During the Berkshire annual meeting, both Buffett and Munger had great things to say about Jeff Bezos. I highlighted some their comments earlier this week. At one point, Buffett recommended watching an interview Bezos did with Charlie Rose late last year.
It’s a good interview that fits with what Buffett and Munger discussed during the meeting. Bezos’s ideas around Amazon’s customer-centric view and long-term perspective fit with their philosophy:
…the thing that connects everything that Amazon does is the number one – our number one conviction and idea and philosophy and principle which is customer obsession, as opposed to competitor obsession. And so we are always focused on the customer, working backwards from the customer’s needs, developing new skills internally so that we can satisfy what we perceive to be future customer needs… And it all starts with, it’s not just customer obsession, that is the number one one. But we have a very inventive culture, so we like to pioneer invent… Willingness to think long-term. I think that is another common thread that runs through every single thing we do. We are very happy to invest in new initiatives that are very risky, for five to seven years, which most companies won’t do that… It’s the combination of the risk-taking and the long-term outlook that make Amazon, not unique, but special in a smaller crowd.
Those three things account for most of Amazon’s success. It’s something most companies fail to do. Either they’re too short-sighted, risk averse, or competitor focused, which almost always puts them in a position of playing from behind.
Another part that stuck out, fits with Buffett’s view on tech companies in general. Tech is not a capital intensive business like the steel mills and railroads of old.
…we built Amazon because we didn’t have to do any of the heavy lifting. The transportation and logistics infrastructure of U.S. Postal Service which would have been hundreds of billions in CapEx, already existed. We didn’t have to build the internet, it was run on, on long distance cables that were actually put in the ground for long-distance phone calls. And we didn’t have to build a payment system, the credit card system already existed. So all these things would have been tens of billions or hundreds of billions in CapEx and we got to rest on top of them.
With tech, it’s really easy to enter but just as easy to be overrun by competitors unless you do something different. The difference with Amazon goes back to the earlier point on customer focus, long-term view, and inventive spirit. That doesn’t mean Amazon is impervious.
But everything Amazon is doing – the ecosystem it’s building through Prime, Kindle, Fire, Echo, Dash buttons, etc. – drives customers back to the retail business. That causes stickiness. Customers are less likely to stray from Amazon.
Anyways, I thought I’d post the interview here for those interested.
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