Long-Term Thinking: How Amazon's 1997 Philosophy Can Transform Your Investment Strategy
Investment Wisdom from Amazon's Early Days: A Guide for Novice Investors
Introduction
In 1997, Amazon was just beginning its journey, with $147.8 million in revenue and 1.5 million customers. Looking back from 2025, Jeff Bezos' early investment philosophy has proven remarkably prescient. This one-pager distills his approach for today's novice investors.
Core Investment Principles
1. Prioritize Long-Term Value Creation
- Then: "A fundamental measure of our success will be the shareholder value we create over the long term."
- Now: Despite market ups and downs since 1997, Amazon's focus on long-term value has yielded extraordinary returns. For individual investors, this means considering a company's potential over 5-10 years, not just quarterly earnings.
2. Identify Market Leadership Opportunities
- Then: "Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital."
- Now: Companies that achieve dominant positions in their markets (like Amazon in e-commerce/cloud, Apple in premium devices, Microsoft in enterprise software) have consistently outperformed the broader market over decades.
3. Accept Short-Term Volatility for Long-Term Gains
- Then: "We may make decisions and weigh tradeoffs differently than some companies... We will make investment decisions in light of long-term market leadership considerations rather than short-term profitability."
- Now: Amazon stock has experienced significant volatility throughout its history, but those who held through downturns have been rewarded tremendously. This principle applies to your own investments - expect volatility but focus on fundamentals.
4. Look for Customer Obsession
- Then: "We will continue to focus relentlessly on our customers."
- Now: Companies that genuinely prioritize customer experience (not just saying it but building their business model around it) tend to build sustainable competitive advantages.
5. Measure What Matters
- Then: "We first measure ourselves in terms of the metrics most indicative of our market leadership: customer and revenue growth, the degree to which our customers continue to purchase from us on a repeat basis, and the strength of our brand."
- Now: When evaluating investments, look beyond traditional metrics like P/E ratios to understand retention rates, customer acquisition costs, and brand strength indicators.
6. Balance Boldness with Analytical Discipline
- Then: "We will make bold rather than timid investment decisions where we see a sufficient probability of gaining market leadership advantages... We will measure our programs and the effectiveness of our investments analytically."
- Now: The most successful investments often appear risky at first glance but are backed by thorough analysis and clear strategic thinking.
Practical Applications for Today's Investors
- Build a long-term portfolio - Commit to holding quality investments for 5+ years
- Invest in what you understand - Follow Bezos' customer-centric approach by investing in products/services you personally value
- Look for moats - Seek companies building defensible market positions through network effects, economies of scale, or proprietary technology
- Expect volatility - Amazon's stock has dropped by 30%+ multiple times during its journey to becoming one of the world's most valuable companies
- Focus on fundamentals - Revenue growth, customer retention, and market share often matter more than short-term profitability for emerging growth companies
Final Thought
As Bezos wrote in 1997: "It's not easy... but we are working to build something important, something that matters to our customers, something that we can all tell our grandchildren about. Such things aren't meant to be easy."
The same philosophy applies to successful investing. It isn't always easy, but a disciplined, long-term approach based on sound principles is still the most reliable path to building wealth.