Jeff Bezos Shareholder Letters: 7 Key Concepts of 24 Years of running Amazon

I've read through every Shareholder Letter written by Amazon Founder Jeff Bezos. Here are the 7 Concepts that struck me the most.

May 19, 2024

Jeff Bezos is not your typical CEO. His unique approach to business (and investing) has made him one of the richest people on earth (net worth: $210b) and Amazon one of the biggest companies.

A lot of his thinking is based on the value investing philosophy. Not necessarily what you would’ve expected from a man who grew one of the biggest tech giants and innovators.

1. Fundamentals vs. Stock Price

"The stock is not the company, and the company is not the stock."

Typical for a value investor mindset, he focused on improving the fundamentals and increasing value. He didn’t bother with stock movements or quarterly numbers.

2. One-Way Doors vs. Two-Way Doors

Bezos distinguishes between two types of decisions. “One-way doors” and “Two-way doors.”

One-way doors are Type 1 decisions; they are irreversible. Once you choose a path, you must follow it. Going back is not an option.

Two-way doors are Type 2 decisions; they are reversible. Focus on quick decision-making, assess their success, and reverse if needed.

Most decisions are Two-way doors. When, however, a One-way door decision comes up, it’s important to identify it as such.

3. Spawner Bets

The “Spawner Concept” might be known to you if you read my material on Mohnish Pabrai.

Spawner investments are about making many asymmetric bets. Asymmetric bets have little downside (low cost to start) but unlimited upside (big market opportunity and scale).

Naturally, most of these bets will fail, but the ones that work will make up for all the failures. The big tech companies, among them Amazon, are famous for this approach.

4. EBITDA are Bullshit Earnings; Cash Flow is King

Bezos has a strong cash flow focus. Cash flow is what investors (and all other owners) have a claim to at the end of the day.

Not EBITDA, EBIT, or other metrics. In the end, it's cash flows!

5. Vision and Patience

"Long-term thinking is both a requirement and an outcome of true ownership."

As investors, we should think like owners. Bezos knew that, too. You would think that’s required as a founder and CEO, but many CEOs just think about the next quarter and about an exit sooner or later.

Bezos never lost his ownership mindset. His long-term mindset prevented him from making mistakes fueled by emotion and panic.

Not easy - especially considering the sector he was in and the time he founded and ran Amazon.

6. Investment Criteria

1. High Returns on Capital

2. Large Market Opportunities

3. Scale Advantages

4. Low Capital Intensity

7. Builder vs. Wanderer

Builder's Way: Invent, launch, reinvent, relaunch, start over, rinse, repeat, again and again.

Wanderer's Way: Not linear but not random, guided by hunch, gut, intuition, and curiosity. Most very big ideas come from wandering. But you need both.

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Thanks for reading, and have a great day!

Daniel