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Jeff Bezos’ letter to shareholders

451 points by adamsi 11y ago

ww520 11y ago
It's very telling that he devoted a large portion of the letter on AWS.
- vonklaus 11y ago
  Amazon had a $7B biz in 2015[0]. I am on mobile but I believe they have more servers than google. obviously, it fits with my personal narrative/is self serving, to say that the war for search is coming, but it is. Microsoft basically modeled azure as a more user friendly AWS, and is courting devs with the release today of integrated code search with hacker rank, as well as the push to open source a ton of tooling (similar to googledocs enterprise strategy) to get developers on the platform. msft also is pushing blockchain on azure, likely because it is interesting to developers and they have failed miserably to get payments done like apple & google. Search is going to be big as ecosystems narrow, however outside of this, and to your point, AWS is a very valuable part of AMazons strategy. Never in the world (maybe robber baron era but quite dif) has anyone owned the entire channel. Amazon: 1. Retailer of physical things. 2. marketmaker for physical things. 3. producer, market maker, and retail distribution for dogital goods. 4. last-mile delivery of physical goods. 5. backbone provider for phys goods (registered shipping broker) 6. owner of infrastructure of most of the conpetitors. in the christensen innovators dillemma sense, they don't have it. if someone does sonethong better than them and scale, they are hedged by getting paid for theyre infrastructure. so interesting stuff. as search becomes less of a monopoly and continues to be edged out by ancilliary products, google is going to invest heavily in infrastruct. you can see them doing this now as they get cash together, tighten focus and embrace this meta stricture. Short Term, AMZN is likely to be richest company in the world. excepting maybe Apple as they continue to build product & transition into an o2o Bank & Finance institution. they already are quite large, having users with accounts, they're own quasi credit card & payment system, and capital reserves. this lesves aside their lending activities (at tje supply chain level) snd affiliate marketing with barclaycard ect 0. http://www.businessinsider.com/why-amazon-is-so-hard-to-topple-in-the-cloud-and-where-everybody-else-falls-2015-10 http://www.businessinsider.com/why-amazon-is-so-hard-to-topp...
shuri 11y ago
You have to love this sentence "We want Prime to be such a good value, you’d be irresponsible not to be a member."
- sremani 11y ago
  Amazon is too good at what they do. The feeling that they give too good of a value, while I spent thousands of dollars on their site was a weird kind of high. That is the end game, you spend a lot with Prime since, it shows up in two days and no shipping etc. I cancelled my Prime membership, and just that saves me a hundred or two a month, because now I have to think twice before ordering anything since shipping cost is involved and also have to bundle enough items such that I qualify for free shipping. side note: jet.com is not collecting sales tax yet. That is 8.25% differential where I live.
  - e40 11y ago
    I went to the site. They popped up a window that asked for my email address and there was no way to dismiss this without giving it something. I closed the tab.
    - dhimes 11y ago
      I've run into this several times the last few days. I give fake emails. Usually something on aol, and a name that hopefully nobody has.
  - Navarr 11y ago
    You shouldn't consider Jet.com not collecting sales tax as a "good thing" since you are technically required to pay it by law (in most places, normally, afaik, IANAL) So you technically do still need to pay that 8.25% differential.
    - vitd 11y ago
      Indeed you do. Many years ago I had a business. One year the state decided to audit my business. No biggie, I had paid all my taxes as required. Except I hadn't. My business was located near a big box warehouse and you could order on the website and go pick it up. This was when almost all online orders were claimed to be "tax free". I did that for a few hard drives and some other stuff. I ended up owing about $150 in back taxes and penalties because I hadn't manually figured out the sales tax I was supposed to pay and reported it. I was a little annoyed at my accountant whose reaction was, "Yeah, nobody pays that, though technically you're supposed to." Needless to say, I have a new accountant.
kopos 11y ago
His point about Type 1 and Type 2 decisions - so telling. Been there, seen it in action. Every line of the letter was so well thought out. And he is big on India! Flipkart has a lot to worry about.
kopos 11y ago
His point about Type 1 and Type 2 decisions - so telling. Been there, seen it in action. Every line of the letter was so well thought out. And he is big on India! Flipkart has a lot to worry about.
kahwooi 11y ago
Amazon isn't making any money yet. Maybe in future they will make some. I don't like using AWS (I just don't know why), I prefer Microsoft Azure and Digital Ocean.
- msandford 11y ago
  > Amazon isn't making any money yet. Amazon makes TONS of money. They aren't currently returning any of it to shareholders as profits, they're continuously reinvesting it in the company. The difference between gross profit and net profit is how much Amazon is spending on building new businesses that after a few years start grossing $10b a year in sales like AWS. That got funded out of the gross profits from regular Amazon retail operations.
  - kahwooi 11y ago
    LOL. Ballmer say so: http://www.geekwire.com/2014/ex-microsoft-ceo-steve-ballmer-says-amazon-com-isnt-real-business/ http://www.geekwire.com/2014/ex-microsoft-ceo-steve-ballmer-...
    - rhizome 11y ago
      Ballmer isn't conflicted or anything.
      - beambot 11y ago
        Not to mention that MSFT went from $50/share to $30/share under Ballmer's tenure as CEO. Not sure he has any legs to stand on to bash AMZN about being a "real business." http://money.cnn.com/infographic/technology/gates-ballmer-microsoft-stock/ http://money.cnn.com/infographic/technology/gates-ballmer-mi...
    - CamperBob2 11y ago
      Also, the iPhone is never going to fly.
  - ProAm 11y ago
deleted 11y ago
[deleted]
kahwooi 11y ago
Amazon isn't making any money yet. Maybe in future they will make some. I don't like using AWS (I just don't know why), I prefer Microsoft Azure and Digital Ocean.
peteretep 11y ago
Help me understand how: "We learned from our failures and stayed stubborn on the vision" isn't mutually exclusive
- glibgil 11y ago
  $99 Prime, for example
- hspak 11y ago
  How so? You try again when you fail like that Thomas Edison quote: "I have not failed. I've just found 10,000 ways that won't work."
- skj 11y ago
  You can have tactical failures that don't invalidate the vision.
- resu_nimda 11y ago
  Usually vision is paired with the concept of execution. The vision was to build a business out of being a marketplace where third parties can sell goods, they failed twice on the execution.
- sib 11y ago
  There's another part of the quote that was not included that relates to being flexible on tactics (...while being stubborn on vision). So the "why" and "for whom" stay constant, but the "what" and "how" may change as you learn.
- davidrusu 11y ago
  They are convinced of the vision and have an unwavering belief that they will achieve this vision, but there are many paths one can take. So to act rationally when encountering a failed attempt, given their belief, is to learn and try something else. :)
- adventured 11y ago
  He's talking about failures related to individual steps on the way to the greater vision of what Amazon is supposed to represent as a value proposition to customers. A single failure on a step, such as the Fire Phone for example, doesn't imply a failure of the overall vision ("Our vision is to be earth's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.").
sabalaba 11y ago
I see this letter as an attempt at vindication for the controversy sparked by the NYT article on Amazon's corporate culture. Jeff Bezos was clearly affected and I see this as a defense of their "distinctive culture". "For better or for worse" that culture got them to $100 billion in annual sales faster than any company in history.
- sharkweek 11y ago
  I live in Seattle and am friends with a lot of Amazon folks. Most work very hard and complain from time to time, but I only know one who left for another job because most who are there now actually really like their jobs. One friend put it best after he transitioned from a small department in the ecommerce side of the business to one of AWS's early-ish hires, that most young departments have the thrill of working at a startup but with some very supportive corporate backing (as long as things are growing).
  - wavefunction 11y ago
    >very supportive corporate backing (as long as things are growing). I tend to feel like this would be most corporations that aren't shooting themselves in the foot. Not that there aren't plenty of those out there.
  - inopinatus 11y ago
    I'll echo that from personal experience. I left AWS to start my current company. I had a regret-prevention imperative to do so, but it was still the toughest call. Amazon's culture is highly polarising. The emergent properties of which are all the truths and lies you ever read about the place.
    - karmelapple 11y ago
      Can you confirm any truths or deny any lies?
      - andrewguenther 11y ago
kylehotchkiss 11y ago
I'm trying to do some math. What is the total economic value of the actual Amazon river, and how many Amazon rivers economies did Amazon.com make last year. Anybody?
- hartator 11y ago
  I guess you can now say Brazil has the 2nd most valuable Amazon.
  - MusaTheRedGuard 11y ago
    Stealing that
  - kylehotchkiss 11y ago
    ha! good one.
- rorykoehler 11y ago
  If the Amazon river dried up we'd all be dead. Most of it's 'economic' value isn't recorded in our myopic economic measurements.
  - jchendy 11y ago
    How would that kill us all?
    - deegles 11y ago
      It would mean no rain was falling anywhere in the Amazon basin, which would imply some really messed up weather :)
- dredmorbius 11y ago
  "Economic value" is a slippery concept. First off, most people read that as "price times volume", or the exchange value of some good or service. The Amazon River isn't exchanged, it has no exchange value. Another definition of "economic value" is use value, which is to say, the benefit derived from use, possession, existence, control, etc., of some good. The problem here is that economics has little handle on estimating just what this use-value is. Some economists claim it cannot be measured or known (e.g., Ludwig von Mises), others note that it's not intrinsic but is always relative -- a property between the valuer and the valued (William Foster Lloyd in his 1834 essay on value, William Stanley Jevons in his book on money and transactions). That is, there is no absolute value. (Lloyd's essay is prescient in some ways of Einstein's later work.) Edwin Cannen, editor and researcher on Adam Smith notes that Smith's definition of wealth, "the annual labour and produce of the nation", specifically excludes the concept of land or mineral wealth as included in that definition. That's a recent discovery of mine in the past week or so, and I want to look into it further, but it's quite the observation. I've been working on a couple of concepts. One is that there are really three related but distinct concepts: costs, value, and price. They're somewhat related, but through a loose mechanism. Cost is what you give up to get something. "All costs are opportunity costs" (Krugman, Economics, 2008). Value is what you gain by something. Individually, value is hard to measure but in aggregate you've got good percentage going off biological or ecological measures, usually of metabolism, energy, or energy-and-materials throughput. Price then becomes a somewhat odd duck, in that it's a cost for the motivation of exchange. Ideally we'd like C <= P < V, that is, cost is less than or equal to price, which is less than value. Several problems introduce themselves though, and I'm going to hand wave and say "it's complicated", but for numerous reasons over the short term, price can fall well below long-term costs (the rational is similar to the logic of the shut-down point in microeconomics). But let's go back to the cost of providing Amazon, Inc., vs. the Amazon River. The former has an economic throughput of, very roughly, $100 billion dollars. This is an estimate, and I think I'm high here. But there's a point to this. Turns out if you look at US GDP and energy inputs, a barrel of oil generates about $1,000 of GDP. So Amazon's revenues represent about 1 million barrels of oil energy equivalent. I'm going to estimate that the Amazon River Basin is about 1/4 the surface area of South America (which I've got as a constant in GNU Units). It receives incident sunlight at roughly 1 kW/m^2 for 8 hours a day, or equivalently, for 1/3 of the duration of a year. In barrels of oil equivalent, that's about 7 trillion. Which is to say, there's about 7 billion times the cost to provisioning the Amazon as there Amazon, Inc. If Amazon, Inc. disappeared off the face of the Earth, a few tens of thousands of people would need to find a new job, and a few hundreds of millions others would have to travel to the store or find a new eCommerce provider. If the Amazon disappeared off the face of the Earth, odds are that an event significant enough to destroy all of modern civilisation would have transpired. One valuation of that is the roughly $70 trillion of the global economy. I'd say the river wins over Big River Book Company. The fact that our economic system fails to account for the relative values correctly says far more for what's wrong with our economic system than with how valuable Amazon, Inc. is, or how unvaluable the Amazon River is. ---- And checking my estimates. The Amazon River basin is 7 million km^2, or about 39% the area of South America. Amazon's 2015 annual revenues were actually $107 billion, though profits were $1 billion. So I was less generous than intended. Still, at 7 billion : 1 I'd argue my analysis is within reason.
okyup 11y ago
He knows the importance of image and says all the right things to tug at your heart strings... they're fighting global warming, they're helping single moms, and they're running a startup-like environment unlike the other big evil corporations.
- jkaunisv1 11y ago
  It blew my mind that his example of helping a single mom of EIGHT was her getting trained as a long haul truck driver. Who's taking care of that many kids while she's gone? Truck driving is not that well-paid, and the length of absences is right there in the job title.
  - srt146 11y ago
    His example is a subtle jab at working class. He thinks people are such trash that truck driver is aspirational for them. The education benefits for blue collar workers at Amazon take years to kick in and don't cover a single year at most community colleges. Workers are frequently fired before 90 days to prevent benefits from starting. Workers would do far better to do a small education loan and start training early.
    - simonh 11y ago
      >He thinks people are such trash that truck driver is aspirational for them What planet are you on? Truck driver is an excellent working class job. It's skilled labour (yes, really), you need to be trustworthy and able to operate independently, work long hours and take responsibility for a very expensive asset. As a result it pays a significant premium compared to a lot of manual labour and service jobs.
      - amarka 11y ago
        At best it's an ok working class job; for Amazon, it's more of a stop-gap until delivery vehicles with auto-pilot are more widely available.
- 11y ago
danblick 11y ago
Am I the only one who read "Type I and II decisions" and thought "System I and II decisions" (from Thinking, Fast and Slow?). I like the idea of distinguishing reversible from irreversible decisions, I just wish he'd come up with better names...
- SilasX 11y ago
  1 vs 2 is a bad, non-mnemonic naming convention to use, for either of those cases. Sadly, it also appears in "type I vs type II" errors. Even "false positive vs false negative" isn't helpful, since the decision of what counts as "positive" is arbitrary. Better to refer to the category directly: eg, "false ham vs false spam", "false acceptance vs false rejection". While we're on the topic Amazon and bad naming, what's with AWS EC2 instances? They have "spot" vs "on demand" instances, which have very different properties, ideal for different use cases ... and yet, in the context of economics and markets, the terms are basically synonyms!
  - bonzini 11y ago
    I'm not sure about "false acceptance vs false rejection" being better than "false positive vs false negative". False positive pretty much always means you give incorrect bad news; false negative means you give incorrect good news. "Acceptance" may mean either "ham" or "spam" depending on the context.
    - rwjwjuwjudf 11y ago
      Positive means you found the special thing you are looking for; negative means you just found an ordinary thing. False positive means you thought you found the special thing but you didn't, it was just ordinary; false negative means you thought you found an ordinary thing but actually it was special. False positives mean you throw away ham as spam (terrible), false negatives mean you let some spam into your mailbox (not a big deal). But false positives also mean you diagnose benign as malignant (annoying), and false negatives also mean you diagnose malignant as benign (fatal). So depending on what you are looking for, it varies whether false negatives or false positives are worse. Or maybe they can be equally bad. I don't think you need to rename positive and negative as long as positive is understood as unusual and negative is understood as normal.
holri 11y ago
Stallmans letter to Amazon customers: https://stallman.org/amazon.html https://stallman.org/amazon.html
- drKarl 11y ago
  Very interesting
- lmm 11y ago
  I'm not going to take a letter that uses silly names seriously. That's grade-school rhetoric.
  - chippy 11y ago
    "...then they laugh at you"
  - alimbada 11y ago
    It's Stallman. No one should take him seriously, ever.
    - amelius 11y ago
      Ad hominem fallacy.
      - xux 11y ago
        Just because is ad hominem, doesn't mean it's a fallacy. Sometimes a person's reputation is so bad you don't need to give any benefit of the doubt for his/her opinions.
        erikpukinskis 11y ago
        Whether or not you turn out to be correct has no bearing on whether your reasoning was fallacious.
        11y ago
kumarski 11y ago
Still very relevant: http://ben-evans.com/benedictevans/2014/9/4/why-amazon-has-no-profits-and-why-it-works http://ben-evans.com/benedictevans/2014/9/4/why-amazon-has-n...
an_account_name 11y ago
From the 1997 letter that's included at the bottom: > We established long-term relationships with many important strategic partners, including America Online, Yahoo!, Excite, Netscape, GeoCities, AltaVista, @Home, and Prodigy. That takes me back.
- simonh 11y ago
  Looking at it that way, it's kind of impressive that Yahoo! is still around.
  - hinkley 11y ago
    I honestly don't have the slightest clue how yahoo stays in business. And I don't mean that as rhetoric, either. Other than Bloomberg I don't get where the money comes from. I hope it's not organized crime... I'd probably read a biography of the company out of curiosity.
    - huuu 11y ago
      Search, advertisement and stock. For example they have worth ~40B in Asian stock.
    - simonh 11y ago
      All I can do is guess, but if you go to their home page take a look at the sidebar. That's a pretty impressive range of services. You can manage your email, buy stuff, check the news, see what's on TV, check the weather. It's AOL but on the web and for non-technical people having one place where you can do everything is probably pretty attractive. Especially if it came set as their web browser home page and they don't know how to change it or create bookmarks. That's not a long term sustainable business though, as the non-tech savvy oldsters in the population get replaced by youngsters that mainly use mobile devices and apps anyway. I think Cringeley has a point. Yahoo should slim down and use it's remaining financial weight to turn itself into a tech industry specialised version of Berkshire Hathaway. Copy Google's corporate structure and hive off the portal into a subsidiary of a holding company that focuses on managing investments.
smadge 11y ago
Blah blah blah blah...
yoyomamayo 11y ago
I think there is a fair bit of misunderstanding about Jeff's letter on this thread. For those who have not read all of his shareholder letters from the past 20 years, I would really recommend you to do so. What Jeff is saying in this years letter is nothing new. He's literally been saying the same things for 20 years now.
tpae 11y ago
"To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment."
thepainful1 11y ago
Jeff is amazing. It's that simple!
julianpye 11y ago
AWS and Prime are winners. So is marketplace, he says. Maybe financially for Amazon, but from a customer standpoint I think marketplace is a real failure. It's the reason I tell relatives not to buy on Amazon, because several got burned so many times by accidentally buying from dodgy sellers, thinking it was from Amazon.
preordained 11y ago
I work at a small software company, and too often our CEO and company will latch onto nuggets from material like this and use it to justify a "swing for the fences", "nothing ventured nothing gained" sort of mindset. All well and good, but they blithely overlook the "we fail all the time" parts, and sometimes we take risks where the potential losses are not easy to absorb, or we don't have the vast resources of a big company to attempt a thing without impacting our mainline investment. Unfortunately, I've seen first hand that interesting, inspiring ideas can turn cargo cult real quick without some reality to temper them; namely, there are only two scenarios where you can easily justify risk (that is, not sweat over it): 1. You have nothing to lose. 2. You have relatively little to lose.
- zeemonkee3 11y ago
  I suspect a lot of the current griping over hiring practices is due to this. Small companies cargo-cult hiring practices from Google/Amazon/Apple/Facebook, but they forget that these companies have huge numbers of good applicants who are willing to jump through hoops just for the opportunity to have $BIGNAME on their resume.
  - timje1 11y ago
    A tangent, but when did 'cargo-cult' become a verb and not a noun?
    - jjtheblunt 11y ago
      Wtf is cargo cult?
      - steveklabnik 11y ago
        https://en.wikipedia.org/wiki/Cargo_cult#Metaphorical_uses_of_the_term https://en.wikipedia.org/wiki/Cargo_cult#Metaphorical_uses_o...
      - hguant 11y ago
        From wikipedia: "The name derives from the belief that various ritualistic acts will lead to a bestowing of material wealth." Basically, slavishly copying someone else's actions without actually understanding the underlying principle behind those actions. The most famous example is from WWII - Japanese and American armed forces built airstrips on underdeveloped islands, and either abandoned or shared what seemed like massive amounts of wealth with the islanders. When the war was over, islanders replicated airstrips and military bases, some even dressing up as soldiers, in order to bring back the flow of cargo.
DrNuke 11y ago
Occasional customer here buying only discounted goods from Amazon logistics only and always at the total minimum I need not to pay shippage. Quality is overall worsening year after year but Amazon has always been a bonanza, the day it ends thank you and good riddance, going local again.
jlubawy 11y ago
Not 100% sure how the Amazon/Zappos relationship is setup but I think it's odd that Zappos isn't mentioned anywhere in this or AFAIK anywhere in there investor documents. Does anyone now how Zappos is performing since being acquired? Especially with all of the controversy with their management styles? To be fair I'm sure Zappos is probably a small part of Amazon's revenue, but as a Las Vegas native I'm interested.
- deleted 11y ago
  [deleted]
- tim333 11y ago
  Seems to be doing ok http://www.reviewjournal.com/business/zappos-predicts-massive-profit-growth-2015 http://www.reviewjournal.com/business/zappos-predicts-massiv...
awinter-py 11y ago
I must have the breakfast octopus http://www.dmagazine.com/publications/d-magazine/2014/july/matt-rutledge-woot-has-a-new-deal-mediocre-corporation?single=1 http://www.dmagazine.com/publications/d-magazine/2014/july/m...

451 points by adamsi 11y ago

ww520 11y ago

It's very telling that he devoted a large portion of the letter on AWS.

vonklaus 11y ago
Amazon had a $7B biz in 2015[0]. I am on mobile but I believe they have more servers than google. obviously, it fits with my personal narrative/is self serving, to say that the war for search is coming, but it is. Microsoft basically modeled azure as a more user friendly AWS, and is courting devs with the release today of integrated code search with hacker rank, as well as the push to open source a ton of tooling (similar to googledocs enterprise strategy) to get developers on the platform. msft also is pushing blockchain on azure, likely because it is interesting to developers and they have failed miserably to get payments done like apple & google. Search is going to be big as ecosystems narrow, however outside of this, and to your point, AWS is a very valuable part of AMazons strategy. Never in the world (maybe robber baron era but quite dif) has anyone owned the entire channel. Amazon: 1. Retailer of physical things. 2. marketmaker for physical things. 3. producer, market maker, and retail distribution for dogital goods. 4. last-mile delivery of physical goods. 5. backbone provider for phys goods (registered shipping broker) 6. owner of infrastructure of most of the conpetitors. in the christensen innovators dillemma sense, they don't have it. if someone does sonethong better than them and scale, they are hedged by getting paid for theyre infrastructure. so interesting stuff. as search becomes less of a monopoly and continues to be edged out by ancilliary products, google is going to invest heavily in infrastruct. you can see them doing this now as they get cash together, tighten focus and embrace this meta stricture. Short Term, AMZN is likely to be richest company in the world. excepting maybe Apple as they continue to build product & transition into an o2o Bank & Finance institution. they already are quite large, having users with accounts, they're own quasi credit card & payment system, and capital reserves. this lesves aside their lending activities (at tje supply chain level) snd affiliate marketing with barclaycard ect 0. http://www.businessinsider.com/why-amazon-is-so-hard-to-topple-in-the-cloud-and-where-everybody-else-falls-2015-10 http://www.businessinsider.com/why-amazon-is-so-hard-to-topp...

shuri 11y ago

You have to love this sentence "We want Prime to be such a good value, you’d be irresponsible not to be a member."

sremani 11y ago
Amazon is too good at what they do. The feeling that they give too good of a value, while I spent thousands of dollars on their site was a weird kind of high. That is the end game, you spend a lot with Prime since, it shows up in two days and no shipping etc. I cancelled my Prime membership, and just that saves me a hundred or two a month, because now I have to think twice before ordering anything since shipping cost is involved and also have to bundle enough items such that I qualify for free shipping. side note: jet.com is not collecting sales tax yet. That is 8.25% differential where I live.
- e40 11y ago
  I went to the site. They popped up a window that asked for my email address and there was no way to dismiss this without giving it something. I closed the tab.
  - dhimes 11y ago
    I've run into this several times the last few days. I give fake emails. Usually something on aol, and a name that hopefully nobody has.
- Navarr 11y ago
  You shouldn't consider Jet.com not collecting sales tax as a "good thing" since you are technically required to pay it by law (in most places, normally, afaik, IANAL) So you technically do still need to pay that 8.25% differential.
  - vitd 11y ago
    Indeed you do. Many years ago I had a business. One year the state decided to audit my business. No biggie, I had paid all my taxes as required. Except I hadn't. My business was located near a big box warehouse and you could order on the website and go pick it up. This was when almost all online orders were claimed to be "tax free". I did that for a few hard drives and some other stuff. I ended up owing about $150 in back taxes and penalties because I hadn't manually figured out the sales tax I was supposed to pay and reported it. I was a little annoyed at my accountant whose reaction was, "Yeah, nobody pays that, though technically you're supposed to." Needless to say, I have a new accountant.

kopos 11y ago

His point about Type 1 and Type 2 decisions - so telling. Been there, seen it in action. Every line of the letter was so well thought out. And he is big on India! Flipkart has a lot to worry about.

kopos 11y ago

His point about Type 1 and Type 2 decisions - so telling. Been there, seen it in action. Every line of the letter was so well thought out. And he is big on India! Flipkart has a lot to worry about.

kahwooi 11y ago

Amazon isn't making any money yet. Maybe in future they will make some. I don't like using AWS (I just don't know why), I prefer Microsoft Azure and Digital Ocean.

msandford 11y ago
> Amazon isn't making any money yet. Amazon makes TONS of money. They aren't currently returning any of it to shareholders as profits, they're continuously reinvesting it in the company. The difference between gross profit and net profit is how much Amazon is spending on building new businesses that after a few years start grossing $10b a year in sales like AWS. That got funded out of the gross profits from regular Amazon retail operations.
- kahwooi 11y ago
  LOL. Ballmer say so: http://www.geekwire.com/2014/ex-microsoft-ceo-steve-ballmer-says-amazon-com-isnt-real-business/ http://www.geekwire.com/2014/ex-microsoft-ceo-steve-ballmer-...
  - rhizome 11y ago
    Ballmer isn't conflicted or anything.
    - beambot 11y ago
      Not to mention that MSFT went from $50/share to $30/share under Ballmer's tenure as CEO. Not sure he has any legs to stand on to bash AMZN about being a "real business." http://money.cnn.com/infographic/technology/gates-ballmer-microsoft-stock/ http://money.cnn.com/infographic/technology/gates-ballmer-mi...
  - CamperBob2 11y ago
    Also, the iPhone is never going to fly.
- ProAm 11y ago

deleted 11y ago

[deleted]

kahwooi 11y ago

Amazon isn't making any money yet. Maybe in future they will make some. I don't like using AWS (I just don't know why), I prefer Microsoft Azure and Digital Ocean.

peteretep 11y ago

Help me understand how: "We learned from our failures and stayed stubborn on the vision" isn't mutually exclusive

glibgil 11y ago
$99 Prime, for example
hspak 11y ago
How so? You try again when you fail like that Thomas Edison quote: "I have not failed. I've just found 10,000 ways that won't work."
skj 11y ago
You can have tactical failures that don't invalidate the vision.
resu_nimda 11y ago
Usually vision is paired with the concept of execution. The vision was to build a business out of being a marketplace where third parties can sell goods, they failed twice on the execution.
sib 11y ago
There's another part of the quote that was not included that relates to being flexible on tactics (...while being stubborn on vision). So the "why" and "for whom" stay constant, but the "what" and "how" may change as you learn.
davidrusu 11y ago
They are convinced of the vision and have an unwavering belief that they will achieve this vision, but there are many paths one can take. So to act rationally when encountering a failed attempt, given their belief, is to learn and try something else. :)
adventured 11y ago
He's talking about failures related to individual steps on the way to the greater vision of what Amazon is supposed to represent as a value proposition to customers. A single failure on a step, such as the Fire Phone for example, doesn't imply a failure of the overall vision ("Our vision is to be earth's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.").

sabalaba 11y ago

I see this letter as an attempt at vindication for the controversy sparked by the NYT article on Amazon's corporate culture. Jeff Bezos was clearly affected and I see this as a defense of their "distinctive culture". "For better or for worse" that culture got them to $100 billion in annual sales faster than any company in history.

sharkweek 11y ago
I live in Seattle and am friends with a lot of Amazon folks. Most work very hard and complain from time to time, but I only know one who left for another job because most who are there now actually really like their jobs. One friend put it best after he transitioned from a small department in the ecommerce side of the business to one of AWS's early-ish hires, that most young departments have the thrill of working at a startup but with some very supportive corporate backing (as long as things are growing).
- wavefunction 11y ago
  >very supportive corporate backing (as long as things are growing). I tend to feel like this would be most corporations that aren't shooting themselves in the foot. Not that there aren't plenty of those out there.
- inopinatus 11y ago
  I'll echo that from personal experience. I left AWS to start my current company. I had a regret-prevention imperative to do so, but it was still the toughest call. Amazon's culture is highly polarising. The emergent properties of which are all the truths and lies you ever read about the place.
  - karmelapple 11y ago
    Can you confirm any truths or deny any lies?
    - andrewguenther 11y ago

kylehotchkiss 11y ago

I'm trying to do some math. What is the total economic value of the actual Amazon river, and how many Amazon rivers economies did Amazon.com make last year. Anybody?

hartator 11y ago
I guess you can now say Brazil has the 2nd most valuable Amazon.
- MusaTheRedGuard 11y ago
  Stealing that
- kylehotchkiss 11y ago
  ha! good one.
rorykoehler 11y ago
If the Amazon river dried up we'd all be dead. Most of it's 'economic' value isn't recorded in our myopic economic measurements.
- jchendy 11y ago
  How would that kill us all?
  - deegles 11y ago
    It would mean no rain was falling anywhere in the Amazon basin, which would imply some really messed up weather :)
dredmorbius 11y ago
"Economic value" is a slippery concept. First off, most people read that as "price times volume", or the exchange value of some good or service. The Amazon River isn't exchanged, it has no exchange value. Another definition of "economic value" is use value, which is to say, the benefit derived from use, possession, existence, control, etc., of some good. The problem here is that economics has little handle on estimating just what this use-value is. Some economists claim it cannot be measured or known (e.g., Ludwig von Mises), others note that it's not intrinsic but is always relative -- a property between the valuer and the valued (William Foster Lloyd in his 1834 essay on value, William Stanley Jevons in his book on money and transactions). That is, there is no absolute value. (Lloyd's essay is prescient in some ways of Einstein's later work.) Edwin Cannen, editor and researcher on Adam Smith notes that Smith's definition of wealth, "the annual labour and produce of the nation", specifically excludes the concept of land or mineral wealth as included in that definition. That's a recent discovery of mine in the past week or so, and I want to look into it further, but it's quite the observation. I've been working on a couple of concepts. One is that there are really three related but distinct concepts: costs, value, and price. They're somewhat related, but through a loose mechanism. Cost is what you give up to get something. "All costs are opportunity costs" (Krugman, Economics, 2008). Value is what you gain by something. Individually, value is hard to measure but in aggregate you've got good percentage going off biological or ecological measures, usually of metabolism, energy, or energy-and-materials throughput. Price then becomes a somewhat odd duck, in that it's a cost for the motivation of exchange. Ideally we'd like C <= P < V, that is, cost is less than or equal to price, which is less than value. Several problems introduce themselves though, and I'm going to hand wave and say "it's complicated", but for numerous reasons over the short term, price can fall well below long-term costs (the rational is similar to the logic of the shut-down point in microeconomics). But let's go back to the cost of providing Amazon, Inc., vs. the Amazon River. The former has an economic throughput of, very roughly, $100 billion dollars. This is an estimate, and I think I'm high here. But there's a point to this. Turns out if you look at US GDP and energy inputs, a barrel of oil generates about $1,000 of GDP. So Amazon's revenues represent about 1 million barrels of oil energy equivalent. I'm going to estimate that the Amazon River Basin is about 1/4 the surface area of South America (which I've got as a constant in GNU Units). It receives incident sunlight at roughly 1 kW/m^2 for 8 hours a day, or equivalently, for 1/3 of the duration of a year. In barrels of oil equivalent, that's about 7 trillion. Which is to say, there's about 7 billion times the cost to provisioning the Amazon as there Amazon, Inc. If Amazon, Inc. disappeared off the face of the Earth, a few tens of thousands of people would need to find a new job, and a few hundreds of millions others would have to travel to the store or find a new eCommerce provider. If the Amazon disappeared off the face of the Earth, odds are that an event significant enough to destroy all of modern civilisation would have transpired. One valuation of that is the roughly $70 trillion of the global economy. I'd say the river wins over Big River Book Company. The fact that our economic system fails to account for the relative values correctly says far more for what's wrong with our economic system than with how valuable Amazon, Inc. is, or how unvaluable the Amazon River is. ---- And checking my estimates. The Amazon River basin is 7 million km^2, or about 39% the area of South America. Amazon's 2015 annual revenues were actually $107 billion, though profits were $1 billion. So I was less generous than intended. Still, at 7 billion : 1 I'd argue my analysis is within reason.

okyup 11y ago

He knows the importance of image and says all the right things to tug at your heart strings... they're fighting global warming, they're helping single moms, and they're running a startup-like environment unlike the other big evil corporations.

jkaunisv1 11y ago
It blew my mind that his example of helping a single mom of EIGHT was her getting trained as a long haul truck driver. Who's taking care of that many kids while she's gone? Truck driving is not that well-paid, and the length of absences is right there in the job title.
- srt146 11y ago
  His example is a subtle jab at working class. He thinks people are such trash that truck driver is aspirational for them. The education benefits for blue collar workers at Amazon take years to kick in and don't cover a single year at most community colleges. Workers are frequently fired before 90 days to prevent benefits from starting. Workers would do far better to do a small education loan and start training early.
  - simonh 11y ago
    >He thinks people are such trash that truck driver is aspirational for them What planet are you on? Truck driver is an excellent working class job. It's skilled labour (yes, really), you need to be trustworthy and able to operate independently, work long hours and take responsibility for a very expensive asset. As a result it pays a significant premium compared to a lot of manual labour and service jobs.
    - amarka 11y ago
      At best it's an ok working class job; for Amazon, it's more of a stop-gap until delivery vehicles with auto-pilot are more widely available.
11y ago

danblick 11y ago

Am I the only one who read "Type I and II decisions" and thought "System I and II decisions" (from Thinking, Fast and Slow?). I like the idea of distinguishing reversible from irreversible decisions, I just wish he'd come up with better names...

SilasX 11y ago
1 vs 2 is a bad, non-mnemonic naming convention to use, for either of those cases. Sadly, it also appears in "type I vs type II" errors. Even "false positive vs false negative" isn't helpful, since the decision of what counts as "positive" is arbitrary. Better to refer to the category directly: eg, "false ham vs false spam", "false acceptance vs false rejection". While we're on the topic Amazon and bad naming, what's with AWS EC2 instances? They have "spot" vs "on demand" instances, which have very different properties, ideal for different use cases ... and yet, in the context of economics and markets, the terms are basically synonyms!
- bonzini 11y ago
  I'm not sure about "false acceptance vs false rejection" being better than "false positive vs false negative". False positive pretty much always means you give incorrect bad news; false negative means you give incorrect good news. "Acceptance" may mean either "ham" or "spam" depending on the context.
  - rwjwjuwjudf 11y ago
    Positive means you found the special thing you are looking for; negative means you just found an ordinary thing. False positive means you thought you found the special thing but you didn't, it was just ordinary; false negative means you thought you found an ordinary thing but actually it was special. False positives mean you throw away ham as spam (terrible), false negatives mean you let some spam into your mailbox (not a big deal). But false positives also mean you diagnose benign as malignant (annoying), and false negatives also mean you diagnose malignant as benign (fatal). So depending on what you are looking for, it varies whether false negatives or false positives are worse. Or maybe they can be equally bad. I don't think you need to rename positive and negative as long as positive is understood as unusual and negative is understood as normal.

holri 11y ago

Stallmans letter to Amazon customers: https://stallman.org/amazon.html https://stallman.org/amazon.html

drKarl 11y ago
Very interesting
lmm 11y ago
I'm not going to take a letter that uses silly names seriously. That's grade-school rhetoric.
- chippy 11y ago
  "...then they laugh at you"
- alimbada 11y ago
  It's Stallman. No one should take him seriously, ever.
  - amelius 11y ago
    Ad hominem fallacy.
    - xux 11y ago
      Just because is ad hominem, doesn't mean it's a fallacy. Sometimes a person's reputation is so bad you don't need to give any benefit of the doubt for his/her opinions.
      - erikpukinskis 11y ago
        Whether or not you turn out to be correct has no bearing on whether your reasoning was fallacious.
        11y ago

kumarski 11y ago

Still very relevant: http://ben-evans.com/benedictevans/2014/9/4/why-amazon-has-no-profits-and-why-it-works http://ben-evans.com/benedictevans/2014/9/4/why-amazon-has-n...

an_account_name 11y ago

From the 1997 letter that's included at the bottom: > We established long-term relationships with many important strategic partners, including America Online, Yahoo!, Excite, Netscape, GeoCities, AltaVista, @Home, and Prodigy. That takes me back.

simonh 11y ago
Looking at it that way, it's kind of impressive that Yahoo! is still around.
- hinkley 11y ago
  I honestly don't have the slightest clue how yahoo stays in business. And I don't mean that as rhetoric, either. Other than Bloomberg I don't get where the money comes from. I hope it's not organized crime... I'd probably read a biography of the company out of curiosity.
  - huuu 11y ago
    Search, advertisement and stock. For example they have worth ~40B in Asian stock.
  - simonh 11y ago
    All I can do is guess, but if you go to their home page take a look at the sidebar. That's a pretty impressive range of services. You can manage your email, buy stuff, check the news, see what's on TV, check the weather. It's AOL but on the web and for non-technical people having one place where you can do everything is probably pretty attractive. Especially if it came set as their web browser home page and they don't know how to change it or create bookmarks. That's not a long term sustainable business though, as the non-tech savvy oldsters in the population get replaced by youngsters that mainly use mobile devices and apps anyway. I think Cringeley has a point. Yahoo should slim down and use it's remaining financial weight to turn itself into a tech industry specialised version of Berkshire Hathaway. Copy Google's corporate structure and hive off the portal into a subsidiary of a holding company that focuses on managing investments.

smadge 11y ago

Blah blah blah blah...

yoyomamayo 11y ago

I think there is a fair bit of misunderstanding about Jeff's letter on this thread. For those who have not read all of his shareholder letters from the past 20 years, I would really recommend you to do so. What Jeff is saying in this years letter is nothing new. He's literally been saying the same things for 20 years now.

tpae 11y ago

"To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment."

thepainful1 11y ago

Jeff is amazing. It's that simple!

julianpye 11y ago

AWS and Prime are winners. So is marketplace, he says. Maybe financially for Amazon, but from a customer standpoint I think marketplace is a real failure. It's the reason I tell relatives not to buy on Amazon, because several got burned so many times by accidentally buying from dodgy sellers, thinking it was from Amazon.

preordained 11y ago

I work at a small software company, and too often our CEO and company will latch onto nuggets from material like this and use it to justify a "swing for the fences", "nothing ventured nothing gained" sort of mindset. All well and good, but they blithely overlook the "we fail all the time" parts, and sometimes we take risks where the potential losses are not easy to absorb, or we don't have the vast resources of a big company to attempt a thing without impacting our mainline investment. Unfortunately, I've seen first hand that interesting, inspiring ideas can turn cargo cult real quick without some reality to temper them; namely, there are only two scenarios where you can easily justify risk (that is, not sweat over it): 1. You have nothing to lose. 2. You have relatively little to lose.

zeemonkee3 11y ago
I suspect a lot of the current griping over hiring practices is due to this. Small companies cargo-cult hiring practices from Google/Amazon/Apple/Facebook, but they forget that these companies have huge numbers of good applicants who are willing to jump through hoops just for the opportunity to have $BIGNAME on their resume.
- timje1 11y ago
  A tangent, but when did 'cargo-cult' become a verb and not a noun?
  - jjtheblunt 11y ago
    Wtf is cargo cult?
    - steveklabnik 11y ago
      https://en.wikipedia.org/wiki/Cargo_cult#Metaphorical_uses_of_the_term https://en.wikipedia.org/wiki/Cargo_cult#Metaphorical_uses_o...
    - hguant 11y ago
      From wikipedia: "The name derives from the belief that various ritualistic acts will lead to a bestowing of material wealth." Basically, slavishly copying someone else's actions without actually understanding the underlying principle behind those actions. The most famous example is from WWII - Japanese and American armed forces built airstrips on underdeveloped islands, and either abandoned or shared what seemed like massive amounts of wealth with the islanders. When the war was over, islanders replicated airstrips and military bases, some even dressing up as soldiers, in order to bring back the flow of cargo.

DrNuke 11y ago

Occasional customer here buying only discounted goods from Amazon logistics only and always at the total minimum I need not to pay shippage. Quality is overall worsening year after year but Amazon has always been a bonanza, the day it ends thank you and good riddance, going local again.

jlubawy 11y ago

Not 100% sure how the Amazon/Zappos relationship is setup but I think it's odd that Zappos isn't mentioned anywhere in this or AFAIK anywhere in there investor documents. Does anyone now how Zappos is performing since being acquired? Especially with all of the controversy with their management styles? To be fair I'm sure Zappos is probably a small part of Amazon's revenue, but as a Las Vegas native I'm interested.

deleted 11y ago
[deleted]
tim333 11y ago
Seems to be doing ok http://www.reviewjournal.com/business/zappos-predicts-massive-profit-growth-2015 http://www.reviewjournal.com/business/zappos-predicts-massiv...

awinter-py 11y ago

I must have the breakfast octopus http://www.dmagazine.com/publications/d-magazine/2014/july/matt-rutledge-woot-has-a-new-deal-mediocre-corporation?single=1 http://www.dmagazine.com/publications/d-magazine/2014/july/m...