The Bezos Letters

Steve Anderson is a professional speaker, consultant, and futurist. He gives keynote presentations on the future of technology, how businesses can leverage the online world, and how companies can assess and use strategic risk to their advantage. His insurance agency, The Anderson Network, is considered to be a leader in the field of insuring productivity, technology, and profits. He is on the advisory boards of several insurance industry work groups and think-tanks. He is a graduate of the University of the District of Columbia and Taylor University.

Amazon is the fasted company in history to reach $100 billion in sales! How did Jeff Bezos achieve that? The reality is Bezos leverages risk and has created an exceptional culture of experimentation and invention. He believes you don't grow if you're not willing to take risks, and he constantly evaluates Amazon's "RoR" — Return on Risk.

Fortunately for everyone else, Jeff Bezos has detailed and outlined his approach to risk and his growth strategies in his annual letters to Amazon's shareholders. Amazon has written these letters for the last twenty-one years. When you analyze them, it becomes clear there are fourteen growth principles which articulate how Bezos and Amazon use risk to their advantage.

These fourteen principles fall into four growth cycles:

1. Test. At Amazon, testing is a way of life. All team members are encouraged to try new things and see whether they improve the way Amazon does business. If something doesn't work, there are no punishments but if something does work, Amazon bets big. Most businesses try and avoid failures, but Bezos does the exact opposite.

2. Build. At Amazon, building is how you turn promising ideas into stable initiatives. They build to make sure what they invest in is something customers actually want. Amazon is always willing to sacrifice short-term gains in order to build a strong foundation for new products which will be around for many years.

3. Accelerate. To Amazon, accelerating is what you do once something has been tested and shown to work. You then figure out how you can creatively use technology to boost what you're doing. You also form a passionate team to drive and accelerate the future growth, making your company fast-paced and dynamic.

4. Scale. For Amazon, scale requires that you maintain an innovative culture which is willing to take risks on behalf of the customer. You have to focus on maintaining high standards, measuring only what matters, and most important of all make decisions as if it is your first day in business. You have to focus on the customer.

I really liked this book. There are serveral books that analyze Warren Buffett's letters to Berkshire Hathaway shareholders for clues into his approach to investing, but this is the first book I've seen that does the same for Jeff Bezos's letters to Amazon's shareholders.

The author, Steve Anderson, stresses that Bezos tries new things and is prepared to take risks. Bezos stated publicly that he is prepared to lose a billion dollars in order to figure out how to make billions more. You've got to admit that pretty gutsy!

The 14 principles that Steve Anderson distilled from those letters to shareholders are interesting in their own right. Obsessing over customers comes through loud-and-clear and so too does making high-velocity decisions. I particularly like the mindset of always acting like it's Day 1 and there's still unlimited opportunities that lie ahead. That's a great way to think and act.

Jeff Bezos borrowed $300,000 and quit his job to start the Amazon.com online book store in July 1994. That investment has grown like a rocket ship as Amazon has become the fastest company ever to reach $100 billion in sales, one of the first companies ever to be valued at $1 trillion, and the employer of more than 650,000 people (which is a number greater than the population of countries like Iceland and the Bahamas). That all suggests there might be something good in these principles.