Amazon’s Inspirational Letter to Shareholders
Amazon.com Inc was founded by Jeff Bezos on 5th July 1994. The American multinational company offers a variety of services like e-commerce, video streaming services, music audios, cloud gaming services, cloud drive, etc.
The company went public on 15th May 1997 with its share price increasing from 18 $ to 3293 $ today, that is 14th August 2021.
It means that if you owned 1 share of Amazon in 1997 back then and kept it, you would have witnessed a growth of 18194.44% in its price. Mind-blowing isn’t it?
This philosophy has been very well presented by Amazon’s founder Jeff Bezos in his 1997 Letter to Shareholders.
Do you know that Jeff Bezos reprints the same 1997 letter every year in his annual report to illustrate that It’s All About the Long Term.
Amazon’s mantra has always been quite simple. In order to beat the competition, create strong shareholder value, diverse customer services, increase customer base, gain market leadership, Invest aggressively for the long term.
Some noteworthy points of Amazon’s Investment Philosophy are:
- Long-term always beats short-term:
Amazon has always tried to create wealth and does not chase after short-term profitability from Wall Street reactions.
2. Customer obsessed:
Amazon continues to add a multitude of services every day, thereby increasing its customer base. Since Amazon offers the cheapest products and a wider selection, customers always rush to this e-commerce platform to buy anything they want.
3. Maximizing cash flows:
Amazon wants to generate as much cash flows as possible and maximize the present value of future cash flows.
4. Retaining talented employees:
Amazon always prefers giving ESOP (Employee Stock Option Plan) to its employees rather than cash believing that giving them ownership would retain versatile and talented employees leading to Amazon’s success.
In fact, one of the most important metrics resulting in Amazon’s innovation and success has been its Dividend Payout Ratio which is (drum rolls please) 0 %.
It means Amazon has been continuously re-investing funds to expand more and more and grow rapidly. It does not believe in keeping its shareholders satisfied by paying them regular dividends.
Rather, Amazon continues to be a growth-centric company and keeps on building more and more assets. It aims to achieve the potential of its business model with its long-term vision of Work hard. Have fun. Make history.
Some lifelong inspirational tips we can get from Amazon’s investment strategy is:
- Keep on re-investing in yourself :
Create assets for yourself to achieve growth in the long run.
2. Exist to serve your customer’s problems:
Customer is what your business exists for. Create customer value and relationships in your business to drive an increasing customer base.
3. Think long-term:
Those who have tried to succeed in the short run have always reached a maturity stage sooner.
4. Be clear in your approach:
There will be times when people around you might not agree with your philosophy. Don’t worry, Have faith and Trust yourself and move ahead.
