Jeff Bezos made waves this week that investors should “take a seat” and that Amazon would be ploughing all its profits into the business to address COVID-19. Cue investors fainting, an immediate 5% stock price downturn. But Amazon’s approach is entirely to be expected: in what universe would Amazon NOT invest to meet a new opportunity?
In the first Bezos letter to shareholders in 1997, Bezos said: “We believe that a fundamental measure of our success will be the shareholder value we create over the long term… We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions… We will make bold rather than timid investment decisions where we see a sufficient probability of gaining market leadership advantages.”
And Amazon executed. It effectively spent all of its profits between 2002 and 2018 on investments mostly on its unmatched logistics network, transforming it from this:
To this: 