Lessons from Jeff Bezos’ Annual Letter to Shareholders: Be afraid

20150224165308-jeff-bezos-amazon
Tech

Lessons from Jeff Bezos’ Annual Letter to Shareholders: Be afraid

If you want to succeed like Jeff Bezos:

• Be afraid
• Pay to quit
• Plant seeds
• Cash is king
• Hire the best
• Customers 1st
• Think long-term
• Think exponentially
• Process over results
• Make the right decisions

Jeff Bezos is worth 177.5 billion dollars. Every year he wrote an annual letter teaching us how. I read all 40,000 words of them so you don’t need to. Here are 14 lessons worth your time:
• Focus on customers Focus on your customers, No, obsess over them. Focus on offering value and efficiency. The more customers you have, the more you are able to offer value. Always make decisions with your customers in mind.
• Be afraid Wake up every morning terrified. Not of your competition. Of your customers. Without customers, there you have no business. Without evolution, you have no business. There is no rest for the weary.
• Plant seeds and wait Plant seeds that will grow into meaningful new businesses. It takes discipline, a bit of patience, and a nurturing culture. Invest in new businesses you expect can generate specific returns on capital and scale to a meaningful size.
• Think long term Your fundamental success will be measured over the long term. Every decision you make should bear this in mind. The longer your horizon, the better the decision you will make. Reflect this focus. Always.
• Think exponentially In 2001, Amazon saw: – processing power 2x every 18 months – price performance of disk space 2x every 12 – price performance of bandwidth 2x every 9 They predicted it would allow 60x bandwidth per customer in 5 years at the SAME COST per customer.
• Work long, hard and smart You can work long, hard or smart, but at Amazon you can’t choose two out of three. Set the bar high. Hire the best. Your colleagues will determine your future.
• Hiring the best To hire the best people, ask: 1 – Will I admire this person 2 – Will they raise our average 3 – Where can they be a super star Your colleagues make or break the business. Hire colleagues who will raise the bar. Work Hard, Have Fun, Make History.
• Pay to Quit You want people on the team who want to be on the team. If they don’t want to be on the team, get them off. Amazon, borrowing from Zappos, offers $2,000 to colleagues to quit. The offer increases $1,000 per year until $5,000.
• Make the right decisions Type 1 decisions are irreversible. A one way door. Make them slow, careful, deliberate, and involve consultation. Type 2 decisions are reversible. A two way door. Make them quick by individuals, or small groups, who have high judgment.
• Failure is feedback You cannot succeed without failure long term. Make your workplace a place to fail – failure and invention are inseparable twins. You win big when you go against convention. Convention is generally right. Be willing to be wrong.
• Process over results Amazon executives spend little time on financial results. Focusing on the process of controllable inputs is the most effective way to maximize financial outputs over time. By focusing on customers and executing, the financial results will happen.
• Cash is King Always focus on cash flow. Your future cash flow and your future number of shares are all we need to determine the fair value of your stock. The more you can increase future cash flow, the more you can increase tomorrow’s value.
• Dream Businesses A dream business has four characteristics: – customers love it – it can grow to a large size – it has strong returns on capital – it can endure long term – decades When you find these, go all-in on them.
• Always Day 1 Day 1 at Amazon is growth, always moving forward. Day 2 is stasis, followed by irrelevance, then excruciating, painful decline, and ultimately death. To always be in Day 1, simply follow all of the points above. Alway. Every. Single. Day.
TL;DR: If you want to succeed like Jeff Bezos: • Be afraid • Pay to quit • Plant seeds • Cash is king • Hire the best • Customers 1st • Think long-term • Think exponentially • Process over results • Make the right decisions Remember, It is always Day 1

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