Jeff Bezos just passed up Warren Buffett as the third richest person in the world (despite the fact that Amazon has yet to post a profit).
Interestingly, Mr. Buffett has had a number of complimentary things to say about Bezos lately. In May, Buffett told CNBC, “We haven’t seen many businessmen like him . . . Overwhelmingly, he’s taken things you and I’ve been buying and he’s figured out a way to make us happier buying those products, either by fast delivery or prices or whatever it may be, and that’s remarkable.”
In Bezos’ most recent letter to shareholders, he outlines the Amazon philosophy that has led to this astounding success. Four key points in my opinion:
- As evidenced by the 1997 shareholder letter he always attaches to this annual missive, Bezos has stuck to his knitting and not deviated despite what must be at times enormous pressure to diverge from his model. In 19 years he has not wavered—though he has innovated like crazy (see #2 and #3).
- Amazon really is driven by customer needs vs. competitors’ behavior. From the letter, in reference to Amazon Web Services: “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. In contrast, 90 to 95% of what we build in AWS is driven by what customers tell us they want.” This lines up with Buffett’s comment and echoes the 1997 letter’s first point: “Obsess Over Customers.”
- According to Mr. Bezos, Amazon is the best company in the world when it comes to failure. He says this with pride because they run true “experiments” – e.g. they really don’t know in advance what’s going to happen. But they figure all experiments that are in response to specific customer needs are worth doing.
- Bezos distinguishes Type 1 decisions, which are potentially fatal and require a lot of thought and modeling and time, from Type 2 decisions, which are not fatal and are usually iterative—that is: if at first you fail, try, try again. Without the two categories, all decisions can look like Type 1 decisions and decision making goes glacial. “The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention. We’ll have to figure out how to fight that tendency.”
Last week I wrote about three things entrepreneurs can learn from life in a small town in Italy, and it’s gratifying to see that Jeff Bezos would agree with my point #2 (Explore Fearlessly). What would happen if we took his ideas to heart? Unwavering commitment to his mission and his customers, plus his willingness to fail, have brought him to the place where Warren Buffett speaks of him with admiration. What could it do for you?
If you think these ideas are worth implementing, or if you feel your business is ready to make a major change but aren’t sure how to begin, send me an email at Scott@doubledareyou.us and we can set up a time to talk.