Bezos talked about achievements and responsibilities, and Amazon can have today because it has always been unique to be itself, so don't forget the original intention.
In the third quarter of this year, Jeff Bezos will resign as CEO of Amazon, passing the baton to Andy Jassy, head of cloud computing, to transition to executive chairman of Amazon's board of directors. Looking back at Amazon's history, people always ask, how did it always stay alive?
From an online bookstore, to launching Prime members, Kindle, voice assistant Alexa, cloud computing AWS... It really confirms Bezos's saying, "We just invent."
After leaving office, the "inventor" will still do more of what he wants to do, such as building rockets, doing charity to focus on climate change, and managing the Washington Post that he bought many years ago. "[Creating] is what I enjoy the most, and what I'm best at. I can get the most out of it."
On April 15, CEO Jeff Bezos sent his last letter to shareholders, and since 1997, every annual letter to shareholders has been regarded as a "bible" read by Internet entrepreneurs, and the phrase "It's all about the long term" is like a god-level prophecy, allowing Amazon's huge business map to revolve around his long-termism.
If I sum up the letter in a short paragraph, it would be: Amazon has what it is today because we've been creating value. For customers, this value may be that Prime members save users time shopping, AWS has increased the speed of software development, but this does not mean that Amazon is perfect, and more needs to be done to create value for employees and society. And don't forget how Amazon came to be here, because of its uniqueness and irreplaceability, and it has always been prepared to pay the price for it.
Anyone who has read Amazon's Leadership Principles knows that Amazon puts "Customer Obsession" first, which is the company's proud capital. This time, Bezos rarely said that he had to be "the world's most customer-centric company" and "the best employer in the world."
That's because amazon just now went through a major test in 26 years, with employees at the Bethemer warehouse in Alabama voting whether to join the Retail, Wholesale and Department Store Union (RWDSU).
"If I had a chance to meet Bezos, I'd like to ask him if he ever imagined us working 10 hours a day in a warehouse sweating, unable to even go to the toilet?" A warehouse employee said. "There are reports where our employees are treated like robots, which is inaccurate, and when we surveyed employees in distribution centers, 94 percent said they would recommend to a friend to work at Amazon." Bezos and the employees have their own opinions.
The voting results show that although the effort to form Amazon's first union failed, employees and Amazon are bound to be caught in a protracted struggle, and it is rare for the two parties in the United States to reach an unprecedented consensus on this issue.
As outgoing CEO, Bezos instructed his successors and Amazon about the future: The world wants you to be like it because it's a lot less frictional, but you need to know that you have to be unique and differentiated to survive, even if you have to pay a huge price.
Finally, the letter ends with Day 1. Day 1 is bezos's philosophy, which means that no matter how far the company has grown, no matter how much people have achieved, they still have to think of each day as the first day. This is an exhortation to Amazon's future, and it is also a hint of its own next journey.
Here is Bezos' letter to shareholders:
In Amazon's 1997 letter to shareholders (and our first), I spoke of our desire to create a "lasting franchise," a franchise that reshapes the meaning of serving customers by unleashing the power of the Internet. I noticed that Amazon has grown from 158 employees to 614 people and has more than 1.5 million customers. We just went public at a split-adjusted share price of $1.50 per share. At the time, I mentioned that Amazon was on Day 1.
We've come a long way since then, and we're working harder than ever to serve and delight our customers. Last year, we employed 500,000 people, and now we employ 1.3 million people worldwide. We have more than 200 million Prime members worldwide. More than 1.9 million small and medium-sized businesses sell on our platform, accounting for nearly 60% of our retail sales. More than 100 million smart home devices connected to Alexa, the smart assistant. AWS serves millions of customers and annualized run rates of $50 billion by 2020. In 1997, we hadn't launched Prime, Marketplace, Alexa, or AWS, and we didn't even think about it then. We take a lot of risks on every project and put sweat and creativity into it.
Along the way, we've created $1.6 trillion in wealth for our shareholders. Who are they? You're one of them, and my Amazon stake has made me rich. But more than seven-eighths of the shares equate to $1.4 trillion in wealth created for others to own. Who are they? They are pension funds, universities, 401(k) (pension system), and Mary and Larry (retail investors who bought Amazon stock) and happened to send him a thank-you email as Bezos wrote this letter. ）
I hear stories like that all the time. I know some of them who spend their money from Amazon on college, emergencies, housing, vacations, entrepreneurship, and philanthropy. I'm proud of the wealth Amazon has created for its shareholders. This is important because helping improves their lives. But I also know that this is not yet the greatest part of the value we create.
<h1 class="pgc-h-arrow-right" data-track="20" > create more value than consumption</h1>
If you want to succeed in business (and actually in life), you have to create more than you consume. Your goal should be to create value for everyone you interact with. Any business that can't create value for the people it touches, even if it seems successful on the surface, won't last long in this world. Will soon be obsolete.
Remember, stock prices are not about the past, they are projections of future cash flows and discounted back to the present. The stock market represents foresight. However, I'm going to change the subject now and talk about the past. How much value will we create for our shareholders in 2020? This is a relatively easy question to answer, because the accounting system is set up to answer this question. Our net profit for 2020 is $21.3 billion. If Amazon isn't a public company with thousands of shareholders, but a sole proprietorship with only a single owner, that's all it will get in 2020.
What about employees? It's also a fairly easy-to-answer value creation question because we can look at compensation spending. A company's expenses represent the income of its employees. In 2020, employee revenues totaled $80 billion, plus $11 billion in expenses, including benefits and various payroll taxes, totaling $91 billion.
What about third-party sellers? We have an in-house team (Sales Partner Services) to answer this question. They estimate that in 2020, third-party sellers will make between $25 billion and $39 billion from selling items on Amazon, conservatively speaking, I'm assuming $25 billion here.
As for customers, we have to break them down into consumer customers and AWS customers. The first is the consumer, which we offer low prices, multiple options, and fast delivery, but suppose we ignore all of this and focus on one thing, and that is that we save time for our customers.
On Amazon, 28% of purchases are made in three minutes or less, and half purchases take less than 15 minutes to complete. Compared to a typical brick-and-mortar shopping trip, which requires driving, parking, searching store aisles, queuing up to checkout, finding your car, and then driving home, studies have shown that this takes an average of an hour. If you assume that a typical Amazon shopping takes only 15 minutes and saves you the time you spend going to a physical store a few times a week, you'll save more than 75 hours a year. This is important, after all, in the early 2000s, we were all very busy.
We convert it to dollars, so let's assume the time saved at $10 per hour (which is conservative). 75 hours multiplied by $10 per hour, minus the cost of Prime, we can create about $630 in value per Prime member. We have 200 million Prime members, which means a total of $126 billion in value created in 2020.
AWS is difficult to estimate because each customer's workload is very different, but we do it anyway, acknowledging high errors in advance. The direct cost improvement from cloud and on-premises operation varies, but a reasonable estimate is 30%. Of AWS's $45 billion in revenue for the full year 2020, that 30 percent represents $19 billion in customer value. ($64 billion for internal operations, $45 billion for AWS)
The difficulty with this assessment is that direct cost reduction is the smallest part of the benefits of moving to the cloud for customers. The bigger benefit is increased speed of software development, which can significantly improve the competitiveness and revenue of customers. We don't have a reasonable way to estimate this segment of customer value, except to say that it is almost certainly greater than the direct cost savings. Conservatively, I think this portion of AWS will generate for customers in 2020 at $38 billion.
Adding up the value we will create for AWS and consumer customers, we will create a total customer value of $164 billion in 2020. Overall, we generated $21 billion in value for shareholders, $91 billion for employees, $25 billion for third-party sellers, and $164 billion for customers in 2020, for a total of $301 billion.
If each group has a profit and loss statement that represents their interaction with Amazon, then the numbers above are the "bottom line" of these income statements. These numbers are part of the reason people work for us, sellers sell through us, and customers buy from us, which is that we create value for them. This value creation is not a "zero-sum game" . It's not just about moving money from one pocket to another. Looking around society as a whole, you will find that invention is the root of all true value creation, and the value created is considered the best measure of innovation.
Of course, our relationships with these people and the value we create are not just about money. Money doesn't tell the whole story. For example, our relationship with our shareholders is relatively simple, and they invest and hold shares for a period of their own choosing. We rarely provide guidance to shareholders on matters such as annual meetings and proper voting procedures. Even so, they can ignore these instructions and skip the vote outright.
Our relationship with our employees is a very different example. We have the processes they follow and the standards they need to meet. We need training and various certifications. Employees must be on the job at the allotted times. Our interactions with our employees are numerous and fine-grained. It's not just a matter of wages and benefits, it also touches on all the other detailed aspects of the relationship between the two parties.
Is the board comforted by the results of Bethemer's recent union vote? No. I think we need to do more for our employees. While the voting results are tilted to one end and our direct relationship with our employees remains close, it's clear to me that we need a better vision to create value for our employees — a vision that makes them successful.
If you read some news reports, you might think we don't care about our employees. In these reports, our employees are sometimes referred to as desperate souls and treated like robots. But this is not accurate. They are mature and thoughtful people who can choose where to work. When we surveyed employees in distribution centers, 94 percent said they would recommend coming to work at Amazon from a friend.
Employees can take naps during shifts, move their bodies, fetch water, use restrooms, or talk to managers, all without affecting their performance. These naps are in addition to between a 30-minute lunch and a 30-minute normal break.
Instead of setting unreasonable performance goals, we set achievable performance goals that take into account tenure and actual employee performance data. Employee performance is the result of a comprehensive assessment over a long period of time, because we know that in any given week, day, or hour, a variety of factors can affect their performance. If an employee fails to meet performance goals for a period of time, their manager talks to them and provides guidance.
Training is also extended to employees who excel and take on more responsibility. In fact, 82% of training is proactive, provided to employees who meet or exceed expectations. We laid off less than 2.6% of our employees because they were unable to perform their duties. In 2020, this number is even lower due to the impact of COVID-19 on operations.
<h1 class="pgc-h-arrow-right" data-track="39" > the best employers and safest places to work in the world</h1>
The truth is that the huge team of thousands of people who lead Amazon's operations has always been very concerned about our temporary workers, and we pride ourselves on the work environment we create. We're also proud that Amazon is a company that creates jobs not just for computer scientists and people with advanced degrees, we're also creating jobs for people who have never had that advantage.
While we've come a long way, it's clear to me that we need a better vision to make our employees successful. We have always wanted to be the most customer-centric company in the world. We're not going to change that, and that's why we've been so successful. But I promise to add one more, and we will be the best employers and the safest places to work in the world.
In my upcoming role as Executive Director, I will focus on new initiatives. I'm an inventor, and that's what I like the most, and what I do best. So I can create the most value. I am excited to work with a passionate team in operations to further invent in this arena of "best employer and safest place to work". Amazon is always flexible in the details, but when it comes to vision, we are stubborn and ruthless. When we make up our minds to do something, we never fail, and at this point, we don't fail either.
We delve into security issues. For example, about 40 percent of amazon injuries are related to musculoskeletal disorders (MSDs), conditions such as sprains or strains that can result from repeated exercise. MSDs are common in the kind of jobs we do, and are more likely to occur within the first six months of an employee's onboarding. We need to invent solutions to reduce MSD for new employees, many of whom may be participating in formal work for the first time.
WorkingWell is one such program, which we rolled out to 859,000 employees in 2020 at 350 locations in North America and Europe, where we trained a small group of employees on body mechanics, being proactive in health and safety. In addition to reducing work injuries, these concepts also have a positive impact on activities other than daily work.
We are developing a new automated staffing schedule that uses sophisticated algorithms to rotate employees between jobs that use different tendon groups to reduce repetitive movements and help protect employees from MSD risk. This new technology is at the heart of our job rotation program to be launched in 2021. Our growing focus on early MSD prevention has paid off. From 2019 to 2020, overall MSD decreased by 32%, resulting in more than half fewer MSDs having to leave work.
We employ 6,200 security professionals at Amazon. They use security science to solve complex problems and establish new industry best practice standards. In 2021, we will invest more than $300 million in safety projects, including an initial $66 million, to develop technologies that help prevent forklifts from colliding with other types of industrial vehicles.
When we take the lead, others follow. Two and a half years ago, when we set a $15 minimum wage for hourly workers, we did it because we wanted to lead in wages rather than go with the flow, because we thought it was the right thing to do. A recent paper by economists at the University of California, Berkeley and Brandeis University analyzed the impact of our decision to raise the minimum starting salary to $15 an hour. Their assessments reflect what we hear from our employees, their families, and the communities in which they live.
We have raised our starting salaries not only for our own employees, but also for other workers in the same community, boosting local economies across the country. Research shows that in the same labor market, our raises resulted in a 4.7% increase in average hourly wages for other employers.
Our leadership is not over. If we want to be the best employer in the world, we shouldn't be satisfied with 94% of employees saying they'll recommend Amazon jobs to their friends, but we have to aim for 100%. We will continue to lead in terms of wages, benefits, upskilling opportunities and other aspects, and we will do so over time.
If any shareholders fear that the goal of being the "world's best employer and safest workplace" could distract us from our focus as "the world's most customer-centric company," then I hope you can put aside your concerns. Think of it this way: If we can run two different businesses at the same time, like consumer e-commerce and AWS, and both do very well at the highest level, then of course we can do the same thing on both vision statements. In fact, I believe they will reinforce each other.
<h1 class="pgc-h-arrow-right" data-track="51" > climate commitment</h1>
In an early draft of this letter, I began this section with arguments and examples aimed at proving that human-induced climate change is real. But, frankly, I think we can stop saying that now. You don't have to say that photosynthesis is real, or that gravity is real, or that water at sea level is boiling at 100 degrees Celsius. These things are entirely true, and so is climate change.
Not so long ago, most people thought it would be a good thing to tackle climate change, but they also thought it would be costly and threaten jobs, competitiveness and economic growth. We know better now. Smart action to combat climate change will not only stop bad things from happening, but will also make our economies more efficient, help drive technological change, and reduce risk. All in all, these can lead to more and better jobs, healthier and happier children, more productive workers, and a more prosperous future.
But that doesn't mean it's an easy task, and the next decade will be a defining one. The economy of 2030 will need to be very different from today's, and Amazon plans to be at the heart of that change. We launched the Climate Pledge in September 2019 with Global Optimism because we want to help drive this positive revolution. We need to be part of a growing corporate team that understands the urgency and opportunities of the 21st century.
Now, less than two years later, 53 companies representing almost all sectors of the economy have signed the climate pledge. Companies such as Best Buy, IBM, Infosys, Mercedes-Benz, Microsoft, Siemens and Verizon have pledged to achieve zero carbon emissions in their global operations by 2040, 10 years ahead of the Paris Agreement. The vow also requires them to regularly measure and report on greenhouse gas emissions, implement decarbonization strategies through genuine business change and innovation, and neutralize any remaining emissions through additional, quantifiable, real, permanent and socially beneficial compensation. Credible, high-quality compensation is precious, and we should retain them to compensate for economic activities that do not exist for low-carbon alternatives.
The signatories to the climate pledge are making meaningful, tangible and ambitious commitments. Uber aims to become a zero-carbon platform in Canada, Europe and the United States by 2030, and Henkel plans to source 100% of the electricity it produces from renewable sources. Amazon is moving towards our own goal of using 100% renewable energy by 2025, five years ahead of our original 2030 target. Amazon is the world's largest corporate buyer of renewable energy, with 62 grid-scale wind and solar projects and 125 solar-roofed distribution and sorting centers around the world. These projects generate more than 6.9 gigawatts of electricity and provide more than 20 million megawatt hours of energy per year.
Shipping is an important part of Amazon's business operations and the toughest part of our plan to achieve zero carbon emissions by 2040. To help accelerate the market for electric vehicle technology quickly and help all companies transition to greener technologies, we invested more than $1 billion in Rivian and ordered 100,000 electric delivery vehicles from the company. We also have partnerships with Mahindra in India and Mercedes-Benz in Europe.
These custom electric delivery vehicles from Rivian are already in operation and made their debut in Los Angeles in February. 10,000 new cars will hit the road as early as next year, and by 2030, all 100,000 vehicles will be on the road, saving millions of tons of carbon emissions. An important reason we want other companies to join the climate pledge is to signal to the market that companies should start inventing and developing new technologies that signatories need to deliver on their commitments. Our purchase of 100,000 Rivian electric delivery trucks is a good example.
To further accelerate investment in the new technologies needed to build a zero-carbon economy, we launched the Climate Pledge Fund last June. The investment plan starts at $2 billion and is invested in visionary companies to facilitate the transition to a low-carbon economy. Amazon has announced investments in CarbonCure Technologies, Pachama, Redwood Materials, Rivian, Turntide Technologies, ZeroAvia, and Infinium, and they're just some of the innovative companies we want to build the zero-carbon economy of the future.
I also personally contributed $10 billion in grants to help drive the systemic change we need over the next decade. We will support leading scientists, activists, NGOs, environmental justice organizations and others working to fight climate change and protect the natural world. Late last year, I offered my first round of grants to 16 organizations working on innovation and mobile solutions. It will be a collective effort by large companies, small companies, global organizations and individuals, and I am excited to be a part of this journey and optimistic that humanity can come together to solve this challenge.
<h1 class="pgc-h-arrow-right" data-track="61" > to survive by maintaining differentiation, the world wants you to fit in</h1>
This is my last annual shareholder letter as CEO of Amazon, and I feel there is one last extremely important thing that must be passed on to everyone. I want all Amazonians to take this to heart.
Here's a quote from The Blind Watch Maker, published by Richard Dawkins, which has a basic fact about biology:
"Avoiding death is something you have to work on. If nature is left to chance (such as death), the body tends to return to a state of equilibrium with the environment. If you measure certain variables, such as temperature, acidity, moisture, or charge in an organism, you will often find that they differ greatly from the corresponding measurements in your surroundings. For example, our body temperature is usually higher than that of our surroundings, and in cold climates, the body has to work hard to maintain this difference. But when we die, this function stops, the temperature difference begins to disappear, and eventually our body temperature is the same as that of our surroundings. Of course, not all animals struggle to avoid reaching equilibrium with the surrounding temperatures, but all animals make similar efforts to avoid merging with their surroundings. For example, in arid countries, plants and animals struggle to maintain liquid content in cells, which runs counter to the natural tendency for water to flow from cells to dry the outside world. If they fail, they die. More broadly, if organisms don't actively stop water loss, they will eventually blend into their surroundings and no longer exist as self-aware organisms. That's what happens when they die."
While this isn't a metaphor, it's still a great quote that's relevant to Amazon. I even think it's relevant to all companies, all agencies, and the lives of each of us. In what ways does the world attract you to trying to keep you so-called "normal"? How much effort does it take to maintain your uniqueness? Keep the things that make you different?
I know a happy couple who often come across scenes alongside their husbands who often pretend to look at their wives in pain and say, "Can't you be normal?" Then they burst out laughing. Of course, the deep truth is that he loves what makes her unique. But, at the same time, if we are a little bit more normal, things tend to get easier and consume less energy, which is also true.
This phenomenon always occurs in different dimensions, democracy is not normal, and tyranny is the norm of history. If we stop all the hard work needed to maintain democracy, we will soon be in balance with tyranny.
We all know that uniqueness (originality) is valuable, and we are all taught to "be yourself." What I really ask you to do is embrace and realistically recognize how much effort it takes to maintain this uniqueness. The world wants you to fit in, and it will do everything it can to attract you, but don't let that happen. You have to pay for being different, but it's worth it. The fairy tale version of "be yourself" is that as long as you let your uniqueness shine, all pain will disappear. This claim is misleading. It's worth it to be yourself, but don't expect it to be easy or free, you have to constantly put in the effort.
The world is always trying to fit Amazon into it and keep us in balance with our surroundings. This will require sustained effort, but we can and must do better.
As always, I attach our 1997 shareholder letter. It concluded: "Amazon.com thanks customers for their support and trust, thanks to each other for their hard work, and thanks to shareholders for their support and encouragement." That hasn't changed at all. I would like to thank Jassy in particular for agreeing to take on the role of CEO, which is a difficult and responsible job. Jassie is talented and believes in the highest standards. I assure you that Jassy will not allow the world to turn us into ordinary people, he will gather the energy we need to keep us alive and make us different. It's not easy, but it's crucial. I think he's going to make everybody happy. Thank you, Jassy!
To all of you: Be kind, be original, create more than you consume, and never let the world draw you into your surroundings. It's still Day 1.
This article is written by Shen Zhihan
Headmap source Visual China
Editor-in-charge Jing Yu
This article was originally released by Geek Park GeekPark, please add Geek Jun WeChat geekparker.