How Amazon Became a Retail Giant: The Story of the “Amazon Flywheel”

  Amazon is already a very outstanding company now, but going forward 30 years, he, like many entrepreneurs today, is also groping in the dark.
  The difference is that Bezos is a wise man, very assertive, and good at thinking. He and the key crew drew the “Amazon Flywheel” and put everything on a good footing. The first thing he clarified was the company’s business model. The basic principles of this model have not changed in almost 30 years. Bezos thinks about the importance of resources according to the business model, and thus determines the most basic governance principles of the company.
  Bezos made up his mind to enter the Internet field in 1994. He found that the Internet sector had grown by 2,300% in the previous year. He believes that if a technology or an industry develops at this speed, it must have great commercial value. This is a once-in-a-lifetime opportunity to start a business.
  However, how to cut into the field of e-commerce? Bezos chose books, the product with the highest degree of standardization, the easiest storage, and the easiest logistics and transportation, and based on cost considerations, the company was located in Washington State. After that, Bezos established three basic principles of Amazon’s business model: customer first, creative employees and long-termism.
  In 1997, Bezos wrote his first letter to shareholders, which could be considered a manifesto. Bezos wrote:
  We need to be obsessed with customers. From the day of the company’s opening, we have been focusing on customers, creating value for customers, and making them feel that this value is irresistible. We realized that the internet was, and still is, a “network-on-waiting” state. We want to give our customers something they can’t get from other sources.
  In 1998, he wrote again:
  We want to build the most customer-centric company in the world. We must adhere to the axiom that “consumers have sensitive perception and intelligent discrimination”; we must base brand signals on actual actions, rather than playing tricks. Our customers tell us that they choose Amazon, and tell their friends about it, because of the choice, ease of use, low prices, and great service.
  This logic was later figuratively described as the “Amazon Flywheel”. The logic of this flywheel continues to drive Amazon’s growth, up to the present day.
  Bezos knows that the most important resource driving the “Amazon flywheel” at high speed is employees (including third-party suppliers), not money. So he said: “Setting high thresholds and finding excellent people is the only way for us to succeed in the future. We must hire and retain talented employees, and we must issue more options instead of cash. Can employees be like masters? Think about it? Has it actually become the owner? This is the key to our success.”
  Amazon has not relied on burning money to obtain traffic since its inception, so its external financing is very limited, and the speed of equity dilution is very fast. Slowly, in this way, Bezos maintained a strong control over the company. Moreover, Bezos’ attitude towards external investors is mainly based on me, which is quite tough. Bezos once wrote: “True ownership requires long-term thinking; conversely, looking at problems with a long-term perspective is also the inevitable result of true ownership.” Homeowners and renters think
  differently of. Bezos knew a couple who rented out the house to others, and the tenant actually nailed the Christmas tree to the wooden floor of the house instead of using a shelf to fix the Christmas tree. Bezos said that this is the routine of bad tenants, and landlords would never make such short-sighted decisions. The situation for investors is similar. Some investors are short-term tenants who switch portfolios very quickly. They temporarily “own” the equity, which is actually “renting” the stock. Therefore, those who frequently buy and sell company stocks in the market are all tenants, and the value of tenants to the company is limited, so there is no need to care about them.
  In 2000, the dot-com bubble burst, and Amazon’s stock price fell by 80% within a year. In his letter to shareholders this year, Bezos once again emphasized three basic principles. He wrote: “If the company’s competitive position is better than a year ago, why is the stock price lower than it was a year ago?” Investor Gresham said: “In the short term, the stock market is a voting machine; In the long run, the stock market is a weighing machine.” Obviously, in 1999, because of the Internet boom, the stock market was flooded with too many voters. Very few of these people are here to weigh the company, whereas Amazon is a company that wants to be weighed by the stock market.

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