American Consequences - August 2017

“But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few

to your door in two hours. You can stream Manchester by the Sea on Amazon Video. Oh, and Amazon Studios produced that Oscar- winning movie as well. The U.S. economy and retail sales have just recently surpassed the highs set before the financial crisis. Sales at the major department stores and big-box stores have grown 20% over the last 10 years. But that doesn’t even register when compared with Amazon’s 1,100% growth. Amazon has booked this growth and its pervasive spread through the U.S. economy by having a fundamentally different approach than any other company we know. It focuses on the long-term view... Let us draw a parallel between business and investing. In investing, you can instantly claim an advantage over everyone else in the market by adopting (and more difficult... sticking with ) a long-term view. Thousands of fund managers and millions of individual investors are trying to find good investments for this quarter or boost their returns for this year. If you can widen your view to five years, you’re playing a different game and the competition disappears. That’s an important lesson for investors. And Jeff Bezos takes the exact same approach with Amazon. “If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people,” Bezos said in a 2011 interview with Wired magazine.

companies are willing to do that.” Bezos built Amazon by going against

expectations and testing new ideas. Amazon started in 1994 as a bookseller. I remember when it branched out to sell other items around 1998, and it seemed like a strange choice. Amazon’s brand was books. In those days, people went to different websites to buy different things. Aside from selling “everything,” Amazon has undertaken big projects that turned into great businesses. Those projects took a lot of time and capital... and seemed a little crazy at the time. Consider the Kindle e-book reader, which Amazon first released in 2007... The thought of a bookstore making hardware was a huge leap in thinking and a big risk. First of all, Amazon sold things, it didn’t build them. Second, Amazon sold books. E-books would be a direct competitor to its core business. Most companies don’t have the guts in invest in the technology that will undermine its very business. These days, e-book sales total billions of dollars. Amazon claims about 70% of the e-book reader market with its Kindle device.

In business, competition is never as healthy as total domination.

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