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Lesson #5: Don’t Chase the Quick Buck, Think Long-Term

Article Overview: “You can do the math 15 different ways, and every time the math tells you that you shouldn’t lower prices because you’re going to make less money” says Bezos with a giant laugh. “That’s undoubtedly true in the current quarter, in the current year. But it’s probably not true over a 10-year period, when the benefit is going to increase the frequency with which your customers shop with you, the fraction of their purchases they do with you as opposed to other places. Their overall satisfaction is going to go up.”

Lesson #5: Don’t Chase the Quick Buck, Think Long-Term

“You can do the math 15 different ways, and every time the math tells you that you shouldn’t lower prices because you’re going to make less money” says Bezos with a giant laugh. “That’s undoubtedly true in the current quarter, in the current year. But it’s probably not true over a 10-year period, when the benefit is going to increase the frequency with which your customers shop with you, the fraction of their purchases they do with you as opposed to other places. Their overall satisfaction is going to go up.”

From day one, much to the dissent of investors and onlookers, Bezos has insisted on taking a long term strategy for his company. He was not interested in whether something would help sell a few books today. Instead, Bezos wanted to make sure even more books were being sold tomorrow. “If I had a nickel for every time a potential investor told me this wouldn’t work,” he jokingly recalls. “Sometimes we measure things and see that in the short term they actually hurt sales, and we do it anyway.”

One such controversial tactic was Bezos’ early decision to allow negative reviews of books on the Amazon.com website. He immediately began receiving letters from people asking whether he even understood his own business. “You make money when you sell things,” they wrote. “Why are you allowing negative reviews on your Website?” But, for Bezos, the answer was simple: “Our point of view is we will sell more if we help people make purchasing decisions.” Don’t get him wrong – more than anyone, Bezos is interested in good financial returns. But, he also wants to be around for another few decades, and that is how he plans his business strategies.

Despite the company’s continued growth, the decision to invest in Amazon is often perceived as a risky one due to Bezos’ management style. However, he is open about his strategy and anyone who wants in, can come onboard. “If you’re very clear to the outside world that you’re taking a long-term approach, then people can self-select in,” he says. “As [Warren] Buffett says, you get the shareholders you deserve.”

Whether it’s selling books online, or any other venture, Bezos recommends taking a long term point of view. While he acknowledges this is something about which there is a lot of controversy, his experience tells him it works. “A lot of people – and I’m just not one of them – believe that you should live for the now,” says Bezos. “I think what you do is think about the great expanse of time ahead of you and try to make sure that you’re planning for that in a way that’s going to leave you ultimately satisfied. This is the way it works for me.”

Bezos acknowledges that there are many different paths to success and satisfaction, and what works for him might not work for everyone else. But, what is important is “to find one that works for you.”

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Article Tags: amazon, business strategies, chase, customers shop, decades, different ways, dissent, early decision, fraction, laugh, management style, math, nickel, onlookers, own business, point of view, satisfaction, tactic, term approach, term strategy



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