Run by the intelligent – A nice synopsis showing how Apple and Amazon are different than most companies

intelligentby kevin dooley

MG Siegler on Jeff Bezos’s Strategy With Amazon
[Via Daring Fireball]

MG Siegler:

The goal is actually to not make a huge profit too early, and Bezos manages it perfectly. You want to avoid showing your cards too early as you continue to lay the groundwork for an ever-larger business. Occasionally, you’ll have to show those cards and win a hand to prove that you can. But the rest of the time you call and fold, as you await the monster to take the entire pot.

Great piece. I’ve harped on Amazon’s seemingly eternal lack of profitability as much as anyone, but when you think about it and study their business, it’s not that they can’t turn a profit. They’re not burning through money like they were in the go-go ’90s. They simply choose not to turn a profit, and instead invest everything in operations and low prices.

The key to Bezos’s genius, though, is in how he’s set the expectations from Amazon’s investors. They’re seemingly all on board with this strategy, and, in return, this permission to run at break-even has made Amazon impossible for need-to-turn-a-profit businesses to compete with. That’s what makes Amazon “the anti-Apple”, as MG writes. Apple is a formidable competitor because it’s so massively profitable; Amazon is a formidable competitor because it has permission — even encouragement — from its investors to run the operation at break-even.

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I’ve written recently about  the intelligent, the bandits, the helpless and the stupid. One hallmark of the bandits when they run a company is that they are mostly concerned with how Wall Street sees them, focussed on quarterly earnings instead of longterm growth, looking at market share rather than profitability. All in order to maximize the money they get. Short term manipulation is better than long term growth.

Mainly because these bandits expect to be gone long before that long term happens.

But Apple and Amazon appear not to be run by bandits in that sense at all. Neither cares very much with what Wall Street says and neither is run by anyone looking to make a quick score then leaving

Apple makes huge profits and Wall Street punishes it. Amazon makes no profits and Wall Street rewards is. But in both cases, the companies are more successful than any competitor, I think, because they do not act like normal bandits

Apple’s laser-like focus on customers keeps Wall Street from intruding and has produced a tremendously wealthy company. Amazom too is focussed on customers, not Wall Street. Amazon Prime is one of the best deals around, both for the customer and for Amazon. The true sign of the intelligent.

Now, neither Apple not Amazon is purely intelligent – few things made by man always seek the win-win situation of the intelligent.

But both seem to shirk from the purely zero-sum approach used by most bandits. Apple and Amazon are examples of what 21st century corporations will be most successful

They will add some intelligence in with their banditry.