Jeff Bezos letter to shareholders on the Amazon way of business offers pearls of wisdom

Warren Buffet has spent years not only assembling a portfolio of companies, but also positioning himself amongst the world’s richest. So when he offers his “sage” advice, everyone listens, particularly when it comes in the form of a letter to shareholders.

A 2010 letter made mention of a famous Winston Churchill quote: “You shape your houses and then they shape you.” In 2014 he laid bare how his investment in Energy Future Holdings had been done without consulting Charlie Munger, vice chairman of Berkshire Hathaway – a bad decision on his part. Admitting you are wrong is tough, but is still the best move to make, he said. “The poor returns were a result of my wrong evaluation.”

In 2016 Buffett claimed that while the new generation was the luckiest in history, their diversity would “deliver abundance beyond any dreams of our forefathers”. His latest claimed competitive advantage shouldn’t be prioritised over efficiency.

By comparison, a letter to shareholders from Jeff Bezos is rarely met with such vigour from those it isn’t meant for. As Adam Lashinsky, executive editor of Fortune, claimed: “Bezos’ pearls of wisdom are repetitive by design. He discusses similar concepts each year, tweaking them for new realities. But there are themes this year that constitute fresh material in the Bezos oeuvre.”

Indeed, his 2017 letter to shareholders has been met with delight, and gives us insight into Amazon’s success. Namely, focusing on the customer.

“There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great,” he wrote in his letter to shareholders. “Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf.

“You, the product or service owner, must understand the customer, have a vision, and love the offering. Then, beta testing and research can help you find your blind spots. A remarkable customer experience starts with heart, intuition, curiosity, play, guts, taste. You won’t find any of it in a survey. Good inventors and designers deeply understand their customer. They spend tremendous energy developing that intuition. We must do the same.”

He also placed much emphasis on embracing trends quickly. Fighting them, he claimed, only meant fighting the future.

“These trends are not that hard to spot (they get talked and written about a lot), but they can be strangely hard for large organisations to embrace. We’re in the middle of an obvious one right now: machine learning and artificial intelligence.”

Lastly, he gave his thoughts on making decisions – and how teams should work together. To keep the same amount energy and dynamism as the day you started, he maintained, you have to make high-quality, high-velocity decisions. Speed is key, and links directly to his second point of being able to adapt swiftly to external trends.

However, it was pointed out that a one-size-fits-all decision-making process simply doesn’t exist. Those decisions – most decisions, according to Bezos – could also be deemed “two-way doors”. If you don’t like what you see, then change it.

More importantly, in terms of team performance: “Recognise true misalignment issues early and escalate them immediately. Sometimes teams have different objectives and fundamentally different views. They are not aligned. No number of meetings will resolve it. Without escalation, the default dispute resolution mechanism for this scenario is exhaustion. Whoever has more stamina carries the decision.”

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