Lessons From Jeff Bezos

 I have long been fascinated by Jeff Bezos and the growth of Amazon. There is no question that his firm has changed the way we shop and set a standard for service for retailers. Here are a few things that I have digested by tracking his actions over the past few decades:

1) Bezos’ mantra is: “We have a whole process that starts with the consumer and works backwards.” As a result, many business analysts would say that Amazon is the most consumer-centric company in the world. Many have imitated their approach.

When I mentioned this to people in various industries, I have often received the reply that “just about everybody does that.” Not in my experience. Not even close. I worked with people who promised outstanding service when pitching business, yet when it came in their primary focus was on earning a 20%+ profit margin on the new acquisition. I was frequently accused of over-servicing an account. The customer was paid lip service but the firm’s bottom line mattered far more than the long term health of the people ultimately paying us.

A similar scam goes on in financial services where a “customized plan” is put together for new clients. The reality is that it is almost always a pre-packaged mix of assets that is driven solely by the age of the client(s) and their existing net worth. The exception was the late Jack Bogle of Vanguard who popularized the index fund. His tactic, fully above board, was to buy the entire market and charge a very, very low service fee. Overtime, the natural growth of markets would make your holdings rise and you were not eaten up by high fees from investment "professionals.” Bogle was truly customer-centric.

2) Bezos is a great communicator. Study his work and it is cloning Winston Churchill. Years ago, I told a colleague that he should read Warren Buffett’s annual letters to shareholders of Berkshire Hathaway (I still highly recommend them). My friend said you should read the Amazon letter to shareholders that Jeff Bezos puts out each year. The guy writes like Churchill, he said.

I am a huge Churchill fan and was always impressed since my teenage years with the clarity of both his writing and speeches. The great man once said regarding writing or speechmaking: “Short words are best, and old words when short are best of all.” Read Bezos or watch some of his presentations on You Tube. The man is a great communicator. Many words have one syllable, sentences are short and memorable. To me, it is a 21st century American version of Sir Winston. Executives in all industries should imitate this approach.

3) “Missionaries love their product and love their customers.”—Jeff Bezos

Do you REALLY love your customers? If not, maybe you are in the wrong game.

4) “Humans aren’t good at understanding exponential growth.”—Jeff Bezos

When Jeff launched Amazon, a deciding factor was that the internet was growing at 2,400% per year. Mind boggling but most of us missed it. I never bought Amazon shares as, a quasi-securities analyst, they had no consistent earnings for years. Yes, sales kept exploding but I was wedded to a low P/E (price to earnings ratio) strategy and the company’s shares left the station without me. This comment still hits home and smarts a bit.

5) Avoid big departments. Bezos once said that if your team cannot be fed with two pizzas, it is too big. So, he divides teams into smaller groups and fresh ideas seem to pop up.

6) He banned power-points at meetings. At Amazon, memos are used and very tightly written. For some meetings, no one reads the recommendation memo until decision-makers are all in the room. The memo is passed out and everyone reads it at the same time. Also, for each staff meeting, there is an empty chair at the table. The point is that the chair represents the consumer and you always need to be aware of them and their needs and wants.

7) One last gem from Bezos—“You don’t choose your passions. You passions choose you.” 

Many people have tried to copy some of this. Some Amazon alumni are developing consumer-centric companies. I wish them well. One very successful player is Bom Kim who has created a company called Coupang (ticker symbol CPNG) which is referred to as the Amazon of South Korea. I am not touting the company and do not own any at present but I do follow their journey closely.

There are many books out about Amazon. My two favorites are: The Bezos Blueprint by Carmine Gallo and bezanomics by Brian Dumaine.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.