The Amazon OS
Originally Published on May 22, 2021
How your memory works
Think of the last vacation that you took. Take some time to remember whatever you can, from that vacation.
Here is my guess about how you remember your vacation.
You remember:
- peaks - the restaurant you went to, the sunset you saw, the ride you took, the time you got so drunk that you couldn't stand, and
- end - the last day, the last dinner, the last journey.
Psychologist Daniel Kahneman calls this the 'Peak-end rule'.
You remember your past experiences based on how you felt on the:
- peaks of those experiences - the most intense points,
- end of those experiences - the conclusions
Another phenomenon that he figured out is this -
You DON'T remember the length of your experiences. The days you spent on the vacation just blend together into one memory. Your memory is not based on the number of days you spent on the vacation but on the snapshots of peaks and ends. If your vacation had just 10 intense moments then it does not matter if it was a 1-day vacation, a 1-week vacation or a 1-month vacation. You will remember all these vacations as being very similar. This is called duration neglect.
What Jeff Bezos Wants You To Remember about Amazon
Bezos like all great writers knows these rules intuitively. In Amazon's annual shareholder letters he makes full use of these rules. He knows that as people read his letters they won't remember how long or detailed the letters were - how many graphs they had or how many numbers were discussed. They will just remember the peaks of their reading experiences and the ends of the letters.
The Peaks
So, the letters are short and every letter focuses intensely on a few points that he wants you to remember. He gives many examples that evoke empathy and emotion in any reader. These form the peaks of his letters. I have written a series of posts on these peaks.
The Ends
This post is about the ends. Bezos gives special attention to how he ends each of his letters. These are the crux of everything that Bezos wants you to remember about Amazon as a company in the long term. So, I have compiled all the ends of his shareholder letters from 1997-2020 in this post.
The last two paragraphs of his letters are the place where the magic happens. These paragraphs are can be read without much context and they summarise the reasoning behind why Amazon does what it does.
1997:
We now know vastly more about online commerce than when Amazon.com was founded, but we still have so much to learn. Though we are optimistic, we must remain vigilant and maintain a sense of urgency. The challenges and hurdles we will face to make our long-term vision for Amazon.com a reality are several: aggressive, capable, well-funded competition; considerable growth challenges and execution risk; the risks of product and geographic expansion; and the need for large continuing investments to meet an expanding market opportunity. However, as we’ve long said, online bookselling, and online commerce in general, should prove to be a very large market, and it’s likely that a number of companies will see significant benefit. We feel good about what we’ve done, and even more excited about what we want to do.
We at Amazon.com are grateful to our customers for their business and trust, to each other for our hard work, and to our shareholders for their support and encouragement.
1998:
The most important thing I could say in this letter was said in last year’s letter, which detailed our long-term investment approach. Because we have so many new shareholders (this year we’re printing more than two hundred thousand of these letters—last year we printed about thirteen thousand), we’ve appended last year’s letter immediately after this year’s. I invite you to please read the section titled “It’s All About the Long Term.” You might want to read it twice to make sure we’re the kind of company you want to be invested in. As it says there, we don’t claim it’s the right philosophy, we just claim it’s ours!
All the best and sincere thanks once again to our customers and shareholders and all the folks here who are working passionately every day to build an important and lasting company.
1999:
In closing, consider this most important point: the current online shopping experience is the worst it will ever be. It’s good enough today to attract seventeen million customers, but it will get so much better. Increased bandwidth will result in faster page views and richer content. Further improvements will lead to “always-on access” (which I expect will be a strong boost to online shopping at home, as opposed to the office) and we’ll see significant growth in non-PC devices and wireless access. Moreover, it’s great to be participating in what is a multi-trillion-dollar global market, in which we are so very, very tiny. We are doubly blessed. We have a market-size unconstrained opportunity in an area where the underlying foundational technology we employ improves every day. That is not normal.
As always, we at Amazon.com remain grateful to our customers for their business and trust, to each other for our hard work, and to our shareholders for their support and encouragement. Many, many thanks.
2000:
The year 2001 will be an important one in our development. Like 2000, this year will be a year of focus and execution. As a first step, we’ve set the goal of achieving a pro forma operating profit in the fourth quarter. While we have a tremendous amount of work to do and there can be no guarantees, we have a plan to get there, it’s our top priority, and every person in this company is committed to helping with that goal. I look forward to reporting to you our progress in the coming year.
We at Amazon.com remain grateful to our customers for their business and trust, to each other for our hard work, and to our shareholders for their support and encouragement. Many, many thanks.
2001:
As I’ve discussed many times before, we are firm believers that the long-term interests of shareholders are tightly linked to the interests of our customers: if we do our jobs right, today’s customers will buy more tomorrow, we’ll add more customers in the process, and it will all add up to more cash flow and more long-term value for our shareholders. To that end, we are committed to extending our leadership in e-commerce in a way that benefits customers and therefore, inherently, investors—you can’t do one without the other.
As we kick off 2002, I am happy to report that I am as enthusiastic as ever about this business. There is more innovation ahead of us than behind us, we are close to demonstrating the operating leverage of our business model, and I get to work with this amazing team of Amazonians all over the world. I am lucky and grateful. We thank you, our owners, for your support, your encouragement, and for joining us on this adventure. If you’re a customer, we thank you again!
2002:
In short, what’s good for customers is good for shareholders.
Once again this year, I attach a copy of our original 1997 letter and encourage current and prospective shareowners to take a look at it. Given how much we’ve grown and how much the Internet has evolved, it’s notable that the fundamentals of how we do business remain the same.
2003:
We have a strong team of hard-working, innovative folks building Amazon.com. They are focused on the customer and focused on the long term. On that time scale, the interests of shareowners and customers are aligned.
P.S. Again this year, the widely followed American Customer Satisfaction Index gave Amazon.com a score of eighty-eight—the highest customer satisfaction score ever recorded in any service industry, online or off. A representative of the ACSI was quoted as saying, “If they go any higher, they will get a nosebleed.” We’re working on that.
2004:
This focus on free cash flow isn’t new for Amazon.com. We made it clear in our 1997 letter to shareholders—our first as a public company—that when “forced to choose between optimizing GAAP accounting and maximizing the present value of future cash flows, we’ll take the cash flows.”
2005:
The foundation of our decision-making philosophy was laid out in our 1997 letter to shareholders, a copy of which is attached...
You can count on us to combine a strong quantitative and analytical culture with a willingness to make bold decisions. As we do so, we’ll start with the customer and work backward. In our judgment, that is the best way to create shareholder value.
2006:
In our experience, if a new business enjoys runaway success, it can only begin to be meaningful to the overall company economics in something like three to seven years. We’ve seen those time frames with our international businesses, our earlier nonmedia businesses, and our third-party seller businesses. Today, international is 45 percent of sales, nonmedia is 34 percent of sales, and our third-party seller businesses account for 28 percent of our units sold. We will be happy indeed if some of the new seeds we’re planting enjoy similar successes.
We’ve come a distance since we celebrated our first $10 million in sales. As we continue to grow, we’ll work to maintain a culture that embraces new businesses. We will do so in a disciplined way, with an eye on returns, potential size, and the ability to create differentiation that customers care about. We won’t always choose right, and we won’t always succeed. But we will be choosy, and we will work hard and patiently.
2007:
Your team of missionaries here is fervent about driving free cash flow per share and returns on capital. We know we can do that by putting customers first. I guarantee you there is more innovation ahead of us than behind us, and we do not expect the road to be an easy one. We’re hopeful, and I’d even say optimistic, that Kindle, true to its name, will “start a fire” and improve the world of reading.
Kindle exemplifies our philosophy and long-term investment approach discussed in our first letter to shareholders in 1997.
2008:
Our primary financial goal remains maximizing long-term free cash flow and doing so with high rates of return on invested capital. We are investing heartily in Amazon Web Services, in tools for third-party sellers, in digital media, in China, and in new product categories. And we make these investments with the belief that they can be of meaningful scale and can clear our high bar for returns.
Around the world, amazing, inventive, and hard-working Amazonians are putting customers first. I take great pride in being part of this team. We thank you, our owners, for your support, for your encouragement, and for joining us on our continuing adventure.
2009:
Taken as a whole, the set of goals is indicative of our fundamental approach. Start with customers and work backward. Listen to customers, but don’t just listen to customers—also invent on their behalf. We can’t assure you that we’ll meet all of this year’s goals. We haven’t in past years. However, we can assure you that we’ll continue to obsess over customers. We have strong conviction that that approach—in the long term—is every bit as good for owners as it is for customers.
It’s still Day 1.
2010:
We live in an era of extraordinary increases in available bandwidth, disk space, and processing power, all of which continue to get cheap fast. We have on our team some of the most sophisticated technologists in the world—helping to solve challenges that are right on the edge of what’s possible today. As I’ve discussed many times before, we have unshakeable conviction that the long-term interests of shareowners are perfectly aligned with the interests of customers.
And we like it that way. Invention is in our DNA and technology is the fundamental tool we wield to evolve and improve every aspect of the experience we provide our customers. We still have a lot to learn, and I expect and hope we’ll continue to have so much fun learning it. I take great pride in being part of this team.
It’s still Day 1.
2011:
Amazonians are leaning into the future, with radical and transformational innovations that create value for thousands of authors, entrepreneurs, and developers. Invention has become second nature at Amazon, and in my view the team’s pace of innovation is even accelerating—I can assure you it’s very energizing. I’m extremely proud of the whole team and feel lucky to have a front row seat.
It’s still Day 1!
2012:
As proud as I am of our progress and our inventions, I know that we will make mistakes along the way—some will be self-inflicted, some will be served up by smart and hard-working competitors. Our passion for pioneering will drive us to explore narrow passages, and, unavoidably, many will turn out to be blind alleys. But—with a bit of good fortune—there will also be a few that open up into broad avenues.
I am incredibly lucky to be a part of this large team of outstanding missionaries who value our customers as much as I do and who demonstrate that every day with their hard work.
2013:
We have the good fortune of a large, inventive team and a patient, pioneering, customer-obsessed culture—great innovations, large and small, are happening every day on behalf of customers, and at all levels throughout the company. This decentralized distribution of invention throughout the company—not limited to the company’s senior leaders—is the only way to get robust, high-throughput innovation. What we’re doing is challenging and fun—we get to work in the future. Failure comes part and parcel with invention. It’s not optional. We understand that and believe in failing early and iterating until we get it right. When this process works, it means our failures are relatively small in size (most experiments can start small), and when we hit on something that is really working for customers, we double-down on it with hopes to turn it into an even bigger success. However, it’s not always as clean as that. Inventing is messy, and over time, it’s certain that we’ll fail at some big bets too.
I feel super lucky to be a part of the Amazon team. It’s still Day 1.
2014:
Marketplace, Prime, and Amazon Web Services are three big ideas. We’re lucky to have them, and we’re determined to improve and nurture them—make them even better for customers. You can also count on us to work hard to find a fourth. We’ve already got a number of candidates in the works, and as we promised some twenty years ago, we’ll continue to make bold bets. With the opportunities unfolding in front of us to serve customers better through invention, we assure you we won’t stop trying.
It’s still Day 1.
2015:
Renewable energy, Frustration-Free Packaging, Career Choice, Leave Share, and Ramp Back are examples of a culture that embraces invention and long-term thinking. It’s very energizing to think that our scale provides opportunities to create impact in these areas.
I can tell you it’s a great joy for me to get to work every day with a team of such smart, imaginative, and passionate people.
It’s still Day 1
2016:
So, have you settled only for decision quality, or are you mindful of decision velocity too? Are the world’s trends tailwinds for you? Are you falling prey to proxies, or do they serve you? And most important of all, are you delighting customers? We can have the scope and capabilities of a large company and the spirit and heart of a small one. But we have to choose it.
A huge thank-you to each and every customer for allowing us to serve you, to our shareowners for your support, and to Amazonians everywhere for your hard work, your ingenuity, and your passion.
It remains Day 1.
2017:
This year marks the twentieth anniversary of our first shareholder letter, and our core values and approach remain unchanged. We continue to aspire to be Earth’s most customer-centric company, and we recognize this to be no small or easy challenge. We know there is much we can do better, and we find tremendous energy in the many challenges and opportunities that lie ahead.
A huge thank-you to each and every customer for allowing us to serve you, to our shareowners for your support, and to Amazonians everywhere for your ingenuity, your passion, and your high standards.
It remains Day 1.
2018:
Our investments are not limited to our current employees or even to the present. To train tomorrow’s workforce, we have pledged $50 million, including through our recently announced Amazon Future Engineer program, to support STEM and CS education around the country for elementary, high school, and university students, with a particular focus on attracting more girls and minorities to these professions. We also continue to take advantage of the incredible talents of our veterans. We are well on our way to meeting our pledge to hire twenty-five thousand veterans and military spouses by 2021. And through the Amazon Technical Veterans Apprenticeship program, we are providing veterans on-the-job training in fields like cloud computing.
A huge thank-you to our customers for allowing us to serve you while always challenging us to do even better, to our shareowners for your continuing support, and to all our employees worldwide for your hard work and pioneering spirit. Teams all across Amazon are listening to customers and wandering on their behalf!
It remains Day 1.
2019:
For now, my own time and thinking continues to be focused on COVID-19 and how Amazon can help while we’re in the middle of it. I am extremely grateful to my fellow Amazonians for all the grit and ingenuity they are showing as we move through this. You can count on all of us to look beyond the immediate crisis for insights and lessons and how to apply them going forward.
Reflect on this from Theodor Seuss Geisel: “When something bad happens you have three choices. You can either let it define you, let it destroy you, or you can let it strengthen you.”
I am very optimistic about which of these civilization is going to choose.
Even in these circumstances, it remains Day 1.
2020:
As always, I attach our 1997 shareholder letter. It concluded with this: “We at Amazon.com are grateful to our customers for their business and trust, to each other for our hard work, and to our shareholders for their support and encouragement.” That hasn’t changed a bit. I want to especially thank Andy Jassy for agreeing to take on the CEO role. It’s a hard job with a lot of responsibility. Andy is brilliant and has the highest of high standards. I guarantee you that Andy won’t let the universe make us typical. He will muster the energy needed to keep alive in us what makes us special. That won’t be easy, but it is critical. I also predict it will be satisfying and oftentimes fun. Thank you, Andy.
To all of you: be kind, be original, create more than you consume, and never, never, never let the universe smooth you into your surroundings. It remains Day 1.