How To Get Rich According To Jeff Bezos
There are a million ways to make $1,000,000. And this is how Jeff Bezos did it. He needs no introduction. Right. So let's just cut straight to the chase.
Customers have the money, not the competition. Well, many people think about the competition. Bezos urges you to only focus on your customers because, at the end of the day, they have the money. It doesn't matter what the competition is doing, as long as you provide the best products for your customers. And the hardest thing to win is their trust. It's hard to gain and really easy to lose. You do it by making the hard things so well and predictable over time, by creating high expectations and also delivering on them at the same time through every business and every industry.
Customers will be forever dissatisfied. They don't know exactly what they want. They just know they want it better. In one shareholder letter, Bezos said that nobody asked for the Amazon Prime membership program, but they all loved it when it was deployed. It's your job to figure out how to satisfy the never-ending need of your customers for a better product. And that intuition is a skill that is hard to master.
And this is similar to what Steve Jobs said about nobody wanting the iPod, but they all loved it when they got it. It's a hard task to anticipate the needs of your customers, but ultimately, it's a crucial thing. You need to figure out if you want to succeed on a global scale. Build around things that won't change. People often ask what will change in the next ten years, but nobody asks what won't change in the next ten years? And for Bezos, that's the more important question because it means you can build a business around something that will likely still be there in the future.
This predictability allows you to deploy your full focus if you think about it. There are some needs that will always be there, no matter what; the need for everyday things delivered fast at your door, for example, will forever be prescient, which is why Amazon was built around this, and every decision they made was made with this in mind.
The four key attributes of a Jeremy business, according to Jeff Bezos, are:
The customers love it. The first sign of a strong business is how it's perceived by its customers. If they love it, you're doing a great job. If they hate it, well, it means they simply don't have another option yet, which is an opportunity for someone else to make it better.
It can grow in very large size. For Bezos, the second sign of a strong business is its scalability. If you can make a great product, but you can only make it once or serve very few people, you will ultimately fail because you cannot grow past a certain point.
It has strong returns on capital because at the end of the day, profit is king. A sinking ship is a sinking ship, no matter how great the destination might be.
Finally, it's durable in time. This is what we talked about in the previous point. The final sign of a strong business is if it's built around a need that will still be there for years to come.
Stubborn on the vision, flexible on the details. Bezos argues that today's entrepreneurs need to be stubborn and flexible all at the same time. And the way to do that is to be really stubborn on your vision or your desired outcome and figure out how to get there on the fly. If you keep on moving the goalposts or you keep on changing your vision, you'll lack clarity and consistency. You can't make something happen if it keeps changing every six months.
So you need to be really stubborn in that case, but at the same time, you need to be flexible in how you get there because ultimately, life is unpredictable and things change. New technologies emerge, and new trends start to shape our behavior. Old solutions won't work for new problems, but as long as you have a really fixed vision and a clear idea of where you want to be, you will eventually figure it out.
It's easier to invent the future than to predict it. Bezos argues the only way to predict what's about to happen next is if you make it happen yourself. Nobody can predict the future besides those who actively build it. You see, in hindsight, things seem obvious. In Amazon's case, it seems obvious now that online purchases will dominate the market.
But another way to look at this is online purchases ended up dominating the market because companies like Amazon made it possible. And if it wasn't for Amazon, probably another company would have made it possible. This is a mentality shift. Can you make something possible for other people?
Advertising is the price you pay for a bad product. A good product will sell itself through word of mouth. This is a golden rule that will always be true: if you build something so great that people really love to use it, they will tell their friends about it. But if you have to spend millions of dollars to convince people to buy your product, well, you've got a bad product to start with.
Now, that's not to say you can't be profitable with this approach, but it's smarter to invest in a great product than to be marketing a bad one. Bezos is in the camp of reinvesting everything you have, making your product better, and letting your product speak for itself.
If you think about it, most of the time you try something new, it's because someone you trust told you about it, not because you saw an ad for it. Word of mouth is the most powerful form of marketing. If you have a high-quality product that solves a real need, make little money on a lot of people.
When you think about it, there are two ways to make money. Either you sell something really expensive a couple of times, or you sell something really cheap to as many people as possible. In the first scenario, your advantages are scarcity and exclusivity. That's why you can't just go into a Rolex shop and buy whatever you want; there's a waiting list.
On the other hand, though, in the era of Infinite Scalability, Bezos argues that the second model is far more profitable. It's a customer-centric approach where your focus is on delivering the best solution possible to as many people as possible.
Figure out needs and work backwards. Most people start with a product and then find people to sell it to. Jeff Bezos argues that a better approach is to start with a need and figure out the product afterwards. Bezos has always said the focus should be on the customer and their needs. You always start with that and have it at the core of your business. And once you really understand what those needs are, then building a product becomes much easier.
Embrace external trends. In Jeff Bezos' eyes, if you fight trends, you essentially fight the future. Or, like the saying goes, adapt or die. This builds upon the idea of being flexible with the details, which we mentioned earlier. When things change, you need to change with them while keeping your vision fixed.
Remember: stubborn with the vision, flexible with the method. If the future is drones, then your product is delivery by drone while keeping the same vision of cheap and fast online purchases. You see how this all ties together. Trends will boost your business if you incorporate them smartly or make it irrelevant if you ignore them.
The two types of decisions in Bezos' world: important and impactful decisions are being made constantly, and to keep moving forward at a steady pace, you first need to recognize what type of decision you are faced with, he noted. There are two types of decisions. He actually calls them type one and type two decisions.
The Type one decisions are the ones that are irreversible and have a long-term impact, like one-way doors; once you go through, you can't go back. These decisions must be made slowly and methodically, with great deliberation and consultation. You must have all of the information and gather all of the data before you can make the call. However, most decisions are not like that. They are reversible. You can go through the door, and if you don't like what you see, you can go back out and try another door.
Bezos calls these type two decisions, and he argues you should first recognize them and secondly learn how to make them swiftly. He notes that most decisions are type two, and they probably should be made with somewhere around 70% of the information you wish you had. On top of that, he argues, you need to learn how to disagree with, but support a proposal just to keep things moving along.
For example, he said he greenlit an Amazon Studios original even though he told the team that he doesn't find it interesting enough. It's complicated to produce and the business terms aren't that good, but the team had a completely different opinion and wanted to go ahead. So he agreed and committed and told the team, "I hope it becomes the most watched thing we've ever made."
So why is this important? Well, you see, big returns come from batting against conventional wisdom, and the conventional wisdom is usually right. Nine times out of ten, your bet will be wrong. But that one time you are right will make up for the rest of it. Bezos made that decision because the team had already brought home 11 Emmys, six Golden Globes, and three Oscars. If they had to spend a lot of time convincing him to agree, there was a high chance this new project would have never been done.
And that, my friend, is a wrap on this list. We hope you learned something valuable here today, and if you enjoyed this video, you'll love the rest in this series, which you can check out right here or by clicking the link in the description. We'll see you back here next time, my friend. Take care.