Amazon's Jeff Bezos; "It's All About The Long Term"

[engine]

I thought this was an interesting article. Any business, not just an ecommerce business, can learn from some of the ideas.

Amazon's Jeff Bezos; "It's All About The Long Term" [economist.com]

The founder and chief executive of Amazon has often ruffled investors’ feathers by sacrificing short-term profits to make big bets on new technologies that, he insists, will produce richer returns for the company’s shareholders in future. He laid out this philosophy in his first letter to shareholders, penned in 1997, which was entitled “It’s all about the long term”.

As companies grow, there is a danger that novel ideas get snuffed out by managers’ desire to conform and play it safe. “You get social cohesion at the expense of truth,” he says. He believes that the best way to guard against this is for leaders to encourage their staff to work on big new ideas. “It’s like exercising muscles,” he adds. “Either you use them or you lose them.”

[dpd1]

He's right... Business people, investors, and the general public, are WAY too impatient now days. Everybody demands instant gratification and overnight success.

[triggerfinger]

This is the fallacy of Wall St. Business is not about quarterly reports and year end bonuses. The short-sightedness of this approach leads to the public getting the shaft (Mortgage crisis, anyone?)
Of course he's right, in '97 he launched an online Bookstore. I remember him being on the Tonight Show saying how it wouldn't be profitable for many years. Years later: Amazon created the e-book market, is crushing the e-commerce sector, crushing cloud computing sector, etc.
What would Wall St. say about a company with no profitability? Exactly, short term charlatans only looking at their yearly salary.

[buckworks]

A long term vision can be immensely profitable .... as long as you have enough money to pay your bills in the short term.

Long term or short, you have to stay solvent.

[triggerfinger]

Of course, there is no long term without short term, however the Wall Street types will gladly sacrifice long term feasibility for short term profits. All they see is Q1-Q4. This is a significant cause of many of the bubbles, as traders try to squeeze the maximum amount of growth out of the short term, cash the bonus check, and are immune from the inevitable burst that leaves long term investors and 401ks in the dust to slowly grow to the next bubble burst. /endrant

[dpd1]

Not all financial people are immoral and short term, but unfortunately, enough of them are now days to screw it up for everybody. You know things are screwed up when somebody like Warren Buffett even says they're screwed up. And he of course is a notorious buy and hold, long term guy.

So the question is... Which is the better investment... Amazon now, or buy into the FaceBook IPO hoopla. I wouldn't go with either, because I think internet stuff is too volatile. But if I had to choose, I'd take Amazon long term. They're not going anywhere and offer actual substance. FB is built on social habit. Not exactly a solid long term investment.

[triggerfinger]

I've said numerous times that FB will never be worth 100B. That's the type of valuation that wall street is infamous for. At 3.7 billion revenue and 1 billion profit per year, how does that equate to 100B? Even if you point to growth to 3 Billion users (the entire internet using population of the earth) that still only works out to like 12 billion revenue and 3.5B profit.
28 years to make what your worth?!?
In 20 years, Facebook will be Yahoo. (The young kids already only use it for messaging ,the cool kids are on tumblr now), and the laymen suckers with their scottrade accounts will be in the dust, as per usual. Completely charlatan I say!

[dpd1]

I tend to agree for the most part. Logically and numerically, the worth just isn't there. Nor the stability. But the market is rarely logical these days, so who knows how high it will go short term. Nothing would surprise me at this point. But don't tell the investing crowd that... I said the same thing on an investing forum, and was raked over the coals by many people. Apparently they weren't around long enough to remember AOL, ICQ, and all the rest that nobody uses anymore. Ironically, per user, AOL makes more money than FB right now. The rest is hype.

Youth is anti establishment by nature... Once the revenue efforts start with all the ads, that will be that. And grandma will sign up to wherever the grand kids are. But short term... Who knows, maybe there's some money to be made. I don't have the time to play those games though.