One of my favorite Bezo-isms is “Disagree and Commit.” I’ve seen it in articles a handful of times recently as the adulation around Amazon and Bezos’ management reaches a fever pitch.
Notwithstanding the disappointing forecast for Q418, Amazon’s recent operating performance has been spectacular. But, more interesting is that it has been “spectacular at scale” and across a very large and complex business.
While Revenue Growth YOY has been strong,
the real story has been YOY growth in Operating Income.
Those are beautiful numbers. It’s clear that in the past few years the company has turned on the profit machine.
For many years, Amazon (and Bezos) trumpeted their focus on revenue growth. The mantra was “we are reinvesting all of our profits in growth.” This is the same thing most startups say (and most VCs push for) as growth compounds rapidly if you can keep the growth percentage (yup – it’s simple math.) This has been particularly true for B2B SaaS companies, not withstanding the notion of the Rule of 40 for a Healthy SaaS Company.
While growth in revenue is still important, Amazon’s ability to generate this kind of growth on its operating income is a reminder that turning on the profit switch at some point does matter, if only to show how much leverage your operating model has (me thinks Tesla did that in Q318 for the same reason). The AWS numbers are remarkable to me – their YOY growth is 46% and their operating income is about 30%. That’s well above the rule of 40.
I would have loved to be in the meetings during the shift from “grow at all costs” to “keep growing fast, but flip the operating income switch.” There were many moments in time over the past 15+ years where I’m sure this came up. But clearly the focus on this changed in the last few years, and the results are now front and center.
I don’t hold any Amazon stock directly, nor do I play the stock market, but the financials in public companies have a myriad of lessons buried in them for private companies that are scaling. That said, the management lessons buried underneath the numbers are even more important. “Disagree and commit” seems to be working well these days for Amazon.
I just sent this note out to our CEO list. I was going to write a different post today about The Founder Wellness Pact: How Accelerators are Addressing Depression Among Founders but I’m going to save it for next week. After sending this note out, I decided it was the clearest thing I could add to your world today going into the weekend.
Jeff Bezos’ annual letter is now up there with Warren Buffett’s annual letter as must reads for me. However, it is a lot shorter (5 minutes vs. 20 minutes).
You’ve probably seen lots of techy news, tweets, and medium posts about this. Don’t read them. Just read the letter. It won’t take long, and if you think about it while you are reading it, it will mean something that sticks.
Ask yourself several questions when you are finished:
1. Do you have a customer-obsessed culture?
2. Do you make decisions with 70% of the information?
3. Do you have a “disagree but commit” culture (especially when it’s you that is disagreeing)?
As I noticed quotes from the Code Conference dominate my Twitter feed yesterday, I saw a few from the Jeff Bezos interview that made me say out loud “Jeff Bezos is amazing.” I love his use of the phrase “cultural norms” (it’s one of my favorite phrases) and I particularly thought his comments on Donald Trump and the Peter Thiel / Gawker situation were right on the money.
The interview prompted me to think about how biases affect my thinking. I’ve been struggling with the Peter Thiel / Gawker stuff and have asked a few friends closer to the situation and the people involved to give me their perspectives as I’ve tried to determine whether my biases are overwhelming my perspective on it. As a result, I haven’t discussed it publicly, and instead have thought harder about it at a meta-level, which is actually more interesting to me.
I don’t know Jeff Bezos and have never met him, so my strong positive reaction to the interview reinforced this notion around unscrambling my biases as part of better critical thinking. If we use Amazon as an example, my relationship with the company, and my corresponding experiences over the years, have created a set of biases that I map to my impression of Bezos. And, as you read though the list below of my experiences / viewpoints, you’ll quickly see how the biases can create a chaotic mind-mess.
Following are the quick thoughts that come to mind when I think about Amazon.
- Love it as a customer
- Frustrated with how they have handled relationships with companies I’m an investor in
- Delighted with how they have handled relationships with companies I’m an investor in
- Moments of misery with interactions around difficult things
- Brilliance and clarity of thought from Bezos
- Wasted money on Amazon products that sucked
- Amazing delight with Amazon products that I use every day, including my Kindle
- Sucky experience as an author
- Distribution that otherwise wouldn’t exist for me as an author
- Many friends at Amazon
- Sympathy for the stupid way Colorado has dealt with them around affiliates and sales tax
I could probably come up with another 50 bullet points like this. Given that Bezos is the CEO and public face of Amazon, I map my view of the company to him. I know that is only one dimension of him – and his experience as a human – but it’s the one that I engage with.
Then I remember we are all human. Shit is hard. We make lots of mistakes. And, when I sit and listen to Bezos talk to Walt Mossberg, I have an entirely new level of amazement, appreciation, and intellectual affection for him, and – by association – Amazon.
I know that many different kinds of biases get in my way every day. I’ve learned the names for some of them, how they work, and how to overcome them through various work of mine over the year. But at the root of it, I realize that a continuous effort to unscramble them when confronted with something that has created dissonance in my brain is probably the most effective way to confront and resolve the biases.
For those of you in the world who tolerate me saying “what do you think of thing X” and then give me a thoughtful response, thank you, especially when you know I’m wrestling with trying to understand what I think about X. Now you know that part of what I’m asking you to help me with it to unscramble my biases around the particular person or situation that is represented by thing X.
If you are an founder or employee of a public company, repeat after me:
This is one of my favorite Jeff Bezos quotes.
It’s easily to get bummed out when your stock price drops. I believe the emotions follow the +1/-5 rule. Each time it goes up, you get one unit of happiness. Each time it goes down, you get -5 units of happiness.
Think about that for a second. If you look at the stock price every day the market is open, you’ll look at it about 250 times a year. Let’s assume that your stock is higher at the end of the year, but that on 125 days it goes up, and 125 days it goes down. You’ll have +125 happiness for the up days and -625 happiness for the down days. Even though your stock price is higher at the end of the year, you’ll have -500 happiness points.
Now, in the above case, if you only look at your stock at the end of each month, you’ll have 6 up days and 6 down days. That’s +6 – 30 = -24 happiness points. Still unhappy, but less so.
If you look at the stock only one time at the end of the year, you’ll have +1 happiness points.
Lesson: Don’t look at your stock price. Run your business. Work in your business. Do amazing things. Build value. Derive your happiness from the amazing things you are doing for your customers, the great people you work with, and the mission that you are on. Oh – and all the great things in the rest of your life outside of work.
Remember: You are not your stock price.