3 Lessons From Jeff Bezos’ Final Letter to Shareholders as Amazon CEO

Jeff Bezos is one of the top business leaders of our time. Since he founded Amazon in 1994, the company has generated tremendous returns for its shareholders. Its stock price has increased by more than 194,000% since its initial public offering in 1997. However, after a 25-year tenure as Amazon’s CEO, Bezos recently announced he is stepping down from that role and passing the top job on to current Amazon Web Services President Andy Jassy.

Like many corporate leaders, Bezos has made a practice of writing annual letters to shareholders. Here are three lessons investors might want to take note of from his final letter before he wraps up his tenure as CEO.

1. To succeed, you have to provide value

After some introductory anecdotes, the first section of Bezos’ 2020 letter, released on April 15, goes over how sustainable businesses create more than they consume:

If you want to be successful in business (in life, actually), you have to create more than you consume. Your goal should be to create value for everyone you interact with. Any business that doesn’t create value for those it touches, even if it appears successful on the surface, isn’t long for this world. It’s on the way out.

A sustainable business is one that, on a net basis, provides more value than it takes, while an unsustainable business extracts more value from its customers and stakeholders than it gives to them. A positive example of this is Amazon Prime, the company’s flagship subscription service. For $120 a year, its more than 200 million members get unlimited free, fast delivery on all qualifying purchases, plus access to a host of other services including Prime Video and Amazon Music. Amazon could clearly get away with charging more for Prime, but one of the reasons it chooses not to is so it can keep its customers happy.

For a non-Amazon example of creating more than you consume, consider Microsoft Office. This software suite generates billions in revenue for Microsoft each year, but it has maintained its sway in the marketplace for decades in part because it provides solid value to users.

2. Employees are valuable stakeholders

One place that some allege Amazon lags is in providing more value than it extracts is with its employees. While the company pays a competitive minimum wage of $15 an hour, some still think it isn’t adequate considering the revenue the company generates. And there are regular reports of brutal and/or unpleasant working conditions at Amazon warehouses. One recent revelation alleges that workers were forced to urinate in bottles while on shift because they weren’t afforded time to go to the bathroom. And a national union has just sued Amazon, alleging that the company illegally hampered efforts by workers trying to form a union at an Alabama facility. Workers at that facility had recently voted not to unionize.

Bezos did address some of this in the letter, stating “I think we need to do a better job for our employees.” If Amazon continues to treat its workers poorly, there is a chance that eventually, some will do their jobs poorly, which can create a worse experience for Amazon’s customers, which then will result in less value generated for shareholders. It is important to keep employees happy in order to create a durable, long-running enterprise.

A great example of the flip side of this coin in the retail sector is Costco, which has a great reputation for treating its workers well. It’s one of the only large retailers to consistently make Glassdoor’s Best Places to Work list. Amazon should consider using Costco as inspiration to improve the long-term viability of its business by creating a better work environment for its employees.

3. To survive, you have to be different

One key factor that gives a business staying power is how well it differentiates itself from the competition. “The world wants you to be typical — in a thousand ways, it pulls at you. Don’t let it happen,” Bezos writes toward the end of his 2020 letter.

This distinctiveness is what keeps businesses valuable, but it takes a lot of energy to keep that originality going. Again, let’s consider Amazon Prime: It took a ton of energy, original thought, and risk to offer unlimited free delivery to any customer on a wide selection of products for a low annual fee, especially when the program first launched in 2005. But once it scaled up, Prime made Amazon’s value proposition more obvious to consumers, differentiating it from its e-commerce peers and allowing the company to separate itself from the pack.

There’s a ton to learn from Jeff Bezos’ annual letters. You can find each one going back to 1997 on Amazon’s investor relations page. The insights they offer into his leadership style might even help you identify some of the market’s next great businesses, and stocks that could eventually generate life-altering returns in your portfolio.