Editor’s note: This article was first published in April 2013, when Jeff Bezos was Amazon’s CEO; the shareholder letter for 2012, Amazon’s $272 share price after a decade of nearly 1,000% growth, and the US profit and wage figures are from then. Bezos stepped down as CEO in 2021.
Last week, Amazon CEO Jeff Bezos published his annual letter to the company’s shareholders. Bezos’s letter should be a call for companies to change the way they do business, and the way they think about it, in the current situation.
Companies should be encouraged to adopt the guidelines and core principles on which Amazon’s business is built. Bezos will sacrifice this year’s profits to invest in customer loyalty, in compensation for his employees and in new products. All of this, Jeff Bezos says, will mean giving up profits this year, but it will make the company much stronger in the long run.
The obsession with short-term profits is what has helped create the unhealthy, unsustainable situation that now afflicts the economy, according to Bezos.
Corporate profit margins, particularly in the United States, are higher than at any point in history, while the wages companies pay are the lowest they have ever been, and unemployment has reached its highest levels since 1970.
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The wages companies pay in turn become revenue for other companies. So many corporations are getting by in the short term, but in the long term the situation could become unsustainable, because consumers spend or save according to what they earn.
Amazon is an example of a company that doesn’t put short-term profits ahead of long-term investment when that investment adds value to the company.
Amazon’s philosophy is to put customers, employees and long-term value investment first.
This way of thinking has more than once led short-term investors to complain that the company can, and should, make more money. Long-term investors, of course, are very happy with the way Jeff Bezos does business. The company’s shares have risen almost 1,000% over the last decade and currently trade at $272, so it has been a very profitable investment.
Amazon has managed to build one of the most dominant, durable and valuable companies on the internet. During the dot-com crash, Bezos watched many companies that focused on the short term go under. Amazon, on the other hand, came out of it stronger thanks to its philosophy.
As Bezos sees it, investing more of today’s profits will give us tomorrow’s opportunities: product development, customer loyalty and dedicated employees.
Featured image: Joe Mabel, CC BY-SA 4.0, via Wikimedia Commons.
