire year one of it he talks about he starts talking about AWS Amazon web services which is now this gigantic
you know who knows how much the the the business would be worth if it was actually outside of Amazon it's very uh valuable I think in the last uh I think the last sharehold talks about like the growth of AWS specifically I think it was like something I forgot that how fast it grew but now it's up to like $50
billion a year year whatever it was when he wrote that letter this is the main point the value of Amazon web services is undeniable meaning from the customer perspective the value is undeniable I think about this in my terms so not off myself is good question to ask yourself is the value my product provides
undeniable and then he's just got a fantastic quote he's talking about all these other businesses that they're inventing on behalf of the customer I love this the most radical and transformative of inventions are often those that Empower others and he ital ize that others to unleash their ize
that too creativity to produce their dreams I'm going to read that without me interrupting the most radical and transformative of inventions are often those that Empower others to unleash their creativity to pursue their dreams moving ahead he's got a entire shareholder letter dedicated to The
Importance of Being internally driven now this section was fantastic I added some highlights uh from the previous time that I read it what I don't remember though and I looked for it um I put this is wild it reminds me of Charlie Monger on Costco being against human nature my guess is the fact that
they could improve increased prices and they don't but I couldn't find that anywhere in my notes so I'm not entirely sure what I was referencing there so it says our energy at Amazon comes from a desire to impress customers rather than the Zeal to best our competitors one advantage
perhaps a somewhat subtle one of a customer-driven focus is that it aids a certain type of proactivity when we're at our best we don't wait for external pressures we are internally driven to impr our services adding Ben benefits and features before we have to 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 reaction to competition and so he gives an example of this well he says we built an automated system that look for occasions when we've provided a customer experience that is not up to our
standards and those systems then proactively refund customers one industry Observer recently received an automated email from us that said we notice that you experienced poor video playback while watching the following rental on Amazon video on demand Casablanca we are sorry for the inconvenience and have issued you a
refund for the following amount $2.99 we hope to see you again soon surprised by the proactive refund he ended up writing about the experience Amazon noticed that I experienced poor video playback and they decided to give me a refund because of that wow talk about putting customers first and this
is his main point doing it proactive ly is more expensive for us but it also surprises Delights and earns trust and a few years later at the beginning of the 2014 shareholder letter he gives the characteristics that he looks for in businesses that he wants to keep forever 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's durable in time with the potential to endure for decades when you find one of these get married we are now happily wed to what I believe are three such life
Partners Marketplace Prime and AWS and so those are just three more big Winners but a lot of that is like you have to do a lot of experimentation and the reason you to do that is because the big Winners pay for many experiments it does not matter if it took them a hundred failed experiments to get these three
giant businesses so he talks a lot about why you have to be bold in the world of business and I just wrote right above the section this is so important to remember outsize 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 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 returns 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 longtail distribution of returns is why it's important to be bold Big Winners pay for so many
experiments so then he dedicates one of his shareholder letters one year of shareholder letters to this idea fending off day two and so it says Jeff what does day two look like that's the question I 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 move buildings I took the name with me I spend time thinking about this topic 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 and so
he goes into more detail about this to be sure this kind of decline would happen in an in extreme slow motion an established company might Harvest day two for decades but the final result would 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 cannot have a simple answer so he's going to give us a few ideas I think he's got four different um ideas here uh cannot 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 Essentials for day one defense and he puts this into four categories customer Obsession a skeptical view of proxies the eager adoption of external trends and high velocity decision- making so the first one true customer Obsession you and I
have talked about it a bunch today I have to go into more detail this one was interesting res resist proxies as companies get larger and more complex there's a tendency to manage to proxies this comes in many shapes and sizes and it's dangerous and subtle a common example is process as proxy good process
serves you so you can serve customers but if you're not watchful the process becomes the thing the process becomes the proxy for the result you want it's not that rare he's talking about in large organizations 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 will use it as an opportunity to investigate and improve the process so resist the third one Embrace external trends this one was surprising but then I understood what he meant and just think about like the very beginning of Amazon was Jeff ex uh embracing an
external Trend that external Trend being the internet right the growth of the internet at the very beginning the outside world can push you into day two if you won't or can't Embrace powerful Trend Trends quickly if you fight them you're probably fighting the future embrace them and you have a Tailwind
we're in the middle of an obvious one right now machine learning and artificial intelligence and then his final piece of advice on this is that you have to be capable of making high velocity decisions day two companies make high quality decisions but they make high quality decisions slowly you have to
somehow make high quality High Velocity decisions and so he says Amazon is determined to keep our decision-making velocity high speed matters in business and so this is a main theme he's repeated over and over again not only in shareholder letters but also in um in the different books and different talks
and he uses this metaphor over and over again about the fact that there is one-way doors and two-way doors when making decisions and if a decision is easily reversible the two-way door is what he calls it you should be doing those very fast there are and he says like most of the decisions that you're
going to make as you're building your business or two-way doors having once in a while you have to have there's a oneway door it's like if I make this decision I can't go back so it's like you better really think and slow down and make sure you're making those decisions correctly but he says a common
mistake is that as company's age they treat two-way doors as one-way doors so he says uh never use a one-size fits-all decision making process many decisions are reversible and he says they're two-way doors then he continues most decisions should probably be made with somewhere around 70% of the information
that you wish you had if you wait for 90% in most cases you're probably being too slow Plus either way you need to get good at quickly recognizing and correcting bad decisions if you're good at course correcting being wrong maybe less costly than you think whereas being slow is going to be expensive for sure
and the next shareholder letter is all about how to build a culture of high standards um he says high standards are contagious another way to think about this is what Steve Jobs would repeat over over again that you should be be a yard stick for Quality that some people are not used to an environment where
Excellence is actually expected uh so Jeff says I believe high standards are teachable people are pretty good at learning High stand standards simply through exposure high standards are contagious bring a new person onto a high standard team and they'll quickly adapt the opposite this is so important
right so high standards are contagious so are low standards and he says that by saying the opposite is also true and he also does not believe that high standards are Universal they're domain specific and you have to learn how to apply high standards in multiple different domains I believe high
standards are domain specific and that you have to learn high standards separately in every Arena of Interest understanding this point is important because it keeps you humble you can consider yourself a person of high standards in general and still have dehab 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 and he's got this great quote later on I want to put put into this section before we move on leaders have relentlessly high standards many people may think these standards are
unreasonably high so so this next section actually threw me for a loop this is just absolutely incredible thinking and it's that you're going to have to fix unrealistic beliefs on scope and so he talks about hey uh we have a friend she's like really really good she could do like a perfect freestanding
handstand and she was telling Jeff that she even hired a handstand Coach and he's like I can't believe there's such a thing like why would you need a coach for that and the coach gave her so in the very first lesson gave her some really good advice and it's about understanding a realistic scope most
people he said think that if they work hard they should be able to master a handstand in about 2 weeks the reality is that it takes about 6 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 are often hidden and
undiscussed will kill high standards and so he applies this in his business he says listen Amazon culture is famous for having these six-page narratives they will not do PowerPoint instead before a meeting you have to write out like what the ideas or what you're thinking should
put an unbelievable you should put way more time than you think you should in these preparing these documents because you're taking up so much time and having a meeting in the first place right so it says we don't do PowerPoint at Amazon uh we write uh narratively structured six-page memos we silently read one at
the beginning of each meeting in a kind of study hall and so he talks about the quality of these memos varies widely and so they realize like what is the main like why are we finding like if there is a bad memo what is the likely cause and he realized it's it's says when a memo isn't great it's not the writer's
inability to recognize the high standard but instead a wrong expectation on scope this is very fascinating they mistakenly believe a high standard six-page memo can be written in one or two days or even a few hours when really it might take a week or more they're trying to perfect a handstand in just two weeks
and we're not coaching them right the great memos are written and Rewritten shared with colleagues who are asked to improve the work set aside for a couple of days and then edit it again with a fresh mind they simply cannot be done in a day or two the key Point here is that you can improve results through the
simple Act of teaching scope that a great memo probably should take a week or more so then Jeff starts writing about his idea of the importance of wandering um he not only writes about it in share horor letters but he also talks about it in public speeches and so he says sometimes often actually in
business you do know where you're going and when you do you can be efficient you can put in a place you can put in place a plan and execute in contrast wandering in business is not efficient so this is what I was referencing earlier where he says multiple times that the the best uh
like all their best ideas the most opportunities came from wandering uh in contrast wandering in business is not efficient but it's also not random it's Guided by hunch gut intuition curiosity empowered by a deep conviction that the prize for customers is big enough that it's worth being a little messy and
tangental to find our way there wandering is an essential counterbalance to efficiency you need to employ both the outside discoveries the nonlinear ones are like are highly likely to require wandering and so he gives us uh this example AWS 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 so he combines this idea of the importance
of wandering with another idea that's related to it that that your failures need to scale too as your business scales uh so he's going to use the example of echo for this 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 size that can actually move the needle and so his point is like at Amazon side at Amazon size we're going to have to occasionally have multi-billion dollar failures uh so this kind of large scale risk-taking is part of the service we as a large company can
provide to our customers and to society the good news for shareholders is that a single big winning bet can more than cover the cost of many losers and so he talks about how disastrous the fir phone was they lost a bunch of money but it also LED them in part to developing Echo
development of the fir phone and echko was started around the same time while the fir phone was a failure we were able to take our learnings and as well as our developers and accelerate our efforts building echko in Alexa no customer was asking for Echo this was definitely us wandering market research doesn't help
if you had gone to a customer in 2013 and said would you like a black always on cylinder in your kitchen about the size of a pring 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 and
then he said since that first generation Echo customers have purchased more than 100 million they've sold a couple hundred million uh I just searched for this earlier to see if I could get the updated numbers and I think the the biggest number I saw was like two or 3 hundred million of these things they've sold so
far and finally we've reached his last shareholder letter I just want to pull out one piece of advice that Jeff has for you and I that I thought was absolutely excellent differentiation is survival and the universe wants you to be typical in what ways does the world pull at you
in an attempt to make you normal how much work does it take to maintain your distinctiveness to keep alive the thing or the things that make you special we all know that distinctiveness originality is valuable what I'm asking you to do is Embrace how much energy it takes to maintain that distinctiveness
the world wants you to be typical in a thousand ways it pulls at you don't let that happen and that is where I'll leave it for the full story highly recommend reading Jeff shareholder letters for yourself and rereading them throughout your career I will leave a link on it's on Amazon's website um
amazon.com but I'll leave a link below you can read it for free if you want them in book form and you want to use the book that I use for this it's called invent and wander uh the collective writings of Jeff Bezos I will also leave a link below if you buy the book you'll be supporting the podcast at the same time that is
282 books down 1,000 too and I'll talk to you again soon I want to give you a quick update to the founders membership program I was calling it Founders daily and I just changed the name to Founders premium because I added an additional benefit I'm going to start doing AMA ask me anything episodes you can subscribe
there's a link Down Below in the show notes and your podcast player you can also find the link at Founders podcast.com and once you subscribe you'll get get immediate access to the private podcast feed so far I've done about 60 of these little miniature episodes where I give you one idea from
one of hist's greatest Founders every day but now after you subscribe you'll see the ability it says ask me anything you can submit a question and then as soon as I get enough questions I'm going to record an AMA episode where I actually answer those questions and so the way I think about Founders premium
is it's my attempt to go even deeper I want to take the lessons that you and I are learning on Founders and reinforce them through these short daily ideas and then the longer ask me anything episodes so if that sounds like something you'd be interested in check out the link below and you can also go to Founders podcast.com