2014 – Dreamy businesses are marriages, not swipes

I have always been intrigued by the letters sent to shareholders by both Warren Buffett and Jeff Bezos.

They are inspiring and, for wannabes like yours truly, a source of motivation and hope. So I am creating a series of articles on what learnings I took away from the letters of Jeff Bezos. This is the eighteenth letter in the series.

You can check out the complete series here:

https://alphonserajdavid.com/category/book-reviews/non-fiction/jeff-bezos-stakeholder-letters/

Bezos, right at the beginning, defines what he calls a “dreamy business offering.”

He says a dreamy business has at least four characteristics. Customers love it, it can grow to a very large size, has strong returns on capital, and is durable in time, with potential to endure for decades. And most importantly, when you find one, “don’t just swipe right, get married.”

Bezos goes on to say Amazon is now “married” to three such partners: Marketplace, Prime, and AWS. The rest of the letter is about how these three feed each other, and how Amazon keeps nourishing them.

Lesson #1: A great business is simple to describe, hard to keep

I like the “four characteristics” test because it is clean and easy esp. and a good yeardstick to use esp. whe your job is all about creating new ideas.

But the more important bit is what he says next. There are “no sinecures in business.” You don’t get to relax. If you want durability, you keep investing.

This is counterintuitive because the moment something works, the instinct is to slow down and harvest. Bezos is saying, if you want a decades-long marriage, you keep showing up. You keep nourishing the relationship. You keep adding more value.

Lesson #2: Expect ugly iterations before the breakthrough

The Marketplace origin story is a story of failure and iternation. Auctions flopped. zShops flopped. Then they morphed it into Marketplace.

It took multiple “wrong” tries to reach the right model. If they stopped after Auctions, the Marketplace would not exist. Maybe, this is how most breakthrough products look in real life. Ugly early. Then obvious later.

Also, Marketplace is not just “add sellers.” The core move was letting third-party sellers compete on the same detail page as Amazon. Many retailers would never do it.

I don’t think I would ever have the guts to coannibilize my current proven business model for a unproven idea.

Lesson #3: Prime proves this: make the promise, then build discipline

Prime started as a two day shipping promise, but this letter makes it clear that Prime is built on systems. It’s interesting, first you make a promise to the customers, see if the promise sticks, then focus on the different operational factors like Inventory replenishment, Inventory placement, Pricing automation and Fulfillment centers run in a new way to hit delivery date promises.

He says the fulfillment network went from 13 sites when Prime launched to 109 now, and that they are on the eighth generation of FC design. He also talks about Amazon Robotics and “more than 15,000 robots.”

This shows what subscriptions really demand. A subscription promise is not a pricing model. It is an execution model. Successful subscription models need flawlwess execution for success.

Lesson #4: FBA is the glue. It turns two products into one flywheel

This was my favorite line in the letter: “FBA is so important because it is glue that inextricably links Marketplace and Prime.”

Sellers want more sales. When they join FBA, their items can become Prime eligible. Prime eligibility drives more sales. Then Prime members get more Prime eligible selection. Membership value goes up. Marketplace pumps Prime. Prime pumps Marketplace. Circle complete.

He says, “Maintaining a firm grasp of the obvious is more difficult than one would think it should be.”

In my head, this is the perfect example of a business model that is hard to copy. Not because the concept is secret, but because the execution is deep. Warehouses. Software. Returns. Customer service. One box shipments. It is not a feature. It is a machine.

Lesson #5: AWS wins because “better and faster” beats “cheaper”

Bezos explains AWS in a way every enterprise buyer should read. He says the pitch “almost as good” will not work. What customers want is “better and faster.” If cost savings come too, great. But “the cost savings is the gravy, not the steak.”

I agree with this. In B2B, cheap is not the goal when the system is mission critical. Speed and reliability win. And the hidden value is what he calls out: IT is high leverage. If your IT is more nimble than your competitor’s, you can ship more business projects faster. That is real advantage.

I also liked the part about developers becoming “ambassadors” as they change jobs. This is how enterprise adoption spreads in real life. Tools win through habits, not through brochures.

Lesson #6: Enable choice, and you build a stronger machine

This part surprised me the first time I read it. Amazon pays 95% of tuition for in-demand skills, even if those skills are not relevant to a career at Amazon. The idea is “enable choice.”

It is easy to call this generosity. I see it as a system design decision. Better-trained people run better operations. Better operations serve customers better. Also, programs like this attract talent to hard roles.

I liked the detail that they are building on-site classrooms with glass walls to inspire others. That is culture by design, not posters.

Bezos ends by saying they will keep looking for a fourth dreamy business and they “won’t stop trying.”